TIDMESP
RNS Number : 3731I
Empiric Student Property PLC
12 August 2021
12 August 2021
Empiric Student Property plc
("Empiric" or the "Company" or, together with its subsidiaries,
the "Group")
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2021
Empiric Student Property plc (ticker: ESP), the owner and
operator of premium student accommodation across the UK, today
reports its interim results for the six months ended 30 June
2021.
Duncan Garrood, Chief Executive Officer of Empiric Student
Property plc, said:
"Whilst we have been impacted by the pandemic, we remain
encouraged by the resilience of the business, which is underpinned
by the operational transformation we've undergone over the past
three years, and our underlying business outlook remains positive.
The number of students in our target market is set for continued
growth and we are optimistic that a commitment to face to face
teaching in most universities will result in occupancy levels for
the upcoming 2021/22 academic year continuing to grow in the coming
weeks.
Our unique Hello Student brand proposition gives us a
competitive advantage, especially in a COVID affected world, and we
plan to strengthen its impact and reach as we deliver on our five
key priorities; actively managing our property portfolio;
strengthening our brand proposition; driving performance through
data analytics; delivering consistently high customer service; and
developing our people.
We are actively managing the portfolio for capital recycling and
are encouraged by progress on our disposal programme which supports
the value of our balance sheet. We have also started the
refurbishment works on our assets as planned. Our new revenue
management system is working well and will allow us to reduce costs
from September 2021 onwards as well as increase customer
acquisition and revenue.
We are pleased to report that we will resume dividend payments
in Q4 this year with a payment of 2.5p per share. This comprises
the PID distribution requirement of 1p per share for the financial
year 2019 and 1.5p per share for 2020. In 2022, we plan to start
paying a minimum dividend of 1.5p per share per annum, with a view
to increasing this as occupancy levels normalise. Our future
dividend policy will be progressive, whilst also ensuring that
dividends are paid on a fully covered basis. Driving long term
shareholder value remains top of our agenda as we drive value
enhancing changes in our business."
Financial performance
-- Revenue of GBP25.9 million (H1 2020: GBP34.0 million), as
occupancy for this half year is 65% (H1 2020: 84%). The like for
like rental growth for AY 2020/21 was 1.3%, down from the 1.8%
previously reported as we prioritised occupancy levels over rental
growth.
-- Property expenses at GBP10.9 million (H1 2020: GBP10.6
million). This increase was primarily driven through higher council
tax liabilities due to lower occupancy.
-- Overall gross margin of 57.9% (H1 2020: 68.8%) as a result of lower revenues.
-- Maintained focus on controlling administrative expenses,
which were GBP5.3 million (H1 2020: GBP5.2 million).
-- Disposal completed of four assets for GBP18.1 million,
generating a profit on disposal of GBP1.7 million.
-- Operating profit was GBP13.2 million (H1 2020 loss: GBP8.0
million), including a fair value gain of GBP1.8 million (H1 2020
loss: GBP26.2 million).
-- Net financing costs for the period were GBP6.2 million, net
of interest earned (H1 2020: GBP6.4 million).
-- Profit before tax was GBP7.0 million (H1 2020 loss: GBP14.4
million). No corporation tax was charged in the period, as the
Group fulfilled all its obligations as a REIT.
-- Basic EPS of 1.16p (H1 2020 loss: 2.39p).
-- The operating business continues to generate cash despite
reduced occupancy rates. Adjusted earnings for H1 2021 are GBP3.5
million (H1 2020: GBP12.0 million).
-- Adjusted EPS was 0.59 pence (H1 2020: 1.98 pence).
-- No dividends paid during the period due to the ongoing impact
of the pandemic (H1 2020: 1.25p). Resumption of dividend payments
in Q4 this year with a payment of 2.5p.
-- As at 30 June 2021, the Group owned 91 assets representing
9,170 beds (31 December 2020: 9,396 beds). The portfolio included
87 revenue-generating properties at the period end, with 8,543
beds.
-- Property portfolio valued at GBP994 million at 30 June 2021
(31 December 2020: GBP1,005 million), reflecting the asset
disposals completed. The portfolio valuation has remained stable
since the year end on a like for like basis. The COVID-19 valuation
deduction made by CBRE as at 30 June 2021 reduced to GBP20 million
compared to GBP21.4 million at the year end.
-- Underlying valuation yield of 5.59% (31 December 2020: 5.61%)
has improved slightly, reflecting an improvement in rental growth
on our super prime assets, partially offset by a reduction in
secondary assets.
-- As at 30 June 2021, EPRA net tangible assets ("NTA") per
share was 106.2 pence (31 December 2020: 105.0 pence).
-- Total Return in the period was 1.1% (30 June 2020: (2.1%)).
-- During the period we fully complied with all of our banking
covenants and there was no refinancing of debt facilities required.
At the period end, the Group had committed investment debt
facilities of GBP420 million, of which GBP375 million (31 December
2020: GBP390 million) had been drawn down, resulting in an LTV of
34.5% (31 December 2020: 35.4%), in line with our long term target
of 35%.
o Of total drawn debt of GBP375 million, GBP277 million (74%) is
at fixed interest rates and GBP98 million (26%) is at floating
rates. The aggregate cost of debt is 2.9%, with a weighted average
term to maturity of 5.4 years at 30 June 2021.
o As at 30 June 2021, we had GBP77.2 million of undrawn
facilities and cash, and we currently have around GBP45 million of
unencumbered assets.
o No further refinancing requirements until November 2022.
Operational performance
-- Throughout the pandemic, we have taken a supportive approach
to our students' situation, granting later check-ins, deferments,
cost-free cancellations and refunds. Online reviews suggest this
has helped enhance our brand reputation and drive future customer
acquisition.
-- In November 2020, we successfully launched our new revenue
management system and all bookings for the academic year 2021/22
are now managed in-house. We expect this to deliver annualised cost
savings of about GBP1.5 million per annum from September 2021
onwards as well as increase customer acquisition and revenue.
-- We established an ESG Committee at Board level and set up
three internal working groups to deliver the ESG initiatives. We
conducted a benchmarking exercise against a relevant peer group,
and also completed stakeholder interviews across a wide range of
stakeholders. This has enabled us to identify and validate the four
key themes that we intend to focus on and also align our
initiatives with an industry reporting standard and establish clear
metrics by which our progress can be measured:
o Health and safety
o Mental health and wellbeing
o Energy efficiency
o Sustainable properties
-- We continue to make good progress on all five of the key
commercial priorities for the Group, which we are confident will
further strengthen the Group's position: actively managing our
property portfolio; strengthening our brand proposition; driving
performance through data analytics; delivering consistently high
customer service; and developing our people.
Market update
-- The latest data from UCAS, as of 30 June 2021, underlines
that the UK student market is growing:
o Student applications to UK Universities for AY 21/22 have
grown 4% and university offers have increased 3% year on year.
o UCAS predicts that these increases will see a record number of
students starting university in the autumn. It is encouraging to
see applications from the UK up 7% and Non-EU International
Students up 14%, with application from China and India, two key
markets for the Group, up 17% and 30%, respectively.
-- The Education Secretary has recently announced the end of
restrictions on face to face teaching, and almost all universities
are now planning a blended approach to learning, with a mix of face
to face teaching and online lectures. In other words, they expect
students to attend in person for AY 21/22 which is encouraging.
-- ONS estimates the number of UK 18-year-olds to grow 25% by
2030 adding almost 1 million more over the decade.
-- 2020 was a record year with investment in student property
totaling just over GBP6.0 billion, however the majority of this was
Blackstone's GBP4.7 billion acquisition of the iQ portfolio. In
2021 so far, investment volumes are around GBP1.7 billion with the
main sources of investment coming from REITs, private equity,
sovereign wealth funds and private individuals. The potential
acquisition of GCP Student Living is a good example. There is an
expectation in the market that with only a number of weeks to go
until the start of the 2021/22 academic year, many deals are likely
to remain on hold until the start of the academic year or until
bookings are confirmed through physical occupancy.
Post Period End
-- Bookings of 70% for the 2021/22 academic year at 11 August,
compared to 65% as at 12 August 2020.
o The lateness in bookings is mostly caused by some
international students not yet committing to their plans. As a
result, the Group currently has a greater proportion of UK Students
in its mix, now representing 47% of bookings compared to about one
third pre-pandemic. The remainder are international students and
split equally between Chinese and other nationalities.
o In recent weeks, an increasing number of bookings have come
from international students outside the UK, who typically rent the
Group's highest quality stock. The UK Government has indicated it
will treat them in the same way as domestic residents, which means
all students should be able to travel to the UK, regardless of
country of origin, although relevant quarantine procedures will
still apply.
o The Group has put in place a comprehensive quarantine package
for students coming from countries on the amber list offering two
free weeks of accommodation as well as providing food, laundry
services and making arrangements for testing so that they are able
to self-isolate without any difficulties.
o If the current level of bookings continues, we expect
occupancy levels at the start of the academic year to be in the
region of 75% to 85%.
-- We are pleased to resume dividend payments in Q4 this year
with a payment of 2.5p. This comprises the PID distribution
requirement of 1p per share for the financial year 2019 and a 1.5p
per share for 2020.
-- In 2022, we intend to start paying a minimum dividend of 1.5p
per share per annum, with a view to increasing this as occupancy
levels normalise.
-- We are making good progress on the disposal of non-core
assets, and plan to use these proceeds to invest an estimated GBP44
million on the refurbishment of properties, with a targeted IRR of
9% to 11%, and also spend approximately GBP30 million over the
period to 2025 on work to ensure our buildings comply with
forthcoming changes in fire and safety legislation.
-- Looking forward, once we achieve occupancy levels in line
with those before the pandemic, we expect to deliver a Gross Margin
above 70% and a total return in the 7% to 9% pa range.
Half year results Presentation
The Company presentation for investors and analysts will take
place at 9.00am (BST) via a live webcast and conference call .
To access the live webcast, please register in advance here:
https://www.investis-live.com/empiric/60ed60cc0ed69a0a00480b39/eqgp
To access the live conference call, please contact Maitland/AMO
at:
empiric-maitland@maitland.co.uk or by telephone on +44 (0) 20 7379 5151.
The recording of the webcast and presentation slides will also
be accessible later on in the day from the Company website:
https://www.empiric.co.uk/investor-information/company-documents
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Empiric Student Property plc (via Maitland/AMO below)
Duncan Garrood (Chief Executive Officer)
Lynne Fennah (Chief Financial & Operating
Officer)
Jefferies International Limited 020 7029 8000
Stuart Klein
Tom Yeadon
RBC Europe Limited (trading as RBC Capital
Markets) 020 7653 4000
Charlie Foster
Marcus Jackson
Maitland/AMO (Communications Adviser) 07747 113 930
James Benjamin empiric-maitland@maitland.co.uk
The Company's LEI is 213800FPF38IBPRFPU87.
Further information on Empiric can be found on the Company's
website at www.empiric.co.uk .
Notes:
Empiric Student Property plc is a leading provider and operator
of modern, predominantly direct-let, premium student accommodation
located in high-demand university towns and cities across the UK.
Investing in both operating and development assets, Empiric is a
fully integrated operational student property business focused on
premium studio-led accommodation managed through its Hello
Student(R) operating platform, that is attractive to affluent
growing student segments.
The Company, an internally managed real estate investment trust
("REIT") incorporated in England and Wales, listed on the premium
listing segment of the Official List of the Financial Conduct
Authority and was admitted to trading on the main market for listed
securities of the London Stock Exchange in June 2014.
MANAGEMENT REPORT
Throughout the pandemic, we have adopted a supportive approach
to our customers, and online reviews suggest this has helped
enhance the Hello Student(R) brand reputation and drive up our Net
Promoter Score to a sector leading +27. Driving long-term
shareholder value remains top of our agenda as we drive value
enhancing changes in our business and manage cash prudently.
Key Priorities
Within our 2020 Annual Report we highlighted five key priorities
for the Group. We have made good progress on each of these, which
are summarised below:
1) Actively Managing our Property Portfolio
As we presented in March 2021, we have categorised our portfolio
into four segments.
Segment A - This segment comprises properties we regard as core
Hello Student sites. They are in good condition, have properly
configured rooms, communal facilities and yield the best
returns.
We plan to grow this segment through either standing asset
acquisitions or developments. The location of these new sites will
be situated near our existing buildings to increase the density of
clustered buildings and drive operational efficiency.
Segment B - This segment comprises properties which
fundamentally meet the Hello Student criteria but need investment
in either refurbishment or modest reconfiguration. We will invest
in these sites, where modelled returns are attractive, on a
site-by-site basis. The aim is to eliminate this segment by
converting them into Segment A quality. This will ensure that all
Hello Student sites are of a consistently high standard. The level
of refurbishments required are detailed further later on.
Segment C - This segment comprises properties which are not
consistent with the Hello Student brand but have good commercial
characteristics. There are two sub-categories in this segment.
The first sub-segment covers sites that are ideal for mature
graduates or postgraduates who often look for accommodation in
quieter locations, or perhaps something more suitable for couples.
Holding this proposition enables us to retain and "upgrade"
existing customers if they continue their studies, allowing us to
benefit from building loyalty through their undergraduate
experience.
The second sub-segment consists of properties ideally suited to
first year UK students, typically because of their proximity to
campus and cluster room configurations. These are usually managed
through nomination agreements. However, if we cannot renew an
agreement, we will consider moving the property to Segment D, for
disposal. We have already taken one such decision and will continue
to keep the remaining sites in the second sub-section under
review.
Segment D - This segment comprises assets that no longer remain
aligned to our brand proposition and are therefore identified for
disposal.
To date, we have sold four sites in this segment for a total
sale price of GBP18.1 million, this was above the December 2020
valuations leading to a profit on disposal for the half year of
GBP1.7 million.
Further disposals are being pursued.
2) Strengthening our Brand Proposition
The Hello Student brand already has strong awareness and a good
reputation; however, it needs to have its proposition refined and
refreshed through customer insight.
We have carried out extensive qualitative and quantitative
customer research and identified the most important things to our
customers. The survey covered more than 1,750 existing students who
live in Halls, PBSA and those using HMOs. Our key question was
"what are the most important factors when choosing accommodation
(excluding location and price)".
The top priorities were very clear. Having their own space with
some privacy, somewhere they feel safe and somewhere that feels
like home where they can study.
Safety, security and our quality service, provided within a
convenient distance of campus in a homely environment are all
critical elements, which we have embedded in our proposition.
These findings also validate our recent change in working
patterns to introduce 24-hour cover in our properties. Our
reception desks are now manned around the clock, not just 9 to 5,
ensuring that our residents feel safe and secure at all times.
The findings also confirm that our overriding brand message of
"Homes, not Halls" is compelling.
3) Driving Performance Through Data Analytics
With the completion of our in-house revenue management system
(see operational update for detail), we are now refining and
systemising our approach to pricing and marketing. We are ensuring
that we have the capability within the Group to provide detailed
understanding of revenue management, conversion rates and the
effectiveness of our marketing.
For example, we recently undertook an in-depth analysis of a
cluster of properties in a city which seemed to be behind on
bookings. This showed that across the cluster we had a large number
of room types and prices. This was causing customer confusion and
drop-off at the point of booking, so conversion was particularly
low. This fragmented offering also led to sub-optimal search engine
optimisation. As a result, we reduced the choice to six room types,
re-aligned pricing against mapped local competitors and invested in
targeted "pay per click" to drive more traffic to our website. As a
result, our search position is now in the top three, and revenue
occupancy grew 10% above the portfolio benchmark within two months
of launching our revised offer.
4) Delivering Consistent Customer Service
Our research has showed that providing social facilities and
events through a period of lockdown and extended on-line learning,
has been key to driving wellbeing and customer satisfaction.
For example, we hold mental health awareness programmes,
exercise and yoga classes, quiz nights, music nights and cookery
classes.
We have given all our colleagues "mental health first aid"
training, to help them spot early signs of issues that our
customers may be experiencing. We have also introduced an external
counselling service free of charge to our customers to support them
24 hours a day.
As a result of this support, we have had an increased level of
positive reviews on Google and social media which helps to build
brand reputation and word of mouth recommendations. Our Net
Promoter Score ("NPS") as measured by the independent Global
Student Living Index has risen 6 points to +27 and compares
favourably to -8 NPS for "All Halls".
5) Developing our People
Our senior leadership and operations teams are now complete,
providing us with the breadth and experience to execute our
strategy.
We have redefined and relaunched our values from the grassroots
up, ensuring everyone has an opportunity to contribute. These have
been received well and will form the bedrock of our service
culture.
Following approval at our Annual General Meeting we introduced a
sharesave scheme for the first time for all our employees, aligning
rewards with shareholder interests.
In March 2021 we reported our colleague engagement was 81% which
compares favourably to the national average of 68%. We have
recently conducted a further survey where initial results indicate
that this level was maintained. This is especially pleasing given
the challenges of the past year of lockdown.
Our Market
2020 was a record year with investment volumes totalling just
over GBP6 billion despite the challenges of the COVID-19 pandemic,
however the majority of this was the result of Blackstone's GBP4.7
billion acquisition of the iQ portfolio. In 2021 so far, the
investment volume is around GBP1.7 billion with the main sources of
investment coming from REITs, private equity, sovereign wealth
funds and private individuals. The potential acquisition of GCP is
a good example. There is an expectation in the market that with
only months to go until the start of the 2021/22 academic year,
many deals are likely to remain on hold until the start of the year
or until bookings are confirmed through physical occupancy.
Student demand figures for the upcoming year are looking
positive. In the UCAS midcycle results the key points were:
- Total undergraduate applicants up by 4%
- Non-EU international applicants up by 14%
- UK applicants up by 7%
- EU applicants down by 43%
The Education Secretary has also announced the end of
restrictions on face-to-face teaching, though it seems that almost
all universities are planning a blended approach to learning, with
a mix of in-person teaching and online lectures, meaning that they
expect students to attend in person for AY 2021/22.
Operational Update
Health and Safety Update
We continue to make health and safety our top priority. Focus
areas have included in-depth fire safety studies, lone working
arrangements including the introduction of an app-based process for
regular check-ins and emergency support, enhanced reporting and
colleague training. We have also maintained our focus on compliance
which remains at high levels of achievement. During the half year
we have had no serious injuries or fatalities, and our customer
safety focus has been enhanced through 24/7 site presence.
Revenue Management System
We have continued our agile response to the challenges presented
by COVID-19, enabled by our in-sourcing strategy over the previous
three years.
As noted in our 2020 Annual Report, we started selling on our
new platform for the academic year 2021/22 in November last year.
This new system has several benefits including:
- Direct control of all aspects of our revenue management,
enabling us to make price changes much more efficiently and
swiftly.
- Improved customer journey on our website and ability to manage
the relationship with our customers directly end-to-end and a CRM
system.
- Annualised cost savings of about GBP1.5 million per annum from
September 2021 onwards, once our contract with a third-party
provider expires.
The process for the collection of student debtors is the final
element of this new platform which is currently being brought
in-house. This will be completed by September 2021 and will be a
centralised function within the finance team for the academic year
2021/22.
Our recently appointed Sales and Marketing Director will
leverage this platform and focus in particular on:
- systemising our approach to dynamic pricing; and
- further improvements to the customer journey.
Both of the above link us back to our five key priorities as
highlighted on pages 4 to 5 of our 2020 Annual Report.
Environment, Social and Governance ("ESG") Update
Having delivered the majority of the operational transformation,
we now have direct control of our assets and are increasingly
focused on sustainability.
We are committed to creating a sustainable, positive,
environmentally focused, social and economic legacy for our
shareholders, customers, colleagues and wider stakeholders.
In November 2020 we appointed an external ESG consultant to help
us develop an ESG roadmap, which has progressed during the
period.
We have also established an ESG Committee at Board level and set
up three internal working groups to deliver the ESG
initiatives.
We have conducted a benchmarking exercise against a relevant
peer group, and also completed stakeholder interviews across a wide
range of stakeholders, which has enabled us to validate the key
themes.
We have identified four key themes we intend to focus on, as
follows:
- Health and safety
- Mental health and wellbeing
- Energy efficiency
- Sustainable properties
We intend to align our initiatives with an industry reporting
standard and establish clear metrics by which our progress can be
measured. We will report further on our progress in our 2021 Annual
Report.
Financial Performance
Revenue decreased by 24% to GBP25.9 million (H1 2020: GBP34.0
million), as occupancy for this half year is 65% compared to
occupancy of 84% in the previous half year. The like-for-like
rental growth for AY 2020/21 was 1.3%, down from the 1.8%
previously reported as we prioritised occupancy levels over rental
growth.
Property expenses were 3% higher at GBP10.9 million (H1 2020:
GBP10.6 million). This increase was primarily driven by higher
council tax liabilities due to lower occupancy. Overall gross
margin reduced to 57.9% from 68.6% for the first half of 2020.
We maintained our focus on controlling administrative expenses,
which were broadly flat at GBP5.3 million (H1 2020: GBP5.2
million).
Operating profit under IFRS was GBP13.2 million (H1 2020 loss:
GBP8.0 million), including a fair value gain of GBP1.8 million (H1
2020 loss: GBP26.2 million), see Portfolio and Valuation section
for detail. The initial yield of 5.59% is marginally better than
the beginning of the year (31 December 2020: 5.61%). During the
period we sold four assets with a net gain on disposal of GBP1.7
million.
Net financing costs for the period were GBP6.2 million, net of
interest earned (H1 2020: GBP6.4 million).
Profit before tax was GBP7.0 million (H1 2020 loss: GBP14.4
million). No corporation tax was charged in the period, as the
Group fulfilled all its obligations as a REIT.
Adjusted EPS was 0.59 pence (H1 2020: 1.98 pence. Adjusted EPS
is defined in Note 4.
As at 30 June 2021, the EPRA NTA per share was 106.2 pence, (31
December 2020: 105.0 pence).
Total Return
Total Return in the period was 1.1% (H1 2020: (2.1)%).
Dividends
We did not pay any dividends during the period due to the
ongoing impact of the pandemic. See the Looking Forward section for
our future dividend policy.
Financing
During the period there was no refinancing of our debt
facilities required. At the period end, we had committed investment
debt facilities of GBP420 million, of which GBP375 million (31
December 2020: GBP390 million) had been drawn down, resulting in an
LTV of 34.5% (31 December 2020: 35.4%). The aggregate cost of debt
is 2.9%, with a weighted average term to maturity of 5.4 years at
30 June 2021. We fully complied with all of our banking covenants
during the period.
Of our total drawn down facilities, GBP277 million is at fixed
interest rates and GBP98 million is at floating rates.
We have also agreed waivers or an easing of covenant
requirements on all our debt to ensure that we remain covenant
compliant throughout the pandemic and through the majority of our
Going Concern scenarios as set out further on. We would like to
thank all of our lenders for the support which they have provided
through this period.
We currently have around GBP45 million of unencumbered assets
and as at the period end, we had GBP77 million of undrawn
investment facilities and cash.
As we have no re-financing requirements until November 2022 and
have taken protective measures to preserve liquidity, we are well
placed to trade through the COVID-19 pandemic until the market
recovers.
Portfolio and Valuation
As of 30 June 2021, the Group owned 91 assets representing 9,170
beds (31 December 2020: 9,396 beds). The portfolio included 87
revenue-generating properties at the period end, with 8,543 beds.
65% of our beds (including pipeline) are located in Russell Group
university towns, and CBRE class 90% of our portfolio as prime or
super prime.
Each property in the portfolio has been independently valued by
CBRE, in accordance with the Royal Institution of Chartered
Surveyors ("RICS") Valuation-Professional Standards January 2014
and the UK national supplement 2018 (the "Red Book"). At 30 June
2021, the portfolio was valued at GBP994 million.
During the period we disposed of four properties for GBP18.1
million, they had a book value of GBP16.4 million and generated a
profit on disposal of GBP1.7 million.
The underlying Net initial yield ("NIY") (after capital
deductions) improved slightly to 5.59% (December 2020: 5.61%).
COVID Deduction
- At 31 December 2020, the portfolio valuation reflected a
GBP21.4 million COVID-related reduction mainly due to CBRE's
assumption of 60% occupancy for the following nine months.
- As at 30 June 2021, CBRE revised this COVID deduction to
GBP20.0 million and this is made up of:
- A deduction for the remaining three months of AY 2020/21
covering July to September, being the difference between a normal
year's expected income and predicted income for this period.
- A deduction for AY 2021/22, reflecting their assumption of
lower levels of international students, and income reductions
ranging from 5% to 30% for each building in the portfolio.
Developments and Redevelopment
At the period end, we had a pipeline of four development
projects, as shown in the table below:
Site Development basis Beds Delivery year
------------------------- ------------------------------- ------ -------------
Emily Davies, Southampton Major refurbishment 232 2021
------------------------- ------------------------------- ------ -------------
St Mary's, Bristol Direct development 153 2022
------------------------- ------------------------------- ------ -------------
South Bridge, Edinburgh Major refurbishment 61 2022
------------------------- ------------------------------- ------ -------------
FISC, Canterbury Major refurbishment/development 181(1) TBC
------------------------- ------------------------------- ------ -------------
1 Potential for further beds as a result of the ongoing planning
application.
Current Developments
The Southampton extension and refurbishment project completed in
December 2020 is being mobilised into an operational building for
the start of the 2021/22 academic year. The Edinburgh refurbishment
project is due to start on site as we deliver this for the 2022/23
academic year.
St Mary's, Bristol development programme has been deferred to
the next academic year as a consequence of COVID-19 that ultimately
led to the required replacement of the main contractor. The new
contractor is appointed, and the site is back to full construction
activity.
We are continuing to progress the Canterbury development, where
we have achieved planning consent for the first phase of the
development but are awaiting the outcome of a planning application
for the second phase to ensure we get the greatest value from the
development.
Planned Capital Expenditure and Refurbishments
As we mentioned at the year end and earlier in this report, we
are now focused on active portfolio management.
Below we outline a high-level prudent indication of capital
expenditure plans for the next five years:
- An estimated GBP44 million to be spent on refurbishments. We
are targeting an IRR of 9% to 11% for these refurbishment
investment projects.
- About GBP4 million on green initiatives to produce power or reduce energy consumption.
- Approximately GBP30 million essential work to ensure our
buildings comply with forthcoming changes in fire and safety
legislation.
In recent years, our underlying level of ongoing capital
expenditure that supports building life cycle plans has been circa
GBP4 million per year and we expect this to continue throughout the
five-year period.
Earlier in this report, we detail our approach to repositioning
the portfolio and the rationale behind it.
If for any reason we cannot deliver the desired rate of return
then we will look to dispose of the asset, although our
expectations are that this is unlikely.
We have already started two pilot projects in Bristol and Leeds,
and we are carrying out the work whilst students are in residence
for the first time. The projects are being managed to minimise the
impact to our customers, and working in this way enables us to
reduce any income loss.
Looking Forward
Whilst we have been impacted by the pandemic, our underlying
business outlook remains positive.
The number of students in our target market is set for continued
growth and we are optimistic that a commitment to face-to-face
teaching in most universities will result in occupancy levels for
the upcoming 2021/22 academic year growing in the coming weeks.
Our unique Hello Student brand proposition gives us a
competitive advantage, especially in a COVID affected world, and we
plan to strengthen its impact and reach as we deliver on our five
key priorities.
We are actively managing the portfolio for capital recycling and
are encouraged by progress on our disposal programme which supports
the value of our balance sheet. We have also started the
refurbishment works on our assets as planned.
Our new revenue management system is working well and will allow
us to reduce costs from September 2021 as well as increase revenue
and customer acquisition.
We expect our administration expense to be around GBP11 million
for FY 2021. We have adopted a cautious approach to managing cash
flow over the last year to ensure we protect shareholder value,
including the pausing of dividend payments.
We are now pleased to report that we will resume dividend
payments in Q4 this year with a payment of 2.5p per share. This
comprises the PID distribution requirement of 1.0p per share for
the financial year 2019 and a 1.5p per share for 2020.
In 2022, we intend to start paying a minimum of 1.5p per share
per annum, with a view to increasing this as occupancy levels
normalise.
Our future dividend policy will be progressive, whilst also
ensuring that dividends are paid on a fully covered basis.
Our aim is to return to full occupancy as soon as it is possible
to do so, once we achieve occupancy levels in line with those
achieved pre-pandemic we would expect the Group to produce the
following:
- Total return in the range of 7% to 9%.
- Gross margin above 70%.
If the current level of bookings continues, we expect occupancy
levels at the start of the academic year to be in the region of
75%-85%.
Principal Risks and Uncertainties
The principal risks and uncertainties we face are described in
detail on pages 42 to 46 of our Annual Report and Accounts for the
year ended 31 December 2020. The Audit Committee, which assists the
Board with its responsibilities for managing risk, has considered
those principal risks and uncertainties in the light of the third
national lockdown in early 2021 and concluded that whilst the
categories of principal risks are unchanged during the period,
there has been a slight reduction in risk across all aspects of our
business as a result of the impact of COVID-19 vaccination
roll-out.
COVID-19
COVID-19 has had an impact across every industry, with the
primary impact on the Group being the safety of our people and
customers and reduced levels of occupancy.
As a result, for the December 2020 Annual Report, the Board
introduced a new risk - Revenue Risk - which highlights the risk of
reduced revenue from changes to university operations (for example,
university teaching moving to an online platform or universities
facing financial difficulties due to reduced student demand for
higher education) and travel restrictions (for example, reduced
domestic and international travel or issues with international
student visas).The resilience of our business as a result of
COVID-19 uncertainty has been documented under Going Concern.
Brexit
The UK left the European Union after a transition period, and to
date we have not seen any impact from this event. The Board takes
comfort that this government is committed to growing international
student numbers - from the current level of almost 450,000 to
600,000 by 2030. The Treasury has also recognised the value of
higher education exports by making visa applications and
postgraduate employment limitations less onerous. As a result, no
principal risk has been added due to Brexit.
Principal Risks
The principal risks and uncertainties described in the Annual
Report and Accounts are summarised below:
External Risks
- Student Demand Risk - There is a risk that the level of student demand will decrease.
- Competition Risk - The risk of an increased level of
competition and supply in the student accommodation sector.
- Property Market Risk - The potential for a downturn in the property market.
- Regulatory Risk - Large levels of regulation being applied to the student accommodation market.
- Funding Risk - The availability of debt or equity and ability to raise it on acceptable terms.
- Revenue Risk - The risk of reduced revenue from various
changes to university operations and travel restrictions.
Internal Risks
- Health and Safety Risk - The occurrence of a major health and safety incident including a fire.
- Cyber Security Risk - The Group suffering from a cyber security breach.
- People Risk - Inability to retain and attract top levels of staff.
Going Concern
The COVID-19 pandemic has created global economic uncertainty,
and in particular uncertainty around income for the 2021/22
academic year. Accordingly, the Group has conducted a detailed
going concern review and considered its liquidity position and
banking covenant compliance strength. The detailed assessment we
have undertaken is set out in Note 1.2 of the financial
statements.
The Directors consider that the Group has adequate resources in
place for at least 12 months from the date of these results and
have therefore adopted the going concern basis of accounting in
preparing the half year financial statements.
Responsibility Statement of the Directors in Respect of the
Interim Report and Accounts
The Directors confirm that to the best of their knowledge this
condensed set of financial statements has been prepared in
accordance with UK -adopted International Accounting Standard 34
and that the operating and financial review herein includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8 of
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority, namely:
- an indication of important events that have occurred during
the first six months of the financial period and their impact on
the condensed financial statements and a description of the
principal risks and uncertainties for the remaining six months of
the financial period; and
- material related party transactions in the first six months.
A list of the current Directors is shown further on in this
report. Shareholder information is as disclosed on the Empiric
Student Property plc website, www.empiric.co.uk.
For and behalf of the Board
Mark Pain
Chairman
11 August 2021
Independent Review Report to Empiric Student Property plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises the condensed
consolidated statement of comprehensive income, the condensed
consolidated statement of financial position, the condensed
consolidated statement of changes in equity, the condensed
consolidated statement of cash flows and related notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' Responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the
Group will be prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this interim financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2021 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Use of our Report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London, United Kingdom
11 August 2021
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
Unaudited Condensed Consolidated Statement of Comprehensive
Income
Unaudited six months to 30 Unaudited six months to 30 Audited year
June 2021 June 2020 31 December 2020
Notes GBP'000 GBP'000 GBP'000
---------------------------- ----- ---------------------------- ---------------------------- -----------------
Continuing operations
Revenue 25,921 34,014 59,444
Property expenses (10,925) (10,599) (22,651)
Gross profit 14,996 23,415 36,793
---------------------------- ---------------------------- -----------------
Administrative expenses (5,257) (5,199) (9,841)
Gain on disposal of
investment property 1,651 - -
Change in fair value of
investment property 6 1,807 (26,202) (37,603)
Operating profit/(loss) 13,197 (7,986) (10,651)
---------------------------- ---------------------------- -----------------
Finance cost (6,199) (6,445) (13,341)
Finance income 1 22 22
---------------------------- ---------------------------- -----------------
Net finance cost 2 (6,198) (6,423) (13,319)
Profit/(Loss)before tax 6,999 (14,409) (23,970)
---------------------------- ---------------------------- -----------------
Corporation tax 3 - - -
Profit/(Loss) for the period
and Total Comprehensive
Income/(Expense) 6,999 (14,409) (23,970)
============================ ============================ =================
Earnings per share expressed
as pence per share
Basic 4 1.16 (2.39) (3.97)
Diluted 4 1.16 (2.39) (3.97)
---------------------------- ---------------------------- -----------------
Unaudited Condensed Consolidated Statement of Financial
Position
Unaudited Unaudited
30 June 2021 30 June 2020 Audited 31 December 2020
Notes GBP'000 GBP'000 GBP'000
--------------------------------------- ----- ---------------- ------------- ------------------------
Non-current assets
Property, plant and equipment 177 333 135
Intangible assets 1,011 1,672 1,054
Investment property-operational assets 6 969,355 984,631 981,369
Investment property-development assets 6 24,942 25,449 23,751
---------------- ------------- ------------------------
995,485 1,012,085 1,006,309
---------------- ------------- ------------------------
Current assets
Trade and other receivables 7,161 6,335 14,510
Cash and cash equivalents 32,160 6,157 33,927
---------------- ------------- ------------------------
39,321 12,492 48,437
---------------- ------------- ------------------------
Total assets 1,034,806 1,024,577 1,054,746
================ ============= ========================
Current liabilities
Trade and other payables 15,878 13,590 15,527
Deferred rental income 8,007 8,110 20,676
---------------- ------------- ------------------------
23,885 21,700 36,203
---------------- ------------- ------------------------
Non-current liabilities
Bank borrowings 7 370,508 359,913 385,266
370,508 359,913 385,266
---------------- ------------- ------------------------
Total liabilities 394,393 381,613 421,469
---------------- ------------- ------------------------
Total net assets 640,413 642,964 633,277
================ ============= ========================
Called up share capital 6,032 6,032 6,032
Share premium 295 257 257
Capital reduction reserve 475,038 475,038 475,038
Retained earnings 159,048 161,637 151,950
Total equity 640,413 642,964 633,277
Total equity and liabilities 1,034,806 1,024,577 1,054,745
================ ============= ========================
NAV per share basic (pence) 8 106.17 106.60 105.00
NAV per share diluted (pence) 8 105.71 106.36 104.60
EPRA NTA per share basic (pence) 8 106.17 106.60 105.00
Unaudited Condensed Consolidated Statement of Changes in
Equity
Period from 1 January to 30 June 2021 (unaudited)
Called Capital Cash flow
up share Share reduction Retained hedge Total
capital premium reserve earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- -------- ---------- --------- --------- -------
Balance at 1 January 2021 6,032 257 475,038 151,950 - 633,277
Changes in equity
Profit for the period - - - 6,999 - 6,999
Total comprehensive expense/income
for the period - - - 6,999 - 6,999
Share-based payment - - - 137 - 137
Share options exercised
(Note 10) - 38 - (38) - -
--------- -------- ---------- --------- --------- -------
Total contributions and
distribution recognised
directly in equity - 38 - 99 - 137
--------- -------- ---------- --------- --------- -------
Balance at 30 June 2021 6,032 295 475,038 159,048 - 640,413
========= ======== ========== ========= ========= =======
Period from 1 January to 30 June 2020 (unaudited)
Capital
Called up reduction Retained Cash flow
share capital Share premium reserve earnings hedge reserve Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------- ------------- ------------- -------------- -------------- ------------
Balance at 1
January 2020 6,032 257 482,578 175,891 - 664,758
Changes in
equity
Profit for the
period - - - (14,409) - (14,409)
Fair value - - - - - -
gain on cash
flow hedge
------------- ------------- ------------- -------------- -------------- ------------
Total
comprehensive
income for the
period - - - (14,409) - (14,409)
Share-based
payment - - - 155 - 155
Dividends - - (7,540) - - (7,540)
Total
contributions
and
distribution
recognised
directly in
equity - - (7,540) 155 - (7,385)
------------- ------------- ------------- -------------- -------------- ------------
Balance at 30
June 2020 6,032 257 475,038 161,637 - 642,964
============= ============= ============= ============== ============== ============
Year from 1 January to 31 December 2020 (audited)
Capital
Called up reduction Retained Cash flow
share capital Share premium reserve earnings hedge reserve Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------- ------------- ------------- -------------- -------------- ------------
Balance at 1
January 2020 6,032 257 482,578 175,891 - 664,758
Changes in
equity
Loss for the
period - - - (23,970) - (23,970)
Total
comprehensive
income for the
period - - - (23,970) - (23,970)
Share-based
payment - - - 29 - 29
Dividends - - (7,540) - - (7,540)
------------- ------------- ------------- -------------- -------------- ------------
Total
contributions
and
distribution
recognised
directly in
equity - - (7,540) 29 - (7,511)
------------- ------------- ------------- -------------- -------------- ------------
Balance at 31
December 2020 6,032 257 475,038 151,950 - 633,277
============= ============= ============= ============== ============== ============
Unaudited Condensed Consolidated Statement of Cash Flows
Unaudited six months to Unaudited six months to 30 Audited year to 31
30 June 2021 June 2020 December 2020
GBP'000 GBP'000 GBP'000
--------------------------- -------------------------- -------------------------- --------------------------
Cash flows from operating
activities
(Loss)/Profit before income
tax 6,999 (14,409) (23,970)
Share-based payments 137 155 29
Depreciation charge 192 157 326
Impairment of fixed assets - - 898
Finance income (1) (22) (22)
Finance costs 6,199 6,445 13,341
Gain on disposal of
investment property (1,651) - -
Change in fair value of
investment property (1,807) 26,202 37,603
-------------------------- -------------------------- --------------------------
10,068 18,528 28,205
Decrease in trade and other
receivables 6,025 4,201 (3,971)
Increase/(decrease) in trade
and other payables 539 (512) 1,653
(Decrease) in deferred
rental income (12,669) (21,094) (8,528)
-------------------------- -------------------------- --------------------------
(6,105) (17,405) (10,846)
-------------------------- -------------------------- --------------------------
Net cash flows generated
from operations 3,963 1,123 17,359
Cash flows from investing
activities
Purchase of tangible fixed
assets (108) (77) (72)
Purchase of intangible
assets (83) (113) (370)
Purchase of investment
property (3,907) (7,497) (14,258)
Proceeds from disposal of
investment property 18,020 - -
Fixed term deposit - 22 22
-------------------------- -------------------------- --------------------------
Net cash flows from
investing activities 13,922 (7,665) (14,678)
Cash flows from financing
activities
Dividends paid - (7,540) (7,540)
Bank borrowings - 10,000 77,800
Repayments of bank
borrowings (15,000) - (42,800)
Loan arrangement fees paid (137) (371) (1,009)
Finance costs (4,515) (5,907) (11,722)
-------------------------- -------------------------- --------------------------
Net cash from financing
activities (19,652) (3,818) 14,729
(Decrease)/increase in cash
and cash equivalents (1,767) (10,360) 17,410
========================== ========================== ==========================
Cash and cash equivalents at
beginning of period 33,927 16,517 16,517
Cash and cash equivalents at
end of period 32,160 6,157 33,927
Unaudited Notes to the Financial Statements
For the period 1 January 2021 to 30 June 2021
1. Accounting Policies
1.1 Trading Period
The condensed interim financial statements of the Group
reporting period is from 1 January 2021 to 30 June 2021.
1.2 Going Concern
The COVID-19 pandemic has created global economic uncertainty,
and in particular an uncertainty around income for the 2020/21 and
2021/22 academic years. Accordingly, the Group has conducted a
detailed going concern review and considered its liquidity position
and banking covenant compliance strength.
On 31 March 2020 the Group announced the difficult decision to
suspend dividend distributions and guidance. The Group also took
decisive action to focus on liquidity. All development spend was
paused and other discretionary costs were reviewed with reductions
identified and implemented. The Group also announced it would look
favourably upon requests on a case-by-case basis from its customers
who were either no longer in occupation or, due to university
closures, plan not to return to their accommodation, to be released
from their rent and lease obligations from 25 April 2020 onwards.
The worst-case estimate for this was a GBP21.0 million cash impact,
however the final actual impact of releasing students their rent
obligations for the academic year 2020/21 was much less at GBP6.5
million.
As at 30 June 2021 the Group had GBP32 million in cash and GBP45
million of undrawn investment debt facilities. The Group is well
funded and has no refinancing requirements until November 2022.
The Group's debt facilities include covenants in respect of LTV
and interest cover, both projected and historic, and all debt
facilities are ring-fenced with each specific lender. The Group
maintains regular dialogue with all of its lenders as part of the
ordinary course of business, however during the pandemic we have
increased the frequency of this dialogue. As part of these
discussions with our lenders we have had conversations specifically
around the interest cover covenants to ensure we either temporarily
restructure these or gain the relevant waivers from the banks to
ensure that no issues arise. To date all of our banks have been
supportive during this period and have expressed commitment to the
long-term relationship they wish to build with Empiric.
Management has evaluated a number of scenarios in its going
concern model. The critical assumption is the revenue occupancy for
the upcoming 2021/22 academic year. Upside, central and downside
cases have been constructed showing 2021/22 academic year occupancy
of between 65% and 95%. For the 2020/21 academic year our occupancy
has been 65%.
Revenue occupancy Revenue occupancy
for 2020/21 academic for 2021/22 academic
Scenario year year
Scenario 1 - Upside Scenario 65% 95%
Scenario 2 - Central Scenario 65% 80%
Scenario 3 - Downside Scenario 65% 65%
------------------------------- --------------------- ---------------------
The Group continues to maintain covenant compliance for its LTV
thresholds throughout the going concern assessment period. Property
values would have to fall by more than 17% from June 2021
valuations before LTV covenants are breached.
In Scenario 1 and 2 above the Group continues to maintain
covenant compliance for all its interest cover covenants. It
maintains adequate levels of liquidity and does not need to utilise
the additional GBP20 million RCF facility negotiated with Lloyds
Bank plc throughout the same assessment period. In addition, no
assumption is made as to the level of additional cost cutting
measures or mitigating actions which could potentially be
undertaken.
In Scenario 3, under our Downside Stress Scenario, we would not
meet interest cover covenants at 31 March 2022 measurement date for
two lenders. However, the Group has cure rights under the lending
agreements and sufficient cash headroom to cure any interest cover
ratio breaches if required. For one lender, under Scenario 3, we
would not meet a specific 70% occupancy covenant requirement by
October 2021. Under this scenario we would be dependent on the
further support of this lender, and we would expect this support to
be forthcoming.
To support the Directors' going concern assessment, the
management also evaluated the occupancy level at which all ICR
covenant tests were breached and, additionally, the impact of a
"Reverse Stress Test" which was performed to determine the level of
revenue occupancy for the 2021/22 academic year at which the Group
would need to seek alternative sources of funding. For this model
we kept revenue occupancy for the 2020/21 academic year at 65%.
The Directors noted that if occupancy falls below 44% then the
Group would be in breach of all ICR covenants, and at 15% revenue
occupancy for the 2021/22 academic year (50% lower revenue
occupancy than our Downside Stress Scenario) the Group would need
to seek alternative sources of funding.
As at 11 August 2021 our bookings for the 2021/22 academic year
are at 70% and we are seeing these grow on a daily basis. As such
we believe the downside scenario is unlikely.
Having reviewed and considered three modelled scenarios, the
Directors consider that the Group has adequate resources in place
for at least 12 months from the date of these results and have
therefore adopted the going concern basis of accounting in
preparing the annual financial statements.
1.3 Basis of Preparation
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK adopted
international accounting standards, with future changes being
subject to endorsement by the UK Endorsement Board. The Group
transitioned to UK adopted international accounting standards in
its consolidated financial statements on 1 January 2021. There was
no impact or changes in accounting policies from the
transition.
This condensed consolidated interim financial report for the
half-year reporting period ended 30 June 2021 has been prepared in
accordance with the UK adopted International Accounting Standard
34, "Interim Financial Reporting" and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
The Interim Report does not include all of the notes of the type
normally included in an annual financial report. Accordingly, this
Report is to be read in conjunction with the Annual Report for the
year ended 31 December 2020, which has been prepared in accordance
with both "international accounting standards in conformity with
the requirements of the Companies Act 2006" and "international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union", and any public
announcements made by the Group during the interim reporting
period.
These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 31
December 2020 were approved by the Board of Directors on 16 March
2021 and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
These financial statements have been reviewed, not audited.
The Group's financial statements have been prepared on a
historical cost basis, except for investment property and
derivative financial instruments which have been measured at fair
value. The consolidated financial statements are presented in
Sterling, which is also the Group's functional currency.
The accounting policies adopted in this Report are consistent
with those applied in the Group's statutory accounts for the year
ended 31 December 2020 and are expected to be consistently applied
during the year ending 31 December 2021.
Unaudited Notes to the Financial Statements
For the period 1 January 2021 to 30 June 2021
1.4 Significant Accounting Judgements, Estimates and
Assumptions
The preparation of the Group's interim financial statements
requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities, and the disclosure of contingent liabilities, at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability
affected in future periods.
Estimates
In the process of applying the Group's accounting policies,
management has made the following estimates, which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
a) Fair valuation of investment property
The market value of investment property is determined, by an
independent real estate valuation expert, to be the estimated
amount for which a property should exchange on the date of the
valuation in an arm's length transaction. Properties have been
valued on an individual basis. The valuation experts use recognised
valuation techniques and the principles of IFRS 13.
The valuations have been prepared in accordance with the RICS
Valuation-Professional Standards January 2014 and the UK national
supplement 2018 (the "Red Book"). Factors reflected include current
market conditions, annual rentals, lease lengths, and location. The
significant methods and assumptions used by valuers in estimating
the fair value of investment property are set out in Note 6.
For properties under development the fair value is calculated by
estimating the fair value of the completed property using the
income capitalisation technique less estimated costs to completion
and an appropriate developer's margin.
Judgements
In the process of applying the Group's accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the consolidated
interim financial statements:
a) Operating lease contracts-the Group as lessor
The Group has investment properties which have various
categories of leases in place with tenants. The judgements by lease
type are detailed below:
Student leases: As these leases all have a term of less than one
year, the Group retains all the significant risks and rewards of
ownership of these properties and so accounts for the leases as
operating leases.
Nominations and commercial leases: The Group has determined,
based on an evaluation of the terms and conditions of the
arrangements, particularly the lease terms, insurance requirements
and minimum lease payments, that it retains all the significant
risks and rewards of ownership of these properties and so accounts
for the leases as operating leases.
1.5 Seasonality of Operations
The results of the Group's operating business are closely
aligned to the levels of occupancy achieved by the property
portfolio in each academic year. Empiric targets 51-week tenancies,
with a one-week void period falling in September. This results in
slightly lower revenue on the existing portfolio in the second half
year combined with slightly higher costs from turning around the
rooms for the new academic year.
The Group counteracts this through the development cycle as
construction is timed to complete ready for the start of the
academic year in September each year. These new properties becoming
available increases revenue in the second half year.
1.6 Segmental Information
The Directors are of the opinion that the Group is engaged in a
single segment business, being the investment in student and
commercial lettings, within the United Kingdom.
2. Net Finance Cost
Unaudited six months to 30 Unaudited six months to 30 Audited year to 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
-------------------------- -------------------------- -------------------------- ---------------------------
Finance costs
Interest expense on bank
borrowings 5,820 5,890 11,838
Amortisation of loan
transaction costs 379 555 1,503
-------------------------- -------------------------- ---------------------------
6,199 6,445 13,341
Finance income
Interest received on bank
deposits 1 22 22
-------------------------- -------------------------- ---------------------------
1 22 22
Net finance cost 6,198 6,423 13,319
========================== ========================== ===========================
3. Corporation Tax
Taxation on the profit or loss for the period not exempt under
UK REIT regulations comprises current and deferred tax. Taxation is
recognised in the profit and loss within the Group Consolidated
Statement of Comprehensive Income except to the extent that it
relates to items recognised as direct movement in equity, in which
case it is also recognised as a direct movement in equity.
Current tax is expected tax payable on any non-REIT taxable
income for the period, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax
payable in respect of previous years.
Unaudited Notes to the Financial Statements
For the period 1 January 2021 to 30 June 2021
4. Earnings Per Share
The number of ordinary shares is based on the time-weighted
average number of shares throughout the period.
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated using the weighted
average number of shares adjusted to assume the conversion of all
dilutive potential ordinary shares.
EPRA EPS, reported on the basis recommended for real estate
companies by EPRA, is a key measure of the Group's operating
results.
Adjusted earnings is a performance measure used by the Board to
assess the Group's dividend payments. Licence fees, development
rebates and rental guarantees are added to EPRA earnings on the
basis noted below as the Board sees these cash flows as supportive
of dividend payments.
- The adjustment for licence fees receivable is calculated by
reference to the fraction of the total period of completed
construction during the period, multiplied by the total licence
fees receivable on a given forward funded asset.
- The development rebate is due from developers in relation to
late completion on forward funded agreements as stipulated in
development agreements.
- The discounts on acquisition are in respect of the vendor
guaranteeing a rental shortfall for the first year of operation as
stipulated in the sale and purchase agreement.
Reconciliations are set out below:
Calculation of
Calculation of Calculation of Calculation of Calculation of adjusted basic
basic EPS diluted EPS EPRA basic EPS EPRA diluted EPS EPS
------------------
Unaudited six
months to 30 June
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ---------------- ---------------- ---------------- ---------------- ---------------
Earnings 6,999 6,999 6,999 6,999 6,999
Changes in fair
value of
investment
property (Note 6) - - (1,807) (1,807) (1,807)
Gain on disposal of
investment
property - - (1,651) (1,651) (1,651)
Earnings/adjusted
earnings (GBP'000) 6,999 6,999 3,541 3,541 3,541
Weighted average
number of shares
('000) 603,168 603,168 603,168 603,168 603,168
Adjustment for
employee share
options ('000) - 2,593 - 2,593 -
Total number of
shares ('000) 603,168 605,761 603,168 605,761 603,168
---------------- ---------------- ---------------- ---------------- ---------------
Per-share amount
(pence) 1.16 1.16 0.59 0.58 0.59
================ ================ ================ ================ ===============
Calculation of
Calculation of Calculation of Calculation of Calculation of adjusted basic
basic EPS diluted EPS EPRA basic EPS EPRA diluted EPS EPS
------------------
Unaudited six
months to 30 June
2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ---------------- ---------------- ---------------- ---------------- ---------------
Earnings (14,409) (14,409) (14,409) (14,409) (14,409)
Adjustment to
include discounts
on acquisition due
to rental
guarantees
in the period - - - - 162
Changes in fair
value of
investment
property (Note 6) - - 26,202 26,202 26,202
Earnings/adjusted
earnings (GBP'000) (14,409) (14,409) 11,793 11,793 11,955
Weighted average
number of shares
('000) 602,939 602,939 602,939 602,939 602,939
Adjustment for
employee share
options ('000) - -(1) - 1,367 -
Total number of
shares ('000) 602,939 604,306 602,939 604,306 602,939
---------------- ---------------- ---------------- ---------------- ---------------
Per-share amount
(pence) (2.39) (2.39) 1.96 1.95 1.98
================ ================ ================ ================ ===============
1 Due to the Group making a loss in the period, under IAS 33 the share options become antidilutive
and thus are excluded from the above calculation.
Audited year to 31
December 2020
Earnings (23,970) (23,970) (23,970) (23,970) (23,970)
Adjustment to
include discounts
on acquisition due
to rental
guarantees in the
year - - - - 221
Changes in fair
value of
investment
property (Note 6) - - 37,603 37,603 37,603
Earnings/adjusted
earnings (23,970) (23,970) 13,633 13,633 13,854
Weighted average
number of shares
('000) 603,161 603,161 603,161 603,161 603,161
Adjustment for
employee share
options ('000) - -(1) - 551 -
Total number of
shares ( '000) 603,161 604,185 603,161 603,712 603,161
---------------- ---------------- ---------------- ---------------- ---------------
Per-share amount
(pence) (3.97) (3.97) 2.26 2.26 2.30
================ ================ ================ ================ ===============
1 Due to the Group making a loss in the year, under IAS 33 the
share options become antidilutive and thus are excluded from the
above calculation.
Unaudited Notes to the Financial Statements
For the period 1 January 2021 to 30 June 2021
5. Dividends Paid
Unaudited six Unaudited six Audited year
months to 30 months to 30 to 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
----------------------------------- ------------- ------------- ---------------
Interim dividend of 1.25 pence per
ordinary share
in respect of the quarter ended
31 December 2020 - 7,540 7,540
------------- ------------- ---------------
- 7,540 7,540
============= ============= ===============
6. Investment Property
Investment Investment
properties properties Total operational Properties
freehold long leasehold assets under development Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ----------- ---------------------- ----------------- ------------------ ---------
As at 1 January 2021 849,220 132,149 981,369 23,751 1,005,120
Property additions 1,755 251 2,006 1,731 3,737
Property disposals (16,367) -- (16,367) - (16,367)
Change in fair value
during
the period 3,765 (1,418) 2,347 (540) 1,807
----------- ---------------------- ----------------- ------------------ ---------
As at 30 June 2021
(unaudited) 838,373 130,982 969,355 24,942 994,297
=========== ====================== ================= ================== =========
As at 1 January 2020 861,639 137,741 999,380 29,700 1,029,080
Property additions 2,064 227 2,291 4,911 7,202
Transfer of completed
developments 5,582 - 5,582 (5,582) -
Change in fair value
during
the period (18,230) (4,392) (22,622) (3,580) (26,202)
---------
As at 30 June 2020
(unaudited) 851,055 133,576 984,631 25,449 1,010,080
=========== ====================== ================= ================== =========
Investment Investment
properties properties Total operational Properties
freehold long leasehold assets under development Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ------------- -------------------- ---------------------- ----------------- -------------------------
As at 1
January 2020 861,639 137,741 999,380 29,700 1,029,080
Property
additions 3,915 352 4,267 9,376 13,643
Transfer of
completed
developments 13,082 - 13,082 (13,082) -
Change in fair
value during
the year (29,416) (5,944) (35,360) (2,243) (37,603)
------------- -------------------- ---------------------- ----------------- -------------------------
As at 31
December 2020
(audited ) 849,220 132,149 981,369 23,751 1,005,120
============= ==================== ====================== ================= =========================
In accordance with IAS 40, the carrying value of investment
property is their fair value as determined by independent external
valuers. This valuation has been conducted by CBRE Limited, as
independent external valuers, and has been prepared as at 30 June
2021, in accordance with the Appraisal and Valuation Standards of
the RICS, on the basis of market value. This value has been
incorporated into the financial statements.
The valuation of all property assets uses market evidence and
also includes assumptions regarding income expectations and yields
that investors would expect to achieve on those assets over time.
Many external economic and market factors, such as interest rate
expectations, bond yields, the availability and cost of finance and
the relative attraction of property against other asset classes,
could lead to a reappraisal of the assumptions used to arrive at
current valuations. In adverse conditions, this reappraisal can
lead to a reduction in property values and a loss in NAV.
All investment property is categorised as Level 3. There have
been no transfers between Level 1 and Level 2 during any of the
periods, nor have there been any transfers between Level 2 and
Level 3 during any of the periods.
The valuations have been prepared on the basis of market value
("MV"), which is defined in the RICS Valuation Standards as:
"The estimated amount for which a property should exchange on
the date of valuation between a willing buyer and a willing seller
in an arm's length transaction after proper marketing wherein the
parties had each acted knowledgeably, prudently and without
compulsion."
Unaudited Notes to the Financial Statements
For the period 1 January 2021 to 30 June 2021
The table below reconciles the fair value of the investment
property as per the Consolidated Group Statement of Financial
Position and the market value of the investment property as per the
independent valuation performed in respect of each period end.
Unaudited six Unaudited six Audited year
months to 30 months to 30 to 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
-------------------------------- ------------- ------------- ---------------
Value per independent valuation
report 993,828 1,009,610 1,004,651
Plus: long leasehold liability 469 470 469
------------- ------------- ---------------
Fair value per Group Statement
of Financial Position 994,297 1,010,080 1,005,120
============= ============= ===============
The following descriptions and definitions relate to valuation
techniques and key unobservable inputs made in determining fair
values. The valuation techniques for student properties use a
discounted cash flow with the following inputs:
a) Unobservable input: Rental values
The rent at which space could be let in the market conditions
prevailing at the date of valuation. The rent ranges per week are
as follows:
30 June 2021 30 June 2020 31 December 2020
---------------- ------------- ----------------
GBP89-GBP339 per GBP102-GBP357 GBP95-GBP357 per
week per week week
b) Unobservable input: Rental growth
The estimated average annual increase in rent based on both
market estimations and contractual arrangements. The assumed
growths in valuations are as follows:
30 June 2021 30 June 2020 31 December 2020
------------ ------------ ----------------
1.0% 2.86% 1.48%
c) Unobservable input: Net yield
The net initial yield is defined as the initial gross income as
a percentage of the market value (or purchase price as appropriate)
plus standard costs of purchase. The ranges in net initial yields
are as follows:
30 June 2021 30 June 2020 31 December 2020
------------ ------------ ----------------
4.45%-8.15% 4.35%-7.50% 4.45%-8.50%
d) Unobservable input: COVID rent deduction
The valuation as of 30 June 2021 includes a GBP19,982,000
capital deduction to the valuation to reflect the impact of
COVID-19 on the valuations. This deduction is made up of three
parts:
1) The valuation reflects the contracted rental income as at 30
June 2021, with appropriate shortfalls made to each asset weighted
to the remainder of the academic year.
2) A general 'COVID Risk' deduction with a cap and collar of 5%
and 30% has also been made to 2021/22 gross income, depending on
each asset's performance. This reflects a risk adjustment weighted
towards those assets which CBRE consider to be at risk if students
fail to return as expected.
3) A further deduction if there is a shortfall in projected rent
for 2021/22, due to low demand. For example, in markets typically
dominated by international students some operators have reduced
their rents to attract more domestic bookings, but as set out
earlier the market perception is that this is a one-year blip for
2021/22. In these instances, CBRE have calculated the difference
between our opinion of market rent post 2021/22 and the proposed
rents provided to us and, where CBRE have adopted the higher rent
in the valuation, deducted any difference between the two where it
is significant.
e) Unobservable input: Physical condition of the property
f) Unobservable input: Planning consent
No planning enquiries undertaken for any of the development
properties.
g) Sensitivities of measurement of significant unobservable
inputs
As set out in the significant accounting estimates and
judgements, the Group's portfolio valuation is open to judgements
and is inherently subjective by nature.
As a result, the following sensitivity analysis for the student
properties has been prepared by the valuer:
-3% change in rental +3% change in rental -0.25% change in +0.25% change in
income income yield yield
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------------------- -------------------- -------------------- --------------------
(Decrease)/increase
in the fair value of
investment properties
As at 30 June 2021 (39,130) 39,250 41,550 (45,720)
As at 30 June 2020 (40,000) 40,000 43,470 (47,530)
As at 31 December 2020 (40,020) 40,060 46,340 (42,230)
-------------------- -------------------- -------------------- --------------------
Unaudited Notes to the Financial Statements
For the period 1 January 2021 to 30 June 2021
7. Borrowings
The existing facilities are secured by charges over individual
investment properties held by certain asset-holding subsidiaries.
These assets have a fair value of GBP948 million at 30 June 2021.
In some cases, the lenders also hold charges over the shares of the
subsidiaries and the intermediary holding companies of those
subsidiaries.
A summary of the drawn and undrawn bank borrowings in the period
is shown below:
Bank borrowings Bank borrowings
drawn 30 June undrawn 30 June Total
2021 2021 30 June 2021
GBP'000 GBP'000 GBP'000
------------------------------------ ---------------- ---------------- -------------
At 1 January 2021 (audited) 390,000 52,500 442,500
Bank borrowings repaid during
the year (15,000) 15,000 -
---------------- ---------------- -------------
At 30 June 2021 (unaudited) 375,000 67,500 442,500
================ ================ =============
At 1 January 2020 (audited) 355,000 35,000 390,000
Bank borrowings drawn in the
period 10,000 22,500 32,500
---------------- ---------------- -------------
At 30 June 2020 (unaudited) 365,000 57,500 422,500
================ ================ =============
At 1 January 2020 (audited) 355,000 35,000 390,000
Bank borrowings from new facilities
in the year 52,800 42,500 95,300
Bank borrowings drawn in the
year 25,000 (25,000) -
Bank borrowings repaid in the
year (42,800) - (42,800)
---------------- ---------------- -------------
At 31 December 2020 (audited) 390,000 52,500 442,500
================ ================ =============
Any associated fees in arranging the bank borrowings unamortised
as at the period end are offset against amounts drawn on the
facilities as shown in the table below:
Unaudited 30 Unaudited 30 Audited 31 December
June 2021 June 2020 2020
Current borrowings GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ -------------------
Balance brought forward - 42,800 42,800
Bank borrowings becoming current - - -
in the period
Less: Bank borrowings becoming
non-current during the period - (42,800) (42,800)
Less: Bank borrowings repaid - - -
in the year
Bank borrowings drawn down in - - -
the year
------------ ------------ -------------------
Bank borrowings: due in less - - -
than one year
Less: Unamortised costs - - -
------------ ------------ -------------------
Current liabilities: Bank borrowings - - -
============ ============ ===================
Unaudited 30 Unaudited 30 Audited 31 December
June 2021 June 2020 2020
Non-current borrowings GBP'000 GBP'000 GBP'000
------------------------------------- ------------- ------------ -------------------
Balance brought forward 390,000 312,200 312,200
Total bank borrowings in the
period - 10,000 112,800
Bank borrowings becoming non-current
during the period - 42,800 -
Less: Bank borrowings becoming - - -
current during the period
Less: Bank borrowings repaid
during the period (15,000) - (35,000)
------------- ------------ -------------------
Bank borrowings: due in more
than one year 375,000 365,000 390,000
Less: Unamortised costs (4,492) (5,087) (4,734)
------------- ------------ -------------------
Non-current liabilities: bank
borrowings 370,508 359,913 385,266
============= ============ ===================
Unaudited 30 Unaudited 30 Audited 31 December
June 2021 June 2020 2020
Maturity of bank borrowings GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------ -------------------
Repayable within 1 year - - -
Repayable between 1 and 2 years - - -
Repayable between 2 and 5 years 117,800 107,800 132,800
Repayable in over 5 years 257,200 257,200 257,200
Non-current liabilities: bank
borrowings 375,000 365,000 390,000
============ ============ ===================
Unaudited Notes to the Financial Statements
For the period 1 January 2021 to 30 June 2021
8. NAV Per Share
In October 2019, EPRA published new best practice
recommendations for financial disclosures by public real estate
companies. Three new measures of Net Asset Value ("NAV") were
introduced namely: EPRA Net Tangible Assets ("NTA"), EPRA Net
Reinvestment Value ("NRV") and EPRA Net Disposal Value ("NDV").
These recommendations are effective for accounting periods starting
on 1 January 2020 and have been adopted by the Group.
The principles of the three new measures per EPRA are below:
EPRA Net Reinstatement Value: Assumes that entities never sell
assets and aims to represent the value required to rebuild the
entity.
EPRA Net Tangible Assets: Assumes that entities buy and sell
assets, thereby crystallising certain levels of unavoidable
deferred tax.
EPRA Net Disposal Value: Represents the shareholders' value
under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated to the
full extent of their liability, net of any resulting tax. As the
Group is a REIT, no adjustment is made for deferred tax.
The Group consider NAV to be the most relevant measure of the
NAV measures and we expect this to be our primary NAV measure going
forward.
A reconciliation of the three new EPRA NAV metrics from IFRS NAV
is shown in the table below. The previously reported EPRA NAV has
also been included for comparative purposes.
Previously reported
NAV New EPRA NAV measures measure
--------- ------------------------------------------ -------------------------
IFRS EPRA NRV EPRA NTA EPRA NDV EPRA NAV
-------------------------
Unaudited six months to
30 June 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------------- ------------ ----------- -------------------------
Net assets per Statement
of Financial Position 640,415 640,415 640,415 640,415 640,415
Adjustments
Purchaser's costs(1) - 34,658 - - -
Net assets used in per
share calculation 640,415 675,073 640,415 640,415 640,415
Number of shares in issue
------------------------- --------- --------------- ------------ ----------- -------------------------
Issued share capital
('000) 603,203 603,203 603,203 603,203 603,203
Issued share capital plus
employee options ('000) 605,796 605,796 605,796 605,796 605,796
Net asset value per share GBP GBP GBP GBP GBP
------------------------- --------- --------------- ------------ ----------- -------------------------
Basic net asset value per
share 1.062 1.119 1.062 1.062 1.062
Diluted net asset value
per share 1.057 1.114 1.057 1.057 1.057
1 EPRA NTA and EPRA NDV reflect IFRS values which are net of purchaser's costs. Any purchaser's
costs deducted from the market value, are added back when calculating EPRA NRV.
NAV New EPRA NAV measures Previously reported measure
------- ----------------------------------- ---------------------------
IFRS EPRA NRV EPRA NTA EPRA NDV EPRA NAV
--------------------------------
Year ended 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------- --------------- -------- -------- ---------------------------
Net assets per Statement of
Financial Position 633,278 633,278 633,278 633,278 633,278
Adjustments
Purchaser's costs(1) - 32,830 - - -
Net assets used in per share
calculation 633,278 666,108 633,278 633,278 633,278
Number of shares in issue
-------------------------------- ------- --------------- -------- -------- ---------------------------
Issued share capital ('000) 603,161 603,161 603,161 603,161 603,161
Issued share capital plus
employee options ('000) 605,475 605,475 605,475 605,475 605,475
Net asset value per share GBP GBP GBP GBP GBP
-------------------------------- ------- --------------- -------- -------- ---------------------------
Basic net asset value per share 1.050 1.104 1.050 1.050 1.050
Diluted net asset value per share 1.046 1.100 1.046 1.046 1.046
1 EPRA NTA and EPRA NDV reflect IFRS values which are net of purchaser's costs. Any purchaser's
costs deducted from the market value, are added back when calculating EPRA NRV.
NAV New EPRA NAV measures Previously reported measure
------- ---------------------------- ---------------------------
IFRS EPRA NRV EPRA NTA EPRA NDV EPRA NAV
---------------------------------------
Unaudited six months to 30 June 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ------- -------- -------- -------- ---------------------------
Net assets per Statement of Financial
Position 642,964 642,964 642,964 642,964 642,964
Adjustments
Purchaser's costs(1) - 34,620 - - -
Net assets used in per share calculation 642,964 677,584 642,964 642,964 642,964
Number of shares in issue
--------------------------------------- ------- -------- -------- -------- ---------------------------
Issued share capital ('000) 603,161 603,161 603,161 603,161 603,161
Issued share capital plus employee
options ('000) 604,596 604,596 604,596 604,596 604,596
Net asset value per share GBP GBP GBP GBP GBP
--------------------------------------- ------- -------- -------- -------- ---------------------------
Basic net asset value per share 1.066 1.123 1.066 1.066 1.066
Diluted net asset value per share 1.063 1.121 1.063 1.063 1.063
1 EPRA NTA and EPRA NDV reflect IFRS values which are net of purchaser's costs. Any purchaser's
costs deducted from the market value, are added back when calculating EPRA NRV.
9. Capital Commitments
As at 30 June 2021, the Group had total capital commitments of
GBP1.0 million (31 December 2020: GBP11.3 million) relating to
forward funded or direct developments.
10. Related Party Disclosures
Key Management Personnel
Key management personnel are considered to comprise the Board of
Directors.
Share Capital
On 2 June 2021 the Company issued 42,112 ordinary shares to meet
its obligations arising from a deferred share award granted on 25
April 2017 to Timothy Attlee, the former Chief Executive of the
Company.
Share-Based Payments
On 22 April 2021, the Company granted nil-cost options over a
total of 800,000 ordinary shares to Duncan Garrood and 632,400
ordinary shares to Lynne Fennah pursuant to the Empiric Long Term
Incentive Plan (the "LTIP") for the 2021 financial year.
On 2 June 2021 the Company issued 42,112 ordinary shares to meet
its obligations arising from a deferred share award granted on 25
April 2017 to Timothy Attlee, the former Chief Executive of the
Company.
On 23 June 2021, under the Company's newly established SAYE
Option Plan, the Company issued 324,784 options over ordinary
shares.
Board Change
There were no changes in the period.
11. Subsequent Events
None.
Definitions
Adjusted EPS - Adjusted earnings per share is a performance
measure used by the Board to assess the Group's dividend payments.
Licence fees, development rebates, rental guarantees and cumulative
gains made on disposals of assets are added to EPRA earnings on the
basis noted below as the Board sees these cash flows as supportive
of dividend payments. This is then divided by the weighted average
number of ordinary shares outstanding during the period (refer to
Note 4).
ANUK - Accreditation Network UK is a central resource for
tenants, landlords and scheme operators interested in accreditation
of private rented housing.
Average Interest Cost - The weighted interest cost of our drawn
debt portfolio at the balance sheet date.
Average Term of Debt - The weighted average term of our debt
facilities at the balance sheet date.
Basic EPS - The earnings attributed to ordinary shareholders
divided by the weighted average number of ordinary shares
outstanding during the period (refer to Note 4).
Colleague Engagement - KPI-Non IFRS measure-Calculated as per
the results of our biannual colleague engagement surveys.
Company - Empiric Student Property plc.
CRM - Customer Relationship Management.
Customer Happiness - KPI-Non IFRS measure-Calculated per the
results of our biannual customer surveys.
Dividend Cover - Adjusted earnings divided by dividend paid
during the year.
EPRA - European Public Real Estate Association.
EPRA EPS - Reported on the basis recommended for real estate
companies by EPRA (refer to Note 8).
EPRA NAV - EPRA NAV is calculated as net assets per the
Consolidated Statement of Financial Position excluding fair value
adjustments for debt-related derivatives (refer to Note 8).
EPRA Net Disposal Value ("NDV") - Represents the shareholders'
value under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated to the
full extent of their liability, net of any resulting tax. As the
Group is a REIT, no adjustment is made for deferred tax.
EPRA Net Reinvestment Value ("NRV") - Assumes that entities
never sell assets and aims to represent the value required to
rebuild the entity.
EPRA Net Tangible Assets ("NTA") - Assumes that entities buy and
sell assets, thereby crystallising certain levels of unavoidable
deferred tax.
EU - European Union.
Executive Team - The Executive Directors made up of the CEO and
CFO/COO.
GHG - Greenhouse gas.
Gross Asset Value ("GAV") - The total value of the Group's
wholly owned property portfolio (refer to Note 6).
Gross Rent - The total rents achievable if the portfolio was
100% occupied for an academic year.
Gross margin - Gross profit expressed as a percentage of rental
income.
Group - Empiric Student Property plc and its subsidiaries.
Hello Student(R) platform - Our customer-facing brand and
operating system which we operate all of our buildings under.
HE - Higher education.
HMO - Homes of multiple occupants.
IASB - International Accounting Standards Board.
IFRS - International Financial Reporting Standards.
IPO - The Group's Initial Public Offering in June 2014.
IRR - Internal rate of return is a metric used to estimate the
profitability of potential investments.
LIBOR - London interbank offered rate.
Loan-to-value ("LTV") - A measure of borrowings used by property
investment companies calculated as total drawn borrowings (GBP375
million), net of cash (GBP32 million) and fixed term deposits, as a
percentage of Gross Asset Value (GBP994 million) (refer to Notes 6
and 7) = 34.5%.
Net Asset Value ("NAV") - Net Asset Value is the net assets in
the Statement of Financial Position attributable to ordinary equity
holders.
Non-PID - Non -- property income distribution.
PBSA - Purpose-built Student Accommodation.
PID - Property income distribution.
RCF - Revolving credit facility.
Rebooker Rate - KPI-Non IFRS measure-Calculated as the
percentage of students staying with us in the previous year who
chose to stay living with us for another academic year.
REIT - Real estate investment trust.
Revenue Occupancy - KPI - Non IFRS measure - Calculated as the
percentage of our Gross Annualised Revenue we have achieved for an
academic year.
RICS - Royal Institution of Chartered Surveyors.
Safety - Number of accidents - KPI-Non IFRS measure-Calculated
as the number of RIDDOR accidents reported to the Health and Safety
Executive.
Senior Leadership Team - The senior management team which sits
beneath the Executive Team and is made up of the six department
heads.
Total Return ("TR" or "TAR") - Growth in NAV per share plus
dividends paid, expressed as a percentage of NAV per share at the
beginning of the period.
Total Shareholder return - Share price growth with dividends
deemed to be reinvested on the dividend payment date.
The Code - UK Code of Corporate Governance, as published in
2018.
UKLA - United Kingdom Listing Authority.
Company Information and Corporate Advisers
Directors and Advisers
Directors Registrar
Mark Pain (Chairman) Computershare Investor Services PLC
Duncan Garrood (Chief Executive Officer) The Pavilions
Lynne Fennah (Chief Financial and Operating Officer) Bridgwater Road
Jim Prower (Non-Executive Director) Bristol BS99 6ZZ
Stuart Beevor (Non-Executive Director) Auditor
Alice Avis (Non-Executive Director) BDO LLP
Broker and Joint Financial Adviser 55 Baker Street
Jefferies International Ltd London W1U 7EU
Vintners Place Valuer
68 Upper Thames Street CBRE Limited
London EC4V 3BJ Henrietta House
Broker and Joint Financial Adviser Henrietta Place
RBC Europe Limited London W1G 0NB
Riverbank House Administrator and Company Secretary
2 Swan Lane FIM Capital Limited
London EC4R 3BF 7 Cavendish Square
Legal Adviser to the Company London W1G 0PE
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
Communications Adviser
Maitland/AMO
3 Pancras Square
London N1C 4AG
Company Registration Number: 08886906 Registered Office
Incorporated in the UK (Registered in England) 6th Floor, Swan House
Empiric Student Property plc is a public 17 to 19 Stratford Place
company limited by shares London W1C 1BQ
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END
IR ZZGMRGMMGMZZ
(END) Dow Jones Newswires
August 12, 2021 02:00 ET (06:00 GMT)
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