TIDMDIGS
RNS Number : 2327Z
GCP Student Living PLC
17 September 2020
GCP STUDENT LIVING PLC
LEI: 2138004J4ID66FK38H25
ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARED 30 JUNE 2020
GCP Student Living plc, (the "Company" or together with its
subsidiaries, the "Group"), which was the first student
accommodation REIT in the UK, today announces its results for the
financial year ended 30 June 2020.
The full annual report and financial statements can be accessed
via the Company's website at www.gcpstudent.com or by contacting
the Company Secretary by telephone on 01392 477500.
AT A GLANCE
2018 2019 2020
------------------------------- --------- --------- --------------
Value of property portfolio GBP784.4m GBP921.6m GBP1,000.8m(3)
EPRA NAV(2) per ordinary share 149.12p 165.52p 171.78p
Dividends per ordinary share 5.95p 6.15p 6.15p
Net operating margin(2) 78% 79% 80%
Share price per ordinary share 147.00p 162.20p 124.00p
Student rental growth(2) 4.1% 3.5% 4.4%
------------------------------- --------- --------- --------------
HIGHLIGHTS(1)
-- Total shareholder return(2) of -20.6% for the period.
Annualised total shareholder return since IPO(2) of 7.4%, compared
to the Company's target return of 8-10%.
-- NAV total return(2) of 12.9% since IPO and 7.6% for the year.
-- Dividends of 6.15 pence per share paid in respect of the year.
-- EPRA NAV(2) per share (cum-income) of 171.78 pence and EPRA
NAV per share (ex--income) of 170.36 pence at 30 June 2020.
-- Total rental income for the year of GBP47.8 million (30 June 2019: GBP44.4 million).
-- Gross proceeds of approximately GBP77 million raised through
a substantially oversubscribed placing of new ordinary shares.
-- Inclusion in the FTSE 250 Index from 18 September 2019.
-- High-quality portfolio of eleven assets with 4,116 beds
located primarily in and around London, with a valuation of GBP1.0
billion(3) at 30 June 2020.
-- Prior to Covid-19, the portfolio was fully occupied and
achieved rental growth of 4.4% for the 2019/20 academic year.
-- Blended NIY(2) of operational portfolio of 4.44% (30 June 2019:4.45%).
-- At the date of the report, 68% of rooms across the Group's
portfolio of student accommodation have been booked for the 2020/21
academic year.
1. The Company's financial statements are prepared in accordance
with IFRS. The financial highlights above include performance
measures based on EPRA best practice recommendations which are
designed to enhance transparency and comparability across the
European real estate sector. See glossary below for
definitions.
2. Alternative Performance Measure - see below for definitions and calculation methodology.
3. The valuation, as determined by the Company's independent
valuer, is subject to 'material valuation uncertainty' caused by
the Covid-19 pandemic and in accordance with recent guidance issued
by the Royal Institution of Chartered Surveyors.
Robert Peto, Chairman, commented:
"The Covid-19 pandemic has dragged the global economy into a
recession as billions of people across the world have entered a
period of economic and social lockdown. It is against this backdrop
that I report on a challenging year for the Company. The Group's
portfolio continues to benefit from resilient valuations supported
by the focus on assets in attractive locations for student
accommodation, including in the Company's core London market.
The longer-term impact of the Covid-19 pandemic remains unknown
and difficult to quantify. Further, there remains ongoing
uncertainty as to the impact of the UK's departure from the EU on
the Company. Notwithstanding this, the Board and the Investment
Manager remain confident of the Company's long --term return
prospects.
It is my intention to retire from the Board following the annual
general meeting to be held in late 2020, having served as Chairman
since IPO. The Board intends to appoint David Hunter as Chairman of
the Company at that time. It has been a great joy serving
shareholders and working alongside my fellow Board members and the
Company's advisers during my tenure."
Gravis Capital Management
Limited +44 020 3405 8500
Nick Barker
Dion Di Miceli
Stifel Nicolaus Europe
Limited +44 020 7710 7600
Mark Bloomfield
Mark Young
Buchanan / Quill +44 020 7466 5000
Helen Tarbet
Henry Wilson
About the Company
GCP Student Living plc, a FTSE 250 company, was the first real
estate investment trust in the UK to focus on student residential
assets.
The Company seeks to provide shareholders with attractive total
returns in the longer term through the potential for modest capital
appreciation and regular, sustainable, long--term dividends with
inflation--linked income characteristics.
It invests in properties located primarily in and around London
where the Investment Manager believes the Company is likely to
benefit from supply and demand imbalances for student residential
accommodation and a growing number of international students.
The Company has a premium listing on the Official List of the
FCA and trades on the Premium Segment of the Main Market of the
London Stock Exchange. The Company had a market capitalisation of
GBP564.2 million at 30 June 2020.
INVESTMENT OBJECTIVES AND KPIs
The Company's purpose as a REIT is to invest in UK student
accommodation to meet the following key objectives:
TOTAL RETURN PORTFOLIO QUALITY DIVERSIFICATION
---------------------------- ---------------------------- -------------------------------
To provide shareholders To focus on high-quality, To invest and manage
with attractive total modern private student assets with the objective
returns in the longer residential accommodation of spreading risk.
term. and teaching facilities
primarily in and around
London.
KEY PERFORMANCE INDICATORS
---------------------------- ---------------------------- -------------------------------
The Company has generated The Company's investment The Company's property
an annualised total portfolio has achieved portfolio comprises
shareholder return average annualised ten modern standing
since IPO(1) of 7.4%. student rental growth student accommodation
since IPO(1) of 3.9%. buildings and one development
asset.
---------------------------- ---------------------------- -------------------------------
6.15p FULL(2) 4,116
Dividends in respect Occupancy for 2019/20 Number of beds at 30
of the year academic year June 2020
30 June 2019: 6.15p
AY 2018/19: FULL 30 June 2019: 4,116
-20.6% 4.4% 11
Total shareholder return(1) Student rental growth(1) Number of assets at
for the year for the year 30 June 2020
30 June 2019: 14.8% 30 June 2019: 3.5% 30 June 2019: 11
---------------------------- ---------------------------- -------------------------------
Further information on Company performance can be found
below.
1. Alternative performance measure - see below for definitions and calculation methodology.
2. The Company's portfolio was fully occupied at the start of the 2019/20 academic year.
PORTFOLIO OVERVIEW
At 30 June 2020, the Company's portfolio comprised eleven assets
with c.4,100 beds, providing high-quality, modern student
accommodation.
CHAIRMAN'S STATEMENT
The Board has confidence in the strategy and long-term prospects
of the Group, notwithstanding a year of unprecedented
challenges.
Introduction
At the half year in December 2019, I was pleased to be reporting
a period of full occupancy for the 2019/20 academic year and strong
rental growth across the Group's portfolio, with a total
shareholder return for the six-month period of 24.3%. At that time
the Board noted uncertainties around the potential impact on the
Company of the UK's departure from the EU, relations between the
US, the UK and China (which may impact the global mobility of
Chinese students) and the emergence of Covid-19.
The Covid-19 pandemic has dragged the global economy into a
recession as billions of people across the world have entered a
period of economic and social lockdown. In the period from 2
January 2020 to 23 March 2020 the FTSE All Share Index fell by some
35%, the fastest decline in its history.
It is against this backdrop that I report on a challenging year
for the Company. The Group's portfolio continues to benefit from
resilient valuations supported by the focus on assets in attractive
locations for student accommodation, including the Company's core
London market and reflected in the modest rise to its NAV during
the year. At 30 June 2020, the Group's portfolio valuation exceeded
GBP1 billion for the first time since IPO.
The share prices of many UK REITs, including the Company's, have
been impacted by the uncertainty caused by the Covid-19 pandemic.
During the year under review the Company delivered a total
shareholder return of -20.6%. The annualised total shareholder
return since IPO was 7.4%, more than double the returns of both the
FTSE All Share and FTSE EPRA NAREIT Indices over that period albeit
below the 8-10% target set at IPO.
The Company's performance has been adversely impacted by
students vacating their rooms in response to the pandemic, the
closure of academic institutions and forgoing rents. The wellbeing
of the residents and staff in the Group's buildings is of paramount
importance to the Board, the Investment Manager and the Property
Managers. Further information on the safeguarding provisions that
have been put in place can be found below.
It is encouraging to note the Company successfully collected
approximately 92% of budgeted income for the financial year. This
has enabled it to maintain its annual dividend of 6.15 pence per
share.
Investment activity
The Company benefits from a conditional forward purchase
agreement to acquire a high specification, purpose-built, private
student accommodation residence in the same location as its Scape
Guildford asset. The property is expected to be completed in the
2020/21 academic year, providing 403 beds. If acquired, this
property will form part of an enlarged Scape Guildford asset,
providing 544 beds in the same locality as the University of Surrey
and offering the potential for the Group to benefit from
operational economies of scale.
As announced by the Company on 7 April 2020, in light of the
disruption and market uncertainty caused by the Covid-19 pandemic,
the forward purchase agreement in respect of Scape Mile End
Canalside has terminated and the vendor of this asset is no longer
contractually required to sell it to the Company. It is noted that
the pipeline agreement entered into at IPO between the Company and
Scape has lapsed.
The Company's forward-funded development at Scape Brighton is
currently expected to be fully operational during the course of
September and October 2020, having been impacted by minor
construction delays as a result of reduced levels of construction
activity due to the Covid-19 pandemic. The impact of these delays
is not expected to be material.
Financial results
The Company's investment portfolio delivered rental income of
GBP47.8 million (30 June 2019: GBP44.4 million) over the period,
representing 92% of all budgeted revenues for the financial year.
It receives rental income primarily from direct lets of rooms to
students, and a combination of nominations agreements with higher
education institutions and long-term leases.
Rental payments for direct let agreements with students are paid
in three tranches for each academic year, with c.40% received in
September, c.40% in January and the remaining c.20% in April.
On 27 March 2020, the Company advised it would look favourably
upon requests to forgo rents by students seeking to return home for
the remainder of the 2019/20 academic year. As the Company's
academic year runs for a period of 51 weeks from mid-September each
year, the Directors expect the Company's income for the first
quarter of the financial year ended 30 June 2021 will be materially
reduced.
The Company generated profit before tax (including valuation
gains) of GBP48.6 million (GBP14.7 million excluding valuation
gains). Its EPRA NAV(1) per share (cum-income) has increased by
3.8% during the year from 165.52 pence to 171.78 pence at 30 June
2020.
Dividends
The Company has paid dividends in respect of the year ended 30
June 2020 of 6.15 pence per share. The dividends were paid as 5.35
pence per share as PID and 0.8 pence per share as an ordinary
dividend. The total dividend for the year was 86% covered by
adjusted EPS of 5.26 pence.
The adverse impact of the Covid-19 pandemic means that the
Group's operational portfolio has not been fully occupied for the
entire year, impacting dividend cover. The Company targets a fully
covered dividend over the longer term.
Financing
In December 2019, the Company raised gross proceeds of
approximately GBP77 million by way of a substantially
oversubscribed non-pre-emptive placing of new ordinary shares. The
placing was NAV-accretive for shareholders; further details are set
out below.
At 30 June 2020, the Group's available debt facilities totalled
GBP335 million, of which GBP281.7 million was drawn. At that date,
the Group's current blended cost of borrowing on its drawn debt was
2.95% with an average weighted maturity of approximately six years.
The loan-to-value of the Group at the year end was 22%. It is the
Directors' current intention to target gearing of approximately 30%
in the long term.
Further details of the Group's debt facilities are set out in
note 17 to the financial statements.
Environmental, social, governance ("ESG")
The Company considers best practice application of ESG
principles as paramount in its activities, the assets within its
investment portfolio and the operations of its advisers. It has an
'A' MSCI ESG rating, an EPRA sBPR silver award and is in the
process of obtaining a GRESB rating. The Investment Manager is a
signatory to the UN Principles for Responsible Investment. Further
details can be found below.
Investment management and property management arrangements
Post year end, and as announced on 27 August 2020, the Company
entered into revised investment management arrangements with the
Investment Manager, further details of which are set out below. The
Company has separately entered into new property management
arrangements with the Property Manager, Scape.
The new arrangements will reduce the investment management fees
payable by the Company on the Group's existing asset base and
introduce different tiers of investment management fees depending
on the size of the Company, as measured by the NAV.
The Company will be responsible for the payment of property
management fees under the new arrangements.
The revised management arrangements will provide the Company
with a competitive investment management fee basis and more closely
align property management fees to relevant operational metrics in a
manner which is more often akin to the market standard seen with
PBSA operations in the UK.
The amendments to these arrangements will result in an immediate
reduction to the Group's cost base. By way of illustration, were
these arrangements to have been entered into on 1 July 2019, the
Company would have benefited from approximately GBP0.6 million of
cost savings for the twelve--month period ended 31 June 2020. The
amended fee arrangements came into effect on 1 July 2020.
Outlook
The year under review has been dominated by the Covid-19
pandemic. Events leading from this have resulted in a reversal
during the year of the Company's hitherto strong operational
performance. The longer-term impact of the Covid-19 pandemic
remains unknown and difficult to quantify. Further, there remains
ongoing uncertainty as to the impact of the UK's departure from the
EU on the Company.
Notwithstanding this, the Board and the Investment Manager
remain confident of the Company's long--term return prospects.
The Company provides shareholders with access to a portfolio of
private student accommodation assets in prime locations which have
historically benefited from strong supply and demand imbalances,
resulting in full occupancy, rental growth and yield
compression.
The approach adopted by the Board and the Investment Manager to
asset selection and the locations in which the Company operates has
delivered a portfolio in markets which are well positioned to
attract both domestic and international students, including its
core market in and around London. The attraction of the UK, and
London in particular, for domestic and global students alike
remains evident. The UK has some of the highest-ranking
universities in the world, with three of the top ten institutions
in 2020(1) .
The substantial majority of HEIs to which the Company is exposed
are providing on-campus learning for the upcoming 2020/21 academic
year, with the expectation that students will attend in person.
Student applications for full-time higher education in the UK for
the 2020/21 academic year have increased by 2.3% on the previous
year(2) .
In the event the disruption caused by the Covid-19 pandemic
continues into the 2020/21 academic year, the Company benefits from
being defensively positioned, with strong capital resources and
conservative borrowing levels. For further information, refer to
the viability statement and the going concern assessment below.
The Board and the Investment Manager continue to monitor global
events as they relate to student numbers, including the impact of
the Covid-19 pandemic on the ability of students to attend their
universities (and therefore occupy rooms), Brexit and relations
between the US, the UK and China, which may impact the global
mobility of Chinese students as well as their choice of
destination.
The Board
It is my intention to retire from the Board following the annual
general meeting to be held in late 2020, having served as Chairman
since IPO. The Board intends to appoint David Hunter as Chairman of
the Company at that time. It has been a great joy serving
shareholders and working alongside my fellow Board members and the
Company's advisers during my tenure.
Robert Peto
Chairman
16 September 2020
1. The Times Higher Education World University rankings 2020.
2. UCAS.
STRATEGIC REPORT
STRATEGIC OVERVIEW
The Company's investment objective is to provide shareholders
with attractive total returns in the longer term.
7.4%
Annualised total shareholder return since IPO(1)
6.15p
Dividends paid in respect of the year
Investment strategy
The Company's investment strategy is set out in its investment
objective and policy below. It should be considered in conjunction
with the Chairman's statement and the strategic report which
provide an in-depth review of the Company's performance and future
strategy.
Further information on the business model is set out below.
Investment objective
The Company's investment objective is to provide shareholders
with attractive total returns in the longer term through the
potential for modest capital appreciation and regular, sustainable,
long--term dividends with inflation-linked characteristics.
Investment policy
The Company intends to meet its investment objective through
owning, leasing and licensing student residential accommodation and
teaching facilities to a diversified portfolio of direct let
tenants and HEIs. The Company will mostly invest in modern,
purpose-built, private student residential accommodation and
teaching facilities located primarily in and around London, where
the Investment Manager believes the Company is likely to benefit
from supply and demand imbalances for student residential
accommodation. The Company may also invest in development and
forward--funded projects which are consistent with the objective of
providing shareholders with regular, sustainable dividends and have
received planning permission for student accommodation, subject to
the Board being satisfied as to the reputation, track record and
financial strength of the relevant developer and building
contractor.
Rental income will predominantly derive from a mix of
contractual arrangements including direct leases and/or licences to
students ('direct let agreements'), leases and/or licences to
students guaranteed by HEIs and/or leases and/or licences directly
to HEIs. The Company may enter into soft nominations agreements
(pari passu marketing arrangements with HEIs to place their
students in private accommodation) or hard nominations agreements
(longer-term marketing arrangements with HEIs of between two and 30
years in duration). Where the Company invests in properties which
contain commercial or retail space, it may derive further income
through leases of such space. Where the Company invests in
development and forward--funded projects, development costs will
typically be paid in stages through construction, with a bullet
payment at completion.
The Company intends to focus primarily on accommodation and
teaching facilities for students studying at Russell Group
universities and other leading academic institutions, regional
universities with satellite teaching facilities in and around
London and specialist colleges.
The Company may invest directly or through holdings in special
purpose vehicles and its assets may be held through limited
partnerships, trusts or other vehicles with third party
co-investors.
Borrowing and gearing policy
The Company may seek to use gearing to enhance returns over the
long term. The level of gearing will be governed by careful
consideration of the cost of borrowing and the Company may seek to
use hedging or otherwise seek to mitigate the risk of interest rate
increases. Gearing, represented by borrowings as a percentage of
gross assets, will not exceed 55% at the time of investment. It is
the Directors' current intention to target gearing of approximately
30% of gross assets in the long term and to comply with the REIT
condition relating to the ratio between the Group's 'property
profits' and 'property finance costs'.
Use of derivatives
The Company may invest through derivatives for efficient
portfolio management. In particular, the Company may engage in
interest rate hedging or otherwise seek to mitigate the risk of
interest rate increases as part of the Company's efficient
portfolio management.
Investment restrictions
The Company invests and manages its assets with the objective of
spreading risk through the following restrictions:
-- the Company will derive its rental income from a portfolio of not less than 500 studios;
-- the value of any newly acquired single property will be
limited to 25% of gross assets, calculated as at the time of
investment;
-- the Company mostly invests in modern, purpose-built, private
student residential accommodation and teaching facilities located
primarily in and around London. Accordingly, no less than 75% of
the Group's property portfolio will comprise assets which are
located in and around London, calculated as at the time of
investment;
-- at least 90% by value of the properties directly or
indirectly owned by the Company shall be in the form of freehold or
long leasehold (over 60 years remaining at the time of acquisition)
properties or the equivalent;
-- the Company will not:
i. invest more than 20% of its gross assets in undeveloped land;
ii. commit more than 15% of its gross assets to forward-funded
projects in respect of such undeveloped land, such commitment to be
determined on the basis of the net construction funding
requirements (and associated advisory costs) of such projects at
the time of commitment up to their completion in both cases as
measured at the time of investment;
-- the Company will not invest in completed assets which are not
income generative at, or shortly following, the time of
acquisition; and
-- the Company will not invest in closed-ended investment companies.
The Directors currently intend, at all times, to conduct the
affairs of the Company so as to enable it to qualify as the
principal company of a REIT group for the purposes of Part 12 of
the CTA (and the regulations made thereunder).
In the event of a breach of the investment guidelines and
restrictions set out above, the Investment Manager shall inform the
Directors upon becoming aware of the same and, if the Directors
consider the breach to be material, notification will be made to a
regulatory information service.
No material change will be made to the investment policy without
the approval of shareholders by ordinary resolution.
Business and status of the Company
The Company is registered as a public limited company and is an
investment company within the terms of section 833 of the Companies
Act 2006. The Company is a REIT for the purposes of Part 12 of the
CTA. The Company will be treated as a REIT so long as it continues
to meet the REIT conditions in relation to any accounting
period.
The Company was incorporated on 26 February 2013. Its shares
trade on the Premium Segment of the Main Market of the London Stock
Exchange.
1. Alternative performance measure - see below for definitions and calculation methodology.
Business Model
The Company's primary objective is to provide shareholders with
attractive total returns in the longer term through the potential
for modest capital appreciation and regular, sustainable, long-term
dividends.
INVESTMENT The Three FunDAMENTALS IMPLEMENTATION OF KPI Sustainability
OBJECTIVES STRATEGY MEASUREMENT
TOTAL RETURN WHAT THE COMPANY INDEPENT STRONG The Company ENVIRONMENTAL
To provide BUYS BOARD GOVERNANCE has generated AND SOCIAL
shareholders * Intelligent design to optimise long -- term returns an annualised Read how
with attractive total the Company's
total returns shareholder activities
in the longer * Large-scale assets benefiting from operating return since benefit
term. efficiencies IPO(1) of the
7.4%. environment
and contribute
* Modern purpose-built 6.15p to society
Dividends in the
paid in sustainability
accommodation respect section
of the year below.
------------------------------------------------------------- --------------- --------------- -------------- ---------------
PORTFOLIO WHERE THE ASSETS PROPERTY FINANCIAL The Company's GOVERNANCE
QUALITY ARE LOCATED INVESTMENT MANAGEMENT investment Read how
To focus on * Primary focus The Company portfolio the Company
high-quality, The Company uses gearing has achieved is governed
modern private invests to enhance average and the
student in and around in modern, returns annualised activities
residential London purpose-built, over the rental growth of the Board
accommodation * Proximity to HEIs and/or major transport hubs private long term. since IPO(1) during the
and teaching student The level of 3.9%. year in
facilities residential of gearing the governance
primarily * High supply-side barriers accommodation is governed FULL(2) section
in and around and teaching by careful Occupancy in the full
London. facilities consideration for 2019/20 annual report.
located of the academic
primarily cost of year
in and around borrowing.
London, The Company
where the may also
Investment use hedging
Manager or otherwise
believes seek to
the Company mitigate
is likely the risk
to benefit of interest
from supply rate
and demand increases.
imbalances
for student
residential
accommodation.
------------------------------------------------------------- --------------- --------------- -------------- ---------------
DIVERSIFICATION HOW THE COMPANY ASSET REINVESTMENT/ The Company's FINANCIAL
To invest OPERATES MANAGEMENT LIFECYCLING property Read about
and manage portfolio the Company's
assets with * High-specification facilities The Company The Company comprises financial
the objective has put has a ten modern performance,
of spreading the quality, dedicated standing dividend
risk. * Hotel -- level service design, lifecycle student cover in
experience reserve accommodation the financial
and held for buildings review and
* Competitive pricing performance future and one its long-term
of its assets capital development viability
at the heart expenditure asset. below.
of its to ensure
operational the properties 4,116
strategy. are maintained Number of
This is at the beds at 30
achieved level needed June 2020
through to sustain
the Company's the current
choice of rents and
Property any assumed
Managers future
and the rental
Group's growth.
employees.
------------------------------------------------------------- --------------- --------------- -------------- ---------------
1. Alternative performance measure - see glossary for definitions and calculation methodology.
2. The Company's portfolio was fully occupied at the start of the 2019/20 academic year.
INVESTMENT MANAGER'S REPORT
The UK continues to attract substantial numbers of EU and non-EU
international students, with the number of applications from
international students increasing by 5.1% year-on-year.
The UK student accommodation market
The UK remains a global leader in the provision of higher
education, with some of the highest-ranking universities in the
world, including three in the top ten in 2020(1) , making it
attractive to both domestic and international students, for whom
the UK is the second most popular destination for further education
after the USA(2) .
Student numbers supportive of occupancy and growth
UCAS data for the 2019/20 academic year showed a record level of
almost 550,000 students accepted onto full-time courses in the UK,
with year--on--year growth from domestic (1.1%) and non-EU
international students (6.9%) and a reduction in EU students
(-0.3%). Non-EU student acceptances were at record levels, with
acceptances from EU students remaining above those seen prior to
the EU referendum.
On 9 July 2020, UCAS provided an update on the number of
applications made by 30 June 2020 to full-time education in the UK
for the 2020/21 academic year. By that date, the overall number of
applicants stood at 652,790, a year-on-year increase of 2.3% and
the highest number of applicants at this point in the applications
cycle in four years. The increase in the number of applications has
been driven by demand from UK domestic and non--EU students.
The number of applications from domestic students has increased
by 1.6% on last year. This follows a period of modest decreases
which were attributed to the decline in the population of 18
year-olds in the UK, which has been forecast to reverse after
2020(3) . Applications by domestic students should also be
considered in the wider context of entry rates for higher education
which represent the proportion of the population who are placed in
higher education. At 30 June 2020, a record 41% of all UK 18
year-olds applied to attend full-time higher education for the
2020/21 academic year, the first time more than four out of ten
have applied by that point in the enrolment cycle.
The UK continues to attract substantial numbers of EU and non-EU
international students, with the number of applications from
international students increasing by 5.1% year-on-year. The total
number of applications from international students is at the
highest level ever seen.
The number of applications by non-EU students at 30 June 2020
increased by almost 10% year--on--year to 89,130, also the highest
level ever seen. EU student applications remain above the levels
seen prior to the EU referendum in 2016, having decreased by 2%
from the previous academic year.
The UCAS applications data for the 2020/21 academic year above
supports the Investment Manager's view that students will continue
to invest in their education and enrol in courses to further their
future employment prospects, more so in times of recession where
alternative employment opportunities may be scarce. Further, the
continued rise in the number of applications from international
students suggests that students remain willing to travel to study
abroad in order to obtain qualifications delivered in the English
language and are making applications on the basis that they will do
so.
1. The Times Higher Education World University Rankings 2020.
2. OECD.
3. Office for National Statistics.
The number of students applying to higher education continues to
substantially exceed the number of places available. For the
2019/20 academic year, nearly one in four of all applications were
unable to secure a place in higher education, equating to c.165,000
applicants(1) .
The Covid-19 pandemic has resulted in students being unable to
sit A-level examinations, the results of which form the basis of
acceptances by HEIs in the UK. Prior to the UK Government's
eventual decision to allow A-level grades to be determined by way
of teacher assessments, 27.6% of A-were graded at 'A' or above,
compared with 25.2% in 2019(2) . The Investment Manager expects
that the increase in top grades being awarded as a result of the
intervention will occur. This, coupled with the UK Government's
decision to suspend a proposed cap on the number of students HEIs
can accept for the 2020/21 academic year, will benefit
higher-ranked HEIs and accelerate the ongoing trend suggesting a
wider flight to quality in the UK.
Approximately 80% of the Company's portfolio is located in and
around London, a global centre of academic excellence attracting
domestic and international students alike.
London has one of the largest student populations of any city in
the world, and demand for higher education courses in London
remains strong relative to much of the rest of the UK. It is home
to 23 universities, with four universities ranked in the top 40 by
The Times Higher Education World University Rankings, more than any
other city in the world. Approximately one-third of the 2.4 million
students in the UK study in London and the south--east of
England(3) . A quarter of all international students in the UK
choose to study in London(3) . Notwithstanding this, the number of
domestic students alone substantially exceeds the supply of
purpose-built student accommodation in London.
The attraction of London to students underpins the Company's
ability to deliver strong occupancy and long-term rental growth.
These demand dynamics are also in play in the Brighton market,
which is home to both the University of Sussex (a UK top 20
university) and the University of Brighton, with in aggregate
c.34,000 students, including c.8,500 international students. The
city is also home to two of the largest English language foundation
course providers in the UK. Approximately 15% of the Company's
portfolio by capital value at 30 June 2020 is located in
Brighton.
Strong supply-side barriers
The investment returns from student accommodation vary
considerably between cities in the UK with an undersupply of
student housing and those with less restrictive planning
regulations where the risk of oversupply is increased. The
Investment Manager targets markets and micro locations which it
believes demonstrate a structural undersupply of private student
accommodation, typically resulting from limited land availability
and/or restrictive planning regulations.
1. UCAS.
2. Ofqual.
3. HESA.
Severe undersupply in London, driven by high land values and a
challenging planning environment, means that it is undersupplied
relative to the UK average in terms of the number of students per
bed. Brighton, like London, also remains severely undersupplied as
a consequence of restrictive planning regulations.
Modern purpose-built student accommodation is in short supply,
of which an estimated two-thirds(1) is almost 20 years old and
ill-suited to providing the high specification facilities sought by
many students of today.
The supply of development of new schemes in London remains low,
with just 5,300 beds(2) currently under construction driven by low
land availability, high alternative use value and the restrictive
planning conditions.
The beneficial impact of these supply-side barriers on the
Company's portfolio is reflected by the valuation increases and
rental growth achieved since its IPO in 2013, and should support
occupancy and growth going forward.
Transactional activity
Investment volumes of student accommodation assets exceeded
GBP5.2 billion in 2019, the highest level of transactional activity
in the UK since 2015. This included the acquisition by Unite plc of
Liberty Living Group plc, which constituted a portfolio of
purpose-built student accommodation comprising c.24,000 beds
located across the UK for a total consideration of c.GBP1.4
billion.
The Investment Manager estimates that a further GBP5.1 billion
has been traded or was put under offer in the first half of 2020,
notably including the acquisition of the iQ Student portfolio of
28,000 beds (including c.6,800 beds in London) by Blackstone Group
for GBP4.7 billion, at an estimated yield of 4.2%. This transaction
was the largest-ever property transaction in the UK and was
completed in May 2020, during the Covid-19 pandemic.
Such investment activity, combined with the expectations of
above-average rental growth over the long term, continues to
support valuation yields across the London market.
Portfolio performance update
The key drivers of the Company's returns are based on the three
fundamentals shown in the business model section above, which form
the basis of how the Investment Manager seeks to add value over the
long term.
The operational portfolio generated rental income of GBP47.8
million for the year to 30 June 2020, representing 92% of all
budgeted revenues for the financial year, comprising income from
direct lets of rooms to students, nominations agreements with HEIs
and long-term commercial leases.
1. JLL London Student Housing.
2. Knight Frank Research.
On 3 September 2019, the Company announced that its operational
properties were fully occupied with respect to the 2019/20 academic
year. This remained the case until restrictions on global mobility
and closure of academic institutions caused by the Covid-19
pandemic resulted in the majority of students vacating their
rooms.
The Board, the Investment Manager and the Property Managers have
all prioritised the safety and well--being of students and the
Group's employees from the outset. This included offering to forego
rents for those students wishing to return home for the final term
of the 2019/20 academic year. For further information on the
safeguarding provisions that have been put in place, see below.
The Company's academic year runs for a period of 51 weeks from
mid--September. It receives direct let income in three tranches for
each academic year; c.40% in each of September and January and the
remaining c.20% in April. As such, the final payment tranche was
adversely affected by the Covid-19 pandemic. Given the overlap
between the final quarter of the Company's academic year with the
following financial year, this is expected to materially reduce the
direct let income received for the first quarter of the financial
year ended 30 June 2021.
During the financial year the construction of the student
building at Circus Street, Brighton was completed on time and in
line with the Investment Manager's expectations. The student
accommodation is contracted on a 21-year lease, with annual
uplifts, to a subsidiary of Kaplan Inc, a global education
provider. Rental income in respect of the lease agreement with
Kaplan has been received in line with expectations.
The Company has received reduced payments in connection with a
nominations agreement with a subsidiary of INTO University
Partnerships, a provider of foundation courses, for 210 beds at
Scape Mile End. At 30 June 2020, the Company had received
approximately 83% of rents due to it from INTO for the financial
year.
Revenue from the Company's long-term lease with a subsidiary of
WeWork at Scape Shoreditch has been lower than expected. At 30 June
2020, the Company had received approximately 90% of the rents due
to it from WeWork for the financial year. The Investment Manager is
in discussion with both WeWork and INTO in connection with the
outstanding payments.
Post year end, at the date of the report, approximately 68% of
rooms across the Group's portfolio of student accommodation,
including in respect of Scape Brighton, have been booked. The
average level of bookings at the same date over the past five
academic years was 94%. The Investment Manager believes students
have delayed booking accommodation for the 2020/21 academic year in
light of the Covid-19 pandemic, and expects higher booking levels
later in the enrolment cycle than would ordinarily be the case.
The Company benefits from strong supply and demand imbalances
and the location of its assets, all of which are within a
ten-minute walk of an HEI or major transport links.
In the year under review, the Company has achieved modest NAV
growth driven by a like--for--like portfolio valuation uplift of
3.2%. The market valuation of the portfolio was GBP1 billion(1) at
30 June 2020. The valuation uplift for the year has been driven by
valuation uplifts on Scape Mile End of GBP9.7 million, Scape
Wembley of GBP8.2 million and Scape Bloomsbury of GBP4.8
million.
The blended net initial yield of the Company's operational
portfolio at 30 June 2020 was 4.44% (30 June 2019: 4.54%).
The Directors and the Investment Manager are keeping wider
events and market conditions under review and continue to assess
whether these investment opportunities may be pursued during this
period of uncertainty.
The Covid-19 pandemic has resulted in reduced levels of activity
across the property construction sector. It is therefore pleasing
to note that the Company's forward-funded development at Scape
Brighton has not been materially impacted by such delays, and is
expected to open to students for the 2020/21 academic year in two
stages across September and October 2020.
The construction costs at Scape Brighton are in part being
funded through a GBP55 million development loan facility, of which
c.GBP32 million was drawn at 30 June 2020.
1. The valuation, as determined by the Company's independent
valuer, is subject to 'material valuation uncertainty' caused by
the Covid-19 pandemic and in accordance with recent guidance issued
by the Royal Institution of Chartered Surveyors.
Outlook
The Covid-19 pandemic has presented unprecedented challenges for
the higher education sector, including the Company. Media coverage
has, in places, incorrectly interpreted the suspension of mass
lectures by certain HEIs, notably the University of Cambridge, as a
closure of campuses to students. Cambridge University, and many
others, has stated that it will welcome as many students as
possible for the start of the 2020/21 academic year. Mass lectures
are only one part of the education provision of most UK HEIs.
Noting the challenges posed by the Covid-19 pandemic, universities
have stated that they will continue to provide small group teaching
as much as possible - a method of educational delivery that is at
the heart of higher education provision in the UK.
For the 2019/20 academic year, the Group's assets were occupied
by students from 82 HEIs, with a majority attending five HEIs in
and around London. The Investment Manager and Property Manager,
Scape, have been monitoring public statements by these HEIs in
relation to their plans for the 2020/21 academic year. A
substantial majority of the HEIs to which the Company is exposed
have opened to students for on-campus learning for the 2020/21
academic year.
Social distancing will necessitate a hybrid teaching approach
until such time that an enduring solution to the Covid-19 pandemic
is found by governments globally. This will combine smaller lecture
and/or group sizes with online learning. In such a scenario, it is
the Investment Manager's expectation that students will attend some
classes in person whilst making use of online offerings from their
accommodation. In doing so, students will seek to attend campuses
where possible given the role university plays as a rite-of-passage
in the lives of undergraduate students in particular.
The Company provides shareholders with a property portfolio
which the Investment Manager believes will benefit from supply and
demand imbalances for student residential accommodation in its core
markets as HEIs reopen and students return to their studies. The
attraction of these core markets for owners of private student
residential accommodation remains evident, as demonstrated by the
occupancy levels, rental growth and yield compression seen across
the Company's portfolio since IPO.
The Investment Manager believes investment demand is
increasingly selective, with the weight of institutional capital
focusing on the supply of 'core' locations with attractive supply
and demand characteristics. This is illustrated by the substantial
yield differential between private student residential
accommodation assets in and around London and in super prime
regional locations such as Brighton as compared to those located in
secondary or tertiary regional locations. It is the Investment
Manager's belief that this trend is likely to continue.
The combination of strong demand for higher education in the
locations in which the Group's assets are located and ongoing
supply constraints should continue to support occupancy, rental
prospects and property valuations across the Company's portfolio
going forward.
Gravis Capital Management Limited
16 September 2020
REVIEW OF THE FINANCIAL YEAR
The Company generated rental income of GBP47.8 million, paid
dividends of 6.15 pence per share and delivered a total shareholder
return(1) of -20.6%.
Rental income
The Company generated rental income for the year ended 30 June
2020 of GBP47.8 million from the Company's property portfolio. This
represents 92% of budgeted income for the financial year. The
portfolio was fully occupied up until restrictions on global
mobility and closure of academic institutions resulting from the
Covid-19 pandemic led to the majority of students vacating their
rooms. The Company's commercial and nominations income has also
been impacted, with the Company receiving reduced rents due for the
financial year.
Property operating costs
Property expenditure of GBP9.7 million was incurred during the
year, which is in line with expectations. The Company's net
operating margin has remained broadly stable at c.80% with the
ongoing efficient management of costs by the Company's Property
Managers.
Administration expenses
Total administration expenses of GBP9.9 million comprise fund
running costs, including the Investment Manager's fee, Property
Managers' fees and other service provider costs in the period.
Administration costs are carefully monitored and controlled by the
Investment Manager and the Board to ensure that the Company
receives good value for services received.
Aborted transaction costs
Costs of GBP3.8 million relate to the Company's decision not to
proceed with the acquisition of Scape Mile End Canalside in the
light of the Covid-19 uncertainty and volatility in the financial
markets.
These costs relate to a deposit paid upon entering into the
forward purchase agreement in 2017, legal fees, due diligence fees
and lender due diligence fees.
Net financing costs
Net finance costs of GBP9.8 million in the year principally
comprise loan interest associated with the Company's financing
arrangements. These costs have increased year-on-year due to the
Company drawing on redrawable credit and development facilities, in
line with expectations (refer to note 17).
Profitability
Profit before tax and fair value gains on investment properties
of GBP14.7 million was generated in the period.
Total fair value gains on investment properties through
revaluation of the Company's investment portfolio were GBP33.9
million for the year, positively impacting operating profit and
generating EPS of 11.17 pence. The adjusted EPS(1) for the period
was 5.26 pence(2) excluding fair value gains on investment
properties and adjusting for licence fees receivable on
forward--funded developments and aborted transaction costs.
Financial performance
Condensed profit and loss
For the For the
year ended year ended
30 June 30 June
2020 2019
Notes GBP'000 GBP'000
----------------------------------------------------------------------------------- ------ ---------- ----------
Rental income 4 47,762 44,410
Property operating expenses 5 (9,658) (9,364)
----------------------------------------------------------------------------------- ------ ---------- ----------
Gross profit (net operating income) 38,104 35,046
----------------------------------------------------------------------------------- ------ ---------- ----------
Net operating margin 80% 79%
Administration expenses 5 (9,861) (8,808)
Aborted transaction costs (3,765) -
Net finance costs 15, 16 (9,804) (7,317)
----------------------------------------------------------------------------------- ------ ---------- ----------
Profit before tax and fair value gains on investment properties (realised profits) 14,674 18,921
----------------------------------------------------------------------------------- ------ ---------- ----------
Fair value gains on investment properties 10 33,904 73,865
----------------------------------------------------------------------------------- ------ ---------- ----------
Profit before tax for the year 48,578 92,786
----------------------------------------------------------------------------------- ------ ---------- ----------
1. Alternative performance measure - see below for definitions and calculation methodology.
2. Refer to note 3 for detailed calculation.
Ongoing charges
The Company's ongoing charges ratio(1) was 1.28% for the year
ended 30 June 2020, calculated in line with the AIC methodology,
excluding direct property costs. This ratio is expected to decrease
going forward, as a result of the Company entering into a new
investment management agreement with the Investment Manager.
Dividends
In order to maintain its REIT status, the Company is required to
meet a minimum distribution test for each accounting period for
which it is a REIT. This test requires the Company to distribute at
least 90% of the property rental profits from its property rental
business for each accounting period, as adjusted for tax
purposes.
In respect of the financial year ended 30 June 2020, the Company
paid dividends of 6.15 pence per ordinary share, which is in line
with the previous year. The dividends were paid as 5.35 pence per
ordinary share as a PID in respect of the Group's tax exempt
property rental business and 0.8 pence per ordinary share as an
ordinary UK dividend. The Company has fulfilled all of its
obligations under the UK REIT regime and was in full compliance
with the REIT requirements at 30 June 2020 and at the date of this
report.
Dividend cover
The total dividend of 6.15 pence for the year was 86% covered by
adjusted EPS(1) of 5.26 pence(2) . The Company's dividend cover
during the period benefited from the opening of Circus Street,
Brighton in September 2019. Conversely, the material reduction to
its revenues during the period as a consequence of the Covid-19
pandemic has meant that the Company's operational portfolio did not
support a fully covered dividend.
The Company targets a fully covered dividend over the longer
term. This may not be achieved where the revenue generated by the
portfolio is reduced, such as during the Covid-19 pandemic and
during periods of investment where there is a continuing programme
of acquisitions where assets may not be revenue generative during
the period of construction.
Capital raise
The Company completed an equity capital raise in December 2019,
raising gross proceeds of c.GBP77 million. The issue price was
186.00 pence as shares were issued at a 6.3% discount to the
closing price per ordinary share on 18 December 2019 of 198.40
pence and a 10.4% premium to the then prevailing EPRA NAV(1) per
share (ex--income). Further details are set out in note 18.
Cash flow generation
The Company held cash and cash equivalents of GBP60.4 million at
the end of the financial year. A total of GBP17.0 million of
operating cash flows were generated in relation to the Company's
student accommodation portfolio. Total equity capital raised in the
year amounted to c.GBP77 million, which was used in part to fund
the construction of Circus Street, Brighton and Scape Brighton. The
remaining cash outflows during the year relate to the cost of
servicing the Company's debt facility in addition to payment of
dividends, resulting in a net increase in cash and cash equivalents
at the year end.
Debt financing
The Company's loan facilities total GBP335 million, of which
GBP281.7 million was drawn at 30 June 2020. These facilities
include fully drawn fixed interest rate term facilities with PGIM
for an aggregate amount of GBP235 million, which are secured
against certain of the Group's operational assets, and have an
average weighted maturity of approximately six years. In addition,
the Group has GBP100 million of floating rate borrowing facilities
with Wells Fargo (of which GBP46.7 million was drawn as at 30 June
2020) comprising a development facility of GBP55 million and a
GBP45 million redrawable credit facility. The loan--to--value of
the Group at the year--end date was approximately 22%.
1. Alternative performance measure - see below for definitions and calculation methodology.
2. Refer to note 3.
Asset performance
The Company experienced 4.4% student rental growth(1) for the
2019/20 academic year and benefited from yield compression. The
valuation uplift for the year has been predominantly driven by
uplifts on Scape Mile End of GBP9.7 million, Scape Wembley of
GBP8.2 million and Scape Bloomsbury of GBP4.8 million.
Further information on property valuations is given in note 13
to the financial statements.
Lifecycle reserve
The Company's lifecycle cash reserves were GBP2.0 million at the
year end and are held within cash and cash equivalents. The
reserves are held for future lifecycle expenditure to ensure the
properties are maintained at the level needed to sustain the
current rents and any assumed future rental growth.
Net assets
Net assets attributable to equity holders at 30 June 2020 on an
IFRS basis were GBP781.4 million, up from GBP684.7 million at 30
June 2019. The increase in net assets since the prior year end was
primarily driven by the capital raise of GBP77 million and the
increase in the valuation of the property portfolio. At 30 June
2020, there were 455,019,030 shares in issue, giving an EPRA NAV(1)
per share (cum--income) of 171.78 pence.
NAV and share price return
The Company's ordinary shares have traded at an average premium
to EPRA NAV(1) per share (ex-income) of 3.6% since IPO, with an
average premium over the financial year of 0.3%.
EPRA NAV(1) per share (cum-income) has increased from 165.52
pence at 30 June 2019 to 171.78 pence per share at 30 June 2020, a
3.8% increase year--on-year. Dividends of 6.15 pence per ordinary
share were paid to shareholders. The annualised total shareholder
return since IPO(1) was 7.4%, compared to the annualised target
return of 8 to 10%. The total shareholder return(1) for the year
was -20.6%.
Financial performance
Condensed balance sheet
As at As at
30 June 30 June
2020 2019
Notes GBP'000 GBP'000
----------------------------------------------------- ----- ---------------- --------------
Assets
Investment property 10 1,009,838(2) 919,203
Trade and other receivables, retentions and deposits 17,979 17,550
Cash and cash equivalents 23 60,358 15,509
----------------------------------------------------- ----- ---------------- --------------
Total assets 1,088,175 952,262
----------------------------------------------------- ----- ---------------- --------------
Liabilities
Trade and other payables, retentions and deposits (9,374) (6,195)
Deferred income (6,085) (12,293)
Lease liability (11,608) -
Financial derivatives (233) -
Interest-bearing loans and borrowings 17 (279,456) (249,111)
----------------------------------------------------- ----- ---------------- --------------
Total liabilities (306,756) (267,599)
----------------------------------------------------- ----- ---------------- --------------
Net assets 781,419 684,663
----------------------------------------------------- ----- ---------------- --------------
Number of shares 455,019,030 413,653,630
EPRA NAV(1) per share (cum-income) 3 171.78p 165.52p
EPRA NAV(1) per share (ex-income) 170.36p 163.96p
----------------------------------------------------- ----- ---------------- --------------
1. Alternative performance measure - see below for definitions and calculation methodology.
2. The valuation, as determined by the Company's independent
valuer, is subject to 'material valuation uncertainty' caused by
the Covid-19 pandemic and in accordance with recent guidance issued
by the Royal Institution of Chartered Surveyors.
PROPERTY PORTFOLIO
The Company's property portfolio consists of high-quality,
modern student accommodation, located primarily in and around
London.
11
Number of assets at 30 June 2020
4,116
Number of beds at 30 June 2020
80%
Percentage of portfolio in and around London
At 30 June 2020, the Company's portfolio comprised eleven
high--quality, modern student accommodation buildings, of which 80%
of the total capital value was located in and around London.
Property Number of Date of acquisition Book cost Valuation at 30 NIY
beds June 2020
Current
Scape Mile End 588 May 2013 GBP94.4m GBP164.4m 4.42%
Scape Wembley 578 Jun 2016 GBP78.0m GBP105.4m 4.65%
Scape Brighton 555 Jul 2018 GBP68.2m GBP72.7m N/A
Scape Shoreditch 541 Sep 2015 GBP166.8m GBP210.6m 4.29%
Circus Street(1) 450 Aug 2017 GBP61.9m GBP77.8m 3.56%
Scape Bloomsbury 432 Apr 2017 GBP167.3m GBP194.5m 4.00%
Scape Greenwich 280 May 2014 GBP40.5m GBP59.9m 4.62%
The Pad 220 Dec 2013 GBP28.6m GBP33.7m 5.80%
Podium 178 Dec 2017 GBP29.6m GBP31.2m 5.65%
Water Lane Apartments 153 Feb 2016 GBP18.8m GBP22.3m 5.25%
Scape Guildford 141 Sep 2015 GBP19.1m GBP28.3m 5.15%
---------------------- --------- ------------------- --------- --------------- -----
Top five HEIs attended
1. UCL
2. QMUL
3. RHUL
4. Kaplan
5. INTO
Top five nationalities represented
1. Chinese
2. British
3. Indian
4. Thai
5. Malaysian
4.44%
Blended net initial yield
80%
Studio rooms in the Company's buildings(2)
1. The student accommodation element of the development is
operational. The office element remains under construction at 30
June 2020.
2. Excluding Circus Street, Brighton which is let under a 20-year FRI lease to Kaplan.
THE LONDON ADVANTAGE
London is a global centre of academic excellence attracting
domestic and international students alike.
London has one of the largest student populations of any city in
the world, and demand for higher education courses in London
remains strong relative to much of the rest of the UK. It is home
to 23 universities, with four universities ranked in the top 40 by
The Times Higher Education World University Rankings, more than any
other city in the world. Approximately one-third of the 2.4 million
students in the UK study in London and the south--east of
England(1) . A quarter of all international students in the UK
choose to study in London(1) . Notwithstanding this, the number of
domestic students alone substantially exceeds the supply of
purpose-built student accommodation in London.
The investment returns from student accommodation vary
considerably between cities in the UK with an undersupply of
student housing and those with less restrictive planning
regulations where risks of supply gluts are increased. Severe
undersupply in London, driven by high land values and a challenging
planning environment, means that it is undersupplied relative to
the UK average in terms of the number of beds per student. The
beneficial impact of these supply-side barriers on the Company's
portfolio is reflected by the valuation increases and rental growth
achieved since its IPO in 2013, and should support occupancy and
growth going forward.
KEY FACTS - PORTFOLIO
80% of portfolio in and around London
All within 10 minutes of HEIs or major transport links
Benefiting from a students per bed ratio of 3.6 in London
Featured Assets
Scape Shoreditch
541
Number of beds
Scape Shoreditch is situated in a prime London location in
Shoreditch, N1. The property was acquired by the Company in
September 2015.
Built over eleven floors, the building comprises 541 studio
bedrooms and c.10,000 sq ft of communal areas. Studio rooms by
their nature, enable better social distancing. The rooms are fully
equipped for city living, with integrated storage and work space,
fitted kitchenette and dining area and an en suite shower room.
Located in the building are a gym, study lounge, games room, cinema
and large communal kitchen. On the upper levels are landscaped
rooftop gardens with four pavilions, including a barbecue terrace,
offering spectacular views over London and down through the central
glass roof into the commercial space.
The property generates c.GBP10 million of gross revenue per
annum when fully occupied, through a combination of direct let
tenancies and commercial income. The commercial lease at the
property generates c.25% of total gross annual revenues. The
property has generated a valuation uplift of GBP1.7 million for the
year to 30 June 2020.
ASSET LOCATION
Scape Shoreditch offers students a complete London living
solution in one of London's most fashionable districts, Tech City,
London's technology and media district. The property is located two
minutes from Old Street station, within a 15-minute walk of CASS
Business School, University of Arts and University of Law, with
City, University of London (and LSE, UCL and QMUL all located
within a short journey of the property.
SCAPE BLOOMSBURY
432
Number of beds
Scape Bloomsbury is situated in a prime central London position
in Bloomsbury, WC1. The property was acquired by the Company in
April 2017.
The property is a 110,000 sq ft ten-storey building situated on
half an acre of freehold land which was previously used as a
Government office before being converted into student accommodation
in 2008. Following acquisition in April 2017, the Group
reconfigured and refurbished the property to the high specification
typical of the Group's existing standing assets and the Scape
brand.
The property provides 432 beds and generates c.GBP10 million in
gross revenue per annum when fully occupied, through a combination
of long-term contracts and short-term lets. The property has
generated a valuation uplift of GBP4.8 million for the year to 30
June 2020.
ASSET LOCATION
Scape Bloomsbury is one of the most prime private student
accommodation schemes in London, located in Bloomsbury within a few
hundred metres of some of the world's leading universities. The
property is within a short walking distance of UCL, SOAS and two
teaching hospitals, UCH and GOSH. LSE, King's College, City,
University of London and University of the Arts are also within
walking distance, bringing the total number of students in close
proximity to Scape Bloomsbury to c.100,000.
Stakeholders
Stakeholders are integral to the long-term sustainable success
of the Group. They include students, employees, shareholders, local
communities and suppliers.
Stakeholder engagement
Overview
The Board of Directors recognises that, both individually and
collectively, its overarching duty is to act in good faith and in a
way that is most likely to promote the success of the Company and
the Group. As set out in section 172 of the Companies Act 2006, the
Directors act for the benefit of shareholders and in the interests
of stakeholders as a whole, having regard, amongst other matters,
to:
-- the likely consequences of any decision in the long term;
-- the interests of the Group's employees;
-- the need to foster the Group's business relationships with suppliers, customers and others;
-- the impact of the Group's operations on the community and the environment;
-- the desirability of the Group maintaining a reputation for
high standards of business conduct; and
-- the need to act fairly between shareholders of the Company.
The Directors seek to understand the needs and priorities of the
Company's stakeholders in accordance with section 172 of the
Companies Act 2006. All Board discussions include consideration of
the longer-term consequences of any key decisions and their
implications for the relevant stakeholders.
The Group's key stakeholders comprise students, employees,
shareholders, the local communities in which it operates and its
suppliers.
The section below sets out why and how the Group engages with
these stakeholders and the actions taken by it to ensure that their
interests are taken into account in the Board's decision
making.
Shareholders
Why engage
The Company invests in student residential assets in order to
provide shareholders with attractive total returns in the longer
term in the form of dividends and capital appreciation. The Board
and the Investment Manager recognise the importance of engaging
with shareholders on a regular basis in order to maintain a high
level of transparency and accountability and to inform the
Company's decision making and future strategy.
How the Company engages
The Board primarily engages with investors through the
Investment Manager and its Broker, who maintain an ongoing dialogue
with shareholders through daily market interactions, shareholder
presentations, investor seminars, analyst presentations, site
visits and marketing presentations. Further dialogue with
shareholders is achieved through the annual and half-yearly
reports, news releases via a regulatory information service and the
Company's website.
In addition, the Board engages with the Company's shareholders
at general meetings of the Company. The Directors make themselves
available to discuss matters with shareholders outside of these
formal meetings, as appropriate.
Shareholders wishing to communicate directly with the Board
should contact the Company Secretary using the contact details set
out in the corporate information section of this report.
The annual general meeting of the Company will be held on 4
November 2020. A separate notice convening the annual general
meeting will be posted to shareholders and will be separate to the
annual report. The notice will include an explanation of the items
of business to be considered at the meeting and will be uploaded to
the Company's website in due course.
Employees
Why engage
The Group employs over 100 people who provide day-to-day
property management services at the Scape-branded assets and, in
doing so, ensure that high levels of customer service are
consistently provided to students residing within these properties.
The Group's people are key to future success and the Directors
recognise the responsibility to ensure continued engagement and
wellbeing and to provide opportunities for personal and
professional development.
How the Company engages
Scape has overall responsibility for the supervision and
provision of property management services at the Group's
Scape-branded assets through the oversight and management of the
employees of GCP Operations Limited, a subsidiary of the Company.
Employee research is conducted through staff forums and surveys and
the results are fed back to the board of GCP Operations Limited on
a regular basis. Scape operates an internal recruitment scheme to
provide opportunities for employees to develop within the business.
Vacant roles are advertised internally with a focus on recruiting
from within, in order to develop staff and retain the best talent,
whilst continuing to attract a diverse workforce.
In addition to annual appraisals, regular training programmes
and employee benefit schemes, the Company's employees have access
to a comprehensive employee assistance programme providing a
support network that offers expert advice and guidance. The
programme covers a wide range of issues, providing access to
services such as counselling for emotional and mental health
issues, bereavement support and legal, financial and medical
advice.
Suppliers
Why engage
The Company recognises the importance of maintaining high
standards of business conduct and seeks to ensure that these are
applied in all of its business dealings and in its engagement with
suppliers. As an externally managed REIT, the Group relies on the
performance of third party service providers to perform its main
functions.
How the Company engages
The Group's supply chain comprises primarily UK-based suppliers
or specialist contractors providing goods or services in the UK. In
relation to the investment portfolio, these are mostly property
management related services, such as maintenance, lifecycle works,
as well as other technical services. There are also real estate
services such as development, construction and refurbishment. The
Property Managers have overall responsibility for the procurement
of property management services and provide feedback to the Board
of the Company on a regular basis as appropriate.
The Company has engaged a number of professional services firms,
including the Investment Manager, Administrator, Solicitor, Broker
and Company Secretary, to provide a range of operational and
advisory services to the Group.
The performance of the Group's service providers is closely
monitored by the Board, through the management engagement
committee, principally by way of individual review meetings which
are conducted by the Directors with each of the Group's main
service providers on an annual basis. A formal scoring system has
been adopted by the Directors in respect of the performance of each
service provider.
The Board is satisfied that, to the best of its knowledge, the
Group's principal advisers comply with the provisions of the Modern
Slavery Act 2015. A full statement on modern slavery is available
to view on the Company's website.
Society
Why engage
The Group's eleven assets are situated in local communities in
London, Brighton and Bristol and the students residing within these
properties play an important part in contributing to these
communities. The Company is committed to acting in a socially
responsible manner and the Directors consider community involvement
to be an important part of that responsibility.
How the Company engages
By investing in areas that are undergoing regeneration, such as
in Wembley and in Brighton, the Company is helping to improve the
local area and reduce pressure on housing stock in areas where
there are supply and demand imbalances. The Company takes a highly
selective approach to the locations in which it seeks to invest,
with the key focus being on delivering long-term, sustainable
rental growth and value. It considers understanding a building's
relationship with the community and its contribution to the
wellbeing of society an important factor.
The Group is involved with a number of social and local
community initiatives through the Property Managers, including
initiatives to give back to the local area through sponsorship and
local events.
Scape has partnered with local job centres in the vicinity of
the Company's buildings to provide mentoring services to
candidates, including providing advice on interview preparation and
technique and guidance on how to prepare a CV. This partnership has
been beneficial to both parties, with the Group being able to
provide employment to a number of candidates.
The students that reside in the Company's buildings also bring
inward investment to local communities by supporting local
businesses.
Further information on the impact of the Company's operations on
the community and the environment is set out below.
Students
Why engage
Approximately 4,000 students reside in the Group's properties.
The Company aims to provide inspirational places for these students
to live and work and its buildings are designed to help students
get the very best out of their university experience. Students are
the Company's core customers and regular engagement with them is at
the heart of the Company's purpose, enabling it to meet its
investment objective.
How the Company engages
The Board engages with students through its Property Managers
and through its employees, who engage with students on a daily
basis, through on-site interaction, regular social events and
student surveys. All Scape buildings have employees available on a
24-hour basis to keep students safe and secure. In the year, the
Scape app was successfully launched, providing a further means
through which students can engage actively with employees, as well
as accessing a wide range of health and wellbeing initiatives.
The Company also partners with institutions that have pushed the
boundaries in education and which can open doors for life after
university. The Company works with leading education institutions
such as INTO, QMUL, Ravensbourne, ACM and WeWork, a global provider
of shared workspaces.
The Board receives regular feedback from the Property Managers
and the Investment Manager on matters relating to student
engagement and welfare.
Stakeholder engagement during the Covid-19 pandemic
In early March 2020, immediately prior to the introduction of
the UK Government's stay at home guidance, the Directors agreed to
hold regular update calls, initially on a twice-weekly basis, to
consider the implications of Covid-19 for the Group and its
stakeholders.
A formal agenda was adopted for these meetings, which includes
consideration of the following matters:
Student and employee welfare
A dashboard is provided at each meeting which sets out whether
there are any reported cases of Covid-19 within the Group's
properties and the number of students and employees self-isolating.
Regular welfare updates are provided to the Board by the Property
Managers.
The Property Managers have been closely monitoring the welfare
of individuals who are self-isolating and the Group's employees
have been providing welfare and sustenance support. In addition to
the information set out below, a number of digital mental health
and wellbeing initiatives have been launched by Scape, which have
received positive feedback from students.
In July 2020, the Board approved the installation of bluetooth
door locks across c.3,000 beds in the Company's portfolio on the
basis that this technology will strengthen existing student
safeguarding measures going forward by allowing Scape to monitor
live occupancy in the building. The new locks will be installed in
the Scape assets ahead of the commencement of the 2020/21 academic
year.
Shareholder feedback
The Company's Broker regularly updates the Directors on investor
sentiment, trading volumes in the Company's shares and provides a
summary of any feedback received from the Company's major
shareholders.
The Company actively consults with its shareholders and, as
announced to the market on 27 August 2020, most recently did so
regarding amendments to the Company's management arrangements.
Shareholder feedback has also been considered as part of the
Board's decision making with respect to its dividend strategy for
the third and fourth interim dividends paid in respect of the
quarters ended 31 March 2020 and 30 June 2020, and will be going
forward, for the year ending 30 June 2021.
COVID-Secure
The safety and wellbeing of students and staff is of paramount
importance to the Board, the Investment Manager, and the Property
Managers.
The Property Managers have implemented comprehensive safety
procedures to ensure the Company's buildings are a safe place to
live and work and have received assurance on the protocols from the
British Safety Council.
Flexible starts
Students have been offered flexible start dates, enabling them
to move their check-in dates in line with universities reopening.
Students also can check in up to four weeks early, rent--free,
before term begins. This provides them with accommodation before
their contract start date and enables students to self-isolate if
required. Revised check-in procedures have been implemented with
arrival days staggered to minimise the number of students arriving
to the building at any one time.
Supporting students
Dedicated health practitioners are on hand to provide advice on
symptoms and help with self--isolation. At the Scape buildings, the
Scape app provides students with support from staff as well as
enabling them to book socially distanced activities. The Property
Managers have been offering self-isolation support packages which
include everything from hygiene kits to food box subscriptions.
Scape are also offering access to online fitness classes and online
mental health and wellbeing resources.
Protecting staff
The Property Managers are fully committed to making the
buildings a safe place to work. Risk assessments and training have
both been carried out on a regular basis in line with UK Government
guidance. Signage is in place to advise employees on the social
distancing rules and raise awareness on symptoms, self-isolation
and correct hygiene. Temperature screening is undertaken prior to
each shift and working hours have been staggered in order to
minimise social contact. Face masks have been provided to all staff
members.
Keeping clean
Thermal cameras have been installed in reception areas for
temperature screening. Cleaning at every location has been
increased with regular deep cleaning throughout the buildings.
Sanitation points have been set up with signage to encourage good
hand hygiene. Clear distancing guides have been introduced in
spaces so that they can be used in a safe way. Students can book
study areas for use individually, allowing them to observe social
distancing.
Doing the right thing
In March 2020, in agreement with the Company, Scape accepted
requests to forgo rent on a case-by-case basis related to the final
direct let instalment due in April 2020 for residents seeking to
return home for the remainder of the current academic year.
Consideration was given to the ability of students to occupy their
rooms, whether as a result of closure of academic institutions or
other unavoidable factors.
Sustainability
The Company aims to operate a fully sustainable business model
with a low carbon footprint for all its stakeholders.
Responsible investment
The Investment Manager is a signatory to the UN Principles for
Responsible Investment ("UNPRI"). The UNPRI, established in 2006,
is a global collaborative network of investors working together to
put the six Principles for Responsible Investment into practice.
The principles are a voluntary and aspirational set of investment
principles for incorporating ESG issues into investment practice.
More information can be found on the UNPRI website:
www.unpri.org.
The Investment Manager has established a dedicated
sustainability committee to assess ESG issues and integrate
sustainability across its business, including the embedding of
responsible investing policies in its investment management
processes.
Environmental impact
The Group is committed to being both socially and
environmentally responsible and recognises the impact it has on the
environment. The Company has an 'A' MSCI ESG rating, an EPRA sBPR
silver award and is in the process of obtaining a GRESB rating. It
has delegated the day-to-day asset and facilities management to the
Property Managers, who are responsible for the provision of energy
supplies, including the procurement of renewable energy, managing
the Group's waste schemes and raising general awareness of
environmental impact and waste reduction amongst the Group's
employees and residents. This year has seen further improvements
made around sustainability, energy efficiency and links to
charity.
The Student Energy Project
Scape this year worked with The Student Energy Project ("TSEP")
on an exclusive energy saving campaign called 'React, Reduce,
Reforest'. The aim of the campaign was to encourage energy saving
behaviours amongst students whilst regularly logging their energy
usage habits in a dedicated app. TSEP monitored usage against set
targets and provided rewards such as vouchers or charity donations
for hitting sustainability targets. For the building with the
highest saving this year, a tree was planted for each resident; in
total, c.400 trees were planted.
Due to the unprecedented effect of Covid-19 upon student
behaviour and energy usage, TSEP capped the project year at the end
of March 2020. The campaign is something Scape will be seeking to
roll out again during the next academic year, hopefully on a larger
scale and over a longer duration.
Sustainable buildings
The Group's environmental sustainability measures include the
use of highly efficient combined heat and power ("CHP") systems,
ground source heat pumps and intelligent interior heating and
lighting to minimise GHG emissions. CHP is a highly efficient
process that captures and utilises the heat that is a by-product of
the electricity generation process. By generating heat and power
simultaneously, CHP can reduce carbon emissions by up to 30%
compared to the separate means of conventional generation via a
boiler and power station.
The Company's property portfolio incorporates green roof space,
solar panels, rainwater harvesting and sustainable waste
management, including diverting waste from landfill to generate
renewable electricity via the waste management process. In the year
to 30 June 2020, a total of 820 tonnes of property waste has been
diverted from landfill, with Scape procuring the conversion of 86%
of all property waste into renewable energy and 14% into national
recycling schemes. The property waste has been recycled into
various consumer products such as cups and bottles and renewable
energy, with approximately 385,000 kWh of electricity being
generated during the year.
Energy efficiency
The Company's buildings are either constructed, or acquired, as
newly operational properties and therefore conform to the Company's
requirements for the highest standards of energy efficiency. The
properties are designed with this in mind, with 100% of the
portfolio with an EPC rated B or above.
At Scape Mile End an LED lighting conversion has been carried
out, replacing all existing fluorescent lighting with LED
equivalents to improve energy efficiency across the building.
Energy consumption for a fluorescent lamp is up to ten times the
usage of LED equivalents and therefore significant financial
savings can be achieved by upgrading building light fittings.
An energy performance certificate ("EPC") is required by law
whenever a building is bought, sold or rented. An EPC is a key
measure of an asset's energy efficiency, and grades the property
from A (most efficient) to G (least efficient).
The Company portfolio (by gross internal area) at 30 June 2020
is rated as follows:
A: 11%
B: 89%
C-G: 0%
ENVIRONMENTAL DATA
Greenhouse gas emissions
Carbon emissions data
Year ended Year ended
30 June 30 June
2020 2019
------------------------------------------------------------------- ---------- ----------
Absolute energy use:
Residential gas (kWh) 9,743,744 8,781,918
Residential electricity (kWh) 5,830,977 5,851,542
------------------------------------------------------------------- ---------- ----------
Absolute CO(2) e emissions (tonnes CO(2) e) 3,151 3,110
------------------------------------------------------------------- ---------- ----------
Residential gas emissions (tonnes CO(2) e) (Scope 1) 1,792 1,615
Residential electricity emissions (tonnes CO(2) e) (Scope 2) 1,359 1,496
------------------------------------------------------------------- ---------- ----------
Total residential emissions (tonnes CO(2) e) (Scopes 1+2) 3,151 3,110
------------------------------------------------------------------- ---------- ----------
CO(2) e emissions per sq ft (tonnes CO(2) e/sq ft) 0.0036 0.0036
------------------------------------------------------------------- ---------- ----------
Residential gas and oil emissions (tonnes CO(2) e/sq ft) (Scope 1) 0.0020 0.0019
Residential electricity emissions (tonnes CO(2) e/sq ft) (Scope 2) 0.0016 0.0017
------------------------------------------------------------------- ---------- ----------
Total residential emissions (tonnes CO(2) /sq ft) (Scopes 1+2) 0.0036 0.0036
------------------------------------------------------------------- ---------- ----------
CO(2) e emissions per bed (tonnes CO(2) e/number of beds) 0.8 0.8
------------------------------------------------------------------- ---------- ----------
30 June 30 June
Impact area EPRA Code Units of measure Indicator 2020 2019
-------------------------- -------------------- -------------------------- --------------- ----------- ----------
Total electricity
consumption Elec-Abs/Elec-LfL Annual kWh All properties 5,830,977 5,851,542
Total district heating and
cooling consumption DH&C-Abs/DH&C-LfL Annual kWh All properties 1,083,810 1,077,590
Total fuel consumption Fuels-Abs/Fuels-LfL Annual kWh All properties 15,574,720 14,633,460
kWh/appropriate
Building energy intensity Energy-Int denominator All properties 3,784 3,555
-------------------------- -------------------- -------------------------- --------------- ----------- ----------
Methodology/notes:
Methodology
The principal methodology used to calculate the emissions
reflects the UK Government's Environmental Reporting Guidelines
2019 version. The Company has reported on all the emission sources
required under the Regulations. An operational control approach was
used to define the Company's organisational boundary and
responsibility for GHG emissions. The Company owns 100% of the
property assets it operates and has therefore reported on that
basis. All material emission sources within this boundary have been
reported upon, in line with the requirements of the
Regulations.
Intensity ratio:
In order to express the GHG emissions in relation to a
quantifiable factor associated with the Company's activities, the
intensity ratio per square foot has been chosen. It is considered
that this intensity ratio will provide a uniform basis of comparing
data between the Company's different properties and take into
account the commercial areas within the properties. This will also
allow comparison of the Company's performance over time, as well as
with other companies in the Company's peer group. Consumption per
bed has also been presented for comparison purposes.
Total consumption on an absolute basis has remained broadly in
line with the prior year.
Like-for-like data
The operational control approach has been used and therefore
Circus Street, which became operational during the year, has been
excluded. The property has been leased under a 20-year FRI lease.
Therefore absolute and like--for--like data is identical.
District heating
Scape Greenwich is the only property with district heating and
cooling systems and therefore consumption and like-for-like data is
identical.
Appropriate denominator
Consumption per bed has been chosen as the denominator.
Landlord obtained utility consumption:
All data has been obtained from metered buildings, no estimation
has been used.
Disclosure on own offices:
The Company does not occupy any premises and outsources all of
its services on a fee basis.
Year ended 30 June Year ended 30 June
Impact area EPRA code Units of measure Indicator 2020 2019
---------------------- ------------ ----------------------- --------------- ------------------ ------------------
Total direct GHG
emissions GHG-Dir-Abs Annual metric All properties 3,151 3,110
tonnes CO(2)
Greenhouse gas (GHG)
emissions intensity Tonnes CO(2)
from building /appropriate
consumption GHG-Int denominator All properties 0.8 0.8
---------------------- ------------ ----------------------- --------------- ------------------ ------------------
Water consumption
Year ended 30 June Year ended 30 June
Impact area EPRA Code Units of measure Indicator 2020 2019
--------------------- ---------- --------------------- --------------- -------------------- ---------------------
Total water
consumption Water-Abs Annual cubic metres All properties 172,725 197,016
Building water m(2) /appropriate
intensity Water-Int denominator All properties 42.0 47.9
--------------------- ---------- --------------------- --------------- -------------------- ---------------------
Waste and recycling
Year ended Year ended
Impact area EPRA code Units of measure Indicator 30 June 2020 30 June 2019
-------------------- -------------------- ------------------- ------------------- --------------- ---------------
Annual metric
Total weight of tonnes and
waste by disposal proportion by
route Waste-Abs/Waste-LfL disposal route Tonnes of waste 820 100% 705 100%
------------------- ------ ------- ------ -------
Waste to energy 705 86% 604 86%
--------------------------------------------------------------------------------- ------ ------- ------ -------
Waste to recycling 112 14% 98 14%
--------------------------------------------------------------------------------- ------ ------- ------ -------
Waste to Landfill 4 0% 3 0%
--------------------------------------------------------------------------------- ------ ------- ------ -------
Methodology/notes:
Like-for-like data:
The operational control approach has been used and therefore
Circus Street, which became operational during the year, has been
excluded. The property has been leased under a 20-year FRI lease.
Therefore absolute and like--for--like data is identical.
Water source:
All of the water consumed at the Company's buildings is
purchased through water utility companies.
Appropriate denominator:
Consumption per bed has been chosen as the denominator.
Landlord obtained utility consumption:
All data has been obtained from metered buildings, estimation
has been used for two months'water consumption at Water Lane
Apartments (where no data was available) based on average
consumption during the year.
Employee data
Year ended Year ended
30 June 30 June
2020 2019
------------- --------------
Impact area EPRA code Units of measure Indicator Female Male Female Male
----------------- -------------- ---------------------- -------------- ------ ----- ------ ------
Employee gender Number of Board of
diversity Diversity-Emp employees Directors 2 3 2 3
Senior
management 3 2 2 3
---------------------------------------------------------------------- ------ ----- ------ ------
Employees 66 48 64 57
---------------------------------------------------------------------- ------ ----- ------ ------
Total 71 53 68 63
---------------------------------------------------------------------- ------ ----- ------ ------
Percentage
Gender pay ratio Diversity-Pay difference by gender All employees -1.5% +1.5% -15.1% +15.1%
----------------- -------------- ---------------------- -------------- ------ ----- ------ ------
Year ended
Year ended 30 June 30 June
Impact area EPRA code Units of measure Indicator 2020 2019
----------------------------- ------------- ------------------------ -------------- ------------------ ----------
Employee training and
development Emp-Training Average hours per annum All employees 10.5 8.3
----------------------------- ------------- ------------------------ -------------- ------------------ ----------
Employee performance
appraisals Emp-Dev Percentage of employees All employees 100% 100%
----------------------------- ------------- ------------------------ -------------- ------------------ ----------
Employee turnover Emp-Turnover Percentage of employees All employees 69% 71%
----------------------------- ------------- ------------------------ -------------- ------------------ ----------
New hires Emp-Turnover New hires All employees 80 121
----------------------------- ------------- ------------------------ -------------- ------------------ ----------
Impact area EPRA Code Units of Indicator Year ended Year ended
measure 30 June 30 June
2020 2019
-------------------- ----------- ----------- --------------- ---------------- ----------------
Injury
rate,
lost day
rate,
accident
severity
rate and
Employee health absentee Injury
and safety H&S-Emp rate rate 13.9% 10.5%
-----------
Lost day
rate 0.0% 0.0%
Accident
severity
rate 0.0% 0.0%
Absentee
rate 0.0% 0.7%
------------------------------------------------------------ ---------------- ----------------
Asset health
and safety Percentage
assessments H&S-Assets of assets All properties 100% 100%
-------------------- ----------- ----------- --------------- ---------------- ----------------
Asset health
and safety Percentage
compliance H&S-Comp of assets All properties 100% 100%
-------------------- ----------- ----------- --------------- ---------------- ----------------
Community Comty-Eng Percentage All properties The Company is indirectly
engagement, of assets involved in a number
impact assessments of social and local
and development community initiatives
programmes via the Property Manager,Scape,
who manages c.85% of
the operational portfolio
at 30 June 2020, such
as initiatives to give
back to the local area
through sponsorship
and local events.
Read more above.
-------------------- ----------- ----------- --------------- ----------------------------------
Methodology/notes:
New hires and turnover:
Scape has overall responsibility for the supervision and
provision of asset management services through oversight and
management of the employees of GCP Operations Limited, a subsidiary
of the Company. GCP Operations Limited experiences a high employee
turnover rate due to the nature of the roles in the business which
include temporary staff and are predominantly service based.
Gender pay ratio:
The reduction in the ratio this year is due to an increase in
female senior appointments (by way of internal promotions) and
female appointments in head office roles. The ratio excludes the
Board of Directors who are all non-executive.
RISK MANAGEMENT
Robust risk assessments and reviews of internal controls are
undertaken regularly in the context of the Company's overall
investment objective.
Role of the Board
The Directors have overall responsibility for risk management
and internal controls within the Group. They recognise that risk is
inherent in the operation of the Group and that effective risk
management is an important element in the success of the
organisation. The Directors have delegated responsibility for the
assurance of the risk management process and the review of
mitigating controls to the audit and risk committee.
The Directors, when setting the risk management strategy, also
determine the nature and extent of the significant risks and the
Company's risk appetite in implementing this strategy. A formal
risk identification and assessment process has been in place since
IPO, resulting in a risk framework document which summarises the
key risks and their mitigants.
The Directors undertake a formal risk review with the assistance
of the audit and risk committee at least twice a year in order to
assess the effectiveness of the Group's risk management and
internal control systems. During the year under review, the
Directors have not identified, nor been advised of, any failings or
weaknesses which they have determined to be of a material nature.
The principal risks and uncertainties which the Group faces are set
out below.
Internal control review
The Board is responsible for the internal controls relating to
the Group including the reliability of the financial reporting
processes and for reviewing their effectiveness.
The Directors have reviewed and considered the guidance supplied
by the Financial Reporting Council on risk management, internal
control and related finance and business reporting. An ongoing
process has been established for identifying, evaluating and
managing the principal and emerging risks faced by the Group and is
kept under regular review by the Board, through the audit and risk
committee. This process, together with key procedures established
with a view to providing effective financial control, was in place
during the year under review and at the date of this report.
The internal control systems are designed to ensure that proper
accounting records are maintained, that the financial information
on which business decisions are made, and which is issued for
publication, is reliable and that the assets of the Group are
safeguarded.
The following are the main features of the Group's internal
control and risk management systems:
-- a defined schedule of matters reserved for decision by the
Board, which is reviewed by the Board at least annually;
-- the audit and risk committee regularly reviews the Company's
internal controls, risk management systems and risk matrix;
-- the Company has defined investment criteria, as set out in
the investment policy. Compliance with these criteria is regularly
reviewed by the Investment Manager, particularly when considering
possible new investments;
-- the Board has a procedure to ensure that the Company can
continue to be approved as an investment company by complying with
sections 1158/1159 of the Corporation Tax Act 2010;
-- the Investment Manager and Administrator prepare forecasts
and management accounts which allow the Board to assess the
Company's activities and to review its performance;
-- contractual agreements with the Investment Manager and other
third party service providers, and adherence to them, are regularly
reviewed;
-- the services and controls at the Investment Manager and at
other service providers are reviewed annually and assurance letters
are provided by service providers to the Company on an annual
basis;
-- the audit and risk committee receives and reviews assurance
reports on the controls of all third party service providers,
including the Depository, Investment Manager and Administrator,
undertaken by professional service providers; and
-- the Investment Manager's Risk Officer continually reviews the
Investment Manager's controls in its capacity as AIFM to the
Company. Risk Officer reports are submitted to the committee on a
six-monthly basis.
The risk management process and Group systems of internal
control are designed to manage rather than eliminate the risk of
failure to achieve the Company's objectives. It should be
recognised that such systems can only provide reasonable, not
absolute, assurance against material misstatement or loss.
The Directors have carried out a review of the effectiveness of
the systems of internal control as they have operated over the
period and up to the date of approval of the report and financial
statements.
There were no matters arising from this review that required
further investigation and no significant failings or weaknesses
were identified.
Internal control assessment process
Robust risk assessments and reviews of internal controls are
undertaken regularly in the context of the Company's overall
investment objective. The Board, through the audit and risk
committee, has categorised risk management controls under the
following key headings:
-- operational risk;
-- market risk;
-- financial risk;
-- reputational risk; and
-- emerging risks.
In arriving at its judgement of what risks the Group faces, the
Board has considered the Group's operations in the light of the
following factors:
-- the nature and extent of risks which it regards as acceptable
for the Group to bear within its overall business objective;
-- the threat of such risks becoming reality;
-- the Group's ability to reduce the incidence and impact of risk on its performance;
-- the cost to the Group and benefits related to the review of
risk and associated controls of the Group; and
-- the extent to which the third parties operate the relevant controls.
A risk matrix is in place against which the risks identified and
the controls to mitigate those risks can be monitored. The risks
are assessed on the basis of:
-- the likelihood of them happening;
-- the impact on the business if they were to occur; and
-- the effectiveness of the controls in place to mitigate them.
This risk register is reviewed at least every six months by the
audit and risk committee and at other times as necessary.
The Board, during the course of these reviews, has concluded
that geopolitical risk should be included as a principal risk this
year due to the ongoing uncertainty in regards to the UK's exit
from the EU, relations between the UK, US and China and the
Covid-19 pandemic. Additionally, emerging risks have been disclosed
for the first time this year.
The majority of the day-to-day management functions of the Group
are sub-contracted, and the Directors therefore obtain regular
assurances and information from key third party suppliers regarding
the internal systems and controls operating in their organisations.
In addition, each of the third parties is requested to provide a
copy of its report on internal controls each year, where available,
which is reviewed by the audit and risk committee.
PRINCIPAL RISKS AND UNCERTAINTIES
The Directors have identified the following principal risks and
uncertainties and the actions taken to manage each of these. If one
or more of these risks materialised, it could have the potential to
significantly impact the Group's ability to meet its investment
objective.
Risk 1: Operational Risk
---------------------------- ---------------------------- ---------------------------- ----------------------------
Risk Impact How the risk is managed Change in residual risk over
the year
---------------------------- ---------------------------- ---------------------------- ----------------------------
Reliance on the Investment
Manager and third party
service providers
---------------------------- ---------------------------- ---------------------------- ----------------------------
The Group relies upon the Failure by a third party The performance of the Stable
performance of third party service provider to carry Group's service providers is The Investment Manager
service providers to perform out its obligations in closely monitored by the continues to provide
its main accordance with management engagement adequate resource and act
functions. In particular, the terms of its committee of the Board, with due skill, care
the Group depends on the appointment, or to exercise which conducts review and diligence in its
Investment Manager to due care and skill, could meetings with each of the responsibilities as
provide investment have a material adverse Group's principal Investment Manager and AIFM
advice and management effect on the Group's third party service to the Company. The
services. Such services, performance. The misconduct providers on an annual Company's
which include monitoring the or misrepresentations by basis. The audit and risk third party service
performance of employees of the committee also reviews providers continue to act in
the investment portfolio and Group, the Investment the internal controls accordance with their
conducting due diligence in Manager, the Property reports and other compliance obligations. The Investment
respect of any new Managers or other third and regulatory reports of Manager and third party
investments, are party service providers its service providers service providers enacted
integral to the Group's could cause significant on an annual basis. The Business Continuity Plans in
performance. losses to the Group. performance of the employees response to
within the Group is the Covid-19 outbreak and
monitored by the these are operating
Board of GCP Operations and effectively
Scape and considered
regularly by the Board.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Due diligence
---------------------------- ---------------------------- ---------------------------- ----------------------------
Prior to entering into an To the extent that the In addition to the due Stable
agreement to acquire any Investment Manager diligence carried out by the Although the Company's
property, the Investment underestimates or fails to Investment Manager, third property portfolio has been
Manager will perform identify risks and party technical, impacted by the Covid-19
due diligence on behalf of liabilities insurance and legal experts pandemic, it has
the Group, on the proposed associated with the are engaged to advise on not impacted the process of
investment. The due investment in question, the specific risks to an due diligence. The portfolio
diligence process Group may be subject to acquisition, whether generated rental income for
may not reveal all the facts defects in title, it be structured via a the year
that may be relevant in to environmental, structural property--owning vehicle or of GBP47.8 million, which
connection with any proposed or operational defects a direct property represents 92% of the
investment. requiring remediation, or acquisition. budgeted income for the
may be unable year.
to obtain necessary permits
which may materially and
adversely impact the EPRA
NAV(1) per
share and the earnings of
the Company.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Concentration risk
---------------------------- ---------------------------- ---------------------------- ----------------------------
The Company's property As a result of portfolio The Group is focused on the Decrease
portfolio comprised eleven concentration, the Group may London market because this The Company has completed
assets at 30 June 2020. The be adversely affected by is where the largest the construction of its
Group's assets events, including supply/demand first asset in Brighton
are primarily located in and Brexit and the Covid-19 imbalance exists in the UK under a forward-funding
around London. pandemic, which may damage student accommodation agreement and has continued
or diminish London's market. The Investment the construction of a second
attractiveness to Manager and the Property asset in Brighton. The
students (especially Managers have significant Directors
overseas students) or London experience in the sector and believe that Brighton
property values. continuously monitor the demonstrates the strong
market and supply and demand imbalances
provide quarterly updates to for student residential
the Board, to act as an accommodation similar to the
early warning signal of any characteristics that make
adverse market London attractive.
conditions ahead.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Net income and property
values
---------------------------- ---------------------------- ---------------------------- ----------------------------
Occupancy, rental income and A decrease in rental income, The Investment Manager will Increase
property values may be occupancy and/or property only propose to the Board At the start of the academic
adversely affected by a values may materially and those assets which it year, the Company's
number of factors, adversely believes are in portfolio achieved full
including a fall in the impact the NAV and earnings the most advantageous occupancy for the
number of students, of the Company as well as locations and benefit from sixth consecutive year. This
competing sites, any harm to the ability to service large supply and demand remained the case until the
the reputation of interest on its imbalances that can restrictions on global
the Group or the Scape brand debt facility in the longer withstand the entry of new mobility and
amongst universities, term. The failure to collect competitors into the market. closure of academic
students or other potential rents, periodic renovation In addition, the quality of institutions caused by the
customers, costs assets Covid-19 pandemic resulted
or as a result of other and increased operating that the Group acquires will in the majority
local or national factors, costs may also adversely be amongst the best in class of students vacating their
including Brexit and the affect the Group. to minimise occupancy risk. rooms. The operational
Covid-19 pandemic. The portfolio generated rental
Investment Manager monitors income of GBP47.8
the performance of the million for the year to 30
Property Managers and June 2020, representing 92%
provides the Board of all budgeted revenues for
with performance reports on the financial
a quarterly basis, including year.
any operational or
performance-related
issues which could
potentially have an impact
on brand confidence or
integrity.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Property valuation
---------------------------- ---------------------------- ---------------------------- ----------------------------
The valuation of the Group's Valuations of the Group's The Company has entered into Increase
property portfolio is investments may not reflect a valuation agreement with The valuation at 30 June
inherently subjective, in actual sale prices, even Knight Frank LLP to provide 2020, as determined by the
part because where any such quarterly Company's independent
property valuations are made sales occur shortly after valuations of all of the valuer, was subject
on the basis of assumptions the relevant valuation date. Group's assets. Knight Frank to 'material valuation
which may not prove to be Property investments are LLP is one of the largest uncertainty' caused by the
accurate, typically valuers of Covid-19 pandemic and in
and because of the illiquid and may be student accommodation in the accordance with
individual nature of each difficult for the Company to UK and therefore has access recent guidance issued by
property and limited sell and the price achieved to a large number of data the Royal Institution of
transactional activity. on any such realisation points Chartered Surveyors. Post
may be at a discount to the to support its valuations. year end, the
prevailing valuation of the In addition to this, the Company has been notified
relevant investments. Board of Directors has that, with effect from 7
significant experience July 2020, its valuations
of property valuation and will no longer
its constituent elements. be subject to this
qualification
---------------------------- ---------------------------- ---------------------------- ----------------------------
Compliance with laws and
regulations
---------------------------- ---------------------------- ---------------------------- ----------------------------
Any change in the laws, A material adverse effect on The Company has appointed Stable
regulations and/or the ability of the Company Gowling WLG (UK) LLP as The Company's internal
government policy affecting to successfully pursue its legal counsel, Link Company compliance procedures
the Group, including investment Matters Limited continue to operate
any change in the Company's policy and meet its as Company Secretary and effectively.
tax status or in taxation investment objective or Deloitte LLP as tax adviser The Investment Manager and
legislation in the UK provide favourable returns to ensure compliance with third party service
(including a change to shareholders. An all relevant providers enacted Business
in interpretation of such increase in the rates of laws and regulations. The Continuity Plans
legislation). stamp duty land tax could Board has ultimate in response to the Covid-19
have a material impact on responsibility for ensuring outbreak and these are also
the value of adherence to all operating effectively.
assets acquired. In laws and regulations,
addition, if the Group fails including the UK REIT
to remain a REIT for UK tax regime, and monitors the
purposes, its compliance reports provided
profits and property by the Investment Manager
valuation gains will be and other third party
subject to UK corporation service providers.
tax.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Risk 2: Market Risk
---------------------------- ---------------------------- ---------------------------- ----------------------------
UK property market
conditions
---------------------------- ---------------------------- ---------------------------- ----------------------------
The Group's profitability An overall downturn in the The Investment Manager Increase
depends on property values UK property market as a continuously monitors market The Covid-19 pandemic is
in the UK to a significant result of Brexit, Covid-19 conditions and provides the causing significant
extent. and/or other Board with uncertainty in the UK
factors and the availability quarterly updates on the property market. The
of credit to the UK property student accommodation market immediate
sector may have a materially and senior debt market to impact on the property
adverse act as an market of a widespread
effect upon the value of the early warning signal of any shutdown has been reduced
property owned by the Group adverse market conditions levels of income and
and ultimately upon the NAV ahead. a significant reduction in
and the transaction activity
ability of the Company to resulting in a material
generate revenues. uncertainty clause
caveating valuations across
the wide range of UK
property sectors. This
caveat was lifted
for purpose-built student
accommodation on 7 July
2020.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Government policy and Brexit
---------------------------- ---------------------------- ---------------------------- ----------------------------
Changes in government policy Material reductions to the The Board, together with its Increase
which adversely impact the number of students, relevant advisers, closely Covid-19 has increased
number of students in the including international monitors changes in government involvement in
UK. Further, students, attending government policy the higher education sector.
the Group may be subject to HEIs in the UK and/or in respect of UK, EU and The U-turn regarding
a period of significant material adverse impact on international students. awarding of A-levels in the
uncertainty when the UK the value of student midst of the Covid-19
leaves the EU. accommodation assets outbreak led to an increase
Covid-19 is also impacting in the UK may have a in the number
government policy and may be material adverse impact on of top grades awarded and
subject to further changes. the Company's ability to increased the uncertainty
meet its stated objectives. for lower-ranked
institutions in regard
to student numbers. The
Company's assets are in
locations that stand to
benefit from students
attending more highly ranked
institutions. As a result of
Brexit, the UK Government
has confirmed
that EU students will pay
full international student
rates from the 2021/22
academic year.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Geopolitical
---------------------------- ---------------------------- ---------------------------- ----------------------------
Negative changes to the Material reductions to the The Board has significant New
relationship between the UK number of students, experience and, together
and other nations from which including international with its advisers, monitors
residents students, attending global macro-economic
of the Company's assets HEIs in the UK and/or and political developments
originate may have an material adverse impact on which may impact UK, EU and
adverse impact on demand. the value of student international student
accommodation assets numbers. The
in the UK may have a Company seeks to acquire
material adverse impact on assets in locations with a
the Company's ability to supply shortfall and strong
meet its stated objectives demand to
attract a diversified range
of domestic and
international students.
---------------------------- ---------------------------- ---------------------------- ----------------------------
RISK 3: FINANCIAL RISK
---------------------------- ---------------------------- ---------------------------- ----------------------------
Risk Impact How the risk is managed Change in residual risk over
the year
---------------------------- ---------------------------- ---------------------------- ----------------------------
Breach of loan covenants and
gearing limits
---------------------------- ---------------------------- ---------------------------- ----------------------------
The availability of the An adverse change to capital The Company's borrowing Stable
Company's debt facilities values as a result of a policy provides for the The Company's gearing and
depends on the Company downturn in the UK property Company to have no more than loan-to-value ratios remain
complying with a market, or 55% gearing in within long-term targets and
number of key financial a reduction to net income the short term and the Company
covenants in respect of due to factors such as a approximately 30% in the is in full compliance with
loan-to-value and interest fall in the number of long term. In addition to all financial covenants at
service cover. students or other this, the Investment the year end.
national factors, may lead Manager provides the Board
to a situation whereby the with a quarterly update on
Company breaches its banking the state of the UK property
covenants. market
and the senior debt market.
---------------------------- ---------------------------- ---------------------------- ----------------------------
EMERGING RISKS
As part of the Company's risk management processes, emerging
risks are considered at the formal reviews of the Company's risk
matrix. Emerging risks include trends which are characterised by a
high degree of uncertainty in terms of their occurrence,
probability and their potential impact.
Emerging RiskS
Risk Impact How the risk is Change in residual
managed risk over the
year
---------------------------- ------------------------- --------------------------- ------------------
Covid-19
---------------------------- ------------------------- --------------------------- ------------------
A prolonged global The restriction The Board, together New
pandemic limiting of movement of people with its relevant
the movement of leading to a material advisers, is closely
people and adversely reduction to the monitoring the crisis,
impacting the number number of students which has been evolving
of students in the attending HEIs in rapidly. The Company
UK. the UK may have requires that its
a material adverse service providers
impact on the Company's adopt best management
income and ability practices to mitigate
to meet its stated the risks of Covid-19
objectives. to users of the
Company's assets.
The Company has
also put all acquisitions
on hold and is maintaining
a surplus cash balance.
---------------------------- ------------------------- --------------------------- ------------------
-Climate change
---------------------------- ------------------------- --------------------------- ------------------
Short-term increase The Company's buildings The Company seeks New
in environmental may become inaccessible to adhere to existing
changes could have or incapable of and emerging ESG
a significant detrimental occupation. Universities policies. It has
effect on the Company's may be affected, participated in
buildings or the leading to a reduction GRESB for the 2019/20
universities served in the number of reporting cycle.
(e.g. through flooding). students, which A sustainability
would have a negative committee was established
impact on occupancy, in 2019 by the Investment
earnings and property Manager and the
valuations. Property Manager,
Scape, to monitor
and implement ESG
initiatives. The
Investment Manager
also carries out
environmental impact
assessments in due
diligence processes.
University funding
---------------------------- ------------------------- --------------------------- ------------------
The primary sources A material reduction The Board has significant New
of funding for universities to the number of experience and,
are tuition fees, HEIs in the UK, together with its
followed by research due to lack of funding, advisers, monitors
grants. There are consolidation or the funding positions
growing pressures otherwise, may have of UK higher education
on universities' a material adverse institutions. The
funding sources, impact on the number Company's focus
with policy reviews of students. This on London means
suggesting tuition may lead to a reduction it has exposure
fees may be lowered. in the Company's to the market in
Brexit may also income and ability the UK with the
lead to a reduction to meet its stated greatest diversity
in EU funding and objectives. of highly ranked
Covid-19 may impact higher education
receipt of tuition institutions.
fees.
---------------------------- ------------------------- --------------------------- ------------------
1. Alternative performance measure - see below for definitions and calculation methodology.
GOING CONCERN ASSESSMENT AND VIABILITY STATEMENT
Going concern
In assessing the Group's ability to continue as a going concern,
the Directors have considered the Company's investment objective,
risk management policies, capital management (see note 21 to the
financial statements), the quarterly NAV and the nature of its
portfolio and expenditure projections. The Directors believe that
the Group has adequate resources, an appropriate financial
structure and suitable management arrangements in place to continue
in operational existence for the foreseeable future, being a period
of at least twelve months from the date of this report. In
addition, the Board has had regard to the Group's investment
performance, the price at which the Company's shares trade relative
to the NAV and ongoing investor interest in the continuation of the
Company (including feedback from meetings and conversations with
shareholders by the Group's advisers).
Based on their assessment and considerations, the Directors have
concluded that the financial statements of the Company and the
Group should continue to be prepared on a going concern basis and
the financial statements have been prepared accordingly. The
Directors have also made an assessment of the viability of the
Company.
Viability statement
The Directors have assessed the viability of the Company over a
five-year period to 30 June 2025, taking into account the financial
position of the Group and the potential impact of the Company's
principal risks and uncertainties detailed above, in particular the
risk that reduced occupancy due to the Covid-19 pandemic could have
on future years, which could materially affect the valuation and
cash flows of the Company's investments and, therefore, the
viability of the Company. They have also considered the Company's
policy for monitoring, managing and mitigating its exposure to
these risks.
The Directors have assessed the prospects of the Group over a
period longer than the twelve months required by the going concern
provision. The Board has determined that a five-year period
constitutes an appropriate period to provide its viability
statement. The Company does not have a fixed life, it assumes
long-term hold periods for the assets in its portfolio and analyses
its financial model over a five-year horizon. The weighted average
maturity of the Company's debt facilities is approximately six
years.
This assessment involved an evaluation of the potential impact
on the Group of these risks occurring. Where appropriate, the
Group's financial model was subject to a sensitivity analysis
involving flexing a number of key assumptions in the underlying
financial forecasts in order to analyse the effect on the Group's
net cash flows and other key financial ratios including loan
covenants. Additionally, the Company considers the impact of
structural changes in light of wider macro-economic conditions,
with regard to refinancing and asset sales.
The impact of Covid-19 on market conditions within which the
Company operates has been significant. As a result, additional
testing has been carried out to reflect the Company's ability to
operate in unfavourable conditions.
The impact of these assumptions has been measured against the
Company's key metrics:
-- profitability;
-- loan covenants;
-- the level of financial headroom; and
-- compliance with the REIT rules.
Alongside the five-year forecast stress testing the Board has
undertaken reverse stress testing conducted with respect to the
2020 financial year regarding the effect of income and valuation
sensitivities on viability and key loan covenants.
Based on the results of the analysis and current booking levels,
the Directors have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as they fall
due over the five-year period of their assessment.
This strategic report has been approved by the Board and signed
on its behalf by:
Robert Peto
Chairman
16 September 2020
Governance
DIRECTORS
Robert Peto -Chairman
Malcolm Naish - Senior Independent Director and Chair of the
management engagement committee
Marlene Wood - Chair of the audit and risk committee
Gillian Day - Chair of the remuneration committee
David Hunter - Chair of the nomination committee
EXTRACTS FROM THE DIRECTORS' REPORT
Share capital
At the annual general meeting held on 6 November 2019, the
Company was granted authority to allot ordinary shares of the
Company up to 10% of the Company's total issued share capital at
that date, amounting to 41,365,400 ordinary shares.
On 27 December 2019, the Company issued 41,365,400 ordinary
shares at a price of 186.00 pence per share, with an aggregate
nominal value of GBP413,654, raising gross proceeds of
approximately GBP77 million. The shares were issued under the
existing shareholder authorities granted at the Company's annual
general meeting held on 6 November 2019, as set out above.
The placing price represented a premium of 10.4% to the
Company's prevailing EPRA NAV(1) (ex-income) of 168.55 pence per
ordinary share and a discount of 6.3% to the closing market price
per share on 18 December 2019 of 198.40 pence. The shares were
issued to institutional investors and professionally advised
private investors and admitted to trading on the Premium Segment of
the London Stock Exchange s Main Market on 27 December 2019.
As a consequence of the above and as at the date of this report,
the Company's ability to allot shares under its existing authority
has been exhausted.
At the annual general meeting held on 6 November 2019, the
Company was granted authority to purchase up to 14.99% of the
Company's ordinary share capital in issue at that date on which the
notice of annual general meeting was published, amounting to
62,006,679 ordinary shares. No ordinary shares have been bought
back under this authority. This authority will expire at the
conclusion of, and renewal will be sought at, the annual general
meeting to be held on 4 November 2020.
Shares bought back by the Company may be held in treasury, from
where they could be re-issued at or above the prevailing NAV
quickly and cost effectively. This provides the Company with
additional flexibility in the management of its capital base. No
shares were bought back or held in treasury during the year or at
the year end.
At the year end, and at the date of this report, the issued
share capital of the Company comprised 455,019,030 ordinary shares.
At general meetings of the Company, ordinary shareholders are
entitled to one vote on a show of hands and, on a poll, to one vote
for every ordinary share held.
At 30 June 2020, the total voting rights of the Company were
455,019,030, and at the date of this report are 455,019,030.
Dividends
Dividends totalling 6.15 pence per ordinary share have been paid
in respect of the year ended 30 June 2020 as follows:
Year Year
ended ended
30 June 2020 30 June 2019
pence pence
------------------------ ------------ ------------
First interim dividend 1.57 1.53
Second interim dividend 1.58 1.53
Third interim dividend 1.58 1.53
Fourth interim dividend 1.42 1.56
------------------------ ------------ ------------
Total 6.15 6.15
------------------------ ------------ ------------
FINANCIAL STATEMENTS
Statement of Directors' responsibilities
In respect of the annual report and financial statements
The Directors are responsible for preparing the annual report
and financial statements in accordance with applicable UK law and
IFRS as adopted by the EU.
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they present fairly the
financial position, financial performance and cash flows of the
Group for that year. In preparing the financial statements, the
Directors are required to:
-- select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors and
then apply them consistently;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with specific
requirements in IFRS is insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the Group's financial position and financial performance;
-- state that the Group has complied with IFRS, subject to any
material departures disclosed and explained in the financial
statements;
-- make judgements and estimates that are reasonable and prudent; and
-- prepare financial statements on a going concern basis unless
it is inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that the
financial statements comply with the Companies Act 2006 and Article
4 of the IAS Regulation. They are also responsible for safeguarding
the assets of the Group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a strategic report, Directors' report,
Directors' remuneration report and corporate governance statement
that comply with that law and those regulations, and for ensuring
that the annual report includes information required by the Listing
Rules and Disclosure Guidance and Transparency Rules of the
FCA.
The financial statements are published on the Company's website,
www.gcpstudent.com, which is maintained on behalf of the Company by
the Investment Manager. The work carried out by the Auditor does
not involve consideration of the maintenance and integrity of this
website and, accordingly, the Auditor accepts no responsibility for
any changes that have occurred to the financial statements since
they were initially presented on the website.
Under the investment management agreement, the Investment
Manager is responsible for the maintenance and integrity of the
corporate and financial information included on the Company's
website. Visitors to the website need to be aware that legislation
in the UK covering the preparation and dissemination of the
financial statements may differ from legislation in their
jurisdiction.
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with IFRS as
adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit of the Company and the
Group; and
-- this annual report includes a fair review of the development
and performance of the business and the position of the Company and
the Group, together with a description of the principal risks and
uncertainties that it faces.
The Directors consider that the annual report and financial
statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the Company's position and performance, business model and
strategy.
On behalf of the Board
Robert Peto
Chairman
16 September 2020
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the year ended 30 June 2020 or the
year ended 30 June 2019 but is derived from those accounts.
Statutory accounts for the year ended 30 June 2019 have been
delivered to the Registrar of Companies and those for 2020 will be
delivered in due course. The Auditor has reported on those
accounts; their report was (i) unqualified, (ii) did not include a
reference to any matters to which the Auditor drew attention by way
of emphasis without qualifying their report and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies
Act 2006. The text of the Auditor's report can be found in the
Company's full annual report and financial statements at
www.gcpstudent.com.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2020
30 June 30 June
Notes 2020 2019
Continuing operations GBP'000 GBP'000
--------------------------------------------------------------------------------- ----- ------- -------
Rental income 4 47,762 44,410
Property operating expenses 5 (9,658) (9,364)
--------------------------------------------------------------------------------- ----- ------- -------
Gross profit 38,104 35,046
Administration expenses 5 (9,861) (8,808)
Aborted transaction costs 5 (3,765) -
--------------------------------------------------------------------------------- ----- ------- -------
Operating profit before gains on investment properties and financial instruments 24,478 26,238
Fair value gains on investment properties 10 33,904 73,865
--------------------------------------------------------------------------------- ----- ------- -------
Operating profit 58,382 100,103
Finance income 15 93 1,088
Finance expenses 16 (9,897) (8,405)
--------------------------------------------------------------------------------- ----- ------- -------
Profit before tax 48,578 92,786
Tax charge on residual income 7 - -
--------------------------------------------------------------------------------- ----- ------- -------
Total comprehensive income for the year 48,578 92,786
--------------------------------------------------------------------------------- ----- ------- -------
EPS (basic and diluted) (pence per share) 3 11.17 22.92
--------------------------------------------------------------------------------- ----- ------- -------
The accompanying notes form an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
30 June 30 June
Notes 2020 2019
GBP'000 GBP'000
---------------------------------------- ----- ----------- -----------
Assets
Non-current assets
Investment property 10 1,009,838 919,203
Retention account - 308
---------------------------------------- ----- ----------- -----------
Total non-current assets 1,009,838 919,511
---------------------------------------- ----- ----------- -----------
Current assets
Cash and cash equivalents 23 60,358 15,509
Deposit for investment property - 2,648
Retention account 308 -
Trade and other receivables 24 17,671 14,594
---------------------------------------- ----- ----------- -----------
Total current assets 78,337 32,751
---------------------------------------- ----- ----------- -----------
Total assets 1,088,175 952,262
---------------------------------------- ----- ----------- -----------
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 17 (279,456) (249,111)
Retention account - (308)
Lease liability (11,266) -
Financial derivatives (233) -
---------------------------------------- ----- ----------- -----------
Total non-current liabilities (290,955) (249,419)
---------------------------------------- ----- ----------- -----------
Current liabilities
Trade and other payables 25 (9,066) (5,887)
Deferred income (6,085) (12,293)
Lease liability (342) -
Retention account (308) -
---------------------------------------- ----- ----------- -----------
Total current liabilities (15,801) (18,180)
---------------------------------------- ----- ----------- -----------
Total liabilities (306,756) (267,599)
---------------------------------------- ----- ----------- -----------
Net assets 781,419 684,663
---------------------------------------- ----- ----------- -----------
Equity
Share capital 18 4,550 4,137
Share premium 19 525,748 450,658
Special reserve 20 26,340 38,759
Retained earnings 20 224,781 191,109
---------------------------------------- ----- ----------- -----------
Total equity 781,419 684,663
---------------------------------------- ----- ----------- -----------
Number of shares in issue 455,019,030 413,653,630
EPRA NAV(1) per share (pence per share) 3 171.78 165.52
IFRS NAV per share (pence per share) 171.73 165.52
---------------------------------------- ----- ----------- -----------
These financial statements were approved by the Board of
Directors of GCP Student Living plc on 16 September 2020 and signed
on its behalf by:
Robert Peto
Chairman
Company number: 08420243
The accompanying notes form an integral part of these financial
statements.
1. Alternative performance measure - see below for definitions
and calculation methodology.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
Share Special Retained
Capital Share reserve earnings Total
Notes GBP'000 premium GBP'000 GBP'000 GBP'000
----------------------------------------------- ----- ------- ------- -------- -------- --------
Balance at 1 July 2019 4,137 GBP'000 38,759 191,109 684,663
----------------------------------------------- ----- ------- ------- -------- -------- --------
Total comprehensive income - - - 48,578 48,578
Ordinary shares issued 413 76,526 - - 76,939
Share issue costs - (1,436) - - (1,436)
Dividends paid in respect of the previous year 8 - - (2,344) (4,109) (6,453)
Dividends paid in respect of the current year 8 - - (10,075) (10,797) (20,872)
----------------------------------------------- ----- ------- ------- -------- -------- --------
Balance at 30 June 2020 4,550 525,748 26,340 224,781 781,419
----------------------------------------------- ----- ------- ------- -------- -------- --------
Consolidated statement of changes in equity
For the year ended 30 June 2019
Share Share Special Retained
Capital premium reserve earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- ----- ------- ------- ------- -------- --------
Balance at 1 July 2018 3,851 408,617 44,497 117,245 574,210
----------------------------------------------- ----- ------- ------- ------- -------- --------
Total comprehensive income - - - 92,786 92,786
Ordinary shares issued 286 42,854 - - 43,140
Share issue costs - (813) - - (813)
Dividends paid in respect of the previous year 8 - - (2,508) (3,306) (5,814)
Dividends paid in respect of the current year 8 - - (3,230) (15,616) (18,846)
----------------------------------------------- ----- ------- ------- ------- -------- --------
Balance at 30 June 2019 4,137 450,658 38,759 191,109 684,663
----------------------------------------------- ----- ------- ------- ------- -------- --------
The accompanying notes on form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2020
30 June
30 June 2020 2019
GBP'000 GBP'000
-------------------------------------------------------------------------- ----- ------------ --------
Cash flows from operating activities Notes
Operating profit 58,382 100,103
Adjustments to reconcile profit for the year to net operating cash flows:
Gains from change in fair value of investment properties 10 (33,904) (73,865)
Increase in other receivables and prepayments (1,583) (3,159)
(Decrease)/increase in other payables and accrued expenses (5,941) 2,535
-------------------------------------------------------------------------- ----- ------------ --------
Net cash flow generated from operating activities 16,954 25,614
-------------------------------------------------------------------------- ----- ------------ --------
Cash flows from investing activities
Land and development expenditure on properties under construction (41,075) (58,327)
Capital expenditure on investment properties (295) (7,872)
-------------------------------------------------------------------------- ----- ------------ --------
Net cash used in investing activities (41,370) (66,199)
-------------------------------------------------------------------------- ----- ------------ --------
Cash flows from financing activities
Proceeds from issue of ordinary shares 76,939 43,140
Share issue costs (1,436) (813)
Proceeds from interest-bearing loans and borrowings 57,016 34,620
Repayment of interest-bearing loans and borrowings (28,220) (17,470)
Repayment of leasing liability (174) -
Loan arrangement fees (49) (1,429)
Finance income 85 1,020
Finance expenses (7,828) (7,614)
Dividends paid in the year 8 (27,068) (24,573)
-------------------------------------------------------------------------- ----- ------------ --------
Net cash flow generated from financing activities 69,265 26,881
-------------------------------------------------------------------------- ----- ------------ --------
Net increase/(decrease) in cash and cash equivalents 44,849 (13,704)
Cash and cash equivalents at start of the year 15,509 29,213
-------------------------------------------------------------------------- ----- ------------ --------
Cash and cash equivalents at end of the year 23 60,358 15,509
-------------------------------------------------------------------------- ----- ------------ --------
The accompanying notes on form an integral part of these
financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Part 1. Basis of preparation
This section includes the Company's accounting policies applied
to the financial statements in accordance with IFRS. Accounting
policies specific to a particular note have been included with the
note to the financial statements.
1. General information
GCP Student Living plc is a REIT incorporated in England and
Wales on 26 February 2013. The registered office of the Company is
located at 51 New North Road, Exeter EX4 4EP. The Company has a
premium listing on the Official List of the FCA and trades on the
Premium Segment of the Main Market of the London Stock Exchange.
The Company had a market capitalisation of GBP564.2 million at 30
June 2020.
2. Basis of preparation
These financial statements are prepared in accordance with IFRS
issued by the IASB as adopted by the European Union. The financial
statements have been prepared under the historical cost convention,
except for investment property and financial instruments, which
have been measured at fair value. The audited financial statements
are presented in Pound Sterling and all values are rounded to the
nearest thousand pounds (GBP'000), except when otherwise
indicated.
These financial statements are for the year ended 30 June 2020.
Comparative figures are for the previous accounting period, the
year ended 30 June 2019.
The Group has chosen to adopt the EPRA best practice guidelines
for calculating key metrics such as net asset value and earnings,
which are presented alongside the IFRS measures where
applicable.
2.1 Changes to accounting standards and interpretations
New standards, amendments to standards and interpretations which
came into effect for accounting periods starting on or after 1
January 2019 have had an impact on the financial statements as
follows:
IFRS 16 Leases was introduced for accounting periods beginning
on or after 1 January 2019. The Group incurs ground rent in
relation to one of its investment properties that has previously
been treated as an operating lease and now falls within the scope
of IFRS 16. As a result, the Group has recognised a right-of-use
asset of GBP11,610,000 and a lease liability of GBP11,610,000 as at
1 July 2019. The Company has taken a modified retrospective
approach. There were no adjustments to opening reserves at 1 July
2019 as a right-of-use asset and a lease liability were recognised
at the same amount. The lease liability is calculated at the net
present value of the future lease payments, discounted using the
Group's incremental borrowing rate of 3.01%. The right-of--use
asset is included within investment property in the consolidated
statement of financial position at fair value.
The following new standards and amendments to existing standards
have been published and, once approved by the EU, will be mandatory
for the Group's accounting periods beginning after 1 July 2020 or
later periods. The Group has decided not to adopt them early.
-- IFRS 3 Business Combinations - Definition of a Business, to
be applied to transactions that are either business combinations or
asset acquisitions for which the acquisition date is on or after
the first annual reporting period beginning on or after 1 January
2020. Whilst this will not affect historic transactions of the
Company, as and when an acquisition takes place the accounting
treatment will be reviewed in line with the new standard.
The Group does not expect the adoption of new accounting
standards issued but not yet effective to have a significant impact
on its financial statements.
2.2 Significant accounting judgements and estimates
The preparation of these financial statements in accordance with
IFRS requires the Directors of the Company to make judgements,
estimates and assumptions that affect the reported amounts
recognised in the financial statements. 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 in the future.
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
financial statements:
Operating lease commitments - Group as lessor
The Group has entered into commercial property leases on its
investment property portfolio. The Group has determined, based on
evaluation of the terms and conditions of the arrangements, such as
the lease term not constituting a substantial portion of the
economic life of the commercial property, that it retains all the
significant risks and rewards of ownership of these properties and
recognises the contracts as operating leases.
Going concern
The Directors have made an assessment of the Group's ability to
continue as a going concern and are satisfied that the Company has
the resources to continue in business for the foreseeable future,
for a period of not less than twelve months from the date of this
report.
In making the assessment, the Directors have considered the
likely impacts of the current Covid-19 pandemic on the Group,
operations and the investment portfolio. The Directors noted the
cash balance exceeds any short-term liabilities, and have performed
stress testing and reverse stress testing. The Group is a REIT
traded on the London Stock Exchange, where assets are not required
to be liquidated to meet day-to-day redemptions. Whilst the
economic future is uncertain, the Directors believe it is possible
the Group could experience further reductions in income and/or
property valuations, however this should not be to a level which
would threaten the Group's ability to continue as a going concern.
The Directors, the Investment Manager and other service providers
have put in place contingency plans to minimise disruption.
Furthermore, the Directors are not aware of any material
uncertainties that may cast significant doubt upon the Group's
ability to continue as a going concern and the Group's financial
position in respect of its cash flows, borrowing facilities and
investment commitments. Therefore, the financial statements have
been prepared on the going concern basis.
Estimates
Valuation of property
The Group's investment properties are held at fair value as
determined by the external valuer in accordance with the RICS
Valuation Global Standards 2017 and IFRS 13. Refer to note 13 for
further details of the judgements and estimates made in determining
the valuation of property.
For the valuation of the properties as at 30 June 2020, the
valuer has included the following valuation considerations in its
report:
"The outbreak of the Novel Coronavirus (COVID-19), declared by
the World Health Organisation as a "Global Pandemic" on the 11th
March 2020, has impacted global financial markets. Travel
restrictions have been implemented by many countries. In the UK,
market activity is being impacted in all sectors. As at the
valuation date, we consider that we can attach less weight to
previous market evidence for comparison purposes, to inform
opinions of value. Indeed, the current response to COVID-19 means
that we are faced with an unprecedented set of circumstances on
which to base a judgement. Our valuation(s) is/are therefore
reported on the basis of 'material valuation uncertainty' per VPGA
10 of the RICS Valuation - Global Standards. Consequently, less
certainty - and a higher degree of caution - should be attached to
our valuation than would normally be the case. Given the unknown
future impact that COVID-19 might have on the real estate market,
we recommend that you keep the valuation of this property under
frequent review.
For the avoidance of doubt, the inclusion of the 'material
valuation uncertainty' declaration above does not mean that the
valuation cannot be relied upon. Rather, the phrase is used in
order to be clear and transparent with all parties, in a
professional manner that - in the current extraordinary
circumstances - less certainty can be attached to the valuation
than would otherwise be the case. The material uncertainty clause
is a disclosure, not a disclaimer."
Post year end, the Company has been notified that with effect
from 7 July 2020, its valuations will no longer be subject to this
qualification.
2.3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are stated in the notes to the financial
statements.
a) Basis of consolidation
As a real estate entity, the Company does not meet the
definition of an investment entity and therefore does not qualify
for the consolidation exemption under IFRS 10. The consolidated
financial statements comprise the financial statements of the Group
and its subsidiaries as at 30 June 2020. Subsidiaries are
consolidated from the date of acquisition, being the date on which
the Group obtained control, and will continue to be consolidated
until the date that such control ceases. An investor controls an
investee when the investor is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee. In
preparing these financial statements, intra-group balances,
transactions and unrealised gains or losses have been eliminated in
full. The subsidiaries all have the same year end as the Company.
Uniform accounting policies are adopted in the financial statements
for transactions and events in similar circumstances.
b) Functional and presentation currency
The overall objective of the Group is to generate returns in
Pound Sterling and the Group's performance is evaluated in Pound
Sterling. Therefore, the Directors consider Pound Sterling as the
currency that most faithfully represents the economic effects of
the underlying transactions, events and conditions and have
therefore adopted it as the functional and presentation
currency.
c) Segmental reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being the investment and provision of
student accommodation facilities (including ancillary retail,
commercial and teaching facilities) in the UK.
Part 2. Review of the financial year
This section includes information on performance of the Company,
including rental income, EPRA metrics, operating and administration
expenses and information of dividends for the year. The EPRA
metrics have been reconciled to the IFRS measures where appropriate
and are included to enhance comparability across the real estate
sector.
3. EPRA metrics
3.1 EPS and EPRA EPS
Basic EPS is calculated by dividing profit for the year
attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares during the year. As
there are no dilutive instruments in issue, basic and diluted EPS
are identical. The following reflects the earnings and share data
used in the basic and diluted share computations and EPRA EPS(1)
and Group-specific adjusted EPS(1) computations.
30 June 2020 30 June 2019
GBP'000 GBP'000
Group earnings for EPS and diluted EPS 48,578 92,786
Fair value gains on investment properties (33,904) (73,865)
Fair value losses on financial assets 233 -
----------------------------------------------------------------- ------------ ------------
Group earnings for basic and diluted EPRA EPS(1) (EPRA Earnings) 14,907 18,921
----------------------------------------------------------------- ------------ ------------
Group-specific adjustments:
Licence fees on forward-funded developments 4,206 2,263
Aborted transaction costs 3,765 -
----------------------------------------------------------------- ------------ ------------
Group-specific adjusted earnings 22,878 21,184
----------------------------------------------------------------- ------------ ------------
30 June 2020 30 June 2019
Pence per Pence per
share share
------------------------------------------- ---------------- ------------ ------------
Basic Group EPS 11.17 22.92
Basic Group EPRA EPS(1) 3.42 4.67
Diluted Group EPS 11.17 22.92
Diluted Group EPRA EPS(1) 3.42 4.67
Group-specific adjusted EPS(1) 5.26 5.23
Total dividends 6.15 6.15
------------------------------------------- ---------------- ------------ ------------
Dividend cover ratio(1) 86% 85%
------------------------------------------- ---------------- ------------ ------------
30 June 2020 30 June 2019
Number of shares Number of shares
------------------------------------------- ---------------- --------------------------
Weighted average number of shares in issue 434,788,411 404,793,233
------------------------------------------- ---------------- --------------------------
A Group-specific adjusted EPS(1) has been calculated to show
EPRA earnings(1) excluding non-recurring transactions and adding
licence fees on forward-funding agreements which are treated as
capital items in the financial statements. The capital items have
arisen from the following:
1. For the year ended 30 June 2020:
i. licence fees of GBP4,206,000 from the developers of Scape
Brighton and Circus Street, Brighton in respect of forward-funding
agreements; and
ii. aborted transaction costs of GBP3,765,000 in relation to the
Scape Mile End Canalside acquisition, including a write-off of the
deposit under the forward purchase agreement.
2. For the year ended 30 June 2019:
i. licence fees of GBP2,263,000 from the developers of Scape
Brighton and Circus Street, Brighton in respect of forward-funding
agreements.
1. Alternative performance measure - see below for definitions and calculation methodology.
3.2 EPRA NAV(1)
Basic NAV per share is calculated by dividing net assets in the
statement of financial position attributable to ordinary equity
holders of the Company by the number of ordinary shares outstanding
at the end of the year. As there are no dilutive instruments in
issue, basic and diluted NAV per share are identical. The following
reflects the net asset and share data used in the basic, diluted
and EPRA NAV(1) per share computations:
30 June 2020 30 June 2019
GBP'000 GBP'000
------------------------------------------ ------------ ------------
NAV per the financial statements 781,419 684,663
Effect of dilutive instruments - -
Diluted NAV 781,419 684,663
Fair value of other financial liabilities 233 -
Deferred tax liability - -
------------------------------------------ ------------ ------------
EPRA NAV(1) 781,652 684,663
------------------------------------------ ------------ ------------
Fully diluted number of shares 455,019,030 413,653,630
------------------------------------------ ------------ ------------
EPRA NNNAV (1) pence per share 171.73 165.52
------------------------------------------ ------------ ------------
EPRA NAV (1) pence per share 171.78 165.52
------------------------------------------ ------------ ------------
IFRS NAV pence per share 171.73 165.52
------------------------------------------ ------------ ------------
3.3. EPRA cost ratio(1)
30 June 2020 30 June 2019
GBP'000 GBP'000
--------------------------------------------------------------- -------------- --------------
Administration expenses 9,861 8,808
Property operating expenses 9,658 9,364
Less ground rent (347) (335)
Less recoverable service charge income and other similar costs (226) (239)
--------------------------------------------------------------- -------------- --------------
EPRA costs (including direct vacancy costs) 18,946 17,598
--------------------------------------------------------------- -------------- --------------
Gross rental income 47,762 43,939
Less recoverable service charge income and other similar items (226) (239)
--------------------------------------------------------------- -------------- --------------
Gross rental income 47,536 43,700
--------------------------------------------------------------- -------------- --------------
EPRA cost ratio(1) (including direct vacancy costs) 40% 40%
--------------------------------------------------------------- -------------- --------------
Further EPRA metrics are disclosed in notes 11 and 12 to the
financial statements.
1. APM - see below for definitions and calculation methodology.
4. Rental income
30 June 2020 30 June 2019
GBP'000 GBP'000
------------------------- ------------ ------------
Nomination rental income 6,243 5,990
Direct let rental income 35,482 35,008
Discounts (332) (261)
------------------------- ------------ ------------
Total student income 41,393 40,737
Teaching space income 525 501
Commercial rental income 5,451 2,701
------------------------- ------------ ------------
Gross rental income 47,369 43,939
Ancillary income 386 471
Other income 7 -
------------------------- ------------ ------------
Total 47,762 44,410
------------------------- ------------ ------------
Ancillary income includes income received through services
provided to students such as laundry, cleaning and vending
machines.
Accounting policy
Rental income, including direct lets to students, nomination
agreements to HEIs and leases to commercial tenants receivable
under operating leases, is recognised on a straight--line basis
over the term of the lease, except for contingent income in respect
of rental guarantees which is recognised when it arises.
Incentives for lessees to enter into lease agreements are spread
evenly over the lease term, even if the payments are not made on
such a basis. The lease term is the non--cancellable period of the
lease together with any further term for which the tenant has the
option to continue the lease, where, at the inception of the lease,
the Directors are reasonably certain that the tenant will exercise
that option.
5. Property operating and administration expenses
30 June 2020 30 June 2019
GBP'000 GBP'000
------------------------------ ------------ ------------
Operating costs 2,650 2,641
Marketing 312 401
Utilities 1,697 1,568
Property maintenance 1,743 1,496
Staff costs 3,256 3,258
------------------------------ ------------ ------------
Property operating expenses 9,658 9,364
------------------------------ ------------ ------------
Investment management fees 7,467 6,455
Directors' remuneration 212 186
Other administration expenses 2,182 2,167
------------------------------ ------------ ------------
Administration expenses 9,861 8,808
Aborted transaction costs 3,765 -
------------------------------ ------------ ------------
Total 23,284 18,172
------------------------------ ------------ ------------
Investment management fees are further disclosed in note 28 and
Directors' remuneration is further disclosed in note 26.
Property management agreements
During the year under review, the Group had two Property
Managers. The Group is responsible for all fees payable in relation
to property management costs incurred by it.
Collegiate Accommodation Consulting Limited
Under the terms of its asset and facilities management
agreement, Collegiate is entitled to a fee of 5.5% of the total
rental income collected per annum attributable to Water Lane
Apartments. The fee is calculated and paid monthly in arrears.
Scape
For the financial year ended 30 June 2020, the Company received
property management services from Scape Student Living Limited.
Post year end, the asset and facilities management agreements
between the Group and Scape Student Living Limited were terminated
and new property management agreements were entered into with Scape
Student Limited, as set out below.
Under the terms of its asset and facilities management
agreements, Scape was entitled to a fee which was calculated and
paid quarterly in arrears and was one quarter of the Investment
Manager's fee attributable to those assets in the Group's portfolio
for which it provided asset and facilities management services. The
fee paid to Scape was paid from the Investment Manager's fee.
In the period since the Company's IPO in 2013, Scape and its
affiliates have grown into a global developer, manager and operator
of PBSA in the UK, Australia and Europe with c.30,000 student beds
in operation or under construction globally. In order to align the
Group's property management arrangements with those entered into by
Scape and its affiliates globally, and as announced by the Company
on 27 August 2020, new property management agreements have been
entered into between the Group and Scape, including in respect of
Circus Street and Scape Brighton.
Under the terms of the new property management arrangements,
with effect from 1 July 2020, Scape will be entitled to an annual
property management fee (payable quarterly in arrears) in respect
of the management of PBSA of 4% of the total income and 1.25% of
net operating income attributable to the Group's PBSA managed by
Scape. An annual property management fee (payable quarterly in
arrears) of 2% of income shall be payable in respect of the
management of the Group's non-PBSA commercial space.
The property management fees payable by the Group to Scape shall
be subject to a minimum fee where the provision of academic
services by UK higher education institutions is affected such that
the Group's occupancy is materially and adversely affected by a
pandemic and/or epidemic, including in the current Covid-19
pandemic. Such fee shall be calculated as 80% of the Group's
relevant budgeted annual property management fees, payable
quarterly in arrears.
The revised arrangements between the Group and Scape provide for
the assumption by Scape of certain employment cost overheads which
were previously incurred by the Group. By way of illustration, the
assumption by Scape of such costs would have reduced costs incurred
by the Group by approximately GBP0.8 million for the twelve-month
period ended 30 June 2020.
The Group shall be responsible for all fees payable to Scape
under the property management agreements. The revised property
management arrangements may be terminated by the Company or Scape
at any time with 24 months' notice, provided that such notice may
expire no earlier than 30 September 2023.
As part of a wider separation of the businesses of the
Investment Manager and Scape, and in light of their time
commitments to the Scape business, post year end, Nigel Taee
(Chairman of Scape) and Tom Ward (Global CEO of Scape) resigned as
directors of the Investment Manager. Tom Ward served as the
Company's lead portfolio manager in its early years following IPO.
The Directors thank Mr Ward for his substantial contribution to the
Company during that time. For the avoidance of doubt, neither Mr
Taee nor Mr Ward were involved in the provision of investment
management services to the Company immediately prior to their
resignations.
At 30 June 2020, the directors of the Investment Manager
indirectly owned a c.75% interest in Scape Student Living Limited.
As part of the separation of the businesses of the Investment
Manager and Scape, post year end a single director of the
Investment Manager holds an interest of approximately 6% in Scape
Student Limited.
Administration agreement
Link Alternative Fund Administrators Limited has been appointed
as the Administrator to the Company and its subsidiaries. It
provides the day--to-day administration services for these
entities. It is also responsible for the Company's general
administrative functions, such as the calculation and publication
of the NAV and maintenance of the Company's accounting and
statutory records. Under the terms of its administration agreement,
Link Alternative Fund Administrators Limited is entitled to an
administration fee of GBP150,000 per annum (exclusive of VAT). The
administration agreement is terminable upon six months' written
notice.
Company secretarial agreement
Link Company Matters Limited has been appointed by the Company
to provide company secretarial functions required by the Companies
Act 2006. The Secretary is entitled to a fee of GBP70,000 per annum
in respect of the Company and GBP2,000 per annum in respect of each
UK subsidiary. The company secretarial fees are subject to an
annual RPI increase. The secretarial agreement is terminable upon
six months' written notice.
Depositary agreement
Langham Hall UK Depositary LLP has been appointed as depositary
to the Company. The Depositary is responsible for ensuring the
safekeeping of custody assets and the non-custody assets of the
Company entrusted to it (held on trust for the Company as
applicable); the oversight and supervision of the Investment
Manager and the Company; and for ensuring the Company's cash flows
are properly monitored. Under the terms of the depositary
agreement, the Depositary is entitled to a fee of GBP51,000 per
annum, subject to an annual RPI increase. The depositary agreement
is terminable by either the Company and/or the Investment Manager
upon six months' written notice.
Accounting policy
All property operating expenses and administration expenses are
charged to the income statement and are accounted for on an
accruals basis.
6. Auditor's remuneration
30 June 2020 30 June 2019
GBP'000 GBP'000
--------------- ------------ ------------
Audit fee 180 159
Other services 20 9
--------------- ------------ ------------
Total 200 168
--------------- ------------ ------------
The Company reviews the scope and nature of all proposed
non-audit services before engagement, to ensure that the
independence and objectivity of the Auditor are safeguarded. Audit
fees are recognised within administration expenses in the statement
of comprehensive income and comprise the following:
30 June 2020 30 June 2019
GBP'000 GBP'000
---------------------------------------------------------------- ------------ ------------
Annual report and financial statements 60 26
Subsidiary financial statements for the year ended 30 June 2020 120 -
Subsidiary financial statements for the year ended 30 June 2019 - 116
Subsidiary financial statements for the year ended 30 June 2018 - 17
---------------------------------------------------------------- ------------ ------------
Total 180 159
---------------------------------------------------------------- ------------ ------------
For the year ended 30 June 2020, the Auditor provided non-audit
services, being the review of the half-yearly report and condensed
consolidated financial statements for a fee of GBP20,000 (2019:
GBP9,000).
30 June 2020 30 June 2019
GBP'000 GBP'000
------------------------------------------------------------------- ------------ ------------
Half-yearly report and condensed consolidated financial statements 20 9
------------------------------------------------------------------- ------------ ------------
Total 20 9
------------------------------------------------------------------- ------------ ------------
The audit and risk committee has considered the independence and
objectivity of the Auditor and has conducted a review of non-audit
services which the Auditor has provided during the year under
review. The audit and risk committee receives an annual assurance
from the Auditor that its independence is not compromised by the
provision of such non-audit services.
7. Taxation
Corporation tax has arisen as follows:
30 June 2020 30 June 2019
GBP'000 GBP'000
---------------------------------------------------- ------------ ------------
Corporation tax on residual income for current year - -
Corporation tax on residual income for prior periods - -
Total - -
---------------------------------------------------- ------------ ------------
Reconciliation of tax charge to profit before tax:
30 June 2020 30 June 2019
GBP'000 GBP'000
----------------------------------------- ------------ ------------
Profit before tax 48,578 92,786
Corporation tax at 19% (2019: 19%) 9,230 17,629
Change in value of investment properties (6,458) (14,034)
Change in value of financial assets 60 -
Tax exempt property rental business (4,381) (3,962)
Capital allowances (394) (541)
Excess management expenses 1,943 908
----------------------------------------- ------------ ------------
Total - -
----------------------------------------- ------------ ------------
The Group has unrelieved excess management expenses of
GBP23,355,000 (2019: GBP14,161,000) and a non-trade loan
relationship deficit of GBP2,218,000 (2019: GBP2,003,000). As it is
unlikely that the Group will generate sufficient taxable profits in
the future to utilise these amounts, therefore no deferred tax
asset has been recognised in respect of these items.
Accounting policy
Corporation tax is recognised in the income statement except
where in certain circumstances corporation tax may be recognised in
other comprehensive income.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt
with in equity.
As a REIT, the Group is exempt from corporation tax on the
profits and gains from its property rental business, provided it
continues to meet certain conditions as per REIT regulations.
Non-qualifying profits and gains of the Group (residual income)
continue to be subject to corporation tax. Therefore, current tax
is the expected tax payable on the non-qualifying taxable income
for the year if applicable, using tax rates enacted or
substantively enacted at the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
8. Dividends
30 June 2020 30 June 2019
-------------------------------- --------------------------------
Total Ordinary Total Ordinary
Dividend pence PID dividend GBP'000 pence PID dividend GBP'000
------------------- -------------- ------ ---- --------- ------- ------ ---- --------- -------
Current year
dividends
Fourth
interim
30 June 2020/2019 dividend(1) 1.42 1.26 0.16 - 1.56 1.08 0.48 -
Third interim
31 March 2020/2019 dividend 1.58 1.30 0.28 7,189 1.53 1.11 0.42 6,282
Second
31 December interim
2019/2018 dividend 1.58 1.30 0.28 7,189 1.53 1.22 0.31 6,282
30 September First interim
2019/2018 dividend 1.57 1.49 0.08 6,494 1.53 1.13 0.40 6,282
------------------- -------------- ------ ---- --------- ------- ------ ---- --------- -------
Total 6.15 5.35 0.80 20,872 6.15 4.54 1.61 18,846
----------------------------------- ------ ---- --------- ------- ------ ---- --------- -------
Prior year
dividends
Fourth
interim
30 June 2019/2018 dividend 1.56 1.08 0.48 6,453 1.51 0.94 0.57 5,814
------------------- -------------- ------ ---- --------- ------- ------ ---- --------- -------
Total 1.56 1.08 0.48 6,453 1.51 0.94 0.57 5,814
----------------------------------- ------ ---- --------- ------- ------ ---- --------- -------
Dividends in statement
of changes in equity 27,325 24,660
Movement in withholding
tax accrual (257) (87)
----------------------------------- ------ ---- --------- ------- ------ ---- --------- -------
Dividends in statement
of cash flows 27,068 24,573
----------------------------------- ------ ---- --------- ------- ------ ---- --------- -------
1. The fourth interim dividend was declared after the year end
and therefore is not accrued for as a provision in the financial
statements.
On 31 July 2020, the Company declared a fourth interim dividend
of 1.42 pence per ordinary share amounting to GBP6.5 million. The
dividend was paid on 14 September 2020 to shareholders on the
register at close of business on 14 August 2020.
As a REIT, the Company is required to pay PIDs equal to at least
90% of the property rental business profits of the Group.
Accounting policy
Dividends due to the Company's shareholders are recognised when
they become payable. For interim dividends this is when they are
paid.
Part 3. Asset management
This section includes information on the Company's investment
portfolio, valuation methodology and its performance over the year.
The Group's investment properties are valued at fair value as
determined by the external valuer in accordance with the RICS
Valuation Global Standards 2017 and IFRS 13.
9. Operating leases
Leases are typically direct let agreements with individual
students or HEIs for an academic year or shorter period. The Group
also has a small number of leases on commercial areas, teaching and
retail spaces and a number of nomination agreements whereby
multiple beds are let out for a set number of years. The Company
additionally has granted a 21-year lease over its Circus Street
asset.
In March 2020, in response to the Covid-19 pandemic and in
agreement with the Company, Scape accepted requests to forgo rent
on a case-by-case basis related to the final direct let instalment
due in April 2020, for residents seeking to return home for the
remainder of the current academic year.
Future minimum rentals receivable under non-cancellable
operating leases as at 30 June 2020 are as follows:
30 June 2020 30 June 2019
GBP'000 GBP'000
--------------------- ------------ ------------
Less than one year 35,697 46,731
One to two years 15,682 17,575
Two to three years 9,936 9,811
Three to four years 9,813 9,811
Four to five years 9,813 9,789
More than five years 66,598 77,222
--------------------- ------------ ------------
Total 147,539 170,939
--------------------- ------------ ------------
Accounting policy
When the Group acts as lessor, it determines at lease inception
whether each lease is a finance lease or an operating lease. To
classify each lease, the Group makes an overall assessment of
whether the lease transfers substantially all of the risk and
rewards incidental to ownership of the underlying asset. If this is
the case, then the lease is a finance lease; if not, then it is an
operating lease. The Group recognises lease payments received under
operating leases as income on a straight-line basis over the lease
term.
10. UK investment property
Properties
under
construction Leasehold Freehold Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------------------- ------------- --------- -------- ---------
Carrying value
at 1 July 2019 97,540 264,651 557,012 919,203
Capital expenditure
on properties - 27 136 163
Land and development expenditure on properties under construction 44,958 - - 44,958
Movement between properties under construction and leasehold properties (67,350) 67,350 - -
Fair value gains on investment properties(1) 6,334 4,899 22,671 33,904
Adjustment in respect of right-of-use asset recognised on first
application of IFRS 16(2) - 11,610 - 11,610
----------------------------------------------------------------------- ------------- --------- -------- ---------
Carrying value at 30 June 2020 81,482 348,537 579,819 1,009,838
----------------------------------------------------------------------- ------------- --------- -------- ---------
Right-of-use asset - (11,522) - (11,522)
Lease incentives - 2,514 - 2,514
----------------------------------------------------------------------- ------------- --------- -------- ---------
Fair value at 30 June 2020 81,482 339,529 579,819 1,000,830
----------------------------------------------------------------------- ------------- --------- -------- ---------
Carrying value at 1 July 2018 30,490 248,460 505,474 784,424
Capital expenditure on properties - 55 4,895 4,950
Land and development expenditure on properties under construction 55,964 - - 55,964
Fair value gains on investment property 11,086 16,136 46,643 73,865
----------------------------------------------------------------------- ------------- --------- -------- ---------
Carrying value at 30 June 2019 97,540 264,651 557,012 919,203
----------------------------------------------------------------------- ------------- --------- -------- ---------
Lease incentives - 2,399 - 2,399
----------------------------------------------------------------------- ------------- --------- -------- ---------
Fair value at 30 June 2019 97,540 267,050 557,012 921,602
----------------------------------------------------------------------- ------------- --------- -------- ---------
1. Included in fair value gains on investment properties is a
loss of GBP88,000 which relates to the adjustment in the year in
respect of the right-of-use asset.
2. IFRS 16 has been adopted for the first time this year; for
further information refer to note 2.1.
The Group continued construction of Scape Brighton and completed
construction of the student accommodation element of Circus Street
during the year. Refer to note 28 for details of construction costs
to complete on Scape Brighton.
Accounting policy
Investment property comprises property held to earn rental
income or for capital appreciation, or both. Investment property is
measured initially at cost including transaction costs. Transaction
costs include transfer taxes and professional fees to bring the
property to the condition necessary for it to be capable of
operating. The carrying amount also includes the cost of replacing
part of an existing investment property at the time that cost is
incurred if the recognition criteria are met.
Subsequent to initial recognition, investment property is stated
at fair value in accordance with IFRS 13. Gains or losses arising
from changes in the fair values are included in the income
statement in the period in which they arise under IAS 40 Investment
Property.
The determination of the fair value of investment property
requires the use of estimates such as future cash flows from assets
(from lettings and future revenue streams), capital values of
fixtures and fittings, plant and machinery, any environmental
matters and the overall repair and condition of the property and
discount rates applicable to those assets.
Gains or losses on the disposal of investment property are
determined as the difference between net disposal proceeds and the
carrying value of the asset.
Investment properties under construction are measured at fair
value if the fair value is considered to be reliably determinable.
Investment properties under construction for which the fair value
cannot be determined reliably, but for which the Company expects
that the fair value of the property will be reliably determinable
when construction is completed, are measured at cost less any
impairment until the fair value becomes reliably determinable or
construction is completed, whichever is earlier.
Licence fees (where income is receivable from a developer in
respect of a forward-funding agreement) are deducted from the cost
of investment properties and shown as a receivable until
settled.
11. EPRA NIY(1)
Calculated as the value of investment properties divided by
annualised net rents:
30 June 2020 30 June 2019
GBP'000 GBP'000
------------------------------------------------------ ------------ ------------
Investment properties 1,000,830 921,602
Less: investment property under construction (81,482) (97,540)
------------------------------------------------------ ------------ ------------
Operational property portfolio 919,348 824,062
Allowance for estimated purchasers' costs 54,769 25,207
------------------------------------------------------ ------------ ------------
Operational property portfolio plus purchasers' costs 974,117 849,269
------------------------------------------------------ ------------ ------------
Annualised cash passing rental income 50,713 45,675
Property operating costs (7,499) (7,159)
------------------------------------------------------ ------------ ------------
Annualised net rents 43,214 38,516
Topped-up net annualised rent 43,214 38,516
------------------------------------------------------ ------------ ------------
EPRA NIY(1) 4.44% 4.54%
EPRA topped-up NIY 4.44% 4.54%
------------------------------------------------------ ------------ ------------
Property-related capital expenditure analysis
30 June 2020 30 June 2019
GBP'000 GBP'000
------------------------------- ------------ ------------
Acquisitions 44,958 55,964
Subsequent capital expenditure 163 4,950
------------------------------- ------------ ------------
Total capital expenditure 45,121 60,914
------------------------------- ------------ ------------
Methodology/notes:
Acquisitions:
The cost of acquisition of land and capital expenditure in
respect of development properties.
Subsequent capital expenditure:
Capital expenditure post acquisition includes the costs of
refurbishment.
12. EPRA vacancy rate
The Company's buildings were fully occupied at the start of the
2019/20 academic year and remained the case until the restrictions
on global mobility and closure of academic institutions resulting
from the Covid-19 pandemic resulted in the majority of students
vacating their rooms. The Company's buildings were fully occupied
for the prior 2018/19 academic year.
13. Fair value
IFRS 13 defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The following methods and assumptions were used to estimate the
fair values.
The fair value of cash and short-term deposits, trade
receivables, trade payables and other current liabilities
approximate their carrying amounts due to the short--term
maturities of these instruments.
Interest-bearing loans and borrowings are disclosed at amortised
cost. The carrying value of the loans and borrowings approximate to
their fair value due to the contractual terms and conditions of the
loan.
Quarterly valuations of investment property are performed by
Knight Frank LLP, an accredited external valuer with recognised and
relevant professional qualifications and recent experience of the
location and category of the investment property being valued;
however, the valuations are the ultimate responsibility of the
Directors, who appraise these quarterly.
The Group's investment properties are held at fair value as
determined by the external valuer in accordance with the RICS
Valuation Global Standards 2017 and IFRS 13.
The determination of the fair value of investment property
requires the use of estimates such as future cash flows from assets
(such as lettings and future revenue streams), the capital values
of fixtures and fittings, plant and machinery, any environmental
matters and the overall repair and condition of the property and
discount rates applicable to those assets.
The following tables show an analysis of the fair values of
assets and liabilities recognised in the statement of financial
position by level of the fair value hierarchy(1) :
30 June 2020
----------------------------------------
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair value GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- -------- --------- ---------
Investment properties - - 1,000,830 1,000,830
Financial derivatives - (233) - (233)
---------------------------------------------- -------- -------- --------- ---------
Total - (233) 1,000,830 1,000,597
---------------------------------------------- -------- -------- --------- ---------
30 June 2019
----------------------------------------
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair value GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- -------- --------- ---------
Investment properties - - 921,602 921,602
---------------------------------------------- -------- -------- --------- ---------
Total - - 921,602 921,602
---------------------------------------------- -------- -------- --------- ---------
1. Explanation of the fair value hierarchy:
-- Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
-- Level 2 - use of a model with inputs (other than quoted
prices included in Level 1) that are directly or indirectly
observable market data; and
-- Level 3 - use of a model with inputs that are not based on observable market data.
There have been no transfers between levels during the
period.
Valuation techniques and significant inputs within the valuation
of investment properties
The following table analyses:
-- the fair value measurements at the end of the reporting period;
-- a description of the valuation techniques applied;
-- the inputs used in the fair value measurement, including the
ranges of rent charged to different units within the same building;
and
-- for Level 3 fair value measurements, quantitative information
about significant unobservable inputs used in the fair value
measurement.
Class Fair value Valuation technique Key unobservable Range
inputs
----------------- -------------- --------------------- ---------------------- ----------------------------
Operational GBP919,348,000 Income capitalisation ERV - 2019/20 GBP165 - GBP670
student property Rental growth per bed per week
30 June 2020 Tenancy period 2% - 3%
Sundry income 40/51 weeks
Facilities management GBP50 - GBP100
cost per bed per annum
Initial yield GBP2,150 - GBP2,550
per bed per annum
4.00% - 5.80% blended
(4.00% - 7.50%)
----------------- -------------- --------------------- ---------------------- ----------------------------
Development GBP81,482,000 RLV (less cost RLV GBP9,910,000 -
student property left to spend)/ Build cost left GBP72,670,000
30 June 2020 to spend GBP4,244,000 -
GBP12,281,000
----------------- -------------- --------------------- ---------------------- ----------------------------
Operational GBP824,062,000 Income capitalisation ERV - 2018/19 GBP165 - GBP651
student property Rental growth per bed per week
30 June 2019 Tenancy period 2% - 3%
Sundry income 40/51 weeks
Facilities management GBP50 - GBP100
cost per bed per annum
Initial yield GBP2,100 - GBP2,350
per bed per annum
4.10% - 5.80% blended
(4.10% - 7.50%)
----------------- -------------- --------------------- ---------------------- ----------------------------
Development GBP97,540,000 RLV (plus cost RLV GBP19,480,000 -GBP34,690,000
student property spend to date) Build cost spend GBP6,722,000 -
30 June 2019 to date GBP36,002,000
----------------- -------------- --------------------- ---------------------- ----------------------------
All gains and losses recorded in profit or loss for recurring
fair value measurements categorised within Level 3 of the fair
value hierarchy are attributable to changes in unrealised gains or
losses relating to investment property held at the end of the
reporting period.
The carrying amount of the Company's other assets and
liabilities is considered to approximate their fair value.
For the valuation of the properties as at 30 June 2020, the
valuer has included the following valuation considerations in their
report:
"The outbreak of the Novel Coronavirus (COVID-19), declared by
the World Health Organisation as a "Global Pandemic" on the 11th
March 2020, has impacted global financial markets. Travel
restrictions have been implemented by many countries. In the UK,
market activity is being impacted in all sectors. As at the
valuation date, we consider that we can attach less weight to
previous market evidence for comparison purposes, to inform
opinions of value. Indeed, the current response to COVID-19 means
that we are faced with an unprecedented set of circumstances on
which to base a judgement. Our valuation(s) is/are therefore
reported on the basis of 'material valuation uncertainty' per VPGA
10 of the RICS Valuation - Global Standards. Consequently, less
certainty - and a higher degree of caution - should be attached to
our valuation than would normally be the case. Given the unknown
future impact that COVID-19 might have on the real estate market,
we recommend that you keep the valuation of this property under
frequent review.
For the avoidance of doubt, the inclusion of the 'material
valuation uncertainty' declaration above does not mean that the
valuation cannot be relied upon. Rather, the phrase is used in
order to be clear and transparent with all parties, in a
professional manner that - in the current extraordinary
circumstances - less certainty can be attached to the valuation
than would otherwise be the case. The material uncertainty clause
is a disclosure, not a disclaimer."
Post year end, the Company has been notified that with effect
from 7 July 2020, its valuations will no longer be subject to this
qualification.
1. Alternative performance measure - see below for definitions
and calculation methodology.
14. Events after the reporting period
On 27 August 2020, the Company entered into a revised investment
management agreement with the Investment Manager. Details of the
revised fee and termination arrangements with the Investment
Manager are included in note 28. At the same date, the Group
entered into new property management agreements with the Property
Manager, Scape. Details of the new agreements with Scape are
included in note 5. The revised investment management agreement and
the new property management agreements are effective from 1 July
2020.
On 7 July 2020, the Company was informed by the Valuer that it
will be following the recommendation made by the RICS Material
Valuation Uncertainty Leaders Forum (UK) in relation to the
valuation managed student housing of institutional grade that a
material valuation uncertainty may no longer be appropriate for the
Group's properties and that its valuations will no longer be
subject to this qualification.
In the period since the year end, the Directors and Investment
Manager have continued to monitor the level of bookings at the
Group's properties in light of the Covid-19 pandemic. At the date
of the report, 68% of rooms across the Group's portfolio of student
accommodation, including in respect of Scape Brighton, have been
booked.
Part 4. Borrowings and equity
This section includes information on the Company's
interest-bearing loans and borrowings, leverage, capital position
and exposure to financial risk. The Group manages its capital
requirements through a combination of debt and equity.
15. Finance income
30 June
30 June 2020 2019
GBP'000 GBP'000
-------------------------------------------------- ------------ --------
Income from cash and short-term deposits 79 33
Income from interest-bearing loans and borrowings 14 1,055
-------------------------------------------------- ------------ --------
Total 93 1,088
-------------------------------------------------- ------------ --------
Accounting policy
Interest income is recognised on an effective interest rate
basis and shown within the income statement as financial
income.
16. Finance expenses
30 June
30 June 2020 2019
GBP'000 GBP'000
----------------------------------------------------- ------------ --------
Bank charges 13 8
Change in fair value of interest rate derivatives(1) 233 -
Commitment and other fees 863 676
Finance interest 172 -
Loan arrangement fees amortised 824 619
Loan interest 7,792 7,101
----------------------------------------------------- ------------ --------
Other - 1
----------------------------------------------------- ------------ --------
Total 9,897 8,405
----------------------------------------------------- ------------ --------
1. The Group has entered into an interest rate swap and cap in
order to seek to mitigate the risk of interest rate increases as
part of the Group's efficient portfolio management. Refer to note
17 for further details.
Accounting policy
Any finance costs that are separately identifiable and directly
attributable to a liability are amortised as part of the cost of
the liability. All other finance costs are expensed in the period
in which they occur. Finance costs consist of interest and other
costs that an entity incurs in connection with bank and other
borrowings. Fair value movements on derivatives are recorded in
finance expenses.
17. Interest --bearing loans and borrowings
30 June 2020 30 June 2019
GBP'000 GBP'000
----------------------------------------------------------- ------------ ------------
Borrowings at the start of the year 252,150 235,000
Borrowings drawn down in the year 57,790 34,620
Borrowings repaid in the year (28,220) (17,470)
----------------------------------------------------------- ------------ ------------
Borrowings at the end of the year 281,720 252,150
----------------------------------------------------------- ------------ ------------
Unamortised loan arrangement fees at the start of the year (3,039) (2,229)
Amortised during the year 824 619
Loan arrangement fees incurred during the year (49) (1,429)
----------------------------------------------------------- ------------ ------------
Unamortised loan arrangement fees at the end of the year (2,264) (3,039)
----------------------------------------------------------- ------------ ------------
Borrowings less unamortised loan arrangement fees 279,456 249,111
----------------------------------------------------------- ------------ ------------
At 30 June 2020, the Group had debt facilities of GBP335
million, comprising the following:
Fixed-rate secured facilities totalling GBP235 million with
PGIM:
Amount Facility Interest rate % Maturity Drawn
--------------- -------- --------------- --------------- --------------
GBP130,000,000 1 3.07 September 2024 GBP130,000,000
GBP40,000,000 1 2.83 September 2024 GBP40,000,000
GBP65,000,000 2 2.82 April 2029 GBP65,000,000
--------------- -------- --------------- --------------- --------------
Secured credit facilities totalling GBP100 million with Wells
Fargo:
Amount Facility Interest rate % Maturity Drawn
------------- -------------------------- --------------- ---------------------- -------------
GBP45,000,000 Redrawable credit facility LIBOR + 1.85% July 2021 GBP15,000,000
GBP55,000,000 Development loan LIBOR + 3.10% December 2021 + 1 year GBP31,720,000
------------- -------------------------- --------------- ---------------------- -------------
The Group has entered into interest rate hedging arrangements in
relation to the Wells Fargo development loan. The arrangements
expire on the maturity of the loan in December 2021. Under the
arrangements, the Group has entered into an interest rate cap of
1.75% and an interest rate swap of 0.676%, both with respect to
LIBOR. The notional amounts of the cap and swap each follow a
profile equal to 50% of the anticipated drawdown profile of the
loan.
The Group uses gearing to seek to enhance returns over the long
term and for the purpose of funding acquisitions in line with the
Company's investment policy. The level of gearing is governed by
careful consideration of the cost of borrowing.
The debt facilities include gearing and interest cover covenants
that are measured in accordance with the respective facility
agreement. The Group has maintained significant headroom against
all measures throughout the financial year and is in full
compliance with all loan covenants at 30 June 2020.
30 June 2020 30 June 2019
Reconciliation of financing liabilities GBP'000 GBP'000
----------------------------------------- ------------ ------------
Balance at the start of the year 249,111 232,771
Changes from cash flows
Borrowings drawn down 57,016 34,620
Borrowings repaid (28,220) (17,470)
Loan arrangement fees (49) (1,429)
Non-cash changes
Commitment and other fees capitalised 774 -
Amortisation of loan arrangement fees 824 619
----------------------------------------- ------------ ------------
Balance at the end of the year 279,456 249,111
----------------------------------------- ------------ ------------
30 June 2020
Reconciliation of lease liability GBP'000
------------------------------------------------------------------------------------------ ------------
Non-cash changes
------------------------------------------------------------------------------------------ ------------
Adjustment in respect of recognition of lease liability on first application of IFRS 16 11,610
Finance interest 172
Changes from cash flows
Repayment of leasing liability (174)
Balance at the end of the year 11,608
------------------------------------------------------------------------------------------ ------------
Leverage
For the purposes of the AIFMD, leverage is any method which
increases the Company's exposure, including the borrowing of cash
and the use of derivatives. It is expressed as a ratio between the
Company's exposure and its NAV and is calculated under the gross
and commitment methods, in accordance with AIFMD.
The Company is required to state its maximum and actual leverage
levels, calculated as prescribed by AIFMD. At 30 June 2020, the
figures are as follows:
Leverage exposure Maximum limit Actual exposure
------------------ -------------- ---------------
Gross method 155% 128%
Commitment method 155% 136%
------------------ -------------- ---------------
Accounting policy
Loans and borrowings are initially recognised as the proceeds
received net of directly attributable transaction costs. Loans and
borrowings are subsequently measured at amortised cost with
interest charged to the income statement at the effective interest
rate and shown within finance costs. Transaction costs are spread
over the term of loan.
18. Share capital
Number Share
of shares issue price GBP'000
----------------------------------- ----------- ----------- -------
Issued and fully paid:
Balance at 1 July 2018 385,064,556 3,851
Shares issued on 25 September 2018 25,512,151 149.50p 255
Shares issued on 4 June 2019 3,076,923 162.50p 31
----------------------------------- ----------- ----------- -------
Balance at 30 June 2019 413,653,630 4,137
Shares issued on 27 December 2019 41,365,400 186.00p 413
----------------------------------- ----------- ----------- -------
Balance at 30 June 2020 455,019,030 4,550
----------------------------------- ----------- ----------- -------
The share capital comprises one class of ordinary shares. At
general meetings of the Company, ordinary shareholders are entitled
to one vote on a show of hands and on a poll, to one vote for every
share held. There are no restrictions on the size of a shareholding
or the transfer of shares, except for the UK REIT restrictions.
19. Share premium
30 June 2020 30 June 2019
GBP'000 GBP'000
----------------------------------- ------------ ------------
At the start of the year 450,658 408,617
Shares issued on 25 September 2018 - 37,885
Shares issued on 4 June 2019 - 4,969
Shares issued on 27 December 2019 76,526 -
Share issue costs (1,436) (813)
----------------------------------- ------------ ------------
Balance at the end of the year 525,748 450,658
----------------------------------- ------------ ------------
20. Capital and reserves
Share capital
Share capital is the nominal amount of the Company's ordinary
shares in issue.
Share premium
Share premium relates to amounts subscribed for share capital in
excess of nominal value less associated issue costs of the
subscriptions.
Share premium comprises the following cumulative amounts:
30 June 2020 30 June 2019
GBP'000 GBP'000
--------------------------- ------------ ------------
Issued share capital 603,963 527,437
Share issue costs (10,857) (9,421)
Cancelled share premium(1) (67,358) (67,358)
--------------------------- ------------ ------------
Total 525,748 450,658
--------------------------- ------------ ------------
1. On 31 July 2013, the Company, by way of special resolution,
cancelled the value of its share premium account, by an Order of
the High Court of Justice, Chancery Division. As a result of this
cancellation, GBP67.4 million was transferred from share premium to
retained earnings in the financial period ended 30 June 2014.
Special reserve
The special reserve represents the cancelled share premium less
dividends paid from this reserve.
The special reserve comprises the following cumulative
amounts:
30 June 2020 30 June 2019
GBP'000 GBP'000
----------------------------- ------------ ------------
Cancelled share premium 67,358 67,358
Dividends paid from reserves (41,018) (28,599)
----------------------------- ------------ ------------
Total 26,340 38,759
----------------------------- ------------ ------------
Retained earnings
Retained earnings represent the profits of the Group less
dividends paid from revenue profits to date. Unrealised gains on
the revaluation of investment properties contained within this
reserve are not distributable until they crystallise upon sale of
the investment property.
Retained earnings comprise the following cumulative amounts:
30 June 2020 30 June 2019
GBP'000 GBP'000
------------------------------------------------ ------------ ------------
Total unrealised gains on investment properties 224,781 191,109
Total revenue profits 68,434 53,527
Dividends paid from revenue profits (68,434) (53,527)
------------------------------------------------ ------------ ------------
Total 224,781 191,109
------------------------------------------------ ------------ ------------
21. Capital management
The Group's capital is represented by share capital, reserves
and borrowings.
The primary objective of the Group's capital management is to
ensure that it remains within its quantitative banking covenants
and maintains a strong credit rating. No changes were made in the
objectives, policies or processes during the period.
The Group may use gearing to enhance returns over the long term.
The level of gearing will be governed by careful consideration of
the cost of borrowing and the Group may use hedging or otherwise
seek to mitigate the risk of interest rate increases. As at the
year end, the Group was operating with a loan-to-value of 22% (30
June 2019: 26%).
The debt facilities include gearing and interest cover covenants
that are measured in accordance with the respective facility
agreement. The Group has maintained significant headroom against
all measures throughout the financial year and is in full
compliance with all loan covenants at 30 June 2020.
22. Financial risk management objectives and policies
The Company's principal financial liabilities are long-term
loans and borrowings. The main purpose of the Company's loans and
borrowings is to finance the acquisition of the Company's property
portfolio. The Company has trade and other receivables, trade and
other payables, and cash and short-term deposits that arise
directly from its operations.
The Company is exposed to market risk, interest rate risk,
credit risk and liquidity risk. The Board of Directors reviews and
agrees policies for managing each of these risks, which are
summarised below.
Market risk
Market risk is the risk that the future values of investments in
property and related investments will fluctuate due to changes in
market prices. The total exposure at the statement of financial
position date is GBP1,000,830,000 and, to manage this risk, the
Group diversifies its portfolio across a number of assets.
The outbreak of the Covid-19 pandemic has impacted global
financial markets. Travel restrictions have been implemented by
many countries. In the UK, market activity is being impacted in all
sectors. Given the unknown future impact that Covid-19 might have
on the property market, the Directors intend to keep the valuation
of the property under frequent review.
The following sensitivity analysis has been prepared by the
valuer:
-3% change in +3% change in -0.25% change +0.25% change
rental income rental income in yield in yield
As at 30 June 2020 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------------- ------------- ------------- ------------- -------------
(Decrease)/increase in the fair value of the investment
properties (824,308) 877,061 (905,150) 803,380
---------------------------------------------------------- ------------- ------------- ------------- -------------
-3% change in +3% change in -0.25% change +0.25% change
rental income rental income in yield in yield
As at 30 June 2019 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------------- ------------- ------------- ------------- -------------
(Decrease)/increase in the fair value of the investment
properties (800,318) 848,630 (874,004) 781,024
---------------------------------------------------------- ------------- ------------- ------------- -------------
The key assumptions for the commercial properties are net
initial yields, current rent and rental growth. A movement of 3% in
passing rent and 0.25% in the net initial yield will not have a
material impact on the financial statements.
Sensitivity analysis to significant changes in unobservable
inputs within the valuation of investment properties
Significant increases/decreases in the ERV (per sq ft p.a.) and
rental growth p.a. in isolation would result in a significantly
higher/lower fair value measurement. Significant
increases/decreases in the long-term vacancy rate and discount rate
(and exit yield) in isolation would result in a significantly
lower/higher fair value measurement.
Generally, a change in the assumption made for the ERV (per sq
ft p.a.) is accompanied by:
_ a discretionary similar change in the rent growth p.a. and
discount rate (and exit yield); and
_ an opposite change in the long-term vacancy rate.
Gains and losses recorded in profit or loss for recurring fair
value measurements categorised within Level 3 of the fair value
hierarchy amount to GBP33,904,000 (2019: GBP73,865,000) and are
presented in the income statement in line item 'fair value gains on
investment properties'.
Market risk is also the risk that the fair values of financial
instruments will fluctuate because of changes in market prices.
Refer to the principal risks above where market risk is discussed
in more detail.
Interest rate risk
Interest rate risk is the risk that the future cash flows of a
financial instrument will fluctuate because of changes in market
interest rates. The Company's exposure to the risk of changes in
market interest rates is minimal as it has taken out the majority
of the debt as fixed rate bank loans of GBP170,000,000 with a
maturity of September 2024 and GBP65,000,000 with a maturity of
April 2029.
The Company also has a variable rate facility of up to
GBP100,000,000, of which GBP46,720,000 has been drawn down. The
Group has entered into interest rate hedging arrangements in
relation to this variable rate facility. The arrangements expire on
the maturity of the loan in December 2021.
Liquidity risk
Liquidity risk is defined as the risk that the Group will
encounter difficulty in meeting obligations associated with
financial liabilities that are settled by delivering cash or
another financial asset. Exposure to liquidity risk arises because
of the possibility that the Group could be required to pay its
liabilities earlier than expected. The Group's objective is to
maintain a balance between continuity of funding and flexibility
through the use of bank deposits and loans.
The table below summarises the maturity profile of the Group's
financial liabilities based on contractual undiscounted
payments:
Less Three
than three to twelve One to Two to More than
months months two years five years five years Total
Year ended 30 June 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ---------- ---------- ----------- ----------- --------
Interest-bearing loans and borrowings 2,102 6,237 54,211 186,634 71,900 321,084
Trade and other payables 8,003 1,063 - - - 9,066
Lease liability 86 256 332 937 9,997 11,608
Retention account - 308 - - - 308
-------------------------------------- ----------- ---------- ---------- ----------- ----------- --------
Total 10,191 7,864 54,543 187,571 81,897 342,066
-------------------------------------- ----------- ---------- ---------- ----------- ----------- --------
Less Three
than three to twelve One to Two to More than
months months two years five years five years Total
Year ended 30 June 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ---------- ---------- ----------- ----------- --------
Interest-bearing loans and borrowings 1,868 5,563 24,561 20,868 244,622 297,482
Trade and other payables 4,829 1,058 - - - 5,887
Retention account - - 308 - - 308
-------------------------------------- ----------- ---------- ---------- ----------- ----------- --------
Total 6,697 6,621 24,869 20,868 244,622 303,677
-------------------------------------- ----------- ---------- ---------- ----------- ----------- --------
Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk
from its leasing activities and its financing activities, including
deposits with banks and financial institutions.
Credit risk is managed by requiring tenants to pay rentals in
advance. The credit quality of the tenant is assessed at the time
of entering into a lease agreement. Outstanding tenants'
receivables are regularly monitored. The maximum exposure to credit
risk at the reporting date is the carrying value of each class of
financial asset.
The following table analyses the Group's exposure to credit
risk:
30 June 2020 30 June 2019
GBP'000 GBP'000
---------------------------- ------------ ------------
Retention account 308 308
Cash and cash equivalents 60,358 15,509
Trade and other receivables 14,216 14,023
---------------------------- ------------ ------------
Total 74,882 29,840
---------------------------- ------------ ------------
The retention account and cash and cash equivalents are held
with Barclays Bank PLC, which holds an A-1 credit rating, with the
exception of GBP22.5 million held with Landesbank-Thüringen
Girozentrale (Helaba) which holds an A-1 credit rating, GBP10
million held with Standard Chartered Bank which holds an A-1 credit
rating and GBP10 million Sumitomo Mitsu Banking Corp Europe which
also holds an A-1 credit rating. Ratings taken from S&P
Global.
Part 5. Working capital
This section includes information on the Company's cash reserves
and working capital management, including trade receivables and
payables.
23. Cash and cash equivalents
30 June 2020 30 June 2019
GBP'000 GBP'000
------------------------------------- ------------ ------------
Cash and cash equivalents 56,011 4,987
Subsidiary cash and cash equivalents 4,347 10,522
------------------------------------- ------------ ------------
Total 60,358 15,509
------------------------------------- ------------ ------------
Accounting policy
Cash and cash equivalents comprise cash at bank and short--term
deposits with banks and other financial institutions, with an
initial maturity of three months or less.
24. Trade and other receivables
30 June 2020 30 June 2019
GBP'000 GBP'000
---------------------------- ------------ ------------
Prepayments 941 820
Rent receivable 1,777 1,543
Cash held by rental agents 3,479 2,530
Licence fees 3,614 2,924
Lease incentives 2,514 2,399
Receivables from developers 4,427 3,631
Other receivables 919 747
---------------------------- ------------ ------------
Total 17,671 14,594
---------------------------- ------------ ------------
Accounting policy
Trade and other receivables are recognised initially at fair
value and subsequently carried at amortised cost less provision for
impairment. Where the time value of money is material, receivables
are carried at amortised cost using the effective interest method.
Impairment provisions are recognised based on the expected credit
loss model detailed within IFRS 9.
The Group recognises a loss allowance for expected credit losses
on trade and other receivables where necessary. The loss allowance
is based on lifetime expected credit losses. The amount of expected
credit losses is updated at each reporting date to reflect changes
in credit risk since initial recognition. The expected credit
losses on these financial assets are estimated based on the Group's
historical credit loss experience, adjusted for factors that are
specific to the debtors, general economic conditions and an
assessment of both the current as well as the forecast direction of
conditions at the reporting date. Impaired balances are reported
net, however impairment provisions are recorded within a separate
provision account with the loss being recognised within
administration costs within the consolidated statement of
comprehensive income. On confirmation that the trade receivable
will not be collectable, the gross carrying value of the asset is
written off against the associated provision. The expected credit
losses on rent receivables as well as other receivables for the
year ended 30 June 2020 were not material.
Licence fees represent income receivable from a developer in
respect of a forward-funding agreement which is deducted from the
cost of investment and shown as a receivable until settled.
25. Payables and accrued expenses
30 June 2020 30 June 2019
GBP'000 GBP'000
---------------------------- ------------ ------------
Property operating expenses 744 1,032
Finance expenses 1,002 936
Other expenses 7,320 3,919
---------------------------- ------------ ------------
Trade and other payables 9,066 5,887
---------------------------- ------------ ------------
Deferred income 6,085 12,293
Total 15,151 18,180
---------------------------- ------------ ------------
Accounting policy
Trade and other payables are initially recognised at fair value
and subsequently held at amortised cost.
Deferred income is rental income received in advance during the
accounting period. The income is deferred and is unwound to revenue
on a straight--line basis over the period in which it is
earned.
Part 6. Staff and key management
The following detail wages and salaries of the employees of the
Group.
26. Directors' remuneration
30 June 2020 30 June 2019
GBP'000 GBP'000
Robert Peto 50 48
Gillian Day 39 38
Peter Dunscombe(1) - 13
David Hunter(2) 39 6
Malcolm Naish 39 38
Marlene Wood 45 43
------------------- ------------ ------------
Total 212 186
------------------- ------------ ------------
1. Retired as a Director of the Company on 6 November 2018.
2. Appointed as a Director of the Company on 1 May 2019.
A summary of the Directors' emoluments, including the
disclosures required by the Companies Act 2006, is set out in the
Directors' remuneration report in the full Annual Report.
27. Staff costs
30 June 2020 30 June 2019
GBP'000 GBP'000
--------------- ------------ ------------
Salaries 3,187 3,163
Other benefits 68 95
--------------- ------------ ------------
Total 3,255 3,258
--------------- ------------ ------------
With the exception of the Directors, whose remuneration is shown
in the Directors' remuneration report and policy in the full Annual
Report, the Group employed 112 (2019: 124) members of staff, with
an average of 123 (2019: 117) employees during the year.
The Group operates a defined contributions pension scheme for 79
(2019: 83) of its employees. The costs for the year ended 30 June
2020 totalled GBP49,000 (30 June 2019: GBP40,000).
28. Related party transactions
Directors
The Directors (all non-executive Directors) of the Company and
subsidiaries are considered to be the key management personnel of
the Group. Directors' remuneration for the year totalled GBP212,000
(2019: GBP186,000) and at 30 June 2020, a balance of GBPnil (2019:
GBPnil) was outstanding. Further information is given in note 26.
The Directors of the Company are also the directors of all
subsidiaries apart from GCP Operations Limited where the directors
are representatives from the Investment Manager and the Property
Manager Scape who are not considered key management personnel of
the Group.
Investment management arrangements
Investment Manager
The Company is party to an investment management agreement with
the Investment Manager, pursuant to which the Company has appointed
the Investment Manager to provide investment management services
relating to the respective assets on a day-to-day basis in
accordance with the Company's investment objective and policy,
subject to the overall supervision and direction of the Board of
Directors.
For the financial year ended 30 June 2020, the Investment
Manager was entitled to receive a management fee at an annual rate
of 1% of the prevailing NAV of the Group, payable quarterly in
arrears. From its investment management fee, the Investment Manager
was responsible for the payment of annual property management fees
of up to 0.25% of the Group's NAV that is attributable to its
operational assets. For the twelve-month period ended 30 June 2020,
the investment management fee earned by the Investment Manager, net
of payments made by it in respect of property management fees, was
0.82% of the Group's average NAV over that period.
As announced on 27 August 2020, the Company entered into revised
investment management arrangements with the Investment Manager. The
amended fee arrangements, which are payable quarterly in arrears
based on the prevailing NAV of the Group, came into effect on 1
July 2020, as set out below.
Revised investment Previous investment
management fee from management fee to
NAV 1 July 2020 (annualised) 30 June 2019 (annualised)
---------------------------------------------- ------------------------ -------------------------
Up to GBP950 million 0.7500% 1.00%
Above GBP950 million and up to GBP1.5 billion 0.6375% 1.00%
Above GBP1.5 billion 0.5625% 1.00%
---------------------------------------------- ------------------------ -------------------------
Pursuant to the revised investment management agreement, the
Group is responsible for the payment of all property management
fees incurred by it. Further details of the Company's property
management agreements are set out in note 5.
The revised investment management agreement between the Company
and the Investment Manager can be terminated by the Company or the
Investment Manager at any time with not less than 24 months'
written notice to the other party. If the investment management
agreement is terminated by the Company or the Investment Manager on
24 months' notice in the event of certain change of control events
relating to the Company, the investment management fees payable in
such circumstances will be based on the prevailing published NAV at
the time immediately preceding the change of control.
The Investment Manager is also appointed as the Company's AIFM
and receives an annual fee of GBP25,000, subject to an annual RPI
increase.
During the year, the Group incurred GBP7,548,000 (30 June 2019:
GBP6,582,000) in respect of investment management fees, the AIFM
fee, and marketing and investor introduction services. A total of
GBP7,467,000 (30 June 2019: GBP6,455,000) is included within
administration expenses in the consolidated statement of
comprehensive income and GBP81,000 (30 June 2019: GBP127,000) is
included within the share issue costs relating to shares issued
during the year; at 30 June 2020, GBP1,949,000 (30 June 2019:
GBP1,707,000) was outstanding.
Transactions with persons connected to the Investment
Manager
The following transactions are disclosed for the purpose of
transparency and are not related party transactions under IAS
24.
The Group is party to a contract with Scaperfield Limited to
acquire and forward-fund the construction of Scape Brighton, which
has been ongoing during the year. At 30 June 2020 estimated
construction costs to complete were GBP12,281,000. The directors of
the Investment Manager and their family members, directly or
indirectly, owned in aggregate approximately 80% of Scaperfield
Limited during the year, post year end this reduced to 30%.
The Company benefits from a conditional forward purchase
agreement with Kernel Court Limited to acquire a high
specification, purpose-built, private student accommodation
residence in the same locality as its Scape Surrey asset in
Guildford. The directors of the Investment Manager and their family
members, directly or indirectly, owned in aggregate approximately
40% of Kernel Court Limited during the year, post year end this
reduced to 16%.
Each of the above assets has been or will be acquired, as
appropriate, on the basis of an independent valuation and approval
by the independent Board of Directors.
Part 7. Company subsidiaries
This section includes information on the subsidiaries of the
Company and inter--company transactions. All subsidiaries are
consolidated from the date on which the Company obtained control of
the entity.
29. Subsidiaries
The financial statements comprise the financial statements of
the Company and its subsidiaries listed below.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtained control,
and will continue to be consolidated until the date when such
control ceases. The financial statements of the subsidiaries are
prepared for the same reporting period as the Parent Company, using
consistent accounting policies. All intra-group balances,
transactions, unrealised gains and losses resulting from
intra-group transactions and distributions are eliminated in full.
The Company has a 100% beneficial interest (whether directly or
indirectly) in the issued share capital of all subsidiaries.
Profit after
Place of Number and Capital and tax for the
registration, class of shares reserves at year ended
incorporation held by 30 June 2020 30 June 2020
Company and operation the Group Group holding GBP'000 GBP'000
--------------------------- --------------- --------------------------- ------------- ------------- -------------
GCP Bloomsbury Limited
(1,2) UK 16 ordinary shares 100% 104,584 8,445
GCP Brighton Limited(2) UK 4 ordinary shares 100% 48,575 5,108
1,046,728,191 ordinary
GCP Brunswick Limited(1,2) UK shares 100% 15,356 14
GCP Holdco Limited(1,2) UK 5 ordinary shares 100% 403,215 18,764
GCP Holdco 2 Limited(1,2) UK 22 ordinary shares 100% 149,103 10,068
GCP Holdco 3 Limited(1,2) UK 22 ordinary shares 100% 144,017 36,449
GCP Makerfield Limited(1,2) UK 22 ordinary shares 100% 45,438 2,549
GCP Operations Limited(2) UK 2 ordinary shares 100% 143 (7)
GCP QMUL Limited(2) UK 4 ordinary shares 100% (542) (3,089)
GCP RHUL Limited(1,2) UK 4 ordinary shares 100% 19,608 (255)
GCP RHUL 2 Limited(1,2) UK 4 ordinary shares 100% 17,722 (1,453)
GCP Scape East Limited
(1,2) UK 51,508,283 ordinary shares 100% 127,188 9,543
GCP SG Limited (1,2) UK 4 ordinary shares 100% 29,367 (167)
GCP Surrey 2 Limited(1,2) UK 2 ordinary shares 100% (19) (19)
GCP Topco Limited(2) UK 3 ordinary shares 100% 403,204 18,801
GCP Topco 2 Limited(2) UK 22 ordinary shares 100% 149,062 10,055
GCP WL Limited(1,2) UK 3 ordinary shares 100% 24,125 203
GCP Wembley Limited(2) UK 12 ordinary shares 100% 94,865 7,785
GCP Wembley 2 Limited(1,2) UK 2 ordinary shares 100% 413 11
GCP Greenwich Limited(1,3) Guernsey 102 ordinary shares 100% 43,075 3,902
GCP Greenwich 2
Limited(1,3) Guernsey 102 ordinary shares 100% 900 (483)
GCP Greenwich JV
Limited(1,3) Guernsey 103 ordinary shares 100% 69,455 3,937
GCP Old Street Limited
(1,3) Guernsey 100 ordinary shares 100% 146,621 7,015
GCP Old Street 2
Limited(1,3) Guernsey 100 ordinary shares 100% 232 (1,284)
GCP Old Street Acquisitions
Limited(1,3) Guernsey 450 A ordinary shares 100% 146,420 295
550 B ordinary shares
----------------------------------------------------------------------- ------------- ------------- -------------
1. Indirect subsidiaries.
2. Registered office: Beaufort House, 51 New North Road, Exeter EX4 4EP.
3. Registered office: Hirzel House, Smith Street, St Peter Port,
Guernsey GY1 2NG. On 1 July 2019 the Group's Guernsey registered
companies became UK tax resident by virtue of their central
management and control being located in the UK.
Accounting policy
Where property is acquired, via corporate acquisition or
otherwise, management considers the substance of the assets and
activities of the acquired entity in determining whether the
acquisition represents the acquisition of a business.
Where such acquisitions are not judged to be an acquisition of a
business, they are not treated as business combinations. Rather,
the cost to acquire the corporate entity is allocated between the
identifiable assets and liabilities of the entity based on their
relative fair values at the acquisition date. Accordingly, no
goodwill or additional deferred taxation arises. Otherwise,
acquisitions are accounted for as business combinations.
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, measured at acquisition date fair
value, and the amount of any non-controlling interest in the
acquiree.
For each business combination, the acquirer measures the
non-controlling interest in the acquiree at fair value of the
proportionate share of the acquiree's identifiable net assets.
Acquisition costs (except for costs of issue of debt or equity) are
expensed in accordance with IFRS 3 Business Combinations.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition
date.
Contingent consideration is deemed to be equity or a liability
in accordance with IAS 32. If the contingent consideration is
classified as equity, it is not re--measured and its subsequent
settlement shall be accounted for within equity. If the contingent
consideration is classified as a liability, subsequent changes to
the fair value are recognised in profit or loss.
Business combinations are accounted for using the acquisition
method.
30. Ultimate controlling party
It is the view of the Directors that there is no ultimate
controlling party.
COMPANY STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
Notes 30 June 2020 30 June 2019
GBP'000 GBP'000
----------------------------------- ----- ------------ ------------
Assets
Non-current assets
Investment in subsidiary companies 3 744,440 689,760
----------------------------------- ----- ------------ ------------
744,440 689,760
----------------------------------- ----- ------------ ------------
Current assets
Cash and cash equivalents 4 56,011 4,987
Trade and other receivables 5 71,884 68,233
----------------------------------- ----- ------------ ------------
127,895 73,220
----------------------------------- ----- ------------ ------------
Total assets 872,335 762,980
----------------------------------- ----- ------------ ------------
Liabilities
Current liabilities
Trade and other payables 6 (90,916) (78,317)
----------------------------------- ----- ------------ ------------
Total liabilities (90,916) (78,317)
----------------------------------- ----- ------------ ------------
Net assets 781,419 684,663
----------------------------------- ----- ------------ ------------
Equity
Share capital 4,550 4,137
Share premium 525,748 450,658
Special reserve 26,340 38,759
Retained earnings 224,781 191,109
----------------------------------- ----- ------------ ------------
Total equity 781,419 684,663
----------------------------------- ----- ------------ ------------
Number of shares in issue 455,019,030 413,653,630
NAV per share (pence per share) 171.73 165.52
----------------------------------- ----- ------------ ------------
The total comprehensive income of the Company for the year was
GBP48,578,000 (30 June 2019: GBP92,786,000).
The financial statements were approved by the Board of Directors
of GCP Student Living plc on 16 September 2020 and signed on its
behalf by:
Robert Peto
Chairman
Company number: 08420243
The accompanying notes below form an integral part of these
Company financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
Share Share Special Retained
capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- ------- ------- -------- -------- --------
Balance at 1 July 2019 4,137 450,658 38,759 191,109 684,663
----------------------------------------------- ------- ------- -------- -------- --------
Total comprehensive income 48,578 48,578
Ordinary shares issued 413 76,526 - - 76,939
Share issue costs - (1,436) - - (1,436)
Dividends paid in respect of the previous year - - (2,344) (4,109) (6,453)
Dividends paid in respect of the current year - - (10,075) (10,797) (20,872)
----------------------------------------------- ------- ------- -------- -------- --------
Balance at 30 June 2020 4,550 525,748 26,340 224,781 781,419
----------------------------------------------- ------- ------- -------- -------- --------
Company statement of changes in equity
For the year ended 30 June 2019
Share Share Special Retained
capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- ------- -------- ------------- -------- --------
Balance at 1 July 2018 3,851 408,617 44,497 117,245 574,210
----------------------------------------------- ------- -------- ------------- -------- --------
Total comprehensive income - - - 92,786 92,786
Ordinary shares issued 286 42,854 - - 43,140
Share issue costs - (813) - - (813)
Dividends paid in respect of the previous year - - (2,508) (3,306) (5,814)
Dividends paid in respect of the current year - - (3,230) (15,616) (18,846)
----------------------------------------------- ------- -------- ------------- -------- --------
Balance at 30 June 2019 4,137 450,658 38,759 191,109 684,663
----------------------------------------------- ------- -------- ------------- -------- --------
The accompanying notes below form an integral part of these
Company financial statements.
COMPANY STATEMENT OF CASH FLOWS
For the year ended 30 June 2020
30 June 30 June
2020 2019
Notes GBP'000 GBP'000
---------------------------------------------------------------- ----- -------- --------
Cash flows from operating activities
Operating profit 48,509 92,776
Adjustments to reconcile profit for the year to net cash flows:
Gains from change in fair value of subsidiary companies (47,226) (88,922)
Dividends received from subsidiary companies (6,823) (8,701)
Net recharges from subsidiary companies (4,002) (3,412)
Increase in other receivables and prepayments (121) (64)
Increase in other payables and accrued expenses 378 224
---------------------------------------------------------------- ----- -------- --------
Net cash flow used in operating activities (9,285) (8,099)
---------------------------------------------------------------- ----- -------- --------
Cash flows from investing activities
Acquisition of subsidiaries 3 - (22,399)
Net cash received from/(paid to) subsidiary companies 11,805 (1,549)
---------------------------------------------------------------- ----- -------- --------
Net cash generated from/(used in) investing activities 11,805 (23,948)
---------------------------------------------------------------- ----- -------- --------
Cash flows from financing activities
Proceeds from issue of ordinary share capital 76,939 43,140
Share issue costs (1,436) (813)
Finance income 76 29
Finance expenses (7) (4)
Dividends paid in the year (27,068) (24,573)
---------------------------------------------------------------- ----- -------- --------
Net cash flow generated from financing activities 48,504 17,779
---------------------------------------------------------------- ----- -------- --------
Net increase/(decrease) in cash and cash equivalents 51,024 (14,268)
Cash and cash equivalents at start of the year 4,987 19,255
---------------------------------------------------------------- ----- -------- --------
Cash and cash equivalents at end of the year 4 56,011 4,987
---------------------------------------------------------------- ----- -------- --------
Non-cash items
Transfer of GCP Wembley Limited to GCP Holdco 3 Limited - (93,408)
Investment in GCP Holdco 3 Limited - 93,408
---------------------------------------------------------------- ----- -------- --------
The accompanying notes below form an integral part of these
Company financial statements.
NOTES TO THE COmpany FINANCIAL STATEMENTS
For the year ended 30 June 2020
1. General information
GCP Student Living plc is a REIT incorporated in England and
Wales on 26 February 2013. The registered office of the Company is
located at 51 New North Road, Exeter EX4 4EP. The Company's shares
are listed on the Premium Segment of the Main Market of the London
Stock Exchange.
2. Basis of preparation
These financial statements are prepared in accordance with IFRS
issued by the IASB as adopted by the EU. The financial statements
have been prepared under the historical cost convention, except for
investments in subsidiaries that have been measured at fair value.
The audited financial statements are presented in Pound Sterling
and all values are rounded to the nearest thousand pounds
(GBP'000), except when otherwise indicated.
These financial statements are for the year ended 30 June 2020.
Comparative figures are for the previous accounting period, the
year ended 30 June 2019.
The Company has taken advantage of the exemption in section 408
of the Companies Act 2006 not to present its own income statement
or statement of comprehensive income.
The financial statements of the Company follow the accounting
policies laid out above.
3. Investment in subsidiary companies
30 June 2020 30 June 2019
GBP'000 GBP'000
------------------------------------------------------------ ------------ ------------
At the beginning of the year 689,760 578,439
Investment in subsidiary companies 7,853 22,399
------------------------------------------------------------ ------------ ------------
Total 697,613 600,838
Fair value gains on the revaluation of subsidiary companies 46,827 88,922
------------------------------------------------------------ ------------ ------------
Total 744,440 689,760
------------------------------------------------------------ ------------ ------------
30 June 2020 30 June 2019
Investment in and transfers of subsidiary companies GBP'000 GBP'000
------------------------------------------------------------ ------------ ------------
Investments in subsidiary companies
GCP Topco 2 Limited 4,322 -
GCP Holdco 3 Limited 3,531 115,807
------------------------------------------------------------ ------------ ------------
Total 7,853 115,807
------------------------------------------------------------ ------------ ------------
Cash items included in cash flow
GCP Holdco 3 Limited - 22,399
------------------------------------------------------------ ------------ ------------
Total - 22,399
------------------------------------------------------------ ------------ ------------
Cash items included in the statement of cash flows comprise
share purchases in the above entities.
Accounting policy
Investments in subsidiary companies which are all 100% owned by
the Company are valued at NAV, which is equivalent to fair
value.
Changes in fair value of investments and gains on the sale of
investments are recognised as they arise in the Company statement
of comprehensive income.
4. Cash and cash equivalents
30 June 2020 30 June 2019
GBP'000 GBP'000
-------------------------- ------------ ------------
Cash and cash equivalents 56,011 4,987
-------------------------- ------------ ------------
Total 56,011 4,987
-------------------------- ------------ ------------
Accounting policy
Cash and cash equivalents comprise cash at bank and short--term
deposits with banks and other financial institutions, with an
initial maturity of three months or less.
5. Other receivables
30 June 2020 30 June 2019
GBP'000 GBP'000
Amounts due from subsidiary companies 71,658 68,128
Prepayments and other receivables 226 105
-------------------------------------- ------------ ------------
Total 71,884 68,233
-------------------------------------- ------------ ------------
6. Other payables and accrued expenses
30 June 2020 30 June 2019
GBP'000 GBP'000
------------------------------------ ------------ ------------
Amounts due to subsidiary companies 87,916 75,953
Other expenses payable 3,000 2,364
------------------------------------ ------------ ------------
Total 90,916 78,317
------------------------------------ ------------ ------------
7. Fair value
IFRS 13 defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The following methods and assumptions were used to estimate the
fair values.
The fair value of cash and short--term deposits, trade
receivables, trade payables and other current liabilities
approximate their carrying amounts due to the short--term
maturities of these instruments.
The valuation of subsidiaries is based on NAV. The NAVs of the
subsidiaries are based on fair values of the assets held by the
subsidiary; see note 13 to the consolidated financial statements
for details of underlying asset fair values. The valuations are the
ultimate responsibility of the Directors, who appraise these
quarterly.
The following tables show an analysis of the fair values of
financial instruments recognised in the statement of financial
position by level of the fair value hierarchy(1) :
30 June 2020 Level 1 Level 2 Level 3 Total
Assets measured at fair value GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ------- ------- ------- --------
Investment in subsidiaries - - 744,440 744,440
------------------------------ ------- ------- ------- --------
Total - - 744,440 744,440
------------------------------ ------- ------- ------- --------
30 June 2019 Level 1 Level 2 Level 3 Total
------------------------------ ------- ------- ------- --------
Assets measured at fair value GBP'000 GBP'000 GBP'000 GBP'000
Investment in subsidiaries - - 689,760 689,760
------------------------------ ------- ------- ------- --------
Total - - 689,760 689,760
------------------------------ ------- ------- ------- --------
1. Explanation of the fair value hierarchy:
-- Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
-- Level 2 - use of a model with inputs (other than quoted
prices included in Level 1) that are directly or indirectly
observable market data; and
-- Level 3 - use of a model with inputs that are not based on observable market data.
8. Related party transactions
The tables below disclose the transactions and balances between
the Company and subsidiary entities:
30 June 2020 30 June 2019
Transactions GBP'000 GBP'000
------------------------------------- ------------ ------------
Recharges of fund level expenses to:
GCP Bloomsbury Limited 744 703
GCP Brighton Limited 297 190
GCP Brunswick Limited 4 4
GCP Greenwich 2 Limited 243 230
GCP Holdco Limited 5 5
GCP Holdco 2 Limited 5 5
GCP Holdco 3 Limited 5 9
GCP Makerfield Limited 249 53
GCP Old Street 2 Limited 818 780
GCP Operations Limited 8 10
GCP QMUL Limited 8 8
GCP RHUL Limited 140 138
GCP RHUL 2 Limited 127 125
GCP Scape East Limited 630 570
GCP SG Limited 115 111
GCP Surrey 2 Limited 9 -
GCP Topco Limited 5 5
GCP Topco 2 Limited 5 5
GCP Wembley 2 Limited 407 375
GCP WL Limited 93 88
------------------------------------- ------------ ------------
Total 3,917 3,414
------------------------------------- ------------ ------------
30 June 30 June
2020 2019
Balances GBP'000 GBP'000
------------------------------------------- -------- --------
Other intercompany balances due (to)/from:
GCP Brighton Limited 30,921 18,794
GCP Holdco 3 Limited (8,050) (5,533)
GCP Makerfield Limited - 4,808
GCP Operations Limited (156) (142)
GCP QMUL Limited 534 98
GCP RHUL 2 Limited - 21
GCP Surrey 2 Limited 120 68
GCP Topco Limited (72,741) (65,861)
GCP Topco 2 Limited 33,031 44,339
GCP Wembley Limited - (2,047)
GCP Wembley 2 Limited 83 (1,443)
GCP WL Limited - (927)
------------------------------------------- -------- --------
Total (16,258) (7,825)
------------------------------------------- -------- --------
Shareholder Information
Key dates
September Annual results announced
Payment of fourth interim dividend
November Annual general meeting
December Company's half--year end
Payment of first interim dividend
March Half--yearly results announced
Payment of second interim dividend
June Company's year end
Payment of third interim dividend
--------- ----------------------------------
Frequency of NAV publication
The Company's NAV is released via RNS to the London Stock
Exchange on a quarterly basis and is published on the Company's
website.
Sources of further information
Copies of the Company's annual and half-yearly reports, stock
exchange announcements and further information on the Company can
be obtained from the Company's website:
www.gcpstudent.com.
Warning to users of this report
This report is intended solely for the information of the person
to whom it is provided by the Company, the Investment Manager or
the Administrator. This report is not intended as an offer or
solicitation for the purchase of shares in the Company and should
not be relied on by any person for the purpose of accounting, legal
or tax advice or for making an investment decision. The payment of
dividends and the repayment of capital are not guaranteed by the
Company. Any forecast, projection or target is indicative only and
not guaranteed in any way, and any opinions expressed in this
report are not statements of fact and are subject to change, and
neither the Company nor the Investment Manager is under any
obligation to update such opinions.
Past performance is not a reliable indicator of future
performance, and investors may not get back the original amount
invested. Unless otherwise stated, the sources for all information
contained in this report are the Investment Manager and the
Administrator. Information contained in this report is believed to
be accurate at the date of publication, but none of the Company,
the Investment Manager and the Administrator gives any
representation or warranty as to the report's accuracy or
completeness. This report does not contain and is not to be taken
as containing any financial product advice or financial product
recommendation. None of the Company, the Investment Manager and the
Administrator accepts any liability whatsoever for any loss
(whether direct or indirect) arising from any use of this report or
its contents.
Electronic communications from the Company
Shareholders now have the opportunity to be notified by email
when the Company's annual reports, half-yearly reports and other
formal communications are available on the Company's website,
instead of receiving printed copies by post. This has environmental
benefits in the reduction of paper, printing, energy and water
usage, as well as reducing costs to the Company. If you have not
already elected to receive electronic communications from the
Company and wish to do so, visit www.signalshares.com. To register,
you will need your investor code, which can be found on your share
certificate or your dividend tax voucher.
Alternatively, you can contact Link's Customer Support Centre,
which is available to answer any queries you have in relation to
your shareholding:
By phone: from the UK, call 0871 664 0300; from overseas call
+44 (0) 371 664 0300 (calls cost 12 pence per minute plus your
phone company's access charge. Calls outside the UK will be charged
at the applicable international rate. Link is open between 09:00 -
17:30, Monday to Friday excluding public holidays in England and
Wales).
By email: enquiries@linkgroup.co.uk
By post: Link Group, The Registry, 34 Beckenham Road, Beckenham,
Kent BR3 4TU.
Annual general meeting
The Company's annual general meeting will be held on Wednesday,
4 November 2020. The notice of this meeting will be circulated to
shareholders in due course and will be separate to the annual
report. The notice will also be uploaded to the Company's website
www.gcpstudent.com in due course.
National Storage Mechanism
A copy of the annual report and financial statements will be
submitted shortly to the National Storage Mechanism ("NSM") and
will be available for inspection at the NSM, which is situated at
https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism.
ALTERNATIVE PERFORMANCE MEASURES
The Board and the Investment Manager assess the Company's
performance using a variety of measures that are not defined under
IFRS and are therefore classed as alternative performance measures
("APMs"). Where possible, reconciliations to IFRS are presented
from the APMs to the most appropriate measure prepared in
accordance with IFRS. All items listed below are IFRS financial
statement line items unless otherwise stated. APMs should be read
in conjunction with the consolidated statement of comprehensive
income, consolidated statement of financial position and
consolidated statement of cash flows, which are presented in the
financial statements section of this report. The APMs below may not
be directly comparable with measures used by other companies.
Adjusted EPS
EPS adjusted for non-recurring transactions and licence fees
receivable on forward-funded developments (refer to note 3).
Annualised total shareholder return since IPO
Total shareholder return(1) expressed as a weighted annual
percentage. Calculated with reference to the IPO issue price of 100
pence per ordinary share.
Source: Bloomberg
Blended NIY
Net initial yield of the operational portfolio as determined by
the Company's valuer.
Dividend cover ratio
Total dividends per share divided by adjusted EPS, expressed as
a percentage (refer to note 3).
EPRA cost ratio
Ratio of overheads and operating expenses against gross rental
income. Net overheads and operating expenses relate to all
administrative and operating expenses net of any service fees,
recharges or other income specifically intended to cover overhead
and property expenses (refer to note 3).
EPRA EPS
Recurring earnings from core operational activities excluding
movements relating to revaluation of investment properties and
interest rate swaps and the related tax effects, divided by the
number of shares in issue (refer to note 3).
EPRA NAV
Net assets divided by number of shares. Includes all property at
market value but excludes the mark to market of interest rate swaps
(refer to note 16).
EPRA NIY
Annualised rental income based on the cash rents passing at the
balance sheet date, less non--recoverable property operating
expenses, divided by the market value of the property, increased
with (estimated) purchasers' costs (refer to note 11).
EPRA triple net asset value (EPRA NNNAV)
EPRA NAV(1) including adjustments for the fair value of
financial instruments, the fair value of debt and deferred taxes
(refer to note 3).
Loan-to-value or LTV
A measure of borrowings used by property investment companies
calculated as borrowings, net of cash, as a proportion of property
value.
As at As at
30 June 30 June
2020 2019
Loan-to-value GBP'000 GBP'000
------------------------------------- ---------- ---------
Interest-bearing loans and borrowing 281,720 252,150
Cash and cash equivalents (60,358) (15,509)
------------------------------------- ---------- ---------
221,362 236,641
Investment property 1,009,838 919,203
------------------------------------- ---------- ---------
Loan-to-value 22% 26%
------------------------------------- ---------- ---------
NAV total return
A measure showing how the NAV per share has performed over a
period of time, taking into account both capital returns and
dividends paid to shareholders, expressed as a percentage. It
assumes that dividends paid to shareholders are reinvested at NAV
at the time the shares are quoted ex-dividend. This is a standard
performance metric across the investment industry and allows
comparability across the sector.
Source: Bloomberg
Net operating margin
Gross profit expressed as a percentage of rental income.
Ongoing charges
Ongoing charges (previously total expense ratios or TERs) is a
measure of the annual percentage reduction in shareholder returns
as a result of recurring operational expenses assuming markets
remain static and the portfolio is not traded.
30 June 30 June
Ongoing charges 2020 2019
--------------------------- -------- --------
Investment management fees 7,467 6,455
Directors' fees 212 186
Administration expenses 2,182 2,167
--------------------------- -------- --------
Total expenses 9,861 8,808
Non-recurring expenses (50) (204)
--------------------------- -------- --------
Total expenses 9,811 8,604
Average NAV 765,132 656,171
Ongoing charges ratio 1.28% 1.31%
--------------------------- -------- --------
Student rental growth
Annual increase in direct let rental rates, expressed as a
percentage.
Total shareholder return
A measure of the performance of a Company's shares over time. It
combines share price movements and dividends to show the total
return to the shareholder expressed as a percentage. It assumes
that dividends are reinvested in the shares at the time the shares
are quoted ex dividend. This is a standard performance metric
across the investment industry and allows comparability across the
sector.
Source Bloomberg
1. Refer to relevant APM.
Glossary
Adjusted EPS
Refer to APMs above
AIC
Association of Investment Companies
AIC Code
AIC Code of Corporate Governance, as published in February
2019
AIFM
Alternative Investment Fund Manager
AIFMD
Alternative Investment Fund Managers Directive
Annualised total shareholder return since IPO
Refer to APMs above
APM
Alternative performance measure
BAFE
British Approvals for Fire Equipment (UK)
Blended NIY
Refer to APMs above
CIL
Community Infrastructure Levy
City
City, University of London
CMA Order
Competition and Markets Authority Order
Collegiate
Collegiate AC Limited - Property Manager for Water Lane
Apartments, Bristol
Company or GCP Student
GCP Student Living plc
Cost of borrowing
Cost of borrowing expressed as a percentage weighted according
to period drawn down (refer to notes 16 and 17)
CTA
Corporation Tax Act 2010
Dividend cover ratio
Refer to APMs above
EPRA
European Public Real Estate Association
EPRA cost ratio
Refer to APMs above
EPRA EPS
Refer to APMs above
EPRA NAV
Refer to APMs above
EPRA NAV per share (cum-income)
Net asset value before deduction of proposed dividend
EPRA NAV per share (ex-income)
Net asset value after deduction of proposed dividend
EPRA NIY
Refer to APMs above
EPRA triple net asset value (EPRA NNNAV)
Refer to APMs above
EPS
Earnings per share (refer to note 3)
ERV
Estimated rental value (refer above)
ESG
Environmental, social, governance
EU
European Union
FCA
Financial Conduct Authority
FPPP
Financial Position and Prospects Procedures
FRC
Financial Reporting Council
FRI leases
Full repairing and insuring leases
Full occupancy
Full occupancy is determined as occupancy across the Company's
operational portfolio of properties being no less than 97%. This is
consistent with terminology used across the private purpose--built
student accommodation market and the methodology applied by the
Company since its IPO in 2013
GHG
Greenhouse gas
GOSH
Great Ormond Street Hospital
GRESB
Global Real Estate Sustainability Benchmark
Group
GCP Student Living plc and its subsidiaries
H&S
Health and safety
HEI
Higher education institution
IASB
International Accounting Standards Board
IFRS
International Financial Reporting Standards
INTO
INTO University Partnerships
IPO
Initial public offering
KCL
King's College London
LIBOR
London interbank offered rate
Loan-to-value or LTV
Refer to APMs above
LSE
London School of Economics
MAR
Market Abuse Regulation
MSCI ESG Rating
ESG ratings provided by MSCI Inc.
NAV
Net asset value (refer to note 3)
NAV total return
Refer to APMs above
Net operating margin
Gross profit expressed as a percentage of rental income
NIY
Net initial yield
Non--PID
Non--property income distribution
OECD
Organisation for Economic Co-operation and Development
Ongoing charges ratio
Refer to APMs above
PBSA
Purpose-built student accommodation
PGIM
PGIM Real Estate Finance
PID
Property income distribution
PPS
Pence per share
QMUL
Queen Mary University of London
RCF
Redrawable credit facility
REIT
Real estate investment trust
RHUL
Royal Holloway, University of London
RICS
Royal Institution of Chartered Surveyors
RLV
Residual land value
RPI
Retail price index
RNS
Regulatory news service
Scape
Scape Student Living Limited or Scape Student Limited - Property
Manager for Scape Shoreditch, Scape Mile End, Scape Greenwich,
Scape Guildford, Scape Wembley, Scape Bloomsbury, Podium, Scape
Brighton, Circus Street, Brighton and The Pad
SOAS
School of Oriental and African Studies
Student rental growth
Refer to APMs above
Total shareholder return
Refer to APMs above
UAL
University of the Arts London
UCAS
Universities and Colleges Admissions Service
UCH
University College Hospital
UCL
University College, London
UK Code
UK Code of Corporate Governance, as published in 2018
END
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END
FR KKABQFBKDCCD
(END) Dow Jones Newswires
September 17, 2020 02:00 ET (06:00 GMT)
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