Resilient retail
Annual Report and Accounts 2022
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Contents
Strategic Report
Our investment case ...................................1
Chairman’s statement ................................2
Our business at a glance ..........................4
Chief Executive’s review ...........................6
Our marketplace ........................................10
Our strategy ..................................................14
Our Key Performance Indicators .......... 16
Business model .........................................20
Stakeholder engagement ......................22
Portfolio review ..........................................30
Finance review .......................................... 38
Our ESG approach ...................................52
Principal risks and uncertainties ...........78
Governance
Chairman’s letter on governance.........87
Our leadership team ................................88
Board leadership
and Company purpose ............................ 91
s172 Statement .........................................92
Nomination Committee report ............100
Audit Committee report .........................103
Remuneration report ..............................109
Directors’ report ......................................128
Statement of Directors’
responsibilities ...........................................131
Financial Statements
Independent Auditors’ report ..............132
Consolidated Statement
of Comprehensive Income ...................142
Consolidated Balance Sheet ...............143
Consolidated Cash Flow
Statement ...................................................144
Consolidated Statement
of Changes in Equity...............................145
Notes to the Financial Statements.....146
Company Balance Sheet ......................178
Statement of Changes in Equity .........179
Notes to the Financial Statements.....180
EPRA Performance Measures .............184
Alternative Performance Measures ...188
Glossary ......................................................189
Company information .............................IBC
NewRiver is a leading Real Estate Investment Trust
specialising in buying, managing and developing
resilient retail assets throughout the UK. Every day,
our shopping centres and retail parks provide
essential goods and services and support the
development of thriving communities across the UK.
NewRiver has a Premium Listing on the Main Market
of the London Stock Exchange (ticker: NRR).
2022 Financial Highlights
Underlying Funds
From Operations
£28.3m
FY21: £11.5M
UFFO Per Share
9.2p
FY21: 3.8P
IFRS Loss After Tax
Ordinary Dividend Per Share
£(26.6)m
FY21: £(150.5)M
7.4p
FY21: 3.0P
Portfolio valuation performance
Loan To Value
-0.9%
FY21: -13.6%
Total Accounting Return
-6.6%
FY21: -24.9%
34.1%
FY21: 50.6%
Key
Performance versus previous year
Improved
Declined
Maintained
Front Cover Image: Cuckoo Bridge Retail Park, Dumfries
Sprucefield Retail Park, Lisburn, Northern Ireland
Our Investment Case
1
2
3
4
Our focused portfolio
positioning
We own and manage resilient retail assets that provide
essential goods and services to communities across the
UK. These assets provide affordable and well located
space that is compatible with retailers’ increasingly
omnichannel strategies.
Our market leading
operating platform
Our expert asset management team, our data-driven approach
and our strong occupier relationships set us apart.
Our financial flexibility
and capacity
Our unsecured balance sheet, significant covenant headroom
and access to undrawn liquidity provide the financial flexibility
to support our growth aspirations.
Our clear strategy
for growth
Our strategy is designed to deliver income-led premium
returns through maintaining a resilient retail portfolio,
expanding our capital partnerships and realising value
through our regeneration projects.
Reliable and
recurring
income-led
Premium Total
Accounting
Return
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
1
STRATEGIC REPORT
CH AIR MAN’S STAT EMENT
Our vision for
resilient retail
Baroness Ford OBE
Non-Executive Chairman
"Our vision of resilient retail is built
on what we know and what has been
thrown into sharp relief during the
Pandemic: that well-positioned
assets, in the right location, at
affordable rents, remain very
attractive to retailers."
Kittybrewster Retail Park, Aberdeen
2
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
Last June when we published our FY21
results, we had just come through the worst
of the second wave of COVID-19 when
I wrote to shareholders with a clear plan
to build on the remarkable resilience the
NewRiver portfolio had demonstrated since
the start of the Pandemic.
Principally we had decided to sell our pub portfolio which had
reached its natural scale for NewRiver. We had earmarked the
proceeds to lower our LTV to a more sustainable level to create
a solid platform from which to grow a highly resilient retail portfolio
by capitalising on the opportunities that we believed were likely
to emerge post-COVID. In order to take advantage of these
opportunities, we also set out our vision of what the future of retail
looked like, alongside a plan to divest ourselves of all but the most
resilient assets.
I am pleased to say that this is exactly what was delivered. The
price we obtained for the Hawthorn portfolio was a vindication of
both the decision to sell and the timing of the transaction. At that
stage, we had no idea that the Omicron variant was just around
the corner. So I want to thank all those colleagues involved who
had a clear-eyed view, at all times, on what was in the best
interests of our shareholders.
The resultant capital structure is much more aligned to suit our
long-term prospects of rebuilding the major, resilient, retail
focused REIT in the UK, and the work that our teams have done
to re-shape the portfolio has delivered the best possible platform
from which to grow the business. Make no mistake, we believe
very strongly in the future of high-quality, well-positioned retail.
Our focus on convenience and location has stood us in great
stead throughout two years and three waves of the Pandemic.
Our tenants have flourished as their customers have continued to
shop locally and to shop regularly. Our vision of resilient retail is
built on what we know and what has been thrown into sharp relief
during the Pandemic: that well-positioned assets, in the right
location, at affordable rents, remain very attractive to retailers.
When these characteristics are combined with easy access, good
facilities, and great value offerings, physical retail remains highly
attractive to shoppers. We also share the view that the surge in
online shopping that was necessitated by the Pandemic will
stabilise to a more natural level; and there is very clear evidence
of this happening in recent weeks and months.
But of course, the toll that the Pandemic has taken continues to
be exacted. The return of inflation, sadly familiar to those of us
who joined the workforce in the 1970s, presents families with huge
challenges in the coming period. However, as during the
Pandemic, we believe that the essential nature of the shops in our
Our purpose
To own, manage and develop resilient
retail assets across the UK that
provide essential goods and services
and support the development
of thriving communities.
We Developed our Pathway
to Net-Zero Carbon
We have now published our detailed pathway
to net-zero which provides the scope
of our commitment and our intentions for measuring
our progress, developed in accordance with the
Better Buildings Partnership's (BBP) Net Zero
Carbon Pathway Framework and aligned to a
1.5-degree future using the Science-Based Targets
(SBT) Methodology.
portfolio, twinned with the value offer from many of our retailers,
will provide customers with opportunities to manage the weekly
budget in a way that delivers the best value for money. So whilst
the Board is rightly monitoring the economic situation very closely,
we are clear that our assets will remain very attractive locations to
retailers and their customers.
The last few years have been challenging for retail landlords, and
we are no exception. But it is becoming clear that the narrative
that predicted the total demise of physical shopping was massively
overdone. We were always clear about that. Our continued
operational success consistently challenged that narrative and our
return to capital growth this year has underscored that. Whilst it
has sometimes been hard to get a hearing amongst the hype and
froth surrounding online, we sense that this is clearly changing and
that investors are now seeing the very real value that physical
retail assets represent.
Throughout the last year, the Board at NewRiver has worked
exceptionally hard for shareholders. We are grateful for your
patience and support and look forward to meeting in person
this year at the AGM. This year will see Kay Chaldecott complete
ten years on the Board at NewRiver. We asked for an extension
of Kay’s tenure last year to benefit from her extensive experience
in the sector. This has proved invaluable as we worked our way
through the Pandemic and we are very grateful to Kay for her
fantastic service to the Company. Mark Davies, CFO for nearly
ten years, left the Board on the sale of Hawthorn, and in thanking
him for his sterling service, we wish him well for the future.
Following Mark’s departure, Will Hobman, who has been with the
Company for six years, was appointed as CFO ensuring a smooth
transition. Post year end we have also been delighted to welcome
Dr Karen Miller to the Board as a Non-Executive Director. Karen
brings with her a wealth of commercial sustainability expertise
which will be of great benefit in supporting our environmental
sustainability strategy.
Finally, I would like to thank all my colleagues at NewRiver who
again, have worked tirelessly this year to deliver such positive
operational results. We have a fantastic cohort of hugely motivated
and talented staff. We have all been through two tough years, but
the business is in very good shape, and in very good heart.
Baroness Ford OBE
Non-Executive Chairman
Next Collection Pod, Cuckoo Bridge Retail Park, Dumfries
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
3
STRATEGIC REPORT
OUR BUS IN ESS AT A GLANC E
Our resilient retail portfolio
How we define resilient retail
As part of refining our strategy in 2021 we
identified ten key characteristics of resilient
retail assets, based on our significant retail
real estate experience and proprietary
data sources.
These characteristics, ranging from location, online compatibility
and rental affordability to asset management intensity can be
quantitatively measured to form an assessment of an asset’s
long-term resilience, guiding our acquisition screening and
ultimately our capital allocation decisions.
Recognising that not every resilient asset will necessarily score
well on each metric, this data-led approach forms just one part
of our investment and asset management toolkit. Our holistic
approach also draws on sector experience, a best-in-class
operating platform, strong stakeholder relationships and
robust financials.
As the leading UK retail real estate company we understand
what makes a resilient retail asset and we know how to protect
and enhance resilience over the longer term.
By focusing on the fundamentals we are confident we will
deliver stable income, capital growth and premium total
accounting returns.
Resilient retail: 10 key characteristics
Location
Online compatible
Strong demographic profile
• Our centres are located close to some of the fastest growing
Fulfils role in omnichannel supply chains
• Our retail parks are optimised for click & collect with both free
communities in the UK
parking and delivery & returns pods in car parks
Optionality
Asset management
Underlying alternative use
• Our assets present optionality to re-purpose surplus retail
Low-intensity, low-risk asset management
• We have a targeted capex programme to increase rental
space or land predominantly for residential
income and capital growth
Retail supply
ESG
Favourable retail demand vs supply balance
• Good demand from retailers for our assets which are in the
heart of communities and aligned with increasing localism and
working from home
• We have low occupational costs with an affordable average
rent of £11.74 per sq ft
Convenience
Easy access, customer friendly
• Average travel time of only 13 minutes to our community
shopping centres
• Our retail parks have large, accessible free car parking and
are well served by public transport
Contributes to ESG commitments
• We can decarbonise our assets at a lower future cost
•
• Our assets are easily accessible with low-travel times,
100% renewable electricity across our managed retail assets
including 26% of shoppers travelling by foot, conducive to
a low-carbon footprint
Working from home
Rise of localism
• Our local assets in the heart of communities benefit from the
increased spend redirected from cities to more suburban and
neighbourhood locations following the shift to hybrid working
Occupiers
Liquidity
Occupier mix aligned with demand
• Our diversified occupier line-up is focused on essential
Low capital value and wide buyer pool
• Liquid average lot size of £19.3m
goods and services
4
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
Waterfront Retail Park, Barry
Our resilient retail portfolio at a glance
We focus on the positive impact we can have on our communities,
employees,occupiers and the environment.
Robust operating metrics
Top occupiers
Resilient rent
collection
Resilient
occupancy
Resilient
leasing
96%
95.6%
Area
+1.0m sq ft
+7.4%
Long-term leasing deals
vs Valuers ERV
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Subtotal
% Total gross income
2.9%
2.7%
2.6%
2.4%
2.4%
2.1%
2.1%
2.0%
1.6%
1.5%
22.3%
Stats as at 31 March 2022 / in FY22
Portfolio Segmentation
Focused on three resilient sectors
26%
Retail Parks
1. Retail Parks
14%
1%
34%
25%
Shopping Centres –
Core
Shopping Centres –
Regeneration
Shopping Centres –
Work Out
Other
2. Core Shopping Centres
3. Regeneration Shopping Centres
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
5
STRATEGIC REPORT
CH IEF EXECUTIVE'S REVI EW
Strengthened financial
and operational position
Our objectives have never been clearer –
to own and manage the most resilient retail
portfolio in the UK that will deliver stable
income, capital growth and thus superior
returns for our shareholders.
Underlying Funds
From Operations
£28.3m
FY21: £11.5M
Valuation
performance
-0.9%
FY21: -13.6%
Underlying Funds From
Operations Per Share
Completed
disposals
9.2p
FY21: 3.8P
£305m
FY21: £81m
Allan Lockhart
Chief Executive
"We have reshaped our portfolio
to enhance resilience and we are
well-positioned to deliver stable
income, capital growth and premium
total accounting returns"
6
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
Key
Performance versus previous year
Improved
Declined
Maintained
Ordinary Dividend
Per Share
7.4p
FY21: 3.0P
LTV
34.1%
FY21: 50.6%
Occupancy
95.6%
FY21: 95.8%
Net debt
£221.5m
FY21: £493.3m
Rent collection
96%
FY21: 86%*
Leasing vs ERV
Total Accounting Return
GRESB Score
7.4%
FY21: +0.6%
-6.6%
FY21: -24.9%
68
FY21: 60
Overview
We ended the year in a far stronger financial and operational
position, having reset the business to support our strategic aim to
deliver consistent 10% total accounting returns in the medium-
term, underpinned by a conservative and flexible balance sheet.
All of that was achieved in a period of continuing disruption from
COVID-19 earlier in the year and more latterly economic
uncertainty, partly caused by the tragic war in Ukraine. The results
from the decisive actions that we took in the year clearly
demonstrate the resilient and defensive positioning of our
portfolio, our market-leading platform and the incredible hard work
of the team at NewRiver.
Across the business, we have delivered robust and improved
financial and operational metrics that have led to an increase in
UFFO for the year to £28.3 million compared to £11.5 million in
FY21 and our NTA has recorded a modest increase in the second
half of the year to 134 pence per share.
What is perhaps most pleasing of all is that our retail portfolio has
returned to capital growth in the second half which supported a
total return outturn of +7.5%. This performance has been led by
retail parks, but significantly, our Core shopping centre portfolio
has delivered an excellent result, together with modest capital
growth from our Regeneration portfolio. We delivered a total
accounting return of -6.6% in the year as a whole, but importantly
and with our objective to deliver a consistent total accounting
return in mind, we delivered a +5.4% return in the second half.
Operationally, we had an excellent year both in terms of leasing
volume and pricing. Rent collection, car park and
commercialisation cashflows all improved during the year with rent
collection in particular close to pre COVID-19 levels.
Our retail disposal programme set at the start of the financial year
was achieved in-line with our expectations and at pricing
supportive of latest valuation. As a result of the completion of our
planned disposals and the capital growth delivered in the second
half of the year, our Loan To Value (‘LTV’) has materially reduced
from 51% to 34%.
* As at time of reporting FY21 results
With a highly flexible balance sheet, an LTV now within our
operating guidance providing us with surplus capital to invest in a
highly disciplined manner at the right time and with a clear strategy
in place, NewRiver has genuine optionality and is well positioned
to achieve its strategic objective of delivering a consistent 10%
total accounting return in the medium-term.
Financial Performance and Dividend
Our UFFO has recovered well during FY22, delivering more than
double that of FY21 and our dividend is comfortably fully covered.
We have announced a final dividend of 3.3 pence per share,
delivering a total dividend for the year of 7.4 pence per share,
representing a substantial increase on last year’s dividend of 3.0
pence per share.
Valuations have stabilised with a modest 0.9% reduction over the
year, compared to -15.2% reduction in FY21; and our portfolio
valuation increased by 2.6% in the second half. The portfolio
delivered a total return of 7.5% in FY22, an improvement on -6.9%
in FY21. Retail Parks and Core shopping centres delivered total
returns of 23.5% and 14.3% respectively.
NTA per share increased to 134 pence per share in March 2022
from 131 pence in September 2021 but for the year as a whole NTA
was down from 151 pence per share, due predominantly to the
sale of Hawthorn, our pub business in August 2021 which reduced
NTA per share by 11 pence. As a result, our total accounting return
for the year was -6.6%, representing a material improvement on
the prior year return of -24.9%. Excluding the impact of the pubs
disposal, the total accounting return was 0.9%.
We have transformed and strengthened the balance sheet to
create a low risk debt profile by reducing our net debt to £222
million, ending the year with £88 million of unrestricted cash and
£125 million of additional available liquidity. We extended the
maturity on our undrawn Revolving Credit Facility to August 2024
and we have no interest rate exposure and no maturity on drawn
debt until March 2028.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
7
STRATEGIC REPORT
CH IEF EXECUTIVE'S REVI EW C O NT I NUED
The strength of our balance sheet position was endorsed in
December 2021 when Fitch Ratings reaffirmed our Long-Term
Issuer Default Rating (IDR) at 'BBB' with a Stable Outlook and our
senior unsecured rating (relating to the £300 million unsecured
2028 bond) at 'BBB+' and Short-Term IDR at 'F2'.
Operationally we are on track to deliver 15% administrative cost
savings by the end of FY23 on an annualised basis which include
the relocation of the NewRiver London office to a more cost-
effective office space that better suits the needs and aspirations of
post-pandemic hybrid working and notably the new office space
has some of the greenest building credentials in London.
Resilient Retail Strategy Update
Following the successful sale of our pub business, we hosted a
Capital Markets Day in September 2021 to articulate our revised
resilient retail strategy for our retail only business. The strategy is
designed to deliver consistent 10% total accounting returns and to
ensure that we have a resilient portfolio risk profile for future years.
Our strategy is focused on three key areas: capital recycling,
capital partnerships and regeneration.
Capital recycling provides us with the opportunity to enhance
returns and improve our long-term risk profile. Capital partnerships
offer us the opportunity to enhance returns in a capital light way.
Regeneration provides us with the opportunity to deliver capital
growth through redeveloping surplus retail space, predominantly
for residential use.
Capital Recycling
During the year we completed £305 million of disposals with the
most significant being the sale of the Hawthorn pub business and
we also completed £77 million of planned retail disposals. As a
result of our retail disposals, we are now in a position of having
surplus capital to invest which we intend to deploy in a highly
disciplined manner and in accordance with our capital allocation
policy, in order to deliver enhanced risk adjusted returns to
shareholders. This could include investing into our existing portfolio
through regeneration or accretive asset management projects,
investing in acquisitions, either on balance sheet or via joint
ventures, or buying back the Company’s own shares. The Board
assesses the relative merits of these options on an ongoing basis.
In line with our strategy to improve the underlying portfolio risk
profile, we have made good progress on disposals from our Work
Out portfolio. At the start of the year we had 15 assets in our Work
Out portfolio; by the end of the year we had sold four assets and a
further five assets have been targeted for sale this coming year.
For the remaining six Work Out assets, we have made good
progress in implementing credible turnaround strategies. As such,
we believe we are on track to have exited our Work Out portfolio
by the end of FY23.
Capital Partnerships
It was an active year for our capital partnership with BRAVO, a
fund managed by the Pacific Investment Management Company.
In April 2021, we acquired The Moor Estate in Sheffield for £41
million. NewRiver took a 10% equity stake and receives attractive
fee income. In addition to this acquisition, our capital partnership
with BRAVO disposed of two retail parks for a total consideration
of £67 million delivering NewRiver an IRR of 18.8% excluding the
promote performance fee.
8
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
Our capital partnership is performing very well and as such the
prospects for an attractive promote pay-out in the medium-term
has significantly increased during the year.
Our asset management mandate with Canterbury City Council was
extended in September 2021 to include the management of
Riverside, a new leisure development in Canterbury.
Regeneration
The highlight of the year was the disposal of two of our
Regeneration projects at pricing that clearly demonstrates the
value-creation opportunities that regeneration offers.
In October 2021 we successfully disposed of our Regeneration
asset in Penge, South London, to a leading housebuilder achieving
a price that was 5.4% ahead of the last book value. In March 2022,
we concluded the sale of our Regeneration project in Cowley,
Oxford, for gross proceeds of £39 million (including escrow
amounts), again at a premium to the last reported book value.
Operational Performance
Operationally, we had an excellent leasing year both in terms of
volume and pricing.
Rent collection, car park and commercialisation cashflows all
improved during the year with rent collection in particular now
back to pre COVID-19 collection rates. Our leasing volumes also
increased, continuing to demonstrate the resilient positioning of
our portfolio, supported by genuine rental affordability at just £11.74
per sq ft (Mar 2021 £11.51).
During the 12 months, we completed 1,039,800 sq ft of new
lettings and renewals with long-term deals achieved on terms on
average 7.4% ahead of valuation ERV. We continue to let our
space to quality operators with strong covenants who provide
important essential goods and services to our local communities.
As a result of our leasing activity during the year, our occupancy
level remains high at 95.6% (March 2021: 95.8%).
Our portfolio is focused on three areas: Retail Parks, Core
community shopping centres and Regeneration.
Retail Parks which represent 26% of our portfolio have performed
very well during the year, where we are seeing elevated demand
for space and this is reflected in the high occupancy of 97.1% that
we enjoy. Equally, our retail park portfolio delivered a strong
performance with 14.4% of capital growth and 23.5% total return
during the year.
Our Core shopping centres which in many ways are important
assets of community value, in total represent 34% of our gross
assets. During the year our Core shopping centres saw an excellent
leasing performance, with long-term deals transacted at 10.0%
above ERVs and ended the year with an occupancy level of 96.5%.
For the year as a whole, our Core shopping centres delivered 3.3%
capital growth and a total return of 14.3% which was an excellent
result given the ongoing COVID-19 disruption.
Regeneration assets at the year-end represented 25% of total
gross assets, a reduction from the previous year due to the
successful sale of two Regeneration assets in Penge and Cowley.
On a like-for-like basis, our Regeneration portfolio delivered stable
capital performance of -0.6% and a total return of 4.1% which we
view as a good result given construction cost inflation. The
inflationary pressures that we saw in the market during the year
have partly been mitigated with the progress that we have made
during the year.
ESG
The real estate industry has a critical role to play in protecting the
long-term sustainability of our planet and we are proud to have
continued to make progress with our ESG objectives which are
embedded within the business.
During the year, we published our Pathway to Net-Zero and our
emissions reduction targets have been validated by the SBTi as
consistent with a 1.5-degree future. Demonstrating our ESG progress,
we were pleased to have been awarded a ‘B’ rating by the CDP
(formerly Carbon Disclosure Project) for our management of climate
issues, up from a ‘C’ rating in the previous year. Our GRESB score
increased by 13% during the year and we achieved a Gold in the
EPRA Sustainability Best Practice Recommendations Awards. We
were one of only two companies that jumped from a Bronze to Gold
award in just one year.
All of the energy supplied to our common areas (malls and car parks)
is already carbon neutral and we have achieved our target of zero
waste to landfill by 2022. This year, we are planning to introduce a
further 125 EV charging stations across our portfolio, which will
significantly increase our EV charging capacity and our ability to
support customers to reduce their carbon footprint. We also continue
our partnership with The Trussell Trust, providing funds, space and
time to help support the important work that they do to reduce
hunger in the UK.
In line with our commitment to advance our ESG strategy, the
appointment of Dr Karen Miller to the Board will provide additional
knowledge and experience in relation to climate challenges together
with her wider commercial retail experience.
Market Backdrop and Outlook
Within the capital markets, we have seen an increase in liquidity. In
particular, the retail park sector benefited from a significant
increase in demand from a wider investor pool which has led to a
year of strong capital growth with year on year volumes doubling in
2021. The shopping centre market saw an improvement in liquidity
but less pronounced than retail parks. Nevertheless, shopping
centre valuations stabilised in the latter part of the year after a
prolonged period of material valuation decline.
With retail stores being open for the majority of the financial year,
UK in-store retail sales have recovered overall to pre Covid-19
levels according to ONS. By contrast, online sales reported by ONS
have fallen during the year due to the reopening of physical stores.
The recovery in retail sales has been supported by a UK consumer
who, for the majority of the year, has been in reasonable financial
shape. Low levels of unemployment with just 3.8% of people
searching for jobs in the three months to February 2022, record job
vacancies, wage growth, elevated savings ratios and a good year
for house prices, having increased by 14.3% in the year to March
2022, have all supported increased consumer spending. With retail
sales broadly back to pre COVID-19 levels, we have seen active
demand for space in the market and in the UK overall, vacancy
rates have fallen. In addition, there has been a significant decline in
CVAs and tenant administrations.
More recently, the tragic war in Ukraine has led to significant
inflationary pressure as a result of higher energy and commodity
costs with inflation in the UK rising to a 30-year high with prices
rising 7% in the 12 months to March 2022. This, coupled with the
Bank of England implementing monetary tightening at the same
time that the UK Government has adopted fiscal tightening, is clearly
resulting in a contraction of economic growth. On top of that, the
continuing large-scale lockdowns in China resulting in supply chain
disruption, are only adding to the economic challenges.
It is therefore likely that consumer disposable income will be
impacted in the year ahead. For retailers that means margins will
be lower as not all of their increased costs will be passed on to the
consumer. It is interesting to note that the pure-play online retailers
are, in particular, challenged by a high inflation environment given
their lower margins in the first place. In contrast, multi-channel
retailers are better placed to deal with rising costs by using their
physical store distribution network for click and collect.
For NewRiver, our portfolio, which is more focused on essential
goods and services, is the right place to be when consumers
prioritise necessity-based retail spend over discretionary spend
and so will provide us with insulation.
Our assets are located in the heart of their local communities, easily
accessible to our shoppers with low travel times which means they
spend less on fuel travelling to our assets compared to more
destination-led, discretionary spend assets. With our occupiers facing
rising costs, having affordable rents, which we do, is key to sustaining
rental cashflows particularly in periods of high inflation and contracting
economic growth. Moreover, next April our occupiers should receive
a significant reduction in their rateable values which we currently
estimate to be circa 30% on average across our portfolio.
One of the key drivers of our future success will be our capital
allocation decisions. Even though we have put ourselves in a
position of having surplus capital with our LTV now at 34%, some
6% below our guidance; we believe that in the near-term it is in our
shareholders interest to maintain headroom to our LTV guidance
given the increasingly uncertain macro-economic outlook. That
said, we do have ongoing disposals which will provide further
capital for redeployment which we will do in a highly disciplined
way and in accordance with our capital allocation policy.
In conclusion, our objectives have never been clearer – to own and
manage the most resilient retail portfolio in the UK that will deliver
stable income, capital growth and thus superior returns for our
shareholders. With a portfolio predominantly focused on essential
goods and services, a flexible balance sheet and our market
leading platform, we are well positioned to achieve this objective
and to deliver attractive long-term returns for our shareholders
whilst helping create thriving communities across the UK.
Allan Lockhart
Chief Executive
15 June 2022
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
9
STRATEGIC REPORT
OUR MARKETPLAC E
A resilient response
to market trends
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.
Consumer trends
Rising cost of living
In the 12 months to 31 March 2022, inflation in the UK hit a
30-year high with prices rising by 7%, caused by supply chain
disruption as we emerged from the pandemic and then
further exacerbated by the war in Ukraine.
Unemployment
Job vacancies in the UK are now at a record high and the
UK unemployment rate has returned to its pre-Pandemic low,
with just 3.9% of people in search of jobs in the 3 months to
March 2022. Wage growth has accelerated to 5.4% as at
March 2022.
Inflation
Average Weekly Earnings
RPI
CPI
Flexible working
Hybrid working has now been widely adopted in the UK with
more than 80% of firms offering employees the opportunity
to work from home for part of the week. This trend has
created a resurgence of localism with consumers shopping
closer to where they live, boosting spend at local and
neighbourhood shopping centres and benefitting small and
independent operators.
House prices
House prices have been increasing at their fastest rate since
2004, having increased by 14.3% in the year to March 2022
and 21% since the outbreak of COVID-19, reflecting the low
interest environment and an imbalance in supply and
demand. The average house price is now estimated at a
record high of £265,000. With consumers’ homes often being
the largest part of their net worth, rising house prices typically
positively impact consumer confidence.
10
8
6
4
2
0
%
9.0%
7.0%
5.4%
-2
8
1
-
r
a
M
8
1
-
g
u
A
9
1
-
r
a
M
9
1
-
g
u
A
0
2
-
r
a
M
0
2
-
g
u
A
1
2
-
r
a
M
1
2
-
g
u
A
2
2
-
r
a
M
NewRiver’s response
• Despite the rising cost of living, retail sales continue to grow,
with volumes (excluding fuel) up 3.5% year-on-year in the first
three months of 2022. Record high levels of job vacancies
and wage inflation, coupled with a strong housing market,
are helping mitigate negative sentiment with consumers
still enjoying a buoyant period of post-lockdown spending.
• Should inflationary pressures curtail retail volumes over the
coming months, spend is likely to be prioritised on essential
goods and as such the NewRiver portfolio will be defensively
positioned due to its focus on non-discretionary spend
and convenience retail.
10
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
• Consumers may also look to reduce costs through their fuel
consumption and chose to shop more locally; with an average
travel time of 13 minutes and 52% of our customers opting
to walk or take public transport to travel to our retail centres,
our assets are situated in locations which would likely benefit
from changes in consumers’ travel behaviours.
• Similarly, our portfolio should also continue to benefit from the
shift towards hybrid working as spend is redirected from cities
to more suburban and neighbourhood locations.
ESG trends
Conscious Consumerism
The shift towards more conscious consumerism is visible
in the growing variety of eco-labels; not only industry-
approved and recognised labels, but methods of how
products are being branded help signal to consumers
that they are making responsible choices, for example, by
highlighting the recyclability or reduced plastic content of the
packaging. The shift has been supported by increasing public
visibility of environmental and social activism, heavily
facilitated by social media, ensuring that Generation-Z
is at the centre of this ESG trend.
Recent research by Deloitte found that 28% of consumers
have stopped buying certain products due to ethical or
environmental concerns. Amongst Generation-Z, this
increases to 45%, and provides a clear indication that
the rise of conscious consumerism will continue.
NewRiver’s response
• As part of our ESG programme, we actively engage with our
retailers on issues of environmental best practice, including
energy management and considerations in the fit-out and
refurbishment of sales spaces. We have recently undertaken our
own research into commitments made by our retailers to reduce
their carbon emissions, and were pleased to learn that 66% of the
floor area occupied by our Top 50 occupiers is subject to
comprehensive targets, similar or directly aligned to our own.
This represents approximately a third of our total portfolio floor
area, and we intend to extend this analysis beyond our top 50
retailers to develop a complete picture in 2022.
• Our centres are home to 450 independent retailers helping
provide a greater sense of individuality and character for our
shoppers at our assets. CACI’s research found that 26% of
our shoppers travel by foot, and a further 25% travel by bus,
demonstrating how our customers are able to make green
travel choices and “shop local” at our centres.
Shopping Local
Linked to conscious consumerism is the pandemic-driven
emphasis on “shopping local” and supporting independent
retailers. This is seen to be both greener and more socially
responsible, enabling consumers to feel that their purchasing
decisions have a direct, positive impact on their communities.
Research we commissioned from CACI found that 45% of our
shoppers consider their carbon footprint in their shopping
decisions and that travel options, influenced by accessibility,
form a significant part of this consideration. We are seeing
occupiers adapt their locations strategies and store formats to
expand into the suburbs and regions where certain brands
had previously been City-centric, such as Pret.
Wellbeing
Mental wellbeing has been steadily rising up the public health
and corporate agendas, with the pandemic having exacerbated
some of the most prevalent issues in our communities, such as
loneliness. In highlighting these issues, the pandemic also
welcomed a wave of community cohesion across the country,
and public spaces able to support social interaction became
critically important during periods of restrictions. Against a
backdrop of blurred boundaries between work and home
settings, this has served to corroborate the important role of
physical retail and leisure spaces in enhancing our social lives,
providing space for community uses, offering experiential value,
and thereby supporting our mental wellbeing.
• We ensure that our assets offer an appropriate mix of uses to
meet community needs and customer preferences alike. Our
ESG programme also ensures that asset-level initiatives and
campaigns support social inclusion, provide space to
showcase local creative talent, offer family-focused activities,
tackle prevalent community issues, and ensure our centres
are autism friendly.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
11
STRATEGIC REPORT
OUR MARKETPLAC E CONTINUE D
Retailer trends
Online shopping
Online penetration has continued to recede as consumers
have returned to the high street following the easing of
COVID-19 restrictions. In March 2022, 26.1% of retail
purchases were made online, down from 37.7% a year earlier,
and is expected to fall further. 21% of non-food sales were
made online in March 2022, down from a peak of 46% during
the pandemic and just 9% of food sales are being transacted
online.
Rising costs
Retailers are clearly facing the challenges of cost inflation,
with higher operating costs and rising input prices putting
downward pressure on margins. However, this may not
translate into higher costs for the consumer, with a number of
retailers reporting their intention to limit price increases, and
absorb some of the impact of cost inflation.
Many retailers are citing difficulties associated with online
deliveries due to rising fuel prices and wage inflation
(with some citing challenges recruiting warehouse staff too).
With energy, fuel and wage costs on the rise, coupled with
consumers’ return to bricks and mortar retail, pureplay
retailers in particular are facing some difficult headwinds.
Amazon recently reported a 3% decline year on year in net
online sales whilst their physical stores enjoyed their fourth
consecutive quarter of sales growth.
Multichannel retailers are emerging as the clear winners with
retailers showing that a physical high street presence,
coupled with an online platform, accelerates consumer
onboarding, increases customer loyalty and leads to greater
market share.
NewRiver’s response
• Online sales have plateaued to 26% of all retail sales
and are expected to fall further, significantly short of the 50%+
predictions that were being made at the start of the pandemic.
• Our retail portfolio is deliberately focused on essential retailers
which serve the local community, and has minimal exposure
to the structurally challenged sub-sectors including department
stores, mid-market fashion and casual dining.
Amazon YoY Net Sales Growth (%)
Net sales - online stores
Net sales - physical stores
Q4 2020
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
50
40
30
20
10
0
-10
-20
Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021
Q1 2022
Administrations
Retailer administrations and CVAs have fallen sharply in the
first quarter of 2022 compared to the same period in 2021.
The pandemic saw an unprecedented number of retailer
casualties, as lockdown and social distancing restrictions
expedited retailer administrations. Recent administrations like
Arcadia, Debenhams and House of Fraser have taken
significant capacity out of a previously saturated market,
leaving additional market share for those successful retailers
who continue to trade.
• Retail parks are a key investment area for NewRiver
as they provide many Click & Collect-friendly characteristics
such as free, surface-level parking and good access; and we
are developing innovative Click & Collect solutions e.g.
collection & return pods in car parks.
• Over the past five years, we have reduced service charge
budgets by 16%, helping reduce our retailers’ property costs.
• Our assessment of the upcoming 2023 rates reassessment
forecasts an expected reduction in business rates of circa 30%
across our portfolio. This saving will help offset retailers’ rising
cost base and further improve the affordability of rents.
12
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
Investment market trends
Increased liquidity following rebasing of valuations
and rents
The retail warehouse investment market has seen
considerable growth in demand in recent months with over £1
billion of assets traded in Q1 2022, the highest volume
transacted in one quarter in over 10 years, bring the total
transactions over the past 12 months to over £4 billion. The
sector’s resilience continues to be demonstrated not just by
high volume levels but also by an increasingly diverse buyer
pool, with this weight of money leading to further yield
compression across the sector.
The shopping centre investment market continues to show
signs of recovery, evidenced by a stabilisation in yields and
deal activity. The first three months of 2022 saw investment
volumes reach £370 million – the strongest Q1 figure seen
since 2016. Early cycle investors have been moving back into
the sector, attracted by opportunistic pricing.
Retail Warehouse Transaction Volumes (£m)
5000
4000
3000
2000
1000
2012 2013
2014 2015 2016
2017
2018 2019 2020 2021 Q1 2022
NewRiver’s response
NewRiver’s portfolio delivered a capital uplift of 2.6% in the
second half of FY22, with Retail Parks, Core Shopping Centres
and Regeneration Shopping Centres all seeing valuation uplifts.
Our Retail Warehouse and Shopping Centre equivalent yields
now stand at 6.6% and 9.3%, both above their respective MSCI
benchmarks. Over the past two years, both our Shopping Centres
and Retail Warehouses capital return outperformed the market,
in part owing to our affordable rents and smaller lot sizes, which
have been in demand given the debt markets are still yet to fully
return to previous levels of activity. However with retail lending still
at historically low levels, we expect to see the availability of debt
in the retail real estate investment market to increase, further
improving liquidity.
Increased availability of debt
As the UK has emerged from the pandemic and valuations
have stabilised, the commercial real estate debt markets have
begun to return. According to Bayes Business School
(formerly known as Cass Business School), in 2021 new loan
origination in the UK reached £49.8 billion, a 48% increase on
2020 and the highest level seen since 2015. Retail lending
has been most prevalent amongst debt funds and challenger
banks, with traditional high street lenders remaining cautious,
typically lending on existing assets.
Sources
ONS
MSCI
Nationwide House Price Index
Savills research
Knight Frank research
Cushman & Wakefield research
Chartered Institute of Management
Centre for Retail Research
Amazon Q1 2022 results
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
13
STRATEGIC REPORT
OUR STRATEGY
Delivering
premium returns
Revised Strategy
Following the successful sale of Hawthorn,
the pub business, we set out our revised
resilient retail strategy for our retail only
business at our Capital Markets Day in
September 2021.
This strategy is focused on three key areas
to ensure that we have a resilient portfolio
with a low risk profile for the future which
in turn allow us to achieve our key
objective of delivering premium Total
Accounting Returns.
Our strategy is underpinned by four
key pillars:
1. Our focused portfolio positioning
2. Our market-leading operating
platform
3. Our financial flexibility and capacity
4. A clear strategy for growth
ESG Progress
• Announced our Pathway to Net Zero by 2050
• Our Emissions Reduction Targets were validated by the SBTi
as consistent with a 1.5-degree future
• Awarded a ‘B’ Rating by the CDP for our management of
climate issues
• GRESB score increased by 13%
• Achieved Gold in the EPRA Sustainability Best Practice
Recommendation Awards
• Achieved our target of zero waste to landfill by 2022
• All energy supplied to our common areas is carbon neutral
Introduced a new Sustainability Brief and Framework for
•
Developments and a Green Procurement Policy
14
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
Our strategy aims to deliver
a reliable and recurring income
led 10% Total Accounting Return
through:
1
Disciplined capital
allocation
Disposal of assets and disciplined
reinvestment in order to:
1. Generate cash earnings growth
2. Enhance capital growth
3. Improve portfolio risk profile
4. Accelerate achievement of
net zero carbon targets
5. Improve operational efficiency
Progress this year:
• Completed £305 million of disposals in total during FY22
• These disposals were a mix of non-core assets and mature assets
• Largest transaction completed during FY22 was the disposal of
the Hawthorn pub business for gross proceeds £224.0 million
• Retail disposals totalled £77.1 million during FY22, completed
on terms broadly in-line with latest valuation
• Disposal activity has been the principal reason for the
significant reduction in our Loan to Value, from 50.6% in March
2021 to 34.1% in March 2022
2
Expanding Capital
Partnerships
3
Delivering capital and
income growth through
regeneration
Continue our track record of successful
capital partnerships in order to:
1. Increase recurring revenue
streams in a capital light way
2. Improve operational efficiency
3. Benefit from significant
financial promotes
Use our in-house regeneration capability
and regeneration portfolio to:
1. Deliver capital growth efficiently
2. Increase revenue through JV
delivery vehicles
3. Increase non-retail cashflow earnings
4. Accelerate achievement of net zero
4. Accelerate achievement of net
carbon targets
zero carbon targets
Progress this year:
• Expanded our BRAVO capital partnership through the acquisition
of The Moor, Sheffield in April 2021 for £41.0 million (NewRiver
share £4.1 million)
• Disposed of Poole retail park for £58.0 million in December 2021
(NewRiver share £5.8 million); asset was held in BRAVO capital
partnership and had been acquired for £44.7 million (NewRiver
share £4.5 million) in October 2019
• Extended our capital partnership with Canterbury City Council
to manage its new leisure development, Riverside, as well as
our existing mandate for Whitefriars Shopping Centre which
was extended for another 5 years in 2020
• Asset management fees increased to £1.9 million in FY22 from
£1.2 million in FY21
•
Progress this year:
• Profitable sale of two regeneration assets during the year,
accounting for over 60% of total retail disposals completed
during FY22
In October 2021, completed disposal of Blenheim Shopping
Centre in Penge following a successful pre-application consultation
with Bromley Council. Sold to a leading residential developer
for gross proceeds of £12.4 million, reflecting a net initial yield
of 3.1% and a 35% premium to its March 2021 valuation
In March 2022, following the release of the planning decision
notice by Oxford City Council enabling 236,000 sq ft of mixed-
use regeneration, completed the sale of Templars Square
Shopping Centre in Cowley for gross proceeds of £38.8 million,
reflecting a 4.9% premium to the asset's latest valuation
•
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
15
STRATEGIC REPORT
KE Y PE RFORMA NCE I NDICATORS
Measuring our
strategic progress
Underlying Funds From Operations
Loan to Value
£28.3m
34%
55.5
55.1
52.1
51
47
37
34
28.3
28
11.5
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Description
Underlying Funds From Operations (‘UFFO’) measures
underlying operational profits and excludes 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 operating profits.
Our performance
We delivered UFFO of £28.3 million in FY22, compared
to £11.5 million in FY21. Retail operations contributed
£20.5 million to this total and the pubs contributed £7.8 million
prior to the disposal of the Hawthorn pub business in August
2021. Retail performance improved half on half during the
year, delivering UFFO of £12.8 million in the second half,
compared to £7.7 million in the first half.
Description
Loan to Value (‘LTV’) is the proportion of our properties that
are funded by borrowings. The measure is presented on
a proportionally consolidated basis. Maintaining an LTV of
less than 50% is one of our five key Financial Policies and in
addition our medium-term guidance is to maintain an LTV
of less than 40%.
Our performance
Our LTV reduced significantly from 50.6% at 31 March 2021 to
34.1% at 31 March 2022 and is now back within guidance and
policy, with significant headroom to debt covenants. The key
driver of the reduction in LTV was the £305 million of disposals
completed during FY22.
Link to strategy, ESG and Remuneration
£
2
3
1
Link to strategy, ESG and Remuneration
£
2
3
1
16
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
Key
Link to strategic objectives
Link to ESG and Remuneration
1
2
3
Ongoing portfolio refinement through disciplined capital allocation to
enhance our risk-adjusted returns
ESG Environmental, Social
and Governance
Leveraging our platform through capital partnerships
to support revenue growth
£ Remuneration
Pursuing Regeneration opportunities to provide
capital growth
Retail occupancy
95.6%
Admin cost ratio
17%
96.5
95.2
94.8
95.8
95.6
25
17
15
15
13
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Description
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.
Our performance
Maintained a high and stable retail occupancy of 95.6%
(31 March 2021: 95.8%) despite ongoing challenges from
COVID-19 and the Omicron variant.
Description
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.
Our performance
Our admin cost ratio was 17% during the year, achieving
a reduction from 25% in FY21 due to the recovery of our
income during FY22 and a reduction in administrative costs
due to the disposal of the Hawthorn business and the
unlocking of cost efficiencies.
Link to strategy, ESG and Remuneration
Link to strategy, ESG and Remuneration
1
3
ESG
1
3
£
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
17
STRATEGIC REPORT
KE Y PE RFORMA NCE I NDICATORS CONT INUE D
Key
Link to strategic objectives
Link to ESG and Remuneration
1
2
3
Ongoing portfolio refinement through disciplined capital allocation to
enhance our risk-adjusted returns
ESG Environmental, Social
and Governance
Leveraging our platform through capital partnerships
to support revenue growth
£ Remuneration
Pursuing Regeneration opportunities to provide
capital growth
Interest cover
3.5x
GRESB Score
68
70
68
62
60
6.2
5.1
4.8
46
3.5
2.3
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Description
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 performance
Interest cover improved during FY22 to 3.5x, from 2.3x in
FY21 due to improved operational performance and the
repayment of £335 million of bank facilities during the first half
following the Hawthorn disposal. At this level, interest cover
is within policy, with significant headroom to debt covenants.
Description
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.
Our performance
NewRiver has been a GRESB participant since 2016. We have
achieved a 13% uplift in our GRESB score versus 2021 to
score 68. Our CDP score increased to a "B" from a "C" and
we achieved Gold Level compliance with EPRA Sustainability
Best Practice Recommendations.
Link to strategy, ESG and Remuneration
Link to strategy, ESG and Remuneration
2
3
£
1
2
3
ESG
18
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
Total Property Return
Total Accounting Return
+7.5%
-6.6%
8.2
7.5
8.1
-3.3
1.3
-5.4
-6.9
-6.6
-14.7
2018
2019
2020
2021
2022
2018
2019
2020
-24.9
2021
2022
Description
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.
Description
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 performance
Our portfolio delivered a Total Return of 7.5% in FY22
compared to the MSCI All Retail benchmark at 14.9%. This
underperformance is largely attributable to the benchmark's
weighting in Retail Warehousing (which delivered capital
growth of over 22% during the period). Our shopping centres
out-performed.
Our performance
Our TAR was -6.6% for FY22, compared to -24.9% in FY21.
The first half of FY22 was impacted by the disposal of the
Hawthorn pub business which reduced EPRA NTA per share
by 11 pence, and encouragingly in the second half we
delivered a TAR of +5.4%.
Link to strategy, ESG and Remuneration
£
2
3
1
Link to strategy, ESG and Remuneration
1
2
3 £
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
19
STRATEGIC REPORT
BUS INESS MODEL
How we execute our
resilient retail strategy
Our purpose
To own, manage and develop resilient retail
assets across the UK that provide essential
goods and services and support the
development of thriving communities.
1. Disciplined capital allocation
We continually assess the long-term resilience of our assets,
with capital allocation decisions made by comparing risk
adjusted returns on our assets to those available from other
uses of capital. These uses of capital include investing into
our portfolio, acquiring new assets and buying back our own
shares. Assets can be acquired either on our balance sheet
or in capital partnerships. Our significant market experience
enables us to price risk appropriately, and our low average lot
sizes enhance liquidity which means we can execute disposals
quickly and effectively.
5. Flexible
balance sheet
Our operating platform is
underpinned by a conservative,
unsecured balance sheet. We
are focused on maintaining our
conservative covenant headroom
position and have access to
significant liquidity which
provides us with the flexibility
to pursue opportunities which
support our strategy for growth.
5
1
Underpinned by
our active ESG
programme
4
2
4. Capital
partnerships
We engage in capital
partnerships to acquire and
manage jointly owned resilient
retail assets and to manage
assets owned by third parties.
We leverage the scale and
expertise of our platform to drive
further returns through capital
partnerships and create value.
Our capital partnerships provide
us with enhanced returns
through the generation of fee
income and the opportunity
to receive promotes.
3
3. Regeneration
We create income and capital
growth from within our portfolio
through our Regeneration activity
in a capital light way which
is generally residential-led,
focused on replacing surplus
retail space with much needed
new homes. Our in-house
development team works with
stakeholders to secure valuable
planning consents which,
depending on scale, we can
either progress ourselves or with
our capital partners, or sell to
crystallise profit.
20
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
2. Active asset
management
We draw on our in-house
expertise, our deep
understanding of our market
and our excellent occupier
relationships to enhance and
protect income returns through
our active asset management
strategy. Initiatives range from
the deployment of targeted
capex to improve asset
environments, to proactive
measures to reduce costs
for occupiers.
Our business model is underpinned by a committed ESG programme
Our ESG Objectives
Minimising our environmental impact
We have set out our pathway to achieving net-zero
across our portfolio, and we advise our capital partners
on environmental best practice as well applying this
assessment when we consider any acquisition.
1
2
3
4
5
We leverage the flexibility of our balance sheet to ensure
investment in energy efficiency over the next 20 years is
accounted in financial planning. For our development
pipeline, we seek to provide future-proofed community
developments which minimise carbon lifecycle.
Engaging our team and occupiers 2
We raise awareness of evolving ESG issues with our team
and create opportunities for positive impact. We engage
with our existing occupiers about environmental and
3
4
sustainability strategies and we typically pre-let our
developments, allowing us to work with occupiers to ensure
their requirements are met.
Supporting our communities 2
Our assets play a critical role to the local communities they
are located in and our on-site teams support local charities
and community groups.
4
3
Leading governance and disclosure 2
Implementation of our ESG strategy, policies and approach
to environmental risk management are overseen by our
Head of Asset Management and ESG who is well placed to
ensure ESG initiatives are executed across the portfolio
given their combined role.
3
4
For our development projects, we work closely with councils
and local groups to ensure developments address
community needs.
Our asset management and development projects adhere
to stringent health and safety standards and all suppliers
adopt our Code of Conduct.
For more information on
our Strategy see page 14
Read more about our Stakeholder
Engagement see page 22
Read more about our Pathway to Net Zero
on our website www.nrr.co.uk/esg
We achieved full marks in GRESB
for our approach to Social and
Governance issues
We Connected our Communities
with Nature
We increased our overall GRESB performance by 13%
in 2021 and are proud to have achieved a perfect
score in the social and governance aspects of the
assessment. Our focus for 2022 is the sharing of data
to improve the accuracy of our occupiers' collective
understanding of asset environmental performance.
The Ridings Centre, Wakefield was awarded a Green Apple
for its rooftop allotment, created in partnership with Age UK
to provide a green space for local residents; the team
at Templars Square, Cowley, Oxford partnered with ARKT
Oxford to transform an unloved piece of land into a tranquil
community garden; and the team at Locksheath Shopping
Village, Fareham worked with local business, Garden
Beauty, to support school children to transform unwanted
pallets into beautiful planters.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
21
STRATEGIC REPORT
STAKEHOLDER ENGAGEMENT
Stakeholder engagement
drives our business success
Our stakeholders
The pandemic has proven that strong working relationships with
the key stakeholders within a business is critical to success. At
NewRiver, we are proud of the excellent relationships that we
have with a broad range of stakeholders who help us deliver on
our strategy, business model and ongoing success, from our JV
partners to corporate advisers, our retail partners, local authorities
and of course our own team. We are conscious too that our
stakeholders also have a range of differing priorities and concerns
and we endeavour to incorporate these into our own strategic
decision-making.
Our team
51
Employees
65%
Of our team have
professional
qualifications
1,127
Total hours of
training this year
70%
Of our team have
worked at NewRiver
for 5+ years
70%
Of our team undertook
professional training
during the year
23
Hours of training per
employee this year
At NewRiver we know that the success
of the Company comes from the people
within our team.
Our HR strategy ensures a collaborative and flexible working
environment for all staff. We provide support for each and every
member of the team to unlock their full potential, enabled by a
positive and collaborative working environment with the ability to
work flexibly both from the office and at home. Our shared
parental leave policies support parents to balance the challenges
of career development allied with the support to enable them to
raise their families without compromising their career goals.
22
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
Critical to effective corporate Governance is how the Board aligns
strategic decisions with the Company’s purpose, values, strategy
and stakeholders. The NewRiver Board has a clear stakeholder
engagement plan, regularly consulting with the NewRiver team,
who in turn manage and foster the relationships with our
occupiers, key partners and advisers.
We are proud of our staff retention, with over 70% of our staff with
over 5 years’ service. Our team have ample opportunities to
develop their careers within NewRiver with comprehensive
training and development support provided.
Communication, collaboration and respect sit at the heart of our
HR strategy which harnesses the power of the team to drive our
business forward.
Board Engagement during the year
A regular staff forum ensures that there is effective engagement
between the Board, Senior Management and the wider Team. We
regularly provide the opportunity for our Non-Executive Directors
to meet the wider team both formally and informally, both in
confidence or in wider forum.
Our annual Employee Engagement Survey and comprehensive
appraisal programme enable all staff to comment on key issues
facing the business and to solicit their views on our corporate
culture and policies. The survey undertaken in March 2022 was
completed by every member of the team and evidenced a high
satisfaction score across all aspects of corporate life.
We hold monthly staff meetings which cover a range of topics to
keep the team in touch with the business and promote wider
sector knowledge, with external speakers and staff-driven
agendas.
Read more information on our
Section 172(1) Statement on page 92
How did we engage?
• Staff Forum
• Staff engagement survey
• Monthly all staff briefing meetings
• Monthly Non-Executive Director visits to London office
Individual performance reviews and development discussions
•
•
‘This is me’ mental health campaign
• Our comprehensive appraisal process
• Alastair Miller, our designated Non-Executive Director
responsible for engaging with employees, has held workforce
engagement sessions
• The Board reviewed the findings of the Employee Engagement
Survey and an overview of key trends for the year. The Board
paid specific attention to employee morale and discussed
proposed actions and further opportunities
• Directors visited assets across the portfolio with the local teams
Topics raised
• Leadership and Strategy
• Opportunities for personal and career development
• Knowledge sharing across the Company
• Wellbeing and flexible working
• Rewards and benefits
• Fostering a diverse and inclusive culture
• Our ESG strategy
How did we respond?
• Used findings from the employee survey to direct our Company
level engagement priorities
• Aligned employee rewards with company objectives
• Provided a range of physical and mental wellbeing services
• Continued to encourage employee share ownership in the
Company through awards of all-employee share schemes
• Launched Data Freedom, a new portfolio data platform to
improve access to data across the team
• Provided further training and information sessions on some key
We continue to support the UK Government’s Apprenticeships
Scheme. During the year 70% of our staff undertook professional
training and employees across the business spent a total of 1,127
hours on training, including Continuing Professional Development.
We appraise our team annually, undertaking a tailored
performance review which includes a professional development
plan which allows our team to set objectives, track progress
and fulfil their potential.
Diversity
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. Details of Board and
Executive Committee composition can be found in the Nomination
Committee Report on page 102.
We are proud to say that we have a very even gender balance
across the business:
Gender representation across the business
[49:51]%
Group
Exco
51%
49%
60%
40%
topics raised
Board
Recruitment and talent
Our total head count across the Group at the close of the year
was 51. Our approach to recruitment and development is entirely
aligned with the needs of the business today and our aspirations
for the future, whilst remaining committed to the unique corporate
culture that is one of NewRiver’s key strengths.
We are committed to developing the skills, capability and
performance of all employees. We provide employees with the
opportunity to develop themselves and progress in their careers.
Our support ranges from funding professional qualifications
including RICS and ACCA to informal weekly training sessions
and talks over a healthy breakfast once a month from industry
experts on a wide range of topics to empower the team with
research and knowledge to help enhance their day-to-day role.
71%
29%
Female
Male
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
23
STRATEGIC REPORT
STAKEHOLDER ENGAGEMENT CONT I NUED
Reward and Recognition
Our team work hard to achieve the results we deliver year on year
and the Board is committed to rewarding this hard work through
our remuneration policies; this includes bonus entitlements to
reward excellent performance, and also through our Long Term
Incentive Plan to help secure retention of our talented team.
The Company offers a range of benefits to our team, ranging from
paid medical insurance for all staff, to the more recent launch
of an electric car scheme and a six-week paid sabbatical to
employees who have been with the business for 10+ years.
For families, we offer enhanced shared parental pay entitlements.
The team also have the opportunity to discuss the benefits
available with specialist advisers to ensure that they suit their
needs. The benefits are reviewed each year to ensure they meet
employee expectations and industry benchmarks.
Health and Wellbeing
We recognise that our people are our greatest asset and we are
committed to improving the quality of our employees’ working
lives by providing a safe and healthy working environment. Our
aim is to create a positive working environment by integrating
wellbeing in all work activities and by empowering our people to
make positive choices regarding their health and wellbeing.
Physical Environment and Flexible Working
Our Head Office is in the West End of London with satellite offices
in Edinburgh, Manchester and Glasgow. The London office space
is open plan which we believe fosters a more collegiate
and dynamic way of working, providing easy accessibility
to management and the opportunity for team members
at all levels to communicate across teams and to learn
from colleagues in a more relaxed environment.
We offer all staff the ability to work from home two days a week,
with three days spent in the office where we work around core
hours to enable staff to travel and organise their days to best suit
them, be it time with family or to undertake fitness or hobbies.
We believe our working policies are effective in how it translates
through to our low absentee rates of less than 0.5%.
Mental Health
The pandemic has helped shine a brighter spotlight on the
importance of protecting the mental health of the team within an
organisation. At NewRiver, we try and ensure staff feel supported.
We are working with a mental health charity, Chasing The Stigma
to ensure that mental health is normalised in both the workplace
and our wider communities. We have a number of trained mental
health first aiders and ambassadors within our business to provide
all staff with support where needed.
Find out more here: www.chasingthestigma.co.uk
24
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
Our communities
Our assets are located in the heart of
communities throughout 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.
Read more about our community
engagement initiatives on page 66
Board Engagement during the year
How did we engage?
• Review of Company purpose, regular reporting to the Board
through the CEO report and the ESG reporting
• Received presentations from Development team on
Community Investment Plans
• Directors, including the CEO, volunteered at Trussell Trust food
banks
• The Board considers potential impacts to local residential areas
where Regeneration and broader developments are under
discussion, including during the planning process relating to
key developments across our portfolio
• Requests for capital expenditure approval include
consideration of how the projects could benefit the local
community including improvement of the retail and services
offer, creation of new jobs and homes and enhancement
of the public realm. Such projects include The Capitol Centre
in Cardiff, a potential food store in Market Deeping and our
ongoing regeneration plans for Grays, Essex
• Regular consultation with local community groups,
through our development work, to enable us to understand
their requirements and establish our priorities as a result.
NewRiver representatives sit on the Board of several
Town Funds to help steer the direction of local economic
and social growth
• Our Shopping Centre Managers organise regular events and
fundraising activities which bring people together, encourage
dialogue and support the development of thriving communities
• TARA: This year we became a Member of The Academy of
Real Assets, a charity whose mission is to engage students
from underserved UK state schools and introduce them to a
career in the world of real estate by providing them with insight
into, and contacts within, the industry
Topics raised
• Town centre regeneration
• Responsible planning, development and design
• Community wellbeing and social value
• Environmental protection
“We moved in just after the Pandemic started – we
are a children’s role play café. We have a section for
adults to enjoy as a normal coffee shop, and we have
a role play area where children aged 0-6 years old
can pretend to be in the real world.
“Digital media is a cost-effective, dynamic marketing
tool. Our omni-channel strategy focuses on
engagement, not just the accumulation of followers,
which means we achieve a greater marketing reach
and return on investment.
What attracted us was the community feel around
Locks Heath Village and the demographic. The
NewRiver team have been really supportive,
especially moving in and during the pandemic, and
the local team and centre manager have been really
supportive.”
Nick Goddard,
Big Little Village owner, Locks Heath Shopping Village,
Fareham
We use Facebook to converse with our audience;
Instagram as our shop window and Twitter for B2B
communications including social media influencers.
Our 60,000 strong e-audience choose to spend their
time in our digital environment – which then
translates into a desire to experience the physical
destination, boosting business for our retailers.
Quality content ensures Abbey Centre's engagement
metrics consistently out-perform our city centre
competitors”.
Clare Beswick,
Marketing Manager, The Abbeycentre,
Newtownabbey, Belfast
How did we respond?
• We have donated £326,500 to the Trussell Trust to date since
the start of our partnership as well as donating physical space
at our assets and the volunteer time of our team.
• At the asset level, our centre teams undertake regular training
programmes to continue to ensure our teams are equipped
with appropriate skills and qualifications to help ensure the
smooth running of their on-site teams, our occupiers and the
centre in general.
Increased use of social media by our asset teams to encourage
discussions, transparency and improve feedback.
•
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
25
STRATEGIC REPORT
STAKEHOLDER ENGAGEMENT CONT I NUED
Occupiers
The success of NewRiver relies on the
success of our occupiers and when our
occupiers are thriving then so too can we
which is why we continuously nurture our
working relationships with our occupiers, so
we can better understand their needs and
potential challenges or opportunities.
We have hand-picked our portfolio to focus on occupiers
that provide essential goods and services and to support
the development of thriving communities across the UK, while
deliberately avoiding structurally challenged sub-sectors such
as department stores and mid-market fashion.
We are proud that our portfolio offers excellent affordability of
rents with low occupational costs, demonstrated through our
strong retailer retention rate of 90%. Our on-site teams work
hard to ensure that our assets are clean, safe, and welcoming.
Topics raised
• Our occupiers feel that our on-site teams are easily contactable
responsive and efficient with 86% confirming their satisfaction
in this area
• 89% of respondents are satisfied with the management of the
cleaning and waste in the common areas of our assets
• Our occupiers were satisfied with the various community
events we host across our assets throughout the year,
including supporting the elderly and those with disabilities
• Our occupiers are happy with the sustainability initiatives we
implement at our centres and 82% agree that improving the
sustainability performance of their own business is important,
with 64% rating this as ’very important’
How did we respond?
• Our retailers indicated that they would like to see more electric
charging points across the portfolio and we are pleased to
have secured the roll-out of a further 125 new charging stations
• We have achieved a 16% reduction in equivalent service
charge budgets over the last five years and service charge
reductions from FY21 to FY22 of 4.5%
Board Engagement during the year
How did we engage?
• Our Annual Occupier Survey reported that 26% rated their
general Satisfaction Score as 10/10, and 67% of respondents
rated their general Satisfaction Score as 8/10 or higher
• Our team were pleased to return to face-to-face meetings with
our retailers following the lifting of COVID-19 restrictions
• We have initiated conversations with our retailers around
environmental and sustainability strategies, including enhanced
data collection around on-site energy consumption
• The Board received regular reports through the ExCo reports,
CEO reporting and ESG reporting
• Regular meetings between ExCo members including the CEO
and our key occupiers to understand their future needs,
including sentiment, performance, growth/contraction,
sustainability initiatives and potential opportunities and risks
within our occupier base, which were fed back to the Board to
inform future strategy
26
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
“I’ve been the centre manager here for 10 years and
many of the independent retailers have traded here
for more than 15 years – I’m very proud to be a part of
Team Avenue.
During the pandemic, it was heart-warming to see
how our community and retailers supported one
another.
The centre is very much an integral part of the
community with shoppers coming three to four
times a week. We really enjoy working with local
community groups, charities and schools and
we’ve even won several awards along the way.”
Michelle McCabe,
Centre Manager, The Avenue, Newton Mearns, Glasgow
“I live locally and I use the centre frequently, so we
identified an opportunity for a new cafe due to how
busy the centre clearly is during the day. The centre
management have been perfect, they’ve helped us
all the way through from start to finish. It’s a great mix
of people, it’s a great location."
Allay Mohan,
Owner Of The Diner, The Avenue,
Newton Mearns, Glasgow
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
27
STRATEGIC REPORT
STAKEHOLDER ENGAGEMENT CONT I NUED
Lenders
We have strong working relationships with
our banks, bondholders and rating agency
who in turn help provide funding to facilitate
our strategy.
As part of this, we are in regular dialogue to ensure our banks and
bondholders understand the Company’s strategy and targets.
These relationships have helped ensure that the business remains
in a strong and flexible financial position with a fully unsecured
balance sheet. This structure is highly efficient and covenant-light,
affording us significant operational flexibility.
Board Engagement during the year
How did we engage?
• Regular meetings with our relationship banks, bondholders and
rating agency to ensure that they are kept up to date with
business strategy, developments and performance
• Especially important during FY22 given Hawthorn disposal and
subsequent debt repayment
• Ahead of our debt maturity we met with all our debt providers
on numerous occasions
• Offered meetings to all our Bondholders as part of our FY21
results roadshow
• Debt structure and current and future debt requirements are
considered by the Board on a regular basis as part of the
CFO’s review
• The Board was engaged throughout the year when
authorisation was required in order to make the changes to the
Group’s debt structure described below
Topics raised
• Sale of Hawthorn business and shape of NewRiver business
following the sale
• Recovery and resilience of retail operations post COVID
pandemic, including rent collection, leasing, and occupancy
• Recovery of retail valuations post COVID pandemic
• Activity in the retail investment market
•
Interest rate environment
How did we respond?
•
•
In August 2021 we completed the sale of the Hawthorn pub
business, and during the first half we repaid £335 million of
Group bank debt facilities
In October 2021 we agreed a one-year extension on our
undrawn £125 million Revolving Credit Facility ('RCF') to August
2024, following negotiations with our four key relationship
banks
• These actions mean that we have no maturity on drawn debt
•
until March 2028 and no exposure to interest rate rises on our
drawn Group debt facility
In December 2021 Fitch Ratings affirmed NewRiver’s Long-
Term Issuer Default Rating (IDR) at ‘BBB’ with Stable Outlook
and our senior unsecured rating at ‘BBB+’
28
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
Local Authorities
We are proud to work in partnership with
over 60 different local authorities across
the UK to help regenerate and protect
the towns we are invested in to create
long-term social and economic growth.
Board Engagement during the year
How did we engage?
• Several 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, repurpose and rejuvenate the area surrounding
our community-centred retail assets
• NewRiver also supported several Local Authorities
in preparing bids under the Levelling Up Fund,
including Mid Sussex (Burgess Hill) and Thurrock (Grays)
• The CEO attended various senior-level meetings with local
authorities alongside the asset and development team, meeting
all levels including Chief Executives and the wider cabinet,
Planning Officers, Regeneration Officers and also local
Councillors, to steer the regional strategy that will impact the
social and economic long-term viability of a town which has a
direct impact on our own assets
Topics raised
• Appreciation of Council priorities across the borough and the
significance of private sector-led regeneration
• Allocation of resources to the local authority planning team
• Local authority support for marginal regeneration projects that
bring a positive Benefit:Cost Ratio (BCR)
• Head lease renegotiation to permit major redevelopment
where the local authority is the freeholder
How did we respond?
• Our ongoing engagement with local authorities also extends to
our Capital Partnerships and we are pleased that this led to the
extension of our asset management mandate with Canterbury
City Council to manage its new leisure development, Riverside
• The 2021 AGM was held as a physical meeting and was attended
by all of the Board. Recognising that some shareholders may not
have been comfortable attending in person, we provided
opportunities for shareholders to submit questions to the Board
via email and to attend via conference call
• The Board reviews and approves material and communications
with investors, namely trading updates, results announcements,
the Annual Report and Accounts, and significant business
events and transactions
• The respective Committee Chairs engage with
shareholders on significant matters related to their
specific areas of responsibility
• The Board receives regular updates on market sentiment,
investor relations activity and share price performance
Topics raised
• Delivery of the Company’s revised strategy focused
on resilient retail
• Financial performance
• Sustainability
• Leadership changes
• Retailer/Occupier challenges and opportunities
• Macro economic themes including how inflation and rising
energy costs impact our retailers
How did we respond?
• Online technology has become an integral part of our investor
engagement programme, and in many ways has enhanced
efficiency and accessibility. We anticipate that virtual
engagement will continue to play a part in our Investor
Relations programme in the future, allowing us to make most
effective use of management time, engage with international
and regionally based investors, and help reduce associated
carbon emissions
• Our investor feedback has helped shape our disclosures and
the supplementary information provided in results materials
Shareholders
Our shareholders are the ultimate owners
of our business. In order to deliver on all
our ambitions for the communities we are
invested in, it is critical that our shareholders
continue to understand and support the
Company’s strategy, business model,
investment case and progress.
We have an active engagement strategy, supported
by our corporate brokers, providing our shareholders with
frequent business updates, regular meetings, both in person
and online, and on-site visits.
Where appropriate, our Board and members of the Executive
Committee will engage with shareholders.
The comprehensive calendar of engagement includes the
AGM, regulatory announcements, conference calls and
shareholders 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.
Board Engagement during the year
How did we engage?
• Focused virtual and face to face investor meetings with the
CEO and CFO
• 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
• We engage with retail shareholders via direct communications,
our website, media and Annual General Meetings (AGM)
• Our corporate website contains comprehensive information
about our business, regulatory news and press releases
alongside information about our approach to Environmental,
Social and Governance (ESG) issues
• Management engaged with 75 investors across a total of 140
meetings throughout the financial year
• For our FY22 interim results presentation to analysts in
•
November 2021, a live audio webcast with replay facilities
was made available on our website
In September 2021 we held a Capital Markets Day for analysts
and shareholders which focused on our revised retail strategy.
The Capital Markets Day was hosted by the CEO, CFO and
senior members of the NewRiver team
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
29
STRATEGIC REPORT
PORTF OLIO REVIEW
Creating the most
resilient retail portfolio
Highlights
• Retail Portfolio delivered Total Return of +7.5%; Retail
Parks +23.5% and Core Shopping Centres +14.3%
• Retail Disposals of £77 million including two
regeneration projects above book value
• Completed over one million sq ft of leasing. Long Term
leasing +7.4% versus valuer’s ERV
• Occupancy remains high at 95.6%
• Rent collection up to 96% for the year
•
Increased prospects of promote pay out as Capital
Partnership with BRAVO continues to perform well
Operational Update
Overview
We saw a strong recovery in our operational performance in FY22
despite the ongoing disruption from COVID-19 which was
prevalent for the majority of the year.
The pandemic has been challenging for many businesses, but it
has demonstrated the underlying resilience in our portfolio which
is clear in our FY22 operational metrics.
Rent collection for the year was 96%, a significant improvement
on 86% last year and we saw quarter on quarter improvement
throughout FY22.
Our car park and commercialisation cashflows also recovered well,
at 70% compared to pre-COVID-19 levels. Although these revenue
streams are yet to fully recover to pre-COVID-19 levels, we are
pleased with the steady progress that we are making, now
supplemented by new non-car parking income generated from
our car parks through our Urban Hub initiative with APCOA.
We completed 1,039,800 sq ft of leasing transactions in FY22
which was a similar volume to FY21. However in FY22 we saw
a significant improvement in leasing pricing where our long term
deals were transacted at +7.4% above valuers ERV. This
represents a significant improvement to FY19, FY20 and FY21.
As a consequence of our leasing activity, no material CVAs or
occupier administrations, and the underlying resilience of our
portfolio, our occupancy level remained high at 95.6% and
consistent with the previous year (31 March 2021: 95.8%).
In total we completed £77 million of planned retail disposals
achieved broadly in line with their latest book values at -2.1%.
Given our focus on reducing our LTV, acquisition activity was
limited to a single acquisition through our capital partnership with
BRAVO with our share being £4 million excluding purchaser costs.
In relation to our regeneration and development activity, the
highlight of the year was the sale of Templars Square in Cowley,
Oxford and the Blenheim Centre in Penge, South-East London
both at a price exceeding book value and the original acquisition
price thereby demonstrating the value creation opportunity that
we are able to deliver from these types of regeneration projects.
Elsewhere in the portfolio, we have made good progress in
advancing our redevelopment projects.
Valuation: A Return to Capital Growth
As at 31 March 2022, our portfolio was valued at £649 million.
The key movements from the previous year (£974 million) were
the disposal of the Hawthorn pub business (£248 million),
£77 million of planned retail disposals and finally a modest
like-for-like valuation decline of -0.9% for the year.
We saw an improvement in our portfolio valuation performance
in the second half of the year with valuation growth of 2.6% and
stabilisation for the year as a whole with a modest decline of
-0.9%. Our Core Shopping Centres, Retail Parks and Regeneration
portfolios, which are the resilient retail sectors on which NewRiver
will be focused going forward, delivered valuation growth for the
year of 5.2%. Our Work Out portfolio, which now represents 14%
of our total portfolio and we are committed to exiting by the end
of FY23, saw valuation decline of -25.9%, the majority of which
was in the first half of the year.
30
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT A breakdown of the key valuation movements by asset type is provided below.
As at 31 March 2022
(£m)
Portfolio
Weighting
(%)
Valuation
Movement H1
(%)
Valuation
Movement H2
(%)
Valuation
Movement FY22
(%)
Topped-up
NIY
(%)
Shopping Centres
– Core
Retail Parks
Shopping Centres
– Regeneration
Shopping Centres
– Work Out
Other
Total
221.2
167.9
162.6
89.7
8.0
649.4
34%
26%
25%
14%
1%
100%
-0.4%
4.0%
-1.6%
-18.9%
-5.9%
-3.1%
3.7%
9.8%
1.5%
-8.3%
-5.9%
2.6%
NEY
(%)
9.3%
6.6%
3.3%
14.4%
9.5%
6.3%
-0.6%
5.8%
6.3%
-25.9%
-15.9%
-0.9%
11.1%
4.7%
7.9%
15.7%
8.4%
8.8%
LFL ERV
Movement
(%)
3.6%
-1.2%
-1.5%
-2.8%
-0.6%
-0.2%
Our Retail Warehouse portfolio delivered a total return of +23.5% for the year which although is less than the MSCI index at 30.2%, has
significantly out-performed the MSCI index over the last three years with a total return of +22.6% versus the index at +10.1%. This long term
out-performance is reflective of the higher income returns that we deliver and that our average capital size is more liquid and thus our
portfolio is less volatile in periods of market disruption.
Our Core Shopping Centre portfolio delivered a total return of 14.3% for the year which was a good result given the disruption from COVID-19.
When our Regeneration and Work Out Shopping Centres are included, the total return for all of our shopping centres for the year was
3.3% which is an out-performance relative to the MSCI index which recorded a total return of 1.4% for the same period. This out-
performance is reflective of our portfolio positioning focused on essential goods and services but also, our shopping centres delivering
higher income returns at 8.7% for the period versus MSCI income return of 6.5%.
Year to 31 March 2022
NRR portfolio
MSCI All Retail Benchmark
Relative performance
Total Return - 12 months to March 2022
NewRiver
MSCI Benchmark
Relative Performance
Total Return - 24 months to March 2022
NewRiver
MSCI Benchmark
Relative Performance
Total Return - 36 months to March 2022
NewRiver
MSCI Benchmark
Relative Performance
Total Return
Income Return
Capital Growth
7.5%
14.9%
-7.4%
8.3%
5.6%
2.7%
-0.8%
8.9%
-9.7%
Shopping Centres Retail Warehouses
3.3%
1.4%
1.9%
-7.9%
-22.5%
14.6%
-15.6%
-36.7%
21.1%
23.5%
30.2%
-6.7%
25.7%
25.5%
0.2%
22.6%
10.1%
12.5%
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
31
PORTF OLIO REVIEW CONTI NU ED
Capital Partnerships
Capital Partnerships are an important part of our business model
allowing us to acquire assets in a capital light way and to enhance
our returns from asset management income and the potential
to receive financial promotes.
It was another active year for our Capital Partnership activities with
£67.1 million (NewRiver share: £10.4 million) of retail park disposals
and the £41.0 million (NewRiver share: £4.1 million) acquisition of
The Moor in Sheffield, a 28 acre income producing estate in one
of the UK’s top 10 cities. Our principal Capital Partnership is with
BRAVO, a fund managed by the Pacific Investment Management
Company. At year end our BRAVO joint venture owned three retail
parks and an asset in Sheffield.
• Sheffield: At the start of the period we completed the acquisition
of The Moor, Sheffield, for a total price of £41.0 million within
our BRAVO Capital Partnerships (NewRiver share: £4.1 million).
The estate is anchored by Next, Sainsbury’s, Primark, H&M,
a 670-space car park, a nine-screen cinema, and The Moor
Market. The asset encompasses the prime retail destination for
Sheffield City Centre spanning 680,000 sq ft of retail and leisure
over 28 acres and has delivered excellent returns in the period.
Our asset management team enhanced the asset by completing
a number of new lettings including Sports Direct, Five Guys,
Bodycare and innovative interactive restaurant concept Boom
Battle Bar on terms above the initial business plan.
Since acquisition we have generated additional value through
the sale of the car park for £9.4 million in February 2022 and a
vacant unit to Lidl for £4.8 million in December 2021. An
agreement with Bank Leumi to provide a debt facility for the
asset has been completed. The asset is 82% let and generates
£7.6 million of annualised rental income. We are also
undertaking a stylish re-brand together with small scale public
realm landscaping works to further enhance the location.
Furthermore, we identified significant mixed-use development
opportunities at The Moor and we are working to obtain
planning consent as part of phase one of our regeneration
proposals to deliver a circa 250 unit Build To Rent units.
• Canterbury: We extended our third-party asset management
mandate of Whitefriars Shopping Centre with Canterbury City
Council for a further five years and completed a new mandate
for their recently developed The Riverside leisure
development. The Riverside will see a cinema, 189 social
housing units and 491 student accommodation units created
just 15 minutes’ walk from the City Centre. The anchor tenant,
Curzon Cinema, is expected to open late summer 2022 and
we are under offer and in negotiations with a number of
national food & beverage operators.
Leasing activity
Overview
In total we completed over one million sq ft of leasing transactions
during the year, securing £7.4 million of annualised income. Our
long-term leasing transactions which represented 75% of the total
rent secured were transacted at rents 7.4% above valuers ERVs.
Over 50% of those leasing transactions were in our Core
Shopping Centre and Retail Park portfolios at rents exceeding
valuers ERVs by 10.0% and 26.1% respectively. Even in our
Work-Out portfolio where we had good levels of leasing activity,
long term leasing transactions were on terms 9.6% ahead of
valuers ERVs.
The only part of our portfolio that recorded a decline in rent
secured, versus valuers ERV was in our regeneration portfolio at
-4.9%. However this is reflective of our ongoing strategy to ensure
greater lease flexibility to support our vacant possession strategy.
Overall, our long term leasing transactions had a weighted
average lease expiry profile (WALE) of 6.4 years with Retail Parks
at 9.1 years, Core Shopping Centres at 6.8 years and our
Regeneration portfolio at 5.1 years which again is reflective of our
vacant possession strategy.
In terms of tenant incentives, we have seen a marked
improvement in rent-free periods in the period compared to FY21
and FY20. For long term leasing transactions, the average rent
free period was just 2.3 months with many occupiers receiving no
rent free period.
The demand for space that we saw in our portfolio during the
period was broadly based with 59% of the space leased to
Grocery, Discount, Health & Beauty, Home, DIY and Value
Fashion. We received good demand from ‘Grab & Go’ food
operators and Independent Retailers, as our leasing activity to
these sub sectors was more than double the prior year.
Asset Management and Development
Our team has had an active year pursuing a range of asset
management initiatives which are designed to improve the
underlying quality of our rental cashflows and to deliver capital
growth. Typical asset management and development initiatives
include, but are not limited to, improvement to the occupational
type and mix, delivering incremental income through
commercialisation and car parking, reduction of service charge
costs, improving the shopper experience through enhanced
aesthetics, unit extensions/amalgamations, small scale development
on surplus land and large-scale regeneration. Increasingly ESG
initiatives have been implemented at our assets including more
EV chargers, roof-top gardens and ‘Quiet Hour’ programmes.
32
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Retail Parks
Enterprise 5 Retail Park, Bradford
As at 31 March 2022, Retail Parks accounted for 26% of our total
portfolio, totalling 15 assets. It has been a positive year for our
Retail Park Portfolio which at year end was 97.1% occupied.
Due to the majority of our retail parks being adjacent to major
supermarkets with plenty of free surface level car parking,
supportive of online fulfilment through click and collect, we have
seen strong occupational and investor demand for our type of
retail parks.
Disposals
• Poole: In December 2021 we disposed of Poole Retail Park in
Dorset for £58.0 million (NRR share: £5.8 million), held in our
BRAVO capital partnership, The price reflects a net initial yield of
6.6%, a 7.4% premium to its last valuation. The price achieved was
30% higher than when NewRiver and BRAVO acquired the asset
in October 2019 and this asset has generated an IRR of 21.6%
(excluding the promote fee) for NewRiver. In the two years since
acquisition we have completed several successful initiatives
including securing a 10-year lease extension and over 60% rental
uplift with Homebase.
• Newport: We also sold a retail park in Newport on the Isle of
Wight for £9.1 million (NewRiver share: £4.6 million) reflecting a
net initial yield of 5.8%. This followed our successful asset
management implementation programme including regearing
leases with Curry’s and Pets at Home, and a new letting to
Food Warehouse. The IRR excluding promote generated on
the completion of the sale was 15.2%.
•
Asset Management – Selected Highlights
Include:
• Aberdeen: At Kittybrewster, a high performing city-centre retail
park, we further enhanced the retail profile during the year with a
new 10 year lease with JD Sports for a 10,000 sq ft unit which
once open, will bring the park to 100% occupancy.
• Barrow: Our introduction of discount food operator, Aldi, to our
retail park in Barrow, has been well received by the local
community and has helped further drive the performance of this
retail park. We are now under offer on a final unit following strong
demand for space and on completion the park will be 100% let.
• Bradford: A major achievement for the year was the letting of a
former Wickes unit to leading DIY operator Homebase in August
2021 on a 10 year lease. The new store opened in November
2021 and has had a positive impact to the retail park which
already performs well given its location adjacent to a highly
successful Morrisons.
• Cardiff, Valegate: At our retail park in Cardiff we are under offer
to two new occupiers, the first for a 27,000 sq ft store to a
leading discount operator and the second, a 10,000 sq ft store
to a leisure operator. On completion of these transactions, the
park will be fully let.
• Dewsbury: We signed a lease with Aldi to take 19,000 sq ft at
our retail park in Dewsbury and handed the new unit over in
May 2022 for the store to open at the end of the summer, and
we are under offer on the final vacant unit on the park which
will make the park 100% let, further strengthening this excellent
and well-located retail park.
• Dumfries: We introduced a Next Click & Collect pod to our
retail park in Dumfries in December 2020 which has performed
well and helped to generate new footfall to this popular retail
park. We have subsequently introduced Bensons for Beds who
have taken the former Dreams unit after we served notice,
further improving the rental terms and agreeing a 10 year lease.
During the year we have also submitted a planning application
to create a new Food Warehouse which will benefit from
trading adjacent to a successful Tesco superstore.
Inverness: An important new operator to open within the
Inverness community was our letting to The Department for
Work and Pensions during the year who took a 10,000 sq ft unit
on a 5-year lease paying £112,500 pa. This is in addition to
other asset management initiatives underway at the Glendoe
& Telford Retail Park in Inverness which will materialise in FY23
including a 12,000 sq ft unit under offer to a food retailer.
• Sprucefield: is a retail park located in Northern Ireland
anchored by Sainsbury’s and B&Q and owned in our Capital
Partnership with BRAVO. We have made good progress with
our proposals to deliver two new drive-thru units and a
restaurant unit. We have received offers for both and are also
in discussions with occupiers to sell surplus land that would
facilitate a 24,000 sq ft unit for a discount food operator.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
33
PORTF OLIO REVIEW CONTI NU ED
Shopping Centres
The Avenue Shopping Centre, Newton Mearns
Our Core Shopping Centres are located in the heart of their local
communities, playing a key role to the local social and economic
prosperity of their conurbations providing a range of essential
goods and services to local people. Typically our centres are
easily accessible with short travel times supporting the wider
climate and well-being agenda.
As at 31 March 2022 our Core Shopping Centre portfolio
represented 34% of our total portfolio value and comprises 14 core
community shopping centres with an occupancy of 96.5%.
Selected highlights Include:
• Fareham: We received a resolution to grant planning consent
in December 2021 for a highway re-adjustment which will not
only improve the local shopping experience but will also
enable the release of two possible sites for residential
development, creating up to 65 potential new homes.
• Leith: Our asset in Leith, located in close proximity to Edinburgh
City Centre, is a solid performing asset providing essential goods
and services to its local community. We were pleased to
introduce Costa, the first branded coffee offer to the centre.
We are currently working up proposals to deliver new residential
homes in this increasingly popular area of Edinburgh.
• Hastings: NewRiver and Hastings Borough Council worked
closely together to prepare and submit a bid to the
Government’s Towns Fund and in July the Ministry of Housing,
Communities & Local Government confirmed that £24.3 million
grant funding has been allocated to Hastings of which
£2 million has been allocated to NewRiver’s shopping centre,
subject to approval of the Business Case. Part of the funds
have already been deployed to convert a former New Look unit
to create a gym and to provide an office for the Department of
Work and Pensions. The remaining funds will be applied to our
proposals to deliver up to circa 90 new homes.
• Market Deeping: Terms have been agreed to provide a 20,000
sq ft store for a discount food operator and a planning application
is under preparation.
• Newtownabbey: We have seen strong recovery post COVID-19
in Newtownabbey, Belfast including the relocating and upsizing
of various retailers including DV8, River Island, Superdrug,
Bonmarche and Specsavers with further discussions
ongoing. This has resulted in strong ERV and capital growth
for this asset.
• Newton Mearns: We are exploring options to sell a parcel
of land adjacent to our shopping centre and have an offer from
a leading house developer. We are also progressing various
lettings and initiatives to bring in alternative uses to this centre
which is anchored by Asda and Marks & Spencer.
34
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Regeneration
Burgess Hill regeneration plans
Our Regeneration Portfolio as at 31 March 2022 comprises three
assets and represents 25% of our total portfolio value. Following
the disposal of two of our regeneration projects during the year
we now have three projects which we continue to make good
progress with.
• 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. Following Design
Review Panel sessions with the local authority earlier this year
we are making good progress preparing for our planning
application which we expect to submit in the Q3 2022. Our
proposals will create up to 900 new homes, reduce the excess
retail provision and improve the public realm and
interconnectivity of the town as a whole. Meanwhile we are
making steady progress with our vacant possession strategy
to ensure lease flexibility whilst protecting rental cashflows.
• Bexleyheath: Our strategic masterplan that combines asset
management and residential development initiatives to provide
over 700 new homes is making progress and we are preparing
to commence pre planning discussions with the Council and
other major stakeholders.
• Burgess Hill: During the period, the planning Decision Notice
was issued by Mid Sussex District Council in July 2021
following completion of the Section 106. Preparations are at
an advanced stage to sell part of our asset where we have
detailed planning consent for 172 residential units. The capital
receipt from this disposal will be used to partially fund the retail
refurbishment and the construction of the food store, car park
and hotel.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
35
PORTF OLIO REVIEW CONTI NU ED
Work-Out
As at 31 March 2022 our Work-Out portfolio represented less than
15% of our total portfolio. During the year we completed the sale of
four of the assets and a further two assets are currently under
active negotiations. In addition to the sales already completed and
planned sales this year we have made good progress in
implementing our turnaround strategies for the remaining
Work-Out assets. Examples of these turnaround strategies include:
• Cardiff: We continue our exciting plans to regenerate The
Capitol Shopping Centre in Cardiff. The shopping centre site is
built upon what was formerly known as the Capitol Theatre and
played host to a number of famous musicians in its heyday,
including the Beatles. Our repositioning plans are sympathetic
to this heritage and intend to reincarnate some of this cultural
significance and make The Capitol the culture hub of Cardiff
again. In November, we signed an agreement for lease with
Kommune, a new all-day dining and retail experiential operator,
who are due to open in the Autumn. Public realm works have
also begun to reinstate the historic canal feeder adjacent to our
asset which will enhance the environment and introduce new
market kiosks, outdoor seating and an open-air event space.
• Wallsend: At the end of FY21 we achieved planning consent for
the development of a new medical centre adjacent to our
shopping centre, in Wallsend outside Newcastle. Working closely
with North Tyneside Council, we completed on the sale of the site
to Assura, who are now on-site with a target opening date for the
new medical centre in the Autumn. This will provide an important
new community service for the local community and will also
improve footfall to our shopping centre.
• Wisbech: At our shopping centre, in Wisbech, an attractive
market town in the Fenlands, we are working up options to
provide a 20,000 sq ft new food store which will transform this
asset and the town centre.
Commercialisation & Car Parking
During the year our car park and commercialisation cashflows
have returned to growth, closing the year +72% up on last year,
representing 70% of pre-COVID-19 levels and continuing to grow.
We have been developing some exciting sustainable initiatives
within our commercialisation strategy to allow us to provide better
services to our shoppers that fit their changing lifestyles including
a greater provision of EV chargers, cycle parks and potential dark
kitchens. We completed a long-term partnership with APCOA,
Europe’s largest car parking solutions operator, to roll out their
innovative Urban Hub concept out across both shopping centres
and retail parks. We have installed 12 more InPost Lockers with
a further 5 in the pipeline and 1 ByBox locker with another in the
pipeline. We are also working with Amazon to install an additional
4 lockers, bringing the total to 28 across the portfolio and are
planning for 125+ more EV charge points meeting demand from
customers for such. Car park revenues have recovered well and
are growing whilst we also continue to review our car park offer
to better reflect customer demand, post pandemic.
Rent collection
We have continued to see our rent collection rates improve quarter on quarter, almost restored to pre COVID-19 levels now as our rent
collection levels reach 96% for the year. This is reflective of our affordable rents, averaging £11.74 per sq ft and the resilience of our value
and essential retail focused occupiers.
Rent cash collection rate by quarter
FY211
FY22
Q1
85%
92%
Q2
93%
97%
Q3
96%
97%
Q4
93%
97%
FY
92%
96%
1. Rent cash collection rate relating to FY21 billings includes cash collected to date in the period since the time of the prior year results
36
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Top occupiers
% Total gross income
31 March 2022
% Total gross income
31 March 2021
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Subtotal
2.9%
2.7%
2.6%
2.4%
2.4%
2.1%
2.1%
2.0%
1.6%
1.5%
2.8%
2.8%
2.4%
2.5%
2.8%
2.0%
2.3%
2.6%
1.9%
1.8%
22.3%
23.9%
Resilient Retailers Profile
Many of our top retailers are discount led and multi-channel,
both of which are defensive in the current retail climate, with
multi-channel retailers far outperforming their pure-play counterparts
as they are better equipped to fulfil online purchases through their
store distribution network and capitalise on incremental spend
from click and collect customers. By contrast, pure-play retailers
are battling to mitigate the cost inflation that they are experiencing
in particular from customer deliveries and returns.
Our retail rental income is well-diversified, with 1,600 leases across
over 750 different occupiers, primarily focused on providing
essential goods and services to local communities. Our top
occupiers by gross rental income for the year are B&M, Poundland
and Primark, each deliberately accounting for under 3% of total
rent. This diversification, combined with our affordable rents of
£11.74 per sq ft, underpins the sustainability of our income.
As well as face to face meetings we also conduct an annual
Occupier Survey and this year’s results reported that 26% rated
their general Satisfaction Score as 10/10, and 67% of respondents
rated their general Satisfaction Score as 8/10 or higher. Our
occupiers are happy with the sustainability initiatives we
implement at our centres with 82% agreeing that improving the
sustainability performance of their own business is important, with
64% rating this as ’very important’.
Furthermore, we have been increasing our engagement with our
retailers around our ESG Strategy and our Pathway to Net Zero
including how we gather energy on occupier units. Some 90% of
our carbon emissions comes from our occupier units and we are
pleased to report that 66% of space let to our Top 50 retailers is
let to occupiers who have also committed to a Net Zero Pathway.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
37
FINANCE REVIEW
A transformative year
for NewRiver
This has been a transformative year for
NewRiver, during which we have
repositioned and restructured the business
to support its future growth.
Underlying Funds
From Operations
£28.3m
FY21: £11.5m
LTV
34.1%
FY21: 50.6%
Underlying Funds From
Operations Per Share
Ordinary Dividend
Per Share
9.2p
FY21: 3.8P
7.4p
FY21: 3.0P
Will Hobman
Chief Financial Officer
38
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Key
Performance versus previous year
Improved
Declined
Maintained
IFRS Loss After Tax
Admin cost ratio
Net debt
£(26.6)m
FY21: (150.5)m
16.9%
FY21: 24.9%
£221.5m
FY21: £493.3m
Interest cover
3.5x
FY21: 2.3x
Total Accounting Return
Net finance costs
-6.6%
FY21: -24.9%
£19.5m
FY21: £23.7m
The first half of the year was focused on completing the disposal
of the Hawthorn pub business and strengthening our financial
position so that we ended the first half with LTV within guidance,
finance cost efficiency improved, liquidity maintained and debt
maturity extended. In the second half we saw the continued
recovery of our underlying operations and, due primarily to the
successful execution of our disposal programme, we ended the
year with LTV at 34.1% meaning we are now in a surplus capital
position relative to our LTV guidance. Perhaps most importantly
given the write-downs we have experienced in recent years, and
having seen signs of valuation stabilisation in the first half, we saw
the portfolio return to capital growth in the second half.
Underlying Funds From Operations (‘UFFO’) of £28.3 million
compare to £11.5 million delivered in FY21, with retail operations
delivering UFFO of £12.8 million in the second half, compared
to £7.7 million in the first half. Our dividend policy is now linked
directly to UFFO, which means that as our UFFO has increased,
so too has our dividend. Having declared an interim dividend
of 4.1 pence per share in November 2021, the Board is pleased to
declare a final dividend relating to the second half of the financial
year of 3.3 pence per share. This brings the total FY22 dividend
declared to 7.4 pence per share, representing 80% of UFFO.
IFRS loss after tax for FY22 was £26.6 million (FY21: loss of £150.5
million), improved from the loss reported for the first half of the
year of £49.9 million. The first half loss reflected the one-off impact
of the loss on disposal of Hawthorn of £39.7 million and a
non-cash reduction in portfolio valuation of £22.2 million and the
position improved in the second half due to 2.6% or £15.7 million
of increase in portfolio valuation, along with the improvement in
UFFO noted above.
Our portfolio was valued on a proportionally consolidated basis at
£649 million at 31 March 2022, compared to £974 million at 31
March 2021, with the reduction due principally to the completion of
the disposal of the Hawthorn pub business which had a valuation
of £248 million at 31 March 2021, and retail disposals totalling £77
million. EPRA Net Tangible Assets per share were 134 pence at 31
March 2022 (31 March 2021: 151 pence) and IFRS net assets were
£414.1 million (31 March 2021: £460.4 million), with the majority of
Weighted average
debt maturity*
5.7yrs
FY21: 4.3yrs
* Drawn only
Net debt: EBITDA
4.6x
FY21: 14.6x
the reduction in both measures explained by the disposal of the
Hawthorn pub business and with both showing improvement from
the position reported at 30 September 2021 of 131 pence per
share and £402.1 million respectively due to the 2.6% increase
in portfolio valuation recorded in the second half.
The increase in portfolio valuation in the second half of FY22
followed the signs of stabilisation we saw in the first half, where
we recorded a 3.1% like-for-like reduction in the retail portfolio.
This compared to reductions of 9.4% in the first half and 6.1%
in the second half of the last financial year, and means we have
seen consistent improvement in valuation performance half on half
over the last 2 years. Importantly in Core shopping centres,
Regeneration shopping centres and Retail parks, which are the
resilient retail sectors on which NewRiver will be focused going
forward, we saw an increase in portfolio valuation of 0.4% in the
first half, and 4.8% in the second half of FY22, with the only
sub-sector showing decline in both halves of the year being the
Work Out shopping centres, which now account for only 14% of
the total portfolio and which we are committed to exiting by the
end of FY23.
We delivered a total accounting return of -6.6% over the year,
which was impacted by the loss on disposal of the Hawthorn pub
business during the first half, and compares to -24.9% in the prior
year. In the second half, with the portfolio returning to capital
growth, we delivered a total accounting return of +5.4%, which is
encouraging in the context of our medium-term objective to
deliver a consistent 10% total accounting return per annum.
Balance sheet repositioned and
restructured to support future growth
Throughout FY22 we focused on strengthening our balance sheet
position through the delivery of our disposal programme,
principally the completion of the disposal of Hawthorn, and by
engaging with our unsecured bank lenders to restructure our
existing bank facilities. The successful completion of these
activities means that we ended the year in a surplus capital
position with reduced leverage, improved finance cost efficiency,
improved debt maturity and sufficient liquidity to fund growth.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
39
FINANCE REVIEW CONT I NUED
Delivery of disposal programme
We completed the disposal of Hawthorn on 20 August 2021, having first announced our intention to sell the business on 14 April 2021.
The pricing achieved represented an earnings multiple of 11.5x, based on the estimated pro-forma EBITDA for the year ended 31 March
2020, which was at the upper end of our pricing expectations. The disposal was the key contributor to the reduction in LTV in the first half,
from 50.6% presented at 31 March 2021 to 39.4% at 30 September 2021. In the second half we completed £69.5 million of retail disposals,
taking total retail disposals completed during FY22 to £77.1 million, and being the principal driver for the reduction in LTV to 34.1% at
31 March 2022.
In addition to the significant improvement in our LTV position, the completed disposal activity was the principal contributor to the
improvement in our net debt position during the year, from £493.3 million at 31 March 2021 to £221.5 million at 31 March 2022.
Proportionally consolidated
Cash
Principal value of gross debt
Net debt1
Drawn RCF
Total liquidity2
Gross debt repaid / (drawn) in period / year
March 2022
£m
September 2021
£m
March 2021
£m
March 2020
£m
88.2
(314.0)
(221.5)
-
213.2
339.13
37.3
(318.1)
(276.4)
-
162.3
335.0
154.3
(653.1)
(493.3)
(170.0)
199.3
(0.7)
82.1
(652.4)
(563.6)
(170.0)
127.1
(142.4)
Loan to Value
34.1%
39.4%
50.6%
47.1%
1. Including unamortised arrangement fees
2. Cash and undrawn RCF. March 2022 and September 2021 columns reflect the bank facility amendment & restatement signed in October 2021
3. £339.1 million of debt repaid includes £4.1 million of JV & associate debt which was repaid on disposal of retail parks in Poole and Newport held by the BRAVO
capital partnership; Group debt repaid in FY22 was £335 million
Debt restructuring
In June 2021, as COVID-19 lockdown measures continued to ease and operational performance improved, we made the decision to repay
£70 million of drawn RCF. Immediately following the completion of the Hawthorn disposal in August 2021, with our cash position reflecting
the net disposal proceeds, we repaid a further £100 million of drawn RCF which meant that our RCF was fully undrawn from that point.
In September 2021, as discussions with our bank lenders around future debt requirements reached a conclusion, we cancelled the
£165 million term loan and associated interest rate swaps. We expect that these actions will reduce annualised debt costs by £7 million per
annum, which is 35% of the cash interest proportion of our FY21 finance costs, and we have benefitted from £3.5 million of these savings
in the second half of FY22.
Proportionally consolidated
March 2021
June 2021 RCF repayment
August 2021 – Hawthorn proceeds received
August 2021 RCF repayment
September 2021 – Term loan cancellation
Retail disposal proceeds
Other movements1
March 2022
1. Other movements is formed of operating, financing and investing cash flows
Cash
£m
154.3
(70.0)
196.0
(100.0)
(165.0)
68.4
4.5
88.2
Gross Debt
£m
(653.1)
Unamortised fees
£m
5.5
70.0
-
100.0
165.0
4.1
-
(314.0)
-
-
-
(0.8)
-
(0.4)
4.3
Net Debt
£m
(493.3)
-
196.0
-
(0.8)
72.5
4.1
(221.5)
40
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Upon cancellation of the £165 million term loan in September, our
unsecured bank facilities reduced to a fully undrawn £215 million
RCF expiring in August 2023. In October 2021 we reached
agreement with our bank lenders to reduce the quantum and to
extend the maturity of the RCF. Having undertaken detailed
analysis of our future debt requirements, including the maximum
level of possible drawings under a range of portfolio valuation
scenarios while maintaining LTV within our guidance, we believe
that a £125 million RCF provides NewRiver with the appropriate
level of liquidity. In addition, we have negotiated a £50 million
accordion which means that, if required, the facility size can be
increased to £175 million in the future, subject to lender consent.
When the unsecured bank facility was originally negotiated in
August 2017, the agreement was drafted as a five year term
expiring in August 2022 with two ‘+1’ options to extend the term
to August 2024, at the consent of lenders. In September 2018,
the first extension option was granted, increasing the maturity to
August 2023, and in October 2021 as part of the RCF negotiation,
we agreed the second extension with our bank lenders, increasing
the RCF expiry to August 2024.
This meant that on agreement of the second extension the RCF
had just under three years to expiry, in-line with the likely term we
would have achieved on a new facility in today’s market. As such,
in negotiating the extension we achieved the same result as a new
three year facility in the most efficient way possible, using existing
covenants and documentation. The positive net result is that,
despite a challenging lending market in relation to retail assets
and with concerns around inflation and interest rate rises, we have
secured access to up to £175 million of liquidity with no refinancing
requirement until FY25.
The strength of our balance sheet was recognised in December
2021, when Fitch Ratings reaffirmed NewRiver’s Long-Term Issuer
Default Rating (IDR) at ‘BBB’ with a 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.
In summary, we ended the year with the balance sheet repositioned
and restructured to support future growth, with LTV within guidance
and our already conservative covenant headroom significantly
improved. Furthermore, we have worked collaboratively with our
bank lenders to right size our bank facilities to strike the
appropriate balance between finance cost efficiency and liquidity.
We have also extended maturity so that our fully unsecured
balance sheet has no refinancing requirement until FY25,
and no refinancing requirement based on drawn debt until FY28.
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, 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 income returns, is UFFO.
UFFO measures the Company’s underlying operational profits,
excluding one-off or non-cash adjustments such as portfolio
valuation movements and profits or losses on the disposal of
investment properties. 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 profits. It is for this reason
that UFFO, which includes the contribution from Hawthorn up to
its disposal on 20 August 2021, 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.
Hawthorn disposal
On 14 April 2021, we announced three strategic priorities, one
of which was to divest ourselves of Hawthorn, our community
pub business. The rationale for this decision was that the Board
believed that the pub portfolio was sub-scale in a sector likely
to see significant consolidation opportunities which could not be
unlocked under NewRiver's ownership due to its status as a REIT.
Furthermore, the divestment of Hawthorn would have a beneficial
impact on NewRiver’s LTV, potentially reducing this to within our
guidance level depending on the pricing achieved.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
41
FINANCE REVIEW CONT I NUED
On 26 July 2021, we announced that we had agreed the sale of Hawthorn to AT Brady Bidco Limited (‘Admiral Taverns’) for gross proceeds
of £224.0 million, and we announced the completion of the disposal on 20 August 2021. The pricing achieved reflected an earnings
multiple of 11.5x based on the estimated pro-forma EBITDA for the year ended 31 March 2020 which was at the upper end of our pricing
expectations and compares favourably to other transactions completed in the pub sector in recent years.
The pricing achieved represented a loss of £39.7 million, or a discount of 15%, when compared to book value. This discount is due to both
the disposal being a portfolio transaction, as NewRiver itself experienced as we amassed the pub portfolio starting in 2013, acquiring
individual portfolios at a blended discount of 15% to their individual asset valuations; and that in Hawthorn we sold a trading business
including the administrative costs of operating the pub platform, which are not reflected in the individual asset valuations and which ran
at £9.5 million in FY21. Importantly, we reported LTV of 39.4% at 30 September 2021, which was back within our guidance predominantly
as a result of the disposal.
Following the completion of the sale of Hawthorn, the following additional table is included to show the proportionally consolidated UFFO
figure split between retail (continuing operations) and Hawthorn (discontinued operations).
Hawthorn is disclosed as a single line entitled “discontinued operations” in the consolidated statement of comprehensive income on page
142. The reconciliation of IFRS loss after taxation to UFFO in the “Underlying Funds From Operations” section of this review bridges the
figure disclosed within the consolidated statement of comprehensive income to Hawthorn’s UFFO contribution during its period of
ownership (from 1 April to 20 August 2021). The following table shows the UFFO contribution from Hawthorn on a line-by-line basis.
UNDERLYING FUNDS FROM OPERATIONS
Revenue
Property operating expenses
Net property income
Administrative expenses
Other income
Operating profit
Net finance costs
Taxation
Underlying Funds From Operations
UFFO per share (pence)
Ordinary dividend per share (pence)
Ordinary dividend cover
Admin cost ratio
Admin cost ratio – continuing operations
Weighted average # shares
31 March 2022
31 March 2021
Retail
£m
77.7
(25.9)
51.8
(11.7)
-
40.1
Hawthorn1
£m
Total
£m
18.1
(10.9)
7.2
(4.2)
4.8
7.8
95.8
(36.8)
59.0
(15.9)
4.8
47.9
(19.5)
(0.1)
28.3
9.2
7.4
125%
16.9%
16.0%
307.2
Retail
£m
77.7
(30.5)
47.2
(12.0)
2.7
37.9
Hawthorn2
£m
18.0
(17.0)
1.0
(9.5)
4.5
(4.0)
Total
£m
95.7
(47.5)
48.2
(21.5)
7.2
33.9
(23.7)
1.3
11.5
3.8
3.0
127%
24.9%
18.1%
306.4
1. Pubs performance from 1 April 2021 to 20 August 2021 when disposal of Hawthorn business was completed.
2. Pubs performance from 1 April 2020 to 31 March 2021. This is not comparable with the shorter period of ownership in FY22 and therefore the analysis that follows
focuses on comparing FY22 performance from 1 April 2021 to 20 August 2021 with performance from H1 FY21.
42
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT
Hawthorn contributed £7.8 million of operating profit in the first half prior to its disposal on 20 August 2021, which compares to a £4.0 million
loss for the entire prior year. In order to provide a more meaningful analysis, the contribution from Hawthorn prior to its disposal has been
compared to its performance during the first half of the prior year of £0.4 million.
On this basis, Hawthorn contributed £7.8 million of operating profit pre-disposal, which compares to £0.4 million in the first half of the prior
year. The key reason for the increase in contribution is the recognition of an insurance settlement of £3.3 million prior to disposal in FY22,
which related to income disruption during the first national lockdown in the prior year. This settlement was recognised in FY22 within
Other income, but in effect replaced Net property income lost in the prior year.
Analysis of contribution from Hawthorn (£m)
Contribution from Hawthorn for the six months ended 30 September 2020
Income disruption insurance claim
HY21 contribution proforma incl. insurance claim
Lifting of Covid restrictions
Period of ownership
HY22 contribution proforma for insurance payment
Income disruption insurance payment
Contribution from Hawthorn for period until 20 August 2021
3.3
3.3
0.4
3.7
2.7
(1.9)
4.5
7.8
Removing the impact of the timing of the insurance settlement, the contribution from Hawthorn increased from £3.7 million in the first half
of the prior year, to £4.5 million in the current year pre-disposal. This increased contribution reflects the impact of UK-wide operating
restrictions in the prior period, specifically the first national lockdown in Q1 FY21, and the relaxation of operating restrictions in the current
period, the effect of which was offset by our shorter period of ownership due to the disposal of the pubs on 20 August 2021.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
43
FINANCE REVIEW CONT I NUED
Underlying Funds From Operations
The following table reconciles IFRS loss after taxation to UFFO, which is the Company’s measure of underlying operational profits.
Reconciliation of loss after taxation to UFFO
Loss for the period after taxation
7.0
(33.6)
(26.6)
(122.1)
(28.4)
(150.5)
31 March 2022
31 March 2021
Retail1
£m
Hawthorn2
£m
Total
£m
Retail
£m
Hawthorn
£m
Total
£m
Adjustments
Revaluation of property
Revaluation of joint ventures’ and associates’ investment
properties
Loss on disposal of investment properties
Changes in fair value of financial instruments and associated
close out costs
Loss on disposal of subsidiary
Acquisition costs
Deferred tax
EPRA earnings
Depreciation of property
Forward looking element of IFRS 9
Abortive fees
Restructuring costs3
Share-based payment charge
Underlying Funds From Operations
12.3
(5.8)
5.4
(0.6)
-
-
0.6
18.9
-
(0.2)
-
0.9
0.9
-
-
(0.8)
-
39.7
-
1.9
7.2
0.4
-
0.2
-
-
12.3
131.5
23.2
154.7
(5.8)
4.6
(0.6)
39.7
-
2.5
26.1
0.4
(0.2)
0.2
0.9
0.9
(1.8)
4.1
0.1
2.2
-
-
14.0
-
0.6
0.3
-
0.6
15.5
-
1.4
-
-
0.1
(1.4)
(5.1)
1.1
-
-
-
-
(4.0)
(1.8)
5.5
0.1
2.2
0.1
(1.4)
8.9
1.1
0.6
0.3
-
0.6
11.5
20.54
7.8
28.3
1. Retail UFFO after tax for the year ended 31 March 2022, including all Group net finance costs. Disclosed as “continuing operations” in the consolidated statement
of comprehensive income
2. Pub operating performance from 1 April 2021 to 20 August 2021 when disposal of Hawthorn business was completed. Disclosed as “discontinued operations”
in consolidated statement of comprehensive income
3. During the year the Group incurred restructuring costs in relation to employee related matters following the sale of Hawthorn
4. The Retail column reflects the full impact of the finance costs of £19.5 million (FY21: £23.7 million) none of which has been allocated to Hawthorn
44
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Underlying Funds From Operations is represented on a proportionally consolidated basis in the following table. The following UFFO
commentary is focused on the continuing retail business, and the “Contribution from Hawthorn” during the year is discussed separately
in the “Hawthorn disposal” section of this review.
UNDERLYING FUNDS FROM OPERATIONS
Revenue
Property operating expenses
Net property income
Administrative expenses
Other income
Operating profit
Net finance costs
Taxation
Retail UFFO
Contribution from Hawthorn2
Underlying Funds From Operations
UFFO per share (pence)
Ordinary dividend per share (pence)
Ordinary dividend cover
Admin cost ratio
Admin cost ratio – continuing ops
Weighted average # shares
31 March 2022
31 March 2021
Adjustments1
£m
JVs &
Associates
Proportionally
consolidated
£m
Proportionally
consolidated
£m
Group
£m
73.7
(25.5)
48.2
(13.4)
-
34.8
(18.4)
-
-
(0.2)
(0.2)
1.8
-
1.6
(0.1)
-
4.0
(0.2)
3.8
(0.1)
-
3.7
(1.0)
(0.1)
(33.6)
41.4
-
77.7
(25.9)
51.8
(11.7)
-
40.1
(19.5)
(0.1)
20.5
7.8
28.3
9.2
7.4
125%
16.9%
16.0%
307.2
77.7
(30.5)
47.2
(12.0)
2.7
37.9
(23.7)
1.3
15.5
(4.0)
11.5
3.8
3.0
127%
24.9%
18.1%
306.4
1. Adjustments to Group figures to remove non-cash and non-recurring items, principally forward looking element of IFRS 9 £0.2 million, share-based payment charge
£(0.9) million, restructuring costs £(0.9) million, changes in fair value of financial instruments and associated close out costs £0.1 million. Adjustments to Contribution
from Hawthorn include £(39.7) million of loss on disposal, profit on disposal of investment properties £0.8 million, depreciation on public houses £(0.4) million,
abortive fees and acquisition costs £(0.2) million and Deferred tax £(1.9) million
2. Pub operating performance from 1 April 2021 to 20 August 2021 when disposal of Hawthorn business was completed. Disclosed as “discontinued operations”
in consolidated statement of comprehensive income. See “Hawthorn disposal” section of this review for performance commentary
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
45
FINANCE REVIEW CONT I NUED
Net property income
Analysis of retail net property income (£m)
Retail net property income for the year ended 31 March 2021
Like-for-like rental income
Rent and service charge provisions
Car park and commercialisation income
Retail NRI recovery
Asset management fees
Net disposals
Retail net property income for the year ended 31 March 2022
(0.5)
4.9
2.9
47.2
7.3
0.7
55.2
(3.4)
51.8
On a proportionally consolidated basis, retail net property income was £51.8 million for the year to 31 March 2022 compared to £47.2 million
in the year ended 31 March 2021. The principal reasons for the £4.6 million increase were the recovery of £7.3 million of net property
income previously lost due to COVID-19 impact, offset by our net disposal activity which reduced net property income by £3.4 million.
In the year to 31 March 2021, we grouped a number of items directly impacted by the pandemic under the heading of “COVID-19 impact”,
showing a reduction in net property income of £15.2 million during FY21. We have maintained the categorisation in FY22 as “Retail NRI
recovery”, which shows that £7.3 million of income disruption has been recovered to date. The key reason for this recovery is the net
reduction year on year of £4.9 million of Retail rent and service charge provisions, reflecting the conservative approach we took in the
prior year in providing against retail rents and service charge amounts that we deemed unlikely to be received as a result of COVID,
and reflecting our continued resilient rent collection.
This is partially offset by a modest decline in like-for-like income of £0.5 million, an improvement on £0.7 million at H1 as we have begun
to see the results of positive leasing performance throughout the financial year.
Car park and commercialisation income has increased by £2.9 million, representing 70% of pre-COVID revenue levels and encouragingly
and importantly we have continued to see a positive trend quarter on quarter during FY22.
The £0.7 million increase in asset management fee income reflects the continued growth of our capital partnership with BRAVO, with two
further asset management mandates added in the last 18 months on Sprucefield Retail Park and The Moor in Sheffield.
Net disposals reduced net property income by £3.4 million, with the capital partnership transactions noted above, namely the disposal of
90% of Sprucefield Retail Park into the BRAVO partnership in September 2020 offset slightly by the acquisition of The Moor in Sheffield
(NRR 10% share) in April 2021, contributing a net £1.4 million reduction. The balance of the reduction is split evenly between the fully
annualised impact of the remaining disposals completed at the end of FY21, and the part year impact of the £77.1 million of disposals
completed during FY22.
46
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Dividends
At the FY21 results in June 2021, NewRiver announced a new
dividend policy under which dividends equivalent to 80% of UFFO
would 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, and therefore the policy allows the final dividend to be
“topped-up” where required to ensure REIT compliance, such that
the blended payout in any financial year may be higher than 80%.
In-line with this policy, in November 2021 the Board declared
an interim dividend of 4.1 pence per share in respect of the six
months ended 30 September 2021, based on 80% of UFFO per
share of 5.1 pence. The Board has today declared a final dividend
of 3.3 pence per share in respect of the year ended 31 March
2022, taking the total FY22 dividend declared to 7.4 pence,
equivalent to 80% of UFFO per share of 9.2 pence and an
increase of 147% versus the 3.0 pence per share declared in
relation to the year ended 31 March 2021.
The final dividend of 3.3 pence per share in respect of the year
ended 31 March 2022 will, subject to shareholder approval at the
2022 AGM, be paid on 2nd September 2022 to shareholders
on the register as at 29 July 2022. The dividend will be payable
as a REIT Property Income Distribution (PID).
Administrative expenses
Retail administrative expenses were £11.7 million in the year to
31 March 2022, a reduction compared to the £12.0 million incurred
in the year ended 31 March 2021 as we begin to see the benefit
of cost efficiencies unlocked across the business. During the first
half we completed an extensive review of our cost base, following
which we set a target to reduce admin costs by 15% from the
baseline FY21 figure of £12 million. We have targeted unlocking
these savings by the end of FY23, so that we expect to see the
fully annualised impact of these savings in FY24. To date, we have
unlocked £1 million of annualised administrative cost savings,
much of the benefit of which will begin to flow through in FY23.
Other income
There was no other income recognised across the Retail portfolio
in the year ended 31 March 2022, compared to £2.7 million in the
year ended 31 March 2021. The prior year figure related primarily
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.
Net finance costs
Net finance costs were £19.5 million in the year to 31 March 2022,
compared to £23.7 million in the year to 31 March 2021. The
principal reason for the reduction was the repayment of £170
million of RCF and cancellation of £165 million of term loan and
associated swaps during the first six months of the year. The RCF
was repaid in two tranches of £70 million at the end of June 2021
and £100 million in August 2021 immediately following the
Hawthorn disposal, and the term loan was cancelled in late
September 2021. These actions unlocked a finance cost saving
of £7 million per annum versus the prior year, £3.5 million of which
benefitted the year ended 31 March 2022, with the balance of the
saving to follow in FY23.
Taxation
As a REIT we are exempt from UK corporation tax in respect of our
qualifying UK property rental income and gains arising from direct
and indirect disposals of exempt property assets, including income
and gains within the Hawthorn business. The majority of the
Group’s income is therefore tax free as a result of its REIT status.
Our REIT exemption did not extend to profits arising from the
margin made on the sale of drinks within the Hawthorn portfolio
during our period of ownership, or the element of the disposal of
the Hawthorn portfolio relating to non-qualifying property assets,
and it does not extend to other sources of income.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
47
FINANCE REVIEW CONT I NUED
Balance sheet
EPRA net tangible assets (‘EPRA NTA’) include a number of adjustments to the IFRS reported net assets and both measures are presented
below on a proportionally consolidated basis.
Properties at valuation1
Right of use asset
Investment in JVs & associates
Other non-current assets
Cash
Other current assets
Total assets
Other current liabilities
Lease liability
Borrowings2
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
Group
£m
609.1
75.7
31.9
0.7
82.8
18.9
819.1
(33.5)
(75.7)
(295.8)
-
(405.0)
414.1
As at
31 March 2022
As at
31 March 2021
JVs &
Associates
£m
Proportionally
consolidated
£m
Proportionally
consolidated
£m
40.3
-
(31.9)
1.5
5.4
0.7
16.0
(1.4)
-
(13.9)
(0.7)
(16.0)
-
649.4
75.7
-
2.2
88.2
19.6
835.1
(34.9)
(75.7)
(309.7)
(0.7)
(421.0)
414.1
-
0.6
(0.3)
414.4
134p
135p
34.1%
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%
1. See Note 14 for a reconciliation between Properties at valuation and categorisation per Consolidated balance sheet
2. Principal value of gross debt, less unamortised fees
48
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Net assets
As at 31 March 2022, IFRS net assets were £414.1 million, a decrease when compared to the position as at 31 March 2021 of £460.4 million,
but an increase when compared to the position at 30 September 2021 of £402.1 million. The reduction during the first half was primarily
due to the disposal of Hawthorn, the community pub business, as outlined in the “Hawthorn disposal” section of this review. Portfolio
valuation was also a contributor to the reduction at the half year, decreasing by 3.1%, but encouragingly valuations have shown a like-for-
like increase of 2.6% during the second half, which is the key reason for the increase in IFRS net assets between September 2021 and
March 2022.
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, deferred tax 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 11% to £414.4 million, from £463.2 million at 31 March
2021, and EPRA NTA per share decreased similarly to 134 pence per share at 31 March 2022 from 151 pence per share at 31 March 2021.
The decrease in EPRA NTA and EPRA NTA per share is primarily due to the Hawthorn disposal which completed on 20 August 2021.
As noted above when discussing IFRS net assets, both the EPRA NTA and EPRA NTA per share positions improved in the second half
of the financial year, from £402.1 million and 131 pence per share at 30 September 2021, as the portfolio returned to capital growth in the
second half.
Properties at valuation
Proportionally consolidated properties at valuation was £649.4 million at 31 March 2022, compared to £974.2 million at 31 March 2021,
with the reduction due principally to the completion of the Hawthorn disposal. Portfolio valuation reduced by 3.1% on a like-for-like basis
in the first half, before increasing by 2.6% in the second half, meaning valuations reduced by a modest 0.9% during FY22. Importantly
in Core shopping centres, Regeneration shopping centres and Retail Parks, which are the resilient retail sectors on which NewRiver will
be focused going forward, we saw an increase in portfolio valuation of 5.2% during FY22, with the majority of the declines concentrated
in the Work Out shopping centres, which now account for only 14% of the total portfolio and which we are committed to exiting by the
end of FY23.
Debt & financing
Principal value of gross debt
Weighted average cost of debt1
Weighted average debt maturity – total2
Weighted average debt maturity – drawn only3
Proportionally consolidated
31 March 2022
31 March 2021
£314.0m
£653.1m
3.4%
4.8 yrs
5.7 yrs
3.2%
4.3 yrs
4.5 yrs
1. Cost of debt assuming £125 million revolving credit facility is fully drawn. Currently entirely undrawn
2. Contracted weighted average debt maturity on total debt
3. Contracted weighted average debt maturity on drawn debt only
The principal value of our gross debt has reduced by £339.1 million since 31 March 2021, principally due to the repayment of £170 million
of drawn RCF and the cancellation of our £165 million term loan following the completion of the Hawthorn disposal.
Our weighted average cost of debt has increased slightly, because the unsecured corporate bond now constitutes a larger proportion
of our debt structure following the debt reduction and the coupon on the unsecured bond is 3.5%, hence the weighted average cost of
debt has increased towards this level. Weighted average debt maturity increased to 4.8 years from 4.3 years because the unsecured bond
does not expire until March 2028 and now constitutes a larger proportion of our debt structure and because we agreed a one-year RCF
extension with our bank lenders immediately in October 2021. On a drawn basis, i.e. including the bond only, weighted average debt
maturity increases further to 5.7 years.
The strength of our balance sheet was recognised in December 2021, when Fitch Ratings reaffirmed NewRiver’s Long-Term Issuer Default
Rating (IDR) at ‘BBB’ with a 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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
49
FINANCE REVIEW CONT I NUED
Share premium account
The share premium account balance of £227.4 million at 31 March 2021 was transferred to retained earnings, following the cancellation
of the share premium account effective from 31 August 2021. See note 25 for further details.
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. We have five financial policies in total, including LTV and interest cover which also appear as debt covenants
on our unsecured bank facilities and our bond.
During the year ended 31 March 2021, we experienced significant retail valuation and pub income decline due to COVID-19, which led
to us being outside of policy on LTV, Balance sheet gearing and Net debt: EBITDA. However, the decisive actions we completed during
FY22, together with the continued resilience of our operational performance and the stabilisation we have seen in our valuations mean
that we are now in compliance with all five policies, with significant headroom restored.
Loan to value
Financial policy
Proportionally consolidated
31 March 2022
30 September 2021
31 March 2021
Guidance <40%
Policy <50%
34.1%
39.4%
50.6%
Group
31 March 2022
30 September 2021
31 March 2021
Balance sheet gearing
<100%
51%
65%
Net debt: EBITDA
Interest cover1
Ordinary dividend cover2
1. 12 month look-back calculation, consistent with debt covenant
2. Calculated with reference to UFFO
Proportionally consolidated
FY22
4.6x
3.5x
125%
HY22
6.9x
2.7x
125%
<10x
>2.0x
>100%
104%
FY21
14.6x
2.3x
127%
Our LTV reduced from 50.6% at 31 March 2021 to 39.4% at 30 September 2021 principally due to the disposal of Hawthorn, the
community pub business, which completed during the first half. In the second half, we completed a further £69.5 million of retail disposals
and the portfolio returned to capital growth, meaning that the LTV reduced further to 34.1% at 31 March 2022.
At this level, LTV is now within our guidance of less than 40%, which means that we are now in a surplus capital position which we believe
leaves us very well placed given the increasingly uncertain macro-economic outlook. We have worked hard to achieve this strengthened
position, and while we maintain our guidance, we will not rush to redeploy to the 40% level and instead we intend to retain some
headroom to our guidance in the near-term along with excess cash in the bank which together give us maximum optionality.
Balance sheet gearing is now also comfortably within guidance having improved half on half during the financial year, ending the year at
51% compared to 104% at 31 March 2021 and Net debt: EBITDA is also now within our stated policy, at 4.6x, compared to 14.6x in the year
ended 31 March 2021. Again, the improvements reflect the successful completion of the Hawthorn disposal, with Net debt: EBITDA also
enhanced due to improved operational performance following the relaxation of Covid restrictions and because EBITDA benefitted from
income from Hawthorn in the first half of the year prior to its disposal.
Interest cover was within policy at 31 March 2021 at 2.3x and has improved from there to 3.5x due to improved operational performance
and the repayment £335 million of bank facilities during the first half following the Hawthorn disposal.
The Board has declared a final dividend of 3.3 pence in respect of the year ended 31 March 2022, taking the total dividend declared up
to 7.4 pence, up 147% on last year and in-line with the dividend policy we launched at the full year last year which links dividends directly
to UFFO and means that the dividend is fully covered, in-line with our financial policy.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT 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
Guideline
<5% of gross income
<10% of GAV
>70% pre-let or pre-sold on committed
31 March 2022
2.9% (B&M)
<1%
100%
Pub weighting (excluding c-stores)
<30% of GAV
N/A following Hawthorn disposal
Conclusion
This has been a transformative year for NewRiver, during which the recovery in our underlying operations has gathered pace and our
decisive actions have fundamentally improved our financial position and future prospects.
Throughout the Covid period, one of the key strengths of NewRiver has been its unsecured balance sheet, and we have enhanced this
strength during the year through repaying our RCF and extending its maturity, in so doing preserving valuable liquidity and optionality
whilst ensuring that our earliest maturity on drawn debt is not until 2028. Our LTV position has dramatically improved and we are now
comfortably within all of our financial policies thanks to the debt reduction exercise we completed during the year and the continued
recovery in our underlying operations.
We are conscious that the macro-economic picture remains challenging, but we believe that the fundamentals of our business and the
actions we have completed during the year mean we are well placed. Furthermore, we have no exposure to interest rate fluctuations
on our drawn debt and we have the surplus capital and cash resources to deploy at the right time into the right opportunities that we are
confident will present themselves in the future. We are encouraged by the strong return to capital growth in our core portfolio in the
second half of the financial year and the total accounting return of 5.4% that has been delivered as a result of this. As such we are
confident in our ability to deliver our target of a consistent 10% total accounting return in the medium-term.
Will Hobman
Chief Financial Officer
15 June 2022
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
51
STRATEGIC REPORT
OUR ESG A PPROACH
Delivering on our commitment
to sustainability
Key highlights
• Published our Pathway to Net-Zero by 2050
• Emissions reduction targets validated by SBTi as
consistent with a 1.5 degree future
• Awarded ‘B’ Rating by the CDP for our management of
climate issues, improved from a ‘C’ last year
• GRESB score improved by +13%
• Gold Award in EPRA Sustainability Best Practice
Recommendation Awards
• Achieved zero waste to landfill by 2022 target
• All energy supplied to our common areas is carbon neutral
•
Introduced a new Sustainability Brief and Framework for
Developments and a Green Procurement Policy
Emma Mackenzie
Head of Asset Management and ESG
Support for climate action gathered
significant momentum over the course of
this year, with COP26 in November marking
a pivotal opportunity for world leaders to
reach agreement on our collective pathway
to a 1.5-degree future.
I was personally pleased to see the Glasgow Climate Pact address
funding for climate justice, acknowledging that many of the
countries that feel the impact of rising temperatures most severely
are not only those that have contributed least to climate change,
but which are also least able to financially address the impacts
they are already facing.
Pathway to Net-Zero
At NewRiver, we have been developing our own pathway to aligning
our business and portfolio with a 1.5-degree future and have now
published our detailed net-zero carbon pathway, which provides the
scope of our commitment, our three-step target, and our intentions
for measuring our progress. In my dual role as Head of Asset
Management and ESG, I look forward to overseeing the tangible
change this pathway will guide across our portfolio.
An industry-wide net-zero roadmap was also launched by the UK
Green Building Council (UKGBC) last year. We were pleased to have
contributed to the consultation, which brought together views from
all areas of the sector. The UKGBC’s roadmap identifies stakeholder
actions required across the entire industry, many of which NewRiver
has already addressed, including the adoption of a comprehensive
green leasing strategy. We also supply helpful occupier guidance for
reducing energy consumption, welcome ideas for centre
improvements, and encourage the sharing of crucial data, which will
continue to be a focus for us into FY23, and a key feature of our
annual staff ESG training.
For our development activities, our new Sustainability Brief and
Framework for Developments outlines the operational and
embodied carbon targets we have set ourselves, in line with
industry guidance and our commitment to achieving net-zero.
Over the course of 2021, we also updated a host of our internal
ESG-related policies, including our Green Procurement Policy.
I am proud that NewRiver achieved an ‘A’ in the governance
section of the CDP this year, contributing to our overall score of ‘B’
and recognition for “taking coordinated action on climate issues”.
Reflective of our continuous efforts to ensure a sustainable
approach to the management of our assets, we also achieved a
13% improvement in the Global Real Estate Sustainability Benchmark
(GRESB) this summer (68/100), comprising a perfect score in the
management, social and governance pillars of the assessment.
As we move forward and further into the implementation phase of
our net-zero strategy, communication with our stakeholders will
continue to be of critical importance to us in achieving our
ambition. We saw an 85% increase in our Corporate Scope 3
emissions during FY22, largely driven by a significant increase in
business travel with staff now able to travel to our assets, coupled
with an anticipated increase in utilities consumption and waste
generation at our head office, reflective of increased occupancy
levels. As part of our FY23 ESG programme, we look forward to
increasing our engagement on climate issues with our top goods
and services providers, which is a pivotal step on our pathway to
bringing our corporate emissions to net-zero by 2025.
We also continue to build upon our employee engagement initiatives
and made mental wellbeing a key focus of our employee satisfaction
survey this year. The success of any business is a direct reflection of
its people, and so it is extremely important to NewRiver to understand
how the implementation of our flexible working policy is influencing
perceptions of the office atmosphere, productivity, work/life balance,
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
and the level of social interaction we enjoy at work. We are pleased to
have found that most staff are satisfied with their work/life balance
and that the flexible working policy is a key enabler of this, releasing
time to be more active or spend it with family or friends. Importantly,
visits to the office were rated to be of high social benefit by 78% of
staff, demonstrating that our culture remains strong. We are excited to
be moving to a BREEAM Excellent office building this summer and
look forward to embracing all the facilities it has to offer.
In FY23, we will increase ESG engagement beyond our own
value chain, to extend to the wider real estate sector, through The
Academy of Real Assets. We recognise that the industry has much to
benefit from greater socioeconomic diversity and, for it to change,
we must start at grass roots level. Our membership of The Academy
of Real Assets will allow us to engage with students from some of the
most underserved UK state schools and introduce them to the wide
variety of careers in real estate by providing them with insight to, and
contacts within, the industry. This will hopefully replicate the access
and mentorship opportunities that more privileged students typically
enjoy, in addition to giving us insight into what more we can do to
drive greater progress in this key area for our industry.
We continue to support the exceptional work of our corporate charity
partner The Trussell Trust, which, through another year characterised
by COVID-19 related uncertainty, coupled with the cost-of-living crisis,
continued to make emergency food supplies available to those most
in need. This year, 2.5 million emergency food parcels were given to
people in crisis by Trussell Trust food banks, representing a 33%
increase compared to the previous year. During this very challenging
period, we have been able to increase our food donation support by
an additional 0.5 tonnes, alongside providing 224 hours of volunteer
support at the Trussell Trust’s community food banks.
We have been equally inspired by the enormous generosity of the
thousands of individuals across the country who have donated,
coordinated aid packages, and even opened their own homes to
Ukrainian refugees. The events that continue to unfold in Ukraine
mean that many are forced to flee with only the items they are able
to carry. We have made a donation to the Disaster Emergency
Committee’s appeal to provide essential food, water, healthcare, and
protection to those whose lives have been uprooted and
endangered. Our thoughts are very much with them at this time.
The impact of our ESG programme reflects its local, community focus
and its clear alignment with our business model. The holistic nature of
our ESG strategy is embedded into every part of our business and
would not be possible without the enthusiasm and support of our
staff, property managers, site teams, and professional advisers whom
I would like to take this opportunity to thank most sincerely for their
continued commitment to our vision.
Emma Mackenzie
Head of Asset Management and ESG
Our ESG Journey through to 2022
Formalised
our four ESG
objectives and
established an
official programme
of engagement and
improvement
EPC Assessment
roll-out and MEES risk
exposure review.
Established data
management
programme and
initiated AMR and
LED lighting rollout
Embedded ESG
risks into our corporate
risk management and
governance practices,
established our first
corporate charity
partnership with the
Trussell Trust, fitted
solar PVs to five assets
2015
2016
2017
2018
2019
2020
Developed net-zero
strategy, salary waivers given
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)
2021
ESG considerations
embedded into our
business model and
targets set against
our ESG priorities
Energy and GHG
emission targets set,
installed 18 InstaVolt
electric charging
points, launched
sustainable occupier
fitout guide and
green 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
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
53
STRATEGIC REPORT
OUR ESG A PPROACH CONTI NU ED
Sustainability Accreditations and Commitments
We use industry-recognised indices to track our sustainability performance:
Accreditation
or commitment
Score
or equivalent
Observations
Global Real Estate
Sustainability
Benchmark
CDP (formerly
Carbon Disclosure
Project)
United Nations
Sustainable
Development Goals
Task Force on
Climate-related
Financial
Disclosures
FTSE Russell
EPRA sBPR
Score:
68/100
Score:
B
We are committed
to 11 SDGs
addressing issues
we can meaningfully
impact
4th consecutive year
reporting
Score:
2.7
Award:
Gold
We achieved a perfect score in the Management module (30/30) and
the Social (18/18) and Governance (20/20) aspects of the GRESB
assessment this year, outperforming our peers for another year. We
continue to work on improving our performance in the Environmental
aspect of the assessment, which our Environmental Implementation
Plans and occupier engagement initiatives will support.
We improved on our 2020 score of ‘C’ to achieve a ‘B’ in 2021, taking us
from the ‘awareness’ to the ‘management’ level of the assessment. This
means we are now recognised by the CDP as “taking coordinated
action on climate issues”.
We have specific targets and annually track our progress against them.
Please see Our Environmental & Social Targets for more information.
NewRiver publicly supports the TCFD Recommendations and is in its 4th
consecutive year of reporting in alignment with them. We continued to
develop our capabilities and refine our internal processes and systems
to equip the business to respond to emerging and evolving climate-
related risks.
In our most recent assessment, we received an overall ESG Rating of 2.7
out of 5, above the ‘Retail REIT’ average of 2.6 and ‘Financials’ industry
average of 2.4. Our key strengths identified by FTSE’s assessment include
Corporate Governance (5/5), Risk Management (4/5), Anti-Corruption (4/5),
Human Rights & Community (4/5) and Environmental Supply Chain (4/5).
We have identified the following areas as opportunities for improvement:
Pollution & Resources and Water Security.
Awards are given to listed real estate companies in recognition of
excellence in the transparency and comparability of their ESG
disclosures. NewRiver was one of only nine companies to newly receive
a Gold award in 2021, and one of only two to improve performance from
Bronze to Gold over the course of only 12 months.
We Achieved Recognition from the
CDP for Managing Climate Issues
We Received an
EPRA sBPR Gold Award
NewRiver seeks to be transparent in its approach
to climate action, and participating in the CDP is
an essential part of the way we achieve this. In the
2021 benchmarking process, we were awarded a
score of ‘B’, taking us from the ‘awareness’ to the
‘management’ level; testament to the dedication
of our business to driving alignment with a best
practice approach to climate risk management.
Our ESG performance is reported in accordance
with EPRA’s Sustainability Best Practice
Recommendations, which support the transparency
and comparability of disclosures on a full breadth
of ESG metrics, from gender diversity to waste
generation. NewRiver is one of just two companies
to have improved performance from Bronze to
Gold in 2021.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
About our ESG Performance Reporting
Our ESG reporting continues to evolve with the maturation of our
ESG programme. This year, we have integrated our previously
separate ESG report into our Annual Report and Accounts (ARA),
to better reflect the way in which our ESG strategy is embedded
into our business.
We stay abreast of emerging market and ESG disclosure trends
alongside the proactive management of our data collection
processes to ensure our stakeholders are provided with valuable
insight into our ESG performance.
Scope and Boundaries
This report relates to our ESG performance during our 2022 fiscal
period, 1 April 2021 – 31 March 2022. In disclosing our ESG
performance, we adopt the Operational Control boundary, in
recognition of this boundary being reflective of our ability to
implement our operating policies and influence ESG performance.
Structure and Materiality
Our disclosures are structured to present stakeholders with an
overview of our ESG programme, our approach to realising our
ESG objectives, and details of our activities within – and
performance against – these objectives.
To maintain transparency and comparability of our performance
disclosures over time, we consistently monitor and report against
the ESG metrics recommended by EPRA.
We assess the materiality of ESG issues relevant to our business
by considering their potential impact on our portfolio, our
stakeholders, and our communities. The UN Sustainable
Development Goals to which we have committed support guided
action on issues that we have the opportunity to meaningfully
contribute to, by nature of our business model, purpose, and
mission. Embedding the recommendations of the Task Force on
Climate-Related Financial Disclosures allows us to identify risks
and opportunities associated with external factors, and develop an
informed and strategic approach to their management.
Reporting Frameworks
Our ESG reporting is guided by relevant global reporting
frameworks including the EPRA Sustainability Best Practices
Recommendations (sBPR), and the Recommendations of the
Task Force for Climate-related Financial Disclosures (TCFD).
Having integrated our ESG reporting into our ARA this year, we
have also adopted the recommendations of the International
Integrated Reporting Council (IIRC).
We Became a Signatory to the BBP
Climate Commitment
The BBP Climate Commitment acknowledges
the transformation required across the industry
to deliver net-zero buildings by 2050. It aims to
leverage collaborative and tangible action on
climate change whilst increasing transparency
and accountability, providing an important catalyst
for change within the sector.
Broadening our Board's
ESG expertise
The Board’s commitment to ESG has continued to deepen
with the Board undertaking specific training on ESG during
the fiscal period. The Board receive quarterly ESG Strategy
updates to continue to track progress and assess potential
ESG risks posed to the business. We are also delighted to
announce that as part of the Board’s recognition of the
growing importance of ESG being embedded within the
business and portfolio, the Board has appointed a new
Non-Executive Director with wide-ranging strategic and
practical ESG expertise who will have Board responsibility for
ESG across the business moving forward.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
55
OUR ESG A PPROACH CONTI NU ED
Our approach to ESG
Our unique position as a long-term investor in local communities across the United Kingdom creates invaluable opportunities to leverage
change. We are committed to ensuring that we are responsible neighbours in our communities, supporting and championing local causes and
innovating to address the needs of local people, whilst minimising our impact on the environment. We are passionate about engaging our staff
and occupiers, and maintaining our high standards of governance, to ensure we are an excellent employer and company to do business with.
Our ESG activities are applied through our business model to meet our ESG objectives. Aligned with our corporate strategy, our objectives
are built around four focus areas which reflect the issues that are important to our stakeholders and our business.
Progress against our objectives is measured annually against our ESG targets and external benchmarks, 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 best practice evolves.
Our ESG
activities
Used to inform
and shape
Used to inform
and shape
5
1
External
benchmarks
and
guidance
Are applied through
our business model
Our ESG
targets
4
2
Progress
measured against
Progress
measured against
3
To meet
Our ESG
objectives
Disciplined
capital allocation
Active asset
management
Regeneration
Capital
partnerships
Flexible
balance sheet
Our ESG objectives
Minimising our
environmental impact
Engaging our
team and occupiers
Supporting
our communities
Leading governance
and disclosure
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Our Environmental and Social Targets
In 2018, we set ourselves specific, time-bound environmental and social targets which have served to guide the asset-level action we have
taken to realise our ESG objectives thus far. Having now formalised our pathway to net-zero carbon, we have reviewed our 2018 targets against
our heightened ambitions and developed a holistic pathway to a 1.5-degree future which engages our stakeholders and delivers positive social
impact. Our original 2018 targets have been combined with our new net-zero targets and are presented below. Previous emissions reduction
targets set in 2018 have been superseded by our more ambitious net-zero commitment.
N
Publicly commit to net-zero
carbon (NZC) and set FY20
carbon emissions baseline.
S
N
E
Achieve a 75% response rate to
our occupier satisfaction survey.
Biodiversity plans to be in place
for at least 15% of our assets.
Achieve NZC for all corporate-
related carbon emissions
(Scope 1-3).
85% recycling rate at our
managed properties.
Electric vehicle charging points
installed across all retail
properties with a surface-level
car park.
50% improvement (from a 2020
baseline) in landlord on-site
renewable energy generation.
Building certifications targeted,
and lifecycle carbon assessments
undertaken, for 100% of our new
construction and major
renovation projects.
Key
N
E
S
Net-zero targets
UN SDG aligned
Environmental targets
UN SDG aligned
Social targets
2021
2022
2025
2030
2040
2050
S
Provide a minimum of one work
experience placement per year at
50% of our assets.
Achieve a 90% response rate to
our annual staff wellbeing survey.
All enclosed shopping centres to
participate in our Quiet Hour
Initiative and have a community
engagement plan in place.
50% of NewRiver staff to
participate in our volunteering
programme.
Receive target validation from the
Science-Based Targets Initiative
(SBTi for aligning our net-zero
pathway with a 1.5-degree global
warming trajectory.
100% of waste generated at our
managed properties is diverted
from landfill.
100% of landlord electricity is
procured from renewable
sources.
Achieve a 42% reduction (against
baseline) in carbon emissions
across our corporate activities
and operational real estate, as
required by the SBTi.
N
E
N
E
75% of occupiers transitioned to
renewable energy supplies.
N
N
Achieve NZC for all operational
emissions from the directly
managed areas of our portfolio
(Scope 1-3).
Achieve NZC in terms of
operational and embodied
emissions (Scope 1-3) across our
portfolio, whether space is
directly managed, or managed by
third parties.
E
Over 25% of landlord energy
is generated on-site from
renewable sources.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
57
OUR ESG A PPROACH CONTI NU ED
Minimising our Environmental Impact
Minimising our environmental impact means taking action at the
corporate, portfolio, and asset level. We have policies in place to
guide corporate-level activity which engage our staff on principles
of collective environmental responsibility that can be applied
across our business. Our net-zero pathway and interim targets
guide our initiatives, supported by our asset-level Environmental
Implementation Plans, which allow us to monitor our progress and
accelerate action where required.
Our Centre Teams helped to
“Keep Britain Tidy”
Centre manager, Craig Allen, led a “Great British Spring Clean”
event at Morecambe beach. The Arndale Centre team was
joined by representatives from Morecambe Town Council and
Morecambe RNLI and together, the group of volunteers
collected 15 bags of litter from the beach.
Progress Towards Our Near-Term Environmental Targets (Targets set in 2018)
Target
Target Year FY22 Progress Report
100% of waste generated at our
managed properties is diverted from
landfill
100% of landlord electricity is
procured from renewable sources
85% recycling rate at our managed
properties
Electric vehicle charging points
installed across all retail properties
with a surface-level car park
50% improvement (from a 2020
baseline) in landlord on-site
renewable energy generation
Building certifications targeted, and
lifecycle carbon assessments
undertaken, for 100% of our new
construction and major renovation
projects
2022
We are pleased to have achieved our target of zero waste to landfill by the end
of FY22.
2022
2025
2025
2025
We exceeded our target, having transitioned all landlord electricity supplies
across our portfolio to REGO-backed tariffs in FY20.
Our FY22 recycling rate was 54%, bringing us 64% of the way to achieving
this target.
We are currently 94% of the way to achieving this target, with new contracts
recently agreed to provide a further 120 charging stations across the portfolio.
Our FY22 renewable energy generation unfortunately did not exceed our FY20
generation. During the year, we also sold our St Elli centre which benefits from
PV installations. We continue to explore opportunities for further on-site
renewable energy generation at our assets, and recognise this as a focus area
over the next 3 years.
2025
51%* of our recently completed new construction and major renovation projects
were subject to a lifecycle carbon assessment and achieved a BREEAM Certification.
* by floor area
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Energy and GHG Emissions Performance
On Earth Day, 22nd April 2022, we became a signatory to the
Better Buildings Partnership’s Climate Commitment, joining other
responsible organisations across the industry in pursuing a 1.5°C
future for our planet. In becoming a signatory, we have committed
to publishing our net-zero carbon pathway and delivery plan,
disclosing the energy performance of our assets, and developing
a comprehensive climate resilience strategy. The initiative has an
overreaching objective of delivering net-zero buildings by 2050,
incorporating both operational and embodied carbon. The scope
of the commitment makes it one of the most ambitious
commitments that property owners can adopt.
Our Scope 1 & 2 emissions reduction targets have been approved
by the Science Based Targets Initiative (SBTi). In seeking the
approval of our targets, we have re-set our emissions profile to a
baseline year of 2020, having previously reported against a
baseline of 2018. This change has been made, together with a
recalculation of our FY21 emissions to reflect our sale of Hawthorn
Leisure, in order to follow best practice and maintain our high
standards of transparency in reporting.
The key milestones on our journey to becoming a net-zero
business are:
• 2025: all corporate emissions (Scopes 1-3) will be brought to
net-zero
• 2030: we will achieve a 42% reduction in absolute emissions
from our 2020 baseline
• 2040: all emissions arising from the landlord-controlled areas
of our portfolio (Scopes 1-3) will be brought to net-zero
• 2050: all emissions arising from the tenant-controlled areas
of our portfolio, and from our development activities, will be
brought to net-zero, making us a fully net-zero business.
You can read more about our commitment and delivery strategy in
our Pathway to Net-Zero.
In line with the Companies Act 2006 (Strategic & Directors’ Reports)
Regulations 2013, we disclose our annual global GHG emissions in
terms of our total energy use, intensity ratio, and a narrative on the
energy management and efficiency measures we implement.
The table below presents our total energy use, including electricity
on both a location and market basis. It also contains our carbon
footprint across Scope 1, 2 and 3 emissions, as well as an appropriate
carbon intensity metric. The performance data presented below
relates to the 2022 financial year, 1st April 2021 – 31st March 2022.
Our FY22 SECR disclosures
FY22
FY21
% change
Greenhouse Gas Emissions by Scope (tCO2e)
Scope 1 Emissions from combustion of gas & other fuels
657.46
782.91
-16%
Scope 2 Location-based emissions from electricity purchased for own use
2,473.61
2,485.07
Scope 2 Market-based emissions from electricity purchased for own use
0
0
Scope 3 Emissions from purchased goods & services, fuel & energy-related activities,
waste, business travel & employee commuting, and downstream leased assets
26,356.75
25,671.65
Total Scope 1, 2 & 3 location-based emissions
Total Scope 1, 2 & 3 market-based emissions
Intensity Scope 1 & 2 (location-based) tCO2e/m2
Energy Consumption (kWh)
29,487.82
28,939.63
27,014.21
26,454.56
0.014
0.014
Energy use from the combustion of gas and other fuels
3,604,182
4,259,424
Energy use from consumption of electricity purchased for own use
11,649,834
10,664,200
0%
0%
3%
2%
2%
0%
-15%
9%
Energy use from business travel
110,108
24,117
357%
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
59
OUR ESG A PPROACH CONTI NU ED
Performance Highlights
•
16% reduction in Scope 1 emissions from the combustion of
gas & other fuels
• 57% reduction in total scope 1, 2 & 3 emissions from our
baseline year of FY20
• 383,796 kWh of renewable electricity generated on-site at
our assets
• Scope 1 & 2 emissions reduction targets validated by the SBTi
Energy Management and Efficiency
Measures
Last year, we developed asset-level Environmental & Social
Implementation Plans which are now in place across 100% of our
managed shopping centres. The plans specify four mandatory
energy management and efficiency measures which must be
reviewed, on a quarterly basis, for implementation at all centres
where the measure is relevant and feasible. These measures are:
• Routine reviews of the installation of smart meters (AMR) for
•
•
all relevant utility types
Installation of LEDs in all landlord-controlled areas
Implementing a Building Management System optimisation
programme
• Reviewing plant equipment run times and controls at least
quarterly and ensuring optimum settings are in place for day/
night, seasons and occupancy
We have increased AMR coverage (electricity and gas) across our
portfolio to 77% over the course of FY22. We have also begun the
process of switching our water meters to AMRs.
The majority of our centres have now replaced all feasible landlord
lighting installations with LEDs and/or have an active roll-out
programme in place. At centres that benefit from passenger lifts,
energy efficient kinetic motors are being installed where possible.
The ongoing reviews of plant equipment run times and controls
has led to, for example, monitoring of car park usage at Horsefair
Shopping Centre and reducing hours of operation to eliminate
unnecessary electricity consumption after required opening hours.
Our Environmental & Social Implementation Plans also review
opportunities to install electric vehicle charging points across our
portfolio. We are pleased to have recently agreed contracts which
will provide 120 new charging stations in total, representing an
11-fold increase on the capacity of our current installations. We
estimate that this project has the potential to save up to 4,406
tonnes of CO2e per year1, enough to power 1,453 homes across
the UK2!
Data Notes
Reporting
Period
Boundary
Reporting
Method
Emissions
Factor
Scope 3
emissions
Intensity Level
Data
Restatement
1. Based on the savings reported by the providers of our existing installations
2. Based on national statistics provided by the Department for Business, Energy, and Industrial Strategy
60
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
Aligned with our financial reporting, our GHG
emissions relate to the financial year ended 31 March
2022. Emission data from the financial year ended 31
March 2021 has also been included.
We have used the operational control method to
outline our carbon footprint boundary. Occupiers’
energy usage and emissions are not included in our
Scope 1 and 2 reporting boundary, but are reported
in Scope 3 as downstream leased assets. Where we
hold more than a 25% ownership stake in a real
asset, we report on 100% of its associated emissions.
Where we hold less than a 25% stake, we report
proportionately in accordance with our share of
ownership, as we consider this approach to be
consistent with our operational control reporting
boundary.
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 FY22
reporting are from the Defra greenhouse gas
reporting tool 2021 and the factors and conversions
used for FY21 reporting are from Defra’s 2020
reporting tool.
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.
For intensity level reporting, we have used the
operationally controlled (landlord) area of our
portfolio as the denominator. Vacant units have been
excluded in the intensity measure due to the
year-on-year variability. In any event, vacant units
represent a de minimis percentage of our total
GHG emissions.
In our FY21 annual report, energy consumption and
emissions associated with the Hawthorn pub business
were included in our disclosures. Following the sale of
the business, we recalculated our FY21 emissions to
exclude those arising from HL business activities, to
ensure continued comparability and transparency of
our emissions performance reporting. This process has
been followed for all FY21 environmental disclosures
made within this report. For the avoidance of doubt,
our FY22 disclosures also exclude any emissions
arising from the HL business that fell within the relevant
reporting period.
STRATEGIC REPORT Our Corporate Environmental Performance Measures
EPRA Code
Performance
Measure
Unit(s) of
measure
% of data
estimation
Absolute Performance (Abs)
FY22
FY21
% Change
Elec-Abs
Electricity consumption1 Annual kWh
0%
33,864
32,992
3%
DH&C-Abs
District heating &
cooling
Annual kWh
Our corporate offices are not connected to district heating & cooling
Fuels-Abs
Fuel consumption1
Annual kWh
See footnote
42,814
26,706
Energy-Int
Energy intensity
kWhelec-eq/m2/yr
GHG-Dir-Abs
Scope 1 emissions
GHG-Indir-Abs
Scope 2 emissions
(location-based)
Kg CO2e
Kg CO2e
Scope 2 emissions
(market-based)
Kg CO2e
Scope 3 emissions4
Tonnes CO2e
0%
0%
See data
notes on
page 60
77
5,043
7,109
0
587.6
622
4,910
6,066
0
317
60%
24%
3%
17%
0%
85%
GHG-Int
Scope 1 and 2
emissions
Kg CO2e/ m2/ year
See footnote
14.5
13.12
11%
Water-Abs
Water consumption1
Annual m3
Water-Int
Water intensity
M3 consumption/ m2
Waste
Kg total waste1
Kg
Recycling rate
% of total waste
recycled
0%
324
0.39
2,176
45%
65
0.082
-
-
398%
398%3
-
-
1. Carbonxgen prepares precise apportionment of electricity charges for our head office, whilst gas and water are apportioned based on whole building data. In the
above disclosures, we have apportioned gas and water consumption based on the percentage of direct NewRiver usage of the total electricity consumed on site,
which in FY22 was 5%. Waste data has been apportioned based on floor area.
2. FY21 intensity metrics have been re-stated due to a floor area denominator correction.
3. Water consumption at our head office has proportionately increased significantly more than energy consumption. As the water data is prepared for the building
as a whole and apportioned to us, we are working with the property managers to understand the considerable increase.
4. Corporate Scope 3 emissions include emissions arising from waste generation and water use at our head office, our purchased goods & services, business travel
and employee commuting
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
61
OUR ESG A PPROACH CONTI NU ED
Our Portfolio Environmental Performance Measures
EPRA Code Performance
Measure
Unit(s) of
measure
% of data
estimation
Absolute Performance (Abs)
Like-for-like Performance (LfL)
FY22
FY21
FY22
FY21
% Change
Elec-Abs,
Elec-LfL
Electricity
consumption
Annual MWh
15%
11,615
10,631
11,365
9,911
15%
DH&C-Abs &
LfL
District heating &
cooling
Annual MWh
None of our properties were connected to or benefitted from district heating &
cooling
Fuels-
Abs,Fuels-LfL
Fuel consumption
Annual MWh
1%
3,561
4,233
3,554
4,087
-13%
Energy-Int
Energy intensity
kWhelec-eq/
m2/yr
64
57
63
54
17%
GHG-Dir-Abs
Scope 1 emissions
Tonnes CO2e
652
778
651
Scope 2 emissions
(location-based)
Tonnes CO2e
2,466
2,479
2,413
751
2,311
GHG-Indir-
Abs
Scope 2 emissions
(market-based)
Tonnes CO2e
0
0
0
0
Scope 3 emissions Tonnes CO2e
25,769
25,355
23,991
23,798
GHG-Int
Scope 1 and 2
emissions
Tonnes CO2e/
m2/ year
0.014
0.014
0.018
0.018
-13%
4%
0%
1%
0%
Water-Abs,
Water-LfL
Water consumption Annual m3
39%
57,177
66,019
56,743
65,868
-14%
Water-Int
Water intensity
Waste-Abs,
Waste-LfL
Cert-ToT
Tonnes total waste
Tonnes diverted
from landfill
Tonnes waste to
energy
Tonnes recycling
Type and number
of sustainably
certified assets
m3
consumption/
m2
Tonnes
Total number
by certification/
rating/
labelling
scheme
0.40
0.46
0.41
0.48
-14%
0%
0%
0%
0%
2,546
2,031
2,483
2,546
2,022
2,483
1,932
1,930
29%
29%
1,108
764
1,064
807
32%
1,372
921
1,354
1,120
21%
Please see page 64 for a detailed breakdown of this performance measure.
62
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT
1. Data coverage: the figures reported against each performance measure represent 100% of the assets within our Operational Control reporting boundary.
2. Normalisation: Intensity indicators for energy, water and waste are based on relevant floor area.
3. Absolute and like-for-like asset-level performance measures include only landlord-procured energy/water. NewRiver does not procure utilities for sub-metered
tenant consumption.
4. “Estimation” refers to filling invoice gaps, not to whether invoices are based on “estimated” or “actual” readings. Although a vast majority of the data presented is
based on actual consumption, in the instances where there were gaps in electricity consumption, the average of the months where we had data was applied to the
missing months. Where data covered only part of a month, a pro-rata method using known consumption was applied. With regards to natural gas, due to the
significant change of consumption throughout the year, any unknown consumption was estimated using the average trend for the supplies with actual data. Water
data estimations are based on average intensity across actual FY22 data and cross-referenced with the previous years' data.
5. FY21 intensity metrics have been restated due to an improvement in the accuracy of the floor area denominator used.
6. As our portfolio is now comprised of entirely retail properties within the UK only, we no longer undertake segmental analysis.
7. Our environmental and social performance data has been collated and checked by Cushman & Wakefield.
A Review of Our Performance
In FY22, we saw a 16% decrease in our absolute gas consumption across our portfolio, equating to a CO2e saving of 126 tonnes. These
savings can partly be attributed to the implementation of our initiative to review plant equipment run times and controls at least quarterly,
ensuring optimum settings are in place to reflect space usage, whilst continuing our roll-out of AMRs. We also switched our gas supplies to
a carbon offset tariff8, to support with further reducing our environmental impact ahead of our target to bring these emissions to net-zero.
Alongside this, we saw an increase in our electricity usage, contributing to an overall increase in total energy consumption. Like-for-like
electricity consumption over the course of the year increased by 15%; an increase we had anticipated with the lifting of lockdown
restrictions. Combined with our corporate emissions performance, our overall Scope 1 & 2 emissions have decreased by 4% by
comparison to last year.
Over the course of the year, our solar PV installations generated 383,796 kWh of electricity on-site, representing 3.2% of total landlord
electricity consumption. We continue to explore opportunities for further on-site renewable energy generation at our assets, and have a target
to increase this proportion to 25% by 2050.
Our total (corporate & portfolio) Scope 3 emissions increased by 3% in FY22, largely driven by the gradual return to “normal” over the
course of the year. We saw a significant increase in our business travel, with employees now able to travel and visit site again, alongside
an expected increase in utilities consumption at our head office. During FY23, we look forward to moving to a new net-zero head office
location at 80 Charlotte Street and developing our employee engagement processes to understand opportunities to reduce emissions
associated with employee commuting and business travel. In doing so, we will also seek to understand the impact of our shift to a flexible
working model.
Electricity Consumption
(Portfolio)
Gas Consumption
(Portfolio)
Total Portfolio Scope 1 & 2
GHG Emissions
(absolute)
Total Portfolio Scope 3 GHG
Emissions Performance
(absolute)
10,631
11,615
9%
SCOPE 1
778
FY21
652
FY22
-16%
SCOPE 2
2,479
2,466
25,355
2%
25,769
3,561
4,233
-0.5%
-16%
FY21
FY22
FY21
FY22
FY21
FY22
% change
% change
% change
8. For the avoidance of doubt, these offsets are not reflected in our emissions calculations
FY21
FY22
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
63
OUR ESG A PPROACH CONTI NU ED
Certifications & Energy Performance Certificates
Since October 2008, an Energy Performance Certificate (EPC) has been legally required when a building is sold, rented, or constructed. A
certificate is valid for a period of 10 years; on expiry there is no legal requirement to replace an EPC unless the property is to be sold or let.
Under the EPC regulations, a lease renewal is not required to have an EPC in place. In England & Wales, it has been a legal requirement
since April 2018 that any domestic or non-domestic property, where a valid EPC exists, must have an asset rating of “E” or above to be let
to a new or renewed tenancy. For domestic properties, these regulations were extended from April 2020, to cover all existing tenancies.
For non-domestic properties, the date at which the regulations will be extended is April 2023.
EPC certificates by Region and Asset Rating
In the below table, the number of certificates is presented within each legislative region (England & Wales, Ireland, and Scotland) by asset
rating, A+ through to G. We have also disclosed the number of units with no/expired EPCs to provide clarity on certification coverage
across the portfolio. We are pleased to have increased EPC coverage to 63% since 31st March 2021 (up from 54%). This excludes recently
sold assets for which we acquired new EPCs for the purposes of sale.
Region
A+
England &
Wales
Northern
Ireland
Scotland
Total
0
0
0
0
A
3
0
0
3
B
67
1
0
C
217
13
10
D
211
11
15
68
240
237
E
123
3
36
162
F
24
0
14
38
G
21
4
24
49
No/ Expired
EPC
366
38
71
475
The below chart shows NewRiver EPCs for the England & Wales retail portfolio in comparison to the national EPC register, comparing
against other non-domestic certificates. Our data shows that the NewRiver portfolio out-performs the EPC profile of the national database,
having a higher proportion of certificates providing a minimum rating of “C”, and a lower proportion of certificates rated “F” or “G”. Our
programme of EPC assessments and Minimum Energy Efficiency Standards (MEES) risk reduction has helped to ensure we can continue
to let properties lawfully. Through continued management of non-compliant and expiring EPCs in accordance with the MEES, the
NewRiver portfolio is well defended against potential compliance-related risks to value.
EPC Performance
35
30
25
20
15
10
5
0
National database*
NewRiver Portfolio
* National EPC database
figures correct as
of March 2021
A+
A
B
C
D
E
F
G
Water Performance Summary
14% decrease in like-for-like water consumption across our portfolio during FY22
FY22 Performance Highlights
•
• Water efficiency measures installed across various sites, including storm water re-use in connection with irrigation
• We have begun switching our water meters to AMRs
• Our energy broker, who manages our water meters, has upgraded their water validation systems to improve the data we receive on
our consumption
64
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Narrative on FY22 Performance
In FY22, we saw a 14% decrease in like-for-like water consumption
across our portfolio, which can partly be attributed to recent
efficiency measures implemented. For example, The Ridings
Centre has fitted Ozygen units to its public washrooms, saving 2.4
million litres of water per year, as well as a storm water collection
system to its roof for use within the centre’s garden. The Cornmill
Centre has also installed water butts to various points on its roof,
again for irrigation purposes. We also have various water
efficiency initiatives currently in motion, such as fitting sensor taps
to our public washrooms at the Hillstreet Centre.
Our Environmental & Social Implementation Plans require that
opportunities to install leak detection systems, reuse stormwater
and/or grey water, and to install low-flow fixtures are reviewed on
a quarterly basis. This ensures that there is an ongoing process of
assessing the feasibility of initiatives that will contribute to further
reducing our water consumption in future.
Waste Performance Summary
YoY Total Water
Consumption graph
comparing FY21 and FY22
YoY Like-for-like Water
Consumption graph
comparing FY21 and FY22
66,019m3
57,177m3
65,868m3
56,743m3
-13%
-14%
FY21
FY22
FY21
FY22
% change
% change
FY22 Performance Highlights
• We achieved our target to divert 100% of our waste from landfill
• Our recycling rate was 54%, bringing us 64% of the way to our 2025 target
• Our Arndale Centre extended their waste management practices to their local area, taking part in a community beach clean as part of
the “Great British Spring Clean”
• The Prospect Centre increased its recycling rate by 9% over the course of 2021, saving over 125,000 m3 of CO2e, over 400,000 kWh of
energy, over 1.3 million litres of water, and 847 trees1
Disposal route
Waste Type
0.2%
44%
37%
1%
17%
Recycling
Composting
Materials Recovery Facility
(MRF)
Incineration with
energy recovery
Incineration without
energy recovery
Landfill (with or without
energy recovery)
Other
12%
1%
6%
Dry Mixed Recycling
Food Waste & Organic Waste
55%
General Waste
24%
2%
0.4%
Hazardous Waste
Recycling (Cans/ Plastics)
Recycling (Glass)
Recycling (Paper/Cardboard)
Other
Narrative on FY22 Performance
In FY22, the waste generated across our like-for-like portfolio increased by 29%, largely attributable to the re-opening of our occupiers’
stores following successive periods of closure throughout FY21. Over the year, we continued to make good progress against our
short-term waste management targets, and are pleased to have now achieved our 2022 target of diverting 100% of our managed waste
from landfill. We were also able to recycle over half of all waste generated.
1. Savings based on reports provided by our waste contractor
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
65
OUR ESG A PPROACH CONTI NU ED
Maximising our Social Impact
Maximising our social impact means leveraging every opportunity
to generate meaningful social value in our workplace and in our
communities. We recognise that social value comes in many forms
and believe that action should respond to need; therefore, we take
careful consideration of the most pertinent issues to our staff, our
occupiers, and the thousands of visitors to our centres across the
country.
We Supported Local Veterans in
our Community
The Hildreds Centre won a Corporate Social
Responsibility award for designing and building a
sculpture to commemorate the 75th anniversary of
VE and VJ day last year, and for supporting the Royal
British Legion in raising both awareness for the
organisation and funds for local veterans.
Progress Towards Our Near-Term Social Targets
Target
Target Year FY22 Progress Report
Provide a minimum of one work
experience placement per year at
50% of our assets
2022
Achieve a 90% response rate to our
annual staff wellbeing survey
All enclosed shopping centres to
participate in our Quiet Hour
Initiative and have a community
engagement plan in place
2022
2022
50% of NewRiver staff to participate
in our volunteering programme
2022
Achieve a 75% response rate to our
occupier satisfaction survey
2025
Biodiversity plans to be in place for
at least 15% of our assets
2025
We have developed community engagement plans for all of our managed centres,
within which the offering of work experience is a key component. However, our
progress towards this target was unfortunately impeded by COVID-19 restrictions
and we found that many of our centres were unable to meet the supervision
requirements of providing work experience via school engagement programmes.
In response, we have this year reviewed our school engagement and careers
support strategy, to ensure our efforts are focused where they will have most value
for recipients. To this end, NewRiver has become a member of the Academy of Real
Assets, having so far contributed to the Academy book and expressed our interest
in providing work experience placements. We will develop a new, measurable
engagement target as we learn more about the various opportunities that exist
to support the Academy’s important mission.
We are pleased to have exceeded our target, having achieved a 100% response
rate to our FY22 staff wellbeing survey.
We have achieved this target with the introduction of asset-level Environmental &
Social Implementation Plans across our portfolio in FY21. Whilst some centres
have experienced COVID-19 disruptions to these initiatives, all centres will
resume Quiet Hour before the end of the year, and have an action plan in place
for ongoing community engagement activities.
In FY22, NewRiver staff provided 132 hours of volunteer support to the Trussell
Trust, with volunteering sessions typically lasting around five hours each. We
have therefore exceeded our target, delivering a total of 26.4 volunteering
sessions, equating to a 51% staff participation rate.
Based on our most recent occupier survey, we are currently at the halfway point
to achieving this target. Our centre managers play a pivotal role in our ability to
collect a representative sample of occupier views, and we have sought their
feedback on our current research collection processes, which we will utilise to
help increase our response rate. We will also be introducing a charity donation
incentive to encourage greater levels of participation.
Pre-defined biodiversity initiatives are reviewed on a quarterly basis across all
centres as part of our Environmental & Social Implementation plans. We have
also commissioned a specialist ecology survey of one of our centres, the Avenue,
to assess both biodiversity enhancement opportunities and landscaping
improvements. Considering only externally produced biodiversity plans, our
current progress against our target is 20%.
66
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Engaging our Team
Our approach to engaging our team is centred around our
aspiration to listen. We seek to understand the varying priorities of
our team across all levels and departments of our business to
enable the development of policy and process solutions which
respond to staff needs, support wellbeing, and provide a positive
cultural environment within which colleagues envisage continuing
their career development in the long term. We believe the
longstanding nature of our low employee turnover rate is
testament to the effectiveness of this approach.
The Board has taken the decisive step to further strengthen this
commitment by undertaking specific ESG training during the year
and appointing a new Non-Executive Director to the Board as of
30 May 2022 who will have specific responsibility for ESG across
the business. Members of senior management also have specific
ESG-linked performance goals connected to their remuneration.
i n g
r
n it o
o
M
n
tio
a
t
n
e
m
e
l
p
m
I
S
t
a
ff Training
Needs A
ss
e
s
s
m
e
n
t
A
c
t
i
o
n
P
l
a
n
nin
g
m ent
p
e l o
v
Pol i c y D e
Monitoring and needs assessment take place both through the
employee appraisal process and anonymously via our annual staff
survey. Our staff survey is developed in partnership with, and
responses are independently analysed by, our ESG consultants.
Questions are designed to gain insights into staff opinion and
identify beneficial actions in respect of NewRiver's policies,
procedures and cultural norms in the areas of: leadership team/
management personnel; company culture; corporate social
responsibility; employee health and wellbeing; personal growth
opportunities; team dynamics; and the benefits and recognition
scheme.
Insights from our
FY22 survey:
>80% of NewRiver staff identify
that they:
• Resonate with the company values
• Frequently receive useful career and
personal development feedback,
recognition and encouragement from
their line managers
• Are confident in our zero-tolerance
approach to discrimination
• Feel that we are flexible towards family
commitments
• Are satisfied with the information we
provide on mental health
• Consider their mood at work to be
generally positive
• Find it easy to concentrate in the office
environment provided
• Feel supported by their team members
and enjoy working with them
• Are challenged and excited by the work
they do at NewRiver
Actions identified by our FY22 survey:
• Utilise key findings from the survey to further educate staff
on the wellness benefits of our flexible working policy and
ensure full cultural acceptance of our new ways of
working, to empower all staff to exercise the policy in a
way that reflects their personal circumstances
• Consider opportunities to broaden our staff training
programme to include soft skills training on topics such as
communication, presentation and listening skills
• Consider the feasibility of introducing a "focus time" policy,
allocating dedicated focus time in all staff calendars,
during which internal meetings would be discouraged.
This is identified as a potential action to support
employees’ preferred ways of working
• Utilise survey feedback to inform the design of our new
office space. Employees have communicated that
breakout spaces which encourage social interaction are
particularly important to them
Overall satisfaction score: 71/100
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
67
OUR ESG A PPROACH CONTI NU ED
Our Commitment to SDG 5:
Gender Equality
Our Employee Satisfaction &
Wellbeing Survey returned a
Satisfaction Score of 71
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 continue to strive to
provide the most flexible employment policies to enable all of our
employees to combine a fulfilling career with a family-orientated
lifestyle.
This year, we have taken the decision to publish our gender pay
gap information. 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 gap, but in the spirit
of our commitment to gender equality, we are pleased to provide
our first disclosure below.
Responses to our FY22 employee survey –
independently analysed by Cushman & Wakefield
– were overwhelmingly positive; with staff
identifying that they feel valued by NewRiver and
that our people, policies, culture, and values serve
to support this feeling.
Our team volunteered
to help end Food Poverty
30.6%
Mean gender pay gap
33.2%
Median gender pay gap
In interpreting this gender pay gap disclosure, it is important to
note that this is not a calculation of equal pay for equal work. The
gender pay gap is the difference between the average annual
salaries of men and women across all levels of the company,
excluding any bonuses or other benefits received. The
comparison is drawn across all departments of the business,
spanning all levels of seniority. We adopt a strict equal pay for
equal work policy, ensuring that all remuneration is managed in
compliance with equality legislation.
Our commitment to diversity and inclusion also extends beyond
our business, to the wider real estate sector. During FY22, we
formalised our membership of the Academy of Real Assets, whose
mission is to increase accessibility and diversity through
connecting young talent that might otherwise not have access to
the world of real estate. We recognise that the longstanding issue
of female underrepresentation within the industry persists, despite
recent progress, and this will therefore remain to be a key driver of
our ongoing support of the Academy.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
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. As the
longer-term impacts of the pandemic unfold together
with the impact of higher inflation, more people than
ever are expected to need a food bank. We continued
our support for the Trussell Trust throughout FY22,
through donations and volunteering time, with the
total value of this support amounting to £70,621. See
page 71 for more information on how we’ve calculated
this.
We became a Member of the
Academy of Real Assets
The Academy of Real Assets has a mission to engage
students from some of the most underserved UK state
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STRATEGIC REPORT Employee Social Performance Measures
EPRA Code
Diversity-Emp
Performance
Measure
Employee gender
diversity
Unit(s) of Measure
Boundary
FY211
FY22
NewRiver Board
Percentage of employees,
Board diversity
Percentage of employees,
All employee gender
diversity
29% female/ 71%
male
49% female/ 51%
male
29% Female
71% Male
49 % Female
51 % male
—
Employee racial diversity Percentage of employees,
All employee racial
diversity
Diversity-Pay
Gender pay ratio
Emp-Training
Emp-Dev
Emp-Turnover
—
H&S-Emp
—
Ratio of gender pay,
mean/median
Average hours/employee
Total £s invested
Average hours/ employee
Percentage of employees
Employee training and
development
Employee training,
subscriptions, surveys,
and online platforms
Employee health &
safety training
Employee performance
appraisals
Total number of new
hires
Total number of leavers Total number
Rate of new hires
Rate of employee
turnover
Temporary staff
Percentage
Percentage
Total number
Percentage of employees
who are contractors or
temporary staff
Per 100,000 hours worked
Per 100,000 hours worked
Days per employee
Total number
Injury rate
Lost day rate
Absentee rate
Fatalities
Instances of non-
compliance with labour
standards
Total number
—
67% White/ 8%
Asian/ 2% mixed/
2% MOTH/
remainder
undisclosed.
—2 30.61% Mean/ 33%
Median
23
18
NewRiver head
office employees
£247,000
£210,110
—
100%
26
13
18%
9%
—
0
0
0
0
0
0
100%
5
7
10%
13%
0%
0
0
0
0
0
1. FY21 figures include the employees of Hawthorn Leisure
2. 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, therefore this did not form part of our disclosures last year. We have however voluntarily disclosed this information for FY22 and intend to continue to do
so going forward
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
69
OUR ESG A PPROACH CONTI NU ED
Insights from our
FY22 occupier survey:
86% of retailers agree that their centre
manager is easily contactable,
responsive, and that general
communication is timely and effective.
67% of respondents rated their general
satisfaction as 8/10 or higher, with 26%
providing a rating of 10/10.
• Most of our occupiers are satisfied with
the various community events we host
throughout the year, as well as the
initiatives we implement to support the
elderly and people with disabilities
• 89% of respondents are satisfied with the
management of cleaning and waste in
common areas
• Most of our occupiers are satisfied with
the sustainability initiatives we implement
at our centres
• 82% of retailers agree that improving the
sustainability performance of their
business is important, with over 64%
rating it as “very important”
Actions identified by our FY22 survey:
• 60% of retailers would be interested to hear more from us
on the overall sustainability performance of their individual
centre. With improved occupier data visibility this year and
the introduction of our Environmental & Social
Implementation Plans, we are currently considering the
best format for introducing sustainability performance
reporting directly to our occupiers.
• Our retailers advised us that they would welcome more
opportunities to charge electric vehicles, and we are
pleased to have now secured the installation of 125 new
charging stations across our portfolio.
• We also received some suggestions from our occupiers as
to appropriate new uses to introduce at our centres. We
ensure our assets provide a mix of convenience, value
and services for customers’ everyday needs, whilst also
using space to support and raise awareness of local
charities. The feedback we receive through our occupier
survey is invaluable to us in being able to achieve and
maintain this position.
Engaging our Occupiers
Occupier satisfaction is a core priority of our business; as such, we
undertake routine surveys to gain insight into occupier opinions
on material topics such as the service-mindedness of our centre
management teams and our sustainability programme.
The opportunity to respond to our FY22 survey was offered to
100% of our occupiers, and we received a total of 415 responses.
Please see “Progress Towards Our Near-Term Social Targets” for
information on how we intend to improve our response rate.
We Received Valuable Feedback
through our Occupier Satisfaction
Survey
Over two thirds of the respondents to our occupier
survey rated their overall satisfaction as 8/10 or
higher, and over a quarter awarded us a rating of
10/10. We learnt that more than 80% of our occupiers
consider it important to improve their sustainability
performance, and we are hopeful about the
collaboration opportunities this presents.
Working with our Occupiers to
enhance how we capture
Energy Consumption
Through our proactive centre management teams,
we have been successful in collecting electricity data
for circa 40% of the occupied space across our
managed shopping centres, and gas data for almost
50%.* The collection of this data has significantly
increased our understanding of our assets' energy
usage, and in turn, improved the accuracy of our
emissions reporting. We have also greatly improved
our visibility of occupier-controlled gas supplies
across our portfolio, which we currently understand to
cover in the region of 15% of the lettable floor area.
We continue to explore options for further increasing
the reliability of this data through, for example, formal
meter surveys of our assets.
* Based only on assets where centre teams are in place. Percentage of
gas data coverage is higher due to lower incidence of gas consumption
across the portfolio
70
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Supporting our Communities
Supporting impactful local causes through our position in our
communities has always been central to our culture and strategy
of creating shared value for our stakeholders.
This year, we have updated our volunteering policy to provide
NewRiver-funded time for our staff to support causes which matter
most to them, and to share team bonding opportunities in doing so.
The Trussell Trust
Staff are able to participate in monthly volunteering
opportunities with our corporate charity partner, the
Trussell Trust, or elect to utilise their gifted
volunteering time to support any cause that’s
particularly close to their hearts. In FY22, our
support for the Trussell Trust provided:
4.5 tonnes
of food donations, the equivalent of 59,300 portions or £8,900
worth of pasta, enough dinners for
40 families of 4
for a whole year!
£58,117
of direct monetary donations
224 hours
of volunteered support, with a total value of £3,604*
We also showed our support for the Trussell Trust via a social
media campaign and received the following impact statement
from their team:
“Every engagement is a chance to
build support to our fight against
hunger in the UK, so we are
especially grateful for the 687 social
media engagements the NewRiver
team generated and we’d welcome
opportunities to partner with them in
the future.”
CEO, Allan Lockhart and Head of Asset Management & ESG,
Emma Mackenzie visiting one of the Trussell Trust's Food Banks
* Based on the national TOMs Framework proxy value for voluntary hours donated to support VCSEs (excluding expert business advice) of £16.09 per hour
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
71
OUR ESG A PPROACH CONTI NU ED
Asset Social Performance Measures
EPRA Code
Performance Measure
Unit(s) of Measure Boundary
FY21
FY22
H&S-Asset
Asset health and safety assessments
Percentage of assets
100%
100%
H&S-Comp
Asset health and safety compliance
Number of incidents in
reporting year
Development and major refurbishment project
health and safety compliance
Number of incidents
over past 3 years
Managed Assets
0
-
0
0
Comty-Eng
Community engagement, impact assessments
and development programmes
Percentage of assets
100%
100%
At our Centres
1,978
hours spent by on-site staff supporting community initiatives
£76,744
Monetary donations raised by aggregate charity fundraising
activities
295
social, community or charitable initiatives supported
Our Centres brought Festive Cheer
to our Communities
“When travelling to work over the festive season early
in the morning, it was lovely to see all of the
decorations hung up in the Forum. It made me feel
magical and got me excited to spend the Christmas
period with my family. I have recently been struggling
with my mental health due to work, so hearing the
Christmas music in the background and seeing all the
wonderful decorations made me feel happier and
made the rest of my day seem less daunting.” –
Feedback collected via our customer survey at the
Forum Shopping Centre, Wallsend.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT Our Governance of Sustainability and Climate-Related Matters
Our purpose is to buy, manage and develop retail assets across the UK which provide essential goods and services, supporting the
development of thriving communities.
Our Board recognises our responsibility to ensure our portfolio can weather the physical and transitional risks created by a changing
climate to ensure the long-term resilience of our business and the returns we achieve for our investors, as well as the all-important
communities we serve.
Governance Performance Measures
EPRA
Code
Performance
Measure
Unit(s) of Measure
FY21
FY22
Gov-Board Composition of the highest
governance body
Number of executive board
members
Number of independent/
non-executive board members
2
4
Average tenure on the governance
body
3.8
Number of independent/
non-executive board members
with competencies relating to
environmental and social impacts
2
2
5
4.1
2
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
Board oversight of code of
conduct
Narrative on process
Due diligence of partner
organisations
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.
Please refer to page 100 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 in which
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.
The Company has a Code of Conduct which is included in the staff
handbook. Non-compliance with the Code would be a staff disciplinary
matter. The Board, through its Audit Committee, has oversight of
non-compliance. The Company also has a whistleblowing policy and
process which is regularly reviewed by the Audit Committee, giving
consideration to its effectiveness. There have been no instances of
non-compliance with the Company's Code of Conduct.
The Company has an on-boarding process for partner organisations and
suppliers, including a Supplier Code of Conduct. The Company also has a
Modern Slavery policy which all organisations we do business with are
required to confirm their agreement to as part of the on-boarding process.
Anti-corruption measures
Narrative on process
The Company has an Anti-bribery and anti-corruption policy. As part of this
policy there is a gifts and hospitality approval process and register.
Fines and settlements in
connection with non-
compliance with
environmental, anti-bribery/
corruption, or other
ESG-related regulation
Total GBP of fines in past three
years, type of non-compliance
£0, no incidences of non-
compliance
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
73
OUR ESG A PPROACH CONTI NU ED
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.
NewRiver is committed to embedding the recommendations of the
Financial Stability Board’s Task Force on Climate-related Financial
Disclosures (TCFD) within our approach to climate-related risk
management. This disclosure aims to present a transparent
account of our processes designed to support our journey
towards a low-carbon business model, structured around the
TCFD’s four disclosure pillars: Governance, Strategy, Risk
Management, and Metrics and Targets.
Our 2022 report marks our fourth consecutive year reporting
consistently with the TCFD's recommendations. We continue to
develop our capabilities and explore new methods and technologies
to support our response to emerging climate-related risks. Two
current focus areas include the identification of a suitable portfolio-
wide approach to scenario analysis, and deepening our
understanding of our Scope 3 emissions to reduce reliance on
estimations, for example in connection with the Scope 3 categories
of Downstream Leased Assets and Employee Commuting. We have
identified the actions we will take in this regard within our Pathway to
Net-Zero which can be found on our website.
Governance
TCFD Governance Recommendation ‘a’: Describe the
board’s oversight of climate-related risks and
opportunities
Our Board takes ultimate responsibility for our business’ resilience
against climate issues and the transition of our portfolio to a
low-carbon operating model. Material climate issues are
considered by the Board when reviewing NewRiver’s strategic
approach to managing associated impacts on the day-to-day
operation of our assets, to preserve our ability to create value for
our investors and communities. Allan Lockhart, our Chief Executive
and senior Board Director, retains overall accountability for our
ESG programme and approach to climate matters.
The Board’s oversight is supported by the ESG Committee, led by
our Head of Asset Management and ESG, Emma Mackenzie. The
Committee meets quarterly to oversee NewRiver’s approach, which
is guided by our Pathway to Net-Zero, whilst reviewing and ensuring
that appropriate resources are mobilised to enable proactivity. The
Committee provides quarterly briefings to the Board, updating its
members on key milestones achieved by the ESG programme.
The Audit Committee adopts an integrated risk management
approach, in which ESG and climate issues are embedded. 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. The Committee regularly evaluates
changes to identified risks and ensures that appropriate controls
are applied in alignment with the Board’s risk appetite.
NEWRIVER BOARD
Oversees Company’s strategic approach to responding to climate
issues across the business and retains overall accountability
AUDIT COMMITTEE
Supports Board oversight of climate-related risk management
processes and monitors emerging and principal risks across
NewRiver’s value chain
EXECUTIVE
COMMITTEE
ASSET MANAGEMENT
ESG
COMMITTEE
Manages Company’s response to climate-related matters through
the implementation of a holistic ESG programme which guides
on-the-ground initiatives that serve to manage and mitigate any
climate-related risks, present or emerging, across the managed portfolio
PROPERTY AND CENTRE MANAGEMENT
Support implementation of initiatives to mitigate climate risks and
monitor asset performance against the metrics and targets
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT The Terms of Reference for each of our Board Committees are
being updated to further clarify the role of the committee members
in considering and managing climate-related risks in the context of
each of the committee’s respective functions. We have also
confirmed the appointment of a new Non-Executive Director to the
Board as of Q1 FY23, who will leverage existing climate-related
capabilities to have specific responsibility for ESG matters across
the business.
TCFD Governance Recommendation ‘b’: Describe
management’s role in assessing and managing
climate-related risks and opportunities.
Senior management is closely involved in our day-to-day
approach to climate issues. Through her dual role 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 all
management activities.
In addition, asset and property management teams interact
with centre management to ensure that policies are implemented
across the portfolio and that performance is tracked through our
ESG programme. Quarterly performance updates are provided to
the Board via the ESG Committee.
Our internal teams, our Board, and our centre managers, have all
received ESG training during the year, delivered by our external
consultants. We invest in these sessions to ensure that management
personnel are kept abreast of the latest developments in
sustainability best practice and evolving climate issues.
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,
potentially impacting certain properties where a heightened
exposure risk exists due to a combination of physical factors.
●
Chronic
Heat Stress
Increased heat waves may manifest, affecting the
operation of managed assets and installed plant
equipment, potentially leading to breakdowns from
increased demand/running time.
Sea-level Rise
Long-term sea-level rise may affect the viability of certain
managed assets which are located in geographies at a
higher risk of exposure to rising sea levels.
Transition
risks and
opportunities
Policy
and legal
Energy efficiency
and carbon
regulations relating
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 operating model.
Technology Costs to transition
managed assets to
low-carbon model
Opportunities exist to implement a range of efficient
technologies designed to improve environmental impact
and efficiency.
Market
Changing
customer
behaviour
Reputation Avoid
stigmatisation of
the real estate
sector based on
ineffective
response to
climate change
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.
Continuously work towards, and monitor our progress
against, our SBTi approved emissions reduction targets.
Key milestones consistent with a 1.5-degree future include
our 2030 and 2050 targets. Ensure that any offsets
purchased as part of our strategy are additional, not
overestimated, lead to permanent removals, do not
support double counting, and do not cause wider social or
environmental harm.
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
75
OUR ESG A PPROACH CONTI NU ED
Strategy
TCFD Strategy Recommendation ‘a’: Describe the
climate-related risks and opportunities the organisation
has identified over the short, medium, and long term.
NewRiver considers climate-related risks, as well as opportunities,
that may arise from both the physical impacts of climate change
and the transition of our managed assets across the UK to a
low-carbon operating model.
We recognise that climate risks and opportunities have the potential
to arise across a range of timeframes. Through our integrated risk
management process, we identify climate-related issues across three
clear time horizons, which inform our ESG and corporate strategies.
TCFD Strategy Recommendation ‘b’: Describe the
impact of climate-related risks and opportunities on
the organisation’s businesses, strategy, and financial
planning.
The Board has a low risk tolerance for principal risks affecting our
business, including climate-related issues. Consistent with this
appetite, our robust ESG programme guides our actions on our
pathway to net-zero and supports our response to climate-related
issues through the implementation of asset-level initiatives
designed to improve efficiency, reduce environmental impact, and
enhance resilience.
We have embedded ESG and climate considerations throughout
our business processes, departments, and functions. Our Pathway
to Net-Zero Carbon communicates our delivery strategy, which
details how we have and will continue to achieve this in the
context of our business model. Please see page 9 of our pathway
to net zero on our website for more information, including
examples of how climate-related risks and opportunities impact
financial planning.
Key risks we have further explored and addressed over the past
18 months include the Policy and Legal, Technology, and
Reputation risks identified in the table above. Actions we have
taken to advance our approach to these risks include:
• Commissioning Net-Zero Asset Plans for a sample of our
portfolio, comprising one shopping centre and one retail park, to
understand the financial materiality of transitioning these assets to
a low-carbon operating model. We continue to work with our
consultants on understanding any extrapolation potential these
studies have to develop a broader picture for our portfolio.
• Significantly improving the coverage of EPC assessments
across our portfolio, as the opportunity arises to undertake
such assessments as lease events occur. To understand the
materiality of works required to remain compliant with
proposed updates to the Minimum Energy Efficiency
Standards, we continue to commission EPC+ reports to quantify
and assess costs associated with various intervention options.
• We have become a signatory to the Better Buildings
Partnership’s Climate Commitment, joining other responsible
organisations across the real estate sector in actively reducing
our emissions to avoid the very worst effects of climate change.
76
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
TCFD Strategy Recommendation ‘c’: Describe the
resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios,
including a 2°C or lower scenario.
Together with developing a strategic response to realising our
net-zero commitments, we continue to evaluate methods of
undertaking detailed climate scenario analysis to deepen our
understanding of asset-level exposure to physical and transition
risks. We have a comprehensive view of the portfolio exposure to
near-term risks through the maintenance of our EPC schedule,
MEES risk management processes, and flood risk register.
Through our continuous efforts to improve occupier data
collection rates, we are also improving our understanding of the
energy usage intensity of our assets, supporting our assessment
of associated transition risks and opportunities.
As part of our evaluation of detailed climate scenario analysis
tools, we have piloted a Climate Value at Risk (CVaR) approach on
two of our assets; one shopping centre and one retail park. We
worked with our sustainability consultants to understand how this
method analyses risk exposure, including its benefits and
limitations. The model assessed risk exposure under three
scenarios: 3-degrees, 2-degrees and 1.5-degrees. Whilst the
studies were helpful to assessing physical risk exposure, which
was found to be relatively low, we continue to explore more
meaningful methods of quantifying the potential financial impact of
collective physical and transition risks, as CVaR in this instance has
not been identified as an appropriate metric for our business.
We took the next step on our
Climate Resilience Journey
Continuing our work on adopting the
recommendations of the TCFD, we have piloted a
Climate Value at Risk approach to scenario analysis.
We worked with our sustainability consultants to
understand how this method analyses risk exposure,
including its benefits and limitations. We will explore
further scenario analysis solutions over the next
six months to identify the most meaningful method for
adoption by our business.
STRATEGIC REPORT Risk Management
TCFD Risk Management Recommendation ‘a’: Describe
the organisation’s processes for identifying and
assessing climate-related risks.
Climate-related risks are identified through NewRiver’s integrated
risk management 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
risks. The risk register assesses the impact and likelihood of each
identified risk, which is translated into a risk heat map. Where the
residual risk does not align with the Board’s risk appetite,
management actions are recommended with a view to
mitigating the relevant risk.
TCFD Risk Management Recommendation ‘b’:
Describe the organisation’s processes for managing
climate-related risks.
Accountability for mitigating actions is assigned to a senior asset and
property manager. This approach allows NewRiver to ensure there is
a top-down understanding of principal risks across the business,
backed by bottom-up mechanisms to support monitoring by
management and their ability to address principal risks in a timely
manner. With the support of our centre managers, we implement a
host of initiatives designed to manage environmental impact and
promote the efficient operation of our assets.
TCFD Risk Management Recommendation ‘c’: Describe
how processes for identifying, assessing, and
managing climate-related risks are integrated into the
organisation’s overall risk management.
Please see pages 52-58 for a detailed presentation of how the
identification, assessment and management of climate-related
risks are integrated into NewRiver’s overall risk management
processes.
Metrics and Targets
TCFD Metrics and Targets Recommendation ‘a’:
Disclose the metrics used by the organisation to assess
climate-related risks and opportunities in line with its
strategy and risk management process.
Annually, we disclose a suite of climate-related metrics which track
our performance towards realising our core objective of
minimising our environmental impact.
These metrics are aligned with the EPRA’s best practice
recommendations for transparently disclosing sustainability
performance. The EPRA performance tables on pages 61-62
present our 2022 performance across these metrics, alongside
historical performance.
We guide action towards making positive progress against these
metrics using a set of short, medium and long-term targets,
detailed on page 57. These targets are aligned with the UN
Sustainable Development Goals to which we have committed,
including SDG 13, Climate Action.
TCFD Metrics and Targets Recommendation ‘b’:
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related risks.
In accordance with our reporting obligations under the UK’s
Streamlined Energy and Carbon Reporting regulations, we
disclose our annual carbon emissions performance. Please refer to
pages 59-60, where we provide further information on our FY22
emissions performance, together with a comparison against our
historical performance and the methodologies used to prepare
these disclosures. Methodologies used are consistent with the
WBCSD/WRI Greenhouse Gas (GHG) Protocol Corporate
Accounting and Reporting Standard and capture all Scope 3
emissions categories identified as material to our business.
TCFD Metrics and Targets Recommendation ‘c’:
Describe the targets used by the organisation to
manage climate-related risks and opportunities and
performance against targets.
Following the release of the Science Based Targets initiative’s
(SBTi) Corporate Net-Zero Standard in October 2021 – the world’s
first framework for corporate net-zero targets consistent with a
1.5°C future – we have published our Pathway to Net-Zero and
have received validation from the SBTi for our Scope 1 and 2
emissions reduction targets.
Science-based targets (SBTs) provide companies with a clearly
defined pathway to future-proof growth by specifying how much
and how quickly they need to reduce their GHG emissions to
achieve a net-zero world by no later than 2050. Pragmatic
net-zero strategies place the corporate SBT methodology at their
heart, prioritising rapid decarbonisation before the use of carbon
offsets. This is the approach that we will take in pursuing the
following targets:
1. Our corporate emissions will be brought to net-zero by 2025
2. We will achieve a 42% reduction in total absolute emissions by
2030*
3. Our landlord-controlled portfolio emissions will be brought to
net-zero by 2040
4. Our tenant-controlled portfolio emissions, and emissions
associated with our development activities, will be brought to
net-zero by 2050
For more information on the actions we will take to achieve these
targets, please see our Pathway to Net-Zero which provides our
detailed delivery plan. Our Pathway to Net-Zero is presented
separately on our website for ease of ongoing access for our
stakeholders.
* Against a baseline year of 2020
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
77
PR INCIPA L RISKS AND UNCERT AI NT I ES
Our approach to
risk management
Risk is inherent in all businesses and
effective risk management is a key element
in the delivery of our strategy and operation
of our business model.
The COVID-19 pandemic continued to bring economic and social
disruption during FY22, however our culture and strong
governance systems and risk mitigation have continued to support
the business during the year.
Risk monitoring and assessment including
emerging risks
The identification of risks is a continual process. This has been
highlighted more so over the last couple of years with a global
pandemic creating uncertainty across all sectors both economically
and socially and other geopolitical events impacting supply chains
and sentiment. 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. Last year as a
result of this continuous assessment of emerging risks we created
a new principal risk, ‘Cyber Security’. This year no further emerging
risks have been identified or upgraded to principal risk. We have
however split the Climate Risk to reflect its constituent parts of
Climate change strategy and Climate change impacts on our
assets. 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 risk environment in which the Company operates has
continuously changed throughout the year with various iterations
to the COVID-19 measures and the changing macroeconomic
landscape. While there was an easing of restrictions during April
2021 with non-essential retail re-opening, uncertainty remained
over the year with a number of COVID-19 measures still in place.
The winter saw ‘’Plan B’ measures introduced with the spread of the
Omicron variant until all restrictions were completely lifted in the UK
on 1 April 2022. Wider concerns around the deterioration of the
UK retail market and continued political and economic uncertainty
both in the UK and globally have remained or increased during the
year.
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 and geopolitical unrest. This flexibility enables
the business to adjust and respond to fast-changing situations 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 in some of the following ways:
• Maintaining an unsecured balance sheet, with the Company
benefitting 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 2022
STRATEGIC REPORT The Risk Management process and responsibility
BOARD
Collectively responsible for managing risk
• Regularly reviews risks within strategy discussions, the impact of risk
• Conducts formal reviews of principal risks (including emerging risks)
on strategy and levers within the business model that can be adjusted
to manage these risks.
twice a year – one of which is in connection with consideration of the
viability statement.
• Monitors KPIs which link to risk and strategy through Board reports.
AUDIT COMMITTEE
Oversees risk management process
• 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 advisers for specific specialist risk
impacts and deep-dive reviews.
Receives reports on the risk management process twice annually.
•
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 risks) at least quarterly.
• Delegates line responsibility for managing risks within their area of
• Reviews risk topics through regular timetabled presentations or papers.
• Uses external advisers for specific specialist risk impacts.
• Monitors KPIs which link to risk and strategy.
accountability.
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
b
a
Political and regulatory
Catastrophic external event
a
b
Climate change strategy
Climate change impacts
on our assets
Changes in technology
and consumer habits and
demographics
Cyber security
Movement from FY21
Operational risk
People
Financing
Asset management
Development
Acquisition
Disposal
Medium
Probability
Very High
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
79
PR INCIPA L RISKS AND UNCERT AI NT I ES CO NTI NUED
External Risks
Risk and impact
Monitoring and management
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:
1
2
Probability:
Movement:
3
• The Board regularly assesses the Company’s
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.
• Through regular stress testing of our
portfolio we ensure our financial position is
sufficiently resilient.
• Closely monitoring rent collection and cash flow.
2. Political and regulatory
Changes in UK Government policy, the adverse
effects of Brexit on our tenants, or the impact of
political uncertainty on consumers’ retail and
leisure spend.
Responsibility:
Board & ExCo
Impact:
Link to strategy:
1
2
Probability:
Movement:
3
• 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 the BPF
and the High Street Task Force.
Change in risk assessment during
the period
• Macroeconomic risk has increased during the
year and is considered a medium to high
impact risk with a medium to high probability.
• Retail sales rebounded after each lockdown
however sentiment has been impacted by
cost of living and energy cost worries and
inflation fears.
• Valuations have increased in the second half
and the disposal of the Hawthorn business and
subsequent debt repayment means our covenant
and policy headroom has also improved.
• Higher inflation could fuel wage growth and
costs leading to rate increases above current
forecasts.
• The Bank of England is expecting inflation to
rise further this year and the economy to slow.
However with interest rate adjustments the
Bank of England expects inflation to fall next
year and be close to its 2% target in around
two years’ time.
• Political and regulatory risk has decreased
slightly during the year with the easing of
COVID-19 restrictions. This is considered a
medium to high impact risk with a medium
to high probability.
• Political uncertainty surrounding COVID-19 has
improved with the roll out of vaccinations and
opening up of all restrictions.
• 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 expired on 31 March 2022.
• There are further uncertainties around the
outcome of the Government review of the
Landlord and Tenant Act 1954.
• There are now also uncertainties around
the impact of the Levelling Up and
Regeneration Bill.
• The impact on the property market of the
Register of Overseas Entities owning UK
property is currently unclear.
• The conflict in Ukraine and its long term
impact on the UK and the rest of the world
is unknown.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT
Key
Risk change during 2021/22
Impact and probability
Risk has
increased
Risk has
decreased
Risk has not
changed
Low
Medium
High
Risk and impact
Monitoring and management
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:
1
2
Probability:
Movement:
3
• The Board has developed a comprehensive
crisis response plan which details actions
to be taken at a head office and asset-level.
• The Board regularly monitors the Home Office
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.
4.a Climate change strategy
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:
1
2
Probability:
Movement:
3
ESG
• 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 the ESG
section of this 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 have developed our Pathway to Net
Zero Carbon and set new medium and
long-term targets in line with the latest
science-based targets.
• ESG performance is independently reviewed
by our external environmental consultants
and is measured against applicable targets
and benchmarks.
• We continue to report in line with TCFD
requirements.
Change in risk assessment during
the period
• Catastrophic external event risk has been
slightly decreased during the year and is
considered a high impact risk with a medium
to high probability.
• The impact of COVID-19 caused
unprecedented economic and operational
disruption. We mitigated the impact through
our portfolio positioning focusing 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 or restrictions.
• The successful roll out of vaccinations and the
opening up of restrictions was positive and our
operational performance has proved the
resilience of our portfolio.
• The National Terrorism Threat Level is
substantial and the impact from the war in
Ukraine is unclear.
• The climate change risk has been separated
into two risks to focus on it constituent parts
(Climate Change Strategy and Climate change
impacts on our assets).
• Climate change risk remained the same during
the period and is considered a medium to high
impact risk with a medium to high probability.
• 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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
81
PR INCIPA L RISKS AND UNCERT AI NT I ES CO NTI NUED
Key
Risk change during 2021/22
Impact and probability
Risk has
increased
Risk has
decreased
Risk has not
changed
Low
Medium
High
Risk and impact
Monitoring and management
• We regularly assess assets for environmental
risk and ensure sufficient insurance is in
place to minimise the impact of
environmental incidents.
In conjunction with insurers flood risk
assessments have been carried out at all
of our assets and considered low.
•
4.b Climate change impacts on
our assets
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 at our assets could
lead to erosion of investor value and increases
in insurance premiums.
Impact:
Probability:
Movement: NEW
Responsibility:
Board & ExCo, CEO
and ESG Committee,
Head of ESG
Link to strategy:
1
2
3
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
Link to strategy:
3
Impact:
Probability:
Movement:
• 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 retail parks are ideally positioned to help
retailers with their multi-channel retail strategies.
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.
• There are limited IT servers on sites.
• Multiple third-party supplier programmes 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
Responsibility:
Board & ExCo,
Head of IT
Impact:
Link to strategy:
1
2
Probability:
Movement:
changes to data access following staff
changes and authority limit access.
• We have reviewed our IT systems and have
enhanced a number of areas during the year.
• Cyber insurance cover is in place.
• We have recently carried out an external
review of the Group’s IT security and systems
as part of our internal audit process.
3
82
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
Change in risk assessment during
the period
• The climate change risk has been separated
into two risks to focus on it constituent parts
(Climate Change Strategy and Climate change
impacts on our assets).
• Climate change impacts on our assets risk
remained the same during the period and is
considered a medium to high impact risk with
a medium to low probability.
• Although exposure to extreme weather events
is a near-term risk, other climate impacts such
as heat stress and sea level rises are
medium-term or long-term time horizons.
Whilst their impact is high, their probability
imminently is low.
• Climate impacts are embedded into capital
allocation decisions and considered for all
future acquisitions of both equipment installed
at the assets and for the assets themselves.
• Changes in technology and consumer habits
risk has increased during the year and is
considered a low-medium impact risk with a
high probability.
• Although COVID-19 lockdown restrictions
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 was a new Principal Risk in 2021 and has
remained unchanged during the year. Whilst
this risk has always been recorded and
monitored on our risk register its prominence
was elevated in 2021 because one of our
third- party suppliers experienced a cyber
security incident. No data breaches were
found but our normal reporting systems were
slower while the incident was being investigated.
• This risk could also be increased due to
employees working from home during the
pandemic. Staff continue to work from home
on a flexible basis.
STRATEGIC REPORT
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:
1
2
Probability:
Movement:
3
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:
1
3
Probability:
Movement:
ESG
• Attracting, retaining and developing talent
• People risk has increased during the year
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.
• 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.
and is considered a medium impact risk with
a medium probability.
It remains a challenging operating environment
for the Company, which could present some
issues in attracting and retaining talent.
Inflation will also put pressure on salary costs
and demands. This impact is mitigated by an
active employee engagement programme and
the alignment of reward with both individual
and Company-level performance.
• We continue to focus on staff wellbeing and
actively seek regular feedback from staff.
• We also offer many forms of flexible working
including job share, annualised hours, variation
of hours and working from home. Since the
pandemic we have implemented a policy
of working enabling staff to work from home
a number of days a week should they choose
to do so.
• The Board regularly assesses Company
• Financing risk has reduced during the year
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.
• Working capital and cashflow analysis and
detailed forward assessments of cashflows are
regularly reviewed by the Executive Committee.
• Our credit rating is independently assessed
by Fitch Ratings at least annually
and is considered a low to medium impact risk
with a low to medium probability.
• Although macroeconomic developments,
particularly in the wake of COVID-19 and an
increase in inflation have impacted financial
markets, the strength of the Company’s
unsecured balance sheet means we have
significantly mitigated the risk of not being able
to secure sufficient financing.
• The strength of the Company Balance sheet
improved further with the sale of the Hawthorn
Pub business in August 2021.
• The Company has also extended the maturity
on its undrawn Revolving Credit Facility
to August 2024.
• There is no exposure to interest rate rises
on drawn debt.
• Through its asset disposal programme strategy
the Company has managed to mitigate the
impact COVID-19 might otherwise have had
on its cash and liquidity position and LTV.
• Asset management risk has decreased during
the year and is considered a medium to high
impact risk with a medium probability.
• The COVID-19 pandemic placed restrictions on
the operations of our occupiers and impacted
performance and rent collection at our assets.
These have improved greatly and are now
close to pre-pandemic levels.
• There have, however, been a number of
high-profile retail failures since the beginning
of the pandemic, including amongst our
occupier base.
• Our COVID-19 response was focused
on supporting occupiers and ensuring
businesses could emerge from the crisis
in robust financial shape.
• The successful roll out of vaccinations and
the opening up of restrictions was positive and
our operational performance has proved the
resilience of our assets.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
83
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:
1
2
Probability:
Movement:
3
ESG
• 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 regularly by
the Executive Committee.
• Retailer concentration risk is monitored, with
a guideline that no retailer will account for
more than 5% of gross income (currently
largest retailer is B&M accounting for 2.9%
of gross income)
PR INCIPA L RISKS AND UNCERT AI NT I ES CO NTI NUED
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:
3
ESG
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:
1
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:
1
Probability:
Movement:
• We apply a risk-controlled development
strategy through negotiating long-dated
pre-lets for the majority of assets.
• All development is risk-controlled and forms
• Development risk has remained unchanged
through the period and is considered a low
to medium impact risk with a low to
medium probability.
only 3% of the portfolio by value.
• Supply issues and increases in costs of
• 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.
building supplies will impact developments,
as they remain a small part of portfolio the
overall impact is low.
• A number of our regeneration assets have
been sold which decreases the proportion
of assets focused on development which
inherently reduces risk exposure.
• 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 sector.
• We have the ability to acquire in joint ventures,
thereby sharing risk.
• Acquisition risk has increased through the year
and is considered a low to medium impact risk
with a medium probability.
• The lack of supply and relative price of
some assets may reduce opportunities
for acquisition.
• Having sold the Hawthorn pub business and
completed planned retails disposals, we are
now in the position to deploy capital in line
with our returns-focussed approach to capital
allocation and subject to our LTV guidance.
• Our portfolio is focused on high-quality assets
with low lot sizes, making them attractive to a
wide pool of buyers.
• Assets are valued every six months by
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 sector.
• 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.
• Disposal risk has remained unchanged during
the year and is considered a low to medium
impact risk with a medium probability.
• National and geopolitical uncertainty and
COVID-19 increased market uncertainty
are causing some purchasers to reconsider
or delay acquisition decisions.
• We have an active and successful 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.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT
Viability Statement
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 20), strategy
(pages 14 and 15) and principal risks and uncertainties (pages
78 to 84).
In making this assessment, the Directors view the Group’s focus
on its resilient sub-sector of convenience retail, 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 2025.
This period of assessment is 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 78 to 84, together with the likely
degree of effectiveness of mitigating actions reasonably expected
to be available to the Group. The most relevant of these risks to
viability, with the highest potential impact, were considered to be:
• Macroeconomic – Economic conditions in the UK with high
inflation and a low growth outlook and changes to fiscal and
monetary policy may impact market activity.
• Political and regulatory – Changes in UK Government policy,
remaining uncertainty around the impact of Brexit on our
tenants, the conflict in Ukraine and its impact on the UK 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.
Although the Board is encouraged with improved position in the
UK with respect to Covid the position going forward will be
monitored closely. At the time of writing there also remains
significant uncertainty around prospects for the UK economy due
to the mix of high inflation and low expected growth, coupled with
the potential impact on the UK economy of the conflict in Ukraine.
Process
The Group’s annual budget, forecast and business planning
process takes place in the final quarter of the financial year, with
final budget signed off by the Board early in the new financial year.
The exercise is completed at a granular level, on a lease-by-lease
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 during the year has taken actions to strengthen it further, being:
• Disposing of Hawthorn for gross consideration of £224m;
• Repaying and cancelling the £165m term loan and repaying
£170m of drawn revolving credit facility; and
• Extending the maturity of the revolving credit facility to August
2024 and right-sizing the facility from £215m to £125m (with the
facility fully undrawn).
The only drawn debt currently in the Group is the £300m bond
which is not due for repayment until the end of FY28.
At the end of FY21 the Directors completed a thorough review
of all of the Group’s assets and developed a clear view of what
resilient retail looks like in the future. Following this review, in early
FY22, the Group 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
disposal completed on 20 August 2021
• Sell its non-core retail assets and recycle the resultant capital
into resilient retail. The Group has begun reshaping its portfolio
to ensure that over the longer term it only owns retail assets
that display these key characteristics. 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 has completed £77m of
retail disposals in FY22 and expects further sales in FY23 in
line with the strategy.
• 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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
85
VIABILITY STATEMENT C ONT INUED
The forecast scenario selected by the Directors to assess the
Group’s viability is based on the strategy update announced on
14 April 2021. This assumes exiting the workout portfolio by the
end of FY23 along with 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 with significant headroom.
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 (see the Going Concern
section of note 1 of the financial statements). This includes
removing all uncommitted acquisitions and disposals, assuming
no valuation growth 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 and comfortably meet its covenants.
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 Strategic Report was approved by the Board on
15 June 2022
By order of the Board
ALLAN LOCKHART
Chief Executive Officer
86
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGIC REPORT COR PORATE GOVERNANCE
The Chairman’s Letter
on Governance
It also allows for flexibility and the ability to adapt and respond to
fast changing situations. This culture, along with our strong
governance systems, has therefore continued to support the
business during the COVID-19 crisis and during the busy time
selling the Hawthorn Pub business.
Succession planning in action
Board Appointments
In August 2021 we welcomed Will Hobman to the Board as Chief
Financial Officer following Mark Davies stepping down from the
Board in July 2021 prior to the completion of the Hawthorn Pub
sale. Will's appointment is an example of orderly succession
planning in action. Will was previously Finance Director for two
years prior to his appointment as CFO.
Kay Chaldecott will be stepping down from the Board at the 2022
AGM so much of the Nomination Committee's activity this year has
been to scope and recruit her replacement. Following this
recruitment process in May 2022 we were delighted to welcome
Dr Karen Miller to the Board as a Non-Executive Director. Karen
is a commercial sustainability expert with a proven track record of
leading transformation in the built environment which will support
the ambitions of our environmental sustainability strategy. The
process for appointing Karen is more fully detailed later in the
Nomination Report.
Board effectiveness
The Board’s review of its effectiveness follows a three year plan.
Last year the effectiveness review was carried out by an external
facilitator. This year the effectiveness review involved internally
facilitated questionnaires. The anonymised questionnaires were
reviewed by an external facilitator and a summary report shared
with myself and the Company Secretary. I’m pleased to report that
the Board continues to work effectively.
Shareholder Engagement
The AGM process has been somewhat disrupted over the last
couple of years with a closed meeting necessary in 2020 and a
hybrid arrangement in 2021; we are therefore very much looking
forward to having a fully physical Annual General Meeting this year
and to welcoming and engaging with shareholders at this meeting.
Yours sincerely
BARONESS FORD OBE
Chairman
15 June 2022
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
87
Margaret Ford
Chairman
Dear Shareholders
I have pleasure in introducing NewRiver’s Corporate Governance
report for the year ended 31 March 2022. In my introductory
statement to the Annual Report 2022 on pages 2 and 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.
A culture that supports our purpose
Our purpose is to own, manage and develop resilient retail assets
across the UK that provide essential goods and services and
support the development of thriving communities. Two years 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 and develop. This culture supports our
purpose and is evidenced in our positive staff engagement
responses. This year our staff have been able to feedback to us
face to face informally and also more formally in staff meetings as
well as through our Annual Employment Survey. Each of these
methods have provided positive feedback with the Employment
Survey providing a high satisfaction score. 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 and
during the sale of the Hawthorn Pub business. We now have a
small workforce, following the sale of the Hawthorn Pub business,
with only around 50 employees. This proximity between the Board
and a small 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.
OUR LE ADERSHIP T EAM
Board of Directors
Baroness Ford OBE
Allan Lockhart
Baroness Ford OBE
Non-Executive Chairman, Appointed September 2017
Allan Lockhart
Chief Executive Officer
Key Skills and Experience
Allan has over 30 years’ experience in the UK retail real estate market. He started
his career with Strutt & Parker in 1988 advising major property companies and
institutions on retail leasing, investment and development. In 2002, Allan was
appointed as Retail Director to Halladale Plc with a remit to acquire value add
opportunities In the UK retail real estate market and ensure the successful
implementation of asset management strategies. Following the successful sale
of Halladale Plc In early 2007, Allan 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
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 also 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; Trustee, British Olympic
Association; Director, Deloitte UK LLP and Chair of the UK Audit Governance Board;
Director, North/South Europe Board;Member of the Global Advisory Board for
Deloitte.
Baroness Ford was appointed to the House of Lords in 2006 and is a Cross bench
peer.
Will Hobman
Kay Chaldecott
Will Hobman
Chief Financial Officer, Appointed August 2021
Kay Chaldecott
Independent Non-Executive Director, Appointed March 2012
Key Skills and Experience
Will is a Chartered Accountant with over ten years’ Real Estate experience, having
qualified at BDO LLP working in its Audit and Corporate Finance departments.
Before joining NewRiver in June 2016, Will worked at British Land for five years in
a variety of finance roles, latterly in Investor Relations, and formerly within the
Financial Reporting and Financial Planning & Analysis teams. Will obtained a BArch
(Hons) in Architecture from Nottingham University before obtaining his ACA
qualification, becoming an FCA in March 2020.
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
British Property Federation Finance Committee Member
External Appointments
Other
Lichfields planning and development consultancy (Board member);
Next Leadership (member of the Advisory Board)
88
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE
Key
Chair of committee
Member of Audit Committee
Member of Nomination Committee
Member of Remuneration Committee
Alastair Miller
Charlie Parker
Alastair Miller
Senior Independent Director, Appointed January 2016
Charlie Parker
Independent Non-Executive Director, Appointed September 2020
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.
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)
Key skills and Experience
Charlie Parker was previously Chief Executive and Head of the Public Service for
the Government of Jersey from January 2018 until his retirement in March 2021.
Prior to working in Jersey, Charlie was 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. During his various roles as
a Chief Executive, Charlie oversaw the significant transformation and modernisation
of a large number of public services often resulting in reduced costs and improved
performance. He was also responsible for a range of large scale capital infrastructure
and regeneration projects in Jersey, Westminsterand Oldham. Prior to 2008 he
held a number of investment, development and regeneration roles across national
and local government bodies for over twenty years.
External Appointments
Other
Buckingham Palace Reservicing Programme Challenge Board
Griffin Investments Ltd
Dr Karen Miller
Colin Rutherford
Dr Karen Miller
Independent Non-Executive Director, Appointed May 2022
Colin Rutherford
Independent Non-Executive Director, Appointed February 2019
Key Skills and Experience
Dr Karen Miller is affiliated to the Department of Engineering, Cambridge University
and is Co-Director of the Cambridge Sustainability Programme. Karen is a
sustainability expert with a proven track record of leading transformation through
a collaborative applied approach in large national and international companies.
Karen has over twenty-five years’ experience of growing businesses in the retail
sector through innovation.
External Appointments
Listed Companies
None
Other
Buckingham Palace Reservicing Programme Challenge Board
Co Director, Cambridge Sustainability Programme
Leader of European Institute for Innovation and Technology (EIT) Food Programmes
Key Skills and Experience
Colin is an experienced public and private company chairman and
independent director, with relevant sector experience including asset management,
bioscience, 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.
External Appointments
Public Companies
Evofem Biosciences Inc (Independent Director and Audit Committee Chairman)
Private Companies
Allstone Sand Gravels & Aggregates Limited (Chairman);
Brookgate Limited (Chairman);
Donaldson Group Limited (Independent Director and Audit Committee Chairman);
Rothley Group Limited (Chairman)
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
89
Executive
Committee
Allan Lockhart
Chief Executive Officer
Charles Spooner
Head of Capital Markets
Key Skills and Experience
Charles is responsible for Capital Markets and Retail Parks throughout the
UK and has over 20 years’ experience in the real estate investment and asset
management sector.
Charles has benefited from the broad experience as an asset manager at F&C REIT
and RREEF, on an advisory capacity at Cushman Wakefield and as a retailer advising
Specsavers on their investment agency and development activity. Charles is
responsible for acquisitions, disposals, development and implementation of asset
management strategies, with particular focus on the retail warehouse sector.
Edith Monfries
Chief Operating and People Officer
Key Skills and Experience
Edith is a Chartered Accountant having trained with Deloitte, Haskins and Sells.
She has over 30 years’ experience in the retail and leisure property sector,
combining Finance, Operational and HR roles, specialising in advising on strategic
and operational matters.
Edith was appointed Head of HR at NewRiver in October 2018 and now in her role
as COO brings her expertise in talent development within the sector to the
business. She served as COO of Hawthorn when the pub company was under
NewRiver’s ownership and oversaw the smooth transition following the sale.
See page 88 for key skills and experience.
Will Hobman
Chief Financial Officer
See page 88 for key skills and experience.
Emma Mackenzie
Head of Asset Management Head of ESG
Key Skills and Experience
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 20 years’ experience in the retail
property market.
Launched in June 2020, Emma is one of nine Board Members on the Government’s
High Street Task Force, following her role on the Govt’s High Streets Expert Panel
and chaired by Sir John Timpson in 2019. The HSTF provides access to experts,
case studies and practical solutions to local town leaders and Government to help
support and revitalise UK high streets and town centres.
Emma also sits on the Commercial Committee of the British Property Federation.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE 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 14 and 20 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 own, manage and develop resilient retail assets
across the UK that provide essential goods and services and
support 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 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
extensive 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 to 31 March 2022. Throughout the financial year ended
31 March 2022, the Company has fully complied with all the
provisions of the Code, except provisions 10 and 38 and we
provide a full explanation below.
Code Provision 10 requires the Board to identify in its
Annual Report each Non-Executive Director it considers to
be independent. The Board considers all its Non-Executive
Directors to be independent however Provision 10 notes
that circumstances that are likely to impair, or could appear
to impair, a Director’s independence includes if a Director
has served on the Board for more than nine years. Kay
Chaldecott was appointed in 2012 and was due to retire last
year. Against a backdrop of COVID-19 the Board requested
that Kay extend her tenure by one year in 2021. This
allowed the Board to continue to benefit from her significant
knowledge and expertise of the real estate sector as the
Company continued to navigate the effects of the COVID-19
pandemic. The Board was of the opinion that Kay remained
independent after nine years on the Board and continued to
exercise objective and independent judgement. Kay will not
be offering herself for re-election at the AGM this year.
Code Provision 38 requires, among other things, that the
pension contribution rates for executive directors should be
aligned with those available to the workforce. Since the
adoption of the new Remuneration policy at the AGM in
2020 any new Executive Directors receive Company
contributions in line with the UK workforce which is currently
4%. Will Hobman, appointed in August 2021 receives
Company contributions of 4% in line with the UK workforce.
The Company is currently contributing 15% of base salary for
the CEO. As outlined in the Remuneration Policy this
contribution rate will be reduced for this incumbent director
to the rate applicable to the majority of the workforce at the
end of this remuneration policy period.
The Governance section has been organised to follow the
structure of the 2018 Code. Details of the way the Code has
been applied can be found in the following pages:
Board Leadership and Company Purpose
pages 91 to 95
Division of Responsibilities
pages 96 to 97
Composition, Succession and Evaluation
(Including the Nomination Committee Report)
pages 98 to 102
Audit, Risk and Internal Control (Including the
Audit Committee Report)
pages 103 to 108
Remuneration (the Directors’ Remuneration
Report)
pages 109 to 127
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
91
COR PORATE GOVERNANCE CONT I NU ED
Section 172(1) statement
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 2022.
Details of our key stakeholders and how the Board engages with
them can be found in the strategic report on pages 22 to 29.
Further details of the Board activities and principal decisions are
set out on pages 94 to 95 providing insight into how the Board
makes decisions and their link to strategy. Other disclosures
relating to our consideration of the matters set out in s172(1)(a-f)
of Act can be found as follows:
S172 factor
Our approach
Relevant disclosures
(a) the likely
consequence of
any decision in 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.
Company purpose (pages 3 and 91)
Business Model (pages 20 to 21)
Our strategy (pages 14 to 15)
(b) the interests of the
company’s employees
We have a small workforce which allows a naturally close proximity
between the Board and the workforce making it easy for the
Board to engage with staff directly especially as the Directors
regularly visit the London office and other sites.
(c) the need to foster
the company’s
business relationships
with suppliers,
customers and others
The Board is committed to fostering the Company’s business
relationships with occupiers, local authorities and other
stakeholders. These stakeholders are key to our business model
and therefore members of the Exco (including Board members)
have direct responsibilities for managing and developing these
relationships.
Employee engagement (pages 22 to 24)
Our Stakeholders (pages 22 to 29)
Human Rights and Modern Slavery
(page 98)
(d) the impact of the
company’s operations
on the community and
the environment
The Board is committed to our communities and our assets are
integral to the communities they serve. We aim to enhance the
lives of consumers and minimise our impact on the environment.
These matters are therefore considered in all strategic decisions
and embedded into the business model.
Our Business Model (pages 20 to 21)
Our Stakeholders (pages 22 to 29)
Our pathway to Net Zero (page 57)
TCFD disclosures (pages 74 to 77)
GHG and emissions data
(pages 59 to 62)
(e) the desirability of
the company
maintaining a
reputation for 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 Chairman’s Letter on Governance
(page 87)
Whistleblowing (page 107)
Internal control structure (page 106)
Employee engagement (pages 22 to 24)
(f) the need to act fairly
as between members
of the company.
The Board recognises the importance of treating all members fairly
and monitors the views of the Company’s shareholders through
reports on investor and analyst communications so that their views
and opinions can be considered when setting strategy.
Annual General Meeting (page 98)
Share capital structure (page 130)
Our Stakeholders (pages 22 to 29)
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE Staff Engagement
BOARD
(Led by Alastair Miller our Non-Executive Director
responsible for workforce engagement).
• NED/Staff engagement sessions
• Staff survey results
EXECUTIVE COMMITTEE
(“EXCO”)
• Direct report engagement and staff appraisals
and feedback
• Monthly All Staff sessions
• Staff survey results
OUR STAFF
• Monthly All Staff sessions
• Staff survey results
Workforce Engagement Mechanism
– the role of our designated Non-
Executive Director
Alastair Miller, our Senior Independent Director, has
responsibility for ensuring that the Board successfully
engages with our workforce.
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.
We have a small workforce which allows a naturally close
proximity between the Board and the workforce making It
easy for the Board to engage with staff directly especially as
the Directors regularly visit the London office and also other
sites. This year with the relaxing of COVID-19 restrictions we
have been able to expand on the previous online staff
forums by having a hybrid meeting between staff and
Alastair. Staff were invited to attend a group meeting with
Alastair in the London office or online if preferred. Questions
were invited ahead of the session as well as live on the day.
Questions covered thoughts on home working, the new
London office, inflation impacts, salaries and pension
contributions, the business and strategy, Board
appointments, ESG and share price performance. As a result
of some of the questions raised by staff additional sessions
were organised to explain some of the features of the
Company Strategy in greater detail and to provide further
information about the Company’s approach to ESG. This
included a session with staff to guide them through the net
zero plans and more about the work carried out with the
Trussell Trust. Further details on our engagement with staff
can be found on pages 22 to 24.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
93
COR PORATE GOVERNANCE CONT I NU ED
Board activities
Discussion
Strategy
• The Board discussed the strategy for the divestment of the community pub business in order to reset the
Finance & Financing
LTV and provide the firepower to reshape the portfolio
• A working Committee which included Board members was set up to progress this divestment and report
regularly to the Board and bring the decisions to the Board at key points in the process including the ultimate
sale terms and conditions, price and buyer. The Remuneration Committee reported on the Hawthorn leaver
staff awards treatment
• The Board has continued to review the short- and long-term implications of COVID-19 on the Group and
its assets, our developments and occupiers
• The Chief Financial Officer has 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
• The Board has regularly reviewed the Group's financial position and structure and following the disposal of the
Hawthorn pub business, the Board made the decision to repay and cancel £335 million of bank facilities and
agree the one-year extension of our undrawn Revolving Credit Facility ('RCF')
Audit and Risk
• The Chair of the Audit Committee reported to the Board on the proceedings of each Audit Committee
meeting and meetings with valuers
• The Board considers the risk register and internal controls at least twice a year
• 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
• Members of the ExCo are regularly invited to attend the Board meetings to present on various projects
•
In September 2021 the Group held a capital markets day to set out the strategy following the sale of the
Hawthorn pub business
Stakeholders
• Stakeholders including employees, 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
• Staff survey results are considered at the Board meeting
• The Board received updates from Alastair Miller’s attendance at a staff sessions
Environmental
• The Board was provided with training on ESG matters.
• The Board also regularly discussed the net zero targets and issues in the lead up to making the decisions
around setting the net zero target
• The Board considered and updated all ESG related policies during the year.
Governance
• The Committee chairs reported on key matters discussed at the Board Committees
• The Company Secretary reported on key governance developments and on work carried out to update
the Group’s governance policies and procedures
• The Board reviewed their schedule of matters and updated the terms of reference of the Board committees
Link to strategy
1
2
3
ESG
1
2
3
ESG
1
1
1
1
1
2
3
ESG
2
3
ESG
2
3
ESG
2
3
ESG
2
3
ESG
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE
Board activities
Discussion
Strategy
• The Board discussed the strategy for the divestment of the community pub business in order to reset the
LTV and provide the firepower to reshape the portfolio
• A working Committee which included Board members was set up to progress this divestment and report
regularly to the Board and bring the decisions to the Board at key points in the process including the ultimate
sale terms and conditions, price and buyer. The Remuneration Committee reported on the Hawthorn leaver
staff awards treatment
• The Board has continued to review the short- and long-term implications of COVID-19 on the Group and
its assets, our developments and occupiers
Finance & Financing
• The Chief Financial Officer has 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
• The Board has regularly reviewed the Group's financial position and structure and following the disposal of the
Hawthorn pub business, the Board made the decision to repay and cancel £335 million of bank facilities and
agree the one-year extension of our undrawn Revolving Credit Facility ('RCF')
Audit and Risk
• The Chair of the Audit Committee reported to the Board on the proceedings of each Audit Committee
meeting and meetings with valuers
• The Board considers the risk register and internal controls at least twice a year
• 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
• Members of the ExCo are regularly invited to attend the Board meetings to present on various projects
•
In September 2021 the Group held a capital markets day to set out the strategy following the sale of the
Hawthorn pub business
Stakeholders
• Stakeholders including employees, 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
• Staff survey results are considered at the Board meeting
• The Board received updates from Alastair Miller’s attendance at a staff sessions
Environmental
• The Board was provided with training on ESG matters.
• The Board also regularly discussed the net zero targets and issues in the lead up to making the decisions
around setting the net zero target
• The Board considered and updated all ESG related policies during the year.
Governance
• The Committee chairs reported on key matters discussed at the Board Committees
• The Company Secretary reported on key governance developments and on work carried out to update
the Group’s governance policies and procedures
• The Board reviewed their schedule of matters and updated the terms of reference of the Board committees
Link to strategy
1
2
3
ESG
1
2
3
ESG
1
1
1
1
1
2
3
ESG
2
3
ESG
2
3
ESG
2
3
ESG
2
3
ESG
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.
None of the Directors took on any significant new additional
external appointments in the year.
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.
The Nomination Committee annually reviews the time
commitments to ensure that all Board members continue to be
able to devote sufficient time and attention to the Company’s
business. Whilst a number of the Board have other Non-Executive
directorships and commitments the Nomination Committee
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 process of the sale
of the Hawthorn business. Each Non-Executive Director has made
themselves available at short notice to discuss the sale and the
process as the sale progressed.
The other listed company directorships of the NewRiver REIT plc
Directors is set out on pages 88 to 89. The Board and committee
attendance record of each of the Directors during FY22 is set out
on page 97 of this report.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
95
COR PORATE GOVERNANCE CONT I NU ED
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; and
•
reviewing and agreeing training and development for the Board.
Allan’s responsibilities include:
recommending the Group’s strategy to the Board;
• managing the business of the Group;
•
• Environment, Social & Governance strategy;
•
• management of the Group’s property portfolio, including developments.
implementing the strategy agreed by the Board; and
Will’s responsibilities include:
implementing the Group’s financial strategy, including balance sheet capitalisation;
•
• overseeing financial reporting and internal controls; and
• supporting the CEO in the delivery of the Group’s strategy and financial performance.
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; and
• ensuring that the Board successfully engages with our workforce.
Chief
Executive
Officer
Allan Lockhart
Chief
Financial Officer
Will Hobman
Senior
Independent
Non-Executive
Director
Alastair Miller
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.
Balance between Non-Executive and Executive Directors
The Board currently comprises five independent Non-Executive Directors (excluding the Chairman) and two Executive Directors.
Kay Chaldecott will be stepping down from the Board at the AGM in July 2022. 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.
96
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE 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.
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. As a result of the Hawthorn disposal process, there were a number of ad-hoc Board meetings
in addition to the scheduled Board meetings this year. A steering Committee of the Board was also authorised to progress the process
and then Board meetings were held to discuss and approve any matters that required direct Board approval. All Directors have been in
attendance (via phone or video call) at all of these short notice ad hoc meetings.
Attendance at regular scheduled Board meetings and the Board Committees is shown below.
Board Members
Margaret Ford: Chairman
Executive Directors
Allan Lockhart
Mark Davies1
Will Hobman2
Non-Executive Directors
Kay Chaldecott
Alastair Miller
Charlie Parker3
Colin Rutherford
1. Mark Davies stepped down 28 July 2021
2. Will Hobman joined 20 August 2021
3. Charlie Parker was appointed to the Nomination Committee on 24 November 2021
BOARD
AUDIT
COMMITTEE
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
Attendance Attendance
Attendance
Attendance
7/7
7/7
2/2
5/5
7/7
7/7
7/7
7/7
-
-
-
-
2/3
3/3
3/3
3/3
7/7
4/4
-
-
-
7/7
7/7
6/7
7/7
-
-
-
4/4
4/4
1/1
4/4
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
97
COR PORATE GOVERNANCE CONT I NU ED
Composition,
succession and evaluation
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, human trafficking and child labour
within their own organisation and supply chain. The Modern
Slavery statement was updated and published during the year.
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 (FY21)
Externally facilitated Board evaluation using interviews
YEAR 2 (FY22)
Follow-up on actions prepared in response to the year 1
evaluation using internally facilitated questionnaires
YEAR 3 (FY23)
Continued follow up on actions arising from the previous
two years using internally facilitated questionnaires
Induction of new Directors
The Chairman, Company Secretary and Chief Operating and
People Officer 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. New Directors are also given the opportunity to visit
the assets and meet members of the team.
Annual General Meeting (“AGM”)
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 2021 limited social contact was permitted at the time
of the AGM. Shareholders were therefore welcomed to attend
in person. Recognising that some shareholders may not have felt
comfortable attending in person as restrictions were only just easing,
we provided a facility for shareholders to follow the AGM remotely
and submit questions to the Board on the business of the meeting.
We also provided facilities for shareholders to submit questions
ahead of the AGM via email. Subject to any restrictions we intend to
hold the AGM as a physical meeting again this year.
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.
In line with our sustainability commitment, we do not issue hard copy
forms of proxy in the post. Instead, we ask shareholders to appoint
a proxy online via the Registrar’s portal.
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 updates on these issues during the year and the
Anti-Corruption and Anti-Bribery policy has been updated and
communicated to staff.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE During FY21 Ceradas Limited, a board effectiveness consultancy with no other connections with the Company, undertook an effectiveness
review of the Board using one-to-one interviews conducted with the Board members and the Company Secretary. Ceradas prepared
a report of its findings from the Board evaluation including recommendations to enable Directors to develop an active plan response.
Ceradas presented the report to the Board. Recommendations and progress made against those recommendations are shown below.
Recommendations:
Progress:
1
Schedule additional ’regular’ Board meetings
rather than quarterly
Additional regular Board meetings have been held
during the year
2
Schedule more formal executive team updates
to the Board
ExCo members have attended Board meetings
to provide updates on operational matters
3
Involve the whole Board in succession planning
as well as the Nomination Committee
All NEDs are members of the Nomination
Committee and reports are given to the Board to
enable the Executive Directors to join the discussions
4
Consider other mechanisms for employee
engagement
A return to face to face engagement has been
possible following the lifting of restrictions. Also
Board members are more visible in the office as
Board meetings and other meetings have returned
to the office
5
Review the Board paper process to ascertain
if improvements can be made
Circulation of Board papers has been more timely
and the papers themselves have been evolving.
During FY22 Ceradas has assisted with the creation of a follow-up questionnaire based on the actions identified in FY21 and the
development of the strategy in FY22. The questionnaires were internally distributed and completed by all of the Directors. Ceradas has
reviewed the questionnaire responses and has recently provided a summary report to the Board. We will report on the outcomes of this
review in next year’s Annual Report and on the progress made during the year.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
99
NO MINATION COMMIT TE E RE POR T
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
Our Committee consists of four Independent Non-Executive
Directors and the Chair of the Board (Biographies are available
on pages 88 and 89).
Margaret Ford: Committee Chairman
Kay Chaldecott
Alastair Miller
Colin Rutherford
Charlie Parker
(appointed to the Committee 24 November 2021)
Key Focus for the Committee in 2021/22:
• Monitor and continue to plan for orderly succession to Board
and Executive positions
• Ensure a smooth handover for Will Hobman as he succeeds
Mark Davies as CFO
• Review the composition, skills and needs of the Board to
agree the specifications for a future Non-Executive Director
to replace Kay Chaldecott
• Carry out the recruitment process for a new Non-Executive
Director and recommend the appointment to the Board
Baroness Ford OBE
Non-Executive Chairman
Dear Shareholders
I am pleased to present the Nomination Committee Report for
2022. Monitoring and continuing to plan for orderly succession
to Board and executive positions has been a key focus this year.
In August 2021, we welcomed Will Hobman to the Board as Chief
Financial Officer as Mark Davies stepped down from the Board
prior to the completion of the Hawthorn pub business sale. Will's
appointment has been a fine example of orderly succession
planning. Will was Finance Director of the Company for two years
prior to his appointment.
During last year Kay Chaldecott reached her nine-year term.
We were however delighted to announce that Kay had agreed to
extend her tenure for a further year, so that we could continue to
benefit from her significant knowledge and expertise of the retail
real estate sector as we continued to navigate the effects of the
COVID-19 pandemic. As a Committee we had considered this
extension beyond nine years against the backdrop of the
disruption of COVID-19 and the skills needed on the Board
at the time. Kay will now be stepping down from the Board at the
AGM. Much of the Committee activity this year has therefore been
seeking a replacement for Kay and we are delighted to welcome
Dr Karen Miller to the Board with effect from 30 May 2022.
Further details of Karen’s appointment process can be found
later in this report.
The Committee’s focus for FY23 will include a smooth induction
for our newest Director and the continued succession planning
and diversity priorities.
Baroness Ford
Chairman
15 June 2022
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE
How the Committee operates
The Committee is required to meet twice a year and holds
ad hoc meetings when required. During the year the Committee
met four times.
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 Chief Operating and People Officer
is also invited to attend on occasion to assist with succession
planning discussions.
The Committee reviews its Terms of Reference annually to ensure
that they continue 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.
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. This
detailed succession planning enabled the Committee to quickly
identify a replacement for Mark Davies, CFO, when he stepped
down from the Board in July 2021. Will Hobman was identified as
having the relevant skills, experience and knowledge to provide
an excellent replacement. Will was Finance Director of the
Company for two years prior to his appointment and had been
with the Company for over five years.
Succession planning has been considered at the majority of the
Committee’s 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. Again this year, this planning has
aided our assessment of skills and balance for the specification for
a replacement Non-Executive Director as detailed below.
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. Against
the backdrop of COVID-19 in 2020 the Board requested that
Kay Chaldecott extend her tenure for a further year in 2021.
This allowed the Board to continue to benefit from her significant
knowledge and expertise of the real estate sector as we continued
to navigate the effects of the COVID-19 pandemic. The Committee
was of the opinion that Kay remained independent after nine years
on the Board and continued to exercise objective judgement. Kay
will, this year, be stepping down from the Board and not offering
herself for re-election at the AGM in July 2022. During the year the
Committee has taken steps to find a replacement Non-Executive
Director as detailed below.
Board appointment
To progress the Group’s ESG strategy the Committee
acknowledged that there was a need for a Board role with strong
environmental credentials. Following presentations from various
recruitment consultants we appointed Nurole Limited, a Global
Executive Search consultancy with no other relationship with the
Group, to conduct an external search for a Non-Executive Director.
Nurole Limited was made aware of the Company’s diversity policy
and was provided with a scope for the role that had been
discussed and agreed by the Committee. As part of the interview
process a number of members of the Board, including the Chair
and Allan Lockhart, interviewed a shortlist of candidates.
Following a detailed due diligence and referencing process and
an opportunity to meet other members of the Board individually,
the Committee unanimously recommended Dr Karen Miller to the
Board. Karen joined the Board on 30 May 2022 and has
commenced an extensive induction process.
Board Committee membership
During the year we have continued to consider the roles of each
Committee. Having altered the leadership of the Committees last
year to progress the work of each Committee we have not felt the
need to make any changes this year other than to appoint Charlie
Parker to the Nominations Committee in addition to his other
Committee memberships.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
101
NO MINATION COMMIT TE E RE POR T CONT INU ED
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. Following the appointment of
Dr Karen Miller the balance of independent directors (excluding
the Chair) is two Executive Directors and five independent
Non-Executive Directors. Kay Chaldecott will, however, be
stepping down as a Non-Executive Director at the forthcoming
AGM. This will make the balance of independent directors
(excluding the Chair) two Executive Directors and four
independent Non-Executive Directors.
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 of our employees to have
a fulfilling career supported by family-friendly policies.
At the date of this report, the Board comprises three female
Directors and five male Directors, equivalent to 37.5% female
representation. Kay Chaldecott will however be stepping down
from the Board at the 2022 AGM following which there will be 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 three male ExCo
members equivalent to 40% female representation. Direct reports
of the Executive Committee are 52% female and 48% 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 and
retail sectors, with financial or real estate training. The Company aims
to recruit the best candidates on the basis of their merit and ability.
Composition of the Board at the year end
1
4
2
Chairman
Executive Directors
Non-Executive Directors
(Independent)
Length of Directors’ tenure
2
2
Less than three years
Three to six years
3
Six to ten years
Gender Balance at the year end
Board
Executive Committee
Direct Reports of Executive Committee
Group
Female
Male
2 29%
2 40%
12 52%
25 49%
71%
5
3 60%
11 48%
26 51%
Other Nomination Committee activity
During the year the Nomination Committee also considered the
following matters:
• Committee Report: Approval of the Nomination Committee
Report prior to publication;
• Time Commitment: A review of the time commitment required
from each Director and their other external appointments, prior
to making a recommendation to the Board that all of the
continuing Directors be proposed for re-election at the 2022
AGM; and
• Terms of Reference: Annual review of the Committee Terms
of Reference.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE
AUD IT COMMITTEE REPORT
Audit, risk and
internal control
Colin Rutherford
Audit Committee Chairman
Dear Shareholders
I am pleased to present the Audit Committee Report for 2022.
As well as continuing to monitor the impact of COVID-19 on the
financial projections and controls of the business, we have
overseen and monitored the smooth handover between outgoing
and incoming CFOs. The handover has indeed proved seamless
given Will's breadth of experience and knowledge of the Group.
With the sale of the Hawthorn pub business completed in August
2021 we have been able to resume our internal audit programme
and commissioned two third-party reviews. One was to review the
Group's IT security and systems and the other to review and provide
assurance over the design and effectiveness of the key controls to
manage cash collection and bank accounts within the Group.
Further details of these reviews can be found later in this report.
As part of our normal programme and duties 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 105 of this report.
Our regular programme of meetings and discussions, supported
by our interactions with the Company’s management, external
auditors 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
15 June 2022
Committee role
• Oversight of financial reporting and internal controls
• Risk management and review of control processes
• Oversight of the external audit process
• Maintaining a whistleblowing procedure
• Assessment of management judgements and external valuers
• Oversight of the Internal Audit process
Audit Committee composition
Our Committee consists of four Independent Non-Executive
Directors (biographies are available on pages 88 to 89).
Committee Members
Colin Rutherford: Committee Chairman
Kay Chaldecott
Alastair Miller
Charlie Parker (appointed 1 April 2021)
Key Focus for 2021/22
• Monitor the smooth handover for Will Hobman as he
succeeded Mark Davies as CFO
• Continue to monitor the Group's relationship with its
External Auditors
• Oversight of the financial aspects of the Hawthorn pub
business sale
• Monitoring the successful management of the LTV reduction
• Monitoring the ESG achievements
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 was
previously the Chairman of the Audit Committee of Mitchells
& Butlers plc. Alastair Miller is a Chartered Accountant and was
previously the Chief Financial Officer of New Look Group and has
significant, recent and relevant financial experience. The Committee
as a whole has competence relevant to the sector in which the
Company operates.
During the year the Audit Committee held three meetings.
The Chief Financial Officer and the Group’s external auditors were
invited to attend the Committee meetings. The Company
Secretary acts as secretary to the Committee.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
103
AUD IT COMMITT EE RE PORT CONT I NUED
Responsibilities of the Committee during
the year
During the year, the Committee was responsible for:
• overseeing the Group’s relationship with its external 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
judgements;
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;
• oversight of third-party internal audit workstreams; 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 auditors, including assessing their
performance, effectiveness and independence annually and
recommending to the Board their reappointment or removal.
PricewaterhouseCoopers LLP (PwC) were appointed as the
Group’s external auditors in 2019. 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 is the PwC lead audit partner and, 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 auditors which it should address.
There were none.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
External auditor
The Committee considers the nature, scope and results of the
external auditors’ work, and reviews, develops and implements
a policy on the supply of any non-audit services that are to be
provided by the external auditors. It receives and reviews reports
from the Group’s external 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 2022,
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.
The Committee approved the implementation of the plan following
discussions with both PwC and management.
Audit and non-audit fees
Audit fees for the financial year ended 31 March 2022
were £510,000.
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 £95,000 in non-audit fees to PwC
for the financial year ended 31 March 2022. The non-audit fees
relate solely to PwC’s review of the interim results for the six
months to 30 September 2021.
Effectiveness and independence
The Chair of the Committee speaks regularly to the external audit
partner to ascertain if there are any concerns, to discuss the audit
reports and to ensure that the external auditors have received the
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.
GOVERNANCE 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
external auditors.
The audit plan, the audit findings and the
external auditors’ report.
Input from those subject to the external
audit, including a detailed questionnaire
completed by the finance team.
The Committee has looked to this practice aid for guidance and has ensured that assessment
of the external audit is a continuing and integral part of the Committee’s activities.
The Committee has met with the external audit partner without management at least twice
during the year 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 external auditors’ 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 and the Finance
team during the external audit process. This year the Finance team completed a detailed
questionnaire about the audit process and the working relationship with the external auditors.
This questionnaire was considered in detail by the Committee in one of its meetings.
Having regard to these matters the Committee has considered the effectiveness of the external audit process and feels that the external
auditors have 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 external auditors at the 2022 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 considered the key judgements and estimates.
Going Concern was considered a key judgement in the prior year due to the impact of COVID-19 on the Group’s financial position and
operations. In respect of the year ended 31 March 2022, the Going Concern review was no less rigorous and was given the same level
of prominence by the Committee, but the improvements made to the Group’s financial position and the recovery in operations seen
during the year, has resulted in the Committee concluding that both its Going Concern and Viability key judgements remain satisfactory.
During the year the Committee also reviewed the treatment of the Hawthorn disposal, and its presentation as a discontinued operation
as this was a material transaction completed during the year. However, the Committee did not identify any additional key judgements
or estimates in the accounting or presentation adopted in the financial statements.
The significant issue considered by the Committee in respect of the year ended 31 March 2022, which contained a significant degree
of estimation uncertainty, is set out in the table below.
Significant issue
How the issue was addressed
Valuation of properties
Changes in key estimates can have
a significant impact on the valuation
of properties. The Group has a
property portfolio recognised on its
Consolidated Balance Sheet valued
by external valuers at £609.1 million
at 31 March 2022.
The Committee and management met with Colliers, Knight Frank and Duff and Phelps (the Group’s
external valuers) 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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
105
AUD IT COMMITT EE RE PORT CONT I NUED
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. During the year as part of the disposal of the Hawthorn
pub business a full review of the procedures and processes that
the Company has in place was carried out in order to produce
a Financial Position and Prospects Procedures document (FPPP).
The findings of this review provided the Committee with additional
comfort that the Group’s system of internal controls remains fit for
purpose and robust.
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 further ’deep-dive’ discussions of the Group’s
risk register to reassess each risk on the register and its
risk scoring;
further 'deep-dive' audits on specific risks; this year it was
cyber-security and cash controls;
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 the ExCo's quarterly detailed assessment of
the risk register.
106
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
The effectiveness of the Company’s risk management and internal
control systems is reviewed annually and was last reviewed by the
Committee in May 2022. 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 section.
Internal audit function
The Group does not have an internal audit team. 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 an in-house team. The Committee
does however look to third-parties to provide an internal audit
review function. This year the Committee commissioned the
following internal audit reviews:
Cyber security
Cyber security was a new principal risk in 2021. A cyber event
can affect any company and the number of such events has
increased significantly in the UK particularly with more staff
working from home.
To address this risk and ensure the Group’s systems were
properly protected, BrightCyber were requested to undertake
a review of the Group’s IT security and systems. The outcome
of this review has been completed and found the IT systems
were secure and fit for purpose. There were a number of areas
where BrightCyber recommended improvements which
have already been implemented or will be actioned during the
coming months.
BrightCyber have also now been requested to undertake
a review of Cyber Security and IT Systems in a sample of our
shopping centres.
Cash Controls
As part of the internal audit plan, BDO were requested to scope
and carry out a review to provide assurance over the design and
effectiveness of the key controls to manage cash collection and
bank accounts within the Group. BDO’s review highlighted that
generally there was a sound system of internal control designed
to achieve system objectives and there were a number of areas
of good practice with some exceptions. BDO were therefore able
to provide moderate assurance over both the design and the
operational effectiveness of the systems the Group had in place.
Four low to medium risk recommendations for improvement
were made by the BDO review. The majority of these have now
been incorporated into the systems or will be developed further
during FY23 and will be monitored by the Committee.
GOVERNANCE 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. This period of assessment is aligned
to performance measurement and management remuneration,
and in the opinion of the Committee, 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. The Committee places 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. The Committee further tested the
Group’s performance against its stated strategy and its future
plans. Accordingly, the Committee recommended to the Board
that the statement be approved.
The Committee further focused on the appropriateness of
adopting the going concern basis in preparing the Group’s
financial statements for the year ended 31 March 2022 and
satisfied itself that the going concern basis of presentation of the
financial statements and the related disclosure is appropriate.
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 its findings to the Board. During the year the
Whistleblowing Policy was reviewed and updated. Training on
whistleblowing is 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 the 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 other employee and wider
stakeholder compliance policies. This included the Bribery Policy
and the Gifts and Hospitality Policy and the registration process f
or gifts and hospitality. Training has been provided to staff on
these policies and the Committee regularly reviews the Gifts and
Hospitality register.
Statement of compliance
The Company is not a constituent of the FTSE 350, however 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
and 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;
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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
107
AU DIT COMMITT EE RE PORT CONT I NUED
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 Group’s position and performance, business model and strategy.
To ensure this is the case the following process is in place:
Experienced Team
• 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 CFO, Sustainability Manager, Director
of Communications and IR, Company Secretary
• as narrative sections are prepared they are circulated to Board and ExCo members to review and comment
Senior Review
•
the draft Annual Report is given to other staff members not involved in the drafting process to read and feedback on its fairness,
balance and understandability
Staff Review
•
the Committee reviews the Annual Report on behalf of the Board, taking into account the comments made by the Board and
reports issued by PwC and makes recommendations to the Board
Committee oversight and review
Controls and confirmation
•
the Committee satisfies itself that the controls over the
accuracy and consistency of information presented in the
Annual Report are robust and that the information is presented
fairly (including the calculations and use of alternative
performance measures)
•
the Committee confirms 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
108
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE RE MUNE RATI ON COMMI TT EE RE PORT
Remuneration
Committee Report
Alastair Miller
Committee Chairman
Dear Shareholders
On behalf of the Board, I am pleased to present the Remuneration
Committee Report for the financial year ended 31 March 2022.
This is the second year of the application of the Remuneration
Policy approved by the shareholders at the 2020 AGM and there
have not been any significant changes to the operation of the
policy. In this statement I have summarised the link between
remuneration and performance, our decisions on remuneration for
FY22 and how we will operate the policy in FY23.
FY22 has been a successful year for NewRiver despite the
continuing impact of COVID-19 on the wider economy and the
general uncertainty around various restrictions imposed during the
year. Our community assets have proven to be resilient
throughout this period and have under-pinned our performance
for the year. We successfully sold our Hawthorn Pub business
which has lowered our LTV to a more sustainable level and our
balance sheet is now well positioned to take advantage of
opportunities that we will seek out over the coming year. Our
financial and operational performance allowed us to recommence
distributing dividends under our new dividend policy from the end
of FY21 and this has continued throughout FY22. The Committee
has had regular updates on workforce pay and benefits
throughout this year and the health and wellbeing of our staff has
remained a key priority. We are mindful of the current inflationary
pressures which are driving up the cost of living and will be
recognising this in pay awards for our staff during FY23.
It is against this backdrop that the Committee has carried out its
duties and made its decisions.
Implementation of the policy in FY22
Base Salary
As reported in the FY21 Remuneration Report base salaries
remained unchanged during FY22 for both the Executive Directors
and the members of ExCo. The wider team’s salaries however did
benefit from a pay review.
Annual Bonus
Following a scale back in the bonus opportunity in FY21 from 125%
of salary to 100% of salary, the Committee reset the bonus
opportunity for the Executive Directors at 125% of salary in FY22 in
accordance with our Remuneration Policy.
The strong performance of the business in FY22 has resulted in a
solid performance against the FY22 bonus targets, which were
consistent with the targets set in FY21, the measures being closely
aligned to business strategy and focused on business priorities.
The resultant out-turn was a 75% of maximum for Allan Lockhart
and an 85% of maximum for Will Hobman whose bonus will be pro
rata to reflect the seven months in which Will has been CFO.
Mark Davies, who stood down from the Board on 28 July 2021,
received a bonus on a pro rata basis to reflect his contribution to
the successful completion of the Hawthorn disposal.
In FY20 and FY21, the Committee exercised discretion when
approving the appropriate bonus for the Executive Directors. In
FY22, the Committee feel that in recognition of the excellent
progress made by the business during the year, the outcome from
the FY22 bonus targets reflects a fair reward for the efforts and
performance of the Executives and as such have agreed and
confirmed the bonus out-turns.
Long Term Incentive Plan
Awards granted in 2019 due to vest in 2022 by reference to
performance over the previous three years were based on Total
Shareholder Return (TSR) and relative Total Accounting Return
(TAR). As the minimum hurdle was not met for either measure, the
awards will lapse. The Committee is comfortable that the level of
vesting is in line with underlying performance and shareholder
experience over the performance period.
The Committee is comfortable that the Policy operated as
intended during the year.
Other considerations during the year
During the year the Committee had oversight of the reward and
compensation packages that operate across the Company, which
are considered competitive. I am the appointed designated
Non-Executive Director who has the responsibility of ensuring that
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
109
RE M UNE RATION C OMMI TT EE RE POR T CO NTI NUED
during the policy period, Will Hobman's Company pension
contributions are in line with the workforce, currently at 4%
of base salary.
Annual Bonus: Executive Directors will have the opportunity
to earn a bonus up to a normal maximum of 125% of salary. In line
with FY22, 75% of the bonus will be based on corporate and
financial measures, and for FY23 we have introduced an element
based on absolute growth in Total Accounting Return (TAR). 25%
will remain based on strategic measures (including measurable
ESG objectives consistent with the Company's ESG commitments
and strategy). Thirty percent of any bonus paid will be deferred
into shares for two years.
Long-term incentives: Grant levels will be 100% of base salary.
In line with FY22 grants, performance will be assessed against
relative TSR and relative TAR vs a peer group of UK REITs.
Awards must be held by Executive Directors for a further two years
after vesting.
Closing remarks
We believe we have taken sensible steps in ensuring the robust
operation of our Remuneration Policy with recognition to the
experience of both shareholders, employees and other
stakeholders. Bonuses have been awarded to the wider team
to ensure alignment with the level of bonuses awarded to the
Executive Directors.
We have exercised pay restraint for the Executive Directors and
members of ExCo whilst ensuring that the wider workforce have
received pay increases recognising the impact of the significant
inflationary pressures which currently prevail.
We welcome feedback and if shareholders have any questions
about remuneration generally, or the contents of the report,
I can be contacted through our investor relations email at
info@nrr.co.uk.
My fellow Directors and I intend to attend the AGM and we would
be pleased to answer any questions you may have about the
Committee’s work.
Alastair Miller
Committee Chairman
15 June 2022
the Board successfully engages with the 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. Staff forums are held to ensure that
there is an opportunity for staff to raise questions. We also 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.
The Committee consults with its larger shareholders on executive
pay matters, where considered appropriate. As there are no
significant changes in the implementation of the Remuneration
Policy, we have not carried out a further formal consultation with
shareholders in relation to the policy or its operation in FY22.
However, we do intend to consult shareholders and employees in
relation to the new policy, which will be proposed for shareholder
approval at the 2023 AGM and I am always happy to make myself
available to shareholders to discuss any concerns or feedback
shareholders may have.
Board changes
Will Hobman has succeeded Mark Davies as CFO and was
appointed on 20 August 2021. Prior to this, Will was the Financial
Director. Will's starting salary is £325,000. This salary is below that
of the former CFO's salary. The salary was set taking into account
that this will be Will Hobman's first CFO role and provides head
room to increase the base salary with more experience in the role.
His pension contribution is 4%, in line with the rate applying to the
majority of the workforce and the other elements of his package
are in line with the remuneration policy, with full details set out
later in this report.
Implementation of the Policy in FY23
The current Remuneration Policy enters its third year in FY23 and
will operate consistently during this year. When considering the
implementation of the Remuneration Policy, the Committee
considered several factors including pay ratios and the gender pay
gap. The outcome of the review was that our current approach
remains appropriate. Therefore, there will be no significant
changes to the implementation of the Policy in FY23.
The implementation of the Remuneration Policy for FY23 is
outlined on page 127. The key decisions made by the Committee
in relation to FY23 include:
Base salary: Similar to FY22, there will be no increases in base
salary for either the Executive Directors or ExCo. The inflationary
pressures being felt throughout the economy have informed the
level of increase across the wider workforce to ensure pay awards
which reflect those inflationary pressures and ensure we reward
competitively with the wider market.
Pensions: The Company currently contributes 15% of base salary
for Allan Lockhart as an existing Director when the policy was
first implemented. This will reduce at the end of the policy period
to the rate applying to the workforce. As a new Director, appointed
110
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE Remuneration at a glance
FY22 Annual Bonus Performance
FY20-22 Performance Share Plan
Corporate and financial measures (75% weighting)
Measure
Achievement (% of max)
Measure
Achievement (% of max)
e
t
a
r
o
p
r
o
C
Total return vs
IPD All Retail
50%
Earnings yield (FFO)
100%
Relative TSR vs FTSE
All Share Index
Relative Total Accounting
Return vs Peer Group
Total
0%
0%
0
l
a
i
c
n
a
n
F
i
LTV
100%
Strategic measures (25% weighting)
Director
Achievement (% of max)
Allan Lockhart
40%
c
i
g
e
t
a
r
t
S
Implementation of Policy in FY23
Base Salaries
• Allan Lockhart: £470,000 no
increase from previous year
• Will Hobman: £325,000
Benefits
• No change
Will Hobman
80%
Pension
• Allan Lockhart: 15% of salary to
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 FY21/22
)
£
(
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
£984,462
1m
750k
£637,339
500k
250k
0k
£585,323
£399,453
£326,704
2022
2021
2022
2021
2022
Allan
Lockhart
Mark
Davies
Will
Hobman
Salary
Pension
Annual bonus
reduce in FY24 to align with staff
• Will Hobman: 4% of salary
Annual Bonus • Maximum opportunity is 125%
of salary
• Performance conditions:
• 75% Corporate Targets
• 25% individual strategic objectives
• 30% deferred into shares for
two years
Long Term
Incentive Plan
• Grant levels will not exceed 100%
of salary
• Performance conditions:
• Relative TSR (50%)
• Relative TAR (50%)
two-year post-vesting holding
period applies
•
Shareholding
requirements
• 200% of salary
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
111
RE M UNE RATION C OMMI TT EE RE POR T CO NTI NUED
Summary Remuneration Policy
The Remuneration Policy was approved by shareholders at the 2020 Annual General Meeting on 14th August 2020. 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
Fixed
Salary
Market competitive
remuneration base
reflecting role,
responsibilities, skills
and experience.
Pension
To provide
competitive post-
retirement benefits.
To assist with
recruitment and
retention.
Performance
Target
Not
applicable
Not
applicable
Operation
Maximum
Normally reviewed annually, effective
There is no prescribed maximum.
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.
The Company currently contributes
15% of base salary for Allan Lockhart as
an existing Director when the policy
was first implemented. This will reduce
at the end of the policy period.
As a new Director, appointed during
the policy period, Will Hobman's
Company pension contributions are in
line with the UK workforce at 4% of
base salary.
The Company reserves the right to
pay a non-pensionable cash
supplement in lieu of pension
contributions.
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. This currently only applies
to one Executive Director (CEO).
Future Executive Directors will
receive Company contributions in
line with the UK workforce, currently
4% of base salary. Will Hobman, an
Executive Director who was
appointed during the year, has a
pension contribution of 4% in line
with the UK workforce.
Benefits
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.
Benefits are set at a level which the
Committee considers appropriate
when compared to the Company’s
listed real estate investment
trust peers.
Not
applicable
Other benefits such as relocation
allowances may be offered
if considered appropriate and
reasonable by the Committee.
There is no prescribed maximum.
112
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE 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.
30% 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 2022
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RE M UNE RATION C OMMI TT EE RE POR T CO NTI NUED
Executive Directors
Element
Variable
Shareholding
Requirement
Performance
Target
Not applicable
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).
Maximum
Fee increases are applied
in line with outcome
of the review.
Performance
Target
Not applicable
Chairman and Non-Executive Directors
Element
Purpose and
Link to Strategy
Operation
Fees
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).
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE 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.
• Examples of the caps under the Remuneration Policy are
illustrated in the scenario charts.
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 2022
115
RE M UNE RATION C OMMI TT EE RE POR T CO NTI NUED
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
Will Hobman
Margaret Ford
Colin Rutherford
Kay Chaldecott
Alastair Miller
Charlie Parker
Date of Appointment
18 August 2016
20 August 2021
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.
116
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE 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 FY23 financial year. Four scenarios have been illustrated for each Executive Director:
Allan Lockhart
Will Hobman
)
£
(
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
100.0%
56.9%
33.9%
29.6%
£339k
£1,071k
£1,233k
13.2%
30.4%
26.4%
37.9%
32.9%
£624k
13.0%
32.5%
Minimum On Target Maximum Maximum
Minimum On Target Maximum Maximum
100.0%
54.4%
31.7%
27.5%
with
Share Price
Increase
Fixed Pay
Annual Bonus
LTIP
with
Share Price
Increase
LTIP value with 50%
share price growth
Minimum performance:
On target performance:
• comprising the minimum remuneration receivable (being normal base
salary, pension and benefits calculated using the 2021/22 figures;
• comprising fixed pay, annual bonus payment at 50% of the
maximum opportunity and long-term incentive awards vesting
at 25% of maximum opportunity;
Maximum performance:
• comprising fixed pay, 100% of annual bonus and 100% vesting
of long-term incentive awards, and
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 2022
117
RE M UNE RATION C OMMI TT EE RE POR T CO NTI NUED
Remuneration Report
This section sets out how the Directors’ Remuneration Policy was
implemented during the financial year ended 31 March 2022.
Where stated, disclosures regarding Director’s remuneration
have been audited by the Company’s external auditors, PwC.
This section, together with the Chairman’s Statement, is subject
to an advisory vote at the 2022 AGM.
Remuneration Committee
The Remuneration Committee is comprised of all the Non-
Executive Directors, including the Chair. Charlie Parker joined the
Committee on 1 April 2021. The Remuneration Committee meets
at least four times a year, together with adhoc meetings when
required. It met seven times during the year and all members
attended the meetings. A Board and Committee attendance chart
is contained in the Governance report on page 97:
Committee Members
Alastair Miller: Committee Chairman
Kay Chaldecott
Margaret Ford
Colin Rutherford
Charlie Parker
The Chief Executive Officer and Chief Operating and People
Officer 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. Terms of
reference for the Remuneration Committee can be found on the
Company’s website.
118
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
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;
• consider and set 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 FY22
The Committee focussed on the following items within its remit
during the year:
• considering carefully the continued 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;
•
reviewing a report from Korn Ferry on developments in market
practice in remuneration matters;
• setting the salary and remuneration arrangements for the
incoming CFO;
• setting the bonus KPIs for the CEO and CFO for FY22 to align
with the Company’s strategy;
• considering Mark Davies' bonus as a Director;
• considering Mark Davies’ bonus as an employee in relation to
Hawthorn;
• considering the treatment of Hawthorn Good Leavers’ share
awards; and
• determining the grant level and performance conditions for the
FY22 PSP award;
• approving ExCo bonuses.
GOVERNANCE Statement of voting at the Annual General Meeting
The following table summarises the details of votes cast for and against the Directors’ remuneration policy and the Directors’ remuneration
report at the 2020 and 2021 AGM, along with the number of votes withheld.
That the Directors’ remuneration report be received
and approved (2021 AGM)
That the Directors’ remuneration policy be received
and approved (2020 AGM)
Votes for
%
Votes against
Total shares for
and against
%
Votes withheld
123,377,051
93.01
9,276,709
6.99 132,653,760
2,241,038
160,581,406
94.19
9,902,752
5.81
170,484,158
89,031
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 FY22 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 £36,954 in the year ended 31 March 2022. 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 FY22 (audited)
The following tables show a single figure total of remuneration for the year ended 31 March 2022 for each of the Directors and compares
this figure to the prior year.
Executive Directors
Allan Lockhart
Will Hobman3
Mark Davies4
Financial
Year
2022
2021
2022
2021
2022
2021
Salary1 £
Benefits2£
Pension5£
470,000
470,000
189,583
–
136,000
408,000
3,337
2,839
855
–
304
1,883
70,500
70,500
7,583
–
20,400
61,200
Subtotal for
fixed pay £
Cash
bonus £
543,837 308,438
65,800
543,339
141,002
198,021
–
–
119,000
156,704
79,968
471,083
Value
of bonus
deferred into
shares £
Long-term
incentive
plans £
Subtotal
for variable
pay £
132,187
28,200
60,430
–
51,000
34,272
_
–
_
–
-
–
440,625
94,000
201,432
–
170,000
114,240
Total £
984,462
637,339
399,453
–
326,704
585,323
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. Will Hobman was appointed to the Board on 20 August 2021 and the remuneration shown is from this date. Prior to this, Will Hobman was the Financial Director
(below Board level role).
4. Mark Davies retired from the Board on 28 July 2021. The amounts disclosed represent the remuneration for the period that Mark was an Executive Director.
5. Allan Lockhart and Mark Davies received a pension contribution of 15% of salary. Will Hobman received a pension contribution of 4% of salary.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
119
RE M UNE RATION C OMMI TT EE RE POR T CO NTI NUED
Non-Executive Directors
Margaret Ford
Kay Chaldecott1
Alastair Miller2
Charlie Parker3
Colin Rutherford4
Financial Year
Base Fee £
Audit Committee
Chairman £
Remuneration
Committee
Chairman £
Senior Independent
Non-Executive
Director £
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
160,000
160,000
50,000
50,000
50,000
50,000
50,000
25,000
50,000
50,000
–
–
–
–
–
3,324
–
–
7,500
4,176
–
–
–
3,324
7,500
4,176
–
–
–
–
–
–
–
–
7,500
7,500
–
–
–
–
Total £
160,000
160,000
50,000
53,324
65,000
65,000
50,000
25,000
57,500
54,176
1. Kay Chaldecott stepped down as Remuneration Committee Chair on 10 September 2020.
2. Alastair Miller stepped down as Audit Committee Chair and took up the role of Remuneration Committee Chair on 10 September 2020.
3. Charlie Parker was appointed on 10 September 2020.
4. Colin Rutherford was appointed Audit Committee Chair on 10 September 2020.
Annual bonus for the year to 31 March 2022 (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.
The performance against measures to 31 March 2022 are set out in the tables below. For Allan Lockhart and Will Hobman, the bonus was
subject to relative Total Return, Earnings yield (UFFO), LTV and strategic objectives.
Weighting
Threshold
25% of
maximum
Target
50% of
maximum
Stretch
100% of
maximum
Actual
result
Achievement % of maximum
available under that element
Pay-out as a percentage of
total bonus
Allan
Lockhart
Will
Hobman
Allan
Lockhart
Will
Hobman
20%
At index
25% <5% below
10% ahead 20% ahead
>5% or
above
26m
target
50%
50%
28.3m
100%
100%
30%
<42%
<40%
<38%
34.1%
100%
100%
10%
25%
30%
10%
25%
30%
25%
See
overleaf
40%
80%
10%
20%
Measure
Corporate
Total Return vs
IPD All Retail
Earnings
yield (UFFO)
Financial
LTV
Strategic
Strategic
objectives
A summary of the strategic objectives for the Allan Lockhart and Will Hobman are shown below:
Strategic objectives
Weighting
Assessment of performance by the Committee
Achievement
Allan Lockhart
Cost reductions: Unlocking £1m, £2m and £2.5m
of savings
Achieve further disposals from the Workout
portfolio worth £10m, £20m, £30m
7.5%
10%
£1.0m
£8.5m
Materially improve
GRESB Score
Materially improve EPRA
Score
ESG
Total
3.75% GRESB score improved from 60% to 68%
EPRA improved two categories from
Bronze to Gold
3.75%
25%
2.5%
0%
3.75%
3.75%
10%
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE
Strategic objectives
Weighting
Assessment of performance by the Committee
Achievement
Will Hobman
Cost reductions: Unlocking £1m, £2m and £2.5m
of savings
To complete refinance strategy
Materially improve
GRESB Score
Materially improve EPRA
Score
ESG
Total
7.5%
£1.0m
Repayment of Term Loan of £165m,
reduction in RCF of £170m and reduction in
annualise debt costs of £7m
10%
3.75% GRESB score improved from 60% to 68%
EPRA improved two categories from
Bronze to Gold
3.75%
25%
2.5%
10%
3.75%
3.75%
20%
Based on performance to 31 March 2022, the annual bonus outcome for Executive Directors during the year are shown below.
The Committee is satisfied that no adjustments to the pay-outs is required, and that the outcome is reflective of underlying performance.
Executive
Allan Lockhart
Will Hobman
Annual Bonus outcome
% of maximum
% of salary
Bonus outcome
75%
85%
93.75%
106.25%
£440,625
£201,432
30% of the bonus will be deferred into shares for two years. Deferred shares are subject to continued employment.
Mark Davies, who stood down from the Board on 28 July 2021, received a bonus on a pro rata basis of a maximum of 125% of salary
to reflect his contribution to the successful completion of the Hawthorn Pubs disposal. The Committee set the bonus opportunity based on
the Committee’s assessment of the financial performance of the Hawthorn business (80%) and Mark’s performance and contribution to the
completion of the Hawthorn disposal (20%). The Remuneration Committee assessed Mark’s performance for the proportion of the financial
year that he served as an Executive Director and determined that he should be paid a pro rata bonus of £170,000. This reflected the very
strong performance of the business at that time and Mark's contribution to the strategy to create the right conditions for a complex disposal in
a very challenging market environment for a Hospitality business, and the significant value that this has brought to the Group. In-line with the
Director’s Remuneration Policy this was payable 30% in deferred shares, which will vest on the second anniversary of grant.
Long-term Incentive Plans (audited)
Vesting of Performance Share Plan awards
The Performance Share Awards were granted to Allan Lockhart, Will Hobman and Mark Davies on 27 June 2019. The performance targets
for these awards and the performance to 31 March 2022 are shown below:
Measure
25% of maximum
75% of maximum
100% of maximum
Weighting
Threshold
Target
Stretch
Actual result
Total Shareholder Return vs FTSE All
Share (excluding investment trusts)
Total Accounting Return ranking
vs. UK REITs1
50%
50%
Median
62.5 percentile
Upper Quartile
Below median
Median
62.5 percentile
Upper Quartile
Below median
Total
Vesting (%
of max)
0%
0%
0%
1. The UK REIT peer group included the following companies Segro, Land Securities Group, British Land, Derwent London, Hammerson, Shaftesbury, Unite Group,
Tritax Big Box REIT, Capital & Counties Properties, Great Portland Estates, Workspace Group, Big Yellow Group, Assura, Grainger, Londonmetric Property, Safestore
Holdings, UK Commercial Property REIT, Primary Health Properties and CLS Holdings.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
121
RE M UNE RATION C OMMI TT EE RE POR T CO NTI NUED
PSP awards granted in the year to 31 March 2022 (audited)
The following Performance Share Plan awards were granted to Executive Directors as nil cost options on 7 September 2021:
Executive
Allan Lockhart
Will Hobman
Value of awards at
grant date1 (% salary)
Number of shares
comprising award
% of award vesting
at threshold
£470,000 (100%)
£205,000 (100%2)
597,964
260,814
25%
25%
Vesting Period
End Date
7 Sept 2024
7 Sept 2024
Holding Period
End Date
7 Sept 2026
7 Sept 2026
1. The closing price on the day before the grant date has been used to determine the number of shares comprising the award. This was 78.6p.
2. Prior to appointment as CFO, Will Hobman was NewRiver REIT Finance Director. The grant was 100% of Will Hobman's salary at 31 March 2021 prior to his
appointment as a Director.
Performance will be assessed from 1 April 2021 to 31 March 2024. 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%.
2. 50% of each award may vest based on the Company’s TSR compared to a group of UK REITs.
3. 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 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
CLS HOLDINGS
GRAINGER
LONDONMETRIC PROPERTY
SAFESTORE HOLDINGS
UK COMMERCIAL PROPERTY
REIT
PRIMARY HEALTH
PROPERTIES
Deferred Shares granted in the year to 31 March 2022 (audited)
Awards of Deferred Bonus Shares over the Company's shares were granted to Executive Directors as nil cost options in FY22 as shown
below. The deferred share awards are based on 30% of the bonus awarded for the year to 31 March 2021. Vesting of the awards is
normally subject to continued employment at the date of vesting in two years' time.
Executive
Allan Lockhart
Mark Davies
Will Hobman
Number of shares
Face value of the
granted1,2
award at grant date
Grant date
Vest date
35,878
£28,200
43,603
65,764
£34,272
£51,000
20,992
£16,500
7 September
2021
7 September
2021
1 November
20213
7 September
2021
7 September
2023
7 September
2023
1 November
2023
7 September
2023
1. The closing price on the day before the grant date has been used to determine the number of shares comprising the award. This was 78.6p for the September
awards and 77.55p for the November award.
2. Awards are not subject to performance conditions
3. Deferred bonus award for the period as a Director (1 April 2021 to 28 July 2021)
4. Vesting of awards is normally subject to continued employment unless an employee leaver is deemed a 'Good Leaver'.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE Summary of Directors Interests (audited)
The beneficial interests of the Executive Directors in share awards and share options as at 31 March 2022 are shown in the following tables.
Plan
Vesting by
USOP
Vested
DBP May 2020
PSP May 2021
Jun 2022
PSP
DBP
Jun 2021
Aug 2023
PSP
Sept 2023
DBP
Sept 2024
PSP
Allan Lockhart
Share price at
date of
award £
Exercise
price £
At
31 March
2021
Dividend
equivalent
shares added3
Granted
Lapsed
Exercised
2.35
2.86
2.98
1.77
1.79
0.63
0.78
0.78
2.35
nil
nil
nil
nil
nil
nil
nil
–
338,000
–
62,194
–
170,772
–
290,915
–
66,952
–
497,354
–
35,878
– 597,964
1,426,187 633,842
– (338,000)
–
–
(170,772)
–
–
24,682
–
–
–
42,198
–
1,621
27,030
–
(508,772)
95,531
–
–
–
–
–
–
–
–
At
31 March
2022
–
62,194
–
315,597
66,952
539,552
37,499
624,994
1,646,788
Plan
Vesting by1
PSP May 2021
Jun 2022
PSP
DBP
Jun 2021
Aug 2022
DBP
Aug 2023
PSP
Sept 2023
DBP
Sept 2024
PSP
Will Hobman
Share price at
date of
award £
Exercise
price £
At
31 March
20212
Dividend
equivalent
shares added3
Granted
2.98
1.77
1.79
0.63
0.63
0.78
0.78
nil
nil
nil
nil
nil
nil
nil
31,640
64,991
10,050
45,044
158,730
–
–
–
–
–
–
–
20,992
260,814
310,455 281,806
–
5,513
–
3,821
13,467
948
11,789
35,538
Lapsed
Exercised4
(31,640)
–
–
–
–
–
–
(31,640)
–
–
(10,050)
–
–
–
–
(10,050)
At 31 March
2022
–
70,504
–
48,865
172,197
21,940
272,603
586,109
Grant Date
Sep 2011
May 2018
May 2018
Jun 2019
Jun 2019
Aug 2020
Sept 2021
Sept 2021
Total
Grant Date
May 2018
Jun 2019
Jun 2019
Aug 2020
Aug 2020
Sept 2021
Sept 2021
Total
1. A holding period of two years is applied following vesting
2. At date of appointment 20 August 2021
3. The right to dividends is accrued and is only payable if and to the extent that the awards vest.
4. Will’s awards were exercised on 03 September 2021, some were sold to cover tax at a share price of 78.9p. The aggregate gain from exercising this award was
£7,929.45
Grant Date
May 2018
Jun 2019
Jul 2019
Aug 2020
Total
Plan
Vesting by
PSP May 2021
Jun 2022
PSP
DBP
Jun 2021
Aug 2023
PSP
Share price at
date of
award £
Exercise
price £
2.86
1.77
1.79
0.63
nil
nil
nil
nil
Mark Davies
At
31 March
2021
160,725
252,540
58,587
431,746
903,598
Aggregate
Dividend
equivalent
shares added
Granted
Lapsed
Exercised
–
–
–
–
–
–
(160,725)
– (252,540)
–
–
–
–
(413,265)
–
–
–
–
–
–
At 28 July
2021
–
–
58,587
431,746
490,333
1. Mark stepped down from the Board on 28 July 2021
DBP = Deferred Bonus Plan.
PSP = Performance Share Plan.
USOP = Unapproved Share Option Plan.
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 an the remaining unexercised options lapsed in the year.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
123
RE M UNE RATION C OMMI TT EE RE POR T CO NTI NUED
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. Beneficially owned
shares, the net of tax value of vested and unvested DBP awards plus vested but unexercised PSP awards may be counted towards
the value of the executives’ shareholdings for the purposes of the 200% holding guideline.
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
2022
Value of
beneficially
owned
shares as
% of salary1
Vested DBP
awards held
at
31 March
20222
Vested but
unexercised
PSP awards
held at
31 March
2022
Unvested
DBP
awards held
at
31 March
2022
Value of
holdings
including
vested and
unvested
DBP and
PSP1
Unvested
PSP
awards held
at
31 March
2022
Allan Lockhart
Will Hobman3
Mark Davies4
Margaret Ford
Kay Chaldecott
Alastair Miller
Colin Rutherford
Charlie Parker
347,355
111,035
291,315
106,440
39,445
68,746
–
11,454
63%
50%
61%
–
–
–
–
–
129,146
–
_
–
–
234,188
–
–
–
–
–
–
–
–
37,499
70,805
114,410
–
–
–
–
–
94% 1,480,143
515,304
82%
_
134%
–
–
–
–
–
–
–
–
–
–
Total held
as at
31 March
2022
1,994,143
697,144
639,813
106,440
39,445
68,746
–
11,454
Shareholding
% of salary
unmet
unmet
N/A
N/A
N/A
N/A
N/A
N/A
1. Based on the closing share price of 85.6p as at 31 March 2022 and salary for 2021/22. Shareholding guidelines, under the Remuneration Policy, require the CEO and
CFO to hold a minimum number of shares with a value in excess of 200% of base salary. Will Hobman’s calculation is based on salary paid post appointment as CFO.
2. Includes dividend equivalent shares added to that date. Although vested these awards have not yet been exercised.
3. Will Hobman was appointed on 20 August 2021. The shareholding as a percentage of salary has been calculated on the basis of his prorated salary.
4. Mark Davies retired from the Board on 28 July 2021, and his shareholding is at this date. He remains subject to post-employment shareholding requirements.
5. All awards are nil cost awards.
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 2022 to 6 June 2022, being the latest practicable date before
the publication of this Annual Report.
Payments to past Directors
Payments to former Director: Mark Davies
Mark Davies stepped down from the Board and as CFO on 28 July 2021. Mark remained in the employment of the Company until
30 September 2021.
Mark’s salary, pension and benefits for the proportion of the year served as an Executive Director were:
Earned in relation to service as an Executive Director to 28 July 2021
Salary
£136,000
Benefits
£304
Pension
£20,400
Bonus in relation to qualifying services as an Executive Director
The Committee set performance targets at the start of the FY21/22 financial year based on the Committee’s assessment of the financial performance
of the business and Mark’s performance and contribution to the successful completion of the Hawthorn disposal. The Remuneration Committee
assessed Mark’s performance for the proportion of the financial year that he served as an Executive Director and determined that he should be paid
a bonus of £170,000. This amount represented 125% of salary, pro rata to the proportion of the year served as an Executive Director. In line with the
Directors’ Remuneration Policy this was payable 30% in deferred shares, which vest on the second anniversary of grant.
Outstanding Share Awards
The status and terms of the unvested Deferred Bonus Shares and Performance Share Plan awards were unaffected by Mark’s stepping
down from the Board and remaining an employee, including deferral periods and post vest holding requirements. Mark did not receive
a PSP award during the 2021/22 financial year.
Post-Employment shareholding requirement
Mark was required to abide by the post-employment shareholding requirement in accordance with the remuneration policy. The effective date
is 28 July 2021 being the date he stood down from the Board and qualifying shares must continue to be held for two years from this date.
124
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE Remuneration arrangements after stepping down from the Board
Ongoing contractual and remuneration arrangements were unchanged for the period of time as an employee as CEO of Hawthorn. Separate
from any payment for qualifying services, consistent with other Hawthorn employees, Mark was eligible and received a further bonus
payment in his capacity as an employee, based on Mark's performance and contribution to the successful completion of the Hawthorn Pub
disposal. Subsequent to the disposal and, again, consistent with other Hawthorn employee leavers, Mark was treated as good leaver for the
purposes of his share awards when he left the Hawthorn business.
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
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
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 2022. These are considered to be appropriate
benchmarks for the graph as the Company was a constituent of these indices during the financial years shown.
2012
2013
2014
2015
2016
2017
2018
2019
20201
2021
David
Lockhart
David
Lockhart
David
Lockhart
David
Lockhart
David
Lockhart
David
Lockhart
David
Lockhart
Allan
Lockhart
Allan
Lockhart
Allan
Lockhart
2022
Allan
Lockhart
Total
remuneration (£) 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
70.0
36.5
32.6
66.7
76.3
77.3
13.1
–
–
–
–
911,972 543,239 637,339 984,462
64.0
–
–
–
20.0
75.0
–
–
1 Allan Lockhart received no bonus in 2020
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 overleaf, along with the total pay for the employees at the three quartiles.
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. This method is, in the
Committee’s view, the most comprehensive and accurate reflection of the remuneration picture across our employee population.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
125
RE M UNE RATION C OMMI TT EE RE POR T CO NTI NUED
The ratio calculated by reference to actual pay rates on 31 May 2022 and based on the CEO’s full salary. The total employee pay at the
50th and 75th percentile has changed following the sale of the Pubs business leading 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
FY22
FY21
FY20
Method
Option A
Option A
Option A
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
7:1
7:1
8:1
12.7:1
9:1
17:1
17.2:1
19:1
34:1
The total pay for the individuals identified at the Lower quartile, Median and Upper quartile positions are set out below:
Upper quartile
Median
Lower quartile
FY2022
Total Pay
£141,894
£77,757
£57,365
Annual percentage change in remuneration of Directors and employees
The table below sets out the percentage change in base salary, value of taxable benefits and bonus for all the Directors compared with
the average percentage change for employees.
Directors
Executive Directors
Allan Lockhart
Mark Davies1
Will Hobman2
Non-Executive Directors
Margaret Ford
Kay Chaldecott3
Alastair Miller
Charlie Parker4
Colin Rutherford5
All Employees6
FY21/FY22
FY20/FY21
Salary/fee
Benefits
Annual Bonus
Salary/fee
Benefits
Annual Bonus
0%
0%
N/A
0%
-6%
0%
0%
6%
5.15%
18%
-50%
N/A
N/A
N/A
N/A
N/A
N/A
20%
369%
356%
N/A
N/A
N/A
N/A
N/A
N/A
96%
0%
0%
N/A
0%
0%
0%
0%
0%
0%
0%
0%
N/A
N/A
N/A
N/A
N/A
N/A
0%
100%
100%
N/A
N/A
N/A
N/A
N/A
N/A
100%
1. Mark Davies stepped down from the Board on 28 July 2021. For ease of comparison we have compared his fees on a pro rated basis.
2. Will Hobman was appointed to the Board on 20 August 2021 and so no comparison can be made.
3. Kay Chaldecott stepped down as Remuneration Committee Chair on 10 September 2020 therefore the fees Kay received decreased.
4. Charlie Parker was appointed on 10 September 2020.
5. Colin Rutherford was appointed Audit Committee Chair on 10 September 2020 therefore the fees Colin received increased.
6. 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 FY22 and FY21.
Total spend on employee pay1, 2
Total distributions to shareholders
Share Buy Backs
FY22
£’000
7,614
21,661
–
FY21
£’000
6,851
_
–
% difference
from prior year
11%
100%
0%
1. Includes salaries, bonuses, social security costs and pension costs as shown in the notes to the Financial Statements.
2. For comparison purposes Hawthorn employees have been removed from the spend on employee pay as they were only employed in FY22 for part of the year.
126
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE
What the Executive Directors can earn in FY23
The section below sets out the planned implementation of the remuneration policy in FY23. There are no significant changes to the
proposed implementation of the remuneration policy.
Salaries and fees
The base salaries and fees for FY23 are set out below, which are unchanged from the prior year:
Allan Lockhart – Chief Executive Officer
Will Hobman – Chief Financial Officer
salary for FY23
£470,000
£325,000
Fees payable to the Chairman and Non-Executive Directors will be in line with FY22 and 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
1. The Non-Executive Directors’ fees were last increased in April 2018
0% increase
0% increase
Fees1 for FY23
£160,000
£50,000
£7,500
£7,500
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.
For the FY23 annual bonus, 25% will be based on TAR compared to the relevant IPD Index, 25% will be based on Underlying Funds From
Operations, 10% will be based on LTV and 15% will be based on absolute growth in TAR and 25% will be based on personal strategic
objectives. This revised mix of measures is considered by the Committee to provide a strong link to the business strategy. 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 2023. 30% of the bonus will be deferred into shares for two years.
Long-term incentives – Performance Share Plan
The Performance Share Awards will be granted with the performance targets as shown below:
Measure
Total Shareholder Return vs FTSE All Share
(excluding investment trusts)
Total Accounting Return ranking
vs. UK REITs1
Weighting
Threshold
Target
Stretch
25% of maximum
75% of maximum
100% of maximum
50%
50%
Median
62.5 percentile
Upper Quartile
Median
62.5 percentile
Upper Quartile
1. The UK REIT peer group included the following companies Segro, Land Securities Group, British Land, Derwent London, Hammerson, Shaftesbury, Unite Group,
Tritax Big Box REIT, Capital & Counties Properties, Great Portland Estates, Workspace Group, Big Yellow Group, Assura, Grainger, Londonmetric Property, Safestore
Holdings, UK Commercial Property REIT, Primary Health Properties and CLS Holdings.
Grant levels will not exceed 100% of base salary. Awards must be held by Executive Directors for a further two years after vesting.
Signed on behalf of the Board
Alastair Miller
Committee Chairman
15 June 2022
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
127
DIRECTORS' REPORT
Directors’ Report
The Directors present their report together with the audited
consolidated financial statements and the report of the auditor for
the year ended 31 March 2022.
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 sector. Details of the Group’s principal subsidiary
undertakings are set out on pages 180 to 181.
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 91.
Results and dividend
The Directors have proposed a final dividend of 3.3 pence per
share. Together with the interim dividend of 4.1 pence, the total
dividend for FY22 is 7.4 pence. The final dividend is payable on
2nd September 2022 to shareholders on the register as at 29
July 2022. 3.3 pence will be paid as a PID net of withholding tax
where appropriate. The Company will be offering a scrip dividend
alternative. A dividend of 3.0 pence per share was paid in FY21.
The Board
The Directors, who served throughout the year unless stated
otherwise, are detailed below:
Margaret Ford
Allan Lockhart
Will Hobman
Mark Davies
Kay Chaldecott
Alastair Miller
Charlie Parker
Colin Rutherford
Service in the year 31 March 2022
Served throughout the year
Served throughout the year
Appointed 20 August 2021
Resigned 28 July 2021
Served throughout the year
Served throughout the year
Served throughout the year
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 88 to 89.
Additional Information
The Strategic Report is set out on pages 1 to 86 and is incorporated into the Directors’ report by reference. 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
Viability statement
Governance report
Listing Rule:
9.8.4R (1)(2) (5-14)(B)
9.8.4R (4)
Page 131
Page 92
Staff – pages 22 to 24
Pages 122 to 124 of the Directors’ Remuneration Report
Strategic report – pages 22 to 29, Governance report – page 93
ESG report – pages 52 to 77
ESG report – page 59
Strategic Report – pages 1 to 86
Pages 78 to 84 and pages 174 to 175
Page 86
Pages 85 to 86
Pages 87 to 131
Not applicable
Long-term incentive plans - pages 121 to 123
128
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE 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. Further details on
the Board’s role can be found in the Corporate Governance
Report on pages 87 to 131.
Directors’ interests
Details of the Directors’ share interests can be found in
the Remuneration Committee Report on pages 109 to 127.
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 2022 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 Guidance and
Transparency Rules issued by the Financial Conduct Authority. As at 31 March 2022 and as at 6 June 2022 (being the latest practicable
date prior to publication of the Annual Report):
As at 31 March 2022
Shareholder
M&G
Premier Milton
IntegraFin Holdings
BlackRock
Farringdon Capital Management
As at 6 June 2022
Shareholder
M&G
Premier Milton
IntegraFin Holdings
Farringdon Capital Management
Number of shares
17,768,427
15,803,355
15,480,100
16,117,371
9,663,935
% of issued Share Capital
5.80%
5.15%
5.00%
5.22%
3.16%
Number of shares
17,768,427
15,803,355
15,480,100
9,663,935
% of issued Share Capital
5.80%
5.15%
5.00%
3.16%
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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
129
DIRECTORS' REPORT CONT I NU ED
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.
Share capital structure
As at 31 March 2022, the Company’s issued share capital
consisted of 310,298,677 ordinary shares of one penny each.
No shares are held in treasury. 2,116,980 ordinary shares are held
in the Employee Benefit Trust. Therefore, the total number of
voting rights in the Company is 308,181,697. 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.
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 2021,
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 2022 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 in the event
of a takeover
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 112 to 114.
Auditor
PricewaterhouseCoopers LLP have 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 26 July 2022. 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 2022 AGM
and the recommendations in relation to them will be set out in the
2022 AGM Notice.
Political donations
No political donations were made by the Company or its
subsidiaries during the year (2021: Nil).
The Directors’ Report was approved by the Board of Directors
on 15 June 2022.
By Order of the Board
Kerin Williams
Company Secretary
15 June 2022
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE Statement of Directors’
responsibilities in respect
of the financial statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulation.
Directors’ confirmations
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 UK-adopted international accounting
standards, 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 and financial position 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.
The confirmation is given and should be interpreted in accordance
with the provisions of section 418 of the Companies Act 2006.
Baroness Ford OBE
Non-Executive Chairman
15 June 2022
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 with
UK-adopted international accounting standards and the Company
financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 101 “Reduced Disclosure Framework”,
and applicable law).
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 applicable UK-adopted international accounting
standards have been followed for the Group financial
statements and United Kingdom Accounting Standards
comprising FRS 101 have been followed for the Company
financial statements, 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 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 also 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 2022
131
Independent auditors’ report to the
members of NewRiver REIT plc
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.
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, we have provided no
non-audit services to the Company or its controlled undertakings
in the period under audit.
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 2022 and of the Group’s loss and the
Group’s cash flows for the year then ended;
the Group financial statements have been properly prepared
in accordance with UK-adopted international accounting
standards;
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 (the “Annual Report”), which
comprise: the Consolidated and Company Balance Sheets as at
31 March 2022; 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.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS 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 (Group)
• Sale of the Hawthorn Pub business (Group)
• Valuation of investments in subsidiaries (Company)
Materiality
• Overall Group materiality: £8,191,000 (2021: £12,259,000)
based on 1% of the Group's total assets.
• Specific Group materiality: £1,305,000 (2021: £1,800,000),
based on 5% of EPRA earnings.
• Overall Company materiality: £7,958,000 (2021: £11,522,000)
based on 1% of the Company's total assets.
• Overall Group performance materiality: £6,143,000 (2021:
£9,194,000), Specific Group performance materiality:
£978,000 (2021: £1,350,000) and Company performance
materiality: £5,968,000 (2021: £8,641,000).
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 sale of the Hawthorn Pub business (Group) is a new key
audit matter this year. Recoverability of trade receivables,
accrued income, lease incentives and service charge debtor
balances (Group), and the Impact of Covid-19 (Group and
Company), which were key audit matters last year, are no longer
included because the risk surrounding these uncertainties has
reduced. There is evidence of continued improvement in rent
collection rates and the long term ability of certain tenants to
meet their rental obligations, hence these are not considered to
be key audit matters at year end. Otherwise, the key audit
matters below are consistent with last year.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
133
Key audit matter
How our audit addressed the key audit matter
Valuation of investment properties (Group)
Refer to page 105 (Audit Committee report), Notes to the financial
statements - Note 1 (Accounting policies), Note 2 (Critical accounting
judgements and estimates) and Note 14 (Investment properties).
The Group currently owns and manages a portfolio of commercial assets
within the UK which includes shopping centres, retail warehouses, high
street shops and a number of development properties. The total value of
the portfolio as at 31 March 2022 was £649.4 million (investment
properties £609.1 million and £40.3 million held on a proportional basis
within the associates and joint ventures) (2021: £974.2 million, which
represented investment properties of £681.9 million, Pub assets
(investment properties and public houses held as property, plant and
equipment related to the Hawthorn Pub business) valued at £248.2
million which were disposed of in the year and £44.1 million held on a
proportional basis within the associates and joint ventures).
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 changing
consumer habits and the impact of macroeconomic factors, further
contributed to the subjectivity for the year ended 31 March 2022. 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 shops are
valued at fair value, reflecting the fact that the properties are largely
existing investment properties generating rental income.
In determining the valuation of retail assets, the valuers consider 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.
Given the inherent subjectivity in the valuation of investment properties, the
need for deep market knowledge when 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.
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, such as the
length of their relationship with the Group, or that may have imposed scope
limitations on their work. We also considered fee arrangements between
the external valuers and the Group, and other engagements 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.
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, any special
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 overall quality of the tenant base, 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.
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.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS Key audit matter
How our audit addressed the key audit matter
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.
In determining the valuation of development property held under a
residual valuation, the valuers consider the property specific information,
such as the development plans for the site. They then apply several
judgemental assumptions including 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 or any
offers received for the development are considered and the valuers
make adjustments to the valuation to reflect development potential. In
determining the value of development land, valuers primarily consider
recent comparable land transactions.
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, 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, as well as any
third party offers received for development assets. Properties held for
future development are valued using the highest and best use method.
This is determined by assessing both the residual method of valuation
(allowing for all associated risks) and the investment method of valuation
for each individual asset to determine the most appropriate method.
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. Assumptions were applied appropriately,
reflected comparable market transactions (where available) and included
consideration for climate change and a range of other external factors like
any ongoing Covid-19 impacts. 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 when considering available
comparable market evidence.
Sale of the Hawthorn Pub business (Group)
Refer to page 105 (Audit Committee Report) and Note 8 (Loss on disposal
of subsidiary).
We obtained management’s loss on disposal calculation, including the
profit recognised during the trading period prior to disposal, and have
performed the following:
In August 2021, the Group disposed of its interest in the Hawthorn Pub
business for gross proceeds of £224.0m, generating a loss on disposal of
£39.7million.
Given the transaction constituted a disposal of an entire segment, has
been disclosed as a discontinued operation, and the material nature of
the balances involved (being the valuation of the investment properties
and public houses held as property, plant and equipment of £256.1million)
we considered this to be a key audit matter.
• substantively tested transactions recognised during the trading period
•
•
•
prior to disposal;
reviewed the Sales and Purchase agreement to gain an understanding
of the terms of the transaction and verified receipt of the proceeds;
tested the net asset value transferred on sale to supporting
documentation;
tested transaction fees to supporting documentation such as invoices
or contractual agreements and have confirmed that they are directly
attributable to the disposal;
tested the accuracy of the loss on disposal; and
•
• considered the requirements of IFRS 5 “Non-current assets held for sale
and discontinued operations” and determined whether the financial
statements included all required disclosures.
From the work performed, we considered the loss on disposal of the
Hawthorn Pub business and net asset value transferred to be accurately
calculated and appropriately accounted for. We evaluated the disclosures
in the financial statements and found these to be appropriate.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
135
Key audit matter
How our audit addressed the key audit matter
Valuation of investments in subsidiaries (Company)
Refer to Notes to the financial statements - Note A (Accounting policies)
and Note B (Investments in subsidiaries).
The Company holds investments in subsidiaries amounting to £329.9
million as at 31 March 2022 (2021: £570.3 million). The Company's
accounting policy is to hold its investments in subsidiary undertakings at
cost less provision for cumulative impairments. Where an impairment
has been recognised in previous periods, and the conditions that
caused the impairment are no longer present, the impairment charge
previously recognised will be reversed, up to the cost of the original
investment value.
As a result of the Hawthorn Pub business disposal, £249.2 million of
investments were disposed of during the year. In addition, the Company
recognised an impairment reversal of £9.4 million as a result of positive
movements in investment property valuation and trading profits (2021:
impairment charge of £220.4 million).
Given the material size of the investments, the impairment reversal and the
level of estimation involved, we considered this to be a key audit matter.
We obtained the Company’s assessment of the valuation of investments
held in subsidiaries as at 31 March 2022 and performed the following:
• assessed the accounting policy for investments in 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";
identified the key judgement within the valuation of investments in
subsidiaries to be the valuation of investment properties. For details on
our work on property valuations, refer to the key audit matter above;
•
• verified that the carrying value of investment properties had been
appropriately included in the assessment of the valuation of
investments in subsidiaries;
reviewed the disclosures within the Annual Report, including the £9.4
million impairment reversal and the £249.2 investment disposal, and
considered these to be complete and accurate.
•
Based on the work performed, we found the amount of impairment reversal
and the disclosures in the financial statements to be appropriate.
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 currently owns and invests in a number of shopping centres, retail warehouses, high street shops and developments across
the United Kingdom. These are held within a variety of subsidiaries, joint ventures and associates. Following the disposal of the Hawthorn
Pub business in the year, we have identified a single component, being the Retail business, that makes up the Group. The Retail
component was subject to a full scope audit using our adopted materiality thresholds and all of the work was performed 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. The Hawthorn Pub business was audited to our Overall Group materiality threshold and we performed the audit of the stub trading
period through to the date of disposal, including the audit of the loss on disposal of the business. All of this work was performed by the
Group team. In respect of the audit of the Company, the Group audit team performed a full scope statutory audit.
As part of our audit we also made enquiries of management to understand the process they had adopted to assess the potential impact
of climate change on the business. Management considers that the impact of climate change does not give rise to a material financial
statement impact in the current year. We used our knowledge of the Group to evaluate management’s assessment. We particularly
considered how climate change risks would impact the assumptions made in the valuation of investment property. We also considered
the consistency of the climate change disclosures included in the Annual Report, drawing on our knowledge of the business gained
through the audit process.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS 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:
Financial statements - Group
Financial statements - Company
Overall materiality
£8,191,000 (2021: £12,259,000).
£7,958,000 (2021: £11,522,000).
How we determined it
1% of the Group's total assets
1% of the Company's total assets
Rationale for benchmark applied We determined materiality based on total assets
given the valuation of investment properties,
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.
Specific materiality
£1,305,000 (2021: £1,800,000).
Not applicable.
How we determined it
Rationale for benchmark applied
Not applicable.
Not applicable.
5% of the Group's 2022 EPRA earnings (2021:
5% of the Group’s weighted average EPRA
earnings from 2019 to 2021). Given the market
has continued to rebound from Covid-19,
utilising a weighted average in 2022 was no
longer considered relevant.
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
184 of the financial statements which includes a
reconciliation between IFRS and EPRA earnings).
This materiality was used in the audit of
operating activities.
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% (2021: 75%) of overall materiality, amounting to £6,143,000
(2021: £9,194,000) for the Group financial statements and £5,968,000 (2021: £8,641,000) for the Company financial statements. Our
performance materiality for operating activities was 75% of specific materiality, amounting to £978,000 (2021: £1,350,000) 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 £409,000 (Group audit)
(2021: £612,000) for investing and financing activities, £65,000 (Group audit) (2021: £90,000) for operating activities and £795,000 (Company
audit) (2021: £576,000) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
137
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:
• obtaining management's paper that supports the Board's
assessment and conclusions with respect to the disclosures
provided over going concern;
• discussing the key assumptions supporting the going concern
review and forecasts, challenging the rationale for those
assumptions, using our knowledge of the business and
industry to ensure they reflect the latest expectations of the
retail market and industry data;
• checking the mathematical accuracy of management’s model;
• assessing management’s forecasting accuracy by comparing
•
the forecasts established to the actual performance for the past
3 years up to and including 2022;
reviewing management's reasonable worst case scenario and
performing 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;
• confirming the Group's revolving credit facility, Corporate bond
and long-term credit rating; and
• performing a stress test on the reasonable worst case scenario
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.
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, which includes reporting based on the Task
Force on Climate-related Financial Disclosures (TCFD)
recommendations. 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 2022 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 Remuneration Committee Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
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NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS 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
• 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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
139
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.
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 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
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. 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;
• assessing matters reported on the Group’s whistleblowing
helpline and the results of management’s investigation of such
matters where relevant;
• evaluating compliance with the REIT tax rules with the
involvement of our tax specialists in the audit;
•
• performing procedures relating to the valuation of investment
properties 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 those
posted by senior management.
•
140
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS 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
Remuneration Committee Report to be audited are not in
agreement with the accounting records and returns.
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
three years, covering the years ended 31 March 2020 to
31 March 2022.
Other matter
In due course, as required by the Financial Conduct Authority
Disclosure Guidance and Transparency Rule 4.1.14R, these
financial statements will form part of the ESEF-prepared annual
financial report filed on the National Storage Mechanism of the
Financial Conduct Authority in accordance with the ESEF
Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report
provides no assurance over whether the annual financial report
will be prepared using the single electronic format specified in the
ESEF RTS.
Christopher Burns (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
15 June 2022
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
141
CO NSOLIDATED ST ATE ME NT OF CO MPREHE NSI VE INCO ME
F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 2 2
Continuing Operations
Revenue
Property operating expenses**
Net property income
Administrative expenses
Other income
Share of income from joint ventures
Share of income from associates
Net property valuation movement
Loss on disposal of subsidiary
Loss on disposal of investment properties
Operating profit / (loss)
Finance income
Finance costs
Profit / (loss) for the year before taxation
Taxation
Profit / (loss) for the year after taxation from
continuing operations
Loss for the year after taxation from discontinued
operations
(Loss) / profit for the year
Other comprehensive loss
Revaluation of property, plant and equipment -
discontinued operations
Other movement- discontinued operations
Total comprehensive loss for the year
Comprehensive loss for the year – discontinued
operations
Comprehensive profit / (loss) for the year –
continuing operations
Total comprehensive loss for the year
Earnings / (loss) per share – continuing operations
Basic (pence)
Diluted (pence)
Loss per share
Basic (pence)
Diluted (pence)
Notes
4
5
6
7
15
16
14
8
9
10
10
11
3
12
12
12
12
YYeeaarr eennddeedd 3311 MMaarrcchh 22002222
OOppeerraattiinngg
aanndd
ffiinnaanncciinngg
22002222
££mm
73.7
FFaaiirr vvaalluuee
aaddjjuussttmmeennttss
22002222
££mm
–
(25.5)
48.2
(13.4)
–
1.1
0.2
–
–
(4.2)
31.9
1.4
(19.8)
13.5
–
13.5
(31.7)
(18.2)
–
–
–
–
2.9
2.9
(12.3)
–
–
(6.5)
–
–
(6.5)
–
(6.5)
(1.9)
(8.4)
TToottaall
22002222
££mm
73.7
(25.5)
48.2
(13.4)
–
4.0
3.1
(12.3)
–
(4.2)
25.4
1.4
(19.8)
7.0
–
7.0
(33.6)
(26.6)
–
–
(26.6)
(33.6)
7.0
(26.6)
2.3
2.3
(8.6)
(8.6)
Year ended 31 March 2021
(Re-presented)*
Operating
and
financing
2021
£m
Fair value
adjustments
2021
£m
Total
2021
£m
73.1
(30.1)
43.0
(12.7)
2.7
3.5
0.7
–
–
–
–
–
1.2
0.6
(131.5)
(131.5)
–
–
(2.2)
(4.1)
(129.7)
(100.6)
–
–
0.3
(23.1)
(129.7)
(123.4)
–
1.3
73.1
(30.1)
43.0
(12.7)
2.7
2.3
0.1
–
(2.2)
(4.1)
29.1
0.3
(23.1)
6.3
1.3
7.6
(129.7)
(122.1)
(6.6)
1.0
(21.8)
(151.5)
(28.4)
(150.5)
(0.5)
0.2
(150.8)
(28.7)
(122.1)
(150.8)
(39.8)
(39.8)
(49.1)
(49.1)
* Re-presentation relates to the sale of Hawthorn which was completed on 20 August 2021 and has been presented as a discontinued operation above, please see note
3. All other activities derive from continuing operations of the Group.
** Included in property operating expenses is a loss allowance reversal of £0.3 million (2021: £7.0 million charge (re-presented)) of expected credit loss relating to debtors
for continuing operations.
The notes on pages 146 to 177 form an integral part of these financial statements.
142
142
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
CO NSOLIDATED BALANCE SHEET
A S AT 31 MAR CH 20 22
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
Cash and cash equivalents
Total current assets
Assets held for sale
Total assets
Equity and liabilities
Current liabilities
Trade and other payables
Lease liability
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 (NTA) per share (pence)
Basic
Diluted
EPRA NTA
Notes
14
24
15
16
17
18
21
19
22
24
20
11
24
23
25
25
25
25
12
12
12
22002222
££mm
684.6
0.2
24.0
7.9
0.7
–
2021
£m
934.9
3.5
25.6
5.3
54.1
0.5
717.4
1,023.9
18.9
82.8
101.7
–
26.0
150.5
176.5
25.5
819.1
1,225.9
33.5
0.7
34.2
–
–
75.0
295.8
370.8
414.1
3.1
1.1
(2.3)
412.2
414.1
135p
134p
134p
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
150p
150p
151p
The notes on pages 146 to 177 form an integral part of these financial statements.
The financial statements on pages 142 to 177 were approved by the Board of Directors on 15 June 2022 and were signed on its behalf by:
Allan Lockhart
CChhiieeff EExxeeccuuttiivvee
NewRiver REIT plc
Registered number: 10221027
Will Hobman
CChhiieeff FFiinnaanncciiaall OOffffiicceerr
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
143
143
CO NSOLIDATED CASH FLO W STATE MENT
F O R T HE Y E AR E ND ED 31 MA R CH 20 2 2
Cash flows from operating activities
Profit / (loss) for the year before taxation – continuing operations
Loss for the year before taxation – discontinued operations
Loss for the year before taxation
Adjustments for:
Loss on disposal of investment property
Loss on disposal of Hawthorn
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
22002222
££mm
7.0
(31.7)
(24.7)
3.4
39.7
–
12.3
(2.9)
(2.9)
(1.1)
(0.2)
18.4
(1.4)
(0.3)
0.1
1.2
0.9
2021
£m
(123.4)
(29.8)
(153.2)
5.5
–
2.2
154.7
(1.2)
(0.6)
(2.3)
(0.1)
22.8
(2.6)
7.1
0.2
1.9
0.6
Cash generated from operations before changes in working capital
42.5
35.0
Changes in working capital
Decrease / (increase) in trade and other receivables
Increase in payables and other financial liabilities
Cash generated from operations
Interest paid
Corporation tax received
Dividends received from joint ventures
Dividends received from associates
Net cash generated from operating activities
Cash flows from investing activities
Cash proceeds net of cash disposed and transaction costs from disposal of subsidiaries
Interest income
Investment in associate investments
Disposal of associate investments
Purchase of investment properties
Disposal of investment properties
Development and other capital expenditure
Purchase of plant and equipment
Net cash generated from investing activities
Cash flows from financing activities
Repayment of bank loans
Repayment of principal portion of lease liability
Dividends paid – ordinary
Net cash generated used in financing activities
Cash and cash equivalents at beginning of the year
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at 31 March
The notes on pages 146 to 177 form an integral part of these financial statements.
144
144
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
9.7
7.6
59.8
(20.3)
–
5.6
2.0
47.1
196.0
0.4
(4.0)
2.5
(7.3)
65.2
(9.6)
(3.0)
240.2
(335.0)
(0.7)
(19.3)
(355.0)
150.5
(67.7)
82.8
(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
FINANCIAL STATEMENTS
CO NSOLIDATED ST ATE ME NT OF CH ANGES IN E QUITY
F O R T HE Y E AR E ND ED 31 MA R CH 20 2 2
Revaluation of property, plant and equipment
17
As at 1 April 2020
Loss for the year after taxation
– continuing operations
– discontinued operations
Loss for the year after taxation
Other movements
Total comprehensive loss for the year
Transactions with equity holders
Share-based payments
As at 31 March 2021
Profit / (loss) for the year after taxation
– continuing operations
– discontinued operations
Loss for the year after taxation
Transactions with equity holders
Transfer from share premium
Issue of new shares
Share-based payments
Dividends paid
As at 31 March 2022
Notes
Share
capital
£m
3.1
Share
premium
£m
227.4
Merger
reserve
£m
Retained
earnings and
other reserves
£m
(2.3)
382.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(122.1)
(28.4)
(150.5)
0.2
(0.5)
0.6
(150.8)
(150.8)
3.1
227.4
(2.3)
232.2
–
–
–
–
–
–
–
3.1
–
–
–
(227.4)
1.1
–
–
1.1
–
–
–
–
–
–
–
(2.3)
7.0
(33.6)
(26.6)
227.4
–
0.9
(21.7)
412.2
25
Total
£m
610.6
(122.1)
(28.4)
(150.5)
0.2
(0.5)
0.6
460.4
7.0
(33.6)
(26.6)
–
1.1
0.9
(21.7)
414.1
The notes on pages 146 to 177 form an integral part of these financial statements.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
145
145
NOTES TO THE FINANCI AL S TATE ME NTS
11.. AAccccoouunnttiinngg ppoolliicciieess
GGeenneerraall iinnffoorrmmaattiioonn
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.
SSuummmmaarryy ooff ssiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess
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.
BBaassiiss ooff pprreeppaarraattiioonn
These consolidated financial statements have been prepared on the going concern basis and in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and in accordance with UK-adopted International Accounting Standards and with
the requirements of the Companies Act 2006.
DDiissccoonnttiinnuueedd ooppeerraattiioonnss
On 20 August 2021, the Group sold its pub segment, Hawthorn, which constituted a major line of business. As such the comparative
information has been re-presented to show the results of Hawthorn as a discontinued operation. Further details can be found in notes 3
and 8.
GGooiinngg ccoonncceerrnn
The Group’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 a £125 million (plus £50 million accordion, at lenders’
consent) of undrawn revolving credit facility (‘RCF’) and a £300 million unsecured corporate bond. The undrawn RCF matures in August
2024, and the bond in March 2028. The debt has financial covenants that the Group is required to comply with including an LTV covenant
of less than 60% on the RCF (65% on the bond), and a 12 month historical interest cover ratio of more than 1.75x on the RCF (1.50x on the
bond), 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 Board approved budget, flexed to create a reasonable worst case scenario, which includes the key assumptions listed below.
– Capital values to remain flat throughout the forecast horizon, in contrast to the growth noted in 2H22 of +2.6% across the portfolio and
the upward trend noted in the Core and Retail park assets across FY22;
– A 15% reduction in net income. This reflects a significant downside to rental agreements re-geared or re-negotiated throughout the
pandemic given that 94% of rents relating to FY21 were collected or alternative payments agreed at the time of reporting despite the
multiple national lockdowns in place throughout the year; FY22 rent collection or alternative payments agreed is 96%, whilst 1Q23 rent
collection or alternative payments agreed is 91% at the time of reporting demonstrating continued high rent collection rates during the
Covid recovery period;
– No disposal proceeds are assumed throughout the forecast period which have not yet completed at the time of reporting, despite the
completion of £77 million of disposals during FY22, and £20 million of retail disposals now under offer or exchanged and a further £17m
in active discussions at the date of approval of these financial statements. Similarly, no assumption is made for the deployment of any
surplus capital available as at 31 March 2022 and the growth and returns that would otherwise generate.
Under this scenario, the Group is forecast to maintain sufficient cash and liquidity resources and remain compliant with its financial
covenants over the going concern period. Further stress testing was performed on this scenario which demonstrated that the Group’s
drawn debt covenants could absorb a further valuation decline of 38% and a further 39% reduction in annual net rental income before
breaching covenant levels. The Group maintains sufficient cash and liquidity reserves to continue in operation and pay its liabilities as they
fall due throughout the going concern assessment period and as such the Directors conclude a going concern basis of preparation is
appropriate.
146
146
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
CCaasshh ffllooww ssttaatteemmeenntt
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 acquisitions of investment properties are disclosed as cash flows from
investing activities because this most appropriately reflects the Group’s business activities.
PPrreeppaarraattiioonn ooff tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss
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 2022 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.
NNeeww aaccccoouunnttiinngg ppoolliicceess
The Group has adopted the following amendments for the first time in 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)
– Covid-19-Related Concessions beyond 30 June 2021 (Amendment to IFRS 16)
Adopting these amendments has not impacted amounts recognised in prior periods or are expected to have a material impact on the current
period or future periods based on the Group’s current strategy. 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 2021.
SSttaannddaarrddss aanndd aammeennddmmeennttss iissssuueedd bbuutt nnoott yyeett eeffffeeccttiivvee
A number of new amendments have been issued but are not yet effective for the current accounting period.
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
– Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
– Definition of Accounting Estimates (Amendments to IAS 8)
– Deferred Tax – Related to assets and liabilities arising from a single transactions (Amendments to IAS12)
– Disclosure of Accounting Policies (Amendments to IAS 1)
No material impact is expected upon the adoption of these standards.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
147
147
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
11.. AAccccoouunnttiinngg ppoolliicciieess ccoonnttiinnuueedd
RReevveennuuee rreeccooggnniittiioonn
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 which 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. This
forms part of discontinued operations.
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.
Pub turnover related rent
Pub 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. This forms part of discontinued operations in the
current and prior year.
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 profit and loss account 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.
148
148
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
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.
SSeerrvviiccee cchhaarrggee eexxppeennssee
Service charge expenses are recognised in the period in which they are incurred.
FFiinnaannccee iinnccoommee aanndd ccoossttss
Finance income and costs excluding fair value derivative movements, are recognised using the effective interest rate method. The effective
interest rate 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 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.
TTaaxxaattiioonn
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.
IInnvveessttmmeenntt pprrooppeerrttiieess
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 its present condition and the sale is highly probable.
PPrrooppeerrttyy,, ppllaanntt aanndd eeqquuiippmmeenntt
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.
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:
– Fixtures and fittings 20% on a straight line-basis depending on the useful life
– Office equipment 33% on a straight line-basis
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
149
149
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
11.. AAccccoouunnttiinngg ppoolliicciieess ccoonnttiinnuueedd
JJooiinntt vveennttuurreess
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.
AAssssoocciiaatteess
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 a particular entity is controlled or has significant influence, 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 associate so as to obtain benefits from its
activities.
LLeeaasseess
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 leases of land or property that meets the definition of investment property under IAS 40 it has been
disclosed within the investment property balance. After initial recognition, IAS 40 requires the amount of the recognised lease liability,
calculated in accordance with IFRS 16, to be added back to the amount determined under the net valuation model, to arrive at the carrying
amount of the investment property under the fair value model. Differences between the ROU asset and associated lease liability 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.
FFiinnaanncciiaall iinnssttrruummeennttss
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.
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.
150
150
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
Cash and cash equivalents
Cash and cash equivalents include cash on hand, cash in transit, 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 financial instruments classified as financial liabilities 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 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.
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.
VVaalluuee aaddddeedd ttaaxx
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.
SShhaarree ccaappiittaall
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.
SShhaarree--bbaasseedd ppaayymmeennttss
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.
EEmmppllooyyeeee BBeenneeffiitt TTrruusstt
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.
DDiivviiddeennddss
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.
BBuussiinneessss ccoommbbiinnaattiioonnss
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.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
151
151
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
22.. CCrriittiiccaall aaccccoouunnttiinngg jjuuddggeemmeennttss aanndd eessttiimmaatteess
The preparation of financial statements requires management to make estimates and judgements 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.
SSiiggnniiffiiccaanntt jjuuddggeemmeennttss
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.
SSoouurrcceess ooff eessttiimmaattiioonn uunncceerrttaaiinnttyy
Investment property
The Group’s investment properties 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 performance measures such as Net Tangible
Assets per share.
Rents and ERVs 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.
152
152
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
33.. SSeeggmmeennttaall rreeppoorrttiinngg aanndd ddiissccoonnttiinnuueedd ooppeerraattiioonnss
The Group’s operations were organised into two operating segments, being investment in retail property and in pubs. The retail
investments comprise shopping centres, retail parks and high street stores. On 20 August 2021, the Group disposed of its pub segment.
This has therefore been classified as discontinued operations. The pub investments consisted 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.
The segmental information is presented for the period the Group owned the pubs up to 20 August 2021. Since this date, the Group is a
single segment business focused on retail.
For ease of presentation, the breakdown of the pubs results presented as a single line on the face of the Consolidated Statement of
Comprehensive Income are set out in the table below.
22002222
2021
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
Administrative expenses
Other income
Segment result
Share of joint ventures’ and associates’ profit after tax
(Loss) / profit on disposal of investment properties
Loss on disposal of subsidiaries
Finance income
Finance costs
Net valuation movement
Changes in fair value of financial instruments and
associated close out costs
Taxation
Profit / (loss) for the year after taxation
RReettaaiill
££mm
57.7
–
–
14.6
(1.3)
1.9
0.8
73.7
(20.3)
(1.8)
(3.4)
(25.5)
(13.4)
–
34.8
7.1
(4.2)
–
0.4
(18.9)
(12.3)
0.1
–
7.0
PPuubbss
££mm
2.3
15.8
–
–
–
–
–
18.1
–
(0.1)
(10.8)
(10.9)
(4.8)
4.8
7.2
–
0.8
(39.7)
–
–
–
–
(1.9)
(33.6)
GGrroouupp
££mm
60.0
15.8
–
14.6
(1.3)
1.9
0.8
91.8
(20.3)
(1.9)
(14.2)
(36.4)
(18.2)
4.8
42.0
7.1
(3.4)
(39.7)
0.4
(18.9)
(12.3)
0.1
(1.9)
Retail
£m
61.1
–
–
11.6
(1.8)
1.2
1.0
73.1
(17.5)
(2.2)
(10.4)
(30.1)
(12.7)
2.7
33.0
4.2
(4.1)
(2.2)
0.3
(23.2)
(131.5)
0.1
1.3
Pubs
£m
4.4
9.1
4.5
–
–
–
–
18.0
–
(0.3)
(16.7)
(17.0)
(10.7)
4.5
(5.2)
–
(1.4)
–
–
–
(23.2)
–
1.4
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)
(23.4)
7.2
27.8
4.2
(5.5)
(2.2)
0.3
(23.2)
(154.7)
0.1
2.7
(26.6)
(122.1)
(28.4)
(150.5)
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
153
153
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
33.. SSeeggmmeennttaall rreeppoorrttiinngg aanndd ddiissccoonnttiinnuueedd ooppeerraattiioonnss ccoonnttiinnuueedd
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
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Total current assets including
assets held for sale
Segment assets
44.. RReevveennuuee
22002222
RReettaaiill
££mm
PPuubbss
££mm
UUnnaallllooccaatteedd
££mm
GGrroouupp
££mm
684.6
24.0
7.9
–
0.7
0.2
18.9
82.8
–
819.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
684.6
24.0
7.9
–
0.7
0.2
717.4
18.9
82.8
–
101.7
819.1
Retail
£m
739.3
25.6
5.3
–
–
–
25.1
–
25.5
2021
Pubs
£m
Unallocated
£m
Group
£m
195.6
–
–
52.7
–
–
–
–
–
–
1.4
4.0
0.9
–
–
–
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
820.8
249.2
155.9
1,225.9
Property rental and related income*
Amortisation of tenant incentives and letting costs
Surrender premiums and commissions
Rental related income
Asset management fees
Service charge income
Revenue
22002222
££mm
57.7
(1.3)
0.8
57.2
1.9
14.6
73.7
2021
£m
61.1
(1.8)
1.0
60.3
1.2
11.6
73.1
*
Included within property rental and related income is car park income of £4.9 million (2021: £2.7 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 (now within discontinued operations) 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.
55.. PPrrooppeerrttyy ooppeerraattiinngg eexxppeennsseess
Service charge expense
Rates on vacant units
Expected credit loss (reversal) / charge
Other property operating expenses
Property operating expenses
22002222
££mm
20.3
1.8
(0.3)
3.7
25.5
2021
£m
17.5
2.2
7.0
3.4
30.1
154
154
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
66.. AAddmmiinniissttrraattiivvee eexxppeennsseess
Wages and salaries
Social security costs
Other pension costs
Staff costs
Depreciation
Share-based payments
Other administrative expenses
Abortive costs
Restructuring costs*
Administrative expenses
22002222
££mm
5.1
0.7
0.1
5.9
0.1
0.9
5.6
–
0.9
13.4
* During the year the Group incurred restructuring costs totalling £0.9 million (2021: £nil) in relation to employee related matters following the sale of Hawthorn.
Net administrative expenses ratio is calculated as follows:
Administrative expenses
Adjust for:
Asset management fees
Share of joint ventures’ and associates administrative expenses
Share based payments
Restructuring costs
Group’s share of net administrative expenses – continuing operations
Group’s share of net administrative expenses – discontinued operations
Group’s share of net administrative expenses – Reported Group
Property rental and related income*
Share of joint ventures’ and associates’ property income
Property rental, other income and related income – continuing operations
Property rental, other income and related income – discontinued operations
Property rental, other income and related income – Reported Group
22002222
££mm
13.4
(1.9)
0.2
(0.9)
(0.9)
9.9
4.2
14.1
58.0
3.9
61.9
21.4
83.3
2021
£m
4.8
0.8
0.2
5.8
0.4
0.6
5.6
0.3
–
12.7
2021
£m
12.7
(1.2)
0.2
(0.6)
(0.3)
10.8
9.5
20.3
55.9
3.9
59.8
21.7
81.5
Net administrative expenses as a % of property income (including share of joint ventures and associates) –
continuing operations
Net administrative expenses as a % of property income (including share of joint ventures and associates) –
Reported Group
16.0%
18.1%
16.9%
24.9%
* This balance includes an expected credit reversal/(loss) of £0.3 million (2021: £(5.0) million), which excludes the £0.2 million reversal (2021: £(0.6) million charge) forward
looking element of the calculation and includes the expected credit loss held in joint ventures and associates of £(0.2) million (2021: £(0.3) million).
AAvveerraaggee mmoonntthhllyy nnuummbbeerr ooff ssttaaffff –– ccoonnttiinnuuiinngg
Directors
Operations and asset managers
Support functions
Total
On disposal of Hawthorn 101 employees were employed by subsidiaries that were sold on 20 August 2021.
22002222
7
17
32
56
2021
7
17
31
55
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
155
155
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
66.. AAddmmiinniissttrraattiivvee eexxppeennsseess ccoonnttiinnuueedd
AAuuddiittoorrss’’ rreemmuunneerraattiioonn
Audit of the Company and consolidated financial statements
Audit of subsidiaries, pursuant to legislation
Non-audit fees – interim review
Total fees
In addition to this the joint ventures and associates paid £103k (2021: £82k) in audit fees.
77.. OOtthheerr iinnccoommee
Insurance proceeds
Other income
22002222
££’’000000
310
200
510
95
605
22002222
££mm
–
–
2021
£’000
315
235
550
100
650
2021
£m
2.7
2.7
88.. LLoossss oonn ddiissppoossaall ooff ssuubbssiiddiiaarryy
YYeeaarr eennddeedd 3311 MMaarrcchh 22002222
Hawthorn
On 20 August 2021 NewRiver REIT plc (‘NRR’) completed the sale of the entire issued share capital of Hawthorn Leisure REIT Limited
(‘Hawthorn’), the entity that held, either directly or indirectly through its wholly-owned subsidiaries, NewRiver's entire community pub
business to AT Brady Bidco Limited. Financial performance for the period to 20 August 2021 is included in Note 3 – Segmental reporting
and discontinued operations.
Hawthorn Leisure Limited
Hawthorn Leisure Acquisitions Limited
Hawthorn Leisure Honey Limited
Hawthorn Leisure Management Limited
Hawthorn Leisure Scotco Limited
NewRiver Retail Holdings No 4 Limited
NewRiver Retail Holdings No 7 Limited
NewRiver Retail Property Unit Trust No 4
22002222
££mm
224.0
(202.3)
(53.8)
(1.2)
(16.6)
19.9
(254.0)
(30.0)
(9.7)
(39.7)
SSuubbssiiddiiaarriieess ddiissppoosseedd
Hawthorn Leisure REIT Limited
Hawthorn Leisure (Bravo Inns) Limited
Bravo Inns Limited
Bravo Inns II Limited
Hawthorn Leisure Community Pubs Limited
Hawthorn Leisure (Mantle) Limited
Hawthorn Leisure Public Houses Limited
Hawthorn Leisure Holdings Limited
Gross disposal proceeds
Net assets disposed of:
Investment property
Managed houses
Property, plant and equipment
Cash
Other net liabilities
Carrying value
Loss on disposal of subsidiary before transaction costs
Transaction costs
Loss on disposal of subsidiary (discontinued operations – Note 3)
156
156
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
Cash flows from discontinued operations
Cash flows from operating activities
Cash flows from investing activities
Total cash flows from discontinued operations
YYeeaarr eennddeedd
3311 MMaarrcchh
22002222
££mm
13.8
187.9
201.7
31 March
2021
£m
12.1
(10.4)
1.7
YYeeaarr eennddeedd 3311 MMaarrcchh 22002211
On 30 September 2020, the Group disposed of a subsidiary which owned Sprucefield Retail Park for gross disposal proceeds of £38.5
million with a carrying value of £40.7 million, resulting in a loss of £2.2 million. The Group then acquired a 10% interest, see note 16.
99.. LLoossss oonn ddiissppoossaall ooff iinnvveessttmmeenntt pprrooppeerrttiieess
Gross disposal proceeds
Carrying value
Cost of disposal
Loss on disposal of investment properties
1100.. FFiinnaannccee iinnccoommee aanndd ffiinnaannccee ccoossttss
Finance income
Income from loans with joint ventures and associates
Write off of derivatives
Finance expense
Interest on borrowings
Finance cost on lease liabilities
Revaluation of derivatives
Net finance expense
22002222
££mm
66.3
(68.9)
(1.6)
(4.2)
22002222
££mm
(0.4)
(1.0)
17.1
2.7
–
18.4
2021
£m
27.8
(31.3)
(0.6)
(4.1)
2021
£m
(0.3)
–
20.2
3.0
(0.1)
22.8
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
157
157
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
1111.. TTaaxxaattiioonn
Current tax - prior year adjustment
Taxation (credit) – continuing
Taxation charge / (credit) – discontinued
Taxation charge / (credit) – Reported Group
Loss before tax from continuing operations
Loss before tax from discontinuing operations
Loss before tax
Tax at the current rate of 19% (2021: 19%)
Revaluation of property
Movement in unrecognised deferred tax
Non-taxable loss on disposal of subsidiary
Non-taxable profit due to REIT regime
Non-deductible expenditure
Non-taxable income
Transfer pricing adjustment
Prior year adjustment
Taxation charge / (credit)
22002222
££mm
–
–
1.9
1.9
22002222
££mm
7.0
(31.7)
(24.7)
(4.7)
2.3
2.1
7.6
(5.4)
–
(0.8)
0.8
–
1.9
2021
£m
(1.3)
(1.3)
(1.4)
(2.7)
2021
£m
(123.4)
(29.8)
(153.2)
(29.1)
29.3
2.2
–
(6.7)
2.9
–
–
(1.3)
(2.7)
RReeaall EEssttaattee IInnvveessttmmeenntt TTrruusstt rreeggiimmee ((RREEIITT rreeggiimmee))
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.
DDeeffeerrrreedd ttaaxx
Deferred tax asset
Deferred tax liabilities
Net deferred tax
Deferred tax asset
Deferred tax liabilities
Net deferred tax
31 March
2021
£m
–
(0.7)
(0.7)
Charge
£m
Disposals
£m
–
(1.9)
(1.9)
–
2.6
2.6
3311 MMaarrcchh
22002222
££mm
–
–
–
31 March
2020
£m
Credit /
(Charge)
£m
Disposals
£m
31 March
2021
£m
1.2
(3.3)
(2.1)
(1.2)
2.6
1.4
–
–
–
–
(0.7)
(0.7)
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 not recognised a deferred tax liability or deferred tax asset. As at 31 March 2022 the Group has unrecognised tax losses of £12.5
million (2021: £46.0 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.
The Finance Act 2021, which was substantively enacted on 24 May 2021 and received Royal Assent on 10 June 2021, provided for an
increase in the main rate of corporation tax from 19% to 25% for companies with profits in excess of £250,000 with effect from 1 April 2023.
These changes have been taken into account in calculating the current year deferred tax charge. Deferred taxes at the balance sheet date
have been measured using the expected enacted tax rate and this is reflected in these financial statements.
158
158
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
1122.. PPeerrffoorrmmaannccee mmeeaassuurreess
A reconciliation of the performance measures to the nearest IFRS measure is below:
Profit / (Loss) for the year after taxation
Adjustments
Net valuation movement
Loss on disposal of investment properties
Changes in fair value of financial instruments and associated
close out costs
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
Deferred tax
Loss on disposal of investment properties
EPRA earnings
Share-based payment charge
Forward looking element of IFRS 9**
Depreciation on public houses
Abortive costs
Restructuring costs***
Underlying Funds From Operations (UFFO)
YYeeaarr eennddeedd 3311 MMaarrcchh 22002222
DDiissccoonnttiinnuueedd
££mm
(33.6)
CCoonnttiinnuuiinngg**
££mm
7.0
TToottaall
££mm
(26.6)
Year ended 31 March 2021
Discontinued
£m
Continuing*
£m
Total
£m
(122.1)
(28.4)
(150.5)
12.3
4.2
(0.1)
–
–
–
(5.8)
(0.5)
0.6
1.2
18.9
0.9
(0.2)
–
–
0.9
20.5
–
(0.8)
–
–
1.9
39.7
–
–
–
–
7.2
–
–
0.4
0.2
–
7.8
12.3
3.4
(0.1)
–
1.9
39.7
(5.8)
(0.5)
0.6
1.2
26.1
0.9
(0.2)
0.4
0.2
0.9
28.3
131.5
4.1
23.2
1.4
154.7
5.5
(0.1)
–
–
2.2
(1.8)
0.2
–
–
14.0
0.6
0.6
–
0.3
–
15.5
–
0.1
(1.4)
–
–
–
–
–
(5.1)
–
–
1.1
–
–
(4.0)
(0.1)
0.1
(1.4)
2.2
(1.8)
0.2
–
–
8.9
0.6
0.6
1.1
0.3
–
11.5
* The continuing column reflects the full impact of the finance costs of £18.4 million (31 March 2021: £22.8 million).
** 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
*** During the year the Group incurred restructuring costs totalling £0.9 million (2021: £nil) in relation to employee related matters following the sale of Hawthorn.
NNuummbbeerr ooff sshhaarreess
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
22002222
NNoo.. MM
307.2
1.8
309.0
IFRS Basic EPS
EPRA Basic EPS
UFFO Basic EPS
IFRS Diluted EPS
EPRA Diluted EPS
UFFO Diluted EPS
22002222
CCoonnttiinnuuiinngg DDiissccoonnttiinnuueedd
(10.9)
2.3
6.2
6.7
2.3
6.1
6.7
2.3
2.5
(10.9)
2.3
2.5
2021
Continuing Discontinued
(39.8)
4.6
5.1
(39.8)
4.6
5.0
(9.3)
(1.7)
(1.3)
(9.3)
(1.7)
(1.3)
TToottaall
(8.6)
8.5
9.2
(8.6)
8.4
9.2
2021
No. M
306.4
0.8
307.2
Total
(49.1)
2.9
3.8
(49.1)
2.9
3.7
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
159
159
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
12. Performance measures continued
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
Goodwill
Fair value derivatives
EPRA net tangible assets
22002222
SShhaarreess
mm
307.2
1.8
309.0
–
–
–
££mm
414.1
–
414.1
0.6
–
(0.3)
PPeennccee ppeerr
sshhaarree
135p
£m
460.4
–
134p
460.4
0.7
(0.5)
2.6
2021
Shares
m
306.5
0.8
307.3
–
–
–
Pence per
share
150p
150p
414.4
309.0
134p
463.2
307.3
151p
1133.. DDiivviiddeennddss
There were no dividends paid in the prior year; the dividends paid in the year are set out below:
Payment date
Year to March 2022
Ordinary dividends
3 September 2021
14 January 2022
PID
Non-PID
Pence per
share
3.0
4.1
–
–
3.0
4.1
£m
9.1
12.6
21.7
The final dividend of 3.3 pence per share in respect of the year ended 31 March 2022 will, subject to shareholder approval at the 2022
AGM, be paid on 2nd September 2022 to shareholders on the register as at 29 July 2022. The dividend will be payable as a REIT Property
Income Distribution (PID).
PPrrooppeerrttyy IInnccoommee DDiissttrriibbuuttiioonn ((PPIIDD)) ddiivviiddeennddss
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.
NNoonn--PPIIDD ddiivviiddeennddss
Any non-PID element of dividends will be treated in exactly the same way as dividends from other UK, non-REIT companies.
1144.. IInnvveessttmmeenntt pprrooppeerrttiieess
Fair value brought forward
Acquisitions
Capital expenditure
Lease incentives, letting and legal costs
Reclassification to plant property and equipment
Transfer from / (to) assets held for sale (Note 19)
Disposals
Disposal of subsidiaries
Net valuation movement
Fair value carried forward
Right of use asset (investment property)
Fair value carried forward
160
160
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
22002222
££mm
851.9
7.3
9.6
1.3
–
25.5
(72.9)
(202.3)
(11.3)
609.1
75.5
684.6
2021
£m
1,102.3
–
10.0
2.4
(4.1)
(25.5)
(44.7)
(40.7)
(147.8)
851.9
83.0
934.9
FINANCIAL STATEMENTS
RReettaaiill –– ccoonnttiinnuuiinngg ooppeerraattiioonnss
The Group’s investment properties have been valued at fair value on 31 March 2022 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 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.
The fair value at 31 March 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.
As at 31 March 2022
PPrrooppeerrttyy EERRVV
PPrrooppeerrttyy rreenntt
FFaaiirr vvaalluuee
((££mm))
216.2
MMiinn
££ ppeerr ssqq fftt
8.5
MMaaxx
££ ppeerr ssqq fftt
30.1
AAvveerraaggee
££ ppeerr ssqq fftt
14.2
MMiinn
££ ppeerr ssqq fftt
8.2
MMaaxx
££ ppeerr ssqq fftt
30.7
AAvveerraaggee
££ ppeerr ssqq fftt
12.8
162.6
89.7
132.5
8.1
609.1
7.4
5.3
9.1
5.4
15.3
19.4
14.0
15.0
9.8
16.0
11.1
8.0
2.6
4.6
0.6
3.8
8.4
14.0
14.7
8.6
5.1
11.1
9.7
3.0
6.5%
15.7%
6.6%
8.4%
5.8%
11.1%
6.0%
4.7%
PPrrooppeerrttyy
eeqquuiivvaalleenntt
yyiieelldd
AAvveerraaggee
%%
9.3%
EEPPRRAA ttooppppeedd
uupp nneett iinniittiiaall
yyiieelldd
AAvveerraaggee
%%
9.5%
Shopping Centres – Core
Shopping Centres – Regeneration
Shopping Centres – Work Out
Retail parks
High street and other
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 parks
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%
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
161
161
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
1144.. IInnvveessttmmeenntt pprrooppeerrttiieess ccoonnttiinnuueedd
SSeennssiittiivviittiieess ooff mmeeaassuurreemmeenntt ooff ssiiggnniiffiiccaanntt iinnppuuttss
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.
We consider +/-10% for ERV and +/-100bps for NEY to capture the increased uncertainty in these key valuation assumptions, and deem it to
be a reasonably possible scenario.
The investments are a portfolio of retail 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 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
– Estimated development costs
There were no changes to valuation techniques during the year. 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., which includes a consideration of climate change and a range of other
external factors.
2022: 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 parks
High street and other
IImmppaacctt oonn vvaalluuaattiioonnss ooff aa
1100%% cchhaannggee iinn EERRVV
IImmppaacctt oonn vvaalluuaattiioonnss ooff 110000
bbppss cchhaannggee iinn yyiieelldd
££mm
IInnccrreeaassee
1100%%
19.9
14.3
7.5
9.5
0.7
51.9
££mm
DDeeccrreeaassee
1100%%
(18.7)
(13.6)
(7.4)
(11.2)
(1.1)
(52.0)
££mm
IInnccrreeaassee
11..00%%
(22.6)
(21.1)
(7.2)
(15.7)
(0.9)
(67.5)
££mm
DDeeccrreeaassee
11..00%%
28.5
29.2
8.3
19.4
0.7
86.1
££mm
216.2
162.6
89.7
132.5
8.1
609.1
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 parks
High street and other
∗ This number includes assets held for sale of £25.5m.
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)
(56.3)
(22.1)
(26.2)
(11.2)
(14.4)
(0.4)
(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*
162
162
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
PPuubbss –– ddiissccoonnttiinnuueedd ooppeerraattiioonnss
At 31 March 2021, the valuations across the leisure and hospitality sector, including pubs were 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. The external valuers confirmed that the inclusion of the “material
valuation uncertainty” declaration did not mean that the valuations for NewRiver’s pub portfolio could not be relied upon. Rather, the phrase
was used in order to be clear and transparent with all parties, in a professional manner that – in the extraordinary circumstances at 31 March
2021 – less certainty could be attached to valuations than would otherwise have been the case. Due to the pubs disposal in the year, there
were no investment properties subject to material uncertainty (2021: £195.6 million).
For the purposes of the Circular for the sale of Hawthorn, Colliers performed a valuation at 30 June 2021 for the Hawthorn assets which
identified no material valuation movements from 31 March 2021. The Directors are satisfied that there was no material valuation movement
between 30 June 2021 and the date of disposal on 20 August 2021.
SSeennssiittiivviittiieess ooff mmeeaassuurreemmeenntt ooff ssiiggnniiffiiccaanntt iinnppuuttss
Given the disposal of Hawthorn on 20 August 2021 no sensitivity analysis has been presented. Any change in valuation of the pub
investment property assets at the date of disposal would have no net impact on the total loss for the period from discontinued operations in
the consolidated statement of comprehensive income.
RReeccoonncciilliiaattiioonn ttoo nneett vvaalluuaattiioonn mmoovveemmeenntt iinn ccoonnssoolliiddaatteedd ssttaatteemmeenntt ooff ccoommpprreehheennssiivvee iinnccoommee
Net valuation movement in investment properties
Net valuation movement in investment properties
Net valuation movement in right of use asset
Net valuation movement in consolidated statement of comprehensive income – continuing operations
22002222
££mm
(11.3)
(1.0)
(12.3)
2021
£m
(131.2)
(0.3)
(131.5)
The reduction net valuation movement attributable to discontinued operations in the consolidated statement of comprehensive income
was £nil (2021: £23.2 million).
RReeccoonncciilliiaattiioonn ttoo pprrooppeerrttiieess aatt vvaalluuaattiioonn iinn tthhee ppoorrttffoolliioo
Investment property
Property, plant and equipment
Assets held for sale
Properties held in joint ventures
Properties held in associates
Properties at valuation
Note
14
17
19
15
16
22002222
££mm
609.1
–
–
30.6
9.7
649.4
2021
£m
851.9
52.7
25.5
35.2
8.9
974.2
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
163
163
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
1155.. IInnvveessttmmeennttss iinn jjooiinntt vveennttuurreess
As at 31 March 2022 the Group has two joint ventures.
Opening balance
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
22002222
££mm
25.6
1.1
2.9
(5.6)
24.0
2021
£m
22.1
2.3
1.2
–
25.6
22002222
%% HHoollddiinngg
50
50
2021
% Holding
50
50
The Group is the appointed asset manager on behalf of these joint ventures and receives asset management fees, development
management fees and 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 at 31 March are as follows:
Consolidated balance sheet
Non-current assets
Current assets
Current liabilities
Liabilities due in more than one
year
Net assets
Loan to joint venture
Net assets adjusted for loan to
joint venture
22002222
NNRRII LLPP
££mm
–
0.3
–
–
0.3
–
0.3
NNaappiieerr
££mm
61.2
9.1
(1.8)
(26.8)
41.7
–
41.7
TToottaall
££mm
61.2
9.4
(1.8)
(26.8)
42.0
–
GGrroouupp’’ss
sshhaarree
££mm
30.6
4.7
(0.9)
(13.4)
21.0
3.0
Napier
£m
62.6
7.0
(2.6)
(30.4)
36.6
–
42.0
24.0
36.6
2021
NRI LP
£m
8.0
1.6
(1.0)
–
8.6
–
8.6
Total
£m
70.6
8.6
(3.6)
(30.4)
45.2
–
Group's
share
£m
35.3
4.3
(1.8)
(15.2)
22.6
3.0
45.2
25.6
The table above provides summarised financial information for the joint ventures. The information disclosed reflects the amounts presented
in the financial statements of the joint ventures. To arrive at the Group’s share of these amounts under equity accounting, certain minor
adjustments are required to be made.
22002222
2021
Consolidated statement of comprehensive
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
Profit / (loss) on disposal of
investment property
Profit / (loss) after taxation
Add back net valuation movement
Group’s share of joint ventures’
profit / (loss) before valuation
movements
NNaappiieerr
££mm
5.6
(0.1)
5.5
(0.2)
(0.1)
5.2
5.8
1.5
12.5
(5.8)
NNRRII LLPP
££mm
0.1
–
0.1
(0.1)
–
–
–
(4.5)
(4.5)
–
TToottaall
££mm
5.7
(0.1)
5.6
(0.3)
(0.1)
5.2
5.8
(3.0)
8.0
(5.8)
GGrroouupp’’ss
sshhaarree
££mm
2.8
–
2.8
(0.1)
(0.1)
2.6
2.9
(1.5)
4.0
(2.9)
Napier
£m
NRI LP
£m
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
Total
£m
7.9
(1.7)
6.2
(0.3)
(1.3)
4.6
2.4
–
7.0
(2.4)
Group’s
share
£m
4.0
(0.8)
3.2
(0.2)
(0.7)
2.3
1.2
–
3.5
(1.2)
6.7
(4.5)
2.2
1.1
4.2
0.4
4.6
2.3
The Group’s share of contingent liabilities in the joint ventures is £nil (2021: £nil).
164
164
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
1166.. IInnvveessttmmeennttss iinn aassssoocciiaatteess
The Group has one direct investment in an associate entity in which it has a 10% stake, Sealand S.à.r.l, which owns 100% of NewRiver Retail
(Hamilton) Limited and NewRiver (Sprucefield) Limited at 31 March 2022.
Opening balance
Additions to Investment in associates
Disposals from Investment in associates
Distributions and dividends
Group’s share of profit after taxation excluding valuation movement
Net valuation movement
Investment in associates
22002222
££mm
5.3
4.0
(2.5)
(2.0)
0.2
2.9
7.9
2021
£m
0.9
3.7
–
–
0.1
0.6
5.3
On 1 April 2021, Sealand S.à.r.l, completed the acquisition of The Moor shopping centre in Sheffield, via NewRiver Retail (Hamilton) Limited,
in which the Group holds an indirect 10% interest. The gross asset value at the date of the transaction was £41.0 million.
On 20 December 2021 the Group sold its interest in NewRiver Retail (Nelson) Limited.
Name
NewRiver Retail (Nelson) Limited (Nelson)
NewRiver Retail (Hamilton) Limited (Hamilton)
NewRiver (Sprucefield) Limited (Sprucefield)
Country of
incorporation
UK
UK
UK
22002222
%% HHoollddiinngg
–
10
10
2021
% Holding
10
10
10
The Group is the appointed asset manager on behalf of Sealand S.à.r.l and receives asset management fees, development management
fees and performance-related bonuses.
The aggregate amounts recognised in the consolidated balance sheet and consolidated statement of comprehensive income are as
follows:
3311 MMaarrcchh 22002222
31 March 2021
Consolidated balance sheet
Non-current assets
Current assets
Current liabilities
Liabilities due in more than one year
Net assets
Loans to associates
Net assets adjusted for loans to associates
Consolidated statement of comprehensive income
Revenue
Property operating expenses
Net property income
Administration expenses
Net finance costs
Net valuation movement
Profit on disposal of investment property
Taxation
Profit after taxation
Add back net valuation movement
Group's share of associates' profit before valuation movements
TToottaall
££mm
97.3
14.7
(17.5)
(62.7)
31.8
–
31.8
22002222
TToottaall
££mm
12.6
(2.4)
10.2
(0.7)
(3.6)
5.9
29.1
2.7
(7.2)
30.5
(29.1)
1.4
GGrroouupp’’ss
sshhaarree
££mm
9.7
1.5
(1.8)
(6.3)
3.1
4.8
7.9
22002222
GGrroouupp’’ss
sshhaarree
££mm
1.2
(0.2)
1.0
–
(0.4)
0.6
2.9
0.3
(0.7)
3.1
(2.9)
0.2
Total
£m
89.5
6.7
(37.5)
(42.1)
16.6
–
16.6
2021
Total
£m
6.4
(1.6)
4.8
(0.2)
(2.8)
1.8
6.2
–
–
8.0
(6.2)
1.8
Group’s
share
£m
8.9
0.7
(3.8)
(4.2)
1.6
3.7
5.3
2021
Group’s
share
£m
0.6
(0.2)
0.4
–
(0.3)
0.1
0.6
–
–
0.7
(0.6)
0.1
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
165
165
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
1177.. PPrrooppeerrttyy ppllaanntt aanndd eeqquuiippmmeenntt
Cost or valuation
At 1 April 2021
Additions
Disposals
Disposal of subsidiaries
At 31 March 2022
Accumulated depreciation
At 1 April 2021
Charge for the year
Disposal of subsidiaries
At 31 March 2022
Net book value at 31 March 2022
Net book value at 31 March 2021
Cost or valuation
At 1 April 2020
Additions
Revaluation:
Recognised in the consolidated statement of comprehensive income
Recognised in the 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
OOffffiiccee
eeqquuiippmmeenntt
££mm
2.4
FFiixxttuurreess aanndd
ffiittttiinnggss
££mm
0.6
0.6
–
(2.1)
0.9
1.1
0.1
(0.8)
0.4
0.5
1.3
0.1
–
–
0.7
0.5
–
–
0.5
0.2
0.1
Office
equipment
£m
Fixtures and
fittings
£m
0.6
–
–
–
–
–
1.8
0.6
–
–
–
–
2.4
0.7
0.4
1.1
1.3
1.1
PPuubblliicc
hhoouusseess
££mm
55.4
2.3
(0.8)
TToottaall
££mm
58.4
3.0
(0.8)
(56.9)
(59.0)
–
1.6
2.7
0.4
(3.1)
–
–
52.7
Public
houses
£m
56.6
2.7
(0.5)
(6.6)
4.1
(0.9)
4.3
0.5
(3.9)
0.9
0.7
54.1
Total
£m
59.0
3.3
(0.5)
(6.6)
4.1
(0.9)
0.6
55.4
58.4
0.5
–
0.5
0.1
0.1
1.6
1.1
2.7
52.7
55.0
2.8
1.5
4.3
54.1
56.2
The Group’s public houses were disposed of in the period. As at 31 March 2021 they were valued at fair value 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 were performed by appropriately
qualified valuers who have relevant and recent experience in the sector. As mentioned in note 14, there was a material uncertainty clause
relating to the public house valuations included in the note above as at 31 March 2021.
166
166
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
1188.. TTrraaddee aanndd ootthheerr rreecceeiivvaabblleess
Trade receivables
Restricted monetary asset
Service charge receivables*
Other receivables
Prepayments
Accrued income
22002222
££mm
3.7
5.6
1.7
6.2
0.7
1.0
2021
£m
9.6
5.6
2.6
4.9
1.9
1.4
18.9
26.0
∗
Included in service charge receivables is £1.4 million of Value Added Taxation (2021: £0.4 million) and £0.3 million of service charge debtors (2021: £2.2 million).
Trade receivables are shown after deducting a loss allowance of £5.2m (2021: £9.3m). 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 £0.3 million (2021: £5.6 million charge). The Group has calculated the
expected credit loss by applying a forward-looking outlook, impacted by the Covid-19 pandemic, to historical 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 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.
Opening loss allowance at 1 April
Increase in loss allowance recognised in the consolidated statement of comprehensive income during the year
Disposal of subsidiary
Loss allowance write off
Closing loss allowance at 31 March
22002222
££mm
9.3
0.3
(2.5)
(1.9)
5.2
2021
£m
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.
1199.. AAsssseettss hheelldd ffoorr ssaallee
Assets held for sale at 1 April
Transfer (to) / from investment properties
Assets held for sale at 31 March
22002222
££mm
25.5
(25.5)
–
2021
£m
–
25.5
25.5
In the year ended 31 March 2022 the Group made a number of strategic disposals. As at 31 March 2022 no investment properties meet the
definition of assets held for sale under IFRS.
During the year the £25.5 million of properties held for sale as at 31 March 2021 were not sold and are no longer available for sale as the
Group decided to retain them, therefore they have been transferred back to investment property.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
167
167
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
2200.. DDeerriivvaattiivvee ffiinnaanncciiaall iinnssttrruummeennttss
The Group enters into derivative financial instruments to provide an economic hedge to its interest rate 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
Non-current liabilities
Interest rate swaps – receive floating pay fixed
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
22002222
££mm
–
–
Average contract interest rate Notional principal amount
Fair value
22002222
%%
–
–
–
–
2021
%
0.8%
1.5%
1.5%
–
22002222
££mm
–
–
–
–
2021
£m
137.2
137.2
70.0
344.4
22002222
££mm
–
–
–
–
2021
£m
(2.6)
(2.6)
2021
£m
–
(2.6)
–
(2.6)
In September 2021 the Company repaid and cancelled its £165m term loan, see note 23. Following the cancellation of the term loan the
related derivatives were terminated. The Group has no derivatives in issue in controlled entities.
2211.. CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss
There are no restrictions on cash in place (2021: nil). As at 31 March 2022 and 31 March 2021 cash and cash equivalents comprised of cash
held in bank accounts.
2222.. TTrraaddee aanndd ootthheerr ppaayyaabblleess
Trade payables
Service charge liabilities*
Other payables
Accruals
Value Added Taxation
Rent received in advance
22002222
££mm
3.0
9.2
3.5
8.7
3.4
5.7
2021
£m
4.4
10.9
7.0
15.0
2.2
7.4
33.5
46.9
∗ Service charge liabilities includes accruals of £1.7 million (31 March 2021: £0.3 million), service charge creditors and other creditors of £5.3 million (31 March 2021: £2.8
million), deferred income of £2.2 million (31 March 2021: £7.8 million) and £nil of Value Added Taxation (31 March 2021: £nil).
2233.. BBoorrrroowwiinnggss
Maturity of drawn bank borrowings:
Between two and three years
After five years
Less unamortised fees / discount
22002222
££mm
–
300.0
300.0
2021
£m
335.0
300.0
635.0
(4.2)
(5.3)
295.8
629.7
168
168
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
Unsecured borrowings:
Term loan
Revolving credit facility
Corporate bond
CCaarrrryyiinngg
aammoouunntt
22002222
££mm
–
–
300.0
300.0
FFaaiirr vvaalluuee
22002222
££mm
–
–
285.9
285.9
Carrying
amount
2021
£m
165.0
170.0
300.0
635.0
Fair value
2021
£m
165.0
170.0
283.7
618.7
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 in the prior year was approximately
the same as their carrying amount, after adjusting for the unamortised arrangement fees, and also represented Level 2 fair value
measurement.
Unsecured borrowings:
Revolving credit facility
Corporate bond
Maturity date
August 2024
March 2028
Facility
drawn
£m
–
300.0
300.0
Unamortised
facility fees /
discount
£m
(1.0)
(3.2)
(4.2)
Facility
£m
125.0
300.0
425.0
£m
(1.0)
296.8
295.8
On 21 October 2021 the Group extended the maturity of its revolving credit facility to August 2024 and at the same time cancelled £90
million of the facility, reducing it from £215 million to £125 million with a £50 million accordion (subject to lenders consent). The revolving
credit facility also references Sterling Over Night Indexed Average (‘SONIA’) as its floating rate.
In the year the Group drew down £nil (31 March 2021: £nil) and repaid £170 million (31 March 2021: £nil) of the revolving credit facility. In
addition, on 29 September 2021 the Group fully repaid and cancelled its £165 million Term loan.
2244.. LLeeaassee ccoommmmiittmmeenntt aarrrraannggeemmeennttss
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 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
22002222
££mm
75.5
0.2
0.7
75.0
2021
£m
83.0
3.5
0.7
84.9
The expense relating to low value assets which have not been recognised under IFRS 16 was £nil million (31 March 2021: £0.1 million) and
the expense relating to variable lease payments not included in the measurement of lease liabilities was £nil million (31 March 2021: £nil
million). The total cash outflow in relation to lease commitments for the year was £2.7 million (31 March 2021: £3.5 million).
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
169
169
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
2244.. LLeeaassee ccoommmmiittmmeenntt aarrrraannggeemmeennttss ccoonnttiinnuueedd
Lease liability maturity table
Within one year
Between one and two years
In the second to fifth year inclusive
After five years
Lease commitments payable by the Group are as follows:
Within one year
One to two years
Two to five years
After five years
Effect of discounting
Lease liability
22002222
££mm
0.7
0.7
2.1
72.2
75.7
22002222
££mm
3.2
3.0
9.0
2021
£m
0.7
0.7
2.1
82.1
85.6
2021
£m
3.3
3.3
10.0
253.8
269.0
(193.3)
75.7
253.9
270.5
(184.9)
85.6
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
22002222
££mm
50.0
42.7
89.4
133.7
315.8
2021
£m
64.7
55.9
114.9
161.1
396.6
The Group’s weighted average lease length of lease commitments at 31 March 2022 was 5.3 years (March 2021: 5.2 years).
Operating lease obligations exist over the Group’s offices, head leases on the Group’s retail portfolio and ground rent leases.
Investment properties 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 £1.6 million
(March 2021: £3.1 million).
170
170
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
2255.. SShhaarree ccaappiittaall aanndd rreesseerrvveess
SShhaarree ccaappiittaall
Ordinary shares
1 April 2020
Shares issued under employee share schemes
31 March 2021
Scrip dividends issued
Shares issued under employee share schemes
Scrip dividends issued
31 March 2022
1 April 2020 and 31 March 2021
Shares issued under employee share schemes
Transfer of share premium
Scrip dividends issued
31 March 2022
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
0.1
0.5
0.6
0.8
–
0.82
–
0.86
309.0
309.0
309.0
309.5
309.5
310.3
310.3
2.8
2.7
2.7
2.7
2.1
2.1
2.1
Shares in
issue
m’s
306.2
306.3
306.3
306.8
307.4
308.2
308.2
Share
capital
£’000
Share
premium
£’000
Total
£’000
3,062
227,349
230,411
6
–
14
3,082
–
6
(227,349)
(227,349)
1,147
1,147
1,161
4,229
MMeerrggeerr rreesseerrvvee
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.
SShhaarree pprreemmiiuumm
Following the passing of the special resolution at the Company's Annual General Meeting on 27 July 2021 relating to the cancellation of the
Company's share premium account and the order made by the Court on 24 August 2021 confirming the cancellation of the Company's
share premium account (the ‘Order’), the Order and the statement of capital in respect of the cancellation have been registered by the
Registrar of Companies. The share premium account balance of £227.4 million has been transferred to retained earnings, following the
cancellation of the share premium account effective from 31 August 2021.
SSccrriipp ddiivviiddeenndd sshhaarreess
Shares issued in respect of elections to participate in the Scrip Dividend Scheme in respect of dividends declared in the year.
RReettaaiinneedd eeaarrnniinnggss
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.
SShhaarreess hheelldd iinn EEmmppllooyyeeee BBeenneeffiitt TTrruusstt ((EEBBTT))
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 5% 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 2,116,979 ordinary shares held by EBT.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
171
171
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
2266.. SShhaarree--bbaasseedd ppaayymmeennttss
The Group has three share schemes for employees:
– Share option scheme
– Performance Share Scheme
– Deferred bonus scheme
SShhaarree ooppttiioonn sscchheemmee
Options were granted between 2009 and 2012. The options were priced at the share price at date of issue. No options were granted in
2021 or 2022. The charge for the year recognised in the consolidated statement of comprehensive income was nil (2021: nil).
Year issued
2009-2011
2012
Average
exercise price
Outstanding
at start of year
Granted
Number
Exercised
2.54
2.35
–
338,000
338,000
–
–
–
–
–
–
Lapsed
–
(338,000)
(338,000)
Outstanding
at end of year
Number
exercisable
Average
remaining life
(years)
–
–
–
–
–
–
–
–
PPeerrffoorrmmaannccee SShhaarree SScchheemmee
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 are provided in the Remuneration Report. The charge for the year recognised in the consolidated statement of
comprehensive income was £0.5 million (March 2021: £0.3 million).
Average
exercise price
Outstanding
at start of year
Granted
Number
Exercised
Outstanding
at end of year
Number
exercisable
Average
remaining life
(years)
–
–
–
–
–
–
278,506
–
1,366,652
–
–
–
Lapsed
(278,506)
–
–
–
– (1,366,652)
–
–
–
1,818,153
143,127
–
(46,809)
1,914,471
3,104,871
248,610
(123,952)
(414,259) 2,815,270
– 2,960,526
–
(19,946) 2,940,580
6,568,182 3,352,263
(123,952)
(2,126,172) 7,670,321
–
–
–
7.2
8.4
9.4
–
–
–
–
–
–
–
DDeeffeerrrreedd BBoonnuuss SScchheemmee
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 £0.4 million
(March 2021: £0.3 million).
Average
exercise price
Outstanding
at start of year
Granted
Exercised
Lapsed
Outstanding
at end of year
Number
exercisable
Average
remaining life
(years)
–
–
–
–
–
63,554
154,692
323,012
526,640
–
–
–
–
35,520
313,619
(9,665)
(30,415)
–
–
53,889
124,277
(200,568)
(4,394)
118,050
(165,687)
(29,771)
366,702
–
–
313,619
1,067,898
349,139
(406,335)
(34,165)
976,537
–
–
–
–
–
–
FFaaiirr vvaalluuee
The fair value of the share options has been calculated based on a Monte Carlo Pricing Model using the following inputs:
Year issued
2017
2018
2019
2020
2021
2022
Year issued
2018
2019
2020
2021
2022
–
–
0.2
1.4
2.5
2021
0.63
Nil
21%
22002222
0.78
Nil
25%
0.252%
-0.048 – -0.009%
0%
0%
Share price
Exercise price
Expected volatility
Risk free rate
Expected dividends*
∗ based on quoted property sector average.
172
172
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
2277.. FFiinnaanncciiaall iinnssttrruummeennttss aanndd rriisskk mmaannaaggeemmeenntt
The Group’s activities expose it to a variety of financial risks in relation to the financial instruments it uses: market risk including cash flow
interest rate risk, credit risk and liquidity risk. The financial risks relate to the following financial instruments: trade receivables, cash and
cash equivalents, trade and other payables, borrowings and derivative financial instruments.
Risk management parameters are established by the Board on a project-by-project basis. Reports are provided to the Board quarterly and
also when authorised changes are required.
FFiinnaanncciiaall iinnssttrruummeennttss
Financial assets
Financial assets at amortised cost
Trade and other receivables
Cash and cash equivalents
Total financial assets and maximum exposure to credit risk
Financial liabilities
Fair value through profit or loss
Interest rate swaps and caps
At amortised cost
Borrowings
Lease liabilities
Payables and accruals
Valuation
level
22002222
££mm
2021
£m
15.9
82.8
98.7
22.4
150.5
172.9
2
–
(2.6)
(295.8)
(629.7)
(75.7)
(22.2)
(393.7)
(295.0)
(85.6)
(29.4)
(747.3)
(574.4)
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.
MMaarrkkeett rriisskk
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. At 31 March 2022 the Group has no drawn debt that is subject to variable interest rates and no open derivatives in
controlled entities.
There would be no impact on finance costs to the Group if interest rates increase or decrease as we have no drawn variable rate debt. In
the prior year, 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 and the impact of a 200 bps decrease in interest rates for the prior year would reduce
the net interest payable in the consolidated statement of comprehensive income by £4.0 million. The directors considered this to be a
reasonable sensitivity in the prior year given historical 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. All outstanding rent receivables are regularly monitored. In order to measure the expected credit
losses, trade receivables from tenants have been grouped by 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 likelihood that tenants will pay.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
173
173
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
2277.. FFiinnaanncciiaall iinnssttrruummeennttss aanndd rriisskk mmaannaaggeemmeenntt ccoonnttiinnuueedd
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
22002222
GGrroossss
aammoouunntt
££mm
3.3
22002222
LLoossss
aalllloowwaannccee
££mm
0.8
0.4
0.1
0.5
4.6
8.9
0.1
0.1
0.2
4.0
5.2
22002222
%% aapppplliieedd
24%
25%
100%
40%
87%
22002222
CCaarrrryyiinngg
aammoouunntt
££mm
2.5
0.3
–
0.3
0.6
3.7
2021
Gross
amount
£m
2021
Loss
allowance
£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
2021
% applied
20%
22%
40%
31%
68%
2021
Carrying
amount
£m
4.0
0.7
0.3
1.1
3.5
9.6
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 £0.6 million (2021: £1.4 million) on service charge debtors and £nil (2021: £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 1 April
Increase in loss allowance recognised in the consolidated statement of comprehensive income during the year
Disposal of subsidiary
Loss allowance write off
Closing loss allowance at 31 March
22002222
££mm
4.6
0.5
0.5
3.3
8.9
(5.2)
3.7
22002222
££mm
9.3
0.3
(2.5)
(1.9)
5.2
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
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.
174
174
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
LLiiqquuiiddiittyy rriisskk
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. A summary table with maturity of financial liabilities is presented below:
2022 £m
Borrowings
Interest on borrowings
Lease liabilities
Payables and accruals
2021 £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 decrease / (increase) in cash and cash equivalents
Bank loans repaid
Change in bank loan fees to be amortised
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
Group’s share of joint ventures’ and associates’ borrowings
Group cash
Group’s share of joint venture and associate cash
Group’s share of net debt
LLeessss tthhaann
oonnee yyeeaarr
–
OOnnee ttoo ttwwoo
yyeeaarrss
–
TTwwoo ttoo ffiivvee
yyeeaarrss
–
(10.5)
(3.0)
–
(31.5)
(9.0)
–
MMoorree tthhaann
ffiivvee yyeeaarrss
(300.0)
(9.7)
TToottaall
(300.0)
(62.2)
(253.8)
(269.0)
–
(22.2)
(10.5)
(3.2)
(22.2)
(35.9)
–
(19.1)
(0.7)
(3.3)
(29.4)
(52.5)
(13.5)
(40.5)
(563.5)
(653.4)
–
(19.1)
(1.3)
(3.3)
–
(335.0)
(300.0)
(635.0)
(34.4)
(0.6)
(10.0)
–
(20.2)
–
(253.9)
–
(92.8)
(2.6)
(270.5)
(29.4)
(23.7)
(380.0)
(574.1)
(1,030.3)
22002222
££mm
493.3
67.7
(335.0)
1.1
(1.6)
(4.0)
–
2021
£m
563.6
(69.7)
–
1.1
(2.5)
(1.2)
2.0
221.5
493.3
295.8
13.9
(82.8)
(5.4)
221.5
629.7
17.9
(150.5)
(3.8)
493.3
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
175
175
NOTES TO THE FINANCI AL S TATE ME NTS CO NTI NUED
2277.. FFiinnaanncciiaall iinnssttrruummeennttss aanndd rriisskk mmaannaaggeemmeenntt ccoonnttiinnuueedd
CCaappiittaall rriisskk mmaannaaggeemmeenntt
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. 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.
Between 31 March 2021 and 31 March 2022, the Group’s proportionally consolidated LTV decreased by 17% from 51% to 34% and the
gearing ratio from 104% to 51% mainly as a result of the sale of Hawthorn, retail disposals and stabilisation in retail valuations. The Group
continually monitors LTV and will continue to monitor LTV closely, factoring in disposal activity and further valuation declines as disclosed in
Note 1. The Group has remained compliant with all of its banking covenants during the year 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’)
RReeccoonncciilliiaattiioonn ooff ffiinnaanncciiaall lliiaabbiilliittiieess
Reconciliation of financial liabilities
As at 1 April 2021
(Decrease)/Increase through financing cash flows
Repayment of bank loans
Repayment of principal portion of lease liability
Other changes
Lease modification
Disposals
Disposal of subsidiary
Termination of derivative
Change in capitalised loan fees to be amortised
As at 31 March 2022
22002222
££mm
295.8
(82.8)
213.0
414.1
51%
13.9
(5.4)
221.5
609.1
–
–
40.3
649.4
34%
LLeeaassee
lliiaabbiilliittiieess
££mm
85.6
BBoorrrroowwiinnggss
££mm
629.7
DDeerriivvaattiivveess
££mm
(2.6)
–
(0.7)
(5.2)
(1.7)
(2.3)
–
–
(335.0)
–
–
–
–
–
1.1
75.7
295.8
–
–
–
–
–
2.6
–
–
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%
TToottaall
££mm
712.7
(335.0)
(0.7)
(5.2)
(1.7)
(2.3)
2.6
1.1
371.5
176
176
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
Reconciliation of financial liabilities
As at 1 April 2020
(Decrease)/Increase through financing cash flows
Repayment of principal portion of lease liability
Change in fair value of derivative
Other changes
Change in capitalised loan fees to be amortised
As at 31 March 2021
Lease
liabilities
£m
86.3
Borrowings
£m
Derivatives
£m
628.6
(2.7)
(0.7)
–
–
–
–
1.1
85.6
629.7
–
0.1
–
(2.6)
Total
£m
712.2
(0.7)
0.1
1.1
712.7
2288.. CCoonnttiinnggeenncciieess aanndd ccoommmmiittmmeennttss
The Group has no material contingent liabilities (2021: None). The Group was contractually committed to £1.3 million of capital expenditure
to construct or develop investment property as at 31 March 2022 (31 March 2021: £4.0 million). The Group also committed to a 5 year lease
which has commenced on 1 April 2022 with rent per annum of £0.3 million.
Under the terms of the sale agreement to dispose of Hawthorn, the Group gave certain warranties, including tax, relating to Hawthorn. A
breach of warranty will only give rise to a successful claim in damages if the buyer can show that the warranty was breached and that the
effect of the breach is to reduce the value of Hawthorn at the date of disposal. Claims must be received, in the case of a Warranty Claim,
within a year of Completion and, in the case of a Tax Claim, within 6 years of Completion. No such claims have been received.
2299.. RReellaatteedd ppaarrttyy ttrraannssaaccttiioonnss
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 £2.8 million (2021: £1.9 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 has loans with a joint venture of £3.0 million (2021: £3.0 million) and loans with associates of £4.8 million (March 2021: £3.7
million).
Management fees are charged to joint ventures and associates for asset management, investment advisory, project management and
accounting services. Total fees charged were:
NewRiver Retail (Nelson) Limited
NewRiver Retail (Napier) Limited
NewRiver Retail (Hamilton) Limited
NewRiver (Sprucefield) Limited
22002222
££mm
0.1
0.2
0.2
0.2
2021
£m
0.1
0.2
–
0.1
As at 31 March 2022, an amount of £0.2 million (2021: £0.1 million) was due to the Group relating to management fees.
During the year, the Group recognised £0.4 million of interest from joint ventures and associates (2021: £0.3 million) and as at 31 March
2022 the amount owing to the Group was £0.2 million (2021: £0.2 million).
KKeeyy mmaannaaggeemmeenntt ppeerrssoonnnneell
Details of Directors’ remuneration are given in the report of the Remuneration Committee on pages 109 to 127.
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 party transactions between 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.
3300.. PPoosstt bbaallaannccee sshheeeett eevveennttss
There were no other significant events occurring after the reporting period, but before the financial statements were authorised for issue.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
177
177
CO MPA NY B ALA N CE SHEE T
A S AT 31 MAR CH 20 22
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
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
22002222
££mm
329.9
225.9
555.8
2021
£m
570.3
235.7
806.0
238.0
250.5
1.1
0.9
240.0
795.8
0.3
2.3
–
101.8
104.4
295.8
295.8
395.6
3.1
1.1
33.6
357.8
395.6
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
D
E
The notes on pages 180 to 183 form an integral part of the Company financial statements. 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 £36.3 million
(31 March 2021: loss of £156.0 million).
The financial statements were approved by the Board of Directors on 15 June 2022 and were signed on its behalf by:
Allan Lockhart
CChhiieeff EExxeeccuuttiivvee
Will Hobman
CChhiieeff FFiinnaanncciiaall OOffffiicceerr
Registered number: 10221027
178
178
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
C O MPA NY S T ATE ME NT OF CH ANG ES IN EQUITY
F O R T HE Y E AR E ND ED 31 MA R CH 20 2 2
As at 1 April 2020
Loss after taxation
Transfer from merger reserve
As at 31 March 2021
Loss after taxation
Transfer from merger reserve
Equity issue
Transfer of share premium
Dividends paid
As at 31 March 2022
Share
capital
£m
3.1
–
–
3.1
–
–
–
–
–
3.1
Share
premium
£m
227.4
–
–
227.4
–
–
1.1
(227.4)
–
1.1
Merger
reserve
£m
211.7
–
(187.5)
24.2
–
9.4
–
–
–
33.6
Retained
earnings
£m
166.3
(156.0)
187.5
197.8
(36.3)
(9.4)
–
227.4
(21.7)
357.8
Total
£m
608.5
(156.0)
–
452.5
(36.3)
–
1.1
–
(21.7)
395.6
The notes on pages 180 to 183 form an integral part of these financial statements. There was no other income in the year therefore the loss
after taxation is the Company’s total comprehensive loss for the year.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
179
179
NOTES TO THE CO MPANY FI NANCI AL S TATE ME NTS
A. Accounting policies
BBaassiiss ooff aaccccoouunnttiinngg
The Company’s separate financial statements for the year ended 31 March 2022 are prepared in accordance with Financial Reporting
Standard 101 (FRS 101) “Reduced Disclosure Framework” as issued by the Financial Reporting Council. The financial statements are
presented in pounds Sterling. These financial statements have been prepared under the historical cost convention.
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 the 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.
For the Company’s going concern assessment, refer to note 1.
CCrriittiiccaall eessttiimmaatteess
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.
CChhaannggeess ttoo aaccccoouunnttiinngg ppoolliicciieess
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
– 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.
IInnvveessttmmeenntt iinn ssuubbssiiddiiaarriieess
Investments in subsidiary undertakings are stated at cost less provision for cumulative impairments. Where an impairment has been
recognised in previous periods, and the conditions that caused the impairment are no longer present, the impairment charge previously
recognised will be reversed, up to the cost of the original investment value.
FFiinnaanncciiaall iinnssttrruummeennttss
Financial assets
The Company 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 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 IFRS 9 in the determination of the expected credit losses. 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.
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.
180
180
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS FFiinnaanncciiaall lliiaabbiilliittiieess
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 financial instruments classified as financial liabilities 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 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.
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.
SShhaarree--bbaasseedd ppaayymmeennttss
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.
SShhaarree ccaappiittaall
Shares are classified as equity when there is no obligation to transfer cash or other assets.
DDiivviiddeennddss
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. Dividend information is provided in note
13 to the consolidated accounts.
MMeerrggeerr rreesseerrvvee
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, adjusted for subsequent impairments and impairment reversals
in NewRiver Retail Limited following the creation of the merger reserve in 2016.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
181
181
N O T ES TO T HE COM PA NY F IN ANC IA L S TA TE ME N TS CO NT I NU ED
B. Investment in subsidiaries
All subsidiaries are held indirectly except the companies marked* in the below listing.
Country of
incorporation
Activity
Proportion of ownership
interest
Name
C-store REIT Limited
Convenience Store REIT Limited
NewRiver Capital Limited*
NewRiver Retail (Burgess Hill) Limited
NewRiver (Darnall) Limited
NewRiver Finance Company Limited
NewRiver REIT (UK) Limited
NewRiver Leisure Limited
NewRiver Retail (Bexleyheath) Holdings Limited
UK
UK
UK
UK
UK
UK
UK
UK
UK
Dormant company
Dormant company
Real estate investments
Dormant company
Real estate investments
Real estate investments
Asset management
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
UK
UK
UK
Real estate investments
Real estate investments
Real estate investments
Luxembourg Real estate investments
UK
UK
UK
Dormant
General partner
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 (Ramsay Development) Limited
NewRiver Retail (Ramsay Investment) Limited
NewRiver Retail (Skegness) Limited
NewRiver Retail (Wakefield) Limited
NewRiver Retail (Warminster) Limited
NewRiver Retail (Wisbech) Limited
NewRiver Retail (Witham) Limited
UK
UK
UK
UK
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
Real estate investments
Real estate investments
Real estate investments
Real estate investments
NewRiver Retail (Wrexham No.1) Limited
Guernsey
Real estate investments
NewRiver Retail (Portfolio No. 10) Limited*
UK
Real estate investments
182
182
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
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%
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
Partnership
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
FINANCIAL STATEMENTS
Name
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. 5 Limited
NewRiver Retail Holdings No. 6 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. 5
NewRiver Retail Property Unit Trust No. 6
NewRiver Retail Property Unit Trust No. 7
Shopping Centre REIT Limited
Country of
incorporation
Activity
Proportion of ownership
interest
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
UK
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
UK
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
Dormant company
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 units
Ordinary units
Ordinary units
Ordinary units
Ordinary units
Ordinary units
Ordinary units
Ordinary Shares
All UK incorporated companies have their registered offices at 16 New Burlington Place, London, W1S 2HX. All Jersey incorporated
companies have their registered offices at 13 Castle Street, St Helier, Jersey, Channel Islands, JE4 5UT. All Guernsey incorporated
companies have their registered offices at Floor 2 Trafalgar Court, Les Banques, St Peter Port, GY1 4LY. All Luxembourg incorporated
companies have their registered offices at 5, Heienhaff L-1736 Senningerberg.
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 (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
Reconciliation of the movement in investment in subsidiaries:
Opening balance
Reversal / (Impairment) in subsidiaries
Disposal of subsidiaries
Additions to investments
Other movement
Investment in subsidiaries
22002222
££mm
570.3
9.4
(249.2)
–
(0.6)
2021
£m
560.4
(220.4)
–
230.3
–
329.9
570.3
The Company has recognised an impairment reversal of £9.4 million (2021: £220.4 million impairment) to reflect the increase in the
valuation of the overall assets of the investment in subsidiary as a result of a positive movement in property valuations and trading profits.
On 20 August 2021 the Company completed the sale of the entire issued share capital of Hawthorn Leisure REIT Limited (‘Hawthorn’), the
entity that held, either directly or indirectly through its wholly-owned subsidiaries, NewRiver’s entire community pub business, to AT Brady
Bidco Limited.
The Company recognised a loss on disposal of £33.8 million.
CC.. AAuuddiittoorrss rreemmuunneerraattiioonn
The auditors’ remuneration in respect of the Company is disclosed in note 6.
DD.. BBoorrrroowwiinnggss
All borrowings issued by the Group at 31 March 2022 were issued by the Company. See note 23 of the consolidated financial statements
for details.
EE.. CCaappiittaall rreedduuccttiioonn
Following the passing of the special resolution at the Company's Annual General Meeting on 27 July 2021 relating to the cancellation of the
Company's share premium account and the order made by the Court on 24 August 2021 confirming the cancellation of the Company's
share premium account (the ‘Order’), the Order and the statement of capital in respect of the cancellation have been registered by the
Registrar of Companies. The share premium account balance of £227.4 million has been transferred to retained earnings, following the
cancellation of the share premium account effective from 31 August 2021.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
183
183
EP RA P ERFO RMANCE MEASU RES (U NAUD ITED )
The information in this section is unaudited and does not form part of the consolidated primary statements of the company or the notes
thereto.
IInnttrroodduuccttiioonn
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 the following tables.
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
EEPPRRAA EEaarrnniinnggss PPeerr SShhaarree:: 88..55pp
Definition
Earnings from operational activities
FFYY2222
8.5p
41.1%
38.7%
FY21
2.9p
61.3%
58.6%
MMaarrcchh 22002222 March 2021
170p
148p
134p
139p
7.5%
8.0%
4.4%
151p
155p
8.4%
8.9%
4.2%
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)
EPRA Earnings – continuing operations
EPRA Earnings per Share (EPS) – continuing operations
FFYY2222
((££mm))
(26.6)
12.3
43.1
(0.1)
–
1.9
(4.5)
26.1
FY21
(£m)
(150.5)
154.7
7.7
(0.1)
0.1
(1.4)
(1.6)
8.9
307.2m
306.4m
8.5p
18.9
6.2p
2.9p
14.0
4.6p
184
184
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
Reconciliation of EPRA Earnings to Underlying Funds From Operations (UFFO)
EPRA Earnings
Share-based payment charge
Depreciation on property
Forward-looking element of IFRS 9
Restructuring and abortive costs
Underlying Funds From Operations (UFFO)
Basic number of shares
UFFO per share
Underlying Funds From Operations (UFFO) – continuing operations
UFFO per share – continuing operations
FFYY2222
((££mm))
26.1
0.9
0.4
(0.2)
1.1
28.3
FY21
(£m)
8.9
0.6
1.1
0.6
0.3
11.5
307.2m
306.4m
9.2p
20.5
6.7p
3.8p
15.5
5.1p
EEPPRRAA NNRRVV ppeerr sshhaarree:: 114488pp;; EEPPRRAA NNTTAA ppeerr sshhaarree:: 113344pp;; EEPPRRAA NNDDVV ppeerr sshhaarree:: 113399pp
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 2022
IFRS Equity attributable to shareholders
Fair value of financial instruments
Deferred tax in relation to fair value gains of Investment Property/ PPE
Fair value of debt
Purchasers’ costs
EPRA NRV / NTA / NDV
Fully diluted number of shares
EPRA NRV / NTA / NDV per share
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
EEPPRRAA NNRRVV
((££mm))
414.1
EEPPRRAA NNTTAA
((££mm))
414.1
EEPPRRAA NNDDVV
((££mm))
414.1
(0.3)
0.6
–
43.8
458.2
309.0
148p
(0.3)
0.6
–
–
414.4
309.0
134p
–
–
14.1
–
428.2
309.0
139p
EPRA NRV
(£m)
EPRA NTA
(£m)
460.4
460.4
EPRA NDV
(£m)
460.4
2.6
0.7
–
–
60.1
523.8
307.3m
170p
2.6
0.7
(0.5)
–
–
–
–
(0.5)
16.3
–
463.2
307.3m
151p
476.2
307.3m
155p
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
185
185
E PRA PER FOR MA NC E M EA SUR ES (U NA UD ITE D ) CO NT IN U ED
EEPPRRAA NNIIYY:: 77..55%%,, EEPPRRAA ‘‘ttooppppeedd--uupp’’ NNIIYY:: 88..00%%
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
MMaarrcchh 22002222
((££mm))
609.1
40.3
–
March 2021
(£m)
904.6
44.1
25.5
(22.3)
(32.0)*
627.1
40.4
667.5
62.9
(13.1)
49.8
3.3
53.1
7.5%
8.0%
942.2
47.3
989.5
96.4
(13.7)
82.7
5.4
88.1
8.4%
8.9%
B
A
C
A/B
C/B
* Residual development value retrospectively applied to Grays as at March 2021. Previously stated 8.2% EPRA NIY and 8.8% EPRA ‘topped-up’ NIY.
Continuing operations as at March 2021 calculated as 7.4% EPRA NIY and 8.2% EPRA ‘topped-up’ NIY.
EEPPRRAA VVaaccaannccyy rraattee:: 44..44%%
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
MMaarrcchh 22002222
((££mm))
March 2021
(£m)
A
B
A/B
2.6
58.6
4.4%
2.8
66.0
4.2%
186
186
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
EEPPRRAA CCoosstt RRaattiioo ((iinncclluuddiinngg ddiirreecctt vvaaccaannccyy ccoossttss)):: 4411..11%%;;
EEPPRRAA CCoosstt RRaattiioo ((eexxcclluuddiinngg ddiirreecctt vvaaccaannccyy ccoossttss)):: 3388..77%%
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
Service charge costs recovered through rents but not separately invoiced
EPRA Costs (including direct vacancy costs)
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)
EPRA Cost Ratio (including direct vacancy costs) – continuing operations
EPRA Cost Ratio (excluding direct vacancy costs) – continuing operations
A
B
C
A/C
B/C
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 reversal / (loss)
Other income
Gross Rental Income
Administrative cost ratio as per IFRS
Administrative cost ratio as per IFRS – continuing operations
FFYY2222
((££mm))
33.4
5.6
(1.9)
(4.8)
0.4
–
0.7
–
33.4
(2.0)
31.4
77.3
–
3.9
81.2
41.1%
38.7%
36.8%
33.8%
FFYY2222
((££mm))
33.4
(0.7)
(0.2)
4.8
(5.6)
(16.2)
(0.2)
(1.2)
14.1
81.2
(0.7)
0.3
2.5
A
D
C
E
D/E
83.3
16.9%
16.0%
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%
44.4%
41.5%
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%
18.1%
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
187
187
ALTE RNATIVE PERFO RMANCE MEASURES ( AP MS)
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 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 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
‘Financial Policies’ section of the ‘Finance Review’
Note 6 of the Financial Statements
Glossary
IFRS Basic EPS
Note 12 of the Financial Statements
N/A
N/A
N/A
N/A
N/A
N/A
N/A
‘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
188
188
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS
GLOSSARY
Glossary
Admin cost ratio: Is the Group’s share of net administrative
expenses (including its share of JV administrative expenses)
divided by the Group’s share of property income (including its
share of JV property income).
Average debt maturity: Is measured in years, when each tranche of
Group debt is multiplied by the remaining period to its maturity and
the result is divided by total Group debt in issue at the period end.
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 joint venture 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: Is Estimated Rental Value, the external valuers’ opinion of 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.
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: UK-adopted International Accounting 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 ventures under a contractual arrangement whereby
decisions on financial and operating policies essential to the
operation, performance and financial position of the venture
require each joint venture partner’s consent.
Leasing events: Long-term and temporary new lettings, lease
renewals and lease variations within investment and joint
venture properties.
Like-for-like ERV growth: Is the change in ERV over a period on
the standing investment properties expressed as a percentage of
the ERV at the start of the period.
Like-for-like footfall: Is the movement in footfall against the same
period in the prior period, on properties owned throughout both
comparable periods, aggregated at 100% share.
Like-for-like net income: Is the change in net income on properties
owned throughout the current and previous periods under review.
This growth rate includes revenue recognition and lease accounting
adjustments but excludes properties held for development in either
period, properties with guaranteed rent reviews, asset management
determinations and surrender premiums.
Long-term leasing deals: Are leasing deals with a fixed term
certain of at least one year.
Loan to Value (LTV): Is the ratio of gross debt less cash, short-
term deposits and liquid investments to the aggregate value of
properties and investments. LTV is expressed on a proportionally
consolidated basis.
Mark to market: Is the difference between the book value of an
asset or liability and its market value.
MSCI-IPD: MSCI Real Estate Investment Property Databank Ltd or
‘IPD’ produces independent benchmarks of property returns and
NewRiver portfolio returns.
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
189
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 measures the Company's
underlying operational profits, excluding one-off or non-cash
adjustments such as portfolio valuation movements and profits or
losses on the disposal of investment properties.
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.
GL OSSARY CON TINU ED
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 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.
Retail occupancy rate: Is the estimated rental value of let units
expressed as a percentage of the total estimated rental value of
the portfolio, excluding development properties.
Risk-controlled development pipeline: Is the combination of all
development projects that the Company is currently pursuing or
assessing for feasibility. Our risk-controlled approach means that
we will not commit to a new development unless we have pre-let
or pre-sold at least 70% by area.
Tenant (or lease) incentives: Are any incentives offered to
occupiers to enter into a lease. Typically the incentive will be an
initial rent-free period, or a cash contribution to fit-out or similar
costs. Under accounting rules, the value of lease incentives given
to tenants is amortised through the Income Statement on a
straight-line basis to the lease expiry.
190
NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL STATEMENTS Company Information
Directors
Margaret Ford
(Non-Executive Chairman)
Allan Lockhart
(Chief Executive Officer)
Will Hobman
(Chief Financial Officer)
Kay Chaldecott
(Non-Executive Director)
Alastair Miller
(Non-Executive Director)
Dr Karen 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
Vinters Place
68 Upper Thames Street
London
EC4V 3BL
Shore Capital Limited
Cassini House
57 St James’s Street
London
SW1A 1LD
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
Cannon Place
78 Cannon Street
London
EC4N 6AF
Tax Advisers
BDO LLP
55 Baker Street
London
W1U 7EU
Registrars
Link Group
10th floor
Central Square Wellington Street
Leeds
LS1 4DL
This report is printed on paper certified in accordance with the FSC®
(Forest Stewardship Council®) and is recyclable and acid-free.
Pureprint Ltd is FSC certified and ISO 14001 certified showing that it is
committed to all round excellence and improving environmental
performance is an important part of this strategy.
Pureprint Ltd aims to reduce at source the effect its operations have
on the environment and is committed to continual improvement,
prevention of pollution and compliance with any legislation or
industry standards.
Pureprint Ltd is a Carbon / Neutral® Printing Company.
Designed and produced by Black Sun Plc
www.blacksunplc.com
www.nrr.co.uk
NewRiver REIT plc
16 New Burlington Place
London W1S 2HX
+44 (0) 20 3328 5800
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