Good morning, everyone, and welcome to our full year results presentation. As we have previously announced, we are currently working on a potential transaction with Capital & Regional, but today is all about our strong results, and we will update the market on the potential Capital & Regional transaction as and when necessary, but not today. Before we go through our presentation, let me start by saying that we believe we are in the strongest position we have been for five years, a direct result of how we have carefully repositioned our portfolio for the evolving consumer trends. We have delivered another excellent operational performance, underpinned by the quality of our asset management, and it has been a year in which our assets significantly outperformed the market in terms of the growth in consumer spending levels.
Our balance sheet is in great shape and supports the significant growth options that we have, including deployment of capital and the expansion of our successful capital partnership strategy. While we have demonstrated our resilience over the last four years, we are confident that over the next few years, we are well set to deliver growth. So let's move on to our presentation. As usual, I will start with an overview of FY 2024, followed by our view on our marketplace, and then share some of the highlights of the interesting spending data that we are now accessing. Will Hobman will walk us through the financial results, and I will finish with our operational review and outlook. We ended our financial year in an excellent position, having delivered another year of strong operational and financial results.
We've seen an improving market backdrop, especially within the occupational market, despite elevated interest rates and high inflation. Rental tension is returning, and this is underpinned by a U.K. consumer who has proved to be more resilient than financial markets were expecting. We've seen this within our own portfolio, with active demand for space leading to another year of strong leasing performance and our highest ever occupancy. These operational metrics delivered Underlying Funds From Operations of GBP 24.4 million, delivering a full-year dividend of GBP 0.066 per share, 1.18 covered. For the second consecutive year, our portfolio delivered a capital and total return outperformance relative to both the MSCI all-property and retail indices, reflective of the strength of our well-positioned portfolio, focused on essential goods and services with an inherent high income component.
Our LTV improved to 30.8%, supported by greater stability in our valuations and an operational performance, which resulted in excellent cash generation as we ended the year with GBP 133 million of cash. Net tangible assets per share on the 31st of March was 115 pence, with the majority of the 6p reduction in FY 2024 incurred in the first half of the financial year. With a portfolio that is performing well and a balance sheet providing optionality and capacity, NewRiver is well positioned to deliver future earnings growth. The occupational market is wholly dependent on the U.K. consumer, and despite consumers having to spend more on mortgages, rent, household bills, spending in retail and supermarkets is still up versus the prior year.
Wage growth, low levels of unemployment, and broadly stable house prices have supported this increase in retail spending, and the outlook is positive, with rising consumer confidence coming through and inflation falling back to the Bank of England's target of 2%. The really interesting graph on this slide is the Lloyds Bank customer spending data. This shows the month-on-month spend movement and the relativity between what their customers are spending in retail, plus supermarkets, total customer spending, including mortgages, rent, and household bills, and our analysis of what is being spent in NewRiver's portfolio. It is quite clear from the data how well our portfolio, and therefore our tenants, are doing in terms of customer spending over the last two years.
We believe that our occupational market is in its best position for at least five years, as retailers have benefited from this resilience in consumer spending and reflecting that much of the corporate restructuring and administrations have already taken place, that national retailers today have a laser focus on margin, not just volume growth, and that omni-channel retailers have been consistently gaining market share from pure-play online retailers. As a result, demand for space is increasing and vacancy rates for retail are reducing for both retail parks and shopping centers. Unsurprisingly, given the elevated risk-free rate, capital transactional volumes across the commercial real estate market were down compared to the prior year, and retail has not been immune to that. That said, we have recently seen an increase in investor demand for retail parks, given the highly favorable supply-demand imbalance, which will lead to consistent rental growth....
Recent available shopping centers are attracting multiple bids, partly due to the high cash-on-cash income returns on offer. To enhance our asset management capability through greater customer insights, we have recently started working with Lloyds Bank, who have the largest share of the U.K. domestic banking market, with approximately 26 million customers, to combine high-quality spending data with our retail market expertise. So far, we've been able to analyze two years of customer spending data on approximately two-thirds of our portfolio by value, with the intention to analyze the remaining portfolio data during this year. This data provides us with store-by-store turnover, including the online contribution, where customers are coming from, frequency of customer visits, average transaction values, demographic profiles, and interestingly, where customers make their first purchase, their second purchase, and so on.
Set out on this slide are a few of our main findings, the key ones being that our portfolio is delivering in-store spend growth well in excess of the national average, clearly demonstrating that our occupational cost ratio, at 8.8%, is highly affordable. We're excited about the prospects of utilizing this high-quality data to enhance our decision-making on capital deployment, leasing strategy, marketing, and the overall risk assessment of our assets. Let me now hand over to Will to talk you through our financials.
Thanks, Allan, and good morning, everyone. It's my pleasure to be taking you through our full year results today, starting with our key balance sheet and debt metrics. You can see from the slide that our financial position has improved further during the year. With our key debt metrics, net debt to EBITDA, LTV, and interest cover, all improved and all at or close to the best levels we've ever reported. Cash levels remain high at GBP 133 million, which improves to GBP 233 million when you include our undrawn revolving credit facility. This position is supported by our low and attractive cost of drawn debt, which is fixed at 3.5%. Because we have no maturity on drawn debt until 2028, that'll remain the case for a number of years to come.
Next, our revolving credit facility, which we extended in November from August 2024 to November 2026, and further to November 2028, subject to bank consent. At the same time, we reduced the facility size from GBP 125 million to GBP 100 million, while also reducing the margin, and so too, the annual cost. Although not currently drawn, having the RCF available to us gives valuable access to additional liquidity. So we currently have access to up to GBP 233 million of cash and liquidity, and subject to bank consent, an additional GBP 50 million of accordion too. It also means that we've maintained access to multiple sources of funding and demonstrates the continued support for NewRiver in the credit markets. I'll now spend a moment covering our financial policies, which form a key component of our approach to financial risk management.
On the left of the slide, you can see the reported position versus our policy, which shows we're comfortably in compliance across the board. I'll pick up dividends separately later on, but the charts on the right of this slide show that the position across all four debt-related financial policies is the strongest it's been since 2018, and even further back than that in most cases, which we believe is a great place to be in the current market and a great position from which to grow. This position was recognized by Fitch, along with our continued strong operational metrics when they reaffirmed NewRiver's investment-grade credit rating in December at BBB with a stable outlook and BBB+ on the bond itself.
These ratings have now been maintained since the corporate bond was issued 6 years ago, which, alongside the continued support from our bank lenders, we see as a real endorsement of the continued strength of our operations and financial position, our best-in-class asset management platform, and our well-positioned portfolio. Moving on to look at loan-to-value in more detail. You can see that disposals, principally Napier, the joint venture we established with Bravo back in 2019, are the key driver of the reduction from 33.9% at the start of the year to 30.8% now, offset slightly by targeted investment into our existing portfolio, and the modest 2.3% valuation decline seen during the year, the majority of which occurred in the first half, with the second half down by only 0.4%.
The first half reduction was concentrated in our regeneration portfolio, which showed much improved performance in the second half. Importantly, our core shopping centers and retail parks delivered another year of stability, and we continued to outperform the MSCI benchmark by a significant margin. Next, LTV guidance from here. Over the last 2 years, we've consistently said that we would not rush to redeploy to our 40% guidance level, and that in the near term, we intended to keep some headroom to that level and to operate with higher cash holdings, given the uncertain macro outlook, which we believe was the right call, given the position of strength we're able to report today. The difference now is that with stability in our core portfolio valuations and an LTV of just over 30%, we're now in a position to allocate capital.
We're currently reviewing some interesting opportunities, which we believe could offer the types of compelling returns we've targeted delivering to shareholders. In addition, we're making good progress in the search for a new capital partner to invest into retail parks, where we can boost our asset level returns with management fees. While waiting to deploy, with the base rate at 5.25% for most of the year, we've been earning just over a 5% return on the majority of our cash. So it still made a meaningful contribution to UFFO during the year. We've made the decision to pass this contribution straight through to shareholders by topping up the dividend, which I'll cover in more detail shortly. Before that, UFFO, which has reduced from GBP 25.8 million last year to GBP 24.4 million this year.
The key drivers of this movement, including disposals, are shown clearly in the bridge on the left-hand side of the slide, which shows that once one-off COVID-related credits in the prior year are factored in, principally the final collection of COVID rental arrears and the settlement of a COVID insurance claim, the core business has continued to perform well. Net property income has decreased by GBP 4.9 million, but that's principally due to the disposals completed during the year, including the disposal of the Napier JV in the first quarter and the completion of workout disposals over the last two years.
You can see that the workout assets have underperformed in the second half, as they did in the first half, but we've made good progress during the year in our disposal and turnaround strategies, completing 2 disposals during the year, with a further sale completed post-balance sheet, and implementing 2 turnarounds, meaning that workout has reduced from 11% of the total portfolio a year ago to 6% at the year-end. And most importantly, from a future performance perspective, our core portfolio performed well, and we saw continued growth in asset management income from our capital partnerships. Moving on to the other UFFO line items. Admin costs have continued to reduce modestly, but given inflationary pressures, a significant achievement in real terms, and reflecting the positive impact of our ongoing cost savings initiatives, which will remain a focus going forward.
Other income relates to COVID income disruption insurance settlements, and has reduced by GBP 1 million year on year, because as I've just mentioned, last year, we received GBP 1.4 million relating to our car park income, and during the first half of this year, we received GBP 0.4 million relating to commercialization income. Lastly, net finance costs, which have benefited from the income we're currently generating on our cash balances, over a 5% return on the majority of our cash holdings. Lastly, the dividend. As you know, we pay dividends twice per annum, announced within our half and full-year results, and based on 80% of the UFFO reported for the most recently completed six-month period, with the ability to top up the dividend payout from the 80% base level at the full year.
At the half year, we made the decision to temporarily flex our half-year dividend payout upwards by paying out 100% of the interest income earned on our cash holdings during the first half to reward our shareholders with an enhanced dividend yield as we awaited the compelling investment opportunities we expected to materialize in the near term, with a dividend that remained comfortably covered by UFFO. At the time of the half-year results, we also said that subject to capital deployment in H2, our intention would be to top up again at the full year. As mentioned earlier, although we're currently evaluating some compelling investment opportunities, any deployment made in H2 was limited to planned investment into our existing portfolio and more than covered by disposal proceeds.
Therefore, we've decided, as we did at the half year, to increase our H2 dividend payout by again paying out 100% of the interest income earned on our cash holdings during the second half. Number one on the left-hand side of the slide shows the interest income contributed GBP 0.009 per share to UFFO in the second half of FY 2024. And as highlighted by numbers two and three on the slide, the entire GBP 0.009 per share will be paid out as dividend. This increases the second half dividend from GBP 0.03 per share per our 80% base payout to GBP 0.032 per share, and takes our total FY 2024 dividend to GBP 0.066 per share.
An 85% payout, comfortably 118% covered, and representing a dividend yield of over 9% based on our recent share price. Thank you all for listening. I'll now hand you back to Allan.
Thanks, Will. We have consistently expressed our confidence in our portfolio, and our analysis of the Lloyds Bank spend data reinforces this. Last year's operational performance was no exception, with an increase in occupancy to 98%, a tenant retention rate of 94%, and another year of strong leasing performance ahead of values ERVs, as they have been for three consecutive years. An operating metric that we monitor closely is new leasing rent versus previous rent. In our view, it is critically important to understand over what time period the rent has changed, which is why we track the compound annual growth rate of our leasing transactions.
What is worth noting is that over the combined last three financial years, our compound annual growth rate has been only -0.3%, which is a remarkable result given the extent of disruption in the retail markets over the last 10 years. Of course, it also helps that we have a market-leading asset management platform, which you need in the highly operational sector that retail real estate has become. Moving now to our valuation performance, which again significantly outperformed the MSCI, experiencing a like-for-like movement of -2.3%. Pleasingly, our core shopping centers and retail parks delivered capital returns of +1.1% and 0.9%, respectively. We have now had stable or growing valuations in five of the last six reporting periods within these segments.
Whilst our regeneration portfolio experienced -8.7% valuation movement impacted by rising interest rates and inflation, the second half of FY 2024 saw a broadly stable performance of only -0.8%. Our workout portfolio saw the largest decline, but now only accounts for a modest part of our total portfolio. We've always held the view that income returns over the long term are the key driver of total returns, and given our high portfolio yield, you can see the importance of that income return in our total return outperformance relative to MSCI. During the year, our retail parks delivered a total return outperformance of 590 basis points, and our shopping centers, including workout and regeneration, of 290 basis points.
Over a 5-year period, our portfolio has consistently outperformed on income, capital, and total returns, and we expect that to continue. Our core shopping centers and retail parks are delivering attractive and reliable cash flows. With a continuing tightening of the supply of space in our portfolio, driven by active demand, we've had another good year of leasing performance. Growth in valuations within these segments, underpinned by those reliable cash flows and their high income yield, has led to another year of significant total return outperformance relative to MSCI. In relation to our regeneration portfolio, we are pleased with the strategic progress we are making in our projects in Burgess Hill and Grays. At Bexleyheath, which comprises a shopping center anchored by Marks & Spencer and a retail park anchored by Sainsbury's, we have decided to defer our plans to deliver new residential homes to beyond 2029.
Our decision was principally driven by the strong occupational performance of the asset and by our analysis of the Lloyds Bank spend data, which shows a marked increase in customer spending year-over-year and highly favorable occupational cost ratio at 9.1%. We believe deferring our development plans at this time in the cycle will protect this significant income stream. Moving forward, we will move Bexleyheath out of our regeneration portfolio and into our core shopping center and retail park portfolios. On that basis, regeneration will represent 5% of our total portfolio moving forward. Back in March 2021, our core portfolio represented 60% of our total portfolio, with the remaining 40% in pubs and workout assets. Over the last three financial years, our portfolio positioning has improved through key disposals, so that today, our core portfolio represents 93% of total assets.
As you can also see on this slide, our balance sheet has also been repositioned over the same period, with significant improvements in our debt metrics, including LTV, net debt to EBITDA, ICR, and cash. With carefully repositioned portfolio that is performing well and a balance sheet providing optionality, NewRiver is well positioned to deliver growth. Today, NewRiver owns and/or manages a portfolio of GBP 1.3 billion, of which 60% is owned by our capital partners. We are collecting more than GBP 120 million per annum of rent from over 1,700 tenants across 28 shopping centers and 29 retail parks. We believe that our geographical representation, together with our customer, retailer, and capital market insights, is unrivaled. Commercial real estate in the U.K. is becoming more operational, which has been the case for retail for several years.
To deliver the best performance from our own balance sheet assets over the years, we have invested in our infrastructure, including people, data, and systems. Our strategy to expand our capital partnership business is no different to Amazon's strategy in opening up their logistics network to third-party merchants in return for fee income, which they have built up to ensure the best service to Amazon's customers. We are seeking a new partner to form a long-term joint venture to build up a high-quality retail park portfolio. We are targeting a minimum of GBP 200 million of private capital from core plus investors, and our engagement with potential partners, which commenced earlier this year, has been extremely positive. Regeneration is a growing area of the market, reflecting that it is a key political priority of the main parties in the U.K., and thus, significant public capital is being made available.
In response to this, we are making good progress creating a public-private partnership model that will be a key delivery vehicle for local authorities to joint venture with to deliver regeneration projects in their town centers. We will provide some modest co-investment and high-quality asset and development management services. We believe over the coming years, there will be changing ownerships within destination shopping centers, and being one of the U.K.'s leading owners and managers of retail real estate, we believe our expertise in managing complex, multi-let retail real estate uniquely positions New River to absorb the management of these centers. Ultimately, we are a specialist asset-backed operating platform with limited competition that can credibly match the high-quality asset management services that we offer and the ability to co-invest.
With this in mind, we believe that today, our capital partnership business, with recurring annualized earnings of GBP 2.5 million, is scalable and are very confident of our long-term growth potential to deliver significant earnings growth in a capital-light way. We're pleased to report that our ESG program has continued to deliver on our long-term objectives, as evidenced by our achievements during the year. We have made headway on our path to net zero, progressing against our emission reduction targets, achieving a 31% reduction in Scope 1 and 16% reduction in Scope 2 emissions in FY 2024 versus FY 2023. We're encouraged that our occupiers share our ambition, with 60% of our portfolio floor area occupied by retailers who have set emission reduction targets.
The quality of the governance of our business was once again recognized as we retained our first-place ranking in the GRESB management module out of over 1,000 participants across Europe, and our overall score increased to 72 out of 100. We also retained our B CDP rating for our management of climate-related issues, as well as our Gold Award in EPRA's Sustainability Best Practice Recommendation Awards. The success of our business comes from the people within our team and our working partnerships, and so we are delighted to have been recently recognized for the second year running in the Sunday Times Best Places to Work. Our achievements across people, place, partnership, environment, and governance testify how our ESG commitment is embedded throughout our business and contributing to our success and growth as a responsible real estate investor.
There's positive momentum in our marketplace, in which we have consistently outperformed and delivered strong operational and financial results. We have completed the hard work and the careful repositioning of our balance sheet portfolio over the last three years, whilst significantly investing in our people, data, and systems to become one of the U.K.'s leading owners and managers of retail real estate. The discount in our share price, in our opinion, is more reflective of our size, share liquidity constraints, and wider equity market conditions for listed REITs and investment trusts. This is a challenge that we will seek to overcome through earnings growth to drive returns for shareholders, pursuing several growth avenues. We have a strong balance sheet, which provides us with optionality.
We are very well positioned, given the earnings growth potential that we have in our own portfolio from capital deployment, and that our capital partnership business is highly scalable. As U.K. real estate is becoming more operational, we believe that specialist asset-backed operating platforms like NewRiver will become more important as the main conduit for private capital investing into the real estate markets, and therefore, more valuable. While we have demonstrated our resilience over the last four years, we are confident that over the next few years, we're well set to deliver growth. We'll now move to Q&A. Just as a reminder, that given we remain in an offer period with Capital & Regional, we are subject to the rules of the Takeover Code, and as such, we cannot take any questions in relation to the potential transaction. So please bear that in mind.
Thank you. The first question comes from Simon Corfield: Why not use your cash to buy back shares?
Well, thank you for your question, Simon. Share buybacks is one of our capital allocation options. That said, as we just said in our presentation, our share price trading at a discount is, in our opinion, more reflective of our size and share liquidity constraints, and therefore, we're seeking to pursue opportunities that will deliver earnings growth, increase scale, and improve share liquidity. We believe that that will deliver strong growth in shareholder value.
Thank you. The second question comes from Richard Moon, who asks, "What is the hurdle rate for CapEx on the existing portfolio?
Yeah, we have a number of projects where we are planning to invest into some of our assets this year. We're looking to achieve a yield on cost in excess of 9% and an IRR of in excess of 10% on the capital investment that we're planning this year.
Thank you. Now that you've moved Paisley and Wallsend into your core portfolio, what rental yield are those assets producing? That's from Mark Bentley.
Thank you, Mark. Well, we're delighted to have completed our turnaround strategies in Paisley and Wallsend, and to ensure a successful transition to our highly successful core shopping center portfolio. Those two assets will be in our core shopping center portfolio, delivering a rental yield in excess of 10%.
Next question comes from Greg: Will the sale timing of Grays be influenced by anticipated changes in Bank of England interest rates?
Well, we submitted our planning application for Grays. We're anticipating getting a planning approval towards the end of this year, and that will put us in a position where we can sell that asset during the course of 2025.
Next question comes from Eleanor Frew: Do you expect to dispose of the remaining workout portfolio assets by the end of this year? And can you give some more details on the acquisitions that you're looking at?
Thank you, Eleanor. Well, we have two further disposals to make in our workout portfolio. We're making good progress on those. But the two key projects in our workout portfolio is in Cardiff, where we have now submitted a planning application to reposition that center to a predominantly multi-entertainment center. We expect to get planning consent later on in July, and we're currently under offer to lease approximately 80,000 sq ft to one of the most successful multi-entertainment operators. We have a further project in our workout portfolio, where we're seeking to re-anchor that center. We're in negotiations with a major discount retailer, and that will also involve repositioning the car park so that we provide a modern, free car park facility.
That, we think, will transform that asset in terms of footfall generation and greater spending growth.
The next question comes from James Lowen: Can you talk a little bit more about Bexleyheath, given its size, its value, performance, and the decision to move it back into core?
... Yeah, part of the reason that we made the decision to move Bexleyheath into back into our core portfolio is just really reflective of the underlying performance of of of the asset in Bexleyheath. As I mentioned, it comprises two assets there, a shopping center anchored by Marks & Spencer, and a retail park, which is anchored by Sainsbury's. The retail park is fully let, the shopping center is nearly fully let, and what's been incredibly encouraging is the the spending data that we're now accessing from Lloyds Bank, and our analysis is showing that Bexleyheath is outperforming the wider market in terms of year-on-year spend spending growth, and the occupational cost ratio, that is rent, business rates, and service charges. The percentage of retailers' turnover is at at a very affordable level of 9.1%.
So this gives us great confidence around the security and the reliability of those future rental cash flows.
James, got a follow-on question. What would be a good size in terms of contribution to income for asset management business to look like on a five-year view?
Well, today, our capital partnership business is delivering recurring earnings of around GBP 2.5 million. We think we've got very significant growth potential. We did, a number of years ago, set out a target to get that to GBP 5 million. We're very confident we can achieve that, and there is absolutely no reason why we can't continue to grow our capital partnership business beyond the GBP 5 million mark. And I think this is just partly reflective, as we said in the presentation, that retail real estate has become more and more operational. And New River is arguably, you know, one of the leading owners and managers of multi-tenanted retail real estate.
You know, given the expertise, the experience, the access to data that we have, and as more investors come into the retail real estate market, the best way to deploy capital in the retail real estate market is through a platform like NewRiver. So we think this, this is an area of our business that can deliver very significant growth potential.
Next question comes from Matthew Saperia. How much equity would you expect to co-invest alongside a partner in the retail parks opportunity? Will it be seeded with existing assets, and do you have a pipeline of new opportunities?
Yeah, we have a pipeline, Matthew. We're not planning to seed it with our, our own assets, and in terms of our co-investment, it will be somewhere between 10%-30% of the required equity.
The next question is from Marcus Phayre-Mudge on Burgess Hill. What percentage of the asset is represented by the potential residential site sale? And what's the longest stop date on the pre-lets, i.e., when will those deals fall away?
Thank you, Marcus. Yeah, the residential site sale is broadly in line with our current book value. In terms of the pre-lets, we're under offer to pre-let the main food store to one of the major food discounters on a very long lease with indexation, and the hotel is also under offer on a long lease. We've got planning. That planning consent has been implemented, and we anticipate starting works, as I mentioned in the presentation, we're planning to do this in a joint venture, and we're proposing that- well, we're hoping that works will start towards the end of this year, beginning of next year.
One further question from James Long. At this point in the cycle, would you go to 40% LTV for expansion options?
Well, our guidance is to be at or below 40%. We think that, that's absolutely appropriate for us as a business. Our current LTV is around 30%, but our net debt to EBITDA is one of the lowest in the listed real estate sector, and our interest cover ratio is one of the highest. So, yes, we feel confident our operating at or close to our guidance level. Well, I think that's all the questions. Thank you, Lucy. So just wanted to thank everybody for joining us this morning. Thank you.