TIDMESP
RNS Number : 3694I
Empiric Student Property PLC
21 March 2018
21 March 2018
Empiric Student Property plc
("Empiric" or the "Company" or, together with its subsidiaries,
the "Group")
RESULTS FOR THE 12 MONTHSED 31 DECEMBER 2017
The Board of Empiric Student Property plc (ticker: ESP), the
owner and operator of student accommodation across the UK, today
announced the Company's full year results for the 12 months ended
31 December 2017.
HEADLINES
Financial
As at 31 December 31 December 2016
2017
Portfolio valuation GBP890.1m GBP721.3m
NAV per share (basic) 104.37p 105.90p
Dividend declared
per share 5.55p 3.05p(1)
Gross annualised GBP65.3m GBP52.1m
rent(2)
Adjusted Earnings
Per Share 1.86p 0.72p(1)
Revenue GBP51.2m GBP19.2m(1)
Earnings Per Share
(basic) 3.84p 3.38p(1)
EPRA Earnings Per
Share 0.70p 0.38p(1)
(1 The comparative figures are for the six months to 31 December
2016 and so are not directly comparable.)
2 Gross Annualised rent includes commercial revenue and marketed
student revenue for the academic year 2016/17 at full occupancy
(the Group considers student occupancy levels of 97% and above as
fully let).
Financial Performance(1)
-- 2017 Adjusted Earnings for the year were GBP10.1 million.
-- Adjusted Basic Earnings per share for the year were 1.86 pence.
-- Revenue was GBP51.2 million for the year.
-- Declared and paid dividends per share of 5.55 pence in
respect of the year to 31 December 2017, in line with the reduced
target announced in the business review and trading update on 23
November 2017.
-- Portfolio valued at GBP890.1 million at 31 December 2017, up 23.4%.
-- Targeting gross annualised rent of GBP72.2 million for the 2018/19 academic year.
-- Occupancy of 92% for academic year 2017/18, which was
affected by local property management issues and local economic
conditions in some cities. Pricing review, earlier marketing and
process monitoring have been put in place to support the target of
97% occupancy for the coming academic year.
-- Operating margins and dividend cover reduced by a number of
financial and operational inefficiencies within the Group and its
supply chain. A full review of the Group was completed, the results
of which were announced in November 2017 and immediately began
implementing significant financial and operational improvements and
cost savings.
-- Operating margin of 57% for 2017.
-- Administration expenses of GBP13.5 million for 2017, (H1 2017
GBP7.6 million, GBP5.9 million for H2 2017).
-- Raised net proceeds of GBP107.6 million through the issue of
100,917,432 shares at 109 pence per share in July 2017.
-- Agreed a new GBP10 million, three-year unsecured loan, which
has been fully drawn down, and a GBP70 million, three-year secured
revolving credit facility, which was undrawn at the year end.
-- Dividend cover on an adjusted basis of 33%.
-- Loan to value ratio ("LTV") of 33% at 31 December 2017, which
is within both the long-term LTV target of 35% and our maximum LTV
of 40%. The aggregate cost of debt was 3.25% with a weighted
average term to maturity of 6.7 years.
Operational Performance
-- 94 assets with 9,158 beds contracted at 31 December 2017, in
29 prime university cities and towns.
-- 1,460 new beds in the 2017/18 academic year including 1,031
beds from nine newly completed developments.
-- 85 operating or revenue-generating properties at the year
end, with an average valuation yield of 5.7% and average yield on
cost of 6.7%.
-- Increased the number of assets on the Hello Student(R)
platform by 26 to 62 during the year, meaning Hello Student(R) is
marketing or managing 73% of the Company's operational
buildings.
-- During the year acquired four standing assets (429 beds), one
forward funded asset (106 beds), one development site (153 beds)
and Revcap's 50% interest in the Willowbank joint venture (178
beds).
-- Sold the Forthside development site in Sterling (208 beds).
Business Review
As advised in the 23 November 2017 business review and trading
update, a top to bottom review of the business has been undertaken.
A summary of the scope of the review and resulting key actions
taken to date are as follows:
Scope of Review Actions
----------------- ----------------------------------------
Finance team Replaced 8 out of 12 people including
structure and recruitment of a new Group Financial
experience Controller.
----------------- ----------------------------------------
Reporting and Stronger budget and forecasting
forecasting process with input from all key
process personnel.
----------------- ----------------------------------------
External service Reviewed all contracts and performance,
providers bringing facilities management
in-house over a twelve-month period.
Further scope to review bringing
in-house Revenue Management and
HR capability, and to rationalise
our IT platforms and providers
moving forward.
----------------- ----------------------------------------
End to end sales Improved accuracy of data and
process constant monitoring, with timely
corrective action taken where
necessary.
----------------- ----------------------------------------
Broader team Performance metrics aligned to
collaboration business objectives and more effective
and engagement collaboration across the business.
----------------- ----------------------------------------
Post Period End
-- Purchased Emily Davies Halls of Residence in Southampton,
adding an affordable price to complement our studio schemes, in
line with our investment strategy, bringing the current number of
assets to 95.
Outlook
-- Revenue projections for academic year 2017/18 remain
unchanged based on 92% occupancy until the start of the new
academic year.
-- For the 2018/19 academic year, we are targeting occupancy
levels of 97% supported by an increased focus on the end to end
sales process.
-- Bookings for the 2018/19 academic year are currently 48%
compared to 22% at the same time last year, an increase of more
than double.
-- A modest increase in gross margin is forecast for FY 2018,
with a significant uplift in the fourth quarter as occupancy levels
increase from September onwards and as the cost of third party
property management and facilities management begins to fall
away.
-- Targeting an operating margin of 70% in 2019 with tangible
progress towards that target in FY 2018.
-- Reshape the investment portfolio by reinvesting the proceeds
of the sale of a parcel of non-core assets into our core markets.
This will involve less than 10% of the Group's property assets by
value.
-- Unlock the value of our development assets through joint ventures.
-- Targeting administration expenses of GBP10 million in 2018, a reduction of 26% on FY 2017.
-- Targeting a dividend of 5.0 pence per share for the year ending 31 December 2018.
-- On an adjusted basis we expect to see a fully covered
dividend by the year ending 31 December 2019(1) with significant
progress towards that target in FY 2018.(.)
(1 The figures in relation to prospective dividends set out
above are not intended to be, and should not be taken as, a profit
forecast or estimate, or a dividend declaration.)
Tim Attlee, Acting Chief Executive Officer of Empiric Student
Property plc, commented:
"We have a very strong property portfolio which operationally
underperformed in 2017. We have identified the causes of that
underperformance and are implementing the changes necessary to
allow the business to deliver the improvements we all want to
see.
We expect these actions will deliver growth in operating margin
and dividend cover during 2018 and beyond. As a result, we continue
to target a total return of 10% per annum over the medium
term."
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Empiric Student Property (via Newgate below)
plc
Tim Attlee (Acting Chief
Executive Officer)
Lynne Fennah (Chief Financial
Officer)
Jefferies International Tel: 020 7029 8000
Limited
Gary Gould
Stuart Klein
Newgate (PR Adviser) Tel: 020 7680 6550
James Benjamin Em: empiric@newgatecomms.com
Anna Geffert
Leena Patel
The Company's LEI is 213800FPF38IBPRFPU87.
Further information on Empiric can be found on the Company's
website at www.empiric.co.uk.
Notes:
Empiric Student Property plc is a leading provider and operator
of modern, direct-let, nominated or leased student accommodation
across the UK. Investing in both operating and development assets,
Empiric is a multi-niche student property company focused on, (i)
providing good quality first year accommodation managed through its
Hello Student(R) operating platform in partnership with
universities, (ii) offering a variety of second and third year
purpose built accommodation options for individual students and
those wanting a group living environment, and (iii) continuing to
expand the Group's existing premium, studio-led accommodation
portfolio which is attractive to international and postgraduate
students.
The Company, an internally managed real estate investment trust
("REIT") incorporated in England and Wales, listed on the premium
listing segment of the Official List of the Financial Conduct
Authority and was admitted to trading on the main market for listed
securities of the London Stock Exchange in June 2014.
A meeting for investors and analysts will be held at 9:00am
today at:
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
The presentation will also be accessible via a live conference
call and on-demand via the Company website:
https://www.empiric.co.uk/investor-information/company-documents
Those wishing to attend the presentation or access the live
conference call are kindly asked to contact Newgate at
empiric@newgatecomms.com or by telephone on +44 (0) 20 7680
6550.
In addition, a recorded webcast of this meeting and the
presentation will also be available to download from the Company's
website: www.empiric.co.uk.
The Annual Report and Accounts will today be available on the
Company's website at www.empiric.co.uk. In accordance with Listing
Rule 9.6.1, copies of these documents will also be submitted today
to the UK Listing Authority via the National Storage Mechanism and
will be available for viewing shortly at
www.morningstar.co.uk/uk/NSM.
Hard copies of the Annual Report and Accounts will be sent to
shareholders, along with the notice for Annual General Meeting
2018, on or around 22 March 2018.
CHAIRMAN'S STATEMENT
Dear Fellow Shareholder
The Rt Honourable the Baroness Brenda Dean of Thornton-le-Fylde
was Non-Executive Chairman of the Board of Empiric from 28 May 2014
until her death on 13 March 2018.
She presided over the Company for the financial year reported on
in this Annual Report and she was involved in preparing the
document until 13 March when it had reached an advanced stage. It
is due to this involvement that the Company has decided that the
Chairman's Statement, Chairman's Introduction to Corporate
Governance and the Nominations Committee Report should be published
in her name.
As Acting Chairman as of 14 March 2018, I confirm that I fully
support and endorse the statements made in this report.
The Board and staff of Empiric are deeply saddened by her loss,
but immensely grateful for Brenda's contribution to the Company and
the impact she had more widely during her illustrious career.
Brenda will be hugely missed.
Stuart Beevor
Acting Chairman
Dear Fellow Shareholder
The Board is acutely aware that performance was below
expectations in what was a difficult year for Empiric. We have
identified the reasons for this and have taken quick and decisive
action to rectify it. The work we are doing will transform
Empiric's performance and support delivery of our target total
return of 10% per annum.
Performance and Business Review
The Group has grown significantly since the IPO in 2014 and
particularly between June 2016 and the start of the 2017/18
academic year. During this time, we increased the number of
operating beds by more than 70% and more than trebled the number of
buildings on the Hello Student(R) operating platform. The
performance of the operating portfolio this year has been affected
by financial and operational inefficiencies, both in the Group and
in its supply chain. In addition, while the majority of the
operating portfolio is fully let(1) for the current academic year,
lettings at a number of our properties including in Aberdeen and
Cardiff were significantly below target (see page 20 of the Annual
Report for more detail), contributing to overall occupancy of 92%.
Together, these factors reduced our operating margin for 2017 to
57%. This in turn affected dividend cover, requiring the Board to
reduce its dividend target for the third and fourth quarters of
2017 and for 2018.
Lynne Fennah, who joined us as Chief Financial Officer ("CFO")
on 26 June 2017 has led a full review of the Group. As a result,
with the strengthened finance team, we have implemented significant
financial and operational improvements to the Group's processes,
reporting and procedures.
Since the end of the financial year, the Board has also decided
to bring the remaining buildings managed by third parties onto the
Hello Student(R) platform ahead of the 2018/19 academic year,
helping us to drive occupancy and revenue. We are also bringing
facilities management in-house, which will further reduce costs.
(See page 18 of the Annual Report for more detail.) The Board is
targeting an operating margin of above 70% and we expect to make
significant progress towards this during 2018.
The Group is also rigorously focused on reducing administration
expenses, which totalled GBP13.5 million for the year (H1: GBP7.6
million, H2: GBP5.9 million). This included a number of one-off
costs, and we have also identified further savings (see page 18 of
the Annual Report for more detail). The Board is now targeting
administration expenses of GBP10 million in 2018.
The Group continued to grow its portfolio at a manageable rate
during the year, through selected acquisitions and the successful
completion of a number of developments.
At the year end, the property portfolio was independently valued
at GBP890.1 million, an increase of 23.4% for the year. More
information about the portfolio and the valuation can be found in
the Chief Executive Officer's review.
Dividends
Our dividend target for 2017 was 6.1 pence per share. We paid
interim dividends in line with this target in respect of the first
two quarters of the year, totalling 3.05 pence per share. However,
with dividend cover falling below our original expectations, on 23
November the Board announced a reduced target for 2017 of 5.55
pence per share. We declared dividends of 1.25 pence per share in
respect of both the third and fourth quarters and therefore met
this revised target.
For 2018, the Board is targeting a dividend of 5.0 pence per
share. We expect to see a significant improvement in dividend cover
during 2018 on an adjusted earnings basis, and for the 2019
dividend to be fully covered.
Strategy
In 2016, we set out a long-term strategy for Empiric, which is
described on page 8 of the Annual Report for more detail. The Board
continues to believe this is the right strategy for the Group and
that it will deliver attractive returns for shareholders. However,
our priority for the coming months is to maximise the returns from
our existing asset base, through the operational improvements
discussed above and by fine tuning the portfolio and reshaping our
investment portfolio. The Chief Executive Officer's review explains
more about our strategic priorities.
Board, Management and Staff
We were delighted to appoint Lynne Fennah and her experience in
the real estate and hospitality sectors is already proving
invaluable to the Group. Lynne replaced Michael Enright, who
resigned on 14 March 2017.
On 11 December 2017, the Board gave Paul Hadaway notice to
terminate his employment with the Company and he formally stepped
down as Director on 12 December 2017. The Board acknowledges his
contribution to the business and wishes him well.
Tim Attlee, Chief Investment Officer and co-founder of Empiric,
agreed to assume the additional role of acting Chief Executive
Officer. The Board firmly believes that Tim, with his in-depth
knowledge of the business and sector, is the right person to lead
us through this period of transformation. Following Paul Hadaway's
departure, Lynne Fennah has also taken on responsibility for the
Group's operations.
The new team has made a great start in bringing about the
improvements arising from the review of the Group.
The Board has been deeply involved in the business in recent
months and has taken difficult decisions that are in the long-term
interests of Empiric and its shareholders. It is healthy for the
Board to regularly review how it functions and therefore conducted
an external review of the performance of the Board and its
Committees, which was completed in February 2018. More information
can be found on page 46 of the Annual Report.
This has been a challenging time for Empiric and our people have
responded superbly. Their energy and commitment to the Group's
success has been unfaltering, and I thank all of them on behalf of
the Board for their contribution.
Shareholders
Since the IPO, we have worked hard to build strong relationships
with our shareholders and we will continue to regularly engage with
them, so they are informed about our plans and progress. On behalf
of the Board, I want to thank our shareholders for their continued
support. The Board has a strong sense of responsibility to our
shareholders and we are determined to ensure positive outcomes for
them and for all our stakeholders.
Summary
The Board is confident that the actions we are taking, coupled
with Empiric's excellent portfolio, will ensure a bright future for
the business. We expect these actions will deliver growth in
operating margin and dividend cover during 2018 and beyond. As a
result, we continue to target a total return of 10% per annum over
the medium term.
The Rt Hon the Baroness
Dean of Thornton-le-Fylde
Statement made prior to her death and approved by the Acting
Chairman below:
Stuart Beevor
Acting Chairman
21 March 2018
(1 The Group considers occupancy levels of 97% and above as
fully let.)
OUR STRATEGIC OBJECTIVES
Locations Buildings Management
-------------------------------------------------------------- -------------------------------------------------------- ------------------------------------------------------
Objectives Objectives Objectives
-------------------------------------------------------------- -------------------------------------------------------- ------------------------------------------------------
* Selectively invest in 36 towns and cities * Continue to purchase core assets * Provide the majority of operational functions
in-house
* Create efficiencies in locations with existing assets, * Increase development options
plus some additional leading university locations * Grow at a sustainable rate
* Diversify income between different markets and
* Develop in-house metrics of university performance product types, to spread operational risk and * Build gross income
and trajectory, to refine product types and assess increase efficiencies
locational risk
* Reduce costs per bed
* Improve operational efficiency
Progress Progress Progress
------------------------------------------------------------- ------------------------------------------------------------- ---------------------------------------------------------------
* Completed nine developments for the 2017/18 academic * Acquired four standing assets, one forward funded * Added 26 assets to the Hello Student(R) platform
year, all in locations where we already have assets development, a development site and Revcap's 50% during the year and after the year end agreed to
interest in the Willowbank joint venture bring the remaining assets onto the platform for the
2018/19 academic year. There is also a phased
* Expanded the Hello Student(R) platform, giving us approach to bring facilities management in-house
operating efficiencies in locations with multiple * Trialled the premium townhouse concept in Exeter and
assets let the development to the University of Exeter for
one year * Increased future gross income through our acquisition,
development and redevelopment programmes
* Created an in-house research function, giving us a
much deeper understanding of individual locations and * Trialling the affordable apartment concept in
the demand for different product types Victoria Point, Manchester * Completed a detailed review of the Group and began to
implement significant operational and financial
improvements and cost savings
* Completed a review of all assets and city groups,
which is informing the process of reshaping the
investment portfolio * Began to rationalise staffing levels to improve
efficiency
Brand Customers Shareholder Outcomes
------------------------------------------------------------ ------------------------------------------------------------- ------------------------------------------------------------
Objectives Objectives Objectives
------------------------------------------------------------ ------------------------------------------------------------- ------------------------------------------------------------
* Improve the student experience through a consistent * Enable loyal customers to move building to building * Improve profitability through lower cost base per
and high-quality approach to branding, operation and and city to city but keep them attracted to the Hello city and bed
management through the Hello Student(R) platform Student(R) brand and platform
* Mitigate risk of a single-niche approach and broaden
* Build on the Hello Student(R) consumer brand and * Ensure high levels of tenant satisfaction are growth opportunities
capture first year students as new customers and then achieved in every location
provide a fresher-to-PhD" accommodation and service
offering * Continue to grow a high yield on cost portfolio
* Build communities through building design and on-site through development
management programme
------------------------------------------------------------ ------------------------------------------------------------- ------------------------------------------------------------
Progress Progress Progress
---------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------
* 62 assets with 5,819 beds marketed by Hello * Conducted Voice of the Tenant research, to understand * Added 17 assets to the operating portfolio for the
Student(R) for 2017/18 academic year how Hello Student(R) is perceived by students and how start of the 2017/18 academic year
our buildings perform
* Hello Student(R) now operating in 24 cities at the * Added to our pipeline of forward funded and direct
year end, up from 17 at 31 December 2016 * Achieved accreditation by Accreditation Network UK developments
("ANUK") in January 2017, through the National Code
Standards for Larger Student Developments, showing
* Introduced a new Hello Student(R) website and our support for high standards in management and * Developed plans to fine tune the portfolio and add
enhanced booking system practice further depth to cities where we can earn attractive
returns
* Increased the brand reach, with web traffic 3.6 ti
mes
greater than 2016 and Facebook driving over 50% of
referrals to our website
---------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------
OUR BUSINESS MODEL
Physical Assets
We have a diversified and attractive portfolio of properties
that offers high-quality accommodation to customers ranging from
first year undergraduates to postgraduates.
Specialist Knowledge
We understand how to successfully develop, acquire and operate
student accommodation assets.
Relationships
We have strong relationships with universities, developers and
potential vendors of PBSA assets.
Financial Assets
We finance our business through a combination of shareholder
equity and debt facilities. Our debt has a weighted average term of
6.7 years and interest costs which are predominantly fixed or
capped.
Technology
We are developing fit-for-purpose systems to support our
operations, booking and accounting.
Select Locations
We are highly selective about where we invest. We currently
operate in 29 towns and cities, which are home to some of the most
successful universities in the UK and where student numbers are
rising faster than average. We select sites based on their
compatibility with our operating models and proximity to
universities and amenities.
Our investment policy enables us to invest in studio and
small-group assets, modern townhouses and affordable apartments, as
well as building unique relationships with universities. These four
different accommodation niches enable us to invest more deeply in
each city.
Investment
Our Investment Policy allows us to invest our capital in a
variety of ways. We can acquire freehold or long leasehold
interests in individual buildings and portfolios and undertake
forward funded and direct developments, on our own or in joint
ventures (see below). Over time, we will redevelop selected assets
in our portfolio, increasing rental income and capital values. This
approach allows us to be flexible, investing our capital in the way
that best suits us at the time, so we can prioritise generating
revenue in the near term, the delivery of longer-term returns or a
balance of the two.
Whichever route we choose, we select buildings with character
that fit our strategic niches and where we can create future goals.
Specifications are tailored to each building, with high-quality
interiors and the generous provision of communal space. Our
buildings have an average of around 100 beds, making them the right
size for creating cohesive communities of friends, and are usually
clustered together for operational efficiency.
Manage
Our Hello Student(R) platform currently markets and manages most
of our assets and all of our assets will be on the platform for the
2018/19 academic year. Adding assets to the platform gives us
economies of scale, helps us to cross-sell as customers move
between buildings and cities, and assists with recruiting
experienced and dedicated staff. Empowering our property managers
to feel ownership and pride helps us to drive occupancy and
increase the number of students who rebook with us. The platform
also gives us improved data on asset performance and insight into
students' needs, so we can improve our offering.
Develop
Developing assets allows us to acquire them at a greater yield
on cost than buying standing assets. Forward funded projects are
typically less complex than direct developments, have a lower risk
profile as the planning, construction and time risk lies with the
third-party developer, have lower staffing requirements and benefit
from a forward funding coupon charged to the developer.
Direct development delivers higher yielding assets than forward
funding. We have a strong track record, having completed all our
direct developments to date on time or ahead of schedule.
Reinvest
We intend to hold our investments for the long term but we may
sell an asset if we see an opportunity to create more value for
shareholders by reinvesting the proceeds.
Stakeholders
Shareholders
Shareholders benefit from the rising capital value of our
portfolio and growing rents, which support our dividends.
Employees
Our employees have the opportunity to develop their careers in
an exciting and growing sector.
Communities
The communities around our assets benefit from reduced pressure
on local housing stock.
Customers
Our student customers benefit from having a great place to live
during their studies, at a rent that represents value for
money.
CHIEF EXECUTIVE OFFICER'S REVIEW
Clear lessons have been learned from the shortfall in our
operating performance in 2017. The Board has asked me to take on
the additional role of Acting CEO during this challenging period
and I am confident that our relentless focus on increasing revenue,
cutting costs and unleashing the potential of our staff will
deliver the transformation the business needs to fulfil its
potential for all stakeholders.
We continued to enhance the Group's portfolio during the year,
through acquisitions and completed developments, and we are now
improving profitability through an investment strategy tailored to
our current circumstances. Empiric has excellent assets and we are
confident that our transformation programme will maximise the value
we generate from them.
Strategic Priorities
In our 2025 plan, we set out our vision to be the UK's leading
provider of premium student accommodation, offering exemplary
locations, buildings and tenant experience, and this remains the
case. In the near term, we are tailoring our investment strategy to
our current circumstances, with increasing dividend cover being our
absolute priority. Empiric has excellent assets, with a total asset
value of GBP973 million, and our transformation programme will
maximise the operational profitability of our standing asset
portfolio and realise the value of our developments.
Our strategy targets 36 key university towns and cities in the
UK. We currently have investments in 29 of these locations, and
these remain our primary focus as we look to enhance our
operational effectiveness. We are reviewing every asset to
determine whether we could enhance returns by disposing of it and
reinvesting the proceeds, bearing in mind the transaction costs of
disposal and acquisition. This process considers the asset's
financial performance, alongside the growth profile of the
university it serves, the supply pipeline in its market and the
implications for rental growth, recognising that supply in some
cities is strong and this has challenged occupancy levels. The
scale of this portfolio fine tuning will be modest and is likely to
involve no more than 5-10% of our assets by value.
Where we dispose of assets, we will look to drive efficiencies
by re-investing more deeply in existing markets and increasing our
range of product and price points, as we are already doing
successfully in Exeter, Leicester, York and Manchester. This will
ensure we have something to offer everyone from first year
undergraduates to postgraduates and help us to cross sell within
the Hello Student(R) brand. Markets with excellent universities and
constrained supply of PBSA will be prime candidates for investment.
We will look to acquire standing assets rather than development
opportunities where possible, to ensure any acquisitions contribute
to rental income from day one.
Completing the transition of assets to the Hello Student(R)
platform is a core goal, as it will help us to drive occupancy and
efficiencies, so we maximise revenue and margins. More information
about Hello Student(R) 's progress in 2017 can be found on page 19
of the Annual Report.
Portfolio Summary
At 31 December 2017, the Group owned, or was committed on, 94
assets representing 9,158 beds (31 December 2016: 89 assets,
representing 8,504 beds). The portfolio included 85
revenue-generating assets (31 December 2016: 75 assets). This will
increase to 91 for the 2018/19 academic year, with a further three
for later years.
The gross annualised rent for the 85 revenue-generating
properties at the year end was approximately GBP65.3 million (31
December 2016: GBP52.1 million). Of this, GBP1.8 million was
attributable to commercial revenue, representing 2.8% of the gross
annualised rent (31 December 2016: GBP1.8 million, representing
3.5% of the gross annualised rent). The gross annualised rent roll
is expected to increase to GBP72.2 million for the 2018/19 academic
year, following completion of the four developments and two
redevelopment projects that are currently under way. In November
2017 we announced a like-for-like rental growth target of 3.2% for
the 2018/19 academic year. With 44% of rooms let under assured
short-hold tenancies, as at the date of publication, 3.2% is at the
upper end of our expectations but we have made demonstrable
progress towards that target.
Valuation
Each property in the portfolio has been independently valued by
CBRE, in accordance with the RICS Valuation - Professional
Standards January 2014 (the "Red Book"). At 31 December 2017, the
portfolio was valued at GBP890.1 million, an increase of 23.4% for
the year (31 December 2016: GBP721.3 million).
The increase in valuation has been driven by a combination of
acquisitions, yield compression and rental growth in the majority
of our cities, which are continuing to see strong demand, tempered
by a reduction in the valuation of assets located in certain
cities, including Aberdeen and Cardiff, where we have faced
operational challenges (see page 20 of the Annual Report for more
detail).
Asset Acquisitions
During the year, we announced the acquisition of four standing
assets, one forward funded project and one development site, at a
total cost of GBP64.5 million. These purchases added 429
operational beds to the portfolio, with the potential to add over
500 further beds once the developments are complete. Details of the
acquisitions can be found in the table on page 31 of the Annual
Report. In addition to these transactions, we also purchased
Revcap's 50% share in the Willowbank joint venture in Glasgow.
The standing assets acquired primarily comprise our core studio
accommodation, as well as a number of townhouses and apartments.
The property we acquired at South Bridge, Edinburgh, is let to the
University of Edinburgh until March 2020 on an internal repairing
lease, guaranteeing us full occupancy for the remaining term.
The development projects will provide further studios, as well
as two and three bed apartments and six bed townhouses, in line
with our strategy of diversifying our product types.
Developments
The Group made significant progress with its development
projects during the year, with 1,031 new beds being completed for
September 2017. These included our first premium townhouses, at
Clifton Place, Exeter, which we let to the University of Exeter for
the 2017/18 academic year. Once we have completed the projects
which are currently in progress, we will have delivered more than
GBP250 million of assets at cost through forward funded and direct
developments, showing the importance of development to the Group's
growth.
In total, seven forward funded projects reached completion and
became operational in 2017. An eighth forward funded project,
Trippet Lane in Sheffield, was delayed and is due to be completed
in April 2018. Trippet Lane was therefore subject to a rental
guarantee from the developer for the 2017/18 academic year. Rental
guarantees on forward funded developments give us full protection
in the first year of selling, mitigating construction risk for
us.
The delay to Trippet Lane highlighted the benefit of owning a
number of properties in a city. We completed our development
project at Provincial House in Sheffield ahead of schedule,
allowing us to offer places to students who had booked a place in
Trippet Lane. In addition, we were able to offer places to students
on the waiting list at our other Sheffield property, Portobello
House. The completion of Provincial House maintains our record of
completing all direct developments on time or early.
In November 2017, we obtained planning permission at Ocean Bowl,
Falmouth, for 190 beds. This development will contribute much
needed student accommodation and relieve pressure on the local
housing market. Falmouth has one of the fastest growing student
populations in the UK, with a student to bed ratio of 2.7:1,
against the national average of 2.3:1. Ocean Bowl complements our
scheme next door, Maritime Studios, and will allow us to benefit
from operational efficiencies. Details of completed and current
development projects can be found in the tables on page 31 of the
Annual Report.
Redevelopments
Victoria Point is a flagship asset in Manchester, comprising six
blocks which between them contain the three direct let asset types
in our portfolio. Four of the blocks are currently operational,
while blocks 3 and 4 are undergoing redevelopment to provide
affordable accommodation suitable for returning undergraduates.
These blocks will be operational for the 2018/19 academic year.
We have identified eight other operating assets which are
suitable for redevelopment, giving us the potential to enhance the
properties and increase rental income and capital values. Any
redevelopment would be subject to the availability of finance and
would be carefully timed to minimise the impact on dividend
cover.
Disposal
On 27 November 2017, we completed the disposal of the Forthside
Way development site in Stirling for GBP2.0 million. Our focus is
on building critical mass in our target cities and this was our
only asset in Stirling. We sold the property with the benefit of
planning permission we obtained for a 208-bed PBSA development,
resulting in a substantial uplift in value above the original
acquisition price.
Safety
The safety of our students is always a top priority for us.
Following the devastating fire at Grenfell Tower in June 2017, we
commissioned an independent building-control approved inspector and
fire-risk assessor, to undertake a full fire risk review of all our
operating properties, from both a construction and operational
perspective. While all buildings have been physically inspected,
the formal reporting process will be ongoing during Q1 2018. The
initial reports indicate that all the buildings in the portfolio
are physically fully fire safety compliant and the on-site
operating staff are trained in fire risk awareness and fire safety
procedures. Monitoring of the physical assets continues and our
staff are receiving ongoing training.
People and Culture
The entire team is focused on transforming Empiric's
performance, and this is at the heart of the cultural change that
is now under way. Everything we do is with the aim of increasing
revenue, reducing cost or helping the team to perform more
effectively. Applying our energy to these three areas is a key part
of successfully turning our financial and operational performance
around.
We are therefore striving to build a positive, collaborative and
communicative culture, where our people bring forward suggestions
for improvement, take responsibility for execution and are
empowered to act, with appropriate oversight. Everyone will have
the opportunity to learn new things, increase their skills and
develop their careers.
Our aim is to reward commitment and success, so we are putting
in place measurable objectives for all our people and will appraise
their performance against them. These individual objectives will
align with the three main Group objectives - maximising revenue,
reducing cost and building a strong team ethic - to ensure rigorous
focus on what is important.
We have significantly strengthened the team this year, to ensure
we have the right calibre of people, not least in finance (see page
21 of the Annual Report for more detail).
We recognise that diversity can lead to better decision making
and improved business outcomes. The changes to our team this year
have further improved our gender diversity, particularly at a
senior level. More information can be found on page 26 of the
Annual Report.
Post Balance Sheet Events
Since the end of the financial year, we have acquired Emily
Davies Halls of Residence in Southampton, which diversifies our
portfolio in the city and extends our ability to provide affordable
accommodation and diversifies our portfolio in the city. We have
also completed the land purchases of Falmouth Ocean Bowl and
Edinburgh King's Stables Road.
Outlook
Our challenge for 2018 is to drive the profitability of our
entire portfolio, while bringing all externally resourced
operational functions in-house and completing their
integration.
The strength of the underlying investment thesis coupled with
the high quality of our assets will support this transformation and
provide a platform for the resumption of the Empiric's growth.
Tim Attlee
Acting Chief Executive Officer
21 March 2018
OPERATIONAL AND FINANCIAL REVIEW
Operational Review
As discussed in the Chairman's Statement, we completed a full
review of the Group's operations and financial performance and
announced our findings on 23 November 2017. The review identified a
number of inefficiencies within the Group and its supply chain,
which we are rapidly rectifying. This has resulted in more focus on
revenue management and on achieving the levels of revenue we expect
by returning to full occupancy at 97%, alongside reviewing and
reducing both our direct and administrative costs.
We have been working to rationalise costs internally, as we
consolidate our lettings operations. Central buying of utilities,
for instance, has now been secured and will be effective from
September 2018.
The Board has also approved two key actions which will
significantly improve our operational effectiveness, reduce our
direct costs and contribute to margin. First, we will bring all the
properties currently being managed by third-party PBSA managers
onto the Hello Student(R) platform, ahead of the 2018/19 academic
year. This will enable us to directly manage costs, give us full
control over the marketing of those assets and the interactions
with students, and provide us with live data on our entire
portfolio, so we can respond dynamically to changes in the market
and drive occupancy and revenue.
The second critical change is that we will start to in-source
the facilities management services from their current outsourced
service providers, and we have appointed GVA to assist us with both
building in-house capability and the transition plan. Internalising
of facilities management will save us the providers' profit margin
and VAT, thereby generating a saving after recruiting staff and
other costs to undertake this process. Cost savings will start to
be delivered from the start of the 2018/19 academic year.
Administration expenses in 2017 included a number of one-offs,
as explained in the Financial Review. We are also taking action to
cut administration expenses further, including reducing consultancy
agreements and contractor headcount. Administration costs in the
second half of 2017 came in at GBP5.9 million, as forecast, and we
are working to bring further tasks in-house to reduce this over the
next year. Changes to our forecasting process during the year have
resulted in much more accurate information being provided for
decision making, and we will continue to evolve these forecasting
models.
Hello Student(R)
We continued to increase the number of assets on the Hello
Student(R) platform during the year. At 31 December 2017, 62 of our
85 revenue generating assets were on the platform, up from 36 a
year earlier. With the exception of one asset in Exeter, all new
assets during the year went onto the platform, rather than to
third-party managers. Hello Student(R) 's ability to support the
mobilisation of new assets was shown by the performance of Samuel
Tuke Apartments and George Street, which were both full in their
first year of operation.
We launched the new Hello Student(R) website in November 2017.
This enables us to track enquiries and provides improved reporting,
as well as offering us better control of the content and having a
smarter, more visually engaging customer interface. We also
upgraded our bookings software, which has provided greater levels
of analytics.
The Hello Student(R) brand is building and engagement with the
website is continually growing, with a 460% increase in web traffic
in 2017, compared with the previous year. Social media is central
to our sales platform, as we use it to engage with students, raise
awareness of the Hello Student(R) brand and drive website traffic.
In 2017, we had a total of 74,000 Facebook followers and the total
reach of all our posts was 2.2 million. Facebook was also
responsible for driving over 50% of referrals to the Hello
Student(R) website.
The increasing scale of the Hello Student(R) platform offers
rationalisation opportunities, as we look to make sure it is as
efficient as possible in each city. We therefore began reviewing
staffing levels towards the end of 2017. We also introduced more
robust performance management for our people, as described in the
Chief Executive Officer's review.
During the year, we trialled a new in-house capability to manage
the back office processing of bookings and payments, and
transferred our four properties in Cardiff onto the new system.
However, issues with the new system were a significant contributor
to low levels of occupancy in Cardiff, as discussed in more detail
below, and we therefore discontinued the trial and moved the
properties back to the existing Hello Student(R) system.
We continue to review the student booking journey, to ensure it
is the best user experience it can be, and that the interface
between the online processes and our physical presence is as
seamless and effective as possible.
Research and Development
An important output from our operating platform is improved data
on students' needs and preferences, and the performance of our
assets. Our programme of student satisfaction and innovation
research gives us valuable insight into how we can improve our
offer. We conduct deep analyses of our cities, including the
financial performance of the universities, the type of students
they attract, where those students come from, the supply, quality
and price of accommodation, and the niches we can successfully
target there. This has benefits in honing operational reporting and
acquisition insight, as well as allowing us to further develop
relationships with universities.
Financial Performance
Comparative Figures
The change in our financial year end from June to December
during 2016 has resulted in the comparative period for this set of
results being the six months to 31 December 2016. Comparisons of
amounts in the income statement between the two periods are
therefore not meaningful and the discussion below focuses on
performance in 2017 on a standalone basis.
Financial Results
Revenue from our assets was GBP51.2 million in 2017 (H2 2016:
GBP19.2 million). Growth in the year resulted from the increase in
revenue-producing assets from 75 to 85 and higher average annual
rents. However, the portfolio was only 92% let for the 2017/18
academic year (2016/17: 97%). The large majority of the shortfall
was the result of poor lettings in Aberdeen and Cardiff. Aberdeen
was affected by local economic conditions, resulting from the oil
price slump causing a mass increase in housing supply in the city.
Cardiff had new supply entering the market, causing price
disruption in existing buildings during their mobilisation year. In
addition, Cardiff transitioned management into Hello Student(R) mid
sales cycle, there were local management conflicts and the systems
problems noted above, which have now been resolved.
There were also a number of other cities where occupancy was
affected to a lesser extent. The transition of a large number of
assets to the emerging Hello Student(R) platform was a factor, as
well as operational issues in cities such as Glasgow and Newcastle.
In response, we have adopted earlier and more strategic transition
programmes, reduced initial listed rents in Cardiff and Aberdeen,
which are offset by higher than average rents in other cities, and
introduced rigorous weekly monitoring of bookings. We continue to
monitor opportunities to maximise income by adjusting rents in
light of demand throughout the bookings cycle.
The shortfall in occupancy and the operational inefficiencies
outlined above resulted in operating profit under IFRS of GBP32.5
million for 2017 (H2 2016: GBP20.2 million). This included an
aggregate revaluation uplift of GBP15.8 million, net of property
acquisition costs, on our property portfolio at the year end (H2
2016: GBP14.5 million), and a gain of GBP1.1 million (H2 2016:
GBPnil) on the sale of Forthside Way in Stirling. The operating
margin for the year was 57%.
Administration expenses for the year were GBP13.5 million (H2
2016: GBP5.3 million), with GBP7.6 million incurred in first half
and GBP5.9 million in the second half. There were a number of
one-off costs in the first half, including the settlement agreement
with the previous Chief Financial Officer and the cost of temporary
finance staff, to support our migration to a new accounting
platform. The second half of the year contained one-off costs for
the settlement agreement with the previous Chief Executive
Officer.
Net financing costs for the year were GBP11.8 million, net of
money market investment income and the fair value gain on interest
rate swaps of GBP0.1 million (H2 2016: GBP4.2 million and GBP0.3
million, respectively).
Profit before tax for 2017 was GBP20.8 million (H2 2016: GBP16.9
million). No corporation tax was charged, as the Group fulfilled
all of its obligations as a REIT. Basic earnings per share were
therefore 3.84 pence (3.83 pence on a diluted basis) (H2 2016: 3.38
pence and 3.35 pence (diluted)).
The Net Asset Value ("NAV") per share as at 31 December 2017 was
104.37 pence, prior to adjusting for the interim dividend for the
quarter ended 31 December 2017 of 1.25 pence per share (31 December
2016: 105.9 pence, prior to adjusting for the interim dividend of
1.55 pence per share). The NAV is shown net of all property
acquisition costs and dividends paid during the year.
Dividends
The dividends declared and paid in respect of the 2017 financial
year are shown in the table overleaf. The changes to our dividend
targets for 2017 and 2018 are covered by the Chairman on page 4 of
the Annual Report.
Of the total dividends in respect of the year, 2.94 pence per
share was declared as a property income distribution ("PID") and
2.61 pence per share was declared as ordinary UK dividends (H2
2016: 0.93 pence per share and 2.12 pence per share
respectively).
Dividends
Quarter to Declared Paid Amount (p)
----------------- ----------------- ----------------- ----------
31 March 2017 10 May 2017 31 May 2017 1.525
----------------- ----------------- ----------------- ----------
30 June 2017 4 July 2017 1 August 2017 1.525
----------------- ----------------- ----------------- ----------
30 September
2017 23 November 2017 15 December 2017 1.25
----------------- ----------------- ----------------- ----------
Due 23 March
31 December 2017 26 February 2018 2018 1.25
----------------- ----------------- ----------------- ----------
5.55
----------------------------------------------------- ----------
Our adjusted earnings per share, which we see as the most
relevant measure when assessing dividend distributions, were 1.86
pence (H2 2016: 0.72 pence). Adjusted earnings per share is defined
under Key Performance Indicators on page 22 of the Annual
Report.
At 31 December 2017, the Company had distributable reserves of
GBP75.6 million, which compares with the cash cost for the total
dividend for 2017 of GBP30.6 million. We therefore have substantial
headroom for the payment of future dividends.
Equity Financing
On 24 July 2017, we completed a placing, open offer and offer
for subscription for 100,917,432 shares, at an issue price of 109
pence per share. This raised net proceeds of GBP107.6 million. At
31 December 2017, GBP73.8 million of the proceeds had been
committed.
Debt Financing
On 6 March 2017, we agreed a new unsecured term loan facility of
GBP10 million, which was drawn down in full. This was our first
facility at the Company level, reflecting the maturity of the
business. The facility has a three-year term and an all-in cost of
2.15% p.a. On 20 November 2017, we announced a new secured,
three-year GBP70 million revolving credit facility ("RCF") with
Lloyds Bank. The RCF has a margin of 1.75% above three-month LIBOR
and can be extended by 12 months, by mutual consent, on each of the
first and second anniversaries, to give a total term of five years.
The RCF was undrawn at the year end.
During the year, we also extended the terms of two existing
facilities. These were:
-- the GBP32.8 million facility with AIB Group (UK) PLC, which
is now repayable in October 2020; and
-- the GBP30.63 million facility with Royal Bank of Scotland,
which now becomes repayable in December 2018.
In addition, following our acquisition of Revcap's 50% share of
the Willowbank joint venture, we repaid the joint venture's
outstanding debt of GBP9.5 million.
As at 31 December 2017, the Group had committed debt facilities
of GBP390 million, of which GBP303.8 million had been drawn down
(31 December 2016: GBP310 million of facilities, with GBP243.9
million drawn down). Of our total facilities, GBP191.1 million is
at fixed interest rates and GBP198.9 million is at floating rates,
with a further GBP35.5 million of the floating rate debt subject to
interest rate caps or swaps. The aggregate cost of debt is 3.25%,
with a weighted average term of 6.7 years at 31 December 2017. We
fully complied with our covenants during the year.
Our LTV ratio at the year end was 32.9% (31 December 2016:
31.1%). Our borrowing policy is to maintain a conservative level of
aggregate borrowings, with a long-term LTV target of 35% and a
maximum of 40%.
Total Shareholder Return
The total shareholder return (see page 22 of the Annual Report
for definition) for the year to 31 December 2017 was -7.2%, this
compared with 12.3% for the FTSE All-Share REIT Index.
Finance Team
We restructured the finance team during the year. While the size
of the team is unchanged, eight of the 12 team members are new,
including me as CFO. This has given the team a much greater
skillset and much higher capability. I want to thank the team for
their considerable efforts in recent months, which have proved
invaluable as we have begun to transform the business.
Alternative Investment Fund Manager ("AIFM")
The Company continues to be authorised as a full-scope AIFM and
is regulated by the Financial Conduct Authority. The Company has
engaged a specialist compliance consultancy, Portman Compliance
Consulting LLP, to ensure that it adheres to all of its regulatory
obligations.
Lynne Fennah
Chief Financial Officer
21 March 2018
KEY PERFORMANCE INDICATORS
Total Shareholder Return NAV per share (basic)
("TSR") | % | p
--------------------------------- -------------------------------
2017 -7.2 2017 104.37
--------------------- ---------- ---------------- -------------
2016(2) 1.1 2016(1) 105.9
--------------------- ---------- ---------------- -------------
Definition: the growth Definition: the value
in share price plus dividends of the Group's total assets
paid, as a percentage less the book value of
of the mid-market price its liabilities attributable
at the start of the financial to shareholders divided
period. by the number of shares
in issue at the year end.
--------------------------------- -------------------------------
LTV ratio | % Dividend against target
| p
--------------------------------- -------------------------------
2017 32.9 2017 5.55
--------------------- ---------- ------------------- ----------
2016(2) 31.1 2016(1) 3.05
--------------------- ---------- ------------------- ----------
Definition: the proportion Definition: dividends
of borrowings compared declared in respect of
to Gross Asset Value (defined the financial period divided
as total assets less current by the number of shares
liabilities). in issue at the year end.
--------------------------------- -------------------------------
Earnings per share (basic) Adjusted earnings per
| p share | p
----------------------------------- ----------------------------------
2017 3.84 2017 1.86
---------------------- ----------- --------------------- -----------
2016(2) 3.38 2016(2) 0.72
---------------------- ----------- --------------------- -----------
Definition: post-tax earnings Definition: post-tax adjusted
generated that are attributable earnings per share attributable
to shareholders, divided to shareholders adjusted
by the weighted average to include License fees,
number of shares in issue development rebates, rental
in the period. guarantees and cumulative
gains made on disposal
of assets. For more information
on the adjustments see
page 86 of the Annual
Report.
----------------------------------- ----------------------------------
EPRA PERFORMANCE INDICATORS
EPRA earnings (basic) GBPm p per
share
Earnings from operational activities. 2017 3.8 2017 0.7
2016(2) 2016(2)
1.9 0.4
Purpose
A key measure of a company's underlying
operating results and an indication of
the extent to which current dividend payments
are supported by earnings.
---------------------------------------------- --------- ---------
EPRA NAV (basic) GBPm p per share
NAV adjusted to include properties
and other investment interests
at fair value and to exclude
certain items not expected to
crystallise in a long-term investment
property business.
2017 630.0 2017 104.5
2016(1) 2016(1)
532.1 106.2
Purpose
Makes adjustments to International
Financial Reporting Standards
("IFRS") NAV to provide stakeholders
with the most relevant information
on the fair value of the assets
and liabilities for a true real
estate investment company.
----------------------------------------- ------------- -----------
EPRA NNNAV (basic) GBPm p per
share
EPRA NAV adjusted to include the fair 2017 617.9 2017 102.5
values of:
(i) financial instruments; 2016(1) 2016(1)
519.6 103.7
(ii) debt; and
(iii) deferred taxes.
Purpose
Adjusts EPRA NAV to provide stakeholders
with the most relevant information on
the current fair value of all the assets
and liabilities within a real estate company.
---------------------------------------------- ----------- -----------
EPRA net initial yield ("NIY") %
Annualised rental income, based on the cash rents 2017 4.0
passing at the balance sheet date, less non-recoverable
property operating expenses, divided by the market
value of the property net of (estimated) purchasers'
costs.
2016(1)
4.2
Purpose
A comparable measure for portfolio valuations.
This measure should make it easier for investors
to judge how the valuation of portfolios compare.
--------------------------------------------------------- ---------
(1 As at 31 December 2016)
(2 For the six-month period ending 31 December 2016)
PRINCIPAL RISKS AND UNCERTAINTIES
Approach to Managing Risk
The Group's risk management process is designed to identify,
evaluate and mitigate (rather than eliminate) the significant risks
we face. The process can therefore only provide reasonable, rather
than absolute, assurance. We outsource certain services to our
administrator, FIM Capital Limited (the "Administrator"), and other
service providers, and rely to an extent on their systems and
controls.
The Audit Committee formally reviews the effectiveness of our
risk management processes and internal control systems, on the
Board's behalf. During the course of these reviews, the Board has
not identified or been advised of any material failings or
weaknesses.
Changes to Risks During the Year
The principal risks and uncertainties we face changed during the
year, as we encountered new challenges.
The Board considered that there was one new risk which presented
itself this year. This is a risk around property costs, which is
discussed further in Risk 13.
Risk 11 increased during 2017, due to lower occupancy in some
cities, as detailed on page 20 of the Annual Report. The Board has
also merged Risk 11 with the Hello Student(R) occupancy risk set
out in the last Annual Report, as all the properties are being
brought onto the Hello Student(R) platform in 2018.
Risk 8 increased during the year, due to the changes in the
Executive Directors and their responsibilities, as explained in the
Chairman's Statement.
The Board has also amalgamated some risk categories during the
year, so they more accurately reflect the principal risks we face.
The two development risks described in the 2016 annual report have
been combined into a single risk (Risk 5), and the Health and
Safety and Laws and Regulations risks are now expressed in a single
operational risk (Risk 9).
Finally, the Board considers that commercial revenue is no
longer a principal risk, due to its immaterial impact on the
Group's financial statements and the low likelihood of
occurrence.
Principal Risks
The principal risks and uncertainties we face have the potential
to materially affect our business, either favourably or
unfavourably. Some risks may be unknown to us at present, and some
risks that we currently regard as immaterial, and have therefore
not included here, may become material in the future.
Risk Impact Mitigation
--------------------------------- ------------------------------------ ---------------------------------
Strategic risks
--------------------------------- ------------------------------------ ---------------------------------
1 We will continue An adverse change in We constantly monitor
to focus exclusively the higher education government policy and
on the student market could reduce its actual or potential
accommodation sector. student numbers and impact on UK, EU and
We will, therefore, demand for student international student
rely on the development accommodation, either numbers studying in
of the higher education across the UK or in the UK. We pay particular
market in the UK specific regions. This, attention to proposals
generally, or in in turn, could reduce relating to the UK's
speci c regions, our rental income and exit from the EU and
including any change the value of all, or how these affect the
in demand from a signi cant proportion UK as a whole and speci
international students. of, our portfolio. c regions, such as
Scotland.
We acquire or develop
assets serving leading
university cities and
towns. The properties
are well located and
we believe maintaining
competitive rental
levels should ensure
high occupancy levels
across the portfolio,
during periods of weaker
demand.
Our strategy allows
us to diversify across
several niches, giving
us an offer that appeals
to a broad range of
students, from first
years to post-graduates.
We also seek to ensure
that our developments
and, where possible,
acquisitions of standing
assets, are t for alternative
use such as private
residential, subject
to planning.
--------------------------------- ------------------------------------ ---------------------------------
2. We face competition Increased competition The UK's full-time
from a number of may lead to an oversupply student population
UK and international of rooms through overdevelopment, was 1.8 million for
property investors, to inflated prices the 2016/17 academic
both existing and for existing properties year. We are focused
new, which may or development land, on the cities and towns
have larger nancial or reduce the rents with high-quality and
resources and/or we can achieve. growing higher education
be targeting lower institutions and where
investment returns. our research indicates
that there is a significant
under supply of PBSA.
Our assets are in prime
locations, in varying
formats and at different
price points. In times
of reduced demand,
they should be more
attractive to potential
customers than the
competition, at the
right price.
--------------------------------- ------------------------------------ ---------------------------------
Investment risks
--------------------------------- ------------------------------------ ---------------------------------
3. The performance Market conditions may Our assets are in multiple
of our portfolio reduce our revenues, prime locations, diversifying
depends on general which may affect our the risk of adverse
property and investment ability to make distributions changes to the portfolio.
market conditions. to shareholders. Our Investment Policy
There remains uncertainty contains a prudent
in the property A fall in property borrowing limit of
market following valuations may lead 40% of our Gross Asset
the result of the to the Group breaching Value, with a target
EU referendum in its banking covenants. of 35%. We regularly
June 2016, which review property market
could prevail until conditions and would
Brexit negotiations take action, should
are concluded and it look like any property
beyond, depending used as collateral
on the outcome had decreased in value
of the negotiations. to the extent that
If market conditions there was a risk that
deteriorate and, we might breach any
as a result, the of our LTV covenants.
value of our assets The LTV covenants have
falls, our NAV been negotiated to
will reduce. Furthermore, be as exible as possible.
our borrowings In addition, international
contain Loan to students pay in advance,
value ("LTV") covenants. meaning we maintain
substantial cash balances
on account.
The student property
sector has demonstrated
considerable robustness,
underpinned by the
supply and demand imbalance.
Nevertheless, we do
not overstretch annual
rent increases, which
we vary according to
the local market conditions
for each area or building.
EU students are only
7% of all full-time
students in the UK.
With the high number
of other international
students applying to
study in the UK, the
higher education sector
is not reliant on students
from the EU.
--------------------------------- ------------------------------------ ---------------------------------
4 Our ability to Rental income and property Our portfolio is geographically
achieve our investment values may be affected diversified and where
objective depends by increased supply there is more than
on both the rental of student accommodation, one property serving
income we receive failure to collect a town or university,
and the appreciation rents, increasing costs the total number of
in property values. or any deterioration beds equates to no
in the quality of our more than 5% of the
properties. location's full-time
student population.
We are not therefore
unduly exposed to any
one student market.
Each operational property
is managed either directly
by Hello Student(R)
or by reputable property
management companies.
Our Operations Director
liaises with the property
managers, to ensure
rent is collected on
time (usually in advance
at the start of an
academic year), that
the properties are
well maintained and
the desired level of
customer service is
provided.
--------------------------------- ------------------------------------ ---------------------------------
Development Risk
--------------------------------- ------------------------------------ ---------------------------------
5 Our development Any of the risks associated Our Investment Policy
activities are with our development only allows us to commit
likely to involve activities could reduce up to 15% of NAV to
more risk than the value of our assets. expenditure on development
operating our properties. A delay in constructing (excluding the cost
This includes general assets under development of the land or property
construction risks could result in one to be developed).
such as delays, or more of the assets Since IPO, we have
late delivery, not being delivered undertaken a greater
developments not in time for the start proportion of our development
being completed of the academic year, activities through
(while associated with a resultant impact forward funded projects,
costs are still on occupancy and revenue. rather than by direct
incurred) or changes development. Forward
in market conditions, funding projects reduces
which could result the risk to us, as
in completed developments the developer takes
having substantial on the construction
vacancies. risk and the risk of
cost over-runs. These
projects also generally
bene t from a rental
guarantee for the rst
year of operations,
if the asset is not
delivered in time for
the start of the academic
year. For assets we
develop directly, we
put in place suitable
contingencies, insurance
cover and other arrangements
with the responsible
contractor or sub-contractor,
to cover the impact
of any delay.
Our development activities
span a range of towns
and cities and there
is little or no overlap
in the developers acting
on these projects (with
the maximum exposure
to any one developer
restricted to 20% of
GAV for forward funded
projects), further
reducing the impact
of any delays or changes
in market conditions.
--------------------------------- ------------------------------------ ---------------------------------
Funding Risks
--------------------------------- ------------------------------------ ---------------------------------
6 Our strategy Increases in interest At 31 December, the
allows us to take payable would reduce Group had committed
on debt with variable our pro tability. debt facilities of
interest rates. GBP390 million, of
We may therefore which GBP191.1 million
hedge or partly was at fixed interest
hedge our interest rates. Of the GBP198.9
rate exposure. million of facilities
However, this might with floating rates,
not be suf cient GBP35.5 million was
to protect us from subject to interest
adverse movements rate caps or swaps.
in interest rates.
--------------------------------- ------------------------------------ ---------------------------------
7 The Group may Without the continued During the year, we
not be able to availability of debt agreed a new term loan
secure further on acceptable terms, of GBP10 million, a
debt on acceptable we may be unable to new revolving credit
terms. progress investment facility of GBP70 million
opportunities as they and extended the terms
arise and continue of two existing facilities.
to grow the Group, At the year end, our
in line with the long-term debt had a weighted
strategy. average term of 6.7
years and the headroom
in our facilities was
GBP86.2 million.
--------------------------------- ------------------------------------ ---------------------------------
People Risk
--------------------------------- ------------------------------------ ---------------------------------
8 Our ability to The Executive Directors' As a result of poor
achieve our investment failure to acquire performance, the previous
objective depends and manage assets effectively CFO resigned and the
on the performance could materially affect CEO was served notice.
of the Executive our pro tability, NAV See page 5 of the Annual
Directors, which and share price. Similarly, Report for more detail.
cannot be guaranteed. the departure of an The Board appointed
As a result, our Executive Director a new and experienced
performance will, or member of senior CFO during the year,
to a large extent, staff, and either a to improve the performance
depend on our ability delay or failure in of the Executive Directors.
to align the incentives recruiting a suitable There is also a new
of the Executive replacement, could division of roles within
Directors to shareholders' affect the Group's the Executive team
interests, retain performance. to improve performance,
key staff and/or which is detailed further
recruit people on page 5 of the Annual
of the right calibre Report.
and experience.
--------------------------------- ------------------------------------ ---------------------------------
Operational Risks
--------------------------------- ------------------------------------ ---------------------------------
9 Our operations, Failing to comply with Our investment team
including our development laws or regulations has significant experience
activities, are may affect our ability and, together with
subject to laws to deliver or acquire its advisers, closely
and regulations further buildings, monitors the planning
enacted by national or result in one or environment both nationally
and local government. more existing buildings and in our target markets.
Our ability to being temporarily or The Executive Directors
respond and adapt permanently closed, are ultimately responsible
to the changing which may have a material for ensuring that planning
planning and regulatory adverse effect on our submissions are well
environment is performance. prepared, address local
key to our future Any change in the laws concerns and demonstrate
business performance. or regulations relating good design, and that
We need to comply to our operations or all our buildings comply
with health and development activities with building regulations,
safety laws and may have a material are sustainable and
regulations, to adverse impact on our environmentally efficient.
protect the health ability to implement For health and safety,
and wellbeing of our Investment Policy we undertake landlord
our employees, and our returns to risk assessments for
contractors, customers shareholders. every property prior
and the general A serious health and to occupation. In addition,
public. safety incident could all our student property
result in criminal is insured as occupied
or civil proceedings residential property,
and severely damage our property managers
our reputation. It receive training to
could also lead to minimise the risk of
delays in development a health and safety
projects. incident occurring,
and our buildings are
inspected on a sample
basis, as part of our
ANUK accreditation.
--------------------------------- ------------------------------------ ---------------------------------
10 The Company If we fail to remain The Board is responsible
operates as a UK a REIT for UK tax purposes, for ensuring we adhere
REIT and has a our pro ts and gains to the UK REIT regime.
tax-ef cient corporate will be subject to It monitors the compliance
structure, which UK Corporation Tax. reports provided by
benefits UK shareholders. the Executive Directors
Any change to our on potential transactions,
tax status, UK the Administrator's
tax legislation reports on asset levels
or interpretation and our registrar and
of that legislation broker's reports on
could affect our shareholdings.
ability to achieve Our Head of Compliance
our investment provides internal compliance
objective or provide support. In addition,
favourable returns Ernst & Young LLP provides
to shareholders. REIT compliance monitoring
services and Portman
Compliance Consulting
LLP assists us with
compliance matters.
--------------------------------- ------------------------------------ ---------------------------------
11 We may not be If we cannot maintain Following the shortfall
able to maintain attractive occupancy in occupancy in 2017,
the occupancy rates levels (or maintain we have introduced
of our properties them on economically a rigorous focus on
or any other properties favourable terms), revenue management,
we acquire. there may be a material including bringing
adverse effect on our all the properties
pro tability, NAV and currently managed by
share price. third parties onto
the Hello Student(R)
platform for the 2018/19
academic year. This
gives us full control
over marketing and
student interaction,
and provides live data
across the portfolio,
so we can respond rapidly
to changes in the market
and drive occupancy
and revenue.
--------------------------------- ------------------------------------ ---------------------------------
12 We collect and A major information Our networks are protected
retain information security breach could by rewalls and anti-virus
in computer systems have a signi cant impact protection systems,
regarding our business on our reputation and with back-up procedures
dealings, our customers could result in the also in place.
and our suppliers. loss of business-critical We have retained a
Securely processing, information. This in specialist information
maintaining and turn could affect our technology consultancy
transmitting this ability to do business to enhance our controls
information is or result in nes or and optimise our systems
critical to our compensation, reducing design, to minimise
business and we our pro tability. the risk of hacking.
must comply with This is particularly
restrictions on critical as we expand
the handling of our portfolio and our
sensitive information operational capabilities,
(including employee to ensure our investment
and customer information). in computer systems
aligns with our overall
business strategy,
is cost-effective and
designed to reduce
as far as possible
the risk of security
breaches.
All staff are given
appropriate training
to identify emails
and other communications
that could result in
a security breach.
--------------------------------- ------------------------------------ ---------------------------------
13 Our operations A lack of direct oversight We undertake rigorous
and management could mean that the analysis of our cost
of cost bases are Group is not minimising base on a monthly basis,
currently reliant its cost base and in with input from finance,
on a number of turn is not maximising operations and asset
third party property its profitability. management.
managers. As a In addition, there
result there is is a concerted effort
a risk that we to bring the facilities
may not be able management of the Group
to have full control in house. This is detailed
over our cost base. on page 18 of the Annual
Report.
--------------------------------- ------------------------------------ ---------------------------------
DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements and have
elected to prepare the Company financial statements in accordance
with International Financial Reporting Standards ("IFRSs") as
adopted by the European Union. Under company law the Directors must
not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group
and Company and of the profit or loss for the Group for that
period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
-- prepare a Directors' Report, a Strategic Report and
Directors' Remuneration Report which comply with the requirements
of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. The
Directors are responsible for ensuring that the Annual Report and
Accounts, taken as a whole, are fair, balanced, and understandable
and provides the information necessary for shareholders to assess
the Group's performance, business model and strategy.
Website Publication
The Directors are responsible for ensuring the Annual Report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Directors' Responsibilities Pursuant to DTR4
The Directors confirm to the best of their knowledge:
-- The Group financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and Article 4 of the IAS
Regulation and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the
Group.
-- The Annual Report includes a fair review of the development
and performance of the business and the financial position of the
Group and the Parent Company, together with a description of the
principal risks and uncertainties that they face.
Stuart Beevor
Acting Chairman
21 March 2018
GROUP STATEMENT OF COMPREHENSIVE INCOME
Year ended Six months to Unaudited year ended
31 December 2017 31 December 2016 31 December 2016
Note GBP'000 GBP'000 GBP'000
------------------------------------------------------ ---- ---------------- ---------------- --------------------
Continuing operations
Revenue 2 51,205 19,210 31,415
Property expenses 3 (22,220) (8,152) (11,587)
------------------------------------------------------ ---- ---------------- ---------------- --------------------
Net rental income 28,985 11,058 19,828
Administrative expenses 4 (13,454) (5,323) (9,431)
Change in fair value of investment property 13 15,836 14,474 24,806
Gain on disposal of investment property 1,122 - -
------------------------------------------------------ ---- ---------------- ---------------- --------------------
Operating profit 32,489 20,209 35,203
---------------- ---------------- --------------------
Finance cost (11,882) (4,231) (6,815)
Finance income 87 255 782
---------------- ---------------- --------------------
Net finance costs 5 (11,795) (3,976) (6,033)
Share of results from joint ventures 56 713 1,874
------------------------------------------------------ ---- ---------------- ---------------- --------------------
Profit before income tax 20,750 16,946 31,044
Corporation tax 7 - - -
------------------------------------------------------ ---- ---------------- ---------------- --------------------
Profit for the year/period 20,750 16,946 31,044
Other comprehensive income
Items that will be reclassified to statement of
comprehensive income
Fair value gain or (loss) on cashflow hedge 508 453 (602)
------------------------------------------------------ ---- ---------------- ---------------- --------------------
Total comprehensive income for the year/period 21,258 17,399 30,442
------------------------------------------------------ ---- ---------------- ---------------- --------------------
Earnings per share expressed in pence per share 8
Basic 3.84 3.38 6.51
Diluted 3.83 3.35 6.45
------------------------------------------------------ ---- ---------------- ---------------- --------------------
GROUP STATEMENT OF FINANCIAL POSITION
At At
31 December 2017 31 December 2016
Note GBP'000 GBP'000
------------------------------------------ ---- ---------------- ----------------
ASSETS
Non-current assets
Property, plant and equipment 11 475 509
Intangible assets 12 1,423 1,017
Investment property - Operational Assets 13 848,537 644,510
Investment property - Development Assets 13 42,045 67,380
Investment in joint venture 14 - 4,923
Derivative financial assets 19 1 19
------------------------------------------ ---- ---------------- ----------------
Total non-current assets 892,481 718,358
------------------------------------------ ---- ---------------- ----------------
Current assets
Trade and other receivables 15 27,792 24,852
Cash and cash equivalents 16 52,721 59,399
------------------------------------------ ---- ---------------- ----------------
Total current assets 80,513 84,251
------------------------------------------ ---- ---------------- ----------------
Total assets 972,994 802,609
------------------------------------------ ---- ---------------- ----------------
LIABILITIES
Current liabilities
Trade and other payables 17 22,620 16,033
Borrowings 18 20,767 -
Derivative financial liability 19 424 485
Deferred income 17 22,286 15,760
------------------------------------------ ---- ---------------- ----------------
Total current liabilities 66,097 32,278
------------------------------------------ ---- ---------------- ----------------
Non-current liabilities
Borrowings 18 277,382 238,718
Derivative financial liability 19 257 748
------------------------------------------ ---- ---------------- ----------------
Total non-current liabilities 277,639 239,466
------------------------------------------ ---- ---------------- ----------------
Total liabilities 343,736 271,744
------------------------------------------ ---- ---------------- ----------------
Total net assets 629,258 530,865
------------------------------------------ ---- ---------------- ----------------
Equity
Called-up share capital 20 6,029 5,013
Share premium 21 467,268 359,958
Capital reduction reserve 22 75,602 106,198
Retained earnings 80,841 60,686
Cashflow hedge reserve (482) (990)
------------------------------------------ ---- ---------------- ----------------
Total equity 629,258 530,865
------------------------------------------ ---- ---------------- ----------------
Total equity and liabilities 972,994 802,609
------------------------------------------ ---- ---------------- ----------------
Net Asset Value per share basic (pence) 9 104.37 105.90
Net Asset Value per share diluted (pence) 9 104.15 105.07
EPRA Net Asset Value per share (pence) 9 104.49 106.15
------------------------------------------ ---- ---------------- ----------------
These financial statements were approved by the Board of
Directors on 21 March 2018 and signed on its behalf by:
Lynne Fennah
Chief Financial Officer
COMPANY STATEMENT OF FINANCIAL POSITION
Company Registration Number: 08886906
At At
31 December 2017 31 December 2016
Note GBP'000 GBP'000
------------------------------------ ---- ---------------- ----------------
ASSETS
Non-current assets
Property, plant and equipment 11 475 509
Intangible assets 12 491 127
Investments in subsidiaries 31 12,571 5,118
Investment in joint venture 14 - 2,965
------------------------------------ ---- ---------------- ----------------
Total non-current assets 13,537 8,719
------------------------------------ ---- ---------------- ----------------
Current assets
Trade and other receivables 15 4,267 602
Amounts due from Group undertakings 15 807,451 651,897
Cash and cash equivalents 16 17,091 14,997
------------------------------------ ---- ---------------- ----------------
Total current assets 828,809 667,496
------------------------------------ ---- ---------------- ----------------
Total assets 842,346 676,215
------------------------------------ ---- ---------------- ----------------
LIABILITIES
Current liabilities
Trade and other payables 17 2,130 1,639
Amounts due to Group undertakings 17 306,173 216,305
------------------------------------ ---- ---------------- ----------------
Total current liabilities 308,303 217,944
Non-current liabilities
Borrowings 18 9,933 -
------------------------------------ ---- ---------------- ----------------
Total non-current liabilities 9,933 -
------------------------------------ ---- ---------------- ----------------
Total liabilities 318,236 217,944
------------------------------------ ---- ---------------- ----------------
Total net assets 524,110 458,271
------------------------------------ ---- ---------------- ----------------
Equity
Called-up share capital 20 6,029 5,013
Share premium 21 467,268 359,958
Capital reduction reserve 22 75,602 106,198
Retained earnings (24,789) (12,898)
------------------------------------ ---- ---------------- ----------------
Total equity 524,110 458,271
------------------------------------ ---- ---------------- ----------------
Total equity and liabilities 824,346 676,215
------------------------------------ ---- ---------------- ----------------
The Company made a loss for the year of GBP11,296,000 (six
months to December 2016 loss of: GBP4,619,000).
These financial statements were approved by the Board of
Directors on 21 March 2018 and signed on its behalf by:
Lynne Fennah
Chief Financial Officer
GROUP STATEMENT OF CHANGES IN EQUITY
Called-up Share Capital reduction Retained Cash flow Total
share capital premium reserve earnings hedge reserve equity
Year ended 31 December 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ------------- ------- ----------------- -------- ------------- --------
Balance at 1 January 2017 5,013 359,958 106,198 60,686 (990) 530,865
Changes in equity
Profit for the year - - - 20,750 - 20,750
Fair value gain on cash flow hedge - - - - 508 508
---------------------------------------- ------------- ------- ----------------- -------- ------------- --------
Total comprehensive income for the year - - - 20,750 508 21,258
---------------------------------------- ------------- ------- ----------------- -------- ------------- --------
Issue of share capital 1,009 108,991 - - - 110,000
Share options exercised 7 749 - (756) - -
Share issue costs - (2,430) - - - (2,430)
Share-based payments - - - 161 - 161
Dividends - - (30,596) - - (30,596)
---------------------------------------- ------------- ------- ----------------- -------- ------------- --------
Total contributions and distribution
recognised directly in equity 1,016 107,310 (30,596) (595) - 77,135
---------------------------------------- ------------- ------- ----------------- -------- ------------- --------
Balance at 31 December 2017 6,029 467,268 75,602 80,841 (482) 629,258
---------------------------------------- ------------- ------- ----------------- -------- ------------- --------
Period ended 31 December 2016
Balance at 1 July 2016 5,013 359,958 121,236 43,345 (1,443) 528,109
Changes in equity
Profit for the period - - - 16,946 - 16,946
Fair value gain on cash flow hedge - - - - 453 453
---------------------------------------- ------------- ------- ----------------- -------- ------------- --------
Total comprehensive income for the
period - - - 16,946 453 17,399
Share-based payments - - - 395 - 395
Dividends - - (15,038) - - (15,038)
---------------------------------------- ------------- ------- ----------------- -------- ------------- --------
Total contributions and distribution
recognised directly in equity - - (15,038) 395 - (14,643)
Balance at 31 December 2016 5,013 359,958 106,198 60,686 (990) 530,865
---------------------------------------- ------------- ------- ----------------- -------- ------------- --------
COMPANY STATEMENT OF CHANGES IN EQUITY
Called-up Share Capital reduction Retained Total
share capital premium reserve earnings equity
Year ended 31 December 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------- ------------- ------- ----------------- -------- --------
Balance at 1 January 2017 5,013 359,958 106,198 (12,898) 458,271
Changes in equity
Loss for the year - - - (11,296) (11,296)
------------------------------------------------------- ------------- ------- ----------------- -------- --------
Total comprehensive loss for the year - - - (11,296) (11,296)
------------------------------------------------------- ------------- ------- ----------------- -------- --------
Issue of share capital 1,009 108,991 - - 110,000
Share options exercised 7 749 - (756) -
Share issue costs - (2,430) - - (2,430)
Share-based payments - - - 161 161
Dividends - - (30,596) - (30,596)
------------------------------------------------------- ------------- ------- ----------------- -------- --------
Total contributions and distribution recognised
directly in equity 1,016 107,310 (30,596) (595) 77,135
------------------------------------------------------- ------------- ------- ----------------- -------- --------
Balance at 31 December 2017 6,029 467,268 75,602 (24,789) 524,110
------------------------------------------------------- ------------- ------- ----------------- -------- --------
Period ended 31 December 2016
Balance at 1 July 2016 5,013 359,958 121,236 (8,674) 477,533
Changes in equity
Loss for the period - - - (4,619) (4,619)
------------------------------------------------------- ------------- ------- ----------------- -------- --------
Total comprehensive loss for the period - - (4,619) (4,619)
------------------------------------------------------- ------------- ------- ----------------- -------- --------
Share-based payments - - - 395 395
Dividends - - (15,038) - (15,038)
------------------------------------------------------- ------------- ------- ----------------- -------- --------
Total contributions and distribution recognized
directly in equity - - (15,038) 395 (14,643)
Balance at 31 December 2016 5,013 359,958 106,198 (12,898) 458,271
------------------------------------------------------- ------------- ------- ----------------- -------- --------
GROUP STATEMENT OF CASH FLOWS
Year ended Six months to
31 December 2017 31 December 2016
GBP'000 GBP'000
-------------------------------------------------------- ---------------- ----------------
Cash flows from operating activities
Profit before income tax 20,750 16,946
Share-based payments 161 395
Depreciation and amortisation 251 73
Finance income (87) (255)
Finance costs 11,882 4,231
Share of results from joint venture (56) (713)
Change in fair value of investment property (15,836) (14,474)
Gain on disposal of investment property (1,122) -
-------------------------------------------------------- ---------------- ----------------
15,943 6,203
-------------------------------------------------------- ---------------- ----------------
Increase in trade and other receivables (3,003) (6,135)
Increase in trade and other payables 1,959 1,059
Increase in deferred rental income 6,526 11,342
-------------------------------------------------------- ---------------- ----------------
5,482 6,266
-------------------------------------------------------- ---------------- ----------------
Net cash flows generated from operations 21,425 12,469
-------------------------------------------------------- ---------------- ----------------
Cash flows from investing activities
Purchases of tangible fixed assets (88) (240)
Purchases of intangible assets (535) (325)
Investments in joint ventures - (13)
Purchase of investment property (154,479) (183,222)
Disposal of investment property 2,000 -
Interest received 87 254
-------------------------------------------------------- ---------------- ----------------
Net cash flows from investing activities (153,015) (183,546)
-------------------------------------------------------- ---------------- ----------------
Cash flows from financing activities
Share issue proceeds 110,000 -
Share issue costs (2,430) -
Dividends paid (30,596) (15,038)
Bank borrowings drawn 69,446 97,346
Bank borrowings repaid (9,534) (9,286)
Loan arrangement fees paid (2,016) (2,789)
Finance cost (excluding fair value loss on derivatives) (9,958) (3,680)
-------------------------------------------------------- ---------------- ----------------
Net cash flows from financing activities 124,912 66,553
-------------------------------------------------------- ---------------- ----------------
Increase in cash and cash equivalents (6,678) (104,524)
Cash and cash equivalents at beginning of period 59,399 163,923
-------------------------------------------------------- ---------------- ----------------
Cash and cash equivalents at end of period 52,721 59,399
-------------------------------------------------------- ---------------- ----------------
COMPANY STATEMENT OF CASH FLOWS
Year ended Six months to
31 December 2017 31 December 2016
GBP'000 GBP'000
-------------------------------------------------------- ---------------- ----------------
Cash flows from operating activities
Loss before income tax (11,296) (4,619)
Share-based payments 161 395
Depreciation and amortisation 159 28
Finance income (43) (227)
Finance costs 197 -
-------------------------------------------------------- ---------------- ----------------
(10,822) (4,423)
-------------------------------------------------------- ---------------- ----------------
Increase in trade and other receivables (3,665) (91)
Increase/(decrease) in trade and other payables 544 (42)
-------------------------------------------------------- ---------------- ----------------
(3,121) (133)
-------------------------------------------------------- ---------------- ----------------
Net cash flows absorbed by operations (13,943) (4,556)
-------------------------------------------------------- ---------------- ----------------
Cash flows from investing activities
Purchases of tangible fixed assets (88) (404)
Purchases of intangible assets (401) (127)
Investments in subsidiaries (4,650) (1)
Investments in joint ventures - (13)
Payments to/on behalf of subsidiaries 89,868 (196,358)
Repayments from subsidiaries (155,498) 87,448
Interest received 43 227
-------------------------------------------------------- ---------------- ----------------
Net cash flows from investing activities (70,726) (109,228)
-------------------------------------------------------- ---------------- ----------------
Cash flows from financing activities
Share issue proceeds 110,000 -
Share issue costs (2,430) -
Dividends paid (30,596) (15,038)
Bank borrowings drawn 10,000 -
Loan arrangement fee paid (93) -
Finance cost (excluding fair value loss on derivatives) (118) -
-------------------------------------------------------- ---------------- ----------------
Net cash flows from financing activities 86,763 (15,038)
-------------------------------------------------------- ---------------- ----------------
Increase in cash and cash equivalents 2,094 (128,822)
Cash and cash equivalents at beginning of period 14,997 143,819
-------------------------------------------------------- ---------------- ----------------
Cash and cash equivalents at end of period 17,091 14,997
-------------------------------------------------------- ---------------- ----------------
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
1.1 Period of Account
The consolidated financial statements of the Group are in
respect of the reporting period from 1 January 2017 to 31 December
2017.
1.2 Basis of Preparation
The consolidated financial statements of the Group for the year
to 31 December 2017 comprise the results of Empiric Student
Property plc (the "Company") and its subsidiaries (together, the
"Group"). These financial statements have been prepared on a going
concern basis and in accordance with International Financial
Reporting Standards ("IFRS") as issued by the International
Accounting Standards Board ("IASB") and as adopted by the European
Union.
The Group financial statements have been prepared on a
historical cost basis, except for investment property and
derivative financial instruments which have been measured at fair
value. The consolidated financial statements are presented in
Sterling which is also the Company, and the Group's functional
currency.
The Company has applied the exemption allowed under Section
408(1b) of the Companies Act 2006 and has therefore not presented
its own Statement of Comprehensive Income in these financial
statements. The Group profit for the year includes a loss after
taxation of GBP11,296,000 (six month period ended 31 December 2016:
GBP4,619,000) for the Company, which is reflected in the financial
statements of the Company.
The financial information does not constitute the Group's
statutory accounts for the year ended 31 December 2017 or the six
month period ended 31 December 2016 but is derived from those
accounts. The Group's statutory accounts for the six month period
ended 31 December 2016 have been delivered to the Registrar of
Companies. The Group's statutory accounts for the year ended 31
December 2017 will be delivered to the Registrar of Companies in
due course. The Auditor has reported on both the December 2017 and
December 2016 accounts; the reports were unqualified, did not
include a reference to any matters to which the Auditor drew
attention by way of emphasis without qualifying their report and
did not contain any statement under Section 498 of the Companies
Act 2006.
1.3 Going Concern
The consolidated financial statements have been prepared on a
going concern basis as discussed in the Director's Report on page
63 of the Annual Report.
1.4 Significant Accounting Judgements, Estimates and
Assumptions
The preparation of the Group's financial statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities, and the disclosure of contingent liabilities, at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability
affected in future periods.
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:
(a) Fair Valuation of Investment Property
The market value of investment property is determined, by an
independent external real estate valuation expert, to be the
estimated amount for which a property should exchange on the date
of the valuation in an arm's length transaction. Properties have
been valued on an individual basis. The valuation experts use
recognised valuation techniques and the principles of IFRS 13.
The valuations have been prepared in accordance with the RICS
Valuation - Professional Standards January 2014 (the "Red Book").
Factors reflected include current market conditions, annual
rentals, lease lengths, and location. The significant methods and
assumptions used by valuers in estimating the fair value of
investment property are set out in Note 13.
For properties under development the fair value is calculated by
estimating the fair value of the completed property using the
income capitalisation technique less estimated costs to completion
and an appropriate developer's margin.
(b) Operating Lease Contracts - the Group as Lessor
The Group has acquired investment properties which have
commercial property leases in place with tenants. The Group has
determined, based on an evaluation of the terms and conditions of
the arrangements, particularly the lease terms and minimum lease
payments, that it retains all the significant risks and rewards of
ownership of these properties and so accounts for the leases as
operating leases.
(c) Fair Valuation of Interest Derivatives
In accordance with IAS 39, the Group values its interest rate
derivatives at fair value. The fair values are estimated by JCRA
Limited with revaluation occurring on a six monthly basis. The
financial valuation expert will use a number of assumptions in
determining the fair values including estimations of future
interest rates and therefore future cash flows. The fair value
represents the net present value of the difference between the cash
flows produced by the contracted rate and the valuation rate.
(d) Business Combinations
The Group acquires subsidiaries that own investment properties.
At the time of acquisition, the Group considers whether each
acquisition represents the acquisition of a business or the
acquisition of an asset. The Group accounts for an acquisition as a
business combination where an integrated set of activities is
acquired in addition to the property.
Where such acquisitions are not judged to be the acquisition of
a business, they are not treated as business combinations, rather
the cost to acquire the corporate equity is allocated between the
identifiable assets and liabilities of the entity based upon their
relative fair values at the acquisition date. Accordingly, no
goodwill or additional deferred tax arises.
Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 31 December
2017. Subsidiaries are those investee entities where control is
achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, it
has:
(a) power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee);
(b) exposure, or rights, to variable returns from its involvement with the investee; and
(c) the ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar
rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group's voting rights and potential voting rights.
The Group reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the
subsidiary.
The financial statements of the subsidiaries are prepared for
the same reporting period as the Parent Company, using consistent
accounting policies. All intra-group balances, transactions and
unrealised gains and losses resulting from intra-group transactions
are eliminated in full.
Financial Assets - Loans and Receivables
The Group classifies its financial assets into one of the
categories required by the accounting standards, depending on the
purpose for which the asset was acquired. The Group has not
classified any of its financial assets as "held to maturity".
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted on an active
market. They arise principally through the provision of goods and
services to customers (e.g. trade receivables), but also
incorporate other types of contractual monetary asset. They are
initially recognised at fair value plus transaction costs that are
directly attributable to their acquisition or issue, and are
subsequently impaired if there is doubt over recovery.
The Group's loans and receivables comprise "trade and other
receivables" and "cash and cash equivalents" in the Consolidated
Statement of Financial Position.
"Cash and cash equivalents" includes cash in hand, deposits held
at call with banks, and other short-term, highly liquid investments
with original maturities of three months or less from
inception.
Financial Liabilities
The Group's financial liabilities predominantly comprise trade
payables and other short-term monetary liabilities, which are
initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.
Forward Funded Developments
Under the terms of certain funding agreements, the Group commits
to pay the total fixed price construction cost to the developer
upon entering into the agreement. As construction costs are
incurred, funds are released subject to the authorisation of the
Group's subsidiary that has contracted the development, along with
the appropriate monitoring surveyor certification.
During the period between initial investment in a forward funded
agreement and the practical completion date, the Group typically
earns licence fee income. This is payable by the developer to the
Group once the development is complete. Under IFRS, such licence
fees are deducted from the cost of the investment and are shown as
a receivable until settled. Any economic benefit of the licence fee
is reflected within the Group Statement of Comprehensive Income as
a movement in the fair value of investment property.
Hedge Accounting
The Group's activities expose it to the financial risks of
changes in interest rates.
The use of financial derivatives (interest rate swaps and caps)
is approved by the Board of Directors and is consistent with the
Group's risk management strategy.
Derivative financial instruments are initially measured at fair
value on the contract date and are subsequently remeasured to fair
value at each reporting date. Any difference between the
transaction price and the initial fair value is recognised
immediately in the Consolidated Statement of Comprehensive Income.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated or exercised, no longer qualifies
for hedge accounting or the Group chooses to end the hedging
relationship.
Cash Flow Hedges
The Group has entered into a derivative contract in order to
convert its floating rate debt to a fixed rate to hedge the
interest rate risk. This hedging instrument was designated as a
cash flow hedge at inception. Changes in fair value of the hedging
instrument are recognised in Other Comprehensive Income to the
extent that they represent an effective hedge, otherwise fair value
changes are recognised as financial costs in the Consolidated
Statement of Comprehensive Income.
Intangible Assets
Intangible assets are initially recognised at cost and then
subsequently carried at cost less accumulated amortisation and
impairment losses.
Amortisation has been charged to the Consolidated Statement of
Comprehensive Income on a straight-line basis over ten years,
except for the Hello Student(R) Application, which is being
amortised on a straight-line basis over five years due to the
nature of the asset.
Investment Property
Investment property comprises property that is held to earn
rentals or for capital appreciation, or both, and property under
development rather than for sale in the ordinary course of business
or for use in production or administrative functions.
Investment property is measured initially at cost including
transaction costs and is included in the financial statements on
unconditional exchange. Transaction costs include transfer taxes,
professional fees and initial leasing commissions to bring the
property to the condition necessary for it to be capable of
operating.
Once purchased, investment property is stated at fair value.
Gains or losses arising from changes in the fair values are
included in the Consolidated Statement of Comprehensive Income in
the period in which they arise.
Investment property is derecognised when it has been disposed
of, or permanently withdrawn from use, and no future economic
benefit is expected from its disposal. The investment property is
derecognised upon unconditional exchange. The difference between
the net disposal proceeds and the carrying amount of the asset
results in either gains or losses at the retirement or disposal of
investment property. Any gains or losses are recognised in the
Consolidated Statement of Comprehensive Income in the period of
retirement or disposal.
Joint Ventures
The Group was party to a joint arrangement when there was a
contractual arrangement that confers joint control over the
relevant activities of the arrangement to the Group and at least
one other party. Joint control is assessed under the same
principles as control over subsidiaries.
The Group classifies its interests in joint arrangements as
either:
-- Joint ventures: where the Group has rights to only the net assets of the joint arrangement.
-- Joint operations: where the Group has both the rights to
assets and obligations for the liabilities of the joint
arrangement.
In assessing the classification of interests in joint
arrangements, the Group considers:
-- The structure of the joint arrangement.
-- The legal form of joint arrangements structured through a separate vehicle.
-- The contractual terms of the joint arrangement agreement.
-- Any other facts and circumstances (including any other contractual arrangements).
Joint ventures are initially recognised in the Consolidated
Statement of Financial Position at cost and are subsequently
accounted for using the equity method, where the Group's share of
post-acquisition profits and losses and other comprehensive income
is recognised in the Consolidated Statement of Comprehensive Income
(except for losses in excess of the Group's investment in the joint
venture unless there is an obligation to make good those
losses).
Profits and losses arising on transactions between the Group and
its joint venture are recognised only to the extent of unrelated
investor's interests in the joint venture. The investor's share in
the joint venture's profits and losses resulting from these
transactions is eliminated against the carrying value of the joint
venture.
Any premium paid for an investment in a joint venture above the
fair value of the Group's share of the identifiable assets,
liabilities and contingent liabilities acquired is capitalised and
included in the carrying amount of the investment in joint venture.
Where there is objective evidence that the investment in a joint
venture has been impaired, the carrying amount of the investment is
tested for impairment in the same way as other non-financial
assets.
The Group accounts for its interests in joint operations by
recognising its share of assets, liabilities, revenues and expenses
in accordance with its contractually conferred rights and
obligations.
Operating Leases
Rentals paid under operating leases are charged to the
Consolidated Statement of Profit or Loss on a straight-line basis
over the period of the lease.
Property, Plant and Equipment
All property, plant and equipment is stated at historical cost
less depreciation. Historical cost includes expenditure which is
directly attributable to the acquisition of the asset.
Depreciation has been charged to the Consolidated Statement of
Comprehensive Income on the following basis:
-- Fixtures and fittings: 15% per annum on a reducing balance basis;
-- Computer equipment: straight-line basis over three years.
Rental Income
The Group is the lessor in respect of operating leases. Rental
income arising from operating leases on investment property is
accounted for on a straight-line basis over the lease term and is
included in gross rental income in the Consolidated Statement of
Comprehensive Income due to its operating nature.
Tenant lease incentives are recognised as a reduction of rental
revenue on a straight-line basis over the term of the lease. The
lease term is the non-cancellable period of the lease together with
any further term for which the tenant has the option to continue
the lease, where, at the inception of the lease, the Directors are
reasonably certain that the tenant will not exercise that
option.
Amounts received from tenants to terminate leases or to
compensate for dilapidations are recognised in the Consolidated
Statement of Comprehensive Income when the right to receive them
arises.
Rent and Other Receivables
Rent and other receivables are recognised at their original
invoiced value net of VAT. A provision is made when there is
objective evidence that the Group will not be able to recover
balances in full.
Segmental Information
The Directors are of the opinion that the Group is engaged in a
single segment business, being the investment in student and
commercial lettings, within the United Kingdom.
Share-Based Payments
Where share options are awarded to employees, the fair value of
the options at the date of grant is charged to the Consolidated
Statement of Comprehensive Income over the vesting period.
Non-market vesting conditions are taken into account by adjusting
the number of equity instruments expected to vest at each reporting
date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually
vest. Non-vesting conditions and market vesting conditions are
factored into the fair value of the options granted. So long as all
other vesting conditions are satisfied, a charge is made
irrespective of whether the market vesting conditions are
satisfied.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the Consolidated Statement of Comprehensive Income over the
remaining vesting period. National Insurance obligations with
respect to equity-settled share-based payments awards are accrued
over the vesting period.
Share Capital
Ordinary shares are classified as equity. External costs
directly attributable to the issuance of shares are recognised as a
deduction from equity.
Taxation
As the Group is a UK Real Estate Investment Trust ("REIT"),
profits arising in respect of the property rental business are not
subject to UK corporation tax.
Taxation in respect of profits and losses outside of the
property rental business comprises current and deferred taxes.
Taxation is recognised in Consolidated Statement of Comprehensive
Income except to the extent that it relates to items recognised as
direct movement in equity, in which case it is also recognised as a
direct movement in equity.
Current tax is the total of the expected corporation tax payable
in respect of any non-REIT taxable income for the year and any
adjustment in respect of previous periods, based on tax rates
applicable to the periods.
Deferred tax is calculated in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases, based on tax
rates enacted or substantively enacted at the balance sheet
date.
Deferred tax liabilities are recognised in full (except to the
extent that they relate to the initial recognition of assets and
liabilities not acquired in a business combination). Deferred tax
assets are only recognised to the extent that it is considered
probable that the Group will obtain a tax benefit when the
underlying temporary differences unwind.
1.5 Accounting Standards and Interpretations Issued but Not Yet
Effective
At the date of authorisation of these financial statements, the
following accounting standards had been issued which are not yet
applicable to the Group:
IFRS 9 - Financial Instruments (effective periods beginning 1
January 2018)
The Group has assessed the impact of the new standard on the
Group's results and financial position.
The Group does not expect any material impact on its financial
assets. These are held at amortised cost currently and the Group
does not consider a change in this basis of measurement. The Group
has determined that there is no material impact on moving to the
expected credit loss model on the date of transition as generally
income from students is received in advance.
The Group has assessed the impact on financial liabilities under
the new standard and again does not foresee a material impact.
The key impact to the Company will be the impact on amounts due
from Group undertakings. These balances are interest free and
repayable on demand, which are used to fund asset purchases. Under
IFRS 9, an 'expected loss' impairment model applies which requires
a loss allowance to be recognised based on expected credit losses.
The Group does not consider that there is any material impairment
as the Group undertakings would in theory be able to generate
sufficient cash from the operation and/or the proceeds of a sale of
their investment properties in order to repay any amounts due. As a
result, no cash loss is anticipated. At the present time there is
no necessity for these Group undertakings to sell any investment
properties and these amounts have not been demanded.
There may however be limited changes to presentation and
disclosure for both the Group and the Company.
IFRS 15 - Revenue from Contracts with Customers (effective
periods beginning 1 January 2018)
The new standard combines a number of previous standards,
setting out a new model for the recognition of revenue. The Group
has assessed this new five-step recognition model and there will
not be a material impact on the Group due to the simple structure
of its rental leases.
IFRS 16 - Leases (effective periods beginning 1 January
2019)
As Lessee
The Group's lease commitment for head office space will be
brought onto the statement of financial position together with the
corresponding asset. The expected impact has will be less than 0.3%
of gross assets and so will not be material to the Group.
As Lessor
The Group's accounting for lessors will not materially change as
the Group only holds short-term operating leases.
Other Amendments
Additionally, amendments to existing standards have been issued
by the IASB, including:
-- IFRS 2 (amendments) 'Classification and Measurement of Share-Based Payment Transactions'
-- IAS 7 (amendments) 'Disclosure Initiative'
-- IAS 12 (amendments) 'Recognition of Deferred Tax Assets for Unrealised Losses'
-- IFRS 10 and IAS 28 (amendments) 'Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture'
The Directors do not consider that these amendments will
materially impact the financial statements.
2. REVENUE
Group
----------------------------------
Year ended Six months to
31 December 2017 31 December 2016
GBP'000 GBP'000
------------------------------------------------------------ ---------------- ----------------
Student rental income 49,450 18,320
Commercial rental income 1,755 890
------------------------------------------------------------ ---------------- ----------------
Total revenue 51,205 19,210
------------------------------------------------------------ ---------------- ----------------
3. PROPERTY EXPENSES
Group
----------------------------------
Year ended Six months to
31 December 2017 31 December 2016
GBP'000 GBP'000
------------------------------------------------------------ ---------------- ----------------
Direct site costs 8,563 3,143
Technology services 1,001 358
Site office and utilities 8,500 2,000
Cleaning and service contracts 2,611 991
Repairs and maintenance 1,545 1,660
------------------------------------------------------------ ---------------- ----------------
Total property expenses 22,220 8,152
------------------------------------------------------------ ---------------- ----------------
4. ADMINISTRATIVE EXPENSES
Group
----------------------------------
Year ended Six months to
31 December 2017 31 December 2016
GBP'000 GBP'000
------------------------------------------------------------ ---------------- ----------------
Salaries and Directors' remuneration 4,256 2,018
Legal and professional fees 4,546 1,148
Other administrative costs 2,295 1,179
IT expenses 414 -
Irrecoverable VAT 1,578 717
------------------------------------------------------------ ---------------- ----------------
13,089 5,062
------------------------------------------------------------ ---------------- ----------------
Auditor's fees
Fees payable for the audit of the Group's annual accounts 200 175
Fees payable for the review of the Group's interim accounts 40 -
Fees payable for the audit of the Group's subsidiaries 125 86
------------------------------------------------------------ ---------------- ----------------
Total auditor's fees 365 261
------------------------------------------------------------ ---------------- ----------------
Total administrative expenses 13,454 5,323
------------------------------------------------------------ ---------------- ----------------
The Auditor has also received GBP80,000 (2016: GBPnil) in
respect of providing reporting accountant services in connection
with the equity issue in July 2017. The fees relating to the share
issue have been treated as share issue expenses and offset against
share premium account.
5. NET FINANCE COST
Group
----------------------------------
Year ended Six months to
31 December 2017 31 December 2016
Finance costs GBP'000 GBP'000
--------------------------------------- ---------------- ----------------
Fair value loss on interest rate cap 18 -
Interest expense on bank borrowings 10,330 3,680
Amortisation of loan transaction costs 1,534 551
----------------------------------------- ---------------- ----------------
11,882 4,231
--------------------------------------- ---------------- ----------------
Finance income
Fair value gain on interest rate swap 43 -
Fair value gain on interest rate cap - 1
Interest received on bank deposits 44 254
----------------------------------------- ---------------- ----------------
87 255
--------------------------------------- ---------------- ----------------
Net finance cost 11,795 3,976
----------------------------------------- ---------------- ----------------
6. EMPLOYEES AND DIRECTORS
Group Company
---------------------------------- ----------------------------------
Year ended Six months to Year ended Six months to
31 December 2017 31 December 2016 31 December 2017 31 December 2016
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- ---------------- ---------------- ---------------- ----------------
Total wages and salaries 5,353 1,469 3,479 1,021
Less: capitalised salary costs - (31) - (31)
Less: Hello Student(R) wages and salaries
included in property
expenses (2,005) (448) - -
-------------------------------------------- ---------------- ---------------- ---------------- ----------------
Total wages and salaries included in
administrative expenses 3,348 990 3,479 990
Pension costs 245 134 114 134
Cash bonus 91 164 91 164
Share-based payments 161 395 161 395
National insurance 411 335 411 335
-------------------------------------------- ---------------- ---------------- ---------------- ----------------
4,256 2,018 4,256 2,018
-------------------------------------------- ---------------- ---------------- ---------------- ----------------
The average monthly number of employees of
the Group during
the period was as follows:
Management 4 3 4 3
Administration - ESP 21 21 21 21
Administration - Hello Student(R)1 113 57 - -
-------------------------------------------- ---------------- ---------------- ---------------- ----------------
138 81 25 24
-------------------------------------------- ---------------- ---------------- ---------------- ----------------
1 This number includes Community
Ambassadors.
Group and Company
----------------------------------
Year ended Six months to
31 December 2017 31 December 2016
Directors' remuneration GBP'000 GBP'000
-------------------------------------------- ---------------- ---------------- ---------------- ----------------
Salaries and fees 1,147 625
Pension costs 131 74
Cash bonus 38 164
Share-based payments 161 395
Payments for loss of office 690 -
-------------------------------------------- ---------------- ---------------- ---------------- ----------------
2,167 1,258
-------------------------------------------- ---------------- ---------------- ---------------- ----------------
GBPnil (2016: GBP31,000) of wages and salaries are directly
related to the costs necessary to develop the Hello Student(R)
application and NAVision software and have therefore been
capitalised within intangible assets.
A summary of the Directors' emoluments, including payments for
loss of office, and including the disclosures required by the
Companies Act 2006 is set out in the Directors' Remuneration Report
on pages 53 to 62 of the Annual Report.
7. CORPORATION TAX
The Group became a Real Estate Investment Trust ("REIT") on 1
July 2014 and as a result does not pay UK corporation tax on its
profits and gains from its qualifying property rental business in
the UK provided it meets certain conditions. Non-qualifying profits
and gains of the Group continue to be subject to corporation tax as
normal.
In order to achieve and retain REIT status, several conditions
have to be met on entry to the regime and on an ongoing basis,
including:
-- at the start of each accounting period, the assets of the
property rental business (plus any cash and certain readily
realisable investments) must be at least 75% of the total value of
the Group's assets;
-- at least 75% of the Group's total profits must arise from the
tax exempt property rental business; and
-- at least 90% of the tax exempt profit of the property rental
business (excluding gains) of the accounting period must be
distributed.
-- In addition, the full UK corporation tax exemption in respect
of the profits of the property rental business will not be
available if the profit: financing cost ratio in respect of the
property rental business is less than 1.25.
-- The Group met all of the relevant REIT conditions for the year ended 31 December 2017.
The Directors intend that the Group should continue as a REIT
for the foreseeable future, with the result that deferred tax is
not required to be recognised in respect of temporary differences
relating to the property rental business.
Group
Year ended Six months to
31 December 2017 31 December 2016
GBP'000 GBP'000
---------------------------------------------------------------------------------- ---------------- ----------------
Current tax - -
---------------------------------------------------------------------------------- ---------------- ----------------
Income tax charge/(credit) for the period - -
Adjustment in respect of prior period - -
---------------------------------------------------------------------------------- ---------------- ----------------
Total current income tax charge/(credit) in the income statement - -
---------------------------------------------------------------------------------- ---------------- ----------------
Deferred tax
Total deferred income tax charge/(credit) in the income statement - -
---------------------------------------------------------------------------------- ---------------- ----------------
Total current income tax charge/(credit) in the income statement - -
---------------------------------------------------------------------------------- ---------------- ----------------
The tax assessed for the period is lower than the standard rate of corporation tax
in the
period.
Group
----------------------------------
Year ended Six months to
31 December 2017 31 December 2016
GBP'000 GBP'000
---------------------------------------------------------------------------------- ---------------- ----------------
Profit for the period 20,750 16,946
---------------------------------------------------------------------------------- ---------------- ----------------
Profit before tax multiplied by the rate of corporation tax in the UK of 19.25%
(2016: 20.00%) 3,994 3,389
Exempt property rental profits in the period (3,526) (856)
Exempt property revaluations in the period (3,049) (2,895)
Effects of:
Non-allowable expenses 310 15
Residual property revaluations in the year - -
Unutilised current year tax losses 2,271 347
---------------------------------------------------------------------------------- ---------------- ----------------
Total current income tax charge/(credit) in the income statement - -
---------------------------------------------------------------------------------- ---------------- ----------------
A deferred tax asset in respect of the tax losses generated by
the residual (non-tax exempt) business of the Group of GBP2,271,000
(31 December 2016: GBP347,000) will be recognised to the extent
that their utilisation is probable. On the basis that the residual
business is not expected to be income generating in future periods,
a deferred tax asset of GBP3,222,000 (2016: GBP951,000) has not
been recognised in respect of such losses.
8. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period. Diluted
earnings per share is calculated using the weighted average number
of shares adjusted to assume the conversion of all dilutive
potential ordinary shares.
Reconciliations are set out below:
Calculation of
Calculation of Calculation of Calculation of Calculation of Adjusted
Basic EPS Diluted EPS EPRA Basic EPS EPRA Diluted EPS Basic EPS
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------------- -------------- -------------- ---------------- --------------
Year to 31 December 2017
Profit for the year 20,750 20,750 20,750 20,750 20,750
Adjustment to include licence fee
receivable on forward funded
developments in the year - - - - 2,633
Adjustment to include development
rebate on forward funded
developments in the year - - - - 1,166
Adjustment to include discounts on
acquisition due to rental
guarantees in the year - - - - 1,346
Adjustments to remove:
Changes in fair value of investment
properties (Note 13) - - (15,836) (15,836) (15,836)
Gain on disposal of investment
property - - (1,122) (1,122) -
Changes in fair value of interest
rate derivatives (Note 19) - - 18 18 18
------------------------------------ -------------- -------------- -------------- ---------------- --------------
Earnings/Adjusted Earnings 20,750 20,750 3,810 3,810 10,077
------------------------------------ -------------- -------------- -------------- ---------------- --------------
Weighted average number of shares
('000) 540,521 540,521 540,521 540,521 540,521
Adjustment for employee share
options ('000) - 1,287 - 1,287 -
------------------------------------ -------------- -------------- -------------- ---------------- --------------
Total number shares ('000) 540,521 541,808 540,521 541,808 540,521
------------------------------------ -------------- -------------- -------------- ---------------- --------------
Per-share amount (pence) 3.84 3.83 0.70 0.70 1.86
------------------------------------ -------------- -------------- -------------- ---------------- --------------
Period to 31 December 2016
Profit for the period 16,946 16,946 16,946 16,946 16,946
Adjustment to include licence fee
receivable on forward funded
developments in the period - - - - 1,201
Adjustment to include development
rebate on forward funded
developments in the period - - - - 496
Adjustments to remove:
Changes in fair value of investment
properties (Note 13) - - (14,474) (14,474) (14,474)
Changes in fair value of share of
joint venture investment - - (557) (557) (557)
Changes in fair value of interest
rate derivatives (Note 19) - - (1) (1) (1)
------------------------------------ -------------- -------------- -------------- ---------------- --------------
Earnings/Adjusted Earnings 16,946 16,946 1,914 1,914 3,616
------------------------------------ -------------- -------------- -------------- ---------------- --------------
Weighted average number of shares
('000) 501,279 501,279 501,279 501,279 501,279
Adjustment for employee share
options ('000) - 3,990 - 3,990 -
------------------------------------ -------------- -------------- -------------- ---------------- --------------
Total number shares ('000) 501,279 505,269 501,279 505,269 501,279
------------------------------------ -------------- -------------- -------------- ---------------- --------------
Per-share amount (pence) 3.38 3.35 0.38 0.38 0.72
------------------------------------ -------------- -------------- -------------- ---------------- --------------
The ordinary number of shares is based on the time weighted
average number of shares throughout the period.
EPRA EPS, reported on the basis recommended for real estate
companies by the European Public Real Estate Association, is a key
measure of the Group's operating results.
Adjusted earnings is a performance measure used by the Board to
assess the Group's dividend payments. Licence fees, development
rebates, rental guarantees and cumulative gains made on disposals
of assets are added to EPRA earnings on the basis noted below as
the Board sees these cash-flows as supportive of dividend
payments.
The adjustment for licence fee receivable is calculated by
reference to the fraction of the total construction completed
during the period, multiplied by the total licence fee receivable
given on a forward funded asset.
The development rebate is due from developers in relation to
late completion on forward funded developments as stipulated in
development agreements.
The discounts on acquisition are in respect of the vendor
guaranteeing a rental shortfall for the first year of operation as
stipulated in the sale and purchase agreement.
Gains on disposal are the cumulative gains made at the point of
disposal.
9. NET ASSET VALUE PER SHARE (NAV)
Basic NAV per share is calculated by dividing net assets in the
Consolidated Statement of Financial Position attributable to
ordinary shareholders of the Parent by the number of ordinary
shares outstanding at the end of the period.
EPRA NAV is calculated as net assets per the Consolidated
Statement of Financial Position excluding fair value adjustments
for debt related derivatives.
EPRA NNNAV is the EPRA NAV adjusted to include the fair values
of financial instruments and debt.
Net asset values have been calculated as follows:
Group
----------------------------------
31 December 2017 31 December 2016
GBP'000 GBP'000
---------------------------------------------------------------------------------- ---------------- ----------------
Net assets per Statement of Financial Position 629,258 530,865
Adjustment to exclude the fair value loss of financial instruments 700 1,232
---------------------------------------------------------------------------------- ---------------- ----------------
EPRA NAV 629,958 532,097
---------------------------------------------------------------------------------- ---------------- ----------------
Adjustment to include the fair value of debt (11,399) (11,285)
Adjustment to include the fair value loss of financial instruments (700) (1,232)
---------------------------------------------------------------------------------- ---------------- ----------------
EPRA NNNAV 617,859 519,580
---------------------------------------------------------------------------------- ---------------- ----------------
Ordinary shares Number Number
---------------------------------------------------------------------------------- ---------------- ----------------
Issued share capital 602,887,740 501,279,071
Issued share capital plus employee options 604,175,057 505,269,491
---------------------------------------------------------------------------------- ---------------- ----------------
Pence Pence
---------------------------------------------------------------------------------- ---------------- ----------------
NAV per share basic 104.37 105.90
NAV per share diluted 104.15 105.07
EPRA NAV per share basic 104.49 106.15
EPRA NAV per share diluted 104.27 105.31
EPRA NNNAV per share basic 102.48 103.65
EPRA NNNAV per share diluted 102.26 102.83
---------------------------------------------------------------------------------- ---------------- ----------------
10. DIVIDS PAID
Group and Company
----------------------------------
Year ended Period ended
31 December 2017 31 December 2016
GBP'000 GBP'000
---------------------------------------------------------------------------------- ---------------- ----------------
Interim dividend in respect of period ended 30 June 2016 at 1.5 pence per ordinary
share - 7,519
Interim dividend of 1.5 pence per ordinary share in respect of the quarter ended
30 September
2016 - 7,519
Interim dividend of 1.55 pence per ordinary share in respect of the quarter ended
31 December
2016 7,770 -
Interim dividend of 1.525 pence per ordinary share in respect of the quarter ended
31 March
2017 7,645 -
Interim dividend of 1.525 pence per ordinary share in respect of the quarter ended
30 June
2017 7,645 -
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended
30 September
2017 7,536 -
---------------------------------------------------------------------------------- ---------------- ----------------
30,596 15,038
---------------------------------------------------------------------------------- ---------------- ----------------
On 26 February 2018, the Company announced the declaration of a
final interim dividend in respect of the financial year ended 31
December 2017, of 1.25 pence per ordinary share amounting to GBP7.5
million, which will be paid on 23 March 2018 to ordinary
shareholders.
11. FIXED ASSETS
Group Company
------------ --------- ------- ------------ --------- -------
Fixtures Computer Fixtures Computer
and fittings equipment Total and fittings equipment Total
Year ended 31 December 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------ --------- ------- ------------ --------- -------
Costs
As at 1 January 2017 455 127 582 455 127 582
Additions 35 53 88 35 53 88
---------------------------- ------------ --------- ------- ------------ --------- -------
As at 31 December 2017 490 180 670 490 180 670
---------------------------- ------------ --------- ------- ------------ --------- -------
Depreciation
As at 1 January 2017 42 31 73 42 31 73
Charge for the year 66 56 122 66 56 122
---------------------------- ------------ --------- ------- ------------ --------- -------
As at 31 December 2017 108 87 195 108 87 195
---------------------------- ------------ --------- ------- ------------ --------- -------
Net book value
As at 31 December 2017 382 93 475 382 93 475
---------------------------- ------------ --------- ------- ------------ --------- -------
Group Company
----------- -------------------- ------- ---------- ----------- -----------
Fixtures Fixtures
and Computer and Computer
fittings equipment Total fittings equipment Total
Period ended
31 December
2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ----------- ----------- -------------------- ------- ---------- ----------- -----------
Costs
As at 1 July
2016 242 140 382 94 84 178
Additions 460 43 503 361 43 404
Transfer to
Investment
Property (247) (56) (303) - - -
------------- ----------- ----------- -------------------- ------- ---------- ----------- -----------
As at 31
December
2016 455 127 582 455 127 582
------------- ----------- ----------- -------------------- ------- ---------- ----------- -----------
Depreciation
As at 1 July
2016 54 31 85 29 16 45
Charge for
the period 13 15 28 13 15 28
Depreciation on assets
transferred to Investment
Property (25) (15) (40) - - -
-------------------------- ----------- -------------------- ------- ---------- ----------- -----------
As at 31
December
2016 42 31 73 42 31 73
------------- ----------- ----------- -------------------- ------- ---------- ----------- -----------
Net book
value
As at 31
December
2016 413 96 509 413 96 509
------------- ----------- ----------- -------------------- ------- ---------- ----------- -----------
12. INTANGIBLE ASSETS
Group Company
Hello Hello Hello
Student(R) Student(R) Hello Student(R) Student(R)
Application Website NAVision Application Website NAVision
Development Development Development Total Development Development Development Total
Year ended 31
December 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Costs
As at 1
January 2017 187 792 127 1,106 - - 127 127
Additions 124 10 401 535 - - 401 401
As at 31
December 2017 311 802 528 1,641 - - 528 528
Amortisation
As at 1
January 2017 - 89 - 89 - - - -
Charge for the
year 16 76 37 129 - - 37 37
As at 31
December 2017 16 165 37 218 - - 37 37
Net book value
As at 31
December 2017 295 637 491 1,423 - - 491 491
Group Company
Hello Hello Hello
Student(R) Student(R) Hello Student(R) Student(R)
Application Website NAVision Application Website NAVision
Development Development Development Total Development Development Development Total
Period ended
31 December
2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Costs
As at 1 July
2016 - 781 - 781 - - - -
Additions 187 11 127 325 - - 127 127
As at 31
December 2016 187 792 127 1,106 - - 127 127
Amortisation
As at 1 July
2016 - 44 - 44 - - - -
Charge for the
period - 45 - 45 - - - -
As at 31
December 2016 - 89 - 89 - - - -
Net book value
As at 31
December 2016 187 703 127 1,017 - - 127 127
13. INVESTMENT PROPERTY
Group
------------------------------------------------------------------------------------------------
Investment
Investment properties long Total operational Properties under Total investment
properties freehold leasehold assets development property
Year ended 31 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
December 2017
-------------------- ------------------- -------------------- ----------------- ---------------- ----------------
As at 1 January 2017 564,882 79,628 644,510 67,380 711,890
Property additions 77,846 7,890 85,736 77,935 163,671
Disposals - - - (815) (815)
Transfer of
completed
developments 82,305 23,938 106,243 (106,243) -
Change in fair value
during the year 10,322 1,726 12,048 3,788 15,836
-------------------- ------------------- -------------------- ----------------- ---------------- ----------------
As at 31 December
2017 735,355 113,182 848,537 42,045 890,582
-------------------- ------------------- -------------------- ----------------- ---------------- ----------------
Group
------------------------------------------------------------------------------------------------
Investment Investment Total Properties Total
properties properties operational under investment
freehold long leasehold assets development property
Period ended 31 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
December 2016
-------------------- ------------------- -------------------- ----------------- ---------------- ----------------
As at 1 July 2016 368,260 75,180 443,440 70,754 514,194
Property additions 151,036 1,658 152,694 30,528 183,222
Transfer of
completed
developments 40,495 - 40,495 (40,495) -
Change in fair value
during the period 5,091 2,790 7,881 6,593 14,474
-------------------- ------------------- -------------------- ----------------- ---------------- ----------------
As at 31 December
2016 564,882 79,628 644,510 67,380 711,890
-------------------- ------------------- -------------------- ----------------- ---------------- ----------------
During the year GBP17,637,000 (31 December 2016: GBP4,917,000)
of additions related to expenditure on existing standing
assets.
In accordance with IAS 40, the carrying value of investment
property is their fair value as determined by independent external
valuers. This valuation has been conducted by CBRE Limited, as
external valuers, and has been prepared as at 31 December 2017, in
accordance with the RICS Valuation - Professional Standards January
2014 (the "Red Book"). Properties have been valued on an individual
basis. This value has been incorporated into the financial
statements.
The valuation of all property assets uses market evidence and
also includes assumptions regarding income expectations and yields
that investors would expect to achieve on those assets over time.
Many external economic and market factors, such as interest rate
expectations, bond yields, the availability and cost of finance and
the relative attraction of property against other asset classes,
could lead to a reappraisal of the assumptions used to arrive at
current valuations. In adverse conditions, this reappraisal can
lead to a reduction in property values and a loss in net asset
value.
The table below reconciles the fair value of the Investment
Property per the Consolidated Group Statement of Financial Position
and Investment Property per the independent valuation performed in
respect of each period end.
Group
--------------------------------------
As at 31 December As at 31 December
2017 2016
GBP'000 GBP'000
--------------------------------------------------- ------- ---------------- ----------------- -------------------
Value per independent valuation report 890,110 721,345
Less:
Investment in joint ventures - (9,455)
--------------------------------------------------- ------- ---------------- ----------------- -------------------
890,110 711,890
Add:
Head leases 472 -
--------------------------------------------------- ------- ---------------- ----------------- -------------------
Fair value per Group Statement of Financial
Position 890,582 711,890
--------------------------------------------------- ------- ---------------- ----------------- -------------------
Fair Value Hierarchy
The following table provides the fair value measurement hierarchy for investment property:
Quoted prices in Significant Significant
active markets observable inputs unobservable inputs
Total (Level 1) (Level 2) (Level 3)
Date of valuation 31 December 2017 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ------- ---------------- ----------------- -------------------
Assets measured at fair value:
Student properties 865,870 - - 865,870
Commercial properties 24,240 - - 24,240
--------------------------------------------------- ------- ---------------- ----------------- -------------------
As at 31 December 2017 890,110 - - 890,110
--------------------------------------------------- ------- ---------------- ----------------- -------------------
Significant observable Significant
Quoted prices in active inputs unobservable inputs
Total markets (Level 1) (Level 2) (Level 3)
Date of valuation 31 December 2016 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------- ----------------------- ---------------------- -------------------
Assets measured at fair value:
Student properties 688,390 - - 688,390
Commercial properties 23,500 - - 23,500
----------------------------------- ------- ----------------------- ---------------------- -------------------
As at 31 December 2016 711,890 - - 711,890
----------------------------------- ------- ----------------------- ---------------------- -------------------
There have been no transfers between Level 1 and Level 2 during
the period, nor have there been any transfers between Level 2 and
Level 3 during the period.
The valuations have been prepared on the basis of market value
which is defined in the RICS Valuation Standards, as: "The
estimated amount for which a property should exchange on the date
of valuation between a willing buyer and a willing seller in a
transaction after proper marketing wherein the parties had each
acted knowledgably, prudently and without compulsion."
Market value as defined in the RICS Valuation Standards is the
equivalent of fair value under IFRS.
The following descriptions and definitions relate to valuation
techniques and key unobservable inputs made in determining fair
values. The valuation techniques for student properties uses a
discounted cash flow with the following inputs:
(a) Unobservable input: Rental income
The rent at which space could be let in the market conditions
prevailing at the date of valuation.
Range GBP95 per week-GBP347 per week (31 December 2016:
GBP89-GBP337 per week).
(b) Unobservable input: Rental growth
The estimated average increase in rent based on both market
estimations and contractual arrangements.
Assumed growth of 3.08% used in valuations (31 December 2016:
2.16%).
(c) Unobservable input: Net initial yield
The net initial yield is defined as the initial gross income as
a percentage of the market value (or purchase price as appropriate)
plus standard costs of purchase.
Range: 4.65%-6.30% (31 December 2016: 5.20%-6.80%).
(d) Unobservable input: Physical condition of the property
(e) Unobservable input: Planning consent
No planning enquiries undertaken for any of the development
properties.
(f) Sensitivities of measurement of significant unobservable inputs
As set out in the significant accounting estimates and
judgements the Group's portfolio valuation is open to judgements
and is inherently subjective by nature.
As a result, the following sensitivity analysis has been
prepared by the valuer:
-3% Change in +3% Change in -0.25% Change in +0.25% Change in
Rental Income Rental Income Yield Yield
As at 31 December 2017 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------- ------------- ------------- ---------------- ----------------
(Decrease)/increase in the fair value of the
investment properties (36,260) 36,260 42,070 (38,500)
---------------------------------------------------- ------------- ------------- ---------------- ----------------
-3% Change in +3% Change in -0.25% Change in +0.25% Change
Rental Income Rental Income Yield in Yield
As at 31 December 2016 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------- ------------- ------------- ---------------- ----------------
(Decrease)/increase in the fair value of the
investment properties (30,320) 29,590 34,230 (31,350)
---------------------------------------------------- ------------- ------------- ---------------- ----------------
(g) The key assumptions for the commercial properties are net
initial yield, current rent and rental growth. A movement of 3% in
passing rent and 0.25% in the net initial yield of the commercial
properties will not have a material impact on the financial
statements.
14. JOINT VENTURES
In March 2017, the Group bought Revcap Advisors Limited's 50%
share of the Glasgow joint venture, Empiric (Glasgow) Limited for
GBP4,650,000. At the date of this transaction, this joint venture
had external debt of GBP9,534,000 which was repaid to the
lender.
Additions of investment property of GBP18,707,000 were
recognised. This acquisition of Willowbank (and the full valuation)
is reflected in the investment property movement for the year.
15. TRADE AND OTHER RECEIVABLES
Group Company
---------------------------------- ----------------------------------
31 December 2017 31 December 2016 31 December 2017 31 December 2016
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------------- ---------------- ---------------- ----------------
Trade receivables 470 729 - 11
Other receivables 2,412 6,346 154 85
Amounts owed by property managers 10,777 9,743 3,881 -
Prepayments 11,318 5,591 225 506
VAT recoverable 2,815 2,443 7 -
------------------------------------ ---------------- ---------------- ---------------- ----------------
27,792 24,852 4,267 602
------------------------------------ ---------------- ---------------- ---------------- ----------------
Amounts due from Group undertakings - - 807,451 651,897
------------------------------------ ---------------- ---------------- ---------------- ----------------
27,792 24,852 811,718 652,499
------------------------------------ ---------------- ---------------- ---------------- ----------------
At 31 December 2017, there were no material trade receivables
overdue at the year end, no aged analysis of trade receivables has
been included. The Directors consider that the carrying values of
trade and other receivables approximate to their fair value.
Amounts due from Group undertakings are interest free and due on
demand.
16. CASH AND CASH EQUIVALENTS
The amounts disclosed on the statement of cash flow as cash and
cash equivalents are in respect of the following amounts shown in
the Consolidated Statement of Financial Position:
Group Company
---------------------------------- ----------------------------------
31 December 2017 31 December 2016 31 December 2017 31 December 2016
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ---------------- ---------------- ---------------- ----------------
Cash and cash equivalents 52,721 59,399 17,091 14,997
----------------------------------- ---------------- ---------------- ---------------- ----------------
17. TRADE AND OTHER PAYABLES
Group Company
---------------------------------- ----------------------------------
31 December 2017 31 December 2016 31 December 2017 31 December 2016
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ---------------- ---------------- ---------------- ----------------
Trade payables 2,376 1,974 484 -
Other payables 3,950 3,362 274 640
Accrued expenses 16,122 10,080 1,200 382
Directors' bonus accrual 172 617 172 617
----------------------------------- ---------------- ---------------- ---------------- ----------------
22,620 16,033 2,130 1,639
----------------------------------- ---------------- ---------------- ---------------- ----------------
Amounts owed to Group undertakings - - 306,173 216,305
----------------------------------- ---------------- ---------------- ---------------- ----------------
22,620 16,033 308,303 217,944
----------------------------------- ---------------- ---------------- ---------------- ----------------
At 31 December 2017, there was deferred rental income of
GBP22,286,000 (31 December 2016: GBP15,760,000) which was rental
income that had been booked that relates to future periods.
The Directors consider that the carrying values of trade and
other payables approximate to their fair value.
Amounts due to Group undertakings are interest free and
repayable on demand.
18. BANK BORROWINGS
A summary of the drawn and undrawn bank borrowings in the period
is shown below:
Group
------------------------------------------------------------------------------------
Bank borrowings Bank borrowings Total Bank borrowings Bank borrowings Total
drawn undrawn 31 Dec drawn undrawn 31 Dec
31 Dec 2017 31 Dec 2017 2017 31 Dec 2016 31 Dec 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------------- --------------- ------- --------------- --------------- -------
At 1 January 2017 243,917 66,113 310,030 155,857 60,773 216,630
Bank borrowings from new
facilities in the period 10,000 70,000 80,000 97,346 - 97,346
Bank borrowings assumed on
acquisition of joint venture 9,534 - 9,534 - - -
Bank borrowings drawn in the
period 49,912 (49,912) - (9,286) - (9,286)
Bank borrowings repaid during
the period (9,534) - (9,534) - 5,340 5,340
-------------------------------- --------------- --------------- ------- --------------- --------------- -------
At 31 December 2017 303,829 86,201 390,030 243,917 66,113 310,030
-------------------------------- --------------- --------------- ------- --------------- --------------- -------
The Group has entered into two new separate banking facilities
during the year and drawn down on two existing available
facilities. A total of GBP59,912,000 (31 December 2016:
GBP97,346,000) of additional debt was drawn whilst having an
undrawn debt facility available of GBP86,201,000 at 31 December
2017 (31 December 2016: GBP66,113,000). The weighted average term
to maturity of the Group's debt as at the year end is 6.71 years
(31 December 2016: 7.5 years).
Bank borrowings are secured by charges over individual
investment properties held by certain asset-holding subsidiaries.
These assets have a fair value of GBP829,765,000 at 31 December
2017 (31 December 2016: GBP573,015,000). In some cases, the lenders
also hold charges over the shares of the subsidiaries and the
intermediary holding companies of those subsidiaries.
The Company entered into a new facility during the year for
GBP10,000,000 which it fully drew down. As at 31 December 2017
there were GBP67,000 of unamortised loan fees. The loan is due to
be repaid during the year ended 31 December 2020.
Any associated fees in arranging the bank borrowings unamortised
as at the period end are offset against amounts drawn on the
facilities as shown in the table below:
Group
----------------------------------
31 December 2017 31 December 2016
Non-Current GBP'000 GBP'000
----------------------------------------------------- ---------------- ----------------
Balance brought forward 243,917 155,857
Total bank borrowings in the period 69,446 97,346
Less: Bank borrowings becoming current in the period (21,190) -
Less: Bank borrowings repaid during the period (9,534) (9,286)
----------------------------------------------------- ---------------- ----------------
Bank borrowings drawn: due in more than one year 282,639 243,917
Less: Unamortised costs (5,257) (5,199)
----------------------------------------------------- ---------------- ----------------
Bank borrowings due in more than one year 277,382 238,718
----------------------------------------------------- ---------------- ----------------
Group
----------------------------------
31 December 2017 31 December 2016
Current GBP'000 GBP'000
----------------------------------------------------- ---------------- ----------------
Balance brought forward - -
Bank borrowings becoming current in the period 21,190 -
----------------------------------------------------- ---------------- ----------------
Bank borrowings drawn: due in less than one year 21,190 -
Less: Unamortised costs (423) -
----------------------------------------------------- ---------------- ----------------
Bank borrowings due in less than one year 20,767 -
----------------------------------------------------- ---------------- ----------------
Maturity of Bank Borrowings
Group
----------------------------------
31 December 2017 31 December 2016
GBP'000 GBP'000
----------------------------------------------------- ---------------- ----------------
Repayable between one and two years 55,500 23,117
Repayable between two and five years 36,039 35,500
Repayable in over five years 191,100 185,300
----------------------------------------------------- ---------------- ----------------
Bank borrowings drawn: due in more than one year 282,639 243,917
----------------------------------------------------- ---------------- ----------------
Each of the Group's facilities has an interest charge which is
payable quarterly. Three of the facilities have an interest charge
that is based on a margin above Libor whilst the other five
facility interest charges are fixed at 3.97%, 3.52%, 3.24%, 3.64%
and 2.51%. The weighted average margin payable by the Group on its
debt portfolio as at the period end was 3.25% (31 December 2016:
3.46%).
19. INTEREST RATE DERIVATIVES
To mitigate the interest rate risk that arises as a result of
entering into variable rate linked loans, the Group has entered
into an interest rate cap and interest rate swap. The interest rate
cap has been taken out to cap the rate to which three-month Libor
can rise and is coterminous with the initial term of the facility.
The premium of GBP238,500 is being settled over the five-year life
of the loan.
On the 24 October 2014 a derivative swap contract was taken out
to hedge the interest rate risk on long-term debt of GBP35.5
million. The change in valuation of this derivative at 31 December
2017 was GBP0.5 million gain (31 December 2016: GBP0.5 million
gain) recognised in other comprehensive income. GBP0.3 million of
this derivative liability has been recognised as a non-current
liability (31 December 2016: GBP0.7 million).
The Group will continue to review the level of its hedging in
the light of the current low interest rate environment.
Fair Value of Derivative Instruments
31 December 2017 31 December 2016
GBP'000 GBP'000
---------------------------------------------------------- ---------------- ----------------
Non-current assets: Interest rate derivatives - cap 1 19
Current liabilities: Interest rate derivatives - swap (424) (485)
Non-current liabilities: Interest rate derivatives - swap (257) (748)
---------------------------------------------------------- ---------------- ----------------
The interest rate derivatives are marked to market by the
relevant counterparty banks on a quarterly basis in accordance with
IAS 39. Any movement in the fair values of the interest rate cap
are taken to the net finance costs in the Group Statement of
Comprehensive Income.
31 December 2017 31 December 2016
GBP'000 GBP'000
---------------------------------------------------------------------------------- ---------------- ----------------
Interest rate cap premium - opening fair value 19 18
Changes in fair value of interest rate derivatives (18) 1
---------------------------------------------------------------------------------- ---------------- ----------------
Closing fair value 1 19
---------------------------------------------------------------------------------- ---------------- ----------------
31 December 2017 31 December 2016
GBP'000 GBP'000
---------------------------------------------------------------------------------- ---------------- ----------------
Total bank borrowings 303,829 243,917
Total fixed borrowings (191,100) (185,300)
Total floating rate borrowings 112,729 58,617
Notional value of borrowings hedged by interest rate derivative - swap 35,500 35,500
---------------------------------------------------------------------------------- ---------------- ----------------
Proportion of notional value of interest rate swap derivative to floating rate
bank borrowings 31.5% 60.6%
---------------------------------------------------------------------------------- ---------------- ----------------
Fair Value of Debt
Group
----------------------------------
Fair Value
less
Fair Value Book Value Book Value
GBP'000 GBP'000 GBP'000
-------------------- ---------- ---------- ----------
At 31 December 2017 199,039 187,640 11,399
At 31 December 2016 193,092 181,807 11,285
-------------------- ---------- ---------- ----------
The fair value of the fixed rate debt has been valued by the
independent valuation expert, JCRA. The floating rate debt has been
excluded as it is assumed the carrying value will be similar to the
fair value.
The fair value of these contracts is determined by discounting
the future cash flows estimated to be paid or received under these
contracts using a valuation technique based on forward rates
derived from short-term rates, futures, swap rates and implied
option volatility.
Fair Value Hierarchy
The following table provides the fair value measurement
hierarchy for interest rate derivatives:
Group
-----------------------------------------
Quoted prices Significant Significant
in observable
active markets inputs unobservable
inputs
(Level 1) (Level 2) (Level 3)
Assets/(liability) Date of GBP'000 GBP'000 GBP'000 GBP'000
measured at fair Valuation
value:
------------------- ------------ ------- -------------- ----------- ------------
31 December
2017
Interest rate
derivative - cap 1 - 1 -
Interest rate
derivative - swap (681) - (681) -
31 December
2016
Interest rate
derivative - cap 19 - 19 -
Interest rate
derivative - swap (1,232) - (1,232) -
--------------------------------- ------- -------------- ----------- ------------
The fair value of these contracts is recorded in the Group
Consolidated Statement of Financial Position and is determined by
forming an expectation that interest rates will exceed strike rates
and discounting these future cash flows at the prevailing market
rates as at the period end.
There have been no transfers between Level 1 and Level 2 during
the period, nor have there been any transfers between Level 2 and
Level 3 during the period.
20. SHARE CAPITAL
Ordinary Shares Issued and Fully Paid at 1p Each
Group and Company Group and Company
---------------------------------- ----------------------------------
31 December 2017 31 December 2017 31 December 2016 31 December 2016
Number GBP'000 Number GBP'000
-------------------------------------------- ---------------- ---------------- ---------------- ----------------
Balance brought forward 501,279,071 5,013 501,279,071 5,013
Issue in relation to an equity issuance on
24 July 2017 100,917,432 1,009 - -
Issue in relation to LTIP equity issuances 691,237 7 - -
-------------------------------------------- ---------------- ---------------- ---------------- ----------------
Balance carried forward 602,887,740 6,029 501,279,071 5,013
-------------------------------------------- ---------------- ---------------- ---------------- ----------------
On 24 July 2017 100,917,432 shares of GBP0.01 were issued at an
issue price of GBP1.09, raising GBP110,000,000.
On 11 August 2017 (552,990) and 4 October 2017 (138,247), a
total of 691,237 ordinary shares of GBP0.01 were issued as part of
the Directors' LTIP. See Note 28 for more detail.
21. SHARE PREMIUM
The share premium relates to amounts subscribed for share
capital in excess of nominal value:
Group and
Company
------------------------
31 December 31 December
2017 2016
GBP'000 GBP'000
------------------------------------------- ----------- -----------
Balance brought forward 359,958 359,958
Share premium on ordinary shares issued
in relation to further equity share
issuance 108,991 -
Costs associated with the issue of
ordinary shares (2,430) -
Share premium on share options exercised 749 -
------------------------------------------- ----------- -----------
Balance carried forward 467,268 359,958
------------------------------------------- ----------- -----------
22. CAPITAL REDUCTION RESERVE
Group and
Company
------------------------
31 December 31 December
2017 2016
GBP'000 GBP'000
------------------------------------------- ----------- -----------
Balance brought forward 106,198 121,236
Less interim dividends declared and
paid per Note 10 (30,596) (15,038)
------------------------------------------- ----------- -----------
Balance carried forward 75,602 106,198
------------------------------------------- ----------- -----------
The capital reduction reserve account
is a distributable reserve.
Refer to Note 10 for details of the
declaration of dividends to Shareholders.
23. LEASING AGREEMENTS
Future total minimum lease payments
under non-cancellable operating leases
fall due as follows:
Group
------------------------
31 December 31 December
2017 2016
GBP'000 GBP'000
------------------------------------------- ----------- -----------
Less than one year 361 361
Between one and five years 1,446 1,446
More than five years 1,355 1,717
------------------------------------------- ----------- -----------
Total 3,162 3,524
------------------------------------------- ----------- -----------
Future total minimum lease receivables
under non-cancellable operating leases
on investment properties are as follows:
Group
------------------------
31 December 31 December
2017 2016
GBP'000 GBP'000
------------------------------------------- ----------- -----------
Less than one year 41,180 32,834
Between one and five years 12,648 12,862
More than five years 11,887 10,727
------------------------------------------- ----------- -----------
Total 65,715 56,423
------------------------------------------- ----------- -----------
The above relates to contracted student rent, commercial leases
and nomination agreements with UK universities in place as at 31
December 2017. The impact of student leases for the forthcoming
academic year signed by 31 December 2017 have not been included as
the certainty of income does not arise until the tenant takes
occupation of the accommodation.
24. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 December 2017 (31
December 2016: GBPnil).
25. CAPITAL COMMITMENTS
The Group had capital commitments relating to forward funded
developments totalling GBP22,821,000 at 31 December 2017 (31
December 2016: GBP61,443,000).
26. RELATED PARTY DISCLOSURES
Key management personnel
Key management personnel are considered to comprise the Board of
Directors. Please refer to Note 6 for details of the remuneration
for the key management, and page 60 of the Annual Report for
dividends received by Directors in the year.
Share Capital
Share transactions of related parties during the year ended 31
December 2017 were as follows:
Name How related No of shares Transaction Date
--------------- ----------- ------------ ----------- ------------
Tim Attlee Director 186,300 Disposal 19 January
2017
Paul Hadaway Ex-Director 276,495 Exercised 11 August
Options 2017
Tim Attlee Director 276,495 Exercised 11 August
Options 2017
Paul Hadaway Ex-Director 130,521 Disposal 17 August
2017
Tim Attlee Director 130,521 Disposal 17 August
2017
Paul Hadaway Director 46,000 Purchased 15 September
2017
Michael Enright Ex-Director 138,247 Exercised 4 October
Options 2017
Lynne Fennah Director 55,400 Purchased 21 December
2017
--------------- ----------- ------------ ----------- ------------
Share-based Payments
On 25 April 2017, nil cost options were granted to Executive
Directors in the amounts of:
Paul Hadaway 35,779 shares
Tim Attlee 35,779 shares
On 11 August 2017, Executive Directors exercised vested nil cost
options in the amounts of:
Paul Hadaway 276,495 shares
Tim Attlee 276,495 shares
On 4 October 2017, an ex-Executive Director exercised vested nil
cost options in the amount of:
Michael Enright 138,247 shares
On 12 December 2017, nil cost options were granted to an
Executive Director in the amount of:
Lynne Fennah 135,610 shares
Details of the shares granted are outlined in Note 28 -
Share-based payments.
Payment for Service
Payments for professional services totalling GBP150,000
(excluding VAT) were made to Real Estate Venture Capital Management
LLP (Revcap). Revcap is deemed to be a related party as one of
their employees, Stephen Alston, is a Non-Executive Director of the
Company.
Acquisition of Joint Venture Company
On 31 March 2017, the Group acquired the remaining 50%
shareholding in Empiric (Glasgow) Limited from the joint venture
partner, Revcap Advisors Limited for GBP4,560,000. Revcap Advisors
Limited is a sister company of Real Estate Venture Capital
Management LLP.
27. SUBSEQUENT EVENTS
Property Transactions
Edinburgh - King's Stables Road
On 10 January 2018, the Group acquired the freehold land for
GBP5.0 million (excluding costs). The land is part of a forward
funded agreement for a 166-bed development.
Falmouth - Ocean Bowl
On 25 January 2018, the Group acquired the freehold land for
GBP1.9 million (excluding costs). The land has planning permission
for a 190-bed development.
Southampton - Emily Davies
On 12 February 2018, the Group acquired the freehold of a
240-bed student accommodation scheme in Southampton for GBP10.6
million (excluding costs). The property is fully occupied and
leased by Southampton Solent University ("SSU") on a Full Repairing
and Insuring basis until September 2019.
28. SHARE-BASED PAYMENTS
The Company operates three equity-settled share-based
remuneration schemes for Executive Directors under the deferred
annual bonus, long-term incentive plan and the value delivery plan.
The details of the schemes are included in the Remuneration
Committee Report on page 59 of the Annual Report.
Issued
On 25 April 2017, the Company granted nil-cost options over a
total of 71,558 (Paul Hadaway 35,779, Tim Attlee 35,779) ordinary
shares pursuant to the deferred shares element of the annual bonus
awards for the financial period ended 31 December 2016 (the "Annual
Bonus Awards").
On 12 December 2017, the Company granted nil-cost options over a
total of 135,610 ordinary shares pursuant to the Empiric 2014
Long-Term Incentive Plan (the "2017-2020 LTIP Awards") to Lynne
Fennah the Company's Chief Financial Officer.
Exercised
On 11 August 2017 Paul Hadaway and Tim Attlee, Directors of the
Company, each exercised vested nil-cost options over 276,495
ordinary shares in the Company ("ordinary shares") pursuant to the
Empiric Student Property Plc 2014 Long-Term Incentive Plan (the
"Exercise").
On 4 October 2017, Michael Enright, an ex-Director of the
Company, exercised vested nil-cost options over 138,247 ordinary
shares in the Company ("ordinary shares") pursuant to the Empiric
Student Property Plc 2014 Long-Term Incentive Plan.
None of the nil-cost options are currently exercisable. The
weighted average remaining contractual life of these options was
1.5 years (2016: 1.8 years).
During the year to 31 December 2017, the amount recognised
relating to the options was GBP161,000.
The awards have the benefit of dividend equivalence. The
Remuneration Committee will determine on or before vesting whether
the dividend equivalent will be provided in the form of cash and/or
shares.
Group and Company
----------------------------------
31 December 2017 31 December 2016
------------------------------------- ---------------- ----------------
Outstanding number brought forward 3,913,420 2,880,391
Granted during the period 207,198 1,033,029
Vested & exercised during the period (691,237) -
Lapsed during the period(1) (1,951,564) -
------------------------------------- ---------------- ----------------
Outstanding number carried forward 1,477,817 3,913,420
------------------------------------- ---------------- ----------------
1 A number of these related to past Directors. See pages 59 and
60 of the Annual Report for more detail.
The fair value on date of grant for the nil-cost options under
the 2017-2020 LTIP Awards and Annual Bonus Awards were priced using
the Monte Carlo pricing model.
The following information is relevant in the determination of
the fair value of these nil-cost options in the period:
Annual Bonus LTIP Awards
Award
---- -------------------------------------- ------------ -----------
(a) Weighted average share price at grant GBP1.11 GBP1.07
date of
(b) Exercise price of GBPnil GBPnil
(c) Contractual life of 3 years 3 years
(d) Expected volatility of 15.60% 17.86%
(e) Expected dividend yield of 6.30% 8.31%
(f) Risk free rate of 0.79% 1.07%
(g) The volatility assumption is based on a statistical
analysis of daily share prices of comparator
companies over the last three years.
(h) The TSR performance conditions have been considered
when assessing the fair value of the options.
---- -----------------------------------------------------------------
29. FINANCIAL RISK MANAGEMENT
Financial Instruments
The Group's principal financial assets and liabilities are those
which arise directly from its operations: trade and other
receivables, trade and other payables and cash and cash
equivalents.
Set out below is a comparison by class of the carrying amounts
and fair value of the Group's financial instruments that are shown
in the financial statements:
Risk Management
The Group is exposed to market risk (including interest rate
risk), credit risk and liquidity risk.
The Board of Directors oversees the management of these
risks.
The Board of Directors reviews and agrees policies for managing
each of these risks which are summarised below.
(a) Market Risk
Market risk is the risk that the fair values of financial
instruments will fluctuate because of changes in market prices. The
financial instruments held by the Group that are affected by market
risk are principally the Group's bank balances along with the
interest rate derivatives (swap and cap) entered into to mitigate
interest rate risk.
The Group monitors its interest rate exposure on a regular
basis. A sensitivity analysis performed to ascertain the impact on
profit or loss and net assets of a 50 basis point shift upwards in
interest rates would result in an increase in finance costs of
GBP386,000 (2016: GBP116,000).
(b) Credit Risk
Credit risk is the risk that counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risks
from both its leasing activities and 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 based on an extensive
credit rating scorecard 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.
(i) Tenant Receivables
Tenant receivables, primarily tenant rentals, are presented in
the Consolidated Statement of Financial Position net of allowances
for doubtful receivables and are monitored on a case-by-case basis.
Credit risk is primarily managed by requiring tenants to pay
rentals in advance and performing tests around strength of covenant
prior to acquisition. There are no trade receivables past due as at
the period end.
(ii) Credit Risk Related to Financial Instruments and Cash
Deposits
One of the principal credit risks of the Group arises with the
banks and financial institutions. The Board of Directors believes
that the credit risk on short-term deposits and current account
cash balances are limited because the counterparties are banks, who
are committed lenders to the Group, with high credit ratings
assigned by international credit-rating agencies.
Credit Ratings (Moody's) Long Term Outlook
-------------------------- --------- --------
AIB Group Baa1 Positive
Canada Life Aa3 Stable
Mass Mutual Aa2 Negative
Royal Bank of Scotland Plc Baa3 Stable
Lloyds Bank Plc Aa3 Stable
-------------------------- --------- --------
(c) Liquidity Risk
Liquidity risk arises from the Group's management of working
capital and going forward, the finance charges and principal
repayments on any borrowings, of which currently there are none. It
is the risk that the Group will encounter difficulty in meeting its
financial obligations as they fall due as the majority of the
Group's assets are property investments and are therefore not
readily realisable. The Group's objective is to ensure it has
sufficient available funds for its operations and to fund its
capital expenditure. This is achieved by continuous monitoring of
forecast and actual cash flows by management.
The following table sets out the contractual obligations
(representing undiscounted contractual cash flows) of financial
liabilities:
Group
-------------------------------------------------------------------------------
On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ------------------ -------------- ------------ --------- -------
At 31 December 2017
Bank borrowings and interest - 2,608 29,015 121,685 233,663 386,971
Swap derivatives - 123 365 342 - 830
Trade and other payables - 22,620 - - - 22,620
----------------------------- --------- ------------------ -------------- ------------ --------- -------
- 25,351 29,380 122,027 233,663 410,421
----------------------------- --------- ------------------ -------------- ------------ --------- -------
Group
-------------------------------------------------------------------------------
On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ------------------ -------------- ------------ --------- -------
At 31 December 2016
Bank borrowings and interest - 2,129 6,387 94,067 217,196 319,779
Swap derivatives - 123 365 830 - 1,318
Trade and other payables - 16,033 - - - 16,033
----------------------------- --------- ------------------ -------------- ------------ --------- -------
- 18,285 6,752 94,897 217,196 337,130
----------------------------- --------- ------------------ -------------- ------------ --------- -------
Company
-------------------------------------------------------------------------------
On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ------------------ -------------- ------------ --------- -------
At 31 December 2017
Bank borrowings and interest - 54 161 10,252 - 10,467
Swap derivatives - - - - - -
Trade and other payables - 2,130 - - - 2,130
----------------------------- --------- ------------------ -------------- ------------ --------- -------
- 2,184 161 10,252 - 12,597
----------------------------- --------- ------------------ -------------- ------------ --------- -------
Company
-------------------------------------------------------------------------------
On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ------------------ -------------- ------------ --------- -------
At 31 December 2016
Bank borrowings and interest - - - - - -
Swap derivatives - - - - - -
Trade and other payables - 1,639 - - - 1,639
----------------------------- --------- ------------------ -------------- ------------ --------- -------
- 1,639 - - - 1,639
----------------------------- --------- ------------------ -------------- ------------ --------- -------
30. CAPITAL MANAGEMENT
The primary objectives of the Group's capital management is to
ensure that it remains a going concern and continues to qualify for
UK REIT status.
The Board of Directors monitors and reviews the Group's capital
so as to promote the long-term success of the business, facilitate
expansion and to maintain sustainable returns for shareholders.
Capital consists of ordinary shares, other capital reserves and
retained earnings.
31. SUBSIDIARIES
Those subsidiaries listed below are considered to be all
subsidiaries of the Company at 31 December 2017, with the shares
issued being ordinary shares. All subsidiaries are registered in
London at the following address: 6th Floor, Swan House, 17-19
Stratford Place, London, England, W1C 1BQ. In each case the country
of incorporation is England and Wales.
Company
------------------------
31 December 31 December
2017 2016
GBP'000 GBP'000
---------------------------- ----------- -----------
As at 1 January 2017 5,118 5,117
Additions in the period 7,453 1
---------------------------- ----------- -----------
Balance at 31 December 2017 12,571 5,118
---------------------------- ----------- -----------
Status Ownership Principal
Activity
-------------------------------------- -------------- --------- --------------------
Brunswick Contracting Limited Active 100% Property Contracting
Empiric (Alwyn Court) Limited Active 100% Property Investment
Empiric (Baptist Chapel) Limited Active 100% Property Investment
Empiric (Bath Canalside) Limited Active 100% Property Investment
Empiric (Bath James House) Limited Active 100% Property Investment
Empiric (Bath JSW) Limited Active 100% Property Investment
Empiric (Bath Oolite Road) Active 100% Property Investment
Empiric (Bath Piccadilly Place) Active 100% Property Investment
Empiric (Birmingham Emporium) Active 100% Property Investment
Limited
Empiric (Birmingham) Limited Active 100% Property Investment
Empiric (Bristol) Leasing Limited Dormant 100% Property Leasing
Empiric (Bristol) Limited Active 100% Property Investment
Empiric (Buccleuch Street) Leasing Dormant 100% Property Leasing
Limited
Empiric (Buccleuch Street) Limited Active 100% Property Investment
Empiric (Canterbury Franciscans Active 100% Property Investment
Court) Limited
Empiric (Canterbury Pavilion Court) Active 100% Property Investment
Limited
Empiric (Cardiff Wndsor House) Dormant 100% Property Leasing
Leasing Limited
Empiric (Cardiff Wndsor House) Active 100% Property Investment
Limited
Empiric (Centro Court) Limited Active 100% Property Investment
Empiric (Claremont Newcastle) Active 100% Property Investment
Limited
Empiric (College Green) Limited Active 100% Property Investment
Empiric (Developments) Limited Active 100% Development
Management
Empiric (Durham St Margarets) Active 100% Property Investment
Limited
Empiric (Edge Apartments) Limited Active 100% Property Investment
Empiric (Edinburgh KSR) Limited Active 100% Property Investment
Empiric (Egham High Street) Limited Active 100% Property Investment
Empiric (Exeter Bishop Blackall Active 100% Property Investment
School) Limited
Empiric (Exeter Bonhay Road) Leasing Dormant 100% Property Leasing
Limited
Empiric (Exeter Bonhay Road) Limited Active 100% Property Investment
Empiric (Exeter City Service) Active 100% Property Investment
Limited
Empiric (Exeter DCL) Limited Active 100% Property Investment
Empiric (Exeter Isca Lofts) Limited Active 100% Property Investment
Empiric (Exeter LL) Limited Active 100% Property Investment
Empiric (Falmouth Maritime Studios) Active 100% Property Investment
Limited
Empiric (Falmouth Ocean Bowl) Active 100% Property Investment
Limited
Empiric (Glasgow Ballet School) Active 100% Property Investment
Limited
Empiric (Glasgow Bath St) Limited Active 100% Property Investment
Empiric (Glasgow George Square) Dormant 100% Property Leasing
Leasing Limited
Empiric (Glasgow George Square) Active 100% Property Investment
Limited
Empiric (Glasgow George St) Leasing Active 100% Property Leasing
Limited
Empiric (Glasgow George St) Limited Active 100% Property Investment
Empiric (Glasgow Otago Street) Dormant 100% Property Investment
Limited
Empiric (Glasgow) Leasing Limited Active 100% Property Leasing
Empiric (Glasgow) Limited Active 100% Property Investment
Empiric (Hatfield CP) Limited Active 100% Property Investment
Empiric (Huddersfield Oldgate Dormant 100% Property Leasing
House) Leasing Limited
Empiric (Huddersfield Oldgate Active 100% Property Investment
House) Limited
Empiric (Huddersfield Snow Island) Active 100% Property Leasing
Leasing Limited
Empiric (Lancaster Penny Street Active 100% Property Investment
1) Limited
Empiric (Lancaster Penny Street Active 100% Property Investment
2) Limited
Empiric (Lancaster Penny Street Active 100% Property Investment
3) Limited
Empiric (Leeds Algernon) Limited Active 100% Property Investment
Empiric (Leeds Cookridge) Limited Active 100% Property Investment
Empiric (Leeds Mary Morris) Limited Active 100% Property Investment
Empiric (Leeds Pennine House) Active 100% Property Investment
Limited
Empiric (Leeds St Marks) Limited Active 100% Property Investment
Empiric (Leicester 134 New Walk) Active 100% Property Investment
Limited
Empiric (Leicester 136-138 New Active 100% Property Investment
Walk) Limited
Empiric (Leicester 140-142 New Active 100% Property Investment
Walk) Limited
Empiric (Leicester 160 Upper New Active 100% Property Investment
Walk) Limited
Empiric (Leicester Bede Park) Active 100% Property Investment
Limited
Empiric (Leicester De Montfort Active 100% Property Investment
Square) Limited
Empiric (Leicester Hosiery Factory) Active 100% Property Investment
Limited
Empiric (Leicester Peacock Lane) Active 100% Property Investment
Limited
Empiric (Leicester Shoe & Boot Active 100% Property Investment
Factory) Limited
Empiric (Liverpool Art School/Maple Active 100% Property Investment
House) Limited
Empiric (Liverpool Chatham Lodge) Active 100% Property Investment
Limited
Empiric (Liverpool Grove Street) Active 100% Property Investment
Limited
Empiric (Liverpool Hahnemann Building) Active 100% Property Investment
Limited
Empiric (Liverpool Octagon/Hayward) Active 100% Property Investment
Limited
Empiric (London Camberwell) Limited Active 100% Property Investment
Empiric (London Francis Gardner) Active 100% Property Investment
Limited
Empiric (London Road) Limited Active 100% Property Investment
Empiric (Manchester Ladybarn) Active 100% Property Investment
Limited
Empiric (Manchester Victoria Point) Active 100% Property Investment
Limited
Empiric (Newcastle Metrovick) Active 100% Property Investment
Limited
Empiric (Northgate House) Limited Active 100% Property Investment
Empiric (Nottingham 95 Talbot) Active 100% Property Investment
Limited
Empiric (Nottingham Frontage) Dormant 100% Property Leasing
Leasing Limited
Empiric (Nottingham Frontage) Active 100% Property Investment
Limited
Empiric (Oxford Stonemason) Limited Active 100% Property Investment
Empiric (Picturehouse Apartments) Active 100% Property Investment
Limited
Empiric (Portobello House) Limited Active 100% Property Investment
Empiric (Portsmouth Elm Grove Active 100% Property Investment
Library) Limited
Empiric (Portsmouth Europa House) Active 100% Property Leasing
Leasing Limited
Empiric (Portsmouth Europa House) Active 100% Property Investment
Limited
Empiric (Portsmouth Kingsway House) Active 100% Property Investment
Limited
Empiric (Portsmouth Registry) Active 100% Property Investment
Limited
Empiric (Provincial House) Leasing Active 100% Property Leasing
Limited
Empiric (Provincial House) Limited Active 100% Property Investment
Empiric (Reading Saxon Court) Active 100% Property Leasing
Leasing Limited
Empiric (Reading Saxon Court) Active 100% Property Investment
Limited
Empiric (Snow Island) Limited Active 100% Property Investment
Empiric (Southampton) Leasing Active 100% Property Leasing
Limited
Empiric (Southampton) Limited Active 100% Property Investment
Empiric (St Andrews Ayton House) Active 100% Property Leasing
Leasing Limited
Empiric (St Andrews Ayton House) Active 100% Property Investment
Limited
Empiric (St Peter Street) Leasing Dormant 100% Property Leasing
Limited
Empiric (St Peter Street) Limited Active 100% Property Investment
Empiric (Stirling Forthside) Leasing Dormant 100% Property Leasing
Limited
Empiric (Stirling Forthside) Limited Active 100% Property Investment
Empiric (Stoke Caledonia Mill) Active 100% Property Investment
Limited
Empiric (Summit House) Limited Active 100% Property Investment
Empiric (Talbot Studios) Limited Active 100% Property Investment
Empiric (Trippet Lane) Leasing Active 100% Property Leasing
Limited
Empiric (Trippet Lane) Limited Active 100% Property Investment
Empiric (Twickenham Grosvenor Active 100% Property Investment
Hall) Limited
Empiric (York Foss Studios 1) Active 100% Property Investment
Limited
Empiric (York Lawrence Street) Active 100% Property Investment
Limited
Empiric (York Percy's Lane) Limited Active 100% Property Investment
Empiric Acquisitions Limited Active 100% Intermediate
Holding Company
Empiric Investment Holdings (Four) Active 100% Holding Company
Limited
Empiric Investment Holdings (Three) Active 100% Holding Company
Limited
Empiric Investment Holdings (Two) Active 100% Holding Company
Limited
Empiric Investment Holdings (Five) Active 100% Holding Company
Limited
Empiric Investment Holdings (Six) Active 100% Holding Company
Limited
Empiric Investments (Five) Limited Active 100% Immediate
Holding Company
Empiric Investments (Three) Limited Active 100% Immediate
Holding Company
Empiric Investments (Four) Limited Active 100% Immediate
Holding Company
Empiric Investments (One) Limited Active 100% Immediate
Holding Company
Empiric Investments (Six) Limited Active 100% Immediate
Holding Company
Empiric Investments (Two) Limited Active 100% Immediate
Holding Company
Empiric Student Property Limited Active 100% Property Management
Empiric Student Property Trustees Active 100% Trustee of
Limited EBT
Hello Student Management Limited Active 100% Property Management
Grove St Studios Ltd In liquidation 100% Property Investment
Spring Roscoe Limited In liquidation 100% Property Investment
-------------------------------------- -------------- --------- --------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGUGWWUPRPWU
(END) Dow Jones Newswires
March 21, 2018 03:01 ET (07:01 GMT)
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