Annual Report • Jun 27, 2023
Annual Report
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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).
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%
8.3p
FY22: 6.7p FY21: 6.4p
Portfolio Valuation Performance
-5.9%
FY22: -0.9% FY21: -13.6%
Net debt
FY22: £221.5m FY21: £493.3m
£(16.8)m
FY22: £(26.6)m FY21: £(150.5)m
Loan To Value
33.9%
FY22: 34.1% FY21: 50.6%
Performance versus previous year
Improved Declined Maintained
| Chair's statement | 2 |
|---|---|
| Overview | 4 |
| Our business | 6 |
| Chief Executive's review | 8 |
| Our marketplace | 12 |
| Our business model | 18 |
| Stakeholder engagement | 20 |
| Key performance indicators | 28 |
| Portfolio review | 32 |
| Our platform | 42 |
| Finance review | 46 |
| Our ESG approach | 54 |
| Principal risks and uncertainties | 88 |
| Viability statement | 95 |
| The Chair's letter on governance | 97 |
|---|---|
| Our leadership team | 98 |
| Board leadership and | 101 |
| Company purpose | |
| Nomination Committee Report | 109 |
| Audit Committee Report | 113 |
| Remuneration Report | 119 |
| Directors' Report | 137 |
| Statement of Directors' responsibilities 140 | |
| Independent Auditors' Report | 141 |
|---|---|
| Consolidated Statement of Comprehensive Income |
149 |
| Consolidated Balance Sheet | 150 |
| Consolidated Cash Flow Statement | 151 |
| Consolidated Statement of Changes | 152 |
| in Equity | |
| Notes to the Financial Statements | 153 |
| Company Balance Sheet | 180 |
| Statement of Changes in Equity | 181 |
| Notes to the Financial Statements | 182 |
| Alternative Performance Measures | 187 |
| EPRA Performance Measures | 188 |
| Glossary | 194 |
| Company information | 196 |
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.
Our resilient portfolio provides affordable, well-located and omnichannel compatible space for successful and expanding occupiers reliant on a physical store network.
See page 6
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 42
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 46
Chair's statement
"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 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.
Town 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.
Non-Executive Chair
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
Overview
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
See page 18
Our strategy aims to deliver a consistent 10% Total Accounting Return in the medium term by focusing exclusively on these activities
See page 11
Underpinned by effective risk management
See page 88
MARKET
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 business
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.
| % rent | stores | |
|---|---|---|
| 1. | 3.4% | 20 |
| 2. | 3.1% | 10 |
| 3. | 2.4% | 14 |
| 4. | 2.3% | 4 |
| 5. | 2.2% | 14 |
| 6. | 2.1% | 13 |
| 7. | 2.1% | 5 |
| 8. | 2.0% | 6 |
| 9. | 1.6% | 3 |
| 10. | 1.4% | 11 |
| total | 22.6% |
6 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2023
FY21 FY22 FY23
• Our centres are located close to some of the fastest growing communities in the UK
• Our assets present optionality to re-purpose surplus retail space or land predominantly for residential
• Our diversified occupier line-up is focused on essential goods and services
• Our retail parks are optimised for click & collect with both free parking and delivery & returns pods in car parks
• Our market leading platform has a targeted capex programme to increase rental income, capital growth and shopper experience
• 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
• Liquid average lot size of £15.9 million
Chief Executive's review
"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.
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.
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.
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. Pleasingly, 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.
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.
Occupancy 96.7% FY22: 95.6%
Leasing vs ERV +1.1.% FY22: +7.4%
Completed disposals
£23m FY22: £305m
Retail Underlying Funds From Operations £25.8m FY22: £20.5m
LTV 33.9% FY22: 34.1%
Total Accounting Return -4.6% FY22: -6.6%
* As at time of reporting FY22 results
Rent collection 98% FY22: 96%
GRESB score 70 FY22: 68
Valuation performance
-5.9% FY22: -0.9%
Retail UFFO per share
8.3p FY22: 6.7p
Net debt £201.3m FY22: £221.5m
Ordinary Dividend per share 6.7p FY22: 7.4p
Key
Performance versus previous year
Improved Declined Maintained
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.
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
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.
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.
Capital allocation during the year has been focused on investing in our portfolio with tightly controlled discipline given the macroeconomic 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.
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.
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, 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. .
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.
Chief Executive Officer
14 June 2023
Our strategy aims to deliver a reliable and recurring income led 10% Total Accounting Return and create value for our stakeholders:
We do this by delivering on our business model:
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.
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).
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).
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.
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.
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)
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.
Source: Savills Research Source: Centre for Retail Research
Online sales as % of total retail sales
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.
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.
16% average reduction in rateable values for retailers across the NewRiver portfolio
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.
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.
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.
(%)
Source: MSCI
Source: Cushman & Wakefield
Retail Warehouse Transaction Volumes
Source: Savills
Our business model
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.
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. derpinned by a committed ESG strategy
Un
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.
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.
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.
75% team retention of 5+ years
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.
24 Number of capital partnership assets under management (April 2023)
19 x retail parks and 5 x shopping centres
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.
63 No. of different UK communities we are directly invested in or manage assets within
See page 22 for more information See page 24 for more information See page 26 for more information
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.
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.
96 FY23 investor meetings
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.
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 business model is underpinned by our active ESG programme using industry-recognised indices to track our sustainability performance.
We are delighted to have been acknowledged postperiod 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
Stakeholder engagement
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.
Critical to effective corporate Governance is how the Board aligns strategic decisions with the Company's purpose, values, strategy and stakeholders. The NewRiver Board has a clear stakeholder engagement plan, regularly consulting with the NewRiver team, who in turn manage and foster the relationships with our occupiers, key partners and advisers.
We are 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.
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 | Our approach |
|---|---|
| the likely consequence of any decision in the long term |
As a Board of a REIT owning assets which also include a risk-controlled development pipeline, the Board is always conscious of the long term. Looking to the future the Board and Executive Committee regularly assess the overall corporate strategy and acquisition, asset management and disposal decisions in the context of current and future long-term trends and markets. We closely assess the latest trends reported by CACI, our research provider, to ensure we are aligned with evolving trends. These insights and the Board's own extensive experience steer the long-term strategic direction. |
| the interests of the company's employees |
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 need to foster the company's business relationships with suppliers, customers and others |
The Board is committed to fostering the Company's business relationships with occupiers, local authorities and other stakeholders. These stakeholders are key to our business model and therefore members of the Exco (including Board members) have direct responsibilities for managing and developing these relationships. Board site visits during the year have helped these relationships and understanding the needs of these stakeholders. |
| the impact of the company's operations on the community and the environment |
The Board is committed to our communities and our assets are integral to the communities they serve. We aim to enhance the lives of consumers and minimise our impact on the environment. These matters are therefore considered in all strategic decisions and embedded into the business model. |
| the desirability of the company maintaining a reputation for high standards of business conduct |
Our values mirror our culture and as a team our values are to be trusted and respected and this is entrenched into Board decisions. 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 need to act fairly as between members of the company. |
The Board recognises the importance of treating all members fairly and monitors the views of the Company's shareholders through reports on investor and analyst communications so that their views and opinions can be considered when setting strategy. |
"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
26 Hours of training per employee this year
70% Of our team undertook professional training during the year
94 Hours of volunteer support dedicated to the Trussell Trust
75% Of our team have worked at NewRiver for 5+ years
1,150 Total hours of training this year
64%
Of our team have professional qualifications
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.
We are proud to say that we have a very even gender balance across the business:
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.
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.
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:
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.
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.
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.
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
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.
Section 172(1) Statement on page 21
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:
Our assets are located in the heart of communities throughout the UK and play an integral role in the lives of our customers.
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.
initiatives on pages 25, 57, 77 and 78
• 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
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.
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.
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.
• 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.
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.
The respective Committee Chairs engage with shareholders on significant matters related to their specific areas of responsibility
The Board receives regular updates on market sentiment, investor relations activity and share price performance
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.
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."
Chief Financial Officer
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.
• Non-Executive and Executive Directors attended various seniorlevel 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
• 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.
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
Please read our comprehensive ESG Strategic Report to find out about our about commitment and progress.
Please refer to page 54
Key performance indicators
£25.8m
Loan to Value
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.
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.
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%.
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.
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.
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.
15%
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 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.
Key
Link to business model and strategic objectives
Link to strategy, ESG and Remuneration
1 Disciplined capital allocation
1 2 3 ESG
2 Leveraging our platform
3 Flexible Balance Sheet
Link to ESG and Remuneration
ESG Environmental, Social and Governance
£ Remuneration
4.3x
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.
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.
70
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.
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.
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 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%.
Link to business model and strategic objectives
1 Disciplined capital allocation
2 Leveraging our platform
Total Accounting Return
-4.6%
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.
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.
Link to ESG and Remuneration
ESG Environmental, Social and Governance
£ Remuneration
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.
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 |
||
|---|---|---|---|---|---|---|---|---|---|---|
| (%) | (%) | (%) | (£ psf) | (Ave. pa) | (%) | (sq ft) | % vs valuer ERV |
(%) | (Average Lease Length) |
|
| Retail Parks | 97.5% | 100% | 99% | £12.49 | £116,000 | 97% | 163,400 | 0.8% | 0.6% | 12.3 |
| Shopping Centres – Core |
97.7% | 90% | 98% | £13.18 | £39,000 | 94% | 309,700 | 2.3% | -0.8% | 9.9 |
| Shopping Centres – Regen |
97.4% | 97% | 100% | £13.00 | £69,000 | 86% | 138,700 | -3.9% | -0.7% | 9.4 |
| Shopping Centres – Work Out |
92.8% | 89% | 97% | £9.13 | £23,000 | 65% | 338,800 | -2.1% | -0.4% | 6.7 |
| Total1 | 96.7% | 92% | 98% | £11.98 | £45,000 | 88% | 979,200 | 1.1% | -0.4% | 10.0 |
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.
Occupancy 96.7% FY22: 95.6%
Leasing Activity +1.1% ahead of valuer ERV
FY22: +7.4%
Retention Rate 92%
Affordable Average Rent
£11.98 per sq ft FY22: £11.74 per sq ft
Rent Collection
98% FY22: 96%
Average CAGR FY21-FY23
-0.4% on 10.0yr average
previous lease period
979,200 sq ft FY22: 1,039,800 sq ft
Leasing Volume
Gross to Net Rent Ratio 88%
FY22: 84%
Total Return 2.3%, +1,020 bps outperforming the MSCI All Retail over 12 months
FY22: 7.5%
Portfolio NIY of 8.0%, +220bps versus the MSCI All Retail at 5.9%
FY22: 7.9%
Expanding Capital Partnerships across public, private equity and institutional sectors
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.
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.
| As at 31 March 2023 | (£m) | Portfolio Weighting (%) |
Valuation Movement H1 (%) |
Valuation Movement H2 (%) |
Valuation Movement FY (%) |
Topped-up NIY (%) |
NEY (%) |
LFL ERY Movement (%) |
LFL ERV Movement (%) |
|---|---|---|---|---|---|---|---|---|---|
| Shopping Centres – Core | 219.9 | 37% | 0.2% | -0.9% | -0.7% | 9.6% | 9.3% | 0.0% | -1.1% |
| Retail Parks | 165.5 | 28% | 0.5% | -3.5% | -3.2% | 7.0% | 7.0% | 0.3% | 2.7% |
| Shopping Centres – Regen |
140.0 | 23% | -4.2% | -10.5% | -14.1% | 5.9% | 6.8% | 0.6% | 1.2% |
| Total excl. Work Out / Other |
525.4 | 88% | -1.0% | -4.4% | -5.4% | 7.9% | 7.9% | 0.3% | 0.4% |
| Shopping Centres – Work Out |
63.4 | 11% | -2.5% | -5.8% | -7.8% | 9.4% | 14.0% | -0.3% | -8.7% |
| Other | 4.8 | 1% | -5.7% | -13.5% | -22.6% | 10.0% | 9.5% | 0.6% | -11.3% |
| Total | 593.6 | 100% | -1.3% | -4.7% | -5.9% | 8.0% | 8.6% | 0.2% | -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 | Total Return | Capital Growth | Income Return |
|---|---|---|---|
| NRR Portfolio | 2.3% | -6.2% | 9.0% |
| MSCI All Retail Benchmark | -7.9% | -12.7% | 5.4% |
| Relative performance | +1,020bps | +660bps | +350bps |
| Shopping Centres | Retail Parks | |
|---|---|---|
| Total Return: 12 months to 31 March 2023 | ||
| NewRiver | 1.6% | 4.8% |
| MSCI Benchmark | -5.1% | -6.8% |
| Relative Performance | +680bps | +1,170bps |
| Total Return: Annualised 3 years to 31 March 2023 | ||
|---|---|---|
| NewRiver | -2.1% | 8.7% |
| MSCI Benchmark | -9.7% | 5.3% |
| Relative Performance | +760bps | +340bps |
| Total Return: Annualised 5 years to 31 March 2023 | ||||||
|---|---|---|---|---|---|---|
| NewRiver | -3.5% | 5.1% | ||||
| MSCI Benchmark | -11.0% | -0.3% | ||||
| Relative Performance | +750bps | +550bps |
Review our 12-month, 3-year and 5-year outperformance MSCI on page 43
Portfolio review continued
New Aldi store (unit extension of former Next), Dewsbury
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.
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.
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%.
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.
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.
Pipeline of residential units +1,700 Repurposed retail space proposed +150k sq ft
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.
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.
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
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.
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
Retained Gold Award in EPRA Sustainability Best Practice Recommendations Awards
Retained 'B' Rating from the CDP for our management of climate-related issues
Our platform continued
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.
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.
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. 5m sqft 80% 20%
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.
Shopping Centre.
Our market leading asset management platform is leveraged through capital partnerships in three sectors:
"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
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.
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.
Retail Underlying Funds From Operations
£25.8m FY22: £20.5m
Retail UFFO Per Share 8.3p
FY22: 6.7p
IFRS Loss After Tax £(16.8)m FY22: £(26.6)m
Total Accounting Return -4.6% FY22: -6.6%
Net debt £201.3m FY22: £221.5m
Weighted average debt maturity2 4.7 yrs FY22: 5.7 yrs
LTV
33.9% FY22: 34.1%
Ordinary Dividend Per Share
6.7p 1 FY22: 7.4p
Admin cost ratio 15.2% FY22: 16.9%
Net finance costs £14.9m FY22: £19.5m
Interest cover
4.3x FY22: 3.5x
Key Performance versus previous year
Improved Declined Maintained
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.
The following table reconciles IFRS (loss) / profit after taxation to UFFO, which is the Company's measure of underlying operational profits.
| 31 March 2023 | 31 March 2022 | |||||
|---|---|---|---|---|---|---|
| Retail £m |
Hawthorn £m |
Total £m |
Retail £m |
Hawthorn1 £m |
Total £m |
|
| (Loss) / profit for the year after taxation | (16.8) | – | (16.8) | 7.0 | (33.6) | (26.6) |
| Adjustments | ||||||
| Revaluation of property | 38.2 | – | 38.2 | 12.3 | – | 12.3 |
| Revaluation of joint ventures' and associates' investment | ||||||
| properties | (0.8) | – | (0.8) | (5.8) | – | (5.8) |
| Loss / (profit) on disposal of investment properties | 3.8 | – | 3.8 | 5.4 | (0.8) | 4.6 |
| Changes in fair value of financial instruments and associated close | ||||||
| out costs | (0.2) | – | (0.2) | (0.6) | – | (0.6) |
| Loss on disposal of subsidiary | – | – | – | – | 39.7 | 39.7 |
| Deferred tax | 0.2 | – | 0.2 | 0.6 | 1.9 | 2.5 |
| EPRA earnings | 24.4 | 24.4 | 18.9 | 7.2 | 26.1 | |
| Depreciation of property | – | – | – | – | 0.4 | 0.4 |
| Forward looking element of IFRS 9 | (0.2) | – | (0.2) | (0.2) | – | (0.2) |
| Abortive fees | – | – | – | – | 0.2 | 0.2 |
| Restructuring costs2 | – | – | – | 0.9 | – | 0.9 |
| Head office relocation costs | 0.5 | – | 0.5 | – | – | – |
| Share-based payment charge | 1.1 | – | 1.1 | 0.9 | – | 0.9 |
| Underlying Funds From Operations | 25.8 | – | 25.8 | 20.5 | 7.8 | 28.3 |
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
During the prior year the Group incurred restructuring costs in relation to employee related matters following the sale of Hawthorn
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.
| 31 March 2022 | |||||
|---|---|---|---|---|---|
| Underlying funds from operations | Group £m |
JVs & Associates £m |
Adjustments1 £m |
Proportionally consolidated £m |
Proportionally consolidated £m |
| Revenue | 72.2 | 4.0 | – | 76.2 | 77.7 |
| Property operating expenses | (25.1) | (0.4) | (0.2) | (25.7) | (25.9) |
| Net property income | 47.1 | 3.6 | (0.2) | 50.5 | 51.8 |
| Administrative expenses | (12.6) | (0.1) | 1.6 | (11.1) | (11.7) |
| Other income | 1.4 | – | – | 1.4 | – |
| Operating profit | 35.9 | 3.5 | 1.4 | 40.8 | 40.1 |
| Net finance costs | (14.0) | (0.7) | (0.2) | (14.9) | (19.5) |
| Taxation | – | (0.3) | 0.2 | (0.1) | (0.1) |
| Retail UFFO | 21.9 | 2.5 | 1.4 | 25.8 | 20.5 |
| Contribution from Hawthorn2 | – | 7.8 | |||
| Underlying Funds From Operations | 25.8 | 28.3 | |||
| UFFO per share (pence) | 8.3 | 9.2 | |||
| Ordinary dividend per share (pence) | 6.7 | 7.4 | |||
| Ordinary dividend cover | 125% | 125% | |||
| Admin cost ratio3 | 15.2% | 16.9% | |||
| Weighted average # shares (m) | 309.7 | 307.2 |
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
UFFO contribution from the Hawthorn business in FY22 prior to its disposal on 20 August 2021
Includes Hawthorn in FY22
| Analysis of retail net property income (£m) | |
|---|---|
| Retail net property income for the year ended 31 March 2022 | 51.8 |
| Like-for-like rental income | 1.2 |
| Rent and service charge provisions | 0.2 |
| Car park and commercialisation income | 1.3 |
| Other | (0.3) |
| Retail NRI recovery | 2.4 |
| Net disposals | (3.7) |
| Retail net property income for the year ended 31 March 2023 | 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.
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 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 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.
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.
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).
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.
| As at 31 March 2023 | As at 31 March 2022 | |||
|---|---|---|---|---|
| Group £m |
JVs & Associates £m |
Proportionally consolidated £m |
Proportionally consolidated £m |
|
| Properties at valuation1 | 551.5 | 42.1 | 593.6 | 649.4 |
| Right of use asset | 76.7 | – | 76.7 | 75.7 |
| Investment in JVs & associates | 29.3 | (29.3) | – | – |
| Other non–current assets | 0.4 | 1.5 | 1.9 | 2.2 |
| Cash | 108.6 | 2.7 | 111.3 | 88.2 |
| Other current assets | 15.0 | 0.9 | 15.9 | 19.6 |
| Total assets | 781.5 | 17.9 | 799.4 | 835.1 |
| Other current liabilities | (29.5) | (1.1) | (30.6) | (34.9) |
| Lease liability | (76.7) | – | (76.7) | (75.7) |
| Borrowings2 | (296.7) | (15.9) | (312.6) | (309.7) |
| Other non–current liabilities | – | (0.9) | (0.9) | (0.7) |
| Total liabilities | (402.9) | (17.9) | (420.8) | (421.0) |
| IFRS net assets | 378.6 | – | 378.6 | 414.1 |
| EPRA adjustments: | ||||
| Deferred tax | 0.9 | 0.6 | ||
| Fair value financial instruments | (0.6) | (0.3) | ||
| EPRA NTA | 378.9 | 414.4 | ||
| EPRA NTA per share | 121p | 134p | ||
| IFRS net assets per share | 122p | 135p | ||
| LTV | 33.9% | 34.1% |
See Note 14 for a reconciliation between Properties at valuation and categorisation per Consolidated balance sheet
Principal value of gross debt, less unamortised fees
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 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.
| Proportionally consolidated | |||||
|---|---|---|---|---|---|
| 31 March 2023 | 30 September 2022 | 31 March 2022 | |||
| Weighted average cost of debt – drawn only1 | 3.5% | 3.5% | 3.4% | ||
| Weighted average debt maturity – drawn only1 | 4.7 yrs | 5.2 yrs | 5.7 yrs | ||
| Weighted average debt maturity – total2 | 3.8 yrs | 4.3 yrs | 4.8 yrs |
Weighted average cost of debt and weighted average debt maturity on drawn debt only
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 | 31 March 2023 £m |
30 September 2022 £m |
31 March 2022 £m |
|---|---|---|---|
| Cash | 111.3 | 95.1 | 88.2 |
| Principal value of gross debt | (316.0) | (316.0) | (314.0) |
| Net debt1 | (201.3) | (217.1) | (221.5) |
| Drawn RCF | – | – | – |
| Total liquidity2 | 236.3 | 220.1 | 213.2 |
| Gross debt (drawn) / repaid in the year / period | (2.0) | (2.0) | 339.1 |
| Loan to Value | 33.9% | 33.8% | 34.1% |
Including unamortised arrangement fees
Cash and undrawn RCF
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 | ||||
|---|---|---|---|---|---|---|
| 31 March 2023 | 30 September 2022 | 31 March 2022 | ||||
| Guidance <40% | ||||||
| Loan to value | Policy <50% | 33.9% | 33.8% | 34.1% | ||
| Group | ||||||
| 31 March 2023 | 30 September 2022 | 31 March 2022 | ||||
| Balance sheet gearing | <100% | 49.7% | 49.8% | 51.5% | ||
| Proportionally consolidated | ||||||
| FY23 | HY23 | FY22 | ||||
| Net debt: EBITDA | <10x | 4.9x | 5.1x | 4.6x | ||
| Interest cover1 | >2.0x | 4.3x | 3.9x | 3.5x | ||
| Ordinary dividend cover2 | >100% | 125% | 125% | 125% |
12 month look-back calculation, consistent with debt covenant
Calculated with reference to UFFO
LTV 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.
Alongside our financial policies we have a number of additional guidelines used by management to analyse operational and financial risk, which we disclose in the following table:
| Guideline | 31 March 2023 | |
|---|---|---|
| Single retailer concentration | <5% of gross income | 3.4% (Poundland) |
| Development expenditure | <10% of GAV | <1% |
| Risk-controlled development | >70% pre-let or pre-sold on committed | N/A, no developments on site |
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
Our ESG approach
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.
Head of Asset Management and ESG
Our ESG Journey through to 2022
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.
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.
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.
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
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:
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.
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.
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.
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.
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.
We use industry-recognised indices to track our sustainability performance:
| Accreditation or commitment |
Score or equivalent |
Observations |
|---|---|---|
| Global Real Estate Sustainability Benchmark |
Score: 70/100 |
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. |
| CDP (formerly Carbon Disclosure Project) |
Score: B |
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". |
| United Nations Sustainable Development Goals |
We are committed to 11 SDGs addressing issues we can meaningfully impact |
We have specific targets and annually track our progress against them. Please see Our Environmental & Social Targets for more information. |
| Task Force on Climate-related Financial Disclosures |
5th consecutive year reporting |
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. |
| FTSE Russell |
Score: 3.0 |
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. |
| EPRA sBPR |
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. |
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.
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.
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:
This 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.
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.
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 Climaterelated 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.
Our ESG approach continued
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.
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.
Supporting our communities
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.
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.
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.
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.
| Target | Target Year |
% Complete |
FY23 Progress Report |
|---|---|---|---|
| 100% of waste generated at our managed properties is diverted from landfill |
2022 | 100% | We are pleased to have achieved our target of zero waste to landfill in FY22 and maintained this policy throughout FY23. |
| 100% of landlord electricity is procured from renewable sources |
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% | 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. |
|||
| Electric vehicle charging points installed across all retail properties with a surface-level car park |
2025 | 41% | 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. |
| 50% improvement (from a 2020 baseline) in landlord on-site renewable energy generation |
2025 | 0% | 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. |
|||
| Building certifications targeted, and lifecycle carbon assessments undertaken, for 100% of our new construction and major renovation projects |
2025 | N/A | 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. |
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.
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.
| 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 | -17% |
| Scope 2 Location-based emissions from electricity purchased for own use | 2,029.2 | 2,315.4 | -12% |
| Scope 2 Market-based emissions from electricity purchased for own use | 0 | 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 | -19% |
| Total Scope 1, 2 & 3 location-based emissions | 27,600.3 | 33,814.2 | -18% |
| Total Scope 1, 2 & 3 market-based emissions | 25,085.8 | 30,895.9 | -19% |
| Intensity Scope 1 & 2 (location-based) tCO2e/m2* | 0.017 | 0.018 | 0% |
| Energy Consumption (kWh) | |||
| Energy use from the combustion of gas and other fuels | 4,307,514 | 5,144,303 | -16% |
| Energy use from consumption of electricity purchased for own use | 10,493,433 | 10,904,824 | -4% |
| Energy use from business travel | 11,069 | 7,587 | 46% |
12-month period ending 31 December 2022
12-month period ending 31 December 2021
* Refer to Data Notes on p.72
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:
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 |
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. |
| Boundary | 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. |
| Reporting Method |
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. |
| Emissions Factor |
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. |
| Scope 3 emissions |
We used the GHG Protocol Scope 3 Standard to collate and report on our Scope 3 emissions in the form of emissions from purchased goods and services, 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. |
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.
| Absolute Performance (Abs) | ||||||
|---|---|---|---|---|---|---|
| EPRA Code | Performance Measure |
Unit(s) of Measure |
Boundary % of data estimation |
FY23 | FY221 | % Change |
| Elec-Abs | Electricity consumption1 | Annual kWh | 0% | 31,932 | 34,214 | -7% |
| DH&C-Abs | 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 | -39% | |
| Energy-Int | Energy intensity4 | kWhelec-eq/m2/yr | See footnotes | 82 | 76 | 8% |
| GHG-Dir-Abs | Scope 1 emissions | Kg CO2e | 4,568 | 7,511 | -39% | |
| GHG-Indir-Abs | Scope 2 emissions (location-based) |
Kg CO2e | 0% | 6,175 | 7,265 | -15% |
| Scope 2 emissions (market-based) |
Kg CO2e | 0% | 0 | 0 | 0% | |
| Scope 3 emissions3 | Kg CO2e | 2,476 | 3,502 | -29% | ||
| GHG-Int | Scope 1 and 2 emissions | Kg CO2e/ m2/ year | 17.63 | 17.61 | 0% | |
| Water-Abs | Water consumption1 | Annual m3 | See footnotes | 166 | 258 | -36% |
| Water-Int | Water intensity | M3 consumption/ m2 |
0.27 | 0.31 | -11% | |
| Waste | Kg total waste2 | Kg | 1,072 | 2,285 | -53% | |
| Recycling rate | % total waste recycled |
0% | 51% | 45% | 13% |
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%.
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%).
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.
kWh elec-eq/m2/yr is calculated using the REEB Benchmark 2020.
| Absolute Performance (Abs) |
Like-for-like Performance (LfL) | |||||||
|---|---|---|---|---|---|---|---|---|
| EPRA Code Performance | Unit(s) of | % of Data | FY23 | FY22 | FY23 | FY22 | % | |
| Measure | Measure | Estimation | Change | |||||
| Elec-Abs, Elec-LfL |
Electricity consumption |
Annual MWh | 0.4% | 10,462 | 10,871 | 10,262 | 10,124 | 1% |
| DH&C-Abs & LfL |
District heating & cooling |
Annual MWh | heating & cooling | None of our properties were connected to or benefited from district | ||||
| Fuels Abs,Fuels-LfL |
Fuel consumption | Annual MWh | 0.1% | 4,283 | 5,103 | 4,109 | 4,268 | -4% |
| Energy-Int | Energy intensity | kWhelec-eq/m2/yr | 0.077 | 0.078 | 0.080 | 0.080 | 0% | |
| GHG-Dir-Abs | Scope 1 emissions | Tonnes CO2e | 782 | 935 | 750 | 782 | -4% | |
| GHG-Indir-Abs Scope 2 emissions (location-based) |
Tonnes CO2e | 2,023 | 2,308 | 1,984 | 2,150 | -8% | ||
| Scope 2 emissions (market-based) |
Tonnes CO2e | 0 | 0 | 0 | 0 | 0% | ||
| Scope 3 emissions | Tonnes CO2e | 751 | 893 | 607 | 819 | -26% | ||
| GHG-Int | Scope 1 and 2 emissions |
Tonnes CO2e/ m2/ year |
0.016 | 0.017 | 0.017 | 0.018 | -7% | |
| Water-Abs, Water-LfL |
Water consumption | Annual m3 | 4.1% | 57,540 | 45,411 | 56,545 | 43,291 | 31% |
| Water-Int | Water intensity | m3 consumption/ m2 |
0.33 | 0.24 | 0.34 | 0.26 | 31% | |
| Waste-Abs, Waste-LfL |
Tonnes total waste | 0.8% | 3,253 | 2,919 | 3,249 | 2,818 | 15% | |
| Tonnes diverted from landfill |
Tonnes | 0.8% | 3,253 | 2,919 | 3,249 | 2,818 | 15% | |
| Tonnes waste to energy |
1.4% | 1,124 | 1,026 | 1,120 | 1,006 | 11% | ||
| Tonnes recycling | 0.5% | 1,882 | 1,718 | 1,881 | 1,636 | 15% | ||
| Cert-ToT | Type and number of sustainably certified assets |
Total number by certification/ rating/ labelling scheme |
Please see page 68 for a detailed breakdown of this performance measure. |
Data coverage: the figures reported against each performance measure represent 100% of the assets within our Operational Control reporting boundary.
Normalisation: Intensity indicators for energy, water and waste are based on relevant floor area.
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".
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.
"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.
As our portfolio is comprised of entirely retail properties within the UK only, we do not undertake segmental analysis.
Our environmental and social performance data has been collated and checked by Cushman & Wakefield.
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.
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.
For the avoidance of doubt, these offsets are not reflected in our emissions disclosures
In construction
2,023
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.
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+ | A | B | C | D | E | F | G | No/ Expired EPC |
|---|---|---|---|---|---|---|---|---|---|
| England & Wales |
0 | 5 | 104 | 209 | 175 | 94 | 1 | 0 | 286 |
| Northern Ireland |
0 | 0 | 2 | 15 | 11 | 3 | 0 | 4 | 35 |
| Scotland | 0 | 0 | 0 | 14 | 19 | 28 | 10 | 14 | 85 |
| Total | 0 | 5 | 106 | 238 | 205 | 125 | 11 | 18 | 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.
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:
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.
Waste to anaerobic digestion
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.
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.
| Target | Target Year |
Progress % |
FY23 Progress Report |
|---|---|---|---|
| Support a minimum of 5 industry/ career engagement activities for young people per year |
Per year | N/A | 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 |
2022 | 100% | We are pleased to have exceeded our target, having achieved a 100% response rate to our 2022 staff wellbeing survey. |
| All enclosed shopping centres to participate in our Quiet Hour Initiative and have a community engagement plan in place |
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. |
| 50% of NewRiver staff to participate in our volunteering programme |
2022 | 100% | 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%. |
Our most recent staff survey returned an overall satisfaction score of 71%, with over 80% of staff identifying that they:
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.
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 |
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 |
| empower all staff to exercise the policy in a way that reflects their personal circumstances |
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 |
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. |
|
| 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 |
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. |
| Utilise survey feedback to inform the design of our new office space. Employees have communicated that breakout spaces which encourage |
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. |
| social interaction are particularly important to them |
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! |
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. |
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. |
|
| Intention | To embed ESG performance monitoring into broader asset performance monitoring |
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.
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.
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.
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.
We have recently updated our Equal Opportunities policy to provide a comprehensive standalone policy statement which clearly communicates:
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.
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:
Whilst recognising that:
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.
(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%
Company
Male:Female ratio
53:47 FY22: 51:49
Comparables refer to previous reporting period for FY22, 1 April 2021 to 31 March 2022.
Not disclosed in FY22
| 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 |
2 | 5 |
| Total number of leavers | Total number | 9 | 5 | ||
| Rate of new hires | Percentage | 4% | 10% | ||
| Rate of employee turnover | Percentage | 15% | 0% | ||
| — | Temporary staff | Percentage of employees who are contractors or temporary staff |
0% | 0% | |
| H&S-Emp | Injury rate | Per 100,000 hours worked | 0 | 0 | |
| Lost day rate | Per 100,000 hours worked | 0 | 0 | ||
| Absentee rate | Days per employee | 0 | 0 | ||
| Fatalities | Total number | 0 | 0 | ||
| — | Instances of non-compliance with labour standards |
Total number | 0 | 0 |
12-month period ending 31 December 2022
FY22 figures include the employees of Hawthorn Leisure
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.
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 | We are working with our energy brokers to create a platform capable of storing and presenting |
| to hear more from us on the overall | sustainability performance data for both the landlord and occupier areas of our portfolio. The |
| sustainability performance of their | success of this solution will require collaboration with our occupiers, and we are hopeful that |
| individual centre. | this will deliver helpful insights to support a reduction in our collective environmental impact. |
| Our retailers advised us that they | We currently have 123 new charging bays in the pipeline for near-term delivery across our |
| would welcome more opportunities | portfolio. We will also review further opportunities as part of the Green Travel Plan milestone |
| to charge electric vehicles. | 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. |
from our 2022 survey include:
of retailers agree that their centre manager is easily contactable, responsive, and that general
of respondents rated their general satisfaction as 8/10 or higher, with 26% providing a rating of 10/10
management of cleaning and waste
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 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
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.
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.
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 £66,320, well exceeding our target of £30,000, for the Trussell Trust. Trussell Trust donations 2018-2022 Per £000
£450k of direct monetary donations to date since our partnership with the Trussell Trust began in June 2019
In FY23 our support for the Trussell Trust provided:
of volunteered support, with a total value of £2,550*
of food donations, once again this equates to approximately 59,300 portions or £8,900 worth of pasta, enough dinners for....
for a whole year
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
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 initiatives supported
| EPRA Code | Performance Measure | Unit(s) of Measure | Boundary | FY23 | FY22 |
|---|---|---|---|---|---|
| H&S-Asset | Asset health and safety assessments |
Percentage of assets | 100% | 100% | |
| H&S-Comp | Asset health and safety compliance |
Number of incidents in reporting year |
0 | 0 | |
| Development and major refurbishment project health and safety compliance |
Number of incidents over past 3 years |
Managed Assets | 0 | – | |
| Comty-Eng | Community engagement, impact assessments and development programmes |
Percentage of assets | 100% | 100% |
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.
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.
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.
| EPRA | Performance | Unit(s) of Measure | FY231 | FY222 | |
|---|---|---|---|---|---|
| Code | Measure | ||||
| Gov Board |
Composition of the highest governance body |
Number of executive board members |
2 | 2 | |
| Number of independent/ non-executive board members |
4 | 4 | |||
| Average tenure on the governance body |
3.6 | 4.1 | |||
| Number of independent/ non-executive board members with competencies relating to environmental and social impacts |
4 | 2 | |||
| Gov Selec |
Process for nominating and selecting the highest governance body |
Narrative on process | Nomination Committee. | As a Stock-Exchange-Listed business, NewRiver is required under the is responsible for identifying and nominating candidates to the Board. Please refer to page 109 for the latest report from the NewRiver |
UK Corporate Governance code to have a Nomination Committee which |
| Gov Col |
Process for managing conflicts of interest |
Narrative on process | discussed by the Board. | reviewed at each Board meeting so that the Board may consider and disclosure of any conflicts of interest prior to any matter that may be reviewed by the Audit Committee on a six-monthly basis. |
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 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 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 |
| – | Board oversight of code of conduct |
Narrative on process | committee. There have been no instances of non-compliance. | 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 |
|
| – | Due diligence of partner organisations |
Narrative on process | of the on-boarding process. | 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 |
|
| – | Anti-corruption measures |
Narrative on process | policy and process. | 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 |
The Company has an Anti-bribery and anti-corruption policy. As part of this |
| – | Fines and settlements in connection with non-compliance with environmental, anti-bribery/ corruption, or other ESG related regulation |
Total GBP of fines in past three years, type of non-compliance |
£0, no incidences of non-compliance |
12-month period ending 31 December 2022
12-month period ending 31 December 2021
Our ESG approach continued
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
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 climaterelated 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.
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.
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.
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:
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::
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.
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.
Term Impact Probability Relevance to NewRiver
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
| 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 |
Short | 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 |
|
|---|---|---|---|---|---|
| Policy & Legal | efficiency and the transition of assets to a low-carbon operating model, improving resilience. |
Medium | High | 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 |
|
| Long | High | 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 |
|||
| Costs to transition managed assets to low-carbon |
Opportunities exist to implement a range of technologies designed to improve environmental impact and efficiency, supporting our net-zero commitments. |
Short | High | 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 |
|
| Technology model |
Medium | High | We will be in the core implementation phase of our net-zero pathway |
||
| Long | High | 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 |
|||
| Avoid stigmatisation based on ineffective response |
We must continuously work towards, and monitor our progress against, our SBTi approved emissions reduction targets. Key milestones |
Short | High | 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) |
|
| Reputation | to climate consistent with a 1.5-degree change 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. |
Medium | High | We have committed to reducing absolute emissions by 42% by 2030, consistent with a 1.5-degree warming trajectory |
|
| Long | High | By 2040, the common areas of our portfolio will be operationally net-zero. By 2050, we will be a fully net-zero carbon organisation |
Changes in the way consumers live, work, shop and use technology could have an adverse impact on demand for our assets.
| Changing Changes in consumer shopping customer preferences present an behaviour opportunity to leverage our ESG strategy to demonstrate the ways in which we actively cater to the evolving needs of customers. |
Short | Medium | Our assets support sustainable travel options and engage occupiers & customers in our ESG programme |
||
|---|---|---|---|---|---|
| Market | Medium | High | 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 |
||
| Long | High | 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 |
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 | 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. |
| Technology & Reputation | 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. |
| Market | 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. |
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 massrelated 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.
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.
Please see our business model on page 18
Embed Net-Zero Carbon and climate resilience in due diligence and analysis of stock selection from 2022
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
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.
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 climaterelated risks are integrated into NewRiver's overall risk management processes.
• Measure the embodied carbon emissions of all re-developments & major refurbishments by undertaking 'Life Cycle Assessments' (LCA), from 2023
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.
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.
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:
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:
| Metric(s) | Monitoring Frequency | ||
|---|---|---|---|
| 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 |
| 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 |
Principal risks and uncertainties
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 all areas including risk management. The 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. 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 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. with day-to-day risk management, ensuring delegation of accountability for each
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.
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.
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:
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.
| 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 need for an internal audit and appoints third parties to test internal controls. |
• Monitors the internal controls framework. • Considers the use of external advisors for specific specialist risk impacts and deep-dive reviews. • Receives reports on the risk management process twice annually. |
|||
| EXECUTIVE COMMITTEE Regularly reviews the entire risk register - members are responsible for managing risk within their area of accountability |
||||
| • Conducts reviews of the entire risk register (which includes emerging risks) at least quarterly. • Delegates line responsibility for managing risks within their area of accountability. |
• Reviews risk topics through regular timetabled presentations or papers. • 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 |
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| 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.
Operational risks People Financing Asset management Development Acquisition Disposal
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.
Risk and impact Monitoring and management Change in risk assessment
Risk has increased Risk has decreased Risk has not changed
Low Medium High
| Monitoring and management | Change in risk assessment during the period |
|---|---|
| • 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. |
• 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. |
| • We have a comprehensive ESG programme which is regularly reviewed by the Board and Executive Committee. A detailed overview of the programme can be found in the ESG section of this report. • One of the key objectives of the programme is to minimise our impact on the environment through reducing energy consumption, sourcing from renewable sources and increased recycling. • We have developed our Pathway to Net Zero 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. |
• The climate change risk was separated last 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. • In conjunction with insurers flood risk assessments have been carried out at all of our assets and the risk is considered low. |
• 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). • Climate change impacts on our assets risk remained the same during the period and is considered a medium to high impact risk with a medium to low probability. • Although exposure to extreme weather events is a near-term risk, other climate impacts such as heat stress and sea level rises are medium term or long-term time horizons. Whilst their impact is high, their probability 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. |
Movement:
Principal risks and uncertainties continued
| Risk and impact | Monitoring and management | Change in risk assessment during the period |
|---|---|---|
| 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. |
• 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. |
| 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 |
• 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 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. |
• 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.
Risk change during FY23
Risk has increased Risk has decreased Risk has not changed
Impact and probability
Low Medium High
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.
Remco, ExCo, SID (as employee engagement director), Head of HR
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.
Impact: Probability: Movement:
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.
ExCo, Emma Mackenzie, Head of Asset Management and the Asset Managers
| 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: |
• We apply a risk-controlled development strategy through negotiating long-dated pre-lets for the majority of assets. • All development is risk-controlled and forms 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. |
• Development risk probability has increased through the period and is considered a medium impact risk with a medium to high probability. • Supply issues and increases in the cost of 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. |
|---|---|---|
| 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: |
• 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. |
| 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: |
• Our portfolio is focused on high-quality assets with low lot sizes, making them attractive to a wide pool of buyers. • Assets are valued every six months by external valuers, enabling informed disposal pricing decisions. • Disposals are subject to approval by the Board and Executive Committee, who are highly experienced in the retail sector. • Our portfolio is large and our average asset lot size is small, meaning that each asset represents only a small proportion of revenues and profits, thereby mitigating the impact of a sale not proceeding. |
• Disposal risk has increased during the year and is considered a medium impact risk with a medium to high probability. • 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. |
| Key Risk change during FY23 |
Impact and probability |
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.
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:
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.
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:
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.
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.
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
Chief Executive Officer
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.
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.
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.
| A. An effective Board | 98 |
|---|---|
| B. Purpose, values and culture | 101 |
| C. Governance framework and Board resources | 105 |
| D.Stakeholder engagement | 20-27, 102 |
| E. Workforce policies and practices | 22-24, 102 |
| Division of responsibilities | |
| F. Board roles | 104 |
| G. Independence | 104, 110 |
| H.External appointments and conflicts of interest | 98-99, 103 |
| I. Key activities of the Board in FY23 | 103 |
| J. Appointments to the Board | 107, 110 |
K. Board skills, experience and knowledge 111 L. Annual Board and Committee evaluation 108
| M.Financial reporting, external auditor and internal | 114-115 |
|---|---|
| audit | |
| N.Review of the 2023 Report and Accounts | 118 |
| O.Internal financial controls and risk management | 116-117 |
| P. Linking remuneration with purpose and strategy | 119-126, 130 |
|---|---|
| Q.Remuneration Policy review | 119-127 |
| R. Performance outcomes in FY23 and strategic targets | 130 |
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.
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.
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.
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.
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
Our leadership team
Independent Non-Executive Director, Appointed February 2019
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.
Evofem Biosciences Inc (Independent Director and Audit Committee Chairman)
Allstone Sand Gravels & Aggregates Limited (Chairman); Brookgate Limited (Chairman); Donaldson Group Limited (Independent Director and Audit Committee Chairman); Rothley Group Limited (Chairman)
Chief Executive Officer
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.
Chair of the British Property Federation (BPF) Retail Board
Chief Financial Officer Appointed August 2021
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.
British Property Federation Finance Committee Member
Company Secretary, Appointed October 2020
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.
Senior Independent Director, Appointed January 2016
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
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.
Superdry Plc (Director and Auditco Chair); Unbound Group plc (Director and Auditco Chair)
RNLI (Risk and Audit committee member & Council Member)
Non-Executive Chair, Appointed September 2017
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.
Listed Companies Lendlease Corporation (Senior Advisor to the Board)
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.
Independent Non-Executive Director, Appointed September 2020
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.
Buckingham Palace Reservicing Programme Challenge Board; Griffin Investments Ltd
Independent Non-Executive Director, Appointed May 2022
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.
Buckingham Palace Reservicing Programme Challenge Board; Co Founder, Cambridge Net Positive Lab
Corporate Governance
Head of Asset Management and ESG
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.
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.
Chief Financial Officer
See page 98 for 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.
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.
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.
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.
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.
Corporate Governance continued
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.
| Discussion | Link to strategy | |
|---|---|---|
| Strategy | • The Board discussed progress against strategy at most meetings and receives updates on strategy in the CEO's report |
2 1 3 ESG |
| • 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 |
||
| Finance and | • The Chief Financial Officer has presented a financial report at each Board meeting | |
| Financing | • 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 | 2 1 3 ESG |
|
| • 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 Audit Committee meeting and meetings with valuers |
|
| • The Board considers the risk register and internal controls at least twice a year | 2 1 3 ESG |
|
| • Update to the Board on the whistleblowing procedures | ||
| Operational and Investor Relations |
• The CEO presented a report at each Board meeting which also included updates on investor relations |
|
| • Members of the ExCo are regularly invited to attend the Board meetings to present on various projects |
2 1 3 ESG |
|
| • In September 2022 the Group held a capital markets day | ||
| Stakeholders | • Stakeholders including employees, occupiers, councils and communities, lenders and 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 |
1 2 3 ESG |
|
| • HR reports are either tabled separately or included the CEO's report | ||
| • The Board received updates from Alastair Miller's attendance at staff sessions | ||
| Environmental | • 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 | 2 1 3 ESG |
|
| Governance | • The Committee Chairs reported on key matters discussed at the Board Committees | |
| • The Company Secretary reported on key governance developments and on work carried out to update the Group's governance policies and procedures |
||
| • The Board reviewed 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 |
1 2 3 ESG |
Link to business model and strategic objectives
1 Disciplined capital allocation 2 Leveraging our platform 3 Flexible Balance Sheet ESG Environmental, Social and Governance
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.
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.
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.
Corporate Governance continued
There is a clear division of responsibilities between the Chair, CEO and other members of the Board, as follows:
| Role | Responsibilities |
|---|---|
| Chair | Margaret's role is to lead the Board and ensure that it operates effectively. |
| Margaret Ford | |
| 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. | |
| Chief Executive | Allan's responsibilities include: |
| Officer | • managing the business of the Group; |
| Allan Lockhart | • 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. | |
| Chief Financial | Will's responsibilities include: |
| Officer | • implementing the Group's financial strategy, including balance sheet capitalisation; |
| Will Hobman | • overseeing financial reporting and internal controls; and |
| • supporting the CEO in the delivery of the Group's strategy and financial performance. | |
| Senior Independent | Alastair's responsibilities include: |
| Non-Executive | • acting as a sounding board for the Chairman; |
| Director | • evaluating the Chairman's performance as part of the Board's evaluation process; |
| Alastair Miller | • 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 Alastair Miller, Charlie Parker, Colin Rutherford and Karen Miller bring independent |
| Non-Executive | judgement, knowledge and varied commercial experience to the meetings and in their oversight of the Group's |
| Directors | strategy. Alastair and Colin chair the Remuneration and Audit Committees respectively. |
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.
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.
The purpose of ExCo is to assist the CEO in the performance of his duties within the bands of the Committee's authority, including:
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.
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.
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.
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.
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 members of the business below ExCo level tasked with assisting ExCo with the progress of the Group strategy.
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.
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.
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 | Board Attendance |
Audit Committee Attendance |
Remuneration Committee Attendance |
Nomination Committee Attendance |
|---|---|---|---|---|
| Margaret Ford1 : Chair |
7/8 | – | 2/4 | 3/3 |
| Executive Directors | ||||
| Allan Lockhart | 8/8 | – | – | – |
| Will Hobman2 | 7/8 | – | – | – |
| Non-Executive Directors | ||||
| Kay Chaldecott3 | 2/2 | 2/2 | 1/1 | 1/1 |
| Alastair Miller | 8/8 | 5/5 | 4/4 | 3/3 |
| Charlie Parker | 8/8 | 5/5 | 4/4 | 3/3 |
| Colin Rutherford | 8/8 | 5/5 | 4/4 | 3/3 |
| Dr Karen Miller4 | 8/8 | 3/3 | 3/3 | 2/2 |
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.
Will Hobman missed a Board meeting due to the birth of his daughter
Kay Chaldecott stepped down on 26 July 2022
Dr Karen Miller was appointed to the Board and its Committees on 30 May 2022
Dr Karen Miller Independent Non-Executive Director,
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.
| Business Plan | CEO |
|---|---|
| Succession Planning | |
| Valuations | |
| Salary Structure | |
| Relationship with Auditors | CFO |
| Most Recent Audit | |
| Liabilities | |
| Internal Controls | Head of Financial Reporting |
| Internal Audit | |
| Risk management/Insurance | |
| Non Audit Services | |
| Business Planning | |
| Management Reporting | |
| Board Procedures | Company Secretary |
| Corporate Governance | |
| Terms of Reference | |
| Board/Director Obligations Training | |
| Meetings/Year Plan | |
| Policies: Whistleblowing; Share Dealing | |
| Share Schemes | |
| Organisation | Chief Operating and People Officer |
| Culture | |
| HR Policies | |
| Investor Relations | Investor Relations & Corporate |
| Communications Programme | Communications Director |
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.
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.
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.
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.
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:
Externally facilitated Board evaluation using interviews facilitated by Ceradas Limited, a board effectiveness consultancy with no other connections to the Company
▼
Follow up on actions prepared in response to the Year 1 evaluation, using internally facilitated questionnaires reviewed by an external board evaluator
▼
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.
The following recommendations were made:
▼
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.
Nomination Committee Report
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
Our Committee consists of four Independent Non-Executive Directors and the Chair of the Board (biographies are available on pages 98 and 99).
• Complete NED Board appointment process – consideration and approval
▼
▼
• Draft Nomination Committee Report in Annual Report
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.
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.
| Female | Male | |||
|---|---|---|---|---|
| Board | 2 | 29% | 5 | 71% |
| Executive Committee | 2 | 40% | 3 | 60% |
| Direct Reports of Executive Committee | 12 | 52% | 11 | 48% |
| Group | 23 | 50% | 23 | 50% |
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 | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
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.
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.
The Board aspires to maintain a balance such that:
while recognising that:
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.
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 | 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. |
| 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. |
The Chair of the Board is female. |
| 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). |
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 | 5 | 71% | 3 | 3 | 60% |
| Women | 2 | 29% | 1 | 2 | 40% |
| Not specified/prefer not to say | – | – | – | – | – |
| 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 |
|
|---|---|---|---|---|---|
| White British or other White (including minority/ white groups) |
7 | 100% | 4 | 5 | 100% |
| Mixed/Multiple ethnic groups Asian/Asian British |
– | – | – | – | – |
| Black/African/Caribbean/Black British Other ethnic group, including Arab |
– | – | – | – | – |
| Not specified/prefer not to say | – | – | – | – | – |
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
Our Committee consists of four Independent Non-Executive Directors: (biographies are available on pages 98 and 99).
• Meeting with the Property Valuers
▼
▼
▼
• Re-appointment of External Auditors recommendation.
• Meeting with the Property Valuers
▼
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.
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 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.
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.
| Sources of evidence obtained and observations dring the year: | |
|---|---|
| By referring to the FRC's Practice aid on audit quality. | 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. |
| Observations of, and interactions with, the external auditors. | 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 audit plan, the audit findings and the external auditors' report. | 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. |
| Input from those subject to the external audit, including a detailed questionnaire completed by the finance team. |
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.
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 | The Committee and management met with Colliers, Knight Frank and |
| Changes in key estimates can have a significant impact on the | Kroll (previously Duff and Phelps) (the Group's external valuers) on |
| valuation of properties. The Group has a property portfolio | several occasions to discuss the valuation of the assets and |
| recognised on its Consolidated Balance Sheet valued by external | understand the process that was followed, the key estimates used |
| valuers at £551.5 million at 31 March 2023. | 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. |
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:
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 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 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.
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 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.
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.
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.
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.
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:
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.
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:
Responsibilities Statement
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.
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.
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.
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.
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:
On this basis, the Committee decided not to exercise any discretion to reduce the overall vesting outcome.
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.
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.
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.
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 [email protected].
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
Corporate and financial measures (75% weighting)
200% of salary 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.
| Measure | Achievement (% of max) | |
|---|---|---|
| PSP | Relative TSR vs Peer Group |
100% |
| Relative Total Accounting Return vs Peer Group |
0% | |
| Total | 50% |
| 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 | Grant levels at 100% of salary |
| Incentive Plan | Performance conditions: |
| Relative TSR (50%) | |
| Relative TAR (50%) | |
| Two-year post-vesting holding period applies |
|
| Shareholding requirements |
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:
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.
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.
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.
When reviewing the remuneration policy, the Committee considers a wide range of factors, including:
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:
| Principle | Committee approach |
|---|---|
| Clarity Remuneration arrangements should be transparent and promote effective engagement with shareholders and the workforce. |
• 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. |
| Simplicity Remuneration structures should avoid complexity and their rationale and operation should be easy to understand. |
• The components of our Remuneration Policy are consistent throughout the Company so they are simple to operate and communicate. |
| 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. |
• 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. |
| Predictability The range of possible values of rewards to individual directors and any other limits or discretions should be identified and explained at the time of approving the policy. |
• Incentive plans are determined based on a proportion of base salary so there is a sensible balance between fixed pay and performance-linked elements. • There are provisions to override the formula driven outcome of incentive plans and deferral and clawbacks to minimise the likelihood of a poor link between reward and performance. |
| Proportionality The link between individual awards, the delivery of strategy and the long-term performance of the company should be clear. Outcomes should not reward poor performance. |
• Incentive plans are determined based on a proportion of base salary so there is a sensible balance between fixed pay and performance-linked elements. • There are provisions to override the formula driven outcome of incentive plans deferral and clawbacks to ensure that poor performance is not rewarded. |
| Alignment to culture Incentive schemes should drive behaviours consistent with company purpose, values and strategy. |
• 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. |
| Element | Purpose & Link to Strategy |
Operation | Maximum | Performance Target | |
|---|---|---|---|---|---|
| Fixed | |||||
| Salary | Market competitive remuneration base |
Normally reviewed annually, effective 1 April, although salaries |
There is no prescribed maximum. Increases will typically be dependent |
Not applicable. | |
| reflecting role, responsibilities, skills and experience |
may be reviewed more frequently or at different times of the year if the Committee determines this is appropriate. |
on the results of an annual review in the context of the average increase for the wider work force, inflation and market data. |
|||
| 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. |
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 |
||||
| Paid in cash monthly. | responsibility of the role. | ||||
| Pension | To provide competitive |
The Executive Directors may participate in the Company's |
A pension contribution is payable in line with the pension available to the |
Not applicable. | |
| post-retirement | defined contribution plan or receive | workforce, currently 4% of salary. The | |||
| benefits. | a cash supplement in lieu of pension | CEO's pension contribution will reduce | |||
| To assist with recruitment and retention. |
contributions. | from 15% of salary to this level from the 2023 AGM. |
|||
| Benefits | To provide a | The Company provides a range of | Benefits are set at a level which the | Not applicable. | |
| competitive and | non-pensionable benefits to Executive | Committee considers appropriate | |||
| cost-effective | Directors which may include medical | when compared to the Company's | |||
| benefits package. | insurance, life assurance, permanent health insurance, holiday and sick pay. |
listed real estate investment trust peers. |
|||
| To assist with | |||||
| recruitment and | Other benefits such as relocation | There is no prescribed maximum. | |||
| retention. | allowances may be offered if considered appropriate and |
||||
| reasonable by the Committee. |
| Element | Purpose & Link to Strategy |
Operation | Maximum | Performance Target | |
|---|---|---|---|---|---|
| Variable | |||||
| Bonus | To incentivise performance in the reporting year. Targets are consistent with the Group's long term strategy. |
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 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 deferral of a proportion of the bonus in shares aligns directors' interests with those of shareholders and to discourage short term decision making. |
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. |
the bonus will be subject to financial performance conditions. |
|||
| Performance | To incentivise | Discretionary grant of nil-cost options or | The maximum award level permitted | Performance targets | |
| Share Plan | 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. |
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. |
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. |
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. |
|
| Shareholding Requirement |
To encourage long-term share ownership and support alignment of interests with shareholders. |
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. |
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. |
Not applicable |
| Element | Purpose & Link to Strategy |
Operation | Maximum | Performance Target |
|---|---|---|---|---|
| Fees | To provide | Annual fee for the Chair. | Fee increases are applied in line | Not applicable. |
| market competitive director fees. |
Annual base fee for the Non-Executive Directors. |
with outcome of the review. | ||
| 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). |
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.
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.
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.
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:
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.
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.
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.
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:
| Directors | Date of Appointment | Expiry date of service agreement of letter of appointment |
|---|---|---|
| Allan Lockhart | 18 August 2016 | 12 month rolling contracts |
| Will Hobman | 20 August 2021 | |
| Margaret Ford | 1 September 2017 | 3 month rolling contracts |
| Colin Rutherford | 5 February 2019 | |
| Dr Karen Miller | 30 May 2022 | |
| Charlie Parker | 10 September 2020 | |
| Alastair Miller | 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.
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.
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.
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.
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.
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. FY23 Remuneration Committee activity
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:
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.
• Plan and discuss the proposed new Remuneration Policy
▼
▼
▼
• Review Terms of Reference
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.
| Votes for | % | Votes against | % | Total shares for and against |
Votes withheld | |
|---|---|---|---|---|---|---|
| That the Directors' remuneration report be received and approved (2022 AGM) |
130,803,393 | 91.13 | 12,735,708 | 8.87 | 143,539,101 | 19,847 |
| That the Directors' remuneration policy be received and approved (2020 AGM) |
160,581,406 | 94.19 | 9,902,752 | 5.81 | 170,484,158 | 89,031 |
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.
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.
| 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 | 2023 | 470,000 | 5,001 | 70,500 | 545,501 | 338,870 | 145,230 | 266,056 | 750,156 | 1,295,657 |
| 2022 | 470,000 | 3,337 | 70,500 | 543,837 | 308,438 | 132,187 | – | 440,625 | 984,462 | |
| Will Hobman2 | 2023 | 325,000 | 2,168 | 13,000 | 340,168 | 234,325 | 100,425 | – | 334,750 | 674,918 |
| 2022 | 189,583 | 855 | 7,583 | 198,021 | 141,002 | 60,430 | – | 201,432 | 399,453 |
Benefits are the Directors' private medical cover.
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.
Allan Lockhart received a pension contribution of 15% of salary. Will Hobman received a pension contribution of 4% of salary.
| Financial Year | Base Fee £ | Audit Committee Chairman £ |
Remuneration Committee Chairman £ |
Senior Independent Non-Executive Director £ |
Total £ | |
|---|---|---|---|---|---|---|
| Margaret Ford | 2023 | 160,000 | – | – | – | 160,000 |
| 2022 | 160,000 | – | – | – | 160,000 | |
| Kay Chaldecott1 | 2023 | 16,667 | – | – | – | 16,667 |
| 2022 | 50,000 | – | – | – | 50,000 | |
| Alastair Miller | 2023 | 50,000 | – | 7,500 | 7,500 | 65,000 |
| 2022 | 50,000 | – | 7,500 | 7,500 | 65,000 | |
| Charlie Parker | 2023 | 50,000 | – | – | – | 50,000 |
| 2022 | 50,000 | – | – | – | 50,000 | |
| Colin Rutherford | 2023 | 50,000 | 7,500 | – | – | 57,500 |
| 2022 | 50,000 | 7,500 | – | – | 57,500 | |
| Dr Karen Miller2 | 2023 | 42,051 | – | – | – | 42,051 |
| 2022 | – | – | – | – | – |
Kay Chaldecott stepped down from the Board on 26 July 2022.
Dr Karen Miller was appointed to the Board on 30 May 2022.
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 | Achievement % of maximum available under that element |
Pay-out as a percentage of total | bonus | ||
|---|---|---|---|---|---|---|---|---|---|
| 25% of | 50% of | 100% of | Allan | Will | Allan | Will | |||
| Measure | maximum | maximum | maximum | Lockhart | Hobman | Lockhart | Hobman | ||
| Corporate | |||||||||
| Total Return vs | |||||||||
| IPD All Retail | 25% | At index | 10% ahead | 20% ahead | Stretch | 100% | 100% | 25% | 25% |
| Earnings yield | >5% or | ||||||||
| (UFFO) | 25% | <5% below | £21.7m | above | £25.8m | 100% | 100% | 25% | 25% |
| Financial | |||||||||
| LTV | 10% | <38% | <36% | <34% | 33.9% | 100% | 100% | 10% | 10% |
| TAR Return | 15% | <10% | 6.7% | >10% | Miss | 0% | 0% | 0% | 0% |
| Strategic | |||||||||
| Strategic | |||||||||
| objectives | 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 | ||
|---|---|---|---|---|---|
| Allan Lockhart | Will Hobman | Allan Lockhart | Will Hobman | ||
| Cost reductions: unlock further cost saving | 5% | A further £900k of savings unlocked | 5% | 5% | |
| Achieve further disposals from the Workout portfolio | 7.5% | Disposal of Wakefield and Darlington assets | 7.5% | 7.5% | |
| M&G mandate to manage 16 Retail Parks | |||||
| Capital Partnerships: secure additional capital partnerships | 5% | and 2 Shopping centres | 5% | 5% | |
| ESG | |||||
| Green Financing Structure | Achieved target GRESB and EPRA scores | ||||
| GRESB and EPRA Score Maintenance | and progress on Net-Zero see ESG Report | ||||
| Measured Reduction in the Journey to Net-Zero | 7.5% | on pages 54-87 | 5% | 5% | |
| Total | 25% | 90% | 90% | 22.5% | 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 | Annual Bonus outcome | |||||
|---|---|---|---|---|---|---|
| % of maximum | % of salary | Bonus outcome | ||||
| Allan Lockhart | 82.5% | 103% | £484,100 | |||
| Will Hobman | 82.5% | 103% | £334,750 |
Thirty percent of the bonus will be deferred into shares for two years. Deferred shares are subject to continued employment.
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:
| Vesting | ||||||
|---|---|---|---|---|---|---|
| Weighting | Threshold | Target | Stretch | Actual result | (% of max) | |
| Measure | 25% of maximum | 75% of maximum | 100% of maximum | |||
| Total Shareholder Return vs UK REITs1 | 50% | Median | 62.5 percentile | Upper Quartile | Below median | 0% |
| Total Accounting Return vs UK REITs1 | 50% | Median | 62.5 percentile | Upper Quartile | Below median | 100% |
| Total | 50% |
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 | Grant date | Vest date | Number of shares granted |
Estimated number of shares to vest |
Value of share to vest |
Dividend equivalents |
Estimated value |
|---|---|---|---|---|---|---|---|
| Allan Lockhart | 21-Aug-20 | 21-Aug-23 | 497,354 | 248,677 | £219,507 | 52,727 | £266,056 |
| Will Hobman | 21-Aug-20 | 21-Aug-23 | 158,730 | 79,365 | £70,055 | 16,827 | £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.
The following Performance Share Plan awards were granted to Executive Directors as nil cost options on 6 July 2022:
| Executive | 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 |
|---|---|---|---|---|---|
| Allan Lockhart | £470,000 ( 100%) | 532,880 | 25% | 6 July 2025 | 6 July 2027 |
| Will Hobman | £325,000 (100%) | 368,481 | 25% | 6 July 2025 | 6 July 2027 |
Performance will be assessed from 1 April 2022 to 31 March 2025. The targets for both performance conditions are as follows:
| TSR ranking vs. UK REITs (50% of award) | Total Accounting Return ranking vs. UK REITs (50% of award) | Vesting (% of award)1 | |
|---|---|---|---|
| Below threshold | Less than Median (50th percentile) | Less than Median (50th percentile) | 0 |
| Threshold | Equal to Median (50th percentile) | Equal to Median (50th percentile) | 25 |
| Equal to 62.5th percentile | Equal to 62.5th percentile | 75 | |
| Equal to Upper Quartile | Equal to Upper Quartile | ||
| Maximum | (75th percentile) and above | (75th percentile) and above | 100 |
Vesting is calculated on a straight-line basis between 25%, 75% and 100%.
50% of each award may vest based on the Company's TSR compared to a group of UK REITs.
50% of each award may vest based on the Company's Total Accounting Return ("TAR") compared to a group of UK REITs that report their NAV on an EPRA basis. TAR is defined as the annualised return over the performance period based on the change in EPRA NTA per share and the level of dividends paid per share.
| The TSR and TAR comparator group was composed of the companies set out in the list below. | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| • SEGRO | • GREAT PORTLAND ESTATES | • UNITE GROUP | • LONDONMETRIC PROPERTY | ||||||
| • LAND SECURITIES GROUP | • WORKSPACE GROUP | • TRITAX BIG BOX REIT | • SAFESTORE HOLDINGS | ||||||
| • BRITISH LAND | • BIG YELLOW GROUP | • GRAINGER | • UK COMMERCIAL PROPERTY REIT | ||||||
| • DERWENT LONDON | • ASSURA | • CLS HOLDINGS | • PRIMARY HEALTH PROPERTIES | ||||||
| • HAMMERSON | • SHAFTESBURY CAPITAL |
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 | Number of shares granted1,2 | Face value of the award at grant date | Grant date | Vest date |
|---|---|---|---|---|
| Allan Lockhart | 148,960 | £132,187 | 6 July 2022 | 6 July 2024 |
| Will Hobman | 109,255 | £96,953 | 6 July 2022 | 6 July 2024 |
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.
Awards are not subject to performance conditions.
Vesting of awards is normally subject to continued employment unless an employee leaver is deemed a 'Good Leaver'.
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.
The beneficial interests of the Executive Directors in share awards and share options as at 31 March 2023 are shown in the following tables.
| Allan Lockhart | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 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 |
| May 2018 | DBP | May 2020 | 2.86 | nil | 62,194 | – | – | – | – | 62,194 |
| Jun 2019 | PSP | Jun 2022 | 1.77 | nil | 314,327 | – | – | (314,327) | – | – |
| Jun 2019 | DBP | Jun 2021 | 1.79 | nil | 66,952 | – | – | – | – | 66,952 |
| Aug 2020 | PSP | Aug 2023 | 0.63 | nil | 537,381 | – | 44,340 | – | – | 581,721 |
| Sept 2021 | DBP | Sept 2023 | 0.78 | nil | 37,348 | – | 3,081 | – | – | 40,429 |
| Sept 2021 | PSP | Sept 2024 | 0.78 | nil | 622,480 | – | 51,362 | – | – | 673,842 |
| July 2022 | DBP | July 2024 | 0.88 | nil | – | 148,960 | 12,290 | – | – | 161,250 |
| July 2022 | PSP | July 2025 | 0.88 | nil | – 532,880 | 43,968 | – | – | 576,848 | |
| Total | 1,640,683 681,840 | 155,041 | (314,327) | – | 2,163,236 |
| Will Hobman | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 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 | At 31 March 2023 |
| Jun 2019 | PSP | Jun 2022 | 1.77 | nil | 70,220 | – | – | (70,220) | – | – |
| Aug 2020 | DBP | Aug 2022 | 0.63 | nil | 48,668 | – | – | – | (48,668) | – |
| Aug 2020 | PSP | Aug 2023 | 0.63 | nil | 171,504 | – | 14,151 | – | – | 185,655 |
| Sept 2021 | DBP | Sept 2023 | 0.78 | nil | 21,852 | – | 1,802 | – | – | 23,654 |
| Sept 2021 | PSP | Sept 2024 | 0.78 | nil | 271,507 | – | 22,402 | – | – | 293,909 |
| July 2022 | DBP | July 2024 | 0.88 | nil | – | 109,255 | 9,014 | – | – | 118,269 |
| July 2022 | PSP | July 2025 | 0.88 | nil | – | 368,481 | 30,404 | – | – | 398,885 |
| Total | 583,752 | 477,736 | 77,773 | (70,220) | (48,668) | 1,020,373 |
A holding period of two years is applied following vesting.
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.
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 |
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 |
Value of holdings including vested and unvested DBP and PSP1 |
Unvested PSP awards held at 31 March 2023 |
Total held as at 31 March 2023 |
Shareholding % of salary |
|
|---|---|---|---|---|---|---|---|---|---|
| Allan Lockhart | 374,286 | 63% | 129,146 | – | 201,679 | 119% | 1,832,411 | 2,537,522 | 119% (unmet) |
| Will Hobman | 188,517 | 46% | – | – | 141,923 | 80% | 878,449 | 1,208,889 | 80% (unmet) |
| Margaret Ford | 106,440 | – | – | – | – | 106,440 | N/A | ||
| Alastair Miller | 69,806 | – | – | – | – | – | – | 69,806 | N/A |
| Colin Rutherford | – | – | – | – | – | – | – | – | N/A |
| Charlie Parker | 11,454 | – | – | – | – | – | – | 11,454 | N/A |
| Dr Karen Miller | – | – | – | – | – | – | – | – | N/A |
Based on the closing share price of 79p as at 31 March 2023 and salary for FY23.
Includes dividend equivalent shares added to that date. Although vested these awards have not yet been exercised.
All awards are nil cost awards.
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.
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.
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.
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).
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 | David | David | David | David | Allan | Allan | Allan | Allan | Allan | |
| Lockhart | Lockhart | Lockhart | Lockhart | Lockhart | Lockhart | Lockhart | Lockhart | Lockhart | Lockhart | |
| Total remuneration | ||||||||||
| (£) | 642,000 | 850,000 | 1,792,205 | 1,341,958 | 1,012,946 | 911,972 | 543,239 | 637,339 | 984,462 | 1,295,657 |
| Annual bonus | ||||||||||
| (% of max) | 69.0 | 70.0 | 100.0 | 66.7 | 77.3 | 64.0 | – | 20.0 | 75.0 | 82.5 |
| Total LTIP vesting | ||||||||||
| (% of max) | – | – | 50.0 | 76.3 | 13.1 | – | – | – | – | 50.0 |
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.
| Year | Method | 25th percentile pay ratio | Median pay ratio | 75th percentile pay ratio | |
|---|---|---|---|---|---|
| FY23 | Option A | 6.6:1 | 12.6:1 | 19.2:1 | |
| FY22 | Option A | 7:1 | 12.7:1 | 17.2:1 | |
| FY21 | Option A | 7:1 | 9:1 | 19:1 | |
| FY20 | Option A | 8:1 | 17:1 | 34:1 |
The total pay for the individuals identified at the Lower quartile, Median and Upper quartile positions are set out below:
| FY23 | |
|---|---|
| Total Pay | |
| Upper quartile | £196,932 |
| Median | £102,551 |
| Lower quartile | £67,469 |
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.
| FY22/FY23 | FY21/22 | FY20/FY21 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Directors | Salary/fee | Benefits | Annual Bonus | Salary/fee | Benefits | Annual Bonus | Salary/fee | Benefits | Annual Bonus |
| Executive Directors | |||||||||
| Allan Lockhart | 0% | 49.9% | 9.9% | 0% | 18% | 369% | 0% | 0% | 100% |
| Will Hobman1 | 0% | 32.9% | 8.5% | N/A | N/A | N/A | N/A | N/A | N/A |
| Non-Executive Directors | |||||||||
| Margaret Ford | 0% | N/A | N/A | 0% | N/A | N/A | 0% | N/A | N/A |
| Kay Chaldecott2 | 0% | N/A | N/A | -6% | N/A | N/A | 0% | N/A | N/A |
| Alastair Miller | 0% | N/A | N/A | 0% | N/A | N/A | 0% | N/A | N/A |
| Charlie Parker | 0% | N/A | N/A | 0% | N/A | N/A | 0% | N/A | N/A |
| Colin Rutherford | 0% | N/A | N/A | 6% | N/A | N/A | 0% | N/A | N/A |
| Dr Karen Miller3 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| All Employees4 | 5% | 37% | 6% | 5.15% | 20% | 96% | 0% | 0% | 100% |
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.
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
Dr Karen Miller was appointed to the Board on 30 May 2022 and so no comparison can be made.
All employees are used as there are no employees of the listed parent company.
The table below shows employee pay and distributions to shareholders for FY23 and FY22.
| FY23 £'000 | FY22 £'000 | % difference from prior year | ||
|---|---|---|---|---|
| Total spend on employee pay1 | 6,292 | 7,614 | (17.3%) | |
| Total distributions to shareholders | 20,863 | 21,661 | (3.7%) | |
| Share Buy Backs | – | – | 0% |
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.
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 | Salary for FY23 | Salary for FY24 | % increase |
|---|---|---|---|
| Allan Lockhart – Chief Executive Officer | £470,000 | £484,100 | 3% |
| Will Hobman – Chief Financial Officer | £325,000 | £334,750 | 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 | Fees for FY23 | Fees for FY24 | % increase |
|---|---|---|---|
| Chairman | £160,000 | £164,800 | 3% |
| Basic fee for a Non-Executive Director | £50,000 | £51,500 | 3% |
| Additional fee for serving as Chairman of the Audit | |||
| and Remuneration Committees | £7,500 | £7,725 | 3% |
| Additional fee for serving as the Senior Independent | |||
| Non-Executive Director | £7,500 | £7,725 | 3% |
• The Non-Executive Directors' fees were last increased in April 2018
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 | FY24 Weighting |
|---|---|
| Total Return vs IPD index | 25% |
| Earnings yield (UFFO) | 25% |
| LTV | 5% |
| TAR Return | 20% |
| Strategic objectives (including ESG targets) | 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.
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.
| Threshold | Target | Stretch | ||
|---|---|---|---|---|
| Measure | Weighting | 25% of maximum | 75% of maximum | 100% of maximum |
| Relative TSR vs UK REIT peer group | 50% | Median | 62.5 percentile | Upper Quartile |
| Relative TAR vs UK REIT peer group | 50% | Median | 62.5 percentile | Upper Quartile |
• 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
Committee Chair
14 June 2023
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
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.
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.
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 Directors, who served throughout the year unless stated otherwise, are detailed below:
| 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.
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:
| Page numbers | |
|---|---|
| s.172 statement | Page 21 |
| Staff, culture and | Staff – pages 22 to 23 and 101 |
| employee involvement | |
| Directors' interests | Pages 132 to 133 of the Directors' |
| Remuneration Report | |
| Stakeholder engagement | Strategic report – pages 22 to 27, |
| Governance report – pages 102 & | |
| 107 | |
| Environmental policy | ESG report – pages 54 to 87 |
| Greenhouse gas | ESG report – page 63 |
| emissions | |
| Future business | Strategic Report – pages 1 to 95 |
| developments | |
| Financial risk | Pages 88 to 95 and pages 175 to 178 |
| management objectives | |
| and policies | |
| Going concern | Page 95 |
| Viability statement | Page 95 |
| Governance report | Pages 96 to 140 |
| Diversity | Pages 22, 74 & 112 |
| Listing Rule: | |
| 9.8.4R (1)(2) (5-14)(B) | Not applicable |
| 9.8.4R (4) | Long-term incentive plans - pages 131 |
| to 132 | |
| 9.8.6R (9) & LR 14.3.33R(1) | Page 112 |
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.
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.
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.
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.
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):
| Shareholder | Number of shares | % of issued Share Capital |
|---|---|---|
| Premier Milton | 15,803,355 | 5.07% |
| M&G Plc | 15,404,761 | 4.99% |
| IntegraFin Holdings | 15,480,100 | 4.96% |
| FIL Limited | 15,080,808 | 4.87% |
| Farringdon Capital Management | 11,909,919 | 3.83% |
| Shareholder | Number of shares | % of issued Share Capital |
|---|---|---|
| Premier Milton | 15,803,355 | 5.07% |
| FIL Holdings | 15,770,051 | 5.06% |
| M&G Plc | 15,404,761 | 4.99% |
| IntegraFin Holdings | 15,480,100 | 4.96% |
| Farringdon Capital Management | 11,909,919 | 3.83% |
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:
The Company has no branches outside the UK.
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.
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.
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.
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.
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.
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.
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.
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
Company Secretary
14 June 2023
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:
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.
Each of the Directors, whose names and functions are listed in the Governance Report confirm that, to the best of their knowledge:
In the case of each Director in office at the date the Directors' report is approved:
The confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
14 June 2023
In our opinion:
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.
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.
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.
• 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.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
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.
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.
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.
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.
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:
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.
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.
We obtained the Company's assessment of the valuation of investments held in subsidiaries as at 31 March 2023 and performed the following:
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.
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.
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.
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
| Financial statements - Group | Financial statements - Company | |
|---|---|---|
| Overall materiality | £7.8 million (2022: £8.2 million). | £8.1 million (2022: £8.0 million). |
| How we determined it | 1% of the Group's total assets | 1% of the Company's total assets |
| Rationale for benchmark applied | We determined materiality based on total assets given the valuation of investment properties, whether held directly or through joint ventures and associates, is the key determinant of the Group's value. This materiality was used in the audit of investing and financing activities. |
Given the NewRiver REIT plc entity is primarily a holding Company we determined total assets to be the appropriate benchmark. |
| Specific materiality | £1.2 million (2022: £1.3 million) | Not applicable |
|---|---|---|
| How we determined it | 5% of the Group's 2023 EPRA earnings (2022: 5% of the Group's 2022 EPRA earnings) |
Not applicable |
| Rationale for benchmark applied | 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. |
Not applicable |
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.
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:
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.
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.
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.
In our opinion, the part of the Remuneration Committee Report to be audited has been properly prepared in accordance with the Companies Act 2006.
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:
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:
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.
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.
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:
assessing matters reported on the Group's whistleblowing helpline and the results of management's investigation of such matters, where relevant;
evaluating compliance with the REIT tax rules with the involvement of our tax specialists in the audit;
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of noncompliance 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.
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.
Under the Companies Act 2006 we are required to report to you if, in our opinion:
We have no exceptions to report arising from this responsibility.
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.
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
For the year ended 31 March 2023
| Year ended 31 March 2023 | Year ended 31 March 2022 | ||||||
|---|---|---|---|---|---|---|---|
| Continuing Operations | Notes | Operating and financing 2023 £m |
Fair value adjustments 2023 £m |
Total 2023 £m |
Operating and financing 2022 £m |
Fair value adjustments 2022 £m |
Total 2022 £m |
| Revenue | 4 | 72.2 | – | 72.2 | 73.7 | – | 73.7 |
| Property operating expenses* | 5 | (25.1) | – | (25.1) | (25.5) | – | (25.5) |
| Net property income | 47.1 | – | 47.1 | 48.2 | – | 48.2 | |
| Administrative expenses | 6 | (12.6) | – | (12.6) | (13.4) | – | (13.4) |
| Other income | 7 | 1.4 | – | 1.4 | – | – | – |
| Share of profit from joint ventures | 15 | 2.4 | 0.6 | 3.0 | 1.1 | 2.9 | 4.0 |
| Share of profit from associates | 16 | 0.1 | 0.2 | 0.3 | 0.2 | 2.9 | 3.1 |
| Net property valuation movement | 14 | – | (38.2) | (38.2) | – | (12.3) | (12.3) |
| Loss on disposal of investment properties | 9 | (3.8) | – | (3.8) | (4.2) | – | (4.2) |
| Operating (loss) / profit | 34.6 | (37.4) | (2.8) | 31.9 | (6.5) | 25.4 | |
| Finance income | 10 | 1.4 | – | 1.4 | 1.4 | – | 1.4 |
| Finance costs | 10 | (15.4) | – | (15.4) | (19.8) | – | (19.8) |
| (Loss) / profit for the year before taxation | 20.6 | (37.4) | (16.8) | 13.5 | (6.5) | 7.0 | |
| Taxation | 11 | – | – | – | – | – | – |
| (Loss) / profit for the year after taxation from continuing operations |
20.6 | (37.4) | (16.8) | 13.5 | (6.5) | 7.0 | |
| Loss for the year after taxation from discontinued | |||||||
| operations | 8 | – | – | – | (31.7) | (1.9) | (33.6) |
| Loss for the year | 20.6 | (37.4) | (16.8) | (18.2) | (8.4) | (26.6) | |
| Total comprehensive loss for the year | (16.8) | (26.6) |
There are no items of other comprehensive income for the current or prior year
| (Loss) / earnings per share – continuing operations | |||
|---|---|---|---|
| Basic (pence) | 12 | (5.4) | 2.3 |
| Diluted (pence) | 12 | (5.4) | 2.3 |
| Loss per share | |||
| Basic (pence) | 12 | (5.4) | (8.6) |
| Diluted (pence) | 12 | (5.4) | (8.6) |
* 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.
As at 31 March 2023
| Notes | 2023 £m |
2022 £m |
|
|---|---|---|---|
| Non-current assets | |||
| Investment properties | 14 | 627.3 | 684.6 |
| Right of use asset | 22 | 0.9 | 0.2 |
| Investments in joint ventures | 15 | 23.8 | 24.0 |
| Investments in associates | 16 | 5.5 | 7.9 |
| Property, plant and equipment | 0.4 | 0.7 | |
| Total non-current assets | 657.9 | 717.4 | |
| Current assets | |||
| Trade and other receivables | 17 | 15.0 | 18.9 |
| Cash and cash equivalents | 19 | 108.6 | 82.8 |
| Total current assets | 123.6 | 101.7 | |
| Total assets | 781.5 | 819.1 | |
| Equity and liabilities | |||
| Current liabilities | |||
| Trade and other payables | 20 | 29.5 | 33.5 |
| Lease liability | 22 | 0.4 | 0.7 |
| Total current liabilities | 29.9 | 34.2 | |
| Non-current liabilities | |||
| Lease liability | 22 | 76.3 | 75.0 |
| Borrowings | 21 | 296.7 | 295.8 |
| Total non-current liabilities | 373.0 | 370.8 | |
| Net assets | 378.6 | 414.1 | |
| Equity | |||
| Share capital | 3.1 | 3.1 | |
| Share premium | 2.4 | 1.1 | |
| Merger reserve | (2.3) | (2.3) | |
| Retained earnings and other reserves | 375.4 | 412.2 | |
| Total equity | 378.6 | 414.1 | |
| Net Asset Value (NAV) per share (pence) | |||
| Basic | 12 | 122p | 135p |
| Diluted | 12 | 121p | 134p |
| EPRA NTA | 12 | 121p | 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 Will Hobman Chief Financial Officer
Registered number: 10221027
For the year ended 31 March 2023
| 2023 £m |
2022 £m |
|
|---|---|---|
| Cash flows from operating activities | ||
| (Loss) / profit for the year before taxation – continuing operations | (16.8) | 7.0 |
| Loss for the year before taxation – discontinued operations | – | (31.7) |
| Loss for the year before taxation | (16.8) | (24.7) |
| Adjustments for: | ||
| Loss on disposal of investment property | 3.8 | 3.4 |
| Loss on disposal of Hawthorn | – | 39.7 |
| Net valuation movement | 38.2 | 12.3 |
| Net valuation movement in joint ventures | (0.6) | (2.9) |
| Net valuation movement in associates | (0.2) | (2.9) |
| Share of profit from joint ventures | (2.4) | (1.1) |
| Share of profit from associates | (0.1) | (0.2) |
| Net interest expense | 14.0 | 18.4 |
| Rent free lease incentives | 0.2 | (1.4) |
| Movement in expected credit loss | (0.1) | (0.3) |
| (Capitalisation) / amortisation of legal and letting fees | (0.1) | 0.1 |
| Depreciation on property plant and equipment | 0.8 | 1.2 |
| Share-based payment expense | 0.9 | 0.9 |
| Cash generated from operations before changes in working capital | 37.6 | 42.5 |
| Changes in working capital | ||
| Decrease in trade and other receivables | 3.0 | 9.7 |
| (Decrease) / increase in payables and other financial liabilities | (4.3) | 7.6 |
| Cash generated from operations | 36.3 | 59.8 |
| Interest paid | (14.1) | (20.3) |
| Dividends received from joint ventures | 3.2 | 5.6 |
| Dividends received from associates | 0.4 | 2.0 |
| Net cash generated from operating activities | 25.8 | 47.1 |
| Cash flows from investing activities | ||
| Cash proceeds net of cash disposed and transaction costs from disposal of subsidiaries | – | 196.0 |
| Interest income | 1.2 | 0.4 |
| Investment in associate | – | (4.0) |
| Return of investment from associate | 2.3 | – |
| Disposal of associate investments | – | 2.5 |
| Purchase of investment properties | – | (7.3) |
| Disposal of investment properties | 19.5 | 65.2 |
| Development and other capital expenditure | (2.9) | (9.6) |
| Purchase of plant and equipment | (0.1) | (3.0) |
| Net cash generated from investing activities | 20.0 | 240.2 |
| Cash flows from financing activities | ||
| Repayment of bank loans | – | (335.0) |
| Repayment of principal portion of lease liability | (0.4) | (0.7) |
| Dividends paid – ordinary | (19.6) | (19.3) |
| Net cash used in financing activities | (20.0) | (355.0) |
| Cash and cash equivalents at beginning of the year | 82.8 | 150.5 |
| Net increase in / (decrease) in cash and cash equivalents | 25.8 | (67.7) |
| Cash and cash equivalents at 31 March | 108.6 | 82.8 |
The notes on pages 153 to 179 form an integral part of these financial statements.
For the year ended 31 March 2023
| Notes | Share capital £m |
Share premium £m |
Merger reserve £m |
Retained earnings and other reserves £m |
Total £m |
|
|---|---|---|---|---|---|---|
| As at 1 April 2021 | 3.1 | 227.4 | (2.3) | 232.2 | 460.4 | |
| Loss for the year after taxation | ||||||
| – continuing operations | – | – | – | 7.0 | 7.0 | |
| – discontinued operations | – | – | – | (33.6) | (33.6) | |
| Loss for the year after taxation | – | – | – | (26.6) | (26.6) | |
| Total comprehensive loss for the year after taxation | – | – | – | (26.6) | (26.6) | |
| Transactions with equity holders | ||||||
| Transfer from share premium | – | (227.4) | – | 227.4 | – | |
| Issue of new shares | – | 1.1 | – | – | 1.1 | |
| Share-based payments | – | – | – | 0.9 | 0.9 | |
| Dividends paid | 13 | – | – | – | (21.7) | (21.7) |
| As at 31 March 2022 | 3.1 | 1.1 | (2.3) | 412.2 | 414.1 | |
| Loss for the year after taxation | – | – | – | (16.8) | (16.8) | |
| Total comprehensive loss for the year after taxation | – | – | – | (16.8) | (16.8) | |
| Transactions with equity holders | ||||||
| Issue of new shares | – | 1.3 | – | – | 1.3 | |
| Share-based payments | – | – | – | 0.9 | 0.9 | |
| Dividends paid | 13 | – | – | – | (20.9) | (20.9) |
| As at 31 March 2023 | 3.1 | 2.4 | (2.3) | 375.4 | 378.6 |
The notes on pages 153 to 179 form an integral part of these financial statements.
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.
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.
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.
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.
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.
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.
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.
The Group has adopted the following amendments for the first time in the year ended 31 March 2023:
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.
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
Effective for the year ended 31 March 2025:
No material impact is expected upon the adoption of these standards.
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.
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 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.
Management fees are recognised in the consolidated statement of comprehensive income as the services are delivered and performance obligations met. The Group assesses whether the individual elements of service in the agreement are separate performance obligations. Where the agreements include multiple performance obligations, the transaction price will be allocated to each performance obligation.
Car park income is recognised in accordance with IFRS 15. This income stream is recognised in the period in which it is earnt and when performance obligations are made.
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.
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.
All revenue streams under IFRS 15 allocate transaction price against performance obligations as they are satisfied. With the exception of asset management fees, IFRS 15 revenue streams do not carry variable consideration. There are no significant judgements in applying IFRS 15. There are no significant payment terms on any of the IFRS 15 revenue streams.
Service charge 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.
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.
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:
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 postacquisition 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 postacquisition 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.
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.
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 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.
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.
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.
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.
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.
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.
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.
| £m £m Property rental and related income* 58.2 57.7 Amortisation of tenant incentives and letting costs (1.5) Surrender premiums and commissions 0.6 0.8 Rental related income 57.3 57.2 Asset management fees 1.5 1.9 |
2023 | 2022 | |
|---|---|---|---|
| (1.3) | |||
| Service charge income | 13.4 | 14.6 | |
| Revenue 72.2 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.
| 2023 | 2022 | |
|---|---|---|
| £m | £m | |
| Service charge expense | 19.0 | 20.3 |
| Rates on vacant units | 2.7 | 1.8 |
| Expected credit loss reversal | (0.1) | (0.3) |
| Other property operating expenses | 3.5 | 3.7 |
| Property operating expenses | 25.1 | 25.5 |
| 2023 £m |
2022 £m |
|
|---|---|---|
| Wages and salaries | 5.2 | 5.1 |
| Social security costs | 0.9 | 0.7 |
| Other pension costs | 0.1 | 0.1 |
| Staff costs | 6.2 | 5.9 |
| Depreciation** | 0.8 | 0.1 |
| Share-based payments | 1.1 | 0.9 |
| Other administrative expenses | 4.0 | 5.6 |
| Head office relocation costs* | 0.5 | – |
| Restructuring costs | – | 0.9 |
| Administrative expenses | 12.6 | 13.4 |
* 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:
| 2023 £m |
2022 £m |
|
|---|---|---|
| Administrative expenses | 12.6 | 13.4 |
| Adjust for: | ||
| Asset management fees | (1.5) | (1.9) |
| Share of joint ventures' and associates administrative expenses | 0.1 | 0.2 |
| Share based payments | (1.1) | (0.9) |
| Head office relocation costs | (0.5) | – |
| Restructuring costs | – | (0.9) |
| Group's share of net administrative expenses – continuing operations | 9.6 | 9.9 |
| Group's share of net administrative expenses – discontinued operations | – | 4.2 |
| Group's share of net administrative expenses – Reported Group | 9.6 | 14.1 |
| Property rental and related income* | 58.0 | 58.0 |
| Other income – Covid-19 income disruption insurance | 1.4 | – |
| Share of joint ventures' and associates' property income | 3.6 | 3.9 |
| Property rental, other income and related income – continuing operations | 63.0 | 61.9 |
| Property rental, other income and related income – discontinued operations | – | 21.4 |
| Property rental, other income and related income – Reported Group | 63.0 | 83.3 |
| Net administrative expenses as a % of property income (including share of joint ventures and associates) – continuing operations |
15.2% | 16.0% |
| Net administrative expenses as a % of property income (including share of joint ventures and associates) – Reported Group |
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).
| 2023 | 2022 | |
|---|---|---|
| Directors | 7 | 7 |
| Operations and asset managers | 17 | 17 |
| Support functions | 27 | 32 |
| Total | 51 | 56 |
On disposal of Hawthorn 101 employees were employed by subsidiaries that were sold on 20 August 2021.
| 2023 | 2022 | |
|---|---|---|
| £m | £m | |
| Audit of the Company and consolidated financial statements | 0.3 | 0.3 |
| Audit of subsidiaries, pursuant to legislation | 0.2 | 0.2 |
| 0.5 | 0.5 | |
| Non-audit fees – interim review | 0.1 | 0.1 |
| Total fees | 0.6 | 0.6 |
In addition to this the joint ventures and associates paid £0.1 million (2022: £0.1 million) in audit fees.
| 2023 | 2022 | |
|---|---|---|
| £m | £m | |
| Insurance proceeds | 1.4 | – |
| Other income | 1.4 | – |
The Group has recognised £1.4m for Covid-19 income disruption following agreement with the insurer.
There have been no disposals in the year ended 31 March 2023.
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.
| Hawthorn Leisure REIT Limited | Hawthorn Leisure Limited |
|---|---|
| Hawthorn Leisure (Bravo Inns) Limited | Hawthorn Leisure Acquisitions Limited |
| Bravo Inns Limited | Hawthorn Leisure Honey Limited |
| Bravo Inns II 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 |
| £m | |
|---|---|
| Revenue | 18.1 |
| Property operating expenses | (10.9) |
| Net property income | 7.2 |
| Other income | 4.8 |
| Administrative expenses | (4.8) |
| Loss on disposal of subsidiary | (39.7) |
| Other | 0.8 |
| Loss for the period before taxation | (31.7) |
| Deferred Tax | (1.9) |
| Loss for the period after taxation | (33.6) |
| 2022 £m |
|||
|---|---|---|---|
| Gross disposal proceeds | 224.0 | ||
| Net assets disposed of: | |||
| Investment property | (202.3) | ||
| Managed houses | (53.8) | ||
| Property, plant and equipment | (1.2) | ||
| Cash | (16.6) | ||
| Other net liabilities | 19.9 | ||
| Carrying value | (254.0) | ||
| Loss on disposal of subsidiary before transaction costs | (30.0) | ||
| Transaction costs | (9.7) | ||
| Loss on disposal of subsidiary | (39.7) | ||
| 31 March 2022 | |||
| Cash flows from 1 April 2021 to 20 August 2021 | £m | ||
| Cash flows from operating activities | 13.8 | ||
| Cash flows from investing activities | 187.9 | ||
| Total cash flows from discontinued operations | 201.7 | ||
| 9. Loss on disposal of investment properties |
|||
| 2023 £m |
2022 £m |
||
| Gross disposal proceeds | 20.0 | 66.3 | |
| Carrying value | (22.3) | (68.9) | |
| Cost of disposal | (1.5) | (1.6) | |
| Loss on disposal of investment properties | (3.8) | (4.2) | |
| 10. Finance income and finance costs |
|||
| 2023 £m |
2022 £m |
||
| Income from loans with joint ventures and associates | (0.3) | (0.4) | |
| Income from treasury deposits | (1.1) | – | |
| Write off of derivatives | – | (1.0) | |
| Finance income | (1.4) | (1.4) |
| Interest on borrowings | 12.7 | 17.1 |
|---|---|---|
| Finance cost on lease liabilities | 2.7 | 2.7 |
| Finance costs | 15.4 | 19.8 |
| 2023 £m |
2022 £m |
|
|---|---|---|
| Taxation charge / (credit) – continuing | – | – |
| Taxation charge / (credit) – discontinued | – | 1.9 |
| Taxation charge / (credit) – Reported Group | – | 1.9 |
| Loss before tax | (16.8) | (24.7) |
| Tax at the current rate of 19% (2022: 19%) | (3.2) | (4.7) |
| Revaluation of property | 7.3 | 2.3 |
| Movement in unrecognised deferred tax | (0.2) | 2.1 |
| Non-taxable loss on disposal of subsidiary | – | 7.6 |
| Non-taxable profit due to REIT regime | (4.4) | (5.4) |
| Non-taxable income | (0.4) | (0.8) |
| Transfer pricing adjustment | 0.9 | 0.8 |
| Taxation (credit) / charge | – | 1.9 |
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 Group continues to meet these conditions and management intends that the Group should continue as a REIT for the foreseeable future.
| 31 March 2022 £m |
Charge £m |
Disposals £m |
31 March 2023 £m |
|
|---|---|---|---|---|
| Net deferred tax | – | – | – | – |
| 31 March 2021 £m |
Charge £m |
Disposals £m |
31 March 2022 £m |
|
| Net deferred tax | (0.7) | (1.9) | 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.
A reconciliation of the performance measures to the nearest IFRS measure is below:
| Year ended 31 March 2023 | Year ended 31 March 2022 | ||||||
|---|---|---|---|---|---|---|---|
| Continuing | Discontinued | Total | Continuing | Discontinued | Total | ||
| £m | £m | £m | £m | £m | £m | ||
| (Loss) / profit for the year after taxation | (16.8) | – | (16.8) | 7.0 | (33.6) | (26.6) | |
| Adjustments | |||||||
| Net valuation movement | 38.2 | – | 38.2 | 12.3 | – | 12.3 | |
| Loss on disposal of investment properties | 3.8 | – | 3.8 | 4.2 | (0.8) | 3.4 | |
| Changes in fair value of financial instruments and associated | |||||||
| close out costs | – | – | – | (0.1) | – | (0.1) | |
| Deferred tax | – | – | – | – | 1.9 | 1.9 | |
| Loss on disposal of subsidiary | – | – | – | – | 39.7 | 39.7 | |
| Group's share of joint ventures' and associates' adjustments | |||||||
| Revaluation of investment properties | (0.8) | – | (0.8) | (5.8) | – | (5.8) | |
| Revaluation of derivatives | (0.2) | – | (0.2) | (0.5) | – | (0.5) | |
| Deferred tax | 0.2 | – | 0.2 | 0.6 | – | 0.6 | |
| Loss on disposal of investment properties | – | – | – | 1.2 | – | 1.2 | |
| EPRA earnings | 24.4 | – | 24.4 | 18.9 | 7.2 | 26.1 | |
| Share-based payment charge | 1.1 | – | 1.1 | 0.9 | – | 0.9 | |
| Forward looking element of IFRS 9* | (0.2) | – | (0.2) | (0.2) | – | (0.2) | |
| Depreciation on public houses | – | – | – | – | 0.4 | 0.4 | |
| Head office relocation costs | 0.5 | – | 0.5 | – | – | – | |
| Abortive costs | – | – | – | – | 0.2 | 0.2 | |
| Restructuring costs | – | – | – | 0.9 | – | 0.9 | |
| Underlying Funds From Operations (UFFO) | 25.8 | – | 25.8 | 20.5 | 7.8 | 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.
| 2023 | 2022 | |
|---|---|---|
| Number of shares | No. m | No. m |
| Weighted average number of ordinary shares for the purposes of Basic EPS, UFFO and EPRA | 309.7 | 307.2 |
| Effect of dilutive potential ordinary shares: | ||
| Performance share plan | 1.2 | 1.1 |
| Deferred bonus shares | 0.8 | 0.7 |
| Weighted average number of ordinary shares for the purposes of Diluted EPS | 311.7 | 309.0 |
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Continuing | Discontinued | Total | Continuing | Discontinued | Total | |
| IFRS Basic EPS | (5.4) | – | (5.4) | 2.3 | (10.9) | (8.6) |
| IFRS Diluted EPS | (5.4) | – | (5.4) | 2.3 | (10.9) | (8.6) |
| EPRA EPS | 7.9 | – | 7.9 | 6.2 | 2.3 | 8.5 |
| UFFO EPS | 8.3 | – | 8.3 | 6.7 | 2.5 | 9.2 |
The below table reconciles the differences between the calculation of basic and EPRA NTA.
EPRA NTA per share and basic NTA per share:
| 2023 | 2022 | ||||||
|---|---|---|---|---|---|---|---|
| Shares | Pence per | Shares | Pence per | ||||
| £m | m | share | £m | m | share | ||
| Net assets | 378.6 | 310.7 | 122p | 414.1 | 307.2 | 135p | |
| Unexercised employee awards | – | 2.0 | – | 1.8 | |||
| Diluted net assets | 378.6 | 312.7 | 121p | 414.1 | 309.0 | 134p | |
| Group's share of associates deferred tax liability | 0.9 | – | 0.6 | – | |||
| Group's share of joint venture/associates fair value derivatives | (0.6) | – | (0.3) | – | |||
| EPRA Net Tangible Assets | 378.9 | 312.7 | 121p | 414.4 | 309.0 | 134p |
The dividends paid in the year are set out below:
| Pence | ||||
|---|---|---|---|---|
| Payment date | PID | Non-PID | per share | £m |
| Year to March 2022 | ||||
| Ordinary dividends | ||||
| 3 September 2021 | 3.0 | – | 3.0 | 9.1 |
| 14 January 2022 | 4.1 | – | 4.1 | 12.6 |
| 21.7 | ||||
| Year to March 2023 | ||||
| Ordinary dividends | ||||
| 3 September 2022 | 3.3 | – | 3.3 | 10.1 |
| 17 January 2023 | 3.5 | – | 3.5 | 10.8 |
| 20.9 |
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).
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.
Any non-PID element of dividends will be treated in exactly the same way as dividends from other UK, non-REIT companies.
| 2023 £m |
2022 £m |
|
|---|---|---|
| Fair value brought forward | 609.1 | 851.9 |
| Acquisitions | – | 7.3 |
| Capital expenditure | 2.9 | 9.6 |
| Lease incentives, letting and legal costs | (0.1) | 1.3 |
| Transfer from assets held for sale (Note 18) | – | 25.5 |
| Disposals | (22.3) | (72.9) |
| Disposal of subsidiaries | – | (202.3) |
| Net valuation movement | (38.1) | (11.3) |
| Fair value carried forward | 551.5 | 609.1 |
| Right of use asset (investment property) | 75.8 | 75.5 |
| Fair value carried forward | 627.3 | 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:
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.
| Property ERV Property rent |
Property | EPRA topped | |||||||
|---|---|---|---|---|---|---|---|---|---|
| equivalent yield |
up net initial yield |
||||||||
| 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 |
Average % |
Average % |
|
| Shopping Centres – Core | 214.8 | 8.8 | 30.1 | 14.0 | 8.0 | 30.8 | 12.9 | 9.3% | 9.7% |
| Shopping Centres – Regeneration | 140.1 | 5.2 | 18.8 | 16.1 | 4.0 | 13.4 | 10.6 | 6.8% | 5.9% |
| Shopping Centres – Work Out | 63.3 | 6.5 | 15.3 | 8.8 | 1.5 | 6.3 | 4.4 | 14.0% | 9.4% |
| Retail parks | 128.6 | 9.6 | 14.2 | 11.4 | 7.9 | 14.7 | 10.9 | 7.0% | 7.0% |
| High street and other | 4.7 | 4.2 | 8.6 | 6.6 | 3.7 | 8.7 | 4.1 | 9.5% | 10.0% |
| 551.5 |
| Property ERV | Property rent | Property EPRA topped |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 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 |
equivalent yield Average % |
up net initial yield Average % |
||
| Shopping Centres – Core | 216.2 | 8.5 | 30.1 | 14.2 | 8.2 | 30.7 | 12.8 | 9.3% | 9.5% | |
| Shopping Centres – Regeneration | 162.6 | 7.4 | 15.3 | 9.8 | 2.6 | 8.4 | 5.1 | 6.5% | 5.8% | |
| Shopping Centres – Work Out | 89.7 | 5.3 | 19.4 | 16.0 | 4.6 | 14.0 | 11.1 | 15.7% | 11.1% | |
| Retail parks | 132.5 | 9.1 | 14.0 | 11.1 | 0.6 | 14.7 | 9.7 | 6.6% | 6.0% | |
| High street and other | 8.1 | 5.4 | 15.0 | 8.0 | 3.8 | 8.6 | 3.0 | 8.4% | 4.7% | |
| 609.1 |
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:
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.
| Impact on valuations of a 10% change in ERV |
Impact on valuations of 100 bps change in yield |
||||
|---|---|---|---|---|---|
| Retail asset valuation £m |
Increase 10% £m |
Decrease 10% £m |
Increase 1.0% £m |
Decrease 1.0% £m |
|
| Shopping Centres – Core | 214.8 | 18.2 | (16.7) | (21.7) | 27.6 |
| Shopping Centres – Regeneration | 140.1 | 13.5 | (13.0) | (18.9) | 26.0 |
| 63.3 | 6.5 | (5.8) | (5.8) | 7.4 | |
| 128.6 | 9.7 | (9.6) | (14.2) | 18.9 | |
| 4.7 | 0.6 | (0.6) | (0.6) | 0.7 | |
| 551.5 | 48.5 | (45.7) | (61.2) | 80.6 |
| Impact on valuations of a 10% change in ERV |
Impact on valuations of 100 bps change in yield |
||||
|---|---|---|---|---|---|
| Asset Type | Retail asset valuation £m |
Increase 10% £m |
Decrease 10% £m |
Increase 1.0% £m |
Decrease 1.0% £m |
| Shopping Centres – Core | 216.2 | 19.9 | (18.7) | (22.6) | 28.5 |
| Shopping Centres – Regeneration | 162.6 | 14.3 | (13.6) | (21.1) | 29.2 |
| Shopping Centres – Work Out | 89.7 | 7.5 | (7.4) | (7.2) | 8.3 |
| Retail parks | 132.5 | 9.5 | (11.2) | (15.7) | 19.4 |
| High street and other | 8.1 | 0.7 | (1.1) | (0.9) | 0.7 |
| 609.1 | 51.9 | (52.0) | (67.5) | 86.1 |
Reconciliation to net valuation movement in consolidated statement of comprehensive income
| 2023 | 2022 | |
|---|---|---|
| Net valuation movement in investment properties | £m | £m |
| Net valuation movement in investment properties | (38.1) | (11.3) |
| Net valuation movement in right of use asset | (0.1) | (1.0) |
| Net valuation movement in consolidated statement of comprehensive income | (38.2) | (12.3) |
Reconciliation to properties at valuation in the portfolio
| 2023 | 2022 | |
|---|---|---|
| Note | £m | £m |
| Investment property 14 |
551.5 | 609.1 |
| Properties held in joint ventures 15 |
32.2 | 30.6 |
| Properties held in associates 16 |
9.9 | 9.7 |
| Properties at valuation | 593.6 | 649.4 |
As at 31 March 2023 the Group has two joint ventures.
| 2023 £m |
2022 £m |
|
|---|---|---|
| Opening balance | 24.0 | 25.6 |
| Group's share of profit after taxation excluding valuation movement | 2.4 | 1.1 |
| Net valuation movement | 0.6 | 2.9 |
| Dividends | (3.2) | (5.6) |
| Investment in joint venture | 23.8 | 24.0 |
| Name Country of incorporation |
2023 % Holding |
2022 % Holding |
| NewRiver Retail Investments LP (NRI LP) Guernsey |
50 | 50 |
| NewRiver Retail (Napier) Limited (Napier) UK |
50 | 50 |
The Group is the appointed asset manager on behalf of these joint ventures and receives asset management fees, development management fees and performance-related bonuses.
NewRiver Retail Investments LP and NewRiver Retail (Napier) Limited have a 31 December year end. The aggregate amounts recognised in the consolidated balance sheet and consolidated statement of comprehensive income at 31 March are as follows:
| 2023 | 2022 | |||
|---|---|---|---|---|
| Consolidated balance sheet | Total £m |
Group's share £m |
Total £m |
Group's share £m |
| Non-current assets | 64.4 | 32.2 | 61.2 | 30.6 |
| Current assets | 5.5 | 2.8 | 9.4 | 4.7 |
| Current liabilities | (1.4) | (0.7) | (1.8) | (0.9) |
| Liabilities due in more than one year | (26.9) | (13.5) | (26.8) | (13.4) |
| Net assets | 41.6 | 20.8 | 42.0 | 21.0 |
| Loan to joint venture | – | 3.0 | – | 3.0 |
| Net assets adjusted for loan to joint venture | 41.6 | 23.8 | 42.0 | 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 | |||
|---|---|---|---|---|
| Consolidated statement of comprehensive income | Total £m |
Group's share £m |
Total £m |
Group's share £m |
| Revenue | 5.9 | 3.0 | 5.7 | 2.8 |
| Property operating expenses | (0.4) | (0.2) | (0.1) | – |
| Net property income | 5.5 | 2.8 | 5.6 | 2.8 |
| Administration expenses | (0.2) | (0.1) | (0.3) | (0.1) |
| Net finance costs | (0.6) | (0.3) | (0.1) | (0.1) |
| Group's share of joint ventures' profit before valuation movements | 4.7 | 2.4 | 5.2 | 2.6 |
| Net valuation movement | 1.2 | 0.6 | 5.8 | 2.9 |
| Profit / (loss) on disposal of investment property | 0.1 | – | (3.0) | (1.5) |
| Profit after taxation | 6.0 | 3.0 | 8.0 | 4.0 |
| Add back net valuation movement | (1.2) | (0.6) | (5.8) | (2.9) |
| Group's share of joint ventures' profit before valuation movements | 4.8 | 2.4 | 2.2 | 1.1 |
The Group's share of contingent liabilities in the joint ventures is £nil (2022: £nil).
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.
| 2023 £m |
2022 £m |
|
|---|---|---|
| Opening balance | 7.9 | 5.3 |
| Additions to Investment in associates | – | 4.0 |
| Disposals from Investment in associates | – | (2.5) |
| Return of investment in associates* | (2.3) | – |
| Dividends | (0.4) | (2.0) |
| Group's share of profit after taxation excluding valuation movement | 0.1 | 0.2 |
| Net valuation movement | 0.2 | 2.9 |
| Investment in associates | 5.5 | 7.9 |
* 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.
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 | Country of incorporation | 2023 % Holding |
2022 % Holding |
|---|---|---|---|
| NewRiver Retail (Nelson) Limited (Nelson) | UK | – | – |
| NewRiver Retail (Hamilton) Limited (Hamilton) | UK | 10 | 10 |
| NewRiver (Sprucefield) Limited (Sprucefield) | UK | 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:
| 31 March 2023 | 31 March 2022 | ||||
|---|---|---|---|---|---|
| Consolidated balance sheet | Total £m |
Group's share £m |
Total £m |
Group's share £m |
|
| Non-current assets | 99.3 | 9.9 | 97.3 | 9.7 | |
| Current assets | 8.2 | 0.8 | 14.7 | 1.5 | |
| Current liabilities | (16.1) | (1.6) | (17.5) | (1.8) | |
| Liabilities due in more than one year | (67.8) | (6.8) | (62.7) | (6.3) | |
| Net assets | 23.6 | 2.3 | 31.8 | 3.1 | |
| Loans to associates | – | 3.2 | – | 4.8 | |
| Net assets adjusted for loans to associates | 23.6 | 5.5 | 31.8 | 7.9 | |
| 2023 | 2023 | 2022 | 2022 | ||
| Consolidated statement of comprehensive income | Total £m |
Group's share £m |
Total £m |
Group's share £m |
|
| Revenue | 9.9 | 1.0 | 12.6 | 1.2 | |
| Property operating expenses | (2.4) | (0.2) | (2.4) | (0.2) | |
| Net property income | 7.5 | 0.8 | 10.2 | 1.0 | |
| Administration expenses | (0.1) | – | (0.7) | – | |
| Net finance costs | (3.5) | (0.4) | (3.6) | (0.4) | |
| 3.9 | 0.4 | 5.9 | 0.6 | ||
| Net valuation movement | 1.7 | 0.2 | 29.1 | 2.9 | |
| Profit on disposal of investment property | 0.6 | – | 2.7 | 0.3 | |
| Taxation | (3.4) | (0.3) | (7.2) | (0.7) | |
| Profit after taxation | 2.8 | 0.3 | 30.5 | 3.1 | |
| Add back net valuation movement | (1.7) | (0.2) | (29.1) | (2.9) | |
| Group's share of associates' profit before valuation movements | 1.1 | 0.1 | 1.4 | 0.2 |
| 2023 £m |
2022 £m |
|
|---|---|---|
| Trade receivables | 2.6 | 3.7 |
| Restricted monetary assets | 4.8 | 5.6 |
| Service charge receivables* | 1.2 | 1.7 |
| Other receivables | 3.8 | 6.2 |
| Prepayments | 0.7 | 0.7 |
| Accrued income | 1.9 | 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.
| 2023 £m |
2022 £m |
|
|---|---|---|
| Opening loss allowance at 1 April | 5.2 | 9.3 |
| (Decrease) / Increase in loss allowance recognised in the consolidated statement of comprehensive income during | ||
| the year in relation to tenant debtors | (0.2) | 0.3 |
| Disposal of subsidiary | – | (2.5) |
| Loss allowance utilisation | (2.0) | (1.9) |
| Closing loss allowance at 31 March | 3.0 | 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.
| 2023 | 2022 | |
|---|---|---|
| £m | £m | |
| Assets held for sale at 1 April | – | 25.5 |
| Transfer to investment properties | – | (25.5) |
| Assets held for sale at 31 March | – | – |
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.
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.
| 2023 £m |
2022 £m |
|
|---|---|---|
| Trade payables | 2.6 | 3.0 |
| Service charge liabilities* | 9.8 | 9.2 |
| Other payables | 1.8 | 3.5 |
| Accruals | 9.0 | 8.7 |
| Value Added Taxation | 0.3 | 3.4 |
| Rent received in advance | 6.0 | 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).
| Maturity of drawn bank borrowings: | 2023 £m |
2022 £m |
|---|---|---|
| After five years | 300.0 | 300.0 |
| Less unamortised fees / discount | (3.3) | (4.2) |
| 296.7 | 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).
| Unamortised facility fees / |
|||||
|---|---|---|---|---|---|
| Unsecured borrowings: | Maturity date | Facility £m |
Facility drawn £m |
discount £m |
£m |
| Revolving credit facility | August 2024 | 125.0 | – | (0.6) | (0.6) |
| Corporate bond | March 2028 | 300.0 | 300.0 | (2.7) | 297.3 |
| 425.0 | 300.0 | (3.3) | 296.7 |
In the year the Group drew down £nil (31 March 2022: £nil) of the revolving credit facility.
The Group earns rental income by leasing its investment properties to tenants under non-cancellable lease commitments.
The Group holds two types of leases.
The lease liability and associated ROU asset recognised in the consolidated balance sheet are set out below.
| 2023 £m |
2022 £m |
|
|---|---|---|
| Right of use asset (Investment property) | 75.8 | 75.5 |
| Right of use asset (Property, plant and equipment) | 0.9 | 0.2 |
| Current lease liability | 0.4 | 0.7 |
| Non-current lease liability | 76.3 | 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).
| 2023 | 2022 | |
|---|---|---|
| £m | £m | |
| Within one year | 0.4 | 0.7 |
| Between one and two years | 0.8 | 0.7 |
| In the second to fifth year inclusive | 0.5 | 2.1 |
| After five years | 75.0 | 72.2 |
| 76.7 | 75.7 |
Lease commitments payable by the Group are as follows:
| 2023 | 2022 | |
|---|---|---|
| £m | £m | |
| Within one year | 3.0 | 3.2 |
| One to two years | 3.0 | 3.0 |
| Two to five years | 8.9 | 9.0 |
| After five years | 253.6 | 253.8 |
| 268.5 | 269.0 | |
| Effect of discounting | (191.8) | (193.3) |
| Lease liability | 76.7 | 75.7 |
At the balance sheet date the Group had contracted with tenants for the following future minimum lease payments on its investment properties:
| 2023 £m |
2022 £m |
|
|---|---|---|
| Within one year | 45.6 | 50.0 |
| Between one and two years | 39.5 | 42.7 |
| In the second to fifth year inclusive | 79.7 | 89.4 |
| After five years | 123.3 | 133.7 |
| 288.1 | 315.8 |
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).
| Ordinary shares | 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) |
|---|---|---|---|---|---|
| 1 April 2021 | 309.0 | 2.7 | 306.3 | ||
| Scrip dividends issued | 0.5 | 0.82 | 309.5 | 2.7 | 306.8 |
| Shares issued under employee share schemes | 0.6 | – | 309.5 | 2.1 | 307.4 |
| Scrip dividends issued | 0.8 | 0.86 | 310.3 | 2.1 | 308.2 |
| 31 March 2022 | 310.3 | 2.1 | 308.2 | ||
| Scrip dividends issued | 1.0 | 0.86 | 311.3 | 2.1 | 309.2 |
| Shares issued under employee share schemes | 0.6 | – | 311.3 | 1.5 | 309.8 |
| Scrip dividends issued | 0.6 | 0.78 | 311.9 | 1.5 | 310.4 |
| Shares issued under employee share schemes | 0.1 | – | 311.9 | 1.4 | 310.5 |
| 31 March 2023 | 311.9 | 1.4 | 310.5 |
All shares issued and authorised are fully paid up.
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 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.
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.
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).
The Group has two share schemes for employees:
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 |
Granted | Number Exercised |
Lapsed | Outstanding at end of year |
Number exercisable |
Average remaining life (years) |
|---|---|---|---|---|---|---|---|---|
| 2020 | – | 1,914,471 | – | – | (1,914,471) | – | – | – |
| 2021 | – | 2,815,270 | 196,539 | (257,357) | (40,588) | 2,713,864 | – | 0.4 |
| 2022 | – | 2,940,580 | 231,352 | – | (89,370) | 3,082,562 | – | 1.4 |
| 2023 | – | – | 2,888,265 | – | (133,165) | 2,755,100 | – | 2.3 |
| 7,670,321 | 3,316,156 | (257,357) | (2,177,594) | 8,551,526 | – |
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 | – | 53,889 | – | (8,921) | – | 44,968 | – | – |
| 2019 | – | 124,277 | – | (7,526) | – | 116,751 | – | – |
| 2020 | – | 118,050 | – | (35,805) | – | 82,245 | – | – |
| 2021 | – | 366,702 | – | (340,659) | (10,152) | 15,891 | – | – |
| 2022 | – | 313,619 | 24,499 | – | – | 338,118 | – | 0.5 |
| 2023 | – | – | 666,333 | – | (25,870) | 640,463 | – | 1.3 |
| 976,537 | 690,832 | (392,911) | (36,022) | 1,238,436 | – |
The fair value of the share options has been calculated based on a Monte Carlo Pricing Model using the following inputs:
| 2023 | 2022 | |
|---|---|---|
| Share price | 0.87 | 0.78 |
| Exercise price | Nil | Nil |
| Expected volatility | 43% | 25% |
| Risk free rate | 1.675% | 0.252% |
| Expected dividends* | 0% | 0% |
* based on quoted property sector average.
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.
| 2023 £m |
2022 £m |
|
|---|---|---|
| Financial assets | ||
| Financial assets at amortised cost | ||
| Trade and other receivables | 13.4 | 15.9 |
| Cash and cash equivalents | 108.6 | 82.8 |
| Total financial assets and maximum exposure to credit risk | 122.0 | 98.7 |
| Financial liabilities | ||
| At amortised cost | ||
| Borrowings | (296.7) | (295.8) |
| Lease liabilities | (76.7) | (75.7) |
| Payables and accruals | (20.0) | (22.2) |
| (393.4) | (393.7) | |
| (271.4) | (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.
The Group is not subject to any foreign currency risk as nearly all transactions are in Pounds Sterling.
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.
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 Gross amount £m |
2023 Loss allowance £m |
2023 % applied |
2023 Carrying amount £m |
2022 Gross amount £m |
2022 Loss allowance £m |
2022 % applied |
2022 Carrying amount £m |
|
|---|---|---|---|---|---|---|---|---|
| 0-30 days | 2.4 | 0.6 | 25% | 1.8 | 3.3 | 0.8 | 24% | 2.5 |
| 30-60 days | 0.1 | 0.1 | 100% | – | 0.4 | 0.1 | 25% | 0.3 |
| 60-90 days | 0.3 | 0.1 | 33% | 0.2 | 0.1 | 0.1 | 100% | – |
| 90-120 days | 0.3 | 0.1 | 33% | 0.2 | 0.5 | 0.2 | 40% | 0.3 |
| Over 120 days | 2.5 | 2.1 | 84% | 0.4 | 4.6 | 4.0 | 87% | 0.6 |
| 5.6 | 3.0 | 2.6 | 8.9 | 5.2 | 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:
| 2023 £m |
2022 £m |
|
|---|---|---|
| Risk level | ||
| Very high | 2.5 | 4.6 |
| High | 0.3 | 0.5 |
| Medium | 0.4 | 0.5 |
| Low | 2.4 | 3.3 |
| Gross carrying amount before loss allowance | 5.6 | 8.9 |
| Loss allowance | (3.0) | (5.2) |
| Carrying amount | 2.6 | 3.7 |
| 2023 £m |
2022 £m |
|
|---|---|---|
| Opening loss allowance at 1 April | 5.2 | 9.3 |
| (Release) / increase in loss allowance recognised in the consolidated statement of comprehensive income during the year in relation to tenant debtors |
(0.2) | 0.3 |
| Disposal of subsidiary | – | (2.5) |
| Loss allowance utilisation | (2.0) | (1.9) |
| Closing loss allowance at 31 March | 3.0 | 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.
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 | Less than one year |
One to two years |
Two to five years |
More than five years |
Total |
|---|---|---|---|---|---|
| Borrowings | – | – | (300.0) | – | (300.0) |
| Interest on borrowings | (10.5) | (10.5) | (30.7) | – | (51.7) |
| Lease liabilities | (3.0) | (3.0) | (8.9) | (253.6) | (268.5) |
| Payables and accruals | (20.0) | – | – | – | (20.0) |
| (33.5) | (13.5) | (339.6) | (253.6) | (640.2) | |
| 2022 £m | |||||
| Borrowings | – | – | – | (300.0) | (300.0) |
| Interest on borrowings | (10.5) | (10.5) | (31.5) | (9.7) | (62.2) |
| Lease liabilities | (3.2) | (3.0) | (9.0) | (253.8) | (269.0) |
| Payables and accruals | (22.2) | – | – | – | (22.2) |
| (35.9) | (13.5) | (40.5) | (563.5) | (653.4) |
| Reconciliation of movement in the Group's share of net debt in the year | 2023 £m |
2022 £m |
|---|---|---|
| Group's share of net debt at beginning of year | 221.5 | 493.3 |
| Cash flow | ||
| Net (increase) / decrease in cash and cash equivalents | (25.8) | 67.7 |
| Bank loans repaid | – | (335.0) |
| Change in bank loan fees to be amortised | 0.9 | 1.1 |
| Group's share of joint ventures' and associates' cash flow | ||
| Net decrease / (increase) in cash and cash equivalents | 2.7 | (1.6) |
| Bank loans repaid | – | (4.0) |
| New bank loans | 1.9 | – |
| Change in bank loan fees to be amortised | 0.1 | – |
| Group's share of net debt | 201.3 | 221.5 |
| Being: | ||
| Group borrowings | 296.7 | 295.8 |
| Group's share of joint ventures' and associates' borrowings | 15.9 | 13.9 |
| Group cash | (108.6) | (82.8) |
| Group's share of joint venture and associate cash | (2.7) | (5.4) |
| Group's share of net debt | 201.3 | 221.5 |
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 | 2023 £m |
2022 £m |
|---|---|---|
| Borrowings | 296.7 | 295.8 |
| Cash and cash equivalents | (108.6) | (82.8) |
| Net debt | 188.1 | 213.0 |
| Equity attributable to equity holders of the parent | 378.6 | 414.1 |
| Net debt to equity ratio ('Balance sheet gearing') | 50% | 51% |
| Share of joint ventures' and associates' borrowings | 15.9 | 13.9 |
| Share of joint ventures' and associates' cash and cash equivalents | (2.7) | (5.4) |
| Group's share of net debt | 201.3 | 221.5 |
| Carrying value of investment property | 551.5 | 609.1 |
| Share of joint ventures' and associates carrying value of investment properties | 42.1 | 40.3 |
| Group's share of carrying value of investment properties | 593.6 | 649.4 |
| Net debt to property value ratio ('Loan to value') | 33.9% | 34.1% |
| Reconciliation of financial liabilities | Lease liabilities £m |
Borrowings £m |
Derivatives £m |
Total £m |
|---|---|---|---|---|
| As at 1 April 2022 | 75.7 | 295.8 | – | 371.5 |
| (Decrease)/Increase through financing cash flows | ||||
| Head office lease | 1.1 | – | – | 1.1 |
| Repayment of principal portion of lease liability | (0.4) | – | – | (0.4) |
| Lease modification | 0.3 | – | – | 0.3 |
| Loan amortisation | – | 0.9 | – | 0.9 |
| As at 31 March 2023 | 76.7 | 296.7 | – | 373.4 |
| Reconciliation of financial liabilities | Lease liabilities £m |
Borrowings £m |
Derivatives £m |
Total £m |
|---|---|---|---|---|
| As at 1 April 2021 | 85.6 | 629.7 | (2.6) | 712.7 |
| (Decrease)/Increase through financing cash flows | ||||
| Repayment of bank loans | – | (335.0) | – | (335.0) |
| Repayment of principal portion of lease liability | (0.7) | – | – | (0.7) |
| Other changes | ||||
| Lease modification | (5.2) | – | – | (5.2) |
| Disposals | (1.7) | – | – | (1.7) |
| Disposal of subsidiary | (2.3) | – | – | (2.3) |
| Termination of derivative | – | – | 2.6 | 2.6 |
| Change in capitalised loan fees to be amortised | – | 1.1 | – | 1.1 |
| As at 31 March 2022 | 75.7 | 295.8 | – | 371.5 |
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.
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:
| 2023 £m |
2022 £m |
|
|---|---|---|
| NewRiver Retail (Nelson) Limited | – | 0.1 |
| NewRiver Retail (Napier) Limited | 0.2 | 0.2 |
| NewRiver Retail (Hamilton) Limited | 0.2 | 0.2 |
| NewRiver (Sprucefield) Limited | 0.1 | 0.2 |
As at 31 March 2023, an amount of £0.3 million (2022: £0.2 million) was due to the Group relating to management fees.
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).
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.
| 2023 £m |
2022 £m |
|
|---|---|---|
| Short-term employee benefits | 3.1 | 3.0 |
| Other benefits | 0.1 | 0.1 |
| 3.2 | 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.
There were no significant events occurring after the reporting period, but before the financial statements were authorised for issue.
As at 31 March 2023
| Notes | 2023 £m |
2022 £m |
|
|---|---|---|---|
| Non-current assets | |||
| Investment in subsidiaries | B | 323.9 | 329.9 |
| Amounts owed from subsidiary undertakings | D | 213.7 | 225.9 |
| Total non-current assets | 537.6 | 555.8 | |
| Current assets | |||
| Amounts owed from subsidiary undertakings | D | 196.5 | 238.0 |
| Other receivables | 0.7 | 1.1 | |
| Cash and cash equivalents | 84.7 | 0.9 | |
| Total current assets | 281.9 | 240.0 | |
| Total assets | 819.5 | 795.8 | |
| Equity and liabilities | |||
| Current liabilities | |||
| Trade creditors | – | 0.3 | |
| Accruals | 2.3 | 2.3 | |
| Amounts owed to subsidiary undertakings | 154.9 | 101.8 | |
| Total current liabilities | E | 157.2 | 104.4 |
| Non-current liabilities | |||
| Borrowings | F | 296.7 | 295.8 |
| Total non-current liabilities | 296.7 | 295.8 | |
| Net assets | 365.6 | 395.6 | |
| Equity | |||
| Share capital | 3.1 | 3.1 | |
| Share premium | 2.4 | 1.1 | |
| Merger reserve | 27.6 | 33.6 | |
| Retained earnings | 332.5 | 357.8 | |
| Total equity | 365.6 | 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 Will Hobman
Chief Financial Officer
Registered number: 10221027
For the year ended 31 March 2023
| Notes | Share capital £m |
Share premium £m |
Merger reserve £m |
Retained earnings £m |
Total £m |
|
|---|---|---|---|---|---|---|
| As at 1 April 2021 | 3.1 | 227.4 | 24.2 | 197.8 | 452.5 | |
| Loss after taxation | – | – | – | (36.3) | (36.3) | |
| Transfer to merger reserve | – | – | 9.4 | (9.4) | – | |
| Equity issue | – | 1.1 | – | – | 1.1 | |
| Transfer of share premium | G | – | (227.4) | – | 227.4 | – |
| Dividends paid | – | – | – | (21.7) | (21.7) | |
| As at 31 March 2022 | 3.1 | 1.1 | 33.6 | 357.8 | 395.6 | |
| Loss after taxation | – | – | – | (10.4) | (10.4) | |
| Transfer from merger reserve | – | – | (6.0) | 6.0 | – | |
| Equity issue | – | 1.3 | – | – | 1.3 | |
| Dividends paid | – | – | – | (20.9) | (20.9) | |
| As at 31 March 2023 | 3.1 | 2.4 | 27.6 | 332.5 | 365.6 |
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.
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.
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.
The Company has taken advantage of all disclosure exemptions allowed by FRS 101. These financial statements do not include:
The above disclosure exemptions have been adopted because equivalent disclosures are included in the consolidated Group accounts into which the Company is consolidated.
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.
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.
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.
Shares are classified as equity when there is no obligation to transfer cash or other assets.
Dividends to the Company's shareholders are recognised when they become legally payable. In the case of interim dividends, this is when paid. In the case of final dividends, this is when approved by equity holders at a general meeting. Dividend information is provided in note 13 to the consolidated financial statements.
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.
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.
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).
All subsidiaries are held indirectly except the companies marked* in the below listing.
| Name | Country of incorporation |
Activity | Proportion of ownership interest |
Class of share |
|---|---|---|---|---|
| C-store REIT Limited | UK | Dormant company | 100% | Ordinary Shares |
| Convenience Store REIT Limited | UK | Dormant company | 100% | Ordinary Shares |
| NewRiver Capital Limited* | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Burgess Hill) Limited | UK | Dormant company | 100% | Ordinary Shares |
| NewRiver (Darnall) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Finance Company Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver REIT (UK) Limited | UK | Asset management | 100% | Ordinary Shares |
| NewRiver Leisure Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Bexleyheath) Holdings Limited | UK | Group holding company | 100% | Ordinary Shares |
| NewRiver Retail (Bexleyheath) Limited | Jersey | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Broadway Square) UK Limited | UK | Dormant | 100% | Ordinary Shares |
| NewRiver Retail (Bexleyheath) UK Limited | UK | Dormant | 100% | Ordinary Shares |
| NewRiver Retail (Boscombe No. 1) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Broadway Square) Limited | Jersey | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Cardiff) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Carmarthen) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Darlington) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Grays S.a.r.l* | Luxembourg | Real estate investments | 100% | Ordinary Shares |
| NewRiver (Grays) UK Limited* | UK | Dormant | 100% | Ordinary Shares |
| NewRiver Retail (GP3) Limited | UK | General partner | 100% | Ordinary Shares |
| NewRiver Retail (Leylands Road) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Market Deeping No. 1) Limited | Guernsey | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Morecambe) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Newcastle No. 1) Limited | Guernsey | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Nominee No.3) Limited | UK | Dormant company | 100% | Ordinary Shares |
| NewRiver Retail (Paisley) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Penge) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Portfolio No. 1) Limited | Guernsey | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Portfolio No. 2) Limited | Guernsey | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Portfolio No. 3) Limited | UK | Holding company | 100% | Ordinary Shares |
| NewRiver Retail (Portfolio No. 3) Limited Partnership | UK | Real estate investments | 100% | Partnership |
| NewRiver Retail (Portfolio No. 5) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Portfolio No. 6) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Portfolio No. 4) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Portfolio No. 8) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Ramsay Development) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Ramsay Investment) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Skegness) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Wakefield) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Warminster) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Wisbech) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Witham) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Wrexham No.1) Limited | Guernsey | Real estate investments | 100% | Ordinary Shares |
| NewRiver Retail (Portfolio No. 10) Limited | UK | Real estate investments | 100% | Ordinary Shares |
| Name | Country of incorporation Activity | Proportion of ownership interest |
Class of share | |
|---|---|---|---|---|
| NewRiver Retail Holdings Limited | Guernsey | Group holding company | 100% | Ordinary Shares |
| NewRiver Retail Holdings No. 1 Limited | Guernsey | Group holding company | 100% | Ordinary Shares |
| NewRiver Retail Holdings No. 2 Limited | Guernsey | Group holding company | 100% | Ordinary Shares |
| NewRiver Retail Holdings No. 3 Limited | Guernsey | Group holding company | 100% | Ordinary Shares |
| NewRiver Retail Holdings No. 5 Limited | Guernsey | Group holding company | 100% | Ordinary Shares |
| NewRiver Retail Holdings No. 6 Limited | Guernsey | Group holding company | 100% | Ordinary Shares |
| NewRiver Retail Limited* | Guernsey | Group holding company | 100% | Ordinary Shares |
| NewRiver Retail Limited | UK | Real estate investments | 100% | Ordinary units |
| NewRiver Retail Property Unit Trust | Jersey | Real estate investments | 100% | Ordinary units |
| NewRiver Retail Property Unit Trust No. 2 | Jersey | Real estate investments | 100% | Ordinary units |
| NewRiver Retail Property Unit Trust No. 3 | Jersey | Real estate investments | 100% | Ordinary units |
| NewRiver Retail Property Unit Trust No. 5 | Jersey | Real estate investments | 100% | Ordinary units |
| NewRiver Retail Property Unit Trust No. 6 | Jersey | Real estate investments | 100% | Ordinary units |
| NewRiver Retail Property Unit Trust No. 7 | Jersey | Real estate investments | 100% | Ordinary units |
| Shopping Centre REIT Limited | UK | Dormant company | 100% | 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.
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:
| 2023 | 2022 | |
|---|---|---|
| £m | £m | |
| Opening balance | 329.9 | 570.3 |
| (Impairment) / Reversal in subsidiaries | (6.0) | 9.4 |
| Disposal of subsidiaries | – | (249.2) |
| Other movement | – | (0.6) |
| Investment in subsidiaries | 323.9 | 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.
The auditors' remuneration in respect of the Company is disclosed in note 6 of the consolidated financial statements.
| 2023 | 2022 | |
|---|---|---|
| £m | £m | |
| Non-current – Amounts owed from subsidiary undertakings * | 213.7 | 225.9 |
| Current – Amounts owed from subsidiary undertakings | 196.5 | 238.0 |
| 410.2 | 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.
| 2023 £m |
2022 £m |
|
|---|---|---|
| Trade creditors | – | 0.3 |
| Accruals | 2.3 | 2.3 |
| Amounts owed to subsidiary undertakings | 154.9 | 101.8 |
| 157.2 | 104.4 |
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 for details.
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.
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 | N/A | 'Financial Policies' section of the "Finance review" |
| Admin cost ratio | N/A | Note 6 of the Financial Statements |
| Interest cover | N/A | Glossary |
| EPRA EPS | IFRS Basic EPS | Note 12 of the Financial Statements |
| EPRA NIY | N/A | 'EPRA Performance Measures' section of this document |
| EPRA 'topped-up' NIY | N/A | 'EPRA Performance Measures' section of this document |
| EPRA Vacancy Rate | N/A | 'EPRA Performance Measures' section of this document |
| Total Accounting Return | N/A | Glossary |
| Weighted average cost of debt | N/A | 'Financial Policies' section of the "Finance review" |
| Weighted average debt maturity | N/A | 'Financial Policies' section of the "Finance review" |
| Loan to Value | N/A | Note 25 of the Financial Statements |
The information in this section is unaudited and does not form part of the consolidated primary statements of the company or the notes thereto.
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
| FY23 | FY22 | |
|---|---|---|
| EPRA Earnings Per Share (EPS) | 7.9p | 8.5p |
| EPRA Cost Ratio (including direct vacancy costs) | 38.9% | 41.1% |
| EPRA Cost Ratio (excluding direct vacancy costs) | 34.6% | 38.7% |
| March 2023 | March 2022 | |
| EPRA NRV per share | 134p | 148p |
| EPRA NTA per share | 121p | 134p |
|---|---|---|
| EPRA NDV per share | 135p | 139p |
| EPRA LTV | 37.0% | 37.2% |
| EPRA NIY | 7.6% | 7.5% |
| EPRA 'topped-up' NIY | 8.0% | 8.0% |
| EPRA Vacancy Rate | 3.4% | 4.4% |
Earnings from operational activities
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
| FY23 (£m) |
FY22 (£m) |
|
|---|---|---|
| Earnings per IFRS income statement | (16.8) | (26.6) |
| 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 |
3.8 | 43.1 |
| Changes in fair value of financial instruments and associated close-out costs | – | (0.1) |
| Acquisition costs on share deals and non-controlling joint venture interests | – | – |
| Deferred tax in respect of EPRA adjustments | – | 1.9 |
| Adjustments to above in respect of joint ventures (unless already included under proportional consolidation) | (0.8) | (4.5) |
| EPRA Earnings | 24.4 | 26.1 |
| Basic number of shares | 309.7m | 307.2m |
| EPRA Earnings per Share (EPS) | 7.9p | 8.5p |
| EPRA Earnings – continuing operations | 24.4 | 18.9 |
| EPRA Earnings per Share (EPS) – continuing operations | 7.9p | 6.2p |
Reconciliation of EPRA Earnings to Underlying Funds From Operations (UFFO)
| FY23 (£m) |
FY22 (£m) |
|
|---|---|---|
| EPRA Earnings | 24.4 | 26.1 |
| Share-based payment charge | 1.1 | 0.9 |
| Depreciation on property | – | 0.4 |
| Forward-looking element of IFRS 9 | (0.2) | (0.2) |
| Head office relocation costs | 0.5 | – |
| Restructuring and abortive costs | – | 1.1 |
| Underlying Funds From Operations (UFFO) | 25.8 | 28.3 |
| Basic number of shares | 309.7m | 307.2m |
| UFFO per share | 8.3p | 9.2p |
| Underlying Funds From Operations (UFFO) – continuing operations | 25.8 | 20.5 |
| UFFO per share – continuing operations | 8.3p | 6.7p |
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.
Makes adjustments to IFRS NAV to provide stakeholders with the most relevant information on the fair value of the assets and liabilities within a true real estate investment company with a long-term investment strategy.
| 31 March 2023 | EPRA NRV (£m) |
EPRA NTA (£m) |
EPRA NDV (£m) |
|---|---|---|---|
| IFRS Equity attributable to shareholders | 378.6 | 378.6 | 378.6 |
| Fair value of financial instruments | (0.6) | (0.6) | – |
| Deferred tax in relation to fair value gains of Investment Property | 0.9 | 0.9 | – |
| Fair value of debt | – | – | 43.2 |
| Purchasers' costs | 40.2 | – | – |
| EPRA NRV / NTA / NDV | 419.1 | 378.9 | 421.8 |
| Fully diluted number of shares | 312.7m | 312.7m | 312.7m |
| EPRA NRV / NTA / NDV per share | 134p | 121p | 135p |
| 31 March 2022 | EPRA NRV (£m) |
EPRA NTA (£m) |
EPRA NDV (£m) |
| IFRS Equity attributable to shareholders | 414.1 | 414.1 | 414.1 |
| Fair value of financial instruments | (0.3) | (0.3) | – |
| Deferred tax in relation to fair value gains of Investment Property | 0.6 | 0.6 | – |
| Fair value of debt | – | – | 14.1 |
| Purchasers' costs | 43.8 | – | – |
| EPRA NRV / NTA / NDV | 458.2 | 414.4 | 428.2 |
| Fully diluted number of shares | 309.0m | 309.0m | 309.0m |
| EPRA NRV / NTA / NDV per share | 148p | 134p | 139p |
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.
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 | Group (£m) |
Share of Joint Ventures (£m) |
Share of Associates (£m) |
Total (£m) |
|---|---|---|---|---|
| Borrowings from financial institutions | – | (12.0) | (4.0) | (16.0) |
| Corporate bond | (300.0) | – | – | (300.0) |
| Net payables | (14.5) | (0.2) | (0.3) | (15.0) |
| Cash and cash equivalents | 108.6 | 2.1 | 0.6 | 111.3 |
| Net Debt (A) | (205.9) | (10.1) | (3.7) | (219.7) |
| Investment property at fair value | 551.5 | 32.2 | 9.9 | 593.6 |
| Total Property Value (B) | 551.5 | 32.2 | 9.9 | 593.6 |
| LTV (A/B) | 37.3% | 37.0% |
| 31 March 2022 | Group (£m) |
Share of Joint Ventures (£m) |
Share of Associates (£m) |
Total (£m) |
|---|---|---|---|---|
| Borrowings from financial institutions | – | (12.0) | (2.0) | (14.0) |
| Corporate bond | (300.0) | – | – | (300.0) |
| Net payables | (14.6) | (0.6) | (0.4) | (15.6) |
| Cash and cash equivalents | 82.8 | 4.0 | 1.4 | 88.2 |
| Net Debt (A) | (231.8) | (8.6) | (1.0) | (241.4) |
| Investment property at fair value | 609.1 | 30.6 | 9.7 | 649.4 |
| Total Property Value (B) | 609.1 | 30.6 | 9.7 | 649.4 |
| LTV (A/B) | 38.1% | 37.2% |
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).
A comparable measure for portfolio valuations to assist investors in comparing portfolios.
| March 2023 (£m) |
March 2022 (£m) |
|
|---|---|---|
| Properties at valuation – wholly owned | 551.5 | 609.1 |
| Properties at valuation – share of Joint Ventures & Associates | 42.1 | 40.3 |
| Trading property (including share of Joint Ventures & Associates) | – | – |
| Less: Developments | (10.2) | (22.3) |
| Completed property portfolio | 583.4 | 627.1 |
| Allowance for estimated purchasers' costs and capital expenditure | 44.9 | 40.4 |
| Grossed up completed property portfolio valuation B |
628.3 | 667.5 |
| Annualised cash passing rental income | 59.6 | 62.9 |
| Property outgoings | (11.9) | (13.1) |
| Annualised net rents A |
47.7 | 49.8 |
| Add: Notional rent expiration of rent free periods or other lease incentives | 2.4 | 3.3 |
| Topped-up net annualised rent C |
50.1 | 53.1 |
| EPRA NIY A/B |
7.6% | 7.5% |
| EPRA 'topped-up' NIY C/B |
8.0% | 8.0% |
Estimated Market Rental Value (ERV) of vacant space divided by ERV of the whole portfolio, excluding pub and development assets.
A 'pure' (%) measure of investment property space that is vacant, based on ERV.
| March 2023 (£m) |
March 2022 (£m) |
|
|---|---|---|
| Estimated Rental Value of vacant retail space A |
1.8 | 2.6 |
| Estimated Rental Value of the retail portfolio B |
53.0 | 58.6 |
| EPRA Vacancy Rate A/B |
3.4% | 4.4% |
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.
| FY23 (£m) |
FY22 (£m) |
|
|---|---|---|
| Administrative/operating expenses per IFRS | 19.2 | 33.4 |
| Net service charge costs/fees | 5.6 | 5.6 |
| Management fees less actual/estimated profit element | (1.5) | (1.9) |
| Other operating income/recharges intended to cover overhead expenses less any related profits | – | (4.8) |
| Share of Joint Ventures and associates expenses (net of other income) | 0.4 | 0.4 |
| Exclude (if part of the above): | ||
| Investment property depreciation | – | – |
| Ground rent costs | 0.6 | 0.7 |
| Service charge costs recovered through rents but not separately invoiced | – | – |
| EPRA Costs (including direct vacancy costs) A |
24.3 | 33.4 |
| Direct vacancy costs | (2.7) | (2.0) |
| EPRA Costs (excluding direct vacancy costs) B |
21.6 | 31.4 |
| Gross Rental Income less ground rents – per IFRS | 58.8 | 77.3 |
| Less: service fee and service charge costs components of Gross Rental Income (if relevant) | – | – |
| Add: share of Joint Ventures and associates (Gross Rental Income less ground rents) | 3.6 | 3.9 |
| Gross Rental Income C |
62.4 | 81.2 |
| EPRA Cost Ratio (including direct vacancy costs) A/C |
38.9% | 41.1% |
| EPRA Cost Ratio (excluding direct vacancy costs) B/C |
34.6% | 38.7% |
| EPRA Cost Ratio (including direct vacancy costs) – continuing operations | 38.9% | 36.8% |
| EPRA Cost Ratio (excluding direct vacancy costs) – continuing operations | 34.6% | 33.8% |
Reconciliation of EPRA Costs (including direct vacancy costs) to Net Administrative expenses per IFRS
| FY23 (£m) |
FY22 (£m) |
||
|---|---|---|---|
| EPRA Costs (including direct vacancy costs) | 24.3 | 33.4 | |
| Exclude | |||
| Ground rent costs | (0.6) | (0.7) | |
| Share of Joint Ventures and associates property expenses (net of other income) | (0.4) | (0.2) | |
| Other operating income/recharges intended to cover overhead expenses less any related profits | – | 4.8 | |
| Net service charge costs/fees | (5.6) | (5.6) | |
| Operating expenses (excluding service charge cost) | (6.6) | (16.2) | |
| Tenant incentives (included within income) | (0.2) | (0.2) | |
| Letting & legal costs (included within income) | (1.3) | (1.2) | |
| Group's share of net administrative expenses as per IFRS | D | 9.6 | 14.1 |
| EPRA Gross Rental Income | C | 62.4 | 81.2 |
| Ground rent costs | (0.6) | (0.7) | |
| Expected credit (loss) / reversal | (0.2) | 0.3 | |
| Other income | 1.4 | 2.5 | |
| Gross Rental Income | E | 63.0 | 83.3 |
| Administrative cost ratio as per IFRS | D/E | 15.2% | 16.9% |
| Administrative cost ratio as per IFRS – continuing operations | 15.2% | 16.0% |
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.
Balance sheet gearing: Is the balance sheet net debt divided by IFRS net assets.
BRAVO: Is BRAVO Strategies III LLC, with which NewRiver formed a capital partnership in May 2019 to acquire and manage a portfolio of retail assets in the UK.
Book value: Is the amount at which assets and liabilities are reported in the financial statements.
Cost of debt: Is the 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.
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.
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.
Income return: Is the income derived from a property as a percentage of the property value.
Interest cover: Interest cover is tested at corporate level and is calculated by comparing actual net property income received versus cash interest payable on a 12 month look-back basis.
Joint venture: Is an entity in which the Group holds an interest on a long-term basis and is jointly controlled by the Group and one or more ventures under a contractual arrangement whereby decisions on financial and operating policies essential to the operation, performance and financial position of the venture require each joint venture partner's consent.
Leasing events: Long-term and temporary new lettings, lease renewals and lease variations within investment and joint venture properties.
Like-for-like ERV growth: Is the change in ERV over a period on the standing investment properties expressed as a percentage of the ERV at the start of the period.
Like-for-like footfall: Is the movement in footfall against the same period in the prior period, on properties owned throughout both comparable periods, aggregated at 100% share.
Like-for-like net income: Is the change in net income on properties owned throughout the current and previous periods under review. This growth rate includes revenue recognition and lease accounting adjustments but excludes properties held for development in either period, properties with guaranteed rent reviews 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.
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 presold at least 70% by area.
Tenant (or lease) incentives: Are any incentives offered to occupiers to enter into a lease. Typically the incentive will be an initial rent-free period, or a cash contribution to fit-out or similar costs. Under accounting rules, the value of lease incentives given to tenants is amortised through the Income Statement on a straight-line basis to the lease expiry.
Total Accounting Return (TAR): Is the increase or decrease in EPRA NTA per share plus dividends paid in the period, expressed as a percentage of EPRA NTA per share at the beginning of the period.
Total Property Return (TPR): Is calculated as the change in capital value, less any capital expenditure incurred, plus net income, expressed as a percentage of capital employed over the period, as calculated by MSCI Real Estate (formerly IPD). Total property returns are calculated monthly and indexed to provide a return over the relevant period.
Topped-Up Net Initial Yield: Net initial yield adjusted to include notional rent in respect of let properties which are subject to a rent free period at the valuation date.
Underlying Funds From Operations (UFFO): is a measure of 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.
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
Ropemaker Place, Level 12 25 Ropemaker Street London EC2Y 9LY
Jefferies International Limited
Vinters Place 68 Upper Thames Street London EC4V 3BL
Cassini House 57 St James's Street London SW1A 1LD
5 Clifford Street London W1S 2LG
1 Embankment Place London WC2N 6RH
Cannon Place 78 Cannon Street London EC4N 6AF
55 Baker Street London W1U 7EU
10th floor Central Square Wellington Street Leeds LS1 4DL
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NewRiver REIT plc 89 Whitfield Street London W1T 4DE Tel: +44(0) 20 3328 5800
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