REG - NewRiver REIT plc - NewRiver REIT plc FY22 Full Year Results
07/06/2022 07:00
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RNS Number : 9248N NewRiver REIT PLC 07 June 2022
NewRiver REIT PLC
Preliminary unaudited results for the year ended 31 March 2022
7 June 2022
Balance sheet strengthened, operations resilient and strategy progressing well
Allan Lockhart, Chief Executive commented: "The decisive actions that we took
last year have delivered a significant improvement in our financial and
operating metrics, with LTV down from 51% to 34%, Underlying Funds From
Operations up by 146% to £28.3 million, portfolio valuation returning to
capital growth, high occupancy maintained, leasing volumes and pricing
improved and finally, total dividend more than doubled to 7.4 pence per share,
fully covered by UFFO. All of this was achieved despite the disruption from
COVID-19.
There can be no doubt that today we are in a far stronger financial and
operational position than when we outlined our strategy to create the most
resilient retail portfolio in the UK a year ago. As such we are optimistic
about our future prospects and our strategic aim to deliver consistent 10%
total accounting returns, even though it is clear that UK economic growth is
slowing due to high inflation and monetary and fiscal tightening. Uncertainty
does create opportunities and we have put ourselves into a strong position
where we have genuine optionality."
Improved financial results and return to capital growth in H2
● Underlying Funds From Operations increased to £28.3m (FY21: £11.5m)
● UFFO per share increased to 9.2p (FY21: 3.8 pence)
● Final dividend of 3.3p per share, bringing total FY22 dividend to 7.4p per
share, fully covered by UFFO (FY21: 3.0p)
● Retail Net Property Income up 9.7% to £51.8m (FY21: £47.2m)
● Retail portfolio valued at £649m; Portfolio delivered +7.5% Total Return in
FY22 and returned to capital growth in H2 with valuations +2.6%
● Retail IFRS profit after tax of £7.0m (FY21: loss of -£122.1m)
● Pub IFRS loss after tax (discontinued operations) of -£33.6m including loss
on Hawthorn disposal (FY21: loss of -£28.4m)
● EPRA NTA per share down 11% to 134p due to Hawthorn disposal, but increased
from 131p at 30 September 2021 due to return to capital growth in H2
● Total Accounting Return of -6.6% (FY21: -24.9%), improved from H1 with +5.4%
return delivered in H2
Achieved target to dispose of non-core assets
● Completed the disposal of pub business, Hawthorn, in August 2021 for gross
proceeds of £224.0m
● Completed £77.1m of retail disposals at 2.1% discount to latest valuation; on
track to exit Work Out by end FY23
● Largest retail transaction was the disposal of a Regeneration shopping centre
in Cowley, Oxford, for gross proceeds of £38.8m
Materially strengthened financial position gives maximum optionality
● LTV reduced from 50.6% at 31 March 2021 to 34.1% at 31 March 2022; well within
guidance
● Fully unsecured balance sheet with drawn Group debt reduced by £335m
● Significant cash and available liquidity of £213.2m, including £88.2m of
cash
● Net debt reduced by 55% to £221.5m (31 March 2021: £493.3m)
● No maturity on drawn debt until 2028 and no exposure to interest rate rises on
drawn debt
Resilient operational performance and continued progress on ESG objectives
● Rent collection for FY22 of 96% - significantly ahead of 86% last year - and
Q1 tracking at over 90% cash collection
● 1,039,800 sq ft of new lettings and renewals completed across the portfolio;
long-term transactions at average 7.4% premium to ERV
● High, stable retail occupancy of 95.6% (31 March 2021: 95.8%)
● Pathway to Net-Zero published in March 2022 with target aligned with a 1.5°C
scenario and signatory of the Better Building Partnership Climate Commitment
● 13% uplift in 2021 GRESB score to 68, CDP score increased to a "B" from a "C"
and achieved Gold Level compliance with EPRA Sustainability Best Practice
Recommendations
Results summary
Performance Note FY22 HY22 FY21
Unaudited Unaudited Audited
Underlying Funds From Operations ('UFFO') (1) £28.3m £15.5m £11.5m
UFFO per share (1) 9.2p 5.1p 3.8p
Ordinary dividend 7.4p 4.1p 3.0p
Ordinary dividend cover (2) 125% 125% 127%
Interest cover (3) 3.5x 2.7x 2.3x
Net Property Income £59.0m £32.4m £48.2m
IFRS Loss after taxation -£26.6m -£49.9m -£150.5m
IFRS Basic EPS -8.6p -16.3p -49.1p
Total Accounting Return (4) -6.6% -11.3% -24.9%
GRESB Score (unaudited) (5) 68 68 60
Balance Sheet Note March 2022 Sep 2021 March 2021
IFRS Net Assets £414.1m £402.1m £460.4m
EPRA NTA per share (6) 134p 131p 151p
Balance Sheet (proportionally consolidated) (7) March 2022 Sep 2021 March 2021
Net debt £221.5m £276.4m £493.3m
Principal value of gross debt (8) £314.0m £318.1m £653.1m
Cash £88.2m £37.3m £154.3m
Weighted average cost of debt (9) 3.4% 3.4% 3.2%
Weighted average debt maturity - drawn only (10) 5.7 years 6.2 years 4.5 years
Weighted average debt maturity (11) 4.8 years 5.2 years 4.3 years
Loan to value (12) 34.1% 39.4% 50.6%
Notes:
(1) Underlying Funds From Operations ('UFFO') is a Company measure of underlying
operational profits which excludes one off or non-cash adjustments as set out
in Note 12 to the Financial Statements and in the Finance Review. UFFO, which
includes the contribution from Hawthorn up to its disposal on 20 August 2021,
is used by the Company as the basis for ordinary dividend policy and cover.
(2) Ordinary dividend cover is calculated with reference to UFFO
(3) Interest cover is tested at corporate level and is calculated by comparing
actual net property income received versus cash interest payable on a 12 month
look-back basis
(4) Total Accounting Return is the EPRA NTA per share movement during the half,
plus dividends paid in the period, divided by EPRA NTA per share at the start
of the period
(5) GRESB is the leading sustainability benchmark for the global real estate
sector, and its annual assessment scores participating companies out of 100
(6) 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
(7) Proportionally consolidated means Group and share of JVs & associates
(8) Principal value of gross debt being £300.0 million of Group and £14.0
million share of JVs & associates (March 2021: £635.0 million of Group
and £18.1 million share of JVs & associates)
(9) Cost of debt assuming £125 million revolving credit facility is fully drawn
(10) Contracted weighted average debt maturity on drawn debt only. September 2021
position includes impact of one-year RCF extension agreed in October 2021
(11) Contracted weighted average debt maturity. September 2021 position includes
impact of one-year RCF extension agreed in October 2021
(12) 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)
Finsbury Glover Hering +44 (0)20 7251 3801
Gordon Simpson
James Thompson
This announcement contains inside information as defined in Article 7 of the
EU Market Abuse Regulation No 596/2014 and has been announced in accordance
with the Company's obligations under Article 17 of that Regulation. This
announcement has been authorised for release by the Board of Directors.
Results presentation
A pre-recorded presentation will be streamed at 10:30am today on our website
(www.nrr.co.uk (http://www.nrr.co.uk) ) and at the following link:
https://secure.emincote.com/client/newriver/fullyearresults2022
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fsecure.emincote.com%2Fclient%2Fnewriver%2Ffullyearresults2022&data=05%7C01%7Cwhobman%40nrr.co.uk%7C6dd6e40234e649ce1c1e08da328b9671%7C2f3a21b942a84e4d87b81a5384f6aab2%7C0%7C0%7C637877872341811520%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=AU8RZZK7BWB2hjF4IzUpE5%2BepOG0Hsci0%2F1ay74s7GA%3D&reserved=0)
. This will be followed immediately by a live Q&A session for investors
and analysts.
The accompanying slides will be made available at www.nrr.co.uk
(http://www.nrr.co.uk) just prior to the presentation commencing.
Forward-looking statements
The information in this announcement may include forward-looking statements,
which are based on current projections about future events. These
forward-looking statements reflect the directors' beliefs and expectations and
are subject to risks, uncertainties and assumptions about NewRiver REIT plc
(the 'Company'), including, amongst other things, the development of its
business, trends in its operating 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
Overview
We ended the year in a far stronger financial and operational position, having
reset the business to support our strategic aim to deliver consistent 10%
total accounting returns in the medium-term, underpinned by a conservative and
flexible balance sheet. All of that was achieved in a period of continuing
disruption from COVID-19 earlier in the year and more latterly economic
uncertainty, partly caused by the tragic war in Ukraine. The results from the
decisive actions that we took in the year clearly demonstrate the resilient
and defensive positioning of our portfolio, our market-leading platform and
the incredible hard work of the team at NewRiver.
Across the business, we have delivered robust and improved financial and
operational metrics that have led to an increase in UFFO for the year to
£28.3 million compared to £11.5 million in FY21 and our NTA has recorded a
modest increase in the second half of the year to 134 pence per share.
What is perhaps most pleasing of all is that our retail portfolio has returned
to capital growth in the second half which supported a total return outturn of
+7.5%. This performance has been led by retail parks, but significantly, our
Core shopping centre portfolio has delivered an excellent result, together
with modest capital growth from our Regeneration portfolio. We delivered a
total accounting return of -6.6% in the year as a whole, but importantly and
with our objective to deliver a consistent total accounting return in mind, we
delivered a +5.4% return in the second half.
Operationally, we had an excellent year both in terms of leasing volume and
pricing. Rent collection, car park and commercialisation cashflows all
improved during the year with rent collection in particular close to pre
COVID-19 levels.
Our retail disposal programme set at the start of the financial year was
achieved in-line with our expectations and at pricing supportive of latest
valuation. As a result of the completion of our planned disposals and the
capital growth delivered in the second half of the year, our Loan To Value
('LTV') has materially reduced from 51% to 34%.
With a highly flexible balance sheet, an LTV now within our operating guidance
providing us with surplus capital to invest in a highly disciplined manner at
the right time and with a clear strategy in place, NewRiver has genuine
optionality and is well positioned to achieve its strategic objective of
delivering a consistent 10% total accounting return in the medium-term.
Financial Performance and Dividend
Our UFFO has recovered well during FY22, delivering more than double that of
FY21 and our dividend is comfortably fully covered. We have announced a final
dividend of 3.3 pence per share, delivering a total dividend for the year of
7.4 pence per share, representing a substantial increase on last year's
dividend of 3.0 pence per share.
Valuations have stabilised with a modest 0.9% reduction over the year,
compared to -15.2% reduction in FY21; and our portfolio valuation increased by
2.6% in the second half. The portfolio delivered a total return of 7.5% in
FY22, an improvement on -6.9% in FY21. Retail Parks and Core shopping centres
delivered total returns of 23.5% and 14.3% respectively.
NTA per share increased to 134 pence per share in March 2022 from 131 pence in
September 2021 but for the year as a whole NTA was down from 151 pence per
share, due predominantly to the sale of Hawthorn, our pub business in August
2021 which reduced NTA per share by 11 pence. As a result, our total
accounting return for the year was -6.6%, representing a material improvement
on the prior year return of -24.9%. Excluding the impact of the pubs disposal,
the total accounting return was 0.9%.
We have transformed and strengthened the balance sheet to create a low risk
debt profile by reducing our net debt to £222 million, ending the year with
£88 million of unrestricted cash and £125 million of additional available
liquidity. We extended the maturity on our undrawn Revolving Credit Facility
to August 2024 and we have no interest rate exposure and no maturity on drawn
debt until March 2028.
The strength of our balance sheet position was endorsed in December 2021 when
Fitch Ratings reaffirmed our Long-Term Issuer Default Rating (IDR) at 'BBB'
with a Stable Outlook and our senior unsecured rating (relating to the £300
million unsecured 2028 bond) at 'BBB+' and Short-Term IDR at 'F2'.
Operationally we are on track to deliver 15% administrative cost savings by
the end of FY23 on an annualised basis which include the relocation of the
NewRiver London office to a more cost-effective office space that better suits
the needs and aspirations of post-pandemic hybrid working and notably the new
office space has some of the greenest building credentials in London.
Resilient Retail Strategy Update
Following the successful sale of our pub business, we hosted a Capital Markets
Day in September 2021 to articulate our revised resilient retail strategy for
our retail only business. The strategy is designed to deliver consistent 10%
total accounting returns and to ensure that we have a resilient portfolio risk
profile for future years. Our strategy is focused on three key areas: capital
recycling, capital partnerships and regeneration.
Capital recycling provides us with the opportunity to enhance returns and
improve our long-term risk profile. Capital partnerships offer us the
opportunity to enhance returns in a capital light way. Regeneration provides
us with the opportunity to deliver capital growth through redeveloping surplus
retail space, predominantly for residential use.
Capital Recycling
During the year we completed £305 million of disposals with the most
significant being the sale of the Hawthorn pub business and we also completed
£77 million of planned retail disposals. As a result of our retail disposals,
we are now in a position of having surplus capital to invest which we intend
to deploy in a highly disciplined manner and in accordance with our capital
allocation policy, in order to deliver enhanced risk adjusted returns to
shareholders. This could include investing into our existing portfolio through
regeneration or accretive asset management projects, investing in
acquisitions, either on balance sheet or via joint ventures, or buying back
the Company's own shares. The Board assesses the relative merits of these
options on an ongoing basis.
In line with our strategy to improve the underlying portfolio risk profile, we
have made good progress on disposals from our Work Out portfolio. At the start
of the year we had 15 assets in our Work Out portfolio; by the end of the year
we had sold four assets and a further five assets have been targeted for sale
this coming year. For the remaining six Work Out assets, we have made good
progress in implementing credible turnaround strategies. As such, we believe
we are on track to have exited our Work Out portfolio by the end of FY23.
Capital Partnerships
It was an active year for our capital partnership with BRAVO, a fund managed
by the Pacific Investment Management Company. In April 2021, we acquired The
Moor Estate in Sheffield for £41 million. NewRiver took a 10% equity stake
and receives attractive fee income. In addition to this acquisition, our
capital partnership with BRAVO disposed of two retail parks for a total
consideration of £67 million delivering NewRiver an IRR of 18.8% excluding
the promote performance fee.
Our capital partnership is performing very well and as such the prospects for
an attractive promote pay-out in the medium-term has significantly increased
during the year.
Our asset management mandate with Canterbury City Council was extended in
September 2021 to include the management of Riverside, a new leisure
development in Canterbury.
Regeneration
The highlight of the year was the disposal of two of our Regeneration projects
at pricing that clearly demonstrates the value-creation opportunities that
regeneration offers.
In October 2021 we successfully disposed of our Regeneration asset in Penge,
South London, to a leading housebuilder achieving a price that was 5.4% ahead
of the last book value. In March 2022, we concluded the sale of our
Regeneration project in Cowley, Oxford, for gross proceeds of £39 million
(including escrow amounts), again at a premium to the last reported book
value.
Operational Performance
Operationally, we had an excellent leasing year both in terms of volume and
pricing.
Rent collection, car park and commercialisation cashflows all improved during
the year with rent collection in particular now back to pre COVID-19
collection rates. Our leasing volumes also increased, continuing to
demonstrate the resilient positioning of our portfolio, supported by genuine
rental affordability at just £11.74 per sq ft (Mar 2021 £11.51).
During the 12 months, we completed 1,039,800 sq ft of new lettings and
renewals with long-term deals achieved on terms on average 7.4% ahead of
valuation ERV. We continue to let our space to quality operators with strong
covenants who provide important essential goods and services to our local
communities. As a result of our leasing activity during the year, our
occupancy level remains high at 95.6% (March 2021: 95.8%).
Our portfolio is focused on three areas: Retail Parks, Core community shopping
centres and Regeneration.
Retail Parks which represent 26% of our portfolio have performed very well
during the year, where we are seeing elevated demand for space and this is
reflected in the high occupancy of 97.1% that we enjoy. Equally, our retail
park portfolio delivered a strong performance with 14.4% of capital growth and
23.5% total return during the year.
Our Core shopping centres which in many ways are important assets of community
value, in total represent 34% of our gross assets. During the year our Core
shopping centres saw an excellent leasing performance, with long-term deals
transacted at 10.0% above ERVs and ended the year with an occupancy level of
96.5%.
For the year as a whole, our Core shopping centres delivered 3.3% capital
growth and a total return of 14.3% which was an excellent result given the
ongoing COVID-19 disruption.
Regeneration assets at the year-end represented 25% of total gross assets, a
reduction from the previous year due to the successful sale of two
Regeneration assets in Penge and Cowley.
On a like-for-like basis, our Regeneration portfolio delivered stable capital
performance of -0.6% and a total return of 4.1% which we view as a good result
given construction cost inflation. The inflationary pressures that we saw in
the market during the year have partly been mitigated with the progress that
we have made during the year.
ESG
The real estate industry has a critical role to play in protecting the
long-term sustainability of our planet and we are proud to have continued to
make progress with our ESG objectives which are embedded within the business.
During the year, we published our Pathway to Net-Zero and our emissions
reduction targets have been validated by the SBTi as consistent with a
1.5-degree future. Demonstrating our ESG progress, we were pleased to have
been awarded a 'B' rating by the CDP (formerly Carbon Disclosure Project) for
our management of climate issues, up from a 'C' rating in the previous year.
Our GRESB score increased by 13% during the year and we achieved a Gold in the
EPRA Sustainability Best Practice Recommendations Awards. We were one of only
two companies that jumped from a Bronze to Gold award in just one year.
All of the energy supplied to our common areas (malls and car parks) is
already carbon neutral and we have achieved our target of zero waste to
landfill by 2022. This year, we are planning to introduce a further 125 EV
charging stations across our portfolio, which will significantly increase our
EV charging capacity and our ability to support customers to reduce their
carbon footprint. We also continue our partnership with The Trussell Trust,
providing funds, space and time to help support the important work that they
do to reduce hunger in the UK.
In line with our commitment to advance our ESG strategy, the appointment of Dr
Karen Miller to the Board will provide additional knowledge and experience in
relation to climate challenges together with her wider commercial retail
experience.
Market Backdrop and Outlook
Within the capital markets, we have seen an increase in liquidity. In
particular, the retail park sector benefited from a significant increase in
demand from a wider investor pool which has led to a year of strong capital
growth with year on year volumes doubling in 2021. The shopping centre market
saw an improvement in liquidity but less pronounced than retail parks.
Nevertheless, shopping centre valuations stabilised in the latter part of the
year after a prolonged period of material valuation decline.
With retail stores being open for the majority of the financial year, UK
in-store retail sales have recovered overall to pre Covid-19 levels according
to ONS. By contrast, online sales reported by ONS have fallen during the year
due to the reopening of physical stores.
The recovery in retail sales has been supported by a UK consumer who, for the
majority of the year, has been in reasonable financial shape. Low levels of
unemployment with just 3.8% of people searching for jobs in the three months
to February 2022, record job vacancies, wage growth, elevated savings ratios
and a good year for house prices, having increased by 14.3% in the year to
March 2022, have all supported increased consumer spending. With retail sales
broadly back to pre COVID-19 levels, we have seen active demand for space in
the market and in the UK overall, vacancy rates have fallen. In addition,
there has been a significant decline in CVAs and tenant administrations.
More recently, the tragic war in Ukraine has led to significant inflationary
pressure as a result of higher energy and commodity costs with inflation in
the UK rising to a 30-year high with prices rising 7% in the 12 months to
March 2022. This, coupled with the Bank of England implementing monetary
tightening at the same time that the UK Government has adopted fiscal
tightening, is clearly resulting in a contraction of economic growth. On top
of that, the continuing large-scale lockdowns in China resulting in supply
chain disruption, are only adding to the economic challenges.
It is therefore likely that consumer disposable income will be impacted in the
year ahead. For retailers that means margins will be lower as not all of their
increased costs will be passed on to the consumer. It is interesting to note
that the pure-play online retailers are, in particular, challenged by a high
inflation environment given their lower margins in the first place. In
contrast, multi-channel retailers are better placed to deal with rising costs
by using their physical store distribution network for click and collect.
For NewRiver, our portfolio, which is more focused on essential goods and
services, is the right place to be when consumers prioritise necessity-based
retail spend over discretionary spend and so will provide us with insulation.
Our assets are located in the heart of their local communities, easily
accessible to our shoppers with low travel times which means they spend less
on fuel travelling to our assets compared to more destination-led,
discretionary spend assets. With our occupiers facing rising costs, having
affordable rents, which we do, is key to sustaining rental cashflows
particularly in periods of high inflation and contracting economic growth.
Moreover, next April our occupiers should receive a significant reduction in
their rateable values which we currently estimate to be circa 30% on average
across our portfolio.
One of the key drivers of our future success will be our capital allocation
decisions. Even though we have put ourselves in a position of having surplus
capital with our LTV now at 34%, some 6% below our guidance; we believe that
in the near-term it is in our shareholders interest to maintain headroom to
our LTV guidance given the increasingly uncertain macro-economic outlook. That
said, we do have ongoing disposals which will provide further capital for
redeployment which we will do in a highly disciplined way and in accordance
with our capital allocation policy.
In conclusion, our objectives have never been clearer - to own and manage the
most resilient retail portfolio in the UK that will deliver stable income,
capital growth and thus superior returns for our shareholders. With a
portfolio predominantly focused on essential goods and services, a flexible
balance sheet and our market leading platform, we are well positioned to
achieve this objective and to deliver attractive long-term returns for our
shareholders whilst helping create thriving communities across the UK.
Allan Lockhart
Chief Executive Officer
Portfolio Review
Highlights
· Retail Portfolio delivered Total Return of +7.5%; Retail Parks +23.5% and Core
Shopping Centres +14.3%
· Retail Disposals of £77 million including two regeneration projects above
book value
· Completed over one million sq ft of leasing. Long Term leasing +7.4% versus
valuer's ERV
· Occupancy remains high at 95.6%
· Rent collection up to 96% for the year
· Increased prospects of promote pay out as Capital Partnership with BRAVO
continues to perform well
Resilient Retail Operational Update
Overview
We saw a strong recovery in our operational performance in FY22 despite the
ongoing disruption from COVID-19 which was prevalent for the majority of the
year.
The pandemic has been challenging for many businesses, but it has demonstrated
the underlying resilience in our portfolio which is clear in our FY22
operational metrics.
Rent collection for the year was 96%, a significant improvement on 86% last
year and we saw quarter on quarter improvement throughout FY22.
Our car park and commercialisation cashflows also recovered well, at 70%
compared to pre-COVID-19 levels. Although these revenue streams are yet to
fully recover to pre-COVID-19 levels, we are pleased with the steady progress
that we are making, now supplemented by new non-car parking income generated
from our car parks through our Urban Hub initiative with APCOA.
We completed 1,039,800 sq ft of leasing transactions in FY22 which was a
similar volume to FY21. However in FY22 we saw a significant improvement in
leasing pricing where our long term deals were transacted at +7.4% above
valuers ERV. This represents a significant improvement to FY19, FY20 and FY21.
As a consequence of our leasing activity, no material CVAs or occupier
administrations, and the underlying resilience of our portfolio, our occupancy
level remained high at 95.6% and consistent with the previous year (31 March
2021: 95.8%).
In total we completed £77 million of planned retail disposals achieved
broadly in line with their latest book values at -2.1%. Given our focus on
reducing our LTV, acquisition activity was limited to a single acquisition
through our capital partnership with BRAVO with our share being £4 million
excluding purchaser costs.
In relation to our regeneration and development activity, the highlight of the
year was the sale of Templars Square in Cowley, Oxford and the Blenheim Centre
in Penge, South-East London both at a price exceeding book value and the
original acquisition price thereby demonstrating the value creation
opportunity that we are able to deliver from these types of regeneration
projects. Elsewhere in the portfolio, we have made good progress in advancing
our redevelopment projects.
Valuation: A Return to Capital Growth
As at 31 March 2022, our portfolio was valued at £649 million. The key
movements from the previous year (£974 million) were the disposal of the
Hawthorn pub business (£248 million), £77 million of planned retail
disposals and finally a modest like-for-like valuation decline of -0.9% for
the year.
We saw an improvement in our portfolio valuation performance in the second
half of the year with valuation growth of 2.6% and stabilisation for the year
as a whole with a modest decline of -0.9%. Our Core Shopping Centres, Retail
Parks and Regeneration portfolios, which are the resilient retail sectors on
which NewRiver will be focused going forward, delivered valuation growth for
the year of 5.2%. Our Work Out portfolio, which now represents 14% of our
total portfolio and we are committed to exiting by the end of FY23, saw
valuation decline of -25.9%, the majority of which was in the first half of
the year.
A breakdown of the key valuation movements by asset type is provided below.
As at 31 March 2022 Portfolio Weighting Valuation Movement Valuation Movement H2 Valuation Movement FY22 Topped-up NIY NEY LFL ERV Movement
H1
(£m) (%) (%) (%) (%) (%) (%) (%)
Shopping Centres - Core 221.2 34% -0.4% 3.7% 3.3% 9.5% 9.3% 3.6%
Retail Parks 167.9 26% 4.0% 9.8% 14.4% 6.3% 6.6% -1.2%
Shopping Centres - Regeneration 162.6 25% -1.6% 1.5% -0.6% 5.8% 6.3% -1.5%
Shopping Centres - Work Out 89.7 14% -18.9% -8.3% -25.9% 11.1% 15.7% -2.8%
Other 8.0 1% -5.9% -5.9% -15.9% 4.7% 8.4% -0.6%
Total 649.4 100% -3.1% 2.6% -0.9% 7.9% 8.8% -0.2%
Our Retail Warehouse portfolio delivered a total return of +23.5% for the year
which, although is less than the MSCI index at 30.2%, has significantly
out-performed the MSCI index over the last three years, with a total return of
+22.6% versus the index at +10.1%. This long term out-performance is
reflective of the higher income returns that we deliver and that our average
capital size is more liquid and thus our portfolio is less volatile in periods
of market disruption.
Our Core Shopping Centre portfolio delivered a total return of 14.3% for the
year which was a good result given the disruption from COVID-19.
When our Regeneration and Work Out Shopping Centres are included, the total
return for all of our shopping centres for the year was 3.3% which is an
out-performance relative to the MSCI index which recorded a total return of
1.4% for the same period. This out-performance is reflective of our portfolio
positioning focused on essential goods and services but also, our shopping
centres delivering higher income returns at 8.7% for the period versus MSCI
income return of 6.5%.
Year to 31 March 2022 Total Return Income Return Capital Growth
NRR portfolio 7.5% 8.3% -0.8%
MSCI All Retail Benchmark 14.9% 5.6% 8.9%
Relative performance -7.4% 2.7% -9.7%
Shopping Centres Retail Warehouses
Total Return - 12 months to March 2022
NewRiver 3.3% 23.5%
MSCI Benchmark 1.4% 30.2%
Relative Performance 1.9% -6.7%
Total Return - 24 months to March 2022
NewRiver -7.9% 25.7%
MSCI Benchmark -22.5% 25.5%
Relative Performance 14.6% 0.2%
Total Return - 36 months to March 2022
NewRiver -15.6% 22.6%
MSCI Benchmark -36.7% 10.1%
Relative Performance 21.1% 12.5%
Capital Partnerships
Capital Partnerships are an important part of our business model allowing us
to acquire assets in a capital light way and to enhance our returns from asset
management income and the potential to receive financial promotes.
It was another active year for our Capital Partnership activities with £67.1
million (NewRiver share: £10.4 million) of retail park disposals and the
£41.0 million (NewRiver share: £4.1 million) acquisition of The Moor in
Sheffield, a 28 acre income producing estate in one of the UK's top 10 cities.
Our principal Capital Partnership is with BRAVO, a fund managed by the Pacific
Investment Management Company. At year end our BRAVO joint venture owned three
retail parks and an asset in Sheffield.
· Sheffield: At the start of the period we completed the acquisition of The
Moor, Sheffield, for a total price of £41.0 million within our BRAVO Capital
Partnerships (NewRiver share: £4.1 million). The estate is anchored by Next,
Sainsbury's, Primark, H&M, a 670-space car park, a nine-screen cinema, and
The Moor Market. The asset encompasses the prime retail destination for
Sheffield City Centre spanning 680,000 sq ft of retail and leisure over 28
acres and has delivered excellent returns in the period. Our asset management
team enhanced the asset by completing a number of new lettings including
Sports Direct, Five Guys, Bodycare and innovative interactive restaurant
concept Boom Battle Bar on terms above the initial business plan.
Since acquisition we have generated additional value through the sale of the
car park for £9.4 million in February 2022 and a vacant unit to Lidl for
£4.8 million in December 2021. An agreement with Bank Leumi to provide a debt
facility for the asset has been completed. The asset is 82% let and generates
£7.6 million of annualised rental income. We are also undertaking a stylish
re-brand together with small scale public realm landscaping works to further
enhance the location.
Furthermore, we identified significant mixed-use development opportunities at
The Moor and we are working to obtain planning consent as part of phase one of
our regeneration proposals to deliver a circa 250 unit Build To Rent units.
· Canterbury: We extended our third-party asset management mandate of
Whitefriars Shopping Centre with Canterbury City Council for a further five
years and completed a new mandate for their recently developed The Riverside
leisure development. The Riverside will see a cinema, 189 social housing units
and 491 student accommodation units created just 15 minutes' walk from the
City Centre. The anchor tenant, Curzon Cinema, is expected to open late summer
2022 and we are under offer and in negotiations with a number of national
leisure and food & beverage operators.
Leasing activity
Overview
In total we completed over one million sq ft of leasing transactions during
the year, securing £7.4 million of annualised income. Our long-term leasing
transactions, which represented 75% of the total rent secured, were transacted
at rents 7.4% above valuers ERVs. Over 50% of those leasing transactions were
in our Core Shopping Centre and Retail Park portfolios at rents exceeding
valuers ERVs by 10.0% and 26.1% respectively. Even in our Work-Out portfolio,
where we had good levels of leasing activity, long term leasing transactions
were on terms 9.6% ahead of valuers ERVs.
The only part of our portfolio that recorded a decline in rent secured, versus
valuers' ERV was in our regeneration portfolio at -4.9%. However this is
reflective of our ongoing strategy to ensure greater lease flexibility to
support our vacant possession strategy.
Overall, our long term leasing transactions had a weighted average lease
expiry profile (WALE) of 6.4 years with Retail Parks at 9.1 years, Core
Shopping Centres at 6.8 years and our Regeneration portfolio at 5.1 years
which again is reflective of our vacant possession strategy.
In terms of tenant incentives, we have seen a marked improvement in rent-free
periods in the period compared to FY21 and FY20. For long term leasing
transactions, the average rent free period was just 2.3 months with many
occupiers receiving no rent free period.
The demand for space that we saw in our portfolio during the period was
broadly based with 59% of the space leased to Grocery, Discount, Health &
Beauty, Home & DIY and Value Fashion. We received good demand from 'Grab
& Go' food operators and Independent Retailers, as our leasing activity to
these sub sectors was more than double the prior year.
Asset Management and Development
Our team has had an active year pursuing a range of asset management
initiatives which are designed to improve the underlying quality of our rental
cashflows and to deliver capital growth. Typical asset management and
development initiatives include, but are not limited to, improvement to the
occupational type and mix, delivering incremental income through
commercialisation and car parking, reduction of service charge costs,
improving the shopper experience through enhanced aesthetics, unit
extensions/amalgamations, small scale development on surplus land and
large-scale regeneration. Increasingly ESG initiatives have been implemented
at our assets including more EV chargers, roof-top gardens and 'Quiet Hour'
programmes.
Retail Parks
As at 31 March 2022, Retail Parks accounted for 26% of our total portfolio,
totalling 15 assets. It has been a positive year for our Retail Park Portfolio
which at year end was 97.1% occupied. Due to the majority of our retail parks
being adjacent to major supermarkets with plenty of free surface level car
parking, supportive of online fulfilment through click and collect, we have
seen strong occupational and investor demand for our type of retail parks.
Disposals
· Poole: In December 2021 we disposed of Poole Retail Park in Dorset for £58.0
million (NRR share: £5.8 million), held in our BRAVO capital partnership, The
price reflects a net initial yield of 6.6%, a 7.4% premium to its last
valuation. The price achieved was 30% higher than when NewRiver and BRAVO
acquired the asset in October 2019 and this asset has generated an IRR of
21.6% (excluding the promote fee) for NewRiver. In the two years since
acquisition we have completed several successful initiatives including
securing a 10-year lease extension and over 60% rental uplift with Homebase.
· Newport: We also sold a retail park in Newport on the Isle of Wight for £9.1
million (NewRiver share: £4.6 million) reflecting a net initial yield of
5.8%. This followed our successful asset management implementation programme
including regearing leases with Curry's and Pets at Home, and a new letting to
Food Warehouse. The IRR excluding promote generated on the completion of the
sale was 15.2%.
Asset Management - Selected Highlights Include:
· Aberdeen: At Kittybrewster, a high performing city-centre retail park, we
further enhanced the retail profile during the year with a new 10 year lease
with JD Sports for a 10,000 sq ft unit which once open, will bring the park to
100% occupancy.
· Barrow: Our introduction of discount food operator, Aldi, to our retail park
in Barrow, has been well received by the local community and has helped
further drive the performance of this retail park. We are now under offer on a
final unit following strong demand for space and on completion the park will
be 100% let.
· Bradford: A major achievement for the year was the letting of a former Wickes
unit to leading DIY operator Homebase in August 2021 on a 10 year lease. The
new store opened in November 2021 and has had a positive impact to the retail
park which already performs well given its location adjacent to a highly
successful Morrisons.
· Cardiff, Valegate: At our retail park in Cardiff we are under offer to two new
occupiers, the first for a 27,000 sq ft store to a leading discount operator
and the second, a 10,000 sq ft store to a leisure operator. On completion of
these transactions, the park will be fully let.
· Dewsbury: We signed a lease with Aldi to take 19,000 sq ft at our retail park
in Dewsbury and handed the new unit over in May 2022 for the store to open at
the end of the summer, and we are under offer on the final vacant unit on the
park which will make the park 100% let, further strengthening this excellent
and well-located retail park.
· Dumfries: We introduced a Next Click & Collect pod to our retail park in
Dumfries in December 2020 which has performed well and helped to generate new
footfall to this popular retail park. We have subsequently introduced Bensons
for Beds who have taken the former Dreams unit after we served notice, further
improving the rental terms and agreeing a 10 year lease. During the year we
have also submitted a planning application to create a new Food Warehouse
which will benefit from trading adjacent to a successful Tesco superstore.
· Inverness: An important new operator to open within the Inverness community
was our letting to The Department for Work and Pensions during the year who
took a 10,000 sq ft unit on a 5-year lease paying £112,500 pa. This is in
addition to other asset management initiatives underway at the Glendoe &
Telford Retail Park in Inverness which will materialise in FY23 including a
12,000 sq ft unit under offer to a food retailer.
· Sprucefield: is a retail park located in Northern Ireland anchored by
Sainsbury's and B&Q and owned in our Capital Partnership with BRAVO. We
have made good progress with our proposals to deliver two new drive-thru units
and a restaurant unit. We have received offers for both and are also in
discussions with occupiers to sell surplus land that would facilitate a 24,000
sq ft unit for a discount food operator.
Shopping Centres
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 providing a range of essential goods and services to local
people. Typically our centres are easily accessible with short travel times
supporting the wider climate and well-being agenda.
As at 31 March 2022 our Core Shopping Centre portfolio represented 34% of our
total portfolio value and comprises 14 core community shopping centres with an
occupancy of 96.5%. Selected highlights include:
· Fareham: We received a resolution to grant planning consent in December 2021
for a highway re-adjustment which will not only improve the local shopping
experience but will also enable the release of two possible sites for
residential development, creating up to 65 potential new homes.
· Leith: Our asset in Leith, located in close proximity to Edinburgh City
Centre, is a solid performing asset providing essential goods and services to
its local community. We were pleased to introduce Costa, the first branded
coffee offer to the centre. We are currently working up proposals to deliver
new residential homes in this increasingly popular area of Edinburgh.
· Hastings: NewRiver and Hastings Borough Council worked closely together to
prepare and submit a bid to the Government's Towns Fund and in July the
Ministry of Housing, Communities & Local Government confirmed that £24.3
million grant funding has been allocated to Hastings of which £2 million has
been allocated to NewRiver's shopping centre, subject to approval of the
Business Case. Part of the funds have already been deployed to convert a
former New Look unit to create a gym and to provide an office for the
Department of Work and Pensions. The remaining funds will be applied to our
proposals to deliver up to circa 90 new homes.
· Market Deeping: Terms have been agreed to provide a 20,000 sq ft store for a
discount food operator and a planning application is under preparation.
· Newtownabbey: We have seen strong recovery post COVID-19 in Newtownabbey,
Belfast including the relocating and upsizing of various retailers including
DV8, River Island, Superdrug, Bonmarche and Specsavers with further
discussions ongoing. This has resulted in strong ERV and capital growth for
this asset.
· Newton Mearns: We are exploring options to sell a parcel of land adjacent to
our shopping centre and have an offer from a leading house developer. We are
also progressing various lettings and initiatives to bring in alternative uses
to this centre which is anchored by Asda and Marks & Spencer.
Regeneration
Our Regeneration Portfolio as at 31 March 2022 comprises three assets and
represents 25% of our total portfolio value. Following the disposal of two of
our regeneration projects during the year we now have three projects which we
continue to make good progress with.
· Grays: We acquired Grays Shopping Centre in June 2018, recognising a
significant opportunity for a high-density residential-led redevelopment of
the site, which is located just 35 minutes from central London by train.
Following Design Review Panel sessions with the local authority earlier this
year we are making good progress preparing for our planning application which
we expect to submit in the Q3 2022. Our proposals will create up to 900 new
homes, reduce the excess retail provision and improve the public realm and
interconnectivity of the town as a whole. Meanwhile we are making steady
progress with our vacant possession strategy to ensure lease flexibility
whilst protecting rental cashflows.
· Bexleyheath: Our strategic masterplan that combines asset management and
residential development initiatives to provide over 700 new homes is making
progress and we are preparing to commence pre planning discussions with the
Council and other major stakeholders.
· Burgess Hill: During the period, the planning Decision Notice was issued by
Mid Sussex District Council in July 2021 following completion of the Section
106. Preparations are at an advanced stage to sell part of our asset where we
have detailed planning consent for 172 residential units. The capital receipt
from this disposal will be used to partially fund the retail refurbishment and
the construction of the food store, car park and hotel.
Work-Out
As at 31 March 2022 our Work-Out portfolio represented less than 15% of our
total portfolio. During the year we completed the sale of four of the assets
and a further two assets are currently under active negotiations. In addition
to the sales already completed and planned sales this year we have made good
progress in implementing our turnaround strategies for the remaining Work-Out
assets. Examples of these turnaround strategies include:
· Cardiff: We continue our exciting plans to regenerate The Capitol Shopping
Centre in Cardiff. The shopping centre site is built upon what was formerly
known as the Capitol Theatre and played host to a number of famous musicians
in its heyday, including the Beatles. Our repositioning plans are sympathetic
to this heritage and intend to reincarnate some of this cultural significance
and make The Capitol the culture hub of Cardiff again. In November, we signed
an agreement for lease with Kommune, a new all-day dining and retail
experiential operator, who are due to open in the Autumn. Public realm works
have also begun to reinstate the historic canal feeder adjacent to our asset
which will enhance the environment and introduce new market kiosks, outdoor
seating and an open-air event space.
· Wallsend: At the end of FY21 we achieved planning consent for the development
of a new medical centre adjacent to our shopping centre, in Wallsend outside
Newcastle. Working closely with North Tyneside Council, we completed on the
sale of the site to Assura, who are now on-site with a target opening date for
the new medical centre in the Autumn. This will provide an important new
community service for the local community and will also improve footfall to
our shopping centre.
· Wisbech: At our shopping centre, in Wisbech, an attractive market town in the
Fenlands, we are working up options to provide a 20,000 sq ft new food store
which will transform this asset and the town centre.
Commercialisation & Car Parking
During the year our car park and commercialisation cashflows have returned to
growth, closing the year +72% up on last year, representing 70% of
pre-COVID-19 levels and continuing to grow. We have been developing some
exciting sustainable initiatives within our commercialisation strategy to
allow us to provide better services to our shoppers that fit their changing
lifestyles including a greater provision of EV chargers, cycle parks and
potential dark kitchens. We completed a long-term partnership with APCOA,
Europe's largest car parking solutions operator, to roll out their innovative
Urban Hub concept out across both shopping centres and retail parks. We have
installed 12 more InPost Lockers with a further 5 in the pipeline and 1 ByBox
locker with another in the pipeline. We are also working with Amazon to
install an additional 4 lockers, bringing the total to 28 across the portfolio
and are planning for 125+ more EV charge points meeting demand from customers
for such. Car park revenues have recovered well and are growing whilst we also
continue to review our car park offer to better reflect customer demand, post
pandemic.
Rent collection
We have continued to see our rent collection rates improve quarter on quarter,
almost restored to pre COVID-19 levels now as our rent collection levels reach
96% for the year. This is reflective of our affordable rents, averaging
£11.74 per sq ft and the resilience of our value and essential retail focused
occupiers.
Rent cash collection rate by quarter
Q1 Q2 Q3 Q4 FY
FY21(1) 85% 93% 96% 93% 92%
FY22 92% 97% 97% 97% 96%
1. Rent cash collection rate relating to FY21 billings includes cash
collected to date in the period since the time of the prior year results
Resilient Retailers Profile
Many of our top retailers are discount led and multi-channel, both of which
are defensive in the current retail climate, with multi-channel retailers far
outperforming their pure-play counterparts as they are better equipped to
fulfil online purchases through their store distribution network and
capitalise on incremental spend from click and collect customers. By contrast,
pure-play retailers are battling to mitigate the cost inflation that they are
experiencing in particular from customer deliveries and returns.
Our retail rental income is well-diversified, with 1,600 leases across over
750 different occupiers, primarily focused on providing essential goods and
services to local communities. Our top occupiers by gross rental income for
the year are B&M, Poundland and Primark, each deliberately accounting for
under 3% of total rent. This diversification, combined with our affordable
rents of £11.74 per sq ft, underpins the sustainability of our income.
As well as face to face meetings we also conduct an annual Occupier Survey and
this year's results reported that 26% rated their general Satisfaction Score
as 10/10, and 67% of respondents rated their general Satisfaction Score as
8/10 or higher. Our occupiers are happy with the sustainability initiatives we
implement at our centres with 82% agreeing that improving the sustainability
performance of their own business is important, with 64% rating this as 'very
important'.
Furthermore, we have been increasing our engagement with our retailers around
our ESG Strategy and our Pathway to Net Zero including how we gather energy on
occupier units. Some 90% of our carbon emissions comes from our occupier units
and we are pleased to report that 66% of space let to our Top 50 retailers is
let to occupiers who have also committed to a Net Zero Pathway.
Top occupiers
Rank Occupier % Total gross income % Total gross income
31 March 2022 31 March 2021
1 B&M 2.9% 2.8%
2 Poundland 2.7% 2.8%
3 Primark 2.6% 2.4%
4 Boots 2.4% 2.5%
5 Superdrug 2.4% 2.8%
6 Marks & Spencer 2.1% 2.0%
7 TK Maxx 2.1% 2.3%
8 Wilko 2.0% 2.6%
9 Iceland 1.6% 1.9%
10 Sainsbury's 1.5% 1.8%
Subtotal 22.3% 23.9%
Finance review
This has been a transformative year for NewRiver, during which we have
repositioned and restructured the business to support its future growth. The
first half of the year was focused on completing the disposal of the Hawthorn
pub business and strengthening our financial position so that we ended the
first half with LTV within guidance, finance cost efficiency improved,
liquidity maintained and debt maturity extended. In the second half we saw the
continued recovery of our underlying operations and, due primarily to the
successful execution of our disposal programme, we ended the year with LTV at
34.1% meaning we are now in a surplus capital position relative to our LTV
guidance. Perhaps most importantly given the write-downs we have experienced
in recent years, and having seen signs of valuation stabilisation in the first
half, we saw the portfolio return to capital growth in the second half.
Underlying Funds From Operations ('UFFO') of £28.3 million compare to £11.5
million delivered in FY21, with retail operations delivering UFFO of £12.8
million in the second half, compared to £7.7 million in the first half. Our
dividend policy is now linked directly to UFFO, which means that as our UFFO
has increased, so too has our dividend. Having declared an interim dividend of
4.1 pence per share in November 2021, the Board is pleased to declare a final
dividend relating to the second half of the financial year of 3.3 pence per
share. This brings the total FY22 dividend declared to 7.4 pence per share,
representing 80% of UFFO.
IFRS loss after tax for FY22 was £26.6 million (FY21: loss of £150.5
million), improved from the loss reported for the first half of the year of
£49.9 million. The first half loss reflected the one-off impact of the loss
on disposal of Hawthorn of £39.7 million and a non-cash reduction in
portfolio valuation of £22.2 million and the position improved in the second
half due to 2.6% or £15.7 million of increase in portfolio valuation, along
with the improvement in UFFO noted above.
Our portfolio was valued on a proportionally consolidated basis at £649
million at 31 March 2022, compared to £974 million at 31 March 2021, with the
reduction due principally to the completion of the disposal of the Hawthorn
pub business which had a valuation of £248 million at 31 March 2021, and
retail disposals totalling £77 million. EPRA Net Tangible Assets per share
were 134 pence at 31 March 2022 (31 March 2021: 151 pence) and IFRS net assets
were £414.1 million (31 March 2021: £460.4 million), with the majority of
the reduction in both measures explained by the disposal of the Hawthorn pub
business and with both showing improvement from the position reported at 30
September 2021 of 131 pence per share and £402.1 million respectively due to
the 2.6% increase in portfolio valuation recorded in the second half.
The increase in portfolio valuation in the second half of FY22 followed the
signs of stabilisation we saw in the first half, where we recorded a 3.1%
like-for-like reduction in the retail portfolio. This compared to reductions
of 9.4% in the first half and 6.1% in the second half of the last financial
year, and means we have seen consistent improvement in valuation performance
half on half over the last 2 years. Importantly in Core shopping centres,
Regeneration shopping centres and Retail parks, which are the resilient retail
sectors on which NewRiver will be focused going forward, we saw an increase in
portfolio valuation of 0.4% in the first half, and 4.8% in the second half of
FY22, with the only sub-sector showing decline in both halves of the year
being the Work Out shopping centres, which now account for only 14% of the
total portfolio and which we are committed to exiting by the end of FY23.
We delivered a total accounting return of -6.6% over the year, which was
impacted by the loss on disposal of the Hawthorn pub business during the first
half, and compares to -24.9% in the prior year. In the second half, with the
portfolio returning to capital growth, we delivered a total accounting return
of +5.4%, which is encouraging in the context of our medium-term objective to
deliver a consistent 10% total accounting return per annum.
Balance sheet repositioned and restructured to support future growth
Throughout FY22 we focused on strengthening our balance sheet position through
the delivery of our disposal programme, principally the completion of the
disposal of Hawthorn, and by engaging with our unsecured bank lenders to
restructure our existing bank facilities. The successful completion of these
activities means that we ended the year in a surplus capital position with
reduced leverage, improved finance cost efficiency, improved debt maturity and
sufficient liquidity to fund growth.
Delivery of disposal programme
We completed the disposal of Hawthorn on 20 August 2021, having first
announced our intention to sell the business on 14 April 2021. The pricing
achieved represented an earnings multiple of 11.5x, based on the estimated
pro-forma EBITDA for the year ended 31 March 2020, which was at the upper end
of our pricing expectations. The disposal was the key contributor to the
reduction in LTV in the first half, from 50.6% presented at 31 March 2021 to
39.4% at 30 September 2021. In the second half we completed £69.5 million of
retail disposals, taking total retail disposals completed during FY22 to
£77.1 million, and being the principal driver for the reduction in LTV to
34.1% at 31 March 2022.
In addition to the significant improvement in our LTV position, the completed
disposal activity was the principal contributor to the improvement in our net
debt position during the year, from £493.3 million at 31 March 2021 to
£221.5 million at 31 March 2022.
Proportionally consolidated March 2022 September 2021 March 2021 March 2020
£m £m £m £m
Cash 88.2 37.3 154.3 82.1
Principal value of gross debt (314.0) (318.1) (653.1) (652.4)
Net debt(1) (221.5) (276.4) (493.3) (563.6)
Drawn RCF - - (170.0) (170.0)
Total liquidity(2) 213.2 162.3 199.3 127.1
Gross debt repaid / (drawn) in period / year 339.1(3) 335.0 (0.7) (142.4)
Loan to Value 34.1% 39.4% 50.6% 47.1%
1. Including unamortised arrangement fees
2. Cash and undrawn RCF. March 2022 and September 2021 columns reflect
the bank facility amendment & restatement signed in October 2021
3. £339.1 million of debt repaid includes £4.1 million of JV &
associate debt which was repaid on disposal of retail parks in Poole and
Newport held by the BRAVO capital partnership; Group debt repaid in FY22 was
£335 million
Debt restructuring
In June 2021, as COVID-19 lockdown measures continued to ease and operational
performance improved, we made the decision to repay £70 million of drawn RCF.
Immediately following the completion of the Hawthorn disposal in August 2021,
with our cash position reflecting the net disposal proceeds, we repaid a
further £100 million of drawn RCF which meant that our RCF was fully undrawn
from that point. In September 2021, as discussions with our bank lenders
around future debt requirements reached a conclusion, we cancelled the £165
million term loan and associated interest rate swaps. We expect that these
actions will reduce annualised debt costs by £7 million per annum, which is
35% of the cash interest proportion of our FY21 finance costs, and we have
benefitted from £3.5 million of these savings in the second half of FY22.
Proportionally consolidated Cash Gross Debt Unamortised fees Net Debt
£m £m £m £m
March 2021 154.3 (653.1) 5.5 (493.3)
June 2021 RCF repayment (70.0) 70.0 - -
August 2021 - Hawthorn proceeds received 196.0 - - 196.0
August 2021 RCF repayment (100.0) 100.0 - -
September 2021 - Term loan cancellation (165.0) 165.0 (0.8) (0.8)
Retail disposal proceeds 68.4 4.1 - 72.5
Other movements(1) 4.5 - (0.4) 4.1
March 2022 88.2 (314.0) 4.3 (221.5)
1. Other movements is formed of operating, financing and investing cash
flows
Upon cancellation of the £165 million term loan in September, our unsecured
bank facilities reduced to a fully undrawn £215 million RCF expiring in
August 2023. In October 2021 we reached agreement with our bank lenders to
reduce the quantum and to extend the maturity of the RCF. Having undertaken
detailed analysis of our future debt requirements, including the maximum level
of possible drawings under a range of portfolio valuation scenarios while
maintaining LTV within our guidance, we believe that a £125 million RCF
provides NewRiver with the appropriate level of liquidity. In addition, we
have negotiated a £50 million accordion which means that, if required, the
facility size can be increased to £175 million in the future, subject to
lender consent.
When the unsecured bank facility was originally negotiated in August 2017, the
agreement was drafted as a five year term expiring in August 2022 with two
'+1' options to extend the term to August 2024, at the consent of lenders. In
September 2018, the first extension option was granted, increasing the
maturity to August 2023, and in October 2021 as part of the RCF negotiation,
we agreed the second extension with our bank lenders, increasing the RCF
expiry to August 2024.
This meant that on agreement of the second extension the RCF had just under
three years to expiry, in-line with the likely term we would have achieved on
a new facility in today's market. As such, in negotiating the extension we
achieved the same result as a new three year facility in the most efficient
way possible, using existing covenants and documentation. The positive net
result is that, despite a challenging lending market in relation to retail
assets and with concerns around inflation and interest rate rises, we have
secured access to up to £175 million of liquidity with no refinancing
requirement until FY25.
The strength of our balance sheet was recognised in December 2021, when Fitch
Ratings reaffirmed NewRiver's Long-Term Issuer Default Rating (IDR) at 'BBB'
with a Stable Outlook, its senior unsecured rating at 'BBB+' and its
Short-Term IDR at 'F2.' The senior unsecured rating applies to NewRiver's
£300 million senior unsecured bond dated 2028.
In summary, we ended the year with the balance sheet repositioned and
restructured to support future growth, with LTV within guidance and our
already conservative covenant headroom significantly improved. Furthermore, we
have worked collaboratively with our bank lenders to right size our bank
facilities to strike the appropriate balance between finance cost efficiency
and liquidity. We have also extended maturity so that our fully unsecured
balance sheet has no refinancing requirement until FY25, and no refinancing
requirement based on drawn debt until FY28.
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
underlying operational profits, excluding one-off or non-cash adjustments such
as portfolio valuation movements and profits or losses on the disposal of
investment properties. 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, which includes the contribution from
Hawthorn up to its disposal on 20 August 2021, 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.
Hawthorn disposal
On 14 April 2021, we announced three strategic priorities, one of which was to
divest ourselves of Hawthorn, our community pub business. The rationale for
this decision was that the Board believed that the pub portfolio was sub-scale
in a sector likely to see significant consolidation opportunities which could
not be unlocked under NewRiver's ownership due to its status as a REIT.
Furthermore, the divestment of Hawthorn would have a beneficial impact on
NewRiver's LTV, potentially reducing this to within our guidance level
depending on the pricing achieved.
On 26 July 2021, we announced that we had agreed the sale of Hawthorn to AT
Brady Bidco Limited ('Admiral Taverns') for gross proceeds of £224.0 million,
and we announced the completion of the disposal on 20 August 2021. The pricing
achieved reflected an earnings multiple of 11.5x based on the estimated
pro-forma EBITDA for the year ended 31 March 2020 which was at the upper end
of our pricing expectations and compares favourably to other transactions
completed in the pub sector in recent years.
The pricing achieved represented a loss of £39.7 million, or a discount of
15%, when compared to book value. This discount is due to both the disposal
being a portfolio transaction, as NewRiver itself experienced as we amassed
the pub portfolio starting in 2013, acquiring individual portfolios at a
blended discount of 15% to their individual asset valuations; and that in
Hawthorn we sold a trading business including the administrative costs of
operating the pub platform, which are not reflected in the individual asset
valuations and which ran at £9.5 million in FY21. Importantly, we reported
LTV of 39.4% at 30 September 2021, which was back within our guidance
predominantly as a result of the disposal.
Following the completion of the sale of Hawthorn, the following additional
table is included to show the proportionally consolidated UFFO figure split
between retail (continuing operations) and Hawthorn (discontinued operations).
Hawthorn is disclosed as a single line entitled "discontinued operations" in
the consolidated statement of comprehensive income. The reconciliation of IFRS
loss after taxation to UFFO in the "Underlying Funds From Operations" section
of this review bridges the figure disclosed within the consolidated statement
of comprehensive income to Hawthorn's UFFO contribution during its period of
ownership (from 1 April to 20 August 2021). The following table shows the UFFO
contribution from Hawthorn on a line-by-line basis.
31 March 2022 31 March 2021
UNDERLYING FUNDS FROM OPERATIONS Retail Hawthorn(1) Total Retail Hawthorn(2) Total
£m
£m
£m
£m
£m £m
Revenue 77.7 18.1 95.8 77.7 18.0 95.7
Property operating expenses (25.9) (10.9) (36.8) (30.5) (17.0) (47.5)
Net property income 51.8 7.2 59.0 47.2 1.0 48.2
Administrative expenses (11.7) (4.2) (15.9) (12.0) (9.5) (21.5)
Other income - 4.8 4.8 2.7 4.5 7.2
Operating profit 40.1 7.8 47.9 37.9 (4.0) 33.9
Net finance costs (19.5) (23.7)
Taxation (0.1) 1.3
Underlying Funds From Operations 28.3 11.5
UFFO per share (pence) 9.2 3.8
Ordinary dividend per share (pence) 7.4 3.0
Ordinary dividend cover 125% 127%
Admin cost ratio 16.9% 24.9%
Admin cost ratio - continuing operations 16.0% 18.1%
Weighted average # shares 307.2 306.4
1. Pubs performance from 1 April 2021 to 20 August 2021 when disposal of
Hawthorn business was completed.
2. Pubs performance from 1 April 2020 to 31 March 2021. This is not
comparable with the shorter period of ownership in FY22 and therefore the
analysis that follows focuses on comparing FY22 performance from 1 April 2021
to 20 August 2021 with performance from H1 FY21.
Hawthorn contributed £7.8 million of operating profit in the first half prior
to its disposal on 20 August 2021, which compares to a £4.0 million loss for
the entire prior year. In order to provide a more meaningful analysis, the
contribution from Hawthorn prior to its disposal has been compared to its
performance during the first half of the prior year of £0.4 million.
On this basis, Hawthorn contributed £7.8 million of operating profit
pre-disposal, which compares to £0.4 million in the first half of the prior
year. The key reason for the increase in contribution is the recognition of an
insurance settlement of £3.3 million prior to disposal in FY22, which related
to income disruption during the first national lockdown in the prior year.
This settlement was recognised in FY22 within Other income, but in effect
replaced Net property income lost in the prior year.
Analysis of contribution from Hawthorn (£m)
Contribution from Hawthorn for the six months ended 30 September 2020 0.4
Income disruption insurance claim 3.3
HY21 contribution proforma incl. insurance claim 3.7
Lifting of Covid restrictions 2.7
Period of ownership (1.9)
HY22 contribution proforma for insurance payment 4.5
Income disruption insurance payment 3.3
Contribution from Hawthorn for period until 20 August 2021 7.8
Removing the impact of the timing of the insurance settlement, the
contribution from Hawthorn increased from £3.7 million in the first half of
the prior year, to £4.5 million in the current year pre-disposal. This
increased contribution reflects the impact of UK-wide operating restrictions
in the prior period, specifically the first national lockdown in Q1 FY21, and
the relaxation of operating restrictions in the current period, the effect of
which was offset by our shorter period of ownership due to the disposal of the
pubs on 20 August 2021.
Underlying Funds From Operations
The following table reconciles IFRS loss after taxation to UFFO, which is the
Company's measure of underlying operational profits.
Reconciliation of loss after taxation to UFFO
31 March 2022 31 March 2021
Retail(1) Hawthorn(2) Total Retail Hawthorn Total
£m £m £m £m £m £m
Loss for the period after taxation 7.0 (33.6) (26.6) (122.1) (28.4) (150.5)
Adjustments
Revaluation of property 12.3 - 12.3 131.5 23.2 154.7
Revaluation of joint ventures' and associates' investment properties (5.8) - (5.8) (1.8) - (1.8)
Loss on disposal of investment properties 5.4 (0.8) 4.6 4.1 1.4 5.5
Changes in fair value of financial instruments and associated close out costs (0.6) - (0.6) 0.1 - 0.1
Loss on disposal of subsidiary - 39.7 39.7 2.2 - 2.2
Acquisition costs - - - - 0.1 0.1
Deferred tax 0.6 1.9 2.5 - (1.4) (1.4)
EPRA earnings 18.9 7.2 26.1 14.0 (5.1) 8.9
Depreciation of property - 0.4 0.4 - 1.1 1.1
Forward looking element of IFRS 9 (0.2) - (0.2) 0.6 - 0.6
Abortive fees - 0.2 0.2 0.3 - 0.3
Restructuring costs(3) 0.9 - 0.9 - - -
Share-based payment charge 0.9 - 0.9 0.6 - 0.6
Underlying Funds From Operations 20.5(4) 7.8 28.3 15.5 (4.0) 11.5
1. Retail UFFO after tax for the year ended 31 March 2022, including all
Group net finance costs. Disclosed as "continuing operations" in the
consolidated statement of comprehensive income
2. Pub operating performance from 1 April 2021 to 20 August 2021 when
disposal of Hawthorn business was completed. Disclosed as "discontinued
operations" in consolidated statement of comprehensive income
3. During the year the Group incurred restructuring costs in relation to
employee related matters following the sale of Hawthorn
4. The Retail column reflects the full impact of the finance costs of
£19.5 million (FY21: £23.7 million) none of which has been allocated to
Hawthorn
Underlying Funds From Operations is represented on a proportionally
consolidated basis in the following table. The following UFFO commentary is
focused on the continuing retail business, and the "Contribution from
Hawthorn" during the year is discussed separately in the "Hawthorn disposal"
section of this review.
31 March 2022 31 March 2021
UNDERLYING FUNDS FROM OPERATIONS Group Adjustments(1) JVs & Associates Proportionally consolidated Proportionally consolidated
£m
£m
£m
£m
£m
Revenue 73.7 - 4.0 77.7 77.7
Property operating expenses (25.5) (0.2) (0.2) (25.9) (30.5)
Net property income 48.2 (0.2) 3.8 51.8 47.2
Administrative expenses (13.4) 1.8 (0.1) (11.7) (12.0)
Other income - - - - 2.7
Operating profit 34.8 1.6 3.7 40.1 37.9
Net finance costs (18.4) (0.1) (1.0) (19.5) (23.7)
Taxation - - (0.1) (0.1) 1.3
Retail UFFO 20.5 15.5
Contribution from Hawthorn(2) (33.6) 41.4 - 7.8 (4.0)
Underlying Funds From Operations 28.3 11.5
UFFO per share (pence) 9.2 3.8
Ordinary dividend per share (pence) 7.4 3.0
Ordinary dividend cover 125% 127%
Admin cost ratio 16.9% 24.9%
Admin cost ratio - continuing ops 16.0% 18.1%
Weighted average # shares 307.2 306.4
1. Adjustments to Group figures to remove non-cash and non-recurring
items, principally forward looking element of IFRS 9 £0.2 million,
share-based payment charge £(0.9) million, restructuring costs £(0.9)
million, changes in fair value of financial instruments and associated close
out costs £0.1 million. Adjustments to Contribution from Hawthorn include
£(39.7) million of loss on disposal, profit on disposal of investment
properties £0.8 million, depreciation on public houses £(0.4) million,
abortive fees and acquisition costs £(0.2) million and Deferred tax £(1.9)
million
2. Pub operating performance from 1 April 2021 to 20 August 2021 when
disposal of Hawthorn business was completed. Disclosed as "discontinued
operations" in consolidated statement of comprehensive income. See "Hawthorn
disposal" section of this review for performance commentary
Net property income
Analysis of retail net property income (£m)
Retail net property income for the year ended 31 March 2021 47.2
Like-for-like rental income (0.5)
Rent and service charge provisions 4.9
Car park and commercialisation income 2.9
Retail NRI recovery 7.3
Asset management fees 0.7
55.2
Net disposals (3.4)
Retail net property income for the year ended 31 March 2022 51.8
On a proportionally consolidated basis, retail net property income was £51.8
million for the year to 31 March 2022 compared to £47.2 million in the year
ended 31 March 2021. The principal reasons for the £4.6 million increase were
the recovery of £7.3 million of net property income previously lost due to
COVID-19 impact, offset by our net disposal activity which reduced net
property income by £3.4 million.
In the year to 31 March 2021, we grouped a number of items directly impacted
by the pandemic under the heading of "COVID-19 impact", showing a reduction in
net property income of £15.2 million during FY21. We have maintained the
categorisation in FY22 as "Retail NRI recovery", which shows that £7.3
million of income disruption has been recovered to date. The key reason for
this recovery is the net reduction year on year of £4.9 million of Retail
rent and service charge provisions, reflecting the conservative approach we
took in the prior year in providing against retail rents and service charge
amounts that we deemed unlikely to be received as a result of COVID, and
reflecting our continued resilient rent collection.
This is partially offset by a modest decline in like-for-like income of £0.5
million, an improvement on £0.7 million at H1 as we have begun to see the
results of positive leasing performance throughout the financial year.
Car park and commercialisation income has increased by £2.9 million,
representing 70% of pre-COVID revenue levels and encouragingly and
importantly we have continued to see a positive trend quarter on quarter
during FY22.
The £0.7 million increase in asset management fee income reflects the
continued growth of our capital partnership with BRAVO, with two further asset
management mandates added in the last 18 months on Sprucefield Retail Park and
The Moor in Sheffield.
Net disposals reduced net property income by £3.4 million, with the capital
partnership transactions noted above, namely the disposal of 90% of
Sprucefield Retail Park into the BRAVO partnership in September 2020 offset
slightly by the acquisition of The Moor in Sheffield (NRR 10% share) in April
2021, contributing a net £1.4 million reduction. The balance of the reduction
is split evenly between the fully annualised impact of the remaining disposals
completed at the end of FY21, and the part year impact of the £77.1 million
of disposals completed during FY22.
Administrative expenses
Retail administrative expenses were £11.7 million in the year to 31 March
2022, a reduction compared to the £12.0 million incurred in the year ended 31
March 2021 as we begin to see the benefit of cost efficiencies unlocked across
the business. During the first half we completed an extensive review of our
cost base, following which we set a target to reduce admin costs by 15% from
the baseline FY21 figure of £12 million. We have targeted unlocking these
savings by the end of FY23, so that we expect to see the fully annualised
impact of these savings in FY24. To date, we have unlocked £1 million of
annualised administrative cost savings, much of the benefit of which will
begin to flow through in FY23.
Other income
There was no other income recognised across the Retail portfolio in the year
ended 31 March 2022, compared to £2.7 million in the year ended 31 March
2021. The prior year figure related primarily to insurance proceeds received
following the fire in October 2018 at the unit formerly occupied by B&M at
Clifton Moor Retail Park in York.
Net finance costs
Net finance costs were £19.5 million in the year to 31 March 2022, compared
to £23.7 million in the year to 31 March 2021. The principal reason for the
reduction was the repayment of £170 million of RCF and cancellation of £165
million of term loan and associated swaps during the first six months of the
year. The RCF was repaid in two tranches of £70 million at the end of June
2021 and £100 million in August 2021 immediately following the Hawthorn
disposal, and the term loan was cancelled in late September 2021. These
actions unlocked a finance cost saving of £7 million per annum versus the
prior year, £3.5 million of which benefitted the year ended 31 March 2022,
with the balance of the saving to follow in FY23.
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, including income and gains within the Hawthorn
business. The majority of the Group's income is therefore tax free as a result
of its REIT status. Our REIT exemption did not extend to profits arising from
the margin made on the sale of drinks within the Hawthorn portfolio during our
period of ownership, or the element of the disposal of the Hawthorn portfolio
relating to non-qualifying property assets, and it does not extend to other
sources of income.
Dividends
At the FY21 results in June 2021, NewRiver announced a new dividend policy
under which dividends equivalent to 80% of UFFO would be declared twice
annually at the Company's half and full year results, calculated with
reference to the most recently completed six-month period.
The Company is a member of the REIT regime whereby profits from its UK
property rental business are tax exempt. The REIT regime only applies to
certain property-related profits and has several criteria which have to be
met, including that at least 90% of our profit from the property rental
business must be paid as dividends. We intend to continue as a REIT for the
foreseeable future, and therefore the policy allows the final dividend to be
"topped-up" 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 2021 the Board declared an interim
dividend of 4.1 pence per share in respect of the six months ended 30
September 2021, based on 80% of UFFO per share of 5.1 pence. The Board has
today declared a final dividend of 3.3 pence per share in respect of the year
ended 31 March 2022, taking the total FY22 dividend declared to 7.4 pence,
equivalent to 80% of UFFO per share of 9.2 pence and an increase of 147%
versus the 3.0 pence per share declared in relation to the year ended 31 March
2021.
The final dividend of 3.3 pence per share in respect of the year ended 31
March 2022 will, subject to shareholder approval at the 2022 AGM, be paid on
2nd September 2022 to shareholders on the register as at 29 July 2022. 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 2022 As at 31 March 2021
JVs & Associates Proportionally consolidated Proportionally consolidated
£m
£m
£m
Group
£m
Properties at valuation(1) 609.1 40.3 649.4 974.2
Right of use asset 75.7 - 75.7 86.5
Investment in JVs & associates 31.9 (31.9) - -
Other non-current assets 0.7 1.5 2.2 3.5
Cash 82.8 5.4 88.2 154.3
Other current assets 18.9 0.7 19.6 27.2
Total assets 819.1 16.0 835.1 1,245.7
Other current liabilities (33.5) (1.4) (34.9) (49.5)
Lease liability (75.7) - (75.7) (84.9)
Borrowings(2) (295.8) (13.9) (309.7) (647.6)
Other non-current liabilities - (0.7) (0.7) (3.3)
Total liabilities (405.0) (16.0) (421.0) (785.3)
IFRS net assets 414.1 - 414.1 460.4
EPRA adjustments:
Goodwill - (0.5)
Deferred tax 0.6 0.7
Fair value financial instruments (0.3) 2.6
EPRA NTA 414.4 463.2
EPRA NTA per share 134p 151p
IFRS net assets per share 135p 150p
LTV 34.1% 50.6%
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 2022, IFRS net assets were £414.1 million, a decrease when
compared to the position as at 31 March 2021 of £460.4 million, but an
increase when compared to the position at 30 September 2021 of £402.1
million. The reduction during the first half was primarily due to the disposal
of Hawthorn, the community pub business, as outlined in the "Hawthorn
disposal" section of this review. Portfolio valuation was also a contributor
to the reduction at the half year, decreasing by 3.1%, but encouragingly
valuations have shown a like-for-like increase of 2.6% during the second half,
which is the key reason for the increase in IFRS net assets between September
2021 and March 2022.
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 11% to £414.4 million, from £463.2 million
at 31 March 2021, and EPRA NTA per share decreased similarly to 134 pence per
share at 31 March 2022 from 151 pence per share at 31 March 2021. The decrease
in EPRA NTA and EPRA NTA per share is primarily due to the Hawthorn disposal
which completed on 20 August 2021. As noted above when discussing IFRS net
assets, both the EPRA NTA and EPRA NTA per share positions improved in the
second half of the financial year, from £402.1 million and 131 pence per
share at 30 September 2021, as the portfolio returned to capital growth in the
second half.
Properties at valuation
Proportionally consolidated properties at valuation was £649.4 million at 31
March 2022, compared to £974.2 million at 31 March 2021, with the reduction
due principally to the completion of the Hawthorn disposal. Portfolio
valuation reduced by 3.1% on a like-for-like basis in the first half, before
increasing by 2.6% in the second half, meaning valuations reduced by a modest
0.9% during FY22. Importantly in Core shopping centres, Regeneration shopping
centres and Retail Parks, which are the resilient retail sectors on which
NewRiver will be focused going forward, we saw an increase in portfolio
valuation of 5.2% during FY22, with the majority of the declines concentrated
in the Work Out shopping centres, which now account for only 14% of the total
portfolio and which we are committed to exiting by the end of FY23.
Debt & financing
Proportionally consolidated
31 March 2022 31 March 2021
Principal value of gross debt £314.0m £653.1m
Weighted average cost of debt(1) 3.4% 3.2%
Weighted average debt maturity - total(2) 4.8 yrs 4.3 yrs
Weighted average debt maturity - drawn only(3) 5.7 yrs 4.5 yrs
1. Cost of debt assuming £125 million revolving credit facility is
fully drawn. Currently entirely undrawn
2. Contracted weighted average debt maturity on total debt
3. Contracted weighted average debt maturity on drawn debt only
The principal value of our gross debt has reduced by £339.1 million since 31
March 2021, principally due to the repayment of £170 million of drawn RCF and
the cancellation of our £165 million term loan following the completion of
the Hawthorn disposal.
Our weighted average cost of debt has increased slightly, because the
unsecured corporate bond now constitutes a larger proportion of our debt
structure following the debt reduction and the coupon on the unsecured bond is
3.5%, hence the weighted average cost of debt has increased towards this
level. Weighted average debt maturity increased to 4.8 years from 4.3 years
because the unsecured bond does not expire until March 2028 and now
constitutes a larger proportion of our debt structure and because we agreed a
one-year RCF extension with our bank lenders immediately in October 2021. On a
drawn basis, i.e. including the bond only, weighted average debt maturity
increases further to 5.7 years.
The strength of our balance sheet was recognised in December 2021, when Fitch
Ratings reaffirmed NewRiver's Long-Term Issuer Default Rating (IDR) at 'BBB'
with a Stable Outlook, its senior unsecured rating at 'BBB+' and its
Short-Term IDR at 'F2.' The senior unsecured rating applies to NewRiver's
£300 million senior unsecured bond dated 2028.
Share premium account
The share premium account balance of £227.4 million at 31 March 2021 was
transferred to retained earnings, following the cancellation of the share
premium account effective from 31 August 2021. See note 25 for further
details.
Financial policies
Our conservative financial policies were put in place in consultation with
shareholders and form a key component of our financial risk management
strategy. We have five financial policies in total, including LTV and interest
cover which also appear as debt covenants on our unsecured bank facilities and
our bond.
During the year ended 31 March 2021, we experienced significant retail
valuation and pub income decline due to COVID-19, which led to us being
outside of policy on LTV, Balance sheet gearing and Net debt: EBITDA. However,
the decisive actions we completed during FY22, together with the continued
resilience of our operational performance and the stabilisation we have seen
in our valuations mean that we are now in compliance with all five policies,
with significant headroom restored.
Financial policy Proportionally consolidated
31 March 2022 30 September 2021 31 March 2021
Loan to value Guidance <40% 34.1% 39.4% 50.6%
Policy <50%
Group
31 March 2022 30 September 2021 31 March 2021
Balance sheet gearing <100% 51% 65% 104%
Proportionally consolidated
FY22 HY22 FY21
Net debt: EBITDA <10x 4.6x 6.9x 14.6x
Interest cover(1) >2.0x 3.5x 2.7x 2.3x
Ordinary dividend cover(2) >100% 125% 125% 127%
1. 12 month look-back calculation, consistent with debt covenant
2. Calculated with reference to UFFO
Our LTV reduced from 50.6% at 31 March 2021 to 39.4% at 30 September 2021
principally due to the disposal of Hawthorn, the community pub business, which
completed during the first half. In the second half, we completed a further
£69.5 million of retail disposals and the portfolio returned to capital
growth, meaning that the LTV reduced further to 34.1% at 31 March 2022.
At this level, LTV is now within our guidance of less than 40%, which means
that we are now in a surplus capital position which we believe leaves us very
well placed given the increasingly uncertain macro-economic outlook. We have
worked hard to achieve this strengthened position, and while we maintain our
guidance, we will not rush to redeploy to the 40% level and instead we intend
to retain some headroom to our guidance in the near-term along with excess
cash in the bank which together give us maximum optionality.
Balance sheet gearing is now also comfortably within guidance having improved
half on half during the financial year, ending the year at 51% compared to
104% at 31 March 2021 and Net debt: EBITDA is also now within our stated
policy, at 4.6x, compared to 14.6x in the year ended 31 March 2021. Again, the
improvements reflect the successful completion of the Hawthorn disposal, with
Net debt: EBITDA also enhanced due to improved operational performance
following the relaxation of Covid restrictions and because EBITDA benefitted
from income from Hawthorn in the first half of the year prior to its disposal.
Interest cover was within policy at 31 March 2021 at 2.3x and has improved
from there to 3.5x due to improved operational performance and the repayment
£335 million of bank facilities during the first half following the Hawthorn
disposal.
The Board has declared a final dividend of 3.3 pence in respect of the year
ended 31 March 2022, taking the total dividend declared up to 7.4 pence, up
147% on last year and in-line with the dividend policy we launched at the full
year last year which links dividends directly to UFFO and means that the
dividend is 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 2022
Single retailer concentration <5% of gross income 2.9% (B&M)
Development expenditure <10% of GAV <1%
Risk-controlled development >70% pre-let or pre-sold on committed 100%
Pub weighting (excluding c-stores) <30% of GAV N/A following Hawthorn disposal
Conclusion
This has been a transformative year for NewRiver, during which the recovery in
our underlying operations has gathered pace and our decisive actions have
fundamentally improved our financial position and future prospects.
Throughout the Covid period, one of the key strengths of NewRiver has been its
unsecured balance sheet, and we have enhanced this strength during the year
through repaying our RCF and extending its maturity, in so doing preserving
valuable liquidity and optionality whilst ensuring that our earliest maturity
on drawn debt is not until 2028. Our LTV position has dramatically improved
and we are now comfortably within all of our financial policies thanks to the
debt reduction exercise we completed during the year and the continued
recovery in our underlying operations.
We are conscious that the macro-economic picture remains challenging, but we
believe that the fundamentals of our business and the actions we have
completed during the year mean we are well placed. Furthermore, we have no
exposure to interest rate fluctuations on our drawn debt and we have the
surplus capital and cash resources to deploy at the right time into the right
opportunities that we are confident will present themselves in the future. We
are encouraged by the strong return to capital growth in our core portfolio in
the second half of the financial year and the total accounting return of 5.4%
that has been delivered as a result of this. As such we are confident in our
ability to deliver our target of a consistent 10% total accounting return in
the medium-term.
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 £0.6 billion portfolio covers 8 million sq ft and comprises 28
community shopping centres and 15 conveniently located retail parks. We have
hand-picked our portfolio to focus on occupiers providing essential goods and
services and to support the development of thriving communities across
the UK, while deliberately avoiding structurally challenged sub-sectors such
as department stores and mid-market fashion. 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 stable income and capital growth to our investors.
NewRiver has a Premium Listing on the Main Market of the London Stock Exchange
(ticker: NRR). Visit www.nrr.co.uk for further information.
Principal risks and uncertainties
Our approach to risk management
Risk is inherent in all businesses and effective risk management is a key
element in the delivery of our strategy and operation of our business model.
The COVID-19 pandemic continued to bring economic and social disruption during
FY22, however our culture and strong governance systems and risk mitigation
have continued to support the business during the year.
Our small workforce encourages flexibility and collaboration across the
business in all areas including risk. The accessibility and flexibility of the
Board and senior staff are particularly pertinent when adapting to emerging
and external risks such as a global pandemic and geopolitical unrest. 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 of the Company and regularly evaluates our appetite for risk,
ensuring our exposure to risk is managed effectively. The Audit Committee
monitors the adequacy and effectiveness of the Company's risk management and
internal controls and supports the Board in assessing the risk mitigation
processes and procedures. The Executive Committee is closely involved with
day-to-day risk management, ensuring that it is embedded within the Company's
culture and values and that there is a delegation of accountability for each
risk to senior management.
Risk appetite
There are multiple risks that could impact our ability to successfully execute
our strategy. The Board generally has a low-risk appetite but recognises that
the external environment in which it operates is inherently risky. Mitigating
actions are therefore agreed for all risks that exceed the Group's risk
appetite. Our experienced leadership team continuously works to mitigate the
risks arising from the external environment.
Significant factors which contribute to the low risk of our business include:
· Maintaining an unsecured balance sheet, with the Company benefitting from a
more diversified debt structure and gaining access to a larger pool of capital
to help achieve our strategic goals
· Our disciplined approach to stock selection with probability risk-adjusted
returns
· Deploying capital in joint ventures, thereby diversifying risk
· A diverse tenant base in which there is no single tenant exposure of more than
3%
· Our experienced Board and senior management
Risk monitoring and assessment including emerging risks
The identification of risks is a continual process. This has been highlighted
more so over the last couple of years with a global pandemic creating
uncertainty across all sectors both economically and socially and other
geopolitical events impacting 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 assists in identifying emerging risks as they develop
and ensures that their impact is continually assessed as they emerge and
progress. All risks on the register are 'scored' in terms of impact and
probability. A risk heat map can be a useful visual aid to understand the
potential impact and probability of each significant risk on a gross basis
prior to mitigation.
Principal risk areas are:
External risks Operational risks
1. Macroeconomic 7. People
2. Political and regulatory 8. Financing
3. Catastrophic external event 9. Asset management
4a. Climate change strategy 10. Development
4b. Climate change impacts on our assets 11. Acquisition
5. Changes in technology and consumer habits and demographics 12. Disposal
6. Cyber Security
Risk assessment during the year
The general risk environment in which the Company operates remained uncertain
throughout the year. While there was an easing of restrictions during April
2021 with non-essential retail re-opening, uncertainty remained over the year
with a number of COVID-19 measures still in place. The winter saw 'Plan B'
measures introduced with the spread of the Omicron variant until all
restrictions were completely lifted in the UK on 1 April 2022. Wider concerns
around the deterioration of the UK retail market and continued political and
economic uncertainty both in the UK and globally have remained or increased
during the year.
External Risks
Risk and impact Monitoring and management Change in risk assessment during the period
1. Macroeconomic · The Board regularly assesses the Company's strategy in the context of · Macroeconomic risk has increased during the year and is considered a
the wider macroeconomic environment. This continued review of strategy focuses medium to high impact risk with a medium to high probability.
Economic conditions in the UK and changes to fiscal and monetary policy may on positioning our portfolio for the evolving economic situation.
impact market activity, demand for investment assets, the operations of our
· Retail sales rebounded after each lockdown however sentiment has been
occupiers or the spending habits of the UK population. · The Board and management team consider updates from external impacted by cost of living and energy cost worries and inflation fears.
advisers, reviewing key indicators such as forecast GDP growth, employment
rates, interest rates and Bank of England guidance and consumer confidence · Valuations have increased in the second half and the disposal of the
indices. Hawthorn business and subsequent debt repayment means our covenant and policy
headroom has also improved.
· Our portfolio is focused on resilient market sub-sectors such as
essential retailers. · Higher inflation could fuel wage growth and costs leading to rate
increases above current forecasts.
· Through regular stress testing of our portfolio we ensure our
financial position is sufficiently resilient. · The Bank of England is expecting inflation to rise further this year
and the economy to slow. However with interest rate adjustments the Bank of
· Closely monitoring rent collection and cash flow. England expects inflation to fall next year and be close to its 2% target in
around two years' time.
2. Political and regulatory · The Board regularly considers political and regulatory developments · Political and regulatory risk has decreased slightly during the year
and the impact they could have on the Company's strategy and operating and is considered a medium to high impact risk with a medium to high
Changes in UK Government policy, the adverse effects of Brexit on our tenants, environment. probability.
or the impact of political uncertainty on consumers' retail and leisure spend.
· External advisers, including legal advisers, provide updates on · Political uncertainty surrounding COVID-19 has improved with the roll
emerging regulatory changes to ensure the business is prepared and is out of vaccinations and opening up of all restrictions.
compliant.
· There still remain uncertainties around the longer-term impacts of
· We regularly assess market research to gauge the impact of regulatory Brexit and also uncertainties relating to the possibility of Scottish
change on consumer habits. Devolution.
· We carry out stress testing on our portfolio in relation to · The Coronavirus Act imposed a moratorium on landlords' ability to
regulatory changes which may impact our operations or financial position. forfeit leases of commercial property for non-payment of rent in England and
Wales and Northern Ireland. This moratorium expired on 31 March 2022.
· Where appropriate, we participate in industry and other
representative bodies to contribute to policy and regulatory debate. · There are further uncertainties around the Government review of the
Individual ExCo constituents are members of the BPF and the High Street Task Landlord and Tenant Act 1954.
Force.
· There are now also uncertainties around the impact of the Levelling
Up and Regeneration Bill.
· The impact on the property market of the Register of Overseas
Entities owning UK property is currently unclear.
3. Catastrophic external event · The Board has developed a comprehensive crisis response plan which · Catastrophic external event risk has been decreased during the year
details actions to be taken at a head office and asset-level. and is considered a high impact risk with a medium to high probability.
An external event such as civil unrest, a civil emergency including a
large-scale terrorist attack or pandemic, could severely disrupt global · The Board regularly monitors the Home Office terrorism threat level · The impact of COVID-19 caused unprecedented economic and operational
markets and cause damage and disruption to our assets. and other security guidance. disruption. We mitigated the impact through our portfolio positioning focusing
on essential goods and services, our cash position and liquidity and our
· The Board regularly monitors advice from the UK Government regarding active approach to asset management.
pandemic responses and emergency procedures at our assets are regularly tested
and enhanced in-line with the latest UK Government guidance. · COVID-19 has also demonstrated the effectiveness of home working for
the business, which has ensured preparedness for any future lockdowns or
· We have robust IT security systems which cover data security, restrictions.
disaster recovery and business continuity plans.
· The successful roll out of vaccinations and the opening up of
· The business has comprehensive insurance in place to minimise the restrictions was positive and our operational performance has proved the
cost of damage and disruption to assets. resilience of our portfolio.
· The National Terrorism Threat Level is substantial and the impact
from the war in Ukraine is unclear.
4a. Climate change strategy · We have a comprehensive ESG programme which is regularly reviewed by · The climate change risk has been separated into two risks to focus on
the Board and Executive Committee. A detailed overview of its constituent parts (Climate change strategy and Climate change impacts on
A failure to implement appropriate climate risk management measures, comply
our assets).
with evolving regulations and meeting our ESG targets could impact the the programme can be found in the ESG section of this report.
operation and value of our assets, leading to a risk of asset obsolescence,
· Climate change risk remained the same during the period and is
reputational damage and erosion of investor value. · One of the key objectives of the programme is to minimise our impact considered a medium to high impact risk with a medium to high probability.
on the environment through reducing energy consumption, sourcing from
renewable sources and increased recycling. · ESG has risen up the agenda of many stakeholders and expectations of
compliance with best practice have increased.
· We have developed our Pathway to Net Zero Carbon and set new medium
and long-term targets in line with the latest science-based targets. · Regulatory requirements have also increased during the period, in
addition to the scoring criteria for certain ESG benchmarks such as GRESB.
· ESG performance is independently reviewed by our external
environmental consultants and is measured against applicable targets and · Our ESG Committee pre-empted these changes and our initiatives and
benchmarks. disclosure continue to evolve in-line with best practice.
· We continue to report in line with TCFD requirements. · ESG is embedded into capital allocations and is considered for all
future acquisitions.
4b. Climate change impacts on our assets · We regularly assess assets for environmental risk and ensure · The climate change risk has been separated into two risks to focus on
sufficient insurance is in place to minimise the impact of environmental its constituent parts (Climate change strategy and Climate change impacts on
Changes in the way consumers live, work, shop and use technology could have an incidents. our assets).
adverse impact on demand for our assets.
· In conjunction with insurers flood risk assessments have been carried · Climate change impacts on our assets risk remained the same during
out at all of our assets and considered low. the period and is considered a medium to high impact risk with a medium to low
probability.
· Although exposure to extreme weather events is a near-term risk,
other climate impacts such as heat stress and sea level rises are medium-term
or long-term time horizons. Whilst their impact is high, their probability
imminently is low. Climate impacts are embedded into capital allocation
decisions and considered for all future acquisitions of both equipment
installed at the assets and for the assets themselves.
5. Changes in technology and consumer habits and deomographics · The Board and Executive Committee regularly assess our overall · Changes in technology and consumer habits risk has increased during
corporate strategy and acquisition, asset management and disposal decisions in the year and is considered a low-medium impact risk with a high probability.
Changes in the way consumers live, work, shop and use technology could have an the context of current and future consumer demand. Our strategy is designed to
adverse impact on demand for our assets. focus on resilient assets that take into account these future changes. · Although COVID-19 lockdown restrictions significantly increased home
working and online shopping, we expect some of this to unwind in the short
· We closely assess the latest trends reported by CACI, our research term but consumer habits will evolve over the medium term.
provider, to ensure we are aligned with evolving consumer trends.
· Our portfolio is focused on providing essential retail to local
· Our retail portfolio is focused on essential spending on goods and communities, which continues to mitigate the impact of online retail on our
services which are resilient to the growth of online retail. portfolio.
· Our retail parks are ideally positioned to help retailers with their · While COVID-19 may have accelerated the trend to online shopping this
multi-channel retail strategies. provides opportunities for our portfolio, particularly retail parks and local
community shopping centres.
· 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. · This was a new Principal Risk in 2021 and has remained unchanged
during the year. Whilst this risk has always been recorded and monitored on
A cyber attack could result in the Group being unable to use its IT systems · Multiple third-party supplier programmes are used which have their own our risk register its prominence was elevated in 2021 because one of our
and/or losing data. This could delay reporting and divert management time. security systems and are independently audited by Deloitte and ISO2000 third-party suppliers experienced a cyber security incident. No data breaches
This risk could be increased due to many employees working from home during accredited. were found but our normal reporting systems were slower while the incident was
the pandemic.
being investigated.
· ExCo receives quarterly reporting on IT matters.
· This risk could also be increased due to employees working from home
· Security protocols are in place to ensure swift changes to data access during the pandemic. Staff continue to work from home on a flexible basis.
following staff changes and authority limit access.
· We have reviewed our IT systems and have enhanced a number of areas
during the year.
· Cyber insurance cover is in place.
· We have recently carried out an external review of the Group's IT
security and systems as part of our internal audit process.
Operational Risks
Risk and impact Monitoring and management Change in risk assessment during the period
7. People · Attracting, retaining and developing talent is core to our HR · People risk has increased during the year and is considered a medium
strategy, which is regularly reviewed by the Board and Executive Committee. impact risk with a medium probability.
The inability to attract, retain and develop our people and ensure we have the
right skills in place could prevent us from implementing our strategy. · We undertake an extensive Employee Engagement Survey once a year to · It remains a challenging operating environment for the Company, which
gauge employee views on leadership, company culture, health and wellbeing, could present some issues in attracting and retaining talent. Inflation will
personal growth and benefits and recognition. This informs any changes to HR also put pressure on salary costs and demands. This impact is mitigated by an
policy. active employee engagement programme and the alignment of reward with both
individual and Company-level performance.
· We regularly benchmark our pay and benefits against those of peers and
the wider market. · We continue to focus on staff wellbeing and actively seek regular
feedback from staff.
· Succession planning is in place for all key positions and is reviewed
regularly by the Nomination Committee. · We also offer many forms of flexible working including job share,
annualised hours, variation of hours and working from home. Since the pandemic
· Longer notice periods are in place for key employees. we have implemented a policy of working enabling staff to work from home a
number of days a week should they choose to do so.
· Our recruitment policies consider the needs of the business today and
our aspirations for the future, whilst ensuring our unique corporate culture
is maintained.
8. Financing · The Board regularly assesses Company financial performance and · Financing risk has reduced during the year and is considered a low to
scenario testing, covering levels of gearing and headroom to financial medium impact risk with a low to medium probability.
If gearing levels become higher than our risk appetite or lead to breaches in covenants and assessments by external rating agencies.
bank covenants this would impact our ability to implement our strategy. The
· Although macroeconomic developments, particularly in the wake of
business could also struggle to obtain funding or face increased interest · The Company has a programme of active engagement with key lenders and COVID-19 and an increase in inflation have impacted financial markets, the
rates as a result of macroeconomic factors. shareholders. strength of the Company's unsecured balance sheet means we have significantly
mitigated the risk of not being able to secure sufficient financing.
· The Company has a wholly unsecured balance sheet, which mitigates the
risk of a covenant breach caused by fluctuations in individual property · The strength of the Company Balance sheet improved further with the
valuations. sale of the Hawthorn Pub business in August 2021.
· The Company has long-dated maturity on its debt, providing sufficient · The Company has also extended the maturity on its undrawn Revolving
flexibility for refinancing. Credit Facility to August 2024.
· Working capital and cashflow analysis and detailed forward assessments · There is no exposure to interest rate rises on drawn debt.
of cashflows are regularly reviewed by the Executive Committee.
· Through its asset disposal programme strategy the Company has managed
· Our credit rating is independently assessed by Fitch Ratings at least to mitigate the impact COVID-19 might otherwise have had on its cash and
annually liquidity position and LTV.
9. Asset management · Asset-level business plans are regularly reviewed by the asset · Asset management risk has decreased during the year and is considered
management team and the Executive Committee and detailed forecasts are updated a medium to high impact risk with a medium probability.
The performance of our assets may not meet with the expectations outlined in frequently.
their business plans, impacting financial performance and the ability to
· The COVID-19 pandemic placed restrictions on the operations of our
implement our strategies. · The Executive Committee reviews whole portfolio performance on a occupiers and impacted performance and rent collection at our assets.
quarterly basis to identify any trends that require action.
· These have improved greatly and are now close to pre-pandemic levels.
· Our asset managers are in contact with centre managers and occupiers
on a daily basis to identify potential risks and improvement areas. · There have, however, been a number of high-profile retail failures
since the beginning of the pandemic, including amongst our occupier base.
· Revenue collection is reviewed regularly by the Executive Committee.
· Our COVID-19 response was focused on supporting occupiers and ensuring
· Retailer concentration risk is monitored, with a guideline that no businesses could emerge from the crisis in robust financial shape.
retailer will account for more than 5% of gross income (currently largest
retailer is B&M accounting for 2.9% of gross income) · The successful roll out of vaccinations and the opening up of
restrictions was positive and our operational performance has proved the
resilience of our assets.
10. Development · We apply a risk-controlled development strategy through negotiating · Development risk has remained unchanged through the period and is
long-dated pre-lets for the majority of assets. considered a low to medium impact risk with a low to medium probability.
Delays, increased costs and other challenges could impact our ability to
pursue our development pipeline and therefore our ability to profitably · All development is risk-controlled and forms only 3% of the portfolio · Supply issues and increases in costs of building supplies will impact
recycle development sites and achieve returns on development. by value. developments, as they remain a small part of portfolio the overall impact is
low.
· Capital deployed is actively monitored by the Executive Committee,
following detailed due diligence modelling and research. · A number of our regeneration assets have been sold which decreases the
proportion of assets focused on development which inherently reduces risk
· An experienced development team monitors on-site development and cost exposure.
controls.
· On large scale developments where construction is more than 12 months
we look to carry out the project in partnership and/or forward sell.
11. Acquisition · We carry out thorough due diligence on all new acquisitions, using · Acquisition risk has increased through the year and is considered a
data from external advisers and our own rigorous in-house modelling before low to medium impact risk with a medium probability.
The performance of asset and corporate acquisitions might not meet with our committing to any transaction. Probability-weighted analysis takes account of
expectations and assumptions, impacting our revenue and profitability. these risks. · The lack of supply and relative price of some assets may reduce
opportunities for acquisition.
· Acquisitions are subject to approval by the Board and Executive
Committee, who are highly experienced in the retail sector. · Having sold the Hawthorn pub business and completed planned retails
disposals, we are now in the position to deploy capital in line with our
· We have the ability to acquire in joint ventures, thereby sharing returns-focussed approach to capital allocation and subject to our LTV
risk. guidance.
12. Disposal · Our portfolio is focused on high-quality assets with low lot sizes, · Disposal risk has remained unchanged during the year and is considered
making them attractive to a wide pool of buyers. a low to medium impact risk with a medium probability.
We may face difficulty in disposing of assets or realising their fair value,
thereby impacting profitability and our ability to reduce debt levels or make · Assets are valued every six months by external valuers, enabling · National and geopolitical uncertainty and COVID-19 increased market
further acquisitions. informed disposal pricing decisions. uncertainty are causing some purchasers to reconsider or delay acquisition
decisions.
· Disposals are subject to approval by the Board and Executive
Committee, who are highly experienced in the retail sector. · We have an active and successful disposal programme, with the volume
of transactions being completed naturally increasing disposal risk. The
· Our portfolio is large and our average asset lot size is small, average lot size however is lower than most in the market so tends to be more
meaning that each asset represents only a small proportion of revenues and liquid.
profits, thereby mitigating the impact of a sale not proceeding.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2022
Year ended 31 March 2022 Year ended 31 March 2021
(Re-presented)*
Continuing Operations Notes Operating Fair value adjustments Total Operating Fair value adjustments Total
and
2022
2022
and
2021
2021
financing
£m
£m
financing
£m
£m
2022
2021
£m
£m
Revenue 4 73.7 - 73.7 73.1 - 73.1
Property operating expenses** 5 (25.5) - (25.5) (30.1) - (30.1)
Net property income 48.2 - 48.2 43.0 - 43.0
Administrative expenses 6 (13.4) - (13.4) (12.7) - (12.7)
Other income 7 - - - 2.7 - 2.7
Share of income from joint ventures 15 1.1 2.9 4.0 2.3 1.2 3.5
Share of income from associates 16 0.2 2.9 3.1 0.1 0.6 0.7
Net property valuation movement 14 - (12.3) (12.3) - (131.5) (131.5)
Loss on disposal of subsidiary 8 - - - (2.2) - (2.2)
Loss on disposal of investment properties 9 (4.2) - (4.2) (4.1) (4.1)
-
Operating profit / (loss) 31.9 (6.5) 25.4 29.1 (129.7) (100.6)
Finance income 10 1.4 - 1.4 0.3 - 0.3
Finance costs 10 (19.8) - (19.8) (23.1) - (23.1)
Profit / (loss) for the year before taxation 13.5 (6.5) 7.0 6.3 (129.7) (123.4)
Taxation 11 - - - 1.3 - 1.3
Profit / (loss) for the year after taxation from continuing operations 13.5 (6.5) 7.0 7.6 (129.7) (122.1)
Loss for the year after taxation from discontinued operations 3 (31.7) (1.9) (33.6) (6.6) (21.8) (28.4)
(Loss) / profit for the year (18.2) (8.4) (26.6) 1.0 (151.5) (150.5)
Other comprehensive loss
Revaluation of property, plant and equipment - discontinued operations - (0.5)
Other movement- discontinued operations - 0.2
Total comprehensive loss for the year (26.6) (150.8)
Comprehensive loss for the year - discontinued operations (33.6) (28.7)
Comprehensive profit / (loss) for the year - continuing operations 7.0 (122.1)
Total comprehensive loss for the year (26.6) (150.8)
Earnings / (loss) per share - continuing operations
Basic (pence) 12 2.3 (39.8)
Diluted (pence) 12 2.3 (39.8)
Loss per share
Basic (pence) 12 (8.6) (49.1)
Diluted (pence) 12 (8.6) (49.1)
*Re-presentation relates to the sale of Hawthorn which was completed on 20
August 2021 and has been presented as a discontinued operation above, please
see note 3. All other activities derive from continuing operations of the
Group.
**Included in property operating expenses is a loss allowance reversal of
£0.3 million (2021: £7.0 million charge (re-presented)) of expected credit
loss relating to debtors for continuing operations.
CONSOLIDATED BALANCE SHEET
As AT 31 March 2022
Notes 2022 2021
£m
£m
Non-current assets
Investment properties 14 684.6 934.9
Right of use asset 24 0.2 3.5
Investments in joint ventures 15 24.0 25.6
Investments in associates 16 7.9 5.3
Property, plant and equipment 17 0.7 54.1
Goodwill - 0.5
Total non-current assets 717.4 1,023.9
Current assets
Trade and other receivables 18 18.9 26.0
Cash and cash equivalents 21 82.8 150.5
Total current assets 101.7 176.5
Assets held for sale 19 - 25.5
Total assets 819.1 1,225.9
Equity and liabilities
Current liabilities
Trade and other payables 22 33.5 46.9
Lease liability 24 0.7 0.7
Total current liabilities 34.2 47.6
Non-current liabilities
Derivative financial instruments 20 - 2.6
Deferred tax liability 11 - 0.7
Lease liability 24 75.0 84.9
Borrowings 23 295.8 629.7
Total non-current liabilities 370.8 717.9
Net assets 414.1 460.4
Equity
Share capital 25 3.1 3.1
Share premium 25 1.1 227.4
Merger reserve 25 (2.3) (2.3)
Retained earnings and other reserves 25 412.2 232.2
Total equity 414.1 460.4
Net Asset Value (NTA) per share (pence)
Basic 12 135p 150p
Diluted 12 134p 150p
EPRA NTA 12 134p 151p
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 2022
2022 2021
£m
£m
Cash flows from operating activities
Profit / (loss) for the year before taxation - continuing operations 7.0 (123.4)
Loss for the year before taxation - discontinued operations (31.7) (29.8)
Loss for the year before taxation (24.7) (153.2)
Adjustments for:
Loss on disposal of investment property 3.4 5.5
Loss on disposal of Hawthorn 39.7 -
Loss on disposal of subsidiary - 2.2
Net valuation movement 12.3 154.7
Net valuation movement in joint ventures (2.9) (1.2)
Net valuation movement in associates (2.9) (0.6)
Share of income from joint ventures (1.1) (2.3)
Share of income from associates (0.2) (0.1)
Net interest expense 18.4 22.8
Rent free lease incentives (1.4) (2.6)
Movement in expected credit loss (0.3) 7.1
Amortisation of legal and letting fees 0.1 0.2
Depreciation on property plant and equipment 1.2 1.9
Share based-payment expense 0.9 0.6
Cash generated from operations before changes in working capital 42.5 35.0
Changes in working capital
Decrease / (increase) in trade and other receivables 9.7 (8.2)
Increase in payables and other financial liabilities 7.6 2.2
Cash generated from operations 59.8 29.0
Interest paid (20.3) (22.1)
Corporation tax received - 1.7
Dividends received from joint ventures 5.6 -
Dividends received from associates 2.0 -
Net cash generated from operating activities 47.1 8.6
Cash flows from investing activities
Cash proceeds net of cash disposed and transaction costs from disposal of 196.0 38.5
subsidiaries
Interest income 0.4 0.3
Investment in associate investments (4.0) (2.4)
Disposal of associate investments 2.5 -
Purchase of investment properties (7.3) -
Disposal of investment properties 65.2 40.1
Development and other capital expenditure (9.6) (10.0)
Purchase of plant and equipment (3.0) (3.3)
Net cash generated from investing activities 240.2 63.2
Cash flows from financing activities
Repayment of bank loans (335.0) -
Repayment of principal portion of lease liability (0.7) (0.7)
Dividends paid - ordinary (19.3) (1.4)
Net cash generated used in financing activities (355.0) (2.1)
Cash and cash equivalents at beginning of the year 150.5 80.8
Net (decrease) / increase in cash and cash equivalents (67.7) 69.7
Cash and cash equivalents at 31 March 82.8 150.5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2022
Notes Share capital Share premium Merger reserve Retained earnings and other reserves Total
£m
£m
£m
£m
£m
As at 1 April 2020 3.1 227.4 (2.3) 382.4 610.6
Loss for the year after taxation
- continuing operations - - - (122.1) (122.1)
- discontinued operations - - - (28.4) (28.4)
Loss for the year after taxation - - - (150.5) (150.5)
Other movements - - - 0.2 0.2
Revaluation of property, plant and equipment 17 - - - (0.5) (0.5)
Total comprehensive loss for the year - - - (150.8) (150.8)
Transactions with equity holders
Share-based payments - - - 0.6 0.6
As at 31 March 2021 3.1 227.4 (2.3) 232.2 460.4
Profit / (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)
Transactions with equity holders
Transfer from share premium 25 - (227.4) - 227.4 -
Issue of new shares - 1.1 - - 1.1
Share-based payments - - - 0.9 0.9
Dividends paid - - - (21.7) (21.7)
As at 31 March 2022 3.1 1.1 (2.3) 412.2 414.1
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
General information
NewRiver REIT plc (the 'Company') and its subsidiaries (together the 'Group')
is a property investment group specialising in commercial real estate in the
UK. The Company is registered and domiciled in the UK and the registered
office of the Company is 16 New Burlington Place, London, W1S 2HX.
Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all years presented.
Basis of preparation
These consolidated financial statements have been prepared on the going
concern basis and in accordance with the Disclosure and Transparency Rules of
the Financial Conduct Authority and in accordance with UK-adopted
International Accounting Standards and with the requirements of the Companies
Act 2006.
Discontinued operations
On 20 August 2021, the Group sold its pub segment, Hawthorn, which constituted
a major line of business. As such the comparative information has been
re-presented to show the results of Hawthorn as a discontinued operation.
Further details can be found in notes 3 and 8.
Going concern
The Group's going concern assessment considers the Group's principal risks,
and is dependent on a number of factors, including cashflow and liquidity,
continued access to borrowing facilities and the ability to continue to
operate the Group's unsecured debt structure within its financial covenants.
The Group's balance sheet is unsecured, which means that none of its debt is
secured against any of its property assets. This type of financing affords
significant operational flexibility, and consists of a £125 million (plus
£50 million accordion, at lenders' consent) of undrawn revolving credit
facility ('RCF') and a £300 million unsecured corporate bond. The undrawn RCF
matures in August 2024, and the bond in March 2028. The debt has financial
covenants that the Group is required to comply with including an LTV covenant
of less than 60% on the RCF (65% on the bond), and a 12 month historical
interest cover ratio of more than 1.75x on the RCF (1.50x on the bond), and
both sources of unsecured financing have cure provisions in the event of a
breach.
The going concern assessment is based on a 12 month outlook from the date of
the approval of these financial statements, using the Group's Board approved
budget, flexed to create a reasonable worst case scenario, which includes the
key assumptions listed below.
- Capital values to remain flat throughout the forecast horizon, in
contrast to the growth noted in 2H22 of +2.6% across the portfolio and the
upward trend noted in the Core and Retail park assets across FY22;
- A 15% reduction in net income. This reflects a significant downside
to rental agreements re-geared or re-negotiated throughout the pandemic given
that 94% of rents relating to FY21 were collected or alternative payments
agreed at the time of reporting despite the multiple national lockdowns in
place throughout the year; FY22 rent collection or alternative payments agreed
is 96%, whilst 1Q23 rent collection or alternative payments agreed is 91% at
the time of reporting demonstrating continued high rent collection rates
during the Covid recovery period;
- No disposal proceeds are assumed throughout the forecast period
which have not yet completed at the time of reporting, despite the completion
of £77 million of disposals during FY22, and £20 million of retail disposals
now under offer or exchanged and a further £17m in active discussions at the
date of approval of these financial statements. Similarly, no assumption is
made for the deployment any surplus capital available as at 31 March 2022 and
the growth and returns that would otherwise generate.
Under this scenario, the Group 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's drawn debt covenants could absorb a
further valuation decline of 38% and a further 39% reduction in annual net
rental income before breaching covenant levels. The Group 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 is presented within investing cash flows;
interest paid is presented within operating cash flows. The acquisitions of
investment properties are disclosed as cash flows from investing activities
because this most appropriately reflects the Group's business activities.
Preparation of the consolidated financial statements
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries controlled by the Company, made up to 31
March each year. Control is achieved when the Company is exposed, or has
rights, to variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the investee.
The consolidated financial statements account for interest in joint ventures
and associates using the equity method of accounting per IFRS 11 and IAS 28
respectively. The financial statements for the year ended 31 March 2022 have
been prepared on the historical cost basis, except for the revaluation of
investment properties, the revaluation of property, plant and equipment and
derivatives which are held at fair value through profit and loss.
New accounting polices
The Group has adopted the following amendments for the first time in the year
ended 31 March 2022:
- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS
39, IFRS 7, IFRS 4 and IFRS 16)
- Covid-19-Related Concessions beyond 30 June 2021 (Amendment to IFRS
16)
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 2021.
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 2023
- Annual Improvements to IFRS Standards 2018-2020
- Property, Plant and Equipment - Proceeds before Intended Use
(Amendments to IAS 16)
- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS 37)
- Reference to the Conceptual Framework (Amendments to IFRS 3)
Effective for the year ended 31 March 2024
- 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 IAS12)
- Disclosure of Accounting Policies (Amendments to IAS 1)
No material impact is expected upon the adoption of these standards.
Revenue recognition
Rental income
Rental income from fixed and minimum guaranteed rent reviews is recognised on
a straight-line basis over the entire lease term. Where such rental income is
recognised ahead of the related cash flow, an adjustment is made to ensure the
carrying value of the related property including the accrued rent does not
exceed the external valuation. Initial direct costs incurred in negotiating
and arranging a new lease are amortised on a straight-line basis over the
period from the date of lease commencement to the expiry date of the lease.
Where a rent-free period is included in a lease, this is recognised over the
lease term, on a straight-line basis, as a reduction of rental income.
Where a lease incentive payment, or surrender premiums are paid to enhance the
value of a property, it is amortised on a straight- line basis over the period
from the date of lease commencement to the expiry date of the lease as a
reduction of rental income. It is management's policy to recognise all
material lease incentives and lease incentives greater than six months. Upon
receipt of a surrender premium for the early determination of a lease, the
profit, net of dilapidations and non-recoverable outgoings relating to the
lease concerned, is accounted for from the effective date of the modification,
being the date at which both parties agree to the modification, considering
any prepaid or accrued lease payments relating to the original lease as part
of the lease payments for the new lease.
Letting costs are recognised over the lease term on a straight line basis as a
reduction of rental income.
Service charge income
Service charge income is recognised in accordance with IFRS 15. This income
stream is recognised in the period 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.
Managed pub income
Managed pub income relates to income received in the pub business relating to
food, drinks and machine income. The revenue from drink and food is recognised
at the point at which the goods are provided. The revenue earned from machines
is recognised in the period in which it relates.
In the Group's pub business, revenue is measured at the fair value of the
consideration received or receivable and represents amounts receivable for
goods and services provided in the normal course of business, net of
discounts, VAT and other sales-related taxes. This forms part of discontinued
operations.
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.
Pub turnover related rent
Pub turnover related rent relates to the margin earnt on the sale of wet
products and is recognised at the fair value of the consideration received or
receivable for goods and services provided in the normal course of business.
This forms part of discontinued operations in the current and prior year.
Other income
Other income is recognised in accordance with IFRS 15. This income stream is
recognised in the period in which it is earnt and when performance obligations
are made.
Government grants
Monetary resources transferred to the Group by the government, government
agencies or similar bodies are recognised at fair value, when the Group is
reasonably certain that the grant will be received. Grants are recognised in
the profit and loss account within other income, on a systematic basis, over
the same period during which the expenses, for which the grant was intended to
compensate, are recognised.
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 at 3.2%. The finance cost is charged to profit or loss over the lease
period so as to produce a constant rate of interest on the remaining balance
of the liability for each period.
The ROU asset is depreciated over the shorter of the lease term or the useful
life of the underlying asset. The ROU asset is subject to testing for
impairment if there is an indicator of impairment. ROU assets that are not
classified as investment properties are disclosed on the face of the
consolidated balance sheet on their own line, and the lease liability included
in the headings current and non-current liabilities on the consolidated
balance sheet.
Where the ROU asset relates to 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 £3,000. 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 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
at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily
convertible into known amounts of cash and which are subject to an
insignificant risk of change in value, and bank overdrafts. Bank overdrafts
are shown within borrowings in current liabilities in the consolidated balance
sheet.
Financial liabilities
Financial liabilities are classified at fair value through profit or loss or
as other liabilities. A financial liability is derecognised when the
obligation under the liability is discharged or cancelled or expires.
All loans and borrowings are classified as other liabilities. Initial
recognition is at fair value less directly attributable transaction costs.
After initial recognition, interest bearing loans and borrowings are
subsequently measured at amortised costs using the effective interest method.
Financial liabilities included in trade and other payables are recognised
initially at fair value and subsequently at amortised cost.
The 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 values of derivative financial liabilities are determined as follows:
Interest rate swaps and caps are measured using the midpoint of the yield
curve prevailing on the reporting date. The valuations do not include accrued
interest from the previous settlement date to the reporting date. The fair
value represents the net present value of the difference between the
contracted rate and the valuation rate when applied to the projected balances
for the period from the reporting date to the contracted expiry dates.
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's operations were organised into two operating segments, being
investment in retail property and in pubs. The retail investments comprise
shopping centres, retail parks and high street stores. On 20 August 2021, the
Group disposed of its pub segment. This has therefore been classified as
discontinued operations. The pub investments consisted of community public
houses. All of the Group's operations are in the UK and therefore no
geographical segments have been identified.
The relevant gross revenue, net rental income and property and other assets,
being the measures of segment revenue, segment result and segment assets used
by the management of the business, are set out below. The results include the
Group's share of assets and results from properties held in joint ventures and
associates.
The segmental information is presented for the period the Group owned the pubs
up to 20 August 2021. Since this date, the Group is a single segment business
focused on retail.
For ease of presentation, the breakdown of the pubs results presented as a
single line on the face of the Consolidated Statement of Comprehensive Income
are set out in the table below.
Segment revenues and result 2022 2021
Retail Pubs Group Retail Pubs Group
£m £m £m £m £m £m
Property rental and related income 57.7 2.3 60.0 61.1 4.4 65.5
Managed pub income - 15.8 15.8 - 9.1 9.1
Turnover related rent - - - - 4.5 4.5
Service charge income 14.6 - 14.6 11.6 - 11.6
Amortisation of tenant incentives and letting costs (1.3) - (1.3) (1.8) - (1.8)
Asset management fees 1.9 - 1.9 1.2 - 1.2
Surrender premiums and commissions 0.8 - 0.8 1.0 - 1.0
Segment revenue 73.7 18.1 91.8 73.1 18.0 91.1
Service charge expense (20.3) - (20.3) (17.5) - (17.5)
Rates (1.8) (0.1) (1.9) (2.2) (0.3) (2.5)
Other property operating expenses (3.4) (10.8) (14.2) (10.4) (16.7) (27.1)
Property operating expenses (25.5) (10.9) (36.4) (30.1) (17.0) (47.1)
Administrative expenses (13.4) (4.8) (18.2) (12.7) (10.7) (23.4)
Other income - 4.8 4.8 2.7 4.5 7.2
Segment result 34.8 7.2 42.0 33.0 (5.2) 27.8
Share of joint ventures' and associates' profit after tax 7.1 - 7.1 4.2 - 4.2
(Loss) / profit on disposal of investment properties (4.2) 0.8 (3.4) (4.1) (1.4) (5.5)
Loss on disposal of subsidiaries - (39.7) (39.7) (2.2) - (2.2)
Finance income 0.4 - 0.4 0.3 - 0.3
Finance costs (18.9) - (18.9) (23.2) - (23.2)
Net valuation movement (12.3) - (12.3) (131.5) (23.2) (154.7)
Changes in fair value of financial instruments and associated close out costs 0.1 - 0.1 0.1 - 0.1
Taxation - (1.9) (1.9) 1.3 1.4 2.7
Profit / (loss) for the year after taxation 7.0 (33.6) (26.6) (122.1) (28.4) (150.5)
Segment assets 2022 2021
Retail Pubs Unallocated Group Retail Pubs Unallocated Group
£m
£m
£m
£m
£m £m £m £m
Non-current assets
Investment properties 684.6 - - 684.6 739.3 195.6 - 934.9
Investments in joint ventures 24.0 - - 24.0 25.6 - - 25.6
Investment in associates 7.9 - - 7.9 5.3 - - 5.3
Public houses - - - - - 52.7 - 52.7
Property, plant and equipment 0.7 - - 0.7 - - 1.4 1.4
Other non-current assets 0.2 - - 0.2 - - 4.0 4.0
Total non-current assets 717.4 1,023.9
Current assets
Trade and other receivables 18.9 - - 18.9 25.1 0.9 - 26.0
Cash and cash equivalents 82.8 - - 82.8 - - 150.5 150.5
Assets held for sale - - - - 25.5 - - 25.5
Total current assets including assets held for sale 101.7 202.0
Segment assets 819.1 - - 819.1 820.8 249.2 155.9 1,225.9
4. Revenue
2022 2021
£m
£m
Property rental and related income* 57.7 61.1
Amortisation of tenant incentives and letting costs (1.3) (1.8)
Surrender premiums and commissions 0.8 1.0
Rental related income 57.2 60.3
Asset management fees 1.9 1.2
Service charge income 14.6 11.6
Revenue 73.7 73.1
*Included within property rental and related income is car park income of
£4.9 million (2021: £2.7 million) which falls under the scope of IFRS 15.
The remainder of the income is covered by IFRS 16.
Asset management fees, managed pub income (now within discontinued operations)
and service charge income which represents the flow through costs of the
day-to-day maintenance of shopping centres falls under the scope of IFRS 15.
Refer to accounting policies in Note 1.
5. Property operating expenses
2022 2021
£m
£m
Service charge expense 20.3 17.5
Rates on vacant units 1.8 2.2
Expected credit loss (reversal) / charge (0.3) 7.0
Other property operating expenses 3.7 3.4
Property operating expenses 25.5 30.1
6. Administrative expenses
2022 2021
£m
£m
Wages and salaries 5.1 4.8
Social security costs 0.7 0.8
Other pension costs 0.1 0.2
Staff costs 5.9 5.8
Depreciation 0.1 0.4
Share-based payments 0.9 0.6
Other administrative expenses 5.6 5.6
Abortive costs - 0.3
Restructuring costs* 0.9 -
Administrative expenses 13.4 12.7
*During the year the Group incurred restructuring costs totalling £0.9
million (2021: £nil) in relation to employee related matters following the
sale of Hawthorn.
Net administrative expenses ratio is calculated as follows:
2022 2021
£m
£m
Administrative expenses 13.4 12.7
Adjust for:
Asset management fees (1.9) (1.2)
Share of joint ventures' and associates administrative expenses 0.2 0.2
Share based payments (0.9) (0.6)
Restructuring costs (0.9) (0.3)
Group's share of net administrative expenses - continuing operations 9.9 10.8
Group's share of net administrative expenses - discontinued operations 4.2 9.5
Group's share of net administrative expenses - Reported Group 14.1 20.3
Property rental and related income* 58.0 55.9
Share of joint ventures' and associates' property income 3.9 3.9
Property rental, other income and related income - continuing operations 61.9 59.8
Property rental, other income and related income - discontinued operations 21.4 21.7
Property rental, other income and related income - Reported Group 83.3 81.5
Net administrative expenses as a % of property income (including share of 16.0% 18.1%
joint ventures and associates) - continuing operations
Net administrative expenses as a % of property income (including share of 16.9% 24.9%
joint ventures and associates) - Reported Group
*This balance includes an expected credit reversal/(loss) of £0.3 million
(2021: £(5.0) million), which excludes the £0.2 million reversal (2021:
£(0.6) million charge) forward looking element of the calculation and
includes the expected credit loss held in joint ventures and associates of
£(0.2) million (2021: £(0.3) million).
Average monthly number of staff - continuing
2022 2021
Directors 7 7
Operations and asset managers 17 17
Support functions 32 31
Total 56 55
On disposal of Hawthorn 101 employees were employed by subsidiaries that were sold on 20 August 2021.
Auditors' remuneration
2022 2021
£'000
£'000
Audit of the Company and consolidated financial statements 310 315
Audit of subsidiaries, pursuant to legislation 200 235
510 550
Non-audit fees - interim review 95 100
Total fees 605 650
In addition to this the joint ventures and associates paid £103k (2021:
£82k) in audit fees.
7. Other income
2022 2021
£m
£m
Insurance proceeds - 2.7
Other income - 2.7
8. Loss on disposal of subsidiary
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. Financial performance for the period to 20 August 2021 is included in
Note 3 - Segmental reporting and discontinued operations.
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
2022
£m
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 (discontinued operations - Note 3) (39.7)
Cash flows from discontinued operations Year ended
31 March 2022 31 March 2021
£m £m
Cash flows from operating activities 13.8 12.1
Cash flows from investing activities 187.9 (10.4)
Total cash flows from discontinued operations 201.7 1.7
Year ended 31 March 2021
On 30 September 2020, the Group disposed of a subsidiary which owned
Sprucefield Retail Park for gross disposal proceeds of £38.5 million with a
carrying value of £40.7 million, resulting in a loss of £2.2 million. The
Group then acquired a 10% interest, see note 16.
9. Loss on disposal of investment properties
2022 2021
£m
£m
Gross disposal proceeds 66.3 27.8
Carrying value (68.9) (31.3)
Cost of disposal (1.6) (0.6)
Loss on disposal of investment properties (4.2) (4.1)
10. Finance income and finance costs
2022 2021
£m
£m
Finance income
Income from loans with joint ventures and associates (0.4) (0.3)
Write off of derivatives (1.0) -
Finance expense
Interest on borrowings 17.1 20.2
Finance cost on lease liabilities 2.7 3.0
Revaluation of derivatives - (0.1)
Net finance expense 18.4 22.8
11. Taxation
2022 2021
£m
£m
Current tax - prior year adjustment - (1.3)
Taxation (credit) - continuing - (1.3)
Taxation charge / (credit) - discontinued 1.9 (1.4)
Taxation charge / (credit) - Reported Group 1.9 (2.7)
2022 2021
£m
£m
Loss before tax from continuing operations 7.0 (123.4)
Loss before tax from discontinuing operations (31.7) (29.8)
Loss before tax (24.7) (153.2)
Tax at the current rate of 19% (2021: 19%) (4.7) (29.1)
Revaluation of property 2.3 29.3
Movement in unrecognised deferred tax 2.1 2.2
Non-taxable loss on disposal of subsidiary 7.6 -
Non-taxable profit due to REIT regime (5.4) (6.7)
Non-deductible expenditure - 2.9
Non-taxable income (0.8) -
Transfer pricing adjustment 0.8 -
Prior year adjustment - (1.3)
Taxation charge / (credit) 1.9 (2.7)
Real Estate Investment Trust regime (REIT regime)
The Group is a member of the REIT regime whereby profits from its UK property
rental business are tax exempt. The REIT regime only applies to certain
property-related profits and has several criteria which have to be met. The
main criteria are:
- the assets of the property rental business must be at least 75% of the
Group's assets;
- the profit from the tax-exempt property rental business must exceed 75%
of the Group's total profit;
- at least 90% of the Group's profit from the property rental business must
be paid as dividends.
The Group continues to meet these conditions and management intends that the
Group should continue as a REIT for the foreseeable future.
Deferred tax
31 March 2021 Charge Disposals 31 March 2022
£m £m £m £m
Deferred tax asset - - - -
Deferred tax liabilities (0.7) (1.9) 2.6 -
Net deferred tax (0.7) (1.9) 2.6 -
31 March 2020 Credit / (Charge) Disposals 31 March 2021
£m £m £m £m
Deferred tax asset 1.2 (1.2) - -
Deferred tax liabilities (3.3) 2.6 - (0.7)
Net deferred tax (2.1) 1.4 - (0.7)
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
2022 the Group has unrecognised tax losses of £12.5 million (2021: £46.0
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.
The Finance Act 2021, which was substantively enacted on 24 May 2021 and
received Royal Assent on 10 June 2021, provided for an increase in the main
rate of corporation tax from 19% to 25% for companies with profits in excess
of £250,000 with effect from 1 April 2023. These changes have been taken into
account in calculating the current year deferred tax charge. Deferred taxes at
the balance sheet date have been measured using the expected enacted tax rate
and this is reflected in these financial statements.
12. Performance measures
A reconciliation of the performance measures to the nearest IFRS measure is
below:
Year ended 31 March 2022 Year ended 31 March 2021
Continuing* Discontinued Total Continuing* Discontinued Total
£m £m £m £m £m £m
Profit / (Loss) for the year after taxation 7.0 (33.6) (26.6) (122.1) (28.4) (150.5)
Adjustments
Net valuation movement 12.3 - 12.3 131.5 23.2 154.7
Loss on disposal of investment properties 4.2 (0.8) 3.4 4.1 1.4 5.5
Changes in fair value of financial instruments and associated close out costs (0.1) - (0.1) (0.1) - (0.1)
Acquisition costs - - - - 0.1 0.1
Deferred tax - 1.9 1.9 - (1.4) (1.4)
Loss on disposal of subsidiary - 39.7 39.7 2.2 - 2.2
Group's share of joint ventures' and associates' adjustments
Revaluation of investment properties (5.8) - (5.8) (1.8) - (1.8)
Revaluation of derivatives (0.5) - (0.5) 0.2 - 0.2
Deferred tax 0.6 - 0.6 - - -
Loss on disposal of investment properties 1.2 - 1.2 - - -
EPRA earnings 18.9 7.2 26.1 14.0 (5.1) 8.9
Share-based payment charge 0.9 - 0.9 0.6 - 0.6
Forward looking element of IFRS 9** (0.2) - (0.2) 0.6 - 0.6
Depreciation on public houses - 0.4 0.4 - 1.1 1.1
Abortive costs - 0.2 0.2 0.3 - 0.3
Restructuring costs*** 0.9 - 0.9 - - -
Underlying Funds From Operations (UFFO) 20.5 7.8 28.3 15.5 (4.0) 11.5
* The continuing column reflects the full impact of the finance costs of
£18.4 million (31 March 2021: £22.8 million).
** Forward looking element of IFRS 9 relates to a provision against debtor
balances in relation to invoices in advance for future rental income. These
balances are not due in the current year and therefore no income has yet been
recognised in relation to these debtors
*** During the year the Group incurred restructuring costs totalling £0.9
million (2021: £nil) in relation to employee related matters following the
sale of Hawthorn.
Number of shares
Number of shares 2022 2021
No. M
No. M
Weighted average number of ordinary shares for the purposes of Basic EPS, UFFO 307.2 306.4
and EPRA
Effect of dilutive potential ordinary shares:
Deferred bonus shares 1.8 0.8
Weighted average number of ordinary shares for the purposes of diluted EPS, 309.0 307.2
UFFO and EPRA
2022 2021
Continuing Discontinued Total Continuing Discontinued Total
IFRS Basic EPS 2.3 (10.9) (8.6) (39.8) (9.3) (49.1)
EPRA Basic EPS 6.2 2.3 8.5 4.6 (1.7) 2.9
UFFO Basic EPS 6.7 2.5 9.2 5.1 (1.3) 3.8
IFRS Diluted EPS 2.3 (10.9) (8.6) (39.8) (9.3) (49.1)
EPRA Diluted EPS 6.1 2.3 8.4 4.6 (1.7) 2.9
UFFO Diluted EPS 6.7 2.5 9.2 5.0 (1.3) 3.7
The below table reconciles the differences between the calculation of basic
and EPRA NTA.
EPRA NTA per share and basic NTA per share:
2022 2021
£m Shares Pence per £m Shares Pence per share
m
m share
Net assets 414.1 307.2 135p 460.4 306.5 150p
Unexercised employee awards - 1.8 - 0.8
Diluted net assets 414.1 309.0 134p 460.4 307.3 150p
Deferred tax liability 0.6 - 0.7 -
Goodwill - - (0.5) -
Fair value derivatives (0.3) - 2.6 -
EPRA net tangible assets 414.4 309.0 134p 463.2 307.3 151p
13. Dividends
There were no dividends paid in the prior year; the dividends paid in the year
are set out below:
Payment date PID Non-PID Pence per share £m
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
The final dividend of 3.3 pence per share in respect of the year ended 31
March 2022 will, subject to shareholder approval at the 2022 AGM, be paid on
2nd September 2022 to shareholders on the register as at 29 July 2022. 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
2022 2021
£m
£m
Fair value brought forward 851.9 1,102.3
Acquisitions 7.3 -
Capital expenditure 9.6 10.0
Lease incentives, letting and legal costs 1.3 2.4
Reclassification to plant property and equipment - (4.1)
Transfer from / (to) assets held for sale (Note 19) 25.5 (25.5)
Disposals (72.9) (44.7)
Disposal of subsidiaries (202.3) (40.7)
Net valuation movement (11.3) (147.8)
Fair value carried forward 609.1 851.9
Right of use asset (investment property) 75.5 83.0
Fair value carried forward 684.6 934.9
Retail - continuing operations
The Group's investment properties have been valued at fair value on 31 March
2022 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 2022
Property ERV Property rent Property equivalent yield EPRA topped up net initial yield
Average
Average
%
%
Fair value Min Max Average Min Max Average
(£m)
£ per sq ft
£ per sq ft
£ per sq ft
£ per sq ft
£ per sq ft
£ per sq 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
As at 31 March 2021
Property ERV Property rent Property equivalent yield EPRA topped up net initial yield
Average
Average
%
%
Fair value Min Max Average Min Max Average
(£m)
£ per sq ft
£ per sq ft
£ per sq ft
£ per sq ft
£ per sq ft
£ per sq ft
Shopping Centres - Core 209.5 9.1 25.4 13.8 8.4 26.9 12.6 9.3% 9.5%
Shopping Centres - Regeneration 210.5 5.3 19.7 14.7 5.1 13.5 10.5 6.4% 5.7%
Shopping Centres - Work Out 127.5 6.4 17.1 10.1 3.3 9.1 5.8 13.1% 9.3%
Retail parks 117.1 9.5 14.1 11.6 2.3 14.7 9.4 7.7% 6.9%
High street and other 17.3 5.7 14.2 8.1 2.2 17.0 6.7 4.6% 5.4%
681.9
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 Company's financial and
property management systems and is subject to the Group's overall control
environment, and assumptions applied by the valuers, e.g. ERVs and yields.
These assumptions are based on market observation and the valuers'
professional judgement, which includes a consideration of climate change and a
range of other external factors.
2022: Sensitivity impact on valuations of a 10% change in estimated rental value and absolute yield of 100 bps.
Impact on valuations of a 10% change in ERV Impact on valuations of 100 bps change in yield
Asset Type £m £m £m £m £m
Increase 10%
Decrease 10%
Increase 1.0%
Decrease 1.0%
Retail asset valuation
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
2021: Sensitivity impact on valuations of a 10% change in estimated rental value and absolute yield of 100 bps.
Asset Type £m Impact on valuations of a 10% change in ERV Impact on valuations of 100 bps change in yield
Retail asset valuation
£m £m £m £m
Increase
Decrease 10%
Increase 1.0%
Decrease 1.0%
10%
Shopping Centres - Core 209.5 18.5 (16.9) (22.1) 27.8
Shopping Centres - Regeneration 210.5 17.6 (18.2) (26.2) 35.6
Shopping Centres - Work Out 127.5 10.8 (11.2) (11.2) 13.4
Retail parks 117.1 8.9 (9.3) (14.4) 18.9
High street and other 17.3 0.7 (0.7) (0.4) 0.5
681.9* 56.5 (56.3) (74.3) 96.2
*This number includes assets held for sale of £25.5m.
Pubs - discontinued operations
At 31 March 2021, the valuations across the leisure and hospitality sector,
including pubs were reported on the basis of "material valuation uncertainty"
as per VPS 3 and VPGA 10 of the RICS Red Book Global. Consequently, less
certainty - and a higher degree of caution - was attached to the valuations
provided than would normally be the case. The external valuers confirmed that
the inclusion of the "material valuation uncertainty" declaration did not mean
that the valuations for NewRiver's pub portfolio could not be relied upon.
Rather, the phrase was used in order to be clear and transparent with all
parties, in a professional manner that - in the extraordinary circumstances at
31 March 2021 - less certainty could be attached to valuations than would
otherwise have been the case. Due to the pubs disposal in the year, there were
no investment properties subject to material uncertainty (2021: £195.6
million).
For the purposes of the Circular for the sale of Hawthorn, Colliers performed
a valuation at 30 June 2021 for the Hawthorn assets which identified no
material valuation movements from 31 March 2021. The Directors are satisfied
that there was no material valuation movement between 30 June 2021 and the
date of disposal on 20 August 2021.
Sensitivities of measurement of significant inputs
Given the disposal of Hawthorn on 20 August 2021 no sensitivity analysis has
been presented. Any change in valuation of the pub investment property assets
at the date of disposal would have no net impact on the total loss for the
period from discontinued operations in the consolidated statement of
comprehensive income.
Reconciliation to net valuation movement in consolidated statement of
comprehensive income
Net valuation movement in investment properties 2022 2021
£m
£m
Net valuation movement in investment properties (11.3) (131.2)
Net valuation movement in right of use asset (1.0) (0.3)
Net valuation movement in consolidated statement of comprehensive income - (12.3) (131.5)
continuing operations
The reduction net valuation movement attributable to discontinued operations
in the consolidated statement of comprehensive income was £nil (2021: £23.2
million).
Reconciliation to properties at valuation in the portfolio
Note 2022 2021
£m
£m
Investment property 14 609.1 851.9
Property, plant and equipment 17 - 52.7
Assets held for sale 19 - 25.5
Properties held in joint ventures 15 30.6 35.2
Properties held in associates 16 9.7 8.9
Properties at valuation 649.4 974.2
15. Investments in joint ventures
As at 31 March 2022 the Group has two joint ventures.
2022 2021
£m
£m
Opening balance 25.6 22.1
Group's share of profit after taxation excluding valuation movement 1.1 2.3
Net valuation movement 2.9 1.2
Distributions and dividends (5.6) -
Investment in joint venture 24.0 25.6
Name Country of incorporation 2022 2021
% 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:
Consolidated balance sheet 2022 2021
Napier NRI LP Total Group's share Napier NRI LP Total Group's
£m
£m
£m
£m £m £m £m share
£m
Non-current assets 61.2 - 61.2 30.6 62.6 8.0 70.6 35.3
Current assets 9.1 0.3 9.4 4.7 7.0 1.6 8.6 4.3
Current liabilities (1.8) - (1.8) (0.9) (2.6) (1.0) (3.6) (1.8)
Liabilities due in more than one year (26.8) - (26.8) (13.4) (30.4) - (30.4) (15.2)
Net assets 41.7 0.3 42.0 21.0 36.6 8.6 45.2 22.6
Loan to joint venture - - - 3.0 - - - 3.0
Net assets adjusted for loan to joint venture 41.7 0.3 42.0 24.0 36.6 8.6 45.2 25.6
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.
Consolidated statement of comprehensive income 2022 2021
Napier NRI LP Total Group's share Napier NRI LP Total Group's
£m
£m
£m
£m
£m
£m
£m
share
£m
Revenue 5.6 0.1 5.7 2.8 6.6 1.3 7.9 4.0
Property operating expenses (0.1) - (0.1) - (0.9) (0.8) (1.7) (0.8)
Net property income 5.5 0.1 5.6 2.8 5.7 0.5 6.2 3.2
Administration expenses (0.2) (0.1) (0.3) (0.1) (0.2) (0.1) (0.3) (0.2)
Net finance costs (0.1) - (0.1) (0.1) (1.3) - (1.3) (0.7)
Group's share of joint ventures' profit before valuation movements 5.2 - 5.2 2.6 4.2 0.4 4.6 2.3
Net valuation movement 5.8 - 5.8 2.9 5.0 (2.6) 2.4 1.2
Profit / (loss) on disposal of investment property 1.5 (4.5) (3.0) (1.5) - - - -
Profit / (loss) after taxation 12.5 (4.5) 8.0 4.0 9.2 (2.2) 7.0 3.5
Add back net valuation movement (5.8) - (5.8) (2.9) (5.0) 2.6 (2.4) (1.2)
Group's share of joint ventures' profit / (loss) before valuation movements 6.7 (4.5) 2.2 1.1 4.2 0.4 4.6 2.3
The Group's share of contingent liabilities in the joint ventures is £nil
(2021: £nil).
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 2022.
2022 2021
£m
£m
Opening balance 5.3 0.9
Additions to Investment in associates 4.0 3.7
Disposals from Investment in associates (2.5) -
Distributions and dividends (2.0) -
Group's share of profit after taxation excluding valuation movement 0.2 0.1
Net valuation movement 2.9 0.6
Investment in associates 7.9 5.3
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 £41.0 million.
On 20 December 2021 the Group sold its interest in NewRiver Retail (Nelson)
Limited.
Name Country of incorporation 2022 2021
% Holding
% Holding
NewRiver Retail (Nelson) Limited (Nelson) UK - 10
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:
Consolidated balance sheet 31 March 2022 31 March 2021
Total Group's share Total Group's
£m
£m
£m
share
£m
Non-current assets 97.3 9.7 89.5 8.9
Current assets 14.7 1.5 6.7 0.7
Current liabilities (17.5) (1.8) (37.5) (3.8)
Liabilities due in more than one year (62.7) (6.3) (42.1) (4.2)
Net assets 31.8 3.1 16.6 1.6
Loans to associates - 4.8 - 3.7
Net assets adjusted for loans to associates 31.8 7.9 16.6 5.3
Consolidated statement of comprehensive income 2022 2022 2021 2021
Total
Group's share
Total
Group's
£m
£m
£m
share
£m
Revenue 12.6 1.2 6.4 0.6
Property operating expenses (2.4) (0.2) (1.6) (0.2)
Net property income 10.2 1.0 4.8 0.4
Administration expenses (0.7) - (0.2) -
Net finance costs (3.6) (0.4) (2.8) (0.3)
5.9 0.6 1.8 0.1
Net valuation movement 29.1 2.9 6.2 0.6
Profit on disposal of investment property 2.7 0.3 - -
Taxation (7.2) (0.7) - -
Profit after taxation 30.5 3.1 8.0 0.7
Add back net valuation movement (29.1) (2.9) (6.2) (0.6)
Group's share of associates' profit before valuation movements 1.4 0.2 1.8 0.1
17. Property plant and equipment
Cost or valuation Office equipment Fixtures and fittings Public houses Total
£m £m £m £m
At 1 April 2021 2.4 0.6 55.4 58.4
Additions 0.6 0.1 2.3 3.0
Disposals - - (0.8) (0.8)
Disposal of subsidiaries (2.1) - (56.9) (59.0)
At 31 March 2022 0.9 0.7 - 1.6
Accumulated depreciation
At 1 April 2021 1.1 0.5 2.7 4.3
Charge for the year 0.1 - 0.4 0.5
Disposal of subsidiaries (0.8) - (3.1) (3.9)
At 31 March 2022 0.4 0.5 - 0.9
Net book value at 31 March 2022 0.5 0.2 - 0.7
Net book value at 31 March 2021 1.3 0.1 52.7 54.1
Cost or valuation Office equipment Fixtures and fittings Public houses Total
£m
£m
£m
£m
At 1 April 2020 1.8 0.6 56.6 59.0
Additions 0.6 - 2.7 3.3
Revaluation:
Recognised in the consolidated statement of comprehensive income - - (0.5) (0.5)
Recognised in the income statement - - (6.6) (6.6)
Net transfers from investment property - - 4.1 4.1
Disposals - - (0.9) (0.9)
At 31 March 2021 2.4 0.6 55.4 58.4
Accumulated depreciation
At 1 April 2020 0.7 0.5 1.6 2.8
Charge for the year 0.4 - 1.1 1.5
At 31 March 2021 1.1 0.5 2.7 4.3
Net book value at 31 March 2021 1.3 0.1 52.7 54.1
Net book value at 31 March 2020 1.1 0.1 55.0 56.2
The Group's public houses were disposed of in the period. As at 31 March 2021
they were valued at fair value by independent valuers, Colliers International
Valuation UK LLP, on the basis of fair value in accordance with the Current
Practice Statements contained in The Royal Institution of Chartered Surveyors
Valuation - Professional Standards, (the 'Red Book'). The valuations were
performed by appropriately qualified valuers who have relevant and recent
experience in the sector. As mentioned in note 14, there was a material
uncertainty clause relating to the public house valuations included in the
note above as at 31 March 2021.
18. Trade and other receivables
2022 2021
£m
£m
Trade receivables 3.7 9.6
Restricted monetary asset 5.6 5.6
Service charge receivables* 1.7 2.6
Other receivables 6.2 4.9
Prepayments 0.7 1.9
Accrued income 1.0 1.4
18.9 26.0
*Included in service charge receivables is £1.4 million of Value Added
Taxation (2021: £0.4 million) and £0.3 million of service charge debtors
(2021: £2.2 million).
Trade receivables are shown after deducting a loss allowance of £5.2m (2021:
£9.3m). The provision for doubtful debts is calculated as an expected credit
loss on trade receivables in accordance with IFRS 9. The charge to the
consolidated statement of comprehensive income in relation to doubtful debts
made against tenant debtors was £0.3 million (2021: £5.6 million charge).
The Group has calculated the expected credit loss by applying a
forward-looking outlook, impacted by the Covid-19 pandemic, to historical
default rates.
The Group monitors rent collection in order to anticipate and minimise the
impact of default by tenants, which may be impacted by Covid-19 and the
ability of tenants to pay rent receivables. All outstanding rent receivables
are regularly monitored. In order to measure the expected credit losses, trade
receivables from tenants have been grouped on a basis on shared credit risk
characteristics and an assumption around the tenants ability to pay their
receivable, based on conversations held and our knowledge of their credit
history. The expected loss rates are based on historical payment profiles of
tenant debtors and corresponding historical credit losses. These historical
loss rates are then adjusted to reflect the current pandemic.
2022 2021
£m
£m
Opening loss allowance at 1 April 9.3 4.2
Increase in loss allowance recognised in the consolidated statement of 0.3 5.6
comprehensive income during the year
Disposal of subsidiary (2.5) -
Loss allowance write off (1.9) (0.5)
Closing loss allowance at 31 March 5.2 9.3
The restricted monetary asset relates to cash balances which legally belong to
the Group but which the Group cannot readily access. They do not meet the
definition of cash and cash equivalents and consequently are presented
separately from cash in the consolidated balance sheet.
19. Assets held for sale
2022 2021
£m
£m
Assets held for sale at 1 April 25.5 -
Transfer (to) / from investment properties (25.5) 25.5
Assets held for sale at 31 March - 25.5
In the year ended 31 March 2022 the Group made a number of strategic
disposals. As at 31 March 2022 no investment properties meet the definition of
assets held for sale under IFRS.
During the year the £25.5 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.
20. Derivative financial instruments
The Group enters into derivative financial instruments to provide an economic
hedge to its interest rate risks. These financial instruments are classified
as Level 2 fair value measurements, being those derived from inputs other than
quoted prices. There were no transfers between levels in the current year.
2022 2021
£m
£m
Interest rate swaps
Non-current liabilities - (2.6)
- (2.6)
Average contract interest rate Notional principal amount Fair value
2022 2021 2022 2021 2022 2021
%
%
£m
£m
£m
£m
Interest rate swaps - receive floating pay fixed
In more than one year but less than two - 0.8% - 137.2 - -
In more than two years but less than five - 1.5% - 137.2 - (2.6)
Interest rate caps
In less than one year - 1.5% - 70.0 - -
- - - 344.4 - (2.6)
In September 2021 the Company repaid and cancelled its £165m term loan, see
note 23. Following the cancellation of the term loan the related derivatives
were terminated. The Group has no derivatives in issue in controlled entities.
21. Cash and cash equivalents
There are no restrictions on cash in place (2021: nil). As at 31 March 2022
and 31 March 2021 cash and cash equivalents comprised of cash held in bank
accounts.
22. Trade and other payables
2022 2021
£m
£m
Trade payables 3.0 4.4
Service charge liabilities* 9.2 10.9
Other payables 3.5 7.0
Accruals 8.7 15.0
Value Added Taxation 3.4 2.2
Rent received in advance 5.7 7.4
33.5 46.9
* Service charge liabilities includes accruals of £1.7 million (31 March
2021: £0.3 million), service charge creditors and other creditors of £5.3
million (31 March 2021: £2.8 million), deferred income of £2.2 million (31
March 2021: £7.8 million) and £nil of Value Added Taxation (2021: £nil).
23. Borrowings
Maturity of drawn bank borrowings: 2022 2021
£m
£m
Between two and three years - 335.0
After five years 300.0 300.0
300.0 635.0
Less unamortised fees / discount (4.2) (5.3)
295.8 629.7
Unsecured borrowings: Carrying amount Fair value Carrying amount Fair value
2021
2021
2022 2022
£m
£m
£m
£m
Term loan - - 165.0 165.0
Revolving credit facility - - 170.0 170.0
Corporate bond 300.0 285.9 300.0 283.7
300.0 285.9 635.0 618.7
The fair value of the Group's corporate bond has been estimated on the basis
of quoted market prices, representing Level 1 fair value measurement as
defined by IFRS 13 Fair Value Measurement. The fair value of the Group's bank
loans in the prior year was approximately the same as their carrying amount,
after adjusting for the unamortised arrangement fees, and also represented
Level 2 fair value measurement.
Unsecured borrowings: Maturity date Facility Facility drawn Unamortised facility fees / discount £m
£m
£m
£m
Revolving credit facility August 2024 125.0 - (1.0) (1.0)
Corporate bond March 2028 300.0 300.0 (3.2) 296.8
425.0 300.0 (4.2) 295.8
On 21 October 2021 the Group extended the maturity of its revolving credit
facility to August 2024 and at the same time cancelled £90 million of the
facility, reducing it from £215 million to £125 million with a £50 million
accordion (subject to lenders consent). The revolving credit facility also
references Sterling Over Night Indexed Average ('SONIA') as its floating rate.
In the year the Group drew down £nil (31 March 2021: £nil) and repaid £170
million (31 March 2021: £nil) of the revolving credit facility. In addition,
on 29 September 2021 the Group fully repaid and cancelled its £165 million
Term loan.
24. Lease commitment arrangements
The Group earns rental income by leasing its investment properties to tenants
under non-cancellable lease commitments.
The Group holds two types of leases.
- Head leases: A number of the investment properties 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.
2022 2021
£m
£m
Right of use asset (Investment property) 75.5 83.0
Right of use asset (Property, plant and equipment) 0.2 3.5
Current lease liability 0.7 0.7
Non-current lease liability 75.0 84.9
The expense relating to low value assets which have not been recognised under
IFRS 16 was £nil million (March 2021: £0.1 million) and the expense relating
to variable lease payments not included in the measurement of lease
liabilities was £nil million (March 2021: £nil million). The total cash
outflow in relation to lease commitments for the year was £2.7 million (March
2021: £3.5 million).
Lease liability maturity table
2022 2021
£m
£m
Within one year 0.7 0.7
Between one and two years 0.7 0.7
In the second to fifth year inclusive 2.1 2.1
After five years 72.2 82.1
75.7 85.6
Lease commitments payable by the Group are as follows:
2022 2021
£m
£m
Within one year 3.2 3.3
One to two years 3.0 3.3
Two to five years 9.0 10.0
After five years 253.8 253.9
269.0 270.5
Effect of discounting (193.3) (184.9)
Lease liability 75.7 85.6
At the balance sheet date the Group had contracted with tenants for the
following future minimum lease payments on its investment properties:
2022 2021
£m
£m
Within one year 50.0 64.7
Between one and two years 42.7 55.9
In the second to fifth year inclusive 89.4 114.9
After five years 133.7 161.1
315.8 396.6
The Group's weighted average lease length of lease commitments at 31 March
2022 was 5.3 years (March 2021: 5.2 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 £1.6 million (March
2021: £3.1 million).
25. Share capital and reserves
Share capital
Ordinary shares Number of shares issued Price per share Total Held by EBT Shares in issue
m's
pence
m's
m's
m's
1 April 2020 309.0 2.8 306.2
Shares issued under employee share schemes 0.1 - 309.0 2.7 306.3
31 March 2021 309.0 2.7 306.3
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
Share capital Share premium Total
£'000 £'000 £'000
1 April 2020 and 31 March 2021 3,062 227,349 230,411
Shares issued under employee share schemes 6 - 6
Transfer of share premium - (227,349) (227,349)
Scrip dividends issued 14 1,147 1,161
31 March 2022 3,082 1,147 4,229
All issued shares are fully paid up.
Merger reserve
The merger reserve arose as a result of the scheme of arrangement and
represents the nominal amount of share capital that was issued to shareholders
of NewRiver Retail Limited.
Share premium
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 £227.4 million has been transferred to retained
earnings, following the cancellation of the share premium account effective
from 31 August 2021.
Scrip dividend shares
Shares issued in respect of elections to participate in the Scrip Dividend
Scheme in respect of dividends declared in the year.
Retained earnings
Retained earnings consist of the accumulated net comprehensive profit of the
Group, less dividends paid from distributable reserves, and transfers from
equity issues where those equity issues generated distributable reserves.
Shares held in Employee Benefit Trust (EBT)
As part of the scheme of arrangement and group reorganisation, the Company
established an EBT which is registered in Jersey. The EBT, at its discretion,
may transfer shares held by it to directors and employees of the Company and
its subsidiaries. The maximum number of ordinary shares that may be held by
the EBT may not exceed 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 2,116,979 ordinary shares held by EBT.
26. Share-based payments
The Group has three share schemes for employees:
- Share option scheme
- Performance Share Scheme
- Deferred bonus scheme
Share option scheme
Options were granted between 2009 and 2012. The options were priced at the
share price at date of issue. No options were granted in 2021 or 2022. The
charge for the year recognised in the consolidated statement of comprehensive
income was nil (2021: nil).
Year issued Average exercise price Outstanding at start of year Granted Number Lapsed Outstanding at end of year Number exercisable Average remaining life (years)
Exercised
2009-2011 2.54 - - - - - - -
2012 2.35 338,000 - - (338,000) - - -
338,000 - - (338,000) - -
Performance Share Scheme
Zero priced share options have been issued to senior management and executive
directors under the Performance Share Scheme since 2013. The options vest to
the extent that performance conditions are met over a three or four-year
period. At the end of the period there may be a further vesting condition that
the employee or director remains an employee of the Group. Further details on
the scheme and the performance conditions are provided in the Remuneration
Report. The credit for the year recognised in the consolidated statement of
comprehensive income was £0.5 million (March 2021: £0.3 million charge).
Year issued Average exercise price Outstanding at start of year Granted Number Lapsed Outstanding at end of year Number exercisable Average remaining life (years)
Exercised
2017 - 278,506 - - (278,506) - - -
2018 - - - - - - - -
2019 - 1,366,652 - - (1,366,652) - - -
2020 - 1,818,153 143,127 - (46,809) 1,914,471 - 7.2
2021 - 3,104,871 248,610 (123,952) (414,259) 2,815,270 - 8.4
2022 - - 2,960,526 - (19,946) 2,940,580 - 9.4
6,568,182 3,352,263 (123,952) (2,126,172) 7,670,321 -
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 £0.4
million (March 2021: £0.3 million).
Year issued Average exercise price Outstanding at start of year Granted Exercised Lapsed Outstanding at end of year Number exercisable Average remaining life (years)
2018 - 63,554 - (9,665) - 53,889 - -
2019 - 154,692 - (30,415) - 124,277 - -
2020 - 323,012 - (200,568) (4,394) 118,050 - 0.2
2021 - 526,640 35,520 (165,687) (29,771) 366,702 - 1.4
2022 - - 313,619 - - 313,619 - 2.5
1,067,898 349,139 (406,335) (34,165) 976,537 -
Fair value
The fair value of the share options has been calculated based on a Monte Carlo
Pricing Model using the following inputs:
2022 2021
Share price 0.78 0.63
Exercise price Nil Nil
Expected volatility 25% 21%
Risk free rate 0.252% -0.048 - -0.009%
Expected dividends* 0% 0%
*based on quoted property sector average.
27. Financial instruments and risk management
The Group's activities expose it to a variety of financial risks in relation
to the financial instruments it uses: market risk including cash flow interest
rate risk, credit risk and liquidity risk. The financial risks relate to the
following financial instruments: trade receivables, cash and cash equivalents,
trade and other payables, borrowings and derivative financial instruments.
Risk management parameters are established by the Board on a
project-by-project basis. Reports are provided to the Board quarterly and also
when authorised changes are required.
Financial instruments
Valuation 2022 2021
level
£m
£m
Financial assets
Financial assets at amortised cost
Trade and other receivables 15.9 22.4
Cash and cash equivalents 82.8 150.5
Total financial assets and maximum exposure to credit risk 98.7 172.9
Financial liabilities
Fair value through profit or loss
Interest rate swaps and caps 2 - (2.6)
At amortised cost
Borrowings (295.8) (629.7)
Lease liabilities (75.7) (85.6)
Payables and accruals (22.2) (29.4)
(393.7) (747.3)
(295.0) (574.4)
The fair value of the financial assets and liabilities at amortised cost are
considered to be the same as their carrying value, with the exception of
certain fixed rate borrowings, see note 23 for further details.
Market risk
Currency risk
The Group is not subject to any foreign currency risk as nearly all
transactions are in Pounds Sterling.
Interest rate risk
The Group's interest rate risk arises from borrowings issued at floating
interest rates (see note 23). The Group's interest rate risk is reviewed
quarterly by the Board. The Group manages its exposure to interest rate risk
on borrowings through the use of interest rate derivatives (see note 20).
Interest rate caps and interest rate swaps are used to both mitigate the risk
of an increase in interest rates but also to allow the Group to benefit from a
fall in interest rates. The Group has employed an external adviser when
contracting hedging to advise on the structure of the hedging. At 31 March
2022 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 if interest rates
increase or decrease as we have no drawn variable rate debt. In the prior
year, the impact of a 200 bps increase in interest rates for the year would
increase net interest payable in the consolidated statement of comprehensive
income by £4.0 million and the impact of a 200 bps decrease in interest rates
for the prior year would reduce the net interest payable in the consolidated
statement of comprehensive income by £4.0 million. The directors considered
this to be a reasonable sensitivity in the prior year given historical
interest rates and the possibility for short term swings in rates.
Credit risk
The Group's principal financial assets are cash, trade receivables and other
receivables.
The Group manages its credit risk through policies to ensure that rental
contracts are made with tenants meeting appropriate balance sheet covenants,
supplemented by rental deposits or bank guarantees from international banks.
The Group may suffer a void period where no rents are received. The quality of
the tenant is assessed based on an extensive tenant covenant review scorecard
prior to acquisition of the property. The assessment of the tenant credit
worthiness is also monitored on an ongoing basis. Credit risk is assisted by
the vast majority of occupational leases requiring that tenants pay rentals in
advance. The Group monitors rent collection in order to anticipate and
minimise the impact of default by tenants. 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:
2022 2022 2022 2022 2021 2021 2021 2021
Gross amount
Loss allowance
% applied
Carrying amount
Gross amount
Loss allowance
% applied
Carrying amount
£m
£m
£m
£m £m £m
0-30 days 3.3 0.8 24% 2.5 5.0 1.0 20% 4.0
30-60 days 0.4 0.1 25% 0.3 0.9 0.2 22% 0.7
60-90 days 0.1 0.1 100% - 0.5 0.2 40% 0.3
90-120 days 0.5 0.2 40% 0.3 1.6 0.5 31% 1.1
Over 120 days 4.6 4.0 87% 0.6 10.9 7.4 68% 3.5
8.9 5.2 3.7 18.9 9.3 9.6
The Group recognises an expected credit loss allowance on trade debtors, as
noted in the above table. The Group also recognises an expected credit loss
allowance of £0.6 million (2021: £1.4 million) on service charge debtors and
£nil (2021: £0.1 million) on insurance debtors.
The Group categorises trade debtors in varying degrees of risk, as detailed
below:
2022 2021
£m
£m
Risk level
Very high 4.6 3.9
High 0.5 2.4
Medium 0.5 4.4
Low 3.3 8.2
Gross carrying amount before loss allowance 8.9 18.9
Loss allowance (5.2) (9.3)
Carrying amount 3.7 9.6
2022 2021
£m
£m
Opening loss allowance at 1 April 9.3 4.2
Increase in loss allowance recognised in the consolidated statement of 0.3 5.6
comprehensive income during the year
Disposal of subsidiary (2.5) -
Loss allowance write off (1.9) (0.5)
Closing loss allowance at 31 March 5.2 9.3
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 project-by-project 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:
2022 £m Less than One to two Two to five More than Total
one year
years
years
five years
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)
2021 £m
Borrowings - - (335.0) (300.0) (635.0)
Interest on borrowings (19.1) (19.1) (34.4) (20.2) (92.8)
Interest rate swaps (0.7) (1.3) (0.6) - (2.6)
Lease liabilities (3.3) (3.3) (10.0) (253.9) (270.5)
Payables and accruals (29.4) - - - (29.4)
(52.5) (23.7) (380.0) (574.1) (1,030.3)
Reconciliation of movement in the Group's share of net debt in the year 2022 2021
£m
£m
Group's share of net debt at beginning of year 493.3 563.6
Cash flow
Net decrease / (increase) in cash and cash equivalents 67.7 (69.7)
Bank loans repaid (335.0) -
Change in bank loan fees to be amortised 1.1 1.1
Group's share of joint ventures' and associates' cash flow
Net increase in cash and cash equivalents (1.6) (2.5)
Bank loans repaid (4.0) (1.2)
New bank loans - 2.0
Group's share of net debt 221.5 493.3
Being:
Group borrowings 295.8 629.7
Group's share of joint ventures' and associates' borrowings 13.9 17.9
Group cash (82.8) (150.5)
Group's share of joint venture and associate cash (5.4) (3.8)
Group's share of net debt 221.5 493.3
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.
Between 31 March 2021 and 31 March 2022, the Group's proportionally
consolidated LTV decreased by 17% from 51% to 34% and the gearing ratio from
104% to 51% mainly as a result of the sale of Hawthorn, retail disposals and
stabilisation in retail valuations. The Group continually monitors LTV and
will continue to monitor LTV closely, factoring in disposal activity and
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.
Net debt to equity ratio 2022 2021
£m
£m
Borrowings 295.8 629.7
Cash and cash equivalents (82.8) (150.5)
Net debt 213.0 479.2
Equity attributable to equity holders of the parent 414.1 460.4
Net debt to equity ratio ('Balance sheet gearing') 51% 104%
Share of joint ventures' and associates' borrowings 13.9 17.9
Share of joint ventures' and associates' cash and cash equivalents (5.4) (3.8)
Group's share of net debt 221.5 493.3
Carrying value of investment property and public houses 609.1 851.9
Carrying value of managed houses - 52.7
Carrying value of assets held for sale - 25.5
Share of joint ventures' and associates carrying value of investment 40.3 44.1
properties
Group's share of carrying value of investment properties 649.4 974.2
Net debt to property value ratio ('Loan to value') 34% 51%
Reconciliation of financial liabilities
Reconciliation of financial liabilities Lease liabilities Borrowings Derivatives Total
£m
£m
£m
£m
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
Reconciliation of financial liabilities Lease liabilities Borrowings Derivatives Total
£m
£m
£m
£m
As at 1 April 2020 86.3 628.6 (2.7) 712.2
(Decrease)/Increase through financing cash flows
Repayment of principal portion of lease liability (0.7) - - (0.7)
Change in fair value of derivative - - 0.1 0.1
Other changes
Change in capitalised loan fees to be amortised - 1.1 - 1.1
As at 31 March 2021 85.6 629.7 (2.6) 712.7
28. Contingencies and commitments
The Group has no material contingent liabilities (2021: None). The Group was
contractually committed to £1.3 million of capital expenditure to construct
or develop investment property as at 31 March 2022 (31 March 2021: £4.0
million). The Group also committed to a 5 year lease which has commenced on 1
April 2022 with rent per annum of £0.3 million
Under the terms of the sale agreement to dispose of Hawthorn, 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.
29. Related party transactions
Transactions between the Company and its subsidiaries have been eliminated on
consolidation and are not disclosed in this note.
During the year the Company paid £2.8 million (2021: £1.9 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 £3.0 million (2021: £3.0
million) and loans with associates of £4.8 million (March 2021: £3.7
million).
Management fees are charged to joint ventures and associates for asset
management, investment advisory, project management and accounting services.
Total fees charged were:
2022 2021
£m
£m
NewRiver Retail (Nelson) Limited 0.1 0.1
NewRiver Retail (Napier) Limited 0.2 0.2
NewRiver Retail (Hamilton) Limited 0.2 -
NewRiver (Sprucefield) Limited 0.2 0.1
As at 31 March 2022, an amount of £0.2 million (2021: £0.1 million) was due
to the Group relating to management fees.
During the year, the Group recognised £0.4 million of interest from joint
ventures and associates (2021: £0.3 million) and as at 31 March 2022 the
amount owing to the Group was £0.2 million (2021: £0.2 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.
30. Post balance sheet events
There were no other significant events occurring after the reporting period,
but before the financial statements were authorised for issue.
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
FY22 FY21
EPRA Earnings Per Share (EPS) 8.5p 2.9p
EPRA Cost Ratio (including direct vacancy costs) 41.1% 61.3%
EPRA Cost Ratio (excluding direct vacancy costs) 38.7% 58.6%
March 2022 March 2021
EPRA NRV per share 148p 170p
EPRA NTA per share 134p 151p
EPRA NDV per share 139p 155p
EPRA NIY 7.5% 8.4%
EPRA 'topped-up' NIY 8.0% 8.9%
EPRA Vacancy Rate 4.4% 4.2%
EPRA Earnings Per Share: 8.5p
Definition
Earnings from operational activities
Purpose
A key measure of a company's underlying operating results and an indication of
the extent to which current dividend payments are supported by earnings
FY22 FY21
(£m)
(£m)
Earnings per IFRS income statement (26.6) (150.5)
Adjustments to calculate EPRA Earnings, exclude:
Changes in value of investment properties, development properties held for 12.3 154.7
investment and other interests
Profits or losses on disposal of investment properties, development properties 43.1 7.7
held for investment and other interests
Changes in fair value of financial instruments and associated close-out costs (0.1) (0.1)
Acquisition costs on share deals and non-controlling joint venture interests - 0.1
Deferred tax in respect of EPRA adjustments 1.9 (1.4)
Adjustments to above in respect of joint ventures (unless already included (4.5) (1.6)
under proportional consolidation)
EPRA Earnings 26.1 8.9
Basic number of shares 307.2m 306.4m
EPRA Earnings per Share (EPS) 8.5p 2.9p
EPRA Earnings - continuing operations 18.9 14.0
EPRA Earnings per Share (EPS) - continuing operations 6.2p 4.6p
Reconciliation of EPRA Earnings to Underlying Funds From Operations (UFFO)
FY22 FY21
(£m)
(£m)
EPRA Earnings 26.1 8.9
Share-based payment charge 0.9 0.6
Depreciation on property 0.4 1.1
Forward-looking element of IFRS 9 (0.2) 0.6
Restructuring and abortive costs 1.1 0.3
Underlying Funds From Operations (UFFO) 28.3 11.5
Basic number of shares 307.2m 306.4m
UFFO per share 9.2p 3.8p
Underlying Funds From Operations (UFFO) - continuing operations 20.5 15.5
UFFO per share - continuing operations 6.7p 5.1p
EPRA NRV per share: 148p; EPRA NTA per share: 134p; EPRA NDV per share: 139p
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.
31 March 2022 EPRA NRV EPRA NTA EPRA NDV
(£m) (£m) (£m)
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/ PPE 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 309.0 309.0 309.0
EPRA NRV / NTA / NDV per share 148p 134p 139p
31 March 2021 EPRA NRV EPRA NTA EPRA NDV
(£m)
(£m)
(£m)
IFRS Equity attributable to shareholders 460.4 460.4 460.4
Fair value of financial instruments 2.6 2.6 -
Deferred tax in relation to fair value gains of Investment Property/ PPE 0.7 0.7 -
Goodwill as per the IFRS balance sheet - (0.5) (0.5)
Fair value of debt - - 16.3
Purchasers' costs 60.1 - -
EPRA NRV / NTA / NDV 523.8 463.2 476.2
Fully diluted number of shares 307.3m 307.3m 307.3m
EPRA NRV / NTA / NDV per share 170p 151p 155p
EPRA NIY: 7.5%, 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 2022 March 2021
(£m)
(£m)
Properties at valuation - wholly owned 609.1 904.6
Properties at valuation - share of Joint Ventures & Associates 40.3 44.1
Trading property (including share of Joint Ventures & Associates) - 25.5
Less: Developments (22.3) (32.0)*
Completed property portfolio 627.1 942.2
Allowance for estimated purchasers' costs and capital expenditure 40.4 47.3
Grossed up completed property portfolio valuation B 667.5 989.5
Annualised cash passing rental income 62.9 96.4
Property outgoings (13.1) (13.7)
Annualised net rents A 49.8 82.7
Add: Notional rent expiration of rent free periods or other lease incentives 3.3 5.4
Topped-up net annualised rent C 53.1 88.1
EPRA NIY A/B 7.5% 8.4%
EPRA 'topped-up' NIY C/B 8.0% 8.9%
*Residual development value retrospectively applied to Grays as at March 2021. Previously stated 8.2% EPRA NIY and 8.8% EPRA 'topped-up' NIY
Continuing operations as at March 2021 calculated as 7.4% EPRA NIY and 8.2%
EPRA 'topped-up' NIY.
EPRA Vacancy rate: 4.4%
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 2022 March 2021
(£m)
(£m)
Calculation of EPRA Vacancy Rate £m £m
Estimated Rental Value of vacant retail space A 2.6 2.8
Estimated rental value of the retail portfolio B 58.6 66.0
EPRA Vacancy Rate A/B 4.4% 4.2%
EPRA Cost Ratio (including direct vacancy costs): 41.1%;
EPRA Cost Ratio (excluding direct vacancy costs): 38.7%
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.
FY22 FY21
(£m)
(£m)
Administrative/operating expenses per IFRS 33.4 52.0
Net service charge costs/fees 5.6 5.9
Management fees less actual/estimated profit element (1.9) (1.2)
Other operating income/recharges intended to cover overhead expenses less any (4.8) (7.2)
related profits
Share of Joint Ventures and associates expenses (net of other income) 0.4 1.3
Exclude (if part of the above):
Investment property depreciation - -
Ground rent costs 0.7 0.3
Service charge costs recovered through rents but not separately invoiced - -
EPRA Costs (including direct vacancy costs) A 33.4 51.1
Direct vacancy costs (2.0) (2.2)
EPRA Costs (excluding direct vacancy costs) B 31.4 48.9
Gross Rental Income less ground rents - per IFRS 77.3 79.5
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 3.9 3.9
rents)
Gross Rental Income C 81.2 83.4
EPRA Cost Ratio (including direct vacancy costs) A/C 41.1% 61.3%
EPRA Cost Ratio (excluding direct vacancy costs) B/C 38.7% 58.6%
EPRA Cost Ratio (including direct vacancy costs) - continuing operations 36.8% 44.4%
EPRA Cost Ratio (excluding direct vacancy costs) - continuing operations 33.8% 41.5%
Reconciliation of EPRA Costs (including direct vacancy costs) to Net
Administrative expenses per IFRS
FY22 FY21
(£m)
(£m)
EPRA Costs (including direct vacancy costs) A 33.4 51.1
Exclude
Ground rent costs (0.7) (0.3)
Share of Joint Ventures and associates property expenses (net of other income) (0.2) (1.1)
Other operating income/recharges intended to cover overhead expenses less any 4.8 7.2
related profits
Net service charge costs/fees (5.6) (5.9)
Operating expenses (excluding service charge cost) (16.2) (28.9)
Tenant incentives (included within income) (0.2) (0.2)
Letting & legal costs (included within income) (1.2) (1.6)
Group's share of net administrative expenses as per IFRS D 14.1 20.3
EPRA Gross Rental Income C 81.2 83.4
Ground rent costs (0.7) (0.3)
Expected credit reversal / (loss) 0.3 (5.3)
Other income 2.5 3.7
Gross Rental Income E 83.3 81.5
Administrative cost ratio as per IFRS D/E 16.9% 24.9%
Administrative cost ratio as per IFRS - continuing operations 16.0% 18.1%
ALTERNATIVE PERFORMANCE MEASURES (APMS)
In addition to information contained in the Group financial statements,
Alternative Performance Measures ('APMs'), being financial measures which are
not specified under IFRS, are also used by management to assess the Group's
performance. These include a number of measures contained in the 'Financial
Statistics' table at the beginning of this document. These APMs include a
number of European Public Real Estate Association ('EPRA') measures, prepared
in accordance with the EPRA Best Practice Recommendations reporting framework.
We report these because management considers them to improve the transparency
and relevance of our published results as well as the comparability with other
listed European real estate companies.
The table below identifies the APMs used in this statement and provides the
nearest IFRS measure where applicable, and where in this statement an
explanation and reconciliation can be found.
APM Nearest IFRS measure Explanation and reconciliation
Underlying Funds From Operations ('UFFO') and UFFO per share (Loss) / Profit for the period after taxation 'Underlying Funds From Operations' section of the 'Finance Review'
EPRA Net Tangible Assets ('NTA') and EPRA NTA per share Net Assets 'Balance sheet' section of the '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 3 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 4 of the 'Financial Statistics' table
Weighted average cost of debt N/A Note 9 of the 'Financial Statistics' table
Weighted average debt maturity N/A Note 10 & 11 of the 'Financial Statistics' table
Loan to Value N/A Note 12 of the 'Financial Statistics' table
Glossary
Admin cost ratio: Is the Group's share of net administrative expenses
(including its share of JV administrative expenses) divided by the Group's
share of property income (including its share of JV property income).
Average debt maturity: Is measured in years, when each tranche of Group debt
is multiplied by the remaining period to its maturity and the result is
divided by total Group debt in issue at the period end.
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 joint venture
partnership in May 2019 to acquire and manage a portfolio of retail assets in
the UK.
Book value: Is the amount at which assets and liabilities are reported in the
financial statements.
Cost of debt: Is the Group loan interest and derivative costs at the period
end, divided by total Group debt in issue at the period end.
CVA: is a Company Voluntary Arrangement, a legally binding agreement that
allows a company to settle debts by paying only a proportion of the amount
that it owes to creditors (such as contracted rent) or to come to some other
arrangement with its creditors over the payment of its debts.
Dividend cover: Underlying Funds From Operations per share divided by dividend
per share declared in the period.
EPRA: Is the European Public Real Estate Association.
EPRA earnings: Is the IFRS profit after taxation excluding investment property
revaluations, fair value adjustments on derivatives, gains/losses on disposals
and deferred tax.
EPRA Net Tangible Assets (EPRA NTA): Are the balance sheet net assets
excluding the mark to market on effective cash flow hedges and related debt
adjustments, deferred taxation on revaluations, goodwill, and diluting for the
effect of those shares potentially issuable under employee share schemes.
EPRA NTA per share: Is EPRA NTA divided by the diluted number of shares at the
period end.
ERV: Is Estimated Rental Value, the external valuers' opinion of 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.
ERV growth: Is the change in ERV over a period on our investment portfolio
expressed as a percentage of the ERV at the start of the period. ERV growth is
calculated monthly and compounded for the period subject to measurement, as
calculated by MSCI Real Estate (formerly named IPD).
Estimated rental value (ERV): Is the external valuers' opinion as to the open
market rent which, on the date of valuation, could reasonably be expected to
be obtained on a new letting or rent review of a property.
Footfall: Is the annualised number of visitors entering our shopping centre
assets.
GAV: Is Gross Asset Value, the total value of all real estate investments
owned by the Company
Group: Is NewRiver REIT plc, the Company and its subsidiaries and its share of
joint ventures (accounted for on an equity basis).
Head lease: Is a lease under which the Group holds an investment property.
IFRS: 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.
Interest-rate swap: Is a financial instrument where two parties agree to
exchange an interest rate obligation for a predetermined amount of time. These
are used by the Group to convert floating-rate debt obligation or investments
to fixed rates.
Joint venture: Is an entity in which the Group holds an interest
on a long-term basis and is jointly controlled by the Group and one or more
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, asset management determinations and surrender premiums.
Long-term leasing deals: Are leasing deals with a fixed term certain of at
least one year.
Loan to Value (LTV): Is the ratio of gross debt less cash, short-term deposits
and liquid investments to the aggregate value of properties and investments.
LTV is expressed on a proportionally consolidated basis.
Mark to market: Is the difference between the book value of an asset or
liability and its market value.
MSCI-IPD: MSCI Real Estate Investment Property Databank Ltd or 'IPD' produces
independent benchmarks of property returns and NewRiver portfolio returns.
Net equivalent yield (NEY): Is the net weighted average income return a
property will produce based upon the timing of the income received. In
accordance with usual practice, the equivalent yields (as determined by the
external valuers) assume rent received annually in arrears and on values
before deducting prospective purchaser's costs.
Net initial yield (NIY): Is the current annualised rent, net of costs,
expressed as a percentage of capital value, after adding notional purchaser's
costs.
Net rental income: Is the rental income receivable in the period after payment
of net property outgoings. Net rental income will differ from annualised net
rents and passing rent due to the effects of income from rent reviews, net
property outgoings and accounting adjustments for fixed and minimum contracted
rent reviews and lease incentives.
NewRiver share: Represents the Group's ownership on a proportionally
consolidated basis.
Passing rent: Is the gross rent, less any ground rent payable under head
leases.
Pre-let: A lease signed with an occupier prior to the completion of a
development.
Pre-sale: A sale exchanged with a purchaser prior to completion of a
development.
Property Income Distribution (PID): As a REIT the Group is obliged to
distribute 90% of the tax-exempt profits. These dividends, which are referred
to as PIDs, are subject to withholding tax at the basic rate of income tax.
Certain classes of shareholders may qualify to receive the dividend gross. See
our website (www.nrr.co.uk) for details. The Group can also make other normal
(non-PID) dividend payments which are taxed in the usual way.
Real Estate Investment Trust (REIT): Is a listed property company which
qualifies for and has elected into a tax regime, which exempts qualifying UK
property rental income and gains on investment property disposals from
corporation tax.
Rental value growth: Is the increase in the current rental value, as
determined by the Company's valuers, over the 12-month period on a
like-for-like basis.
Retail occupancy rate: Is the estimated rental value of let units expressed as
a percentage of the total estimated rental value of the portfolio, excluding
development properties.
Risk-controlled development pipeline: Is the combination of all development
projects that the Company is currently pursuing or assessing for feasibility.
Our risk-controlled approach means that we will not commit to a new
development unless we have pre-let or pre-sold at least 70% by area.
Tenant (or lease) incentives: Are any incentives offered to occupiers to enter
into a lease. Typically the incentive will be an initial rent-free period, or
a cash contribution to fit-out or similar costs. Under accounting rules, the
value of lease incentives given to tenants is amortised through the Income
Statement on a straight-line basis to the lease expiry.
Total Accounting Return (TAR): Is the increase or decrease in EPRA NTA per
share plus dividends paid in the period, expressed as a percentage of EPRA NTA
per share at the beginning of the period.
Total Property Return (TPR): Is calculated as the change in capital value,
less any capital expenditure incurred, plus net income, expressed as a
percentage of capital employed over the period, as calculated by MSCI Real
Estate (formerly IPD). Total property returns are calculated monthly and
indexed to provide a return over the relevant period.
Topped-Up Net Initial Yield: Net initial yield adjusted to include notional
rent in respect of let properties which are subject to a rent free period at
the valuation date.
Underlying Funds From Operations (UFFO): is a measure of cash profits which
includes recurring cash profits and excludes other one off or non-cash
adjustments. UFFO measures the Company's underlying operational profits,
excluding one-off or non-cash adjustments such as portfolio valuation
movements and profits or losses on the disposal of investment properties.
Unsecured balance sheet: The Company's balance sheet is unsecured, which means
that none of its debt is secured against any of its property assets.
Weighted average lease expiry (WALE): Is the average lease term remaining to
first break, or expiry, across the portfolio weighted by rental income. This
is also disclosed assuming all break clauses are exercised at the earliest
date, as stated. Excludes short-term licences and residential leases.
Yield on cost: Passing rents expressed as a percentage of the total
development cost of a property.
Yield Shift: Is a movement (usually expressed in basis points) in the
equivalent yield of a property asset.
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