NewRiver Regulatory News (NRR)

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NewRiver REIT plc Full Year Results

16 May 2017

Convenience and community focus delivering growing and sustainable cash returns

David Lockhart, Chief Executive commented: "Our convenience-led, community-focused retail and leisure portfolio has proved well-positioned, despite the prevailing macro-economic uncertainty in the UK, and we have continued to deliver growing and sustainable cash returns to our shareholders. We have increased our full year ordinary dividend by over 8% to 20 pence per share, and today we have announced an additional 3 pence special dividend linked to our retail warehouse acquisition in Sheffield, meaning our fully covered dividend has increased by 24% in total.

Looking ahead, we believe that with our convenience and community focus, affordable rents, active approach to asset management and in-built risk-controlled development pipeline we are well-placed to continue to deliver growing and sustainable cash returns to our shareholders. Reflecting the confidence we have in the strength of our underlying business, we have today announced that the ordinary dividend for the first quarter of the new financial year will increase by 5% to 5.25 pence per share."

Focused strategy of delivering growing and sustainable cash returns to shareholders

· Funds From Operations1 ('FFO') up 24% to £58.2 million (FY16: £47.1 million); current year includes £11.5 million of surrender premium and rent received following our opportunistic acquisition of a retail warehouse in Sheffield

· FFO per share of 24.9 pence (FY16: 26.6 pence); prior year included promote receipts from Bravo JV of 2.8 pence

· Fully covered ordinary dividend per share increased by over 8% to 20.0 pence (FY16: 18.5 pence)

· Special dividend announced today of 3.0 pence per share taking total dividend to 23.0 pence, +24%

· FY18 first quarter dividend announced today of 5.25 pence per share, an increase of 5% (Q1 FY17: 5.00 pence)

· EPRA NAV per share down 1.0% to 292 pence (March 2016: 295 pence); increased from 290 pence reported in H1 due to capital return of +0.5% in H2; total property return +6.8%, +400 bps vs MSCI-IPD All Retail benchmark

· IFRS profit after tax of £36.2 million (FY16: £69.4 million) with decrease due mainly to non-cash reduction in portfolio valuation; IFRS basic EPS 15.5 pence (FY16 39.2 pence); IFRS net assets £684.5 million (March 2016: £689.9 million)

Disciplined stock selection and profitable capital recycling

· Assets under management increased by 14% to £1.3 billion (March 2016: £1.1 billion); NRR share £1.1 billion

· Acquisitions totalled £158.4 million, average equivalent yield of 7.2%; recycled capital profitably through £10.7 million of disposals on terms 7% ahead of valuation

· £120.3 million acquisition of Broadway Shopping Centre and Retail Park in Bexleyheath, South East London, blended equivalent yield of 7.0%; Morleys department store recently opened in former BHS unit

· £20.2 million acquisition of Cuckoo Bridge Retail Park, Dumfries, equivalent yield of 7.9%

· £17.9 million acquisition of a retail warehouse in Sheffield from open-ended property fund; surrender premium and rent of £11.5 million received from former occupier and repositioning plans progressing well

Creating sustainable income through active asset management and affordable rents

· 355 leasing events across 1,108,700 sq ft of space; long term retail deals on average up 3.9% vs ERV

· Occupancy increased to 97% (March 2016: 96%); maintained above 94% since IPO eight years ago

· Like-for-like net income +1.2%; affordable average retail rent of £12.45 per sq ft (March 2016: £12.14 per sq ft)

· Like-for-like footfall across the shopping centre portfolio +0.5% outperforming the UK benchmark by 210bps

· From 1 April 2017, rateable values across 90% of our retail portfolio reduced by over 19% benefitting retailers by improved cost ratios; pub operators across our portfolio will save on average 40% on business rates

Generating secure long-term income through risk-controlled developments

· Progressing 1.9 million sq ft development pipeline; 77,100 sq ft completed in period; 26,000 sq ft on-site

· A further eight convenience stores completed for Co-operative taking total number to 11; first c-store disposal completed for £1.0 million, representing an initial yield of 4.85%

· Planning granted on 192,900 sq ft; 62,000 sq ft at Canvey Island Retail Park, already over 50% pre-let

· 384,800 sq ft of planning applications submitted; includes 236,000 sq ft mixed-use regeneration in Cowley, Oxford

Conservative balance sheet and benefits of scale2

· Loan to value of 37% (March 2016: 27%) increased due to acquisitions early in FY17 but well within stated policy

· Cost of debt reduced to 3.5% (March 2016: 3.7%); refinancing exercise underway, expected to complete in FY18

· Interest cover remains a strong metric for the Company at 4.5x (March 2016: 4.3x)

Achieved key milestone with move to Main Market and FTSE 250 inclusion

· Completed move from AIM to a Premium Listing on the Main Market of the London Stock Exchange in August 2016

· Qualified for inclusion in the FTSE 250, FTSE All-Share and EPRA/NAREIT UK indices in December 2016

Notes:

(1) The Company has previously referred to FFO as EPRA adjusted earnings

(2) All debt metrics presented on a proportionally consolidated basis

Financial Statistics

Notes:

(1) Funds From Operations ('FFO') is a Company measure of cash profits which includes realised recurring cash profits plus realised cash profits (or losses) on the sale of properties and excludes other one off or non-cash adjustments as set out in Note 10. This is a true cash profit earned by the Company during the year and the basis for dividend payments and cover.

(2) Interest cover is tested at property level and is the basis for banking covenants. It is calculated by comparing actual net rental income received versus cash interest payable.

(3) Total Accounting Return (paid basis) equals EPRA NAV per share growth plus dividends paid in the period.

(4) Total Accounting Return (declared basis) equals EPRA NAV per share growth plus dividends relating to the year ended 31 March 2017 (including special dividends)

(5) Facilities are secured directly against properties and are shown in the table on a look-through basis to include the Company's share of joint venture debt.

(6) Loan to value measures the value of properties compared to the secured debt facilities, net of cash balances.

For further information

NewRiver REIT plc +44 (0)20 3328 5800

David Lockhart (Chief Executive)

Mark Davies (Chief Financial Officer)

Will Hobman (Head of Investor Relations)

Bell Pottinger +44 (0)20 3772 2500

David Rydell

David Bass

Eve Kirmatzis

This announcement contains inside information as defined in Article 7 of the EU Market Abuse Regulation No 596/2014 and has been announced in accordance with the Company's obligations under Article 17 of that Regulation. This announcement has been authorised for release by the Board of Directors.

Results presentation

The results presentation will be held at 9.30am today at the offices of Eversheds Sutherland (International) LLP, 1 Wood St, London EC2V 7WS.

A live audio webcast will be available at: http://view-w.tv/965-1325-18068/en

A recording of this webcast will be available on the same link after the presentation, and on the Company's website (http://www.nrr.co.uk/investor-center) later in the day.

Results video

A short video overview of the financial results can be found at: http://www.nrr.co.uk/investor-center

About NewRiver

NewRiver REIT plc (ticker: NRR) is a premium listed REIT on the London Stock Exchange and a constituent of the FTSE 250 and EPRA indices. The Company is a specialist real estate investor, asset manager and developer focused solely on the UK retail and leisure sector.

Founded in 2009, NewRiver is one of the UK's largest owner/managers of convenience-led shopping centres with assets under management of £1.3 billion principally comprising 33 UK wide shopping centres together with further nationwide retail and leisure assets. The portfolio totals over 8 million sq. ft. with over 2,000 occupiers, an annual footfall of 150 million and a retail occupancy rate of 97 per cent.

Visit www.nrr.co.uk for further information. LEI number: 2138004GX1VAUMH66L31

Forward-looking statements

The information in this announcement may include forward-looking statements, which are based on current projections about future events. These forward-looking statements reflect the directors' beliefs and expectations and are subject to risks, uncertainties and assumptions about NewRiver REIT plc (the "Company"), including, amongst other things, the development of its business, trends in its operating industry, returns on investment and future capital expenditure and acquisitions, that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements.

None of the future projections, expectations, estimates or prospects in this announcement should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects have been prepared are correct or exhaustive or, in the case of the assumptions, fully stated in the document. As a result, you are cautioned not to place reliance on such forward looking statements as a prediction of actual results or otherwise. The information and opinions contained in this announcement are provided as at the date of this document and are subject to change without notice. No one undertakes to update publicly or revise any such forward looking statements. No statement in this document is or is intended to be a profit forecast or profit estimate or to imply that the earnings of the Company for the current or future financial years will necessarily match or exceed the historical or published earnings of the Company.

Chairman's review

I am delighted to report that NewRiver REIT plc ("NewRiver") produced excellent financial results for the year ended 31 March 2017. Funds From Operations grew by 24% to £58 million, and the Company increased the ordinary dividend for the period by 8% to 20.0 pence per share (2016 18.5 pence), as well as declaring an additional special dividend of 3.0 pence per share.

Following graduation from AIM to a Premium Listing on the Main Market of the London Stock Exchange in August 2016, the Company became a constituent of the FTSE 250 and FTSE All-Share indices on 19 December 2016. From the same date, it was also included in the EPRA indices which measure the performance of the European listed REIT sector. I would like to welcome all new shareholders joining the register as a result of these significant events.

On admission to the Main Market, NewRiver REIT plc became the ultimate parent company, replacing NewRiver Retail Limited. The change in name reflected the combination of the Company's portfolio now including both retail and leisure assets as well as its high dividend pay-out ratio as a UK-registered Real Estate Investment Trust. The core business strategy remains unchanged and the Company continues to operate according to its strict founding principles of active asset management and risk-controlled development.

NewRiver's specialism is owning convenience-led, community-focused assets, primarily serving family shopping and leisure requirements. Its occupiers are, in the main, value-led retailers, paying affordable rents and providing shoppers with everyday non-discretionary items such as clothing and groceries. From the perspective of the landlord, this sector consistently proves itself to be a highly resilient segment of the retail market, capable of sustaining cash flows in most economic conditions. The strength of the Company's key operating metrics demonstrated the soundness of its business model during what was at times a turbulent year for the retail sector generally. Notably, like-for-like footfall and occupancy levels both improved compared to the previous period.

The Company showed agility in the acquisitions market over the year with the purchase of a major shopping centre in Bexleyheath, South East London, a retail park in Dumfries and a retail warehouse in Sheffield. The latter purchase subsequently generated cash receipts of £11.5 million, which, in accounting terms, fall within the definition of Funds From Operations. The Board has therefore approved a further special dividend of 3.0 pence to be paid on 4 August 2017 to shareholders on the register on 16 June 2017. The ex-dividend date will be 15 June 2017.

I am also delighted to announce that the first quarter dividend for FY18 will be increased to 5.25 pence per share (Q1 FY17: 5.00 pence), payable on 4 August 2017 to shareholders on the register on 16 June 2017. The ex-dividend date will be 15 June 2017.

As previously announced, Chris Taylor, Senior Independent Director, stepped down from the Board with effect from 9 April 2017. On behalf of NewRiver, I would like to thank Chris for his major contribution over five years as a Non-Executive Director and to wish him well for the future. On behalf of the Board, I would also like to thank NewRiver's management and employees, whose hard work, enthusiasm and entrepreneurial flair delivered another strong performance. Finally, I am grateful to the Company's advisers and shareholders for their continuing support.

While the Board is aware of general economic caution in light of uncertainty over Brexit negotiations and the potential for rises in inflation and interest rates, it believes that NewRiver is well placed to meet the challenges that could arise in this environment. The Company owns a sizeable portfolio with critical mass. It is highly cash generative with an occupier base representing some of the strongest covenants in the UK retail and leisure sectors. Assets are geographically diversified with a focus on day to day shopping needs which the Company considers to be significantly less volatile than other segments of the retail market.

The Board remains optimistic in its outlook for the Company and looks forward to the future with confidence.

Paul Roy

Chairman

15 May 2017

Chief Executive's review

This has been another outstanding year for NewRiver, which is reflected in a strong set of full year results. These results also demonstrate that our focused business model, which we have strictly adhered to since our IPO, is clearly working well.

Our convenience-led, community-focused retail and leisure portfolio has proved well-positioned and well-placed in what has been an uncertain twelve months at the macro economic and political levels. As a business, we have maintained our disciplined approach to stock selection, remained active asset managers, progressed our risk-controlled development pipeline and recycled capital profitably, all of which has allowed us to continue to deliver growing and sustainable cash profits to our shareholders.

Our Funds From Operations ('FFO') of £58.2 million were up 24% compared to the same period last year due to acquisitions made in the last 12 months as well as our highly active asset management programme. The Board recently approved a final quarterly dividend of 5.0 pence per share, resulting in a fully covered ordinary dividend for the year of 20.0 pence per share, up over 8% compared to last year. We are delighted to announce an additional 3.0 pence per share special dividend linked to our acquisition in Sheffield, taking the total dividend for the year to 23.0 pence per share, an increase of 24%. This special dividend demonstrates our commitment to continue to distribute growing cash returns to our shareholders. Looking ahead, the increase in our Q1 FY18 dividend to 5.25 pence per share, an increase of 5% on Q1 FY17, reflects our confidence in the security and sustainability of our cash flows.

Our assets under management now stand at £1.3 billion, £1.1 billion at NewRiver's share, with our EPRA net asset value per share down marginally by 3 pence to 292 pence reflecting the absorption of acquisition costs and Main Market move costs as well as a small 0.6% reduction in portfolio valuation. Importantly, this reduction came in the first half of our financial year, when real estate values were impacted by Brexit fears, and our valuations showed improvement in the second half. Our IFRS net assets have decreased by 0.8%, due principally to the same factors.

During the year, we completed acquisitions totalling £158 million at an equivalent yield of 7.2%. In April 2016 we completed our largest acquisition to date, buying the Broadway Shopping Centre and Broadway Square Retail Park in Bexleyheath, South East London, for £120 million at a blended equivalent yield of 7.0%. We have been active in the year since acquisition, improving rental tone in the shopping centre by 15% and working in partnership with the London Borough of Bexley to design a masterplan for the shopping centre, retail park and surrounding council owned land. In April 2017, following a comprehensive fit out, London based Morleys Department Stores opened at the centre in the 40,000 sq ft unit formerly occupied by BHS. The opening of this new store has been a real success for Morleys, and we have benefitted from increased footfall across the rest of the shopping centre.

We completed the acquisition of Cuckoo Bridge Retail Park in Dumfries in June 2016 in an off-market transaction for £20 million. At the time of acquisition, we identified several opportunities to drive income and capital growth by improving the occupier line-up and have agreed heads of terms with a fashion/homeware occupier to introduce a 20,000 sq ft full line store subject to obtaining planning consent which is anticipated in the next few months.

In September 2016, we moved quickly to acquire a retail warehouse in Sheffield from an open-ended property fund for £18 million. As we completed the acquisition, we exchanged contracts with the occupier to accept a surrender premium of up to £12.25 million by May 2017, meaning that in essence we acquired a 110,000 sq ft prominently located retail warehouse on an 11 acre site for a net price of £6 million. In March 2017, having moved into advanced negotiations with a number of potential occupiers and purchasers, we requested and received the surrender premium, having received rent in the interim, the majority of which we are paying to our shareholders as a 3.0 pence per share special dividend. Pleasingly, the asset has been independently valued at 50% more than our net purchase price.

Across our retail portfolio we continued our track record of strong and improving operational metrics, with the increase in occupancy from 96% in March 2016 to 97% in March 2017 reflecting the compelling nature of our convenience-led, community-focused portfolio to occupiers. Our highly active approach to asset management resulted in the completion of more than 300 new lettings and renewals, with long term deals completed on terms 3.9% ahead of ERV. Importantly our rents remain affordable for our occupiers, at £12.45 psf on average. The combination of our high occupancy and affordable average rents indicates to us that retailers are trading profitably at our assets, underpinning the sustainability of our income. This affordability will be further supported by this year's business rates revaluation, with draft rateable values across our retail portfolio in England, Scotland and Wales falling by over 19% on average. Our pub operators will also benefit from the rates revaluation, saving on average 40% on business rates from 1 April 2017.

During the year, we successfully applied our active asset management approach to our pub portfolio. At the time of the Trent portfolio acquisition, we signed a four year leaseback agreement with Marston's Plc which ends later this year. Of the 189 pubs held in the Trent portfolio, we have now successfully transferred the management of 44 pubs from Marston's, and during the year we secured contracted income on a further 22 pubs by surrendering the leaseback arrangement early and agreeing new 15 year RPI linked leases with Marston's. The remaining pubs will be transferred in small batches over the remainder of the calendar year. We have continued to make selective and profitable disposals from our pub portfolio, selling seven pubs for £4 million in the year representing a 10% premium to March 2016 valuation and over a 30% premium to purchase price.

We have made good progress on our 1.9 million sq ft risk-controlled development pipeline during the year. At our 465,000 sq ft consented regeneration project in Burgess Hill, we have pre-let 49% of the retail and leisure element, up from 41% just six months ago, with leases now signed with Next and Nandos. On the residential element of the scheme, we have agreed terms with a residential investment company for a significant pre-sale. In order to facilitate the development, we recently agreed terms with Lidl and Iceland to surrender and relocate to sites adjacent to the shopping centre, as well as agreeing to re-locate the local council owned library. All of this progress means that we hope to be in a position to start on site later in the summer.

Elsewhere in our risk-controlled development pipeline, in November 2016 we received planning consent at Canvey Island for a 62,000 sq ft retail park which is already 52% pre-let. In the same month we also submitted the planning application for our exciting 236,000 sq ft mixed-use regeneration in Cowley, Oxford. Our current development commitment is modest, with 26,000 sq ft under construction all of which is pre-let. Our risk-controlled approach to development means we will not commit to further developments without substantial pre-letting.

The convenience store programme within our pub portfolio continued to progress, and we handed over a further eight c-stores to the Co-operative in the period taking the total number completed to date to 11. In early 2017 we completed our first c-store disposal for £970,000, representing an initial yield of 4.85%, and over 11% ahead of valuation. We are on site for the construction of a further three c-stores totalling 11,000 sq ft and we have consent to construct a further 15 totalling 53,400 sq ft.

Our LTV was 37% at 31 March 2017, up from 27% at March 2016 predominantly due to the acquisition of our assets in Bexleyheath which completed in April 2016. Our interest cover remained robust at 4.5x and our weighted average cost of debt was 3.5%, down from 3.7% in March 2016.

We completed our move from AIM to a Premium Listing on the Main Market in August 2016 marking a significant milestone for NewRiver and we continued this impressive momentum into December, when we qualified for admission into the FTSE 250, FTSE All-Share and EPRA indices at the first attempt.

We have a fantastic, talented and enthusiastic team at NewRiver and I would like to thank them all for their hard work and significant contribution to this year's results.

Outlook

We believe that with our convenience and community focus, strong operational metrics, affordable rents and conservative balance sheet we are well-positioned to continue to grow and deliver secure and sustainable cash returns to our shareholders.

In the context of the slowdown in the investment market since the EU Referendum we are pleased to have bided our time and believe that current market conditions and the pricing for typical assets which NewRiver wishes to acquire are beginning to provide opportunities for the Company.

We have never relied on the market to drive returns for our shareholders, instead we have ourselves created value by applying our proven business model, and focusing on the convenience-led, community-focused retail and leisure sectors where the UK household budget is spent day in, day out. We remind ourselves that the business was founded in 2009 during a severe recession and has grown into a FTSE 250 entity in less than eight years.

NewRiver is highly capable of enhancing shareholder value through its very active asset management programme and our strict adherence to risk-controlled development practices. Our business model remains highly scalable and we view the future with excitement and confidence.

David Lockhart

Chief Executive

15 May 2017

Property review

Highlights

· Assets under management increased by 14% to £1.3 billion (NRR share £1.1 billion)

· Portfolio capital return down 0.6% including acquisition costs; H2 +0.5% mitigating 1.0% fall seen in H1

· Ungeared total property return +6.8%, outperforming the MSCI-IPD All Retail benchmark by 400 bps

· £158.4 million of acquisitions at an average equivalent yield of 7.2%

· Occupancy increased to 97% from 96% in March 2016; maintained above 94% since NRR was founded in 2009

· 355 total leasing events across 1,108,700 sq ft; new long term retail leasing events on average 3.9% ahead of ERV

· Like-for-like net income +1.2%; affordable average retail rent of £12.45 per sq ft (March 2016: £12.14 per sq ft)

· Like-for-like footfall +0.5%, outperforming benchmark by 210bps

· Eight further convenience stores handed over to Co-operative taking total delivered to date to 11

· Planning granted on 192,900 sq ft, including 62,000 sq ft Canvey Island Retail Park, already over 50% pre-let

· 384,800 sq ft of planning applications submitted, including 236,000 sq ft mixed-use regeneration in Cowley, Oxford

Overview

Conveniently positioned at the heart of the community

We are experts in the convenience-led, community-focused UK retail and leisure market and own, operate and actively manage a high quality, necessity based portfolio of assets that cater to the day to day needs of our consumers, retailers and communities. We are relevant, progressive and create attractive venues that cater to all daily needs.

To successfully drive value and returns for our shareholders we are focused on consistent and sustainable cash flows, the realisation of embedded asset management opportunities and the unlocking of redevelopment and development value.

We successfully apply a disciplined and focused plan to achieve the desired value and returns.

Strategic: Our stock selection is supported by a wealth of experience and discipline which means that we are able to assess and price risk appropriately.

Active: We are able to grow income and unlock value from within our portfolio through active asset management and risk-controlled developments. Either opportunistically or once we have successfully implemented our business plans, we are able to realise and distribute the value we have created to our shareholders, through profitable capital recycling.

Intelligence through research and local market knowledge: Across our retail portfolio, we conduct regular consumer surveys, so we understand how local residents are using our assets, what they value and what we can do to make their lives easier. These show a trend of high frequency visits and loyalty by our core customers. In our view, demographic changes will be as influential if not more so than technology over the coming years and we are well positioned to benefit from the growth of the grey pound and undoubted benefits of click and collect.

Engagement: We have close and well established relationships with our retail and leisure occupiers. We understand their challenges, not least from rising input and staff costs, and we are focused on working with and on behalf of our occupiers to ensure that they will continue to operate profitably at our assets and grow their bottom line.

Experienced and focused: We benefit from an exceptionally talented team that is patient, determined and focused. We have scale within the business to drive efficiency and create value. Our occupiers listen to us and we listen to them.

With uncertainty comes opportunity and we have a proven track record of sustainable cash flow enhancement and value creation and we remain well-positioned for the future.

Portfolio performance

During the year, our portfolio valuation at NRR share increased to £1.13 billion, from £0.97 billion in March 2016. Acquisitions accounted for the majority of the increase, offset by a marginally negative capital return of -0.6%, which includes acquisition costs and capital expenditure incurred. Capital returns fell in the first half by 1.0%, as the investment market stalled in the immediate aftermath of the EU Referendum, but importantly capital returns for the second half of the financial year were +0.5%.

Our capital return compares favourably to the market, outperforming the MSCI-IPD All Retail benchmark of -2.3% by 170 bps. Moreover, we delivered a total property return of 6.8%, significantly outperforming the benchmark of 2.8% by 400 bps.

The portfolio equivalent yield stands at 8.1% in March 2017, from 8.2% in March 2016. The equivalent yield on our Shopping Centres, which account for 61% of our portfolio, has compressed from 7.9% to 7.7%, principally following the acquisition of our assets in Bexleyheath.

Disciplined stock selection

Since 1 April 2016 we have completed £158.4 million of acquisitions in three separate transactions, at an average equivalent yield of 7.2%.

Bexleyheath

Our most significant acquisition was in Bexleyheath, South East London, where in April 2016 we purchased both the Broadway Shopping Centre and the Broadway Square Retail Park for a total cost of £120.3 million at a blended equivalent yield of 7.0%. The assets were acquired from an institutional vendor, and represent NewRiver's largest single asset acquisition to date. The Bexleyheath assets were 100% occupied at acquisition, and provide a balanced range of convenience, food and fashion retailers to the local community, in-line with our wider portfolio. In total, the assets comprise 525,000 sq ft of space, representing over 60% of the town's retail space and provide the principal retail destination for a South East London borough earmarked for significant growth with attractive and sustained footfall of over 9 million per annum.

We believe that the assets are well placed to benefit from rental growth due to the combination of an affluent and growing local population, high occupancy and strong underlying retailer sales. Furthermore, having purchased from an institution, at acquisition we identified a number of opportunities to use our active asset management and risk-controlled development approach to unlock capital growth.

We have been active in the year since acquisition, completing 23,300 sq ft of leasing activity with WH Smiths, Vodafone, Card Factory, Claire's and McDonalds and improving the rental tone of the shopping centre by 15% which is already ahead of our underwriting assumptions. On 13 April 2017, following a comprehensive fit out, London based Morleys Department Stores opened at the centre in the 40,000 sq ft unit vacated by BHS in August 2016. The opening of this new store has been a real success for Morleys, and we have benefitted from increased footfall across the rest of the shopping centre. After absorbing acquisition costs, we have already seen a 3.7% capital return in our first year of ownership, and as we underwrite all acquisitions on a five year view we have identified a number of other active asset management initiatives which we will roll out over the next few years.

We have worked in partnership with the London Borough of Bexley to design a masterplan for the shopping centre, retail park and surrounding council owned land. As part of this process we have identified the potential to build a number of towers in the airspace above our existing ownership, and whilst we are unlikely to build all of these towers, we have now included provision for up to 300 units within the 'early feasibility stage' section of our risk-controlled development pipeline. Importantly, although we commissioned a structural assessment of the assets as part of our pre-acquisition due diligence, we did not include any upside regarding the development potential in our conservative acquisition underwriting assumptions.

Dumfries

In June 2016, we completed the acquisition of Cuckoo Bridge Retail Park, Dumfries, in an off-market transaction for total consideration of £20.2 million. The asset is 100% occupied and comprises 130,000 sq ft of income generating space across seven retail and two drive through units, with 550 car park spaces. The acquisition equated to an equivalent yield of 7.9% with net rental income of £1.5 million per annum and a weighted average lease expiry at acquisition of 8.3 years. Cuckoo Bridge is the dominant retail park in Dumfries, with a strong and isolated catchment, and is located adjacent to a 24 hour Tesco supermarket which provides the main food offer for the town. Anchored by Homebase, the retail park offers a good mix of occupiers including B&M, Poundstretcher, Laura Ashley, KFC and Costa Coffee.

At the time of acquisition, we identified several opportunities to drive income and capital growth by further improving the occupier line-up and have agreed heads of terms with a fashion/homeware occupier to introduce a 20,000 sq ft full line store subject to obtaining planning consent which is anticipated in the next few months.

Sheffield

In September 2016, we moved quickly to complete the acquisition of a retail warehouse in Sheffield from an open-ended property fund for £17.9 million, representing an equivalent yield of 7.6%. The 11 acre site comprises a 110,000 sq ft retail warehouse unit and 580 car parking spaces, and is well located 2.5 miles east of Sheffield city centre and in close proximity to Meadowhall shopping centre.

The asset presented an attractive value-creating opportunity for NewRiver with the unit let to a home improvement retailer no longer in occupation due to over representation in the area. As we completed the acquisition, we simultaneously exchanged contracts with the home improvement retailer to accept a surrender premium of up to £12.25 million to release them from their lease obligations, meaning that in essence we acquired a prominently located retail warehouse for £6 million or less than £55 per sq ft in capital value terms. The timing of the surrender premium was flexible, and we had until early May 2017 to exercise the option.

Since acquisition, we have made good progress in our plans to reposition the asset and in March 2017, having moved into advanced negotiations with a number of potential occupiers and purchasers, we requested and received a surrender premium of £10.8 million, having received £0.7 million of rent in the interim. While our plans are not final at this stage, it is likely we will subdivide the existing retail warehouse into 4-5 units, build two drive through units in the car park and sell a portion of the site to a value food retailer or a self-storage operator. Pleasingly, at 31 March 2017 the asset has been valued at over 50% more than our effective purchase price.

Profitable capital recycling

Since 1 April 2016 we have completed £10.7 million of disposals, on terms 7% ahead of valuation and almost 30% ahead of total cost (being purchase price plus subsequent capex).

During the year we completed the disposal of two assets which were acquired in July 2015 as part of the Ramsay portfolio. At acquisition, the Ramsay portfolio included nine retail parks and four development sites located adjacent to upper-quartile performing Morrison's foodstores. In August 2016 we sold a development site in Newquay for £700,000, and in September we sold Leafield Retail Park in Dumfries for £2.7 million. These disposals were completed marginally ahead of March 2016 book value, and 33% ahead of the price paid in July 2015.

We made a number of disposals across our pub portfolio comprising pub sales to tenants, sales of non-core ancillary land and the sale of our first convenience store. In total we sold seven pubs for £4.1 million, a 10% premium to March 2016 valuation, and over a 30% premium to purchase price. We sold two plots of land adjacent to pubs at the Royal Oak, Kings Bromley and the Ostrich Inn, Longford for £86,000 in aggregate. These plots were held at zero value, and so although small in size they demonstrate the incremental value we are able to extract from the pub portfolio.

In early 2017 we decided to test the convenience store investment market by offering the Spital Lane Co-op, a c-store pub conversion completed in April 2016 and let to the Co-op on a 15 year RPI-linked lease, for sale at auction. The auction was held in February 2017 and the c-store was sold to a private investor for £970,000, representing an initial yield of 4.85%, and over 11% ahead of valuation.

We will continue to recycle mature assets, assets where our estimates of forward looking returns are below acceptable levels and assets where we believe that the risk profile has changed.

Active asset management

Our active asset management is a key driver of long-term capital value and the generation of cash returns to shareholders.

We have an active and hands on approach to asset management utilising our in-house expertise, a deep understanding of our market and strong relationships with our occupiers which means we are able to deliver the right space in the right locations.

Retail

We continued to sign leases on terms ahead of valuers' estimates in the year, completing 333 new lettings and renewals across our retail portfolio, with long term deals secured on average 3.9% ahead of March 2016 ERV. These deals were spread evenly over the year, across 993,300 sq ft which is over 10% of the lettable space in our retail portfolio, reflecting our active asset management approach. Our increased scale means that we can offer occupiers the opportunity to complete deals on a portfolio basis and during the year we completed 8 lease renewals with Peacocks/Edinburgh Woollen Mill across 54,400 sq ft, securing a 13.4% increase in passing rent to £634,000. This high volume of leasing activity means that our occupancy rate was 97% at March 2017, a significant increase from 96% in March 2016.

Our average rents remain affordable at £12.45 per sq ft, with the increase from £12.14 at March 2016 due predominantly to the assets purchased in Bexleyheath. The combination of our high occupancy and affordable average rents indicates to us that retailers are trading profitably at our assets, underpinning the sustainability of our income. This affordability will be further supported by the 2017 business rates revaluation, with draft rateable values showing that across our retail portfolio in England, Scotland and Wales rateable values will fall by over 19% on average, with over 90% of our occupiers benefitting from this saving.

Footfall across the shopping centre portfolio totalled 149 million during the year, up 0.5% compared to last year on a like-for-like basis and outperforming the national benchmark by 210 bps. Footfall was particularly strong at assets where we have recently completed active asset management or risk-controlled development initiatives. For example, at The Forum Shopping Centre, Wallsend, like-for-like footfall was up 11%, due principally to the opening of a new 18,500 sq ft Aldi and 1,450 sq ft Burger King in the second half of the year. Downward footfall movements were often linked to ongoing and planned development activity. For example, at the Abbey Centre, Newtownabbey, footfall was down almost 9% mainly due to the volume of ongoing development and enhancement works at the centre, such as the new Next anchor store which opened in December 2016, which we believe will drive future footfall. Reflecting the impact of our actions, we saw ERV growth of almost 7% in the year at the Abbey Centre, and a capital return of almost 3%.

A year ago we had exposure of 1% of total rent to BHS, spread across three centres. Ahead of the BHS administration, we advanced plans to secure alternative occupiers and we have made good progress in re-letting these units. At the Abbey Centre, we agreed a temporary letting of the former BHS unit to Dunnes Stores, the leading Irish department store operator, to allow them to continue to trade whilst we extend their current unit by 15,000 sq ft. We have terms agreed with a best in class retailer to take occupation of the 40,000 sq ft former BHS unit at the end of the temporary Dunnes lease. At Priory Meadow, Hastings we have terms agreed with a major flagship retailer that we believe will be a major attraction to the centre and at the Burns Mall Shopping Centre, Kilmarnock, we are actively pursuing a subdivision and are in discussions with a range of retail and leisure operators.

As well as our shopping centres portfolio, we remained active across our retail warehouse portfolio. During the year we completed a comprehensive programme of asset management enhancements at Clough Road Retail Park in Hull, having acquired the asset in June 2014 as part of the Linear Portfolio. We paid £7.5 million for the 95,500 sq ft park which was only 85% let, was in need of investment and had adjacent PC World and Currys units. Within a year of acquisition, we had let the vacant unit to Go Outdoors and the park was fully occupied. In the year under review, we signed a new 10 year lease with Currys and negotiated the surrender of the PC World unit, which we then sub-divided and re-let to Office Outlet and Halfords at an improved rental level. In November 2016, we completed the construction of a Costa coffee pod in the car park, signed on a 15 year lease, taking total investment in the asset to £1.2 million, and driving a valuation uplift since acquisition of over 30%.

Marketing & commercialisation

The principal objective of our shopping centre marketing is to drive footfall, dwell time and spend because if our retailers are successful, our shopping centres and our business are successful. We seek to achieve these marketing objectives by delivering an outstanding customer experience through innovative, high-quality and consistent marketing.

In today's retail and leisure environment achieving these objectives requires highly targeted, smart and creative marketing by working in close partnership with our retailers to ensure that our marketing achieves the greatest return on investment. Successful engagement with our shoppers and retailers relies on a detailed understanding of our shoppers' needs and the goals and challenges of our retailers. To this effect, this year we have begun developing bespoke retailer campaigns that utilise the brands of the world-class retailers we have within our portfolio to deliver marketing campaigns that integrate the brick and click by driving click and collect usage for our physical store retailers. 

Our 33 shopping centres are convenience-led, community-focused retail and leisure hubs so providing consistent convenience, affordability and accessibility is paramount. Our 2017 shopping centre consumer surveys reported a 4-fold increase in the usage of click and collect at our centres, with 2.3% of shoppers who visited using click and collect, up from 0.6% in 2015. In 2017, the average click and collect spend (online spend collected at the centre) was £44. Importantly, 57% of those shoppers went on to make an additional spend of £24.82 on retail and 24% made an additional spend of £5.40 on catering. The NewRiver click and collect shopper is therefore worth an average of £60 versus the non-click and collect shopper who is spending £25.46 on average per visit. In summary, from 2015 we have grown click and collect user volumes by almost four times, those shoppers are worth over twice as much as the non-user and are a highly valuable customer to target for the benefit of our retailers.

We are working on ways to bridge the gap between online and offline shopping across our portfolio and channel customer spend back into store. During this financial year we ran a sector-first marketing initiative with Amazon called "Lucky Codes", becoming the first UK shopping centre owner to partner with Amazon in a bespoke campaign to drive awareness and usage of the Amazon Lockers located at 20 of our centres. Importantly, it was an exciting opportunity for us to offer our customers new ways to shop with us. Click and collect works well for both our customers and our shopping centres. Our customers enjoy free and convenient deliveries and returns whilst our centres benefit from uplifts in sales and footfall as a result of people choosing the lockers as their means of delivery. 

The Outcome:

· Lucky Codes rewarded customers using the lockers and shopping in the centre between Black Friday (25 November 2016) through to 2 December 2016 and featured a fully integrated marketing campaign.

· The campaign was targeted specifically at the over 35 age bracket linked to research recently published by Savills that the Over 35's are the largest users of click and collect, with a large number owning their own houses, cars and having families as well as being primary shoppers within the NRR portfolio. We therefore saw an opportunity to capture a new customer within our catchments.

· 18,000 emails were issued from Amazon to their Amazon customers within the postcode sectors of all 20 participating centres. That email achieved a 28% open-rate, being opened by over 5,000 customers who are now aware they can click and collect at our centres.

· As a result of the campaign, footfall across the participating centres was +4% and was +2% ahead of the target.

· Amazon Locker usage was up +40% and +30% ahead of target. 

We continue to drive our marketing forward creating significant economies of scale as we drive innovation, improve sophistication, consistency and co-ordination at a corporate and asset level in a variety of ways to ensure our shoppers are happy and our marketing is achieving the greatest return on investment for our retailers.

Increasing the volume of commercialisation activity across our retail portfolio has been an area of focus for NewRiver for a number of years, as it represents a significant opportunity to generate incremental income from our existing assets as well as increasing customer dwell time and basket spend. During the year to March 2017, commercialisation income grew by an impressive 41% to £3.2 million from £2.3 million in March 2016. Whilst this increase was fuelled by acquisitions, even on a like-for-like basis the growth was still almost 9%.

Highlights for the year have included investing in purpose-built kiosks for temporary promotions to improve mall aesthetics. They have also generated increased income and a second phase of investment is now underway. We have seen a dramatic improvement in mall aesthetics with over 80 bespoke mall kiosks now installed, 26 of which are independent retailers all investing in a future with NewRiver. At Bexleyheath we have introduced Krispy Kreme and Mr Pretzels to our portfolio, both of which are now in discussions to expand across other centres in the portfolio.

During the year we signed ten year leases with our preferred mobile phone accessories operator, Top Gift, which include scheduled kiosk upgrades to keep the offer fresh. Contracts are now also in place with Elonex for the installation of digital advertising screens in the 17 centres and four further centres now have large format external advertising panels.

Pubs

In October 2013, we acquired a portfolio of 202 pubs from Marston's Plc (the 'Trent' portfolio). Each pub in the portfolio was handpicked by management for its high roadside visibility, high passing footfall and prominent location, with the intention of converting a significant number of them for retail/residential use. The pubs in the portfolio traded strongly, with high occupancy and strong income returns, and consequently in August 2015 we acquired a second portfolio of 158 pubs from Punch Taverns (the 'Mantle' portfolio). We have since sold nine pubs, many of which were to existing tenants, and closed seven for convenience store conversion meaning we now have 344 pubs remaining in our portfolio.

Pub portfolio movements

At the time of the Trent portfolio acquisition, we signed a four year leaseback agreement with Marston's Plc, which comes to an end at the end of the year. We have been active in negotiating the transfer of a number of pubs in advance of the deadline, with 35 pubs transferred to NewRiver with existing tenancies in place and 9 pubs transferred to be operated by LT Management, the specialist pub management company that already manages the Mantle portfolio on our behalf. Further to these transfers, in December 2016 we secured contracted income on 22 pubs by surrendering the leaseback arrangement 13 months early and agreeing new 15 year RPI linked leases with Marston's PLC.

We have in place a structured programme to transfer the remaining 123 Trent pubs to the management of NewRiver and LT Management, and through a detailed estate review, involving all relevant stakeholders, we have split the transfer into small batches in order to manage the programme effectively. The first tranche of pubs will be transferred in May with the last batch transferring by the end of the agreement. Throughout the programme our team will be visiting each site and working with the publicans to ensure a smooth transition. We are confident that the majority of publicans will remain in their pubs during the transfer and our operations managers and instructed solicitors will ensure that new leases and tenancies are implemented seamlessly. For the minority of pubs where the publican intends to vacate, we will implement our tried and tested lettings programme to recruit high quality publicans who will continue to grow the business. Throughout the transfer programme we are working closely with Marston's to ensure that the process is as smooth as possible.

Trent portfolio transfer programme

* 21 pubs transferred per the NewRiver REIT plc Third Quarter Company Update, with one additional pub added subsequently

Across our entire pub portfolio we are making targeted capital investment in order to drive trade and increase values. Since 1 April 2016, we have completed works on nine of our pubs, investing more than £100,000 in projects including external redecoration and improved signage to enhance curb appeal, internal refurbishment to enhance the customer experience and extensive works to improve kitchens, toilets and tenant accommodation. At those pubs where we have completed refurbishment works we have seen significant improvements to both rental income and sales volumes, and we have a further £2.3 million of capital expenditure planned over the next twelve months.

Lastly, as part of the 2017 business rates revaluation our pub operators will save 40% on average on business rates from 1 April 2017 when the business rate relief threshold rose from £6,000 to £12,000.

Risk-controlled development

We have made significant progress on our risk-controlled development pipeline which now totals 1.9 million sq ft (1.4 million sq ft in the near-term) across our retail (1,653,100 sq ft) and pub (271,500 sq ft) portfolios, and which we believe will be a key driver of long term returns for our shareholders.

Our development strategy includes:

· Regeneration of existing space (e.g. new food court at Montague Centre, Worthing)

· Development of sites acquired in portfolio acquisitions (e.g. Canvey Island retail park)

· Capitalising on opportunities above or adjacent to existing assets (e.g. Cowley, Oxford, new build c-store/residential development)

· Complete redevelopment of existing assets (e.g. Burgess Hill, c-store/residential pub conversions)

Total development pipeline

*Excluding residential

During the period, we completed 77,100 sq ft of development across 11 assets, with 26,000 sq ft of development currently under construction.

Since the start of the period, we have secured planning permission for 192,900 sq ft of development, including Canvey Island Retail Park and an 85 bedroom hotel in Romford. We have submitted planning applications on 384,800 sq ft of development, including 236,000 sq ft mixed-use regeneration in Cowley, Oxford and a 100 unit residential scheme in Stamford.

Retail

Retail portfolio development pipeline

*Excluding residential

Completed in period/Under construction

Abbey Centre, Newtownabbey: At the Abbey Centre, located 6 miles to the north of Belfast, a new 44,000 sq ft Next anchor store was handed over for fit-out in August 2016 on schedule and within budget and Next were delighted with the finished product. The store opened on 14 December 2016 and we understand that early trading has been ahead of forecast. We are now on-site with the subsequent phase of development works at the centre, constructing a 15,000 sq ft extension to create a 35,000 sq ft flagship unit for Dunnes Stores, the leading Irish department store operator, which we will hand over for fit-out works by the end of the summer 2017.

Planning granted

Canvey Island: We acquired the site in Canvey Island, Essex, in July 2015 as part of the Ramsay portfolio, and submitted a planning application in June 2016 to create a 62,000 sq ft (87,000 sq ft including mezzanine) retail park. We received planning consent in early November 2016, and this consent was granted with no section 106 requirement nor any restriction on opening hours. The park is already 52% pre-let to B&M and Sports Direct, with a further 23% in solicitors' hands. This pre-letting activity has significantly de-risked the development, and so it is our intention to begin onsite works within the next six months.

Burgess Hill: We secured full detailed planning consent for our £65 million mixed-use redevelopment of Burgess Hill town centre in March 2016. The 465,000 sq ft project will provide a 10-screen multiplex cinema, a 63 bed hotel pre-let to Travelodge, a higher quality retail offer and new restaurant and leisure provisions, 174 additional car park spaces and an improved public realm, together with 142 new residential units and a new purpose built library. In the first half of the financial year, we exchanged contracts with Cineworld so that at 30 September 2016, the retail and leisure element of the scheme was 41% pre-let. Since then we have exchanged contracts on a further 24,500 sq ft with Next and Nandos, meaning that the retail and leisure element of the scheme is now 49% pre-let, with a further 10% in solicitors' hands. On the residential element of the scheme, we have terms agreed with a residential investment company for a significant pre-sale.

In order to facilitate the development, we have agreed terms with Lidl and Iceland to surrender and relocate to sites adjacent to the shopping centre, as well as agreeing to re-locate the local council owned library. All of this progress means that we hope to be in a position to start on site later in the summer.

In planning

Cowley, Oxford: Templars Square shopping centre has been at the heart of Cowley, less than 2 miles from Oxford city centre, for over fifty years and its future success is of great importance to the local community. We have owned Templars Square since December 2012 and in November 2016 we submitted a planning application for a 236,000 sq ft mixed-use development to rejuvenate the shopping centre, meet strong demand for new housing in the local area and add a much needed choice of restaurants and hotels to Cowley. The development will include a 71-bed hotel, 226 new residential apartments, modernised car parks and major improvement of the public realm. The leisure element of the scheme is already 82% pre-let, having exchanged contracts with Travelodge last year.

A combination of rationalisation of the existing car park provision, capitalising on the air space above the centre and site assembly have enabled a proposal with significant massing. The existing shopping centre will continue to trade throughout and we are confident that its rental tone will benefit from the improvement works. Having completed a comprehensive programme of community engagement and consultation both prior to and following the submission of our planning application, we anticipate that our planning application will be determined at Planning Committee in July 2017.

Stamford: We acquired the 8 acre site in Stamford, Lincolnshire, in July 2015 as part of the Ramsay portfolio, along with our Canvey Island development site and two other development sites. The site is well located less than 1 mile from the centre of Stamford and in March 2017 we submitted an outline planning application for the provision of up to 100 dwellings comprising a mix of house types and tenures.

Pre-planning

Capitol Shopping Centre, Cardiff: We are in pre-application consultation with Cardiff Council to bring forward a major re-positioning of the Capitol Shopping Centre, acquired in January 2016 as part of the Neptune Portfolio. The centre is well located in the city centre, benefitting from a high volume of commuter traffic from Cardiff Queen Street Station as well as a significant student population. We plan to reposition the centre as a mixed retail and leisure destination, and construct 400 student accommodation units in the air space above the centre.

Early feasibility stages

We believe that our risk-controlled development pipeline will be a key driver of future growth and we are currently reviewing a number of medium-term opportunities across our retail portfolio. These opportunities include 127,600 sq ft of extensions across our shopping centre portfolio and over 250,000 sq ft of residential potential above our Greater London shopping centres in Bexleyheath and Penge.

Pubs

Pubs portfolio development pipeline

*Excluding residential

As well as generating high levels of low risk cash returns, our portfolio of 344 pubs contains a number of inbuilt value creating development opportunities. These include the potential to build convenience stores or residential units on surplus land adjacent to pubs which was effectively acquired with zero value, and opportunities to convert pubs into convenience stores or residential units.

Convenience stores

We signed a conditional agreement with the Co-operative in September 2014, which was varied in January 2016, to deliver up to 45 c-stores for fixed lease terms of 15 years at rents ranging from £15.00-17.50 per sq ft, with RPI linked increases capped at 4% and collared at 1%. In January 2017, we signed a supplemental agreement with the Co-operative revising this number to 40 c-stores. The agreement also includes performance fees of up to £3.4 million, with the first payment triggered by the delivery of our 15th c-store to the Co-operative, which we expect to occur in the first half of the next financial year.

To date we have handed over 11 c-stores to the Co-op, with eight c-stores totalling 29,800 sq ft handed over since 1 April 2016. Of the stores delivered to date, eight utilised surplus land adjacent to the existing pubs, two were pub conversions and one was a new build on a site previously occupied by a pub. We completed our first c-store disposal, selling the Spital Lane Co-op for £970,000 in February 2017, representing an initial yield of 4.85% and over 11% ahead of valuation.

We are on site for the construction of a further three c-stores totalling 11,000 sq ft and we have consent to construct a further 15 totalling 53,400 sq ft.

Residential

Our pubs portfolio development pipeline includes the potential for almost 200 residential units across 55 pub sites. To date we have received planning consent for 71 residential units across 25 pub sites, with consent received for 50 units across 16 pub sites in the current financial year. Using our in-house residential planning expertise, our strategy with these residential opportunities is to create value by obtaining planning consent, and then to realise value by selling on to local developers. We currently have 13 opportunities on the market, five of which are in solicitors' hands at pricing ahead of March 2017 valuation.

Allan Lockhart

Property Director

15 May 2017

Finance review

Highlights

· Funds From Operations ('FFO') increased by 23.6% to £58.2 million (FY16: £47.1 million) delivering an FFO per share of 24.9 pence

· Ordinary dividend per share increased by 8.1% to 20.0 pence (FY16: 18.5 pence) and fully covered in line with Company's Financial Policy

· Special dividend declared of 3.0 pence per share taking total dividend to 23.0 pence, an increase of 24.3% on prior year

· FY18 first quarter dividend announced today of 5.25 pence per share, an increase of 5.0% (Q1 FY17: 5.00 pence)

· EPRA NAV per share decreased by 1.0% to 292 pence (March 2016: 295 pence); increased from 290 pence reported in H1 due to capital return of +0.5% in H2

· IFRS profit after tax of £36.2 million (FY16: £69.4 million) including £19.4 million of non-cash fair value reductions; IFRS basic EPS 15.5 pence (FY16 39.2 pence); IFRS net assets £684.5 million (March 2016: £689.9 million)

· Total accounting return (dividend paid basis) +5.7%; total accounting return (dividend declared basis) +6.8%

· Loan to value increased to 37% (March 2016: 27%) due to £158.4 million of acquisitions completed in the period; well within the Company's stated Financial Policy

· Cost of debt 3.5% (March 2016: 3.7%); interest cover of 4.5x (March 2016: 4.3x)

· Refinancing exercise underway, expected to complete in FY18 with Management intending to increase maturity and convert the majority of the Company's debt to unsecured

Key performance measures

The Group financial statements are prepared under IFRS where the Group's interests in joint ventures are shown as a single line item on the income statement and balance sheet (in accordance with IFRS 11 Joint Arrangements) and all subsidiaries are consolidated at 100%.

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 also presented on this basis.

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 the Financial Statistics included on page 2 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 (BPR) reporting framework. We report a number of 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. The measures used in the review below are all APMs presented on a proportionally consolidated basis unless otherwise stated.

The APM on which Management places most focus, reflecting the Company's commitment to driving cash income returns and growing the dividend, is Funds From Operations ('FFO'). We feel that this measure is most appropriate when considering our dividend policy as it is a cash measure and it is familiar to non-property and international investors. Funds From Operations is a Company measure determined by cash profits which includes realised recurring cash profits, realised cash profits or losses on the sale of properties and excludes other one off or non-cash adjustments. Previously, we referred to this measure as EPRA Adjusted earnings.

Overview

Our convenience-led, community-focused retail and leisure portfolio has delivered another highly profitable year for our shareholders, with Funds From Operations ('FFO') increasing by 23.6% to £58.2 million, from £47.1 million in FY16. FFO per share was 24.9 pence, and our ordinary dividend per share increased by 8.1% to 20.0 pence (FY16: 18.5 pence).

Reflecting our commitment to continue to deliver growing cash returns to shareholders, we declared a special dividend of 3.0 pence per share taking our fully covered total dividend for the year to 23.0 pence, an increase on FY16 of 24.3%. Including the special dividend and based on our opening EPRA NAV per share, we provided a high income yield of 7.8% to our shareholders.

IFRS Profit for the period after tax of £36.2 million decreased by £33.2 million from £69.4 million in FY16 due predominantly to £24.0 million of non-cash property revaluation surplus generated in FY16, compared to a decline of £15.4 million and some mark to market non-cash adjustments to interest rate instruments in the current year.

IFRS net assets have proved robust decreasing by only 0.8% to £684.5 million, from £689.9 million at 31 March 2016. When our portfolio was last independently valued in September 2016 we reported IFRS net assets of £674.6 million, reflecting exceptional costs linked to our move to the Main Market as well as the adverse impact of the EU Referendum on our portfolio valuation, and so we are pleased to report a positive NAV performance in the second half of the year. EPRA NAV per share decreased by 1.0% to 292 pence per share, from 295 pence per share at 31 March 2016.

Our operations are underpinned by a conservatively positioned balance sheet which we have maintained well within our stated Financial Policies, with LTV of 37% (March 2016: 27%) and interest cover of 4.5x (March 2016: 4.3x). The increase in LTV was due predominantly to the acquisition of our assets in Bexleyheath which completed in April 2016, and on a proforma basis our LTV at March 2016 was 35%. This acquisition was completed utilising our existing cash resources and taking on a new debt facility, which, along with our other refinancing activities, contributed to the reduction in our cost of debt from 3.7% in March 2016 to 3.5% in March 2017.

The provider of the new facility, DekaBank, was keen to put in place a longer term loan but we agreed to just a two year maturity, knowing that a balance sheet refinance in the near future would be a more effective longer term solution. This meant that as at 31 March 2017 our weighted average debt maturity was deliberately lower at 2.5 years.

We recently appointed Rothschild & Co as independent debt advisor to assist Management in completing this refinancing in the next twelve months. A low debt maturity puts the Company in the best possible position to complete this exercise in a cost-efficient and timely manner, maximising the cost benefit to our shareholders. As part of the proposed refinancing, we intend to increase our debt maturity and become an issuer of unsecured debt.

Reflecting our confidence in the strength and sustainability of our underlying cash profits, the Board has approved a Q1 FY18 dividend of 5.25 pence per share, a further increase of 5% (Q1 FY17 5.00 pence).

Reconciliation of IFRS profit after taxation to Funds From Operations

Income statement

Funds From Operations is represented on a proportionally consolidated basis in the table below.

1. Including 3.0 pence special dividend

Net property income

Group net property income increased by 47% to £80.4 million, from £54.6 million in FY16. This increase was due primarily to £158.4 million of acquisition activity completed in the current year, as well as the full year impact of acquisition activity completed in the year to March 2016.

On a proportionally consolidated basis, net property income increased by 33.5% to £89.7 million, from £67.2 million in FY16 with the key driver being the acquisition activity described above.

The full year impact of net acquisitions completed in the year to March 2016 added £5.9 million to net property income. Current year net acquisitions added £8.7 million to net property income. In April 2016, we acquired the Broadway Shopping Centre and the Broadway Square Retail Park in Bexleyheath for a total cost of £120.3 million. In June 2016 we completed the acquisition of Cuckoo Bridge Retail Park in Dumfries for £20.2 million and in September 2016 we completed the acquisition of a retail warehouse in Sheffield for £17.9 million.

Linked to our acquisition in Sheffield, as well as receiving rent from the date of acquisition we also received a surrender premium from the incumbent occupier. Including rent received and the premium itself, receipts totalled £11.5 million.

Administrative expenses

Administrative expenses increased by 7.1% during the year, to £13.6 million from £12.7 million in FY16, but importantly our cost ratio reduced to 15.1% (FY16: 18.5%) demonstrating the benefits of scale to the business.

In addition to these administrative costs, we incurred exceptional costs of £1.2 million (March 2016: £0.9 million) linked to our move to the Main Market which completed in August 2016. While the Main Market move costs of £2.1 million are significant, we are confident that the benefits of access to a wider pool of capital and improved liquidity in our shares will outweigh this cost over the longer term. We qualified for the FTSE 250, All-Share and EPRA indices in December 2016, and have already welcomed a number of new shareholders to our share register as a consequence.

Net financing costs

In FY17, net financing costs increased by 10.3% to £17.1 million from £15.5 million in FY16. Over the same period, our property portfolio has increased by 16.5% to £1,130.6 million, which is significantly more than the increase in finance costs. This differential is caused by our growing scale and the reduction in our cost of debt from 3.7% to 3.5% due to refinancing activity completed in the year, which is explained in the 'Net debt & financing' section of this Review.

Profit/(loss) on disposals

During the year ended 31 March 2017 we completed a modest level of property disposals compared to the prior year, reflecting the slowdown in the investment market following the EU Referendum in June 2016. The proceeds of our disposals were £10.7 million at NRR share, and these disposals were completed at a premium to book value of £0.3 million. This level of activity compares to £48.2 million of disposals completed in the year to March 2016, at a premium to book value of £8.3 million.

Profitable capital recycling is a key aspect of our business model, and we remain committed to recycling mature assets, assets where our estimates of forward looking returns are below acceptable levels and assets where we believe that the risk profile has changed.

Taxation

As a REIT, the Company is not exposed to tax on qualifying UK property rental income and gains arising from disposal of exempt property assets. In the year ended March 2017, we incurred a corporation tax charge of £1.2 million, compared to a £0.1 million charge incurred in the year to March 2016.

The majority of the charge incurred relates to income received from the Mantle portfolio of pubs, which we purchased from Punch Taverns in August 2015. The occupational agreement for some of these pubs is on a 'managed' basis, which means that we receive a profit from the pubs rather than just a rental income.

Our growing dividend

At NewRiver, we are proud of our track record of delivering a growing ordinary dividend to our shareholders, and we are committed to maintaining this discipline in the future. Our dividend policy is driven by two key objectives:

· Growing cash FFO and FFO per share so that we can continue to pay a growing and fully covered dividend

· The REIT requirement to pay out at least 90% of recurring cash profits

We are committed to a fully covered dividend, and this is one of our four key Financial Policies. Our Financial Policies are explained in the 'Net debt & financing' section of this Review.

In FY17, we increased our ordinary dividend by 8.1% to 20.0 pence, from 18.5 pence in FY16. Further to this, today we announced an additional 3.0 pence special dividend linked to the retail warehouse acquisition in Sheffield which we completed in September 2016. We acquired the Sheffield asset for £17.9 million, and during the year we received a surrender premium and rent from the incumbent occupier totalling £11.5 million, the majority of which we will pay to our shareholders as a special dividend. The special dividend will be paid on 4 August 2017 to shareholders on the register at close of business on 16 June 2017. The ex-dividend date will be 15 June 2017. The dividend will be payable as a REIT Property Income Distribution (PID).

Today we also announced our ordinary dividend for the first quarter of FY18 of 5.25 pence, an increase of 5.0% from the 5.00 pence paid in the first quarter of FY17. The ordinary dividend will be paid on 4 August 2017 to shareholders on the register at close of business on 16 June 2017. The ex-dividend date will be 15 June 2017. The quarterly dividend will be payable as a REIT Property Income Distribution (PID).

Balance sheet

EPRA net assets include a number of adjustments to the IFRS reported net assets and both measures are presented below on a proportionally consolidated basis.

Net assets

At 31 March 2017, IFRS net assets decreased by 0.8% to £684.5 million, from £689.9 million at 31 March 2016. This decrease is after absorbing purchase costs on £158.4 million of acquisitions, one off Main Market move costs and a 0.6% reduction in capital values. At 30 September 2016 we reported IFRS net assets of £674.6 million, and so in the second half of the financial year we saw an increase in net assets, driven by a capital return across our portfolio of 0.5%.

EPRA net assets ('EPRA NAV') is calculated by adjusting IFRS net assets to reflect the potential impact of dilutive ordinary shares, and to remove the fair value of any derivatives held on the balance sheet. These adjustments are made with the aim of improving comparability with other European real estate companies. EPRA NAV per share decreased by 1.0% to 292 pence per share, from 295 pence per share at 31 March 2016.

Net debt & financing

Net debt

Analysis of movement in net debt (£m)

Net debt increased by £156.2 million in the period predominantly due to £162.2 million of acquisitions (including purchase costs). This included our largest acquisition to date in Bexleyheath where we purchased a retail park and shopping centre for £120.3 million.

Net cash inflow from operations was £60.0 million, £1.8 million in excess of FFO and demonstrating the highly cash generative nature of our business and our efficient working capital management. We paid £46.0 million of dividends to our shareholders, being 19.75 pence on a per share basis.

We completed £11.3 million of disposals in the year on terms 7% above valuation, including £5.2 million of disposals across our pub portfolio and the disposal of two assets from our Ramsay retail warehouse portfolio, totalling £3.4 million.

We invested £17.3 million into our portfolio, either through active asset management initiatives or on our risk-controlled developments. During the year we spent £6.7 million on our pub portfolio, principally on the construction of eight convenience stores for the Co-operative, £1.3 million on asset enhancement works on the Piazza in Paisley, £1.2 million at The Forum in Wallsend (including a drive through unit for Burger King) and £0.8 million at Clough Road Retail Park in Hull where we sub-divided and re-let the former PC World unit and constructed a Costa coffee pod in the car park.

Financial Policies

1. Dividend cover includes the special dividend of 3.0 pence per share

Our conservative Financial Policies were put in place in consultation with shareholders and form a key component of our financial risk management strategy.

· Our Loan to Value was 37% at 31 March 2017, increased from 27% at 31 March 2016 due to the £158.4 million of acquisitions made in the period. Our balance sheet gearing increased to 52% from 29% in the year, again due to acquisitions completed. Both of these measures are significantly below our stated upper limits, but we are comfortable at these levels and do not intent to increase our Loan to Value or balance sheet gearing in the near term.

· Our interest cover was 4.5x at 31 March 2017, increased from 4.3x in March 2016 and significantly ahead of our financing policy which requires a minimum cover of 2.0x.

· Our dividend cover, calculated with reference to FFO per share and including both ordinary and special dividends, was 108% at 31 March 2017, in line with our policy of at least 100% dividend cover.

Financing

We attribute significant value to the strength of the relationships we enjoy with our lenders, and during FY17 we continued to build on our existing strong relationships with Barclays, HSBC, Santander, Lloyds and AIG, as well as establishing a new relationship with DekaBank.

The DekaBank facility formed part of our largest acquisition to date in Bexleyheath where we purchased a retail park and shopping centre for £120.3 million in April 2016. This acquisition was part funded by a new £49 million facility with DekaBank, at an all in cost of 2.2%.

In July 2016 we signed an improved £85.3 million debt facility with AIG on our pub and convenience store portfolio. Under the terms of the new facility, the bank margin was reduced by 30% and the loan maturity was extended from 2018 to 2021. Following this refinancing activity, our weighted average interest rate reduced to 3.5%, from 3.7% at March 2016.

Our weighted average debt maturity is deliberately low at 2.5 years, and in February 2017 we appointed Rothschild & Co as our independent debt advisor to assist Management in completing a balance sheet refinancing exercise. Unhindered by legacy debt issues and with a low debt maturity we are well placed to complete this exercise in a cost-efficient manner, maximising the benefit to our shareholders. Our strategy is to refinance almost all of our existing secured facilities with a range of unsecured facilities, significantly extending our weighted average debt maturity and reducing our cost of debt. Balance sheet scale and a strong interest cover are important factors in our ability to achieve this objective and we believe that our conservative Financial Policies leave us well placed.

Summary

We have built a highly cash generative and profitable business that has once again delivered a fully covered and growing cash dividend to our shareholders. Looking ahead, with the positive feedback we have already received at this early stage of our refinancing exercise, and with our ongoing active asset management and risk-controlled development initiatives, we feel confident in our ability to continue to deliver a fully covered and growing dividend to our shareholders.

Mark Davies

Chief Financial Officer

15 May 2017

Principal risks and uncertainties

The Board overseas the Group's risk management and internal controls. It determines the Group's risk appetite. The Audit Committee monitors the effectiveness of the Group's risk management and internal controls systems. The Executive Committee is responsible for risk management on a day-to-day basis and monitors strategic and other risks. It delegates accountability for risk management to the asset managers and monitors their performance

Principal Risks

The current principal risks facing the Company are described in the table below. The risks have the potential to affect the business of the Group should they occur

Directors' Responsibilities Statement

The Group's annual report for the year ended 31 March 2017 contains the following statement of Directors' responsibilities. Certain parts of the annual report are not included within this announcement.

The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group's financial statements in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period.

In preparing these financial statements, the Directors are required by International Accounting Standard 1 to:

· properly select and apply accounting policies;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements in IRFSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and make an assessment of the Company's ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group Financial Statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

We confirm that, to the best of our knowledge:

· the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

· the strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

· the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

This responsibility statement was approved by the Board of Directors on 15 May 2017 and is signed on its behalf by:

David Lockhart Mark Davies

Chief Executive Officer Chief Financial Officer

15 May 2017

CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2017

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

During the year, the Group completed its move to the Main Market and reorganised via a scheme of arrangement. See paragraph 2 of note 1 for details of how the reorganisation has impacted the financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

All items in the consolidated statement of comprehensive income will be recycled to the income statement. The notes form an integral part of these financial statements.

During the year, the Group completed its move to the Main Market and reorganised via a scheme of arrangement. See paragraph 2 of note 1 for details of how the reorganisation has impacted the financial statements.

CONSOLIDATED BALANCE SHEET

As at 31 March 2017

The notes form an integral part of these financial statements.

During the year, the Group completed its move to the Main Market and reorganised via a scheme of arrangement. See paragraph 2 of note 1 for details of how the reorganisation has impacted the financial statements.

The financial statements were approved by the Board of Directors on 15 May 2017 and were signed on its behalf by:

David Lockhart Mark Davies

Chief Executive Chief Financial Officer

NewRiver REIT plc

Registered number: 10221027

CONSOLIDATED CASH FLOW STATEMENT

As at 31 March 2017

During the year, the Group completed its move to the Main Market and reorganised via a scheme of arrangement. See paragraph 2 of note 1 for details of how the reorganisation has impacted the financial statements.

The notes form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

As at 31 March 2017

During the year, the Group completed its move to the Main Market and reorganised via a scheme of arrangement. See paragraph 2 of note 1 for details of how the reorganisation has impacted the financial statements.

The notes form an integral part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

1. Accounting policies

General information

NewRiver REIT plc (the 'Company') and its subsidiaries (together the 'Group') is a property investment group specialising in commercial real estate in the UK.

Scheme of arrangement

During the year, the Group completed its move from AIM to the premium listing segment of the official list, trading on the Main Market of the London Stock Exchange. NewRiver REIT plc became the ultimate parent company, with the former parent company, NewRiver Retail Limited, becoming a direct subsidiary of NewRiver REIT plc, in a scheme of arrangement on 18 August 2016. The principal steps of the group reorganisation were as follows:

NewRiver REIT plc was incorporated in the United Kingdom on 8 June 2016 under the Companies Act 2006 as a public company. On incorporation, the share capital of NewRiver REIT plc was £50,000.02 divided into 2 ordinary shares of 1 pence and 50,000 redeemable preference shares of £1. The preference shares were redeemed on 12 October 2016.

As part of a scheme of arrangement under Guernsey law, all issued ordinary shares in the capital of NewRiver Retail Limited, the former holding company of the Group, were cancelled by way of a reduction of capital on 18 August 2016. Following the cancellation of the shares, NewRiver Retail Limited issued a corresponding number of ordinary shares to the Company, such that the Company held all of the issued shares in the capital of NewRiver Retail Limited. The Company has, in turn, issued ordinary shares to the former shareholders of NewRiver Retail Limited on a one-for-one basis. The result of the share cancellation and share issue is that the Company is now the ultimate parent company of the Group.

Throughout the period from incorporation to 18 August 2016, NewRiver REIT plc was a dormant company with no revenues and no assets and did not constitute a business as defined by IFRS 3 Business Combinations. The transaction therefore falls outside the scope of that standard. Following the guidance regarding the selection of an appropriate accounting policy provided by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the transaction has been accounted for using the principles of merger accounting, allowed for group reconstructions, as set out in FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland.

This policy, which does not conflict with IFRS, reflects the economic substance of the transaction as a continuation of the previous Group. The comparatives presented in these consolidated financial statements are therefore the consolidated results and financial positon of NewRiver Retail Ltd for the year then ended. In order to present equity as a continuation of the previous Group, share capital and reserves have been restated at the preceding reporting dates as follows:

Going concern

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

• Value of investment property

• Timing of property transactions

• Capital expenditure and tenant incentives

• Rental income

• Loan covenants

• Capital and debt funding

The Group has 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, as detailed in note 19, the Group is currently within all financial covenants. The Group has bank facilities to fund any future risk-controlled developments. The Group has a significant portion of borrowings that fall due within one year of the balance sheet date. The Directors are currently in advanced negotiations with the existing lenders and with some new lenders to agree facilities to refinance the existing borrowings. The Directors are confident that these bank facilities can be refinanced, or in the absence of available bank finance that the properties could be sold at a value significantly above the associate borrowing.

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.

Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented.

Basis of preparation

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'), therefore the Group financial statements comply with Article 4 of the EU IAS Regulation. The financial statements are presented in pounds Sterling. The financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties and derivatives which are stated at fair value.

Cash flow statement

The Group has reported the cash flows from operating activities using the indirect method. Interest received is presented within investing cash flows; interest paid is presented within operating cash flows. The acquisitions of investment properties are disclosed as cash flows from investing activities because this most appropriately reflects the Group's business activities.

Preparation of the consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries controlled by the Company, made up to 31 March each year. Control is achieved 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. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Intra group transactions are eliminated in full.

Changes in accounting policy and disclosure

In the current year, the following new and amended IFRSs and amendments have been adopted but have not had a material effect on the financial performance or position of the Group:

· IAS 1 (Amendments) Disclosure Initiative

· IAS 16 and IAS 38 (Amendments) - Clarification of Acceptable Methods of Depreciation and Amortisation

· IAS 27 (Amendments) Equity Method in Separate Financial Statements

· IFRS 11 (Amendments) Accounting for Acquisitions of Interests in Joint Operations

· IFRS 10, IFRS 12 and IAS 28 (Amendments) Investment Entities: Applying the Consolidation Exception

· Annual Improvements to IFRSs: 2012-2014 Cycle

At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:

· IAS 7 (Amendments) Disclosure Initiative

· IAS 12 (Amendments) Recognition of Deferred Tax Assets for Unrealised Losses

· IAS 40 (Amendments) Transfers of Investment Property

· IFRS 2 (Amendments) Classification and Measurement of Share-based Payment Transactions

· IFRS 4 (Amendments) - Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts

· IFRS 9 Financial Instruments

· IFRS 14 Regulatory Deferral Accounts

· IFRS 15 Revenue from Contracts with Customers

· IFRS 16 Leases

· IFRIC 22 Foreign Currency Transactions and Advance Consideration

The Directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group in future periods, except that IFRS 9 may impact both the measurement and disclosures of financial instruments, IFRS 15 may have an impact on revenue recognition and related disclosures and IFRS 16 may impact the recognition and measurement of leases on the Group's balance sheet.

Business combinations

The Group applies the acquisition method to account for business combinations. The cost of the acquisition is measured at the aggregate of the fair values, at the date of completion, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquired. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS are recognised at their fair value at the acquisition. Where the fair value of the consideration is less than the fair value of the identifiable assets and liabilities then the difference is recognised as a bargain purchase in the income statement.

Each acquisition is considered by management in light of the substance of the acquisition to determine whether the acquisition is a business combination or acquisition of investment property.

Joint ventures

Interests in joint ventures are accounted for using the equity method of accounting. The Group's joint ventures are entities over which the Group has joint control with a partner. Investments in joint ventures are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Group's share of the net assets of the joint venture, less any impairment. 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 control in order to conclude whether the Group controls the joint venture.

Investment property

Property held to earn rentals or for capital appreciation, or both, 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 transaction costs. After initial recognition, investment property is carried at fair value.

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.

When the Group begins to redevelop an investment property for continued future use as an investment property, the property remains an investment property.

Investment property is derecognised when the risk and rewards of the property is transferred to the purchaser. Gains or losses on the sale of properties are calculated by reference to the carrying value at the end of the previous year, adjusted for subsequent capital expenditure.

Property, plant and equipment

Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is recognised over the useful lives of the equipment, using the straight-line method at a rate of between 10% to 25% depending on the useful life.

The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset.

Operating leases

As lessor

The cost of securing an operating lease are capitalised within the carrying amount of the related investment property and amortised over the lease term. Revenue from operating leases is recognised as per the revenue recognition policy.

As lessee

Leases in which a significant portion of the risks and rewards of ownership are retained by another party, the lessor, are classified as operating leases. Payments including prepayments, made under operating leases (net of any incentives received from the lessor) are charged to income statement on a straight-line basis over the period of the lease.

Cash and cash equivalents

Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less which are readily accessible.

Financial instruments

Financial assets

Financial assets are classified as financial assets at fair value through profit or loss or loans and receivables as appropriate. The Group

determines the classification of its financial assets at initial recognition. Financial assets are recognised upon becoming party to the contractual terms and are initially measured at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The fair value of a non-interest bearing asset is its discounted receivable amount. If the due date of the asset is less than one year, discounting is omitted.

The Group's financial assets consist of cash, loans and receivables and derivative instruments.

The financial instruments classified as financial assets at fair value through profit or loss include interest rate swap and cap arrangements. Recognition of the derivative financial instruments takes place when the hedging contracts are entered into. They are recognised at fair value and transaction costs are included directly in finance costs.

The fair values of derivative financial assets and financial liabilities are determined as follows:

Interest rate swaps and caps are measured using the midpoint of the yield curve prevailing on the reporting date. The valuations do not include accrued interest from the previous settlement date to the reporting date. The fair value represents the net present value of the difference between the contracted rate and the valuation rate when applied to the projected balances for the period from the reporting date to the contracted expiry dates.

Financial assets are derecognised only when the contractual rights to the cash flows from the financial asset expire or the Group transfers substantially all risks and rewards of ownership.

The Group assesses at each financial position date whether there is objective evidence that a financial asset or group of financial

assets is impaired. If there is objective evidence (such as significant financial difficulty of the obligor, breach of contract, or it becomes probable that the debtor will enter bankruptcy), the asset is tested for impairment. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows (that is the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through use of an allowance account. The amount of the loss is recognised in the income statement.

Trade receivables are carried at amortised cost less a provision for impairment where there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of the amounts due under the original terms. Impaired debts are derecognised when they are assessed as uncollectible.

If in a subsequent period 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 liabilities

Financial liabilities are classified at fair value through profit or loss or as other liabilities. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

All loans and borrowings are classified as other liabilities. Initial recognition is at fair value less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised costs using the effective interest method.

Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost.

The fair value of a non-interest bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted.

Hedge accounting

Hedges of interest rate risk on firm commitments are designated as cash flow hedges where the hedge is expected to be highly effective.

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. 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.

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 hedged item.

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. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss.

Share capital

Shares are classified as equity when there is no obligation to transfer cash or other assets. The cost of issuing share capital is recognised directly in equity against the proceeds from the share capital.

Taxation

Income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the balance

sheet. Tax is recognised in the income statement.

Deferred tax

Any deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates that are expected to apply in the period when the liability is settled or the asset is realised. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

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.

Share-based payments

The cost of equity settled transactions is measured with reference to the fair value at the date at which they were granted. Where vesting performance conditions are non-market based, the fair value excludes the effect these vesting conditions and an estimate is made at each balance sheet date of the number of instruments expected to vest. The fair value is recognised over the vesting period in the income statement, 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 income statement for that period.

Employee Benefit Trust

The Group operates an Employee Benefit Trust for the exclusive benefit of the Group's employees. The investment in the Company's shares held by the trust is recognised at cost and deducted from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the shares held by the trust.

Revenue recognition

Rental income

Rental income from fixed and minimum guaranteed rent reviews is recognised on a straight-line basis over the entire lease term. Where such rental income is recognised ahead of the related cash flow, an adjustment is made to ensure the carrying value of the related property including the accrued rent does not exceed the external valuation. Initial direct costs incurred in negotiating and arranging a new lease are amortised on a straight-line basis over the period from the date of lease commencement to the expiry date of the lease.

Where a rent-free period is included in a lease, the rental income foregone is allocated evenly over the period from the date of lease commencement to the expiry date of the lease.

Where a lease incentive payment, or surrender premiums is 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. 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 immediately reflected in income.

Asset management fees

Management fees are recognised in the income statement as the services are delivered.

Promote payments

The Group is contractually entitled to receive a promote payment should the returns from a 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 or other termination events. Any entitlements under these arrangements are only accrued for in the financial statements once the Group believes that crystallisation of the fee is virtually certain.

Dividends

Dividends to the Company's shareholders are recognised when they become legally payable. In the case of interim dividends, this is when paid. In the case of final dividends, this is when approved by equity holders.

Finance income and costs

Finance income and costs are recognised using the effective interest rate method. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset or financial liability.

Service charge income and expense

Service charge income is recognised in the accounting period in which the services are rendered and the related property expenses are recognised in the period in which they are incurred.

Exceptional items

Performance measures are adjusted to exclude exceptional items. Exceptional items are items that are significant in size or nature, or are non-recurring and are adjusted to explain the performance of the Group. In the current and comparative year exceptional items consist of the Group's expenses in relation to the move from AIM to the Main Market.

2. Critical accounting judgements and estimates

The preparation of financial statements requires management to make estimates affecting the reported amounts of assets and liabilities, of revenues and expenses, and of gains and losses. The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. Estimates and judgements are continually evaluated and are based on historical experience as adjusted for current market conditions and other factors.

Significant judgements

Investment properties

The Group's investment properties are stated at fair value, based on an independent external appraisal. The valuation of the Group's development property portfolio and its joint ventures is inherently subjective due to, amongst other factors, the individual nature of each property, forecast trading EBITDA, the status of planning consent, the assumption that vacant possession will be obtained, development cost projections, tenant credit risk and the expected future rental income. As a result, the valuation of the Group's development property portfolio is subject to a degree of uncertainty and is based on information available at the date of valuation.

Taxation

The Company has elected for REIT status. To continue to qualify from the regime, the Group is required to comply with certain conditions as defined in the REIT legislation. Management are required to exercise judgement to determine whether each property acquisition should be included within the REIT rental property income business and whether, on disposal of that property, any gain arising is capital or trading in nature and therefore whether it has triggered a tax charge to be payable to HMRC.

The Group has unrecognised tax losses carried forward at 31 March 2017 as detailed in Note 9. Judgement is required in assessing the likelihood that taxable income will be available to utilise the losses.

Accounting for acquisitions

Management must assess whether the acquisition of property through the purchase of a corporate vehicle should be accounted for as an asset purchase or a business combination. Management exercise judgement to determine whether the acquired business or property contains processes and inputs in addition to property. When management conclude that processes and inputs are being acquired in addition to the property then the transaction is accounted for as a business combination. Where there are no such items, the transaction is treated as an asset purchase.

Business combinations are accounted for using the acquisition method any excess of the purchase consideration over the fair value of the net assets acquired is recognised as goodwill and reviewed annually for impairment. Any discount received or acquisition related costs are recognised in the income statement.

Sources of estimation uncertainty

As noted above, the Group's investment properties are stated at fair value. The assumptions and estimates used to value the properties are detail in note 12. Small changes in the key estimates, such as the estimated future rental income, can have a significant impact on the valuation of the investment properties, and therefore a significant impact on the balance sheet and key performances measures such as Net Asset Value per share. Certain estimates require an assessment of factors not within management's control, such as overall market conditions.

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. The impact on the valuation will be mitigated by the interrelationship of two unobservable inputs moving in directions which have an opposite impact on value e.g. an increase in rent may be offset by an increase in yield, resulting in no net impact on the valuation.

The estimated fair value may differ from the price at which the Group's assets could be sold. Actual realisation of net assets could differ from the valuation used in these financial statements, and the difference could be significant.

3. Segmental reporting

The chief operating decision maker is the Board of Directors. The Board of Directors are of the opinion that the principal activity of the Group is to invest in commercial real estate in the UK.

IFRS requires operating segments to be identified on the basis of internal financial reports about components of the Group that are regularly reviewed by the chief operating decision maker i.e. the Board of Directors. The internal financial reports received by the Board contain financial information at a Group level and there are no reconciling items between the results contained in these reports and the amounts reported in the financial statements.

The property portfolio includes investment properties located throughout the UK, predominantly regional investments outside London and comprises a diverse portfolio of commercial buildings including shopping centres, retail warehouses, high street assets and pubs. The Directors consider that these properties all contribute to delivering on a strategy of targeting higher-yielding property that offer attractive returns through rental income. Therefore, these individual properties have been aggregated into a single operating segment.

All of the Group's properties are based in the UK. No geographical grouping is contained in any of the internal financial reports provided to the Board and, therefore, no geographical segmental analysis is disclosed.

4. Gross income

In March 2017, the Group received a surrender premium of £10,788,000 in relation to a rental agreement from a retail warehouse in Sheffield.

5. Property operating expenses

Property operating expenses have increased year on year by 151% whilst property rental and related income has increase by 54%. The principal reasons for the increase is presentation of costs in relation to the pub portfolio and the acquisition of a property in London with a significant ground rent. An element of the pub portfolio is transitioning from receiving a net rent to a leased model whereby the group receives gross income and pays operating expenses.

6. Administrative expenses

Net administrative expenses ratio is calculated as follows: