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 UK, is pleased to report its interim results for the six months
ended 30 June 2024.
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
|
|
30 June
2023
|
30 June
2024
|
Change
|
|
Income
statement
|
|
|
|
|
Revenue (£m)
|
41.3
|
42.4
|
+2.7%
|
|
Like-for-like rental growth (%)
|
5.2
|
10.5
|
+5.3% pts
|
|
EPRA earnings (£m)
|
14.1
|
13.6
|
-3.5%
|
|
EPRA earnings per share (p)
|
2.3
|
2.3
|
|
|
Company adjusted earnings (£m)
|
14.1
|
14.5
|
+2.8%
|
|
Company adjusted earnings per share (p)
|
2.3
|
2.4
|
|
|
Gross margin (%)
|
71.7
|
72.2
|
+0.5% pts
|
|
Dividends paid/declared per share (p)
|
1.625
|
1.75
|
+7.7%
|
|
|
|
|
|
|
|
31 December
2023
|
30 June
2024
|
Change
|
|
Balance
sheet
|
|
|
|
|
EPRA NTA per share (p)
|
120.7
|
122.8
|
+1.7%
|
|
Portfolio valuation (£m)
|
1,097.9
|
1,134.9
|
+1.3%1
|
|
Cash and undrawn committed facilities (£m)
|
82.5
|
44.7
|
-45.8%
|
|
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
|
•
|
Revenue increased 2.7% to £42.4m (30 June 2023:
£41.3m), up 10.5% on a like-for-like basis
|
|
•
|
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
|
|
•
|
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
|
|
•
|
Portfolio valuation increased to £1,134.9m reflecting
a 1.3% net like-for-like increase, inclusive of the removal of
Multiple Dwellings Relief
|
|
•
|
Net initial yield of 5.4% (31 December 2023:
5.5%)
|
|
•
|
EPRA NTA per share increased 1.7% to 122.8p (31
December 2023: 120.7p)
|
|
•
|
First half dividends paid and payable of 1.75p, 7.7%
ahead of the first half of 2023 and in line with target
|
|
•
|
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
|
•
|
Revenue occupancy for academic year 2024/25 currently
at 92% with continued expectation of exceeding 97%
|
|
•
|
Like-for-like growth in average weekly rents to
exceed 6% for academic year 2024/25
|
|
•
|
Re-booker rate set to exceed the 22% achieved in the
prior year
|
Growing and actively managing the property
portfolio
|
•
|
Two acquisitions completed in key top-tier cities,
growing existing clusters in Bristol and Glasgow and presenting
opportunity to drive total return
|
|
•
|
Full refurbishment of Brunswick Apartments,
Southampton, to deliver 173 newly refurbished rooms and amenity on
track for September reopening, with strong rental growth
secured
|
|
•
|
Planning application submitted to facilitate a 200+
bed extension of Victoria Point, Manchester
|
|
•
|
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
|
•
|
EPRA loan-to-value at 33.8%, ahead of long-term
target of 35%
|
|
•
|
Refinancing of 2024 & 2025 variable debt
maturities completed with material refinancing risk removed until
2028
|
|
•
|
Weighted average cost of debt at 4.6%, in line with
guidance (31 December 2023: 4.3%), 95% with interest rate
protection
|
|
•
|
Cash and undrawn committed facilities of £44.7m
|
Hello Student operating platform delivers
market leading service
|
•
|
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
|
|
•
|
Highest ever customer satisfaction score of 87%
versus PBSA average of 79%
|
Business and market outlook remains positive
for second half of 2024
|
•
|
Revenue occupancy for academic year 2024/25 underpins
confidence that our portfolio will again be effectively full for a
third consecutive year
|
|
•
|
Targeting a minimum dividend for the year to 31
December 2024 of 3.5 pence per share
|
|
•
|
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:
|
Empiric Student
Property plc
|
(via FTI Consulting below)
|
|
Duncan Garrood (Chief Executive Officer)
|
|
|
Donald Grant (Chief Financial & Sustainability
Officer)
|
|
|
|
|
|
Jefferies
International Limited
|
020 7029 8000
|
|
Tom Yeadon
|
|
|
Andrew Morris
|
|
|
|
|
|
Peel Hunt
LLP
|
020 7418 8900
|
|
Capel Irwin
Henry Nicholls
FTI
Consulting
Dido Laurimore
Eve Kirmatzis
|
020 3727 1000
empiric@fticonsulting.com
|
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 in a multi building cluster
operational model, Empiric is a fully integrated operational
student property business focused on premium studio-led
accommodation managed through its Hello Student 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
under the Equity Shares 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. The Company is classified as a commercial company listed
under the UK Listing Rules and as such is not an alternative
investment fund ("AIF") for the purposes of the Alternative
Investment Fund Managers Directive ("AIFMD") and is not required to
provide investors with a Key information Document ("KID") in
accordance with the Packaged Retail and Insurance-based Investment
Products ("PRIIPs") regulations.
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 UK's best
universities has remained strong, with further rental growth
captured for the 2024/25 lettings cycle across our portfolio. As
our operational platform matures, so has the consistency of our
customer service, driving an improving net promoter score and
record rate of customer satisfaction. With the non-core disposal
programme now materially complete, along with our ongoing
refurbishment programme, we have been actively seeking to grow the
portfolio. We were pleased to have secured two great opportunities
during this first half of 2024 and have continued to progress
potential joint venture negotiations to accelerate the roll out of
our post graduate product. We have also completed the refinancing
of all near term debt maturities, with no material refinancing now
required until 2028.
In July we saw a change in Government in the UK, with
the Labour Party's manifesto indicating a desire to make higher
education more accessible to UK students. There are no immediate
intentions to revise the UK tuition fee cap nor is there expected
to be any significant change in migration rules following the
recent report by the Migration Advisory Committee. There is a
desire to support high performing research institutions and a
recognition that current university funding structures are
unsustainable and are, therefore, likely to be reviewed. Further,
no rent controls are anticipated and we expect to see positive
changes in the planning process, not just with respect to capacity,
but helpfully also in the speed of processing.
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 UK
PBSA specifically attracting interest from global capital interest.
Relative to 2023, investment in PBSA has bounced back in the first
half of the year, with CBRE reporting £2.1bn of investment into the
sector in 2024 to date, three times higher than the same period in
2023. Investment volumes in the first half of 2024 have been
boosted by Mapletree's £1bn buyout of an 8,200-bed portfolio
located in the UK and Germany along with two large UK portfolio
deals. Project Aqua, 711 beds in Exeter and Glasgow, was bought by
LGIM for £122m reflecting an initial yield of 5.3 per cent and
Project Jade, a 4,335-bed regional portfolio, was acquired by PGIM
from Unite for £184m, reflecting a 6.25 per cent initial yield.
Single assets transactions include Pavilion Court, a 699-bed asset
in Wembley, sold for £125.0m to Apollo, reflecting 4.65 per cent
initial and Capital House in Southampton purchased by Greystar for
£44m, 5.0 per cent initial. The abolition of Multiple Dwellings
Relief ("MDR") came into
effect on 1 June 2024 and has resulted in pricing for some assets
being impacted by up to 4.0 per cent by virtue of increased stamp
duty charges. This will likely impact pricing of transactions into
the second half of 2024.
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
UK's HMO supply decreasing by 146,000 beds over the past four
years.
Demand for UK higher education is
normalising post pandemic but remains very strong. UCAS, which
represents around 90 per cent of total applications, recently
published application data to June 2024 in respect of the 2024/25
academic year. Applications for higher tariff institutions, to
which we are primarily aligned, have continued to grow, increasing
0.4 per cent year-on-year. Lower tariff institutions have
experienced a further decline in applications, dropping 3.7 per
cent, further demonstrating a continued flight to
quality.
International applicants have fallen
by 1.9 per cent, with the largest declines seen in applicants from
Nigeria and India, a large constituent of this decline arising from
dependant applications. This follows a tightening of rules for
dependant family visas for masters students, a change which has not
impacted us due to the single occupancy nature of the majority of
our sites. Applications from China, the USA, Canada and the
UAE continued to report modest increases. Non-EU international
applicants remain 40 per cent higher than their pre-pandemic
level.
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 UK remains within the top four most-favoured
international destinations for students originating from the USA,
China and India and continues to perform well on relative
affordability when compared with many other sought-after
international destinations for higher education. Demographically, to date, we have experienced an increase in
demand from international students which does demonstrate the
resilience of the UK's international student market.
These strong trends contributed to
sector wide rental growth of eight per cent for the 2023/24
academic year, with Glasgow experiencing the strongest rental
growth of all the major markets at 19 per cent. For the 2024/25
academic year, expectations for continued rental growth, in
addition to anticipated cuts to the base rate of interest, have
held prime regional yields stable across the sector during the
first half of 2024.
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 UK Government announced the
abolition of Multiple Dwellings Relief. The removal of MDR has
increased purchaser cost assumptions applied to the valuations of
our properties located in England and Wales (the latter by virtue
of the Welsh governments on-going consultation). This has resulted
in a £26.5 million reduction in the portfolio valuation. Adjusting
for the impact of this legislative change, the underlying change in
the portfolio's like-for-like valuation was 3.8 per cent
increase.
|
Valuers quality
segmentation
|
Properties
|
Operational beds
|
Market value (£m)
|
Market value (%)
|
|
Super prime regional
|
22
|
2,322
|
513.3
|
45.2
|
|
Prime regional
|
46
|
4,425
|
542.7
|
47.8
|
|
London
|
1
|
79
|
19.9
|
1.8
|
|
|
69
|
6,826
|
1,075.9
|
94.8
|
|
Secondary
|
9
|
1,025
|
59.0
|
5.2
|
|
Total
|
78
|
7,851
|
1,134.9
|
100.0
|
|
Strategic
segmentation
|
|
|
|
|
Market value
(£m)
|
NIY
(%)
|
|
Operational portfolio
|
|
|
|
|
1,112.0
|
5.4
|
|
Commercial portfolio
|
|
|
|
|
16.3
|
8.0
|
|
Development portfolio
|
|
|
|
|
7.0
|
|
|
Total
|
|
|
|
|
1,134.9
|
|
|
|
|
|
|
|
|
|
|
|
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 £12.8 million. These sales represent 151
non-studio operational beds. In August, post period end, we
exchanged contracts for the disposal of a further 120 bed non-core
property in Stoke, which when taken collectively, has reduced the
number of cities in which we operate by two.
Since March 2021, including the above, the Company
has generated a total of £115.5 million from the disposal of
non-core assets, marginally above book values in aggregate.
In February 2024 we acquired a small development
opportunity, College House in Bristol for £5.6 million. This former
office building is located adjacent to our existing College Green
building. A planning application has been submitted to facilitate a
change of use to student accommodation and the delivery of over 50
new PBSA beds into this strong operational cluster. The property
benefits from three commercial units at street level, one of which
was vacant at acquisition and has subsequently been let to a local
bakery.
A planning application was submitted in May 2024 to
facilitate an extension and full refurbishment of our existing
operational site at Victoria Point, Manchester. If successful, the
redeveloped scheme would deliver over 200 new PBSA beds into this
acutely undersupplied city.
In June 2024, contracts were exchanged to acquire a
94-bed operational asset in the west end of Glasgow for £9.7
million. The property, which is in close proximity to our
Willowbank hub site, increases our bed count in this significantly
undersupplied city to 534, and now our second largest city. The
property was acquired almost entirely let for the forthcoming
academic year reflecting an effective net initial yield in excess
of 7.5 per cent for academic year 2024/25. The property can be
refurbished to align with our brand standard which, together with
the operational efficiencies of clustering, unlocks attractive
returns through an enhanced rental tone and, across the city,
improved operational margins.
We are in active discussions in respect of
high-quality, well-located opportunities in two further UK cities
where we have a strong existing operational presence. With cost of
capital in sharper focus, we expect to prioritise operational
opportunities in top-tier cities where value can be unlocked
through future refurbishment and operational efficiencies.
Refurbishment &
development
In 2022, we took the decision to close one of our
larger sites, Brunswick Apartments in Southampton, for the duration
of the 2023/24 academic year. The decision was taken to facilitate
a full room and amenity refurbishment alongside fire safety and
decarbonisation works. This extensive refurbishment programme
has progressed both on-plan and on-budget and the site will reopen
to students in September 2024. The 173-bed scheme has sold
extremely well, and to date has delivered an increase in average
weekly rents of over 50 per cent when compared to the property's
pre refurbishment year of operation. Notwithstanding market rental
growth now captured, this performance has surpassed
expectations.
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 Glasgow
which, although acquired fully operational, is expected to deliver
enhanced returns through refurbishment.
|
|
Properties
|
Cities
|
Top tier cities
|
Beds
|
Market value
(£m)
|
NIY
(%)
|
|
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 UK university students and has grown at a compound annual
growth rate of nine per cent since academic year 2017/18. For the
current 2023/24 academic year, 39 per cent of our customers were
post graduates. In September 2023, we opened our second Post-Grad
exclusive site at Talbot Studio's in Nottingham. This followed the
success of our Post-Grad pilot which opened in Edinburgh in
November 2022 and has been sold out for both subsequent academic
years.
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.
|
|
Properties
|
Cities
|
Top Tier cities
|
Beds
|
Market value
(£m)
|
NIY
(%)
|
|
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 Bristol to a fast-growing Asian
supermarket operator. A complementary offering to our students at
Market Quarter, this lease eliminates a vacant unit which had been
in place since our acquisition of the property in early 2022.
Opening in early August, the deal also facilitates the development
of new gym amenity space to the rear of the unit and with it, the
opportunity to consolidate our gym offer across the city.
Also in Bristol, a new ten-year lease has been signed
for a vacant unit at our newly acquired College House site.
The tenant, an established bakery in the South West of
England, opened for business in July.
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.
|
|
Refurbishment
(£m)
|
Fire safety works
(£m)
|
Green initiatives
(£m)
|
|
Five year plan (2021
- 2025)
|
36.1
|
46.0
|
12.0
|
|
Invested to 31 December 2023
|
21.4
|
17.2
|
1.7
|
|
Invested during H1 2024
|
8.1
|
8.5
|
2.0
|
|
Forecast investment
for H2 2024
|
2.7
|
5.1
|
2.5
|
In addition to the above, ongoing capital life
cycling works require around £4.0 million per annum.
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 (UK & Ireland), Best Private Housing, Best Student
Wellbeing, Best Customer Service and Best Booking Experience at
this year's Global Student Living awards, which will be held in
October 2024, a record number of finalist nominations for the
Company.
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 Glasgow and a development opportunity at College
House in Bristol for £16.0 million in aggregate, inclusive of
purchaser costs.
Revenue increased £1.1 million or 2.7 per cent when
compared to the first half of 2023. When adjusted for disposals and
rooms held vacant to accommodate refurbishment works, underlying
like-for-like rental growth of 10.5 per cent was achieved.
Our gross margin was 72 per cent, up 0.5 per cent when compared to
the same period last year, albeit this is expected to moderate
toward 70 per cent in the second half of the year following the
annual summer turnaround period.
Administrative costs increased by £0.6 million to
£7.1 million, in line with guidance at £15.0 million for the
year. This was the 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.
Notwithstanding the abolition of Multiple Dwellings
Relief, the portfolio's valuation increased by £13.7 million
relative to 31 December 2023, reflecting the ongoing demand supply
imbalance in the PBSA sector continuing to drive rental growth.
EPRA earnings were £13.6 million for the
period. A company adjusted earnings figure has been presented
to normalise the impact of accelerated debt arrangement fees and
other refinancing related costs of £0.9 million, which will not be
recurring. Company adjusted earnings were £14.5 million, or 2.4
pence per share, 2.8% ahead of the prior year. IFRS profit
was £24.8 million (H1 2023: £24.6 million).
A £124.9 million seven year refinancing was completed
during the first half of 2024, consolidating four small facilities
which were scheduled to mature in 2024 and 2025. Excluding
£0.9 million of additional costs directly related to the
refinancing, net finance costs were in line with the first half of
the prior year, with the increased weighted average cost of debt
offset by lower average debt drawn. The weighted average cost of
debt now stands at 4.6 per cent, an increase of 30 bps from 31
December 2023 and in line with guidance provided. EPRA LTV
increased to 33.8 per cent following reinvestment activity and the
good progress made on the Groups capex programme.
EPRA net tangible asset value per share increased by
1.7 per cent to 122.8 pence per share. This was primarily due
to a 1.3 per cent like-for-like increase in the portfolio
valuation.
Total dividends paid during the first half of 2024
were 1.8 pence per share. Combined with the growth in EPRA
net tangible assets, this resulted in a total accounting return of
3.2 per cent for the six months to 30 June 2024.
Income statement
|
|
|
30 June
2024
|
30 June
2023
|
|
|
|
£m
|
£m
|
|
Revenue
|
|
42.4
|
41.3
|
|
Property expenses
|
|
(11.8)
|
(11.7)
|
|
Gross profit
|
|
30.6
|
29.6
|
|
Gross margin
|
|
72.2%
|
72%
|
|
|
|
|
|
|
Administrative expenses
|
|
(7.1)
|
(6.5)
|
|
Operating profit
|
|
23.4
|
23.1
|
|
Net finance costs
|
|
(9.9)
|
(9.0)
|
|
EPRA earnings
|
|
13.6
|
14.1
|
|
|
|
|
|
|
Revaluation
|
|
13.7
|
10.3
|
|
Loss on disposal
|
|
(1.9)
|
(0.6)
|
|
Derivative mark to market (loss)/gain
|
|
(0.6)
|
0.8
|
|
IFRS Profit
|
|
24.8
|
24.6
|
|
|
|
|
|
|
Weighted average ordinary shares (m)
|
|
603.4
|
603.3
|
|
IFRS EPS (pence)
|
|
4.0
|
4.1
|
|
EPRA EPS (pence)
|
|
2.3
|
2.3
|
|
|
|
|
|
|
EPRA earnings
|
|
13.6
|
14.1
|
|
Add back accelerated arrangement fees and other costs
related to refinancing
|
|
0.9
|
-
|
|
Company adjusted earnings
|
|
14.5
|
14.1
|
|
Company adjusted EPS (pence)
|
|
2.4
|
2.3
|
|
|
|
|
|
The evolution of revenue across the period is set out
below.
|
|
£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 £2.0 million annualised increase in
utility costs, impacting from the fourth quarter of this financial
year. This will moderate the rate of improvement in gross margin
across the next 18 months whilst this material operating cost is
rebased, following which we expect to see gradual improvement in
gross margin into 2026 and beyond.
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 £15.0 million,
which across the two financial years of 2023 and 2024, would
represent an increase in administrative costs of around 12 per
cent.
Net finance costs have remained in line with the
prior year, when adjusted for non-recurring refinancing related
costs of £0.9 million. The increase in overall weighted average
cost of debt being offset by lower drawn debt and commitment fees,
relative to the first half of 2023.
The Group recorded a £1.9 million loss on disposal of
a portfolio of four small assets for £12.8 million which completed
in May 2024.
Balance sheet
|
|
30 June
2024
|
30 June
2023
|
|
|
£m
|
£m
|
|
Property (market value)
|
1,134.9
|
1,097.9
|
|
|
|
|
|
Bank borrowings drawn
|
(402.1)
|
(360.3)
|
|
Cash on hand
|
44.7
|
40.5
|
|
Net debt
|
(357.4)
|
(319.8)
|
|
|
|
|
|
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 £13.7 million, with earnings largely
offset by dividends.
|
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.
|
|
30 June
2024
|
31 Dec
2023
|
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 Bristol, Glasgow and Edinburgh, with
underlying yields largely unchanged. At 30 June 2024, our
portfolio net initial yield was 5.4 per cent, relative to 5.5 per
cent at 31 December 2023.
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.
|
|
30 June
2024
|
31 Dec
2023
|
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 £124.9 million
facility. This refinancing, together with £20.0 million drawn on a
committed undrawn facility to bolster liquidity during our
typically weaker summer period, has increased drawn debt by £41.8
million. The weighted average cost of debt increased
from 4.3 per cent to 4.6 per cent, in line with guidance. The
weighted term to maturity has been now been extended from 3.9 years
at 31 December 2023 to 5.1 years. The next material debt
maturity is not now due until 2028.
Cashflow
|
|
30 June
2024
|
30 June
2023
|
|
|
£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)
|
|
|
|
|
|
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 £8.1 million invested in refurbishment,
primarily at Brunswick House in Southampton and Summit House in
Cardiff. £8.5 million was applied toward fire safety works
with 70 per cent of portfolio now EWS1 certified. Including
purchasers costs, £5.9 million was invested for the acquisition of
College House, Bristol acquired in February 2024. The acquisition
of Claremont House in Glasgow, although unconditional at 30 June
2024, only completed in early July and therefore not reflected in
the cashflows presented above.
Disposal activity generated £12.4 million net of
costs, through the disposal of a portfolio of four non-core
assets.
Dividends of £9.9 million were paid during the
period, with a further £1.0 million in withholding taxes settled
post period end.
Net borrowings drawn of £41.8 million followed
refinancing related activity together with investment in the
Group's capital expenditure programme and acquisition of
property.
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 £2.0 million.
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 3.5 pence per share for 2024. As usual, this will be
revisited in the fourth quarter, following the start of the new
2024/25 academic year.
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 £44.7 million in cash.
Within the going concern period to 31 December 2025, the Group no
longer has any debt maturities falling due, with the next material
refinancing not until 2028.
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 0.8725 pence per
share has been declared for the second quarter of 2024, bringing
total dividends paid and payable in respect of the first half of
2024 to 1.75 pence per share. This is in line with our
full year target dividend of 3.5 pence per share
announced alongside our full year results in March 2024.
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 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 and any material changes in the related-party transactions
described in the last annual report.
|
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 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 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 (UK) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" ("ISRE (UK)
2410 (Revised)"). 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 1.2, 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
(Revised), 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 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 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, UK
14 August 2024
BDO LLP is a limited liability
partnership registered in England and Wales (with registered number
OC305127).
Condensed Consolidated Statement of
Comprehensive Income (unaudited)
|
|
|
Six months to 30 June 2024
(Unaudited)
|
Six months to 30 June 2023
(Unaudited)
|
Full year to
31 December 2023 (Audited)
|
|
|
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
2024 (Unaudited)
|
30 June
2023 (Unaudited)
|
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
equity
|
|
|
£ 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
equity
|
|
|
£ 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
equity
|
|
|
£ 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 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 2023, which has been
prepared in accordance with the UK-adopted international accounting
standards.
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 £44.7 million
and its capital commitments were £6.6 million.
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 £124.9 million refinancing, which capped SONIA at 4.5
per cent. At the time of approval of this Interim Report, the
Group had £20.0 million, representing five per cent of drawn debt,
without interest rate protection.
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 £100.0 million in
unencumbered properties that could be used to enhance lender
security. Borrowings remain appropriately spread across a range of
lenders and maturities so as to minimise any potential
concentration of risk.
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 £20.0
million facility falling due in February 2026, immediately after
the going concern period and lender appetite to take action to
refinance suitably ahead of the facility's scheduled maturity date
and pledging as security, the Group's unencumbered asset pool.
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 UK national supplement
(the "Red Book"). Factors reflected include current market
conditions, net underlying operational income, periodic rentals,
lease lengths and location as well as estimated costs to be
incurred as part of the Group's EWS programme. The significant
methods and assumptions used by valuers in estimating the fair
value of investment property are set out in Note 7.
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 United
Kingdom.
2. Finance Costs
|
|
Six months to
30 June 2024
(unaudited)
|
Six months to
30 June 2023
(unaudited)
|
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 UK REIT regulations comprises current and deferred
tax. Taxation is recognised 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 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
property (Note 7)
|
-
|
-
|
(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
property (Note 7)
|
-
|
-
|
(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 0.875 pence per
ordinary share in respect of the quarter ended 31 December
2022
|
|
|
5.3
|
|
Interim dividend of 0.8125 pence per
ordinary share in respect of the quarter ended 31 March
2023
|
|
|
4.9
|
|
Interim dividend of 0.8125 pence per
ordinary share in respect of the quarter ended 30 June
2023
|
|
|
4.9
|
|
Interim dividend of 0.9375 pence per
ordinary share in respect of the quarter ended 30 September
2023
|
|
|
5.6
|
|
Interim dividend of 0.875 pence per
ordinary share in respect of the quarter ended 31 December
2022
|
|
5.3
|
|
|
Interim dividend of 0.8125 pence per
ordinary share in respect of the quarter ended 31 March
2023
|
|
4.9
|
|
|
Interim dividend of 0.9375 pence per
ordinary share in respect of the quarter ended 31 December
2023
|
5.6
|
|
|
|
Interim dividend of 0.875 pence per
ordinary share in respect of the quarter ended 31 March
2024
|
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 £21.3 million (30 June 2023: £9.1
million) of additions related to capital expenditure were
recognised in the carrying value of the operational portfolio.
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 £26.5 million reduction in
the overall portfolio valuation.
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
30 June 2024 (unaudited)
|
Six months to
30 June 2023 (unaudited)
|
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
|
|
£88-£542
per week (weighted average rent of £229 per week)
|
£88-493 per
week (weighted average rent of £211 per week)
|
£96-£493
per week (weighted average rent of £219 per week)
|
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%
(weighted average of 5.4%)
|
4.75%-8.90%
(weighted average of 5.3%)
|
4.5%-8.9%
(weighted average of 5.5%)
|
d) Unobservable input: Physical condition of
the property
CBRE's assumption at 30 June 2024 is that £29.6
million of cost in relation to fire safety works should be
reflected as a deduction within its valuation (31 December
2023: £33.0 million).
e) Unobservable input: Planning consent
The development site at FISC, Canterbury is pending
Phase 2 planning consent. CBRE have determined the fair value as
the sales price for a development in progress including a profit
margin, discount and associated risk factors to complete the
development.
College House in Bristol is a vacant office building
with occupied commercial units on the ground floor. The asset has
the benefit of permitted development conversion to residential.
Subject to planning permission, the asset is intended to be
converted to PBSA. Accordingly, the asset has been fair valued
based on the existing scheme.
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
in rental income
|
+3% change
in rental income
|
-0.25% change
in yield
|
+0.25% change
in yield
|
|
|
£ 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 £16.5 million
(December 2023: £22.4 million). With the assets being actively
marketed, management expects the sales to be completed in 2024.
|
|
Investment properties freehold
£ m
|
|
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 £1,029.5 million at
30 June 2024. 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
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
during the period
|
-
|
-
|
-
|
|
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 £6.6 million (31 December 2023: £1.7 million) for
the future development and enhancement of investment property.
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 Glasgow, Scotland for total consideration of £9.8
million. As the acquisition had unconditionally exchange on 28 June
2024 it has been included in investment property in the Statement
of Financial Position as at 30 June 2024.
On 8 August 2024, the Group exchanged contracts for
the sale of Caledonia Mills, Stoke for £1.5
million. Completion will occur in September 2024.
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.
