TIDMNRR
RNS Number : 4028P
NewRiver REIT PLC
17 November 2016
NewRiver REIT plc Half Year Results
17 November 2016
Focused strategy delivering secure and sustainable cash
returns
David Lockhart, Chief Executive commented: "I am pleased to
report that NewRiver has again produced growing cash profits from
its high quality and defensively positioned portfolio. We have a
proven track record of generating secure income returns and
delivering a growing dividend to our shareholders, and this half
has been no exception with the dividend per share up by over 11%.
We completed our move to the Main Market in August, only seven
years after the Company was founded, with FTSE All Share and EPRA
index qualification in December our next target. Following the EU
Referendum, our operational metrics remain strong and we have
continued to see good levels of demand across the portfolio. The
Brexit vote has impacted the investment market but created some
good buying opportunities for us in the short term as demonstrated
by our recent retail warehouse acquisition in Sheffield from an
open-ended property fund.
Looking ahead, while uncertainty remains, with the
convenience-led profile of our portfolio, affordable rents,
conservative balance sheet and risk controlled development
pipeline, our proven business model is well equipped to continue to
deliver secure and sustainable cash returns to our
shareholders."
Focused strategy of delivering secure and sustainable cash
returns paying dividends
-- Funds From Operations(1) ('FFO') up 24% to GBP24.5 million (Sep 2015: GBP19.7 million)
-- FFO per share of 10.5 pence (Sep 2015: 13.2 pence); prior
period included promote receipts from Bravo JV of 2.8 pence per
share
-- Fully covered first half dividend per share increased by 11%
to 10.0 pence(2) (Sep 2015: 9.0 pence)
-- Third quarter dividend announced today of 5.0 pence per share (FY16: 4.75 pence)
-- EPRA NAV per share down 1.7% to 290 pence (Mar 2016: 295
pence); after absorbing acquisition costs, 1.0% valuation deficit
and one off Main Market move costs
-- IFRS PBT of GBP11.6 million (Sep 15: GBP42.2 million)
including an GBP11.4 million non-cash reduction in portfolio
valuation
-- Total shareholder return +2.7% vs EPRA/NAREIT UK Index down
2.2%; total accounting return +1.6%
Successfully deployed equity into GBP158 million of strategic
acquisitions
-- Assets under management increased by 14% to GBP1.3 billion
(Mar 2016: GBP1.1 billion); NRR share GBP1.1 billion
-- Acquisitions totalling GBP158.4 million, average equivalent yield of 7.2%
-- GBP120.3 million acquisition of Broadway Shopping Centre and
Retail Park in Bexleyheath, South East London, blended equivalent
yield of 7.0%
-- GBP20.2 million acquisition of Cuckoo Bridge Retail Park, Dumfries, equivalent yield 7.9%
-- GBP17.9 million acquisition of a retail warehouse in
Sheffield from open-ended property fund, equivalent yield 7.6%;
exchanged contracts with the current occupier for NRR to accept up
to a GBP12 million surrender premium
Creating sustainable income through active asset management and
affordable rents
-- 178 leasing events; long term deals on average up 0.9% vs ERV
with an average lease length of 10.1 years
-- High occupancy of 96% (Mar 2016: 96%); maintained above 94% since IPO seven years ago
-- Affordable average retail rent of GBP12.69 per sq ft (Mar 2016: GBP12.14 per sq ft)
-- Footfall across the shopping centre portfolio of 74 million
in H1; on a like-for-like basis -0.2% vs Sep 2015 but outperforming
the UK benchmark by 180bps; post EU Referendum +1.1% on a
like-for-like basis
-- Ahead of 2017 rates revaluation, draft rateable values across
the portfolio in England & Wales will fall by more than 20%
benefitting retailers greatly and reducing cost ratios further
Generating secure long-term income through risk-controlled
developments
-- Progressing 1.6 million sq ft development pipeline; 67,300 sq
ft completed in period; 24,800 sq ft on-site
-- Further six convenience stores handed over to Co-operative
taking total number to nine, securing annual rent of GBP0.6
million; under construction and consented schemes will add a
further GBP1.5 million of annual rent
-- Planning granted on 159,600 sq ft; includes 62,000 sq ft at
Canvey Island Retail Park, already over 50% pre-let
-- 367,400 sq ft of planning applications submitted; includes
236,000 sq ft mixed-use regeneration in Cowley, Oxford
Conservative gearing and low cost of debt(3)
-- Loan to value of 38% (Mar 2016: 27%) increased due to
acquisitions in the period but well within stated policy
-- Cost of debt reduced to 3.65% (Mar 2016: 3.70%); seeing scale
benefits in recent lower cost facilities
-- Interest cover remains a strong metric for the Company at 4.3x (Mar 2016: 4.3x)
Achieved key milestone with move to Main Market
-- Completed move from AIM to a Premium Listing on the Main
Market of the London Stock Exchange
-- Currently meet the requirements for inclusion in FTSE ALL
Share, and EPRA/NAREIT UK indices in December 2016
Notes:
1. The Company has previously referred to FFO as EPRA adjusted earnings.
2. Includes two quarterly payments of 5.0 pence each
3. All debt metrics presented on a proportionally consolidated basis
Financial Statistics
Performance (6 months ended) Note Sep 2016 Sep 2015 Change
------------------------------------------- ----- ---------- ------------- -------
Funds From Operations ('FFO') (1) GBP24.5m GBP19.7m +24%
------------------------------------------- ----- ---------- ------------- -------
FFO PS (Pence Per Share) (1) 10.5 13.2 -20%
------------------------------------------- ----- ---------- ------------- -------
EPRA EPS (Pence Per Share) 9.7 12.6 -23%
------------------------------------------- ----- ---------- ------------- -------
Dividends (Pence Per Share) 10.0 9.0 +11%
------------------------------------------- ----- ---------- ------------- -------
Dividend cover (1) 105% 147%
------------------------------------------- ----- ---------- ------------- -------
Net income GBP38.3m GBP32.1m +19%
------------------------------------------- ----- ---------- ------------- -------
Like-for-like net income growth +0.2%
------------------------------------------- ----- ---------- ------------- -------
Capital return -1.0%
------------------------------------------- ----- ---------- ------------- -------
Property valuation movement and disposals -GBP11.4m +GBP22.9m
------------------------------------------- ----- ---------- ------------- -------
Cost ratio 14% 16%
------------------------------------------- ----- ---------- ------------- -------
Interest cover (2) 4.3x 4.0x
------------------------------------------- ----- ---------- ------------- -------
IFRS Profit before taxation GBP11.6m GBP42.2m
------------------------------------------- ----- ---------- ------------- -------
IFRS Basic EPS (Pence Per Share) 4.7 28.3
------------------------------------------- ----- ---------- ------------- -------
IFRS Cash generated from operations GBP27.7m GBP18.9m
------------------------------------------- ----- ---------- ------------- -------
Total Shareholder Return +2.7% +17.3%
------------------------------------------- ----- ---------- ------------- -------
Total Accounting Return (3) +1.6% +11.7%
------------------------------------------- ----- ---------- ------------- -------
Balance Sheet (proportionally consolidated) * Note Sep 2016 Mar 2016 Change
----------------------------------------------- ----- ---------- ---------- -------
IFRS Net Assets GBP674.6m GBP689.9m -2.2%
----------------------------------------------- ----- ---------- ---------- -------
EPRA NAV per share 290p 295p -1.7%
----------------------------------------------- ----- ---------- ---------- -------
Principal value of gross debt (4) GBP474.8m GBP382.6m
----------------------------------------------- ----- ---------- ---------- -------
Cash GBP42.1m GBP117.5m
----------------------------------------------- ----- ---------- ---------- -------
Net debt GBP428.7m GBP261.7m
----------------------------------------------- ----- ---------- ---------- -------
Cost of debt 3.65% 3.70% -5bps
----------------------------------------------- ----- ---------- ---------- -------
Average debt maturity 3.2 years 3.5 years
----------------------------------------------- ----- ---------- ---------- -------
Loan to value (5) 38% 27%
----------------------------------------------- ----- ---------- ---------- -------
Balance sheet gearing 54% 29%
----------------------------------------------- ----- ---------- ---------- -------
% of debt at fixed/capped rates 97% 93%
----------------------------------------------- ----- ---------- ---------- -------
Notes:
* Unless otherwise stated all figures are proportionally
consolidated.
(1) Funds From Operations ('FFO') is a Company measure
determined by cash profits which includes realised recurring cash
profits plus realised cash profits on the sale of properties above
valuation and excludes other one off or non-cash adjustments as set
out in Note 6. This is a true cash profit earned by the Company
during the year and the basis for dividend payments and cover.
Prior period included promote receipts from Bravo JV of GBP4.2
million or 2.8 pence per share
(2) Interest cover is tested at property level and is the basis
for banking covenants. It is calculated by comparing actual net
rental income received versus cash interest payable.
(3) Total Accounting Return equals NAV per share growth plus
dividends paid in the period.
(4) Facilities are secured directly against properties and are
shown in the table on a look-through basis to include the Company's
share of joint venture debt.
(5) Loan to value measures the value of properties compared to
the secured debt facilities, net of cash balances.
For further information
NewRiver REIT plc +44 (0)20 3328 5800
David Lockhart (Chief Executive)
Mark Davies (Chief Financial Officer)
Allan Lockhart (Property Director)
Will Hobman (Head of Investor Relations)
Bell Pottinger +44 (0)20 3772 2500
David Rydell
David Bass
James Newman
Eve Kirmatzis
This announcement contains inside information as defined in
Article 7 of the EU Market Abuse Regulation No 596/2014 and has
been announced in accordance with the Company's obligations under
Article 17 of that Regulation.
Results presentation
The results presentation will be held at 10.45am today at the
offices of Eversheds LLP, 1 Wood St, London EC2V 7WS.
A live audio webcast will be available at:
http://view-w.tv/965-1325-17489/en
A recording of this webcast will be available on the same link
after the presentation, and on the Company's website
(http://www.nrr.co.uk/investor-center) later in the day.
Results video
A short video overview of the financial results from Mark
Davies, CFO, can be found at:
http://www.nrr.co.uk/investor-center
About NewRiver
NewRiver REIT plc (ticker: NRR) is a premium listed REIT on the
London Stock Exchange. The Company is a specialist real estate
investor, asset manager and developer focused solely on the UK
retail and leisure sector.
Founded in 2009, NewRiver is one of the UK's largest
owner/managers of convenience-led shopping centres with assets
under management of GBP1.3 billion principally comprising 33 UK
wide shopping centres together with further nationwide retail and
leisure assets. The portfolio totals over 8 million sq. ft. with
over 2,000 occupiers, an annual footfall of 150 million and a
retail occupancy rate of 96 per cent.
Visit nrr.co.uk for further information.
Forward-looking statements
The information in this announcement may include forward-looking
statements, which are based on current projections about future
events. These forward-looking statements reflect the directors'
beliefs and expectations and are subject to risks, uncertainties
and assumptions about NewRiver REIT plc (the "Company"), including,
amongst other things, the development of its business, trends in
its operating industry, returns on investment and future capital
expenditure and acquisitions, that could cause actual results and
performance to differ materially from any expected future results
or performance expressed or implied by the forward-looking
statements.
None of the future projections, expectations, estimates or
prospects in this announcement should be taken as forecasts or
promises nor should they be taken as implying any indication,
assurance or guarantee that the assumptions on which such future
projections, expectations, estimates or prospects have been
prepared are correct or exhaustive or, in the case of the
assumptions, fully stated in the document. As a result, you are
cautioned not to place reliance on such forward looking statements
as a prediction of actual results or otherwise. The information and
opinions contained in this announcement are provided as at the date
of this document and are subject to change without notice. No one
undertakes to update publicly or revise any such forward looking
statements. No statement in this document is or is intended to be a
profit forecast or profit estimate or to imply that the earnings of
the Company for the current or future financial years will
necessarily match or exceed the historical or published earnings of
the Company.
Chief Executive's review
The first half of the financial year has been another busy
period for NewRiver. In an environment of increased uncertainty in
the UK, we remained focused on creating sustainable income across
our convenience-led portfolio through disciplined stock selection,
active asset management and risk-controlled development. We
completed our largest single acquisition to date, applied our asset
management skills to create sustainable income across the
portfolio, progressed our risk-controlled development pipeline,
completed our move to the Main Market and delivered a fully
covered, growing dividend to our shareholders.
Our Funds From Operations ('FFO') of GBP24.5 million were up 24%
compared to the same period last year due to acquisitions made in
the last 12 months and our active asset management. FFO per share
was down 20% to 10.5 pence, due to promote income received in the
prior period. The Board approved two quarterly dividend payments of
5.0 pence per share resulting in a fully covered interim dividend
of 10.0 pence per share, up 11% compared to the same period last
year. We have also announced a third quarter dividend of 5.0 pence
per share, further demonstrating our proven ability to deliver
secure and sustainable cash returns. Our assets under management
now stand at GBP1.3 billion, GBP1.1 billion at NewRiver's share,
with our EPRA net asset value per share down 5 pence to 290 pence
reflecting the absorption of acquisition and Main Market move costs
as well as a small 1% reduction in portfolio valuation. Our total
accounting return for the period was 1.6%.
We continued to sign leases ahead of valuers' estimates, with
178 new lettings and renewals completed on terms 0.9% ahead of ERV.
Our operational metrics remain robust, with occupancy unchanged
from March 2016 at 96%. In fact, since NewRiver was founded in
September 2009, occupancy has always been above 94%. Occupier
retention remains high at 86%, and our rents are affordable at
GBP12.69 psf on average. The combination of our high occupancy,
high retention and low average rents shows us that retailers are
trading profitably at our centres, underpinning the sustainability
of our income.
We completed acquisitions totalling GBP158 million at an
equivalent yield of 7.2%. We started the period by completing our
largest acquisition to date, buying the Broadway Shopping Centre
and Broadway Square Retail Park in Bexleyheath, South East London,
for GBP120 million at a blended equivalent yield of 7%. We have
been active in the six months since acquisition, improving rental
tone in the shopping centre and working in partnership with the
London Borough of Bexley to design a masterplan for the shopping
centre, retail park and surrounding council owned land.
We remained active in the investment market throughout the
period, completing the acquisition of Cuckoo Bridge Retail Park in
Dumfries in June off-market for GBP20 million, and a retail
warehouse in Sheffield in September for GBP18 million. We moved
quickly to acquire the Sheffield asset from an open-ended property
fund and it is a great example of a NewRiver deal. As we completed
the Sheffield acquisition we exchanged contracts with the current
occupier, a bulky goods retailer, to accept a surrender premium of
up to GBP12.25 million which must be exercised by May 2017. In
essence, this means that we have acquired a 110,000 sq ft
prominently located retail warehouse for less than GBP6 million,
well below replacement cost. We plan to sub-divide and re-position
the asset and we are in discussions with a number of retailers
interested in taking the space.
We made good progress in the period implementing active asset
management initiatives at those assets acquired in the last 12
months. We purchased the Neptune Portfolio, consisting of 3
shopping centres in Darlington, Wakefield and Cardiff, in January
2016 for GBP92 million. Pre-acquisition we identified that at the
Ridings Centre, Wakefield, there was an opportunity to
significantly increase net rental income. We have made good
progress since acquisition, commencing phase one of works costing
GBP1.2 million which we aim to complete in the second half of the
current financial year and which we believe will increase net rent.
We are also in pre-planning for a major 147,000 sq ft retail and
leisure re-development at the Capitol Shopping Centre in Cardiff,
which will include almost 180 apartments in the air space above the
centre.
Our 1.6 million sq ft risk-controlled development pipeline has
also moved forward since the year end. At our 465,000 sq ft
regeneration scheme in Burgess Hill, we have exchanged contracts
with Cineworld for a 10 screen multiplex cinema, meaning that the
retail & leisure element of the scheme is now 41% pre-let with
a further 22% in solicitors' hands. Post period end, we received
planning consent at Canvey Island for a 62,000 sq ft retail park
which is already 52% pre-let, with a further 23% in solicitors'
hands. In November, we submitted the planning application for our
exciting 236,000 sq ft mixed-use regeneration in Cowley, Oxford.
Our current development commitment is modest, with 24,800 sq ft
under construction, and our risk-controlled approach to development
means we will not commit to further developments without
substantial pre-letting.
The convenience store programme within the pub portfolio
continued to progress, and we handed over a further six C-stores to
the Co-operative in the period taking the total number completed to
date to nine and adding GBP0.6 million to our rent roll. We are on
site for the construction of a further two totalling 6,500 sq ft
and we have consent to construct a further 25 totalling 85,400 sq
ft.
Our LTV was 38% at 30 September, up from 27% at March 2016
predominantly due to the acquisition of our assets in Bexleyheath
which completed in April. Our interest cover remained robust at
4.3x and our weighted average cost of debt was 3.65%, down from
3.70% in March 2016.
We completed our move from AIM to a Premium Listing on the Main
Market in August marking a significant milestone for NewRiver, only
seven years following our GBP25 million IPO. We are excited to have
entered the next ambitious phase in the Company's development, and
we currently meet the requirements for inclusion in the FTSE All
Share and EPRA indices in December 2016.
Post the EU Referendum, operationally it has been business as
usual for NewRiver. Our key metrics remain robust and the business
has performed well, with retailers continuing to take space and
footfall up 1.1% on a like-for-like basis across our centres. The
investment market has been impacted, but we remained selectively
active and moved quickly to take advantage of the short window of
opportunity created by open-ended fund redemptions in August.
Outlook
Looking ahead, the UK economy looks set for a prolonged period
of uncertainty, with the exact timing and structure of Brexit not
yet clear. In this environment, retailer profit margins will
continue to face pressure, with increasing import costs due to
weakening sterling and the introduction of the National Living Wage
both negatives for the sector. However, our portfolio is well
positioned towards convenience and non-discretionary spend and will
be further supported by the 2017 business rates revaluation, with
our draft rateable values showing that across our portfolio in
England and Wales rateable values will fall by over 20%, with
almost 75% of our occupiers benefitting from this.
We founded the Company in 2009 during a severe recession, and
since then we have consistently created value for our shareholders
through our proven business model, focusing on the
non-discretionary convenience-led retail & leisure sector where
the UK household budget is spent day in, day out. We believe that
with our convenience-led specialism, strong operational metrics,
affordable rents and conservative balance sheet we are
well-positioned to continue to deliver secure and sustainable cash
returns to our shareholders.
David Lockhart
Chief Executive
17 November 2016
Operating review
Highlights
-- Assets under management increased by 14% to GBP1.3 billion (NRR share GBP1.1 billion)
-- Capital return -1.0%
-- Ungeared total property return +2.6%, outperforming the IPD All Retail benchmark by 310 bps
-- GBP158.4 million of acquisitions at an average equivalent yield of 7.2%
-- GBP5.6m of disposals 5% ahead of valuation
-- 178 total leasing events; average new long term leasing events 0.9% ahead of ERV
-- Strong occupancy sustained at 96%; maintained above 94% since NRR was founded in 2009
-- Like-for-like footfall -0.2% vs H1 2016 outperforming
benchmark by 180bps; post EU Referendum +1.1% as consumers continue
to buy non-discretionary items
-- Six further convenience stores handed over to Co-operative
taking total to nine, securing GBP0.6 million of rent
-- Planning granted on 159,600 sq ft including Canvey Island Retail Park
-- 367,400 sq ft of planning applications submitted, including
236,000 sq ft mixed-use regeneration in Cowley, Oxford
Portfolio overview
As at 30 September Valuation Capital NIY NEY LFL ERV
2016 NRR share Return Growth
=================== ============= ========== ======= ======= ==========
GBPm % % % %
=================== ============= ========== ======= ======= ==========
Shopping Centres 690 (1.2) 7.0 7.7 0.1
=================== ============= ========== ======= ======= ==========
Retail Warehouses 171 (0.4) 6.5 7.2 1.3
=================== ============= ========== ======= ======= ==========
High Street 46 (2.1) 6.8 6.7 1.1
=================== ============= ========== ======= ======= ==========
Pubs & Convenience
Stores 177 (0.8) 11.8 11.8 N/A
=================== ============= ========== ======= ======= ==========
Development 46 (0.7) N/A N/A N/A
=================== ============= ========== ======= ======= ==========
Total 1,130 (1.0) 7.6 8.3 0.1
=================== ============= ========== ======= ======= ==========
During the period, assets under management increased from
GBP0.97 billion in March 2016 to GBP1.13 billion in September.
Acquisitions account for the majority of the movement, with
like-for-like valuations remaining broadly flat. Including
acquisition costs and capital expenditure incurred, capital return
across the portfolio was down marginally by 1.0%. Our capital
return compares favourably to the market, outperforming the IPD All
Retail benchmark of -3.0% by 200 bps. Moreover, we delivered a
Total Property Return of 2.6%, significantly outperforming the
benchmark of -0.5% by 310 bps.
The equivalent yield across the portfolio now stands at 8.3%. On
a like-for-like basis, equivalent yields have remained stable, with
no more than 10 bps movement since March 2016 across all sectors of
the portfolio. Taking account of acquisition and disposals, the
equivalent yield on the Shopping Centre portfolio (which accounts
for 61% of NewRiver's share of assets) has come in from 7.9% to
7.7% following the recent acquisition of Bexleyheath.
Acquisitions
We completed GBP158.4 million of strategic acquisitions in the
period in three separate transactions, at an average equivalent
yield of 7.2%.
Bexleyheath
Our most significant acquisition was in Bexleyheath, South East
London, where in April we purchased both the Broadway Shopping
Centre and the Broadway Square Retail Park for a total cost of
GBP120.3 million at a blended equivalent yield of 7.0%. The
acquisition was a rare opportunity to acquire high-quality retail
assets in Greater London at an attractive price, approximately 95
basis points above the 15-year average IPD non-central London
retail net initial yield of 5.75%. The assets were acquired from an
institutional vendor, and the acquisition represented NewRiver's
largest single asset acquisition to date and the Company's first
significant asset in Greater London.
The Bexleyheath assets are 100% occupied, reflecting high demand
from retailers and excellent growth credentials, and provide a
balanced range of convenience, food and fashion retailers in-line
with NewRiver's wider portfolio. In total, the assets comprise
525,000 sq ft of retail & leisure space across an eleven-acre
site with an average lease length at acquisition of 12.7 years.
Representing over 60% of the town's retail space, the assets
provide the principal retail destination for a South East London
borough earmarked for significant growth with attractive and
sustained footfall of over 9 million. Bexleyheath has an affluent
and growing population which will benefit from major regeneration
and infrastructure projects including Thames Gateway, Europe's
largest regeneration project, which will provide 160,000 new homes
in the area, and direct access to Abbey Wood Crossrail station
scheduled to open in 2018.
Dumfries
In June, we completed the acquisition of Cuckoo Bridge Retail
Park, Dumfries, off-market for a total consideration of GBP20.2
million. The acquisition equated to a net initial yield of 7.05%,
an equivalent yield of 7.87% and a reversionary yield of 7.93%,
with net rental income of GBP1.5 million per annum and a weighted
average lease expiry at acquisition of 8.3 years at purchase.
Cuckoo Bridge is the dominant retail park in Dumfries, prominently
located in close proximity to the A75. The asset has a strong
catchment, is 100% occupied and comprises 130,000 sq ft of income
generating space across seven retail units with 550 car park
spaces. The asset benefits from prime positioning, adjacent to a 24
hour Tesco supermarket which provides the main food offer for the
town. Anchored by Homebase, the retail park offers a mix of quality
retailers including Dunelm, Poundstretcher, Laura Ashley, B&M,
KFC and Costa Coffee.
Sheffield
In September, we moved swiftly to complete the acquisition of a
retail warehouse in Sheffield from an open-ended property fund for
GBP17.9 million, representing an equivalent yield of 7.6%. The
property comprises a 110,000 sq ft retail warehouse unit and 580
car parking spaces, and is well located 2.5 miles east of Sheffield
city centre and in close proximity to Meadowhall shopping centre.
The asset is prominently located and highly visible being adjacent
to the A6102 which forms part of the Sheffield inner ring road.
The asset presented an attractive value-creating opportunity for
NewRiver with the unit currently let to a home improvement retailer
no longer in occupation due to over representation in the area. As
we completed the acquisition, we simultaneously exchanged contracts
with the home improvement retailer to accept a surrender premium of
up to GBP12.25 million to release them from their lease
obligations. The timing of this premium is flexible, and excluding
some restrictions in January 2017 we can exercise the premium at
any time until the 4(th) May 2017, receiving rent from the retailer
in the interim. Capitalising on seasonality a temporary let was
secured with Royal Mail for the festive period, saving GBP0.3
million of holding costs, after which it is our intention to
sub-divide, re-position and re-let the warehouse unit.
Disposals
We sold GBP5.6 million of property in the period, 5.4% ahead of
March 2016 valuation.
Two retail warehouse disposals were completed in the period,
both of which were acquired in July 2015 as part of the Ramsay
portfolio purchase. At acquisition, the Ramsay portfolio included
nine value-led retail parks and four development sites located
adjacent to upper-quartile performing Morrison's foodstores. In
August we sold a development site in Newquay for GBP700,000, and in
September we sold Leafield Retail Park in Dumfries for GBP2.7
million. These disposals were completed marginally ahead of book
value, and 33% ahead of the price paid in July 2015.
We made a number of disposals across our pub portfolio,
comprising either pub sales to tenants or non-core sales of
ancillary properties and land which we do not consider to be
essential to the ongoing operational and strategic management of
the assets. In total we sold four pubs for GBP2.1 million, a 7.6%
premium to March 2016 valuation, and over a 40% premium to purchase
price. We sold two plots of land adjacent to pubs, at the Royal
Oak, Kings Bromley and the Ostrich Inn, Longford for GBP86,000.
These plots were held at zero value, and so although small in size
they demonstrate the incremental value we are able to extract from
the pub portfolio.
We will continue to recycle mature assets, assets where we feel
the forward looking returns are below acceptable levels and assets
where we feel the risk profile has changed.
Asset management
Our active asset management is a key driver of long-term capital
value and the generation of income returns to shareholders.
We continued to sign leases on terms ahead of valuers' estimates
in the period, completing 178 new lettings and renewals with long
term deals on terms 0.9% ahead of March 2016 ERV. Half of these
leasing events were completed following the EU Referendum
demonstrating the robust and attractive profile of the NewRiver
portfolio. At 96%, our occupancy remained strong and in line with
March 2016 and since the company was established in September 2009
during a severe recession, occupancy has never been below 94%.
Retailer retention remains high at 86%, demonstrating that the
vast majority of our retailers want to remain in occupation at
lease expiry. Our average rents remain affordable at GBP12.69 per
sq ft, with the increase from GBP12.14 at March 2016 due
predominantly to the assets purchased in Bexleyheath. The
combination of high occupancy, high retention and affordable rents
is important because it shows that retailers are trading profitably
at our centres and therefore that our income is sustainable.
Footfall across the shopping centre portfolio totalled 74
million during the period, down 0.2% compared to the same period
last year on a like-for-like basis but outperforming the national
benchmark by 180 bps. Testimony to the robust positioning of the
NewRiver portfolio, following the EU Referendum footfall was up
1.1% on a like-for-like basis, showing that consumers have
continued to visit our conveniently located centres to buy
non-discretionary items.
Although footfall was down marginally over the half on a
like-for-like basis, at an asset level downward movements were
often linked to ongoing development activity. For example, at the
Abbey Centre, Newtownabbey, footfall was down 5% mainly due to the
volume of ongoing development and enhancement works at the centre
which we believe will drive future footfall. The works are well
progressed, and we handed over a 44,000 sq ft flagship store to
Next in August on schedule and within budget. Reflecting the impact
of our actions, we saw ERV growth of over 4% in the period at the
Abbey Centre.
At March 2016 we had exposure of 1% of total rent to BHS, spread
across three centres. Ahead of the BHS administration, we advanced
plans to secure alternative strategic occupiers and in the short
time since the final BHS closure we have made good progress in
re-letting these units. At the Abbey Centre, Newtownabbey, we have
agreed a temporary letting of the former BHS unit to Dunnes Stores,
the leading Irish department store operator, to allow them to
continue to trade whilst we extend their current unit by 15,000 sq
ft. We are in legal negotiations with a major flagship operator to
secure a long term letting commencing at the end of the temporary
Dunnes lease. At Priory Meadow, Hastings we have terms agreed with
a major flagship retailer that we believe will be a major
attraction to the centre. At the Burns Mall Shopping Centre,
Kilmarnock, we are actively pursuing a subdivision and are in
discussions with a range of retail and leisure operators.
At Bexleyheath, we have had an active six months since our
acquisition of the Broadway Shopping Centre and the Broadway Square
Retail Park. Both schemes are fully let, and we have seen
significant interest from existing and new retailers which will
create rental tension and allow us to improve rental tone.
Following our recent lease renewal with Vodafone at GBP91,500 per
annum we have increased the rental tone of the shopping centre by
almost 5% within the first 6 months of ownership. A handful of
lease renewals are currently in solicitors' hands at or above this
level with national retailers cementing a sustainable upward trend
of rental growth. Metro Bank successfully opened in July opening
almost 500 new accounts in the first week of trading and we are
working in partnership with the London Borough of Bexley to design
a masterplan for the shopping centre, retail park and surrounding
council owned land.
We made good progress in the period on asset management
initiatives at those assets acquired in the last 12 months. We
purchased the Neptune Portfolio, comprising three shopping centres
in Darlington, Wakefield and Cardiff, in January 2016 for GBP92
million. Pre-acquisition we identified that at the Ridings Centre,
Wakefield there was an opportunity to significantly increase net
rental income. Across our entire portfolio, the average gross to
net rent conversion rate is 90%, and at Wakefield the figure was
closer to 50% at acquisition. Our strategy is to reduce voids,
reconfigure unit sizes, increase food & beverage provision and
rebrand the centre. In the period we commenced phase one of works
costing GBP1.2 million which we aim to complete in the second half
of the current financial year. We are also in pre-planning for a
major 147,000 sq ft retail and leisure re-development at the
Capitol Shopping Centre in Cardiff which will include almost 180
apartments in the air space above the centre.
We recently completed a comprehensive programme of asset
management enhancements at Clough Road Retail Park in Hull having
acquired the asset in June 2014 as part of the Linear Portfolio. We
paid GBP7.5 million for the 95,500 sq ft park which was only 85%
let, was in need of investment and had adjacent PC World and Currys
units. Within a year of acquisition, we had let the vacant unit to
Go Outdoors and the park was fully occupied. In the period under
review, we signed a new 10 year lease with Currys and negotiated
the surrender of the PC World unit, which we then sub-divided and
re-let to Staples and Halfords improving the retail offer on the
park as well as the rental tone. Post period end, we completed the
construction of a Costa coffee pod in the car park, signed on a 15
year lease, taking total investment in the asset to GBP1.0 million,
and driving valuation uplift since acquisition of over 20%.
We have worked hard to secure rateable value reductions for our
occupiers ahead of the 2017 business rates revaluation and we
recently received our draft rateable values. These show that across
our portfolio in England and Wales rateable values will fall by
more than 20%, with almost 75% of our occupiers seeing cash benefit
from 1 April 2017.
Development
We have made significant progress on our risk-controlled
development pipeline which now totals 1.6 million sq ft development
which we believe will be a key driver of long term returns for
shareholders.
Development pipeline
C-store Shopping Retail Residential Hotel Total Let/
Centre Warehouse Pipeline Pre-let*
Sq ft Sq ft Sq ft Sq ft Sq Sq ft %
ft
Completed
in period/
Under construction 29,800 59,000 3,300 - - 92,100 100
--------------------- -------- --------- ----------- ------------ -------- ---------- ----------
Planning
granted 85,400 279,300 65,600 205,000 20,500 655,800 52
--------------------- -------- --------- ----------- ------------ -------- ---------- ----------
In planning 16,500 33,400 12,000 277,300 67,200 406,400 65
--------------------- -------- --------- ----------- ------------ -------- ---------- ----------
Pre-planning 13,600 - 32,000 190,900 30,000 266,500 n/a
--------------------- -------- --------- ----------- ------------ -------- ---------- ----------
Early feasibility
stages - 107,600 68,400 13,000 - 189,000 n/a
--------------------- -------- --------- ----------- ------------ -------- ---------- ----------
Total Pipeline 145,300 479,300 181,300 686,200 117,700 1,609,800
--------------------- -------- --------- ----------- ------------ -------- ---------- ----------
*Excluding residential
Completed in period/Under construction
During the period, we completed 67,300 sq ft of development
across seven assets, with 24,800 sq ft of development currently
under construction, predominantly in our pub portfolio.
Public Houses: Having signed a conditional agreement with the
Co-operative in September 2014, we handed over a further six
C-stores in the period totalling 23,300 sq ft, taking the total
number completed to date to nine. Of the stores delivered to date,
six utilised surplus land adjacent to the existing pubs, two were
pub conversions and one was a new build on a site previously
occupied as a pub.
The C-stores handed over to date have annualised rents of GBP0.6
million on 15-year leases across 34,900 sq ft, at a total
construction cost of GBP5.4 million. We are on site for the
construction of a further two totalling 6,500 sq ft and we have
consent to construct a further 25 totalling 85,400 sq ft.
Abbey Centre, Newtownabbey: A new 44,000 sq ft Next anchor store
was handed over to Next for fit-out in August and is scheduled to
open in time for Christmas. The store was delivered on schedule and
within budget and Next were delighted with the finished product. We
are now on-site with the next phase of development works at the
centre, constructing a 15,000 sq ft extension to create a 31,600 sq
ft flagship unit for Dunnes Stores, the leading Irish department
store operator.
Planning granted
Since the start of the period, we secured planning permission
for 159,600 sq ft of development across 27 schemes.
Canvey Island: We acquired the site in July 2015 as part of the
Ramsay portfolio. We submitted a planning application in June 2016
to create a 62,000 sq ft retail park, 87,000 sq ft including
mezzanine, and we received planning consent in early November. The
consent was given with no s.106 requirement and no restriction on
opening hours. Even at this early stage the park is already 52%
pre-let, with B&M signing an agreement for lease on 25,000 sq
ft in the period and Sports Direct signing post period end.
Including deals in solicitors' hands, the park is 75% pre-let.
Burgess Hill: In our full year announcement, we reported that we
had recently secured full detailed planning consent for our GBP65
million mixed-use redevelopment of Burgess Hill town centre. The
465,000 sq ft project will provide a 10-screen multiplex cinema, a
63 bed Travelodge, a higher quality retail offer and new restaurant
and leisure provisions, 174 additional car park spaces and an
improved public realm, together with 142 new residential units and
a new purpose built library. During the period, we exchanged
contracts with Cineworld meaning the retail, leisure & hotel
elements of the scheme are now 41% pre-let. Including deals in
solicitors' hands, this number increases to over 60% pre-let.
Montague Centre, Worthing: A3 consent was granted to re-position
18,000 sq ft of existing space at the shopping centre into a
restaurant quarter with leading national operators. We have agreed
terms with Patisserie Valerie and Nando's and have deals with a
handful of high quality national operators in final negotiations.
Works are due commence in the first half of 2017 with completion of
phase 1 open for trade by Christmas 2017.
In planning
Cowley, Oxford: In November we submitted a planning application
for our 236,000 sq ft mixed-use regeneration in Cowley, Oxford
having previously announced that we had exchanged contracts with
Travelodge for a 71-bed hotel. As well as the hotel and two new
restaurant units, we plan to create 225 new residential apartments,
modernised car parks and major improvement of the public realm.
Templars Square has been at the heart of Cowley for over fifty
years and its future success is of great importance to the local
community. There is a clear need to rejuvenate the shopping centre,
meet strong demand for new homes in Oxford and add much needed
choice of restaurants and hotels. A combination of rationalisation
of the existing car provision, air space opportunity and site
assembly have enabled a proposal with significant massing. The
existing shopping centre will continue to trade throughout and we
are confident that rental tone will benefit from the development
works.
Pre-planning
Capitol Shopping Centre, Cardiff: We are in pre-application
consultation with Cardiff Council to bring forward a major
re-development of the Capital Shopping Centre, acquired in January
2016 as part of the Neptune Portfolio. The centre is well located
in the city centre, benefitting from a high volume of commuter
traffic from Cardiff Queen Street Station as well as a significant
student population. We plan to reposition the centre as a mixed
retail and leisure destination, and construct 178 apartments in the
air space above the centre.
Financial review
Highlights
-- Funds from operations ('FFO') increased by 24% to GBP24.5
million (Sep 2015: GBP19.7 million) delivering an FFO per share of
10.5 pence
-- Fully covered first half dividend per share increased by 11% to 10.0 pence
-- EPRA NAV per share decreased by 1.7% to 290p (Mar 2016: 295p)
after absorbing acquisition costs, 1.0% valuation deficit and one
off Main Market move costs
-- IFRS PBT of GBP11.6 million (Sep 15: GBP42.2 million)
including an GBP11.4 million non-cash reduction in portfolio
valuation
-- Total shareholder return +2.7% vs EPRA/NAREIT UK Index down
2.2%; total accounting return +1.6%
-- Loan to value increased to 38% (Mar 2016: 27%) due to
GBP158.4 million of acquisitions completed in the period; safely
within the Company's stated policy
-- Cost of debt 3.65% (Mar 2016: 3.70%); robust interest cover of 4.3x (Mar 2016: 4.3x)
Overview
The business performed well in the first half of the year,
increasing Funds From Operations ("FFO") to GBP24.5 million (Sep
2015: GBP19.7 million) with FFO per share of 10.5 pence. The
dividend per share of 10.0 pence for the first half is therefore
105% covered by FFO per share.
Reflecting the Company's focus on driving cash income returns
and growing the dividend we will place more emphasis on Funds From
Operations ('FFO') going forward. We feel that this measure is most
appropriate when considering our dividend policy as it is a cash
measure and it is familiar to non-property and international
investors. We will continue to disclose the EPRA ratios in
accordance with EPRA guidelines.
The 24% increase in FFO in the period was primarily driven by
acquisition activity completed in the last twelve months. FFO per
share of 10.5 pence provides 105% cover to first half dividend of
10.0 pence per share (Sep 2015: 9.0 pence) and we are on track to
deliver growing FFO for the full year. It is worth noting that FFO
per share of 13.2 pence in the prior period included 2.8 pence of
promote receipts.
Our loan to value increased from 27% in March to 38% due to
acquisitions completed in the period. EPRA net asset value per
share reduced by 1.7% to 290 pence due to a 1.0% reduction in
portfolio valuation, which included purchase costs on GBP158
million of acquisitions, and one off Main Market costs.
We continued to build on our strong banking relationships with
external debt providers, refinancing GBP134 million of debt in the
half, our overall cost of debt was reduced to 3.65% (Mar 2016:
3.70%) and interest cover remained strong at 4.3x.
The business is capable of delivering further scale benefits as
demonstrated by its administrative cost ratio of 14% and is focused
on achieving a lower cost of debt.
FY12 FY13 FY14 FY15 FY16 HY17
-------------------------------- ----- ----- ----- ----- ------ ------
Cost ratio 24% 24% 22% 23% 19% 14%
Weighted average interest rate 4.0% 3.9% 3.9% 3.8% 3.70% 3.65%
-------------------------------- ----- ----- ----- ----- ------ ------
Presentation of financial information
The Group financial statements are prepared under IFRS where the
Group's interests in joint ventures are shown as a single line item
on the income statement and balance sheet and all subsidiaries are
consolidated at 100%. Management reviews the performance of the
business principally on a proportionally consolidated basis which
includes the Group's share of joint ventures on a line-by-line
basis. The Group's financial key performance indicators are also
presented on this basis.
Funds From Operations
Funds From Operations is a Company measure determined by cash
profits which includes realised recurring cash profits plus
realised cash profits on the sale of properties above valuation and
excludes other one off or non-cash adjustments. Funds From
Operations is represented on a proportionally consolidated basis in
the table below, including a line by line presentation of the Group
and its JVs.
Six months ended 30 September
Unaudited Six months ended 30 September 2016 2015
------------------ ----------------------------------------- -------------------------------- -----------------
Proportionally Proportionally
INCOME STATEMENT Group Joint Ventures consolidated Group Joint Ventures consolidated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ------- -------------- ---------------- ------------- ----------------- -----------------
Gross income 40,455 5,183 45,638 26,640 9,134 35,774
Property operating
expenses (6,823) (512) (7,335) (2,827) (798) (3,625)
------------------ ------- -------------- ---------------- ------------- ----------------- -----------------
Net income 33,632 4,671 38,303 23,813 8,336 32,149
Administrative
expenses (6,487) (267) (6,754) (4,919) (411) (5,330)
Net financing
costs (7,677) (1,006) (8,683) (4,959) (2,472) (7,431)
Loss on disposal
of investment
properties (57) (4) (61) (73) - (73)
Joint ventures net
income 148 (148) - 5,453 (5,453) -
Revaluation
(deficit)/surplus (8,177) (3,204) (11,381) 22,869 - 22,869
Revaluation
derivatives 183 4 187 - - -
Taxation (509) (46) (555) - - -
------------------ ------- -------------- ---------------- ------------- ----------------- -----------------
IFRS Profit for
the period after
tax 11,056 - 11,056 42,184 - 42,184
Revaluation
deficit/(surplus) 11,381 - 11,381 (22,869) - (22,869)
EPRA adjustments 2,049 - 2,049 400 - 400
------------------ ------- -------------- ---------------- ------------- ----------------- -----------------
Funds From
Operations 24,486 24,486 19,715 - 19,715
------------------ ------- -------------- ---------------- ------------- ----------------- -----------------
FFO per share 10.5 10.5 13.2 13.2
------------------ ------- -------------- ---------------- ------------- ----------------- -----------------
Dividend per share 10.0 10.0 9.0 9.0
------------------ ------- -------------- ---------------- ------------- ----------------- -----------------
Dividend Cover 105% 105% 147% 147%
Admin cost ratio 14% 14% 16% 16%
Cost of debt 3.65% 3.65% 3.70% 3.70%
Net income
Net income has increased by 19% to GBP38.3 million in the half
reflecting the full benefit of GBP294 million of net acquisitions
completed in the last financial year and further acquisitions
completed in the current period. We invested GBP158 million in the
half buying a shopping centre and retail park in Bexleyheath, a
retail park in Dumfries and a retail warehouse in Sheffield. We saw
like-for-like net income growth of 0.2% across the portfolio
reflecting the impact of our ongoing active asset management
initiatives.
Administrative expenses
Administrative expenses increased by 6% to GBP5.6 million in the
period, excluding GBP1.2 million of exceptional costs linked to our
move to the Main Market which we completed successfully in the
period. As the Company has grown we have invested in additional
headcount but importantly our admin cost ratio has reduced further
to 14% (Sep 2015: 16%) which is below our previously reported
target of 15% and is a good example of the scale benefits we are
starting to see.
Net financing costs
Overall financing costs increased by 17% to GBP8.7 million in
the period due to the increasing scale of the underlying business,
with properties at valuation increasing by 28% from GBP882 million
in September 2015, to GBP1,130 million in September 2016. Our cost
of debt remains low at 3.65% (March 2016: 3.70%) and interest costs
continue to be 4.3x covered (March 2016: 4.3x).
FFO per share
FFO per share decreased by 20% to 10.5 pence from 13.2 pence in
the period. This is primarily due to a promote payment received by
the Company from our JV partner in the prior period following the
acquisition of 50% of their share of the joint venture.
Dividends
It is our fundamental belief that dividend per share is our key
performance ratio and our dividend policy is driven by two key
objectives:
-- Growing cash Funds From Operations and FFO per share
-- The REIT requirement to pay out at least 90% of recurring cash profits
We have seen significant growth in FFO in recent years and the
Board has increased the dividend from 5.5 pence per share in the
year to March 2011 to 10.0 pence for the first half of the current
financial year. A key driver of the Company's growth has been the
ability to raise and deploy equity quickly and wisely but never at
the expense of dividend per share.
The Board approved a second quarterly dividend of 5.0 pence in
the period, bringing the dividend declared in the half of the
financial year to 10.0 pence per share, an 11% increase on the
prior year (Sep 2015: 9.0 pence).
The Company today announces its third quarterly dividend of 5.0
pence per share (FY16: 4.75 pence). This will be paid on 27 January
2017 to shareholders on the register at close of business on 30
December 2016. The ex-dividend date will be 29 December 2016. The
quarterly dividend will be payable as a REIT Property Income
Distribution (PID).
Balance sheet
EPRA net assets include a number of adjustments to the IFRS
reported net assets and both measures are presented below on a
proportionally consolidated basis.
Unaudited As at 30 September As at 31 March 2016
2016
-------------------- --------------------------------------- ---------------------------------------
BALANCE SHEET Group Joint Proportionally Group Joint Proportionally
GBP'000 ventures consolidated GBP'000 ventures consolidated
GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ---------- ---------- --------------- ---------- ---------- ---------------
Properties at
valuation 997,643 132,729 1,130,372 839,107 134,162 973,269
Investment in
joint ventures 67,819 (67,819) - 70,125 (70,125) -
Other non-current
assets 593 - 593 551 - 551
Cash 38,624 3,448 42,072 114,071 3,429 117,500
Other current
assets 8,004 142 8,146 8,846 433 9,279
-------------------- ---------- ---------- --------------- ---------- ---------- ---------------
Total assets 1,111,842 68,500 1,181,183 1,032,700 67,899 1,100,599
Other current
liabilities (28,712) (3,362) (32,074) (25,768) (2,335) (28,103)
Debt (405,610) (65,138) (470,748) (314,105) (65,074) (379,179)
Other non-current
liabilities (3,810) - (3,810) (2,960) (490) (3,450)
-------------------- ---------- ---------- --------------- ---------- ---------- ---------------
Total liabilities (437,290) (68,500) (505,790) (342,833) (67,899) (410,732)
-------------------- ---------- ---------- --------------- ---------- ---------- ---------------
IFRS net assets 674,551 - 674,551 689,867 - 689,867
EPRA adjustments 11,624 - 11,624 7,880 - 7,880
-------------------- ---------- ---------- --------------- ---------- ---------- ---------------
EPRA net assets 686,175 - 686,175 697,747 - 697,747
EPRA NAV per share 290p 295p
-------------------- ---------- ---------- --------------- ---------- ---------- ---------------
EPRA NAV per share
At 30 September 2016, the EPRA NAV per share was 290 pence, down
5 pence from March 2016. The 1.7% reduction in the period reflects
a reduction in portfolio valuation of 1.0%, the absorption of
purchase costs and one off costs associated with our Main Market
move. Of the valuation reduction, two thirds relates to a fall in
capital values, and one third relates to purchase costs incurred on
acquisitions completed in the period. Including the dividend paid
in the period, we delivered a total accounting return of 1.6%.
IFRS net assets
At 30 September 2016, IFRS net assets were GBP674.6 million,
down 2.2% from March 2016. This movement was due to the GBP11.4
million reduction in portfolio valuation in the period, as well as
an adverse movements on interest rate hedges largely due to a
decrease in LIBOR linked to the movement in base rates and the
overall growth in the portfolio.
Net debt & financing
Proportionally consolidated
30 September 2016 31 March 2016
---------------------------------------------- ------------------ --------------
Net debt GBP428.7m GBP261.7m
Principal value of gross debt GBP474.8m GBP382.6m
Loan to value 38% 27%
Weighted average interest rate of drawn debt 3.65% 3.70%
Interest cover 4.3x 4.3x
Weighted average debt maturity of drawn debt 3.2 yrs 3.5 yrs
---------------------------------------------- ------------------ --------------
Net debt increased by GBP167 million in the period predominantly
due to GBP158 million of acquisitions and subsequent drawdowns of
new debt. This included our largest acquisition to date in
Bexleyheath where we purchased a retail park and shopping centre
for GBP120.3 million, part funded by a new GBP49 million facility
with DekaBank, at an all in cost of 2.2%.
Including the GBP49 million DekaBank facility, the principal
value of gross debt increased by GBP92.2 million to GBP474.8
million in the period, with the majority of the remaining increase
due to the Company drawing GBP30 million of revolving credit
facilities in the period. At 30 September 2016 we had GBP67 million
of undrawn facilities (Mar 2016: GBP102 million).
We also signed an improved GBP85.3 million debt facility with a
major US insurance company on our pub and convenience store
portfolio. Under the terms of the new facility, the bank margin was
reduced by 30% and the loan maturity was extended from 2018 to
2021. Following this refinancing activity, our weighted average
interest rate was 3.65%, reduced from 3.70% at March 2016.
On a proportionally consolidated basis LTV was 38% at 30
September 2016, increased from 27% at March 2016 due to acquisition
activity and safely below our Company policy maximum of 50%. Our
interest cover remains unchanged at 4.3x.
Mark Davies
Chief Financial Officer
Principal risks and uncertainties
The principal risks of the business are set out on pages 52-53
of the Group's 2016 Annual Report & Accounts alongside their
potential impact and related mitigations.
The Board has considered the principal risks and uncertainties
that the Group is exposed to, and which may impact performance, in
light of the outcome of the UK's referendum on continued membership
of the EU. Whilst we consider the principal risks are unchanged
from those set out in the Annual Report and Accounts published in
June 2016, the Board is aware that market uncertainty could lead to
some risks being elevated.
The Board has reviewed the principal risks in the context of the
second half of the current financial year and believes there has
been no material change to the risks outlined in the Group's Annual
Report, and that the existing mitigation measures within the
business remain relevant for the risks highlighted.
Directors' Responsibility Statement
We confirm to the best of our knowledge:
(a) The condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting';
(b) The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
On behalf of the Board
David Lockhart Mark Davies
Chief Executive Chief Financial Officer
17 November 2016
Copies of this announcement are available on the Company's
website at www.nrr.co.uk and can be requested from the Company's
registered office at 37 Maddox Street, London, W1S 2PP.
Auditors Review Report
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2016 which comprises the consolidated
income statement, consolidated statement of comprehensive income,
the consolidated statement of financial position, the consolidated
statement of cash flows, consolidated statement of changes in
equity and related notes 1 to 14. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2016 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Guernsey, Channel Islands
17 November 2016
Condensed consolidated Income Statement
For the six months ended 30 September 2016
Six months ended 30 September 2016 Six months ended 30 September 2015
Operating and Fair value Operating and Fair value
financing adjustments Total financing adjustments Total
Unaudited Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ----- ----------------- ---------------- -------- ----------------- ---------------- --------
Gross income 3 40,455 - 40,455 26,640 - 26,640
Property
operating
expenses 4 (6,823) - (6,823) (2,827) - (2,827)
----------------- ----- ----------------- ---------------- -------- ----------------- ---------------- --------
Net property
income 33,632 - 33,632 23,813 - 23,813
Administrative
expenses 5 (6,487) - (6,487) (4,919) - (4,919)
Share of income
from joint
ventures 10 3,352 (3,204) 148 5,453 2,296 7,749
Net valuation
movement 9 - (8,177) (8,177) - 20,573 20,573
Loss on disposal
of investment
properties (57) - (57) (73) - (73)
----------------- ----- ----------------- ---------------- -------- ----------------- ---------------- --------
Operating profit 30,440 (11,381) 19,059 24,274 22,869 47,143
Net finance
expense
Finance income 54 - 54 25 - 25
Finance costs (7,548) - (7,548) (4,984) - (4,984)
----------------- ----- ----------------- ---------------- -------- ----------------- ---------------- --------
Profit for the
period before
taxation 22,946 (11,381) 11,565 19,315 22,869 42,184
Taxation (509) - (509) - - -
----------------- ----- ----------------- ---------------- -------- ----------------- ---------------- --------
Profit for the
period after
taxation 22,437 (11,381) 11,056 19,315 22,869 42,184
----------------- ----- ----------------- ---------------- -------- ----------------- ---------------- --------
Earnings per
share
Funds From
Operations 6 10.5p 13.2p
EPRA 6 9.7p 12.6p
Basic 6 4.7p 28.3p
Diluted 6 4.7p 28.1p
----------------- ----- ----------------- ---------------- -------- ----------------- ---------------- --------
All activities derive from continuing operations of the
Group.
During the period, the Group completed its move from AIM to the
Premium listing segment of the official list, trading on the Main
Market of the London Stock Exchange. NewRiver REIT plc became the
ultimate parent company, with the former parent company, NewRiver
Retail Limited, becoming a direct subsidiary of NewRiver REIT plc,
in a scheme of arrangement. The results and comparatives presented
in these condensed consolidated financial statements include the
consolidated results and financial positon of NewRiver Retail Ltd
for the period prior to 18 August 2016. See note 12 for further
details.
Condensed consolidated Statement of Comprehensive Income
For the six months ended 30 September 2016
Six months ended
30 September 30 September
2016 2015
Unaudited GBP'000 GBP'000
------------------------------------- ------------ ------------
Profit for the period after taxation 11,056 42,184
Other comprehensive (expense)/income
Items that may be reclassified
subsequently to profit or loss
Unrealised (loss)/gain on interest
rate hedging (4,558) 6
-------------------------------------- ------------ ------------
Total comprehensive income for
the period 6,498 42,190
-------------------------------------- ------------ ------------
During the period, the Group completed its move from AIM to the
Premium listing segment of the official list, trading on the Main
Market of the London Stock Exchange. NewRiver REIT plc became the
ultimate parent company, with the former parent company, NewRiver
Retail Limited, becoming a direct subsidiary of NewRiver REIT plc,
in a scheme of arrangement. The results and comparatives presented
in these condensed consolidated financial statements include the
consolidated results and financial positon of NewRiver Retail Ltd
for the period prior to 18 August 2016. See note 12 for further
details.
Condensed consolidated Statement of Financial Position
As at 30 September 2016
Audited
Unaudited 31 March
30 September 2016 2016
Notes GBP'000 GBP'000
--------------------------------- ----- ------------------ ---------
Non-current assets
Investment properties 9 997,643 839,107
Investments in joint ventures 10 67,819 70,125
Property, plant and equipment 593 551
--------------------------------- ----- ------------------ ---------
Total non-current assets 1,066,055 909,783
--------------------------------- ----- ------------------ ---------
Current assets
Trade and other receivables 7,876 8,462
Derivative financial instruments 11 128 384
Cash and cash equivalents 38,624 114,071
--------------------------------- ----- ------------------ ---------
Total current assets 46,628 122,917
--------------------------------- ----- ------------------ ---------
Total assets 1,112,683 1,032,700
--------------------------------- ----- ------------------ ---------
Equity and liabilities
Current liabilities
Trade and other payables 28,112 25,632
Current taxation liabilities 600 136
--------------------------------- ----- ------------------ ---------
Total current liabilities 28,712 25,768
--------------------------------- ----- ------------------ ---------
Non-current liabilities
Derivative financial instruments 11 3,810 2,960
Borrowings 11 405,610 314,105
--------------------------------- ----- ------------------ ---------
Total non-current liabilities 409,420 317,065
--------------------------------- ----- ------------------ ---------
Net assets 674,551 689,867
--------------------------------- ----- ------------------ ---------
Equity
Share capital 12 2,385 -
Retained earnings 680,901 118,248
Other reserves - 554,599
Merger reserve 12 (2,335) -
Hedging reserve (6,400) (1,842)
Share option reserve - 1,961
Revaluation reserve - 16,901
--------------------------------- ----- ------------------ ---------
Total equity 674,551 689,867
--------------------------------- ----- ------------------ ---------
Net Asset Value (NAV) per share
EPRA 8 290p 295p
Basic 8 289p 295p
Diluted 8 287p 294p
--------------------------------- ----- ------------------ ---------
During the period, the Group completed its move from AIM to the
Premium listing segment of the official list, trading on the Main
Market of the London Stock Exchange. NewRiver REIT plc became the
ultimate parent company, with the former parent company, NewRiver
Retail Limited, becoming a direct subsidiary of NewRiver REIT plc,
in a scheme of arrangement. The results and comparatives presented
in these condensed consolidated financial statements include the
consolidated results and financial positon of NewRiver Retail Ltd
for the period prior to 18 August 2016. See note 12 for further
details.
The financial statements were approved by the Board of Directors
on 17 November 2016 and were signed on its behalf by:
David Lockhart Mark Davies
Chief Executive Chief Financial Officer
Condensed consolidated Cash Flow statement
For the six months ended 30 September 2016
Unaudited 6 months ended
Note 30 September 2016 30 September 2015
GBP'000 GBP'000
------------------------------------------------------------------ ---- ----------------- -----------------
Cash flows from operating activities
Profit for the period before tax 11,565 42,184
Adjustments for:
Net movement from fair value adjustments on investment properties 9 8,177 (20,573)
Loss on disposal of investment property 57 73
Net movement from fair value adjustments in joint ventures 10 3,204 (2,296)
Share of income from joint ventures (3,352) (5,453)
Net finance costs 7,494 4,959
Rent free lease incentives (350) (112)
Provision for bad debts 53 (3)
Amortisation of legal and letting fees 90 (342)
Depreciation on property plant and equipment 74 62
Share options 700 400
------------------------------------------------------------------ ---- ----------------- -----------------
Cash generated from operations before changes in working capital 27,712 18,899
Changes in working capital:
Increase in receivables and other financial assets (793) (487)
Increase in payables and other financial liabilities 64 3,105
------------------------------------------------------------------ ---- ----------------- -----------------
Cash generated from operations 26,983 21,517
Net finance costs (7,061) (4,984)
------------------------------------------------------------------ ---- ----------------- -----------------
Net cash inflow from operating activities 19,922 16,533
------------------------------------------------------------------ ---- ----------------- -----------------
Cash flows from investing activities
Purchase of investment properties 9 (160,842) (83,889)
Properties acquired in business combinations - (194,033)
Disposal of investment properties 5,585 6,150
Development and other capital expenditure (9,494) (4,729)
Purchase of plant and equipment (116) (117)
Dividends received from joint ventures 10 1,900 2,250
------------------------------------------------------------------ ---- ----------------- -----------------
Net cash used in investing activities (162,967) (274,368)
------------------------------------------------------------------ ---- ----------------- -----------------
Cash flows from financing activities
Proceeds from issuance of new shares 93 143,208
Repayment of bank loans (62,964) -
New borrowings 153,854 133,612
Purchase of derivatives (728) -
Dividends paid 7 (22,657) (10,899)
------------------------------------------------------------------ ---- ----------------- -----------------
Net cash generated from financing activities 67,598 265,921
------------------------------------------------------------------ ---- ----------------- -----------------
Cash and cash equivalents at 1 April 114,071 15,412
Net (decrease)/increase in cash and cash equivalents (75,447) 8,086
------------------------------------------------------------------ ---- ----------------- -----------------
Cash and cash equivalents at 30 September 38,624 23,498
------------------------------------------------------------------ ---- ----------------- -----------------
During the period, the Group completed its move from AIM to the
Premium listing segment of the official list, trading on the Main
Market of the London Stock Exchange. NewRiver REIT plc became the
ultimate parent company, with the former parent company, NewRiver
Retail Limited, becoming a direct subsidiary of NewRiver REIT plc,
in a scheme of arrangement. The results and comparatives presented
in these condensed consolidated financial statements include the
consolidated results and financial positon of NewRiver Retail Ltd
for the period prior to 18 August 2016. See note 12 for further
details.
Condensed consolidated Statement of Changes in Equity
As at 30 September 2016
Unaudited
Share
capital Share
Retained and Other Hedging option Revaluation Merger
earnings premium reserves reserve reserves reserves reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ----- --------- ---------- ---------- ---------- --------- ----------- ---------- --------
As at 31 March
2015 58,254 - 273,582 (690) 1,063 7,486 - 339,695
Net proceeds of
issue from new
shares - 149,650 - - - - - 149,650
Transfer of
share premium - (149,650) 149,650 - - - - -
Total
comprehensive
income for the
period 42,184 - - 6 - - - 42,190
Realisation of
fair value
movements (630) - - - - 630 - -
Share-based
payments - - - - 400 - - 400
Dividend paid - - (10,899) - - - - (10,899)
Revaluation
movement (20,573) - - - - 20,573 - -
---------------- ----- --------- ---------- ---------- ---------- --------- ----------- ---------- --------
As at 30
September 2015 79,235 - 412,333 (684) 1,463 28,689 - 521,036
Net proceeds of
issue from new
shares - 163,554 - - - - - 163,554
Transfer of
share premium - (163,554) 163,554 - - - - -
Total
comprehensive
income for the
period 27,225 - - (1,158) - - - 26,067
Realisation of
fair value
movements 10,728 - (3,967) - - (10,728) - (3,967)
Share-based
payments - - - - 498 - - 498
Dividends paid 7 - - (17,321) - - - - (17,321)
Revaluation
movement 1,060 - - - - (1,060) - -
---------------- ----- --------- ---------- ---------- ---------- --------- ----------- ---------- --------
As at 31 March
2016 118,248 - 554,599 (1,842) 1,961 16,901 - 689,867
Net proceeds of
issue from new
shares - 143 - - - - - 143
Transfer of
share premium 93 (93) - - - - - -
Total
comprehensive
income for the
period 11,056 - - (4,558) - - - 6,498
Share-based
payments 700 - - - - - - 700
Share-for-share
acquisition (2) 573,461 2,335 (554,599) - (1,961) (16,901) (2,335) -
Dividends paid 7 (22,657) - - - - - - (22,657)
---------------- ----- --------- ---------- ---------- ---------- --------- ----------- ---------- --------
As at 30
September 2016 680,901 2,385 - (6,400) - - (2,335) 674,551
---------------- ----- --------- ---------- ---------- ---------- --------- ----------- ---------- --------
(2) During the period, the Group completed its move from AIM to
the Premium listing segment of the official list, trading on the
Main Market of the London Stock Exchange. NewRiver REIT plc became
the ultimate parent company, with the former parent company,
NewRiver Retail Limited, becoming a direct subsidiary of NewRiver
REIT plc, in a scheme of arrangement. The results and comparatives
presented in these condensed consolidated financial statements
include the consolidated results and financial positon of NewRiver
Retail Ltd for the period prior to 18 August 2016. See note 12 for
further details.
Notes to the financial statements
1 Accounting policies
General information
NewRiver REIT plc (the 'Company') and its subsidiaries (together
the 'Group') is a property investment group specialising in
commercial real estate in the UK.
These consolidated financial statements have been approved for
issue by the Board of Directors on 17 November 2016.
Scheme of arrangement
During the period the Group completed its move from AIM to the
Premium listing segment of the official list, trading on the Main
Market of the London Stock Exchange. NewRiver REIT plc became the
ultimate parent company, with the former parent company, NewRiver
Retail Limited, becoming a direct subsidiary of NewRiver REIT plc,
in a scheme of arrangement on 18 August 2016. The principal steps
of the group reorganisation were as follows:
NewRiver REIT plc was incorporated in the United Kingdom on 8
June 2016 under the Companies Act 2006 as a public company. On
incorporation, the share capital of NewRiver REIT plc was
GBP50,000.02 divided into 2 ordinary shares of 1 pence and 50,000
redeemable preference shares of GBP1. The preference shares were
redeemed on 12 October 2016.
As part of a scheme of arrangement under Guernsey law, all
issued ordinary shares in the capital of NewRiver Retail Limited,
the former holding company of the Group, were cancelled on by way
of a reduction of capital on 18 August 2016. Following the
cancellation of the shares, NewRiver Retail Limited issued a
corresponding number of ordinary shares to the Company, such that
the Company held all of the issued shares in the capital of
NewRiver Retail Limited. The Company has, in turn, issued ordinary
shares to the former shareholders of NewRiver Retail Limited on a
one-for-one basis. The result of the share cancellation and share
issue is that the Company is now the ultimate parent company of the
Group.
Throughout the period from incorporation to 18 August 2016,
NewRiver REIT plc was a dormant company with no revenues and no
assets and did not constitute a 'business' as defined by IFRS 3
Business Combinations. The transaction therefore falls outside the
scope of that standard. Following the guidance regarding the
selection of an appropriate accounting policy provided by IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors,
the transaction has been accounted for using the principles of
merger accounting, allowed for group reconstructions, as set out in
FRS 102, the Financial Reporting Standard applicable in the UK and
Republic of Ireland.
This policy, which does not conflict with IFRS, reflects the
economic substance of the transaction as a continuation of the
previous Group. The comparatives presented in these condensed
consolidated financial statements are therefore the consolidated
results and financial positon of NewRiver Retail Ltd for the period
or year then ended.
Going concern
The Directors of the Company 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. The
Group is currently well within the prescribed financial covenants
on its borrowing facilities. Together with its cash resources the
Group plans to arrange bank facilities to fund any future
risk-controlled developments.
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.
Critical accounting estimates and judgements
At 31 March 2016, the Group disclosed within its post balance
sheet event note that the acquisition of the legal entities that
owned the Broadway Shopping Centre and Broadway Square Retail Park
in Bexleyheath was expected to be accounted for as a Business
Combination per IFRS 3. After further analysis in the process of
applying the Group's accounting policies, management have deemed
that the legal entities acquired did not constitute a 'business' as
defined by IFRS 3 Business Combinations. The transaction is
therefore accounted for as an acquisition of a group of assets,
applying the recognition principles of IAS 40 Investment
Properties. The applicable accounting standards for the recognition
of other assets acquired and liabilities assumed have been adopted
in accordance with the Group's policies. There have been no other
changes to other critical accounting estimates and judgements as
reported in the 31 March 2016 annual report.
Statement of compliance
The financial statements are prepared in accordance with IFRSs
as adopted by the European Union. The condensed set of financial
statements included in this half yearly financial report has been
prepared in accordance with International Accounting Standard 34
'Interim Financial Reporting', as adopted by the European
Union.
The financial information for the period ended 30 September 2016
does not constitute statutory accounts as defined in section 434 of
the Companies Act 2006. A copy of the statutory accounts of
NewRiver Retail Ltd for the year ended 31 March 2016 can be
requested from the Group's registered address. The auditors' report
on those accounts was not qualified and did not include a reference
to any matters to which the auditor drew attention by way of
emphasis without qualifying the report.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries. The consolidated
financial statements account for interest in joint ventures using
the equity method of accounting per IFRS11.
The same accounting policies, presentation and methods of
computation are followed in the condensed set of financial
statements as applied in the Group's latest audited financial
statements, a copy of which can be found on our website
www.nrr.co.uk.
2 Segmental reporting
For the purpose of IFRS 8, the chief operating decision maker
takes the form of the Board of Directors. The Board of Directors
are of the opinion that the principal activity of the Group is to
invest in commercial real estate in the UK.
IFRS 8 Operating Segments requires operating segments to be
identified on the basis of internal financial reports about
components of the Group that are regularly reviewed by the chief
operating decision maker i.e. the Board of Directors. The internal
financial reports received by the Board contain financial
information at a Group level as a whole and there are no
reconciling items between the results contained in these reports
and the amounts reported in the financial statements.
The property portfolio includes investment properties located
throughout the UK, predominantly regional investments outside
London and comprises a diverse portfolio of commercial buildings
including shopping centres, retail warehouses, high street assets
and pubs. The Directors consider that these properties all
contribute to delivering on a strategy of targeting high yielding
property that offers attractive returns through rental income.
Therefore, these individual properties have been aggregated into a
single operating segment. As such, the Directors consider there to
be one reportable segment under the provisions of IFRS 8.
All of the Group's properties are based in the UK. No
geographical grouping is contained in any of the internal financial
reports provided to the Board and, therefore, no geographical
segmental analysis is required by IFRS 8. Furthermore, no single
tenant accounts for more than 2.7% of the Groups total rents
received from investment properties.
3 Gross income
2016 2015
GBP'000 GBP'000
------------------------------------------ -------- --------
Property income 39,974 21,723
Asset management fees 393 530
Realised gain received from joint venture - 4,220
Surrender premiums and commissions 88 167
------------------------------------------ -------- --------
Gross income 40,455 26,640
------------------------------------------ -------- --------
4 Property operating expenses
2016 2015
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Service charge income 12,774 5,290
Service charge expense (10,836) (4,734)
---------------------------------------------------- -------- --------
Net service charge expense 1,938 556
Amortisation of tenant incentives and letting costs 566 326
Ground rent 1,597 508
Rates on vacant units 1,154 510
Other property operating expenses 1,568 927
Property operating expenses 6,823 2,827
---------------------------------------------------- -------- --------
5 Administrative expenses
2016 2015
GBP'000 GBP'000
------------------------------------------------------------------------------------------ -------- --------
Staff costs 3,306 3,005
Depreciation 74 62
Share-based payments 700 400
Other administrative expenses 1,233 1,452
Main market move costs 1,174 -
------------------------------------------------------------------------------------------ -------- --------
Administrative expenses 6,487 4,919
------------------------------------------------------------------------------------------ -------- --------
Asset management fees (393) (530)
Joint ventures' share of administrative expenses 266 412
------------------------------------------------------------------------------------------ -------- --------
Net administrative expenses 6,360 4,801
------------------------------------------------------------------------------------------ -------- --------
Revenue 40,455 26,640
Less asset management fees and other income (481) (4,917)
Share of joint ventures' revenue 5,157 9,134
------------------------------------------------------------------------------------------ -------- --------
Group's share of property income 45,131 30,857
------------------------------------------------------------------------------------------ -------- --------
Net administrative expenses as a % of property income (including share of joint ventures) 14% 16%
------------------------------------------------------------------------------------------ -------- --------
2016 2015
Number Number
------------------------------------------ ------- -------
Average staff numbers including Directors 51 44
------------------------------------------ ------- -------
6 Performance measures
The European Public Real Estate Association (EPRA) issues
recommendations for performance measures. The EPRA earnings measure
excludes investment property revaluations and gains on disposals,
intangible asset movements and their related taxation.
Given the group's focussed strategy on delivering growing cash
income returns the Group measure of Funds From Operations (FFO) is
disclosed. The Group has previously referred to this measure as
EPRA Adjusted earnings. The Group no longer discloses NAREIT FFO as
a performance measure.
2016 2015
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Profit for the period after taxation 11,056 42,184
Adjustments
Revaluation of investment properties 8,177 (20,573)
Revaluation of joint ventures' investment properties 3,204 (2,296)
Loss on disposal of investment properties 57 73
Derivative revaluation (183) -
Derivative revaluation - joint ventures 358 -
Gain on bargain purchase - (674)
------------------------------------------------------- -------- --------
EPRA earnings 22,669 18,714
Loss on disposal of investment properties (57) (73)
Share-based payment charge 700 400
Gain on bargain purchase - 674
Exceptional cost in respect of move to the main market 1,174 -
------------------------------------------------------- -------- --------
Funds From Operations 24,486 19,715
------------------------------------------------------- -------- --------
2016 2015
Number of shares No. 000s No. 000s
--------------------------------------------------------------------------------------- --------- ---------
Weighted average number of ordinary shares for the purposes of Basic EPS, FFO and EPRA 233,669 148,899
Effect of dilutive potential ordinary shares:
Options 466 1,143
Deferred bonus 314 -
Performance share plan 423 -
Warrants 204 254
--------------------------------------------------------------------------------------- --------- ---------
Weighted average number of ordinary shares for the purposes of diluted EPS 235,076 150,296
--------------------------------------------------------------------------------------- --------- ---------
Performance measures (pence)
FFO EPS 10.5 13.2
EPRA EPS 9.7 12.6
Basic EPS 4.7 28.3
Diluted EPS 4.7 28.1
During the period, the Group completed its move from AIM to the
Premium listing segment of the official list, trading on the Main
Market of the London Stock Exchange. NewRiver REIT plc became the
ultimate parent company, with the former parent company, NewRiver
Retail Limited, becoming a direct subsidiary of NewRiver REIT plc,
in a scheme of arrangement. The results and comparatives presented
in these condensed consolidated financial statements include the
consolidated results and financial positon of NewRiver Retail Ltd
for the period prior to 18 August 2016. See note 12 for further
details. The number of shares used in the performance measures for
earnings includes the weighted average of NewRiver Retail Limited's
shares up to 18 August 2016 and NewRiver REIT's shares from that
date. NewRiver REIT issued the same number of shares as NewRiver
Retail Limited had in issue in 18 August 2016. See note 12 for
further details.
7 Dividends
The following dividends are associated with the current and
prior periods:
Pence per 30 September 2016
Payment date Dividend PID Non-PID share GBP'000
----------------------------- -------------------------- ----- ------- --------- -----------------
Current period dividends
13 May 2016 Fourth quarterly dividend 2.75 2.00 4.75 10,984
17 August 2016 First quarterly dividend 5.00 - 5.00 11,673
28 October 2016 (1) Second quarterly dividend 5.00 - 5.00 11,677
----------------------------- -------------------------- ----- ------- --------- -----------------
12.75 2.00 14.75 34,334
-------------------------------------------------------- ----- ------- --------- -----------------
(1) Post balance sheet event
Pence per 30 September 2015
Payment date Dividend PID Non-PID share GBP'000
----------------------------- -------------------------- ----- ------- --------- -----------------
Prior period dividends
18 May 2015 Fourth quarterly dividend 4.25 - 4.25 5,401
31 July 2015 First interim dividend 4.50 - 4.50 5,839
13 November 2015 Second interim dividend 4.50 - 4.50 8,094
----------------------------- -------------------------- ----- ------- --------- -----------------
13.25 - 13.25 19,334
-------------------------------------------------------- ----- ------- --------- -----------------
A third quarterly dividend of 5.00 pence per share in respect of
the year ended 31 March 2017 will be paid on 27 January 2017 to
shareholders on the register at close of business on 30 December
2016. The ex-dividend date will be 29 December 2016. The quarterly
dividend will be payable as a REIT Property Income Distribution
(PID).
8 Net asset value per share
30 September 2016 31 March 2016
Shares Shares
GBP'000s No'000s Pence per share GBP'000s No'000s Pence per share
---------------------------- -------- -------- --------------- -------- -------- ---------------
Basic net asset value(1) 674,551 233,761 289 689,867 233,494 295
Warrants in issue 550 376 146 629 420 150
Unexercised employee awards 4,674 2,673 175 4,674 2,740 171
---------------------------- -------- -------- --------------- -------- -------- ---------------
Diluted net asset value 679,775 236,810 287 695,170 236,654 294
Fair value derivatives 6,400 - - 2,577 - -
---------------------------- -------- -------- --------------- -------- -------- ---------------
EPRA net asset value 686,175 236,810 290 697,747 236,654 295
---------------------------- -------- -------- --------------- -------- -------- ---------------
(1) Basic net asset value number of shares includes vested share
awards with nil exercise price of 211,901
9 Investment properties
30 September 2016 31 March 2016
GBP'000 GBP'000
--------------------------------------------- ----------------- -------------
Fair value brought forward 839,107 404,098
Acquisitions 162,035 192,490
Capital expenditure 10,320 12,955
Properties acquired in business combinations - 252,400
Disposals (5,642) (42,349)
---------------------------------------------- ----------------- -------------
1,005,820 819,594
--------------------------------------------- ----------------- -------------
Net valuation movement (8,177) 19,513
---------------------------------------------- ----------------- -------------
Fair value carried forward 997,643 839,107
---------------------------------------------- ----------------- -------------
The Group's total property portfolio was valued by independent
external valuers on the basis of fair value, in accordance with the
RICS Valuation - Professional Standards 2014, ninth edition,
published by The Royal Institution of Chartered Surveyors. The
information provided to the valuers, and the assumptions and
valuations model used by the valuers are reviewed by the property
portfolio team, the Property Director and the Chief Financial
Officer. The valuers meet with the external auditors and also
present directly to the Audit Committee on a half yearly basis.
Real estate valuations are complex and derived from data that is
not widely publicly available and involves a degree of judgement.
For these reasons, the valuations are classified as Level 3 in the
fair value hierarchy as defined by IFRS 13. The valuations are
sensitive to change in rental and yield data as well as EBITDA data
and multiples adopted for the pubs. The fair value at 30 September
2016 represent the highest and best use. In respect of the pub
portfolio the valuer makes judgements on whether to use residual
value or a higher value to include development potential where
appropriate. Where no conversion opportunity has been identified at
present, the valuer has not specifically considered an alternative
use valuation.
10 Investments in joint ventures
March
September 2016 2016
GBP'000 GBP'000
--------------------------------------------------------------- ------------------------- -------------- ----------
Opening balance 70,125 113,027
Effective disposal of investments - (54,017)
Group's share of profit after taxation 3,352 8,559
Net valuation movement (3,204) 4,489
Distributions and dividends(1) (1,900) (4,325)
Investment in joint ventures - 2,266
Unrealised (loss)/gain on interest rate hedging (554) 126
------------------------------------------------------------------------------------------ -------------- ----------
Closing balance 67,819 70,125
------------------------------------------------------------------------------------------ -------------- ----------
March
September 2016 2016
Name Country of incorporation % Holding % Holding
--------------------------------------------------------------- ------------------------- -------------- ----------
NewRiver Retail Investments LP and NewRiver Retail Investments
(GP) Ltd Guernsey 50 50
NewRiver Retail Property Unit Trust No.2 Jersey 50 50
NewRiver Retail Property Unit Trust No.5, No.6, No.7 Jersey 50 50
--------------------------------------------------------------- ------------------------- -------------- ----------
(1) The net cash outflow during the period was GBP1.9 million
(March 2016 GBP4.3 million).
There are currently five joint ventures. NewRiver Retail
Property Unit Trusts No 2, 5,6,7 (the 'Middlesbrough', and
'Swallowtail' JVs) are established jointly controlled Jersey
Property Unit Trusts set up by NewRiver Retail Limited and PIMCO
BRAVO II Fund LP ('BRAVO II') to invest in UK retail property.
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.
Summarised financial information of all joint ventures is as
follows:
30 September 31 March
---------------------------------------------------- ------------------------- --------------------------
2016 2016 2016 2016
Total Group's share Total Group's share
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------- --------- -------------- --------- ---------------
Balance sheet
Non-current assets 265,458 132,729 268,324 134,163
Current assets 7,179 3,589 7,724 3,862
Current liabilities (5,973) (2,986) (4,671) (2,335)
Borrowings (130,276) (65,138) (130,149) (65,068)
Other non-current liabilities (750) (375) (979) (497)
---------------------------------------------------- --------- -------------- --------- ---------------
Net assets 135,638 67,819 140,249 70,125
---------------------------------------------------- --------- -------------- --------- ---------------
30 September 30 September
---------------------------------------------------- ------------------------- --------------------------
2016 2016 2015 2015
Total Group's share Total* Group's share*
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------- --------- -------------- --------- ---------------
Income statement
Net property income 9,340 4,670 12,466 8,337
Administration expenses (532) (266) (676) (412)
Net finance costs (1,288) (644) (3,514) (2,472)
---------------------------------------------------- --------- -------------- --------- ---------------
7,520 3,760 8,276 5,453
Net valuation movement (6,408) (3,204) 4,591 2,296
Derivative fair value movement (716) (358) - -
Profit on disposal (8) (4) - -
Taxation (92) (46) - -
---------------------------------------------------- --------- -------------- --------- ---------------
Profit after taxation 296 148 12,867 7,749
---------------------------------------------------- --------- -------------- --------- ---------------
Profit after taxation before net valuation movement 6,704 3,352 8,276 5,453
---------------------------------------------------- --------- -------------- --------- ---------------
*Includes NewRiver Retail Property Unit Trust III and IV for the
period 1 April 2015 to 30 June 2015 prior to the Group's
acquisition of the remaining 50%.
11 Borrowings
30 September 2016 31 March 2016
GBP'000 GBP'000
------------------------------------------------------------------------------------ ----------------- -------------
Secured bank loans 405,610 314,105
Maturity of borrowings:
Balance sheet borrowings
Less than one year - -
Between one and two years 48,927 -
Between two and three years 86,078 94,029
Between three and four years 167,971 186,269
Between four and five years 102,634 33,807
------------------------------------------------------------------------------------ ----------------- -------------
405,610 314,105
------------------------------------------------------------------------------------ ----------------- -------------
Maturity of borrowings:
Group's share of joint venture borrowings
Less than one year 6,395 6,396
Between one and two years 13,521 -
Between two and three years - 13,505
Between three and four years 45,222 45,178
Between four and five years - -
65,138 65,079
------------------------------------------------------------------------------------ ----------------- -------------
Effective interest rate during the period/year
Secured borrowings 3.8% 4.2%
Joint ventures' secured borrowings 3.0% 2.9%
Group including share of joint ventures 3.65% 3.7%
Loan to value including share of joint ventures' investment properties and
borrowings 38% 27%
Interest cover including share of joint ventures 4.3x 4.3x
------------------------------------------------------------------------------------ ----------------- -------------
Facility drawn Unamortised facility fees Balance
30 September 2016 Maturity date GBP'000 GBP'000 GBP'000
------------------------------------------------- -------------- -------------- ------------------------- --------
Secured borrowings:
Deka Mar 2018 49,000 73 48,927
Barclays Dec 2018 31,996 164 31,832
Santander Mar 2019 30,000 250 29,750
HSBC May 2019 24,736 241 24,495
Lloyds Oct 2019 65,009 701 64,308
Santander/HSBC Mar 2020 51,584 522 51,062
Barclays Mar 2020 52,965 364 52,601
Santander Feb 2021 34,029 199 33,830
AIG July 2021 70,000 1,195 68,805
------------------------------------------------- -------------- -------------- ------------------------- --------
409,319 3,709 405,610
---------------------------------------------------------------- -------------- ------------------------- --------
Group's share of joint ventures' secured
borrowings:
Santander Feb 2017 6,400 5 6,395
Barclays Aug 2018 13,585 64 13,521
HSBC Nov 2019 45,500 278 45,222
------------------------------------------------- -------------- -------------- ------------------------- --------
65,485 347 65,138
---------------------------------------------------------------- -------------- ------------------------- --------
Total Group's share of borrowings 474,804 4,056 470,748
----------------------------------------------------------------- -------------- ------------------------- --------
Undrawn facilities 65,404 65,404
----------------------------------------------------------------- -------------- ------------------------- --------
Fair value on interest rate swaps
The Group recognised a mark to market fair value loss of GBP4.6
million (2015: profit GBP0.01 million) on its interest rate swaps
for the year ended 30 September 2016. The fair value of interest
rate swap liabilities in the balance sheet as at 30 September 2016
was GBP3.8 million (March 2016: GBP3.0 million). The fair value of
interest rate swap assets in the balance sheet as at 30 September
2016 was GBP0.1 million (March 2016: GBP0.3 million). All
borrowings are due after more than one year and the derivative
financial instruments are held as non-current liabilities.
12 Share capital and reserves
During the period the Group completed its move from AIM to the
Premium listing segment of the official list, trading on the Main
Market of the London Stock Exchange. NewRiver REIT plc became the
ultimate parent company, with the former parent company, NewRiver
Retail Limited, becoming a direct subsidiary of NewRiver REIT plc,
in a scheme of arrangement on 18 August 2016. The principal steps
of the group reorganisation were as follows:
NewRiver REIT plc was incorporated in the United Kingdom on 8
June 2016 under the Companies Act 2006 as a public company. On
incorporation, the share capital of NewRiver REIT plc was
GBP50,000.02 divided into 2 ordinary shares of 1 pence and 50,000
redeemable preference shares of GBP1. The preference shares were
redeemed on 12 October 2016. All ordinary shares have 1 vote per
share. There are no voting rights attached to the preference
shares. The deferred shares were redeemed following the period end.
All shares are fully paid.
As part of a scheme of arrangement under Guernsey law, all
issued ordinary shares in the capital of NewRiver Retail Limited,
the former holding company of the Group, were cancelled by way of a
reduction of capital on 18 August 2016. Following the cancellation
of the shares, NewRiver Retail Limited issued a corresponding
number of ordinary shares to the Company, such that the Company
held all the issued shares in the capital of NewRiver Retail
Limited. The Company has, in turn, issued ordinary shares to the
former shareholders of NewRiver Retail Limited on a one-for-one
basis. The result of the share cancellation and share issue is that
the Company is now the ultimate parent company of the Group.
On 18 August 2016, the Company issued 238,588,536 ordinary
shares with a nominal value of one pence each to the former
shareholders of NewRiver Retail Limited.
As at 30 September 2016 5,039,000 shares are held in an Employee
Benefit Trust for the benefit of employees under the Group's
employee share schemes (31 March 2016: 5,152,055).
Shareholders who subscribed for placing shares in the original
share listing of NewRiver Retail Limited's shares received
warrants, in aggregate, to subscribe for 3% of the fully diluted
share capital. The subscription price is adjusted following the
payment of dividends or share issuance and was 146p as at 30
September 2016. 377,000 remain outstanding (31 March 2016: 420,000)
and are now warrants over the Company's shares.
Ordinary shares Number Price Total Held Shares
issued per share number in treasury in issue
000's pence 000's 000's 000's
NewRiver Retail Limited:
Brought forward at
April 2016 238,545 5,152 233,393
Warrant exercise 43 148 238,588 5,152 233,436
Shares issued under
employee share scheme - - 238,588 5,075 233,513
-------------------------- -------- ----------- -------- ------------- ----------
Number of shares in
issue at time of scheme
of arrangement 238,588 5,075 233,513
NewRiver REIT plc:
Issue pursuant to
scheme of arrangement 238,588 1 238,588 5,075 233,513
Shares issued under
employee share scheme - - 238,588 5,039 233,549
-------------------------- -------- ----------- -------- ------------- ----------
Carried forward at
30 September 2016 238,588 5,039 233,549
-------------------------- -------- ----------- -------- ------------- ----------
-- Other reserves consisted of distributable reserves created
upon the issue of share capital by NewRiver Retail Limited. Upon
the scheme of arrangement becoming effective the distributable
reserves have been presented within retained earnings.
-- The hedging reserve consists of the fair value movement of
interest rate derivatives that are in an effective cash flow
hedging relationship.
-- Share option reserve consisted of the cumulative charge in
relation to NewRiver Retail Limited's employee share schemes. Upon
the scheme of arrangement becoming effective and new share schemes
being issued under the Company, the cumulative charge has been
reclassified to retained earnings along with the related charge
from the income statement.
-- Revaluation reserves represented the unrealised retained
earnings recognised based on the new movement in fair value of the
Group's investment properties. During the period the charge has
been reclassified to retained earnings to be consistent with other
investment property investment companies.
-- The merger reserve arose as result of the scheme of
arrangement and represents the nominal amount of share capital that
was issued to shareholders of NewRiver Retail Limited.
13 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
Total emoluments of Executive Directors during the period
(excluding share-based payments) were GBP2.1 million (2015 GBP1.6
million).
Share based payments of GBP0.7 million (2015: GBP0.4 million)
accrued during the period.
During the period, 62,600 shares (2015: nil) were acquired on
the open market by Directors.
14 Post balance sheet events
During the period the Group completed the acquisition of a
retail warehouse in Sheffield for GBP17.8 million with a bulky
goods tenant with a lease in place until October 2029. Since the
reporting date the Group has exchanged contracts with the tenant to
surrender the lease at a premium receivable by the Group of up to
GBP12.25 million. The surrender premium may or may not be received
in the year ending 31 March 2017 but must be paid by the tenant by
4 May 2017. The Group is making good progress in re-letting the
space with a range of national retailers.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FFAEDMFMSELF
(END) Dow Jones Newswires
November 17, 2016 02:01 ET (07:01 GMT)
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