Final Results

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 £18.0 million (2012: £15.0 million)

·  EPRA Adjusted Profit growth of 7% to £5.2 million (2012: £4.9 million)

·  Dividend per share increased 7% to 16 pence, fully covered

·  EPRA adjusted earnings per share of 16.3 pence

·  IFRS reported profit of £1.5 million (2012: £3.8 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 £0.7 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

·  £90 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 £400 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 £0.5 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 £90 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: [phone]
David Lockhart, Chief Executive Mark Davies, Finance Director
Pelham Bell Pottinger	Tel: [phone]
David Rydell/Guy Scarborough/Charlotte Offredi
Cenkos Securities	Tel: [phone]
Ian Soanes/Max Hartley
Investec Bank Garry Levin/ Chris Sim/ David Andersen	Tel [phone]

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 £5.2 million (2012: £4.9 million) on revenue up by 20% to £18.0 million (2012: £15.0 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 £90 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 £400 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 £2.1 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 £300 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 £1 spent online, £1.75 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 £90 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 £5.2 million (2012: £4.9 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 £400 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 £90 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 £3.2 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 £363,000 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 £2 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 £1 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 £90 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 £850,000 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 £1.18 million to a private investment company reflecting a net yield of 6% and an IRR of 18%. The unit was acquired in 2010 for £850,000 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 £75,000 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 £2.3 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 £860,000 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 £4.6 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 £475,000. 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 £135,000 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 £115,000 rising to £117,500 in the third year for a 10 year term and Carphone Warehouse has taken a new lease at £25,000 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 £414,000 to £487,000.

 

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 £180,000 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 £142,500. 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 £70,000 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 £363,000 pa. Additionally, a pre-let has been signed for a 10 year lease with Home Bargains at a rent of £125,000 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 £370,000 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 £3.7 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 £331,000 to £553,000 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 £800,000 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 £400 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 £23.7 million to £36.2 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 £2.0 million of NewRiver annual income, up 1.8% against ERV.

Lease renewals sustained £860,000 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 £234 million up from £220 million in March 2012. NewRiver's share of contracted rent is currently £19 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 £18.0 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 £10.5 million, up £0.8 million on 2012 (£9.7 million). EPRA profits inclusive of the realised profit on sale of assets in the year totalled £5.2 million up from £4.9 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 £14.4 million compared to £12.8 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 £3.6 million for the year (2012: £2.2 million).

Operating expenses totalled £4.8 million in 2013 compared to £4.0 million in 2012. This reflects the increased headcount following the 42% increase in assets under management and asset management fee income. The Company received £1.7 million (2012: £0.7 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 £4.1 million (2012: £3.5 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 £0.9 million (2012: £0.9 million) of recurring profit to EPRA profit before interest and tax.

Net interest costs totalled £6.2 million (2012: £5.3 million) for the year, £1.6 million of which was payable on convertible loan stock and £4.6 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 £0.8 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 £1.5 million (2012: £3.8 million).

Consolidated Statement of Comprehensive Income (Extract)

	FY13 £m	FY12 £m
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 £4.2 million (2012: £4.3 million) which amounted to 13.0 pence per share (2012: 17.4 pence per share).

Consolidated Balance Sheet (Extract)

	2013 £m	2012 £m
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 £8.6 million since 2012 is a combination of two key factors: Firstly there was a property acquisition in Warrington for £3.5 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 £7.3 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 £14.7 million as a result of the £4.8 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 £9.9 million due in part to the sale of a property in Canterbury for £1.2 million and also due to downward revaluations of £1.5 million on the remaining properties at balance sheet date.

 

Other Assets & Liabilities

The Company retained £7.5 million of cash on its Balance Sheet at 31 March 2013 (2012: £8.6 million). Other assets include rental debtors of £1.2 million and prepayments of £0.8 million. Other liabilities include £3.1 million of rent received in advance as the majority of rent is collected quarterly in advance, £5.4 million of accruals and a mark to market valuation deficit of £2.1 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 £45.2 million of new senior debt facilities (2012: £47.3 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 £79.8 million (2012: £79.1 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 2013			Year ended 31 March 2012
	Notes	Income £'000	Capital £'000	Total £'000	Income £'000	Capital £'000	Total £'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

	Notes	Year ended 31 March 2013 £'000	Year ended 31 March  2012 £'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

	Notes	31 March 2013 £'000	31 March 2012 £'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

	Note	31 March  2013 £'000	31 March  2012 £'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

	Notes	Retained earnings £'000	Share capital and Share premium £'000	Other reserves £'000	Hedging reserves £'000	Share option reserves £'000	Revaluation reserves £'000	Total £'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 £15 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                    £2.35 - £2.50

Exercise price               £2.35 - £2.71

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                    £2.01

Exercise price               £N/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 £'000	2012 £'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 £'000	2012  £'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 £'000	2012 £'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 £'000	2012 £'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 £'000	2012 £'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 £'000	2012 £'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 £'000	2012 £'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 £'000	2012 £'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 £1.6 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 £'000		2012 £'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
Number of shares	2013  No. 000's		2012 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 £'000	2012 £'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:

Payment date	PID	Non-PID	Pence per share	2013 £'000	2012 £'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 £'000	2012 £'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 £'000	2012 £'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

Name	Country of incorporation	% Holding 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 £3.91m (2012: cash inflow £0.84m).

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 Retail Investments (GP) Ltd Total £'000	2013 Group's Share 50%  £'000	2012 NewRiver Retail Investments (GP) Ltd Total £'000	2012 Group's Share 50% £'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 £nil.

 

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 Unit Trust Total £'000	2013 Group's Share 10% £'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 £nil.

14 Property, plant and equipment

	Fixtures and equipment £'000	Total  £'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

Name	Country of incorporation	Activity	Proportion of ownership interest 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%
NewRiver Retail (UK) Limited	UK	Company operation 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 £'000	2012 £'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 £0.4m (2012: £0.2m) was made against trade receivables as at 31 March 2013.

17 Cash and cash equivalents

	2013 £'000	2012 £'000
Cash at bank	7,545	8,562
	7,545	8,562

18 Trade and other payables

	2013 £'000	2012 £'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  £'000	2012 £'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 (£ million)

- Hedging and Group borrowing costs (including share of joint ventures)

Fixed                £67.3

Capped             £32.0

Floating             £29.6

3.86%* (2012: 4.02%)

*Effective interest rate during the year to 31 March 2013.

 

Total Group borrowing facilities (£ million)

- Including share of joint ventures

Balance Sheet   £113.4

Joint Ventures   £15.5

Convertibles       £25.0

2.97 years** (2012: 3.66 years)

**Weighted average debt maturity including extension options.

 

Facility and arrangement fees

	2013						2012
	Facility £'000	Fees  £'000	Amortised £'000	Balance £'000			Facility £'000	Fees £'000	Amortised £'000	Balance £'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 £'000	2012 £'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 £0.6 million (2012: £1.5 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 £2.08 million (2012: £1.38 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 £25 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 £2.72 nominal value of CULS held (adjusted from £2.80 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 Retained earnings £'000	2012 Share premium £'000	2012 Other reserves £'000	2012 Hedging  reserve £'000	2012 Share option reserve £'000	2012 Revaluation reserve £'000	2012 Total £'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 Retained earnings £'000	2013 Share premium £'000	2013 Other reserves £'000	2013 Hedging  reserve £'000	2013 Share option reserve £'000	2013 Revaluation reserve £'000	2013 Total £'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 £1.65 (2012: £2.52) resulting in an increase of the total share capital and other reserves to £78.6 million (2012: £74.1 million). Costs of £0.3 million (2012: £2.2 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 £4.6 million (2012: £40.3 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 £2.50 and all such warrants shall be fully vested and exercisable upon issuance. The subscription price was adjusted to £2.44 following the share issue in May 2010 and subsequently to £2.06 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 000s	2012 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 Price  £	2013  Number of Options	2012  Number 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 Price  £	2013 Number of Shares	2012  Number of 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 £'000	2012  £'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  £'000	2012 £'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 £15.98 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 £141.7 million (2012: £107.7 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 £0.57 million at 31 March 2013 (2012: £1.45 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 £0.7 million (2012: £1.1 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
	Current  £'000	Year 2  £'000	Years 3 to 5 £'000			Current  £'000	Year 2  £'000	Years 3 to 5 £'000
Interest bearing loans and borrowings	-	-	113,373*		Interest bearing loans and borrowings	-	13,268	95,498
CULS	-	-	25,000		CULS	-	-	25,000
Trade and other payables	11,418	220	-		Trade and other payables	7,403	744	-
Derivative financial instruments	-	509	1,571		Derivative 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 £1.8 million (2012:£1.5 million). This increased since 2012 as a result of an additional Executive Director on the Board.

Share-based payments of £0.1 million (2012: £0.1 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 £'000	2012 £'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

 

END

 

 

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