TIDMESP
RNS Number : 6336V
Empiric Student Property PLC
11 August 2022
11 August 2022
Empiric Student Property plc
("Empiric" or the "Company" or, together with its subsidiaries,
the "Group")
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2022
Good progress to date in 2022 and increasingly confident in the
positive outlook for our business and long-term strength of our
market
Empiric Student Property plc (ticker: ESP), the owner and
operator of premium student accommodation serving key UK
universities, today reports its interim results for the six months
ended 30 June 2022.
Duncan Garrood, Chief Executive Officer of Empiric Student
Property plc, said:
"We are pleased to have grown our revenue, earnings and
portfolio valuation in the first half, and to have delivered a
total accounting return, the sum of income and capital growth, of
10.9% for the period, up from 1.1% in H1 2021. This reflects the
reduced impact of COVID on the academic year 2021/22, strong yield
compression, increased rents and our continuing work on further
improving our portfolio and business.
We are encouraged to have achieved occupancy to date for the
forthcoming academic year 2022/23 of 92%. This is ahead by 10%
compared to the same time pre-pandemic, and w e expect to deliver
revenue occupancy at the upper end of our revised guidance of 90%
to 95%. T his has been driven not only by market conditions
normalising but also by the proactive enhancements we are making to
our business and portfolio. We remain committed to paying a minimum
dividend of 2.5 pence in 2022 and will review this in Q4 once
occupancy levels are confirmed for the new academic year.
In a rising inflationary environment, it is important to note
that we have hedged our energy costs up until Q3 2024. We have also
fixed two thirds of our total debt facilities, which gives us
significant protection from rising interest rates.
Despite the wider uncertain backdrop, we are well positioned to
provide further attractive growth. We are increasingly confident in
the normalisation, and long-term strength and resilience of our
market, and of the strong, sustainable growth and value creation
potential within our business."
HIGHLIGHTS
30 J une 30 June 2021 change
2022
Revenue GBP35.6m GBP 25.9m +37%
------------ ------------- --------
Property costs GBP10.6m GBP 10.9m -3%
------------ ------------- --------
Gross margin 70.2% 57.9% +21%
------------ ------------- --------
Administrative expenses GBP6.3m GBP5.3m +20%
------------ ------------- --------
Adjusted earnings per share 1.97p 0.59p +234%
------------ ------------- --------
(Loss)/Gain on disposal of
investment property (GBP0.1)m GBP1.7m -109%
------------ ------------- --------
Change in fair value of investment
property GBP58.6m GBP1.8m +3,141%
------------ ------------- --------
Profit before taxation GBP70.3m GBP7.0m +904%
------------ ------------- --------
Dividends paid GBP7.5m - -
------------ ------------- --------
Loan to value (%) 32.8% 33.1% -1%
------------ ------------- --------
30 June 31 December
2022 2021
------------ ------------- --------
Property valuation GBP1,087.7m GBP1,021.8m +6%
------------ ------------- --------
EPRA NTA Per share 117.8p 107.4p +10%
------------ ------------- --------
Total return (%) 10.9% 1.1% +890%
------------ ------------- --------
Delivering improving financial performance and attractive
returns
-- Growth in revenue of 37% to GBP35.6 million (H1 2021: GBP25.9
million), as occupancy for the first half was 86% compared to 65%
for the same period in 2021.
-- Like for like rental growth for the academic year 2021/22 was
1.5%, up from 1.3% reported previously, as we focused on occupancy
levels during the year over rental growth.
-- In March, we reported 84% revenue occupancy for the academic
year 2021/22, which has increased to 86% since then, slightly above
the upper end of our guidance.
-- Property costs of GBP10.6 million were 3% lower than the same period last year.
-- Gross margin has increased by 21%, from 57.9% to 70.2%, as a
result of a GBP9.7 million improvement in revenue.
-- Administration expenses were GBP6.3 million and in line with guidance.
-- Adjusted Earnings for the period were GBP11.9 million (H1
2021: GBP3.5 million), with Adjusted earnings per share of 1.97
pence (H1 2021: 0.59 pence).
-- We sold five assets in the period for GBP26.7 million
slightly above book value and reported a net loss on disposal of
investment property (GBP0.1) million after deducting re-financing
and sales costs.
-- The net profit from a change in the fair value of investment
properties was GBP58.6 million (H1 2021: gain of GBP1.8
million).
-- Profit before tax of GBP70.3 million (H1 2021: GBP7.0 million).
-- Basic earnings per share of 11.65 pence (H1 2021: 1.16 pence).
-- Property portfolio valued at GBP1,087.7 million (31 December
2021: GBP1,021.8 million). On a like for like basis, the investment
property valuation increased by 7%. This was driven by strong yield
compression and like for like rental growth, CBRE's removal of the
Covid-related valuation reduction of GBP6.2 million and by our
continuing work on further improving our portfolio and
business.
-- Underlying valuation yield of 5.2% (31 December 2021: 5.3%) has improved, reflecting both a strengthening of yields in our prime assets and improved rental growth.
-- EPRA Net Tangible Assets ("NTA") per share up 10% to 117.8
pence (31 December 2021: 107.4 pence).
-- Total accounting return, the sum of income and capital
growth, increased to 10.9% (H1 2021: 1.1%).
We have made significant progress in further improving our
portfolio and business across the following critical areas:
actively managing our property portfolio; strengthening our brand
proposition; driving performance through data analytics; delivering
consistently high customer service; and developing our people.
Strong student demand for academic year 2022/23 - ahead of
pre-pandemic peak
-- We are encouraged to have to date achieved occupancy for the
forthcoming academic year 2022/23 of 92%, which is ahead by 10%
compared to the same time pre-pandemic.
-- We expect to deliver revenue occupancy at the upper end of
our revised guidance of 90% to 95%. This has been driven not only
by market conditions normalising but also by the proactive
improvements that we are continuing to make to our portfolio and
business.
-- Through our enhanced and more targeted marketing, combined
with good customer service, we have significantly increased the
participation of domestic students in our business, showing how we
can successfully flex our customer base depending on the market
environment.
-- Bookings achieved to date for academic year 2022/23 indicate
that half our customers are from the UK, up from pre-pandemic
levels of a third.
-- One third of our bookings are from China and the remainder
are other international students, though this balance may change
slightly by September as some markets, including India, tend to
book very late. Asian markets are again at the forefront of
international enquiries, and we have done considerable work to tap
into these markets directly, using specific social media and
platforms.
-- We have seen encouraging growth in rebookers to 23% and the
proportion of postgraduates has increased by approximately 8%. This
gives us confidence that our Postgrad product, which we are
piloting in Edinburgh, will have significant attraction.
Further enhancing our business and portfolio to provide
attractive, sustainable returns and enhanced value to all our
stakeholders
-- Our portfolio optimisation and recycling capital strategy is
progressing well. Since March 2021, we have sold 9 assets for
GBP44.6 million (GBP26.7 million in H1 2022), and with asset
disposals worth GBP40 million currently under offer at or around
book value. Our disposal programme remains on track, as we work to
eliminate non-core assets.
-- Disposals allow us to recycle capital and in March we
announced our first acquisition since 2018, Market Quarter in
Bristol, for a cost of GBP19 million with an expected unlevered IRR
of 8% to 9%. It is fully let for academic year 2022/23, with an 18%
increase in rent.
o This site is close to our other assets in Bristol and creates
a cluster of four buildings run by the same management team. This
enables us to maintain our small boutique proposition whilst
reducing costs and improving our margin.
o Future acquisitions will focus on continuing our cluster
strategy.
-- We have secured a good pipeline of potential acquisitions and
development opportunities and are under offer on a further
acquisition worth GBP15 million within a key growth city and
clustered location.
-- We are on track to complete two developments in September
2022 in Bristol and Edinburgh, all launched rooms for the academic
year 2022/23 are fully let with waiting lists, and with yields on
cost of 6.3% and 6.1% and IRRs of 10%-11% and 12%-13%,
respectively.
-- Following successful pilots, we are undertaking further
refurbishments of two communal areas and 47 rooms for the academic
year 2022/23, with a further three communal areas and 300 rooms for
the academic year 2023/24, with an IRR target of 9%-11%.
Strong balance sheet
-- Loan to value for the Group was 32.8%, broadly in line with our 35% long-term target.
-- At 30 June 2022, before deduction of loan arrangement fees,
the Group had committed investment debt facilities of GBP420
million, of which GBP400 million were drawn down. GBP277 million of
this debt is fixed and GBP123 million is floating. The aggregate
cost of debt was 3.3%, with a weighted average term of five
years.
Committed to being a responsible business
-- At our annual results reported in March this year, we
announced our plan to be net zero on our operations, property
portfolio and energy consumption by 2035 and we are pleased to
report that we are reducing this timeframe to 2033.
-- Our Paris aligned scope 3 target is by 2050 or before, and we
will be reviewing this target regularly with the aim of achieving
it faster as more data becomes available.
-- We have published our first full Net Zero Strategy report on
the sustainability section of our corporate website today, and this
includes setting out the seven KPIs that will enable us to track
our progress against this commitment.
Encouraged by the strong outlook for our business and the wider
sector
-- With strong occupancy to date of 92% for the forthcoming
academic year 2022/23, w e expect to deliver revenue occupancy at
the upper end of our revised guidance of 90% to 95%.
-- We are driving strong life for like rental growth, and we now
expect to deliver rental growth in the region of 5% to 6% for
academic year 2022/23. While some of this is due to our enhanced
marketing and new dynamic pricing strategy, it is also in part a
result of the recovery from Covid, which is likely to moderate in
future years.
-- In a rising inflationary environment, it is important to note
that we have hedged our energy costs up until Q3 2024. We have also
fixed two thirds of our total debt facilities, which gives us
significant protection from rising interest rates.
-- We are pleased to have resumed dividend payments and we
remain committed to paying a minimum of 2.5 pence in 2022, and we
will review the dividend in the fourth quarter once we have
confirmed our occupancy levels for the new academic year , in line
with our policy of being fully covered and progressive .
-- Strong and resilient outlook for student demand growth expected from:
o Sustainable demographic growth projected from domestic
students over the next 10 years.
o Significantly growth in international student numbers
(non-EU), which are projected to increase strongly through to at
least 2026, according to the latest UCAS forecasts.
-- We are increasingly confident in the normalisation and
long-term strength of our market, and of the strong, sustainable
growth and value creation potential within our business.
Half year results presentation at 8.30 a.m. (UK) today
Please register below for the Company results presentation
in-person briefing and live webcast and conference call for
analysts and investors at 8.30 a.m. (UK) today.
To register to attend the in-person briefing, which is at the
offices of Peel Hunt, 7th Floor, 100 Liverpool Street, London, EC2M
2AT, please contact Maitland/amo at:
empiric-maitland@maitland.co.uk or by telephone on +44 (0) 20
7379 5151.
To access the live webcast, please register in advance here:
https://www.lsegissuerservices.com/spark/EMPIRICSTUDENTPROPERTY/events/2e76e4e3-0cd0-4958-97fc-c75d4d4af916
To access the live conference call, please register here to
receive unique dial-in details :
https://cossprereg.btci.com/prereg/key.process?key=PTGBD68WD
The recording of the results presentation will be available
later in the day via the Company's London Stock Exchange profile
page
https://www.lsegissuerservices.com/spark/EMPIRICSTUDENTPROPERTY/events/2e76e4e3-0cd0-4958-97fc-c75d4d4af916
and from the Company website:
https://www.empiric.co.uk/investor-information/company-documents
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Empiric Student Property plc (via Maitland/amo below)
Duncan Garrood (Chief Executive Officer)
Lynne Fennah (Chief Financial & Sustainability
Officer)
Jefferies International Limited 020 7029 8000
Tom Yeadon
Andrew Morris
Peel Hunt LLP 020 7418 8900
Capel Irwin
Carl Gough
07747 113 930 / 020 7379
Maitland/amo (Communications Adviser) 5151
James Benjamin empiric-maitland@maitland.co.uk
Alistair de Kare-Silver
The Company's LEI is 213800FPF38IBPRFPU87.
Further information on Empiric can be found on the Company's
website at www.empiric.co.uk .
Notes:
Empiric Student Property plc is a leading provider and operator
of modern, predominantly direct-let, premium student accommodation
serving key UK universities. Investing in both operating and
development assets, Empiric is a fully integrated operational
student property business focused on premium studio-led
accommodation managed through its Hello Student(R) operating
platform, that is attractive to affluent growing student
segments.
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.
MANAGEMENT REPORT
Market Continues to Grow
2021 saw investment volumes in the UK student accommodation
sector total just over GBP4.1 billion despite the lingering effects
of the COVID-19 pandemic. In 2022 so far, investment volumes have
been considerable, highlighting demand from a growing list of
private equity, sovereign wealth funds, property companies and
private individuals looking to increase exposure in the sector. GIC
and Greystar's purchase of the Student Roost portfolio from
Brookfield for GBP3.3 billion in May, competed for by several
well-funded bidders, demonstrates continued confidence in the
market. Investors have been prepared to look beyond wider economic
market sentiment to focus on the UK student accommodation sector's
strong long-term growth prospects.
Student demand figures for the upcoming year are looking
positive . In the UCAS June Deadline results the key points
were:
- Total undergraduate applicants up slightly by 0.2%
- Non-EU international applicants up 9% with growth in applicants from China and India
- Chinese applicants up 10%
- Indian applicants up 20%
- EU applicants down by 27%
- Total applicants up 6% from 2019/20 applications
We are encouraged to see the year-on-year trend of growth in
students, fuelled by the desire of international students to study
in the UK, and in top quality UK universities in particular.
UCAS are predicting that by 2026 there will be over a million
applicants for UK universities, and that at least a fifth of those
will be international students. This means overall applications are
projected to grow nearly 50% over the next 5 years.
There is also a long-term trend of growing numbers of
postgraduate students. The data for this is not as recent as UCAS,
which only records undergraduate applications, but the latest
figures from the Higher Education Statistics Agency reported
743,000 UK post graduate students in 2020/21 which was up 16% on
the previous year. This gives us confidence that our Postgrad
product, which we are piloting in Edinburgh, will have significant
attraction.
Our Mix of Students
Our bookings to date for the 2022/23 academic year suggest that
half our customers are from the UK, up from pre-pandemic levels of
a third. Through our enhanced targeted marketing, combined with
good customer service, we have significantly increased the
participation of domestic students in our business, showing how we
can flex our customer base depending on the current offering to
meet demand patterns.
One third of our bookings are from China in line with
pre-pandemic levels with the remainder being other international
students. This balance may change slightly by September as some
markets, including India, tend to book very late.
Asian markets are leading our international enquiries. We have
done considerable work to tap into these markets directly, using
specific social media platforms and advertising campaigns.
We have seen encouraging growth in rebookers to 23% and the
proportion of postgraduates has increased to approximately 41%.
This gives us confidence that our new Postgrad product, which we
are piloting in Edinburgh, will have significant demand.
5 Key Priorities
Within our 2021 Annual Report we highlighted five key priorities
for the Group. We have made good progress on each of these, which
are summarised below:
1 Actively Managing Our Portfolio
Clearly, our portfolio segmentation will fluctuate in size and
value as we continue to optimise the portfolio.
Segment A (65%) comprises properties which we consider our best
assets. We have grown this by 11% since March 2021, as a result of
valuation uplifts, making an acquisition, and upgrading assets from
Segment B through refurbishment.
Segment B (14%) consists of sites which fundamentally meet the
Hello Student criteria but need investment to command the rental
yield we require. Our aim is to upgrade these sites to Segment
A.
Segment C (14%) originally included two sub-segments.
The first consisted of sites suitable for first years, bound by
nomination agreements. We have now reviewed whether to dispose of
these assets and so have moved them to Segment D.
Segment C now consists solely of sites ideal for postgraduates.
We aim to grow this category and are launching a pilot with the
sub-brand "Post Grad by Hello Student" in Edinburgh this
autumn.
Segment D (7%) comprises assets that no longer remain core and
are on our disposal programme. The Board will review whether to
formally approve disposals on a case by case basis.
Portfolio Recycling
Since March last year, we have sold nine assets in segment D for
GBP44.6 million. These were all sold above book value. We currently
have further assets worth GBP40 million under offer. Most of these
consist of apartments with shared facilities which are not in line
with our core brand. We are in discussions on all our remaining
segment D sites and expect the disposal programme to complete
within the next 18 months.
In March 2022, we announced our first acquisition since 2018,
Market Quarter Studios in Bristol, for a cost of GBP19 million with
an expected unlevered IRR of 8 to 9%. It is fully let for the
upcoming academic year with an average uplift in rent of 18%. This
site is close to our other assets in Bristol and creates a cluster
of four buildings run by the same management team. This will enable
us to maintain our small boutique proposition whilst reducing costs
and improving our margin. Future acquisitions will focus on
continuing this cluster strategy.
We have a strong pipeline of potential acquisitions and
development opportunities and are under offer on a further
acquisition worth GBP15 million in a key growth city which will
enhance the clustered location. This is funded through our capital
recycling programme.
We have two developments which are due to complete for the
forthcoming academic year, St Mary's in Bristol and Southbridge in
Edinburgh. Both buildings are fully let for the forthcoming
academic year.
We have a refurbishment plan to convert Segment B assets to
Segment A and plan to invest GBP4.4 million this year with a target
unleveraged IRR of 9% to 11%.
Following our two successful refurbishment pilot schemes earlier
in the year, we are continuing with our programme though we have
decided to delay some refurbishments until next year when we can
contract them well in advance at better prices.
So, for this year we are focusing on a couple of communal areas
and 47 rooms, whilst next year we will have a more expansive
programme covering several communal areas and 300 beds.
We had 8,775 operating beds in the portfolio last August and
will have 8,603 beds in September following:
- disposals from segment D, reducing beds by 476
- our acquisition in Bristol, Market Quarter Studios, adding 92 beds
- and the opening of 2 developments, St Mary's Bristol with 153
beds, and Edinburgh Southbridge with 59 post graduate beds.
76% of our portfolio currently serves our target universities
which include Russell Group and other top-quality institutions, and
once segment D is eliminated, we expect this to rise to well above
80%. In other cities where we have a strong commercial performance
- for example Falmouth, Huddersfield and Portsmouth - we will
maintain our position.
2 Strengthening Our Brand
We have been carrying out work to refresh and evolve our brand,
this is now complete and launched across our digital channels, with
continued rollout at each touchpoint in the customer journey.
Our new brand proposition was created following a number of
workshops and focus groups with our students to really understand
their needs and ensure that we have a brand which they can identify
with and find appealing. The research with our students has been
extremely positive and they find this an attractive and relatable
brand. Next year we will undertake a thorough overhaul of our
customers' digital journey to ensure we continue to provide the
best possible experience that further strengthens the brand
proposition and our differentiation in the market.
The strong brand position and increased differentiation will
increase both new customer acquisition and retention rates.
3 Driving Performance - Data Analytics
Now that our revenue management platform is in house and fully
operational, we have been able to maximise our revenue from our
dynamic pricing model through rigorous algorithmic analysis coupled
with human judgement.
An example of this is in Glasgow, where we applied an initial
increase of 3.8% on our rents across the city. As bookings grew and
certain room categories in some sites started to fill up, our
algorithms recommended further targeted increases. As a result,
overall Glasgow has achieved a total rental increase of 7.1% and is
fully booked.
We are also working on a new room categorisation which
significantly simplifies our current structure, and we will start
selling on this basis in the autumn for the 2023/24 academic
year.
For the current year, our 2022/23 academic year bookings of 92%
are well ahead of the prior year and 10% ahead of the 2019/20
academic year, which was previously our best year ever.
As such, we are increasing our guidance for 2022/23 academic
year to 90% to 95%, and we expect to be toward the top of this
range assuming no further disruption.
4 Delivering Consistent Service
We have launched an app to enable students to communicate easily
and quickly with us.
The app allows customers to contact us about maintenance issues,
parcel deliveries, visitors or social plans at a time of their
choosing. And we in turn will be able to monitor our response times
and customer satisfaction levels.
The app has now been successfully piloted in seven properties.
In those seven sites we have been able to halve the amount of time
it takes to deal with almost three quarters of service and
maintenance requests. So, we now plan to roll out the app across
all our sites for the forthcoming academic year 2022/23.
5 Developing Our People
We have also continued to invest in our people, as they are at
the heart of a successful service organisation.
We continue to pay the Real Living Wage which will always be
above the National Living Wage minimum, to retain and motivate our
key customer service team members.
We are very pleased that since joining the "Best Companies"
scheme (the previous Sunday Times Best Employers), we have
progressed to the "Star Employer" category and grown our positive
engagement scores.
At a time when hiring is very competitive, increasing employee
engagement helps to increase our retention.
Sustainable Shareholder Returns
In summary, we continue to focus on driving improved and
sustainable shareholder returns and creating and delivering
positive value and impact to all our stakeholders.
The number of students in the 2022/23 academic year is set for
continued growth and based on our current bookings we expect
revenue occupancy towards the top end of our guidance.
We are delivering strong rental growth as the business bounces
back after the pandemic and expect a like-for-like uplift of around
5% to 6% for the 2022/23 academic year, which is helping to drive
an uplift in our portfolio valuation.
We continue to actively manage our portfolio and recycle capital
with good progress on disposals, acquisitions, developments, and
refurbishments.
We have defined our sustainability metrics and now plan to
achieve net zero on our own operations by 2033 rather than
2035.
We are pleased to have reinstated dividend payments and have
committed to paying a minimum of 2.5 pence this year, which we will
review once occupancy levels are confirmed in quarter four, in line
with our fully covered and progressive policy.
Finally, we are targeting a gross margin above 70% and a total
return of 7% to 9% in 2023, assuming a full year of normal
occupancy levels.
Financial Performance
Revenue improved 37% to GBP35.6 million, as occupancy for the
first half was 86% compared to 65% for the same period in 2021.
Like-for-like rental growth for the 2021/22 academic year was
1.5%, up from 1.3% reported in March, as we focused on occupancy
levels during the year over rental growth.
Property e xpenses were marginally lower than the same period
last year.
Gross margin increased from 58% to 70% as a result of a GBP9.7
million improvement in revenue.
During the first half we sold five assets for GBP26.7 million,
above book value with a net loss on disposal of GBP0.1 million
after costs.
The net profit from a change in the fair value of investment
properties was GBP58.6 million compared to GBP1.8 million in the
previous half year.
Net finance expense was GBP6.9 million, 11% higher due to higher
interest rates and a higher level of borrowing.
Taking all this together , we are reporting a profit of GBP70.3
million with Basic earnings per share of 11.7 pence.
Valuation Movement
Since the year end, we have sold five assets for GBP26.7
million, in line with the book value shown here of GBP25.9
million.
We then purchased one asset in Bristol for GBP19 million to
further our clustering strategy.
After these disposals and acquisitions, the portfolio was valued
at GBP1,014.9 million.
During the period we spent GBP6.1 million on capital expenditure
as well as GBP7.7 million on developments, mainly on St Mary's
Bristol.
The value of developments has increased by GBP14 million in the
first half.
At the year -end we reported a COVID-related valuation reduction
of GBP6.2 million mainly due to CBRE's assumption of lower income
for the 2021/22 academic year .
At the end of June, CBRE removed this reduction entirely,
resulting in a favourable movement of GBP6.2 million.
Our commercial portfolio, which comprises convenience stores and
restaurants within our sites, went up GBP0.3 million.
We told you last year that we will spend GBP37 million on health
and safety works in the five years up to 2025 related to work on
external wall systems and fire stopping.
CBRE have assumed that GBP17.2 million of this cost was
reflected in the year-end valuation we reported in March. And they
have assumed a further GBP10.8 million for the first half this
year. This is due to greater certainty around the scope of works
required on buildings as well as the cost.
In addition, CBRE have assumed a GBP2.4 million deduction, which
reflects risk to income from the programme of work on external wall
systems and fire stopping.
And the value of our operational assets grew by GBP51.7 million,
driven by strong yield compression and like-for-like rental
growth.
We are unlikely to experience the same level of yield
compression in the second half and whilst this valuation uplift has
driven a very strong total return in the first half, we expect this
to moderate in 2023.
Overall Net Initial Yield has improved from 5.3% to 5.2% since
the year-end.
Collectively, these movements resulted in a valuation at the end
of June of GBP1,088 million.
Financial Position at 30 June 2022
The portfolio was valued at GBP1,088 million as at 30 June
2022.
The cash holding was GBP51 million compared to GBP37 million at
the prior year end.
Debt now stands at GBP402 million after deducting loan
arrangement fees, up from GBP371 million as at 31 December
2021.
And the Net Asset Value of the Group was GBP711 million,
compared to GBP648 million , mainly due to the improved
valuation.
At the end of June, before deduction of loan arrangement fees ,
the Group had committed investment debt facilities of GBP420
million, of which GBP400 million were drawn down.
GBP277 million of this debt is fixed and GBP123 million is
floating.
The aggregate cost of debt was 3.3%, with a weighted average
term of 5.0 years.
And the Loan to Value for the Group was 32.8%, broadly in line
with our 35% long-term target.
As of 31 July, we had GBP72.5 million of undrawn facilities and
cash, and we currently have around GBP38 million of unencumbered
assets.
In an environment with rising interest rates, it is important
that three quarters of our drawn debt is fixed.
Capital Expenditure
As stated in our December 2021 Annual Report, we have outlined
our planned capital expenditure over the five-years from 2021 to
2025. This was split into three categories.
Refurbishment
We expect to invest GBP44 million in total on refurbishments. Of
that we plan to spend GBP2.8 million in 2022, of which GBP0.6
million has been spent to date, with a more significant programme
in 2023.
Green spend
Managing our assets in a sustainable way is a key focus with an
estimated total spend of GBP4 million on green initiatives.
We expect to invest GBP500,000 this year on smart panel heat
network systems and solar panels, with GBP50,000 spent so far.
Fire safety
The total estimated five-year spend on fire safety works is
GBP37 million:
This year we are planning GBP4 million of fire stopping work
with GBP2.3 million incurred to date, and a further GBP6.5 million
on external wall rectification, with GBP1.3 million spent to
date.
We also expect to maintain our on-going maintenance capital
expenditure of about GBP4 million a year.
Outlook for Full Year 2022
We are encouraged that occupancy for the next academic year
2022/23 is currently at 92%, which is ahead by 10% compared to the
same time pre-pandemic.
With greater confidence that market conditions are normalising
and progress on further improving our business and portfolio, we
are increasing our guidance for revenue occupancy to 90% to 95% for
2022/23 academic year, and we expect to be toward the top of this
range, assuming no further disruption.
On Administration costs, we are at GBP6.3 million for the first
half, in line with our guidance.
Our cost forecast includes an inflationary uplift in salaries
this year for those in more junior positions and a small uplift for
more senior roles.
We are benefiting from having fixed our electricity and gas
costs up until Q3 2024.
And of course, two thirds of our drawn debt is fixed which gives
us significant protection from rising interest rates.
On the back of our confidence in occupancy levels for the
2022/23 academic year, we are revising our administration cost
forecast for the full year to GBP13 million. This reflects our
decision to accelerate investment in the future growth of the
business, as well as salary uplifts to reflect the current
competitive labour market.
Our expectation for capital expenditure in 2022 remains at
GBP24.5 million in total, taking into account the expenditure we
detailed earlier, with a further GBP13 million for development.
On the dividend we have committed to paying a minimum of 2.5
pence in 2022 and will review this in Q4 once occupancy levels are
confirmed for the new academic year.
Environment, Social and Governance Update
In our 2021 Annual Report, we outlined four key themes that we
intend to focus on:
- Becoming a sustainable business
- Health and safety
- Mental health and wellbeing
- Providing opportunities for all
We continue to make good progress across all four areas and will
provide an update on each one in our 2022 Annual Report.
This section will focus solely on how Empiric Student Property
plc will become a sustainable business.
At the year-end, we announced our plan to be net zero on our own
operations, property portfolio and energy consumption by 2035, and
we are pleased to report that we are reducing this timeframe to
2033.
We are pleased to have established and started to mobilise our
net zero strategy, and we intend to review progress and update the
pathway continuously as we move forward.
There is still more work to do on our Paris aligned Scope 3
target of 2050 which we hope to accelerate once we have more data
to provide an accurate picture.
We have identified seven KPIs that will enable us to track our
progress against this commitment; these are listed below:
- For our first KPI, we are developing an ongoing ESG training
and development programme for our employees by 2023.
- Then for our second, a long-term programme to engage our
customers on climate objectives, by 2024.
- Our third is focused on procuring renewable electricity by
2023 in line with RE:100 definitions of evidence. For those who are
not familiar with RE:100, this is a global initiative with over 370
corporate members committed to using 100% renewable
electricity.
- Fourth, we plan to establish a means of measuring whole life
carbon in our developments by 2025.
- Our fifth KPI tracks our progress in removing fossil fuels
from our buildings, with the aim of removing natural gas in 80% of
our assets by 2030 and 100% by 2033.
- Sixth we plan to deliver on government requirements for all
buildings to be EPC B or better by 2030.
- Finally, we are reducing energy used per bed across our
portfolio from 4,813 kilowatt hours in 2019 to 2,000 by 2033 with a
longer term target of below 1.500 by 2040.
ESG Key Milestones
We have published our full Net Zero strategy and summary of our
EPC ratings on the ESG section of our corporate website as at the
date of publication of this document.
Phase I
2022 - 2024
In this phase we will:
- establish and mobilise a Net Zero Pathway,
- develop an engagement plan for colleagues and customers,
- conduct a whole life carbon assessment of new developments.
Phase II
2025 - 2028
This phase will deliver:
- updated net zero pathway targets to incorporate key learnings,
- along with upgrading EPCs and the removal of fossil fuels across our assets.
Phase III
2029 - 2033
This phase will focus on:
- updating the pathway targets to achieve net zero,
- establishing offsetting requirements and an offsetting programme in advance of 2032,
- and reducing operational emissions to zero.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties we face are described in
detail on pages 48 to 53 of our Annual Report and Accounts for the
year ended 31 December 2021.
Risk Environment
The Board is cognisant that the risk environment has heightened
since the year end, with the war in Ukraine, inflation and rising
interest rates alongside a highly competitive labour market.
However, the Audit Committee, which assists the Board with its
responsibilities for managing risk, has considered the principal
risks and uncertainties and concluded that they have not changed
since the year-end report.
They did note however that all of the external risks and the
people risk noted below have increased since the year end.
Principal Risks
The principal risks and uncertainties described in the Annual
Report and Accounts are summarised below:
External Risks
- Competition Risk - The risk of an increased level of
competition and supply in the student accommodation sector.
- Property Market Risk - The potential for a downturn in the property market.
- Regulatory Risk - Large levels of regulation being applied to
the student accommodation market.
- Funding Risk - The availability of debt or equity and ability to raise it on acceptable terms.
- Revenue Risk - The risk of reduced revenue from various
changes to university operations and travel restrictions.
Internal Risks
- Health and Safety Risk - The occurrence of a major health and
safety incident, including a fire.
- Cyber Security Risk - The Group suffering a cyber security breach.
- People Risk - Inability to retain and attract top levels of staff.
- Safe and Sustainable Buildings Risk - How our buildings will
withstand increased legislation around fire safety as well as
pressure from climate change.
Going Concern
The Board is cognisant that the risk environment has heightened
since the year end, with the war in Ukraine, inflation and rising
interest rates alongside a highly competitive labour market.
Accordingly, the Group has conducted a detailed going concern
review and considered its liquidity position and banking covenant
compliance strength. The detailed assessment we have undertaken is
set out in Note 1.2 of the financial statements.
The Directors consider that the Group has adequate resources in
place for at least 12 months from the date of these results and
have therefore adopted the going concern basis of accounting in
preparing the half year financial statements.
Responsibility Statement of the Directors in Respect of the
Interim Report and Accounts
The Directors confirm that to the best of their knowledge this
condensed set of financial statements has been prepared in
accordance with UK adopted International Accounting Standard 34 and
that the operating and financial review herein includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8 of
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority, namely:
- an indication of important events that have occurred during
the first six months of the financial period and their impact on
the condensed financial statements and a description of the
principal risks and uncertainties for the remaining six months of
the financial period; and
- material related party transactions in the first six months.
A list of the current Directors is shown further on in the
Interim Report and Accounts. Shareholder information is as
disclosed on the Empiric Student Property plc website,
www.empiric.co.uk.
For and behalf of the Board
Mark Pain
Chairman
10 August 2022
INDEPENT REVIEW REPORT TO EMPIRIC STUDENT PROPERTY PLC
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the condensed
consolidated statement of comprehensive income, the condensed
consolidated statement of financial position, the condensed
consolidated statement of changes in equity, the condensed
consolidated statement of cash flows and related notes.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1.3, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the Directors have inappropriately
adopted the going concern basis of accounting or that the Directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however, future events or
conditions may cause the Group to cease to continue as a going
concern.
Responsibilities of Directors
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the Directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Review of the Financial
Information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of Our Report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London, United Kingdom
10 August 2022
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Unaudited Condensed Consolidated Statement of Comprehensive
Income
Unaudited six months to 30 Unaudited six months to 30 Audited year
June 2022 June 2021 31 December 2021
Notes GBP'000 GBP'000 GBP'000
---------------------------- ----- ---------------------------- ---------------------------- -----------------
Continuing operations
Revenue 35,628 25,921 55,967
Property expenses (10,610) (10,925) (23,061)
Gross profit 25,018 14,996 32,906
---------------------------- ---------------------------- -----------------
Administrative expenses (6,289) (5,257) (10,547)
(Loss)/gain on disposal of
investment property (149) 1,651 1,652
Change in fair value of
investment property 6 58,564 1,807 17,567
Operating profit 77,144 13,197 41,578
---------------------------- ---------------------------- -----------------
Finance cost (6,871) (6,199) (12,382)
Finance income 2 1 1
---------------------------- ---------------------------- -----------------
Net finance cost 2 (6,869) (6,198) (12,381)
Profit before tax 70,275 6,999 29,197
---------------------------- ---------------------------- -----------------
Corporation tax 3 - - -
Profit for the period and
Total comprehensive income 70,275 6,999 29,197
============================ ============================ =================
Earnings per share expressed
as pence per share
Basic 4 11.65 1.16 4.84
Diluted 4 11.64 1.16 4.84
---------------------------- ---------------------------- -----------------
Unaudited Condensed Consolidated Statement of Financial
Position
Unaudited Unaudited
30 June 2022 30 June 2021 Audited 31 December 2021
Notes GBP'000 GBP'000 GBP'000
----------------------------------------- ----- ------------- ------------- ------------------------
Non-current assets
Property, plant and equipment 1,051 177 426
Intangible assets 1,398 1,011 1,318
Right of use asset 1,476 - 1,010
Investment property - operational assets 6 1,037,315 969,355 967,194
Investment property - development assets 6 50,350 24,942 28,692
------------- ------------- ------------------------
1,091,590 995,485 998,640
------------- ------------- ------------------------
Current assets
Trade and other receivables 5,013 7,161 7,839
Assets classified as held for sale - - 25,870
Cash and cash equivalents 51,087 32,160 37,127
------------- ------------- ------------------------
56,100 39,321 70,836
------------- ------------- ------------------------
Total assets 1,147,690 1,034,806 1,069,476
============= ============= ========================
Current liabilities
Trade and other payables 19,371 15,878 19,990
Borrowings 7 19,984 - 44,712
Lease liability 107 - 107
Deferred rental income 13,649 8,007 29,862
------------- ------------- ------------------------
53,111 23,885 94,671
------------- ------------- ------------------------
Non-current liabilities
Borrowings 7 382,422 370,508 326,244
Lease liability 1,418 - 963
383,840 370,508 327,207
------------- ------------- ------------------------
Total liabilities 436,951 394,393 421,878
------------- ------------- ------------------------
Total net assets 710,739 640,413 647,598
============= ============= ========================
Called-up share capital 6,032 6,032 6,032
Share premium 295 295 295
Capital reduction reserve 452,418 475,038 459,958
Retained earnings 251,994 159,048 181,313
Total equity 710,739 640,413 647,598
Total equity and liabilities 1,147,690 1,034,806 1,069,476
============= ============= ========================
NAV per share basic (pence) 8 117.83 106.17 107.36
NAV per share diluted (pence) 8 117.76 105.71 106.75
EPRA NTA per share basic (pence) 8 117.83 106.17 107.36
Unaudited Condensed Consolidated Statement of Changes in
Equity
Period from 1 January to 30 June 2022 (unaudited)
Called Capital
up share Share reduction Retained Total
capital premium reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- --------- -------- ---------- --------- -------
Balance at 1 January 2022 6,032 295 459,958 181,313 647,598
Changes in equity
Profit for the period - - - 70,275 70,275
Total comprehensive expense/income
for the period - - - 70,275 70,275
Share-based payment - - - 406 406
Dividends - - (7,540) - (7,540)
--------- -------- ---------- --------- -------
Total contributions and distribution (7,540
recognised directly in equity - - ) 406 (7,134)
--------- -------- ---------- --------- -------
Balance at 30 June 2022 6,032 295 452,418 251,994 710,739
========= ======== ========== ========= =======
Period from 1 January to 30 June 2021 (unaudited)
Called up share Capital reduction
capital Share premium reserve Retained earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ------------------ ------------- ------------------ ----------------- ------------
Balance at 1 January
2021 6,032 257 475,038 151,950 633,277
Changes in equity
Profit for the
period - - - 6,999 6,999
Total comprehensive
expense/income for
the period - - - 6,999 6,999
Share-based payment - - - 137 137
Share options
exercised - 38 - (38) -
------------------ ------------- ------------------ ----------------- ------------
Total contributions
and distribution
recognised directly
in equity - 38 - 99 137
------------------ ------------- ------------------ ----------------- ------------
Balance at 30 June
2021 6,032 295 475,038 159,048 640,413
================== ============= ================== ================= ============
Year from 1 January to 31 December 2021 (audited)
Called up share Capital reduction
capital Share premium reserve Retained earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ------------------ ------------- ------------------ ----------------- ------------
Balance at 1 January
2021 6,032 257 475,038 151,950 633,277
Changes in equity
Profit for the
period - - - 29,197 29,197
Total comprehensive
income for the
period - - - 29,197 29,197
Share-based payment - - - 204 204
Share options
exercised - 38 - (38) -
Dividends - - (15,080) - (15,080)
------------------ ------------- ------------------ ----------------- ------------
Total contributions
and distribution
recognised directly
in equity - 38 (15,080) 166 (14,876)
------------------ ------------- ------------------ ----------------- ------------
Balance at 31
December 2021 6,032 295 459,958 181,313 647,598
================== ============= ================== ================= ============
Unaudited Condensed Consolidated Statement of Cash Flows
Unaudited six months to Unaudited six months to Audited year to 31
30 June 2022 30 June 2021 December 2021
GBP'000 GBP'000 GBP'000
--------------------------- -------------------------- -------------------------- --------------------------
Cash flows from operating
activities
Profit before income tax 70,275 6,999 29,197
Share-based payments 405 137 204
Depreciation charge 298 192 457
Finance income (2) (1) (1)
Finance costs 6,871 6,199 12,382
Loss/(gain) on disposal of
investment property 149 (1,651) (1,652)
Change in fair value of
investment property (58,564) (1,807) (17,567)
-------------------------- -------------------------- --------------------------
19,432 10,068 23,020
Decrease in trade and other
receivables 2,826 6,025 6,670
(Decrease)/increase in trade
and other payables (1,092) 539 3,532
(Decrease)/increase in
deferred rental income (16,213) (12,669) 9,186
-------------------------- -------------------------- --------------------------
(14,479) (6,105) 19,388
-------------------------- -------------------------- --------------------------
Net cash flows generated
from operations 4,953 3,963 42,408
Cash flows from investing
activities
Purchase of tangible fixed
assets (673) (108) (427)
Purchase of intangible
assets (207) (83) (537)
Investment property
additions (14,695) (3,907) (15,701)
Purchase of investment
property (19,453) - -
Proceeds from disposal of
investment property 25,731 18,020 17,982
Interest received 2 - 1
-------------------------- -------------------------- --------------------------
Net cash flows from
investing activities (9,295) 13,922 1,318
Cash flows from financing
activities
Dividends paid (7,190) - (13,589)
Bank borrowings drawn 32,752 - -
Repayments of bank
borrowings - (15,000) (15,000)
Loan arrangement fees paid (1,738) (137) (168)
Finance costs (5,458) (4,515) (11,769)
Lease liability repaid (64) - -
-------------------------- -------------------------- --------------------------
Net cash from financing
activities 18,302 (19,652) (40,526)
Increase/(decrease) in cash
and cash equivalents 13,960 (1,767) 3,200
========================== ========================== ==========================
Cash and cash equivalents at
beginning of period 37,127 33,927 33,927
Cash and cash equivalents at
end of period 51,087 6,157 37,127
Unaudited Notes to the Financial Statements
For the period 1 January 2022 to 30 June 2022
1. Accounting Policies
1.1 Trading Period
The condensed interim financial statements of the Group
reporting period is from 1 January 2022 to 30 June 2022.
1.2 Going Concern
The Group is gaining more certainty over income as the COVID-19
pandemic becomes part of business as usual. However, the Board is
aware that with the war in Ukraine, inflation and rising interest
rates alongside a highly competitive labour market there is still
global economic uncertainty.
Accordingly, the Group has conducted a detailed going concern
review for the period to 30 September 2023 and considered its
liquidity position and banking covenant compliance strength.
As at 30 June 2022 the Group had GBP51 million in cash and GBP20
million of undrawn investment debt facilities. The Group is well
funded and has no refinancing requirements until February 2023. We
have opened discussions with the GBP20 million loan due in February
2023 with a view to refinancing it.
The Group's debt facilities include covenants in respect of LTV
and interest cover, both projected and historic, and all debt
facilities are ring-fenced with each specific lender. The Group
maintains regular dialogue with all of its lenders as part of the
ordinary course of business. To date, all of our banks have been
supportive during this period and have expressed commitment to the
long-term relationship they wish to build with Empiric.
Management has evaluated a number of scenarios in its going
concern model. The key variables we have used are revenue for the
upcoming 2022/23 academic year, increasing interest rates and
inflation. For the 2021/22 academic year our occupancy has been
held at 86%. The list of scenarios are below, they are all on top
of our base case model which includes our current prudent forecasts
on cost inflation and interest rates.
Occupancy level Property cost inflation Interest rate increases
for 2022/23 academic
Scenario year
Base case scenario 95% Detailed assumptions Detailed assumptions
per internal model. per internal model.
Scenario 1 85% As per base case As per base case
Scenario 2 85% Plus 2% above base As per base case
case
in 2023 & 2024
Scenario 3 85% As per base case Plus 1.5% above
base case
------------------ --------------------- ----------------------- -----------------------
The Group continues to maintain covenant compliance for its LTV
thresholds throughout the going concern assessment period. Property
values would have to fall by more than 26% from June 2022
valuations before LTV covenants are breached.
In all the scenarios above the Group continues to maintain
covenant compliance for all its interest cover covenants. It
maintains adequate levels of liquidity throughout the going concern
period. In addition, no assumption is made as to the level of
additional cost-cutting measures or mitigating actions which could
potentially be undertaken if the Group needed.
To support the Directors' going concern assessment, the
management also evaluated the occupancy level at which all ICR
covenant tests were breached and, additionally, the impact of a
"Reverse Stress Test" which was performed to determine the level of
revenue occupancy for the 2022/23 academic year at which the Group
would need to seek alternative sources of funding. For this model
we kept revenue occupancy for the 2021/22 academic year at 86%. The
Directors noted that if occupancy falls below 63% then the Group
would be in breach of all ICR covenants.
As at 10 August 2022 our bookings for the 2022/23 academic year
are at 92% and we are seeing these grow on a daily basis. As such,
we believe the downside scenario is unlikely.
Having reviewed and considered three modelled scenarios, the
Directors consider that the Group has adequate resources in place
for at least 12 months from the date of these results and have
therefore adopted the going concern basis of accounting in
preparing the interim financial statements.
1.3 Basis of Preparation
This condensed consolidated interim financial report for the
half-year reporting period ended 30 June 2022 has been prepared in
accordance with the UK adopted International Accounting Standard
34, "Interim Financial Reporting" and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
The Interim Report does not include all of the notes of the type
normally included in an annual financial report. Accordingly, this
Report is to be read in conjunction with the Annual Report for the
year ended 31 December 2021, which has been prepared in accordance
with both "international accounting standards in conformity with
the requirements of the Companies Act 2006" and "international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union", and any public
announcements made by the Group during the interim reporting
period.
These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 31
December 2021 were approved by the Board of Directors on 16 March
2022 and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
These financial statements have been reviewed, not audited.
The Group's financial statements have been prepared on a
historical cost basis, except for investment property and
derivative financial instruments which have been measured at fair
value. The 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 2021 and are expected to be consistently applied
during the year ending 31 December 2022.
1.4 Significant Accounting Judgements, Estimates and
Assumptions
The preparation of the Group's interim financial statements
requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities, and the disclosure of contingent liabilities, at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability
affected in future periods.
Estimates
In the process of applying the Group's accounting policies,
management has made the following estimates, which have the most
significant effect on the amounts recognised in the consolidated
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 valuations have been prepared in accordance with the RICS
Valuation-Professional Standards January 2014 and the UK national
supplement 2018 (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.
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) Operating lease contracts - the Group as lessor
The Group has investment properties which have various
categories of leases in place with tenants. The judgements by lease
type are detailed below:
Student leases: As these leases all have a term of less than one
year, the Group retains all the significant risks and rewards of
ownership of these properties and so accounts for the leases as
operating leases.
Nominations and commercial leases: The Group has determined,
based on an evaluation of the terms and conditions of the
arrangements, particularly the lease terms, insurance requirements
and minimum lease payments, that it retains all the significant
risks and rewards of ownership of these properties and so accounts
for the leases as operating leases.
1.5 Seasonality of Operations
The results of the Group's operating business are closely
aligned to the levels of occupancy achieved by the property
portfolio in each academic year. 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 of the year.
1.6 Segmental Information
The Directors are of the opinion that the Group is engaged in a
single segment business, being the investment in student and
commercial lettings, within the United Kingdom.
2. Net Finance Cost
Unaudited six months to 30 Unaudited six months to 30 Audited year to 31
June 2022 June 2021 December 2021
GBP'000 GBP'000 GBP'000
--------------------------- -------------------------- -------------------------- --------------------------
Finance costs
Interest expense on bank
borrowings 6,435 5,820 11,567
Amortisation of loan
transaction costs 436 379 815
-------------------------- -------------------------- --------------------------
6,871 6,199 12,382
Finance income
Interest received on bank
deposits 2 1 1
-------------------------- -------------------------- --------------------------
2 1 1
Net finance cost 6,869 6,198 12,381
========================== ========================== ==========================
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 number of ordinary shares is based on the time-weighted
average number of shares throughout the period.
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated using the weighted
average number of shares adjusted to assume the conversion of all
dilutive potential ordinary shares.
EPRA EPS, reported on the basis recommended for real estate
companies by EPRA, is a key measure of the Group's operating
results.
Adjusted earnings per share is a performance measure used by the
Board to assess the Group's dividend payments. Licence fees,
development rebates and rental guarantees are added to EPRA
earnings on the basis noted below as the Board sees these cash
flows as supportive of dividend payments. This is then divided by
the weighted average number of ordinary shares outstanding during
the period.
- The adjustment for licence fees receivable is calculated by
reference to the fraction of the total period of completed
construction during the period, multiplied by the total licence
fees receivable on a given forward-funded asset.
- The development rebate is due from developers in relation to
late completion on forward funded agreements 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.
Reconciliations are set out below:
Calculation of
Calculation of Calculation of Calculation of Calculation of adjusted basic
basic EPS diluted EPS EPRA basic EPS EPRA diluted EPS EPS
------------------
Unaudited six
months to 30 June
2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ---------------- ---------------- ---------------- ---------------- ---------------
Earnings 70,275 70,275 70,275 70,275 70,275
Changes in fair
value of
investment
property (Note 6) - - (58,564) (58,564) (58,564)
Loss on disposal of
investment
property - - 149 149 149
Earnings/adjusted
earnings (GBP'000) 70,275 70,275 11,860 11,860 11,860
Weighted average
number of shares
('000) 603,203 603,203 603,203 603,203 603,203
Adjustment for
employee share
options ('000) - 352 - 352 -
Total number of
shares ('000) 603,203 603,555 603,203 603,555 603,203
---------------- ---------------- ---------------- ---------------- ---------------
Per-share amount
(pence) 11.65 11.64 1.97 1.97 1.97
================ ================ ================ ================ ===============
Calculation of
Calculation of Calculation of Calculation of Calculation of adjusted basic
basic EPS diluted EPS EPRA basic EPS EPRA diluted EPS EPS
------------------
Unaudited six
months to 30 June
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ---------------- ---------------- ---------------- ---------------- ---------------
Earnings 6,999 6,999 6,999 6,999 6,999
Changes in fair
value of
investment
property (Note 6) - - (1,807) (1,807) (1,807)
Gain on disposal of
investment
property - - (1,651) (1,651) (1,651)
Earnings/adjusted
earnings (GBP'000) 6,999 6,999 3,541 3,541 3,541
Weighted average
number of shares
('000) 603,168 603,168 603,168 603,168 603,168
Adjustment for
employee share
options ('000) - 2,593 - 2,593 -
---------------- ---------------- ---------------- ---------------- ---------------
Total number of
shares ('000) 603,168 605,761 603,168 605,761 603,168
---------------- ---------------- ---------------- ---------------- ---------------
Per-share amount
(pence) 1.16 1.16 0.59 0.58 0.59
================ ================ ================ ================ ===============
Audited year to 31
December 2021
------------------ ---------------- ---------------- ---------------- ---------------- ---------------
Earnings 29,197 29,197 29,197 29,197 29,197
Changes in fair
value of
investment
properties
(Note 6) - - (17,573) (17,573) (17,573)
Gain/loss on
disposal of
investment
property - - (1,652) (1,652) (1,652)
Earnings/adjusted
earnings 29,197 29,197 9,972 9,972 9,972
Weighted average
number of shares
('000) 603,185 603,185 603,185 603,185 603,185
Adjustment for
employee share
options ('000) - 254 - 254 -
---------------- ---------------- ---------------- ---------------- ---------------
Total number of
shares ( '000) 603,185 603,439 603,185 603,439 603,185
---------------- ---------------- ---------------- ---------------- ---------------
Per-share amount
(pence) 4.84 4.84 1.65 1.65 1.65
================ ================ ================ ================ ===============
5. Dividends Paid
Unaudited six Unaudited six Audited year
months to 30 months to 30 to 31 December
June 2022 June 2021 2021
GBP'000 GBP'000 GBP'000
------------------------------------ ------------- ------------- ---------------
Interim dividend of 2.50 pence per
ordinary share in respect of the
quarter ended 30 September 2021 - - 15,080
Interim dividend of 0.625 pence
per ordinary share in respect of
the quarter ended 31 December 2021 3,770 - -
Interim dividend of 0.625 pence
per ordinary share in respect of
the quarter ended 31 March 2022 3,770 - -
------------- ------------- ---------------
7,540 - 15,080
============= ============= ===============
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 2022 835,452 131,743 967,195 28,690 995,885
Property additions 5,022 1,079 6,101 7,662 13,763
Property acquisitions 19,453 - 19,453 - 19,453
Change in fair value during
the period 38,734 5,832 44,566 13,398 58,564
----------- --------------- ----------------- ------------------ ---------
As at 30 June 2022
(unaudited) 898,661 138,654 1,037,315 50,350 1,087,665
=========== =============== ================= ================== =========
As at 1 January 2021 849,220 132,149 981,369 23,751 1,005,120
Property additions 1,755 251 2,006 1,731 3,737
Property disposals (16,367) - (16,367) - (16,367)
Change in fair value during
the period 3,765 (1,418) 2,347 (540) 1,807
---------
As at 30 June 2021
(unaudited) 838,373 130,982 969,355 24,942 994,297
=========== =============== ================= ================== =========
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 2021 849,220 132,149 981,369 23,751 1,005,120
Property additions 6,173 1,808 7,981 7,418 15,399
Property disposals (16,330) - (16,330) - (16,330)
Transfer to held for sale
asset (25,870) - (25,870) - (25,870)
Change in fair value during
the year 22,259 (2,215) 20,044 (2,477) 17,567
----------- --------------- ----------------- ------------------ ---------
As at 31 December 2021
(audited ) 835,452 131,743 967,195 28,691 995,886
=========== =============== ================= ================== =========
While GBP40m of properties came under offer after the period
end, the Board considers that the properties that are part of our
disposal program do not meet the criteria for held for sale assets
because management do not expect sales to be concluded within 12
months of 30 June 2022.
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
2022, in accordance with the Appraisal and Valuation Standards of
the RICS, on the basis of market value. This value has been
incorporated into the financial statements.
The valuation of all property assets uses market evidence and
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 as per the Consolidated Group Statement of Financial
Position and the market value of the investment property as per the
independent valuation performed in respect of each period end.
Unaudited six Unaudited six Audited year
months to 30 months to 30 to 31 December
June 2022 June 2021 2021
GBP'000 GBP'000 GBP'000
-------------------------------- ------------- ------------- ---------------
Value per independent valuation
report 1,087,197 993,828 1,021,288
Plus: long leasehold liability 468 469 468
Deduct: Assets held for sale - - (25,870)
------------- ------------- ---------------
Fair value per Group Statement
of Financial Position 1,087,665 994,297 995,886
============= ============= ===============
The following descriptions and definitions relate to valuation
techniques and key unobservable inputs made in determining fair
values. The valuation techniques for student properties use a
discounted cash flow with the following inputs:
a) Unobservable input: Rental values
The rent at which space could be let in the market conditions
prevailing at the date of valuation. The rent ranges per week are
as follows:
30 June 2022 30 June 2021 31 December 2021
------------- ---------------- ----------------
GBP87-420 per GBP89-GBP339 per GBP85-GBP387 per
week week week
b) Unobservable input: Rental growth
The estimated average annual increase in rent based on both
market estimations and contractual arrangements. The assumed
growths in valuations are as follows:
30 June 2022 30 June 2021 31 December 2021
------------ ------------ ----------------
2.60% 1.00% (1.56%)
c) Unobservable input: Net 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 ranges in net initial yields
are as follows:
30 June 2022 30 June 2021 31 December 2021
------------ ------------ ----------------
4.25%-8.15% 4.45%-8.15% 4.25%-8.15%
d) Unobservable input: COVID rent deduction
The COVID-19 rent deduction which impacted the 2020 valuation
has now fallen away. See prior year annual report for basis of this
deduction. In December 2021 there was a total capital deduction
totalling GBP6,368,080 to reflect occupancy shortfall. This was
based on CBRE's market perception that 2021/22 is going to be an
unaffected year and that no risk deduction in respect of COVID-19
uncertainties is required. In the June 2022 valuation this
deduction has been removed.
e) Unobservable input: Physical condition of the property
We have announced we would spend GBP37 million on health and
safety works over the next five years. CBREs assumption is that
GBP29.8 million of this cost should now be reflected in the
valuation at the period-end (31 December 2021: GBP17.2 million) in
respect of work on external wall systems and fire stopping on
buildings over 18 metres tall as well as those for which we now
have a clear programme of works for. Management has performed a
sensitivity analysis to assess the impact of a change in its
estimate of total costs relating to the GBP29.8 million deduction.
A 20% increase in the estimated remaining costs would affect net
valuation gains/losses on property in the IFRS P&L by GBP6.0
million and would reduce the Group's NTA by less than 0.1 pence on
a per share basis. Whilst the spend is expected to be utilised
within two years, there is uncertainty over this timing.
f) Unobservable input: Planning consent
No planning enquiries undertaken for any of the development
properties.
g) 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 in rental +3% change in rental -0.25% change in +0.25% change in
income income yield yield
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------------------- -------------------- -------------------- --------------------
(Decrease)/increase
in the fair value of
investment properties
As at 30 June 2022 (42,770) 42,840 53,670 (48,590)
As at 30 June 2021 (39,130) 39,250 41,550 (45,720)
As at 31 December 2021 (41,520) 40,710 48,480 (44,900)
-------------------- -------------------- -------------------- --------------------
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 GBP1,049 million at 30 June 2022.
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 Total
drawn 30 June undrawn 30 June 30 June
GBP'000 GBP'000 GBP'000
------------------------------ ---------------- ---------------- --------
At 1 January 2022 (audited) 375,000 67,500 442,500
Facilities reduced during the
period - (10,500) (10,500)
Bank borrowings drawn in the
period 32,752 (32,752) -
---------------- ---------------- --------
At 30 June 2022 (unaudited) 407,752 24,248 432,000
================ ================ ========
At 1 January 2021 (audited) 390,000 52,500 442,500
Bank borrowings drawn in the
period (15,000) 15,000 -
---------------- ---------------- --------
At 30 June 2021 (unaudited) 375,000 67,500 442,500
================ ================ ========
At 1 January 2021 (audited) 390,000 52,500 442,500
Bank borrowings repaid in the
year (15,000) 15,000 -
---------------- ---------------- --------
At 31 December 2021 (audited) 375,000 67,500 442,500
================ ================ ========
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:
Unaudited 30 Unaudited 30 Audited 31 December
June 2022 June 2021 2021
Current borrowings GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ -------------------
Balance brought forward 45,000 - -
Bank borrowings becoming current
in the period 20,000 - 45,000
Less: Bank borrowings becoming
non-current during the period (45,000) - -
Bank borrowings: due in less
than one year 20,000 - 45,000
Less: Unamortised costs (16) - (288)
------------ ------------ -------------------
Current liabilities: Bank borrowings 19,984 - 44,712
============ ============ ===================
Unaudited 30 Unaudited 30 Audited 31 December
June 2022 June 2021 2021
Non-current borrowings GBP'000 GBP'000 GBP'000
------------------------------------- ------------- ------------ -------------------
Balance brought forward 330,000 390,000 390,000
Total bank borrowings in the
period 32,752 - -
Bank borrowings becoming non-current
during the period 45,000 - -
Less: Bank borrowings becoming
current during the period (20,000) - (45,000)
Less: Bank borrowings repaid
during the period - (15,000) (15,000)
------------- ------------ -------------------
Bank borrowings: due in more
than one year 387,752 375,000 330,000
Less: Unamortised costs (5,330) (4,492) (3,756)
------------- ------------ -------------------
Non-current liabilities: bank
borrowings 382,422 370,508 326,244
============= ============ ===================
Unaudited 30 Unaudited 30 Audited 31 December
June 2022 June 2021 2021
Maturity of bank borrowings GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------ -------------------
Repayable within 1 year 20,000 - 45,000
Repayable between 1 and 2 years 52,800 - 20,000
Repayable between 2 and 5 years 77,752 117,800 52,800
Repayable in over 5 years 257,200 257,200 257,200
Non-current liabilities: bank
borrowings 407,752 375,000 375,000
============ ============ ===================
8. NAV Per Share
The principles of the three measures per EPRA are below:
EPRA Net Reinstatement Value: Assumes that entities never sell
assets and aims to represent the value required to rebuild the
entity.
EPRA Net Tangible Assets: Assumes that entities buy and sell
assets, thereby crystallising certain levels of unavoidable
deferred tax.
EPRA Net Disposal Value: Represents the shareholders' value
under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated to the
full extent of their liability, net of any resulting tax. As the
Group is a REIT, no adjustment is made for deferred tax.
The Group considers NAV to be the most relevant measure of the
NAV measures and we expect this to be our primary NAV measure going
forward.
A reconciliation of the three EPRA NAV metrics from IFRS NAV is
shown in the table below.
NAV EPRA NAV measures
------- ----------------------------
IFRS EPRA NRV EPRA NTA EPRA NDV
--------------------------------------------------
Unaudited six months to 30 June 2022 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ------- -------- -------- --------
Net assets per Statement of Financial Position 710,739 710,739 710,739 710,739
Adjustments
Fair value of fixed rate debt - - - 4,590
Purchaser's costs(1) - 38,340 - -
Net assets used in per share calculation 710,739 749,079 710,739 715,329
Number of shares in issue
-------------------------------------------------- ------- -------- -------- --------
Issued share capital ('000) 603,203 603,203 603,203 603,203
Issued share capital plus employee options ('000) 603,555 603,555 603,555 603,555
Net asset value per share GBP GBP GBP GBP
-------------------------------------------------- ------- -------- -------- --------
Basic net asset value per share 1.178 1.242 1.178 1.186
Diluted net asset value per share 1.178 1.241 1.178 1.185
NAV EPRA NAV measures
------- ----------------------------
IFRS EPRA NRV EPRA NTA EPRA NDV
--------------------------------------------------
Unaudited six months to 30 June 2021 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ------- -------- -------- --------
Net assets per Statement of Financial Position 640,415 640,415 640,415 640,415
Adjustments
Fair value of fixed rate debt - - - (31,295)
Purchaser's costs(1) - 34,658 - -
Net assets used in per share calculation 640,415 675,073 640,415 609,120
Number of shares in issue
-------------------------------------------------- ------- -------- -------- --------
Issued share capital ('000) 603,203 603,203 603,203 603,203
Issued share capital plus employee options ('000) 605,796 605,796 605,796 605,796
Net asset value per share GBP GBP GBP GBP
-------------------------------------------------- ------- -------- -------- --------
Basic net asset value per share 1.062 1.119 1.062 1.010
Diluted net asset value per share 1.057 1.114 1.057 1.005
NAV EPRA NAV measures
------- ----------------------------
IFRS EPRA NRV EPRA NTA EPRA NDV
--------------------------------------------------
Year ended 31 December 2021 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ------- -------- -------- --------
Net assets per Statement of Financial Position 647,598 647,598 647,598 647,598
Adjustments
Fair value of fixed rate debt - - - (14,333)
Purchaser's costs(1) - 34,168 - -
Net assets used in per share calculation 647,598 681,766 647,598 633,265
Number of shares in issue
-------------------------------------------------- ------- -------- -------- --------
Issued share capital ('000) 603,203 603,203 603,203 603,203
Issued share capital plus employee options ('000) 606,649 606,649 606,649 606,649
Net asset value per share GBP GBP GBP GBP
-------------------------------------------------- ------- -------- -------- --------
Basic net asset value per share 1.074 1.130 1.074 1.050
Diluted net asset value per share 1.068 1.124 1.068 1.044
(1) EPRA NTA and EPRA NDV reflect IFRS values which are net of
purchaser's costs. Any purchaser's costs deducted from the market
value are added back when calculating EPRA NRV.
9. Capital Commitments
As at 30 June 2022, the Group had total capital commitments of
GBP5.2 million (31 December 2021: GBP8.6 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 changes in the period.
Share-Based Payments
On 24 March 2022, the Company granted Duncan Garrood, Chief
Executive Officer, nil-cost options over 20,084 ordinary shares in
the Company ("ordinary shares") and Lynne Fennah, Chief Financial
& Sustainability Officer, nil-cost options over 15,877 ordinary
shares relating to the deferred shares element of the annual bonus
award for the financial year to 31 December 2021 (the "Annual Bonus
Award 2021").
Also on 24 March 2022, Duncan Garrood was granted nil-cost
options over 701,814 ordinary shares, and Lynne Fennah was granted
nil-cost options over 554,784 ordinary shares pursuant to the
Empiric Long Term Incentive Plan for the 2022 financial year (the
"LTIP").
Board Change
On 23 May 2022, it was announced that Lynne Fennah will be
stepping down from her role as Chief Financial & Sustainability
Officer of the Company to pursue other interests. Lynne will remain
in her position until May 2023.
Also on 23 May 2022, Stuart Beevor, Independent Non-Executive
Director and Chair of the Remuneration Committee of the Company,
stepped down from the Board.
On 14 June 2022, Clair Preston-Beer has been appointed to the
Board as an Independent Non-Executive Director, effective from 1
July 2022.
11. Subsequent Events
On 04 August 2022, it was announced that Donald Grant has been
appointed as the new Chief Financial & Sustainability Officer
of the Company effective 12 September 2022.
Definitions
Adjusted EPS - Adjusted earnings per share is a performance
measure used by the Board to assess the Group's dividend payments.
Licence fees, development rebates and rental guarantees are added
to EPRA earnings on the basis noted below as the Board sees these
cash flows as supportive of dividend payments. This is then divided
by the weighted average number of ordinary shares outstanding
during the period (refer to Note 8).
Alternative Performance Measures ("APM") - The Group uses
alternative performance measures including the European Public Real
Estate ("EPRA") Best Practice Recommendations ("BPR") to supplement
IFRS as the Board considers that these measures give users of the
Annual Report and Financial Statements the best understanding of
the underlying performance of the Group's property portfolio. The
EPRA measures are widely recognised and used by public real estate
companies and investors and seek to improve transparency,
comparability and relevance of published results in the sector.
Reconciliations between EPRA and other alternative performance
measures and the IFRS financial statements can be found in Notes 8
and 9 and in the definitions below.
ANUK - Accreditation Network UK is a central resource for
tenants, landlords and scheme operators interested in accreditation
of private rented housing.
Average Interest Cost - The weighted interest cost of our drawn
debt portfolio at the balance sheet date.
Average Term of Debt - The weighted average term of our debt
facilities at the balance sheet date.
Basic EPS - The earnings attributed to ordinary shareholders
divided by the weighted average number of ordinary shares
outstanding during the period (refer to Note 8).
Colleague Engagement - KPI - Non-IFRS measure - Calculated as
per the results of our biannual colleague engagement surveys.
Company - Empiric Student Property plc.
Customer Happiness - KPI - Non-IFRS measure - Calculated as per
the results of our biannual customer surveys.
Dividend Cover - Adjusted earnings divided by dividend paid
during the year.
EPRA - European Public Real Estate Association.
EPRA EPS - Reported on the basis recommended for real estate
companies by EPRA (refer to Note 8).
EPRA NAV - EPRA NAV is calculated as net assets per the
Consolidated Statement of Financial Position excluding fair value
adjustments for debt-related derivatives (refer to Note 9).
EPRA Net Disposal Value ("NDV") - Represents the shareholders'
value under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated to the
full extent of their liability, net of any resulting tax. As the
Group is a REIT, no adjustment is made for deferred tax.
EPRA Net Reinvestment Value ("NRV") - Assumes that entities
never sell assets and aims to represent the value required to
rebuild the entity.
EPRA Net Tangible Assets ("NTA") - Assumes that entities buy and
sell assets, thereby crystallising certain levels of unavoidable
deferred tax.
EU - European Union.
Executive Team - The Executive Directors made up of the CEO and
CFO/CSO.
GHG - Greenhouse gas.
Gross Asset Value or GAV - The total value of the Group's wholly
owned property portfolio (refer to Note 13).
Gross rent - The total rents achievable if the portfolio was
100% occupied for an academic year.
Gross margin - Gross profit expressed as a percentage of rental
income.
Group - Empiric Student Property plc and its subsidiaries.
Hello Student(R) platform - Our customer-facing brand and
operating system which we operate all of our buildings under.
HE - Higher education.
HMO - Homes of multiple occupants.
IASB - International Accounting Standards Board.
IFRS - International Financial Reporting Standards.
IPO - The Group's Initial Public Offering in June 2014.
LIBOR - London interbank offered rate.
Loan-to-value or LTV - A measure of borrowings used by property
investment companies calculated as total drawn borrowings, net of
cash, as a percentage of property value.
Net Asset Value or NAV - Net Asset Value is the net assets in
the Statement of Financial Position attributable to ordinary equity
holders.
Non-PID - Non - property income distribution.
PBSA - Purpose built student accommodation.
PID - Property income distribution.
RCF - Revolving credit facility.
Rebooker Rate - KPI - Non-IFRS measure - Calculated as the
percentage of students staying with us in the previous year who
chose to stay living with us for another academic year.
REIT - Real estate investment trust.
Revenue Occupancy - KPI - Non-IFRS measure - Calculated as the
percentage of our Gross Annualised Revenue we have achieved for an
academic year.
RICS - Royal Institution of Chartered Surveyors.
Safety - Number of accidents - KPI - Non-IFRS measure -
Calculated as the number of RIDDOR accidents reported to the Health
and Safety Executive.
Senior Leadership Team - The senior management team which sits
beneath the Executive Team and is made up of the six department
heads.
SONIA - Sterling Over Night Index Average is the effective
reference for overnight indexed swaps for unsecured transactions in
the Sterling market. The SONIA itself is a risk-free rate.
The Code - UK Code of Corporate Governance, as published in
2018.
Total Return ("TR" or "TAR") - The growth of NAV per share plus
dividends per share measured as a percentage.
Total Shareholder Return - Share price growth with dividends
deemed to be reinvested on the dividend payment date.
UKLA - United Kingdom Listing Authority.
Company Information and Corporate Advisers
Directors and Advisers
Directors Registrar
Mark Pain (Chairman) Computershare Investor Services PLC
Duncan Garrood (Chief Executive Officer) The Pavilions
Lynne Fennah (Chief Financial and Sustainability Officer) Bridgwater Road
Martin Ratchford (Non-Executive Director) Bristol BS99 6ZZ
Clair Preston-Beer (Non-Executive Director) Auditor
Alice Avis (Non-Executive Director) BDO LLP
Broker and Joint Financial Adviser 55 Baker Street
Jefferies International Ltd London W1U 7EU
100 Bishopsgate Valuer
London EC2N 4JL CBRE Limited
Broker and Joint Financial Adviser Henrietta House
Peel Hunt LLP Henrietta Place
7th Floor London W1G 0NB
100 Liverpool Street, Administrator and Company Secretary
London APEX Group
EC2M 2AT 6th Floor
Legal Adviser to the Company 140 London Wall
Gowling WLG (UK) LLP London
4 More London Riverside EC2Y 5DN
London SE1 2AU
Communications Adviser
Maitland/amo
3 Pancras Square
London N1C 4AG
Company Registration Number: 08886906 Registered Office
Incorporated in the UK (Registered in England) 1st Floor, 72 Borough High Street,
Empiric Student Property plc is a public London, SE1 1XF
company limited by shares
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