- Title:
Proposed Disposal of Hawthorn Leisure REIT Limited - Time:
07:00:09 - Date:
26 Jul 2021 - Category:
Disposals - ID:
4131G
This announcement contains inside information as defined in Article 7 of the EU Market Abuse Regulation No 596/2014 (as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018) 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.
NewRiver REIT plc
("NewRiver" or the "Company")
Proposed Disposal of Hawthorn Leisure REIT Limited for £222.3 million
The Board of NewRiver REIT plc ("NewRiver" or the "Company"), a leading real estate investment trust specialising in buying, managing and developing essential retail and leisure assets throughout the UK, announces that it has entered into an agreement for the sale of the entire issued share capital of Hawthorn Leisure REIT Limited ("Hawthorn"), the entity in the Group that holds, either directly or indirectly through its wholly-owned subsidiaries, NewRiver's entire community pub business (the "Disposal"), to AT Brady Bidco Limited ("Admiral Taverns") for a gross aggregate cash consideration of approximately £222.3 million.
Allan Lockhart, Chief Executive of NewRiver, commented: "Over recent years, we have grown Hawthorn to become the UK's leading community and wet-led pub business. As a consequence of this, we received significant interest from a range of potential buyers for Hawthorn, following the divestment plan we announced in April 2021.
We have now agreed the sale of Hawthorn which, once completed, will deliver on our key priority to reset Loan to Value, strengthening our balance sheet and enabling us to focus on executing our resilient retail strategy. I would like to thank the entire Hawthorn team and, in particular, Mark Davies, who the Board had previously mandated to lead the divestment of Hawthorn, for their professionalism and dedication throughout the process, which has delivered a great result for NewRiver shareholders.
Alongside the new dividend policy which we announced recently in our full year results, and increased transactional evidence in the parts of the retail investment market that we are focused on, we look forward with genuine confidence."
Admiral Taverns is a wet-led community pub operator, with approximately 1,000 pubs across England, Wales and Scotland.
The Disposal of Hawthorn, which as at 30 June 2021 comprised 674 leased & tenanted and operator managed community pubs, represents the successful delivery of the Company's previously announced strategic priority to divest itself of its community pub business in order to reset its LTV and provide the firepower to reshape its portfolio.
Highlights of the Disposal
· Expected gross aggregate cash consideration of approximately £222.3 million.
· Net aggregate proceeds are expected to be used to reduce net debt, significantly strengthening NewRiver's balance sheet by resetting LTV to below 40 per cent on a 31 March 2021 pro-forma basis, which is in line with Company guidance.
· The disposal of the pub business, once completed, will enable the majority of future proceeds from non-core retail disposals, of which we currently have £73 million exchanged or under offer, to be recycled into resilient retail assets and NewRiver's regeneration portfolio which offer superior income and capital growth opportunities.
In accordance with the Listing Rules, due to the size of the Disposal in relation to the size of the Company, the Disposal constitutes a Class 1 transaction (as defined in the Listing Rules) and is therefore subject to Shareholder approval. Completion is therefore conditional upon the approval of the Disposal Resolution at the General Meeting. Accordingly, a Circular is expected to be sent to Shareholders on or around 28 July 2021, containing further details of the Disposal, the Board's recommendation and convening the General Meeting at which Shareholders will be asked to approve the Disposal. Completion is expected to occur in August 2021. A separate announcement will be released on publication of the Circular, setting out a detailed timetable for the General Meeting and Completion.
For further information
| NewRiver REIT plc Allan Lockhart (Chief Executive) Emily Meara (Head of Investor Relations) |
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+44 (0)20 3328 5800 |
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| Liberum (Sponsor to NewRiver) Jamie Richards James Greenwood Nikhil Varghese |
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+44 (0)20 3100 2000 |
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| Kinmont (Financial Adviser to NewRiver) Mat Thackery |
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+44 (0)20 7087 9100 |
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| Finsbury |
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+44 (0)20 7251 3801 |
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| Gordon Simpson James Thompson |
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Important Notices
Information regarding forward-looking statements
This announcement contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature. All statements other than statements of historical fact are forward-looking statements. They are based on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects", "is expected", "is subject to", "budget", "scheduled", "estimates", "forecasts", "goals", "intends", "anticipates", "believes", "targets", "aims" or "projects". Words or terms of similar substance or the negative thereof, are forward-looking statements, as well as variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations.
Forward-looking statements include statements relating to: (a) future capital expenditures, expenses, revenues, earnings, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (b) business and management strategies and the expansion and growth of the Company's operations; and (c) the effects of economic conditions on the Company's business.
Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause actual results, performance or achievements of the Company to differ materially from the expectations of the Company include, among other things, general business and economic conditions, industry trends, competition, changes in government and changes in regulation and policy, including in relation to taxation as well as political and economic uncertainty. Such forward-looking statements should therefore be construed in light of such factors.
Neither the Company nor any of its Directors, officers or advisers provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as at the date of this announcement.
Other than in accordance with its legal or regulatory obligations (including under the Listing Rules and the Disclosure Guidance and Transparency Rules), the Company is not under any obligation and the Company expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
No profit forecast
No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per Ordinary Share for the current or future financial years will necessarily match or exceed the historical published earnings per Ordinary Share.
Cautionary statement
This announcement is not intended to, and does not constitute, or form part of, any offer to sell or an invitation to purchase or subscribe for any securities or a solicitation of any vote or approval in any jurisdiction. Shareholders are advised to read carefully the formal documentation in relation to the Disposal once it has been despatched. Any response to the Disposal should be made only on the basis of the information in the formal documentation to follow.
Important information relating to financial advisers
Liberum, which is authorised and regulated in the United Kingdom by the FCA, is acting solely for the Company as sponsor and for no-one else in connection with the Disposal and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice to any other person in relation to the Disposal, the content of this announcement or any other matters described in this announcement.
Kinmont, which is authorised and regulated in the United Kingdom by the FCA, is acting solely for the Company as financial adviser and for no-one else in connection with the Disposal and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice to any other person in relation to the Disposal, the content of this announcement or any other matters described in this announcement.
Rounding
Percentages in this announcement have been rounded and accordingly may not add up to 100 per cent. Certain financial data have also been rounded. As a result of this rounding, the totals of data presented in this announcement may vary slightly from the actual arithmetic totals of such data.
1. Introduction
NewRiver REIT plc (the "Company" or "NewRiver"), a leading real estate investment trust specialising in buying, managing and developing essential retail and leisure assets throughout the UK, has entered into an agreement for the sale of the entire issued share capital of Hawthorn Leisure REIT Limited ("Hawthorn"), the entity in the Group that holds, either directly or indirectly through its wholly-owned subsidiaries, NewRiver's entire community pub business (the "Disposal"), to AT Brady Bidco Limited (the "Purchaser") for a gross aggregate cash consideration of approximately £222.3 million (the "Consideration").
As at 30 June 2021, Hawthorn owned, either directly or indirectly through its wholly-owned subsidiaries, and managed 674 leased & tenanted and operator managed community pubs primarily in suburban locations, residential neighbourhoods, towns, city centres and communities throughout England, Scotland and Wales. Hawthorn's pubs are almost all wet-led and operated by individuals, typically as a family business and, at over two-thirds of the sites, the operator lives in residential accommodation provided above or adjacent to the pub. As at 30 June 2021, 95 per cent of Hawthorn's pubs were owned freehold.
The Consideration is payable in full and in cash by the Purchaser on Completion, subject to certain customary adjustments in relation to the period between 28 March 2021 and Completion.
After adjustment for estimated transaction costs, the Company expects to receive net aggregate proceeds from the Disposal of approximately £216.1 million. The Company intends to utilise the net aggregate proceeds of the Disposal to reduce net debt in order to reduce LTV, allowing the Group to invest in its core Retail Portfolio.
In accordance with the Listing Rules, due to the size of the Disposal in relation to the size of the Company, the Disposal constitutes a Class 1 transaction (as defined in the Listing Rules) and is therefore subject to Shareholder approval. Completion is therefore conditional upon the approval of the Disposal Resolution at the General Meeting. Accordingly, a Circular is expected to be sent to Shareholders on or around 28 July 2021, containing further details of the Disposal, the Board's recommendation and convening the General Meeting at which Shareholders will be asked to approve the Disposal. Completion is expected to occur in August 2021. A separate announcement will be released on publication of the Circular, setting out a detailed timetable for the General Meeting and Completion.
2. Background to and reasons for the Disposal
In the second half of the financial year ended 31 March 2021, the Company undertook a thorough portfolio-wide strategic review, which involved analysing every asset in its portfolio in terms of current and projected resilience and value-creation opportunities. The review examined current and emerging trends across the retail landscape, including shoppers' changing behaviours and priorities, to determine how the Company can ensure that its portfolio remains as resilient in the future as it has proved to be during the COVID-19 pandemic.
The strategic review and its findings culminated in the Board's strategic aim that by 2025 assets in the Company's portfolio will display only the characteristics of resilient retail. It is the Board's belief that this will transform the business into a more agile and resilient proposition and will provide the appropriate balance of income and capital returns.
In pursuing this strategic aim, one of the Company's key priorities included the divestment of the Pub Portfolio. The Board believes that the Pub Portfolio is currently sub-scale in a sector which could see significant consolidation opportunities which cannot be unlocked under NewRiver's ownership due to its status as a real estate investment trust. Furthermore, the divestment of the Pub Portfolio will reduce the Company's LTV and provide the capital to reshape the Company's portfolio.
In the Board's view, the Disposal delivers the best outcome for the Shareholders and is a key step to achieving the Board's strategic aim that by 2025, assets in the Company's portfolio will display only the characteristics of resilient retail.
The Disposal proceeds will be used to reduce the level of the Group's net debt, accelerating the delivery of the Group's target to reduce Group LTV below 40 per cent. On a pro forma basis, adjusting for the net aggregate proceeds of the Disposal and based on the property valuation as at 31 March 2021, excluding the Hawthorn portfolio, the Group's LTV ratio would be 39.8 per cent. The Disposal will also allow the Group to invest in its core Retail Portfolio and, together with other sales of non-core retail assets, to recycle the resultant capital into resilient retail.
3. Principal terms and conditions of the Disposal
The Disposal is being made pursuant to the terms of the Sale Agreement. Under the Sale Agreement, NewRiver has agreed to sell the entire issued share capital of Hawthorn to the Purchaser.
The Consideration of approximately £222.3 million is payable in full and in cash by the Purchaser on Completion, subject to certain customary adjustments in relation to the period between 28 March 2021 and Completion. In addition, there may be a further amount of up to approximately £4.0 million, relating to a pending insurance claim, that is received by Hawthorn following the date of the Sale Agreement and such amount shall be payable by the Purchaser to the Company pursuant to the terms of the Sale Agreement.
The Sale Agreement contains certain warranties and indemnities given by each of NewRiver and the Purchaser which are customary for a transaction of this nature.
Completion of the Disposal is conditional only upon (i) the Circular being approved and stamped by the FCA, and the same being published in accordance with the Listing Rules, and (ii) the approval of the Disposal Resolution at the General Meeting. The Board expects that, subject to the approval by Shareholders at the General Meeting, Completion is expected to occur in August 2021.
No transitional services arrangements will be required following the Disposal, as the Disposal Group will be operating on a stand-alone basis from Completion.
4. Information on the Purchaser
The Purchaser is a member of the Admiral Taverns group, a wet-led community pub operator, with approximately 1,000 pubs across England, Wales and Scotland.
Headquartered in Chester, the Admiral Taverns business was founded in 2003 and in 2010 a new management team was appointed and a new strategy launched to transform Admiral Taverns into a leading community pub operation with a refined portfolio of sustainable wet-led pubs. It has since won the Publican Award for Best Leased and Tenanted Pub Company in 2019, 2016 and 2013, each time that it has entered. In 2017 Proprium Capital Partners and C&C Group plc backed the management buyout of Admiral Taverns and in 2019 supported the acquisition of 150 tenanted community pubs from Star Pubs & Bars and 137 pubs from Marston's PLC.
5. Information on NewRiver
NewRiver is a leading real estate investment trust specialising in buying, managing and developing retail and leisure assets throughout the UK. As at 30 June 2021, the Company's £1.0 billion portfolio covered nine million sq. ft. and comprised 33 community shopping centres, 19 conveniently located retail parks and 674 community pubs.
The Company has hand-picked a portfolio of retail assets to deliberately focus on occupiers providing essential goods and services, and avoid structurally challenged sub-sectors such as department stores, mid-market fashion and casual dining. The Company closed the financial year ended 31 March 2021 with a blended retail cash rent collection rate of 86 per cent across all four quarters of the financial year. Including rent either deferred or subject to regear, this blended rate rises to 93 per cent. As at 30 June 2021, rent collection in respect of the first quarter of the financial year ended 31 March 2022 stood at 89 per cent including deferrals and regears, ahead of collection at the same point last year. The Company's active approach to asset management and inbuilt 2.6 million sq. ft. development pipeline provides further opportunities to extract value from its portfolio.
As at 31 March 2021, underlying funds from operations were £11.5 million, compared to £52.1 million in the previous financial year ended 31 March 2020, due to the restrictions placed on the Company's business and its assets during the COVID-19 pandemic, particularly in the Company's pub business. The Company's IFRS loss after tax was £(150.5) million, compared to a loss of £(121.1) million in the prior financial year, predominantly reflecting a non-cash reduction in portfolio valuation of £152.9 million.
As at 31 March 2021, the Company's proportionally consolidated portfolio valuation was £974.2 million, compared to £1,197.1 million in the previous financial year ended 31 March 2020, due to a 13.6 per cent like-for-like decline in valuations and the completion of £81.2 million of disposals, in line with the Company's strategy to complete between £80-100 million of disposals in the financial year ended 31 March 2021.
The Company's EPRA NTA per share was 151 pence per share as at 31 March 2021, compared to 201 pence per share as at 31 March 2020. The decrease in EPRA NTA and EPRA NTA per share was primarily due to the 13.6 per cent like-for-like decrease in portfolio valuation. As at 31 March 2021, the Company's IFRS net assets were £460.4 million, compared to £610.6 million as at 31 March 2020, reduced for the same reason. The Company's portfolio outperformed the MSCI-IPD All Retail benchmark on a total return basis by 120 bps, driven by an income return outperformance of 180 bps.
6. Summary of the Disposal Group
Following the corporate reorganisation of the Company's community pub business implemented on 23 November 2020, Hawthorn owned, either directly or indirectly through its wholly-owned subsidiaries, the Group's pub property portfolio, which included 674 leased & tenanted pubs and operator managed pubs as at 30 June 2021 (the "Pub Portfolio").
As at 30 June 2021, across Hawthorn, approximately 80 per cent of sites operated under a 'leased & tenanted' model, whereby Hawthorn has an occupational lease with a tenant, who is responsible for all operating costs of the pub, including staff costs. Most of the leased & tenanted pubs are 'tied', meaning that tenants are required to purchase drinks from Hawthorn and lease games machines from Hawthorn-approved suppliers. In return, Hawthorn receives rental income, a margin between the wholesale price and sale price to tenants on drinks supplied, and a share of machine profits.
As at 30 June 2021, approximately 19 per cent of Hawthorn sites operated under an 'operator managed' model, whereby Hawthorn enters into an operator agreement with a pub partner. Hawthorn incurs all operating costs of running the pub, except for staff costs, which are borne by the operator. In return, Hawthorn receives gross turnover generated by the pub and pays a management fee to the pub partner, which is on average around 20 per cent of net revenue.
The UK Government required the temporary closure of all hospitality businesses on 20 March 2020, and the entire Pub Portfolio was closed until 4 July 2020, when pubs in England were allowed to reopen. During the lockdown period, the Company's focus was on protecting Hawthorn's financial position and supporting Hawthorn's pub partners. To protect Hawthorn's financial position, Hawthorn accessed UK Government support packages which Hawthorn invested directly in pub partner assistance and reduced non-essential capex and operating costs. Hawthorn's BDMs were in close contact with the pub partners and provided help in accessing available government support, including the Retail, Hospitality and Leisure Grant and the Coronavirus Job Retention Scheme. In addition, over 86 per cent of Hawthorn's pub partners invested in their pub during the lockdown, particularly in improving outside space. Reflecting this level of support, 97 per cent of Hawthorn's tenants said they were either satisfied or very satisfied with Hawthorn's help during the lockdown period.
From 4 July 2020, pubs in England were allowed to reopen and, within a week, over 90 per cent of the Pub Portfolio in England was operational. Following the lifting of restrictions in Scotland and Wales several weeks later, over 90 per cent of the entire Pub Portfolio was trading by mid-August 2020.
The underlying performance of Hawthorn's pubs was strong following reopening, with like-for-like volumes in the leased & tenanted portfolio down only eight per cent and like-for-like sales in the operator managed pubs down only 16 per cent compared to the same period in 2019. This performance compared favourably to the wider market; pub like-for-like sales were down 18 per cent over the same period according to the Coffer Peach Business Tracker.
In order to support its pub partners' recovery following reopening, Hawthorn did not charge rent for the months of July or August 2020, and launched its Partner Investment Fund, through which Hawthorn matched investments made by pub partners. Both of these schemes were conditional on obtaining commitments from pub partners that ensured Hawthorn was able to retain its tenants and operators for the long-term.
From October 2020, pub operations began to face new restrictions, initially in the form of new hospitality closures in Scotland but culminating in further national restrictions for England announced by the UK Government on 31 October 2020. The experience gained during the first lockdown meant that Hawthorn could act swiftly and effectively, offering financial aid and practical advice, to support tenants and pub operators during this period of fresh restrictions.
During the financial year ended 31 March 2021, Hawthorn invested £1.3 million of grant income in support payments to its pub operators in the operator managed estate. These support payments, designed to cover operator living costs, were aimed at maintaining high levels of operator retention and occupancy. This ensured that its pubs were ready to welcome back customers on reopening and removed the burden of vacant property costs. As at 30 June 2021, only four pubs in the operator managed portfolio were vacant, representing a 96.9 per cent occupancy level. This is a testament to the targeted support and strong relationships that Hawthorn's BDMs and wider team have forged with the pub operators.
Following decisive action to invest in Hawthorn's portfolio during the first lockdown, and seeing the benefits of this on reopening, Hawthorn took the opportunity to further enhance its pubs during the second half of the financial year ended 31 March 2021 and invested a further £0.9 million in improving outside space. An additional £0.3 million (matched by tenants) was also invested via Hawthorn's Partner Investment Fund to support 110 new schemes.
After several months of temporary closure, Hawthorn opened over 60 per cent of its Pub Portfolio on 12 April 2021, following the easing of restrictions on outside trading, and reopened the vast majority of the remaining pubs following the easing of restrictions on indoor trading from 17 May 2021. With a focus on well-located community and suburban pubs, and with the benefit of more consumers working from home and using their local services and facilities, Hawthorn has been able to recover quickly on reopening and trading is tracking significantly ahead of budget. In the period from 12 April 2021 to 21 June 2021, like-for-like volumes in the leased & tenanted portfolio were up two per cent compared to the same period in 2019. Like-for-like sales in the operator managed pubs were down 13 per cent compared to the same period in 2019 but Hawthorn is still ahead of budget and in line with the wider pub sector as measured by the Coffer Peach Business Tracker.
In response to the revenue recovery in its pubs since reopening, Hawthorn made the decision to repay funds received under the Coronavirus Job Retention Scheme during lockdown last year. These funds were repaid to HMRC in April 2021.
Pub net property income was £1.0 million in the financial year ended 31 March 2021, compared to £24.3 million in the financial year ended 31 March 2020, predominantly due to the mandatory closure of the Pub Portfolio for the vast majority of the financial year as part of the UK Government's response to the COVID-19 pandemic. In England, where the majority of Hawthorn's pubs are located, Hawthorn experienced seven months of national lockdowns, two months of the tiered system, and just three months of normal trading over the Summer of 2020. When the pubs were open and able to trade, performance was encouraging, with only a modest like-for-like decline of £0.6 million, reflecting reduced capacity, recovering customer confidence, some localised restrictions, and the Government's Eat Out to Help Out scheme.
The direct impact of closing the Pub Portfolio throughout the sustained periods of lockdown in the year adversely impacted income by £14.6 million, with the support provided to partners, predominantly in the form of rent waivers, further reducing income by £8.7 million. The cost of destroying beer supplies adversely impacted income by £0.4 million.
The impact of a full year of income from acquisition of Bravo Inns Limited and 28 community pubs from Marston's plc in the financial year ended 31 March 2020 added £0.8 million and £0.2 million respectively.
Disposal Group Income Statement
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Year ended 31 March 2019 |
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Year ended 31 March 2020 |
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Year ended 31 March 2021 |
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(£'m) |
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(£'m) |
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(£'m) |
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
|
| Revenue |
41.9 |
|
51.4 |
|
18.1 |
| Property operating expenses |
(20.1) |
|
(27.1) |
|
(17.1) |
| Net property income |
21.8 |
|
24.3 |
|
1.0 |
| Administrative expenses |
(6.5) |
|
(9.2) |
|
(9.6) |
| Other income |
- |
|
- |
|
4.6 |
| Acquisition and integration costs |
(4.2) |
|
(0.4) |
|
(0.1) |
| Net valuation movement |
(1.8) |
|
(26.6) |
|
(23.2) |
| Loss on disposal of investment properties |
(0.2) |
|
(0.3) |
|
(1.4) |
| Operating profit/(loss) |
9.1 |
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(12.2) |
|
(28.7) |
| Net finance costs |
(4.6) |
|
(4.3) |
|
(4.1) |
| Profit/(loss) for the year before taxation |
4.5 |
|
(16.5) |
|
(32.8) |
| Taxation |
(0.5) |
|
(0.3) |
|
1.3 |
| Profit/(loss) for the year after taxation |
4.0 |
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(16.8) |
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(31.5) |
Disposal Group Net Asset Statement
| As at 31 March 2021 |
Disposal Group |
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£m |
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(unaudited) |
| Non-current assets |
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| Investment properties |
197.5 |
| Right of use asset |
0.7 |
| Property, plant and equipment |
53.4 |
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251.6 |
| Current assets |
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| Trade and other receivables |
3.0 |
| Cash and cash equivalents |
12.0 |
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|
15.0 |
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|
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| Total assets |
266.6 |
| Current liabilities |
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| Trade and other payables |
(14.2) |
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|
(14.2) |
| Non-current liabilities |
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| Deferred tax liability |
(0.6) |
| Lease liability |
(2.5) |
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(3.1) |
| Total liabilities |
(17.3) |
| Net assets |
249.3 |
7. Use of proceeds, financial effects of the Disposal and strategy of the Continuing Group
After adjustment for estimated transaction costs, the Company expects to receive net aggregate proceeds from the Disposal of approximately £216.1 million. The net aggregate proceeds are expected to be used to reduce net debt, significantly strengthening the balance sheet and accelerating the delivery of the Group's target to reduce Group LTV below 40 per cent. The Group intends to use approximately £100 million of the net aggregate proceeds of the Disposal to repay all of the outstanding balance on the Revolving Credit Facility.
Whilst the Company will benefit from a reduction of interest payable in respect of the Revolving Credit Facility and of head office costs, the Disposal is expected to be dilutive to normalised EPRA Earnings and to EPRA NTA.
No transitional services arrangements will be required following the Disposal, as the Disposal Group will be operating on a stand-alone basis from Completion. This means that the Company will not incur costs in implementing transitional services arrangements and there will be no impact on the functioning of its continuing business as a result of the fulfilment of its obligations under such arrangements.
After the Disposal, the Group intends to sell other non-core retail assets and recycle the resultant capital into resilient retail whilst also transforming its regeneration assets to create long-term value by jointly working with sector specialists and appropriate capital partners.
8. Board changes
The Board intends that Mark Davies will step down as Chief Financial Officer of NewRiver prior to completion of the Disposal, and intends that Will Hobman, who has been NewRiver's Finance Director for almost two years and with the Company for over five years, will be appointed Chief Financial Officer of NewRiver at completion of the Disposal.
The Board intends that Will Hobman will enter into a service contract with the Company, terminable by either party on 12 months' prior written notice or by the Company immediately in the case of gross misconduct (amongst other circumstances). The contract will contain provisions relating to pay, pension contributions payable by the Company and holiday entitlement. On notice of termination, the Company will be entitled to make a payment in lieu of notice under the contract. The contract will contain acknowledgements by Will on conduct requirements in respect of confidential information, share dealings and conflicts of interest.
9. Current trading, trends and future prospects for the Continuing Group
The 2021 Annual Report and Accounts included the following statements about current trading and prospects:
"COVID-19 has posed unprecedented challenges however our operational and financial achievements have convinced us of the underlying strength of our portfolio and platform. As a result we have focused our efforts on ensuring that our portfolio remains resilient over the longer term.
The macroeconomic environment is improving; in May the Bank of England upgraded its 2021 growth outlook for the UK economy from 5% to 7.25%, driven by anticipated consumer spending. Consumer confidence in the UK economy has returned to pre-pandemic levels and we are well placed to benefit from consumers' growing preference for shopping locally and supporting community assets.
In terms of the investment market, liquidity in retail parks has improved during the year and investor demand for regeneration projects has also increased over the second half of FY21, especially for assets located in areas with attractive underlying residential values. We are starting to see early signs of an uplift in shopping centre liquidity and we expect the investment market to improve further as we emerge from the COVID-19 crisis.
With the benefit of an improving market backdrop and the insights gained from our recent strategic review we are looking forward to the coming year with genuine optimism."
Appendix - Definitions and Glossary
The following definitions apply throughout this announcement, unless the context otherwise requires.
| "2021 Annual Report and Accounts" |
the annual report and accounts prepared by the Company for the financial year ended 31 March 2021.
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| "BDM" |
business development manager.
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| "Board" or "Directors"
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the board of directors of the Company.
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| "Companies Act"
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the Companies Act 2006, as amended from time to time. |
| "Completion" |
completion of the Disposal in accordance with the provisions of the Sale Agreement.
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| "Consideration" |
the gross aggregate cash consideration of approximately £222.3 million for the sale of the entire issued share capital of Hawthorn.
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| "Continuing Group" |
NewRiver REIT plc and its subsidiaries and subsidiary undertakings, being the Group following Completion (excluding, for the avoidance of doubt, the Disposal Group), with Group or Continuing Group being used as the context requires.
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| "Disclosure Guidance and Transparency Rules"
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the disclosure guidance and transparency rules as set out in the FCA's handbook of rules and guidance, as amended. |
| "Disposal"
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the proposed disposal of the Disposal Group pursuant to the Sale Agreement. |
| "Disposal Group" or "Hawthorn" |
Hawthorn Leisure REIT Limited, a company incorporated in England and Wales with registered number 08045171, and its subsidiaries and subsidiary undertakings.
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| "Disposal Resolution" |
the ordinary resolution to be proposed and considered at the General Meeting to approve the Disposal, to be set out in the Notice of General Meeting.
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| "EPRA Earnings" |
the IFRS profit after taxation excluding investment property revaluations, fair value adjustments on derivatives, gains/losses on disposals and deferred tax.
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| "EPRA NTA" |
EPRA Net Tangible Assets, being the balance sheet net assets excluding the mark to market on effective cash flow hedges and related debt adjustments, deferred taxation on revaluations, goodwill, and diluting for the effect of those shares potentially issuable under employee share schemes.
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| "Facilities Agreement" |
the facilities agreement dated 9 August 2017 between the Company as borrower, Barclays Bank plc, The Royal Bank of Scotland plc, HSBC Bank plc and Santander UK plc as arrangers and lenders and HSBC Bank plc as agent, as amended and restated pursuant to a deed of amendment and restatement dated 20 February 2018.
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| "FCA" |
the UK Financial Conduct Authority.
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| "General Meeting" |
the general meeting of the Company at which the Disposal Resolution will be proposed and considered.
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| "Group" |
in respect of any time prior to Completion, the Company and its consolidated subsidiaries and subsidiary undertakings and, in respect of any time following Completion, the Continuing Group, with Group or Continuing Group being used as the context requires.
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| "IFRS" |
the International Financial Reporting Standards as adopted by the International Accounting Standards Board and the EU.
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| "Kinmont" |
Kinmont Limited, the financial adviser to the Company.
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| "Liberum" |
Liberum Capital Limited, the Sponsor to the Company.
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| "Listing Rules" |
the listing rules made by the FCA under section 73A of FSMA, as amended from time to time.
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| "LTV" |
loan to value.
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| "Ordinary Shares" |
the ordinary shares of one pence each in the share capital of the Company.
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| "Pub Portfolio" |
the Group's pub property portfolio, which included 674 leased & tenanted pubs and operator managed pubs as at 30 June 2021.
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| "Purchaser" |
AT Brady Bidco Limited, a company incorporated in England and Wales with registered number 10935753.
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| "Retail Portfolio" |
the retail property portfolio owned by the Group, which included 33 community shopping centres and 19 conveniently located retail parks as at 30 June 2021.
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| "Revolving Credit Facility" |
the Company's revolving credit facilities of £215 million pursuant to the Facilities Agreement, for general corporate purposes, of which, as at 31 March 2021, £170 million was drawn, £70 million of which was subsequently repaid voluntarily by the Company on 30 June 2021.
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| "Sale Agreement" |
the conditional sale agreement in respect of the Disposal Group.
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| "Shareholder" |
a holder of Ordinary Shares from time to time.
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All references to legislation in this document are to the legislation of England and Wales unless the contrary is indicated. Any reference to any provision of any legislation shall include any amendment, modification, re-enactment or extension of it.
For the purpose of this announcement, "subsidiary" and "subsidiary undertaking" have the meanings given by the Companies Act.
Words importing the singular shall include the plural and vice versa, and words importing the masculine gender shall include the feminine or neutral gender.
Proposed Disposal of Hawthorn Leisure REIT Limited07:00:0926 Jul 2021Disposals4131G