TIDMDIGS
GCP STUDENT LIVING PLC
LEI: 2138004J4ID66FK38H25
ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 30 JUNE
2017
GCP Student Living plc, (the "Company" or together with its subsidiaries, the
"Group"), which was the first student accommodation REIT in the UK, today
announces its results for the financial year ended 30 June 2017.
The full annual report and financial statements and the Notice of the AGM can
be accessed via the Company's website at www.graviscapital.com/funds/
gcp-student or by contacting the Company Secretary by telephone on 01392
477500.
AT A GLANCE
2015 2016 2017
Revenue for the year GBP11.5m GBP22.5m GBP28.6m
Net operating margin 78% 79% 79%
Rental growth 3.6% 4.5% 3.9%
Annualised shareholder return since IPO 18.1% 13.9% 14.2%
Dividends per ordinary share for the year 5.60p 5.66p 5.75p
EPRA NAV per ordinary share 125.51p 136.93p 139.08p
Share price per ordinary share 129.25p 130.75p 145.00p
Value of property portfolio GBP177.2m GBP424.8m GBP634.6m
HIGHLIGHTS
* The Company delivered a robust set of results generating total revenue for
the year of GBP28.6 million.
* Annualised shareholder returns since IPO of 14.2%, in excess of the
Company's target return of 8-10%.
* The Company successfully raised GBP103.6 million through two oversubscribed
placings of ordinary shares.
* Dividends of 5.75 pence per ordinary share for the period in line with
target.
* NAV (cum income) per ordinary share of 139.08 pence and NAV (ex-income) per
ordinary share of 137.62 pence at 30 June 2017.
* The Company's properties continue to benefit from the supply/demand
imbalance for high-quality, modern student facilities in London, with all
properties fully occupied and rental growth of 3.9% for the 2016/17
academic year.
* The Company completed the acquisition of Woburn Place, London WC1, which
following refurbishment ahead of the 2018/19 academic year, is expected to
provide c.420 beds.
* At 30 June 2017, the portfolio comprised eight student accommodation
assets, primarily in and around London, with c.3,000 beds which were either
operational or expected to complete construction or refurbishment over the
next two academic years. The portfolio valuation at that date was GBP634.6
million.
* On 16 September 2016, the Company completed its Migration to a premium
listing on the Official List of the UKLA. Trading in its ordinary shares
was transferred from the SFS to the Premium Segment of the Main Market of
the LSE with effect from that date.
* During the period, the Company was admitted by the FTSE Group to the FTSE
All Share and FTSE EPRA/NAREIT Global Real Estate indices, which has
broadened the Company's appeal to a wider range of investors.
* Post year end, the Company's first forward-funded development at Scape
Wembley, London, completed on schedule for the 2017/18 academic year,
providing a further c.580 beds.
Robert Peto, Chairman, commented:
"I am pleased to report a year of continued positive performance. The Company
has grown its dividend to 5.75 pence per ordinary share in respect of the year
and delivered annualised total returns since IPO in 2013 of 14.2%, exceeding
its long term target of 8-10% per annum.
The Company's core focus on student residential accommodation assets located in
and around London, where, at the year end, 97% of the value of the portfolio
was located, coupled with conservative levels of borrowings, provides
shareholders with a portfolio of properties which benefit from strong supply
and demand characteristics, which is the primary driver of rental growth in the
sector and underpins the Company's attractive income characteristics.
The two oversubscribed capital raises over the period are a reflection of the
strong ongoing support for the Company's investment mandate by new and existing
investors alike, with admission to the FTSE All-Share and EPRA/NAREIT Global
REIT indices further broadening the Company's appeal.
Demand from overseas students for private student residential accommodation in
the Company's core market is likely to remain resilient relative to the rest of
the UK given the attractions of London as a cosmopolitan, global centre of
academic excellence. The Company continues to deliver on its objectives and its
portfolio remains well positioned to provide shareholders with regular,
sustainable dividends that should continue to grow over the long term."
For further information, please contact:
Gravis Capital Management Limited +44 20 3405 8500
Tom Ward tom.ward@graviscapital.com
Nick Barker nick.barker@graviscapital.com
Dion Di Miceli dion.dimiceli@graviscapital.com
Stifel Nicolaus Europe Limited +44 20 7710 7600
Neil Winward neil.winward@stifel.com
Mark Young mark.young@stifel.com
Tom Yeadon tom.yeadon@stifel.com
Buchanan +44 20 7466 5000
Charles Ryland charlesr@buchanan.uk.com
Vicky Hayns victoriah@buchanan.uk.com
ABOUT US
GCP Student Living plc was the first real estate investment trust in the UK to
focus on student residential assets. The Company invests in modern, private
student residential accommodation and teaching facilities located primarily in
and around London.
Our primary objective is to provide shareholders with attractive total returns
in the longer term through the potential for modest capital appreciation and
regular, sustainable, long-term dividends with RPI inflation-linked income
characteristics.
The Company invests in properties located primarily in and around London where
the Investment Manager believes the Company is likely to benefit from supply
and demand imbalances and a growing number of international students.
The Company is a closed-ended investment company incorporated in England and
Wales, and its shares trade on the Premium Segment of the Main Market of the
LSE.
INVESTMENT OBJECTIVES
The Company invests in UK student accommodation to meet the following key
objectives:
Dividend income
To provide shareholders with regular, sustainable, long-term dividends, with
RPI inflation-linked characteristics.
The Company has paid a total of 5.75 pence per ordinary share in dividends for
the year, increasing the Company's dividend year-on-year.
Capital appreciation
To provide modest capital appreciation over the long term.
The valuation of the Company's property portfolio has increased by 2.8% over
the year driven by a combination of uplifts in valuation on acquisition,
increasing rental rates and yield compression.
Portfolio quality
Focus on high-quality, modern, private student residential accommodation and
teaching facilities for students studying at leading academic institutions
primarily in and around London.
At 30 June 2017, the Company's property portfolio comprised eight modern
standing student accommodation buildings, and one development, of which 97% of
the value is located in and around London.
Dividends paid for the 5.75p
year
Annualised dividend 1.6%
growth
Capital appreciation 2.8%
Value of property GBP
portfolio 634.6m
Occupancy for 2016/17 FULL
academic year
Rental growth 3.9%
CHAIRMAN'S STATEMENT
Full occupancy, strong rental growth and valuation uplifts have all contributed
to a robust set of financial results for the year.
Introduction
On behalf of the Board, I am pleased to report a year of continued positive
performance against a backdrop of wider macroeconomic turmoil.
It has been another busy year for the Company with the acquisition of two new
assets, two equity fundraisings, a new borrowing facility and a move to the
Premium Segment of the LSE. Since the year end, one further property has been
purchased, about which further details are provided below.
Through strong rental growth across its portfolio, the Company grew its
dividend by 1.6% to 5.75 pence per ordinary share over the year. Shareholders
have received an annualised total return of 14.2% since May 2013 when the
Company was launched, exceeding its target of 8-10% per annum.
Portfolio
At year end, the portfolio comprised eight student accommodation assets,
primarily in and around London, with c.3,000 beds. The properties are
predominantly occupied by international students and offer modern, high
specification facilities.
The portfolio, which is primarily located in and around London, was
independently valued at GBP634.6 million as at 30 June 2017, which represented an
uplift in value over the year of 2.8%. This valuation increase has been driven
by rising rental rates, uplifts in valuation on funded developments and
investment demand for student accommodation driving upward pressure on asset
prices across the sector. The blended net initial yield on the Company's
portfolio of standing assets was 5.00% as at the year end.
Post year end, the Company has completed on the acquisition of one further
property adding 450 beds to its portfolio.
Acquisitions
During the year, the Company acquired two properties - Woburn Place and Scape
Wembley.
Woburn Place is located in Bloomsbury, a prime central London location within
short walking distance of several globally recognised universities. It was
acquired as a standing investment where the Investment Manager has identified
the opportunity for a major refurbishment ahead of the 2018/19 academic year,
where it is expected to provide a further c.420 beds.
Scape Wembley was acquired as a forward-funded development, with the Company
acquiring the land and subsequently funding construction of the property. Scape
Wembley was opened to students in August 2017, adding a further 580 modern beds
to the Company's portfolio.
Post year end, the Company completed on the acquisition of Circus Street,
Brighton, which will provide further portfolio diversification.
Circus Street, the Company's second forward-funded development asset, is
expected to provide around 450 beds and 30,000 square feet of commercial office
space in central Brighton ahead of the 2018/19 academic year. Whilst outside of
the Company's core market, the Directors believe that Brighton demonstrates
many of the characteristics of the London market including strong demand with
high numbers of international students and significant supply constraints.
Investments through future contractual arrangements such as forward-funding
agreements enable the Company to secure properties at attractive valuations
relative to acquiring standing assets which are already operational and income
producing. In addition, they provide an opportunity for the Company to acquire
properties in areas where suitable modern purpose-built student accommodation
assets may be unavailable. It is encouraging that the Company has benefitted
from such arrangements resulting in modest valuation uplifts at the time the
purchase is completed.
Financial results
Full occupancy, strong rental growth and valuation uplifts have all contributed
to a robust set of financial results for the year. The EPRA NAV per ordinary
share increased by 1.6%, from 136.93 pence to 139.08 pence at 30 June 2017.
The Company's property portfolio generated GBP28.6 million of rental income,
delivering an operating profit (including valuation gains) of GBP28.3 million (GBP
16.5 million excluding valuation gains).
Dividends
The Company paid dividends in respect of the financial year ended 30 June 2017
of 5.75 pence per ordinary share. The dividends were paid as 4.92 pence per
ordinary share as a REIT PID and 0.83 pence per ordinary share as an ordinary
UK dividend. The Company has increased its dividend by 1.6% year-on-year.
Financing
The Company conducted two oversubscribed capital raises during the period,
raising gross proceeds of GBP103.6 million which have been used in funding the
construction of Scape Wembley and acquisition of Woburn Place.
The Board is also pleased to note the Company has reduced its blended cost of
borrowing to 2.96% during the period, having entered into new banking
facilities with its lender, PGIM. As at 30 June 2017, the Company's borrowing
facilities totalled GBP235 million, of which GBP220 million was drawn with an
average weighted maturity at that date of c.8 years. The loan-to-value of the
Group at that date was approximately 32%.
Migration and FTSE Indices
During the period, the Company completed the Migration of its listing to the
Official List of the UKLA and to trading on the Premium Segment of the Main
Market of the LSE. Subsequently, the Company was admitted to the FTSE All
Share, FTSE Small Cap and FTSE EPRA/NAREIT Global Real Estate indices. This has
broadened the investor appeal of the Company, further enhancing the market
liquidity of its shares as it has grown.
Outlook
The Company's focus on student residential accommodation assets located in and
around London, coupled with a conservative level of borrowings, provides
shareholders with a property portfolio with attractive income characteristics.
The Investment Manager remains focused on delivering a portfolio of properties
which benefit from strong supply and demand characteristics, which it believes
is the primary driver of rental growth in the sector. Consequently, whilst the
Company's portfolio remains London-centric, from time to time, properties may
be added outside of this market where the sector fundamentals mirror that of
the London market. By way of illustration, the Company's acquisition in
Brighton can be seen in the wider context of a local market with substantial
supply constraints, strong demand from the c.36,000 students at the two
Brighton universities with c.6,100 international students and limited choice of
high quality accommodation currently available.
The number of new schemes due for development in London over the next few years
remains at a historic low. Planning approvals and development tax (the
community infrastructure levy) on student accommodation continue to make it
difficult to bring new developments in and around London on stream. In this
context, the Investment Manager has been successful in securing new, modern
properties through forward-funding or forward-purchase agreements, effectively
enabling the Company to create its own pipeline of modern assets where good
quality standing investments are difficult to acquire.
Demand from overseas students for private sector student accommodation in the
Company's core market is likely to remain resilient relative to the rest of the
UK given the number of overseas students in London and its perception as a
global centre of academic excellence. Depreciation in the value of sterling may
further serve to enhance the UK's competitiveness for overseas students
although the Brexit negotiations may deter some students from applying to UK
universities whilst new controls on immigration remain unclear.
We are living through turbulent and uncertain times, but the Company has
continued to deliver on its objectives and its portfolio remains well
positioned to provide shareholders with regular, sustainable, dividends that
should continue to grow over the long term.
Robert Peto
Chairman
14 September 2017
STRATEGIC REPORT
STRATEGIC OVERVIEW
The Company's investment objective is to provide shareholders with attractive
total returns in the longer term through the potential for modest capital
appreciation and regular, sustainable, long-term dividends with RPI
inflation-linked characteristics.
Investment policy
The Company intends to meet its investment objective through owning, leasing
and licensing student residential accommodation and teaching facilities to a
diversified portfolio of direct let tenants and HEIs. The Company will mostly
invest in modern, purpose built, private student residential accommodation and
teaching facilities located primarily in and around London where the Investment
Manager believes the Company is likely to benefit from supply and demand
imbalances for student residential accommodation. The Company may also invest
in development and forward-funded projects which are consistent with the
objective of providing shareholders with regular, sustainable dividends and
have received planning permission for student accommodation, subject to the
Board being satisfied as to the reputation, track record and financial strength
of the relevant developer and building contractor.
Rental income will predominantly derive from a mix of contractual arrangements
including direct leases and/or licences to students (direct let agreements),
leases and/or licences to students guaranteed by HEIs and/or leases and/or
licences directly to HEIs. The Company may enter into soft nominations
agreements (pari passu marketing arrangements with HEIs to place their students
in private accommodation) or hard nominations agreements (longer-term marketing
arrangements with HEIs of between two and 30 years in duration). Where the
Company invests in properties which contain commercial or retail space, it may
derive further income through leases of such space. Where the Company invests
in development and forward-funded projects, development costs will typically be
paid in stages through construction, with a bullet payment at completion.
The Company intends to focus primarily on accommodation and teaching facilities
for students studying at Russell Group universities and other leading academic
institutions, regional universities with satellite teaching facilities in and
around London and at specialist colleges.
The Company may invest directly or through holdings in special purpose vehicles
and its assets may be held through limited partnerships, trusts or other
vehicles with third party co-investors.
Borrowing and gearing policy
The Company may seek to use gearing to enhance returns over the long term. The
level of gearing will be governed by careful consideration of the cost of
borrowing and the Company may seek to use hedging or otherwise seek to mitigate
the risk of interest rate increases. Gearing, represented by borrowings as a
percentage of gross assets, will not exceed 55% at the time of investment. It
is the Directors' current intention to target gearing of less than 30% of gross
assets in the long term and to comply with the REIT condition relating to the
ratio between the Group's property profits and property finance costs. Details
of the Company's borrowings are given in note 19.
Use of derivatives
The Company may invest through derivatives for efficient portfolio management.
In particular, the Company may engage in interest rate hedging or otherwise
seek to mitigate the risk of interest rate increases as part of the Company's
efficient portfolio management.
Investment restrictions
The Company invests and manages its assets with the objective of spreading risk
through the following restrictions:
* the Company will derive its rental income from a portfolio of not less than
500 studios;
* the value of any newly acquired single property will be limited to 25% of
gross assets, calculated as at the time of investment;
* the Company mostly invests in modern, purpose-built, private student
residential accommodation and teaching facilities located primarily in and
around London. Accordingly, no less than 75% of the Group's property
portfolio will comprise assets which are located in and around London,
calculated as at the time of investment;
* at least 90% by value of the properties directly or indirectly owned by the
Company shall be in the form of freehold or long leasehold (over 60 years
remaining at the time of acquisition) properties or the equivalent;
* the Company will not (i) invest more than 20% of its gross assets in
undeveloped land; and (ii) commit more than 15% of its gross assets to
forward-funded projects in respect of such undeveloped land, such
commitment to be determined on the basis of the net construction funding
requirements (and associated advisory costs) of such projects at the time
of commitment up to their completion, in both cases as measured at the time
of investment;
* the Company will not invest in completed assets which are not income
generative at, or shortly following, the time of acquisition; and
* the Company will not invest in closed-ended investment companies.
The Directors currently intend, at all times, to conduct the affairs of the
Company so as to enable it to qualify as the principal company of a REIT for
the purposes of Part 12 of the CTA (and the regulations made thereunder).
In the event of a breach of the investment guidelines and restrictions set out
above, the Investment Manager shall inform the Directors upon becoming aware of
the same and, if the Directors consider the breach to be material, notification
will be made to a Regulatory Information Service.
No material change will be made to the investment policy without the approval
of shareholders by ordinary resolution.
Business and status of the Company
The Company is registered as a public limited company and is an investment
company within the terms of section 833 of the Companies Act 2006. The Company
is a REIT for the purposes of Part 12 of the CTA. Notification has been
submitted to, and acknowledged by, HMRC for the Company to enter the UK REIT
regime. The Company will be treated as a REIT so long as it continues to meet
the REIT conditions in relation to any accounting period.
The Company was incorporated on 26 February 2013. Its shares trade on the
Premium Segment of the Main Market of the LSE.
The Company's performance, along with the important events that have occurred
during the period under review, the key factors influencing the financial
statements and the principal risks and uncertainties for the financial period
are set out in the Chairman's statement above and the disclosures below.
UK STUDENT ACCOMMODATION MARKET
International student numbers, which have been the primary driver of applicant
growth over the past five years, have remained strong.
Overview
The UK has some of the highest-ranking universities in the world, with three in
the top 10 and seven in the top 50 in 2016/171. The UK higher education sector
generates c.GBP73 billion for the economy and contributes 2.8% of the nation's
gross domestic product.2
Students have become increasingly globally mobile with, according to the OECD,
over 4.5 million students studying abroad in 2014, more than double the 2.1
million internationally mobile students in 2000. This figure is forecast to
reach 8 million by 2025. China, India, the Republic of Korea, Germany and Saudi
Arabia are the top five countries with students going abroad, with almost one
in six international students being Chinese, and Asian students accounting for
53% of all students studying abroad.
The world's population is increasingly becoming more educated. In many of the
world's largest established economies nearly half of the population of 25 to
34-year olds has tertiary education.
The student body has also changed over the period, becoming younger and with a
higher proportion of full-time students, as the decline in the number of
part-time and mature students has continued since 2010. Full-time students now
make up 74% of the student body, up from 62% at the start of the decade, and
under-25s now make up three-quarters of all undergraduates and a third of
postgraduates3.
As well as changes in the age of students and their mode of study, the student
body has become more cosmopolitan over the decade. In 2004/05, 4% of students
came from the EU and 9% from outside the EU. By 2014/15, the numbers had
increased to 5% and 14% respectively4. The US is the most popular market for
international students, with the UK in second place, though significantly
stronger on a per capita basis. One of the UK's advantages is its average cost
of living and tuition, which is generally lower than in both the US and
Australia5.
1. Times Higher Education World University Rankings 2016/17.
2. The Impact of Universities on the UK Economy, Universities UK.
3. OECD Education at a Glance 2014. A1-3.
4. HESA student record.
5. OECD Education at a Glance 2014. A13.
HEI acceptance rates
Acceptance rates for the 2016/17 academic cycle broke last year's record, with
the intake of undergraduates entering UK higher education totalling c.535,000.
Nevertheless, there were another c.180,000 students who applied for a place who
did not get accepted, which shows a significant surplus demand in the sector.
On 13 July 2017, UCAS published application statistics for the June 2017
deadline, which showed that applicants for the UK and EU were down by 4% and 5%
respectively, while non-EU international students were up 2% on last year. The
reduction in UK student numbers has been primarily driven by a reduction in
nursing degrees, owing to significant funding cuts, with the remainder coming
from mature undergraduates who are more likely to be taking up apprenticeships
under the new government schemes. EU student numbers were forecast to decrease
following two record years of growth and the impact of the Brexit vote.
However, this shortfall is not expected to have a material impact owing to the
scale of student demand buffer outlined above.
International student numbers, which have been the primary driver of applicant
growth over the past five years, have remained strong. We expect these numbers
should continue to rise over the medium term, with the sector benefitting from
sterling's depreciation and the impact of US protectionist trade and visa
policies. The UK remains the second most popular global destination for those
seeking higher education and the government has confirmed through the Brexit
white paper that there is no limit to the number of genuine international
students who can come to the UK to study.
Student accommodation - supply/demand imbalance
There is a fundamental supply/demand imbalance in the UK student accommodation
sector which is responsible for the stability and the robust rental and capital
returns produced in this financial year.
The UK has seen rising student numbers since the early 1990s, with the student
population more than doubling over this period. Domestic student applications
have increased despite an ageing population and international student numbers
continue to grow at a disproportionate rate, as evidenced by the increase in
international student application rates for the 2016/17 academic year.
There is a structural shortfall of purpose-built student accommodation in most
of the UK. The supply of private student accommodation has failed to keep pace
with the increasing demand owing to the following:
* the residential property market has recovered over the past few years,
increasing land values as well as increasing the pressure on the private
residential sector to house tenants other than students who are willing to
pay higher rent levels;
* the private rented sector has become subject to greater local authority and
government legislation for houses in multiple occupancy; and
* universities are not developing new accommodation as they are becoming more
focused on their core competency of investing in education.
The London market
London has more world-class universities than any other city in the world.
International students are attracted to London for a number of reasons
including the reputation of London's universities, the quality of education and
London's status as a social and cultural centre.
The Company is primarily focused on the London student accommodation market
because this is where the supply/demand imbalance is at its greatest. London
has a number of important demand dynamics that separate it from the wider UK
student housing market:
* Nearly one in three students in London are international;
* London has the largest number of international students of any city in the
world with c.107,000 students in 2015/16;
* London is home to some of the leading HEIs in the world which attract a
significant number of international students;
* London and the South East have over 30% of the entire student population of
the UK.
On the supply side, the main constraints are as follows:
* availability of well-located sites is at its lowest and land prices have
experienced significant inflation driven by residential development;
* the introduction of the community infrastructure levy in some boroughs has
eliminated the commercial viability of many student schemes; and
* There are only c.90,000 purpose-built student accommodation beds in London,
indicating a substantial undersupply.
Student accommodation - the importance of design and quality
Purpose-built student accommodation has evolved as a product over the past 15
years. Over this period, and in particular, following the introduction of
tuition fees, students have become consumers in their own right and are making
their investment decisions for their higher education not just on course alone,
but also on a mix of quality of the academia and the quality and location of
accommodation.
Increasingly, students are demanding high-quality living space with clever
design, quality materials, TV areas, communal kitchens and social areas in the
buildings which provide opportunities for social groups to form and bond,
centred around work and play spaces. Likewise, they are demanding services that
create wider social engagement such as talks, events, workshops and tie-ins
with local businesses and educational establishments.
The leading players in the market are now providing facilities which mix
academia, co-working and social spaces, providing a true campus environment.
REVIEW OF THE FINANCIAL YEAR
The Company achieved average rental growth of 3.9% across the portfolio for the
2016/17 academic year, producing a robust set of results.
Financial results
The Company achieved average rental growth of 3.9% across the portfolio for the
2016/17 academic year, producing a robust set of results, with rental income
for the year ended 30 June 2017 of GBP28.6 million generated from the Company's
property portfolio.
Total gains on investment properties through revaluation of the Company's
investment portfolio were GBP11.9 million as at 30 June 2017, positively
impacting operating profit and generating EPS of 8.1 pence. The adjusted EPS
for the period was 4.69 pence (excluding fair value gains on investment
properties and adjusting for exceptional items and licence fee income).
Total administration expenses of GBP6.1 million comprise fund running costs,
including the Investment Manager's fee, Asset and Facilities Managers' fees and
other service provider costs in the period.
Ongoing finance charges of GBP4.9 million in the year comprise loan interest
associated with the Company's financing arrangements.
The Company generated total profit before tax for the period of GBP23.5 million.
Dividends
In order to maintain REIT status, the Company is required to meet a minimum
distribution test for each accounting period for which it is a REIT. This test
requires the Company to distribute at least 90% of the income profits of the
property rental business for each accounting period, as adjusted for tax
purposes. In respect of the financial year ended 30 June 2017, the Company paid
dividends of 5.75 pence per ordinary share.
The dividends were paid 4.92 pence per ordinary share as a REIT PID in respect
of the Group's tax exempt property rental business and 0.83 pence per ordinary
share as an ordinary UK dividend. The Company fulfilled all of its obligations
under the UK REIT regime and was in full compliance with the REIT requirements
at 30 June 2017 and at the date of this report.
Dividend cover
Whilst the Company targets a fully covered dividend over the longer term,
during periods of investment where there is a continuing programme of
acquisitions, this may not be achieved. Dividends of GBP16.2 million (5.75 pence
per ordinary share) were paid during the year. The dividends were 80% covered
by adjusted EPS of 4.69 pence, which is adjusted for exceptional items
principally those arising in connection with the Migration, rental guarantees
and licence fee income.
Capital raises
The Company completed two oversubscribed equity capital raises during the
period, raising gross proceeds of GBP23 million in December 2016 and GBP80.6
million in February 2017. The issue prices were 140 pence in each case and were
issued at a 4.3% and 2.1% discount to share price and a 3% and 2.4% premium to
NAV (ex-income) respectively. The issues were NAV accretive for existing
shareholders.
Cash flow generation
The Company held cash and cash equivalents of GBP55.1 million at the end of the
financial year. A total of GBP14.2 million of operating cash flows were generated
in relation to the Company's student accommodation portfolio. Total equity
capital raised in the year amounted to GBP103.6 million, which was used in part
to fund the construction of Scape Wembley and to acquire Woburn Place. The
remaining cash outflows relate to the cost of servicing the Company's debt
facility in addition to payment of dividends, resulting in a net decrease in
cash and cash equivalents at the year end.
Financial performance
Income statement
For the For the
year ended year ended
30 June 2017 30 June
GBP'000 2017
GBP'000
Rental income 28,611 22,482
Property operating expenses (6,086) (4,600)
Gross profit (net operating income) 22,525 17,882
Net operating margin 79% 79%
Administration expenses (6,072) (5,712)
Fair value gains on investment properties 11,855 27,156
Operating profit 28,308 39,326
Finance income 70 75
Finance costs - ongoing (4,864) (3,441)
Finance costs - other - (7,635)
Profit before tax for the year 23,514 28,325
Debt financing
During the period, the Company entered into an agreement with its lender, PGIM,
to increase the Company's GBP130 million secured debt facility by a further GBP40
million. The increased GBP170 million facility is repayable on 30 September 2024
and the cost of debt on this loan has been reduced from 3.07% to 3.01%. The
Company further entered into a new GBP65 million facility with PGIM, of which GBP
50 million has been drawn at a fixed cost of debt of 2.82%. The facility is
repayable in 2029 and is secured against certain of the Company's assets.
Accordingly, the Company's banking facilities total GBP235 million, of which GBP220
million was drawn at 30 June 2017 at a blended cost of borrowing of 2.96% and
with an average weighted maturity of c.8 years. The loan-to-value of the Group
at that date is approximately 32%.
Asset performance
The Company experienced 3.9% year-on-year rental growth for the 2016/17
academic year and marginal yield compression. The valuation of the Company's
property portfolio has increased by GBP74.5 million or 14.9% since the Company's
IPO or its acquisition of assets. The portfolio was fully occupied for the 2016
/17 academic year.
Net assets
Net assets attributable to equity holders at 30 June 2017 were GBP467 million, up
from GBP358.5 million at 30 June 2016. The increase in net assets since the prior
year end is primarily driven by the acquisition of two further properties.
At 30 June 2017, there were 335,768,782 ordinary shares in issue, giving an
EPRA NAV (cum-income) per ordinary share of 139.08 pence.
NAV and share price performance
The Company's ordinary shares have traded at an average premium of 6.1% since
IPO, with an average premium over the financial year of 7.2%. The Company's
share price hit an all-time high of 152.75 pence per ordinary share on 7 April
2017. Its ordinary shares have persistently traded at a premium to their NAV
since IPO in 2013.
EPRA NAV (cum income) has increased from 136.93 pence as at 30 June 2016 to
139.08 pence per ordinary share as at 30 June 2017, a 1.6% increase
year-on-year. Dividends of 5.75 pence per ordinary share were paid to
shareholders. At the Group level, the annualised total return since IPO was
14.2%, which exceeds the annualised target return of 8-10%.
Financial performance
Net assets
As at As at
30 June 2017 30 June 2016
GBP'000 GBP'000
Assets
Investment property 634,640 424,787
Receivables 7,825 7,682
Cash and cash equivalents 55,110 66,337
Total assets 697,575 498,806
Liabilities
Payables (5,148) (6,929)
Deferred income (7,964) (5,235)
Senior loan (217,469) (128,174)
Total liabilities (230,581) (140,338)
Net assets 466,994 358,468
Number of shares 335,768,782 261,795,015
EPRA NAV per share (cum-income) 139.08p 136.93p
EPRA NAV per share (ex-income) 137.62p 135.50p
COMPANY PERFORMANCE
The Company continues to deliver strong performance.
2017 2016
Annualised shareholder return 14.2% 13.9%
since IPO
Basic earnings per ordinary 8.1p 15.5p
share
Dividends per ordinary share 5.75p 5.66p
for the year
EPRA NAV per ordinary share 139.08p 136.93p
Loan-to-value 32% 27%
Rental growth 3.9% 4.5%
PROPERTY PORTFOLIO
The Company's property portfolio consists of high-quality, modern student
accommodation focusing on international students, postgraduates and domestic
students alike.
Quality, design and brand
The living experience forms a mainstay of each student's university life and
the Company has put the quality, design, experience and performance of its
assets at the heart of its operational strategy. This is achieved through the
Company's investment selection and its choice of Asset and Facilities Managers.
Scape is the Asset and Facilities Manager for all of the Company's 'Scape'
branded assets and with effect from 1 September 2016, The Pad (previously
managed by CRM). The vision of the Scape brand was to create a new kind of
student accommodation; one that was affordable but with modern design. By
enlisting the help of leading interior designers and top architects, Scape
continues to ensure that high standards of quality finishes and service are
met. Years of hard work and listening to student feedback has resulted in some
of the best student accommodation in and around London.
Alongside the striking design features, the properties also offer ample common
space for students to socialise and study. High-speed internet and wi-fi are
available throughout each location. Scape responds proactively to student
feedback, which has resulted in the provision of extra facilities and
amenities, such as additional private rooms for group study, recreational areas
and a gym.
Collegiate is the Asset and Facilities Manager for Water Lane Apartments.
Collegiate's management philosophy is based on enhancing the university
experience for their residents. It specialises in managing high-specification,
design led schemes with a focus on superior service quality. Collegiate's team
has experience in managing a range of diverse student accommodation assets,
in over 25 cities, and across over 40 student blocks, serving some 30,000
student tenants.
At 30 June 2017, the Company's portfolio comprised high-quality, modern student
accommodation buildings, of which 97% of the value was located in and around
London.
Current
Asset Number of beds Valuation at 30 Net Initial
June 2017 Yield
Scape East 588 GBP129.8m 5.05%
Scape Wembley 578 GBP59.1m1 N/A
Scape Shoreditch 541 GBP177.7m 4.75%
Woburn Place 4552 GBP138.7m 4.76%
Scape Greenwich 280 GBP51.8m 5.03%
The Pad 220 GBP34.9m 5.75%
Water Lane 153 GBP18.8m 5.75%
Apartments
Scape Surrey 141 GBP23.8m 5.65%
Total/blended 2,956 GBP634.6m 5.00%
yield
Post year end
Asset Number of beds Valuation at 30 June Net Initial Yield
2017
Circus Street 450 N/A3 N/A
Total/blended yield 450 N/A N/A
1. At 30 June 2017, the property was under construction.
2. Number of beds at acquisition prior to refurbishment.
3. Acquired post year end and currently under construction.
OPERATIONAL ASSET
Scape Wembley
Number of beds: 578
Fulton Road, London HA9 0TF
Scape Wembley is a private student residence located in Wembley, London. It was
forward funded by the Company and completed in August 2017 under the Scape
brand.
The property is located adjacent to Wembley Stadium and within short walking
distance from Wembley Park Station. Scape Wembley comprises high-specification,
purpose-built private student accommodation with c.580 modern studios and beds
with communal areas. The majority of London's universities are accessible
within 30 minutes. The site is located within 14 minutes travel time to
Marylebone, 20 minutes to Bond Street and 25 minutes to King's Cross.
For the forthcoming 2017/18 academic year, Scape Wembley is occupied by
students from 45 HEIs and of 74 different nationalities, with c.70% of tenants
coming from outside the UK.
OPERATIONAL ASSET
Scape Shoreditch
Number of beds: 541
45 Brunswick Place, London N1 6DX
Scape Shoreditch is located in a prime London location in Shoreditch. The
property was acquired by the Company in September 2015.
The property is within a 15-minute walk of The City University
(c.18,000 students) and CASS Business School.
The building comprises 541 studio bedrooms and c.10,000 sq ft of communal areas
including a gym, dance studio, study lounge, games room, cinema, communal
kitchen, sun terrace and barbecue terrace. The building also includes c.49,000
sq ft of commercial facilities let to WeWork on a 15-year fully repairing and
insuring lease. The lease generates approximately 25% of total revenues for
Scape Shoreditch after expiry of the tenant's incentives.
At 30 June 2016, Scape Shoreditch was occupied by students from 45 HEIs and of
59 different nationalities, with c.94% of tenants coming from outside the UK.
OPERATIONAL ASSET
Scape East
Number of beds: 588
450 Mile End Road, London E1 4GG
Scape East is a private student residence located in Mile End, London. It was
completed in June 2012 under the Scape brand.
Scape East is located directly opposite QMUL, which is a Russell Group HEI and
one of London's leading universities with c.17,000 students. Approximately 87%
of all Scape East's direct let students study at QMUL. The impressive building
encompasses a double height entrance and floor-to-ceiling glazed reception.
Residents have access to a private courtyard garden, free gym, TV and games
lounge, communal kitchen, study areas and an on-site restaurant.
Additional rental income is generated through a 30-year FRI lease with annual
RPI uplifts of teaching facilities. This has generated 6.5% of total revenues
for Scape East for the 2016/17 academic year.
As at 30 June 2016, Scape East was occupied by students from 25 different HEIs
and of 67 different nationalities, with c.89% of tenants coming from outside
the UK.
DEVELOPMENT ASSET
Woburn Place
This property is under refurbishment
Number of beds: 455¹
In April 2017, the Company acquired Woburn Place, a private student
accommodation asset located at a prime central London position in Bloomsbury,
WC1.
Woburn Place, which for the 2016/17 academic year was operated by Unite
Students, is within short walking distance of University College London
(c.38,000 students from 150 countries), SOAS University of London
(c.5,000 students from 133 countries) and two teaching hospitals, University
College Hospital and Great Ormond Street Hospital. The London School of
Economics, Kings College London, City University and University of the Arts,
London are also within walking distance, bringing the total number of students
in close proximity to Woburn Place to c.100,000.
From mid-September 2017, the Group will reconfigure and refurbish the
property to the high specification typical of the Group's existing standing
assets and the Scape Student Living brand. The refurbishment will involve
diversifying the mix of accommodation units, offering modern studios and single
and double occupancy apartment-style accommodation, which is expected to
optimise rental growth and occupancy levels.
It is currently envisaged that the refurbishment will be substantially
completed ahead of the 2018/19 academic year, following which it is currently
expected that the property will provide c.420 modern beds as well as communal
areas.
¹ Number of beds at acquisition prior to refurbishment.
POST YEAR DEVELOPMENT ASSET
Circus Street, Brighton
This development is under construction
Number of beds: 450
In July 2017, the Company entered into an exclusivity arrangement in respect of
the acquisition of its second forward-funded development.
Circus Street, is located in a city centre location in Brighton within short
walking distance of its iconic pier, vibrant shopping district and transport
links. The property will primarily serve the University of Sussex, a UK top 20
university, and Brighton University with in aggregate c.36,000 students
including c.6,100 international students. Brighton benefits from a strong
structural shortfall of private student accommodation and considerable supply
constraints.
The expectation is that construction of Circus Street will be completed ahead
of the 2019/2020 academic year following which it will offer high specification
student accommodation and c.30,000 square feet of commercial office space. The
student accommodation will provide c.450 modern beds. It is currently expected
the student accommodation will be contracted to a subsidiary owned and
guaranteed by an established global HEI on a 21 year lease, with upward only
annual uplifts. It is currently envisaged that the additional commercial space
will generate ancillary revenues through medium to long-term leases.
The acquisition of Circus Street through a forward-funded arrangement has
enabled the Group to secure an asset at an attractive valuation relative to
acquiring assets which are already operational. Further, such arrangements
enable the Group to provide modern, purpose-built accommodation where suitable
existing assets are scarce.
CORPORATE, SOCIAL AND ENVIRONMENTAL RESPONSIBILITY
The Company's aim is to operate a fully sustainable business model with a low
carbon footprint.
The Company is committed to being both socially and environmentally responsible
and recognises the impact it has on the environment.
Environmental impact
The Company is committed to being both socially and environmentally responsible
and recognises the impact it has on the environment. The Company has delegated
the day-to-day asset and facilities management to the Asset and Facilities
Managers, who are responsible for the provision of energy supplies, including
the procurement of renewable energy, managing the Company's waste schemes and
raising general awareness of environmental impact and waste reduction amongst
the Group's employees and residents.
Sustainability
The Company's environmental sustainability measures include the use of
highly-efficient combined heat and power systems, ground source heat pumps and
intelligent interior heating and lighting to minimise GHG emissions.
The Company's property portfolio incorporates green roof space, rainwater
harvesting and sustainable waste management, including diverting waste from
landfill to generate renewable electricity via the waste management process.
In the year to 30 June 2017, Scape procured the conversion c.83% of property
waste into renewable energy and 17% into national recycling schemes.
Greenhouse gas emissions
This section contains information on GHG emissions required by the Companies
Act 2006 (Strategic Report and Directors' Report) Regulations 2013 (the
"Regulations").
Reporting period
The reporting period is 1 July 2016 to 30 June 2017, comprising the financial
year of the Company.
Methodology
The principal methodology used to calculate the emissions reflects the UK
Government's Environmental Reporting Guidance (2013 version).
The Company has reported on all of the emission sources required under the
Regulations. The Company does not have responsibility for any emission sources
that are not included in the carbon emissions data table below.
Organisational boundary
An operational control approach was used to define the Company's organisational
boundary and responsibility for GHG emissions. The Company owns 100% of the
property assets it operates and has therefore reported on that basis. All
material emission sources within this boundary have been reported upon, in line
with the requirements of the Regulations.
Intensity ratio
In order to express the GHG emissions in relation to a quantifiable factor
associated with the Company's activities, the intensity ratio per square foot
has been chosen. It is considered that this intensity ratio will provide a
uniform basis of comparing data between the Company's different properties and
take into account the commercial areas within each of the properties. This will
also allow comparison of the Company's performance over time, as well as with
other companies in the Company's peer group.
Total GHG emissions data for the year ended 30 June 2017:
Carbon emissions data 2017 2016 2016
(rebased)1
Absolute energy use:
Residential gas (kWh) 4,121,815 5,928,932 3,939,897
Residential oil (kWh) - - -
Residential electricity (kWh) 6,526,010 4,365,836 3,089,383
Absolute CO2e emissions (tonnes CO2e) 2,899 2,890 1,998
Residential gas emissions (tonnes CO2e) (Scope 1) 1,201 1,664 725
Residential oil emissions (tonnes CO2e) (Scope 1) - - -
Residential electricity emissions (tonnes CO2e) 1,698 1,226 1,273
(Scope 2)
Total residential emissions (tonnes CO2e) (Scopes 2,899 2,890 1,998
1+2)
CO2e emissions per sq ft 0.0050 0.0047 0.0034
Residential gas and oil emissions (tonnes CO2e/sq 0.0021 0.0018 0.0012
ft) (Scope 1)
Residential electricity emissions (tonnes CO2e/sq 0.0029 0.0029 0.0022
ft) (Scope 2)
Total residential emissions (tonnes CO2e/sq ft) 0.0050 0.0047 0.0034
(Scopes 1+2)
1 The 2016 emissions data has been rebased to reflect a comparative
twelve-month period on a like-for-like basis for the prior year.
The Company's emissions have increased year-on-year due to owning and operating
three of the Company's assets for a full 12-month period.
Diversity and equality
The Company is committed to achieving a working environment which provides
equality of opportunity and freedom from unlawful discrimination on the grounds
of race, sex, pregnancy and maternity, marital or civil partnership status,
gender reassignment, disability, religion, beliefs, age or sexual orientation.
The Company's policy aims to remove unfair and discriminatory practices and to
encourage full contribution from its diverse community. It is committed to
actively opposing all forms of discrimination and values diversity amongst its
workforce.
Further information on the Company's diversity policy is included in the
corporate governance statement in the full Annual Report.
Social and community
The Company is committed to being socially responsible and the Directors
consider community involvement to be an important part of that responsibility.
The Company is indirectly involved with a number of social and local community
initiatives via the Asset and Facilities Managers, such as local employment
schemes and initiatives to give back to the local area through student
bursaries, sponsorship and local events.
Human rights
The Company respects human rights and aims to provide assurance to internal and
external stakeholders that it will carry out its affairs in accordance with the
principles of the Universal Declaration of Human Rights. No human rights
concerns have arisen within the Company's operations or its supply chain during
the year ended 30 June 2017.
Employees
Scape has overall responsibility for the supervision and provision of asset
management services through oversight and management of the employees of GCP
Operations Limited, a subsidiary of the Company, and has responsibility for the
procurement and supervision of the facilities management services on behalf of
the Company in connection with the Company's 'Scape' branded assets, and with
effect from 1 September 2016, The Pad.
Gender breakdown
The gender breakdown of the Group's Directors, senior management and employees
as at 30 June 2017, is detailed below.
As at 30 June 2017 Women Men
Directors 1 (2016: 1) 3 (2016: 3)
Senior management 3 (2016: 3) 5 (2016: 3)
Employees 39 (2016: 38) 43 (2016: 30)
RISK MANAGEMENT
Robust risk assessments and reviews of internal controls are undertaken
regularly in the context of the Company's overall investment objective.
The Board is responsible for the systems of internal controls relating to the
Group including the reliability of the financial reporting process and for
reviewing the systems' effectiveness.
Role of the Board
The Directors have overall responsibility for risk management and internal
control within the Group. They recognise that risk is inherent in the operation
of the Group and that effective risk management is key to the success of the
organisation. The Directors have delegated responsibility for the assurance of
the risk management process and the review of mitigating controls to the audit
committee.
The Directors, when setting the risk management strategy, also determine the
nature and extent of the significant risks and its risk appetite in
implementing this strategy. A formal risk identification and assessment process
has been in place since IPO, resulting in a risk framework document which
summarises the key risks and their mitigants.
The Directors undertake a formal risk review with the assistance of the audit
committee at least twice a year in order to assess the effectiveness of the
Group's risk management and internal control systems. During the course of such
review, the Directors have not identified, nor been advised of any failings or
weaknesses which they have determined to be of a material nature. The principal
risks and uncertainties which the Group faces are set out below.
Internal control review
The Board is responsible for the systems of internal controls relating to the
Group including the reliability of the financial reporting process and
for reviewing the systems' effectiveness.
The Directors have reviewed and considered the guidance supplied by the FRC on
risk management, internal control and related finance and business reporting
and an ongoing process has been established for identifying, evaluating and
managing the risks faced by the Group. This process, together with key
procedures established with a view to providing effective financial control,
was in place during the year under review and at the date of this report.
The internal control systems are designed to ensure that proper accounting
records are maintained, that the financial information on which business
decisions are made and which is issued for publication, is reliable and that
the assets of the Group are safeguarded.
The risk management process and Group systems of internal control are designed
to manage rather than eliminate the risk of failure to achieve the Company's
objectives. It should be recognised that such systems can only provide
reasonable, not absolute, assurance against material misstatement or loss.
The Directors have carried out a review of the effectiveness of the systems of
internal control as they have operated over the period and up to the date of
approval of the report and financial statements.
There were no matters arising from this review that required further
investigation and no significant failings or weaknesses were identified.
Internal control assessment process
Robust risk assessments and reviews of internal controls are undertaken
regularly in the context of the Company's overall investment objective.
The Board, through the audit committee, has categorised risk management
controls under the following key headings:
* execution risk;
* portfolio risk;
* financial risk; and
* regulatory risk.
In arriving at its judgement of what risks the Group faces, the Board has
considered the Group's operations in the light of the following factors:
* the nature and extent of risks which it regards as acceptable for the Group
to bear within its overall business objective;
* the threat of such risks becoming reality;
* the Group's ability to reduce the incidence and impact of risk on its
performance;
* the cost to the Group and benefits related to the review of risk and
associated controls of the Group; and
* the extent to which the third parties operate the relevant controls.
A risk matrix has been produced against which the risks identified and the
controls in place to mitigate those risks can be monitored. The risks are
assessed on the basis of the likelihood of them happening, the impact on the
business if they were to occur and the effectiveness of the controls in place
to mitigate them. This risk register is reviewed at least every six months by
the audit committee and at other times as necessary.
Most of the day-to-day management functions of the Group are sub-contracted,
and the Directors therefore obtain regular assurances and information from key
third party suppliers regarding the internal systems and controls operating in
their organisations. In addition, each of the third parties is requested to
provide a copy of its report on internal controls each year, which is reviewed
by the audit committee.
Going concern
In assessing the Group's ability to continue as a going concern, the Directors
have considered the Company's investment objective, risk management policies,
capital management (see note 27 to the financial statements), the quarterly NAV
and the nature of its portfolio and expenditure projections. The Directors
believe that the Group has adequate resources, an appropriate financial
structure and suitable management arrangements in place to continue in
operational existence for the foreseeable future. In addition, the Board has
had regard to the Group's investment performance, the price at which the
Company's shares trade relative to the NAV and ongoing investor interest in the
continuation of the Company (including feedback from meetings and conversations
with shareholders by the Group's advisers).
Based on their assessment and considerations, the Directors have concluded that
they should continue to prepare the financial statements of the Company on a
going concern basis and the financial statements have been prepared
accordingly.
Viability statement
The Directors have considered each of the Company's principal risks and
uncertainties detailed below, in particular the risk and impact of a downturn
in the UK commercial property market or the international student market which
could materially affect the valuation and cash flows of the Company's
investments, impacting the viability of the Company. The Directors also
considered the Company's policy for monitoring, managing and mitigating its
exposure to these risks.
The Directors have assessed the prospects of the Company over a longer period
than the twelve months required by the going concern provision. The Board has
determined that a five-year period constitutes an appropriate period to provide
its viability statement. The Company does not have a fixed life, it assumes
long-term hold periods for the assets in its portfolio and analyses its
financial model over a five-year horizon.
This assessment involved an evaluation of the potential impact on the Company
of these risks occurring. Where appropriate, the Company's financial model was
subject to a sensitivity analysis involving flexing a number of key assumptions
in the underlying financial forecasts in order to analyse the effect on the
Company's net cash flows and other key financial ratios including loan
covenants. This analysis included modelling the impact of severe but plausible
downside scenarios that incorporate the principal risks as follows:
* reductions in rental income;
* reductions in property values;
* increases in the Company's operating expenses; and
* deflationary scenarios that could impact on the Company's ability to meet
its loan covenants.
The Company's assets derive revenues considered to be dependable due to the
inherent supply demand imbalances of the market in which the Company operates.
Additionally, the Company's low leverage comprises a fixed rate facility which
matures beyond the five-year horizon. Therefore, the Directors have a
reasonable expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the five-year period of their
assessment.
Principal risks and uncertainties
The Directors have identified the following principal risks and uncertainties
and the actions taken to manage each of these. If one or more of these risks
materialised, this could potentially have a significant impact upon the Group's
ability to meet its investment objective.
RISK 1: EXECUTION RISK
Reliance on the Investment Manager and third party service providers
Risk: The Group relies upon the performance of third party service providers to
perform its main functions. In particular, the Group depends on the Investment
Manager to provide investment advice and management services. Such services,
which include monitoring the performance of the investment portfolio and
conducting due diligence in respect of any new investments, are integral to the
Group's performance.
Impact: Failure by a third party service provider to carry out its obligations
in accordance with the terms of its appointment, or to exercise due care and
skill, could have a material adverse effect on the Group's performance. The
misconduct or misrepresentations by employees of the Group, the Investment
Manager, the Asset and Facilities Managers or other third-party service
providers could cause significant losses to the Group.
How the risk is managed: The performance of the Group's service providers is
closely monitored by the management engagement committee of the Company, which
conducts review meetings with each of the Group's principal third party service
providers on an annual basis. The audit committee also reviews the internal
controls reports and other compliance and regulatory reports of its service
providers on an annual basis. The performance of the employees within the Group
is monitored by Scape and considered by the board of GCP Operations Limited
which meets twice a year.
Due diligence
Risk: Prior to entering into an agreement to acquire any property, the
Investment Manager will perform due diligence, on behalf of the Group, on the
proposed investment. The due diligence process may not reveal all facts that
may be relevant in connection with any proposed investment.
Impact: To the extent that the Investment Manager underestimates or fails to
identify risks and liabilities associated with the investment in question, the
Group may be subject to defects in title, to environmental, structural or
operational defects requiring remediation, or may be unable to obtain necessary
permits which may materially and adversely impact the NAV and the earnings
of the Company.
How the risk is managed: In addition to the due diligence carried out by the
Investment Manager, third party technical, insurance and legal experts are
engaged to advise on specific risks to an acquisition, whether it be structured
via a property-owning vehicle or a direct property acquisition.
RISK 2: PORTFOLIO RISK
UK property market conditions
Risk: The Group's performance depends on property values in the UK to a
significant extent.
Impact: An overall downturn in the UK property market as a result of Brexit and
/or other factors and the availability of credit to the UK property sector may
have a materially adverse effect upon the value of the property owned by the
Group and ultimately upon the net asset value and the ability of the Company to
generate revenues.
How the risk is managed: The Investment Manager continuously monitors market
conditions and provides the Board with quarterly updates on the student
accommodation market and senior debt market to act as an early warning signal
of any adverse market conditions ahead.
Concentration risk
Risk: The Company's property portfolio comprises eight assets. Substantially
all of the Group's assets are currently located in and around London; as a
result of this concentration, the Group may be adversely affected by events
including Brexit, which may damage or diminish London's attractiveness to
students (especially overseas students) or London property values.
Impact: Any circumstances which materially affect the returns generated by the
Group's property portfolio may materially and adversely impact the NAV and
earnings of the Company.
How the risk is managed: The Group is focused on the London market because this
is where the largest supply/demand imbalance exists in the UK student
accommodation market. The Investment Manager and the Asset and Facilities
Managers have significant experience in the sector and continuously monitor the
market and provide quarterly updates to the Board, to act as an early warning
signal of any adverse market conditions ahead.
Development risk
Risk: The Group may invest in development and forward-funded projects which
have received planning permission for student accommodation. Development
activities may involve a higher degree of risk than is associated with standing
assets.
Impact: Inaccurate assessment of a development opportunity, delays or
disruptions which are outside of the Group's control, changes in market
conditions and the inability of developers and/or building contractors to
perform their contractual commitments could have a material adverse effect on
the Company's profitability and NAV.
How the risk is managed: The Group engages third party professional advisers to
review and opine on development risk prior to commitment. All contracts entered
into are guaranteed maximum price contracts with a suitable contractor and
significant equity buffer. The Company's development exposure is limited to 20%
of its gross assets in undeveloped land and 15% of its gross assets to
forward-funded projects in respect of such undeveloped land.
Net income and capital values
Risk: Occupancy, rental income and property values may be adversely affected by
a number of factors, including a fall in the number of students, competing
sites, any harm to the reputation of the Group or the Scape brand amongst
universities, students or other potential customers or as result of other local
or national factors, including Brexit. The failure to collect rents, periodic
renovation costs and increased operating costs may also adversely affect the
Group.
Impact: A decrease in rental income, occupancy and/or property values may
materially and adversely impact the NAV and earnings of the Company as well as
the ability to service interest on its debt facility in the longer term.
How the risk is managed: The Investment Manager will only propose to the Board
those assets which it believes are in the most advantageous locations and
benefit from large supply and demand imbalances that can withstand the entry of
new competitors into the market. In addition, the quality of assets that the
Group acquires will be amongst the best in class to minimise occupancy risk.
The Investment Manager monitors the performance of the Asset and Facilities
Managers and provides the Board with performance reports on a quarterly basis,
including any operational or performance-related issues which could potentially
have an impact on brand confidence or integrity.
Property valuation and liquidity
Risk: The valuation of the Group's property portfolio is inherently subjective,
in part because all property valuations are made on the basis of assumptions
which may not prove to be accurate, and because of the individual nature of
each property and limited transactional activity.
Impact: Valuations of the Group's investments may not reflect actual sale
prices, even where any such sales occur shortly after the relevant valuation
date. Property investments are typically illiquid and may be difficult for the
Company to sell and the price achieved on any such realisation may be at a
discount to the prevailing valuation of the relevant investments.
How the risk is managed: The Company has entered into a valuation agreement
with Knight Frank LLP to provide quarterly valuations of all of the Group's
assets. Knight Frank LLP is one of the largest valuers of student accommodation
in the UK and therefore has access to the maximum number of data points to
support its valuations. In addition to this, the Board of Directors has
significant experience of property valuation and its constituent elements.
Whilst the Company invests funds with the aim of both capital appreciation and
investment income, it has no immediate plans to sell or realise the capital
appreciation (and so generate returns) from any increase in the value of its
investment properties, except by way of increased rental income.
RISK 3: FINANCIAL RISK
Breach of financial covenants
Risk: The availability of Company's debt facility depends on the Company
complying with a number of key financial covenants in respect of loan-to-value
and interest service cover.
Impact: An adverse change to capital values as a result of a downturn in the UK
property market or a reduction to net income due to factors such as a fall in
the number of students or other national factors may lead to a situation
whereby the Group breaches its banking covenants.
How the risk is managed: The Company's borrowing policy provides for the
Company to have no more than 55% gearing in the short term and 30% in the long
term. In addition to this, the Investment Manager provides the Board with a
quarterly update on the state of the UK property market and the senior debt
market and act as an early warning signal. At 30 June 2017, the Company had
significant headroom against its banking covenants.
RISK 4: REGULATORY RISK
Compliance with laws and regulations
Risk: Any change in the laws, regulations and/or government policy affecting
the Group, including any change in the Company's tax status or in taxation
legislation in the UK (including a change in interpretation of such
legislation) may have a material adverse effect on the ability of the Company
to successfully pursue its investment policy and meet its investment objective
or provide favourable returns to shareholders.
Impact: An increase in the rates of stamp duty land tax could have a material
impact on the value of assets acquired. In addition, if the Group fails to
remain a REIT for UK tax purposes, its profits and property valuation gains
will be subject to UK corporation tax.
How the risk is managed: The Board has appointed Gowling WLG (UK) LLP as legal
counsel, Capita Company Secretarial Services Limited as Company Secretary and
Deloitte LLP as tax adviser to ensure compliance with all relevant laws and
regulations. The Board has ultimate responsibility for ensuring adherence to
the UK REIT regime and monitors the compliance reports provided by the
Investment Manager and other third party service providers.
Government policy and Brexit
Risk: Changes in government policy which adversely impact the number of
students in the UK may have a material adverse impact on the Company's ability
to meet its stated objectives. Further, the Group may be subject to a period of
significant uncertainty in the event of the UK leaving the EU.
Impact: Material reductions to the number of students, including international
students, attending HEIs in the UK and/or material adverse impact on the value
of student accommodation assets in the UK.
How the risk is managed: The Board has significant experience in the sector
and, together with its relevant advisers, closely monitors changes in
government policy in respect of UK, EU and international students.
The strategic report has been approved by the Board and signed on its behalf.
Robert Peto
Chairman
14 September 2017
BOARD OF DIRECTORS
Robert Peto - Chairman
Marlene Wood - Chair of the audit committee
Peter Dunscombe - Senior Independent Director and Chair of the remuneration
committee
Malcolm Naish - Chair of the management engagement committee
All Directors are non-executive and independent of the Investment Manager.
EXTRACTS FROM THE DIRECTORS' REPORT
Share capital
At a general meeting held on 27 April 2016, the Company was granted the
authority to allot and to disapply pre-emption rights in respect of a placing
programme of up to 65 million ordinary shares (the "2016 Placing Programme").
As reported in the 2016 annual report, following the publication of a
prospectus in respect of the 2016 Placing Programme on 29 April 2016, the
Company announced on 20 May 2016 that it had accepted applications in respect
of a placing of 44,085,232 ordinary shares at a price of 136.10 pence per
share, with an aggregate nominal value of GBP440,852.32 raising gross proceeds of
GBP60 million for the Company (the "May 2016 Placing"). These shares were issued
under the placing to institutional investors and professionally-advised private
investors and admitted to trading on the SFS on 24 May 2016, prior to the
Migration.
As part of its 2016 Placing Programme, the Company further announced on 16
December 2016 that it had accepted applications in respect of a placing of
16,428,572 ordinary shares at a price of 140 pence per share, with an aggregate
nominal value of GBP164,285.72, raising gross proceeds of GBP23 million for the
Company (the "December 2016 Placing"). These shares were issued under the
placing to institutional investors and professionally advised private investors
and admitted to trading on the premium segment of the LSE's main market on 20
December 2016 following the Migration. In all, 60,513,804 ordinary shares were
issued and allotted by the Company prior to the closure of the 2016 Placing
Programme, with an aggregate nominal value of GBP605,138.04, raising gross
proceeds of GBP83 million for the Company.
At a general meeting held on 31 January 2017, the Company was granted the
authority to allot and to disapply pre-emption rights in respect of a placing
programme of up to 200 million ordinary shares (the "2017 Placing Programme").
Following the publication of a prospectus in respect of the 2017 Placing
Programme on 2 February 2017, the Company announced on 22 February 2017 that it
had accepted applications in respect of 57,545,195 ordinary shares at a price
of 140 pence per share, with an aggregate nominal value of GBP575,451.95, raising
gross proceeds of GBP80.6 million for the Company (the "Initial Issue"). These
shares were issued under the placing to institutional investors and
professionally-advised private investors and admitted to the premium segment of
the LSE's main market on 24 February 2017.
In pursuance of its 2017 Placing Programme, the Company announced on 5 July
2017 that it had accepted applications in respect of a placing of 49,295,774
ordinary shares at a price of 142 pence per share, with an aggregate nominal
value of GBP492,957.74, raising gross proceeds of GBP70 million for the Company
(the "July 2017 Placing"). These shares were issued under the placing to
institutional investors and professionally advised private investors and
admitted to trading on the premium segment of LSE's main market on 7 July 2017.
Following the July 2017 Placing, and as at the date of this report, the Company
may allot up to a further 93,159,031 ordinary shares under the 2017 Placing
Programme, which will expire on 1 February 2018.
At the annual general meeting held on 27 October 2016, the Company was granted
authority to purchase up to 14.99% of the Company's ordinary share capital in
issue at that date, amounting to 39,243,072 ordinary shares. No ordinary shares
have been bought back under this authority. This authority will expire at the
conclusion of, and renewal will be sought at, the annual general meeting to be
held on 25 October 2017. Shares bought back by the Company may be held in
treasury, from where they could be re-issued at or above the prevailing NAV
quickly and cost effectively. This provides the Company with additional
flexibility in the management of its capital base. No shares were held in
treasury during the year or at the year end.
At the year end, the issued share capital of the Company comprised 335,768,782
ordinary shares. At the date of this report, the Company's issued share capital
comprised 385,064,556 ordinary shares.
At general meetings of the Company, ordinary shareholders are entitled to one
vote on a show of hands and on a poll, to one vote for every ordinary share
held. At 30 June 2017, the total voting rights of the Company were 335,768,782
and as at the date of this report, are 385,064,556.
Dividends
Dividends totalling 5.75 pence per ordinary share have been paid in respect of
the year ended 30 June 2017 as follows:
Year ended Year ended
30 June 30 June
2017 2016
pence pence
First interim dividend 1.43 1.41
Second interim dividend 1.43 1.41
Third interim dividend 1.43 1.41
Fourth interim dividend 1.46 1.43
Total 5.75 5.66
No final dividend is being proposed.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
In the respect of the annual report and financial statements
The Directors are responsible for preparing the annual report and financial
statements in accordance with applicable UK law and IFRS as adopted by the EU.
Under company law, the Directors must not approve the financial statements
unless they are satisfied that they present fairly the financial position,
financial performance and cash flows of the Group for that year.
In preparing the financial statements, the Directors are required to:
* select suitable accounting policies in accordance with IAS 8: "Accounting
Policies, Changes in Accounting Estimates and Errors" and then apply them
consistently;
* present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
* provide additional disclosures when compliance with specific requirements
in IFRS is insufficient to enable users to understand the impact of
particular transactions, other events and conditions on the Group's
financial position and financial performance;
* state that the Group has complied with IFRS, subject to any material
departures disclosed and explained in the financial statements; and
* make judgements and estimates that are reasonable and prudent.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Group and enable
them to ensure that the financial statements comply with the Companies Act 2006
and Article 4 of the IAS Regulation. They are also responsible for safeguarding
the assets of the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a strategic report, Directors' report, Directors' remuneration report
and corporate governance statement that comply with that law and those
regulations, and for ensuring that the annual report includes information
required by the Disclosure Guidance and Transparency Rules of the UKLA.
The financial statements are published on the Company's website, which is
maintained on behalf of the Company by the Investment Manager. The work carried
out by the Auditor does not involve consideration of the maintenance and
integrity of this website and accordingly, the Auditor accepts no
responsibility for any changes that have occurred to the financial statements
since they were initially presented on the website. Under the investment
management agreement, the Investment Manager is responsible for the maintenance
and integrity of the corporate and financial information included on the
Company's website. Visitors to the website need to be aware that legislation in
the UK covering the preparation and dissemination of the financial statements
may differ from legislation in their jurisdiction.
We confirm that to the best of our knowledge:
* the financial statements, prepared in accordance with IFRS as adopted by
the EU, give a true and fair view of the assets, liabilities, financial
position and profit of the Company (and Group as a whole); and
* this annual report includes a fair review of the development and
performance of the business and the position of the Company (and Group as a
whole), together with a description of the principal risks and
uncertainties that it faces.
The Directors consider that the annual report and financial statements, taken
as a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's performance, business model
and strategy.
On behalf of the Board
Robert Peto
Chairman
14 September 2017
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's
statutory accounts for the year ended 30 June 2017 or the year ended 30 June
2016 but is derived from those accounts. Statutory accounts for the year ended
30 June 2016 have been delivered to the Registrar of Companies and those for
2017 will be delivered in due course. The Auditor has reported on those
accounts; their report was (i) unqualified, (ii) did not include a reference to
any matters to which the Auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under Section 498
(2) or (3) of the Companies Act 2006. The text of the Auditor's report can be
found in the Company's full annual report and financial statements at
www.graviscapital.com/funds/gcp-student.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2017
30 June 30 June
Continuing operations Notes 2017 2016
GBP'000 GBP'000
Rental income 4 28,611 22,482
Property operating expenses 5 (6,086) (4,600)
Gross profit 22,525 17,882
Administration expenses 5 (6,072) (5,712)
Operating profit before gains on investment properties 16,453 12,170
Fair value gains on investment properties 3 11,855 27,156
Operating profit 28,308 39,326
Finance income 9 70 75
Finance expenses - ongoing 10 (4,864) (3,441)
Finance expenses - exceptional 10 - (7,635)
Profit before tax 23,514 28,325
Tax (charge)/credit on residual income 11 (40) 3
Profit for the year 23,474 28,328
Other comprehensive income to be reclassified to
profit and loss in subsequent years
Net gains on cash flow hedges 20 - 214
Total comprehensive income for the year 23,474 28,542
EPS (basic and diluted) (pps) 14 8.08 15.48
The accompanying notes below form an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2017
30 June 2017 30 June 2016
Notes GBP'000 GBP'000
Assets
Non-current assets
Investment property 3 634,640 424,787
Retention account 308 815
634,948 425,602
Current assets
Cash and cash equivalents 16 55,110 66,337
Trade and other receivables 17 7,517 6,867
62,627 73,204
Total assets 697,575 498,806
Liabilities
Non-current liabilities
Interest bearing loans and borrowings 19 (217,469) (128,174)
Retention account (308) (815)
(217,777) (128,989)
Current liabilities
Trade and other payables 18 (4,840) (6,114)
Deferred income 18 (7,964) (5,235)
(12,804) (11,349)
Total liabilities (230,581) (140,338)
Net assets 466,994 358,468
Equity
Share capital 21 3,358 2,618
Share premium 22 340,233 239,653
Special reserve 23 53,576 58,371
Retained earnings 23 69,827 57,826
Total equity 466,994 358,468
Number of shares in issue 335,768,782 261,795,015
EPRA NAV per share (pps) 24 139.08 136.93
These financial statements were approved by the Board of Directors of GCP
Student Living plc on 14 September 2017 and signed on its behalf by:
Robert Peto
Chairman
Company number: 08420243
The accompanying notes below form an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2017
Share Share Special Retained
capital premium reserve earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 July 2,618 239,653 58,371 57,826 358,468
2016
Total - - - 23,474 23,474
comprehensive
income
Ordinary shares 740 102,824 - - 103,564
issued
Share issue costs - (2,244) - - (2,244)
Dividends paid in 13 - - (1,651) (2,093) (3,744)
respect of the
previous year
Dividends paid in 13 - - (3,144) (9,380) (12,524)
respect of the
current year
Balance at 30 3,358 340,233 53,576 69,827 466,994
June 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2016
Share Share Hedging Special Retained
capital premium reserve reserve earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 July 2015 1,099 39,946 (214) 65,223 31,675 137,729
Profit for the year - - - - 28,328 28,328
Other comprehensive income
that may be reclassified
subsequently to profit and
loss
Fair value movement on - - 214 - - 214
financial derivative
Total comprehensive income - - 214 - 28,328 28,542
Ordinary shares issued 1,519 201,251 - - - 202,770
Share issue costs - (1,544) - - - (1,544)
Dividends paid in respect - - - (534) (1,005) (1,539)
of the previous year
Dividends paid in respect 13 - - - (6,318) (1,172) (7,490)
of the current year
Balance at 30 June 2016 2,618 239,653 - 58,371 57,826 358,468
The accompanying notes below form an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2017
30 June 30 June
Notes 2017 2016
GBP'000 GBP'000
Cash flows from operating activities
Operating profit 28,308 39,326
Adjustments to reconcile profit for the year to net
operating cash flows:
Gains from change in fair value of investment 3 (11,855) (27,156)
properties
Corporation tax (payments)/refunds (41) 12
Decrease/(increase) in other receivables and 406 (3,120)
prepayments
Decrease in other payables and accrued expenses (2,650) (4,891)
Net cash flow generated from operating activities 14,168 4,171
Cash flows from investing activities
Acquisition of investment properties (195,469) (54,469)
Acquisition of subsidiaries net of cash acquired - (156,092)
Net cash used in investing activities (195,469) (210,561)
Cash flows from financing activities
Proceeds from issue of ordinary shares 103,564 79,000
Share issue costs (2,244) (1,538)
Proceeds from the issue of C shares - 16,195
C share issue costs - (2,490)
Bank loan drawn 19 90,000 130,000
Repayment of bank loan - (40,000)
Finance income 70 75
Finance expenses (5,110) (5,942)
Dividends paid in the year (16,206) (8,865)
Net cash flow generated from financing activities 170,074 166,435
Net decrease in cash and cash equivalents (11,227) (39,955)
Cash and cash equivalents at start of the year 66,337 106,292
Cash and cash equivalents at end of the year 16 55,110 66,337
The accompanying notes below form an integral part of these financial
statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2017
1. General information
GCP Student Living plc is a closed ended investment company incorporated in the
UK on 26 February 2013. The registered office of the Company is located at 51
New North Road, Exeter EX4 4EP. The Company's shares are listed on the premium
segment of the Official List of the UKLA and are traded on the Premium Segment
of the LSE's Main Market.
2. Basis of preparation
These financial statements are prepared in accordance with IFRS issued by the
IASB as adopted by the European Union. The financial statements have been
prepared under the historical cost convention, except for investment property,
which has been measured at fair value. The audited financial statements are
presented in Pound Sterling and all values are rounded to the nearest thousand
pounds (GBP'000), except when otherwise indicated.
These financial statements are for the year ended 30 June 2017. Comparative
figures are for the previous accounting period, the year ended 30 June 2016.
The Group has chosen to adopt the EPRA best practice guidelines for calculating
key metrics such as net asset value and earnings, which are presented alongside
the IFRS measures.
2.1 Changes to accounting standards and interpretations
The following new standards and amendments to existing standards have been
published and once approved by the EU, will be mandatory for the Group's
accounting periods beginning after 1 July 2017 or later periods. The Group has
decided not to adopt them early.
* IFRS 7 Financial Instruments: Disclosures - amendments regarding additional
hedge accounting disclosures (applies when IFRS 9 is applied).
* IFRS 9 Financial Instruments (effective for annual periods beginning on or
after 1 January 2018).
* IFRS 15 Revenue from Contracts (effective for annual periods beginning on
or after 1 January 2018).
* IFRS 16 Leases (effective for annual periods beginning on or after 1
January 2019).
The Group does not expect the adoption of new accounting standards issued but
not yet effective to have a significant impact on its financial statements.
2.2 Significant accounting judgements and estimates
The preparation of these financial statements in accordance with IFRS requires
the Directors of the Company to make judgements, estimates and assumptions that
affect the reported amounts recognised in the financial statements. However,
uncertainty about these assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of the asset or liability
in the future.
Judgements
In the process of applying the Group's accounting policies, management has made
the following judgements which have the most significant effect on the amounts
recognised in the consolidated financial statements:
Valuation of property
The valuations of the Group's investment property are at fair value as
determined by the external valuer on the basis of market value in accordance
with the internationally accepted RICS Valuation - Professional Standards
January 2014 (incorporating the International Valuation Standards) and in
accordance with IFRS 13.
Operating lease commitments - group as lessor
The Group has entered into commercial property leases on its investment
property portfolio. The Group has determined, based on evaluation of the terms
and conditions of the arrangements, such as the lease term not constituting a
substantial portion of the economic life of the commercial property, that it
retains all the significant risks and rewards of ownership of these properties
and recognises the contracts as operating leases.
Going concern
The Directors have made an assessment of the Group's ability to continue as a
going concern and are satisfied that the Company has the resources to continue
in business for the foreseeable future, for a period of not less than twelve
months from the date of this report. Furthermore, the Directors are not aware
of any material uncertainties that may cast significant doubt upon the
Company's ability to continue as a going concern. Therefore, the financial
statements have been prepared on the going concern basis.
2.3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial
statements are stated in the notes to the financial statements.
a) Basis of consolidation
As a real estate entity the Company does not meet the definition of an
investment equity and therefore does not qualify for the consolidation
exception under IFRS 10. The consolidated financial statements comprise the
financial statements of the Group and its subsidiaries as at 30 June 2017.
Subsidiaries are consolidated from the date of acquisition, being the date on
which the Group obtained control, and will continue to be consolidated until
the date that such control ceases. An investor controls an investee when the
investor is exposed, or has rights to variable returns from its involvement
with the investee and has the ability to affect those returns through its power
over the investee. In preparing these financial statements, intra-group
balances, transactions and unrealised gains or losses have been eliminated in
full. The subsidiaries all have the same year end as the Company. Uniform
accounting policies are adopted in the financial statements for transactions
and events in similar circumstances.
b) Functional and presentation currency
The overall objective of the Group is to generate returns in Pound Sterling and
the Group's performance is evaluated in Pound Sterling. Therefore, the
Directors consider Pound Sterling as the currency that most faithfully
represents the economic effects of the underlying transactions, events and
conditions and have therefore adopted it as the functional and presentation
currency.
c) Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being the investment and provision of student accommodation
facilities (including ancillary retail and teaching facilities) in the UK.
3. UK investment property
Properties
under
development Leasehold Freehold Total
GBP'000 GBP'000 GBP'000 GBP'000
As at 1 July 2016 - 173,070 251,717 424,787
Acquisition of property - - 138,952 138,952
Additional expenditure on properties - 614 235 849
Land and development costs 58,197 - - 58,197
Fair value gains on revaluation of 903 4,026 6,926 11,855
investment property
As at 30 June 2017 59,100 177,710 397,830 634,640
As at 1 July 2015 - - 177,220 177,220
Acquisitions arising from business - 166,100 - 166,100
combinations
Acquisition of property - 59 54,252 54,311
Fair value gains on revaluation of - 6,911 20,245 27,156
investment property
As at 30 June 2016 - 173,070 251,717 424,787
During the year the Group commenced construction of a forward-funded
development, Scape Wembley, which completed in August 2017. The Group also
purchased Woburn Place via a wholly owned subsidiary, GCP Bloomsbury Limited.
The Group's outstanding capital commitments in respect of the forward funding
of Scape Wembley were GBP20.2 million, subject to the receipt of a licence fee
which will reduce the amount payable to the developer. At the balance sheet
date, the licence fee could not be reliably measured.
The amount paid for acquisition of investment property shown in the
consolidated statement of cash flows of GBP195,469,000 is cash paid and does not
take in account amounts due at the beginning or end of the year.
Accounting policy
Investment property comprises property held to earn rental income or for
capital appreciation or both. Investment property is measured initially at cost
including transaction costs. Transaction costs include transfer taxes and
professional fees to bring the property to the condition necessary for it to be
capable of operating. The carrying amount also includes the cost of replacing
part of an existing investment property at the time that cost is incurred if
the recognition criteria are met.
Subsequent to initial recognition, investment property is stated at fair value.
Gains or losses arising from changes in the fair values are included in the
income statement in the period in which they arise under IAS 40 Investment
Property.
The determination of the fair value of investment property requires the use of
estimates such as future cash flows from assets (from lettings, tenants'
profiles, future revenue streams), capital values of fixtures and fittings,
plant and machinery, any environmental matters and the overall repair and
condition of the property and discount rates applicable to those assets.
Gains or losses on the disposal of investment property are determined as the
difference between net disposal proceeds and the carrying value of the asset.
Investment properties under construction are measured at fair value if the fair
value is considered to be reliably determinable. Properties of which the
Company expects that the fair value will be reliably determinable when
construction is completed, are measured at cost less impairment until the fair
value becomes reliably determinable or construction is completed, whichever is
earlier.
Investment properties under construction for which the fair value cannot be
determined reliably, but for which the Company expects that the fair value of
the property will be reliably determinable when construction is completed, are
measured at cost less impairment until the fair value becomes reliably
determinable or construction is completed, whichever is earlier.
Licence fees (where income is receivable from a developer in respect of a
forward-funding agreement) are deducted from the cost of investment and shown
as a receivable until settled.
4. Rental income
30 June 30 June
2017 2016
GBP'000 GBP'000
Nomination rental income 3,613 3,688
Direct let rental income 22,093 16,623
Discounts (316) (426)
Total student income 25,390 19,885
Teaching space income 420 471
Retail space income 2,426 1,747
Gross rental income 28,236 22,103
Service charge income 375 264
Employee costs recharge income - 115
Total 28,611 22,482
The Company's employees are overseen and managed by Scape, which has overall
responsibility for the provision of asset management services. The Group
employs the staff of the Asset and Facilities Manager, Scape. Employee costs
recharge income above represents payroll costs relating to employee time spent
on the Group's pipeline properties which were managed by Scape at the year end,
but had not yet been acquired by the Group.
Accounting policy
Rental income including direct lets to students, leases to universities and
commercial tenants receivable under operating leases is recognised on a
straight-line basis over the term of the lease, except for contingent rental
income which is recognised when it arises.
Incentives for lessees to enter into lease agreements are spread evenly over
the lease term, even if the payments are not made on such a basis.
The lease term is the non-cancellable period of the lease together with any
further term for which the tenant has the option to continue the lease,
where, at the inception of the lease, the Directors are reasonably certain that
the tenant will exercise that option.
Service charges are recognised on an accruals basis and are received to cover
expenditure on hard and soft facilities management.
5. Property operating and administration expenses
30 June 30 June
2017 2016
GBP'000 GBP'000
Operating costs 2,348 1,583
Utilities 992 856
Insurance 283 144
Sales and marketing 283 249
Property maintenance 173 38
Staff costs 2,064 1,718
Ground rent 138 234
Ancillary income (195) (222)
Property operating expenses 6,086 4,600
Investment management fees 4,211 3,026
Directors' remuneration 173 121
Other administration expenses 1,688 2,565
Administration expenses 6,072 5,712
Total 12,158 10,312
Included within administration expenses are investment management fees, as
disclosed in note 28 below and Directors' remuneration as disclosed in note 6.
Ancillary income includes income received through such activities as laundry,
cleaning and vending machines.
Accounting policy
All property operating expenses and administration expenses are charged to the
income statement and are accounted for on an accruals basis.
6. Directors' remuneration
30 June 30 June
2017 2016
GBP'000 GBP'000
Robert Peto 45 34
Marlene Wood 42 31
Peter Dunscombe 37 28
Malcolm Naish 37 28
Total 161 121
A summary of the Directors' emoluments, including the disclosures required by
the Companies Act 2006 is set out in the Directors' remuneration report in the
full annual report and financial statements.
7. Staff costs
30 June 30 June
2017 2016
GBP'000 GBP'000
Salaries 2,048 1,702
Other benefits 16 17
Total 2,064 1,719
With the exception of the Directors, whose remuneration is shown in the
Directors' remuneration report, as at 30 June 2017 the Group employed 90 (2016:
74) members of staff, with an average of 83 (2016: 72) employees during the
year.
Employee costs totalling GBPnil (2016: GBP115,000) have been recharged to entities
outside the Group. This amount is included within revenue in note 4.
The Group operates a defined contributions pension scheme for eight (2016: one)
of its employees. The costs for the year ended 30 June 2017 totalled GBP10,000
(2016: GBP4,000).
8. Auditor's remuneration
30 June 30 June
2017 2016
GBP'000 GBP'000
Audit fee 98 95
Other services 9 255
Total 107 350
The Company reviews the scope and nature of all proposed non-audit services
before engagement, to ensure that the independence and objectivity of the
Auditor are safeguarded. Audit fees are comprised of the following items:
30 June 30 June
2017 2016
GBP'000 GBP'000
Year end annual report and financial statements 26 26
Subsidiary accounts for the year ended 30 June 2017 72 -
Subsidiary accounts for the year ended 30 June 2016 - 69
Total 98 95
For the year ended 30 June 2017, the Auditor has provided a review of the
half-yearly report and financial statements for a fee of GBP9,000 (2016: GBP7,000).
30 June 30 June
2017 2016
GBP'000 GBP'000
Reporting accountant services - 28
Review of half-yearly report 9 7
Tax advice - 18
Tax compliance services for VAT - 30
Tax compliance services for corporation tax returns - 119
Tax advice in respect of aborted property purchases - 53
Total 9 255
The audit committee has considered the independence and objectivity of the
Auditor and has conducted a review of non-audit services which the Auditor has
provided during the year under review. The audit committee receives an annual
assurance from the Auditor that its independence is not compromised by the
provision of such non-audit services.
9. Finance income
30 June 30 June
2017 2016
GBP'000 GBP'000
Income from cash and short-term deposits 70 75
Total 70 75
Accounting policy
Interest income is recognised on an effective interest rate basis and shown
within the income statement as finance income.
10. Finance expenses
Ongoing charges 30 June 30 June
2017 2016
GBP'000 GBP'000
Swap interest - 10
Loan interest 4,610 3,239
Loan non-utilisation fee - 15
Bank charges 5 6
Loan arrangement fees amortised 249 171
Total 4,864 3,441
Exceptional charges 30 June 30 June
2017 2016
GBP'000 GBP'000
Amortisation of loan arrangement fees - 431
Swap break fees - 255
Loan cancellation fees - 610
Amortisation of C share issue costs - 2,536
Return on C shares - 3,803
Total - 7,635
In the year ended 30 June 2016, exceptional finance charges arose from two
items:
1. The Group entered into significantly improved new financing arrangements.
The total costs of repaying the original bank borrowings and breaking the
Company's interest rate swap was GBP1,296,000.
2. Finance costs of GBP6,339,000 arising in the period which represent:
i. issue costs of GBP2,536,000 which were treated as finance cost rather
than a reduction to equity due to the C shares being recognised as debt;
and
ii. the C shares issued during the year ended 30 June 2015, represented
contracts for conversion into a variable number of ordinary shares and
therefore the C shares were classified as liabilities under IFRS. The
return on the C shares of GBP3,803,000 represented an increase in the assets
attributable to the C shares over and above the funds raised from their
issue.
Accounting policy
Any finance costs that are separately identifiable and directly attributable to
a liability that will be in existence for a period of time are amortised as
part of the cost of the liability. All other finance costs are expensed in the
period in which they occur. Finance costs consist of interest and other costs
that an entity incurs in connection with bank and other borrowings.
After initial recognition, C shares are subsequently measured at amortised cost
using the effective interest method. Amortisation is credited/(charged)
to finance income/(finance costs) in the income statement. Transaction costs
are amortised to the earliest conversion period.
11. Taxation
Corporation tax has arisen as follows:
30 June 30 June
2017 2016
GBP'000 GBP'000
Corporation tax on residual income for current year - -
Corporation tax on residual income for prior periods 40 (3)
Total 40 (3)
Reconciliation of tax charge to profit before tax:
30 June 30 June
2017 2016
GBP'000 GBP'000
Profit before tax 23,514 28,325
Corporation tax at 19.75% (2016: 20.00%) 4,644 5,665
Change in value of investment properties (2,341) (5,431)
Tax exempt property rental business (2,789) (2,107)
Amounts not deductible for tax purposes (66) 1,367
Capital allowances (314) (318)
Excess management expenses 880 824
Other 26 (3)
Total 40 (3)
The Group has unrelieved excess tax losses of GBP4,312,000 (2016: GBP2,831,000) it
is unlikely that the Group will generate sufficient taxable profits in the
future to utilise these amounts and therefore no deferred tax asset has been
recognised.
Accounting policy
Corporation tax is recognised in the income statement except where in certain
circumstances corporation tax may be recognised in other comprehensive income.
As a REIT, the Group is exempt from corporation tax on the profits and gains
from its property rental business, provided it continues to meet certain
conditions as per REIT regulations.
Non-qualifying profits and gains of the Group (the residual business) continue
to be subject to corporation tax. Therefore, current tax is the expected
tax payable on the non-qualifying taxable income for the year if applicable,
using tax rates enacted or substantively enacted at the balance sheet date.
12. Operating leases
Leases are typically direct let agreements with individual students or HEIs for
the academic year or a shorter period. The Group also has a small number of
commercial leases on teaching and retail spaces and a number of nomination
agreements whereby blocks of beds are let out for a set number of years.
Future minimum rentals receivable under non-cancellable operating leases as at
30 June 2017 are as follows:
30 June 30 June
2017 2016
GBP'000 GBP'000
Within one year 30,408 26,912
Between one and five years 42,104 21,491
More than five years 62,728 41,647
Total 135,240 90,050
13. Dividends
30 June 2017 30 June 2016
Pence per GBP'000 Pence per GBP'000
share share
For the year ended 30 June 2017
First interim dividend paid on 5 December 1.43 3,744 1.41 1,549
2016
Second interim dividend paid on 6 March 1.43 3,979 1.41 2,871
2017
Third interim dividend paid on 5 June 1.43 4,801 1.41 3,070
2017
Dividends paid during the year 4.29 12,524 4.23 7,490
Fourth interim dividend paid on 5 1.46 5,622 1.43 3,744
September 20171
Total 5.75 18,146 5.66 11,234
Paid as
PIDs 4.92 15,108 5.31 10,849
Ordinary dividends 0.83 3,038 0.35 385
Total 5.75 18,146 5.66 11,234
1. The fourth interim dividend is paid after the year end and is not accrued
in the financial statements.
As a REIT, the Company is required to pay PIDs equal to at least 90% of the
property rental business profits of the Group. A fourth interim PID for the
year ended 30 June 2017 was paid on 5 September 2017.
Accounting policy
Dividends due to the Company's shareholders are recognised when they become
payable. For interim dividends this is when they are paid.
14. Earnings per share
Basic EPS is calculated by dividing profit for the year attributable to
ordinary shareholders of the Company by the weighted average number of ordinary
shares during the year. As there are no dilutive instruments in issue, basic
and diluted EPS are identical. The following reflects the earnings and share
data used in the basic and diluted NAV per share computations:
30 June 30 June
2017 2016
GBP'000 GBP'000
Group earnings for EPS 23,474 28,328
Fair value gains on investment properties (11,855) (27,156)
Group earnings for EPRA EPS 11,619 1,172
Group specific adjustments:
Exceptional finance costs per note 10 - 7,635
Other exceptional items 394 884
Licence fees receivable on forward funded developments 1,421 -
Capitalised rental guarantee 189 -
Group specific adjusted earnings 13,623 9,691
30 June 30 June
2017 2016
Pence Pence
per share per share
Basic Group EPS 8.08 15.48
Basic Group EPRA EPS 3.99 0.64
Diluted Group EPS 8.08 15.48
Diluted Group EPRA EPS 3.99 0.64
Group specific adjusted EPS 4.62 5.30
30 June 30 June
2017 2016
Number Number
of shares of shares
Weighted average number of shares in issue 290,504,478 183,007,508
A third Group specific adjusted EPS calculation has been made to show EPRA
earnings excluding the exceptional one-off costs arising in the year. The costs
have arisen from the following items:
1. For the year ended 30 June 2017:
i. Migration costs relating to the Main Market of the LSE of GBP394,000
ii. Licence fees from the developer of Scape Wembley in respect of a
forward-funding agreement of GBP1,421,000
iii. A rental guarantee in respect of Woburn Place of GBP189,000 which
was capitalised
2. For the year ended 30 June 2016:
i. costs of repaying and breaking the original bank borrowings and
interest rate swap totalling GBP1,296,000
ii. Finance costs of GBP6,339,000 arising from the accounting treatment
of the C shares. For further details please refer to note 10.
15. Subsidiaries
The financial statements comprise the financial statements of the Company and
its subsidiaries, GCP Topco Limited, GCP Holdco Limited, GCP Scape East
Limited, GCP Brunswick Limited (formerly Ternion (Danehurst) Limited), GCP
Operations Limited, Leopard Guernsey Greenwich JV Limited, Leopard Guernsey
Greenwich Limited, Leopard Guernsey Greenwich 2 Limited, Old Street
Acquisitions Limited, Leopard Guernsey Old Street Limited, Leopard Guernsey Old
Street 2 Limited, GCP RHUL Limited, GCP SG Limited, GCP WL Limited, GCP Wembley
2 Limited (formerly GCP Brunswick 2 Limited), GCP Wembley Limited (formerly GCP
Apex Limited), GCP RHUL 2 Limited, GCP Bloomsbury Limited, GCP Holdco 2
Limited, and GCP Topco 2 Limited for the year ended 30 June 2017, and the
comparative year for the year ended 30 June 2016.The Company also owns a
dormant subsidiary: GCP Brighton Limited which had not yet commenced activities
at the year end.
Subsidiaries are fully consolidated from the date of acquisition, being the
date on which the Group obtained control, and will continue to be consolidated
until the date when such control ceases. The financial statements of the
subsidiaries are prepared for the same reporting period as the parent company,
using consistent accounting policies. All intra-group balances, transactions,
unrealised gains and losses resulting from intra-group transactions and
distributions are eliminated in full. The Company has a 100% beneficial
interest (whether directly or indirectly), in the issued share capital of all
subsidiaries.
On 7 March 2017, GCP Topco 2 Limited and GCP Holdco 2 Limited were incorporated
as wholly owned subsidiaries of GCP Student Living plc. These companies were
dormant until 30 March 2017. On 7 March 2017, GCP Bloomsbury Limited became a
wholly owned subsidiary of GCP Holdco 2 Limited. Also on that date GCP Holdco 2
Limited became a subsidiary of GCP Topco 2 Limited.
On 30 March 2017, GCP Holdco 2 Limited took over direct ownership of GCP WL
Limited and GCP RHUL 2 Limited from GCP Student Living plc in a share for share
exchange.
On 30 March 2017, GCP Topco 2 Limited took over direct ownership of GCP Holdco
2 Limited from GCP Student Living plc, in a share for share exchange.
GCP Bloomsbury Limited, incorporated 21 February 2017, was dormant until 5
April 2017, when it acquired Woburn Place. The principal activity of the
company is the provision of student accommodation in line with the Group's
investment strategy.
GCP Wembley Limited (formerly GCP Apex Limited), incorporated 15 June 2016, was
dormant until it commenced construction of Scape Wembley. The principal
activity of the company is the provision of student accommodation in line with
the Group's investment strategy.
Profit
Capital after
Country of Number and and tax for
Company registration, class of share reserves the
incorporation held by Group at year
and operation the Group holding 30 June ended
2017 30 June
GBP'000 2017
GBP'000
GCP Wembley Limited UK 10 ordinary shares 100% 60,694 694
(formerly GCP Apex
Limited)2
GCP Brighton UK 2 ordinary shares 100% - -
Limited2
GCP Bloomsbury UK 6 ordinary shares 100% 50,550 602
Limited2
GCP Brunswick UK 1,046,728,191 100% 15,390 638
Limited1,2 ordinary shares
GCP Wembley 2 UK 2 ordinary shares 100% 2 -
Limited (formerly
GCP Brunswick 2
Limited)1,2
GCP Holdco UK 5 ordinary shares 100% 301,142 23,796
Limited1,2
GCP Holdco 2 UK 10 ordinary shares 100% 70,234 1,258
Limited1,2
GCP Operations UK 2 ordinary shares 100% 74 86
Limited2
GCP RHUL Limited1,2 UK 4 ordinary shares 100% 20,570 1,990
GCP RHUL 2 Limited2 UK 2 ordinary shares 100% (14) (14)
GCP Scape East UK 51,508,283 ordinary 100% 91,035 8,123
Limited1,2 shares
GCP SG Limited1,2 UK 4 ordinary shares 100% 24,321 2,374
GCP Topco Limited2 UK 3 ordinary shares 100% 301,125 23,793
GCP Topco 2 Limited2 UK 10 ordinary shares 100% 70,228 1,253
GCP WL Limited2 UK 3 ordinary shares 100% 19,719 1,410
Leopard Guernsey Guernsey 102 ordinary shares 100% 28,646 3,129
Greenwich Limited1,3
Leopard Guernsey Guernsey 102 ordinary shares 100% 1,160 104
Greenwich 2
Limited1,3
Leopard Guernsey Guernsey 103 ordinary shares 100% 54,800 3,214
Greenwich JV
Limited1,3
Leopard Guernsey Old Guernsey 100 ordinary shares 100% 100,180 8,556
Street Limited1,3
Leopard Guernsey Old Guernsey 100 ordinary shares 100% 629 384
Street 2 Limited1,3
Old Street Guernsey 450 A ordinary shares 100% 98,785 8,848
Acquisitions
Limited1,3
550 B ordinary shares
1. Indirect subsidiaries.
2. Registered office: Beaufort House, 51 New North Road, Exeter, EX4 4EP
3. Registered office: Weighbridge House, The Puller, St Peter Port, Guernsey,
GY1 1WL
Accounting policy
Where property is acquired, via corporate acquisition or otherwise, management
considers the substance of the assets and activities of the acquired
entity in determining whether the acquisition represents the acquisition of a
business.
Where such acquisitions are not judged to be an acquisition of a business, they
are not treated as business combinations. Rather, the cost to acquire the
corporate entity is allocated between the identifiable assets and liabilities
of the entity based on their relative fair values at the acquisition date.
Accordingly, no goodwill or additional deferred taxation arises. Otherwise,
acquisitions are accounted for as business combinations.
Business combinations are accounted for using the acquisition method. The cost
of an acquisition is measured as the aggregate of the consideration
transferred, measured at acquisition date fair value and the amount of any
non-controlling interest in the acquiree.
For each business combination, the acquirer measures the non-controlling
interest in the acquiree at fair value of the proportionate share of the
acquiree's identifiable net assets. Acquisition costs (except for costs of
issue of debt or equity) are expensed in accordance with IFRS 3 Business
Combinations.
When the Group acquires a business, it assesses the financial assets and
liabilities assumed for appropriate classification and designation in
accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date.
Contingent consideration is deemed to be equity or a liability in accordance
with IAS 32. If the contingent consideration is classified as equity, it is not
re-measured and its subsequent settlement shall be accounted for within equity.
If the contingent consideration is classified as a liability, subsequent
changes to the fair value are recognised either in profit or loss or as a
change to other comprehensive income.
16. Cash and cash equivalents
30 June 30 June
2017 2016
GBP'000 GBP'000
Cash and cash equivalents 25,808 57,565
Subsidiary cash and cash equivalents 29,302 8,772
Total 55,110 66,337
Accounting policy
Cash and cash equivalents comprise cash at bank and short-term deposits with
banks and other financial institutions, with an initial maturity of
three months or less.
17. Trade and other receivables
30 June 30 June
2017 2016
GBP'000 GBP'000
Prepayments 799 254
Rent receivable 793 581
Amounts held on deposit - 2,000
Cash held by rental agents 1,845 1,518
Licence fees 1,430 -
Lease incentives 2,482 1,415
Other receivables 168 1,099
Total 7,517 6,867
Accounting policy
Rent and other receivables are recognised at their original invoiced value. An
impairment provision is made when there is objective evidence that the
Group will not be able to recover balances in full. Balances are written off
when the probability of recovery is assessed as being remote.
Licence fees represent income receivable from a developer in respect of a
forward-funding agreement which deducted from the cost of investment at
completion and shown as a receivable until settled.
Lease incentives including rent free periods and payments to tenants are
allocated to the statement of comprehensive income on a straight-line basis
over the lease term.
18. Other payables and accrued expenses
30 June 30 June
2017 2016
GBP'000 GBP'000
Property operating expenses payable 1,715 3,359
Finance expenses payable 883 425
Other expenses payable 2,242 2,330
Trade and other payables 4,840 6,114
Deferred income 7,964 5,235
Total 12,804 11,349
Accounting policy
Trade and other payables are initially recognised at fair value and
subsequently held at amortised cost.
Deferred income is rental income received in advance during the accounting
period. The income is deferred and is unwound to rental income on a
straight-line basis over the period in which it is earned.
19. Interest bearing loans and borrowings
30 June 2016
30 June New Previous
2017 facility facility
GBP'000 GBP'000 GBP'000
Loans drawn down at the start of the year 130,000 - 40,000
Repayment of initial loan - - (40,000)
Loan drawn down 90,000 130,000 -
Total loans drawn down 220,000 130,000 -
Unamortised loan arrangement fees brought forward (1,826) - 224
Loan arrangement fees for the year (953) (1,997) (655)
Amortised in the year 248 171 431
Unamortised loan arrangement fees carried forward (2,531) (1,826) -
Loan balance less unamortised loan arrangement fees 217,469 128,174 -
The Group has a secured facility for up to GBP130 million of borrowings at a
fixed rate of 3.07% which is set to mature in September 2024. On 3 April 2017,
the Group increased the secured facility by GBP40 million at a fixed rate of
2.83%, on 5 April 2017 the Group drew down the additional GBP40 million. On 3
April 2017 the Group secured an additional facility for up to GBP65 million of
borrowings at a fixed rate of 2.82%, the Group drew down GBP50 million on 5 April
2017.
The Group uses gearing to enhance returns over the long term. The level of
gearing is governed by careful consideration of the cost of borrowing and the
Group uses hedging or otherwise seeks to mitigate the risk of interest rate
increases. Gearing, represented by borrowings as a percentage of gross assets,
will not exceed 55% at the time of investment. It is the Directors' current
intention to target gearing of less than 30% of gross assets in the long term
and to comply with the REIT condition relating to the ratio between the Group's
'property profits' and 'property finance costs'.
The debt facilities include loan-to-value of and interest cover covenants that
are measured at a Group level. The Group has maintained significant headroom
against all measures throughout the financial period and is in full compliance
with all loan covenants at 30 June 2017.
Leverage
For the purposes of the AIFMD, leverage is any method which increases the
Company's exposure, including the borrowing of cash and the use of derivatives.
It is expressed as a ratio between the Company's exposure and its net asset
value and is calculated under the gross and commitment methods, in accordance
with AIFMD.
The Company is required to state its maximum and actual leverage levels,
calculated as prescribed by the AIFMD as at 30 June 2017, figures are as
follows:
Leverage exposure Maximum Actual
limit exposure
Gross method 155% 136%
Commitment method 155% 136%
Accounting policy
Loans and borrowings are initially recognised at the proceeds received net of
directly attributable transaction costs. Loans and borrowings are subsequently
measured at amortised cost with interest charged to the income statement at the
effective interest rate, and shown within finance expenses. Transaction costs
are spread over the term of loan.
20. Financial derivatives and hedging
30 June 30 June
2017 2016
Total Total
GBP'000 GBP'000
Interest rate swap at fair value:
Fair value at start of year - (214)
Change in valuation - -
Termination of swap contract - 214
Fair value of financial derivatives - -
Cash flow hedges
On 30 September 2015, the Group terminated its interest swap contract. Break
costs of GBP214,000 were incurred and expensed within finance costs in the
consolidated statement of comprehensive income in the prior year.
The Group's interest rate swap was used to hedge the exposure to the variable
interest rate payments on the variable rate element of the Company's
secured loans.
Derivatives are classified in Level 2 in the fair value hierarchy under IFRS
13.
Accounting policy
The Group uses interest rate swaps to hedge its risks associated with interest
rates. Such derivative financial instruments are initially recognised at fair
value on the date on which a derivative contract is entered into and are
subsequently re-measured at fair value. Derivatives are recognised as an asset
when the fair value is positive and as a liability when the fair value is
negative.
21. Share capital
30 June 30 June
2017 2016
GBP'000 GBP'000
Issued and fully paid:
At the start of the year 2,618 1,099
Shares issued on conversion of C shares 93,725,280 ordinary - 937
shares of GBP0.01 each
Shares issued on 12 February 2016 14,074,075 ordinary shares of GBP - 141
0.01 each
Shares issued on 24 May 2016 44,085,232 ordinary shares of GBP0.01 - 441
each
Shares issued on 20 December 2016 16,428,572 ordinary shares of GBP 164 -
0.01 each
Shares issued on 24 February 2017 57,545,195 ordinary shares of GBP 576 -
0.01 each
Balance at the end of the year 3,358 2,618
The share capital comprises one class of ordinary shares. At general meetings
of the Company, ordinary shareholders are entitled to one vote on a show
of hands and on a poll, to one vote for every share held. There are no
restrictions on the size of a shareholding or the transfer of shares, except
for the UK REIT restrictions.
22. Share premium
30 June 30 June
2017 2016
GBP'000 GBP'000
At the start of the year 239,653 39,946
Shares issued on conversion of C shares - 122,833
Shares issued on 12 February 2016 - 18,859
Shares issued on 24 May 2016 - 59,559
Shares issued on 20 December 2016 22,836 -
Shares issued on 24 February 2017 79,988 -
Share issue costs (2,244) (1,544)
Balance at the end of the year 340,233 239,653
23. Capital and reserves
Share capital
Share capital is equal to the nominal amount of the Company's ordinary shares
in issue.
Share premium
Share premium relates to amounts subscribed for share capital in excess of
nominal value less associated issue costs of the subscriptions. On 31 July
2013, the Company by way of special resolution cancelled the value of its share
premium account at that date, by an Order of the High Court of Justice,
Chancery Division. As a result of this cancellation, GBP67.4 million was
transferred from share premium to the special reserve in the financial period
ended 30 June 2014.
Share premium comprises the following cumulative amounts:
30 June 30 June
2017 2016
GBP'000 GBP'000
Issue of share capital 415,076 312,252
Share issue costs (7,485) (5,241)
Share premium cancelled (67,358) (67,358)
Share premium 340,233 239,653
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net
change in the fair value of cash flow hedging instruments. At 30 June 2017, the
Group's hedging reserve was GBPnil.
Special reserve
The special reserve represents the cancelled share premium less dividends paid
from this reserve.
The special reserve comprises the following cumulative amounts:
30 June 30 June
2017 2016
GBP'000 GBP'000
Cancelled share premium 67,358 67,358
Dividends paid from reserves (13,782) (8,987)
Special reserve 53,576 58,371
Retained earnings
Retained earnings represent the profits of the Group less dividends paid from
revenue profits to date. It should be noted that unrealised gains on the
revaluation of investment properties contained within this reserve are not
distributable until any gains crystallise on the sale of the investment
property.
Retained earnings comprise the following cumulative amounts:
30 30 June
June 2017 2016
GBP'000 GBP'000
Total unrealised gains on investment properties 69,827 57,826
Total revenue profits 20,965 9,492
Dividends paid from revenue profits (20,965) (9,492)
Retained earnings 69,827 57,826
24. Net asset value per share
Basic NAV per share amounts are calculated by dividing net assets attributable
to ordinary equity holders of the Company in the statement of financial
position by the number of ordinary shares outstanding at the end of the year.
As there are no dilutive instruments in issue, basic and diluted NAV per share
are identical. The following reflects the net asset and share data used in the
basic and diluted NAV per share computations:
30 June 30 June
2017 2016
Pence Pence
per share per share
EPRA NAV (pps) 139.08 136.93
The EPRA NAV may be calculated as:
30 June 30 June
2017 2016
GBP'000 GBP'000
Net assets attributable to ordinary shareholders 466,994 358,468
Net assets for calculation of EPRA NAV 466,994 358,468
Number of shares in issue 335,768,782 261,795,015
25. Fair value
IFRS 13 defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The following methods and assumptions
were used to estimate the fair values.
The fair value of cash and short-term deposits, trade receivables, trade
payables and other current liabilities approximate their carrying amounts due
to the short-term maturities of these instruments.
Interest-bearing loans and borrowings are disclosed at amortised cost. The
carrying value of the loans and borrowings approximate their fair value due to
the contractual terms and conditions of the loan.
Quarterly valuations of investment property are performed by Knight Frank LLP,
an accredited external valuer with recognised and relevant professional
qualifications and recent experience of the location and category of the
investment property being valued, however the valuations are the ultimate
responsibility of the Directors, who appraise these quarterly.
The valuation of the Company's investment property at fair value is determined
by the external valuer on the basis of market value in accordance with the
internationally accepted RICS Valuation - Professional Standards January 2014
(incorporating the International Valuation Standards).
The determination of the fair value of investment property requires the use of
estimates such as future cash flows from assets (such as lettings, tenants'
profiles, future revenue streams), the capital values of fixtures and fittings,
plant and machinery, any environmental matters and the overall repair and
condition of the property) and discount rates applicable to those assets.
The following tables show an analysis of the fair values of investment
properties recognised in the statement of financial position by level of the
fair value hierarchy1:
30 June 2017
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair GBP'000 GBP'000 GBP'000 GBP'000
value
Investment properties - - 634,640 634,640
Total - - 634,640 634,640
30 June 2016
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair GBP'000 GBP'000 GBP'000 GBP'000
value
Investment properties - - 424,787 424,787
Total - - 424,787 424,787
1. Explanation of the fair value hierarchy:
- Level 1 - quoted prices (unadjusted) in active markets for identical
assets or liabilities that the entity can access at the measurement date;
- Level 2 - use of a model with inputs (other than quoted prices included
in Level 1) that are directly or indirectly observable market data; and
- Level 3 - use of a model with inputs that are not based on observable
market data.
Valuation techniques and significant inputs within the valuation of investment
properties
The following table analyses:
* the fair value measurements at the end of the reporting period;
* a description of the valuation techniques applied;
* the inputs used in the fair value measurement, including the ranges of rent
charged to different units within the same building; and
* for Level 3 fair value measurements, quantitative information about
significant unobservable inputs used in the fair value measurement.
Class Fair value Valuation Key unobservable Range
technique inputs
Student GBP575,540,000 Income ERV - 2016/17 GBP164 - GBP610 per week
property 30 capitalisation
June 2017
Rental growth 2.0% - 3.0%
Tenancy period 51 weeks
Sundry income GBP50 -GBP100 per bed per
annum
Facilities management GBP2,050- 2,500 per bed
cost per annum
Initial yield 4.76% - 5.75% blended
(4.75% - 7.50%)
Student GBP424,787,000 Income ERV - 2015/16 GBP164.50 - GBP430 per week
property capitalisation
30 June 2016 Rental growth 2.5% - 3.0%
Tenancy period 51 weeks
Sundry income GBP50 - GBP100 per bed per
annum
Facilities management GBP1,950 - GBP2,150 per bed
cost per annum
Initial yield 4.75% - 5.75% blended
(4.75% - 7.50%)
The fair value of student property as at 30 June 2017 (GBP575,540,000) above
excludes Scape Wembley, which has been valued at the sum of land plus
development costs (GBP59,100,000) which is assessed to be equivalent to the fair
value at the year end.
Sensitivity analysis to significant changes in unobservable inputs within the
valuation of investment properties
Significant increases/decreases in the ERV (per sq ft p.a.) and rental growth
p.a. in isolation would result in a significantly higher/lower fair value
measurement. Significant increases/decreases in the long-term vacancy rate and
discount rate (and exit yield) in isolation would result in a significantly
higher/lower fair value measurement.
Generally, a change in the assumption made for the ERV (per sq ft p.a.) is
accompanied by:
* a similar change in the rent growth p.a. and discount rate (and exit
yield); and
* an opposite change in the long-term vacancy rate.
Gains and losses recorded in profit or loss for recurring fair value
measurements categorised within Level 3 of the fair value hierarchy amount to GBP
11,855,000 (2016: GBP27,156,000) and are presented in the consolidated statement
of comprehensive income in line item 'fair value gains on investment
properties'.
All gains and losses recorded in profit or loss for recurring fair value
measurements categorised within Level 3 of the fair value hierarchy are
attributable to changes in unrealised gains or losses relating to investment
property held at the end of the reporting period.
The carrying amount of the Company's assets and liabilities is considered to be
the same as their fair value.
26. Financial risk management objectives and policies
The Company's principal financial liabilities are long-term loans and
borrowings. The main purpose of the Company's loans and borrowings is to
finance the acquisition of the Company's property portfolio. The Company has
trade and other receivables, trade and other payables and cash and short-term
deposits that arise directly from its operations.
The Company is exposed to market risk, interest rate risk, credit risk and
liquidity risk. The Board of Directors reviews and agrees policies for managing
each of these risks which are summarised below.
Market risk
Market risk is the risk that future values of investments in property and
related investments will fluctuate due to changes in market prices. The total
exposure at the statement of financial position date is GBP634,640,000 and to
manage this risk, the Group diversifies its portfolio across a number of
assets.
Market risk is also the risk that the fair values of financial instruments will
fluctuate because of changes in market prices. The derivative financial
instruments that were held by the Company in the prior period, were all fixed
terms at fixed rates with the floating elements hedged against 50% of total
borrowings. The Company's exposure to market risk was limited to the remaining
50% which was not hedged.
Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. The
Company's exposure to the risk of changes in market interest rates relates is
minimal as it has taken out a fixed rate loan.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under
a financial instrument or customer contract, leading to a financial loss. The
Group is exposed to credit risk from its financing activities, including
deposits with banks and financial institutions.
Credit risk is managed by requiring tenants to pay rentals in advance. The
credit quality of the tenant is assessed at the time of entering into a lease
agreement. Outstanding tenants' receivables are regularly monitored. The
maximum exposure to credit risk at the reporting date is the carrying value of
each class of financial asset.
The following table analyses the Group's exposure to credit risk:
30 June 30 June
2017 2016
GBP'000 GBP'000
Retention account 308 815
Cash and cash equivalents 55,110 66,337
Trade and other receivables 7,517 6,867
Total 62,935 74,019
The retention account, cash and cash equivalents are held with Barclays Bank
PLC, which holds an A credit rating, with the exception of GBP15 million held
with Landesbank-Thüringen Girozentrale (Helaba) which holds also an A credit
rating.
Liquidity risk
Liquidity risk is defined as the risk that the Group will encounter difficulty
in meeting obligations associated with financial liabilities that are settled
by delivering cash or another financial asset. Exposure to liquidity risk
arises because of the possibility that the Group could be required to pay its
liabilities earlier than expected. The Group's objective is to maintain a
balance between continuity of funding and flexibility through the use of bank
deposits and loans.
The table below summarises the maturity profile of the Group's financial
liabilities based on contractual undiscounted payments:
Less Three
than three to twelve One to Two to More than
Year ended 30 June months months two years five years five years Total
2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing - 4,904 6,533 19,599 235,058 266,094
loans and borrowings
Trade and other 4,586 254 - - - 4,840
payables
Retention account - - 308 - - 308
Total 4,586 5,158 6,841 19,599 235,058 271,242
Less Three
than three to twelve One to Two to More than
Year ended 30 June months months two years five years five years Total
2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing 1,006 2,985 3,941 11,984 145,975 165,891
loans and borrowings
Trade and other 774 5,340 - - - 6,114
payables
Retention account - - 815 - - 815
Total 1,780 8,325 4,756 11,984 145,975 172,820
27. Capital management
The Group's capital is represented by share capital, reserves and borrowings.
The primary objective of the Group's capital management is to ensure that it
remains within its quantitative banking covenants and maintains a strong credit
rating. No changes were made in the objectives, policies or processes during
the period.
The Group may use gearing to enhance returns over the long term. The level of
gearing will be governed by careful consideration of the cost of borrowing and
the Group may use hedging or otherwise seek to mitigate the risk of interest
rate increases. Gearing, represented by borrowings as a percentage of gross
assets, will not exceed 55% at the time of investment. It is the Directors'
current intention to target gearing of less than 30% of gross assets in the
long term and to comply with the REIT condition relating to the ratio between
the Group's property profits and property finance costs. As at the year end,
the Group was operating with a loan-to-value of 32% (30 June 2016: 27%).
During the year, the Group did not breach any of its loan covenants, nor did it
default on any other of its obligations under its loan agreement.
28. Related party transactions
Directors
The Directors (all non-executive Directors) of the Company and subsidiaries are
considered to be the key management personnel of the Group. Directors'
remuneration for the year totalled GBP161,000 and at 30 June 2017, a balance of GBP
nil (2016: GBP13,000) was outstanding. Further information is given in note 6.
Investment Manager
The Company is party to an investment management agreement with the Investment
Manager, pursuant to which the Company has appointed the Investment Manager to
provide investment management services relating to the respective assets on a
day-to-day basis in accordance with the Company's investment objective and
policy, subject to the overall supervision and direction by the Board of
Directors.
For its services to the Company, the Investment Manager receives an annual fee
at the rate of 1% of the Net Asset Value of the Company (or such lesser amount
as may be demanded by the Investment Manager at its own absolute discretion).
The Investment Manager has committed additional resource in providing its
client funds, including the Company, a more comprehensive service which
strengthens the level of transaction and marketing support for the Company, in
a cost efficient manner. The Investment Manager receives a fee of 0.3% of the
aggregate gross proceeds from any issue of new shares in consideration for the
provision of marketing and investor introduction services. The Investment
Manager has appointed Highland Capital Partners Limited to assist it with the
provision of such services and pays all fees due to Highland Capital Partners
Limited out of the fees it receives from the Company.
The Investment Manager receives an annual fee of GBP22,500 in relation to its
role as the Company's AIFM, subject to an RPI increase.
During the year, the Group incurred GBP4,667,000 (2016: GBP3,354,000) in respect of
investment management fees, the AIFM fee and transaction management and
documentation services. A total of GBP4,211,000 is included within administration
expenses in the consolidated income statement and GBP451,000 is included within
the share issue costs relating to shares issued during the year. As at 30 June
2017 GBP1,170,000 (2016: GBP897,000) was outstanding.
With effect from 22 July 2014, the Company's Investment Manager was authorised
as an AIFM by the FCA under the AIFMD regulations. The Company has provided
disclosures on its website, www.graviscapital.com/funds/gcp-student,
incorporating the requirements of the AIFMD regulations.
Subsidiaries
GCP Student Living plc as at 30 June 2017 owns a 100% controlling stake,
whether directly or indirectly, in GCP Topco Limited, GCP Holdco Limited, GCP
Scape East Limited, GCP Brunswick Limited, GCP Wembley 2 Limited (formerly GCP
Brunswick 2 Limited), GCP Operations Limited, Leopard Guernsey Greenwich JV
Limited, Leopard Guernsey Greenwich Limited, Leopard Guernsey Greenwich 2
Limited, Old Street Acquisitions Limited, Leopard Guernsey Old Street Limited,
Leopard Guernsey Old Street 2 Limited, GCP RHUL Limited and GCP RHUL 2 Limited,
GCP WL Limited, GCP Wembley Limited (formerly GCP Apex Limited), GCP SG
Limited, GCP Bloomsbury Limited, GCP Holdco 2 Limited, GCP Topco 2 Limited and
GCP Brighton Limited respectively.
The tables below disclose the transactions and balances between the Company and
subsidiary entities:
30 June 30 June
Transactions 2017 2016
GBP'000 GBP'000
Recharges of fund level expenses to:
GCP Scape East Limited 494 285
GCP Brunswick Limited 7 20
Leopard Guernsey Greenwich 2 Limited 195 138
GCP SG Limited 95 51
GCP RHUL Limited 142 74
Leopard Guernsey Old Street 2 Limited 670 340
GCP WL Limited 78 21
GCP Wembley Limited (formerly GCP Apex Limited) 161 -
GCP Bloomsbury Limited 142 -
GCP Topco Limited 5 5
GCP Holdco Limited 5 5
GCP Operations Limited 10 17
GCP Topco 2 Limited 3 -
GCP Holdco 2 Limited 3 -
GCP RHUL2 Limited 2 -
During the year, the Company received a long-term loan of GBP40 million from GCP
Topco Limited and subsequently granted a long-term loan of GBP40 million to GCP
Topco 2 Limited.
30 June 30 June
Balances 2017 2016
GBP'000 GBP'000
Other intercompany balances due from/(to):
GCP Topco Limited (41,684) 4,182
GCP WL Limited (928) 468
GCP Operations Limited (79) 41
GCP Wembley Limited (formerly GCP Apex Limited) 15,393 -
GCP RHUL 2 Limited 20 -
GCP Topco 2 Limited 38,158 -
On 7 March 2017, GCP Bloomsbury Limited became a wholly owned subsidiary of GCP
Holdco 2 Limited. Also on that date GCP Holdco 2 Limited became a subsidiary of
GCP Topco Limited. GCP WL Limited became a subsidiary of GCP Holdco 2 Limited
on 30 March 2017.
The following information is an analysis of the investments made by the Company
during the year.
30 June
Company 2017
GBP'000
GCP WL Limited 19,028
GCP Bloomsbury Limited 49,948
Total 68,976
29. Events after the reporting period
On 7 July 2017, the Company issued 49,295,774 ordinary shares at a placing
price of 142 pence per share, raising gross proceeds of GBP70 million for the
Company, substantially exceeding target gross proceeds.
On 4 July 2017, the Company entered into a contract to acquire and forward fund
the construction of Circus Street, Brighton. The costs of acquiring and forward
funding the construction is expected to be approximately GBP70 million, which
will be funded by the net proceeds of the placing of new ordinary shares
outlined above.
Scape Wembley completed construction in August 2017 and is open to students for
the 2017/18 academic year.
On 17 August 2017, the names of the Company's subsidiaries GCP Apex Limited and
GCP Brunswick 2 Limited were changed to GCP Wembley Limited and GCP Wembley 2
Limited respectively.
30. Ultimate controlling party
It is the view of the Directors that there is no ultimate controlling party.
COMPANY STATEMENT OF FINANCIAL POSITION
As at 30 June 2017
30 June 2017 30 June
Notes GBP'000 2016
GBP'000
Assets
Non-current assets
Investment in subsidiary companies 3 432,120 305,574
432,120 305,574
Current assets
Cash and cash equivalents 4 25,808 57,565
Trade and other receivables 5 55,482 2,040
81,290 59,605
Total assets 513,410 365,179
Liabilities
Current liabilities
Trade and other payables 6 (46,416) (6,711)
Total liabilities (46,416) (6,711)
Net assets 466,994 358,468
Equity
Share capital 3,358 2,618
Share premium 340,233 239,652
Retained earnings 123,403 116,198
Total equity 466,994 358,468
Number of shares in issue 335,768,782 261,795,015
NAV per share (pps) 139.08 136.93
The comprehensive income of the Company was GBP23,475,000 (2016: GBP28,542,000).
These financial statements were approved by the Board of Directors of GCP
Student Living plc on 14 September 2017 and signed on its behalf by:
Robert Peto
Chairman
Company number: 08420243
The accompanying notes below form an integral part of these Company financial
statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2017
Share Share Special Retained
capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 July 2016 2,618 239,653 58,371 57,826 358,468
Profit for the year - - - 23,474 23,474
Ordinary shares issued 740 102,824 - - 103,564
Share issue costs - (2,244) - - (2,244)
Dividends - - (4,795) (11,473) (16,268)
Balance at 30 June 2017 3,358 340,233 53,576 69,827 466,994
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2016
Share Share Hedging Special Retained
capital premium reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 July 1,099 39,946 (214) 65,223 31,675 137,729
2015
Profit for the year - - - - 28,328 28,328
Other comprehensive - - - - - -
income that may be
reclassified
subsequently to
profit and loss
Fair value movement - - 214 - - 214
on financial
derivative
Total comprehensive - - 214 - 28,328 28,542
income
Ordinary shares 1,519 201,251 - - - 202,770
issued
Share issue costs - (1,544) - - - (1,544)
Dividends - - - (6,852) (2,177) (9,029)
Balance at 30 June 2,618 239,653 - 58,371 57,826 358,468
2016
The accompanying notes below form an integral part of these Company financial
statements.
COMPANY STATEMENT OF CASH FLOWS
For the year ended 30 June 2017
30 June 30 June
Notes 2017 2016
GBP'000 GBP'000
Cash flows from operating activities
Operating profit 23,434 34,811
Adjustments to reconcile profit for the year to net
cash flows:
Gains from change in fair value of subsidiary (16,599) (34,237)
companies
Dividends received from subsidiary companies (11,119) (2,671)
Corporation tax paid (24) -
Net recharges from subsidiary companies (2,012) (955)
Decrease/(increase) in other receivables and 1,970 (2,035)
prepayments
(Increase)/decrease in other payables and accrued (218) 1,018
expenses
Net cash flow used in operating activities (4,568) (4,069)
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired 3 (109,947) (130,492)
Net cash (paid to)/received from subsidiary (2,421) 5,933
companies
Net cash used in investing activities (112,368) (124,559)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 103,564 79,000
Share issue costs (2,244) (1,538)
Proceeds from the issue of C shares - 16,195
C share issue costs - (2,490)
Finance income 68 71
Finance expenses (3) (1)
Dividends paid in the year (16,206) (8,865)
Net cash flow generated from financing activities 85,179 82,372
Net decrease in cash and cash equivalents (31,757) (46,256)
Cash and cash equivalents at start of the year 57,565 103,821
Cash and cash equivalents at end of the year 4 25,808 57,565
Non-cash items
Long-term loan received from GCP Topco Limited 40,000 -
Long-term loan granted to GCP Topco 2 Limited (40,000) -
The accompanying notes below form an integral part of these Company financial
statements.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 30 June 2017
1. General information
GCP Student Living plc is a closed-ended investment company incorporated in the
UK on 26 February 2013. The registered office of the Company is located at
51 New North Road, Exeter EX4 4EP. The Company's shares trade on the premium
segment of the Main Market of the LSE.
2. Basis of preparation
These financial statements are prepared in accordance with IFRS issued by the
IASB as adopted by the European Union. The financial statements have been
prepared under the historical cost convention, except for investments in
subsidiaries that have been measured at fair value. The audited financial
statements are presented in Pound Sterling and all values are rounded to the
nearest thousand pounds (GBP'000), except when otherwise indicated.
These financial statements are for the year ended 30 June 2017. Comparative
figures are for the previous accounting period, the year ended 30 June 2016.
The Company has taken advantage of the exemption in section 408 of the
Companies Act 2006 not to present its own income statement or statement of
comprehensive income.
The financial statements of the Company follow the accounting policies laid out
above and below.
3. Investment in subsidiary companies
30 June 30 June
2017 2016
GBP'000 GBP'000
At the beginning of the year 305,574 140,492
Investment in subsidiary companies 109,947 130,845
Total acquisitions 109,947 130,845
Fair value gains on the revaluation of subsidiary companies 16,599 34,237
Total 432,120 305,574
Investment in and transfers of subsidiary companies
30 June 30 June
2017 2016
GBP'000 GBP'000
Investments in subsidiary companies
GCP SG Limited - 19,047
GCP RHUL Limited - 16,288
GCP Holdco Limited - 76,652
GCP WL Limited - 18,858
GCP Wembley Limited (formerly GCP Apex Limited) 60,000 -
GCP Bloomsbury Limited 49,947 -
109,947 130,845
Cash items included in cash flow
GCP Holdco Limited - 76,446
GCP SG Limited - 18,888
GCP RHUL Limited - 16,300
GCP WL Limited - 18,858
GCP Wembley Limited (formerly GCP Apex Limited) 60,000 -
GCP Bloomsbury Limited 49,947 -
Total 109,947 130,492
During the year, the Company invested GBP50 million in GCP Bloomsbury Limited to
enable this company to acquire Woburn Place, and GBP60 million in GCP Wembley
Limited (formerly GCP Apex Limited) to finance the construction of Scape
Wembley.
Accounting policy
Investments in subsidiary companies which are all 100% owned by the Company are
valued at NAV, which is equivalent to fair value. Changes in fair value of
investments and gains on the sale of investments are recognised as they arise
in the Company statement of comprehensive income.
4. Cash and cash equivalents
30 June 30 June
2017 2016
GBP'000 GBP'000
Cash and cash equivalents 25,808 57,565
Total 25,808 57,565
Accounting policy
Cash and cash equivalents comprise cash at bank and short?term deposits with
banks and other financial institutions, with an initial maturity of three
months or less.
5. Trade and other receivables
30 June 30 June
2017 2016
GBP'000 GBP'000
Amounts due from subsidiary companies 55,413 -
Prepayments and other receivables 69 40
Amounts held on deposit - 2,000
Total 55,482 2,040
6. Other payables and accrued expenses
30 June 30 June
2017 2016
GBP'000 GBP'000
Amounts due to subsidiary companies 44,533 4,691
Other expenses payable 1,883 2,020
Total 46,416 6,711
7. Fair value
IFRS 13 defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The following methods and assumptions
were used to estimate the fair values.
The fair value of cash and short-term deposits, amounts due to and from
subsidiary companies and other current liabilities approximate their carrying
amounts due to the short-term maturities of these instruments.
Quarterly valuations of subsidiaries are based on NAV. The NAV of the
subsidiaries are based on fair values of the assets held by the subsidiary,
refer to note 25 to the Consolidated Financial Statements for details of
underlying asset fair values.
The following tables show an analysis of the fair values of financial
instruments recognised in the statement of financial position by level of the
fair value hierarchy1:
30 June 2017
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair GBP'000 GBP'000 GBP'000 GBP'000
value
Investment in subsidiaries - - 432,120 432,120
Total - - 432,120 432,120
30 June 2016
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair GBP'000 GBP'000 GBP'000 GBP'000
value
Investment in subsidiaries - - 305,574 305,574
Total - - 305,574 305,574
1. Explanation of the fair value hierarchy:
- Level 1 - quoted prices (unadjusted) in active markets for identical
assets or liabilities that the entity can access at the measurement date;
- Level 2 - use of a model with inputs (other than quoted prices included
in Level 1) that are directly or indirectly observable market data; and
- Level 3 - use of a model with inputs that are not based on observable
market data.
ANNUAL GENERAL MEETING
The Company's Annual General Meeting will be held at the offices of Gowling WLG
(UK) LLP, 4 More London Riverside, London SE1 2AU at 12.00 noon on Wednesday,
25 October 2017.
The notice of this meeting will be circulated to shareholders with the full
annual report and financial statements and will also be available at
www.graviscapital.com/funds/gcp-student.
NATIONAL STORAGE MECHANISM
A copy of the annual report and financial statements and Notice of AGM will be
submitted shortly to the National Storage Mechanism ("NSM") and will be
available for inspection at the NSM, which is situated at www.morningstar.co.uk
/uk/NSM.
GLOSSARY OF KEY TERMS
AIC Association of Investment Companies
AIC Code AIC Code of Corporate Governance
AIC Guide AIC Corporate Governance Guide for Investment Companies
AIFM Alternative Investment Fund Manager
AIFMD Alternative Investment Fund Managers' Directive
CO2e Carbon dioxide equivalent
Collegiate Collegiate Accommodation Consulting Limited - Asset
and Facilities Manager for Water Lane Apartments, Bristol
Company GCP Student Living plc
Cost of borrowing Cost of borrowing expressed as a percentage weighted
according to period drawn down
CRM Corporate Residential Management Limited - Asset and
Facilities Manager for The Pad until 31 August 2016
C shares Convertible redeemable preference shares of one pence each in
the capital of the Company
CTA Corporation Tax Act 2010
EPRA European Public Real Estate Association
EPRA EPS Recurring earnings from core operational activities excluding
movements relating to revaluation of investment properties
and interest rate swaps and the related tax effects, divided
by the number of shares in issue
EPRA NAV Includes all property at market value but excludes the mark
to market of interest rate swaps
EPRA NAV per share Net asset value after deduction of proposed dividend
ex-income
EPS Earnings per share
ERV Estimated rental value
EU European Union
FPP Financial position and prospects
FRC Financial Reporting Council
FRI Full repairing and insuring
GHG Greenhouse gas
Gross assets The aggregate value of the total assets of the Company
Group GCP Student Living plc and its subsidiaries
HEI Higher education institution
HMRC HM Revenue & Customs
IASB International Accounting Standards Board
IFRS International Financial Reporting Standards
IPO Initial public offering
JLL Jones Lang LaSalle Inc
kWh Kilowatt hour
Loan-to-value Debt expressed as a percentage of gross assets
LSE London Stock Exchange
MAR Market Abuse Regulation
Migration The migration of the Company's shares to a premium listing on
the Official List, and a transfer to trading on the Premium
Segment of the Main Market of the LSE, which took effect on
16 September 2016
NAV Net asset value
Net operating margin Gross profit divided by rental income given as a percentage
figure
OECD Organisation for Economic Co-operation and Development
PGIM PGIM Real Estate Finance
PID Property income distribution
Portfolio total return Unleveraged weighted capital and income return of the
investment portfolio weighted by net rental income
PPS Pence per share
QMUL Queen Mary University of London
REIT Real Estate Investment Trust
Rental growth Annual rental growth measured on a like-for-like basis across
the portfolio
RHUL Royal Holloway, University of London
RICS Royal Institution of Chartered Surveyors
RNS Regulatory news service
RPI Retail price index
Scape Scape Student Living Limited - Asset and Facilities Manager
for Scape Shoreditch, Scape East, Scape Greenwich, Scape
Surrey, Scape Wembley and The Pad (with effect from
1 September 2016)
SFS Specialist Fund Segment of the Main Market of the LSE
Total shareholder Share price growth with dividend deemed to be reinvested on
return the dividend date
UCAS Universities and Colleges Admissions Service
UK CODE UK Code of Corporate Governance
UKLA United Kingdom Listing Authority
ENDS
Neither the contents of GCP Student Living plc's website nor the contents of
any website accessible from hyperlinks on the website (or any website) is
incorporated into, or forms part of, this announcement.
END
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