TIDMESP
RNS Number : 4866S
Empiric Student Property PLC
17 March 2021
17 March 2021
Empiric Student Property plc
("Empiric" or the "Company" or, together with its subsidiaries,
the "Group")
FULL YEAR RESULTS FOR THE 12 MONTHSED 31 DECEMBER 2020
Despite the pandemic disruption, 2020 was still a year of
delivery and Empiric is well placed to drive future performance and
improve returns for shareholders
Empiric Student Property plc (ticker: ESP), the owner and
operator of premium student accommodation across the UK, today
reports its annual results for the 12 months ended 31 December
2020.
Duncan Garrood, Chief Executive Officer of Empiric Student
Property plc, said:
"As we entered 2020, we were making good progress against our
medium-term objectives, creating an in-house operating platform,
growing revenue, reducing costs, and increasing our operating
margin and dividend cover. The pandemic clearly brought challenges,
but we reacted quickly to support our customers and brand
reputation.
We recognise that these are particularly challenging times for
all students, and we remain committed to supporting and doing the
right thing by each student on a case-by-case basis. Protecting and
supporting our customers, colleagues and other stakeholders whilst
underpinning the value of our assets, preserving sufficient
liquidity, and protecting the long-term value of the Group for
shareholders will continue to guide our actions.
The Group has remained resilient and is well placed to benefit
from opportunities when the market recovers, and our underlying
business outlook is positive with customer demand set to grow. Our
Hello Student(R) brand proposition, especially in a COVID-19
affected world, gives us a competitive advantage with predominately
self-contained studio apartments, and a friendly supportive service
focused on student well-being. There is still more to be done to
maximise the benefits of our operating model and we remain
intensely focused on delivering further value for all our
stakeholders.
On 31 March 2020, due to uncertainty created by COVID-19, the
Group announced a number of actions to strengthen further its cash
position. This included the Board's decision, whilst remaining
mindful of its REIT tax obligations, to suspend dividend
distributions until market conditions stabilised. The Board
recognises the importance of the dividend to shareholders and will
seek to resume dividends at an appropriate level as soon as there
is sufficient clarity of outlook."
Financial performance
-- Revenue in 2020 was GBP59.4 million, down 16% from GBP70.9
million in 2019. The decrease was due to three key factors:
o GBP6.5 million of refunds were provided to students for the
period from April to September 2020, as we released students from
their obligations on a case-by-case basis. We consider this action
also supports shareholders as this helps protect our brand.
o Expected summer lets in 2020 of around GBP700,000 were lost
due to the pandemic.
o At the start of the 2020/21 academic year, we reported revenue
occupancy rates of 70%, compared to 94% in 2019/20. This meant that
the final four months of the 2020 financial year had significantly
reduced occupancy compared to 2019.
o The underlying performance was robust, and our like for like
rental growth would have been 3.1%, excluding the COVID-19 refunds
for academic year 2019/20.
o At this point, for the current academic year 2020/21 like for
like rental growth is 1.8%.
-- The business remained cash generative, with Adjusted Earnings
of GBP13.9 million (2019: GBP26.7 million).
-- Adjusted EPS is the most relevant measure of earnings when
assessing dividend distributions. It decreased by 48% to 2.30 pence
(2019: 4.43 pence), showing that the underlying operating business
continues to generate cash despite the impact of the pandemic.
-- Property costs were GBP22.7 million, down 3% both in total
and on a per bed basis, as we cut discretionary costs and delayed
expenditure where appropriate and continued to make efficiency
improvements while also continuing to see the benefit of the
operational transformation.
-- Due to the COVID-19 pandemic reducing our occupancy levels,
council tax has been suffered on our empty rooms which has reduced
the cost savings we have made. If we exclude the impact of this
increased council tax bill during the year, our average cost per
bed fell by over 6%.
-- The impact on revenue and property costs above produced a
gross margin for the year of 61.9% (2019: 67.1%).
-- Administration expenses were GBP9.8 million in 2020, lower
than our initial guidance of GBP10 million (2019: GBP9.1
million).
-- The net loss from a change in the fair value of investment
properties during the year was GBP37.6 million (2019: GBP29.2
million gain), due to the following components.
o At our half year in August 2020, we reported a GBP42 million
deduction in the portfolio valuation due to CBRE's assumption of
50% occupancy for the following 15 months. At the year-end, CBRE
have revised this assumption to 60% occupancy for the following
nine months, reducing the GBP42 million deduction to GBP21 million
for the full year.
o GBP9 million of the decrease is in the valuation of
operational assets over the year for two reasons:
-- There has been a polarisation in the valuation of prime vs.
secondary assets which has resulted in a slight softening of the
portfolio's Net Initial Yield from 5.55% to 5.61%.
-- A reduction in Net Operating Income projections on secondary
assets.
o GBP6 million of the decrease is on the value of our commercial
portfolio, reflecting yields moving out.
o GBP2 million of the decrease is on our development assets,
reflecting extended timetables on our development assets, which
were put on hold for a period due to the pandemic.
-- The overall result is a loss before tax of GBP24.0 million
(2019: profit GBP54.8 million). No corporation tax was charged, as
the Group fulfilled all of its obligations as a UK Real Estate
Investment Trust ("REIT").
-- Basic loss per share ("EPS") was therefore (3.97) pence and
also (3.97) pence on a diluted basis (2019: earnings 9.08 pence and
9.07 pence diluted).
-- Total dividends of 1.25 pence per share for 2020 (2019: 5.0 pence per share).
-- At 31 December 2020, the portfolio was valued at GBP1,005
million, a decrease of 2% from prior year (31 December 2019:
GBP1,029 million), due to the fall in fair value of investment
properties detailed above, and GBP13 million spent on capital
expenditure and developments during the year.
-- As at 31 December 2020, we owned or were committed to owning
95 assets, representing 9,396 beds (31 December 2019: 95 assets,
9,401 beds). Of these, 91 were revenue-generating assets, with
8,887 beds (31 December 2019: 93 assets, with 8,830 beds).
-- The EPRA Net Tangible Asset value ("NTA") per share as at 31
December 2020 was 105.00 pence, (31 December 2019: 110.21 pence,
prior to adjusting for the 2019 fourth quarter dividend of 1.25
pence per share). The NTA is net of dividends paid during the
year.
-- At the year end, we had committed investment debt facilities
of GBP420 million, of which GBP390 million (31 December 2019:
GBP355 million) had been drawn down, resulting in an LTV of 35.4%*
(31 December 2019: 32.9%), in line with our long-term target of 35%
and below our stated maximum of 40%. The aggregate cost of our
investment debt is 2.9%, with a weighted average term to maturity
of 5.9 years at 31 December 2020. We fully complied with all of our
banking covenants during the period and continue to do so.
-- We have no re-financing requirements until November 2022 and
have taken measures to preserve liquidity. The relationship with
our lending banks is strong and we have also agreed waivers or an
easing of covenant requirements on all of our debt, leaving us well
placed to trade through until the market recovers and then maximise
the value from our business to our shareholders and wider
stakeholders.
Operational performance
-- We were in good shape as we began 2020. We had completed the
majority of our insourcing journey and were seeing the benefits
through improved financial performance from our more robust
operating model.
-- Our underlying business (excluding the valuation impact on
our portfolio) continued to trade profitably during 2020.
-- 2020 was, however, a challenging year due to the COVID-19
pandemic, but the changes we have implemented over the past few
years, and in this year, have ensured a more resilient business
model.
o As a responsible owner and operator of predominantly
direct-let, premium UK student accommodation, we implemented
actions to ensure that we operated safely throughout the pandemic,
continuing to provide COVID-19 secure homes, critical services, and
enhanced programmes to ensure the safety and well-being of our
students and colleagues.
o We experienced physical occupancy levels of above 50% during
each of the three national lockdowns.
o During the year, we conducted a comprehensive review of the
operational team structure, and as a result moved to a more optimal
structure, which enables us to improve customer service
delivery.
o In November 2020, we successfully launched our new revenue
management system and all bookings for the academic year 2021/22
are now managed in-house.
-- The COVID-19 pandemic has affected our ability to optimise
the impact of our operational changes, in particular our asset
disposal programme, and our ability to deliver a stable dividend to
our shareholders.
-- Whilst uncertainty remains, we are confident the changes made
to our operations and the commitment of our staff will enable us to
manage successfully through the COVID-19 challenges and put us in a
strong position to drive sustainable shareholder value in the
future.
Post Period End
-- The Group supported its students throughout 2020 and remains
committed to supporting students who have been further impacted by
the UK Government's latest COVID-19 lockdown and associated
restrictions. We continue to look favourably upon requests on a
case-by-case basis from students seeking to amend their rent and
lease obligations for the current semester if they are unable to
occupy their rooms at this time. The rating we achieved in the
recent National Student Housing Survey was significantly ahead of
the average for the sector, which indicates that our students have
appreciated this flexibility and unprecedented level of
support.
-- We also remain committed to supporting residents who
currently occupy their rooms at the Group's properties. Our
accommodation is a person's home and often residents do not have
alternative accommodation. This is particularly important for
international students who comprise around 60% of Hello Student's
residents for the current academic year 2020/21. All our buildings
remain open, staffed, maintained, and operating strictly in line
with Government guidance and we are ensuring that our residents,
colleagues, business partners and the communities in which we
operate remain safe and secure, and their well-being remains a key
priority.
-- Following further progress with the late checking-in of
students and adjusting for the support we have provided to students
since January 2021 as a result of the current national lockdown,
revenue occupancy remains at 65% currently, which includes 2% of
students still to check-in now or at a later date in the academic
year. The collection of rents remains in line with our usual
collection profile and the physical occupancy level in our
buildings is currently approximately 57% of total operational
rooms.
-- Current bookings for the 21/22 academic year are 20%,
significantly slower than in pre Covid-19 cycles, although we have
started to see an uplift in bookings since the Government's recent
announcement of the roadmap to exit lockdown.
-- Universities are very late in advising places for the 2021/22
academic year and we expect the sales cycle to be significantly
back ended. We welcome the vaccination programme, and this gives us
cautious optimism about a return to increasingly normal levels of
occupancy. UCAS applications for the 2021/22 academic year are also
encouraging, with the non-EU international market up by 17%
overall, and within this, Chinese applications are up by 21%. UK
applications are also showing strong demand growth reflecting an
increase of 11% so far.
-- The Group recently completed on the sale of three properties
in Portsmouth for GBP7.4 million, above the latest book value as at
31 December 2020.
Notes
* Total drawn borrowings, net of cash and fixed term deposits,
as a percentage of Gross Asset Value.
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Empiric Student Property plc (via Maitland/AMO below)
Duncan Garrood (Chief Executive Officer)
Lynne Fennah (Chief Financial & Operating
Officer)
Jefferies International Limited 020 7029 8000
Stuart Klein
Tom Yeadon
RBC Europe Limited (trading as RBC Capital
Markets) 020 7653 4000
Charlie Foster
Marcus Jackson
Maitland/AMO (Communications Adviser) 07747 113 930
James Benjamin empiric-maitland@maitland.co.uk
The Company's LEI is 213800FPF38IBPRFPU87.
Further information on Empiric can be found on the Company's
website at www.empiric.co.uk .
Notes:
Empiric Student Property plc is a leading provider and operator
of modern, predominantly direct-let, premium student accommodation
located in high-demand university towns and cities across the UK.
Investing in both operating and development assets, Empiric is a
fully integrated operational student property business focused on
premium studio-led accommodation managed through its Hello
Student(R) operating platform, that is attractive to affluent
growing student segments.
The Company, an internally managed real estate investment trust
("REIT") incorporated in England and Wales, listed on the premium
listing segment of the Official List of the Financial Conduct
Authority and was admitted to trading on the main market for listed
securities of the London Stock Exchange in June 2014.
Results Presentation
The Company presentation for investors and analysts will take
place via a webcast and conference call at 8.30am on the day .
This Company presentation is available from 7am today via the
Company website:
http://www.empiric.co.uk/investor-information/company-documents
For those who wish to access the live webcast, please register
here:
https://www.investis-live.com/empiric/603e5228dd22a114007da96d/wlww
For those who wish to access the live conference call, please
contact Maitland/AMO at
empiric-maitland@maitland.co.uk or by telephone on +44 (0) 20 7379 5151.
The recording of the webcast/conference call will also be made
available later in the day via the Company
website: http://www.empiric.co.uk/investor-information/company-documents
Annual Report
Hard copies of the Annual Report and Accounts will be sent to
shareholders, along with the proxy form and notice for Annual
General Meeting to be held on 25 May 2021. These documents will
also be made available on the Company's website at
www.empiric.co.uk . In accordance with Listing Rule 9.6.1, copies
of these documents will be submitted to the National Storage
Mechanism and will be available for viewing shortly at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
STRATEGIC REPORT
Chairman's Statement
Sustainable long term growth delivery
"Our people have shown tireless commitment and skill in
addressing the challenges posed by the COVID-19 pandemic. We kept
all of our properties open and appropriately staffed, whilst
continuing to serve our customers in a safe, secure environment. We
remain committed to supporting and doing the right thing by each
student on a case-by-case basis."
As we entered 2020 we were making good progress against our
medium-term objectives; creating an in-house operating platform,
growing revenue, reducing costs, and increasing our operating
margin and dividend cover.
H owever, since March 2020, we have, like many others, faced
challenges on an unprecedented scale as a result of the COVID-19
pandemic which has caused significant disruption to our business
and had a substantial impact on our financial performance.
Nevertheless, we remain well positioned to continue to respond
effectively to the challenge today and into the future.
Our People
Our continued progress is only possible because of the
dedication and ability of all of our people. I would like to thank
everyone in our business for their contribution over the past
year.
The views of our people are extremely important because they are
at the heart of our customer proposition and core to us living our
brand. We carried out two colleague engagement surveys in 2020.
Response rates were over 70% and engagement scores were in excess
of 80%. Comments provided by survey respondents helped the business
and Board to understand what needs to be done to make Empiric a
great place to work.
Our Colleague Forum, formed of colleagues across the Group, met
ten times during the year to discuss a variety of topics.
Health and Safety
Having insourced our FM activities, we now have complete control
of our health and safety environment. We continue to enhance our
monitoring and make our buildings as safe as possible.
Environmental, Social and Governance ("ESG")
Having spent the past two and a half years restructuring the
business, insourcing, and building a responsible and effective
operating platform, we are now in a position to reflect on: how we
perform as stewards of the environment, how we meet our social
obligations to employees, suppliers, customers and the communities
in which we operate to deliver a more resilient, sustainable and
responsible business and create further value to our
stakeholders.
At the core of our proposition is a commitment to create a
sustainable, positive, environmental, social and economic legacy
for our shareholders, customers, colleagues and wider
stakeholders.
During 2020 we created a Board-level ESG committee, which will
meet quarterly, tasked with providing a roadmap to deliver a
significant step change in our approach to ESG which is a strategic
priority for the next 12 months. This will further help us to
confirm and disclose the actual and potential impacts of
ESG-related risks and opportunities that are material to our
business, strategy, and financial planning.
Board Appointments and Succession
On 18 March 2020 we announced that Tim Attlee would be stepping
down from his role as Chief Executive Officer of the Company at the
end of June 2020. Tim co-founded and helped float Empiric in 2014.
As the Company's Chief Investment Officer, Tim led the Company's
asset acquisition and development programme.
On 26 June, after a rigorous selection process, we appointed
Duncan Garrood as our new Chief Executive. Duncan is an experienced
and proven business leader with excellent business development and
operational capabilities in PLCs and large privately- owned
businesses in the UK and overseas. He has strong operational, sales
and marketing skills, and extensive experience in commercial
businesses with significant real estate assets. Duncan joined
Empiric on 28 September 2020.
The Board effectiveness review concluded that the Board and its
Committees continued to operate effectively throughout 2020.
Dividends
On 17 February 2020, the Board declared a dividend of 1.25 pence
per ordinary share in respect of the quarter ended 31 December
2019, which was paid on 20 March 2020.
On 31 March 2020, due to uncertainty created by COVID -19, the
Group announced a number of actions to strengthen further its cash
position. This included the Board's decision, whilst remaining
mindful of its REIT tax obligations, to suspend all future dividend
distributions until market conditions stabilised.
The Board is mindful of the importance of the dividend to many
shareholders and will seek to resume dividends at an appropriate
level as soon as there is sufficient clarity of outlook. For this,
we would need to see more commitment in the approach of
universities to face-to-face teaching and a significant improvement
in occupation and rental income.
AGM
Our 2020 AGM will be held on 25 May 2021. We are monitoring
developments in UK regulations in relation to how AGMs may be held
during this period. Further details about the AGM will be provided
in the AGM Notice.
Looking Forward
The operational transformation of the business is largely
complete, and we are now embedding and driving sustainable
performance from our new operating model. There is still more to be
done to deliver the performance we are capable of and we remain
focused intensely on delivering for all our stakeholders.
At the time of writing, we are facing the challenges being posed
by the COVID-19 pandemic. We remain vigilant and are closely
monitoring the situation and will provide updates as appropriate.
Protecting and supporting our customers, colleagues and other
stakeholders whilst underpinning the value of our assets for
shareholders will continue to guide our actions over the coming
months.
MARK PAIN
Non-Executive Chairman
16 March 2021
Handling the COVID-19 crisis
Our response to the COVID-19 pandemic has been underpinned by
three key priorities: keeping our people, customers and communities
safe, maintaining critical services for our customers while
supporting their wellbeing and protecting value for our
shareholders.
Our Senior Leadership Team has shown tireless commitment and
skill in responsibly addressing the challenges posed by the
COVID-19 pandemic. We kept all of our properties open, COVID-19
secure and appropriately staffed, serving our customers in a safe,
secure environment.
Colleague Engagement Score
83%
(2019: 75%)
At a Glance
Our top priority remains the health, safety and welfare of our
residents, employees and wider stakeholders. We recognise that
these are particularly challenging times for all students, and we
remain committed to supporting and doing the right thing by each
student on a case-by-case basis, whilst also protecting the
long-term value of the Group
Empiric offers students places where they want to live. Our
properties are some of the best in the market and our people get to
know our students well, so we provide a more responsible and
responsive service. This approach - combined with the smaller size
and individual character of our buildings - helps to foster a
strong sense of community, encouraging students to stay with us in
future years. In short, we offer our students homes, not halls.
Beds contracted by region
Scotland 1,167 North East 261
North West 1,457 Yorkshire 1,041
West Midlands Wales 519
1,866
South West 1,556 South East 1,529
Revenue Generating Assets 91 (2019 - 92)
Cities and Towns 29 ( 2019 - 29)
Assets Contracted 95 ( 2019 - 95)
Beds Contracted 9,396 ( 2019 - 9,401)
Group Key Stats
324 Employees
6 Years in operation
86% of portfolio by value considered prime real estate or
better
Responding to COVID-19
Keeping our People, Customers and Communities Safe
- Reporting tool to monitor the safety of our people and customers
- Regular communication
- Updated HR policies
- Strong IT infrastructure which easily facilitated working-from-home
Maintaining Critical Services for our Customers
- PPE, safety infrastructure and new procedures introduced
- Refund programme launched
- Virtual tours
- New pledges, such as the "Book with confidence" scheme
Protecting and Driving Value for Shareholders
- Non-essential cost cutting
- Reducing capital commitments
- Liquidity improvements
- Maintaining close relationships with our banks
- Detailed scenario planning and modelling
COVID-19 Impact timeline 2020
February
- Audit Committee and Board discussed COVID-19 as a risk to the
business and the adequacy of disclosures in the Annual Report.
March
- Announced various cost saving and capital preservation measures across the business.
- Revised procedures to ensure that social distancing is maintained.
- Announced our refund programme.
April
- Commencement of furlough for c100 colleagues; the Board took
the decision to fund this directly and not take government
support.
May
- We commenced virtual viewings, allowing prospective students
to see our offering remotely.
June
- All furloughed colleagues returned to work in COVID-19 secure
locations around the country.
July
- We raised an additional GBP20 million of debt on our RCF
facility with Lloyds Bank to ensure we had sufficient working
capital to weather even our worst case scenario planning.
August
- We achieved significant cost savings, due to the high number
of vacant rooms allowing our in-house staff to clean and turn
around rooms for the upcoming academic year rather than using
external contractors.
September
- Check-ins for the new academic year began, students booked
slots for paperless check ins, which were done so we limited the
number of touch points.
October
- Due to the staggered return of students, our check-in period spread well into October.
November
- Launch of Hello Student(R) Live Festival, which was a series
of live events and activities ranging from yoga to baking
tutorials.
December
- We launched our student wellbeing helpline with our insurance provider.
The resilience in our in-house operational model
The pandemic has proved that the decision to turn Hello
Student(R) into a responsible in-house operational model was the
correct one. The agility which we had to be able to change
processes, look after staff and increase safety would not have been
possible had we still been using third-party operators to run our
buildings. This resilience will continue to stand us in good stead
as we go into a challenging 2021.
Differentiated customer proposition well suited to COVID-19
environment
The average size of our buildings is circa 100 beds, and in 83%
of our rooms people can self-isolate effectively. This smaller size
of building with self-contained studios means that our buildings
are more aligned with a socially distanced world and there is much
less footfall going through them compared to some other larger
buildings.
Protecting and creating long term sustainable value
Throughout the pandemic there were a number of challenging
decisions that had to be made. When making decisions the impact on
our stakeholders was carefully considered in the short and long
term at each juncture. We always seek to act in the best interests
of our stakeholders.
"As we weather the challenges that have arisen as a result of
COVID-19, we continue to trade profitably and remain very confident
about our long-term future, to deliver enhanced sustainable value
for all of our stakeholders."
Our Market
Attractive, stable and compelling
Growing Maturity
Despite being considered an alternative investment, PBSA is
cementing itself as a mature real estate asset class, with the
potential to generate significant income and be resilient even in
periods of economic downturn. As reported by CBRE's 2020 Student
Accommodation Index, PBSA was the best performing asset class in
the year to September 2020. Looking forward, Savills's five-year
forecast released in January 2021 had PBSA as the third best
performing sector.
These strong returns are also associated with lower volatility,
meaning the sector has produced risk-adjusted returns roughly three
times as high as the mainstream market. Like all sectors, PBSA has
been affected by the COVID -19 pandemic with capital values falling
0.4% in the year to September 2020, its only fall in the past
decade. However, PBSA saw one of the smallest decline in capital
values when compared with other sectors and still saw rental growth
of 1.6% in the year to September 2020, the fifth consecutive year
of outperformance against the mainstream market. Only Industrial
saw higher rental growth in 2020 (at 2.0%) while both Office and
Retail saw rental values fall (2.2% and 8.1% respectively).
CBRE's 2020 Index also highlighted an increasingly clear
polarisation in the PBSA market with London and Super Prime
Regional assets outperforming Prime Regional and Secondary assets.
In the year to September 2020, assets in London and Super Prime
Regional locations experienced positive capital growth, while
assets in Secondary markets saw capital values fall 9.9%. This is
also mirrored with rental growth where in the same period, Super
Prime markets saw a 2.8% rise in net rental growth and Prime
Regional saw a 1.7% rental growth, whereas Secondary markets saw
net rents fall 2.3%. The Empiric portfolio is well aligned to the
high-growth locations with 86% by value classified as either
London, Super Prime Regional or Prime Regional.
Positive Student Demographics
In UCAS's End of Cycle Report 2020, positive demand statistics
for the 2020 admissions cycle were reported. The data indicates
that 728,780 students applied to higher education ("HE") providers
in the UK in 2020, up by 22,345 students (+3.2%) on 2019.
Applications from non-EU domiciled students rose 12.2% to 98,660,
significantly offsetting the small fall in applications from EU
domiciled students.
Overall student acceptances reflected stronger growth with
29,235 extra students (+5.4%) which included EU students increasing
by 1.7% and non-EU domiciled students by 7,615 (+16.9%),
highlighting the continued appeal of HE providers in the UK for
overseas students, despite short-term restrictions on international
mobility. Notably, UCAS report 24% and 35% year on year increases
in applicants from China and India respectively with also
significant demand from the USA.
The UK's International Education Strategy continues to secure
the country's position in the global HE sector and support
graduates with a generous post-study work visa system.
Student Demographics
Applicants Acceptances
--------- -------------------------------- --------------------------------
Domicile 2019 2020 Change Change 2019 2020 Change Change
--------- ------- ------- ------ ------ ------- ------- ------ ------
UK 565,480 577,260 11,780 2.1 464,335 485,400 21,065 4.5
EU 53,085 52,865 -220 -0.4 31,765 32,320 555 1.7
Non-EU 87,870 98,660 10,790 12.3 45,140 52,755 7,615 16.9
--------- ------- ------- ------ ------ ------- ------- ------ ------
Total 706,435 728,785 22,350 3.2 541,240 570,475 29,235 5.4
--------- ------- ------- ------ ------ ------- ------- ------ ------
UCAS End of Cycle Report 2020
Alongside positive international demand, domestic demand for HE
continues to grow. In the coming decade, growth in the full time
(FT) student population is forecast to be driven by a higher
participation rate and the absolute growth of the 18-year- old
cohort in the UK which has been in decline over the past 5 years.
UCAS reports that the proportion of UK domiciled 18-year-olds
accepted by UK providers increased from 34.1% in 2019 to 37% in
2020. The research also projects that the population of 18
-year-olds will rise from around 710,000 in 2020 to 850,000 in
2026.
In 2020, demand was also boosted by centre assessed grades,
which resulted in a greater number of school leavers with the
required grades needed for acceptance into higher ranked
universities. Higher ranked universities have benefited the most,
with applications rising 31% since the cap on student numbers was
lifted in 2012. Conversely, applications to medium ranked providers
only rose by 4% and lower ranked universities fell by 15% in an
ongoing trend. In HESA's latest data release, 384,030 people were
reported to have enrolled on a postgraduate course in AY 2019/20,
up 10% on the previous year. This rise in postgraduate student
numbers is expected to continue, repeating previous
counter-cyclical behaviour in periods of economic downturn.
Following the global financial crisis, full time postgraduates grew
from 161,015 in 2007 to 207,595 in 2010.
Constrained Supply
The long-term fundamentals of PBSA including the demand supply
imbalance remain compelling particularly when focusing on
high-quality assets in desirable locations. According to research
combining HESA 2018/19 data and PBSA supply for 2020/21, only 57%
of demand for PBSA is currently being met, 65% including consented
pipeline. In 2019, JLL reported that the pipeline had declined by
25% in the three previous years, a trend which appears to have been
exacerbated by COVID-19 restrictions, which paused construction on
many sites leading to delayed completions for the year to September
2020. StuRents report that in Q3 2020, developers applied for
consents for fewer than 3,000 beds, with 3,395 being approved,
showing falls of 73% and 44% respectively on Q3 2019.
Comparatively, in 2016 planning applications peaked at 50,000 beds.
This decline has been in part due to the rise of alternative living
sectors such as PRS refocusing developer attention, the growing
difficulty in gaining suitable PBSA consents in increasing
restrictive planning environments, along with several Secondary
markets becoming oversupplied.
The Flight to Quality
Whilst some property sectors experienced a virtual shutdown in
transactions in 2020, largely due to the impacts of COVID-19 and
Brexit-related uncertainty, PBSA remained comparatively resilient.
The global investment appetite for UK PBSA was very strong at the
start of 2020 with portfolio and M&A activity continuing to be
a key feature of the market, following significant portfolio
acquisitions in 2019. In Q1, the sector's attention focused on
Blackstone's purchase of the iQ student portfolio for GBP4.66
billion, the largest ever private real estate transaction in the
UK. With several well-funded prospective buyers willing to pay
premium pricing for the 32,000-bed portfolio, this transaction
affirmed that PBSA was more attractive than ever for investors in
Q1 2020. Following a reduced level of activity during the first
lockdown, the market has been gathering pace with a further GBP1
billion traded since March 2020. With the iQ transaction and the
recovering activity in H2 2020, the year saw the highest
transaction volume ever for UK PBSA at GBP6 billion.
To reflect the short-term income uncertainty caused by the
pandemic and the long-term strength of the sector, rental
guarantees from vendors for the 2020/21 academic year have been
widely used to support transactions. These have facilitated the
market by protecting the purchasers' short term income position.
The flight to quality continued in 2020, with investors focusing on
high-quality assets in markets with strong universities and
compelling supply and demand characteristics, reflected by
transactions in Super Prime and Prime Regional locations. Despite
COVID-19, July 2020 saw KWAP acquire 700 operational beds in Leeds
and Sheffield for GBP89 million. This purchase of Symons House (351
beds) and Crown House (335 beds) reflected GBP127,000 per bed and a
yield of 5.50%. In August 2020, GSA & Harrison Street added
further stock to a growing portfolio with the acquisition of Print
Hall (267 beds) and Unity Street (217 beds) in Bristol, for GBP58.2
million, reflecting GBP120,247 per bed and yield of 4.90%.
The ever maturing and polarising nature of the PBSA market has
been reflected in yield compression in the best -quality segments.
CBRE report that between Q4 2019 and Q4 2020, best-in-class direct
let Super Prime Regional and Central London yields compressed by 25
basis points and 10 basis points respectively, while Prime Regional
yields stabilised and further softening in Secondary Regional
locations was experienced.
In the post-COVID-19 landscape, investors are expected to be
drawn to sectors such as PBSA, which exhibit stable income returns
and counter-cyclical behaviour. Unlike other sectors facing
structural challenges, the long-term demand for HE and the
undersupply of high-quality PBSA beds will underpin investment
demand in the coming years.
Increase in higher ranked university applications in 2020
+31%
Market Yields - Best in Class, Direct Let
December 2020 December 2019
----------------- -----------------
Current Trend Current Trend
--------------------- ------- -------- ------- --------
Central London 3.90% Stronger 4.00% Stronger
Super Prime Regional 4.75% Stronger 5.00% Stronger
Prime Regional 5.25% Stable 5.25% Stronger
Secondary Regional 8.00% Weaker 7.75% Weaker
--------------------- ------- -------- ------- --------
Source: CBRE Student Sector Investment Yields.
Business Model
Our business model combines an attractive portfolio of
high-quality student homes with an efficient and responsible
in-house operational platform. Together, our operations and assets
enable us to create value for all our stakeholders. This allows us
to generate attractive returns for our shareholders and build a
strong platform for long-term growth.
Key Strengths
Buildings
We have a diversified and attractive portfolio of properties
that offer high-quality and safe accommodation to our
customers.
Our People
Our people are key to our customer journey.
Our passionate and committed colleagues allow us to deliver a
high level of service to our customers while maintaining cost
control.
Specialist Knowledge
We have the knowledge to develop, acquire and operate high
quality, sustainable student accommodation assets.
Brand
The Hello Student(R) brand has continued to grow, becoming a
leading brand and giving us a clear identity in the student
property market.
Financing
We finance our business through a combination of shareholder
equity and debt facilities. We have strong liquidity and good
relationships with our lenders.
Technology
We continue to leverage technology to augment business processes
that drive efficiencies operationally, financially and commercially
whilst also improving our user and customer experiences.
How We Add Value
Our Culture
Our people and customers are our key focus and we are here to
deliver excellent seamless service and financial returns through
working together.
Select Locations/Specifications
We are selective about where we invest, with a focus on the
towns and cities that are home to the most successful universities
and where student numbers are rising faster than average. We select
sites based on their compatibility with the types of accommodation
we provide and their proximity to universities and amenities.
Our buildings are on average around 100 beds, which helps to
foster a more homely, collegiate feeling to living.
Develop/Buy
Developing assets allows us to acquire them at a greater yield
on cost than buying standing assets. Forward-funded projects are
typically less complex than direct developments and have a lower
risk profile, as the planning, construction and time risk lies with
the third-party developer. These projects also have lower staffing
requirements and benefit from a forward -funding coupon charged to
the developer. However, direct development delivers higher-yielding
assets than forward funding. We have a strong proven track record
in direct development.
We also buy standing assets when a specific opportunity arises
which complements our portfolio.
Operate
Our assets are marketed through our Hello Student(R) platform.
This platform gives us a clearly identifiable brand which helps to
offer our customers a range of options. Encouraging our people to
follow our values helps to increase ownership and pride in our
homes. This ensures that customers have the best experience
possible, helping to drive occupancy, rents and profit.
We have a student welfare programme in place to ensure that we
provide the support that our customers need during their stay with
us.
Reinvest
We intend to hold our buildings for the long term. However, we
may sell an asset if we see an opportunity to create more value for
shareholders by reinvesting the proceeds. We therefore continually
review the portfolio to ensure our capital is effectively
allocated.
Outputs for our Stakeholders
Customers
Our customers benefit from having a great home to live in during
their studies, at a rent that represents value for money.
Customer Satisfaction
7.6 out of 10
Our People
Our people have the opportunity to develop their careers in an
exciting and growing sector.
Colleague Engagement Score
83%
Shareholders
Shareholders benefit from total returns which are underpinned by
income. The positive long term returns have been impacted by
COVID-19.
Total Return for 2020
(3.6)%
Communities
The communities around our assets benefit from increased
employment, reduced pressure on local housing stock, and from the
improvements we fund to social infrastructure in the surrounding
area.
Amount of Government Support Taken
GBPnil
Our Strategy
Making progress against our strategic objectives in spite of
COVID-19.
Strategic Strategic Associated Associated
area objective Progress in the year KPIs Key aims for 2021 risks
------------ --------------- ------------------------------------------------------------- ------------ ------------------------------------------------------------- ------------
1. We want to A, B, C, E1, E2,
Customers achieve * We launched a 24-hour mental health welfare phone D, E * Increase customer satisfaction score even further in E4, E6,
customer line with access to qualified counsellors available 2021. I1, I2
satisfaction by to all students.
building
welcoming * Review other ways which we can support our customers'
communities in * Our customer satisfaction score was 7.6, despite all welfare through our ESG Committee. In particular,
our homes and of the challenges we have faced through COVID-19. building on the work we have already begun around
by giving our mental health as well as safety and the environment.
customers a
sense of * 24 hours, 7 days a week, staff cover in all our
safety, cities as a result of our restructure.
wellbeing and
belonging.
We aim to * We launched a range of measures as a result of
deliver a COVID-19.
friendly
personalised
service, and be
present when
our customers
need
us.
------------ --------------- ------------------------------------------------------------- ------------ ------------------------------------------------------------- ------------
2. We want to A, B, C, E1, E2,
Brand raise awareness * We have launched our in-house revenue management E, F * Reviewing the design and layout of both the Hello E4, E6,
of the Hello platform for AY2021/22 bookings. We have already seen Student(R) and Empiric corporate website. I1, I2
Student(R) the benefits of being able to communicate with
brand among potential customers in a much more dynamic way.
students, to * Launch an ESG roadmap to develop and deliver our
support our objectives and long-term strategy. This will further
premium * We launched a programme of customer refunds as a help us to confirm and disclose the actual and
accommodation result of COVID-19, and we believe these actions potential impacts of ESG-related risks and
and service helped to protect our brand and enhance the long term opportunities that are material to our business,
offering. value of the Group. strategy, and financial planning.
We want to
become known as
a responsible
provider and
manager of
homes, not
halls.
------------ --------------- ------------------------------------------------------------- ------------ ------------------------------------------------------------- ------------
3. We have A, B, C, E1, E2,
Our People continued with * Increased involvement and engagement of Colleague D, E, F * Embed the new operations structure, optimizing E4, E6,
and our aim of Forum to contribute to developing business response customer service delivery. I1, I2
Operations developing a to handling of COVID-19 impact.
culture where
our people are * Increased focus on mandatory training, new HR KPI to
engaged and * Colleague engagement surveys completed twice in 2020; track compliance levels and ensure standards are
proud firstly in June with a Group engagement index of 83% being achieved.
to continue to representing +8% on the previous six months and then
work for the in December (73% response rate) with a Group
business, engagement index of 81%, representing -2% compared to * Development and delivery of social purpose programme
making Empiric the summer. This shows we have maintained a good under new ESG Committee.
"a great place level of colleague engagement despite a challenging
to work" and year and significant change programme delivered in Q4
destination 2020. * We plan to roll out a sharesave scheme to all our
of choice for people in 2021 subject to AGM approval.
candidates
wanting to work * We have completed restructuring of the operations
in the student team to deliver customer service and increased * Review and relaunch our Company values to ensure they
accommodation presence on sites across extended working hours, reflect the values which are lived and embodied by
sector. seven days a week. our people and align with our stakeholders.
We will aim to
continually and
responsibly
improve
operational
efficiency
through
enhancing
our in-house
functions and
performance
coaching our
colleagues to
help them
provide the
best
and most
efficient
customer
service
experience.
------------ --------------- ------------------------------------------------------------- ------------ ------------------------------------------------------------- ------------
4. We will A, B, C, E1, E2,
Buildings maximise the * We completed a development and a refurbishment D, E, J * Complete the Bristol St Mary's development providing E5, E6
value from the delivering a combined total of 284 operational beds. an additional 153 beds in the city.
asset portfolio
by managing the
portfolio, * We gained planning permission for a redevelopment of * Our Head of Property is conducting a full portfolio
recycling one of our buildings in London, which will provide 18 review, looking at disposal, refurbishment and
capital additional beds. acquisition targets.
to improve
returns and
sustainability. * We delayed development on a number of projects due to
This will be capital preservation measures as a result of
done by COVID-19.
maintaining a
portfolio of
attractively
high-yielding
investments
with rental
growth.
------------ --------------- ------------------------------------------------------------- ------------ ------------------------------------------------------------- ------------
5. We want to A, B, C, D E1, E2,
Shareholders provide our * We completed two extensions and one refinance during * We will revisit and strengthen our ESG roadmap and E3, E4,
shareholders the year, despite the challenges of COVID-19 to reporting across the Group E5, E6,
with attractive ensure that the Group's long-term future is secured. I1, I2, I3
sustainable
returns. This * Beyond COVID-19 we are positioned to return to full
is achieved * Various capital preservation measures were occupancy and optimise profitability enabling us to
through implemented as a result of COVID-19. resume paying an attractive dividend.
improving
profitability
and growing our * The progress achieved in all of the above strategic * We will continue to engage closely with all
portfolio. areas contribute to shareholder returns. shareholders.
------------ --------------- ------------------------------------------------------------- ------------ ------------------------------------------------------------- ------------
KPI Links
A. Rebooker Rate
B. Customer Happiness
C. Revenue Occupancy
D. Safety - Number of Accidents
E. Colleague Engagement
F. Gross Margin
G. Adjusted Earnings per Share
H. Dividend Cover
I. Net Asset Value per Share
J. Total Return
Risks Links
External Risks
E1. Student Demand Risk
E2. Competition Risk
E3. Property Market Risk
E4. Regulatory Risk
E5. Funding Risk
E6. Revenue Risk
Internal Risks
I1. Health and Safety Risk
I2. Cyber Security Risk
I3. People Risk
Chief Executive Officer's Review
Ensuring our customers safety
"We have continued to progress with our strategy through
investment in our people, customers and assets."
We recognise that these are particularly challenging times for
all students, and we remain committed to supporting and doing the
right thing by each student on a case-by-case basis, whilst also
protecting the long-term value of the Group.
2 020 has brought significant challenges to the business, but
the Group has remained resilient and is well placed to benefit from
opportunities when the market recovers.
Our top priority has been the safety and wellbeing of our
colleagues, customers, communities and stakeholders, and we have
devoted significant resources to ensure this is the case.
Despite these challenges, we have progressed our strategy
through investment in our people, customers and assets.
Supporting our Customers
In December 2020, we launched a Student Assistance Programme in
partnership with Endsleigh and Health Assured. This scheme provides
a suite of wellbeing services for our customers, offering them
support to deal with physical and mental health issues or financial
difficulties. The provision of this scheme has also supported some
universities that have faced challenges in providing sufficient
wellbeing support to their students throughout 2020 and this will
not just be in place during COVID-19 times but a permanent
enhancement of our student wellbeing support.
Developing our People
In January 2020, we appointed a Training & Development
Manager to design and deliver programmes to our people for their
personal and professional growth.
We overhauled our e-learning platform and provided support for
new learning opportunities to various roles within the business.
This change in emphasis from classroom to online webinar delivery
has been efficient, and we have continued to focus on key sessions
such as sales and customer services to increase the knowledge and
skills of our operational teams.
Our aims in 2021 include an increased focus on mandatory
training with a new measure to track compliance levels and ensure
high standards are being achieved. For example, we will deliver our
plans to enhance the variety of skills of colleagues within our
maintenance teams. This will allow for cost efficiencies as a
broader range of repairs and maintenance works can be conducted in
-house, and will also develop the network of our regional teams so
they are able to support each other across the country.
We will also be optimising the new management structure across
our operational teams so that local training support and coaching
is integrated into our ways of working and culture.
During 2020, we recognised the contribution that our front-line
operational teams have made to our customers and the business. From
1 January 2021, we will increase pay to align with the Real Living
Wage for 2021 as our minimum, and we are committed to pay a fair
wage for all core roles. We have recently gained accreditation from
the Real Living Wage Foundation and have undertaken to uphold those
standards for years to come.
In May, we undertook the Group's third colleague engagement
survey which achieved a response rate of 72% and an overall
colleague engagement score of 83% against the UK all-sector average
of 68% and previous year's result of 69%. These results were
delivered despite the current pandemic and help to give us a better
understanding of what matters to our people and to ensure we
deliver improvements.
Towards the end of 2020, we conducted a shorter 'pulse'
colleague engagement survey which had a 73% response rate and 81%
overall colleague engagement score. The Senior Leadership Team have
worked with the Colleague Forum to devise an action plan in
response to their feedback.
We have taken a number of actions as a result of the feedback we
received from these surveys, for example launching the Student
Assistance programme detailed above, pledging to review our values
in 2021 and launching monthly townhalls to bring all of our people
together.
Developments Delivered in 2020
Site Development basis Beds Completed
140/142 New Walk, Leicester Forward funded 52 June 2020
Emily Davies, Southampton Major refurbishment/development 232 December 2020
--------------------------- ------------------------------- ---- -------------
Future Development Pipeline
Site Development basis Beds Delivery year
St Marys, Bristol Forward funded 153 2021
Southbridge, Edinburgh Major refurbishment/development 61 TBC
FISC, Canterbury Major refurbishment/development 134 TBC
---------------------- ------------------------------- ---- -------------
"For the first time this year, our electricity portfolio is run
off 100% renewable energy."
As part of an increasing focus on our ESG agenda, we have
established an ESG Committee at board level which will work with
the Senior Leadership Team to define the strategy, identify key
topics, and implement initiatives and policies. We will be
publishing the Terms of Reference for the ESG Committee on our
website shortly.
Our Environmental Duty
As part of our ESG responsibility, we have launched a
Sustainability working group which will work with the Board and
Senior Leadership Team on projects that improve the sustainability
of our operational business and ways in which we can be more
environmentally supportive.
For the first time this year, our electricity portfolio is run
off 100% renewable energy. This means the electricity we use is
generated in renewable ways ranging from solar and wind turbines to
biomass plants.
Our team is also working with our third-party energy provider,
Amber Energy, to identify assets where energy usage is currently
higher than our target and methods by which we can reduce this.
Our Brand
The Hello Student(R) brand has continued to evolve throughout
2020 as a result of a variety of activities, including the goodwill
generated through our support for both our customers and
universities during COVID-19.
Hello Student(R) has strong brand awareness and a positive
reputation, but we have work to do in making it more prominent and
visible and to reflect more closely the priorities of our wider
stakeholders. Through our portfolio management programme, we will
make the brand execution tighter, more consistent, and powered by
researched customer insight. A programme of refining the Hello
Student(R) brand proposition in depth, and particularly in
specifying our service model, is underway and will help us to grow
Hello Student(R) to a leadership position in our sector.
We continue to invest in our online and social media marketing
platforms to reach both domestic and international customers
efficiently. We have also used direct customer feedback and
experiences to provide a more personal touch to our marketing
strategies. The opportunity our new booking platform brings us,
plus a refreshment of our website, will lead to a new digital
experience for prospective customers.
Our aim is to build further on the strength of our brand within
our properties and ensure the Hello Student(R) name becomes more
prominent within the student accommodation sector.
Our Portfolio
As at 31 December 2020, we owned or were committed to owning 95
assets, representing 9,396 beds (31 December 2019: 95 assets, 9,401
beds). Of these, 91 were revenue-generating assets, with 8,887 beds
(31 December 2019: 92 assets, with 8,830 beds).
We have undertaken a strategic review of our portfolio, with the
aim of rationalising it to maximise the expertise, positive
reputation, and commercial power of the Hello Student(R) brand. We
plan to dispose of non core assets, and this gives us an
opportunity for capital recycling, which we will undertake whilst
focusing on the best interests of shareholders. This includes
consideration of investment in refurbishments or reconfigurations,
as we aim to bring the portfolio to a consistently high
standard.
Portfolio Safety
Safety remains our top priority as a business and to that end we
ensure that our buildings comply with not only all relevant
regulations but also with best practice within the industry. We are
in the process of updating our fire risk and mitigation strategies
throughout our estate, and where that is appropriate it includes
undertaking detailed External Wall Surveys. Such surveys will
ensure any residual cladding or firebreak risks are clearly
identified and are being undertaken by highly experienced
professional teams and where necessary qualified fire experts.
Should remedial actions be identified as necessary, these will be
addressed.
Independent Valuation
Each property in our portfolio has been independently valued by
CBRE, in accordance with the Royal Institution of Chartered
Surveyors ("RICS") Valuation - Professional Standards January 2014
(the "Red Book"). At 31 December 2020, the portfolio was valued at
GBP1,005 million, a decrease of 2% from prior year (31 December
2019: GBP1,029 million). See valuation bridge to the right.
Average valuation yield (before COVID-19 deductions)
5.61%
(31 December 2019: 5.55%)
Number of beds added through completion of developments
284
Across two development projects
Developments and Redevelopments
On 30 June 2020, we completed a forward-funded, 52-bed
development in Leicester. In December we then completed the major
refurbishment works of Emily Davies in Southampton, adding 232
beds. We also recommenced the direct development of St Mary's in
Bristol which is expected to be completed in time to operate for
the 2021/22 academic year.
Due to COVID-19 we have paused two projects, a development in
Canterbury called Franciscans and a refurbishment in Edinburgh,
called Southbridge. We are reviewing whether to proceed with these
projects on a monthly basis, clearly predicated by our prudent
approach to cash management during the pandemic.
In December 2020 we secured planning permission for the
redevelopment of Francis Gardner Apartments in London. The new
seven-storey development will provide 18 new bedrooms with a mix of
two, three and four-bed flats with shared kitchens and living
facilities.
Strategy in Action
Customers
Prioritising safety and welfare
We are committed to supporting and doing the right thing by each
student on a case-by-case basis, whilst also protecting the
long-term value of the Group.
We have strived to ensure that all of our customers have felt
safe during these difficult times. These were focused on ensuring
our customers were safe and their welfare was monitored. Our
smaller, more flexible buildings have adapted well to many of the
challenges posted by the pandemic.
During May and June 2020 our buildings remained at a level of
around 55% occupancy.
Strategy in Action
People and Operations
Agile, effective and responsive
In-sourcing programme progress
We have found significant benefits from the in-sourcing
programme completed to date, including having the organizational
agility to respond quickly and effectively to the impact of
COVID-19. We have found that our people acted amazingly well and
were incredibly responsive to the challenges that we faced.
We have also restructured our operational staffing model. This
will help to ensure that we remain agile and effective and even
more resilient.
Back office revenue management system will deliver cost saving
of GBP1.5million per year from Q4 2021.
Key Performance Indicators
Monitoring our performance
Non-Financial KPIs
A B
Rebooker Rate (%) Customer Happiness (Out of 10)
23% 7.6
--------------- -------------------------------------------------- -------------------------------------------------
Performance 2020 23% 2020 7.6
2019 21% 2019 7.8
--------------- -------------------------------------------------- -------------------------------------------------
Purpose The rebooker rate demonstrates our ability to Student satisfaction reflects the quality of
retain customers within the Hello Student(R) service we provide and the attractiveness of
brand, which is an indicator of the quality of our buildings.
service we provide.
--------------- -------------------------------------------------- -------------------------------------------------
Strategic Link 12345 12345
--------------- -------------------------------------------------- -------------------------------------------------
C D
Revenue Occupancy (%) Safety - Number of Accidents
65% 0
--------------- -------------------------------------------------- -------------------------------------------------
Performance 2020/21 As at the end of February 65% 2020 0
2019/20 As at the end of February 93.9% 2019 3
------------------------------------------------------------------ -------------------------------------------------
Purpose Occupancy is a key driver of our revenue and The number of reportable accidents throughout
demonstrates the quality and location of our the Group each year. This is a key reporting
assets, the strength of our sales process and our metric to the Health & Safety Executive as well
ability to set appropriate rents. as a measure of our health and safety strategy
and procedures.
--------------- -------------------------------------------------- -------------------------------------------------
Strategic Link 12345 12345
Note - As facilities management was only
insourced from April 2019 the above comparative
was
only for a nine-month period.
--------------- -------------------------------------------------- -------------------------------------------------
E
Colleague Engagement
83%
--------------- ----------------------------------------------------------------------------------------------
Performance 2020 83%
2019 75.0%
--------------- ----------------------------------------------------------------------------------------------
Purpose Colleague engagement scores provide an insight into the happiness of our people across a range
of topics regarding their working environment.
--------------- ----------------------------------------------------------------------------------------------
Strategic Link 12345
--------------- ----------------------------------------------------------------------------------------------
Our key performance indicators ("KPIs") are central to how we
run our business and allow us to drive the performance of the
business for our shareholders. Due to the impact of COVID-19 during
the year, a number of our usual KPIs are showing anomalous figures
during this reporting period. We expect this impact to carry
forward into our 2021 KPI reporting.
Financial KPIs
F G
Gross Margin (%) Adjusted Earnings per Share (p)
61.9% 2.30p
--------------- ------------------------------------------------- --------------------------------------------------
Performance 2020 61.9% 2020 2.30
2019 67.1% 2019 4.43
--------------- ------------------------------------------------- --------------------------------------------------
Purpose The gross margin reflects our ability to drive Adjusted earnings per share is the earnings
occupancy and to rigorously control our operating measure that best demonstrates our ability to
costs. reward shareholders through dividends.
--------------- ------------------------------------------------- --------------------------------------------------
Strategic Link 12345 12345
--------------- ------------------------------------------------- --------------------------------------------------
H I
Dividend Cover (%) Net Asset Value per Share (p)
183.8% 105.00
--------------- -------------------------------------------------- -------------------------------------------------
Performance 2020 183.8% 2020 105.0
2019 88.5% 2019 110.21
--------------- -------------------------------------------------- -------------------------------------------------
Purpose Dividend cover shows our ability to pay dividends Movement in the NAV per share reflects the
out of current year earnings. - Note in quality of our assets and our ability to
the current year dividends were suspended. generate
revenue from them.
--------------- -------------------------------------------------- -------------------------------------------------
Strategic Link 12345 12345
--------------- -------------------------------------------------- -------------------------------------------------
J
Total Return (%)
(3.6)%
--------------- -----------------------------------------------------------------------------------------
Performance 2020 (3.6)%
2019 8.6%
--------------- -----------------------------------------------------------------------------------------
Purpose The total return shows the aggregate value (lost) / gained for shareholders, through both
capital (decline)/ growth of NAV and dividends.
--------------- -----------------------------------------------------------------------------------------
Strategic Link 12345
--------------- -----------------------------------------------------------------------------------------
DUNCAN GARROOD
Chief Executive Officer
16 March 2021
CFO and COO Statement
Driving efficiencies
"Cost saving of GBP1.5 million annually from Q4, with the first
full year of savings in 2022 - there is a significant cost saving
as we will no longer rely on an external third-party revenue
management platform provider."
Despite the impact of COVID-19 our operational performance has
been robust. We have continued to focus on revenue generation,
reducing costs and increasing efficiency, as we complete and embed
the changes made as part of the operational transformation and
in-sourcing programme. In this respect we completed two key
projects during the year, the first being a comprehensive review of
the operational team structure and the second was the successful
go-live of the revenue management system.
Operations Team Restructure
As part of the operational transformation programme, we have
directly employed all staff working in our buildings since 2019, as
we brought all activities in-house from several third-party
managers. The organisational structure we inherited was inefficient
and not aligned to optimal customer service delivery.
We therefore conducted a review during the year and moved to a
more optimal structure, which has the following key benefits:
- Investment in more sales and customer service roles.
- Increasing the "out of hours" presence in our buildings,
resulting in 24-hour/7 days a week coverage in our cities. This
helps to make our buildings safer and allows us to provide a better
welfare service to our students.
- Centralising tasks to the customer relations team (a
centralised hub). This has made the support we provide to our site
teams more efficient and has removed several administrative tasks
from the site teams allowing them to focus on customer service.
- The above changes to the structure are cost neutral, but
facilitate improved customer service delivery overall.
The proposed restructure was sponsored by the Senior Leadership
Team and presented to the Board for approval.
As the restructure impacted more than 20 of our people, we had a
statutory legal duty to consult collectively, and this consultation
was conducted through our Colleague Forum.
Revenue Management System
In November 2020 we successfully launched our new revenue
management system and have started to take bookings for the
academic year 2021/22. This system has been in development for
three years and I would like to thank the entire team involved for
the successful delivery of this platform, which is a key milestone
for the Group.
The revenue management platform will form the basis of our
ability to generate revenue efficiently and effectively end to end
moving forward. The immediate benefits that this new system
delivers are:
- More timely pricing adjustments - we have already seen the
benefit of being able to make more timely pricing adjustments,
which facilitates maximising revenue streams.
- Improving the journey, communication and interaction with the
customer - we now have much greater access to and ability to
communicate with our customers. We are now able to monitor in real
time the progress of each customer as they move through the booking
journey and to provide timely support as required.
- Ease of use by our people, as all activity is on one platform
- this has significantly reduced inefficiency and cost.
- Revenue management platform and finance system are one
integrated platform - this has removed the need to transfer
financial transaction data between systems. The result is real-time
financial information and reduced cost.
- Cost saving of GBP1.5 million annually from Q4, with the first
full year of savings in 2022 - there is a significant cost saving
as we will no longer rely on an external third-party revenue
management platform provider.
Health and Safety
Health and Safety is of paramount importance to the Group. We
have a legal and moral responsibility to ensure that everyone who
is living, working in or visiting our buildings are kept safe.
Our buildings are inspected on a regular basis by the site staff
to ensure that we identify and eliminate hazards. To assess the
buildings for significant issues on an ongoing basis, we engage
with specialist consultants to undertake thorough assessments of
general safety/hazards, fire risks/ prevention and water
systems/treatment against legionella.
During 2020 we had planned to launch formal Health and Safety
training by the Institute of Occupational Safety and Health
("IOSH"), and this was booked for H1 2020 but was cancelled due to
the COVID-19 pandemic. However, through discussions with IOSH, we
have established an IOSH-approved online training programme, with
the first course delivered in December 2020 and to continue
throughout 2021.
We have also prepared a series of Toolbox Talks which are in
document and video format for 2021 launch, and this will enable all
site teams to have continual access to informal training.
We have also designed and agreed upon the format of a Health
& Safety Forum to be implemented during 2021. This will include
representatives from site teams throughout the country, as well as
members of the Senior Leadership team and the Board.
"Our "cloud first" strategy allowed us to apply business
continuity with minimal disruption to productivity."
IT Infrastructure Improvements
During the year we also further strengthened our IT
infrastructure. We gained Cyber Essentials Plus accreditation in
April 2020 at the height of the pandemic, as well as implementing
advanced cloud security tools to enhance our risk management
strategy for the increased levels of remote and flexible working
expected in the post COVID- 19 landscape. Our "cloud first"
strategy allowed us to apply business continuity with minimal
disruption to productivity and greater flexibility to address
challenges as we are not dependent on traditional on-premise
solutions.
Financial Performance
Over the last three years we have delivered a positive financial
improvement across all metrics year on year, as a direct result of
the operational transformation we have implemented.
At the start of 2020 this operational transformation was largely
complete, we had started to see the benefits with our gross margin
approaching 70% and we were close to achieving dividend cover of
100%.
However, then the COVID- 19 pandemic hit. Whilst we are
encouraged by the underlying performance of the business, the
impact of the pandemic is clear.
Revenue in 2020 was GBP59.4 million, down 16% from GBP70.9
million in 2019. The decrease was due to three key factors;
- GBP6.5 million of refunds were provided to students for the
period from April to September 2020.This allowed us to release
students who were in need from their obligations on a case-by-case
basis and also helped to protect our brand.
- At the start of the 2020/21 academic year, we reported
occupancy rates of 70%, compared to 94% in 2019/20. This meant that
the final four months of the 2020 financial year had significantly
reduced occupancy compared to 2019.
- Historically we have also sold around GBP700,000 of summer
lets each year, clearly due to the COVID-19 pandemic we were not
able to utilise this source of income in 2020.
However, the underlying performance of revenue was still robust,
excluding the COVID- 19 refunds for academic year 2019/20 our like
for like rental growth would have been 3.1%. At this point, for the
current academic year 2020/21 like for like rental growth is
1.8%.
Property costs were GBP22.7 million, down 3% overall as we cut
discretionary costs and delayed expenditure where appropriate and
continued to make efficiency improvements while also continuing to
see the benefit of the operational transformation.
Dividends
Quarter ending Declared Paid Amount (p)
----------------- ----------------- -------------- ----------
31 December 2019 17 February 2020 20 March 2020 1.25
----------------- ----------------- -------------- ----------
Loan to Value
35.4%
(2019: 32.9%)
Refunds provided to students in need
GBP6.5m
For 2019/20 academic year
On a cost per bed basis our cost was down 3%. Due to the
COVID-19 pandemic reducing our occupancy levels we have been
required to pay council tax on these empty rooms which has reduced
the cost savings we have made. If we exclude the impact of this
increased council tax bill during the year, our average cost per
bed fell by over 6%.
The impact on revenue and property costs above produced a gross
margin for the year of 61.9% (2019: 67.1%).
Administration expenses were GBP9.8 million in 2020, lower than
our initial guidance of GBP10 million (2019: GBP9.2 million). We
made savings in a number of areas such as not paying any employee
or Director bonuses for 2020.
The net loss from a change in the fair value of investment
properties during the year was GBP37.6 million (2019: GBP29.2
million gain). This loss is made up of four key components which
are explained below;
- GBP21 million of the decrease is due to CBRE making a capital
deduction to reflect the perceived risk to occupancy for the
remainder of the 2020/21 academic year.
- GBP9 million of the decrease is in the valuation of
operational assets over the year for two reasons:
- There has been a polarisation of prime v secondary assets
which has resulted in a softening of Net Initial Yield from 5.55%
to 5.61%.
- a reduction in Net Operating Income projections on secondary assets.
- GBP6m of the decrease is on the value of our commercial
portfolio, reflecting yields moving out on retail property.
- GBP2m of the decrease is on our development assets reflecting
the increased timetables on some of our development assets which
are currently on hold due to our cash preservation approach.
Net financing costs for the year were GBP13.3 million, net of
money market investment income (2019: GBP12.7 million). This net
financing cost was slightly more than 2019 due to a higher level of
drawn down debt through the year, as well as slightly lower
interest received.
The result of this is a Loss before tax of GBP24.0 million,
(2019: profit GBP54.8 million). No corporation tax was charged, as
the Group fulfilled all of its obligations as a UK Real Estate
Investment Trust ("REIT"). Basic loss per share ("EPS") was
therefore (3.97) pence and also (3.97) pence on a diluted basis
(2019: earnings 9.08 pence and 9.07 pence (diluted).
Adjusted EPS is the most relevant measure of earnings when
assessing dividend distributions. It decreased by 48% from 4.43
pence in 2019 to 2.30 pence in 2020. This shows that the underlying
operating business is continuing to generate cash despite the
impact of the pandemic.
The Net Asset Value ("NAV") per share as at 31 December 2020 was
105.00 pence, (31 December 2019: 110.21 pence, prior to adjusting
for the interim dividend of 1.25 pence per share in respect of the
quarter ended 31 December 2019). The NAV is shown net of all
property acquisition costs and dividends paid during the year.
Dividends
The dividends declared in respect of the 2020 financial year are
shown in the table on the previous page.
Of the total dividends, 0.85 pence per share was declared as
property income distributions and 0.40 pence per share was declared
as ordinary UK dividends (2019: 2.75 pence per share and 2.25 pence
per share, respectively).
The reduced dividend in the period has given dividend cover of
184% (2019: 88.5%).
On 31 March 2020, due to uncertainty created by COVID -19, the
Group announced a number of actions to strengthen further its cash
position. This included the Board's decision, whilst remaining
mindful of its REIT tax obligations, to suspend all future dividend
distributions until market conditions stabilised. The Board is
mindful of the importance of the dividend to shareholders and will
seek to resume dividends at an appropriate level as soon as there
is sufficient clarity of outlook. For this, we would need to see
more commitment in the approach of universities to face-to-face
teaching and a significant improvement in occupation and rental
income.
Debt
In January 2020 we raised GBP22.5 million of development debt
with NatWest bank to complete the existing pipeline.
In March 2020 we re- financed an expiring uncharged facility
with FCB and at the same time increased the facility from GBP10 to
GBP20 million.
In April 2020 we re-financed early an expiring GBP32.8 million
facility with AIB on more favourable terms.
Throughout the year we have conducted extensive scenario
planning and in July 2020 we took the prudent step of increasing
our GBP70 million RCF with Lloyds Bank to GBP90 million.
At the year end, before deduction of loan arrangement fees, the
group had committed investment debt facilities of GBP420 million,
of which GBP390 million were drawn down (2019: GBP355 million drawn
down).
Of our drawn investment debt GBP277 million of this debt is
fixed and GBP113 million is floating. The aggregate cost of our
investment debt was 2.9%, with a weighted average term of 5.9
years.
The Loan to Value for the group was 35.4% (2019: 32.9%), broadly
in line with our long-term LTV target of 35%.
We have also agreed waivers or an easing of covenant
requirements on all our debt to ensure that we remain covenant
compliant throughout the pandemic. We would like to thank all of
our lenders for the support which they have provided through this
period.
We currently have around GBP52 million of unencumbered assets
and as at the year end we had GBP63.9 million of undrawn investment
facilities and cash.
As we have no re-financing requirements until November 2022 and
have taken protective measures to preserve liquidity, we are well
placed to trade through until the market recovers.
Responsible Business
Progressive, responsible
Progression on our ESG journey is a priority at Board level.
Our ESG Journey and Commitment to Stakeholders
As a business we are committed to creating and operating a
responsible and sustainable business which has a positive impact on
all of our stakeholders while maintaining a profitable and
sustainable business.
Our ESG journey is aligned to our culture and will be reflected
in our relaunched values in 2021. ESG is important to all of our
key stakeholders, who all receive benefits. ESG and our approach
also becomes part of our approach to risk management.
Due to the impact of COVID -19 we have not been able to push on
as far as we had expected with our ESG roadmap. However, we have
still been able to make some very valuable key steps forward. We
have also set out our plan for progressing our ESG agenda in 2021,
through the Board, Senior Leadership Team and new committees'
guidance. The Board has placed ESG as one of its key
priorities.
This section provides more information on the various
stakeholder engagement activities and our future plans.
ESG Management Framework
The Board
The Board has overall responsibility for...
the Group's ESG strategy and the direction which the Group will
take.
ESG Committee
The Committee will oversee...
the creation of overall ESG strategy from the Group, ensuring
that there is Board level discussion and input.
Sustainability working group
The group will oversee...
the delivery of environmental sustainability initiatives and
commitments throughout the business.
People & Community working group
The group will oversee...
the delivery of initiatives impacting our people and the
communities we operate in.
Governance working group
The group will oversee...
the levels of governance and oversight across the business
continue to be upheld to a high standard.
Senior Leadership Team
Senior management are responsible for...
ensuring this ESG strategy is embedded throughout the business
and provide key support to the communities above.
Our People
The successful delivery of an ESG strategy across our business
will require the collaboration and support of all our people.
Priorities and targets for 2021
Priorities Targets
------------------------------------------------------ --------------------------------------------------------------
Develop our ESG strategy and messaging We have appointed an external consultant to help the Group
review and formalise our ESG strategy.
This will allow the Group to illustrate its long-term ESG
strategy more formally and develop
ambitious and achievable targets in the short and long-term
by which we can be measured against.
We expect to announce more details of exactly what these
commitments mean, including targets,
timescales and plans in our 2021 Annual Report.
------------------------------------------------------ --------------------------------------------------------------
Embedding and developing the work of the ESG Committee We have set up and agreed terms of reference for the ESG
Committee and it will meet on a quarterly
basis with the first formal meeting held in January 2021.
The strategy and actions the Committee
set will have a large impact in shaping the ESG roadmap of
the business and ensuring the strategy
set out by the Board is achieved.
------------------------------------------------------ --------------------------------------------------------------
Review our Group Values With a new CEO, an updated staffing structure and a renewed
focus on ESG through the business
means that 2021 will be a perfect time to revisit the
Group's values which we will present
in the 2021 Annual Report. This reflects the evolution of
the business over the last couple
of years.
------------------------------------------------------ --------------------------------------------------------------
Our Key Stakeholders
Customers
The needs of our customers inspire our brand and provide
insightful feedback on how we can improve our service offering to
them and better fulfil our purpose. We have a responsibility to
provide our customers with a safe place to live and to care for
their wellbeing, which is critical to the Board's strategic
decision-making and our review of any operational changes.
Communities
Our communities help us to fulfil our purpose of enhancing the
university experience for our customers. The Board aims to
understand the local markets in which we operate and the key issues
we face which assists its decision-making around new opportunities
through which we can contribute to our local communities.
Environment
Our environment is fundamental to our future. We have a duty to
operate our business in an efficient way, giving specific regard to
the impact of our operations on the environment and utilising
methods throughout our properties (both development and operational
sites) that mitigate the risk of environmental damage.
People
Our people are vital to the successful delivery of our business
performance. We have a responsibility to provide our people with a
safe place to work and to care for their wellbeing.
The tone and culture of our organisation comes alive through the
actions of our people.
Shareholders
Our shareholders are key stakeholders in our business.
The Board has a responsibility and desire to communicate key
matters relating to the Group openly and honestly to our
shareholders.
The Group also has a wider responsibility to shareholders to
enhance the value of the business and fulfil its purpose
ethically.
Stakeholder Engagement
Priorities Why We Engage How We Engage Their Material Issue Actions Taken in 2020
(Detail in next section)
------------ --------------- --------------- --------------------------------------------- -------------------------------------------------------------
Customers Our customers On a
are at the core day-to-day * Safety in their homes * Implementation of enhanced health and safety measures
of our purpose basis within in our buildings
and provide our
useful insights buildings. * Customer service
into how we can Through * Offering refunds to students impacted by COVID-19
build biannual pandemic
on our customer customer * Value for money
service to surveys.
improve their Through our * Launching a student assistance programme
experience at social media
university. We presence.
have a
responsibility
to provide our
customers with
a safe home to
live in and to
support them
through their
journey
at university.
------------ --------------- --------------- --------------------------------------------- -------------------------------------------------------------
People Our people have On a
been key to our day-to-day * Safety at work * Implementation of enhanced health and safety measures
operational basis we use in our buildings
transformation, Workplace as
working hard to an internal * Pay and reward
deliver the communication * Revamping our internal communications to offer weekly
brand tool. communications and monthly townhalls
experience for Weekly * Communication
our customers. updates are
We have a provided to * Becoming a Real Living wage employer from January
responsibility all by 2021
to provide our members of
people with a the SLT.
safe working * Restructuring our operational staffing model
environment and Monthly
to support them townhalls are
in both their held where
career and our people
personal can raise
development. questions and
contribute.
Through the
Colleague
Forum.
------------ --------------- --------------- --------------------------------------------- -------------------------------------------------------------
Communities Our purpose to Through
enhance the on-site * Job creation * Provided 284 new beds during the year to free up
university communication local housing stock
experience for with members
our customers of the public * Housing stock
also serves to and local * Supported a number of local charities and donated
support communities. items to British Heart Foundation
the local We have * Supporting local charities
communities we membership
operate in with the
through the British
creation of Property
jobs and Federation
assisting to where we can
reduce tensions interact with
in the local communities
housing and
markets. We government on
have a a wider
responsibility basis.
to give back to We also have
our local interaction
communities with
and support communities
them in their through the
local property
initiatives licensing
that help disclosures
others. we have
to undertake.
------------ --------------- --------------- --------------------------------------------- -------------------------------------------------------------
Shareholders Our Through
shareholders face-to-face * ESG reporting and disclosure * Launching the ESG Committee
are key to our meetings with
long-term investors.
sustainable Through our * Sustainable business * Developing our ESG strategy
performance. Annual and
Interim
We have a Report. * Financial results * Protecting the business and ensuring its long-term
responsibility At our Annual sustainability and going concern
to manage the General
business in an Meeting.
ethical manner,
ensuring that
we value
the interests
of all our key
stakeholder
groups in order
to enhance the
value of the
Group
for the
shareholders.
------------ --------------- --------------- --------------------------------------------- -------------------------------------------------------------
Environment The environment On an annual
in which we basis there * Reduction in greenhouse gas emissions * Moving all our electricity to renewable energy
live in is a is detailed sources
valuable and ESG reporting
precious asset without our * Sustainable business
which we need Annual * Identifying energy reduction initiatives requiring
to ensure Report. some capital expenditure to implement in 2021
our business
helps to In 2021 we
protect and are looking
conserve. to increase
the level of
Environmental reporting and
issues such as policies
climate change available on
could develop our website.
into a business
risk for our
business.
------------ --------------- --------------- --------------------------------------------- -------------------------------------------------------------
Customers
Customer Pledge
Our pledge to our customer is that we will always strive to
fulfil our purpose (see inside front cover) which involves
providing our students a safe place in which to live. Due to the
impact of COVID- 19 we implemented a wide-ranging number of
initiatives to keep our customers safe and improve their wellbeing,
from monitoring of students self isolating to implementing
protective measures within our buildings.
Refund Programme
In April 2020 we launched a refund programme to help our
customers who had been impacted by the COVID-19 pandemic, and we
launched this programme because we felt that ethically it was the
right thing to do. The Board's considerations are set out within
the s.172 statement.
Wellbeing
In 2020 we launched in partnership with Endsleigh, a student
assistance programme. This programme provides our customers with
unlimited access to a 24/7 mental health and confidential
counselling (BACP accredited) through a telephone helpline. Calls
are answered by an experienced counsellor or therapist who will
offer support for a variety of issues. Our customers may also have
up to six sessions of structured telephone counselling including
CBT counselling per issue each year. We believe supporting our
customer's wellbeing is paramount.
Our People
Prioritising Health and Wellbeing During COVID-19
Ensuring our people were safe during the pandemic was of
paramount importance to the Group. We implemented a wide-ranging
number of initiatives to keep our people safe, from monitoring of
any staff showing symptoms or self isolating to implementing
protective measures within our buildings and adapting our sickness
and leave policies. More detail of all of our responses to COVID-19
are detailed on page 6.
Reward and Recognition
Due to the effects that COVID- 19 has had on the Group, the
decision was taken to suspend the Group's formal bonus scheme. A
pay freeze among all managerial roles and above was also
implemented to protect our business.
As part of the Group reorganisation discussed in more detail on
page 30, we rebased the pay of our frontline staff looking at the
latest benchmarking and also with a view to being a Real Living
Wage employer. From January 2021 the Group will pay all staff at
least the Real Living Wage and has an ambition to ensure they
remain at this level in the future.
Internal Communications
In a time where people felt more isolated than ever during the
pandemic, ensuring internal communications were kept current and
frequent was a key priority. During the year we revamped our
internal communications to offer weekly communications and monthly
townhalls.
We held two townhalls during 2020 and will move to a monthly
basis in 2021. They have already heralded strong feedback and
favourable support from our people.
Equality, Diversity and Inclusion
Group employees are committed to promoting an inclusive,
positive and collaborative culture. We treat everyone equally
irrespective of age, sex, sexual orientation, race, colour,
nationality, ethnic origin, religion, religious or other
philosophical belief, disability, gender identity, gender
reassignment, marital or civil partner status, or pregnancy or
maternity.
We continued to review our approach to diversity, equality and
inclusion, including the use of targets during 2020. We recognise
this as a key building block of our social strategy and it will
form part of the Governance working group's 2021 agenda. Our
workforce and customers are from a diverse range of people so we
need to ensure that our workplace remains inclusive and allows our
people and our customers a place where they can thrive.
Case study
Workforce Representation
Listening to our people
The Colleague Forum
The Colleague Forum is a formal workforce advisory panel set-up
in May 2019, consisting of 12 employee representatives across the
Group. Its main purpose is to give the wider workforce a platform
through which they can share their ideas on enhancing business
performance and improving efficiencies, as well as their experience
with the business.
The Colleague Forum is supported by Alice Avis (Non-Executive
Board member) who attends at least one Colleague Forum meeting
every year and is available as a direct Board contact for the
forum.
During 2020 the Colleague Forum consulted with the Senior
Leadership Team and HR team on key decisions including the Group's
response to COVID-19 and the restructure of our operational teams.
It was a good platform for the wider workforce to communicate their
key questions and priorities during a year of change, allowing the
business to respond effectively and understand best what support
our people and customers needed.
Social - our people
Communities
Supporting local communities during COVID-19
During the year we continued to support our local communities in
any ways we could during this difficult time. The way we helped and
supported local communities varied from organising fundraisers to
buy PPE for local hospitals and care homes to donating unwanted
goods left behind by students to the British Heart Foundation. In
2021 as part of our ESG roadmap we hope to pull together all the
support we give back to our local communities.
Modern Slavery
Protecting human rights and preventing modern slavery is
important to us. We are fundamentally opposed to slavery and
committed to understanding the risk of it and ensuring it does not
occur anywhere within our business or supply chain.
Our most significant risk area in relation to slavery and human
trafficking is in our supply chain, particularly in connection with
the sourcing by suppliers of construction material, certain goods
and the provision of manual labour in property development and
management services.
While nearly all our direct suppliers are based in the UK, some
of these suppliers source some materials from around the world.
As part of our broader initiative to identify and mitigate risk
in our supply chain, we have updated our consideration of factors
such as:
- reviewing our current contractors and suppliers, particularly
in relation to supply chain, with a view to developing preferred
supplier list arrangements based on robust selection;
- centralising more contracts as a core part of our supplier management strategy;
- strengthening our compliance review processes within procurement practices;
- developing strong relationships with UK- based suppliers and
contractors that align to our business code of conduct
expectations; and
- ensuring systems are in place to encourage the reporting of
concerns and the protection of whistleblowers in our supply
chain.
We believe there is minimal risk of slavery and human
trafficking in our colleague base. We continue to review this risk
assessment and monitor our activity as part of our broader approach
to ensuring we are a responsible and sustainable business.
For our full statement please refer to
www.hellostudent.co.uk.
Shareholders
ESG Reporting
Shareholders are becoming even more conscious and question the
ESG credentials of the businesses in which they want to be involved
with. We have received feedback from our investors that they wish
to gain a greater understanding of the ESG credentials of the
Group. The shareholders are the ultimate beneficiary of all of the
actions taken throughout this section and will further benefit from
the actions and targets we have set out for.
Ethical Business
We are committed to carrying out business fairly, honestly and
openly. Our anti-bribery policy mandates a zero-tolerance approach,
which all our people must read and consent to, both during their
induction and when any updates are made to the policy. We require
employees to take regular compliance training and to certify each
year that they have complied with our policies.
Our people are important to our business maintaining the highest
standards of honesty, openness and accountability. Our
whistleblowing policy explains how our people can report a
whistleblowing concern and reassures them that any such disclosure
is made in full confidence. The Board monitors and reviews the
policy on at least an annual basis to ensure it complies with UK
legislation. There were no incidents of whistleblowing during the
year.
OUR VALUES
Our core values ensure that everyone understands and is aligned
behind what we are and how we want to operate.
Honest
We act with integrity and have courage to do the right
things.
Open
We are transparent in what we do. We engage, involve and
share.
Creative
We do things differently, delighting our customers, colleagues
and shareholders.
Strive
We are always looking for better ways to do things for our
customers, colleagues and shareholders.
Environment
Energy Usage
Our total direct and indirect greenhouse gas emissions
like-for-like have decreased by 8% since 2019. Our electricity
consumption has reduced by 11% on a like for like basis compared to
2019.
We believe that while some of the energy savings have been due
to initiatives we have implemented, COVID- 19 has also had an
impact in the reduction of GHG and electricity consumption in
2020.
Water Usage
Our total water usage has decreased by 7% since 2019. we believe
that there would have been a greater reduction in 2020, however, we
increased our flushing activities to ensure the sites were well
sanitised before the return of students, increasing consumption in
2020.
Methodology
We have used the EPRA Best Practices Recommendations on
Sustainability Reporting (3rd Edition) and GHG Protocol Standard
(revised edition), using a financial control organisational
boundary to prepare this disclosure. The UK Government Conversion
Factors for Company Reporting have been applied to convert energy
data into greenhouse gas emissions. Whole building data has been
reported and any missing data has been estimated using either
direct comparison, pro rata calculation or based on an average
consumption value per bed.
Green Energy
The electricity we use in our buildings is 100% renewable. This
is backed by UK-based renewable generation certificates
administered by Ofgem. This means the electricity we use is
generated in renewable ways ranging from solar and wind turbines to
anaerobic digestion and biomass plants.
We have also planned a workshop in 2021 with our energy
consultant to identify new opportunities for green energy that can
be implemented at our existing sites and how this will impact our
energy consumption and costs.
Waste Management
All sites currently have recycling facilities that are used by
our customers and people. We aim to review our overall waste
management arrangement to identify more efficient ways to manage
our recycling throughout the whole Group. The Sustainability
working group will review our waste strategy in 2021.
The tables below contain our EPRA performance data for each
relevant impact area.
Greenhouse Gas EPRA Code 2020 2019
----------------------------------------------- -------------- ----- -----
Like-for-like:
Total direct GHG emissions (tCO (2) e) GHG-Dir-LfL 3,786 4,377
Total indirect GHG emissions (tCO (2) e) GHG-Indir-LfL 4,617 4,742
----------------------------------------------- -------------- ----- -----
Absolute :
Total direct GHG emissions (tCO (2) e) GHG-Dir-Abs 3,787 4,337
Total indirect GHG emissions (tCO (2) e) GHG-Indir-Abs 4,622 4,742
----------------------------------------------- -------------- ----- -----
Normalised:
GHG intensity from building energy consumption
(tCO (2) e per operating bed) GHG-Int 0.97 1.04
----------------------------------------------- -------------- ----- -----
2020 - % of total assets included: LfL - 100% / Abs - 100%
2020 - % of data estimated: LfL - 0.5% / Abs - 0.5%
Energy EPRA Code 2020 2019
--------------------------------------------------- ----------- ---------- ----------
Like-for-like:
Total fuel consumption (kWh) Fuels-LfL 20,592,043 23,803,443
Total district heating & cooling consumption (kWh) DH&C-Abs - -
Total electricity consumption (kWh) Elec-LfL 18,063,751 20,337,862
--------------------------------------------------- ----------- ---------- ----------
Absolute:
Total fuel consumption (kWh) Fuels-Abs 20,597,942 23,803,443
Total district heating & cooling consumption (kWh) DH&C-Abs - -
Total electricity consumption (kWh) Elec-Abs 18,083,045 20,337,862
--------------------------------------------------- ----------- ---------- ----------
Normalised:
Building energy intensity (kWh per operating bed) Energy-Int 4,439.46 5,025.19
--------------------------------------------------- ----------- ---------- ----------
2020 - % of total assets included: LfL - 100% / Abs - 100%
2020 - % of data estimated: LfL - 0.5% / Abs - 0.5%
Water EPRA Code 2020 2019
-------------------------------------------------- ---------- ------- -------
Like-for-like:
Total water consumption (m(3) ) Water-LfL 422,730 455,578
-------------------------------------------------- ---------- ------- -------
Absolute:
Total water consumption (m(3) ) Water-Abs 422,730 455,578
-------------------------------------------------- ---------- ------- -------
Normalised:
Building water intensity (m(3) per operating bed) Water-Int 48.52 51.86
-------------------------------------------------- ---------- ------- -------
2020 - % of total assets included: LfL - 100% / Abs - 100%
2020 - % of data estimated: LfL - 49% / Abs - 49%
Section 172
Section 172(1) Companies Act 2006 'Duty to promote the success
of the company'
A director of a company must act in the way he/she considers, in
good faith, would be most likely to promote the success of the
company for the benefit of its members as a whole, and in doing so
have regard (amongst other matters) to:
The likely consequences of any decision in the long-term
The Board provides oversight over the Company's performance and
gives guidance as to the long-term strategy of the Company. The
day-to-day management and decision-making is delegated by the Board
to the Senior Leadership Team who provide regular updates to the
Board. This allows the Board to monitor the performance of the
Company and that the Company is progressing in line with the
long-term strategy.
The interests of the Company's employees
Our people are crucial to the Company's success; they provide
our customers with exceptional service to ensure they feel at home.
The Board recognises how vital our people are and as such all
decisions taken by the Board consider the interests of the
Company's employees.
The Board has designated Alice Avis (Non-Executive Director) to
liaise with the Colleague Forum. This allows a direct conduit
between the Board and our people. This gives the Board insight into
the views and concerns of our people and allows them to ensure
their decisions are aligned with the interests of the Company's
employees.
The need to foster the Company's business relationships with
suppliers, customers and others
The Company has a few key suppliers and the Board is involved in
reviewing and approving any key contracts which the Company enters
into. As such the Board provides oversight and challenge to key
suppliers. Day-to-day relationships with Company suppliers are
delegated to the Senior Leadership Team to ensure a close
relationship is fostered.
Without customers the Company could not exist, and as such the
Board takes great interest in fostering relationships with these
customers. The Board reviews the results of the biannual customer
survey, as well as receiving and reviewing other ad hoc reports on
our customer's preferences and wishes. As part of the CEO's Board
reporting, our customers sit as a standing agenda item. The Board
believes that fostering a close relationship and a deep
understanding of our customers is key to the Company's success.
The impact of the Company's operations on the community and the
environment
The community and environment in which the Company operates in
is a key priority for the Board. The Board identified that the
Company's ESG strategy was not strong enough and so set about
reviewing this in 2020 for launch in 2021. The Board takes the
impact of the Group's operations on the community and environment
into account in each decision. The decisions which the Board take
can have widespread ramifications. Reviewing this impact is not a
perfunctory exercise but one which the Board believes is a key
responsibility, which includes robust challenge of all
decisions.
The desirability of the Company maintaining a reputation for
high standards of business conduct
The Board recognises the importance of maintaining a reputation
for high standards of business conduct. The Board always seeks to
make the "right" decision which while taking into account the needs
of all of our stakeholders also reflects morally on our obligations
as a Company.
The Board encourages this principle throughout the business and
directs the Company's ethos through the Company purpose and values.
The Board is reviewing alongside the Senior Leadership Team and our
people, the Company values in 2021 to ensure they continue to
remain fit for purpose.
The Board also encourages the Company to go above and beyond in
certain areas and one particular example is mental health welfare,
where the Board pushed for support for both our people and our
customers to be set up.
The need to act fairly as between shareholders of the
Company
The Board believes transparency and accountability of the
business is paramount to encourage shareholder confidence. The
Board listens to and reviews the views across our shareholder
base.
The need to act fairly between all of our shareholders underpins
the Board's decisions; and the Board receives regular feedback from
shareholders after our annual and interim results release. The
Board also receives and reviews feedback from research analysts
throughout the year. This helps to identify key shareholder trends
which the Board takes note of. The capital structure of the Company
as a REIT, limiting individual shareholdings to a maximum of 10% of
issued share capital helps to ensure there are no dominant
shareholders and that all shareholders are treated equally.
Principal Decision 1 - March 2020 - COVID-19 response decision
When the impacts of the COVID-19 pandemic began to become visible in March 2020, the Board
took several different actions such as:
* Offering refunds to students who met specific
criteria
* Suspension of dividends
* Deferring development spend
Long-term success The actions which the Board The Board reflected that the refunds decision would
considerations undertook were focused on generate some positive brand goodwill
protecting the long-term and help our brand stand out amongst others in the
success of market who did not take the same approach.
the Company. The decision to suspend dividends and defer
The decision to offer development spend were taken by the Board after
refunds was taken after considering the long-term viability of the Company.
considering the PBSA market Taking these actions ensured that the
and the reputation Company would conserve capital to weather the
of the Hello Student(R) crisis.
brand.
The Board sought to protect
and strengthen the Hello
Student(R) brand by offering
these refunds.
------------------------------- ------------------------------ -----------------------------------------------------
Stakeholder impact Customers - The Board Shareholders - The Board considered that our
considerations considered that offering shareholders would benefit from these decisions,
refunds clearly was a as they would help to protect the long-term
positive decision for viability of the Company.
our customers. Many students Community/Environment - The Board considered
benefited from this decision whether there were any adverse impacts on either
during what was a very the community or environment and concluded that the
stressful above decision would have no adverse impact.
time.
People - The Board
considered how these
decisions would impact
people, protecting our
capital
by suspending dividends and
that deferring development
spend would help to ensure
our long-term
viability and ensure our
people's jobs were
protected.
------------------------------- ------------------------------ -----------------------------------------------------
Outcomes The actions taken by the The Board's belief is that this principal decision
Board to preserve capital taken was a positive decision for all stakeholders.
has ensured that the Company
is in a healthy
state as we progress through
this pandemic and has
allowed the Company to still
be considered
a going concern.
The Company and the Hello
Student (R) brand received
large amounts of positive
feedback from
students receiving refunds.
------------------------------- ------------------------------ -----------------------------------------------------
Principal Decision 2 - September 2020 - Staff restructuring decision
In September 2020 the Senior Leadership Team presented to the Board a staff restructuring
paper which looked at overhauling the current staffing structure. Due to the size of this
transition and change the Board reviewed this proposal.
Long-term success considerations When making this decision the Board
considered the long-term success of
the business. The
existing structure was not fit for
purpose and as such left the Company
at a disadvantage
to other competitors in the industry.
As such implementing this change would
ensure that the
Company had a solid footing for
success in the future.
--------------------------------- ---------------------------------------- -----------------------------------------
Stakeholder impact considerations Customers - The Board considered that Shareholders - The Board considered
moving to a 24 hours a day 7 days a that our shareholders would benefit
week staffing structure from these decisions;
was only going to benefit our the new staffing structure is budgeted
customers. It would allow us the to be cost neutral and will also reduce
ability to be there for our the need for
customers at all times of the day third-party security contractors. As
whenever our customers need us most. stated above, it will also ensure the
People - The Board considered how business has a
these decisions would impact people. platform for long-term growth which
Clearly, under the will benefit the shareholders.
restructure some of our people would Community/Environment - The Board
be made redundant which would have a considered what impact the new staffing
negative impact. structure would
However, the rationale behind the fact have in our buildings. Having staff in
that we are making our staffing model our buildings 24 hours a day will allow
fit for purpose, them to focus
the creation of alternative roles for further on energy efficiency measures
staff to apply for and ensuring the and recycling which take place around
structure is viable the clock. The
for the long-term all outweigh the Board reviewed other impacts and
negative impact. Overall the Board concluded that the above decision would
believed that the staffing have no adverse impact.
restructure would have a positive
impact on our people.
--------------------------------- ---------------------------------------- -----------------------------------------
Outcomes The outcome was that the Board
approved the staff restructuring with
the restructure complete
by December. As we move into 2021 more
evidence will become available to
support the Board's
considerations above.
The Board's belief is that this
principal decision taken was a
positive decision for all
stakeholders.
--------------------------------- ---------------------------------------- -----------------------------------------
LYNNE FENNAH
Chief Financial and Operating Officer
16 March 2021
Principal Risks and Uncertainties
2 020 has been a year of change with the COVID -19 pandemic
having a significant impact on our principal risks and
uncertainties. The Board has maintained constant review of the
Group's risk environment, ensuring operational platforms are
flexible in adapting to risks whilst remaining in line with our
strategic objectives. With the key challenges faced this year, the
Group has maintained its strong culture of mitigating significant
risks and responding to changes efficiently.
The Board regularly assesses the risk appetite of the Group,
with the Audit Committee formally reviewing the effectiveness of
our risk management process and internal control systems
biannually. During the year, the Audit Committee has not identified
or been advised of any material failings or weaknesses.
Changes to Principal Risks
COVID-19 has revealed a number of factors that will be impacted
either directly by the ongoing pandemic, or life in a post COVID-19
world as the 'new normal' is defined.
As a result, the Board has introduced a new risk - "Revenue
Risk" - which highlights the risk of reduced revenue from changes
to university operations (for example, university teaching moving
to an online platform or universities facing financial difficulties
due to reduced student demand for higher education) and travel
restrictions (for example, reduced domestic and international
travel or issues with international student visas).
Now all assets are operating under the Hello Student(R)
platform, cost control has become part of our culture and the
business has better processes in place to operate efficiently. As
such, we have removed the Cost Control Risk from our principal
risks. With less developments in the pipeline, we have removed the
Development Risk.
The health and safety of our people, customers and visitors to
our sites is paramount, and the Board puts health and safety and
the associated risks on every meeting agenda. With increasing focus
on fire safety and greater regulations in place, we believe our
Regulatory Risk and Health & Safety Risk has increased.
The Audit Committee has reviewed and approved the above changes
to our principal risks and risk appetite
Brexit
The UK has now formally left the European Union after a
transition period. To date we have not seen any impact from this
event. The Board takes comfort that this government is committed to
growing international student numbers - from the current level of
almost 450,000 to 600,000 by 2030. The Treasury has also recognised
the value of higher education exports by making visa applications
and postgraduate employment limitations less onerous. As a result
no principal risk has been added due to Brexit.
Risk Responsibilities
The Board
The Board has overall responsibility for...
the determination of the Group's risk appetite, the setting of
objectives and policies, and has ultimate responsibility for
managing risk.
Audit Committee
The Audit Committee formally reviews...
the effectiveness of our risk management processes and internal
control systems biannually.
Senior Leadership Team
Senior management are responsible for...
reviewing and monitoring the Group's key risks, and overseeing
the implementation and operation of the risk management and
internal control systems.
Our People
Everyone at Empiric has a role to play...
in identifying key risks facing the Group, and in the day-to-day
management of risk through applying the appropriate controls,
policies and processes.
Adapting risk management in a changing environment
External Internal
Risks Risks
E1 Student Demand Risk I1 Health & Safety Risk
E2 Competition Risk I2 Cyber Security Risk
E3 Property Market Risk I3 People Risk
E4 Regulatory Risk
E5 Funding Risk
E6 Revenue Risk
The COVID-19 pandemic has created global economic uncertainty,
and in particular an uncertainty around income for the 2020/21 and
2021/22 academic years. Accordingly, the Group has conducted a
detailed going concern review and considered its liquidity position
and banking covenant compliance strength.
On 31 March 2020 the Group announced the difficult decision to
suspend dividend distributions and guidance. The Group also took
decisive action to focus on liquidity. All development spend was
paused and other discretionary costs were reviewed with reductions
identified and implemented. The Group also announced it would look
favorably upon requests on a case-by-case basis from its customers
who were either no longer in occupation or, due to university
closures, plan not to return to their accommodation, to be released
from their rent and lease obligations from 25 April 2020 onwards.
The worst-case estimate for this was a GBP21 million cash impact,
however the final actual impact of releasing students their rent
obligations for the academic year 2020/21 was much less at
GBP6.5m.
As at 31 December 2020 the Group had GBP34 million in cash and
GBP30 million of undrawn investment debt facilities. The Group is
well funded and has no refinancing requirements until November
2022.
The Group's debt facilities include covenants in respect of LTV
and interest cover, both projected and historic, and all debt
facilities are ring fenced with each specific lender. The Group
maintains regular dialogue with all of its lenders as part of the
ordinary course of business, however during the pandemic we have
increased the frequency of this dialogue. As part of these
discussions with our lenders we have had conversations specifically
around the interest cover covenants to ensure we either temporarily
restructure these or gain the relevant waivers from the banks to
ensure that no issues arise. To date all of our banks have been
supportive during this period and have expressed commitment to the
long-term relationship they wish to build with Empiric.
Management has evaluated a number of scenarios in its going
concern model. The critical assumption is the revenue occupancy for
the 2021/22 academic year. Upside, central and downside cases have
been constructed showing 2021/22 academic year occupancy of between
80% and 95%. A downside stress scenario has also been considered
which has set 2021/22 revenue occupancy at similar levels to the
2020/21 academic year.
In Scenario 1, 2 & 3 above the Group continues to maintain
covenant compliance for all its interest cover covenants. It
maintains adequate levels of liquidity and does not need to utilise
the additional GBP20 million RCF facility negotiated with Lloyds
Bank plc throughout the same assessment period. In addition, no
assumption is made as to the level of additional cost cutting
measures or mitigating actions which could potentially be
undertaken.
In Scenario 4, under our Downside Stress Scenario, we would not
meet interest cover covenants at the 30 June 2021 measurement date
for two lenders. However, the Group has cure rights under the
lending agreements and sufficient cash headroom to cure any ICR
breaches if required.
For one lender, under scenario 4, we would not meet a specific
80% occupancy covenant requirement by October 2021. Under this
scenario we would be dependent on the further support of this
lender, and we would expect this support to be forthcoming.
To support the Directors' going concern assessment, the
management also evaluated the occupancy level at which all ICR
covenant tests were breached and, additionally, the impact of a
'Reverse Stress Test' which was performed to determine the level of
revenue occupancy for the 2021/22 academic year at which the Group
would need to seek alternative sources of funding. For this
modeling we kept revenue occupancy for the 2020/21 academic year at
65%.
The Director's noted that if occupancy falls below 44% then the
Group would be in breach of all ICR covenants, and at 18% revenue
occupancy for the 2021/22 academic year (47% lower revenue
occupancy than our Downside Stress Scenario) the Group would need
to seek alternative sources of funding.
Having reviewed and considered three modelled scenarios, a
Downside Stress Scenario, the 2021/22 academic year occupancy level
at which ICR covenants would be breached and the level at which
alternative sources of funding would be required, the Directors
consider that the Group has adequate resources in place for at
least 12 months from the date of these results and have therefore
adopted the going concern basis of accounting in preparing the
annual financial statements.
Going concern - Viability Statement
Revenue occupancy for 2020/21 academic Revenue occupancy for 2021/22
Scenario year academic year
-------------------------------------- -------------------------------------- --------------------------------------
Scenario 1 - Upside Scenario 65% 95%
Scenario 2 - Central Scenario 65% 85%
Scenario 3 - Downside Scenario 65% 80%
Scenario 4 - Downside Stress Scenario 65% 65%
-------------------------------------- -------------------------------------- --------------------------------------
The Group continues to maintain covenant compliance for its LTV
thresholds throughout the going concern assessment period. Property
values would have to fall by more than 15% from December 2020
valuations before LTV covenants are breached.
External Risks Table
Risk and Potential impact Mitigation in place Trend
brief
description
--------------- -------------------------------------------- ------------------------------------------------------------ -------
E1 Student
Demand * Loss of revenue * Senior Leadership Team and the Board closely monitor
Risk government policy, student numbers and other micro
There is a and macro-economic factors.
risk * Erosion of asset values
that the
level * Through a detailed selection process, we ensure our
of student * High void costs assets are well located serving established leading
demand universities.
will
decrease. * Potential breach in bank covenants
* Where possible, we ensure our buildings are fit for
Link to alternative use, such as private residential, subjec
Strategy t
1 2 3 4 5 to planning.
* High-quality management information is provided
across the business.
* All properties are now managed in-house under the
Hello Student(R) brand.
--------------- -------------------------------------------- ------------------------------------------------------------ -------
E2 Competition
Risk * Oversupply of student accommodation * UK student numbers are due to increase from 2021.
The risk of
an
increased * Reduction of student rental growth * We ensure our assets are well located serving
level established leading universities.
of
competition * Inflated asset and land prices
and supply in * Assets in prime locations, in varying formats and at
the different price points.
student
sector.
* High-quality management information is provided
Link to across the business.
Strategy
1 2 3 4 5
* All properties are now managed in-house under the
Hello Student(R) brand helping to provide a unique
identity.
--------------- -------------------------------------------- ------------------------------------------------------------ -------
E3 Property
Market * Erosion of asset values * Assets in multiple prime locations, diversifying the
Risk risk.
The potential
for * Potential breach in bank covenants
a downturn in * We maintain prudent levels of gearing, with a LTV
the limit of 40% and a long-term target of 35%.
property * Lower Total Return for shareholders
market.
* The higher education sector is made up of a wide
Link to range of students from the UK, EU and non-EU
Strategy countries. This range helps to insulate the student
1 2 3 4 5 accommodation market.
--------------- -------------------------------------------- ------------------------------------------------------------ -------
E4 Regulatory
Risk * Potential impact on our Total Return * Hello Student(R) is ANUK accredited, and Lynne Fenna
Large levels h
of sits on the Student Accommodation Committee of the
regulation * Reputational damage and penalties British Property Federation.
being
applied to
the * Higher compliance costs * Involvement with these bodies means that we are well
student informed of any potential upcoming regulatory change
accommodation .
market. It also provides a basis for industry lobbying if
required.
Link to
Strategy
1 2 3 4 5 * Our operational teams try to build close working
relationships with local authorities to keep abreast
of any changes.
* Regular review of fire safety regulations and checks
to ensure our buildings, at a minimum, remain
compliant with standards.
--------------- -------------------------------------------- ------------------------------------------------------------ -------
E5 Funding Risk
The * Stifling of future growth potential * Our average maturity of debt is 5.9 years with GBP30
availability million undrawn as at 31 December 2020.
of debt or
equity * Forced sale of assets to repay debt
and ability * We maintain prudent levels of gearing, with a LTV
to limit of 40% and a long-term target of 35%.
raise it on * Reduction of profit
acceptable
terms. * Experienced finance team with a strong track record
in delivering both debt and equity.
Link to
Strategy
1 2 3 4 5
--------------- -------------------------------------------- ------------------------------------------------------------ -------
E6 Revenue Risk
The risk of * Reduce profitability * Regular communication with universities to review
reduced changes in their operations and future teaching
revenue from plans.
various * Stifling of future growth potential
changes to
university * Monitoring changes in domestic and international
operations * Potential breach in bank covenants travel restrictions and adapting out sales approach
and accordingly.
travel
restrictions. * Erosion of assets values
* Where possible, we ensure our buildings are fit for
Link to alternative use, such as private residential, subjec
Strategy t
12345 to planning.
* High-quality management information Is provided
across the business.
--------------- -------------------------------------------- ------------------------------------------------------------ -------
Internal Risks Table
Risk and Potential impact Mitigation in place Trend
brief
description
------------- ---------------------------------------------- ------------------------------------------------------------- -------
I1 Health and
Safety * Injury and impact on customers, contra * Health and safety metrics are reported monthly.
Risk ctors, staff
The and visitors
occurrence * Policies, procedures and training for all staff.
of a major
health * Compensation costs incurred
and safety * Ultimate Board responsibility involving regular Board
incident reporting from the Head of FM.
including a * Reputational impact
fire
or * Live compliance dashboard which is monitored daily.
infectious * Loss of life in a worst-case scenario
breakout.
* Regular review of fire safety regulations and checks
Link to to ensure our buildings remain compliant with
Strategy standards going over and beyond fire safety
1 2 3 4 5 requirements.
------------- ---------------------------------------------- ------------------------------------------------------------- -------
I2 Cyber
Security * Reputational damage * Developed a business continuity plan to enable Group
Risk operations to continue in the event of a breach.
The Group
suffering * Deteriorated customer experience
from a * Centralised our IT network across the Group and
cyber recruited an in-house IT team.
security * Higher costs and reduced profitability
breach.
* Deployed an updated training programme across all
Link to staff.
Strategy
1 2 3 4 5
* Implemented a data monitoring system to protect our
platforms across the IT estate.
------------- ---------------------------------------------- ------------------------------------------------------------- -------
I3 People Risk
Inability * Loss of key business knowledge * Exit interviews are used to identify any areas for
to retain improvement within the business.
and attract
top * Higher costs
levels of * Ongoing training and development programme designed
staff. to upskill staff regularly and progress forward with
* Impact on customer service their career within the business.
Link to
Strategy
1 2 3 4 5
------------- ---------------------------------------------- ------------------------------------------------------------- -------
Emerging Risks
The Audit committee also considers emerging risks. These are new
or unforeseen risks that we are conscious of however their
potential impact is not fully known. The Committee reviews these
biannually alongside the Principal Risks and Uncertainties. The
Audit Committee has detailed below the risks it believes are
emerging and the potential impact it may have on our Principal
Risks.
Emerging Risks Impact on Principal Risk Probabilities Mitigating factors
--------------- ---------------------------------------------- -------------------------------------------------------------
Geo-political
Crisis * Increase - E1 - Student Demand Risk * Involvement with the BPF Student Accommodation
A geopolitical Committee which lobbies the government on issues
dispute between impacting the sector.
China or India * Increase - E3 - Property Market Risk
and the UK
could result in * The UK Government has expressed their support for
foreign * Increase - E5 - Funding Risk international students and the positive impact that
governments they have on our economy.
placing
embargos on * Increase - E6 - Revenue Risk
their students
coming to study
in the UK.
--------------- ---------------------------------------------- -------------------------------------------------------------
Increasing use
of Online * Increase - E1 - Student Demand Risk * Studies have revealed that a significant majority of
University students want to return to a campus based experiences
Courses as soon as possible.
The COVID-19 * Increase - E3 - Property Market Risk
pandemic has
forced * University experiences is seen as more of a life
universities * Increase - E6 - Revenue Risk experience rather than just an educational stepping
and students stone.
into the use of
online teaching
methods. The
fact that the
pandemic has
shown that this
style of
teaching can be
effective
to some degree
could result
into a long
term move
towards online
courses which
would not
require
purpose-built
student
accommodation.
--------------- ---------------------------------------------- -------------------------------------------------------------
Climate Change
Climate changes * Increase - E1 - Student Demand Risk * There will be a move to more responsible landlords
has the who can prove that their buildings are efficiently
potential to and ethically run which will be monitored by our ESG
impact every * Increase - E3 - Property Market Risk Committee.
business in the
world. Climate
change could * Increase - E5 - Funding Risk
impact planning
legislation
restricting * Increase - E6 - Revenue Risk
supply of PBSA,
cause flooding,
increase * Increase - I1 - Health and Safety Risk
government
legislation
across a wide
range of areas
and many other
impacts.
The increased
awareness
around this
issue is going
to bring these
issues and
risks to the
foreground.
--------------- ---------------------------------------------- -------------------------------------------------------------
University
Funding * Increase - E1 - Student Demand Risk * Reviewing our portfolio to ensure that we are aligned
The level of to cities with more than one university which have
funding, and strong financial backing.
how * Increase - E3 - Property Market Risk
universities
receive this
has changed * Increase - E5 - Funding Risk
significantly
over the
last twenty * Increase - E6 - Revenue Risk
years. A number
of universities
are facing
significant
financial
stress as a
result
of COVID-19 and
there is a risk
that a number
of universities
fall into
administration.
This would
cause
significant
declines in
student
populations in
the cities of
the affected
institution.
--------------- ---------------------------------------------- -------------------------------------------------------------
Introduction of
regulation of * Increase - E1 - Student Demand Risk * We act as a responsible owner of student
the student accommodation who does the right thing. Further
accommodation legislation within the market may have a positive
industry * Increase - E3 - Property Market Risk impact to the Group as less scrupulous suppliers are
The COVID-19 forced out of the market.
pandemic has
drawn attention * Increase - E4 - Regulatory Risk
to the vast
range of level
of service and * Increase - E6 - Revenue Risk
corporate
responsibility
of providers
within the
student
accommodation
industry.
The industry is
one which
varies from HMO
owners
operating a
handful of beds
up to providers
who operate
tens of
thousands of
beds.
The support
which providers
and landlords
provided to
students in
this pandemic
has caused
a lot of media
attention so
there is a risk
that regulation
may be applied
to the
industry.
--------------- ---------------------------------------------- -------------------------------------------------------------
Pandemic
The COVID-19 * Increase - E1 - Student Demand Risk * Reviewing our marketing strategy and offering so that
pandemic is we appeal to UK nationals alongside international
constantly students.
evolving and * Increase - E3 - Property Market Risk
there is a
continued * The COVID-19 pandemic has shown that the robust and
potential * Increase - E4 - Regulatory Risk detailed protocols we have in place within our
threat that business to manage any impact.
new strains of
the virus * Increase - E5 - Funding Risk
become more
damaging.
This could * Increase - E6 - Revenue Risk
impact many
areas such as
travel, both * Increase - I1- Health and Safety Risk
international
and domestic or
future
lockdowns.
There is also
the potential
risk of future
pandemics from
viruses which
are as yet
unknown.
--------------- ---------------------------------------------- -------------------------------------------------------------
Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare the Group and
Company financial statements for each financial year. Under that
law the Directors are required to prepare the Group financial
statements and have elected to prepare the Company financial
statements in accordance with International Financial Reporting
Standards ("IFRSs") as adopted by the European Union. Under company
law the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the Group and Company and of the profit or loss for
the Group for that year.
In preparing these financial statements, the Directors are
required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and accounting estimates that are reasonable and prudent;
- state whether they have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies to the European Union, subject to any
material departures disclosed and explained in the financial
statements;
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business; and
- prepare a Directors' Report, a Strategic Report and Directors'
Remuneration Report which comply with the requirements of the
Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable
them to ensure that the financial statements comply with the
Companies Act 2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation. The Directors 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.
Website Publication
The Directors are responsible for ensuring the Annual Report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the UK governing the preparation and
dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Directors' Responsibilities Pursuant to DTR4
The Directors confirm that to the best of their knowledge:
- the Group financial statements have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies to the European Union and Article 4 of
the IAS Regulation and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Group
and the undertakings included in the consolidation as a whole;
- the Annual Report includes a fair review of the development
and performance of the business and the financial position of the
Group and the Parent Company, together with a description of the
principal risks and uncertainties that they face; and
- the Annual Report and Accounts, taken as a whole, are fair,
balanced and understandable and provide the information necessary
for shareholders to assess the Group's performance, business model
and strategy.
Mark Pain
Chairman | 16 March 2021
Group Statement of Comprehensive Income
Year ended Year ended
31 December 31 December
2020 2019
Note GBP'000 GBP'000
--------------------------------------------------------------------- ---- ----------- -----------
Continuing operations
Revenue 2 59,444 70,908
Property expenses 3 (22,651) (23,351)
--------------------------------------------------------------------- ---- ----------- -----------
Net rental income 36,793 47,557
Administrative expenses 4 (9,841) (9,222)
Change in fair value of investment property 13 (37,603) 29,176
--------------------------------------------------------------------- ---- ----------- -----------
Operating (loss) / profit (10,651) 67,511
----------- -----------
Finance cost (13,341) (13,148)
Finance income 22 409
----------- -----------
Net finance costs 5 (13,319) (12,739)
--------------------------------------------------------------------- ---- ----------- -----------
(Loss) / profit before income tax (23,970) 54,772
Corporation tax 7 - -
--------------------------------------------------------------------- ---- ----------- -----------
(Loss) / profit for the year (23,970) 54,772
Other comprehensive income
Items that will be reclassified to Statement of Comprehensive Income
Fair value gain on cash flow hedge - 80
--------------------------------------------------------------------- ---- ----------- -----------
Total comprehensive (loss) / income for the year (23,970) 54,852
--------------------------------------------------------------------- ---- ----------- -----------
(Loss) / earnings per share expressed in pence per share 8
Basic (3.97) 9.08
Diluted (3.97) 9.07
Gross Margin 61.9% 67.1%
--------------------------------------------------------------------- ---- ----------- -----------
Group Statement of Financial Position
At At
31 December 31 December
2020 2019
Note GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 11 135 352
Intangible assets 12 1,054 1,619
Investment property - Operational Assets 13 981,369 999,380
Investment property - Development Assets 13 23,751 29,700
------------------------------------------ ---- ----------- -----------
Total non-current assets 1,006,309 1,031,051
------------------------------------------ ---- ----------- -----------
Current assets
Trade and other receivables 14 14,510 10,538
Cash and cash equivalents 15 33,927 16,517
------------------------------------------ ---- ----------- -----------
Total current assets 48,437 27,055
------------------------------------------ ---- ----------- -----------
Total assets 1,054,746 1,058,106
------------------------------------------ ---- ----------- -----------
LIABILITIES
Current liabilities
Trade and other payables 16 15,527 14,372
Borrowings 17 - 42,675
Deferred income 16 20,676 29,204
------------------------------------------ ---- ----------- -----------
Total current liabilities 36,203 86,251
Non-current liabilities
Borrowings 17 385,266 307,097
------------------------------------------ ---- ----------- -----------
Total non-current liabilities 385,266 307,097
------------------------------------------ ---- ----------- -----------
Total liabilities 421,469 393,348
------------------------------------------ ---- ----------- -----------
Total net assets 633,277 664,758
------------------------------------------ ---- ----------- -----------
Equity
Called up share capital 19 6,032 6,032
Share premium 20 257 257
Capital reduction reserve 21 475,038 482,578
Retained earnings 151,950 175,891
------------------------------------------ ---- ----------- -----------
Total equity 633,277 664,758
------------------------------------------ ---- ----------- -----------
Total equity and liabilities 1,054,746 1,058,106
------------------------------------------ ---- ----------- -----------
Net Asset Value per share basic (pence) 9 105.00 110.21
Net Asset Value per share diluted (pence) 9 104.60 109.99
EPRA NTA per share (pence) 9 105.00 110.21
------------------------------------------ ---- ----------- -----------
These financial statements were approved by the Board of
Directors on 16 March 2021 and signed on its behalf by:
Lynne Fennah
Chief Financial Officer
Company Statement of Financial Position
At At
31 December 31 December
2020 2019
Note GBP'000 GBP'000
------------------------------------ ---- ----------- -----------
ASSETS
Fixed Assets
Property, plant and equipment 11 56 288
Intangible assets 12 968 1,080
Investments in subsidiaries 30 187,598 81,686
------------------------------------ ---- ----------- -----------
Total fixed assets 188,622 83,054
------------------------------------ ---- ----------- -----------
Current Assets
Trade and other receivables 14 353 304
Amounts due from Group undertakings 14 350,578 420,006
Cash and cash equivalents 15 24,775 12,407
------------------------------------ ---- ----------- -----------
Total current Assets 375,706 432,717
------------------------------------ ---- ----------- -----------
Total assets 564,328 515,771
------------------------------------ ---- ----------- -----------
Creditors
Current creditors
Trade and other payables 16 2,918 2,841
Amounts due to Group undertakings 16 9,548 9,721
Borrowings - 9,995
------------------------------------ ---- ----------- -----------
Total current creditors 12,466 22,557
Non-current creditors
Borrowings 19,961 -
------------------------------------ ---- ----------- -----------
Total non-current creditors 19,961 -
------------------------------------ ---- ----------- -----------
Total creditors 32,427 22,557
------------------------------------ ---- ----------- -----------
Total net assets 531,901 493,214
------------------------------------ ---- ----------- -----------
Capital and Reserves
Called up share capital 19 6,032 6,032
Share premium 20 257 257
Capital reduction reserve 21 475,038 482,578
Retained earnings 50,574 4,347
------------------------------------ ---- ----------- -----------
Total capital and reserves 531,901 493,214
------------------------------------ ---- ----------- -----------
The Company made a profit for the year of GBP46,198,000 (2019:
GBP8,179,000 loss).
These financial statements were approved by the Board of
Directors on 16 March 2021 and signed on its behalf by:
Lynne Fennah
Director
Group Statement of Changes in Equity
Capital
Called up Share reduction Retained Cash flow Total
share capital premium reserve earnings hedge reserve equity
Year ended 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------- --------- --------- -------- ------------- --------
Balance at 1 January 2020 6,032 257 482,578 175,891 - 664,758
Changes in equity
Profit for the year - - - (23,970) - (23,970)
---------------------------------------------- ------------- --------- --------- -------- ------------- --------
Total comprehensive income for the year - - - (23,970) - (23,970)
---------------------------------------------- ------------- --------- --------- -------- ------------- --------
Share-based payments - - - 29 - 29
Dividends - - (7,540) - - (7,540)
---------------------------------------------- ------------- --------- --------- -------- ------------- --------
Total contributions and distribution
recognised directly in equity - - (7,540) 29 - (7,511)
---------------------------------------------- ------------- --------- --------- -------- ------------- --------
Balance at 31 December 2020 6,032 257 475,038 151,950 - 632,277
---------------------------------------------- ------------- --------- --------- -------- ------------- --------
Year ended 31 December 2019
Balance at 1 January 2019 6,029 467,268 45,458 121,215 (80) 639,890
Changes in equity
Profit for the year - - - 54,772 - 54,772
Fair value gain on cash flow hedge - - - - 80 80
---------------------------------------------- ------------- --------- --------- -------- ------------- --------
Total comprehensive income for the year - - - 54,772 80 54,852
---------------------------------------------- ------------- --------- --------- -------- ------------- --------
Share-based payments - - - 164 - 164
Share premium cancellation - (467,268) 467,268 - - -
---------------------------------------------- ------------- --------- --------- -------- ------------- --------
Share options exercised 3 257 - (260) - -
---------------------------------------------- ------------- --------- --------- -------- ------------- --------
Dividends - - (30,148) - - (30,148)
---------------------------------------------- ------------- --------- --------- -------- ------------- --------
Total contributions and distribution
recognised directly in equity 3 (467,011) 437,120 (96) - (29,984)
---------------------------------------------- ------------- --------- --------- -------- ------------- --------
Balance at 31 December 2019 6,032 257 482,578 175,891 - 664,758
---------------------------------------------- ------------- --------- --------- -------- ------------- --------
Company Statement of Changes in Equity
Capital
Called up Share reduction Retained Total
share capital premium reserve earnings equity
-------------------------------------------------------------
Year ended 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------- ------------- --------- --------- -------- --------
Balance at 1 January 2020 6,032 257 482,578 4,347 493,214
Changes in equity
Profit for the year - - - 46,198 46,198
------------------------------------------------------------- ------------- --------- --------- -------- --------
Total comprehensive loss for the year - - - 46,198 46,198
------------------------------------------------------------- ------------- --------- --------- -------- --------
Share-based payments - - - 29 29
Dividends - - (7,540) - (7,540)
------------------------------------------------------------- ------------- --------- --------- -------- --------
Total contributions and distribution recognised directly in
equity - - (7,540) 29 (7,511)
------------------------------------------------------------- ------------- --------- --------- -------- --------
Balance at 31 December 2020 6,032 257 475,038 50,574 531,901
------------------------------------------------------------- ------------- --------- --------- -------- --------
Year ended 31 December 2019
Balance at 1 January 2019 6,029 467,268 45,458 12,622 531,377
Changes in equity
Loss for the year - - - (8,179) (8,179)
------------------------------------------------------------- ------------- --------- --------- -------- --------
Total comprehensive loss for the year - - - (8,179) (8,179)
------------------------------------------------------------- ------------- --------- --------- -------- --------
Share-based payments - - - 164 164
Share premium cancellation - (467,268) 467,268 - -
------------------------------------------------------------- ------------- --------- --------- -------- --------
Share options exercised 3 257 - (260) -
------------------------------------------------------------- ------------- --------- --------- -------- --------
Dividends - - (30,148) - (30,148)
------------------------------------------------------------- ------------- --------- --------- -------- --------
Total contributions and distribution recognised directly in
equity 3 (467,011) 437,120 (96) (29,984)
------------------------------------------------------------- ------------- --------- --------- -------- --------
Balance at 31 December 2019 6,032 257 482,578 4,347 493,214
------------------------------------------------------------- ------------- --------- --------- -------- --------
Group Statement of Cash Flows
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
-------------------------------------------------------- ----------- -----------
Cash flows from operating activities
(Loss) / profit before income tax (23,970) 54,772
Share-based payments 29 164
Depreciation and amortisation 326 283
Finance income (22) (409)
Finance costs 13,341 13,148
Intangible asset impairment 898 -
Change in fair value of investment property 37,603 (29,176)
-------------------------------------------------------- ----------- -----------
28,205 38,782
-------------------------------------------------------- ----------- -----------
Decrease in trade and other receivables (3,971) 958
(Decrease)/increase in trade and other payables 1,653 (1,269)
Increase in deferred rental income (8,528) 2,236
-------------------------------------------------------- ----------- -----------
(10,846) 1,925
-------------------------------------------------------- ----------- -----------
Net cash flows generated from operations 17,359 40,707
-------------------------------------------------------- ----------- -----------
Cash flows from investing activities
Purchases of tangible fixed assets (72) (85)
Purchases of intangible assets (370) (552)
Purchase of investment property (14,258) (39,620)
Interest received 22 409
Fixed term deposit - 10,000
-------------------------------------------------------- ----------- -----------
Net cash flows from investing activities (14,678) (29,848)
-------------------------------------------------------- ----------- -----------
Cash flows from financing activities
Dividends paid (7,540) (30,148)
Bank borrowings drawn 77,800 115,500
Bank borrowings repaid (42,800) (90,500)
Loan arrangement fee paid (1,009) (1,064)
Finance cost (excluding fair value loss on derivatives) (11,722) (11,603)
-------------------------------------------------------- ----------- -----------
Net cash flows from financing activities 14,729 (17,815)
-------------------------------------------------------- ----------- -----------
Increase / (decrease) in cash and cash equivalents 17,410 (6,956)
Cash and cash equivalents at beginning of year 16,517 23,473
-------------------------------------------------------- ----------- -----------
Cash and cash equivalents at end of year 33,927 16,517
-------------------------------------------------------- ----------- -----------
Notes to the Financial Statements
1. ACCOUNTING POLICIES
1.1 Period of Account
The consolidated financial statements of the Group are in
respect of the reporting period from 1 January 2020 to 31 December
2020.
The consolidated financial statements of the Group for the year
ended 31 December 2020 comprise the results of Empiric Student
Property plc (the "Company") and its subsidiaries and were approved
by the Board for issue on 16 March 2021. The Company is a public
limited company incorporated and domiciled in England and Wales.
The Company's ordinary shares are admitted to the official list of
the UK Listing Authority, a division of the Financial Conduct
Authority, and traded on the London Stock Exchange. The registered
address of the Company is disclosed in the Company information.
1.2 Basis of Preparation
The consolidated financial statements of the Group for the year
to 31 December 2020 comprise the results of Empiric Student
Property plc (the "Company") and its subsidiaries (together, the
"Group"). These financial statements have been prepared on a going
concern basis and in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006 and international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies to the
European Union. The Parent Company financial statements have been
prepared in accordance with FRS 101, Financial Reporting Standards
Reduced Disclosure Framework.
The "requirements of the Companies Act 2006" here means accounts
being prepared in accordance with "international accounting
standards" as defined in section 474(1) of that Act, as it applied
immediately before the Implementation Period (IP) completion day
(end of transition period), including where the company also makes
use of standards which have been adopted for use within the United
Kingdom in accordance with regulation 1(5) of the International
Accounting Standards and European Public Limited Liability Company
(Amendment etc.) (EU Exit) Regulations 2019".
The Group's financial statements have been prepared on a
historical cost basis, except for investment property and
derivative financial instruments which have been measured at fair
value. The consolidated financial statements are presented in
Sterling which is also the Company and the Group's functional
currency.
The Company has applied the exemption allowed under section
408(1b) of the Companies Act 2006 and has therefore not presented
its own Statement of Comprehensive Income in these financial
statements. The Group loss for the year includes a profit after
taxation of GBP46,198,000: (2019 loss of GBP8,179,000) for the
Company, which is reflected in the financial statements of the
Company.
The financial information does not constitute the Group's
statutory accounts for the year ended 31 December 2020 or the year
ended 31 December 2019 but is derived from those accounts. The
Group's statutory accounts for the year ended 31 December 2019 have
been delivered to the Registrar of Companies. The Group's statutory
accounts for the year ended 31 December 2020 will be delivered to
the Registrar of Companies in due course. The Auditor has reported
on both the December 2020 and December 2019 accounts; the reports
were unqualified, did not include a reference to any matters to
which the Auditor drew attention by way of emphasis without
qualifying their report and did not contain any statement under
Section 498 of the Companies Act 2006.
1.3 Disclosure Exemptions Adopted
In preparing the financial statements of the Parent Company,
advantage has been taken of all disclosure exemptions conferred by
FRS 101. The Parent Company financial statements do not
include:
-- certain comparative information as otherwise required by
international accounting standards;
-- a statement of cash flows;
-- the effect of future accounting standards not yet adopted; and
-- disclosure of related party transactions with other wholly
owned members of the Group headed by Empiric Student Property
plc.
In addition, and in accordance with FRS 101, further disclosure
exemptions have been adopted because equivalent disclosures are
included in the consolidated financial statements of Empiric
Student Property Plc. The Parent Company Financial Statements do
not include certain disclosures in respect of:
-- Financial Instruments (other than certain disclosures
required as a result of recording financial instruments at fair
value); and
-- Fair value measurement (other than certain disclosures
required as a result of recording financial instruments at fair
value).
The Company has taken advantage of the exemption allowed under
section 408 of the Companies Act 2006 and does not present its own
profit and loss account in these financial statements.
1.4 Going Concern
The COVID-19 pandemic has created global economic uncertainty,
and in particular an uncertainty around income for the 2020/21 and
2021/22 academic years. Accordingly, the Group has conducted a
detailed going concern review and considered its liquidity position
and banking covenant compliance strength.
On 31 March 2020 the Group announced the difficult decision to
suspend dividend distributions and guidance. The Group also took
decisive action to focus on liquidity. All development spend was
paused and other discretionary costs were reviewed with reductions
identified and implemented. The Group also announced it would look
favorably upon requests on a case -by -case basis from its
customers who were either no longer in occupation or, due to
university closures, plan not to return to their accommodation, to
be released from their rent and lease obligations from 25 April
2020 onwards. The worst-case estimate for this was a GBP21 million
cash impact, however the final actual impact of releasing students
their rent obligations for the academic year 2020/21 was much less
at GBP6.5m.
As at 31 December 2020 the Group had GBP34 million in cash and
GBP30 million of undrawn investment debt facilities. The Group is
well funded and has no refinancing requirements until November
2022.
The Group's debt facilities include covenants in respect of LTV
and interest cover, both projected and historic, and all debt
facilities are ring fenced with each specific lender. The Group
maintains regular dialogue with all of its lenders as part of the
ordinary course of business, however during the pandemic we have
increased the frequency of this dialogue. As part of these
discussions with our lenders we have had conversations specifically
around the interest cover covenants to ensure we either temporarily
restructure these or gain the relevant waivers from the banks to
ensure that no issues arise. To date all of our banks have been
supportive during this period and have expressed commitment to the
long-term relationship they wish to build with Empiric.
Management has evaluated a number of scenarios in its going
concern model. The critical assumption is the revenue occupancy for
the 2021/22 academic year. Upside, central and downside cases have
been constructed showing 2021/22 academic year occupancy of between
80% and 95%. A downside stress scenario has also been considered
which has set 2021/22 revenue occupancy at similar levels to the
2020/21 academic year.
Revenue occupancy Revenue occupancy
for for
Scenario 2020/21 academic 2021/22 academic
year year
-------------------------------------- ----------------- -----------------
Scenario 1 - Upside Scenario 65% 95%
Scenario 2 - Central Scenario 65% 85%
Scenario 3 - Downside Scenario 65% 80%
Scenario 4 - Downside Stress Scenario 65% 65%
-------------------------------------- ----------------- -----------------
The Group continues to maintain covenant compliance for its LTV
thresholds throughout the going concern assessment period. Property
values would have to fall by more than 15% from December 2020
valuations before LTV covenants are breached.
In Scenario 1, 2 & 3 above the Group continues to maintain
covenant compliance for all its interest cover covenants. It
maintains adequate levels of liquidity and does not need to utilise
the additional GBP20 million RCF facility negotiated with Lloyds
Bank plc throughout the same assessment period. In addition, no
assumption is made as to the level of additional cost cutting
measures or mitigating actions which could potentially be
undertaken.
In Scenario 4, under our Downside Stress Scenario, we would not
meet interest cover covenants at the 30 June 2021 measurement date
for two lenders. However, the Group has cure rights under the
lending agreements and sufficient cash headroom to cure any ICR
breaches if required. For one lender, under scenario 4, we would
not meet a specific 80% occupancy covenant requirement by October
2021. Under this scenario we would be dependent on the further
support of this lender, and we would expect this support to be
forthcoming.
To support the Directors' going concern assessment, the
management also evaluated the occupancy level at which all ICR
covenant tests were breached and, additionally, the impact of a
'Reverse Stress Test' which was performed to determine the level of
revenue occupancy for the 2021/22 academic year at which the Group
would need to seek alternative sources of funding. For this
modeling we kept revenue occupancy for the 2020/21 academic year at
65%.
The Director's noted that if occupancy falls below 44% then the
Group would be in breach of all ICR covenants, and at 18% revenue
occupancy for the 2021/22 academic year (47% lower revenue
occupancy than our Downside Stress Scenario) the Group would need
to seek alternative sources of funding.
Having reviewed and considered three modelled scenarios, a
Downside Stress Scenario, the 2021/22 academic year occupancy level
at which ICR covenants would be breached and the level at which
alternative sources of funding would be required, the Directors
consider that the Group has adequate resources in place for at
least 12 months from the date of these results and have therefore
adopted the going concern basis of accounting in preparing the
annual financial statements.
1.5 Significant Accounting Judgements, Estimates and
Assumptions
The preparation of the Group's financial statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities, and the disclosure of contingent liabilities, at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability
affected in future periods.
Estimates
In the process of applying the Group's accounting policies,
management has made the following estimates, which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
(a) Fair Valuation of Investment Property
The market value of investment property is determined, by an
independent external real estate valuation expert, to be the
estimated amount for which a property should exchange on the date
of the valuation in an arm's length transaction. Properties have
been valued on an individual basis. The valuation experts use
recognised valuation techniques and the principles of IFRS 13.
The valuations have been prepared in accordance with the RICS
Valuation - Professional Standards January 2014 (the "Red Book").
Factors reflected include current market conditions, annual
rentals, lease lengths and location. The significant methods and
assumptions used by valuers in estimating the fair value of
investment property are set out in Note 13.
For properties under development the fair value is calculated by
estimating the fair value of the completed property using the
income capitalisation technique less estimated costs to completion
and an appropriate developer's margin.
Judgements
In the process of applying the Group's accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
(b) Operating Lease Contracts - the Group as Lessor
The Group has investment properties which have various
categories of leases in place with tenants. The judgements by lease
type are detailed below:
Student leases: As these leases are all have a term of less than
one year, the Group retains all the significant risks and rewards
of ownership of these properties and so accounts for the leases as
operating leases.
Nominations and Commercial leases: The Group has determined,
based on an evaluation of the terms and conditions of the
arrangements, particularly the lease terms, insurance requirements
and minimum lease payments, that it retains all the significant
risks and rewards of ownership of these properties and so accounts
for the leases as operating leases.
Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 31 December
2020. Subsidiaries are those investee entities where control is
achieved when the Group 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.
Specifically, the Group controls an investee if, and only if, it
has:
(a) power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee);
(b) exposure, or rights, to variable returns from its involvement with the investee; and
(c) the ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar
rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group's voting rights and potential voting rights.
The Group reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the
subsidiary.
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 and
unrealised gains and losses resulting from intra-Group transactions
are eliminated in full.
Financial Assets
The Group classifies its financial assets into one of the
categories discussed below, depending on the purpose for which the
asset was acquired. Other than financial assets in a qualifying
hedging relationship, the Group's accounting policy for each
category is as follows:
Fair Value Through Profit or Loss
This category comprises only in-the-money derivatives (see
"Financial liabilities" section of out-of- money derivatives) .
They are carried in the Statement of Financial Position at fair
value with changes in fair value recognised in the Statement of
Comprehensive Income in the finance income or expense line. Other
than derivative financial instruments which are not designated as
hedging instruments, the Group does not have any assets held for
trading nor does it voluntarily classify any financial assets as
being at fair value through profit or loss.
Amortised Cost
These assets are primarily from the provision of goods and
services to customers (e.g. trade receivables), but also
incorporate other types of financial assets where the objective is
to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely payments of principal and
interest. They are initially recognised at fair value plus
transaction costs that are directly attributable to their
acquisition or issue and are subsequently carried at amortised cost
using the effective interest rate method, less provision for
impairment.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 using the lifetime
expected credit losses. During this process the probability of the
non-payment of the trade receivable is assessed. This probability
is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
trade receivables. For trade receivables, which are reported net,
such provisions are recorded in a separate provision account with
the loss being recognised within cost of sales in the 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.
Impairment provisions for intercompany receivables are
recognised based on a forward-looking expected credit loss model.
The methodology used to determine the amount of the provision is
based on whether there has been a significant increase in credit
risk since initial recognition of the financial asset. For those
where the credit risk has not increased significantly since initial
recognition of the financial asset, 12-month expected credit losses
against gross interest income are recognised. For those where the
credit risk has increased significantly, lifetime expected credit
losses along with the gross interest income are recognised. For
those that are determined to be credit impaired, lifetime expected
credit losses along with interest income on a net basis are
recognised.
From time to time, the Group elects to renegotiate the terms of
trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to
changes in the timing of payments rather than changes to the
amounts owed and, in consequence, the new expected cash flows are
discounted at the original effective interest rate and any
resulting difference to the carrying value is recognised in the
Statement of Comprehensive Income (operating profit).
The Group's financial assets measured at amortised cost comprise
trade and other receivables and cash and cash equivalents in the
Statement of Financial Position.
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, other short-term highly liquid investments with
original maturities of three months or less, and - for the purpose
of the Statement of Cash Flows - bank overdrafts. Bank overdrafts
are shown within loans and borrowings in current liabilities on the
Statement of Financial Position.
Financial Liabilities
The Group classifies its financial liabilities into one of two
categories, depending on the purpose for which the liability was
acquired.
Other than financial liabilities in a qualifying hedging
relationship (see below), the Group's accounting policy for each
category is as follows:
Fair Value Through Profit or Loss
This category comprises only out-of-the-money derivatives (see
"Financial assets" for in-the-money derivatives). They are carried
in the Statement of Financial Position at fair value with changes
in fair value recognised in the Statement of Comprehensive Income.
The Group does not hold or issue derivative financial instruments
for speculative purposes, but for hedging purposes. Other than
these derivative financial instruments, the Group does not have any
liabilities held for trading nor has it designated any financial
liabilities as being at fair value through profit or loss.
Other Financial Liabilities
Other financial liabilities include the following items:
- Bank borrowing is initially recognised at fair value net of
any transaction costs directly attributable to the issue of the
instrument. Such interest-bearing liabilities are subsequently
measured at amortised cost using the effective interest rate
method, which ensures that any interest expense over the period to
repayment is at a constant rate on the balance of the liability
carried in the Consolidated Statement of Financial Position. For
the purposes of each financial liability, interest expense includes
initial transaction costs and any premium payable on redemption, as
well as any interest or coupon payable while the liability is
outstanding.
- Trade payables and other short-term monetary liabilities,
which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest method.
Hedge Accounting
Hedge accounting is applied to financial assets and financial
liabilities only where all of the following criteria are met:
- at the inception of the hedge there is formal designation and
documentation of the hedging relationship and the Group's risk
management objective and strategy for undertaking the hedge;
and
- the hedge relationship meets all of the hedge effectiveness
requirements, including that an economic relationship exists
between the hedged item and the hedging instrument, the credit risk
effect does not dominate the value changes, and the hedge ratio is
designated based on actual quantities of the hedged item and
hedging instrument.
Cash Flow Hedges
The effective part of forward contracts designated as a hedge of
the variability in cash flows of interest rate risk arising from
firm commitments, and highly probable forecast transactions, are
measured at fair value with changes in fair value recognised in
Other Comprehensive Income and accumulated in the cash flow hedge
reserve. The Group uses such contracts to fix the cost interest
payments.
Intangible Assets
Intangible assets are initially recognised at cost and then
subsequently carried at cost less accumulated amortisation and
impairment losses.
Amortisation has been charged to the Consolidated Statement of
Comprehensive Income on a straight-line basis over ten years.
Investment Property
Investment property comprises property that is held to earn
rentals or for capital appreciation, or both, and property under
development rather than for sale in the ordinary course of business
or for use in production or administrative functions.
Investment property is measured initially at cost including
transaction costs and is included in the financial statements on
unconditional exchange. Transaction costs include transfer taxes,
professional fees and initial leasing commissions to bring the
property to the condition necessary for it to be capable of
operating.
Once purchased, investment property is stated at fair value.
Gains or losses arising from changes in the fair values are
included in the Consolidated Statement of Comprehensive Income in
the period in which they arise.
Investment property is derecognised when it has been disposed
of, or permanently withdrawn from use, and no future economic
benefit is expected from its disposal. The investment property is
derecognised upon unconditional exchange. The difference between
the net disposal proceeds and the carrying amount of the asset
would result in either gains or losses at the retirement or
disposal of investment property. Any gains or losses are recognised
in the Consolidated Statement of Comprehensive Income in the period
of retirement or disposal.
Property, Plant and Equipment
All property, plant and equipment is stated at historical cost
less depreciation. Historical cost includes expenditure which is
directly attributable to the acquisition of the asset.
Depreciation has been charged to the Consolidated Statement of
Comprehensive Income on the following basis:
- Fixtures and fittings: 15% per annum on a reducing balance basis; and
- Computer equipment: straight-line basis over three years.
Rental Income
The Group is the lessor in respect of operating leases. Rental
income arising from operating leases on investment property is
accounted for on a straight-line basis over the lease term and is
included in gross rental income in the Consolidated Statement of
Comprehensive Income due to its operating nature.
Tenant lease incentives are recognised as a reduction of rental
revenue on a straight-line basis over the term of the lease. 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.
Amounts received from tenants to terminate leases or to
compensate for dilapidations are recognised in the
Consolidated Statement of Comprehensive Income when the right to receive them arises.
Where a student requested a rent refund and they met the
criteria set out, including leaving the property, the Group
recognise no further income in relation to that let, reduce cash
with the cash amount refunded, wrote off any deferred income in
relation to the refund and any difference between cash and deferred
income was debited or credited to revenue in the Statement of
Comprehensive Income.
Segmental Information
The Directors are of the opinion that the Group is engaged in a
single segment business, being the investment in student and
commercial lettings, within the United Kingdom.
Share-Based Payments
Where share options are awarded to employees, the fair value of
the options at the date of grant is charged to the Consolidated
Statement of Comprehensive Income over the vesting period.
Non-market vesting conditions are taken into account by adjusting
the number of equity instruments expected to vest at each reporting
date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually
vest. Non-vesting conditions and market vesting conditions are
factored into the fair value of the options granted. So long as all
other vesting conditions are satisfied, a charge is made
irrespective of whether the market vesting conditions are
satisfied.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the Consolidated Statement of Comprehensive Income over the
remaining vesting period. National Insurance obligations with
respect to equity-settled share-based payments awards are accrued
over the vesting period.
Share Capital
Ordinary shares are classified as equity. External costs
directly attributable to the issuance of shares are recognised as a
deduction from equity.
Taxation
As the Group is a UK REIT, profits arising in respect of the
property rental business are not subject to UK corporation tax.
Taxation in respect of profits and losses outside of the
property rental business comprises current and deferred taxes.
Taxation is recognised in the Consolidated Statement of
Comprehensive Income except to the extent that it relates to items
recognised as direct movement in equity, in which case it is also
recognised as a direct movement in equity.
Current tax is the total of the expected corporation tax payable
in respect of any non-REIT taxable income for the year and any
adjustment in respect of previous periods, based on tax rates
applicable to the periods.
Deferred tax is calculated in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases, based on tax
rates enacted or substantively enacted at the balance sheet
date.
Deferred tax liabilities are recognised in full (except to the
extent that they relate to the initial recognition of assets and
liabilities not acquired in a business combination). Deferred tax
assets are only recognised to the extent that it is considered
probable that the Group will obtain a tax benefit when the
underlying temporary differences unwind.
1.6 Impact of New Accounting Standards and Changes in Accounting
Policies
At the date of authorisation of these financial statements, the
following accounting standards had been issued which are not yet
applicable to the Group:
- IAS 1/8 definition of materiality amendment
- IFRS 3 definition of a business
- IBOR reform phase 1
- IFRS 16 amendment for rent concessions
The above standards or interpretations not yet effective are
expected to have a material impact on these condensed consolidated
financial statements of the Group.
2. REVENUE
Group
------------------------
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------- ----------- -----------
Student rental income 64,218 69,209
Student rental refunds (6,539) -
Commercial rental income 1,765 1,699
------------------------- ----------- -----------
Total revenue 59,444 70,908
------------------------- ----------- -----------
3. PROPERTY EXPENSES
Group
------------------------
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------- ----------- -----------
Direct site costs 7,575 7,128
Technology services 671 936
Site office and utilities 9,371 9,832
Cleaning and service contracts 2,922 2,729
Repairs and maintenance 2,112 2,726
------------------------------- ----------- -----------
Total property expenses 22,651 23,351
------------------------------- ----------- -----------
4. ADMINISTRATIVE EXPENSES
Group
------------------------
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------------------------ ----------- -----------
Salaries and Directors' remuneration 4,655 5,024
Legal and professional fees 1,976 1,776
Other administrative costs 2,453 1,604
IT expenses 326 333
------------------------------------------------------------ ----------- -----------
9,410 8,737
------------------------------------------------------------ ----------- -----------
Auditor's fees
Fees payable for the audit of the Group's annual accounts 210 210
Fees payable for the review of the Group's interim accounts 40 40
Fees payable for the audit of the Group's subsidiaries 136 136
------------------------------------------------------------ ----------- -----------
Total auditor's fees 386 386
------------------------------------------------------------ ----------- -----------
Abortive acquisition costs 45 99
------------------------------------------------------------ ----------- -----------
Total administrative expenses 9,841 9,222
------------------------------------------------------------ ----------- -----------
5. NET FINANCE COST
Group
------------------------
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
--------------------------------------- ----------- -----------
Finance costs
Interest expense on bank borrowings 11,838 11,947
Amortisation of loan transaction costs 1,503 1,201
--------------------------------------- ----------- -----------
13,341 13,148
--------------------------------------- ----------- -----------
Finance income
Fair value gain on interest rate swap - 181
Interest received on bank deposits 22 228
--------------------------------------- ----------- -----------
22 409
--------------------------------------- ----------- -----------
Net finance cost 13,319 12,739
--------------------------------------- ----------- -----------
6. EMPLOYEES AND DIRECTORS
Group
------------------------
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------------------------------------------------- ----------- -----------
Wages and salaries 8,021 6,994
Pension costs 295 327
Cash bonus - 878
Share-based payments 29 164
National insurance 725 750
------------------------------------------------------------------------------------- ----------- -----------
9,070 9,113
------------------------------------------------------------------------------------- ----------- -----------
Less: Hello Student amounts included in property expenses (4,415) (4,089)
------------------------------------------------------------------------------------- ----------- -----------
Amounts included in administrative expenses 4,655 5,024
------------------------------------------------------------------------------------- ----------- -----------
The average monthly number of employees of the Group during the year was as follows:
Management 5 5
Administration - ESP 44 27
Operations - Hello Student(R) 316 335
------------------------------------------------------------------------------------- ----------- -----------
365 367
------------------------------------------------------------------------------------- ----------- -----------
Group
------------------------
Year ended Year ended
31 December 31 December
2020 2019
Directors' remuneration GBP'000 GBP'000
-------------------------- ----------- -----------
Salaries and fees 928 1,007
Pension costs 86 107
Cash bonus - 212
Payment in lieu of notice 351 -
Share-based payments 29 164
-------------------------- ----------- -----------
1,394 1,490
-------------------------- ----------- -----------
A summary of the Directors' emoluments, including the
disclosures required by the Companies Act 2006 is set out in the
Directors' Remuneration Report.
7. CORPORATION TAX
The Group became a REIT on 1 July 2014 and as a result does not
pay UK corporation tax on its profits and gains from its qualifying
property rental business in the UK provided it meets certain
conditions. Non-qualifying profits and gains of the Group continue
to be subject to corporation tax as normal.
In order to achieve and retain REIT status, several conditions
have to be met on entry to the regime and on an ongoing basis,
including:
- at the start of each accounting period, the assets of the
property rental business (plus any cash and certain readily
realisable investments) must be at least 75% of the total value of
the Group's assets;
- at least 75% of the Group's total profits must arise from the
tax-exempt property rental business; and
- at least 90% of the tax exempt profit of the property rental
business (excluding gains) of the accounting period must be
distributed.
In addition, the full UK corporation tax exemption in respect of
the profits of the property rental business will not be available
if the profit: financing cost ratio in respect of the property
rental business is less than 1.25.
The Group met all of the relevant REIT conditions for the year
ended 31 December 2020.
The Directors intend that the Group should continue as a REIT
for the foreseeable future, with the result that deferred tax is
not required to be recognised in respect of temporary differences
relating to the property rental business.
Group
------------------------
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
-------------------------------------------------------------------------------------------- ----------- -----------
Current tax
Income tax charge/(credit) for the year - -
Adjustment in respect of prior year - -
-------------------------------------------------------------------------------------------- ----------- -----------
Total current income tax charge/(credit) in the income statement - -
-------------------------------------------------------------------------------------------- ----------- -----------
Deferred tax
Total deferred income tax charge/(credit) in the income statement - -
-------------------------------------------------------------------------------------------- ----------- -----------
Total current income tax charge/(credit) in the income statement - -
-------------------------------------------------------------------------------------------- ----------- -----------
The tax assessed for the year is lower than the standard rate of corporation tax in the year
Profit for the year (23,970) 54,772
-------------------------------------------------------------------------------------------- ----------- -----------
Profit before tax multiplied by the rate of corporation tax in the UK of 19% (2019: 19%) (4,554) 10,407
Exempt property rental profits in the year (2,042) (4,194)
Exempt property revaluations in the year 7,144 (5,543)
Effects of:
Non-allowable expenses 70 47
Capital allowances (1,006) (1,143)
Unutilised current year tax losses 388 426
-------------------------------------------------------------------------------------------- ----------- -----------
Total current income tax charge/(credit) in the income statement - -
-------------------------------------------------------------------------------------------- ----------- -----------
A deferred tax asset in respect of the tax losses generated by
the residual (non-tax exempt) business of the Group GBP388,000 (31
December 2019: GBP426,000) will be recognised to the extent that
their utilisation is probable. On the basis that the residual
business is not expected to be income generating in future periods,
a deferred tax asset of GBP3,027,000 (2019: GBP3,818,000) has not
been recognised in respect of such losses.
8. EARNINGS PER SHARE
The ordinary number of shares is based on the time-weighted
average number of shares throughout the year.
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated using the weighted
average number of shares adjusted to assume the conversion of all
dilutive potential ordinary shares.
EPRA EPS, reported on the basis recommended for real estate
companies by EPRA, is a key measure of the Group's operating
results.
Adjusted earnings is a performance measure used by the Board to
assess the Group's dividend payments. Licence fees, development
rebates and rental guarantees are added to EPRA earnings on the
basis noted below as the Board sees these cash flows as supportive
of dividend payments.
- The adjustment for licence fee receivable is calculated by
reference to the fraction of the total period of completed
construction during the period, multiplied by the total licence fee
receivable on a given forward-funded asset.
- The development rebate is due from developers in relation to
late completion on forward-funded agreements as stipulated in
development agreements.
- The discounts on acquisition are in respect of the vendor
guaranteeing a rental shortfall for the first year of operation as
stipulated in the sale and purchase agreement.
Reconciliations are set out below:
Calculation of Calculation
Calculation of Calculation of EPRA of EPRA Calculation of
basic EPS diluted EPS basic EPS diluted EPS adjusted EPS
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- -------------- ---------------- -------------- ----------- --------------
Year to 31 December 2020
Earnings (23,970) (23,970) (23,970) (23,970) (23,970)
Adjustment to include discounts on
acquisition due to rental guarantees
in the year - - - - 221
Adjustments to remove:
Changes in fair value of investment
properties (Note 13) - - 37,603 37,603 37,603
--------------------------------------- -------------- ---------------- -------------- ----------- --------------
Earnings/Adjusted Earnings (23,970) (23,970) 13,633 13,633 13,854
Weighted average number of shares
('000) 603,161 603,161 603,161 603,161 603,161
Adjustment for employee share options
('000) - -(1) - 551 -
--------------------------------------- -------------- ---------------- -------------- ----------- --------------
Total number shares ('000) 603,161 603,161 603,161 603,712 603,161
--------------------------------------- -------------- ---------------- -------------- ----------- --------------
Per-share amount (pence) (3.97) (3.97) 2.26 2.26 2.30
--------------------------------------- -------------- ---------------- -------------- ----------- --------------
Year to 31 December 2019
Earnings 54,772 54,772 54,772 54,772 54,772
Adjustment to include licence fee
receivable on forward-funded
developments in the year - - - - 1,038
Adjustment to include discounts on
acquisition due to rental guarantees
in the year - - - - 229
Adjustments to remove:
Changes in fair value of investment
properties (Note 13) - - (29,176) (29,176) (29,176)
Changes in fair value of interest rate
derivatives (Note 18) - - (181) (181) (181)
--------------------------------------- -------------- ---------------- -------------- ----------- --------------
Earnings/Adjusted Earnings 54,772 54,772 25,415 25,415 26,682
--------------------------------------- -------------- ---------------- -------------- ----------- --------------
Weighted average number of shares
('000) 602,929 602,929 602,929 602,929 602,929
Adjustment for employee share options
('000) - 1,215 - 1,215 -
--------------------------------------- -------------- ---------------- -------------- ----------- --------------
Total number shares ('000) 602,929 604,144 602,929 604,144 602,929
--------------------------------------- -------------- ---------------- -------------- ----------- --------------
Per-share amount (pence) 9.08 9.07 4.22 4.21 4.43
--------------------------------------- -------------- ---------------- -------------- ----------- --------------
1 Due to the Group making a loss in the year, under IAS 33 the
share options become antidilutive and thus are excluded from the
above calculation.
9. NET ASSET VALUE PER SHARE
In October 2019, EPRA published new best practice
recommendations for financial disclosures by public real estate
companies. Three new measures of Net Asset Value were introduced
namely: EPRA Net Tangible Assets (NTA), EPRA Net Reinvestment Value
(NRV) and EPRA Net Disposal Value (NDV). These recommendations are
effective for accounting periods starting on 1 January 2020 and
have been adopted by the Group.
The principles of the three new measures per EPRA are below:
EPRA Net Reinstatement Value: Assumes that entities never sell
assets and aims to represent the value required to rebuild the
entity.
EPRA Net Tangible Assets: Assumes that entities buy and sell
assets, thereby crystallising certain levels of unavoidable
deferred tax.
EPRA Net Disposal Value: Represents the shareholders' value
under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated to the
full extent of their liability, net of any resulting tax. As the
Group is a REIT, no adjustment is made for deferred tax.
The Group consider NAV to be the most relevant measure of the
NAV measures and we expect this to be our primary NAV measure going
forward.
A reconciliation of the three new EPRA NAV metrics from IFRS NAV
is shown in the table below. The previously reported EPRA NAV has
also been included for comparative purposes.
Previously
-------
reported
NAV New EPRA NAV measures measure
------- ------------------------- ----------
EPRA EPRA EPRA EPRA
IFRS NRV NTA NDV NAV
Year ended 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ------- ------- ------- ------- ----------
Net assets per Statement of Financial Position 633,278 633,278 633,278 633,278 633,278
Adjustments
Intangibles - - - - -
Purchaser's costs (1) - 32,830 - - -
-------------------------------------------------- ------- ------- ------- ------- ----------
Net assets used in per share calculation 633,278 666,108 633,278 633,278 633,278
-------------------------------------------------- ------- ------- ------- ------- ----------
Number of shares in issue
-------------------------------------------------- ------- ------- ------- ------- ----------
Issued share capital ('000) 603,161 603,161 603,161 603,161 603,161
Issued share capital plus employee options ('000) 605,475 605,475 605,475 605,475 605,475
Net asset value per share GBP GBP GBP GBP GBP
-------------------------------------------------- ------- ------- ------- ------- ----------
Basic net asset value per share 1.050 1.104 1.050 1.050 1.050
Diluted net asset value per share 1.046 1.101 1.046 1.046 1.046
-------------------------------------------------- ------- ------- ------- ------- ----------
Previously
-------
reported
NAV New EPRA NAV measures measure
------- ------------------------- ----------
EPRA EPRA EPRA EPRA
IFRS NRV NTA NDV NAV
Year ended 31 December 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ------- ------- ------- ------- ----------
Net assets per Statement of Financial Position 664,758 664,758 664,758 664,758 664,758
Adjustments
Intangibles - - - - -
Purchaser's costs (1) - 36,593 - - -
-------------------------------------------------- ------- ------- ------- ------- ----------
Net assets used in per share calculation 664,758 701,351 664,758 664,758 664,758
-------------------------------------------------- ------- ------- ------- ------- ----------
Number of shares in issue
-------------------------------------------------- ------- ------- ------- ------- ----------
Issued share capital ('000) 603,161 603,161 603,161 603,161 603,161
Issued share capital plus employee options ('000) 604,376 604,376 604,376 604,376 604,376
Net asset value per share GBP GBP GBP GBP GBP
-------------------------------------------------- ------- ------- ------- ------- ----------
Basic net asset value per share 1.102 1.162 1.102 1.102 1.102
Diluted net asset value per share 1.100 1.160 1.100 1.100 1.100
-------------------------------------------------- ------- ------- ------- ------- ----------
1 EPRA NTA and EPRA NDV reflect IFRS values which are net of
purchaser's costs. Any purchaser's costs deducted from the market
value, are added back when calculating EPRA NRV
10. DIVIDS PAID
Group and Company
------------------------
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
-------------------------------------------------------------------------------------------- ----------- -----------
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 31
December
2018 - 7,536
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 31 March
2019 - 7,536
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 30 June
2019 - 7,536
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 30
September
2019 - 7,540
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 31
December
2019 7,540 -
-------------------------------------------------------------------------------------------- ----------- -----------
7,540 30,148
-------------------------------------------------------------------------------------------- ----------- -----------
No dividends have been declared since the year end.
11. FIXED ASSETS
Group Company
Fixtures and Computer Fixtures and Computer
fittings equipment Total fittings equipment Total
Year ended 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------ --------- ------- ------------ --------- -------
Costs
As at 1 January 2020 490 266 756 490 193 683
Additions - 72 72 - 26 26
---------------------------- ------------ --------- ------- ------------ --------- -------
As at 31 December 2020 490 338 828 490 219 709
---------------------------- ------------ --------- ------- ------------ --------- -------
Depreciation
As at 1 January 2020 223 181 404 214 181 395
Charge for the year 49 41 90 49 10 59
Impairment 199 - 199 199 - 199
---------------------------- ------------ --------- ------- ------------ --------- -------
As at 31 December 2020 471 222 693 462 191 653
---------------------------- ------------ --------- ------- ------------ --------- -------
Net book value
As at 31 December 2020 19 116 135 28 28 56
---------------------------- ------------ --------- ------- ------------ --------- -------
Group Company
Fixtures and Computer Fixtures and Computer
fittings equipment Total fittings equipment Total
Year ended 31 December 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------ --------- ------- ------------ --------- -------
Costs
As at 1 January 2019 490 181 671 490 181 671
Additions - 85 85 - 12 12
---------------------------- ------------ --------- ------- ------------ --------- -------
As at 31 December 2019 490 266 756 490 193 683
---------------------------- ------------ --------- ------- ------------ --------- -------
Depreciation
As at 1 January 2019 165 140 305 165 140 305
Charge for the year 58 41 99 49 41 90
---------------------------- ------------ --------- ------- ------------ --------- -------
As at 31 December 2019 223 181 404 214 181 395
---------------------------- ------------ --------- ------- ------------ --------- -------
Net book value
As at 31 December 2019 267 85 352 276 12 288
---------------------------- ------------ --------- ------- ------------ --------- -------
12. INTANGIBLE ASSETS
Group Company
-------------------------------------- --------------------
Hello Student(R)
website NAVision(1) NAVision(1)
development development Total development Total
Year ended 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------------- ----------- ------- ----------- -------
Costs
As at 1 January 2020 878 1,271 2,149 1,271 1,271
Additions - 370 370 370 370
---------------------------- ---------------- ----------- ------- ----------- -------
As at 31 December 2020 878 1,641 2,519 1,641 1,641
---------------------------- ---------------- ----------- ------- ----------- -------
Amortisation
As at 1 January 2020 339 191 530 191 191
Charge for the year 87 149 236 149 149
Impairment 366 333 699 333 333
---------------------------- ---------------- ----------- ------- ----------- -------
As at 31 December 2020 792 673 1,465 673 673
---------------------------- ---------------- ----------- ------- ----------- -------
Net book value
As at 31 December 2020 86 968 1,054 968 968
---------------------------- ---------------- ----------- ------- ----------- -------
Group Company
-------------------------------------------------------- --------------------
Hello Student(R) Hello Student(R)
application website NAVision(1) NAVision(1)
development development development Total development Total
Year ended 31 December 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
Costs
As at 1 January 2019 311 878 719 1,597 719 719
Additions - - 552 552 552 552
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
As at 31 December 2019 311 878 1,271 2,149 1,271 1,271
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
Amortisation
As at 1 January 2019 311 252 92 344 92 92
Charge for the year - 87 99 186 99 99
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
As at 31 December 2019 - 339 191 530 191 191
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
Net book value
As at 31 December 2019 - 539 1,080 1,619 1,080 1,080
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
1. Relates to the development of our accounting system which
enables us to bring our revenue management system inhouse see page
29 for detail.
Impairment
Hello Student(R) website development
During the year we conducted a review of our intangible asset
relating to the Hello Student website. As can be seen on pages 21,
we have identified that overhauling our website will be a priority
for 2021. As such there was an impairment during the year writing
of GBP366,000 of costs relating to the old website which have been
deemed to be obsolete.
NAVision development
During the year we launched our new revenue management system,
see page 29 for detail. This new system has provided us with a
number of benefits. As a result of the launch of this new release
we conducted a review of our intangible asset relating to the
NAVision development. It was found that there were a number of
costs identified which were for parts of the system no longer in
use under the new revenue management system. As such there was an
impairment during the year writing of GBP333,000 of costs relating
to the items within the NAVision system which were replaced by the
new system.
13. INVESTMENT PROPERTY
Group
------------------------------------------------------------
Investment
Investment properties Total Properties Total
properties long operational under investment
freehold leasehold assets development property
Year ended 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- ---------- ----------- ----------- ----------
As at 1 January 2020 861,639 137,741 999,380 29,700 1,029,080
Property additions 3,915 352 4,267 9,376 13,643
Transfer to / from developments 13,082 - 13,082 (13,082) -
Change in fair value during the year (29,416) (5,944) (35,360) (2,243) (37,603)
------------------------------------- ---------- ---------- ----------- ----------- ----------
As at 31 December 2020 849,220 132,149 981,369 23,751 1,005,120
------------------------------------- ---------- ---------- ----------- ----------- ----------
Group
------------------------------------------------------------
Investment
Investment properties Total Properties Total
properties long operational under investment
freehold leasehold assets development property
Year ended 31 December 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- ---------- ----------- ----------- ----------
As at 1 January 2019 796,640 132,731 929,371 41,670 971,041
Property additions 4,206 410 4,616 24,247 28,863
Transfer to / from developments 34,441 - 34,441 (34,441) -
Change in fair value during the year 26,352 4,600 30,952 (1,776) 29,176
------------------------------------- ---------- ---------- ----------- ----------- ----------
As at 31 December 2019 861,639 137,741 999,380 29,700 1,029,080
------------------------------------- ---------- ---------- ----------- ----------- ----------
During the year GBP4,267,000 (31 December 2019: GBP5,418,000) of
additions related to expenditure were recognised in the carrying
value of standing assets.
In accordance with IAS 40, the carrying value of investment
property is their fair value as determined by independent external
valuers. This valuation has been conducted by CBRE Limited, as
external valuer, and has been prepared as at 31 December 2020, in
accordance with the Appraisal & Valuation Standards of the
RICS, on the basis of market value. Properties have been valued on
an individual basis. This value has been incorporated into the
financial statements.
The valuation of all property assets uses market evidence and
includes assumptions regarding income expectations and yields that
investors would expect to achieve on those assets over time. Many
external economic and market factors, such as interest rate
expectations, bond yields, the availability and cost of finance and
the relative attraction of property against other asset classes,
could lead to a reappraisal of the assumptions used to arrive at
current valuations. In adverse conditions, this reappraisal can
lead to a reduction in property values and a loss in Net Asset
Value.
The table below reconciles between the fair value of the
investment property per the Consolidated Group Statement of
Financial Position and investment property per the independent
valuation performed in respect of each year end.
Group
------------------------
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------------------------------- ----------- -----------
Value per independent valuation report 1,004,651 1,028,610
Add: 1,004,651 1,028,610
Head lease 469 470
----------------------------------------------------- ----------- -----------
Fair value per Group Statement of Financial Position 1,005,120 1,029,080
----------------------------------------------------- ----------- -----------
Fair Value Hierarchy
The following table provides the fair value measurement
hierarchy for investment property:
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
Total (Level 1) (Level 2) (Level 3)
Date of valuation 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- ------------- ----------- ------------
Assets measured at fair value:
Student properties 986,899 - - 986,899
Commercial properties 18,221 - - 18,221
----------------------------------- --------- ------------- ----------- ------------
As at 31 December 2020 1,005,120 - - 1,005,120
----------------------------------- --------- ------------- ----------- ------------
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
Total (Level 1) (Level 2) (Level 3)
Date of valuation 31 December 2019 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- ------------- ----------- ------------
Assets measured at fair value:
Student properties 1,004,450 - - 1,004,450
Commercial properties 24,160 - - 24,160
----------------------------------- --------- ------------- ----------- ------------
As at 31 December 2019 1,028,610 - - 1,028,610
----------------------------------- --------- ------------- ----------- ------------
There have been no transfers between Level 1 and Level 2 during
the year, nor have there been any transfers between Level 2 and
Level 3 during the year.
The valuations have been prepared on the basis of market value
which is defined in the RICS Valuation Standards, as:
"The estimated amount for which a property should exchange on
the date of valuation between a willing buyer and a willing seller
in an arm's-length transaction after proper marketing wherein the
parties had each acted knowledgeably, prudently and without
compulsion."
Market value as defined in the RICS Valuation Standards is the
equivalent of fair value under IFRS.
The following descriptions and definitions relate to valuation
techniques and key unobservable inputs made in determining fair
values. The valuation techniques for student properties uses a
discounted cash flow with the following inputs:
(a) Unobservable input: Rental income
The rent at which space could be let in the market conditions
prevailing at the date of valuation. Range GBP95 per week-GBP357
per week (31 December 2019: GBP97-GBP347 per week).
(b) Unobservable input: Rental growth
The estimated average increase in rent based on both market
estimations and contractual arrangements. Assumed growth of 1.48%
used in valuations (31 December 2019: 3.55%).
(c) Unobservable input: Net initial yield
The net initial yield is defined as the initial gross income as
a percentage of the market value (or purchase price as appropriate)
plus standard costs of purchase.
Range: 4.45%-8.50% (31 December 2019: 4.50%-7.25%).
(d) Unobservable input: COVID rent deduction
The valuation as of 31 December 2020 includes a GBP21,439,000
capital deduction to the valuation to reflect the impact of
COVID-19 on the valuations. This deduction is made up of two
parts.
1 - A 75% deduction (to reflect the period from 1 January to
September) of the difference between expected gross income (if
unaffected by COVID-19) and actual predicted income for
AY2020/21.
2 - A 10% reduction to actual income from AY2020/21 to reflect
any potential future refunds.
This is based on CBRE's view that AY2021/22 is going to be an
unaffected year and therefore requires no capital deduction
relating to COVID-19.
(e) Unobservable input: Physical condition of the property
(f) Unobservable input: Planning consent
No planning enquiries undertaken for any of the development
properties.
(g) Sensitivities of measurement of significant unobservable inputs
As set out in the significant accounting estimates and
judgements, the Group's portfolio valuation is open to judgements
and is inherently subjective by nature.
As a result, the following sensitivity analysis has been
prepared by the valuer:
-3% change +3% change -0.25% +0.25%
in rental in rental change change
income income in yield in yield
As at 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------------- ---------- ---------- -------- --------
(Decrease)/increase in the fair value of the investment properties (40,020) 40,060 46,340 (42,230)
------------------------------------------------------------------- ---------- ---------- -------- --------
-3% change +3% change -0.25% +0.25%
in rental in rental change change
income income in yield in yield
As at 31 December 2019 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------------- ---------- ---------- -------- --------
(Decrease)/increase in the fair value of the investment properties (39,190) 39,270 46,520 (42,350)
------------------------------------------------------------------- ---------- ---------- -------- --------
(h) The key assumptions for the commercial properties are net
initial yield, 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.
14. TRADE AND OTHER RECEIVABLES
Group Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ----------- ----------- ----------- -----------
Trade receivables 2,539 314 - -
Other receivables 1,063 470 5 20
Amounts owed by property managers 6,505 5,144 - -
Prepayments 4,157 4,355 341 277
VAT recoverable 246 255 7 7
------------------------------------ ----------- ----------- ----------- -----------
14,510 10,538 353 304
Amounts due from Group undertakings - - 350,578 420,006
------------------------------------ ----------- ----------- ----------- -----------
14,510 10,538 350,931 420,310
------------------------------------ ----------- ----------- ----------- -----------
Movements on the Group provision for impairment of trade
receivable were as follows:
Group
------------------------
31 December 31 December
2020 2019
GBP'000 GBP'000
--------------------------------------------------- ----------- -----------
At 1 January (594) (593)
(Increase) in provision for receivables impairment (855) (1)
--------------------------------------------------- ----------- -----------
At 31 December (1,439) (594)
--------------------------------------------------- ----------- -----------
Provisions for impaired receivables have been included in
property expenses in the income statement. Amounts charged to the
impairment provision are generally written off, when there is no
expectation of recovering additional cash.
The maximum exposure to credit risk at the reporting date is the
book value of each class of receivable mentioned above and its cash
and cash equivalents. The Group does not hold any collateral as
security, though in some instances students provide guarantors.
Management believes that the concentration of credit risk with
respect to trade receivables is limited due to the Group's customer
base being large, unrelated and are living with us. As such we have
a high level of communication with them.
At 31 December 2020, there were no material trade receivables
overdue at the year end, and no aged analysis of trade receivables
has been included. The carrying value of trade and other
receivables classified at amortised cost approximates fair
value.
The Company performed a review of the expected credit loss on
the amounts due from Group undertakings, there was no provision
made during the year (2019: GBPnil).
15. CASH AND CASH EQUIVALENTS
Group Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ----------- ----------- ----------- -----------
Cash and cash equivalents 33,927 16,517 24,775 12,407
-------------------------- ----------- ----------- ----------- -----------
16. TRADE AND OTHER PAYABLES
Group Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ----------- ----------- -----------
Trade payables 3,406 3,294 848 533
Other payables 1,800 1,287 251 325
Accrued expenses 9,574 8,821 1,072 1,013
Directors' bonus accrual 747 970 747 970
----------------------------------- ----------- ----------- ----------- -----------
15,527 14,372 2,918 2,841
----------------------------------- ----------- ----------- ----------- -----------
Amounts owed to Group undertakings - - 9,548 9,721
----------------------------------- ----------- ----------- ----------- -----------
15,527 14,372 12,466 12,562
----------------------------------- ----------- ----------- ----------- -----------
At 31 December 2020, there was deferred rental income of
GBP20,676,000 (31 December 2019: GBP29,204,000) which was rental
income that had been booked that relates to future periods.
The Directors consider that the carrying value of trade and
other payables approximates to their fair value.
Amounts owed to Group undertakings are interest free and
repayable on demand.
17. BANK BORROWINGS
A summary of the drawn and undrawn bank borrowings in the year
is shown below:
Group
----------------------------------------------------------------------------
Bank Bank Bank Bank
borrowings borrowings borrowings borrowings
drawn undrawn Total drawn undrawn Total
31 December 31 December 31 December 31 December 31 December 31 December
2020 2020 2020 2019 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
At 1 January 355,000 35,000 390,000 330,000 60,000 390,000
Bank borrowings from new facilities in
the year 52,800 42,500 95,300 55,500 - 55,500
Bank borrowings drawn in the year 25,000 (25,000) - 60,000 (25,000) 35,000
Bank borrowings repaid during the year (42,800) - (42,800) (90,500) - (90,500)
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
At 31 December 390,000 52,500 442,500 355,000 35,000 390,000
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
The Group has refinanced two facilities, one with AIB for
GBP32.8m and the second with FCB for GBP10 million which we also
extended to GBP 20 million. In July 2020 we extended our RCF with
Lloyds bank from GBP70 million to GBP90 million. (2019 a total of
GBP115,500,000 of additional debt was drawn and a total of
GBP90,500,000 was repaid during the year. There is an undrawn RCF
debt facility available of GBP30,000,000 at 31 December 2020 (31
December 2019: GBP35,000,000). The Group also entered into a
development facility with NatWest for GBP 22.5 million during the
year. At 31 December 2020 no balance has been drawn down. The
weighted average term to maturity of the Group's debt as at the
year end is 5.9 years (31 December 2019: 6.6 years).
Bank borrowings are secured by charges over individual
investment properties held by certain asset-holding subsidiaries.
These assets have a fair value of GBP952,441,000 at 31 December
2020 (31 December 2019: GBP879,910,000). In some cases, the lenders
also hold charges over the shares of the subsidiaries and the
intermediary holding companies of those subsidiaries.
The Company has a GBP20 million unsecured facility with FCB -
see above (2019: GBP10 million) repayable in more than one year,
fully drawn. The balance net of loan arrangement fees carried as at
31 December 2020 was GBP19,961,000 (31 December 2019:
GBP9,995,000).
Any associated fees in arranging the bank borrowings unamortised
as at the year end are offset against amounts drawn on the
facilities as shown in the table below:
Group
------------------------
31 December 31 December
2020 2019
Non-current GBP'000 GBP'000
--------------------------------------------------- ----------- -----------
Balance bought forward 312,200 274,500
Total bank borrowings in the year 77,800 115,500
Bank borrowings becoming non-current in the year - 55,500
Less: Bank borrowings becoming current in the year - (42,800)
Less: Bank borrowings repaid during the year - (90,500)
--------------------------------------------------- ----------- -----------
Bank borrowings drawn: due in more than one year 390,000 312,200
Less: Unamortised costs (4,734) (5,103)
--------------------------------------------------- ----------- -----------
Bank borrowings due in more than one year 385,266 307,097
--------------------------------------------------- ----------- -----------
Group
------------------------
31 December 31 December
2020 2019
Current GBP'000 GBP'000
------------------------------------------------- ----------- -----------
Balance bought forward 42,800 55,500
Total bank borrowings in the year - -
Less: Bank borrowings repaid during the year (42,800) (55,500)
Bank borrowings becoming current in the year - 42,800
------------------------------------------------- ----------- -----------
Bank borrowings drawn: due in less than one year - 42,800
Less: Unamortised costs - (125)
------------------------------------------------- ----------- -----------
Bank borrowings due in less than one year - 42,675
------------------------------------------------- ----------- -----------
Maturity of Bank Borrowings
Group
------------------------
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------ ----------- -----------
Repayable between one and two years - 35,000
Repayable between two and five years 132,800 -
Repayable in over five years 257,200 277,200
------------------------------------------ ----------- -----------
Bank borrowings due in more than one year 390,000 312,200
------------------------------------------ ----------- -----------
Each of the Group's facilities has an interest charge which is
payable quarterly. Four of the facilities have an interest charge
that is based on a margin above LIBOR whilst the other five
facility interest charges are fixed at 3.97%, 3.52%, 3.24%, 3.64%
and 3.20%. The weighted average rate payable by the Group on its
investment debt portfolio as at the year end was 2.90% (31 December
2019: 3.20%).
19. SHARE CAPITAL
Group and Company Group and Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2020 2020 2019 2019
Number GBP'000 Number GBP'000
------------------------ ----------- ----------- ----------- -----------
Balance brought forward 603,160,940 6,032 602,887,740 6,029
Share options exercised - - 273,200 3
------------------------ ----------- ----------- ----------- -----------
Balance carried forward 603,160,940 6,032 603,160,940 6,032
------------------------ ----------- ----------- ----------- -----------
There were no share issues in the year relating to vesting share
options. See Note 27 for further details. In the prior year there
were two issues, on 2 October 2019 for 120,833 ordinary shares and
the other on 26 November 2019 for 152,385 ordinary shares.
20. SHARE PREMIUM
The share premium relates to amounts subscribed for share
capital in excess of nominal value:
Group and Company
------------------------
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------------------- ----------- -----------
Balance brought forward 257 467,268
Share premium cancellation - (467,268)
Share premium on share options exercised - 257
----------------------------------------- ----------- -----------
Balance carried forward 257 257
----------------------------------------- ----------- -----------
Cancellation
At the AGM on 2 May 2019, shareholders approved a resolution to
cancel the Company's share premium account, which stood at GBP467
million. The court order to confirm the cancellation was received
on 4 June 2019, following which the share premium account was
cancelled. Cancellation results in this capital being treated as
realised profit, giving us the flexibility to declare dividends or
make other distributions to shareholders, although there is no
current intention to do so.
21. CAPITAL REDUCTION RESERVE
Group and Company
------------------------
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------------------------------- ----------- -----------
Balance brought forward 482,578 45,458
Less interim dividends declared and paid per Note 10 (7,540) (30,148)
Share premium cancellation - 467,268
Balance carried forward 475,038 482,578
----------------------------------------------------- ----------- -----------
The capital reduction reserve account is a distributable
reserve.
Refer to Note 10 for details of the declaration of dividends to
shareholders.
22. LEASING AGREEMENTS
Future total minimum lease receivables under non-cancellable
operating leases on investment properties are as follows:
Group
------------------------
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------- ----------- -----------
Less than one year 39,625 49,278
Between one and two years 1,169 3,271
Between two and three years 1,123 1,407
Between three and four years 1,102 1,361
Between four and five years 1,042 1,338
More than five years 6,269 9,851
----------------------------- ----------- -----------
Total 50,330 66,506
----------------------------- ----------- -----------
The above relates to commercial leases and nomination agreements
with UK universities in place as at 31 December 2020. The impact of
student leases for the forthcoming academic year signed by 31
December 2020 have not been included as the certainty of income
does not arise until the tenant takes occupation of the
accommodation. As at 31 December 2020 GBP17,689,000 (31 December
2019: GBP29,204,000) of the future minimum lease receivables have
been received as cash.
23. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 December 2020 (31
December 2019: GBPnil).
24. CAPITAL COMMITMENTS
The Group had capital commitments relating to developments
totalling GBP11,331,000 at 31 December 2020 31 (December 2019:
GBP31,542,000).
25. RELATED PARTY DISCLOSURES
Key Management Personnel
Key management personnel are considered to comprise the Board of
Directors. Please refer to Note 6 for details of the remuneration
for the key management.
Share Capital
There were no share transactions with related parties during the
year ended 31 December 2020.
Share-based Payments
On 8 April 2020, the Company granted nil-cost options over a
total of 152,512 (Tim Attlee 80,116 and Lynne Fennah 72,396)
ordinary shares pursuant to the deferred shares element of the
annual bonus awards for the financial period ended 31 December 2019
(the "Annual Bonus Awards").
Further, and also on 8 April 2020, Lynne Fennah was granted
nil-cost options over 511,892 ordinary shares pursuant to the
Empiric 2014 Long Term Incentive Plan (the "2017-2020 LTIP Awards")
for the 2020 financial year.
On 11 November 2020, Duncan Garrood was granted nil-cost options
over 400,000 ordinary shares pursuant to the Empiric 2014 Long Term
Incentive Plan (the "2017-2020 LTIP Awards") for the 2020 financial
year.
Details of the shares granted and exercised are outlined in Note
27.
26. SUBSEQUENT EVENTS
On 15 March 2021 the Group sold 3 properties in Portsmouth for a
total of GBP7.4m. The sale price was at a premium to the market
value as at 31 December 2020.
27. SHARE-BASED PAYMENTS
The Company operates three equity-settled share-based
remuneration schemes for Executive Directors under the deferred
annual bonus and LTIP. The details of the schemes are included in
the Remuneration Committee Report.
Issued
On 8 April 2020, the Company granted nil-cost options over a
total of 152,512 (Tim Attlee 80,116 and Lynne Fennah 72,396)
ordinary shares pursuant to the deferred shares element of the
annual bonus awards for the financial period ended 31 December 2019
(the "Annual Bonus Awards").
Further, and also on 8 April 2020, Lynne Fennah was granted
nil-cost options over 511,892 ordinary shares pursuant to the
Empiric 2014 Long Term Incentive Plan (the "2017-2020 LTIP Awards")
for the 2020 financial year.
On 11 November 2020, Duncan Garrood was granted nil-cost options
over 400,000 ordinary shares pursuant to the Empiric 2014 Long Term
Incentive Plan (the "2017-2020 LTIP Awards") for the 2020 financial
year.
Of the nil-cost options, 206,889 are currently exercisable. The
weighted average remaining contractual life of these options was
1.7 years (2019: 1.7 years).
During the year to 31 December 2020 the amount recognised
relating to the options was GBP29,000 (2019:GBP164,000).
The awards have the benefit of dividend equivalence. The
Remuneration Committee will determine on or before vesting whether
the dividend equivalent will be provided in the form of cash and/or
shares.
31/12/2020 31/12/2019 31/12/2018 31/12/2017 31/12/2016
--------------------------------------- ---------- ---------- ---------- ----------- ----------
Outstanding number brought forward 1,250,045 1,051,708 1,477,817 3,913,420 2,880,391
Granted during the period 1,064,494 604,134 439,022 207,198 1,033,029
Vested and exercised during the period - (129,253) (139,325) (691,237) -
Lapsed during the period - (276,544) (725,806) (1,951,564) -
--------------------------------------- ---------- ---------- ---------- ----------- ----------
Outstanding number carried forward 2,314,539 1,250,045 1,051,708 1,477,817 3,913,420
--------------------------------------- ---------- ---------- ---------- ----------- ----------
The fair value on date of grant for the nil-cost options under
the 2018-21 LTIP Awards and Annual Bonus Awards were priced using
the Monte Carlo pricing model.
The following information is relevant in the determination of
the fair value of these nil-cost options in the year:
Annual Bonus Award
---- -------------------------------------------------------------------------------------------- ------------------
(a) Weighted average share price at grant date of GBP0.68
(b) Exercise price of GBPnil
(c) Contractual life of 3 years
(d) Expected volatility of 34.12%
(e) Expected dividend yield of 0.00%
(f) Risk-free rate of 0.55%
(g) The volatility assumption is based on a statistical analysis of daily share prices of
comparator
companies over the last three years
(h) The TSR performance conditions have been considered when assessing the fair value of the
options
---- -------------------------------------------------------------------------------------------- ------------------
28. FINANCIAL RISK MANAGEMENT
Financial Instruments
The Group's principal financial assets and liabilities are those
which arise directly from its operations: trade and other
receivables, trade and other payables and cash and cash
equivalents. Set out below is a comparison by class of the carrying
amounts and fair value of the Group's financial instruments that
are shown in the financial statements:
Risk Management
The Company and Group is exposed to market risk (including
interest rate risk), credit risk and liquidity risk.
The Board of Directors oversees the management of these
risks.
The Board of Directors reviews and agrees policies for managing
each of these risks which are summarised below.
(a) Market Risk
Market risk is the risk that the fair values of financial
instruments will fluctuate because of changes in market prices. The
financial instruments held by the Company and Group that are
affected by market risk are principally the Company and Group bank
balances along with the interest rate derivatives (swap and cap)
entered into to mitigate interest rate risk.
(b) Credit Risk
Credit risk is the risk of financial loss to the Company and
Group if a customer or counterparty to a financial instrument fails
to meet its contractual obligations. The Company and Group is
exposed to credit risks from both its leasing activities and
financing activities, including deposits with banks and financial
institutions.
The Group has established a credit policy under which each new
tenant is assessed based on an extensive credit rating scorecard at
the time of entering into a lease agreement.
The Group's review includes external rating, when available, and
in some cases bank references. The Group determines concentrations
of credit risk by monthly monitoring the creditworthiness rating of
existing customers and through a monthly review of the trade
receivables' ageing analysis.
Credit risk also arises from cash and cash equivalents and
deposits with banks and financial institutions. For banks and
financial institutions, only independently rated parties with
minimum rating "B" are accepted.
Further disclosures regarding trade and other receivables, which
are neither past due nor impaired, are provided in Note 14.
(i) Tenant Receivables
Tenant receivables, primarily tenant rentals, are presented in
the Group Statement of Financial Position net of allowances for
doubtful receivables and are monitored on a case-by-case basis.
Credit risk is primarily managed by requiring tenants to pay
rentals in advance and performing tests around strength of covenant
prior to acquisition. There are no trade receivables past due as at
the year end.
(ii) Credit Risk Related to Financial Instruments and Cash
Deposits
One of the principal credit risks of the Company and Group
arises with the banks and financial institutions. The Board of
Directors believes that the credit risk on short-term deposits and
current account cash balances are limited because the
counterparties are banks, which are committed lenders to the
Company and Group, with high credit ratings assigned by
international credit rating agencies.
Credit ratings (Moody's) Long-term Outlook
------------------------ --------- --------
AIB Group Baa2 Stable
Canada Life Aa3 Stable
Mass Mutual Aa3 Negative
Scottish Widows A2 Positive
Lloyds Bank Plc A3 Stable
------------------------ --------- --------
(c) Liquidity Risk
Liquidity risk arises from the Company and Group management of
working capital and going forward, the finance charges and
principal repayments on any borrowings, of which currently there
are none. It is the risk that the Company and Group will encounter
difficulty in meeting their financial obligations as they fall due
as the majority of the Company and Group assets are property
investments and are therefore not readily realisable. The Company
and Group objective is to ensure they have sufficient available
funds for their operations and to fund their capital expenditure.
This is achieved by continuous monitoring of forecast and actual
cash flows by management.
The following table sets out the contractual obligations
(representing undiscounted contractual cash flows) of financial
liabilities:
Group
------------------------------------------------------------
Less than 3 3 to 12 1 to 5
On demand months months years > 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ----------- ------- ------- --------- -------
At 31 December 2020
Bank borrowings and interest - 3,021 9,063 199,749 283,925 495,758
Trade and other payables - 15,527 - - - 15,527
----------------------------- --------- ----------- ------- ------- --------- -------
- 18,548 9,063 199,749 283,925 511,285
----------------------------- --------- ----------- ------- ------- --------- -------
Group
------------------------------------------------------------
Less than 3 3 to 12 1 to 5
On demand months months years > 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ----------- ------- ------- --------- -------
At 31 December 2019
Bank borrowings and interest - 13,101 41,801 149,450 317,287 521,639
Trade and other payables - 14,372 - - - 14,372
----------------------------- --------- ----------- ------- ------- --------- -------
- 27,473 41,801 149,450 317,287 536,011
----------------------------- --------- ----------- ------- ------- --------- -------
Company
------------------------------------------------------------
Less than 3 3 to 12 1 to 5
On demand months months years > 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ----------- ------- ------- --------- -------
At 31 December 2020
Bank borrowings and interest - 96 289 20,447 - 20,832
Trade and other payables - 2,918 - - - 2,918
----------------------------- --------- ----------- ------- ------- --------- -------
- 3,014 289 20,447 - 23,750
----------------------------- --------- ----------- ------- ------- --------- -------
Company
------------------------------------------------------------
Less than 3 3 to 12 1 to 5
On demand months months years > 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ----------- ------- ------- --------- -------
At 31 December 2019
Bank borrowings and interest - 10,045 - - - 10,045
Trade and other payables - 2,841 - - - 2,841
----------------------------- --------- ----------- ------- ------- --------- -------
- 12,886 - - - 12,886
----------------------------- --------- ----------- ------- ------- --------- -------
29. CAPITAL MANAGEMENT
The primary objectives of the Group's capital management are to
ensure that it remains a going concern and continues to qualify for
UK REIT status.
The Board of Directors monitors and reviews the Group's capital
so as to promote the long-term success of the business, facilitate
expansion and to maintain sustainable returns for shareholders.
Capital consists of ordinary shares, other capital reserves and
retained earnings.
30. SUBSIDIARIES
Those subsidiaries listed below are considered to be all
subsidiaries of the Company at 31 December 2020, with the shares
issued being ordinary shares. All subsidiaries are registered in
London at the following address: 6th Floor, Swan House, 17-19
Stratford Place, London, England, W1C 1BQ.
In each case the country of incorporation is England and
Wales.
Company
------------------------
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------- ----------- -----------
As at 1 January 81,686 8,623
Additions in the year 106,215 73,063
Disposals (303) -
----------------------- ----------- -----------
Balance at 31 December 187,598 81,686
----------------------- ----------- -----------
During the current year and prior year there were a number of
subsidiaries which moved around the Group, due to reorganisations
relating to debt; these were all non -- cash movements whereby plc
forgave intercompany debt owned by subsidiaries in return for the
issue of further shares.
Company Status Ownership Principal activity
------------------------------------------- ------- --------- ----------------------
Brunswick Contracting Limited Active 100% Property Contracting
Empiric (Alwyn Court) Limited Active 100% Property Investment
Empiric (Baptists Chapel) Limited Active 100% Property Investment
Empiric (Bath Canalside) Limited Active 100% Property Investment
Empiric (Bath James House) Limited Active 100% Property Investment
Empiric (Bath JSW) Limited Active 100% Property Investment
Empiric (Bath Oolite Road) Limited Active 100% Property Investment
Empiric (Bath Piccadilly Place) Limited Active 100% Property Investment
Empiric (Birmingham Emporium) Limited Active 100% Property Investment
Empiric (Birmingham) Limited Active 100% Property Investment
Empiric (Bristol St Mary's) Limited Active 100% Property Investment
Empiric (Bristol St Mary's) Leasing Limited Dormant 100% Property Leasing
Empiric (Bristol) Leasing Limited Dormant 100% Property Leasing
Empiric (Bristol) Limited Active 100% Property Investment
Empiric (Buccleuch Street) Limited Active 100% Property Investment
Empiric (Canterbury Franciscans) Limited Active 100% Property Investment
Empiric (Canterbury Pavilion Court) Limited Active 100% Property Investment
Empiric (Cardiff Wndsr House) Leasing Dormant 100% Property Leasing
Limited
Empiric (Cardiff Wndsr House) Limited Active 100% Property Investment
Empiric (Centro Court) Limited Active 100% Property Investment
Empiric (Claremont Newcastle) Limited Active 100% Property Investment
Empiric (College Green) Limited Active 100% Property Investment
Empiric (Developments) Limited Active 100% Development Management
Empiric (Durham St Margarets) Limited Active 100% Property Investment
Empiric (Edge Apartments) Limited Active 100% Property Investment
Empiric (Edinburgh KSR) Limited Active 100% Property Investment
Empiric (Edinburgh KSR) Leasing Limited Active 100% Property Leasing
Empiric (Exeter Bishop Blackall School) Active 100% Property Investment
Limited
Empiric (Exeter Bonhay Road) Leasing Dormant 100% Property Leasing
Limited
Empiric (Exeter Bonhay Road) Limited Active 100% Property Investment
Empiric (Exeter City Service) Limited Active 100% Property Investment
Empiric (Exeter DCL) Limited Active 100% Property Investment
Empiric (Exeter Isca Lofts) Limited Active 100% Property Investment
Empiric (Exeter LL) Limited Active 100% Property Investment
Empiric (Falmouth Maritime Studios) Limited Active 100% Property Investment
Empiric (Falmouth Ocean Bowl) Limited Active 100% Property Investment
Empiric (Falmouth Ocean Bowl) Leasing Active 100% Property Leasing
Limited
Empiric (Glasgow Ballet School) Limited Active 100% Property Investment
Empiric (Glasgow Bath St) Limited Active 100% Property Investment
Empiric (Glasgow George Square) Leasing Dormant 100% Property Leasing
Limited
Empiric (Glasgow George Square) Limited Active 100% Property Investment
Empiric (Glasgow George St) Leasing Limited Active 100% Property Leasing
Empiric (Glasgow George St) Limited Active 100% Property Investment
Empiric (Glasgow) Leasing Limited Active 100% Property Leasing
Empiric (Glasgow) Limited Active 100% Property Investment
Empiric (Hatfield CP) Limited Active 100% Property Investment
Empiric (Huddersfield Oldgate House) Dormant 100% Property Leasing
Leasing Limited
Empiric (Huddersfield Oldgate House) Active 100% Property Investment
Limited
Empiric (Huddersfield Snow Island) Leasing Active 100% Property Leasing
Limited
Empiric (Lancaster Penny Street 1) Limited Active 100% Property Investment
Empiric (Lancaster Penny Street 2) Limited Active 100% Property Investment
Empiric (Lancaster Penny Street 3) Limited Active 100% Property Investment
Empiric (Leeds Algernon) Limited Active 100% Property Investment
Empiric (Leeds Mary Morris) Limited Active 100% Property Investment
Empiric (Leeds Pennine House) Limited Active 100% Property Investment
Empiric (Leeds St Marks) Limited Active 100% Property Investment
Empiric (Leicester 134 New Walk) Limited Active 100% Property Investment
Empiric (Leicester 136-138 New Walk) Active 100% Property Investment
Limited
Empiric (Leicester 140-142 New Walk) Active 100% Property Investment
Limited
Empiric (Leicester 160 Upper New Walk) Active 100% Property Investment
Limited
Empiric (Leicester Bede Park) Limited Active 100% Property Investment
Empiric (Leicester De Montfort Square) Active 100% Property Investment
Limited
Empiric (Leicester Hosiery Factory) Limited Active 100% Property Investment
Empiric (Leicester Peacock Lane) Limited Active 100% Property Investment
Empiric (Leicester Shoe & Boot Factory) Active 100% Property Investment
Limited
Empiric (Leicester West Walk) Limited Dormant 100% Property Investment
Empiric (Liverpool Art School/Maple House) Active 100% Property Investment
Limited
Empiric (Liverpool Chatham Lodge) Limited Active 100% Property Investment
Empiric (Liverpool Grove Street) Limited Active 100% Property Investment
Empiric (Liverpool Hahnemann Building) Active 100% Property Investment
Limited
Empiric (Liverpool Octagon/Hayward) Limited Active 100% Property Investment
Empiric (London Camberwell) Limited Active 100% Property Investment
Empiric (London Francis Gardner) Limited Active 100% Property Investment
Empiric (London Road) Limited Active 100% Property Investment
Empiric (Manchester Ladybarn) Limited Active 100% Property Investment
Empiric (Manchester Victoria Point) Limited Active 100% Property Investment
Empiric (Newcastle Metrovick) Limited Active 100% Property Investment
Empiric (Northgate House) Limited Active 100% Property Investment
Empiric (Nottingham 95 Talbot) Limited Active 100% Property Investment
Empiric (Nottingham Frontage) Leasing Dormant 100% Property Leasing
Limited
Empiric (Nottingham Frontage) Limited Active 100% Property Investment
Empiric (Oxford Stonemason) Limited Active 100% Property Investment
Empiric (Picturehouse Apartments) Limited Active 100% Property Investment
Empiric (Portobello House) Limited Active 100% Property Investment
Empiric (Portsmouth Elm Grove Library) Active 100% Property Investment
Limited
Empiric (Portsmouth Europa House) Leasing Active 100% Property Leasing
Limited
Empiric (Portsmouth Europa House) Limited Active 100% Property Investment
Empiric (Portsmouth Kingsway House) Limited Active 100% Property Investment
Empiric (Portsmouth Registry) Limited Active 100% Property Investment
Empiric (Provincial House) Leasing Limited Active 100% Property Leasing
Empiric (Provincial House) Limited Active 100% Property Investment
Empiric (Reading Saxon Court) Leasing Active 100% Property Leasing
Limited
Empiric (Reading Saxon Court) Limited Active 100% Property Investment
Empiric (Snow Island) Limited Active 100% Property Investment
Empiric (Southampton) Leasing Limited Active 100% Property Leasing
Empiric (Southampton) Limited Active 100% Property Investment
Empiric (Southampton Emily Davies) Limited Active 100% Property Investment
Empiric (St Andrews Ayton House) Leasing Active 100% Property Leasing
Limited
Empiric (St Andrews Ayton House) Limited Active 100% Property Investment
Empiric (St Peter Street) Limited Active 100% Property Investment
Empiric (Stirling Forthside) Leasing Dormant 100% Property Leasing
Limited
Empiric (Stirling Forthside) Limited Active 100% Property Investment
Empiric (Stoke Caledonia Mill) Limited Active 100% Property Investment
Empiric (Summit House) Limited Active 100% Property Investment
Empiric (Talbot Studios) Limited Active 100% Property Investment
Empiric (Trippet Lane) Limited Active 100% Property Investment
Empiric (Twickenham Grosvenor Hall) Limited Active 100% Property Investment
Empiric (York Foss Studios 1) Limited Active 100% Property Investment
Empiric (York Lawrence Street) Limited Active 100% Property Investment
Empiric (York Percy's Lane) Limited Active 100% Property Investment
Empiric Acquisitions Limited Active 100% Immediate Holding
Company
Empiric Investment Holdings (Five) Limited Active 100% Holding Company
Empiric Investment Holdings (Four) Limited Active 100% Holding Company
Empiric Investment Holdings (Six) Limited Active 100% Holding Company
Empiric Investment Holdings (Three) Limited Active 100% Holding Company
Empiric Investment Holdings (Two) Limited Active 100% Holding Company
Empiric Investments (Five) Limited Active 100% Immediate Holding
Company
Empiric Investments (Four) Limited Active 100% Immediate Holding
Company
Empiric Investments (One) Limited Active 100% Immediate Holding
Company
Empiric Investments (Six) Limited Active 100% Immediate Holding
Company
Empiric Investments (Three) Limited Active 100% Immediate Holding
Company
Empiric Investments (Two) Limited Active 100% Immediate Holding
Company
Empiric Investments (Seven) Limited Dormant 100% Immediate Holding
Company
Empiric Investment Holdings (Seven) Limited Dormant 100% Holding Company
Empiric Student Property Trustees Limited Active 100% Trustee of EBT
Empiric (Edinburgh South Bridge) Limited Active 100% Property Investment
Hello Student(R) Management Limited Active 100% Property Management
------------------------------------------- ------- --------- ----------------------
Definitions
Adjusted EPS - Adjusted earnings per share is a performance
measure used by the Board to assess the Group's dividend payments.
Licence fees, development rebates, rental guarantees and cumulative
gains made on disposals of assets are added to EPRA earnings on the
basis noted below as the Board sees these cash flows as supportive
of dividend payments. This is then divided by the weighted average
number of ordinary shares outstanding during the period (refer to
Note 8).
ANUK - Accreditation Network UK is a central resource for
tenants, landlords and scheme operators interested in accreditation
of private rented housing.
Average Interest Cost - The weighted interest cost of our drawn
debt portfolio at the balance sheet date.
Average term of debt - The weighted average term of our debt
facilities at the balance sheet date.
Basic EPS - The earnings attributed to ordinary shareholders
divided by the weighted average number of ordinary shares
outstanding during the period (refer to Note 8).
Colleague Engagement - KPI - Non IFRS measure - Calculated as
per the results of our biannual colleague engagement surveys
Company - Empiric Student Property plc
Customer Happiness - KPI - Non IFRS measure - Calculated per the
results of our biannual customer surveys
Dividend Cover - Adjusted earnings divided by dividend paid
during the year.
EPRA - European Public Real Estate Association
EPRA EPS - Reported on the basis recommended for real estate
companies by EPRA (refer to Note 8).
EPRA NAV - EPRA NAV is calculated as net assets per the
Consolidated Statement of Financial Position excluding fair value
adjustments for debt-related derivatives (refer to Note 9).
EPRA Net Disposal Value ("NDV") - Represents the shareholders'
value under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated to the
full extent of their liability, net of any resulting tax. As the
Group is a REIT, no adjustment is made for deferred tax.
EPRA Net Reinvestment Value ("NRV") - Assumes that entities
never sell assets and aims to represent the value required to
rebuild the entity.
EPRA Net Tangible Assets ("NTA") - Assumes that entities buy and
sell assets, thereby crystallising certain levels of unavoidable
deferred tax.
EU - European Union
Executive Team - The Executive Directors made up of the CEO and
CFO/COO.
GHG - Greenhouse gas
Gross Asset Value or GAV - The total value of the Group's wholly
owned property portfolio (refer to Note 13).
Gross Rent - The total rents achievable if the portfolio was
100% occupied for an academic year.
Gross margin - Gross profit expressed as a percentage of rental
income.
Group - Empiric Student Property plc and its subsidiaries.
Hello Student(R) platform - Our customer-facing brand and
operating system which we operate all of our buildings under.
HE - Higher education
HMO - Homes of multiple occupants
IASB - International Accounting Standards Board
IFRS - International Financial Reporting Standards
IPO - The Group's Initial Public Offering in June 2014.
LIBOR - London interbank offered rate
Loan-to-value or LTV - A measure of borrowings used by property
investment companies calculated as total drawn borrowings, net of
cash and fixed term deposits, as a percentage of Gross Asset Value
(refer to Notes 13 and 17).
Net Asset Value or NAV - Net Asset Value is the net assets in
the Statement of Financial Position attributable to ordinary equity
holders.
Non-PID - Non -- property income distribution
PBSA - Purpose Built Student Accommodation
PID - Property income distribution
RCF - Revolving credit facility
Rebooker Rate - KPI - Non IFRS measure - Calculated as the
percentage of students staying with us in the previous year who
chose to stay living with us for another academic year
REIT - Real estate investment trust
Revenue Occupancy - KPI - Non IFRS measure - Calculated as the
percentage of our Gross Annualised Revenue we have achieved for an
academic year
RICS - Royal Institution of Chartered Surveyors
Safety - Number of accidents - KPI - Non IFRS measure -
Calculated as the number of RIDDOR accidents reported to the Health
and Safety Executive
Senior Leadership Team - The senior management team which sits
beneath the Executive Team and is made up of the six department
heads.
Total Return ("TR" or "TAR")
Total Shareholder return - Share price growth with dividends
deemed to be reinvested on the dividend payment date.
The Code - UK Code of Corporate Governance, as published in
2018.
UKLA - United Kingdom Listing Authority
Company Information and Corporate Advisers
Company Registration Number: 08886906
Incorporated in the UK
(Registered in England)
Empiric Student Property plc is a public company limited by
shares
Registered Office
6th Floor Swan House 17-19 Stratford Place
London W1C 1BQ
DIRECTORS AND ADVISERS
Directors
Mark Pain (Chairman)
Duncan Garrood (Chief Executive Officer)
Lynne Fennah (Chief Financial and Operating Officer)
Jim Prower (Non-Executive Director)
Stuart Beevor (Non-Executive Director)
Alice Avis (Non-Executive Director)
Broker and Joint Financial Adviser
Jefferies International Ltd
Vintners Place
68 Upper Thames Street
London EC4V 3BJ
Broker and Joint Financial Adviser
RBC Europe Limited
Riverbank House
2 Swan Lane
London EC4R 3BF
Legal Adviser to the Company
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
Company Secretary
FIM Capital Limited
7 Cavendish Square London W1G 0PE
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Auditor
BDO LLP
55 Baker Street
London W1U 7EU
Communications Adviser
Maitland/AMO
3 Pancras Square
London N1C 4AG
Valuer
CBRE Limited
Henrietta House
Henrietta Place
London W1G 0NB
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR DKABPDBKBOND
(END) Dow Jones Newswires
March 17, 2021 03:00 ET (07:00 GMT)
Empiric Student Property (LSE:ESP)
Historical Stock Chart
From Mar 2024 to Apr 2024
Empiric Student Property (LSE:ESP)
Historical Stock Chart
From Apr 2023 to Apr 2024
