NewRiver REIT Annual Report 2023

Plain-text annual report

N e w R i v e r R E I T p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 2 3 Annual Report and Accounts 2023 NewRiver is a leading Real Estate Investment Trust specialising in buying, managing and developing resilient retail assets across the UK that provide essential goods and services whilst supporting the development of thriving communities. NewRiver has a Premium Listing on the Main Market of the London Stock Exchange (ticker: NRR). 2023 Financial Highlights Retail Underlying Funds From Operations (UFFO)1 £25.8m FY22: £20.5m FY21: £19.5m Ordinary Dividend Per Share 6.7p FY22: 7.4p FY21: 3.0p Total Accounting Return -4.6% FY22: -6.6% FY21: -24.9% Contents Strategic Report Chair’s statement Overview Our business Chief Executive’s review Our marketplace Our business model Stakeholder engagement Key performance indicators Portfolio review Our platform Finance review Our ESG approach Principal risks and uncertainties Viability statement 2 4 6 8 12 18 20 28 32 42 46 54 88 95 Retail UFFO Per Share1 8.3p FY22: 6.7p FY21: 6.4p Portfolio Valuation Performance -5.9% FY22: -0.9% FY21: -13.6% Net debt £201.3m FY22: £221.5m FY21: £493.3m IFRS Loss After Tax £(16.8)m FY22: £(26.6)m FY21: £(150.5)m Loan To Value 33.9% FY22: 34.1% FY21: 50.6% Key Performance versus previous year Improved Declined Maintained 97 98 101 Governance The Chair’s letter on governance Our leadership team Board leadership and Company purpose Nomination Committee Report 109 Audit Committee Report 113 Remuneration Report 119 Directors’ Report 137 Statement of Directors’ responsibilities 140 Financial Statements Independent Auditors’ Report Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Cash Flow Statement Consolidated Statement of Changes in Equity Notes to the Financial Statements Company Balance Sheet Statement of Changes in Equity Notes to the Financial Statements Alternative Performance Measures EPRA Performance Measures Glossary Company information 141 149 150 151 152 153 180 181 182 187 188 194 196 1. Retail UFFO is UFFO from continuing operations and excludes contribution from Hawthorn in FY22 prior to its disposal on 20 August 2021, see Note 12 to the Financial Statements RESILIENT RESILIENT ROBUST MARKET DYNAMICS Our portfolio positioning, focused on essential goods and services, where a physical store is vital to our occupiers, is the reason for the underlying resilience of our operating performance. AGILE PLATFORM Our market leading asset management platform draws on the in-house expertise of our team, our deep market knowledge and excellent occupier relationships to enhance and protect income streams for our assets both on our own balance sheet and those we manage on behalf of our capital partners. See page 12 See page 42 FOCUSED PORTFOLIO STRONG FINANCIAL POSITION Our resilient portfolio provides affordable, well-located and omnichannel compatible space for successful and expanding occupiers reliant on a physical store network. Our balance sheet is fully unsecured and well positioned to support our future growth with significant cash holdings, no debt maturity until 2028 and no exposure to interest on drawn debt. See page 6 See page 46 RETAIL RETAIL NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 1 Strategic Report Chair’s statement Our vision for resilient retail The last year has seen another strong operational performance from NewRiver, in sharp contrast to sentiment towards real estate in the equity capital markets. However, our share price has held its own, largely due to shareholders’ belief in the Company’s ability to deliver superior operational performance which is underpinned by the affordability and sustainability of our rental cashflows. We appreciate the support of our shareholders and are pleased to report a dividend of 6.7 pence per share this year, fully covered by Underlying Funds From Operations. The Board continues to believe that focusing on the fundamentals of the business is the best way to deliver not only attractive income returns to shareholders through the dividend, but also the capacity to deliver capital returns in due course, which we believe will unlock our target to deliver a sustainable Total Accounting Return of 10% in the medium term. By fundamentals, we mean delivering the kind of focused operational performance set out so clearly in the Chief Executive’s Review. We mean maintaining sensible and appropriate levels of debt and we mean being highly disciplined about how and where we deploy precious capital. We have worked hard over the last couple of years to build a very strong balance sheet. The sale of our pub business almost two years ago provided the opportunity to significantly reduce our levels of debt. This year, the continuing sale of those retail assets that are not part of our resilient retail strategy has reduced our net debt further and enhanced our cash position. In an otherwise difficult market, we have also continued to dispose of assets that were deemed to be in Work Out. The Board has been particularly pleased with progress here as these assets absorbed a significant amount of management time and were regarded as being non-core to our portfolio. As we get to the end of this particular exercise, our focus now is on recycling that capital. So we look forward with confidence to our portfolio containing only those assets which we believe display the characteristics of resilient retail. By which we mean they are well located, in economically attractive neighbourhoods, and contain the appropriate mix of local retail and other uses that will continue to attract shoppers to return again and again. “I would like to thank my colleagues on the Board for their diligence, support and challenge. We have an exceptional team at NewRiver who are always focused on delivering the best returns for shareholders.” Baroness Ford OBE Non-Executive Chair 2 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportTown centres have never been in more need of regeneration and we believe we are well equipped to provide solutions. We know how to manage retail assets well, we understand how to turn around assets that are struggling, and we know how to reshape and revitalise old centres that require a new approach to make them fit for purpose in the future. Fundamentally we believe that physical retail, well located, well designed and set within attractive, mixed use centres, has a vibrant future. Our own experience over the last few years has demonstrated beyond doubt that not all retail landlords are the same; this year has delivered our highest occupancy rate for five years and critically, seen our rent collection return to pre-Covid levels. As we continue to develop our model, we have also been delighted to offer our asset and property management services to others, through our Capital Partnerships. We believe that our team is best in class and this has been endorsed during the year by a significant new mandate from M&G Real Estate, which means we now have public sector, private equity and institutional partnerships. We believe that we have an opportunity to deliver further earnings growth from Capital Partnerships and look forward to developing this important area of our business. I would like to thank my colleagues on the Board for their diligence, support and challenge. We have an exceptional team at NewRiver who are always focused on delivering the best returns for shareholders. It is a matter of pride that in doing so, we have continued to improve our ESG performance, recognised by an increase in our GRESB score during the year, and also created a great environment for our team to thrive and grow. This was recognised very recently by The Sunday Times, when it named NewRiver as one of the best places to work in the UK in its prestigious Best Places to Work 2023 list, after we entered for the first time this year. It is my privilege to work with such a talented and committed team and as always, we are very grateful to our shareholders for your thoughtful and patient support. Baroness Ford OBE Non-Executive Chair 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. Resilient performance and strategic progress highlights • Resilient operational performance • Strong financial position • Expanded Capital Partnerships • Disposal target delivered; Work Out exit on track • Portfolio valuation outperformance • Progress on ESG objectives NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 3 Strategic Report Overview Delivering 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. See page 3 shapes our business model • Disciplined capital allocation • Leveraging our platform • Flexible balance sheet • Integrated ESG programme See page 18 which in turn drives our growth strategy Our strategy aims to deliver a consistent 10% Total Accounting Return in the medium term by focusing exclusively on these activities See page 11 delivered within our risk management framework Underpinned by effective risk management See page 88 4 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportWe have a resilient investment case to deliver reliable and recurring revenues MARKET • Focused on a resilient sub-sector of the retail market • Providing essential goods and services to communities • Store-based network for omnichannel retail • Well-positioned to withstand macroeconomic headwinds See page 12 PORTFOLIO • Retail Parks • Core Shopping Centres • Work Out • Regeneration See page 32 PLATFORM • Market leading asset management team • Scalable operational structure • Data-driven approach • Strong occupier relationships • Expanding Capital Partnerships See page 42 FINANCIAL POSITION • Unsecured balance sheet structure • No debt maturity until 2028 • Significant cash holdings • Debt costs fixed until 2028 See page 46 We oversee and manage our purpose, culture, values, strategy, sustainability and relationships through effective Board leadership and governance See page 96 Enabling us to generate long-term value for our stakeholders: • Our team • Our communities • Our shareholders • Our capital partners • Our occupiers • Our environment See page 20 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 5 Strategic Report Strategic report Our business Resilient retail at a glance Our resilient retail portfolio, focused on providing essential goods and services to local communities, has once again delivered a strong operational performance reflecting the active occupational demand for space at our assets and demonstrating the underlying resilience within our portfolio and our platform. Portfolio segmentation Top 10 retailers 11% 1% 28% 23% 37% Retail Parks Shopping Centres – Core Shopping Centres – Regeneration Shopping Centres – Work Out Other Focused on three resilient sectors 1. Retail Parks 2. Core Shopping Centres 3. Regeneration Shopping Centres 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. total % rent stores 20 10 14 4 14 13 5 6 3 11 3.4% 3.1% 2.4% 2.3% 2.2% 2.1% 2.1% 2.0% 1.6% 1.4% 22.6% Progress this year Robust rent collection High occupancy High retention rate % 6 9 % 8 9 % 2 9 % 8 5 9 . % 6 5 9 . % 7 6 9 . % 0 9 % 2 9 % 7 8 98% 97% 92% FY21 FY22 FY23 FY21 FY22 FY23 FY21 FY22 FY23 6 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic Report Resilient retail: 10 key characteristics Location Online compatible Strong demographic profile • Our centres are located close to some of the fastest growing communities in the UK Fulfils role in omnichannel supply chains • Our retail parks are optimised for click & collect with both free parking and delivery & returns pods in car parks Optionality Asset management Underlying alternative use • Our assets present optionality to re-purpose surplus retail space Low-intensity, low-risk asset management • Our market leading platform has a targeted capex or land predominantly for residential programme to increase rental income, capital growth and shopper experience Retail supply ESG Favourable retail demand vs supply balance • Good demand from retailers for our assets, which are in the heart of communities and cater for increased localism and working from home dynamics • We have low occupational costs with an affordable average rent of £11.98 per sq ft Contributes to ESG commitments • We can decarbonise our assets at a lower future cost • 100% renewable electricity across our managed retail assets • Our assets are easily accessible with low travel times, including 26% of shoppers travelling by foot which is conducive to a low-carbon footprint Convenience Working from home 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 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 £15.9 million goods and services Affordable average rent Strong leasing pricing vs ERV Compound Annual Growth Rate (CAGR) vs previous rent 1 5 . 1 1 £ 4 7 . 1 1 £ 8 9 . 1 1 £ % 3 0 . - % 4 0 . - % 5 0 . - £11.98 psqf % 6 0 + . % 4 7 + . % 1 . 1 + +1.1% -0.5% FY21 FY22 FY23 FY21 FY22 FY23 Leasing Pricing: long term rent secured in leasing activity vs valuer ERV FY21 FY22 FY23 CAGR: percentage per annum growth of new rent vs previous passing rent, over period of previous lease length NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 7 Chief Executive’s review Resilient performance and strategic progress Our strong operational performance, including disposals within our Work Out portfolio, resulted in excellent cash generation as we ended the financial year with £111.3 million of cash up from £88.2 million at the end of FY22. Whilst the MSCI All Property and All Retail indices experienced capital returns of -16% and -13% respectively for the year 1 April 2022 to 31 March 2023, our portfolio outperformed with a like-for-like valuation movement of -5.9%. The majority of our reported decline was contained within our Regeneration portfolio, predominantly driven by higher estimated development costs, a direct consequence of persistent high inflation. As a result, our EPRA Net Tangible Assets (NTA) per share at the full year was 121 pence (FY22: 134 pence). At our FY22 results, we said that we would seek to maintain headroom to our Loan To Value (LTV) guidance of <40% given the macro-economic uncertainty at that time. That was the right decision given the significant disruption in the real estate capital markets especially in the final quarter of 2022. Our LTV at the full year was 33.9% (FY22: 34.1%), well within our guidance. Importantly, we have no refinancing or exposure to higher interest rates on drawn debt until 2028 and we view this, together with the significant spread between our portfolio net initial yield of 8.0% and our cost of borrowing of 3.5%, as key strengths. A key highlight of the full year was successfully expanding our Capital Partnerships strategy by securing a high-quality mandate from M&G Real Estate to asset manage a large retail portfolio comprising 16 retail parks and one shopping centre, further extended to include a second shopping centre post year end. This is a great endorsement of the quality of our asset management platform and also demonstrates the potential to grow our recurring earnings in a capital light way. Our operating and financial results demonstrate the underlying resilience of our business in what has been a challenging year for the real estate sector. That, together with our strong financial position and the strategic options available to us, means we remain confident in delivering our objective of a consistent 10% total accounting return for our shareholders. FINANCIALS Strong Financial Performance & Fully Covered Dividend Our Retail UFFO increased by 26% in FY23 to £25.8 million (FY22: £20.5 million). This performance has been driven by an increase in our Net Property Income, up 5.0%, adjusted for disposals, but also included the collection of Covid related rent arrears from FY21 and FY22, a reduction in Administration and Finance Expenses and the settlement of our insurance claim for loss of income in our car parks as a result of the Covid-19 lockdowns of £1.4 million. In line with our dividend policy, we have declared a final dividend of 3.2 pence per share bringing the total dividend for FY23 to 6.7 pence per share, which is 125% covered by UFFO. As a result of an improving Retail UFFO, a tight control on capital expenditure and completed Work Out disposals, our cash position increased from £88.2 million in March 2022 to £111.3 million in March 2023. One of the benefits of rising interest rates, is that we are now receiving a return on our excess cash which is accretive to our UFFO. Valuation Outperformance Our portfolio valuation has been far more insulated from the impact of rising interest rates compared to the wider real estate sector, partly due to our already high portfolio yield, and recorded a like-for-like valuation movement of -5.9%. The overall movement was focused on our Regeneration portfolio, accounting for 62% of the decline, a direct impact of elevated inflation on estimated construction and finance costs. “We are confident of our ability to deliver our medium term objective of a consistent premium total accounting return.” Allan Lockhart Chief Executive We ended our financial year in a strong position having delivered a resilient set of operating and financial results, continuing to execute our strategy notwithstanding wider macro-economic headwinds. Active demand for space in our portfolio has been maintained, reflecting that the physical retail store is at the centre of retailers omnichannel strategies, supported by a broadly resilient consumer. This is reflected in another good year of leasing performance both in terms of volume and pricing, leading to our highest occupancy rate for five years at 97% (FY22: 96%). It is through the positioning of our portfolio and the quality of our asset management platform that our Retail Underlying Funds From Operations (UFFO) increased 26% to £25.8 million from £20.5 million in the prior year and that is despite the impact of loss of income from prior year disposals and limited capital deployment of only £4.0 million. 8 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportPleasingly, our Core Shopping Centre portfolio, representing 37% of our total portfolio, proved to be broadly stable with a -0.7% capital return for FY23. Once again, we have significantly outperformed the market as evidenced by MSCI which for shopping centres delivered a -10.8% capital return over the last twelve months. Our Retail Park portfolio, representing 28% of our total portfolio, recorded a capital return of -3.2% entirely due to yield expansion offset by ERV growth of 2.7%. Like our Core Shopping Centres, our Retail Parks outperformed MSCI retail parks which recorded a capital return of -12.1% over the same period. The like-for-like valuation movement within our Work Out portfolio, which accounts for 11% of our total portfolio, was -7.8%, outperforming the MSCI Shopping Centre Index. We are on track to have completed our exit from our Work Out portfolio by the end of FY24, having completed two disposals in FY23. Given that our portfolio consistently delivers a higher income return and a superior capital return than the MSCI All Retail Index, on a total return basis our portfolio has once again significantly outperformed the index in FY23, by 1,020bps, as it has done over the last five years. Our Balance Sheet is in great shape with an LTV of 33.9% at the year end, in line with the prior year. Equally important is Balance Sheet gearing which for us is less than 50%, Net debt to EBITDA is only 4.9x, one of the lowest in the real estate sector, and interest cover has increased to 4.3x, one of the highest in the real estate sector. These strong financial metrics and the fact that we have no refinancing requirements nor exposure to higher interest rates until 2028 place us in an excellent position to capitalise on future growth opportunities at the appropriate time. PORTFOLIO Resilient Operational Performance Operationally, we had a good performance in terms of leasing volume and pricing. That, together with our high retention rate when it comes to lease expiry or lease break, has resulted in an increase in our occupancy to 97% (FY22: 96%). Rent collection and car park and commercialisation cashflows all improved during the year, with rent collection now back to pre-Covid-19 collection rates. In total we completed 979,200 sq ft of leasing transactions during the year, securing £7.9 million of annualised income. Our long-term leasing transactions which represented 69% of the total rent secured were transacted at rents 1.1% above valuer ERVs. Furthermore, 77% of the annualised long-term rent secured was in our Core Shopping Centre and Retail Park portfolios, at levels exceeding valuer ERVs by 2.3% and 0.8% respectively. Whilst rent secured within our Regeneration Portfolio was down -3.9% versus valuer ERV, it was +9.0% ahead of the previous passing rent and therefore accretive to rental cashflows. It is also reflective of our ongoing strategy to ensure greater lease flexibility to support our vacant possession strategy. The Work Out portfolio leasing activity was on terms -2.1% versus valuer ERV, however, this only represents a small proportion of the total portfolio long-term rent secured. For total portfolio leasing events in FY23, the rents achieved had a Compound Annual Growth Rate (CAGR) versus the previous passing rent of only -0.5% over the average previous lease period of 10.3 years. Over the past three years, which totals £15.4m of annualised rent, this is only -0.4% based on an average previous lease period of 10.0 years. Taking into account the significant disruption the retail sector has faced over the last 10 years from the growth of online retailing and Covid-19, this clearly demonstrates the underlying resilience in our rental cashflows. OUR HIGHLIGHTS Occupancy 96.7% FY22: 95.6% Rent collection 98% FY22: 96% Leasing vs ERV +1.1.% FY22: +7.4% Completed disposals £23m FY22: £305m GRESB score 70 FY22: 68 Valuation performance -5.9% FY22: -0.9% Retail Underlying Funds From Operations £25.8m FY22: £20.5m Retail UFFO per share 8.3p FY22: 6.7p LTV 33.9% FY22: 34.1% Net debt £201.3m FY22: £221.5m Total Accounting Return Ordinary Dividend per share -4.6% FY22: -6.6% 6.7p FY22: 7.4p * As at time of reporting FY22 results Key Performance versus previous year Improved Declined Maintained NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 9 Strategic Report Chief Executive’s Review continued Overall, our long-term leasing transactions had a weighted average lease expiry (WALE) of 8.2 years, up from 6.4 years in FY22, with Retail Parks at 12.0 years and Core Shopping Centres at 6.9 years. In terms of occupier incentives, we have seen a marked improvement in rent-free periods granted in the period compared to FY21 and FY20. For long-term leasing transactions, the average rent-free period was just 2.8 months with many occupiers receiving no rent-free period. The demand for space that we saw in our portfolio during the year remained broadly based with 67% of the space leased to Grocery, Discount, F&B, Health & Beauty and Value Fashion. Well Positioned Portfolio As at 31 March 2023, Retail Parks accounted for 28% of our portfolio, totalling 14 assets. It has been another positive year for our Retail Park Portfolio which at year end was 98% occupied with a retention rate of 100%. We have continued to see strong occupational and investor demand for our Retail Parks which are predominately located adjacent to major supermarkets, benefit from free surface car parking and are supportive of retailers’ omnichannel strategies. As such we had a good year of leasing with transactions completed 0.8% ahead of valuer ERV. Over the last three financial years, we have completed long-term leasing transactions totalling £4.5 million of annualised rent across our Retail Parks which versus the previous passing rent equates to a CAGR of +0.6% per annum over the average previous lease period of 12.3 years. Our Retail Parks delivered a total return of 4.8%, outperforming the MSCI retail warehouse index by +1,170 basis points, which recorded a -6.8% total return. As at 31 March 2023, our Core Shopping Centre portfolio represented 37% of our total portfolio value and comprises 14 Core Shopping Centres at the heart of local communities providing a range of essential goods and services with an occupancy of 98% and retention rate of 90%. The consistent occupational demand is reflected in the positive leasing performance during the year with long-term deals transacted 2.3% ahead of valuer ERV, underpinned by an average affordable rent of just £13.18 per square foot and £39,000 per annum. Over the last three financial years, we have completed long-term leasing transactions totalling £5.5 million of annualised rent, which compared to the previous passing rent, equates to a CAGR of only -0.8% per annum over the average previous lease period of 9.9 years. Our Core Shopping Centres delivered a total return of 10.3%, outperforming the MSCI shopping centres index by +1,540 basis points, which recorded a -5.1% total return. We have three Regeneration assets, representing 23% of the total portfolio value, for which we have planning consent for: 187 residential units, over 850 residential units at the pre-planning application stage and a further 350 residential units in the masterplan stage for phase one. None of these projects will be built-out by NewRiver as our intention is to deliver value either through sale or by partnering with residential developers, once planning consents are secured. Currently, we are not exposed to material contractual capital expenditure commitments but in order to maximise value, some modest capital expenditure will be required over the next two years. Whilst we advance our regeneration proposals, we have maintained a high occupancy at 97% whilst at the same time building flexibility into the leases to deliver future vacant possession. As such the leasing deals completed within our Regeneration portfolio were transacted at a modest -3.9% below valuer ERVs. Our Work Out portfolio represents 11% of our portfolio and comprises nine assets which we intend to dispose of or complete turnaround strategies on. Since our Half Year results, we have completed the disposals of two shopping centres in Wakefield and Darlington, with the remaining sales to be completed in FY24; those assets subject to a turnaround strategy are supported by further investment by the end of 10 10 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 FY24. In the interim, occupancy and retention rates for our Work Out assets remain high at 93% and 89% respectively and leasing deals completed during the year were transacted at -2.1% below valuer ERV. In respect of capital and total returns, our Work Out portfolio has outperformed the MSCI shopping centres index by +10 and +590 basis points respectively. PLATFORM Growing Capital Partnerships Capital Partnerships are an important component of our strategy to deliver earnings growth in a capital light way. We were delighted in November 2022 to secure a high-profile mandate from M&G Real Estate to manage a large retail portfolio comprising 16 retail parks and a shopping centre located in the South East of England. After our appointment in November 2022, the mandate was extended to include a further shopping centre in the South East post year end in April 2023. Currently, we have three key Capital Partnerships: in the public sector with Canterbury City Council; in the private equity sector with BRAVO; and now in the institutional sector with M&G Real Estate. Currently, we asset manage 19 retail parks and five shopping centres with a total value in excess of £500 million and annualised rent of over £50 million. The expansion and breadth of our Capital Partnerships is a clear recognition of the need for a best-in-class platform to extract performance in the highly operational retail sector. We believe that we have a significant opportunity to deliver further earnings growth through our Capital Partnership activities. Prudent Capital Allocation Capital allocation during the year has been focused on investing in our portfolio with tightly controlled discipline given the macro- economic uncertainty. Total investment in FY23 was £4.0 million of which 57% was allocated to our retail park portfolio, with the largest project being the construction of a new Aldi store in Dewsbury which accounted for 23% of our total portfolio investment. We invested £0.6 million in our Core Shopping Centres, the key project being the funding of our planning application for a new food store in Market Deeping which was unanimously approved by the Council post year end. Our Regeneration portfolio received £0.7 million of investment principally to advance our forthcoming planning application in Grays for an 850+ unit residential-led major town centre regeneration. Committed progress to ESG We take our role as the custodians of assets within the community very seriously and part of that responsibility is helping to protect the long-term sustainability of the environment that they sit within, and we are pleased to report great progress in the delivery of our committed ESG Strategy. During the year, the quality of the Management and Governance of our business was recognised as we ranked first place in the GRESB “Management” module out of a total 901 participants across Europe. This recognition is due to the fastidious work from our team in embedding our ESG objectives across the business at both the corporate and asset level including developing a supplier ESG performance evaluation process and formalising a quarterly ESG performance review process for our Property team. Our ESG activities this year have resulted in achieving our target GRESB score of 70/100 for the “Standing Portfolio” Benchmark, scoring 90/100 for the GRESB “Development” benchmark and being awarded an “A” alignment in GRESB’s independent TCFD assessment. Strategic ReportWe also retained our ‘B’ Rating from CDP for our management of climate-related issues as well as retaining our Gold Award in EPRA Sustainability Best Practice Recommendations Awards, recognising the excellence in the transparency and comparability of our environmental, social and governance disclosures. Our assets are typically easily accessible with short travel times, supporting the wider climate and well-being agenda. We set our pathway to Net Zero in 2019 and we continue to make great inroads in implementing this. Achieving net-zero within the retail sector relies upon mutual action by real estate owners and occupiers. The energy consumed by our occupiers in our assets accounts for almost 90% of our total carbon emissions. These are emissions over which we have limited control, but we continue to develop our engagement activities to support alignment between our climate ambitions and those of our occupiers and so we are pleased to report that 57% of our lettable floorspace is occupied by retailers that have already set emissions reduction targets, with approximately 70% of that 57% part of the BRC Climate Commitment to reduce carbon emissions to net zero by 2040. As we reported last year, all of the energy supplied into our common areas (malls and car parks) is already carbon neutral but this year we also generated over 250,000 kWh of renewable electricity on-site at our assets, maintained our “zero waste to landfill” policy and delivered or secured contracts for EV charging infrastructure at 88% of our surface-level car parks. Given cost inflation headwinds, it is also notable that the energy supplied into our malls is hedged until Spring 2024, so we are not facing into price increases. Finally, during the year we relocated our Head Office to a BREEAM Excellent, Net-Zero building in London. We are committed to continuing this great work and playing our part in helping protect our planet and stakeholders for the long-term. . MARKET Outlook Despite ongoing geopolitical tensions, elevated inflation and higher interest rates, we are reassured with the improving occupational demand for space in our resiliently positioned portfolio. Given our current high occupancy rates for Retail Parks and Core Shopping Centres at 98% and the benefit of the reduction of business rates for our occupiers, we believe that the prospects for future rental growth are now encouraging which should be supportive of future valuations. For some time now, we have consistently expressed our confidence in our portfolio positioning which is predominately focused on essential goods and services. Our operating and financial results over the last two years demonstrate the underlying resilience that we have in our portfolio and in our platform, and we expect that to continue into our new financial year. We are in an excellent position with a strong balance sheet that is not exposed in the medium term to rising interest rates, we have capital available to deploy and opportunities to expand our Capital Partnerships. We are therefore confident of our ability to deliver our medium term objective of a consistent 10% total accounting return. Allan Lockhart Chief Executive Officer 14 June 2023 OUR STRATEGY Our strategy aims to deliver a reliable and recurring income led 10% Total Accounting Return and create value for our stakeholders: Communities Shareholders Lenders Environment Local Authorities Occupiers Team Capital Partners We do this by delivering on our business model: ned by a c rpin e d n U t t e d ESG strategy o m m i 1. Disciplined capital allocation 2. Leveraging our platform 3. Flexible balance sheet This strategy is underpinned by clear pillars of execution: • Highly collaborative working relationships with all key partners • A clear plan to help create thriving communities in the towns where we are invested • A committed sustainability strategy to minimise our impact on the environment • Creating opportunities for our team to develop their careers • Operational efficiency and excellence • Maintaining a strong balance sheet • Delivering consistent and attractive risk-adjusted returns NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 11 11 Strategic report Our marketplace RESILIENT RETAIL ROBUST MARKET The UK economy and retail real estate market has never before endured such volatile conditions including international health pandemics and war as well as political and fiscal instability. This has led to cost inflation, rising interest rates and increased caution amongst both investors and consumers. Yet contrary to perception and media narrative, the consumer has remained resilient and those retail occupiers with an omnichannel offer, reliant on the physical store and focused on providing essential goods and services, have continued to perform well. This is the robust sub-sector of the market that we specialise in, meaning our resilient retail real estate portfolio is well-positioned for growth. 12 12 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic Report Consumers Rising Housing Costs The housing market has shown resilience in 2023 as mortgage rates eased and the labour market remained tight in part reversing the negative sentiment following the jump in the Bank of England interest rates as a result of the somewhat calamitous September mini-budget. House prices are stabilising and the average house price is still 20% higher compared with March 2020 (Halifax). Borrowers are choosing longer mortgage terms to satisfy affordability requirements whilst many potential first time buyers are delaying their plans and resorting to the rental market, putting further pressure on rental costs already impacted by a significant demand supply imbalance (UK Finance). High But Easing Inflation UK inflation appears to have peaked at 11.1% in the 12 months to October 2022, falling more slowly than anticipated over the subsequent months to 8.7% in April as rates across transport and clothing declined but offset by persistent food price inflation. It is expected further easing in commodity and goods prices will result in a continued downward trend in inflation later in the year, with perhaps the key risk in respect of ongoing inflation in 2023 being the impact of higher wage costs. Whilst annual wage growth as at March 2023 stands at 5.8%, in real terms it is -3.0%, the largest real total decline since April 2009 (ONS) albeit the negative differential is widely expected to narrow through 2023 and reverse by the end of 2024 (Shore Capital). Consumers Still Spending Early 2023 has followed a stronger than forecast Christmas 2022, with sales values and volumes (excl. fuel) +2.4% and +1.0% in the three months to April 2023 compared with the previous three months. April sales figures compared to pre-Covid levels are +17.9% in value and +0.3% in volume, indicating consumers are purchasing at similar levels to pre-pandemic. Despite the narrative around the consumer squeeze and wide-scale belt-tightening, this is not yet reflected in the data and consumers are still sitting on excess savings built up during the pandemic. Retail Sales Values and Volumes 0 0 1 = 0 2 - b e F x e d n I l s e a S l i a t e R 130 125 120 115 110 105 100 95 90 85 80 12 10 ) % Y o Y ( 8 I P C 6 4 2 0 2020 Feb Value 2021 Sep 2023 Apr Volume CPI (RHS) Source: ONS Changing Purchasing Behaviour Due to cost of living pressures, patterns of spending have shifted away from luxuries towards essential and cheaper alternatives. Barclays data shows that 34% of consumers are buying “dupes”, affordable versions of expensive products, especially in food and drink products with 68% of consumers opting for the cheaper options. There is an evident pattern of down trading in the grocery sector, discount stores continue to experience month on months sales growth and in terms of eating out, there is shift in preference from expensive restaurants to more value focused, deal driven options. NewRiver’s response • Despite the cost of living crisis, retail sales have remained strong with the first half of 2022 benefiting from a buoyant period of post-lockdown spending with positive sales figures continuing into early 2023 following a strong Christmas period. Positive consumer spending has led to strong sentiment among retailers and is reflected within NewRiver’s retention rate of 92% and increased occupancy of 97%. • Consumers are evidently changing their purchasing behaviour, down-trading across product categories as a reaction to adjustments on their disposable income and will be awaiting signs that mortgage rates, food and fuel inflation have peaked prior to increasing their discretionary spend. NewRiver’s occupier base has limited exposure to discretionary spend with 78% by rent from within essential sub-sectors. • The GfK consumer confidence index shows that whilst confidence is low, it is improving significantly. Since March 2023, there has been a 13 point jump in positivity for personal finance situations – such a large jump suggests household finances are stronger than perceived and the overall consumer confidence index is at its highest level since March 2022 playing into spend across our portfolio. • The increased cost of living and impact of rising mortgage costs is not equal across the UK, with those living in cities and within London and South East likely to be most impacted where mortgages are higher and disposal income as a percentage of gross income is lower. NewRiver’s portfolio is located throughout the UK, 66% outside the South East, in areas which on average have a house price of £208,000, compared to the UK average of £287,000 (Halifax). The NewRiver consumer is therefore impacted to a lesser extent due to rising mortgage costs. • As inflation eases throughout 2023, real disposable incomes will improve, confidence will continue to recover alongside record low unemployment levels of only 3.9% (as at March 2023), and there is the potential that retail sales by volume should continue to increase. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 13 Strategic Report Our marketplace continued Retailers Strong Occupational Market There is positive sentiment amongst retailers, with strong reported sales results especially in-store performance and renewed retailer expansion plans for 2023. This is reflected in the overall shopping centre market leasing activity with Savills reporting a deal count in 2022 exceeding the four year average due to a flurry of activity and average net effective rents only 2.9% down compared to 2019. Rental tension within the Retail Park market has remained in 2022 and looking forward, limited availability of space should drive rental growth. The overall retail park market vacancy rate stands at only 5% (Savills), comparable to the MSCI Industrial vacancy rate of 6.3% which has seen 21% ERV growth over the past two years. Retail Parks Rents and Vacancy (net effective rents) Limited Retailer Distress 2022 was a quiet year for retailer distress with only 2,300 stores impacted. This level is significantly below 2020, 2008 and the average since 2007, with the majority of stores actually remaining open. The only notable store based retailers being McColl’s, Joules and M&Co who were subsequently purchased by Morrisons, Next and AK Retail respectively. Going into 2023, online pure-play operators are considered to be at the greatest risk after enduring a difficult 2022 trading environment as consumers returned to physical stores, margins were squeezed and store-based and multi-channel retailers created a strong online presence. Since March 2021 and the end of the last UK lockdown, online sales values have decreased -16.0% and pure-play -6.6% against overall retail sales value growth of +15.7% during this period. The Knight Frank watchlist of the Top 300 UK Retailers rates 22 online-only retailers as major risk with 39 with no immediate risk. Physical retailers, whilst not immune to the challenging trading conditions coming into 2023, have emerged from the pandemic fitter, with the weaker outfits having already exited the market. UK Retailer Failures Decline 25% 20% 16% 11% 7% 2% -2% -7% -11% -15% -20% 7% 6% 5% 4% 3% 2% 1% 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 3 1 0 2 4 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 1 2 0 2 2 2 0 2 0% 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 1 2 0 2 2 2 0 2 Net Effective Rent Growth YoY (LHS) Vacancy % sq ft (RHS) Stores impacted Average since 2007 D T Y 3 2 0 2 Source: Savills Research Source: Centre for Retail Research Shopping Centre Rents since 2019 (net effective rents rolling 4-Qtr average) 15% 10% 5% 0% -5% -10% -15% -20% -25% 0 2 0 2 1 Q 0 2 0 2 2 Q 0 2 0 2 3 Q 0 2 0 2 4 Q 1 2 0 2 1 Q 1 2 0 2 2 Q 1 2 0 2 3 Q 1 2 0 2 4 Q 2 2 0 2 1 Q 2 2 0 2 2 Q 2 2 0 2 3 Q 2 2 0 2 4 Q vs 2019 Source: Savills Research YoY 14 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Online sales as % of total retail sales 50 40 30 20 10 0 % 8 5 4 . -25% from peak % 1 . 1 2 -4% from peak % 1 . 2 1 % 2 8 . Apr 2020 Mar 2023 Jan 2021 Mar 2023 Source: ONS Peak Non-food Food Online % sales Percentage Change in Rateable Values 2017-23 leading to lower occupational costs Revaluation Movement (%) NewRiver -16 Retail -10 All Properties Offices Industrial Source: VOA +7 +10 +27 Continued Rise of Omnichannel Online is considered a channel of distribution rather than category of retail and given the consumer desire for flexibility to purchase goods when, where and how they want, omnichannel retail with the converging of physical and online channels is becoming ever more popular. 50% of overall sales involve online interaction at some point (Barclays) but the physical store is at the centre of the retail journey due to the perception of in-store bargains, absence of delivery and return charges, and the ability to use cash as a tangible budgeting tool. Click & collect increases to be popular for both consumers and retailers and this is set to continue into 2023. Positive 2023 Rates Revaluation Outcome The 2023 rates revaluation was a welcome outcome for retailers and will provide significant occupational cost savings at a time when other operational costs have increased. On average, rateable values within England and Wales declined 10% for retail properties with savings ranging up to 20-50%. This compares incredibly favourable to the 27% increase within Industrial and 10% in Offices. Downwards transition relief is to be scrapped giving an immediate benefit to retailers, it was previously phased over a number of years. “The physical store remains at the centre of the retail journey” 16% average reduction in rateable values for retailers across the NewRiver portfolio NewRiver’s response • The strong retail occupational market is reflected in our leasing statistics with 979,200 sq ft of new lettings and renewals agreed in FY23 with long-term transactions on average +1.1% ahead of ERV, 9.7% ahead of previous rent and with a Weighted Average Lease Expiry of 8.2 years • 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 and mid-market fashion. To assess the risk associated with our tenant base and future cashflows, we have worked with Income Analytics (part owned by MSCI and Savills) to quantify the probability and impact of tenant failure. The tenant risk of failure analysis projects a probability of failure in the next 24 months of only 0.9%. • The resilience of NewRiver’s rental cashflows is underpinned by affordable rents and low occupational costs. Given the downward pressure on retailer margins as a result of material increases in retailer’s cost and revenue pressures which are set to continue in the short to medium term, we have assessed the continuing rental affordability over the next 3 years. As expected, maintaining the retailer’s existing net margin, the affordability level falls -1.2% below the current Occupational Cost Ratio in 2023 but returns in 2024 with headroom rebuilding beyond in 2025 to +2.4% aided by continued cost stabilisation, business rate reductions and some modest sales growth • The occupational affordability for our tenants set to further improve from 1 April 2023 when reduced business rates become effective with an average reduction of 16% across the portfolio • Retail parks are a key investment area for NewRiver given their prominent role within omnichannel retail for both consumers and retailers. They have 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. Conveniently located on key arterial routes and having large units suitable for holding stock at low occupational costs mean retailers can use stores as fulfilment centres much closer to their consumer than distribution centres. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 15 Strategic Report Our marketplace continued Investment Market wide yield expansion 2022 started strongly with transaction volumes improving across all retail sub-sectors for the first time since 2013 attracted by the relative discount to other property sectors. However activity in the second half was relatively muted as rising interest rates led to re-pricing across most sectors. Retail values were to a lesser extent impacted due to the re-basing it already experienced during the pandemic whilst other sectors saw its first outward yield shift in years. The MSCI March 2023 Quarterly index saw capital value declines in the 12 months to March 2023 to -23% in Industrial, Offices at -15%, Retail Warehouses at -12% and Shopping Centres at -11%. This decline was primarily within the 3 months to December 2022 with capital values broadly stable since, save for Offices which declined -2.4% in the 3 months to March 2023. Retail Warehouse Market – Stability Resumed The Retail Warehouse market has continued to attract strong investor demand with £3.4 billion transacted across 152 deals in 2022. Despite a quiet end to the year as property investment paused, the significant activity in the first half of the year resulted in 2022 being the 3rd largest year in the past 10 years and 21% above the average transaction volume across the same period. Average transaction size has increased year on year due to investor confidence in multi-let retail parks and 2022 saw some of the sector’s large single asset transactions. Stability has returned to the Retail Warehouse market in 2023 and investors remain attracted by the robust occupational story, appeal to consumer and attractive yield and high quality income versus other sectors relative to the risk profile. Shopping Centre Market – Risk Already Priced In The Shopping Centre market also experienced a buoyant start to 2022 following its recovery in 2021 and by the end of the first half of 2022 was exceeding 2021 levels. 2022 saw £1.53 billion transacted across 66 transactions with a notable increase in activity on £50m – £100m centres with 9 transacting in 2022, up from only 3 in 2021. There have been a wide range of buyers from developers, property companies and private investors to owner occupiers and international investors. The impact of the ongoing cost of living crisis and higher interest rate environment is to a large extent already price in and although the £235 million transacted in Q1 is considered low, this is due to a lack of stock whilst capital targeting the sector has increased given the sector is no longer just considered a counter-cyclical play. Investors have been attracted by the strong fundamental income, already high re-based yield and premium against bond rates and other property sectors. 16 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 MSCI UK Sector 12 Month Return (%) Total Return NewRiver Retail Shopping Centres Retail Warehouse 2.3 (7.9) (5.1) (6.8) Supermarket (15.7) Office (12.2) Industrial (20.4) Capital Return NewRiver Retail Shopping Centres Retail Warehouse Supermarket (19.9) Office (15.3) Industrial (23.2) Income Return (12.7) (10.8) (12.1) (6.2) 9.0 NewRiver Retail Shopping Centres Retail Warehouse Supermarket Office Industrial Source: MSCI 5.4 6.4 5.9 5.2 3.6 3.6 Retail Warehouse Transaction Volumes l m £ s e m u o V n o i t c a s n a r T 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 1 2 0 2 2 2 0 2 Transaction Vol (LHS) No of Deals (RHS) Source: Cushman & Wakefield Shopping Centre Transactions Volumes l m £ s e m u o V n o i t c a s n a r T 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2017 2018 2019 2020 2021 2022 Transaction Vol (LHS) No of Deals (RHS) Source: Savills NewRiver’s response • NewRiver’s portfolio like-for-like valuation decline of 4.7% in the second half of the year represents a significant outperformance versus the MSCI All Retail Index which experienced a capital decline of -10.8%. Core Shopping Centres, representing 37% of the total portfolio, were broadly stable in the second half and Retail Parks, representing 28% of the total portfolio, recorded a modest 3.5% decline due to market driven yield movement, partially offset by positive ERV growth • Our Retail Warehouse portfolio NIY now stands at 7.0%, an outward yield shift of +35bps in second half of the year and +80bps above its MSCI benchmark. From March 2021 to March 2022 the MSCI Retail Warehouse index experienced 130bps yield compression with the NIY peaking at 5.5% at which point the yield gap to NewRiver widened from +40bps to +80bps. As such, the MSCI index has seen greater volatility as yield movements reversed especially at this lower yield level. • Our Core Shopping Centre portfolio NIY now stands at 9.6%, +210 bps above its MSCI benchmark. Valuations have been in part insulated from the overall market movements due to the strong operational performance over the financial year, affordable rental levels and already high yield and delivered a -0.7% valuation decline for the year. • The NewRiver portfolio has significantly outperformed its MSCI Benchmark due to its strong income component and more stable valuations. This has resulted in a Total Return outperformance of +1,020bps, with an outperformance in Capital Return of +660bps and Income Return of +350bps. • Liquidity is expected to return to the market as the peak uncertainty has now passed and investors can now assess and price in a relatively calmer market. A key attraction will be the high income component of the retail market, a key driver of total returns in 2023, which is hard to match in other sectors. 200 180 160 140 120 100 80 60 40 20 0 80 70 60 50 40 30 20 10 0 s n o i t c a s n a r t f o . o N s n o i t c a s n a r t f o . o N NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 17 Strategic Report Strategic report Our business model Delivering value for our stakeholders Our purpose What sets us apart To own, manage and develop resilient retail assets across the UK that provide essential goods and services and support the development of thriving communities. Our resilient and focused portfolio, market leading operating platform and financial flexibility mean we are optimally positioned for future growth and to achieve our objective of a consistent 10% Total Accounting Return. S G s t r a t egy d E m itt e 1. Disciplined capital allocation d by a co m e n pin r e d n U We 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. Capital allocation decision include investing into our portfolio, acquiring assets in the direct real estate market and share buybacks. Assets can be acquired either on our balance sheet or in capital partnerships. Our significant market experience allows us to price risk appropriately, and our low average lot sizes enhance liquidity which means we can execute disposals quickly and effectively. 2. Leveraging our platform We leverage our market leading platform to enhance and protect income returns through active asset management across our assets and on behalf of our capital partnerships; the latter also provide enhanced returns through fee income and the opportunity to receive promote fees. We also create income and capital growth through our Regeneration activity in a capital light way, principally residential-led, focused on replacing surplus retail space with much needed new homes. 3. Flexible balance sheet Our operating platform is underpinned by a conservative, unsecured balance sheet. We are focused on maintaining our prudent covenant headroom position and have access to significant cash reserves which provide us with the flexibility to pursue opportunities which support our strategy for growth. 18 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportStakeholder value created Our team The success of the Company comes from its people. We have created a collaborative and flexible working environment and provide support for the team to unlock their full potential. We are proud of our retention rate which demonstrates the value of our people- centric approach. 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. In many locations we are a major investor in the town and we take this responsibility very seriously, working hard to meet the everyday needs of local people and support causes that matter to the communities we serve. Our shareholders Our shareholders are the ultimate owners of our business. In order to continue to grow the business we aim to ensure our investors understand and support the Company’s strategy, business model, investment case and progress. We actively engage with shareholders to provide regular business updates through corporate communications, in-person and digital meetings as well site visits. 75%team retention of 5+ years 63No. of different UK communities we are directly invested in or manage assets within 96FY23 investor meetings See page 22 for more information See page 24 for more information See page 26 for more information Our capital partners Capital partnerships are an important part of our business, contributing to overall earnings growth. Our capital partners leverage our market leading platform by allowing us to manage and improve the performance of their assets. Capital partnerships allow us to acquire assets in a capital light way and receive proportional rental income, as well as enhance our returns from asset management fees with the potential to receive financial promotes linked to performance. 24Number of capital partnership assets under management (April 2023) 19 x retail parks and 5 x shopping centres Our occupiers When our occupiers thrive then so too can NewRiver. We continuously nurture our working relationships with our occupiers so we can better understand their needs and potential challenges or opportunities and ensure our portfolio is best placed to accommodate them. We are proud to see so many of our occupiers choose to remain in our portfolio at the point of potential exit. 92%FY23 occupier retention rate Our environment The real estate industry has a critical role to play in protecting the long-term sustainability of our planet. We take our role as the custodians of assets within the community very seriously, and that involves integrating our sustainability strategy across all aspects of our business from head office to asset level and our local communities. 1st NewRiver ranked first place in the GRESB Management module out of 901 participants across Europe See page 44 for more information See page 6 for more information See page 58 for more information Our sustainable approach Our business model is underpinned by our active ESG programme using industry-recognised indices to track our sustainability performance. NewRiver was named in the Sunday Times Best Places to Work 2023 We are delighted to have been acknowledged post- period in the ‘small organisation’ category (10-49 employees) in The Sunday Times Best Places to Work 2023 for our wide-ranging benefits package and ongoing commitment to supporting our team and their career development in a collaborative, diverse and inclusive culture. See page 20 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 19 Stakeholder engagement Authentic stakeholder engagement underpins our business Our Stakeholders include: Communities Shareholders Lenders Environment Local Authorities Occupiers Team Capital Partners OUR STAKEHOLDERS The success of our business is underpinned by our best in class team and effective relationships with our multiple stakeholders. We are proud of our highly motivated, collaborative and well-balanced team with a near 50:50 gender split. Our team continue to focus on helping drive the business forward whilst also advancing their own career development. We foster strong working relationships with our wider stakeholders who collectively help us deliver on our strategy, business model and ongoing success. We recognise that our stakeholders have a range of varying priorities and concerns and we endeavour to incorporate these into our own strategic decision-making. Board engagement 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. NewRiver was named in the Sunday Times Best Places to Work 2023 We are delighted to have been acknowledged in May 2023 in the ‘small organisation’ category (10-49 employees) in The Sunday Times Best Places to Work 2023 for our wide-ranging benefits package and ongoing commitment to supporting our team and their career development in a collaborative, diverse and inclusive culture. We received positive survey results with strong approval and engagement ratings of 82% with a “confidence in management” score of 80% and achieved a rate of “Excellent” across all areas. At NewRiver we provide a flexible working environment to suit the different lifestyles of our team, and important policies including full-private medical cover, ‘gender-agnostic’ shared parental leave and wider flexible working patterns were recognised by the Sunday Times. Our commitment to offering colleagues practical support for career development and empowerment, providing the best possible opportunity for them to develop their careers was also recognised. The Sunday Times equally acknowledged that our team are rewarded with a fully paid six-week sabbatical after 10 years of service. 20 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportSECTION 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 2023. Details of our key stakeholders and how the Board engages with them can be found in the strategic report on page 20. Further details of the Board activities and principal decisions are set out on page 103 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 the likely consequence of any decision in the long term the interests of the company’s employees the need to foster the company’s business relationships with suppliers, customers and others the impact of the company’s operations on the community and the environment the desirability of the company maintaining a reputation for high standards of business conduct the need to act fairly as between members of the company. Our approach 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. We have a small workforce which allows a naturally close proximity between them and the Board making it easy for the Board to engage with staff directly especially as the Directors regularly visit the London office and other sites. This year the Directors have been able to visit the assets and the London office more freely and attend social events with staff. 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. Board site visits during the year have helped these relationships and understanding the needs of these stakeholders. 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 values mirror our culture and as a team our values are to be trusted and respected and this is entrenched into Board decisions. Staff receive regular training on our anti-corruption policies to ensure that they are entrenched in all staff decisions and conduct. Again the size and proximity of the workforce allows our values to be communicated, embedded and monitored easily and less formally. 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. “At NewRiver people are our greatest asset and it is therefore an honour to have been named in The Sunday Times Best Places to Work 2023. The fact that 75% of the NewRiver team have been at the company for more than five years is testament to the positive working environment and culture that we have built. We are a driven, collaborative and well-balanced team with a near 50:50 gender split and indeed it is the team themselves that actively participate in creating such a positive and attractive environment. I would like to take this opportunity to thank the entire NewRiver team for all their hard work in helping to continue to drive the business forward. It would not have been possible without each and every one of them.” Edith Monfries Chief Operating and People Officer at NewRiver REIT 46 Employees 75% Of our team have worked at NewRiver for 5+ years 26 Hours of training per employee this year 70% Of our team undertook professional training during the year 1,150 Total hours of training this year 64% Of our team have professional qualifications 94 Hours of volunteer support dedicated to the Trussell Trust NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 21 Strategic Report Stakeholder engagement continued OUR TEAM At NewRiver we know that the success of the Company comes from the people within our team. Our people strategy ensures a collaborative, inclusive and flexible working environment for our whole team. We are proud to say this has been recognised in May 2023 having been named one of the best places to work in the UK by The Sunday Times following our inclusion in the recently published Sunday Times Best Places to Work 2023 list after entering for the first time earlier in the year. Communication, collaboration and respect sit at the heart of our people strategy which harnesses the power of the team to drive our business forward. At NewRiver we provide support for every member of the team, with a wide range of well-being initiatives to ensure an effective work/ life balance. Training and Development is key to empowering our loyal team and ensuring that everyone has a chance to unlock their full potential. Our flexible working policy fosters a positive working environment to suit the different lifestyles of our team. As well as flexible working, we offer an attractive and wide-ranging benefits package including full-private medical cover and ‘gender-agnostic’ shared parental leave together with training and career development in a collegiate, diverse and inclusive culture. Long-serving team members are also rewarded with a fully paid six-week sabbatical following 10 years of service; and we also offer an opt-in salary sacrifice for electric cars and a policy enabling staff to take time off to volunteer. Our high staff retention testifies the team satisfaction with over 75% of our staff having worked at NewRiver for 5 years’ or more. Gender & Ethnicity representation across the business We are proud to say that we have a very even gender balance across the business: Group 17% Ethnicity Representation Female Male Read more information about our Diversity & Inclusion on page 74 22 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Recruitment and talent Our total head count across the Group at the close of the year was 46. 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 continuously working to develop the skills, capability and performance of all employees. Our support ranges from funding professional qualifications including RICS and ACCA to informal training sessions and a bi-weekly team meeting to empower the team with research and knowledge to help enhance their day-to-day role. 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 1,150 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. Our ethnicity representation is 17%. We also have a Diversity and Representation committee who meet regularly to promote inclusion across the business. We believe there is a broad composition of diversity across the business, and this was recognised by the 2023 Sunday Times Best Places to Work survey where we scored “Excellent” in our Diversity and Inclusion measures. Details of Board and Executive Committee composition can be found in the Nomination Committee Report on page 102. Reward and Recognition Our team are dedicated to achieving the results that 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, some particular highlights include: • flexible hybrid working with 3:2 days split in the office/on site: at home • full private medical cover for all staff • ‘gender-agnostic’ shared parental leave • training and career development • an electric car scheme • six week paid sabbatical to employees who have been with the business for 10+ years • mental and physical health resources and training • staff volunteering policy enabling staff to take time off to volunteer for our charitable partner The Trussell Trust or a charity of their choice The team also have the opportunity to discuss the benefits available with specialist advisers to ensure that they suit their needs. We review the benefits each year to ensure they meet employee expectations and industry benchmarks. 50%50%Strategic ReportHealth and Well-being 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 well-being in all work activities and by empowering our people to make positive choices regarding their health and well-being. Physical Environment and Flexible Working This year we relocated to a new office space on Whitfield Street in Fitzrovia. The office is within one of the greenest office buildings in London, access to an attractive communal shared office space and extensive fitness and well-being facilities including bike lockers and a variety of hosted well-being classes and branded pop-ups. The London office space is open plan with hot-desks which has helped our team become more digitally-centric and print less paper. The office environment provides easy accessibility to management and the opportunity for team members at all levels to communicate and engage 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 or at assets 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 0.1%. Our dedicated Diversity and Representation Committee meet regularly and implement initiatives to engage and motivate the wider team. Mental Health The pandemic helped shine a brighter spotlight on the importance of ensuring good mental health. We are in our second year of 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 at Head Office but this year we also provided important mental health training via Chasing The Stigma’s dedicated mental health programme called Ambassadors of Hope. Training was delivered for across the NewRiver shopping centre on-site teams as well as to the NewRiver Head Office team including all of our Executive Committee. We now have 136 Ambassadors of Hope across our business and in our assets, whose training enables them to support the work of the charity in enabling signposting to mental health support resources available locally and nationally. Find out more here: www.chasingthestigma.co.uk Board Engagement during the year Our Board have a comprehensive engagement strategy working to engage the wider team, including an active outreach programme with Board Directors visiting assets to meet the centre management teams, our occupiers and local authorities. A regular staff forum ensures that there is effective communication and interaction between the Board, Senior Management and the wider Team. We regularly provide the opportunity for our Non- Executive Directors to meet the team both formally and informally, both in confidence or in wider forum. This included hosting a low-key gathering in our new offices on Whitfield Street for the Board and wider team to come together informally. Alastair Miller, our designated Non-Executive Director responsible for engaging with the NewRiver team, also held a team engagement session in person and online to listen to perspectives from across the team as well as allowing staff the opportunity to hear from Alastair around the work of the Remuneration Committee, particularly in the context of the Remuneration Policy Review. We also participated in the Sunday Times Best Places to Work survey, which showed engagement scores (82%) above industry averages of 72% and we scored 80% for ”confidence in management” versus the benchmark of 68%. 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. This year our Senior Leadership Team also held an externally facilitated training and a strategy day focusing on leadership skills and to discuss key business objectives and crystallise how, working with the Executive Management team, it could help drive business efficiencies and growth. Read more information on our Section 172(1) Statement on page 21 Sustainable Development Goals (SDGs) We have included case studies of various initiatives delivered throughout the year and we have highlighted within each one how they fulfilled the Sustainable Development Goals (SDGs) as set out in this key: NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 23 Stakeholder engagement continued How did we engage? • Staff Forum and bi-weekly all staff briefing meetings • Sunday Times Best Places to Work Survey 2023 • Regular Non-Executive Director office visits to allow the Board to interact with and listen to the wider team • Our comprehensive appraisal process with individual performance reviews and development discussions • Chasing The Stigma “Ambassador of Hope” mental health training conducted at Head Office and across our shopping centres; all of our Executive Committee undertook this important training • Alastair Miller, our designated Non-Executive Director responsible for engaging with employees, has held team engagement sessions • Board Directors visited assets across the portfolio to better understand the assets and spend time with the property team and local on-site teams Topics raised • Leadership and Strategy • Opportunities for personal and career development • Knowledge sharing across the Company • Well-being and flexible working • Rewards and benefits • Fostering a diverse and inclusive culture • Our ESG strategy How did we respond? • Findings from the employee survey are being used to map out Company level engagement priorities • Continued to provide a range of physical and mental well-being services • Continued to encourage employee shared ownership in the Company’s success through the award of all-employee share schemes • Training and information sessions conducted on key topics raised • Expanded our Diversity Policies • Diversity Training arranged with an external company, scheduled for July 2023 • Leadership Skills Training TARA Youth Board, hosted at NewRiver offices 24 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 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. Supporting our Communities in the Cost-of-Living Crisis The social enterprise, Green Rose, spent a month at the Arndale Centre, Morecambe offering the local community free advice and support on energy issues. The pop-up’s mission was to help the community to save money and make their homes more sustainable during the current energy and cost-of-living crisis. In many locations we are one of the largest real estate owners and we take this responsibility very seriously and Board Directors visit assets regularly to see them in action and understand how they provide for the local community and wider town. We aim to strengthen the communities we operate in providing for the everyday needs of locals through our shops and services and supporting the causes that matter to them. Read more about our community engagement initiatives on pages 25, 57, 77 and 78 Board Engagement during the year How did we engage? • Review of Company purpose, regular reporting to the Board through the quarterly CEO report and quarterly ESG reporting • Received presentations from Development team on Community Investment Plans • Directors volunteered at Trussell Trust food banks • Board Directors visited assets across the portfolio meeting with local teams alongside the asset and development managers • 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 require consideration of how the projects could benefit the local community including improvement of the retail and services offer, creation of new jobs and homes, public realm enhancement and environmental impact. • Regular consultation with local community groups, through our development work, to enable us to understand their requirements and establish our priorities as a result – principally in Grays this year • 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 Strategic Report • TARA: we continued our partnership with The Academy of Real Assets, a charity whose mission is to engage students from under served 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. One of our development managers chairs and hosts the TARA Youth Board helping drive this agenda Topics raised • Town centre regeneration • Creating long-term social and economic prosperity • Responsible planning, development and design • Community well-being and social value • Environmental protection How did we respond? • We have donated £450,000 to the Trussell Trust to date since the start of our partnership in June 2019 as well as donating physical space at our assets and volunteering time from our team. • Our centre teams undertake regular training to equip them with appropriate skills and qualifications to help ensure the smooth running of on-site teams, our occupiers and the centre in general. • Enhanced social media use for community engagement. Stopping UK Hunger Since the inception of our partnership with the Trussell Trust, we have raised over £450,000 in support of their mission to stop UK hunger. Non-monetary support has included circa 10.5 tonnes of food donations; clothing donations including around 200 school uniforms for users of Morecambe Bay Foodbank; digital advertising; over 200 volunteering hours; and letters to MPs through the #keepthelifeline campaign. “You are Important” Our centre The Horsefair in Wisbech partook in the “You Are Important” campaign, a large-scale collaborative art project which involved Wisbech-based businesses and organisations working with artists and local people to create a visual celebration of every member of the community. Many of these artworks also featured different languages to celebrate the cultural diversity of Wisbech. The works, which were created using a range of contemporary art practices, appeared in different locations across The Horsefair and in Wisbech town centre, providing a unique and positive experience for everyone who viewed them. OUR OCCUPIERS When our occupiers thrive, so too can we. 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 92% and an affordable average rent of £12. Our on-site teams work hard to ensure that our assets are clean, safe, and welcoming environments for all ages. Board Engagement during the year How did we engage? • Regular retailer engagement underpins our asset management strategy including regular meetings between Board Directors, Executive Directors and our asset teams with our key occupiers, listening to challenges and opportunities arising from the shop floor to retailer head offices which is fed into our planning and informs our strategy • Part of these conversations with our retailers include our environmental and sustainability strategies, including green leases, enhanced data collection and on-site energy consumption • The Board receives regular reports on occupier activity through Exco reports and ESG reporting to inform future strategy • The asset management team attend the annual Completely Retail Marketplace in London where the retail real estate industry come together to discuss new opportunities as well as expand and consolidate existing leasing plans and asset management initiatives • Non-Executive Directors have attended industry conferences alongside Executive Directors Topics raised • Topics raised via retailer and occupier meetings include understanding the future needs of occupiers including sentiment, performance, growth/contraction plans, sustainability initiatives and potential opportunities and risks within our occupier base, green leases and MEES compliance. How did we respond? • Continuing to collect energy data from our occupiers and assets • Engagement with our occupiers regarding our Pathway to Net Zero to help align with the occupier’s net zero ambitions • Assisting with Business Rate reductions for our occupiers • Board Directors sit on various industry committees helping shape policy and strategy. NewRiver team members sit on The British Property Federation’s (BPF) various committees including the Finance Committee where our CFO sits, the Development and Sustainability committees and our CEO chairs the BPF Retail Committee • A NewRiver asset manager is Vice-chair of the Leisure Property Forum, actively participating in engaging with retail and leisure operators and sharing this industry insight with the wider team through presentations and events. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 25 Stakeholder engagement continued OUR 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 investor engagement includes the AGM, regulatory announcements and non-regulatory news flow, 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 with a revival of face to face meetings • 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 • As well as institutional investors, we engage with retail investors via direct communications, our website, media, Annual General Meetings (AGM) and platforms including Investor Meet, hosting a dedicated retail investor presentation at our half year results • Our relaunched 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 96 investors during the year, including shareholders and non-holders, and institutional and retail investors • We hosted our first post-pandemic in-person results presentation to analysts in November 2022 for our HY23 Results – a live audio webcast was also available our website with a replay function • The 2022 AGM was again 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 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 26 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 • The Board receives regular updates on market sentiment, investor relations activity and share price performance • The Remuneration Committee undertook a review of the Remuneration policy in consultation with Shareholders for which Shareholder provided positive support toward the proposed revisions. Topics raised • Continued delivery of the Company’s revised strategy focused on resilient retail following the pub business disposal in FY22 • Financial performance • Operational performance • Capital allocation • Portfolio valuation performance • Progress on the disposal of our Work-Out portfolio • Progress across our Regeneration portfolio • Growth of Capital Partnerships • Sustainability • Retailer challenges and opportunities • Macro-economic themes including how inflation and rising energy costs impact our retailer How did we respond? • Post pandemic virtual engagement continue to form a part of our Investor Relations programme, allowing us to capitalise on effective use of management time, engaging with international and regionally based investors, and helping reduce associated carbon emissions • Our investor feedback has helped enhance our disclosures and the supplementary information provided in results materials. OUR 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? • The CFO and finance team held 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 • Held meetings with our Bondholders as part of our FY22 and HY23 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 Strategic ReportFitch Affirmed NewRiver’s Investment Grade Credit Ratings Fitch Ratings affirmed our Long-Term Issuer Default Rating (IDR) at ‘BBB’ with a Stable Outlook, senior unsecured rating at ‘BBB+’ and Short-Term IDR at ‘F2’. The senior unsecured rating applies to NewRiver’s £300 million unsecured bond dated 2028. “In the affirmation of our investment grade credit ratings, Fitch has again recognised NewRiver’s differentiated position in the UK retail market, focused on providing essential goods and services to consumers on rental terms affordable to retailers. This focus on resilient retail, alongside our best in class operating platform and the strength of our balance sheet, means we feel well positioned despite the challenging backdrop.” Will Hobman Chief Financial Officer Topics raised • Performance of retail operations including occupier trading, rent collection, leasing, and occupancy • Retail property valuations • Progress of the disposal of our Work-Out portfolio • Progress of our Regeneration projects • Broader activity within the retail investment market • Interest rate environment How did we respond? • Actions taken in FY22 mean 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 2022 Fitch Ratings affirmed NewRiver’s Long-Term Issuer Default Rating (IDR) at ‘BBB’ with Stable Outlook, our senior unsecured rating at ‘BBB+’ and Short-Term IDR at ‘F2’ • We worked with two companies to undertake scenario stress testing to predict the projected probability of failure of our occupiers and assess their rental cashflow stability factoring in increased pressures on retailer margins. OUR LOCAL AUTHORITIES We are proud to work in partnership with circa 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? • Non-Executive and Executive Directors attended various senior- level meetings with local authorities and public sector focused organisations, 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) How did we respond? • Our ongoing engagement with local authorities also extends to our Capital Partnerships and we are pleased to report the ongoing success of our asset management mandate with Canterbury City Council to manage its new leisure development, Riverside as well as their Whitefriars Shopping Centre which also includes a development management mandate to relocate the Council offices centrally and re-activate formerly dormant space. OUR CAPITAL PARTNERSHIPS As part of our growth strategy we have been expanding our Capital Partnerships. We have created a standalone spread of this strategy in more detail. Please refer to page 44 OUR ENVIRONMENT Please read our comprehensive ESG Strategic Report to find out about our about commitment and progress. Please refer to page 54 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 27 Key performance indicators Measuring our strategic progress Underlying Funds From Operations Loan to Value £25.8m 33.9% 1 . 5 5 1 . 2 5 . 3 8 2 . 8 5 2 5 . 1 1 . 6 0 5 1 . 7 4 . 9 6 3 1 . 4 3 . 9 3 3 £m % 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 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 Total UFFO for FY23 was £25.8 million down from a total UFFO of £28.3 million in FY22. This is following disposal of the Hawthorn pub business. However on a underlying retail only basis this is up 26% from £20.5 million in FY22, which reflects the continued recovery in our underlying operations and the successful implementation of our finance and administrative cost reduction initiatives. 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 LTV has remained stable at 33.9% as at 31 March 2023, reducing from 34.1% as at 31 March 2022, comfortably within our guidance of <40%. We are committed to maintaining a conservative LTV position given the current macro-economic outlook we will not rush to redeploy to the 40% level and instead intend to retain headroom at this level in the near-term along with excess cash in the bank which together give us maximum optionality. Description Description Retail occupancy is the estimated rental value of occupied retail The admin cost ratio is total administrative expenses as a units expressed as a percentage of the total estimated rental value proportion of gross revenue on a proportionally consolidated basis, of the retail portfolio, excluding development activities. including our share of administrative expenses and gross revenue from joint ventures and associates. It is a measure of our operational efficiency. Our performance Our performance We achieved our highest occupancy level for five years, with Our admin cost ratio was 15% for FY23 achieving a a high, stable retail occupancy of 96.7%, up from 95.6% in FY22, reduction from 17% in FY22 principally following a reduction demonstrating the resilience of our essential spend led portfolio in administrative costs due to the disposal of the Hawthorn and its continued attraction and suitability to occupiers. business and the unlocking of administrative cost efficiencies. Link to strategy, ESG and Remuneration Link to strategy, ESG and Remuneration Link to strategy, ESG and Remuneration Link to strategy, ESG and Remuneration 1 2 3 £ 1 2 3 £ 1 2 3 ESG 1 2 3 £ 28 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportRetail occupancy 96.7% . 2 5 9 . 8 4 9 . 8 5 9 . 6 5 9 . 7 6 9 Admin cost ratio 15% 5 2 5 1 3 1 7 1 5 1 % % 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 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. 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 and associates. It is a measure of our operational efficiency. Our performance We achieved our highest occupancy level for five years, with a high, stable retail occupancy of 96.7%, up from 95.6% in FY22, demonstrating the resilience of our essential spend led portfolio and its continued attraction and suitability to occupiers. Our performance Our admin cost ratio was 15% for FY23 achieving a reduction from 17% in FY22 principally following a reduction in administrative costs due to the disposal of the Hawthorn business and the unlocking of administrative cost efficiencies. Description 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 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 appropriate measure of the underlying performance of the less than 50% is one of our five key Financial Policies and in business, as it reflects our generation of operating profits. addition our medium-term guidance is to maintain an LTV Our performance of less than 40%. Our performance Total UFFO for FY23 was £25.8 million down from a total UFFO LTV has remained stable at 33.9% as at 31 March 2023, of £28.3 million in FY22. This is following disposal of the reducing from 34.1% as at 31 March 2022, comfortably within Hawthorn pub business. However on a underlying retail only our guidance of <40%. We are committed to maintaining a basis this is up 26% from £20.5 million in FY22, which reflects conservative LTV position given the current macro-economic the continued recovery in our underlying operations and the outlook we will not rush to redeploy to the 40% level and successful implementation of our finance and administrative instead intend to retain headroom at this level in the near-term cost reduction initiatives. along with excess cash in the bank which together give us Link to strategy, ESG and Remuneration Link to strategy, ESG and Remuneration Link to strategy, ESG and Remuneration Link to strategy, ESG and Remuneration 1 2 3 £ 1 2 3 ESG 1 2 3 £ maximum optionality. 1 2 3 £ Key Link to business model and strategic objectives 1 Disciplined capital allocation 2 Leveraging our platform 3 Flexible Balance Sheet Link to ESG and Remuneration ESG Environmental, Social and Governance £ Remuneration NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 29 Key performance indicators continued Interest cover 4.3x 1 . 5 8 4 . . 3 4 5 3 . . 3 2 GRESB Score 70 0 7 8 6 0 7 2 6 0 6 ratio number 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 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 This year we ranked 1st in the GRESB Management module out of a 901 participants across Europe. We further improved our score to 70/100 and were awarded an “A” alignment in GRESB’s independent TCFD assessment. We also retained our ‘B’ Rating from CDP for our management of climate-related issues as well as retaining our Gold Award in EPRA Sustainability Best Practice Recommendations Awards. Link to strategy, ESG and Remuneration £ ESG 2 3 1 Description Description Total Property Return is a measure of the income and capital Total Accounting Return (‘TAR’) is the change in EPRA Net growth generated across our portfolio. It is calculated Tangible Assets (‘NTA’) per share over the year, plus dividend by MSCI Real Estate (formerly known as IPD) on our behalf, paid, as a percentage of the EPRA NTA at the start of the year. using independent valuers. We assess our performance against the market by comparing our returns to the MSCI TAR performance relative to UK-listed Real Estate Investment Trusts is a key metric used in setting the long-term incentive plan. All Retail benchmark. Our performance Our portfolio delivered a Total Return of 2.3% in FY23 We delivered a total accounting return of -4.6%, impacted by compared to the MSCI All Retail benchmark at -7.9% due to the the portfolio valuation decline of -5.9%, compared with -6.6% in inherent high income component of our portfolio. the prior year. We paid a 6.8 pence dividend for the year, offset Our performance by movement in NTA. Our core shopping centres and retail parks delivered capital returns of -0.7% and -3.2%. Link to strategy, ESG and Remuneration Link to strategy, ESG and Remuneration 1 2 3 £ 1 2 3 ESG 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 and associates. Maintaining interest cover of more than 2.0x is one of our five key Financial Policies. Our performance Interest cover increased by 0.8x from 3.5x in FY22 to 4.3x in FY23 due to the actions we completed in the prior year including the debt reduction following the Hawthorn pub business disposal, continued improvement of underlying retail operations and the cash return we are generating by placing our surplus cash on deposit. This level provides significant headroom to our policy of 2.0x. Link to strategy, ESG and Remuneration 1 2 3 £ 30 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportTotal Property Return Total Accounting Return +2.3% -4.6% 5 7 . . 3 3 - . 6 4 - . 6 6 - 3 . 1 . 3 2 . 7 4 1 - . 4 5 - . 9 6 - . 9 4 2 - % % 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 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. Our performance Our portfolio delivered a Total Return of 2.3% in FY23 compared to the MSCI All Retail benchmark at -7.9% due to the inherent high income component of our portfolio. Our core shopping centres and retail parks delivered capital returns of -0.7% and -3.2%. Description Total Accounting Return (‘TAR’) is the change in EPRA Net Tangible Assets (‘NTA’) per share over the year, plus dividend paid, as a percentage of the EPRA NTA 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 We delivered a total accounting return of -4.6%, impacted by the portfolio valuation decline of -5.9%, compared with -6.6% in the prior year. We paid a 6.8 pence dividend for the year, offset by movement in NTA. Description 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 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 costs from joint ventures and associates. Maintaining interest sustainability performance of real estate asset investments, cover of more than 2.0x is one of our five key Financial Policies. resulting in an overall score marked out of 100. Improvements in our GRESB score can be used to measure the effectiveness Our performance of our ESG programme. Our performance Interest cover increased by 0.8x from 3.5x in FY22 to 4.3x in This year we ranked 1st in the GRESB Management module FY23 due to the actions we completed in the prior year including the debt reduction following the Hawthorn pub out of a 901 participants across Europe. We further improved our score to 70/100 and were awarded an “A” alignment in business disposal, continued improvement of underlying retail GRESB’s independent TCFD assessment. We also retained operations and the cash return we are generating by placing our ‘B’ Rating from CDP for our management of climate-related our surplus cash on deposit. This level provides significant issues as well as retaining our Gold Award in EPRA headroom to our policy of 2.0x. Sustainability Best Practice Recommendations Awards. Link to strategy, ESG and Remuneration Link to strategy, ESG and Remuneration Link to strategy, ESG and Remuneration Link to strategy, ESG and Remuneration 1 2 3 £ 1 2 3 £ ESG 1 2 3 £ 1 2 3 ESG Key Link to business model and strategic objectives 1 Disciplined capital allocation 2 Leveraging our platform 3 Flexible Balance Sheet Link to ESG and Remuneration ESG Environmental, Social and Governance £ Remuneration NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 31 Strategic Report Portfolio review RESILIENT RETAIL FOCUSED PORTFOLIO 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. Portfolio Weighting 11% 1% 11% 28% 1% 28% 23% 23% 37% 37% 32 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Retail Parks Shopping Centres – Core Shopping Centres Retail Parks – Regeneration Shopping Centres Shopping Centres – Core – Work Out Shopping Centres – Regeneration Other Shopping Centres – Work Out Other Strategic Report Operational Update Robust and consistent operational metrics continue to demonstrate the underlying resilience and active demand for space in our portfolio, supported by the strong performance of the physical retail store channel and resilient consumer. Net property income adjusted for disposals increased by +5.0% in the 12 months to March 2023, occupancy increased to 96.7% (FY22: 95.6%) and rent collection remains at normalised levels of 98% (FY22: 96%). As a 31 March 2023 Occupancy Retention Rate Rent Collection Affordable Average Rent Gross to Net Rent Ratio Leasing Volume Leasing Activity Average CAGR FY21-FY23 Retail Parks Shopping Centres – Core Shopping Centres – Regen Shopping Centres – Work Out Total1 (%) (%) 97.5% 100% (%) 99% (£ psf) (Ave. pa) £12.49 £116,000 (%) 97% (sq ft) % vs valuer ERV (Average Lease Length) (%) 163,400 0.8% 0.6% 12.3 97.7% 90% 98% £13.18 £39,000 94% 309,700 2.3% -0.8% 97.4% 97% 100% £13.00 £69,000 86% 138,700 -3.9% -0.7% 92.8% 96.7% 89% 92% 97% 98% £9.13 £11.98 £23,000 £45,000 65% 88% 338,800 -2.1% -0.4% 979,200 1.1% -0.4% 9.9 9.4 6.7 10.0 1. Total includes Other representing 1% of total portfolio by value In total, we completed 979,200 sq ft of leasing transactions during the year, securing £7.9 million of annualised income. Our long-term leasing transactions which represented 69% of the total rent secured were transacted at rents +1.1% above valuer ERVs. Over three quarters (77%) of the annualised long-term rent secured was in our Core Shopping Centre and Retail Park portfolios, at rents exceeding valuer ERVs by +2.3% and +0.8% respectively. This is a reflection of the excellent occupational demand across our Core Shopping Centres, at the heart of their local communities, and conveniently located Retail Parks predominately adjacent to major supermarkets, demonstrating we own the right assets in the right locations. OUR HIGHLIGHTS Portfolio Metrics as at 31 March 2023 Occupancy Retention Rate 96.7% FY22: 95.6% 92% FY22: 90% Leasing Activity +1.1% ahead of valuer ERV FY22: +7.4% Total Return Affordable Average Rent £11.98 per sq ft FY22: £11.74 per sq ft Rent Collection Leasing Volume 979,200 sq ft FY22: 1,039,800 sq ft Gross to Net Rent Ratio 88% FY22: 84% 98% FY22: 96% Average CAGR FY21-FY23 -0.4% on 10.0yr average previous lease period Portfolio NIY of 2.3%, +1,020 bps outperforming the MSCI All Retail over 12 months 8.0%, +220bps versus the MSCI All Retail at 5.9% FY22: 7.5% FY22: 7.9% Expanding Capital Partnerships across public, private equity and institutional sectors NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 33 Strategic Report Portfolio review continued Whilst rent secured within our regeneration portfolio was down -3.9% versus valuer ERV, it was 9.0% ahead of the previous passing rent and therefore accretive to rental cashflows. It is also reflective of our ongoing strategy to ensure greater lease flexibility to support our vacant possession strategy. We have been making good progress across our three regeneration assets which are predominantly focused on reducing surplus retail and delivering new residential units to these locations within commuting distance of London. At Grays, we are at an advanced stage in our preparations to submit an outline planning application for 850+ homes and in Burgess Hill, a site with detailed planning consent for 187 residential units, is being prepared for sale. The Work Out portfolio leasing activity was on terms -2.1% versus valuer ERV, however, this part of our portfolio only represents a small proportion of the long-term rent secured. Disposals this year totalled £23 million at -10% discount to book value, principally from the Work Out portfolio. Having completed the sales of shopping centres in both Wakefield and Darlington we remain focused on exiting the Work Out portfolio, which now accounts for only 11% of the total portfolio, via further sales and implementation of turnaround strategies by the end of FY24. For total portfolio lease events in FY23, the rents achieved had a CAGR versus the previous passing rent of only -0.5% over the average previous lease period of 10.3 years. Over the past three years, this is only -0.4% based on an average previous lease period of 10.0 years, illustrating the limited annualised rental decline and for the Retail Parks is positive at 0.6%. Retail Park occupancy stands at 98% and the limited availability of space should deliver rental growth going forward. Overall, our long-term leasing transactions had a weighted average lease expiry (WALE) of 8.2 years, up from 6.4 years in FY22, with Retail Parks at 12.0 years and Core Shopping Centres at 6.9 years. In terms of tenant incentives, due to the continued competitive tension in the occupational market, for long-term leasing transactions the average rent free period was broadly aligned to FY22 at just 2.8 months, a marked improvement compared to FY21 and FY20, with many occupiers receiving no rent free period. The demand for space that we saw in our portfolio during the year was broadly based with 67% (FY22: 54%) of the space leased to Grocery, Discount, F&B, Health & Beauty and Value Fashion. Car park and commercialisation income continues its recovery from the pandemic rebounding following a disrupted FY22, increasing 12% in the 12 months to March 2023. Overall, income is now back up to 78% against pre-pandemic levels. Our portfolio valuation at £593.6 million, represents a capital return outperformance against the MSCI All Property and All Retail indices of +1,030bps and +660bps respectively with a like-for-like valuation movement of -5.9% for the year. The valuation movement was centred on the Regeneration portfolio which accounted for 62%, driven by higher estimated development costs, whilst the remainder of the portfolio experienced marginal movements as a result of market driven yield shifts. Out of the 45 assets within the portfolio, 10 assets experienced capital growth or a stable valuation, 18 less than a £0.5 million decline and 10 between a £0.5-£1 million decline. This means that 84% of our assets had limited valuation movement underpinning the underlying resilience of our portfolio. Our Capital Partnerships continue to grow having secured a high-quality mandate from M&G Real Estate in November 2022 to asset manage a large retail portfolio, with a further south-east shopping centre added to this mandate subsequent to our appointment. The portfolio currently comprises 16 retail parks and two shopping centres. Our key partnerships are across the public, private equity and institutional sectors illustrate the importance of specialist retail partners in a highly operational sector and endorsement of the quality of our asset management platform. Valuation Valuation Outperformance +660bps Capital return outperformance vs. MSCI All Property and All Retail indices As at 31 March 2023, our portfolio was valued at £593.6 million (31 March 2022: £649.4 million). Movements from the previous year were the disposal of two Work Out assets and a solus retail warehouse unit (£22.4 million) and a like-for-like valuation movement of -5.9% for the year. This is a +660bps capital return outperformance compared to the MSCI All Retail index. Valuations were broadly stable in the first half of the year at -1.3%, followed by a -4.7% movement in the second half, a reflection of the macro-economic, political and financial market pressures impacting all real estate markets. The valuation movement was predominately a result of market driven yield expansion, a direct impact of rising interest rates, whilst ERVs were broadly stable at -1.7% for the total portfolio and +0.4% excluding our Work Out portfolio and Regeneration assets. Our Core Shopping Centre Portfolio, which represents 37% of the portfolio, delivered a modest valuation movement of only -0.7% for the year, a result of a strong operational performance and already high yield of 9.6%. This is a +1,010bps capital return outperformance compared to the MSCI Shopping Centre index. Retail Parks, representing 28% of the portfolio, saw a movement of -3.2% driven by some modest yield expansion offset by a +2.7% increase in LFL ERVs. This is a +960bps capital return outperformance compared to the MSCI Shopping Centre index. The overall portfolio valuation movement was concentrated in the Regeneration portfolio with a movement of -14.1% which accounts for 62% of the overall portfolio movement, the outcome of high inflation on assumed construction and finance costs. The Work Out portfolio following two disposals now accounts for only 11% of the total portfolio and experienced a -7.8% valuation movement due to negative NOI and ERV movements. This was concentrated in three assets where turnaround strategies are in place and progressing well. Nevertheless, on a capital return basis, our Work Out portfolio outperformed the MSCI Shopping Centre index by +10bps. 34 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic Report As at 31 March 2023 Shopping Centres – Core Retail Parks Shopping Centres – Regen Total excl. Work Out / Other Shopping Centres – Work Out Other Total Portfolio Weighting (%) Valuation Movement H1 (%) Valuation Movement H2 (%) Valuation Movement FY (%) Topped-up NIY (%) 37% 28% 0.2% 0.5% -0.9% -3.5% -0.7% -3.2% 9.6% 7.0% (£m) 219.9 165.5 NEY (%) 9.3% 7.0% LFL ERY Movement (%) LFL ERV Movement (%) 0.0% 0.3% 140.0 23% -4.2% -10.5% -14.1% 5.9% 6.8% 0.6% -1.1% 2.7% 1.2% 525.4 88% -1.0% -4.4% -5.4% 7.9% 7.9% 0.3% 0.4% 63.4 4.8 593.6 11% 1% 100% -2.5% -5.7% -1.3% -5.8% -13.5% -4.7% -7.8% -22.6% -5.9% 9.4% 10.0% 8.0% 14.0% 9.5% 8.6% -0.3% 0.6% 0.2% -8.7% -11.3% -1.7% The portfolio Net Initial Yield now stands at 8.0%, and has a Net Equivalent Yield of 8.6%, c.200bps higher than the MSCI All Retail Benchmark at 5.9% and 6.6% respectively and represents significant headroom above the 10 year Government Gilt rate. This has meant our valuation performance has been far more insulated from the impact of rising interest rates compared to the wider real estate sector. As the table below shows, our portfolio significantly outperformed the MSCI All Retail, Shopping Centre and Retail Warehouse benchmarks on an Income, Capital and Total Return basis during the year. Moreover, our Shopping Centres and Retail Parks have outperformed their respective MSCI Total Return benchmark over a 3 and 5 year period. 12 months to 31 March 2023 NRR Portfolio MSCI All Retail Benchmark Relative performance Total Return: 12 months to 31 March 2023 NewRiver MSCI Benchmark Relative Performance Total Return: Annualised 3 years to 31 March 2023 NewRiver MSCI Benchmark Relative Performance Total Return: Annualised 5 years to 31 March 2023 NewRiver MSCI Benchmark Relative Performance Review our 12-month, 3-year and 5-year outperformance MSCI on page 43 Total Return Capital Growth Income Return 2.3% -7.9% +1,020bps -6.2% -12.7% +660bps 9.0% 5.4% +350bps Shopping Centres Retail Parks 1.6% -5.1% +680bps 4.8% -6.8% +1,170bps -2.1% -9.7% +760bps 8.7% 5.3% +340bps -3.5% -11.0% +750bps 5.1% -0.3% +550bps NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 35 Strategic Report Portfolio review continued New Aldi store (unit extension of former Next), Dewsbury RETAIL PARKS As at 31 March 2023, Retail Parks accounted for 28% of our portfolio, totalling 14 assets. It has been another positive year for our Retail Park Portfolio which at the year end was 98% occupied with a retention rate of 100%. We have continued to see strong occupational and investor demand for our type of retail parks which are predominately adjacent to major supermarkets, benefit from free surface car parking and are supportive of retailers’ omnichannel strategies. FY23 HIGHLIGHTS • Portfolio weighting: 28% • No. assets: 14 • NIY %: 7.0% versus MSCI Retail Warehouse NIY of 6.2% • Average lot value: £17.2 million • Key occupiers: B&M, TK Maxx, Halfords, Aldi • Occupancy: 97.5% • Retention rate: 100% • Rent collection: 99% • Affordable average rent: £12.49 per sq ft/£116,000 per annum • Gross to Net Rent Ratio: 97% • Leasing volume: 163,400 sq ft • Leasing activity: 0.8% ahead of valuer ERV • Average CAGR FY21-FY23: 0.6% on 12.3yr average previous lease period • Total Return 4.8% outperforming the MSCI Retail Warehouses by 1,170 basis points KEY RETAILERS 36 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic Report Selected highlights Include: • Barrow-in-Furness, Hollywood Retail & Leisure Park: This retail park provides the key retail and leisure to the town with the only Vue cinema in the catchment and benefits from an occupier line up of Aldi, TK Maxx, Curry’s, Dunelm, McDonalds and KFC. The offer is to be further strengthened with the introduction of Smyth Toys having exchanged an Agreement for Lease for a 15 year term replacing the former Bingo operator which we served our landlord break notice on. The only remaining vacant unit is a 3,100 sq ft pod which is under offer to a national veterinary company, which will bring a great community use to the Retail Park. • Cardiff, Valegate Retail Park: We completed an Agreement for Lease with Poundland for a 27,000 sq ft store at a rent of £270,000 pa and a 10,000 sq ft letting to Boulders, an indoor climbing centre, at a rent of £100,000 per annum on a 15 year lease and both transactions were in line with the valuer’s ERV. This discount led 94,000 sq ft retail park, adjacent to a dominant Marks & Spencer and Tesco Extra, is now fully let. • Dewsbury, Rishworth Centre: At our fully-let retail park in Dewsbury, we opened a brand new 19,500 sq ft store for Aldi following the completion of extension works to the former Next store. Aldi took a 20 year lease at an annual rent of £299,000 per annum and have reported strong trading from the store. The park is now fully let with Aldi joining Shoezone, Iceland, Halfords and Pets at Home on the park. • Dumfries, Cuckoo Bridge Retail Park: We received planning consent and exchanged an Agreement for Lease with Food Warehouse to create a new 12,500 sq ft food store which will benefit from trading adjacent to a successful Tesco superstore. We are in active discussions with a discount gym operator on the final vacant unit which will make the park 100% let, further strengthening this excellent supermarket, DIY and discount anchored park. • Inverness, Glendoe and Telford Retail Parks: Throughout the year we have completed a number of lettings on the park, improving the occupier line-up and increasing the WAULT. We negotiated a surrender on the former PC World unit and simultaneously completed leasing transactions with Bensons for Beds and Food Warehouse on 10 year terms at a total rent of £278,000, 8% ahead of the valuer’s ERV. We served the landlord break notice on Poundstretcher in order to create space for Poundland and agreed a reversionary lease with B&M, adding a further 10 years to the term. • Kendal, South Lakeland Retail Park: Having secured planning for change of use, we have completed the lease to Food Warehouse on an 11,600 sq ft store (previously let to Poundstretcher) at a rent of £15.50 per sq ft on a 10 year lease. Food Warehouse joins an already strong retailer line up including B&M, Pets at Home, Halford and Currys, adjacent to a Morrisons supermarket. • Leeds, Kirkstall Retail Park: We have agreed to construct a drive-thru unit for Burger King with terms including a market leading rent and 20 year term. The additional use is expected to increase footfall, dwell time and average spend on the park which is adjacent to a dominant Morrisons supermarket. • Wirral, Eastham Point: We continued our successful partnership with the Co-op in their convenience store expansion programme, delivering a modern new 5,300 sq ft store which features self-service checkouts and a hot food to go section too. Co-op took a 15 year lease at a rent of £70,000 per annum. Kutchenhaus also took a new 10 year lease for a new store and together these lettings bring the park to 100% occupancy. Retention rate 100% Occupancy 98% Strong leasing pricing CAGR 1% -1.5% % 8 9 % 0 0 1 % 2 9 % 6 7 9 . % 1 . 7 9 % 5 7 9 . % 1 . 6 2 % 8 0 . % 2 4 - . % 3 3 1 . % 6 0 . % 5 . 1 - % 6 0 . - FY21 FY22 FY23 FY21 FY22 FY23 FY21 FY22 FY23 FY21 FY22 FY23 average NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 37 Portfolio review continued The Avenue Shopping Centre, Newton Mearns CORE SHOPPING CENTRES 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 by providing a range of essential goods and services to local people. Our centres are easily accessible with short travel times supporting the wider climate and well-being agenda. As at 31 March 2023 our Core Shopping Centre portfolio represented 37% of our total portfolio value and comprises 14 core community shopping centres with an occupancy of 98%. FY23 HIGHLIGHTS • Portfolio weighting: 37% • No. assets: 14 • NIY 9.6% versus MSCI Shopping Centre NIY of 7.5% • Average lot value: £19.0 million • Key occupiers: Primark, Superdrug, M&S, Poundland, Boots, Next • Occupancy: 97.7% • Retention rate: 90% • Rent collection: 98% • Affordable average rent: £13.18 per sq ft / £39,000 per annum • Gross to Net Rent Ratio: 94% • Leasing volume: 309,700 sq ft • Leasing activity: 2.3% ahead of valuer ERV • Average CAGR FY21-FY23: -0.8% on 9.9yr average previous lease period • Total Return 10.3% outperforming the MSCI Shopping Centres by +1,540 basis points KEY RETAILERS 38 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportCORE SHOPPING CENTRES Selected highlights Include: • Newtownabbey, Abbey Centre: Our 320,000 sq ft centre in Belfast anchored by Primark, Next and Dunnes Stores provides a clear illustration of the consistent occupational demand for a fit-for-purpose community shopping centre. Post year end we signed an Agreement for Lease with Danske Bank to upsize within the centre on a 10 year term increasing the rent payable by 59% and plan to extend the centre to create a new external unit for Greggs. Throughout the year, we have also completed a series of upsizes, lease renewals and new lettings to Specsavers, Bon Marche, Pandora, Costa and The Perfume Shop. • Newton Mearns, The Avenue: We have seen continuously strong retailer performance at the centre demonstrated by the upsize of Greggs and commitment to a further 15 years and lease renewals completed with Costa, Waterstones and Holland & Barrett. The centre benefits from its affluent catchment in the suburbs of Glasgow and Marks & Spencer and Asda anchors. • Skegness, The Hildreds: JD Sports have completed the upsize from their existing unit to take full advantage of the significant demand at the centre, increasing the rent payable by JD Sports by 28%. Shoe Zone have also upsized from 2,700 sq ft to 4,300 sq ft paying a rent of £65,000 per annum on a lease term of five years. Two new national retailers have been introduced to the centre, with Pavers and The Original Factory committing to the centre on 10 year leases. • Hastings, Priory Meadow: We completed a lease with Black Sheep Coffee post year end on a 20 year lease term at £60,000 per annum on one of the last remaining vacancies and a new 12,000 sq ft unit for The Gym which is open 24 hours a day and is helping contribute to enhanced footfall and supplementary spend at the centre. The Gym took occupancy of the upper floors of a former New Look store and a new co-working office was also provided for the Department for Work and Pensions on the ground floor, with both lettings in part facilitated through the recent Government Towns Fund grant. • Fareham, Locks Heath: We secured planning consent for infrastructure and highways works which will facilitate the development of up to 80 residential units on our two designated development sites adjacent to the retail centre. Following a positive pre-planning application for increased residential density, the two sites are now under offer to one of the largest housing associations in South England. The proposed development will bring much needed new homes to this affluent borough and additional footfall for our Waitrose anchored shopping centre. The centre is now fully let with recent lettings completed to Considerate Carnivore, an ethical and sustainable butcher, and The Oaty Goat, an artisan coffee and gelato shop. • Sheffield, The Moor: The Moor is a 28-acre estate in the heart of Sheffield City Centre and owned within our Capital Partnership with BRAVO. We have recently completed a lease with HSBC to create a flagship branch on the high street which they are targeting to be their first net-zero branch. This lease transaction was secured on a 10 year lease 12.5% ahead of the valuer’s ERV at a rent of £225,000 per annum. • Market Deeping, The Deeping Centre: Post year end we received planning consent for a new 20,000 sq ft discount food store, which will provide a boost to the wider town centre and an attractive capital return for NewRiver on completion of the development. Retention rate 90% Occupancy 98% Strong leasing pricing CAGR 2% 0% % 9 8 % 8 8 % 0 9 % 6 6 9 . % 5 6 9 . % 7 7 9 . % 0 1 % 3 2 . % 4 0 . % 1 - % 9 0 . - % 8 0 . - % 0 FY21 FY22 FY23 FY21 FY22 FY23 FY21 FY22 FY23 FY21 FY22 FY23 average NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 39 Portfolio review continued Proposed foodstore at The Horsefair, Wisbech on surplus car parking WORK OUT Our Work Out portfolio represents 11% of our portfolio and comprises assets which we intend to dispose of or complete turnaround strategies for. Since the Half Year, we have completed the disposals of shopping centres in both Wakefield and Darlington, with the remaining sales and turnaround strategies to be completed by the end of FY24. The key turnaround strategies include: • Cardiff, Capitol Shopping Centre: We are planning the wholesale repositioning of the asset to competitive and social leisure with an enhanced F&B provision. The Capitol Shopping Centre sits alongside the Council’s major upgrade to the wider area which will improve the infrastructure and public realm, including reinstating a stretch of canal next to the Centre’s entrance, and is due to complete in the Autumn 2023. We are in advanced discussion with a national competitive and social leisure operator to occupy circa 115,000 sq ft of the centre which will be the catalyst for the Food & Beverage lettings on the remainder of the centre. FY23 HIGHLIGHTS • Portfolio weighting: 11% • No. assets: 9 • NIY %: 9.4% versus MSCI Shopping Centre NIY of 7.5% • Average lot value: £7.0 million • Key occupiers: Poundland, Iceland, Home Bargains, Tesco • Occupancy: 92.8% • Retention rate: 89% • Rent collection: 97% • Affordable average rent: £9.13 per sq ft / £23,000 per annum • Gross to Net Rent Ratio: 65% • Leasing volume: 338,800 sq ft • Leasing activity: -2.1% below valuer ERV • Average CAGR FY21-FY23: -0.4% on 6.7yr average previous • Kilmarnock, Burns Mall: We are working collaboratively with the lease period Council on plans to demolish the former BHS to create a surface car park to be let to the Council on a long-term lease and upsize key occupiers within the centre. We are confident that the removal of surplus retail, improvement in public realm and accessibility will revitalise the centre. The works are to be part funded by the Council. • Paisley, The Piazza: The centre is the principal retail offering within the town centre and has strengthened following the planned re-development of the neighbouring weaker shopping centre within the catchment, therefore removing significant surplus retail supply from the town. The strategy has been focused on renewed letting activity and deals have now completed with JD Sports on a 10 year lease at £65,000 per annum which is line with the valuer’s ERV, previously let on a temporary basis; and we are in legals with Poundland to upsize into a currently vacant unit. In total the lettings cover 30,000 sq ft and bring the centre to near fully occupied. • Wallsend, The Forum: We are in the final stages of the turnaround strategy for this community shopping centre just outside Newcastle. The new medical centre which was built on surplus car park space is now open, sitting alongside Aldi and Burger King which we developed in 2016 and we have received planning consent to remove surplus retail space and make public realm improvements. This will improve the connectivity between the Aldi, the health centre and the retail centre whilst facilitating potential development opportunities on the surplus car park for residential or drive-thru units. • Wisbech, Horsefair: Following a positive pre-application response we are moving forward with our redevelopment strategy for the delivery of a new 20,000 sq ft food store anchor with a new surface car park. Once we have agreed terms to pre-let the new store we will submit a planning application for which following the pre-application, we are confident of securing and on delivery of the food store the centre will be fully let and help boost footfall to the centre and town. 40 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 • Total Return 0.7% outperforming the MSCI Shopping Centres by 590 basis points KEY RETAILERS Work Out Portfolio Strategy (% of valuation) 30% 70% Completed Disposals 2 x assets £17m Turnaround Planned disposals Strategic Report Broadway Shopping Centre, Bexleyheath REGENERATION We have three regeneration assets, representing 23% of the total portfolio value where the strategy is to deliver capital growth through redeveloping surplus retail space predominantly for residential. • Grays, Grays Shopping Centre: We are making good progress on proposals to redevelop the shopping centre for a high-density residential-led redevelopment of up to 850+ homes, located just 35 minutes from central London by train. Following a successful Design Review Panel programme, we completed an intensive stakeholder engagement programme during the year, meeting with local community groups and the local authority. Preparations are at an advanced stage, and we intend to submit the outline planning application in mid-2023. • Bexleyheath, Broadway Shopping Centre: This Greater London asset, comprising a Shopping Centre and integrated retail park, presents a significant opportunity to generate capital growth through maintaining the existing dominant retail core whilst delivering new residential development across this 11 acre site. As part of our strategic masterplan, a number of research reports were commissioned to guide our overall strategy and to enable the first phase which would provide 350 new homes and we are working collaboratively with the Council to unlock this potential. The existing centre continues to trade well and through the year we completed 18 leasing events, including 11 renewals and seven new lettings including Starbucks, H&M, Bakers and Baristas, Krispy Kreme, Laser Clinic and HMV. • Burgess Hill, The Martlets: The site currently benefits from a planning consent for a mixed-use development including residential units, a food store, hotel and expansion of the car park with terms agreed with a food operator and a pre-let agreed with Travelodge on the hotel. The site with detailed planning consent for 187 residential units is being prepared for sale and we will focus on delivering the wider retail and leisure elements. FY23 HIGHLIGHTS • Portfolio weighting: 23% • No. assets: 3 • NIY %: 5.9% versus MSCI Shopping Centre NIY of 7.5%: • Average lot value: £46.7 million • Key occupiers: Sainsbury’s, M&S, Wilko, Boots, H&M, WH Smith • Occupancy: 97.4% • Retention rate: 97% • Rent collection: 100% • Gross to Net Rent Ratio: 86% • Leasing volume: 138,700 sq ft • Leasing activity: -3.9% ahead of valuer ERV • Average CAGR FY21-FY23: -0.7% on 9.4yr average previous lease period • Total Return -9.4% underperforming the MSCI Shopping Centres by -420 basis points KEY RETAILERS Repurposed retail space proposed 3 x assets +150k sq ft Pipeline of residential units +1,700 units NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 41 Our platform RESILIENT RETAIL AGILE PLATFORM As the leading UK retail real estate company we own, manage and develop resilient retail assets across the UK both on our own balance sheet and on behalf of our capital partners. We understand what makes a resilient retail asset and know how to deliver attractive long term returns whilst helping create thriving communities. 42 42 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportOur Portfolio We specialise in owning, managing and developing resilient retail assets throughout the UK and have hand-picked our 7 million sq ft portfolio of community shopping centres and conveniently located retail parks, which are occupied by tenants predominately focused on essential goods and services compatible to omni-channel retailing. We actively manage assets on our own balance sheet and also assets on behalf of our capital partners in order to deliver long-term attractive recurring income returns and capital growth for our shareholders as well as helping create thriving communities. Market Leading Platform 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 and development strategy, underpinned by a data-driven approach Activities include: • Deployment of targeted capex to improve asset environments and shopper experience • Enhancing occupier type and mix • Proactive measures to reduce costs for occupiers • Implementation of ESG strategies including a supplier ESG performance evaluation process and a quarterly ESG performance review for our Property team; and on-site ESG training • Generating incremental income through commercialisation and car parking • Small scale development projects • Master-planning large scale town centre regeneration projects Track Record: Operational Resilience We have a track record of delivering resilient portfolio-wide operational metrics. Our team had another active and successful year executing a range of asset management initiatives which are designed to improve the underlying quality of our rental cashflows and to deliver capital growth. Accredited Asset Management and Development Approach FY23 OPERATIONAL HIGHLIGHTS • 96.7% occupancy • 98% rent collection • 92% retention rate • £11.98 affordable average rent • +1.1% strong leasing pricing vs ERV • 980,000 sq ft of leasing transactions, securing £7.9 million of annualised income NewRiver Outperformance vs MSCI Benchmark 1 year s p b 0 7 1 1 + s p b 0 8 6 + s p b 0 6 9 + s p b 0 6 3 + s p b 0 2 3 + s p b 0 6 1 + Total Return Capital Growth Income Return 3 year s p b 0 6 7 + s p b 0 4 3 + s p b 0 9 4 + s p b 0 7 2 + s p b 0 5 + s p b 0 7 2 + Total Return Capital Growth Income Return Ranked 1st place in the GRESB Management module out of 901 participants across Europe; achieved an ‘A’ alignment rating in GRESB’s independent TCFD assessment; achieved 90/100 score in the GRESB Development benchmark 5 year s p b 0 5 7 + Retained Gold Award in EPRA Sustainability Best Practice Recommendations Awards Retained ‘B’ Rating from the CDP for our management of climate-related issues s p b 0 5 5 + s p b 0 8 4 + s p b 0 9 4 + s p b 0 4 + s p b 0 5 2 + Total Return Capital Growth Income Return Retail parks Shopping Centres NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 43 Strategic Report Strategic report Strategic report Strategic Report Our platform continued Leveraging our platform through capital partnerships Capital Partnerships are an important part of our business, contributing to overall earnings growth, by allowing us to acquire assets in a capital light way and receive proportional rental income. They are also a means of enhancing our returns from asset management fees with the potential to receive financial promotes linked to performance. Our Capital Partnerships by area and number Growing Our Capital Partnerships As well as managing assets on our own balance sheet, we also actively manage assets on behalf of our capital partners by leveraging our market leading asset management platform across three sectors: private equity, institutional investors and local authorities. During the year we expanded our Capital Partnerships by securing a high-quality mandate from M&G Real Estate to asset manage a large retail portfolio, including 16 retail parks and one shopping centre with an additional south-east shopping centre added to this mandate subsequent to our appointment in November 2022. Capital Partnerships are an important part of our business, delivering earnings growth in a capital light way through asset management fees, a share of rent and the potential to receive financial promotes. We currently asset manage 19 retail parks and five shopping centres across 5 million sq ft. 80% 5m sq ft 20% 80% 5 shopping centres 19 retail parks 5 shopping centres 19 retail parks The expansion and breadth of our Capital Partnerships is a clear indication of the need for specialist retail partners with a best-in-class asset management platform to enhance performance in the highly operational retail sector and we see this a as key area of strategic expansion to help provide us with the opportunity to deliver future earnings growth. 20% 5m sq ft PARTNERSHIP WITH M&G Our Capital Partnerships continue to grow and in November 2022 we secured a high-quality mandate from M&G Real Estate to asset manage a large retail portfolio, with an additional south-east shopping centre added to this mandate since the appointment. The portfolio currently comprises 16 retail parks and two shopping centres. 44 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportAdvancing our Capital Partnerships Our market leading asset management platform is leveraged through capital partnerships in three sectors: LOCAL AUTHORITIES with Canterbury City Council across two shopping centres in Canterbury. 2x shopping centres PRIVATE EQUITY with BRAVO for three retail parks and one shopping centre in Sheffield 1x shopping centre 3x retail parks INSTITUTIONAL SECTOR with M&G Real Estate across two shopping centres and 16 retail parks 2x shopping centres 16x retail parks Key highlights: • We have completed 18 long-term leasing transactions across 65,600 sq ft, securing £1.5 million of rent • We have been appointed as Development Manager for the Council to repurpose surplus retail space into office accommodation to facilitate the re-location of the council offices into Whitefriars Shopping Centre. Key highlights: • At The Moor, Sheffield we have completed a lease with HSBC to create a flagship branch on the high street which they are targeting to be their first net-zero branch • At Sprucefield Retail Park, Northern Ireland Key highlights: • Following our appointment in November 2022, the mandate was expanded to include an additional south-east shopping centre post-period in April 2023 • We have successfully onboarded and we have received planning consent, post-period, for three drive-thru units across 9,800 sq ft with terms agreed with operators on each unit embedded the portfolio within our day to day operations. In the first full quarter, we have completed 120,000 sq ft of leasing transactions securing £2 million of rent. • At Telford Retail Park, Inverness we negotiated a surrender on the former PC World unit and simultaneously completed leasing transactions with Bensons for Beds and Food Warehouse. Festival Retail Park, Hanley, Stoke-on-Trent (M&G) NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 45 Strategic Report Finance review RESILIENT RETAIL STRONG FINANCIAL POSITION “Despite the macro-economic headwinds faced, particularly in the second half of the year, by continuing to deliver our strategic objectives and due to the strength of our asset management platform, we have managed to maintain and even enhance the strength of our financial position.” Will Hobman Chief Financial Officer 46 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Finance review Despite the macro-economic headwinds faced, particularly in the second half of the year, by continuing to deliver our strategic objectives and due to the strength of our asset management platform, we have managed to maintain and even enhance the strength of our financial position while sustaining the operational momentum that has built over the last two years. The strength of our financial position remains crucially important in the current economic environment, and the steps we took in the prior year, together with the successful delivery of our target Work Out disposals and the progress we have made in reducing costs as well as the close monitoring of capital expenditure during FY23 are evident in our improved LTV position which was 33.9% at 31 March 2023, reduced from 34.1% in March 2022 and 50.6% in March 2021. This has been achieved by reducing absolute levels of net debt (from £493.3 million in March 2021 to £201.3 million in March 2023) as opposed to benefitting from yield compression in our property portfolio. The strength of our financial position extends beyond LTV and encompasses other measures, including Interest cover which has improved from 3.5x in FY22, to 4.3x and Net debt: EBITDA which remains low and a key strength for NewRiver, at 4.9x. Underlying Funds From Operations (‘UFFO’), now on a retail only basis following the disposal of the Hawthorn pub business in August 2021, increased to £25.8 million from £20.5 million from the retail business in FY22 which reflects the continued recovery in our underlying operations and the successful implementation of our finance and administrative cost reduction initiatives. Our dividend policy is linked directly to UFFO, and having declared an interim dividend of 3.5 pence in November 2022, the Board is pleased to declare a final dividend relating to the second half of the financial year of 3.2 pence per share. This brings the total FY23 dividend to 6.7 pence, representing 80% of UFFO per share of 8.3 pence. IFRS loss after tax for FY23 was £16.8 million including a non-cash reduction in portfolio valuation of £37.4 million, improved from the prior year (FY22: loss of £26.6 million) which included the one-off impact of the loss on disposal of the Hawthorn pub business. Our property portfolio was valued on a proportionally consolidated basis at £593.6 million as at 31 March 2023, compared to £649.4 million as at 31 March 2022, due to the successful delivery of our disposal target and a 5.9% portfolio valuation decline. The majority of the valuation decline, 4.7% of the total 5.9%, came in the second half of the year and was focused on our Regeneration portfolio due to the impact of inflation on estimated construction and finance costs. Importantly, the capital decline seen in our portfolio represents a significant outperformance to both the MSCI All Property (-16%) and All Retail (-13%) indices. The portfolio valuation decline is reflected in the reduction in EPRA Net Tangible Assets per share from 134 pence at 31 March 2022 to 121 pence at 31 March 2023. We delivered a total accounting return of -4.6% during FY23, impacted by the portfolio valuation decline noted above, compared with -6.6% in the prior year. 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. OUR HIGHLIGHTS Retail Underlying Funds From Operations LTV £25.8m FY22: £20.5m 33.9% FY22: 34.1% Retail UFFO Per Share 8.3p FY22: 6.7p Ordinary Dividend Per Share 6.7p 1 FY22: 7.4p IFRS Loss After Tax Admin cost ratio £(16.8)m FY22: £(26.6)m 15.2% FY22: 16.9% Total Accounting Return Net finance costs -4.6% FY22: -6.6% £14.9m FY22: £19.5m Net debt £201.3m FY22: £221.5m Interest cover 4.3x FY22: 3.5x Weighted average debt maturity2 4.7 yrs FY22: 5.7 yrs Net debt: EBITDA 4.9x 1 FY22: 4.6x 1. Due to sale of Hawthorn pub business in August 2021 2. Drawn debt only Key Performance versus previous year Improved Declined Maintained NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 47 Strategic Report Finance review continued 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 operational profits, which includes other income and excludes one off or non-cash adjustments, such as portfolio valuation movements, profits or losses on the disposal of investment properties, fair value movements on derivatives and share-based payment expense. 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 is used to measure dividend cover. The relevant sections of this Finance Review contain supporting information, including reconciliations to the financial statements and IFRS measures. The ‘Alternative Performance Measures’ section also provides references to where reconciliations can be found between APMs and IFRS measures. Underlying Funds From Operations The following table reconciles IFRS (loss) / profit after taxation to UFFO, which is the Company’s measure of underlying operational profits. Reconciliation of (loss) / profit after taxation to UFFO (Loss) / profit for the year after taxation Adjustments Revaluation of property Revaluation of joint ventures’ and associates’ investment properties Loss / (profit) on disposal of investment properties Changes in fair value of financial instruments and associated close out costs Loss on disposal of subsidiary Deferred tax EPRA earnings Depreciation of property Forward looking element of IFRS 9 Abortive fees Restructuring costs2 Head office relocation costs Share-based payment charge Underlying Funds From Operations 31 March 2023 Hawthorn £m Total £m – (16.8) Retail £m 7.0 31 March 2022 Hawthorn1 £m Total £m (33.6) (26.6) – – – – – – – – – – – – – 38.2 12.3 (0.8) 3.8 (0.2) – 0.2 24.4 – (0.2) – – 0.5 1.1 (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 (5.8) 4.6 (0.6) 39.7 2.5 26.1 0.4 (0.2) 0.2 0.9 – 0.9 25.8 20.5 7.8 28.3 Retail £m (16.8) 38.2 (0.8) 3.8 (0.2) – 0.2 24.4 – (0.2) – – 0.5 1.1 25.8 1. Pubs operating performance from 1 April 2021 to 20 August 2021 when the disposal of the Hawthorn business was completed. Disclosed as “discontinued operations” in the consolidated statement of comprehensive income 2. During the prior year the Group incurred restructuring costs in relation to employee related matters following the sale of Hawthorn 48 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Underlying Funds From Operations is represented on a proportionally consolidated basis in the following table. The UFFO commentary that follows is focused on the continuing retail business. The £7.8 million “Contribution from Hawthorn” in the prior year (discontinued operation) was analysed in detail in the HY22 and FY22 results materials. 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 ratio3 Weighted average # shares (m) Group £m 72.2 (25.1) 47.1 (12.6) 1.4 35.9 (14.0) – 21.9 31 March 2023 31 March 2022 JVs & Associates £m Adjustments1 £m Proportionally consolidated £m Proportionally consolidated £m 4.0 (0.4) 3.6 (0.1) – 3.5 (0.7) (0.3) 2.5 – (0.2) (0.2) 1.6 – 1.4 (0.2) 0.2 1.4 76.2 (25.7) 50.5 (11.1) 1.4 40.8 (14.9) (0.1) 25.8 – 25.8 8.3 6.7 125% 15.2% 309.7 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% 307.2 1. Adjustments to Group and JV & Associates figures to remove non-cash and non-recurring items, principally forward looking element of IFRS 9 £0.2 million, share-based payment charge £(1.1) million, head office relocation costs £(0.5) million, revaluation of derivatives £0.2 million and deferred tax of £(0.2) million 2. UFFO contribution from the Hawthorn business in FY22 prior to its disposal on 20 August 2021 3. Includes Hawthorn in FY22 Net property income Analysis of retail net property income (£m) Retail net property income for the year ended 31 March 2022 Like-for-like rental income Rent and service charge provisions Car park and commercialisation income Other Retail NRI recovery Net disposals Retail net property income for the year ended 31 March 2023 1.2 0.2 1.3 (0.3) 51.8 2.4 (3.7) 50.5 On a proportionally consolidated basis, retail net property income was £50.5 million during the year, compared to £51.8 million in the year ended 31 March 2022. Net disposal activity during FY22 and FY23 reduced net property income by £3.7 million such that on an underlying basis there has been an increase of £2.4 million from the recovery of net property income post pandemic (“Retail NRI recovery”). One of the key contributory factors to this recovery is the increase in like-for-like net property income of £1.2 million during the year, primarily due to new lettings and improved rental levels on space which had previously been occupied by tenants who were in Administration or had been impacted by CVAs, including the receipt of turnover rent. Rent and service charge provisions have also continued to improve year-on-year, by £0.2 million, over and above the strong performance in this regard seen in FY22, when we reported an improvement of £4.9 million for the year. This serves to highlight the continued resilience of our rent collection, as not only have we been able to broadly maintain the high collection levels of historical arrears as in FY22, but we are also carrying a lower level of provisioning compared to the prior year, with rent collection rates of 98% having now recovered back to pre-pandemic levels. Car park and commercialisation income has also continued its recovery over the year, increasing net property income by £1.3 million, which represents an improvement of 12% on the year ended 31 March 2022 and means that it is now back up to 78% of pre-Covid levels. We completed £23.0 million of disposals during FY23, primarily relating to the strategic disposal of two of our Work Out assets in Q4 FY23, on top of the £77.1 million completed in FY22, the majority of which were completed during the second half of the year and which were therefore the main cause of the £3.7 million decrease in net property income from net disposal activity. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 49 Finance review continued Administrative expenses Administrative expenses were £11.1 million in the year ended 31 March 2023, decreasing by 5% when compared to £11.7 million for the previous year and 8% when compared to £12.0 million in the year ended 31 March 2021. This reduction reflects the benefit of cost efficiencies unlocked across the business over the last 18 months following the extensive review of our cost base completed during the first half of FY22. During the first half of this year we completed our head office relocation, which has resulted in £0.5 million of administrative cost savings per annum. Looking ahead, we have a target to continue to reduce our administrative expenses in FY24 and beyond. Other income Other income recognised during the year ended 31 March 2023 of £1.4 million compared to £nil in the prior year. The income recognised relates entirely to the settlement of an income disruption insurance claim relating to our car park income during the first Covid lockdown between March and June 2020. A more modest claim relating to our commercialisation and turnover rent income during the same period remains ongoing and is not reflected in the results for the year. Net finance costs Net finance costs were £14.9 million in the year to 31 March 2023, compared to £19.5 million in the year to 31 March 2022. 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 prior year following the disposal of the Hawthorn pub business. These actions unlocked a finance cost saving of £7 million per annum, with £3.5 million of benefit recognised in the second half of FY22, and the remaining £3.5 million in the first half of FY23. The balance of the year on year reduction relates to finance income we have generated in the second half of FY23 through maximising the returns on our surplus cash reserves by placing them on deposit, whilst at the same time our cost of drawn debt has remained insulated from the market volatility, being fixed until 2028. 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. The majority of the Group’s income is therefore tax free as a result of its REIT status, albeit this exemption does not extend to other sources of income such as interest or asset management fees. Dividends Under our dividend policy, we declare dividends equivalent to 80% of UFFO 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”, including 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 2022 the Board declared an interim dividend of 3.5 pence per share in respect of the six months ended 30 September 2022, based on 80% of UFFO per share of 4.4 pence. The Board has today declared a final dividend of 3.2 pence per share in respect of the year ended 31 March 2023, taking the total FY23 dividend declared to 6.7 pence, equivalent to 80% of UFFO per share of 8.3 pence. The final dividend of 3.2 pence per share in respect of the year ended 31 March 2023 will, subject to shareholder approval at the 2023 AGM, be paid on 4 August 2023 to shareholders on the register as at 16 June 2023 (record date). The dividend will be payable as a REIT Property Income Distribution (PID). 50 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportBalance 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: Deferred tax Fair value financial instruments EPRA NTA EPRA NTA per share IFRS net assets per share LTV Group £m 551.5 76.7 29.3 0.4 108.6 15.0 781.5 (29.5) (76.7) (296.7) – (402.9) 378.6 As at 31 March 2023 As at 31 March 2022 JVs & Associates £m Proportionally consolidated £m Proportionally consolidated £m 42.1 – (29.3) 1.5 2.7 0.9 17.9 (1.1) – (15.9) (0.9) (17.9) – 593.6 76.7 – 1.9 111.3 15.9 799.4 (30.6) (76.7) (312.6) (0.9) (420.8) 378.6 0.9 (0.6) 378.9 121p 122p 33.9% 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% 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 Net assets As at 31 March 2023, IFRS net assets were £378.6 million, reducing from £414.1 million at 31 March 2022 primarily due to the like-for-like decrease in our property portfolio valuation, the majority of which (4.7% of the total 5.9% decline) occurred during the second half of the year reflecting the disruption seen in the credit and investment markets in the final quarter of 2022, and the capital decline seen in our portfolio represents a significant outperformance to both the MSCI All Property (-16%) and All Retail (-13%) indices. 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 8.6% to £378.9 million, from £414.4 million at 31 March 2022 due to the -5.9% like-for-like decrease in portfolio valuation noted above. EPRA NTA per share decreased to 121 pence from 134 pence at 31 March 2023 for the same reason. Properties at valuation Properties at valuation decreased by £55.7 million during the year, due to the £23.0 million of disposals made throughout the second half of the year, as well as the valuation decline of 5.9% explained above. Of the £23.0 million of disposals made in the year, £17.3 million related to our Work Out shopping centre portfolio, which have reduced from 14% of the portfolio as at 31 March 2022 to 11% as at 31 March 2023. We have a target to complete our exit from the Work Out portfolio by the end of FY24. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 51 Finance review continued Debt & financing Weighted average cost of debt – drawn only1 Weighted average debt maturity – drawn only1 Weighted average debt maturity – total2 Proportionally consolidated 31 March 2023 30 September 2022 31 March 2022 3.5% 4.7 yrs 3.8 yrs 3.5% 5.2 yrs 4.3 yrs 3.4% 5.7 yrs 4.8 yrs 1. Weighted average cost of debt and weighted average debt maturity on drawn debt only 2. Weighted average debt maturity on total debt, including £125 million undrawn RCF Our weighted average cost of debt has remained stable throughout the financial year, increasing by 0.1% from 3.4% at 31 March 2022 to 3.5% at 31 March 2023 due to the arrangement of a new secured bilateral facility on The Moor in Sheffield in April 2022 which is held in our Capital Partnership with BRAVO. On a drawn basis, weighted average debt maturity decreased from 5.7 to 4.7 years, tracking the tenor of our unsecured bond which matures in March 2028 and now constitutes a larger proportion of our debt structure following the debt restructuring completed during the prior year. Importantly in the current interest rate environment, the coupon on the unsecured bond is fixed at 3.5%. Proportionally consolidated Cash Principal value of gross debt Net debt1 Drawn RCF Total liquidity2 Gross debt (drawn) / repaid in the year / period Loan to Value 1. Including unamortised arrangement fees 2. Cash and undrawn RCF 31 March 2023 £m 30 September 2022 £m 31 March 2022 £m 111.3 (316.0) (201.3) – 236.3 (2.0) 33.9% 95.1 (316.0) (217.1) – 220.1 (2.0) 33.8% 88.2 (314.0) (221.5) – 213.2 339.1 34.1% Financial policies We have five financial policies in total, including LTV and Interest cover which also appear as debt covenants on our unsecured RCF and our bond. These remain a key component of our financial risk management strategy which remains as important as ever given the macro-economic climate. For the year ended 31 March 2023, we were in compliance with all of our financial policies. Measure Financial policy Proportionally consolidated Loan to value Guidance <40% Policy <50% Balance sheet gearing Net debt: EBITDA Interest cover1 Ordinary dividend cover2 <100% <10x >2.0x >100% 1. 12 month look-back calculation, consistent with debt covenant 2. Calculated with reference to UFFO 31 March 2023 30 September 2022 31 March 2022 33.9% 33.8% 34.1% Group 31 March 2023 30 September 2022 31 March 2022 49.7% FY23 4.9x 4.3x 125% 49.8% Proportionally consolidated HY23 5.1x 3.9x 125% 51.5% FY22 4.6x 3.5x 125% 52 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportLTV has remained stable at 33.9% as at 31 March 2023, reducing from 34.1% as at 31 March 2022 and comfortably within our guidance of <40%. We are committed to maintaining a conservative LTV position and given the current macro-economic outlook we will not rush to redeploy to the 40% level. Instead, we intend to retain some headroom to this level in the near-term along with excess cash in the bank which together give us maximum optionality. Balance sheet gearing has reduced by 1.8% from 51.5% at 31 March 2022 to 49.7% at 31 March 2023, comfortably within our policy. Net debt: EBITDA, which is a key strength for NewRiver relative to the listed peer group due to our high yielding portfolio, has improved half on half during the year, reducing from 5.1x at the half year to 4.9x at 31 March 2023. This is a slight increase from the 4.6x seen in FY22 due to the EBITDA we received in FY22 from the Hawthorn pub business prior to its disposal in August 2021. Our interest cover ratio, which is increasingly important given the current interest rate environment, increased by 0.8x from 3.5x at 31 March 2022 to 4.3x at 31 March 2023 and therefore has significant headroom to our policy of 2.0x. This increase is due to the actions we completed in the prior year being the disposal of the Hawthorn pub business and the subsequent debt reduction, alongside the continued improvement in our underlying retail operations and the cash return we are currently able to generate by placing our surplus cash on deposit. Importantly, because our cost of drawn debt is fixed at 3.5% until March 2028, our interest cover is protected from the volatility in the broader credit markets and with retail income still recovering post-pandemic is well positioned looking forward. The Board has declared a final dividend of 3.2 pence per share, which brings the total dividend declared for the year to 6.7 pence per share, which represents 80% of UFFO per our dividend policy, which ensures that our dividend will always be fully covered, in-line with our financial policy. 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 <5% of gross income 3.4% (Poundland) Guideline 31 March 2023 Development expenditure <10% of GAV <1% Risk-controlled development >70% pre-let or pre-sold on committed N/A, no developments on site Conclusion Against a challenging backdrop, what is pleasing is that operationally the business continued to perform well throughout the year and we believe we have ended the year in a stronger financial position than at the start. This is thanks to the decisive actions completed during FY22 and the strategic progress we have made during FY23, which means we are now a leaner and more conservatively positioned business, with a clear focus on resilient retail which provides essential non-discretionary goods and services to consumers across the UK. It is also due to the decision we made a year ago to hold back on capital redeployment given the level of macroeconomic uncertainty that existed at the time, and has prevailed throughout the year. Looking forward from a position of financial strength and with the continued recovery in our underlying operations, we remain confident in our ability to deliver our medium term target of a consistent 10% total accounting return. Will Hobman Chief Financial Officer 14 June 2023 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 53 Strategic Report Strategic report Our ESG approach Advancing our approach to responsible real estate ownership Our ESG Journey through to 2022 2015 Formalised our four ESG objectives and established an official programme of engagement and improvement 2016 ESG considerations embedded into our business model and targets set against our ESG priorities 2017 2018 2019 2020 2021 2022 EPC Assessment roll-out and MEES risk exposure review. Established data management programme and initiated AMR and LED lighting rollout Energy and GHG emission targets set, installed 18 InstaVolt electric charging points, launched sustainable occupier fit-out guide and green lease clauses, established our well-being programme 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 100% renewable electricity across managed retail assets, increased our community funding in response to the Covid outbreak, first CDP submission, 12% reduction in GHG emissions 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) Achieved our target of zero waste to landfill; awarded ‘B’ rating for our second CDP disclosure; advanced our EPRA sustainability best practice award to Gold; and made our first gender pay gap disclosure. Ranked 1st place in the GRESB “Management” module out of a total 901 European participants; 90/100 for the GRESB “Development” benchmark; 70/100 GRESB score for “Standing Portfolio” Benchmark; Awarded “A” for alignment in GRESB’s independent TCFD assessment. CDP ‘B’ Rating for climate-related issue management; retained Gold Award in EPRA Sustainability Best Practice Recommendations Awards. Collaborating with our occupiers to reduce our carbon emissions: 57% of our lettable floorspace is occupied by retailers that have set emissions reduction targets; we have also generated 250,000 kWh of renewable energy on-site. Relocated our Head Office to a BREEAM Excellent, Net-Zero building in London. We continue to make great progress on our ESG Strategy, further embedding this vital commitment across the business, to fulfil our targets and help protect our people, planet and environment. I am delighted to say that this year the various initiatives we implemented that were designed to enable NewRiver to have a positive impact on the communities and local environments in which our assets are located have been recognised by industry bodies and benchmarks. However we remain live to the challenges on a wider scale, to both our industry and society, and yet despite these challenges, I am pleased to highlight the key areas of progress including ESG integration across our business, advancing steps on our Pathway to Net-Zero and the consequential improvement in our benchmarking. Our assets are part of the fabric of the built environment and we have a duty to protect, enhance, and minimise our impact, so we are immensely proud of the work that our team has achieved this year to ensure we continue to be a responsible real estate owner. Emma Mackenzie Head of Asset Management and ESG 54 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportImproving ESG Benchmark Performance Making progress on our journey to Net-Zero ESG Benchmark Performance Highlights • Developed a lifecycle carbon framework and targets for our Retained ‘B’ Rating from the CDP for our management of climate-related issues FY23 Pathway to Net Zero Highlights • Developed a lifecycle carbon framework and targets for our development projects • Externally verified our GHG disclosures to ISO 14064-3:2019 • Retained Gold Award in EPRA Sustainability Best Practice to enhance transparency and credibility Recommendations Awards • Relocated our Head Office to a BREEAM Excellent, • Achieved an “A” alignment rating in GRESB’s independent Net-Zero building TCFD assessment • Generated over 250,000 kWh of renewable electricity • Achieved our target GRESB score of 70/100 for the on-site at our assets “Standing Portfolio” Benchmark • NewRiver ranked first place in the GRESB “Management” module out of 901 participants across Europe • Achieved 90/100 score in the GRESB “Development” benchmark • Increased our FTSE Russell ESG Rating to 3/5 • Contributed data to the Net Zero Carbon Buildings Standard • Undertook research into the emissions reduction targets across our occupier base to inform our collaboration strategy • Achieved a like-for-like reduction in Scope 1 emissions from our consumption of natural gas Our Response to the Challenges One of the challenges in improving our ESG benchmark performance lies in the variation of assessment methodologies emerging from involuntary benchmarks. Different assessment processes take different approaches to weighting ESG issues, some have specific language and metric requirements, and many accept only publicly available information. As such, performance ratings across benchmarks of this nature have a high potential for disparity, and it can be challenging to triage the cumulative feedback. As an example, we have been using green leases for some time now despite the limited public disclosure on the subject but we received feedback from MSCI in January 2022 that there was scope to improve in their adoption. Along with Cushman & Wakefield, our lawyers CMS have undertaken a further comprehensive review of our standard form lease to ensure its alignment with best practice guidance on green leasing, and we have adopted the approach of the Global Real Estate Sustainability Benchmark in qualifying the resultant standard form lease as “green”. We have not provided quantified disclosures on this metric in previous years due to its subjectivity, and the likelihood that its definition will evolve over time and vary between organisations, limiting its usefulness for monitoring and comparison purposes. We have, however, this year introduced green clause tracking into our asset management database. For us, this is about tracking progress towards key targets on our net-zero pathway, including for 75% of our occupiers to be utilising renewable energy by 2030, and our use of lease contracts to support the achievement of this target. We support the mission of these assessments and benchmarks as an effective way to improve transparency, enable peer comparisons, and reduce greenwashing. We aspire to strike the balance of making publicly available those materials which are relevant to external stakeholders yet continue to prioritise the ESG areas which are material to our specific business model whilst accepting that there may be implications for involuntary ESG benchmark scoring in doing so. Our Response to the Challenges Whilst we progress our business towards a net-zero future we find the availability, accuracy and completeness of the required data to quantify carbon impact, challenging. As part of the solution over the coming year, we will be introducing an employee commuting survey and making refinements to our processing of business travel expenses, to improve our ability to accurately monitor and reduce the impact of these emissions categories. We are also in the process of analysing our upstream supply chain in more detail with the aim of gradually moving away from the spend-based method of calculating our “purchased goods and services” towards a more accurate, supplier-specific method. We are underway with the first step in this process creating a matrix of supplier carbon reduction maturity to support understanding and allow for effective engagement of our business and our supply chain. Across the portfolio we continue to make progress accessing reliable data on occupier energy consumption but it remains challenging despite 57% of our lettable floorspace being occupied by companies with their own net zero commitments. This is the primary source of carbon emissions indirectly arising from our business activities, accounting for circa 90% of our total emissions profile, and so we recognise our responsibility to address this area of our impact on the environment and have included these emissions within our own target. Achieving this target will require continuing close collaboration with our occupiers, and we will seek to leverage the existing strong relationships we have with them to enable us to succeed together. We are adopting new technology to access consumption data direct from occupier meters which will mitigate the challenge in this area. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 55 Strategic Report Our ESG approach continued Evolving ESG integration, risk management, and stakeholder engagement We are proud of the great progress and recognition our ESG strategy has achieved yet we recognise that there is a constant cycle of evolution and improvement to undertake in the delivery of a successful ESG strategy. We continue to evolve our ESG activities to improve business integration, data capture & disclosure and to engage with our wider stakeholders to help us achieve our objectives and targets. FY23 ESG Business Integration Highlights • Maintained our “zero waste to landfill” policy • Full MEES compliance achieved • Developed a supplier ESG performance evaluation process • Delivered or secured contracts for EV charging infrastructure at 88% of our surface-level car parks • Commissioned a portfolio-wide quantitative climate risk scenario analysis • Advanced our Diversity, Equity & Inclusion approach, policy and targets • Formalised a quarterly ESG performance review process for our Property team • Implemented recommendations from our staff satisfaction & wellbeing survey • Provided bespoke ESG training to our centre management teams Our Response to the Challenges To ensure our own employees, both Property and Finance, and site teams are continuing to learn the importance of, and impact they can have, in the success of our ESG programme we have carried out all staff ESG training throughout the year including an interactive session at our annual Centre Manager Conference, held this year at The Moor in Sheffield. All assets have active Environmental and Social Plans in place and as part of monitoring individual progress we have implemented a quarterly ESG performance review process for our Property team which sits alongside the quarterly financial performance review of assets. Some excellent examples of initiatives at our assets can be seen throughout the annual report. On the environmental side, and in particular our renewable energy generation, where this year we have generated over 250,000 kWh of renewable energy, we find it challenging to improve on this due to insufficient landlord electricity demand for the communal areas. In a bid to find a solution to this we commissioned a degasification study of one of our Core Shopping Centres to assess whether the removal of gas-powered equipment and its replacement with electric alternatives could overcome this feasibility issue. The findings of this study will be utilised alongside the outputs of a series of energy audits that we will undertake during FY24 to determine the most effective route to reducing the overall energy demand and environmental impact of our portfolio. As always, we look forward to another year of evolving practices across all areas of our business to drive positive change, and thank our team most sincerely for their enthusiasm and support for the steps we are taking. Emma Mackenzie Head of Asset Management and ESG 1. J Willis et al. (2023), the Greenwashing Hydra. 56 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Sustainable Development Goals (SDGs) NewRiver has committed to 11 of the 17 Sustainable Development Goals (SDGs). We have included case studies of various initiatives delivered throughout the year and we have highlighted within each one how they fulfilled the respective Sustainable Development Goals (SDGs) as set out in this key: Our Centre Teams helped to “Keep Britain Tidy” Craig Allen, Centre Manager at The Arndale Shopping Centre, Morecambe, 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, using biodegradable bin bags. We Retained our EPRA sBPR Gold Award 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. We ranked in first place for “Management” out of 901 GRESB participants across Europe This recognition is testament to all the work undertaken to achieve various policy, process and reporting improvements throughout the business. Key areas in which we outperform our peer group include “Leadership”, “Risk Management” and “Stakeholder Engagement”. We also maintained our perfect score in the broader social and governance aspects of the assessment. Supporting those affected by the Crisis in Ukraine The Company raised over £3,750 for Ukraine Aid and over £350 for the British Red Cross at a corporate level and across our portfolio as well as collecting essential items including blankets, toiletries, and clothing. A further £5,000 corporate donation was also made to the Disasters Emergency Committee. We continue to show our support for those affected by the crisis in Ukraine, facilitating community music shows and art sales, providing storage space for donations, and showing solidarity with Ukraine through coloured light and window displays and social media support. Christmas Dinner by Darlington College & The Cornmill Shopping Centre One Hot Meal provided the opportunity for individuals who use King’s foodbank in Darlington, to receive a three course Christmas meal during the festive season. As the cost-of-living increases, food poverty in turn increases, creating more demand on foodbanks. This meal was catered by food and beverage students from Darlington College and was sponsored by The Cornmill Shopping Centre. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 57 Our ESG approach continued Sustainability Accreditations and Commitments We use industry-recognised indices to track our sustainability performance: Accreditation or commitment 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 or equivalent Score: 70/100 Score: B We are committed to 11 SDGs addressing issues we can meaningfully impact 5th consecutive year reporting Score: 3.0 Observations We have improved our score year on year from 68/100 to 70/100 and once again achieved a perfect score in the Management module (30/30), ranking first place out of 901 participants across Europe. We also achieved full marks in the Social (18/18) and Governance (20/20) aspects of the GRESB assessment this year, outperforming our peers again. 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 are pleased to have maintained our ‘B’ score in FY23, continuing to be 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 5th consecutive year of reporting in alignment with them. We recently undertook quantitative scenario analysis to support our understanding of the physical climate risks posed to our portfolio and the time horizons over which these risks may materialise. In our most recent assessment, we received an overall ESG Rating of 3 out of 5, above the ‘Retail REIT’ average of 2.7 and ‘Financials’ industry average of 2.5, and an improvement on our score of 2.7 from last year. Our key strengths identified by FTSE’s assessment include Corporate Governance (5/5), Risk Management (4/5), Anti-Corruption (4/5), and Human Rights & Community (4/5). We have identified the following areas as opportunities for improvement: Pollution & Resources, Social Supply Chain and Water Security. Award: Gold Awards are given by the European Public Real Estate Association (EPRA) to listed real estate companies in recognition of excellence in the transparency and comparability of their ESG disclosures and we are proud to have maintained the top award status. ESG REPORTING PERIOD: This year we have updated ESG reporting period to the calendar year in order to facilitate the ISO 14064-3:2019 data verification process. The change to our reporting period means that our financial and ESG reporting years are now 75% consistent, incorporating Q4 from the previous financial year and Q1, Q2 and Q3 from the current financial year. This is clearly labelled throughout the report. 58 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportThis report therefore relates to our ESG performance during the calendar year of 1 January 2022 – 31 December 2022 which includes Q4 FY22 and Q1, Q2 and Q3 in FY23. Throughout this report, this reporting period is referred to as FY23. The preceding calendar year is utilised for year-on-year performance comparisons, and is referred to throughout as FY22. 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 sustainability 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, we also adopt the recommendations of the International Integrated Reporting Council (IIRC). 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 (refer to page 60) 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. About our ESG Performance Reporting Each year, our ESG reporting continues to evolve as our ESG programme matures. Having previously published a standalone ESG report alongside our Annual Report and Accounts (ARA), we now integrate our reporting 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 and proactively manage our data collection processes to ensure our stakeholders are provided with valuable insight into our ESG performance. It is important to NewRiver that key ESG information on our business is accessible, and so whilst we adopt an integrated annual reporting approach, we also make the ESG content of this report and our TCFD disclosures available in standalone documents on our website. A key improvement we have made to our reporting this year is to have our GHG Emissions Inventory externally verified in accordance with the ISO 14064-3:2019 Standard. Ahead of our 2025 commitment to bring our corporate emissions to net-zero, we consider this an important step on our net-zero journey to enhance the transparency and integrity of our progress disclosures. Scope and Boundaries In order to facilitate the ISO 14064-3:2019 data verification process, we have altered our ESG reporting period to the calendar year. We previously reported in direct alignment with our financial reporting year, however the resource requirements of the ISO 14064-3:2019 standard necessitated that we make this change in order to continue with our integrated reporting approach. In making this decision, we considered the following: 1. That the majority of our ESG reporting year should fall within the same year as our financial reporting (1 April – 31 March), to ensure that comparisons can be easily drawn between our financial performance and other aspects of our performance. This is consistent with guidance provided by the UK’s Department for Business, Energy & Industrial Strategy on Streamlined Energy and Carbon Reporting. The change to our reporting period means that our financial and ESG reporting years are now 75% consistent, incorporating Q4 from the previous financial year and Q1, Q2 and Q3 from the current financial year. 2. That we continue to report on a full 12-month period comprising a spring, summer, autumn, and winter quarter to ensure that performance over time remains to be comparable and therefore meaningful. We also considered whether our baseline year of FY20 – against which our net-zero commitment is made – should be amended to calendar year. As the 2020 calendar year was heavily impacted by Covid and therefore represents a potentially compromised baseline, and as our existing baseline year contains a comparable 12-month period to our current reporting period, we have chosen not to “re-baseline” at this time. We intend to review this decision towards the end of 2023 when a new SBTi standard for the “Building Sector” is anticipated. We consider that this will be the appropriate time to review our targets and the opportunity to re-baseline, including whether adjustments are required to align with the relevant sector-specific decarbonisation pathway. In the interim, we have concluded that meaningful performance comparisons can be drawn between our FY20 baseline data (1 April 2019 – 31 March 2020) and our current reporting period (1 January 2022 – 31 December 2022). 1. Limited assurance based on a data sample of 60% of each emissions category NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 59 Our ESG approach continued Our business model is underpinned by a committed ESG programme Used to infor m a n e p a h d s Our ESG activities ▼ Used to in f o r m a n d s h a p e External benchmarks and guidance Are applied through our business model Our ESG targets P r o g r e s s m e a s u r e d a g ainst g r e s s m easured against Key o r P To meet ▼ Our ESG objectives Disciplined capital allocation Leveraging our platform Flexible balance sheet Our ESG Objectives 1 2 3 Minimising our environmental impact Engaging our team and occupiers Supporting our communities 1 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 sustainability strategies and we typically pre-let our developments, allowing us to work with occupiers to ensure their requirements are met. 1 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. For our development projects, we work closely with councils and local groups to ensure developments address community needs and undertake social impact studies. 1 2 3 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 as applying this assessment when we consider any acquisition. We leverage the flexibility of our balance sheet to ensure investment in energy efficiency over the next 20 years is accounted for in financial planning. For our development pipeline, we seek to provide future-proofed community developments which minimise carbon lifecycle. Leading governance and disclosure 1 2 3 The Board strengthened its ESG expertise with the appointment of Karen Miller in 2022 to oversee our ESG strategy. 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. Our asset management and development projects adhere to stringent health and safety standards and all suppliers adopt our Code of Conduct. 60 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic Report Our Environmental and Social Targets In developing our pathway to becoming a net-zero business, we reviewed the original targets we set ourselves in 2018 and considered their consistency with our net-zero vision, therefore where previous targets did not support our heightened ambitions, they were displaced with our SBTi-approved (Scope 1 & 2) emissions reduction targets. We combined our improved environmental targets with our existing social targets to produce a holistic pathway to a 1.5-degree future which engages our stakeholders and delivers positive social impact. N N E Publicly commit to net-zero and set FY20 carbon emissions baseline. Achieve net-zero 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. S Achieve a 75% response rate to our occupier satisfaction survey. Biodiversity plans to be in place for at least 15% of our assets. Key N E S Net-zero targets UN SDG aligned Environmental targets UN SDG aligned Social targets 2021 2022 2025 2030 2040 2050 N E S N E N N E 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. 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. Achieve a 42% reduction (against baseline) in carbon emissions across our corporate activities and operational real estate, as required by the SBTi. 75% of occupiers transitioned to renewable energy supplies. Achieve net-zero for all operational emissions from the directly managed areas of our portfolio (Scope 1-3). Achieve net-zero in terms of operational and embodied emissions (Scope 1-3) across our portfolio, whether space is directly managed, or managed by third parties. Over 25% of landlord energy is generated on-site from renewable sources. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 61 Our ESG approach continued ENVIRONMENTAL 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 & Social Implementation Plans, which allow us to monitor our progress and accelerate action where required. Progress Towards Our Near-Term Environmental Targets Target Target Year % Complete FY23 Progress Report 100% of waste generated at our managed properties is diverted from landfill 100% of landlord electricity is procured from renewable sources 2022 100% We are pleased to have achieved our target of zero waste to landfill in FY22 and maintained this policy throughout FY23. 2022 100% We transitioned all landlord electricity supplies across our portfolio to Renewable Energy Guarantees of Origin (REGO) backed tariffs in 2020. 85% recycling rate at our managed properties 2025 74% Electric vehicle charging points installed across all retail properties with a surface-level car park 2025 41% 2025 0% 50% improvement (from a 2020 baseline) in landlord on-site renewable energy generation Considering only non-organic waste, our FY23 recycling rate was 63%, consistent with FY22’s rate. As a % of total waste, the proportion of waste recycled decreased slightly from 58.8% to 57.9%. The proportion of waste incinerated also decreased slightly from 35.1% to 34.6%. Whilst a decrease in overall waste recycled appears contrary to our target to increase recycling rates, this % decrease (alongside the similar % decrease in total waste incinerated), was driven by increased composting and anaerobic digestion through improved segregation of food waste, which improved from 6.0% in FY22, to 7.6% in FY23. We currently have EV charging installations at 7/17 of our surface-level car parks, with contracts in motion to deliver installations at a further 8 sites, which will bring our progress rate to 88%. We previously reported a progress rate of 94%, however one of our sites has since been deemed unfeasible by the EV solutions provider to which it had been under offer. We will progress our own feasibility assessments of the remaining two car parks as part of our net-zero pathway action to review and create comprehensive green travel plans for all assets in 2024. Renewable energy generation at the assets within our operational control boundary has decreased by 15% between 2020 and 2022. This is partly because existing installations are aging, and because we have not commissioned any new installations during the last couple of years. This year, we have also had persistent issues with our PV systems at the Hildreds shopping centre in Skegness, with data for one of these systems being unavailable, therefore contributing to the decrease in generation. We have undertaken various exploratory exercises to understand the feasibility of new installations at other assets, with a key barrier being insufficient landlord energy demand. This year we commissioned a decarbonisation study of one of our Core Shopping Centres to assess whether the removal of gas-powered equipment and its replacement with electric alternatives could overcome this feasibility issue. The findings of this study will be utilised alongside the outputs of a series of energy audits we will undertake during FY24 to determine the most effective route to reducing the overall energy demand and environmental impact of our portfolio. 2025 N/A Building certifications targeted, and lifecycle carbon assessments undertaken, for 100% of our new construction and major renovation projects In the 12 months to 31 December 2022 we completed one major development project which comprised of an extension to the former Next unit to create a new Aldi store at our retail park in Dewsbury. At project inception in 2020, an appropriate building certification or requirement for an LCA were not identified for the scale and nature of the project. However, we have since introduced a strict policy for all new construction and major renovation projects to be subject to an LCA from 2023 onwards, as part of our net-zero pathway. 62 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportEnergy 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. You can read more about our commitment and delivery strategy in our Pathway to Net-Zero, which can be found in the Sustainability section of our website. 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 calendar year, 1st January 2022 – 31st December 2022, but consistent with the rest of this report, is referred to as FY23. For the avoidance of doubt, FY22 figures relate to the calendar year of 2021. 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. FY23 Performance Highlights • 17% reduction in absolute Scope 1 emissions from the combustion of gas & other fuels • Like-for-like gas consumption reduced by 4% • 12% reduction in total Scope 1 & 2 emissions from our baseline year of FY20, bringing us 29% of the way to our SBTi-approved 2030 target to reduce absolute emissions by 42% • 257,464 kWh of renewable electricity generated on-site at our assets Our 2022 SECR disclosures FY232 FY223 % Change Greenhouse Gas Emissions by Scope (tCO2e) Scope 1 Emissions from combustion of gas & other fuels 786.3 942.2 Scope 2 Location-based emissions from electricity purchased for own use 2,029.2 2,315.4 Scope 2 Market-based emissions from electricity purchased for own use 0 0 Scope 3 Emissions from purchased goods & services, capital goods, fuel & energy-related activities, waste, business travel & employee commuting, and downstream leased assets 24,784.8 30,556.6 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) 27,600.3 33,814.2 25,085.8 30,895.9 0.017 0.018 Energy use from the combustion of gas and other fuels 4,307,514 5,144,303 Energy use from consumption of electricity purchased for own use 10,493,433 10,904,824 Energy use from business travel 11,069 7,587 2. 12-month period ending 31 December 2022 3. 12-month period ending 31 December 2021 * Refer to Data Notes on p.72 -17% -12% 0% -19% -18% -19% 0% -16% -4% 46% NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 63 Our ESG approach continued Energy Management and Efficiency Measures Environmental & Social Implementation Plans are 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 they are 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 86% over the course of FY23. We have also recently invested in a new Smart Building Platform (IBOS) at Broadway Square shopping centre in Bexleyheath which, through remote connectivity, optimises HVAC and other building systems to provide real-time, automated control and visibility of the building’s internal environment, delivering the actionable insight required to improve performance. 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 have passenger lifts, energy efficient kinetic motors are being installed where possible. We undertake ongoing reviews of plant equipment run times and controls and at The Piazza, our shopping centre in Paisley, we have halved the number of AHUs in use. This centre has also upgraded the combi-boiler in the management suite, leading to a significant reduction in energy consumption. Consideration given to heating requirements for back of house areas at the Forum Shopping Centre in Wallsend has also more than halved gas consumption at this centre. Data Notes Reporting Period Boundary Reporting Method Emissions Factor Scope 3 emissions Our GHG emissions performance disclosures relate to the calendar year of 2022 (referred to as FY23). Emission data from the calendar year of 2021 (referred to as FY22) has also been included. We have used the Operational Control method to outline our carbon footprint boundary. Emissions arising from occupiers’ energy usage are not included in our Scope 1 and 2 reporting boundaries, but are reported in Scope 3 as downstream leased assets. Our Operational Control boundary excludes assets owned by JV partnerships, as well as assets where we act only in an advisory capacity. 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 2022 (FY23) reporting are from the Defra greenhouse gas reporting tool 2022 and the factors and conversions used for 2021 (FY22) reporting are from Defra’s 2021 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, capital goods, fuel and energy-related activities, waste and water, business travel, employee commuting and downstream leased assets. Intensity Level For intensity level reporting, we have used the directly 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. Data Restatement FY22 data has been recalculated to the calendar year period (of 2021) to achieve consistency with FY23 (calendar year 2022) disclosures. Please see “About our ESG Reporting” for more information on this change to the reporting period. 64 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportOur Corporate Environmental Performance Measures NewRiver occupied 16 New Burlington Place as our head office until mid-July 2022. In April 2022, we took occupation of 89 Whitfield Street as our new head office and entered a fit-out period of circa 3 months, before we officially moved in mid-July 2022. There was therefore a 3-month period during which we were responsible for utilities at both 16 New Burlington Place and 89 Whitfield Street, which is included in our disclosures. 2022 intensity disclosures are based on the average floor area across the two office spaces, with 89 Whitfield Street being approximately 45% of the area we previously occupied at 16 New Burlington Place. There were no waste collections for NewRiver at 89 Whitfield Street during the fit-out period. EPRA Code Performance Measure Unit(s) of Measure Boundary % of data estimation Absolute Performance (Abs) FY23 FY221 % Change Elec-Abs DH&C-Abs Electricity consumption1 Annual kWh 0% 31,932 34,214 -7% District heating & cooling Annual kWh Our corporate offices are not connected to district heating & cooling Fuels-Abs Fuel consumption1 Annual kWh 24,832 41,009 Energy-Int Energy intensity4 kWhelec-eq/m2/yr See footnotes GHG-Dir-Abs Scope 1 emissions Kg CO2e GHG-Indir-Abs Scope 2 emissions (location-based) Kg CO2e 0% 82 4,568 6,175 76 7,511 7,265 -39% 8% -39% -15% Scope 2 emissions (market-based) Kg CO2e 0% 0 0 0% Scope 3 emissions3 Kg CO2e GHG-Int Scope 1 and 2 emissions Kg CO2e/ m2/ year Water-Abs Water consumption1 Annual m3 See footnotes Water-Int Water intensity M3 consumption/ m2 Waste Kg total waste2 Kg Recycling rate % total waste recycled 0% 2,476 17.63 166 0.27 1,072 51% 3,502 17.61 258 0.31 2,285 45% -29% 0% -36% -11% -53% 13% 1. Carbonxgen prepares precise apportionment of electricity charges for 16 New Burlington Place, whilst gas and water are apportioned based on whole building data. We have apportioned gas and water consumption based on the percentage of direct NewRiver usage of the total electricity consumed on site, which over the relevant months was 4%. 2. Waste data for 16 New Burlington Place is prepared on a whole building basis. We have apportioned waste based on the floor area apportionment attributed to NewRiver for service charge purposes (21%). 3. Scope 3 emissions as presented above include the emissions associated with our occupation of our corporate offices, and so include water consumption, waste generation, and indirect emissions from our consumption of energy. 4. kWh elec-eq/m2/yr is calculated using the REEB Benchmark 2020. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 65 Our ESG approach continued Our Portfolio Environmental Performance Measures -4% 0% -4% -8% 0% -26% -7% 31% 31% 15% 15% 11% 15% Water-Abs, Water-LfL Water-Int Waste-Abs, Waste-LfL Cert-ToT EPRA Code Performance Measure Electricity consumption Elec-Abs, Elec-LfL DH&C-Abs & LfL Fuels- Abs,Fuels-LfL Energy-Int Unit(s) of Measure Annual MWh % of Data Estimation Absolute Performance (Abs) FY22 FY23 Like-for-like Performance (LfL) FY23 FY22 % Change 0.4% 10,462 10,871 10,262 10,124 1% District heating & cooling Annual MWh None of our properties were connected to or benefited from district heating & cooling Fuel consumption Annual MWh 0.1% 4,283 5,103 4,109 4,268 Energy intensity kWhelec-eq/m2/yr 0.077 0.078 0.080 0.080 GHG-Dir-Abs Scope 1 emissions Tonnes CO2e GHG-Indir-Abs Scope 2 emissions (location-based) Tonnes CO2e Scope 2 emissions (market-based) Tonnes CO2e Scope 3 emissions Tonnes CO2e GHG-Int Scope 1 and 2 emissions Tonnes CO2e/ m2/ year 782 935 2,023 2,308 750 1,984 782 2,150 0 0 0 0 751 0.016 893 0.017 607 0.017 819 0.018 Water consumption Annual m3 4.1% 57,540 45,411 56,545 43,291 Water intensity m3 consumption/ m2 0.33 0.24 0.34 0.26 Tonnes total waste 0.8% 3,253 2,919 3,249 2,818 Tonnes diverted from landfill Tonnes waste to energy Tonnes recycling Type and number of sustainably certified assets Tonnes Total number by certification/ rating/ labelling scheme 0.8% 3,253 2,919 3,249 2,818 1.4% 1,124 1,026 1,120 1,006 0.5% 1,882 1,718 1,881 1,636 Please see page 68 for a detailed breakdown of this performance measure. 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. Scope 3 emissions relate to the emissions included in our 2040 net-zero target, which are those arising from the directly controlled areas of our assets (i.e., waste, water, and upstream emissions and transmission & distribution losses from energy consumption). We have chosen to include these categories only to provide a clear performance comparison, as all other Scope 3 categories are otherwise difficult to distinguish when collated with “downstream leased assets”. 4. Absolute and like-for-like asset-level performance measures include only landlord-procured energy/water. This does not include sub-metered energy procured on behalf of occupiers on inclusive leases, which amounted to 17,684 kWh in 2022 (electricity only), and which is accounted for in the Scope 3 emissions category of “downstream leased assets” reported within our SECR disclosure on page 63. 5. “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 and water 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 variability of consumption throughout the year, any unknown consumption was estimated using seasonal trends. 6. As our portfolio is comprised of entirely retail properties within the UK only, we do not undertake segmental analysis. 7. Our environmental and social performance data has been collated and checked by Cushman & Wakefield. 66 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportA Review of Our Performance In FY23, we saw a 4% decrease in like-for-like gas consumption across our portfolio, equating to a CO2e saving of 26 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 saw that some centres’ energy consumption benefited from a milder winter quarter in 2022. Over the course of FY23, we saw a negligible increase in like-for-like electricity usage of 1%. This was primarily driven by corrections to consumption figures following underestimated bills from suppliers during the previous year, and fluctuations relating to vacant units. Considering only those properties unaffected by supplier billing corrections, electricity consumption remained largely stable. Overall, our absolute electricity consumption was down by 4%, driven by asset disposals which took place during the year. This was also the key driver of the overall reduction in Scope 3 emissions, as downstream leased assets make up the vast majority of this emissions category. We have switched our gas supplies to a carbon offset tariff4, to support with further reducing our environmental impact ahead of our target to bring these emissions to net-zero. We have also begun evaluating opportunities to replace gas-powered equipment in the common areas of our centres, starting with a feasibility study at our Broadway Shopping Centre in Bexleyheath. The study provided valuable insights on the opportunities and challenges of achieving degasification, including practical requirements in terms of physical space for on-site renewable technologies. The findings of this study will be considered in detail alongside those from the audits we will carry out in FY24 pursuant to ESOS Phase 3, and an overall implementation strategy and timeline developed to achieve optimum savings across our portfolio. Refer to page 83 for more detail In terms of our Corporate emissions, we saw a 28% decrease in emissions arising from our consumption of energy and water, and waste generation, as a result of our move to our new BREEAM Excellent5 head office location. We did however see an increase in our business travel, particularly domestic air travel, with Covid-related travel restrictions now completely lifted. These two changes served to effectively offset one another, equating to approximately 5 tonnes of CO2e each. 4. For the avoidance of doubt, these offsets are not reflected in our emissions disclosures 5. In construction Electricity Consumption (Portfolio) 10,462 -4% 10,871 FY22 FY23 2,023 Gas Consumption (Portfolio) 5,103 4,283 -16% FY22 FY23 Total Portfolio Scope 1 & 2 GHG Emissions (absolute) 782 FY23 2,023 -16% -12% 935 FY22 2,308 FY22 FY23 Total Portfolio Scope 3 GHG Emissions Performance (absolute) 751 -16% 893 FY22 FY23 Key % change NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 67 Our ESG approach continued 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. In England & Wales, the Minimum Energy Efficiency Standards (MEES) now require that all properties, where valid EPCs exist, must have an asset rating of “E” or above to be lawfully let. Previously this requirement only applied to new tenancies, however it was extended to cover existing (non-domestic) tenancies on 1 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. This excludes recently sold assets for which we acquired new EPCs for the purposes of sale. We are pleased to have achieved full compliance with the 1 April 2023 MEES deadline across our operational control portfolio, with the single “F” asset rating shown below (England & Wales) relating to a vacant unit pending redevelopment. We also have further certificates pending covering over half of those units currently in the category of having no/expired EPCs. Draft ratings have been issued for c.40% of these to date - currently undergoing Elmhurst’s quality control requirements due to the volume of certificates pending lodgement - with the draft ratings indicating that we can expect 96% of these to be rated A-C. Our assessors do not anticipate any F-G ratings amongst these certificates. Region A+ England & Wales Northern Ireland Scotland Total 0 0 0 0 A 5 0 0 5 B C 104 209 2 0 15 14 D 175 11 19 106 238 205 E 94 3 28 125 F 1 0 10 11 G 0 4 14 18 No/ Expired EPC 286 35 85 406 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” (50%), and a lower proportion of certificates rated “F” or “G” (5%). Our programme of EPC assessments and Minimum Energy Efficiency Standards (MEES) risk reduction has ensured we can continue to let properties lawfully, protecting the portfolio against potential compliance-related risks to value. EPC Performance NewRiver Retail Portfolio (E&W) in Comparison to National EPC Register 35 30 25 20 15 10 5 0 A+ A B C D E F G National database* NewRiver Portfolio * National EPC database ﬁgures correct as of March 2023 68 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportWater Performance Summary Waste Performance Summary FY23 Performance Highlights • Water efficiency measures installed at various sites, including water re-use in connection with both irrigation and cleaning • We have begun switching our water meters to smart meters • Our energy broker, who manages our water meters, has upgraded their water validation systems to improve the data we receive on our consumption FY23 Performance Highlights • We maintained our policy to divert 100% of our waste from landfill • Our recycling rate was 63%6, bringing us three quarters of the way to achieving our 2025 target of 85%. • 65% of total waste generated avoided incineration. Waste that was incinerated benefited from energy recovery. Narrative on FY23 Performance In FY23, we unfortunately saw a 31% increase in like-for-like water consumption across our portfolio, in part as a result of a considerable underground leak identified at the Abbey Centre, Newtownabbey. Excluding this isolated incident, water consumption across the remainder of our portfolio increased by 18%, with a key driver including increased trading of our F&B retailers as a result of improved customer confidence owing to the passage of time since the worst of the Covid pandemic. Water efficiency measures installed during the year included: • a leak detection system at the Ridings Centre, Wakefield • installation of water butts to the roof of the Cornmill Centre, Darlington for irrigation purposes • re-use of rainwater through deionised reach & wash window cleaning system, to clean the glazed roof areas of the Avenue 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 which seek to contribute to reducing our water consumption. Whilst the leak we experienced at the Abbey Centre was unfortunate, this is a lesson that will be drawn upon in our evaluation of leak detection systems as part of these plans going forward. Disposal Route 4.4% 3.2% 28.8% 34.6% Narrative on FY23 Performance In FY237, the waste generated across our like-for-like portfolio increased by 15%, largely attributable to the re-opening of our occupiers’ stores following successive periods of closure during 2021, when total waste generated reduced by a third compared with FY20. Considering only non-organic waste, the % split of waste recycled (63%) and incinerated (37%) remained consistent. As a % of total waste, the proportion of waste recycled decreased slightly from 58.8% to 57.9%. The proportion of waste incinerated also decreased slightly from 35.1% to 34.6%. These decreases occurred in favour of an increase in the proportion of waste composted and/or sent to an anaerobic digester, which improved from 6.0% in FY228, to 7.6% in FY23. Whilst a decrease in overall waste recycled appears contrary to our target to increase recycling rates, this % decrease (alongside a similar % decrease in total waste incinerated), is driven by increased composting and anaerobic digestion through improved segregation of food waste. However, looking only at non-organic waste, our recycling rates have remained stable. Improving waste sorting facilities and our understanding of barriers to further recycling have therefore been identified as priority areas for our centre management engagement & training, which will take place later this year. 6. based on total non-organic waste 7. Calendar year of 2022 8. Calendar year of 2021 Waste Type 0.48% 0.9% 7.6% 60.9% 16.1% 0.02% 1.5% 0.6% 11.9% 29.0% Waste to incineration with energy recovery General waste Paper/Cardboard Waste to dedicated recycling facility Dry mixed recycling Wood Waste to mixed recycling facility Cans & Plastics Mixed metals Waste to composter Waste to anaerobic digestion Glass Food waste Other NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 69 Our ESG approach continued SOCIAL Maximising our Social Impact Maximising our social impact means taking 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 UK. Progress Towards Our Near-Term Social Targets Target Year Progress % Per year N/A Target Support a minimum of 5 industry/ career engagement activities for young people per year FY23 Progress Report This is a new target which we have set ourselves this year following the expiration of our previous work experience offering target. Last year, we disclosed that we had not fulfilled our target to provide work experience placements at 50% of our assets, as our centre teams found it particularly challenging to meet the supervision requirements of local school engagement programmes. As such, we have 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 (TARA). Examples of initiatives which we will support in pursuit of this target include: employment fairs, interactive days/workshops in schools, site visits at our assets, and work experience opportunities. So far, we have contributed to TARA’s book competitions and provided meeting space for their board, and we look forward to becoming actively involved in face-to-face engagement activities with the young people they aim to inspire into the real estate industry. 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 2022 100% We are pleased to have exceeded our target, having achieved a 100% response rate to our 2022 staff wellbeing survey. 2022 100% 2022 100% The introduction of asset-level Environmental & Social Implementation Plans across our portfolio means that all centres have an action plan in place for ongoing community engagement activities, with the Quiet Hour initiative forming a key component of these plans. Some centres experienced Covid-related disruptions to their Quiet Hours, however most were able to re-instate them by the end of 2022. All centres have now re-instated their Quiet Hours. In FY23, NewRiver staff provided 94 hours of volunteer support to the Trussell Trust, with volunteering sessions typically lasting around five hours each. Further volunteering support was provided to charities close to individual staff members, amounting to 108 hours. Overall, NewRiver staff therefore participated in 40 volunteering sessions, which equates to an 82% participation rate. We have therefore achieved this target. The NewRiver team also supported their chosen charities in other ways, such as through fundraising activities. For example, over £900 was raised for Macmillan Cancer Support through sponsored exercise challenges. Achieve a 75% response rate to our occupier satisfaction survey 2025 50% 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. Biodiversity plans to be in place for at least 15% of our assets 2025 20% 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 to assess both biodiversity enhancement opportunities and landscaping improvements. Considering only externally produced biodiversity plans, our current progress against our target is 20%. 70 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportMonitoring Implementation Needs Assessment How we engage our team Staff Training Action Planning Policy Development FY23 PERFORMANCE HIGHLIGHTS Our most recent staff survey returned an overall satisfaction score of 71%, with over 80% of staff identifying that they: • Resonate with the company values • Frequently receive useful career and personal • Are satisfied with the information we provide on mental health development feedback, recognition and encouragement from their line managers • Consider their mood at work to be generally positive • Find it easy to concentrate in the office • Are confident in our zero-tolerance approach environment provided to discrimination • Feel supported by their team members and • Feel that we are flexible towards family commitments enjoy working with them • Are challenged and excited by the work they do at NewRiver 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. Monitoring and needs assessment take place both through the employee appraisal process and anonymously via our annual staff survey. Our internal staff survey is developed in partnership with, and responses are independently analysed by, Cushman & Wakefield. 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. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 71 Our ESG approach continued We received recommendations from Cushman & Wakefield following our most recent survey, which we have considered and actioned as follows: Recommendation Action taken 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 The flexible working policy has been clarified with the team at various points since its inception, with the formalisation of a policy for all staff to work 3 days per week in the office and 2 days flexibly. Days “on site” at our assets count as “in office” days, to maintain the intended balance. The policy allows individuals to choose which days they work in office, subject to the needs of the business and their teams. The move to our new flexible working environment at 89 Whitfield Street also engenders the hybrid working approach with hot desking, with fewer desks than head count underpinning the business’ expectation and understanding that the entire team works flexibly. Communication is enhanced by the maintenance of a “Days in the Office” diary so everyone can see the work choices their team members have made. Consider opportunities to broaden the 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 We have made further investment in training with a Senior Leadership Team Workshop and Away Day, facilitated by an external consultant. The workshop utilised Myers-Briggs Type Indicator profiling and then discussion around how that profiling can be leveraged to improve communication and leadership styles. Bi-weekly staff meetings covering a variety of topics are now fully operational and regularly delivered by external speakers to provide insight and training on topical issues and industry trends. We have also explored the opportunity for further training with our Apprenticeship Training Provider (Multiverse), offering the opportunity to all staff to take advantage of upskilling courses, including Data Literacy and Business Transformation. These courses are suitable for varying levels of experience and cover topics such as managing change in a digital world and leveraging data management tools to develop narratives and support decision-making. Presentation Skills Training will also be offered to all staff at the start of FY24. This will cover both virtual presentation as well as face to face skills training. With the move to our new office at 89 Whitfield Street which provides staff with access to the building’s communal working space, offering the opportunity to step away from the main office environment and secure some quiet time, we have chosen not to allocate dedicated “focus time” in the diary at this stage. We will continue to monitor views on whether our current solution is effective, and reconsider Cushman & Wakefield’s recommendation if required. The new offices are based on a hot desking principle with ample breakout spaces, both informal and formal. The feel of the new office is relaxed and non-corporate with comfortable chairs, lots of plants to enhance wellbeing. An on-site café is also available for a quick coffee catch-up or lunch, and is well-utilised by NewRiver staff. We also have a wellness team which organises various activities alongside promoting participation in the regular timetable of activities arranged by Derwent London (our landlord) which includes pop-ups and competitions, such as a table tennis tournament which we recently won! 72 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportHelping our Team embed our ESG Programme into the business ESG training is delivered to our team by our external consultants on an annual basis. Training sessions cover a range of topics including industry initiatives and trends, updates on our performance, and support for implementing any newly introduced policies and processes. Annual training sessions extend to our on-site teams, who receive training specific to the nature of their roles. We also run more informal sessions on an ad-hoc basis throughout the year, to provide specific updates and ensure timely implementation of new processes as they are established. Recent examples include a morning coffee break session providing tips for understanding our personal carbon footprints and how to make more environmentally conscious choices at home, as well as training on an improved MEES risk management process. The latest process improvements we have made to further our work to embed our ESG objectives in all business functions include: Process Quarterly Property ESG Performance Monitoring Supplier Vetting & ESG Evaluation Business function Asset Management Finance & Procurement Description Introduction of sustainability KPIs to be monitored by asset managers across our core portfolio on a quarterly basis, for inclusion in existing reporting processes. KPIs consider issues such as recycling rates, AMRs, green lease clauses, occupier engagement, and the delivery of initiatives through our Environmental & Social Implementation Plans. Intention To embed ESG performance monitoring into broader asset performance monitoring Improvements to our processes for vetting suppliers, in particular to include consideration of their approach to key ESG issues which are important to our business. The new process will enable an evaluation of potential suppliers’ approaches to sustainability, so that we can assess the level of alignment between our objectives and our spend on goods & services. Enable understanding of supplier ESG performance; Support our move away from the spend-based method of calculating the carbon emissions that arise from these activities. We continue to include personal ESG targets in employee goal setting and performance appraisals. We encourage employees to include targets which support our corporate objectives, but also provide the flexibility to set personal targets that address issues which are important to them or their role. Members of senior management also have specific ESG-linked performance goals connected to their remuneration. We Continue to be Recognised by the CDP for Managing Climate Issues 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 and 2022 benchmarking processes, 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. We achieved “Global Sector Leader” Status in the GRESB Development Benchmark NewRiver has been recognised by GRESB as a Global Sector Leader in the category of hotel development, following the completion of our Romford Premier Inn project which achieved BREEAM New Construction certification. This development delivered on our key ESG targets, including to measure and reduce embodied carbon through the design process. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 73 Our ESG approach continued Our Commitment to Diversity, Equity & Inclusion (DEI) 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 an active home life. Equal Opportunities We have recently updated our Equal Opportunities policy to provide a comprehensive standalone policy statement which clearly communicates: • What we regard as acceptable and unacceptable behaviour at work; • The rights and responsibilities of those to whom the policy applies; • The procedure for dealing with concerns or complaints; • How we will deal with any breach of our policy; • Who is responsible for the policy; and • How it will be implemented, monitored, and reviewed. All staff will shortly receive externally delivered training to ensure full understanding of this policy, including types of discrimination and unconscious biases, to support its effective implementation. Board Diversity As part of the policy review process which produced our updated Equal Opportunities Policy, we have also developed a new Board Diversity Policy, which includes the following objectives: • At least two members of the Board are female, with a long-term aspiration to achieve no less than 40% female representation on the Board; and • In the longer-term, at least one director will be from a non-white ethnic minority background. Whilst recognising that: • This balance may not be achieved until further Directors are replaced at the end of their tenure; • On an ongoing basis, periods of change in Board composition may result in temporary periods when this balance is not achieved; • All appointments must continue be made on merit; • And new appointees embody the core values of the Group. Gender Pay Gap Last year, we took the decision to begin publishing 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, however we are pleased to provide our disclosure below in support of our commitment to DEI. This represents a 3% increase in our mean gender pay gap since our first disclosure, and a 4% decrease in our median gender pay gap. These fluctuations are driven by differences in the roles and seniority levels of male and female leavers and joiners to NewRiver over this period. 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. DIVERSITY AT A GLANCE (January 2022 - December 2022)(1) Ethnic diversity(2) 17% Board Male:Female ratio 71:29 FY22: 71:29 Mean gender pay gap 34% FY22: 30.6% Exco Male:Female ratio 60:40 FY22: 60:40 Median gender pay gap 29% FY22: 33.2% Company Male:Female ratio 53:47 FY22: 51:49 1. Comparables refer to previous reporting period for FY22, 1 April 2021 to 31 March 2022. 2. Not disclosed in FY22 74 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportEmployee Social Performance Measures EPRA Code Performance Measure Unit(s) of Measure Boundary FY231 FY222 Diversity-Emp Employee gender diversity Percentage of employees, Board diversity NewRiver Board 29% female/ 71% male 29% female/ 71% male Percentage of employees, All employee gender diversity 47 % Female/ 53% Male 49% female/ 51% male — Employee racial diversity Percentage of employees, All employee racial diversity 84% White/9% Asian/1% Caribbean/ 5% Mixed/1 % Moth 88% White/ 8% Asian/ 2% mixed/ 2% Moth Diversity-Pay3 Gender pay ratio Ratio of gender pay, mean/median 34% Mean/ 29% Median 30.61% Mean/ 33% Median Emp-Training Employee training and development Average hours/employee 26 23 Employee training, subscriptions, surveys, and online platforms Total £s invested £142,492 £159,202 Employee health & safety training Average hours/ employee 2 0 Emp-Dev Employee performance appraisals Percentage of employees 100% 100% Emp-Turnover Total number of new hires Total number NewRiver direct employees Total number of leavers Total number Rate of new hires Percentage Rate of employee turnover Percentage — Temporary staff Percentage of employees who are contractors or temporary staff H&S-Emp Injury rate Per 100,000 hours worked Lost day rate Per 100,000 hours worked Absentee rate Days per employee Fatalities Total number — Instances of non-compliance with labour standards Total number 2 9 4% 15% 0% 0 0 0 0 0 5 5 10% 0% 0% 0 0 0 0 0 1. 12-month period ending 31 December 2022 2. FY22 figures include the employees of Hawthorn Leisure 3. 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. We calculate gender pay gap based on the difference between the average annual salaries of men and women, excluding bonuses and other benefits. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 75 Our ESG approach continued 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 2022 survey was offered to 100% of our occupiers, and we received a total of 415 responses. Our next survey will be undertaken in the autumn of this year. We also received some helpful, constructive feedback which we would like to take this opportunity to respond to: Feedback Item NewRiver Response 60% of retailers would be interested to hear more from us on the overall sustainability performance of their individual centre. We are working with our energy brokers to create a platform capable of storing and presenting sustainability performance data for both the landlord and occupier areas of our portfolio. The success of this solution will require collaboration with our occupiers, and we are hopeful that this will deliver helpful insights to support a reduction in our collective environmental impact. Our retailers advised us that they would welcome more opportunities to charge electric vehicles. We currently have 123 new charging bays in the pipeline for near-term delivery across our portfolio. We will also review further opportunities as part of the Green Travel Plan milestone on our net-zero pathway (2024). 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. KEY INSIGHTS from our 2022 survey include: 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 89% of respondents are satisfied with the management of cleaning and waste in common areas 82% of retailers agree that improving the sustainability performance of their business is important, with over 64% rating it as “very important” 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 Most of our occupiers are satisfied with the sustainability initiatives we implement at our centres 76 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportCarving a collective pathway to Net-Zero This year, to inform our occupier engagement strategy as part of our journey to becoming a net-zero carbon business, we have undertaken a review of our occupiers’ sustainability commitments and emissions reduction ambitions, to understand current levels of alignment and identify key areas in which to focus our engagement efforts. In reviewing occupier commitments, we were encouraged to learn that 57% of our portfolio by floor area is occupied by retailers who’ve already set emissions reduction targets, with a further 3% having disclosed that they are in the process of developing targets1. Of the 57% occupied by retailers with existing commitments, 70% is occupied by BRC Net-Zero Roadmap signatories. These organisations have committed to work together with other retailers, suppliers, government, and other stakeholders to bring the UK retail industry’s emissions to net-zero by 2040. Occupier carbon emission reduction targets We were very pleased to learn, therefore, that the majority of our occupiers share our sustainability vision. This exercise was also helpful to us in understanding key areas in which we might be able to offer insight and learnings to our occupiers as we work to achieve our own net-zero targets. In particular, we hope to be able to support our SME occupier base on this journey. Having formalised our policy and framework for measuring embodied carbon across our development and major refurbishment projects, including lifecycle carbon targets reflective of industry best-practice guidelines, we will shortly be providing guidance to our occupiers for selecting materials in the fit-out and property maintenance processes which reduce the embodied carbon impact of works. 1. Correct as of September 2022 Commitment in development No Commitment Commitment Made Occupiers committed to BRC 40% 57% 70% 70% 3% Our Partnership with The Trussell Trust In FY23 our support for the Trussell Trust provided: 158.5 hours of volunteered support, with a total value of £2,550* 4.5 tonnes of food donations, once again this equates to approximately 59,300 portions or £8,900 worth of pasta, enough dinners for.... 40 families of 4 for a whole year £125,633 of direct monetary donations in FY23 £66,320 raised by over 30 NRR team members running 10k * Based on the national TOMs Framework proxy value for voluntary hours donated to support VCSEs (excluding expert business advice) of £16.09 per hour We continue our important partnership with The Trussell Trust, donating direct funds, time and physical space to help the charity work toward its vision for a UK without the need for food banks. 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 June 2022 over 30 NewRiver team members each ran 10km raising Trussell Trust donations 2018-2022 Per £000 £66,320, well exceeding our target of £30,000, for the Trussell Trust. Trussell Trust donations 2018-2022 Per £000 6 7 1 6 7 1 2 9 2 9 2019 2020 2021 4 2 1 4 2 1 2023 8 5 8 5 2022 £450k of direct monetary donations to date since our partnership with the Trussell Trust began in June 2019 2019 2020 2021 2022 2023 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 77 Our ESG approach continued AT OUR CENTRES Supporting our Communities Supporting impactful local causes through the position we hold in our communities has always been central to our culture and strategy of creating shared value for our stakeholders. In 2022, we 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. 598 hours spent by on-site staff supporting community initiatives £87,124 Monetary donations raised by aggregate charity fundraising activities 259 social, community or charitable initiatives supported Asset Social Performance Measures EPRA Code Performance Measure Unit(s) of Measure Boundary H&S-Asset Asset health and safety assessments Percentage of assets 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 FY23 100% FY22 100% 0 0 0 – Comty-Eng Community engagement, impact assessments and development programmes Percentage of assets 100% 100% A Mission for a Merry Christmas Locks Heath Shopping Village in Fareham supported its local ‘Mission Christmas’ event during the festive period, where over 200 gifts were donated by the local community and employees. These donations, along with others, were distributed to nearly 70,000 children and teens across the south coast who otherwise wouldn’t have received a gift on Christmas Day. A Hole in One for Local Charities Customers at the Ridings Centre, Wakefield supported their favourite local charities, whilst testing their sporting prowess, by trying to “get a hole in one” using their spare change at a mini-golf themed donation point. Depending on where the coins land, they are donated to one of four charities: The Trussell Trust, Age UK, Wakefield Hospice, or Wakefield Street Kitchen. 78 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic Report GOVERNANCE 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 FY231 FY222 Gov- Board Composition of the highest governance body Number of executive board members Number of independent/ non-executive board members Average tenure on the governance body Number of independent/ non-executive board members with competencies relating to environmental and social impacts Narrative on process Gov- Selec Process for nominating and selecting the highest governance body Gov- Col Process for managing conflicts of interest Narrative on process 2 4 3.6 4 2 4 4.1 2 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 109 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. There is also a staff conflicts of interest policy in place which requires any potential conflicts to be kept on a register and regularly updated. This is reviewed by the Audit Committee on a six-monthly basis. The Company has a code of conduct that is included in the staff handbook. Non-compliance 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. There have been no instances of non-compliance. The Company has an onboarding process for suppliers and a supplier’s code of conduct. The Company also has a Modern Slavery policy. Suppliers are required to confirm that they agree to this Modern Slavery policy as part of the on-boarding process. Board oversight of code of conduct Narrative on process Due diligence of partner organisations Narrative on 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. A conflicts of Interest policy is also in place as well as a whistle-blowing policy and process. £0, no incidences of non-compliance 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 1. 12-month period ending 31 December 2022 2. 12-month period ending 31 December 2021 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 79 Our ESG approach continued 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 recommendation pillars: Governance, Strategy, Risk Management, and Metrics and Targets. Our 2023 disclosures represent our fifth consecutive TCFD report. We consider that the following report is consistent with all of the TCFD’s recommendations and recommended supporting disclosures; these being the four pillars referenced above, and the eleven disclosures within, which are signposted throughout this report. The Governance TCFD’s Guidance for All Sectors has been considered in order to achieve this stated level of consistency with the recommendations. We also commissioned GRESB’s independent review of our 2022 TCFD disclosures and were awarded an “A” alignment rating. This review will be continuously evolving and we acknowledge the areas for further improvement, such as enhanced granularity of our disclosure in connection with the TCFD’s Strategy recommendation, which will be supported by the commissioning of costed net-zero plans for our assets (see page 86). We continue to develop our capabilities and explore new methods and technologies to support our response to emerging climate- related risks. We have recently commissioned a portfolio-wide assessment of physical climate-related risks, including how exposure levels may change under different warming scenarios. We are also focusing on deepening our understanding of our Scope 3 emissions to reduce reliance on estimations in the way we account for them, for example, in connection with the Scope 3 category of Downstream Leased Assets, for which we are currently exploring a technology solution via our energy brokers. 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 Board and 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. 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. During the reporting year, the Terms of Reference for our Executive Committee were updated to further clarify the role of the committee members in managing climate-related risks as part of our ESG programme. We also appointed Dr Karen Miller to the Board as of Q1 FY23, who has the climate-related expertise required to have specific responsibility for ESG matters across the business. The Board received ESG training in FY22, including climate-related issues, and determined that additional ESG training would not be required annually particularly given the strengthening of the Board in this area through the expertise of Dr Karen Miller. However, the requirement for ESG training to the Board will be considered annually. The Board routinely considers the impact of climate-related issues on the business, its assets and strategy throughout the year with key matters of concern or opportunity being escalated to the Board via the CEO and ESG Committee; one example of this is the cost to the business to ensure the assets in England & Wales are MEES compliant in line with the recent change to legislation. 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 and 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-related issues. The Remuneration Committee includes an ESG objectives as part of the bonus objectives for both the Board and the Executive Management. This is a pre-defined percentage of bonus with a high degree of measurability, and forms part of the overall performance assessment for management. 80 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportTransition Risks & Opportunities The table on page 82 outlines the principal transition risks we have identified and the ways in which we expect their relevance to NewRiver to evolve over the defined time horizons. Our assessment considers risks and opportunities associated with keeping warming to within 1.5-degrees above pre-industrial levels - as our strategy is based on this objective – and therefore assumes that the end date for achieving net-zero is 2050. Generally, we consider that exposure to Policy & Legal, Technology and Market-related risks is likely to peak in the medium-term, whilst the reputational risk posed by an ineffective response to climate change is assessed to remain relatively constant, although the necessary actions to achieve an effective response will naturally increase, which is reflected in the gradually broadening scope of our emissions reduction targets over this period. Should collective efforts to keep warming to within 1.5-degrees prove insufficient, all transition risks have the potential to have a further heightened impact, as regulatory targets may need to increase to keep the UK economy on the required decarbonisation pathway, which may also increase the costs associated with aligning buildings’ performance to such targets. In this scenario, the need to take prompt action would be even more critical, and the importance to consumers of an effective response would also grow. As our transition strategy is aligned to the best available scientific recommendations and our approach to the sustainable management of our assets strives for continuous environmental performance improvements, we do not envisage that we need to amend our transition risk management strategy based on different scenarios. Strategy TCFD Strategy Recommendations ‘a’ and ‘c’: Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term; and describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2ºC or lower scenario. 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 identify climate-related issues across short, medium, and long-term horizons, appropriately defined to inform our ESG and corporate strategies. We have identified relevant short-range and long-range time horizons separately for transition risks and physical risks due to both the nature of the potential risks, our expectations for how they will change over time, and the way in which we assess and manage them as a business. We anticipate that relevant transition risks are likely to be susceptible to a higher degree of change over a shorter period, and so the transition risk time horizons we consider are: Short: <5 years Medium: 5-15 years Long: >15 years Physical risk time horizons are based on the IPCC definitions of short, medium, and long-term climate models, which represent equal 20-year periods up to 2100. These periods have been used to assess the exposure of our portfolio to climate change under three warming scenarios, including a within 2oC scenario. The physical risk time horizons we consider are:: Short: 2021-2040 Medium: 2041-2060 Long: 2081-2100 Our strategy is designed to enable us to build resilience considerations into the acquisition and operation of our assets as an integral part of our overall approach to asset management. As our portfolio consists of assets located in the UK only, there is little variation in exposure levels to both transitional and physical risks and opportunities across our assets. Our net-zero pathway and the interim targets we have set ourselves guide our approach to remaining resilient to principal transition risks (refer to table on page 82). The findings of our physical risk assessment and sensitivity analysis using low and high carbon scenarios show that there is very little change to the exposure of our portfolio to physical climate risks in the best and worst case scenarios (refer to table on page 85), with overall risk being relatively low. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 81 Our ESG approach continued Climate Change Strategy (Risk 4a1): 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 Term Impact Probability Relevance to NewRiver Short High Medium High Long High Short High Medium Long High High Short High Medium High Long High We have mitigated the short-term MEES risk associated with our portfolio by ensuring no breaches of the 1 April 2023 change to the regulations. All of the let units across our operational control portfolio have an EPC rating of “E” or better MEES risk has the potential to increase with the introduction of more ambitious thresholds proposed from 2027. There is also potential for ‘energy-in-use’ ratings to emerge New regulatory measures may emerge as we move closer to the Government’s 2050 target. We prepare to remain resilient to such measures through our own net-zero strategy and delivery plan We are in the assessment phase of most technology solutions at this stage on our net-zero pathway, with implementation being focussed on key strategic opportunities We will be in the core implementation phase of our net-zero pathway We envisage that the majority of the transition will occur in the medium term however technology evolves rapidly, and new opportunities may continue to materialise We have committed to becoming a net-zero business and developed our pathway to achieving this commitment. Our corporate net-zero commitment falls within this time horizon (2025) We have committed to reducing absolute emissions by 42% by 2030, consistent with a 1.5-degree warming trajectory By 2040, the common areas of our portfolio will be operationally net-zero. By 2050, we will be a fully net-zero carbon organisation Energy efficiency and carbon regulations relating to managed assets Evolving policy designed to support the UK’s 2050 net-zero commitment presents resource requirements to manage compliance efforts but also highlights opportunities to r educe costs through energy efficiency and the transition of assets to a low-carbon operating model, improving resilience. l a g e L & y c i l o P l y g o o n h c e T n o i t a t u p e R Costs to transition managed assets to low-carbon model Opportunities exist to implement a range of technologies designed to improve environmental impact and efficiency, supporting our net-zero commitments. Avoid stigmatisation based on ineffective response to climate change We must 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. Requirement to 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. 1. Please refer to Principal risks and uncertainties p.93 Key Impact and probability Low Medium High 82 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic Report Climate Change Impacts on our Assets (Risk 4b*): Changes in the way consumers live, work, shop and use technology could have an adverse impact on demand for our assets. Term Impact Probability Relevance to NewRiver Changing customer behaviour Changes in consumer shopping preferences present an opportunity to leverage our ESG strategy to demonstrate the ways in which we actively cater to the evolving needs of customers. Short Medium Medium High t e k r a M Long High Our assets support sustainable travel options and engage occupiers & customers in our ESG programme Customer preferences for environmentally friendly products and services are likely to increase in the medium-term. Our strategy is designed to keep pace with this evolution In the long term, we envisage that there will be less distinction between the environmental credentials of different products and services, as we move closer towards a decarbonised economy 1. Please refer to Principal risks and uncertainties p.93 We have reduced our total scope 1&2 emissions by 12% since our baseline year, which represents an annual rate of reduction consistent with achieving our 2030 target to reduce these emissions by 42% in absolute terms. Actions we have taken over the past 12 months in order to identify opportunities to ensure we continue on this pathway, which underpins our management of transition risks, include: Management of transition risks Policy & Legal Technology & Reputation Market Re-assessments of all of the units across our portfolio with F-G rated EPCs, to achieve an up-to-date and accurate view of our exposure to MEES-related risks and the potential financial implications. Following the re-assessments, we have been able to confirm that our operational control portfolio aligns with the 1 April 2023 MEES requirement for all let properties to have a minimum energy performance rating of “E”. Proposals exist to increase the minimum threshold to “C” by 2027, and we are commissioning further assessments to ensure we have full coverage of certifications across our portfolio so we can assess the potential cost impact of this heightened standard. Commissioning a degasification study of our highest consuming asset to understand options for transitioning it to a fully electric system supported by on-site renewable energy generation. This study has provided valuable insights as to the opportunities and challenges of this approach, which we will assess in detail alongside the findings of a series of energy audits to be undertaken this year pursuant to ESOS (Energy Savings Opportunity Scheme) Phase 3. Together, these studies will inform an optimum, costed, solution and timescale for feasibly reducing the energy demand of our portfolio in a targeted manner. Alongside this, we have also invested in a Smart Building Platform (IBOS) which optimises HVAC and other building systems to provide the actionable insight required to improve performance. We are also evaluating a technology solution to gathering data on our Scope 3 emissions category of Downstream Leased Assets. The continuous review process enabled by our Environmental & Social Implementation plans ensures we are catering to the evolving needs of customers. Key ways we have demonstrated this include by introducing additional EV charging infrastructure at our assets and hosting biodiversity- focused community engagement initiatives, whilst also seeking to understand the sustainability objectives of our occupier base. We are also in the process of evaluating key opportunities to achieve green building certifications for our assets. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 83 Our ESG approach continued Physical Risks & Opportunities The table on page 85 depicts the principal climate hazards we have identified to be relevant to NewRiver’s portfolio and the extent to which exposure levels are projected to change over time under high and low carbon future scenarios. The assessment modelled three climate scenarios in total: SSP1-2.6, a low carbon scenario corresponding to approximately 2°C of warming at the end of the century, SSP2-4.5, an in-between scenario available for some specific climate hazards, and SSP5-8.5, a high carbon scenario corresponding to approximately 4 to 5°C warming at the end of the century. The figure presents the findings of the SSP1-2.6 and SSP5-8.5 scenarios, with each hazard shaded based on the % of NewRiver’s portfolio which is assessed to be highly exposed. Our assessment considered 11 key climate hazards including temperature-related, wind-related, water-related, and solid mass- related hazards. Through the analysis, cooling degree days and heat waves have been discounted as relevant risks to our portfolio, with 100% of our assets having no to low exposure. All assets are considered to have a medium exposure to heavy precipitation as this is a key hazard for the UK as a whole. Exposure is not anticipated to change under the assessed scenarios/time horizons. Wildfire exposure was also considered as it’s an emergent hazard. Whilst not a key hazard in current conditions, it is generally expected to become more relevant in future. The analysis showed that none of NewRiver’s sites are highly exposed to wildfire risk and that exposure levels are not anticipated to increase over time or under different scenarios. Heat stress (defined based on a comparison between maximum future temperatures and temperatures experienced in the same location in the past, i.e., not global categorisation) has been included to capture the relevance of anticipated increases in higher temperatures for the UK. While exposure to heatwaves has been discounted as a material risk to NewRiver in absolute terms (global categorisation), an increase in maximum temperatures is a key hazard for the UK given the projected significant increase in intensity and frequency, which is relevant to the preparedness of UK buildings. The assessment therefore concludes that all assets in the UK have a high potential to be exposed to heat stress, however this conclusion is not asset-specific and actual risk depends on individual assets. Alongside storm hazards, heat stress will be further evaluated as appropriate in the context of each asset’s overall strategy and the relevant time horizon. 84 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic Reportc i n o r h C e t u c A s s e r t s t a e H s s e r t s r e t a W m r o t S d n W i e c n e d i s b u S d o o l f l a t s a o C d o o l f l i a v u F l Low Carbon Scenario High Carbon Scenario Short 2021-2040 Medium 2041-2060 Long 2081-2100 Short 2021-2040 Medium 2041-2060 Long 2081-2100 Summary of hazard exposure Summary of hazard impact Same level of exposure as all buildings in the UK, as asset-specific analysis has not been undertaken. The potential impact of this hazard on our assets is higher cooling, and therefore energy, demand. Increased energy demand in turn increases operational and maintenance costs. No change in exposure levels for scenario/ time horizon over which data is available. Exposure level is never more than 20%. Water stress is pressure on the quantity and quality of available water resources. Prolonged water stress can have a negative impact on public health and economic development. No significant changes in exposure over time and scenario. Range is between 59-65%. Very minor increase in exposure over time and scenario but never exceeding 5%. Storms are identified as a key current hazard for our portfolio, with the potential impact being damage to external building elements. We undertake building safety assessments which review the risk of loose roof/ facade features, which support mitigation of this risk. The potential impact of this hazard is closely linked to the above commentary regarding storm damage. Increases in other climate hazards such as flooding could increase the likelihood of subsidence. This poses a risk of damage to properties. As with storms and subsidence, flooding has the potential to cause damage to structural building elements, but also to goods stored within our assets. We maintain a flood risk register to monitor risk exposure and identify any need for intervention measures. Our assets are insured against this risk. No data to assess exposure in future scenarios, so short-term low carbon scenario represents exposure under current climate conditions. Very minor increase in exposure over time independent of scenario (15-20%), but high carbon scenario accelerates the increase. Constant low exposure over time (11%). Data only available for high carbon scenario. Unavailable 0-20% 20-40% 40-60% 60-80% 80-100% NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 85 Our ESG approach continued 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. Environmental considerations are embedded into capital allocations and are considered for all future acquisitions. The following diagram depicts the actions and processes we have identified as part of our strategy to deliver on our climate ambitions in the context of our business model and financial planning. 1. Disciplined capital allocation 2. Leveraging our platform 3. Flexible Balance Sheet Please see our business model on page 18 1. Disciplined capital allocation Embed Net-Zero Carbon and climate resilience in due diligence and analysis of stock selection from 2022 2. Leveraging our platform • Prepare costed asset management plans to net-zero for all managed assets by 2024 • Actively engage with our top 30 occupiers to align our level of commitment • Actively apply green lease commitments across all occupier transactions • Actively engage NewRiver’s top tier suppliers to align commitment for products and services purchased to mitigate supply chain emissions • Actively pursue procurement of renewable energy across all landlord and occupier space • Adopt NewRiver’s re-development & major refurbishment ESG framework across all relevant projects • Measure the embodied carbon emissions of all re-developments & major refurbishments by undertaking ‘Life Cycle Assessments’ (LCA), from 2023 • Embed minimum fit-out requirements for occupier licenced fit-outs from 2021 • Design out fossil fuels from all major refurbishment projects and re-development projects with immediacy • Leverage our strong relationships with UK high street retail brands, local councils, and our joint venture partners, to ensure efforts are collaborative and long-term • When managing assets owned by third parties, leverage our scale, expertise, and learnings on our journey to net-zero, to promote environmental best practice beyond our own portfolio 3. Flexible balance sheet Leverage the flexibility of our balance sheet to ensure investment in energy efficiency over the next 20 years is well accounted for in financial planning and that the value of our investments is protected from current and future market & legislative risks 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 89-91 for a detailed presentation of how the identification, assessment and management of climate- related risks are integrated into NewRiver’s overall risk management processes. 86 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportMetrics 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 EPRA’s best practice recommendations for transparently disclosing sustainability performance. The EPRA performance tables on pages 65-66 present our FY23 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 61. These targets are aligned with the UN Sustainable Development Goals to which we have committed, including SDG 13, Climate Action. Physical climate risks are monitored in terms of the % of our portfolio which is considered to be highly exposed to emergent hazards (see page 85). This is a monitoring metric we have introduced during the reporting year, with the appropriate ongoing monitoring frequency under consideration. We also maintain a separate flood risk register on an ongoing basis. 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 63-64, where we provide further information on our FY23 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 (World Business Council for Sustainable Development)/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 Specific metrics used to monitor the principal transition risks identified are as follows: Policy & Legal Energy efficiency and carbon regulations relating to managed assets Portfolio EPC Profile Continuous Technology Costs to transition managed assets to low-carbon model Energy usage intensity Monthly Metric(s) Monitoring Frequency Reputation Avoid stigmatisation based on ineffective response to climate change Scope 1, 2 & 3 GHG emissions Annual quantification with monthly monitoring through energy management Market Changing customer behaviour Customer engagement via Centre Management teams Quarterly NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 87 Strategic Report Principal risks and uncertainties Managing our risks and opportunities Risk is inherent in all businesses and effective risk management enables us to manage both the threats and the opportunities associated with our strategy and the operation of our business model. Our small workforce encourages flexibility and collaboration across the business in all areas including risk management. The accessibility and flexibility of the Board and senior staff are particularly pertinent when adapting to evolving risks, emerging risks and external risks such as the aftereffects of a global pandemic and geopolitical instability. 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 framework of the Company and regularly evaluates 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 monitoring and assessment including emerging risks The identification of risks and their management is a continual and evolving process. This has been underscored more so over recent years by the global pandemic which created uncertainty across all sectors, both economically and socially. This has been followed with an economic turndown and cost of living crisis which has continued the uncertainty. Other geopolitical events such as the Russian-Ukraine crisis have also impacted 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 allows us to assess how risks are evolving, assists in identifying emerging risks as they develop and ensures that the impact of each identified risk is continually monitored as it emerges and progresses. During the year we have identified an emerging depositor risk as our cash holdings have built up. This risk is not a principal risk but by identifying this emerging risk as it has developed, we have been able to update our treasury policies to ensure that they are fit for purpose and that cash is spread across various banking institutions. 88 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 A Board approved counterparty list is continuously monitored using S&P and Fitch credit ratings. The treasury policy dictates the maximum exposure to a counterparty based on their rating. The operation of the treasury policy is reported to the Board on a quarterly basis. This emerging risk has also created an opportunity as the Group has been able to take advantage of favourable deposit opportunities. Risk appetite and mitigation The Board has a low-risk appetite for compliance (legal and regulation) related risk. The Board however 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 benefiting from a more diversified debt structure and gaining access to a larger pool of capital to help achieve our strategic goals • A disciplined approach to stock selection with probability risk-adjusted returns • Deploying capital in joint ventures and associates, thereby diversifying risk • A diverse tenant base in which there is no single tenant exposure of more than 4% • An experienced Board and senior management 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. Our heat risk map is set out overleaf. Strategic ReportThe Risk Governance and responsibility BOARD Collectively responsible for managing risk, overseeing the internal controls framework and determining risk appetite • Regularly reviews risks within strategy discussions, the impact of risk on strategy and levers within the business model that can be adjusted to manage these risks. • Conducts formal reviews of principal risks (including emerging risks) at least twice a year - one of which is in connection with consideration of the viability statement. • Monitors KPI’s which link to risk and strategy through Board reports. AUDIT COMMITTEE Oversees the 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. • Monitors the internal controls framework. • Considers the use of external advisors for specific specialist risk impacts and deep-dive reviews. • Monitors the need for an internal audit and appoints third parties to • Receives reports on the risk management process twice annually. test internal controls. EXECUTIVE COMMITTEE Regularly reviews the entire risk register - members are responsible for managing risk within their area of accountability • Conducts reviews of the entire risk register (which includes • Reviews risk topics through regular timetabled presentations emerging risks) at least quarterly. or papers. • Delegates line responsibility for managing risks within their area of accountability. • Uses external advisors for specific specialist risk impacts. • Monitors KPIs which link to risk and strategy. ASSET MANAGERS Members are responsible for managing risk within their assets and highlighting risks as they emerge COMPANY SECRETARY Conducts individual risk reviews with ExCo members and individual business areas. Maintains the risk register and presents an update on the 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 b a Principal risks External risks Macroeconomic 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 Operational risks People Financing Asset management Development Acquisition Disposal Movement from FY22 The risk matrix sets out gross risk (i.e. our assessment of the impact and probability of risks prior to any mitigating factors). All risks have mitigating actions associated with them. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 89 Strategic Report Principal risks and uncertainties continued External risks The Principal risks are: External risks 1. Macroeconomic 2. Political and regulatory 3. Catastrophic external event 4a. Climate change strategy 4b. Climate change impacts on our assets 5. Changes in technology and consumer habits and demographics 6. Cyber Security Operational risks 7. People 8. Financing 9. Asset management 10. Development 11. Acquisition 12. Disposal Risk and impact Monitoring and management Change in risk assessment during the period 1. Macroeconomic • The Board regularly assesses the Company’s • Macroeconomic risk has remained the same 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 Link to strategy: Impact: Probability: Movement: 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 Link to strategy: Impact: Probability: Movement: 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. during the year and is considered a medium to high impact risk with a high probability. • Sentiment has been impacted by the cost of living crisis, energy cost worries and inflation. • Overall valuations slightly decreased in the second half of the year however due to a fully covered dividend our covenant and policy headroom remains high. • Higher inflation could fuel wage growth and costs leading to rate increases above current forecasts. • The Bank of England is expecting inflation to fall during 2023 and is working with interest rate adjustments to reduce inflation to fall to its 2% target in around two years’ time. • The Board regularly considers political and • Political and regulatory risk has remained regulatory developments and the impact they could have on the Company’s strategy and operating environment. the same during the year. This is considered a medium to high impact risk with a high probability. • 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 members are also members of the British Property Federation and the High Street Task Force. • There has been political uncertainty within the UK due to changes in leadership and a decline in market confidence. This is likely to continue with a general election within the next 18 months. There have also been political failures at a local authority level. • There still remains some 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 and we will continue to monitor the potential impact of this. There are further uncertainties around the outcome of the Government review of the Landlord and Tenant Act 1954. • There are also uncertainties around the impact of the Levelling Up and Regeneration Bill. • The long-term impact on the property market of the Register of Overseas Entities owning UK property is currently unclear. Key Risk change during FY23 Impact and probability Risk has increased Risk has decreased Risk has not changed Low Medium High 90 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportRisk and impact Monitoring and management 3. Catastrophic external event An external event such as civil unrest or 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 Link to strategy: Impact: Probability: Movement: • 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. • 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. Change in risk assessment during the period • Catastrophic external event risk has remained the same during the year and is considered a high impact risk with a medium to high probability. • The aftereffects of a global pandemic caused unprecedented economic and operational disruption and the continuing global developments create uncertainty. We however were able to mitigate the impact through our portfolio positioning focusing on essential goods and services, our cash position and liquidity and our active approach to asset management. • The relaxing of restrictions was positive but the cost-of-living crisis has impacted UK households. Our operational performance has however demonstrated the resilience of our portfolio. • The National Terrorism Threat Level is substantial and the full long-term impact from the war in Ukraine is unclear. 4a. Climate change strategy • We have a comprehensive ESG programme • The climate change risk was separated last A failure to implement appropriate climate risk management measures, comply with evolving regulations or meet 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. Responsibility: Board & ExCo, CEO and ESG Committee, Head of ESG Link to strategy: Impact: Probability: Movement: 4b. 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. Responsibility: Board & ExCo, CEO and ESG Committee, Head of ESG Link to strategy: Impact: Probability: Movement: 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 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. year into two risks to focus on its constituent parts (Climate change strategy and Climate change impacts on our assets). • Climate change strategy 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. • We regularly assess assets for environmental risk and ensure sufficient insurance is in place to minimise the impact of environmental incidents. • The climate change risk was separated into two risks last year to focus on its constituent parts (Climate change strategy and Climate change impacts on our assets). • In conjunction with insurers flood risk • Climate change impacts on our assets risk assessments have been carried out at all of our assets and the risk is considered low. 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 is low in the short to medium term. • Climate impacts are embedded into capital allocation decisions and considered for all future acquisitions of both equipment installed at our assets and for the assets themselves. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 91 Principal risks and uncertainties continued External risks continued Risk and impact Monitoring and management 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: 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. Responsibility: Board & ExCo,and Head of IT Link to strategy: • 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 changes to data access following staff changes and to limit authority and 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. Change in risk assessment during the period • Changes in technology and consumer habits risk has remained the same during the year and is considered a low-medium impact risk with a high probability. • Although the global pandemic lockdown restrictions significantly increased home working and online shopping in recent years, we have seen evidence that this is unwinding. Our portfolio is focused on providing essential retail to local communities, which continues to mitigate the impact of online retail on our portfolio. • While the global pandemic 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. • Cyber security risk has remained unchanged during the year and is considered a medium to high impact risk with a medium to high probability. Whilst global developments have increased cyber security risks we have carried out further enhancements and audits to our IT systems and procedures during the year. • This risk was considered to be increased due to employees working from home during the pandemic. Staff may now continue to work from home on a flexible basis. Impact: Probability: Movement: Key Risk change during FY23 Impact and probability Risk has increased Risk has decreased Risk has not changed Low Medium High 92 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportOperational 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. Responsibility: Remco, ExCo, SID (as employee engagement director), Head of HR Link to strategy: Impact: Probability: Movement: • Attracting, retaining and developing talent is core to our HR strategy, which is regularly reviewed by the Board and Executive Committee. • We undertake an employee 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. • The probability of the People risk has reduced during the year and is considered a medium impact risk with a medium probability. • Inflation has 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. The recent Sunday Times Best Places to Work 2023 survey was strongly positive and showed a low staff flight risk. • 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 flexible working enabling staff to work from home a number of days a week should they choose to do so. 8. Financing • The Board regularly assesses Company • Financing risk has increased during the year 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 Link to strategy: Impact: Probability: Movement: 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 medium impact risk with a medium probability. • Macroeconomic developments, particularly the 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. Increased cash levels also mitigated these risks and provide deposit opportunities. • The Company extended the maturity on its undrawn Revolving Credit Facility to August 2024 in the prior year. • There is no exposure to interest rate rises on drawn debt. 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. Responsibility: ExCo, Emma Mackenzie, Head of Asset Management and the Asset Managers Link to strategy: Impact: Probability: Movement: • Asset-level business plans are regularly • Asset management risk has remained reviewed by the asset management team and the Executive Committee and detailed forecasts are updated frequently. the same during the year and is considered a medium to high impact risk with a medium probability. • The Executive Committee reviews whole • The global pandemic placed restrictions on 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 our largest retailer is Poundland accounting for 3.4% of gross income). 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. • Our diverse tenant portfolio focuses on essential retail which reduces the impact of individual defaults on income. • Although we have a low probability of default, the continued cost of living crisis may impact the financial health of our occupiers. • Our operational performance continues to prove the resilience of our assets. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 93 Principal risks and uncertainties continued Operational Risks continued 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. Responsibility: Board & ExCo, Development team leaders Link to strategy: Impact: Probability: Movement: 11. Acquisition The performance of asset and corporate acquisitions might not meet with our expectations and assumptions, impacting our revenue and profitability. Responsibility: Board & ExCo, Charles Spooner, Head of Capital Markets Link to strategy: Impact: 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. Responsibility: Board & ExCo, Charles Spooner, Head of Capital Markets Link to strategy: Impact: Probability: Movement: Key Risk change during FY23 • We apply a risk-controlled development strategy through negotiating long-dated pre-lets for the majority of assets. • Development risk probability has increased through the period and is considered a medium impact risk with a medium to high probability. • All development is risk-controlled and forms • Supply issues and increases in the cost of only 3% of the portfolio by value. • Capital deployed is actively monitored by the Executive Committee, following detailed due diligence modelling and research. • An experienced development team monitors on-site development and cost controls. • On large scale developments where construction is more than 12 months we look to carry out the project in partnership and/or forward sell. building supplies will impact our developments. As they remain a small part of portfolio the overall impact is low. • A number of our regeneration assets were sold during in the prior year which decreased 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 via joint ventures, thereby sharing risk. • Acquisition risk has remained the same through the year and is considered a 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 a position to deploy capital in line with our returns-focused 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. • Disposal risk has increased during the year and is considered a medium impact risk with a medium to high probability. • 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. • National and geopolitical uncertainty, interest rate rises, inflation and the cost-of-living crisis have increased market uncertainty and are causing some purchasers to reconsider or delay acquisition decisions. • We have an active and successful disposal programme where we have executed disposals in the year, with the volume of transactions being completed increasing disposal risk. The average lot size however is lower than most in the market so our assets tend to be more liquid. Impact and probability Risk has increased Risk has decreased Risk has not changed Low Medium High 94 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Strategic ReportViability 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 (pages 11 and 18), strategy (pages 4 and 11) and principal risks and uncertainties (pages 88 to 94). 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 2026. 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 89 to 94, 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 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. • 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, could severely disrupt global markets and cause damage and disruption to our assets. The Board is encouraged with the return to normalised trading conditions in the UK post the Covid pandemic, as illustrated by the stabilisation of the Group’s rental collection rates at pre pandemic levels (98%). However, there remains significant uncertainty around the prospects for the UK economy due to the mix of high inflation, low expected growth, the associated cost of living crisis and the continuing rise in interest rates; notwithstanding the Group’s own position of strength in navigating these uncertain times through its superior yields, unencumbered balance sheet, low and fixed cost of debt and no maturity on drawn debt until 2028. 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 the only drawn debt currently in the Group is the £300million bond, which is not due for repayment until the end of FY28. Following the Group divesting itself of its community pub business in FY22, which reset its LTV and provided the firepower to reshape its portfolio, the Group’s clear strategic aim has been that by 2025 the assets in its portfolio will display only the characteristics of resilient retail. 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 Directors believe that the Group will deliver this through remaining committed to the following strategic priorities: • Selling its non-core retail assets and recycling 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. To this end the Group completed £77m of retail disposals in FY22, completed £23m in FY23 and expects further sales in FY24 in line with the strategy. • Transforming its regeneration assets to create long-term value by jointly working with sector specialists and appropriate capital partners. 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. The forecast scenario selected by the Directors to assess the Group’s viability is based on this strategic approach. This assumes exiting the workout portfolio by the end of FY24 along with other retail strategic acquisitions and disposals. Under this scenario, the Group is forecast to maintain sufficient cash and 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 further valuation decline and a lower income collection rate. Even applying this sensitivity analysis, the Group maintains sufficient cash and liquidity reserves to continue in operation throughout the assessment period 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 14 June 2023 By order of the Board Allan Lockhart Chief Executive Officer NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 95 Corporate Governance Structure of the Governance Section The Governance section provides details of the Board’s corporate governance structures and work for the financial year to 31 March 2023. Together with the Directors’ Remuneration Report on pages 128 to 136, it includes information about how the Company has applied the principles and complied with the provisions of the 2018 UK Corporate Governance Code. The Governance section has been organised to follow the structure and principles (A to R) of the 2018 Code. Compliance with the 2018 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 2018 UK Corporate Governance Code 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 2023 and the Company has fully complied with all the provisions of the Code, except Provisions 10 and 38 as explained more fully on this page. Code Provision 10 Code Provision 38 Requires the Board to identify in its Annual Report each Non-Executive Director that 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 did not retire until the 2022 AGM. Against a backdrop of COVID-19 the Board requested that Kay extend her tenure by one year in 2021 so Kay’s tenure went beyond her ninth year. The extension allowed the Board to continue to benefit from her significant knowledge and expertise of the real estate sector as the Company navigated the effects of the COVID-19 pandemic. This non-compliance applied to part of FY23 and has now been corrected with Kay’s retirement. 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 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 2023 AGM. Audit, risk and internal control M. Financial reporting, external auditor and internal audit N. Review of the 2023 Report and Accounts O. Internal financial controls and risk management 114-115 118 116-117 Remuneration P. Linking remuneration with purpose and strategy Q. Remuneration Policy review R. Performance outcomes in FY23 and strategic targets 119-126, 130 119-127 130 Board leadership and Company purpose A. An effective Board B. Purpose, values and culture C. Governance framework and Board resources D. Stakeholder engagement E. Workforce policies and practices Division of responsibilities F. Board roles G. Independence H. External appointments and conflicts of interest I. Key activities of the Board in FY23 J. Appointments to the Board K. Board skills, experience and knowledge L. Annual Board and Committee evaluation 98 101 105 20-27, 102 22-24, 102 104 104, 110 98-99, 103 103 107, 110 111 108 96 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceThe Chair’s Letter on Governance The Chair’s Letter on Governance Board appointment and induction Kay Chaldecott stepped down from the Board at the 2022 AGM so much of the Nomination Committee’s activity in FY22 and FY23 was to scope and recruit her replacement. Following the 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 and her induction is more fully detailed in the Nomination Committee Report. Stakeholder engagement Asset visits In a post pandemic world we have taken the opportunity to re-engage with our stakeholders face to face. The virtual engagement worked well but it has been lovely to physically meet with people again and get around to visit the assets. Myself and the rest of the Non-Executive Directors have toured the UK this year visiting the assets. Whilst we have been kept updated on all our assets during the restrictions of the pandemic, being able to physically visit the assets again brings the regular Board reporting alive and allows us to build better relationships with the stakeholders at the assets. Staff engagement Engagement with our staff has also benefited from the return to physical visits and meetings. We have a small workforce with only around 50 employees. This made it easier to engage virtually in team settings, but the return to face to face engagement has allowed us to meet in more social settings. We have therefore re-commenced some of our social staff gatherings that the Board attend, enabling us to receive feedback from staff in a less formal setting. Shareholder engagement The 2022 AGM was, for the first time in a couple of years, a fully physical meeting. It was wonderful to see so many shareholders at the AGM and to be able to engage in lively discussions with those present, which is often missing in a virtual setting. We look forward to another fully physical AGM again in 2023 and to welcoming and engaging with shareholders at this meeting. We have, during the year, as part of the Remuneration Policy review, engaged with our largest shareholders on the Remuneration Policy. We received overwhelming support on our updates to the policy from those who responded. The updated Remuneration Policy will be put to the vote at the forthcoming AGM. Yours sincerely Baroness Ford OBE Chair 14 June 2023 Dear Shareholders I have pleasure in introducing NewRiver’s Corporate Governance report for the year ended 31 March 2023. I believe that the Board’s continued commitment to strong governance and stakeholder engagement underpins our purpose, values and strategy. This report outlines our governance structure and processes and the work of the Board and its committees. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 97 Our leadership team Board of Directors Colin Rutherford Independent Non-Executive Director, Appointed February 2019 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 Listed Companies Evofem Biosciences Inc (Independent Director and Audit Committee Chairman) Other Allstone Sand Gravels & Aggregates Limited (Chairman); Brookgate Limited (Chairman); Donaldson Group Limited (Independent Director and Audit Committee Chairman); Rothley Group Limited (Chairman) 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 Will Hobman Chief Financial Officer Appointed August 2021 Key Skills and Experience Will is a Chartered Accountant with over 12 years of 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. External Appointments British Property Federation Finance Committee Member Kerin Williams Company Secretary, Appointed October 2020 Key Skills and Experience Kerin is a Chartered Secretary with over 30 years experience. Kerin has worked in-house in senior positions within company secretarial departments for a number of FTSE100 and FTSE 250 companies in real estate, chemicals, banking and printing. Kerin has also worked in professional services as a company secretarial consultant; her most recent role was as Managing Director of Prism Cosec. Kerin graduated in Law, qualified as a Chartered Secretary in 1997 and is a Fellow of the Chartered Governance Institute. Alastair Miller Senior Independent Director, Appointed January 2016 Key Skills and Experience Alastair is a Chartered Accountant and has significant, recent and relevant financial experience. Throughout his career Alastair has developed skills in 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 98 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Governance Key Chair of committee Member of Audit Committee Member of Nomination Committee Member of Remuneration Committee 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 Lendlease Corporation (Senior Advisor to the Board) External Appointments Listed Companies Superdry Plc (Director and Auditco Chair); Unbound Group plc (Director and Auditco Chair) Other RNLI (Risk and Audit committee member & Council Member) Baroness Ford OBE Non-Executive Chair, Appointed September 2017 Key Skills and Experience Baroness Ford has over 20 years’ experience as a Non-Executive Director and Chairman of private and Stock Exchange listed companies and extensive experience of working with the Government. Margaret 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. 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. Charlie Parker Independent Non-Executive Director, Appointed September 2020 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, Westminster and 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 Buckingham Palace Reservicing Programme Challenge Board; Griffin Investments Ltd Dr Karen Miller Independent Non-Executive Director, Appointed May 2022 Key Skills and Experience Dr Karen Miller is affiliated to the Department of Engineering, Cambridge University and is Co-Founder of the Cambridge Net Positive Lab. 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 25 years’ experience of growing businesses in the retail sector through innovation. External Appointments Buckingham Palace Reservicing Programme Challenge Board; Co Founder, Cambridge Net Positive Lab NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 99 Corporate Governance Executive Committee Allan Lockhart Chief Executive Officer Charles Spooner Head of Capital Markets Edith Monfries Chief Operating and People Officer 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. 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. Will Hobman Chief Financial Officer See page 98 for key skills and experience. See page 98 for key skills and experience. Emma Mackenzie Head of Asset Management and 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 Government’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. 100 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceBoard leadership and company purpose 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. A global pandemic, geopolitical unrest and a cost of living crisis have 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. 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 11 and 18 of the Strategic Report and describes the basis upon which the Company generates and preserves value over the long term. ned by a c rpin e d n U t t e d ESG strategy o m m i 1. Disciplined capital allocation 2. Leveraging our platform 3. Flexible balance sheet Our Culture NewRiver’s collaborative and supportive culture underpins this purpose and drives business practices. With a small workforce of around 50 employees our culture is able to provide individuals who work for us a sense of purpose and an opportunity to thrive and develop as individuals. The proximity between Board and employees makes it easier for the Board to engage with employees and the Directors can monitor the culture in a way not possible for larger companies. The small size of our team also allows for flexibility and adaptability so that we can respond to fast changing situations. 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. 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. This schedule of matters is reviewed regularly to ensure that it is kept up to date with any regulatory changes and is fit for purpose. The last review was undertaken in February 2023. The Executive Committee also has its own Terms of Reference that fit within the governance framework and are approved by the Board. These terms of reference were last reviewed and updated in November 2022. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 101 Corporate Governance continued Board activities 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 natural 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. Staff are invited on a regular basis to attend a group meeting with Alastair in the London office, or online if preferred. The most recent meeting was held in April 2023. Questions are invited ahead of the session as well as taken live on the day. Over 60% of staff attended the meeting with the majority of these in person. Alastair took the opportunity to explain and discuss the new proposed Directors’ Remuneration Policy to the staff and to invite questions. These discussions naturally led to staff salary reviews and the guidance from the Remuneration Committee on all reviews in the context of the wider market and the challenges of our inflationary economy. The performance of the LTIP (a share scheme that all staff participate in) was discussed. Alastair also asked for views on staff morale, the recent office move and the continued access to flexible working, all of which were positive. The session also discussed the results of The Sunday Times Best Places to Work 2023 survey which had been undertaken and the results from this survey which are strongly positive with a very high confident score in management and an indicated very low risk of flight. Staff engagement Board (Led by Alastair Miller, our Non-Executive Director, responsible for workforce engagement) • NED/Staff engagement sessions • Staff survey results • NED visits to assets and London office • Social Events with staff Executive Committee (“ExCo”) • Direct report engagement and staff appraisals and feedback • Monthly All Staff sessions • Staff survey results • Social events with staff • Fund raising events with staff Our Staff • Monthly All Staff Sessions • Staff survey results 102 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceStrategy Finance and Financing Discussion • The Board discussed progress against strategy at most meetings and receives updates on strategy in the CEO’s report • During the year an entire Board meeting was devoted to strategy to ensure time could be dedicated to a deep dive into strategic progress and direction • 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 • Presentation and discussion on the draft budget and business plan • Approval of the annual budget • The CFO provides quarterly reporting against the Treasury policy and the Board considered updates to the Treasury policy to take advantage of better returns on excess cash Audit and Risk • The Chair of the Audit Committee reported to the Board on the proceedings of each Operational and Investor Relations 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 • 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 2022 the Group held a capital markets day Stakeholders • Stakeholders including employees, occupiers, councils and communities, lenders and Environmental Governance shareholders are regularly considered as part of the CEO report to the Board • The Non-Executive Directors visited a number of the Group’s assets during the year and were provided with guided tours from the asset management teams responsible for the assets • HR reports are either tabled separately or included the CEO’s report • The Board received updates from Alastair Miller’s attendance at staff sessions • The Board receives regular updates on ESG progress in the CEO’s report • The Audit Committee reviewed progress against ESG targets and reported to the Board • 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 the Group governance framework, updated the Board’s schedule of matters and reviewed and updated the terms of reference of the Board committees, including ExCo Link to strategy 1 1 1 1 1 1 1 2 3 ESG 2 3 ESG 2 3 ESG 2 3 ESG 2 3 ESG 2 3 ESG 2 3 ESG Key Link to business model and strategic objectives 1 Disciplined capital allocation 2 Leveraging our platform 3 Flexible Balance Sheet ESG Environmental, Social and Governance 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 Chair 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. During the year the Board also approved a staff conflicts of interest policy so that a conflicts of interest register was also maintained below Board and ExCo level. Director concerns Directors have the right to raise concerns at Board meetings and can ask for those concerns to be recorded in the Board minutes. The Group has also established a procedure which enables Directors, in relevant circumstances, to obtain independent professional advice at the Company’s expense. Board time commitments All Directors pre-clear any proposed appointments to listed company boards with the Board prior to committing to them. The Non-Executive Directors are required, by their letters of appointment, to devote as much of their time, attention, ability and skills as are reasonably required for the performance of their duties. This is anticipated as a minimum of one day a month. 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. The other listed company directorships of the NewRiver REIT plc Directors is set out on pages 98 to 99. The Board and committee attendance record of each of the Directors during FY23 is set out on page 106 of this report. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 103 Corporate Governance continued Division of responsibilities There is a clear division of responsibilities between the Chair, CEO and other members of the Board, as follows: Role Chair Margaret Ford Chief Executive Officer Allan Lockhart Chief Financial Officer Will Hobman Senior Independent Non-Executive Director Alastair Miller Responsibilities 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: • managing the business of the Group; • recommending the Group’s strategy to the Board; • ESG strategy; • implementing the strategy agreed by the Board; and • management of the Group’s property portfolio, including developments. 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 an 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. Independent Non-Executive Directors Non-Executive Directors Alastair Miller, Charlie Parker, Colin Rutherford and Karen Miller 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 Independent Non-Executive and Executive Directors The Board comprises four independent Non-Executive Directors (excluding the Chair) and two Executive Directors. The Nomination Committee is of the opinion that the Non-Executive Directors remain independent, in line with the definition set out in the Code and are free from any relationship or circumstances that could affect, or appear to affect, their independent judgement. The Chair was independent on appointment and the Board still considers her to be independent. All Directors are subject to re-election at the AGM each year. Executive Committee (ExCo) The purpose of ExCo is to assist the CEO in the performance of his duties within the bands of the Committee’s authority, including: • the development and implementation of strategy, operational plans, policies, procedures and budgets; • the monitoring of operating and financial performance; • the assessment and control of risk; • development and implementation of the ESG strategy; • the prioritisation and allocation of resources; and • monitoring competitive forces in each area of competition. Company Secretary All Directors have access to the advice and services of the Company Secretary. The appointment of the Company Secretary is a matter for the Board. 104 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceBoard 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. Supporting Committees Executive Committee (“ExCo”) 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. Senior Leadership Team (SLT) Senior members of the business below ExCo level tasked with assisting ExCo with the progress of the Group strategy. ESG Committee Led by Emma Mackenzie, Head of Asset Management and ESG, the ESG Committee ensures the appropriate resources are mobilised so the key ESG programme milestones are achieved. Well-Being Committee Originally set up during lockdown restrictions to focus on staff wellbeing the committee has evolved its brief to provide a collective employee voice and to focus on diversity and inclusion. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 105 Corporate Governance continued Attendance Each of the Directors has committed to attend all scheduled Board and relevant committee meetings and has also 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 Chair or Chief Executive and to provide comments. The Non-Executive Directors meet without the Executive Directors and the Chair present at least once a year. Attendance at regular scheduled Board meetings and the Board Committees is shown below: Board Members Margaret Ford1: Chair Executive Directors Allan Lockhart Will Hobman2 Non-Executive Directors Kay Chaldecott3 Alastair Miller Charlie Parker Colin Rutherford Dr Karen Miller4 Board Attendance Audit Committee Attendance Remuneration Committee Attendance Nomination Committee Attendance 7/8 8/8 7/8 2/2 8/8 8/8 8/8 8/8 – – – 2/2 5/5 5/5 5/5 3/3 2/4 – – 1/1 4/4 4/4 4/4 3/3 3/3 – – 1/1 3/3 3/3 3/3 2/2 1. Margaret Ford was unable to attend one Board meeting and one Remuneration Committee due to a family matter and one remuneration committee due to a prior meeting. 2. Will Hobman missed a Board meeting due to the birth of his daughter 3. Kay Chaldecott stepped down on 26 July 2022 4. Dr Karen Miller was appointed to the Board and its Committees on 30 May 2022 106 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceComposition, succession and evaluation Areas Covered Business Plan Succession Planning Valuations Salary Structure Sessions provided by CEO Relationship with Auditors CFO Most Recent Audit Liabilities Internal Controls Internal Audit Risk management/Insurance Non Audit Services Business Planning Management Reporting Board Procedures Corporate Governance Terms of Reference Board/Director Obligations Training Meetings/Year Plan Policies: Whistleblowing; Share Dealing Share Schemes Organisation Culture HR Policies Investor Relations Communications Programme Head of Financial Reporting Company Secretary Chief Operating and People Officer Investor Relations & Corporate Communications Director Dr Karen Miller Independent Non-Executive Director, Induction programme Karen’s induction programme entailed a number of interactive sessions with members of the senior management team. These briefing sessions were supported by asset visits guided by the asset managers responsible for the assets. 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 senior 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. Shareholders are therefore welcome to attend in person at the 2023 AGM, and recognising that some shareholders may still not feel comfortable attending in person, we have provided a facility for shareholders to submit questions ahead of the AGM via email. The AGM is planned to be held on 26 July 2023. 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. 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 is updated and published each year. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 107 Corporate Governance continued 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 facilitated by Ceradas Limited, a board effectiveness consultancy with no other connections to the Company The following recommendations were made: Recommendations • Make more time for more longer-term strategy discussions in the Board timetable • Schedule more informal meetings as a Board post-Covid • Consider further mechanisms for the Board to meet and engage with stakeholders • Consider a more systematic approach to succession planning and diversity ▼ ▼ YEAR 2 (FY22) Follow up on actions prepared in response to the Year 1 evaluation, using internally facilitated questionnaires reviewed by an external board evaluator ▼ YEAR 3 (FY23) Continued follow up on actions arising from the previous two years using internally facilitated questionnaires During FY22 Ceradas Limited, a board effectiveness consultancy with no other connections to the Company followed up on the review undertaken in FY21 with 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 reviewed the questionnaires and noted that there had been a very healthy level of engagement with the questionnaire. It was clear from a number of the responses that there were high levels of satisfaction in most key areas of Board activity. Progress: • Strategy is discussed and monitored at each Board meeting and dedicated strategy sessions are included in the Board timetable • Board dinners prior to some of the Board meetings and social events with staff have been arranged and attended • The Board already received regular updates on stakeholders and met with staff and shareholders but felt that they wished to meet other stakeholders face-to-face post the pandemic. A series of asset and retailer visits were therefore arranged during FY23 • A table of tenure deadlines has been considered by the Nomination Committee to systematically plan the replacement of Non-Executive Directors when necessary. A detailed Board Diversity Policy has been updated and approved. The Group Diversity Policy is also being updated. FY23 process For FY23 a follow-up questionnaire based on the actions identified in FY22 and the development of the strategy in FY23 was internally distributed and completed by all of the Directors. We will report on the outcomes of this review in next year’s Annual Report and on the progress made during the year. 108 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceNomination Committee Report Nomination Committee Report Dear Shareholders I am pleased to present the Nomination Committee Report for 2023. Monitoring the balance of skills on the Board to match our strategy and succession planning has continued to be the key focus for the Committee this year. Kay Chaldecott stepped down from the Board at the AGM in 2022. Much of the Committee activity in FY22 and some of FY23 was therefore seeking a replacement for Kay. On 30 May 2022 we were delighted to welcome Dr Karen Miller to the Board. Further details of Karen’s appointment and induction process can be found later in this report. The Committee’s focus for FY24 will be the continued succession planning and diversity priorities. Baroness Ford Chair 14 June 2023 Nomination Committee responsibilities • 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 • Identify and nominate for approval candidates to fill Board vacancies • Evaluate the Board’s diversity and balance of skills • Evaluate the performance of the Board • Review the time needed to fulfil the roles of Chair, 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 98 and 99). • Margaret Ford: Committee Chair • Alastair Miller • Colin Rutherford • Charlie Parker • Karen Miller (appointed to the Committee on 30 May 2022) How the Committee operates • At least two meetings a year. During the year the Committee met three times • Only Committee members attend meetings but we also invite the Chief Executive Officer and the Chief Operating and People Officer to assist with succession discussions and to brief the Committee on the views of the executive management • The Committee has formal Terms of Reference and reviews these annually. Copies can be found on our website at www.nrr.co.uk NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 109 Nomination Committee Report continued FY23 Nomination Committee Activity Composition of the Board at the year end May • Complete NED Board appointment process – consideration and approval • Draft Nomination Committee Report in Annual Report ▼ 4 1 2 Chair Executive Directors Non-Executive Directors (Independent) September • Board evaluation review – report actions and outcome • Chairman evaluation ▼ February • Board Diversity policy statement • Annual review of external directorships and time commitments required from Non-Executive Directors prior to re-election • Terms of Reference review 2 Length of Directors’ tenure 2 Less than three years Three to six years Six to ten years 3 Independence and time commitment The Nomination Committee is of the opinion that the Non-Executive Directors and the Chair 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. The balance of directors (excluding the Chair) is two Executive Directors and four independent Non-Executive Directors. The Committee regularly reviews the time commitments of the Non-Executive Directors and none are considered overboarded. Gender balance at the year end Board Executive Committee Direct Reports of Executive Committee Group Female Male 2 29% 2 40% 12 52% 23 50% 71% 5 3 60% 11 48% 23 50% Succession planning and recruitment process The Committee considers succession planning a key element 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 maintain the skills and experience necessary to ensure the continuing success and good governance of the Company. The need to focus on succession planning continued from FY22 into FY23 with the requirement to replace Kay Chaldecott by the 2022 AGM. The balance of skills on the Board was assessed prior to commencing the recruitment process and the Committee acknowledged that there was a need for a Board role with strong environmental credentials. Following presentations from various recruitment consultants, Nurole Limited, a global executive search consultancy with no other relationship with the Group, was appointed 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 immediately commenced an extensive induction process and detailed on page 107. 110 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Governance The Committee regularly reviews the balance of skills on the Board to ensure that they match the Company’s strategy. Board skills matrix Executive Directors Non-Executive Directors Allan Lockhart Will Hobman Margaret Ford Alastair Miller Dr Karen Miller Charlie Parker Colin Rutherford Property asset management Regeneration and development Financial and banking Environmental Social and Governance Capital allocation and cost efficiency Capital partnerships Commercial leadership Mergers and acquisitions Public sector partnerships Workforce well-being ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Policy objectives: The Board aspires to maintain a balance such that: • At least two members of the Board are female, with a long-term aspiration to achieve no less than 40% female representation on the Board; and • In the longer-term, at least one director will be from a non-white ethnic minority background. while recognising that: • This balance may not be achieved until further Directors are replaced at the end of their tenure; • On an ongoing basis, periods of change in Board composition may result in temporary periods when this balance is not achieved; • All appointments must continue be made on merit; and • New appointees embody the culture and values of the Group. Diversity (including gender and ethnicity) will be taken into consideration when evaluating the skills, knowledge and experience desirable to strengthen the Board and when making appointments. The Board supports and monitors management’s actions to increase the proportion of senior leadership roles held by women, people from ethnic minority backgrounds and other under-represented groups across the Company in support of the Hampton-Alexander Review and Parker Review recommendations. Board and Company diversity Company 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. 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, and financial or real estate training. The Company aims to recruit the best candidates on the basis of their merit and ability. Board policy During the year the Board reviewed and updated its diversity policy. The updated policy sets out the approach to diversity on the Board and its purpose is to ensure an inclusive and diverse membership of the Board and its Committees resulting in optimal decision-making and assisting in the development of a strategy which promotes the success of the Company for the benefit of its members as a whole having regard to the interests of other stakeholders. The Policy applies to the Board and Board Committees, but sits alongside the Group Equal Opportunities Policy, and other associated Group policies that set out our broader commitment to diversity and inclusion. The Board acknowledges the benefits of greater diversity, including gender diversity and remains committed to ensuring that the Company’s directors bring a wide range of skills, knowledge, experience, backgrounds and perspectives. The Board supports the recommendations of the Davies Review (Women on Boards), the Hampton-Alexander Review and the Parker Review and intends to consider the recommendations when contemplating future appointments to the Board. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 111 Nomination Committee Report continued LISTING RULES (LR 9.8.6R (9)) and (LR 14.3.33R(1)) As at 31 March 2023 the Company had not met all of the targets of the listing rules diversity and inclusion guidelines as follows Listing rule requirement Detail At least 40% of the board are women At least one of the senior board positions (Chair, Chief Executive Officer (CEO), Senior Independent Director (SID) or Chief Financial Officer (CFO)) is a woman. At least one member of the board is from a minority ethnic background (which is defined by reference to categories recommended by the Office for National Statistics (ONS)) excluding those listed, by the ONS, as coming from a white ethnic background). The Board comprises two female Directors and five male Directors, equivalent to 29% female representation. The Board’s policy is to ensure that at least two members of the Board are female, and that the Board has a long-term aspiration to achieve no less than 40% female representation on the Board. As the Board has only seven Directors, Board vacancies are not frequent. The most recent Board appointment was female but this has not increased the female representation as the incoming female replaced an exiting female. The Chair of the Board is female. There are currently no Board members that are from a non-white ethnic background. As is the case with female representation with a small Board with a low turnover of Directors the targets set by the listing rules will take time to achieve. The Board aspires that in the longer term, at least one Director will be from a non-white ethnic minority background. Number of Board members Percentage of the Board Number of senior positions on the Board (CEO, CFO, SID, Chair) Number in executive management Percentage of executive management Men Women Not specified/prefer not to say 5 2 – 71% 29% – 3 1 – 3 2 – 60% 40% – Number of Board members White British or other White (including minority/ white groups) Mixed/Multiple ethnic groups Asian/Asian British Black/African/Caribbean/Black British Other ethnic group, including Arab Not specified/prefer not to say 7 – – – Percentage of the Board 100% – – – Number of senior positions on the Board (CEO, CFO, SID, Chair) Number in executive management Percentage of executive management 4 – – – 5 – – – 100% – – – 112 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceAudit Committee Report Audit, risk and internal control Dear Shareholders I am pleased to present the Audit Committee Report for 2023. The Report provides an outline of the activities carried out by the Committee in accordance with its terms of reference as it supports the Board and the Company’s governance structure and activities. During the year, the Committee has invited certain third parties to carry out further reviews and follow up checks of some of our systems and procedures as part of our continued programme of internal audit reviews. Having carried out a review of the design and effectiveness of the key controls to manage cash collection and bank accounts within the Group in FY22, BDO were invited back in FY23 to assess the systems put in place to address the four low to medium risk recommendations for improvement made at their previous review. Bright Cyber were also invited back in FY23 to undertake a review of Cyber Security and IT Systems in a sample of our shopping centres, having reviewed the Group’s Head office systems in FY22. The Committee has also 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 115 of this report. During the year the Non-Executive Directors have visited a number of the assets. This provides context to the reports received. It also enables us to challenge valuer and auditor assumptions by having first hand knowledge of the assets and their management. 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, enables the Committee members to effectively discharge our duties and responsibilities. Colin Rutherford Audit Committee Chair 14 June 2023 Audit Committee membership Our Committee consists of four Independent Non-Executive Directors: (biographies are available on pages 98 and 99). • Colin Rutherford: Committee Chair • Alastair Miller • Charlie Parker • Karen Miller (appointed to the Committee on 30 May 2022) How the Committee operates • Each Committee member is independent and has broad commercial experience • Colin Rutherford 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 • During the year the Audit Committee held five meetings • The Chief Financial Officer and the Group’s external auditors are invited to attend the Committee meetings. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 113 Audit Committee responsibilities • Oversight of 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 • Monitoring and annually reviewing the auditor’s independence, objectivity and effectiveness of the audit process • Reviewing the Company’s ESG progress. Audit Committee Report continued FY23 Audit Committee activity May • Meeting with the Property Valuers ▼ May • External Auditors’ Report to the Committeee • Internal Controls Review • Gifts and Hospitality register • Going Concern assessment • Viability statement assessment • Risk Review and Principal Risks • ESG achievements • Preliminary results • Fair, Balanced and Understandable review • Review Annual Report for recommendation to the Board • Draft Audit Committee Report in Annual Report • Meeting with External Auditors without management present • Re-appointment of External Auditors recommendation. ▼ November • Meeting with the Property Valuers ▼ November • Going Concern Review – report actions and outcome • External Auditor’s Plan • External Auditor’s Report to the Committee • Internal controls – updates from third parties • Review of Principal Risks • Half year results • Meeting with External Auditors without management present ▼ February • External Auditor Audit Plan Update • Risk Review • Consider requirement for an internal audit function • Review Whisleblowing • Auditor Effectiveness • Annual Review of Terms of Reference 114 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 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. 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 2023, 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, fees 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 2023 were £499k. 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 £95k in non-audit fees to PwC for the financial year ended 31 March 2023. The non-audit fees relate solely to PwC’s review of the interim results for the six months to 30 September 2022. 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. GovernanceSources of evidence obtained and observations dring 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 2023 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. The significant issue considered by the Committee in respect of the year ended 31 March 2023, 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 £551.5 million at 31 March 2023. The Committee and management met with Colliers, Knight Frank and Kroll (previously 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 and estimates and presented challenges which were reported to and discussed with the Committee. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 115 Audit Committee Report continued Risk management and internal controls Internal control structure 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: 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 a number of follow up internal audit reviews have been commissioned to provide 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; • reviewing regular reports containing detailed information regarding financial performance, rolling forecasts, actual and forecast covenant compliance, cashflows and financial and non-financial KPIs; and • visiting the assets to provide context to the reports received. • 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. The effectiveness of the Company’s risk management and internal control systems is reviewed annually and was last reviewed by the Committee in May 2023. 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. 116 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceInternal 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 follow up 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, Bright Cyber were requested to undertake a review of the Group’s IT security and systems. Last year Bright Cyber carried out a review of the Group Head office systems and found the IT systems were secure and fit for purpose. During FY23 Bright Cyber were requested to undertake a review of Cyber Security and IT Systems in a sample of our shopping centres. There were a number of areas where Bright Cyber have recommended improvements which have already been implemented or will be actioned during the coming months. Cash controls As part of the internal audit plan in FY22 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. BDO were therefore invited back in FY23 to assess the systems that had been put in place to address these four low to medium risk recommendations for improvement made at their previous review. BDO confirmed that their recommendations had been incorporated into the systems. 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. Training on whistleblowing is provided to staff annually to capture new staff and to remind existing staff of the procedures. 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 The Committee reviews the Gifts and Hospitality register at least twice a year. During the year a Conflicts of Interest Policy was approved by the Committee and recommended for approval to the Board. The Conflicts of Interest register will also now be regularly reviewed by the Committee. 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. 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 2023 and satisfied itself that the going concern basis of presentation of the financial statements and the related disclosure is appropriate. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 117 Audit Committee Report continued Fair, balanced and understandable assessment 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: • a core experienced team is responsible for the co-ordination • the narrative sections are drafted by the members of the team with of submissions, verification, review and consistency specific responsibility for each area, such as the Chairman, the CEO, the CFO, Sustainability Manager, Director of Communications and Investor Relations, and the Company Secretary Experienced team 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 provide 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, reports from management 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 118 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceRemuneration Committee Report Remuneration Committee Report Dear Shareholders On behalf of the Board, I am pleased to present the Remuneration Committee Report for the financial year ended 31 March 2023. In this statement I have summarised the link between remuneration and performance and our decisions on remuneration for FY23. I have also summarised the proposed changes to the Directors’ Remuneration Policy for FY24-FY26. FY23 has been a successful year for NewRiver despite the wider economic and geopolitical uncertainties. Our community assets have proven to be resilient throughout this period and have under-pinned our performance for the year. 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 ever mindful of the inflationary pressures which are driving up the cost of living and have recognised this in pay awards for our staff for FY24. Remuneration Policy Our Remuneration Policy was approved by shareholders in July 2020 and is due for renewal at our 2023 AGM. Our current policy has served the Company well over the past three years, enabling us to be flexible in the payments to Executive Directors, and to recruit a new CFO. It has provided a good overall link between pay and performance. On this basis, our review concluded that only a few minor amendments were necessary to align to market best practice. A summary of the key changes to the policy are set out on page 122. Implementation of the Policy in FY23 Base salary As reported in the FY22 Remuneration Report, base salaries remained unchanged during FY23 for both the Executive Directors and the members of ExCo. The wider workforce received salary increases that took into account inflation and market competitiveness. Annual bonus The FY23 annual bonus was based on Total Return (25%), Earnings yield (25%), LTV (10%), TAR Return (15%) and strategic objectives including ESG targets (25%). Operational performance over the year was excellent, which was reflected in the Total Return, Earnings Yield and LTV measures all exceeding the stretch performance targets. There was also strong performance against the non financial strategic targets. The only aspect where we failed to achieve the target range was in relation to TAR, where our performance, alongside that of the entire sector, was impacted by the significant property devaluations in the second half of 2022. The resultant out-turn was 82.5% of maximum for Allan Lockhart and Will Hobman. The Committee is comfortable that the formulaic bonus outcome reflects the wider business performance of the Company. 30% of the bonus will be deferred in shares for two years. Long-term incentive plan The FY21 LTIP Awards will vest to the extent that the relative TAR (50%) and Total Shareholder Return (50%) performance targets are met. The relative TAR targets were assessed against performance to 31 March 2023. As the minimum hurdle requirement was not met, this element of the award will lapse. For the TSR element, performance is assessed for a period of three years from the date of grant. Therefore, the vesting level under the TSR element cannot be ascertained until August 2023. Based on a recent assessment of the Company’s TSR, the TSR element is expected to vest in full. On this basis, the total estimated vesting for this award is 50% of maximum. The Committee considered wider business performance over the three-year performance period and is comfortable that the formulaic vesting outcome is appropriate. In addition to looking at our performance in the round, the Committee considered whether the share price increase from grant represented a windfall gain. Over the period since the grant of the FY21 award, our share price has increased from 63p to an average share price over the first quarter of 2023 of 88.27p. Whilst being cognisant of the guidance from the Investment Association on potential windfall gains from FY21 awards granted during the pandemic, we are not scaling back the award on vesting because: • The FY21 Award was scaled back by one third at grant (from 100% of salary to 67% of salary) to ensure that the Executives did not benefit from a windfall gain. • Relative TSR performance against the sector has been strong. Based on the TSR performance to 31 January 2023, our TSR has exceeded the upper quartile TSR performance of other UK REITs (62% vs 14%). On this basis, the Committee decided not to exercise any discretion to reduce the overall vesting outcome. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 119 Remuneration Committee Report continued Other considerations during the year Wider workforce engagement 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 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. I attend staff forums to ensure that there is an opportunity for staff to raise questions or concerns directly with myself. 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. Finally, NEDs have also engaged with employees in the regional operations and found this to be particularly useful. The executive remuneration policy and its implementation were not raised as material issues during the year. Therefore, no amendments were required to the remuneration policy or its proposed implementation as a result of this engagement. Shareholder engagement Ahead of the 2023 AGM, we engaged with our largest investors to understand their views on our proposed new policy and the proposed implementation in FY24. Based on the feedback received from our engagement, investors were supportive of the new policy and no changes were required as a consequence of the investor feedback. Implementation of the Policy in FY24 The implementation of the Remuneration Policy for FY24 is outlined on pages 135 to 136. The Committee considered how remuneration should be implemented for FY24. Part of this process was reviewing current practice against both market and best practice, wider workforce remuneration and pay ratios. The outcome of the review was that our current approach remains appropriate.The key decisions made by the Committee in relation to FY24 include: Base salary: During the year the Committee reviewed the salary increases for the wider workforce, taking into account high inflation and the increase in cost of living. As a result, the wider workforce received an average increase of 5%. The Committee reviewed the base salary levels for Executive Directors and determined that the salaries should be increased by 3%. This increase was materially below the average workforce increase and also recognised that the CEO's salary had not increased for several years. Pensions: The Company currently contributes 15% of base salary for Allan Lockhart. This will reduce at the end of forthcoming AGM to 4% of salary, the rate applying to the workforce. Will Hobman’s Company pension contributions are also 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 FY23, 75% of the bonus will be based on corporate and financial measures, including Total Return, Earnings Yield, LTV and 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). 30% 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 FY23 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 that the operation of our Remuneration Policy recognises the experience of 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. In recognition of the inflationary pressures on the wider workforce, staff have received pay increases at higher percentage levels than the Executive Directors and Members of the ExCo. 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 Chair 14 June 2023 120 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceRemuneration at a Glance FY23 Annual Bonus Performance FY21-23 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 100% Earnings yield (UFFO) 100% Relative TSR vs Peer Group 100% P S P Relative Total Accounting Return vs Peer Group 0% Total 50% l a i c n a n F i TAR Return 0% LTV 100% Strategic measures (25% weighting) Director Achievement (% of max) Implementation of Policy in FY24 c i g e t a r t S Allan Lockhart Will Hobman 90% 90% Executive Pay in FY22/23 1.4m £1,295,657 ) £ ( n o i t a r e n u m e r l a t o T 1.05m £984,462 700k 350k 0k £674,918 £399,453 2023 2022 2023 2022 Allan Lockhart Will Hobman1 Salary Pension Beneﬁts Annual Bonus LTIP Base Salaries Allan Lockhart: £484,100 Will Hobman: £334,750 Benefits No change Pension Allan Lockhart: 15% of salary to reduce at AGM 2023 to 4% of salary 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 at 100% of salary Performance conditions: Relative TSR (50%) Relative TAR (50%) Two-year post-vesting holding period applies 1. Remuneration was pro-rated in 2022 because Will was appointed during FY22. No value for the LTIP award vesting is included in 2023 as the award relates to his employment below board level. Shareholding requirements 200% of salary NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 121 Remuneration Committee Report continued Remuneration Policy In accordance with the remuneration reporting regulations, the remuneration policy as set out below is intended to apply, subject to shareholder approval at the 2023 AGM to be held on 26 July 2023, for a period of three years from that date. Following a detailed review of the remuneration policy and shareholder engagement, the following changes are proposed. These are limited to modest amendments which do not substantively alter the previous policy: Pension The policy has been updated to reflect that Executive Directors may receive a pension contribution in line with the contribution available to the wider workforce (currently 4% of salary). The CEO’s pension will reduce from 15% of salary to 4% of salary from the date of the 2023 AGM. Performance Share Plan The policy wording in respect of performance conditions has been broadened so that non-financial measures may be incorporated alongside financial and stock market based measures. This will provide greater flexibility to operate the policy in line with the evolving business strategy including, potentially, the use of ESG based measures. We have also flexibility for the dividend equivalent calculation to take into account the holding period (where applicable) and not just up to the point of vesting. Shareholding guidelines The post-employment shareholding guideline has been updated to align with the IA guidelines and market best practice such that Executive Directors will be required to retain 200% of salary for two years post-cessation of employment (or the actual shareholding, if lower). Previously the requirement reduced to 100% of salary for the second year. In addition, we have made some minor wording changes to the policy to enhance clarity. Decision making process for the determination, review and implementation of the policy When reviewing the remuneration policy, the Committee considers a wide range of factors, including: • The Company’s strategic priorities and KPIs and culture and values • The remuneration policies and practices for the workforce and the cascade of remuneration throughout the Company and where practicable improving the consistency of the Executive Directors’ remuneration policy with that of the workforce • The latest guidance from our institutional shareholders, investor representative bodies, regulators and statutory requirements • The overall market competitiveness of the senior executives’ packages To manage any potential conflicts of interest, the Committee ensures that no individual is involved in discussions regarding their own remuneration arrangements. The implementation of the Policy is considered annually by the Committee for the year ahead in light of the strategic priorities and the wider stakeholder experience, whilst incentive targets are also reviewed to check if they remain appropriate or need to be recalibrated. In addition to the decision-making process set out above, the Committee addressed the following factors when determining the remuneration policy and practices, as recommend by the UK Corporate Governance Code: 122 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernancePrinciple 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. 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. 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. Alignment to culture Incentive schemes should drive behaviours consistent with company purpose, values and strategy. Remuneration Policy Table Executive Directors • As noted above 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 consult with employees to explain how the policy for Executive Directors aligns with the pay and conditions of the workforce other than, for instance, where there are more stringent requirements in the Executive Directors’ policy for corporate governance reasons. • 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 LTIP awards, shareholding requirement and clawback and malus provisions all help to mitigate risk. • Incentive plans are determined based on a proportion of base salary so there is a sensible balance between fixed pay and performance-linked elements. • There are provisions to override the formula driven outcome of incentive plans and deferral and clawbacks to minimise the likelihood of a poor link between reward and performance. • Incentive plans are determined based on a proportion of base salary so there is a sensible balance between fixed pay and performance-linked elements. • There are provisions to override the formula driven outcome of incentive plans deferral and clawbacks to ensure that poor performance is not rewarded. • All staff are eligible for bonus plans which are approved by the Committee to ensure consistency with Company purpose, values and the performance measures are linked to the business strategy. Purpose & Link to Strategy Operation Maximum Performance Target Element Fixed Salary Pension Benefits To provide competitive post-retirement benefits. To assist with recruitment and retention. To provide a competitive and cost-effective benefits package. To assist with recruitment and retention. Market competitive remuneration base reflecting role, responsibilities, skills and experience Normally reviewed annually, effective 1 April, although salaries may be reviewed more frequently or at different times of the year if the Committee determines this is appropriate. Salaries are set taking into account the performance of the individual, the responsibilities and size of the role, salary increases across the Group and market data for peer companies. Paid in cash monthly. The Executive Directors may participate in the Company’s defined contribution plan or receive a cash supplement in lieu of pension contributions. There is no prescribed maximum. Not applicable. 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. A pension contribution is payable in line with the pension available to the workforce, currently 4% of salary. The CEO’s pension contribution will reduce from 15% of salary to this level from the 2023 AGM. Not applicable. 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. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 123 Remuneration Committee Report continued Executive Directors Purpose & Link to Strategy Operation Maximum Performance Target Element Variable Bonus Performance Share Plan To incentivise performance in the reporting year. Targets are 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. Shareholding Requirement To encourage long-term share ownership and support alignment of interests with shareholders. All measures and targets will be reviewed and set annually by the Committee at the beginning of the financial year and levels of award are determined by the Committee after the year end based on achievement of performance against the stipulated measures and targets. The Committee retains an overriding discretion to adjust pay-outs from formulaic performance condition 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 or conditional awards of shares. 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 retains an overriding discretion to adjust the vesting level from formulaic performance condition outcomes to ensure that the overall level of vesting reflects its view of corporate performance over the performance period and is fair to both shareholders and participants. A holding period of two years will apply following vesting before participants are entitled to sell their shares. Clawback and malus provisions apply as described in the notes to this table. 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. 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 normally 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. Performance targets will apply over the performance period. The Committee will determine the applicable performance targets and their weightings to ensure they are appropriate. Performance conditions may be based on financial, stock market based and/or non-financial measures (including strategic and ESG measures). A majority of the award will be based on financial and stock market based measures. Not applicable 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. 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 two years. The Committee has the discretion to relax this requirement in exceptional circumstances (e.g. serious ill-health). Shares that have been purchased voluntarily may be excluded from the post-cessation shareholding requirement. 124 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceChair and Non-Executive Directors Purpose & Link to Strategy Element Operation Fees To provide market competitive director fees. Annual fee for the Chair. Annual base fee for the Non-Executive Directors. Maximum Fee increases are applied in line with outcome of the review. Performance Target Not applicable. 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). Notes on the remuneration policy table Dividend equivalents Dividend equivalent shares will be added to unvested awards under the 2016 DBP and the 2016 PSP on a reinvested basis, although this can be calculated in an alternative manner at the discretion of the Committee. Dividends will accrue from the date of grant to the vesting date or, if applicable, the last day of the holding period. Performance measures Each year the Committee selects the most appropriate performance measures and targets for the annual bonus plan and LTIP. The measures selected will be aligned with Company strategy and key performance indicators and performance targets are set with the aim of setting stretching targets which incentivise and reward improved performance. Malus and clawback In the event of gross misconduct, or the material misstatement of financial information, or if an error is discovered in the calculation of any incentive plan payments, or where there has been an issue in relation to the company’s reputation, or corporate failure, the Committee has discretion to exercise malus and clawback provisions in respect of all cash bonus and share awards. The Committee may reduce the vesting of awards prior to vesting and/ or require the repayment or reimbursement of awards which have already vested and been exercised across all incentive plans. The Committee may operate clawback on the terms stated above during the 36 months following the payment date of the annual bonus or vesting date of an award granted on the terms of the 2016 PSP. Discretion The Committee may amend the remuneration policy to accommodate minor changes for administrative or legislative purposes. In relation to the operation of the incentive plans, the Committee has certain discretions which include, but are not limited to, the following: • selecting the participants in the plans; • determining the timing of grants of awards and/or payments; • determining the quantum of awards and/or payments (within the limits set out in the remuneration policy); • determining the extent of vesting based on the assessment of performance; • making the appropriate adjustments required in certain circumstances (e.g. change of control or a capital reorganisation); • determining “good” or “bad” leaver status for incentive plan purposes and applying the appropriate treatment; • determining the weighting, performance measures, and targets for the annual bonus plan and the PSP from year to year; and • if events occur that cause the Committee to determine that the performance conditions and/or targets for the incentive plans are unable to fulfil their original intended purpose, to adjust targets and/or set different measures or weightings for the applicable annual bonus and PSP awards. Consideration of shareholders’ views The Committee’s policy is to consult with major Shareholders in respect of significant decisions on executive remuneration and has done so regularly. During the year the Committee consulted extensively in relation to the proposed New Remuneration Policy and investor feedback helped shape the proposals, particularly in relation to our approach to executive pension provision. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 125 Remuneration Committee Report continued How wider employee pay was considered during the policy review The Committee considered carefully the pay and conditions in the workforce generally, as part of its review of the Directors’ remuneration policy. Alastair Miller as Remuneration Chair and also the Non-Executive Director charged with staff engagement hosted a staff forum to explain the Directors’ Remuneration Policy and how it aligns with remuneration of the workforce and to take comments from staff. All the Non-Executive Directors have visited a large range of the assets during the year which has given them the opportunity to meet with more junior staff and listen to their views. The policy for Executive Directors is rolled out on a consistent basis throughout the workforce. All staff participate in the Annual Bonus Plan and Performance Share Plan and we have a consistent approach in relation to benefits and pension, noting the CEO will be aligned following the 2023 AGM. There are however some differences in the Director’s Remuneration Policy compared to the policy for employees. For example, the opportunity for the incentive plans varies by seniority. Service contracts and payments for loss of office Executive Directors’ service contracts are terminable by either party giving the other 12 months’ written notice. If notice is served by either party, the Executive Director may continue to receive base salary, benefits and pension for the duration of their notice period during which time the Company may require the individual to fulfil their current role or may place the individual on garden leave. The Committee will seek to minimise the level of payments to a departing Director, having regard to all circumstances, including the Company’s contractual obligations to the Director, the reason for departure, and the Company’s policy on mitigation. The Company may elect to make a monthly payment of base salary, plus an amount in lieu of benefits/pension contribution/equivalent or just base salary, in lieu of notice. Any payments in lieu of notice would be phased monthly and subject to offset against earnings elsewhere. Reasonable outplacement and legal costs may be payable. Where a Director may be entitled to pursue a claim against the Company in respect of his/her statutory employment rights or any other claim arising from the employment or its termination, the Committee will be entitled to negotiate settlement terms with the Director that the Committee considers to be reasonable in the circumstances and is in the best interests of the Company, and to enter into a settlement agreement with the Director. In addition to the contractual provisions regarding payment on termination set out above, the Group’s incentive plans and share plans contain provisions relating to termination of employment. Good leaver provisions relate to termination of office or employment by reason of death, ill-health, injury, incapacity or disability of the award holder, redundancy or sale or transfer out of the Group or the Company or undertaking employing that employee, or any other circumstances stipulated by the Committee at the date of award. For any good leaver the approach in relation to the incentive plans will be as follows: Annual bonus: bonus may be payable at the normal time pro-rata for the portion of the year worked. Outstanding deferred bonus awards would be retained and would vest at the usual time. PSP awards: awards would vest at the usual time subject to the achievement of the performance conditions and would normally be scaled back pro-rata for the extent of the vesting period completed at cessation of employment (unless in exceptional circumstances the committee determines that the award should not be scaled back). The two year post vest holding period would usually continue to apply. 126 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 If an Executive Director is not deemed to be a good leaver, all bonus entitlements and LTIP awards would normally lapse. Non-Executive Directors’ letters of appointment incorporate a notice period of three months. No payment for compensation for loss of office will be made to the Chair or any Non-Executive Director other than where the Company determines that fees for the notice period should be paid. The details of the service contracts for Executive Directors and Letters of Appointment for the Non-Executive directors are summarised below: Expiry date of service agreement of letter of appointment 12 month rolling contracts 3 month rolling contracts Directors Date of Appointment Allan Lockhart Will Hobman Margaret Ford Colin Rutherford Dr Karen Miller Charlie Parker Alastair Miller 18 August 2016 20 August 2021 1 September 2017 5 February 2019 30 May 2022 10 September 2020 18 August 2016 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. In exceptional circumstances, the maximum level of variable pay which may be awarded to a new Executive Director in the first year of appointment under the policy will be 325% of salary (i.e. 125% annual bonus plus 200% PSP award). Different performance measures may be set for any initial awards under the DBP and PSP after considering the responsibilities of the individual, 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. Governance 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 form, any applicable performance conditions and 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. Illustrations of the operation of the Remuneration Policy 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 £1,857k 13.0% £1,615k 30.0% 26.1% 37.4% 32.6% £950k 12.7% 31.9% £526k 100.0% 55.4% 32.6% 28.3% £350k £1,103k £1,271k 13.2% 30.3% 26.3% 38.0% 32.9% £643k 13.0% 32.5% Minimum On Target Maximum Maximum Minimum On Target Maximum Maximum 100.0% 54.5% 31.7% 27.6% Fixed Pay Annual Bonus LTIP with Share Price Increase with Share Price Increase LTIP value with 50% share price growth Minimum performance: • comprising the minimum remuneration receivable (being base salary, On target performance: pension and benefits received in FY23); • 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 2023 127 Remuneration Committee Report continued Remuneration Report This section sets out how the Directors’ Remuneration Policy was implemented during the financial year ended 31 March 2023. Where stated, disclosures regarding Director’s remuneration have been audited by the Company’s external auditors, PwC. This section, together with the Chair’s Statement, is subject to an advisory vote at the 2023 AGM. Remuneration Committee The Remuneration Committee is comprised of all the Non-Executive Directors, including the Chair. Karen Miller was appointed to the Board on 30 May 2022 and joined the Committee on this date. The Remuneration Committee meets at least four times a year, together with adhoc meetings when required. It met four times during the year. A Board and Committee attendance chart is contained in the Governance report on page 106. 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 Chair and senior executives below Board level. Terms of reference for the Remuneration Committee can be found on the Company’s website. 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. Committee members Alastair Miller: Committee Chair Margaret Ford Colin Rutherford Charlie Parker Dr Karen Miller 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. FY23 Remuneration Committee activity May • Review outcome of Corporate and personal targets for Exec Director bonuses • Review and approve ExCo bonuses • Consider DBS and PSP awards and targets • FY23 targets and objectives • Review Remuneration report ▼ September • Plan and discuss the proposed new Remuneration Policy • Review Terms of Reference ▼ November • Consider the Remuneration Policy proposal • Review the shareholder consultation process ▼ March • Consider shareholder feedback • Report from Korn Ferry on developments in market practice in remuneration • Review wider workforce arrangements and pay policy • FY24 targets and objectives 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 2022 AGM, along with the number of votes withheld. That the Directors’ remuneration report be received and approved (2022 AGM) That the Directors’ remuneration policy be received and approved (2020 AGM) 128 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Votes for % Votes against Total shares for and against % Votes withheld 130,803,393 91.13 12,735,708 8.87 143,539,101 19,847 160,581,406 94.19 9,902,752 5.81 170,484,158 89,031 GovernanceRemuneration 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 FY23 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 £47,770 in the year ended 31 March 2023. 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 FY23 (audited) The following tables show a single figure total of remuneration for the year ended 31 March 2023 for each of the Directors and compares this figure to the prior year. Executive Directors Financial Year Salary £ Benefits1£ Pension3£ Subtotal for fixed pay £ Cash bonus £ Value of bonus deferred into shares £ Long-term incentive plans £ Subtotal for variable pay £ Total £ Allan Lockhart Will Hobman2 2023 2022 2023 2022 470,000 470,000 325,000 189,583 5,001 3,337 2,168 855 70,500 70,500 13,000 7,583 545,501 543,837 340,168 198,021 338,870 308,438 234,325 141,002 145,230 266,056 – – – 132,187 100,425 60,430 750,156 1,295,657 984,462 440,625 674,918 334,750 399,453 201,432 1. Benefits are the Directors’ private medical cover. 2. Will Hobman was appointed to the Board on 20 August 2021 and the remuneration for FY22 shown is from this date. The value for the bonus has been pro-rated from appointment, in FY22. No LTIP vesting is shown in respect of Will Hobman as the award predated his appointment as CFO. 3. Allan Lockhart received a pension contribution of 15% of salary. Will Hobman received a pension contribution of 4% of salary. Non-Executive Directors Financial Year Margaret Ford Kay Chaldecott1 Alastair Miller Charlie Parker Colin Rutherford Dr Karen Miller2 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Base Fee £ 160,000 160,000 16,667 50,000 50,000 50,000 50,000 50,000 50,000 50,000 42,051 – Audit Committee Chairman £ Remuneration Committee Chairman £ Senior Independent Non-Executive Director £ – – – – – – – – 7,500 7,500 – – – – – – 7,500 7,500 – – – – – – – – – – 7,500 7,500 – – – – – – Total £ 160,000 160,000 16,667 50,000 65,000 65,000 50,000 50,000 57,500 57,500 42,051 – 1. Kay Chaldecott stepped down from the Board on 26 July 2022. 2. Dr Karen Miller was appointed to the Board on 30 May 2022. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 129 Remuneration Committee Report continued Annual bonus for the year to 31 March 2023 (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 2023 are set out in the tables below. Weighting Threshold Target Stretch Actual result 25% of maximum 50% of maximum 100% of maximum Achievement % of maximum available under that element Pay-out as a percentage of total bonus Allan Lockhart Will Hobman Allan Lockhart Will Hobman 25% At index 10% ahead 25% <5% below £21.7m 20% ahead >5% or above Stretch 100% 100% £25.8m 100% 100% <38% <10% <36% 6.7% <34% >10% 33.9% Miss 100% 0% 100% 0% 25% 25% 10% 0% 25% 25% 10% 0% Measure Corporate Total Return vs IPD All Retail Earnings yield (UFFO) Financial LTV TAR Return Strategic Strategic objectives 10% 15% 25% See below 90% 90% 22.5% 22.5% A summary of the strategic objectives are shown below: Strategic objectives Weighting Assessment of performance by the Committee Achievement Cost reductions: unlock further cost saving Achieve further disposals from the Workout portfolio Capital Partnerships: secure additional capital partnerships ESG Green Financing Structure GRESB and EPRA Score Maintenance Measured Reduction in the Journey to Net-Zero Total Allan Lockhart Will Hobman Allan Lockhart Will Hobman 5% A further £900k of savings unlocked 7.5% Disposal of Wakefield and Darlington assets M&G mandate to manage 16 Retail Parks and 2 Shopping centres 5% 5% 7.5% 5% 5% 7.5% 5% Achieved target GRESB and EPRA scores and progress on Net-Zero see ESG Report on pages 54-87 90% 90% 7.5% 25% 5% 22.5% 5% 22.5% Based on performance to 31 March 2023, 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 82.5% 82.5% % of salary 103% 103% Bonus outcome £484,100 £334,750 Thirty percent of the bonus will be deferred into shares for two years. Deferred shares are subject to continued employment. 130 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceLong-term Incentive Plans (audited) Vesting of Performance Share Plan awards Performance Share Plan Awards were granted to Allan Lockhart and Will Hobman on 21 August 2020. The performance targets for these awards are shown below: Weighting Threshold Target Stretch Actual result Vesting (% of max) Measure Total Shareholder Return vs UK REITs1 Total Accounting Return vs UK REITs1 25% of maximum 75% of maximum 62.5 percentile 62.5 percentile Median Median 50% 50% 100% of maximum Upper Quartile Below median Upper Quartile Below median Total 0% 100% 50% 1. The UK REIT peer group listed on page 132. The targets for the Total Accounting Return element were assessed against performance to 31 March 2023. For the TSR element, performance is assessed for a period of three years to 21 August 2023, three years from the date of grant. Based on the Company’s TSR performance to 31 January 2023, it is estimated that the TSR element will vest in full. The actual TSR and vesting level will be provided in the FY24 Directors’ Remuneration Report The Committee is comfortable that the formulaic outcome of the LTIP reflects wider business performance and so no discretion has been applied. The estimated vesting levels for the FY21 LTIP awards are shown below: Executive Allan Lockhart Will Hobman Grant date Vest date 21-Aug-20 21-Aug-20 21-Aug-23 21-Aug-23 Number of shares granted Estimated number of shares to vest Value of share to vest 497,354 158,730 248,677 79,365 £219,507 £70,055 Dividend equivalents 52,727 16,827 Estimated value £266,056 £84,911 • Allan Lockhart’s FY21 award remains subject to a two-year post-vesting holding period. Will Hobman was the Finance Director (below Board level) when the FY21 awards were granted and so no holding period applies. Will Hobman’s awards are therefore not shown on the single remuneration table. • The value of the shares to vest are based on a three-month average share price of 88.27p to 31 March 2023. This value will be restated in the single figure table next year based on the actual share price on the date of vesting. • Dividend equivalents include the final dividend declared for FY23 to be paid in August 2023 prior to vesting. • The share price at grant was 63p, therefore the share price has increased by 25.27p. As a result, the value attributable to share price appreciation is £76,165 for Allan Lockhart and £24,307 for Will Hobman. PSP awards granted in the year to 31 March 2023 (audited) The following Performance Share Plan awards were granted to Executive Directors as nil cost options on 6 July 2022: Executive Allan Lockhart Will Hobman Value of awards at grant date1 (% salary) Number of shares comprising award % of award vesting at threshold Vesting Period End Date Holding Period End Date £470,000 ( 100%) £325,000 (100%) 532,880 368,481 25% 25% 6 July 2025 6 July 2025 6 July 2027 6 July 2027 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 88.2p. Performance will be assessed from 1 April 2022 to 31 March 2025. The targets for both performance conditions are as follows: Below threshold Threshold Maximum TSR ranking vs. UK REITs (50% of award) Total Accounting Return ranking vs. UK REITs (50% of award) Vesting (% of award)1 Less than Median (50th percentile) Equal to Median (50th percentile) Equal to 62.5th percentile Equal to Upper Quartile (75th percentile) and above Less than Median (50th percentile) Equal to Median (50th percentile) Equal to 62.5th percentile Equal to Upper Quartile (75th percentile) and above 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 NTA per share and the level of dividends paid per share. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 131 Remuneration Committee Report continued The TSR and TAR comparator group was composed of the companies set out in the list below. • GREAT PORTLAND ESTATES • UNITE GROUP • SEGRO • LAND SECURITIES GROUP • WORKSPACE GROUP • BIG YELLOW GROUP • BRITISH LAND • ASSURA • DERWENT LONDON • SHAFTESBURY CAPITAL • HAMMERSON • TRITAX BIG BOX REIT • GRAINGER • CLS HOLDINGS • LONDONMETRIC PROPERTY • SAFESTORE HOLDINGS • UK COMMERCIAL PROPERTY REIT • PRIMARY HEALTH PROPERTIES Deferred Shares granted in the year to 31 March 2023 (audited) Awards of Deferred Bonus Shares over the Company’s shares were granted to Executive Directors as nil cost options in FY23 as shown below. The deferred share awards are based on 30% of the bonus awarded for the year to 31 March 2022. Vesting of the awards is normally subject to continued employment at the date of vesting in two years’ time. Executive Allan Lockhart Will Hobman Number of shares granted1,2 Face value of the award at grant date Grant date Vest date 148,960 109,255 £132,187 £96,953 6 July 2022 6 July 2022 6 July 2024 6 July 2024 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 88.74p. 2. Awards are not subject to performance conditions. 3. Vesting of awards is normally subject to continued employment unless an employee leaver is deemed a ‘Good Leaver’. 4. Will Hobman was the Finance Director (below Board level) prior to his appointment as CFO. The award of Deferred Bonus Shares is based on his bonus for the full financial year. Summary of Directors Interests (audited) The beneficial interests of the Executive Directors in share awards and share options as at 31 March 2023 are shown in the following tables. Grant Date Plan Vesting by 1 Share price at date of award £ Exercise price £ At 31 March 2022 Granted Dividend equivalent shares added2 Lapsed Exercised At 31 March 2023 Allan Lockhart May 2018 Jun 2019 Jun 2019 Aug 2020 Sept 2021 Sept 2021 July 2022 July 2022 Total DBP May 2020 Jun 2022 PSP Jun 2021 DBP Aug 2023 PSP DBP Sept 2023 PSP Sept 2024 July 2024 DBP July 2025 PSP 2.86 1.77 1.79 0.63 0.78 0.78 0.88 0.88 nil nil nil nil nil nil nil nil 62,194 314,327 66,952 537,381 37,348 622,480 – – – – – – – 148,960 – 532,880 1,640,683 681,840 Will Hobman – – – 44,340 3,081 51,362 12,290 43,968 155,041 – (314,327) – – – – – – (314,327) 62,194 – – – 66,952 – 581,721 – 40,429 – 673,842 – 161,250 – – 576,848 – 2,163,236 Grant Date Plan Vesting by 1 Share price at date of award £ Exercise price £ At 31 March 2022 Granted Dividend equivalent shares added2 Lapsed Exercised3 Jun 2019 Aug 2020 Aug 2020 Sept 2021 Sept 2021 July 2022 July 2022 Total Jun 2022 PSP Aug 2022 DBP Aug 2023 PSP DBP Sept 2023 PSP Sept 2024 July 2024 DBP July 2025 PSP 1.77 0.63 0.63 0.78 0.78 0.88 0.88 nil nil nil nil nil nil nil 70,220 48,668 171,504 21,852 271,507 – – – – – – 109,255 – 368,481 583,752 477,736 – – 14,151 1,802 22,402 9,014 30,404 77,773 (70,220) – – – – – – (70,220) – (48,668) – – – – – (48,668) At 31 March 2023 – – 185,655 23,654 293,909 118,269 398,885 1,020,373 1. A holding period of two years is applied following vesting. 2. The right to dividends is accrued and is only payable if and to the extent that the awards vest. The FY23 final dividend declared is not included in this figure. 3. Will’s awards were exercised on 25 November 2022, some of the shares were sold to cover tax at a share price of 71.3p. The aggregate gain from exercising this award was £34,840. DBP = Deferred Bonus Plan. PSP = Performance Share Plan. 132 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Governance 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 2023 374,286 188,517 106,440 69,806 – 11,454 – Allan Lockhart Will Hobman Margaret Ford Alastair Miller Colin Rutherford Charlie Parker Dr Karen Miller Value of beneficially owned shares as % of salary1 Vested DBP awards held at 31 March 20232 Vested but unexercised PSP awards held at 31 March 2023 Unvested DBP awards held at 31 March 2023 63% 46% – – – – – 129,146 – – – – – – – – – – – 201,679 141,923 – – – – – Value of holdings including vested and unvested DBP and PSP1 Unvested PSP awards held at 31 March 2023 119% 80% – – – – – 1,832,411 878,449 – – – – – Total held as at 31 March 2023 Shareholding % of salary 2,537,522 1,208,889 106,440 69,806 – 11,454 – 119% (unmet) 80% (unmet) N/A N/A N/A N/A N/A 1. Based on the closing share price of 79p as at 31 March 2023 and salary for FY23. 2. Includes dividend equivalent shares added to that date. Although vested these awards have not yet been exercised. 3. All awards are nil cost awards. 4. Vested but unexercised PSPs are not subject to performance conditions. Unvested PSPs are subject to performance conditions. Outstanding DBP awards are not subject to performance conditions. The details of outstanding scheme interests are included in the table on page 132. 5. At least half of the net shares vested under the deferred annual bonus and the PSP must be retained until the shareholding requirement is met. DBP = Deferred Bonus Plan. PSP = Performance Share Plan. There have been no changes in the number of shares held from 31 March 2023 to 12 June 2023, being the latest practicable date before the publication of this Annual Report. Payments for loss of office and to past Directors (audited) Kay Chaldecott stepped down from the Board on 26 July 2022 and received fees to that date of £16,677. There were no additional payments. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 133 Remuneration Committee Report continued 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 FY13 FY14 FY15 FY16 NewRiver FY17 FY18 FTSE 250 FY19 FY20 FTSE 350 REIT FY21 FY22 FY23 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 2013 and values at intervening financial year ends over a ten-year period to 31 March 2023. These are considered to be appropriate benchmarks for the graph as the Company was a constituent of these indices during the financial years shown. 2014 2015 2016 2017 2018 2019 20201 2021 2022 2023 David Lockhart David Lockhart David Lockhart David Lockhart David Lockhart Allan Lockhart Allan Lockhart Allan Lockhart Allan Lockhart Allan Lockhart 642,000 850,000 1,792,205 1,341,958 1,012,946 911,972 543,239 637,339 984,462 1,295,657 69.0 70.0 100.0 66.7 77.3 64.0 – – 50.0 76.3 13.1 – – – 20.0 75.0 82.5 – – 50.0 Total remuneration (£) Annual bonus (% of max) Total LTIP vesting (% of max) 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 voluntary 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. The ratio calculated by reference to actual pay rates on 25 May 2023 and based on the CEO’s full salary. The CEO pay ratio is broadly in line with the ratio last year. 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. FY23 FY22 FY21 FY20 Year Method 25th percentile pay ratio Median pay ratio 75th percentile pay ratio Option A Option A Option A Option A 6.6:1 7:1 7:1 8:1 12.6:1 12.7:1 9:1 17:1 19.2:1 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 134 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 FY23 Total Pay £196,932 £102,551 £67,469 GovernanceAnnual 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 Salary/fee Benefits Annual Bonus Salary/fee Benefits Annual Bonus Salary/fee Benefits Annual Bonus FY22/FY23 FY21/22 FY20/FY21 Executive Directors Allan Lockhart Will Hobman1 Non-Executive Directors Margaret Ford Kay Chaldecott2 Alastair Miller Charlie Parker Colin Rutherford Dr Karen Miller3 All Employees4 0% 0% 0% 0% 0% 0% 0% N/A 5% 49.9% 32.9% 9.9% 8.5% N/A N/A N/A N/A N/A N/A 37% N/A N/A N/A N/A N/A N/A 6% 0% N/A 0% -6% 0% 0% 6% N/A 5.15% 18% N/A N/A N/A N/A N/A N/A N/A 20% 369% N/A N/A N/A N/A N/A N/A N/A 96% 0% N/A 0% 0% 0% 0% 0% N/A 0% 0% N/A N/A N/A N/A N/A N/A N/A 0% 100% N/A N/A N/A N/A N/A N/A N/A 100% 1. Will Hobman was appointed to the Board on 20 August 2021 for ease of comparison, we have compared his pay on a pro-rated basis. 2. Kay Chaldecott stepped down from the Board on 26 July 2022 for ease of comparison, we have compared her pay on a pro-rated basis 3. Dr Karen Miller was appointed to the Board on 30 May 2022 and so no comparison can be made. 4. 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 FY23 and FY22. Total spend on employee pay1 Total distributions to shareholders Share Buy Backs FY23 £’000 6,292 20,863 – FY22 £’000 % difference from prior year 7,614 21,661 – (17.3%) (3.7%) 0% 1. Includes salaries, bonuses, social security costs and pension costs as shown in the notes to the Financial Statements. Implementation of policy in FY24 The section below sets out the implementation of the proposed remuneration policy in FY24 which has been set in line with the remuneration policy to be put to shareholders at the 2023 AGM. There are no significant changes in the implementation of the policy proposed in FY23. Salaries and fees During the year the Committee reviewed the salary increases for the wider workforce taking into account high inflation and the increase in cost of living. As a result, the wider workforce received an average increase of 5%. The Committee reviewed the base salary levels for Executive Directors and determined that the salaries should be increased by 3%. The base salaries for FY24 are set out below: Executive Allan Lockhart – Chief Executive Officer Will Hobman – Chief Financial Officer Salary for FY23 Salary for FY24 % increase £470,000 £325,000 £484,100 £334,750 3% 3% The Committee also reviewed the Chair fees and the Board (minus the Non-Executive Directors) reviewed the Non-Executive Director fees and concluded that there should be a similar 3% increase to base fees and Committee Chair Fees. The fees for the Chairman and Non-Executive Directors in FY24 are set out below: Director Chairman Basic fee for a Non-Executive Director Additional fee for serving as Chairman of the Audit and Remuneration Committees Additional fee for serving as the Senior Independent Non-Executive Director • The Non-Executive Directors’ fees were last increased in April 2018 Fees for FY23 £160,000 £50,000 £7,500 £7,500 Fees for FY24 £164,800 £51,500 £7,725 £7,725 % increase 3% 3% 3% 3% NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 135 Remuneration Committee Report continued 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. In line with FY23, the bonus will be based on financial and corporate measures (75%) as well as personal strategic objectives (25%). The performance measures are set out in the table below. Measure Total Return vs IPD index Earnings yield (UFFO) LTV TAR Return Strategic objectives (including ESG targets) FY24 Weighting 25% 25% 5% 20% 25% 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 FY24 Remuneration Report. 30% of the bonus will be deferred into shares for two years. Long-term incentives – Performance Share Plan The Committee intends to grant LTIP awards to Executive Directors of 100% of salary. The extent to which the LTIP awards will vest will be determined by the performance measures listed below. Measure Weighting 25% of maximum 75% of maximum 100% of maximum Relative TSR vs UK REIT peer group Relative TAR vs UK REIT peer group 50% 50% Median Median 62.5 percentile 62.5 percentile Upper Quartile Upper Quartile Threshold Target Stretch • The UK REIT peer group listed on page 132. Awards must be held by Executive Directors for a further two years after vesting. Signed on behalf of the Board Alastair Miller Committee Chair 14 June 2023 136 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceDirectors’ 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 2023. Kerin Williams Company Secretary 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 184 to 185. 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 96. Results and dividend The Directors have proposed a final dividend of 3.2 pence per share. Together with the interim dividend of 3.5 pence, the total dividend for FY23 is 6.7 pence. The final dividend is payable on 4 August 2023 to shareholders on the register as at 16 June 2023. 3.2 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 7.4 pence per share was paid in FY22. The Board The Directors, who served throughout the year unless stated otherwise, are detailed below: Margaret Ford Allan Lockhart Will Hobman Kay Chaldecott Alastair Miller Karen Miller Charlie Parker Colin Rutherford Service in the year 31 March 2023 Served throughout the year Served throughout the year Served throughout the year Resigned 26 July 2022 Served throughout the year Appointed 30 May 2022 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 98 to 99. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 137 Directors’ Report continued Additional Information The Strategic Report is set out on pages 1 to 95 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: 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 Diversity Listing Rule: 9.8.4R (1)(2) (5-14)(B) 9.8.4R (4) 9.8.6R (9) & LR 14.3.33R(1) Page numbers Page 21 Staff – pages 22 to 23 and 101 Pages 132 to 133 of the Directors’ Remuneration Report Strategic report – pages 22 to 27, Governance report – pages 102 & 107 ESG report – pages 54 to 87 ESG report – page 63 Strategic Report – pages 1 to 95 Pages 88 to 95 and pages 175 to 178 Page 95 Page 95 Pages 96 to 140 Pages 22, 74 & 112 Not applicable Long-term incentive plans - pages 131 to 132 Page 112 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 96 to 140. Directors’ interests Details of the Directors’ share interests can be found in the Remuneration Committee Report on pages 132 to 133. All related party transactions are disclosed in note 27 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 2023 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 Company’s latest Articles of Association were adopted at the 2021 AGM. 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 2023 and as at 7 June 2023 (being the latest practicable date prior to publication of the Annual Report): As at 31 March 2023 Shareholder Premier Milton M&G Plc IntegraFin Holdings FIL Limited Farringdon Capital Management As at 7 June 2023 Shareholder Premier Milton FIL Holdings M&G Plc IntegraFin Holdings Farringdon Capital Management Number of shares % of issued Share Capital 15,803,355 15,404,761 15,480,100 15,080,808 11,909,919 5.07% 4.99% 4.96% 4.87% 3.83% Number of shares % of issued Share Capital 15,803,355 15,770,051 15,404,761 15,480,100 11,909,919 5.07% 5.06% 4.99% 4.96% 3.83% 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. 138 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceBranches 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 25 to the Group’s financial statements. Share capital structure As at 31 March 2023, the Company’s issued share capital consisted of 311,908,265 ordinary shares of one penny each. No shares are held in treasury. 1,466,713 ordinary shares are held in the Employee Benefit Trust. Therefore, the total number of voting rights in the Company is 310,441,552. Further details of the share capital, including changes throughout the year are summarised in note 23 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 2022, 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 2023 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 set out on pages 123 to 125. 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 2023. 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 authorise the Audit Committee to 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 2023 AGM and the recommendations in relation to them will be set out in the 2023 AGM Notice. Political donations No political donations were made by the Company or its subsidiaries during the year (2022: Nil). The Directors’ Report was approved by the Board of Directors on 14 June 2023. By Order of the Board Kerin Williams Company Secretary 14 June 2023 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 139 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 profit 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 Chair 14 June 2023 Directors’ Report continued Statement of Directors’ responsibilities in respect of the financial statements The Directors are responsible for preparing the Annual Report and Accounts and the financial statements in accordance with applicable law and regulation. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance 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. 140 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 GovernanceIndependent auditors’ report to the members of NewRiver REIT plc Report on the audit of the financial statements Our audit approach Overview 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 2023 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 as applied in accordance with the provisions of the Companies Act 2006; • the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, including 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 2023; 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. 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. 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 and the Company stand alone financial statements, 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) • Valuation of investments in subsidiaries (Company) Materiality • Overall Group materiality: £7.8 million (2022: £8.2 million) based on 1% of the Group’s total assets. • Specific Group materiality: £1.2 million (2022: £1.3 million), based on 5% of EPRA earnings. • Overall Company materiality: £8.1 million (2022: £8.0 million) based on 1% of the Company’s total assets. • Overall Group performance materiality: £5.8 million (2022: £6.1 million), Specific Group performance materiality £0.9 million (2022: £1.0 million) and Company performance materiality £6.1 million (2022: £6.0 million). 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), which was a key audit matter last year, is no longer included because of the one-off nature of the transaction in the prior year. Otherwise, the key audit matters below are consistent with last year. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 141 Auditors Report continued Key audit matter How our audit addressed the key audit matter Valuation of investment properties (Group) Refer to page 115 (Audit Committee report), pages 153-179 (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 property assets within the UK which includes shopping centres, retail parks and high street properties. The total value of the portfolio as at 31 March 2023 was £593.6 million (investment properties £551.5 million and £42.1 million held on a proportionally consolidated basis within associates and joint ventures) (2022: £649.4 million). 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, together with considerations around the impact of climate change. 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 2023. The valuations were carried out by external valuers (Colliers, Knight Frank and Kroll - formerly 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’. In determining the valuation of management’s portfolio, 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 investment properties 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. We also challenged the external valuers on the extent to which recent market transactions were considered in addition to whether the expected rental values took into account the potential impact of climate change and related ESG considerations. In addition, we performed the procedures described below for each type of property. 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 and conclude on the reasonableness of the assumptions utilised such as: • location (community shopping centres and conveniently located retail parks); • size; • occupancy rates; • marketability; and • recent comparable transactions where appropriate. Overall findings We found that the assumptions were applied appropriately, reflected comparable market transactions (where available and appropriate) and included consideration of the impact of climate change and a range of other external factors. Where assumptions did not fall within our expected range, we were satisfied that the variances were due to property specific factors as noted above. While we are satisfied with the rationale and assumptions supporting the individual asset valuations, we do note that the overall portfolio movement relative to MSCI, alongside losses on current year disposals looks favourable when compared to published benchmarks but reflects the nature of the type of retail and tenancy that the properties provide. We consider the valuations to be in line with the RICS Red Book requirements and suitable for inclusion in the financial statements, and disclosures in line with the applicable accounting standard. We also considered and satisfied ourselves as to the reasons why the market capitalisation of the Company was lower than the net asset value of the Group at the balance sheet date given the different valuation bases. 142 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statementsKey audit matter How our audit addressed the key audit matter Valuation of investments in subsidiaries (Company) We obtained the Company’s assessment of the valuation of investments held in subsidiaries as at 31 March 2023 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 valuation 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 values of investment properties had been appropriately included in the assessment of the valuation of investments in subsidiaries; and • reviewed the disclosures within the Annual Report, including the £6.0 million impairment, and considered these to be complete and accurate. Based on the work performed, we concur with the amount of impairment arising. We evaluated the disclosures in the financial statements and found these to be appropriate. Refer to pages 182-186 (Notes to the financial statements – Note A (Accounting policies) and Note B (Investments in subsidiaries)). The Company holds investments in subsidiaries amounting to 323.9 million as at 31 March 2023 (2022: £329.9 million). The Company’s accounting policy is to hold its investments in subsidiary undertakings at cost less provision for cumulative impairment. The Company has recognised an impairment of £6.0 million this year (2022: impairment reversal of £9.4 million). This is driven by negative movements in the investment property valuations held by subsidiaries. Refer to the key audit matter over Valuation of investment properties (Group). Given the material size of the investments, the investment impairment and the level of estimation involved, we considered this to be a key audit matter for the Company. 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 parks, high street shops and developments across the United Kingdom. These are held within a variety of subsidiaries, joint ventures and associates. 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. In respect of the audit of the Company, the Group audit team performed a full scope statutory audit. The impact of climate risk on our audit As part of our audit we also made enquiries of management and its valuation experts to understand the process they have adopted to assess the potential impact of climate change on the business. Management considers that 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 and we particularly considered how climate change risks could 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. Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Overall materiality How we determined it Rationale for benchmark applied Financial statements - Group Financial statements - Company £7.8 million (2022: £8.2 million). £8.1 million (2022: £8.0 million). 1% of the Group's total assets 1% of the Company's total assets 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. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 143 Auditors Report continued Specific materiality How we determined it Rationale for benchmark applied Not applicable Not applicable Not applicable £1.2 million (2022: £1.3 million) 5% of the Group's 2023 EPRA earnings (2022: 5% of the Group's 2022 EPRA earnings) 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 164 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% (2022: 75%) of overall materiality, amounting to £5.8 million (2022: £6.1 million) for the Group financial statements and £6.1 million (2022: £6.0 million) for the Company financial statements. Our performance materiality for operating activities was 75% of specific materiality, amounting to £0.9 million (2022: £1.0 million) for the Group financial statements. In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.3 million (Group audit) (2022: £0.4 million) for investing and financing activities, £0.1 million (Group audit) (2022: £0.1 million) for operating activities and £0.8 million (Company audit) (2022: £0.8 million) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. 144 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statementsConclusions 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; • confirming the Group’s revolving credit facility, Corporate bond and long-term credit rating and understanding the covenant thresholds; • discussing the key assumptions supporting the base case 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; • reviewing management’s reasonable worst case scenario and performing our own sensitivity analysis on the forecasts and key assumptions to understand the potential impact on the financial covenants, focusing specifically on the Loan to Value (LTV) covenant, and liquidity headroom; • reperforming a stress test on the reasonable worst case scenario by assessing the total fall in investment property required in order to breach banking covenants; • checking the mathematical accuracy of management’s model; and • assessing management’s forecasting accuracy by comparing the forecasts established to the actual performance for the past 3 years up to and including 2023. 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. 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 2023 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. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 145 Auditors Report continued 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 and Company 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 Director’s responsibilities in respect of the financial statements, the Directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to listing requirements including the UK FCA Listing Rules, 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 and section 1158 of the Corporation Tax Act 2010, Real Estate Investment Trust (REIT) status. 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; 146 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements• 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. 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. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 147 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 four years, covering the years ended 31 March 2020 to 31 March 2023. 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 14 June 2023 148 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statementsCCoonnssoolliiddaatteedd SSttaatteemmeenntt ooff CCoommpprreehheennssiivvee IInnccoommee For the year ended 31 March 2023 Year ended 31 March 2023 Year ended 31 March 2022 Continuing Operations Revenue Property operating expenses* Net property income Administrative expenses Other income Share of profit from joint ventures Share of profit from associates Net property valuation movement Loss on disposal of investment properties Operating (loss) / profit Finance income Finance costs (Loss) / profit for the year before taxation Taxation (Loss) / profit for the year after taxation from continuing operations Loss for the year after taxation from discontinued operations Loss for the year Total comprehensive loss for the year Notes 4 5 6 7 15 16 14 9 10 10 11 8 Operating and financing 2023 £m 72.2 (25.1) 47.1 (12.6) 1.4 2.4 0.1 – (3.8) 34.6 1.4 (15.4) 20.6 – Fair value adjustments 2023 £m – – – – – 0.6 0.2 (38.2) – (37.4) – – (37.4) – Total 2023 £m 72.2 (25.1) 47.1 (12.6) 1.4 3.0 0.3 (38.2) (3.8) (2.8) 1.4 (15.4) (16.8) – Operating and financing 2022 £m 73.7 (25.5) 48.2 (13.4) – 1.1 0.2 – (4.2) 31.9 1.4 (19.8) 13.5 – 20.6 (37.4) (16.8) 13.5 – 20.6 – (37.4) Fair value adjustments 2022 £m – – – – – 2.9 2.9 (12.3) – (6.5) – – (6.5) – (6.5) (1.9) (8.4) Total 2022 £m 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) 2.3 2.3 (8.6) (8.6) (31.7) (18.2) – (16.8) (16.8) (5.4) (5.4) (5.4) (5.4) There are no items of other comprehensive income for the current or prior year (Loss) / earnings per share – continuing operations Basic (pence) Diluted (pence) Loss per share Basic (pence) Diluted (pence) 12 12 12 12 * Included in property operating expenses is a loss allowance reversal of £0.1 million (2022: £0.3 million) of expected credit loss relating to debtors for continuing operations. The notes on pages 153 to 179 form an integral part of these financial statements. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 149 CCoonnssoolliiddaatteedd BBaallaannccee SShheeeett As at 31 March 2023 Non-current assets Investment properties Right of use asset Investments in joint ventures Investments in associates Property, plant and equipment Total non-current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets Equity and liabilities Current liabilities Trade and other payables Lease liability Total current liabilities Non-current liabilities Lease liability Borrowings Total non-current liabilities Net assets Equity Share capital Share premium Merger reserve Retained earnings and other reserves Total equity Net Asset Value (NAV) per share (pence) Basic Diluted EPRA NTA Notes 2023 £m 2022 £m 14 22 15 16 17 19 20 22 22 21 12 12 12 627.3 684.6 0.9 23.8 5.5 0.4 657.9 15.0 108.6 123.6 781.5 29.5 0.4 29.9 76.3 296.7 373.0 378.6 3.1 2.4 (2.3) 375.4 378.6 122p 121p 121p 0.2 24.0 7.9 0.7 717.4 18.9 82.8 101.7 819.1 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 The notes on pages 153 to 179 form an integral part of these financial statements. The financial statements on pages 149 to 179 were approved by the Board of Directors on 14 June 2023 and were signed on its behalf by: Allan Lockhart Chief Executive Officer Registered number: 10221027 Will Hobman Chief Financial Officer 150 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements CCoonnssoolliiddaatteedd BBaallaannccee SShheeeett As at 31 March 2023 CCoonnssoolliiddaatteedd CCaasshh FFllooww SSttaatteemmeenntt For the year ended 31 March 2023 Notes 2023 £m 2022 £m 2023 £m 2022 £m Non-current assets Investment properties Right of use asset Investments in joint ventures Investments in associates Property, plant and equipment Total non-current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets Equity and liabilities Current liabilities Trade and other payables Lease liability Total current liabilities Non-current liabilities Lease liability Borrowings Total non-current liabilities Net assets Equity Share capital Share premium Merger reserve Total equity Basic Diluted EPRA NTA Retained earnings and other reserves Net Asset Value (NAV) per share (pence) 14 22 15 16 17 19 20 22 22 21 12 12 12 0.9 23.8 5.5 0.4 657.9 15.0 108.6 123.6 781.5 29.5 0.4 29.9 76.3 296.7 373.0 378.6 3.1 2.4 (2.3) 375.4 378.6 122p 121p 121p 0.2 24.0 7.9 0.7 717.4 18.9 82.8 101.7 819.1 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 The notes on pages 153 to 179 form an integral part of these financial statements. The financial statements on pages 149 to 179 were approved by the Board of Directors on 14 June 2023 and were signed on its behalf by: Allan Lockhart Chief Executive Officer Registered number: 10221027 Will Hobman Chief Financial Officer 627.3 684.6 (Loss) / profit for the year before taxation – continuing operations Loss for the year before taxation – discontinued operations Cash flows from operating activities Loss for the year before taxation Adjustments for: Loss on disposal of investment property Loss on disposal of Hawthorn Net valuation movement Net valuation movement in joint ventures Net valuation movement in associates Share of profit from joint ventures Share of profit from associates Net interest expense Rent free lease incentives Movement in expected credit loss (Capitalisation) / amortisation of legal and letting fees Depreciation on property plant and equipment Share-based payment expense Cash generated from operations before changes in working capital Changes in working capital Decrease in trade and other receivables (Decrease) / increase in payables and other financial liabilities Cash generated from operations Interest paid 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 Return of investment from associate 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 used in financing activities Cash and cash equivalents at beginning of the year Net increase in / (decrease) in cash and cash equivalents Cash and cash equivalents at 31 March The notes on pages 153 to 179 form an integral part of these financial statements. (16.8) – (16.8) 3.8 – 38.2 (0.6) (0.2) (2.4) (0.1) 14.0 0.2 (0.1) (0.1) 0.8 0.9 37.6 3.0 (4.3) 36.3 (14.1) 3.2 0.4 25.8 – 1.2 – 2.3 – – 19.5 (2.9) (0.1) 20.0 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 42.5 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) (0.4) (19.6) (20.0) 82.8 25.8 108.6 (0.7) (19.3) (355.0) 150.5 (67.7) 82.8 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 151 CCoonnssoolliiddaatteedd SSttaatteemmeenntt ooff CChhaannggeess iinn EEqquuiittyy For the year ended 31 March 2023 As at 1 April 2021 Loss for the year after taxation – continuing operations – discontinued operations Loss for the year after taxation Total comprehensive 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 Loss for the year after taxation Total comprehensive loss for the year after taxation Transactions with equity holders Issue of new shares Share-based payments Dividends paid As at 31 March 2023 Notes Share capital £m 3.1 Share premium £m 227.4 Merger reserve £m Retained earnings and other reserves £m Total £m (2.3) 232.2 460.4 – – – – – – – – 3.1 – – – – – 3.1 – – – – (227.4) 1.1 – – 1.1 – – 1.3 – – 2.4 – – – – – – – – (2.3) – – – – – (2.3) 7.0 (33.6) (26.6) (26.6) 227.4 – 0.9 (21.7) 412.2 (16.8) (16.8) – 0.9 (20.9) 375.4 7.0 (33.6) (26.6) (26.6) – 1.1 0.9 (21.7) 414.1 (16.8) (16.8) 1.3 0.9 (20.9) 378.6 13 13 The notes on pages 153 to 179 form an integral part of these financial statements. 152 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements CCoonnssoolliiddaatteedd SSttaatteemmeenntt ooff CChhaannggeess iinn EEqquuiittyy For the year ended 31 March 2023 Total comprehensive loss for the year after taxation As at 1 April 2021 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 Loss for the year after taxation Total comprehensive loss for the year after taxation Transactions with equity holders Issue of new shares Share-based payments Dividends paid As at 31 March 2023 Notes Share capital £m 3.1 Share premium £m 227.4 Retained Merger reserve earnings and other reserves £m (2.3) £m 232.2 Total £m 460.4 7.0 (33.6) (26.6) (26.6) – 1.1 0.9 (21.7) 414.1 (16.8) (16.8) 1.3 0.9 (20.9) 378.6 – – – – – – – – – – – – – 7.0 (33.6) (26.6) (26.6) 227.4 – 0.9 (21.7) 412.2 (16.8) (16.8) – 0.9 (20.9) 375.4 – – – – – – – – – – – – – (227.4) – – – – 1.1 – – 1.1 – – 1.3 – – 2.4 3.1 (2.3) 3.1 (2.3) 13 13 The notes on pages 153 to 179 form an integral part of these financial statements. NNootteess ttoo tthhee FFiinnaanncciiaall SSttaatteemmeennttss 1. Accounting policies General information NewRiver REIT plc (the ‘Company’) and its subsidiaries (together the ‘Group’) is a property investment group specialising in commercial real estate in the UK. The Company is registered and domiciled in the UK and the registered office of the Company is 89 Whitfield Street, London, W1T 4DE. Summary of significant accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented. Basis of preparation These consolidated financial statements have been prepared on the going concern basis, in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, in accordance with UK-adopted International Accounting Standards and within the requirements of the Companies Act 2006. Going concern The Group and Company’s going concern assessment considers the Group and Company’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 and Company’s unsecured debt structure within its financial covenants. The Group and Company’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 the only debt currently drawn by the Group is the £300 million unsecured corporate bond which matures in March 2028. This bond has financial covenants that the Group is required to comply with including an LTV covenant of less than 65% and a 12 month historical interest cover ratio of more than 1.5x. The going concern assessment is based on a 12 month outlook from the date of the approval of these financial statements, using the Group and Company’s Board approved budget, flexed to create a reasonable worst case scenario, which includes the key assumptions listed below. - Capital values to decrease a further 10% during FY24 and remain flat throughout the remainder of the forecast horizon, in contrast to the decline noted in FY23 of –5.9% across the portfolio in FY23, 62% of which related to the impact of cost inflation on valuations for the regeneration portfolio with more modest declines noted in the Core Shopping Centres and Retail Parks. - A 15% reduction in net income. This reflects a significant downside to rental agreements re-geared or re-negotiated throughout the pandemic given that 95% of rents relating to FY21 and FY22 has been collected at the time of reporting despite the multiple national lockdowns in place throughout those periods; FY23 rent collection is 98% and 1Q24 rent collection is 91% at the time of reporting demonstrating that rent collection rates have normalised back to pre Covid levels; - 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, £23 million during FY23 and £32 million of retail disposals now under offer or exchanged and a further £30 million in active discussions or committed to be disposed 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 2023 and the growth and returns that would otherwise generate. Under this scenario, the Group and Company 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 and Company’s drawn debt covenants could absorb a further valuation decline of 37% or a further 46% reduction in annual net rental income before breaching covenant levels. The Group and Company 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. Cash flow statement The Group has reported the cash flows from operating activities using the indirect method. Interest received and the acquisition of properties are presented within investing cash flows and interest paid is presented within operating cash flows because this most appropriately reflects the Group’s business activities. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 153 Notes to the financial statements continued 1. Accounting policies continued Preparation of the consolidated financial statements The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries controlled by the Company, made up to 31 March each year. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the investee. The consolidated financial statements account for interest in joint ventures and associates using the equity method of accounting per IFRS 11 and IAS 28 respectively. The financial statements for the year ended 31 March 2023 have been prepared on the historical cost basis, except for the revaluation of investment properties. New accounting policies The Group has adopted the following amendments for the first time in 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) 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 2022. Standards and amendments issued but not yet effective 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 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 IAS 12) - Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) - Insurance contracts – (Amendments to IFRS 17) Effective for the year ended 31 March 2025: - Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) - Non-current Liabilities with Covenants (Amendments to IAS 1) No material impact is expected upon the adoption of these standards. IFRIC Agenda Decision In October 2022, the IFRS Interpretations Committee (‘IFRIC’) released its decision on the application of IFRS 9 and IFRS 16 in relation to how a lessor should account for the forgiveness of amounts due under leases. This concluded that for any rent receivables that are past their due dates and subsequently forgiven, the lessor should apply the expected credit loss (ECL) model in IFRS 9. Therefore, the forgiveness will be subject to the derecognition and impairment requirements in IFRS 9, and the impact of relevant receivable amounts written off reflected in the statement of comprehensive income on the date that the legal rights are conceded. Historically the Group has treated this as a lease modification spread over the remaining lease term. The Group is not materially impacted by this decision and therefore no restatement of the prior year comparative is required. In March 2022, IFRIC finalised its decision with respect to the treatment of demand deposits with restriction on use, which includes tenant rent deposits and service charge amounts collected on behalf of tenants. It was concluded that such deposits which are subject to contractual restrictions, meet the definition of ‘cash and cash equivalents’ within the financial statements. In light of this the Group performed a review of amounts disclosed as ‘restricted monetary assets’ and tenant deposits. The Group is not subject to such contractual restrictions, and therefore no restatement of the prior year comparative is required. 154 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements Notes to the financial statements continued 1. Accounting policies continued Preparation of the consolidated financial statements The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries controlled by the Company, made up to 31 March each year. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the investee. The consolidated financial statements account for interest in joint ventures and associates using the equity method of accounting per IFRS 11 and IAS 28 respectively. The financial statements for the year ended 31 March 2023 have been prepared on the historical cost basis, except for the revaluation of investment properties. New accounting policies The Group has adopted the following amendments for the first time in 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) 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 2022. Standards and amendments issued but not yet effective 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 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 IAS 12) - Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) - Insurance contracts – (Amendments to IFRS 17) Effective for the year ended 31 March 2025: - Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) - Non-current Liabilities with Covenants (Amendments to IAS 1) No material impact is expected upon the adoption of these standards. IFRIC Agenda Decision In October 2022, the IFRS Interpretations Committee (‘IFRIC’) released its decision on the application of IFRS 9 and IFRS 16 in relation to how a lessor should account for the forgiveness of amounts due under leases. This concluded that for any rent receivables that are past their due dates and subsequently forgiven, the lessor should apply the expected credit loss (ECL) model in IFRS 9. Therefore, the forgiveness will be subject to the derecognition and impairment requirements in IFRS 9, and the impact of relevant receivable amounts written off reflected in the statement of comprehensive income on the date that the legal rights are conceded. Historically the Group has treated this as a lease modification spread over the remaining lease term. The Group is not materially impacted by this decision and therefore no restatement of the prior year comparative is required. In March 2022, IFRIC finalised its decision with respect to the treatment of demand deposits with restriction on use, which includes tenant rent deposits and service charge amounts collected on behalf of tenants. It was concluded that such deposits which are subject to contractual restrictions, meet the definition of ‘cash and cash equivalents’ within the financial statements. In light of this the Group performed a review of amounts disclosed as ‘restricted monetary assets’ and tenant deposits. The Group is not subject to such contractual restrictions, and therefore no restatement of the prior year comparative is required. Revenue recognition Property, rental and related income Property, rental and related 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. 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. 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. In the case of insurance other income, this is recognised upon agreement with the insurer. 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. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 155 Notes to the financial statements continued 1. Accounting policies continued Service charge expense Service charge expenses are recognised in the period in which they are incurred. Finance income and costs 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. Taxation Income tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the balance sheet. Tax is recognised in the consolidated statement of comprehensive income. Deferred tax Any deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates that are expected to apply in the period when the liability is settled or the asset is realised. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Investment properties These properties include completed properties that are generating rent or are available for rent, and development properties that are under development or available for development. Investment properties comprise freehold and leasehold properties and are first measured at cost (including transaction costs), then revalued to market value at each reporting date by independent professional valuers. Leasehold properties are shown gross of the leasehold payables (and accounted for as right-of-use asset under IFRS 16, see Leases accounting policy). Valuation gains and losses in a period are taken to the consolidated statement of comprehensive income. As the Group uses the fair value model, as per IAS 40 Investment Properties, no depreciation is provided. An asset will be classified as held for sale within investment properties, in line with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, where the asset is available for immediate sale in its present condition and the sale is highly probable. Property, plant and equipment Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is recognised over the useful lives of the equipment, using the straight-line method at a rate of between 10% to 25% depending on the useful life. 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 Joint ventures Interests in joint ventures are accounted for using the equity method of accounting. The Group’s joint ventures are entities over which the Group has joint control with a partner. Investments in joint ventures are carried in the consolidated balance sheet at cost as adjusted by post- acquisition changes in the Group’s share of the net assets of the joint venture, less any impairment or share of income adjusted for dividends. In assessing whether a particular entity is controlled, the Group considers all of the contractual terms of the arrangement, whether it has the power to govern the financial and operating policies of the joint venture so as to obtain benefits from its activities, and the existence of any legal disputes or challenges to this joint control in order to conclude whether the Group jointly controls the joint venture. Associates Interests in associates are accounted for using the equity method of accounting. The Group’s associates are entities over which the Group has significant influence with a partner. Investments in associates are carried in the consolidated balance sheet at cost as adjusted by post- acquisition changes in the Group’s share of the net assets of the associates, less any impairment or share of income adjusted for dividends. In assessing whether 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. 156 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements Notes to the financial statements continued 1. Accounting policies continued Service charge expense Finance income and costs Service charge expenses are recognised in the period in which they are incurred. 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. Taxation Income tax Deferred tax Investment properties 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. 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. 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. Property, plant and equipment Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is recognised over the useful lives of the equipment, using the straight-line method at a rate of between 10% to 25% depending on the useful life. Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the - Fixtures and fittings 20% on a straight line-basis depending on the useful life - Office equipment 33% on a straight line-basis 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. 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. following bases: Joint ventures Associates Leases At inception, the Group assesses whether a contract is or contains a lease. This assessment involves the exercise of judgement about whether the Group obtains substantially all the economic benefits from the use of that asset, and whether the Group has the right to direct the use of the asset. The Group recognises a right-of-use (“ROU”) asset and the lease liability at the commencement date of the lease. The ROU asset is initially measured based on the present value of lease payments, plus initial direct costs and the cost of obligations to restore the asset, less any incentives received. Lease payments generally include fixed payments and variable payments that depend on an index (such as an inflation index). Each lease payment is allocated between the liability and finance cost. The lease payments are discounted using the interest rate implicit in the lease if that rate can be readily determined or if not, the incremental borrowing rate is used. 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. Financial instruments Financial assets The Group classifies its financial assets as fair value through profit or loss or amortised cost, depending on the purpose for which the asset was acquired and based on the business model test. Financial assets carried at amortised cost 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. Cash and cash equivalents Cash and cash equivalents include cash on hand, cash in transit, deposits held on 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. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 157 Notes to the financial statements continued 1. Accounting policies continued Financial liabilities The Group classifies its financial liabilities at amortised cost. 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 value of a non-interest bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted. Value added tax Revenues, expenses and assets are recognised net of the amount of value added tax except: Where the value added tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the value added tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables that are stated with the amount of value added tax included. The net amount of value added tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated balance sheet. Share capital Shares are classified as equity when there is no obligation to transfer cash or other assets. The cost of issuing share capital is recognised directly in equity against the proceeds from issuing the shares. Share-based payments The cost of equity settled transactions is measured with reference to the fair value at the date at which they were granted. Where vesting performance conditions are non-market based, the fair value excludes the effect of these vesting conditions and an estimate is made at each year end date of the number of instruments expected to vest. The fair value is recognised over the vesting period in the consolidated statement of comprehensive income, with a corresponding increase in equity. Any change to the number of instruments with non-market vesting conditions expected to vest is recognised in the consolidated statement of comprehensive income for that period. Employee Benefit Trust The Group operates an Employee Benefit Trust for the exclusive benefit of the Group’s employees. The investment in the Company’s shares held by the trust is recognised at cost and deducted from equity. No gain or loss is recognised in the consolidated statement of comprehensive income on the purchase, sale, issue or cancellation of the shares held by the trust. Dividends Dividends to the Company’s shareholders are recognised when they become legally payable. In the case of interim dividends, this is when paid. In the case of final dividends, this is when approved by equity holders. Business combinations The Group applies the acquisition method to account for business combinations. The cost of the acquisition is measured at the aggregate of the fair values, at the date of completion, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquired. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS are recognised at their fair value at the acquisition. Where the fair value of the consideration is less than the fair value of the identifiable assets and liabilities then the difference is recognised as a bargain purchase in the consolidated statement of comprehensive income. Where properties are acquired through corporate acquisitions, each transaction is considered by management in light of the substance of the acquisition to determine whether the acquisition is a business combination or an asset acquisition. If a transaction is determined to be an asset acquisition then it is accounted for at cost. 158 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements Notes to the financial statements continued 1. Accounting policies continued Financial liabilities discharged or cancelled or expires. The Group classifies its financial liabilities at amortised cost. A financial liability is derecognised when the obligation under the liability is 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 value of a non-interest bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted. Value added tax Share capital Share-based payments Employee Benefit Trust Dividends Business combinations 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. 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. 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. The Group operates an Employee Benefit Trust for the exclusive benefit of the Group’s employees. The investment in the Company’s shares held by the trust is recognised at cost and deducted from equity. No gain or loss is recognised in the consolidated statement of comprehensive income on the purchase, sale, issue or cancellation of the shares held by the trust. Dividends 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. The Group applies the acquisition method to account for business combinations. The cost of the acquisition is measured at the aggregate of the fair values, at the date of completion, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquired. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS are recognised at their fair value at the acquisition. Where the fair value of the consideration is less than the fair value of the identifiable assets and liabilities then the difference is recognised as a bargain purchase in the consolidated statement of comprehensive income. Where properties are acquired through corporate acquisitions, each transaction is considered by management in light of the substance of the acquisition to determine whether the acquisition is a business combination or an asset acquisition. If a transaction is determined to be an asset acquisition then it is accounted for at cost. 2. Critical accounting judgements and estimates The preparation of financial statements requires management to make estimates 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. Significant judgements REIT Status NewRiver is a Real Estate Investment Trust (REIT) and does not pay tax on its property income or gains on property sales, provided that at least 90% of the Group’s property income is distributed as a dividend to shareholders, which becomes taxable in their hands. In addition, the Group has to meet certain conditions such as ensuring the property rental business represents more than 75% of total profits and assets. Any potential or proposed changes to the REIT legislation are monitored and discussed with HMRC. It is the Directors judgement that the Group has met the REIT conditions in the year. Sources of estimation uncertainty Investment property The Group’s investment properties 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. 3. Segmental reporting and discontinued operations The Group operates as one segment, the retail business. The retail investments comprise shopping centres, retail parks and high street stores. The Group’s Executive Committee examines the Group’s performance, and have identified retail as the only operating segment. The performance and position of the retail business is set out in the consolidated statement of comprehensive income and consolidated balance sheet. All the Group’s operations are in the UK and therefore no geographical segments have been identified. 4. Revenue 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 2023 £m 58.2 (1.5) 0.6 57.3 1.5 13.4 72.2 2022 £m 57.7 (1.3) 0.8 57.2 1.9 14.6 73.7 * Included within property rental and related income is car park income of £5.3 million (2022: £4.9 million) which falls under the scope of IFRS 15. The remainder of the income is covered by IFRS 16. Asset management fees and service charge income which represents the flow through costs of the day-to-day maintenance of shopping centres fall under the scope of IFRS 15.Total revenue recognised under IFRS 15 is £21.6 million (2022: £21.4 million). Refer to accounting policies in note 1. 5. Property operating expenses Service charge expense Rates on vacant units Expected credit loss reversal Other property operating expenses Property operating expenses 2023 £m 19.0 2.7 (0.1) 3.5 25.1 2022 £m 20.3 1.8 (0.3) 3.7 25.5 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 159 Notes to the financial statements continued 6. Administrative expenses Wages and salaries Social security costs Other pension costs Staff costs Depreciation** Share-based payments Other administrative expenses Head office relocation costs* Restructuring costs Administrative expenses * Head office relocation costs mainly relate to an impairment charge relating to property, plant and equipment. ** Depreciation is inclusive of £0.2 million right of use asset depreciation and £0.2 million impairment of the right of use asset. 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 Head office relocation costs 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* Other income – Covid-19 income disruption insurance 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 2023 £m 5.2 0.9 0.1 6.2 0.8 1.1 4.0 0.5 – 12.6 2023 £m 12.6 (1.5) 0.1 (1.1) (0.5) – 9.6 – 9.6 58.0 1.4 3.6 63.0 – 63.0 2022 £m 5.1 0.7 0.1 5.9 0.1 0.9 5.6 – 0.9 13.4 2022 £m 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 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 15.2% 16.0% 15.2% 16.9% * This balance includes an expected credit loss reversal of £0.1 million (2022: £0.3 million), which excludes the £0.2 million reversal (2022: £0.2 million) forward looking element of the calculation and insurance expected credit loss of £0.1 million (2022: £nil) but includes the expected credit loss held in joint ventures and associates of £nil (2022: £0.2 million). Average monthly number of staff – continuing operations 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. 2023 2022 7 17 27 51 7 17 32 56 160 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements Notes to the financial statements continued Wages and salaries Social security costs Other pension costs Staff costs Depreciation** Share-based payments Other administrative expenses Head office relocation costs* Restructuring costs Administrative expenses Administrative expenses Adjust for: Asset management fees Share based payments Head office relocation costs Restructuring costs Share of joint ventures’ and associates administrative expenses 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* Other income – Covid-19 income disruption insurance 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 * Head office relocation costs mainly relate to an impairment charge relating to property, plant and equipment. ** Depreciation is inclusive of £0.2 million right of use asset depreciation and £0.2 million impairment of the right of use asset. 2023 £m 5.2 0.9 0.1 6.2 0.8 1.1 4.0 0.5 – 12.6 2023 £m 12.6 (1.5) 0.1 (1.1) (0.5) 9.6 – – 9.6 58.0 1.4 3.6 63.0 – 63.0 2022 £m 5.1 0.7 0.1 5.9 0.1 0.9 5.6 – 0.9 13.4 2022 £m 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 15.2% 16.0% 15.2% 16.9% 2023 2022 7 17 27 51 7 17 32 56 6. Administrative expenses Auditors’ remuneration 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 £0.1 million (2022: £0.1 million) in audit fees. 7. Other income Insurance proceeds Other income 2023 £m 0.3 0.2 0.5 0.1 0.6 2023 £m 1.4 1.4 2022 £m 0.3 0.2 0.5 0.1 0.6 2022 £m – – Net administrative expenses ratio is calculated as follows: The Group has recognised £1.4m for Covid-19 income disruption following agreement with the insurer. 8. Loss on disposal of subsidiary Year ended 31 March 2023 There have been no disposals in the year ended 31 March 2023. Year ended 31 March 2022 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. Subsidiaries disposed Hawthorn Leisure REIT Limited Hawthorn Leisure Limited Hawthorn Leisure (Bravo Inns) Limited Hawthorn Leisure Acquisitions Limited Bravo Inns Limited Bravo Inns II Limited Hawthorn Leisure Honey Limited Hawthorn Leisure Management Limited Hawthorn Leisure Community Pubs Limited Hawthorn Leisure Scotco Limited Hawthorn Leisure (Mantle) Limited NewRiver Retail Holdings No 4 Limited Hawthorn Leisure Public Houses Limited NewRiver Retail Holdings No 7 Limited Hawthorn Leisure Holdings Limited NewRiver Retail Property Unit Trust No 4 Net administrative expenses as a % of property income (including share of joint ventures and associates) – Results from 1 April 2021 to 20 August 2021 continuing operations Reported Group Net administrative expenses as a % of property income (including share of joint ventures and associates) – * This balance includes an expected credit loss reversal of £0.1 million (2022: £0.3 million), which excludes the £0.2 million reversal (2022: £0.2 million) forward looking element of the calculation and insurance expected credit loss of £0.1 million (2022: £nil) but includes the expected credit loss held in joint ventures and associates of £nil (2022: £0.2 million). Average monthly number of staff – continuing operations 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. Revenue Property operating expenses Net property income Other income Administrative expenses Loss on disposal of subsidiary Other Loss for the period before taxation Deferred Tax Loss for the period after taxation £m 18.1 (10.9) 7.2 4.8 (4.8) (39.7) 0.8 (31.7) (1.9) (33.6) NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 161 Notes to the financial statements continued 8. Loss on disposal of subsidiary continued Loss on disposal of subsidiary at 20 August 2021 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 Cash flows from 1 April 2021 to 20 August 2021 Cash flows from operating activities Cash flows from investing activities Total cash flows from discontinued operations 9. Loss on disposal of investment properties Gross disposal proceeds Carrying value Cost of disposal Loss on disposal of investment properties 10. Finance income and finance costs Income from loans with joint ventures and associates Income from treasury deposits Write off of derivatives Finance income Interest on borrowings Finance cost on lease liabilities Finance costs 162 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 2022 £m 224.0 (202.3) (53.8) (1.2) (16.6) 19.9 (254.0) (30.0) (9.7) (39.7) 31 March 2022 £m 13.8 187.9 201.7 2022 £m 66.3 (68.9) (1.6) (4.2) 2022 £m (0.4) – (1.0) (1.4) 17.1 2.7 19.8 2023 £m 20.0 (22.3) (1.5) (3.8) 2023 £m (0.3) (1.1) – (1.4) 12.7 2.7 15.4 Financial statements Notes to the financial statements continued 8. Loss on disposal of subsidiary continued Loss on disposal of subsidiary at 20 August 2021 Gross disposal proceeds Net assets disposed of: Investment property Managed houses Property, plant and equipment Cash Other net liabilities Carrying value Transaction costs Loss on disposal of subsidiary Loss on disposal of subsidiary before transaction costs Cash flows from 1 April 2021 to 20 August 2021 Cash flows from operating activities Cash flows from investing activities Total cash flows from discontinued operations 9. Loss on disposal of investment properties Gross disposal proceeds Carrying value Cost of disposal Loss on disposal of investment properties 10. Finance income and finance costs Income from loans with joint ventures and associates Income from treasury deposits Write off of derivatives Finance income Interest on borrowings Finance cost on lease liabilities Finance costs 11. Taxation Taxation charge / (credit) – continuing Taxation charge / (credit) – discontinued Taxation charge / (credit) – Reported Group Loss before tax Tax at the current rate of 19% (2022: 19%) Revaluation of property Movement in unrecognised deferred tax Non-taxable loss on disposal of subsidiary Non-taxable profit due to REIT regime Non-taxable income Transfer pricing adjustment Taxation (credit) / charge 2023 £m – – – (16.8) (3.2) 7.3 (0.2) – (4.4) (0.4) 0.9 – 2022 £m – 1.9 1.9 (24.7) (4.7) 2.3 2.1 7.6 (5.4) (0.8) 0.8 1.9 31 March 2022 Real Estate Investment Trust regime (REIT regime) The Group is a member of the REIT regime whereby profits from its UK property rental business are tax exempt. The REIT regime only applies to certain property-related profits and has several criteria which have to be met. The main criteria are: - the assets of the property rental business must be at least 75% of the Group’s assets; - the profit from the tax-exempt property rental business must exceed 75% of the Group’s total profit and; - at least 90% of the Group’s profit from the property rental business must be paid as dividends. The Group continues to meet these conditions and management intends that the Group should continue as a REIT for the foreseeable future. Deferred tax Net deferred tax Net deferred tax 31 March 2022 £m – 31 March 2021 £m (0.7) Charge £m – Charge £m (1.9) Disposals £m 31 March 2023 £m – – Disposals £m 31 March 2022 £m 2.6 – 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 2023 the Group has unrecognised tax losses of £13.1 million (2022: £12.5 million). The losses have not been recognised as an asset due to uncertainty over the availability of taxable income to utilise the losses. The losses do not expire but are reliant on continuity of ownership and source of trade. 2022 £m 224.0 (202.3) (53.8) (1.2) (16.6) 19.9 (254.0) (30.0) (9.7) (39.7) £m 13.8 187.9 201.7 2022 £m 66.3 (68.9) (1.6) (4.2) 2022 £m (0.4) – (1.0) (1.4) 17.1 2.7 19.8 2023 £m 20.0 (22.3) (1.5) (3.8) 2023 £m (0.3) (1.1) – (1.4) 12.7 2.7 15.4 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 163 Notes to the financial statements continued 12. Performance measures A reconciliation of the performance measures to the nearest IFRS measure is below: (Loss) / profit 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 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 Head office relocation costs Abortive costs Restructuring costs Underlying Funds From Operations (UFFO) Year ended 31 March 2023 Year ended 31 March 2022 Continuing £m (16.8) Discontinued £m – 38.2 3.8 – – – (0.8) (0.2) 0.2 – 24.4 1.1 (0.2) – 0.5 – – 25.8 – – – – – – – – – – – – – – – – – Total £m (16.8) 38.2 3.8 – – – (0.8) (0.2) 0.2 – 24.4 1.1 (0.2) – 0.5 – – 25.8 Continuing £m Discontinued £m 7.0 (33.6) 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 Total £m (26.6) 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 * 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 been recognised in relation to these debtors. Number of shares Number of shares Weighted average number of ordinary shares for the purposes of Basic EPS, UFFO and EPRA Effect of dilutive potential ordinary shares: Performance share plan Deferred bonus shares 2023 No. m 309.7 1.2 0.8 2022 No. m 307.2 1.1 0.7 Weighted average number of ordinary shares for the purposes of Diluted EPS 311.7 309.0 IFRS Basic EPS IFRS Diluted EPS EPRA EPS UFFO EPS 2023 Continuing Discontinued (5.4) (5.4) 7.9 8.3 – – – – Total (5.4) (5.4) 7.9 8.3 2022 Continuing Discontinued 2.3 2.3 6.2 6.7 (10.9) (10.9) 2.3 2.5 Total (8.6) (8.6) 8.5 9.2 The below table reconciles the differences between the calculation of basic and EPRA NTA. 164 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements EPRA NTA per share and basic NTA per share: Net assets Unexercised employee awards Diluted net assets Group’s share of associates deferred tax liability Group’s share of joint venture/associates fair value derivatives 2023 2022 £m 378.6 – 378.6 0.9 (0.6) Shares m 310.7 2.0 312.7 – – Pence per share 122p 121p £m 414.1 – 414.1 0.6 (0.3) Shares m 307.2 1.8 309.0 – – Pence per share 135p 134p EPRA Net Tangible Assets 378.9 312.7 121p 414.4 309.0 134p 13. Dividends The dividends paid in the year are set out below: Payment date Year to March 2022 Ordinary dividends 3 September 2021 14 January 2022 Year to March 2023 Ordinary dividends 3 September 2022 17 January 2023 PID Non-PID Pence per share 3.0 4.1 3.3 3.5 – – – – 3.0 4.1 3.3 3.5 £m 9.1 12.6 21.7 10.1 10.8 20.9 * 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 been recognised in relation to these debtors. Weighted average number of ordinary shares for the purposes of Basic EPS, UFFO and EPRA Weighted average number of ordinary shares for the purposes of Diluted EPS 311.7 309.0 The final dividend of 3.2 pence per share in respect of the year ended 31 March 2023 will, subject to shareholder approval at the 2023 AGM, be paid on 4 August 2023 to shareholders on the register as at 16 June 2023. The dividend will be payable as a REIT Property Income Distribution (PID). Property Income Distribution (PID) dividends Profits distributed out of tax-exempt profits are PID dividends. PID dividends are paid after deduction of withholding tax (currently at 20%), which NewRiver pays directly to HMRC on behalf of the shareholder. Non-PID dividends Any non-PID element of dividends will be treated in exactly the same way as dividends from other UK, non-REIT companies. Notes to the financial statements continued 12. Performance measures A reconciliation of the performance measures to the nearest IFRS measure is below: (Loss) / profit 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 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 Head office relocation costs Abortive costs Restructuring costs Underlying Funds From Operations (UFFO) Number of shares Number of shares Effect of dilutive potential ordinary shares: Performance share plan Deferred bonus shares IFRS Basic EPS IFRS Diluted EPS EPRA EPS UFFO EPS Year ended 31 March 2023 Year ended 31 March 2022 Continuing Discontinued Continuing Discontinued £m (16.8) 38.2 3.8 – – – (0.8) (0.2) 0.2 – 24.4 1.1 (0.2) 0.5 – – – 25.8 £m – – – – – – – – – – – – – – – – – – Total £m (16.8) 38.2 3.8 – – – (0.8) (0.2) 0.2 – 24.4 1.1 (0.2) 0.5 – – – 25.8 £m 7.0 12.3 4.2 (0.1) – – (5.8) (0.5) 0.6 1.2 18.9 0.9 (0.2) – – – 0.9 20.5 £m (33.6) – (0.8) – 1.9 39.7 – – – – – – 7.2 0.4 – 0.2 – 7.8 Total £m (26.6) 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 2023 No. m 309.7 1.2 0.8 2022 No. m 307.2 1.1 0.7 2023 2022 Continuing Discontinued Continuing Discontinued (5.4) (5.4) 7.9 8.3 – – – – Total (5.4) (5.4) 7.9 8.3 2.3 2.3 6.2 6.7 (10.9) (10.9) 2.3 2.5 Total (8.6) (8.6) 8.5 9.2 The below table reconciles the differences between the calculation of basic and EPRA NTA. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 165 Notes to the financial statements continued 14. Investment properties Fair value brought forward Acquisitions Capital expenditure Lease incentives, letting and legal costs Transfer from assets held for sale (Note 18) Disposals Disposal of subsidiaries Net valuation movement Fair value carried forward Right of use asset (investment property) Fair value carried forward 2023 £m 609.1 – 2.9 (0.1) – (22.3) 2022 £m 851.9 7.3 9.6 1.3 25.5 (72.9) – (202.3) (38.1) 551.5 75.8 627.3 (11.3) 609.1 75.5 684.6 Capital expenditure of £2.9 million (2022: £9.6 million) is comprised of £1.9 million (2022: £5.0 million) of expenditure in the creation of incremental lettable space and £1.0 million (2022: £4.6 million) of expenditure on non-incremental lettable space. The Group’s investment properties have been valued at fair value on 31 March 2023 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 2023 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 214.8 140.1 63.3 128.6 4.7 551.5 8.8 5.2 6.5 9.6 4.2 30.1 18.8 15.3 14.2 8.6 14.0 16.1 8.8 11.4 6.6 8.0 4.0 1.5 7.9 3.7 30.8 13.4 6.3 14.7 8.7 12.9 10.6 4.4 10.9 4.1 9.3% 6.8% 14.0% 7.0% 9.5% 9.7% 5.9% 9.4% 7.0% 10.0% 166 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements Notes to the financial statements continued 14. Investment properties Fair value brought forward Acquisitions Capital expenditure Lease incentives, letting and legal costs Transfer from assets held for sale (Note 18) Disposals Disposal of subsidiaries Net valuation movement Fair value carried forward Right of use asset (investment property) Fair value carried forward 2023 £m 609.1 – 2.9 (0.1) (22.3) – – (38.1) 551.5 75.8 627.3 2022 £m 851.9 7.3 9.6 1.3 25.5 (72.9) (202.3) (11.3) 609.1 75.5 684.6 Capital expenditure of £2.9 million (2022: £9.6 million) is comprised of £1.9 million (2022: £5.0 million) of expenditure in the creation of incremental lettable space and £1.0 million (2022: £4.6 million) of expenditure on non-incremental lettable space. The Group’s investment properties have been valued at fair value on 31 March 2023 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 2023 Property ERV Property rent Shopping Centres – Core Shopping Centres – Regeneration Shopping Centres – Work Out Retail parks High street and other 214.8 140.1 63.3 128.6 4.7 551.5 Fair value Min Max (£m) £ per sq ft £ per sq ft Average £ per sq ft Min Max £ per sq ft £ per sq ft Average £ per sq ft 8.8 5.2 6.5 9.6 4.2 30.1 18.8 15.3 14.2 8.6 14.0 16.1 8.8 11.4 6.6 8.0 4.0 1.5 7.9 3.7 30.8 13.4 6.3 14.7 8.7 12.9 10.6 4.4 10.9 4.1 Property EPRA topped equivalent up net initial yield Average % 9.3% 6.8% 14.0% 7.0% 9.5% yield Average % 9.7% 5.9% 9.4% 7.0% 10.0% As at 31 March 2022 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 216.2 162.6 89.7 132.5 8.1 609.1 8.5 7.4 5.3 9.1 5.4 30.1 15.3 19.4 14.0 15.0 14.2 9.8 16.0 11.1 8.0 8.2 2.6 4.6 0.6 3.8 30.7 8.4 14.0 14.7 8.6 12.8 5.1 11.1 9.7 3.0 9.3% 6.5% 15.7% 6.6% 8.4% 9.5% 5.8% 11.1% 6.0% 4.7% Sensitivities of measurement of significant inputs As set out within significant accounting estimates and judgements in note 2, the Group’s property portfolio valuation is open to judgements and is inherently subjective by nature. As a result, the sensitivity analysis below illustrates the impact of changes in key unobservable inputs on the fair value of the Group’s properties. 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 Group’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. 2023: Sensitivity impact on valuations of a 10% change in estimated rental value and absolute yield of 100 bps. Asset Type Shopping Centres – Core Shopping Centres – Regeneration Shopping Centres – Work Out Retail parks High street and other Impact on valuations of a 10% change in ERV Impact on valuations of 100 bps change in yield Increase 10% £m Decrease 10% £m Increase 1.0% £m Decrease 1.0% £m 18.2 13.5 6.5 9.7 0.6 48.5 (16.7) (13.0) (5.8) (9.6) (0.6) (45.7) (21.7) (18.9) (5.8) (14.2) (0.6) (61.2) 27.6 26.0 7.4 18.9 0.7 80.6 Retail asset valuation £m 214.8 140.1 63.3 128.6 4.7 551.5 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 167 Notes to the financial statements continued 14. Investment properties continued 2022: Sensitivity impact on valuations of a 10% change in estimated rental value and absolute yield of 100 bps. Asset Type Shopping Centres – Core Shopping Centres – Regeneration Shopping Centres – Work Out Retail parks High street and other Retail asset valuation £m 216.2 162.6 89.7 132.5 8.1 609.1 Reconciliation to net valuation movement in consolidated statement of comprehensive income Net valuation movement in investment properties Net valuation movement in investment properties Net valuation movement in right of use asset Net valuation movement in consolidated statement of comprehensive income Reconciliation to properties at valuation in the portfolio Investment property Properties held in joint ventures Properties held in associates Properties at valuation 15. Investments in joint ventures As at 31 March 2023 the Group has two joint ventures. Opening balance Group’s share of profit after taxation excluding valuation movement Net valuation movement Dividends Investment in joint venture Impact on valuations of a 10% change in ERV Impact on valuations of 100 bps change in yield Increase 10% £m Decrease 10% £m Increase 1.0% £m Decrease 1.0% £m 19.9 14.3 7.5 9.5 0.7 51.9 (18.7) (13.6) (7.4) (11.2) (1.1) (52.0) Note 14 15 16 (22.6) (21.1) (7.2) (15.7) (0.9) (67.5) 2023 £m (38.1) (0.1) (38.2) 2023 £m 551.5 32.2 9.9 593.6 2023 £m 24.0 2.4 0.6 (3.2) 23.8 28.5 29.2 8.3 19.4 0.7 86.1 2022 £m (11.3) (1.0) (12.3) 2022 £m 609.1 30.6 9.7 649.4 2022 £m 25.6 1.1 2.9 (5.6) 24.0 Name NewRiver Retail Investments LP (NRI LP) NewRiver Retail (Napier) Limited (Napier) Country of incorporation Guernsey UK 2023 % Holding 2022 % Holding 50 50 50 50 The Group is the appointed asset manager on behalf of these joint ventures and receives asset management fees, development management fees and performance-related bonuses. 168 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements Notes to the financial statements continued Reconciliation to net valuation movement in consolidated statement of comprehensive income Net valuation movement in investment properties Net valuation movement in investment properties Net valuation movement in right of use asset Net valuation movement in consolidated statement of comprehensive income Reconciliation to properties at valuation in the portfolio Investment property Properties held in joint ventures Properties held in associates Properties at valuation 15. Investments in joint ventures As at 31 March 2023 the Group has two joint ventures. Group’s share of profit after taxation excluding valuation movement Opening balance Net valuation movement Dividends Investment in joint venture £m (22.6) (21.1) (7.2) (15.7) (0.9) (67.5) 2023 £m (38.1) (0.1) (38.2) 2023 £m 551.5 32.2 9.9 593.6 2023 £m 24.0 2.4 0.6 (3.2) 23.8 £m 28.5 29.2 8.3 19.4 0.7 86.1 2022 £m (11.3) (1.0) (12.3) 2022 £m 609.1 30.6 9.7 649.4 2022 £m 25.6 1.1 2.9 (5.6) 24.0 Note 14 15 16 14. Investment properties continued 2022: Sensitivity impact on valuations of a 10% change in estimated rental value and absolute yield of 100 bps. 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: Asset Type Shopping Centres – Core Shopping Centres – Regeneration Shopping Centres – Work Out Retail parks High street and other Impact on valuations of a 10% Impact on valuations of 100 bps change in ERV change in yield valuation Increase 10% Decrease 10% Increase 1.0% Decrease 1.0% Retail asset £m 216.2 162.6 89.7 132.5 8.1 609.1 £m 19.9 14.3 7.5 9.5 0.7 51.9 £m (18.7) (13.6) (7.4) (11.2) (1.1) (52.0) 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 2023 2022 Total £m Group’s share £m 64.4 5.5 (1.4) (26.9) 41.6 – 41.6 32.2 2.8 (0.7) (13.5) 20.8 3.0 23.8 Total £m 61.2 9.4 (1.8) (26.8) 42.0 – 42.0 Group’s share £m 30.6 4.7 (0.9) (13.4) 21.0 3.0 24.0 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. 2023 2022 Group’s share £m Total £m Group’s share £m 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 after taxation Add back net valuation movement Group’s share of joint ventures’ profit before valuation movements The Group’s share of contingent liabilities in the joint ventures is £nil (2022: £nil). 16. Investments in associates Total £m 5.9 (0.4) 5.5 (0.2) (0.6) 4.7 1.2 0.1 6.0 (1.2) 4.8 3.0 (0.2) 2.8 (0.1) (0.3) 2.4 0.6 – 3.0 (0.6) 2.4 5.7 (0.1) 5.6 (0.3) (0.1) 5.2 5.8 (3.0) 8.0 (5.8) 2.2 2.8 – 2.8 (0.1) (0.1) 2.6 2.9 (1.5) 4.0 (2.9) 1.1 2022 £m 5.3 4.0 (2.5) – (2.0) 0.2 2.9 7.9 Name NewRiver Retail Investments LP (NRI LP) NewRiver Retail (Napier) Limited (Napier) Country of incorporation Guernsey UK 2023 % Holding 2022 % Holding 50 50 50 50 Opening balance Additions to Investment in associates Disposals from Investment in associates Return of investment in associates* Dividends Group’s share of profit after taxation excluding valuation movement 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. Net valuation movement Investment in associates 2023 £m 7.9 – – (2.3) (0.4) 0.1 0.2 5.5 * During the year, the Group received £2.3 million (2022: nil) back from associates in the form of shareholder loan repayments and repayment of initial capital invested. 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 2023. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 169 Notes to the financial statements continued 16. Investments in associates continued 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 2023 % Holding 2022 % Holding UK UK UK – 10 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: 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 31 March 2023 31 March 2022 Total £m Group’s share £m Total £m Group’s share £m 99.3 8.2 (16.1) (67.8) 23.6 – 23.6 2023 Total £m 9.9 (2.4) 7.5 (0.1) (3.5) 3.9 1.7 0.6 (3.4) 2.8 (1.7) 1.1 9.9 0.8 (1.6) (6.8) 2.3 3.2 5.5 2023 Group’s share £m 1.0 (0.2) 0.8 – (0.4) 0.4 0.2 – (0.3) 0.3 (0.2) 0.1 97.3 14.7 (17.5) (62.7) 31.8 – 31.8 2022 Total £m 12.6 (2.4) 10.2 (0.7) (3.6) 5.9 29.1 2.7 (7.2) 30.5 (29.1) 1.4 9.7 1.5 (1.8) (6.3) 3.1 4.8 7.9 2022 Group’s share £m 1.2 (0.2) 1.0 – (0.4) 0.6 2.9 0.3 (0.7) 3.1 (2.9) 0.2 170 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements Notes to the financial statements continued Name NewRiver Retail (Nelson) Limited (Nelson) NewRiver Retail (Hamilton) Limited (Hamilton) NewRiver (Sprucefield) Limited (Sprucefield) and performance-related bonuses. Consolidated balance sheet Non-current assets Current assets Current liabilities Net assets Loans to associates Liabilities due in more than one year 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 The Group is the appointed asset manager on behalf of Sealand S.à.r.l and receives asset management fees, development management fees The aggregate amounts recognised in the consolidated balance sheet and consolidated statement of comprehensive income are as follows: 31 March 2023 31 March 2022 Total Group’s share Group’s share Group’s share 2022 Group’s share £m 99.3 8.2 (16.1) (67.8) 23.6 – 23.6 2023 Total £m 9.9 (2.4) 7.5 (0.1) (3.5) 3.9 1.7 0.6 (3.4) 2.8 (1.7) 1.1 £m 9.9 0.8 (1.6) (6.8) 2.3 3.2 5.5 2023 £m 1.0 (0.2) 0.8 – (0.4) 0.4 0.2 – (0.3) 0.3 (0.2) 0.1 Total £m 97.3 14.7 (17.5) (62.7) 31.8 – 31.8 2022 Total £m 12.6 (2.4) 10.2 (0.7) (3.6) 5.9 29.1 2.7 (7.2) 30.5 (29.1) 1.4 £m 9.7 1.5 (1.8) (6.3) 3.1 4.8 7.9 £m 1.2 (0.2) 1.0 – (0.4) 0.6 2.9 0.3 (0.7) 3.1 (2.9) 0.2 16. Investments in associates continued 17. Trade and other receivables 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. Country of incorporation 2023 % Holding 2022 % Holding UK UK UK – 10 10 – 10 10 Trade receivables Restricted monetary assets Service charge receivables* Other receivables Prepayments Accrued income 2023 £m 2.6 4.8 1.2 3.8 0.7 1.9 2022 £m 3.7 5.6 1.7 6.2 0.7 1.0 15.0 18.9 * Included in service charge receivables is £nil of Value Added Taxation (2022: £1.4 million) and £1.2 million of service charge debtors (2022: £0.3 million). Trade receivables are shown after deducting a loss allowance of £3.0 million (2022: £5.2 million), other receivables are shown after deducting a loss allowance of £0.3 million (2022: £nil). The provision for doubtful debts is calculated as an expected credit loss on trade receivables in accordance with IFRS 9. The release to the consolidated statement of comprehensive income in relation to doubtful debts made against tenant debtors was £0.2 million (2022: £0.3 million charge). The Group has calculated the expected credit loss by applying a forward-looking outlook to historical default rates. The Group monitors rent collection and the ability of tenants to pay rent receivables 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 on a basis of shared credit risk characteristics and an assumption around the tenants ability to pay their receivable, based on conversations held and our knowledge of their credit history. The expected credit loss rates are based on historical payment profiles of tenant debtors and corresponding historical credit losses. Opening loss allowance at 1 April (Decrease) / Increase in loss allowance recognised in the consolidated statement of comprehensive income during the year in relation to tenant debtors Disposal of subsidiary Loss allowance utilisation Closing loss allowance at 31 March 2023 £m 5.2 (0.2) – (2.0) 3.0 2022 £m 9.3 0.3 (2.5) (1.9) 5.2 The restricted monetary assets relates to cash balances 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. 18. Assets held for sale Assets held for sale at 1 April Transfer to investment properties Assets held for sale at 31 March 2023 £m – – – 2022 £m 25.5 (25.5) – In the year ended 31 March 2023 the Group made a number of strategic disposals. As at 31 March 2023 no investment properties meet the definition of assets held for sale under IFRS. During the year ended 31 March 2022 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. 19. Cash and cash equivalents There are no restrictions on cash in place (2022: nil). As at 31 March 2023 and 31 March 2022 cash and cash equivalents comprised of cash held in bank accounts and treasury deposits. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 171 Notes to the financial statements continued 20. Trade and other payables Trade payables Service charge liabilities* Other payables Accruals Value Added Taxation Rent received in advance 2023 £m 2.6 9.8 1.8 9.0 0.3 6.0 2022 £m 3.0 9.2 3.5 8.7 3.4 5.7 29.5 33.5 * Service charge liabilities includes accruals of £1.9 million (2022: £1.7 million), service charge creditors and other creditors of £4.8 million (2022: £5.3 million), Value added taxation of £1.0 million (2022: nil) and deferred income of £2.1 million (2022: £2.2 million). 21. Borrowings Maturity of drawn bank borrowings: After five years Less unamortised fees / discount 2023 £m 300.0 (3.3) 296.7 2022 £m 300.0 (4.2) 295.8 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. At 31 March 2023 the fair value was £256.8 million (31 March 2022: £285.9 million). Unsecured borrowings: Revolving credit facility Corporate bond Maturity date August 2024 March 2028 Facility £m Facility drawn £m 125.0 300.0 425.0 – 300.0 300.0 Unamortised facility fees / discount £m (0.6) (2.7) (3.3) £m (0.6) 297.3 296.7 In the year the Group drew down £nil (31 March 2022: £nil) of the revolving credit facility. 22. Lease commitment arrangements The Group earns rental income by leasing its investment properties to tenants under non-cancellable lease commitments. The Group holds two types of leases. - Head leases: A number of the investment properties 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 2023 £m 75.8 0.9 0.4 76.3 2022 £m 75.5 0.2 0.7 75.0 The expense relating to low value assets which have not been recognised under IFRS 16 was £nil million (March 2022: £nil million) and the expense relating to variable lease payments not included in the measurement of lease liabilities was £nil million (March 2022: £nil million). The total cash outflow in relation to lease commitments for the year was £3.0 million (March 2022: £2.7 million), £0.3 million (2022: £0.7 million) relates to the repayment of principle lease liabilities and £2.7 million (2022: £2.0 million) relates to the repayment of interest on lease liabilities. Depreciation recognised on ROU assets during the year was £0.2 million (2022: £0.4 million). 172 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements Notes to the financial statements continued 20. Trade and other payables Trade payables Service charge liabilities* Other payables Accruals Value Added Taxation Rent received in advance 21. Borrowings Maturity of drawn bank borrowings: After five years Less unamortised fees / discount £285.9 million). Unsecured borrowings: Revolving credit facility Corporate bond Lease liability maturity table Within one year Between one and two years In the second to fifth year inclusive After five years * Service charge liabilities includes accruals of £1.9 million (2022: £1.7 million), service charge creditors and other creditors of £4.8 million (2022: £5.3 million), Value added taxation of £1.0 million (2022: nil) and deferred income of £2.1 million (2022: £2.2 million). 29.5 33.5 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 2023 £m 0.4 0.8 0.5 75.0 76.7 2023 £m 3.0 3.0 8.9 253.6 268.5 (191.8) 76.7 2022 £m 0.7 0.7 2.1 72.2 75.7 2022 £m 3.2 3.0 9.0 253.8 269.0 (193.3) 75.7 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. At 31 March 2023 the fair value was £256.8 million (31 March 2022: At the balance sheet date the Group had contracted with tenants for the following future minimum lease payments on its investment properties: Maturity date August 2024 March 2028 Facility Facility drawn £m 125.0 300.0 425.0 £m – 300.0 300.0 Unamortised facility fees / discount £m (0.6) (2.7) (3.3) £m (0.6) 297.3 296.7 Within one year Between one and two years In the second to fifth year inclusive After five years 2023 £m 45.6 39.5 79.7 123.3 288.1 2022 £m 50.0 42.7 89.4 133.7 315.8 In the year the Group drew down £nil (31 March 2022: £nil) of the revolving credit facility. The Group’s weighted average lease length of lease commitments at 31 March 2023 was 5.2 years (March 2022: 5.3 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 £1.5 million (March 2022: £1.6 million). 23. Share capital and reserves Share capital Ordinary shares 1 April 2021 Scrip dividends issued Shares issued under employee share schemes Scrip dividends issued 31 March 2022 Scrip dividends issued Shares issued under employee share schemes Scrip dividends issued Shares issued under employee share schemes 31 March 2023 All shares issued and authorised are fully paid up. Number of shares issued £m’s Price per share pence Total No of shares (m) Held by EBT No of shares (m) Shares in issue No of shares (m) 0.5 0.6 0.8 1.0 0.6 0.6 0.1 0.82 – 0.86 0.86 – 0.78 – 309.0 309.5 309.5 310.3 310.3 311.3 311.3 311.9 311.9 311.9 2.7 2.7 2.1 2.1 2.1 2.1 1.5 1.5 1.4 1.4 306.3 306.8 307.4 308.2 308.2 309.2 309.8 310.4 310.5 310.5 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 173 2023 £m 2.6 9.8 1.8 9.0 0.3 6.0 2022 £m 3.0 9.2 3.5 8.7 3.4 5.7 2023 £m 300.0 (3.3) 296.7 2022 £m 300.0 (4.2) 295.8 2023 £m 75.8 0.9 0.4 76.3 2022 £m 75.5 0.2 0.7 75.0 The Group earns rental income by leasing its investment properties to tenants under non-cancellable lease commitments. 22. Lease commitment arrangements 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 The expense relating to low value assets which have not been recognised under IFRS 16 was £nil million (March 2022: £nil million) and the expense relating to variable lease payments not included in the measurement of lease liabilities was £nil million (March 2022: £nil million). The total cash outflow in relation to lease commitments for the year was £3.0 million (March 2022: £2.7 million), £0.3 million (2022: £0.7 million) relates to the repayment of principle lease liabilities and £2.7 million (2022: £2.0 million) relates to the repayment of interest on lease liabilities. Depreciation recognised on ROU assets during the year was £0.2 million (2022: £0.4 million). Notes to the financial statements continued 23. Share capital and reserves continued Merger reserve The merger reserve arose as a result of the scheme of arrangement and represents the nominal amount of share capital that was issued to shareholders of NewRiver Retail Limited. Share premium Share premium represents amounts subscribed for a share in excess of nominal value less directly attributable issue costs. In the prior year, 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. Retained earnings Retained earnings consist of the accumulated net comprehensive profit of the Group, less dividends paid from distributable reserves, and transfers from equity issues where those equity issues generated distributable reserves. Scrip dividend shares Shares issued in respect of elections to participate in the Scrip Dividend scheme in respect of dividends declared in the year, the value of these was £1.3 million (2022: £1.1 million). The Scrip Dividend Scheme was approved on 14 August 2020. The scheme provides shareholders of NewRiver Ordinary shares with the opportunity, at the shareholders election and where offered by the Company, to elect to receive dividends as New Ordinary shares in the Company instead of their cash dividend, with no dealing charges or stamp duty incurred. Shares held in Employee Benefit Trust (EBT) As part of the scheme of arrangement and group reorganisation, the Company established an EBT which is registered in Jersey. The EBT, at its discretion, may transfer shares held by it to directors and employees of the Company and its subsidiaries. The maximum number of ordinary shares that may be held by the EBT may not exceed 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 1,466,713 ordinary shares held by EBT (2022: 2,116,979). 24. Share-based payments The Group has two share schemes for employees: - Performance Share Scheme - Deferred bonus scheme Performance Share Scheme Zero priced share options have been issued to senior management and executive directors under the Performance Share Scheme since 2013. The options vest to the extent that performance conditions are met over a three or four-year period. At the end of the period there may be a further vesting condition that the employee or director remains an employee of the Group. Further details on the scheme and the performance conditions are provided in the Remuneration Report. The charge for the year recognised in the consolidated statement of comprehensive income was £0.7 million (March 2022: £0.5 million). Financial year issued Average exercise price Outstanding at start of year Number Exercised Lapsed Outstanding at end of year Number exercisable 1,914,471 – – Granted – – (1,914,471) – 2,815,270 196,539 (257,357) (40,588) 2,713,864 – 2,940,580 231,352 – – 2,888,265 – – (89,370) 3,082,562 (133,165) 2,755,100 7,670,321 3,316,156 (257,357) (2,177,594) 8,551,526 Average remaining life (years) – 0.4 1.4 2.3 – – – – – 2020 2021 2022 2023 174 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements Notes to the financial statements continued The merger reserve arose as a result of the scheme of arrangement and represents the nominal amount of share capital that was issued to 23. Share capital and reserves continued Merger reserve Share premium shareholders of NewRiver Retail Limited. Share premium represents amounts subscribed for a share in excess of nominal value less directly attributable issue costs. In the prior year, 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. 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. Retained earnings Scrip dividend shares Shares issued in respect of elections to participate in the Scrip Dividend scheme in respect of dividends declared in the year, the value of these was £1.3 million (2022: £1.1 million). The Scrip Dividend Scheme was approved on 14 August 2020. The scheme provides shareholders of NewRiver Ordinary shares with the opportunity, at the shareholders election and where offered by the Company, to elect to receive dividends as New Ordinary shares in the Company instead of their cash dividend, with no dealing charges or stamp duty incurred. Shares held in Employee Benefit Trust (EBT) As part of the scheme of arrangement and group reorganisation, the Company established an EBT which is registered in Jersey. The EBT, at its discretion, may transfer shares held by it to directors and employees of the Company and its subsidiaries. The maximum number of ordinary shares that may be held by the EBT may not exceed 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 1,466,713 ordinary shares held by EBT (2022: 2,116,979). 24. Share-based payments The Group has two share schemes for employees: - Performance Share Scheme - Deferred bonus scheme Performance Share Scheme Zero priced share options have been issued to senior management and executive directors under the Performance Share Scheme since 2013. The options vest to the extent that performance conditions are met over a three or four-year period. At the end of the period there may be a further vesting condition that the employee or director remains an employee of the Group. Further details on the scheme and the performance conditions are provided in the Remuneration Report. The charge for the year recognised in the consolidated statement of comprehensive income was £0.7 million (March 2022: £0.5 million). Financial year issued Average Outstanding at exercise price start of year Granted Number Exercised Outstanding at Number remaining life Lapsed end of year exercisable (years) 2020 2021 2022 2023 – – – 1,914,471 – – (1,914,471) – 2,815,270 196,539 (257,357) (40,588) 2,713,864 – 2,940,580 231,352 – 2,888,265 – – (89,370) 3,082,562 (133,165) 2,755,100 7,670,321 3,316,156 (257,357) (2,177,594) 8,551,526 – – – – – Average – 0.4 1.4 2.3 Deferred Bonus Scheme Zero priced share options have been issued to senior management and executive directors under the Deferred Bonus Scheme since 2016. The options vest based on the employee or director remaining in the employment of the Group for a defined period (usually two years). The charge for the year recognised in the consolidated statement of comprehensive income for this scheme was £0.4 million (March 2022: £0.4 million). Financial Year issued Average exercise price Outstanding at start of year Granted Exercised Cancelled Outstanding at end of year Number exercisable Average remaining life (years) 2018 2019 2020 2021 2022 2023 – – – – – – 53,889 124,277 118,050 366,702 – – – – (8,921) (7,526) (35,805) – – – (340,659) (10,152) 313,619 24,499 – 666,333 – – – (25,870) 640,463 44,968 116,751 82,245 15,891 338,118 Fair value The fair value of the share options has been calculated based on a Monte Carlo Pricing Model using the following inputs: 976,537 690,832 (392,911) (36,022) 1,238,436 Share price Exercise price Expected volatility Risk free rate Expected dividends* * based on quoted property sector average. – – – – – – – – – – – 0.5 1.3 2023 0.87 Nil 43% 2022 0.78 Nil 25% 1.675% 0.252% 0% 0% 25. Financial instruments and risk management The Group’s activities expose it to a variety of financial risks in relation to the financial instruments it uses: market risk including cash flow interest rate risk, credit risk and liquidity risk. The financial risks relate to the following financial instruments: trade receivables, cash and cash equivalents, trade and other payables, borrowings and derivative financial instruments. Risk management parameters are established by the Board on a project-by-project basis. Reports are provided to the Board quarterly and also when authorised changes are required. Financial instruments Financial assets Financial assets at amortised cost Trade and other receivables Cash and cash equivalents Total financial assets and maximum exposure to credit risk Financial liabilities At amortised cost Borrowings Lease liabilities Payables and accruals 2023 £m 2022 £m 13.4 108.6 122.0 15.9 82.8 98.7 (296.7) (295.8) (76.7) (20.0) (393.4) (271.4) (75.7) (22.2) (393.7) (295.0) 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 21 for further details. None of the financial instruments above are held at fair value. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 175 Notes to the financial statements continued 25. Financial instruments and risk management continued Market risk Currency risk The Group is not subject to any foreign currency risk as nearly all transactions are in Pounds Sterling. Interest rate risk The Group’s interest rate risk arises from borrowings issued at floating interest rates (see note 21). 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. 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 2023 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, in the year or in the prior year, if interest rates increase or decrease as we have no drawn variable rate debt. 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. 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 2023 Gross amount £m 2023 Loss allowance £m 2023 % applied 2.4 0.1 0.3 0.3 2.5 5.6 0.6 0.1 0.1 0.1 2.1 3.0 25% 100% 33% 33% 84% 2023 Carrying amount £m 1.8 – 0.2 0.2 0.4 2.6 2022 Gross amount £m 2022 Loss allowance £m 2022 % applied 3.3 0.4 0.1 0.5 4.6 8.9 0.8 0.1 0.1 0.2 4.0 5.2 24% 25% 100% 40% 87% 2022 Carrying amount £m 2.5 0.3 – 0.3 0.6 3.7 The Group’s total expected credit loss in relation to trade receivables, other receivables and accrued income is £3.5 million (2022: £5.2 million). The Group recognises an expected credit loss allowance on trade receivables of £3.0 million (2022: £5.2 million) as noted in the above table. 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 176 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 2023 £m 2.5 0.3 0.4 2.4 5.6 (3.0) 2.6 2022 £m 4.6 0.5 0.5 3.3 8.9 (5.2) 3.7 Financial statements Notes to the financial statements continued 25. Financial instruments and risk management continued The Group is not subject to any foreign currency risk as nearly all transactions are in Pounds Sterling. Market risk Currency risk Interest rate risk drawn variable rate debt. Credit risk The Group’s interest rate risk arises from borrowings issued at floating interest rates (see note 21). 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. 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 2023 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, in the year or in the prior year, if interest rates increase or decrease as we have no 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. Ageing of past due gross trade receivables and the carrying amount net of loss allowances is set out below: 2023 2023 Gross amount Loss allowance 2023 % applied 2022 2022 Gross amount Loss allowance 2022 % applied £m 2.4 0.1 0.3 0.3 2.5 5.6 £m 0.6 0.1 0.1 0.1 2.1 3.0 25% 100% 33% 33% 84% 2023 Carrying amount £m 1.8 – 0.2 0.2 0.4 2.6 £m 3.3 0.4 0.1 0.5 4.6 8.9 £m 0.8 0.1 0.1 0.2 4.0 5.2 The Group’s total expected credit loss in relation to trade receivables, other receivables and accrued income is £3.5 million (2022: £5.2 million). The Group recognises an expected credit loss allowance on trade receivables of £3.0 million (2022: £5.2 million) as noted in the above table. The Group categorises trade debtors in varying degrees of risk, as detailed below: 0-30 days 30-60 days 60-90 days 90-120 days Over 120 days Risk level Very high High Medium Low Loss allowance Carrying amount Gross carrying amount before loss allowance 2022 Carrying amount £m 2.5 0.3 – 0.3 0.6 3.7 2022 £m 4.6 0.5 0.5 3.3 8.9 (5.2) 3.7 24% 25% 100% 40% 87% 2023 £m 2.5 0.3 0.4 2.4 5.6 (3.0) 2.6 Opening loss allowance at 1 April (Release) / increase in loss allowance recognised in the consolidated statement of comprehensive income during the year in relation to tenant debtors Disposal of subsidiary Loss allowance utilisation Closing loss allowance at 31 March 2023 £m 5.2 (0.2) – (2.0) 3.0 2022 £m 9.3 0.3 (2.5) (1.9) 5.2 The Group monitors its counterparty exposures on cash and short-term deposits weekly. The Group monitors the counterparty credit rating of the institutions that hold its cash and deposits and spread the exposure across several banks. Liquidity risk The Group manages its liquidity risk by maintaining sufficient cash balances and committed credit facilities. The Board reviews the credit facilities in place on a regular 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: 2023 £m Borrowings Interest on borrowings Lease liabilities Payables and accruals 2022 £m Borrowings Interest on borrowings Lease liabilities Payables and accruals Reconciliation of movement in the Group’s share of net debt in the year Group’s share of net debt at beginning of year Cash flow Net (increase) / decrease 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 decrease / (increase) in cash and cash equivalents Bank loans repaid New bank loans Change in bank loan fees to be amortised 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 Less than one year One to two years Two to five years More than five years – (10.5) (3.0) (20.0) (33.5) – (10.5) (3.2) (22.2) (35.9) – (300.0) (10.5) (3.0) – (30.7) (8.9) – – – (253.6) – (13.5) (339.6) (253.6) – (10.5) (3.0) – (13.5) – (300.0) (31.5) (9.0) – (9.7) (253.8) – (40.5) (563.5) 2023 £m 221.5 (25.8) – 0.9 2.7 – 1.9 0.1 Total (300.0) (51.7) (268.5) (20.0) (640.2) (300.0) (62.2) (269.0) (22.2) (653.4) 2022 £m 493.3 67.7 (335.0) 1.1 (1.6) (4.0) – – 201.3 221.5 296.7 15.9 (108.6) (2.7) 201.3 295.8 13.9 (82.8) (5.4) 221.5 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 177 Notes to the financial statements continued 25. Financial instruments and risk management continued Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, to provide returns to shareholders and to maintain an optimal capital structure to reduce the cost of capital. The Group is not subject to any external capital requirements. As detailed in note 11, the Group is a REIT and to qualify as a REIT the Group must distribute 90% of its taxable income from its property business. To maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets. 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 on a proportionally consolidated basis. Between 31 March 2022 and 31 March 2023, the Group’s proportionally consolidated LTV decreased by 0.2% from 34.1% to 33.9% and the gearing ratio from 51% to 50% mainly as a result of retail disposals. The Group continually monitors LTV and will continue to monitor LTV closely, factoring in disposal activity and possible 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 Share of joint ventures’ and associates carrying value of investment properties Group’s share of carrying value of investment properties Net debt to property value ratio (‘Loan to value’) Reconciliation of financial liabilities Reconciliation of financial liabilities As at 1 April 2022 (Decrease)/Increase through financing cash flows Head office lease Repayment of principal portion of lease liability Lease modification Loan amortisation As at 31 March 2023 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 178 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 2023 £m 296.7 (108.6) 188.1 378.6 50% 15.9 (2.7) 201.3 551.5 42.1 593.6 33.9% Lease liabilities £m Borrowings £m Derivatives £m 75.7 295.8 1.1 (0.4) 0.3 – 76.7 – – – 0.9 296.7 – – – – – – Lease liabilities £m Borrowings £m Derivatives £m 85.6 629.7 (2.6) – (0.7) (5.2) (1.7) (2.3) – – (335.0) – – – – – 1.1 75.7 295.8 – – – – – 2.6 – – 2022 £m 295.8 (82.8) 213.0 414.1 51% 13.9 (5.4) 221.5 609.1 40.3 649.4 34.1% Total £m 371.5 1.1 (0.4) 0.3 0.9 373.4 Total £m 712.7 (335.0) (0.7) (5.2) (1.7) (2.3) 2.6 1.1 371.5 Financial statements Notes to the financial statements continued 25. Financial instruments and risk management continued Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, to provide returns to shareholders and to maintain an optimal capital structure to reduce the cost of capital. The Group is not subject to any external capital requirements. As detailed in note 11, the Group is a REIT and to qualify as a REIT the Group must distribute 90% of its taxable income from its 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 on a proportionally Between 31 March 2022 and 31 March 2023, the Group’s proportionally consolidated LTV decreased by 0.2% from 34.1% to 33.9% and the gearing ratio from 51% to 50% mainly as a result of retail disposals. The Group continually monitors LTV and will continue to monitor LTV closely, factoring in disposal activity and possible 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. property business. consolidated basis. 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 Share of joint ventures’ and associates carrying value of investment properties Group’s share of carrying value of investment properties Net debt to property value ratio (‘Loan to value’) Reconciliation of financial liabilities (Decrease)/Increase through financing cash flows Repayment of principal portion of lease liability Reconciliation of financial liabilities As at 1 April 2022 Head office lease Lease modification Loan amortisation As at 31 March 2023 Reconciliation of financial liabilities As at 1 April 2021 Other changes Lease modification Disposals Disposal of subsidiary Termination of derivative (Decrease)/Increase through financing cash flows Repayment of bank loans Repayment of principal portion of lease liability 2023 £m 296.7 (108.6) 188.1 378.6 50% 15.9 (2.7) 201.3 551.5 42.1 593.6 33.9% £m – – – – – – – – – – – – – 2.6 2022 £m 295.8 (82.8) 213.0 414.1 51% 13.9 (5.4) 221.5 609.1 40.3 649.4 34.1% Total £m 371.5 1.1 (0.4) 0.3 0.9 373.4 Total £m 712.7 (335.0) (0.7) (5.2) (1.7) (2.3) 2.6 1.1 371.5 Lease liabilities Borrowings Derivatives £m 85.6 £m 629.7 £m (2.6) £m 75.7 1.1 (0.4) 0.3 – 76.7 – (0.7) (5.2) (1.7) (2.3) – – £m 295.8 – – – 0.9 296.7 (335.0) – – – – – 1.1 Change in capitalised loan fees to be amortised As at 31 March 2022 75.7 295.8 26. Contingencies and commitments The Group has no material contingent liabilities (2022: None). The Group was contractually committed to £1.8 million of capital expenditure to construct or develop investment property as at 31 March 2023 (31 March 2022: £1.3 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 dated 20 August 2021, 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. 27. Related party transactions Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. During the year the Company paid £1.1 million (2022: £2.8 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 (2022: £3.0 million) and loans with associates of £3.2 million (March 2022: £4.8 million) During the year, the Group received £2.3 million (2022: £nil) back from associates in the form of shareholder loan repayments and repayment of initial capital invested. 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 2023 £m – 0.2 0.2 0.1 2022 £m 0.1 0.2 0.2 0.2 Lease liabilities Borrowings Derivatives During the year, the Group recognised £0.3 million of interest from joint ventures and associates (2022: £0.4 million) and as at 31 March 2023 the amount owing to the Group was £0.2 million (2022: £0.2 million). As at 31 March 2023, an amount of £0.3 million (2022: £0.2 million) was due to the Group relating to management fees. Key management personnel The remuneration of key management personnel (comprising of the Executive Directors, Non-Executive Directors and Executive Committee) of the Group is set out below in aggregate for each of the categories specified in IAS 24 ‘Related Party Disclosures.’ Further information about the remuneration of the individual Directors is provided in the audited part of the Remuneration Committee report on pages 119 to 136. Short-term employee benefits Other benefits 2023 £m 3.1 0.1 3.2 2022 £m 3.0 0.1 3.1 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. 28. Post balance sheet events There were no significant events occurring after the reporting period, but before the financial statements were authorised for issue. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 179 CCoommppaannyy BBaallaannccee SShheeeett As at 31 March 2023 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 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 2023 £m 2022 £m B D D E F 323.9 213.7 537.6 196.5 0.7 84.7 281.9 819.5 – 2.3 154.9 157.2 296.7 296.7 365.6 3.1 2.4 27.6 332.5 365.6 329.9 225.9 555.8 238.0 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 The notes on pages 182 to 186 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 company. The loss for the year after taxation was £10.4 million (31 March 2022: loss of £36.3 million). The financial statements were approved by the Board of Directors on 14 June 2023 and were signed on its behalf by: Allan Lockhart Chief Executive Registered number: 10221027 Will Hobman Chief Financial Officer 180 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements CCoommppaannyy BBaallaannccee SShheeeett As at 31 March 2023 CCoommppaannyy SSttaatteemmeenntt ooff CChhaannggeess iinn EEqquuiittyy For the year ended 31 March 2023 As at 1 April 2021 Loss after taxation Transfer to merger reserve Equity issue Transfer of share premium Dividends paid As at 31 March 2022 Loss after taxation Transfer from merger reserve Equity issue Dividends paid As at 31 March 2023 Notes G Share capital £m 3.1 – – – – – 3.1 – – – – 3.1 Share premium £m 227.4 – – 1.1 (227.4) – 1.1 – – 1.3 – 2.4 Merger reserve £m 24.2 – 9.4 – – – 33.6 – (6.0) – – 27.6 Retained earnings £m 197.8 (36.3) (9.4) – 227.4 (21.7) 357.8 (10.4) 6.0 – (20.9) 332.5 Total £m 452.5 (36.3) – 1.1 – (21.7) 395.6 (10.4) – 1.3 (20.9) 365.6 Amounts owed to subsidiary undertakings The notes on pages 182 to 186 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. Amounts owed from subsidiary undertakings Amounts owed from subsidiary undertakings Non-current assets Investment in subsidiaries Total non-current assets Current assets Other receivables Cash and cash equivalents Total current assets Total assets Equity and liabilities Current liabilities Trade creditors Accruals Total current liabilities Non-current liabilities Borrowings Total non-current liabilities Net assets Equity Share capital Share premium Merger reserve Retained earnings Total equity of £36.3 million). Notes 2023 £m 2022 £m B D D E F 323.9 213.7 537.6 196.5 0.7 84.7 281.9 819.5 – 2.3 154.9 157.2 296.7 296.7 365.6 3.1 2.4 27.6 332.5 365.6 329.9 225.9 555.8 238.0 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 The notes on pages 182 to 186 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 company. The loss for the year after taxation was £10.4 million (31 March 2022: loss The financial statements were approved by the Board of Directors on 14 June 2023 and were signed on its behalf by: Allan Lockhart Chief Executive Registered number: 10221027 Will Hobman Chief Financial Officer NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 181 NNootteess ttoo tthhee CCoommppaannyy FFiinnaanncciiaall SSttaatteemmeennttss A. Accounting policies Basis of accounting The Company’s separate financial statements for the year ended 31 March 2023 are prepared in accordance with Financial Reporting Standard 101 (FRS 101) “Reduced Disclosure Framework” as issued by the Financial Reporting Council and within the requirements of the Companies Act 2006. The financial statements are presented in pounds Sterling. These financial statements have been prepared under the historical cost convention. For the Company’s going concern assessment, refer to note 1 of the consolidated financial statements. Changes to accounting policies The Company has adopted the new accounting standards 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. Refer to note 1. DDiisscclloossuurree eexxeemmppttiioonnss The Company has taken advantage of all disclosure exemptions allowed by FRS 101. These financial statements do not include: - the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134 to 136 of IAS 1. - the requirements of IAS 7 Statement of Cash Flows; - the requirements of IFRS 7 Financial Instruments: disclosures; and - the requirements in IAS 24 Related Party Disclosures to disclose related party transactions between two or more 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. Investment in subsidiaries 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. Financial instruments FFiinnaanncciiaall aasssseettss 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. 182 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements NNootteess ttoo tthhee CCoommppaannyy FFiinnaanncciiaall SSttaatteemmeennttss A. Accounting policies Basis of accounting convention. Changes to accounting policies The Company’s separate financial statements for the year ended 31 March 2023 are prepared in accordance with Financial Reporting Standard 101 (FRS 101) “Reduced Disclosure Framework” as issued by the Financial Reporting Council and within the requirements of the Companies Act 2006. The financial statements are presented in pounds Sterling. These financial statements have been prepared under the historical cost For the Company’s going concern assessment, refer to note 1 of the consolidated financial statements. The Company has adopted the new accounting standards 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. Refer to note 1. DDiisscclloossuurree eexxeemmppttiioonnss The Company has taken advantage of all disclosure exemptions allowed by FRS 101. These financial statements do not include: - the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134 to 136 of IAS 1. - the requirements of IAS 7 Statement of Cash Flows; - the requirements of IFRS 7 Financial Instruments: disclosures; and - the requirements in IAS 24 Related Party Disclosures to disclose related party transactions between two or more members of the Group. The above disclosure exemptions have been adopted because equivalent disclosures are included in the consolidated Group accounts into 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. which the Company is consolidated. Investment in subsidiaries Financial instruments FFiinnaanncciiaall aasssseettss 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. 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 value of a non-interest bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted. Share capital Shares are classified as equity when there is no obligation to transfer cash or other assets. Dividends Dividends to the Company’s shareholders are recognised when they become legally payable. In the case of interim dividends, this is when paid. In the case of final dividends, this is when approved by equity holders at a general meeting. Dividend information is provided in note 13 to the consolidated financial statements. Merger reserve The merger reserve resulted from the acquisition of NewRiver Retail Limited and represents the difference between the value of the net assets acquired of £524 million and the nominal value of the shares issued, adjusted for subsequent impairments and impairment reversals in NewRiver Retail Limited following the creation of the merger reserve in 2016. Critical estimates 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 only 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. IImmppaaiirrmmeenntt ooff iinnvveessttmmeenntt iinn ssuubbssiiddiiaarriieess 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 value in use of the investment is below its carrying amount. The value in use 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. If valuations of investment properties declined by 10%, the impairment in investment in subsidiaries would be £53.7 million (2022: £58.6 million). NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 183 Country of incorporation Activity Proportion of ownership interest Class of share Notes to the company financial statements continued B. Investment in subsidiaries All subsidiaries are held indirectly except the companies marked* in the below listing. Name C-store REIT Limited Convenience Store REIT Limited NewRiver Capital Limited* NewRiver Retail (Burgess Hill) Limited 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 NewRiver Retail (Portfolio No. 3) Limited Partnership 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 Guernsey Guernsey UK UK UK UK UK UK UK UK UK UK UK UK UK Dormant company Real estate investments Real estate investments Real estate investments Real estate investments Holding company Real estate investments Real estate investments Real estate investments Real estate investments Real estate investments Real estate investments Real estate investments Real estate investments 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 184 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 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% 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 Notes to the company financial statements continued B. Investment in subsidiaries All subsidiaries are held indirectly except the companies marked* in the below listing. Country of incorporation Activity Proportion of ownership NewRiver Retail (Bexleyheath) Limited Jersey Real estate investments NewRiver Retail (Broadway Square) Limited Jersey Real estate investments 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 NewRiver Retail (Broadway Square) UK Limited NewRiver Retail (Bexleyheath) UK Limited NewRiver Retail (Boscombe No. 1) Limited 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 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 NewRiver Retail (Portfolio No. 3) Limited Partnership 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 UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK Guernsey Guernsey Dormant company Dormant company Real estate investments Dormant company Real estate investments Real estate investments Asset management Real estate investments Group holding company Dormant Dormant Real estate investments Real estate investments Real estate investments Real estate investments Dormant General partner Real estate investments Dormant company Real estate investments Real estate investments Real estate investments Real estate investments Holding company Real estate investments Real estate investments Real estate investments Real estate investments Real estate investments Real estate investments Real estate investments Real estate investments Real estate investments Real estate investments Real estate investments Real estate investments interest 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% NewRiver Retail (Market Deeping No. 1) Limited Guernsey Real estate investments NewRiver Retail (Morecambe) Limited Real estate investments NewRiver Retail (Newcastle No. 1) Limited Guernsey Real estate investments NewRiver Retail (Wrexham No.1) Limited Guernsey Real estate investments NewRiver Retail (Portfolio No. 10) Limited Real estate investments 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 Name Country of incorporation Activity Proportion of ownership interest 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 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 89 Whitfield Street, London, W1T 4DE. 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. Luxembourg Real estate investments 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, 89 Whitfield Street, London, W1T 4DE UK – NewRiver Retail (Sprucefield) Limited, 89 Whitfield Street, London, W1T 4DE UK – NewRiver Retail (Hamilton) Limited, 89 Whitfield Street, London, W1T 4DE Reconciliation of the movement in investment in subsidiaries: Opening balance (Impairment) / Reversal in subsidiaries Disposal of subsidiaries Other movement Investment in subsidiaries 2023 £m 329.9 (6.0) – – 323.9 2022 £m 570.3 9.4 (249.2) (0.6) 329.9 The Company has recognised an impairment of £6.0 million (2022: £9.4 million impairment reversal) to reflect the decrease in the valuation of the overall assets of the investment in subsidiaries as a result of a negative movement in property valuations and trading profits. C. Auditors remuneration The auditors’ remuneration in respect of the Company is disclosed in note 6 of the consolidated financial statements. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 185 Notes to the company financial statements continued D. Amounts owed from subsidiary undertakings Non-current – Amounts owed from subsidiary undertakings * Current – Amounts owed from subsidiary undertakings 2023 £m 213.7 196.5 410.2 2022 £m 225.9 238.0 463.9 * Includes an expected credit loss impairment provision of £0.6 million (2022: £0.7 million) Non-current – amounts owed by subsidiary undertakings are unsecured and bear interest at floating rates based on SONIA. Current amounts owed by subsidiaries undertakings are unsecured repayable on demand. E. Current liabilities Trade creditors Accruals Amounts owed to subsidiary undertakings 2023 £m – 2.3 154.9 157.2 2022 £m 0.3 2.3 101.8 104.4 Amounts owed to subsidiary undertakings are unsecured, interest free and repayable on demand. F. Borrowings All borrowings issued by the Group at 31 March 2023 were issued by the Company. See note 21 of the consolidated financial statements for details. G. Capital reduction In the prior year, 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. 186 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements Notes to the company financial statements continued D. Amounts owed from subsidiary undertakings Non-current – Amounts owed from subsidiary undertakings * Current – Amounts owed from subsidiary undertakings 2023 £m 213.7 196.5 410.2 2022 £m 225.9 238.0 463.9 2023 £m – 2.3 154.9 157.2 2022 £m 0.3 2.3 101.8 104.4 * Includes an expected credit loss impairment provision of £0.6 million (2022: £0.7 million) Non-current – amounts owed by subsidiary undertakings are unsecured and bear interest at floating rates based on SONIA. Current amounts owed by subsidiaries undertakings are unsecured repayable on demand. E. Current liabilities Trade creditors Accruals Amounts owed to subsidiary undertakings F. Borrowings for details. G. Capital reduction Amounts owed to subsidiary undertakings are unsecured, interest free and repayable on demand. All borrowings issued by the Group at 31 March 2023 were issued by the Company. See note 21 of the consolidated financial statements In the prior year, 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. AAlltteerrnnaattiivvee PPeerrffoorrmmaannccee MMeeaassuurreess ((AAPPMMss)) In addition to information contained in the Group financial statements, Alternative Performance Measures (‘APMs’), being financial measures which are not specified under IFRS, are also used by management to assess the Group’s performance. These include a number of measures contained in the ‘Financial Statistics’ table at the beginning of this document. These APMs include a number of European Public Real Estate Association (‘EPRA’) measures, prepared in accordance with the EPRA Best Practice Recommendations reporting framework. We report these because management considers them to improve the transparency and relevance of our published results as well as the comparability with other listed European real estate companies. The table below identifies the APMs used in this statement and provides the nearest IFRS measure where applicable, and where in this statement an explanation and reconciliation can be found. APM Nearest IFRS measure Explanation and reconciliation Underlying Funds From Operations (‘UFFO’) and UFFO per share (Loss) / Profit for the year 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” Note 25 of the Financial Statements NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 187 EEPPRRAA PPeerrffoorrmmaannccee MMeeaassuurreess ((uunnaauuddiitteedd)) The information in this section is unaudited and does not form part of the consolidated primary statements of the company or the notes thereto. Introduction Below we disclose financial performance measures in accordance with the European Public Real Estate Association (‘EPRA’) Best Practice Recommendations which are aimed at improving the transparency, consistency and relevance of reporting across European Real Estate companies. This section sets out the rationale for each performance measure as well as how it is measured. A summary of the performance measures is included in 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 LTV EPRA NIY EPRA ‘topped-up’ NIY EPRA Vacancy Rate EPRA Earnings Per Share: 7.9p DDeeffiinniittiioonn Earnings from operational activities FY23 7.9p 38.9% 34.6% FY22 8.5p 41.1% 38.7% March 2023 March 2022 134p 121p 135p 37.0% 7.6% 8.0% 3.4% 148p 134p 139p 37.2% 7.5% 8.0% 4.4% PPuurrppoossee 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 FY23 (£m) (16.8) FY22 (£m) (26.6) 38.2 12.3 3.8 – – – (0.8) 24.4 43.1 (0.1) – 1.9 (4.5) 26.1 309.7m 307.2m 7.9p 24.4 7.9p 8.5p 18.9 6.2p 188 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements EEPPRRAA PPeerrffoorrmmaannccee MMeeaassuurreess ((uunnaauuddiitteedd)) Introduction companies. 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 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 LTV EPRA NIY EPRA ‘topped-up’ NIY EPRA Vacancy Rate EPRA Earnings Per Share: 7.9p Earnings from operational activities DDeeffiinniittiioonn PPuurrppoossee by earnings FY23 7.9p 38.9% 34.6% 134p 121p 135p 37.0% 7.6% 8.0% 3.4% FY22 8.5p 41.1% 38.7% 148p 134p 139p 37.2% 7.5% 8.0% 4.4% FY23 (£m) (16.8) FY22 (£m) (26.6) 3.8 – – – (0.8) 24.4 7.9p 24.4 7.9p 43.1 (0.1) – 1.9 (4.5) 26.1 8.5p 18.9 6.2p 309.7m 307.2m The information in this section is unaudited and does not form part of the consolidated primary statements of the company or the notes thereto. 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 Head office relocation costs Restructuring and abortive costs Underlying Funds From Operations (UFFO) Basic number of shares UFFO per share March 2023 March 2022 UFFO per share – continuing operations Underlying Funds From Operations (UFFO) – continuing operations FY23 (£m) 24.4 1.1 – (0.2) 0.5 – 25.8 FY22 (£m) 26.1 0.9 0.4 (0.2) – 1.1 28.3 309.7m 307.2m 8.3p 25.8 8.3p 9.2p 20.5 6.7p EPRA NRV per share: 134p; EPRA NTA per share: 121p; EPRA NDV per share: 135p DDeeffiinniittiioonn 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. PPuurrppoossee 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. A key measure of a company’s underlying operating results and an indication of the extent to which current dividend payments are supported Deferred tax in relation to fair value gains of Investment Property 31 March 2023 IFRS Equity attributable to shareholders Fair value of financial instruments 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 38.2 12.3 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 Fair value of debt Purchasers’ costs EPRA NRV / NTA / NDV Fully diluted number of shares EPRA NRV / NTA / NDV per share 31 March 2022 IFRS Equity attributable to shareholders Fair value of financial instruments Deferred tax in relation to fair value gains of Investment Property Fair value of debt Purchasers’ costs EPRA NRV / NTA / NDV Fully diluted number of shares EPRA NRV / NTA / NDV per share EPRA NRV (£m) EPRA NTA (£m) EPRA NDV (£m) 378.6 (0.6) 0.9 – 40.2 419.1 378.6 (0.6) 0.9 – – 378.9 378.6 – – 43.2 – 421.8 312.7m 312.7m 312.7m 134p 121p 135p EPRA NRV (£m) EPRA NTA (£m) EPRA NDV (£m) 414.1 (0.3) 0.6 – 43.8 458.2 414.1 (0.3) 0.6 – – 414.1 – – 14.1 – 414.4 428.2 309.0m 309.0m 309.0m 148p 134p 139p NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 189 EPRA performance measures (unaudited) continued EPRA LTV: 37.0% DDeeffiinniittiioonn EPRA LTV is the ratio of gross debt, net payables less cash and cash equivalents to the aggregate value of properties. LTV is expressed on a proportionally consolidated basis. PPuurrppoossee EPRA LTV introduces a consistent and comparable metric for the real estate sector, with the aim to assess the gearing of the shareholder equity within a real estate investment company. 31 March 2023 Borrowings from financial institutions Corporate bond Net payables Cash and cash equivalents Net Debt (A) Investment property at fair value Total Property Value (B) LTV (A/B) 31 March 2022 Borrowings from financial institutions Corporate bond Net payables Cash and cash equivalents Net Debt (A) Investment property at fair value Total Property Value (B) LTV (A/B) Share of Joint Ventures (£m) Share of Associates (£m) (12.0) – (0.2) 2.1 (10.1) 32.2 32.2 (4.0) – (0.3) 0.6 (3.7) 9.9 9.9 Share of Joint Ventures (£m) Share of Associates (£m) (12.0) – (0.6) 4.0 (8.6) 30.6 30.6 (2.0) – (0.4) 1.4 (1.0) 9.7 9.7 Group (£m) – (300.0) (14.5) 108.6 (205.9) 551.5 551.5 37.3% Group (£m) – (300.0) (14.6) 82.8 (231.8) 609.1 609.1 38.1% Total (£m) (16.0) (300.0) (15.0) 111.3 (219.7) 593.6 593.6 37.0% Total (£m) (14.0) (300.0) (15.6) 88.2 (241.4) 649.4 649.4 37.2% 190 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements EPRA LTV is the ratio of gross debt, net payables less cash and cash equivalents to the aggregate value of properties. LTV is expressed on a EPRA LTV introduces a consistent and comparable metric for the real estate sector, with the aim to assess the gearing of the shareholder equity EPRA performance measures (unaudited) continued EPRA LTV: 37.0% DDeeffiinniittiioonn proportionally consolidated basis. PPuurrppoossee within a real estate investment company. 31 March 2023 Borrowings from financial institutions Corporate bond Net payables Cash and cash equivalents Net Debt (A) Investment property at fair value Total Property Value (B) LTV (A/B) 31 March 2022 Borrowings from financial institutions Corporate bond Net payables Cash and cash equivalents Net Debt (A) Investment property at fair value Total Property Value (B) LTV (A/B) Share of Joint Ventures (£m) Share of Associates Group (£m) – (300.0) (14.5) 108.6 (205.9) 551.5 551.5 37.3% Group (£m) – (300.0) (14.6) 82.8 (231.8) 609.1 609.1 38.1% (12.0) – (0.2) 2.1 (10.1) 32.2 32.2 (12.0) – (0.6) 4.0 (8.6) 30.6 30.6 (£m) (4.0) – (0.3) 0.6 (3.7) 9.9 9.9 (£m) (2.0) – (0.4) 1.4 (1.0) 9.7 9.7 Total (£m) (16.0) (300.0) (15.0) 111.3 (219.7) 593.6 593.6 37.0% Total (£m) (14.0) (300.0) (15.6) 88.2 (241.4) 649.4 649.4 37.2% Share of Joint Ventures (£m) Share of Associates EPRA NIY: 7.6%, EPRA ‘topped-up’ NIY: 8.0% DDeeffiinniittiioonn 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). PPuurrppoossee 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 EPRA Vacancy Rate: 3.4% March 2023 (£m) March 2022 (£m) 551.5 42.1 – (10.2) 583.4 44.9 628.3 59.6 (11.9) 47.7 2.4 50.1 7.6% 8.0% 609.1 40.3 – (22.3) 627.1 40.4 667.5 62.9 (13.1) 49.8 3.3 53.1 7.5% 8.0% B A C A/B C/B DDeeffiinniittiioonn Estimated Market Rental Value (ERV) of vacant space divided by ERV of the whole portfolio, excluding pub and development assets. PPuurrppoossee A ‘pure’ (%) measure of investment property space that is vacant, based on ERV. Estimated Rental Value of vacant retail space Estimated Rental Value of the retail portfolio EPRA Vacancy Rate March 2023 (£m) March 2022 (£m) A B A/B 1.8 53.0 3.4% 2.6 58.6 4.4% NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 191 EPRA performance measures (unaudited) continued EPRA Cost Ratio (including direct vacancy costs): 38.9%; EPRA Cost Ratio (excluding direct vacancy costs): 34.6% DDeeffiinniittiioonn Administrative & operating costs (including & excluding costs of direct vacancy) divided by gross rental income. PPuurrppoossee 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 FY23 (£m) 19.2 5.6 (1.5) – 0.4 – 0.6 – 24.3 (2.7) 21.6 58.8 – 3.6 62.4 FY22 (£m) 33.4 5.6 (1.9) (4.8) 0.4 – 0.7 – 33.4 (2.0) 31.4 77.3 – 3.9 81.2 38.9% 34.6% 38.9% 34.6% 41.1% 38.7% 36.8% 33.8% A B C A/C B/C 192 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statements EPRA performance measures (unaudited) continued EPRA Cost Ratio (including direct vacancy costs): 38.9%; EPRA Cost Ratio (excluding direct vacancy costs): 34.6% DDeeffiinniittiioonn PPuurrppoossee Administrative & operating costs (including & excluding costs of direct vacancy) divided by gross rental income. 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) Service charge costs recovered through rents but not separately invoiced Exclude (if part of the above): Investment property depreciation Ground rent costs 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 FY23 (£m) 19.2 5.6 (1.5) – 0.4 0.6 – – 24.3 (2.7) 21.6 58.8 – 3.6 62.4 38.9% 34.6% 38.9% 34.6% FY22 (£m) 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% 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 (loss) / reversal Other income Gross Rental Income Administrative cost ratio as per IFRS Administrative cost ratio as per IFRS – continuing operations A D C E D/E FY23 (£m) 24.3 (0.6) (0.4) – (5.6) (6.6) (0.2) (1.3) 9.6 62.4 (0.6) (0.2) 1.4 63.0 15.2% 15.2% FY22 (£m) 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 83.3 16.9% 16.0% NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 193 GGlloossssaarryy 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). Associates: is an entity in which the Group holds an interest and is significantly influenced by the Group. Average debt maturity: Is measured in years when each tranche of gross debt is multiplied by the remaining period to its maturity and the result is divided by total gross debt in issue at the period end. Average debt maturity is expressed on a proportionally consolidated basis. Footfall: Is the annualised number of visitors entering our shopping centre assets. Gross Asset Value (GAV): Is 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. Balance sheet gearing: Is the balance sheet net debt divided by IFRS net assets. Income return: Is the income derived from a property as a percentage of the property value. BRAVO: Is BRAVO Strategies III LLC, with which NewRiver formed a capital partnership in May 2019 to acquire and manage a portfolio of retail assets in the UK. 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. Book value: Is the amount at which assets and liabilities are reported in the financial statements. Cost of debt: Is the loan interest and derivative costs at the period end, divided by total debt in issue at the period end. Cost of debt is expressed on a proportionally consolidated basis. 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. 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 earnings per share: Is EPRA earnings divided by the weighted average basic number of shares in issue during the period. 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. EPRA LTV: EPRA LTV is the ratio of gross debt, net payables less cash and cash equivalents to the aggregate value of properties. LTV is expressed on a proportionally consolidated basis. 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. 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. 194 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 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 and asset management determinations. 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: MSCI Inc produces independent benchmarks of property returns and NewRiver portfolio returns. Net equivalent yield (NEY): Is the net weighted average income return a property will produce based upon the timing of the income received. In accordance with usual practice, the equivalent yields (as determined by the external valuers) assume rent received annually in arrears and on values before deducting prospective purchaser’s costs. Financial statements GGlloossssaarryy Admin cost ratio: Is the Group’s share of net administrative expenses Footfall: Is the annualised number of visitors entering our shopping (including its share of JV administrative expenses) divided by the centre assets. Group’s share of property income (including its share of JV property income). Associates: is an entity in which the Group holds an interest and is significantly influenced by the Group. Average debt maturity: Is measured in years when each tranche of gross debt is multiplied by the remaining period to its maturity and the result is divided by total gross debt in issue at the period end. Average debt maturity is expressed on a proportionally consolidated Balance sheet gearing: Is the balance sheet net debt divided by IFRS basis. net assets. Gross Asset Value (GAV): Is 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. BRAVO: Is BRAVO Strategies III LLC, with which NewRiver formed a capital partnership in May 2019 to acquire and manage a portfolio of retail assets in the UK. 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. Book value: Is the amount at which assets and liabilities are reported in the financial statements. Cost of debt: Is the loan interest and derivative costs at the period end, divided by total debt in issue at the period end. Cost of debt is expressed on a proportionally consolidated basis. 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. 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. 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 EPRA earnings per share: Is EPRA earnings divided by the weighted adjustments but excludes properties held for development in either average basic number of shares in issue during the period. period, properties with guaranteed rent reviews and asset EPRA Net Tangible Assets (EPRA NTA): Are the balance sheet net assets excluding the mark to market on effective cash flow hedges Long-term leasing deals: Are leasing deals with a fixed term certain and related debt adjustments, deferred taxation on revaluations, of at least one year. management determinations. goodwill, and diluting for the effect of those shares potentially issuable under employee share schemes. Loan to Value (LTV): Is the ratio of gross debt less cash, short-term deposits and liquid investments to the aggregate value of properties EPRA NTA per share: Is EPRA NTA divided by the diluted number of and investments. LTV is expressed on a proportionally consolidated shares at the period end. basis. EPRA LTV: EPRA LTV is the ratio of gross debt, net payables less Mark to market: Is the difference between the book value of an asset cash and cash equivalents to the aggregate value of properties. LTV or liability and its market value. is expressed on a proportionally consolidated basis. MSCI: MSCI Inc produces independent benchmarks of property ERV growth: Is the change in ERV over a period on our investment returns and NewRiver portfolio returns. 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. 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 Estimated rental value (ERV): Is the external valuers’ opinion as (as determined by the external valuers) assume rent received to the open market rent which, on the date of valuation, could annually in arrears and on values before deducting prospective reasonably be expected to be obtained on a new letting or rent purchaser’s costs. review of a property. Tenant (or lease) incentives: Are any incentives offered to occupiers to enter into a lease. Typically the incentive will be an initial rent-free period, or a cash contribution to fit-out or similar costs. Under accounting rules, the value of lease incentives given to tenants is amortised through the Income Statement on a straight-line basis to the lease expiry. Total Accounting Return (TAR): Is the increase or decrease in EPRA NTA per share plus dividends paid in the period, expressed as a percentage of EPRA NTA per share at the beginning of the period. Total Property Return (TPR): Is calculated as the change in capital value, less any capital expenditure incurred, plus net income, expressed as a percentage of capital employed over the period, as calculated by MSCI Real Estate (formerly IPD). Total property returns are calculated monthly and indexed to provide a return over the relevant period. Topped-Up Net Initial Yield: Net initial yield adjusted to include notional rent in respect of let properties which are subject to a rent free period at the valuation date. Underlying Funds From Operations (UFFO): is a measure of the Company’s operational profits, which includes other income and excludes one off or non-cash adjustments, such as portfolio valuation movements, profits or losses on the disposal of investment properties, fair value movements on derivatives and share-based payment expense. Weighted average lease expiry (WALE): Is the average lease term remaining to first tenant break, or expiry, across the portfolio weighted by rental income. This is also disclosed assuming all tenant 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. 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 payable under leases terms. 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. Proportionally consolidated: The aggregation of the financial results of the Reported Group and the Group’s Share of net assets within its joint venture and associates. 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. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 195 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 Company Information Directors Margaret Ford (Non-Executive Chairman) Allan Lockhart (Chief Executive Officer) Will Hobman (Chief Financial Officer) 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 89 Whitfield Street London W1T 4DE 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 196 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial statementsThis 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 Global www.blacksun-global.com www.nrr.co.uk NewRiver REIT plc 89 Whitfield Street London W1T 4DE Tel: +44(0) 20 3328 5800 N e w R i v e r R E I T p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 2 3

Continue reading text version or see original annual report in PDF format above