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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August 12, 2021 02:00 ET (06:00 GMT)

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