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NRR Newriver Reit Plc

75.80
-0.40 (-0.52%)
Last Updated: 09:32:14
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Newriver Reit Plc LSE:NRR London Ordinary Share GB00BD7XPJ64 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.40 -0.52% 75.80 75.40 76.40 79.00 75.00 79.00 10,922 09:32:14
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Real Estate Investment Trust 73.6M -16.8M -0.0537 -14.12 236.95M

NewRiver REIT PLC NewRiver REIT plc FY21 Full Year Results (6970A)

03/06/2021 7:00am

UK Regulatory (RNS & others)


TIDMNRR

RNS Number : 6970A

NewRiver REIT PLC

03 June 2021

 
 NewRiver PLC 
  Preliminary unaudited results for the year ended 31 March 
   2021 
 3 June 2021 
 

Resilient performance and a return to dividend

Allan Lockhart, Chief Executive commented: "Our resilient performance over the last year has underlined the fundamental strength of our business. Critically, we improved our cash and liquidity position through market-leading rent collection, achieving our non-core disposals target and letting over 1 million sq ft of retail space.

Our performance was underpinned by our unsecured balance sheet, our diversified portfolio focused on local convenience and community and the dedication and expertise of our staff who successfully completed a range of transactions in a very challenging market.

Whilst NewRiver's retail portfolio has proved to be more resilient than that of the wider market over the last twelve months, we are determined to ensure that this remains the case over the longer term. As previously announced, we have undertaken a full strategic review of our portfolio to help us refine our retail strategy. As part of this review the Board took the decision to dispose of our Hawthorn community pub business. The divestment is ongoing and will significantly improve our financial strength, provide the firepower required to reshape our portfolio and enable Hawthorn to capitalise on the significant growth potential available as an independent platform.

Having successfully navigated the challenges of COVID-19 we look to the future with genuine confidence based upon an improving consumer market, the underlying strength of our business and a clear strategic plan to deliver long-term shareholder value. This confidence is reflected in the Board's decision to reinstate our dividend."

Financial results

   --      Underlying Funds From Operations ('UFFO') of GBP11.5 million (FY20: GBP52.1 million) 
   --      UFFO per share of 3.8 pence (FY20: 17.0 pence) 
   --      IFRS loss after tax of -GBP150.5 million (FY20: -GBP121.1 million) 

-- Like-for-like valuation decline of 13.6% which was less marked in the second half (H1:-8.2%, H2:-5.6%)

   --      EPRA NTA per share down 24.9% to 151 pence, driven by the valuation decline 

Strong liquidity position, dividend resumed

-- In line with disposals target, GBP81 million of sales completed since April 2020 at a modest discount to book value

   --      Fully unsecured balance sheet with no bank refinancing requirement until August 2023 

-- Unrestricted cash of GBP154 million as at 31 March 2021, up 88% since start of the year from GBP82 million (total accessible liquidity at 31 March 2021 of GBP199 million)

-- LTV of 50.6% at 31 March 2021 (31 March 2020: 47.1%); strategy in place to deliver significant reduction

   --      Reinstated dividend of 3.0 pence per share, representing 80% of UFFO 
   --      Investment Grade balance sheet maintained at BBB with Stable Outlook 

Resilient operational metrics

   --      93% of retail rent due in FY21 either collected or alternative payments agreed 
   --      Rent collection for Q1 FY22 stands at 85%, tracking ahead of the same period last year 

-- Increased retail occupancy of 95.8% (31 March 2020: 94.8%); pubs occupancy of 98.0% (31 March 2020: 97.0%)

-- 1.2 million sq ft of new lettings and renewals completed across the retail portfolio at 0.6% premium to ERV

-- Strong trading performance in Hawthorn community pub business following each reopening; since 12 April trading across our pub estates has significantly exceeded management expectations

Stakeholder management and support during COVID-19

-- Over 300 revised payment agreements negotiated with retail occupiers to support them through a challenging period while ensuring strong rent collection

   --      Enhanced support offered to independent retailers and charity occupiers 

-- Service charges for retail occupiers further reduced; 12% reduction in budgets over the last four years

-- GBP8 million invested in Hawthorn pub partner support to help retain tenants and ensure rapid recovery on reopening

Elevated focus on ESG

-- Established our ambitious three-step net zero carbon targets, aligned with a 1.5degC scenario

-- Rolled out bespoke shopping centre-led Environmental & Social Implementation Plans across 85% of our retail portfolio to guide on-the-ground Environmental, Social and Governance ('ESG') initiatives

-- Continued to provide enhanced support to our charity partner, the Trussell Trust, through Board and Executive Committee salary sacrifices, donations and virtual fundraising events

Results summary

 
 Performance                                  Note         FY21         FY20   Change 
 Underlying Funds From Operations ('UFFO')    (1)      GBP11.5m     GBP52.1m     -78% 
                                             -----  -----------  -----------  ------- 
 UFFO per share                               (1)          3.8p        17.0p     -78% 
                                             -----  -----------  -----------  ------- 
 Ordinary dividend                                         3.0p        16.2p     -81% 
                                             -----  -----------  -----------  ------- 
 Ordinary dividend cover                      (2)          127%         105% 
                                             -----  -----------  -----------  ------- 
 Interest cover                               (3)          2.3x         4.8x 
                                             -----  -----------  -----------  ------- 
 Net Property Income                                   GBP48.2m     GBP92.9m 
                                             -----  -----------  -----------  ------- 
 IFRS Loss after taxation                     (4)    -GBP150.5m   -GBP121.1m 
                                             -----  -----------  -----------  ------- 
 IFRS Basic EPS                                          -49.1p       -39.6p 
                                             -----  -----------  -----------  ------- 
 Total Accounting Return                      (5)        -24.9%       -14.7% 
                                             -----  -----------  -----------  ------- 
 GRESB Score                                  (6)            60           70 
                                             -----  -----------  -----------  ------- 
 
 
 Balance Sheet                                  Note   March 2021   March 2020   Change 
 IFRS Net Assets                                        GBP460.4m    GBP610.6m 
                                               -----  -----------  -----------  ------- 
 EPRA NTA per share                             (7)          151p         201p     -25% 
                                               -----  -----------  -----------  ------- 
 Balance Sheet (proportionally consolidated)    (8)    March 2021   March 2020 
                                               -----  -----------  -----------  ------- 
 Net debt                                               GBP493.3m    GBP563.6m 
                                               -----  -----------  -----------  ------- 
 Principal value of gross debt                  (9)     GBP653.1m    GBP652.4m 
                                               -----  -----------  -----------  ------- 
 Cash                                                   GBP154.3m     GBP82.1m 
                                               -----  -----------  -----------  ------- 
 Weighted average cost of debt                  (10)         3.2%         3.4% 
                                               -----  -----------  -----------  ------- 
 Weighted average debt maturity                 (11)    4.8 years    5.9 years 
                                               -----  -----------  -----------  ------- 
 Loan to value                                  (12)        50.6%        47.1% 
                                               -----  -----------  -----------  ------- 
 

Notes:

(1) Underlying Funds From Operations ('UFFO') is a Company measure of cash profits which includes recurring cash profits and excludes other one off or non-cash adjustments as set out in Note 12 to the Financial Statements and in the Finance Review. UFFO is used by the Company as the basis for ordinary dividend policy and cover

(2) Ordinary dividend cover is calculated with reference to UFFO

(3) Interest cover is tested at corporate level and is calculated by comparing actual net property income received versus cash interest payable on a 12 month look-back basis. The calculation was aligned to covenant calculations during FY21 therefore the FY20 figure is now calculated as 4.8x compared to 3.8x as previously disclosed.

(4) IFRS Loss after taxation due to non-cash valuation decline of GBP152.9 million, compared to a decline of GBP166.9 million in the prior year

(5) Total Accounting Return is the EPRA NTA per share movement during the year, plus dividends paid in the year, divided by EPRA NTA per share at the start of the period

(6) GRESB is the leading sustainability benchmark for the global real estate sector, and its annual assessment scores participating companies out of 100. In 2020 GRESB Assessment structure fundamentally changed, establishing a new baseline for measuring performance. GRESB therefore advises against direct comparison between 2020 GRESB Scores and prior year results.

(7) EPRA Net Tangible Assets ('NTA') is based on IFRS net assets excluding the mark-to-market on derivatives and related debt adjustments, the carrying value of intangibles, the mark-to-market on the convertible bonds, as well as deferred taxation on property and derivative valuations and is adjusted for the dilutive impact of share options

(8) Proportionally consolidated means Group and share of JVs & associates

(9) Principal value of gross debt being GBP635.0 million of Group and GBP18.1 million share of JVs & associates

(10) Cost of debt assuming GBP215 million revolving credit facility is fully drawn

(11) Average debt maturity assumes one-year extension option is exercised and bank approved. Excluding this option, debt maturity at 31 March 2021 is 4.3 years

(12) Is the ratio of gross debt less cash, short-term deposits and liquid investments to the aggregate value of properties and investments. LTV is expressed on a proportionally consolidated basis

For further information

 
 NewRiver REIT plc                                          +44 (0)20 3328 5800 
 Emily Meara (Head of Investor 
  Relations) 
 Lucy Mitchell (Director of Corporate Communications, 
  PR & Marketing) 
 
 
                       +44 (0)20 7251 
 Finsbury               3801 
 Gordon Simpson 
  James Thompson 
 

This announcement contains inside information as defined in Article 7 of the EU Market Abuse Regulation No 596/2014 and has been announced in accordance with the Company's obligations under Article 17 of that Regulation. This announcement has been authorised for release by the Board of Directors.

Results presentation

A pre-recorded presentation will be streamed at 10:00am BST today on our website ( www.nrr.co.uk ) and at the following link: https://kvgo.com/IJLO/NewRiver_Full_Year_Results_2021 . This will be followed immediately by a live Q&A session for investors and analysts.

The dial in details for the conference call facility are as follows:

   UK Toll Free:                             0808 109 0700 
   Standard International Access:   +44 (0)20 3003 2666 
   Password:                                NewRiver 

The accompanying slides will be made available at www.nrr.co.uk just prior to the presentation commencing.

Forward-looking statements

The information in this announcement may include forward-looking statements, which are based on current projections about future events. These forward-looking statements reflect the directors' beliefs and expectations and are subject to risks, uncertainties and assumptions about NewRiver REIT plc (the 'Company'), including, amongst other things, the development of its business, trends in its operating 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

Overview

In a financial year dominated by COVID-19 disruption, we made good progress against our strategic objectives of enhancing our cash and liquidity position, reducing net debt and thereby protecting our balance sheet. Ongoing restrictions in the second half of the year had an impact on our trading performance however our affordable offering and strong relationships with retailers meant that we achieved market-leading retail rent collection rates and secured 1.2 million sq ft of new leases and renewals during the year. Our pub performance also recovered quickly on reopening last summer and in April of this year. In spite of a challenging market we reached our FY21 disposals target of GBP80 million at only a modest discount to book value, further supporting our cash position and LTV. Our strategic progress has been underpinned by a robust financial and operational performance which reflects the inherent quality and liquidity of our portfolio, our clear market offering and a best-in-class retail and pub platforms.

Results and dividend resumption

Our financial performance in the year was inevitably affected by the national lockdowns and restrictions imposed in response to COVID-19. Underlying Funds From Operations ('UFFO') were GBP11.5 million, compared with GBP52.1 million in the prior year, and EPRA Net Tangible Assets per share were down 25%, driven largely by a non-cash reduction in portfolio valuation. Pressure on rents and yield expansion, exacerbated by COVID-19, has led to valuation declines across the retail real estate sector. The decline in our portfolio valuation has, however, been less pronounced than that of our peers, owing primarily to our affordable rents and structurally higher equivalent yields. Encouragingly, our valuation decline has slowed in the second half of the financial year and our retail park portfolio has returned to growth. Our total return for the year of -6.9% has outperformed the MSCI-IPD benchmark by +120 bps, driven by an income return outperformance of 180 bps. We believe that this outperformance is explained by the quality of our asset management, the affordability of our rents, our portfolio positioning, and the liquidity of our assets.

Since the start of the pandemic we have been focused on protecting our cash position and, in spite of significant disruption throughout FY21, we closed the year with an improved cash and liquidity position of GBP199.3 million, increased from GBP127.1 million at the start of the year. As a result, net debt reduced to GBP493.3 million from GBP563.6 million at the start of the year. This improvement was made possible by market-leading rent collection metrics and a successful disposal programme.

At the start of the financial year we set a target to dispose of between GBP80 million and GBP100 million of assets, with the proceeds to be used to reduce debt. We reached our target with completed disposals of GBP81 million during the year at a blended discount of only 6% to book values. To have achieved this in an exceptionally challenging market demonstrates the inherent liquidity in our portfolio. We have already exchanged or are under offer on a further GBP79 million of disposals so far in FY22.

The disposal programme has mitigated the effects of valuation declines on our LTV metric which, at 50.6% as at 31 March 2021, is higher than our guidance but still well within debt covenant thresholds. We are confident that we will significantly reduce LTV through the divestment of Hawthorn, our community pub business, and through further non-core retail disposals.

Given our resilient operational performance during the pandemic, the success of our disposal programme to date and the further net debt reduction to come from the disposal of Hawthorn, the Board has declared a dividend of 3.0 pence per share in respect of the year ended 31 March 2021. Our future dividend policy will be to pay dividends equivalent to 80% of UFFO, with any top up as required under the REIT regime rules to be confirmed at the full year results. Dividends will be declared twice annually at the Company's half and full year results, with reference to the most recently completed six-month period.

Retail operational performance

Our retail portfolio, focused on essential retailing for local communities, delivered robust operational metrics throughout the year. Our strong relationships with occupiers, awareness of their individual circumstances and affordable rents meant that our rent collection levels improved throughout the year. This was despite the UK Government's rental moratorium being in place for the full year. We closed the financial year with a blended retail cash rent collection rate of 86% across all four quarters (rising to 93% including rent either deferred or subject to regear).

During the year we completed 1.2 million sq ft of new lettings and renewals across our retail portfolio, representing GBP6.5 million of annualised rent. Our high volume of leasing activity has generated an increase in our occupancy rate to 95.8% (31 March 2020: 94.8%). Our rental income is well-diversified, with 1,700 leases across over 800 different occupiers. This diversification, combined with our affordable rents at an average of GBP11.51 per sq ft as at 31 March 2021, supports the sustainability of our income.

Hawthorn community pub business

In our Hawthorn community pub business, protecting our people, our financial position and supporting our pub partners has been our primary focus throughout the year. Over 86% of our pub partners invested in their pub during the first lockdown and, seeing the positive impact on initial reopening, we invested a further GBP0.9 million in improving our pubs' outside space during the second half of FY21. In total, we invested GBP7 million in over 200 capital projects in FY21, many of which enhanced the outside space of our pubs to ensure that they were ready to welcome as many customers as possible on reopening. The success of our approach during lockdown was recently recognised in the results of KAM Media's 'Licensee Index', the leading operator sentiment tracker for the UK licensed and tenanted pub sector. Hawthorn's overall rating in this index -- 8.5 out of 10 -- was the highest of all major pub companies.

Despite lockdowns preventing our pub portfolio from operating for significant periods of the year, like-for like-volumes in our Leased & Tenanted pubs and like-for-like sales in our Operator Managed pubs recovered quickly on reopening in both July 2020 and April 2021. Pub occupancy remained high at 98.0% (31 March 2020: 97.0%).

We also made good progress on disposals, completing non-core pub sales of GBP9.8 million during the year, which further enhanced our cash and liquidity position and delivered on our strategic plan to exit from the fully managed segment of our portfolio.

Post the balance sheet date our insurers have confirmed that, in principle, our insurance policy should cover machine and wet rent losses incurred within our Leased and Tenanted estate for an indemnity period of three months. While the details and quantum of this claim are still to be confirmed it will, if successful, further improve our UFFO, cash and liquidity position in FY22.

Capital partnerships

Another strategic priority was to build on our BRAVO relationship to identify and pursue attractively priced acquisition opportunities.

In September 2020 we disposed of our 90% interest in Sprucefield Retail Park, Lisburn, to BRAVO for net proceeds of GBP34.7 million. This disposal expanded and strengthened our capital partnership with BRAVO while lowering our LTV. NewRiver retains a 10% interest in the asset, benefits from 10% of the net rental income and will also receive a management fee and 'promote' fee based on financial performance.

During the year we also exchanged contracts to acquire The Moor, Sheffield, in our capital partnership with BRAVO (completed in April 2021). The acquisition price of GBP41.0 million (NewRiver share: GBP4.1 million) reflects a significant discount to the breakup value of the individual assets acquired. It also represents an attractive net initial yield ('NIY') of 9.1% (rising to 9.8% following the completion of a number of leasing deals). Following this acquisition, the BRAVO capital partnership now has GBP192.8 million of assets under management (NewRiver share: GBP44.2 million) and we continue to review attractive acquisition opportunities to pursue within similar structures. Annualised asset management fee income is now GBP1.3 million.

Portfolio-wide strategic review

Alongside our FY21 objectives to execute our disposals programme, protect retail and pub revenues and strengthen capital partnerships, we also undertook a comprehensive portfolio-wide strategic review in the second half of the financial year. This strategic review, underpinned by the new portfolio segmentation we announced at half-year, involved analysing every asset in the portfolio in terms of current and projected resilience and value-creation opportunities. The review examined current and emerging trends across the retail landscape, including shoppers' changing behaviours and priorities, to determine how we can ensure that our portfolio remains as resilient in the future as it has proved to be during the pandemic.

The strategic review and its findings culminated in the Board's commitment to three key priorities for the business:

-- Divest ourselves of our community pub business in order to reset our LTV and provide the firepower to reshape our portfolio.

   --      Sell our non-core retail assets and recycle the resultant capital into resilient retail 

-- Transform our regeneration assets to create long-term value by jointly working with sector specialists and appropriate capital partners

Our clear strategic aim is that by 2025 assets in our portfolio will display only the characteristics of resilient retail, and we believe that these collective measures will transform our business into a more agile and resilient proposition which provides the appropriate balance of income and capital returns.

We will be hosting a Capital Markets Day to provide further details around our new retail strategy in September 2021.

ESG priorities - supporting our communities and our commitment to net zero carbon

COVID-19 has highlighted the importance of community and we are proud that our assets and operations could offer some support to local communities during a year of extreme uncertainty and hardship for many. The initiatives we undertook in the year included security teams delivering shopping to those shielding, pubs converting into pop-up village shops to serve isolated neighbourhoods, and temporary units being used as vaccination centres to support the NHS. We continued to provide enhanced aid to our charity partner, the Trussell Trust, whose vital work supports over 1,200 food banks. One of our corporate fundraising initiatives included a steps challenge where we covered 7,723 miles over three weeks by cycling, running and walking - further than travelling to New York and back. We also focused on staff welfare, organising regular virtual events to maintain engagement and providing mental health and wellbeing workshops. Across our portfolio, we continued to engage with Local Authorities to help them secure and deploy funding to transform their town centres into vibrant places that serve their local communities.

We recognise the importance of promoting a robust ESG programme which is firmly embedded in our business model and were delighted to receive our first EPRA Sustainability Best Practice Recommendations award (Bronze) in September 2020. Another milestone in our ESG journey was reached in the year by the adoption of a net zero carbon target in-line with the UK's aim of achieving net zero carbon emissions by 2050. This year we reduced our greenhouse gas emissions by 33% compared to our baseline year of 2018. We will provide further details regarding our net zero pathway and progress later this year. Strong ESG credentials will form the basis of a sustainable business model and will also make us a more attractive long-term partner for our tenants, local authorities, capital partners and lenders. We will continue to identify potential improvements in this area which will shape our future ESG programme.

Outlook

COVID-19 has posed unprecedented challenges however our operational and financial achievements have reinforced our belief in the underlying strength of our portfolio and platform. As a result we have focused our efforts on ensuring that our portfolio remains resilient over the longer term.

The macroeconomic environment is improving; in May the Bank of England upgraded its 2021 growth outlook for the UK economy from 5% to 7.25%, driven by an anticipated sharp rise in consumer spending. Consumer confidence in the UK economy has returned to pre-pandemic levels and we are well placed to benefit from consumers' growing preference for shopping locally and supporting community assets.

In terms of the investment market, liquidity in retail parks improved during the year and investor demand for regeneration projects also increased over the second half of FY21, especially for assets located in areas with attractive underlying residential values. We are starting to see early signs of an uplift in shopping centre liquidity and we expect the investment market to improve further as we emerge from the COVID-19 crisis.

With the benefit of an improving market backdrop and the insights gained from our recent strategic review we are looking forward to the coming year with genuine optimism.

Allan Lockhart

Chief Executive

Business review

Highlights

-- Completed GBP81 million of disposals at a blended NIY of 6.4% and 6% blended discount to valuation

-- Exchanged on the acquisition of The Moor, Sheffield, in our capital partnership with BRAVO for total consideration of GBP41.0 million (NewRiver share: GBP4.1 million)

-- Retail occupancy remained high at 95.8% (31 March 2020: 94.8%); average rent remains affordable at GBP11.51 per sq ft

-- Completed 1.2 million sq ft of new lettings and renewals across the retail portfolio; long-term deals on average -3.1% below previous passing rent and +0.6% above valuation ERV

-- Hawthorn occupancy of 98.0% at 31 March 2021 (31 March 2020: 97.0%); like-for-like volumes for Leased & Tenanted pubs (80% of Hawthorn) performed strongly following July 2020 and April 2021 reopening

-- Development pipeline stands at 2.6 million sq ft, of which over 75% relates to residential development

-- Portfolio valued on a proportionally consolidated basis at GBP974 million as at 31 March 2021 (31 March 2020: GBP1.20 billion)

   --      Total property return of -6.9%, outperforming the MSCI-IPD benchmark by 120 bps 

Capital Allocation

Disposals

During the year we reached our FY21 disposal target of GBP80 million to GBP100 million of assets, completing GBP81.2 million of disposals at an average blended NIY of 6.4% and a 6% blended discount to March 2020 valuations. Disposals were typically of assets where we had completed our asset management and development initiatives or where we were disposing to joint venture structures in-line with our capital partnerships strategy, as was the case for Sprucefield Retail Park.

We achieved our disposal target amidst a challenging market environment, taking advantage of improved liquidity in retail parks during the last six months of the financial year to dispose of assets in Dundee, Felixstowe, Beverley and Canvey Island. All of these assets have been subject to the completion of successful asset management initiatives by NewRiver.

The most significant disposal in the second half of the financial year was of Canvey Island Retail Park, Essex, a 62,000 sq ft A1 development which was developed by NewRiver and completed in November 2018. The retail park recently became fully occupied, with the final 15,000 sq ft unit let to Iceland on a 10-year lease, completing an occupier line-up which also includes M&S Foodhall, Sports Direct, B&M and Costa Coffee. The disposal was completed for a total consideration of GBP11.9 million, in-line with the March 2020 valuation, and generated a 13% profit on cost.

Our largest asset disposal in the year was of a 90% interest in Sprucefield Retail Park, Lisburn, to our capital partner BRAVO for net proceeds of GBP34.7 million, reflecting a NIY of 9.0% and a 5% discount to the March 2020 valuation. NewRiver will retain a 10% interest in the asset, will benefit from 10% of the net rental income and, as appointed asset manager, will also receive a management fee and promote fee based on financial performance. This disposal has helped us to manage our LTV and has expanded and strengthened our relationship with BRAVO as part of NewRiver's capital partnerships strategy.

The success of our disposal programme demonstrates the inherent liquidity of our essential retail and locally positioned portfolio despite FY21 being one of the most challenging periods on record. So far in FY22 we have exchanged on GBP16 million of disposals and GBP63 million of disposals are under offer.

Acquisitions

Our investment priorities during the year were focused on the successful execution of our disposal programme, and acquisition activity in FY21 was therefore rightly limited. However, our capital partnerships strategy allowed us to take advantage of market dynamics, while limiting balance sheet exposure, and in February 2021 we exchanged on a 10% interest in The Moor, Sheffield, as part of a GBP41.0 million acquisition by our BRAVO relationship. This acquisition completed in April 2021.

The Moor is a 680,000 sq ft retail and leisure estate located in Sheffield city centre close to the city's railway station, council offices, and both Sheffield University and Sheffield Hallam University. The estate is anchored by Next, Sainsbury's, and an occupier-owned Primark, and is next to a 670-space car park, a nine-screen cinema and The Moor Market, a covered marketplace owned by Sheffield City Council.

The estate comprises 15 assets capable of being sold separately, which provides inherent liquidity and offers a range of mixed-use development opportunities. NewRiver has identified the potential to develop up to 1,100 build-to-rent residential units and up to 300 purpose-built student accommodation units, offering significant capital growth opportunities.

The acquisition price of GBP41.0 million reflects a significant discount to the break-up value of these individual assets, as provided by an independent valuer. It also represents a NIY of 9.1%, which is imminently expected to rise to 9.8% following the completion of a number of leasing deals, with an equivalent yield of 11.3% and a reversionary yield of 14.6%. NewRiver will also be appointed as asset and development manager, in return for a management fee calculated with reference to the gross rental income and development costs of the asset, and will receive a 'promote' based on financial performance.

Capital expenditure

In-line with our strategy of protecting our cash and liquidity position we took a prudent approach to capital expenditure ('capex') during the year, investing a total of GBP5.3 million in capex projects across our retail assets. The projects selected were all income or value-accretive for the portfolio.

Projects undertaken across the retail portfolio during the year include:

-- The construction of two drive-thru units at Waterfront Retail Park, Barry, let on 15-year leases to Burger King and Costa Coffee, improving the weighted average lease expiry (WALE) of the park and likely to increase footfall, dwell time and average spend;

-- Amalgamation of the former Maplin and Mothercare units at Blackburn Retail Park to create a new 25,000 sq ft B&M Bargains unit and garden centre;

-- Lease surrender and subsequent landlord shell works of an unoccupied unit in Wakes Retail Park, Newport, which we subsequently relet to Food Warehouse on terms which materially increased the WALE of the park to eight years and enhanced the asset's valuation;

-- Landlord shell works, which included replacing a shop front with a large, glazed entrance, to facilitate a letting to Wren Kitchens at Kittybrewster Retail Park in Aberdeen;

-- Subdivision of the 55,000 sq ft unit formerly occupied by Boots in The Prospect Centre, Hull; the ground floor area was subsequently re-let to B&M Bargains, improving the WALE.

Across the pub estate we invested GBP7.9 million in capex projects during the financial year (GBP8.1 million including c-stores) which largely focused on improving the outside space of our pubs to ensure that they were ready to welcome customers on reopening.

Retail portfolio operations

Overview

Our UK-wide retail portfolio comprises 33 community shopping centres, 19 retail parks and a small number of high street units. These assets have an occupier line-up focused on essential goods and services, and over two-thirds of them are anchored by a major food and grocery brand. Our community shopping centres are located in town and city centres, in close proximity to transport connections, civic services and other local amenities, and are characterised by a low travel time and a high frequency of visits. Our retail parks are located on the edge of urban areas, in close proximity to major A-roads, and are characterised by a spacious open-air shopping experience and large free car parks which make them highly compatible with retailers' click & collect strategies.

COVID-19 lockdown, rent collection and ancillary revenue

Following the UK Government's requirement that all non-essential retail premises had to temporarily close on 23 March 2020, our centre managers ensured that all of our centres were compliant with the regulations and that the centres were able to remain open and provide a safe and secure shopping experience for those requiring essential retail. The safety of our staff and customers remained our main priority throughout FY21, a period in which communities and businesses faced the challenge of three national lockdowns and interim periods of tiered restrictions. Reflecting our focus on providing essential retail to local communities, on average 66% of our occupiers were open and trading throughout FY21.

Supported by affordable rents, occupiers across our portfolio have proved resilient, with the majority of retailers who were forced to close during lockdowns reopening within days of the easing of restrictions on non-essential retail. We have also made good progress in continuing to reduce occupier costs, achieving a 12% reduction in service charge budgets over the last four years.

Since the first national lockdown in March 2020, we have engaged constructively with our occupiers to collect contractual rent due, and we made significant progress by negotiating over 300 revised payment agreements. In a number of cases we have given occupiers the option to be invoiced and pay rent monthly, rather than quarterly in advance, which more closely aligns our revenue collection with occupier cash flows. Despite the UK Government's rental moratorium being in place for the full year, our rent collection figures improved throughout the period and we closed the year with a blended retail cash rent collection rate of 86% across all four quarters of the financial year. Including rent either deferred or subject to regear, this blended rate rises to 93%. Rent collection in respect of the first quarter of FY22, due on 25 March 2021, currently stands at 85% including deferrals and regears, ahead of collection at the same point last year.

Status of rent collection as at 27 May 2021

 
                                  Q1 FY21       Q2 FY21       Q3 FY21       Q4 FY21   Total FY21 
     Collected                      82%           87%           91%           84%          86% 
                             ------------  ------------  ------------  ------------  ----------- 
     Deferred                       2%            2%            1%            4%            3% 
                             ------------  ------------  ------------  ------------  ----------- 
     Re-gear                        7%            4%            3%            4%            4% 
                             ------------  ------------  ------------  ------------  ----------- 
     Total collected or 
      alternative payments 
      agreed                        91%           93%           95%           92%          93% 
                             ------------  ------------  ------------  ------------  ----------- 
     Waived                         7%            5%            1%            3%            4% 
                             ------------  ------------  ------------  ------------  ----------- 
     Rent outstanding               2%            2%            4%            5%            3% 
                             ------------  ------------  ------------  ------------  ----------- 
     Total (%)                     100%          100%          100%          100%          100% 
                             ------------  ------------  ------------  ------------  ----------- 
 

As this table shows, the majority of rent has been collected as originally requested. Of the alternative payment agreements, the majority of occupiers have either had rent deferred, over a period of 2 to 24 months, averaging 12 months, or have agreed to a re-gear, which typically entails a lease being extended in exchange for the granting of a rent-free period. We have agreed to waive rent in exceptional circumstances, for example for certain charities and small and independent retailers.

Our rent collection metrics have consistently tracked ahead of the wider market, demonstrating the strength of our occupier relationships, the affordability of our rents and the resilience of value and essential retail during an unprecedented period of disruption and uncertainty.

Car parking utilisation and income during FY21 was also significantly reduced as a result of COVID-19. We provided free parking for key workers in relevant centres however overall park usage was lower, leading to a 63% fall in car park income to GBP2.7 million.

In a similar way, commercialisation income has also suffered, reducing by 57% year-on-year to GBP1.2 million. As we emerge from COVID-19 we are focused on restoring commercialisation income to previous levels and note that commercialisation activity is recovering well following the easing of restrictions in April 2021. We have retained all of our mall retail operators and our food and beverage operators have performed particularly strongly, especially those within open centres. A number of mall operators have expanded into retail units in our centres in Newtownabbey and Middlesbrough. Pop-up markets have also increased in number; whilst not highly profitable in isolation, they generate considerable consumer interest, animate centres and thereby help to revive footfall and dwell times.

Leasing activity

During the year we completed 1,157,100 sq ft of new lettings and renewals across our retail portfolio, representing GBP6.5 million of annualised rent. This represents over a 70% uplift on leasing volume of 678,100 sq ft completed in the previous financial year. In the final two quarters of the year we witnessed a progressive increase in the rents secured compared with both passing rent and ERV. Long-term leasing deals for the year in aggregate were signed at a -3.1% discount to previous passing rent and a 0.6% premium to March 2020 ERV. Long-term leasing deals had an average length of 7.3 years. This high volume of leasing activity means that our occupancy rate increased to 95.8% (31 March 2020: 94.8%) despite the challenging market backdrop.

Our leasing activity throughout the year reflected our focus on essential retailing. During the year we signed four leasing deals with B&M, including three new lettings across our retail park portfolio, and further deals with Homebase, Marks & Spencer, Holland & Barrett, Wren Kitchens, The Works, Costa Coffee and Burger King. In September 2020, we signed a portfolio deal with the value card and gift retailer Cardzone, which saw it take an additional six stores across our portfolio and more than doubled our rental income from this growing retailer.

During the third quarter Next opened one of its first collection & returns pods in the car park of Cuckoo Bridge Retail Park, Dumfries, underlining the increasing importance of retail parks to retailers' click & collect strategies.

In the final quarter of the financial year we completed two significant leasing transactions totalling over 37,000 sq ft with Instant Offices, a flexible office provider, in our shopping centres in Cardiff and Bexleyheath. These transactions highlight the alternative use potential of our well-located, accessible assets. We also signed a new lease with Sports Direct for a 30,400 sq ft unit in Poole Retail Park.

Retail portfolio profile

Our retail rental income is well-diversified, with 1,700 leases across over 800 different occupiers, and our top occupiers are focused on providing essential goods and services. Our policy is that no single retailer will account for more than 5% of total rent, and our top tenants in terms of gross rental income at period end were B&M, Poundland and Superdrug, each accounting for 1.9% of total rent. This diversification, combined with our affordable rents of GBP11.51 per sq ft as at 31 March 2021, underpins the sustainability of our income. Although we consider lease length to be less of a factor in supporting income sustainability, we were pleased to see our weighted average lease expiry remain constant at 5.2 years (31 March 2020: 5.2 years).

Top retail occupiers

 
 Rank     Occupier                   % Total gross income   Number of stores in 
                                                                      portfolio 
 1        B&M                                         1.9                    11 
         -------------------------  ---------------------  -------------------- 
 2        Poundland                                   1.9                    20 
         -------------------------  ---------------------  -------------------- 
 3        Superdrug                                   1.9                    16 
         -------------------------  ---------------------  -------------------- 
 4        Wilko                                       1.8                     8 
         -------------------------  ---------------------  -------------------- 
 5        Boots                                       1.7                    16 
         -------------------------  ---------------------  -------------------- 
 6        Primark                                     1.6                     4 
         -------------------------  ---------------------  -------------------- 
 7        TK Maxx                                     1.5                     8 
         -------------------------  ---------------------  -------------------- 
 8        Marks & Spencer                             1.3                     3 
         -------------------------  ---------------------  -------------------- 
 9        Iceland                                     1.3                    14 
         -------------------------  ---------------------  -------------------- 
 10       Sainsbury's                                 1.2                     3 
         -------------------------  ---------------------  -------------------- 
          Subtotal                                   16.1 
         -------------------------  --------------------- 
          e.g. Next, B&Q, WHSmith, 
 11-25     Home Bargains                             11.1 
         -------------------------  --------------------- 
          e.g. Greggs, Costa, 
 26-100    Tesco, Dunelm                             18.8 
         -------------------------  --------------------- 
          Total                                      46.0 
         -------------------------  --------------------- 
 

At our half-year results we provided a new sub-segmentation of our shopping centre portfolio (Core/Regeneration/Work Out) in order to further improve understanding of the income and valuation profile of our assets, and our strategies to extract further value from our portfolio. The segmentation, provided in more detail below, shows that two-thirds of our assets are held in community pubs, Core Shopping Centres and retail parks; strategies here are to deliver income and valuation growth through active asset management and small-scale developments. Our Regeneration Shopping Centres portfolio includes our assets with significant large-scale residential redevelopment potential, to be realised through our development pipeline or disposal programme. Our Work Out Shopping Centres portfolio is where a supply and demand imbalance is having a significant impact on rents, and our strategy is to either successfully reposition these centres to enable them to become core through active management, or create regeneration opportunities or dispose of them.

 
 Sub-segment(1)   Description                      % of portfolio   Strategy 
                                                      by value 
 Community        Wet-led community pubs                25%         Operational initiatives 
  pubs             in suburban locations.                            and small-scale development 
                   Delivering EBTIDA and                             (e.g. c-stores) initiatives 
                   valuation growth pre-COVID-19                     to enhance income and valuations 
                 -------------------------------  ---------------  ---------------------------------- 
 Core Shopping    Located in areas with                 22%         Asset management and small-scale 
  Centres          good supply/demand dynamics                       development (e.g. combining 
                   for retail space, resulting                       units) initiatives to enhance 
                   in sustainable income                             income and valuations 
                   and valuations 
                 -------------------------------  ---------------  ---------------------------------- 
 Regeneration     Centres with opportunities            22%         Unlock value from regeneration 
  Shopping         to deliver larger scale                           opportunities through capital 
  Centres          residential-led regeneration                      partnerships or selling 
                   schemes                                           with the benefit of planning 
                 -------------------------------  ---------------  ---------------------------------- 
 Retail Parks     Conveniently located food             16%         Asset management and small-scale 
                   & grocery-anchored retail                         development (e.g. drive 
                   parks, offering free car                          thru pods) initiatives to 
                   parking and optimised                             enhance income and valuations 
                   for click & collect 
                 -------------------------------  ---------------  ---------------------------------- 
 Work Out         Located in areas with                 13%         Asset management initiatives 
  Shopping         an oversupply of retail                           to reposition centres and 
  Centres          space, leading to downward                        move them into the Core 
                   pressure on rents and                             Shopping Centres segment, 
                   valuations                                        and selective disposals 
                 -------------------------------  ---------------  ---------------------------------- 
 Other            Standalone high street                 2%         Asset management initiatives 
                   units, non-income generating                      to protect income and selective 
                   development sites and                             disposals 
                   other miscellaneous assets 
                 -------------------------------  ---------------  ---------------------------------- 
 

1. Note that the Group considers its operating segments to be Retail and Pubs for reporting purposes

Impact of CVAs and administrations

Our retail portfolio was affected by a number of Company Voluntary Arrangements (CVAs) or administrations during FY21 which related to occupiers including BrightHouse, New Look, Clarks, Clintons, Peacocks and Bonmarché. CVAs and administrations have been far more prevalent in the mid-market fashion and department store sectors this year. As we have long recognised this vulnerability we have deliberately avoided over-exposure to these sectors, focusing instead on occupiers who provide essential retail and convenience to their local community. Mid-market fashion retailers account for less than 4% of our total rent and we do not have any department stores within our portfolio.

Total exposure to retailers involved in CVAs or administrations during the year was GBP5.3 million, or 5.7% of our annual net rental income at the start of the year. Adjusting for those stores unaffected by CVAs and amounts recovered through new leasing transactions or transactions currently in legals on affected units, the net rental exposure falls by GBP1.3 million to GBP4.0 million. Furthermore, CVAs and administrations notably reduced in the second half of FY21; of the GBP5.3 million total exposure for FY21 only GBP1.7 million, primarily relating to New Look, Peacocks and Clarks, relates to the second half.

Asset management platform

Despite a challenging year for Local Authorities and asset owners we are pleased to have secured a renewal of our third-party asset management mandates with Canterbury City Council and Knowsley Council to manage key retail assets in their town centres. In addition, we have secured two further mandates for the assets acquired via our relationship with BRAVO during the year. The scale, relationships and governance credentials of the NewRiver platform continues to attract the interest of Local Authorities and private owners of retail assets.

Hawthorn community pub portfolio operations

Overview

Our Hawthorn community pub business owns 673 pubs throughout England, Scotland and Wales. Over 96% of our pubs are owned freehold, and occupancy was 98% at period end (31 March 2020: 97.0%).

Across Hawthorn, 80% of sites operate under a Leased & Tenanted model, whereby Hawthorn has an occupational lease with a tenant, who is responsible for all operating costs of the pub, including staff costs. Most of our Leased & Tenanted pubs are 'tied', meaning that tenants are required to purchase drinks from Hawthorn and lease games machines from Hawthorn-approved suppliers. In return, Hawthorn receives rental income, a margin between the wholesale price and sale price to tenants on drinks supplied, and a share of machine profits.

The remaining 20% of Hawthorn sites operate under an Operator Managed model, whereby Hawthorn enters into an operator agreement with a pub partner. Hawthorn incurs all operating costs of running the pub, except for staff costs, which are borne by the operator. In return, Hawthorn receives gross turnover generated by the pub and pays a management fee to the pub partner, which is on average around 20% of net revenue.

First COVID-19 lockdown and subsequent recovery

The UK Government required the temporary closure of all hospitality businesses on 20 March 2020, and our entire portfolio was closed until 4 July 2020, when pubs in England were allowed to reopen. During the lockdown period, our focus was on protecting Hawthorn's financial position and supporting our pub partners. To protect our financial position, we accessed UK Government support packages which we invested directly in pub partner assistance and reduced non-essential capex and operating costs. Our Business Development Managers were in close contact with our pub partners and provided help in accessing available government support, including the Retail, Hospitality and Leisure Grant and the Coronavirus Job Retention Scheme. In addition, over 86% of our pub partners invested in their pub during the lockdown, particularly in improving outside space. Reflecting this level of support, 97% of our tenants said they were either satisfied or very satisfied with Hawthorn's help during the lockdown period.

From 4 July 2020, our pubs in England were allowed to reopen, and within a week over 90% of our pub portfolio in England was operational. Following the lifting of restrictions in Scotland and Wales several weeks later, over 90% of our entire portfolio was trading by mid-August 2020.

The underlying performance of our pubs was strong following reopening, with like-for-like volumes in our Leased & Tenanted portfolio down only 8% and like-for-like sales in our Operator Managed pubs down only 16% compared to the same period in 2019. This performance compared favourably to the wider market; pub like-for-like sales were down 18% over the same period according to the Coffer Peach Business Tracker.

In order to support our pub partners recovery following reopening, we did not charge rent for the months of July or August 2020, and launched our innovative Partner Investment Fund, through which we matched investments made by pub partners. Both of these schemes were conditional on obtaining commitments from our pub partners that ensured we were able to retain the best tenants and operators for the long-term.

New restrictions from October 2020 and reopening from April 2021

From October 2020, our pub operations began to face new restrictions, initially in the form of new hospitality closures in Scotland but culminating in further national restrictions for England announced by the UK Government on 31 October. As a result of COVID-19 measures, our pubs were only able to trade for 17 weeks of the financial year and certain pubs have been able to operate for an even shorter period as a result of local tier restrictions. Furthermore, our pubs have also been subject to significant restrictions on trading capacity to satisfy social distancing requirements.

The experience gained during the first lockdown meant that we could act swiftly and effectively, offering financial aid and practical advice, to support our tenants and pub operators during this period of fresh restrictions.

During FY21 we invested GBP1.3 million of grant income in support payments to pub partners in our Operator Managed estate. These support payments, designed to cover operator living costs, were aimed at maintaining high levels of operator retention and occupancy. This ensured that our pubs were ready to welcome back customers on reopening and removed the burden of vacant property costs. At the end of our financial year only four pubs in our Operator Managed portfolio were vacant, representing a 96.4% occupancy level. This is a testament to the targeted support and strong relationships our Business Development Managers (BDMs) and wider team have forged with our pub operators.

Within our Leased & Tenanted pub estate we have invested almost GBP8 million in rental support to our pub tenants, enabling them to build cash reserves and recover swiftly on reopening. At the end of the financial year only 11 of our Leased & Tenanted pubs were unoccupied, representing a 98.0% occupancy level.

Following decisive action to invest in our portfolio during the first lockdown, and having seen the benefits of this on reopening, we took the opportunity to future-proof more of our pubs during the second half of FY21 and invested a further GBP0.9 million in improving outside space. An additional GBP0.3 million (matched by tenants) was also invested via our Partner Investment Fund to support 110 new schemes.

The dedication and talent of the Hawthorn team was recognised in the results of KAM Media's February 2021 'Licensee Index', the leading operator sentiment tracker for the UK licensed and tenanted pub sector. Hawthorn's overall rating in this index - 8.5 out of 10 - was the highest of all major pub companies, and in the area of COVID-related support specifically, Hawthorn scored 9.2 out of 10, again the highest amongst the major pub companies.

After several months of temporary closure, Hawthorn opened over 60% of its portfolio on 12 April 2021, following the easing of restrictions on outside trading, and reopened the vast majority of the remaining pubs following the easing of restrictions on indoor trading from 17 May. With a focus on well-located community and suburban pubs, and with the benefit of more consumers working from home and using their local services and facilities, we have once again been able to recover quickly on reopening and trading is tracking significantly ahead of budget. Since 12 April, like-for-like volumes in our Leased & Tenanted portfolio are down only 2% compared to the same period in 2019 which is a remarkable achievement given that for the majority of this time we have only been trading in outdoor space and the weather was poor. Like-for-like sales in our Operator Managed pubs are down 17% compared to the same period in 2019 but are still ahead of budget and in line with the wider pub sector as measured by the Coffer Peach Business Tracker. Rent collection is progressing well; we have collected 95% of all rent billed since 4 December 2020.

In response to the revenue recovery in our pubs since reopening we made the decision to repay funds received under the Coronavirus Job Retention Scheme during lockdown last year. These funds were repaid to HMRC in April 2021.

Convenience store ('c-store') developments

To date we have delivered 26 c-stores to the Co-op and during the year we completed construction of 10 apartments at the Seaview Inn, Poole. We sold these apartments, including the c-store, for GBP2.8 million in February 2021 to a single purchaser. We received a premium payment of GBP275,000 from the Co-op in May 2020 following completion of the Seaview Co-op development. We are currently exploring further c-store opportunities on surplus land across our pub portfolio. This includes one of our sites in Glasgow, where we could deliver a scheme similar to the development at the Sea View Inn, comprising a c-store and up to 30 apartments.

Pub and c-store disposals

Our disposal programme across the pub estate progressed well despite the restrictions on pub operations throughout large parts of the year, reflecting the inherent liquidity of these assets. Since 1 April 2020 we have completed 45 pub disposals and two c-store disposals, generating total sales proceeds of GBP13.8 million. The pub disposals generated gross proceeds of GBP9.8m, representing an average blended discount of only 7% to book values, and during this period we exited from the fully managed segment by selling our remaining fully managed pubs, in line with our strategy.

Development in the retail portfolio

Our development pipeline totals 2.6 million sq ft (2.2 million sq ft in the near-term) and is one of the ways in which we extract further value from our assets, particularly those in our Regeneration Shopping Centre segment. Over 70% of our development pipeline is within the Regeneration Shopping Centre portfolio and, reflecting our focus on realising alternative use potential, over 75% of the pipeline relates to residential development.

For the majority of projects in our pipeline, we intend to either sell the site with the benefit of planning or continue with development through capital partnerships. However, for smaller projects with a lead time of less than 12 months, such as our c-store developments for the Co-op, we will typically fund and manage the construction ourselves, using our experienced in-house development team.

The disruption caused by COVID-19 has had an acute impact on our development progress during the year; Local Authorities' planning resources have been stretched even further and planning applications and on-site construction works across the UK have experienced significant delays. To protect our cash and liquidity position we also curtailed many of our capex projects at the outset of the pandemic and focused on projects where we were confident of generating positive returns with limited risk.

Development pipeline

 
                    Shopping    Retail     Health     Hotel   C-store   Residential       Total    Retail       Resi 
                      Centre      Park   & Social                                      Pipeline         &   Pre-sold 
                                             Care                                                 Leisure 
                                                                                                  Pre-let 
                       Sq ft     Sq ft      Sq ft     Sq ft     Sq ft         Sq ft       Sq ft         %          % 
 Completed/Under 
  construction 
  in FY21                  -     3,600          -    37,900     3,600         8,100      53,200       100          - 
                   ---------  --------  ---------  --------  --------  ------------ 
 Planning granted    279,000    31,000          -    63,100    10,700       562,500     946,300        56         29 
                   ---------  --------  ---------  --------  --------  ------------              --------  --------- 
 In planning               -         -          -         -     3,500        13,200      16,700       100          - 
                   ---------  --------  ---------  --------  --------  ------------              --------  --------- 
 Pre-planning              -    77,300     54,200         -     3,500     1,056,900   1,191,900        41          - 
                   ---------  --------  ---------  --------  --------  ------------              --------  --------- 
 Near-term 
  pipeline           279,000   111,900     54,200   101,000    21,300     1,640,700   2,208,100 
                   ---------  --------  ---------  --------  --------  ------------              --------  --------- 
 Early 
  feasibility 
  stages                   -         -          -    50,000         -       378,000     428,000 
                   ---------  --------  ---------  --------  --------  ------------              --------  --------- 
 Total pipeline      279,000   111,900     54,200   151,000    21,300     2,018,700   2,636,100 
                   ---------  --------  ---------  --------  --------  ------------              --------  --------- 
 Additional 
  residential 
  potential(1)             -         -          -         -         -       451,200 
                   ---------  --------  ---------  --------  --------  ------------ 
 
 

1. A strategic review of our entire retail portfolio identified the p otential to deliver residential units adjacent to or above our assets over the next 5-10 years

Completed in period/Under construction

Romford Premier Inn: During the year we continued on-site at the development of an 85-room Premier Inn at a former high street unit in Romford, Greater London. This development has already been sold to a property investor as part of a pre-let forward funding agreement and practical completion is on schedule for the end of June. Our development team's efforts resulted in the achievement of BREEAM 'Very Good' certification for our design stages of the construction of the Premier Inn, which notably achieved 100% for Land Use & Ecology and Transport.

Planning granted

During the financial year over 436,000 sq ft of planning consents have been secured despite the considerable planning delays and disruption caused by COVID-19. A summary of some of the key projects is provided below.

Burgess Hill: In September 2020, Mid Sussex District Council approved our revised planning application for our 465,000 sq ft mixed-use regeneration scheme in Burgess Hill town centre. Working closely with local stakeholders, we had adjusted the design of the scheme to increase its residential provision, from 142 units to 172, and reduce space designated for retail, reflecting the changing nature of the retail market.

The revised scheme includes a 16-lane bowling alley, a 10-screen multiplex cinema, and an 85-bed hotel with a new public café, alongside a significantly improved public realm to provide functional space for managed outdoor events. However, the impact of COVID-19 over the last 12 months has been particularly challenging for the leisure sector, which means that it is likely to take longer to deliver the cinema and bowling elements of the masterplan. Therefore, in the meantime we are consulting with Mid Sussex District Council to investigate the potential of bringing forward the 172-unit residential redevelopment scheme as a priority alongside completing a 'partial implementation' scheme to build the new carpark and refurbish the existing retail units.

Medical centre in Wallsend: In February 2021 planning consent was granted for the development of a new medical centre on our land adjacent to The Forum shopping centre in Wallsend. This land is under offer to a primary care property specialist, and we anticipate that the new medical centre will be open by Summer 2022.

Expansion of existing unit at Rishworth Centre and Railway Street Retail Park, Dewsbury: We have signed an agreement for lease with Aldi to occupy a 19,000 sq ft unit at Rishworth Centre and Railway Street Retail Park, Dewsbury, expanding an existing unit that is currently occupied by Next. We achieved planning in March 2021 and intend to start on site in late summer 2021.

Newton Mearns extension and residential development: We have planning for a 10,000 sq ft extension of Newton Mearns' The Avenue shopping centre - near Glasgow - to accommodate a fitness operator. We are also under offer from a local housing developer on adjacent land at the shopping centre which has the potential for 36 residential units.

Pre-planning

Our pre-planning progress has also been impacted by COVID-19 however we are working on a number of opportunities which we will be looking to accelerate in the coming months.

Grays: We acquired Grays Shopping Centre in June 2018, recognising a significant opportunity for a high-density residential-led redevelopment of the site, which is located just 35 minutes from central London by train. We are currently working closely with Thurrock Council to bring forward a redevelopment plan that would reduce existing commercial floorspace from 177,000 sq ft to 70,000 sq ft, increase public open areas and facilitate an improved pedestrian flow through Grays town centre, as well as providing over 800 new homes. In February 2021 an updated pre-application report was submitted to Thurrock Council setting out the evolution of the scheme following consultations with council officers. In May the council confirmed their broad support for the work carried out on the proposals so far and we are now preparing presentations for the Design Review Panel in order to build further support for the outline planning application.

Fareham: We are awaiting planning consent to reconfigure the internal road network at Locks Heath shopping centre in Fareham, Hampshire, which will enable two land sales; one to a senior living housing developer and another to a local residential developer. Our value-add strategy will provide new homes adjacent to our thriving shopping centre and will improve overall returns from the asset.

Witham: At Newlands shopping centre in Witham, Essex, we are in negotiations to sell one site to a housebuilder alongside planning to deliver 37 apartments and potentially a new health centre on another site. Successful delivery will not only bring new homes into the centre of Witham but will also provide a much-needed community service in the heart of our shopping centre.

Valuation

During the year our portfolio valuation declined to GBP974 million from GBP1.20bn at 31 March 2020 as a result of disposal activity and a 13.6% reduction in portfolio valuation.

A breakdown of the key valuation movements by asset type is provided below.

 
 As at 31 March         Valuation    Portfolio   Valuation   Valuation   Valuation   Topped-up     NEY     LFL ERV 
  2021                (NRR share)    Weighting     Deficit     Deficit     Deficit         NIY            Movement 
                                                        H1          H2          FY 
                                                                                    ---------- 
                           (GBPm)          (%)         (%)         (%)         (%)         (%)     (%)         (%) 
                    -------------  -----------  ----------  ----------  ----------  ----------  ------  ---------- 
 Pubs & C-Stores              248          25%       -4.5%       -4.2%       -8.5%       11.0%   11.0%           - 
                    -------------  -----------  ----------  ----------  ----------  ----------  ------  ---------- 
 Shopping Centres 
  - Core                      210          22%      -10.4%       -8.5%      -18.0%        9.5%    9.3%       -9.9% 
                    -------------  -----------  ----------  ----------  ----------  ----------  ------  ---------- 
 Shopping Centres 
  - Regeneration              210          22%       -6.9%       -3.0%       -9.7%        5.9%    6.7%       -7.1% 
                    -------------  -----------  ----------  ----------  ----------  ----------  ------  ---------- 
 Retail Parks                 157          16%       -4.8%        0.7%       -4.8%        7.3%    7.7%        0.4% 
                    -------------  -----------  ----------  ----------  ----------  ----------  ------  ---------- 
 Shopping Centres 
  - Work Out                  132          13%      -15.1%      -13.1%      -26.2%        9.3%   13.2%       -5.6% 
                    -------------  -----------  ----------  ----------  ----------  ----------  ------  ---------- 
 Other                         17           2%      -16.4%      -11.6%      -27.2%        9.1%    7.6%      -17.4% 
                    -------------  -----------  ----------  ----------  ----------  ----------  ------  ---------- 
 Total                     974(1)         100%       -8.2%       -5.6%      -13.6%        8.8%    9.5%       -6.4% 
                    -------------  -----------  ----------  ----------  ----------  ----------  ------  ---------- 
 

1. See note 14 for reconciliation between Valuation (NRR share) shown in this table, and the relevant notes to the financial statements

Valuations in the shopping centre and retail park markets have been significantly impacted during the COVID-19 period through an acceleration of yield expansion, cash flow disruption and ERV decline. However, within our portfolio we are now seeing a clear trend towards valuation stabilisation, with our valuation decline slowing (H1 FY21: -8.2%, H2 FY21: -5.6%) driven by a significant improvement in ERV decline (H1 FY21: -4.8%, H2 FY21: -1.6%) as evidenced by our strong leasing performance during the year.

Overall, our shopping centre portfolio saw like-for-like equivalent yields expand by 81 bps resulting in the portfolio now being valued at an equivalent yield of 9.3%. Our shopping centre NIY is now 8.2% (260 bps higher than the 20-year MSCI long-term average of 5.6%).

Our Core shopping centre portfolio saw a valuation decline of 18% during the period attributable to 89 bps of yield expansion and 9.9% ERV decline. Regeneration shopping centres experienced a much lower rate of valuation decline of 9.7% owing to the portfolio's significant alternative use value ('AUV').

The resilience of our retail park assets was particularly evident in the second half of the financial year with ERV growth reverting to positive territory (H2 FY21: 2.0%) and yields stabilising (H2 FY21: -6 bps). Our retail park portfolio is now valued at an equivalent yield of 7.7%.

The Work Out shopping centre portfolio, which represents only 13% of all our gross assets, suffered a 26.2% valuation decline. This decline was mainly market driven with equivalent yields expanding by 206 bps to 13.2%. Whilst we do not anticipate further significant outward yield movement we remain committed to reducing our exposure to these assets over the medium term.

Despite the significant disruption to the pub sector during FY21 our pub values performed well, reporting just 8.5% of valuation decline, in part reflecting the portfolio's lack of exposure to city centre locations most affected by the abrupt shift to working from home.

As the table below shows, our portfolio outperformed the MSCI-IPD All Retail benchmark on a total return basis by 120 bps, attributable to an income return outperformance of 180 bps. When our portfolio returns are compared to the specific indices for shopping centres and retail parks, our portfolios show a considerably higher total return outperformance (total returns ahead by 1,670 bps for shopping centres and 430 bps for retail parks). In our view, our overall outperformance is driven by the affordable, sustainable nature of our rents, our smaller, more liquid lot sizes and our high occupancy levels, which means that our ERV decline was far less marked than our peers.

 
 Year to 31 March 2021    Total Return   Income Return   Capital Growth 
 NRR portfolio                   -6.9%            7.5%           -13.5% 
                         -------------  --------------  --------------- 
 MSCI-IPD Benchmark(1)           -8.1%            5.5%           -12.9% 
                         -------------  --------------  --------------- 
 Relative performance         +120 bps        +180 bps          -60 bps 
                         -------------  --------------  --------------- 
 
 
 Year to 31 March 2021                    Total Return 
 NRR shopping centre portfolio                  -10.8% 
                                         ------------- 
 MSCI-IPD shopping centre Benchmark(1)          -23.6% 
                                         ------------- 
 Relative performance                       +1,670 bps 
                                         ------------- 
 NRR retail park portfolio                        0.6% 
                                         ------------- 
 MSCI-IPD retail park Benchmark(1)               -3.6% 
                                         ------------- 
 Relative performance                         +430 bps 
                                         ------------- 
 
   1.     Benchmark includes monthly & quarterly valued retails 

For a number of years we have been tracking the alternative use value ('AUV') for our retail assets and as at 31 March 2021 the AUV of our retail portfolio is GBP767 million which, for the first time, exceeds our retail book values by 6%. The majority alternative use in our portfolio is residential which has been a key driver of the increase in our AUV.

Finance review

COVID-19 has inevitably had an impact on our financial performance in the year. At the outset of the pandemic we moved quickly and decisively to protect our cash and liquidity position by drawing down on our Revolving Credit Facility ('RCF'), accelerating our disposal strategy, cancelling non-essential capital expenditure and suspending dividend payments. As a result, no dividends were paid in the period, compared to 16.2 pence per share in FY20. In recognition of the Company's increased cash and liquidity position, resilient performance during the pandemic and the improving market backdrop, the Board has today announced the resumption of dividends, declaring a dividend of 3.0 pence relating to FY21.

Given the difficult circumstances that we faced, it is unsurprising that Underlying Funds From Operations ('UFFO') came in at GBP11.5 million compared to GBP52.1 million in the prior year, however we have remained profitable in spite of the fact that our community pub business was only able to trade for 17 weeks of the financial year. Our IFRS loss after tax was -GBP150.5 million, compared to a loss of -GBP121.1 million in the prior year, predominantly reflecting a non-cash reduction in portfolio valuation of GBP152.9 million.

Our portfolio was valued on a proportionally consolidated basis at GBP0.97 billion at 31 March 2021, compared to GBP1.20 billion at 31 March 2020, reflecting a 13.6% like-for-like decline in portfolio valuation and the successful execution of our disposal strategy. Our EPRA Net Tangible Assets per share were 151 pence (31 March 2020: 201 pence) and our IFRS net assets were GBP460.4 million (31 March 2020: GBP610.6 million), with the changes predominantly explained by a non-cash reduction in portfolio valuation. The valuation declines across all segments of the portfolio have been less marked, or have reversed, in the second half of the financial year.

Improved cash and liquidity position despite unprecedented income disruption

Throughout the financial year, we have taken decisive actions to protect the strength of our unsecured and unencumbered balance sheet by maximising our cash and available liquidity position and reducing net debt. We ended the year with total available liquidity of GBP199.3 million, increased from GBP127.1 million as at 31 March 2020. This reflects the increase in our entirely unrestricted cash position from GBP82.1 million to GBP154.3 million. As a result, net debt reduced from GBP563.6 million to GBP493.3 million over the financial year.

Since the UK's first national lockdown in March 2020, we have closely monitored our liquidity position, undertaking detailed analysis and stress testing which continues to demonstrate that we remain a financially sound business with a capital structure that is well placed to absorb a prolonged period of uncertainty. We moved quickly to apply for the Covid Corporate Financing Facility ('CCFF'), for which our eligibility to draw GBP50 million was confirmed in April 2020. While we did not draw the CCFF, our eligibility meant that we had available undrawn debt facilities of GBP95 million including the undrawn portion of our revolving credit facility, until the CCFF lapsed in March 2021. In recognition of the resilience of our position, in December 2020, Fitch Ratings reaffirmed NewRiver's Long-Term Issuer Default Rating (IDR) at 'BBB' with Stable Outlook, its senior unsecured rating at 'BBB+', and its Short-Term IDR at 'F2'. The senior unsecured rating applies to NewRiver's GBP300 million senior unsecured bond dated 2028.

LTV increased by 350 bps from 47.1% at the start of the year to 50.6% at 31 March 2021, primarily as a result of non-cash valuation declines mitigated by the successful execution of our disposal strategy, with GBP81.2 million of completed disposals. Despite increasing during the year LTV remains safely below our covenant thresholds and, encouragingly, the rate of valuation decline has reduced significantly in the second half of the financial year with retail park valuations returning to growth. Notwithstanding a full year of COVID-19 disruption our interest cover ratio, the other covenant attached to our unsecured facilities, remains in compliance at 2.3x, ahead of our closest covenant of 1.75x.

Our LTV guidance is unchanged and we remain committed to reducing our LTV to below 40%. We plan to do this through further targeted disposals, as demonstrated by the GBP79 million of retail disposals we currently have exchanged or under offer, and the recently announced intention to divest ourselves of Hawthorn, our community pub business.

Finally, we have a covenant light capital structure with all of our balance sheet assets unencumbered. There are no refinancing events until August 2023, so our balance sheet is in a strong position as we emerge from COVID-19. Maintaining our balance sheet strength and executing our plan to reduce LTV will be a key focus for the rest of FY22 and beyond.

Key performance measures

The Group financial statements are prepared under IFRS, where the Group's interests in joint ventures are shown as a single line item on the income statement and balance sheet. Management reviews the performance of the business principally on a proportionally consolidated basis which includes the Group's share of joint ventures on a line-by-line basis. The Group's financial key performance indicators are presented on this basis.

In addition to information contained in the Group financial statements, Alternative Performance Measures ('APMs'), being financial measures that are not specified under IFRS, are also used by management to assess the Group's performance. These include a number of the financial statistics included on Page 2 of this document. These APMs include a number of European Public Real Estate Association ('EPRA') measures, prepared in accordance with the EPRA Best Practice Recommendations reporting framework, which are summarised in the 'Alternative Performance Measures' section at the end of this document. We report these measures because management considers them to improve the transparency and relevance of our published results as well as the comparability with other listed European real estate companies. Definitions for APMs are included in the glossary and the most directly comparable IFRS measure is also identified. The measures used in the review below are all APMs presented on a proportionally consolidated basis unless otherwise stated.

The APM on which management places most focus, reflecting the Company's commitment to driving cash income returns, is UFFO. UFFO measures cash profits, which includes recurring cash profits and excludes other one-off or non-cash adjustments. We consider this metric to be the most appropriate for measuring the underlying performance of the business as it is familiar to non-property investors, and better reflects the Company's generation of cash profits. It is for this reason that UFFO is used to measure dividend cover.

The relevant sections of this Finance Review contain supporting information, including reconciliations to the financial statements and IFRS measures. The 'Alternative Performance Measures' section also provides references to where reconciliations can be found between APMs and IFRS measures.

Underlying Funds From Operations

The following table reconciles IFRS profit after taxation to UFFO, which is the Company's measure of cash profits.

Reconciliation of loss after taxation to UFFO

 
                                            31 March 2021  31 March 2020 
                                                   (GBPm)         (GBPm) 
                                            ------------- 
Loss for the period after taxation                (150.5)        (121.1) 
------------------------------------------  -------------  ------------- 
Adjustments 
Revaluation of property                             154.7          162.6 
Revaluation of joint ventures' investment 
 properties                                         (1.8)            4.3 
Loss on disposal of investment properties             5.5            1.8 
Revaluation of derivatives                            0.1            2.8 
Loss on disposal of subsidiary                        2.2              - 
Acquisition costs                                     0.1            0.4 
Deferred tax                                        (1.4)            0.5 
EPRA earnings                                         8.9           51.3 
                                            ------------- 
Depreciation on public houses                         1.1            0.8 
Forward looking element of IFRS 9                     0.6              - 
Abortive fees                                         0.3              - 
Share-based payment charge                            0.6              - 
Underlying Funds From Operations                     11.5           52.1 
                                            ------------- 
 

Underlying Funds From Operations is represented on a proportionally consolidated basis in the following table.

 
                                                       31 March 2021                                 31 March 
                                                                                                         2020 
 UNDERLYING FUNDS FROM           Group          Non-cash   JVs & Associates   Proportionally   Proportionally 
  OPERATIONS                              adjustments(1)               GBPm     consolidated     consolidated 
                                  GBPm              GBPm                                GBPm             GBPm 
-----------------------------  -------  ----------------  -----------------  ---------------  --------------- 
 Revenue                          91.1                 -                4.6             95.7            148.2 
-----------------------------  -------  ----------------  -----------------  ---------------  --------------- 
 Property operating expenses    (47.1)               0.6              (1.0)           (47.5)           (55.3) 
-----------------------------  -------  ----------------  -----------------  ---------------  --------------- 
 Net property income              44.0               0.6                3.6             48.2             92.9 
-----------------------------  -------  ----------------  -----------------  ---------------  --------------- 
 Administrative expenses        (23.4)               2.1              (0.2)           (21.5)           (19.8) 
-----------------------------  -------  ----------------  -----------------  ---------------  --------------- 
 Other income                      7.2                 -                  -              7.2                - 
-----------------------------  -------  ----------------  -----------------  ---------------  --------------- 
 Net finance costs              (22.8)             (0.1)              (0.8)           (23.7)           (22.0) 
-----------------------------  -------  ----------------  -----------------  ---------------  --------------- 
 Taxation                          2.7             (1.4)                  -              1.3              1.0 
-----------------------------  -------  ----------------  -----------------  ---------------  --------------- 
 Underlying Funds From 
  Operations                                                                            11.5             52.1 
-----------------------------  -------  ----------------  -----------------  ---------------  --------------- 
 UFFO per share (pence)                                                                  3.8             17.0 
                               -------  ----------------  -----------------  ---------------  --------------- 
 Ordinary dividend per 
  share (pence)                                                                          3.0             16.2 
                               -------  ----------------  -----------------  ---------------  --------------- 
 Ordinary dividend cover                                                                127%             105% 
                               -------  ----------------  -----------------  ---------------  --------------- 
 Admin cost ratio                                                                      24.9%            14.9% 
                               -------  ----------------  -----------------  ---------------  --------------- 
 Weighted average # shares                                                             306.4            305.9 
                               -------  ----------------  -----------------  ---------------  --------------- 
 

1. Adjustments to Group figures to remove non-cash items, principally forward looking element of IFRS 9 GBP(0.6) million, depreciation on public houses GBP(1.1) million, abortive fees and acquisition costs GBP(0.4) million, share-based payment charge GBP(0.6) million, revaluation of derivatives GBP0.1 million and Deferred tax GBP1.4 million

Net property income

 
Analysis of retail net property income (GBPm) 
-----------------------------------------------------  ------- 
Retail net property income for the year ended 
 31 March 2020                                            68.4 
----------------------------------------------  -----  ------- 
Like-for-like rental income                              (3.4) 
 
FY21 CVAs and administrations                   (2.4) 
Rent and service charge provisions              (5.6) 
Lease modifications                             (1.6) 
Car park and commercialisation income           (5.6) 
----------------------------------------------  -----  ------- 
COVID-19 impact                                         (15.2) 
 
Acquisitions                                               2.1 
Disposals                                                (2.2) 
Asset management fees                                      0.3 
Other property costs                                     (2.1) 
Other                                                    (0.7) 
----------------------------------------------  -----  ------- 
Retail net property income for the year ended 
 31 March 2021                                            47.2 
----------------------------------------------  -----  ------- 
 

On a proportionally consolidated basis, retail net property income was GBP47.2 million for the year ended 31 March 2021 compared to GBP68.4 million in the year ended 31 March 2020.

Like-for-like net rental income declined by GBP3.4 million, or -6.2%, including the impact of CVAs and administrations in the prior year. Further to this, CVAs and administrations in FY21, including New Look and Peacocks, reduced net property income by GBP2.4 million.

The GBP5.6 million provision increase has been made in relation to retail rents and service charge amounts that we have deemed unlikely to be received as a result of the COVID-19, and the lease modifications reduction of GBP1.6 million reflects the impact of reprofiling rents where, for example, rent free periods have been offered as a result of the impact of COVID-19. Car park and commercialisation income has declined by GBP5.6 million, or -59%, reflecting reduced footfall across town centres during the national lockdown period.

The GBP2.1 million of additional income from acquisitions related to a full half of income from five retail parks acquired in our relationship with BRAVO, and the acquisition of Sprucefield Retail Park, in FY20. This more than offset the GBP2.2 million of income lost as a result of our asset disposal programme.

The GBP0.3 million increase in asset management fee income, reflects our increased focus on leveraging our market-leading asset management platform, by managing assets on behalf of joint venture partners and third parties.

Analysis of Hawthorn net property income (GBPm)

 
Hawthorn net property income for the year ended 
 31 March 2020                                               24.5 
                                                  ------ 
Decrease in like-for-like income                            (0.6) 
 
COVID-19 closure impact                           (14.6) 
Partner support provided                           (8.7) 
Beer destruction                                   (0.4) 
------------------------------------------------  ------  ------- 
COVID-19 impact                                            (23.7) 
 
Bravo Inns acquisition                                        0.8 
Acquisition of 28 pubs from Marston's                         0.2 
Pub and c-store disposals                                   (0.3) 
Other                                                         0.1 
------------------------------------------------  ------  ------- 
Hawthorn net property income for the year ended 
 31 March 2021                                                1.0 
------------------------------------------------  ------  ------- 
 

Pub net property income was GBP1.0 million during the year to 31 March 2021, compared to GBP24.5 million in the year to 31 March 2020, predominantly due to the mandatory closure of our pub portfolio for the vast majority of the financial year as part of the UK Government's response to the COVID-19 pandemic. In England, where the majority of our pubs are located, we experienced seven months of national lockdowns, two months of the tiered system, and just three months of normal trading over the Summer of 2020. When the pubs were open and able to trade, performance was encouraging, with only a modest like-for-like decline of GBP0.6 million, reflecting reduced capacity, recovering customer confidence, some localised restrictions, and the Government's Eat Out to Help Out scheme.

The direct impact of closing our pubs throughout the sustained periods of lockdown in the year adversely impacted by income by GBP14.6 million, with the support provided to partners, predominantly in the form of rent waivers, further reducing income by GBP8.7 million. The cost of destroying beer supplies adversely impacted income by GBP0.4 million.

The impact of a full year of income from the acquisitions of Bravo Inns and 28 community pubs from Marston's in FY20 added GBP0.8 million and GBP0.2 million respectively.

Administrative expenses

Administrative expenses were GBP21.5 million in the year, compared to GBP19.8 million in FY20. A driver of the increase included the investment we have made into our Hawthorn operating platform in support of the acquisitions made in FY20.

Other income

Other income of GBP7.2 million was received during the year, GBP2.7 million relating to our retail portfolio, and GBP4.5 million relating to our pub portfolio. In retail, other income related entirely to insurance proceeds received following the fire in October 2018 at the unit formerly occupied by B&M at Clifton Moor Retail Park in York.

In the pubs, we received a dilapidation payment in relation to cost of repairs made to the 'Trent' portfolio. This contributed a further GBP0.8 million to income. In addition, we received GBP3.7 million of government grants on our operator managed estate, due to the income disruption caused by the closure of the pub estate in Q1 as a result of COVID-19.

Net finance costs

Net finance costs were GBP23.7 million in the year, compared to GBP22.0 million in the prior year. This is mainly due to the strategic liquidity decision to draw on our RCF in order to protect our cash and liquidity position at the onset of COVID-19 (contributing GBP1.1 million of the increase), and increase in margin due to our LTV rising above 40% in the second half of FY20 (GBP0.6 million).

Taxation

As a REIT we are exempt from UK corporation tax in respect of our qualifying UK property rental income and gains arising from disposal of exempt property assets. The majority of the Group's income is therefore tax free as a result of its REIT status. Our REIT exemption does not extend to profits arising from the margin made on the sale of drinks within the pub portfolio and other sources of income. There was a tax credit of GBP1.3 million during the year, reducing tax provisions made which are no longer expected to be required.

Dividends

On 19 March 2020 we announced that the Board had decided not to declare a fourth quarter dividend for the year ended 31 March 2020 due to uncertainty around the impact of COVID-19 on the Company's operations. When we announced our results for the first half of the financial year on 26 November 2020 we stated that, due to the uncertainty that remained at the time, the Board had decided not to pay a dividend in respect of the first half in order to continue its focus on cash reserves and liquidity, but that it was the Board's intention that a covered dividend would be reinstated at the full year.

Although significant uncertainty remains globally, with the success of the vaccine roll-out in the UK and with the easing of further restrictions on 17 May, England is on track to remove the majority of restrictions on 21 June 2021. In this context, together with the Company's increased cash and liquidity position and resilient performance during the pandemic, the Board has declared a dividend of 3.0 pence per share in respect of the year ended 31 March 2021.

Prior to COVID-19, NewRiver's policy was to pay dividends on a quarterly basis in equal instalments, and the quarterly dividend for the forthcoming year was set at the full year results. This policy was successful for a number of years, but ultimately did not allow management the flexibility to make the capital and operational decisions required in order to achieve the Company's strategic priorities.

As a consequence, NewRiver's dividend policy will now be to pay dividends equivalent to 80% of UFFO. These dividends will be declared twice annually at the Company's half and full year results, calculated with reference to the most recently completed six-month period.

The Company is a member of the REIT regime whereby profits from its UK property rental business are tax exempt. The REIT regime only applies to certain property-related profits and has several criteria which have to be met, including that at least 90% of our profit from the property rental business must be paid as dividends. We intend to continue as a REIT for the foreseeable future.

A dividend of 3.0 pence per share in respect of the year ended 31 March 2021 will, subject to shareholder approval at the 2021 AGM, be paid on 3 September 2021. The ex-dividend date will be 29 July 2021. The 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.

 
                                               As at 31 March 2021               As at 31 March 
                                                                                           2020 
                                     Group   JVs & Associates   Proportionally   Proportionally 
                                      GBPm               GBPm     consolidated     consolidated 
                                                                          GBPm             GBPm 
                                  --------  -----------------  ---------------  --------------- 
 Properties at valuation             930.1               44.1            974.2          1,197.1 
 Right of use asset                   86.5                  -             86.5             87.2 
 Investment in JVs & associates       30.9             (30.9)                -                - 
 Other non-current assets              1.9                1.6              3.5              2.9 
 Cash                                150.5                3.8            154.3             82.1 
 Other current assets                 26.0                1.2             27.2             27.9 
                                  --------  -----------------  ---------------  --------------- 
 Total assets                      1,225.9               19.8          1,245.7          1,397.2 
                                  --------  -----------------  ---------------  --------------- 
 Other current liabilities          (47.6)              (1.9)           (49.5)           (49.9) 
 Lease liability                    (84.9)                  -           (84.9)           (86.3) 
 Debt                              (629.7)             (17.9)          (647.6)          (645.7) 
 Other non-current liabilities       (3.3)                  -            (3.3)            (4.7) 
                                  --------  -----------------  ---------------  --------------- 
 Total liabilities                 (765.5)             (19.8)          (785.3)          (786.6) 
                                  --------  -----------------  ---------------  --------------- 
 IFRS net assets                     460.4                  -            460.4            610.6 
                                  --------  -----------------  ---------------  --------------- 
 EPRA adjustments: 
 Goodwill                                                                (0.5)            (0.2) 
 Deferred tax                                                              0.7              2.1 
 Fair value financial 
  instruments                                                              2.6              2.7 
                                  --------  -----------------  ---------------  --------------- 
 EPRA NTA                                                                463.2            615.2 
                                  --------  -----------------  ---------------  --------------- 
 EPRA NTA per share                                                       151p             201p 
                                  --------  -----------------  ---------------  --------------- 
 IFRS net assets per share                                                150p             199p 
                                  --------  -----------------  ---------------  --------------- 
 LTV                                                                     50.6%            47.1% 
                                  --------  -----------------  ---------------  --------------- 
 

Net assets

As at 31 March 2021, IFRS net assets were GBP460.4 million (31 March 2020: GBP610.6 million). The reduction was primarily due to a 13.6% like-for-like decrease in portfolio valuation.

EPRA NTA is calculated by adjusting net assets to reflect the potential impact of dilutive ordinary shares, and to remove the fair value of any derivatives and goodwill held on the balance sheet. These adjustments are made with the aim of improving comparability with other European real estate companies. EPRA NTA decreased by 25% to GBP463.2 million, from GBP615.2 million at 31 March 2020. EPRA NTA per share decreased by 25% to 151 pence per share at 31 March 2021 compared to 201 pence per share at 31 March 2020. The decrease in EPRA NTA and EPRA NTA per share is primarily due to the 13.6% like-for-like decrease in portfolio valuation.

Properties at valuation

Proportionally consolidated properties at valuation was GBP974.2 million at 31 March 2021, compared to GBP1,197.1 million at 31 March 2020, due to a 13.6% like-for-like decline in valuations and the completion of GBP81.2 million of disposals, in line with our strategy to complete between GBP80-100 million of disposals in FY21.

Net debt & financing

Analysis of movement in proportionally consolidated net debt (GBPm)

 
                                                   Group   JVs & Associates         Proportionally 
                                                                                      consolidated 
                                                          ----------------- 
 Net debt at 31 March 2020                         547.8               15.8                  563.6 
-------------------------------------------               ----------------- 
 Operating activities 
 Net cash inflow from operating activities         (8.6)              (2.4)                 (11.0) 
 
 Investing activities 
 New borrowings                                        -                2.0                    2.0 
 Investment in associate                             2.4                  -                    2.4 
 Disposal of subsidiary                           (38.5)                                    (38.5) 
 Disposal of investment properties                (40.1)              (2.1)                 (42.2) 
 Purchase of plant and equipment                     3.3                  -                    3.3 
 Development and other capital expenditure          10.0                0.4                   10.4 
 
 Financing activities 
 Ordinary dividends paid                             1.4                                       1.4 
 
 
 Other                                               1.5                0.4                    1.9 
 Net debt at 31 March 2021                         479.2               14.1                  493.3 
                                                          ----------------- 
 

Proportionally consolidated net debt decreased by GBP70.3 million during the year to GBP493.3 million, primarily as a result of our disposal activity.

Operating activities generated a net cash inflow of GBP11.0 million, compared with UFFO of GBP11.5 million. As part of our disposal programme, we received cash proceeds of GBP78.3 million, net of re-investment in associates, primarily Sprucefield, of GBP2.4m, in addition to new debt taken out in associates of GBP2.0 million. The purchase of plant and equipment, and development and other capex, represented cash outflows of GBP3.3 million and GBP10.4 million respectively. The payment of withholding tax on the dividend relating to Q3 FY20 resulted in a net cash outflow of GBP1.4 million.

Financial policies

Our conservative financial policies were put in place in consultation with shareholders and form a key component of our financial risk management strategy. Our LTV increased from 47.1% at 31 March 2020 to 50.6% at 31 March 2021 due to non-cash portfolio valuation declines, the effect of which was partially mitigated by the successful execution of our disposal programme and cash generation from our portfolio. While LTV at this level remains safely below our covenant thresholds, it is now ahead of both our stated policy and our guidance.

We are as committed as ever to reducing our LTV to below 40% and balance sheet gearing to below 100%, and we plan to do this through our actions, as demonstrated by the GBP79 million of retail disposals we currently have exchanged or under offer, and the recently announced intention to divest ourselves of Hawthorn, our community pub business.

Similarly, whilst our Net debt: EBITDA ratio is now above our stated policy, the strategic disposals outlined in these results alongside the projected revenue recovery following the easing of lockdown restrictions will significantly improve this metric in the future.

 
                                       Financial policy    Proportionally consolidated 
                                                          31 March 2021   31 March 2020 
                                     ------------------  --------------  -------------- 
 Net debt                                                     GBP493.3m       GBP563.6m 
 Principal value of gross debt                                GBP653.1m       GBP652.4m 
 Weighted average cost of debt(1)                                  3.2%            3.4% 
 Weighted average debt maturity(2)                              4.8 yrs         5.9 yrs 
 
                                          Guidance <40% 
 Loan to value                              Policy <50%           50.6%           47.1% 
 
                                                                   FY21            FY20 
                                     ------------------  --------------  -------------- 
 Net debt: EBITDA                                  <10x           14.6x            7.7x 
 Interest cover                                   >2.0x            2.3x            4.8x 
 Ordinary dividend cover(3)                       >100%            127%            105% 
                                                                      Group 
                                                          31 March 2021   31 March 2020 
                                     ------------------  --------------  -------------- 
 Balance sheet gearing                            <100%            104%             90% 
                                     ------------------  --------------  -------------- 
 
   1.   Cost of debt assuming GBP215 million revolving credit facility is fully drawn 

2. Average debt maturity assumes one-year extension option is exercised and bank approved. Excluding this option, debt maturity at 31 March 2021 is 4.3 years

   3.   Calculated with reference to UFFO 

Additional guidelines

Alongside our financial policies we have a number of additional guidelines used by management to analyse operational and financial risk, which we disclose in the following table:

 
                                  Guideline                   31 March 2021 
 Single retailer concentration    <5% of gross income         1.9% (B&M, Poundland 
                                                               and Superdrug) 
                                 --------------------------  --------------------- 
 Development expenditure          <10% of GAV                 <1% 
                                 --------------------------  --------------------- 
                                  >70% pre-let or pre-sold 
 Risk-controlled development       on committed               100% 
                                 --------------------------  --------------------- 
 Pub weighting (excluding 
  c-stores)                       <30% of GAV                 25% 
                                 --------------------------  --------------------- 
 

Conclusion

It has been a challenging year for the UK economy and lockdown restrictions have impaired the financial performance of the Company and impacted the valuation of our portfolio. In spite of this we remained profitable, generating GBP11.5 million of UFFO, our cash and liquidity position has improved over the year by GBP72 million and we have maintained our Investment Grade credit rating.

Key to the strength of our financial position in navigating our way through the pandemic has been our unsecured balance sheet, the flexibility and unencumbered nature of our banking facilities and our corporate bond, which have enabled us to take decisive action whilst not being distracted by any covenant issues, with a covenant light capital structure that puts us at an advantage to manage risk and explore opportunities. The divestment of our community pub business will strengthen the balance sheet and reduce LTV towards our stated guidance of 40%.

NewRiver has one of the best and most efficient capital structures in the sector. This financial year has tested and proven this and we have come through FY21 in a strong financial position as we look forward to the year ahead.

Mark Davies

Chief Financial Officer

Notes to Editors

About NewRiver

NewRiver REIT plc ('NewRiver') is a leading Real Estate Investment Trust specialising in buying, managing and developing essential retail and leisure assets throughout the UK.

Our GBP1.0 billion portfolio covers 9 million sq ft and comprises 33 community shopping centres, 19 conveniently located retail parks and 673 community pubs. We hand-picked our assets to deliberately focus on occupiers providing essential goods and services, and avoid structurally challenged sub-sectors such as department stores, mid-market fashion and casual dining. This focus, combined with our affordable rents and desirable locations, delivers sustainable and growing returns for our shareholders, while our active approach to asset management and inbuilt 2.6 million sq ft development pipeline provide further opportunities to extract value from our portfolio.

NewRiver has a Premium Listing on the Main Market of the London Stock Exchange (ticker: NRR). Visit www.nrr.co.uk for further information.

Principal risks and uncertainties

Our approach to risk management

Risk is inherent in all business and effective risk management is a key element in the delivery of our strategy and operation of our business model. The COVID-19 pandemic brought economic and social disruption over FY21 however our culture and strong governance systems have supported the business during this challenge. Our small workforce encourages flexibility and collaboration across the business in all areas including risk. The accessibility and flexibility of the Board and senior staff are particularly pertinent when adapting to emerging and external risks such as a global pandemic. This flexibility has enabled the business to adjust and respond to this fast-changing situation and prove its resilience and adaptability.

The Board has ultimate responsibility for the risk management and internal controls of the Company, and regularly evaluates our appetite for risk, ensuring our exposure to risk is managed effectively. The Audit Committee monitors the adequacy and effectiveness of the Company's risk management and internal controls and supports the Board in assessing the risk mitigation processes and procedures. The Executive Committee is closely involved with day-to-day risk management, ensuring that it is embedded within the Company's culture and values, and that there is a delegation of accountability for each risk to senior management.

Risk appetite

There are multiple risks that could impact our ability to successfully execute our strategy. The Board generally has a low risk appetite but recognises that the external environment in which it operates is inherently risky. Mitigating actions are therefore agreed for all risks that exceed the Group's risk appetite. Our experienced leadership team continuously works to mitigate the risks arising from the external environment.

Significant factors which contribute to the low risk of our business include:

-- Maintaining an unsecured balance sheet, with the Company benefiting from a more diversified debt structure and gaining access to a larger pool of capital to help achieve our strategic goals

   --      Our disciplined approach to stock selection with probability risk adjusted returns 
   --      Deploying capital in joint ventures, thereby diversifying risk 
   --      A diverse tenant base in which there is no single tenant exposure of more than 3% 
   --      Our experienced Board and senior management 

Risk monitoring and assessment including emerging risks

The identification of risks is a continual process which has been highlighted more so this year than ever before with a global pandemic creating uncertainty across all sectors both economically and socially. The Company maintains a risk register in which a range of categories are considered. These risks are linked to the business model and strategic priorities of the Company.

The risk register assesses the impact and probability of each identified risk. By identifying all risks on a register and continuously updating this register principal risks can be identified as those that might threaten the Company's business model, future performance, solvency or liquidity and reputation. Their potential impact and probability will also be a factor in whether they are classed as principal. The risk register also records actions that can be taken to further mitigate the risk and each action is assigned to an individual or group. Mitigation factors and actions are assigned to all risks whether they are principal, non-principal or emerging. The continuous updating of this risk register assists in identifying emerging risks as they develop and ensures that their impact is continually assessed as they emerge and progress. All risks on the register are 'scored' in terms of impact and probability. A risk heat map can be a useful visual aid to understand the potential impact and probability of each significant risk on a gross basis prior to mitigation.

Principal risk areas are:

 
 External risks                               Operational risks 
      1. Macroeconomic                             7. People 
                                             ------------------------- 
      2. Political and regulatory                  8. Financing 
                                             ------------------------- 
      3. Catastrophic external event               9. Asset management 
                                             ------------------------- 
      4. Climate change                            10. Development 
                                             ------------------------- 
      5. Changes in technology and consumer        11. Acquisition 
       habits and demographics 
                                             ------------------------- 
      6. Cyber Security (New)                      12. Disposal 
                                             ------------------------- 
 

Risk assessment during the year

The general risk environment in which the Company operates remained uncertain throughout the year. While the easing of lockdown rules from June 2020 onwards removed some risk relating to COVID-19, particularly in our macroeconomic, catastrophic external event and asset management risk categories, the second wave of infections and the imposition of further restrictions by the UK and other national governments from October 2020 onwards meant that much of these risk factors returned. Wider concerns around the deterioration of the UK retail market, and continued political and economic uncertainty relating to the UK's departure from the EU, remained throughout the year.

External Risks

 
 Risk and        Monitoring and management                                         Change in risk assessment 
 impact                                                                             during the period 
 1. 
 Macroeconomic       *    The Board regularly assesses the Company's strategy        *    Macroeconomic risk has remained the same during the 
 Economic                 in the context of the wider macroeconomic                       period and is considered a medium impact risk with a 
 conditions               environment. This continued review of strategy                  medium to high probability. 
 in the UK and            focuses on positioning our portfolio for the evolving 
 changes to               economic situation. 
 fiscal                                                                              *    Although retail sales and pub sales rebounded after 
 and monetary                                                                             the first national lockdown further restrictions by 
 policy may          *    The Board and management team consider updates from             the UK and other national governments from October 
 impact                   external advisers, reviewing key indicators such as             2020 onwards meant that sales in pubs and 
 market                   forecast GDP growth, employment rates, interest rates           non-essential retail were again impacted. 
 activity,                and Bank of England guidance and consumer confidence            Restrictions are however now lifting again and the 
 demand for               indices.                                                        vaccination programme is proving successful. 
 investment 
 assets, the 
 operations          *    Our portfolio is focused on resilient market               *    The uncertainty around the impact of the COVID-19 
 of our                   sub-sectors such as essential retailers and wet-led             pandemic continues to result in declines in asset 
 occupiers                pubs.                                                           valuations, which has narrowed the headroom on some 
 or the                                                                                   of our debt covenants. 
 spending 
 habits of the       *    Through regular stress testing of our portfolio we 
 UK                       ensure our financial position is sufficiently              *    Possible higher inflation could fuel wage growth and 
 population.              resilient.                                                      costs leading to rate increases above current 
                                                                                          forecasts. 
 
                     *    Closely monitoring rent collection and cash flow 
                                                                                     *    The Bank of England is expecting a strong recovery to 
                                                                                          pre-pandemic levels so these Macroeconomic risks are 
                                                                                          expected to improve. 
                ----------------------------------------------------------------  --------------------------------------------------------------- 
 2. Political 
 and               *    The Board regularly considers political and                  *    Political and regulatory risk has increased in the 
 regulatory             regulatory developments and the impact they could                 period and is considered a high impact risk with a 
 Changes in UK          have on the Company's strategy and operating                      high probability. 
 Government             environment. 
 policy, 
 the adverse                                                                         *    Political uncertainty surrounding COVID-19 remains, 
 effects           *    External advisers, including legal advisers, provide              although the roll out of vaccinations and opening up 
 of Brexit on           updates on emerging regulatory changes to ensure the              of restrictions is positive. 
 our tenants,           business is prepared and is compliant. 
 or the impact 
 of political                                                                        *    There still remain uncertainties around the longer 
 uncertainty       *    We regularly assess market research to gauge the                  term impacts of Brexit and also uncertainties 
 on                     impact of regulatory change on consumer habits.                   relating to the possibility of Scottish Devolution. 
 the 
 consumers' 
 retail and        *    We carry out stress testing on our portfolio in              *    The Coronavirus Act imposed a moratorium on 
 leisure                relation to regulatory changes which may impact our               landlords' ability to forfeit leases of commercial 
 spend.                 operations or financial position.                                 property for non-payment of rent in England and Wales 
                                                                                          and Northern Ireland. This moratorium has again been 
                                                                                          extended and will now expire on 30 June 2021. 
                   *    Where appropriate, we participate in industry and 
                        other representative bodies to contribute to policy 
                        and regulatory debate. Individual ExCo constituents          *    There are further uncertainties around the outcome of 
                        are members of BPA, BBPA and the High Street task                 the Government review of the Landlord and Tenant Act 
                        force.                                                            1954. 
                ----------------------------------------------------------------  --------------------------------------------------------------- 
 3. 
 Catastrophic      *    The Board have developed a comprehensive crisis                 *    Catastrophic external event risk has been increased 
 external               response plan which details actions to be taken at a                 during the period and is considered a high impact 
 event                  head office and asset-level.                                         risk with a high probability. 
 An external 
 event 
 such as civil     *    The Board regularly monitors the Home Office                    *    The impact of COVID-19 has caused unprecedented 
 unrest, a              terrorism threat level and other security guidance.                  economic and operational disruption. We mitigated th 
 civil                                                                                 e 
 emergency                                                                                   impact through our portfolio positioning focused on 
 including         *    The Board regularly monitors advice from the UK                      essential goods and services, our cash position and 
 a large-scale          Government regarding pandemic responses and emergency                liquidity and our active approach to asset 
 terrorist              procedures at our assets are regularly tested and                    management. 
 attack                 enhanced in-line with the latest UK Government 
 or pandemic,           guidance. 
 could                                                                                  *    COVID-19 has also demonstrated the effectiveness of 
 severely                                                                                    home working for the business, which has ensured 
 disrupt           *    We have robust IT security systems which cover data                  preparedness for any future lockdowns. 
 global                 security, disaster recovery and business continuity 
 markets and            plans. 
 cause                                                                                  *    The Board continues to review the Company's response 
 damage and                                                                                  to the COVID-19 pandemic and make any necessary 
 disruption        *    The business has comprehensive insurance in place to                 amendments to our crisis response plan. 
 to our                 minimise the cost of damage and disruption to assets. 
 assets. 
                                                                                        *    The roll out of vaccinations and the opening up of 
                                                                                             restrictions is positive and our operational 
                                                                                             performance has proved the resilience of our 
                                                                                             portfolio. 
                ----------------------------------------------------------------  --------------------------------------------------------------- 
 4. Climate 
 change               *    We have a comprehensive ESG programme which is            *    Climate change risk has increased during the period 
 Adverse                   regularly reviewed by the Board and Executive                  and is considered a medium impact risk with a medium 
 impacts                   Committee. A detailed overview of the programme can            likelihood. 
 from                      be found in our standalone ESG report. 
 environmental 
 incidents                                                                           *    ESG has risen up the agenda of many stakeholders and 
 such                 *    One of the key objectives of the programme is to               expectations of compliance with best practice have 
 as extreme                minimise our impact on the environment through                 increased 
 weather                   reducing energy consumption, sourcing from renewable 
 or flooding               sources, and increased recycling. 
 could                                                                               *    Regulatory requirements have also increased during 
 impact the                                                                               the period, in addition to the scoring criteria for 
 operation            *    We are developing our pathway to Net Zero Carbon and           certain ESG benchmarks such as GRESB 
 of our                    setting new medium and long term targets in line with 
 assets.                   the latest climate science. 
 A failure to                                                                        *    Our ESG committee pre-empted these changes and our 
 implement                                                                                initiatives and disclosure continue to evolve in-line 
 appropriate          *    We regularly assess assets for environmental risk and          with best practice. 
 climate risk              ensure sufficient insurance is in place to minimise 
 management                the impact of environmental incidents. 
 measures,                                                                           *    ESG is embedded into capital allocations and is 
 comply with                                                                              considered for all future acquisitions. 
 evolving             *    ESG performance is independently reviewed by our 
 regulations               external environmental consultants and is measured 
 and                       against applicable targets and benchmarks. 
 meeting our 
 ESG 
 targets could        *    We have included TCFD disclosures in our Annual 
 impact the                Report. 
 operation 
 and value of 
 our assets, 
 leading 
 to a risk of 
 asset 
 obsolescence, 
 reputational 
 damage and 
 erosion 
 of investor 
 value. 
                ----------------------------------------------------------------  --------------------------------------------------------------- 
 5. Changes in 
 technology        *    The Board and Executive Committee regularly assess           *    Changes in technology and consumer habits risk has 
 and                    our overall corporate strategy, and acquisition,                  remained the same during the year and is considered a 
 consumer               asset management and disposal decisions in the                    medium impact risk with a low to medium probability. 
 habits                 context of current and future consumer demand. Our 
 and                    strategy is designed to focus on resilient assets 
 demographics.          that take into account these future changes.                 *    Although COVID-19 lockdown restrictions have 
 Changes in                                                                               significantly increased home working and online 
 the                                                                                      shopping, we expect some of this to unwind in the 
 way consumers     *    We closely assess the latest trends reported by CACI,             short term but consumer habits will evolve over the 
 live, work,            our research provider, to ensure we are aligned with              medium term. 
 shop                   evolving consumer trends. 
 and use 
 technology                                                                          *    Our portfolio is focused on providing essential 
 could have an     *    Our retail portfolio is focused on essential spending             retail to local communities, which continues to 
 adverse                on goods and services which are resilient to the                  mitigate the impact of online retail on our 
 impact                 growth of online retail. Our community wet-led pubs               portfolio. 
 on demand for          perform an important social and societal function, 
 our assets.            providing experiences which cannot be replicated 
                        online.                                                      *    While COVID-19 may have accelerated the trend to 
                                                                                          online shopping this provides opportunities for our 
                                                                                          portfolio, particularly retail parks and local 
                   *    Our retail parks are ideally positioned to help                   community shopping centres. 
                        retailers with their multi-channel retail strategies. 
 
                                                                                     *    Our strategy is to reshape our portfolio to ensure 
                   *    The alternative use valuation of our portfolio shows              over the longer term we have the most resilient 
                        we have optionality in realising value from assets                retail portfolio in the UK. 
                        which do not have a future as retail assets. 
                ----------------------------------------------------------------  --------------------------------------------------------------- 
 6. Cyber 
 security          *    There are limited IT servers on sites.                       *    This is a New Principal risk. Whilst this risk has 
 A cyber                                                                                  always been recorded and monitored on our risk 
 attack                                                                                   register its prominence has been elevated in the year 
 could result      *    Multiple third party supplier programs are used which             because one of our third party suppliers experienced 
 in the Group           have their own security systems and are independently             a cyber security incident. No data breaches were 
 being unable           audited by Deloitte and ISO2000 accredited.                       found to have been made but our normal reporting 
 to use its IT                                                                            systems were slower as a result of not having access 
 systems                                                                                  to our normal reporting channels while the incident 
 and/or            *    ExCo receives quarterly reporting on IT matters.                  was being investigated. 
 losing data. 
 This could 
 delay             *    Security protocols are in place to ensure swift              *    This risk could also be increased due to employees 
 reporting and          changes to data access following staff changes and                working from home during the pandemic. 
 divert                 authority limit access. 
 management 
 time. This 
 risk              *    We are have reviewed our IT systems and have a number 
 could be               of focus areas to enhance over the year. 
 increased 
 due to many 
 employees         *    Cyber insurance cover is in place 
 working from 
 home during 
 the 
 pandemic. 
                ----------------------------------------------------------------  --------------------------------------------------------------- 
 

Operational Risks

 
 Risk and         Monitoring and management                                     Change in risk assessment 
 impact                                                                          during the period 
 7. People 
 The inability     *    Attracting, retaining and developing talent is core       *    People risk remains unchanged during the period and 
 to attract,            to our HR strategy, which is regularly reviewed by             is considered a low to medium impact risk with a low 
 retain                 the Board and Executive Committee.                             to medium probability. 
 and develop 
 our 
 people and        *    We undertake an extensive Employee Engagement Survey      *    It remains a challenging operating environment for 
 ensure                 once a year to gauge employee views on leadership,             the Company, which could present some issues in 
 we have the            company culture, health and wellbeing, personal                attracting and retaining talent, but this impact is 
 right                  growth and benefits and recognition. This informs any          mitigated by an active employee engagement programme 
 skills in              changes to HR policy.                                          and the alignment of reward with both individual and 
 place                                                                                 Company-level performance. 
 could prevent 
 us from           *    We regularly benchmark our pay and benefits against 
 implementing           those of peers and the wider market.                      *    We have focused on staff well-being during this 
 our strategy.                                                                         challenging time. We have actively sought regular 
 .                                                                                     feedback from staff. Mindful of mental and physical 
                   *    Succession planning is in place for all key positions          well-being during these prolonged periods of 
                        and is reviewed regularly by the Nomination                    self-isolation and working from home we devised an 
                        committee.                                                     active programme of staff events such as virtual 
                                                                                       social gatherings and exercise classes to help staff 
                                                                                       keep engaged. 
                   *    Longer notice periods are in place for key employees. 
 
                                                                                  *    Our staff retention rate is 95%. 
                   *    Our recruitment policies consider the needs of the 
                        business today and our aspirations for the future, 
                        whilst ensuring our unique corporate culture is 
                        maintained. 
                 ------------------------------------------------------------  ------------------------------------------------------------ 
 8. Financing 
 If gearing        *    The Board regularly assesses Company financial           *    Financing risk remains unchanged during the period 
 levels                 performance and scenario testing, covering levels of          and is considered a high impact risk with a low to 
 become higher          gearing and headroom to financial covenants and               medium probability. 
 than our risk          assessments by external rating agencies. 
 appetite or 
 lead                                                                            *    Although macroeconomic developments, particularly in 
 to breaches in    *    The Company has a programme of active engagement with         the wake of COVID-19 have impacted financial markets, 
 bank covenants         key lenders and shareholders.                                 the strength of the Company's balance sheet, and the 
 this would                                                                           results of our extensive scenario testing, and 
 impact                                                                               stress-testing of headroom, means we have 
 our ability to    *    The Company has a wholly unsecured balance sheet,             significantly mitigated the risk of not being able to 
 implement our          which mitigates the risk of a covenant breach caused          secure sufficient financing. 
 strategy. The          by fluctuations in individual property valuations. 
 business could 
 also struggle                                                                   *    Through our disposal programme strategy we have 
 to obtain         *    The Company has long-dated maturity on its debt,              managed to mitigate the impact COVID-19 might 
 funding                providing sufficient flexibility for refinancing.             otherwise have had on our cash and liquidity position 
 or face                                                                              and LTV. 
 increased 
 interest rates    *    Weekly working capital and cash flow analysis is 
 as a result of         reviewed by the Executive Committee and detailed 
 macroeconomic          forward assessments of cashflows are carried out 
 factors.               regularly. 
 
 
                   *    Our credit rating is independently assessed by Fitch 
                        Ratings every six months. 
                 ------------------------------------------------------------  ------------------------------------------------------------ 
 9. Asset 
 management        *    Asset-level business plans are regularly reviewed by     *    Asset management risk has increased during the period 
 The                    the asset management team and the Executive Committee         and is considered a medium to high impact risk with a 
 performance            and detailed forecasts are updated frequently.                medium to high probability. 
 of our assets 
 may not meet 
 with the          *    The Executive Committee reviews whole portfolio          *    The COVID-19 pandemic has placed restrictions on the 
 expectations           performance on a quarterly basis to identify any              operations of our occupiers and impacted performance 
 outlined in            trends that require action.                                   and rent collection at our assets. 
 their 
 business 
 plans,            *    Our asset managers are in contact with centre            *    There have been a number of high-profile retail 
 impacting              managers and occupiers on a daily basis to identify           failures since the beginning of the pandemic, 
 financial              potential risks and improvement areas.                        including amongst our occupier base. 
 performance 
 and 
 the ability to    *    Revenue collection is reviewed weekly by the             *    Our COVID-19 response has focused on supporting 
 implement our          Executive Committee                                           occupiers and ensuring businesses can emerge from the 
 strategies                                                                           crisis in robust financial shape. 
 
 
                                                                                 *    The roll out of vaccinations and the opening up of 
                                                                                      restrictions is positive and our operational 
                                                                                      performance has proved the resilience of our assets. 
                 ------------------------------------------------------------  ------------------------------------------------------------ 
 10. 
 Development       *    We apply a risk-controlled development strategy          *    Development risk has remained unchanged through the 
 Delays,                through negotiating long-dated pre-lets (typically at         period and is considered a low to medium impact risk 
 increased              least 70% of assets).                                         with a low probability. 
 costs and 
 other 
 challenges        *    All development is risk-controlled and forms only 5%     *    Although the COVID-19 pandemic has brought delays to 
 could                  of the portfolio by value.                                    many development projects, they remain a small part 
 impact our                                                                           of our portfolio and committed capex is low. 
 ability 
 to pursue our     *    Capital deployed is actively monitored by the 
 development            Executive Committee, following detailed due diligence    *    Our largest developments, which include regeneration 
 pipeline               modelling and research.                                       schemes in Burgess Hill and Cowley, Oxford, are 
 and therefore                                                                        driven by key trends which are likely to re-emerge 
 our ability to                                                                       after the immediate impacts of COVID-19 ease. 
 profitably        *    An experienced development team monitors on-site 
 recycle                development and cost controls. 
 development                                                                     *    A number of our regeneration assets are under offer 
 sites                                                                                and this will decrease the proportion of assets 
 and achieve       *    On large scale developments where construction is             focussed on development which inherently reduces risk 
 returns                more than 12 months we look to carry out the project          exposure. 
 on                     in partnership and/or forward sell. 
 development. 
                 ------------------------------------------------------------  ------------------------------------------------------------ 
 11. 
 Acquisition       *    We carry out thorough due-diligence on all new            *    Acquisition risk has reduced through the period and 
 The                    acquisitions, using data from external advisers and            is considered a low impact risk with a low 
 performance            our own rigorous in-house modelling before committing          probability. 
 of asset and           to any transaction. Probability weighted analysis 
 corporate              takes account of these risks. 
 acquisitions                                                                     *    Our key capital allocation priority is to use cash 
 might not meet                                                                        proceeds to reduce debt therefore there will be 
 with our          *    Acquisitions are subject to approval by the Board and          limited acquisition activity for the foreseeable 
 expectations           Executive Committee, who are highly experienced in             future, other than taking 10% stakes in capital 
 and                    the retail and pub real estate sectors.                        partnerships where applicable. 
 assumptions, 
 impacting our 
 revenue and       *    We have the ability to acquire in joint ventures, 
 profitability.         thereby sharing risk. 
                 ------------------------------------------------------------  ------------------------------------------------------------ 
 12. Disposal 
 We may face       *    Our portfolio is focused on high-quality assets with     *    Disposal risk has increased during the period and is 
 difficulty             low lot sizes, making them attractive to a wide pool          considered a low to medium impact risk with a Medium 
 in disposing           of buyers.                                                    Probability. 
 of assets or 
 realising 
 their             *    Assets are valued every six months by external           *    Political uncertainty and the onset of COVID-19 has 
 fair value,            valuers, enabling informed disposal pricing                   increased market uncertainty, causing some purchasers 
 thereby                decisions.                                                    to reconsider or delay acquisition decisions. 
 impacting 
 profitability 
 and our           *    Disposals are subject to approval by the Board and       *    We have an active disposal programme, with the volume 
 ability                Executive Committee, who are highly experienced in            of transactions being completed naturally increasing 
 to reduce debt         the retail and pub real estate sectors.                       disposal risk. The average lot size however is lower 
 levels or make                                                                       than most in the market so tends to be more liquid. 
 further 
 acquisitions.     *    Our portfolio is large and our average asset lot size 
                        is small, meaning that each asset represents only a 
                        small proportion of revenues and profits, thereby 
                        mitigating the impact of a sale not proceeding. 
                 ------------------------------------------------------------  ------------------------------------------------------------ 
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2021

 
                                           Operating                          Operating          Fair 
                                                 and    Fair value                  and         value 
                                           financing   adjustments    Total   financing   adjustments    Total 
                                                2021          2021     2021        2020          2020     2020 
                                   Notes        GBPm          GBPm     GBPm        GBPm          GBPm     GBPm 
=================================  =====  ==========  ============  =======  ==========  ============  ======= 
Revenue                                4        91.1             -     91.1       144.8             -    144.8 
Property operating expenses*           5      (47.1)             -   (47.1)      (55.0)             -   (55.0) 
=================================  =====  ==========  ============  =======  ==========  ============  ======= 
Net property income                             44.0             -     44.0        89.8             -     89.8 
=================================  =====  ==========  ============  =======  ==========  ============  ======= 
 
Administrative expenses                6      (23.4)             -   (23.4)      (20.9)             -   (20.9) 
Other income                           7         7.2             -      7.2           -             -        - 
Share of income / (loss) from 
 joint ventures                       15         2.3           1.2      3.5         2.0         (3.9)    (1.9) 
Share of income / (loss) from 
 associates                           16         0.1           0.6      0.7         0.1         (0.4)    (0.3) 
Net valuation movement             14/17           -       (154.7)  (154.7)           -       (162.6)  (162.6) 
Loss on disposal of subsidiary         8       (2.2)             -    (2.2)           -             -        - 
Loss on disposal of investment 
 properties                            9       (5.5)             -    (5.5)       (1.5)             -    (1.5) 
=================================  =====  ==========  ============  =======  ==========  ============  ======= 
Operating profit / (loss)                       22.5       (152.9)  (130.4)        69.5       (166.9)   (97.4) 
Finance income                        10         0.3             -      0.3         0.1             -      0.1 
Finance costs                         10      (23.1)             -   (23.1)      (24.3)             -   (24.3) 
=================================  =====  ==========  ============  =======  ==========  ============  ======= 
(Loss) / profit for the year 
 before taxation                               (0.3)       (152.9)  (153.2)        45.3       (166.9)  (121.6) 
Taxation                              11         1.3           1.4      2.7         1.0         (0.5)      0.5 
=================================  =====  ==========  ============  =======  ==========  ============  ======= 
Profit / (loss) for the year 
 after taxation                                  1.0       (151.5)  (150.5)        46.3       (167.4)  (121.1) 
=================================  =====  ==========  ============  =======  ==========  ============  ======= 
 
Loss for the year after taxation                                    (150.5)                            (121.1) 
Other comprehensive loss 
Other movement                                                          0.2                                  - 
Revaluation of property, plant 
 and equipment                                                        (0.5)                              (1.0) 
=================================  =====  ==========  ============  =======  ==========  ============  ======= 
Total comprehensive loss for 
 the year                                                           (150.8)                            (122.1) 
=================================  =====  ==========  ============  =======  ==========  ============  ======= 
 
Loss per share 
Basic (pence)                         12                             (49.1)                             (39.6) 
Diluted (pence)                       12                             (49.1)                             (39.6) 
=================================  =====  ==========  ============  =======  ==========  ============  ======= 
 

All activities derive from continuing operations of the Group.

*Included in property operating expenses is a charge of GBP7.1 million (2020: GBP2.5 million) for expected credit losses relating to tenant debtors.

CONSOLIDATED BALANCE SHEET

For the year ended 31 March 2021

 
                                                    2021     2020 
                                          Notes     GBPm     GBPm 
========================================  =====  =======  ======= 
Non-current assets 
Investment properties                        14    934.9  1,185.6 
Right of use asset                                   3.5      3.9 
Investments in joint ventures                15     25.6     22.1 
Investments in associates                    16      5.3      0.9 
Property, plant and equipment                17     54.1     56.2 
Goodwill                                             0.5      0.2 
========================================  =====  =======  ======= 
Total non-current assets                         1,023.9  1,268.9 
========================================  =====  =======  ======= 
Current assets 
Trade and other receivables                  18     26.0     26.7 
Current taxation asset                                 -      0.7 
Cash and cash equivalents                    21    150.5     80.8 
========================================  =====  =======  ======= 
Total current assets                               176.5    108.2 
Assets held for sale                         19     25.5        - 
========================================  =====  =======  ======= 
Total assets                                     1,225.9  1,377.1 
========================================  =====  =======  ======= 
Equity and liabilities 
Current liabilities 
Trade and other payables                     22     46.9     46.8 
Lease liability                              24      0.7      0.7 
Derivative financial instruments             20        -      0.1 
========================================  =====  =======  ======= 
Total current liabilities                           47.6     47.6 
========================================  =====  =======  ======= 
Non-current liabilities 
Derivative financial instruments             20      2.6      2.6 
Deferred tax liability                       11      0.7      2.1 
Lease liability                              24     84.9     85.6 
Borrowings                                   23    629.7    628.6 
========================================  =====  =======  ======= 
Total non-current liabilities                      717.9    718.9 
========================================  =====  =======  ======= 
Net assets                                         460.4    610.6 
========================================  =====  =======  ======= 
 
Equity 
Share capital                                25      3.1      3.1 
Share premium                                25    227.4    227.4 
Merger reserve                               25    (2.3)    (2.3) 
Retained earnings and other reserves         25    232.2    382.4 
========================================  =====  =======  ======= 
Total equity                                       460.4    610.6 
========================================  =====  =======  ======= 
 
Net Asset Value (NAV) per share (pence) 
EPRA                                         12     151p     201p 
Basic                                        12     150p     199p 
Diluted                                      12     150p     199p 
========================================  =====  =======  ======= 
 

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 March 2021

 
                                                              2021     2020 
                                                              GBPm     GBPm 
=========================================================  =======  ======= 
Cash flows from operating activities 
Loss for the year before taxation                          (153.2)  (121.6) 
Adjustments for: 
Loss on disposal of investment property                        5.5      1.5 
Loss on disposal of subsidiary                                 2.2        - 
Net valuation movement                                       154.7    163.0 
Net valuation movement in joint ventures                     (1.2)      3.9 
Net valuation movement in associates                         (0.6)      0.4 
Share of income from joint ventures                          (2.3)    (2.0) 
Share of income from associates                              (0.1)    (0.1) 
Net interest expense                                          22.9     18.7 
Rent free lease incentives                                   (2.6)    (2.1) 
Movement in expected credit loss                               7.1      2.5 
Amortisation of legal and letting fees                         0.2    (0.2) 
Depreciation on property plant and equipment                   1.9      1.2 
Share based-payment expense                                    0.6        - 
Net movement from fair value of derivatives                  (0.1)      2.7 
=========================================================  =======  ======= 
Cash generated from operations before changes in working 
 capital                                                      35.0     67.9 
Changes in working capital 
Increase in trade and other receivables                      (8.2)    (1.7) 
Increase / (decrease) in payables and other financial 
 liabilities                                                   2.2    (5.0) 
=========================================================  =======  ======= 
Cash generated from operations                                29.0     61.2 
Interest paid                                               (22.1)   (17.7) 
Corporation tax received                                       1.7        - 
Dividends received from joint ventures                           -      2.0 
=========================================================  =======  ======= 
Net cash generated from operating activities                   8.6     45.5 
Cash flows from investing activities 
Disposal of subsidiary                                        38.5        - 
Interest income                                                0.3      0.1 
Investment in joint ventures assets                              -   (15.4) 
Investment in associate assets                               (2.4)    (1.2) 
Purchase of investment properties                                -   (44.1) 
Business combinations, net of cash acquired                      -    (6.3) 
Disposal of investment properties                             40.1     50.7 
Development and other capital expenditure                   (10.0)   (14.1) 
Purchase of plant and equipment                              (3.3)   (10.1) 
=========================================================  =======  ======= 
Net cash generated from / (used in) investing activities      63.2   (40.4) 
=========================================================  =======  ======= 
Cash flows from financing activities 
Repayment of bank loans                                          -   (48.7) 
New borrowings                                                   -    161.9 
Repayment of principal portion of lease liability            (0.7)    (0.8) 
Dividends paid - ordinary                                    (1.4)   (63.8) 
=========================================================  =======  ======= 
Net cash(used in) / generated from financing activities      (2.1)     48.6 
=========================================================  =======  ======= 
Cash and cash equivalents at beginning of the year            80.8     27.1 
Net increase in cash and cash equivalents                     69.7     53.7 
=========================================================  =======  ======= 
Cash and cash equivalents at 31 March                        150.5     80.8 
=========================================================  =======  ======= 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2021

 
                                                                            Retained 
                                                                            earnings 
                                              Share     Share    Merger    and other 
                                            capital   premium   reserve     reserves    Total 
                                    Notes      GBPm      GBPm      GBPm         GBPm     GBPm 
==================================  =====  ========  ========  ========  ===========  ======= 
As at a April 2019                              3.1     225.0     (2.3)        570.3    796.1 
Loss for the year after taxation                  -         -         -      (121.1)  (121.1) 
Revaluation of property, plant 
 and equipment                         17         -         -         -        (1.0)    (1.0) 
==================================  =====  ========  ========  ========  ===========  ======= 
Total comprehensive loss for 
 the year                                         -         -         -      (122.1)  (122.1) 
Transactions with equity holders 
Net proceeds from issue of shares      25         -       2.4         -            -      2.4 
Dividends paid                         13         -         -         -       (65.8)   (65.8) 
==================================  =====  ========  ========  ========  ===========  ======= 
As at 31 March 2020                             3.1     227.4     (2.3)        382.4    610.6 
Loss for the year after taxation                  -         -         -      (150.5)  (150.5) 
Other movements                                   -         -         -          0.2      0.2 
Revaluation of property, plant 
 and equipment                         17         -         -         -        (0.5)    (0.5) 
==================================  =====  ========  ========  ========  ===========  ======= 
Total comprehensive loss for 
 the year                                         -         -         -      (150.8)  (150.8) 
Transactions with equity holders 
Share-based payments                              -         -         -          0.6      0.6 
==================================  =====  ========  ========  ========  ===========  ======= 
As at 31 March 2021                             3.1     227.4     (2.3)        232.2    460.4 
==================================  =====  ========  ========  ========  ===========  ======= 
 

NOTES TO THE FINANCIAL STATEMENTS

   1.   Accounting policies 

General information

NewRiver REIT plc (the 'Company') and its subsidiaries (together the 'Group') is a property investment group specialising in commercial real estate in the UK. The Company is registered and domiciled in the UK and the registered office of the Company is 16 New Burlington Place, London, W1S 2HX.

Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, other than where certain new policies have been adopted.

Basis of preparation

The financial information included in the consolidated financial statements has been prepared on a going concern basis using accounting policies consistent with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) and in accordance with the Companies Act 2006, and the Disclosure and Transparency Rules of the Financial Conduct Authority.

In addition to complying with international accounting standards in conformity with the requirements of the Companies Act 2006, the consolidated financial statements also comply with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

The unaudited financial information contained in this announcement does not constitute the Group's statutory accounts as at and for the year ended 31 March 2021, but is derived from those statutory accounts, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The Company's statutory accounts as at and for the year ended 31 March 2021 will be delivered to the Registrar of Companies following the Company's Annual General Meeting on 27 July 2021. Accordingly, the financial information for 2021 is presented as unaudited in this announcement.

The statutory accounts for the year ended 31 March 2020 have been filed with the Registrar of Companies. The auditors' report for those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not include a statement under Section 498 (2) or (3) of the Companies Act 2006.

Going concern

The Group and Company's going concern assessment considers the Group's principal risks, and is dependent on a number of factors, including cashflow and liquidity, continued access to borrowing facilities and the ability to continue to operate the Group's unsecured debt structure within its financial covenants. The Group's balance sheet is unsecured, which means that none of its debt is secured against any of its property assets. This type of financing affords significant operational flexibility, and consists of GBP380 million of unsecured bank facilities and a GBP300 million unsecured corporate bond with the earliest expiry date being August 2023. The debt has a number of financial covenants that the Group is required to comply with including an LTV covenant of less than 60%, and a 12 month historical interest cover ratio of more than 1.75x, and both sources of unsecured financing have cure provisions in the event of a breach.

The going concern assessment is based on a 12 month outlook from the date of the approval of these financial statements, using the Group's three year forecast. This forecast is based on a reasonable worst case scenario, which includes the key assumptions listed below.

- A further 6% blended reduction in capital values across the portfolio over the next twelve months, in addition to the 13.6% recorded in the year ended 31 March 2021

- A further 10% reduction in net income in our Retail portfolio, excluding agreed deferments; this reflects a significant downside to rental agreements re-geared or re-negotiated throughout the pandemic given that 92% of rents relating to Q4 FY21 were collected or alternative payments agreed at the time of reporting despite a full national Lockdown being in place throughout the quarter in question

- A further full national Lockdown in Winter/Spring in 2021/22 in our pub portfolio, this has been modelled to mirror the full national Lockdown seen this past year and is phased as a 50% reduction in Q3 FY22 (i.e. throughout December, including Christmas and New Year), a 100% reduction in Q4 FY22 (i.e. full lockdown for the entire 3 months) and a 25% reduction in Q1 FY23 as the Pubs once again re-open through the Spring

- No disposal proceeds are assumed throughout the forecast period, despite the completion of GBP81 million of disposals during FY21, at a relatively tight discount to book values, with a further GBP79 million of assets exchanged or under offer

- No new financing is assumed, but existing facilities are presumed to remain available (earliest expiry August 2023)

Under this scenario, the Group and Company is forecast to maintain sufficient cash and liquidity resources, and remain compliant with its financial covenants. Further sensitivity analysis was performed on this scenario, including assuming a more significant valuation decline and a lower income collection rate. Even applying this sensitivity analysis, the Group and Company maintains sufficient cash and liquidity reserves to continue in operation throughout the going concern assessment period.

In light of the significant impact of Covid-19 on the UK economy, and the retail and leisure sectors in which the Group operates, the Directors have placed a particular focus on the appropriateness of adopting the going concern basis in preparing the Group's financial statements for the year ended 31 March 2021.

Based on the consideration above, the Board believes that the Group and Company has the ability to continue in business at least 12 months from the date of approval of the financial statements for the year ended 31 March 2021 and therefore have adopted the going concern basis in the preparation of this financial information.

Cash flow statement

The Group has reported the cash flows from operating activities using the indirect method. Interest received is presented within investing cash flows; interest paid is presented within operating cash flows. The acquisition and disposal of investment properties are disclosed as cash flows from investing activities because this most appropriately reflects the Group's business activities.

Preparation of the consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries controlled by the Company, made up to 31 March each year. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the investee.

The consolidated financial statements account for interest in joint ventures and associates using the equity method of accounting per IFRS 11 and IAS 28 respectively. The financial statements for the year ended 31 March 2021 have been prepared on the historical cost basis, except for the revaluation of investment properties, the revaluation of property, plant and equipment and derivatives which are held at fair value through profit and loss. In the current financial year the Group has adopted a number of minor amendments to standards effective in the year issued by the IASB, none of which have had a material impact on the Group. The accounting policies used are otherwise consistent with those contained in the Group's previous Annual Report and Accounts for the year ended 31 March 2020.

New accounting polices

The Group has adopted the following amendments and Conceptual Framework for the first time in the year ended 31 March 2021:

   -       Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) 
   -       Definition of a Business (Amendments to IFRS 3) 
   -       Covid-19-Related Rent Concessions (Amendment to IFRS 16) 
   -       Definition of Material (Amendments to IAS 1 and IAS 8) 

- Revised Conceptual Framework and amendments to References to the Conceptual Framework in IFRS Standards.

- Adopting these amendments and Conceptual Framework has not impacted amounts recognised in prior periods or are expected to have a material impact in future periods based on the Group's current strategy.

Standards and amendments issued but not yet effective

A number of new amendments relevant to the Group, have been issued but are not yet effective for the current accounting period.

Effective for the year ended 31 March 2022

- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

Effective for the year ended 31 March 2023

   -       Annual Improvements to IFRS Standards 2018-2020 
   -       Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16) 
   -       Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) 
   -       Reference to the Conceptual Framework (Amendments to IFRS 3) 

Effective for the year ended 31 March 2024

   -       Disclosure of Accounting Policies (Amendments to IAS 1) 
   -       Classification of Liabilities as Current or Non-current (Amendments to IAS 1) 
   -       Definition of Accounting Estimates (Amendments to IAS 8) 

No material impact is expected upon the adoption of these standards.

Other accounting policies:

Revenue recognition

Rental income

Rental income from fixed and minimum guaranteed rent reviews is recognised on a straight-line basis over the entire lease term. Where such rental income is recognised ahead of the related cash flow, an adjustment is made to ensure the carrying value of the related property including the accrued rent does not exceed the external valuation. Initial direct costs incurred in negotiating and arranging a new lease are amortised on a straight-line basis over the period from the date of lease commencement to the expiry date of the lease.

Where a rent-free period is included in a lease, this is recognised over the lease term, on a straight-line basis, as a reduction of rental income.

Where a lease incentive payment, or surrender premiums are paid to enhance the value of a property, it is amortised on a straight- line basis over the period from the date of lease commencement to the expiry date of the lease as a reduction of rental income. It is management's policy to recognise all material lease incentives and lease incentives greater than six months. Upon receipt of a surrender premium for the early determination of a lease, the profit, net of dilapidations and non-recoverable outgoings relating to the lease concerned, is accounted for from the effective date of the modification, being the date at which both parties agree to the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new lease.

Letting costs are recognised over the lease term on a straight line basis as a reduction of rental income.

Service charge income

Service charge income is recognised in accordance with IFRS 15. This income stream is recognised in the period in it is earnt and when performance obligations are met.

IFRS 15 is based on the principle that revenue is recognised when control passes to a customer. The majority of the Group's income is from tenant leases and is therefore outside of the scope of IFRS 15. However, the standard applies to service charge income. Under IFRS 15, the Group needs to consider the agent versus principal guidance. The Group is principal in the transaction if they control the specified goods or services before they are transferred to the customer. In the provision of service charge, the Group has deemed itself to be principal and therefore the consolidated statement of comprehensive income and the consolidated balance sheet reflect service charge income, expenses, trade and other receivables and trade and other payables.

Managed pub income

Managed pub income relates to income received in the pub business relating to food, drinks and machine income. The revenue from drink and food is recognised at the point at which the goods are provided. The revenue earned from machines is recognised in the period in which it relates.

In the Group's pub business, revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.

Asset management fees

Management fees are recognised in the consolidated statement of comprehensive income as the services are delivered and performance obligations met. The Group assesses whether the individual elements of service in the agreement are separate performance obligations. Where the agreements include multiple performance obligations, the transaction price will be allocated to each performance obligation.

Car park income

Car park income is recognised in accordance with IFRS 15. This income stream is recognised in the period in which it is earnt and when performance obligations are made.

Turnover related rent

Turnover related rent relates to the margin earnt on the sale of wet products and is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business.

Other income

Other income is recognised in accordance with IFRS 15. This income stream is recognised in the period in which it is earnt and when performance obligations are made.

Government grants

Monetary resources transferred to the Group by the government, government agencies or similar bodies are recognised at fair value, when the Group is reasonably certain that the grant will be received. Grants are recognised in the consolidated statement of comprehensive income within other income, on a systematic basis, over the same period during which the expenses, for which the grant was intended to compensate, are recognised.

Grants are disclosed in other income in note 7 to the accounts.

Promote payments

The Group is contractually entitled to receive a promote payment should the returns from a joint venture or associate to the joint venture or associate partner exceed a certain internal rate of return. This payment is only receivable by the Group on disposal of underlying properties held by the joint venture or associate or other termination events. Any entitlements under these arrangements are only accrued for in the financial statements once the Group believes the above performance conditions have been met and there is no risk of the revenue reversing.

IFRS 15

All revenue streams under IFRS 15 allocate transaction price against performance obligations as they are satisfied. With the exception of asset management fees, IFRS 15 revenue streams do not carry variable consideration. There are no significant judgements in applying IFRS 15. There are no significant payment terms on any of the IFRS 15 revenue streams.

Service charge expense

Service charge expenses are recognised in the period in which they are incurred.

Finance income and costs

Finance income and costs are recognised using the effective interest rate method. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset or financial liability.

Taxation

Income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the balance sheet. Tax is recognised in the consolidated statement of comprehensive income.

Deferred tax

Any deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates that are expected to apply in the period when the liability is settled or the asset is realised. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

Investment properties

These properties include completed properties that are generating rent or are available for rent, and development properties that are under development or available for development. Investment properties comprise freehold and leasehold properties and are first measured at cost (including transaction costs), then revalued to market value at each reporting date by independent professional valuers. Leasehold properties are shown gross of the leasehold payables (and accounted for as right-of-use asset under IFRS 16, see Leases accounting policy). Valuation gains and losses in a period are taken to the consolidated statement of comprehensive income . As the Group uses the fair value model, as per IAS 40 Investment Properties, no depreciation is provided. An asset will be classified as held for sale within investment properties, in line with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, where the asset is available for immediate sale in their present condition and the sale is highly probable.

Property, plant and equipment

Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is recognised over the useful lives of the equipment, using the straight-line method at a rate of between 10% to 25% depending on the useful life.

Public houses are initially measured at cost and subsequently measured at valuation, net of depreciation and any impairment losses. Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

   -       Buildings 4% on a straight line-basis or the lease term if shorter 
   -       Fixtures and fittings 20% on a straight line-basis 
   -       IT 33% on a straight line-basis 
   -       Freehold land and assets in the course of construction are not depreciated. 

Residual value is reviewed at least at each financial year and there is no depreciable amount if residual value is the same as, or exceeds, book value.

The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset.

Joint ventures

Interests in joint ventures are accounted for using the equity method of accounting. The Group's joint ventures are entities over which the Group has joint control with a partner. Investments in joint ventures are carried in the consolidated balance sheet at cost as adjusted by post-acquisition changes in the Group's share of the net assets of the joint venture, less any impairment or share of income adjusted for dividends. In assessing whether a particular entity is controlled, the Group considers all of the contractual terms of the arrangement, whether it has the power to govern the financial and operating policies of the joint venture so as to obtain benefits from its activities, and the existence of any legal disputes or challenges to this joint control in order to conclude whether the Group jointly controls the joint venture.

Associates

Interests in associates are accounted for using the equity method of accounting. The Group's associates are entities over which the Group has significant influence with a partner. Investments in associates are carried in the consolidated balance sheet at cost as adjusted by post-acquisition changes in the Group's share of the net assets of the associates, less any impairment or share of income adjusted for dividends. In assessing whether the Group has significant influence over a particular entity, the Group considers all of the contractual terms of the arrangement.

Leases

At inception, the Group assesses whether a contract is or contains a lease. This assessment involves the exercise of judgement about whether the Group obtains substantially all the economic benefits from the use of that asset, and whether the Group has the right to direct the use of the asset.

The Group recognises a right-of-use ("ROU") asset and the lease liability at the commencement date of the lease. The ROU asset is initially measured based on the present value of lease payments, plus initial direct costs and the cost of obligations to restore the asset, less any incentives received.

Lease payments generally include fixed payments and variable payments that depend on an index (such as an inflation index).

Each lease payment is allocated between the liability and finance cost. The lease payments are discounted using the interest rate implicit in the lease if that rate can be readily determined or if not, the incremental borrowing rate is used at 3.2%. The finance cost is charged to profit or loss over the lease period so as to produce a constant rate of interest on the remaining balance of the liability for each period.

The ROU asset is depreciated over the shorter of the lease term or the useful life of the underlying asset. The ROU asset is subject to testing for impairment if there is an indicator of impairment. ROU assets that are not classified as investment properties are disclosed on the face of the consolidated balance sheet on their own line, and the lease liability included in the headings current and non-current liabilities on the consolidated balance sheet.

Where the ROU asset relates to land or property that meets the definition of investment property under IAS 40, after initial recognition the ROU asset is subsequently accounted for as investment property and carried at fair value (see Investment properties accounting policy). Valuation gains and losses in a period are taken to the consolidated statement of comprehensive income.

The Group has elected not to recognise ROU assets and liabilities for leases where the total lease term is less than or equal to 12 months, or for low value leases of less than GBP3,000. The payments for such leases are recognised in the consolidated statement of comprehensive income on a straight-line basis over the lease term. Depreciation is also charged on the right of use asset of GBP0.4 million (2020: GBP0.4 million).

Financial instruments

Financial assets

The Group classifies its financial assets as fair value through profit or loss or amortised cost, depending on the purpose for which the asset was acquired and based on the business model test. Financial assets carried amortised cost include tenant receivables which arise from the provision of goods and services to customers. These are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost, less provision for impairment. Impairment provisions for receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. The probability of tenant default and subsequent non-payment of the receivable is assessed. If it is determined that the receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. If in a subsequent year the amount of the impairment loss decreased and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying value of the asset does not exceed its amortised costs at the reversal date. The Group's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents.

The financial instruments classified as financial assets at fair value through profit or loss include interest rate swap and cap arrangements. Recognition of the derivative financial instruments takes place when the contracts are entered into. They are recognised at fair value and transaction costs are included directly in finance costs.

The fair values of derivative financial assets and financial liabilities are determined as follows:

Interest rate swaps and caps are measured using the midpoint of the yield curve prevailing on the reporting date. The valuations do not include accrued interest from the previous settlement date to the reporting date. The fair value represents the net present value of the difference between the contracted rate and the valuation rate when applied to the projected balances for the period from the reporting date to the contracted expiry dates.

Financial assets are derecognised only when the contractual rights to the cash flows from the financial asset expire or the Group transfers substantially all risks and rewards of ownership.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the consolidated balance sheet.

Financial liabilities

Financial liabilities are classified at fair value through profit or loss or as other liabilities. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

All loans and borrowings are classified as other liabilities. Initial recognition is at fair value less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised costs using the effective interest method.

Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost.

The fair value of a non-interest bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted.

Value added tax

Revenues, expenses and assets are recognised net of the amount of value added tax except:

Where the value added tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the value added tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

Receivables and payables that are stated with the amount of value added tax included. The net amount of value added tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated balance sheet.

Share capital

Shares are classified as equity when there is no obligation to transfer cash or other assets. The cost of issuing share capital is recognised directly in equity against the proceeds from issuing the shares.

Share-based payments

The cost of equity settled transactions is measured with reference to the fair value at the date at which they were granted. Where vesting performance conditions are non-market based, the fair value excludes the effect of these vesting conditions and an estimate is made at each year end date of the number of instruments expected to vest. The fair value is recognised over the vesting period in the consolidated statement of comprehensive income, with a corresponding increase in equity. Any change to the number of instruments with non-market vesting conditions expected to vest is recognised in the consolidated statement of comprehensive income for that period.

Employee Benefit Trust

The Group operates an Employee Benefit Trust for the exclusive benefit of the Group's employees. The investment in the Company's shares held by the trust is recognised at cost and deducted from equity. No gain or loss is recognised in the consolidated statement of comprehensive income on the purchase, sale, issue or cancellation of the shares held by the trust.

Dividends

Dividends to the Company's shareholders are recognised when they become legally payable. In the case of interim dividends, this is when paid. In the case of final dividends, this is when approved by equity holders.

Business combinations

The Group applies the acquisition method to account for business combinations. The cost of the acquisition is measured at the aggregate of the fair values, at the date of completion, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquired. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS are recognised at their fair value at the acquisition. Where the fair value of the consideration is less than the fair value of the identifiable assets and liabilities then the difference is recognised as a bargain purchase in the consolidated statement of comprehensive income.

Where properties are acquired through corporate acquisitions, each transaction is considered by management in light of the substance of the acquisition to determine whether the acquisition is a business combination or an asset acquisition. If a transaction is determined to be an asset acquisition then it is accounted for at cost.

   2.   Critical accounting judgements and estimates 

The preparation of financial statements requires management to make estimates affecting the reported amounts of assets and liabilities, of revenues and expenses, and of gains and losses. The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. Estimates and judgements are continually evaluated and are based on historical experience as adjusted for current market conditions and other factors.

Significant judgements

Leased and tied pub classification as investment property

The Directors have exercised judgement in order to determine the appropriate classification of the leased and tied pubs as investment property or property plant and equipment. Under IAS40 'Investment Properties' an entity treats such a property as investment property if services provided to the occupier are insignificant to the arrangement as a whole. The Directors consider that whilst the relative proportion of wet income to lease income from a tied pub in quantitative terms is not insignificant other factors should be considered in making the assessment of whether the services provided to the tenants are insignificant. The income received by the Group in respect of the sale of wet products is higher than that which would be received by a third party providing the same services and that these pubs pay a lower fixed rent than they would without the wet product tie. This indicates the margin earned, in substance, predominantly represents turnover related rent. Accordingly, leased and tied pubs with an aggregate fair value of GBP195.5 million at 31 March 2021 (2020: GBP219.1 million) have been classified as Investment Property. Managed houses with an aggregate value of GBP52.7 million at 31 March 2021 (2020: GBP55.0 million) have been classified as Property, Plant and Equipment.

Principal vs agent

The Group has contracts with breweries and drinks distributors for the provision of wet product to its pub tenants. In assessing whether it is appropriate to recognise revenue as principal or agent, the Directors exercise their judgement in considering the criteria included in IFRS 15 'Revenue from Contracts with Customers'. The Group is not responsible for the delivery or the quality of the wet drink product and does not take physical control or assume inventory risk in the arrangement; these factors indicate that the Group is acting as agent and the Directors have concluded that this outweighs the fact that the Group sets the pricing with the tenant and bears an element of credit risk. In considering the nature of the relationship with its pub tenants, the Directors are satisfied that the provisions of IFRS 15 indicate that the Group is not acting as principal and has therefore recognised revenue of GBP4.5 million (2020: GBP13.8 million) in the period representing only the net margin earned on wet product sales, see note 4 for further details.

REIT Status

NewRiver is a Real Estate Investment Trust (REIT) and does not pay tax on its property income or gains on property sales, provided that at least 90% of the Group's property income is distributed as a dividend to shareholders, which becomes taxable in their hands. In addition, the Group has to meet certain conditions such as ensuring the property rental business represents more than 75% of total profits and assets. Any potential or proposed changes to the REIT legislation are monitored and discussed with HMRC. It is the Directors judgement that the Group has met the REIT conditions in the year.

Sources of estimation uncertainty

Investment property

The Group's investment properties and public houses are stated at fair value. The assumptions and estimates used to value the properties are detailed in note 14. Small changes in the key estimates, such as the estimated rental value, can have a significant impact on the valuation of the investment properties, and therefore a significant impact on the consolidated balance sheet and key performances measures such as Net Asset Value per share. As at the 31 March 2021, the material valuation uncertainty clause has been lifted within the UK Retail sector for the purposes of these valuations. The material valuation uncertainty clause has not, however, been lifted in the leisure and hospitality sectors, including pubs. The external valuers have confirmed that the inclusion of the "material valuation uncertainty" declaration does not mean that the valuations for NewRivers pub portfolio cannot be relied upon. Rather, the phrase is used in order to be clear and transparent with all parties, in a professional manner that - in the current extraordinary circumstances - less certainty can be attached to valuations than would otherwise be the case. The pubs for which there is a material valuation uncertainty amount to GBP195.5 million within investment property (note 14) and GBP52.7 million within property, plant and equipment (note 17).

Rents, ERVs, EBITDA multiples and maintainable earnings have a direct relationship to valuation, while yield has an inverse relationship. Estimated costs of a development project will inversely affect the valuation of development properties. There are interrelationships between all these unobservable inputs as they are determined by market conditions. The existence of an increase in more than one unobservable input could be to magnify the impact on the valuation, see note 14 for sensitivity analysis.

The estimated fair value may differ from the price at which the Group's assets could be sold. Actual realisation of net assets could differ from the valuation used in these financial statements, and the difference could be significant.

Impairment of trade receivables

As a result of Covid-19 the Group's assessment of expected credit losses is inherently subjective due to the forward-looking nature of the assumptions made, most notably around the assessment over the likelihood of tenants having the ability to pay rent as demanded, as well as the likelihood of rent deferrals and rent free periods being offered to tenants as a result of the pandemic. The expected credit loss which has been recognised is therefore subject to a degree of uncertainty which may not prove to be accurate given the uncertainty caused by Covid-19 at the reporting date and in the year ahead as the roadmap to unlocking the United Kingdom takes effect. The Group has recognised an expected credit loss on trade receivables of GBP5.6 million (31 March 2020: GBP2.5 million) in the year. A 10% increase to the percentage loss allowance rates applied to tenant receivables would result in a GBP0.1 million increase in other property costs and an equivalent increase in loss after tax. A 10% decrease to the percentage loss allowance rates applied to tenant receivables would result in a GBP0.1 million decrease in other property costs and an equivalent reduction in loss after tax. See note 18.

   3.   Segmental reporting 

The Group's operations are organised into two operating segments, being investment in retail property and in pubs. The retail investments comprise shopping centres, retail warehouses and high street stores. The pub investments consist of community public houses. All of the Group's operations are in the UK and therefore no geographical segments have been identified.

The relevant gross revenue, net rental income and property and other assets, being the measures of segment revenue, segment result and segment assets used by the management of the business, are set out below. The results include the Group's share of assets and results from properties held in joint ventures and associates. Included within the administrative expenses is GBP0.4 million (2020: GBP0.4 million) and GBP1.5 million (2020: GBP1.2 million) of depreciation in respect of the pubs and retail segments. Included in the taxation credit is GBP1.3 million credit (2020: GBP0.5 million charge) and GBP1.4 million credit (2020: GBP1.0 million credit) in relation to the pubs and retail segments.

 
                                               2021                    2020 
===================================  =======================  ======================= 
                                     Retail    Pubs    Group  Retail    Pubs    Group 
Segment revenues and result            GBPm    GBPm     GBPm    GBPm    GBPm     GBPm 
===================================  ======  ======  =======  ======  ======  ======= 
Property rental and related income     61.1     4.4     65.5    76.8    13.6     90.4 
Managed pub income                        -     9.1      9.1       -    22.5     22.5 
Turnover related rent                     -     4.5      4.5       -    13.8     13.8 
Service charge income                  11.6       -     11.6    16.9       -     16.9 
Amortisation of tenant incentives 
 and letting costs                    (1.8)       -    (1.8)   (1.5)       -    (1.5) 
Asset management fees                   1.2       -      1.2     0.9       -      0.9 
Surrender premiums and commissions      1.0       -      1.0     1.8       -      1.8 
===================================  ======  ======  =======  ======  ======  ======= 
Segment revenue                        73.1    18.0     91.1    94.9    49.9    144.8 
Service charge expense               (17.5)       -   (17.5)  (21.1)       -   (21.1) 
Rates                                 (2.2)   (0.3)    (2.5)   (2.3)   (1.1)    (3.4) 
Other property operating expenses    (10.4)  (16.7)   (27.1)   (6.2)  (24.3)   (30.5) 
===================================  ======  ======  =======  ======  ======  ======= 
Property operating expenses          (30.1)  (17.0)   (47.1)  (29.6)  (25.4)   (55.0) 
Other income                            2.7     4.5      7.2       -       -        - 
===================================  ======  ======  =======  ======  ======  ======= 
Segment result                         45.7     5.5     51.2    65.3    24.5     89.8 
===================================  ======  ======  =======  ======  ======  ======= 
Administrative expenses                               (23.4)                   (20.9) 
Share of joint ventures' and 
 associates' profit / (loss) after 
 tax                                                     4.2                    (2.2) 
Net valuation movement                               (154.7)                  (162.6) 
Loss on disposal of investment 
 properties                                            (5.5)                    (1.5) 
Loss on disposal of subsidiaries                       (2.2)                        - 
Finance income                                           0.3                      0.1 
Finance costs                                         (23.0)                   (21.5) 
Revaluation of derivatives                             (0.1)                    (2.8) 
Taxation                                                 2.7                      0.5 
===================================  ======  ======  =======  ======  ======  ======= 
Loss for the year after taxation                     (150.5)                  (121.1) 
===================================  ======  ======  =======  ======  ======  ======= 
 
 
Segment assets                               2021                                  2020 
                              ===================================  ==================================== 
                              Retail   Pubs  Unallocated    Total   Retail   Pubs  Unallocated    Total 
                                GBPm   GBPm         GBPm     GBPm     GBPm   GBPm         GBPm     GBPm 
============================  ======  =====  ===========  =======  =======  =====  ===========  ======= 
Non-current assets 
Investment properties          739.3  195.6            -    934.9    961.2  224.4            -  1,185.6 
Investments in joint 
 ventures                       25.6      -            -     25.6     22.1      -            -     22.1 
Investment in associates         5.3      -            -      5.3      0.9      -            -      0.9 
Public houses                      -   52.7            -     52.7        -   55.0            -     55.0 
Property, plant and 
 equipment                         -      -          1.4      1.4        -      -          1.2      1.2 
Other non-current 
 assets                            -      -          4.0      4.0        -      -          4.1      4.1 
============================  ======  =====  ===========  =======  =======  =====  ===========  ======= 
Total non-current 
 assets                                                   1,023.9                               1,268.9 
Current assets 
Trade and other receivables     25.1    0.9            -     26.0     23.5    3.2            -     26.7 
Current taxation 
 asset                             _      -            -        -        -      -          0.7      0.7 
Cash and cash equivalents          -      -        150.5    150.5        -      -         80.8     80.8 
Assets held for sale            25.5      -            -     25.5        -      -            -        - 
============================  ======  =====  ===========  =======  =======  =====  ===========  ======= 
Total current assets 
 including assets 
 held for sale                                              202.0                                 108.2 
============================  ======  =====  ===========  =======  =======  =====  ===========  ======= 
Segment assets                 820.8  249.2        155.9  1,225.9  1,007.7  282.6         86.8  1,377.1 
============================  ======  =====  ===========  =======  =======  =====  ===========  ======= 
 
   4.   Revenue 
 
                                                       2021   2020 
                                                       GBPm   GBPm 
====================================================  =====  ===== 
Property rental and related income*                    65.5   90.4 
Turnover related rent                                   4.5   13.8 
Amortisation of tenant incentives and letting costs   (1.8)  (1.5) 
Surrender premiums and commissions                      1.0    1.8 
====================================================  =====  ===== 
Rental related income                                  69.2  104.5 
====================================================  =====  ===== 
Asset management fees                                   1.2    0.9 
Managed pub income                                      9.1   22.5 
Service charge income                                  11.6   16.9 
====================================================  =====  ===== 
Revenue                                                91.1  144.8 
====================================================  =====  ===== 
 

*Included within property rental and related income is car park income of GBP2.7 million (2020: GBP7.4 million) which falls under the scope of IFRS 15. The remainder of the income is covered by IFRS 16.

Asset management fees, managed pub income and service charge income which represents the flow through costs of the day-to-day maintenance of shopping centres falls under the scope of IFRS 15. Refer to accounting policies in Note 1.

   5.   Property operating expenses 
 
                                     2021   2020 
                                     GBPm   GBPm 
==================================  =====  ===== 
Service charge expense               17.5   21.1 
Rates on vacant units                 2.2    3.4 
Expected credit loss                  7.1    2.5 
Pub operating expenses               12.9   20.3 
Other property operating expenses     7.4    7.7 
==================================  =====  ===== 
                                     47.1   55.0 
==================================  =====  ===== 
 
   6.   Administrative expenses 
 
                                                                                              2021   2020 
                                                                                              GBPm   GBPm 
===========================================================================================  =====  ===== 
Wages and salaries                                                                            11.3    9.9 
Social security costs                                                                          1.4    1.5 
Other pension costs                                                                            0.4    0.4 
===========================================================================================  =====  ===== 
Staff costs                                                                                   13.1   11.8 
Depreciation                                                                                   1.9    1.6 
Share-based payments                                                                           0.6      - 
Other administrative expenses                                                                  7.4    7.1 
===========================================================================================  =====  ===== 
                                                                                              23.0   20.5 
Professional fees in relation to the acquisition and integration of Bravo Inns Limited and 
 Hawthorn                                                                                      0.1    0.4 
Abortive fees                                                                                  0.3      - 
===========================================================================================  =====  ===== 
Administrative expenses                                                                       23.4   20.9 
===========================================================================================  =====  ===== 
 

Net administrative expenses ratio is calculated as follows:

 
                                                                                               2021   2020 
                                                                                               GBPm   GBPm 
============================================================================================  =====  ===== 
Administrative expenses                                                                        23.4   20.9 
Adjust for: 
Asset management fees                                                                         (1.2)  (0.9) 
Share of joint ventures' and associates administrative 
 expenses                                                                                       0.2    0.1 
Depreciation of properties                                                                    (1.1)  (0.8) 
Less share based payments                                                                     (0.6)      - 
Less professional fees in relation to the acquisition and integration of Bravo Inns Limited 
 and Hawthorn                                                                                 (0.1)  (0.4) 
Abortive costs                                                                                (0.3)      - 
============================================================================================  =====  ===== 
Group's share of net administrative expenses                                                   20.3   18.9 
============================================================================================  =====  ===== 
 
Property rental and related income*                                                            77.6  124.2 
Share of joint ventures' and associates' property income                                        3.9    3.4 
============================================================================================  =====  ===== 
                                                                                               81.5  127.6 
Net administrative expenses as a % of property income 
 (including share of joint ventures)                                                          24.9%  14.9% 
============================================================================================  =====  ===== 
 

*This balance includes an expected credit loss of GBP5.0 million (2020: GBPnil), which excludes the GBP0.6 million (2020: GBPnil) forward looking element of the calculation and GBP1.5 million (2020: GBPnil) in relation to service charge and insurance (2020: GBPnil) and includes the expected credit loss held in joint ventures and associates of GBP0.3 million (2020: GBP0.1 million).

Average monthly number of staff

 
                                2021  2020 
==============================  ====  ==== 
Directors                          7     7 
Operations and asset managers     48    44 
Pubs                              28    52 
Support functions                 90    79 
==============================  ====  ==== 
                                 173   182 
==============================  ====  ==== 
 

Auditors' remuneration

 
                                                     2021      2020 
                                                  GBP'000   GBP'000 
===============================================  ========  ======== 
Audit of the Company's financial statements           315       315 
Audit of subsidiaries, pursuant to legislation        235       235 
===============================================  ========  ======== 
                                                      550       550 
Non-audit fees                                        100        50 
===============================================  ========  ======== 
Total fees                                            650       600 
===============================================  ========  ======== 
 

In addition to this the joint ventures and associates (NewRiver Retail (Nelson) Limited), NewRiver Retail (Napier) Limited and NewRiver (Sprucefield) Limited) paid GBP82k (2020: GBP28k) in audit fees.

   7.   Other income 
 
                      2021   2020 
                      GBPm   GBPm 
===================  =====  ===== 
Insurance proceeds     2.7      - 
Government grants      3.7      - 
Dilapidations          0.8      - 
===================  =====  ===== 
Other income           7.2      - 
===================  =====  ===== 
 

Insurance proceeds relates the full settlement received from a fire in one of the Group's retail parks, Government grants were received on the operator managed estate, due to the income disruption caused by the closure of the pub estate as a result of Covid-19.

   8.   Loss on disposal of subsidiary 

On the 30 September 2020, the Group disposed of a subsidiary which owned Sprucefield Retail Park. The Group then acquired a 10% interest. See note 16.

Included in the carrying value were investment properties of GBP40.7 million and cash of GBP1.5 million.

 
                                   2021  2020 
=============================== 
                                   GBPm  GBPm 
===============================  ======  ==== 
Gross disposal proceeds            38.5     - 
Carrying value                   (40.7)     - 
===============================  ======  ==== 
Loss on disposal of subsidiary    (2.2)     - 
===============================  ======  ==== 
 
   9.   Loss on disposal of investment properties 
 
                                              2021    2020 
                                              GBPm    GBPm 
==========================================  ======  ====== 
Gross disposal proceeds                       40.1    48.0 
Carrying value                              (44.7)  (47.9) 
Cost of disposal                             (0.9)   (1.6) 
==========================================  ======  ====== 
Loss on disposal of investment properties    (5.5)   (1.5) 
==========================================  ======  ====== 
 

Included in this calculation is a loss on disposal of property, plant and equipment. The properties had a carrying value of GBP0.9 million (2020: GBPnil million) and were disposed of for GBP0.9 million (2020: GBPnil), leading to a loss on disposal of GBPnil (2020: GBPnil).

10. Finance income and finance costs

 
                                          2021    2020 
                                          GBPm    GBPm 
======================================  ======  ====== 
Finance income 
Income from loans with joint ventures      0.3     0.1 
 
Finance expense 
Interest on borrowings                  (20.2)  (18.7) 
Finance cost on lease liabilities        (3.0)   (2.8) 
Revaluation of derivatives                 0.1   (2.8) 
======================================  ======  ====== 
Net finance expense                     (22.8)  (24.2) 
======================================  ======  ====== 
 

11. Taxation

 
                                         2021   2020 
                                         GBPm   GBPm 
======================================  =====  ===== 
UK Corporation Tax at 19% (2020: 19%) 
Current year                            (1.4)    0.9 
Prior year adjustment                   (1.3)  (1.4) 
======================================  =====  ===== 
Taxation credit                         (2.7)  (0.5) 
======================================  =====  ===== 
 

The credit for the year recognised in the consolidated statement of comprehensive income relates to a total income tax credit of GBP1.3 million (March 2020: GBP1.0 million) and a deferred tax credit of GBP1.4 million (March 2020: GBP0.5 million charge).

 
                                                2021     2020 
                                                GBPm     GBPm 
===========================================  =======  ======= 
Loss before tax                              (153.2)  (121.6) 
Tax at the current rate of 19% (2020: 19%)    (29.1)   (23.1) 
Revaluation of property                         29.3     30.9 
Movement in unrecognised deferred tax            2.2      0.5 
Non-taxable profit due to REIT regime          (6.7)    (9.7) 
Non-deductible expenditure                       2.9      1.9 
Other                                              -      0.4 
Prior year adjustment                          (1.3)    (1.4) 
===========================================  =======  ======= 
Taxation credit                                (2.7)    (0.5) 
===========================================  =======  ======= 
 

Real Estate Investment Trust regime (REIT regime)

The Group is a member of the REIT regime whereby profits from its UK property rental business are tax exempt. The REIT regime only applies to certain property-related profits and has several criteria which have to be met. The main criteria are:

   -       the assets of the property rental business must be at least 75% of the Group's assets; 

- the profit from the tax-exempt property rental business must exceed 75% of the Group's total profit;

- at least 90% of the Group's profit from the property rental business must be paid as dividends.

The Group continues to meet these conditions and management intends that the Group should continue as a REIT for the foreseeable future.

Deferred tax

 
                           31 March            31 March 
                               2020  Movement      2021 
                               GBPm      GBPm      GBPm 
=========================  ========  ========  ======== 
Deferred tax asset              1.2     (1.2)         - 
Deferred tax liabilities      (3.3)       2.6     (0.7) 
=========================  ========  ========  ======== 
Net deferred tax              (2.1)       1.4     (0.7) 
=========================  ========  ========  ======== 
 
 
                           31 March            31 March 
                               2019  Movement      2020 
                               GBPm      GBPm      GBPm 
=========================  ========  ========  ======== 
Deferred tax asset              1.2         -       1.2 
Deferred tax liabilities      (2.8)     (0.5)     (3.3) 
=========================  ========  ========  ======== 
Net deferred tax              (1.6)     (0.5)     (2.1) 
=========================  ========  ========  ======== 
 

The deferred tax assets and liabilities have been calculated at the tax rate effective in the period that the tax is expected to crystallise. The Group has recognised a deferred tax liability calculated at 19% (2020: 19%). As at 31 March 2021, the Group has unrecognised tax losses of GBP46.0 million (2020: GBP22.5 million). The losses have not been recognised as an asset due to uncertainty over the availability of taxable income to utilise the losses. The losses do not expire but are reliant on continuity of ownership and source of trade.

Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill 2015 (on 26 October 2015) and include reducing the main rate to 19%. The reduction to 17% from 1 April 2020 enacted as part of the Finance Bill 2016 has been cancelled as announced in the Budget on 11 March 2020, maintaining the rate of corporation tax at 19%. Deferred taxes at the balance sheet date have been measured using the expected enacted tax rate and this is reflected in these financial statements.

12. Performance measures

A reconciliation of the performance measures to the nearest IFRS measure is below:

 
                                                                  2021     2020 
                                                                  GBPm     GBPm 
=============================================================  =======  ======= 
Loss for the year after taxation                               (150.5)  (121.1) 
Adjustments 
Net valuation movement                                           154.7    162.6 
Loss on disposal of investment properties                          5.5      1.5 
Revaluation of derivatives                                       (0.1)      2.8 
Acquisition costs                                                  0.1      0.4 
Deferred tax                                                     (1.4)      0.5 
Loss on disposal of subsidiary                                     2.2        - 
 
Group's share of joint ventures' and associates' adjustments 
Revaluation of investment properties                             (1.8)      4.3 
Revaluation of derivatives                                         0.2        - 
Loss on disposal of investment properties                            -      0.3 
=============================================================  =======  ======= 
EPRA earnings                                                      8.9     51.3 
Share-based payment charge                                         0.6        - 
Forward looking element of IFRS 9*                                 0.6        - 
Depreciation on public houses                                      1.1      0.8 
Abortive costs                                                     0.3        - 
=============================================================  =======  ======= 
Underlying Funds From Operations (UFFO)                           11.5     52.1 
=============================================================  =======  ======= 
 

*Forward looking element of IFRS 9 relates to a provision against debtor balances in relation to invoices in advance for future rental income. These balances are not due in the current year and therefore no income has yet been recognised in relation to these debtors.

Number of shares

 
                                                                2021    2020 
Number of shares                                               No. m   No. m 
============================================================  ======  ====== 
Weighted average number of ordinary shares for the purposes 
 of Basic EPS, UFFO and EPRA                                   306.4   305.9 
Effect of dilutive potential ordinary shares: 
Deferred bonus shares                                            0.8     0.3 
============================================================  ======  ====== 
Weighted average number of ordinary shares for the purposes 
 of diluted EPS, UFFO and EPRA                                 307.2   306.2 
============================================================  ======  ====== 
Performance measures (pence) 
IFRS 
Basic EPS                                                     (49.1)  (39.6) 
Diluted EPS                                                   (49.1)  (39.6) 
UFFO 
UFFO per share                                                   3.8    17.0 
Diluted UFFO per share                                           3.7    17.0 
EPRA 
EPRA EPS                                                         2.9    16.7 
Diluted EPRA EPS                                                 2.9    16.7 
============================================================  ======  ====== 
 

The below table reconciles the differences between the calculation of basic and EPRA NTA.

EPRA NTA per share and basic NTA per share:

 
                                        2021                       2020 
                              =========================  ========================= 
                                     Shares       Pence         Shares       Pence 
                               GBPm       m   per share   GBPm       m   per share 
============================  =====  ======  ==========  =====  ======  ========== 
Net assets                    460.4   306.5        150p  610.6   306.2        199p 
Unexercised employee awards       -     0.8                  -     0.3 
============================  =====  ======  ==========  =====  ======  ========== 
Diluted net assets            460.4   307.3        150p  610.6   306.5        199p 
Deferred tax liability          0.7       -                2.1       - 
Fair value derivatives          2.6       -                2.7       - 
Goodwill                      (0.5)       -              (0.2)       - 
============================  =====  ======  ==========  =====  ======  ========== 
EPRA net assets               463.2   307.3        151p  615.2   306.5        201p 
============================  =====  ======  ==========  =====  ======  ========== 
 

13. Dividends

No dividends have been paid in the year to 31 March 2021. Details of dividends paid in the year to 31 March 2020 are set out below:

 
                                          Pence 
Payment date           PID  Non-PID   per share  GBPm 
===================  =====  =======  ==========  ==== 
Year to March 2020 
Ordinary dividends 
24 May 2019           5.40        -        5.40  16.3 
26 July 2019          5.40        -        5.40  16.5 
15 November 2019      5.40        -        5.40  16.5 
7 February 2020       5.40        -        5.40  16.5 
===================  =====  =======  ==========  ==== 
                     21.60        -       21.60  65.8 
===================  =====  =======  ==========  ==== 
 

A dividend of 3.0 pence per share in respect of the year ended 31 March 2021 will, subject to shareholder approval at the 2021 AGM, be paid on 3 September 2021. The ex-dividend date will be 29 July 2021. The dividend will be payable as a REIT Property Income Distribution (PID).

Property Income Distribution (PID) dividends

Profits distributed out of tax-exempt profits are PID dividends. PID dividends are paid after deduction of withholding tax (currently at 20%), which NewRiver pays directly to HMRC on behalf of the shareholder.

Non-PID dividends

Any non-PID element of dividends will be treated in exactly the same way as dividends from other UK, non-REIT companies.

14. Investment properties

 
                                                      2021     2020 
                                                      GBPm     GBPm 
=================================================  =======  ======= 
Fair value brought forward                         1,102.3  1,254.1 
Acquisitions                                             -     44.1 
Capital expenditure                                   10.0     14.1 
Lease incentives, letting and legal costs              2.4      2.3 
Reclassification to plant property and equipment     (4.1)    (5.4) 
Transfer to assets held for sale                    (25.5)        - 
Disposals                                           (44.7)   (47.9) 
Disposal of subsidiary                              (40.7)        - 
Net valuation movement                             (147.8)  (159.0) 
=================================================  =======  ======= 
Fair value carried forward                           851.9  1,102.3 
=================================================  =======  ======= 
Right of use asset (investment property)              83.0     83.3 
=================================================  =======  ======= 
Fair value carried forward                           934.9  1,185.6 
=================================================  =======  ======= 
 

The Group's investment properties have been valued at fair value on 31 March 2021 by independent valuers, Colliers International Valuation UK LLP and Knight Frank LLP, on the basis of fair value in accordance with the Current Practice Statements contained in The Royal Institution of Chartered Surveyors Valuation - Professional Standards, (the 'Red Book'). The valuations are performed by appropriately qualified valuers who have relevant and recent experience in the sector.

The outbreak of Covid-19, declared by the World Health Organisation as a "Global Pandemic" on 11 March 2020, has impacted global financial markets. As such, as at the 31 March 2020 the external valuers were faced with an unprecedented set of circumstances on which to base a judgement. The valuations across all asset classes were therefore reported on the basis of "material valuation uncertainty" as per VPS 3 and VPGA 10 of the RICS Red Book Global. Consequently, less certainty - and a higher degree of caution - was attached to the valuations provided than would normally be the case.

As at the 31 March 2021, the material valuation clause has been lifted within the UK Retail sector for the purposes of these valuations. The material valuation uncertainty clause has not, however, been lifted in the leisure and hospitality sectors, including pubs. The external valuers have confirmed that the inclusion of the "material valuation uncertainty" declaration does not mean that the valuations for NewRivers pub portfolio cannot be relied upon. Rather, the phrase is used in order to be clear and transparent with all parties, in a professional manner that - in the current extraordinary circumstances - less certainty can be attached to valuations than would otherwise be the case. Investment property for which there is material valuation uncertainty amount to GBP195.6 million (2020: GBP224.4 million) of public houses in the above balance.

The Group is exposed to changes in the residual value of properties at the end of current lease agreements. The residual value risk born by the Group is mitigated by active management of its property portfolio with the objective of optimising tenant mix in order to:

   -       achieve the longest weighted average lease term possible; 
   -       minimise vacancy rates across all properties; and 
   -       minimise the turnover of tenants with high quality credit ratings. 

The Group also grants lease incentives to encourage high quality tenants to remain in properties for longer lease terms. In the case of anchor tenants, this also attracts other tenants to the property thereby contributing to overall occupancy levels.

There has been no change in the valuation methodology used for investment property as a result of Covid-19. The impact of Covid-19 on the retail valuation has been the impact on yields and the capital deduction based on rental income expectations. Within the pub business, the valuations have made allowances for a delinquency period.

The fair value at 31 March 2021 represents the highest and best use.

The properties are categorised as Level 3 in the IFRS 13 fair value hierarchy. There were no transfers of property between Levels 1, 2 and 3. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

Information about fair value measurements for the investment property and public houses using significant unobservable inputs (Level 3) is set out below:

As at 31 March 2021

 
                                       Property ERV               Property rent 
                                 =========================  =========================  ===========  =========== 
 
                                                                                                    EPRA topped 
                                                                                          Property       up net 
                                     Min      Max  Average      Min      Max  Average   equivalent      initial 
                           Fair      GBP      GBP      GBP      GBP      GBP      GBP        yield        yield 
                          value   per sq   per sq   per sq   per sq   per sq   per sq      Average      Average 
                         (GBPm)       ft       ft       ft       ft       ft       ft            %            % 
======================  =======  =======  =======  =======  =======  =======  =======  ===========  =========== 
Shopping Centres 
 - Core                   209.5      9.1     25.4     13.8      8.4     26.9     12.6         9.3%         9.5% 
Shopping Centres 
 - Regeneration           210.5      5.3     19.7     14.7      5.1     13.5     10.5         6.4%         5.7% 
Shopping Centres 
 - Work Out               127.5      6.4     17.1     10.1      3.3      9.1      5.8        13.1%         9.3% 
Retail warehouses         117.1      9.5     14.1     11.6      2.3     14.7      9.4         7.7%         6.9% 
High street and other      17.3      5.7     14.2      8.1      2.2     17.0      6.7         4.6%         5.4% 
======================  =======  =======  =======  =======  =======  =======  =======  ===========  =========== 
                          681.9 
======================  =======  =======  =======  =======  =======  =======  =======  ===========  =========== 
 
 
                                                      EBITDA multiples 
                                 Property Rent              (x) / 
                                 (GBP per site        Net Initial Yield        EBITDA (GBP per 
                                   valuation)                (%)                        sq ft) 
                     =======  ===================  ======================  =================== 
                        Fair 
                       value 
                      (GBPm)   Min   Max  Average    Min     Max  Average  Min    Max  Average 
===================  =======  ====  ====  =======  =====  ======  =======  ===  =====  ======= 
Pub portfolio          246.8     -     -        -   0.6x   29.1x     7.4x  2.5  129.4     24.5 
Convenience 
 store development 
 portfolio               1.4  88.6  88.6     88.6   6.2%    6.2%     6.2%    -      -        - 
===================  =======  ====  ====  =======  =====  ======  =======  ===  =====  ======= 
                       248.2 
===================  =======  ====  ====  =======  =====  ======  =======  ===  =====  ======= 
Total                  930.1 
===================  =======  ====  ====  =======  =====  ======  =======  ===  =====  ======= 
 

As at 31 March 2020

 
                                       Property ERV               Property rent 
                                 =========================  =========================  ===========  =========== 
 
                                                                                                    EPRA topped 
                                                                                          Property       up net 
                                     Min      Max  Average      Min      Max  Average   equivalent      initial 
                           Fair      GBP      GBP      GBP      GBP      GBP      GBP        yield        yield 
                          value   per sq   per sq   per sq   per sq   per sq   per sq      Average      Average 
                         (GBPm)       ft       ft       ft       ft       ft       ft            %            % 
======================  =======  =======  =======  =======  =======  =======  =======  ===========  =========== 
Shopping Centres 
 - Core                   254.7      9.3     31.4     14.9      8.2     21.4     13.9         8.5%         8.5% 
Shopping Centres 
 - Regeneration           232.0      5.3     21.0     15.1      0.2     15.9     10.7         6.4%         5.7% 
Shopping Centres 
 - Work Out               171.3      7.3     15.7     10.7      3.6     11.7      6.5        11.0%         7.9% 
Retail warehouses         187.0      8.0     15.7     12.0      2.0     16.0     11.2         7.4%         7.1% 
High street and other      32.9      5.0     15.5      6.5        -     16.9      5.2         4.9%         5.0% 
======================  =======  =======  =======  =======  =======  =======  =======  ===========  =========== 
                          877.8 
======================  =======  =======  =======  =======  =======  =======  =======  ===========  =========== 
 
 
                                                           EBITDA multiples 
                                 Property Rent (GBP        (x) / Net Initial      EBITDA (GBP per 
                                 per site valuation)           Yield (%)               sq ft) 
                     =======  ========================  ======================  ==================== 
                        Fair 
                       value 
                      (GBPm)     Min    Max    Average    Min     Max  Average   Min    Max  Average 
===================  =======  ======  =====  =========  =====  ======  =======  ====  =====  ======= 
Pub portfolio          273.8       -      -          -   1.7x   12.2x     7.6x  1.37  115.1    19.65 
Convenience 
 store development 
 portfolio               5.7    19.2   19.4       19.3   5.0%    5.3%     5.2%     -      -        - 
===================  =======  ======  =====  =========  =====  ======  =======  ====  =====  ======= 
                       279.5 
===================  =======  ======  =====  =========  =====  ======  =======  ====  =====  ======= 
Total                1,157.3 
===================  =======  ======  =====  =========  =====  ======  =======  ====  =====  ======= 
 

The investments are a portfolio of retail and leisure assets in the UK. The valuation was determined using an income capitalisation method, which involves applying a yield to rental income streams. Inputs include yield, current rent and ERV. Development properties are valued using a residual method, which involves valuing the completed investment property using an investment method and deducting estimated costs to complete, then applying an appropriate discount rate.

The relationship of unobservable inputs to fair value are the higher the rental values and the lower the yield, the higher the fair value. In the pub portfolio, the valuer values the assets on a Profits Method, assessing their opinion of the Fair Maintainable Trade (FMT) that a Reasonable Efficient Operator (REO) could achieve as at the valuation date having regard to actual trading performance of each asset and wider market dynamics. In respect of the pub portfolio, these are valued on the highest and best use basis. 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.

The inputs to the valuation include:

   -       Rental value - total rental value per annum 

- Equivalent yield - the net weighted average income return a property will produce based upon the timing of the income received.

   -       EBITDA multiples and maintainable earnings from each pub 
   -       Estimated development costs 

There were no changes to valuation techniques during the year. The impact of Covid-19 on the retail valuation has been the impact on yields and the capital deduction based on rental income expectations. Within the pub business, the valuations have made allowances for a delinquency period. Valuation reports are based on both information provided by the Group, e.g. current rents and lease terms which is derived from the Company's financial and property management systems and is subject to the Group's overall control environment, and assumptions applied by the valuers, e.g. ERVs and yields. These assumptions are based on market observation and the valuers' professional judgement.

Sensitivities of measurement of significant inputs

As set out within significant accounting estimates and judgements in note 2, the Group's property portfolio valuation is open to judgements and is inherently subjective by nature. As a result, the sensitivity analysis below illustrates the impact of changes in key unobservable inputs on the fair value of the Group's properties.

Whilst the property valuations reflect the external valuers' assessment of the impact of Covid-19 at the valuation date, we consider +/-10% for ERV, +/-10% for EBITDA +/-100bps for NEY and +/-100bps for multiplier to capture the increased uncertainty in these key valuation assumptions, and deem it to be a reasonable possible scenario.

2021: Sensitivity impact on valuations of a 10% change in estimated rental value and absolute yield of 100 bps.

 
 
                                           Impact on valuations    Impact on valuations 
                                              of a 10% change        of 100 bps change 
                                                  in ERV                 in yield 
                                          ======================  ====================== 
                                                GBPm        GBPm        GBPm        GBPm 
Asset Type                                  Increase    Decrease    Increase    Decrease 
 Retail asset valuation             GBPm         10%         10%        1.0%        1.0% 
================================  ======  ==========  ==========  ==========  ========== 
Shopping Centres - Core            209.5        18.5      (16.9)      (22.1)        27.8 
Shopping Centres - Regeneration    210.5        17.6      (18.2)      (26.2)        35.6 
Shopping Centres - Work Out        127.5        10.8      (11.2)      (11.2)        13.4 
Retail warehouses                  117.1         8.9       (9.3)      (14.4)        18.9 
High street and other               17.3         0.7       (0.7)       (0.4)         0.5 
================================  ======  ==========  ==========  ==========  ========== 
                                  681.9*        56.5      (56.3)      (74.3)        96.2 
================================  ======  ==========  ==========  ==========  ========== 
 

This number includes assets held for sale of GBP25.5m.

Sensitivity impact on valuations of a 10% change in EBITDA and multiplier of 1.0x.

 
                       Impact on valuations    Impact on valuations 
                          of a 10% change        of a 1.0x change 
                             in EBITDA             in multiplier 
====================  ======================  ====================== 
                            GBPm        GBPm        GBPm        GBPm 
GBPm                    Increase    Decrease    Increase    Decrease 
 Pub asset valuation         10%         10%        1.0x        1.0x 
====================  ==========  ==========  ==========  ========== 
248.2                       36.7      (30.0)        33.4      (33.4) 
====================  ==========  ==========  ==========  ========== 
 

2020: Sensitivity impact on valuations of a 10% change in estimated rental value and absolute yield of 100 bps.

 
                                          Impact on valuations    Impact on valuations 
                                             of a 10% change        of 100 bps change 
                                                 in ERV                 in yield 
================================  =====  ======================  ====================== 
                                               GBPm        GBPm        GBPm        GBPm 
Asset Type                                 Increase    Decrease    Increase    Decrease 
 Retail asset valuation            GBPm         10%         10%        1.0%        1.0% 
================================  =====  ==========  ==========  ==========  ========== 
Shopping Centres - Core           254.7        20.6      (19.0)      (26.2)        33.5 
Shopping Centres - Regeneration   231.7        21.3      (20.5)      (30.1)        41.2 
Shopping Centres - Work Out       171.3        15.4      (14.9)      (16.9)        20.5 
Retail warehouses                 186.9         9.4      (16.9)      (21.1)        28.0 
High street and other              33.2         1.4       (1.4)       (1.4)         1.7 
================================  =====  ==========  ==========  ==========  ========== 
                                  877.8        68.1      (72.7)      (95.7)       124.9 
================================  =====  ==========  ==========  ==========  ========== 
 

Sensitivity impact on valuations of a 10% change in EBITDA and multiplier of 1.0x.

 
                       Impact on valuations           Impact on valuations 
                          of a 10% change               of a 1.0x change 
                             in EBITDA                    in multiplier 
====================  ======================  ==================================== 
                                      GBPm         GBPm       GBPm 
GBPm                              Increase     Decrease   Increase            GBPm 
 Pub asset valuation                   10%          10%       1.0x   Decrease 1.0x 
==================== 
279.3                                 29.5       (24.1)       37.4          (34.5) 
====================  ====================  ===========  =========  ============== 
 
 

Reconciliation to net valuation movement in consolidated statement of comprehensive income

 
 
                                                                       2021     2020 
Net valuation movement in investment properties                        GBPm     GBPm 
==================================================================  =======  ======= 
Net valuation movement in investment properties                     (147.8)  (159.0) 
Net valuation movement in property, plant and equipment               (6.6)    (4.0) 
Net valuation movement in right of use asset                          (0.3)      0.4 
==================================================================  =======  ======= 
Net valuation movement in consolidated statement of comprehensive 
 income                                                             (154.7)  (162.6) 
==================================================================  =======  ======= 
 

Reconciliation to properties at valuation in the portfolio

 
                                              2021     2020 
                                       Note   GBPm     GBPm 
=====================================  ====  =====  ======= 
Investment property                      14  851.9  1,102.3 
Property, plant and equipment            17   52.7     55.0 
Assets held for sale                     19   25.5        - 
-------------------------------------  ----  -----  ------- 
Wholly owned properties at valuation         930.1  1,157.3 
Properties held in joint ventures*       15   35.2     35.4 
Properties held in associates            16    8.9      4.4 
=====================================  ====  =====  ======= 
Properties at valuation                      974.2  1,197.1 
=====================================  ====  =====  ======= 
 

*Included in non-current assets in joint ventures is GBP1.5 million (31 March 2020: GBP1.5 million) loan to joint venture which should be deducted from this balance.

15. Investments in joint ventures

As at 31 March 2021 the Group has two joint ventures.

 
                                                              2021   2020 
                                                              GBPm   GBPm 
===========================================================  =====  ===== 
Opening balance                                               22.1    7.6 
Additions to investment in joint ventures                        -   15.4 
Loan to joint venture                                            -    3.0 
Group's share of profit after taxation excluding valuation 
 movement                                                      2.3    2.0 
Net valuation movement                                         1.2  (3.9) 
Distributions and dividends                                      -  (2.0) 
===========================================================  =====  ===== 
Investment in joint venture                                   25.6   22.1 
===========================================================  =====  ===== 
 
 
                                                                     2021         2020 
Name                               Country of incorporation     % Holding    % Holding 
=================================  =========================  ===========  =========== 
NewRiver Retail Investments LP 
 (NRI LP)                          Guernsey                            50           50 
NewRiver Retail (Napier) Limited 
 (Napier)                          UK                                  50           50 
=================================  =========================  ===========  =========== 
 

The Group is the appointed asset manager on behalf of these joint ventures and receives asset management fees, development management fees and potentially performance-related bonuses.

NewRiver Retail Investments LP and NewRiver Retail (Napier) Limited have a 31 December year end. The aggregate amounts recognised in the consolidated balance sheet and consolidated statement of comprehensive income are as follows:

 
                                    2021                             2020 
=====================  ===============================  =============================== 
                                               Group's                          Group's 
Consolidated balance   Napier  NRI LP   Total    share  Napier  NRI LP   Total    share 
 sheet                   GBPm    GBPm    GBPm     GBPm    GBPm    GBPm    GBPm     GBPm 
=====================  ======  ======  ======  =======  ======  ======  ======  ======= 
Non-current assets       62.4     8.0    70.4     36.8    60.2    10.5    70.7     36.9 
Current assets            7.0     1.6     8.6      4.3     2.8     0.4     3.2      1.6 
Current liabilities     (6.5)   (1.0)   (7.5)    (1.8)   (5.8)   (0.2)   (6.0)    (1.5) 
Borrowings due in 
 more than one year    (27.3)       -  (27.3)   (13.7)  (30.0)       -  (30.0)   (14.9) 
=====================  ======  ======  ======  =======  ======  ======  ======  ======= 
Net assets               35.6     8.6    44.2     25.6    27.2    10.7    37.9     22.1 
=====================  ======  ======  ======  =======  ======  ======  ======  ======= 
 
 
                                       2021                            2020 
========================  ==============================  ============================== 
Consolidated statement                           Group's                         Group's 
 of comprehensive         Napier  NRI LP  Total    share  Napier  NRI LP  Total    share 
 income                     GBPm    GBPm   GBPm     GBPm    GBPm    GBPm   GBPm     GBPm 
========================  ======  ======  =====  =======  ======  ======  =====  ======= 
Revenue                      6.6     1.3    7.9      4.0     5.1     1.3    6.4      3.2 
Property operating 
 expenses                  (0.9)   (0.8)  (1.7)    (0.8)   (0.3)   (0.3)  (0.6)    (0.3) 
========================  ======  ======  =====  =======  ======  ======  =====  ======= 
Net property income          5.7     0.5    6.2      3.2     4.8     1.0    5.8      2.9 
Administration expenses    (0.2)   (0.1)  (0.3)    (0.2)   (0.2)   (0.1)  (0.3)    (0.1) 
Net finance costs          (1.3)       -  (1.3)    (0.7)   (0.8)   (0.1)  (0.9)    (0.5) 
========================  ======  ======  =====  =======  ======  ======  =====  ======= 
Group's share of 
 joint ventures' profit 
 before valuation 
 movements                   4.2     0.4    4.6      2.3     3.8     0.8    4.6      2.3 
Net valuation movement       5.0   (2.6)    2.4      1.2   (4.7)   (3.2)  (7.9)    (3.9) 
Loss on disposal               -       -      -        -       -   (0.5)  (0.5)    (0.3) 
========================  ======  ======  =====  =======  ======  ======  =====  ======= 
Profit / (loss) after 
 taxation                    9.2   (2.2)    7.0      3.5   (0.9)   (2.9)  (3.8)    (1.9) 
Add back net valuation 
 movement                  (5.0)     2.6  (2.4)    (1.2)     4.7     3.2    7.9      3.9 
========================  ======  ======  =====  =======  ======  ======  =====  ======= 
Group's share of 
 joint ventures' profit 
 before valuation 
 movements                   4.2     0.4    4.6      2.3     3.8     0.3    4.1      2.0 
========================  ======  ======  =====  =======  ======  ======  =====  ======= 
 

The Group's share of contingent liabilities in the joint ventures is GBPnil (2020: GBPnil).

The comparative information has been re-presented to show information per investment.

16. Investments in associates

On the 30 September 2020, the Group disposed of a subsidiary which owned Sprucefield Retail Park. The Group then acquired a 10% interest.

The Group has one investment in associate in which it has a 10% stake, Sealand S.à.r.l, which owns 100% of NewRiver Retail (Nelson) Limited, NewRiver Retail (Hamilton) Limited and NewRiver Retail (Sprucefield) Limited.

 
                                                              2021   2020 
                                                              GBPm   GBPm 
Opening balance                                                0.9      - 
Additions to Investment in associates                          3.7    1.2 
Group's share of profit after taxation excluding valuation 
 movement                                                      0.1    0.1 
Net valuation movement                                         0.6  (0.4) 
===========================================================  =====  ===== 
Investment in associates                                       5.3    0.9 
===========================================================  =====  ===== 
 
 
                                                                                 2021         2020 
                                                                 Country 
Name                                                    of incorporation    % Holding    % Holding 
====================================================  ==================  ===========  =========== 
NewRiver Retail (Nelson) Limited (Nelson)                             UK           10           10 
NewRiver Retail (Hamilton) Limited (Hamilton)                         UK           10            - 
NewRiver Retail (Sprucefield) Limited (Sprucefield)                   UK           10           10 
====================================================  ==================  ===========  =========== 
 

The Group is the appointed asset manager on behalf of these associates and receives asset management fees, development management fees and potentially performance-related bonuses.

NewRiver Retail (Nelson) Limited, NewRiver (Hamilton) Limited and NewRiver (Sprucefield) Limited have a 31 December year end. The aggregate amounts recognised in the consolidated balance sheet and consolidated statement of comprehensive income are as follows:

 
                                        31 March 2021    31 March 2020 
=====================================  ===============  =============== 
                                               Group's          Group's 
                                        Total    share   Total    share 
Consolidated balance sheet               GBPm     GBPm    GBPm     GBPm 
=====================================  ======  =======  ======  ======= 
Non-current assets                       89.5      8.9    44.0      4.4 
Current assets                            6.7      0.7     2.0      0.2 
Current liabilities                    (37.5)    (3.8)  (15.0)    (1.5) 
Borrowings due in more than one year   (42.1)    (4.2)  (22.0)    (2.2) 
=====================================  ======  =======  ======  ======= 
Net assets                               16.6      1.6     9.0      0.9 
=====================================  ======  =======  ======  ======= 
Loans to associates                         -      3.7       -        - 
=====================================  ======  =======  ======  ======= 
Net assets                               16.6      5.3     9.0      0.9 
=====================================  ======  =======  ======  ======= 
 
 
                                                         2021              2020 
                                               2021   Group's    2020   Group's 
 Consolidated statement of comprehensive      Total     share   Total     share 
  income                                       GBPm      GBPm    GBPm      GBPm 
===========================================  ======  ========  ======  ======== 
Revenue                                         6.4       0.6     1.7       0.2 
Property operating expenses                   (1.6)     (0.2)     0.1         - 
===========================================  ======  ========  ======  ======== 
Net property income                             4.8       0.4     1.8       0.2 
Administration expenses                       (0.2)         -   (0.1)         - 
Net finance costs                             (2.8)     (0.3)   (0.7)     (0.1) 
===========================================  ======  ========  ======  ======== 
                                                1.8       0.1     1.0       0.1 
Net valuation movement                          6.2       0.6   (3.6)     (0.4) 
===========================================  ======  ========  ======  ======== 
Profit / (loss) after taxation                  8.0       0.7   (2.6)     (0.3) 
===========================================  ======  ========  ======  ======== 
Add back net valuation movement               (6.2)     (0.6)     3.6       0.4 
===========================================  ======  ========  ======  ======== 
Group's share of associates' profit before 
 valuation movements                            1.8       0.1     1.0       0.1 
===========================================  ======  ========  ======  ======== 
 

17. Property plant and equipment

 
                                                      Office       Fixtures   Public 
                                                   equipment   and fittings   houses  Total 
Cost or valuation                                       GBPm           GBPm     GBPm   GBPm 
================================================  ==========  =============  =======  ===== 
At 1 April 2020                                          1.8            0.6     56.6   59.0 
Additions                                                0.6              -      2.7    3.3 
Revaluation: 
Recognised in the consolidated statement 
 of comprehensive income                                   -              -    (0.5)  (0.5) 
Recognised in the consolidated income statement            -              -    (6.6)  (6.6) 
Net transfers from investment property                     -              -      4.1    4.1 
Disposals                                                  -              -    (0.9)  (0.9) 
================================================  ==========  =============  =======  ===== 
At 31 March 2021                                         2.4            0.6     55.4   58.4 
================================================  ==========  =============  =======  ===== 
Accumulated depreciation 
At 1 April 2020                                          0.7            0.5      1.6    2.8 
Charge for the year                                      0.4              -      1.1    1.5 
At 31 March 2021                                         1.1            0.5      2.7    4.3 
================================================  ==========  =============  =======  ===== 
Net book value at 31 March 2021                          1.3            0.1     52.7   54.1 
================================================  ==========  =============  =======  ===== 
Net book value at 31 March 2020                          1.1            0.1     55.0   56.2 
================================================  ==========  =============  =======  ===== 
 
 
                                                      Office       Fixtures   Public 
                                                   equipment   and fittings   houses  Total 
Cost or valuation                                       GBPm           GBPm     GBPm   GBPm 
================================================  ==========  =============  =======  ===== 
At 1 April 2019                                          1.4            0.6     27.7   29.7 
Additions                                                0.4              -      9.8   10.2 
Business combinations                                      -              -     18.7   18.7 
Revaluation: 
Recognised in the consolidated statement 
 of comprehensive income                                   -              -    (1.0)  (1.0) 
Recognised in the consolidated income statement            -              -    (4.0)  (4.0) 
Net transfers from investment property                     -              -      5.4    5.4 
================================================  ==========  =============  =======  ===== 
At 31 March 2020                                         1.8            0.6     56.6   59.0 
================================================  ==========  =============  =======  ===== 
Accumulated depreciation                                 0.3            0.5      0.8    1.6 
At 1 April 2019 
Charge for the year                                      0.4              -      0.8    1.2 
Disposals                                                  -              -        -      - 
================================================  ==========  =============  =======  ===== 
At 31 March 2020                                         0.7            0.5      1.6    2.8 
================================================  ==========  =============  =======  ===== 
Net book value at 31 March 2020                          1.1            0.1     55.0   56.2 
================================================  ==========  =============  =======  ===== 
Net book value at 31 March 2019                          1.1            0.1     26.9   28.1 
================================================  ==========  =============  =======  ===== 
 

The Group's public houses have been valued at fair value on 31 March 2021 by independent valuers, Colliers International Valuation UK LLP, on the basis of fair value in accordance with the Current Practice Statements contained in The Royal Institution of Chartered Surveyors Valuation - Professional Standards, (the 'Red Book'). The valuations are performed by appropriately qualified valuers who have relevant and recent experience in the sector. Please see note 14 for further information on the valuation of the Group's properties. As mentioned in note 17, there is a material valuation uncertainty clause on the public house valuations, amounting to GBP52.7 million (2020: GBP55.0 million) in the note above.

The carrying amount of assets which have been revalued would have been GBP51.3 million (2020: GBP52.7 million) had they been carried under the cost model. Depreciation is also charged on the right of use asset of GBP0.4 million (2020: GBP0.4 million), which is not included in the note above.

18. Trade and other receivables

 
                               2021   2020 
                               GBPm   GBPm 
Trade receivables               9.6    6.2 
Restricted monetary asset       5.6    8.1 
Service charge receivables*     2.6    5.6 
Other receivables               4.9    3.8 
Prepayments                     1.9    1.4 
Accrued income                  1.4    1.6 
============================  =====  ===== 
                               26.0   26.7 
============================  =====  ===== 
 

*Included in service charge receivables is GBP0.4 million of Value Added Taxation (2020: GBP0.9 million), GBPnil of accrued income (2020: GBP2.2 million), GBPnil of prepayments (2020: GBP0.4 million) and GBP2.2 million of service charge debtors (2020: GBP2.1 million).

Trade receivables are shown after deducting a loss allowance of GBP9.3m (2020: GBP4.2m). The provision for doubtful debts is calculated as an expected credit loss on trade receivables in accordance with IFRS 9. The charge to the consolidated statement of comprehensive income in relation to doubtful debts made against tenant debtors was GBP5.6 million (2020: GBP2.5 million). The Group has calculated the expected credit loss by applying a forward-looking outlook, impacted by the Covid-19 pandemic, to historic default rates.

The Group monitors rent collection in order to anticipate and minimise the impact of default by tenants, which may be impacted by Covid-19 and the ability of tenants to pay rent receivables. All outstanding rent receivables are regularly monitored. In order to measure the expected credit losses, trade receivables from tenants have been grouped on a basis of shared credit risk characteristics and an assumption around the tenants ability to pay their receivable, based on conversations held and our knowledge of their credit history. The expected loss rates are based on historical payment profiles of tenant debtors and corresponding historical credit losses. These historical loss rates are then adjusted to reflect the current pandemic and likelihood that tenants will pay.

 
                                                            31 March  31 March 
                                                                2021      2020 
                                                                GBPm      GBPm 
==========================================================  ========  ======== 
Opening loss allowance at 1 April 2020/2019                      4.2       1.7 
Increase in loss allowance recognised in the consolidated 
 statement of comprehensive income during the year               5.6       2.5 
Loss allowance write off                                       (0.5)         - 
==========================================================  ========  ======== 
Closing loss allowance at 31 March 2021/2020                     9.3       4.2 
==========================================================  ========  ======== 
 

The restricted monetary asset relates to cash balances which legally belong to the Group but which the Group cannot readily access. They do not meet the definition of cash and cash equivalents and consequently are presented separately from cash in the consolidated balance sheet.

19. Assets held for sale

 
                                         2021   2020 
                                         GBPm   GBPm 
======================================  =====  ===== 
Assets held for sale at 1 April 2020        -      - 
Investment properties                    25.5      - 
======================================  =====  ===== 
Assets held for sale at 31 March 2021    25.5      - 
======================================  =====  ===== 
 

In the year ended 31 March 2021 the Group has made a number of strategic disposals. As at 31 March 2021 there were three retail parks, included within the Group's retail segment, that were in negotiations for sale with a third party. These assets were considered to be in a condition ready for sale and are considered to meet the held for sale criteria under IFRS.

20. Derivative financial instruments

The Group enters into derivative financial instruments to provide an economic hedge to its interest rate exchange risks. These financial instruments are classified as Level 2 fair value measurements, being those derived from inputs other than quoted prices. There were no transfers between levels in the current year.

 
                           2021   2020 
                           GBPm   GBPm 
========================  =====  ===== 
Interest rate swaps 
Current liabilities           -  (0.1) 
Non-current liabilities   (2.6)  (2.6) 
========================  =====  ===== 
                          (2.6)  (2.7) 
========================  =====  ===== 
 
 
                                   Average contract    Notional principal 
                                     interest rate           amount           Fair value 
================================  ==================  ====================  ============== 
                                      2021      2020       2021       2020    2021    2020 
                                         %         %       GBPm       GBPm    GBPm    GBPm 
================================  ========  ========  =========  =========  ======  ====== 
Interest rate swaps - receive 
 floating pay fixed 
In less than one year                    -      0.4%          -       13.4       -   (0.1) 
In more than one year but less 
 than two                             0.8%         -      137.2          -       -       - 
In more than two years but less 
 than five                            1.5%      0.4%      137.2      274.5   (2.6)   (2.6) 
Interest rate caps                       -                    -                  - 
In less than one year                 1.5%      0.5%       70.0        9.7       -       - 
In more than one year but less 
 than two                                -      0.4%          -       70.0       -       - 
In more than two years but less 
 than five                               -         -          -          -       -       - 
================================  ========  ========  =========  =========  ======  ====== 
                                                          344.4      367.6   (2.6)   (2.7) 
================================  ========  ========  =========  =========  ======  ====== 
 

21. Cash and cash equivalents

There are no restrictions on cash in place (2020: nil). As at the 31 March 2021 and 30 March 2020 cash and cash equivalents comprised of cash held in bank accounts.

22. Trade and other payables

 
                               2021   2020 
                               GBPm   GBPm 
============================  =====  ===== 
Trade payables                  4.4    2.6 
Service charge liabilities*    10.9   13.7 
Other payables                  7.0    4.4 
Accruals                       15.0   13.6 
Value Added Taxation            2.2    4.4 
Rent received in advance        7.4    8.1 
============================  =====  ===== 
                               46.9   46.8 
============================  =====  ===== 
 

*Service charge liabilities includes accruals of GBP0.3 million (31 March 2020: GBP1.3 million), service charge creditors and other creditors of GBP2.8 million (31 March 2020: GBP2.9 million) and deferred income of GBP7.8 million (31 March 2020: GBP9.5 million).

23. Borrowings

 
                                    2021   2020 
Maturity of bank facilities:        GBPm   GBPm 
=================================  =====  ===== 
Between two and three years        335.0      - 
Between three and four years           -  335.0 
Between four and five years            -      - 
After five years                   300.0  300.0 
=================================  =====  ===== 
                                   635.0  635.0 
Less unamortised fees / discount   (5.3)  (6.4) 
=================================  =====  ===== 
                                   629.7  628.6 
=================================  =====  ===== 
 
 
 
                            Carrying              Carrying 
                              amount  Fair value    amount  Fair value 
                                2021        2021      2020        2020 
Unsecured borrowings:           GBPm        GBPm      GBPm        GBPm 
Term loan                      165.0       165.0     165.0       165.0 
Revolving credit facility      170.0       170.0     170.0       170.0 
Corporate bond                 300.0       283.7     300.0       285.0 
==========================  ========  ==========  ========  ========== 
                               635.0       618.7     635.0       620.0 
==========================  ========  ==========  ========  ========== 
 

The fair value of the Group's corporate bond has been estimated on the basis of quoted market prices, representing Level 1 fair value measurement as defined by IFRS 13 Fair Value Measurement. The fair value of the Group's bank loans is approximately the same as their carrying amount, after adjusting for the unamortised arrangement fees, and also represents Level 2 fair value measurement.

 
                                                                Unamortised 
                                                                   facility 
                                                      Facility       fees / 
                                            Facility     drawn     discount 
Unsecured borrowings:       Maturity date       GBPm      GBPm         GBPm   GBPm 
==========================  ==============  ========  ========  ===========  ===== 
Term loan                   August 2023        165.0     165.0        (0.7)  164.3 
Revolving credit facility   August 2023        215.0     170.0        (1.0)  169.0 
Corporate bond              March 2028         300.0     300.0        (3.6)  296.4 
==========================  ==============  ========  ========  ===========  ===== 
                                               680.0     635.0        (5.3)  629.7 
 =========================================  ========  ========  ===========  ===== 
 

In the year the Group drew down GBPnil (year-ended March 2020: GBP125 million) of the revolving credit facility.

24. Lease commitment arrangements

The Group earns rental income by leasing its investment properties to tenants under non-cancellable lease commitments.

The Group holds two types of leases.

- Head leases: A number of the investment properties and managed houses held as property, plant and equipment owned by the Group are situated on land held through leasehold arrangements, as opposed to the Group owning the freehold.

   -       Office leases: Office space occupied by the Group's head office. 

The lease liability and associated ROU asset recognised in the consolidated balance sheet are set out below.

 
                                                      2021   2020 
                                                      GBPm   GBPm 
===================================================  =====  ===== 
Right of use asset (Investment property)              83.0   83.3 
Right of use asset (Property, plant and equipment)     3.5    3.9 
Current lease liability                                0.7    0.7 
Non-current lease liability                           84.9   85.6 
===================================================  =====  ===== 
 

As the head leases meet the definition of investment property, it is initially recognised in accordance with IFRS 16, and then subsequently accounted for as investment property in accordance with IAS 40 and the Group's accounting policy.

The ROU asset in relation to the head office lease has been recognised as property, plant and equipment. After initial recognition the ROU head office asset is depreciated on a straight-line basis over the period of the lease.

The expense relating to low value assets which have not been recognised under IFRS 16 was GBP0.1 million (March 2020: GBPnil) and the expense relating to variable lease payments not included in the measurement of lease liabilities was GBPnil million (March 2020: GBPnil). The total cash outflow in relation to lease commitments for the year was GBP3.5 million (March 2020: GBP3.4 million).

Lease liability maturity table

 
                                         2021   2020 
                                         GBPm   GBPm 
======================================  =====  ===== 
Within one year                           0.7    0.7 
Between one and two years                 0.7    0.7 
In the second to fifth year inclusive     2.1    2.1 
After five years                         82.1   82.8 
======================================  =====  ===== 
                                         85.6   86.3 
======================================  =====  ===== 
 

Lease commitments payments payable by the Group were as follows:

 
                           2021     2020 
                           GBPm     GBPm 
======================  =======  ======= 
Within one year             3.3      3.4 
One to two years            3.3      3.4 
Two to five years          10.0     10.2 
After five years          253.9    256.7 
======================  =======  ======= 
                          270.5    273.7 
Effect of discounting   (184.9)  (187.4) 
======================  =======  ======= 
Lease liability            85.6     86.3 
======================  =======  ======= 
 

At the balance sheet date the Group had contracted with tenants for the following future minimum lease payments on its investment properties:

 
                                         2021   2020 
                                         GBPm   GBPm 
======================================  =====  ===== 
Within one year                          64.7   77.2 
Between one and two years                55.9   71.6 
In the second to fifth year inclusive   114.9  161.8 
After five years                        161.1  206.6 
======================================  =====  ===== 
                                        396.6  517.2 
======================================  =====  ===== 
 

The Group's weighted average lease length of lease commitments at 31 March 2021 was 5.2 years (March 2020: 5.2 years).

Operating lease obligations exist over the Group's offices, head leases on the Group's retail portfolio and ground rent leases in the Group's pub portfolio. Investment properties and public houses are leased to tenants under operating leases with rentals payable monthly and quarterly. Where considered necessary to reduce credit risk, the Group may obtain bank guarantees for the term of the lease. The Group also grants lease incentives in order to encourage high quality tenants to remain in properties for longer lease terms. The expense for the year was GBP3.1 million (March 2020: GBP2.5 million).

25. Share capital and reserves

Share capital

 
                                         Number 
                                      of shares       Price          Held by     Shares 
                                         issued   per share   Total      EBT   in issue 
Ordinary shares                             m's       pence     m's      m's        m's 
===================================  ==========  ==========  ======  =======  ========= 
1 April 2019                                                  307.8      3.0      304.8 
Scrip dividends issued                      0.9       206.8   308.7      3.0      305.7 
Shares issued under employee share 
 schemes                                    0.2           -   308.7      2.8      305.9 
Exercise of warrants                        0.3       116.0   309.0      2.8      306.2 
===================================  ==========  ==========  ======  =======  ========= 
31 March 2020                                                 309.0      2.8      306.2 
Shares issued under employee share 
 schemes                                    0.1           -   309.0      2.7      306.3 
===================================  ==========  ==========  ======  =======  ========= 
31 March 2021                                                 309.0      2.7      306.3 
===================================  ==========  ==========  ======  =======  ========= 
 
 
                            Share     Share 
                          capital   premium     Total 
                          GBP'000   GBP'000   GBP'000 
1 April 2019                3,050   224,993   228,043 
Exercise of warrants            3       333       336 
Scrip dividends issued          9     2,023     2,032 
=======================  ========  ========  ======== 
31 March 2020               3,062   227,349   230,411 
=======================  ========  ========  ======== 
31 March 2021               3,062   227,349   230,411 
=======================  ========  ========  ======== 
 

All issued shares are fully paid up.

Merger reserve

The merger reserve arose as a result of the scheme of arrangement and represents the nominal amount of share capital that was issued to shareholders of NewRiver Retail Limited.

Retained earnings

Retained earnings consist of the accumulated net comprehensive profit of the Group, less dividends paid from distributable reserves, and transfers from equity issues where those equity issues generated distributable reserves.

Shares held in Employee Benefit Trust (EBT)

As part of the scheme of arrangement and group reorganisation, the Company established an EBT which is registered in Jersey. The EBT, at its discretion, may transfer shares held by it to directors and employees of the Company and its subsidiaries. The maximum number of ordinary shares that may be held by the EBT may not exceed 10% of the Company's issued share capital. It is intended that the EBT will not hold more ordinary shares than are required in order to satisfy share options granted under employee share incentive plans.

There are currently 2,625,006 ordinary shares held by the EBT.

26. Share-based payments

The Group has three share schemes for employees:

   -       Share option scheme 
   -       Performance Share Scheme 
   -       Deferred bonus scheme 

Share option scheme

Options were granted between 2009 and 2011. The options were priced at the share price at date of issue. No options were granted in 2020 or 2021. The charge for the year recognised in the consolidated statement of comprehensive income was nil (2020: nil).

 
                Average  Outstanding                               Outstanding                      Average 
               exercise     at start               Number               at end        Number      remaining 
Year issued       price      of year  Granted   Exercised  Lapsed      of year   exercisable   life (years) 
============  =========  ===========  =======  ==========  ======  ===========  ============  ============= 
2012               2.35      338,000        -           -       -      338,000       338,000            0.5 
============  =========  ===========  =======  ==========  ======  ===========  ============  ============= 
                             338,000        -           -       -      338,000       338,000 
============  =========  ===========  =======  ==========  ======  ===========  ============  ============= 
 

Performance Share Scheme

Zero priced share options have been issued to senior management and executive directors under the Performance Share Scheme since 2013. The options vest to the extent that performance conditions are met over a three or four-year period. At the end of the period there may be a further vesting condition that the employee or director remains an employee of the Group. Further details on the scheme and the performance conditions is provided in the Remuneration Report. The charge for the year recognised in the consolidated statement of comprehensive income was GBP0.3 million (2020: GBP0.8 million charge).

 
                Average  Outstanding                                      Outstanding                      Average 
               exercise     at start                 Number                    at end        Number      remaining 
Year issued       price      of year    Granted   Exercised       Lapsed      of year   exercisable   life (years) 
============  =========  ===========  =========  ==========  ===========  ===========  ============  ============= 
2017                  -      278,506          -           -            -      278,506             -            5.5 
2018                  -      962,495          -           -    (962,495)            -             -            6.2 
2019                  -    1,588,060          -           -    (221,408)    1,336,652             -            7.3 
2020                  -    2,068,213          -           -    (250,060)    1,818,153             -            8.2 
2021                  -            -  3,129,236           -     (24,365)    3,104,871             -            9.4 
============  =========  ===========  =========  ==========  ===========  ===========  ============  ============= 
                           4,897,274  3,129,236           -  (1,458,328)    6,538,182             - 
============  =========  ===========  =========  ==========  ===========  ===========  ============  ============= 
 

Deferred Bonus Scheme

Zero priced share options have been issued to senior management and executive directors under the Deferred Bonus Scheme since 2016. The options vest based on the employee or director remaining in the employment of the Group for a defined period (usually two years). The charge for the year recognised in the consolidated statement of comprehensive income for this scheme was GBP0.3 million (March 2020: GBP0.8 million credit).

 
                Average  Outstanding                                Outstanding                      Average 
               exercise     at start                                     at end        Number      remaining 
Year issued       price      of year  Granted  Exercised    Lapsed      of year   exercisable   life (years) 
============  =========  ===========  =======  =========  ========  ===========  ============  ============= 
2018                  -       67,016        -    (3,462)         -       63,554             -          (0.7) 
2019                  -      280,957        -  (126,265)         -      154,692             -            0.2 
2020                  -      420,511        -          -  (97,499)      323,012             -            1.2 
2021                  -            -  526,640          -         -      526,640             -            2.4 
============  =========  ===========  =======  =========  ========  ===========  ============  ============= 
                             768,484  526,640  (129,727)  (97,499)    1,067,898             - 
============  =========  ===========  =======  =========  ========  ===========  ============  ============= 
 

Fair value

The fair value of the share options has been calculated based on a Monte Carlo Pricing Model using the following inputs:

 
                                  2021     2020 
====================  ================  ======= 
Share price                       0.63    1.770 
Exercise price                     Nil      Nil 
Expected volatility                21%      21% 
                                        0.548 - 
Risk free rate        -0.048% - 0.009%     0.7% 
Expected dividends*                 0%    12.2% 
====================  ================  ======= 
 

*based on quoted property sector average.

27. Financial instruments and risk management

The Group's activities expose it to a variety of financial risks in relation to the financial instruments it uses: market risk including cash flow interest rate risk, credit risk and liquidity risk. The financial risks relate to the following financial instruments: trade and other receivables, cash and cash equivalents, trade and other payables, borrowings and derivative financial instruments.

Risk management parameters are established by the Board on a project-by-project basis. Reports are provided to the Board quarterly and also when authorised changes are required.

Financial instruments

 
                                     Valuation     2021     2020 
                                         level     GBPm     GBPm 
===================================  =========  =======  ======= 
Financial assets 
Financial assets at amortised cost 
Trade and other receivables                        22.4     20.2 
Cash and cash deposits                            150.5     80.8 
===================================  =========  =======  ======= 
                                                  172.9    101.0 
===================================  =========  =======  ======= 
Financial liabilities 
Fair value through profit or loss 
Interest rate swaps                          2    (2.6)    (2.7) 
At amortised cost 
Borrowings                                      (629.7)  (628.6) 
Lease liabilities                                (85.6)   (86.3) 
Payables and accruals                            (29.4)   (24.8) 
===================================  =========  =======  ======= 
                                                (747.3)  (742.4) 
===================================  =========  =======  ======= 
                                                (574.4)  (641.4) 
===================================  =========  =======  ======= 
 

The fair value of the financial assets and liabilities at amortised cost are considered to be the same as their carrying value, with the exception of certain fixed rate borrowings, see note 22 for further details.

Market risk

Currency risk

The Group is not subject to any foreign currency risk as nearly all transactions are in Pounds Sterling.

Interest rate risk

The Group's interest rate risk arises from borrowings issued at floating interest rates (see note 23). The Group's interest rate risk is reviewed quarterly by the Board. The Group manages its exposure to interest rate risk on borrowings through the use of interest rate derivatives (see note 20). Interest rate caps and interest rate swaps are used to both mitigate the risk of an increase in interest rates but also to allow the Group to benefit from a fall in interest rates. The Group has employed an external adviser when contracting hedging to advise on the structure of the hedging.

Sensitivity analysis is carried out to assess the impact of an increase in interest rates on finance costs to the Group. Management consider that a significant movement in interest rates would be 200 bps and have therefore carried out sensitivity analysis of the impact of such a movement. The impact of a 200 bps increase in interest rates for the year would increase net interest payable in the consolidated statement of comprehensive income by GBP4.0 million (2020: GBP4.0 million). The impact of a 200 bps decrease in interest rates for the year would reduce the net interest payable in the consolidated statement of comprehensive income by GBP4.0 million (2020: GBP3.7 million). The directors consider this to be a reasonable sensitivity given historic interest rates and the possibility for short term swings in rates.

Credit risk

The Group's principal financial assets are cash, trade receivables and other receivables.

The Group manages its credit risk through policies to ensure that rental contracts are made with tenants meeting appropriate balance sheet covenants, supplemented by rental deposits or bank guarantees from international banks. The Group may suffer a void period where no rents are received. The quality of the tenant is assessed based on an extensive tenant covenant review scorecard prior to acquisition of the property. The assessment of the tenant credit worthiness is also monitored on an ongoing basis. Credit risk is assisted by the vast majority of occupational leases requiring that tenants pay rentals in advance. The Group monitors rent collection in order to anticipate and minimise the impact of default by tenants, which may be impacted by covid-19. All outstanding rent receivables are regularly monitored. In order to measure the expected credit losses, trade receivables from tenants have been grouped on a basis on shared credit risk characteristics and an assumption around the tenants ability to pay their receivable, based on conversations held and our knowledge of their credit history. The expected loss rates are based on historical payment profiles of tenant debtors and corresponding historical credit losses. These historical loss rates are then adjusted to reflect the current pandemic and likelihood that tenants will pay.

Ageing of past due gross trade receivables and the carrying amount net of loss allowances is set out below:

 
 
 
                    2021         2021         2021        2021      2020         2020         2020        2020 
                   Gross         Loss                 Carrying     Gross         Loss                 Carrying 
                  amount    allowance    % applied      amount    amount    allowance    % applied      amount 
                    GBPm         GBPm         GBPm        GBPm      GBPm         GBPm         GBPm        GBPm 
==============  ========  ===========  ===========  ==========  ========  ===========  ===========  ========== 
0-30 days            5.0          1.0          20%         4.0       6.8          0.8          12%         6.0 
30-60 days           0.9          0.2          22%         0.7       0.7          0.5          71%         0.2 
60-90 days           0.5          0.2          40%         0.3       0.5          0.5         100%           - 
90-120 days          1.6          0.5          31%         1.1       0.3          0.3         100%           - 
Over 120 days       10.9          7.4          68%         3.5       2.1          2.1         100%           - 
==============  ========  ===========  ===========  ==========  ========  ===========  ===========  ========== 
                    18.9          9.3                      9.6      10.4          4.2                      6.2 
==============  ========  ===========  ===========  ==========  ========  ===========  ===========  ========== 
 

The Group recognises an expected credit loss allowance on trade debtors, as noted in the above table. The Group also recognises an expected credit loss allowance of GBP1.4 million on service charge debtors and GBP0.1 million on insurance debtors.

The Group categorises trade debtors in varying degrees of risk, as detailed below:

 
                                               2021   2020 
                                               GBPm   GBPm 
============================================  =====  ===== 
Risk level 
Very high                                       3.9      - 
High                                            2.4    2.4 
Medium                                          4.4    5.4 
Low                                             8.2    2.6 
============================================  =====  ===== 
Gross carrying amount before loss allowance    18.9   10.4 
============================================  =====  ===== 
Loss allowance                                (9.3)  (4.2) 
============================================  =====  ===== 
Carrying amount                                 9.6    6.2 
============================================  =====  ===== 
 
 
                                                           2021   2020 
                                                           GBPm   GBPm 
========================================================  =====  ===== 
Opening loss allowance at 31 March                          4.2    1.7 
Increase in loss allowance recognised in profit or loss 
 during the year                                            5.6    2.5 
Loss allowance write off                                  (0.5)      - 
========================================================  =====  ===== 
 Closing loss allowance at 31 March                         9.3    4.2 
========================================================  =====  ===== 
 

The Group monitors its counterparty exposures on cash and short-term deposits weekly. The Group monitors the counterparty credit rating of the institutions that hold its cash and deposits and spread the exposure across several banks.

The Group's maximum exposure to credit risk as at 31 March 2021 was GBP26.0 million (31 March 2020: GBP26.7 million).

Liquidity risk

The Group manages its liquidity risk by maintaining sufficient cash balances and committed credit facilities. The Board reviews the credit facilities in place on a project-by-project basis. Cash flow reports are issued weekly to management and are reviewed quarterly by the Board. As a result of the Covid-19 pandemic, the Directors took the decision to utilise a further GBP50 million of undrawn revolving credit facility in the year to 31 March 2020, meaning the Group has over GBP154 million of cash in the bank (including share of joint ventures and associates) and a further GBP45 million of undrawn RCF as at the 31 March 2021. To preserve cash, the Group suspended dividends through the year and suspended all non-essential capital expenditure projects, suspended business rates and marketing in the shopping centres and public houses. A summary table with maturity of financial liabilities is presented below:

 
                                    One to  Two to  More than 
                         Less than     two    five       five 
2021 GBPm                 one year   years   years      years    Total 
=======================  =========  ======  ======  =========  ======= 
Borrowings                       -       -   335.0      300.0    635.0 
Interest on borrowings        19.1    19.1    34.4       20.2     92.8 
Interest rate swaps            0.7     1.3     0.6          -      2.6 
Lease liabilities              3.3     3.3    10.0      253.9    270.5 
Payables and accruals         29.4       -       -          -     29.4 
=======================  =========  ======  ======  =========  ======= 
                              52.5    23.7   380.0      574.1  1,030.3 
=======================  =========  ======  ======  =========  ======= 
2020 GBPm 
=======================  =========  ======  ======  =========  ======= 
Borrowings                       -       -   335.0      300.0    635.0 
Interest on borrowings        18.8    18.8    46.7       30.7    115.0 
Interest rate swaps            0.9     0.7     1.3          -      2.9 
Lease liabilities              3.4     3.4    10.2      256.7    273.7 
Payables and accruals         24.8       -       -          -     24.8 
=======================  =========  ======  ======  =========  ======= 
                              47.9    22.9   393.2      587.4  1,051.4 
=======================  =========  ======  ======  =========  ======= 
 
 
Reconciliation of movement in the Group's share of net      2021    2020 
 debt in the year                                           GBPm    GBPm 
=======================================================  =======  ====== 
Group's share of net debt at beginning of year             563.6   475.1 
Cash flow 
Net increase in cash and cash equivalents                 (69.7)  (53.7) 
New bank loans (net of expenses)                               -   162.0 
Bank loans acquired in business combinations                   -    11.7 
Bank loans repaid                                              -  (48.7) 
Amortisation of bank loan fees                               1.1     1.0 
Group's share of joint ventures' and associates' cash 
 flow 
Net increase in cash and cash equivalents                  (2.5)   (0.9) 
Bank loans repaid                                          (1.2)       - 
New bank loans                                               2.0    17.1 
=======================================================  =======  ====== 
 Group's share of net debt                                 493.3   563.6 
=======================================================  =======  ====== 
Being: 
Group borrowings                                           629.7   628.6 
Joint ventures' and associates' borrowings                  17.9    17.1 
Group cash                                               (150.5)  (80.8) 
Joint venture and associate cash                           (3.8)   (1.3) 
=======================================================  =======  ====== 
Group's share of net debt                                  493.3   563.6 
=======================================================  =======  ====== 
 

Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, to provide returns to shareholders and to maintain an optimal capital structure to reduce the cost of capital. The Group is not subject to any external capital requirements. As detailed in note 11, the Group is a REIT and to qualify as a REIT the Group must distribute 90% of its taxable income from its property business.

To maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of its gearing ratio. This ratio is calculated as net debt divided by equity. Net debt is calculated as total borrowings, less cash and cash equivalents.

During the year, the Group's LTV increased by 4% from 47% to 51% and the gearing ratio from 90% to 104% as at the 31 March 2021 mainly due to the valuation decline caused by the Covid-19 pandemic. The Group continually monitors LTV and will continue to monitor LTV closely, factoring in disposal activity and further valuation declines as mentioned in Note 1. The Group has remained compliant with all of its banking covenants during and since the year end as discussed in Note 1.

 
                                                              2021     2020 
Net debt to equity ratio                                      GBPm     GBPm 
=========================================================  =======  ======= 
Borrowings                                                   629.7    628.6 
Cash and cash equivalents                                  (150.5)   (80.8) 
=========================================================  =======  ======= 
Net debt                                                     479.2    547.8 
Equity attributable to equity holders of the parent          460.4    610.6 
=========================================================  =======  ======= 
Net debt to equity ratio ('Balance sheet gearing')            104%      90% 
=========================================================  =======  ======= 
Share of joint ventures' and associates' borrowings           17.9     17.1 
Share of joint ventures' and associates' cash and cash 
 equivalents                                                 (3.8)    (1.3) 
=========================================================  =======  ======= 
Group's share of net debt                                    493.3    563.6 
Carrying value of investment property and public houses      851.9  1,102.3 
Carrying value of managed houses                              52.7     55.0 
Carrying value of assets held for sale                        25.5        - 
Share of joint ventures' and associates carrying value 
 of investment properties                                     44.1     39.8 
=========================================================  =======  ======= 
Group's share of carrying value of investment properties     974.2  1,197.1 
=========================================================  =======  ======= 
Net debt to property value ratio ('Loan to value')             51%      47% 
=========================================================  =======  ======= 
 

Reconciliation of financial liabilities

 
                                                           Lease 
                                                     liabilities  Borrowings  Derivatives  Total 
Reconciliation of financial liabilities                     GBPm        GBPm         GBPm   GBPm 
==================================================  ============  ==========  ===========  ===== 
As at 1 April 2020                                          86.3       628.6        (2.7)  712.2 
==================================================  ============  ==========  ===========  ===== 
(Decrease)/Increase through financing cash 
 flows 
Repayment of principal portion of lease liability          (0.7)           -            -  (0.7) 
Decrease through changes in fair value 
Change in fair value of derivative                             -           -          0.1    0.1 
Other changes 
Loan amortisation                                              -         1.1            -    1.1 
==================================================  ============  ==========  ===========  ===== 
As at 31 March 2021                                         85.6       629.7        (2.6)  712.7 
==================================================  ============  ==========  ===========  ===== 
 
 
                                                           Lease 
                                                     liabilities  Borrowings  Derivatives   Total 
Reconciliation of financial liabilities                     GBPm        GBPm         GBPm    GBPm 
==================================================  ============  ==========  ===========  ====== 
As at 1 April 2019                                             -       502.7          0.1   502.8 
==================================================  ============  ==========  ===========  ====== 
Adoption of IFRS 16                                         87.1                             87.1 
(Decrease)/Increase through financing cash 
 flows 
Repayment of Bravo Inns loan                                   -      (11.7)            -  (11.7) 
Repayment of bank loans and other costs                        -      (37.0)            -  (37.0) 
Repayment of principal portion of lease liability          (0.8)           -            -   (0.8) 
New borrowings                                                 -       162.0            -   162.0 
Decrease through changes in fair value 
Change in fair value of derivative                             -           -        (2.8)   (2.8) 
Increase through business acquisitions 
Acquisition of Bravo Inns                                      -        11.7            -    11.7 
Other changes 
Loan amortisation                                              -         0.9            -     0.9 
==================================================  ============  ==========  ===========  ====== 
As at 31 March 2020                                         86.3       628.6        (2.7)   712.2 
==================================================  ============  ==========  ===========  ====== 
 

28. Contingencies and commitments

The Group has no material contingent liabilities (2020: None). The Group was contractually committed to GBP4.0 million of capital expenditure to construct or develop investment property as at 31 March 2021 (31 March 2020: GBP1.0 million).

The Supreme Court has issued its judgement in respect of the FCA Business Interruption Test case and the appeal upheld the favourable decision for the FCA in the High Court. The issuer of certain insurance policies held by the Group confirmed in March 2021 that in principal the policy should cover certain losses incurred by the Group following earlier claims made. There is no certainty of the amount or timing of any receipts under these policies and no asset has been recognised in the consolidated balance sheet at 31 March 2021.

29. Related party transactions

Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note.

During the year the Company paid GBP1.9 million (2020: GBP1.0 million) in professional legal fees to CMS Cameron McKenna Nabarro Olswang LLP for property services at commercial market rates. Allan Lockhart, CEO of NewRiver, has a personal relationship with one of the Partners at CMS who along with other Partners provides these legal services.

The Group have loans with a joint ventures of GBP3.0 million (note 15) (2020: GBP3.0 million) and loans with associates of GBP3.7 million (note 16) (March 2020: GBPnil). On the 30 September 2020, the Group disposed of a subsidiary which owned Sprucefield Retail Park. The Group then acquired a 10% interest, see note 8 and 16.

Management fees are charged to joint ventures for asset management, investment advisory, project management and accounting services. Total fees charged were:

 
                                      2021   2020 
                                      GBPm   GBPm 
===================================  =====  ===== 
NewRiver Retail Investments LP           -    0.1 
NewRiver Retail (Nelson) Limited       0.1    0.1 
NewRiver Retail (Napier) Limited       0.2    0.1 
NewRiver Retail (Hamilton) Limited       -      - 
NewRiver (Sprucefield) Limited         0.1      - 
===================================  =====  ===== 
 

As at the 31 March 2021, an amount of GBP0.1 million was due to the Group relating to management fees.

During the year, the Group has recognised GBP0.3 million of interest from joint ventures and associates and as at the 31 March 2021 the amount owing to the Group was GBP0.2 million.

Key management personnel

The Executive Directors of the Company who served during the year are considered to be key management personnel.

The total compensation of key management personnel was GBP1.4 million (2020: GBP1.5 million), which comprised short-term benefits of GBP0.1 million (2020: GBP0.1 million)

The above is a complete list of the Company's related parties other than its 100% owned subsidiaries. All transfer of resources, services or obligations between the Company and these parties have been disclosed, regardless of whether a price is charged. We are unaware of any other related parties, or transactions between disclosed related parties.

Related party relationships and transactions have been accounted for and disclosed in accordance with the requirements of IFRSs or other requirements, for example, the Companies Act 2006.

All members of key management have been identified, as defined by IAS 24, and their remuneration is included in the disclosures of key management compensation.

30. Post balance sheet events

On 1 April 2021, the Group completed an acquisition of a shopping centre in Sheffield, in which the Group holds a 10% interest. The gross asset value subject to the transaction was GBP41.0 million and NewRiver will hold a 10% interest in the asset (NewRiver share: GBP4.1 million). Seven pubs have been disposed of post year end for GBP1.4 million, which in aggregate created a profit on disposal of GBP0.3 million and on 28 May 2021 the Group acquired 14 community pubs based in the East Midlands.

On the 14 April 2021 the Group announced its intention to divest its community pub business which could be via a potential Initial Public Offer ('IPO').

There were no other significant events occurring after the reporting period, but before the financial statements were authorised for issue.

EPRA PERFORMANCE MEASURES (unaudited)

The information in this section is unaudited and does not form part of the consolidated primary statements of the Company or the notes thereto.

Introduction

Below we disclose financial performance measures in accordance with the European Public Real Estate Association ('EPRA') Best Practice Recommendations which are aimed at improving the transparency, consistency and relevance of reporting across European Real Estate companies.

This section sets out the rationale for each performance measure as well as how it is measured. A summary of the performance measures is included in following table.

 
                                                    FY21   FY20 
=================================================  =====  ===== 
EPRA Earnings per Share (EPS)                       2.9p  16.7p 
EPRA Cost Ratio (including direct vacancy costs)   61.3%  44.0% 
EPRA Cost Ratio (excluding direct vacancy costs)   58.6%  41.4% 
=================================================  =====  ===== 
 
                                                   March  March 
                                                    2021   2020 
=================================================  =====  ===== 
EPRA NRV per share                                  170p   225p 
EPRA NTA per share                                  151p   201p 
EPRA NDV per share                                  155p   204p 
EPRA NIY                                            8.2%   8.1% 
EPRA 'topped-up' NIY                                8.8%   8.5% 
EPRA Vacancy Rate                                   4.2%   5.2% 
=================================================  =====  ===== 
 

EPRA Earnings per Share: 2.9p

Definition

Earnings from operational activities

Purpose

A key measure of a company's underlying operating results and an indication of the extent to which current dividend payments are supported by earnings

 
                                                                    FY21      FY20 
                                                                  (GBPm)    (GBPm) 
==============================================================  ========  ======== 
Earnings per IFRS income statement                               (150.5)   (121.1) 
Adjustments to calculate EPRA Earnings, exclude: 
Changes in value of investment properties, development 
 properties held for investment and other interests                154.7     162.6 
Profits or losses on disposal of investment properties, 
 development properties held for investment and other 
 interests                                                           7.7       1.5 
Changes in fair value of financial instruments and associated 
 close-out costs                                                   (0.1)       2.8 
Acquisition costs on share deals and non-controlling 
 joint venture interests                                             0.1       0.4 
Deferred tax in respect of EPRA adjustments                        (1.4)       0.5 
Adjustments to above in respect of joint ventures (unless 
 already included under proportional consolidation)                (1.6)       4.6 
==============================================================  ========  ======== 
EPRA Earnings                                                        8.9      51.3 
==============================================================  ========  ======== 
Basic number of shares                                            306.4m    305.9m 
==============================================================  ========  ======== 
EPRA Earnings per Share (EPS)                                       2.9p     16.7p 
==============================================================  ========  ======== 
 

Reconciliation of EPRA Earnings to Underlying Funds From Operations (UFFO)

 
                                             FY21      FY20 
                                           (GBPm)    (GBPm) 
========================================  =======  ======== 
EPRA Earnings                                 8.9      51.3 
Share-based payment charge                    0.6         - 
Depreciation on public houses                 1.1       0.8 
Forward-looking element of IFRS 9             0.6         - 
Integration costs and abortive fees           0.3         - 
========================================  =======  ======== 
Underlying Funds From Operations (UFFO)      11.5      52.1 
========================================  =======  ======== 
Basic number of shares                     306.4m    305.9m 
========================================  =======  ======== 
UFFO per share                               3.8p     17.0p 
========================================  =======  ======== 
 

EPRA NRV per share: 170p; EPRA NTA per share: 151p; EPRA NDV per share: 155p

Definition

Net Asset Value adjusted to include properties and other investment interests at fair value and to exclude certain items not expected to crystallise in a long-term investment property business model.

Purpose

Makes adjustments to IFRS NAV to provide stakeholders with the most relevant information on the fair value of the assets and liabilities within a true real estate investment company with a long-term investment strategy.

 
                                           EPRA NAV  EPRA NNNAV  EPRA NRV  EPRA NTA  EPRA NDV 
31 March 2021                                (GBPm)      (GBPm)    (GBPm)    (GBPm)    (GBPm) 
=========================================  ========  ==========  ========  ========  ======== 
IFRS Equity attributable to shareholders      460.4       460.4     460.4     460.4     460.4 
Fair value of financial instruments             2.6           -       2.6       2.6         - 
Deferred tax in relation to fair value 
 gains of Investment Property/ PPE              0.7           -       0.7       0.7         - 
Goodwill as per the IFRS balance sheet            -           -         -     (0.5)     (0.5) 
Fair value of debt                                -        16.3         -         -      16.3 
Purchasers' costs                                 -           -      60.1         -         - 
=========================================  ========  ==========  ========  ========  ======== 
EPRA NRV / NTA / NDV                          463.7       476.7     523.8     463.2     476.2 
=========================================  ========  ==========  ========  ========  ======== 
Fully diluted number of shares               307.3m      307.3m    307.3m    307.3m    307.3m 
=========================================  ========  ==========  ========  ========  ======== 
EPRA NRV / NTA / NDV per share                 151p        155p      170p      151p      155p 
=========================================  ========  ==========  ========  ========  ======== 
 
 
                                           EPRA NAV  EPRA NNNAV  EPRA NRV   EPRA NTA  EPRA NDV 
31 March 2020                                (GBPm)      (GBPm)    (GBPm)     (GBPm)    (GBPm) 
=========================================  ========  ==========  ========  =========  ======== 
IFRS Equity attributable to shareholders      610.6       610.6     610.6      610.6     610.6 
Fair value of financial instruments             2.7           -       2.7        2.7         - 
Deferred tax in relation to fair value 
 gains of Investment Property/ PPE              2.1           -       2.1        2.1         - 
Goodwill as per the IFRS balance sheet            -           -         -      (0.2)     (0.2) 
Fair value of debt                                -        15.0         -          -      15.0 
Purchasers' costs                                 -           -      75.3          -         - 
=========================================  ========  ==========  ========  =========  ======== 
EPRA NRV / NTA / NDV                          615.4       625.6     690.7      615.2     625.4 
=========================================  ========  ==========  ========  =========  ======== 
Fully diluted number of shares               306.5m      306.5m    306.5m     306.5m    306.5m 
=========================================  ========  ==========  ========  =========  ======== 
EPRA NRV / NTA / NDV per share                 201p        204p      225p       201p      204p 
=========================================  ========  ==========  ========  =========  ======== 
 

EPRA NIY: 8.2%, EPRA 'topped-up' NIY: 8.8%

Definition

The basic EPRA NIY calculates the annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers' costs.

In respect of the 'topped-up' NIY, an adjustment to the EPRA NIY in respect of the expiration of rent-free periods (or other unexpired lease incentives such as discounted rent periods and step rents).

Purpose

A comparable measure for portfolio valuations to assist investors in comparing portfolios.

 
                                                                                        March     March 
                                                                                         2021      2020 
                                                                                       (GBPm)    (GBPm) 
=============================================================================  ====  ========  ======== 
Properties at valuation - wholly owned                                                  904.6   1,157.3 
Properties at valuation - share of Joint Ventures 
 & Associates                                                                            44.1      39.8 
Trading property (including share of Joint Ventures 
 & Associates)                                                                           25.5       0.3 
Less : Developments                                                                    (17.5)    (65.9) 
===================================================================================  ========  ======== 
Completed property portfolio                                                            956.7   1,131.5 
Allowance for estimated purchasers' costs and capital expenditure                        47.3      74.8 
===================================================================================  ========  ======== 
Grossed up completed property portfolio valuation                                 B   1,004.0   1,206.3 
=============================================================================  ====  ========  ======== 
Annualised cash passing rental income                                                    96.4     110.0 
Property outgoings                                                                     (13.7)    (11.9) 
===================================================================================  ========  ======== 
Annualised net rents                                                              A      82.7      98.1 
Add: Notional rent expiration of rent free periods or other lease incentives              5.4       4.7 
===================================================================================  ========  ======== 
Topped-up net annualised rent                                                     C      88.1     102.8 
=============================================================================  ====  ========  ======== 
EPRA NIY                                                                        A/B      8.2%      8.1% 
=============================================================================  ====  ========  ======== 
EPRA 'topped-up' NIY                                                            C/B      8.8%      8.5% 
=============================================================================  ====  ========  ======== 
 

EPRA Vacancy rate: 4.2%

Definition

Estimated Market Rental Value (ERV) of vacant space divided by ERV of the whole portfolio, excluding pub and development assets.

Purpose

A 'pure' (%) measure of investment property space that is vacant, based on ERV.

 
                                                          March     March 
                                                           2021      2020 
                                                         (GBPm)    (GBPm) 
===============================================  ====  ========  ======== 
Calculation of EPRA Vacancy Rate                           GBPm      GBPm 
Estimated Rental Value of vacant retail space       A       2.8       4.2 
Estimated rental value of the retail portfolio      B      66.0      81.4 
===============================================  ====  ========  ======== 
EPRA Vacancy Rate                                 A/B      4.2%      5.2% 
===============================================  ====  ========  ======== 
 

EPRA Cost Ratio: 61.3%

Definition

Administrative & operating costs (including & excluding costs of direct vacancy) divided by gross rental income.

Purpose

A key measure to enable meaningful measurement of the changes in a company's operating costs.

 
                                                                  FY21      FY20 
                                                                (GBPm)    (GBPm) 
======================================================  ====  ========  ======== 
Administrative/operating expenses per IFRS                        52.0      55.0 
Net service charge costs/fees                                      5.9       4.2 
Management fees less actual/estimated profit element             (1.2)     (0.9) 
Other operating income/recharges intended to cover 
 overhead expenses less any related profits                      (7.2)     (1.8) 
Share of Joint Ventures and associates expenses 
 (net of other income)                                             1.3       0.4 
Exclude (if part of the above): 
Investment property depreciation                                     -         - 
Ground rent costs                                                  0.3       0.6 
Service charge costs recovered through rents but                     -         - 
 not separately invoiced 
======================================================  ====  ========  ======== 
EPRA Costs (including direct vacancy costs)                A      51.1      57.5 
Direct vacancy costs                                             (2.2)     (3.4) 
============================================================  ========  ======== 
EPRA Costs (excluding direct vacancy costs)                B      48.9      54.1 
======================================================  ====  ========  ======== 
Gross Rental Income less ground rents - per IFRS                  79.5     127.3 
Less: service fee and service charge costs components                -         - 
 of Gross Rental Income (if relevant) 
Add: share of Joint Ventures and associates (Gross 
 Rental Income less ground rents)                                  3.9       3.4 
============================================================  ========  ======== 
Gross Rental Income                                        C      83.4     130.7 
======================================================  ====  ========  ======== 
EPRA Cost Ratio (including direct vacancy costs)         A/C     61.3%     44.0% 
======================================================  ====  ========  ======== 
EPRA Cost Ratio (excluding direct vacancy costs)         B/C     58.6%     41.4% 
======================================================  ====  ========  ======== 
 

Reconciliation of EPRA Costs (including direct vacancy costs) to Net Administrative expenses per IFRS

 
                                                                     FY21      FY20 
                                                                   (GBPm)    (GBPm) 
=========================================================  ====  ========  ======== 
EPRA Costs (including direct vacancy costs)                   A      51.1      57.5 
Exclude 
Ground rent costs                                                   (0.3)     (0.6) 
Share of Joint Ventures and associates property 
 expenses (net of other income)                                     (1.1)     (0.3) 
Other operating income/recharges intended to cover 
 overhead expenses less any related profits                           7.2       1.8 
Net service charge costs/fees                                       (5.9)     (4.2) 
Operating expenses (excluding service charge cost)                 (28.9)    (33.8) 
Tenant incentives (included within income)                          (0.2)     (0.3) 
Letting & legal costs (included within income)                      (1.6)     (1.2) 
===============================================================  ========  ======== 
Group's share of net administrative expenses as per IFRS      D      20.3      18.9 
=========================================================  ====  ========  ======== 
 
EPRA Gross Rental Income                                      C      83.4     130.7 
Ground rent costs                                                   (0.3)     (0.6) 
Expected credit loss                                                (5.3)     (2.5) 
Government grant money                                                3.7         - 
===============================================================  ========  ======== 
Gross Rental Income                                           E      81.5     127.6 
=========================================================  ====  ========  ======== 
Administrative cost ratio as per IFRS                       D/E     24.9%     14.9% 
=========================================================  ====  ========  ======== 
 

Alternative Performance Measures (APMs)

In addition to information contained in the Group financial statements, Alternative Performance Measures ('APMs'), being financial measures which are not specified under IFRS, are also used by management to assess the Group's performance. These include a number of measures contained in the 'Financial Statistics' table at the beginning of this document. These APMs include a number of European Public Real Estate Association ('EPRA') measures, prepared in accordance with the EPRA Best Practice Recommendations reporting framework. We report these because management considers them to improve the transparency and relevance of our published results as well as the comparability with other listed European real estate companies.

The table below identifies the APMs used in this statement and provides the nearest IFRS measure where applicable, and where in this statement an explanation and reconciliation can be found.

 
 APM                         Nearest IFRS measure   Explanation and reconciliation 
 Underlying Funds From       (Loss) / Profit for    'Underlying Funds From Operations' 
  Operations ('UFFO') and     the period after       section of the 'Finance Review' 
  UFFO per share              taxation 
                            ---------------------  ----------------------------------- 
 EPRA Net Tangible Assets    Net Assets             'Balance sheet' section of 
  ('NTA') and EPRA NTA per                           the 'Finance Review' 
  share 
                            ---------------------  ----------------------------------- 
 Dividend cover              N/A                    'Financial Policies' section 
                                                     of the 'Finance Review' 
                            ---------------------  ----------------------------------- 
 Admin cost ratio            N/A                    Note 6 of the Financial Statements 
                            ---------------------  ----------------------------------- 
 Interest cover              N/A                    Note 3 of the 'Financial 
                                                     Statistics' table 
                            ---------------------  ----------------------------------- 
 EPRA EPS                    IFRS Basic EPS         Note 12 of the Financial 
                                                     Statements 
                            ---------------------  ----------------------------------- 
 EPRA NNNAV                  Net Assets             'EPRA performance measures' 
                                                     section of this document 
                            ---------------------  ----------------------------------- 
 EPRA NIY                    N/A                    'EPRA performance measures' 
                                                     section of this document 
                            ---------------------  ----------------------------------- 
 EPRA 'topped-up' NIY        N/A                    'EPRA performance measures' 
                                                     section of this document 
                            ---------------------  ----------------------------------- 
 EPRA Vacancy Rate           N/A                    'EPRA performance measures' 
                                                     section of this document 
                            ---------------------  ----------------------------------- 
 Total Accounting Return     N/A                    Note 5 of the 'Financial 
                                                     Statistics' table 
                            ---------------------  ----------------------------------- 
 Weighted average cost       N/A                    Note 10 of the 'Financial 
  of debt                                            Statistics' table 
                            ---------------------  ----------------------------------- 
 Weighted average debt       N/A                    Note 11 of the 'Financial 
  maturity                                           Statistics' table 
                            ---------------------  ----------------------------------- 
 Loan to Value               N/A                    Note 12 of the 'Financial 
                                                     Statistics' table 
                            ---------------------  ----------------------------------- 
 

Glossary

Admin cost ratio: Is the Group's share of net administrative expenses (including its share of JV administrative expenses) divided by the Group's share of property income (including its share of JV property income).

Average debt maturity: Is measured in years, when each tranche of Group debt is multiplied by the remaining period to its maturity and the result is divided by total Group debt in issue at the period end.

Affordable Rent to Sales ratio: Is an estimate of the maximum Rent to Sales ratio that an occupier would deem affordable in relation to a particular retail unit. It is calculated for NewRiver by retail consultancy Harper Dennis Hobbs.

Balance sheet gearing: Is the balance sheet net debt divided by IFRS net assets.

BRAVO: Is BRAVO Strategies III LLC, with which NewRiver formed a capital partnership in May 2019 to acquire and manage a portfolio of retail assets in the UK.

Book value: Is the amount at which assets and liabilities are reported in the financial statements.

Cost of debt: Is the Group loan interest and derivative costs at the period end, divided by total Group debt in issue at the period end.

CVA: is a Company Voluntary Arrangement, a legally binding agreement that allows a company to settle debts by paying only a proportion of the amount that it owes to creditors (such as contracted rent) or to come to some other arrangement with its creditors over the payment of its debts.

Dividend cover: Underlying Funds From Operations per share divided by dividend per share declared in the period.

EPRA: Is the European Public Real Estate Association.

EPRA earnings: Is the IFRS profit after taxation excluding investment property revaluations, fair value adjustments on derivatives, gains/losses on disposals and deferred tax.

EPRA Net Tangible Assets (EPRA NTA): Are the balance sheet net assets excluding the mark to market on effective cash flow hedges and related debt adjustments, deferred taxation on revaluations, goodwill, and diluting for the effect of those shares potentially issuable under employee share schemes.

EPRA NTA per share: Is EPRA NTA divided by the diluted number of shares at the period end.

ERV growth: Is the change in ERV over a period on our investment portfolio expressed as a percentage of the ERV at the start of the period. ERV growth is calculated monthly and compounded for the period subject to measurement, as calculated by MSCI Real Estate (formerly named IPD).

Estimated rental value (ERV): Is the external valuers' opinion as to the open market rent which, on the date of valuation, could reasonably be expected to be obtained on a new letting or rent review of a property.

Footfall: Is the annualised number of visitors entering our shopping centre assets.

GAV: Is Gross Asset Value, the total value of all real estate investments owned by the Company

Group: Is NewRiver REIT plc, the Company and its subsidiaries and its share of joint ventures (accounted for on an equity basis).

Head lease: Is a lease under which the Group holds an investment property.

IFRS: International Financial Reporting Standards

Income return: Is the income derived from a property as a percentage of the property value.

Interest cover: Interest cover is tested at corporate level and is calculated by comparing actual net property income received versus cash interest payable on a 12 month look-back basis.

Interest-rate swap: Is a financial instrument where two parties agree to exchange an interest rate obligation for a predetermined amount of time. These are used by the Group to convert floating-rate debt obligation or investments to fixed rates.

Joint venture: Is an entity in which the Group holds an interest on a long-term basis and is jointly controlled by the Group and one or more parties under a contractual arrangement whereby decisions on financial and operating policies essential to the operation, performance and financial position of the venture require each joint venture partner's consent.

Leasing events: Long-term and temporary new lettings, lease renewals and lease variations within investment and joint venture properties.

Like-for-like ERV growth: Is the change in ERV over a period on the standing investment properties expressed as a percentage of the ERV at the start of the period.

Like-for-like footfall: Is the movement in footfall against the same period in the prior period, on properties owned throughout both comparable periods, aggregated at 100% share.

Like-for-like net income: Is the change in net income on properties owned throughout the current and previous periods under review. This growth rate includes revenue recognition and lease accounting adjustments but excludes properties held for development in either period, properties with guaranteed rent reviews, asset management determinations and surrender premiums.

Long-term leasing deals: Are leasing deals with a fixed term certain of at least one year.

Loan to Value (LTV): Is the ratio of gross debt less cash, short-term deposits and liquid investments to the aggregate value of properties and investments. LTV is expressed on a proportionally consolidated basis.

Mark to market: Is the difference between the book value of an asset or liability and its market value.

MSCI-IPD: MSCI Real Estate Investment Property Databank Ltd or 'IPD' produces independent benchmarks of property returns and NewRiver portfolio returns.

Net equivalent yield (NEY): Is the net weighted average income return a property will produce based upon the timing of the income received. In accordance with usual practice, the equivalent yields (as determined by the external valuers) assume rent received annually in arrears and on values before deducting prospective purchaser's costs.

Net initial yield (NIY): Is the current annualised rent, net of costs, expressed as a percentage of capital value, after adding notional purchaser's costs.

Net rental income: Is the rental income receivable in the period after payment of ground rents and net property outgoings. Net rental income will differ from annualised net rents and passing rent due to the effects of income from rent reviews, net property outgoings and accounting adjustments for fixed and minimum contracted rent reviews and lease incentives.

NewRiver share: Represents the Group's ownership on a proportionally consolidated basis.

Passing rent: Is the gross rent, less any ground rent payable under head leases.

Pre-let: A lease signed with an occupier prior to the completion of a development.

Pre-sale: A sale exchanged with a purchaser prior to completion of a development.

Property Income Distribution (PID): As a REIT the Group is obliged to distribute 90% of the tax-exempt profits. These dividends, which are referred to as PIDs, are subject to withholding tax at the basic rate of income tax. Certain classes of shareholders may qualify to receive the dividend gross. See our website (www.nrr.co.uk) for details. The Group can also make other normal (non-PID) dividend payments which are taxed in the usual way.

Real Estate Investment Trust (REIT): Is a listed property company which qualifies for and has elected into a tax regime, which exempts qualifying UK property rental income and gains on investment property disposals from corporation tax.

Rental value growth: Is the increase in the current rental value, as determined by the Company's valuers, over the 12-month period on a like-for-like basis.

Rent to Sales ratio: Is the turnover of an occupier relation to a unit as a proportion of the headline rent of that unit. It is calculated for NewRiver by retail consultancy Harper Dennis Hobbs.

Retail occupancy rate: Is the estimated rental value of let units expressed as a percentage of the total estimated rental value of the portfolio, excluding development properties.

Risk-controlled development pipeline: Is the combination of all development projects that the Company is currently pursuing or assessing for feasibility. Our risk-controlled approach means that we will not commit to a new development unless we have pre-let or pre-sold at least 70% by area.

Tenant (or lease) incentives: Are any incentives offered to occupiers to enter into a lease. Typically the incentive will be an initial rent-free period, or a cash contribution to fit-out or similar costs. Under accounting rules, the value of lease incentives given to tenants is amortised through the Income Statement on a straight-line basis to the lease expiry.

Total Accounting Return (TAR): Is the increase or decrease in EPRA NTA per share plus dividends paid in the period, expressed as a percentage of EPRA NTA per share at the beginning of the period.

Total Property Return (TPR): Is calculated as the change in capital value, less any capital expenditure incurred, plus net income, expressed as a percentage of capital employed over the period, as calculated by MSCI Real Estate (formerly IPD). Total property returns are calculated monthly and indexed to provide a return over the relevant period.

Topped-Up Net Initial Yield: Net initial yield adjusted to include notional rent in respect of let properties which are subject to a rent free period at the valuation date.

Underlying Funds From Operations (UFFO): is a measure of cash profits which includes recurring cash profits and excludes other one off or non-cash adjustments. UFFO is used by the Company as the basis for ordinary dividend policy and cover.

Unsecured balance sheet: The Company's balance sheet is unsecured, which means that none of its debt is secured against any of its property assets.

Weighted average lease expiry (WALE): Is the average lease term remaining to first break, or expiry, across the portfolio weighted by rental income. This is also disclosed assuming all break clauses are exercised at the earliest date, as stated. Excludes short-term licences and residential leases.

Yield on cost: Passing rents expressed as a percentage of the total development cost of a property.

Yield shift: Is a movement (usually expressed in basis points) in the equivalent yield of a property asset.

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