TIDMESP
RNS Number : 3582Y
Empiric Student Property PLC
21 August 2018
21 August 2018
Empiric Student Property plc
("Empiric" or the "Company" or, together with its subsidiaries,
the "Group")
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2018
Empiric Student Property plc (ticker: ESP), the owner and
operator of premium student accommodation across the UK, is today
reporting its half year results for the six months ended 30 June
2018.
Financial Performance
30 June 2018 2017 Increase /
decrease
Property valuation(1) GBP945.2m GBP890.1m(2) +6%
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NAV per share (basic) 105.54p 104.37p(2) +1%
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Gross annualised rent(3) GBP66.6m GBP65.3m(2) +2%
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Revenue GBP31.3m GBP24.5m(4) +28%
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Gross margin 62.3% 60.4%(4) +3%
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Dividends declared per
share 2.50p 3.05p(4) -18%
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Dividend cover 60.0% 34.4%(4) +74%
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Earnings per share (basic) 3.60p 2.89p(4) +25%
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EPRA earnings per share
(basic) 1.34p 0.29p(4) +362%
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Adjusted earnings per
share 1.50p 1.05p(4) +43%
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-- Property portfolio valued at GBP945.2 million at 30 June 2018
(31 December 2017: GBP890.1 million), up 6.2%, including a 3.0%
like-for-like valuation increase
-- Net asset value ("NAV") per share growth of 1.1% to 105.54
pence (31 December 2017 104.37 pence)
-- Adjusted earnings per share ("EPS") of 1.50 pence (H1 2017:
1.05 pence), resulting in dividend cover for the period of
60.0%
-- Dividends declared of 2.5 pence per share, in line with 5.0 pence target for 2018
-- Administration expenses reduced to GBP4.9 million (H1 2017:
GBP7.6 million), on track to meet full-year target of GBP10
million
-- Gross margin of 62.3% (H1 2017: 60.4%), reflecting good
progress with reducing property costs
-- Gross annualised rent on 87 operating properties of GBP66.6
million for the 2017/18 academic year (31 December 2017: GBP65.3
million for 85 operating properties)
-- Net debt of GBP314.8 million at 30 June 2018 (31 December
2017: GBP298.1 million), resulting in a loan-to-value ratio ("LTV")
of 34.2% (31 December 2017: 32.9%), in line with our long-term
target of 35.0% and maximum of 40.0%. Aggregate cost of debt of
3.1% with a weighted average term to maturity of 5.8 years
Operational Performance
-- Bookings of 87% at 14 August 2018(5) , putting us on track
for full occupancy of 97% for the 2018/19 academic year (Note:
Bookings of 87% at 14 August 2018 is contained within the Interim
Report. Bookings increased to 89% at 20 August 2018 as set out in
the analyst presentation on 21 August).
-- Like-for-like income growth of above 6.0% for the 2018/19
academic year, resulting from an average annualised student rental
growth of 2.0% and increase in the weighted average lease term from
48.5 weeks to 50.5 weeks at the date of this report
-- Facilities management for one third of our assets will be
in-house for the start of the 2018/19 academic year, with all of
our facilities management in-house from 1 April 2019
-- 100% of our direct let properties will be let and maintained
under the Hello Student(R) brand for the start of the 2018/19
academic year
-- Wide range of other operational improvements, including
rationalising staff numbers in Hello Student(R) , refocusing
marketing spend and bringing administration of utilities in-house,
helping to ensure our business is fit-for-purpose for the long
term
-- 95 assets with 9,398 beds contracted at 30 June 2018 (31
December 2017: 94 assets with 9,158 beds), in 29 prime university
cities and towns
-- 87 operating or revenue-generating assets at the period end
(31 December 2017: 85 assets), with an average valuation yield of
5.7% and average yield on cost of 6.5%
-- Acquired one standing asset with 240 beds, for GBP10.6 million
-- All developments due to be completed for the 2018/19 academic
year are progressing satisfactorily
Board and Management Changes
-- Lynne Fennah appointed to dual roles of Chief Operating
Officer and Chief Financial Officer from 1 July 2018, formalising
her responsibility for our operations
-- Mark Pain appointed as Non-Executive Chairman with effect from 1 September 2018
Post Period End Highlights
-- On 21 August 2018, the Board declared a dividend of 1.25
pence per ordinary share in respect of the quarter ended 30 June
2018, which is to be paid on 14 September 2018 to shareholders on
the register on 31 August 2018
-- On 14 August 2018 the Group drew down the first GBP20 million
of its GBP70 million three-year revolving credit facility
Notes
1 Valuation is net of head lease adjustment, see Notes for detail.
2 As at 31 December 2017.
3 Gross annualised rent includes commercial revenue and marketed
student revenue at full occupancy (the Group considers student
occupancy levels of 97% and above as fully let).
4 Six months to 30 June 2017.
Stuart Beevor, Acting Non-Executive Chairman, commented:
"This has been a positive six months for the Group and while
there is more to do, we are confident that we are on track to
deliver our target levels of performance for the full year and
beyond.
Empiric has attractive assets in the right locations, giving us
a portfolio that would be difficult to replicate. We also have a
strong leadership team, with a clear plan for maximising the
performance of those assets. As the operational transformation
takes effect, and the financial results reflect that
transformation, management is able to extend its focus to the
further enhancement of NAV growth. This will be achieved through
deploying the proceeds of the sale of non-core assets into
development and forward funding projects in our core locations.
Our total return target remains at 10% p.a. based on our
expectations for the performance of our stabilised operating
portfolio and development programme."
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Empiric Student Property plc (via Newgate below)
Tim Attlee (Acting Chief Executive
Officer & Chief Investment Officer)
Lynne Fennah (Chief Financial & Operating
Officer)
Jefferies International Limited Tel: 020 7029 8000
Gary Gould
Stuart Klein
Newgate (PR Adviser) Tel: 020 7680 6550
James Benjamin Em: empiric@newgatecomms.com
Anna Geffert
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.
Meeting for investors and analysts and audio recording of
results available
A meeting for investors and analysts will be held at 9.00am
today at:
Newgate Communications
Sky Light City Tower
50 Basinghall Street
London, EC2V 5DE
In addition, later in the day an audio recording of this meeting
and the presentation will also be available to download from the
Company's website: www.empiric.co.uk
CHAIRMAN'S STATEMENT
This was an important six months for the Group, as the actions
taken by the executive team have begun to deliver the performance
improvements the Board targeted. We are therefore on track to meet
our principal objectives for the 2018 financial year.
Performance and Business Review
At the time of our full year results in March, we set out a plan
to transform the Group's financial and operational performance. I
am pleased to report that the executive team has made good progress
with implementing this plan. Their actions have reduced costs while
maintaining service levels and improving our operations, systems
and forecasting, giving us a business that is increasingly fit for
the future.
To achieve the financial performance the Group should be
delivering, we need to maximise the revenue we generate from our
assets and rigorously control costs. Bookings for the 2018/19
academic year are progressing well and stood at 87% at 14 August
2018. This compares with 78% at the same point last year and 76% at
our trading update on 5 July 2018. We have enhanced our processes
for converting bookings into signed leases and benefited from
improved information on the performance of each building, allowing
us to quickly take corrective action. As a result, we continue to
target full occupancy of 97% for the 2018/19 academic year.
We aim to increase our annual gross margin from the 57% achieved
in 2017 to 70% by 2019, with significant progress towards that
target this year. The gross margin in the first half of 2018 was
62.3%, as we saw the benefits of a number of cost-control measures,
including rationalising staff numbers in Hello Student(R) .
The Hello Student(R) brand is fundamental to our ability to
maximise revenue from our assets and all of our direct let
properties will be let and marketed as Hello Student(R) from 1
September 2018.
Our project to bring facilities management in-house is going
well. Facilities management for one third of our assets will be
in-house from 1 September 2018, with all facilities management
in-house from 1 April 2019.
We have also successfully reduced administrative expenses and
are on track to deliver our targeted expenditure of GBP10 million,
26% lower than the previous year.
More information on the improvements to our operational and
financial performance during the period can be found in the
Management Report below.
Dividends
Our dividend target for 2018 is 5.0 pence per share. We have
declared two interim dividends in respect of the six months to 30
June, which totalled 2.5 pence per share, in line with our full
year target. We continue to expect the 2019 dividend to be fully
covered by adjusted earnings, with substantial progress towards
this during 2018. The total dividend for the first half was 60%
covered by adjusted earnings, in line with our expectations.
Portfolio and Valuation
During the period we added one standing asset to the portfolio,
Emily Davies Hall in Southampton, for GBP10.6 million excluding
costs. At the period end, this asset was independently valued at
GBP11.2 million, an overall increase of 5.7%. More information
about the portfolio and the valuation can be found in the
Management Report below.
Financing
The Group remains prudently financed, with an LTV of 34.2% at
the period end, in line with our 35.0% long-term target and well
within our limit of 40.0%.
At 30 June 2018 we had undrawn facilities of GBP70 million which
ensures we have sufficient resources to fund our development plans,
which are set out below.
Strategic Priorities
Empiric has attractive assets, with a gross value of GBP945.2
million. Our priority in the near term is to continue to implement
our transformation programme, so we maximise the profitability of
our standing assets and realise the value of our developments.
The principles underlying the Company's 2025 Plan guide the
investment thesis for the business. Increasing the density of
investment through the acquisition of diversified stock in a number
of core locations remains the right strategy. The pace and scale of
investment envisaged under the Plan has been adapted to suit
Empiric's circumstances.
In our 2017 Annual Report, we said that we were reviewing every
asset, to determine whether we could enhance returns by disposals
and reinvestment of the proceeds, taking account of the transaction
costs involved. That review is now complete, and we have identified
a number of non-core assets which we will dispose of. In this
regard the assets will achieve the best price if they are sold
fully-let at the latest rental level. Hence, we believe the start
of the new Academic Year is the right moment to commence a measured
programme of tailored disposals of properties either singly, or in
small groups.
This strategy will enable the proceeds to be deployed into new
standing assets, or in the development and forward funding of new
high-yielding core assets, taking into account our target of
achieving a fully covered dividend in 2019.
Board, Management and Staff
We were deeply saddened by the death of our Chairman, Baroness
Brenda Dean, on 13 March 2018. She made a substantial contribution
to Empiric and more widely during an illustrious career, and is
greatly missed.
Recruiting a new Non-Executive Chairman has been an important
focus for the Board in recent months. Following a thorough and
independent process, we were delighted to announce on 26 July 2018
the appointment of Mark Pain with effect from 1 September 2018.
Mark will also chair the Nominations Committee and be a member of
the Remuneration Committee. Mark has a strong financial, customer
and shareholder focus and a wealth of board experience, and we are
confident he will make a significant contribution to the Group's
future success. On Mark's appointment, I shall step down as Acting
Non-Executive Chairman and resume my role as a Non-Executive
Director and Chairman of the Remuneration Committee.
Lynne Fennah was appointed to the dual roles of Chief Operating
Officer and Chief Financial Officer from 1 July 2018. This
formalised Lynne's responsibilities, recognising the Group's
continued positive financial and operational progress since she
took charge of our day-to-day operations in December 2017. Tim
Attlee remains Acting Chief Executive Officer and Chief Investment
Officer.
The improved performance in the period is testament to the hard
work and dedication of our people. On the Board's behalf I want to
thank everyone at Empiric for their contribution.
Outlook
This has been a positive six months for the Group and while
there is more to do, we are confident that we are on track to
deliver our target levels of performance for the full year and
beyond.
The uncertainty surrounding the outcome of Brexit negotiations
are of concern, but the full consequences will not be clear for
some time. We will continue to monitor the situation closely, but
to date we have not seen any direct adverse impact.
Empiric has attractive assets in the right locations, giving us
a portfolio that would be difficult to replicate. We also have a
strong leadership team, with a clear plan for maximising the
performance of those assets. As the operational transformation
takes effect, and the financial results reflect that
transformation, management is able to extend its focus to the
further enhancement of NAV growth. This will be achieved through
deploying the proceeds of the sale of non-core assets into
development and forward funding projects in our core locations.
Our TR target remains at 10% p.a. based on our expectations for
the performance of our stabilised operating portfolio and
development programme.
Stuart Beevor
Acting Non-Executive Chairman
21 August 2018
MANAGEMENT REPORT
This has been an encouraging six months for the Group, as we
focused on implementing our plans to improve operational and
financial performance across the business.
Operations
Maximising revenue is a key focus. The enhancements we have made
to our management information, including the greater insights and
analysis provided by the new Hello Student(R) website (see below),
have allowed us to optimise rents to drive bookings. This gives us
a more sustainable level of rents across the portfolio, increasing
the potential for like-for-like rental growth for the 2019/20
academic year. We have also refocused our marketing spend by
targeting our activity and reducing wastage, helping us to reduce
our marketing costs and improve effectiveness.
These efforts have contributed to a material increase in
bookings. At 14 August 2018 bookings were at 87%, up from 78% at
the same point in 2017. Converting bookings to signed leases is
critical, so we have also tightened our processes. Any bookings
that are more than two weeks old are removed from the system,
helping to highlight buildings where action is needed to increase
bookings. The number of signed leases is closely tracking booking
rates, showing the effectiveness of this approach.
As a VAT exempt business, we are unable to reclaim input VAT,
which makes in-housing services financially compelling. Facilities
management is our largest single cost and our plan to in-house this
function is going well. This will save us the providers' profit
margin and VAT, generating savings after recruiting staff and other
costs. All the contracts with our providers have been terminated
and the first significant cost savings will arise in the fourth
quarter of 2018, with one third of the properties coming in-house
for the start of the 2018/19 academic year. All of our facilities
management will be provided in-house from 1 April 2019. We have
appointed GVA to advise on the process and have two secondees from
GVA to support the transition. In addition, improved management
reporting has tightened our control of ad hoc expenditure by our
outsourced providers, with a corresponding benefit to our property
costs during the period.
We have brought the administration of utilities in--house from 1
July 2018 and have entered into fixed price contracts from 1
October 2018 onwards to reduce costs.
We started the period with 62 assets branded as Hello Student(R)
and ended it with 63. By the start of 2018/19 academic year, all of
our direct let properties will be branded Hello Student(R) . This
will enable us to manage costs ourselves, give us full control over
the marketing of those assets and the interaction with students,
and provide us with live data on our entire portfolio, helping us
to drive occupancy and revenue.
Our people are important to us, and the work we are doing is
helping to instil our culture across the Group. This has sharpened
our people's focus on the business, and noticeably improved
engagement and responsiveness. As well as driving direct
performance benefits, this means we are better prepared for
significant actions such as bringing facilities management
in-house.
We launched the new Hello Student(R) website towards the end of
last year. The site has a more flexible design and allows our
in-house team to make updates and promotions in real time. Enhanced
analytics allow us to regularly review the number of hits for a
given property page and track how those translate into enquiries,
viewings, bookings and signed leases. For the period February to
June 2018, the website drove an average of 160 bookings per week
across the Hello Student(R) portfolio. Over the same period, visits
to the website were up over 30% compared with 2017.
We have made good progress with streamlining our administrative
costs, including reducing the number of head office roles and using
fewer consultants and contractors. We are now starting to look at
bringing our human resources and IT functions in-house. The finance
team, which we restructured during 2017, has bedded in well and is
providing essential support and information to the executive
team.
Financial Performance
Revenue from our assets was GBP31.3 million (H1 2017: GBP24.5
million), an increase of 27.8%. The growth was primarily driven by
the increase in the number of operating assets from 75 to 87 and
higher average rents.
Property expenses rose from GBP9.7 million to GBP11.8 million,
again reflecting the increase in operating assets, partially offset
by the benefits of our rigorous cost control. This resulted in a
gross margin of 62.3%, up from 60.4% for the first half of 2017 and
56.6% for 2017 as a whole.
Our focus on reducing costs resulted in administrative expenses
of GBP4.9 million (H1 2017: GBP7.6 million). Administrative
expenses in the first half of 2017 included a number of one-off
costs, 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. We continue to
target administrative expenses of GBP10 million for 2018.
Operating profit under IFRS was GBP28.2 million (H1 2017:
GBP20.2 million). This included an aggregate revaluation uplift of
GBP13.6 million, net of property acquisition costs, on our property
portfolio at the period end (H1 2017: GBP13.0 million).
Net financing costs for the period were GBP6.5 million, net of
interest earned and fair value gain on interest rate swaps of
GBP0.05 million (H1 2017: GBP5.7 million and GBP0.02 million,
respectively).
Profit before tax was GBP21.7 million (H1 2017: GBP14.5 million)
an increase of 50%. No corporation tax was charged in the period,
as the Group fulfilled all of its obligations as a REIT. This
resulted in basic EPS of 3.60 pence (3.59 pence on a diluted basis)
(H1 2017: 2.89 pence and 2.87 pence (diluted)).
The NAV per share as at 30 June 2018 was 105.54 pence, prior to
adjusting for the interim dividend of 1.25 pence per share (31
December 2017: 104.37 pence, prior to adjusting for the interim
dividend of 1.25 pence per share). The NAV is shown net of all
property acquisition costs and dividends paid during the six
months.
Dividends
Amount
Quarter to Declared Payment date (p)
------------------------ ----------------- -------------- ------
31 December 2017 26 February 2018 23 March 2018 1.25
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31 March 2018 23 May 2018 15 June 2018 1.25
------------------------ ----------------- -------------- ------
Total paid 2.50
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14 September
30 June 2018 21 August 2018 2018 1.25
------------------------ ----------------- -------------- ------
Total declared not paid 1.25
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Dividends
Details of the dividends declared and paid in respect of the
period are shown in the table above.
Of the total dividend paid in the period, 1.04 pence per share
was declared as property income dividends and 1.46 pence per share
was declared as ordinary UK dividends (H1 2017: 2.098 pence and
0.952 pence respectively).
Our adjusted EPS, which we see as the most relevant measure when
assessing dividend distributions, was 1.50 pence (H1 2017: 1.05
pence). This resulted in dividend cover of 60% (H1 2017: 34%) an
increase of 76%. Adjusted EPS is defined under Key Performance
Indicators below.
Financing
There were no changes to the Group's debt facilities during the
period. As at 30 June 2018, the Group had committed debt facilities
of GBP390.0 million, of which GBP320.0 million (31 December 2017:
GBP303.8 million) had been drawn down. This resulted in an LTV at
the period end of 34.2% (31 December 2017: 32.9%).
Of our total facilities, GBP191.1 million is at fixed interest
rates and GBP198.9 million is at floating rates, with GBP35.5
million of the floating rate debt subject to interest rate caps or
swaps. The aggregate cost of debt is 3.09%, with a weighted average
term to maturity of 5.83 years at 30 June 2018. We fully complied
with our covenants during the period.
During the second half of 2018, GBP30.6 million of our floating
rate facilities are due for renewal. We will look to reduce our
financing costs on the new facilities.
Portfolio
As at 30 June 2018, the Group owned, or was committed on, 95
assets representing 9,398 beds (31 December 2017: 94 assets
comprising 9,158 beds). The portfolio included 87
revenue-generating properties at the period end (31 December 2017:
85), which will increase to 91 for the 2018/19 academic year, as a
number of development projects reach completion.
The gross annualised rent for the 87 revenue generating
properties is approximately GBP66.6 million (31 December 2017:
GBP65.3 million), of which GBP1.7 million (representing 2.6% of the
gross annualised rent) was attributable to commercial revenue (31
December 2017: GBP1.8 million, representing 2.8% of gross
annualised rent).
At 30 June 2018, the average net yield on acquisition of the
operating properties, or on cost for development assets that had
reached practical completion, was 6.5% (31 December 2017: 6.7%).
The average valuation yield as at 30 June 2018 was 5.7% (31
December 2017: 5.7%).
Acquisition
We acquired one standing asset during the period, the 240-bed
Emily Davies Hall in Southampton. The property is made up of
affordable accommodation arranged in three and four-bed apartments
and broadens our offer in the city. The purchase price was GBP10.6
million, excluding costs.
Developments and Redevelopment
At the period end, we had the following pipeline of forward
funded, direct developments and redevelopments:
Site name Development basis Delivery year Beds
---------------------------- --------------------------------- -------------- ----
The Emporium, Birmingham Forward funded 2018 184
---------------------------- --------------------------------- -------------- ----
Princess Road, Leicester Forward funded 2018 110
---------------------------- --------------------------------- -------------- ----
Percys Place, York Forward funded 2018 106
---------------------------- --------------------------------- -------------- ----
Blocks 3&4 Victoria
Point, Manchester Major refurbishment/development 2018 169
---------------------------- --------------------------------- -------------- ----
569
----------------------------------------------------------------------------- ----
140/142 New Walk, Leicester Forward funded 2019 52
---------------------------- --------------------------------- -------------- ----
King's Stables Road,
Edinburgh Forward funded 2019 166
---------------------------- --------------------------------- -------------- ----
Ocean Bowl, Falmouth Direct development 2019 190
---------------------------- --------------------------------- -------------- ----
408
----------------------------------------------------------------------------- ----
St Mary's, Bristol Direct development 2020 153
---------------------------- --------------------------------- -------------- ----
FISC, Canterbury Major refurbishment/ development 2020 125
---------------------------- --------------------------------- -------------- ----
278
----------------------------------------------------------------------------- ----
All of our projects due for completion ahead of the 2018/19
academic year are progressing satisfactorily, which will result in
a further five assets with 569 beds becoming income producing.
In addition to developing new assets, we continue to see the
potential to increase capital values and income from a number of
our operating assets through targeted redevelopment. We look to
time these redevelopments to limit the impact on our income and
dividend cover. At the present time we are considering redeveloping
buildings comprising a total of 513 beds.
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 30 June 2018, the
portfolio was valued at GBP945.2 million, an increase of 6.3% over
the six months (31 December 2017: GBP890.1 million) and 3.0% on a
like-for-like basis. The key driver for this valuation increase is
the strong increase in our income growth and the profit we achieve
on our development assets.
Total Return ("TR")
The TR for the six months to 30 June 2018 was 3.52%, (H1 2017:
2.80%). We continue to target a TR of 10% per annum. The definition
of TR can be found under Key Performance Indicators below.
Our Market
The UK student accommodation market remains positive, with
rising participation in higher education and continuing strong
global demand.
While the outcome of the Brexit process remains uncertain, its
impact on the UK higher education sector is likely to be limited,
with students from the European Union (the "EU") making up only 7%
of full-time students in the UK. UCAS data as at January 2018
showed a 3% increase in applications from EU students for the
2018/19 academic year. The Government has also confirmed that EU
students will be treated as home students in the first intake after
Brexit and that this status will last for the duration of their
course, making them eligible for the same tuition fees and
financial support as at present.
Investment demand for purpose built student accommodation
("PBSA") is strong, with substantial capital looking to participate
in the market and targeting both standing assets and new
developments. This capital is funding some new entrants, leading to
increased competition. Selectivity remains key to successful
investment and we are starting to see some sites with planning
permission being left undeveloped in cities with substantial supply
of PBSA.
Article 4 directions, which prevent houses being converted into
houses in multiple occupation ("HMOs"), are in place in the
majority of university locations. This continues to restrict the
supply of new HMOs, with local authorities seeing PBSA as a way to
meet demand for student accommodation while protecting housing
stock for local residents.
The number of UK 18-year-olds has declined in recent years but
will rebound strongly from 2021, supporting longer-term market
growth. Over the same period, the number of international students
both from inside and outside the EU choosing to study in the UK has
continued to rise.
Post Balance Sheet Events
On 14 August 2018, the Group drew down the first GBP20 million
of its GBP70 million three-year revolving credit facility. The
funds will be used to fund our development commitments.
On 21 August 2018, the Board declared an interim dividend of
1.25 pence per share in respect of the quarter ended 30 June 2018.
The dividend will be paid on 14 September 2018 to shareholders on
the register on 31 August 2018.
Looking Forward
We expect strong like-for-like income growth of above 6.0% for
the 2018/19 academic year. This is the result of average annualised
rental increases of 2.0% and the executive team's work to extend
the weighted average lease term from 48.5 weeks to 50.5 weeks.
The academic year generates seasonal movements in performance
for all student property businesses. This results in lower revenue,
and lower profit, in the third quarter due to associated turnaround
costs between the tenancy periods. The fourth quarter then
represents the first of the next academic year, when we expect to
achieve the highest margin for the year. Taking into account this
seasonality, we are forecasting the Gross Margin for the year ended
31 December 2018 to be above 61%.
We are focused on improving TR, to achieve this we will continue
to drive operational performance alongside the development of new
assets, funded by the sales proceeds of some non-core assets
together with the use of prudent gearing.
Empiric has the right buildings in the right places with the
right amenities, and a service offer which differentiates us in an
attractive market. The work we are doing to improve the financial
efficiency of our operations and further enhance the customer
experience will help us to make the most of these advantages.
Tim Attlee
Acting Chief Executive Officer & Chief Investment
Officer
Lynne Fennah
Chief Financial & Operating Officer
21 August 2018
DIRECTORS' RESPONSIBILITIES STATEMENT
The Directors confirm that to the best of their knowledge this
condensed set of financial statements has been prepared in
accordance with IAS 34 as adopted by the European Union and that
the operating and financial review herein includes a fair review of
the information required by DTR 4.2.7 and DTR 4.2.8 of the
Disclosure Rules and Transparency Rules of the United Kingdom's
Financial Conduct Authority namely:
-- an indication of important events that have occurred during
the first six months of the financial period and their impact on
the condensed financial statements and a description of the
principal risks and uncertainties for the remaining six months of
the financial period; and
-- material related party transactions in the first six months.
A list of the current Directors is shown below. Shareholder
information is as disclosed on the Empiric Student Property plc
website, www.empiric.co.uk
For and on behalf of the Board
Stuart Beevor
Acting Non-Executive Chairman
21 August 2018
KEY PERFORMANCE INDICATORS
Key Performance Indicators
1. Total return | % 3.52
Definition: the growth in NAV for the six months to 30 June
per share plus dividends paid 2018
per share in the period as a (2.80(1) )
percentage of the opening NAV
per share.
2. NAV per share (basic) | p 105.54
Definition: the value of the at 30 June 2018
Group's total assets less the
book value of its liabilities
attributable to shareholders.
(104.37(2) )
-------------------------------
3. LTV ratio | % 34.2
Definition: the proportion of at 30 June 2018
borrowings compared to gross
asset value (defined as total
assets less current liabilities).
(32.9(2) )
-------------------------------
4. Dividend against target | 2.50
p for the six months to 30 June
Definition: dividends declared 2018
in respect of the financial period. (3.05(1) )
-------------------------------
5. Earnings per share (basic) 3.60
| p for the six months to 30 June
Definition: post-tax earnings 2018
generated that are attributable (2.89(1) )
to shareholders, divided by the
weighted average number of shares
in issue in the period.
-------------------------------
6. Adjusted earnings per share 1.50
| p for the six months to 30 June
Definition: post-tax adjusted 2018
EPS attributable to shareholders (1.05(1) )
which includes the licence fee
receivable on the Group's forward
funded development assets and
late completion development rebate
on forward funded assets.
-------------------------------
Notes
1 For the six-month period ending 30 June 2017.
2 As at 31 December 2017.
EPRA Performance Indicators
EPRA earnings (basic) GBPm p per share
Earnings from operational 8.1 1.34
activities. for the six months for the six months
to 30 June 2018 to 30 June 2018
Purpose (1.4(1) ) (0.29(1) )
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 636.7 105.61
and other investment interests
at fair value and to exclude
certain items not expected
to crystallise in a long-term
investment property business.
at 30 June 2018 at 30 June 2018
Purpose (630.0(2) ) (104.49(2) )
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 626.8 103.96
the fair values of:
(i) financial instruments; at 30 June 2018 at 30 June 2018
(ii) debt; and (617.9(2) ) (102.48(2) )
(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, 4.2
based on the cash rents passing
at the balance sheet date,
less non-recoverable property
operating expenses, divided
by the market value of the
property net of (estimated)
purchasers' costs.
at 30 June 2018
Purpose (4.0(2) )
A comparable measure for
portfolio valuations. This
measure should make it easier
for investors to judge how
the valuation of portfolios
compare.
-------------------- --------------------
Notes
1 For the six-month period ending 30 June 2017.
2 As at 31 December 2017.
PRINCIPAL RISKS AND UNCERTAINTIES
A stable risk environment
The principal risks and uncertainties we face are described in
detail on pages 34 to 39 of our Annual Report and Accounts for the
year ended 31 December 2017. The Audit Committee, which assists the
Board with its responsibilities for managing risk, considers that
those principal risks and uncertainties were unchanged during the
period, not withstanding the greater uncertainty arising from
Brexit.
The principal risks and uncertainties described in the Annual
Report and Accounts are summarised below:
Strategic Risks
-- Development of the UK higher education market generally, or
any change in demand from international students
-- Competition in the PBSA sector from UK and international property investors
-- Uncertainty from Brexit
Investment Risks
-- General property and investment market conditions
-- Dependence on both the rental income received from our
properties and the appreciation in property values
Development Risk
-- General development risks, including construction risks and changes in market conditions
Funding Risks
-- Adverse movements in interest rates
-- Inability to secure further debt on acceptable terms
People Risk
-- Reliance on performance of the Executive Directors and senior staff
Operational Risks
-- Inability to adapt to changing planning and regulatory
environment, and the need to comply with health and safety laws and
regulations
-- Changes to the Company's tax status or UK tax legislation
-- Inability to maintain occupancy rates
-- Information security breach
-- Reliance on third-party property managers
Financial Statements
The financial statements on the following pages detail the
improvement in the Group's performance during the period and its
robust financial position at the period end.
Lynne Fennah
Chief Financial & Operating Officer
21 August 2018
INDEPENT REVIEW REPORT TO EMPIRIC STUDENT PROPERTY PLC
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the interim report for the six months
ended 30 June 2018 which comprises the Condensed Consolidated
Statement of Comprehensive Income, the Condensed Consolidated
Statement of Financial Position, the Condensed Consolidated
Statement of Changes in Equity, the Condensed Consolidated
Statement of Cash Flows and related notes.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The interim report is the responsibility of and has been
approved by the directors. The directors are responsible for
preparing the interim report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
As disclosed in Note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union. The
condensed set of financial statements included in this interim
report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the interim report
based on our review.
Our report has been prepared in accordance with the terms of our
engagement to assist the company in meeting its responsibilities in
respect of interim financial reporting in accordance with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority and for no other purpose. No person is entitled
to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms
of engagement or has been expressly authorised to do so by our
prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (United Kingdom and Ireland) 2410,
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity", issued by the Financial
Reporting Council for use in the United Kingdom. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim report for the six months ended 30 June 2018 is not
prepared, in all material respects, in accordance with
International Accounting Standard 34, as adopted by the European
Union, and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
BDO LLP
Chartered Accountants
London
United Kingdom
21 August 2018
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
30 JUNE 2018
Unaudited Unaudited Audited
six months six months year
to 30 to 30 to 31
June June December
2018 2017 2017
Notes GBP'000 GBP'000 GBP'000
-------------------------------- ----- ----------- ----------- ---------
Continuing operations
-------------------------------- ----- ----------- ----------- ---------
Revenue 31,289 24,459 51,205
-------------------------------- ----- ----------- ----------- ---------
Property expenses (11,787) (9,688) (22,220)
-------------------------------- ----- ----------- ----------- ---------
Gross profit 19,502 14,771 28,985
-------------------------------- ----- ----------- ----------- ---------
Administrative expenses (4,873) (7,627) (13,454)
-------------------------------- ----- ----------- ----------- ---------
Change in fair value of
investment property 6 13,600 13,021 15,836
-------------------------------- ----- ----------- ----------- ---------
Gain on disposal of investment
property - - 1,122
-------------------------------- ----- ----------- ----------- ---------
Operating profit 28,229 20,165 32,489
-------------------------------- ----- ----------- ----------- ---------
Finance cost (6,573) (5,767) (11,882)
-------------------------------- ----- ----------- ----------- ---------
Finance income 46 23 87
-------------------------------- ----- ----------- ----------- ---------
Net finance cost 2 (6,527) (5,744) (11,795)
-------------------------------- ----- ----------- ----------- ---------
Share of results from joint
ventures - 56 56
-------------------------------- ----- ----------- ----------- ---------
Profit before income tax 21,702 14,477 20,750
-------------------------------- ----- ----------- ----------- ---------
Corporation tax 3 - - -
-------------------------------- ----- ----------- ----------- ---------
Profit for the period 21,702 14,477 20,750
-------------------------------- ----- ----------- ----------- ---------
Other comprehensive income
-------------------------------- ----- ----------- ----------- ---------
Items that will be reclassified
to profit and loss
-------------------------------- ----- ----------- ----------- ---------
Fair value gain on cash
flow hedge 239 268 508
-------------------------------- ----- ----------- ----------- ---------
Total comprehensive income
for the period 21,941 14,745 21,258
-------------------------------- ----- ----------- ----------- ---------
Earnings per share expressed
as pence per share
-------------------------------- ----- ----------- ----------- ---------
Basic 4 3.60 2.89 3.84
-------------------------------- ----- ----------- ----------- ---------
Diluted 4 3.59 2.87 3.83
-------------------------------- ----- ----------- ----------- ---------
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
30 JUNE 2018
Unaudited Unaudited Audited
30 June 30 June 31 December
2018 2017 2017
Notes GBP'000 GBP'000 GBP'000
---------------------------------- ----- --------- --------- ------------
Non-current assets
---------------------------------- ----- --------- --------- ------------
Property, plant and equipment 420 536 475
---------------------------------- ----- --------- --------- ------------
Intangible assets 1,332 1,319 1,423
---------------------------------- ----- --------- --------- ------------
Investment property - operational
assets 6 893,121 738,022 848,537
---------------------------------- ----- --------- --------- ------------
Investment property - development
assets 6 52,510 80,360 42,045
---------------------------------- ----- --------- --------- ------------
Derivative financial assets - 6 1
---------------------------------- ----- --------- --------- ------------
947,383 820,243 892,481
---------------------------------- ----- --------- --------- ------------
Current assets
---------------------------------- ----- --------- --------- ------------
Trade and other receivables 13,294 19,436 27,792
---------------------------------- ----- --------- --------- ------------
Cash and cash equivalents 26,326 23,250 52,721
---------------------------------- ----- --------- --------- ------------
39,620 42,686 80,513
---------------------------------- ----- --------- --------- ------------
Total assets 987,003 862,929 972,994
---------------------------------- ----- --------- --------- ------------
Current liabilities
---------------------------------- ----- --------- --------- ------------
Trade and other payables 25,311 25,865 22,620
---------------------------------- ----- --------- --------- ------------
Borrowings 7 30,389 - 20,767
---------------------------------- ----- --------- --------- ------------
Derivative financial liability 334 466 424
---------------------------------- ----- --------- --------- ------------
Deferred rental income 10,186 7,472 22,286
---------------------------------- ----- --------- --------- ------------
66,220 33,803 66,097
---------------------------------- ----- --------- --------- ------------
Non-current liabilities
---------------------------------- ----- --------- --------- ------------
Bank borrowings 7 284,390 298,221 277,382
---------------------------------- ----- --------- --------- ------------
Derivative financial liability 87 477 257
---------------------------------- ----- --------- --------- ------------
284,477 298,698 277,639
---------------------------------- ----- --------- --------- ------------
Total liabilities 350,697 332,501 343,736
---------------------------------- ----- --------- --------- ------------
Net assets 636,306 530,428 629,258
---------------------------------- ----- --------- --------- ------------
Called up share capital 6,029 5,013 6,029
---------------------------------- ----- --------- --------- ------------
Share premium 467,268 359,958 467,268
---------------------------------- ----- --------- --------- ------------
Capital reduction reserve 60,530 90,783 75,602
---------------------------------- ----- --------- --------- ------------
Retained earnings 102,722 75,396 80,841
---------------------------------- ----- --------- --------- ------------
Cash flow hedge reserve (243) (722) (482)
---------------------------------- ----- --------- --------- ------------
Total equity 636,306 530,428 629,258
---------------------------------- ----- --------- --------- ------------
Total equity and liabilities 987,003 862,929 972,994
---------------------------------- ----- --------- --------- ------------
NAV per share basic (pence) 8 105.54 105.81 104.37
---------------------------------- ----- --------- --------- ------------
NAV per share diluted (pence) 8 105.25 105.15 104.15
---------------------------------- ----- --------- --------- ------------
EPRA NAV per share basic
(pence) 8 105.61 106.01 104.49
---------------------------------- ----- --------- --------- ------------
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
PERIOD FROM 1 JANUARY TO 30 JUNE 2018 (UNAUDITED)
Called Capital Cashflow
up share Share reduction Retained hedge Total
capital premium reserve earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- -------- ---------- --------- -------- --------
Balance at 1 January
2018 6,029 467,268 75,602 80,841 (482) 629,258
--------------------------- --------- -------- ---------- --------- -------- --------
Changes in equity
--------------------------- --------- -------- ---------- --------- -------- --------
Profit for the period - - - 21,702 - 21,702
--------------------------- --------- -------- ---------- --------- -------- --------
Fair value gain on cash
flow hedge - - - - 239 239
--------------------------- --------- -------- ---------- --------- -------- --------
Total comprehensive income
for the period - - - 21,702 239 21,941
--------------------------- --------- -------- ---------- --------- -------- --------
Share-based payments - - - 179 - 179
--------------------------- --------- -------- ---------- --------- -------- --------
Dividends - - (15,072) - - (15,072)
--------------------------- --------- -------- ---------- --------- -------- --------
Total contributions and
distribution recognised
directly in equity - - (15,072) 179 - (14,893)
--------------------------- --------- -------- ---------- --------- -------- --------
Balance at 30 June 2018 6,029 467,268 60,530 102,722 (243) 636,306
--------------------------- --------- -------- ---------- --------- -------- --------
PERIOD FROM 1 JANUARY TO 30 JUNE 2017 (UNAUDITED)
Called Capital Cashflow
up share Share reduction Retained hedge Total
capital premium reserve earnings reserve equity
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 period - - - 14,477 - 14,477
--------------------------- --------- -------- ---------- --------- -------- --------
Fair value gain on cash
flow hedge - - - - 268 268
--------------------------- --------- -------- ---------- --------- -------- --------
Total comprehensive income
for the period - - - 14,477 268 14,745
--------------------------- --------- -------- ---------- --------- -------- --------
Share-based payments - - - 233 - 233
--------------------------- --------- -------- ---------- --------- -------- --------
Dividends - - (15,415) - - (15,415)
--------------------------- --------- -------- ---------- --------- -------- --------
Total contributions and
distribution recognised
directly in equity - - (15,415) 233 - (15,182)
--------------------------- --------- -------- ---------- --------- -------- --------
Balance at 30 June 2017 5,013 359,958 90,783 75,396 (722) 530,428
--------------------------- --------- -------- ---------- --------- -------- --------
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
YEAR FROM 1 JANUARY TO 31 DECEMBER 2017 (AUDITED)
Called
up Capital Cashflow
share Share reduction Retained hedge Total
capital premium reserve earnings reserve equity
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
--------------------------- -------- -------- ---------- --------- -------- --------
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months year
to 30 to 30 to 31
June June December
2018 2017 2017
Cash flows from operating activities GBP'000 GBP'000 GBP'000
--------------------------------------- ----------- ----------- ---------
Profit before income tax 21,702 14,477 20,750
--------------------------------------- ----------- ----------- ---------
Share-based payments 179 233 161
--------------------------------------- ----------- ----------- ---------
Depreciation and amortisation 148 105 251
--------------------------------------- ----------- ----------- ---------
Finance income (46) (22) (87)
--------------------------------------- ----------- ----------- ---------
Finance costs 6,573 5,767 11,882
--------------------------------------- ----------- ----------- ---------
Share of results from joint venture - (57) (56)
--------------------------------------- ----------- ----------- ---------
Change in fair value of investment
property (13,600) (13,021) (15,836)
--------------------------------------- ----------- ----------- ---------
Profit on disposal of investment
property - - (1,122)
--------------------------------------- ----------- ----------- ---------
14,956 7,482 15,943
--------------------------------------- ----------- ----------- ---------
Decrease/(increase) in trade and
other receivables 14,755 6,818 (3,003)
--------------------------------------- ----------- ----------- ---------
(Decrease)/increase in trade and
other payables (2,866) 2,965 1,959
--------------------------------------- ----------- ----------- ---------
(Decrease)/increase in deferred
rental income (12,099) (8,289) 6,526
--------------------------------------- ----------- ----------- ---------
(210) 1,494 5,482
--------------------------------------- ----------- ----------- ---------
Net cash flows generated from
operations 14,746 8,976 21,425
--------------------------------------- ----------- ----------- ---------
Cash flows from investing activities
--------------------------------------- ----------- ----------- ---------
Purchase of tangible fixed assets - (87) (88)
--------------------------------------- ----------- ----------- ---------
Purchase of intangible assets (2) (348) (535)
--------------------------------------- ----------- ----------- ---------
Purchase of investment property (36,600) (83,266) (154,479)
--------------------------------------- ----------- ----------- ---------
Disposal of investment property - - 2,000
--------------------------------------- ----------- ----------- ---------
Interest received 25 22 87
--------------------------------------- ----------- ----------- ---------
Net cash flows from investing
activities (36,577) (83,679) (153,015)
--------------------------------------- ----------- ----------- ---------
Cash flows from financing activities
--------------------------------------- ----------- ----------- ---------
Share issue proceeds - - 110,000
--------------------------------------- ----------- ----------- ---------
Share issue costs - - (2,430)
--------------------------------------- ----------- ----------- ---------
Dividends paid (14,928) (15,415) (30,596)
--------------------------------------- ----------- ----------- ---------
Bank borrowings drawn 16,201 69,446 69,446
--------------------------------------- ----------- ----------- ---------
Repayments of bank borrowings - (9,534) (9,534)
--------------------------------------- ----------- ----------- ---------
Loan arrangement fees paid (628) (1,142) (2,016)
--------------------------------------- ----------- ----------- ---------
Finance costs (5,209) (4,801) (9,958)
--------------------------------------- ----------- ----------- ---------
Net cash from financing activities (4,564) 38,554 124,912
--------------------------------------- ----------- ----------- ---------
Decrease in cash and cash equivalents (26,395) (36,149) (6,678)
--------------------------------------- ----------- ----------- ---------
Cash and cash equivalents at beginning
of period 52,721 59,399 59,399
--------------------------------------- ----------- ----------- ---------
Cash and cash equivalents at end
of period 26,326 23,250 52,721
--------------------------------------- ----------- ----------- ---------
UNAUDITED CONDENSED NOTES TO THE FINANCIAL STATEMENTS
For the period 1 January 2018 to 30 June 2018
1. Accounting Policies
1.1 Trading Period
The condensed interim financial statements of the Group
reporting period is from 1 January 2018 to 30 June 2018.
1.2 Going Concern
Since IPO, the Group has raised in excess of GBP600 million from
seven equity placements and GBP390 million of debt. The Group has
deployed these funds across a portfolio of operating assets that
have stable income streams and potential for capital appreciation.
In addition, the Group has committed to a number of developments
which will become operational in time for the 2018/19 academic year
and beyond. As at 30 June 2018 the Group held GBP26 million of cash
that had not been invested in property but is expected to be
invested in line with these objectives. The Group had undrawn debt
facilities amounting to GBP70 million as at 30 June 2018.
The Directors are therefore satisfied that the Group has
sufficient resources to continue in operation for the foreseeable
future, for a period of not less than 12 months from the date of
this report.
1.3 Basis of Preparation
The condensed interim financial statements for the six months
ended 30 June 2018 have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority (previously the Financial Services Authority) and with
IAS 34, Interim Financial Reporting, as adopted by the European
Union.
The condensed consolidated financial statements for the six
months ended 30 June 2018 have been reviewed by the Group's
independent auditor, BDO LLP, in accordance with International
Standard on Review Engagements 2410, Review of Interim Financial
Information Performed by the Independent Auditor of the Entity and
were approved for issue on 21 August 2018.
The condensed consolidated financial statements presented herein
for the period to 30 June 2018 does not constitute full statutory
accounts within the meaning of section 434 of the Companies Act
2006. The Group's Annual Report and Accounts for the year to 31
December 2017 have been delivered to the Registrar of Companies.
The Group's independent auditor's report on those accounts was
unqualified, did not include references to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report and did not contain a statement under section 498(2) or
498(3) of the Companies Act 2006.
The Group's financial statements have been prepared on a
historical cost basis, except for investment property and
derivative financial instruments which have been measured at fair
value. The consolidated financial statements are presented in
Sterling which is also the Group's functional currency.
The accounting policies adopted in this report are consistent
with those applied in the Group's statutory accounts for the year
ended 31 December 2017 and are expected to be consistently applied
during the year ending 31 December 2018, except for the impact of
IFRS 9 from 1 January 2018 where the Group provides against trade
and other receivables based on the expected credit loss model,
rather than the incurred loss model previously adopted.
1.4 Significant Accounting Judgements, Estimates and
Assumptions
The preparation of the Group's interim financial statements
requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities, and the disclosure of contingent liabilities, at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability
affected in future periods.
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
interim financial statements:
(a) Fair valuation of investment property
The market value of investment property is determined, by an
independent real estate valuation expert, to be the estimated
amount for which a property should exchange on the date of the
valuation in an arm's length transaction. Properties have been
valued on an individual basis. The valuation experts use recognised
valuation techniques and the principles of IFRS 13. The Group has
acquired investment properties which are subject to commercial
property leases with tenants.
The valuations have been prepared in accordance with the RICS
Valuation - Professional Standards January 2014 (revised April
2015) (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 6.
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 determined, based on an evaluation of the terms
and conditions of the arrangements, particularly the duration of
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 value for derivatives
In accordance with IAS 39, the Group values its derivative
interest rate swaps at fair value. The fair values are conducted by
an independent financial valuation expert with revaluation
occurring on a six-monthly basis. The independent financial
valuation expert will use a number of assumptions in determining
fair values. The fair value is derived by using the mid-point of
the yield curve prevailing on the reporting date and the valuation
is performed on a clean basis. The fair value represents the net
present value of the difference between the cash flows produced by
the contracted rate and the valuation rate.
1.5 Impact of New Accounting Standards and Changes in Accounting
Policies
IFRS 9 - Financial Instruments and IFRS 15 - Revenue from
Contracts with Customers became effective on 1 January 2018 and as
a result this is the first period under these new standards.
As expected and detailed in the Group's Annual Report and
Accounts for the year to 31 December 2017, the Group's application
of IFRS 9 did not cause a material impact on the classification,
measurement and recognition of financial assets and financial
liabilities within the consolidated financial statements.
In addition, the application of IFRS 15 did not result in a
significant impact on revenue recognition within the consolidated
financial statements. The Group earns revenue from simply
structured rental leases which is recognised over the period to
which it relates.
The Group's assessment on the impact of IFRS 16: Leases
(effective 1 January 2019) remains unchanged since being detailed
in the Group's Annual Report and Accounts for the year to 31
December 2017.
1.6 Seasonality of Operations
The results of the Group's operating business is closely aligned
to the levels of occupancy achieved by the property portfolio in
each academic year. Empiric targets 51-week tenancies, with a
one-week void period falling in September. This results in slightly
lower revenue on the existing portfolio in the second half year
combined with slightly higher costs from turning around the rooms
for the new academic year.
The Group counteracts this through the development cycle as
construction is timed to complete ready for the start of the
academic year in September each year. These new properties becoming
available increases revenue in the second half year.
1.7 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.
2. Net Finance Cost
Unaudited Unaudited Audited
six months six months year
to 30 to 30 to 31
June June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
--------------------------------- ----------- ----------- ---------
Finance costs
--------------------------------- ----------- ----------- ---------
Fair value loss on interest
rate cap 1 13 18
---------------------------------- ----------- ----------- ---------
Interest expense on bank
borrowings 5,514 5,041 10,330
---------------------------------- ----------- ----------- ---------
Amortisation of loan transaction
costs 1,058 713 1,534
---------------------------------- ----------- ----------- ---------
6,573 5,767 11,882
--------------------------------- ----------- ----------- ---------
Finance income
--------------------------------- ----------- ----------- ---------
Fair value gain on interest
rate swap 21 21 43
---------------------------------- ----------- ----------- ---------
Interest received on bank
deposits 25 2 44
---------------------------------- ----------- ----------- ---------
46 23 87
--------------------------------- ----------- ----------- ---------
Net finance cost 6,527 5,744 11,795
---------------------------------- ----------- ----------- ---------
3. Corporation Tax
Taxation on the profit or loss for the period not exempt under
UK REIT regulations comprises current and deferred tax. Taxation is
recognised in the profit and loss within the Group Consolidated
Statement of Comprehensive Income except to the extent that it
relates to items recognised as direct movement in equity, in which
case it is also recognised as a direct movement in equity.
Current tax is expected tax payable on any non-REIT taxable
income for the period, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax
payable in respect of previous years.
4. Earnings per Share
The 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.
Reconciliations are set out below:
Calculation
Calculation Calculation Calculation of EPRA Calculation
of basic of diluted of EPRA diluted of adjusted
EPS EPS basic EPS EPS EPS
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ----------- ----------- ----------- ----------- ------------
Unaudited six months
to 30 June 2018
------------------------------ ----------- ----------- ----------- ----------- ------------
Earnings 21,702 21,702 21,702 21,702 21,702
------------------------------ ----------- ----------- ----------- ----------- ------------
Adjustment to include
licence fee receivable
on forward funded
developments in the
period - - - - 971
------------------------------ ----------- ----------- ----------- ----------- ------------
Adjustment to include
discounts on acquisition
due to rental guarantees
in the period - - - - 5
------------------------------ ----------- ----------- ----------- ----------- ------------
Changes in fair value
of investment property
(Note 6) - - (13,600) (13,600) (13,600)
------------------------------ ----------- ----------- ----------- ----------- ------------
Changes in fair value
of interest rate derivatives
(Note 2) - - (20) (20) (20)
------------------------------ ----------- ----------- ----------- ----------- ------------
Earnings/adjusted
earnings (GBP'000) 21,702 21,702 8,082 8,082 9,058
------------------------------ ----------- ----------- ----------- ----------- ------------
Weighted average number
of shares ('000) 602,888 602,888 602,888 602,888 602,888
------------------------------ ----------- ----------- ----------- ----------- ------------
Adjustment for employee
share options ('000) - 1,657 - 1,657 -
------------------------------ ----------- ----------- ----------- ----------- ------------
Total number of shares
('000) 602,888 604,545 602,888 604,545 602,888
------------------------------ ----------- ----------- ----------- ----------- ------------
Per-share amount (pence) 3.60 3.59 1.34 1.34 1.50
------------------------------ ----------- ----------- ----------- ----------- ------------
Unaudited six months
to 30 June 2017
------------------------------ ----------- ----------- ----------- ----------- ------------
Earnings 14,477 14,477 14,477 14,477 14,477
------------------------------ ----------- ----------- ----------- ----------- ------------
Adjustment to include
licence fee receivable
on forward funded
developments in the
period - - - - 1,402
------------------------------ ----------- ----------- ----------- ----------- ------------
Adjustment to include
development rebate
receivable on forward
funded developments
in the period - - - - 1,166
------------------------------ ----------- ----------- ----------- ----------- ------------
Adjustment to include
discounts on acquisition
due to rental guarantees
in the period - - - - 1,225
------------------------------ ----------- ----------- ----------- ----------- ------------
Changes in fair value
of investment property
(Note 6) - - (13,021) (13,021) (13,021)
------------------------------ ----------- ----------- ----------- ----------- ------------
Changes in fair value
of interest rate derivatives
(Note 2) - - (8) (8) (8)
------------------------------ ----------- ----------- ----------- ----------- ------------
Audited year to 31
December 2018
------------------------------ ----------- ----------- ----------- ----------- ------------
Earnings/adjusted
earnings (GBP'000) 14,477 14,477 1,448 1,448 5,241
------------------------------ ----------- ----------- ----------- ----------- ------------
Weighted average number
of shares ('000) 501,279 501,279 501,279 501,279 501,279
------------------------------ ----------- ----------- ----------- ----------- ------------
Adjustment for employee
share options ('000) - 3,152 - 3,152 -
------------------------------ ----------- ----------- ----------- ----------- ------------
Total number of shares
('000) 501,279 504,431 501,279 504,431 501,279
------------------------------ ----------- ----------- ----------- ----------- ------------
Per-share amount (pence) 2.89 2.87 0.29 0.29 1.05
------------------------------ ----------- ----------- ----------- ----------- ------------
Earnings 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
receivable on forward
funded developments
in the year - - - - 1,166
------------------------------ ----------- ----------- ----------- ----------- ------------
Adjustment to include
discounts on acquisition
due to rental guarantees
in the year - - - - 1,346
------------------------------ ----------- ----------- ----------- ----------- ------------
Changes in fair value
of investment property
(Note 6) - - (15,836) (15,836) (15,836)
------------------------------ ----------- ----------- ----------- ----------- ------------
Gain on disposal of
investment properties
(Note 6) - - (1,122) (1,122) -
------------------------------ ----------- ----------- ----------- ----------- ------------
Changes in fair value
of interest rate derivatives
(Note 2) - - 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 of 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
------------------------------ ----------- ----------- ----------- ----------- ------------
The ordinary number of shares is based on the time-weighted
average number of shares throughout the period.
5. Dividends Paid
Unaudited Unaudited
six months six months Audited year
to 30 June to 30 June to 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ----------- ---------------
Interim dividend of 1.55 pence
per ordinary share in respect
of the quarter ended 31 December
2016 - 7,770 7,770
----------------------------------- ----------- ----------- ---------------
Interim dividend of 1.525 pence
per ordinary share in respect
of the quarter ended 31 March
2017 - 7,645 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
----------------------------------- ----------- ----------- ---------------
Interim dividend of 1.25 pence
per ordinary share in respect
of the quarter ended 31 December
2017 7,536 - -
----------------------------------- ----------- ----------- ---------------
Interim dividend of 1.25 pence
per ordinary share in respect
of the quarter ended 31 March
2018 7,536 - -
----------------------------------- ----------- ----------- ---------------
15,072 15,415 30,596
----------------------------------- ----------- ----------- ---------------
On the 21 August 2018, the Board declared a dividend of 1.25
pence per ordinary share in respect of the quarter ended 30 June
2018, which is to be paid on 14 September 2018 to ordinary
shareholders on the register on 31 August 2018.
6. Investment Property
Investment Investment
properties properties Total operational Properties
freehold long leasehold assets under development Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ----------- --------------- ----------------- ------------------ --------
As at 1 January 2018 735,355 113,182 848,537 42,045 890,582
---------------------- ----------- --------------- ----------------- ------------------ --------
Property additions 12,041 5,343 17,384 24,065 41,449
---------------------- ----------- --------------- ----------------- ------------------ --------
Transfer of completed
developments 17,108 - 17,108 (17,108) -
---------------------- ----------- --------------- ----------------- ------------------ --------
Change in fair value
during the period 6,176 3,916 10,092 3,508 13,600
---------------------- ----------- --------------- ----------------- ------------------ --------
As at 30 June 2018
(unaudited) 770,680 122,441 893,121 52,510 945,631
---------------------- ----------- --------------- ----------------- ------------------ --------
As at 1 January 2017 564,882 79,628 644,510 67,380 711,890
---------------------- ----------- --------------- ----------------- ------------------ --------
Property additions 45,321 6,937 52,258 41,213 93,471
---------------------- ----------- --------------- ----------------- ------------------ --------
Transfer of completed
developments 34,035 - 34,035 (34,035) -
---------------------- ----------- --------------- ----------------- ------------------ --------
Change in fair value
during the period 6,687 532 7,219 5,802 13,021
---------------------- ----------- --------------- ----------------- ------------------ --------
As at 30 June 2017
(unaudited) 650,925 87,097 738,022 80,360 818,382
---------------------- ----------- --------------- ----------------- ------------------ --------
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
---------------------- ----------- --------------- ----------------- ------------------ --------
Transfer of completed
developments 82,305 23,938 106,243 (106,243) -
---------------------- ----------- --------------- ----------------- ------------------ --------
Property disposals - - - (815) (815)
---------------------- ----------- --------------- ----------------- ------------------ --------
Change in fair value
during the year 10,322 1,726 12,048 3,788 15,836
---------------------- ----------- --------------- ----------------- ------------------ --------
As at 31 December
2017 (audited) 735,355 113,182 848,537 42,045 890,582
---------------------- ----------- --------------- ----------------- ------------------ --------
At 30 June 2018 the Group held construction accruals and
retentions of GBP15,269,000 (31 December 2017: GBP10,162,000).
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
independent external valuers, and has been prepared as at 30 June
2018, in accordance with the Appraisal & Valuation Standards of
the Royal Institution of Chartered Surveyors ("RICS"), on the basis
of market value. This value has been incorporated into the
financial statements.
The valuation of all property assets uses market evidence and
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 NAV.
All investment property is categorised as Level 3. There have
been no transfers between Level 1 and Level 2 during any of the
periods, nor have there been any transfers between Level 2 and
Level 3 during any of the periods.
The valuations have been prepared on the basis of Market Value
("MV") which is defined in the RICS Valuation Standards, as:
"The estimated amount for which a property should exchange on
the date of valuation between a willing buyer and a willing seller
in an arm's-length transaction after proper marketing wherein the
parties had each acted knowledgeably, prudently and without
compulsion."
The table below reconciles the fair value of the investment
property per the Consolidated Group Statement of Financial Position
and the market value of the investment property as per the
independent valuation performed in respect of each period end.
Unaudited Unaudited
six months six months Audited year
to 30 June to 30 June to 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
--------------------------------- ----------- ----------- ---------------
Value per independent valuation
report 945,160 817,910 890,110
---------------------------------- ----------- ----------- ---------------
Plus: long leasehold liability 471 472 472
---------------------------------- ----------- ----------- ---------------
Fair value per Consolidated
Statement of Financial Position 945,631 818,382 890,582
---------------------------------- ----------- ----------- ---------------
The descriptions and definitions relating to valuation
techniques and key unobservable inputs made in determining fair
values of student properties are as follows:
(a) Unobservable input: Rental values
The rent at which space could be let in the market conditions
prevailing at the date of valuation. The rent range per week are as
follows:
30 June 2018 30 June 2017 31 December 2017
----------------- ---------------- ----------------
GBP101-GBP347 per GBP89-GBP337 per GBP95-GBP347 per
week week week
----------------- ---------------- ----------------
(b) Unobservable input: Rental growth
The estimated average increase in rent based on both market
estimations and contractual arrangements. The assumed growth in
rents are as follows:
30 June 2018 30 June 2017 31 December 2017
------------ ------------ ----------------
2.67% 1.59% 3.08%
------------ ------------ ----------------
(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. The range in net initial yields
are as follows:
30 June 2018 30 June 2017 31 December 2017
------------ ------------ ----------------
4.50%-6.25% 4.75%-6.55% 4.65%-6.30%
------------ ------------ ----------------
(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 for the student
properties has been prepared by the valuer:
-3% Change +3% Change -0.25% +0.25%
(Decrease)/increase in the in rental in rental Change Change
fair value of investment income income in yield in yield
properties GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---------- ---------- --------- ---------
As at 30 June 2018 (38,950) 39,030 45,310 (41,440)
--------------------------- ---------- ---------- --------- ---------
As at 30 June 2017 (34,420) 34,480 39,080 (38,750)
--------------------------- ---------- ---------- --------- ---------
As at 31 December 2017 (36,260) 36,260 42,070 (38,500)
--------------------------- ---------- ---------- --------- ---------
7. Borrowings
The existing facilities are secured by charges over individual
investment properties held by certain asset-holding subsidiaries.
These assets have a fair value of GBP885 million at 30 June 2018.
In some cases, the lenders also hold charges over the shares of the
subsidiaries and the intermediary holding companies of those
subsidiaries.
A summary of the drawn and undrawn bank borrowings in the period
is shown below:
Bank borrowings Bank borrowings
drawn undrawn Total
GBP'000 GBP'000 GBP'000
--------------------------------------- --------------- --------------- --------
At 1 January 2018 (audited) 303,829 86,201 390,030
--------------------------------------- --------------- --------------- --------
Bank borrowings drawn in the period 16,201 (16,201) -
--------------------------------------- --------------- --------------- --------
At 30 June 2018 (unaudited) 320,030 70,000 390,030
--------------------------------------- --------------- --------------- --------
At 1 January 2017 (audited) 243,917 66,113 310,030
--------------------------------------- --------------- --------------- --------
Bank borrowings from new facilities
in the period 10,000 - 10,000
--------------------------------------- --------------- --------------- --------
Bank borrowings assumed on acquisition
of joint venture 9,534 - 9,534
--------------------------------------- --------------- --------------- --------
Bank borrowings drawn in the period 49,912 (49,912) -
--------------------------------------- --------------- --------------- --------
Bank borrowings repaid in the
period (9,534) - (9,534)
--------------------------------------- --------------- --------------- --------
At 30 June 2017 (unaudited) 303,829 16,201 320,030
--------------------------------------- --------------- --------------- --------
At 1 January 2017 (audited) 243,917 66,113 310,030
--------------------------------------- --------------- --------------- --------
Bank borrowings from new facilities
in the year 10,000 70,000 80,000
--------------------------------------- --------------- --------------- --------
Bank borrowings assumed on acquisition
of joint venture 9,534 - 9,534
--------------------------------------- --------------- --------------- --------
Bank borrowings drawn in the year 49,912 (49,912) -
--------------------------------------- --------------- --------------- --------
Bank borrowings repaid in the
year (9,534) - (9,534)
--------------------------------------- --------------- --------------- --------
At 31 December 2017 (audited) 303,829 86,201 390,030
--------------------------------------- --------------- --------------- --------
On 14 August 2018 the Group drew down the first GBP20 million of
its GBP70 million three-year revolving credit facility.
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:
Audited 31
Unaudited Unaudited December
30 June 2018 30 June 2017 2017
Current borrowings GBP'000 GBP'000 GBP'000
------------------------------------- ------------- ------------- ----------
Balance brought forward 21,190 - -
------------------------------------- ------------- ------------- ----------
Bank borrowings becoming current
in the period - - 21,190
------------------------------------- ------------- ------------- ----------
Bank borrowings drawn down in
the year 9,440 - -
------------------------------------- ------------- ------------- ----------
Bank borrowings: due in less than
one year 30,630 - 21,190
------------------------------------- ------------- ------------- ----------
Less: Unamortised costs (241) - (423)
------------------------------------- ------------- ------------- ----------
Current liabilities: Bank borrowings 30,389 - 20,767
------------------------------------- ------------- ------------- ----------
Balance brought forward 282,639 243,917 243,917
------------------------------------- ------------- ------------- ----------
Total bank borrowings in the period 6,761 69,446 69,446
------------------------------------- ------------- ------------- ----------
Less bank borrowings becoming
current during the period - - (21,190)
------------------------------------- ------------- ------------- ----------
Less bank borrowings repaid during
the period - (9,534) (9,534)
------------------------------------- ------------- ------------- ----------
Bank borrowings: due in more than
one year 289,400 303,829 282,639
------------------------------------- ------------- ------------- ----------
Less: Unamortised costs (5,010) (5,608) (5,257)
------------------------------------- ------------- ------------- ----------
Bank borrowings 284,390 298,221 277,382
------------------------------------- ------------- ------------- ----------
Audited
Unaudited Unaudited 31 December
30 June 2018 30 June 2017 2017
GBP'000 GBP'000 GBP'000
-------------------------------- ------------- ------------- ------------
Maturity of bank borrowings
-------------------------------- ------------- ------------- ------------
Repayable within 1 year 30,630 - 21,190
-------------------------------- ------------- ------------- ------------
Repayable between 1 and 2 years 65,500 47,229 55,500
-------------------------------- ------------- ------------- ------------
Repayable between 2 and 5 years 32,800 65,500 36,039
-------------------------------- ------------- ------------- ------------
Repayable in over 5 years 191,100 191,100 191,100
-------------------------------- ------------- ------------- ------------
Bank borrowings 320,030 303,829 303,829
-------------------------------- ------------- ------------- ------------
Fair Value
less Book
Fair Value Book Value Value
GBP'000 GBP'000 GBP'000
------------------------------ ---------- ---------- ----------
Fair value of fixed rate debt
------------------------------ ---------- ---------- ----------
At 30 June 2018 - unaudited 197,329 187,799 9,530
------------------------------ ---------- ---------- ----------
At 30 June 2017 - unaudited 223,547 187,502 36,045
------------------------------ ---------- ---------- ----------
At 31 December 2017 - audited 199,039 187,640 11,399
------------------------------ ---------- ---------- ----------
The fair value of the fixed rate debt has been valued by
independent financial 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.
8. Net Asset Value per Share ("NAV")
Basic NAV per share is calculated by dividing net assets in the
Statement of Financial Position attributable to ordinary equity
holders 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:
Unaudited Unaudited Audited 31
30 June 2018 30 June 2017 December 2017
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------- ------------- --------------
Net assets per Statement of Financial
Position 636,306 530,428 629,258
-------------------------------------- ------------- ------------- --------------
Adjustment to exclude the fair
value loss of financial instruments 422 956 700
-------------------------------------- ------------- ------------- --------------
EPRA NAV 636,728 531,384 629,958
-------------------------------------- ------------- ------------- --------------
Adjustment to include fair value
of debt (9,530) (36,045) (11,399)
-------------------------------------- ------------- ------------- --------------
Adjustment to include the fair
value loss of financial instruments (422) (956) (700)
-------------------------------------- ------------- ------------- --------------
EPRA NNNAV 626,776 494,383 617,859
-------------------------------------- ------------- ------------- --------------
Ordinary shares Number Number Number
----------------------------------- ----------- ----------- -----------
Issued share capital 602,887,740 501,279,071 602,887,740
----------------------------------- ----------- ----------- -----------
Issued share capital plus employee
options 604,545,037 504,430,869 604,175,057
----------------------------------- ----------- ----------- -----------
Pence Pence Pence
----------------------------- ------ ------ ------
NAV per share basic 105.54 105.81 104.37
----------------------------- ------ ------ ------
NAV per share diluted 105.25 105.15 104.15
----------------------------- ------ ------ ------
EPRA NAV per share basic 105.61 106.01 104.49
----------------------------- ------ ------ ------
EPRA NAV per share diluted 105.32 105.34 104.27
----------------------------- ------ ------ ------
EPRA NNNAV per share basic 103.96 98.62 102.48
----------------------------- ------ ------ ------
EPRA NNNAV per share diluted 103.68 98.01 102.26
----------------------------- ------ ------ ------
9. Capital Commitments
As at 30 June 2018, the Group had total capital commitments of
GBP55 million (31 December 2017: GBP23 million) relating to forward
funded or direct developments.
10. Related Party Disclosures
Key Management Personnel
Key management personnel are considered to comprise the Board of
Directors.
Share Capital
There were no share transactions by related parties during the
period.
Share-Based Payments
On 1 May 2018, the Company granted nil-cost options over a total
of 26,115 ordinary shares to Lynne Fennah pursuant to the deferred
shares element of the annual bonus award for the financial period
to 31 December 2017.
On the same date, the Company granted nil-cost options over a
total of 343,861 ordinary shares to Lynne Fennah pursuant to the
Empiric Long Term Incentive Plan (the "LTIP") for the 2018
financial year.
Board Change
On 5 July 2018, the Board announced that Lynne Fennah had been
appointed to the dual roles of Chief Operating Officer and Chief
Financial Officer with effect from 1 July 2018.
On 26 July 2018, the Board announced that Mark Pain had been
appointed as Non-Executive Chairman with effect from 1 September
2018.
11. Subsequent Events
On 21 August 2018, the Board declared a dividend of 1.25 pence
per ordinary share in respect of the quarter ended 30 June 2018,
which is to be paid on 14 September 2018 to ordinary shareholders
on the register on 31 August 2018.
On 14 August 2018, the Group drew down the first GBP20 million
of its GBP70 million three-year revolving credit facility.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR PMMBTMBATTPP
(END) Dow Jones Newswires
August 21, 2018 02:00 ET (06:00 GMT)
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