TIDMESP
RNS Number : 1343I
Empiric Student Property PLC
31 March 2020
31 March 2020
Empiric Student Property plc
("Empiric" or the "Company" or, together with its subsidiaries,
the "Group")
BUSINESS, PORTFOLIO AND DIVIDEND UPDATE AND COVID-19
The Board of Empiric Student Property plc (ticker: ESP), the
owner and operator of student accommodation across the UK, is today
providing an initial update on the actions it is prudently taking
to mitigate the impact of COVID-19 on its business operations and
financial performance.
The Group's top priority remains the health, safety and welfare
of its residents, employees and wider stakeholders, whilst
protecting the long-term value of the Group.
Empiric continues to operate all of its buildings based on the
advice issued by the World Health Organisation, Public Health
England, Public Health Scotland, the NHS and other relevant
authorities. The Senior Leadership Team is holding daily calls to
monitor the situation and will adjust the Group's approach when and
where necessary.
We are carefully considering the requirements of our residents
to occupy their rooms, whether as a result of the closure of
academic establishments, measures which are restricting domestic
and global mobility, the enforcement of social distancing or other
unavoidable factors, and also those residents who are experiencing
financial hardship. Our accommodation is a person's home and often
residents do not have alternative accommodation. This is
particularly important for international students who comprise two
thirds of Empiric's residents for the current academic year.
The Group's leadership team and all of our colleagues have been
working tirelessly through this challenging and uncertain time,
doing a fantastic job to maintain, secure and operate our buildings
often under very difficult circumstances. The Board is hugely
grateful to them all.
Current trading
For the 2019/20 academic year, occupancy of the Group's
portfolio remains at 94%. The Group receives 9% of its student
letting income from Nomination Agreements with higher education
institutions and the balance from the direct letting of rooms to
students. As the Group deploys a 50-week tenancy agreement, revenue
from summer lettings is minimal.
For the current academic year 2019/20, the Group has received
approximately 91% of all budgeted revenues due to it.
Despite a strong contractual position under the Group's lease
agreements, but given the unprecedented and unpredictable impact of
COVID-19, the Group will look favourably upon requests on a case by
case basis from its residents who are either no longer in
occupation or, due to University closures, plan not to return to
their accommodation, to be released from their rent and lease
obligations from 25 April 2020 onwards. We also remain committed to
supporting residents who want to continue to stay at the Group's
properties.
The Group has carefully considered the impact on all our key
stakeholders and believes that this is the right thing to do in
these extraordinary circumstances. The impact of this decision is
expected to be a worst-case reduction in revenue of up to c.GBP21
million for the academic year 2019/20.
To date, the Group notes that bookings for the 2020/21 academic
year are currently marginally ahead of the same time last year and
bookings continue to be made but at reduced levels. Given the lack
of certainty at this stage, there remains a risk of lower occupancy
and rental rates for 2020/21 than currently forecast.
The Group is continuing to monitor closely the impact of
COVID-19 and will keep shareholders updated on any material
developments that affect the Group as the situation evolves.
Strong balance sheet and liquidity position
As at 31 December 2019, the Group had debt facilities of GBP390
million. The Loan to Value ("LTV") stood at 33%* with an all-in
average interest payable of 3.2% p.a. and a weighted average term
of 6.6 years.
Based on drawn facilities at 31 December 2019, the Group has
significant headroom against banking covenants calculated on an
average basis across the Group as follows: LTV covenant 65%
compared to actual LTV of 35%, and Interest Cover Ratio ("ICR")
covenant of 216% compared to actual ICR of 397%. In addition to
this, the Group has GBP134 million of uncharged assets.
The Group currently has GBP10 million of cash and GBP57 million
of undrawn debt facilities available. We announced at the 2019
annual results on 18 March 2020 that GBP22.5 million of development
debt had been raised since the year end, but as the Group has now
put on hold part of the development pipeline, the corresponding
development debt of GBP10.5 million has also been deferred.
The Group has GBP32.8 million of re-financing remaining due in
2020 and is in the late stages of legal finalisation with the
existing bank, having obtained final credit approval on 12 March
2020. This facility is for four years and on more favourable terms
than the current facility. Following this, the Group will not have
to refinance any debt before November 2022.
Enhanced financial strength
Due to this period of uncertainty, the Group today announces a
number of actions it is implementing to strengthen further its cash
position.
-- The Group will further increase its focus on operational cost
management and take appropriate action to balance the short and
long term interests of the business.
-- The Group will defer developments where it is cost effective
to do so along with non-essential capital expenditure.
-- The Board has decided to suspend all future dividend
distributions until market conditions stabilise, although it
remains mindful of its REIT tax obligations.
Taken together, these measures will provide the business with a
reduction in cash outflows of net c.GBP26 million and ensure the
Group retains cash headroom through the remainder of the 2020
calendar year.
The Board strongly believes that conserving liquidity is the
right decision for the business, and in the longer-term interests
of all stakeholders.
The Group will continue to review the cost base of the business
and will make further savings if required.
Strong differentiated offering that targets growing student
segments
Until there is clarity on the duration and consequences of this
pandemic, the Board is suspending all previous financial
guidance.
The Group remains committed to delivering sustainable growth in
earnings, gross margins and revenues for its shareholders over the
medium to longer term, supported by a greatly improved operational
platform and robust balance sheet, and the Group is committed to
return to dividend distributions as soon as conditions allow.
The medium to long-term outlook for the business remains
positive thanks predominantly to the growth in number of UK 18-year
olds, supportive Government policies targeting an increase of 30%
in the number of international students by 2030 and a growing
number of postgraduates. Also, despite growing student demand, the
growth of supply of purpose-built student accommodation is
slowing.
The Group's differentiated customer proposition, offering
premium accommodation to affluent growing student segments, will
continue to benefit from these trends in the long term.
We will continue to monitor closely the developing situation and
update the market as appropriate.
* Total drawn borrowings, net of cash and fixed term deposits,
as a percentage of Gross Asset Value.
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Empiric Student Property plc (via Maitland/AMO below)
Tim Attlee (Chief Executive Officer)
Lynne Fennah (Chief Financial & Operating
Officer)
Jefferies International Limited Tel: 020 7029 8000
Stuart Klein
Tom Yeadon
RBC Europe Limited (trading as RBC Tel: 020 7653 4000
Capital Markets)
Charlie Foster
Marcus Jackson
M aitland/AMO (Communications Adviser) Tel: 020 7379 5151
James Benjamin Email: empiric-maitland@maitland.co.uk
The Company's LEI is 213800FPF38IBPRFPU87.
Further information on Empiric can be found on the Company's
website at www.empiric.co.uk .
Notes:
Empiric Student Property plc is a leading provider and operator
of modern, 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.
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END
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