Annual Report and Accounts 2021
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NewRiver is a leading Real Estate
Investment Trust specialising in buying,
managing and developing retail and
leisure assets across the UK. Every day,
our shopping centres, retail parks and
pubs provide essential goods and
services to communities.
NewRiver has a Premium Listing on the
Main Market of the London Stock
Exchange (ticker: NRR).
Contents
Strategic Report
Governance
Financial Statements
Our investment case ...................................2
Chairman’s statement ................................3
Our business at a glance ..........................4
How we create value ..................................8
Stakeholder engagement ......................10
Chief Executive’s review .........................16
Our marketplace .......................................20
Our strategy ................................................22
Our KPIs .......................................................24
Business review ........................................28
Finance review ..........................................38
Our ESG approach ...................................46
Principal risks and uncertainties ..........66
Chairman’s letter ........................................77
Our leadership team ................................78
Board leadership
and Company purpose ...........................82
Division of responsibilities .....................88
Composition, succession
and evaluation ...........................................90
Audit , risk and internal control.............95
Remuneration Committee report ........99
Directors’ report ........................................118
Directors’ responsibilities
statement .....................................................121
Independent Auditors’ report ............. 122
Consolidated Statement
of Comprehensive Income ...................134
Consolidated Balance Sheet ...............135
Consolidated Cash Flow
Statement ...................................................136
Consolidated Statement
of Changes in Equity ...............................137
Notes to the
Financial Statements ..............................138
Glossary ......................................................183
Company information ............................IBC
2021 Highlights
REVENUE
(PROPORTIONALLY CONSOLIDATED)
£95.7m
FY20: £148.2m
UNDERLYING FUNDS
FROM OPERATIONS
£11.5m
FY20: £52.1M
IFRS LOSS
AFTER TAX
£(150.5)m
UNDERLYING FUNDS
FROM OPERATIONS PER SHARE
3.8p
FY20: £(121.1)M
FY20: 17.0p
ORDINARY DIVIDEND
PER SHARE
3.0p
FY20: 16.2p
PORTFOLIO VALUATION
(PROPORTIONALLY CONSOLIDATED)
£1.0bn
FY20: £1.2BN
Presentation of financial information
The Group financial statements are prepared under IFRS where the Group’s
interests in joint ventures are shown as a single line item on the income
statement and balance sheet. 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.
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 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 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.
Reconciliations between APMs and their nearest IFRS measures are
provided on page 182, and definitions are provided in the glossary
on page 183. The measures used in this report are all APMs presented
on a proportionally consolidated basis unless otherwise stated.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR INVESTMENT CASE
Our assets are
integral to the
communities
they serve
Our community shopping
centres, conveniently-located
retail parks and community pubs
are a key part of daily life for
consumers, providing value for
money on everyday essential goods
and services.
We are focused
on essential sub-
sectors of the retail
and leisure markets
Our portfolio is focused on
retailers providing essential goods
and services alongside wet-led
community pubs. These sub-sectors
are growing and are online resilient.
Our income
is diversified
and sustainable
Our portfolio is diversified by asset
type, geography and tenant base,
with over 800 different occupiers
across our retail portfolio and over
530 individual tenants across our
pub portfolio.
We extract further
value from assets
through our market-
leading platform
Our active approach to asset
management, our risk-controlled
development pipeline and our
ability to recycle capital profitably
enable us to extract further value
from our assets.
We have a strong
and unencumbered
balance sheet
Our wholly unsecured
balance sheet, with no bank
refinancing events due until
August 2023, provides significant
operational flexibility.
We are committed
to our communities
We aim to enhance the lives
of consumers and minimise
our impact on the environment.
This ensures thriving communities,
reduces operating costs and
unlocks growth opportunities.
2
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
CHA IRMAN’S ST AT EMENT
CHAIRMAN’S STATEMENT
BARONESS FORD OBE
Non-Executive Chairman
When I wrote to shareholders in June last year, we all hoped
that we were coming through the worst of the COVID crisis;
and of course at that point we were anticipating the reopening
of our retail and pubs.
That optimism was somewhat short-lived as we all now know.
Very few people expected the second wave of the pandemic
to be more serious than the first but that is indeed what we
experienced and, of course, many of our retail occupiers and all
of our pubs were obliged to close again.
So it is all the more remarkable to report that NewRiver’s full
year performance has been highly resilient. Our strategy
of providing essential retail in convenient locations has once
again distinguished our portfolio. And this against the most
incredible headwinds.
Our whole team has worked tirelessly over the last year.
I cannot thank our staff enough for the incredible effort that they
have made. But the results speak for themselves. With excellent
relationships in place across our very diverse customer base,
our diligent asset management team has been able to collect
or rebase 93% of rents due.
Our Hawthorn colleagues have shown phenomenal commitment
to the pubs they own or manage. To have maintained energy
and morale during such a significant period of closure is really
admirable. The highly successful reopening of the pub estate
(on both occasions) has demonstrated just how incredibly well
the whole team has coped.
Consequently we finish the year with significant liquidity and
Underlying Funds From Operations in excess of £11.5 million.
Our unsecured debt has continued to underpin the strength of our
balance sheet and our healthy financial position has led the Board
to conclude that now is the right time to restore the dividend,
as we promised one year ago.
However, we have not just used the last year to cope: we have
used the time wisely to completely review our strategy and
have drilled into the likely future performance of every single
one of our assets. As a consequence, we are committed
to creating the most resilient retail portfolio in the UK.
To accomplish this, we have a clear plan. We will divest
ourselves of our pub portfolio. As a REIT, our exposure to this
sector was always going to have a natural scale and we believe
that now is the best time to realise the value that has been
created for shareholders. We will then use the proceeds to
lower our LTV to an appropriate level. This will establish a very
strong financial foundation as we continue to reshape our
assets to form the most sustainable retail portfolio in the UK.
We clearly understand where and what resilient retail needs
to look like in the future and we will only hold and acquire
assets which fit those criteria.
This has been a remarkable year for everyone and in so many
different ways. I believe that the leadership and stewardship
of NewRiver has been as good as it possibly could have been.
The Board has worked hard and has, at every turn, had the
interests of shareholders front and centre in every decision
we have taken.
Finally, it is with great sadness that I pay tribute to David
Lockhart, the founder of NewRiver, who stepped down from
the Board last year and passed away in September. David was
a towering figure in UK real estate for over four decades but,
more importantly, he was an exceptional human being. He was
a highly valued colleague and enjoyed widespread respect
from our shareholders. Above all else, he was a wonderfully
loyal friend and mentor to everyone in the Company.
BARONESS FORD OBE
Non-Executive Chairman
9 June 2021
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR BUSINESS AT A GLANC E
SPECIALISTS IN
CONVENIENCE & COMMUNITY
Core Shopping Centres
Located in areas with good supply
and demand dynamics for retail
space, resulting in sustainable
income and valuations.
They are characterised by high
occupancy and retention rates,
and affordable rents. Through
asset management and small-
scale development initiatives,
we can enhance income and
valuations further.
22%
OF PORTFOLIO
BY VALUE
£13.15
AVERAGE RENT
PER SQ FT
96.6%
OCCUPANCY
Regeneration Shopping Centres
Providing opportunities to deliver
larger-scale residential-led
regeneration schemes. These
assets benefit from relatively low
capital values and desirable town
and city-centre locations. We will
unlock value from these assets
through capital partnerships or
through selling assets with the
benefit of planning permissions.
22%
OF PORTFOLIO
BY VALUE
1.9m
SQ FT OF DEVELOPMENT
POTENTIAL
Work Out Shopping Centres
Located in areas with an
oversupply of retail space,
leading to downward pressure
on rents and valuations.
They are characterised by lower
occupancy and retention rates.
Through asset management
initiatives, we aim to reposition
some of these centres to become
Core Shopping Centres, while
selectively disposing of others.
13%
OF PORTFOLIO
BY VALUE
£9.00
AVERAGE RENT
PER SQ FT
94.3%
OCCUPANCY
4
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Retail parks
Conveniently located on the edge
of town centres, offering an
essential retail line-up. With free
parking and excellent transport
links, they are optimised for
retailers’ ‘click & collect’ strategies.
Through asset management
initiatives and small-scale
development, we can enhance
income and valuations further.
Community Pubs
Hawthorn, our community
pubs company, owns 673
predominantly wet-led, leased
& tenanted pubs in suburban
locations across England, Scotland
and Wales. Before COVID-19,
these pubs were delivering strong
EBITDA and valuation growth,
and trading has been strong
on reopening.
16%
OF PORTFOLIO
BY VALUE
£12.28
AVERAGE RENT
PER SQ FT
97.6%
OCCUPANCY
25%
OF PORTFOLIO
BY VALUE
80%
OPERATE UNDER LEASED
& TENANTED MODEL
98.0%
OCCUPANCY
Asset management mandates
Our platform manages a number of
assets owned by third-parties or within
our capital partnerships. These owners,
who include Local Authorities,
recognise the scale, relationships
and governance credentials that
NewRiver can provide.
8
ASSET MANAGEMENT
MANDATES
£1.3m
ANNUALISED ASSET
MANAGEMENT FEES
Top 10 Occupiers
Top 10 occupiers are focused on essential goods and services
% of rent roll
% of rent roll
1.
2.
3.
4.
5.
1.9%
1.9%
1.9%
1.8%
1.7%
6.
7.
8.
9.
10.
1.6%
1.5%
1.3%
1.3%
1.2%
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
OUR BUSINESS AT A GLANC E
INVESTED IN EVERY
REGION OF THE UK
33
SHOPPING
CENTRES
19
RETAIL PARKS
673
PUBS
6
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Northern Ireland
1
1
Key developments in the year
In September 2020, sold a 90%
interest in Sprucefield Retail
Park to our capital partner
BRAVO for net proceeds of
£34.7 million. This transaction
took acquisitions made by
our BRAVO relationship to
£143.7 million (NewRiver share:
£38.5 million). NewRiver was
also appointed as asset
manager, in return for a
management fee and will
receive a promote based on
financial performance.
North West England & the Midlands
Scotland
4
3 94
Key developments in the year
Sold units at Kingsway East
Retail Park in Dundee to an
occupier for £2.2 million
(NewRiver share), ahead of
September 2020 valuation.
Leasing deals signed with Wren
Kitchens in Aberdeen and GO
Outdoors in Inverness, both
deals at a significant premium
to ERV.
Next opened one of its first car
park collection & return pods at
our retail park in Dumfries.
North East England & Yorkshire
2
6 270
8
3 85
Key developments in the year
Key developments in the year
Completed store extension and
renewal for B&M at Blackburn
Retail Park, increasing the
Weighted Average Lease Expiry
of new leasing activity in the
year by seven months.
Secured renewal of asset
management mandate from
Knowsley Council to manage
Kirkby town centre.
Wales
3
2
27
Exchanged contracts to acquire
The Moor, Sheffield in a 90:10
relationship with BRAVO.
The 680,000 sq ft estate is
anchored by Next, Sainsbury’s
and Primark and has significant
development potential.
Sold our retail park in Beverley
for £6.0 million. Land at our
shopping centre in Wallsend
is under offer for development
of a new medical centre.
London & South East England
12
2 160
Key developments in the year
Key developments in the year
Completed lettings to Costa
and Burger King on two new
drive-thru units we developed
in Waterfront Retail Park, Barry.
In Barry we also completed
deals with B&M and Argos on
terms in line with previous
passing rent.
Disposed of Canvey Island
Retail Park in March 2021 for
£11.9 million, generating a 13%
profit on cost. NewRiver
completed development of the
62,000 sq ft park in November
2018 and the park was fully let
upon sale to M&S, Iceland,
Sports Direct, B&M and Costa.
Completed a new letting with
Instant Offices in Bexleyheath,
sublet to the Ministry of
Housing, Communities and
Local Government.
Completed letting to Instant
Offices, at a significant premium
to ERV, at Capitol Shopping
Centre in Cardiff.
South West England
3
2
37
Key developments in the year
Completed lettings in line with
ERV with Iceland and Pets at
Home at our retail park in
Newport, Isle of Wight.
Completed the disposal
of our c-store development,
including 10 residential units,
at the site of the former
Sea View Inn, Poole.
Completed a new letting with
Sports Direct in Poole Retail
Park, in line with ERV.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
HOW WE CREATE VALU E
DELIVERING RESILIENT RETURNS AND
SUPPORTING LOCAL COMMUNITIES
Our purpose
Our values
We buy, manage and develop retail and
leisure assets across the UK that provide
essential goods and services supporting
the development of thriving communities.
We are Brave, Trusted and Respected,
Smart, Beyond Expectation and Energetic
in all that we do.
Our business model
5. Leveraging
our operating
platform with
a conservative
balance sheet
We leverage the scale and
expertise of our platform,
underpinned by
a conservative and
unencumbered balance
sheet, to drive further
returns. This includes using
our platform to manage
assets owned by third
parties or which we own
through joint ventures with
third parties.
1. Disciplined stock selection
We target high yielding assets with low risk characteristics in our key sectors
of community shopping centres, conveniently-located retail parks and community
pubs. We acquire these assets either directly or through joint ventures.
Our significant market experience and in-depth analysis enable us to price
risk appropriately and buy assets at the right prices.
1
Underpinned by
our active ESG
programme
2
5
4
2. Active asset
management
We enhance and protect
income returns through our
asset management initiatives,
which range from the
deployment of targeted capex
to improve asset environments
to measures to reduce
occupational costs for
occupiers. We draw on our
in-house expertise, a deep
understanding of our market
and strong relationships with
our occupiers to achieve this.
4. Profitable
capital recycling
We regularly assess potential upside
opportunities in disposing of assets
and recycling capital into new
opportunities, and we have a track
record of doing this profitably.
These disposals are typically of
mature assets where our estimates
of forward looking returns are below
target levels, assets where we
believe the risk profile has changed,
or assets sold to special purchasers.
3
3. Risk-controlled
development
We create income and capital growth through our
risk-controlled development pipeline. Our in-house
development team works with stakeholders to
obtain valuable planning consents, which we can
develop ourselves or sell to crystallise a profit.
Our risk-controlled approach means that we will not
commit to developments without securing
significant pre-lets or pre-sales.
8
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Our stakeholders
SEE HOW WE ENGAGE WITH OUR
STAKEHOLDERS ON PAGE 10
Staff
The expertise and
commitment of our
employees drives
our success.
Occupiers
We have over 800 retail
occupiers and over 550
tenants in our community
pub portfolio.
Local Authorities
We have established
relationships with over
60 Local Authorities
across the UK.
Communities
We meet the needs
of UK communities,
and support and
champion local causes.
Lenders
Shareholders
Our relationship banks
and bondholders provide
us with the funding
to execute our strategy.
An open and
continuous dialogue
with shareholders ensures
we build and maintain
their support.
Our strategies
FIND MORE ABOUT OUR STRATEGIES
ON PAGE 22
DISPOSAL
PROGRAMME
CAPITAL
PARTNERSHIPS
PROTECTING
RETAIL AND
PUB REVENUES
Our ESG objectives
FIND MORE ABOUT OUR ESG APPROACH
ON PAGE 46
MINIMISING OUR
ENVIRONMENTAL
IMPACT
ENGAGING OUR
STAFF
AND OCCUPIERS
SUPPORTING
OUR
COMMUNITIES
LEADING
GOVERNANCE
AND DISCLOSURE
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS STAKEHOLDER ENGAGEMENT
OUR STAKEHOLDERS
Our stakeholders are of central importance to our strategy, business model and ongoing success. We are conscious of the range
of stakeholder priorities and concerns and we strive to incorporate these into all strategic decision-making. The Board engages directly
with stakeholders and regularly consults with team members across the business who have day-to-day contact with our occupiers and
partners. The Board seeks to align all decisions with the Company’s purpose, values and strategy and is committed to an open dialogue
with our stakeholders – an essential element of effective corporate governance.
Staff
Our HR strategy places people at the heart of our business,
enabling us to attract and retain our staff. We put the right
people into the right roles and develop their careers to ensure
that they grow with the business. A positive work environment
where employees feel valued and supported underpins
our strategy.
Effective communication starts at the top of the business and
permeates through the organisation. It is equally important that
our Board has the means of hearing directly the views and
concerns of the wider team.
Our culture
Our values
Our people are our key asset.
Their hard-work, dedication
and entrepreneurial spirit sit
at the heart of our business.
We are:
– Collaborative
– Supportive
– Focused
– Flexible
– Hardworking
– Adaptable
– Passionate
– Resilient
Our values mirror our culture.
They are brought to life and
embodied by our people.
We are:
– One Team
– Brave
– Trusted
– Respected
– Smart
– Beyond Expectation
– Energetic
Engagement during the year
NewRiver has established a staff forum, which meets periodically,
to liaise with the Board and to create an environment to raise and
discuss issues. This ensures that the Board has regard to staff
interests in taking its decisions. We regularly provide opportunities
for our Non-Executive Directors to meet the wider staff on both
a formal and informal basis to encourage open dialogue between
the Board and the wider team. We ensure employees can raise
concerns in confidence directly with the Board.
We also strive to curate a working environment which positively
encourages collaboration and communication across business
lines. As part of this we have open-plan offices with flexible
workspaces which encourage people to interact and engage
with colleagues.
We carry out an extensive Employee Engagement Survey
annually, which asks all employees to comment on various
aspects of the Company including Leadership and Management,
Company Culture, Health and Wellbeing, Personal Growth,
Teams and Benefits and Recognition. Survey results are reported
to the Board and Executive Committee to guide future refinement
and development of our People Plans.
As a result of the COVID pandemic we amended our engagement
strategies to ensure the wellbeing of our staff throughout these
challenging times and, rather than undertaking our usual survey,
instead focused on understanding the needs and views of all our
staff at regular intervals during the year.
10
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Impact of COVID-19 pandemic
The COVID-19 pandemic has had a significant impact
on the working practices of many of our staff during the year.
Having planned for this outcome in advance of UK Government
guidelines mandating working from home wherever possible,
the business managed a successful transition to home-working
for all employees.
All employees were equipped with webcam-enabled laptops
and a full suite of communications and productivity software.
We provided a guidance pack on how to work safely and well from
home. Employees were invited to participate in a weekly all-staff
call to provide them with operational updates from around the
business, and to ensure lines of communication were kept open.
Conscious of the importance of ensuring mental and physical
wellbeing during prolonged periods of self-isolation and working
from home, we devised an active programme of remote exercise
classes and virtual social gatherings for staff and provided
a fortnightly newsletter containing tips for keeping occupied and
managing wellbeing at home. These measures were well received
by staff, with excellent attendance rates demonstrating the close,
collaborative culture of NewRiver. To further promote mental and
physical wellbeing we organised a steps challenge in aid of our
charity partner, the Trussell Trust. We covered 7,723 miles
over three weeks by cycling, running and walking. A further
steps challenge in January 2021 saw us walking and talking
to 10 million steps.
In preparation for the gradual easing of lockdown we surveyed our
employees to try and understand their individual circumstances
and ensure that these were incorporated into our return-to-work
plans and to effectively address any areas of concern. Staff have
now started to return to the office on a flexible basis and in line
with government guidance, and we feel well prepared to manage
any requirements for future changes to working arrangements.
Recruitment
Our total head count across the Group, including our Managed
Pubs division, was 169. Our gender diversity is 51%/49%: male/
female across the entire business. Within our retail and pub head
office locations in London and Birmingham, we employ a total of
143 staff. Our Managed Pubs division employs a further 26 staff.
Details of Board and Executive Committee composition can be
found in the Nomination Committee report on pages 93 and 94.
Our recruitment policies consider the needs of the business
today and our aspirations for the future, whilst ensuring that our
unique corporate culture is maintained.
Developing and Retaining our People
We are committed to maximising the skills, capability and
performance of all employees. Our support ranges from funding
professional qualifications including RICS and ACCA certification
to informal breakfast briefings with experts on a wide range of
topics, which all staff members are encouraged to participate in.
We also support the UK government’s Apprenticeships Scheme.
63% of our staff undertook professional training during the year
and employees across the business spent an average of 18 hours
on training, including Continuing Professional Development.
In addition, all employees benefit from a tailored performance
review and professional development plan which allows them
to measure their progress and fulfil their potential. The support
we provide has resulted in a high staff retention rate of 95%
(excluding our Fully Managed Pubs division).
63%
OF STAFF
UNDERTOOK
PROFESSIONAL
TRAINING
95%
STAFF
RETENTION
RATE
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
11
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS STAKEHOLDER ENGAGEMENT
Staff
Investing in our people
Reward and Recognition
We are committed to ensuring that we reward our employees
fairly through our remuneration policies, which include bonus
entitlements for all staff to reward excellent performance,
and through our Long Term Incentive Plan. Our remuneration
policies are tailored to reward excellence and ensure retention
of our talented team.
We currently offer our employees comprehensive benefits,
ranging from paid family medical insurance for all staff and
dependants to income protection. We also offer enhanced
shared parental pay entitlements. Our benefits packages
are tailored and flexible, and all staff have the opportunity to
discuss the benefits available with specialist advisers to ensure
that they are suitable for their needs. We review these benefits
each year to ensure they are meeting employee expectations.
Health and Wellbeing
We are committed to creating a safe and healthy environment
which improves the quality of our employees’ lives. We are
proud participators in the ‘This is me’ campaign, which is
committed to ending the stigma around mental health in the
workplace. Across our business we have four mental health
first aiders, along with a further four mental health champions,
to ensure open, confidential access to support where it is
needed. This initiative has taken on even greater significance
this year as our employees and their families faced the
challenges posed by COVID-19.
12
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Wellbeing initiatives such as exercise bootcamps, cycle-to-work
schemes and fresh fruit and healthy snacks are now returning
to the office environment, complementing the online initiatives
we launched during COVID-19. We also offer an Employee
Assistance Programme, which is intended to help employees
deal with personal problems that might adversely impact their
work performance, health and wellbeing. This programme
provides assessment, short-term counselling and referral
services for employees and their immediate families.
Our flexible working practices enable our staff to work in a way
that is smart, focused and tailored to their individual needs.
Like many companies we intend to maintain greater flexibility
post COVID-19 in recognition of the new reality of the
workplace and employee preferences. The success of our
HR approach is seen through our low absentee rates of less
than 0.5%. We will continue our efforts throughout the year
to promote a healthy work/life balance and provide support
to enable all our staff to thrive.
Fabienne joined NewRiver in 2013, working on
branding and marketing. In recognition of the rising
importance of sustainability, alongside Fabienne’s
interest and commitment, we sponsored
her to undertake a Business Sustainability
Management course at the University of Cambridge,
which she passed with distinction in September 2020.
Now working as Sustainability Manager, Fabienne
supports the strategy, implementation and delivery
of the Company’s sustainability programme.
Communities
READ MORE ABOUT OUR COMMUNITY
ENGAGEMENT INITIATIVES ON PAGE 56
During the year we continued to support the Trussell Trust,
an NGO and charity working towards a hunger-free future,
and we were delighted to raise £176,000. We achieved this
through corporate donations, local site-led events, and the
donation of salary sacrifices from our Board and executive
teams to help those most in need. Despite local fundraising
events not being permitted, over four tonnes of food were
collected and donated to the Trussell Trust with the support
of our on-site teams across our retail properties. We used
our platform to encourage our local centre teams to share
messages on their websites, social media channels and internal
communications encouraging donations and highlighting the
food donation points.
Our assets are located in communities across the UK and
play an integral role in the lives of our customers. We aim
to strengthen communities through meeting their everyday
needs and supporting the causes that matter to them.
Engagement during the year
During the year we adapted our customer surveys to include
more questions regarding customers’ perception of the health
and safety and infection control measures in place in our retail
assets. We also invested time in adapting our centre staff
training programme in preparation for the full reopening of
retail, recognising that the social distancing measures and
various restrictions in place imposed new requirements on
our staff and shoppers.
COVID-19 placed greater pressure on our local communities
and we sought to offer practical help to support them
throughout this period. Examples included transforming a unit
in our shopping centre in Wisbech to a COVID-19 vaccination
centre, housing community pop-ups in Burgess Hill and
mobilising security teams to deliver shopping to
those shielding.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
13
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS STAKEHOLDER ENGAGEMENT
Occupiers
Our strategy relies on the continued prosperity of our
occupiers, most of whom provide essential and value retail for
their local communities. We remain in constant dialogue with
occupiers, investing time in understanding their specific
requirements, challenges and aspirations and enabling them
wherever we can to grow within our portfolio. We engage
closely with our occupiers to ensure our centres are clean,
secure and inviting, that our rents are affordable, and that our
occupational costs are low. We carefully select occupiers
whose offering is consistent with our focus on essential
retailing, value leisure and convenience and we deliberately
avoid exposure to department stores, mid-market fashion and
casual dining outlets which are most vulnerable to the rise
of e-commerce.
Engagement during the year
We have over 800 different occupiers in our retail portfolio
and we are committed to continually improving the service we
provide to these key stakeholders in the business.
At the beginning of the crisis our asset management team
devised a communication plan to understand the pandemic
response plans of our retailers and to take steps to ensure
our centres remained accessible and safe for customers.
During the year we held meetings with over 250 different
occupiers to gain a better understanding of their trading
performance and business needs: meetings which were
especially critical given the challenging operating environment
produced by the pandemic. As a result of COVID-19 physical
restrictions the majority of these meetings had to take place
virtually, meaning more regular contact was often required in
order to maintain close occupier relationships and anticipate
their requirements.
Our team worked with occupiers facing any short-term cash
flow issues to agree revised payment terms, negotiating
over 300 such agreements during the year. We have
proactively engaged with many of our independent occupiers,
recognising that the effects of the pandemic have been
particularly detrimental to their cash flows. Through effective
negotiation and co-operation we were able to achieve a rent
collection rate of 93% for FY21, including deferrals and regears.
As part of our revised rental payment negotiations we have
given a number of 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.
Where possible we have continued to reduce service charge
expenditure, conscious of occupiers’ need to reduce costs.
In the last four years we have reduced total service charge
budgets by 12%.
In support of our occupiers and the wider retail sector we
signed up to Revo’s ‘Shopkeepers Campaign’ in February
2021, using our marketing channels to encourage our wider
network to contact their MPs, asking them to promote the case
for physical retail in the UK Government’s Fundamental Review
of Business Rates. We recognise that fundamental reforms
to business rates will be a key factor in our occupiers’
long-term success.
In our pub portfolio our Business Development Managers were
in close contact with our pub partners throughout the year
and provided help in accessing available government support.
We also offered our tenants and pub operators practical
support in reopening safely and efficiently once restrictions
were eased.
14
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Lenders
Our relationship banks and bondholders provide us with the
funding to execute our strategy. The support of our lenders has
ensured that we are in a strong financial position with a fully
unsecured balance sheet. This structure is highly efficient and
covenant-light, affording us significant operational flexibility.
We will continue to work closely with our relationship banks,
bondholders and rating agencies to maintain this position.
Engagement during the year
We have engaged with our relationship banks, bondholders
and rating agencies through regular meetings and
presentations to ensure that they are kept up to date with
business developments and performance. We have remained
debt covenant compliant throughout the year. In December
2020 Fitch Ratings affirmed NewRiver’s Long-Term Issuer
Default Rating (IDR) at ‘BBB’ with Stable Outlook and our senior
unsecured rating at ‘BBB+.’
Local Authorities
Local Authorities are the ultimate custodians of their town and
city centres, and we are well placed to help them safeguard the
future of these vitally important places. We already work closely
with councils that are local to our assets (having established
relationships with over 60 Local Authorities across the UK),
and our third-party asset management platform allows us
to bring our insight and expertise to many others.
Engagement during the year
Several of the areas where we hold retail assets have received
significant funding under the Towns Fund. NewRiver is
represented on a number of Towns Fund Boards including
Thurrock (Grays), Bournemouth (Boscombe), Hastings and
Wakefield, working in direct partnership with Local Authorities
to redevelop and repurpose the area in and around our
community-centred retail assets. NewRiver is also supporting
Shareholders
As owners of the business, our shareholders are key to our
success. Our Chief Executive, Chief Financial Officer and Head
of Investor Relations engage with them through an active
programme of meetings, presentations and site visits through
the year. Our Chairman and other members of the Board and
Executive Committee also meet investors where appropriate.
The comprehensive calendar of engagement includes the
AGM, regulatory announcements, conference calls and
investor roadshows, as well as regular contact with financial
analysts, financial media, investors, private client fund
managers, retail investors and equity sales teams.
Regular and targeted engagement ensures that our strategy,
business model and investment case are well understood
by shareholders and the wider market.
several Local Authorities in preparing bids under the Levelling
Up Fund, including Mid Sussex (Burgess Hill) and Thurrock.
We are also supporting additional towns to prepare bids
for funding under a range of national and local schemes,
such as the Local Growth Fund and the ‘Getting Building’ Fund,
launched by the government in recognition of the pressing
need to reshape and revive town centres and high streets.
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.
Engagement during the year
During FY21, we held 100 meetings with current and potential
investors. In October 2020 we held a Capital Markets Day
for analysts and institutional shareholders which focused on
Hawthorn, our community pub business. The Capital Markets
Day was also attended by the CEO, CFO and members of the
Executive Committee.
For the FY21 half-year results presentation to analysts
in November 2020, a live audio webcast with replay facilities
was made available on our website.
The 2020 AGM was held in a closed format as a result
of COVID-19 restrictions but we provided opportunities
for shareholders to submit questions to the Board via email.
The pandemic has necessitated the use of online technology
as a key part of our investor engagement programme.
We have been impressed by how effective these web-based
communications have been. We anticipate that virtual
engagement will remain a feature of our Investor Relations
programme in the future, allowing us to make most effective
use of management time, present to investors across the
globe, and reduce the need for extensive travel and associated
carbon emissions.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
15
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CH IEF EX ECUTIVE ’S REVI EW
CHIEF EXECUTIVE’S
REVIEW
ALLAN LOCKHART
Chief Executive
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 £80 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
best-in-class retail and pub platforms.
DIVIDEND PER SHARE
3.0p
FY20: 16.2P
UNDERLYING FUNDS
FROM OPERATIONS
£11.5m
FY20: £52.1M
PORTFOLIO VALUATION
(PROPORTIONALLY
CONSOLIDATED)
£1.0bn
FY20: £1.2BN
IFRS NET ASSETS
£460.4m
FY20: £610.6M
16
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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 £11.5 million, compared with £52.1 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 £199.3 million, increased from £127.1 million at
the start of the year. As a result, net debt reduced to £493.3 million
from £563.6 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 £80 million and £100 million of assets, with the
proceeds to be used to reduce debt. We reached our target with
completed disposals of £81 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 £79 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 £6.5 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 £11.51 per sq ft as at 31 March 2021,
supports the sustainability of our income.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
17
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CH IEF EX ECUTIVE ’S REVI EW
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 £0.9 million in improving our pubs’ outside space during
the second half of FY21. In total, we invested £7 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 £9.8 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 £34.7 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 £41.0 million
(NewRiver share: £4.1 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 £192.8 million
of assets under management (NewRiver share: £44.1 million) and
we continue to review attractive acquisition opportunities to
pursue within similar structures. Annualised asset management
fee income is now £1.3 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.
18
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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
9 June 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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
19
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR MARKETPLAC E
OUR MARKETPLACE
There are a number of long-term market trends, many accelerated by COVID-19,
which present both challenges and opportunities. NewRiver’s continued
responsiveness to these will ensure the ongoing resilience of our portfolio.
Rise of online retail
Technological
innovation
Challenging operating
environment for retailers
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– Online sales rose to a record 33.9% share of all
– The rapid expansion of
– Retailers continue to bear significant costs
retail spending in 20201, mainly reflecting the impact
of COVID-19 physical restrictions
data, artificial intelligence
and computing is set to
disrupt all sectors, but
perhaps especially retail
including escalating business rates (excluding
temporary COVID-19 relief) and increasing
employment costs. Investment is also required
to adapt stores, expand into digital channels
and optimise supply chains in order to retain
market share
– Online retail growth has increased competition
between retailers and price transparency
amongst consumers, making them less brand-loyal
– Although the physical store remains a key part
of retailers’ omnichannel strategy, as the main last
mile distribution channel and as a ‘showroom’,
retailers must adapt quickly to the reality
of e-commerce
– Complementary to online retail, click & collect (C&C)
is an important part of retailers’ strategies which
offers convenience, minimal contact, instant
gratification (same-day pick-up often available)
and no home-delivery charges
– Online purchasers are increasingly aware of the
environmental impact of home deliveries and are
opting for sustainable delivery options such as
C&C – 56% of 18-24-year-olds would be persuaded
to shop with a competitor who offered more
sustainable fulfilment 2
– Customers are
displaying new
behaviours in response
to shopping
technologies and expect
greater convenience,
personalised
experiences and
contactless interactions
– Retailers are remodelling
space to reduce in-store
selling and increase
e-commerce order
fulfilment footprints
– Retailer performance has diverged: operators
comparatively unimpacted by e-commerce have
fared relatively well, whilst department stores
and mid-market fashion operators have continued
to struggle
– Challenged retailers have restructured through
a combination of store closures, CVAs or
administrations
– Successful retailers are particularly focused
on reducing occupational costs
– We have completed a comprehensive strategic
review which analyses the likely impact of online
retail on the resilience of our assets now and in the
future and informs our capital allocation decisions.
– Our retail portfolio is deliberately focused on essential
retailers which serve the local community, and has
minimal exposure to department stores, mid-market
fashion and casual dining outlets which are most
vulnerable to e-commerce
– Retail parks are a key investment area for NewRiver
as they provide many C&C-friendly characteristics
such as free, surface-level parking and good access;
we are developing innovative C&C solutions e.g.
collection & return pods in car parks
– 24% of NewRiver’s portfolio is expected to see higher
C&C use than the UK average in the next 10 years3
– As the in-store vs. online sales dynamic evolves we
will explore lease options which recognise the value
generated by C&C orders and returns at specific
stores, as well as the role physical store marketing
plays in driving online sales
– We actively consider
ways to adapt our
assets to support and
extract value from
technological innovation
– We have a resilient tenant mix and our rents are
affordable; we have a low Rent to Sales ratio
of circa 6%* and the headroom from Affordable
Rent to Sales ratio has been maintained even
during COVID-19
– We work hard to deliver cost efficiencies, achieving
a 12% reduction in service charge budgets over the
last four years
– We actively engage with the government and
sector peers, especially through our work with the
British Property Federation, to advocate for the
business rates reform needed to support the
successful future of retail
– Alternative uses for
our space include the
provision of delivery
lockers, charging and
storage facilities for
e-vehicles and dark
kitchen installations
to fulfil online food
delivery orders
– We are increasingly
using data management
and analytics to drive
internal decisions and
anticipate occupiers’
space requirements
* Affordable rent to sales ratio calculated by CWM in November 2020
20
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Changes to the way
Growing
we live, work and consume
importance of ESG
Increasing government
A growing and
ageing population
support for town
centre regeneration
– UK consumers are spending an
– COVID-19 has catalysed several
– Under pressure to transform
– The UK’s population is growing
increasing proportion of income on
ongoing trends including the shift
experiences over material goods4
towards environmental, social and
town centres, the government
has launched the Towns Fund
and, by 2030, it is expected that
92% of us will be living in towns
as well as on their own health
governance (ESG) considerations
and Levelling Up Fund to
and wellbeing
– Regulated investors are under
– Localism and working from home
pressure to increase their proportion
are expected to continue post
of sustainable assets
COVID-19 – a recent survey finds
fewer than one in 10 wants to
return to the office full time once
restrictions are eased5
– More than 35 stock exchanges
around the world have already
issued (or are in the process of
issuing) ESG reporting guidelines
– From 2006 to 2031 the number
– Ethical consumerism and
of single-occupant households
in the UK is expected to increase
by 60%6
community wellness are predicted
to play a bigger role in consumers’
post-pandemic behaviour
accelerate capital projects
in over 100 towns in the UK
– Increasing support for
public-private sector
and cities, compared with
around 82% today1
– The UK’s population is ageing
and it is expected that one
in four people will be over the
collaboration in the regeneration
age of 65 by 2050, compared
of the UK’s shopping and
with one in five today1
town centres
– Rising demand for low-cost gyms
– Retrofitting multi-tenanted buildings
– Government support will help
– Local Authorities have been set
and value leisure destinations
can be challenging as adapting
to improve the amenity and
closer to home, as consumers look
areas of a building can affect the
prosperity of local areas,
for convenient ways to socialise
efficiency of existing systems, e.g.
and stay fit, especially in the
heating, cooling and ventilation
post-lockdown period
– Owners of older assets, constructed
– Suburban and residential areas will
when energy efficiency was less
reducing the retail footprint
and improving the balance
of demand and supply
of retail space
ambitious targets for the number
and affordability of new homes
– National planning policy has
encouraged residential
development in urban areas,
to improve accessibility and the
see a significantly stronger
widely embedded, face potentially
– Local authorities increasingly
vibrancy of town centres
day-time economy post-pandemic
significant remediation costs
– Convenience retailing is more
– Landlords often do not have control
over occupiers’ energy
procurement decisions – they can
town centres
only aim to influence their decision
– A recent industry survey shows
need the support of commercial
real estate managers and
developers to reinvigorate their
– Health and social care policy
is increasingly focused on
delivering services closer
to where people live
important to consumers as
households face increasing
constraints on time and
storage space
– Smaller houses and more
single-person households have
also increased the need for spaces
outside the home for recreation
and socialising
that public-private sector JVs
and partnerships remain the
preferred delivery and funding
option for most town centre
regeneration projects, identified
by some 38% of all respondents7
– Our provision of convenient spaces
– We continue to invest in and
– Several of the towns where we
– NewRiver’s 2.6 million sq ft
with affordable rents has made us
explore opportunities for onsite
have retail assets have received
development pipeline is
a preferred partner for low-cost
gym and value leisure brands
generation of renewable energy,
e.g. photovoltaic (PV) solar panels
funding under the Towns Fund
weighted towards residential
and we are currently working
developments above or beside
– Our retail assets are easily
– Scientific and technological
accessible and typically see a high
developments are enabling us
frequency of visits and low dwell
to make more accurate analysis
with Local Authorities to spend
our assets
this money effectively in and
around our shopping centres
– The diversity of locations in our
portfolio presents opportunities
time, reflecting their purpose of
of emissions and cost-effective
– We are preparing bids for further
to deliver housing at scale in
providing everyday convenience
implementation of carbon
to consumers
reduction measures
– 68% of NewRiver’s portfolio is not
– This year we formalised our net zero
reliant on worker footfall for spend3
commitment and are confident that
– As consumers move away from
traditional offices, flexible or
co-working arrangements present
our strong relationships with
occupiers will enable successful
a viable solution for vacant retail
– Our comprehensive ESG
space, because shopping centre
workspaces offer instant access
to amenities; we have recently
leased space to Instant Offices
in Cardiff and Bexleyheath
programme supports the
development of thriving
local communities
towns to secure funding under
a range of national and local
a variety of areas through
potential partnerships with
schemes, e.g. the Future High
Housing Associations
Streets Fund, and will continue
to support and help deliver
town regeneration
– NewRiver has demonstrable
experience in converting sites
from retail to alternative uses,
with Local Authorities and
stakeholders to ensure our
assets meet the evolving needs
of the communities we serve,
exploring repurposing
opportunities where appropriate
possession, community
engagement and demolition
– Working with Local Authorities,
we are bringing forward plans
for new health hubs for
a number of our assets
cooperation in achieving net zero
– We maintain a regular dialogue
including securing vacant
Rise of online retail
Technological
innovation
Challenging operating
environment for retailers
– Online sales rose to a record 33.9% share of all
– The rapid expansion of
– Retailers continue to bear significant costs
retail spending in 20201, mainly reflecting the impact
data, artificial intelligence
including escalating business rates (excluding
of COVID-19 physical restrictions
and computing is set to
temporary COVID-19 relief) and increasing
disrupt all sectors, but
employment costs. Investment is also required
perhaps especially retail
to adapt stores, expand into digital channels
and optimise supply chains in order to retain
market share
– Online retail growth has increased competition
between retailers and price transparency
amongst consumers, making them less brand-loyal
– Although the physical store remains a key part
– Customers are
– Retailer performance has diverged: operators
of retailers’ omnichannel strategy, as the main last
displaying new
comparatively unimpacted by e-commerce have
mile distribution channel and as a ‘showroom’,
behaviours in response
fared relatively well, whilst department stores
retailers must adapt quickly to the reality
to shopping
and mid-market fashion operators have continued
of e-commerce
technologies and expect
to struggle
– Complementary to online retail, click & collect (C&C)
is an important part of retailers’ strategies which
offers convenience, minimal contact, instant
gratification (same-day pick-up often available)
and no home-delivery charges
– Online purchasers are increasingly aware of the
environmental impact of home deliveries and are
opting for sustainable delivery options such as
C&C – 56% of 18-24-year-olds would be persuaded
to shop with a competitor who offered more
sustainable fulfilment 2
greater convenience,
personalised
experiences and
contactless interactions
– Retailers are remodelling
space to reduce in-store
selling and increase
e-commerce order
fulfilment footprints
– Challenged retailers have restructured through
a combination of store closures, CVAs or
administrations
– Successful retailers are particularly focused
on reducing occupational costs
– We have completed a comprehensive strategic
– We actively consider
– We have a resilient tenant mix and our rents are
review which analyses the likely impact of online
ways to adapt our
affordable; we have a low Rent to Sales ratio
retail on the resilience of our assets now and in the
assets to support and
of circa 6%* and the headroom from Affordable
future and informs our capital allocation decisions.
extract value from
Rent to Sales ratio has been maintained even
– Our retail portfolio is deliberately focused on essential
technological innovation
during COVID-19
retailers which serve the local community, and has
– Alternative uses for
– We work hard to deliver cost efficiencies, achieving
minimal exposure to department stores, mid-market
fashion and casual dining outlets which are most
vulnerable to e-commerce
– Retail parks are a key investment area for NewRiver
as they provide many C&C-friendly characteristics
such as free, surface-level parking and good access;
we are developing innovative C&C solutions e.g.
collection & return pods in car parks
– As the in-store vs. online sales dynamic evolves we
will explore lease options which recognise the value
generated by C&C orders and returns at specific
stores, as well as the role physical store marketing
plays in driving online sales
our space include the
provision of delivery
lockers, charging and
storage facilities for
e-vehicles and dark
kitchen installations
to fulfil online food
delivery orders
and analytics to drive
internal decisions and
anticipate occupiers’
space requirements
– 24% of NewRiver’s portfolio is expected to see higher
C&C use than the UK average in the next 10 years3
– We are increasingly
using data management
* Affordable rent to sales ratio calculated by CWM in November 2020
a 12% reduction in service charge budgets over the
last four years
– We actively engage with the government and
sector peers, especially through our work with the
British Property Federation, to advocate for the
business rates reform needed to support the
successful future of retail
Sources:
1. Office for National Statistics (ONS) 2020
2. Doodle Pulse Sustainable Delivery 2020 Report
3. Understanding the New Normal for Real Estate, CACI research, 2021
4. Barclaycard UK consumer spending report, March 2020
5. COVID-19 and Working from Home Survey, University of Manchester and Strathclyde, March 2021
6. Organisation for Economic Co-operation and Development (OECD) 2020
7. Revo and Lambert Smith Hampton (LSH) survey, January 2021
Changes to the way
we live, work and consume
Growing
importance of ESG
Increasing government
support for town
centre regeneration
A growing and
ageing population
– UK consumers are spending an
– COVID-19 has catalysed several
– Under pressure to transform
increasing proportion of income on
experiences over material goods4
as well as on their own health
and wellbeing
– Localism and working from home
are expected to continue post
COVID-19 – a recent survey finds
fewer than one in 10 wants to
return to the office full time once
restrictions are eased5
– From 2006 to 2031 the number
of single-occupant households
in the UK is expected to increase
by 60%6
ongoing trends including the shift
towards environmental, social and
governance (ESG) considerations
– Regulated investors are under
pressure to increase their proportion
of sustainable assets
– More than 35 stock exchanges
around the world have already
issued (or are in the process of
issuing) ESG reporting guidelines
– Ethical consumerism and
community wellness are predicted
to play a bigger role in consumers’
post-pandemic behaviour
town centres, the government
has launched the Towns Fund
and Levelling Up Fund to
accelerate capital projects
in over 100 towns in the UK
– Increasing support for
public-private sector
collaboration in the regeneration
of the UK’s shopping and
town centres
– The UK’s population is growing
and, by 2030, it is expected that
92% of us will be living in towns
and cities, compared with
around 82% today1
– The UK’s population is ageing
and it is expected that one
in four people will be over the
age of 65 by 2050, compared
with one in five today1
– Rising demand for low-cost gyms
and value leisure destinations
closer to home, as consumers look
for convenient ways to socialise
and stay fit, especially in the
post-lockdown period
– Suburban and residential areas will
see a significantly stronger
day-time economy post-pandemic
– Convenience retailing is more
important to consumers as
households face increasing
constraints on time and
storage space
– Smaller houses and more
single-person households have
also increased the need for spaces
outside the home for recreation
and socialising
– Retrofitting multi-tenanted buildings
can be challenging as adapting
areas of a building can affect the
efficiency of existing systems, e.g.
heating, cooling and ventilation
– Owners of older assets, constructed
when energy efficiency was less
widely embedded, face potentially
significant remediation costs
– Landlords often do not have control
over occupiers’ energy
procurement decisions – they can
only aim to influence their decision
– Government support will help
to improve the amenity and
prosperity of local areas,
reducing the retail footprint
and improving the balance
of demand and supply
of retail space
– Local authorities increasingly
need the support of commercial
real estate managers and
developers to reinvigorate their
town centres
– A recent industry survey shows
that public-private sector JVs
and partnerships remain the
preferred delivery and funding
option for most town centre
regeneration projects, identified
by some 38% of all respondents7
– Local Authorities have been set
ambitious targets for the number
and affordability of new homes
– National planning policy has
encouraged residential
development in urban areas,
to improve accessibility and the
vibrancy of town centres
– Health and social care policy
is increasingly focused on
delivering services closer
to where people live
– Our provision of convenient spaces
with affordable rents has made us
a preferred partner for low-cost
gym and value leisure brands
– We continue to invest in and
explore opportunities for onsite
generation of renewable energy,
e.g. photovoltaic (PV) solar panels
– Our retail assets are easily
– Scientific and technological
accessible and typically see a high
frequency of visits and low dwell
time, reflecting their purpose of
providing everyday convenience
to consumers
developments are enabling us
to make more accurate analysis
of emissions and cost-effective
implementation of carbon
reduction measures
– 68% of NewRiver’s portfolio is not
reliant on worker footfall for spend3
– As consumers move away from
traditional offices, flexible or
co-working arrangements present
a viable solution for vacant retail
space, because shopping centre
workspaces offer instant access
to amenities; we have recently
leased space to Instant Offices
in Cardiff and Bexleyheath
– This year we formalised our net zero
commitment and are confident that
our strong relationships with
occupiers will enable successful
cooperation in achieving net zero
– Our comprehensive ESG
programme supports the
development of thriving
local communities
– Several of the towns where we
have retail assets have received
funding under the Towns Fund
and we are currently working
with Local Authorities to spend
this money effectively in and
around our shopping centres
– We are preparing bids for further
towns to secure funding under
a range of national and local
schemes, e.g. the Future High
Streets Fund, and will continue
to support and help deliver
town regeneration
– We maintain a regular dialogue
with Local Authorities and
stakeholders to ensure our
assets meet the evolving needs
of the communities we serve,
exploring repurposing
opportunities where appropriate
– NewRiver’s 2.6 million sq ft
development pipeline is
weighted towards residential
developments above or beside
our assets
– The diversity of locations in our
portfolio presents opportunities
to deliver housing at scale in
a variety of areas through
potential partnerships with
Housing Associations
– NewRiver has demonstrable
experience in converting sites
from retail to alternative uses,
including securing vacant
possession, community
engagement and demolition
– Working with Local Authorities,
we are bringing forward plans
for new health hubs for
a number of our assets
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
21
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OU R STRA TEGY
OUR STRATEGIES
TO DELIVER GROWTH
The execution of our proven business model, underpinned by our active ESG programme, enabled us to deliver good progress
against our FY21 strategic objectives and will form the basis of our ongoing success.
FY21 strategic objectives
As a result of COVID-19 disruption our main priorities in FY21 were
executing a focused disposal programme, strengthening capital partnerships
and protecting our retail and pub revenues. These objectives reflected the
challenging operating environment created by COVID-19 and the resulting
need to protect income and safeguard our balance sheet and LTV metrics
while still selectively participating in attractive growth and redevelopment
opportunities. We made good progress against all of our revised objectives
throughout FY21.
FY22 and beyond
In FY21 we completed a thorough review of all our assets and developed
a clear view of what resilient retail looks like in the future. We believe that
resilient retail assets in the future will be those located in catchments with
long-term growth potential and the right balance between the supply of
physical retail space and demand for that space; they will have an offering
that meets the everyday needs of customers while playing a distinct role
within their communities. We will reshape our portfolio to ensure that
over the longer term we only own retail assets that display these
key characteristics.
DISPOSAL PROGRAMME
CAPITAL PARTNERSHIPS
We set a target to dispose of between £80 million and £100 million
of assets in FY21, while maintaining pricing discipline, with the
proceeds to be used to reduce debt.
Progress in FY21
– We reached our target and completed disposals of £81 million
during the year at a modest discount to book value in spite
of ongoing national lockdown restrictions throughout the
financial year
– So far in FY22 we are currently exchanged or under offer on
£79 million of further disposals
– We have reached our disposals target in a challenging investment
market, demonstrating the inherent liquidity in our portfolio
– We have capitalised on improved liquidity in retail parks, driven by
investor demand
– Investor demand for regeneration projects has also improved
over the second half of FY21, especially for assets located in
areas with attractive underlying residential values, and we are
also starting to see early signs of an improvement in shopping
centre liquidity. We expect the investment market to improve
further as we emerge from the COVID-19 crisis
KPIs
– Total Accounting Return
– Loan to Value
– GRESB Score
22
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
In May 2019 we formed a new joint venture relationship with BRAVO,
primarily to acquire and manage a portfolio of retail parks in the UK.
We aimed to build on our relationship with our joint venture partner,
BRAVO, to identify and pursue attractively priced acquisition
opportunities. We sought to make the majority of new acquisitions
in joint ventures, as this increases returns on investment through
asset management fees and promotes and ensures we maintain
balance sheet strength.
We also aimed to use our development experience to partner
with more Local Authorities, who are under increasing pressure
to transform their towns and city centres.
Progress in FY21
– In September 2020 we disposed of 90% of our interest in
Sprucefield Retail Park, Lisburn, to our capital partner BRAVO
for net proceeds of £34.7 million. This disposal expanded and
strengthened our relationship with BRAVO while lowering
our LTV
– During the year end we also exchanged on the acquisition
of The Moor, Sheffield, in our capital partnership with BRAVO
(completed in April 2021); the acquisition price of £41.0 million
(NewRiver share: £4.1 million) reflects a significant discount to the
breakup value of the individual assets acquired
– Following this acquisition our BRAVO relationship now has
£192.8 million of assets under management (NewRiver share:
£44.1 million) and we constantly review attractive acquisition
opportunities to pursue within capital partnership structures
– Several of the areas where we hold retail assets have
received significant funding under the Towns Fund. NewRiver
is represented on a number of Towns Fund Boards including
Thurrock (Grays), Bournemouth (Boscombe), Hastings and
Wakefield, working in direct partnership with Local Authorities
to redevelop and repurpose the area in and around our
community-centred retail assets. NewRiver is also supporting
several Local Authorities in preparing bids under the Levelling Up
Fund, including Mid Sussex (Burgess Hill) and Thurrock
– We are also supporting additional towns to prepare bids for
funding under a range of national and local schemes, such as the
Local Growth Fund and the ‘Getting Building’ Fund, launched by
the government in recognition of the pressing need to reshape
and revive town centres and high streets
KPIs
– Underlying Funds
From Operations
– Total Accounting Return
– Total Property Return
– Annualised Rent Roll
– Interest cover
– GRESB Score
Following the strategic review we committed to the following strategic
priorities:
– Divest ourselves of our community pub business in order to reset
our LTV and provide the firepower to reshape our portfolio. This includes
a potential Initial Public Offer (‘IPO’) of Hawthorn
– 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 the collective
measures outlined above will transform NewRiver into a more agile business
committed to delivering attractive returns to shareholders.
In FY22 we will work towards this goal and focus our attention on driving
enhanced value from our retail portfolio and platform.
We will host a Capital Markets Day in September 2021, at which we will
communicate further details on our new retail strategy and how we intend
to achieve our vision.
PROTECTING RETAIL AND PUB REVENUES
ESG OBJECTIVES
A key priority in FY21 was to engage effectively with retail occupiers
to ensure robust rent collection metrics and to support our pub
partners during periods of closure so that we could quickly restore
pub revenues on reopening in July 2020 and April 2021.
Alongside this we focused on resuming our programme of targeted
capital expenditure projects within our pub portfolio to improve
returns and extract further value from these assets.
Progress in FY21
– We made good progress on rent collection, negotiating over
300 revised payment agreements with occupiers over FY21 and
achieving a rent collection rate of 93% for the year, including rents
either deferred or subject to regear
– Despite lockdowns preventing our pub portfolio from operating
unrestricted 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
– In FY21 we invested over £7 million in over 200 capital projects,
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
– Hawthorn has consistently traded ahead of expectations and
has performed well against the wider market following reopening
in July 2020 and April 2021
KPIs
– Underlying Funds From
Operations
– Total Accounting Return
– Total Property Return
Minimising our
environmental impact
Measures to reduce our greenhouse gas
emissions and energy use include procuring
renewable energy, reducing consumption,
adopting efficient technology, improving building
efficiencies and broadening stakeholder
engagement to better understand our occupiers’
and stakeholders’ needs and priorities.
Engaging our staff
and occupiers
We enthusiastically encourage and support
a holistic approach to managing our business.
As owners we cannot achieve our targets
without the support of our occupiers or of our
staff. Clear and consistent communication with
these key groups, involving two-way education,
is vital for our success.
Supporting
our communities
With a portfolio of assets in communities
across the UK we can drive real, positive
change within towns and cities by supporting
and championing local causes. By creating jobs
and supporting communities we are better
placed to identify and respond to local needs,
helping communities to thrive.
Leading governance
and disclosure
High standards of corporate governance and
disclosure are essential to ensuring we operate
effectively, and to instil confidence amongst
stakeholders. We aim to ensure our governance
and disclosure is in line with best practice.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
23
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR KEY PERFORMANCE I NDI CA T ORS
MEASURING OUR
PROGRESS
KPI
Description
Our performance
UNDERLYING FUNDS FROM OPERATIONS
£11.5m
55.5
55.1
52.1
47.1
2017
2018
2019
2020
2021
11.5
Underlying Funds From
We delivered UFFO of
Operations (‘UFFO’) measures
recurring cash profits and
excludes other one off
or non-cash adjustments.
We consider this to be the
most appropriate measure
of the underlying performance
of the business, as it reflects
our generation of cash profits.
£11.5 million, compared to
£52.1 million in the prior year,
largely driven by a significant
reduction in gross revenue
as a result of COVID-19
disruption; national lockdowns
throughout the financial year
led to lower retail rent
collections and pub revenues.
TOTAL ACCOUNTING RETURN
-24.9%
5.7
2017
8.1
2018
2019
-3.3
2020
2021
-14.7
11.5
-24.9
TOTAL PROPERTY RETURN
-6.9%
8.2
6.8
2017
2018
1.3
2019
2020
-5.4
2021
11.5
-6.9
Our TAR was -24.9% over
the year, compared to -14.7%
over the previous year.
This was principally due
to a reduction in NAV from
201p at 31 March 2020 to 151p
at 31 March 2021.
Total Accounting Return (‘TAR’)
is the change in EPRA Net
Asset Value (‘NAV’) per share
over the year, plus dividend
paid, as a percentage of the
EPRA NAV at the start of the
year. TAR performance relative
to UK-listed Real Estate
Investment Trusts is a key
metric used in setting the
long-term incentive plan.
Our portfolio outperformed the
benchmark by 120 bps. In our
view, this outperformance
is driven by the quality
of our asset management,
the affordability of our rents,
and the liquidity of our assets.
Total Property Return
is a measure of the income
and capital growth generated
across our portfolio. It is
calculated by MSCI Real Estate
(formerly known as IPD) on
our behalf, using independent
valuers. We assess our
performance against the
market by comparing our
returns to the MSCI All
Retail benchmark.
24
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
KPI
Description
Our performance
ANNUALISED RENT ROLL
£98.4m
114.6
117.9
96.5
100.1
98.4
11.5
2017
2018
2019
2020
2021
ADMIN COST RATIO
25%
14
15
15
13
25
11.5
2017
2018
2019
2020
2021
Annualised rent roll is
a measure of the scale
of our business and the
success of our active
asset management and
risk-controlled development.
It is disclosed on proportionally
consolidated basis, including
rental income from joint
ventures at our share.
Our annualised rent roll
decreased 17% to £98.4 million
during the year, largely as
a result of asset disposals,
loss of car parking income and
general impact of COVID-19
disruption across our retail
and pub operations.
Our admin cost ratio was
25% during the year,
increased from 15% in the
previous year. The main driver
of the increase was COVID-
related revenue reduction.
The admin cost ratio is total
administrative expenses
as a proportion of gross
revenue on a proportionally
consolidated basis,
including our share of
administrative expenses
and gross revenue from joint
ventures. It is a measure of our
operational efficiency.
Alignment to our objectives
Strategic objectives
DISPOSAL PROGRAMME
ENVIRONMENTAL,
SOCIAL AND GOVERNANCE
CAPITAL PARTNERSHIPS
REMUNERATION
PROTECTING RETAIL
AND PUB REVENUES
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
25
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
OUR KEY PERFORMANCE I NDI CA T ORS
KPI
Description
Our performance
RETAIL OCCUPANCY
95.8%
96.6
96.5
95.2
94.8
95.8
Retail occupancy is the
estimated rental value of
occupied retail units expressed
as a percentage of the total
estimated rental value of the
retail portfolio, excluding
development activities.
Retail occupancy remained
high at 95.8% at year end.
This was due to our
active approach to asset
management, our affordable
rents, and our track record
of reducing occupational
costs for our retailers.
2017
2018
2019
2020
2021
LOAN TO VALUE
51%
51
47
37
37
28
2017
2018
2019
2020
2021
Loan to Value (‘LTV’) is the
proportion of our properties
that are funded by borrowings.
The measure is presented on
a proportionally consolidated
basis, including our share of
properties and borrowings
held in joint ventures.
Maintaining an LTV of less
than 50% is one of our five
key Financial Policies.
Our LTV increased
over the year, from 47%
at 31 March 2020 to 51% at
31 March 2021, principally
reflecting the valuation decline
during the year. Reducing debt
levels through the disposal
of non-core assets is an
ongoing priority for FY22.
INTEREST COVER
2.3x
6.2
4.5
5.1
4.8
2.3
2017
2018
2019
2020
2021
Interest cover is the ratio
of our operating profit
to our net financing costs,
on a proportionally
consolidated basis, including
our share of operating profit
and net financing costs from
joint ventures. Maintaining
interest cover of more than
2.0x is one of our five key
Financial Policies.
Our interest cover was 2.3x at
31 March 2021, reduced from
4.8x at 31 March 2020, but still
ahead of our stated policy.
26
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
KPI
GRESB SCORE
60
46
36
70
62
60
2017
2018
2019
2020
2021
TBC
Description
Our performance
GRESB is the leading
sustainability benchmark for
the global real estate sector.
Assessments are guided by
factors that investors and the
industry consider to be
material in the sustainability
performance of real estate
asset investments, resulting in
an overall score marked out
of 100. Improvements in our
GRESB score can be used
to measure the effectiveness
of our ESG programme.
NewRiver has been a
GRESB participant since 2016.
In our most recent GRESB
assessment we received
a score of 60, reduced from
a score of 70 in FY20.
The main driver of this was
a fundamental change in the
GRESB assessment structure
in 2020, which included
a move away from focusing
on reporting and transparency
to asset-level performance.
This adversely impacted our
score due to the average age
of our assets and the inclusion
of over 700 Hawthorn pubs
in our assessment. GRESB
advises against direct
comparison between FY21
scores and prior year results.
Alignment to our objectives
Strategic objectives
DISPOSAL PROGRAMME
ENVIRONMENTAL,
SOCIAL AND GOVERNANCE
CAPITAL PARTNERSHIPS
REMUNERATION
PROTECTING RETAIL
AND PUB REVENUES
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
27
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
BU SINES S REVIEW
BUSINESS
REVIEW
Highlights
– Completed £81 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
£41.0 million (NewRiver share: £4.1 million)
– Retail occupancy remained high at 95.8% (31 March 2020: 94.8%);
average rent remains affordable at £11.51 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
£974 million as at 31 March 2021 (31 March 2020: £1.20 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 £80 million
to £100 million of assets, completing £81.2 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 £11.9 million, in-line with
the March 2020 valuation, and generated a 13% profit on cost.
28
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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 £34.7 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 £16 million
of disposals and £63 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 £41.0 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 £41.0 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 £5.3 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 £7.9 million in capex projects
during the financial year (£8.1 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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS BU SINES S REVIEW
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.
Status of rent collection as at 27 May 2021
Collected
Deferred
Re-gear
Total collected or alternative payments agreed
Waived
Rent outstanding
Total (%)
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 £2.7 million.
30
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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.
Q1 FY21
82%
2%
7%
91%
7%
2%
100%
Q2 FY21
87%
2%
4%
93%
5%
2%
100%
Q3 FY21
91%
1%
3%
95%
1%
4%
100%
Q4 FY21
84%
4%
4%
92%
3%
5%
100%
Total FY21
86%
3%
4%
93%
4%
3%
100%
In a similar way, commercialisation income has also suffered,
reducing by 57% year-on-year to £1.2 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 £6.5 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.
Top retail occupiers
Rank
Occupier
1
2
3
4
5
6
7
8
9
10
11-25
26-100
B&M
Poundland
Superdrug
Wilko
Boots
Primark
TK Maxx
Marks & Spencer
Iceland
Sainsbury’s
Subtotal
e.g. Next, B&Q, WHSmith, Home Bargains
e.g. Greggs, Costa, Tesco, Dunelm
Total
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 £11.51 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).
Number of
stores in
portfolio
11
20
16
8
16
4
8
3
14
3
% Total gross
income
1.9
1.9
1.9
1.8
1.7
1.6
1.5
1.3
1.3
1.2
16.1
11.1
18.8
46.0
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
31
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS BU SINES S REVIEW
Retail portfolio operations (continued)
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-segment1
Description
% of portfolio by value
Strategy
Community pubs Wet-led community pubs in suburban
Core Shopping
Centres
Regeneration
Shopping Centres
Retail Parks
Work Out
Shopping Centres
Other
locations. Delivering EBTIDA and valuation
growth pre-COVID-19
Located in areas with good supply/demand
dynamics for retail space, resulting in
sustainable income and valuations
Centres with opportunities to deliver larger
scale residential-led regeneration schemes
Conveniently located food & grocery-
anchored retail parks, offering free car
parking and optimised for click & collect
Located in areas with an oversupply of retail
space, leading to downward pressure on
rents and valuations
Standalone high street units, non-income
generating development sites and other
miscellaneous assets
25%
22%
22%
16%
13%
2%
Operational initiatives and small-scale
development (e.g. c-stores) initiatives
to enhance income and valuations
Asset management and small-scale
development (e.g. combining units)
initiatives to enhance income and valuations
Unlock value from regeneration
opportunities through capital partnerships
or selling with the benefit of planning
Asset management and small-scale
development (e.g. drive thru pods) initiatives
to enhance income and valuations
Asset management initiatives
to reposition centres and move them into
the Core Shopping Centres segment,
and selective disposals
Asset management initiatives to protect
income and selective disposals
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 £5.3 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 £1.3 million to £4.0 million.
Furthermore, CVAs and administrations notably reduced in the
second half of FY21; of the £5.3 million total exposure for FY21
only £1.7 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.
32
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
33
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS BU SINES S REVIEW
Hawthorn community pub portfolio operations (continued)
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.
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.
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 £1.3 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 £8 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 £0.9 million in
improving outside space. An additional £0.3 million (matched
by tenants) was also invested via our Partner Investment Fund
to support 110 new schemes.
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 £2.8 million in February 2021 to a single purchaser. We
received a premium payment of £275,000 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 £13.8 million.
The pub disposals generated gross proceeds of £9.8m,
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.
34
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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
Centre
Retail Park
Health
& Social Care
Hotel
C-store
Residential
Sq ft
–
Sq ft
3,600
Sq ft
–
Sq ft
37,900
Sq ft
3,600
Sq ft
8,100
Total
Pipeline
Sq ft
53,200
Retail &
Leisure
Pre-let
%
100
279,000
–
–
279,000
–
279,000
–
31,000
–
77,300
111,900
–
111,900
–
–
–
54,200
54,200
–
54,200
–
63,100
–
–
101,000
50,000
151,000
–
946,300
562,500
10,700
16,700
3,500
13,200
3,500 1,056,900
1,191,900
21,300 1,640,700 2,208,100
428,000
378,000
21,300 2,018,700 2,636,100
451,200
–
–
56
100
41
Resi
Pre-sold
%
–
29
–
–
Completed/Under
construction in FY21
Planning granted
In planning
Pre-planning
Near-term pipeline
Early feasibility stages
Total pipeline
Additional
residential potential1
1. A strategic review of our entire retail portfolio identified the potential 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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
35
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
BU SINES S REVIEW
Development in the retail portfolio (continued)
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 £974 million
from £1.20bn 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 2021
Valuation
(NRR share)
Portfolio
Weighting
Pubs & C-Stores
Shopping
Centres – Core
Shopping
Centres – Regeneration
Retail Parks
Shopping
Centres – Work Out
Other
Total
(£m)
248
210
210
157
132
17
9741
Valuation
Deficit
H1
(%)
-4.5%
-10.4%
Valuation
Deficit
H2
(%)
-4.2%
-8.5%
Valuation
Deficit
FY
(%)
-8.5%
-18.0%
(%)
25%
22%
22%
-6.9%
-3.0%
-9.7%
16%
13%
2%
100%
-4.8%
-15.1%
-16.4%
-8.2%
0.7%
-13.1%
-11.6%
-5.6%
-4.8%
-26.2%
-27.2%
-13.6%
Topped-up
NIY
(%)
11.0%
9.5%
5.9%
7.3%
9.3%
9.1%
8.8%
NEY
(%)
11.0%
9.3%
LFL ERV
Movement
(%)
–
-9.9%
6.7%
-7.1%
7.7%
13.2%
7.6%
9.5%
0.4%
-5.6%
-17.4%
-6.4%
1. See note 14 for reconciliation between Valuation (NRR share) shown in this table, and the relevant notes to the financial statements
36
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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.
Income Return
7.5%
5.5%
+180 bps
Capital Growth
-13.5%
-12.9%
-60 bps
Year to 31 March 2021
NRR portfolio
MSCI-IPD Benchmark1
Relative performance
Year to 31 March 2021
NRR shopping centre portfolio
MSCI-IPD shopping centre Benchmark1
Relative performance
NRR retail park portfolio
MSCI-IPD retail park Benchmark1
Relative performance
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 £767 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.
Total Return
-6.9%
-8.1%
+120 bps
Total Return
-10.8%
-23.6%
+1,670 bps
0.6%
-3.6%
+430 bps
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
37
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS FINA NCE REV IEW
FINANCE REVIEW
MARK DAVIES
Chief Financial Officer
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.
38
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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
£11.5 million compared to £52.1 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 -£150.5 million, compared to
a loss of -£121.1 million in the prior year, predominantly reflecting
a non-cash reduction in portfolio valuation of £152.9 million.
Our portfolio was valued on a proportionally consolidated basis
at £0.97 billion at 31 March 2021, compared to £1.20 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
£460.4 million (31 March 2020: £610.6 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 £199.3 million, increased from £127.1 million as at 31 March 2020.
This reflects the increase in our entirely unrestricted cash position
from £82.1 million to £154.3 million. As a result, net debt reduced
from £563.6 million to £493.3 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 £50 million was
confirmed in April 2020. While we did not draw the CCFF,
our eligibility meant that we had available undrawn debt facilities
of £95 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 £300 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 £81.2 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 £79 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 APMs include a number of European Public Real Estate
Association (‘EPRA’) measures, prepared in accordance with the
EPRA Best Practice Recommendations reporting framework,
I am committed to promoting
the UN SDG Decent Work and
Economic Growth within my role
at NewRiver.
MORE INFORMATION CAN BE FOUND
ON OUR WEBSITE WWW.NRR.CO.UK
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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
39
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS FINA NCE REV IEW
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
Loss for the period after taxation
Adjustments
Revaluation of property
Revaluation of joint ventures’ investment properties
Loss on disposal of investment properties
Revaluation of derivatives
Loss on disposal of subsidiary
Acquisition costs
Deferred tax
EPRA earnings
Depreciation on public houses
Forward looking element of IFRS 9
Abortive fees
Share-based payment charge
Underlying Funds From Operations
31 March 2021
(£m)
(150.5)
31 March 2020
(£m)
(121.1)
154.7
(1.8)
5.5
0.1
2.2
0.1
(1.4)
8.9
1.1
0.6
0.3
0.6
11.5
162.6
4.3
1.8
2.8
–
0.4
0.5
51.3
0.8
–
–
–
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 OPERATIONS
Revenue
Property operating expenses
Net property income
Administrative expenses
Other income
Net finance costs
Taxation
Underlying Funds From Operations
UFFO per share (pence)
Ordinary dividend per share (pence)
Ordinary dividend cover
Admin cost ratio
Weighted average # shares
Group
£m
91.1
(47.1)
44.0
(23.4)
7.2
(22.8)
2.7
Non-cash
adjustments1
£m
–
0.6
0.6
2.1
–
(0.1)
(1.4)
JVs &
Associates
£m
4.6
(1.0)
3.6
(0.2)
–
(0.8)
–
Proportionally
consolidated
£m
95.7
(47.5)
48.2
(21.5)
7.2
(23.7)
1.3
11.5
3.8
3.0
127%
24.9%
306.4
Proportionally
consolidated
£m
148.2
(55.3)
92.9
(19.8)
–
(22.0)
1.0
52.1
17.0
16.2
105%
14.9%
305.9
1. Adjustments to Group figures to remove non-cash items, principally forward looking element of IFRS 9 £(0.6) million, depreciation on public houses £(1.1) million,
abortive fees and acquisition costs £(0.4) million, share-based payment charge £(0.6) million, revaluation of derivatives £0.1 million and Deferred tax £1.4 million
40
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Net property income
Analysis of retail net property income (£m)
Retail net property income for the year ended 31 March 2020
Like-for-like rental income
FY21 CVAs and administrations
Rent and service charge provisions
Lease modifications
Car park and commercialisation income
COVID-19 impact
Acquisitions
Disposals
Asset management fees
Other property costs
Other
Retail net property income for the year ended 31 March 2021
(2.4)
(5.6)
(1.6)
(5.6)
68.4
(3.4)
(15.2)
2.1
(2.2)
0.3
(2.1)
(0.7)
47.2
On a proportionally consolidated basis, retail net property income
was £47.2 million for the year ended 31 March 2021 compared
to £68.4 million in the year ended 31 March 2020.
Like-for-like net rental income declined by £3.4 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 £2.4 million.
The £5.6 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 £1.6 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 £5.6 million,
or -59%, reflecting reduced footfall across town centres during the
national lockdown period.
The £2.1 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 £2.2 million
of income lost as a result of our asset disposal programme.
The £0.3 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 (£m)
Hawthorn net property income for the year ended 31 March 2020
Decrease in like-for-like income
COVID-19 closure impact
Partner support provided
Beer destruction
COVID-19 impact
Bravo Inns acquisition
Acquisition of 28 pubs from Marston’s
Pub and c-store disposals
Other
Hawthorn net property income for the year ended 31 March 2021
(14.6)
(8.7)
(0.4)
24.5
(0.6)
(23.7)
0.8
0.2
(0.3)
0.1
1.0
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
41
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS FINA NCE REV IEW
Pub net property income was £1.0 million during the year
to 31 March 2021, compared to £24.5 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 £0.6 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
£14.6 million, with the support provided to partners, predominantly
in the form of rent waivers, further reducing income by £8.7 million.
The cost of destroying beer supplies adversely impacted income
by £0.4 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 £0.8 million and £0.2 million respectively.
Administrative expenses
Administrative expenses were £21.5 million in the year, compared
to £19.8 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 £7.2 million was received during the year,
£2.7 million relating to our retail portfolio, and £4.5 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
£0.8 million to income. In addition, we received £3.7 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 £23.7 million in the year, compared to
£22.0 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
£1.1 million of the increase), and increase in margin due to our
LTV rising above 40% in the second half of FY20 (£0.6 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 £1.3 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).
42
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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
£m
930.1
86.5
30.9
1.9
150.5
26.0
1,225.9
(47.6)
(84.9)
(629.7)
(3.3)
(765.5)
460.4
JVs & Associates
£m
44.1
–
(30.9)
1.6
3.8
1.2
19.8
(1.9)
–
(17.9)
–
(19.8)
–
Proportionally
consolidated £m
974.2
86.5
–
3.5
154.3
27.2
1,245.7
(49.5)
(84.9)
(647.6)
(3.3)
(785.3)
460.4
(0.5)
0.7
2.6
463.2
151p
150p
50.6%
Proportionally
consolidated £m
1,197.1
87.2
–
2.9
82.1
27.9
1,397.2
(49.9)
(86.3)
(645.7)
(4.7)
(786.6)
610.6
(0.2)
2.1
2.7
615.2
201p
199p
47.1%
Properties at valuation
Proportionally consolidated properties at valuation was
£974.2 million at 31 March 2021, compared to £1,197.1 million at
31 March 2020, due to a 13.6% like-for-like decline in valuations
and the completion of £81.2 million of disposals, in-line with our
strategy to complete between £80-100 million of disposals in FY21.
Properties at valuation
Right of use asset
Investment in JVs & associates
Other non-current assets
Cash
Other current assets
Total assets
Other current liabilities
Lease liability
Debt
Other non-current liabilities
Total liabilities
IFRS net assets
EPRA adjustments:
Goodwill
Deferred tax
Fair value financial instruments
EPRA NTA
EPRA NTA per share
IFRS net assets per share
LTV
Net assets
As at 31 March 2021, IFRS net assets were £460.4 million
(31 March 2020: £610.6 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 £463.2 million, from £615.2 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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
43
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS FINA NCE REV IEW
Net debt & financing
Analysis of movement in proportionally consolidated net debt (£m)
Net debt at 31 March 2020
Operating activities
Net cash inflow from operating activities
Investing activities
New borrowings
Investment in associate
Disposal of subsidiary
Disposal of investment properties
Purchase of plant and equipment
Development and other capital expenditure
Financing activities
Ordinary dividends paid
Other
Net debt at 31 March 2021
Group JVs & Associates
15.8
547.8
Proportionally
consolidated
563.6
(8.6)
(2.4)
(11.0)
–
2.4
(38.5)
(40.1)
3.3
10.0
1.4
1.5
479.2
2.0
–
–
(2.1)
–
0.4
–
0.4
14.1
2.0
2.4
(38.5)
(42.2)
3.3
10.4
1.4
1.9
493.3
Proportionally consolidated net debt decreased by £70.3 million during the year to £493.3 million, primarily as a result of our
disposal activity.
Operating activities generated a net cash inflow of £11.0 million, compared with UFFO of £11.5 million. As part of our disposal programme,
we received cash proceeds of £78.3 million, net of re-investment in associates, primarily Sprucefield, of £2.4m, in addition to new debt
taken out in associates of £2.0 million. The purchase of plant and equipment, and development and other capex, represented cash
outflows of £3.3 million and £10.4 million respectively. The payment of withholding tax on the dividend relating to Q3 FY20 resulted in
a net cash outflow of £1.4 million.
44
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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 £79 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.
Net debt
Principal value of gross debt
Weighted average cost of debt1
Weighted average debt maturity2
Loan to value
Net debt: EBITDA
Interest cover
Ordinary dividend cover3
Balance sheet gearing
Financial policy
Proportionally consolidated
31 March 2021
£493.3m
£653.1m
3.2%
4.8 yrs
31 March 2020
£563.6m
£652.4m
3.4%
5.9 yrs
Guidance <40%
Policy <50%
50.6%
47.1%
<10x
>2.0x
>100%
FY20
7.7x
4.8x
105%
FY21
14.6x
2.3x
127%
Group
<100%
31 March 2021
104%
31 March 2020
90%
1. Cost of debt assuming £215 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:
Single retailer concentration
Development expenditure
Risk-controlled development
Pub weighting (excluding c-stores)
Guideline
<5% of gross income
<10% of GAV
>70% pre-let or pre-sold on committed
<30% of GAV
31 March 2021
1.9% (B&M, Poundland and Superdrug)
<1%
100%
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 £11.5 million of UFFO, our cash
and liquidity position has improved over the year by £72 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
9 June 2021
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
45
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ESG RE PORT
OUR ESG APPROACH
ALLAN LOCKHART
CEO
Our well-established and robust
ESG programme has allowed us to
successfully navigate the challenges
of the past 12 months, ensuring we
build on our 5-year-strong track record
and seize the opportunities to further
minimise our environmental impact
and support our local communities.
Since the inception of our ESG
Programme in 2015, we have made
significant strides in reducing our
environmental impact, reporting
a 15% decrease in energy usage across
our like-for-like retail portfolio in FY21
compared with the previous year.
From our baseline year of FY18, we have
achieved a 33% reduction in total carbon
emissions across our retail portfolio.
Our commitment to communities,
stakeholders and the environment,
alongside our wider strategy and
long-term asset management
approach, provides additional
depth to our portfolio’s resilience.
46
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Social value
Our positive contribution to the social fabric of the communities
served by our convenient shopping centres and pubs has always
been a core element of our business model and ESG programme.
This is endorsed on an ongoing basis by market accreditations.
Awareness of social cohesion and community support heightened
during FY21 when ‘shopping local’ became a necessity rather than
a choice. We witnessed our retail assets mobilise and adapt
to support local communities in numerous ways. These included
retail security teams delivering shopping to those shielding,
pubs converting into pop-up village shops to support isolated
neighbourhoods and vacant units being used as vaccination
centres to support the NHS.
Over the past 12-month period we took the opportunity
to further enhance our engagement with our occupiers at an
operational level, releasing our Retailer Sustainability Handbook,
designed to support our occupiers in improving the sustainability
of their operations and to complement our own efforts to realise
NewRiver’s ESG targets. Alongside this, we rolled out bespoke
shopping centre-led Environmental & Social Implementation Plans
across 85% of our retail portfolio to guide on-the-ground efforts
to achieve our ESG objectives and ensure the ESG needs of our
local communities are recognised and met as a priority.
ESG engagement and training
Stakeholder engagement is a key element of delivering
on our ESG objectives and we are pleased to report that,
despite challenging circumstances, we were still able to provide
our annual ESG training for our centre managers, head office
staff and wider stakeholders. Supporting this training were our
operational manuals which helped centres to continue providing
key operational metrics throughout the year. This meant that we
could monitor performance, adapt policies accordingly and
ultimately ensure that our ESG objectives remained on track.
Charitable activities
Our continued support for the Trussell Trust, an NGO and charity
working towards a hunger-free future, held poignant significance
throughout 2020, and we are proud of the £176,000 raised
by NewRiver. We achieved this milestone through corporate
donations, local site-led events, as well as the donation of salary
sacrifices from our Board and executive teams to help those most
in need, during a time when local events could no longer take
place during national lockdowns. Despite local fundraising events
not being permitted, over four tonnes of food were collected and
donated to the Trussell Trust with the support of our on-site teams
across our retail properties.
Environmental highlights
Turning to the environment, we continue to make progress
against our short-term targets set in 2020 and are optimistic
about the ways we can minimise our environmental impact
in the coming decade.
A significant milestone in our sustainability journey is the
announcement of our commitment to net zero carbon through
a three-step target set against an ambitious yet achievable timeline.
This is an appropriate time to make this public commitment to
address the challenges and opportunities presented to us by
climate change and we plan to become a signatory of the Better
Buildings Partnership (BBP) Climate Change Commitment in the
next financial year. Further details can be found on page 55.
This is our third consecutive year reporting against the key aspects
of the Task Force on Climate-related Financial Disclosures (TCFD)
recommendations. We continued to develop our capabilities and
refine our internal processes and systems throughout the year to
equip the business to respond to emerging climate-related risks
across our business model. More details on the TCFDs can be
found on page 72.
Our development team’s efforts resulted in the achievement
of BREEAM Very Good for our design stages for the construction
of Premier Inn, Romford, which notably achieved 100% in the
categories of Land Use & Ecology and Transport.
Our established Wellbeing and ESG Committees across NewRiver
and Hawthorn ensure that our programme is well integrated within
every department and level of the business, led by our Head of
Asset Management and ESG, Emma Mackenzie, alongside whom
I am delighted to co-sign this ESG section of our Annual Report.
ALLAN LOCKHART
CEO
EMMA MACKENZIE
Head of Asset Management and ESG
As custodian of the business,
I am proud to align my role
to the UN SDG Partnerships
for the Goals.
MORE INFORMATION CAN BE FOUND
ON OUR WEBSITE WWW.NRR.CO.UK
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
47
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ESG RE PORT
Our approach to ESG
Our ESG
activities
Used to inform
and shape
are applied through
our business model
Used to inform
and shape
External
benchmarks
and
guidance
Our ESG
targets
Progress
measured against
to meet
Progress
measured against
Our ESG
objectives
Disciplined
stock selection
Active asset
management
Risk-controlled
development
Profitable
capital recycling
Leveraging our
operating platform
with a conservative
balance sheet
Our ESG activities are applied through our business model
to meet our ESG objectives. Aligned with our corporate strategy,
our ESG objectives are built around four focus areas which
reflect the ESG issues that are important to our stakeholders
and our business.
In FY21 we made the decision to move to quarterly ESG reporting
which will allow us to collect, analyse and monitor data on
environmental performance across our assets in a timely manner
and to adapt on-site operational procedures and approaches,
where required.
Our ESG initiatives are informed and shaped by both
external benchmarks and guidance, and our own ESG targets.
These initiatives are applied to every area of our business model
in order to meet our ESG objectives. Our progress against these
objectives is then measured against our ESG targets and external
benchmarks on an annual basis, and the outcomes are used to
determine our ESG activities for the following year. This approach
generates a feedback loop whereby our ESG programme can
adapt as our business changes and as best practice evolves.
As an owner of assets located in communities across the UK,
we are committed to enhancing the lives of the people we
serve and to minimising our impact on the environment. At the
same time, we want to ensure we are good neighbours in our
communities, supporting and championing local causes and
innovating to address the needs of local people. At a corporate
level, we are passionate about engaging with our staff and our
occupiers and maintaining our high standards of governance,
in order to ensure we are an excellent employer and the best
company to do business with.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Our ESG objectives
MINIMISING OUR
ENVIRONMENTAL IMPACT
Measures to reduce our greenhouse gas emissions
and energy use include procuring renewable energy,
reducing consumption, adopting efficient technology,
improving building efficiencies and broadening
stakeholder engagement to better understand our
occupiers’ and stakeholders’ needs and priorities.
ENGAGING OUR STAFF
AND OCCUPIERS
We enthusiastically encourage and support
a holistic approach to managing our business.
As owners we cannot achieve our targets without
the support of our occupiers and our staff. Clear and
consistent communication with these key groups,
involving two-way education, is vital for our success.
SUPPORTING
OUR COMMUNITIES
With a portfolio of assets in communities across
the UK we can drive real, positive change within
towns and cities by supporting and championing local
causes. By creating jobs and supporting communities
we are better placed to identify and respond to local
needs, helping communities to thrive.
LEADING GOVERNANCE
AND DISCLOSURE
High standards of corporate governance
and disclosure are essential to ensuring we
operate effectively, and to instil confidence among
stakeholders. We aim to ensure our governance
and disclosure is in line with best practice.
EMMA MACKENZIE
Head of Asset Management & ESG
Programme structure
Our ESG strategy is guided by market trends, industry
benchmarks, internal learnings, legislation, risks and
opportunities identified by our risk management framework,
and stakeholder engagement. These initiatives form our
programme deliverables which are applied to every area of
our business model to ensure we meet our ESG objectives.
Progress is measured against both our own internal targets
and external benchmarks to steer the next year’s activities,
which must adapt as the business changes and best
practice evolves.
Emma Mackenzie, our Head of Asset Management and ESG,
who is also a member of our Executive Committee, takes the
lead on our ESG programme. The programme is developed,
reviewed, and implemented by the internal ESG committee,
comprising representatives from our retail and pub asset
management teams, our IR and HR functions, and our ESG
advisers (Cushman & Wakefield). The Committee meets
quarterly, and its agenda is supplemented by monthly
updates from Cushman & Wakefield, who advise on the
implementation of key initiatives to support NewRiver to
realise its ESG objectives.
As Head of Asset Management
& ESG, I champion the UN SDG
of Zero Hunger through our
corporate charity partnership.
MORE INFORMATION CAN BE FOUND
ON OUR WEBSITE WWW.NRR.CO.UK
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
49
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ESG RE PORT
Applying ESG through our business model
Our ESG programme is aligned to our business model and strategies, and we
factor ESG considerations into every aspect of our operations to meet our four
key ESG objectives. Progress against the objectives is measured against
a comprehensive set of short, medium, and long-term internal targets.
Our progress is also measured against a set of international benchmarks
and frameworks, including the UN Sustainable Development Goals.
Our
business
model
Disciplined
stock selection
Active asset
management
We undertake environmental due
diligence as part of our stock selection
process, including assessments of
energy efficiency and flood risks.
We seek appropriate adaptations to
our assets to improve monitoring and
reduce energy consumption, such as
solar panels, EV chargers and LED
lighting. We also procure renewable
electricity across 100% of our managed
retail portfolio.
Acquisition of new assets involves
a thorough engagement with occupiers
and other stakeholders to assess
whether the asset will meet their needs.
We have expanded the sustainability
clauses within our leases to encourage
our occupiers to provide sustainable
fitouts, and we ensure that staff at our
assets receive thorough training and
development opportunities.
We invest in assets that are already
part of the fabric of their communities.
We aim to revitalise assets by providing
the right mix of occupiers and uses
for communities.
We ensure our assets provide the right
mix of convenience, value and services
for customers’ everyday needs. We also
use space in our assets to support and
raise awareness of local charities.
MINIMISING OUR
ENVIRONMENTAL IMPACT
ENGAGING OUR
STAFF AND OCCUPIERS
SUPPORTING OUR
COMMUNITIES
All acquisition decisions are
subject to a rigorous review process,
including Executive Committee
or Board sign-off where appropriate,
drawing on expertise from around
the business.
Our Head of Asset Management and
ESG co-ordinates asset management
initiatives through a sustainability lens
and sits on our Executive Committee.
LEADING GOVERNANCE
AND DISCLOSURE
50
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Risk controlled
development pipeline
Profitable
capital recycling
Leverage our platform/
conservative balance sheet
Our developments aim for the
appropriate market-guided
sustainability standards, to reduce
energy consumption and ensure they
are fit for the future. Where possible we
retrofit as opposed to more energy-
intensive demolition and rebuilding.
It is our intention that developments
we have owned or developed should
already include key environmental
features that allow their new owners
to operate sustainably.
By opening up our asset management
platform to third parties we can advise
other asset owners on environmental
best practice in asset management
and development.
Most of our developments are pre-let,
so our development team works with
occupiers throughout the development
process to ensure it meets their needs
and specifications.
When we dispose of an asset we
engage with the staff and occupiers at
the asset to ensure an orderly transition
to new ownership.
We ensure that all head office staff
have access to the training and
development opportunities required
to support their careers and their
physical and mental wellbeing.
We work closely with councils and
local groups to ensure developments
address community needs and provide
the right balance of residential, retail,
workplaces and other civic amenities.
We leave behind well-invested assets
that are fit for the future and reinvest
the proceeds into assets serving other
communities elsewhere.
Our platform provides advisory and
asset management services that
enables Local Authorities to revitalise
their town centres. Our staff are
encouraged to support charities
through our fundraising and
volunteer programme.
We ensure that our development work
adheres to the most stringent health
and safety standards, and that all
suppliers sign up to our Supplier
Code of Conduct.
All disposal decisions are subject
to a rigorous review process,
including Executive Committee
and Board sign-off where appropriate,
which includes assessing their impact
on all stakeholders.
Our Board and its committees ensure
that we work on behalf of shareholders
and other stakeholders to drive the
culture and discipline necessary for the
Company to meet its goals.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
51
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ESG RE PORT
Our ESG targets
While we are finalising our pathway to net zero and setting new medium and long-term targets in line
with the latest climate science, we will continue to work towards meeting the current medium (by 2030)
and long-term (by 2050) targets set in 2018 with the addition of a net zero end point by 2050.
Our short-term
targets (2025)
Environmental
Minimising our environmental impact
100% of waste generated at our managed properties
is diverted from landfill by 2022
85% recycling rate at our managed properties
by 2025
100% of landlord electricity procured from
renewable sources by 2022
10% of landlord electricity use from on-site
generation by 2025
Electric vehicle charging points installed across
100% of retail properties with a surface-level
car park by 2025
Building certifications targeted at 100% of new
construction and major renovation projects
by 2025
Achieve net zero carbon for all corporate-related
carbon emissions (Scope 1, 2 and 3 emissions)
by 2025
Conduct life-cycle and embodied carbon emission
assessments for 100% of all new development
projects by 2025
Social
Engaging our staff and occupiers
Supporting our communities
Provide a minimum of one work experience
placement per year at 50% of our managed retail
assets by 2022
Achieve a 90% response rate to our annual staff
wellbeing survey by 2022
Supporting our communities
Achieve a 75% response rate to our occupier
satisfaction survey by 2025
All managed retail assets to participate in our
Quiet Hour Initiative by 2022
Biodiversity plans to be in place for 15% of our
managed properties by 2025
All managed properties have a community
engagement programme in place updated
on an annual basis by 2022
50% of NewRiver staff to participate in our volunteer
work programme annually by 2022
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Our performance – sustainability
accreditations and commitments
We use industry-recognised indices to track our sustainability performance:
Accreditation
or commitment
Score
or equivalent
Observations
Overall score
60/100
3 stars
C
We are committed
to 11 of the 17
UNSDGs
3rd consecutive
year reporting
HR
Commitments
£247,000
We outperformed our peers in our scores
in Social (17/19) and Governance (18/20).
Our area to focus and improve upon is
our environmental score, which involves
prioritising energy, water and waste
consumption along with collating greater
occupier data
Romford Premier Inn achieved a BREEAM
Very Good rating
2020 was our first submission and this
score was in line with the European
and global peer average, reflecting our
ongoing commitment to develop
climate risk reporting and governance
disclosure processes
We have specific targets and annually track
our progress against them
We continued to develop our capabilities
and refine our internal processes and
systems to equip the business to respond
to emerging climate-related risks across our
business model
Reflects total amount invested in
staff training, subscriptions, staff surveys
and online platforms across NewRiver
and Hawthorn
Investing
in people
2,093 hours
Total hours of training completed by head
office staff
£176,000 donated
4 tonnes of food
Reflects money raised and the weight
of food collected to support our
corporate charity
2.9/5
We have participated in the ESG Ratings
since 2017. In our most recent assessment
(December 2020), we received an overall
ESG Rating of 2.9 out of 5, above the
‘Retail REIT’ average of 2.7 and ‘Financials’
industry average of 2.5
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
53
Medium-term
targets (2030)
100% energy (electricity
and gas) procured from
renewable sources
20% reduction in NewRiver-
procured utilities against the
2017 baseline year
50% reduction in carbon
emission intensity across
operational real estate by 2030
Long-term
targets (2050)
Over 25% of energy
generated from renewable
sources at assets
100% energy (electricity
and gas) procured from
renewable sources
40% reduction in NewRiver-
procured utilities against the
2017 baseline year
Achieve net zero carbon on
all operational Scope 1 and 2
emissions from the directly
managed areas across our
portfolio by 2040
By 2050, achieve net zero
carbon in terms of operational
and embodied emissions
(scope 1, 2 and 3 emissions)
at a corporate level and across
our portfolio, whether assets
are directly managed or
managed by third parties
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ESG RE PORT
Our net zero commitment
The scale of the climate emergency and its impact has been
transformational in the last 5 years. From the Paris Climate
Agreement signed in 2015, to the announcement of the Task
Force on Climate-related Financial Disclosures (TCFDs), set to be
mandatory in the UK by 2025, there is growing momentum behind
the adoption of low-carbon strategies to achieve long-term climate
resilience. The UK Government has furthermore committed to
bringing all greenhouse gas (GHG) emissions to net zero by 2050.
Our responsible approach requires transitioning to a more
sustainable business for our essential retail and leisure for local
communities. Minimising our impact on the environment is leading
us to focus on reducing our energy consumption, improving
efficiencies and harnessing stakeholder engagement.
Transitioning to a low-carbon model also helps to manage our
portfolio’s exposure to climate risks and to ensure the long-term
resilience of our business.
We recognise that the part we can play goes beyond our own
real estate portfolio and business – it is a commitment to making
a positive impact on the planet and something we are proud to
uphold. We acknowledge that now is the time to demonstrate our
commitment to carbon reduction and to address the challenges
and opportunities that our pathway to net zero will present.
Progress to date
Since the inception of our Environmental, Social and Governance
(ESG) programme in 2015, we have made significant progress in
improving the environmental efficiency of our portfolio. In 2018,
we developed GHG emission reduction targets using the science-
based target methodology, which set our long-term reduction
pathway for our Scope 1 and 2 emissions in line with the 2°C
temperature limit scenario of the Paris Agreement. Since then,
we have taken action to reduce our energy consumption and
increased the level of renewable energy we procure and generate
on site.
In 2019, following the Committee on Climate Change’s review
of the latest IPCC Special Report on Global Warming, it became
clear that to limit warming to 1.5°C globally we need to achieve net
zero GHG emissions by 2050. In June 2019 the UK Government
announced a target of net zero for UK GHG emissions by 2050
and we began reviewing what this means for the real estate sector
and our operations.
Our journey so far
Established our
Responsible
Investment Policy
and targets set
against our
ESG priorities
Energy and GHG emission targets
set aligned with science-based
targets, installed 18 InstaVolt
electric charging points, launched
sustainable occupier fitout guide
and lease clauses, established our
wellbeing programme
100% renewable electricity
across managed retail assets,
increased our community
funding in response to the
COVID-19 outbreak, first CDP
submission, 12% reduction
in GHG emissions
2015
2016
2017
2018
2019
2020
2021
Formalised our
ESG journey
EPC Assessment roll out
for high risk assets and
MEES legislation review
Established data
management programme
and initiated AMR and
LED lighting rollout
Embedded ESG risks into our
corporate risk management
and governance practices,
integrated pubs into our ESG
programme, established our
first charity partnership with
the Trussell Trust, fitted solar
PVs to five assets
Setting our pathway to net zero,
salary waivers to the Trussell
Trust, Romford Premier Inn
achieved a BREEAM Very Good
certification for design stage,
achieved EPRA Sustainability
Best Practice award for the first
time (bronze)
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Our approach
As the UK Green Building Council outlines there are a variety of
ways to achieve net zero in the real estate sector. Our approach
focuses primarily on reducing the energy demand across our
properties, leading to a corresponding reduction in associated
emissions, and increasing procurement of renewable energy.
Furthermore, we will develop a net zero approach to our major
refurbishment and development projects. Whilst we believe that
the combination of these initiatives should significantly reduce
our emissions, we recognise that some measures will not be
technically or commercially feasible to implement. As such, we will
aim to develop a carbon offsetting solution to ensure that we meet
our reduction criteria.
We have set the following carbon reduction targets, aligned with
a 1.5°C warming scenario, using the Science-Based Targets
initiative (SBTi) methodology:
– By 2025, achieve net zero carbon for all corporate head office
Alongside our targets, we will sign the Better Buildings Partnership
(BBP) Climate Change Commitment which requires signatories to
publish net zero carbon pathways and delivery plans, disclose the
energy performance of their assets and develop comprehensive
climate resilience strategies.
We commit to disclosing our progress against our targets annually
and identifying ways to accelerate our pathway to net zero
whenever possible.
Our strategy in 2021
We aim to publish our pathway timeline in the coming months
to provide more detail on our targets. We believe that to achieve
these targets we will need to rely on a combination of initiatives
to significantly reduce our emissions. These include:
– further improvements to the energy efficiency of our assets
– expanding the use of green energy across all of our assets
– embedding our ESG principles across our developments,
related carbon emissions (Scope 1, 2 and 3 emissions)
refurbishments and operation of assets
– By 2040, achieve net zero carbon on all operational Scope 1
and 2 emissions from the directly managed areas across
our portfolio
– By 2050, achieve net zero carbon in terms of operational
and embodied emissions (scope 1, 2 and 3 emissions)
at a corporate level and across our portfolio, whether assets
are directly managed or managed by third parties
– carefully offsetting those emissions which we cannot eliminate
Our plan will recognise that, while some measures will not be
technically or commercially feasible to implement, bold action
is required to meaningfully achieve these targets.
Pathway to net zero
Become a signatory of Better
Buildings Partnership Climate
Change Commitment, receive
approval from the Science-Based
Target Initiative (SBTi) for aligning
net zero pathway with 1.5°C
global warming trajectory
50% reduction in carbon
emission intensity across
operational real estate,
as required by the SBTi
Achieve net zero carbon
in terms of operational and
embodied emissions (scope
1, 2 and 3 emissions) at
a corporate level and across
our portfolio, whether assets
are directly managed or
managed by third parties
2021
2025
2030
2040
2050
Achieve net zero carbon for all
corporate related carbon emissions
(Scope 1, 2 and 3 emissions)
Create inventory of all real estate
operational carbon emissions and
NewRiver corporate activities
(Scope 1 and 2)
Achieve net zero carbon
on all operational Scope 1
and 2 emissions from the
directly managed areas
across our portfolio
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
55
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ESG RE PORT
OUR ESG INITIATIVES
IN ACTION
Supporting our
communities:
Partnership with
the Trussell Trust
“We are seeing the very best of society
and a desire to help one another. Your
donation means we can remain agile
to respond to the changing situation
and ensure food banks continue to
provide the lifeline of emergency food
and support for people in crisis, whilst
moving forwards to tackle root causes
and campaign for long term change.
Your donation will make a significant
difference to our ability to respond
to the current crisis.’’
SOPHIE CARRE
Head of Corporate Partnerships, Trussell Trust
“NewRiver are well integrated at many
different levels of our partnership,
beyond donations”
LISA ROMANOVA
Corporate Partnerships Manager
£176k
RAISED
> 4 tonnes
OF FOOD COLLECTED
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
We marked our second year supporting the Trussell Trust,
as our corporate charity partner, whose work supports over
1,200 food banks across the UK providing for those most in
need in the community. In 2020, as the pandemic unfolded,
the Trussell Trust network gave out 1.9 million three-day
emergency food supplies to people in crisis and a third of these
went to children, often providing more than 2,600 food parcels
for children each day alone.
This year we have donated up to £176,000. These vital funds
help to provide direct support to the network of food banks;
sourcing food, liaising with local authorities, providing
emotional and well-being support and training to food bank
project managers and volunteers.
As the Trussell Trust adapted during the pandemic so have we
– we have been able to create storage across our shopping
centre portfolio and use our social channels to magnify
the Trussell Trust’s first ever people powered campaign:
Hunger Free Future. Our centres continue to support local
food collections and across the shopping centre portfolio we
have collected over four tonnes of food donations.
Whilst many physical events were unable to take place,
our salary sacrifice by our Board and Executive team members
allowed us to keep up momentum in donations during
critical times for those most vulnerable in our communities.
Additionally, whilst our staff worked from home we embarked
on virtual fundraising events, with a UK coastal walk,
raffles and bingo.
Relevant objectives
ESG
objectives
SDGs
Supporting our
communities:
The Real Junk Food
Project in Wakefield
Adam Smith, founder of The Real Junk Food Project, said
“Thank you to everyone involved at
The Ridings for your amazing support.
It makes a huge difference in allowing
us to carry out our vital work of feeding
bellies not bins.”
The Ridings Shopping Centre, Wakefield, partnered with
The Real Junk Food Project (TRJFP) in April 2020 to
provide free retail space to support the local community.
TRJFP provided valuable food packs to the local community
from two of the centre’s units via the app ‘Too Good to Go’.
The food parcels contain quality excess food that has been
donated from a range of suppliers, caterers and retailers and
which would otherwise have ended up in bins as food waste.
TRJFP intercepts perfectly edible food destined for landfill
and by offering the ‘Too Good To Go’ boxes at a significantly
reduced cost, TRJFP are able to supply good quality,
fresh food to those who might otherwise be unable to afford it.
2,531 parcels
> £25k in value
> 5 tonnes
of food saved
Relevant objectives
ESG
objectives
SDGs
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
57
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Environmental and social
implementation plans
Our ESG programme places continued focus on providing our
assets with the tools and mechanisms to implement on-the-ground
initiatives to improve asset resilience and performance against our
ESG objectives.
This year, we introduced Environmental and Social Implementation
plans to assist centre managers in identifying and assessing the
feasibility of various asset-level initiatives that would contribute to
the achievement of our short, medium and long-term ESG targets.
We suggested initiatives for consideration, such as the introduction
of new habitats and the inclusion of sustainability agenda items
in occupier meetings, and developed the method by which the
environmental and social initiatives will be tracked for each centre.
These plans were implemented at 85% of our retail properties
over the course of the year. Our ESG advisers also undertook an
independent review of all plans to provide their recommendations
as to where further ESG best practice adjustments can be made.
On-site renewable energy generation
Since 2018, when we set our long-term GHG emission reduction
pathway for Scope 1 and 2 emissions within the 2°C temperature
limit scenario in line with the Paris Agreement, we have taken
continuous action to reduce our energy consumption and increase
the proportion of renewable energy we procure and generate on
site. In FY20, the electricity supplied to our managed retail assets
was 100% renewable, and in FY21, 3.7% was generated on site.
Sustainability handbook for retailers
In March we issued all of our retailers with our ‘Small Acts Make
Big Impacts’ booklet to advise our occupiers as to how changing
what we do every day can enhance our communities and reduce
our impact on the environment. The message is focused on the
power of partnerships; communicating to our retailers how we
demonstrate our commitment to ESG, and the ways in which we
welcome our occupiers to work with us in ensuring we are on the
right side of climate change history. The booklet also provides
helpful hints and tips on small behavioural changes all occupiers
can adopt independently, as well as offering support via our
centre managers.
ESG RE PORT
Minimising our
environmental
impact:
Our environmental
initiatives in action
“Our retailers were impressed with the
‘Small Acts Make Big Impacts’ booklet.
It clearly demonstrated NewRiver’s
and the Ridings’ commitment to ESG
and it was a great tool enabling the
management team to discuss completed,
current and future initiatives to enhance
our local community and reduce the
centre’s impact on the environment,
and importantly how our retailers can
continue to get involved with us.”
LEE APPLETON
Centre Director of The Ridings Centre
in Wakefield
BREEAM very good certification
for Romford Premier Inn
We are committed to embedding ESG considerations
across all aspects of our operations, which include our
development activities. Following last year’s BREEAM
certification of our Canvey Island Retail Park, this year,
our forward-funded Romford Premier Inn development
received a BREEAM ‘Very Good’ Design Stage certification.
This exciting development is scheduled for completion at
the end of June 2021.
In line with our ESG-focused development ethos,
we ensured the project embodied BREEAM principles,
and measures taken as part of the development strategy
included exceeding regulatory energy performance
requirements, adopting passive design measures to reduce
the total heating, cooling, mechanical ventilation and
lighting loads, and reducing energy consumption.
A feasibility study was undertaken by an energy specialist
to establish the most appropriate recognised local (on-site
or near-site) low or zero carbon energy sources for the
development. This resulted in a meaningful reduction in the
total energy demand of the building.
Relevant objectives
ESG
objectives
SDGs
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Improving the environmental performance
of our pub portfolio
Building on the energy savings we achieved in 2019 through
the installation of our cellar environment monitors, this year
we made the best of the closure periods in connection with
COVID-19 and continued the rollout of efficiency improvements
across our managed pub portfolio. Key improvements include:
Installation of double glazing
5 sites
Switch to interior LED lighting
13 sites
Switch to exterior LED lighting
23 sites
Increase of insulation depth
4 sites
Boiler upgrades
8 sites
Water heater upgrades
2 sites
Co-ordinated approach to pub
waste management
In 2020, Hawthorn ran a comprehensive tender for waste
management services for our pub portfolio. We appointed ACM
Environmental to support the portfolio’s waste management,
inspired by their leading sustainability credentials and
capabilities in the management, monitoring and reporting
of waste. With ACM, we can ensure our waste management
makes a positive contribution towards realising our objective
of minimising our environmental impact.
Supporting our
communities:
Burgess Hill – proving
eco-friendly trading spaces
for the community
“This year we are thrilled to have
championed six local independent
retailers and charities, each of which
features a diverse mix of sustainability,
health and wellbeing at the heart of
their business models. These fantastic
retailers have in turn supported
their local community within a vibrant
town centre whilst we develop our
regeneration project. Championing
local physical retail via these new
retailers has also allowed us to make an
annual rates saving of circa £108,000.”
NATASHA SOUTHWICK
Asset Manager
Mama Fit is a women’s fitness space and café, a place
for everyone to enjoy offering an open gym, health and
wellbeing classes, personal training and kids dance classes.
Co-owners, Chris and Elliot, are two young entrepreneurs
who have a passion for people and communities. With the
help of close friends and family they turned a walkway into
a beautiful green café, with a gym above, for the local
community to enjoy.
Scrapless is Burgess Hill’s first refill food, produce and
cleaning liquid store offering their customers a brand new
shopping experience and convenient access to a zero-
waste lifestyle in Burgess Hill, Mid Sussex. This plastic-free
retailer also offers shoppers the opportunity to offset their
carbon emissions by planting a tree in their Scrapless Forest
at the check-out.
LoCa, another imaginative start-up, sells handmade
children’s clothing made by a local mum for children up to
8 years, workwear and personalised clothes and bags.
Relevant objectives
ESG
objectives
Relevant objectives
ESG
objectives
SDGs
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
59
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ESG RE PORT
Supporting our
communities:
Social resilience
“The Centres are capable of delivering
thousands of vaccines in the coming
weeks and provide a major boost to our
plans to offer protection to those who
would benefit as quickly as possible.”
DR DAVID VICKERS
Medical Director, Cambridge Community Services
NHS Trust
“We are very pleased that the NHS has
chosen this easily accessible location
in the heart of Wisbech and we will
continue to offer our support to them
whilst they are here.”
KEVIN SMITH
Horsefair Centre Manager
During the pandemic, our team successfully facilitated the
transformation of a unit from a community-based repurposing
furniture and home décor occupier to a COVID-19 vaccination
centre, in just a few weeks. The centre provided additional
support to the vaccination hubs already operating in other
larger vaccination centres, local hospitals and GP surgeries
across the county. The centre’s location in the heart of the
community, with a 400-space car park and bus stations nearby,
meant those in most need could easily access the NHS service.
Care Packages in Middlesbrough
The team at Hillstreet Shopping Centre chose to support their
local community by funding care packages containing
essentials and a few festive treats. A total of 45 packages were
put together and distributed in partnership with Ageing Better
Middlesbrough. Operations Manager, Colin, said ‘they’ve been
really well received by older people in our area grateful that
we’re still thinking of them, especially during Christmas.’
Relevant objectives
ESG
objectives
SDGs
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Streamlined energy and carbon reporting
(SECR) disclosures
In line with the Companies Act 2006 (Strategic & Directors’
Reports) Regulations 2013, we disclose the annual global GHG
emissions for which we are responsible.
The table below presents our total energy use, including
electricity, gas and fuel used in personal cars on business use,
and our carbon footprint across Scope 1, 2 and 3 emissions,
as well as an appropriate carbon intensity metric. Performance
data presented below relates to our retail and pub portfolios for
the financial year ended 31 March 2021.
Our approach
Our methodology to prepare these disclosures is aligned with
the Environmental Reporting Guidelines: including mandatory
greenhouse gas emissions reporting guidance (March 2020)
issued by the Department for Business, Energy & Industrial
Strategy (BEIS), and guidance outlined in the WBCSD/WRI
Greenhouse Gas Protocol Corporate Accounting and Reporting
Standard (revised edition). Calculation of our annual GHG
emissions is based on the BEIS 2020 UK emission conversion
factors. Full details of our methodology are available on request.
Our FY21 SECR disclosures
Combustion of fuel and
operation of our assets
Electricity purchased for
own use (location-based)
Electricity purchased for
own use (market-based)
Emissions from purchased
goods and services, fuel and
energy-related activities,
waste, business travel,
employee commuting and
downstream leased assets
Total Scope 1, 2 and 3 CO2e
emissions (location-based)
Intensity Scope 1 & 2
(location-based) (tCO2e/m2)
Total energy use (kWh)
FY21
FY20
% change
2,279
1,472
55%
3,445
3,356
2.7%
967
28,699
86,837
-67%
34,423
91,665
-62%
0.024
0.024
27,481,131 22,043,230
25%
Performance during the year
In FY21, we saw an increase in our total energy use across our
portfolio, which was driven by the following key factors; firstly,
we appointed a new energy broker who has significantly improved
our data collection processes and enabled greater visibility on our
portfolio’s usage. As a result, we have collected gas usage data
for 72 additional pub sites compared with last year. Secondly,
the offices at our Piazza Centre have been occupied seven days
a week by the NHS, with extended operating hours of 7am to
10pm. To facilitate the use of this building by the NHS, we also
refurbished the Air Handling Units (‘AHUs’) and now have
11 working AHUs, compared with three last year. Throughout the
COVID-19 disruption, our Templar Square Shopping Centre
remained fully open and operational for the local community.
To make this possible and safe, we were required to keep the
main centre doors open (for air flow), meaning that the AHUs
were working harder to maintain a comfortable temperature.
We achieved a 26% reduction in like-for-like electricity
consumption across our portfolio, which was largely driven by the
impact of lockdown measures, with activity being scaled back in
line with social distancing restrictions implemented across the UK.
This reduction can also, in part, be attributed to replacements of
inefficient lighting with new LEDs. Our scope 3 emissions reduced
by two-thirds to 28,699tCO2e in 2021 (2020: 86,837tCO2e),
partly due to the transition of our staff to working remotely
from home, contributing to our total scope 1, 2 and 3 location-
based emissions reduction of 62%.
Energy efficiency measures implemented this year:
Despite the impact of lockdown restrictions on our retail and pub
portfolios, we continued to prioritise the rollout of initiatives
designed to improve environmental performance, reduce energy
usage and improve the energy efficiency of our managed assets.
We continued to roll out LED across the portfolio and now have
LED technology installed across communal areas in our retail
portfolio. We have also increased the proportion of common area
AMRs within our retail portfolio by 12% over the course of the year.
In addition to the optimised cooler efficiency technology installed
in pub cellars across our operator managed pub portfolio, our
property managers implemented six different types of efficiency
measures this year, including superior insulation and boiler
upgrades, which amounted to a total of 55 improvements across
the managed pub portfolio.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
61
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ESG RE PORT
Data Notes
Reporting Period
Boundary
Reporting Method
Emissions Factor
Aligned with our financial reporting, our GHG emissions relate to the financial year ended 31 March 2021. Emission
data from the financial year ended 31 March 2020 has also been included.
We have used the operational control method to outline our carbon footprint boundary. This year, we have expanded
the boundary of our Scope 3 reporting to now include purchased goods and services, fuel and energy-related
activities, waste, business travel, employee commuting and downstream leased assets.
Occupiers’ energy usage and emissions are not included in our Scope 1 and 2 reporting boundary as this is not
deemed to be within our operational control boundary but are reported in Scope 3 as downstream leased assets.
We have measured emissions based on the GHG Protocol Corporate Accounting Standard (revised edition) and
guidance provided by the UK’s Department for Business, Energy & Industrial Strategy and the Department for
Environment, Food and Rural Affairs (‘Defra’) on Streamlined Energy and Carbon Reporting and greenhouse gas
reporting.
The emission factors and conversions used for FY21 reporting are from the Defra greenhouse gas reporting tool 2020
and the factors and conversions used for FY20 reporting are from Defra’s 2019 reporting tool. For Scope 1 emissions,
we used the Gross calorific value (CV) this year instead of the net CV as we identified that most energy billing
has been provided on a gross CV basis. For reporting consistency, the FY20 data has been updated using the
Gross CV factor.
Scope 2 emissions
This year for the first time, we are reporting both a location-based and market-based Scope 2 figure, in-line with the
GHG Protocol Scope 2 Guidance. This demonstrates the purchasing decisions we have made over our retail portfolio,
which is supplied by green tariffs.
Scope 3 emissions
We used the GHG Protocol Scope 3 Standard to collate and report on our Scope 3 emissions in the form of emissions
from purchased goods and services, fuel and energy-related activities, waste, business travel, employee commuting
and downstream leased assets.
Intensity Level
Data Restatement
For intensity level reporting, we have used the operationally controlled area of each property as the denominator.
For the retail portfolio, we estimated the floor area to be 28% of the total area of each property. Emissions from vacant
units have been excluded in the intensity measure due to the variability of emissions and floor area year-on-year.
In any event, vacant units represent a de minimis percentage of our total GHG emissions. We calculated the carbon
intensity at a property level to determine the average ratio of the portfolio.
In our FY20 Annual report, we quoted the value 1,322 (tCO2) for scope 1 emissions. In FY21, this has been restated
as 1,472 (tCO2). This restatement is due to re-invoicing following year end FY20. This change has also impacted our
total emissions figure, which has been revised from 4,894 (tCO2) to 5,044 (tCO2), and total energy use from
21,225,230 (kWh) to 22,043,230 (kWh).
In addition, due to the expanded scope 3 reporting boundary this year, we have restated the Scope 3 figure reported
in FY20 of 216 (tCO2) to make this more comparable. This has been restated as 86,837 (tCO2) and covers the
additional Scope 3 emissions sources reported this year (purchased goods and services, fuel and energy-related
activities, waste, employee commuting and downstream leased assets.
EPRA sustainability best practice recommendations
The ESG performance disclosures in the following tables have been prepared in accordance with the European Public Real Estate
Association’s Sustainability Best Practices Recommendations guidelines and represent key ESG metrics monitored by the business on an
ongoing basis. These metrics aim to bring consistency and clarity to real estate companies’ disclosures of their environmental, social and
corporate governance performance.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Environmental performance measures:
Total Portfolio1,
Asset Type
Total Portfolio,
Retail, Pubs
Total Portfolio
Retail
Pubs
Total Portfolio
Retail
Pubs
Total Portfolio
Retail
Pubs
Total Portfolio
Retail
Pubs
Total Portfolio
Retail
Pubs
Total Portfolio
Retail
Pubs
Total Portfolio
Total Portfolio
Retail
Pubs
Total Portfolio
Retail
Pubs
Total Portfolio
Retail
Pubs
Total Portfolio
Retail
Pubs
Total Portfolio
Retail
Pubs
Total Portfolio
Retail
Pubs
Total Portfolio
Retail
Pubs
EPRA Code
Performance Measure
Elec-Abs,
Elec-LfL
Electricity
consumption
Unit(s) of
Measure
annual MWh
DH&C-Abs
& LfL
District heating
& cooling2
annual MWh
Fuels-Abs,
Fuels-LfL
Fuel consumption
annual MWh
Energy-Int
Energy intensity
kWhelec-eq/
m2/yr
GHG-Dir-
Abs
Scope 1 emissions
tonnes CO2e
GHG-Indir-
Abs
Scope 2 emissions
– location-based
tonnes CO2e
Scope 2 emissions
– market-based
tonnes CO2e
Scope 3 emissions
tonnes CO2e
GHG-Int
Scope 1 and 2
emissions
tonnes CO2e/
m2/year
Water-Abs,
Water-LfL
Water consumption
annual cubic
metres (m3)
Water-Int
Water intensity
m3 consumption
/m2
Waste-Abs
Waste-LfL
Tonnes total waste
Tonnes diverted
from landfill
Tonnes waste
to energy
Tonnes recycling
Tonnes
Cert-ToT
Type and number
of sustainably
certified assets4
Total number
by certification/
rating/labelling
scheme
Absolute Performance
(Abs)
Like-for-like Performance
(LfL)
% of data
estimation
6%
3%
11%
FY21
14,778
10,631
4,147
FY20
13,130
10,005
3,125
FY20 % Change
-26%
-25%
-31%
12,197
9,716
2,481
FY21
9,021
7,315
1,706
7,657
3,772
3,885
79
72
109
1,408
694
714
2,103
1,705
398
967
0
967
6,655
3,307
3,348
97
90
128
1,223
608
615
3,117
2,483
634
8,007
3,347
4,660
89
79
127
1,472
615
857
3,356
2,557
799
12,396
4,233
8,163
82
71
118
2,279
778
1,501
3,446
2,479
967
967
0
967
28,699
0.024
0.019
0.039
86,837
0.024
0.021
0.039
107,769 198,530
66,019 105,434
93,096
41,750
1.516
0.716
1.002
0.576
3.620
1.159
4,283
2,613
3,958
2,031
325
582
4,198
2,596
3,908
2,022
290
574
2,298
764
2,157
764
141
0
1,455
1,366
1,305
921
150
445
0.027
0.023
0.020
0.020
0.040
0.037
150,931
80,951
65,543 105,427
45,504
15,408
1.271
0.648
1.002
0.623
3.544
1.200
3,895
2,613
3,741
2,031
582
154
3
2,596
2,022
574
764
764
0
1,366
921
445
11%
4%
14%
9%
4%
12%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
15%
14%
16%
-19%
-20%
-15%
15%
14%
16%
-33%
-31%
-37%
-67%
-14%
0%
-7%
-46%
-38%
-66%
-49%
-38%
-66%
-33%
-46%
278%
1. Data coverage: the figures reported against each performance measure represent 100% of the assets within our Operational Control reporting boundary.
2. None of our properties were connected to or benefitted from district heating and cooling.
3. Improvements have been made to our waste stream categorisation. Like-for-like comparison measures will be provided in FY22, when we have two consecutive
years of comparable data.
4. Please refer to our ESG report for a detailed breakdown of this performance measure.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
63
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ESG RE PORT
Social performance measures:
EPRA Code
Performance Measure
Diversity-Emp
Employee gender diversity
Diversity-Pay1
Emp-Training
Emp-Dev
Gender pay ratio
Employee training
and development
Employee performance
appraisals
Total number of new hires
Unit(s) of Measure
Percentage of employees,
Board diversity
Percentage of employees,
All employee gender diversity
Ratio of gender pay
Average hours/employee
Percentage of employees
Boundary
NewRiver Board
NewRiver and
Hawthorn head
office employees
NewRiver and
Hawthorn head
office employees
FY21
29% Female/
71% Male
FY20
29% Female/
71% Male
49% Female/
51% Male
50% female/
50% male
18
28
100%
100%
Emp-Turnover
Total number of leavers
NewRiver and Hawthorn head office employees
Rate of new hires
Rate of employee turnover
H&S-Emp
H&S-Asset
H&S-Comp
Comty-Eng
Injury rate
Per 100,000 hours worked
Lost day rate
Per 100,000 hours worked
Absentee rate
Days per employee
Fatalities
Total number
Asset health and safety
assessments
Asset health and safety
compliance
Community engagement,
impact assessments and
development programmes
Percentage of assets
Number of incidents
Percentage of assets
NewRiver and
Hawthorn head
office employees
Managed assets
26
13
18%
9%
0
0
0
0
33
27
25%
20%
0
0
2.97
0
100%
100%
0
0
100%
100%
1. As we have fewer than 250 employees, we are not obliged by The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 to disclose our
gender pay information.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Governance performance measures:
Performance Measure
EPRA Code
Unit(s) of Measure
Gov-Board
Composition of the highest
governance body
Number of executive board members
Number of independent/non-executive board members
Average tenure on the governance body
Number of independent/non-executive board members
with competencies relating to environmental and
social topics
FY21
FY20
2
4
3.8
2
3
3
4.5
1
Gov-Selec
Process for nominating
and selecting the highest
governance body
Narrative
on process
Gov-Col
Process for managing
conflicts of interest
Narrative
on process
As a Stock-Exchange-Listed business, NewRiver is required under the
UK Corporate Governance code to have a Nomination Committee which
is responsible for identifying and nominating candidates to the Board.
Refer to page 92 of the 2021 Annual Report and Accounts for the latest
report from the NewRiver Nomination Committee
As a Stock-Exchange-Listed business, NewRiver is required under the
UK Corporate Governance Code to identify and manage conflicts of
interest. Directors also have duties under the Companies Act 2006.
To manage this process, the Company Secretary keeps a register of
all Directors’ interests. The register sets out details of situations where
each Director’s interest may conflict with those of the Company
(situational conflicts).
The register is reviewed at each Board meeting so that the Board may
consider and authorise any new situational conflicts identified.
At the beginning of each Board meeting, the Chairman reminds the
Directors of their duties under sections 175, 177 and 182 of the
Companies Act 2006, which relate to the disclosure of any conflicts
of interest prior to any matter that may be discussed by the Board.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
65
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS PR INCI PA L RISKS AND UNCERT AI NT I E S
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
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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.
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.
The Risk Management process and responsibility
BOARD
Collectively responsible for managing risk
– Regularly review risks within strategy discussions, the impact of risk
on strategy and levers within the business model that can be adjusted
to manage these risks.
– Conducts formal reviews of principal risks (including emerging risks)
twice a year – one of which is in connection with consideration of the
viability statement.
– Monitors KPI’s which link to risk and strategy through Board reports.
AUDIT COMMITTEE
Oversees risk management process
– Receives reports on the risk management process twice annually.
– Conducts formal reviews of the risk management process twice
a year – one of which is in connection with consideration of the
viability statement.
– Considers the use of external advisors for specific specialist risk
impacts and deep-dive reviews.
EXECUTIVE COMMITTEE
Regularly reviews the entire risk register – Members are responsible for managing risk within their area of accountability
– Conducts formal reviews of entire risk register (which includes emerging
– Delegates line responsibility for managing risks within their area
risks) at least twice a year.
of accountability.
– Reviews risk topics through regular timetabled presentations or papers.
– Monitors KPI’s which link to risk and strategy.
– Uses external advisors for specific specialist risk impacts.
ASSET MANAGERS
Members are responsible for managing risk within their assets and highlighting risks as they emerge
COMPANY SECRETARY
Conducts individual ‘deep-dive’ risk reviews with ExCo members and individual business areas. Maintains the
risk register and presents the outcome of risk reviews to the ExCo, the Audit Committee and the Board at least
twice a year. Has responsibility for training staff on policies and regulations.
Risk matrix
i
h
g
H
y
r
e
V
t
c
a
p
m
I
i
m
u
d
e
M
w
o
L
Low
Principal risks
External risk
Macroeconomic
Political and regulatory
Catastrophic external event
Climate change
Changes in technology
and consumer habits
Cyber security (NEW)
Movement from FY20
Operational risk
People
Financing
Asset management
Development
Acquisition
Disposal
Medium
Probability
Very High
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
67
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
PR INCI PA L RISKS AND UNCERT AI NT I E S
External Risks
Risk and impact
Monitoring and management
Change in risk assessment during
the period
– The Board regularly assesses the Company’s
– Macroeconomic risk has remained the same
1. Macroeconomic
Economic conditions in the UK and changes
to fiscal and monetary policy may impact
market activity, demand for investment assets,
the operations of our occupiers or the spending
habits of the UK population.
Responsibility:
Board & ExCo
Impact:
Link to strategy:
Probability:
strategy in the context of the wider
macroeconomic environment. This continued
review of strategy focuses on positioning our
portfolio for the evolving economic situation.
– The Board and management team consider
updates from external advisers, reviewing key
indicators such as forecast GDP growth,
employment rates, interest rates and
Bank of England guidance and consumer
confidence indices.
– Our portfolio is focused on resilient market
sub-sectors such as essential retailers and
wet-led pubs.
– Through regular stress testing of our
portfolio we ensure our financial position is
sufficiently resilient.
Movement:
– Closely monitoring rent collection and cash flow.
– The Board regularly considers political and
regulatory developments and the impact they
could have on the Company’s strategy and
operating environment.
– External advisers, including legal advisers,
provide updates on emerging regulatory
changes to ensure the business is prepared
and is compliant.
– We regularly assess market research
to gauge the impact of regulatory change on
consumer habits.
– We carry out stress testing on our portfolio
in relation to regulatory changes which may
impact our operations or financial position.
– Where appropriate, we participate in industry
and other representative bodies to contribute
to policy and regulatory debate. Individual ExCo
constituents are members of BPA, BBPA and the
High Street task force.
2. Political and regulatory
Changes in UK Government policy, the adverse
effects of Brexit on our tenants, or the impact
of political uncertainty on the consumers’ retail
and leisure spend.
Responsibility:
Board & ExCo
Impact:
Link to strategy:
Probability:
Movement:
3. Catastrophic external event
An external event such as civil unrest, a civil
emergency including a large-scale terrorist
attack or pandemic, could severely disrupt
global markets and cause damage and
disruption to our assets.
Responsibility:
Board & ExCo
Impact:
Link to strategy:
Probability:
Movement:
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
– The Board have developed a comprehensive
– Catastrophic external event risk has been
crisis response plan which details actions to be
taken at a head office and asset-level.
increased during the period and is considered
a high impact risk with a high probability.
– The Board regularly monitors the Home Office
– The impact of COVID-19 has caused
terrorism threat level and other security
guidance.
– The Board regularly monitors advice from the
UK Government regarding pandemic responses
and emergency procedures at our assets are
regularly tested and enhanced in-line with the
latest UK Government guidance.
– We have robust IT security systems which cover
data security, disaster recovery and business
continuity plans.
– The business has comprehensive insurance
in place to minimise the cost of damage and
disruption to assets.
unprecedented economic and operational
disruption. We mitigated the impact through our
portfolio positioning focused on essential goods
and services, our cash position and liquidity and
our active approach to asset management.
– COVID-19 has also demonstrated the
effectiveness of home working for the business,
which has ensured preparedness for any
future lockdowns.
– The Board continues to review the Company’s
response to the COVID-19 pandemic and make
any necessary amendments to our crisis
response plan.
– The roll out of vaccinations and the opening
up of restrictions is positive and our operational
performance has proved the resilience of
our portfolio.
during the period and is considered a medium
impact risk with a medium to high probability.
– Although, retail sales and pub sales rebounded
after the first national lockdown further
restrictions by the UK and other national
governments from October 2020 onwards
meant that sales in pubs and non-essential retail
were again impacted. Restrictions are however
now lifting again and the vaccination programme
is proving successful.
– The uncertainty around the impact of the
COVID-19 pandemic continues to result in
declines in asset valuations, which has narrowed
the headroom on some of our debt covenants.
– Possible higher inflation could fuel wage growth
and costs leading to rate increases above
current forecasts.
– The Bank of England is expecting a strong
recovery to pre-pandemic levels so these
Macroeconomic risks are expected to improve.
– Political and regulatory risk has increased in the
period and is considered a high impact risk with
a high probability.
– Political uncertainty surrounding COVID-19
remains, although the roll out of vaccinations
and opening up of restrictions is positive.
– There still remain uncertainties around the longer
term impacts of Brexit and also uncertainties
relating to the possibility of Scottish Devolution.
– The Coronavirus Act imposed a moratorium on
landlords’ ability to forfeit leases of commercial
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.
– There are further uncertainties around the
outcome of the Government review of the
Landlord and Tenant Act 1954.
Risk change during 2020/21
Impact and probability
Risk has increased
Risk has decreased
Risk has not changed
Low
Medium
High
Risk and impact
Monitoring and management
4. Climate change
Adverse impacts from environmental incidents
such as extreme weather or flooding could
impact the operation of our assets. A failure to
implement appropriate climate risk management
measures, comply with evolving regulations and
meeting our ESG targets could impact the
operation and value of our assets, leading to
a risk of asset obsolescence, reputational
damage and erosion of investor value.
Impact:
Responsibility:
Board & ExCo, CEO
and ESG Committee,
Head of ESG
Link to strategy:
Probability:
Movement:
5. Changes in technology and
consumer habits and demographics.
Changes in the way consumers live, work,
shop and use technology could have an adverse
impact on demand for our assets.
Responsibility:
Board & ExCo
Impact:
Link to strategy:
Probability:
Movement:
6. Cyber security
A cyber attack could result in the Group being
unable to use its IT systems and/or losing data.
This could delay reporting and divert
management time. This risk could be increased
due to many employees working from home
during the pandemic.
Responsibility:
Board & ExCo,
Head of IT
Impact:
Link to strategy:
Probability:
Movement:
– We have a comprehensive ESG programme
which is regularly reviewed by the Board and
Executive Committee. A detailed overview
of the programme can be found in our
standalone ESG report.
– One of the key objectives of the programme is to
minimise our impact on the environment through
reducing energy consumption, sourcing from
renewable sources and increased recycling.
– We are developing our pathway to Net Zero
Carbon and setting new medium and long-term
targets in line with the latest climate science.
– We regularly assess assets for environmental risk
and ensure sufficient insurance is in place to
minimise the impact of environmental incidents.
– ESG performance is independently reviewed
by our external environmental consultants and
is measured against applicable targets and
benchmarks.
– We have included TCFD disclosures in our
Annual Report.
– The Board and Executive Committee regularly
assess our overall corporate strategy and
acquisition, asset management and disposal
decisions in the context of current and future
consumer demand. Our strategy is designed
to focus on resilient assets that take into account
these future changes.
– We closely assess the latest trends reported
by CACI, our research provider, to ensure we
are aligned with evolving consumer trends.
– Our retail portfolio is focused on essential
spending on goods and services which
are resilient to the growth of online retail.
Our community wet-led pubs perform an
important social and societal function, providing
experiences which cannot be replicated online.
– Our retail parks are ideally positioned to help
retailers with their multi-channel retail strategies.
– The alternative use valuation of our portfolio
shows we have optionality in realising value from
assets which do not have a future as retail assets.
– There are limited IT servers on sites.
– Multiple third party supplier programs are used
which have their own security systems and are
independently audited by Deloitte and ISO2000
accredited.
– ExCo receives quarterly reporting on IT matters.
– Security protocols are in place to ensure swift
changes to data access following staff changes
and authority limit access.
– We have reviewed our IT systems and have a
number of focus areas to enhance over the year.
– Cyber insurance cover is in place.
Change in risk assessment during
the period
– Climate change risk has increased during the
period and is considered a medium impact risk
with a medium likelihood.
– ESG has risen up the agenda of many
stakeholders and expectations of compliance
with best practice have increased.
– Regulatory requirements have also increased
during the period, in addition to the scoring
criteria for certain ESG benchmarks such
as GRESB.
– Our ESG committee pre-empted these changes
and our initiatives and disclosure continue to
evolve in-line with best practice.
– ESG is embedded into capital allocations and
is considered for all future acquisitions.
– Changes in technology and consumer habits risk
has remained the same during the year and is
considered a medium impact risk with a low to
medium probability.
– Although COVID-19 lockdown restrictions have
significantly increased home working and online
shopping, we expect some of this to unwind in
the short term but consumer habits will evolve
over the medium term.
– Our portfolio is focused on providing essential
retail to local communities, which continues
to mitigate the impact of online retail on our
portfolio.
– While COVID-19 may have accelerated the trend
to online shopping this provides opportunities for
our portfolio, particularly retail parks and local
community shopping centres.
– Our strategy is to reshape our portfolio to ensure
over the longer term we have the most resilient
retail portfolio in the UK.
– This is a New Principal risk. Whilst this risk has
always been recorded and monitored on our risk
register its prominence has been elevated in the
year because one of our third party suppliers
experienced a cyber security incident. No data
breaches were found to have been made but
our normal reporting systems were slower as
a result of not having access to our normal
reporting channels while the incident was
being investigated.
– This risk could also be increased due
to employees working from home during
the pandemic.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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PR INCI PA L RISKS AND UNCERT AI NT I E S
Operational Risks
Risk and impact
Monitoring and management
Change in risk assessment during
the period
7. People
The inability to attract, retain and develop
our people and ensure we have the right skills
in place could prevent us from implementing
our strategy.
Impact:
Responsibility:
Remco, ExCo,
SID (as employee
engagement director),
Head of HR
Link to strategy:
Probability:
Movement:
8. Financing
If gearing levels become higher than our risk
appetite or lead to breaches in bank covenants
this would impact our ability to implement our
strategy. The business could also struggle
to obtain funding or face increased interest
rates as a result of macroeconomic factors.
Responsibility:
ExCo & CFO
Impact:
Link to strategy:
Probability:
Movement:
9. Asset management
The performance of our assets may not meet
with the expectations outlined in their business
plans, impacting financial performance and the
ability to implement our strategies.
Impact:
Responsibility:
ExCo,
Emma Mackenzie,
Head of Asset
Management and the
Asset Managers
Link to strategy:
Probability:
Movement:
– Attracting, retaining and developing talent is core
to our HR strategy, which is regularly reviewed
by the Board and Executive Committee.
– We undertake an extensive Employee
Engagement Survey once a year to gauge
employee views on leadership, company culture,
health and wellbeing, personal growth and
benefits and recognition. This informs any
changes to HR policy.
– We regularly benchmark our pay and benefits
against those of peers and the wider market.
– People risk remains unchanged during the
period and is considered a low to medium
impact risk with a low to medium probability.
– It remains a challenging operating environment
for the Company, which could present some
issues in attracting and retaining talent, but this
impact is mitigated by an active employee
engagement programme and the alignment
of reward with both individual and Company-
level performance.
– We have focused on staff well-being during
– Succession planning is in place for all key
positions and is reviewed regularly by the
Nomination committee.
– Longer notice periods are in place for
key employees.
– Our recruitment policies consider the needs
of the business today and our aspirations for the
future, whilst ensuring our unique corporate
culture is maintained.
– The Board regularly assesses Company financial
performance and scenario testing, covering
levels of gearing and headroom to financial
covenants and assessments by external
rating agencies.
– The Company has a programme of active
engagement with key lenders and shareholders.
– The Company has a wholly unsecured balance
sheet, which mitigates the risk of a covenant
breach caused by fluctuations in individual
property valuations.
– The Company has long-dated maturity on its
debt, providing sufficient flexibility for refinancing.
– Weekly working capital and cash flow analysis
is reviewed by the Executive Committee and
detailed forward assessments of cashflows are
carried out regularly.
– Our credit rating is independently assessed
by Fitch Ratings every six months.
– Asset-level business plans are regularly reviewed
by the asset management team and the
Executive Committee and detailed forecasts are
updated frequently.
– The Executive Committee reviews whole
portfolio performance on a quarterly basis
to identify any trends that require action.
– Our asset managers are in contact with centre
managers and occupiers on a daily basis
to identify potential risks and improvement areas.
– Revenue collection is reviewed weekly by the
Executive Committee.
this challenging time. We have actively sought
regular feedback from staff. Mindful of mental
and physical well-being during these prolonged
periods of self-isolation and working from home
we devised an active programme of staff events
such as virtual social gatherings and exercise
classes to help staff keep engaged.
– Our staff retention rate is 95%.
– Financing risk remains unchanged during the
period and is considered a high impact risk with
a low to medium probability.
– Although macroeconomic developments,
particularly in the wake of COVID-19 have
impacted financial markets, the strength of the
Company’s balance sheet, and the results of our
extensive scenario testing, and stress-testing
of headroom, means we have significantly
mitigated the risk of not being able to secure
sufficient financing.
– Through our disposal programme strategy we
have managed to mitigate the impact COVID-19
might otherwise have had on our cash and
liquidity position and LTV.
– Asset management risk has increased during
the period and is considered a medium to high
impact risk with a medium to high probability.
– The COVID-19 pandemic has placed restrictions
on the operations of our occupiers and impacted
performance and rent collection at our assets.
– There have been a number of high-profile retail
failures since the beginning of the pandemic,
including amongst our occupier base.
– Our COVID-19 response has focused
on supporting occupiers and ensuring
businesses can emerge from the 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.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Risk change during 2020/21
Impact and probability
Risk has increased
Risk has decreased
Risk has not changed
Low
Medium
High
Risk and impact
Monitoring and management
Change in risk assessment during
the period
10. Development
Delays, increased costs and other challenges
could impact our ability to pursue our
development pipeline and therefore our ability
to profitably recycle development sites and
achieve returns on development.
Impact:
Responsibility:
Board & ExCo,
Development
team leaders
Link to strategy:
Probability:
Movement:
11. Acquisition
The performance of asset and
corporate acquisitions might not meet
with our expectations and assumptions,
impacting our revenue and profitability.
Impact:
Responsibility:
Board & ExCo,
Charlie Spooner Head
of Capital Markets
Link to strategy:
Probability:
Movement:
12. Disposal
We may face difficulty in disposing of assets
or realising their fair value, thereby impacting
profitability and our ability to reduce debt levels
or make further acquisitions.
Impact:
Responsibility:
Board & ExCo,
Charlie Spooner Head
of Capital Markets
Link to strategy:
Probability:
Movement:
– We apply a risk-controlled development strategy
through negotiating long-dated pre-lets (typically
at least 70% of assets).
– Development risk has remained unchanged
through the period and is considered a low to
medium impact risk with a low probability.
– All development is risk-controlled and forms only
– Although the COVID-19 pandemic has
5% of the portfolio by value.
– Capital deployed is actively monitored by the
Executive Committee, following detailed due
diligence modelling and research.
– An experienced development team monitors
on-site development and cost controls.
– On large scale developments where construction
is more than 12 months we look to carry out the
project in partnership and/or forward sell.
– We carry out thorough due-diligence on all new
acquisitions, using data from external advisers
and our own rigorous in-house modelling
before committing to any transaction. Probability
weighted analysis takes account of these risks.
– Acquisitions are subject to approval by the
Board and Executive Committee, who are
highly experienced in the retail and pub real
estate sectors.
– We have the ability to acquire in joint ventures,
thereby sharing risk.
brought delays to many development projects,
they remain a small part of our portfolio and
committed capex is low.
– Our largest developments, which include
regeneration schemes in Burgess Hill and
Cowley, Oxford, are driven by key trends which
are likely to re-emerge after the immediate
impacts of COVID-19 ease.
– A number of our regeneration assets are under
offer and this will decrease the proportion of
assets focussed on development which
inherently reduces risk exposure.
– Acquisition risk has reduced through the
period and is considered a low impact risk with
a low probability.
– Our key capital allocation priority is to use cash
proceeds to reduce debt therefore there will be
limited acquisition activity for the foreseeable
future, other than taking 10% stakes in capital
partnerships where applicable.
– Our portfolio is focused on high-quality assets
with low lot sizes, making them attractive
to a wide pool of buyers.
– Disposal risk has increased during the period
and is considered a low to medium impact risk
with a medium probability.
– Assets are valued every six months by
– Political uncertainty and the onset of
external valuers, enabling informed disposal
pricing decisions.
– Disposals are subject to approval by the
Board and Executive Committee, who are
highly experienced in the retail and pub real
estate sectors.
– 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.
COVID-19 has increased market uncertainty,
causing some purchasers to reconsider or delay
acquisition decisions.
– We have an active disposal programme, with the
volume of transactions being completed naturally
increasing disposal risk. The average lot size
however is lower than most in the market so
tends to be more liquid.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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PR INCI PA L RISKS AND UNCERT AI NT I E S
TCFD: our journey
to climate resilience
NewRiver’s Board recognises the importance of adopting a sound
framework that supports the business to enhance the resilience
of our assets against the impacts of climate change. Achievement
of our ESG objectives, in particular our objective to minimise our
environmental impact, is crucial to the success of our response.
NewRiver is committed to embedding the recommendations
of the Financial Stability Board’s Task Force on Climate-related
Financial Disclosures (TCFD) within the Company. Our annual ESG
disclosures present a transparent account of our processes and
systems designed to support NewRiver’s journey towards
a low-carbon business model.
Our 2021 ESG report marks our third consecutive year
reporting against the key aspects of the TCFD recommendations.
We continued to develop our capabilities and refine our internal
processes and systems to equip the business to respond to
emerging climate-related risks across our business model.
This work supports NewRiver to appropriately respond to relevant
climate risks across our portfolios, whilst remaining agile and
realising the climate-related opportunities that exist across our
business model. The disclosures below outline NewRiver’s
approach to climate matters in support of our journey to climate
resilience and a net zero carbon future.
Governance
Our Board takes ultimate responsibility for our business resilience
against climate issues and the transition of our portfolio to a low
carbon business model. Material climate issues are considered
by the Board when reviewing NewRiver’s strategic approach to
manage associated impacts on the day-to-day operation of our
assets and ensure our ability to create value for our investors and
communities is preserved. Allan Lockhart, our Chief Executive and
senior Board Director, retains overall accountability for our ESG
programme and approach on climate matters.
Board oversight in this regard is supported by the ESG Committee,
led by our Head of Asset Management and ESG. The Committee
meets quarterly to oversee NewRiver’s approach to managing
climate issues, which is achieved through:
– day-to-day delivery of our energy efficiency and carbon
management initiatives through our ESG programme; and
– ensuring appropriate resources are mobilised to support our
holistic response to material climate issues.
The Committee provides quarterly briefings to the Board,
updating Board members on key milestones achieved by the ESG
programme across key climate matters.
The NewRiver Audit Committee supports the Board’s oversight
and adoption of an integrated risk management approach on ESG
and climate issues. The Committee regularly evaluates NewRiver’s
risk appetite, together with emerging and principal risks which
are captured in the risk register maintained by the Company. The
Committee considers a range of risks across six risk categories,
linked to our business model, strategic priorities and external
environment. Environmental and climate-related risk represents
one of the principal risk categories monitored by the business.
The Committee regularly evaluates changes to identified risks and
ensures that appropriate controls are applied, ensuring alignment
with the Board’s risk appetite.
NewRiver management involvement in the assessment
and management of climate matters
Senior management are closely involved in our day-to-day
management and response to climate issues. Through her dual
NEWRIVER BOARD
Oversees strategic approach to respond to climate issues across the
business and to achieve NewRiver’s ESG objectives
AUDIT COMMITTEE
Supports Board oversight of the management programme to respond
to climate-related matters and monitors emerging and principal
climate-related risks across the business value chain
EXECUTIVE
COMMITTEE
ASSET MANAGEMENT
ESG
COMMITTEE
Manages business response to climate-related matters through the
implementation of the ESG programme and on-the-ground initiatives
that help manage and mitigate any climate-related risks across
managed assets
PROPERTY AND CENTRE MANAGEMENT
Support implementation of initiatives to mitigate climate risks
and monitor asset performance
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
roles as Head of Asset Management and ESG, Executive
Committee member Emma Mackenzie regularly engages with
asset and property management teams to ensure appropriate
energy and carbon management processes and policies are
integrated within day-to-day property management activities.
In addition, asset and property management teams interact with
centre management to ensure that asset-specific energy and
carbon management policies are implemented across our portfolio
and that performance is tracked through our ESG programme.
Quarterly performance updates are provided by Emma Mackenzie
to the Board through the ESG Committee.
Strategy
There are multiple climate-related issues that could manifest
across broad time horizons, which may impact our ability to realise
our ESG objectives and deliver our corporate strategy.
NewRiver considers climate-related risks as well as opportunities
that may arise from the physical impacts of climate change, as well
as from the transition of the managed assets across the UK
to a low-carbon operating model.
The Board has a low risk tolerance for principal risks affecting our
business, including climate-related issues. In line with this appetite,
NewRiver’s ESG programme supports the business to respond
to key climate-related issues, through the implementation of
on-the-ground initiatives designed to improve the efficiency of our
managed assets, reduce their environmental impact and enhance
their resilience against climate issues.
Climate risks and opportunities can manifest across a range
of timeframes in our retail and pub portfolios. Through our
integrated risk management process, we identify climate-related
issues across three clear time horizons, which may influence our
ESG and corporate strategies.
SHORT-TERM
Less than 5 years
MEDIUM-TERM
5-15 years
LONG-TERM
Longer than 15 years
Climate-related risks and opportunities
Time horizons
Short-
term
Medium-
term
Long-
term
Acute
Floods
Physical
risks and
opportunities
Exposure to flood risk from extreme weather events
across certain properties, where a heightened exposure
risk exists due to a combination of factors.
●
Chronic
Heat stress
Increased heat waves may manifest, affecting the
operation of managed assets and installed plant
equipment and leading to breakdowns from increased
demand/running time.
Sea-level rise
Long-term sea-level rise may affect the viability
of certain managed assets in our portfolio which are
located in geographies at a higher risk of sea-level rise.
Transition
risks and
opportunities
Policy
and legal
Efficiency and
low-carbon
regulations related
to managed assets
Evolving policy designed to support the UK’s 2050
net zero commitment presents opportunities to improve
the resilience of our managed assets by deploying
initiatives to improve energy efficiency, reduce costs
and transition to a low-carbon model.
Technology Costs to transition
managed assets to
low-carbon model
Opportunities exist to implement a range of efficient
technologies across our portfolios, designed to improve
environmental impact and efficiency across our assets.
Market
Changing
customer behaviour
Changes in consumer shopping patterns present
an opportunity for our managed assets to implement
key initiatives that cater to the evolving needs
of our customers.
Reputation
Avoid stigmatisation
of the real estate
sector based on
ineffective response
to climate change
Implement our net zero targets to seize opportunities to
improve the resilience of our portfolio to climate-related
risks, including adoption of efficient technologies which
contribute to achieving the UK’s 2050 net zero ambition.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
73
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Our TCFD metrics and targets
Annually, we disclose a suite of climate-related metrics which
track performance across our managed assets towards realising
our ESG objective of minimising our environmental impact.
These metrics are aligned with the EPRA ESG performance
metrics as described above. The EPRA performance tables on
page 63 outline our 2021 performance across these metrics
and are presented alongside historical performance.
We track our performance across these metrics using a set
of short, medium and long-term targets, detailed on page 52
and 53. These targets are aligned with our environmental ESG
objective and guide our efforts to reduce our environmental
impact and positively contribute towards the UN Sustainable
Development Goals, including SDG 13, Climate Action.
Our annual Scope 1, 2
and 3 carbon emissions
In line with our reporting obligations under the UK’s Streamlined
Energy and Carbon Reporting regulations, we disclose our annual
carbon emissions performance. Please refer to page 63 of this
report, where we provide further information on our 2021
emissions performance and comparison against our historical
performance, as well as the methodologies used to prepare
these disclosures, which are in line with the WBCSD/WRI
Greenhouse Gas (GHG) Protocol Corporate Accounting and
Reporting Standard.
PR INCI PA L RISKS AND UNCERT AI NT I E S
Evaluation of the resilience
of our strategic response
Together with developing a strategic response to realise our net
zero commitments, we continue to develop our scenario analysis
capabilities to evaluate the resilience of our business strategy
to the physical and transition risks that exist across our portfolio.
Detailed climate-related scenario analysis has not been
undertaken as yet to understand the potential impacts of different
pathways on our business. We will continue to review our
approach to this as part of our resilience strategy over the next
two years.
TCFD risk management disclosures
NewRiver’s approach to climate risk identification
and management
We regularly monitor risks that are linked to the business model
and strategic priorities of our portfolio. Climate-related issues are
identified through NewRiver’s integrated risk management
framework. Refer to page 97 in this Annual Report for further
details of our framework.
Our risk management framework considers both emerging
and principal risks with the potential to impact our business.
We maintain a risk register that considers a range of categories,
including environmental and climate change risk.
The risk register assesses the impact and likelihood of each
identified risk. This is translated into a risk heat map used to
determine the potential impact and probability of each significant
risk prior to mitigation. Where the residual risk does not align with
Board’s risk appetite, management actions are recommended
to further mitigate the risk.
Accountability for mitigating actions is assigned to a senior asset
and property manager, who is responsible for the day-to-day
management and mitigation of the risks across our portfolios.
This approach allows NewRiver to ensure there is a top-down
understanding of our principal risks across the business, backed
by bottom-up mechanisms to support management’s monitoring
and management of principal risks.
We also adopt a bottom-up approach to manage climate risks.
With the support of our property managers, we implement a host
of initiatives designed to manage the environmental impact and
promote the efficient operation of our managed assets.
74
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
VIABILITY STATE ME NT
VIABILITY STATEMENT
Process
The Group’s annual budget and business planning process
comprises a budget for the next financial year, together with
a forecast for the following two financial years. This process takes
place in the final quarter of the financial year, and culminates in
a Board Strategy Session in March, with final budget sign off by
the Board typically taking place early in the new financial year.
The exercise is completed at a granular level, on a lease-by-lease
and pub-by-pub basis and considers the Group’s profitability,
capital values, loan to value, cash flows and other key financial
metrics over the forecast period. The Group benefits from a wholly
unsecured balance sheet, and has no bank refinancing events
until August 2023.
The Directors have used the last year to complete a thorough
review of all of the Group’s assets and developed a clear view
of what resilient retail looks like in the future. It is considered
that resilient retail assets in the future will be those located in
catchments with long-term growth potential and the right balance
between the supply of physical retail space and demand for that
space; they will have an offering that meets the everyday needs
of customers while playing a distinct role within their communities.
The Group will reshape its portfolio to ensure that over the longer
term it only owns retail assets that display these key characteristics.
Taking account of all the factors noted above, the Group has
committed to the following strategic priorities:
– Divest itself of its community pub business in order to reset
its LTV and provide the firepower to reshape its portfolio.
This includes a potential Initial Public Offer (‘IPO’) of Hawthorn
– Sell its non-core retail assets and recycle the resultant capital
into resilient retail
– Transform its regeneration assets to create long-term value
by jointly working with sector specialists and appropriate
capital partners
By 2025 the Group’s clear strategic aim is that assets in its
portfolio will display only the characteristics of resilient retail
and the Directors believe that the collective measures outlined
above will transform the Group into a more agile business
committed to delivering attractive returns to shareholders.
Period of assessment
The UK Corporate Governance Code requires the Directors to
appraise the viability of the Group over what they consider to be
an appropriate period of assessment taking into account the
Group’s current position, its business model (page 8), strategy
(page 22) and principal risks and uncertainties (page 66).
In making this assessment, the Directors view the Group’s focus
on resilient sub-sectors (convenience retail and community pubs),
expertise in asset management and risk-controlled development,
disposal track record and unencumbered balance sheet as the key
aspects supporting the long-term sustainability of the business.
The Directors consider the appropriate period of assessment to be
three years from the current financial year end, to 31 March 2024,
reflecting the horizon reviewed in detail by the Directors during the
Group’s annual budget and business planning process. This period
of assessment is also aligned to performance measurement and
management remuneration, and in the opinion of the Directors,
this period of assessment strikes the optimal balance of allowing
the impact of strategic decisions to be modelled while maintaining
the accuracy of underlying forecast inputs.
Principal risks
In making their viability assessment, the Directors assessed
the potential impacts, in severe but plausible scenarios, of the
principal risks as set out on pages 68 to 71, together with the likely
degree of effectiveness of mitigating actions reasonably expected
to be available to the Group. The most relevant, with the highest
potential impact, of these risks on viability were considered to be:
– Macroeconomic – Economic conditions in the UK and changes
to fiscal and monetary policy may impact market activity.
– Political and regulatory – Changes in UK Government policy,
the adverse effects of Brexit on our tenants, or the impact of
political uncertainty on the consumers’ retail and leisure spend.
– Catastrophic external event – An external event such as civil
unrest, a civil emergency including a large-scale terrorist attack
or pandemic, or a cyber-attack, could severely disrupt global
markets and cause damage and disruption to our assets.
– Financing – If gearing levels become higher than the Group’s
risk appetite or lead to breaches in bank covenants this would
impact our ability to implement our strategy. The business
could also struggle to obtain funding or face increased interest
rates as a result of macroeconomic factors.
Although the Board is encouraged with the success of the recent
lockdown, the vaccine roll out and the UK Government’s plan
to unlock, at the time of writing there remains considerable
uncertainty surrounding the long-term impact of the COVID-19
pandemic on the UK economy.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
75
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS VIABILITY STATEMENT
The forecast scenario selected by the Directors to assess the
Group’s viability is linked to the strategy update announced
on 14 April 2021. This assumes the divestment of the Hawthorn
community pub business and other retail strategic acquisitions and
disposals. Under this scenario, the Group is forecast to maintain
sufficient cash & liquidity resources and remain compliant with
its financial covenants. Further sensitivity analysis was performed
on this scenario to align it with the assumptions used in the
reasonable worst case scenario for the going concern review,
including removing all uncommitted acquisitions and disposals
including Hawthorn, assuming a more significant valuation decline
and a lower income collection rate. Even applying this sensitivity
analysis, the Group maintains sufficient cash and liquidity reserves
to continue in operation throughout the assessment period.
Viability statement
On the basis of this and other matters considered by the Board
during the year, the Board has a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities
as they fall due over the three year period of their detailed
assessment.
Going concern
The Directors of NewRiver REIT plc have reviewed the current
and projected financial position of the Group making reasonable
assumptions about future trading and performance. Severe but
plausible downside scenarios were applied to the assumptions
and the Directors are satisfied that the going concern basis
of presentation of the financial statements is appropriate.
The Directors’ Report was approved by the Board of Directors.
The Strategic Report was approved by the Board on
9 June 2021
By order of the Board
ALLAN LOCKHART
Chief Executive Officer
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
CORPORAT E GOVERNANCE
THE CHAIRMAN’S LETTER
ON GOVERNANCE 2021
MARGARET FORD
Chairman
Dear Shareholders
I have pleasure in introducing NewRiver’s Corporate Governance
report for the year ended 31 March 2021. In my introductory
statement to the Annual Report 2021 on page 3 I comment on
NewRiver’s overall business performance and resilience during
the past 12 months. In this letter I would like to comment briefly
on the Board’s continued commitment to strong governance
and the work of the Board and its committees.
Purpose, culture and values
Our purpose is to buy, manage and develop retail and leisure
assets across the UK which provide essential goods and services
supporting the development of thriving communities. The onset of
a global pandemic has proved that this business purpose provides
us with a resilient and long-term sustainable business that will
generate value for shareholders and contributes to wider society.
NewRiver has a collaborative and supportive culture which gives
every individual who works for us a sense of purpose and an
opportunity to thrive. This supports our purpose and is evidenced
in our positive staff engagement responses. Our teams are also
hardworking and adaptable as well as passionate and resilient.
This has been especially evidenced in the support and motivation
of our teams across the business during the COVID-19 crisis.
We have a small workforce with only 169 employees and this
encourages flexibility and collaboration across the business.
This proximity between the Board and the workforce makes
it easier for the Board to engage with the culture and enables
the Board to monitor and assess the Company’s culture in a way
not possible for larger companies. As a Board we feel we also
lead by example. Our culture and strong governance systems
have supported the business during this challenging time and the
accessibility and flexibility of the Board and senior staff has aided
the business and provided it with the ability to adapt and respond
to the fast-changing situation and communicate effectively with
employees and other stakeholders.
Board membership
In September 2020 we were delighted to welcome Charlie Parker
to the Board as a Non-Executive Director. Charlie brings with him
a wealth of experience from his various leadership roles in the
public sector, which is particularly relevant to our strategy
of developing strong relationships with Local Authorities and
public bodies.
Again mindful of the skills necessary on the Board going forward
to execute our strategy we were delighted that Kay agreed
to extend her tenure for a further year so that we may continue
to benefit from her significant knowledge and expertise of the
retail real estate sector as we continue to navigate the effects
of the COVID-19 pandemic
Board effectiveness
During the year we carried out an external Board effectiveness
review. I am pleased to report that the Board review concluded
that many of the Board’s functions and activities were working
well. The high level of personal and professional respect among
the Directors contributed to the strong working relationships
at both Board and Committee levels. The review further
observed that Board discussions strike a good balance between
constructiveness and challenge and whilst the review highlighted
that there were a few areas for further improvement these were
not significant. More details on the review process and
recommendations are presented on page 90.
Board Priorities for FY22
The Board’s priorities for FY22 will focus on our committment
to creating the most resilient retail portfolio in the UK. We will
continue to monitor the culture across the business to ensure
that it supports our strategy and listen to the feedback we
receive frequently from our staff. We will also continue to focus
on succession planning and ensuring that we have the right skills
and diversity of thought at Board level and senior management
level to execute our strategy.
AGM
We were disappointed that the uncertainties around
UK restrictions on gatherings resulted in the 2020 AGM being
held as a closed meeting. We hope that the arrangements for the
AGM in 2021 will be less restrictive although at the time of writing
this remains unclear. Irrespective of whether this will be possible
my fellow Directors and I continue to welcome engagement with
shareholders and would be pleased to answer any questions
which you may have about the Board’s work.
Yours sincerely
BARONESS FORD OBE
Chairman
9 June 2021
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
77
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR LEADERSHIP T EAM
BOARD OF DIRECTORS
Baroness Ford OBE
Allan Lockhart
Mark Davies
Kay Chaldecott
Alastair Miller
Charlie Parker
Colin Rutherford
Chair of committee
Member of Audit Committee
Member of Nomination Committee
Member of Remuneration Committee
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
regeneration projects including
a major new office development,
a new hospital campus and the
preparation of a £400m mixed
use leisure, conference and family
entertainment complex. Charlie was
previously Chief Executive of
Westminster City Council from
December 2013 to December 2017
and Chief Executive of Oldham
Metropolitan Borough Council from
October 2008 to December 2013.
Prior to this, he held a number
of investment, development and
regeneration roles across national
and local government bodies.
External Appointments
Listed Companies
None
Other
Buckingham Palace Reservicing
Programme Challenge Board
Colin Rutherford
Independent
Non-Executive Director
Appointed February 2019
Key Skills and Experience
Colin is an international listed public
and private company chairman and
independent non executive director,
with relevant sector experience
including asset management,
financials, leisure and real estate.
Colin graduated in accountancy and
finance and qualified with Touche
Ross (now Deloitte) in 1984 and
is a member of the Institute of
Chartered Accountants of Scotland.
Colin was appointed as Chairman
of Hawthorn, NewRiver’s community
pub business, in May 2021.
External Appointments
Listed Companies
Mitchells & Butlers plc (Director
and Audit Committee Chairman);
Evofem Biosciences Inc, (Director
and Audit Committee Chairman)
Other
Brookgate Limited (Chairman)
Baroness Ford OBE
Non-Executive Chairman
Appointed July 2017
Key Skills and Experience
Baroness Ford has over 20 years’
experience as a Non-Executive
Director and Chairman of private and
Stock Exchange listed companies
and extensive experience of working
with the Government. Margaret has
extensive knowledge across the real
estate market and is an Honorary
Member of the Royal Institute of
Chartered Surveyors. From 2002 to
2008, she was Chairman of English
Partnerships (now Homes England)
and from 2009 to 2012, she was
a member of the Olympic Board
and Chairman of the Olympic Park
Legacy Company. Margaret was
previously a Non-Executive Director
of Taylor Wimpey plc and SEGRO
plc, and the former Chairman of STV
Group plc, Grainger plc and May
Gurney Integrated Services plc.
External Appointments
Listed Companies
Lendlease Corporation
(Senior Advisor to the Board)
Other
Chairman of Challenge Board;
Buckingham Palace Reservicing
Programme; National President
of the British Epilepsy Association;
British Olympic Association;
UK Oversight Board of Deloitte LLP
and also Chair of the UK Audit
Governance Board of Deloitte LLP.
Baroness Ford was appointed to the
House of Lords in 2006. She is
a Cross bench peer and is currently
on an extended leave of absence
from Parliament.
Allan Lockhart
Chief Executive Officer
Key Skills and Experience
Allan has over 30 years’ experience
in the UK real estate market
specialising in the retail sector.
He started his career with Strutt
& Parker in 1988 advising major
property companies and
institutions on retail investment
and development. In 2002,
Allan was appointed as Retail
Director to Halladale and was
responsible for coordinating the
acquisition and implementation
of the asset management strategies
of over 20 shopping centres as well
as acquiring and completing several
profitable retail developments.
In 2009 he co-founded NewRiver
and served as Property Director
since its IPO until being appointed
Chief Executive Officer in May 2018.
External Appointments
Chair of the British Property
Federation (BPF) Retail Board
Mark Davies
Chief Financial Officer
Key Skills and Experience
Mark is a Chartered Accountant with
over 20 years’ experience who
joined the Company at its inception
in 2009 and has played an integral
part in growing the business to
a FTSE 250 Company. Mark has
a strong track record in Capital
Markets including raising £2 billion
of new capital and as the steward
of the Group balance sheet moving
the Company to an unsecured debt
structure following the issuance
of a £300 million ten-year corporate
bond in 2018. Mark is also Chief
Executive Officer of Hawthorn, which
is a business of over 670 community
pubs and Convenience Stores.
Mark led the acquisition of Hawthorn
in 2018 and oversaw the successful
integration of the business in early
2019. He also sits on the Board of
the British Beer and Pub Association
(“BBPA”). Prior to joining NewRiver
Mark was CFO of Omega Land
which was a £1 billion private equity
fund owned by Morgan Stanley and
prior to that an Audit and Corporate
Finance Partner at Grant Thornton
and BDO.
External Appointments
BBPA (Board member and Chair
of the Finance Committee)
Kay Chaldecott
Independent
Non-Executive Director
Appointed March 2012
Key Skills and Experience
Kay has over 25 years’ experience
of developing and managing
regional shopping centres
throughout the UK. Kay is a member
of the Royal Institution of Chartered
Surveyors and has a breadth of
industry knowledge covering
the retail development process,
retail mix and leasing and shopping
centre operations. Kay was
Managing Director of the shopping
centre business of Capital Shopping
Centres Group plc (now Intu
Properties plc) and served as a main
Board Director. She was also
previously a Non-Executive Director
of St. Modwen Properties PLC.
External Appointments
Listed Companies
None.
Other
Lichfields planning and development
consultancy (Board member);
Next Leadership (member of the
Advisory Board)
Alastair Miller
Senior Independent Director
Appointed January 2016
Key Skills and Experience
Alastair is a Chartered Accountant
and has significant, recent and
relevant financial experience.
Throughout his career Alastair
has developed skills over risk
management, property, systems,
company secretariat and investor
relations. Having worked for New
Look Group for 14 years, Alastair
has an in-depth understanding
of retailers and the factors that
impact their trading and profitability.
Alastair was formerly Chief Financial
Officer of New Look Group, Group
Finance Director of the RAC,
and Finance Director of a company
within the BTR Group. Alastair
qualified as a Chartered Accountant
with Deloitte Haskins and Sells and
was a management consultant at
Price Waterhouse. In addition to
being the Senior Independent
Director Alastair has responsibility
for ensuring that the Board
successfully engages with
our workforce.
External Appointments
Listed Companies
Superdry Plc (Director
and Auditco Chair)
Other
RNLI (Risk and Audit committee
member & Council Member)
Charlie Parker
Independent
Non-Executive Director
Appointed September 2020
Key skills and Experience
Charlie Parker has recently retired
as Chief Executive and Head of the
Public Service for the Government
of Jersey. He held the role from
January 2018. During his time
as Chief Executive, he set up
and led an ambitious programme
to transform and modernise Jersey’s
public services. He was also
responsible for and led a range of
largescale capital infrastructure and
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
79
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
OUR LEADERSHIP T EAM
EXECUTIVE COMMITTEE
Allan Lockhart
Mark Davies
Emma Mackenzie
Charles Spooner
Stuart Mitchell
Edith Monfries
Will Hobman
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Allan Lockhart
Chief Executive Officer
See page 79 for key skills.
Mark Davies
Chief Financial Officer
See page 79 for key skills.
Emma Mackenzie
Head of Asset Management
Head of ESG
Stuart Mitchell
Head of Third Party
Asset Management
Relevant Skills
Emma has overarching responsibility
for the financial and operational
performance of the retail portfolio
throughout the UK. Emma’s
responsibilities also include
oversight of NewRiver’s property
management, rent collection and
the Company’s Environmental,
Social and Governance programme.
Emma is a qualified chartered
surveyor with over 25 years’
experience in the retail property
market. In 2018 she was one of the
eight members of the High Streets
Expert Panel chaired by Sir John
Timpson and now sits on the High
Street Task Force Board. Emma also
sits on the Commercial Committee
of the British Property Federation.
Prior to NewRiver Emma worked in
private practice as a retail agent and
asset manager.
Charles Spooner
Head of Capital Markets
Relevant Skills
As Head of Capital Markets,
Charles has responsibility for the
Company’s capital markets activity,
including managing NewRiver’s
acquisitions and disposals strategy,
as well as overseeing the
implementation of asset
management initiatives within
NewRiver’s retail park portfolio.
Charles is a qualified chartered
surveyor with over 20 years’
experience in the retail real estate
investment and asset management
sector. Charles’ previous experience
includes asset management roles
at F&C REIT and RREEF. He has also
been an adviser at Cushman &
Wakefield and advised Specsavers
on their investment agency and
development activity.
Relevant Skills
Stuart is Head of Third Party Asset
Management, has overall
responsibility for the NewRiver
Southern Portfolio and is responsible
for NewRiver’s Leasing and
Commercialisation strategies.
Stuart is a chartered surveyor with
over 15 years’ commercial property
experience, specialising in the retail
sector. He started his career at
Fuller Peiser, which was later
acquired by BNP Paribas Real
Estate. Stuart is a member of the
British Property Federation
Insolvency Committee, Revo Asset
Management Advisory Panel, RICS
and a Director of several Business
Improvement Districts.
Edith Monfries
Head of HR, NewRiver
and Chief Operating Officer,
Hawthorn
Relevant Skills
Edith has responsibility for HR
strategy for the Group and for the
internal operations of Hawthorn,
our community pubs business.
Edith is a Chartered Accountant
with over twenty years’ experience,
having trained with Deloitte, Haskins
and Sells, specialising in advising
businesses in strategic and
operational matters, and talent
development. Edith is President of
the Scottish Beer & Pub Association.
Will Hobman
Finance Director
Relevant Skills
Will has responsibility for overseeing
and directing NewRiver’s financial
operations, including Corporate
Finance, FP&A, Financial Reporting,
Investor Relations and Management
Accounting, reporting to Mark
Davies, Chief Financial Officer.
Will is a Chartered Accountant with
over 10 years’ experience, having
qualified at BDO LLP working in
its Audit and Corporate Finance
departments. Will previously worked
within the Financial Reporting,
FP&A and Investor Relations teams
at British Land and joined NewRiver
as Head of Investor Relations. Will
also sits on the Finance Committee
of the British Property Federation.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
81
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CORPORAT E GOVER NANCE
BOARD LEADERSHIP AND
COMPANY PURPOSE
Generation and preservation of value over the
long term
The Board’s role is to lead the Group and ensure that it delivers
sustainable and growing returns for our shareholders over the
longer term. NewRiver’s business model and strategy is set out
on pages 8 and 22 of the Strategic Report and describes the basis
upon which the Company generates and preserves value over the
long term.
Purpose, Values and Strategy
Our purpose is to buy, manage and develop retail and leisure
assets across the UK which provide essential goods and services
supporting the development of thriving communities. NewRiver’s
collaborative and supportive culture underpins this purpose and
drives business practices.
Board Leadership
The Board oversees the Group’s active approach to asset
management and the strategy of developing and recycling
convenience-led, community-focused retail and leisure assets
throughout the UK and this in turn contributes to the community
and wider society.
The Board has overall authority for the management and conduct
of the Group’s business, strategy and development and is
responsible for ensuring that this aligns with the Group’s culture.
The Board, supported by the company secretary, ensures the
maintenance of a system of internal controls and risk management
(including financial, operational and compliance controls) and
reviews the overall effectiveness of the systems in place.
The Board delegates the day-to-day management of the business
to the Executive Committee. However, there is a schedule
of matters reserved for the Board’s decision which forms part
of a delegated authority framework, to ensure that unusual
or material transactions are brought to the Board for approval.
The schedule is reviewed regularly to ensure that it is kept up to
date with any regulatory changes and is fit for purpose. The last
review and revision was undertaken in May 2021.
COMPLIANCE WITH THE UK
CORPORATE GOVERNANCE CODE
As a Company with a premium listing on the London Stock
Exchange, NewRiver is required under the Financial
Reporting Council (FRC) Listing Rules to comply with the
Code Provisions of the Corporate Governance Code 2018
issued in July 2018 (the 2018 Code), which is available on
the FRC website (www.frc.org.uk). The principles and
provisions of the 2018 Code have applied throughout the
year 31 March 2021. Throughout the financial year ended
31 March 2021, the Company has fully complied with all the
provisions of the Code, except provision 38 and we provide
a full explanation below.
Code Provision 38 requires, among other things, that the
pension contribution rates for executive directors should be
aligned with those available to the workforce. The Company
currently contributes 15% of base salary for all existing
Executive Directors. Following the adoption of the new
Remuneration policy at the AGM in 2020 this contribution
rate will reduce for incumbent directors to the rate
applicable to the majority of the workforce at the end of the
new policy period. Future Executive Directors will receive
Company contributions in line with the UK workforce which
is currently 4%.
Details of the way the Code has been applied can be found
in the following pages:
BOARD LEADERSHIP AND COMPANY
PURPOSE PAGES 77 TO 87
DIVISION OF RESPONSIBILITIES
PAGES 88 TO 89
COMPOSITION, SUCCESSION AND
EVALUATION (INCLUDING THE
NOMINATION COMMITTEE REPORT)
PAGES 90 TO 94
AUDIT, RISK AND INTERNAL CONTROL
(THE AUDIT COMMITTEE REPORT)
PAGES 95 TO 98
REMUNERATION
(THE DIRECTORS’ REMUNERATION
REPORT) PAGES 99 TO 117
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Workforce Engagement Mechanism
– the role of our designated
Non-Executive Director
Alastair Miller our senior independent director was
given responsibility in 2019 for ensuring that the Board
successfully engages with our workforce. During the
year we considered and amended the leadership of the
Board committees so that Alastair could also take the role
of Remuneration Committee Chair. As Chair of the
Remuneration Committee Alastair has direct engagement
with shareholders on remuneration policy and is therefore
best placed to answer questions from the workforce
on Director remuneration and its alignment to group wide
remuneration and strategy.
As explained in the Chairman’s letter we have a small
workforce. As a result of being a small team there is
naturally proximity between the Board and the workforce
which makes it easier for the Board to engage with staff
directly especially as the Directors, in normal circumstances,
visit the London office regularly and also other sites.
This year has however been very different with staff working
from home so a more formal arrangement was set up with
Alastair joining the staff forums online to speak directly with
all staff and answer questions. To ensure there was an
opportunity for all staff to raise questions two separate
forums were held one with Retail staff and one with
Hawthorn staff. Questions were invited ahead of the forum
as well as live on the day. The online nature of this forum
ensured that all staff could join in and resulted in a good
interaction. Questions ranged from strategy, results through
to staff benefits and share price performance. As a result
of some of the questions raised on staff benefits further
training has been provided to staff on the share schemes
available to staff and their operation and further training
sessions are planned.
Stakeholder engagement
Under Section 172(1) of the Company Act 2006, a director
of a company must act in the way he or she considers, in good
faith, would be most likely to promote the success of the company
for the benefit of its members as a whole, and in doing so have
regard (amongst other matters) to:
– the likely consequence of any decision in the long-term
– the interests of the company’s employees
– the need to foster the company’s business relationships
with suppliers, customers and others
– the impact of the company’s operations on the community
and the environment
– the desirability of the company maintaining a reputation
for high standards of business conduct
– the need to act fairly as between members of the company.
The following disclosures on stakeholders describes how the
Directors have had regard to the matters set out in Section 172(1)(a)
to (f) relating to stakeholders and forms the Directors’ statement
under section 414CZA of The Companies Act 2006.
In addition to considering our stakeholders the Board also
consider the following in decision making:
The Long Term: As a Board of a REIT owning assets which also
include a risk-controlled development pipeline the Board is always
conscious of the long term. Looking to the future the
Board and Executive Committee regularly assess the overall
corporate strategy, and acquisition, asset management and
disposal decisions in the context of current and future long-term
trends and markets. We closely assess the latest trends reported
by CACI, our research provider, to ensure we are aligned with
evolving trends. These insights and the Board’s own extensive
experience steer the long term strategic direction.
High Standards of Business Conduct: Our values mirror our
culture and as a team our values are to be trusted and respected
and this is entrenched into Board decisions. During the year we
have reviewed and updated our modern slavery policy and our
anti-corruption and anti-bribery policy and provided extensive
training to staff on these matters to ensure they are also
entrenched in all staff decisions.
The Directors consider, both individually and collectively, that they
have acted in the way they consider, in good faith, would be most
likely to promote the success of the Company for the benefit
of its members as a whole (having regard to the stakeholders and
matters set out in section 172(1)(a-f) of the Companies Act 2006)
in the decisions taken during the year ended 31 March 2021.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CORPORAT E GOVER NANCE
Board engagement with stakeholders
Staff
Communities
Occupiers
Lenders
Local Authorities
Shareholders
Why we
engage
– Our people are our key asset
– A positive work environment
where employees feel valued
supports and underpins strategy
– Our assets are located
– Our strategy relies on
in communities across the UK
and play an integral role in the
lives of our customers
the continued prosperity
of our occupiers
How we
engage
– Designated Non-Executive
Director who has Board
responsibility for engaging
with employees
– Weekly and monthly all staff
– Customer surveys
– Engagement through practical
measures such as transforming
a shopping centre into
a vaccination centre
video calls and ‘huddles’, some
attended by designated NED
– Reporting to the Board through
CEO report and ESG reporting
– Engagement surveys
– Directors visit the London
office and other sites when
restrictions allow
– Constant dialogue to understand
their needs and challenges
– Increased dialogue through the
pandemic as some occupiers
were restricted from trading
by Government measures
through an asset management
communication plan
– Meetings with over 250
occupiers over the pandemic
– Occupier survey
– Our relationship banks and
– Local Authorities are ultimate
– As owners of the business
bondholders provide us with the
custodians of their town and city
our shareholders are key
funding to execute our strategy
centres and we are well placed
to our success
– The support of our lenders has
ensured that we are in a strong
financial position with a fully
unsecured balance sheet
to help them safeguard the future
of these important places
– We engage through regular
– NewRiver representatives sit on
– CEO, CFO and Head of IR
meetings with our relationship
some town boards where we
engage regularly through an
banks, bondholders and
hold assets
rating agencies
– Asset management teams work
– These meetings involve the CFO,
directly in partnership to
CEO and finance team with
redevelop and repurpose the
active programme of meetings,
presentations and site visits.
Investor relations is a regular item
on the Board agenda
regular reports and oversight
area in and around our
– Board Committee chairs make
from the Board
community centres retail assets
themselves available for
– Presentations are given
on business development
and performance
Engagement
outcomes
– Full suite of communications and
productivity software to all staff
working remotely
– Wellbeing programme including
remote exercise classes, social
gatherings and ‘care packages’
– Staff training on how the share
plans work
– Waiving car park charges to
– Revised payment plans for
support designated key workers
– Centre staff training
– Housing community
pop up shops
– Delivering shopping
to those shielding
occupiers facing short term cash
flow issues
– Partner support for pub partners
– Reduced service charge
expenditure to reduce costs
for occupiers
– Charitable donations to the
– Practical support to pub partners
Trussell Trust
including help accessing
government support and
care packages
– We have remained
covenant compliant
– Renewals of third party asset
– The Board are mindful of the
management mandates
investor experience and have
– Fitch Ratings affirmed NewRiver’s
with Canterbury City Council
borne this in mind when
and Knowsley Council
discussing bonus outcomes and
Long-term Issuer Default Rating
(IDR) at ‘BBB’ with stable outlook
and out senior unsecured rating
at ‘BBB+’
engagement on key issues –
prior to the approval of the
Remuneration policy there was
engagement with shareholders
on the shaping of the policy
– Investor roadshows and a capital
markets day were moved to
web-based meetings this year
due to the pandemic
Remuneration Committee
exercise of discretion. Bonuses to
Executive directors were not paid
in FY20 and in FY21 Directors
took the decision to reduce their
salaries and fees by 20% for
three months
– The Remuneration policy was
amended following investor
feedback prior to the approval
at the AGM in 2020
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Board engagement with stakeholders
Why we
engage
How we
engage
– A positive work environment
where employees feel valued
supports and underpins strategy
in communities across the UK
the continued prosperity
and play an integral role in the
of our occupiers
lives of our customers
– Designated Non-Executive
– Customer surveys
– Constant dialogue to understand
Director who has Board
responsibility for engaging
with employees
– Weekly and monthly all staff
a vaccination centre
video calls and ‘huddles’, some
attended by designated NED
– Reporting to the Board through
CEO report and ESG reporting
a shopping centre into
– Engagement through practical
their needs and challenges
measures such as transforming
– Increased dialogue through the
pandemic as some occupiers
were restricted from trading
by Government measures
through an asset management
communication plan
– Meetings with over 250
occupiers over the pandemic
– Occupier survey
– Engagement surveys
– Directors visit the London
office and other sites when
restrictions allow
Engagement
outcomes
– Full suite of communications and
– Waiving car park charges to
– Revised payment plans for
productivity software to all staff
support designated key workers
occupiers facing short term cash
working remotely
– Wellbeing programme including
remote exercise classes, social
gatherings and ‘care packages’
– Staff training on how the share
– Centre staff training
– Housing community
pop up shops
– Delivering shopping
to those shielding
plans work
– Charitable donations to the
– Practical support to pub partners
Trussell Trust
flow issues
– Partner support for pub partners
– Reduced service charge
expenditure to reduce costs
for occupiers
including help accessing
government support and
care packages
Staff
Communities
Occupiers
Lenders
Local Authorities
Shareholders
– Our people are our key asset
– Our assets are located
– Our strategy relies on
– Our relationship banks and
– Local Authorities are ultimate
bondholders provide us with the
funding to execute our strategy
– The support of our lenders has
ensured that we are in a strong
financial position with a fully
unsecured balance sheet
custodians of their town and city
centres and we are well placed
to help them safeguard the future
of these important places
– We engage through regular
meetings with our relationship
banks, bondholders and
rating agencies
– NewRiver representatives sit on
some town boards where we
hold assets
– Asset management teams work
– These meetings involve the CFO,
CEO and finance team with
regular reports and oversight
from the Board
– Presentations are given
on business development
and performance
directly in partnership to
redevelop and repurpose the
area in and around our
community centres retail assets
– We have remained
covenant compliant
– Fitch Ratings affirmed NewRiver’s
Long-term Issuer Default Rating
(IDR) at ‘BBB’ with stable outlook
and out senior unsecured rating
at ‘BBB+’
– Renewals of third party asset
management mandates
with Canterbury City Council
and Knowsley Council
– As owners of the business
our shareholders are key
to our success
– CEO, CFO and Head of IR
engage regularly through an
active programme of meetings,
presentations and site visits.
Investor relations is a regular item
on the Board agenda
– Board Committee chairs make
themselves available for
engagement on key issues –
prior to the approval of the
Remuneration policy there was
engagement with shareholders
on the shaping of the policy
– Investor roadshows and a capital
markets day were moved to
web-based meetings this year
due to the pandemic
– The Board are mindful of the
investor experience and have
borne this in mind when
discussing bonus outcomes and
Remuneration Committee
exercise of discretion. Bonuses to
Executive directors were not paid
in FY20 and in FY21 Directors
took the decision to reduce their
salaries and fees by 20% for
three months
– The Remuneration policy was
amended following investor
feedback prior to the approval
at the AGM in 2020
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Board activities
Discussion
Link to strategy
Strategy
Finance
Audit and Risk
The Board held two strategy days in March 2021.
Follow up work streams were carried out following
these meetings and further strategic presentations
were received in May 2021
The Chief Financial Officer presented a financial
report at each Board meeting
Approval of the Annual Report and interim report
and associated financial statements
Approval of the annual budget
Discussions and decisions to not pay dividends
in light of COVID-19. Further details can be found in
the viability statement on pages 75 and 76
The Chair of the Audit Committee reported to the
Board on the proceedings of each Audit Committee
meeting and meeting with valuers
The Board considers the risk register and internal
controls at least annually
Update to the Board on the whistleblowing
procedures and amendments to the policy
Operational and
Investor relations
The CEO presented a report at each Board meeting
which also included updates on investor relations
Stakeholders
Governance
Members of the ExCo are regularly invited to attend
the meeting to present on various projects
Regular Board meetings have been held to consider
the implications of Government announcements
during the Coronavirus crisis
Stakeholders including occupiers, councils and
communities, lenders and shareholders are regularly
considered as part of the CEO report
HR reports are either reported separately or in the
CEO’s report
The Board received updates from Alastair Miller’s
attendance at staff forums
The Committee chairs reported on key matters
discussed at the Board Committees
The company secretary reported on key governance
developments at quarterly Board meetings and on
work carried out to update the Group’s governance
policies and procedures
The Board have reviewed their schedule of matters
and updated the terms of reference of the
Board committees
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
ESG
ESG
ESG
ESG
ESG
The Board’s key pandemic-related discussions and decisions
Inevitably there were a number of matters arising directly from the COVID-19 pandemic and its impact on the Company and its stakeholders
that were discussed by the Board during the year. The pandemic hit in the last week of the previous financial year and has continued over
this entire financial year. In March and April 2020 the Board held weekly meetings
Discussion and action
Shareholders
– Decision to change the AGM to a closed format meeting but provide opportunities for shareholders
to submit questions to the Board via email
– Investor roadshows were moved to web-based meetings
Financial
Workforce
Occupiers
– Assessment of viability and going concern
– Review of dividend policy and decision to not pay dividends during the year
– Collective decision to temporarily reduce Directors fees by 20% during May to Aug 2020 and donate this
to charity
– Oversight of the successful transition to homeworking for all employees
– Updates via the ExCo on weekly all-staff calls and well-being programmes
– Direct updates on staff engagement from Alastair Miller
– Increased monitoring of the trading performance and business needs of retailers and pub partners
– Accelerated capex to ensure pub garden spaces were ready to reopen in accordance with the
Government roadmap restrictions
– Retailer Survey
Communities
– Continued support to the Trussell Trust, including salary sacrifices of the Board and executive teams
Lenders
– Continued engagement to update on business performance and covenant compliance
Conflicts of interest
The Company Secretary keeps a register of all Directors’ interests.
The register sets out details of situations where each Director’s
interest may conflict with those of the Company (situational
conflicts). The register is considered and reviewed at each Board
meeting so that the Board may consider and authorise any new
situational conflicts identified. At the beginning of each Board
meeting, the Chairman reminds the Directors of their duties under
sections 175, 177 and 182 of the Companies Act 2006 which relate
to the disclosure of any conflicts of interest prior to any matter that
may be discussed by the Board.
Director concerns
Directors have the right to raise concerns at Board meetings and
can ask for those concerns to be recorded in the Board minutes.
The Group has also established a procedure which enables
Directors, in relevant circumstances, to obtain independent
professional advice at the Company’s expense.
Board time commitments
All Directors pre-clear any proposed appointments to listed
company boards with the Board, prior to committing to them.
The Non-Executive Directors are required, by their letters
of appointment, to devote as much of their time, attention,
ability and skills as are reasonably required for the performance
of their duties. This is anticipated as a minimum of one day
a month. Whilst a number of the Board have other Non-Executive
directorships and commitments the Board remains satisfied that all
of the Directors spend considerably more than this amount of time
on Board and Committee activity. This has been especially
demonstrated during the COVID-19 crisis. Each Non-Executive
Director has made themselves available at short notice to discuss
the Crisis and its impact as events unfolded. During March and
April 2020 the Board met at least weekly with full attendance.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
87
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
CORPORAT E GOVER NANCE
DIVISION
OF RESPONSIBILITIES
Role
Responsibilities
Chairman
Margaret Ford
Margaret’s role is to lead the Board and ensure that it operates effectively.
Her responsibilities include:
– setting the agenda, style and tone of Board meetings to ensure that all matters are given
due consideration;
– maintaining a culture of openness, debate and constructive challenge in the Board room;
– ensuring the Board’s effectiveness and ensuring it receives timely information;
– ensuring each new Director receives a full, formal and tailored induction on joining the Board;
– reviewing and agreeing training and development for the Board.
Chief
Executive Officer
Allan Lockhart
Allan’s responsibilities include:
– managing the business of the Group;
– recommending the Group’s strategy to the Board;
– Environment, Social & Governance strategy;
– implementing the strategy agreed by the Board;
– management of the Group’s property portfolio, including developments.
Chief
Financial Officer
Mark Davies
Senior
Independent
Non-Executive
Director
Alastair Miller
Mark’s responsibilities include:
– implementing the Group’s financial strategy, including balance sheet capitalisation;
– overseeing financial reporting and internal controls;
– executive responsibility for the pub portfolio.
Alastair’s responsibilities include:
– acting as a sounding board for the Chairman;
– evaluating the Chairman’s performance as part of the Board’s evaluation process;
– serving as an intermediary for the other Directors when necessary;
– being available to shareholders should the occasion occur when there was a need to convey concern to the
Board other than through the Chairman or the Chief Executive;
– ensuring that the Board successfully engages with our workforce.
Non-Executive
Directors
Non-Executive Directors Kay Chaldecott, Alastair Miller, Charlie Parker and Colin Rutherford bring independent
judgement, knowledge and varied commercial experience to the meetings and in their oversight of the Group’s
strategy. Alastair and Colin chair the Remuneration and Audit Committees respectively.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
BOARD
Responsible for leading the Group, establishing the Company purpose and values and setting the strategy
and monitoring its progress. It sets policies and monitors performance.
AUDIT
COMMITTEE
Reviews and monitors
the Group’s risk
management processes.
Monitors the integrity of the
half-year and annual financial
statements before submission
to the Board. Monitors the
effectiveness
of the audit process.
REMUNERATION
COMMITTEE
Implements the remuneration
policy of the Group which
is to ensure that Directors
and senior management are
rewarded in a way that attracts,
retains and motivates them and
aligns the interests of both
shareholders and management.
NOMINATION
COMMITTEE
Reviews the succession
planning requirements of the
Group and operates a formal,
rigorous and transparent
procedure for the appointment
of new Directors to the Board.
EXECUTIVE COMMITTEE (“EXCO”)
To assist the Chief Executive with the development and implementation of the Group strategy,
the management of the business and the discharge of its responsibilities delegated by the Board.
Balance between Non-Executive
and Executive Directors
The Board comprises four independent Non-Executive
Directors (excluding the Chairman) and two Executive Directors.
The Nomination Committee is of the opinion that the
Non-Executive Directors remain independent, in line with the
definition set out in the Code and are free from any relationship
or circumstances that could affect, or appear to affect,
their independent judgement. The Chairman was independent on
appointment and the Board still consider her to be independent.
All Directors are subject to re-election at the AGM each year.
Company Secretary
All Directors have access to the advice of the Company Secretary.
The appointment of the Company Secretary is a matter for
the Board.
Attendance
Each of the Directors has committed to attend all scheduled Board
and relevant committee meetings and have committed to make
every effort to attend ad hoc meetings, either in person or by
telephone/video call. Board papers are circulated to Directors in
advance of the meetings via an electronic board portal. This allows
for an efficient and secure circulation of Board papers and if
a Director cannot attend a meeting, he or she is able to consider
the papers in advance of the meeting as usual and will have the
opportunity to discuss them with the Chairman or Chief Executive
and to provide comments. The Non-Executive Directors meet
without the Executive Directors and the Chairman present at least
once a year. Since the start of the Coronavirus outbreak the Board
has met regularly on an ad hoc basis as well as its scheduled
regular board meetings. All directors have been in attendance (via
phone or video call) at all of these short notice ad hoc meetings.
Attendance at committee meetings is shown in the respective
committee reports. Attendance at regular Board meetings is
shown below. There were increased Board meetings this year
due to the pandemic.
Board Members
Margaret Ford: Chairman
Allan Lockhart
Mark Davies
Kay Chaldecott
Alastair Miller
Charlie Parker1
Colin Rutherford
1. Charlie Parker joined the Board on 14 September 2020
Attendance
11/11
11/11
10/11
11/11
11/11
4/4
11/11
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89
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COMPOSITION,
SUCCESSION AND EVALUATION
For each resolution, shareholders will have the opportunity to
vote for or against or to withhold their vote. Following the meeting,
the results of votes lodged will be announced to the London Stock
Exchange and displayed on the Company’s website.
Anti-corruption and anti-bribery
We are committed to the highest legal and ethical standards
in every aspect of our business. It is our policy to conduct business
in a fair, honest and open way, without the use of bribery or
corrupt practices to obtain an unfair advantage. We provide
clear guidance for suppliers and employees, including policies
on anti-bribery and corruption, anti-fraud and code of conduct.
All employees have received updated training on these issues
during the year.
Human rights
Being mindful of human rights, the Company has a Modern
Slavery policy to ensure that all of its suppliers are acting
responsibly and are aware of the risks of slavery and human
trafficking within their own organisation and supply chain.
The Modern Slavery statement was updated and published
during the year.
Induction of new Directors
The Chairman and Company Secretary manage an induction
process to ensure that new Directors are fully briefed about the
Company and its operations. This process usually includes asset
visits and meetings with members of the executive management
team as well as specific briefings with regard to their legal and
regulatory obligations as a Director. This year Charlie was provided
with a series of video conference meetings with members of the
ExCo and finance team. Once more established on the Board he
has attended a number of video conference workshops with the
teams responsible for local authority relationships. As the UK
opens up we will ensure that Charlie gets the opportunity to visit
the assets and meet members of the team in person.
Annual General Meeting (“AGM”)
While in normal circumstances the AGM is the annual opportunity
for all shareholders to meet with the Directors and to discuss
with them the Company’s business and strategy, in 2020 this was
not possible due to the Government’s ‘stay at home’ provisions.
A closed AGM was held for 2020. The Board however made sure
that shareholders are able to ask questions ahead of the AGM via
email. This year we hope that there will be less restrictions and
that the AGM can be held as a physical meeting.
The notice of AGM is posted to all shareholders at least
20 working days before the meeting. Separate resolutions
are proposed on all substantive issues and voting is conducted
by a poll. The Board believes this method of voting is more
democratic than voting via a show of hands since all shares voted
at the meeting, including proxy votes submitted in advance of
the meeting, are counted.
Board effectiveness review
In order to evaluate its own effectiveness the Board undertakes annual effectiveness reviews using a combination of externally facilitated
and internally run evaluations over a three year cycle. The cycle of the Board evaluations is summarised as follows:
YEAR 1
Externally facilitated Board
evaluation using interviews
YEAR 2
Follow-up on action prepared
in response to the year 1
evaluation using internally
facilitated questionnaires
YEAR 3
Continued follow up on actions
arising from the previous two year
using internally facilitated
questionnaires
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
– There was a high level of confidence in the strategy among
the Board members and a sense that the clarity of the Board’s
strategic understanding going into the pandemic placed it well
to respond to the challenges of the pandemic.
– The use of video conference during the lockdown period had
given the Directors a new appreciation of the respective
benefits of both face to face meetings and video conferencing
which provides an opportunity for the Board to consider how
best to optimise the benefits of both media
– Taking the addition of Charlie Parker into account the Board’s
composition was highly appropriate with strong skillsets and
experience in real estate, retail development, pub estates,
public sector, urban regeneration, corporate finance, capital
markets and audit/financial management all well represented
– The close proximity between the Board and members of the
workforce made it easier for the Board to engage with culture
and the workforce generally compared to other plc boards.
Nevertheless, it is generally felt that the Board plays its part
in leading by example when it comes to culture. The executive
team had a strong ‘People First’ emphasis on culture which
is fully supported by the Board.
Recommendations to improve effectiveness were highlighted
as follows:
– Consider the scope for executive team interim updates to the
Board on key matters on a more regular basis;
– Schedule additional Board video calls outside of the quarterly
Board meetings to provide opportunities for the Board to focus
on specific strategic updates
– Consider whether the value of face-to-face meetings could be
further utilised by scheduling one or two further informal
meetings e.g. Board dinners during the year
– Review the role of the whole Board as well as the
Nominations Committee in the succession planning process.
– agree further mechanisms for employee engagement that
were appropriate and proportionate for the small workforce.
Actions arising from these recommendations:
– Schedule additional ’regular’ Board meetings rather
than quarterly
– Schedule more formal executive team updates to the Board
– Involve the whole Board in succession planning as well as the
Nominations Committee
– Consider other mechanisms for employee engagement
– review the Board paper process to ascertain if improvements
can be made
In 2020, Ceradas Limited, a Board Effectiveness consultancy with
no other connection with the Company, were invited to undertake
an effectiveness review of the Board. The aim of the Board Review
was to provide an objective and rigorous feedback mechanism
for improving the effectiveness of the Board by assessing the
Board’s activity over the past 12 months and highlighting potential
areas for development. The Board review consisted of the
following steps:
Review by Ceradas of Board and
Committee papers, minutes, terms of reference,
investor feedback, strategy presentations and
other documentation agreed with the Chairman
and Company Secretary
Preparation of an aide memoire outlining the
key topics for discussion for circulation prior
to interviews
One to one interviews conducted with
Board members and the Company Secretary
(via video conference)
Preparation of a report to the Board setting
out the findings from the Board evaluation
and recommendations to enable Directors
to develop an action plan response
Attendance by Ceradas at a Board meeting
(via video conference) to present the report
and discuss the recommendations
The review was undertaken over the course of summer 2020.
Due to the pandemic interviews were via video conference
as was the presentation to the Board which was held in October.
All Board members actively engaged in the process and provided
open and constructive comments.
Overall the conclusion of the review is set out below:
– the Board’s functions and activities were working well.
– The high level of personal and professional respect among
the Directors contributed to the strong working relationships
at both Board and Committee levels.
– Board discussions strike a good balance between
constructiveness and challenge.
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91
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Nomination Committee report
Committee role
– Regularly review the structure, size and composition of the
Board and its Committees
– Review the Leadership and succession needs at Board
and Executive Committee level
– Identifying and nominating for approval candidates to fill
Board vacancies
– Evaluating the Board’s diversity and balance of skills
– Evaluating the performance of the Board
– Reviewing the time needed to fulfil the roles of Chairman,
Senior Independent Director and Non-Executive Directors
Nomination Committee membership and attendance
at meetings
Committee Members
Margaret Ford: Committee Chairman
Kay Chaldecott
Alastair Miller
Colin Rutherford
Attendance
4/4
4/4
4/4
4/4
How the Committee operates
The Committee meets four times a year and holds ad-hoc
meetings when required.
Only members of the Committee are entitled to attend the
meetings. The Chief Executive Officer is invited to attend
so that the Committee can understand the views of executive
management when making its deliberations, especially on
succession planning. The Head of HR is also invited to attend
on occasion to assist with succession planning deliberations.
The Terms of Reference were reviewed and updated during
the year to ensure that they continued to be compatible with
the Corporate Governance Code 2018 and best practice and
are available on the Company’s website at www.nrr.co.uk.
Dear Shareholders
I am pleased to present the Nomination Committee Report
for 2021. Ensuring the Board has the relevant skills to advance
our strategy has been a key focus this year. We have also
continued to plan for orderly succession to both the Board
and senior executive positions as well as diversity.
In progress of our focus on relevant skills to support our
strategy we have, this year, welcomed Charlie Parker to the
NewRiver Board. Charlie brings with him a wealth of
experience from his various leadership roles in the public
sector, which is particularly relevant to our strategy of
developing strong relationships with local authorities and
public bodies. An outline of his appointment process is
provided within this report.
We have been grateful of the support and experience that
our Non-Executive Directors have contributed over this
challenging period. Mindful of the experience we have in
our Non-Executive Directors we have been aware that
Kay Chaldecott will reach her nine-year term in 2021. We have
considered this as a Committee against the backdrop of the
unprecedented times we find ourselves in and the skills
we need on the Board. We are therefore delighted that Kay
has agreed to extend her tenure for a further year so that
we may continue to benefit from her significant knowledge
and expertise of the retail real estate sector as we continue
to navigate the effects of the COVID-19 pandemic. We are
currently vetting Recruitment Consultants who are committed
to promoting diversity to seek Kay’s replacement in 2022.
The Committee will ensure that succession planning
and diversity remains at the top of the agenda in the
forthcoming year.
BARONESS FORD
Chairman
9 June 2021
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Activities of the Committee during the year
Succession planning
The Committee considers succession planning a key part of its
remit. It recognises the importance of creating robust succession
plans for both the Board and executive management so that they
can fulfil the Company’s long-term strategy.
The Committee acknowledges that succession plans should be
regularly reviewed to enable employees and Board members to
continue to have the skills and experience necessary to ensure
the continuing success and good governance of the Company.
The Committee works with the Executive Directors to nurture
a pipeline of talented employees below Board level who will be
able to serve as the next generation of plc Board directors.
During the year the Committee and the Board have actively
considered the composition of both the Board and its committees.
Succession planning has been considered at the majority of its
meetings to ensure that the Board, its Committees and the senior
leadership team have the structure and the skills to carry out the
Group’s strategy. This assessment of skills necessary to execute
strategy led us to seek the appointment of a further Non-Executive
Director as detailed below.
Board appointment
To progress the Group’s strategy of developing strong
relationships in the public sector the Committee acknowledged
that there was a need for a Board role that could support the CEO
with this strategy. Accordingly, Charlie Parker was identified as
a suitable candidate with these skills in the public sector and was
approached about the role. Rockpools, a Global Executive Search
Consultancy, with no other relationship with the Group other than
Executive searches were at the same time commissioned to
conduct an external assessment of other candidates for the role.
Having studied this assessment to provide a detailed
consideration of alternative candidates the Committee concluded
that Charlie Parker was the best fit in terms of skills that were
identified as important for this role. As part of the interview
process all members of the Board met with Charlie individually.
Charlie brings with him a wealth of experience from his various
leadership roles in the public sector and he has already
contributed greatly to our understanding of the public sector and
towards continuing the development of strong relationships with
Local Authorities and public bodies.
Board tenure
Under the UK Corporate Governance Code an appointment term
of longer than nine years from election to the Board is a factor
that may affect whether a Non-Executive Director is considered
independent. Kay Chaldecott was appointed in 2012 and will
therefore reach her nine year term in 2021. We have considered
this as a Committee against the backdrop of the unprecedented
times we find ourselves in and the skills we need on the Board.
Kay has agreed to extend her tenure for a further year so that
we may continue to benefit from her significant knowledge and
expertise of the retail real estate sector as we continue to navigate
the effects of the COVID-19 pandemic. The Committee is of the
opinion that Kay remains independent after nine years on the
Board and continues to exercise objective judgement. Kay will
therefore be offering herself for re-election at the AGM for
a further year. Succession plans have been discussed and the
Committee is engaging with external search consultancies
to progress a suitable replacement for Kay in 2022.
Board Committee membership
During the year we have considered the roles of each Committee
and altered the leadership of the Committees to progress the
work of each Committee further. In particular we felt it sensible
that the Senior Independent Director and Director responsible
for employee engagement should be our Chairman of the
Remuneration Committee. This role change combines Alastair’s
duties efficiently to ensure the employee engagement discussions
include, among other things, how executive remuneration aligns
with the wider company pay policy.
Changes to the Board Committees:
– Kay Chaldecott stepped down as Chairman of the
Remuneration Committee and remains a member of the
Remuneration Committee.
– Alastair Miller stepped down as Chairman of the
Audit Committee and remains a member of the
Audit Committee. Alastair was then appointed as Chairman
of the Remuneration Committee.
– Colin Rutherford was appointed as Chairman of the
Audit Committee.
From 1 April 2021 we also invited Charlie Parker to join both the
Audit Committee and the Remuneration Committee.
Independence
The Nomination Committee is of the opinion that the
Non-Executive Directors and the Chairman remain independent,
in line with the definition set out in the 2018 Code and are free
from any relationship or circumstances that could affect, or appear
to affect, their independent judgement. David Lockhart retired from
the Board and his Executive Deputy Chairman role at the AGM
in August 2020. Following his retirement and the appointment
of Charlie Parker, the balance of independent directors (excluding
the Chair) was a Non-Executive Chairman, two Executive Directors
and four independent Non Executive Directors.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS NO MINATION COMMI T TEE REP O RT
Diversity Policy
As a Company, we are committed to a culture of diversity
and inclusion in which everyone is given equal opportunities to
progress regardless of gender, race, ethnic origin, nationality, age,
religion, sexual orientation or disability. We have been successful
at recruiting key members of our senior management team from
a range of different backgrounds. We continually strive to provide
the most flexible employment policies to enable all our employees
to have a fulfilling career supported by family-friendly policies.
The Board currently comprises two female Directors and five male
Directors, equivalent to 29% female representation. Below Board
level in the Executive Committee there are two female ExCo
members and five male ExCo members equivalent to 29% female
representation. Direct reports of the Executive Committee are
44% female and 56% male.
When recruiting, the Company has always considered all aspects
of diversity during the process. The Company is very mindful
of the need to strive to create as diverse a Company as possible,
and to create as many opportunities as possible for nurturing
emerging female talent. The Company always ensures there
is a selection of candidates who have a good balance of skills,
knowledge and experience. The Committee places particular
value on experience of operating in a listed company, experience
of the real estate, retail and leisure sectors, with financial or real
estate training. The Company aims to recruit the best candidates
on the basis of their merit and ability.
Other Nomination Committee activity
During the year the Nomination Committee also considered the
following matters:
– Approval of the Nomination Committee Report prior
to publication;
– Review of the time commitment required from each Director
and their external appointments; and
– Review of the Committee Terms of Reference.
Composition of the Board during the year
Chairman
Executive Directors
Non-Executive Directors
(Independent)
Length of Directors’ tenure
Less than three years
Three to six years
Seven to ten years
1
2
4
2
2
3
Gender Balance
Board
Executive Committee
Direct Reports of Executive Committee
Group
Female
2 29%
2 29%
11 44%
82 49%
Male
71%
5
71%
5
14 56%
87 51%
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
AUDIT COMMIT TE E R EPORT
AUDIT, RISK AND
INTERNAL CONTROL
Dear Shareholders
As Chairman of the Audit Committee since September 2020,
I am pleased to present a summary of the work of the
Committee. In the last year monitoring the impact of COVID-19
on the financial projections of the business and ensuring the
integrity of internal controls under remote working has been
a key focus.
We have reviewed the significant financial reporting matters
and judgements identified by the finance team and PwC
through the external audit process, and the approach to
addressing those matters is set out in the table on page 97
of this report.
We have overseen a ‘deep-dive’ review of the Group’s risk
register and risk management framework. We have also
reviewed and updated the Company’s Whistleblowing Policy,
reviewed a number of other compliance policies such as the
Bribery Policy and recommended updates to the Committee’s
terms of reference to ensure they continue to be aligned with
the 2018 UK Corporate Governance Code and best practice.
Our regular programme of meetings and discussions,
supported by our interactions with the Company’s
management, external auditor and property valuers and
the quality of the reports and information provided to us,
enable the Committee members to effectively discharge our
duties and responsibilities.
COLIN RUTHERFORD
Audit Committee Chairman
9 June 2021
Committee role
– Oversight of financial reporting and internal controls
– Risk management and review of control processes
– Managing the external audit process
– Maintaining a whistleblowing procedure
– Assessment of management judgements and external values
Audit Committee composition and attendance
at meetings
Committee Members
Colin Rutherford: Committee Chairman
Kay Chaldecott
Alastair Miller
Charlie Parker1
Attendance
4/4
4/4
4/4
0/0
1. Charlie Parker was appointed to the Committee on 1 April 2021.
How the Committee operates
The Committee provides independent review and monitoring
of the risk management and control procedures within the Group.
Each Committee member is independent and has broad
commercial experience as a director. Colin Rutherford also
has significant, recent and relevant financial experience
and is currently also the Chairman of the Audit Committee of
Mitchells & Butlers plc. Alastair Miller is a Chartered Accountant
and previously the Chief Financial Officer of New Look Group
and has significant, recent and relevant financial experience.
The Committee as a whole have competence relevant to the
sector in which the Company operates.
During the year the Audit Committee held four meetings.
The Chief Financial Officer, Finance Director and the Group’s
auditors were invited to attend the Committee meetings.
The Company Secretary acts as secretary to the Committee.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS AU DIT COMMITTEE REPORT
Responsibilities of the Committee during
the year
During the year, the Committee was responsible for:
– overseeing the Group’s relationship with its auditors, PwC,
including their remuneration;
– monitoring the integrity of the half-year and annual financial
statements before submission to the Board;
– discussing any issues arising from the half-year review
and year-end audit of the Group;
– reviewing significant financial reporting matters and judgments;
– reviewing the effectiveness of the Group’s system
of internal controls;
– reviewing the Group’s whistleblowing procedures and reports
to the Board;
– reviewing and monitoring the Group’s risk
management processes;
– conducting an annual review of the need to establish
an internal audit function; and
– monitoring and annually reviewing the auditor’s independence,
objectivity and effectiveness of the audit process.
Activities during the year
Relationship with the auditors
The Committee has primary responsibility for managing the
relationship with the external auditor, including assessing their
performance, effectiveness and independence annually and
recommending to the Board their reappointment or removal.
Following a comprehensive tender in 2019,
PricewaterhouseCoopers LLP (PwC) were appointed as the
Group’s auditor. Prior to this appointment, Deloitte had been the
Group’s auditor for ten years. The Committee keeps under review
the need for future tenders in accordance with current regulations
and subject to the annual assessment of the auditor’s
effectiveness and independence.
Chris Burns was named as the lead audit partner on PwC’s
appointment as external auditor last year. In line with the policy
on lead audit rotation, he is expected to rotate off the audit ahead
of the 2025 audit.
During the year, the members of the Committee met twice
with representatives from PwC without management present,
to ensure that there are no issues in the relationship between
management and the external auditor which it should address.
There were none.
External auditor
The Committee considers the nature, scope and results of the
external auditor’s work and reviews, develops and implements
a policy on the supply of any non-audit services that are to be
provided by the external auditor. It receives and reviews reports
from the Group’s auditors relating to the Group’s annual report
and accounts and the external audit process.
In respect of the audit for the financial year ended 31 March 2021,
PwC presented their audit plan (prepared in consultation with
management) to the Committee. The Audit plan included an
assessment of audit risks, audit scope, independence, the terms
of engagement and robust testing procedures.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
The Committee approved the implementation of the plan following
discussions with both PwC and management.
Audit and non-audit fees
The Company paid £550,000 in audit fees for the financial year
ended 31 March 2021.
The Company has a non-audit services policy in place which
limits PwC to working on the audit or such other matters where
their expertise as the Company’s auditor makes them the logical
choice for the work. This is to preserve their independence and
objectivity. The Company paid £100,000 in non-audit fees to PwC
for the financial year ended 31 March 2021. The non-audit fees
relate solely to PwC’s review of the interim results for the six
months to 30 September 2020.
Effectiveness and independence
The Chair of the Committee speaks regularly to the audit partner
to ascertain if there are any concerns, to discuss the audit reports
and to ensure that the auditor has received support and
information requested from management.
In accordance with the guidance set out in the Financial Reporting
Council’s ‘Practice aid for audit committees’ the assessment of the
external audit has not been a separate compliance exercise, or an
annual one-off exercise, but rather it has formed an integral part of
the Committee’s activities. This has allowed the Audit Committee
to form its own view on audit quality and on the effectiveness of
the external audit process, based on the evidence it has obtained
throughout the year.
Sources of evidence obtained and observations during the year:
– By referring to the FRC’s
Practice aid on audit quality.
– Observations of, and
interactions with, the auditors.
– The audit plan, the audit
findings and the auditor’s
external report.
– Input from those subject
to the audit.
The Committee has looked to this
practice aid for guidance and has
ensured that assessment of the
audit is a continuing and integral
part of the Committee’s activities.
The Committee has met with the
audit partner without management
several times and has noted that
PwC was performing well and the
working relationship was good.
The Committee scrutinises these
documents and reviews them
carefully at meetings and by doing
so has been able to assess the
auditor’s ability to explain in clear
terms what work they performed in
key areas and also assess whether
the description used is consistent
with what they communicated to the
Committee at the audit planning
stage. The Committee has also
regularly challenged these reports
in the meetings.
The Committee has requested the
insights from the Chief Financial
Officer, the Finance Director
and the Finance team during the
audit process.
Having regard to these matters the Committee has considered
the effectiveness of the external audit process and feels that the
auditor has demonstrated professional scepticism and challenged
management’s assumptions where necessary.
The Audit Committee is satisfied with the scope of PwC’s work,
and that PwC continues to be independent and objective.
The Committee is therefore pleased to recommend that PwC
be re-appointed as the Group’s auditor at the 2021 AGM.
Key judgements and estimates
The Committee reviewed the external reporting of the Group
including the interim review, quarterly announcements and the
Annual Report. In assessing the Annual Report, the Committee
considers the key judgements and estimates. The significant
issues considered by the Committee in respect of the year ended
31 March 2021 are set out in the table below:
Significant
issues and
judgement
Going Concern
– given the ongoing
uncertainties
presented by the
impact of COVID-19
there remains
a significant risk over
going concern.
Trading performance
has been impacted
by tenant
administrations/
CVAs; lower rents
for retail tenants and
closure of the pub
estate for a
significant portion
of the year.
Valuation of
Properties
– changes in key
estimates can have
a significant impact
on the valuation
of properties. On
6 November 2020,
the Royal Institution
of Chartered
Surveyors
recommended
that valuers should
strongly consider
including a market
conditions
explanatory note
in valuations
undertaken after
that date.
How the issues were addressed
Significant liquidity measures have been taken to
preserve cash headroom including cancelling the
dividend and the disposal of assets generating
proceeds of £81m. These measures have
strengthened the Group’s position against its
covenants compared to FY20. Management’s Going
Concern forecasts include a downside scenario where
the base case assumptions were sensitised to capture
economic and financial uncertainty as a result of
COVID-19. Under this downside scenario none of the
Group’s debt covenants were breached at any time
throughout the forecast period. Sufficient headroom
remained on the interest cover and liquidity was not
considered a concern. The LTV ratio also had
headroom. The Audit Committee and the Board
discussed and challenged all assumptions in the
modelling noting options available to management.
Colliers International Valuation UK LLP (‘Colliers’) and
Knight Frank LLP (‘Knight Frank’) and Duff and Phelps
have included the market conditions explanatory note
in their valuation reports on the Group’s properties as
at 31 March 2021. A material uncertainty clause
remains in place for the Colliers Pubs valuations. The
external auditors confirmed with Colliers that the
clause does not imply a limitation of scope and that
the valuations as at 31 March 2021 are reported based
on their professional judgement having considering
the evidence available as at the valuation date.
The Committee and management met with Colliers,
Knight Frank and Duff and Phelps on several
occasions to discuss the valuation of the assets and
understand the process that was followed, the key
estimates used and to ensure a robust and
independent valuation had taken place. The meetings
were productive and management and the Committee
have confirmed that they continue to adopt the
valuations as being the fair valuation of the properties
as at the reporting date. In addition the external
auditors have performed additional audit procedures
over the valuer judgements which were reported to
and discussed with the Committee.
Risk management and internal controls
Internal control structure
The Board oversees the Group’s risk management and internal
controls and determines the Group’s risk appetite. The Board
has, however, delegated responsibility for review of the risk
management methodology and the effectiveness of internal
controls to the Audit Committee. The Group’s system of internal
controls includes financial, operational and compliance controls
and risk management. Policies and procedures, including clearly
defined levels of delegated authority, have been communicated
throughout the Group. Internal controls have been implemented
in respect of the key operational and financial processes of the
business. These policies are designed to ensure the accuracy
and reliability of financial reporting and govern the preparation
of the Financial Statements. The Board is ultimately responsible for
the Group’s system of internal controls and risk management and
discharges its duties in this area by:
– holding regular Board meetings to consider the matters
reserved for its consideration;
– receiving regular management reports which provide an
assessment of key risks and controls;
– scheduling regular Board reviews of strategy including reviews
of the material risks and uncertainties (including emerging risks)
facing the business;
– ensuring there is a clear organisational structure with defined
responsibilities and levels of authority;
– ensuring there are documented policies and procedures in place
and reviewing these policies and procedures regularly; and
– reviewing regular reports containing detailed information
regarding financial performance, rolling forecasts, actual and
forecast covenant compliance, cashflows and financial
and non-financial KPIs.
The process by which the Audit Committee has monitored and
reviewed the effectiveness of the system of internal controls and
risk management during the year has included:
– ongoing analysis and review of the Group’s risk register;
– overseeing a further ’deep-dive’ of the Group’s risk register
to reassess each risk on the register and its risk scoring;
– reviewing the assessment of key risks, the process of reporting
these risks and associated mitigating controls, with particular
emphasis on emerging risks; and
– updates from management.
The effectiveness of the Company’s risk management and internal
control systems is reviewed annually and was last reviewed by the
Committee in May 2021. The review concluded that:
– the systems established by management to identify, assess and
manage risks, including emerging risks are effective; and
– the assurance on risk management and internal control
is sufficient to enable the Committee and Board to satisfy
themselves that they are operating effectively.
The Committee is satisfied that the risk management framework
is effective and did not identify any failing in the control systems.
Further details of the Company’s risk management process,
together with the principal risks, can be found in the principal risks
and uncertainties report.
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Internal audit function
The Group employs an internal audit team within the pub division,
responsible for conducting inventory and cash counts on a rolling
basis across the managed pub estate, supported by external
inventory auditors for certain geographic regions. This allows the
business greater comfort over inventory balances, monitoring
wastage and where relevant charging operators for any losses
they have incurred. The Group does not have an internal audit
team across its retail operations. The need for this is reviewed
annually by the Committee. Due to the relative lack of complexity
and the outsourcing of the majority of the day-to-day operational
functions, the Committee continues to be satisfied that there is no
requirement for such a team.
Whistleblowing Policy
The Committee conducts an annual review of the Group’s
Whistleblowing Policy to ensure it remains up to date and relevant
and reports to the Board. During the year the Whistleblowing Policy
was reviewed and updated. Staff were given refresher training
on the Whistleblowing Policy and training on whistleblowing is
now an annual compulsory training event for staff in our online
training portal. Using this portal, the Company can monitor which
individuals are missing their training. The Committee provides
feedback to the Board on our Whistleblowing policy and
procedures and effectiveness of the policy, at least every six
months. There have never been any concerns raised through
the whistleblowing process or through any other process
to the Committee.
Other compliance policies and staff training
During the year we also reviewed our other employee and wider
stakeholder compliance policies. This included the Bribery Policy
and the Gifts and Hospitality Policy and the register process
for gifts and hospitality. We have also engaged BDO to assist in
carrying out a Corporate Criminal Offences (CCO) risk assessment.
This included training and risk assessment workshops with
relevant staff as well as a summary report. We are also setting
up an e-learning module on the subject of Corporate Offences
of Failure to Prevent Facilitation of Tax Evasion as set out in Part 3
of the Criminal Finances Act 2017, and associated HMRC guidance
to assist in meeting staff training obligations under this legislation.
Statement of compliance
The Company is no longer a constituent of the FTSE 350
nevertheless the Company confirms on a voluntary basis that it
has complied with terms of The Statutory Audit Services for Large
Companies Market Investigation (Mandatory User of Competitive
Tender Processes an Audit Committee Responsibilities) Order
2014 (“the Order”) throughout the year. In addition to requiring
mandatory audit re-tendering at least every ten years for FTSE
350 companies, the Order provides that only the Audit Committee,
acting collectively or through its Chair, and for and on behalf of the
Board is permitted:
– to the extent permissible in law and regulation, to negotiate
and agree the statutory audit fee and the scope of the statutory
audit;
– to initiate and supervise a competitive tender process;
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
– to make recommendations to the Directors as to the auditor
appointment pursuant to a competitive tender process;
– to influence the appointment of the audit engagement partner;
and
– to authorise an auditor to provide any non-audit services to the
Group, prior to the commencement of those non-audit services.
Fair, balanced and understandable
The Directors are required to confirm that they consider, taken as
a whole, that the Annual Report is fair, balanced and
understandable and that it provides the information necessary for
shareholders to assess the Company’s position and performance,
business model and strategy.
To ensure this is the case the following process is in place:
– a core experienced team is responsible for the co-ordination
of submissions, verification, review and consistency;
– the narrative sections are drafted by the members of the team
with specific responsibility for that area, such as the Chairman,
the CEO, the Head of IR, Sustainability Manager, Head of
Corporate Reporting, Company Secretary;
– as narrative sections are prepared they are circulated to Board
and ExCo members to review and comment; and
– the Committee reviews the Annual Report, taking into account
the comments made by the Board and reports issued by PwC.
The Committee has satisfied itself that the controls over the
accuracy and consistency of information presented in the Annual
Report are robust, that the information is presented fairly (including
the calculations and use of alternative performance measures) and
has confirmed to the Board that the processes and controls around
the preparation of the Annual Report are appropriate allowing the
Board to make the “fair, balanced and understandable statement”
in the Directors’ Responsibilities Statement.
Viability Statement and going concern
The Committee has reviewed the basis for the Company’s Viability
Statement that is drafted with reference to the financial forecasts
for the next three years. In light of the uncertainty surrounding the
longer term impact of COVID-19 on the UK economy, and the retail
and leisure sectors in which the Group operates, the Committee
placed additional scrutiny on the assumptions used in the forecasts
to ensure they are appropriate. The Committee provides advice
to the Board on the Viability Statement.
The Committee ensured sufficient review was undertaken of the
adequacy of the financial arrangements, cash flow forecasts and
lender covenant compliance. Accordingly, the Committee
recommended to the Board that the statement be approved.
Similarly, and again in-light of the uncertainty surrounding the
longer term impact of COVID-19 on the Company’s operations,
the Committee placed additional focus on the appropriateness
of adopting the going concern basis in preparing the Group’s
financial statements for the year ended 31 March 2021 and
satisfied itself that the going concern basis of presentation of the
financial statements and the related disclosure is appropriate.
REMUNERAT ION COMMI TTE E RE POR T
REMUNERATION
COMMITTEE REPORT
Dear Shareholders
On behalf of the Board, I am pleased to present the
Remuneration Committee Report for the financial year ended
31 March 2021 (FY21). In this statement I have summarised the
link between remuneration and performance, our decisions
on remuneration for FY21 and how we will operate the policy
in FY22.
In relation to FY21 the entire year has been impacted by the
COVID-19 pandemic. Our main priority has been to consider
the health and wellbeing of our workforce and stakeholders
and we took steps to ensure that we were doing as much
as possible in this regard. Further details of this can be found
in our Stakeholder section on pages 83 to 85. In relation
to remuneration, we have ensured that there is a consistent
approach across the entire workforce, including the Executive
Directors, and that for the most senior executives the low share
price and cancelled dividends have been recognised in the
remuneration payable and the level of LTIP awards granted.
During the year we received Government support under
the Coronavirus Job Retention Scheme and topped up any
furloughed employees to their full salary level. This Government
support has since been repaid in full and we have received
no other financial support from the Government.
Implementation of the policy in FY21
and steps taken in light of COVID-19
Base salary
As an owner and operator of community assets throughout the
UK, NewRiver has experienced first-hand the significant impact
that the Coronavirus (COVID-19) pandemic has had on people
across the country. NewRiver has also seen the extraordinary
contributions made by our teams, customers, occupiers, advisers
and other stakeholders, to support those who are most in need.
In recognition of these circumstances, the Board of Directors
waived 20% or more of their base salaries or fees for three
months effective from 1 May 2020. The resultant cost saving
was donated to NewRiver’s corporate charity partner, the Trussell
Trust. The Trussell Trust’s vital work supports over 1,200 food
banks across the UK, while campaigning to ensure everyone can
afford their own food.
The base salaries were reinstated at their previous levels in
August 2020. There were no increases to base salary for the
remainder of FY21.
Annual bonus FY21
Recognising the lower financial performance that was likely to be
delivered in the year, the Committee determined at the start of the
year that the bonus opportunity should be reduced from the
normal policy level of 125% of salary to 100% of salary.
We simplified the mix of measures for the annual bonus plan so
that it was better aligned to the business strategy, focused on the
business priorities and provided a more robust link between pay
and performance. Inevitably, the severe impact of the pandemic
on our business operations hindered our financial performance.
However, we made good progress against some metrics
and the formula driven outturn would have resulted in a 25%
of salary payout for Allan Lockhart and a 35% of salary payout
for Mark Davies. Recognising that this was a year when our
Total Accounting Return, although outperforming the MSCI Real
Estate Index, was negative and we had suspended our dividend
payment, the Committee reviewed the resultant bonus levels and
determined that the annual bonus should be scaled back by 20%.
Overall, after this use of Committee discretion, the bonus payout
was 20% of salary for Allan Lockhart and 28% of salary for
Mark Davies. Bonus payouts for all eligible employees were
similarly scaled back.
Long Term Incentive Plan
Awards granted in 2018 due to vest in 2021 by reference to
performance over the previous three years were based on relative
Total Shareholder Return (TSR) against the FTSE All Share Index
and relative Total Accounting Return (TAR), against a sector peer
group. Both measures are unlikely to achieve the minimum
performance threshold based on performance to date, and so the
awards will lapse. We delayed the grant of the FY21 awards until
after the 2020 AGM and when doing so we considered the grant
levels carefully in light of the share price prevailing at the time
of grant, to ensure that executives could not benefit from what the
Committee considered to be a windfall gain should the share price
recover strongly immediately following COVID-19. Accordingly,
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
99
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Closing remarks
We believe we have taken sensible steps to adapt the operation
of our remuneration policy in the exceptional circumstances
of the COVID pandemic and we have reflected the experience
of shareholders, employees and other stakeholders. I would like to
thank shareholders for their continued support and engagement
during the year. We welcome feedback and if shareholders have
any questions about remuneration generally, or the contents
of this Report, I can be contacted through our investor relations
email at: info@nrr.co.uk.
Whilst we were unable to hold a conventional AGM in 2020
we hope that the arrangements for the AGM in 2021 will be less
restrictive. My fellow Directors and I plan to attend the AGM and
we would be pleased to answer any questions which you may
have about the Committee’s work.
ALASTAIR MILLER
Committee Chairman
9 June 2021
REMUNERATION COMMI TTE E RE POR T
the grant levels were scaled back by one third from the normal
policy level of 100% of salary to 66.6% of salary. As disclosed last
year, the awards were based 50% on our Total Accounting Return
(TAR) and 50% on our Total Shareholder Return (TSR), in both
cases against our sector peer group.
Hawthorn divestment and operation
of the policy in FY22
We announced on 14 April 2021 that our CFO, Mark Davies,
would lead a potential IPO of the Hawthorn Pubs Business
and leave NewRiver on completion of the transaction. Mark will,
for his time as a PLC director, be eligible to receive a pro-rata
FY22 annual bonus in line with the scheme operated for
Executive Directors.
Following stepping down from the Board, he will continue to be
paid his current salary and may participate in the bonus scheme
in his capacity as a NewRiver employee alongside other Hawthorn
management and employees.
Mark will not receive any further remuneration from the completion
of the transaction and will receive no payment for loss of office.
We intend that Will Hobman, who has been NewRiver’s Finance
Director for 18 months and with the Company for five years,
will succeed Mark as CFO. Will’s package will be in line with
the remuneration policy and there will be full disclosure in next
year’s report.
Other than in relation to this potential transaction, the current
remuneration policy will operate broadly unchanged from the
approach in FY21. Salary will remain unchanged for the CEO
and there will be no change to benefits. Pension will remain
at 15% of salary and we have previously announced our intention
to align pensions with the percentage rate applicable to the
workforce by the end of this policy period.
The annual bonus plan will be based on Corporate and Strategic
targets. We intend to make an award under the LTIP to the CEO
and new CFO at the normal policy level of 100% of base salary,
subject to considering the prevailing share price at the time
of grant and the award will again be subject to our relative TSR
and TAR against a peer group.
100
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Remuneration at a glance
FY21 Annual Bonus Performance
FY19-21 Performance Share Plan
Corporate (75% of salary)
(Long-term Incentive)
Measure
Achievement (% of salary)
Measure
Achievement (% of Max)
d
e
s
a
b
h
t
w
o
r
G
Relative TAR
10% out
of 20%
Earnings Yield (FFO)
0% out of 25%
Relative TSR vs FTSE
All Share Index
Relative Total Accounting
Return vs Peer Group
Total
0%
0%
0
e
n
i
l
p
i
c
s
i
d
l
a
i
c
n
a
n
F
i
LTV
7.5%
out
of 30%
Strategic Objectives (25% of salary)
Measure
Achievement (% of salary)
Strategic objectives
(Allan Lockhart)
Strategic objectives
(Mark Davies)
7.5%
out
of 25%
17.5%
out
of 25%
The Committee used discretion to reduce the bonus
outcome by 20%, so the bonus was 20% and 28%
of salary for the CEO and CFO respectively.
Executive Pay in FY20/21
)
£
(
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
800k
600k
400k
200k
0k
£637,339k
£585,323k
£543,239k
£471,130k
Salary
Pension
Benefits
Annual bonus
Long-term
Incentive
2021
2020
2021
2020
Allan
Lockhart
Mark
Davies
Implementation of Policy in FY22
Base Salaries
– Salaries have been frozen:
– Allan Lockhart: £470,000
– Mark Davies: £408,000
Benefits
– No change
Pension
– 15% of salary
Annual Bonus
– Maximum opportunity will revert
to 125% of salary
– Performance conditions:
– 75% Corporate Targets
– 25% individual strategic objectives
– 30% deferred into shares for
2 years
Long Term
Incentive Plan
– Grant levels will not exceed
100% of salary
– Performance conditions:
– Relative TSR (50%)
– Relative TAR (50%)
– 2 year post-vesting holding
period applies
Shareholding
requirements
– 200% of salary
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
101
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
REMUNERATION COMMI TTE E RE POR T
Summary Remuneration Policy
The Remuneration Policy was approved by shareholders at the 2020 Annual General Meeting. The full Remuneration Policy can be found
in the 2020 Annual Report which is available at www.nrr.co.uk
Executive Directors
Element
Purpose and
Link to Strategy
Operation
Maximum
Fixed
Salary
Market competitive
remuneration
base reflecting role,
responsibilities, skills
and experience.
Normally reviewed annually,
effective 1 April although salaries
may be reviewed more frequently
or at different times of the year
if the Committee determines this
is appropriate.
Paid in cash monthly.
Reviewed in context of the salary
increases across the Group.
Reviewed periodically against
peer companies.
Pension
Benefits
To provide
competitive
post-retirement
benefits.
To assist with
recruitment
and retention.
The Company currently contributes
15% of base salary for all existing
Executive Directors.
The Company reserves the
right to pay a non-pensionable
cash supplement in lieu of
pension contributions.
To provide
a competitive
and cost-effective
benefits package.
To assist with
recruitment
and retention.
The Company provides a range
of non-pensionable benefits
to Executive Directors which
may include medical insurance,
life assurance, permanent health
insurance, holiday and sick pay.
Other benefits such as relocation
allowances may be offered if
considered appropriate and
reasonable by the Committee.
There is no
prescribed maximum.
Increases will typically
be dependent on the
results of an annual
review in the context
of the average increase
for the wider work force,
inflation and market data.
Increases will not
normally be above the level
implemented across the
wider workforce. Increases
may be above this level,
for example if there is an
increase in the scale, scope
or responsibility of the role.
The maximum Company
contribution is 15% of base
salary for existing Executive
Directors. This will reduce
to the rate applicable to the
majority of the workforce at
the end of the policy period.
Future Executive Directors
will receive Company
contributions in line with
the UK workforce, currently
4% of base salary.
Benefits are set at a level
which the Committee
considers appropriate
when compared to the
Company’s listed real estate
investment trust peers.
There is no
prescribed maximum.
Performance
Target
Not applicable
Not applicable
Not applicable
102
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Executive Directors
Purpose and
Link to Strategy
Operation
Maximum
Performance
Target
Awards of annual bonus are made
pursuant to the Annual Bonus Plan.
The maximum bonus
is 125% of salary.
On target performance
would result in a bonus
payment of 50% of
maximum bonus. Threshold
performance would result
in bonus payment of up to
25% of maximum bonus.
All measures and
targets relate to
a financial year
of the Company
and are reviewed
on an annual basis.
At least 50%
of the bonus will be
subject to financial
performance
conditions.
Element
Variable
Bonus
Performance
Share Plan
To incentivise
performance in the
reporting year
through the setting
of targets at the
beginning of the
year. These annual
targets are intended
to be consistent with
the Group’s long
term strategy.
The deferral of
a proportion of the
bonus in shares
aligns directors’
interests with those
of shareholders
and to discourage
short term
decision making.
To incentivise
and reward the
delivery of returns
to shareholders and
sustained long-term
performance.
Aligns the Executive
Directors’ interests
with those of
shareholders.
Rewards and helps
retain/recruit
executives.
All measures and targets will be
reviewed and set annually by the
Committee at the beginning of the
financial year and levels of award
determined by the Committee after
the year end are determined based
on achievement of performance
against the stipulated measures
and targets.
The Committee retains an overriding
discretion to adjust pay-outs from
formulaic outcomes to ensure that
overall bonus payments reflect its
view of corporate performance
during the year and are fair to both
shareholders and participants.
Thirty percent of the bonus must
be deferred into shares for two years.
Vesting of the deferred shares will be
subject to continued employment.
The value of the bonus does not
contribute to the pensionable salary.
Clawback and malus
provisions apply.
Discretionary grant of nil-cost
options.
Awards normally vest three years
from the date of award.
Vesting of awards is subject to
satisfaction of performance targets
normally measured over
a three-year period.
The Committee has discretion
to determine the applicable
performance targets and their
weightings to ensure they are
appropriate. Performance conditions
will be based on financial and stock
market-based measures.
A holding period of two years will
apply following vesting before
participants are entitled to sell
their shares.
Clawback and malus
provisions apply.
The maximum award level
permitted under the 2016
PSP plan rules and this
policy is 200% of salary.
The normal annual award
is 100% of salary for all
Executive Directors.
Awards would not be
increased above 100%
of base salary without
prior consultation
with shareholders.
25% of the award is payable
at threshold performance.
Performance
targets will apply
in respect of
a performance
period which will
not be less than
three years.
Notwithstanding the
extent to which the
performance
targets are met,
awards shall only
vest if the
Committee (in its
absolute discretion)
is satisfied that
performance
against the
conditions is
a fair reflection
of underlying
performance.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
103
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS REMUNERATION COMMI TTE E RE POR T
Executive Directors
Performance
Target
Not applicable
Performance
Target
Not applicable
Element
Variable
Shareholding
Requirement
Purpose and
Link to Strategy
Operation
Maximum
To encourage long
term share
ownership and
support alignment
of interests with
shareholders.
The Company operates a
shareholding requirement which
is subject to periodic review.
At least half of the net shares vested
under the deferred annual bonus and
the LTIP must be retained until the
shareholding requirement is met.
After employment, shares that have
been purchased voluntarily may be
excluded from the post-cessation
shareholding requirement.
During employment,
Executive Directors must
build up a shareholding worth
200% of salary.
After employment, Executive
Directors will be required
to retain the lower of the
shareholding requirement
during employment or actual
shareholding at cessation for
one year. In the second year,
Executive Directors will be
required to hold the lower
of the actual shareholding
at cessation or half of the
shareholding requirement
during employment.
The Committee has the
discretion to relax this
requirement in exceptional
circumstances (e.g. serious
ill-health).
Chairman and Non-Executive Directors
Element
Fees
Purpose and
Link to Strategy
Operation
Maximum
Fee increases are applied
in line with outcome
of the review.
To provide
market-competitive
director fees.
Annual fee for the Chairman.
Annual base fee for the Non-
Executive Directors. Additional fees
are paid to Non-Executive Directors
for additional responsibilities such
as being the Senior Independent
Non-Executive Director or chairing
a Board Committee.
Fees are reviewed from time to time
taking into account time commitment,
responsibilities and fees paid by
companies of a similar size and
complexity.
Payable in cash.
Expenses incurred by Non-Executive
Directors in connection with
the fulfilment of their roles are
reimbursed (including any personal
tax due on such expenses).
104
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Considerations in relation to the Policy Review
When reviewing the Remuneration Policy, the Committee considered a wide range of factors, including
– Where practicable improving the consistency of the Executive Directors’ remuneration policy with that of the workforce, for example
in relation to the pension provision.
– Taking into account the latest guidance from our institutional shareholders, investor representative bodies, regulators and
statutory requirements.
– The overall market competitiveness of the senior executives’ packages.
The Committee addresses the following factors when determining the remuneration policy and practices, as recommend by the
UK Corporate Governance Code:
Principle
Committee approach
Clarity – remuneration arrangements should be transparent
and promote effective engagement with shareholders
and the workforce.
Simplicity – remuneration structures should avoid complexity
and their rationale and operation should be easy to understand.
Risk – remuneration arrangements should ensure reputational
and other risks from excessive rewards, and behavioural risks
that can arise from target-based incentive plans, are identified
and mitigated.
– There is a consistent approach taken, where possible,
in relation to the application of the Remuneration Policy
throughout the Company. For instance all employees
participate in an annual bonus plan and the PSP.
– We use our appraisal process to explain and discuss with
employees how the policy for executive directors aligns with
the pay and conditions of the workforce. We also highlight
where there are more stringent requirements in the Executive
Directors’ policy for Directors.
– The components of our Remuneration Policy are consistent
throughout the Company so they are simple to operate
and communicate.
– We look carefully at the range of likely performance outcomes
when setting performance target ranges and use discretion
where this leads to an inappropriate pay outcome.
– Bonus deferral, holding periods on PSP awards, shareholding
requirement and clawback and malus provisions all help
to mitigate risk.
Predictability – the range of possible values of rewards
to individual directors and any other limits or discretions should
be identified and explained at the time of approving the policy.
– Incentive plans are determined based on a proportion of base
salary so there is a sensible balance between fixed pay and
performance-linked elements.
– There are provisions to override the formula driven outcome
of incentive plans and deferral and clawbacks to minimise the
likelihood of a poor link between reward and performance.
Proportionality – the link between individual awards, the delivery
of strategy and the long-term performance of the company should
be clear. Outcomes should not reward poor performance.
– Incentive plans are determined based on a proportion of base
salary so there is a sensible balance between fixed pay and
performance-linked elements.
Alignment to culture – incentive schemes should drive behaviours
consistent with company purpose, values and strategy.
– There are provisions to override the formula driven outcome
of incentive plans deferral and clawbacks to ensure that poor
performance is not rewarded.
– Bonus plans operate widely throughout the Company and are
all approved by the Committee to ensure consistency with
Company purpose, values and the performance measures are
linked to the business strategy.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
105
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS REMUNERATION COMMI TTE E RE POR T
Service contracts
The details of the service contracts for Executive Directors
and Letters of Appointment for the Non-Executive directors are
summarised below:
Executive
Directors
Allan Lockhart
Mark Davies
Margaret Ford
Colin Rutherford
Kay Chaldecott
Alastair Miller
Charlie Parker
Date of Appointment
18 August 2016
18 August 2016
1 September 2017
5 February 2019
18 August 2016
18 August 2016
10 September 2020
Expiry date of service
agreement of letter
of appointment
12 month
rolling contracts
3 month
rolling contracts
The service agreements are available to shareholders to view
at the Company’s Registered Office on request from the Company
Secretary and at the Annual General Meeting.
External Directorships and Memberships
Executive Directors may take up one external directorship,
subject to the prior approval of the Board. In considering the
appointment, the Board will consider whether the appointment will
have an adverse impact on the Director’s role within the Company
and whether it will be a conflict of interest. Fees earned may be
retained by the Director. At present, no Executive Director has an
external directorship.
Executive Directors are encouraged to join, when invited, advisory
committees of industries and professional bodies directly related
to the Company’s business. This helps to keep the Company
informed of any future regulations or trends which may affect it in
the future, as well as providing the opportunity to influence future
decision making.
Recruitment arrangements
The Committee will apply the same Remuneration Policy and
principles when setting the remuneration package for a new
Executive Director. The Committee will take into consideration
all relevant factors to ensure that pay arrangements are in the best
interests of the Company and its shareholders.
Ongoing benefits, pension provisions, annual bonus participation
and awards under both the DBP and the PSP will be in line with
those stated in the policy.
Different performance measures may be set for any initial awards
under the ABP and PSP considering the responsibilities of the
individual and the point in the year that they joined and the rules
of the applicable plan. The rationale will be clearly explained in the
Annual Report following such recruitment. The level of bonus
which may be paid will be pro-rated to reflect the time in the year
when the Executive Director joins.
The Committee will have discretion to make payments or awards
to buy out incentive arrangements forfeited on leaving a previous
employer, i.e. over and above the approach outlined in the table
above and may exercise the discretion available under Listing
Rule 9.4.2R if necessary to do so. In doing so, the Committee
will match the fair value of the awards forfeited, taking account
of the applicable performance conditions, the likelihood of those
conditions being met and the proportion of the applicable vesting
period remaining.
Where an Executive Director appointment is an internal candidate,
the Committee will honour any pre-existing remuneration
obligations or outstanding variable pay arrangements that relate
to the individual’s previous role.
Non-Executive directors will be recruited on the basis
of a Letter of Appointment with a three month notice period.
106
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Illustration of Remuneration Policy
The charts below illustrate the remuneration opportunity provided to each Executive Director in line with the policy at different levels
of performance for the FY22 financial year (based on a full financial year for Mark Davies). Four scenarios have been illustrated for each
Executive Director:
Allan Lockhart
Mark Davies
)
£
(
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
2,000k
1,500k
1,000k
500k
0k
£1,836k
£1,601k
12.8%
29.4%
25.6%
36.7%
32.0%
£954k
12.3%
30.8%
£543k
£1,593k
£1,389k
12.8%
29.4%
25.6%
36.7%
32.0%
£828k
12.3%
30.8%
£471k
100.0%
56.9%
33.9%
29.6%
100.0%
56.9%
33.9%
29.6%
Minimum On Target Maximum Maximum
Minimum On Target Maximum Maximum
with
Share Price
Increase
with
Share Price
Increase
Fixed Pay
Annual Bonus
LTIP
LTIP value
with 50%
share price
growth
1. Minimum performance:
2. On target performance:
– comprising the minimum remuneration receivable (being normal
base salary (before the temporary waiver), pension and benefits
calculated using the 2020/21 figures;
– comprising fixed pay, annual bonus payment at 50% of the
maximum opportunity and long-term incentive awards vesting
at 25% of maximum opportunity;
3. Maximum performance:
– comprising fixed pay, 100% of annual bonus and 100% vesting
of long-term incentive awards, and
4. Maximum performance with share price increase:
– comprising fixed pay, 100% of annual bonus and 100% vesting
of long-term incentive awards with the value increased for share
price appreciation of 50%.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
107
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
REMUNERATION COMMI TTE E RE POR T
Remuneration Report
This section sets out how the Directors’ Remuneration Policy was implemented during the financial year ended 31 March 2021.
Where stated, disclosures regarding Director’s remuneration have been audited by the Company’s external auditor PwC. This section,
together with the Chairman’s Statement, is subject to an advisory vote at the 2021 AGM.
Remuneration Committee attendance
The Remuneration Committee is comprised of all the Non-Executive Directors including the Chair. During the year Kay Chaldecott stepped
down as Chairman of the Committee, although remained on the Committee. Alastair Miller took over as Chairman of the Committee.
Charlie Parker joined the Committee on 1 April 2021. The Remuneration Committee meets at least four times a year, together with ad-hoc
meetings when required. It met four times during the year and attendance was as follows:
Committee Members
Alastair Miller: Committee Chairman
Kay Chaldecott
Margaret Ford
Colin Rutherford
Charlie Parker
Attendance
4/4
4/4
4/4
4/4
0/0
The Chief Executive Officer and Head of HR were invited to attend all or part of the meetings as relevant. These individuals were not
present when their own remuneration was discussed. The Company Secretary acts as secretary to the Committee.
Role of the Remuneration Committee
The role of the Remuneration Committee is to establish a formal and transparent procedure for developing and implementing the
remuneration policy. The Policy should have regard to the risk appetite of the Company and Executive remuneration should be aligned
to the Company’s purpose and values and be clearly linked to the successful delivery of the Company’s long term strategy.
The Committee also reviews the remuneration of the Chairman and senior executives below Board level.
Other main responsibilities of the Committee are to:
– ensure that the Directors and executive management are provided with appropriate incentives to encourage enhanced performance
and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Company and to align their
interests with those of Shareholders;
– attract, retain and motivate Directors and executive management of the quality required to run the Company successfully without
paying more than is necessary, having regard to views of Shareholders and other stakeholders;
– review and have regard to workforce remuneration and related policies and the alignment of incentives and rewards with culture,
taking these into account when setting remuneration policy for Directors and especially when determining annual salary increases;
– considering and setting the objectives, annual pay and targets for the Directors and executive management; and
– review the operation of the Group’s share incentive schemes and the granting and vesting of the schemes.
Any potential conflicts of interest are managed carefully. No Director is present when their own remuneration is being discussed and
Committee papers are redacted where appropriate to avoid individuals seeing proposals before they are discussed by the Committee.
Each meeting minutes whether there are any potential conflicts for any members or attendees.
Focus of the Remuneration Committee during FY21
The Committee focussed on the following items within its remit during the year:
– considering carefully the impact of the COVID-19 pandemic on the application of the Remuneration Policy;
– reviewing the wider workforce arrangements and pay policies and reviews;
– reviewing incentive plan performance conditions;
– approving the remuneration report;
– review of a report from Korn Ferry on developments in market practice in remuneration matters;
– setting the bonus KPI’s for the CEO and CFO for FY21 to align with strategy;
– considering the wider shareholder experience during the COVID-19 pandemic; and
– determining the grant level and performance conditions for the FY21 PSP award.
108
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Remuneration Committee advisor
The Committee keeps itself fully informed on developments and best practice in the field of remuneration and it seeks advice
from external advisers when appropriate. The Committee appoints its own independent remuneration advisers and appointed
Korn Ferry in 2018 following a competitive process. During the year the Committee continued to retain the services of Korn Ferry.
Korn Ferry is a member of the Remuneration Consultants Group and signatory to its Code of Conduct which can be found at
www.remunerationconsultantsgroup.com. During FY21 Korn Ferry did not provide any other services to the Company. Fees charged
by Korn Ferry were on a time and materials basis and totalled £25,993.75 in the year ended 31 March 2021. The Committee reviews the
performance and independence of its advisers on an annual basis and is satisfied that the advice provided is objective and independent.
Total remuneration payable to Directors for FY21 (audited)
The following tables show a single figure total of remuneration for the year ended 31 March 2021 for each of the Directors and compares
this figure to the prior year.
Executive Directors
Allan Lockhart
Mark Davies
David Lockhart5
Financial
Year
2021
2020
2021
2020
2021
2020
Salary1 £
470,000
470,000
408,000
408,000
197,500
395,000
Benefits2 £
2,839
2,739
1,883
1,930
24,139
11,400
Pension £
70,500
70,500
61,200
61,200
29,625
59,250
Subtotal for
fixed pay £
543,339
543,239
471,083
471,130
251,264
465,650
Cash
bonus3 £
65,800
–
79,968
–
–
–
Value
of bonus
deferred into
shares3 £
28,200
–
34,272
–
–
–
Long-term
incentive
plans4 £
–
–
–
–
–
–
Subtotal
for variable
pay £
94,000
–
114,240
–
–
–
Total £
637,339
543,239
585,323
471,130
251,264
465,650
1. Directors paid 20% of their base salaries to charity between 1 May – 1 August 2020.
2. Benefits are the Director’s private medical cover.
3. The Committee used discretion to reduce the value of the FY20 bonus (cash and shares) to zero. The Committee also used discretion to reduce the value of the
FY21 bonus (cash and shares) by 20%.
4. Although the performance period has not quite finished it is currently estimated that the LTIP awards will not meet the minimum performance hurdle and will lapse.
5. David Lockhart retired from the Board at the AGM on 14 August 2020. The amounts disclosed represent the remuneration for the period that David was an
Executive Director.
Non-Executive Directors
Margaret Ford
Kay Chaldecott
Alastair Miller
Charlie Parker2
Colin Rutherford
Financial Year
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Base Fee1,2 £
160,000
160,000
50,000
50,000
50,000
50,000
25,000
–
50,000
50,000
Audit Committee
Chairman3 £
–
–
–
–
–
7,500
–
–
4,176
–
Remuneration
Committee
Chairman4 £
–
–
3,324
7,500
7,500
–
–
–
–
–
Senior Independent
Non-Executive
Director £
–
–
–
–
7,500
7,500
–
–
–
–
Total £
160,000
160,000
53,324
57,500
65,000
65,000
25,000
–
54,176
50,000
1. Directors paid 20% of their fees to charity between 1 May – 1 August 2020.
2. Charlie Parker was appointed on 10 September 2020 and waived his fee via salary sacrifice to charity from appointment date to 31 March 2021
3. Colin Rutherford was appointed Audit Committee Chair on 10 September 2020. Alastair Miller stepped down as Audit Committee chair and took up the role
of Remuneration Committee chair.
4. Kay Chaldecott stepped down as Remuneration Committee Chair on 10 September 2020.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
109
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS REMUNERATION COMMI TTE E RE POR T
Annual bonus for the year to 31 March 2021 (audited)
Executive Directors had the opportunity to earn a bonus up to a maximum of 125% of salary on the basis of the achievement of the
following measures.
Threshold
Potential
% maximum
On target
Potential
% Maximum
Stretch
Potential
% Maximum
Actual
result
Actual % awarded
(before application of
Committee discretion)
Allan
Lockhart
Mark
Davies
At index
<5% below
5 %
6.25%
10% ahead
£21.1m
10%
20% ahead
12.5% >15% above
20%
25%
14.1%
£11.5m
10%
0%
10 %
0%
<52.5%
7.5%
-<50%
15%
<45%
30%
50.6%
7.5%
7.5%
Corporate
Growth based
Relative TAR
Earnings yield
(UFFO) –
£21.1m target
Financial discipline
LTV
Strategic
Strategic objectives Performance
in line with
expectations
6.25%
Good
performance
above
expectations
12.5% Very strong
performance
25%
See
opposite
7.5%
17.5%
Total:
% of maximum
(before application
of discretion)
Amount awarded
by Committee after
applying discretion
to reduce the bonus
by 20%
25%
50%
100%
25%
35%
20%
28%
110
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
The objectives of the CEO and CFO for the year were:
Objective
Allan Lockhart
– ESG Targets :
– Governance – to implement TCFD review
recommendations relating to governance
Performance
– Significant improvements have been made to the
Schedule of Matters relating to ESG and key
responsibilities for ESG
– Social – Trussell Trust: Fund Raising in the year
– Food donations were up by 300% and financial
– Environmental – to construct a tangible plan to
achieve net zero emissions by 2050 or before
– To make progress on the Disposal programme
(threshold, target and stretch measures)
– To develop Public and private Partnerships
donations by 109%
– Board approval of plan achieved
– Over £80m of disposals were achieved which is above
the target measure
– Not achieved due to market conditions
Objective
Mark Davies
– ESG Targets:
– Governance – to implement TCFD review
recommendations relating to governance
Performance
– Significant improvements have been made to the
Schedule of Matters relating to ESG and key
responsibilities for ESG
– Social – Trussell Trust: Fund Raising in the year
– Food donations were up by 300% and financial
Amount awarded
as a % of salary (before
Committee discretion)
2.5% out of 5%
5% out of 10%
0% out of 10%
Total: 7.5% out of 25%
Amount awarded
as a % of salary (before
Committee discretion)
2.5% out of 5%
– Environmental – to construct a tangible plan to
achieve net zero emissions by 2050 or before
– To make progress on the Disposal programme
donations by 109%
– Board approval of plan achieved
– Over £80m of disposals were achieved which is above
the target measure
5% out of 10%
– To progress a release of capital from pubs
– Good progress has been made on the divestment
of pubs
10% out of 10%
Total: 17.5% out of 25%
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
111
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS REMUNERATION COMMI TTE E RE POR T
Long-term Incentive Plans (audited)
Vesting of Performance Share Plan awards
The performance conditions for the 2018 Performance Share Plan award that is capable of vesting on 29 May 2021 are:
Total Shareholder Return (50%)
Total Accounting Return (50%)
Performance
period start
May 2018
1 April 2018
Performance
period end
May 2021
31 March 2021
Minimum hurdle
100% of index
100% of index
Maximum hurdle Achieved / estimated
Less than 100%
150% of index
Less than 100%
150% of index
Although the performance period has not quite finished it is currently estimated that the awards will not meet the minimum hurdle and will
lapse. Full details of the award are contained in the table of directors’ share interests later in this report.
PSP awards granted in the year to 31 March 2021 (audited)
The following Performance Share Plan awards were granted to Executive Directors as nil cost options on 21 August 2020; with the grant
level scaled back by one third from the usual policy level, recognising the fall in the share price from pre COVID levels.
Executive
Allan Lockhart
Mark Davies
Value of awards at
grant date* (% salary)
£313,333 (67%)
£272,000 (67%)
Number of shares
comprising award
497,354
431,746
% of award vesting
at threshold
25%
25%
Vesting Period
End Date
21 Aug 2023
21 June 2023
Holding Period
End Date
21 Aug 2025
21 Aug 2025
* The closing price on the day before the grant date has been used to determine the number of shares comprising the award. This was £1.762.
50% of each award may vest based on the Company’s TSR compared to a group of UK REITs.
50% of each award may vest based on the Company’s Total Accounting Return (“TAR”) compared to a group of UK REITs that report their
NAV on an EPRA basis. TAR is defined as the annualised return over the performance period based on the change in EPRA NAV per
share and the level of dividends paid per share.
The targets for both performance conditions are as follows:
Below threshold
Threshold
Maximum
TSR ranking vs. UK REITs
(50% of award)
Less than Median (50th percentile)
Equal to Median (50th percentile)
Equal to 62.5th percentile
Equal to Upper Quartile
(75th percentile) and above
Total Accounting Return ranking
vs. UK REITs (50% of award)
Less than Median (50th percentile)
Equal to Median (50th percentile)
Equal to 62.5th percentile
Equal to Upper Quartile
(75th percentile) and above
Vesting (% of award)1
0
25
75
100
1. Vesting is calculated on a straight line basis between 25%, 75% and 100%.
The TSR and TAR comparator group was composed of the companies set out in the list below.
SEGRO
LAND SECURITIES GROUP
GREAT PORTLAND ESTATES
WORKSPACE GROUP
BRITISH LAND
BIG YELLOW GROUP
UNITE GROUP
TRITAX BIG BOX REIT
CAPITAL & COUNTIES
PROPERTIES
DERWENT LONDON
HAMMERSON
ASSURA
SHAFTESBURY
ST MODWEN PROPERTIES
CLS HOLDINGS
LONDONMETRIC PROPERTY
SAFESTORE HOLDINGS
UK COMMERCIAL
PROPERTY REIT
PRIMARY HEALTH
PROPERTIES
GRAINGER
112
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Summary of Directors Interests (audited)
The beneficial interests of the Executive Directors in share awards and share options as at 31 March 2021 are shown in the
following tables.
Plan
USOP
PSP
DBP
PSP
PSP
DBP
PSP
Vesting by
Vested
Vested
May 2020
May 2021
Jun 2022
Jun 2021
Aug 2023
Plan
PSP
PSP
DBP
PSP
PSP
DBP
PSP
Vesting by1
Vested
Vested
Vested
May 2021
Jun 2022
Jun 2021
Aug 2023
Exercise/
share price at
date of award
£
2.35
3.46
2.86
2.98
1.77
1.79
0.63
Exercise/
share price at
date of award
£
3.34
3.46
2.86
2.98
1.77
1.80
0.63
Allan Lockhart
At
31 March
Granted
2020
–
338,000
–
154,559
–
62,194
–
170,772
–
290,915
–
66,952
–
497,354
1,083,392 497,354
Mark Davies
At
31 March
2020
159,144
145,465
61,044
160,725
252,540
58,587
–
Granted
–
–
–
–
–
–
431,746
837,505 431,746
Dividend
equivalent
shares added
–
–
–
–
–
–
–
Lapsed
–
(154,559)
–
–
–
–
–
(154,559)
Dividend
equivalent
shares added
–
–
–
–
–
–
–
–
Lapsed
(159,144)
(145,465)
–
–
–
–
–
(304,609)
Exercised
–
–
–
–
–
–
–
Exercised2
–
–
(61,044)
–
–
–
–
(61,044)
At
31 March
2021
338,000
–
62,194
170,772
290,915
66,952
497,354
1,426,187
At
31 March
2021
–
–
–
160,725
252,540
58,587
431,746
903,598
Grant Date
Sep 2011
Jun 2017
May 2018
May 2018
Jun 2019
Jul 2019
Aug 2020
Total
Grant Date
Jan 2017
Jun 2017
May 2018
May 2018
Jun 2019
Jul 2019
Aug 2020
Total
DBP = Deferred Bonus Plan.
PSP = Performance Share Plan.
USOP = Unapproved Share Option Plan.
1. A holding period of two years is applied following vesting
2. Mark’s awards were exercised on 18 June 2020, some were sold to cover tax at a share price of £0.683
Unapproved Share Option Plan
Awards made under the Unapproved Share Option Plan have vested and the participants have until the tenth anniversary from the date of
grant for each award in which to exercise the options. The exercise price per share to be paid upon exercise is shown against each award.
There were no exercises of awards or market value share options during the year.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
113
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS REMUNERATION COMMI TTE E RE POR T
Details of the Directors’ shareholdings and rights to shares (audited)
It is the Board’s policy that Executive Directors build up and retain a minimum shareholding of 200% of base salary. The net of tax value
of vested DBP and PSP awards may be counted towards the value of the executives’ shareholdings.
The beneficial interests of Directors who served during the year, in the shares of the Company are as follows:
Beneficially
owned shares
held at
31 March
2021
347,355
275,838
50,640
39,445
35,956
–
–
Value of
holding as
% of salary*
82%
63%
–
–
–
–
–
Unvested DBP
awards held at
31 March
2021**
66,952
58,587
–
–
–
–
–
Unvested PSP
awards held at
31 March
2021**
959,041
1,004,155
–
–
–
–
–
Vested DBP
awards held at
31 March
2021**
62,194
–
–
–
–
–
–
Vested but
unexercised
PSP awards
held at
31 March
2021
–
–
–
–
–
–
–
Vested but
unexercised
USOP awards
held at
31 March
2021
338,000
–
–
–
–
–
–
Total held
as at
31 March
2021
1,773,542
1,397,077
50,640
39,445
35,956
–
–
Allan Lockhart
Mark Davies
Margaret Ford
Kay Chaldecott
Alastair Miller
Colin Rutherford
Charlie Parker
* based on the closing share price of 93.8p as at 31 March 2021 and salary for 2020/21. Shareholding guidelines, under the new policy, require the CEO and CFO
to hold a minimum number of shares with a value in excess of 200% of base salary.
includes dividend equivalent shares added to that date. Although vested these awards have not yet been exercised.
**
DBP = Deferred Bonus Plan.
PSP = Performance Share Plan.
USOP = Unapproved (market value) Share Option Plan.
There have been no changes in the number of shares held from 31 March 2021 to 9 June 2021, being the latest practicable date before
the publication of this Annual Report.
Payments to past Directors
There have been no payments to past Directors
Historic Total Shareholder Return performance and Chief Executive Officer remuneration
The following information allows comparison of the Company’s TSR (based on share price growth and dividends reinvested) with the
remuneration of the CEO over the last ten years, together with bonus and LTIP pay-outs (as a percentage of the maximum).
250
200
150
100
50
0
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
NewRiver
FTSE 250
FTSE 350 REIT
The chart shows the Company’s TSR and that of the FTSE250 and the FTSE350 REIT Indices based on an initial investment of £100 on 1 April 2011 and values
at intervening financial year ends over a ten-year period to 31 March 2021. These are considered to be appropriate benchmarks for the graph as the Company
was a constituent of these indices during the financial year.
114
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
David
Lockhart
David
Lockhart
David
Lockhart
David
Lockhart
David
Lockhart
David
Lockhart
David
Lockhart
David
Lockhart
Allan
Lockhart
Allan
Lockhart
Allan
Lockhart
Total
remuneration (£) 337,500 467,500 504,000 642,000 850,000 1,792,205 1,341,958 1,012,946
Annual bonus
(% of max)
Total LTIP
vesting
(% of max)
100.0
50.0
69.0
42.0
70.0
36.5
32.6
66.7
76.3
77.3
13.1
–
–
–
–
–
911,972 543 ,239 637,339
64.0
–
–
–
20.0
–
CEO pay ratio
As the Company has less than 250 employees, we are not required to disclose the CEO pay ratio. We however consider it appropriate
to disclose our pay ratios on a voluntarily basis as we are committed to supporting strong governance and transparency. The ratio
of the CEO’s pay to the 25th, 50th and 75th percentile is shown below, along with the total pay for the employees at the three quartiles.
The Group employs the majority of its staff in managed pubs where the average age of its employees is significantly lower than the
median for the rest of the Group’s employees. Positions in managed pubs tend to offer hourly pay based on market rates, without any
performance related bonuses.
We have based the calculation on the methodology outlined in Option A under the regulations, although we have chosen not to disclose
the three salary levels for the relevant employees to allow a simpler comparison with the total pay of the CEO.
The ratio (calculated by reference to actual pay rates on 31 May 2021 and based on the CEO’s full salary (before the 20% charitable
donation) has reduced significantly compared to the prior year, principally because the CEO pay level has reduced. The total employee
pay at the 50th and 75th percentile has changed due to changes to the make up of the workforce (rather than this being reflective
of increases to pay levels in the workforce of this magnitude).
The Committee has used the ratio as part of the overall review of the policy and is comfortable that the ratio is a fair reflection of the
differences to the level of pay of the CEO compared to the workforce generally
Year
FY21
FY20
Method
Option A
Option A
25th percentile pay ratio
7:1
8:1
Median pay ratio
9:1
17:1
75th percentile pay ratio
19:1
34:1
The total pay for the individuals identified at the Lower quartile, Median and Upper quartile positions in FY20 and FY21 are set out below:
Upper quartile
Median
Lower quartile
FY2021
Total Pay
65,000
50,000
24,647
FY2020
Total Pay
68,845
31,542
15,995
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
115
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS REMUNERATION COMMI TTE E RE POR T
Annual percentage change in remuneration of Directors and employees
The table below shows the percentage change in salary or fee, taxable benefits and bonus for FY20 and FY21 for each individual Director
and for all permanent employees of the Group, excluding joiners and leavers.
Salary/fee
Benefits
Annual Bonus
Executive Directors
Allan Lockhart
Mark Davies
Non-Executive Directors
Margaret Ford
Kay Chaldecott
Alastair Miller
Charlie Parker
Colin Rutherford
All Employees1
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
N/A
N/A
N/A
N/A
N/A
0%
100%
100%
N/A
N/A
N/A
N/A
N/A
100%
1. All employees are used as there are no employees of the listed parent company.
Relative importance of spend on pay
The table below shows employee pay and distributions to shareholders for FY20 and FY19.
Total spend on employee pay1
Total distributions to shareholders (including share buy-backs)
FY21
£’000
13,033
_
FY20
£’000
13,172
65,828
% difference
from prior year
-1%
-100%
Notes:
1. Includes salaries, bonuses, social security costs and pension costs as shown in the notes to the Financial Statements.
What the Executive Directors can earn in FY22
Salaries and fees
The base salaries and fees for FY22 are set out below, which are unchanged from the prior year:
Allan Lockhart – Chief Executive Officer
Mark Davies – Chief Financial Officer
salary for FY22
£470,000
£408,000
0% increase
0% increase
Fees payable to the Chairman and Non-Executive Directors are as follows:
Chairman
Basic fee for a Non-Executive Director
Additional fee for serving as Chairman of the Audit and Remuneration Committees
Additional fee for serving as the Senior Independent Non-Executive Director
The Non-Executive directors’ fees were last increased in April 2018
Fee for FY22
£160,000
£50,000
£7,500
£7,500
116
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Annual bonus
The annual bonus will operate as laid out in the remuneration policy. Executive Directors will have the opportunity to earn a bonus
up to a normal maximum of 125% of salary.
We currently intend that 20% will be based on TAR versus the relevant IPD benchmark, 30% on Underlying Funds From Operations,
25% on Loan to Value and 25% on individual strategic objectives. There will be a full narrative of the Committee’s approach in next year’s
Directors’ Remuneration Report.
The measures have been selected to reflect a range of key financial and operational goals which support the Company’s strategic
objectives. The respective targets have not been disclosed as they are commercially sensitive. However, retrospective disclosure of the
targets and performance against them will be set out in the Remuneration Report for the year ending 31 March 2022.
Long-term incentives – Performance Share Plan
Grant levels will not exceed 100% of base salary. Awards will be subject to 50% each of relative TSR and TAR compared to a sector peer
group. Awards must be held for a further two years after vesting.
2020 Annual General Meeting shareholder votes
At the Annual General Meeting held on 14 August 2020, votes cast by proxy and at the meeting in respect of the resolution to approve the
remuneration report were as set out below:
Votes for
%
Votes against
Total shares for
and against
%
Votes withheld
170,325,322
99.88
200,855
0.12
170,526,177
47,013
160,581,406
94.19
9,902,752
5.81
170,484,158
89,031
That the Directors’ remuneration
report be received and approved
That the Directors’ remuneration
policy be received and approved
Signed on behalf of the Board
ALASTAIR MILLER
Committee Chairman
9 June 2021
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
117
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS DIRECTORS’ REPORT
DIRECTORS’ REPORT
Results and dividend
The results for the year are set out in the financial statements.
The Group did not pay any dividends during the year (2020:
£65.8 million). Further details on the dividend payments are set
out in note 13 to the financial statements.
The Board
The Directors, who served throughout the year unless stated
otherwise, are detailed below:
Margaret Ford
Allan Lockhart
Mark Davies
David Lockhart
Kay Chaldecott
Alastair Miller
Charlie Parker
Colin Rutherford
Service in the year 31 March 2021
Served throughout the year
Served throughout the year
Served throughout the year
Retired 14 August 2020
Served throughout the year
Served throughout the year
Appointed 10 September 2020
Served throughout the year
Unless stated otherwise these directors were in office during
the year and up to the date of signing the financial statements.
The roles and biographies of the Directors in office as at the date
of this report are set out on pages 78 to 79.
Powers of Directors
Subject to the Company’s Articles of Association, UK legislation
and any directions given by special resolution, the business of the
Company is managed by the Board, which may exercise all the
powers of the Company.
The Board’s role is to provide entrepreneurial leadership of the
Company within a framework of prudent and effective controls
which enables risk to be assessed and managed. It also sets up
the Group’s strategic aims, ensuring that the necessary financial
and human resources are in place for the Group to meet its
objectives and review management performance. The Board
also sets the Group’s values, standards and culture.
The Directors present their report together with the audited
consolidated financial statements and the report of the auditor
for the year ended 31 March 2021.
Principal activities and status
NewRiver REIT plc (“the Company”) is a premium listed REIT
on the London Stock Exchange. The Company is a specialist real
estate investor, asset manager and developer focused solely
on the UK retail and leisure sector. Details of the Group’s principal
subsidiary undertakings are set out on pages 175 to 176.
Governance
The Financial Reporting Council published a revised UK Corporate
Governance Code in July 2018 (the Code). Further information
on the Code can be found on the Financial Reporting Council’s
website at: www.frc.org.uk. The Company’s Statement on
Governance can be found on page 82.
Additional Information
Additional information which is incorporated by reference into
this Directors’ report, including information required in accordance
with the Companies Act 2006 and the Listing Rule 9.8.4R of the
UK Financial Conduct Authority’s Listing Rules, can be located
as follows:
Directors’
responsibility statement
s.172 statement
Staff, culture and
employee involvement
Directors’ interests
Stakeholder engagement
Environmental policy
Greenhouse
gas emissions
Future business
developments
Financial risk
management
objectives and policies
Going concern
Governance report
Listing Rule:
9.8.4R (1)(2) (5-14)(B)
9.8.4R (4)
Page 121
Details can be found on page 83
Staff – pages 10 to 12
Details can be found
on pages 99 to 117 of the
Directors’ Remuneration Report
Strategic report – page 10
Governance report – pages 83 to 85
ESG report – pages 46 to 65
ESG report – page 63
Strategic Report – pages 1 to 76
Pages 66 to 74
Page 76 (Going Concern)
Pages 77 to 91
Not applicable
Long term incentive plans –
pages 99 to 117
118
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Directors’ interests
Details of the Directors’ share interests can be found in
the Remuneration Committee report on pages 99 to 117.
All related party transactions are disclosed in note 29 to the
financial statements.
Directors’ indemnification and insurance
The Company’s Articles of Association provide for the Directors
and officers of the Company to be appropriately indemnified,
subject to the provisions of the Companies Act 2006.
Qualifying third party indemnity provisions (as defined by section
234 of the Companies Act 2006) were in force during the year
ended 31 March 2021 and remain in force at the date of signing
this report. The Company purchases and maintains insurance
for the Directors and officers of the Company in performing
their duties, as permitted by section 233 Companies Act 2006.
This insurance has been in place during the year and remains
in place at the date of signing this report.
Articles of Association
The rules governing the appointment and replacement of
Directors are contained in the Company’s Articles of Association.
Changes to the Articles of Association must be approved by
shareholders in accordance with legislation in force from time
to time. A copy of the Company’s Articles of Association can
be found on the Company’s website, www.nrr.co.uk.
Significant interests
The table below shows the interests in shares notified to the
Company in accordance with Chapter 5 of the Disclosure and
Transparency Rules issued by the Financial Conduct Authority.
As at 31 March 2021 and as at 9 June 2021 (being the latest
practicable date prior to publication of the Annual Report):
As at 31 March 2021
Shareholder
JP Morgan Asset Management
M&G
IntegraFin Holdings
BlackRock
Farringdon Capital Mgmt
As at 9 June 2021
Shareholder
M&G
IntegraFin Holdings
Farringdon Capital Management
Internal controls review
Taking into account the principal risks, emerging risks and the
ongoing work of the Audit Committee in monitoring the risk
management and internal control systems on behalf of the Board,
the Directors:
– are satisfied that they have carried out a robust assessment
of the principal and emerging risks facing the Group,
including those that would threaten its business model,
future performance, solvency or liquidity; and
– have reviewed the effectiveness of the risk management
and internal control systems and no significant failings
were identified.
Branches outside the UK
The Company has no branches outside the UK.
Financial instruments
The Group’s exposure to, and management of, capital risk,
market risk and liquidity risk is set out in note 27 to the Group’s
financial statements.
Number of shares
18,985,558
17,768,427
15,308,090
15,290,775
9,663,935
% of issued Share Capital
6.20%
5.80%
5.00%
4.99%
3.16%
Number of shares
17,768,427
15,308,090
9,663,935
% of issued Share Capital
5.80%
5.00%
3.16%
Share capital structure
As at 31 March 2021, the Company’s issued share capital consisted
of 308,925,158 ordinary shares of one penny each. No shares
are held in treasury. 2,625,006 ordinary shares are held in the
Employee Benefit Trust. Therefore, the total number of voting
rights in the Company is 306,300,152. Further details of the share
capital, including changes throughout the year are summarised
in note 25 of the financial statements.
Ordinary shareholders are entitled to receive notice of,
and to attend and speak at, any general meeting of the Company.
On a show of hands, every shareholder present in person or by
proxy (or being a corporation represented by a duly authorised
representative) shall have one vote, and on a poll every
shareholder who is present in person or by proxy shall have one
vote for every share of which he or she is the holder. The Notice
of Annual General Meeting specifies deadlines for exercising
voting rights and appointing a proxy or proxies.
There are no restrictions on the transfer of shares except the
UK Real Estate Investment Trust restrictions. The Directors are not
aware of any agreements between holders of the Company’s
shares that may result in the restriction of the transfer of securities
or on voting rights.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
119
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Auditor
PricewaterhouseCoopers LLP has indicated their willingness
to continue in office and a resolution seeking to re-appoint
PricewaterhouseCoopers LLP will be proposed at the
forthcoming AGM.
Annual General Meeting
The Annual General Meeting will be held on 27 July 2021.
At the meeting, resolutions will be proposed to receive the
Annual Report and financial statements, approve the Directors’
remuneration report, re-elect Directors and appoint as auditor
and determine the remuneration of PricewaterhouseCoopers LLP.
In addition, it will be proposed that expiring authorities to allot
shares and to repurchase shares are extended. An explanation
of the resolutions to be put to the shareholders at the 2021 AGM
and the recommendations in relation to them will be set out in the
2021 AGM Notice.
Political donations
No political donations were made by the Company
or its subsidiaries during the year (2020: Nil).
The Directors’ Report was approved by the Board of Directors
on 9 June 2021.
By Order of the Board
KERIN WILLIAMS
Company Secretary
9 June 2021
DIRECTORS’ REPORT
Authority for the Company to purchase
its own shares
Subject to authorisation by shareholder resolution, the Company
may purchase its own shares in accordance with the Companies
Act 2006. Any shares which have been bought back may be
held as treasury shares or cancelled immediately upon completion
of the purchase. At the Annual General Meeting held in 2020,
shareholders authorised the Company to make purchases (within
the meaning of section 693 of the Companies Act 2006) of the
Company’s ordinary shares, up to a maximum of 10% of the issued
share capital at that time, as well as the allotment of new shares
within certain limits approved by shareholders. The Company has
not repurchased any of its ordinary shares under this authority,
which is due to expire at the AGM in 2021 and appropriate
renewals will be sought.
There are no securities of the Company carrying special rights
with regards to the control of the Company in issue.
Change of control – significant agreements
The Company was not party to any significant contracts that are
subject to change of control permissions in the event of a change
of control, but other agreements may alter or terminate upon such
an event.
Compensation for loss of office
The Company does not have any agreements with any Executive
Director or employee that would provide compensation for loss
of office or employment resulting from a takeover except that
the Group’s incentive plans and share plans contain provisions
relating to termination of employment. Further information is
provided in the Directors’ Remuneration Policy summary set out
on pages 102 to 107.
Disclosure of information
to independent auditors
The Directors who held office at the date of approval of this
Directors’ report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company’s
auditor is unaware and that each Director has taken all the steps
that they ought to have taken as a Director to make themselves
aware of any relevant audit information and ensure that the auditor
is aware of such information.
The confirmation is given and should be interpreted in accordance
with the provisions of section 418 of the Companies Act 2006.
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STATEMENT OF DIRECTORS’
RESPONSIBILITIES IN RESPECT
OF THE FINANCIAL STATEMENTS
Directors’ confirmations
The Directors consider that the annual report and accounts, taken
as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group’s
and Company’s position and performance, business model
and strategy.
Each of the Directors, whose names and functions are listed in the
Governance Report confirm that, to the best of their knowledge:
– the Group financial statements, which have been prepared
in accordance with IFRSs as issued by the International
Accounting Standards Board (IASB), give a true and fair view
of the assets, liabilities, financial position and loss of the Group;
– the Company financial statements, which have been prepared
in accordance with United Kingdom Accounting Standards,
comprising FRS 101, give a true and fair view of the assets,
liabilities, financial position and loss of the Company; and
– the Strategic Report includes a fair review of the development
and performance of the business and the position of the Group
and Company, together with a description of the principal risks
and uncertainties that it faces.
In the case of each Director in office at the date the Directors’
report is approved:
– so far as the Director is aware, there is no relevant audit
information of which the Group’s and Company’s auditors are
unaware; and
– they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any
relevant audit information and to establish that the Group’s
and Company’s auditors are aware of that information.
BARONESS FORD OBE
Non-Executive Chairman
9 June 2021
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the group financial statements in accordance
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union in accordance
with international accounting standards in conformity with
the requirements of the Companies Act 2006. Additionally,
the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules require the directors to prepare the group
financial statements in accordance with international financial
reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
Under Company law, Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group for that period. In preparing the financial
statements, the Directors are required to:
– select suitable accounting policies and then apply
them consistently;
– state whether, for the group and company, international
accounting standards in conformity with the requirements
of the Companies Act 2006 and, for the group, international
financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union;
– applicable IFRSs as adopted by the European Union;
– have been followed, subject to any material departures
disclosed and explained in the financial statements;
– make judgements and accounting estimates that are
reasonable and prudent; and
– prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Company will continue in business.
The Directors are also responsible for safeguarding the assets
of the Group and Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company
and enable them to ensure that the financial statements and the
Directors’ Remuneration Report comply with the Companies
Act 2006.
The Directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
121
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Independent auditors’ report to the
members of NewRiver REIT plc
Report on the audit of the financial statements
Opinion
In our opinion:
●
● NewRiver REIT plc’s Group financial statements and Company financial statements (the “financial statements”) give a
true and fair view of the state of the Group’s and of the Company’s affairs as at 31 March 2021 and of the Group’s loss
and cash flows for the year then ended;
the Group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”,
and applicable law); and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
●
●
We have audited the financial statements, included within the Annual Report and Accounts 2021 (the “Annual Report”),
which comprise: the Consolidated and Company Balance Sheets as at 31 March 2021; the Consolidated Statement of
Comprehensive Income, the Consolidated Cash Flow Statement, and the Consolidated and Company Statements of
Changes in Equity for the year then ended; and the notes to the financial statements, which include a description of the
significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Separate opinion in relation to international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union
As explained in Note 1 to the financial statements, the Group, in addition to applying international accounting standards in
conformity with the requirements of the Companies Act 2006, has also applied international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. In our opinion, the Group financial
statements have been properly prepared in accordance with international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were
not provided.
Other than those disclosed in Note 6 and in the Audit Committee report, we have provided no non-audit services to the Group
or its controlled undertakings in the period under audit.
Our audit approach
Overview
Audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the Group
financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls,
and the industry in which the Group operates.
Key audit matters
Valuation of investment properties and public houses held as property, plant and equipment (Group)
Valuation of investments in subsidiary companies (Company)
Recoverability of trade receivables, accrued income, lease incentives and service charge debtor balances (Group)
Impact of COVID-19 (Group and Company)
Materiality
● Overall Group materiality: £12.2 million (2020: £13.7 million) based on 1% of Group's total assets.
● Specific Group materiality: £1.8 million (2020: £2.3 million) based on 5% of the Group's weighted average EPRA earnings
from 2019 to 2021.
● Overall Company materiality: £11.6 million (2020: £13.0 million) based on 1% of total assets (capped at 95% of Group
overall materiality).
● Overall performance materiality: £9.2 million (Group), specific performance materiality: £1.4 million (Group) and overall
performance materiality: £8.7 million (Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of
the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The Key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the Key audit matter
Valuation of investment properties and public houses
held as property, plant and equipment (Group)
Refer to page 97 (Audit Committee report), pages
138 to 158 (Notes to the financial statements - Note 1
Given the inherent subjectivity in the valuation of investment
properties, the need for deep market knowledge when
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
INDEPEN DENT AUDIT ORS' REP O RT
(Accounting policies), Note 2 (Critical accounting
judgements and estimates) Note 14 (Investment
properties) and Note 17 (Property plant and
equipment).
determining the most appropriate assumptions and the
technicalities of the valuation methodology, we engaged our
internal valuation experts (qualified chartered surveyors) to
assist us in our audit of this matter.
The Group owns and manages a portfolio of
commercial assets within the UK which includes
shopping centres, retail warehouses, high street
shops, pubs and a number of development
properties. The total value of the portfolio as at 31
March 2021 was £974.2 million (investment
properties £877.3 million and £52.7 million public
houses held as property, plant and equipment, and
£44.1 million held on a proportional basis within the
joint ventures) (2020: £1.2 billion).
This was identified as a Key audit matter given the
valuation of the portfolio is inherently subjective and
complex due to, among other factors, the individual
nature of each property, its location, and the
expected future rental streams for that particular
property. The wider challenges facing the retail real
estate market, including the impact of COVID-19 and
the relative lack of comparable transactions, as well
as the Government mandated closure of pubs due to
COVID-19, further contributed to the subjectivity for
the year ended 31 March 2021. The valuations were
carried out by external valuers, Colliers, Knight Frank
and Duff & Phelps in accordance with RICS Valuation
- Professional Standards and the Group accounting
policies which incorporate the requirements of
International Accounting Standard 40 'Investment
Property'.
Retail assets
The shopping centres, retail warehouses and high
street assets are valued at investment value,
reflecting the fact that the properties are largely
existing investment properties generating rental
income.
In determining the valuation of retail assets, the
valuers take into account property specific
information such as the current tenancy agreements
and rental income. They then apply judgemental
assumptions such as estimated rental value ('ERV')
and yield, which are influenced by prevailing market
yields and where appropriate comparable market
transactions, to arrive at the final valuation. Due to
the unique nature of each property, the judgemental
assumptions to be applied are determined having
regard to the individual property characteristics at a
detailed tenant by tenant level, as well as considering
the qualities of the property as a whole.
Development assets
Development assets which are subject to active
ongoing development are valued using the residual
valuation approach. Certain operational properties
which have development potential are valued at
investment value, adjusted to account for
development potential.
Material valuation uncertainty clause included in the public
house valuation reports
We considered the adequacy of the disclosures made in notes
2 (critical judgements and estimates) and 14 and 17
(investment properties and public houses held as property,
plant and equipment) to the financial statements. These notes
explain that there is significant estimation uncertainty in relation
to the valuation of public house investment properties of £195.5
million, and the valuation of public houses held as property,
plant and equipment of £52.7 million, for a total of £248.2
million included in the Consolidated balance sheet as at 31
March 2021. We discussed this with management and obtained
sufficient appropriate audit evidence to demonstrate that
management’s assessment of the suitability of the inclusion of
the valuation in the Consolidated balance sheet and
disclosures made in the financial statements was appropriate.
Assessing the valuers’ expertise and objectivity
We assessed the external valuers' qualifications and expertise
and read their terms of engagement with the Group to
determine whether there were any matters that might have
affected their objectivity or may have imposed scope limitations
on their work. We also considered fee arrangements between
the external valuers and the Group, and other engagement
which might exist between the Group and the valuers. We
found no evidence to suggest that the objectivity of the external
valuers in their performance of the valuations was
compromised.
Data provided to the valuers
We checked the accuracy of the underlying lease data, and
capital expenditure used by the external valuers in their
valuation of the portfolio by tracing the data back to the signed
lease agreements on a sample basis. For the pub assets we
also traced the EBITDA data back to the underlying accounting
records. We found the data provided by management to the
valuers to be appropriate for the purposes of the valuation.
Assumptions and estimates used by the valuers
We read the external valuation reports for the assets and
confirmed that the valuation approach for each was in
accordance with RICS standards and suitable for use in
determining the final value for the purpose of the financial
statements. We met with the external valuers to discuss and
challenge the valuation process, the key assumptions and the
rationale behind the more significant valuation movements
during the year. It was evident from our interaction with the
external valuers and from our review of the valuation reports,
that close attention had been paid to the individual
characteristics of each property, such as the tenant base,
overall quality, latest leasing activity and geographic location,
depending on the type of asset being valued. In addition, we
performed the procedures described below for each type of
property. We were able to obtain sufficient evidence to support
the valuation and did not identify any material issues during our
work.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
In determining the valuation of development property
held under a residual valuation, the valuers take into
account the property specific information, such as the
development plans for the site. They then apply a
number of judgemental assumptions including ERV
and yield within the gross development value,
estimated costs to complete and developers profit to
arrive at the valuation. Due to the unique nature of an
ongoing development, the judgemental assumptions
to be applied are determined having regard to the
nature and risks associated with each development.
In determining the valuation of investment properties
with development potential, the valuers initially follow
the same methodology as described previously to
arrive at an investment value. The likelihood of the
development progressing, and the status of planning
consents for the development are taken into account
and the valuers make adjustments to the valuation to
reflect development potential. In determining the
value of development land, valuers primarily take into
account recent comparable land transactions.
Material uncertainty clause included in the public
house valuation reports
The third-party valuers engaged by management to
value the public houses, have included material
valuation uncertainty clauses in their reports. These
clauses highlight that less certainty, and
consequently a higher degree of caution, should be
attached to the valuation as a result of the COVID-19
pandemic. This represents a significant estimation
uncertainty in relation to the valuation of investment
properties and public houses held as property, plant
and equipment.
Pub assets
The pub assets are valued on the fair maintainable
trade (‘FMT’) of the pub. A multiple is then applied to
this FMT. The valuers use actual EBITDA to inform
their opinion of FMT. Adjustments are made between
the EBITDA and FMT depending on a number of
factors, such as management changes and the
impact of capex spend. In determining the valuation
of the pubs, the valuers take into account comparable
market transactions. In forming their assessment of
fair value as at 31 March 2021 the valuers have had
consideration for the impact of COVID-19.
Retail assets
For retail assets, we obtained details of each property and set
an expected range for yield and capital value movement,
determined by reference to published benchmarks and using
our experience and knowledge of the market. We compared the
yield and capital value movement of each property with our
expected range. We also considered the reasonableness of
other assumptions that are not so readily comparable with
published benchmarks, such as ERV. When assumptions were
outside of the expected range, we undertook further
investigations and, when necessary, obtained corroborating
evidence to support the explanations received. This enabled us
to assess the property specific factors that had an impact on
the value, including recent comparable transactions where
appropriate, to conclude on the reasonableness of the
assumptions utilised.
Development assets
For significant developments valued by the residual method, we
obtained the development appraisal and assessed the
reasonableness of the valuers' key assumptions. This includes
comparing the yield to comparable market benchmarks,
comparing the costs to complete estimates to development
plans, and considering the reasonableness of other
assumptions that are not so readily comparable, such as
developers profit. Where necessary, we obtained corroborating
evidence to support explanations received. For investment
properties with development potential we performed the same
procedures as described for retail assets. Additionally, we
considered the reasonableness of any additional value
recognised for development potential by reviewing the stage of
progress of the proposed development, including any planning
consent obtained. Properties held for future development are
valued using the highest and best use method, by adopting the
higher of the residual method of valuation allowing for all
associated risks, and the investment method of valuation for
the existing asset.
Pub assets
For the pub assets, we obtained details of the asset portfolio
and set an expected range for multiple and capital value
movement, determined by reference to published benchmarks
and using our experience and knowledge of the market. We
compared the multiple value and capital value movement of
each portfolio with our expected range.
We also considered the reasonableness of other assumptions
that are not so readily comparable with published benchmarks,
such as the EBITDA to FMT assumptions. We considered
specific assets within the portfolio on an individual basis based
on risk criteria including multiple outliers or non-trading assets.
When assumptions were outside the expected range, we
undertook further investigations and, where necessary,
obtained corroborating evidence to support the explanations
received.
We also tested a sample of asset disposals during the year to
assess the level of profit or loss recognised as a guide to the
historical accuracy of valuations at the individual asset level.
Overall findings
We found that the assumptions used in the valuations were
predominantly consistent with our expectations and comparable
benchmarking information for the asset type and that the
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
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assumptions were applied appropriately and reflected the
comparable market transactions where appropriate . Where
assumptions did not fall within our expected range, we were
satisfied that the variances were due to property specific
factors. We concluded that the assumptions used in the
valuations by the external valuers were supportable in light of
available comparable market evidence.
Valuation of investments in subsidiary companies
(Company)
Refer to pages 173 to 175 (Notes to the financial
statements - Note A (Accounting policies) and Note B
(investments in subsidiaries)).
We obtained the Company’s assessment of the valuation of
investments held in subsidiary companies as at 31 March 2021.
- We assessed the accounting policy for investments in
The Company has investments in subsidiary
companies of £570.3 million as at 31 March 2021
(2020 restated: £560.4 million). The Company's
accounting policy is to hold its investments in
subsidiary companies at cost less any provision for
impairment. As a result of material reductions in the
valuations of investment properties and other
revalued properties, management determined that
there were indicators of impairment in the Company
carrying values of investments in subsidiary
companies and an impairment of £220.4 million was
recorded as at 31 March 2021. In addition,
management identified an error in the calculation of
the impairment in investments in subsidiary
companies in the prior year of £71.8 million.
Given the material size of these investment
impairments and the level of estimation involved, we
considered this to be a Key audit matter.
Recoverability of trade receivables, accrued income,
lease incentives and service charge debtor balances
(Group)
subsidiaries and verified that the methodology used
by the directors in arriving at the value of each
subsidiary was compliant with FRS 101 "Reduced
Disclosure Framework".
- We identified the key judgement within the valuation
of investments in subsidiary companies to be the
valuation of investment properties. For details on our
work on property valuations, refer to the previous Key
audit matter.
- We verified that the carrying values of investment
properties had been appropriately included in the
assessment of the valuation of investments in
subsidiary companies.
- We reviewed the disclosures within the Annual
Report, including the £119.9 million impairment
restatement and the £15.4 million addition of the prior
year investments in subsidiary companies and
considered these to be complete and accurate.
Based on the work performed, we concur with the amount of
impairment recognised and that the commensurate transfer to
merger reserves is appropriate. We evaluated the disclosures
in the financial statements and found these to be appropriate.
Refer to page 138 to 169 Note 1 (Accounting
policies), Note 2 (Critical accounting judgements and
estimates - Impairment of trade receivables) and
Note 18 (Trade and other receivables).
We obtained management’s assessment and calculations over
the IFRS 9 expected credit loss (ECL) which covered trade
receivables, accrued income, lease incentives and service
charge debtor balances.
- We held discussions with management to understand
their approach for calculating each of the ECL
provisions.
- We tested the calculations and assumptions used
within the ECL calculations, and obtained supporting
evidence to validate the risk profile of the balances
and the expected probability of default based on
management’s communications with the tenants and
the recoverability of the debtors to date.
- We performed subsequent receipts testing to support
the recoverability of the balances.
- We performed our own market analysis and used this
to challenge management’s assumptions over the
probability of default.
From the work we performed, we considered the level of
impairment loss to be consistent with the evidence obtained
and the ECL calculated by management to be a reasonable
estimate.
The recoverability of trade receivables, accrued
income, lease incentives and service charge debtors
was considered a Key audit matter in light of the
impact of COVID-19 on the level of outstanding
debtors as at 31 March 2021, the uncertainty of cash
collections and the estimation required when
calculating the expected credit loss (ECL). The Group
has used historic and forward-looking information to
estimate the probability of default on the gross value
of trade receivables, accrued income, lease
incentives and service charge debtors, incorporating
debt collection history, discussions and agreements
with specific tenants and management’s expectations
of the probability of default. As at 31 March 2021, the
Group has an impairment provision of £9.3 million
(2020: £4.2 million) against £18.9 million (2020:
£10.4 million) of gross trade receivables. In
estimating this, management has applied an ECL
model in accordance with the Group’s accounting
policy and IFRS 9 Financial Instruments.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
Given the material size of these receivable balances,
the size of impairment and the level of estimation
involved, we considered this to be a Key audit matter.
Impact of COVID-19 (Group and Company)
Refer to page 138, Note 1 of the Group financial
statements for the directors’ disclosures related to
going concern; page 144, Note 2 to the Group
financial statements for the directors’ disclosures of
the critical accounting estimates and judgements;
pages 75 and 76 for the directors’ assessment of
viability; and pages 95 to 98 for the views of the Audit
Committee.
The directors have considered the potential impact of
the pandemic, COVID-19, on the current and future
operations of the Group and the Company. In doing
so, the directors have made estimates and
judgements that are critical to the outcomes of these
considerations in particular over the areas of
valuation of investment properties and public houses
held as property, plant and equipment and the
potential impairment of tenant receivables in light of
the impact of the COVID-19 pandemic.
Management has also performed a detailed
assessment of the impact of COVID-19 on the future
cash flows of the Group and the Company. This
analysis has been used to assess the Group's
liquidity headroom and to consider its compliance
with the debt covenants in its financing
arrangements. Disclosures of the risk to the Group
and Company of COVID-19 and management's
conclusions on going concern and viability have been
included within the relevant sections of the Annual
Report. Having considered these scenarios and the
range of possible actions available, management has
concluded that there is no material uncertainty in
respect of these conclusions. As a result of the
impact of COVID-19 on the business, the sector and
the wider economy, we determined management’s
consideration of the potential impact of COVID-19,
including the assessment of going concern and
viability, to be a Key audit matter.
In addition, management’s way of working, including
the operation of controls, has changed during the
year as a result of the COVID-19 pandemic and
employees have been working remotely and using
technology enabled working practices.
An explanation of how our audit addressed the areas of
COVID-19 pandemic risk associated with the valuation of
investment properties and public houses held as property, plant
and equipment and the potential impairment of tenant
receivables is included in the Key audit matters described
above.
In assessing the directors’ consideration of the potential impact
of COVID-19, our audit procedures on going concern included:
- We obtained management's paper that supports the
Board's assessment and conclusions with respect to
the disclosures provided over going concern.
- We discussed the key assumptions supporting the
going concern review and challenged the rationale for
those assumptions, using our knowledge of the
business and the industry.
- We checked the accuracy of management’s model
and challenged the forecasts to ensure they reflect
the latest expectations of the impact of COVID-19 on
the Retail and Pubs sectors.
- We understood the mitigating actions being taken by
management, including suspending the dividend
payment during the year and active property asset
disposals.
- We reviewed management's sensitivity scenarios,
which include further potential mitigating actions
available to management. We performed our own
sensitivity analysis on the forecasts, focusing on the
Loan to Value (LTV) covenant, to identify the key
assumptions and understand the potential impact on
the financial covenants and liquidity headroom. We
confirmed the Group's rolling credit facility, term loan
and unsecured bond and confirmed the Group’s long-
term credit rating.
Based on the results of the procedures performed, and on the
information available as of the date of the directors’ approval of
the financial statements, we consider the forecasts to be
reasonable and that it continues to be appropriate to prepare
the Group and the Company on a going concern basis and that
appropriate disclosures are provided in the Annual Report.
Other procedures that we performed in relation to the impact of
COVID-19 included:
-
-
Assessing the impact on the valuation of investments
in subsidiary companies, as explained in the
Valuation of investments in subsidiary companies
(Company) Key audit matter above.
Examining the directors’ post balance sheet events
disclosure in Note 30 to the Group financial
statements.
We also considered whether changes to working practices
brought about by COVID-19 had had an adverse impact on the
effectiveness of management’s business process and IT
controls. We did not identify any evidence of significant
deterioration in the control environment.
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How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and
controls, and the industry in which they operate.
The Group owns and invests in a number of shopping centres, retail warehouses, high street shops, pubs and developments
across the United Kingdom. These are held within a variety of subsidiaries, joint ventures and associates. Based on our
understanding of the Group we focussed our audit work primarily on three components being: Retail, Pubs and Joint ventures
and associates. The Retail, Pubs and Joint ventures and associates components were subject to a full scope audit given
their financial significance to the Group. All components were audited by the Group team. These procedures, together with
additional procedures performed at the Group level (including audit procedures over the consolidation and consolidation
adjustments), gave us the evidence we needed for our opinion on the Group financial statements as a whole. In respect of
the audit of the Company, the Group audit team performed a full scope statutory audit.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall
materiality
How we
determined it
Rationale for
benchmark
applied
Specific
materiality
How we
determined it
Rationale for
benchmark
applied
Financial statements - Group
£12.2 million (2020: £13.7 million).
1% of Group's total assets
Financial statements -
Company
£11.6 million (2020: £13.0
million).
1% of total assets (capped at
95% of Group overall
materiality).
We determined materiality based on total assets given the valuation of
investment properties and pubs held as property, plant and equipment,
whether held directly or through joint ventures and associates, is the
key determinant of the Group's value. This materiality was used in the
audit of investing and financing activities.
Given the NewRiver REIT
plc entity is primarily a
holding Company we
determined total assets to be
the appropriate benchmark.
£1.8 million (2020: £2.3 million).
5% of the Group's weighted average EPRA earnings from 2019
to 2021 (2020: 5% of the Group’s weighted average EPRA earnings
from 2018 to 2020).
In arriving at this materiality we had regard to the fact that
EPRA earnings are a secondary financial indicator of the Group (refer
to page 179 of the financial statements which includes a reconciliation
between IFRS and EPRA earnings) and a weighted average of the last
three years from 2019 to 2021 was utilised to reflect the one off impact
of COVID-19 on the Group’s results in 2020 and 2021. This materiality
was used in the audit of operating activities.
Not applicable.
Not applicable.
Not applicable.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality.
The range of materiality allocated across components was for investing and financing activities was £5.0 million to £11.6
million. The range of materiality allocated across components for operating activities was £0.6 million to £1.7 million.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope
of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example
in determining sample sizes. Our performance materiality for investing and financing activities was 75% of overall materiality,
128
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
amounting to £9.2 million for the Group financial statements and £8.7 million for the Company financial statements. Our
performance materiality for operating activities was 75% of specific materiality, amounting to £1.4 million for the Group
financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range
was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.61
million (Group audit) (2020: £0.69 million) for investing and financing activities, £0.09 million (Group audit) (2020: £0.12
million) for operating activities, and £0.58 million (Company audit) (2020: £0.65 million) as well as misstatements below those
amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group's and the Company’s ability to continue to adopt the going concern
basis of accounting included:
We obtained management's paper that supports the Board's assessment and conclusions with respect to the disclosures
provided over going concern;
We discussed the key assumptions supporting the going concern review and challenged the rationale for those
assumptions, using our knowledge of the business and the industry;
We checked the accuracy of management’s model and challenged the forecasts to ensure they reflect the latest
expectations of the impact of COVID-19 on the Retail and Pubs sectors;
Considering management’s forecasting accuracy by comparing how the forecasts made at the half year compare to the
actual performance in the second half of the year;
We understood the mitigating actions being taken by management, including suspending the dividend payment during
the year and active property asset disposals;
We reviewed management's sensitivity scenarios, which include further potential mitigating actions available to
management. We performed our own sensitivity analysis on the forecasts, focusing on the Loan to Value (LTV) covenant,
to identify the key assumptions and understand the potential impact on the financial covenants and liquidity headroom.
We confirmed the Group's rolling credit facility, term loan and unsecured bond and confirmed the Group’s long-term credit
rating; and
Reverse stress tested the downside going concern assessment by assessing the total fall in investment property required
in order to breach banking covenants.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group's and the Company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group's
and the Company's ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
129
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
INDEPEN DENT AUDIT ORS' REP O RT
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic Report and Directors' Report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions
and matters as described below.
Strategic Report and Directors' Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Directors' Report for the year ended 31 March 2021 is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the Strategic Report and Directors' Report.
Directors’ Remuneration
In our opinion, the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that
part of the corporate governance statement relating to the Company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review. Our additional responsibilities with respect to the corporate governance statement
as other information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit,
and we have nothing material to add or draw attention to in relation to:
The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being managed or mitigated;
The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their identification of any material uncertainties to the Group’s and
Company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial
statements;
The directors’ explanation as to their assessment of the Group's and Company’s prospects, the period this assessment
covers and why the period is appropriate; and
130
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
The directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Group was substantially less in scope than
an audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking
that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering
whether the statement is consistent with the financial statements and our knowledge and understanding of the Group and
Company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of
the corporate governance statement is materially consistent with the financial statements and our knowledge obtained
during the audit:
The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable,
and provides the information necessary for the members to assess the Group’s and Company's position, performance,
business model and strategy;
The section of the Annual Report that describes the review of effectiveness of risk management and internal control
systems; and
The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the Company’s
compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the
Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities in respect of the financial statements, the directors are
responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied
that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or have no
realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and
regulations related to non-compliance with health and safety or environmental and sustainability legislation and breaches of
the Real Estate Investment Trust (REIT) status section 1158 of the Corporation Tax Act 2010, and we considered the extent
to which non-compliance might have a material effect on the financial statements. We also considered those laws and
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
131
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
INDEPEN DENT AUDIT ORS' REP O RT
regulations that have a direct impact on the financial statements such as the Companies Act 2006. We evaluated
management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of
override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase
revenue or reduce expenditure, and management bias in accounting estimates and judgemental areas of the financial
statements such as the valuation of investment properties and public houses held as property plant and equipment. Audit
procedures performed by the engagement team included:
Discussions with management, including the Company Secretary, over their consideration of known or suspected
instances of non-compliance with laws and regulation and fraud;
Understanding and evaluating management’s controls designed to prevent and detect irregularities;
Assessment of matters reported on the Group’s whistleblowing helpline and the results of management’s investigation of
such matters where relevant;
Review of REIT tax compliance with the involvement of our tax specialists in the audit;
Procedures relating to the valuation of investment properties and public houses held as property, plant and equipment
described in the related Key audit matter above;
Reviewing relevant meeting minutes, including those of the Board of Directors and the Audit Committee; and
Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations or
posted by senior management.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial
statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations,
or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete
populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept
or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
we have not obtained all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been
received from branches not visited by us; or
certain disclosures of directors’ remuneration specified by law are not made; or
the Company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement
with the accounting records and returns.
132
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 4 July 2019 to audit the
financial statements for the year ended 31 March 2020 and subsequent financial periods. The period of total uninterrupted
engagement is two years, covering the years ended 31 March 2020 to 31 March 2021.
Christopher Burns (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
9 June 2021
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
133
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
F O R T HE Y E AR E ND ED 31 MA R CH 20 21
Revenue
Property operating expenses*
Net property income
Administrative expenses
Other income
Share of income / (loss) from joint ventures
Share of income / (loss) from associates
Net valuation movement
Loss on disposal of subsidiary
Loss on disposal of investment properties
Operating profit / (loss)
Finance income
Finance costs
(Loss) / profit for the year before taxation
Taxation
Profit / (loss) for the year after taxation
Loss for the year after taxation
Other comprehensive loss
Other movement
Revaluation of property, plant and equipment
Total comprehensive loss for the year
Loss per share
Basic (pence)
Diluted (pence)
Notes
4
5
6
7
15
16
14/17
8
9
10
10
11
12
12
Operating
and
financing
2021
£m
Fair value
adjustments
2021
£m
Operating and
financing
2020
£m
Fair value
adjustments
2020
£m
91.1
(47.1)
44.0
(23.4)
7.2
2.3
0.1
–
(2.2)
(5.5)
22.5
0.3
(23.1)
(0.3)
1.3
1.0
Total
2021
£m
91.1
(47.1)
44.0
(23.4)
7.2
3.5
0.7
–
–
–
–
–
1.2
0.6
(154.7)
(154.7)
–
–
(2.2)
(5.5)
(152.9)
(130.4)
–
–
0.3
(23.1)
(152.9)
(153.2)
1.4
(151.5)
2.7
(150.5)
(150.5)
0.2
(0.5)
(150.8)
(49.1)
(49.1)
144.8
(55.0)
89.8
(20.9)
–
2.0
0.1
–
–
(1.5)
69.5
0.1
(24.3)
45.3
1.0
46.3
Total
2020
£m
144.8
(55.0)
89.8
(20.9)
–
(1.9)
(0.3)
–
–
–
–
–
(3.9)
(0.4)
(162.6)
(162.6)
–
–
(166.9)
–
–
(166.9)
(0.5)
(167.4)
–
(1.5)
(97.4)
0.1
(24.3)
(121.6)
0.5
(121.1)
(121.1)
–
(1.0)
(122.1)
(39.6)
(39.6)
All activities derive from continuing operations of the Group.
∗
Included in property operating expenses is a charge of £7.1 million (2020: £2.5 million) for expected credit losses relating to tenant debtors.
The notes on pages 138 to 170 form an integral part of these financial statements.
134
134
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
F O R T HE Y E AR E ND ED 31 MA R CH 20 21
Operating
and
Fair value
financing
adjustments
Notes
Operating and
Fair value
financing
adjustments
2020
£m
Revenue
Property operating expenses*
Net property income
Administrative expenses
Other income
Share of income / (loss) from joint ventures
Share of income / (loss) from associates
Net valuation movement
Loss on disposal of subsidiary
Loss on disposal of investment properties
Operating profit / (loss)
Finance income
Finance costs
Taxation
Profit / (loss) for the year after taxation
Loss for the year after taxation
Other comprehensive loss
Other movement
Revaluation of property, plant and equipment
Total comprehensive loss for the year
Loss per share
Basic (pence)
Diluted (pence)
4
5
6
7
15
16
8
9
10
10
11
12
12
2021
£m
91.1
(47.1)
44.0
(23.4)
7.2
2.3
0.1
–
(2.2)
(5.5)
22.5
0.3
(23.1)
(0.3)
1.3
1.0
2021
£m
1.2
0.6
–
–
–
–
–
–
–
–
–
1.4
(151.5)
Total
2021
£m
91.1
(47.1)
44.0
(23.4)
7.2
3.5
0.7
(2.2)
(5.5)
0.3
(23.1)
2.7
(150.5)
(150.5)
0.2
(0.5)
(150.8)
(49.1)
(49.1)
(Loss) / profit for the year before taxation
(152.9)
(153.2)
2020
£m
144.8
(55.0)
89.8
(20.9)
–
2.0
0.1
–
–
(1.5)
69.5
0.1
(24.3)
45.3
1.0
46.3
(3.9)
(0.4)
–
–
–
–
–
–
–
–
–
(166.9)
(0.5)
(167.4)
Total
2020
£m
144.8
(55.0)
89.8
(20.9)
–
(1.9)
(0.3)
–
(1.5)
(97.4)
0.1
(24.3)
(121.6)
0.5
(121.1)
(121.1)
–
(1.0)
(122.1)
(39.6)
(39.6)
14/17
(154.7)
(154.7)
(162.6)
(162.6)
(152.9)
(130.4)
(166.9)
All activities derive from continuing operations of the Group.
∗
Included in property operating expenses is a charge of £7.1 million (2020: £2.5 million) for expected credit losses relating to tenant debtors.
The notes on pages 138 to 170 form an integral part of these financial statements.
CONSOLIDATED BALANCE SHEET
F O R T HE Y E AR E ND ED 31 MA R CH 20 21
Non-current assets
Investment properties
Right of use asset
Investments in joint ventures
Investments in associates
Property, plant and equipment
Goodwill
Total non-current assets
Current assets
Trade and other receivables
Current taxation asset
Cash and cash equivalents
Total current assets
Assets held for sale
Total assets
Equity and liabilities
Current liabilities
Trade and other payables
Lease liability
Derivative financial instruments
Total current liabilities
Non-current liabilities
Derivative financial instruments
Deferred tax liability
Lease liability
Borrowings
Total non-current liabilities
Net assets
Equity
Share capital
Share premium
Merger reserve
Retained earnings and other reserves
Total equity
Net Asset Value (NAV) per share (pence)
EPRA
Basic
Diluted
Notes
2021
£m
2020
£m
14
15
16
17
18
21
19
22
24
20
20
11
24
23
25
25
25
25
12
12
12
934.9
1,185.6
3.5
25.6
5.3
54.1
0.5
3.9
22.1
0.9
56.2
0.2
1,023.9
1,268.9
26.0
–
150.5
176.5
25.5
26.7
0.7
80.8
108.2
–
1,225.9
1,377.1
46.9
0.7
–
47.6
2.6
0.7
84.9
629.7
717.9
460.4
3.1
227.4
(2.3)
232.2
460.4
151p
150p
150p
46.8
0.7
0.1
47.6
2.6
2.1
85.6
628.6
718.9
610.6
3.1
227.4
(2.3)
382.4
610.6
201p
199p
199p
134
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
135
135
The notes on pages 138 to 170 form an integral part of these financial statements.
The financial statements on pages 134 to 170 were approved by the Board of Directors on 9 June 2021 and were signed on its behalf by:
ALLAN LOCKHART
Chief Executive
MARK DAVIES
Chief Financial Officer
NewRiver REIT plc
Registered number: 10221027
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT
F O R T HE Y E AR E ND ED 31 MA R CH 20 21
Cash flows from operating activities
Loss for the year before taxation
Adjustments for:
Loss on disposal of investment property
Loss on disposal of subsidiary
Net valuation movement
Net valuation movement in joint ventures
Net valuation movement in associates
Share of income from joint ventures
Share of income from associates
Net interest expense
Rent free lease incentives
Movement in expected credit loss
Amortisation of legal and letting fees
Depreciation on property plant and equipment
Share based-payment expense
Net movement from fair value of derivatives
Cash generated from operations before changes in working capital
Changes in working capital
Increase in trade and other receivables
Increase / (decrease) in payables and other financial liabilities
Cash generated from operations
Interest paid
Corporation tax received
Dividends received from joint ventures
Net cash from operating activities
Cash flows from investing activities
Disposal of subsidiary
Interest income
Investment in joint ventures assets
Investment in associate assets
Purchase of investment properties
Business combinations, net of cash acquired
Disposal of investment properties
Development and other capital expenditure
Purchase of plant and equipment
Net cash generated from / (used in) investing activities
Cash flows from financing activities
Repayment of bank loans
New borrowings
Repayment of principal portion of lease liability
Dividends paid – ordinary
Net cash (used in) / generated from financing activities
Cash and cash equivalents at beginning of the year
Net increase in cash and cash equivalents
Cash and cash equivalents at 31 March
The notes on pages 138 to 170 form an integral part of these financial statements.
136
136
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
2021
£m
2020
£m
(153.2)
(121.6)
5.5
2.2
1.5
–
154.7
163.0
(1.2)
(0.6)
(2.3)
(0.1)
22.9
(2.6)
7.1
0.2
1.9
0.6
(0.1)
35.0
(8.2)
2.2
29.0
(22.1)
1.7
–
8.6
38.5
0.3
–
(2.4)
–
–
40.1
(10.0)
(3.3)
63.2
–
–
(0.7)
(1.4)
(2.1)
80.8
69.7
150.5
3.9
0.4
(2.0)
(0.1)
18.7
(2.1)
2.5
(0.2)
1.2
–
2.7
67.9
(1.7)
(5.0)
61.2
(17.7)
–
2.0
45.5
–
0.1
(15.4)
(1.2)
(44.1)
(6.3)
50.7
(14.1)
(10.1)
(40.4)
(48.7)
161.9
(0.8)
(63.8)
48.6
27.1
53.7
80.8
CONSOLIDATED CASH FLOW STATEMENT
F O R T HE Y E AR E ND ED 31 MA R CH 20 21
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
F O R T HE Y E AR E ND ED 31 MA R CH 20 21
Notes
Share capital
£m
Share
premium
£m
225.0
Merger
reserve
£m
Retained
earnings and
other reserves
£m
(2.3)
570.3
3.1
–
–
–
–
–
As at a April 2019
Loss for the year after taxation
Revaluation of property, plant and equipment
Total comprehensive loss for the year
Transactions with equity holders
Net proceeds from issue of shares
Dividends paid
As at 31 March 2020
Loss for the year after taxation
Other movements
Revaluation of property, plant and equipment
Total comprehensive loss for the year
Transactions with equity holders
Share-based payments
As at 31 March 2021
17
25
13
17
The notes on pages 138 to 170 form an integral part of these financial statements.
–
–
–
2.4
–
–
–
–
–
–
3.1
227.4
(2.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.1
227.4
(2.3)
232.2
Total
£m
796.1
(121.1)
(1.0)
(122.1)
2.4
(65.8)
610.6
(150.5)
0.2
(0.5)
(121.1)
(1.0)
(122.1)
–
(65.8)
382.4
(150.5)
0.2
(0.5)
(150.8)
(150.8)
0.6
0.6
460.4
Cash flows from operating activities
Loss for the year before taxation
Adjustments for:
Loss on disposal of investment property
Loss on disposal of subsidiary
Net valuation movement
Net valuation movement in joint ventures
Net valuation movement in associates
Share of income from joint ventures
Share of income from associates
Net interest expense
Rent free lease incentives
Movement in expected credit loss
Amortisation of legal and letting fees
Depreciation on property plant and equipment
Share based-payment expense
Net movement from fair value of derivatives
Cash generated from operations before changes in working capital
Changes in working capital
Increase in trade and other receivables
Increase / (decrease) in payables and other financial liabilities
Cash generated from operations
Interest paid
Corporation tax received
Dividends received from joint ventures
Net cash from operating activities
Cash flows from investing activities
Disposal of subsidiary
Interest income
Investment in joint ventures assets
Investment in associate assets
Purchase of investment properties
Business combinations, net of cash acquired
Disposal of investment properties
Development and other capital expenditure
Purchase of plant and equipment
Net cash generated from / (used in) investing activities
Cash flows from financing activities
Repayment of bank loans
New borrowings
Repayment of principal portion of lease liability
Dividends paid – ordinary
Net cash (used in) / generated from financing activities
Cash and cash equivalents at beginning of the year
Net increase in cash and cash equivalents
Cash and cash equivalents at 31 March
2021
£m
2020
£m
(153.2)
(121.6)
154.7
163.0
5.5
2.2
(1.2)
(0.6)
(2.3)
(0.1)
22.9
(2.6)
7.1
0.2
1.9
0.6
(0.1)
35.0
(8.2)
2.2
29.0
(22.1)
1.7
–
8.6
38.5
0.3
–
(2.4)
–
–
40.1
(10.0)
(3.3)
63.2
–
–
(0.7)
(1.4)
(2.1)
80.8
69.7
150.5
1.5
–
3.9
0.4
(2.0)
(0.1)
18.7
(2.1)
2.5
(0.2)
1.2
–
2.7
67.9
(1.7)
(5.0)
61.2
(17.7)
–
2.0
45.5
–
0.1
(15.4)
(1.2)
(44.1)
(6.3)
50.7
(14.1)
(10.1)
(40.4)
(48.7)
161.9
(0.8)
(63.8)
48.6
27.1
53.7
80.8
The notes on pages 138 to 170 form an integral part of these financial statements.
136
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
137
137
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
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.
These consolidated financial statements have been approved for issue by the Board of Directors on 9 June 2021.
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 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.
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 £380 million of unsecured bank facilities
and a £300 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 £81 million of disposals during FY21, at a
relatively tight discount to book values, with a further £79 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.
138
138
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
General information
London, W1S 2HX.
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,
These consolidated financial statements have been approved for issue by the Board of Directors on 9 June 2021.
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 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.
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 £380 million of unsecured bank facilities
and a £300 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 £81 million of disposals during FY21, at a
relatively tight discount to book values, with a further £79 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.
138
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
139
139
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
1. Accounting policies continued
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.
140
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
1. Accounting policies continued
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 is recognised in accordance with IFRS 15. This income stream is recognised in the period in it is earnt and when
Service charge income
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 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
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.
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 is recognised in accordance with IFRS 15. This income stream is recognised in the period in which it is earnt and when
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 is recognised in accordance with IFRS 15. This income stream is recognised in the period in which it is earnt and when
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.
Managed pub income
which it relates.
Asset management fees
Car park income
performance obligations are made.
Turnover related rent
Other income
performance obligations are made.
Government grants
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.
140
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
141
141
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
1. Accounting policies continued
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 £3,000. 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 £0.4 million (2020: £0.4 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.
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N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
1. Accounting policies continued
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
of the arrangement.
Leases
the use of the asset.
incentives received.
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
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 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
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 £3,000. 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 £0.4 million (2020: £0.4 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.
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N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
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 £195.5 million at 31 March 2021 (2020: £219.1 million) have
been classified as Investment Property. Managed houses with an aggregate value of £52.7 million at 31 March 2021 (2020: £55.0 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 £4.5 million (2020: £13.8 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
£195.5 million within investment property (note 14) and £52.7 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.
144
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
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 £195.5 million at 31 March 2021 (2020: £219.1 million) have
been classified as Investment Property. Managed houses with an aggregate value of £52.7 million at 31 March 2021 (2020: £55.0 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 £4.5 million (2020: £13.8 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
£195.5 million within investment property (note 14) and £52.7 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 £5.6 million (31 March 2020: £2.5 million) in the year. A 10% increase to the
percentage loss allowance rates applied to tenant receivables would result in a £0.1 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
£0.1 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 £0.4 million (2020: £0.4 million) and
£1.5 million (2020: £1.2 million) of depreciation in respect of the pubs and retail segments. Included in the taxation credit is £1.3 million credit
(2020: £0.5 million charge) and £1.4 million credit (2020: £1.0 million credit) in relation to the pubs and retail segments.
2021
2020
Segment revenues and result
Property rental and related income
Managed pub income
Turnover related rent
Service charge income
Amortisation of tenant incentives and letting costs
Asset management fees
Surrender premiums and commissions
Segment revenue
Service charge expense
Rates
Other property operating expenses
Property operating expenses
Other income
Segment result
Administrative expenses
Share of joint ventures’ and associates’ profit / (loss) after tax
Net valuation movement
Loss on disposal of investment properties
Loss on disposal of subsidiaries
Finance income
Finance costs
Revaluation of derivatives
Taxation
Loss for the year after taxation
Retail
£m
61.1
–
–
11.6
(1.8)
1.2
1.0
73.1
(17.5)
(2.2)
(10.4)
(30.1)
2.7
45.7
Pubs
£m
4.4
9.1
4.5
–
–
–
–
18.0
–
(0.3)
(16.7)
(17.0)
4.5
5.5
Group
£m
65.5
9.1
4.5
11.6
(1.8)
1.2
1.0
91.1
(17.5)
(2.5)
(27.1)
(47.1)
7.2
51.2
(23.4)
4.2
(154.7)
(5.5)
(2.2)
0.3
(23.0)
(0.1)
2.7
(150.5)
Retail
£m
76.8
–
–
16.9
(1.5)
0.9
1.8
94.9
(21.1)
(2.3)
(6.2)
(29.6)
–
65.3
Pubs
£m
13.6
22.5
13.8
–
–
–
–
49.9
–
(1.1)
(24.3)
(25.4)
–
24.5
Group
£m
90.4
22.5
13.8
16.9
(1.5)
0.9
1.8
144.8
(21.1)
(3.4)
(30.5)
(55.0)
–
89.8
(20.9)
(2.2)
(162.6)
(1.5)
–
0.1
(21.5)
(2.8)
0.5
(121.1)
144
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
145
145
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
3. Segmental reporting continued
1,185.6
22.1
0.9
55.0
1.2
4.1
1,268.9
26.7
0.7
80.8
–
108.2
1,377.1
2020
£m
90.4
13.8
(1.5)
1.8
104.5
0.9
22.5
16.9
144.8
2021
Retail
£m
Pubs
£m
Unallocated
£m
Total
£m
2020
Pubs
£m
Unallocated
£m
Total
£m
Segment assets
Non-current assets
Investment properties
Investments in joint ventures
Investment in associates
Public houses
Property, plant and equipment
Other non-current assets
Total non-current assets
Current assets
739.3
25.6
5.3
–
–
–
195.6
–
–
52.7
–
–
Trade and other receivables
25.1
0.9
Current taxation asset
Cash and cash equivalents
Assets held for sale
Total current assets including
assets held for sale
_
–
25.5
–
–
–
–
–
–
–
1.4
4.0
–
–
150.5
–
934.9
25.6
5.3
52.7
1.4
4.0
1,023.9
26.0
–
150.5
25.5
202.0
Retail
£m
961.2
22.1
0.9
–
–
–
23.5
–
–
–
224.4
–
–
55.0
–
–
3.2
–
–
–
–
–
–
–
1.2
4.1
–
0.7
80.8
–
Segment assets
820.8
249.2
155.9
1,225.9
1,007.7
282.6
86.8
4. Revenue
Property rental and related income*
Turnover related rent
Amortisation of tenant incentives and letting costs
Surrender premiums and commissions
Rental related income
Asset management fees
Managed pub income
Service charge income
Revenue
2021
£m
65.5
4.5
(1.8)
1.0
69.2
1.2
9.1
11.6
91.1
∗
Included within property rental and related income is car park income of £2.7 million (2020: £7.4 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
Service charge expense
Rates on vacant units
Expected credit loss
Pub operating expenses
Other property operating expenses
146
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
2021
£m
17.5
2.2
7.1
12.9
7.4
47.1
2020
£m
21.1
3.4
2.5
20.3
7.7
55.0
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
Segment assets
Non-current assets
Investment properties
Investments in joint ventures
Investment in associates
Public houses
Property, plant and equipment
Other non-current assets
Total non-current assets
Current assets
Current taxation asset
Cash and cash equivalents
Assets held for sale
Total current assets including
assets held for sale
Segment assets
4. Revenue
2021
Retail
£m
Pubs
Unallocated
£m
£m
Total
£m
2020
Pubs
£m
Unallocated
739.3
25.6
5.3
–
–
–
_
–
25.5
195.6
52.7
–
–
–
–
–
–
–
1.4
4.0
–
–
–
–
–
–
–
150.5
934.9
25.6
5.3
52.7
1.4
4.0
1,023.9
26.0
–
150.5
25.5
202.0
Retail
£m
961.2
22.1
0.9
–
–
–
–
–
–
224.4
55.0
–
–
–
–
3.2
–
–
–
820.8
249.2
155.9
1,225.9
1,007.7
282.6
86.8
Trade and other receivables
25.1
0.9
23.5
Property rental and related income*
Turnover related rent
Amortisation of tenant incentives and letting costs
Surrender premiums and commissions
Rental related income
Asset management fees
Managed pub income
Service charge income
Revenue
∗
income is covered by IFRS 16.
5. Property operating expenses
Service charge expense
Rates on vacant units
Expected credit loss
Pub operating expenses
Other property operating expenses
£m
–
–
–
–
1.2
4.1
–
0.7
80.8
–
2021
£m
65.5
4.5
(1.8)
1.0
69.2
1.2
9.1
11.6
91.1
2021
£m
17.5
2.2
7.1
12.9
7.4
47.1
Total
£m
1,185.6
22.1
0.9
55.0
1.2
4.1
1,268.9
26.7
0.7
80.8
–
108.2
1,377.1
2020
£m
90.4
13.8
(1.5)
1.8
104.5
0.9
22.5
16.9
144.8
2020
£m
21.1
3.4
2.5
20.3
7.7
55.0
3. Segmental reporting continued
6. Administrative expenses
Wages and salaries
Social security costs
Other pension costs
Staff costs
Depreciation
Share-based payments
Other administrative expenses
Professional fees in relation to the acquisition and integration of Bravo Inns Limited and Hawthorn
Abortive fees
Administrative expenses
Net administrative expenses ratio is calculated as follows:
Administrative expenses
Adjust for:
Asset management fees
Share of joint ventures’ and associates administrative expenses
Depreciation of properties
Less share based payments
Less professional fees in relation to the acquisition and integration of Bravo Inns Limited and Hawthorn
Abortive costs
Group’s share of net administrative expenses
Property rental and related income*
Share of joint ventures’ and associates’ property income
Net administrative expenses as a % of property income (including share of joint ventures)
2021
£m
11.3
1.4
0.4
13.1
1.9
0.6
7.4
23.0
0.1
0.3
23.4
2021
£m
23.4
(1.2)
0.2
(1.1)
(0.6)
(0.1)
(0.3)
20.3
77.6
3.9
81.5
24.9%
2020
£m
9.9
1.5
0.4
11.8
1.6
–
7.1
20.5
0.4
–
20.9
2020
£m
20.9
(0.9)
0.1
(0.8)
–
(0.4)
–
18.9
124.2
3.4
127.6
14.9%
Included within property rental and related income is car park income of £2.7 million (2020: £7.4 million) which falls under the scope of IFRS 15. The remainder of the
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.
∗ This balance includes an expected credit loss of £5.0 million (2020: £2.5 million), which excludes the £0.6 million (2020: £nil) forward looking element of the calculation
and £1.5 million (2020: £nil) in relation to service charge and insurance (2020: £nil) and includes the expected credit loss held in joint ventures and associates
of £0.3 million (2020: £0.1 million).
Full details of the Directors’ emoluments, as required by the Companies Act 2006, are disclosed in the audited sections of the Directors’
Remuneration report. The Company did not grant any credits, advances or guarantees of any kind to its Directors during the current and
preceding year.
Average monthly number of staff
Directors
Operations and asset managers
Pubs
Support functions
2021
2020
7
48
28
90
173
7
44
52
79
182
146
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
147
147
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
6. Administrative expenses continued
Auditors’ remuneration
Audit of the Company’s financial statements
Audit of subsidiaries, pursuant to legislation
Non-audit fees
Total fees
2021
£’000
315
235
550
100
650
In addition to this the joint ventures and associates (NewRiver Retail (Nelson) Limited), NewRiver Retail (Napier) Limited and NewRiver
(Sprucefield) Limited) paid £82k (2020: £28k) in audit fees.
7. Other income
Insurance proceeds
Government grants
Dilapidations
Other income
2021
£m
2.7
3.7
0.8
7.2
2020
£’000
315
235
550
50
600
2020
£m
–
–
–
–
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 £40.7 million and cash of £1.5 million.
Gross disposal proceeds
Carrying value
Loss on disposal of subsidiary
9. Loss on disposal of investment properties
Gross disposal proceeds
Carrying value
Cost of disposal
Loss on disposal of investment properties
2021
£m
38.5
(40.7)
(2.2)
2021
£m
40.1
(44.7)
(0.9)
(5.5)
2020
£m
–
–
–
2020
£m
48.0
(47.9)
(1.6)
(1.5)
Included in this calculation is a loss on disposal of property, plant and equipment. The properties had a carrying value of £0.9 million (2020:
£nil million) and were disposed of for £0.9 million (2020: £nil), leading to a loss on disposal of £nil (2020: £nil).
10. Finance income and finance costs
Finance income
Income from loans with joint ventures
Finance expense
Interest on borrowings
Finance cost on lease liabilities
Revaluation of derivatives
Net finance expense
148
148
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
2021
£m
2020
£m
0.3
0.1
(20.2)
(3.0)
0.1
(22.8)
(18.7)
(2.8)
(2.8)
(24.2)
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
6. Administrative expenses continued
Auditors’ remuneration
Audit of the Company’s financial statements
Audit of subsidiaries, pursuant to legislation
Non-audit fees
Total fees
(Sprucefield) Limited) paid £82k (2020: £28k) in audit fees.
7. Other income
Insurance proceeds
Government grants
Dilapidations
Other income
Gross disposal proceeds
Carrying value
Loss on disposal of subsidiary
9. Loss on disposal of investment properties
Gross disposal proceeds
Carrying value
Cost of disposal
Loss on disposal of investment properties
Finance income
Income from loans with joint ventures
Finance expense
Interest on borrowings
Finance cost on lease liabilities
Revaluation of derivatives
Net finance expense
148
In addition to this the joint ventures and associates (NewRiver Retail (Nelson) Limited), NewRiver Retail (Napier) Limited and NewRiver
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
interest. See note 16.
On the 30 September 2020, the Group disposed of a subsidiary which owned Sprucefield Retail Park. The Group then acquired a 10%
Included in the carrying value were investment properties of £40.7 million and cash of £1.5 million.
Included in this calculation is a loss on disposal of property, plant and equipment. The properties had a carrying value of £0.9 million (2020:
£nil million) and were disposed of for £0.9 million (2020: £nil), leading to a loss on disposal of £nil (2020: £nil).
10. Finance income and finance costs
2021
£’000
315
235
550
100
650
2021
£m
2.7
3.7
0.8
7.2
2021
£m
38.5
(40.7)
(2.2)
2021
£m
40.1
(44.7)
(0.9)
(5.5)
2020
£’000
315
235
550
50
600
2020
£m
–
–
–
–
2020
£m
–
–
–
2020
£m
48.0
(47.9)
(1.6)
(1.5)
2021
£m
2020
£m
0.3
0.1
(20.2)
(3.0)
0.1
(22.8)
(18.7)
(2.8)
(2.8)
(24.2)
11. Taxation
UK Corporation Tax at 19% (2020: 19%)
Current year
Prior year adjustment
Taxation credit
2021
£m
(1.4)
(1.3)
(2.7)
2020
£m
0.9
(1.4)
(0.5)
The credit for the year recognised in the consolidated statement of comprehensive income relates to a total income tax credit of £1.3 million
(March 2020: £1.0 million) and a deferred tax credit of £1.4 million (March 2020: £0.5 million charge).
Loss before tax
Tax at the current rate of 19% (2020: 19%)
Revaluation of property
Movement in unrecognised deferred tax
Non-taxable profit due to REIT regime
Non-deductible expenditure
Other
Prior year adjustment
Taxation credit
2021
£m
(153.2)
(29.1)
29.3
2.2
(6.7)
2.9
–
(1.3)
(2.7)
2020
£m
(121.6)
(23.1)
30.9
0.5
(9.7)
1.9
0.4
(1.4)
(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
Deferred tax asset
Deferred tax liabilities
Net deferred tax
Deferred tax asset
Deferred tax liabilities
Net deferred tax
31 March
2020
£m
Movement
£m
31 March
2021
£m
1.2
(3.3)
(2.1)
(1.2)
2.6
1.4
–
(0.7)
(0.7)
31 March 2019
£m
Movement
£m
1.2
(2.8)
(1.6)
–
(0.5)
(0.5)
31 March
2020
£m
1.2
(3.3)
(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 £46.0 million (2020: £22.5 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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
149
149
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
12. Performance measures
A reconciliation of the performance measures to the nearest IFRS measure is below:
Loss for the year after taxation
Adjustments
Net valuation movement
Loss on disposal of investment properties
Revaluation of derivatives
Acquisition costs
Deferred tax
Loss on disposal of subsidiary
Group’s share of joint ventures’ and associates’ adjustments
Revaluation of investment properties
Revaluation of derivatives
Loss on disposal of investment properties
EPRA earnings
Share-based payment charge
Forward looking element of IFRS 9*
Depreciation on public houses
Abortive costs
Underlying Funds From Operations (UFFO)
2021
£m
(150.5)
2020
£m
(121.1)
154.7
162.6
5.5
(0.1)
0.1
(1.4)
2.2
(1.8)
0.2
–
8.9
0.6
0.6
1.1
0.3
11.5
1.5
2.8
0.4
0.5
–
4.3
–
0.3
51.3
–
–
0.8
–
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
Number of shares
Weighted average number of ordinary shares for the purposes of Basic EPS, UFFO and EPRA
Effect of dilutive potential ordinary shares:
Deferred bonus shares
Weighted average number of ordinary shares for the purposes of diluted EPS, UFFO and EPRA
Performance measures (pence)
IFRS
Basic EPS
Diluted EPS
UFFO
UFFO per share
Diluted UFFO per share
EPRA
EPRA EPS
Diluted EPRA EPS
2021
No. m
306.4
0.8
307.2
2020
No. m
305.9
0.3
306.2
(49.1)
(49.1)
(39.6)
(39.6)
3.8
3.7
2.9
2.9
17.0
17.0
16.7
16.7
150
150
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
Loss on disposal of investment properties
Loss for the year after taxation
Adjustments
Net valuation movement
Revaluation of derivatives
Acquisition costs
Deferred tax
Loss on disposal of subsidiary
Revaluation of investment properties
Revaluation of derivatives
Loss on disposal of investment properties
EPRA earnings
Share-based payment charge
Forward looking element of IFRS 9*
Depreciation on public houses
Abortive costs
Underlying Funds From Operations (UFFO)
Number of shares
Number of shares
Effect of dilutive potential ordinary shares:
Deferred bonus shares
Performance measures (pence)
IFRS
Basic EPS
Diluted EPS
UFFO
UFFO per share
Diluted UFFO per share
EPRA
EPRA EPS
Diluted EPRA EPS
12. Performance measures
A reconciliation of the performance measures to the nearest IFRS measure is below:
The below table reconciles the differences between the calculation of basic and EPRA NTA.
EPRA NTA per share and basic NTA per share:
Net assets
Unexercised employee awards
Diluted net assets
Deferred tax liability
Fair value derivatives
Goodwill
EPRA net assets
Pence per
share
150p
150p
2021
Shares
m
306.5
0.8
307.3
–
–
–
£m
460.4
–
460.4
0.7
2.6
(0.5)
2020
Shares
m
306.2
0.3
306.5
–
–
–
£m
610.6
–
610.6
2.1
2.7
(0.2)
Pence per
share
199p
199p
463.2
307.3
151p
615.2
306.5
201p
Group’s share of joint ventures’ and associates’ adjustments
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:
Payment date
Year to March 2020
Ordinary dividends
24 May 2019
26 July 2019
15 November 2019
7 February 2020
PID
Non-PID
Pence per
share
5.40
5.40
5.40
5.40
21.60
–
–
–
–
–
5.40
5.40
5.40
5.40
21.60
£m
16.3
16.5
16.5
16.5
65.8
∗ 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.
Weighted average number of ordinary shares for the purposes of Basic EPS, UFFO and EPRA
Weighted average number of ordinary shares for the purposes of diluted EPS, UFFO and EPRA
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
Fair value brought forward
Acquisitions
Capital expenditure
Lease incentives, letting and legal costs
Reclassification to plant property and equipment
Transfer to assets held for sale
Disposals
Disposal of subsidiary
Net valuation movement
Fair value carried forward
Right of use asset (investment property)
Fair value carried forward
2021
£m
2020
£m
1,102.3
1,254.1
–
10.0
2.4
(4.1)
(25.5)
(44.7)
(40.7)
44.1
14.1
2.3
(5.4)
–
(47.9)
–
(147.8)
(159.0)
851.9
83.0
934.9
1,102.3
83.3
1,185.6
2021
£m
(150.5)
2020
£m
(121.1)
154.7
162.6
5.5
(0.1)
0.1
(1.4)
2.2
(1.8)
0.2
–
8.9
0.6
0.6
1.1
0.3
11.5
1.5
2.8
0.4
0.5
–
4.3
–
0.3
51.3
–
–
–
0.8
52.1
2021
No. m
306.4
0.8
307.2
2020
No. m
305.9
0.3
306.2
(49.1)
(49.1)
(39.6)
(39.6)
3.8
3.7
2.9
2.9
17.0
17.0
16.7
16.7
150
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
151
151
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
14. Investment properties continued
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 £195.6 million (2020: £224.4 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.
152
152
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
14. Investment properties continued
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 £195.6 million (2020: £224.4 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
Fair value
(£m)
Min
£ per sq ft
Max
£ per sq ft
Average
£ per sq ft
Min
£ per sq ft
Max
£ per sq ft
Average
£ per sq ft
Property
equivalent
yield
Average
%
EPRA topped
up net initial
yield
Average
%
Shopping Centres – Core
Shopping Centres – Regeneration
Shopping Centres – Work Out
Retail warehouses
High street and other
209.5
210.5
127.5
117.1
17.3
681.9
9.1
5.3
6.4
9.5
5.7
25.4
19.7
17.1
14.1
14.2
13.8
14.7
10.1
11.6
8.1
8.4
5.1
3.3
2.3
2.2
26.9
13.5
9.1
14.7
17.0
12.6
10.5
5.8
9.4
6.7
9.3%
6.4%
13.1%
7.7%
4.6%
9.5%
5.7%
9.3%
6.9%
5.4%
Fair value
(£m)
246.8
Property Rent
(£ per site valuation)
Min
Max
–
–
EBITDA multiples (x) /
Net Initial Yield (%)
Average
–
Min
0.6x
Max
Average
29.1x
7.4x
1.4
88.6
88.6
88.6
6.2%
6.2%
6.2%
Min
2.5
–
EBITDA (£ per sq ft)
Average
Max
129.4
24.5
–
–
248.2
930.1
Pub portfolio
Convenience store
development portfolio
Total
As at 31 March 2020
Property ERV
Property rent
Fair value
(£m)
Min
£ per sq ft
Max
£ per sq ft
Average
£ per sq ft
Min
£ per sq ft
Max
£ per sq ft
Average
£ per sq ft
Property
equivalent
yield
Average
%
EPRA topped
up net initial
yield
Average
%
Shopping Centres – Core
Shopping Centres – Regeneration
Shopping Centres – Work Out
Retail warehouses
High street and other
254.7
232.0
171.3
187.0
32.8
877.8
9.3
5.3
7.3
8.0
5.0
31.4
21.0
15.7
15.7
15.5
14.9
15.1
10.7
12.0
6.5
8.2
0.2
3.6
2.0
–
21.4
15.9
11.7
16.0
16.9
13.9
10.7
6.5
11.2
5.2
8.5%
6.4%
11.0%
7.4%
4.9%
8.5%
5.7%
7.9%
7.1%
5.0%
Pub portfolio
Convenience store
development portfolio
Total
Fair value
(£m)
273.8
Min
–
Property Rent (£ per site valuation)
Max
Average
EBITDA multiples (x) / Net Initial Yield (%)
Average
Max
Min
–
–
1.7x
12.2x
7.6x
EBITDA (£ per sq ft)
Min
1.37
Max
115.1
Average
19.65
5.7
19.2
19.4
19.3
5.0%
5.3%
5.2%
–
–
–
279.5
1,157.3
152
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
153
153
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
14. Investment properties continued
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.
Asset Type
Retail asset valuation
Shopping Centres –Core
Shopping Centres – Regeneration
Shopping Centres – Work Out
Retail warehouses
High street and other
Impact on valuations of a
10% change in ERV
Impact on valuations of 100
bps change in yield
£m
Increase
10%
£m
Decrease
10%
£m
Increase
1.0%
£m
Decrease
1.0%
18.5
17.6
10.8
8.9
0.7
56.5
(16.9)
(18.2)
(11.2)
(9.3)
(0.7)
(22.1)
(26.2)
(11.2)
(14.4)
(0.4)
(56.3)
(74.3)
27.8
35.6
13.4
18.9
0.5
96.2
£m
209.5
210.5
127.5
117.1
17.3
681.9*
∗ This number includes assets held for sale of £25.5m.
Sensitivity impact on valuations of a 10% change in EBITDA and multiplier of 1.0x.
£m
Pub asset valuation
248.2
Impact on valuations of a
10% change in EBITDA
Impact on valuations of a
1.0x change in multiplier
£m
Increase
10%
£m
Decrease
10%
£m
Increase
1.0x
£m
Decrease
1.0x
36.7
(30.0)
33.4
(33.4)
154
154
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
14. Investment properties continued
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
– EBITDA multiples and maintainable earnings from each pub
– Estimated development costs
– Equivalent yield – the net weighted average income return a property will produce based upon the timing of the income received.
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 of a
Impact on valuations of 100
10% change in ERV
bps change in yield
Increase
Decrease
Increase
Decrease
£m
£m
£m
209.5
210.5
127.5
117.1
17.3
£m
10%
18.5
17.6
10.8
8.9
0.7
£m
10%
(16.9)
(18.2)
(11.2)
(9.3)
(0.7)
1.0%
(22.1)
(26.2)
(11.2)
(14.4)
(0.4)
681.9*
56.5
(56.3)
(74.3)
1.0%
27.8
35.6
13.4
18.9
0.5
96.2
Impact on valuations of a
Impact on valuations of a
10% change in EBITDA
1.0x change in multiplier
Increase
Decrease
Increase
Decrease
£m
10%
(30.0)
£m
1.0x
33.4
£m
1.0x
(33.4)
£m
10%
36.7
∗ This number includes assets held for sale of £25.5m.
Sensitivity impact on valuations of a 10% change in EBITDA and multiplier of 1.0x.
Asset Type
Retail asset valuation
Shopping Centres –Core
Shopping Centres – Regeneration
Shopping Centres – Work Out
Retail warehouses
High street and other
Pub asset valuation
£m
248.2
154
2020: Sensitivity impact on valuations of a 10% change in estimated rental value and absolute yield of 100 bps.
Asset Type
Retail asset valuation
Shopping Centres – Core
Shopping Centres – Regeneration
Shopping Centres – Work Out
Retail warehouses
High street and other
Impact on valuations of a 10%
change in ERV
Impact on valuations of 100
bps change in yield
£m
Increase
10%
20.6
21.3
15.4
9.4
1.4
68.1
£m
Decrease
10%
£m
Increase
1.0%
£m
Decrease
1.0%
(19.0)
(20.5)
(14.9)
(16.9)
(1.4)
(72.7)
(26.2)
(30.1)
(16.9)
(21.1)
(1.4)
(95.7)
33.5
41.2
20.5
28.0
1.7
124.9
£m
254.7
232.0
171.3
187.0
32.8
877.8
Sensitivity impact on valuations of a 10% change in EBITDA and multiplier of 1.0x.
£m
Pub asset valuation
279.5
Impact on valuations of a 10%
change in EBITDA
Impact on valuations of a 1.0x
change in multiplier
£m
Increase 10%
£m
Decrease 10%
£m
Increase 1.0x
£m
Decrease 1.0x
29.5
(24.1)
37.4
(34.5)
Reconciliation to net valuation movement in consolidated statement of comprehensive income
Net valuation movement in investment properties
Net valuation movement in investment properties
Net valuation movement in property, plant and equipment
Net valuation movement in right of use asset
Net valuation movement in consolidated statement of comprehensive income
Reconciliation to properties at valuation in the portfolio
Investment property
Property, plant and equipment
Assets held for sale
Wholly owned properties at valuation
Properties held in joint ventures*
Properties held in associates
Properties at valuation
2021
£m
2020
£m
(147.8)
(159.0)
(6.6)
(0.3)
(4.0)
0.4
(154.7)
(162.6)
2021
£m
851.9
52.7
25.5
930.1
35.2
8.9
974.2
2020
£m
1,102.3
55.0
–
1,157.3
35.4
4.4
1,197.1
Note
14
17
19
15
16
∗
Included in non-current assets in joint ventures is £1.5 million (31 March 2020: £1.5 million) loan to joint venture which should be deducted from this balance.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
155
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
15. Investments in joint ventures
As at 31 March 2021 the Group has two joint ventures.
Opening balance
Additions to investment in joint ventures
Loan to joint venture
Group’s share of profit after taxation excluding valuation movement
Net valuation movement
Distributions and dividends
Investment in joint venture
Name
NewRiver Retail Investments LP (NRI LP)
NewRiver Retail (Napier) Limited (Napier)
Country of incorporation
Guernsey
UK
2021
£m
22.1
–
–
2.3
1.2
–
25.6
2020
£m
7.6
15.4
3.0
2.0
(3.9)
(2.0)
22.1
2021
% Holding
2020
% Holding
50
50
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:
Consolidated balance sheet
Non-current assets
Current assets
Current liabilities
Borrowings due in more than one
year
Net assets
Napier
£m
62.4
7.0
(6.5)
(27.3)
35.6
2021
NRI LP
£m
8.0
1.6
(1.0)
–
8.6
2021
Total
£m
70.4
8.6
(7.5)
(27.3)
44.2
Group’s
share
£m
36.8
4.3
(1.8)
(13.7)
25.6
Napier
£m
60.2
2.8
(5.8)
(30.0)
27.2
Consolidated statement of comprehensive
income
Napier
£m
NRI LP
£m
Total
£m
Group’s share
£m
Napier
£m
5.1
(0.3)
4.8
(0.2)
(0.8)
3.8
(4.7)
–
(0.9)
4.7
Revenue
Property operating expenses
Net property income
Administration expenses
Net finance costs
Group’s share of joint ventures’
profit before valuation movements
Net valuation movement
Loss on disposal
Profit / (loss) after taxation
Add back net valuation movement
Group’s share of joint ventures’
profit before valuation movements
6.6
(0.9)
5.7
(0.2)
(1.3)
4.2
5.0
–
9.2
(5.0)
1.3
(0.8)
0.5
(0.1)
–
0.4
(2.6)
–
(2.2)
2.6
7.9
(1.7)
6.2
(0.3)
(1.3)
4.6
2.4
–
7.0
(2.4)
4.2
0.4
4.6
4.0
(0.8)
3.2
(0.2)
(0.7)
2.3
1.2
–
3.5
(1.2)
2.3
The Group’s share of contingent liabilities in the joint ventures is £nil (2020: £nil).
The comparative information has been re-presented to show information per investment.
156
156
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
2020
NRI LP
£m
10.5
0.4
(0.2)
–
10.7
2020
NRI LP
£m
1.3
(0.3)
1.0
(0.1)
(0.1)
0.8
(3.2)
(0.5)
(2.9)
3.2
Total
£m
70.7
3.2
(6.0)
(30.0)
37.9
Group’s
share
£m
36.9
1.6
(1.5)
(14.9)
22.1
Total
£m
Group’s share
£m
6.4
(0.6)
5.8
(0.3)
(0.9)
4.6
(7.9)
(0.5)
(3.8)
7.9
3.2
(0.3)
2.9
(0.1)
(0.5)
2.3
(3.9)
(0.3)
(1.9)
3.9
3.8
0.3
4.1
2.0
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
15. Investments in joint ventures
As at 31 March 2021 the Group has two joint ventures.
Group’s share of profit after taxation excluding valuation movement
Opening balance
Additions to investment in joint ventures
Loan to joint venture
Net valuation movement
Distributions and dividends
Investment in joint venture
Name
NewRiver Retail Investments LP (NRI LP)
NewRiver Retail (Napier) Limited (Napier)
Country of incorporation
Guernsey
UK
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:
Consolidated statement of comprehensive
Napier
NRI LP
Total
Group’s share
Napier
NRI LP
Total
Group’s share
Consolidated balance sheet
Non-current assets
Current assets
Current liabilities
Borrowings due in more than one
year
Net assets
income
Revenue
Property operating expenses
Net property income
Administration expenses
Net finance costs
Group’s share of joint ventures’
profit before valuation movements
Net valuation movement
Loss on disposal
Profit / (loss) after taxation
Add back net valuation movement
Group’s share of joint ventures’
2021
NRI LP
2021
£m
8.0
1.6
(1.0)
–
8.6
£m
1.3
(0.8)
0.5
(0.1)
–
0.4
(2.6)
–
(2.2)
2.6
Total
£m
70.4
8.6
(7.5)
(27.3)
44.2
£m
7.9
(1.7)
6.2
(0.3)
(1.3)
4.6
2.4
–
7.0
(2.4)
Napier
£m
62.4
7.0
(6.5)
(27.3)
35.6
£m
6.6
(0.9)
5.7
(0.2)
(1.3)
4.2
5.0
–
9.2
(5.0)
Group’s
share
£m
36.8
4.3
(1.8)
(13.7)
25.6
£m
4.0
(0.8)
3.2
(0.2)
(0.7)
2.3
1.2
–
3.5
(1.2)
2.3
2020
NRI LP
£m
10.5
0.4
(0.2)
–
10.7
2020
£m
1.3
(0.3)
1.0
(0.1)
(0.1)
0.8
(3.2)
(0.5)
(2.9)
3.2
Total
£m
70.7
3.2
(6.0)
(30.0)
37.9
£m
6.4
(0.6)
5.8
(0.3)
(0.9)
4.6
(7.9)
(0.5)
(3.8)
7.9
Group’s
share
£m
36.9
1.6
(1.5)
(14.9)
22.1
£m
3.2
(0.3)
2.9
(0.1)
(0.5)
2.3
(3.9)
(0.3)
(1.9)
3.9
Napier
£m
60.2
2.8
(5.8)
(30.0)
27.2
£m
5.1
(0.3)
4.8
(0.2)
(0.8)
3.8
(4.7)
–
(0.9)
4.7
The Group’s share of contingent liabilities in the joint ventures is £nil (2020: £nil).
The comparative information has been re-presented to show information per investment.
2021
£m
22.1
–
–
2.3
1.2
–
25.6
2020
£m
7.6
15.4
3.0
2.0
(3.9)
(2.0)
22.1
2021
2020
% Holding
% Holding
50
50
50
50
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.
Opening balance
Additions to Investment in associates
Group’s share of profit after taxation excluding valuation movement
Net valuation movement
Investment in associates
Name
NewRiver Retail (Nelson) Limited (Nelson)
NewRiver Retail (Hamilton) Limited (Hamilton)
NewRiver Retail (Sprucefield) Limited (Sprucefield)
2021
£m
0.9
3.7
0.1
0.6
5.3
2020
£m
–
1.2
0.1
(0.4)
0.9
Country of
incorporation
2021
% Holding
2020
% Holding
UK
UK
UK
10
10
10
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:
Consolidated balance sheet
Non-current assets
Current assets
Current liabilities
Borrowings due in more than one year
Net assets
Loans to associates
Net assets
Consolidated statement of comprehensive income
Revenue
Property operating expenses
Net property income
Administration expenses
Net finance costs
Net valuation movement
Profit / (loss) after taxation
Add back net valuation movement
profit before valuation movements
4.2
0.4
4.6
3.8
0.3
4.1
2.0
Group’s share of associates’ profit before valuation movements
31 March 2021
31 March 2020
Total
£m
Group’s share
£m
Total
£m
Group’s share
£m
89.5
6.7
(37.5)
(42.1)
16.6
–
16.6
8.9
0.7
(3.8)
(4.2)
1.6
3.7
5.3
44.0
2.0
(15.0)
(22.0)
9.0
–
9.0
4.4
0.2
(1.5)
(2.2)
0.9
–
0.9
2021
Total
£m
2021
Group’s share
£m
2020
Total
£m
2020
Group’s share
£m
6.4
(1.6)
4.8
(0.2)
(2.8)
1.8
6.2
8.0
(6.2)
1.8
0.6
(0.2)
0.4
–
(0.3)
0.1
0.6
0.7
(0.6)
0.1
1.7
0.1
1.8
(0.1)
(0.7)
1.0
(3.6)
(2.6)
3.6
1.0
0.2
–
0.2
–
(0.1)
0.1
(0.4)
(0.3)
0.4
0.1
156
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
157
157
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
17. Property plant and equipment
Cost or valuation
At 1 April 2020
Additions
Revaluation:
Recognised in the consolidated statement of comprehensive income
Recognised in the consolidated income statement
Net transfers from investment property
Disposals
At 31 March 2021
Accumulated depreciation
At 1 April 2020
Charge for the year
At 31 March 2021
Net book value at 31 March 2021
Net book value at 31 March 2020
Cost or valuation
At 1 April 2019
Additions
Business combinations
Revaluation:
Recognised in the consolidated statement of comprehensive income
Recognised in the consolidated income statement
Net transfers from investment property
At 31 March 2020
Accumulated depreciation
At 1 April 2019
Charge for the year
Disposals
At 31 March 2020
Net book value at 31 March 2020
Net book value at 31 March 2019
0.6
55.4
58.4
Office
equipment
£m
Fixtures and
fittings
£m
Public houses
£m
1.8
0.6
–
–
–
–
2.4
0.7
0.4
1.1
1.3
1.1
0.6
–
–
–
–
–
56.6
2.7
(0.5)
(6.6)
4.1
(0.9)
0.5
–
0.5
0.1
0.1
1.6
1.1
2.7
52.7
55.0
Office
equipment
£m
Fixtures and
fittings
£m
Public houses
£m
1.4
0.4
–
–
–
–
1.8
0.3
0.4
–
0.7
1.1
1.1
0.6
–
–
–
–
–
0.6
0.5
–
–
0.5
0.1
0.1
27.7
9.8
18.7
(1.0)
(4.0)
5.4
56.6
0.8
0.8
–
1.6
55.0
26.9
Total
£m
59.0
3.3
(0.5)
(6.6)
4.1
(0.9)
2.8
1.5
4.3
54.1
56.2
Total
£m
29.7
10.2
18.7
(1.0)
(4.0)
5.4
59.0
1.6
1.2
–
2.8
56.2
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 £52.7 million (2020: £55.0 million) in
the note above.
The carrying amount of assets which have been revalued would have been £51.3 million (2020: £52.7 million) had they been carried under
the cost model. Depreciation is also charged on the right of use asset of £0.4 million (2020: £0.4 million), which is not included in the
note above.
158
158
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
£m
1.8
0.6
–
–
–
–
2.4
0.7
0.4
1.1
1.3
1.1
£m
1.4
0.4
–
–
–
–
1.8
0.3
0.4
–
0.7
1.1
1.1
£m
0.6
–
–
–
–
–
0.5
–
0.5
0.1
0.1
£m
0.6
–
–
–
–
–
0.6
0.5
–
–
0.5
0.1
0.1
£m
56.6
2.7
(0.5)
(6.6)
4.1
(0.9)
1.6
1.1
2.7
52.7
55.0
£m
27.7
9.8
18.7
(1.0)
(4.0)
5.4
56.6
0.8
0.8
–
1.6
55.0
26.9
Total
£m
59.0
3.3
(0.5)
(6.6)
4.1
(0.9)
2.8
1.5
4.3
54.1
56.2
Total
£m
29.7
10.2
18.7
(1.0)
(4.0)
5.4
59.0
1.6
1.2
–
2.8
56.2
28.1
Office
Fixtures and
equipment
fittings
Public houses
Recognised in the consolidated statement of comprehensive income
Recognised in the consolidated income statement
Net transfers from investment property
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 £52.7 million (2020: £55.0 million) in
The carrying amount of assets which have been revalued would have been £51.3 million (2020: £52.7 million) had they been carried under
the cost model. Depreciation is also charged on the right of use asset of £0.4 million (2020: £0.4 million), which is not included in the
Cost or valuation
At 1 April 2020
Additions
Revaluation:
Disposals
At 31 March 2021
Accumulated depreciation
At 1 April 2020
Charge for the year
At 31 March 2021
Net book value at 31 March 2021
Net book value at 31 March 2020
Cost or valuation
At 1 April 2019
Additions
Business combinations
Revaluation:
At 31 March 2020
Accumulated depreciation
At 1 April 2019
Charge for the year
Disposals
At 31 March 2020
Net book value at 31 March 2020
Net book value at 31 March 2019
the note above.
note above.
158
17. Property plant and equipment
18. Trade and other receivables
Office
Fixtures and
equipment
fittings
Public houses
Recognised in the consolidated statement of comprehensive income
Recognised in the consolidated income statement
Net transfers from investment property
Trade receivables
Restricted monetary asset
Service charge receivables*
Other receivables
Prepayments
Accrued income
2021
£m
9.6
5.6
2.6
4.9
1.9
1.4
2020
£m
6.2
8.1
5.6
3.8
1.4
1.6
26.0
26.7
0.6
55.4
58.4
∗
Included in service charge receivables is £0.4 million of Value Added Taxation (2020: £0.9 million), £nil of accrued income (2020: £2.2 million), £nil of prepayments
(2020: £0.4 million) and £2.2 million of service charge debtors (2020: £2.1 million).
Trade receivables are shown after deducting a loss allowance of £9.3m (2020: £4.2m). 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 £5.6 million (2020: £2.5 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
2021
£m
31 March
2020
£m
Opening loss allowance at 1 April 2020/2019
Increase in loss allowance recognised in the consolidated statement of comprehensive income during the year
Loss allowance write off
Closing loss allowance at 31 March 2021/2020
4.2
5.6
(0.5)
9.3
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
Assets held for sale at 1 April 2020
Investment properties
Assets held for sale at 31 March 2021
2021
£m
–
25.5
25.5
1.7
2.5
–
4.2
2020
£m
–
–
–
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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
159
159
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
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.
Interest rate swaps
Current liabilities
Non-current liabilities
Interest rate swaps – receive floating pay fixed
In less than one year
In more than one year but less than two
In more than two years but less than five
Interest rate caps
In less than one year
In more than one year but less than two
In more than two years but less than five
2021
£m
2020
£m
–
(2.6)
(2.6)
(0.1)
(2.6)
(2.7)
Average contract interest rate Notional principal amount
Fair value
2021
%
–
0.8%
1.5%
1.5%
–
–
2020
%
0.4%
–
0.4%
0.5%
0.4%
–
2021
£m
–
137.2
137.2
70.0
–
–
2020
£m
2021
£m
2020
£m
13.4
–
274.5
9.7
70.0
–
–
–
(2.6)
–
–
–
(0.1)
–
(2.6)
–
–
–
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
Trade payables
Service charge liabilities*
Other payables
Accruals
Value Added Taxation
Rent received in advance
2021
£m
4.4
10.9
7.0
15.0
2.2
7.4
2020
£m
2.6
13.7
4.4
13.6
4.4
8.1
46.9
46.8
∗ Service charge liabilities includes accruals of £0.3 million (31 March 2020: £1.3 million), service charge creditors and other creditors of £2.8 million (31 March 2020:
£2.9 million) and deferred income of £7.8 million (31 March 2020: £9.5 million).
23. Borrowings
Maturity of bank facilities:
Between two and three years
Between three and four years
Between four and five years
After five years
Less unamortised fees / discount
160
160
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
2021
£m
335.0
–
–
300.0
635.0
2020
£m
–
335.0
–
300.0
635.0
(5.3)
(6.4)
629.7
628.6
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
Interest rate swaps
Current liabilities
Non-current liabilities
Interest rate swaps – receive floating pay fixed
In less than one year
In more than one year but less than two
In more than two years but less than five
Interest rate caps
In less than one year
In more than one year but less than two
In more than two years but less than five
21. Cash and cash equivalents
cash held in bank accounts.
22. Trade and other payables
Trade payables
Service charge liabilities*
Other payables
Accruals
Value Added Taxation
Rent received in advance
23. Borrowings
Maturity of bank facilities:
Between two and three years
Between three and four years
Between four and five years
After five years
Less unamortised fees / discount
160
Average contract interest rate Notional principal amount
Fair value
2020
£m
2021
£m
2020
£m
2021
%
–
0.8%
1.5%
1.5%
–
–
2020
%
0.4%
–
0.4%
0.5%
0.4%
–
2021
£m
–
137.2
137.2
70.0
–
–
13.4
–
274.5
9.7
70.0
–
344.4
367.6
(2.6)
(2.7)
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
∗ Service charge liabilities includes accruals of £0.3 million (31 March 2020: £1.3 million), service charge creditors and other creditors of £2.8 million (31 March 2020:
£2.9 million) and deferred income of £7.8 million (31 March 2020: £9.5 million).
–
(2.6)
(2.6)
(2.6)
–
–
–
–
–
2021
£m
4.4
10.9
7.0
15.0
2.2
7.4
(0.1)
(2.6)
(2.7)
(0.1)
–
(2.6)
–
–
–
2020
£m
2.6
13.7
4.4
13.6
4.4
8.1
46.9
46.8
2021
£m
335.0
–
–
300.0
635.0
2020
£m
335.0
–
–
300.0
635.0
(5.3)
(6.4)
629.7
628.6
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
£m
2020
£m
Unsecured borrowings:
Term loan
Revolving credit facility
Corporate bond
Carrying
amount
2021
£m
165.0
170.0
300.0
635.0
Fair value
2021
£m
165.0
170.0
283.7
618.7
Carrying
amount
2020
£m
165.0
170.0
300.0
635.0
Fair value
2020
£m
165.0
170.0
285.0
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.
Unsecured borrowings:
Term loan
Revolving credit facility
Corporate bond
Maturity date
August 2023
August 2023
March 2028
Facility
£m
Facility drawn
£m
165.0
215.0
300.0
680.0
165.0
170.0
300.0
635.0
Unamortised
facility fees /
discount
£m
(0.7)
(1.0)
(3.6)
(5.3)
£m
164.3
169.0
296.4
629.7
In the year the Group drew down £nil (year-ended March 2020: £125 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.
Right of use asset (Investment property)
Right of use asset (Property, plant and equipment)
Current lease liability
Non-current lease liability
2021
£m
83.0
3.5
0.7
84.9
2020
£m
83.3
3.9
0.7
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 £0.1 million (March 2020: £nil) and the
expense relating to variable lease payments not included in the measurement of lease liabilities was £nil (March 2020: £nil). The total cash
outflow in relation to lease commitments for the year was £3.5 million (March 2020: £3.4 million).
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
161
161
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
24. Lease commitment arrangements continued
Lease liability maturity table
Within one year
Between one and two years
In the second to fifth year inclusive
After five years
Lease commitments payments payable by the Group were as follows:
Within one year
One to two years
Two to five years
After five years
Effect of discounting
Lease liability
2021
£m
0.7
0.7
2.1
82.1
85.6
2021
£m
3.3
3.3
10.0
2020
£m
0.7
0.7
2.1
82.8
86.3
2020
£m
3.4
3.4
10.2
253.9
270.5
(184.9)
85.6
256.7
273.7
(187.4)
86.3
At the balance sheet date the Group had contracted with tenants for the following future minimum lease payments on its
investment properties:
Within one year
Between one and two years
In the second to fifth year inclusive
After five years
2021
£m
64.7
55.9
114.9
161.1
396.6
2020
£m
77.2
71.6
161.8
206.6
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 £3.1 million (March 2020: £2.5 million).
162
162
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
24. Lease commitment arrangements continued
Lease liability maturity table
Lease commitments payments payable by the Group were as follows:
Within one year
Between one and two years
In the second to fifth year inclusive
After five years
Within one year
One to two years
Two to five years
After five years
Effect of discounting
Lease liability
investment properties:
Within one year
Between one and two years
In the second to fifth year inclusive
After five years
At the balance sheet date the Group had contracted with tenants for the following future minimum lease payments on its
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 £3.1 million (March 2020: £2.5 million).
2021
£m
0.7
0.7
2.1
82.1
85.6
2021
£m
3.3
3.3
10.0
253.9
270.5
(184.9)
85.6
2021
£m
64.7
55.9
114.9
161.1
396.6
2020
£m
0.7
0.7
2.1
82.8
86.3
2020
£m
3.4
3.4
10.2
256.7
273.7
(187.4)
86.3
2020
£m
77.2
71.6
161.8
206.6
517.2
25. Share capital and reserves
Share capital
Ordinary shares
1 April 2019
Scrip dividends issued
Shares issued under employee share schemes
Exercise of warrants
31 March 2020
Shares issued under employee share schemes
31 March 2021
1 April 2019
Exercise of warrants
Scrip dividends issued
31 March 2020
31 March 2021
All issued shares are fully paid up.
Number of
shares issued
m’s
Price per
share
pence
Total
m’s
Held by EBT
m’s
0.9
0.2
0.3
0.1
206.8
–
116.0
–
307.8
308.7
308.7
309.0
309.0
309.0
309.0
3.0
3.0
2.8
2.8
2.8
2.7
2.7
Shares in
issue
m’s
304.8
305.7
305.9
306.2
306.2
306.3
306.3
Share capital
£’000
Share
premium
£’000
Total
£’000
3,050
224,993
228,043
3
9
333
2,023
3,062
3,062
227,349
227,349
336
2,032
230,411
230,411
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.
162
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
163
163
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
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).
Year issued
2012
Average
exercise price
Outstanding
at start of year
Granted
Number
Exercised
Lapsed
Outstanding
at end of year
Number
exercisable
Average
remaining life
(years)
2.35
338,000
338,000
–
–
–
–
–
–
338,000
338,000
1.5
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 £0.3 million (2020: £0.8 million charge).
Year issued
2017
2018
2019
2020
2021
Average
exercise price
Outstanding
at start of year
Granted
Number
Exercised
Lapsed
Outstanding
at end of year
Number
exercisable
–
–
–
278,506
962,495
1,588,060
– 2,068,213
–
–
–
–
–
–
3,129,236
–
–
–
–
–
–
278,506
(962,495)
–
(221,408)
1,366,652
(250,060)
1,818,153
(24,365)
3,104,871
4,897,274
3,129,236
– (1,458,328) 6,568,182
–
–
–
–
–
–
Average
remaining life
(years)
5.5
6.2
7.3
8.2
9.4
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 £0.3 million (March 2020:
£0.8 million credit).
Average
exercise price
Outstanding
at start of year
Granted
Exercised
Lapsed
Outstanding
at end of year
Number
exercisable
Average
remaining life
(years)
Year issued
2018
2019
2020
2021
–
–
–
–
67,016
280,957
420,511
–
–
–
–
526,640
(3,462)
(126,265)
–
–
63,554
154,692
–
–
(97,499)
323,012
–
526,640
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:
(0.7)
0.2
1.2
2.4
2020
1.770
Nil
21%
2021
0.63
Nil
21%
-0.048 – -0.009% 0.548 – 0.7%
0%
12.2%
Share price
Exercise price
Expected volatility
Risk free rate
Expected dividends*
∗ based on quoted property sector average.
164
164
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
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
Number
remaining life
exercise price
at start of year
Granted
Lapsed
at end of year
exercisable
Number
Exercised
2.35
338,000
338,000
–
–
338,000
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 £0.3 million (2020: £0.8 million charge).
Average
Outstanding
exercise price
at start of year
Granted
Number
Exercised
Outstanding
Number
remaining life
Lapsed
at end of year
exercisable
(years)
278,506
962,495
1,588,060
– 2,068,213
–
–
–
–
–
3,129,236
–
278,506
(962,495)
–
(221,408)
1,366,652
(250,060)
1,818,153
(24,365)
3,104,871
4,897,274
3,129,236
– (1,458,328) 6,568,182
Year issued
2012
Year issued
2017
2018
2019
2020
2021
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 £0.3 million (March 2020:
Deferred Bonus Scheme
£0.8 million credit).
Year issued
exercise price
at start of year
Granted
Exercised
Lapsed
at end of year
exercisable
(years)
Average
Outstanding
Outstanding
Number
remaining life
Average
67,016
280,957
420,511
–
–
–
–
–
526,640
(3,462)
(126,265)
–
–
–
63,554
154,692
526,640
(97,499)
323,012
768,484
526,640
(129,727)
(97,499)
1,067,898
The fair value of the share options has been calculated based on a Monte Carlo Pricing Model using the following inputs:
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Average
(years)
1.5
Average
5.5
6.2
7.3
8.2
9.4
(0.7)
0.2
1.2
2.4
2020
1.770
Nil
21%
–
–
–
–
–
–
–
–
–
–
–
2021
0.63
Nil
21%
-0.048 – -0.009% 0.548 – 0.7%
0%
12.2%
2018
2019
2020
2021
Fair value
Share price
Exercise price
Expected volatility
Risk free rate
Expected dividends*
164
∗ 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
Financial assets
Financial assets at amortised cost
Trade and other receivables
Cash and cash deposits
Financial liabilities
Fair value through profit or loss
Interest rate swaps
At amortised cost
Borrowings
Lease liabilities
Payables and accruals
Valuation
level
2021
£m
2020
£m
22.4
150.5
172.9
20.2
80.8
101.0
2
(2.6)
(2.7)
(629.7)
(628.6)
(85.6)
(29.4)
(747.3)
(574.4)
(86.3)
(24.8)
(742.4)
(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 23 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 £4.0 million (2020: £4.0 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 £4.0 million (2020: £3.7 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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
165
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N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
27. Financial instruments and risk management continued
Ageing of past due gross trade receivables and the carrying amount net of loss allowances is set out below:
0-30 days
30-60 days
60-90 days
90-120 days
Over 120 days
2021
Gross amount
£m
2021
Loss
allowance
£m
2021
% applied
£m
2021
Carrying
amount
£m
2020
Gross amount
£m
2020
Loss
allowance
£m
2020
% applied
£m
2020
Carrying
amount
£m
5.0
0.9
0.5
1.6
10.9
18.9
1.0
0.2
0.2
0.5
7.4
9.3
20%
22%
40%
31%
68%
4.0
0.7
0.3
1.1
3.5
9.6
6.8
0.7
0.5
0.3
2.1
10.4
12%
71%
100%
100%
100%
0.8
0.5
0.5
0.3
2.1
4.2
6.0
0.2
–
–
–
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 £1.4 million on service charge debtors and £0.1 million on insurance debtors.
The Group categorises trade debtors in varying degrees of risk, as detailed below:
Risk level
Very high
High
Medium
Low
Gross carrying amount before loss allowance
Loss allowance
Carrying amount
Opening loss allowance at 31 March
Increase in loss allowance recognised in profit or loss during the year
Loss allowance write off
Closing loss allowance at 31 March
2021
£m
3.9
2.4
4.4
8.2
18.9
(9.3)
9.6
2021
£m
4.2
5.6
(0.5)
9.3
2020
£m
–
2.4
5.4
2.6
10.4
(4.2)
6.2
2020
£m
1.7
2.5
–
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 £26.0 million (31 March 2020: £26.7 million).
166
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
27. Financial instruments and risk management continued
Ageing of past due gross trade receivables and the carrying amount net of loss allowances is set out below:
Gross amount
allowance
% applied
Gross amount
allowance
% applied
2021
£m
5.0
0.9
0.5
1.6
10.9
18.9
2021
Loss
£m
1.0
0.2
0.2
0.5
7.4
9.3
2021
£m
20%
22%
40%
31%
68%
2021
Carrying
amount
£m
4.0
0.7
0.3
1.1
3.5
9.6
2020
£m
6.8
0.7
0.5
0.3
2.1
10.4
2020
Loss
£m
0.8
0.5
0.5
0.3
2.1
4.2
2020
£m
12%
71%
100%
100%
100%
2020
Carrying
amount
£m
6.0
0.2
–
–
–
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 £1.4 million on service charge debtors and £0.1 million on insurance debtors.
The Group categorises trade debtors in varying degrees of risk, as detailed below:
0-30 days
30-60 days
60-90 days
90-120 days
Over 120 days
Risk level
Very high
High
Medium
Low
Loss allowance
Carrying amount
Gross carrying amount before loss allowance
Opening loss allowance at 31 March
Increase in loss allowance recognised in profit or loss during the year
Loss allowance write off
Closing loss allowance at 31 March
2021
£m
3.9
2.4
4.4
8.2
18.9
(9.3)
9.6
2021
£m
4.2
5.6
(0.5)
9.3
2020
£m
–
2.4
5.4
2.6
10.4
(4.2)
6.2
2020
£m
1.7
2.5
–
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 £26.0 million (31 March 2020: £26.7 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 £50 million of undrawn revolving credit
facility in the year to 31 March 2020 meaning the Group has over £154 million of cash in the bank (including share of joint ventures and
associates) and a further £45 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:
Less than
one year
One to two
years
Two to five
years
More than
five years
2021 £m
Borrowings
Interest on borrowings
Interest rate swaps
Lease liabilities
Payables and accruals
2020 £m
Borrowings
Interest on borrowings
Interest rate swaps
Lease liabilities
Payables and accruals
Reconciliation of movement in the Group’s share of net debt in the year
Group’s share of net debt at beginning of year
Cash flow
Net increase in cash and cash equivalents
New bank loans (net of expenses)
Bank loans acquired in business combinations
Bank loans repaid
Amortisation of bank loan fees
Group’s share of joint ventures’ and associates’ cash flow
Net increase in cash and cash equivalents
Bank loans repaid
New bank loans
Group’s share of net debt
Being:
Group borrowings
Joint ventures’ and associates’ borrowings
Group cash
Joint venture and associate cash
Group’s share of net debt
–
19.1
0.7
3.3
29.4
52.5
–
18.8
0.9
3.4
24.8
47.9
–
19.1
1.3
3.3
–
335.0
34.4
0.6
10.0
–
300.0
20.2
–
253.9
–
Total
635.0
92.8
2.6
270.5
29.4
23.7
380.0
574.1
1,030.3
–
18.8
0.7
3.4
–
335.0
46.7
1.3
10.2
–
300.0
30.7
–
256.7
–
635.0
115.0
2.9
273.7
24.8
22.9
393.2
587.4
1,051.4
2021
£m
563.6
(69.7)
–
–
–
1.1
(2.5)
(1.2)
2.0
2020
£m
475.1
(53.7)
162.0
11.7
(48.7)
1.0
(0.9)
–
17.1
493.3
563.6
629.7
17.9
(150.5)
(3.8)
493.3
628.6
17.1
(80.8)
(1.3)
563.6
166
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
167
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
27. Financial instruments and risk management continued
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.
Net debt to equity ratio
Borrowings
Cash and cash equivalents
Net debt
Equity attributable to equity holders of the parent
Net debt to equity ratio (‘Balance sheet gearing’)
Share of joint ventures’ and associates’ borrowings
Share of joint ventures’ and associates’ cash and cash equivalents
Group’s share of net debt
Carrying value of investment property and public houses
Carrying value of managed houses
Carrying value of assets held for sale
Share of joint ventures’ and associates carrying value of investment properties
Group’s share of carrying value of investment properties
Net debt to property value ratio (‘Loan to value’)
Reconciliation of financial liabilities
Reconciliation of financial liabilities
As at 1 April 2020
(Decrease)/Increase through financing cash flows
Repayment of principal portion of lease liability
Decrease through changes in fair value
Change in fair value of derivative
Other changes
Loan amortisation
As at 31 March 2021
2021
£m
629.7
(150.5)
479.2
460.4
104%
17.9
(3.8)
493.3
851.9
52.7
25.5
44.1
974.2
51%
2020
£m
628.6
(80.8)
547.8
610.6
90%
17.1
(1.3)
563.6
1,102.3
55.0
–
39.8
1,197.1
47%
Lease
liabilities
£m
Borrowings
£m
Derivatives
£m
Total
£m
86.3
628.6
(2.7)
712.2
(0.7)
–
–
–
–
1.1
–
(0.7)
0.1
–
0.1
1.1
85.6
629.7
(2.6)
712.7
168
168
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
27. Financial instruments and risk management continued
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
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
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.
its property business.
cash equivalents.
Net debt to equity ratio
Borrowings
Cash and cash equivalents
Net debt
Equity attributable to equity holders of the parent
Net debt to equity ratio (‘Balance sheet gearing’)
Share of joint ventures’ and associates’ borrowings
Share of joint ventures’ and associates’ cash and cash equivalents
Group’s share of net debt
Carrying value of investment property and public houses
Carrying value of managed houses
Carrying value of assets held for sale
Share of joint ventures’ and associates carrying value of investment properties
Group’s share of carrying value of investment properties
Net debt to property value ratio (‘Loan to value’)
Reconciliation of financial liabilities
Reconciliation of financial liabilities
As at 1 April 2020
(Decrease)/Increase through financing cash flows
Repayment of principal portion of lease liability
Decrease through changes in fair value
Change in fair value of derivative
Other changes
Loan amortisation
As at 31 March 2021
2021
£m
629.7
(150.5)
479.2
460.4
104%
17.9
(3.8)
493.3
851.9
52.7
25.5
44.1
974.2
51%
2020
£m
628.6
(80.8)
547.8
610.6
90%
17.1
(1.3)
563.6
1,102.3
55.0
–
39.8
1,197.1
47%
Lease
£m
86.3
(0.7)
–
–
liabilities
Borrowings
Derivatives
£m
628.6
£m
(2.7)
Total
£m
712.2
–
–
1.1
–
(0.7)
0.1
–
0.1
1.1
85.6
629.7
(2.6)
712.7
Reconciliation of financial liabilities
As at 1 April 2019
Adoption of IFRS 16
(Decrease)/Increase through financing cash flows
Repayment of Bravo Inns loan
Repayment of bank loans and other costs
Repayment of principal portion of lease liability
New borrowings
Decrease through changes in fair value
Change in fair value of derivative
Increase through business acquisitions
Acquisition of Bravo Inns
Other changes
Loan amortisation
As at 31 March 2020
Lease
liabilities
£m
Borrowings
£m
Derivatives
£m
502.7
–
(11.7)
(37.0)
–
162.0
0.1
–
–
–
–
–
Total
£m
502.8
87.1
(11.7)
(37.0)
(0.8)
162.0
–
(2.8)
(2.8)
11.7
0.9
628.6
–
–
(2.7)
11.7
0.9
712.2
–
87.1
–
–
(0.8)
–
–
–
–
86.3
28. Contingencies and commitments
The Group has no material contingent liabilities (2020: None). The Group was contractually committed to £4.0 million of capital expenditure
to construct or develop investment property as at 31 March 2021 (31 March 2020: £1.0 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.
168
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
169
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
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 £1.9 million (2020: £1.0 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 £3.0 million (note 15) (2020: £3.0 million) and loans with associates of £3.7 million (note 16)
(March 2020: £nil). 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:
NewRiver Retail Investments LP
NewRiver Retail (Nelson) Limited
NewRiver Retail (Napier) Limited
NewRiver Retail (Hamilton) Limited
NewRiver (Sprucefield) Limited
2021
£m
–
0.1
0.2
–
0.1
2020
£m
0.1
0.1
0.1
–
–
As at the 31 March 2021, an amount of £0.1 million was due to the Group relating to management fees.
During the year, the Group has recognised £0.3 million of interest from joint ventures and associates and as at the 31 March 2021 the
amount owing to the Group was £0.2 million.
Key management personnel
The Executive Directors of the Company who served during the year are considered to be key management personnel. The combined
emoluments for the key management personnel (relating to the period they were a Director), based upon amounts included in the Group
financial statements, are set out in the Directors’ remuneration report.
The total compensation of key management personnel was £1.4 million (2020: £1.5 million), which comprised short-term benefits of
£0.1 million (2020: £0.1 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 £41.0 million and NewRiver will hold a 10% interest in the asset (NewRiver share: £4.1 million).
Seven pubs have been disposed of post year-end for £1.4 million, which in aggregate created a profit on disposal of £0.3 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.
170
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
COMPANY BALANCE SHEET
A S AT 31 MAR CH 20 21
Non-current assets
Investment in subsidiaries
Amounts owed from subsidiary undertakings
Total non-current assets
Current assets
Amounts owed from subsidiary undertakings
Other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Current liabilities
Trade creditors
Accruals
Other creditors
2021
£m
–
0.1
0.2
–
0.1
2020
£m
0.1
0.1
0.1
–
–
As at the 31 March 2021, an amount of £0.1 million was due to the Group relating to management fees.
Amounts owed to subsidiary undertakings
Total current liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
Net assets
Equity
Share capital
Share premium
Merger reserve
Retained earnings
Total equity
Notes
B
2021
£m
570.3
235.7
806.0
250.5
0.8
94.9
346.2
1,152.2
–
1.1
2.1
66.8
70.0
629.7
629.7
452.5
3.1
227.4
24.2
197.8
452.5
2020
(restated)
£m
560.4
349.8
910.2
345.6
0.5
53.1
399.2
1,309.4
0.4
2.9
2.4
66.6
72.3
628.6
628.6
608.5
3.1
227.4
211.7
166.3
608.5
The Company has applied the exemption in s408 of the Companies Act for omitting the income statement of the parent company. The loss
for the year after taxation was £156.0 million (31 March 2020: loss of £128 million restated).
∗ The comparative figures as at 31 March 2020 have been restated. Refer to Note A for further information on the restatement.
The financial statements were approved by the Board of Directors on 9 June 2021 and were signed on its behalf by:
ALLAN LOCKHART
Chief Executive
NewRiver REIT plc
Registered number: 10221027
MARK DAVIES
Chief Financial Officer
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 £1.9 million (2020: £1.0 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 £3.0 million (note 15) (2020: £3.0 million) and loans with associates of £3.7 million (note 16)
(March 2020: £nil). On the 30 September 2020, the Group disposed of a subsidiary which owned Sprucefield Retail Park. The Group then
Management fees are charged to joint ventures for asset management, investment advisory, project management and accounting services.
acquired a 10% interest, see note 8 and 16.
Total fees charged were:
NewRiver Retail Investments LP
NewRiver Retail (Nelson) Limited
NewRiver Retail (Napier) Limited
NewRiver Retail (Hamilton) Limited
NewRiver (Sprucefield) Limited
amount owing to the Group was £0.2 million.
Key management personnel
During the year, the Group has recognised £0.3 million of interest from joint ventures and associates and as at the 31 March 2021 the
The Executive Directors of the Company who served during the year are considered to be key management personnel. The combined
emoluments for the key management personnel (relating to the period they were a Director), based upon amounts included in the Group
financial statements, are set out in the Directors’ remuneration report.
The total compensation of key management personnel was £1.4 million (2020: £1.5 million), which comprised short-term benefits of
£0.1 million (2020: £0.1 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 £41.0 million and NewRiver will hold a 10% interest in the asset (NewRiver share: £4.1 million).
Seven pubs have been disposed of post year-end for £1.4 million, which in aggregate created a profit on disposal of £0.3 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.
170
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
171
171
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY
F O R T HE Y E AR E ND ED 31 MA R CH 20 21
As at 1 April 2019 as previously reported
Adjustment
As at 1 April 2019 as restated
Loss after taxation
Restatement* - loss after taxation
Loss after tax - restated
Equity issue
Transfer from merger reserve*
Dividends paid
As at 31 March 2020
Loss after taxation
Transfer from merger reserve
As at 31 March 2021
Share capital
£m
3.1
–
3.1
–
–
–
–
–
–
3.1
–
–
3.1
Share
premium
£m
225.0
–
225.0
–
–
–
2.4
–
–
227.4
–
–
227.4
Merger
reserve
(restated)*
£m
Retained
earnings
(restated)*
£m
Total
(restated)*
£m
799.9
–
799.9
(56.2)
(71.8)
158.7
98.2
256.9
(56.2)
(71.8)
(128.0)
(128.0)
–
103.2
(65.8)
166.3
(156.0)
187.5
197.8
2.4
–
(65.8)
608.5
(156.0)
–
452.5
413.1
(98.2)
314.9
–
–
–
–
(103.2)
–
211.7
–
(187.5)
24.2
∗
the loss after taxation reported in the prior year accounts was £56.2 million. See restatement paragraph for details of the restatement for these figures.
There was no other income in the year therefore the profit after taxation is the Company’s total comprehensive income for the year.
172
172
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
STATEMENT OF CHANGES IN EQUITY
NOTES TO THE FINANCIAL STATEMENTS
F O R T HE Y E AR E ND ED 31 MA R CH 20 21
As at 1 April 2019 as previously reported
Adjustment
As at 1 April 2019 as restated
Loss after taxation
Restatement* - loss after taxation
Loss after tax - restated
Equity issue
Transfer from merger reserve*
Dividends paid
As at 31 March 2020
Loss after taxation
Transfer from merger reserve
As at 31 March 2021
Share capital
Merger
reserve
(restated)*
Retained
earnings
(restated)*
Share
premium
£m
225.0
225.0
2.4
–
–
–
–
–
–
–
–
£m
3.1
–
3.1
–
–
–
–
–
–
–
–
3.1
227.4
211.7
3.1
227.4
Total
(restated)*
£m
799.9
–
£m
158.7
98.2
256.9
799.9
(56.2)
(71.8)
(56.2)
(71.8)
(128.0)
(128.0)
–
103.2
(65.8)
166.3
(156.0)
187.5
197.8
2.4
–
(65.8)
608.5
(156.0)
–
452.5
£m
413.1
(98.2)
314.9
–
–
–
–
–
–
(103.2)
(187.5)
24.2
∗
the loss after taxation reported in the prior year accounts was £56.2 million. See restatement paragraph for details of the restatement for these figures.
There was no other income in the year therefore the profit after taxation is the Company’s total comprehensive income for the year.
A. Accounting policies
Basis of accounting
The Company’s separate financial statements for the year ended 31 March 2021 are prepared in accordance with Financial Reporting Standard 101
(FRS 101) “Reduced Disclosure Framework” as issued by the Financial Reporting Council and the Companies Act 2006. The financial statements
are presented in pounds Sterling. Entities reporting under FRS 101 follow the same rules for correction of errors in IAS 8 as IFRS reporters. However,
there is an exemption in FRS 101 from IAS 1’s requirement to present a ‘third balance sheet’ as at the beginning of the earliest comparative year.
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires the Directors to exercise judgement
in the process of applying the Company’s accounting policies. Changes in assumptions may have a significant impact on the financial statements in
the period the assumptions changed. The Directors believe that the underlying assumptions are appropriate. The most critical estimates,
assumptions and judgements relate to the determination of carrying value of the investment in the Company’s subsidiary undertakings.
The nature, facts and circumstance of the investment are taken into account on assessing whether there are any indications of impairment.
The financial statements are presented in sterling. They are prepared on the historical cost basis, except for the derivative financial instruments which
are included at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for the goods and services.
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently
applied to all years presented, other than where new policies have been adopted.
For the Company’s going concern assessment, refer to note 1.
Restatement
The Company has restated its prior year comparatives to reflect:
– an additional impairment to the investment in subsidiary balance as at 31 March 2020. Through reviewing the prior year investment
impairment assessment, we identified a miscalculation and that there should have been an additional impairment charge of £71.8 million
to the investment in subsidiary balance as at 31 March 2020. The net effect of this amendment is to increase the loss after tax and
reduce net assets by £71.8 million.
– a change in accounting policy relating to impairments made between 2018 and 2020 that related to the Company’s investment in
NewRiver Retail Limited, the Company’s sole investment at the time the merger reserve was created. Transfers from the merger reserve
to retained earnings have been made to offset the impact of these impairments. This has resulted in £98.2 million and £103.2 million
being transferred a restatement in the years to 31 March 2019 and 31 March 2020 respectively. This has no impact on net assets and
has increased retained earnings by £201.4 million.
– an amount of £15.4 million that was disclosed as an investment in associate on the face of the balance sheet. This investment was an
investment in a wholly owned subsidiary and the amount has been restated in the comparatives as an investment in subsidiary.
– the presentation of intercompany balances on the balance sheet. A review has been performed on the terms of intercompany balances
at 31 March 2020 which has resulted in them being re-presented. Previously the Company balance sheet showed current amounts due
from subsidiary undertakings of £689.4 million and amounts owed to subsidiary undertakings of £60.6 million, both classified as current.
Post restatement, the Company now shows non-current amounts due from subsidiary undertakings of £349.8 million, current amounts
due from subsidiary undertakings of £345.6 million and current amounts owed to subsidiary undertakings of £66.6 million.
This adjustment has had no impact on net assets or profit and loss.
Critical estimates
Impairment of investment in subsidiaries
The carrying value of the Company’s investment in subsidiaries are disclosed in note B. The Company tests its investment in subsidiary
balances annually for impairment. An impairment is recognised where the fair value of the investment is below its carrying amount. The fair
values of investments are mainly driven by changes in the value of investment properties held on the balance sheets of those investments
and any distributions made to the Company.
Impairment of intercompany loans
The impairment of intercompany loans is inherently subjective due to the forward-looking nature of the assumptions made. Due to the
current climate the Company is operating in as a result of COVID-19, the Company has recognised an expected credit loss on intercompany
debtors of £0.7 million (2020: £0.7 million). The Company has applied the full expected credit loss model under IFRS 9.
Changes to accounting policies
The Company has adopted the new accounting policies as set out in the accounting policies section of the Group financial statements.
Adopting these new standards and amendments has not had a material impact on the Company in the current or prior years.
Disclosure exemptions
The Company has taken advantage of all disclosure exemptions allowed by FRS 101. These financial statements do not include:
– certain disclosures regarding the Company’s capital;
– a statement of cash flows;
– certain disclosures in respect of financial instruments;
– the effect of future accounting standards not yet adopted; and
172
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
173
173
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
– the requirements of paragraphs 10(d), 10If), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134 to 136 of IAS 1 Presentation of
Financial Statements
– disclosure of related party transactions with wholly-owned members of the Group.
The above disclosure exemptions have been adopted because equivalent disclosures are included in the consolidated Group accounts
into which the Company is consolidated.
Dividends
Dividend information is provided in note 13 to the consolidated accounts.
Investment in subsidiaries
Investments in subsidiary undertakings are stated at cost less provision for impairment.
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 at amortised cost 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 full approach within IFRS 9. If it is determined that a 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. Financial assets at amortised cost consist of loans and receivables. The Company determines the classification of its financial
assets at initial recognition. The Company’s financial assets consist of cash, and loans and receivables.
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.
Financial liabilities
Financial liabilities are classified 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 cost 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.
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
balance sheet date of the number of instruments expected to vest. The fair value is recognised over the vesting period in the statement of
comprehensive income of the company that employs the recipient of the share-based payment, with a corresponding increase in equity.
Share capital
Shares are classified as equity when there is no obligation to transfer cash or other assets.
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 at a general meeting.
Merger reserve
The merger reserve resulted from the acquisition of NewRiver Retail Limited and represents the difference between the value of the net
assets acquired of £524 million and the nominal value of the shares issued, less subsequent impairments in NewRiver Retail Limited
following the creation of the merger reserve in 2016.
174
174
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
– the requirements of paragraphs 10(d), 10If), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134 to 136 of IAS 1 Presentation of
Financial Statements
– disclosure of related party transactions with wholly-owned members of the Group.
The above disclosure exemptions have been adopted because equivalent disclosures are included in the consolidated Group accounts
into which the Company is consolidated.
Dividends
Dividend information is provided in note 13 to the consolidated accounts.
Investment in subsidiaries
Investments in subsidiary undertakings are stated at cost less provision for impairment.
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 at amortised cost 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 full approach within IFRS 9. If it is determined that a 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. Financial assets at amortised cost consist of loans and receivables. The Company determines the classification of its financial
assets at initial recognition. The Company’s financial assets consist of cash, and loans and receivables.
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
Financial assets are derecognised only when the contractual rights to the cash flows from the financial asset expire or the Group transfers
date to the contracted expiry dates.
substantially all risks and rewards of ownership.
Financial liabilities
cancelled or expires.
Financial liabilities are classified as other liabilities. A financial liability is derecognised when the obligation under the liability is discharged or
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 cost 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,
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
balance sheet date of the number of instruments expected to vest. The fair value is recognised over the vesting period in the statement of
comprehensive income of the company that employs the recipient of the share-based payment, with a corresponding increase in equity.
Shares are classified as equity when there is no obligation to transfer cash or other assets.
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 at a general meeting.
The merger reserve resulted from the acquisition of NewRiver Retail Limited and represents the difference between the value of the net
assets acquired of £524 million and the nominal value of the shares issued, less subsequent impairments in NewRiver Retail Limited
following the creation of the merger reserve in 2016.
discounting is omitted.
Share-based payments
Share capital
Dividends
Merger reserve
174
Country of
incorporation
Activity
Proportion of
ownership interest
B. Investment in subsidiaries
All subsidiaries are held indirectly except the companies marked* in the below listing.
Name
C-store REIT Limited
Convenience Store REIT Limited
NewRiver Capital Limited*
NewRiver Retail (Burgess Hill) Limited
Hawthorn Leisure Community Pubs Limited
NewRiver (Darnall) Limited
NewRiver Finance Company Limited
NewRiver REIT (UK) Limited
NewRiver Leisure Limited
Hawthorn Leisure Public Houses Limited
NewRiver Retail (Bexleyheath) Holdings Limited
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Dormant company
Dormant company
Real estate investments
Dormant company
Real estate investments
Real estate investments
Real estate investments
Asset management
Real estate investments
Real estate investments
Group holding company
NewRiver Retail (Bexleyheath) Limited
Jersey
Real estate investments
NewRIver Retail (Broadway Square) UK Limited
NewRIver Retail (Bexleyheath) UK Limited
NewRiver Retail (Boscombe No. 1) Limited
UK
UK
UK
Dormant
Dormant
Real estate investments
NewRiver Retail (Broadway Square) Limited
Jersey
Real estate investments
NewRiver Retail (Cardiff) Limited
NewRiver Retail (Carmarthen) Limited
NewRiver Retail (Darlington) Limited
NewRiver Grays S.a.r.l*
NewRiver (Grays) UK Limited
NewRiver Retail (GP3) Limited
NewRiver Retail (Leylands Road) Limited
Hawthorn Leisure (Mantle) Limited
UK
UK
UK
Real estate investments
Real estate investments
Real estate investments
Luxembourg Real estate investments
UK
UK
UK
UK
Dormant
General partner
Real estate investments
Real estate investments
NewRiver Retail (Market Deeping No. 1) Limited
Guernsey
Real estate investments
NewRiver Retail (Morecambe) Limited
UK
Real estate investments
NewRiver Retail (Newcastle No. 1) Limited
Guernsey
Real estate investments
NewRiver Retail (Nominee No.3) Limited
NewRiver Retail (Paisley) Limited
NewRiver Retail (Penge) Limited
NewRiver Retail (Portfolio No. 1) Limited
NewRiver Retail (Portfolio No. 2) Limited
NewRiver Retail (Portfolio No. 3) Limited
UK
UK
UK
Guernsey
Guernsey
UK
Dormant company
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Holding company
NewRiver Retail (Portfolio No. 3) Limited Partnership UK
Real estate investments
NewRiver Retail (Portfolio No. 5) Limited
NewRiver Retail (Portfolio No. 6) Limited
NewRiver Retail (Portfolio No. 4) Limited
NewRiver Retail (Portfolio No. 8) Limited
NewRiver Retail (Portfolio No.10) Limited
NewRiver Retail (Ramsay Development) Limited
NewRiver Retail (Ramsay Investment) Limited
UK
UK
UK
UK
UK
UK
UK
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Class of share
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Partnership
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
175
175
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
B. Investment in subsidiaries continued
Country of
incorporation
Name
NewRiver Retail (Skegness) Limited
NewRiver Retail (Wakefield) Limited
NewRiver Retail (Warminster) Limited
NewRiver Retail (Wisbech) Limited
NewRiver Retail (Witham No. 1) Limited
NewRiver Retail (Wrexham) Limited
NewRiver Retail Holdings Limited
NewRiver Retail Holdings No. 1 Limited
NewRiver Retail Holdings No. 2 Limited
NewRiver Retail Holdings No. 3 Limited
NewRiver Retail Holdings No. 4 Limited
NewRiver Retail Holdings No. 5 Limited
NewRiver Retail Holdings No. 6 Limited
NewRiver Retail Holdings No. 7 Limited
NewRiver Retail Limited*
NewRiver Retail Limited
NewRiver Retail Property Unit Trust
NewRiver Retail Property Unit Trust No. 2
NewRiver Retail Property Unit Trust No. 3
NewRiver Retail Property Unit Trust No. 4
NewRiver Retail Property Unit Trust No. 5
NewRiver Retail Property Unit Trust No. 6
NewRiver Retail Property Unit Trust No. 7
Hawthorn Leisure REIT Limited*
Hawthorn Leisure (Bravo Inns) Limited
Bravo Inns Limited
Bravo Inns II Limited
Shopping Centre REIT Limited
Hawthorn Leisure Holdings Limited
Hawthorn Leisure Limited
Hawthorn Leisure Scotco Limited
Hawthorn Leisure Management Limited
Hawthorn Leisure Honey Limited
Hawthorn Leisure Acquisitions Limited
UK
UK
UK
UK
UK
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
UK
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
UK1
UK1
UK1
UK1
UK1
UK1
UK1
UK1
UK1
UK1
UK1
Activity
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Group holding company
Group holding company
Group holding company
Group holding company
Group holding company
Group holding company
Group holding company
Group holding company
Group holding company
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Group holding company
Real estate investments
Real estate investments
Real estate investments
Dormant company
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Proportion of
ownership interest
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Class of share
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary units
Ordinary units
Ordinary units
Ordinary units
Ordinary units
Ordinary units
Ordinary units
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
The Company’s investments in joint ventures and associates are detailed in notes 15/16. The registered offices of the companies are:
Guernsey – NewRiver Retail (GP1) Ltd, Floor 2 Trafalgar Court, Les Banques, St Peter Port, GY1 4LY
UK – NewRiver Retail (Nelson) Limited, 16 New Burlington Place, London, W1S 2HX
UK – NewRiver Retail (Napier) Limited, 16 New Burlington Place, London, W1S 2HX
UK – NewRiver (Sprucefield) Limited, 16 New Burlington Place, London, W1S 2HX
UK – NewRiver Retail (Hamilton) Limited, 16 New Burlington Place, London, W1S 2HX
UK1 – Touchstone Pinewood Business Park, Coleshill Road, Marston Green, Birminham B37 7HG
176
176
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
B. Investment in subsidiaries continued
Reconciliation of the movement in investment in subsidiaries:
Country of
incorporation
Activity
Proportion of
ownership interest
Opening balance
Impairment in subsidiaries
Additions to investments
Investment in subsidiaries
2021
£m
560.4
(220.4)
230.3
570.3
2020
(restated)
£m
664.9
(119.9)
15.4
560.4
The Company has recognised an impairment charge of £220.4 million (2020: £119.9 million) to reflect the decline in the valuation of the
overall assets of the Group as a result of an adverse movement in property valuations.
In the prior year, an amount of £15.4 million was disclosed as an investment in associate on the face of the Balance Sheet. This investment
was an investment in a wholly owned subsidiary and the amount has been restated in the comparatives as an investment in subsidiary.
An additional impairment of £71.8 million has been recognised in 2020, see restatement paragraph in note A for further details.
C. Auditors remuneration
The auditors’ remuneration in respect of the Company is disclosed in note 6.
D. Borrowings
All borrowings issued by the Group at 31 March 2021 were issued by the Company. See note 23 of the consolidated financial statements
for details.
N O T ES TO T HE FI NA NC IA L S TA TE ME N TS
Name
NewRiver Retail (Skegness) Limited
NewRiver Retail (Wakefield) Limited
NewRiver Retail (Warminster) Limited
NewRiver Retail (Wisbech) Limited
NewRiver Retail (Witham No. 1) Limited
NewRiver Retail (Wrexham) Limited
NewRiver Retail Holdings Limited
NewRiver Retail Holdings No. 1 Limited
NewRiver Retail Holdings No. 2 Limited
NewRiver Retail Holdings No. 3 Limited
NewRiver Retail Holdings No. 4 Limited
NewRiver Retail Holdings No. 5 Limited
NewRiver Retail Holdings No. 6 Limited
NewRiver Retail Holdings No. 7 Limited
NewRiver Retail Limited*
NewRiver Retail Limited
NewRiver Retail Property Unit Trust
NewRiver Retail Property Unit Trust No. 2
NewRiver Retail Property Unit Trust No. 3
NewRiver Retail Property Unit Trust No. 4
NewRiver Retail Property Unit Trust No. 5
NewRiver Retail Property Unit Trust No. 6
NewRiver Retail Property Unit Trust No. 7
Hawthorn Leisure REIT Limited*
Hawthorn Leisure (Bravo Inns) Limited
Bravo Inns Limited
Bravo Inns II Limited
Shopping Centre REIT Limited
Hawthorn Leisure Holdings Limited
Hawthorn Leisure Limited
Hawthorn Leisure Scotco Limited
Hawthorn Leisure Management Limited
Hawthorn Leisure Honey Limited
Hawthorn Leisure Acquisitions Limited
UK
UK
UK
UK
UK
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
UK
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
UK1
UK1
UK1
UK1
UK1
UK1
UK1
UK1
UK1
UK1
UK1
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Group holding company
Group holding company
Group holding company
Group holding company
Group holding company
Group holding company
Group holding company
Group holding company
Group holding company
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Group holding company
Real estate investments
Real estate investments
Real estate investments
Dormant company
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
Real estate investments
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Class of share
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary units
Ordinary units
Ordinary units
Ordinary units
Ordinary units
Ordinary units
Ordinary units
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
Ordinary Shares
The Company’s investments in joint ventures and associates are detailed in notes 15/16. The registered offices of the companies are:
Guernsey – NewRiver Retail (GP1) Ltd, Floor 2 Trafalgar Court, Les Banques, St Peter Port, GY1 4LY
UK – NewRiver Retail (Nelson) Limited, 16 New Burlington Place, London, W1S 2HX
UK – NewRiver Retail (Napier) Limited, 16 New Burlington Place, London, W1S 2HX
UK – NewRiver (Sprucefield) Limited, 16 New Burlington Place, London, W1S 2HX
UK – NewRiver Retail (Hamilton) Limited, 16 New Burlington Place, London, W1S 2HX
UK1 – Touchstone Pinewood Business Park, Coleshill Road, Marston Green, Birminham B37 7HG
176
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
177
177
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
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.
EPRA Earnings per Share (EPS)
EPRA Cost Ratio (including direct vacancy costs)
EPRA Cost Ratio (excluding direct vacancy costs)
EPRA NRV per share
EPRA NTA per share
EPRA NDV per share
EPRA NIY
EPRA ‘topped-up’ NIY
EPRA Vacancy Rate
EPRA Earnings per Share: 2.9p
Definition
Earnings from operational activities
FY21
2.9p
61.3%
58.6%
FY20
16.7p
44.0%
41.4%
March 2021 March 2020
170p
151p
155p
8.2%
8.8%
4.2%
225p
201p
204p
8.1%
8.5%
5.2%
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
Earnings per IFRS income statement
Adjustments to calculate EPRA Earnings, exclude:
Changes in value of investment properties, development properties held for investment and other interests
Profits or losses on disposal of investment properties, development properties held for investment and other
interests
Changes in fair value of financial instruments and associated close-out costs
Acquisition costs on share deals and non-controlling joint venture interests
Deferred tax in respect of EPRA adjustments
Adjustments to above in respect of joint ventures (unless already included under proportional consolidation)
EPRA Earnings
Basic number of shares
EPRA Earnings per Share (EPS)
FY21
(£m)
(150.5)
FY20
(£m)
(121.1)
154.7
7.7
162.6
1.5
(0.1)
0.1
(1.4)
(1.6)
8.9
2.8
0.4
0.5
4.6
51.3
306.4m
305.9m
2.9p
16.7p
178
178
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
EPRA PERFORMANCE MEASURES
(UNAUDITED)
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
This section sets out the rationale for each performance measure as well as how it is measured. A summary of the performance measures
notes thereto.
Introduction
European Real Estate companies.
is included in following table.
EPRA Earnings per Share (EPS)
EPRA Cost Ratio (including direct vacancy costs)
EPRA Cost Ratio (excluding direct vacancy costs)
EPRA NRV per share
EPRA NTA per share
EPRA NDV per share
EPRA NIY
EPRA ‘topped-up’ NIY
EPRA Vacancy Rate
EPRA Earnings per Share: 2.9p
Earnings from operational activities
Definition
Purpose
supported by earnings
A key measure of a company’s underlying operating results and an indication of the extent to which current dividend payments are
Earnings per IFRS income statement
Adjustments to calculate EPRA Earnings, exclude:
Changes in value of investment properties, development properties held for investment and other interests
Profits or losses on disposal of investment properties, development properties held for investment and other
interests
Changes in fair value of financial instruments and associated close-out costs
Acquisition costs on share deals and non-controlling joint venture interests
Deferred tax in respect of EPRA adjustments
Adjustments to above in respect of joint ventures (unless already included under proportional consolidation)
EPRA Earnings
Basic number of shares
EPRA Earnings per Share (EPS)
FY21
2.9p
61.3%
58.6%
FY20
16.7p
44.0%
41.4%
March 2021 March 2020
170p
151p
155p
8.2%
8.8%
4.2%
225p
201p
204p
8.1%
8.5%
5.2%
FY21
(£m)
(150.5)
FY20
(£m)
(121.1)
154.7
7.7
162.6
1.5
(0.1)
0.1
(1.4)
(1.6)
8.9
2.8
0.4
0.5
4.6
51.3
306.4m
305.9m
2.9p
16.7p
The information in this section is unaudited and does not form part of the consolidated primary statements of the Company or the
Reconciliation of EPRA Earnings to Underlying Funds From Operations (UFFO)
EPRA Earnings
Share-based payment charge
Depreciation on public houses
Forward-looking element of IFRS 9
Integration costs and abortive fees
Underlying Funds From Operations (UFFO)
Basic number of shares
UFFO per share
FY21
(£m)
8.9
0.6
1.1
0.6
0.3
11.5
FY20
(£m)
51.3
–
0.8
–
–
52.1
306.4m
305.9m
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.
31 March 2021
IFRS Equity attributable to shareholders
Fair value of financial instruments
Deferred tax in relation to fair value gains of Investment Property/ PPE
Goodwill as per the IFRS balance sheet
Fair value of debt
Purchasers’ costs
EPRA NRV / NTA / NDV
Fully diluted number of shares
EPRA NRV / NTA / NDV per share
31 March 2020
IFRS Equity attributable to shareholders
Fair value of financial instruments
Deferred tax in relation to fair value gains of Investment Property/ PPE
Goodwill as per the IFRS balance sheet
Fair value of debt
Purchasers’ costs
EPRA NRV / NTA / NDV
Fully diluted number of shares
EPRA NRV / NTA / NDV per share
EPRA NAV
(£m)
460.4
2.6
0.7
–
–
–
EPRA
NNNAV
(£m)
460.4
–
–
–
16.3
–
463.7
476.7
EPRA NRV
(£m)
EPRA NTA
(£m)
EPRA NDV
(£m)
460.4
460.4
460.4
2.6
0.7
–
–
60.1
523.8
2.6
0.7
(0.5)
–
–
–
–
(0.5)
16.3
–
463.2
476.2
307.3m
307.3m
307.3m
307.3m
307.3m
151p
155p
170p
151p
155p
EPRA NAV
(£m)
EPRA NNNAV
(£m)
EPRA NRV
(£m)
EPRA NTA
(£m)
EPRA NDV
(£m)
610.6
610.6
610.6
610.6
610.6
2.7
2.1
–
–
–
–
–
–
15.0
–
2.7
2.1
–
–
75.3
2.7
2.1
(0.2)
–
–
–
–
(0.2)
15.0
–
615.4
625.6
690.7
615.2
625.4
306.5m
306.5m
306.5m
306.5m
306.5m
201p
204p
225p
201p
204p
178
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
179
179
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
E PRA PER FOR MA NC E M EA SUR ES (U NA UD ITE D )
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.
Properties at valuation – wholly owned
Properties at valuation – share of Joint Ventures & Associates
Trading property (including share of Joint Ventures & Associates)
Less: Developments
Completed property portfolio
Allowance for estimated purchasers’ costs and capital expenditure
Grossed up completed property portfolio valuation
Annualised cash passing rental income
Property outgoings
Annualised net rents
Add: Notional rent expiration of rent free periods or other lease incentives
Topped-up net annualised rent
EPRA NIY
EPRA ‘topped-up’ NIY
March 2021
(£m)
March 2020
(£m)
904.6
1,157.3
44.1
25.5
(17.5)
39.8
0.3
(65.9)
956.7
1,131.5
47.3
74.8
B
1,004.0
1,206.3
96.4
(13.7)
82.7
5.4
88.1
8.2%
8.8%
110.0
(11.9)
98.1
4.7
102.8
8.1%
8.5%
A
C
A/B
C/B
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.
Calculation of EPRA Vacancy Rate
Estimated Rental Value of vacant retail space
Estimated rental value of the retail portfolio
EPRA Vacancy Rate
March 2021
(£m)
March 2020
(£m)
A
B
A/B
2.8
66.0
4.2%
4.2
81.4
5.2%
180
180
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
E PRA PER FOR MA NC E M EA SUR ES (U NA UD ITE D )
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.
Properties at valuation – wholly owned
Properties at valuation – share of Joint Ventures & Associates
Trading property (including share of Joint Ventures & Associates)
Less: Developments
Completed property portfolio
Allowance for estimated purchasers’ costs and capital expenditure
Grossed up completed property portfolio valuation
Annualised cash passing rental income
Add: Notional rent expiration of rent free periods or other lease incentives
Property outgoings
Annualised net rents
Topped-up net annualised rent
EPRA NIY
EPRA ‘topped-up’ NIY
EPRA Vacancy rate: 4.2%
Definition
Purpose
A ‘pure’ (%) measure of investment property space that is vacant, based on ERV.
Calculation of EPRA Vacancy Rate
Estimated Rental Value of vacant retail space
Estimated rental value of the retail portfolio
EPRA Vacancy Rate
March 2021
March 2020
(£m)
(£m)
904.6
1,157.3
44.1
25.5
(17.5)
39.8
0.3
(65.9)
956.7
1,131.5
47.3
74.8
96.4
(13.7)
82.7
5.4
88.1
8.2%
8.8%
110.0
(11.9)
98.1
4.7
102.8
8.1%
8.5%
A
C
A/B
C/B
March 2021
March 2020
(£m)
(£m)
A
B
A/B
2.8
66.0
4.2%
4.2
81.4
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.
Administrative/operating expenses per IFRS
Net service charge costs/fees
Management fees less actual/estimated profit element
Other operating income/recharges intended to cover overhead expenses less any related profits
Share of Joint Ventures and associates expenses (net of other income)
Exclude (if part of the above):
Investment property depreciation
Ground rent costs
B
1,004.0
1,206.3
EPRA Costs (including direct vacancy costs)
Service charge costs recovered through rents but not separately invoiced
Direct vacancy costs
EPRA Costs (excluding direct vacancy costs)
Gross Rental Income less ground rents – per IFRS
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)
Gross Rental Income
EPRA Cost Ratio (including direct vacancy costs)
EPRA Cost Ratio (excluding direct vacancy costs)
A
B
C
A/C
B/C
Estimated Market Rental Value (ERV) of vacant space divided by ERV of the whole portfolio, excluding pub and development assets.
Reconciliation of EPRA Costs (including direct vacancy costs) to Net Administrative expenses per IFRS
EPRA Costs (including direct vacancy costs)
Exclude
Ground rent costs
Share of Joint Ventures and associates property expenses (net of other income)
Other operating income/recharges intended to cover overhead expenses less any related profits
Net service charge costs/fees
Operating expenses (excluding service charge cost)
Tenant incentives (included within income)
Letting & legal costs (included within income)
Group’s share of net administrative expenses as per IFRS
EPRA Gross Rental Income
Ground rent costs
Expected credit loss
Government grant money
Gross Rental Income
Administrative cost ratio as per IFRS
A
D
C
E
D/E
FY21
(£m)
52.0
5.9
(1.2)
(7.2)
1.3
–
0.3
–
51.1
(2.2)
48.9
79.5
–
3.9
83.4
61.3%
58.6%
FY21
(£m)
51.1
(0.3)
(1.1)
7.2
(5.9)
(28.9)
(0.2)
(1.6)
20.3
83.4
(0.3)
(5.3)
3.7
81.5
24.9%
FY20
(£m)
55.0
4.2
(0.9)
(1.8)
0.4
–
0.6
–
57.5
(3.4)
54.1
127.3
–
3.4
130.7
44.0%
41.4%
FY20
(£m)
57.5
(0.6)
(0.3)
1.8
(4.2)
(33.8)
(0.3)
(1.2)
18.9
130.7
(0.6)
(2.5)
–
127.6
14.9%
180
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
181
181
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
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 Operations (‘UFFO’) and
UFFO per share
(Loss) / Profit for the period after
taxation
Note 12 of the Financial Statements
EPRA Net Tangible Assets (‘NTA’) and EPRA NTA
per share
Net Assets
Note 12 of the Financial Statements
Dividend cover
Admin cost ratio
Interest cover
EPRA EPS
EPRA NNNAV
EPRA NIY
EPRA ‘topped-up’ NIY
EPRA Vacancy Rate
Total Accounting Return
Weighted average cost of debt
Weighted average debt maturity
Loan to Value
N/A
N/A
N/A
IFRS Basic EPS
Net Assets
N/A
N/A
N/A
N/A
N/A
N/A
N/A
‘Financial Policies’ section of the ‘Finance Review’
Note 6 of the Financial Statements
Glossary
Note 12 of the Financial Statements
‘EPRA performance measures’ section of this
document
‘EPRA performance measures’ section of this
document
‘EPRA performance measures’ section of this
document
‘EPRA performance measures’ section of this
document
Glossary
‘Financial Policies’ section of the ‘Finance Review’
‘Financial Policies’ section of the ‘Finance Review’
Glossary
182
182
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
ALTERNATIVE PERFORMANCE
MEASURES (APMS)
GLOSSARY
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 Operations (‘UFFO’) and
(Loss) / Profit for the period after
Note 12 of the Financial Statements
EPRA Net Tangible Assets (‘NTA’) and EPRA NTA
Net Assets
Note 12 of the Financial Statements
UFFO per share
per share
Dividend cover
Admin cost ratio
Interest cover
EPRA EPS
EPRA NNNAV
EPRA NIY
EPRA ‘topped-up’ NIY
EPRA Vacancy Rate
Total Accounting Return
Weighted average cost of debt
Weighted average debt maturity
Loan to Value
taxation
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
IFRS Basic EPS
Net Assets
Note 12 of the Financial Statements
‘EPRA performance measures’ section of this
‘Financial Policies’ section of the ‘Finance Review’
Note 6 of the Financial Statements
Glossary
document
document
document
document
Glossary
Glossary
‘EPRA performance measures’ section of this
‘EPRA performance measures’ section of this
‘EPRA performance measures’ section of this
‘Financial Policies’ section of the ‘Finance Review’
‘Financial Policies’ section of the ‘Finance Review’
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.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
183
183
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
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.
GLO SSA RY
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.
184
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021
COMPANY INFORMATION
Directors
Margaret Ford
(Non-Executive Chairman)
Allan Lockhart
(Chief Executive Officer)
Mark Davies
(Chief Financial Officer)
Kay Chaldecott
(Non-Executive Director)
Alastair Miller
(Non-Executive Director)
Charlie Parker
(Non-Executive Director)
Colin Rutherford
(Non-Executive Director)
Company Secretary
Kerin Williams
Registered office
16 New Burlington Place
London
W1S 2HX
Company Number
10221027
Brokers
Liberum Capital Limited
Ropemaker Place, Level 12
25 Ropemaker Street
London
EC2Y 9LY
Jefferies International Limited
100 Bishopsgate
London
EC2N 4JL
Financial adviser
Kinmont
5 Clifford Street
London
W1S 2LG
Auditor
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RH
Legal advisers
CMS Cameron McKenna
Nabarro Olswang LLP
78 Cannon Street
London
EC4N 6AF
Tax advisers
BDO LLP
55 Baker Street
London
W1U 7EU
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
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NewRiver REIT plc
16 New Burlington Place
London W1S 2HX
+44 (0) 20 3328 5800
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