TIDMNRR
RNS Number : 3809F
NewRiver Retail Limited
23 May 2013
NewRiver Retail Limited
("NewRiver" or "the Company")
Final Audited Results for the 12 Months ended 31 March 2013
Third consecutive year of growth in revenue, profits and
dividend
NewRiver Retail Limited (AIM and CISX: NRR), the UK REIT
specialising in value-creating retail property investment and asset
management, is pleased to announce annual results for the 12 month
period to 31 March 2013.
Highlights
Robust results generating increased profit and dividend
-- Group revenue increased 20% to GBP18.0 million (2012: GBP15.0
million)
-- EPRA Adjusted Profit growth of 7% to GBP5.2 million (2012:
GBP4.9 million)
-- Dividend per share increased 7% to 16 pence, fully
covered
-- EPRA adjusted earnings per share of 16.3 pence
-- IFRS reported profit of GBP1.5 million (2012: GBP3.8
million)
-- Two successful disposals at high IRR's of 18% and 244%
-- Strong balance sheet with LTV of 51% (2012: 50%)
-- Modest capital value reduction of 0.8% during a period when
shopping centre values fell 3.7%
-- NAV increased by GBP0.7 million whilst EPRA NAV per share
absorbed 18 pence of capex for development and equity issue
dilution to close at 240 pence per share (2012: 258 pence)
PIMCO* Joint Venture provides significant firepower
-- Significant new joint venture established with PIMCO
-- GBP90 million portfolio acquisition comprising five shopping
centres at a net initial yield of 9.7%
-- PIMCO invested in NewRiver to become second largest
shareholder with an 8.5% stake
Active Asset Management is creating value
-- Assets Under Management increased 42% to just under GBP400
million
-- NewRiver is now the fourth largest owner/manager of shopping
centres in the UK by number
-- Completed 142 leasing events during the year (2012: 72) of
which 103 new lettings and lease renewals were 3.4% above valuation
ERV
-- Completed 18% increase at rent review of the Tesco store in
Bramley to GBP0.5 million
-- Minimal impact from retail administrations with only 0.7% of
rents in administration
-- WALE of 7.8 years (2012: 7.4 years)
-- Occupancy rate of 94% achieved across retail portfolio
-- New asset management appointment from administrator Zolfo
Cooper during the year
Risk controlled development is delivering
-- Growing development pipeline totalling 600,000 sq ft
-- Major planning consent and pre-let agreed in Wallsend for
town centre redevelopment
-- Planning consent secured for a 45,000 sq ft regeneration
project in Erdington town centre
-- Agreement for lease signed with Morrisons for a new 71,000 sq
ft food store in Fareham
-- Pre-lets agreed with Primark, Home Bargains, Iceland and
North Tyneside Council
-- Further development schemes in Paisley, Cowley, Widnes,
Wisbech, Market Deeping and Burgess Hill
David Lockhart, Chief Executive of NewRiver Retail,
commented:
"This has been another fast growing year for NewRiver and we are
delighted to have achieved a third consecutive year of growth and a
strong financial performance. We are also pleased to have become
the UK's fourth largest shopping centre owner/manager by number at
this stage in the cycle. Our focus on food and value retailing has
seen the business outperform the sector across a range of indices.
The Company achieved a number of significant milestones during the
year including completing the acquisition of a major shopping
centre portfolio through its important new joint venture with PIMCO
and the successful GBP90 million funding. In addition we continued
to progress our active asset management and extensive
risk-controlled development programme by gaining planning
permissions and major new tenants to anchor schemes.
"UK non-discretionary spend remains resilient and there are
signs of improvement in the wider macro-economy, both of which bode
well for our retailers, their customers and the value and income
derived from our assets. NewRiver has created a significant
platform for sustainable long term growth and we look forward to
the further success of the Company."
*PIMCO refers to the joint venture with Bravo I, a managed fund
sponsored by PIMCO, one of the world's largest financial investment
groups.
For further information contact:
NewRiver Retail Limited Tel: 0203 328 5800
David Lockhart, Chief Executive
Mark Davies, Finance Director
Pelham Bell Pottinger Tel: 0207 861 3232
David Rydell/Guy Scarborough/Charlotte
Offredi
Cenkos Securities Tel: 0207 397 8900
Ian Soanes/Max Hartley
Investec Bank Tel 0207 597 5970
Garry Levin/ Chris Sim/ David Andersen
Chairman's statement
"The Company remains committed to generating strong income
returns for shareholders and the growth in both revenue and profits
has enabled the Board to recommend an increase in the dividend per
share this year."
I am pleased to report NewRiver's annual results for the year
ended 31 March 2013.
The Company continued to build on its position as one of the
leading value-creating property investment businesses in the UK.
EPRA adjusted profit for the year increased by 7% to GBP5.2 million
(2012: GBP4.9 million) on revenue up by 20% to GBP18.0 million
(2012: GBP15.0 million). This healthy performance enables the Board
to recommend a 7% increase in the total dividend for the year to 16
pence per share, thereby continuing its commitment to generating
strong income returns to shareholders.
As well as delivering its third consecutive year of growth in
revenue, profit and dividend, the Company laid strong foundations
for the future through a significant joint venture
relationship.
In December it formed a joint venture with Bravo I, a managed
fund sponsored by PIMCO - one of the world's largest financial
groups. The joint venture is a transformational relationship that
will deliver strong returns to shareholders through the marriage of
Bravo's capital and NewRiver's expertise. The agreement secured the
initial acquisition of a GBP90 million portfolio of five shopping
centres.
Additionally, NewRiver won an asset management contract for two
shopping centres and one high street parade from the administrator
Zolfo Cooper. These properties are already generating incentivised
fee income.
Both initiatives are strong recognition of management's ability
to implement a high quality, active asset management and risk
controlled development strategy. Bravo I has also invested directly
in NewRiver and is now the Company's second largest
shareholder.
The scale of the business grew significantly during the year
through portfolio acquisitions and third party mandates. NewRiver
now owns or manages 23 shopping centres and other town centre
assets with a current capital value of circa GBP400 million making
it the fourth largest in the UK by number of retail assets over
50,000 sq ft. The asset base continues to be highly defensive,
offering capital and income growth through focusing on
non-discretionary spend. During the year the Company further
strengthened its assets by adding a raft of new high quality food
and value covenants to its retailer mix, including Primark,
Wagamama, Starbucks and Nando's.
The Company's outperformance is best recognised through
comparison with its peer market. The GBP2.1 million revaluation
deficit is only 1% of the total portfolio and was achieved during a
year in which total shopping centre values fell by 3.7%. This
strong performance was achieved as a result of the Company's highly
active asset management and risk controlled development
programme.
With acquisition yields historically high and borrowing costs
historically low, NewRiver believes that the retail property market
continues to offer compelling buying opportunities. The Company
intends to take full advantage of these favourable conditions and
is working on a number of on and off balance sheet acquisition
prospects.
The Board is delighted with the progress that NewRiver made in
the year and is confident that the Company will continue to deliver
attractive long term returns for shareholders.
Paul Roy
Chairman
NewRiver Retail Limited
22 May 2013
The retail market
The true value of retail
Convenience, Commodity, Community and Value
The high street is the dominant force in a GBP300 billion market
and like all fast moving and dynamic markets, it has evolved to
cater for the changing needs of the consumer, whose attitudes to
time, money, lifestyle and technology are constantly changing
against the backdrop of the prevailing economic environment.
Consumers have inevitably become more price savvy with shoppers
actively seeking out value and managing their budgets by reducing
volumes purchased as they look to minimise waste, resulting in
top-up shopping becoming the norm. Consumer lifestyle and the high
cost of fuel mean there is less time to make considered purchases.
This equates to a greater reliance on convenience and
technology.
NewRiver's 23 commodity focused shopping centres are set to
benefit from this consumer desire for value and convenience,
capitalising on the opportunity to provide more than a pure retail
channel and become more of a community and social hub providing
shopping as well as a range of leisure and cultural activities. A
thriving town must offer a multitude of services in an inviting
environment, creating a virtuous cycle with customers spending more
time and money in the town centre.
World Class Local Retailers
The grocers continue to be major investors in town centres, with
a rapid expansion of space increasing sales by 28% between
2007-2012. Where Tesco and the Co-op's rapid expansion is
inevitably cooling, other grocers such as Sainsbury's, Morrisons,
Waitrose and Aldi are set to take advantage and expand their
convenience offer. Providing value-for-money, up to the minute
fashion and quality, Primark has seen inflation busting growth
against a backdrop of strong competition and notably without any
online representation.
The consistently strong performance of non-discretionary, food
and value sectors, forecast to continue their rapid expansion, is
therefore an extremely exciting sector to be operating in.
Affordable Luxury
As shoppers continue to cut back on their spending and make more
considered purchases, they do still allow themselves an affordable
luxury such as smaller beauty items or premium coffee purchases.
Costa Coffee reported impressive like for like sales growth of 7%
in 2012 opening 200 new stores.
Consumer Loyalty
It is essential to build consumer loyalty in the current
environment. Consumers have a genuine choice: they can choose not
to shop, to shop online, out of town or locally, therefore it is as
important for property owners as for retailers to fight hard to
ensure that the pound in the consumer's pocket is spent in their
shop. Providing shoppers with an attractive and secure retail
experience with a range of desirable goods and services at a price
that they can afford is critical to this success. At NewRiver we
develop loyalty through events, competitions, social media and
innovations that complement a varied retail offer and drive
footfall, dwell time, loyalty and ultimately increases sales for
our retailers.
Identity
A town's centre is a place to belong in as well as a place to
discover in. Today's consumers expect their shopping centres to
deliver not only quality but also added value. As well as demanding
a wide variety of stores, consumers want to be able to spend their
leisure time in attractive surroundings appropriate to the locality
and expect to be entertained and inspired.
The internet is a hugely exciting opportunity for the high
street, and not a threat, opening up new markets to retailers and
should be embraced to harness incremental income. NewRiver has a
committed "bricks'n'clicks" strategy to implement this. The Company
has created multi-channel retail experiences having introduced free
Wi-Fi to all of its centres, embraced mobile and social media and
is exploring virtual shopping solutions that will integrate the
click with the brick for its retailers. It is no accident that some
of the most-visited UK web sites are also bricks & mortar
retailers. A recent study by Google and Vodafone cited that for
every GBP1 spent online, GBP1.75 was spent in-store. NewRiver has
also introduced Amazon collection lockers into its centres for
increased convenience helping to improve footfall and linked
trips.
Partnerships
Stakeholders must actively promote and invest in their town's
centres. Budgets are tight but the combined enterprise of councils,
shopping centre owners, key businesses, schools and universities
become greater than the sum of the parts and can leverage off each
other's skill base to deliver investment and improvement.
NewRiver has a community and town-centre-first policy and an
absolute commitment to delivering the true value of retail for
their towns and shopping centres.
Operating and Financial Review
Retail is a dynamic and vibrant sector that is pivotal to the UK
economy. Sales remain resilient and provide a range of
opportunities for the astute investor and skilled asset
manager.
Overview
The financial year was marked by the achievement of significant
milestones and growth for the Company. We completed the acquisition
of a major portfolio of five shopping centres through the creation
of an important new joint venture with PIMCO which successfully
raised GBP90 million of debt and equity to fund the acquisition.
The Company was awarded three important planning permissions to
expand three of its core shopping centre assets and completed two
sales ahead of target business plan. NewRiver has continued to
drive forward its asset management and extensive risk controlled
development programme. Additionally we launched a number of digital
initiatives to enhance the value of our assets and deliver a highly
desirable shopping experience for our customers at our UK wide
shopping centres.
For the third consecutive year the Company has continued its
positive financial momentum and increased gross revenues by 20%
resulting in further growth in EPRA adjusted profits to GBP5.2
million (2012: GBP4.9 million). Proposed dividend per share
increased to 16 pence (2012: 15 pence) and EPRA NAV of 240 pence at
the year-end performed broadly in line with market expectations
principally due to the market outperformance of our like-for-like
property valuations.
The Company maintained its acquisitive strategy and
significantly grew its assets under management to approximately
GBP400 million, encompassing 23 shopping centres, 19 of which are
owned outright or through joint venture initiatives. Notably
NewRiver is now the fourth largest owner and manager of shopping
centres by number over 50,000 sq ft in the UK. This is a
significant achievement considering the Company was founded less
than four years ago. The increasing scale and quality of the
portfolio enables NewRiver to drive revenue, reduce operating costs
through greater buying power and benefit from wider reaching
retailer relationships and shared experiences.
The highlight of the year was the acquisition in December 2012
of a portfolio of five shopping centres for a total consideration
of GBP90 million, reflecting a net initial yield of 9.7%. The
purchase was achieved through the creation of an innovative
co-investment joint venture vehicle with PIMCO. With a total
lettable area of one million sq ft, the acquisition considerably
enlarged the asset base from which the Company can generate returns
through its active asset management and risk controlled development
strategy. NewRiver identified a number of significant
value-enhancing opportunities across the portfolio and have already
commenced works in Leamington Spa.
It is a strong endorsement of the Company's management and
strategy that a sophisticated global investor of the quality of
PIMCO chose to partner with, and invest in, NewRiver. We are
delighted to welcome PIMCO as an important shareholder with an 8.5%
stake in the Company.
Retail is a dynamic and vibrant sector that is pivotal to the UK
economy. Sales remain resilient and provide a range of
opportunities for the astute investor and skilled asset manager.
NewRiver continues to focus on the outperforming food and value
sub-sectors where the emphasis is on convenience and the
non-discretionary spend of the UK family budget. Our shopping
centres are community destinations. We focus on meeting the needs
of our customers by working in partnership with our retailers to
drive customer footfall, experience and dwell time. In that respect
we regard our shopping centres as operating platforms rather than
pure property investments.
Our business model is focused on driving the growth of income
returns by targeting high yielding assets with the lowest risk
profile through affordable and sustainable income streams, and
where we can unlock additional value through our active asset
management and development skills. Within the food and value
sub-sectors there are a number of retailers seeking additional
space and with a limited retail development pipeline this provides
attractive opportunities to create value by meeting that demand.
NewRiver's ability to assemble a high quality portfolio that can
generate immediate and attractive cash on cash returns lies at the
heart of our business model.
Across the entire portfolio, NewRiver's asset enhancement
activities progressed significantly with a total of 142 leasing
events including 103 new lettings and lease renewals, maintaining
and generating an income of GBP3.2 million for the Company, 3.4%
above business plan ERV. During the year only 22% of retailers
chose to vacate at expiry. In November, the Company signed a new 25
year lease with Primark, one of Europe's leading value fashion
retailers, for a 56,000 sq ft retail unit at Golden Square Shopping
Centre in Warrington. NewRiver received detailed planning
permission in September for a major redevelopment of the Forum
Shopping Centre near Newcastle-upon-Tyne comprising 77,000 sq ft of
new retail space and a new library and community centre pre-let to
North Tyneside Council for a term of 30 years at an initial rent of
approximately GBP363,000 pa. In May 2013 NewRiver secured planning
consent for a new 45,000 sq ft town centre regeneration project in
Erdington; and signed a pre-let with Morrisons for a new 71,000 sq
ft food store in Fareham.
These approvals are the latest in a raft of NewRiver initiatives
to enhance its asset base through the core strategy of active asset
management and risk controlled development. NewRiver also continued
its commitment to recycling shareholder equity with two sales
totalling over GBP2 million.
We continue to embrace digital innovations with recent
initiatives including agreements with The Cloud (BSkyB) to provide
free Wi-Fi across our portfolio and with Amazon to provide
collection lockers within our shopping centres for customers who
have purchased online. Both initiatives are income-producing and
have contributed to increased footfall and dwell time. We have also
developed our commercialisation activities with major brands
through agreements with Coca-Cola, Photo-Me and Greggs.
NewRiver's occupational base of managed properties now exceeds
850 occupiers which generates an annual footfall of over 80 million
across a total of 3.4 million sq ft. The quality of our offering is
reflected in a 94% occupancy level and a weighted average lease
length of 7.8 years. NewRiver's top 20 occupiers comprise major
high quality covenant retailers including Tesco, Boots,
Sainsbury's, Poundland, Primark, TK Maxx, Argos and the Co-op with
no single occupier accounting for more than 5% of aggregate rental
income. We have been broadly unaffected by retail administrations
and our high occupancy rate of 94% reinforces the low risk
characteristics of our portfolio. The portfolio is geographically
spread across the UK with a greater weighting to the south and east
of England. All of our assets are in town centres, which continue
to dominate the UK retail landscape and account for the majority of
total retail sales.
Outlook
The Company views its future with great optimism. With high
acquisition yields in our core market and low borrowing costs,
there is significant opportunity to grow the portfolio through the
acquisition of good quality assets with defensive income streams
both directly and through our joint venture partners. We have no
hesitation in stating our objective to grow the portfolio to at
least GBP1 billion of gross assets in the medium term and believe
our active asset management risk controlled development skills are
well placed to unlock and generate enhanced value and deliver
long-term capital and income returns to shareholders as a
result.
Our own team is the key to NewRiver's success. We have a 20
strong team of highly focused, experienced and talented individuals
at NewRiver who are passionate about retail, understand the market
intimately and are committed to identifying and delivering the true
value of retail. This includes our entire dedicated and
award-winning centre management teams as well as our skilled and
professional local and national advisors.
The strong performance of the portfolio to date, against
challenging headwinds, is an endorsement of NewRiver's success in
its pro-active approach to value generation. Current market and
economic opportunities provide a significant platform for
sustainable long-term growth for NewRiver and we look forward to
furthering the success of the Company.
Property Review
NewRiver is at the forefront of the changing retail landscape
and has established itself as one of the UK's leading owners of
convenience focused shopping centres. With a combined annual
footfall of over 80 million shoppers across 23 shopping centres,
NewRiver engages with the UK consumer on a daily basis. NewRiver is
uniquely placed to provide for the everyday needs of our shoppers
and their desire for value, convenience and social engagement in a
market where time and money is a critical equation.
Our growing and active portfolio
This year NewRiver's active-asset management programme delivered
71 new lettings at a total rent 1.8% above Valuation ERV;
furthermore we completed 32 lease renewals at a total rent 7.2%
above Valuation ERV. The average weighted lease length on new
lettings and lease renewals was 14.2 years. Like-for-like rental
income was stable with a fractional decline of -0.3%.
During the year NewRiver has secured planning consents for two
major town centre redevelopment projects in Wallsend and Erdington
totalling 122,000 sq ft. The Company also signed an agreement for
lease with Morrisons for a 71,000 sq ft in Fareham. The Company has
a total of 185,000 sq ft of development in the pipeline in Paisley,
Widnes, Market Deeping, Romford and Burgess Hill.
The asset management of shopping centres is no longer confined
exclusively to bricks and mortar. Our bricks'n'clicks strategy
acknowledges the Internet as an opportunity for retail. We have
delivered on our commitment to innovating and future-proofing our
shopping centres including the integration of social media, and the
installation of two income-generating initiatives with the roll-out
of Amazon collection lockers and free Wi-Fi with BSkyB (The
Cloud).
The Company's portfolio continues to generate significant
surplus cash as a result of low borrowing costs, low vacancies,
high rent collection rates, limited impact from retailer
administrations and increased revenues from new lettings,
commercialisation and advertising.
Acquisitions
The Company has experienced a highly active period in which we
have completed our largest acquisition to date with the completion
of the Camel II portfolio. This major off-market acquisition
comprised a portfolio of five shopping centres for a total
consideration of GBP90 million at a net initial yield of 9.7%. The
Camel II portfolio was acquired through the Company's new joint
venture with PIMCO, at an attractive price given the quality and
sustainability of the income stream. As well as generating high
annual cash on cash returns, NewRiver has identified deliverable
asset management opportunities, a number of which are already
underway.
The five shopping centres total one million sq ft, include over
200 retail units and a have combined annual footfall of 21.5
million. With a weighted average lease expiry of 8.1 years, the
portfolio features a range of high quality retailers and food
operators including Currys, Starbucks, Home Bargains, New Look,
Boots, Co-op, Poundland, Argos, WH Smith, Space NK, Wagamama and
Strada.
The portfolio represents an excellent geographical diversity
ranging from Oxford to the west of Scotland and comprises Templars
Square in Cowley, Oxford; Regents Court in Royal Leamington Spa;
The Prospect Centre in Hull; The Promenades in Bridlington and
Burns Mall in Kilmarnock.
Disposals
During the period NewRiver achieved two important disposals
totalling approximately 50,000 sq ft.
We completed the sale of Gilmour House, a vacant 45,000 sq ft
office building located above its shopping centre The Piazza in
Paisley just outside Glasgow. The vacant building was sold for
GBP850,000 to Freshstart Living, a specialist residential and
student buy-to-let property investment company, and will be
converted into student accommodation for the University of West
Scotland boosting the Centre's shopper base. As well as creating
value and recycling equity, the sale increases NewRiver's net
operating income by reducing non-recoverable void rates and service
charge and delivered a 244% IRR.
The second disposal was the sale of a retail unit in Canterbury
for GBP1.18 million to a private investment company reflecting a
net yield of 6% and an IRR of 18%. The unit was acquired in 2010
for GBP850,000 as part of a larger portfolio acquisition through
our joint venture with Morgan Stanley. Through its active asset
management NewRiver negotiated a renewed lease with Jones the
Bootmaker for a new 10 year term and annual rent of GBP75,000
pa.
Asset management
Active asset management has never been more important in
protecting and enhancing income and value. NewRiver aims to create
desirable convenience driven shopping experiences for customers
through a sociable, safe and attractive environment offering a
range of products and services at an attractive price. For NewRiver
this defines the true value of retail for today's shopper.
Today's shopping centres and retail destinations are more than
just a place to shop; they are community hubs that contribute to
shaping the town's identity. To create a point of difference they
should offer events, entertainment, weekly markets and digital
innovation; they are a place to discover, to meet and enjoy
attractive food and beverage options together with a combination of
dynamic national and independent retailers. Delivering this
requires willing local collaboration from key stakeholders on the
town's economic strategy and engagement with retailers.
In last year's annual report NewRiver set out its approach to
asset management focusing on intensive stakeholder engagement and
strengthening retailer relationships as a major focus for the
Company to ensure greater customer satisfaction. In the financial
period the Company has made excellent progress on all aspects of
its asset management strategy.
We actively engage with our retail partners and have
successfully completed 71 new long-term lettings across the
portfolio generating a gross rent of GBP2.3 million exceeding
Valuation ERV by 1.8%. The average weighted lease length of these
new lettings was 17.3 years with an average lease incentive of 6.9
months.
We have completed 32 lease renewals which protects a total
annual rent of GBP860,000 exceeding Valuation ERV by 7.2%. The
portfolio WALE has been further strengthened by these key leasing
events.
NewRiver's focus on sustainable income generation through low
rent to turnover ratios has resulted in a minimal impact from
retailer churn at expiry or break with just 22% vacating, a number
of which were immediately re-let. The Company's focus on store
profitability allows NewRiver to maximise returns through
minimising the impact from tenant loss. We have a highly
disciplined approach to rent collection with revenues exceeding
forecasts.
The Company has a very focused and committed strategy to
continue to reduce property costs, which currently reflects just
11% of gross rent. We are able to identify cost savings by
maximising efficiencies within our service providers, reducing
energy consumption, selective temporary lettings to mitigate rates
liability and undertaking direct negotiations with retailers to
reduce transaction costs. The Company is equally committed to
lowering service charge costs for our retailers as well as on-going
rates to the benefit of our retailers' bill reviews. Appeals across
the portfolio have produced savings past and future within our
portfolio totalling GBP4.6 million to the benefit of our
retailers.
Portfolio highlights
Primark - Golden Square, Warrington
Following the successful acquisition of a long leasehold
interest from Standard Life, working with Lendlease to achieve
vacant possession and the relocation of New Look, construction
works have begun for the complicated restructuring of two units to
create a single 56,000 sq ft unit for Primark. NewRiver signed the
lease with Primark in November 2012 for a term of 25 years at an
annual rent of GBP475,000. Works are due for completion in August
2013 in time for Primark to begin trading for Christmas 2013.
The Piazza, Paisley
NewRiver has commenced works on site to substantially remodel
two vacant units at the Piazza Shopping Centre in Paisley for
Iceland at a rent of GBP135,000 pa for a 15 year term. The
refurbishment and amalgamation works will create a new 9,500 sq ft
anchor store with hand over due in September 2013.
We have also completed a deal with Poundland to extend their
existing store within The Piazza and relocate Carphone Warehouse
into a vacant unit. Poundland are paying GBP115,000 rising to
GBP117,500 in the third year for a 10 year term and Carphone
Warehouse has taken a new lease at GBP25,000 pa.
Market Place, Romford
NewRiver has agreed terms with a leading UK discount department
store. The potential scheme consists of the major refurbishment and
the remodelling of an existing three storey building into a large
single retail unit of 46,984 sq ft. Works are expected to start on
site shortly to enable Christmas 2013 trade.
Tesco - Bramley Shopping Centre, Leeds
NewRiver completed the rent review of the 41,000 sq ft food
store let to Tesco Bramley resulting in an 18% increase in the
annual rent rising from GBP414,000 to GBP487,000.
The Newlands Shopping Centre, Witham
NewRiver completed two key lease renewals with anchor retailers,
Peacocks and Iceland, both at ERV rents. The Company also
negotiated into the leases landlord only breaks to allow for future
redevelopment of the Centre to create larger stores where demand is
strongest. This represents an excellent example of pro-active asset
management to release and unlock the potential development value
whilst maintaining attractive income value.
The Hildreds, Skegness
With strong dominant credentials NewRiver has strengthened the
longevity of the income through lease renewals and secured a
long-term anchor retailer following the successful acquisition from
the Co-operative of its leasehold interest. This unit was re-let to
Home Bargains for a term of 15 years at a rent of GBP180,000
pa.
TK Maxx - Merlin's Walk, Carmarthen
NewRiver have removed the break notice of the TK Maxx store in
Carmarthen, leaving them with a ten year term at GBP142,500. TK
Maxx is an important anchor retailer and this agreement is a
positive endorsement both for the shopping centre and the town.
Food and Beverage
We continue to enhance our food and beverage offer to meet the
needs of the consumer. Food and beverage now represents 3% of our
portfolio and we have identified significant potential for further
growth.
Nando's - Regent Court, Leamington Spa
Following the recent acquisition of Regent Court Shopping Centre
in December 2012, as part of our newly established joint venture
with PIMCO, NewRiver has agreed a 15 year lease with Nando's to
occupy two vacant units totalling 3,200 sq ft at an annual rent of
GBP70,000 pa at ERV. Following completion of the works, NewRiver
handed over the new unit to Nando's who expect to begin trading in
July 2013.
This new letting, combined with NewRiver's submission of a
planning application to increase the provision of restaurant use in
the centre, accelerates the strategy to transform the centre into a
restaurant destination in response to the high level of demand from
restaurant operators.
Costa Coffee - Locks Heath, Fareham
Responding to our consumer analysis for the demand for a food
and beverage operator at the centre, NewRiver introduced Costa
Coffee to the centre and since opening in April 2012 it has
significantly over-traded with the operator already seeking
additional space. The opening of a new Italian restaurant, Franco
& Pablo, has also contributed towards increased dwell time and
an improved retail offer for this convenience led shopping
centre.
BB's Café
NewRiver completed the upgrade and rebrand of the two BB's Café
restaurants at The Sovereign Centre in Boscombe and The Piazza in
Paisley. The new concept stores were some of the first to be
rebranded in the country.
Retailer engagement
NewRiver's relationships with our retailers are integral to our
business. The Company regularly visits its retailers to understand
their business strategies and requirements. As a result, we are
able to pre-empt potential challenges with examples including
portfolio deals achieved with Game, Peacocks and Home Bargains. We
equally understand the importance of independent local retailers
and their role in providing a unique identity and retail offer to
our centres and towns.
NewRiver works very hard to obtain ongoing performance metrics
including seeking access to turnover figures and rent to sale
percentages. These figures allow the Company to track the health of
its retailers, identify trends within each asset and remedy
pressure points by working in partnership with them to ensure their
businesses are profitable. The information is invaluable to
encourage new occupiers into schemes, negotiate leasing events and
portfolio deals. This strategy continues for the forthcoming year
with meetings in place with Home Bargains, Burger King, Boots,
Costa Coffee, Greggs, Heron Foods, Phones 4U, Holland &
Barrett, JD Wetherspoon, Mitchell & Butler, Poundland, 99p
Stores, Poundworld and WH Smith.
Development
Risk controlled development is an important part of our business
model. The Company is making excellent progress enhancing
development value across the portfolio ranging in size from small
unit amalgamations to whole town centre redevelopments. Working
closely with key stakeholders, the Company has identified projects
to enhance, extend and re-activate disused space within our assets,
creating new footfall generators and increasing critical mass. All
of NewRiver's development projects comply with the Company's
disciplined risk control criteria to ensure planning, full pre-lets
and competitive construction contracts are secured before
commencing on site.
State-of-the-art Community Centre and Library at The Forum
Shopping Centre, Wallsend
After successfully securing a hybrid planning permission in
September 2012 this regenerative town development will be delivered
in two phases. The first phase will unlock significant inherent
value through the redevelopment of the vacant Co-op building to
provide three new retail units and a new 50,000 sq ft library and
community centre on the first and second floors. The library and
the community centre have been pre-let to North Tyneside Council
for a term of 30 years at an initial rent of GBP363,000 pa.
Additionally, a pre-let has been signed for a 10 year lease with
Home Bargains at a rent of GBP125,000 pa for one of the three new
ground floor retail units to be created by the redevelopment.
Advanced legal negotiations with other leading value led national
retailers are underway to lease the final two units. The three
retail units will have an estimated gross rent of over GBP370,000
pa and in total will account for 27,000 sq ft of new retail
space.
The enabling contract of the first phase is underway with the
main contract due to start in June 2013 in order to provide a
phased handover of the three retail units in October 2013 and the
library in early 2014.
The second phase of the planning approval includes the proposed
construction of a new 46,000 sq ft food store and approximately 300
space surface car park.
The Martlets, Burgess Hill, West Sussex
This project is one of the largest redevelopment operations
being undertaken by NewRiver. Working in partnership with Mid
Sussex District Council and the Town Council, our vision is to
create a major revitalisation for the town. The Company is
currently in final negotiations to re-gear the headlease of the
Centre and agree a Development Agreement with Mid Sussex District
Council. The Company expects to submit a comprehensive master plan
later this year to redevelop The Martlets which would include a new
50,000 sq ft food store, eight screen cinema, 51,000 sq ft of new
retail units, 60 room hotel and a circa 275 space car park together
with a full refurbishment of the existing centre. Discussions have
commenced with key anchor retailers and initial terms have been
agreed with the cinema operator.
Locks Heath Shopping Village, Fareham, Hampshire
In May 2013 NewRiver signed an agreement to lease with
Morrisons, subject to conditions, under a 25-year term for a 71,000
sq ft food store at its shopping centre in Fareham. This important
agreement would include a major extension and enhancement of the
existing centre transforming the shopping centre, driving footfall
for our existing retailers and boosting the viability of the
scheme. Furthermore the agreement would meet the demand from
locals, determined by a recent public consultation by Fareham
Borough Council, to greatly improve the food and beverage offering
for the area.
Central Square Shopping Centre, Erdington, Birmingham
In May 2013 NewRiver secured a detailed planning consent for the
development of a new 45,000 sq ft town centre regeneration project.
The approved plans provide for a 25,000 sq ft sales area food
store, new retail units totalling 8,000 sq ft and a 230 space car
park. Significant local support was obtained as the development is
in line with Government policy. The scheme is at the heart of
Erdington town centre and will act as a catalyst for the
regeneration of the area.
Albert Square Shopping Centre, Widnes, Cheshire
NewRiver has been awarded planning consent to redevelop the
vacant public house located adjacent to Albert Square Shopping
Centre in Widnes which was acquired in 2010 as part of NewRiver's
joint venture with Morgan Stanley. The proposed plans comprise the
demolition of the existing building and the development of a new
10,000 sq ft retail unit. The Company is in advanced legal
negotiations with a national value retailer and construction will
commence upon completion of the pre-letting agreement.
Templars Square, Cowley
Following the recent acquisition of Templars Square in December
2012, in our newly established joint venture with PIMCO, NewRiver
has entered into a detailed master planning exercise to reposition
the asset, working with Oxford City Council on a phased development
plan. The master planning exercise identifies how all aspects of
the centre can be enhanced and improved by repositioning and adding
to the existing retail mix to include leisure and establish the
scheme as the principal shopping destination for the area.
The Deeping Centre, Market Deeping
The Company acquired a strategic site adjacent to the Co-op
anchored shopping centre and has submitted a planning application
to develop and create two new retail units at the entrance to the
centre totalling 18,000 sq ft. The planning application is being
revised to align with Officers recommendations.
Third Party Asset Management
The Abbey Shopping Centre, Abingdon, Berkshire
NewRiver, as asset manager for Scottish Widows Investment
Partnership, has successfully managed the extensive GBP3.7 million
refurbishment and modernisation of the centre through to
completion.
This has involved a complicated renovation and the architectural
re-styling of the existing shopping centre to complement the
attractive market town and was carried out without interruption to
trading for a substantial number of retailers. The redevelopment
included two large retail units on the ground and first floor
providing 16,000 sq ft. Both units are in advanced letting
negotiations with leading multiple retailers. A second phase
extension to this scheme is under detailed negotiations where terms
have been entered into with The Vale of White Horse District
Council to enter into a joint sale of a long leasehold interest to
a major food store retailer.
The Market Shopping Centre, Crewe
As asset manager of The Market for Scottish Widows Investment
Partnership, NewRiver has been in detailed discussion with Cheshire
East Council to create a master plan and delivery mechanism to
enhance the town centre. Various schemes are being worked up with
the intention of bringing in adjoining stakeholders.
Distressed Debt Asset Management
NewRiver was appointed by Zolfo Cooper as asset manager for two
shopping centres, The Beacon Shopping Centre in North Shields,
North Tyneside and Newkirkgate Shopping Centre in Leith, Edinburgh
as well as one high street parade, La Porte Precinct in
Grangemouth, Scotland.
Commercialisation
Commercialisation is an important income generator and a
platform to offer enhanced customer experience, service and
convenience. NewRiver has developed in-house expertise to manage,
promote and generate mall income and given the size of its
portfolio the Company has achieved significant economies of scale
and cost benefits.
During the period, NewRiver enjoyed a strong growth in
commercialisation with income growing from GBP331,000 to GBP553,000
representing an increase of 67%. This was achieved through
intensive asset management, a number of portfolio deals and the
streamlining of operations. Our forecast for the next 12 months
aims to increase revenue to GBP800,000 with the benefit of
contributions from acquisitions this year and continued growth.
We appointed The Cloud (BSkyB) to provide free Wi-Fi for our
entire shopping centre portfolio and installed four
revenue-generating Amazon Collection Lockers. NewRiver was one of
the first shopping centre owners in the UK to introduce free Wi-Fi
for our shoppers and receive a rent from BskyB in return for access
to our 80 million customers. As well as an enhanced customer
experience and income, it provides us with important data
capture.
Marketing
Investing into the local community is integral to NewRiver's
marketing strategy. The Company aims to transform its shopping
centres into events and entertainment venues through pop-up shops,
theatres and galleries. NewRiver actively engages with local
authorities, schools, charities, media, communities and
neighbouring retailers to create unique customer experiences
resulting in a varied calendar of events for our customers and
their families. To this end our shopping centres have been
shortlisted for seven Shopping Centres Magazine SCEPTRE Awards.
Understanding our consumers and their needs is critical to
driving increased footfall, dwell time and consumption. We
undertake in-depth consumer surveys every two years which include
analysis of the impact of digital within the retail
environment.
The integration of the physical store with digital innovation
presents an exciting opportunity for our customers and retailers.
NewRiver has a committed bricks'n'clicks strategy which includes
mobile optimisation, partnerships with key market players namely
Google and the integration of social media into our marketing that
also extends to our retailers. NewRiver continues however to invest
in effective traditional media channels within our local catchment;
this includes new advertising boards and the development of new
branding, signage and way-finding paths.
Importantly, we make every effort to appoint local partners and
businesses to implement our marketing strategies.
During the period, we launched a bespoke multi-channel Brand
Partnership within our centres. This income-generating initiative
includes cross-media advertising, live sampling and social media
integration. We piloted the scheme with Greggs achieving a 15%
increase in sales for the retailer and a 4.6% uplift in footfall.
The partnership was shortlisted for a BCSC Opal Award, nominated
for a Shopping Centre Magazine SCEPTRE award and already has high
demand from a range of national retailers.
NewRiver's projects with local schools and colleges have created
unique results including the re-brand of the Packhorse Centre in
Huddersfield. Working with the design faculty of Huddersfield
University and the growth of a local charity occupier from a single
unit to a 4,000 sq ft stylised art gallery and event space are
excellent examples of this. The art theme extends to Skegness where
our pop-up art gallery has attracted over 14,000 visitors. In
Witham we collaborated with two local high schools to host a
Dragon's Den pop-up shop and "Media Hub". The Sovereign Centre in
Boscombe, hosted a week long BID (Business Improvement District)
endorsed "Boscombe's Got Talent" fashion and music festival; and
our centre in Hull hosted auditions for Simon Cowell's X-Factor
resulting in a 35% increase in footfall and as much as 9%
incremental sales for retailers including Wilkinson and enabling
some retailers to exceed their monthly KPIs.
Stakeholder Engagement
As a major stakeholder in the towns where our shopping centres
are located, we take a highly active and leading role in steering
the regeneration and economic growth of the town. Investing in the
local community enhances the investment of our shopping centres and
we find the output achieved invaluable. Community and stakeholder
engagement is a core focus for the NewRiver business.
NewRiver has developed close ties with schools, universities,
colleges and community groups to host exhibitions, fashion shows
and business incubation opportunities as well as collaborating with
design faculties to plan the future of our centres and their
positioning.
We work very hard at both the local and executive level to
influence social policy and economic direction in order to promote
and influence the economic success of the towns we operate within
in a highly focused and co-ordinated way. We regard a silo attitude
as archaic and counter-productive and seek to remedy any pressure
points.
NewRiver has formed strong working relationships with key
stakeholders including County, District and Town Councils, local
MPs, town centre managers and educational establishments. We sit on
the boards of our town's BIDs and Town Centre Partnerships in
Boscombe, Burgess Hill, Skegness, Erdington, Paisley, Carmarthen,
Wallsend and Witham where we contribute both financially and
strategically.
Portfolio Metrics
During the period, assets under management increased 42% to just
under GBP400 million as a result of new acquisitions and third
party mandates, increasing the number of shopping centres under
management to 23 - making NewRiver the fourth largest shopping
centre owner/manager in the UK by number over 50,000 sq ft. This
increased the Company's rent roll under management from GBP23.7
million to GBP36.2 million and floor area under management from 2.2
million sq ft to 3.4 million sq ft. The total number of occupiers
within the portfolio has also significantly grown in the past 12
months, increasing from 600 to 851.
Over the past 12 months the Company completed 142 leasing
events, an increase on the 72 completed last year. New lettings
completed generated an additional GBP2.0 million of NewRiver annual
income, up 1.8% against ERV.
Lease renewals sustained GBP860,000 of annual income, up 7.2%
against ERV. The average lease length of new long term lettings and
lease renewals was 14.2 years, helping increase NewRiver's weighted
average unexpired term from 7.4 years to 7.8 years.
Administrations during the period reflected just 0.7% of
NewRiver's contracted rent. Of the 15 units which were impacted by
administration, nine have already been subsequently re-let.
NewRiver's retail occupancy remained relatively flat at 94%.
The Company's share of assets now stands at GBP234 million up
from GBP220 million in March 2012. NewRiver's share of contracted
rent is currently GBP19 million pa, of which 60% is secured against
the Company's principle retail sectors: food, health and beauty,
discount stores and value fashion.
Financial Review
Performance for the year
The Company has continued its growth trajectory. Gross revenue
is up 20% on the previous year to GBP18.0 million largely as a
result of a full year of rental income from properties acquired in
the prior year.
EPRA recurring profit before interest and tax was GBP10.5
million, up GBP0.8 million on 2012 (GBP9.7 million). EPRA profits
inclusive of the realised profit on sale of assets in the year
totalled GBP5.2 million up from GBP4.9 million in 2012. A proposed
final dividend of 10 pence per share reflects a total proposed
dividend of 16 pence per share, up from 15 pence in the previous
period - demonstrating the resilience of the portfolio and its
ability to generate strong rental income returns.
We are also pleased that the average occupancy rate remains high
at 94% with an average lease length of 7.8 years. This reflects our
focus on food and value retailers along with our active asset
management initiatives that has enabled us to secure stable
tenancies across the portfolio. Importantly, the Company has
remained largely immune from the failure of some high profile
retailers which entered administration last year, with only 0.7% of
rent in administration.
Highlights from the Statement of Comprehensive Income
Income
Property net income for the year was GBP14.4 million compared to
GBP12.8 million in the prior year. The growth was largely a result
of a full year of rental income from acquisitions. In line with our
active asset management strategy we have carried out 142 leasing
events during the year. We have also identified investment
opportunities at our shopping centres to increase footfall through
external marketing campaigns including the installation of free
Wi-Fi across the portfolio. These initiatives along with rates and
service charge on vacant units have resulted in property operating
costs of GBP3.6 million for the year (2012: GBP2.2 million).
Operating expenses totalled GBP4.8 million in 2013 compared to
GBP4.0 million in 2012. This reflects the increased headcount
following the 42% increase in assets under management and asset
management fee income. The Company received GBP1.7 million (2012:
GBP0.7 million) of asset management fees & other income as a
result of increasing numbers of third parties requiring our
expertise in managing their retail assets. As a result net
operating expenses remain at GBP4.1 million (2012: GBP3.5 million),
approximately 25% of gross income and in a year when there was
significant investment in building the right management team to
grow the business for the future.
The Group financial statements are prepared under IFRS where the
after tax results of joint ventures are shown as a single line item
on the income statement. Following the sale of properties the joint
venture with Morgan Stanley Real Estate and the joint venture with
Bravo I added GBP0.9 million (2012: GBP0.9 million) of recurring
profit to EPRA profit before interest and tax.
Net interest costs totalled GBP6.2 million (2012: GBP5.3
million) for the year, GBP1.6 million of which was payable on
convertible loan stock and GBP4.6 million for debt secured over
property. Our hedging strategy remains prudent with 77% of Group
debt hedged either on a fixed or capped basis. Interest cover is
very positive at over 3 times at property level compared to banking
covenants which range from 1.5 to 2 times.
In March 2013 we completed on the sale of Gilmour House in
Paisley, which added GBP0.8 million to the EPRA Adjusted Profit for
2013 and ensures we continue to grow our bottom line year-on-year
through both rental profit growth and actual realised profit on
sale of assets. In the period NewRiver achieved a respectable EPRA
adjusted EPS of 16.3 pence per share, which has enabled us to
propose an enhanced dividend for the second half of the year.
After the reduction in capital values, which fell like-for-like
0.8% over the year, the Reported IFRS Profit for the year was
GBP1.5 million (2012: GBP3.8 million).
Consolidated Statement of Comprehensive Income (Extract)
FY13 FY12
GBPm GBPm
----------------------------------------------------- ----- -----
Gross rental income 16.3 14.3
Property operating expenses -3.6 -2.2
Fees & other income 1.7 0.7
----------------------------------------------------- ----- -----
Property net income 14.4 12.8
----------------------------------------------------- ----- -----
Operating expenses -4.8 -4.0
JV net income 0.9 0.9
----------------------------------------------------- ----- -----
EPRA profit before interest & tax 10.5 9.7
----------------------------------------------------- ----- -----
Net interest -6.2 -5.3
Realised profit on disposal of investment properties 0.8 0.4
Other EPRA adjustments 0.1 0.1
----------------------------------------------------- ----- -----
EPRA Adjusted Profit after tax 5.2 4.9
----------------------------------------------------- ----- -----
EPRA Adjusted EPS (pence) 16.3 18.9
Dividend per share (pence) 16.0 15.0
Dividend cover 100% 100%
----------------------------------------------------- ----- -----
Earnings per Share ('EPS')
EPRA EPS is an important performance indicator for the Company
as it relates to recurring profits only. We have included an EPRA
Adjusted EPS measure which also incorporates realised profit on
sale of investment properties which provides the basis for our
dividend policy. EPRA adjusted EPS of 16.3 pence per share is a
strong result and reflects a total shareholder return of 11%.
EPS basic was 4.7 pence (2012: 15.3 pence) and below EPRA EPS
due to the modest capital value movement. In addition we disclose
Funds From Operations ("FFO") as this is an important metric often
used by the investment community when comparing the performance of
International REITs. Reported FFO this year was GBP4.2 million
(2012: GBP4.3 million) which amounted to 13.0 pence per share
(2012: 17.4 pence per share).
Consolidated Balance Sheet (Extract)
2013 2012
GBPm GBPm
------------------------------------------ ------- -------
Investment properties 206.3 197.7
Investment in joint ventures 14.7 11.3
Other assets 9.9 12.0
Borrowings (112.7) (107.8)
Convertible Unsecured Loan Stock ("CULs") (24.7) (24.6)
Other liabilities (13.7) (9.5)
------------------------------------------ ------- -------
Net Assets 79.8 79.1
------------------------------------------ ------- -------
Total Equity 79.8 79.1
------------------------------------------ ------- -------
Net debt (borrowings less cash) 105.2 99.3
Net loan to value 51% 50%
EPRA NAV pence/share 240 258
IFRS NAV pence/share 235 254
------------------------------------------ ------- -------
Investment Properties
The movement in the carrying value of investment properties of
GBP8.6 million since 2012 is a combination of two key factors:
Firstly there was a property acquisition in Warrington for GBP3.5
million which consisted of two retail units to be combined into one
large unit with a 25 year pre-let to Primark agreed. Secondly there
has been GBP7.3 million of development and capital expenditure
across the portfolio. The investment in our properties has been a
major focus in the current year in order to capitalise on the
opportunities to enhance our existing assets.
Joint Ventures
Accounting for joint ventures is determined by the degree of
control or influence the Company exercises. These are accounted for
under the equity method as control is shared; hence investment in
joint ventures is included in the balance sheet as one line item.
Investment in joint ventures has increased since 2012 to GBP14.7
million as a result of the GBP4.8 million investment in the joint
venture with PIMCO in December 2012. The carrying value of the
existing joint venture with Morgan Stanley Real Estate has reduced
since 2012 to GBP9.9 million due in part to the sale of a property
in Canterbury for GBP1.2 million and also due to downward
revaluations of GBP1.5 million on the remaining properties at
balance sheet date.
Other Assets & Liabilities
The Company retained GBP7.5 million of cash on its Balance Sheet
at 31 March 2013 (2012: GBP8.6 million). Other assets include
rental debtors of GBP1.2 million and prepayments of GBP0.8 million.
Other liabilities include GBP3.1 million of rent received in
advance as the majority of rent is collected quarterly in advance,
GBP5.4 million of accruals and a mark to market valuation deficit
of GBP2.1 million on interest rate hedging.
Borrowings
The Group's capital strategy is to maintain a conservative level
of gearing whilst ensuring that projects generate an effective
return for shareholders and the REIT gearing test is always
satisfied.
During the year the Group including joint ventures originated
GBP45.2 million of new senior debt facilities (2012: GBP47.3
million) and we continue to enjoy good relationships with
Santander, HSBC and Clydesdale Bank. This is reflected in the
Company's senior debt borrowing cost in the year of 3.9% (2012:
4.0%).
The Company continues to apply a hedging strategy which is
aligned to the property strategy. Borrowings are currently 77%
hedged against interest rate risk. 52% of all borrowings are fixed
whilst 25% are capped. This provides interest rate protection and
allows the Company to benefit from a low interest rate
environment.
At the property level, where loan covenants are tested the net
Loan to Value ('LTV') as at 31 March 2013 was 51% (2012: 50%). The
Company's targeted LTV range is 45-60%, subject to the Board's view
of market conditions at the time, the prospects of and risks within
the portfolio and the recurring cash flows of the business.
As at 31 March 2013 Balance Sheet gearing was 131% (2012:125%).
Our Convertible Unsecured Loan Stock is a quasi-equity/debt
instrument and including this, Balance Sheet gearing would be 162%
(2012:156%). More detail on the Company's borrowings is provided in
Note 19.
Net Asset Value
The Net Asset Value ("NAV") at 31 March 2013 was GBP79.8 million
(2012: GBP79.1 million) which amounts to an EPRA NAV per share of
240 pence (2012: 258 pence). NAV per share reduced during the year
as the company absorbed developments costs and capex together with
some minimal NAV dilution on shares issued to Bravo I.
Dividend
The Company paid its interim dividend in the year of 6 pence per
share and a final dividend of 10 pence per share has been proposed
by the Board, resulting in a total dividend for the year of 16
pence per share (2012: 15 pence). The Company's entire dividend is
payable as a Property Income Distribution and is covered by
realised profits earned in the year.
The final dividend will be paid on 25 July 2013 to ordinary
shareholders on the register on 28 June 2013 and the ex-dividend
date is 26 June 2013.
REIT status
The Company complied with the REIT requirements in this
financial year. Management intends that the Group should continue
as a REIT for the foreseeable future as management believes that it
is in the best interest of the shareholders.
Summary
A third consecutive year of growth in revenue, EPRA Adjusted
Profits and the dividends per share is a good result and the
Company has established a strong platform for future growth.
Consolidated Income Statement
For the year ended 31 March 2013
Year ended 31 March Year ended 31 March
2013 2012
Income Capital Total Income Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ----- -------- -------- -------- -------- -------- --------
Gross property income 3 17,978 - 17,978 15,011 - 15,011
Property operating expenses 4 (3,591) - (3,591) (2,222) - (2,222)
------------------------------------ ----- -------- -------- -------- -------- -------- --------
Net property income 14,387 - 14,387 12,789 - 12,789
------------------------------------ ----- -------- -------- -------- -------- -------- --------
Administrative expenses 5 (4,797) - (4,797) (4,009) - (4,009)
Share of income from joint ventures 13 859 (1,483) (624) 945 (560) 385
Net valuation movement 12 - (2,157) (2,157) - (274) (274)
Profit on disposal of investment
properties 6 - 811 811 - 413 413
------------------------------------ ----- -------- -------- -------- -------- -------- --------
Operating profit 10,449 (2,829) 7,620 9,725 (421) 9,304
------------------------------------ ----- -------- -------- -------- -------- -------- --------
Net finance expense
Finance income 7 10 - 10 5 - 5
Finance costs 7 (6,220) - (6,220) (5,339) - (5,339)
------------------------------------ ----- -------- -------- -------- -------- -------- --------
Profit for the year before taxation 4,239 (2,829) 1,410 4,391 (421) 3,970
------------------------------------ ----- -------- -------- -------- -------- -------- --------
Current taxation 8 88 - 88 (120) - (120)
------------------------------------ ----- -------- -------- -------- -------- -------- --------
Profit for the year after taxation 4,327 (2,829) 1,498 4,271 (421) 3,850
------------------------------------ ----- -------- -------- -------- -------- -------- --------
All activities derive from continuing operations of the Group.
The Notes form an integral part of these financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2013
Year ended Year ended
31 March 31 March
2013 2012
Notes GBP'000 GBP'000
---------------------------------------- ----- ---------- ----------
Profit for the year after taxation 1,498 3,850
---------------------------------------- ----- ---------- ----------
Other comprehensive income
Fair value loss on interest rate swaps 19 (572) (1,451)
---------------------------------------- ----- ---------- ----------
Total comprehensive income for the year 926 2,399
---------------------------------------- ----- ---------- ----------
Earnings per share
EPRA Adjusted (pence) 9 16.3 18.9
EPRA basic (pence) 9 13.6 17.3
Basic (pence) 9 4.7 15.3
Basic diluted (pence) 9 2.4 15.2
---------------------------------------- ----- ---------- ----------
All activities derive from continuing operations of the Group.
The Notes form an integral part of these financial statements.
Consolidated Balance Sheet
As at 31 March 2013
31 March 31 March
2013 2012
Notes GBP'000 GBP'000
--------------------------------- ----- -------- --------
Non-current assets
Investment properties 12 206,278 197,736
Investments in joint ventures 13 14,688 11,275
Property, plant and equipment 14 404 404
--------------------------------- ----- -------- --------
Total non-current assets 221,370 209,415
--------------------------------- ----- -------- --------
Current assets
Trade and other receivables 16 1,981 3,045
Cash and cash equivalents 17 7,545 8,562
--------------------------------- ----- -------- --------
Total current assets 9,526 11,607
--------------------------------- ----- -------- --------
Total assets 230,896 221,022
--------------------------------- ----- -------- --------
Equity and liabilities
Current liabilities
Trade and other payables 18 10,994 6,908
Current taxation liabilities 18 424 495
--------------------------------- ----- -------- --------
Total current liabilities 11,418 7,403
--------------------------------- ----- -------- --------
Non-current liabilities
Non-current taxation liabilities 18 220 744
Derivative financial instruments 19 2,080 1,376
Borrowings 19 112,697 107,842
Debt instruments 19 24,693 24,581
--------------------------------- ----- -------- --------
Total non-current liabilities 139,690 134,543
--------------------------------- ----- -------- --------
Net assets 79,788 79,076
--------------------------------- ----- -------- --------
Equity
Retained earnings 20 854 1,936
Other reserves 20 78,637 74,085
Hedging reserve 20 (2,273) (1,701)
Share option reserve 22 260 187
Revaluation reserve 20 2,310 4,569
--------------------------------- ----- -------- --------
Total equity 79,788 79,076
--------------------------------- ----- -------- --------
Net Asset Value (NAV) per share
EPRA NAV (pence) 10 240 258
Basic (pence) 10 235 254
Basic diluted (pence) 10 235 253
--------------------------------- ----- -------- --------
The Notes form an integral part of these financial
statements.
The financial statements were approved by the Board of Directors
on 22 May 2013 and were signed on its behalf by:
David Lockhart Mark Davies
Chief Executive Finance Director
Consolidated Cash Flow Statement
As at 31 March 2013
31 March 31 March
2013 2012
Note GBP'000 GBP'000
------------------------------------------------------- ---- --------- ---------
Rental income received from tenants 16,529 12,657
Property related expenditure (3,189) (2,018)
Fees & other income received 1,489 721
Operating expenses paid to suppliers and employees (3,025) (1,716)
------------------------------------------------------- ---- --------- ---------
Cash generated from operations 11,804 9,644
------------------------------------------------------- ---- --------- ---------
Interest paid (6,087) (5,036)
Interest received 10 5
Corporation tax paid (508) (483)
------------------------------------------------------- ---- --------- ---------
Net cash inflow from operating activities 5,219 4,130
------------------------------------------------------- ---- --------- ---------
Investing activities:
Investment in CAMEL II Joint Venture 13 (4,830) -
Purchase of investment properties (4,497) (99,118)
Development & Other capital expenditure (3,208) (737)
Net proceeds from disposal of investment property 6 811 8,058
Purchase of plant & equipment 14 (53) (415)
Distributions from joint ventures 13 925 845
------------------------------------------------------- ---- --------- ---------
Net cash from investing activities (10,852) (91,367)
------------------------------------------------------- ---- --------- ---------
Financing activities:
Issue of new shares 20 4,552 40,284
Increase in bank loans 4,607 47,370
Dividends paid 11 (4,543) (2,506)
------------------------------------------------------- ---- --------- ---------
Net cash from financing activities 4,616 85,148
------------------------------------------------------- ---- --------- ---------
Cash and cash equivalents at the beginning of the year 17 8,562 10,651
Movement during the year (1,017) (2,089)
------------------------------------------------------- ---- --------- ---------
Cash and cash equivalents at the end of the year 7,545 8,562
------------------------------------------------------- ---- --------- ---------
Cash and cash equivalents comprise:
Cash at bank and in hand 17 7,545 8,562
------------------------------------------------------- ---- --------- ---------
Cash and cash equivalents at the end of the year 7,545 8,562
------------------------------------------------------- ---- --------- ---------
The Notes form an integral part of these financial
statements.
Consolidated Statement of Changes in Equity
As at 31 March 2013
Share
capital Share
Retained and Share Other Hedging option Revaluation
earnings premium reserves reserves reserves reserves Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----- --------- ---------- --------- --------- --------- ----------- --------
As at 31 March 2011 318 - 33,801 (250) 62 4,843 38,774
-------------------------------- ----- --------- ---------- --------- --------- --------- ----------- --------
Net proceeds of issue from
new shares 20 - 40,284 - - - - 40,284
Transfer of share premium 20 - (40,284) 40,284 - - - -
Total comprehensive income
for the year 20 3,850 - - (1,451) - - 2,399
Share based payments 22 - - - - 125 - 125
Dividend payments 11 (2,506) - - - - - (2,506)
Revaluation movement 20 274 - - - - (274) -
-------------------------------- ----- --------- ---------- --------- --------- --------- ----------- --------
As at 31 March 2012 1,936 - 74,085 (1,701) 187 4,569 79,076
-------------------------------- ----- --------- ---------- --------- --------- --------- ----------- --------
Net proceeds of issue from
new shares 20 - 4,552 - - - - 4,552
Transfer of share premium 20 - (4,552) 4,552 - - - -
Total comprehensive income
for the year 20 1,498 - - (572) - - 926
Realisation of fair value
movements 20 102 - - - - (102) -
Share-based payments 22 - - - - 73 - 73
Dividend payments 11 (4,839) - - - - - (4,839)
Revaluation movement 20 2,157 - - - - (2,157) -
-------------------------------- ----- --------- ---------- --------- --------- --------- ----------- --------
As at 31 March 2013 854 - 78,637 (2,273) 260 2,310 79,788
-------------------------------- ----- --------- ---------- --------- --------- --------- ----------- --------
The Notes form an integral part of these financial
statements.
Notes to the accounts
1 Accounting policies
General information
NewRiver Retail Limited (the "Company") and its subsidiaries
(together the "Group") is a property investment group specialising
in commercial real estate in the UK. NewRiver Retail Limited was
incorporated on 4 June 2009 in Guernsey as a registered
closed-ended investment company. The Company was incorporated in
Guernsey under the provisions of The Companies (Guernsey) Law,
2008. On 22 November 2010, the Company converted to a REIT and
repatriated effective management and control to the UK. The
Company's registered office is Old Bank Chambers, La Grande Rue, St
Martins, Guernsey GY4 6RT and the business address is 37 Maddox
Street, London W1S 2PP. The Company is publicly traded on the AIM
and Channel Island Stock Exchange ("CISX") market under the symbol
NRR. The Company has taken advantage of the exemption conferred by
the Companies (Guernsey) Law, 2008, Section 244, not to prepare
company only financial statements.
Going concern
The Directors of NewRiver Retail Limited have reviewed the
current and projected financial position of the Group making
reasonable assumptions about future trading and performance. The
key areas reviewed were:
- Value of investment property
- Timing of property transactions
- Capital expenditure and tenant incentive commitments
- Forecast rental income
- Loan covenants
- Capital and debt funding
The Group has cash and short term deposits, as well as
profitable rental income streams and as a consequence the Directors
believe the Group is well placed to manage its business risks.
Whilst the Group has borrowing facilities in place, it is currently
well within prescribed financial covenants. Together with its cash
resources the Group will arrange bank facilities to fund any future
risk controlled developments. The Company has also signed heads of
terms on a new subordinated debt facility of GBP15 million after
the balance sheet date which provides the capacity to support
future capex and risk controlled development requirements.
After making enquiries and examining major areas which could
give rise to significant financial exposure, the Board has a
reasonable expectation that the Company and the Group have adequate
resources to continue its operations for the foreseeable future.
Accordingly, the Group continues to adopt the going concern basis
in preparation of these financial statements.
Statement of compliance
These financial statements have been prepared on a going concern
basis and in accordance with International Financial Reporting
Standards, as adopted by the European Union ("IFRS"). These
financial statements have been prepared under the historical cost
convention, as modified by the revaluation of investment
properties, joint venture interests and derivatives which are fair
valued.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company, its subsidiaries and the Special Purpose
Vehicles ("SPV's") controlled by the Company, made up to 31 March
each year. Control is achieved where the Company has the power to
govern the financial and operating policies of an investee entity
so as to obtain benefits from its activities.
The Group financial statements consolidate the financial
statements of the Company and its subsidiaries. Intra group
transactions are eliminated in full.
Certain new interpretations and amendments or revisions to
existing standards, which may be relevant to the Group, have been
published that are mandatory for later accounting periods and which
have not been adopted early. These are:
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statement
IFRS 11 and IFRS 12 Joint Arrangements and Disclosures of
Interests in other entities respectively.
IFRS 13 Fair Value Measurement
IAS 19 (revised) Employee Benefits
The Directors are considering whether these will have a material
impact on the Group's financial statements. Whilst they believe
these will not have any material impact on the carrying value of
assets and liabilities, these standards may lead to additional
disclosures in the future.
Critical judgements in applying the Group's accounting
policies
In the process of applying the Group's accounting policies,
management is of the opinion that any instances of application of
judgements did not have a significant effect on the amounts
recognised in the financial statements.
Key sources of estimation uncertainty
The preparation of financial statements requires management to
make estimates affecting the reported amounts of assets and
liabilities, of revenues and expenses, and of gains and losses. The
key assumptions concerning the future, and other key sources of
estimation uncertainty at the end of the reporting period, that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year, are discussed below.
i. Investment properties
As described below, the Group's investment properties are stated
at estimated market value, as accounted for by management based on
an independent external appraisal. The estimated fair value may
differ from the price at which the Group's assets could be sold at
a particular time, since actual selling prices are negotiated
between willing buyers and sellers. Also, certain estimates require
an assessment of factors not within management's control, such as
overall market conditions. As a result, actual results of
operations and realisation of net assets could differ from the
estimates set forth in these financial statements, and the
difference could be significant.
ii. Valuation of share-based payments
Management have relied on the services of external experts to
determine the fair value of share based payments. This requires
significant estimates of a number of inputs which are used to model
that fair value.
iii. Valuation of Convertible Unsecured Loan Stock
Management was required to make estimates with the assistance of
external experts to conclude on the valuation of the convertible
unsecured loan stock at the date of issue. The issuance of the
compound instrument was between two knowledgeable parties at arms
length and at a market rate of 5.85% pa for 5 years. Management
have concluded that the value of the convertible option was
negligible and the value resided in the debt portion of the
instrument at the date of issue.
iv. Impairment in investment in subsidiaries and associates
Determining whether investments are impaired requires an
estimation of the fair values less cost to sell and value in use of
those investments. The process requires the Group to estimate the
future cash flows expected from the cash-generating units and an
appropriate discount rate in order to calculate the present value
of the future cash flows. Management has evaluated the
recoverability of those investments based on such estimates.
Investment property and property in the course of
construction
Property held to earn rentals and for capital appreciation is
classified as investment property. Investment property comprises
both freehold and leasehold land and buildings.
Investment property is recognised as an asset when:
- It is probable that the future economic benefits that are
associated with the investment property will flow to the
Company;
- There are no material conditions precedent which could prevent
completion; and
- The cost of the investment property can be measured
reliably.
Investment property is measured initially at its cost, including
related transaction costs. After initial recognition, investment
property is carried at fair value. The Group has appointed Colliers
International as property valuers to prepare valuations on a
semi-annual basis. Valuations are undertaken in accordance with the
appropriate Sections of the current Practice Statements contained
in the Royal Institution of Chartered Surveyors Valuation -
Professional Standards, (the "Red Book"). This is an
internationally accepted basis of valuation. Gains or losses
arising from changes in the fair value of investment property are
included in the income statement in the period in which they arise
and transferred to the revaluation reserve.
When the Group begins to redevelop an existing investment
property for continued future use as an investment property, the
property remains an investment property and is accounted for as
such. When the Group begins to redevelop an existing investment
property with a view to sell, the property is transferred to
trading properties and held as a current asset. The property is
re-measured to fair value as at the date of the transfer with any
gain or loss being taken to the income statement. The re-measured
amount becomes the deemed cost at which the property is then
carried in trading properties.
In completing these valuations the valuer considers the
following:
i. current prices in an active market for properties of a
different nature, condition or location (or subject to different
lease or other contracts), adjusted to reflect those
differences;
ii. recent prices of similar properties in less active markets,
with adjustments to reflect any changes in economic conditions
since the date of the transactions that occurred at those prices;
and
iii. discounted cash flow projections based on reliable
estimates of future cash flows, derived from the terms of any
existing lease and other contracts and (where possible) from
external evidence such as current market rents for similar
properties in the same location and condition, and using discount
rates that reflect current market assessments of the uncertainty in
the amount and timing of the cash flows.
The cost of properties in the course of development includes
attributable interest and other associated outgoings. Interest is
calculated on the development expenditure by reference to specific
borrowings where relevant and otherwise on the average rate
applicable to the term loans. A property ceases to be treated as a
development property on practical completion.
Value added tax
Revenues, expenses and assets are recognised net of the amount
of value added tax except:
i. 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
ii. 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 balance sheet.
Revenue recognition
i. Rental income
Rental income is recognised on an accruals basis. A rent
adjustment based on open market estimated rental value is
recognised from the rent review date in relation to unsettled rent
reviews. Where a rent-free period is included in a lease, the
rental income foregone is allocated evenly over the period from the
date of lease commencement to the expiry date of the lease.
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 lease incentive payment, including surrender premiums is
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. 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 immediately reflected in income.
ii. Interest Income
Interest income and expenses is recognised in the income
statement under the effective interest method as they accrue.
Interest income is recognised on a gross basis, including
withholding tax, if any.
iii. Asset management fees
Management fees are recognised in the income statement on an
accruals basis.
iv. Promote payments
The Group is contractually entitled to receive a promote payment
should the returns from the joint venture to the joint venture
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. Any entitlements under these
arrangements are only accrued for in the financial statements once
the Group believes that crystallisation of the fee is virtually
certain.
Business combinations
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the Group's interest in the net fair
value of the identifiable assets, liabilities and contingent
liabilities recognised. If, after reassessment, the Group's
interest in the net fair value of the acquiree's identifiable
assets, liabilities and contingent liabilities exceeds the cost of
the business combination, the excess is recognised immediately in
the income statement. Goodwill is reviewed for impairments
annually. The acquisition of subsidiaries is accounted for using
the purchase method. 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 3
are recognised at their fair value at the acquisition.
Whilst a corporate acquisition would normally be accounted for
under IFRS 3, there are situations where these transfers may not
qualify as business combinations. This is considered on a case by
case basis by management in light of the substance of the
acquisition.
Acquisitions
The consideration payable in respect of each acquisition may be
dependant upon certain future events. In calculating the cost of
each acquisition the Group has assessed the most probable outcome
as at the balance sheet date. These amounts are reconsidered
annually at each year end and changes to consideration are taken to
the income statement.
Joint ventures
The Group's investment properties are typically held in property
specific special purpose vehicles ("SPVs"), which may be legally
structured as a joint venture.
In assessing whether a particular SPV is accounted for as a
subsidiary or joint venture, the Group considers all of the
contractual terms of the arrangement, including the extent to which
the responsibilities and parameters of the venture are determined
in advance of the joint venture agreement being agreed between the
two parties. The Group will then consider whether it has the power
to govern the financial and operating policies of the SPV, so as to
obtain benefits from its activities, and the existence of any legal
disputes or challenges to this control in order to conclude on the
classification of the SPV as a joint venture or subsidiary
undertaking. The Group considers this position with the evidence
available at the time.
The consolidated financial statements account for interests in
joint ventures using the equity method of accounting. Any premium
paid for an interest in a jointly controlled entity above fair
value of identifiable assets, liabilities and contingent
liabilities is accounted for in accordance with the goodwill
accounting policy.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Convertible unsecured loan stock
Convertible unsecured loan stock consists of both a liability
and equity element. On issue of convertible loan stock, management
assess the fair value of the liability by reference to the cash
flow to redemption associated with the instrument, discounted at a
market rate of interest. The difference between the issue proceeds
and the fair value of the liability is allocated to the equity
element of the instrument.
Trade and other payables
Trade and other payables are initially recognised at fair value,
and subsequently where necessary re-measured at amortised cost
using the effective interest method.
Trade and other receivables
Trade and other receivables are initially recognised at fair
value, and subsequently where necessary re-measured at amortised
cost using the effective interest method. A provision for
impairment of trade receivables is established when there is
objective evidence the Group will not be able to collect all
amounts due according to the original terms of the receivables.
Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is recognised so as to write off the cost or
valuation of assets less their residual values over their useful
lives, using the straight-line method, on the following bases:
Fixtures and equipment 10% - 25%
The gain or loss arising on the disposal of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in income.
Share-based payments
Share Options
Share options have been granted to key management as set out in
Note 22. The cost of equity settled transactions is measured with
reference to the fair value at the date at which they were granted.
The Group accounts for the fair value of these options at grant
date over the vesting period in the Income Statement, with a
corresponding increase to the share-based payment reserve. The fair
value was calculated based on the Black Scholes Model using the
following inputs:
Share price GBP2.35 - GBP2.50
Exercise price GBP2.35 - GBP2.71
Expected volatility 25%* - 10%*
Risk free rate 1.39% - 2.60%
Expected dividends* 6% - 3%
*based on quoted property sector average (not NewRiver Retail
Limited's expected dividend).
Performance Shares
Performance shares have been granted to Executive staff and
Directors as set out in Note 22. These may only vest and be capable
of exercise in accordance with the Performance Share Plan (""PSP"")
rules to the extent that the two performance conditions are
met.
(1) The compound annual total shareholder return ("Compound
TSR") for the Company must equal or exceed 10% over the period of 3
years commencing on the Grant Date; and
(2) the compound annual percentage growth in the adjusted EPRA
earnings per share ("EPS") of the Company must equal or exceed 4%
over the period of 3 years commencing on the first day of the
relevant financial year in which the Grant Date falls.
The Compound TSR condition has been valued using a Monte Carlo
valuation model. The Monte Carlo Option Pricing Model is a,
stochastic model that uses probability analysis to calculate the
value of options subject to market vesting conditions.
The EPS condition has been valued using a Black Scholes Model.
The cost of equity settled transactions is measured with reference
to the fair value at the date at which they were granted. The Group
accounts for the fair value of these options at grant date over the
vesting period in the Income Statement, with a corresponding
increase to the share-based payment reserve. The fair value was
calculated based on the Black Scholes Model using the following
inputs:
Share price GBP2.01
Exercise price GBPN/A
Expected volatility 8%
Risk free rate 0.45%
Expected dividends 7.5%
Treasury Shares
Own equity instruments which are reacquired (treasury shares)
are recognised at cost and deducted from equity. No gain or loss is
recognised in the Income Statement on the purchased, sale, issue or
cancellation of the Group's own equity instruments. Any difference
between the carrying amount and the consideration is recognised in
the reserves.
The Group has issued a number of shares to an Employee Benefit
Trust (EBT) as detailed in Note 21. As this EBT is controlled by
the Group, it is consolidated in these financial statements and
unallocated shares held by the EBT are shown as treasury
shares.
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
the Board.
Hedge accounting
Hedges of interest rate risk on firm commitments are accounted
for as cash flow hedges.
At the inception of the hedge relationship, the entity documents
the relationship between the hedging instruments and the hedged
item, along with its risk management objectives and its strategy
for undertaking various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the Group documents
whether the hedging instrument is highly effective in offsetting
changes in fair values or cash flows of the hedged item.
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash flow hedges is
recognised in other comprehensive income. The gain or loss relating
to the ineffective portion is recognised immediately in profit or
loss, and is included in the 'other gains and losses' line
item.
Amounts previously recognised in other comprehensive income and
accumulated in equity are reclassified to profit or loss in the
periods when the hedged item is recognised in profit or loss, in
the same line of the income statement as the recognised hedged
item. However, when the forecast transaction that is hedged results
in the recognition of a non-financial asset or a non-financial
liability, the gains and losses previously accumulated in equity
are transferred from equity and included in the initial measurement
of the cost of the non-financial asset or non-financial
liability.
Hedge accounting is discontinued when the Group revokes the
hedging relationship, the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge
accounting. Any gain or loss recognised in other comprehensive
income at that time is accumulated in equity and is recognised when
the forecast transaction is ultimately recognised in profit or
loss. When a forecast transaction is no longer expected to occur,
the gain or loss accumulated in equity is recognised immediately in
profit or loss.
Leasing (as lessors)
Leases where the Group does not transfer substantially all the
risks and benefits incidental to the ownership of the assets are
classified as operating leases. All of the Group's properties are
leased to tenants under operating leases and included in investment
property in the balance sheet.
2 Segmental reporting
During the year the Group operated in one business segment,
being property investment in the UK and as such no further
information is provided.
3 Gross property income
2013 2012
GBP'000 GBP'000
----------------------------------- -------- --------
Rental and related income 16,308 14,290
Asset management fees 653 470
Surrender premiums and commissions 1,017 251
----------------------------------- -------- --------
Gross property income 17,978 15,011
----------------------------------- -------- --------
4 Property operating expenses
2013 2012
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Amortisation of tenant incentives and letting costs 402 204
Ground rent payments 733 553
Service charge and void rates 1,756 1,152
Other property operating expenses 700 313
---------------------------------------------------- -------- --------
Property operating expenses 3,591 2,222
---------------------------------------------------- -------- --------
5 Administrative expenses
2013 2012
GBP'000 GBP'000
----------------------------------------------- -------- --------
Group staff costs 2,943 2,537
Depreciation 53 11
Share option expense 73 125
Administration and other operating expenditure 1,728 1,336
----------------------------------------------- -------- --------
Administrative expenses 4,797 4,009
Asset management fees (653) (470)
----------------------------------------------- -------- --------
Net administrative expenses 4,144 3,539
----------------------------------------------- -------- --------
2013 2012
GBP'000 GBP'000
--------------------------------------------------------------------- -------- --------
Auditors remuneration
Fees payable to the Company's auditor for the audit 118 115
Fees payable to the Company's auditor for the interim review 25 24
--------------------------------------------------------------------- -------- --------
Total audit fees 143 139
--------------------------------------------------------------------- -------- --------
Fees payable to the Company's auditor for corporate finance services 23 100
--------------------------------------------------------------------- -------- --------
Total non-audit fees 23 100
--------------------------------------------------------------------- -------- --------
6 Profit on disposal of investment properties
2013 2012
GBP'000 GBP'000
------------------------ -------- --------
Gross disposal proceeds 850 8,380
Costs of disposal (39) (322)
------------------------ -------- --------
Net disposal proceeds 811 8,058
Carrying value - * (7,645)
------------------------ -------- --------
Profit on disposal 811 413
------------------------ -------- --------
*There was no carrying value associated with the sale of Gilmour
House in the current year as it was vacant and of nil value when
acquired as part of the investment property at Paisley.
7 Finance income and expense
2013 2012
GBP'000 GBP'000
----------------------------------------- -------- --------
a) Finance income
Income from cash and short-term deposits 10 5
----------------------------------------- -------- --------
Total finance income 10 5
----------------------------------------- -------- --------
b) Finance costs
Interest on bank loans 4,645 3,756
Interest on debt instruments 1,575 1,583
----------------------------------------- -------- --------
Total finance costs 6,220 5,339
----------------------------------------- -------- --------
Net finance cost 6,210 5,334
----------------------------------------- -------- --------
Interest on debt instruments relates to the Convertible
Unsecured Loan Stock.
More details on the Group's borrowings are provided in Note
19.
8 Taxation
The tax expense for the year comprises:
2013 2012
GBP'000 GBP'000
-------------------------------------- -------- --------
Current taxation
UK Corporation Tax at 24% (2012: 26%) (88) 120
-------------------------------------- -------- --------
Tax (credit)/charge for the year (88) 120
-------------------------------------- -------- --------
The charge for the year can be reconciled to the profit per the
consolidated income statement as follows:
2013 2012
GBP'000 GBP'000
------------------------------------------- -------- --------
Profit before tax 1,410 3,970
Tax at the current rate of 24% (2012: 26%) 338 1,032
Reversal of prior year tax over provision (120) -
Tax effect of profit under REIT regime (306) (912)
------------------------------------------- -------- --------
Tax (credit)/charge (88) 120
------------------------------------------- -------- --------
The Company entered the REIT regime on 22 November 2010 and is
not exposed to tax on qualifying UK property rental income and
gains arising from disposal of exempt property assets, for this
reason deferred tax has not been provided for on revaluations. At
the time of the Company's conversion a provision of GBP1.6 million
(representing a 2% charge on the assets taken into the regime) was
made for the REIT conversion charge which the Company has chosen to
pay over 4 years (which carries as 0.19% charge). The instalments
are payable annually between June 2011 and July 2014.
9 Earnings per share
The European Public Real Estate Association (EPRA) issued Best
Practices Policy Recommendations in October 2010, which gives
guidelines for performance measures. The EPRA earnings measure
excludes investment property revaluations and gains on disposals,
intangible asset movements and their related taxation and the REIT
conversion charge. We have also disclosed an EPRA Adjusted Profit
measure which includes realised gains on disposals and adds back
share option expense as it is unrealised.
The National Association of Real Estate Investment Trusts
(NAREIT) Funds From Operations (FFO) measure is similar to EPRA
earnings and is a performance measure used by many property
analysts. The main difference to EPRA earnings with respect to the
Group is that it adds back the amortisation of leasing costs and
tenant incentives and is based on US GAAP.
The calculation of basic and diluted earnings per share is based
on the following data:
2013 2012
GBP'000 GBP'000
--------------------------------------------------------------- ---------- ----------
Earnings
Earnings for the purposes of basic and diluted EPS being
profit after taxation 1,498 3,850
Adjustments to arrive at EPRA profit
Exceptional items - 83
Unrealised deficit on revaluation of investment properties 2,157 274
Unrealised deficit on revaluation of joint venture investment
properties 1,483 560
Profit on disposal of investment properties (811) (413)
--------------------------------------------------------------- ---------- ----------
EPRA profit 4,327 4,354
Profit on disposal of investment properties 811 413
Share option expense 73 125
--------------------------------------------------------------- ---------- ----------
EPRA Adjusted Profit 5,211 4,892
--------------------------------------------------------------- ---------- ----------
Adjustments to EPRA profit to arrive at NAREIT FFO
EPRA profit 4,327 4,354
Amortisation of tenant incentives and letting costs 402 204
Amortisation of rent free periods (573) (171)
--------------------------------------------------------------- ---------- ----------
NAREIT FFO 4,156 4,387
--------------------------------------------------------------- ---------- ----------
2013 2012
Number of shares No. 000's No. 000's
--------------------------------------------------------------- ---------- ----------
Weighted average number of Ordinary Shares for the purposes of
basic EPS and basic EPRA EPS 31,904 25,242
Effect of dilutive potential Ordinary Shares:
Options - -
Warrants - 28
CULS - -
--------------------------------------------------------------- ---------- ----------
Weighted average number of Ordinary Shares for the purposes of
basic diluted EPS and basic diluted EPRA EPS 31,904 25,270
--------------------------------------------------------------- ---------- ----------
EPRA Adjusted EPS (pence) 16.3 18.9
EPRA EPS basic (pence) 13.6 17.3
EPRA diluted EPS (pence) 13.6 17.2
FFO EPS basic (pence) 13.0 17.4
EPS basic (pence) 4.7 15.3
Diluted EPS basic (pence) 2.4 15.2
--------------------------------------------------------------- ---------- ----------
Under the terms of the Limited Partnership agreement relating to
NewRiver Retail Investments LP dated 28 February 2010, MSREI has
been granted the right to convert its interest in the JV or part
thereof on an NAV for NAV basis into shares of NewRiver Retail
Limited, up to 10% of the share capital of NewRiver Retail Limited
during the joint venture period. This conversion would currently
have a dilutive effect on the Group's EPS calculation (accretive
effect in the prior year) and an accretive effect on the Group's
EPRA EPS calculation.
10 Net asset value per share
2013 2012
GBP'000 GBP'000
------------------------------------------ -------- --------
Net asset value 79,788 79,076
Number of Ordinary Shares 34,030 31,080
Number of Ordinary Shares EPRA* 34,813 34,333
EPRA Net asset value per share (pence) 240 258
Basic Net asset value per share (pence) 235 254
Diluted Net asset value per share (pence) 235 253
------------------------------------------ -------- --------
*The number of shares in issue is adjusted under the EPRA
calculation to assume conversion of the warrants, options, shares
from the long-term incentive plan and the convertible unsecured
loan stock converted to equity providing they have a dilutive
effect.
11 Dividends
The following dividends are associated with the current and
prior years:
Pence 2013 2012
Payment date PID Non-PID per share GBP'000 GBP'000
---------------------------------------- ---- ------- ---------- -------- --------
Current year dividends
25 July 2013 2013 Final dividend 10.0 0.0 10.0 - -
30 January 2013 2013 Interim dividend 6.0 0.0 6.0 2,042 -
---------------------------------------- ---- ------- ---------- -------- --------
16.0
---------------------------------------- ---- ------- ---------- -------- --------
Prior year dividends
13 July 2012 2012 Final dividend 9.0 0.0 9.0 2,797 -
23 December 2011 2012 Interim dividend 6.0 0.0 6.0 - 1,865
---------------------------------------- ---- ------- ---------- -------- --------
15.0
---------------------------------------- ---- ------- ---------- -------- --------
20 July 2011 2011 Final dividend 4.5 0.0 4.5 - 641
---------------------------------------- ---- ------- ---------- -------- --------
Dividends in consolidated statement of
changes in equity 4,839 2,506
Dividends settled in cash 4,839 2,506
Timing difference related to payment of
withholding tax on dividends (296) -
---------------------------------------- ---- ------- ---------- -------- --------
Dividends in cash flow statement 4,543 2,506
---------------------------------------- ---- ------- ---------- -------- --------
The final dividend was declared on 23 May 2013 and will be paid
on 25 July 2013 to ordinary shareholders on the register on 28th
June 2013 and the ex-dividend date is 26 June 2013. It has not been
included as a liability or deducted from retained profits in these
accounts. It will be recognised as an appropriation of retained
earnings in 2014.
The dividend will be paid entirely as a PID (Property Income
Distribution). PID dividends are paid, as required by REIT
legislation, after deduction of withholding tax at the basic rate
of income tax (currently 20%). However, certain classes of
shareholder may be able to claim exemption from deduction of
withholding tax.
12 Investment properties
2013 2012
GBP'000 GBP'000
-------------------------------------------- -------- --------
Opening balance 197,736 105,800
Acquisitions and improvements in the year 10,699 99,855
Disposals in the year - (7,645)
-------------------------------------------- -------- --------
208,435 198,010
Fair value deficit on property revaluations (2,157) (274)
-------------------------------------------- -------- --------
Closing balance 206,278 197,736
-------------------------------------------- -------- --------
The Group's investment properties have been valued at fair value
on 31 March 2013 by independent valuers on the basis of open market
in accordance with the Current Practice Statements contained in The
Royal Institution of Chartered Surveyors Valuation - Professional
Standards, (the "Red Book").
It is the Group's policy to carry investment property at fair
value in accordance with IAS 40 "Investment Property". The fair
value of the Group's investment property at 31 March 2013 has been
determined on the basis of open market valuations carried out by
Colliers International who are the external independent valuers to
the group.
13 Investments in joint ventures
2013 2012
GBP'000 GBP'000
---------------------------------------------------------------- -------- --------
Opening balance 11,275 11,926
Additional joint venture interests acquired during the year (1) 4,830 -
Income from joint ventures 859 945
Net valuation movement (1,483) (560)
Distributions and dividends (1) (925) (695)
Return of capital (1) - (150)
Hedging movements 132 (191)
---------------------------------------------------------------- -------- --------
Net book value 14,688 11,275
---------------------------------------------------------------- -------- --------
Country of % Holding
Name incorporation 2013
-------------------------------------- --------------- ---------
NewRiver Retail Investments LP Guernsey 50%
NewRiver Retail Investments (GP) Ltd* Guernsey 50%
NewRiver Retail Property Unit Trust Jersey 10%
-------------------------------------- --------------- ---------
(1) The net cash outflow during the year was GBP3.91m (2012:
cash inflow GBP0.84m).
There are currently two joint ventures which are equity
accounted for:
1. The Barley JV
NewRiver Retail Investments LP (the "Barley JV") is an
established jointly controlled limited partnership set up by
NewRiver Retail Limited and Morgan Stanley Real Estate Investing
("MSREI") to invest in UK Retail property.
The Barley JV is owned equally by NewRiver Retail Limited and
MSREI. NewRiver Retail (UK) Limited is the appointed asset manager
on behalf of the Barley JV and receives asset management fees as
well as performance-related return promote payments.
No promote payment has been recognised during the year and the
Group is entitled to receive promote payments only after achieving
the agreed hurdles.
Under the terms of the Limited Partnership agreement relating to
NewRiver Retail Investments LP dated 28 February 2010, MSREI has
been granted the right to convert its interest in the Barley JV or
part thereof on an NAV for NAV basis into shares of NewRiver Retail
Limited, up to 10% of the share capital of NewRiver Retail Limited
during the joint venture period.
This conversion would currently have a dilutive effect on the
Group's EPS calculation and an accretive effect on the Group's EPRA
EPS calculation.
In line with the existing NewRiver investment strategy, the
Barley JV will target UK retail property assets with the objective
of delivering added value and above average returns through
NewRiver's proven skills in active and entrepreneurial asset
management and risk controlled development and refurbishment.
*NewRiver Retail Investments (GP) Ltd has a number of 100% owned
subsidiaries which are NewRiver Retail (Finco No 1) Limited and
NewRiver Retail (GP1) Limited, acting in its capacity as General
Partner for NewRiver Retail (Holding No 1) LP and NewRiver Retail
(Portfolio No 1) LP. These entities have been set up to facilitate
the investment in retail properties in the UK by the Barley JV.
The Barley JV has a 31 December year end and the Group has
applied equity accounting for its interest in the Barley JV. The
aggregate amounts recognised in the consolidated balance sheet and
income statement eliminate inter company transactions and are as
follows:
2013 NewRiver 2013 2012 NewRiver 2012
Retail Investments Group's Retail Investments Group's
(GP) Ltd Share (GP) Ltd Share
Total 50% Total 50%
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------------- --------- ------------------- ---------
Balance sheet
Non-current assets 41,700 20,850 45,465 22,733
Current assets 1,880 940 2,035 1,018
Current liabilities (1,118) (559) (2,002) (1,001)
Non-current liabilities (22,658) (11,329) (22,949) (11,475)
---------------------------------------------- ------------------- --------- ------------------- ---------
Net assets 19,804 9,902 22,549 11,275
---------------------------------------------- ------------------- --------- ------------------- ---------
Income statement
Net income 2,592 1,296 3,014 1,507
Administration expenses (312) (156) (205) (103)
Finance costs (882) (441) (919) (459)
---------------------------------------------- ------------------- --------- ------------------- ---------
Recurring income 1,398 699 1,890 945
Fair value (deficit) on property revaluations (2,967) (1,483) (1,121) (560)
---------------------------------------------- ------------------- --------- ------------------- ---------
(Deficit)/income from joint ventures (1,569) (784) 769 385
---------------------------------------------- ------------------- --------- ------------------- ---------
Recurring income in the Barley JV has reduced due to a reduction
in net rental income as properties have been sold.
The Group's share of any contingent liabilities to the Barley JV
is GBPnil.
2. The CAMEL II JV
NewRiver Retail Property Unit Trust (the "CAMEL II JV") is an
established Jersey Property Unit Trust set up by NewRiver Retail
Limited and Bravo I to invest in UK Retail property.
The CAMEL II JV is owned 10% by NewRiver Retail Limited and 90%
Bravo I. NewRiver Retail (UK) Limited is the appointed asset
manager on behalf of the CAMEL II JV and receives asset management
fees as well as performance-related return promote payments. No
promote payment has been recognised during the year and the Group
is entitled to receive promote payments only after achieving the
agreed hurdles.
Management have taken the decision to equity account for the
interest in The CAMEL II JV, as an associate, as the Group has
significant influence over decisions made by the joint venture.
The CAMEL II JV has an acquisition mandate to invest in UK
retail property with an appropriate leverage with future respective
equity commitments being decided on a transaction by transaction
basis. Interests in further property acquisitions made by the joint
venture may vary from the current 10/90 split of existing projects.
NewRiver Retail Limited can invest up to 50% in future
projects.
In line with the existing NewRiver investment strategy, the
CAMEL II JV will target UK retail property assets with the
objective of delivering added value and above average returns
through NewRiver's proven skills in active and entrepreneurial
asset management and risk controlled development and
refurbishment.
The CAMEL II JV has a 31 December year end and the Group has
applied equity accounting for its interest in the CAMEL II JV. The
aggregate amounts recognised in the consolidated balance sheet and
income statement eliminate inter company transactions and are as
follows:
2013 NewRiver
Retail Property 2013
Unit Trust Group's
Total Share 10%
GBP'000 GBP'000
-------------------------------------------- ---------------- ----------
Balance sheet
Non-current assets 90,401 9,040
Current assets 4,668 467
Current liabilities (4,663) (466)
Non-current liabilities (42,546) (4,255)
-------------------------------------------- ---------------- ----------
Net assets 47,860 4,786
-------------------------------------------- ---------------- ----------
Income statement
Net income 2,325 232
Administration expenses (128) (13)
Finance costs (590) (59)
-------------------------------------------- ---------------- ----------
Recurring income 1,607 160
Fair value deficit on property revaluations - -
Income from joint ventures 1,607 160
-------------------------------------------- ---------------- ----------
The Group's share of any contingent liabilities to the CAMEL II
JV is GBPnil.
14 Property, plant and equipment
Fixtures
and equipment Total
GBP'000 GBP'000
------------------------- -------------- --------
At 1 April 2012 404 404
Additions 53 53
Depreciation (53) (53)
------------------------- -------------- --------
At 31 March 2013 404 404
------------------------- -------------- --------
At 1 April 2011 7 7
Additions 415 415
Disposals (7) (7)
Depreciation (11) (11)
------------------------- -------------- --------
At 31 March 2012 404 404
------------------------- -------------- --------
Net Book Value
Cost 468 468
Accumulated depreciation (64) (64)
------------------------- -------------- --------
At 31 March 2013 404 404
------------------------- -------------- --------
Cost 415 415
Accumulated depreciation (11) (11)
------------------------- -------------- --------
At 31 March 2012 404 404
------------------------- -------------- --------
15 Investment in subsidiary undertakings
Below is a list of the Group's principal subsidiaries
Proportion
of ownership
interest
Name Country of incorporation Activity 2013
------------------------------------------ ------------------------- ------------------------ -------------
NewRiver Retail (Boscombe No. 1) Limited UK Real estate investments 100%
NewRiver Retail (Carmarthen) Limited UK Real estate investments 100%
NewRiver Retail CUL No. 1 Limited UK Finance Company 100%
NewRiver Retail (Holdings) Limited Guernsey Real estate investments 100%
NewRiver Retail (Market Deeping No.
1) Limited Guernsey Real estate investments 100%
NewRiver Retail (Newcastle No. 1) Limited Guernsey Real estate investments 100%
NewRiver Retail (Paisley) Limited UK Real estate investments 100%
NewRiver Retail (Portfolio No. 1) Limited Guernsey Real estate investments 100%
NewRiver Retail (Portfolio No. 2) Limited Guernsey Real estate investments 100%
NewRiver Retail (Portfolio No. 3) Limited UK Real estate investments 100%
NewRiver Retail (Portfolio No. 4) Limited UK Real estate investments 100%
NewRiver Retail (Portfolio No. 5) Limited UK Real estate investments 100%
NewRiver Retail (Portfolio No. 6) Limited UK Real estate investments 100%
NewRiver Retail (Skegness) Limited UK Real estate investments 100%
Company operation
NewRiver Retail (UK) Limited UK and asset management 100%
NewRiver Retail (Wisbech) Limited UK Real estate investments 100%
NewRiver Retail (Witham) Limited UK Real estate investments 100%
NewRiver Retail (Wrexham No. 1) Limited Guernsey Real estate investments 100%
------------------------------------------ ------------------------- ------------------------ -------------
The Group's investment properties are held by its subsidiary
undertakings.
16 Trade and other receivables
2013 2012
GBP'000 GBP'000
------------------------------- -------- --------
Trade receivables 1,192 2,089
Prepayments and accrued income 789 505
Other receivables - 451
------------------------------- -------- --------
1,981 3,045
------------------------------- -------- --------
All amounts fall due for payment in less than one year.
A provision of GBP0.4m (2012: GBP0.2m) was made against trade
receivables as at 31 March 2013.
17 Cash and cash equivalents
2013 2012
GBP'000 GBP'000
------------- -------- --------
Cash at bank 7,545 8,562
------------- -------- --------
7,545 8,562
------------- -------- --------
18 Trade and other payables
2013 2012
GBP'000 GBP'000
------------------------------------- -------- --------
Trade payables 1,609 495
Other payables 888 675
Accruals 5,394 2,409
Rent received in advance 3,103 3,329
------------------------------------- -------- --------
10,994 6,908
Taxation - current 424 495
------------------------------------- -------- --------
Current trade and other payables 11,418 7,403
Taxation - non-current 220 744
------------------------------------- -------- --------
Non-current trade and other payables 220 744
------------------------------------- -------- --------
19 Borrowings
2013 2012
GBP'000 GBP'000
--------------------------------- -------- --------
Secured bank loans 112,697 107,842
Convertible Unsecured Loan Stock 24,693 24,581
--------------------------------- -------- --------
137,390 132,423
Maturity of borrowings:
Less than one year - -
Between one and two years - 13,268
Between two and five years* 137,390 119,155
Over five years - -
--------------------------------- -------- --------
137,390 132,423
--------------------------------- -------- --------
*Assumes all options to extend loans at the Group's option are
exercised.
Secured bank loans
Bank loans are secured by way of legal charges on properties
held by the Group and a hedging policy is adopted which is aligned
with the property strategy on each of its assets.
Total Group secured bank loans (GBP million)
- Hedging and Group borrowing costs (including share of joint
ventures)
Fixed GBP67.3
Capped GBP32.0
Floating GBP29.6
3.86%* (2012: 4.02%)
*Effective interest rate during the year to 31 March 2013.
Total Group borrowing facilities (GBP million)
- Including share of joint ventures
Balance Sheet GBP113.4
Joint Ventures GBP15.5
Convertibles GBP25.0
2.97 years** (2012: 3.66 years)
**Weighted average debt maturity including extension
options.
Facility and arrangement fees
2013 2012
Facility Fees Amortised Balance Facility Fees Amortised Balance
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ------------- -------- ------------- -------- ------------- -------- ------------- -------------
Santander* 36,083 (327) 208 35,964 33,371 (327) 132 33,176
Clydesdale** 40,815 (539) 167 40,443 40,815 (539) 64 40,340
HSBC*** 36,475 (346) 162 36,290 34,580 (346) 92 34,326
------------- ------------- -------- ------------- -------- ------------- -------- ------------- -------------
113,373 (1,212) 537 112,697 108,766 (1,212) 288 107,842
Convertibles 25,000 (574) 267 24,693 25,000 (574) 155 24,581
------------- ------------- -------- ------------- -------- ------------- -------- ------------- -------------
138,373 (1,786) 804 137,390 133,766 (1,786) 443 132,423
------------- ------------- -------- ------------- -------- ------------- -------- ------------- -------------
*This facility is 92% fixed by way of an interest rate swap at
an all in cost of 3.9%.
**This facility is 81% fixed by way of an interest rate swap at
an all in cost of 4.1%.
***This facility has a current all in cost of 3.6% and is
subject to an interest rate cap agreement that is 60% capped at
6.5% (4% cap, 2.5% bank margin).
Fair value on interest rate swaps
2013 2012
GBP'000 GBP'000
---------------------------------------------- -------- --------
Derivative financial instruments 2,080 1,376
---------------------------------------------- -------- --------
Market fair value loss recognised in the year (572) (1,451)
---------------------------------------------- -------- --------
The Group recognised a mark to market fair value loss of GBP0.6
million (2012: GBP1.5 million) on its interest rate swaps as at 31
March 2013. The carrying value of interest rate swaps in the
balance sheet as at 31 March 2013 was GBP2.08 million (2012:
GBP1.38 million).
All borrowings are due after more than one year and the
derivative financial instruments are held as non-current
liabilities.
Convertible Unsecured Loan Stock ("CULS")
On 22 November 2010 the Group issued GBP25 million of CULS where
the stock holder may convert all or any of the stock into Ordinary
Shares at the rate of 1 ordinary share for every GBP2.72 nominal
value of CULS held (adjusted from GBP2.80 for special dividends).
Under the terms of the convertible, interest will accrue at 5.85%
on the outstanding loan stock until 31 December 2015 when it will
either be converted or repaid. The interest payable on the CULS is
due biannually on the 30 June and 31 December.
Management was required to make estimates with the assistance of
external experts to conclude on the valuation of the CULS at the
date of issue. The issuance of the compound instrument was between
two knowledgeable parties at arms length and at a market rate of
5.85% pa for 5 years. Management have concluded that the value of
the convertible option was negligible and the value resided in the
debt portion of the instrument at the date of issue.
20 Share capital and reserves
2012 Share 2012
2012 Retained 2012 Share 2012 Other 2012 Hedging option Revaluation
earnings premium reserves reserve reserve reserve 2012 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------- ------------- ------------- ------------- ------------ ------------- -------------
Brought
forward as at
1 April 2011 318 - 33,801 (250) 62 4,843 38,774
Net proceeds
of issue from
new shares - 40,284 - - - - 40,284
Transfer of
share premium - (40,284) 40,284 - - - -
Total
comprehensive
income for
the year 3,850 - - (1,451) - - 2,399
Share-based
payments - - - - 125 - 125
Dividend paid (2,506) - - - - - (2,506)
Revaluation
movement 274 - - - - (274) -
-------------- ------------- ------------- ------------- ------------- ------------ ------------- -------------
Balance
carried
forward as at
31 March 2012 1,936 - 74,085 (1,701) 187 4,569 79,076
-------------- ------------- ------------- ------------- ------------- ------------ ------------- -------------
2013 2013 Share 2013
2013 Retained 2013 Share 2013 Other Hedging option Revaluation
earnings premium reserves reserve reserve reserve 2013 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------- ------------- ------------- ------------- ------------ ------------- -------------
Brought
forward as at
1 April 2012 1,936 - 74,085 (1,701) 187 4,569 79,076
Net proceeds
of issue from
new shares - 4,552 - - - - 4,552
Transfer to
distributable
reserve - (4,552) 4,552 - - - -
Total
comprehensive
income for
the year 1,498 - - (572) - - 926
Share-based
payments - - - - 73 - 73
Realisation of
fair value
movements 102 - - - - (102) -
Dividend paid (4,839) - - - - - (4,839)
Revaluation
movement 2,157 - - - - (2,157) -
-------------- ------------- ------------- ------------- ------------- ------------ ------------- -------------
Balance
carried
forward as at
31 March 2013 854 - 78,637 (2,273) 260 2,310 79,788
-------------- ------------- ------------- ------------- ------------- ------------ ------------- -------------
The authorised share capital is unlimited and there are
currently 34,029,508 shares in issue (31 March 2012: 31,079,508).
In addition there are 624,000 treasury shares held in the Employee
Benefit Trust (Note 21).
In the year ending 31 March 2013, 2.95 million (2012: 16.87
million) nil par value Ordinary Shares were issued to PIMCO Bravo
Fund LP for cash consideration at a price of GBP1.65 (2012:
GBP2.52) resulting in an increase of the total share capital and
other reserves to GBP78.6 million (2012: GBP74.1 million). Costs of
GBP0.3 million (2012: GBP2.2 million) directly attributable to the
issue of these shares have been set against the share premium
account.
During the year the Group approved a transfer from the share
premium account of GBP4.6 million (2012: GBP40.3 million) to other
reserves which may be distributed in the future.
Shareholders who subscribed for Placing Shares in the IPO
received warrants, in aggregate, to subscribe for 3% of the Fully
Diluted Share Capital exercisable at the subscription price per
Ordinary Share of GBP2.50 and all such warrants shall be fully
vested and exercisable upon issuance. The subscription price was
adjusted to GBP2.44 following the share issue in May 2010 and
subsequently to GBP2.06 following subsequent dividend payments and
share issues. During the year no (2012: nil) warrants were
exercised.
As at 31 March 2013, the total number of shares outstanding was
34,029,508 (2012: 31,079,508). No treasury shares were acquired
during the year (2012: nil) (see Note 21).
21 Treasury shares
The Company has established an Employee Benefit Trust (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 Trustee
of the EBT may not exceed 10% of the Company's issued share capital
at that time. It is intended that the Trustee of the EBT will not
hold more Ordinary Shares than are required in order to satisfy
awards/options granted under share incentive plans.
During the year no shares were issued to the EBT (2012:
nil).
As the EBT is consolidated, these shares are treated as Treasury
Shares.
No shares have been allocated by the EBT to directors or
employees during the year.
2013 2012
000s 000s
----------------------- ------ ------
Brought forward 624 624
Issued during the year - -
----------------------- ------ ------
Carried forward 624 624
----------------------- ------ ------
22 Share-based payments
The Group provides share-based payments to employees in the form
of share options and also in the form of performance shares. All
share-based payment arrangements granted since the admission on 1
September 2009 have been recognised in the financial statements.
Further details can be found in accounting policies Note 1.
Share Options
The Group uses the Black-Scholes Model to value share options
and the resulting value is amortised through the income statement
over the vesting period of the share-based payments with a
corresponding credit to the share-based payments reserve.
(a) Terms
Exercise 2013 2012
Price Number Number
GBP of Options of Options
------------------------------------------- -------- ----------- -----------
Awards brought forward 2,471,949 886,949
Awards made during the prior year: 2.35 - 1,585,000
Awards lapsed during the current year: - (154,539)
------------------------------------------- -------- ----------- -----------
Exercisable options at the end of the year 2,317,410 2,471,949
------------------------------------------- -------- ----------- -----------
The awards granted during the year are based on a percentage of
the total number of shares in issue. There have been no new share
options issued in the current year.
Performance Shares
The Group uses the Black-Scholes Model and the Monte Carlo
Pricing Model to value performance shares and the resulting value
is amortised through the income statement over the vesting period
of the share-based payments with a corresponding credit to the
share-based payments reserve.
Exercise 2013 2012
Price Number of Number of
GBP Shares Shares
------------------------------------- --------- ---------- ----------
Awards brought forward - -
Awards made during the current year: nil 500,000
------------------------------------- --------- ---------- ----------
Issued shares at the end of the year 500,000 -
------------------------------------------------ ---------- ----------
(b) Share-based payment charge
2013 2012
GBP'000 GBP'000
-------------------------------------------- -------- --------
Share-based payment expense brought forward 187 62
Share-based payment expense in the year 73 125
-------------------------------------------- -------- --------
Cumulative share-based payment 260 187
-------------------------------------------- -------- --------
23 Financial commitments and operating lease arrangements
2013 2012
GBP'000 GBP'000
------------------------------------- -------- --------
Rentals payable on operating leases:
Within one year 141 173
one to two years 191 141
two to five years 514 514
five years 687 879
------------------------------------- -------- --------
1,533 1,707
------------------------------------- -------- --------
Operating lease payments represent rentals payable by the Group
for occupation of its office properties.
The current lease expires in November 2021 with a tenant break
option in 2016.
24 Post balance sheet events
On 8 May 2013 the Group exercised its option to extend the
bilateral term loan with Santander of GBP15.98 million by 2 years
to 4 June 2015.
On 22 May 2013, the Board of Directors approved a final dividend
of 10 pence per share which will result in a final total dividend
for the year of 16 pence per share (2012: 15 pence).
25 Financial instruments - 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
formally on a quarterly basis and also when authorised changes are
required.
(a) Market risk
Currency risk
As all material transactions are in GBP the group is not subject
to any foreign currency risk.
Cash flow and fair value interest rate risk
The Group has significant interest-bearing cash resources, the
majority of which are held in business accounts with its principal
bankers. The Group's interest rate risk arises from long-term
borrowings (Note 19), borrowings issued at variable rates expose
the Group to cash flow interest rate risk, whilst borrowings issued
at a fixed rate expose the Group to fair value risk. The Group's
cash flow and fair value risk is reviewed quarterly by the
Board.
The cash flow and fair value risk is approved quarterly by the
Board. The Group analyses its interest rate exposure on a dynamic
basis. It takes on exposure to mitigate the effects of fluctuations
in the prevailing levels of market interest rates on its financial
position and cash flows. Interest costs may increase as a result of
such changes. They may reduce or create losses in the event that
unexpected movements arise. Various scenarios are simulated taking
into consideration refinancing, renewal of existing positions,
alternative financing and hedging. Based on these scenarios the
Group calculates the impact on profit and loss of a defined
interest rate shift. The simulation is run on an on-going basis to
verify that the maximum potential impact is within the parameters
expected by management. To date the Group has sought to fix its
exposure to interest rate risk on borrowings through the use of a
variety of interest rate derivatives. At 31 March 2013, the Group
(including joint ventures) had GBP141.7 million (2012: GBP107.7
million) of interest rate swaps in place and its share of net debt
was 77% fixed (2012: 80%). This gives certainty over future cash
flow but exposure to fair value movements, which amounted to an
unrealised loss of GBP0.57 million at 31 March 2013 (2012: GBP1.45
million). Sensitivity analysis is carried out to assess the impact
of an increase in interest rates on finance costs to the Group. The
impact of a 200bps increase in interest rates for the year would
increase the net interest payable in the Income Statement and
reduce net assets by GBP0.7 million (2012: GBP1.1 million).
(b) Credit risk
The Group's principal financial assets are cash and short-term
deposits, trade and other receivables.
The credit risk on the Group's trade and other receivables is
considered low due to the Group having policies in place 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 amounts presented in the
Balance Sheet are net of allowances for doubtful receivables. An
allowance for impairment is made where there is objective evidence
that the Group will not be able to collect all amounts due
according to the terms of the receivables concerned.
The credit risk on the Group's cash and short term deposits and
derivative financial instruments is limited to the Group's policy
of monitoring counterparty exposures.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient
cash, the availability of funding through an adequate amount of
committed credit facilities and the ability to close out market
positions. The Board and its advisers seek to have appropriate
credit facilities in place on a project by project basis, either
from available cash resources or from bank facilities.
Management monitor the Group's liquidity position on a weekly
basis. Formal liquidity reports are issued on a weekly basis and
are reviewed quarterly by the Board, along with cash flow
forecasts. A summary table with maturity of financial liabilities
is presented below:
2013 2012
Years Years
Current Year 2 3 to 5 Current Year 2 3 to 5
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- --------- ---------------------- -------- -------- --------
Interest bearing Interest bearing
loans and borrowings - - 113,373* loans and borrowings - 13,268 95,498
CULS - - 25,000 CULS - - 25,000
Trade and other Trade and other
payables 11,418 220 - payables 7,403 744 -
Derivative Derivative
financial instruments - 509 1,571 financial instruments - - 1,701
----------------------- -------- -------- --------- ---------------------- -------- -------- --------
11,418 729 139,944 7,403 14,012 122,199
----------------------- -------- -------- --------- ---------------------- -------- -------- --------
*Assumes all options to extend at the Group's option are
exercised.
The Group monitors its risk to a shortage of funds by
forecasting cash flow requirements for future years, including
consideration of existing facilities and covenant requirements. The
Group's objective is to maintain a balance between continuity of
funding and flexibility through the use of bank overdrafts and
other short-term borrowing facilities, bank loans and equity fund
raisings.
(d) 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 benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of
capital.
To maintain or adjust the capital structure, the Group may
adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital
on the basis of its gearing ratio. This ratio is calculated as net
debt divided by total capital. Net debt is calculated as total
borrowings (including borrowings and trade and other payables as
shown in the balance sheet) but excluding preference shares, which
for capital risk management is considered to be capital rather than
debt, less cash and short term deposits.
Total capital is calculated as equity, as shown in the balance
sheet, plus preference shares and net debt. The Group is not
subject to any external capital requirements.
26 Related party transactions
Group
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this Note.
Directors' shareholdings can be found in the Directors
report.
Total emoluments of Executive Directors during the period
(excluding share-based payments) were GBP1.8 million (2012:GBP1.5
million). This increased since 2012 as a result of an additional
Executive Director on the Board.
Share-based payments of GBP0.1 million (2012: GBP0.1 million)
accrued during the year.
During the year 544 shares (2012: 24,250) were acquired on the
open market by Directors.
27 Operating lease arrangements
The Group earns rental income by leasing its investment
properties to tenants under non-cancellable operating leases.
At the balance sheet date the Group had contracted with tenants
for the following future minimum lease payments on its investment
properties:
2013 2012
GBP'000 GBP'000
------------------------------------ -------- --------
Within 1 year 14,338 17,267
In the 2nd year 13,520 14,325
In the 3rd to 5th years (inclusive) 35,225 33,922
After 5 years 66,349 45,669
------------------------------------ -------- --------
129,432 111,183
------------------------------------ -------- --------
Weighted Average Lease Expiry
(to expiry) of operating leases in NewRiver Retail Ltd
portfolio
The Group's weighted average lease length of operating leases at
31 March 2013 was 7.8 years (2012: 7.4 years).
This information is provided by RNS
The company news service from the London Stock Exchange
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR NKBDBFBKDOPB
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