Empiric Student Property plc
("Empiric" or the "Company" or, together with its subsidiaries, the "Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024
Continued confidence in outlook as strategic priority shifts to growth
Empiric Student Property plc (ticker: ESP), the owner and operator of premium, studio-led student accommodation across the
Duncan Garrood, Chief Executive Officer of Empiric Student Property plc, said:
"It has been an active first half of the year with good progress made across the board, including the growth of our portfolio through acquisitions, the submission of planning applications and our successful refurbishments programme. We continue to experience strong demand for our high-quality, well-located accommodation, with the booking cycle for the forthcoming 2024/25 academic year providing confidence in the delivery of strong occupancy and rental growth that surpasses inflation.
Operationally, the business continues to perform very well with our net promoter score and customer satisfaction rate advancing year-on-year, underpinning improved re-booker rates, which are on track to be our best ever."
Financial highlights
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30 June |
30 June |
Change |
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Income statement |
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Revenue (£m) |
41.3 |
42.4 |
+2.7% |
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Like-for-like rental growth (%) |
5.2 |
10.5 |
+5.3% pts |
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EPRA earnings (£m) |
14.1 |
13.6 |
-3.5% |
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EPRA earnings per share (p) |
2.3 |
2.3 |
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Company adjusted earnings (£m) |
14.1 |
14.5 |
+2.8% |
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Company adjusted earnings per share (p) |
2.3 |
2.4 |
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Gross margin (%) |
71.7 |
72.2 |
+0.5% pts |
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Dividends paid/declared per share (p) |
1.625 |
1.75 |
+7.7% |
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31 December |
30 June |
Change |
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Balance sheet |
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EPRA NTA per share (p) |
120.7 |
122.8 |
+1.7% |
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Portfolio valuation (£m) |
1,097.9 |
1,134.9 |
+1.3%1 |
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Cash and undrawn committed facilities (£m) |
82.5 |
44.7 |
-45.8% |
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EPRA loan-to-value (%) |
30.6 |
33.8 |
+3.2% pts |
1 Calculated on a like-for-like basis. Increasing to 3.8% when adjusting for the removal of Multiple Dwellings Relief.
Strong performance delivers 10.5% like-for-like rental growth
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Revenue increased 2.7% to |
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• |
Gross Margin improved by 0.5% points to 72.2% at 30 June 2023 (30 June 2023: 71.7%); expected to moderate in line with guidance of 70% across the full year, with finance and administrative costs also in line with guidance |
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EPRA earnings 2.3p per share (30 June 2023: 2.3p per share), 2.8% ahead on a company adjusted basis in spite of inflationary cost pressures |
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• |
Portfolio valuation increased to |
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• |
Net initial yield of 5.4% (31 December 2023: 5.5%) |
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• |
EPRA NTA per share increased 1.7% to 122.8p (31 December 2023: 120.7p) |
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• |
First half dividends paid and payable of 1.75p, 7.7% ahead of the first half of 2023 and in line with target |
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• |
Total accounting return of 3.2% (30 June 2023: 3.1%) |
On track for best ever re-booker campaign, with continued strong demand for academic year 2024/25
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Revenue occupancy for academic year 2024/25 currently at 92% with continued expectation of exceeding 97% |
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• |
Like-for-like growth in average weekly rents to exceed 6% for academic year 2024/25 |
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• |
Re-booker rate set to exceed the 22% achieved in the prior year |
Growing and actively managing the property portfolio
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Two acquisitions completed in key top-tier cities, growing existing clusters in |
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Full refurbishment of Brunswick Apartments, |
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Planning application submitted to facilitate a 200+ bed extension of Victoria Point, |
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Continued consolidation of operational presence with the disposal of a further five non-core properties achieving two further city exits, one post period end. Disposals to date remain ahead of book values in aggregate |
Robust balance sheet
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• |
EPRA loan-to-value at 33.8%, ahead of long-term target of 35% |
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• |
Refinancing of 2024 & 2025 variable debt maturities completed with material refinancing risk removed until 2028 |
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Weighted average cost of debt at 4.6%, in line with guidance (31 December 2023: 4.3%), 95% with interest rate protection |
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Cash and undrawn committed facilities of |
Hello Student operating platform delivers market leading service
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Continued improvement in Global Student Living Index Net Promoter Score from 32 to 37, which compares favourably against PBSA average of 14 and University Halls average of 6 |
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• |
Highest ever customer satisfaction score of 87% versus PBSA average of 79% |
Business and market outlook remains positive for second half of 2024
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• |
Revenue occupancy for academic year 2024/25 underpins confidence that our portfolio will again be effectively full for a third consecutive year |
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Targeting a minimum dividend for the year to 31 December 2024 of |
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Increased investment market activity with continued strength in underlying fundamentals presenting compelling opportunities for growth |
Results presentation at 09.00 (BST) today
To access the live webcast, please register in advance here:
https://stream.brrmedia.co.uk/broadcast/66867e127e85fac36a5f4acc
For further information on the Company, please contact:
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Empiric Student Property plc |
(via FTI Consulting below) |
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Duncan Garrood (Chief Executive Officer) |
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Donald Grant (Chief Financial & Sustainability Officer) |
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Jefferies International Limited |
020 7029 8000 |
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Tom Yeadon |
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Andrew Morris |
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Peel Hunt LLP |
020 7418 8900 |
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Capel Irwin Henry Nicholls
FTI Consulting Dido Laurimore Eve Kirmatzis |
020 3727 1000 |
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
The Company, an internally managed real estate investment trust ("REIT") incorporated in
Disclaimer
This release includes statements that are forward looking in nature. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Empiric Student Property plc to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Any information contained in this release on the price at which shares or other securities in Empiric Student Property plc have been bought or sold in the past, or on the yield on such shares or other securities, should not be relied upon as a guide to future performance.
Operating Review
It has been an active first half of 2024. Student demand for high-quality accommodation aligned to the
In July we saw a change in Government in the
Revenue occupancy for academic year 2024/25 is currently at 92 per cent and we continue to expect to deliver like-for-like rental growth above six per cent, in line with guidance. We have been encouraged by another strong re-booker performance which has already surpassed the 22 per cent achieved in 2023. This is a great achievement, not only insofar as re-bookers remove the cost of new customer acquisition and the related expense of room turnaround, but they also reflect the growing satisfaction level of our customers and our value for money proposition.
Our programme of capital recycling continues to improve gross margin. With more capital aligned to those top-tier cities where we have the benefit of scale and can drive operational performance and improved returns through clustering. This was reflected in a further 0.5 per cent gross margin improvement in this first half compared to the first half of 2023.
UK PBSA Market Continues to Demonstrate Strong Fundamentals
Student accommodation continues to be highly sought after by both existing and new investors, with
The supply of new beds is forecast to increase in 2024, with best estimates indicating the delivery of circa 12,500 beds on average over the next four years. In the medium term, new supply remains heavily constrained with construction cost viability remaining challenging in all but the strongest markets, impacted by land value, planning, enhanced building safety standards and higher debt costs. The constrained supply is also being compounded by the falling number of Houses of Multiple Occupation ("HMOs") with a range of factors forcing private landlords from the market. Since 2016, the stock of private rental properties has decreased by almost ten per cent, with the
Demand for
International applicants have fallen by 1.9 per cent, with the largest declines seen in applicants from
Domestically, applications have reduced by 1.6 per cent compared to 2023, driven by a 4.9 per cent decline in mature student applications. Applications from 18-year-olds are up 0.6 per cent and are forecast to continue growing until 2030 due to the increasing size of the qualifying cohort.
The
These strong trends contributed to sector wide rental growth of eight per cent for the 2023/24 academic year, with
Portfolio overview
A summary of the Group's property portfolio is set out below, segmented in line with our valuer's view of quality. Almost 95 per cent of the portfolio is invested in Prime or Super Prime locations.
Since 31 December 2023, the portfolio has grown in value by 1.3 per cent, like-for-like. This is a result of continued income growth achieved for the 2024/25 academic year. Although underlying yields have remained stable in the first half, the income growth captured resulted in the portfolio's overall net initial yield improving by ten basis points to 5.4 per cent.
On 6 March 2024, the
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Valuers quality segmentation |
Properties |
Operational beds |
Market value (£m) |
Market value (%) |
|||||
|
Super prime regional |
22 |
2,322 |
513.3 |
45.2 |
|||||
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Prime regional |
46 |
4,425 |
542.7 |
47.8 |
|||||
|
|
1 |
79 |
19.9 |
1.8 |
|||||
|
|
69 |
6,826 |
1,075.9 |
94.8 |
|||||
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Secondary |
9 |
1,025 |
59.0 |
5.2 |
|||||
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Total |
78 |
7,851 |
1,134.9 |
100.0 |
|||||
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Strategic segmentation |
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Market value |
NIY |
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Operational portfolio |
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1,112.0 |
5.4 |
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Commercial portfolio |
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16.3 |
8.0 |
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Development portfolio |
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7.0 |
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Total |
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1,134.9 |
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Portfolio management
During the six months to 30 June 2024, we have completed on the disposal of a further four non-core properties, collectively generating
Since March 2021, including the above, the Company has generated a total of
In February 2024 we acquired a small development opportunity, College House in
A planning application was submitted in May 2024 to facilitate an extension and full refurbishment of our existing operational site at Victoria Point,
In June 2024, contracts were exchanged to acquire a 94-bed operational asset in the west end of
We are in active discussions in respect of high-quality, well-located opportunities in two further
Refurbishment & development
In 2022, we took the decision to close one of our larger sites, Brunswick Apartments in
Refurbishments target IRRs of between 9-11 per cent, with properties typically considered for sale if these returns are not deemed achievable. Our annual programme of refurbishment targets the delivery of between 250 and 350 beds annually.
At 30 June 2024, there remained a further ten properties, representing eight per cent of the portfolio by value, that were allocated for refurbishment in order to become on-brand. This includes the recently acquired Claremont House in
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|
Properties |
Cities |
Top tier cities |
Beds |
Market value |
NIY |
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Refurbishment & Development |
10 |
9 |
7 |
760 |
95.6 |
6.1 |
Post-Grad proposition
Our Post-Grad proposition is designed to provide a quieter, more mature living environment through the provision of well-located studio apartments, which are typically larger allowing greater use separation and fully self-contained reducing the need of onsite communal amenity space. Configured for dual occupancy, these Post-Grad exclusive buildings appeal to the shifting priorities of the more discerning post graduate customer, who still values the reassurance of a brand, the ability to make advanced bookings and the certainty of an all-in, fixed cost package whilst living with like-minded people who are at a profoundly different stage of life than a typical undergraduate customer.
The post graduate market comprises over 25 per cent of all
Representing 17 per cent of the portfolio by value, below is a summary of those properties which are currently operating as, or earmarked for conversion to, Post-Grad exclusive sites.
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Properties |
Cities |
Top Tier cities |
Beds |
Market value |
NIY |
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Post-Grad |
18 |
15 |
13 |
1,298 |
189.7 |
5.5 |
During 2023, we began to explore opportunities that would accelerate the rollout of our post graduate product across 15 identified cities demonstrating strong and growing post graduate fundamentals and operational alignment.
Conversations with selected interested parties commenced in late 2023 with the objective of establishing the depth of appetite to form a joint venture. Discussions have continued to progress and we are now at a pivotal point in single candidate negotiations.
Commercial portfolio
We continue to actively manage the 34 unit directly leased commercial portfolio which generally sits below our student accommodation.
During the first half, we have completed a ten-year lease at Market Quarter in
Also in
Capital expenditure programme
Our five-year programme of refurbishment, fire safety works and green initiatives continues. A summary of the position at 30 June 2024 is set out below.
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Refurbishment |
Fire safety works |
Green initiatives |
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Five year plan (2021 - 2025) |
36.1 |
46.0 |
12.0 |
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Invested to 31 December 2023 |
21.4 |
17.2 |
1.7 |
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Invested during H1 2024 |
8.1 |
8.5 |
2.0 |
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Forecast investment for H2 2024 |
2.7 |
5.1 |
2.5 |
In addition to the above, ongoing capital life cycling works require around
In respect of our programme of external fire safety works, all properties have been surveyed with the portfolio certification rate now at 70 per cent. The residual cost of fire safety works is fully reflected within the portfolio's market value and therefore future investment is expected to be valuation neutral.
Delivering high-quality, consistent customer service
Our key performance indicator for the delivery of this strategic priority is Global Student Living's Net Promoter Score ("NPS").
In the first of two surveys to be conducted during 2024, our operating brand, Hello Student, achieved an NPS score of 37, our highest score achieved to date (H1 2023: 32). This significantly outperformed the benchmark All Private Halls score of 14 and University Halls' NPS of six. Of all respondents, 87 per cent rated their level of satisfaction as either good or very good, comparing favourably to the All Private Halls average of 79 per cent. Pleasingly, 79 per cent of our customers responded that their accommodation had a positive impact on their sense of well-being; up from 71 per cent in the prior year.
The delivery of high-quality service requires a high performing and engaged team. As a business we monitor employee engagement and retention rates as a key indicator of performance in this regard. As 2024 marks ten years since the Company's establishment, the executive team hosted a series of engagement days around the country. Whilst celebrating this milestone and setting the vision for the future, it also provided all team members with the opportunity to engage with the executives on a one-to-one basis.
Hello Student is a proud finalist for Best Customer Service (
Creating a sustainable business
During the first half of 2024, we have further improved the portfolio's overall EPC ratings, with 62 per cent of the portfolio now rated EPC B or better. We have installed over 2,000 smart heating controls and completed the decarbonisation of one of our larger sites, taking the decarbonised portfolio to 24.7 per cent by area. We have held the first of two energy awareness weeks and are collating data to measure the impact of our training on behaviour in light of greater awareness.
As part of our commitment to achieving Net Zero by 2033, we put our interim targets for the next two years to a shareholder vote at our Annual General Meeting in May 2024. Although the resolution was passed and was advisory, the result was somewhat disappointing, with 25 per cent of responding shareholders voting against the resolution. In order to better understand the result, and inform future decision making, we have sought engagement with shareholders. Although not yet completed, it appears in part that shareholders would prefer to see a clearer articulation between cost and returns that can be expected for each of the targets set. We will provide a further update on this in March 2025 alongside our annual results.
Financial review
Overview
With the non-core disposal programme now materially complete, the first half of 2024 saw a greater focus on investment and growth. The Group acquired an existing operational site at Claremont House in
Revenue increased
Administrative costs increased by
Notwithstanding the abolition of Multiple Dwellings Relief, the portfolio's valuation increased by
EPRA earnings were
A
EPRA net tangible asset value per share increased by 1.7 per cent to
Total dividends paid during the first half of 2024 were
Income statement
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30 June |
30 June |
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£m |
£m |
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Revenue |
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42.4 |
41.3 |
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Property expenses |
|
(11.8) |
(11.7) |
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Gross profit |
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30.6 |
29.6 |
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Gross margin |
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72.2% |
72% |
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Administrative expenses |
|
(7.1) |
(6.5) |
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Operating profit |
|
23.4 |
23.1 |
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Net finance costs |
|
(9.9) |
(9.0) |
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EPRA earnings |
|
13.6 |
14.1 |
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Revaluation |
|
13.7 |
10.3 |
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Loss on disposal |
|
(1.9) |
(0.6) |
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Derivative mark to market (loss)/gain |
|
(0.6) |
0.8 |
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IFRS Profit |
|
24.8 |
24.6 |
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Weighted average ordinary shares (m) |
|
603.4 |
603.3 |
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IFRS EPS (pence) |
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4.0 |
4.1 |
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EPRA EPS (pence) |
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2.3 |
2.3 |
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EPRA earnings |
|
13.6 |
14.1 |
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Add back accelerated arrangement fees and other costs related to refinancing |
|
0.9 |
- |
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Company adjusted earnings |
|
14.5 |
14.1 |
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Company adjusted EPS (pence) |
|
2.4 |
2.3 |
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The evolution of revenue across the period is set out below.
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|
£m |
|
Revenue for the six months to 30 June 2023 |
41.3 |
|
Rental growth (10.5% like-for-like) |
4.4 |
|
Rooms temporarily unavailable due to capital works |
(1.3) |
|
Disposals |
(2.0) |
|
Revenue for the six months to 30 June 2024 |
42.4 |
Gross margin has improved by a further 0.5 percentage points. We expect this to moderate to around 70 per cent across the full year, marginally above that achieved in 2023. With our historic fixed price utility contract maturing in September this year, we face an approximate
Administrative costs have increased primarily as a result of investment in people to support the Group's growth agenda and the inflationary environment experienced in 2023 which is now fully impacting across the period. Full year overhead costs are expected to remain in line with guidance at circa
Net finance costs have remained in line with the prior year, when adjusted for non-recurring refinancing related costs of
The Group recorded a
Balance sheet
|
|
30 June |
30 June |
|
|
£m |
£m |
|
Property (market value) |
1,134.9 |
1,097.9 |
|
|
|
|
|
Bank borrowings drawn |
(402.1) |
(360.3) |
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Cash on hand |
44.7 |
40.5 |
|
Net debt |
(357.4) |
(319.8) |
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Other net liabilities |
(29.1) |
(43.9) |
|
Net assets |
748.4 |
734.2 |
|
|
|
|
|
Diluted number of shares |
608.7 |
608.0 |
|
|
|
|
|
EPRA NTA per share (pence) |
122.8 |
120.7 |
EPRA NTA increased by 1.7 per cent, primarily due to the revaluation uplift of
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Evolution of net asset value |
£m |
|
31 December 2023 |
734.2 |
|
EPRA earnings |
13.6 |
|
Revaluation gains, like-for-like |
14.1 |
|
Dividends |
(10.9) |
|
Loss on disposal |
(1.9) |
|
Other |
(0.7) |
|
30 June 2024 |
748.4 |
Portfolio valuation
Excluding acquisitions and disposals, on a like-for-like basis, the portfolio increased in value by 1.3 per cent as set out below.
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|
30 June |
31 Dec |
Gain1 |
Change |
|
|
£m |
£m |
£m |
% |
|
Like-for-like property portfolio |
1,119.0 |
1,083.7 |
14.1 |
1.3 |
|
Acquisitions |
15.9 |
- |
(0.4) |
(0.7) |
|
Disposals |
- |
14.2 |
- |
- |
|
Portfolio valuation |
1,134.9 |
1,097.9 |
13.7 |
|
1 Net of capital expenditure and head lease amortisation
The overall portfolio increase was driven by rental growth from those cities with the strongest demand supply imbalance, in particular
The valuation at 30 June 2024 incorporates the impact of the abolition of Multiple Dwellings Relief. This has materially increased purchaser cost assumptions inherent in our valuations for our English and Welsh properties.
For comparability, the below sets out the like-for-like increase as though the adjustment to Multiple Dwellings Relief had been in place at 31 December 2023.
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|
30 June |
31 Dec |
Gain1 |
Change |
|
|
£m |
£m |
£m |
% |
|
Like-for-like property portfolio |
1,119.0 |
1,057.2 |
40.6 |
3.8 |
|
Acquisitions |
15.9 |
- |
(0.4) |
(0.7) |
|
Disposals |
- |
14.2 |
- |
- |
|
Portfolio valuation |
1,134.9 |
1,071.4 |
40.2 |
|
Debt
In March 2024, we refinanced four small near dated maturing facilities into one consolidated seven year
Cashflow
|
|
30 June |
30 June |
|
|
£m |
£m |
|
Operating cash flow |
0.9 |
3.1 |
|
|
|
|
|
Property acquisitions and capital expenditure |
(29.0) |
(10.1) |
|
Property disposals |
12.4 |
33.9 |
|
Finance income |
0.3 |
- |
|
Net cash flows from investing activities |
(16.3) |
23.8 |
|
|
|
|
|
Dividends paid |
(9.9) |
(10.2) |
|
Net borrowings drawn/(repaid) |
41.8 |
(23.9) |
|
Derivative premium paid |
(1.7) |
(0.3) |
|
Finance related costs |
(10.6) |
(7.7) |
|
Financing cash flows |
19.6 |
(42.1) |
|
|
|
|
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Net cash flow |
4.2 |
(15.2) |
Operating cash flows in the first half of the financial year are typically weaker than the second half, the result of the non-cyclical nature of our cashflows which see the majority of our annual cashflows receipted in August & September.
The capital expenditure programme has progressed well this first half, with
Disposal activity generated
Dividends of
Net borrowings drawn of
Outlook
We continue to remain confident in the outlook for the business and the wider purpose built student accommodation sector throughout the remainder of 2024 and beyond. Having sold over 90 per cent of our rooms, confidence exists that we will secure occupancy rates in excess of 97 per cent for the forthcoming academic year, with like-for-like rental growth anticipated to exceed initial guidance of six per cent.
We secured an energy hedge contract almost five years ago which is due to expire in September 2024. In anticipation, we have been selectively securing energy price fixing beyond 2024. Although pricing has stabilised following the significant volatility experienced in 2022, price inflation captured is expected to result in an annualised increase in operating expense of
With refinancing risk removed for the medium term, we have greater certainty in respect to our cost of debt. With 95 per cent of drawn debt either fixed or capped, whilst the downside is protected, we can expect to benefit marginally from any further reduction in interest rates.
Focus remains on our growth strategy, progressing capex plans, the roll out of our Post-Grad product and selectively acquiring opportunities in key top-tier cities to grow beds under management.
The Board remains comfortable with earlier guidance in respect to dividend and continues to expect to pay a minimum dividend of
Going concern
The Board continues to place particular focus on the appropriateness of adopting the going concern assumption when preparing the Group's consolidated financial statements.
At 30 June 2024, the Group had
In light of the Group's liquidity position, its modest level of gearing and capital commitments, the Directors have concluded that, in reasonably possible adverse scenarios, adequate resources and mitigants remain available to continue to operate for the period to 31 December 2025. The Directors therefore concluded that it remains appropriate to adopt the going concern basis of preparation when compiling the interim report and accounts for the six months ended 30 June 2024.
Attention is drawn to note 1.3 of the condensed consolidated interim financial statements for further details surrounding the conclusion reached.
Principal risks
Attention is drawn to the principal risks and uncertainties faced by the Group which are set out in full on pages 32 to 36 of the Annual Report & Accounts 2023.
An interim review of the risk environment has been completed, and the Board has concluded that there has been no significant change in the Group's principal risks or uncertainties.
Dividend
An interim dividend of
The dividend will be paid as a Property Income Distribution on 20 September 2024 to shareholders on the register at 6 September 2024.
Donald Grant
14 August 2024
Statement of Directors' responsibilities
Responsibility Statement of the Directors in Respect of the Interim Report and Accounts
The Directors confirm that to the best of their knowledge this unaudited condensed set of financial statements has been prepared in accordance with
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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 |
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• |
material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
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The Directors of Empiric Student Property plc are listed in the Empiric Student Property plc Annual Report & Accounts for the year ended 31 December 2023. A list of current Directors is also maintained on the Empiric Student Property plc website: www.empiric.co.uk
By order of the Board
Donald Grant
Director
14 August 2024
Independent 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 2024 is not prepared, in all material respects, in accordance with
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 2024 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 Revised International Standard on Review Engagements (
As disclosed in note 1.2, the annual financial statements of the Group are prepared in accordance with
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 (
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
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 statement 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
BDO LLP
Chartered Accountants
14 August 2024
BDO LLP is a limited liability partnership registered in
Condensed Consolidated Statement of Comprehensive Income (unaudited)
|
|
|
Six months to 30 June 2024 (Unaudited) |
Six months to 30 June 2023 (Unaudited) |
Full year to |
|
|
Notes |
£ m |
£ m |
£ m |
|
Continuing operations |
|
|
|
|
|
Revenue |
|
42.4 |
41.3 |
80.5 |
|
Property expenses |
|
(11.8) |
(11.7) |
(25.2) |
|
|
|
|
|
|
|
Gross profit |
|
30.6 |
29.6 |
55.3 |
|
|
|
|
|
|
|
Administrative expenses |
|
(7.1) |
(6.5) |
(14.0) |
|
Change in fair value of investment property |
7,8 |
13.7 |
10.3 |
30.1 |
|
|
|
|
|
|
|
Operating profit |
|
37.2 |
33.4 |
71.4 |
|
|
|
|
|
|
|
Finance costs |
2 |
(10.2) |
(9.0) |
(17.4) |
|
Finance income |
2 |
0.3 |
- |
0.2 |
|
Derivative fair value movement |
|
(0.6) |
0.8 |
(0.2) |
|
Loss on disposal of investment property |
|
(1.9) |
(0.6) |
(0.6) |
|
|
|
|
|
|
|
Profit before tax |
|
24.8 |
24.6 |
53.4 |
|
|
|
|
|
|
|
Corporation tax |
3 |
- |
- |
- |
|
|
|
|
|
|
|
Profit for the period and total comprehensive income |
|
24.8 |
24.6 |
53.4 |
|
|
|
|
|
|
|
Earnings per share expressed as pence per share |
|
|
|
|
|
Basic |
4 |
4.1 |
4.1 |
8.8 |
|
Diluted |
4 |
4.1 |
4.0 |
8.8 |
Condensed Consolidated Statement of Financial Position (unaudited)
|
|
|
30 June |
30 June |
31 December 2023 (Audited) |
|
|
Notes |
£ m |
£ m |
£ m |
|
Non-current assets |
|
|
|
|
|
Investment property - Operational Assets |
7 |
1,110.9 |
1,022.7 |
1,072.7 |
|
Investment property - Development Assets |
7 |
8.2 |
3.3 |
3.0 |
|
Property, plant and equipment |
|
1.0 |
0.9 |
0.8 |
|
Intangible assets |
|
4.3 |
2.7 |
3.1 |
|
Right of use asset |
|
1.1 |
1.3 |
1.2 |
|
Derivative fair value |
|
1.2 |
1.1 |
- |
|
|
|
1,126.7 |
1,032.0 |
1,080.8 |
|
Current assets |
|
|
|
|
|
Trade and other receivables |
|
4.2 |
2.6 |
6.5 |
|
Assets classified as held for sale |
8 |
16.5 |
38.3 |
22.4 |
|
Cash and cash equivalents |
|
44.7 |
40.6 |
40.5 |
|
Derivative fair value |
|
- |
- |
0.1 |
|
|
|
65.4 |
81.5 |
69.5 |
|
|
|
|
|
|
|
Total assets |
|
1,192.1 |
1,113.5 |
1,150.3 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
32.7 |
21.8 |
23.4 |
|
Borrowings |
9 |
- |
13.7 |
56.5 |
|
Lease liability |
|
0.1 |
0.1 |
0.1 |
|
Deferred rental income |
|
12.3 |
11.8 |
34.9 |
|
|
|
45.1 |
47.4 |
114.9 |
|
Non-current liabilities |
|
|
|
|
|
Borrowings |
9 |
397.7 |
349.4 |
300.2 |
|
Lease liability |
|
0.9 |
1.1 |
1.0 |
|
|
|
398.6 |
350.5 |
301.2 |
|
|
|
|
|
|
|
Total liabilities |
|
443.7 |
397.9 |
416.1 |
|
Net assets |
|
748.4 |
715.6 |
734.2 |
|
|
|
|
|
|
|
Called-up share capital |
|
6.0 |
6.0 |
6.0 |
|
Share premium |
|
0.3 |
0.3 |
0.3 |
|
Capital reduction reserve |
|
413.2 |
434.7 |
424.1 |
|
Retained earnings |
|
328.9 |
274.6 |
303.8 |
|
Total equity |
|
748.4 |
715.6 |
734.2 |
|
|
|
|
|
|
|
NAV per share basic (pence) |
5 |
124.0 |
118.6 |
121.7 |
|
NAV per share diluted (pence) |
5 |
122.9 |
117.5 |
120.8 |
|
EPRA NTA per share (pence) |
5 |
122.8 |
117.3 |
120.7 |
Condensed Consolidated Statement of Changes in Equity (unaudited)
Six months ended 30 June 2024 (unaudited)
|
|
Called up share capital |
Share premium |
Capital reduction reserve |
Retained earnings |
Total |
|
|
£ m |
£ m |
£ m |
£ m |
£ m |
|
|
|
|
|
|
|
|
Balance at 1 January 2024 |
6.0 |
0.3 |
424.1 |
303.8 |
734.2 |
|
Profit for the period |
- |
- |
- |
24.8 |
24.8 |
|
Total comprehensive income for the period |
- |
- |
- |
24.8 |
24.8 |
|
Share-based payment |
- |
- |
- |
0.3 |
0.3 |
|
Dividends |
- |
- |
(10.9) |
- |
(10.9) |
|
Amounts recognised directly in equity |
- |
- |
(10.9) |
0.3 |
(10.6) |
|
Balance at 30 June 2024 |
6.0 |
0.3 |
413.2 |
328.9 |
748.4 |
Six months ended 30 June 2023 (unaudited)
|
|
Called up share capital |
Share premium |
Capital reduction reserve |
Retained earnings |
Total |
|
|
£ m |
£ m |
£ m |
£ m |
£ m |
|
|
|
|
|
|
|
|
Balance at 1 January 2023 |
6.0 |
0.3 |
444.7 |
249.8 |
700.8 |
|
Profit for the period |
- |
- |
- |
24.6 |
24.6 |
|
Total comprehensive income for the period |
- |
- |
- |
24.6 |
24.6 |
|
Share-based payment |
- |
- |
- |
0.4 |
0.4 |
|
Reserves transfer |
- |
- |
0.2 |
(0.2) |
- |
|
Dividends |
- |
- |
(10.2) |
- |
(10.2) |
|
Amounts recognised directly in equity |
- |
- |
(10.0) |
0.2 |
(9.8) |
|
Balance at 30 June 2023 |
6.0 |
0.3 |
434.7 |
274.6 |
715.6 |
Full year ended 31 December 2023 (audited)
|
|
Called up share capital |
Share premium |
Capital reduction reserve |
Retained earnings |
Total |
|
|
£ m |
£ m |
£ m |
£ m |
£ m |
|
|
|
|
|
|
|
|
Balance at 1 January 2023 |
6.0 |
0.3 |
444.7 |
249.8 |
700.8 |
|
Profit for the year |
- |
- |
- |
53.4 |
53.4 |
|
Total comprehensive income for the period |
- |
- |
- |
53.4 |
53.4 |
|
Share-based payment |
- |
- |
- |
0.7 |
0.7 |
|
Reserves transfer |
- |
- |
0.1 |
(0.1) |
- |
|
Dividends |
- |
- |
(20.7) |
- |
(20.7) |
|
Amounts recognised directly in equity |
- |
- |
(20.6) |
0.6 |
(20.0) |
|
Balance at 31 December 2023 |
6.0 |
0.3 |
424.1 |
303.8 |
734.2 |
Condensed Consolidated Statement of Cash Flows (unaudited)
|
|
Six months to 30 June 2024 (Unaudited) |
Six months to 30 June 2023 (Unaudited) |
Full year to 31 December 2023 (Audited) |
|
|
|
£ m |
£ m |
£ m |
|
|
Cash flows from operating activities |
|
|
|
|
|
Profit before income tax |
24.8 |
24.6 |
53.4 |
|
|
Share-based payments |
0.4 |
0.4 |
0.9 |
|
|
Depreciation charge |
0.1 |
0.4 |
0.8 |
|
|
Finance costs |
10.2 |
9.0 |
17.4 |
|
|
Finance income |
(0.3) |
- |
(0.2) |
|
|
Loss on disposal of investment property |
1.9 |
0.6 |
0.6 |
|
|
Change in fair value of derivative |
0.6 |
(0.8) |
0.2 |
|
|
Change in fair value of investment property |
(13.7) |
(10.3) |
(30.1) |
|
|
|
24.0 |
23.9 |
43.0 |
|
|
Decrease in trade and other receivables |
1.0 |
3.1 |
0.3 |
|
|
Decrease in trade and other payables |
(1.5) |
(2.6) |
(2.0) |
|
|
(Decrease)/increase in deferred rental income |
(22.6) |
(21.3) |
2.4 |
|
|
|
(23.1) |
(20.8) |
0.7 |
|
|
Net cash flows generated from operations |
0.9 |
3.1 |
43.7 |
|
|
Cash flows from investing activities |
|
|
|
|
|
Purchase of tangible fixed assets |
- |
(0.1) |
- |
|
|
Purchase of intangible assets |
(1.4) |
(0.9) |
(1.6) |
|
|
Purchase and development of investment property |
(27.6) |
(9.1) |
(32.4) |
|
|
Proceeds on disposal of asset held for sale, net of selling costs |
3.3 |
13.6 |
13.6 |
|
|
Proceeds on disposal of investment property, net of selling costs |
9.1 |
20.3 |
29.0 |
|
|
Finance income |
0.3 |
- |
0.2 |
|
|
Net cash flows (used in)/generated from investing activities |
(16.3) |
23.8 |
8.8 |
|
|
Cash flows from financing activities |
|
|
|
|
|
Dividends paid |
(9.9) |
(10.2) |
(20.2) |
|
|
Bank borrowings drawn |
164.9 |
- |
- |
|
|
Repayment of bank borrowings |
(123.1) |
(23.9) |
(30.9) |
|
|
Loan arrangement fee paid |
(2.2) |
- |
(0.1) |
|
|
Derivative premium paid |
(1.7) |
(0.3) |
(0.3) |
|
|
Interest rate cap termination |
0.1 |
- |
- |
|
|
Finance costs |
(8.4) |
(7.6) |
(16.0) |
|
|
Lease liability repaid |
(0.1) |
(0.1) |
(0.3) |
|
|
Net cash generated from/(used in) financing activities |
19.6 |
(42.1) |
(67.8) |
|
|
Increase/(decrease) in cash and cash equivalents |
4.2 |
(15.2) |
(15.3) |
|
|
Cash and cash equivalents at beginning of period |
40.5 |
55.8 |
55.8 |
|
|
Cash and cash equivalents at end of period |
44.7 |
40.6 |
40.5 |
|
Unaudited notes to the Financial Statements
1. Accounting Policies
1.1 Period of Account
The reporting period of the unaudited condensed consolidated interim financial statements of the Group is the six month period from 1 January 2024 to 30 June 2024.
1.2 Basis of Preparation
This unaudited condensed consolidated interim financial report for the six month reporting period ended 30 June 2024 ("Interim Report") has been prepared in accordance with the
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 2023, which has been prepared in accordance with the
The comparative financial information for the year ended 31 December 2023 in this Interim Report does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2023 were approved by the Board of Directors on 13 March 2024 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 Interim Report is 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 2023 and are expected to be consistently applied during the year ending 31 December 2024.
1.3 Going concern
At 30 June 2024, the Group's cash was
Occupancy is a key driver of profitability and cash flows, and at 14 August 2024, based on forward reservations for the upcoming 2024/25 academic year, 92 per cent had been secured which provides sufficient comfort in respect of forward reservations for the forthcoming academic year.
No facilities fall due for repayment during the going concern period to 31 December 2025. Good relationships are maintained with all lenders and indications suggest that a favorable lender appetite remains in respect to the sector.
In March 2024, an interest rate cap was acquired in respect to a
As part of the Group's going concern review, certain scenarios are considered to model the impact on available liquidity. All of the Group's covenants are currently compliant and we envisage compliance to continue to be achieved in a reasonably severe downside scenario, or that sufficient mitigants are available where there is a risk to covenant headroom. The Group's portfolio could currently withstand a 23 per cent decline in property valuations before the first breach in a loan-to-value covenant is triggered.
The Group's average interest cover covenant across all facilities is 1.9 times, whereas gross profit is currently three times total finance costs, providing a good degree of comfort.
Bank borrowings would be renegotiated in advance of any potential covenant breaches, insofar as factors are within the control of the Group. Facility agreements typically contain cure provisions providing for prepayment, cash deposits or security enhancement as may be required to mitigate any potential breach. The Group currently has access to over
The Directors have reassessed the Group's principal risks and severe but plausible downside scenarios in assessing the Group's going concern for the period to 31 December 2025. The Directors have considered, in particular:
|
• |
a reduction in revenue, both in terms of occupancy and growth rate; |
|
• |
an increase in unhedged utility costs assumptions by 1.5 times current market expectations; |
|
• |
an immediate valuation shock of minus 15 per cent in property valuations.
|
In addition, the Directors considered potential mitigants to the downside scenario which include, but are not limited to, further asset disposals and temporary reduction in dividends. Further consideration was given toward a
Having made enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the period to 31 December 2025. In addition, having reassessed the principal risks, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing these 2024 interim results.
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 Interim Report:
Fair valuation of investment property and assets classified as held for sale
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 - Global Standards (incorporating the International Valuation Standards) and the
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 Interim Report:
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.
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 Segmental Information
The Directors are of the opinion that the Group is engaged in a single segment business, being the investment in student and associated commercial lettings, within the
2. Finance Costs
|
|
Six months to |
Six months to |
Full year to 31 December 2023 (audited) |
|
|
£ m |
£ m |
£ m |
|
Finance costs |
|
|
|
|
Interest expense on bank borrowings |
8.9 |
8.5 |
16.2 |
|
Amortisation of loan transaction costs: |
|
|
|
|
Ongoing |
0.4 |
0.5 |
1.2 |
|
Accelerated charges on refinancing |
0.9 |
- |
- |
|
|
10.2 |
9.0 |
17.4 |
|
|
|
|
|
|
Finance income |
|
|
|
|
Interest received on bank deposits |
0.3 |
- |
0.2 |
|
Net finance costs |
9.9 |
9.0 |
17.2 |
3. Corporation Tax
Taxation on the profit or loss for the period not exempt under
Current tax represents 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.
The calculation of each of the measures is set out below:
|
Six months to 30 June 2024 (unaudited) |
Calculation of basic EPS |
Calculation of diluted EPS |
Calculation of EPRA basic EPS |
Calculation of EPRA diluted EPS |
|
£ m |
£ m |
£ m |
£ m |
|
|
Earnings |
24.8 |
24.8 |
24.8 |
24.8 |
|
Changes in fair value of investment |
- |
- |
(13.7) |
(13.7) |
|
Derivative fair value movement |
- |
- |
0.6 |
0.6 |
|
Loss on disposal of investment property |
- |
- |
1.9 |
1.9 |
|
Earnings/adjusted earnings |
24.8 |
24.8 |
13.6 |
13.6 |
|
Weighted average number of shares (m) |
603.4 |
603.4 |
603.4 |
603.4 |
|
Adjustment for employee share options (m) |
- |
5.3 |
- |
5.3 |
|
Total number of shares (m) |
603.4 |
608.7 |
603.4 |
608.7 |
|
Per-share amount (pence) |
4.1 |
4.1 |
2.3 |
2.2 |
|
Six months to 30 June 2023 (unaudited) |
Calculation of basic EPS |
Calculation of diluted EPS |
Calculation of EPRA basic EPS |
Calculation of EPRA diluted EPS |
|
£ m |
£ m |
£ m |
£ m |
|
|
Earnings |
24.6 |
24.6 |
24.6 |
24.6 |
|
Changes in fair value of investment |
- |
- |
(10.3) |
(10.3) |
|
Derivative fair value movement |
- |
- |
(0.8) |
(0.8) |
|
Loss on disposal of investment property |
- |
- |
0.6 |
0.6 |
|
Earnings/adjusted earnings |
24.6 |
24.6 |
14.1 |
14.1 |
|
Weighted average number of shares (m) |
603.3 |
603.3 |
603.3 |
603.3 |
|
Adjustment for employee share options (m) |
- |
5.6 |
- |
5.6 |
|
Total number of shares (m) |
603.3 |
608.9 |
603.3 |
608.9 |
|
Per-share amount (pence) |
4.1 |
4.0 |
2.3 |
2.3 |
|
|
|
|
|
|
|
|
Calculation of basic EPS |
Calculation of diluted EPS |
Calculation of EPRA basic EPS |
Calculation of EPRA diluted EPS |
|
Full year to 31 December 2023 (audited) |
£ m |
£ m |
£ m |
£ m |
|
Earnings |
53.4 |
53.4 |
53.4 |
53.4 |
|
Changes in fair value of investment property (Note 7) |
- |
- |
(30.1) |
(30.1) |
|
Loss on disposal of investment property |
|
|
0.6 |
0.6 |
|
Derivative fair value movement |
- |
- |
0.2 |
0.2 |
|
Earnings/adjusted earnings |
53.4 |
53.4 |
24.1 |
24.1 |
|
Weighted average number of shares (m) |
603.4 |
603.4 |
603.4 |
603.4 |
|
Adjustment for employee share options (m) |
- |
4.6 |
- |
4.6 |
|
Total number of shares (m) |
603.4 |
608.0 |
603.4 |
608.0 |
|
Per-share amount (pence) |
8.8 |
8.8 |
4.0 |
4.0 |
5. 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. As the Group is a REIT, no adjustment is made for 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 EPRA Net Tangible Assets to be the most relevant measure and we consider this to be our primary NAV measure.
A reconciliation of the three EPRA NAV metrics from IFRS NAV is shown in the table below.
|
|
NAV |
EPRA NAV measures |
||||
|
Six months to 30 June 2024 (unaudited) |
IFRS |
EPRA NRV |
|
EPRA NTA |
|
EPRA NDV |
|
£ m |
£ m |
|
£ m |
|
£ m |
|
|
Net assets per Statement of Financial Position |
748.4 |
748.4 |
|
748.4 |
|
748.4 |
|
Adjustments |
|
|
|
|
|
|
|
Fair value of fixed rate debt |
- |
- |
|
- |
|
10.6 |
|
Derivative fair value |
- |
(1.2) |
|
(1.2) |
|
- |
|
Purchaser's costs1 |
- |
67.0 |
|
- |
|
- |
|
Net assets used in per share calculation |
748.4 |
814.2 |
|
747.2 |
|
759.0 |
|
|
|
|
|
|
|
|
|
Number of shares in issue |
|
|
|
|
|
|
|
Issued share capital (m) |
603.4 |
603.4 |
|
603.4 |
|
603.4 |
|
Issued share capital plus employee options (m) |
608.7 |
608.7 |
|
608.7 |
|
608.7 |
|
|
|
|
|
|
|
|
|
Net asset value per share (pence) |
|
|
|
|
|
|
|
Basic Net Asset Value per share (pence) |
124.0 |
|
|
|
|
|
|
Diluted Net Asset Value per share (pence) |
122.9 |
133.8 |
|
122.8 |
|
124.7 |
|
|
NAV |
EPRA NAV measures |
||||
|
Six months to 30 June 2023 (unaudited) |
IFRS |
EPRA NRV |
|
EPRA NTA |
|
EPRA NDV |
|
£ m |
£ m |
|
£ m |
|
£ m |
|
|
Net assets per Statement of Financial Position |
715.6 |
715.6 |
|
715.6 |
|
715.6 |
|
Adjustments |
|
|
|
|
|
|
|
Fair value of fixed rate debt |
- |
- |
|
- |
|
17.4 |
|
Derivative fair value |
- |
- |
|
(1.1) |
|
- |
|
Purchaser's costs1 |
- |
35.7 |
|
- |
|
- |
|
Net assets used in per share calculation |
715.6 |
751.3 |
|
714.5 |
|
733.0 |
|
|
|
|
|
|
|
|
|
Number of shares in issue |
|
|
|
|
|
|
|
Issued share capital (m) |
603.3 |
603.3 |
|
603.3 |
|
603.3 |
|
Issued share capital plus employee options (m) |
608.9 |
608.9 |
|
608.9 |
|
608.9 |
|
|
|
|
|
|
|
|
|
Net asset value per share (pence) |
|
|
|
|
|
|
|
Basic Net Asset Value per share (pence) |
118.6 |
|
|
|
|
|
|
Diluted Net Asset Value per share (pence) |
117.5 |
123.4 |
|
117.3 |
|
120.4 |
|
|
NAV |
EPRA NAV measures |
||||
|
Year ended 31 December 2023 (audited) |
IFRS |
EPRA NRV |
|
EPRA NTA |
|
EPRA NDV |
|
£ m |
£ m |
|
£ m |
|
£ m |
|
|
Net assets per Statement of Financial Position |
734.2 |
734.2 |
|
734.2 |
|
734.2 |
|
Adjustments |
|
|
|
|
|
|
|
Fair value of fixed rate debt |
- |
- |
|
- |
|
10.5 |
|
Derivative fair value |
- |
(0.1) |
|
(0.1) |
|
- |
|
Purchaser's costs1 |
- |
37.1 |
|
- |
|
- |
|
Net assets used in per share calculation |
734.2 |
771.2 |
|
734.1 |
|
744.7 |
|
|
|
|
|
|
|
|
|
Number of shares in issue |
|
|
|
|
|
|
|
Issued share capital (m) |
603.4 |
603.4 |
|
603.4 |
|
603.4 |
|
Issued share capital plus employee options (m) |
608.0 |
608.0 |
|
608.0 |
|
608.0 |
|
|
|
|
|
|
|
|
|
Net asset value per share |
£ |
£ |
|
£ |
|
£ |
|
Basic Net Asset Value per share (pence) |
121.7 |
|
|
|
|
|
|
Diluted Net Asset Value per share (pence) |
120.8 |
126.8 |
|
120.7 |
|
122.5 |
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.
6. Dividends Paid
|
|
Six months to 30 June 2024 (unaudited) |
Six months to 30 June 2023 (unaudited) |
Full year to 31 December 2023 (audited) |
|
|
£ m |
£ m |
£ m |
|
Interim dividend of |
|
|
5.3 |
|
Interim dividend of |
|
|
4.9 |
|
Interim dividend of |
|
|
4.9 |
|
Interim dividend of |
|
|
5.6 |
|
Interim dividend of |
|
5.3 |
|
|
Interim dividend of |
|
4.9 |
|
|
Interim dividend of |
5.6 |
|
|
|
Interim dividend of |
5.3 |
|
|
|
|
10.9 |
10.2 |
20.7 |
7. Investment Property
|
|
Investment properties freehold |
Investment properties long leasehold |
Total operational assets |
Properties under development |
Total Investment property |
|
|
£ m |
£ m |
£ m |
£ m |
£ m |
|
As at 1 January 2024 |
940.0 |
132.7 |
1,072.7 |
3.0 |
1,075.7 |
|
Capital expenditure |
18.0 |
3.1 |
21.1 |
0.3 |
21.4 |
|
Property acquisitions |
10.5 |
- |
10.5 |
5.9 |
16.4 |
|
Sale of investment property |
(10.4) |
- |
(10.4) |
- |
(10.4) |
|
Change in fair value during the period |
13.0 |
4.0 |
17.0 |
(1.0) |
16.0 |
|
As at 30 June 2024 (unaudited) |
971.1 |
139.8 |
1,110.9 |
8.2 |
1,119.1 |
|
|
|||||
|
As at 1 January 2023 |
920.4 |
142.0 |
1,062.4 |
3.3 |
1,065.7 |
|
Capital expenditure |
8.2 |
0.9 |
9.1 |
- |
9.1 |
|
Sale of investment property |
(2.8) |
(18.0) |
(20.8) |
- |
(20.8) |
|
Change in fair value during the period |
7.7 |
2.6 |
10.3 |
- |
10.3 |
|
Transfer to held for sale |
(38.3) |
- |
(38.3) |
- |
(38.3) |
|
As at 30 June 2023 (unaudited) |
895.2 |
127.5 |
1,022.7 |
3.3 |
1,026.0 |
|
|
|
|
|
|
|
|
As at 1 January 2023 |
920.4 |
142.0 |
1,062.4 |
3.3 |
1,065.7 |
|
Capital expenditure |
29.7 |
2.8 |
32.5 |
- |
32.5 |
|
Sale of investment property |
(12.0) |
(18.2) |
(30.2) |
- |
(30.2) |
|
Transfer to held for sale asset |
(22.4) |
- |
(22.4) |
- |
(22.4) |
|
Change in fair value during the year |
24.3 |
6.1 |
30.4 |
(0.3) |
30.1 |
|
As at 31 December 2023 (audited) |
940.0 |
132.7 |
1,072.7 |
3.0 |
1,075.7 |
During the period
In accordance with IAS 40, the carrying value of investment property is its fair value as determined by independent external valuers. This valuation has been conducted by CBRE Limited, as external valuer, and has been prepared as at 30 June 2024, 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 includes assumptions regarding income expectations and yields that investors would expect to achieve on those assets over time. Many external economic and market factors, such as interest rate expectations, bond yields, the availability and cost of finance and the relative attraction of property against other asset classes, could lead to a reappraisal of the assumptions used to arrive at current valuations. In adverse conditions, this reappraisal can lead to a reduction in property values and a loss in net asset value.
The abolition of Multiple Dwellings Relief ("MDR"), which impacts stamp duty incurred, came into effect on 1 June 2024 and has impacted the pricing for some of the Group's assets by up to 4.0 per cent. This has resulted in a
The table below reconciles between 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.
|
|
Six months to |
Six months to |
Full year to 31 December 2023 (audited) |
|
|
£ m |
£ m |
£ m |
|
Value per independent valuation report |
1,134.9 |
1,064.0 |
1,097.9 |
|
Plus: Head lease |
0.7 |
0.3 |
0.2 |
|
Deduct: Assets classified as held for sale |
(16.5) |
(38.3) |
(22.4) |
|
Fair value per Group Statement of Financial Position |
1,119.1 |
1,026.0 |
1,075.7 |
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 2024 |
30 June 2023 |
31 December 2023 |
|
|
|
|
b) Unobservable input: Rental growth
The estimated average annual increase in rent based on both market estimations and contractual arrangements. The assumed rental growth is as follows:
|
30 June 2024 |
30 June 2023 |
31 December 2023 |
|
4.7% |
5.39% |
6.2% |
c) Unobservable input: Net initial yield
The net initial yield is defined as the initial net 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 2024 |
30 June 2023 |
31 December 2023 |
|
4.6%-8.8% |
4.75%-8.90% |
4.5%-8.9% |
d) Unobservable input: Physical condition of the property
CBRE's assumption at 30 June 2024 is that
e) Unobservable input: Planning consent
The development site at FISC,
College House in
f) Sensitivities of measurement of significant unobservable inputs
The Group's portfolio valuation is subject to judgement and is inherently subjective by nature. As a result, the following sensitivity analysis for the student properties has been prepared by the valuer. For the purposes of the sensitivity analysis, the Group considers its property portfolio to be one homogeneous group of properties.
|
|
15% increase in cost of EWS works |
-3% change |
+3% change |
-0.25% change |
+0.25% change |
|
|
£ m |
£ m |
£ m |
£ m |
£ m |
|
(Decrease)/increase in the fair value of investment property |
|
|
|
|
|
|
As at 30 June 2024 |
(4.4) |
(45.5) |
45.5 |
55.9 |
(50.9) |
|
As at 30 June 2023 |
(5.1) |
(44.3) |
44.2 |
53.9 |
(49.1) |
|
As at 31 December 2023 |
(4.9) |
(45.1) |
45.0 |
55.5 |
(50.5) |
8. Assets classified as held for sale
Management considers that two properties (December 2023: three properties) meet the conditions relating to assets held for sale under IFRS 5: Non-current Assets Held for Sale. The combined fair value in these financial statements is
|
|
Investment properties freehold |
|
As at 1 January 2024 |
22.4 |
|
Property disposals |
(3.9) |
|
Additions: subsequent expenditure |
0.3 |
|
Change in fair value of assets classified as held for sale |
(2.3) |
|
As at 30 June 2024 (unaudited) |
16.5 |
9. 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
A summary of the drawn and undrawn bank borrowings in the period is shown below:
|
|
Bank borrowings drawn |
Bank borrowings undrawn |
Total
|
|
|
£ m |
£ m |
£ m |
|
At 1 January 2024 (audited) |
360.3 |
42.0 |
402.3 |
|
Part cancellation of revolving credit facility |
- |
(2.0) |
(2.0) |
|
Facilities repaid and cancelled in the period |
(123.1) |
- |
(123.1) |
|
Bank borrowings drawn in the period |
40.0 |
(40.0) |
- |
|
New facility drawn |
124.9 |
- |
124.9 |
|
At 30 June 2024 (unaudited) |
402.1 |
- |
402.1 |
|
|
|
|
|
|
At 1 January 2023 (audited) |
391.2 |
20.0 |
411.2 |
|
Part cancellation of revolving credit facility |
- |
(22.6) |
(22.6) |
|
Facilities repaid in the period |
(23.9) |
17.6 |
(6.3) |
|
Bank borrowings drawn in the period |
- |
- |
- |
|
Unsecured facility refinanced |
- |
20.0 |
20.0 |
|
At 30 June 2023 (unaudited) |
367.3 |
35.0 |
402.3 |
|
|
|
|
|
|
At 1 January 2023 (audited) |
391.2 |
20.0 |
411.2 |
|
Bank borrowings repaid |
(30.9) |
24.6 |
(6.3) |
|
Part cancellation of revolving credit facility |
- |
(22.6) |
(22.6) |
|
Unsecured facility refinanced |
- |
20.0 |
20.0 |
|
At 31 December 2023 (audited) |
360.3 |
42.0 |
402.3 |
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:
|
|
30 June 2024 (unaudited) |
30 June 2023 (unaudited) |
31 December 2023 (audited) |
|
Current borrowings |
£ m |
£ m |
£ m |
|
Balance brought forward |
57.7 |
- |
- |
|
Bank borrowings becoming current in the period |
- |
13.7 |
57.7 |
|
Less: Bank borrowings becoming non-current during the period |
- |
- |
- |
|
Less: Bank borrowings repaid during the period |
(57.7) |
- |
- |
|
Bank borrowings: due in less than one year |
- |
13.7 |
57.7 |
|
Less: Unamortised costs |
- |
- |
(1.2) |
|
Current liabilities: Bank borrowings |
- |
13.7 |
56.5 |
|
|
30 June 2024 (unaudited) |
30 June 2023 (unaudited) |
31 December 2023 (audited) |
|
Non-current borrowings |
£ m |
£ m |
£ m |
|
Balance brought forward |
302.6 |
391.2 |
391.2 |
|
Total bank borrowings in the period |
164.9 |
- |
- |
|
Bank borrowings becoming non-current |
- |
- |
- |
|
Less: Bank borrowings becoming current during the period |
- |
(13.7) |
(57.7) |
|
Less: Bank borrowings repaid during the period |
(65.4) |
(23.9) |
(30.9) |
|
Bank borrowings: due in more than one year |
402.1 |
353.6 |
302.6 |
|
Less: Unamortised costs |
(4.4) |
(4.2) |
(2.4) |
|
Non-current liabilities: bank borrowings |
397.7 |
349.4 |
300.2 |
|
|
30 June 2024 (unaudited) |
30 June 2023 (unaudited) |
31 December 2023 (audited) |
|
Maturity of bank borrowings |
£ m |
£ m |
£ m |
|
Repayable in less than one year |
- |
13.7 |
57.7 |
|
Repayable between one and two years |
20.0 |
44.0 |
45.4 |
|
Repayable between two and five years |
206.1 |
172.4 |
206.1 |
|
Repayable in over five years |
176.0 |
137.2 |
51.1 |
|
Bank borrowings |
402.1 |
367.3 |
360.3 |
10. Contingent liabilities
There were no contingent liabilities at 30 June 2024 (31 December 2023: £nil).
11. Capital Commitments
As at 30 June 2024, the Group had total capital commitments of
12. Related Party Disclosures
Key Management Personnel
Key management personnel are considered to comprise the Board of Directors.
Share-Based Payments
On 12 April 2024, the Company granted Duncan Garrood, Chief Executive Officer, nil-cost options over 136,476 ordinary shares, and Donald Grant, Chief Financial & Sustainability Officer, nil-cost options over 96,532 ordinary shares in the Company ("ordinary shares") relating to the deferred shares element of the annual bonus award for the financial year to 31 December 2023.
Also on 12 April 2024, Duncan Garrood was granted nil-cost options over 728,294 ordinary shares, and Donald Grant, Chief Financial & Sustainability Officer, was granted nil-cost options over 515,135 ordinary shares pursuant to the Empiric Long Term Incentive Plan for the 2024 financial year.
13. Subsequent Events
On 2 July 2024 the Group completed on the acquisition of a property in
On 8 August 2024, the Group exchanged contracts for the sale of Caledonia Mills,
Glossary
Basic EPS - The earnings attributed to ordinary shareholders divided by the weighted average number of ordinary shares outstanding during the period.
Company - Empiric Student Property plc.
EPRA - European Public Real Estate Association.
EPRA EPS - EPRA Earnings divided by the weighted average number of ordinary shares outstanding during the period.
EPRA Net Disposal Value ("NDV") - Represents the shareholders' value under a disposal scenario, The value of the company assuming assets are sold, and the liabilities are settled and not held to maturity.
EPRA Net Reinvestment Value ("NRV") - The value of the assets on a long-term basis, assets and liabilities are not expected to crystallise under normal circumstances.
EPRA Net Tangible Assets ("NTA") - Assumes the underlying value of the company assuming it buys and sells assets.
Gross margin - Gross profit expressed as a percentage of revenue.
Group - Empiric Student Property plc and its subsidiaries.
Hello Student - Our customer-facing brand and operating platform.
IFRS - International Financial Reporting Standards.
Like-for-like rental growth - Compares the growth in rental income for operational assets throughout both the current and comparative period, excluding acquisitions, developments and disposals.
Like-for-like valuation - Compares the change in capital values of the Group's portfolio at the balance sheet dates, compared to the prior balance sheet date. The calculation excludes acquisitions, developments, disposals and adjusts for capital expenditure.
Net Asset Value or NAV - Net Asset Value is the net assets in the Statement of Financial Position.
PBSA - Purpose Built Student Accommodation.
Post-Grad - Post graduate students who have successfully completed an undergraduate course and are undertaking further studies within higher education.
Re-booker rate - A KPI and 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 - A KPI and 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.
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.
Total Accounting Return - The growth in EPRA NTA over the period plus dividends paid in the period expressed as a percentage of opening EPRA NTA.
Weighted average cost of debt - The weighted rate of interest applied to all drawn debt balances at the balance sheet date.
Weighted average debt maturity - The weighted average term remaining until expiry of our drawn debt facilities at the balance sheet date.
Company Information and Corporate Advisers |
|
|
|
|
Directors and Advisers |
|
|
|
|
Directors Broker and Joint Financial Adviser Legal Adviser to the Company
|
|
Registrar |
|
|
Company Registration Number: 08886906 Empiric Student Property plc is a public |
Registered Office |
||
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