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Summarised audited consolidated results for the year ended 31 August 2018
New Frontier Properties Ltd
(Incorporated in the Republic of Mauritius on 5 June 2014)
(Registration number 123368C1/GBL)
SEM share code: NFP.N000
JSE share code: NFP
ISIN: MU0453N00004
("New Frontier" or "the Company" or "the Group")
SUMMARISED AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 AUGUST 2018
The Company was established in Mauritius as a public company limited by shares holding a Category 1 Global Business
Licence. The Company has primary listings on the Stock Exchange of Mauritius Ltd ("SEM") and the Alternative Exchange
("AltX") of the Johannesburg Stock Exchange ("JSE"). The primary objective of the Company is to acquire good quality,
income-generating retail and logistics/warehouse property assets in the United Kingdom ("UK") and Europe.
The Company advises that following the release of the its reviewed consolidated results for the year ended 31 August
2018 on 30 November 2018, the Company hereby publishes its audited consolidated results for the year ended 31 August
2018.
REPORTING CURRENCY
The Company's results are reported in pounds sterling ("GBP").
FINANCIAL RESULTS
The Group's International Financial Reporting Standards ("IFRS") loss for the year was GBP 76.481 million (2017: Profit
of GBP 242 million), which reflects the fall in valuation of the Group's investment property of GBP 80.835 million.
The average annual "all in" cost of secured debt of the Group as at 31 August 2018, including the effect of fixed rate
financial swap derivatives, was 3.09% per annum (2017: 3.25% per annum). Over 86% (2017: 85%) of the Group's debt
is fixed by use of financial swap derivatives. The Group also had a convertible shareholder loan of GBP 10.132 million on
which interest currently accrues at 12% per annum.
DISTRIBUTABLE EARNINGS
The board of directors ("Board") has resolved not to declare a final dividend as indicated in the Company's announcement
dated 8 November 2018. An interim dividend of GBP 3 pence per share (GBP 4.83 million) was paid for the year.
BANKING
The fall in value of the Group's properties has resulted in its loan to value covenants being exceeded.
Both lenders are engaging proactively with the Group to determine the best course of action and allow time for further
review. Currently both lenders have trapped the free rental cashflow but are releasing funds for all operating expenses and
capital expenditure to support letting activity. Meanwhile, surplus funds will be used to repay the outstanding loans. Whilst
the Group has the support of its funders, its loan terms are effectively repayable on demand.
Following the breach of covenants, HSBC has increased the interest margin from 2.35% to 3%. In order to reduce the level
of debt, the Group (post year-end) has put its logistic asset in Dublin (purchased during this financial year) on the market
for sale.
BUSINESS REVIEW
For retail businesses in the UK, 2018 has been a challenging and frustrating year. Reduced consumer confidence and
sterling's depreciation as a result of Brexit (leading to higher prices for imported goods), have combined with increased
business rates, higher minimum wages and changing patterns of consumer spending to create the perfect retail storm.
Over the past few months, the sector has been hit by a series of Company Voluntary Arrangements ("CVAs") and
receiverships. Tenants including New Look, Poundworld and Select have reduced rents and closed stores across the UK.
With further CVAs and company administrations likely, we anticipate that these challenging market conditions will
continue to impact the business.
In spite of difficult market conditions, well run and appropriately financed retailers will continue to thrive. Indeed, over
the past year, a number of our better performing tenants have upsized.
Our asset managers and advisors are working even harder during these challenging times and it is encouraging to see an
improvement in our vacancies level from 9.73% to 6.61% since the year end, thanks to their efforts. Moreover, footfall
for the three centres has also been largely unaffected, remaining broadly flat at 26,437,602, a reduction of 0.72%
compared to the UK average fall of 1.60%.
Furthermore, the Group's asset manager has voluntarily agreed to assist cashflow by accepting reduced fee payments and
allowing the unpaid balance to roll up.
Property Acquisition
The Board announced on 3 November 2017 that the Company had acquired Unit 1, Stadium Business Park in Dublin,
Ireland for a consideration of EUR 8.65 million reflecting a net initial yield of 8.23%. However, as indicated, this property
has been placed on the market for sale and the proceeds will be used to reduce debt levels.
The Group confirms that it will not be proceeding with the proposed property acquisition in Hassfurt, Germany.
Property values
A summary of the assets that are owned by the Company is shown below. These assets were valued at 31 August 2018 by
a registered independent valuer, Colliers International Valuation UK LLP, at GBP 195.37 million.
Property Location Acquisition date Valuation 2018 Valuation 2017
(GBP)** (GBP)*
Coopers Square Burton upon Trent 14 April 2015 67,470,000 95,000,000
The Cleveland Centre Middlesbrough 14 April 2015 49,725,000 72,500,000
Houndshill Shopping Centre Blackpool 23 September 2015 70,200,000 98,500,000
Stadium Business Park Dublin 31 October 2017 7,970,000 -
Total 195,365,000 266,000,000
*Assuming Stamp duty saving shared ** Assuming full purchasers costs
This significant reduction in the value of the company's shopping centre portfolio of GBP78.61 million (down GBP73.80 million
assuming stamp duty saving as per 2017) can be attributed to several factors including recent Company Voluntary
Arrangements ("CVA's"), company receiverships and tough trading conditions across the UK retail sector. This combined
with rising interest rates, the fall in the value of sterling, rising costs and concerns over Brexit has resulted in a weakened
investor market, particularly outside London and the South East. Consequently, investment yields have moved out which
has exacerbated the valuation fall.
Portfolio analysis
Retail income by covenant type
The majority of tenants in New Frontier's shopping centres are strong covenants with 83.11% of gross rental income
secured to national retail operators.
Letting activity and lease renewals
As at 31 August 2018, the centres at Blackpool, Middlesbrough and Burton upon Trent have seen decreases in combined
occupancy to 90.27% (2017: 94.51%) by Estimated Rental Value ("ERV") and 88.14% (2017: 91.93%) by Gross Lettable
Area ("GLA").
Since the year end, several new lettings have occurred including the upsizing of River Island and Footasylum in Blackpool,
which has helped to increase occupancy by ERV to 93.39% and 91.56% by GLA as at 31 October 2018.
In the past 12 months, New Frontier has concluded 22 leasing events, 7 of which have been core, long-term leases with an
average lease length of 8.75 years and average rent-free of 3 months. Despite this, new long-term lettings and lease renewals
have only increased rental income by 0.11% against 2018 ERV. Again, this may be attributed to the growth in online sales
and the resulting spate of CVAs within the sector.
Nevertheless, New Frontier has continued to actively manage its assets in a challenging retail environment - at Burton upon
Trent, Next opened a new 25,052 sq ft store in the old BHS unit and in April 2018, H&M took the remaining 20,000 sq ft
space alongside Next. At Blackpool, the new IMAX cinema development with ancillary retail is progressing. Meanwhile,
at Middlesbrough a number of new lettings are being progressed which will strengthen and improve the quality of the
centre's tenants further.
PROSPECTS
Over the past few months, the sector has been hit by a series of CVA's and receiverships. Tenants including New Look,
Shakedog, Poundworld, Ministry of Design and Select have reduced rents and closed stores across the UK. With further
CVAs and company administrations expected we anticipate that these challenging conditions will continue to impact the
market and consequently business.
On 10 May 2018, the company announced that, at the Rebosis Property Fund Limited ("Rebosis") results presentation
held on 8 May 2018, Rebosis informed its shareholders that it may motivate to restructure New Frontier including, inter
alia, to propose the delisting of New Frontier and/or the internalisation of New Frontier's asset management.
The Group has noted the statement issued by Rebosis and is considering a variety of options for the Company to save
costs, particularly in the current operating climate.
The Group's asset manager has voluntarily agreed to assist cashflow by accepting reduced payments and allowing the
unpaid balance of fees to roll up.
The Group will continue to actively manage the centres to reduce vacancy and minimise void costs and is investigating
ways of reducing the level of debt including assessing disposals and part disposals of our assets.
The Board considers that whilst the Group has the support of its lenders, it can service its obligations in the normal course
of business and will continue as a going concern.
EXIT FROM UK REIT REGIME
On 30 September 2018 the Group served notice to HM Revenue and Customs in the United Kingdom to leave the UK REIT
regime as it was unable to meet the Close company requirement for UK REIT status as its shareholder base is not
sufficiently diversified.
On leaving the UK REIT regime, the Group will, in the interim, continue to be UK tax resident and will be liable to pay
UK corporation tax at the prevailing rate on its profits. As a consequence of the fall in property values, the Group will not
be able to implement intragroup borrowing arrangements to obtain a tax deduction on its corporate expenses. The effective
rate of tax borne by the Group is likely to be higher than the UK corporation tax rate.
Shareholders are advised that future distributions by the Company will comprise ordinary dividends rather than property
income distributions.
CHANGES TO BOARD
The composition of the Board underwent some changes during the year. Mr Nigel Gurkin resigned as financial director of
the company on 1 August 2018. Mr Andile Mazwai resigned as a non-executive director of the Company with effect from
26 April 2018. Mr Daniel Romburgh, a Mauritian resident, resigned as a non-executive director of the Company, and as
chairperson of the audit and risk committee, on 14 February 2018.
With effect from 1 August 2018, Mr Patrick Smith was appointed to the Board as the new financial director of the Company.
Mr George Titan, a Mauritian resident, was appointed as a non-executive director, and as the new chairperson of the audit
and risk committee, in February 2018.
Following the year-end, on 26 November 2018, Mrs Marelise De Lange resigned as a non-executive director of the
Company. Mr Robert Becker, a South African resident, was appointed as a non-executive director on 28 November 2018.
The Board would like to thank Mr Gurkin, Mr Mazwai, Mr Romburgh and Mrs De Lange for their valuable contributions
to the Company and are pleased to welcome Mr Smith, Mr Titan and Mr Becker to the board.
VENDOR CONSIDERATION PLACEMENT
On 18 December 2017, the board announced the listing of an additional 8,160,657 New Frontier shares pursuant to a vendor
consideration placement at an issue price of ZAR17.50 to settle the purchase consideration of the Dublin property. The
additional New Frontier shares were allotted, issued and listed on the JSE on 15 December 2017 and allotted, issued and
listed on the SEM on 19 December 2017. Following the issue of the new shares, the company has a total of 160,935,407
ordinary shares in issue.
BASIS OF PREPARATION
These summarised audited consolidated results for the year ended 31 August 2018 have been prepared in accordance with
IFRS, including IAS 34 - Interim Financial Reporting, the SEM Listing Rules, the Securities Act of Mauritius 2005 and
the JSE Listings Requirements to the extent required. The accounting policies are in accordance with IFRS and are
consistent with those applied in the previous annual financial statements.
Auditor's report
The Company's external auditors, BDO & Co, have issued their qualified audit opinion on the Group's financial
statements for the year ended 31 August 2018 and expressed a qualified opinion thereon in respect of going concern on
the basis that two subsidiaries of the Group are in breach of the loan to value covenant contained in their respective bank
loan agreement. The subsidiaries are dependent on the continued financial support of its lenders. This indicates the
existence of a material uncertainty related to events or conditions that may cast significant doubt on the Group's ability to
continue as a going concern.
A copy of the auditor's report is available for inspection at the Company's registered office together with the underlying
audited financial information. This summarised report is extracted from audited information but is not itself audited.
The directors take full responsibility for the preparation of these financial results and that the audited condensed
consolidated results have been extracted from the audited financial statements.
SEGMENTAL INFORMATION
The Group derives its revenue from the single business activity of property investment and is active in two segments being
UK Shopping Centres and European warehouses.
By order of the Board
Osiris Corporate Solutions (Mauritius) Limited
Company secretary
7 December 2018
NOTES
Copies of this report are available to the public at the registered office of the Company, Chemin Vingt Pieds, 5th Floor,
La Croisette, Grand Baie, Mauritius.
Copies of the statement of direct or indirect interest of the Senior Officers of the Company pursuant to rule 8(2)(m) of the
Securities (Disclosure of Obligations of Reporting Issuers) Rules 2007 are available to the public upon request to the
company secretary at the Registered Office of the Company at Chemin Vingt Pieds, 5th Floor, La Croisette, Grand Baie,
Mauritius.
This communiqué is issued pursuant to Listing Rules 12.20 and 12.21 and Section 88 of the Securities Act of Mauritius
2005. The Board accepts full responsibility for the accuracy of the information in this communiqué.
For further information please contact:
JSE designated advisor
Java Capital +27 11 722 3050
Company secretary
Osiris Corporate Solutions (Mauritius) Limited +230 650 4030
STATEMENTS OF FINANCIAL POSITION AT 31 AUGUST 2018
THE GROUP
Audited
31 August 31 August
2018 2017
GBP 000 GBP 000
ASSETS
Non-current assets
Property, plant and equipment 15 17
Investment property 193,288 264,800
Derivative financial instrument 1,103 -
194,406 264,817
Current assets
Trade and other receivables 5,179 6,091
Cash and cash equivalents 3,471 5,510
8,650 11,601
Total assets 203,056 276,418
EQUITY
Share capital 47,136 39,412
Hedging reserve (915) (3,330)
(Accumulated losses)/retained earnings (23,102) 63,678
Total equity 23,119 99,760
LIABILITIES
Non-current liabilities
Borrowings 143,581 159,112
Derivative financial instrument - 300
143,581 159,412
Current liabilities
Borrowings 31,356 11,738
Trade and other payables 5,000 5,508
36,356 17,246
Total liabilities 179,937 176,658
Total equity and liabilities 203,056 276,418
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME YEAR ENDED 31 AUGUST 2018
THE GROUP
Audited
Year ended Year ended
31 August 2018 31 August 2017
GBP 000 GBP 000
Rental income 17,521 19,279
Expenses
Property operating expenses (3,395) (1,895)
Administrative expenses (2,555) (1,432)
Other income 21 99
Movement in foreign exchange (16) -
Fair value loss on investment property (80,835) (10,046)
(69,259) 6,005
Net finance costs (7,201) (5,847)
(Loss)/profit before tax (76,460) 158
Taxation (21) 84
(Loss)/profit for the year (76,481) 242
Other comprehensive income for the year
Items that may be reclassified subsequently to profit or loss
Fair value gain on derivative financial instruments 1,404 2,284
Other comprehensive income for the year 1,404 2,284
Total comprehensive (loss)/income for the year (75,077) 2,526
Earnings/(loss) per share
Basic (loss)/earnings per share (GBP) (0.482) 0.002
Headline earnings per share (GBP) 0.027 0.067
STATEMENTS OF CHANGES IN EQUITY YEAR ENDED 31 AUGUST 2018
Audited
(Accumulated
losses)/
Share Hedging retained
capital reserve earnings Total
GBP 000 GBP 000 GBP 000 GBP 000
THE GROUP
Balance at 1 September 2017 39,412 (3,330) 63,678 99,760
Loss for the year - - (76,481) (76,481)
Other comprehensive income for the year - 1,404 - 1,404
Total comprehensive income for the year - 1,404 (76,481) (75,077)
Issue of shares 7,724 - - 7,724
Amortisation of historic cash flow hedging reserve - 1,011 - 1,011
Dividends - - (10,327) (10,327)
Waiver of dividends - - 28 28
Total transactions with owners of the parent 7,724 1,011 (10,299) (1,564)
Balance at 31 August 2018 47,136 (915) (23,102) 23,119
Balance at 1 September 2016 124,412 (5,614) (10,051) 108,747
Profit for the year - - 242 242
Other comprehensive income for the year - 2,284 - 2,284
Total comprehensive income for the year - 2,284 242 2,526
Capital reduction (85,000) - 85,000 -
Dividends - - (11,611) (11,611)
Waiver of dividends - - 98 98
Total transactions with owners of the parent (85,000) - 73,487 (11,513)
Balance at 31 August 2017 39,412 (3,330) 63,678 99,760
STATEMENTS OF CASH FLOWS YEAR ENDED 31 AUGUST 2018
THE GROUP
Audited
Year ended Year ended
31 August 2018 31 August 2017
GBP 000 GBP 000
Cash flows from operating activities
Cash generated from operations 11,837 16,375
Tax refunded 146 217
Interest paid (4,755) (5,411)
Net cash from operating activities 7,228 11,181
Cash flows from investing activities
Addition to investment property (8,150) -
Capital improvements to investment property (1,132) (2,258)
Interest received - 5
Net cash used in investing activities (9,282) (2,253)
Cash flows from financing activities
Proceeds from borrowings 12,800 7,500
Premium paid to reset interest rate swap - (3,030)
Repayment of borrowings (1,783) -
Payment on borrowing costs (695) (14)
Dividend payment (10,299) (11,513)
Net cash from/(used in) financing activities 23 (7,057)
Net (decrease)/increase in cash and cash equivalents for
the year (2,031) 1,871
Effect of foreign exchange rate changes (8) -
Cash and cash equivalents at the beginning of the year 5,510 3,639
At 31 August 2018/ 31 August 2017 3,471 5,510
During the year ended 31 August 2018 a non-cash transaction occurred. A shareholder loan of GBP7,723,214 was converted
into equity and shares were issued for that amount.
EARNINGS PER SHARE
THE GROUP
Audited
Year ended Year ended
31 August 31 August
2018 2017
GBP 000 GBP 000
Basic and headline earnings per share
Basic (loss)/earnings attributable to equity holders of the
Company (76,481) 242
Fair value movement on investment properties 80,835 10,046
Headline earnings attributable to equity holders of the
Company 4,354 10,288
Number of shares/weighted average number of shares 158,587,821 152,774,750
(Loss)/earnings per share
Basic (loss)/earnings per share (GBP) (0.482) 0.002
Headline earnings per share (GBP) 0.027 0.067
Note: As at 31 August 2018 the Company had shareholders convertible loans outstanding of GBP 10.1million (2017: GBP 4.0 million).
The loans will be converted into shares of the Company as and when the Company undertakes an equity raise. The loan is unsecured
and repayable when the Company undertakes the vendor placement, failing which the loans will be repayable on 12 April 2019 which
would not have a dilutionary effect on EPS or HEPS in terms of IAS 33. Since the year end it has been agreed to extend the loan
by a further 12 months from the repayment date. During the year convertible loans of GBP 7.7 million were converted into shares.
Date: 07/12/2018 02:14:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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