Interim results for the perio

RNS Number : 4710X

NewRiver Retail Limited

07 December 2010

 



7 December 2010

NewRiver Retail Limited ("NewRiver" or "the Company")

Interim results for the period ended 30 September 2010

NewRiver Retail Limited (AIM: NRR), the UK REIT specialising in value-creating retail property investment and asset management, is pleased to announce its interim results for the period ended 30 September 2010.

Key Highlights

·      Profit before tax of £1.7m - reflecting rental profits and increased valuations

·      Maiden dividend of 1p per share

·      Net asset valuation ("NAV") of £37.1m - NAV per share of 261 pence and EPRA NAV per share of 264 pence

·      Acquisitions in the period of £23m at 8.1% initial yield and £67m of acquisitions announced since the period end at 8.5% initial yield

·      Gross assets under management have increased to £174m

·      Real Estate Investment Trust ("REIT") status from 22 November 2010

·      Fund raising of £10.5m in the period to accelerate growth

·      £25m issuance of Convertible Unsecured Loan Stock post period end

David Lockhart, Chief Executive of NewRiver Retail Limited, commented:

"These interim results reflect the significant strides that the company has made in the first half of the financial year. Combined with acquisitions after the period end, NewRiver has now acquired more than £150 million of assets since formation, and we continue to be very active in our marketplace. I am particularly proud of the continued move into profit and the fact that we have commenced payment of a dividend. Our recent conversion to REIT status will ensure a regular future dividend distribution. Since the beginning of the financial year, this has been a very active period for the Company and we do not see that changing in the second half and through 2011. The Company has created a significant platform for growth and I look forward to the future with great confidence."

- ends -

For further information

NewRiver Retail Limited                                                                     Tel: [phone]

David Lockhart, Chief Executive                                                                     

Pelham Bell Pottinger                                                                         Tel: [phone]

David Rydell/Rosanne Perry                                                   

Cenkos Securities

Ian Soanes/Max Hartley                                                                      Tel: [phone]

Chairman's statement

I am pleased to report NewRiver Retail's interim results for the six month period to 30 September 2010. The Company generated an operating profit of £1.9m and a profit before tax of £1.7m, which the Board considers to be an excellent start to the Company's first full accounting year. A revaluation surplus in the period of £1.5m demonstrates further the Company's ability to create value and deploy capital wisely.

I am delighted to announce that the Board is recommending the payment of the Company's maiden interim dividend of 1p per share. The Board believes that this first payment is a notable achievement, considering the early stage of the Company.

The period under review has been one of significant progress and growth. The platform the Board put in place last year is now firmly established and provides a strong base for future development. The highlights included a secondary fundraise in April 2010 which the company has since invested.

Since 31 March 2010, the Company completed acquisitions totalling £23m utilising its own Balance Sheet and a further £10m in the Morgan Stanley Real Estate Fund joint venture. The Company successfully identifies attractive investment opportunities through its extensive industry network and each of these transactions was agreed "off market", allowing the Company to operate in an exclusive, cost effective and timely manner. The average yield on the acquisitions completed was an attractive 8.1%, a reflection of the astute purchasing strategy of the Company.

The Company has announced two further portfolio acquisitions since 30 September 2010. The Standard Life Portfolio exchanged contracts at a purchase price of £14m on 28 October 2010 and the CReAM acquisition completed on 30 November 2010 at an aggregate cost of approximately £53m. These acquisitions, again both "off market", were acquired at initial yields of 9% and 8.4% respectively and further demonstrate the ability of the Company to acquire attractive assets at good values.

Since the period end the Company has made significant progress in developing its structure and business model. On 28 October 2010 the Company announced its intention to convert to the status of a REIT. This was approved by shareholders at an Extraordinary General Meeting ("EGM") on 19 November 2010 and subsequently by HMRC meaning that as of 22 November 2010 the Company began trading as a REIT. Simultaneously, the Company announced the issuance of up to £25m of Convertible Unsecured Loan Stock ("CULS") to provide further capital to grow the Company's asset base. The issuance was approved by shareholders at the EGM and the Company has since drawn down the full £25m of CULS to support the Standard Life and CReAM portfolio acquisitions.

I would like to thank shareholders for the strong support they gave to the resolutions tabled at the EGM. I would also like to welcome Andrew Walker to the Board and both Forum and Spearpoint as new investors in the Company.

The Board is delighted to have completed the CReAM acquisition with senior debt provided by HSBC who we welcome as our principal bankers alongside Santander. Together the two banks have provided £95m of senior debt to support the Company and joint venture acquisitions to date.

Investment sentiment in the retail property market has remained cautiously positive. We continue to see good opportunities and our key sectors of food and value-led retailing are performing well. We continue to see good demand from selected retailers and our top 10 tenants include Tesco, Sainsbury's, The Co-operative, New Look and Wilkinsons who are all actively seeking new space for expansion. There is evidence of rental growth in the food sector and the Company has executed over 30 asset management initiatives in the period which is increasing the value of our assets as evidenced by the revaluation surplus.

The Board is pleased with the significant progress made since our last report and looks forward to the future with confidence. It remains a key objective of NewRiver Retail to establish the leading value-creating property investment platform focused on the UK retail property market.

Paul Roy

Chairman

NewRiver Retail Limited

7 December 2010

Consolidated Condensed Statement of Comprehensive Income (unaudited)

For the period from 1 April 2010 to 30 September 2010

		Unaudited Period 1 April 2010 to 30 Sep 2010	Audited Period 4 June 2009 to 31 March 2010	Unaudited Period 4 June 2009 to 30 Sep 2009
	Notes	£'000	£'000	£'000
Total revenue		1,033	329	18
Total operating expenses		(1,152)	(1,172)	(150)
Income from joint ventures	6	594	1,741	-
Net fair value gain on revaluation of investment properties	5	1,470	1,269	-
Operating profit/(loss)		1,945	2,167	(132)
Net finance expense/income
Finance income		24	18	3
Finance costs		(284)	(28)	-
Profit/(loss) for the period before taxation		1,685	2,157	(129)
Taxation		(35)	(42)	-
Profit/(loss) for the period after taxation		1,650	2,115	(129)
Other comprehensive income
Fair value loss on interest rate swaps		(470)	(46)	-
Total comprehensive income for the period		1,180	2,069	(129)
Earnings/(loss) per share
Basic (Pence)	3	12.29	21.15	(1.29)
Diluted (Pence)		12.21	21.11	(1.29)

All activities derive from continuing operations of the Group. The notes form an integral part of these financial statements.

Consolidated Condensed Balance Sheet (unaudited)

As at 30 September 2010

		Unaudited 30 Sep 2010	Audited 31 March 2010	Unaudited 30 Sep 2009
	Notes	£'000	£'000	£'000
Non-current assets
Investment properties	5	37,515	13,315	-
Investments in joint ventures	6	13,562	11,778	-
Property, plant & equipment		7	7	-
Goodwill		-	-	55
		51,084	25,100	55
Current Assets
Trade and other receivables		1,190	67	21
Cash and cash equivalents	8	6,221	8,168	24,226
		7,411	8,235	24,247
Total assets		58,495	33,335	24,302
Equity and liabilities
Non-Current Liabilities
Borrowings	9	19,619	6,693	-
Current Liabilities
Trade and other payables		1,242	471	213
Derivative financial instruments		516	46	-
Net assets		37,118	26,125	24,089
Equity
Share capital	11	33,826	24,031	24,212
Retained earnings		1,026	846	(129)
Hedging reserve		(516)	(46)	-
Share option reserve		43	25	6
Revaluation reserve		2,739	1,269	-
		37,118	26,125	24,089
NAV per share
Basic (Pence)	4	261	261	241
Diluted (Pence)		260	261	241

The notes form an integral part of these financial statements.

Signed on behalf of the Board on 6 December 2010

Chief Executive	Finance Director
David Lockhart	Mark Davies

Consolidated Condensed Cash Flow Statement (unaudited)

As at 30 September 2010

		Unaudited 30 Sep 2010	Audited 31 March 2010	Unaudited 30 Sep 2009
	Note	£'000	£'000	£'000
Net Cash (outflow) from operating activities	10	(645)	(496)	(2)
Investing Activities:
Interest Received		24	18	3
Purchase of investment properties	5	(22,730)	(12,046)	-
Purchase of plant and equipment		1	(8)	-
Cash acquired on acquisition of subsidiary		-	13	13
Cash (outflow) from joint ventures		(1,190)	(10,037)	-
Net cash from investing activities		(23,895)	(22,060)	16
Financing Activities:
Finance costs		(130)	-	-
Issue of new shares	11	9,795	24,031	24,212
New bank loans	9	12,926	6,693	-
Net cash from financing activities		22,593	30,724	24,212
Cash and cash equivalents at the beginning of the period	8	8,168	-	-
Movement during the period		(1,947)	8,168	24,226
Cash and cash equivalents at the end of the period		6,221	8,168	24,226
Cash and cash equivalents at the end of the period comprise:
Cash and cash equivalents	8	6,221	8,168	24,226

The notes form an integral part of these financial statements.

Consolidated Condensed Statement of Changes in Equity (unaudited)

As at 30 September 2010

		2009	2009	2009	2009	2009	2009	2009
		Retained Earnings	Share Capital	Share Premium	Revaluation Reserve	Share based Payments	Hedging Reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000
As at 4 June 2009		-	-	-	-	-	-	-
Net proceeds of issue of new shares	11	-	-	24,212	-	-	-	24,212
Loss for the period		(129)	-	-	-	-	-	(129)
Share-based payments		-	-	-	-	6	-	6
As at 30 September 2009		(129)	-	24,212	-	6	-	24,089

		2010	2010	2010	2010	2010	2010	2010
		Retained Earnings	Share Capital	Share Premium	Revaluation Reserve	Share based Payments	Hedging Reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000
As at 4 June 2009
Net proceeds of issue of new shares	11	-	-	24,031	-	-	-	24,031
Profit for the period after taxation		2,115	-	-	-	-	(46)	2,069
Share-based payments		-	-	-	-	2	-	25
Revaluation surplus for the period	5	(1,269)	-	-	1,269	-	-	-
As at 31 March 2010		846	-	24,031	1,269	25	(46)	26,125
Net proceeds of issue of new shares	11	-	-	9,795	-	-	-	9,795
Profit for the period after taxation		1,650	-	-	-	-	(470)	1,180
Share-based payments		-	-	-	-	18	-	18
Revaluation surplus for the period	5	(1,470)	-	-	1,470	-	-	-
As at 30 September 2010		1,026	-	33,826	2,739	43	(516)	37,118

The notes form an integral part of these financial statements.

Notes to the Accounts

For the period ended 30 September 2010

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 United Kingdom. NewRiver Retail was incorporated on 4 June 2009 in Guernsey as a registered closed-ended investment company. The Company is incorporated in Guernsey under the provisions of The Companies (Guernsey) Law, 2008. The Company's registered office is Isabelle Chambers, Route Isabelle, St Peter Port, Guernsey GY1 3TX. 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 are:

Value of investment property

Timing of property transactions

Capital expenditure and tenant incentive commitments

Forecast rental income

Loan covenants

The Group has substantial 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.

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

The condensed interim financial statements (unaudited) have been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRS") and in accordance with IAS 34 'Interim Financial Reporting'. The same accounting policies, presentation and methods of computation are followed in the condensed financial statements as applied in the Group's latest annual audited financial statements.

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 3 Business Combinations (Amended) and IAS 27 Consolidated and Separate Financial statements (Amended) - amendments resulting from May 2010 Annual Improvements to IFRSs, effective for periods beginning on or after 1 July 2010

IFRS 7 Financial Instruments: Disclosures - amendments resulting from May 2010 Annual Improvements to IFRSs, effective for periods beginning on or after 1 January 2011

IFRS 7 Financial Instruments: Disclosures - amendments enhancing disclosures about transfers of financial assets, effective for periods beginning on or after 1 July 2011

IAS 1 Presentation of Financial Statements - amendments resulting from May 2010 Annual Improvements to IFRSs, effective for periods beginning on or after 1 January 2011

IAS 24 Related Party Disclosures - revised definition of related parties, effective for periods beginning on or after 1 January 2011

IAS 34 Interim Financial Reporting - amendments resulting from May 2010 Annual Improvements to IFRSs, effective for periods beginning on or after 1 January 2011

IFRS 9 Financial Instruments, effective 1 January 2010.

These changes are not expected to have a material impact on the Group's financial statements.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company, its subsidiaries and the Special Purpose Vehicle's ("SPV") controlled by the Company. 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 Condensed Consolidated financial statements consolidate the financial statements of the Company and its subsidiaries. Intra group transactions are eliminated in full.

Use of estimates and key sources of estimation uncertainty

The preparation of the Condensed Consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingencies at the date of the Condensed Consolidated financial statements, and revenue and expenses during the reporting period. Actual results could differ from estimated. Significant estimates in the Group's financial statements include the assumptions relating to the valuation of options and investment properties. By their nature these estimates and assumptions are subject to measurement uncertainty.

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 are not expected to have a significant effect on the amounts recognised in the financial statements.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a 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

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. 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 market 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 Options

Management have relied on the services of external experts to determine the fair value of options at their grant date, in order to expense that value over their estimated exercise period. This requires significant estimates of a number of inputs which are used to model that fair value.

(iii) Impairment in investment in subsidiaries and associates

Determining whether investments in subsidiaries and associates 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

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 Appraisal and Valuation Standards, 6th Edition (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.

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.

Revenue recognition

(i) Rental income

Rental income from operating leases is recognised in income on a straight-line basis over the lease term. Rent is billed in advance and then allocated to the appropriate period. Therefore, deferred revenue generally represents the proportion of rentals invoiced in advance as at the reporting date and any advance payments from tenants. Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of revenue can be measured reliably. Incentives for lessees to enter into lease agreements are spread evenly over the lease term, even if the payments are not made on such a basis. The lease term is the non-cancellable period of the lease, together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the directors are reasonably certain that the tenant will exercise that option.

(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) Management fees

Management fees are recognised in the income statement on an accruals basis.

(iv) Promote payments

Under the terms of the Limited Partnership Agreement of NewRiver Retail Investments LP, 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 crystalisation of the fee is virtually certain.

Joint ventures

The Group's investment properties are typically held in property specific 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 Condensed 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.

2 Segmental reporting

During the period the Group operated in one business segment, being property investment in the United Kingdom and as such no further information is provided.

3 Earnings per share

The EPRA issued Best Practice Policy Recommendations in November 2006, which gives guidelines for the calculation of performance measures. The Group has decided to adopt the EPRA earnings measure, which excludes investment property revaluations, impairments, gains and losses on disposals, changes in fair value of financial instruments, intangible asset movements and related taxation.

The calculation of basic and diluted earnings per share is based on the following data:

	30 Sep 2010	31 March 2010	30 Sep 2009
	Group	Group	Group
	£'000	£'000	£'000
Earnings
Earnings for the purposes of basic and diluted earnings per share being net profit/(loss) for the period	1,650	2,115	(129)

Adjustments to arrive at EPRA profit/(loss)

	£'000	£'000	£'000
Profit/(loss) after taxation	1,650	2,115	(129)
Unrealised surplus on revaluation of investment properties	(1,470)	(1,269)	-
Revaluation movement in the joint venture	12	(1,663)	-
Adjusted EPRA profit/(loss)	192	(817)	(129)

Number of shares

	No 000's	No 000's	No 000's
Weighted average number of ordinary shares for the purposes of basic EPS and basic EPRA EPS	13,425	10,000	10,000
Effect of dilutive potential ordinary shares:
Options	57	12	-
Warrants	36	6	-
Weighted average number of ordinary shares for the purposes of basic diluted EPS and basic diluted EPRA EPS	13,518	10,018	10,000

As per the audited Consolidated Financial Statements at 31 March 2010, 624,000 shares have been issued to the Employee Benefit Trust ("EBT"). No shares have been allocated to the Directors as at 30 September 2010 and therefore is not included above.

EPS basic (Pence)	12.29	21.15	(1.29)
EPRA EPS basic (Pence)	1.43	(8.17)	(1.29)
Diluted EPS (Pence)	12.21	21.11	(1.29)
EPRA diluted EPS (Pence)	1.42	(8.16)	(1.29)

4 Net asset value per share

The EPRA issued Best Practice Policy Recommendations in November 2006, which gives guidelines for the calculation of performance measures. The Group has decided to adopt the EPRA net asset value, which includes investment property revaluations and excludes fair value of financial instruments.

	30 Sep 2010 Group	31 March 2010 Group	30 Sep 2009 Group
	£'000	£'000	£'000
Net asset value (£'000)	37,118	26,125	24,089
Number of ordinary shares at
30 September/31 March (000's)	14,212	10,000	10,000
Net asset value per share (Pence)	261	261	241
Net asset value per share (diluted) (Pence)	260	261	241
EPRA Net asset value per share (Pence)	264	261	241

Net asset value per share is based on Group net assets at 30 September 2010 of £37,118k and the 14,212,000 ordinary shares in issue.

5 Investment Property

	30 Sep 2010 Group	31 March 2010 Group	30 Sep 2009 Group
	£'000	£'000	£'000
Opening Balance	13,315	-	-
Acquisitions in the period	22,730	12,046	-
	36,045	12,046	-
Net fair value gain on revaluation of investment properties	1,470	1,269	-
Closing Balance	37,515	13,315	-

The Group's investment properties have been valued at 30 September 2010 by independent valuers and by the Directors on the basis of open market value in accordance with the Appraisal and Valuation Standards of the Royal Institute of Chartered Surveyors.

The assets purchased as part of the Redevco portfolio were valued at the time of purchase in May 2010. The Directors have considered this valuation and are satisfied there has been no change in value at 30 September 2010.

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 30 September 2010 has been determined by the directors on the basis of open market valuations carried out by Colliers International, who is the external valuer to the Group.

The valuations included in the financial statements have been carried out in accordance with The Royal Institution of Chartered Surveyors Valuation Standards, Sixth Edition (the "Red Book").

The basis for the valuations included in the report is based on current market rental yields, expected rental income and comparable market transactions.

6 Investment in joint ventures

	30 Sep 2010 Group	31 March 2010 Group	30 Sep 2009 Group
	£'000	£'000	£'000
Opening Balance	11,778	-	-
Additions at cost of joint venture interests in the period	1,440	10,037	-
Dividend receivable at period end	(250)	-	-
Share of post acquisition profits	594	1,741	-
Net book value carried forward	13,562	11,778	-

The Group has the following interests in joint ventures:

Name	Country of incorporation	% Holding 2010
NewRiver Retail Investments LP	Guernsey	50%
NewRiver Retail Investments (GP) Ltd*	Guernsey	50%

NewRiver Retail Investments LP (the '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 JV has an acquisition capacity in excess of £250 million including 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 50/50 split of existing projects.

The JV is owned equally by NewRiver Retail Limited and MSREI. NewRiver Capital Limited, the wholly-owned subsidiary and property manager, and adviser to NewRiver Retail Limited, is the appointed asset manager on behalf of the JV and receives asset management fees as well as a performance-related return ("promote payment"). No promote payment has been recognised
during the period and the Company is entitled to receive promote payments when achieving the agreed hurdles.

Under the terms of the Limited Partnership agreement relating to NewRiver Retail Investments LP dated 28th 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, to up to 10 per cent of the share capital of NewRiver Retail Limited during the joint venture period. This conversion would currently have an anti-dilutive effect on the Group's EPS calculation.

In line with the existing NewRiver investment strategy, the 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 No1 ) LP. These entities have been set up to facilitate the investment in retail properties in the UK by the joint venture.

The Group has applied equity accounting for its interest in the JV. The aggregate amounts recognised in the consolidated balance sheet and income statement are:

	2010	2010
	NewRiver Retail Investments (GP) Ltd	Group's Share
	Total	50%
	£'000	£'000
Non-current assets	56,217	28,109
Current assets	2,037	1,019
Current liabilities	(1,923)	(962)
Non-current liabilities	(29,205)	(14,604)
Net assets	27,126	13,562

Income	2,243	1,122
Administration expenses	(306)	(153)
Finance costs	(531)	(266)
Decrease in valuation of investment properties	(24)	(12)
Provision for taxation	(194)	(97)
Profit after tax	1,188	594

The Group's share of the contingent liabilities to the JV is £Nil.

7 Investment in subsidiary undertakings

Name	Country of incorporation	Activity	Proportion of ownership interest
			2010
NewRiver Retail (Wrexham No.1) 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 (Portfolio No. 2) Limited	Guernsey	Real estate investments	100%
NewRiver Capital Limited	United Kingdom	Investment management	100%

The Group's investment properties are held by its subsidiary undertakings.

8 Cash and cash equivalents

	30 Sep 2010 Group	31 March 2010 Group	30 Sep 2009 Group
	£'000	£'000	£'000
Cash at bank	1,208	503	4,226
Short term deposits	5,013	7,665	20,000
	6,221	8,168	24,226

9 Financial assets and liabilities

a) The financial assets of the Group consist of trade and other receivables, cash and cash equivalents and cash deposits.

b) Non-current financial liabilities

	30 Sep 2010 Group	31 March 2010 Group	30 Sep 2009 Group
	£'000	£'000	£'000
Secured bank loans	19,619	6,693	-
Maturity of borrowings:
Less than one year	-	-	-
Between one and two years	-	-	-
Between two and five years	19,619	6,693	-
Over five years	-	-	-

Borrowings

Bank loans are secured by way of legal charges on certain properties held by the Group.

Facility type	Term	Maturity date	2010	2010	Interest rate
			Total facility	Group utilised
			Group	Group
			£'000	£'000
Term loan	5 Years	19 February 2015	9,303
a) Tranche 1				6,702	Fixed rate hedge at 5.18%
b) Tranche 2				2,520	Current rate floating at 2.99%
Term loan	3 Years	4 June 2013	12,360
a) Tranche 1				442	Fixed rate hedge at 3.89%
b) Tranche 2				9,955	Fixed rate hedge at 3.77%
Total				19,619

The Group adopts a hedging policy which is aligned with the property strategy on each of its assets. The total cost of borrowing on assets acquired at 30 September 2010 in respect of Investment properties held on Balance Sheet was 4.16% and for the joint venture entities was 3.52% giving a total effective borrowing cost for the Group of 3.88% during the period to 30 September 2010.

Total loan facility fees of £172k have been offset against the Group's borrowings and are being amortised over the life of the facilities.

The Group recognised a mark to market fair value loss of £470k on its interest rate swaps as at 30 September 2010.

All borrowings are due after more than one year.

10 Cashflow note

	30 Sep 2010 Group	31 March 2010 Group	30 Sep 2009 Group
	£'000	£'000	£'000
Operating profit	1,945	2,167	(132)
Adjustments for:
Income from joint ventures not received	(606)	(79)	-
Net gain on revaluation of investment properties	(1,470)	(1,269)	-
Net gain on revaluation of joint venture investment	12	(1,663)	-
Depreciation of property, plant and equipment	1	12	-
Share based payments expense	18	25	6
Operating cashflows before movements in working capital	(100)	(807)	(126)
Increase in receivables	(845)	(88)	1
Increase in payables	300	399	123
Cash outflows from operations	(645)	(496)	(2)

11 Share capital and share premium account

	30 Sep 2010 Group	31 March 2010 Group	30 Sep 2009 Group
	£'000	£'000	£'000
Balance of share premium account at 31 March 2010	24,031	-	-
Issued in the period: 4,212,000 ordinary shares at a price of 250p each	10,530	25,000	25,000
Issue costs	(735)	(969)	(788)
Balance at 30 September/31 March	33,826	24,031	24,212

	No 000's	No 000's	No 000's
Issued share capital
Ordinary shares of nil par value	14,212	10,000	10,000
Treasury Shares	624	624	624

On the 5 May 2010 4,212,000 nil par value ordinary shares were issued for cash consideration at a price of £2.50 resulting in an increase of the total share premium to £33,826,000 (31 March 2010: £24,031,000). Costs of £735,000 directly attributable to the issue of these shares have been set against the Share Premium account.

The number of shares in issue as at 30 September 2010 is 14,212,000 plus 624,000 of Treasury Shares. The Company has an unlimited Authorised share capital and may issue an unlimited number of shares.

Shareholders who subscribed for Placing Shares in the initial Placing received Warrants, in aggregate, to subscribe for 3 per cent 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 £2.46 following the share issue in May 2010.

The Warrants in aggregate give the Warrantholders the right to subscribe in cash at the Subscription Price for the Warrant Shares.

12 Share-based payments

The Group provides share based payments to employees in the form of share options, all share based payment arrangements granted since the admission on 1st September 2009 have been recognised in the financial statements. The Group uses the Black Scholes Model 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

	No of options
Balance brought forward at 1 April 2010	660,200
Awards made during the period	193,836
Awards vested during the period	-
Total at the end of the period	-
Exercisable options at the end of the period	854,036

The awards granted during the period are based on a percentage of the total number of shares in issue, as a result of the new share issue the number of awards have increased.

(b) Share based payment charge

The Group recognised a total share-based payment expense of £18,110 during the period.

13 Post balance sheet events

On the 28 October 2010 the Group announced the proposed election to enter the UK-REIT regime and the proposed issue of up to £25m nominal value 5.85% CULS. This was approved at the EGM on 19 November 2010. The Company will be liable for a conversion charge of approximately £1.4m upon entering the UK-REIT regime, this charge is payable over 4 years. Further details of the conversion to a REIT and the issue of the CULS is included in the circular which can be found on the company website at www.newriverretail.com.

On the 28 October 2010 the Group exchanged contracts on the purchase of a portfolio of 5 retail assets from Standard Life for a purchase price of £14m at a net initial yield of 9% financed with a debt facility at 65% loan to value (LTV).

On the 30 November 2010 the Group completed on the purchase of a portfolio of 5 retail assets for a purchase price of £53m at a net initial yield of 8.35% financed with a debt facility at 65% LTV.

On the 6 December 2010 the Board approved payment of the maiden dividend at 1p per share (£142,120) payable in January 2011.

14 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.

The following Directors held shares in the Company during the period:

	Number of shares
David Lockhart	1,580,000
Allan Lockhart	140,000
Nick Sewell	100,000
Mark Davies	6,000
Paul Roy	360,000
Susie Farnon	25,000
Peter Tom CBE	40,000
Serena Tremlett	6,000

Serena Tremlett (resigned 19 November 2010) is the Managing Director of Morgan Sharpe Administration Limited which receives fees for providing secretarial and administration services in respect of the Company. During the period £38k was paid to Morgan Sharpe Administration in respect of these services. These services were carried out on an arm's length basis.

Total emoluments of Directors and key management during the period (excluding share-based payments) was £355k and there are no loan balances with directors.

Share based payments of £18,110 accrued during the period and no options were exercised during the period.

 

END

 

 

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