TIDMESP
RNS Number : 5564J
Empiric Student Property PLC
17 August 2023
Empiric Student Property plc
("Empiric" or the "Company" or, together with its subsidiaries,
the "Group")
INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2023
Growth in earnings and dividend supported by record occupancy
and like-for-like rental growth
Empiric Student Property plc (ticker: ESP), the owner and
operator of premium, studio-led student accommodation across the
UK, is pleased to report its interim results for the six months
ended 30 June 2023.
Duncan Garrood, Chief Executive Officer of Empiric Student
Property plc, said:
"The business has experienced a very strong start to the year.
Following our best ever re-booker campaign, the booking cycle for
academic year 2023/24 has tracked significantly ahead of the prior
year. Our accommodation is now effectively full for the forthcoming
academic year with occupancy at 98 per cent, a level achieved
earlier than ever before. We are confident that like-for-like
rental growth of around 9 per cent will now be achieved,
significantly ahead of previous guidance.
The Company is in great shape with improving operating margins,
increased earnings per share, a robust balance sheet and
significantly enhanced portfolio quality following ongoing
refurbishments and execution of our non-core disposal programme. At
an operational level, customer satisfaction measured through our
improving Net Promoter Scores and the Platinum Operator
certification awarded to our Hello Student brand, combined with the
acute undersupply of high quality student accommodation, is driving
increased re-bookings and greater demand for our rooms.
2023 is firmly on track to be another record year for the
Company."
Financial highlights
30 June 30 June
2022 2023 Change
--------------------------------------- ------------ -------- ----------
Income statement
Revenue 35.6 41.3 +16.0%
EPRA earnings (GBPm) 11.9 14.1 +18.5%
EPRA earnings per share (p) 2.0 2.3 +18.5%
Gross margin (%) 70.2 71.7 +2.0%
Dividends paid/declared per share (p) 1.250 1.625 +30.0%
--------------------------------------- ------------ -------- ----------
31 December 30 June
2022 2023 Change
--------------------------------------- ------------ -------- ----------
Balance sheet
EPRA NTA per share (p) 115.4 117.3 +1.6%
Portfolio valuation (GBPm) 1,078.9 1,064.0 +1.0%(1)
Cash and undrawn committed facilities
(GBPm) 75.8 75.6 -0.3%
Property loan-to-value (%) 31.1 30.3 -0.8% pts
--------------------------------------- ------------ -------- ----------
(1) Calculated on a like-for-like basis
Earnings growth underpins 30% increase in first half
dividend
-- Revenue increased 16.0% to GBP41.3m (30 June 2022: GBP35.6m)
-- EPRA EPS increased 18.5% to 2.3p (30 June 2022: 2.0p)
-- Portfolio valuation at GBP1,064.0m reflecting a 1.0% net like-for-like increase
-- Net initial yield of 5.3% (31 December 2022: 5.2%)
-- EPRA NTA per share increased 1.6% to 117.3p (31 December 2022: 115.4p)
-- First half dividends paid and payable of 1.625p, 30.0% ahead
of the first half of 2022 and in line with target
-- Total accounting return of 3.1% (30 June 2022: 10.9%)
Strong demand for academic year 2023/24, including best ever
re-booker campaign
-- Revenue occupancy for academic year 2023/24 at 98% continuing to track ahead of prior year
-- Like-for-like growth in average weekly rents now expected to
be around 9% for academic year 2023/24
Continued focus on operational efficiency with clustering
strategy and refurbishments providing profitable growth
-- 254 newly refurbished beds to be delivered across target
cluster markets for the 2023/24 academic year
-- Finance and administrative costs continue in line with guidance
-- Gross Margin improved to 72% at 30 June 2023 (70%: 30 June
2022); expected to moderate in line with guidance of 70% across the
full year
-- Post-Grad roll-out continues with the planned opening of our
second exclusive Post-Grad offering in Nottingham for academic year
2023/24
Disposal programme on track to complete in 2023
-- Non-core disposal programme generated GBP34.6m from the sale of four properties
-- Contracts have exchanged for the sale of two further
properties post 30 June 2023, collectively generating a further
GBP8.8m
-- Disposals achieved in line with book values demonstrating robust valuation approach
-- Non-core properties now represent only 4% of total portfolio,
with the disposal programme on track
Robust balance sheet
-- Property loan to value at 30.3%, comfortably ahead of long-term target of 35%
-- Weighted average cost of debt 4.3% (31 December 2022: 4.0%),
88% with interest rate protection
-- Cash and undrawn committed facilities of GBP75.6m
-- Terms agreed for the refinancing of 2024 & 2025 variable debt maturities
Hello Student operating platform delivering market leading
service
-- Continued improvement in Global Student Living Index Net
Promoter Score from 27 to 32, which compares favourably against
purpose built student accommodation average of 14 and 9 for
university halls
-- Hello Student awarded Platinum Operator certification by Global Student Living
Business and market outlook remains positive for H2 2023
-- Revenue occupancy target achieved for academic year 2023/24, earlier than prior year
-- Targeting a minimum dividend for the year to 31 December 2023 of 3.25 pence per share
-- Actively exploring growth of Post-Grad opportunity with a
view to accelerating the roll out of this product in key strategic
locations
Results presentation at 09.00 (BST) today
To access the live webcast, please register in advance here:
https://stream.brrmedia.co.uk/broadcast/64995c7f0877dfa14c001a59
For Further Information on the Company, Please Contact:
Empiric Student Property plc (via FTI Consulting below)
Duncan Garrood (Chief Executive Officer)
Donald Grant (Chief Financial & Sustainability
Officer)
Jefferies International Limited 020 7029 8000
Tom Yeadon
Andrew Morris
Peel Hunt LLP 020 7418 8900
Capel Irwin
Carl Gough
FTI Consulting 020 3727 1000
Dido Laurimore empiric@fticonsulting.com
Eve Kirmatzis
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
operating platform, that is attractive to a growing number of
student segments.
The Company is 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.
Disclaimer
This release includes statements that are forward looking in
nature. Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of Empiric Student Property plc to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. Any information contained in this release on the price
at which shares or other securities in Empiric Student Property plc
have been bought or sold in the past, or on the yield on such
shares or other securities, should not be relied upon as a guide to
future performance.
Operating Review
Building on our operational transformation, the business has
experienced a strong start to 2023. The lettings cycle for academic
year 2023/24, which has tracked eight to ten weeks ahead of the
prior year during this first half of 2023, began with our most well
received re-booker campaign. The acute undersupply of high quality
student accommodation, coupled with the strategic shift in the
portfolio away from secondary locations in favour of clustering
premium quality properties in prime, undersupplied cities within
close proximity to top-tier universities, has delivered a re-booker
rate well in excess of the 20 per cent we targeted. Some of our
strongest locations achieved re-booker rates in excess of 30 per
cent, with certain properties securing 100 per cent of eligible
re-bookers. This is a great achievement considering approximately a
third of students complete their higher education journey each
year. Target Revenue Occupancy of greater than 97 per cent has now
been achieved for academic year 2023/24, with only a limited number
of rooms remaining available, and we expect to deliver
like-for-like rental growth in excess of nine per cent,
significantly ahead of previous guidance.
Market outlook remains strong
As other UK real estate sectors have faced a more challenging
macro-economic environment, PBSA has continued to defy market
trends, with GBP7.8 billion of assets traded during 2022. This
figure reflected an increase of 89 per cent on 2021, as real estate
investment volumes in the UK as a whole fell by 14.2 per cent. A
notable proportion of the sector's activity was secured through the
completion of GIC/Greystar's GBP3.3 billion acquisition of
Brookfield's Student Roost portfolio. An additional 54 deals were
completed in 2022 including a number of new entrants to the UK PBSA
market. Global appetite for the sector has continued to increase
with U.S. and Singaporean investors accounting for 47 per cent and
24 per cent of investment in the past three years, respectively
(source: Savills UK PBSA Spotlight May 2023).
Although there has been less PBSA transaction activity to date
in 2023 as investors take stock of the changing macroeconomic
environment, the overall attractiveness of the sector remains
strong. A resurgence in activity in the second half of 2023 is
anticipated, as the market continues to demonstrate robust
year-on-year rental growth for academic year 2023/24, reinforcing
the supply/demand imbalance.
According to Higher Education Statistics Agency's ("HESA")
latest student population data for the 2021/22 academic year, the
number of full-time students increased by 4 per cent to over 2.25
million. This data also showed a rise in total postgraduate
students by 77,000 to 820,000, the highest total ever recorded in
the UK. The growth trajectory is anticipated to continue as the
university-aged population in the UK expands, with the number of
individuals aged 18 expected to reach 890,000 by 2030, compared to
717,000 in 2020. The supply of new beds, including its forward
pipeline, has decreased and is not anticipated to keep pace with
the forecast growth in demand.
The UK's attractiveness as a destination for international
students continues to drive growth in student numbers. HESA report
that the number of full-time international students studying in the
UK has risen from 432,000 in 2017/18 to 636,000 in 2021/22. This
growth has been largely driven by a surge in Indian students,
rising from 15,000 in 2016/17 to 112,000 in 2021/22. Chinese
student numbers had also experienced sustained growth, surpassing
147,000 in total.
Strengthening international student application statistics
continue to be reported. The University and Colleges Admissions
Service's January 2023 statistical release shows a 4 per cent
year-on-year rise in non-EU international applications. This was
driven by Indian applicants which grew by 5 per cent and Nigerian
applicants which rose 26 per cent to 9,130 and 2,930 respectively.
Applications from the U.S. rose 10 per cent and UAE applicants rose
21 per cent to 5,800 and 3,570, respectively. The international
market accounts for 24 per cent of total UK student numbers, but
closer to half the total tuition fees paid to UK universities.
The UK remains within the top four favoured international
destinations for students originating from the United States, China
and India, attracting almost ten per cent of the total
international student market, behind only the United States. The UK
continues to perform well on relative affordability, when compared
with many other sought after international destinations.
Our marketing and sales strategy has continued to target
domestic students as well as international markets where our brand
is underweight, for example in the strengthening Indian and
Nigerian markets. Demographically, for the forthcoming academic
year to date, 49 per cent of rooms have been sold to UK nationals,
32 per cent to Chinese students and 19 per cent to other
international students.
Recent UCAS applications data suggests a decline in overall
student applications of 2.3 per cent, which includes a fall in
applications from Chinese students of 2.2 per cent. This decline in
applications can be attributed to the UK domestic market, as the
overall number of applications from international students has
continued to rise, with strong growth experienced from Indian
students. The reduction in Chinese applications is largely due to
the reopening of the Australian market, post Pandemic. A period
during which the UK was a net beneficiary of Chinese
applicants.
A key driver behind the reduction in UK domestic applications
was a material reduction in applications for Teaching and Nursing
qualifications. Both these professions experienced strong growth
during the Pandemic years of 2020 & 2021. Post pandemic
normalisation, together with recent negative sentiment has impacted
the number of students applying for these qualifications.
Historically, only 15 per cent of Teaching and Nursing
applicants apply to study at higher tariff universities. Removing
Teaching and Nursing applications from the data reduces the decline
in applications to a more modest 0.8 per cent.
Portfolio overview
A summary of the Group's portfolio is set out below, segmented
in line with our valuer's view of quality. Almost 95 per cent of
the portfolio is invested in Prime or Super Prime locations.
Since 31 December 2022, the portfolio has grown in value by one
per cent, like-for-like. This is as a result of the continued
income growth achieved for the 2023/24 academic year, offset by a
weakening of yields in secondary locations and the increased cost
of fire safety works. Overall, the portfolio's net initial yield
has increased by 10 basis points to 5.3 per cent.
Reflected within the like-for-like growth of one per cent, is a
GBP9.0 million adjustment for increased cost of fire safety works.
This follows an extensive tendering exercise for our larger
properties where works are required to be carried out on their
external wall systems ("EWS"). The increase is primarily due to
high demand for specialist contractors, the rising cost of
scaffolding and revisions required following intrusive
investigations. In arriving at the portfolio's market value, the
valuer has applied a pound for pound deduction for the forecasted
cost of works. With works to our taller buildings now contracted,
we have a high degree of comfort in respect to future cost.
Properties Operational Market value Market value
Valuers quality segmentation beds (GBPm) (%)
------------------------------ ----------- ------------ ------------- -------------
Super prime regional 25 2,473 483.5 45.4
Prime regional 46 4,355 498.4 46.8
London 2 151 28.0 2.7
------------------------------ ----------- ------------ ------------- -------------
73 6,979 1,009.9 94.9
Secondary 9 1,025 54.1 5.1
------------------------------ ----------- ------------ ------------- -------------
Total 82 8,004 1,064.0 100.0
------------------------------ ----------- ------------ ------------- -------------
Actively managing the property portfolio
A portfolio segmentation review was carried out in early 2021
with each property assigned a strategic segment reflecting the
Group's investment style, as follows:
-- Segment A : Properties that are well located to top-tier
universities, appropriately configured and on-brand
-- Segment B: Properties that fundamentally meet our key
criteria but require extensive refurbishment to become on-brand. If
extensive refurbishment is not expected to deliver our IRR return
hurdle of 9-11 per cent, then the property is earmarked for
sale.
-- Segment C: Well-located properties which are configured in a
manner that lend themselves better to a conversion to our new brand
Post-Grad by Hello Student, this is typically based on room mix,
size and amenity.
-- Segment D: These properties are typically not of a size or
configuration that lend themselves to become a core Segment A or
Segment C scheme, are typically located in a single asset city
whereby the benefits of clustering can't easily be realised and/or
are not aligned to a top-tier university. These are therefore
considered non-core, and earmarked for disposal.
We have seen activity in the investment market return following
a period of disruption in the final quarter of 2022, allowing us to
progress our non-core disposal programme at pace during the first
half of the year.
During the six months to 30 June 2023, the Group has concluded
the disposal of four properties generating GBP34.6 million, with
pricing above 31 December 2022 book values, in aggregate. The sales
cumulatively represent 524 operational beds and have reduced by one
the cities in which the Company has an operational presence.
Since 30 June, contracts have been exchanged for the sale of two
further properties, representing 96 beds with an aggregate
consideration of GBP8.8 million. One completion took place in July
with the other expected to complete in August. A number of other
non-core asset sales are at various stages of negotiation,
including under offer, providing continued optimism that our
Segment D disposal programme will be materially complete by the end
of 2023.
Since we began our non-core disposal programme in March 2021,
the Company has generated gross proceeds of GBP101.2 million.
As we recycle capital from secondary locations or cities where
we don't have sufficient scale, we aim to drive operational
performance and improved returns through clustering. We are pleased
to report that the progress made over the last 12 months has
enabled us to improve our Gross Margin from 70 per cent at 30 June
2022 to 72 per cent at 30 June 2023, with our core properties now
delivering 73 per cent, on average.
Total market
Segment Segment Segment Segment value NIY
Strategic segmentation A (GBPm) B (GBPm) C (GBPm) D (GBPm) (GBPm) (%)
------------------------ ---------- ---------- ---------- ---------- -------------- -----
Operational portfolio 751.4 106.6 142.0 43.7 1,043.8 5.3
Commercial portfolio 9.4 2.3 1.9 3.5 17.0 8.0
Development portfolio - - - 3.2 3.2
------------------------ ---------- ---------- ---------- ---------- -------------- -----
Total 760.8 108.9 143.9 50.4 1,064.0
------------------------ ---------- ---------- ---------- ---------- -------------- -----
% 71.5 10.3 13.5 4.7 (1) 100.0
------------------------ ---------- ---------- ---------- ---------- -------------- -----
(1) Adjusting for sales exchanged pending completion or
exchanged and completed post 30 June 2023, Segment D now represents
4.1 per cent of the operational portfolio
Refurbishment & development
Our annual refurbishment programme targets the delivery of
between 250 and 350 beds annually. For the start of academic year
2023/24 we are on track to provide 254 newly refurbished beds and
associated amenity areas across six core locations, with ongoing
rolling refurbishments in the fourth quarter of 2023 and the first
quarter of 2024, leading to a further 250 rooms for academic year
2024/25. Refurbishments typically deliver IRRs of between 9-11 per
cent.
In September, we will deliver our second Post-Grad exclusive
site at Talbot Studio's in Nottingham. This follows the success of
our Post-Grad pilot which opened in Edinburgh in November 2022. Our
Edinburgh scheme, which has sold out again for academic year
2023/24, has improved the city's gross margin and delivered a
rental premium per room of approximately 20 per cent, without the
need to build out amenity space.
Capital expenditure programme
Our five year programme of refurbishment, fire safety works and
green initiatives continues. The revised plan, reflecting the
increased cost of EWS works, is set out below. In respect to our
programme of fire safety works, all properties have now been
intrusively surveyed with 61 per cent of the portfolio fully
certified.
Fire safety
Refurbishment works Green initiatives
(GBPm) (GBPm) (GBPm)
----------------------------------------- -------------- ------------ ------------------
Five year Plan (2021 - 2025) 36.1 37.0 12.0
Revision to cost forecast for EWS works - 9.0 -
----------------------------------------- -------------- ------------ ------------------
Revised plan 36.1 46.0 12.0
----------------------------------------- -------------- ------------ ------------------
Invested to date 8.4 14.0 0.8
----------------------------------------- -------------- ------------ ------------------
Forecast H2 23 investment 9.5 6.5 2.8
----------------------------------------- -------------- ------------ ------------------
In addition to the above, ongoing capital life cycling works
require around GBP4.0 million per annum.
We have allocated GBP12.0 million in favour of green
initiatives, to reduce energy consumption and manage future EPC
risk by bringing the portfolio in line with MEES requirements.
Although year to date investment has been modest, decarbonisation
works are underway at three sites, with studies awaited from a
further five. Dedicated resource has been secured to accelerate the
roll out of our decarbonisation plans over the next 18 months.
Growth
We continue to explore acquisition opportunities which are
complementary to our core strategy of acquiring income accretive
properties where we can exploit the benefits of clustering. We are
currently in active discussions in respect of high-quality, well
located opportunities in four UK cities where we have a strong
existing operational presence. These comprise standing assets,
refurbishment and forward fund opportunities.
Over the past five years, the UK's Post-Graduate population has
grown at a compound annual growth rate of nine per cent. With an
increasing number of international Post-Graduates choosing to study
in the UK and UK universities seeking to expand international
student numbers, this market is expected to continue to grow. We
see this as a significant future growth opportunity for the
business, not only in the provision of a product tailored to the
needs of Post-Graduates, but also in driving our clustering
strategy further and extending our relationship with existing
customers. Supported by PwC, the Board is continuing to explore
this opportunity in greater detail with a view to accelerating the
roll out of the product in our key strategic locations.
Delivering consistent customer service
Delivering a high quality customer experience is paramount to
the development of our strategic priorities. Our benchmark and key
performance indicator in this regard is the Global Student Living
Index's ("GSLI") Net Promoter Score ("NPS").
In the first of two surveys to be conducted during 2023, our
operating brand, Hello Student, achieved an NPS score of 32, our
highest score achieved to date (H2 2022: 27). This significantly
outperformed the benchmark All Private Halls score which received
an NPS of 12. Of all respondents, 87 per cent rated their room
positively, with 85 per cent regarding our management and on-site
teams as either good or very good, whilst 74 per cent agreed that
their onsite team cared about their wellbeing.
Hello Student is a proud finalist for the Best Private Housing,
Best Student Wellbeing, Best Learning Environment and Best
Individual Property award at this year's GSLI awards. In addition,
Global Student Living has recently awarded Hello Student a Platinum
Operator certification. This is a fantastic result all round which
demonstrates our commitment to a personal, high quality, customer
service proposition.
Portfolio safety
Safety is, and will remain, of paramount importance to our
business. We have a responsibility to ensure that everyone who is
living, working in or visiting our buildings is kept safe. We
continue to ensure our buildings comply with all relevant
regulations and industry best practice.
Good progress has been made in the first half toward our key
priorities for the year. Fire marshal & fire asset training has
been delivered across the business. Our fire safety campaign and
plans have been well received by the fire service and our fire
management system is fully signed off by our primary authorities.
In respect of Health & Safety, appointed persons training has
been completed, with a contractor management standard now in place
and our safe contractor campaign complete. Our critical incident
plans were mobilised in June, following the sad incident in close
proximity to one of our sites in Nottingham, where three people
lost their lives following a series of stabbings. After a
well-coordinated effort, all our customers and employees were
declared safe and secure, with support made available to those who
required it.
Financial review
Overview
Notwithstanding the ongoing disposal programme, revenue has
increased 16 per cent relative to the first half of 2022. This
captures the impact of the sitting academic year's 5.2 per cent
like for like rental growth coupled with the success of capital
recycling and higher levels of occupancy.
The Group's gross margin has improved to 72 per cent, this is
above guidance, but expected to moderate in line with guidance of
70 per cent across the full year following the annual turnaround of
our customers in August & September.
Administrative costs of GBP6.5 million have reduced as a
percentage of revenue from 17.7 per cent to 15.7 per cent,
comfortably within full year guidance of GBP14.0 million.
Ongoing inflationary concerns and its impact on interest rates
has driven the Group's weighted average cost of debt to 4.3 per
cent from 4.0 per cent at 31 December 2022. Overall finance costs
of GBP9.0 million are GBP2.1 million higher than the first half of
2022, GBP0.8 million higher than the second half of 2022.
IFRS profit for the first half was GBP24.6 million, whilst EPRA
earnings, our measure of recurring earnings, were GBP14.1 million
or 2.3 pence per share, an increase of 15.0 per cent on the first
half of 2022.
Largely in contrast to the wider real estate sector, the
portfolio increased in value by GBP10.3 million, one per cent, on a
like-for-like basis.
Total accounting return, which includes dividends paid and
growth in EPRA Net Tangible Asset value was 3.3 per cent, down from
10.9 per cent at 30 June 2022, due primarily to more modest
valuation growth.
Income statement
Core Non-core 30 June 30 June
portfolio (bucket D) 2023 2022
GBPm GBPm GBPm GBPm
--------------------------- ----------- ------------ -------- --------
Revenue 38.3 3.0 41.3 35.6
Property expenses (10.3) (1.4) (11.7) (10.6)
--------------------------- ----------- ------------ -------- --------
Gross profit 28.0 1.6 29.6 25.0
Gross margin 73% 53% 72% 70%
Administrative expenses (6.5) (6.3)
--------------------------- ----------- ------------ -------- --------
Operating profit 23.1 18.7
Net finance costs (9.0) (6.9)
--------------------------- ----------- ------------ -------- --------
EPRA earnings 14.1 11.8
Revaluation 10.3 58.6
Loss on disposals (0.6) (0.1)
Gain on derivatives 0.8 -
--------------------------- ----------- ------------ -------- --------
IFRS Profit 24.6 70.3
Weighted average ordinary
shares (m) 603.3 603.2
IFRS EPS (pence) 4.1 11.7
EPRA EPS (pence) 2.3 2.0
--------------------------- ----------- ------------ -------- --------
Revenue for the half year increased to GBP41.3 million. With
occupancy for the current sitting academic year at 99 per cent,
this is the first fully normalised period post-pandemic. Occupancy
for the six months to 30 June 2022 was 86 per cent.
Gross profit increased from GBP25.0 million to GBP29.6 million
representing a gross margin increase of 2 per cent to 72 per cent.
This is largely the result of the Group's capital recycling
programme which targets the disposal of properties in secondary or
non-core locations where the benefit of clustering cannot be fully
achieved, and redeployment of the proceeds into acquisitions,
development or refurbishment of properties in core clustered
locations that demonstrate strong demand supply fundamentals.
Administrative costs of GBP6.5 million have remained under
pressure from inflation. With the operational transformation of the
business largely complete and a 3 per cent increase in overhead
costs relative to the first half of 2022, we expect the increase
this year to be modest.
In aggregate disposals generated GBP34.6 million, GBP0.1 million
above their aggregate 31 December 2022 valuation, however after
sales costs a loss of GBP0.6 million was recorded.
An interest rate cap pertaining to GBP67.4 million of floating
rate debt was entered into in February this year. Due to rising
interest rates a mark to market gain of GBP0.8 million has been
recorded.
Balance sheet
30 June 31 December
2023 2022
GBPm GBPm
---------------------------- -------- ------------
Property (market value) 1,064.0 1,078.9
Cash on hand 40.6 55.8
Bank borrowings drawn (367.3) (391.2)
Other net liabilities (21.7) (42.7)
---------------------------- -------- ------------
Net assets 715.6 700.8
Diluted number of shares 609.0 607.2
EPRA NTA per share (pence) 117.3 115.4
Property LTV 30.3% 31.1%
EPRA LTV 32.4% 32.7%
---------------------------- -------- ------------
Net asset value has increased by GBP14.8 million, or 2.1 per
cent since 31 December 2022, primarily due to a revaluation uplift
of GBP10.3 million.
Evolution of net asset value GBPm
------------------------------ -------
31 December 2022 700.8
EPRA earnings 14.1
Like-for-like revaluation 10.3
Dividends (10.2)
Other 0.6
------------------------------ -------
30 June 2023 715.6
------------------------------ -------
Portfolio valuation
30 June 31 December
2023 2022 Gain(1) Change
GBPm GBPm GBPm %
---------------------------------- -------- ------------ ---------- ---------
Like-for-like property portfolio 1,060.8 1,041.2 10.3 1.0
Disposals - 34.5 - -
Developments 3.2 3.2 - -
Portfolio valuation 1,064.0 1,078.9 10.3
---------------------------------- -------- ------------ ---------- ---------
(1) net of capital expenditure and head lease amortisation
There was a marginal upward like-for-like valuation movement of
GBP10.3 million, or one per cent during the first half of the year.
This is as a result of rental growth achieved for the forthcoming
2023/24 academic year, offset by a ten basis point increase in the
portfolio's net initial yield to 5.3 per cent. The increase in net
initial yield is largely the result of yield softening in secondary
locations. The portfolio reversionary yield remains unchanged at
5.5 per cent.
The disposal programme for non-core assets has continued, with
four assets disposed of during the first half of the year
generating gross proceeds of GBP34.6 million. Subsequent to 30 June
2023, contracts have exchanged for the sale of two further
properties, collectively generating a further GBP8.8 million. Both
properties were held as available for sale.
Capital expenditure of GBP9.6 million was invested during the
first half of the year.
Debt
Bank borrowings drawn at 30 June 2023 was GBP367.3 million, of
which 74 per cent is held at fixed rates. Fixed rate debt carries a
weighted average cost of debt of 3.4 per cent and an unexpired term
of 5.3 years. Floating rate debt of GBP96.4 million carries a
weighted average cost of debt of 6.8 per cent and unexpired term of
1.9 years. An interest rate cap is in place over GBP67.4 million of
floating rate debt, meaning interest rate protection extends to 88
per cent of total drawn debt.
Overall, the weighted average cost of debt at 30 June 2023 was
4.3 per cent with a weighted average unexpired term of 4.4
years.
GBP1.5 million of annualised interest expense has been saved by
prepayment of GBP23.9 million of borrowings, through efficient use
of cash from disposals, and cancellation of GBP22.6 million of
surplus facility headroom. The prepaid debt is likely to be
redeployed once suitable assets are identified, and the pipeline
remains healthy.
The group remains fully compliant with loan covenants.
Property loan to value was 30.3 per cent at 30 June 2023, below
our longer term target of 35 per cent, primarily due to valuation
gains and disposal activity. Cash reserves at 30 June 2023 totalled
GBP40.6 million, with a further GBP35.0 million available from
undrawn committed facilities.
The Group has no refinancing risk in 2023, with GBP57.7 million
maturing in 2024. Discussions with new and existing lenders have
continued during the first half of the year with terms now agreed
to refinance all floating rate facilities maturing in 2024 and
2025.
Cashflow
30 June 31 December
2023 2022
GBPm GBPm
----------------------------------------------- -------- ------------
Operating cash flow 3.1 43.6
Property acquisitions and capital expenditure (10.1) (49.1)
Property disposals 33.9 39.7
----------------------------------------------- -------- ------------
Net cash flows from investing activities 23.8 (9.4)
Dividends paid (10.2) (16.7)
Net borrowings (repaid)/drawn (23.9) 14.6
Finance related costs (8.0) (13.4)
----------------------------------------------- -------- ------------
Financing cash flows (42.1) (15.5)
Net cash flow (15.2) 18.7
----------------------------------------------- -------- ------------
Operational cashflows are typically light in the first half of
the financial year, due to the seasonality of cashflows being
linked to academic years. The majority of rents are ordinarily
received in August & December.
Strategic capital recycling has continued with proceeds from the
disposal of non-core assets directed into refurbishment, fire
safety works and prepayment of floating rate debt facilities.
Cash paid in relation to dividends includes the payment of
dividends relating to the fourth quarter of 2022 and the first
quarter of 2023.
Borrowings repaid amounted to GBP23.9 million. Of this, GBP17.6
million was prepaid against the Group's revolving credit
facility.
Finance related costs have continued to increase linked to the
cost of borrowing associated with the Group's floating rate debt
facilities.
Going concern
The Board continues to place particular focus on the
appropriateness of adopting the going concern assumption when
preparing the Group's consolidated financial statements.
At 30 June 2023, the Group had GBP75.6 million in cash and
undrawn committed facilities. Within the going concern period to 31
December 2024, the Group has debt maturities totalling GBP57.7
million for which refinancing discussions are in an advanced stage
and are expected to be secured during the second half of the year,
which if concluded will remove refinancing risk until 2028 and
extend the groups weighted average debt maturity to around six
years.
In light of the Group's liquidity position, its modest level of
gearing and capital commitments, the Directors have concluded that,
in reasonably possible adverse scenarios, adequate resources and
mitigants remain available to continue to operate for the period to
31 December 2024. The Directors therefore concluded that it remains
appropriate to adopt the going concern basis of preparation when
compiling the interim report and accounts for the six months ended
30 June 2023.
Attention is drawn to note 1.3 of the condensed consolidated
interim financial statements for further details surrounding the
conclusion reached.
Dividends
An interim dividend of 0.8125 pence per share has been declared
for the second quarter of 2023, bringing total dividends paid and
payable in respect of the first half of 2023 to 1.625 pence per
share. This is in line with our full year target dividend of 3.25
pence per share announced alongside our full year results in March
2023.
The dividend will be paid as a Property Income Distribution on
22 September 2023 to shareholders on the register at 8 September
2023.
Outlook
Having effectively filled our rooms for the forthcoming academic
year and delivered strong like-for-like rental growth, we remain
confident in the outlook for the business and the wider purpose
built student accommodation sector throughout the remainder of 2023
and beyond.
Although inflation has remained higher for longer than most
expected, our 100 per cent direct-let model coupled with dynamic
pricing capability provides optimism in our ability to capture
inflation and grow like-for-like revenues to keep pace with rising
costs.
Our focus remains on completing the non-core disposal programme,
progressing capex plans and accelerating the roll out of our
Post-Grad by Hello Student brand, whilst always continuing to
provide great service and value for our customers.
With energy hedging in place until the end of 2024, we are
selectively securing energy price fixing beyond 2024, as
opportunities arise.
Terms have been agreed for the refinancing of all 2024 &
2025 debt expiries. Given the facilities being refinanced are
floating rate facilities, and over 70 per cent of the Group's drawn
debt is longer term fixed rate debt, the impact on weighted average
cost of debt is expected to be limited. Once concluded, this would
extend the average unexpired term to around six years.
The Board remains comfortable with all earlier guidance,
including dividend guidance. The Company continues to expect to pay
a minimum dividend of 3.25 pence per share for 2023. This will be
revisited in the fourth quarter, following the start of the 2023/24
academic year.
Principal Risks
Attention is drawn to the principal risks and uncertainties
faced by the Group which are set out in full on pages 30 to 33 of
the Annual Report & Accounts 2022.
An interim review of the risk environment has been completed,
and the Board has concluded that there has been no significant
change in the Group's principal risks or uncertainties.
The overall risk profile has however shifted with certain
principal risks reducing, and others increasing in probably and or
impact.
Where a change in probability or impact was evident, these
changes have been set out below.
Risk Interim assessment
--------------------- ----------------------------------------------------------
Revenue risk Reduced.
Occupancy levels and revenue growth have remained
strong for academic year 2023/24 with demand for
student accommodation out-stripping supply in a
number of the cities the Group operates within.
--------------------- ----------------------------------------------------------
Inflation risk Increased.
Inflation has remained higher for longer than originally
anticipated. Following a rapid increase in interest
rates, there are early signs of improvement.
--------------------- ----------------------------------------------------------
Safe and sustainable Increased.
buildings risk Demand for specialist contractors coupled with
cost inflation has materially impacted the forecast
cost of remedial fire safety works.
--------------------- ----------------------------------------------------------
Statement of Directors' responsibilities
Responsibility Statement of the Directors in Respect of the
Interim Report and Accounts
The Directors confirm that to the best of their knowledge this
condensed set of financial statements has been prepared in
accordance with UK adopted International Accounting Standard 34 and
that the operating and financial review herein includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8 of
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority, namely:
-- an indication of important events that have occurred during
the first six months of the financial period and their impact on
the condensed financial statements and a description of the
principal risks and uncertainties for the remaining six months of
the financial period; and
-- material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report.
The Directors of Empiric Student Property plc are listed in the
Empiric Student Property plc Annual Report for the year ended 31
December 2022. A list of current Directors is also maintained on
the Empiric Student Property plc website: www.empiric.co.uk
By order of the Board
Donald Grant
Director
16 August 2023
Independent Review Report to Empiric Student Property PLC
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2023 which comprises the condensed
consolidated statement of comprehensive income, the condensed
consolidated statement of financial position, the condensed
consolidated statement of changes in equity, the condensed
consolidated statement of cash flows and related notes.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1.2, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the Group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the
Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London, United Kingdom
16 August 2023
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Condensed Consolidated Statement of Comprehensive Income
(unaudited)
Full year
Six months Six months to
to 30 June to 30 June 31 December
2023 (Unaudited) 2022 (Unaudited) 2022 (Audited)
Notes GBP m GBP m GBP m
---------------------------------------------- ----- ----------------- ----------------- ---------------
Continuing operations
Revenue 41.3 35.6 73.0
Property expenses (11.7) (10.6) (24.0)
Gross profit 29.6 25.0 49.0
---------------------------------------------- ----- ----------------- ----------------- ---------------
Administrative expenses (6.5) (6.3) (13.4)
Change in fair value of investment property 7 10.3 58.6 45.6
Operating profit 33.4 77.3 81.2
---------------------------------------------- ----- ----------------- ----------------- ---------------
Finance costs 2 (9.0) (6.9) (15.0)
Derivative fair value movement 0.8 - -
(Loss)/gain on disposal of investment
property (0.6) (0.1) 1.5
Profit before tax 24.6 70.3 67.7
---------------------------------------------- ----- ----------------- ----------------- ---------------
Corporation tax 3 - - -
Profit for the period and total comprehensive
income 24.6 70.3 67.7
---------------------------------------------- ----- ----------------- ----------------- ---------------
Earnings per share expressed as pence
per share
Basic 4 4.1 11.7 11.2
Diluted 4 4.0 11.6 11.1
---------------------------------------------- ----- ----------------- ----------------- ---------------
Condensed Consolidated Statement of Financial Position
(unaudited)
30 June 30 June 31 December
2023 (Unaudited) 2022 (Unaudited) 2022 (Audited)
Notes GBP m GBP m GBP m
----------------------------------------- ----- ----------------- ----------------- ----------------
Non-current assets
Investment property - Operational Assets 7 1,022.7 1,037.3 1,062.4
Investment property - Development Assets 7 3.3 50.4 3.3
Property, plant and equipment 0.9 1.0 1.1
Intangible assets 2.7 1.4 1.9
Right of use asset 1.3 1.5 1.3
Derivative fair value 1.1 - -
----------------------------------------- ----- ----------------- ----------------- ----------------
1,032.0 1,091.6 1070.0
----------------------------------------- ----- ----------------- ----------------- ----------------
Current assets
Trade and other receivables 2.6 5.0 7.0
Assets classified as held for sale 8 38.3 - 13.7
Cash and cash equivalents 40.6 51.1 55.8
----------------------------------------- ----- ----------------- ----------------- ----------------
81.5 56.1 76.5
----------------------------------------- ----- ----------------- ----------------- ----------------
Total assets 1,113.5 1,147.7 1,146.5
----------------------------------------- ----- ----------------- ----------------- ----------------
Current liabilities
Trade and other payables 21.8 19.4 24.8
Borrowings 9 13.7 20.0 -
Lease liability 0.1 0.1 0.1
Deferred rental income 11.8 13.7 33.1
----------------------------------------- ----- ----------------- ----------------- ----------------
47.4 53.2 58.0
----------------------------------------- ----- ----------------- ----------------- ----------------
Non-current liabilities
Borrowings 9 349.4 382.4 386.5
Lease liability 1.1 1.4 1.2
----------------------------------------- ----- ----------------- ----------------- ----------------
350.5 383.8 387.7
----------------------------------------- ----- ----------------- ----------------- ----------------
Total liabilities 397.9 437.0 445.7
----------------------------------------- ----- ----------------- ----------------- ----------------
Net assets 715.6 710.7 700.8
----------------------------------------- ----- ----------------- ----------------- ----------------
Called-up share capital 6.0 6.0 6.0
Share premium 0.3 0.3 0.3
Capital reduction reserve 434.7 452.4 444.7
Retained earnings 274.6 252.0 249.8
----------------------------------------- ----- ----------------- ----------------- ----------------
Total equity 715.6 710.7 700.8
----------------------------------------- ----- ----------------- ----------------- ----------------
NAV per share basic (pence) 5 118.6 117.8 116.1
NAV per share diluted (pence) 5 117.5 117.8 115.4
EPRA NTA per share (pence) 5 117.3 117.8 115.4
----------------------------------------- ----- ----------------- ----------------- ----------------
Condensed Consolidated Statement of Changes in Equity
(unaudited)
Six months ended 30 June 2023 (unaudited)
Called Capital
up share reduction Retained Total
capital Share premium reserve earnings equity
GBP m GBP m GBP m GBP m GBP m
-------------------------------------- --------- ------------- ---------- --------- -------
Balance at 1 January 2023 6.0 0.3 444.7 249.8 700.8
-------------------------------------- --------- ------------- ---------- --------- -------
Profit for the period - - - 24.6 24.6
-------------------------------------- --------- ------------- ---------- --------- -------
Total comprehensive income for the
period - - - 24.6 24.6
-------------------------------------- --------- ------------- ---------- --------- -------
Share-based payment - - - 0.4 0.4
Reserves transfer - - 0.2 (0.2) -
Dividends - - (10.2) - (10.2)
-------------------------------------- --------- ------------- ---------- --------- -------
Amounts recognised directly in equity - - (10.0) 0.2 (9.8)
-------------------------------------- --------- ------------- ---------- --------- -------
Balance at 30 June 2023 6.0 0.3 434.7 274.6 715.6
-------------------------------------- --------- ------------- ---------- --------- -------
Six months ended 30 June 2022 (unaudited)
Capital reduction Total
Called up share capital Share premium reserve Retained earnings equity
GBP m GBP m GBP m GBP m GBP m
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Balance at 1 January
2022 6.0 0.3 460.0 181.3 647.6
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Profit for the period - - - 70.3 70.3
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Total comprehensive
income for the period - - - 70.3 70.3
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Share-based payment - - - 0.4 0.4
Share options exercised - - (7.6) - (7.6)
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Amounts recognised
directly in equity - - (7.6) 0.4 (7.2)
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Balance at 30 June 2022 6.0 0.3 452.4 252.0 710.7
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Full year ended 31 December 2022 (audited)
Capital reduction Total
Called up share capital Share premium reserve Retained earnings equity
GBP m GBP m GBP m GBP m GBP m
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Balance at 1 January
2022 6.0 0.3 459.9 181.4 647.6
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Profit for the year - - - 67.7 67.7
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Total comprehensive
income for the period - - - 67.7 67.7
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Share-based payment - - - 0.7 0.7
Dividends - - (15.2) - (15.2)
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Amounts recognised
directly in equity - - (15.2) 0.7 (14.5)
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Balance at 31 December
2022 6.0 0.3 444.7 249.8 700.8
------------------------ ----------------------- ------------- ------------------------ ----------------- -------
Condensed Consolidated Statement of Cash Flows (unaudited)
Full year to 31 December 2022
Six months to 30 June 2023 (Unaudited) Six months to 30 June 2022 (Unaudited) (Audited)
GBP m GBP m GBP m
-------------------- ---------------------------------------- ---------------------------------------- -----------------------------
Cash flows from
operating activities
Profit before income
tax 24.6 70.3 67.7
Share-based payments 0.4 0.4 0.7
Depreciation charge 0.4 0.4 0.6
Finance costs 9.0 6.9 15.0
Loss/(gain) on
disposal of
investment property 0.6 0.1 (1.5)
Derivative fair
value movement (0.8) - -
Change in fair value
of investment
property (10.3) (58.6) (45.6)
-------------------- ---------------------------------------- ---------------------------------------- -----------------------------
23.9 19.5 36.9
-------------------- ---------------------------------------- ---------------------------------------- -----------------------------
Decrease in trade
and other
receivables 3.1 2.8 0.2
(Decrease)/increase
in trade and other
payables (2.6) (1.1) 3.3
(Decrease)/increase
in deferred rental
income (21.3) (16.2) 3.2
-------------------- ---------------------------------------- ---------------------------------------- -----------------------------
(20.8) (14.5) 6.7
-------------------- ---------------------------------------- ---------------------------------------- -----------------------------
Net cash flows
generated from
operations 3.1 5.0 43.6
-------------------- ---------------------------------------- ---------------------------------------- -----------------------------
Cash flows from
investing activities
Purchase of tangible
fixed assets (0.1) (0.7) (1.0)
Purchase of
intangible assets (0.9) (0.2) (0.9)
Purchase and
development of
investment property (9.1) (34.1) (47.2)
Proceeds on disposal
of asset held for
sale, net of
selling costs 13.6 - 26.7
Proceeds on disposal
of investment
property, net of
selling costs 20.3 25.7 13.0
-------------------- ---------------------------------------- ---------------------------------------- -----------------------------
Net cash flows from
investing
activities 23.8 (9.3) (9.4)
-------------------- ---------------------------------------- ---------------------------------------- -----------------------------
Cash flows from
financing activities
Dividends paid (10.2) (7.2) (16.7)
Bank borrowings
drawn - 32.8 36.2
Repayment of bank
borrowings (23.9) - (20.0)
Loan arrangement fee
paid - (1.7) (1.6)
Derivative premium (0.3) - -
Finance costs (7.6) (5.5) (13.3)
Lease liability
repaid (0.1) (0.1) (0.1)
-------------------- ---------------------------------------- ---------------------------------------- -----------------------------
Net cash from
financing
activities (42.1) 18.3 (15.5)
-------------------- ---------------------------------------- ---------------------------------------- -----------------------------
(Decrease)/increase
in cash and cash
equivalents (15.2) 14.0 18.7
-------------------- ---------------------------------------- ---------------------------------------- -----------------------------
Cash and cash
equivalents at
beginning of period 55.8 37.1 37.1
-------------------- ---------------------------------------- ---------------------------------------- -----------------------------
Cash and cash
equivalents at end
of period 40.6 51.1 55.8
-------------------- ---------------------------------------- ---------------------------------------- -----------------------------
Unaudited notes to the Financial Statements
1. Accounting Policies
1.1 Period of Account
The reporting period of the unaudited condensed consolidated
interim financial statements of the Group is the six month period
from 1 January 2023 to 30 June 2023.
1.2 Basis of Preparation
This unaudited condensed consolidated interim financial report
for the six month reporting period ended 30 June 2023 ("Interim
Report") has been prepared in accordance with the UK adopted
International Accounting Standard 34, "Interim Financial Reporting"
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The Interim Report does not include all of the notes of the type
normally included in an annual financial report. Accordingly, this
Report is to be read in conjunction with the Annual Report for the
year ended 31 December 2022, which has been prepared in accordance
with the UK-adopted international accounting standards.
This Interim Report does not comprise statutory accounts within
the meaning of section 434 of the Companies Act 2006. Statutory
accounts for the year ended 31 December 2022 were approved by the
Board of Directors on 16 March 2023 and delivered to the Registrar
of Companies. The report of the auditors on those accounts was
unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under section 498 of the Companies
Act 2006.
These financial statements have been reviewed, not audited.
The Group's financial statements have been prepared on a
historical cost basis, except for investment property and
derivative financial instruments which have been measured at fair
value. The Interim Report is presented in Sterling, which is also
the Group's functional currency.
The accounting policies adopted in this Report are consistent
with those applied in the Group's statutory accounts for the year
ended 31 December 2022 and are expected to be consistently applied
during the year ending 31 December 2023.
1.3 Going concern
At 30 June 2023, the Group's cash and undrawn committed
facilities were GBP75.6 million and its capital commitments were
GBP11.0 million.
Occupancy is a key driver of profitability and cash flows, and
at 16 August 2023, based on forward reservations for the upcoming
2023/24 academic year, 98 per cent had been secured which compares
favourably to 92 per cent for the 2022/23 academic year as at 11
August 2022.
At the year-end three facilities fell due for repayment during
the going concern period:
-- GBP13.7 million with Canada Life due to expire in March 2024
-- GBP32.8 million with Allied Irish Bank due to expire in October 2024
-- GBP11.2 million with NatWest due to expire in December 2024.
Lender appetite for the sector remains strong and good
relationships are maintained with all lenders. Refinancing
discussions are at an advanced stage and are expected to be secured
prior to the above maturity dates in all cases, which if concluded
will remove refinancing risk until 2028.
In February 2023, an interest rate cap was put in place in
respect to a GBP67.4 million facility held with Lloyds which
capping SONIA at five per cent. At the time of approval of this
Interim Report, the Group had GBP44.0 million of debt without
interest rate protection.
As part of the Group's going concern review, certain scenarios
are considered to model the impact on available liquidity. All of
the Group's covenants are currently compliant and we envisage
compliance to continue to be achieved in a reasonably severe
downside scenario, or that sufficient mitigants are available where
there is a risk to covenant headroom. The Group's portfolio could
currently withstand a 24 per cent decline in property valuations
before a breach in loan to value covenants is triggered.
The Group's average interest cover covenant across all
facilities is 2.0 times, whereas gross profit is currently in
excess of three times total finance costs, providing a good degree
of comfort.
Bank borrowings would be renegotiated in advance of any
potential covenant breaches, insofar as factors are within the
control of the Group. Facility agreements typically contain cure
provisions providing for prepayment, cash deposits or security
enhancement as may be required to mitigate any potential breach.
The Group's borrowings are spread across a range of lenders and
maturities so as to minimise any potential concentration of
risk.
The Directors have reassessed the Group's principal risks and
severe but plausible downside scenarios in assessing the Group's
and Company's going concern for the period to 31 December 2024. The
Directors have considered, in particular:
-- a reduction in revenue, both in terms of occupancy and growth rate;
-- inflation remains high, at eight per cent;
-- utilities costs increase by 2.5 times current market expectation;
-- interest rates increase by 2.0 per cent over current
forecasts, impacting the Group's floating rate debt;
-- an immediate valuation shock of minus 15 per cent in property valuations; and
-- rates at which the expiring debt facilities totalling GBP57.7
million in the period, could be refinanced. These were assumed to
be refinanced at rates provided in indicative terms agreed with
potential new lenders.
In addition, the Directors considered potential mitigants to the
downside scenario which include, but are not limited to, utilising
existing liquidity reserves, further asset disposals, pledging as
security ungeared properties and suspending non committed capital
expenditure.
Having made enquiries, the Directors have reasonable expectation
that the Group has adequate resources to continue in operational
existence for the period to 31 December 2024. In addition, having
reassessed the principal risks, the Directors considered it
appropriate to adopt the going concern basis of accounting in
preparing the Interim Report.
1.4 Significant Accounting Judgements, Estimates and
Assumptions
The preparation of the Group's interim financial statements
requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities, and the disclosure of contingent liabilities, at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability
affected in future periods.
Estimates
In the process of applying the Group's accounting policies,
management has made the following estimates, which have the most
significant effect on the amounts recognised in the Interim
Report:
Fair valuation of investment property
The market value of investment property is determined, by an
independent real estate valuation expert, to be the estimated
amount for which a property should exchange on the date of the
valuation in an arm's length transaction. Properties have been
valued on an individual basis. The valuation experts use recognised
valuation techniques and the principles of IFRS 13.
The valuations have been prepared in accordance with the RICS
Valuation - Global Standards (incorporating the International
Valuation Standards) and the UK national supplement (the "Red
Book"). Factors reflected include current market conditions, net
underlying operational income, periodic 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 7.
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 Interim
Report:
Operating lease contracts - the Group as lessor
The Group has investment properties which have various
categories of leases in place with tenants. The judgements by lease
type are detailed below:
Student leases: As these leases all have a term of less than one
year, the Group retains all the significant risks and rewards of
ownership of these properties and so accounts for the leases as
operating leases.
Nominations and commercial leases: The Group has determined,
based on an evaluation of the terms and conditions of the
arrangements, particularly the lease terms, insurance requirements
and minimum lease payments, that it retains all the significant
risks and rewards of ownership of these properties and so accounts
for the leases as operating leases.
1.5 Seasonality of Operations
The results of the Group's operating business are closely
aligned to the levels of occupancy achieved by the property
portfolio in each academic year. The Group targets 51-week
tenancies, with a one-week void period falling in late August or
early September. This results in slightly lower revenue on the
existing portfolio in the second half year combined with slightly
higher costs from turning around the rooms for the new academic
year.
The Group counteracts this through the development and
refurbishment cycle as construction is timed to complete ready for
the start of the academic year in September. These new properties
or rooms becoming available increases revenue in the second half of
the year.
1.6 Segmental Information
The Directors are of the opinion that the Group is engaged in a
single segment business, being the investment in student
accommodation, within the United Kingdom.
2. Finance Costs
Six months to Six months to
30 June 2023 30 June 2022
(unaudited) (unaudited) Full year to 31 December 2022 (audited)
GBP m GBP m GBP m
--------------------------------------- -------------- -------------- ---------------------------------------
Finance costs
Interest expense on bank borrowings 8.5 6.5 14.0
Amortisation of loan transaction costs 0.5 0.4 1.0
--------------------------------------- -------------- -------------- ---------------------------------------
9.0 6.9 15.0
--------------------------------------- -------------- -------------- ---------------------------------------
3. Corporation Tax
Taxation on the profit or loss for the period not exempt under
UK REIT regulations comprises current and deferred tax. Taxation is
recognised within the Group Consolidated Statement of Comprehensive
Income except to the extent that it relates to items recognised as
direct movement in equity, in which case it is also recognised as a
direct movement in equity.
Current tax represents tax payable on any non-REIT taxable
income for the period, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax
payable in respect of previous years.
4. Earnings Per Share
The number of ordinary shares is based on the time-weighted
average number of shares throughout the period.
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated using the weighted
average number of shares adjusted to assume the conversion of all
dilutive potential ordinary shares.
EPRA EPS, reported on the basis recommended for real estate
companies by EPRA, is a key measure of the Group's operating
results.
The calculation of each of the measures is set out below:
Calculation of basic Calculation of diluted Calculation of EPRA Calculation of EPRA
EPS EPS basic EPS diluted EPS
----------------------
Six months to 30 June
2023 (unaudited) GBP m GBP m GBP m GBP m
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Earnings 24.6 24.6 24.6 24.6
Changes in fair value
of investment
property (Note 7) - - (10.3) (10.3)
Derivative fair value
movement - - (0.8) (0.8)
Loss on disposal of
investment property - - 0.6 0.6
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Earnings/adjusted
earnings (GBP m) 24.6 24.6 14.1 14.1
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Weighted average
number of shares (m) 603.3 603.3 603.3 603.3
Adjustment for
employee share
options (m) - 5.6 - 5.6
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Total number of shares
(m) 603.3 608.9 603.3 608.9
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Per-share amount
(pence) 4.1 4.0 2.3 2.3
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Calculation of basic Calculation of diluted Calculation of EPRA Calculation of EPRA
EPS EPS basic EPS diluted EPS
----------------------
Six months to 30 June
2022 (unaudited) GBP m GBP m GBP m GBP m
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Earnings 70.3 70.3 70.3 70.3
Changes in fair value
of investment
property (Note 7) - - (58.6) (58.6)
Loss on disposal of
investment property - - 0.2 0.2
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Earnings/adjusted
earnings (GBP m) 70.3 70.3 11.9 11.9
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Weighted average
number of shares (m) 603.2 603.2 603.2 603.2
Adjustment for
employee share
options (m) - 0.4 - 0.4
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Total number of shares
(m) 603.2 603.6 603.2 603.6
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Per-share amount
(pence) 11.7 11.6 2.0 2.0
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Full year to 31
December 2022
(audited)
Earnings 67.7 67.7 67.7 67.7
Changes in fair value
of investment
properties (Note 7) - - (45.6) (45.6)
Gain on disposal of
investment property - - (1.5) (1.5)
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Earnings/adjusted
earnings 67.7 67.7 20.6 20.6
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Weighted average
number of shares (m) 603.3 603.3 603.3 603.3
Adjustment for
employee share
options (m) - 3.9 - 3.9
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Total number of shares
(m) 603.3 607.2 603.3 607.2
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Per-share amount
(pence) 11.2 11.1 3.4 3.4
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
5. NAV Per Share
The principles of the three 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 considers EPRA Net Tangible Assets 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 EPRA NAV metrics from IFRS NAV is
shown in the table below.
NAV EPRA NAV measures
----------------------------
IFRS EPRA NRV EPRA NTA EPRA NDV
-----------------------------------------------
Six months to 30 June 2023 (unaudited) GBP m GBP m GBP m GBP m
----------------------------------------------- ----- -------- -------- --------
Net assets per Statement of Financial Position 715.6 715.6 715.6 715.6
Adjustments
Fair value of fixed rate debt - - - 17.4
Derivative fair value (1.1)
Purchaser's costs(1) - 35.7 - -
----------------------------------------------- ----- -------- -------- --------
Net assets used in per share calculation 715.6 751.3 714.5 733.0
----------------------------------------------- ----- -------- -------- --------
Number of shares in issue
----------------------------------------------- ----- -------- -------- --------
Issued share capital (m) 603.3 603.3 603.3 603.3
Issued share capital plus employee options (m) 608.9 608.9 608.9 608.9
Net asset value per share (pence)
----------------------------------------------- ----- -------- -------- --------
Basic Net Asset Value per share (pence) 118.6
----------------------------------------------- ----- -------- -------- --------
Diluted Net Asset Value per share (pence) 117.5 123.4 117.3 120.4
----------------------------------------------- ----- -------- -------- --------
NAV EPRA NAV measures
IFRS EPRA NRV EPRA NTA EPRA NDV
-----------------------------------------------
Six months to 30 June 2022 (unaudited) GBP m GBP m GBP m GBP m
----------------------------------------------- ----- -------- -------- --------
Net assets per Statement of Financial Position 710.7 710.7 710.7 710.7
Adjustments
Fair value of fixed rate debt - - - 4.6
Purchaser's costs(1) - 38.4 - -
----------------------------------------------- ----- -------- -------- --------
Net assets used in per share calculation 710.7 749.1 710.7 715.3
----------------------------------------------- ----- -------- -------- --------
Number of shares in issue
----------------------------------------------- ----- -------- -------- --------
Issued share capital (m) 603.2 603.2 603.2 603.2
Issued share capital plus employee options (m) 603.5 603.5 603.5 603.5
Net asset value per share
----------------------------------------------- ----- -------- -------- --------
Basic Net Asset Value per share (pence) 117.8
----------------------------------------------- ----- -------- -------- --------
Diluted Net Asset Value per share (pence) 117.8 124.2 117.8 118.6
----------------------------------------------- ----- -------- -------- --------
NAV EPRA NAV measures
----------------------------
IFRS EPRA NRV EPRA NTA EPRA NDV
-----------------------------------------------
Year ended 31 December 2022 (audited) GBP m GBP m GBP m GBP m
----------------------------------------------- ----- -------- -------- --------
Net assets per Statement of Financial Position 700.8 700.8 700.8 700.8
Adjustments
Fair value of fixed rate debt - - - 15.3
Purchaser's costs(1) - 38.5 - -
----------------------------------------------- ----- -------- -------- --------
Net assets used in per share calculation 700.8 739.3 700.8 716.1
----------------------------------------------- ----- -------- -------- --------
Number of shares in issue
----------------------------------------------- ----- -------- -------- --------
Issued share capital (m) 603.4 603.4 603.4 603.4
Issued share capital plus employee options (m) 607.2 607.2 607.2 607.2
Net asset value per share GBP GBP GBP GBP
----------------------------------------------- ----- -------- -------- --------
Basic Net Asset Value per share (pence) 116.1
Diluted Net Asset Value per share (pence) 115.4 121.8 115.4 117.9
----------------------------------------------- ----- -------- -------- --------
(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 NR
6. Dividends Paid
Six months Six months Full year to
to 30 June to 30 June 31 December
2023 (unaudited) 2022 (unaudited) 2022 (audited)
GBP m GBP m GBP m
---------------------------------------------- ----------------- ----------------- ---------------
Interim dividend of 0.625 pence per ordinary
share in respect of the quarter ended
31 December 2021 - - 3.8
Interim dividend of 0.625 pence per ordinary
share in respect of the quarter ended
31 March 2022 - - 3.8
Interim dividend of 0.625 pence per ordinary
share in respect of the quarter ended
30 June 2022 - - 3.8
Interim dividend of 0.625 pence per ordinary
share in respect of the quarter ended
30 September 2022 - - 3.8
Interim dividend of 0.625 pence per ordinary
share in respect of the quarter ended
31 December 2021 - 3.8 -
Interim dividend of 0.625 pence per ordinary
share in respect of the quarter ended
31 March 2022 - 3.8 -
Interim dividend of 0.875 pence per ordinary
share in respect of the quarter ended
31 December 2022 5.3 - -
Interim dividend of 0.8125 pence per ordinary
share in respect of the quarter ended
31 March 2023 4.9 - -
---------------------------------------------- ----------------- ----------------- ---------------
10.2 7.6 15.2
---------------------------------------------- ----------------- ----------------- ---------------
7. Investment Property
Investment Investment
properties properties Total operational Properties Total Investment
freehold long leasehold assets under development property
GBP m GBP m GBP m GBP m GBP m
------------------------------- ----------- --------------- ----------------- ------------------ ----------------
As at 1 January 2023 920.4 142.0 1,062.4 3.3 1,065.7
Property additions 8.2 0.9 9.1 - 9.1
Property disposals (2.8 (18.0) (20.8) - (20.8)
Change in fair value during
the period 7.7 2.6 10.3 - 10.3
Transfer to held for sale (38.3) - (38.3) - (38.3)
------------------------------- ----------- --------------- ----------------- ------------------ ----------------
As at 30 June 2023 (unaudited) 895.2 127.5 1,022.7 3.3 1,026.0
------------------------------- ----------- --------------- ----------------- ------------------ ----------------
As at 1 January 2022 835.5 131.7 967.2 28.7 995.9
Property additions 5.0 1.1 6.1 7.7 13.8
Property disposals 19.5 - 19.5 - 19.5
Change in fair value during
the period 38.7 5.8 44.5 14.0 58.5
------------------------------- ----------- --------------- ----------------- ------------------ ----------------
As at 30 June 2022 (unaudited) 898.7 138.6 1,037.3 50.4 1,087.7
------------------------------- ----------- --------------- ----------------- ------------------ ----------------
As at 1 January 2022 835.5 131.7 967.2 28.7 995.9
Capital expenditure 12.9 2.3 15.2 15.2 30.4
Property acquisitions 19.3 - 19.3 - 19.3
Reclassification (8.6) 8.6 - - -
Transfer of completed
developments 52.9 - 52.9 (52.9) -
Sale of investment property (11.8) - (11.8) - (11.8)
Transfer to held for sale asset (13.7) - (13.7) - (13.7)
Change in fair value during
the year 33.9 (0.6) 33.3 12.3 45.6
------------------------------- ----------- --------------- ----------------- ------------------ ----------------
As at 31 December 2022
(audited) 920.4 142.0 1,062.4 3.3 1,065.7
------------------------------- ----------- --------------- ----------------- ------------------ ----------------
During the period GBP9.1 million (30 June 2022: GBP6.1 million)
of additions related to capital expenditure were recognised in the
carrying value of the operational portfolio.
In accordance with IAS 40, the carrying value of investment
property is its 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 30 June 2023, in
accordance with the Appraisal and Valuation Standards of the RICS,
on the basis of market value. This value has been incorporated into
the financial statements.
The valuation of all property assets uses market evidence and
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 as per the Consolidated Group Statement of
Financial Position and the market value of the investment property
as per the independent valuation performed in respect of each
period end.
Six months Six months
to to Full year to
30 June 2023 30 June 2022 31 December
(unaudited) (unaudited) 2022 (audited)
GBP m GBP m GBP m
-------------------------------------------- ------------- ------------- ---------------
Value per independent valuation report 1,064.0 1,087.2 1,078.9
Plus: long leasehold liability 0.3 0.5 0.5
Deduct: Assets held for sale (38.3) - (13.7)
-------------------------------------------- ------------- ------------- ---------------
Fair value per Group Statement of Financial
Position 1,026.0 1,087.7 1,065.7
-------------------------------------------- ------------- ------------- ---------------
The following descriptions and definitions relate to valuation
techniques and key unobservable inputs made in determining fair
values. The valuation techniques for student properties use a
discounted cash flow with the following inputs:
a) Unobservable input: Rental values
The rent at which space could be let in the market conditions
prevailing at the date of valuation. The rent ranges per week are
as follows:
30 June 2023 30 June 2022 31 December 2022
----------------- ----------------- -----------------
GBP88-493 per GBP87-420 per GBP91-GBP461 per
week (weighted week (weighted week (weighted
average rent of average rent of average rent of
GBP211 per week) GBP188 per week) GBP184 per week)
----------------- ----------------- -----------------
b) Unobservable input: Rental growth
The estimated average annual increase in rent based on both
market estimations and contractual arrangements. The assumed
growths in valuations are as follows:
30 June 2023 30 June 2022 31 December 2022
------------ ------------ ----------------
5.39% 2.60% 5.22%
------------ ------------ ----------------
c) Unobservable input: Net initial yield
The net initial yield is defined as the initial net income as a
percentage of the market value (or purchase price as appropriate)
plus standard costs of purchase. The ranges in net initial yields
are as follows:
30 June 2023 30 June 2022 31 December 2022
------------------- ------------------- -------------------
4.75%-8.90% 4.25%-8.15% 4.5%-8.65%
(weighted average (weighted average (weighted average
of 5.3%) of 5.2%) of 5.2%)
------------------- ------------------- -------------------
d) Unobservable input: Physical condition of the property
The Group has announced that it will invest GBP46 million on
fire safety works over a five year period starting in 2021. CBREs
assumption at 30 June 2023 is that GBP35.7 million of this cost
should be reflected as a deduction within its valuation (31
December 2022: GBP29.8 million). This deduction is in respect of
work on external wall systems and fire stopping on buildings over
18 metres tall as well as those for which the Group has a clear
programme of works in plan. Management has performed a sensitivity
analysis to assess the impact of a change in its estimate of total
costs relating to the GBP35.7 million deduction. A 20% increase in
the estimated remaining costs would reduce the change in fair value
of investment property in the Statement of Comprehensive Income by
GBP7.1 million and would reduce the Group's EPRA NTA by less than
0.1 pence on a per share basis. Whilst the investment is expected
to be completed within the next two and a half years, there can be
no certainty in respect of timing.
e) Unobservable input: Planning consent
The development site at FISC, Canterbury is pending Phase 2
planning consent. CBRE have determined the fair value as the sales
price for a development in progress including a profit margin,
discount and associated risk factors to complete the
development.
f) Sensitivities of measurement of significant unobservable inputs
As set out in the significant accounting estimates and
judgements, the Group's portfolio valuation is subject to judgement
and is inherently subjective by nature. As a result, the following
sensitivity analysis for the student properties has been prepared
by the valuer. For the purposes of the sensitivity analysis, the
Group considers its property portfolio to be one homogeneous group
of properties.
-3% change +3% change -0.25% change +0.25% change
in rental income in rental income in yield in yield
GBP m GBP m GBP m GBP m
-------------------------------------------------- ----------------- ----------------- ------------- -------------
(Decrease)/increase in the fair value of
investment properties
As at 30 June 2023 (44.3) 44.2 53.9 (49.1)
As at 30 June 2022 (42.8) 42.8 53.7 (48.6)
As at 31 December 2022 (43.3) 45.6 54.3 (47.2)
-------------------------------------------------- ----------------- ----------------- ------------- -------------
8. Assets classified as held for sale
A property ceases to be recognised as investment property and is
transferred at its fair value to property held for sale when it
meets the criteria of IFRS 5. Under IFRS 5 the asset must be
available for immediate sale in its present condition subject only
to the terms that are usual and customary for sales of such assets
and its sale must be highly probable.
The criteria for a sale being highly probable per IFRS 5 are as
follows:
-- management is committed to a plan to sell;
-- the asset is available for immediate sale;
-- an active programme to locate a buyer has been initiated;
-- the sale is highly probable (within twelve months of
classification as held for sale unless circumstances are beyond the
control of the Group); the asset is being actively marketed for
sale at a sales price reasonable in relation to its fair value;
and
-- actions required to complete the plan indicate that it is
unlikely that plan will be significantly changed or withdrawn
Management considers that four properties (December 2022: one
property) meets the conditions relating to assets held for sale
under IFRS 5: Non-current Assets Held for Sale. All non-current
assets classified as held for sale fall within 'Level 3' as defined
by IFRS. The total fair value of the four properties in this
Interim Report is GBP38.3 million. There have been no transfers
within the fair value hierarchy during the year.
Investment
properties
freehold
GBP m
----------------------------------- ------------
As at 1 January 2023 13.7
Property disposals (13.7)
Transfer from investment property 38.3
----------------------------------- ------------
As at 30 June 2023 (unaudited) 38.3
----------------------------------- ------------
9. Borrowings
The existing facilities are secured by charges over individual
investment properties held by certain asset-holding subsidiaries.
These assets have a fair value of GBP1,044.6 million at 30 June
2023. In some cases, the lenders also hold charges over the shares
of the subsidiaries and the intermediary holding companies of those
subsidiaries.
A summary of the drawn and undrawn bank borrowings in the period
is shown below:
Bank borrowings Bank borrowings
drawn undrawn Total
GBP m GBP m GBP m
-------------------------------------- ---------------- --------------- ------
At 1 January 2023 (audited) 391.2 20.0 411.2
-------------------------------------- ---------------- --------------- ------
Part cancellation of revolving credit
facility - (22.6) (22.6)
Facilities repaid in the period (23.9) 17.6 (6.3)
Bank borrowings drawn in the period - - -
Unsecured facility refinanced - 20.0 20.0
-------------------------------------- ---------------- --------------- ------
At 30 June 2023 (unaudited) 367.3 35.0 402.3
-------------------------------------- ---------------- --------------- ------
At 1 January 2022 (audited) 375.0 67.5 442.5
-------------------------------------- ---------------- --------------- ------
Facilities repaid in the period - (10.5) (10.5)
Bank borrowings drawn in the period 32.8 (32.8) -
-------------------------------------- ---------------- --------------- ------
At 30 June 2022 (unaudited) 407.8 24.2 432.0
-------------------------------------- ---------------- --------------- ------
At 1 January 2022 (audited) 375.0 67.5 442.5
-------------------------------------- ---------------- --------------- ------
Bank borrowings drawn in the year 36.2 (36.2) -
Bank borrowings repaid in the year (20.0) (11.3) (31.3)
-------------------------------------- ---------------- --------------- ------
At 31 December 2022 (audited) 391.2 20.0 411.2
-------------------------------------- ---------------- --------------- ------
Any associated fees in arranging the bank borrowings unamortised
as at the period end are offset against amounts drawn on the
facilities as shown in the table below:
30 June 2023 30 June 2022 31 December
(unaudited) (unaudited) 2022 (audited)
Current borrowings GBP m GBP m GBP m
------------------------------------------- ------------ ------------ ---------------
Balance brought forward - 45.0 45.0
Bank borrowings becoming current in the
period 13.7 20.0 -
Less: Bank borrowings becoming non-current
during the period - (45.0) (45.0)
Bank borrowings: due in less than one
year 13.7 20.0 -
Less: Unamortised costs - -
------------------------------------------- ------------ ------------ ---------------
Current liabilities: Bank borrowings 13.7 20.0 -
------------------------------------------- ------------ ------------ ---------------
30 June 2023 30 June 2022 31 December
(unaudited) (unaudited) 2022 (audited)
Non-current borrowings GBP m GBP m GBP m
----------------------------------------- ------------ ------------ ---------------
Balance brought forward 391.2 330.0 330.0
Total bank borrowings in the period - 32.8 36.2
Bank borrowings becoming non-current
during the period - 45.0 45.0
Less: Bank borrowings becoming current
during the period (13.7) (20.0) -
Less: Bank borrowings repaid during the
period (23.9) - (20.0)
Bank borrowings: due in more than one
year 353.6 387.8 391.2
Less: Unamortised costs (4.2) (5.4) (4.7)
----------------------------------------- ------------ ------------ ---------------
Non-current liabilities: bank borrowings 349.4 382.4 386.5
----------------------------------------- ------------ ------------ ---------------
30 June 2023 30 June 2022 31 December
(unaudited) (unaudited) 2022 (audited)
Maturity of bank borrowings GBP m GBP m GBP m
------------------------------------- ------------ ------------ ---------------
Repayable in less than one year 13.7 20.0 -
Repayable between one and two years 44.0 52.8 64.0
Repayable between two and five years 172.4 77.8 70.0
Repayable in over five years 137.2 257.2 257.2
------------------------------------- ------------ ------------ ---------------
Bank borrowings 367.3 407.8 391.2
------------------------------------- ------------ ------------ ---------------
10. Contingent liabilities
There were no contingent liabilities at 30 June 2023 (31
December 2022: GBPnil).
11. Capital Commitments
As at 30 June 2023, the Group had total capital commitments of
GBP11.0 million (31 December 2022: GBP2.3 million) for the future
development and enhancement of investment property.
12. Related Party Disclosures
Key Management Personnel
Key management personnel are considered to comprise the Board of
Directors.
Share Transactions
On 16 March 2023, Alice Avis, the Company's Senior Independent
and Non-Executive Director acquired 53,600 shares at 85.8 pence per
share. The acquisition was made by Lawgate Properties Limited, an
entity connected to Ms Avis.
Share-Based Payments
On 14 April 2023, the Company granted Duncan Garrood, Chief
Executive Officer, nil-cost options over 125,483 ordinary shares in
the Company ("ordinary shares") relating to the deferred shares
element of the annual bonus award for the financial year to 31
December 2022.
Also on 14 April 2023, Duncan Garrood was granted nil-cost
options over 722,233 ordinary shares, and Donald Grant, Chief
Financial and Sustainability Officer, was granted nil-cost options
over 510,848 ordinary shares pursuant to the Empiric Long Term
Incentive Plan for the 2022 financial year.
13. Subsequent Events
On 5 July 2023, the Group exchanged contracts for the sale of
its Grove Street Studios property, Liverpool for GBP1.8 million.
Completion subsequently took place on 19 July 2023..
On 3 August 2023, the Group exchanged contracts for the sale of
Grosvenor Apartments, London for GBP7.0 million. The sale is
expected to complete during August 2023.
On 3 August 2023, the Company announced the admission of 85,803
new ordinary shares of 1 pence each to the premium listing segment
of the Official List of the FCA and to trading on the London Stock
Exchange. The shares were allotted to satisfy continuing
obligations in respect of deferred share awards granted to the
Company's former CEO, Tim Attlee.
Glossary
ANUK - Accreditation Network UK is a central resource for
tenants, landlords and scheme operators interested in accreditation
of private rented housing.
Basic EPS - The earnings attributed to ordinary shareholders
divided by the weighted average number of ordinary shares
outstanding during the period.
Company - Empiric Student Property plc.
Dividend cover - EPRA earnings divided by dividends paid and
declared for the period.
Dividend payout ratio - The ratio of dividends paid and declared
for the period relative to EPRA earnings for the same period.
EPRA - European Public Real Estate Association.
EPRA EPS - Earnings reported on the basis recommended for real
estate companies using EPRA Best Practice Guidelines.
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.
Gross margin - Gross profit expressed as a percentage of rental
income.
Group - Empiric Student Property plc and its subsidiaries.
Hello Student - Our customer-facing brand and operating
platform, through which we operate all our buildings.
HMO - Homes of multiple occupants.
IASB - International Accounting Standards Board.
IFRS - International Financial Reporting Standards.
Like-for-like rental growth - Compares the growth in rental
income for operational assets throughout both the current and
comparative period, excluding acquisitions, developments and
disposals.
Like-for-like valuation - Compares the change in capital values
of the Group's portfolio at the balance sheet dates, compared to
the prior balance sheet date. The calculation excludes
acquisitions, developments, disposals and adjusts for capital
expenditure.
Net Asset Value or NAV - Net Asset Value is the net assets in
the Statement of Financial Position attributable to ordinary equity
holders.
PBSA - Purpose built student accommodation.
PID - Property income distribution.
Post-Grad - Post-graduate students who have successfully
completed an undergraduate course and are undertaking further
studies within higher education.
Property Loan-to-value or LTV - A measure of borrowings used by
property investment companies calculated as total drawn borrowings,
net of cash, as a percentage of property value.
RCF - Revolving credit facility.
Re-booker Rate - A KPI and 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 - A KPI and 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.
SONIA - Sterling Over Night Index Average is the effective
reference for overnight indexed swaps for unsecured transactions in
the Sterling market. The SONIA itself is a risk-free rate.
Total Accounting Return - The growth in EPRA NTA over the period
plus dividends paid in the period expressed as a percentage of
opening EPRA NTA.
Weighted average cost of debt - The weighted rate of interest
applied to all drawn debt balances at the balance sheet date.
Weighted average debt maturity - The weighted average term
remaining until expiry of our drawn debt facilities at the balance
sheet date.
Company Information and Corporate Advisers
Directors and Advisers
----------------------------------------------------------------- --- ------------------------------------
Directors Registrar
Mark Pain (Chairman) Computershare Investor Services PLC
Duncan Garrood (Chief Executive Officer) The Pavilions
Donald Grant (Chief Financial and Sustainability Officer) Bridgwater Road
Alice Avis (Non-Executive Director, Senior Independent Director) Bristol BS99 6ZZ
Martin Ratchford (Non-Executive Director) External Auditor
Clair Preston-Beer (Non-Executive Director) BDO LLP
55 Baker Street
Broker and Joint Financial Adviser London W1U 7EU
Jefferies International Ltd
Vintners Place Company Secretary
68 Upper Thames Street Apex Secretaries LLP
London EC4V 3BJ 6th Floor, Bastion House,
140 London Wall,
London EC2Y 5DN
Broker and Joint Financial Adviser Valuer
Peel Hunt LLP CBRE Limited
7th Floor Henrietta House
100 Liverpool Street, Henrietta Place
London EC2M 2AT London W1G 0NB
Tax Adviser
Legal Adviser to the Company KPMG
Gowling WLG (UK) LLP 15 Canada Square
4 More London Riverside London E14 5GL
London SE1 2AU
Communications Adviser
FTI Consulting LLP
200 Aldersgate
Aldersgate Street,
London EC1A 4HD
Company Registration Number: 08886906 Registered Office
Incorporated in the UK (Registered in England) 1st Floor Hop Yard Studios,
Empiric Student Property plc is a public 72 Borough High Street,
company limited by shares London SE1 1XF
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END
IR EAKPKFANDEFA
(END) Dow Jones Newswires
August 17, 2023 02:00 ET (06:00 GMT)
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