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NEW FRONTIER PROPERTIES LIMITED - Summarised reviewed consolidated results for the year ended 31 August 2018 and withdrawal of cautionary

Release Date: 30/11/2018 14:30
Code(s): NFP     PDF:  
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Summarised reviewed consolidated results for the year ended 31 August 2018 and withdrawal of cautionary

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 REVIEWED CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 AUGUST 2018 AND WITHDRAWAL OF CAUTIONARY

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.

REPORTING CURRENCY

The Company's results are reported in pounds sterling ("GBP").

FINANCIAL RESULTS

The Group's results shown herein have been reviewed by the Group's auditors and it is anticipated that full audited results
will be announced by 7 December 2018. No material amendments are expected to the figures presented in this
announcement. 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. The 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.

Lease expiry by gross rental

             Mall    Parking   < 1 yr*    2019     2020    2021     2022    2023    >2023
Gross Rent   1.96%   8.15%     21.16%     11.48%   8.64%   12.28%   9.74%   2.33%   24.26%

Weighted average unexpired lease term ("WAULT")

The centres benefit from a WAULT to expiry of 9.79 years and to a term certain of 9.17 years.

                       Burton       Middlesbrough   Blackpool
WAULT to Expiry, yrs   18.15        6.34            5.11
WAULT Certain, yrs     17.9         5.9             4.65

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 

Basis of preparation

The reviewed provisional condensed consolidated financial statements for the year ended 31 August 2018 are prepared in
accordance with the requirements of the JSE Listings Requirements for provisional reports, the SEM Listings Rules and
The Securities Act of Mauritius 2005. The JSE Listings Requirements require provisional reports to be prepared in
accordance with the framework concepts and the measurement and recognition requirements of International Financial
Reporting Standards (IFRS and as a minimum to contain the information required by IAS 34 Interim Financial Reporting.
The accounting policies applied in the preparation of the provisional condensed consolidated financial statements are in
terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements.

Auditor's review report

BDO, the group's independent auditor, has reviewed the provisional condensed consolidated financial statements for the
year ended 31 August 2018 and expressed a qualified review conclusion thereon in respect of going concern on the basis 
that two subsidiaries of the group are in breach of the 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 review report is available for inspection at the company's registered office together with the accompanying 
financial information. The auditor's review report does not necessarily report on all the information contained in these financial results. 
Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they should obtain 
a copy of the auditor's review report together with the accompanying financial information from the company's registered office. 

The directors take full responsibility for the preparation of these financial results and that the reviewed provisional
condensed consolidated results have been extracted from the reviewed financial statements.

SEGMENTAL INFORMATION

The Group derives its revenue from a single business activity, the property sector, which it considers as its only segment.

WITHDRAWAL OF CAUTIONARY

Shareholders are referred to the cautionary announcement released on SENS and published on the SEM website on 8
November 2018. Shareholders are no longer required to exercise caution when dealing in the company's securities as full
information regarding the decline in value of New Frontier's property portfolio has now been provided to shareholders.

By order of the Board

Osiris Corporate Solutions (Mauritius) Limited
Company secretary

30 November 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
                                                                                            Reviewed
                                                                                  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
Capital and reserves (attributable to owners of the parent)
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
                                                                                        Reviewed
                                                                               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

                                                                             Reviewed
                                                                                  (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
                                                                                         Reviewed
                                                                                Year ended       Year ended
                                                                            31 August 2018   31 August 2017
                                                                                   GBP 000          GBP 000
Cash flows from operating activities
Cash generated from operations                                                      10,819           16,375
Tax refunded                                                                           146              217
Interest paid                                                                      (4,755)          (5,411)
Net cash from operating activities                                                   6,210           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                                                            13,818            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                                         1,041          (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
                                                                                          Reviewed
                                                                                  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.

Reviewed
Date: 30/11/2018 02:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

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