Final Results

RNS Number : 6026N

NewRiver Retail Limited

15 June 2010

 



NewRiver Retail Limited ('NewRiver' or 'the Company')

Final Results (audited) for the period ended 31 March 2010

NewRiver Retail Limited, the specialist value-creating retail property investment and asset management company, is pleased to announce its financial results for the seven month period from 1 September 2009 to 31 March 2010*.

Financial highlights

•     Successful admission of the Company's shares to trading on AIM and listing on the CISX with initial capital fund raising of £25 million

•     Subsequent post balance sheet fund raising of £10.5 million to accelerate growth

•     Gross assets under management of approximately £68 million

•     Net asset valuation of £26 million, reflecting a net asset valuation per share of £2.61

•     Annualised recurring asset management fee income in excess of £0.3 million

•     Profit before tax of £2.2 million - reflecting increased valuations

Operational highlights

•     Significant UK-wide acquisition programme identified and executed through purchases of 11 assets on balance sheet and joint venture initiatives

•     Average purchase yield of c9% and average debt cost in the period of <4%

•     Formation of £250 million co-investment joint venture vehicle with Morgan Stanley Real Estate Investing

•     Investment management capabilities strengthened through the recruitment of additional senior commercial property professionals

•     Strong pipeline of identified investment opportunities

•     Market opportunities favour experienced retail sector focused specialist operators

* The accounts are inclusive from the period of incorporation in Guernsey on 4 June 2009 to 31 March 2010. The Company commenced trading on 1 September 2009.

David Lockhart, Non-Executive Director of NewRiver Retail Limited and Chief Executive of NewRiver Capital Limited said:

"Since inception, we have made strong progress with key objectives met and a number of significant milestones passed. We have strengthened our core management team, completed two acquisitions for our own balance sheet and formed a joint venture with Morgan Stanley Real Estate Investing to facilitate the acquisition of a £49 million portfolio.

"Market conditions are still highly favourable for well capitalised opportunistic investors able to execute focused business plans through careful stock selection, implementation of value creating strategies and well timed exit sales.  Our previous experience gives us confidence that we can realise our ambition of becoming one of the leading UK sector focused platforms in the retail real estate sector."

For further information:

NewRiver Retail Limited

Serena Tremlett                                                                      Tel: [phone]

NewRiver Capital Limited

David Lockhart                                                                        Tel: [phone]

Cenkos Securities

Ian Soanes / Max Hartley                                                        Tel: [phone]

Pelham Bell Pottinger

David Rydell / Rosanne Perry                                                Tel: [phone]

Chairman's Statement

I am delighted to present our first set of financial results for the seven months to 31 March 2010. The period commenced on 1 September 2009 with the admission of NewRiver Retail Limited ('NewRiver') shares to trading on AIM and listing on CISX, the Channel Islands Stock Exchange.

NewRiver has been established as a specialist real estate investor and asset manager to take advantage of opportunities in the next cycle of the UK retail property sector. We create value through active and entrepreneurial asset management and risk-controlled development, utilising both our own balance sheet and co-investment joint venture structures. NewRiver is advised on property investment and management matters by NewRiver Capital Limited, our wholly owned subsidiary operated by a highly experienced and well regarded management team led by David Lockhart.

Commercial property has become a global asset class and the Board believes that as the economy moves into the next growth cycle, investors will increasingly seek to identify 'best of class' sector focused asset managers. NewRiver's investment platform concentrates solely on the UK retail property sector, with particular emphasis on the food and value sub-sectors. NewRiver has capitalised on the significant and rapid falls in capital and rental values that occurred during the recent downturn and continues to identify opportunities where the investment managers' opportunistic and entrepreneurial asset management and development skills can create added value and generate returns for shareholders.

We have been very active since inception, acquiring eleven assets (including the joint venture assets) and pursuing a greater number through our deal flow pipeline. Importantly, in March 2010, we entered into a £250 million joint venture with Morgan Stanley Real Estate Investing, one of the largest global property investment groups. The joint venture, NewRiver Retail Investments, has already made its first significant acquisition, a UK wide portfolio of assets for £49 million. The Board is highly optimistic regarding the potential of this important joint venture and the opportunity it presents to acquire significantly larger projects.

The Company's strong start is reflected in its positive financial performance for the period. Following a valuation uplift and income generated from assets, pre-tax profits of £2.2 million have been generated and the Net Asset Value per share at the period-end stands at 261p - reflecting a premium since the shares were originally admitted to AIM. 

The Board is committed to a progressive dividend policy which it intends to implement as soon as possible.

NewRiver raised initial capital of £25 million at Admission and stated its intention to return to investors for future capital to accelerate the growth of the business. In May 2010, shortly after the period end, we successfully raised a further £10.5 million to capitalise the joint venture and further strengthen the balance sheet.

A number of key objectives have been met since NewRiver's creation in September 2009. We aim to build on the considerable momentum already achieved and the start to our new financial year has been encouraging with an upswing in market sentiment as we continue to find attractive opportunities. The Board looks forward to the future with confidence.

Paul Roy

Chairman

14 June 2010

Investment Manager's Report

Chief Executive's Review

The investment and asset management operations of NewRiver Retail Limited ('NewRiver') are undertaken by its wholly owned subsidiary, NewRiver Capital Limited. NewRiver Capital is run by a highly talented team with more than 85 years combined experience and I am pleased to present its first report.

Since inception, we have made strong progress with key objectives met and a number of significant milestones passed. We have strengthened our core management team, completed two acquisitions for our own balance sheet and formed a joint venture with Morgan Stanley Real Estate Investing (MSREI) to facilitate the acquisition of a £49 million property portfolio. We are particularly pleased to have generated a pre-tax profit of approximately £2.2 million in our first accounting period, following a revaluation of assets under ownership, receipt of income from our growing tenant base and revenue from management fees associated with our joint venture. Importantly, we have achieved a net asset value of 261p per share as at 31 March 2010.

We focus entirely on the UK retail property sector and our business model is to create value and generate returns through active and entrepreneurial asset management, risk controlled development and the recycling of equity into new projects. We adopt a UK-wide opportunistic investment strategy which is supported by careful research. Our current focus is on the in-town food and value retail sub-sectors, where sales growth continues to be positive and retailers are keen to acquire space across a range of store formats and agree long lease terms.

The retail sector is the largest in the UK commercial property market, accounting for 46% of the IPD all property index; it has also displayed good longer term performance characteristics with the added benefit of lower volatility and risk profile when compared with other segments of UK commercial real estate. More importantly, the occupational market is continually evolving and changing format which plays to the skill of our experienced and well connected management team. We believe the sector specialist approach with proven asset management skills should consistently outperform, especially in the current challenging market conditions.

The UK commercial property market saw significant falls in capital and rental values during the recession, although the resilience of the UK retail sector has surprised many people with retail sales continuing to show modest year on year growth through 2008 and 2009, two of the most difficult years in the UK economy in recent memory. Our experience through the previous cycle shows the timing is now right to implement a strategy of careful stock selection where, through our asset management and development skills, we can deliver significant value.

In September 2009 we welcomed Nick Sewell to the board of NewRiver Capital with responsibility for acquisitions and asset management. Nick has more than 15 years of expertise specialising in high street, shopping centre and foodstore investments. In October, Mark Davies, a chartered accountant, joined our Board as Finance Director and brings more than ten years of property finance experience. These appointments significantly strengthen our executive team which now has experience in all aspects of retail property including investment, asset management and development as well as strong financing and business administration skills.

In December 2009 NewRiver completed its first investment, acquiring the freehold of a multi-let high street property in Wrexham for £5.25 million, purchased at an initial yield of 9.7%. In January 2010 the acquisition of The Deeping Centre, a district shopping centre near Peterborough was completed for £5.5 million and purchased at an initial yield of 7%. In March 2010, a significant advance was made through the newly established joint venture with MSREI by acquiring a 450,000 sq ft portfolio across nine retail assets from the UBS Triton Property Fund. The £49 million purchase price reflected an initial yield of 9% and we believe the portfolio will benefit significantly from our active asset management strategies.

All of these acquisitions represent typical examples of the assets NewRiver continues to seek to acquire and fit exactly with the stated strategy. Through a combination of active and entrepreneurial asset management, improved returns have already been generated. These acquisitions have also utilised the majority of the initial capital we raised, which is why we took the opportunity of raising a further £10.5 million of new equity in May 2010, just after the period end.

We are delighted to have formed a joint venture with MSREI, which will have initial capacity to acquire assets up to £250 million and will enable us to take on larger projects and with that, a growing recurring fee income through asset management and incentivised fees.

The current financial year has got off to a good start with the announcements of the acquisition by the Group of the Redevco retail portfolio for just over £19 million and a retail property in Newcastle city centre for £4.2 million, both of which reflect our growing transaction pipeline and our ability to deploy capital quickly and wisely.

Market conditions are still highly favourable for well capitalised opportunistic investors able to execute focused business plans through careful stock selection, implementation of value creating strategies and well timed exit sales. Our previous experience gives us confidence that we can realise our ambition of becoming one of the leading UK sector focused platforms in the retail real estate sector. We look forward to the next year with confidence.

I would like to thank those shareholders who supported the initial capital raising in September 2009 and more recently, in May this year. It is also a great privilege to be working with such an experienced and dedicated management team and I would like to thank them and our professional advisors for their hard work and professionalism.

David A S Lockhart

Chief Executive

NewRiver Capital Limited

14 June 2010

Consolidated Statement of Comprehensive Income

For the period from incorporation on 4 June to 31 March 2010

	Notes		4 June to 31 March 2010 £'000
Total revenue	3		329
Total operating expenses	4		(1,172)
Income from joint ventures	11		1,741
Net fair value gain on revaluation of investment properties	10		1,269
Operating profit			2,167
Net finance expenses
Finance income	5		18
Finance costs	5		(28)
Profit for the period before taxation			2,157
Taxation	6		(42)
Profit for the period after taxation			2,115
Other comprehensive income
Fair value loss on interest rate swap	16		(46)
Total comprehensive income for the period			2,069
Earnings per share:
Basic (Pence)	7		21
Diluted (Pence)	7		21

All activities derive from continuing operations of the Group. The notes form an integral part of these financial statements.

Consolidated Balance Sheet

As at 31 March 2010

	Notes		31 March 2010 £'000
Non-current assets
Investment properties	10		13,315
Interest in joint ventures	11		11,778
Property, plant and equipment	12		7
			25,100
Current assets
Trade and other receivables	14		67
Cash and cash equivalents	15		8,168
			8,235
Total assets			33,335
Equity and liabilities
Non-current liabilities
Borrowings	16 & 24		6,693
Current liabilities
Trade and other payables	17		471
Derivative financial instruments	16 & 24		46
Net assets			26,125
Equity
Share capital	19		24,031
Retained earnings			846
Hedging reserve	24		(46)
Share option reserve	21		25
Revaluation reserve	10		1,269
Total shareholders equity			26,125
Net Asset Value (NAV) per share
Basic NAV per share (Pence)	8		261

The notes form an integral part of these financial statements.

Consolidated Cash Flow Statement

As at 31 March 2010

											31 March 2010 £'000
Net cash outflow from operating activities										18	(496)
Investing activities:
Interest received											18
Purchase of investment properties										10	(12,046)
Purchase of plant and equipment										12	(8)
Cash acquired on acquisition of subsidiary										26	13
Cash outflow from the acquisition of joint venture interest										11	(10,037)
Net cash from investing activities											(22,060)
Financing activities:
Issue of new shares net of issue costs										19	24,031
New bank loans										16	6,693
Net cash from financing activities											30,724
Cash and cash equivalents at the beginning of the period											-
Movement during the period											8,168
Cash and cash equivalents at the end of the period											8,168
Cash and cash equivalents comprise:
Cash at bank and in hand											8,168
Cash and cash equivalents at the end of the period										15	8,168

The notes form an integral part of these financial statements.

Consolidated Statement of Changes in Equity

	Notes	2010 Retained earnings £'000	2010 Share capital £'000	2010 Share premium £'000	2010 Revaluation reserve £'000	2010 Share- based payment £'000	2010 Hedging reserve £'000		2010 Total £'000
As at 4 June 2009		-	-	-	-	-	-	-
Net proceeds of issue of new shares	19	-	-	24,031	-	-	-	24,031
Total comprehensive income for the period		2,115	-	-	-	-	(46)	2,069
Share-based payments		-	-	-	-	25	-	25
Revaluation surplus for the period	10	(1,269)	-	-	1,269	-	-	-
		846	-	24,031	1,269	25	(46)	26,125

The notes form an integral part of these financial statements.

Notes to the Accounts

For the period from 4 June 2009 to 31 March 2010

1 Accounting policies

General information

NewRiver Retail Limited (the 'Company') and its subsidiaries (together the 'Group') is a property investment group specialising in commercial real estate in the United Kingdom. NewRiver Retail was incorporated on 4 June 2009 in Guernsey as a registered closed-ended investment Company. The Company is incorporated and domiciled in Guernsey under the provisions of The Companies (Guernsey) Law, 2008. The Company's registered office is Isabelle Chambers, Route Isabelle, St Peter Port, Guernsey GY1 3TX. The Company has taken advantage of the exemption conferred by the Companies (Guernsey) Law, 2008, section 244, not to prepare Company only financial statements.

These audited financial statements of the Group are for the period from incorporation on 4 June 2009 to 31 March 2010.

Going concern

The Directors of NewRiver Retail Limited have reviewed the current and projected financial position of the Group making reasonable assumptions about future trading and performance. The key areas reviewed are:

• Value of investment property

• Timing of property transactions

• Capital expenditure and tenant incentive commitments

• Forecast rental income

• Loan covenants

The Group has substantial cash and short-term deposits, as well as profitable rental income streams and as a consequence the Directors believe the Group is well placed to manage its business risks. Whilst the Group has borrowing facilities in place, it is currently well within prescribed financial covenants.

After making enquiries and examining major areas which could give rise to significant financial exposure the Board has a reasonable expectation that the Company and the Group have adequate resources to continue its operations for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparation of these financial statements

Statement of compliance

These financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards, as adopted by the European Union ('IFRS'). These financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, and derivatives which are fair valued.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company, its subsidiaries and the SPVs controlled by the Company, made up to 31 March each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

The Group financial statements consolidate the financial statements of the Company and its subsidiaries. Intra Group transactions are eliminated in full.

Certain new interpretations and amendments or revisions to existing standards, which may be relevant to the Group, have been published that are mandatory for later accounting periods and which have not been adopted early. These are:

IFRS 2 Share-based Payment - Group Cash Settled Share-based Payment Transactions effective 1 January 2010

IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) including consequential amendments to IFRS 7, IAS 21, IAS 28, IAS 31 and IAS 39 effective 1 July 2009

IFRS 9 Financial Instruments effective 1 January 2013

IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items effective 1 July 2009

IFRIC 18 Transfers of Assets from Customers effective 1 July 2009

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments effective 1 July 2010

Improvements to IFRSs issued April 2009

These changes are not expected to have a material impact on the Group's financial statements.

Use of estimates and key sources of estimation uncertainty

The preparation of the Group's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingencies at the date of the Group's financial statements, and revenue and expenses during the reporting period. Actual results could differ from estimated. Significant estimates in the Group's financial statements include the assumptions relating to the valuation of options and investment properties. By their nature these estimates and assumptions are subject to measurement uncertainty.

Critical judgements in applying the Group's accounting policies

In the process of applying the Group's accounting policies, management is of the opinion that any instances of application of judgements are not expected to have a significant effect on the amounts recognised in the financial statements.

Key sources of estimation uncertainty

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.

(i) Investment properties

The preparation of financial statements requires management to make estimates affecting the reported amounts of assets and liabilities, of revenues and expenses, and of gains and losses. As described below, the Group's investment properties are stated at estimated market value, as accounted for by management based on an independent external appraisal. The estimated market value may differ from the price at which the Group's assets could be sold at a particular time, since actual selling prices are negotiated between willing buyers and sellers. Also, certain estimates require an assessment of factors not within management's control, such as overall market conditions. As a result, actual results of operations and realisation of net assets could differ from the estimates set forth in these financial statements, and the difference could be significant.

(ii) Valuation of Options

Management have relied on the services of external experts to determine the fair value of options at their grant date, in order to expense that value over their estimated exercise period. This requires significant estimates of a number of inputs which are used to model that fair value.

(iii) Impairment in investment in subsidiaries and associates

Determining whether investments in subsidiaries and associates are impaired requires an estimation of the fair values less cost to sell and value in use of those investments. The process requires the Group to estimate the future cash flows expected from the cash-generating units and an appropriate discount rate in order to calculate the present value of the future cash flows. Management has evaluated the recoverability of those investments based on such estimates.

Investment property

Property held to earn rentals and for capital appreciation is classified as investment property. Investment property comprises both freehold and leasehold land and buildings.

Investment property is recognised as an asset when:

• It is probable that the future economic benefits that are associated with the investment property will flow to the Company;

• There are no material conditions precedent which could prevent completion; and

• The cost of the investment property can be measured reliably.

Investment property is measured initially at its cost, including related transaction costs. After initial recognition, investment property is carried at fair value. The Group has appointed Colliers CRE as property valuers to prepare valuations on a semi-annual basis. Valuations are undertaken in accordance with the appropriate sections of the current Practice Statements contained in the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards, 6th Edition (the 'Red Book'). This is an internationally accepted basis of valuation. Gains or losses arising from changes in the fair value of investment property are included in the income statement in the period in which they arise and transferred to the revaluation reserve.

In completing these valuations the valuer considers the following:

(i) current prices in an active market for properties of a different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences;

(ii) recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; and

(iii) discounted cash flow projections based on reliable estimates of future cash flows, derived from the terms of any existing lease and other contracts and (where possible) from external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows.

Taxation

The Company has received tax exempt status from the Administrator of Income Tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. A company that has exempt status for Guernsey tax purposes is exempt from tax in Guernsey on both bank deposit interest and any income that does not have its source in Guernsey.

The Group may incur taxation in other jurisdictions in which it operates.

The Group has subsidiary companies that are incorporated in the United Kingdom and subject to UK tax.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, together with any adjustment in respect of previous years.

Tax is included in the income statement except to the extent that it relates to items recognised directly in equity, in which case the related tax is recognised in equity.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases.

As part of the process of preparing its financial statements, the Group is required to estimate the provision for income tax in each of the jurisdictions in which it operates. This process involves an estimation of the actual current tax exposure, together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the balance sheet. Significant judgement is required in determining the provision for income tax and the recognition of deferred tax assets and liabilities. The recognition of deferred tax assets is based upon whether it is probable that sufficient and suitable taxable profits will be available in the future, against which the reversal of temporary differences can be deducted. Recognition, therefore, involves judgement regarding the future financial performance of the particular legal entity or tax group in which the deferred tax asset has been recognised.

Value added tax

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

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

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

Revenue recognition

(i) Rental income

Rental income from operating leases is recognised in income on a straight-line basis over the lease term. Rent is billed in advance and then allocated to the appropriate period. Therefore, deferred revenue generally represents the proportion of rentals invoiced in advance as at the reporting date and any advance payments from tenants. Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of revenue can be measured reliably.

(ii) Interest income and expenses

Interest income and expenses is recognised in the income statement under the effective interest method as they accrue. Interest income is recognised on a gross basis, including withholding tax, if any.

(iii) Management fees

Management fees are recognised in the income statement on an accruals basis. Interest income is recognised on a gross basis, including withholding tax, if any.

(iv) Promote payments

Under the terms of the Limited Partnership Agreement of NewRiver Retail Investments LP, the Group is contractually entitled to receive a promote payment should the returns from the joint venture to the joint venture 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. Any entitlements under these arrangements are only accrued for in the financial statements once the Group believes that crystalisation of the fee is virtually certain.

Business combinations

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the income statement. Goodwill is reviewed for impairments annually. The acquisition of subsidiaries is accounted for using the purchase method. 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 acquiree. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition.

Acquisitions

The consideration payable in respect of each acquisition may be dependant upon certain future events. In calculating the cost of each acquisition the Group has assessed the most probable outcome as at the balance sheet date. These amounts are reconsidered annually at each year end.

Joint ventures

The Group's investment properties are typically held in property specific special purpose vehicles ('SPVs'), which may be legally structured as a joint venture.

In assessing whether a particular SPV is accounted for as a subsidiary or joint venture, the Group considers all of the contractual terms of the arrangement, including the extent to which the responsibilities and parameters of the venture are determined in advance of the joint venture agreement being agreed between the two parties. The Group will then consider whether it has the power to govern the financial and operating policies of the SPV, so as to obtain benefits from its activities, and the existence of any legal disputes or challenges to this control in order to conclude on the classification of the SPV as a joint venture or subsidiary undertaking. The Group considers this position with the evidence available at the time.

The consolidated financial statements account for interests in joint ventures using the equity method of accounting. Any premium paid for an interest in a jointly controlled entity above fair value of identifiable assets, liabilities and contingent liabilities is accounted for in accordance with the goodwill accounting policy.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Trade and other payables

Trade and other payables are initially recognised at fair value, and subsequently where necessary re-measured at amortised cost using the effective interest method.

Trade and other receivables

Trade and other receivables are initially recognised at fair value. A provision for impairment of trade receivables is established when there is objective evidence the Group will not be able to collect all amounts due according to the original terms of the receivables.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Share options

Share options have been granted to key management as set out in note 21. The cost of equity settled transactions is measured with reference to the fair value at the date at which they were granted. The Group accounts for the fair value of these options at grant date over the vesting period in the income statement, with a corresponding increase to the share based payment reserve. The fair value was calculated based on the Black Scholes Model using the following inputs:

- Share price £2.50

- Exercise price £2.50/£2.71

- Expected volatility 10%*

- Expected life 5 years

- Risk free rate 2.60%

- Expected dividends 3%

*based on similar quoted companies

Treasury shares

Own equity instruments which are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the Group's own equity instruments. Any difference between the carrying amount and the consideration is recognised in the capital reserve.

The Group has issued a number of shares to and Employee Benefit Trust (EBT) as detailed in note 20. As this EBT is controlled by the Group, it is consolidated in these financial statements and shares held by the EBT are shown as treasury shares.

Dividends

Dividends to the Company's shareholders are recognised when they become legally payable. In the case of interim dividends, this is when declared by the Directors. In the case of final dividends, this is when approved by the shareholders at an AGM.

Hedge accounting

Hedges of interest rate risk on firm commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship, the entity documents the relationship between the hedging instruments and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item.

Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the 'other gains and losses' line item.

Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognised in profit or loss, in the same line of the income statement as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income at that time is accumulated in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss.

Leasing (as lessors)

Leases where the Group does not transfer substantially all the risks and benefits incidental to the ownership of the assets are classified as operating leases. All of the Group's properties are leased under operating leases and included in investment property in the balance sheet.

2 Segmental reporting

During the period the Group operated in one business segment, being property investment in the United Kingdom and as such no further information is provided.

3 Revenue

	2010 Group £'000
Rental and related income	257
Asset management fees	72
	329

4 Operating costs

	2010 Group £'000
Group staff costs	405
Depreciation	1
Administration and other operating expenditure	766
	1,172

	2010 Group £'000
Auditors' remuneration
Fees payable to the Company's auditor for the audit	48
Fees payable to the Company's auditor relating to the Admission to AIM	125
Fees payable to the Company's auditor for the interim review	10
	183

5 Finance income and expense

	2010 Group £'000
a) Finance income
Income from cash and short-term deposits	18
Total finance income	18
b) Finance costs
Interest on bank loans	28
Total finance costs	28
Net finance cost	10

More details on the Group's borrowings are provided in note 16.

6 Tax

The tax expense for the period comprises:

	2010 Group £'000
Current taxation	42
Increase in deferred tax asset	-
(Decrease)/increase in deferred tax liability	-
Tax charge	42

The charge for the period can be reconciled to the profit per the consolidated income statement as follows:

Profit before tax	2,157
Tax rate in Guernsey at 0%	-
Adjustments for:
Foreign taxes (UK)	42
Tax charge	42

The Company and its property-holding subsidiaries are incorporated in Guernsey and as such are not subject to UK capital gains tax on the sale of property. For this reason deferred tax has not been provided for on revaluation surpluses.

7 Earnings per share

The European Public Real Estate Association ('EPRA') issued Best Practice Policy Recommendations in November 2006, which gives guidelines for the calculation of performance measures. The Group has decided to adopt the EPRA earnings measure, which excludes investment property revaluations, impairments, gains and losses on disposals, intangible asset movements and related taxation.

The calculation of basic and diluted earnings per share is based on the following data:

	2010 Group £'000
Earnings
Earnings for the purposes of basic and diluted earnings per share being net profit for the period	2,115

Adjustments to arrive at EPRA loss

	£'000
Profit after taxation	2,115
Unrealised surplus on revaluation of investment properties	(1,269)
Increase of investment in joint venture	(1,663)
Adjusted EPRA loss	(817)
Number of shares	No. 000's
Weighted average number of ordinary shares for the purposes of basic EPS and basic EPRA EPS	10,000
Effect of dilutive potential ordinary shares:
Options	12
Warrants	6
Weighted average number of ordinary shares for the purposes of basic diluted EPS and basic diluted EPRA EPS	10,018
As highlighted in note 20, 624,000 shares have been issued to the EBT. No shares have been allocated to the Directors as at 31 March 2010 and therefore is not included above.
EPS basic (Pence)	21.15
EPRA EPS basic (Pence)	(8.17)
Diluted EPS (Pence)	21.11
EPRA diluted EPS (Pence)	(8.16)

8 Net asset value per share

	2010 £'000
Net asset value	26,125
Number of ordinary shares at 31 March	10,000
Net asset value per share Net asset value per share (diluted)	2.61 2.61

Net asset value per share is based on Group net assets at 31 March 2010 of £26,125k and the 10,000,000 ordinary shares in issue.

9 Dividends

The Company has not paid a Dividend during the period.

10 Investment property

	2010 Group £'000
Balance at 4 June 2009	-
Acquisitions in the period	12,046
	12,046
Fair value adjustment on property revaluations	1,269
Balance at 31 March 2010	13,315

The Group's investment properties have been valued at 31 March 2010 by independent valuers and by the Directors on the basis of open market value in accordance with the Appraisal and Valuation Standards of the Royal Institute of Chartered Surveyors.

It is the Group's policy to carry investment property at fair value in accordance with IAS 40 'Investment Property'. The fair value of the Group's investment property at 31 March 2010 has been determined by the Directors on the basis of open market valuations carried out by Colliers International, who is the external valuer to the Group.

The valuations included in the financial statements have been carried out in accordance with The Royal Institution of Chartered Surveyors Valuation Standards, Sixth Edition (the 'Red Book').

The basis for the valuations included in the report is based on current market rental yields, expected rental income and comparable market transactions.

11 Investment in joint ventures

	2010 Group £'000
Balance at 4 June 2009	-
Cost of joint venture interests acquired in the period	10,037
Share of post acquisition profits	1,741
Net book value at 31 March 2010	11,778

The Group has the following interests in joint ventures:

Name	Country of incorporation	% Holding 2010
New River Retail Investments LP NewRiver Retail Investments (GP) Ltd*	Guernsey Guernsey	50% 50%

*NewRiver Retail Investments (GP) Ltd has a number of 100% owned subsidiaries which are NewRiver Retail (Finco No 1) Limited and NewRiver Retail (GP1) Limited, acting in its capacity as General Partner for NewRiver Retail (Holding No 1) LP and NewRiver Retail (Portfolio No1 ) LP. These entities have been set up to facilitate the investment in retail properties in the UK by the joint venture.

NewRiver Retail Investments LP (the 'JV') is a newly established jointly controlled limited partnership set up by NewRiver Retail Limited and Morgan Stanley Real Estate Investing ('MSREI') to invest in UK Retail property. The JV has an acquisition capacity in excess of £250 million including appropriate leverage with future respective equity commitments being decided on a transaction by transaction basis. Interests in further property acquisitions made by the joint venture may vary from the current 50/50 split of existing projects.

The JV is owned equally by NewRiver Retail Limited and MSREI. NewRiver Capital Limited, the wholly-owned subsidiary and property manager, and adviser to NewRiver Retail Limited, is the appointed asset manager on behalf of the JV and receives asset management fees as well as performance-related returns promote payment. No promote payment has been recognised during the period and the Company is entitled to receive promote payments when achieving the agreed hurdles.

Under the terms of the Limited Partnership agreement relating to NewRiver Retail Investments LP dated 28 February 2010, MSREI has been granted the right to convert its interest in the JV or part thereof on an NAV for NAV basis into shares of NewRiver Retail Limited, to up to 10% of the share capital of NewRiver Retail Limited during the joint venture period. This conversion would currently have an anti-dilutive effect on the Group's EPS calculation (see note 7).

In line with the existing NewRiver investment strategy, the JV will target UK retail property assets with the objective of delivering added value and above average returns through NewRiver's proven skills in active and entrepreneurial asset management and risk-controlled development and refurbishment.

The Group has applied equity accounting for its interest in the JV. The investment properties of the JV were externally valued by Jones Lang LaSalle on the basis of open market value in accordance with the Appraisal and Valuation Standards of the Royal Institute of Chartered Surveyors. The aggregate amounts recognised in the consolidated balance sheet and income statement are:

	2010 NewRiver Retail Investments LP total £'000	2010 Group's share 50% £'000
Non-current assets	55,835	27,918
Current assets	644	322
Current liabilities	(10,223)	(5,112)
Non-current liabilities	(22,700)	(11,350)
Net assets	23,556	11,778
Income	228	114
Administration expenses	(14)	(7)
Finance costs	(58)	(29)
Increase in valuation of investment properties	3,325	1,663
Profit before tax	3,481	1,741

The Group's share of the contingent liabilities and capital commitments to the JV is £nil and £1.4 million respectively as at 31 March 2010. The capital commitment relates to the completion of the Widnes property and associated joint venture fees.

12 Property, plant and equipment

	Fixtures and equipment £'000	Total £'000
Cost
Acquired property, plant and equipment	8	8
At 31 March 2010	8	8
Accumulated depreciation
Balance at 4 June 2009	-	-
Charge for the period	(1)	(1)
At 31 March 2010	(1)	(1)
Net book value at 31 March 2010	7	7

The Group's property, plant and equipment is held at cost less any accumulated depreciation.

13 Investment in subsidiary undertakings

Name	Country of incorporation	Activity	Proportion of ownership interest 2010
NewRiver Retail (Wrexham No. 1) Limited	Guernsey	Real estate investments	100%
NewRiver Retail (Market Deeping No. 1) Limited	Guernsey	Real estate investments	100%
NewRiver Retail (Newcastle No. 1) Limited	Guernsey	Real estate investments	100%
NewRiver Capital Limited	United Kingdom	Investment management	100%

The Group's investment properties are held by its subsidiary undertakings.

14 Trade and other receivables

	2010 Group £'000
Trade receivables	41
Prepayments and accrued income	18
Other receivables	8
	67

All amounts fall due for payment in less than one year.

At 31 March 2010 there were no amounts which were overdue and no amounts which were impaired. There is no provision for impairment of trade receivables as at 31 March 2010 as the risk of impairment of the amounts outstanding is not considered to be significant.

15 Cash and cash equivalents

	2010 Group £'000
Cash at bank	503
Short-term deposits	7,665
	8,168

16 Financial assets and liabilities

a) The financial assets of the Company and Group consist of trade and other receivables, cash and cash equivalents and cash deposits.

b) Non-current financial liabilities

	2010 Group £'000
Secured bank loans	6,693
Maturity of borrowings:
Less than one year	-
Between one and two years	-
Between two and five years	6,693
Over five years	-

Borrowings

Bank loans are secured by way of legal charges on certain properties held by the Group.

Facility type	Term	Maturity date	2010 Total facility £'000	2010 Group utilised £'000	Interest rate
Term loan	5 years	19 February 2015	9,303	6,693	Hedged at 5.18%

The Group adopts a hedging policy which is aligned with the property strategy on each of its assets. The total cost of borrowing on assets acquired at 31 March 2010 in respect of investment properties held on Balance Sheet was 5.18% and for the joint venture entities was 3.12% giving a total effective borrowing cost for the Group of 3.89% during the period to 31 March 2010.

A loan facility fee of £93k has been offset against the Group's borrowings and will be amortised over the life of the facility.

The Group recognised a mark to market fair value loss of £46k on its interest rate swaps as at 31 March 2010.

All borrowings are due after more than one year.

17 Trade and other payables

	2010 Group £'000
Trade payables	336
Rent received in advance	135
	471

The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.

18 Cash flow note

	31 March 2010 £'000's
Operating profit	2,167
Adjustments for:
Income from joint ventures not received	(79)
Net gain on revaluation of investment properties	(1,269)
Net gain on revaluation of joint venture investment	(1,663)
Depreciation of property, plant and equipment and goodwill	12
Share-based payments expense	25
Operating cash flows before movements in working capital	(807)
Increase in receivables	(88)
Increase in payables	399
Cash inflows from operations	(496)

19 Share capital and share premium account

	31 March 2010 £'000's
Issued share capital
Issued in the period: 10,000,000 ordinary shares of nil par value	-
Issued in the period: 624,000 ordinary shares of nil par value and held as Treasury shares (see note 20) Share premium	-
Balance at 4 June 2009	-
Issued in the period: 10,000,000 ordinary shares at a price of 250p each	25,000
Issue costs	(969)
Balance at 31 March
Balance at 31 March	24,031

On 1 September 2009 10,000,000 nil par value ordinary shares were issued for cash consideration at a price of £2.50 resulting in a share premium of £25,000,000. Costs of £969k directly attributable to the issue of these shares have been set against the Share Premium account.

The number of shares in issue as at 31 March 2010 is 10,000,000. The Company has an unlimited Authorised share capital and may issue an unlimited number of shares.

Shareholders who subscribed for Placing Shares in the Placing received Warrants, in aggregate, to subscribe for 3% of the Fully Diluted Share Capital exercisable at the subscription price per ordinary share of £2.50 and all such Warrants shall be fully vested and exercisable upon issuance.

The Warrants in aggregate give the Warrantholders the right to subscribe in cash at the Subscription Price for the Warrant Shares.

20 Treasury shares

The Company has established an Employee Benefit Trust (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 Trustee of the EBT may not exceed 10% of the Company's issued share capital at that time. It is intended that the Trustee of the EBT will not hold more ordinary shares than are required in order to satisfy awards/options granted under share incentive plans.

During the period there were 624,000 nil par value shares issued to the EBT for nil consideration. As the EBT is consolidated, these shares are treated as Treasury Shares.

No shares have been allocated by the EBT to Directors or employees during the period.

21 Share-based payments

The Group provides share-based payments to employees in the form of share options. All share-based payment arrangements granted since the admission on 1 September 2009 have been recognised in the financial statements. The Group uses the Black Scholes Model and the resulting value is amortised through the income statement over the vesting period of the share-based payments with a corresponding credit to the share-based payments reserve.

(a) Terms

	No of options
Awards made during the period	660,200
Awards vested during the period	-
Total at the end of the period	660,200
Exercisable options at the end of the period	660,200

During the year 544,000 share options were issued at an exercise price £2.50 and 116,200 share options at an exercise price £2.71. All of the share options are contingent on at least an additional £25 million being raised by the Company (excluding proceeds of the original placing). As disclosed in note 23 (post balance sheet) £10.5 million in new capital was raised on 5 May 2010.

(b) Share-based payment charge

The Group recognised a total share-based payment expense of £25,098.

22 Financial commitments and operating lease arrangements

	2010 £'000
Financial commitments	-
Group Share of the financial commitments to joint ventures	1,400
	1,400
Operating lease arrangements:
Operating lease arrangements where the Group is lessee	55

Operating lease payments represent rentals payable by the Group for occupation of its office properties.

The current lease is an annual commitment with 2.5 years till expiry.

As at 31 March 2010 the Company was committed to its 50% share of the completion monies and related fees in respect of the Widnes property and forming of the joint venture with MSREI. Exchange of contracts on the Widnes property occurred on 5 March 2010 with a 10% deposit paid. Completion took place on 17 May 2010 on which date the Company paid a total sum of £1.4 million.

23 Post balance sheet events

On 5 May 2010 the Company announced the placing of 4,212,200 ordinary shares at a price of £2.50 raising £10.5 million in new capital to support intended commitments and further acquisitions.

On 17 May 2010 the Company's 50% joint venture entity NewRiver Retail Investments LP completed on the purchase of the property at Albert Square, Widnes for a purchase price of £9 million and net initial yield of 10.2%. The joint venture entity has accounted for this acquisition as at the 31 March 2010 as it was probable that the future economic benefits associated with the investment property would flow to the entity and the cost of the investment was measured reliably as agreed in the sale and purchase agreement.

On 4 June 2010 the Group exchanged contracts on the purchase of a portfolio of six retail assets for a purchase price of £19 million at a net initial yield of 7.7% financed with a debt facility at 65% loan to value (LTV).

On 10 June the Group exchanged contracts on the purchase of a retail asset in Northumberland Street, Newcastle for a purchase price of £4.2 million at a net initial yield of 9.6% financed with an established debt facility at 60% LTV.

24 Financial instruments - risk management

The Group's activities expose it to a variety of financial risks in relation to the financial instruments it uses: market risk (including currency risk, price risk and 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 and overseen by the Property Adviser and administrator in conjunction with professional advisers. Reports are provided to the Board formally on a quarterly basis and also when authorised changes are required.

a) Market risk

Currency risk

As all material transactions are in GBP the Group is not subject to any foreign currency risk.

Cash flow and fair value interest rate risk

The Group has significant interest-bearing cash resources, the majority of which are held in business accounts with its principal bankers. The Group's interest rate risk arises from long-term borrowings (note 16). Borrowings issued at variable rates expose the Group to cash flow interest rate risk, whilst borrowings issued at a fixed rate expose the Group to fair value risk. The Group's cash flow and fair value risk is reviewed quarterly by the Board.

The cash flow and fair value risk is approved quarterly by the Board. The Group analyses its interest rate exposure on a dynamic basis. It takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Interest costs may increase as a result of such changes. They may reduce or create losses in the event that unexpected movements arise. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios the Group calculates the impact on profit and loss of a defined interest rate shift. The simulation is
run on an ongoing basis to verify that the maximum potential impact is within the parameters expected by management. Formal reporting to the Board on cash flows is made on a monthly basis. To date the Group has sought to fix its exposure to interest rate risk on borrowings through the use of a variety of interest rate derivatives. This gives certainty over future cash flow but exposure to fair value movements, which amounted to an unrealised loss of £46k at 31 March 2010. The Group has an interest rate hedge in place to mitigate interest rate risk; therefore a sensitivity analysis returns a non-material risk component.

b) Credit risk

The Group's principal financial assets are cash and short-term deposits, trade and other receivables.

The credit risk on the Group's trade and other receivables is considered low due to the Group having policies in place 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 amounts presented in the Balance Sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is objective evidence that the Group will not be able to collect all amounts due according to the terms of the receivables concerned.

The Group has VAT recoverable of £8k. The timing of recovery of these balances is subject to future revenue receipts and application to HMRC. The Group forecasts the recovery of these balances based upon the timing of future revenue receipts and its experience of successful application to the HMRC. No balances are considered passed due or impaired at 31 March 2010 based upon this assessment of the timing of future cash receipts. The Group believes its only exposure is in relation to the timing of recovery.

The credit risk on the Group's cash and short-term deposits and derivative financial instruments is limited to the Group's policy of monitoring counterparty exposures.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Board and its advisers seek to have appropriate credit facilities in place on a project by project basis, either from available cash resources or from bank facilities.

Management monitor the Group's liquidity position on a weekly basis. Formal liquidity reports are issued on a weekly basis and are reviewed quarterly by the Board, along with cash flow forecasts. A summary table with maturity of financial liabilities is presented below.

As at 31 March 2010	Current £'000	Year 2 £'000	Years 3 to 5 £'000	Years 5 to 10 £'000
Interest bearing loans and borrowings	-	-	6,693	-
Trade and other payables	471	-	-	-
Derivative financial instruments	-	-	46	-
	471	-	6,739	-

The Group monitors its risk to a shortage of funds by forecasting cash flow requirements for future years, including consideration of existing facilities and covenant requirements. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and other short-term borrowing facilities, bank loans and equity fundraisings.

(d) Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

To maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of its gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including borrowings and trade and other payables as shown in the balance sheet) but excluding preference shares, which for capital risk management is considered to be capital rather than debt, less cash and short-term deposits. Total capital is calculated as equity, as shown in the balance sheet, plus preference shares and net debt. Where the Group has a net cash position, the gearing ratio will be zero. The Group is not subject to any external capital requirements.

25 Related party transactions

Group

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

The following Directors acquired shares in the Company on admission at £2.50 per share:

	Number of shares
Paul Roy	300,000
Susie Farnon	20,000
David Lockhart	1,460,000
Peter Tom CBE	20,000
Serena Tremlett	4,000

As disclosed in note 23, on 5 May 2010 further shares in the Company were issued. David Lockhart, Paul Roy, Peter Tom CBE and Serena Tremlett subscribed for 120,000, 60,000, 20,000 and 2,000 of these new shares respectively at a price of £2.50.

Susie Farnon recently acquired a further 5,000 shares via a distribution from a Family Trust. Her total number of shares is therefore 25,000.

Serena Tremlett is the Managing Director of Morgan Sharpe Administration Limited which receives fees for providing secretarial and administration services in respect of the Company. During the period £46k was paid to Morgan Sharpe Administration in respect of these services. These services were carried out on an arm's- length basis.

Total emoluments of Directors and key management during the period (excluding share-based payments) was £384k. Further details are contained in the remuneration report.

Share-based payments of £25k accrued during the period, as detailed in note 21.

There are no loan balances with Directors.

26 Acquisition of subsidiaries

On 1 September 2009 the Group acquired 100% of the Issued Share Capital in NewRiver Capital Limited.

The fair value of assets acquired and liabilities assumed were as follows:

	As at 30 Sept 2009 £'000
Cash and cash equivalents	13
Accounts receivable	22
Trade payables	(35)
Net liabilities acquired	0
Net cash inflow arising on acquisition:
Cash consideration	-
Cash and cash equivalents acquired	13
	13

Goodwill from the interim report has been revalued to nil after reconciliation of the Group's opening account balances.

27 Operating lease arrangements

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

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

As at 31 March 2010	As at 31 March 2010 £'000
Within one year	946
In the second year	946
In the third to fifth year (inclusive)	2,838
After five years	7,859
	12,589

 

END

 

 

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