TIDMESP
RNS Number : 1283T
Empiric Student Property PLC
16 March 2023
Empiric Student Property plc
("Empiric" or the "Company" or, together with its subsidiaries,
the "Group")
PRELIMINARY RESULTS FOR THE YEARED 31 DECEMBER 2022
Business transformation delivering operational and valuation
outperformance
Empiric Student Property plc (ticker: ESP), the owner and
operator of premium, studio-led student accommodation across the
UK, is pleased to report its preliminary results for the year ended
31 December 2022.
Duncan Garrood, Chief Executive Officer of Empiric Student
Property plc, said:
"2022 has been another year of razor-sharp focus on our
strategic priorities, with significant progress made across all key
metrics. The steps we have taken over the last five years to
transform the operations of the business, improve our brand and
focus on clusters of high quality accommodation are delivering
tangible results, evidenced by the record revenue occupancy,
significant growth in earnings and improved operating margin that
the business achieved in the year."
"The business is now well positioned for growth and we continue
to recycle the proceeds of non-core sales into our pipeline of
developments and refurbishments. We operate in a resilient sector,
and we continue to see high levels of demand for our product for
the 2023/24 academic year which underpins our confidence in the
outlook for the business and our commitment to our customer-first
philosophy."
Financial highlights
31 December 31 December
2021 2022 Change
--------------------------------------- ------------ ------------ ----------
Income statement
EPRA earnings (GBPm) 9.9 20.6 +108.1%
EPRA earnings per share (p) 1.6 3.4 +112.5%
Gross margin (%) 58.8 67.1 +8.3% pts
Dividend per share (p) 2.5 2.75 +10.0%
Balance sheet
Total accounting return (%) 4.6 10.5 +5.9% pts
EPRA NTA per share (p) 106.7 115.4 +8.2%
Portfolio valuation (GBPm) 1,021.3 1,078.9
Cash and undrawn committed facilities
(GBPm) 81.0 95.8 (1)
Property loan-to-value (%) 33.1 31.1 -2.0% pts
--------------------------------------- ------------ ------------ ----------
(1) Including GBP20.0 million secured post year end
Significant earnings growth underpins strong financial
performance
-- Revenue increased 30% to GBP73.0m (2021: GBP56.0m)
-- EPRA EPS increased 113% to 3.4p (2021: 1.6p)
-- Portfolio valuation GBP1,078.9 million up 7.3% like-for-like (2.4%
net of capex), demonstrating sectors resilience.
-- Net initial yield of 5.2% (2021: 5.3%)
-- EPRA NTA per share increased 8.2% to 115.4p (2021: 106.7p)
-- Total dividend paid and payable for the year of 2.75p, ahead of commitment
-- Total accounting return of 10.5% (2021: 4.6%)
Operational performance driven by record revenue occupancy
-- Like-for-like rental growth of 5.2% for academic year 2022/23, supported
by dynamic pricing
-- 99% revenue occupancy achieved for academic year 2022/23, a record
for the business
-- 90% revenue occupancy for financial year 2022 (2021: 71%)
-- Operational transformation completed, with all activities directly
managed and controlled
-- Clustering strategy driving improved operating margins
Actively managing the property portfolio
-- Non-core disposal programme generates GBP53.1m from the sale of seven
properties in line with book value with proceeds redeployed into
the core portfolio investment programme
-- Completed the sale of a further property post year end, generating
GBP2.6m
-- Acquisition of Market Quarter Studios in Bristol for GBP19.0m adding
92 beds to our Bristol cluster
Progressing developments and refurbishments
-- Developed or refurbished 263 beds for the 2022/23 academic year,
including a state-of-the-art development at St Mary's in Bristol
-- Successful launch of Post-Grad accommodation pilot in Edinburgh,
providing a platform for further growth
-- Over 250 refurbished beds expected to be delivered for the 2023/24
academic year
Robust balance sheet
-- Property loan to value at 31.1%, in line with long-term target of
35%
-- Weighted average cost of debt 4.0% (2021: 3.0%), 89% with interest
rate protection
-- Cash and undrawn committed facilities of GBP95.8m
Delivering consistent customer service
-- Completed roll out of our student app across all locations to improve service offer and customer
engagement
-- Hello Student awarded Best Student Well-being (UK and Ireland) at Global Student Living Awards
2022
-- Continued improvement in Global Student Living Index Net Promoter Score from 22 to 27, which
compares favourably against purpose built student accommodation average of 14 and 9 for university
halls
Responsible business
-- Net Zero strategy launched, targeting net zero by 2033 with GBP10.0
million earmarked for investment in green initiatives over the next
two years
-- Further GBP7.0m invested in fire safety works in 2022, with GBP14.5m
ring-fenced for investment in 2023
Positive outlook for academic year 2023/24 supported by
resilience of the PBSA sector
-- Strong bookings launch, with revenue occupancy of 65% currently secured,
ten weeks ahead of prior year
-- Like-for-like rental growth in excess of 6% now anticipated
-- Targeting revenue occupancy >97%
Results presentation at 09.00 (GMT) today
To access the live webcast, please register in advance here:
https://stream.brrmedia.co.uk/broadcast/63b7f236d908a85f58e0d796
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
Carl Gough
FTI Consulting 020 3727 1000
Dido Laurimore empiric@fticonsulting.com
Eve Kirmatzis
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
located in high-demand university towns and cities across the UK.
Investing in both operating and development assets, Empiric is a
fully integrated operational student property business focused on
premium studio-led accommodation managed through its Hello Student
operating platform, that is attractive to affluent growing student
segments.
The Company is an internally managed real estate investment
trust ("REIT") incorporated in England and Wales, listed on the
premium listing segment of the Official List of the Financial
Conduct Authority and was admitted to trading on the main market
for listed securities of the London Stock Exchange in June
2014.
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.
Chief Executive Officer's Review
2022 has been another year of razor-sharp focus on our strategic
priorities, with significant progress made across all key metrics.
The steps we have taken over the last five years to transform the
operations of the business, improve our brand and focus on clusters
of high quality accommodation are delivering tangible results,
evidenced by the record revenue occupancy, significant growth in
earnings and improved operating margin that the business achieved
in the year.
We have delivered a strong performance in 2022, with key metrics
above pre-pandemic levels. The year saw us achieve a record level
of occupancy at 99 per cent for academic year 2022/23, alongside
strong like-for-like rental growth of 5.2 per cent. We recorded
good growth in the portfolio valuation, up 2.4 per cent on a
like-for-like basis, particularly in the first half of the year
following the removal of a COVID related adjustment of GBP6.2
million and a combination of yield compression and rental growth.
The 31 December 2022 valuations have remained materially in line
with the half year, with strong rental growth offsetting marginal
outward yield shift in the second half of the year. The balance
sheet remains strong with property loan-to-value modest at 31.1 per
cent, comfortably in line with our long-term target of 35 per cent.
Including dividends paid during the year of 2.5 pence, we have
delivered a total accounting return of 10.5 per cent for the
year.
Operationally the business has had an active year. We have now
completed the transformation of our operating platform, with all
operations now internally managed, creating value through greater
control, transparency, data management and agility. We continued to
strengthen the Hello Student brand, launching our student app;
embedded our new revenue management and dynamic pricing platform;
and made significant steps towards becoming a more sustainable
business. We also welcomed a number of new people into our
leadership team during the year.
Driving performance through data analytics
The transformation of our operational capabilities has provided
us access to richer and more timely information. We are able to
react to trends and changing demands at pace and target our
customer mix with much greater flexibility.
For academic year 2022/23, as a result of targeted marketing
during the period of the pandemic, half of our customers were from
the UK, an increase of one third from pre-pandemic levels. Although
our Chinese customer base remains strong, this now represents just
under 30 per cent of our students. We continue to target markets
where we are underweight relative to the opportunity available, for
example Indian students, where we have recently experienced strong
growth.
Our revenue pricing model coupled with our direct-let model,
allows us to maximise revenue relative to demand dynamics on a city
by city basis but also down to site specific room types. Not only
did we achieve record occupancy for the academic year 2022/23, but
overall like-for-like rental growth of 5.2 per cent was comfortably
ahead of base uplift pricing of 1.9 per cent.
We have used historical booking and amendment data to review and
simplify our room categorisation, more than halving the categories,
making the customer choice very much simpler to navigate.
Actively managing the property portfolio
In early 2021 we set out a plan to dispose of a modest portfolio
of non-core assets. At the time those assets identified for
disposal represented approximately 10 per cent of the portfolio, a
little over GBP100 million by value.
Properties included in the disposal programme were typically
either not of a size or configuration which could easily be
converted to our brand standard, outside the catchment area of a
top quality university or a single standing building in a city
where the opportunity to implement our clustering strategy is
challenged.
By 31 December 2022, we had disposed of or contracted to dispose
of assets generating GBP71.3 million, of which GBP53.1 million was
generated from the disposal of seven properties during 2022.
Despite recent market disruption, we successfully disposed of two
properties above book value in the final quarter of 2022,
demonstrating the continued attractiveness and resilience of the
purpose built student accommodation sector. More recently,
discussions have advanced and a further GBP50 million remains under
offer or in advanced discussions.
Proceeds from disposals have, to date, largely been deployed
into our core portfolio investment programme. Opportunities are
evaluated before proceeds are redeployed, including debt prepayment
or reinvestment in new developments or acquisitions to grow our
core Hello Student portfolio.
In February we announced our first acquisition since 2018, the
92 bed Market Quarter Studios scheme in Bristol which we acquired
for GBP19.0 million. This acquisition, together with the opening of
St Mary's, Bristol has more than doubled the number of beds we
provide in the city to 404 beds, with four well located, high
quality sites within a ten minute walk of each other and the
University campus. This provides a great example of our clustering
strategy in action, where we have been able to maintain our
boutique proposition whilst improving our margin in the city from
69 per cent to 76 per cent.
Progressing developments and refurbishments
In September, in time for the start of the 2022/23 academic
year, we opened St Mary's, Bristol. This former Victorian hospital
has been thoughtfully converted into a 153 bed scheme a stone's
throw from the University of Bristol. The property provides first
class accommodation together with a suite of student well-being
initiatives and strong sustainability credentials, with a BREEAM
Excellent accreditation expected. The property has delivered an IRR
in excess of 20 per cent.
In November, our first bespoke Post-Grad project was completed
at Southbridge, Edinburgh. An extensive refurbishment of the
property delivered this 59 bed scheme adjacent to the University of
Edinburgh. Largely pre-let upon completion, we welcomed our first
Post-Grad customers in late November.
Following extensive customer research our Post-Grad product aims
to address the specific requirements of the more mature Post-Grad
student, providing amenity-lite accommodation with fully
self-contained apartments, which are typically 20 per cent larger
on average than our Under-Grad apartments and command a rental
premium of 20 per cent to our undergraduate offer in the City. We
believe there is a significant opportunity for a tailor made
proposition for post-graduates under our new brand "Post-Grad by
Hello Student", since this segment makes up nearly 25 per cent of
all UK University students.
Strong market fundamentals continue
Student applications continued to grow into the 2022/23 academic
year, and UCAS and HESA data illustrates that demand for UK higher
education remains robust with both undergraduate and post-graduate
applications forecast to continue growing.
For academic year 2022/23, undergraduate applications from UK
domestic students grew 1.3 per cent, while applications from non-EU
students grew 13.5 per cent. UCAS predict overall undergraduate
applications will increase by nearly 30 per cent over the next five
years. The number of post-graduates has climbed to 820,000 for
academic year 2022/23, an increase of 10.4 per cent from 2021/22,
the highest annual increase experienced in the past five years.
The agency StuRents predicts the UK could have a shortfall of
450,000 student beds by 2025, exacerbated by a potential
contraction in the HMO market which would drive more students
towards the PBSA sector. Customer demand for purpose built student
accommodation has never been so strong.
Supporting our customers and delivering consistent service
Core to our values is a customer-first philosophy. Every area of
our business is encouraged, and motivated, to live these values. We
are aware with rising rents that our customers expect an
increasingly high quality experience and value for their money.
Their experience is therefore paramount to the development of our
strategic priorities.
Prior to the start of the 2022/23 academic year, we launched our
new student app. The app has provided a platform for greater and
more timely customer engagement and a means to further improve our
service offer. Amongst other functions, the app provides students
the ability to report issues and monitor progress toward
resolution, receive site related information in a timely manner, be
notified when parcels are available for collection and arrange
social events. The app has been a resounding success with great
feedback received. We currently have over 7,000 active users and
numbers continue to grow.
The most substantive evidence of customer service and the
benchmark we use within our business is the Global Student Living
Index's Net Promoter Score ("NPS"). We are proud to report that our
NPS score improved again this year, from 22 to 27. To put this in
context, the latest NPS score for all private purpose built student
accommodation was 14, whilst the score for university halls was
9.
Behind the data, the most important factors for students when
selecting accommodation were proximity to their place of study,
feeling safe and secure and the size, condition and quality of
their accommodation. These are all aspects at the very heart of our
studio based brand proposition. The mental health and well-being of
our customers remains a priority. Of our customers responding to
the survey, 71 per cent said our accommodation had a positive
impact on their well-being, with 73 per cent responding to say they
felt our accommodation teams cared about their well-being. This is
an extremely encouraging result following the investment we have
made in training our people to identify potential issues and assist
students to source the professional support they may require,
particularly at times of stress such as during examinations.
Developing our people
At the heart of any service business is the people that design,
support and deliver great customer experience. It remains a
priority to invest in and motivate talent. Through rewarding,
training and developing our people we ensure our brand remains at
the leading edge of customer service and experience.
At a time when hiring talent is very competitive, there is
particularly strong rationale for focussing on employee retention
and development. During the year we improved our retention rate to
almost 80 per cent, whilst internal promotions accounted for nearly
40 per cent of all non-entry level vacancies. We invested in a
number of our 'rising stars' this year, with 25 of our middle
managers having been sponsored to complete an accredited leadership
programme.
We are proud members of the Real Living Wage Foundation, meaning
our lowest paid employees are paid above the minimum wage and
received salary increases in line with inflation. During a time of
increased cost-of-living pressures we were pleased to support our
employees, with average compensation increases exceeding eight per
cent. Employer pension contributions were also standardised this
year, with all eligible employees now entitled to receive 7.5 per
cent.
Having invested in a programme of well-being and engagement
initiatives, we're pleased to report that our colleague engagement
score of 84 per cent continues to compare favourably to the
national average of 70 per cent.
Portfolio safety
Safety will always remain of paramount importance to our
business. We have a responsibility to ensure that everyone who is
living, working in or visiting our buildings is kept safe. This is
also a key consideration for our customers. We ensure that our
buildings comply with all relevant regulations and also with
industry best practice. A summary of progress and key achievements
this year is set out below.
Fire safety
There was considerable focus on fire safety again this year.
Having allocated GBP37 million toward fire safety initiatives in
2021, we continued to progress our five-year programme of works,
prioritised according to risk. In 2022 we invested a further GBP7.0
million, primarily on internal fire stopping while ensuring the
appropriate solutions were investigated and permission sought,
allowing works to start in the first half of 2023 on the external
works.
Our buildings continue to be inspected on a regular basis to
ensure that we identify and eliminate hazards. To assess the
buildings, we engaged specialist consultants to undertake thorough
assessments of general safety, hazards, fire risks and prevention
and water systems and treatment against legionella.
During the year we employed a new fire risk assessor,
established a clear and comprehensive fire risk management system
and conducted fire marshal training, fire drills and student fire
safety awareness campaigns across our entire business and all its
sites.
Health and Safety
Key achievements in 2022 included a full review of the health
and safety policy and introduction of new blueprint standards that
are more user friendly and manageable. We implemented a new
contractor management standard and launched SafetyNet to help us
manage accident, incident and fire risk assessments. With a
dedicated Health, Safety & Fire Manager in place, we have a
busy period ahead with a clear focus on training and audit.
Becoming a more sustainable business
In August we published our full Net Zero strategy and set out
seven key performance indicators to allow us to track our progress
towards our 2033 commitment. The journey is set out in three clear
phases with the first focussed on engagement and training.
I'm pleased to report that the Board has allocated significant
capital to green initiatives in 2023 and 2024 which should allow us
to accelerate the programme and deliver tangible benefits to all
stakeholders sooner. A detailed pathway to decarbonisation is being
established this year with the aim of reducing energy consumption
and managing future EPC risk. Further details are set out in the
ESG report which will accompany the annual report when
published.
Strategy and outlook
We remain confident in the outlook for our business and the
wider purpose built student accommodation sector. Our focus is on
continuing to drive operational efficiencies through acquiring or
developing new sites in cities that are close to well-located
existing sites and top performing universities. Our clustering
strategy is delivering benefits through scale, whilst enabling us
to maintain the more boutique, personalised experience associated
with the Hello Student proposition.
Having already secured 65 per cent revenue occupancy for the
2023/24 academic year, a level reached some ten weeks earlier than
in the prior year, we are confident of achieving another successful
year from an occupancy perspective. In October 2022 we issued
guidance that we anticipated achieving like-for-like rental growth
in excess of five per cent for academic year 2023/24, however our
direct-let model and dynamic pricing capability provides management
with confidence that like-for-like growth of at least six per cent
can now be achieved.
Given this strong performance, the Board is increasingly
confident in its progressive dividend strategy and will target a
minimum dividend payment of 3.25 pence per share for the 2023
financial year, having paid and declared dividends totalling 2.75
pence per share for the 2022 financial year.
Although significant progress continues to be made, recent
investment market turbulence has delayed our disposal programme
aspirations and, it now looks increasingly likely that we will
continue to hold a number of non-core assets beyond the original
18-month timeline set out in 2021. As demonstrated in the financial
review on page 11, this will have an impact on gross margin into
2023, as non-core properties are typically less efficient and
located in single asset cities where the benefits of clustering
cannot be realised. Nevertheless, we expect the programme to be
materially complete by the end of 2023.
The business is now well positioned for growth and we continue
to recycle the proceeds of non-core asset sales into our pipeline
of developments and refurbishments. We operate in a resilient
sector, and we continue to see high levels of demand for our
product for the 2023/24 academic year which underpins our
confidence in the outlook for the business and our commitment to
our customer-first philosophy.
DUNCAN GARROOD
Chief Executive Officer
16 March 2023
Operating review
Our focus on clustering premium quality properties in prime,
undersupplied cities within close proximity to top-tier
universities continues to deliver strong results. Our brand
proposition, studio-led focus and personalised service offer
continues to excel comparators.
Overview
We have continued to experience strong post-pandemic demand for
our properties, with the academic year 2022/23 seeing record
occupancy of 99 per cent. The Company's direct-let strategy, which
allows us to capture rental growth and inflation in a more timely
manner than a nomination led strategy, delivered like-for-like
rental growth of 5.2 per cent.
The broadened appeal of our brand proposition is reflected in
strong feedback from our customers, allowing Hello Student to
surpass all key benchmarks. A high level of customer satisfaction
resulted in a re-booker rate of 18.5 per cent for academic year
2022/23, with an expectation this will exceed 20 per cent for
academic year 2023/24.
Demand has continued to grow from both domestic and
international students, with university applications increasing 2.1
per cent in 2022. Domestic student numbers have been fuelled by a
demographic increase in 18 year olds coupled with a perception of a
weakening economy and employment market, whilst post-graduate
numbers increased 10 per cent between 2021 and 2022. The growth in
demand for the PBSA sector may be further exacerbated by a
contraction in the HMO market.
Our marketing and sales strategy has continued to target
domestic students as well as international markets where our brand
is underweight, for example India and Nigeria which have seen some
of the strongest growth in international student numbers.
Demographically, for academic year 2022/23, 50 per cent of our
students were UK nationals, 29 per cent Chinese with 21 per cent
other international.
Dynamic pricing has enabled demand and data led pricing
decisions to be made in a manner which considers price sensitivity
not only in cities but also down to exact room types. For academic
year 2022/23 our average inflationary increase was 2.1 per cent,
but with 3.1 per cent additional benefit captured by dynamic
pricing, we were able to deliver like-for-like revenue growth in
excess of 5 per cent. Although affordability remains a key concern
in pricing decisions, dynamic pricing has been particularly
important during the high inflationary period recently
experienced.
Portfolio overview
The 2022 financial year saw continued focus on repositioning the
portfolio. Notwithstanding challenging investment market
conditions, particularly in the second half of the year, we
disposed of or contracted to dispose of seven properties for
GBP53.1 million. A further non-core property was sold post year end
generating GBP2.6 million.
Proceeds from disposal have largely been directed toward an
extensive refurbishment and capital programme targeting fire safety
compliance alongside the elimination of Segment B and the
conversion of Segment C properties, as outlined below.
A portfolio segmentation review was carried out in early 2021
with each property assigned a strategic segment reflecting the
Group's investment style, as follows:
-- Segment A : Properties that are well located, appropriately configured and on-brand
-- Segment B: Properties that fundamentally meet our key
criteria but require extensive refurbishment to become on-brand
-- Segment C: Well-located properties which are configured in a
manner that lend themselves better to a conversion to our new brand
Post-Grad by Hello Student, this is typically based on room mix,
size and amenity
-- Segment D: These properties are typically not of a size or
configuration that lend themselves to become a core Segment A or
Segment C scheme, are typically located in a single asset city
whereby the benefits of clustering can't easily be realised and/or
are not aligned to a top-tier university.
Total
Strategic segmentation Segment Segment Segment Segment market NIY
A (GBPm) B (GBPm) C (GBPm) D (GBPm) value (%)
(GBPm)
-------------------------- ----------- ----------- ----------- ----------- --------- ------
Operational portfolio 724.2 122.0 139.8 70.5 1,056.5 5.2
Commercial portfolio 7.4 5.6 3.7 2.5 19.2 7.8
Development portfolio - - - 3.2 3.2
----------- ----------- ----------- ----------- ---------
Total 731.6 127.6 143.5 76.2 1,078.9
% 67.8 11.8 13.3 7.1 (1) 100.0
(1) Adjusting for sales exchanged pending completion or
exchanged and completed post year end, Segment D now represents 5.6
per cent of the portfolio
Valuers quality segmentation Properties Operational Market Market
beds value (GBPm) value (%)
------------------------------ ------------ ------------ -------------- -----------
Super prime regional 26 2,590 478.2 44.3
Prime regional 48 4,651 512.0 47.5
London 2 151 29.0 2.7
----------- ------------ -------------- -----------
76 7,392 1,019.2 94.5
Secondary 10 1,141 59.7 5.5
----------- ------------ -------------- -----------
Total 86 8,533 1,078.9 100.0
------------------------------- ----------- ------------ -------------- -----------
Adjusting for acquisitions, disposals and properties undergoing
development, the like-for-like portfolio increased in value by 2.4
per cent during 2022. This is almost entirely attributable to
underlying income growth assumptions which average 6 per cent. The
completion of our two main developments, St Mary's, Bristol, and
Southbridge, Edinburgh collectively delivered GBP18.4 million in
valuation gain, net of capital expenditure.
Capital expenditure programme
Our programme of refurbishment, fire safety works and green
initiatives continues at pace. We have allocated GBP8.0 million
from our original refurbishment plan in favour of an acceleration
of green initiatives targeting a reduction in energy consumption
and managing future EPC risk. Given recent volatility in energy
costs, our targeted return hurdle of 9% to 11% IRR remains
appropriate.
In respect to our programme of fire safety works, all properties
have now been surveyed with 61 per cent of the portfolio is now
certified.
Refurbishment Fire safety Green initiatives
(GBPm) works (GBPm)
(GBPm)
-------------------------- -------------- ------------ ------------------
Five year Plan (2021 -
2025) 44.1 37.0 4.0
Reallocation (8.0) - 8.0
-------------------------- -------------- ------------ ------------------
Revised plan 36.1 37.0 12.0
Invested to date 4.7 10.3 0.5
Forecast 2023 investment 6.0 14.5 5.0
-------------------------- -------------- ------------ ------------------
In addition to the above, ongoing capital life cycling works
require around GBP4.0 million per annum.
Commercial portfolio
We have continued to actively manage the 42-unit commercial
estate that generally sits below our operational portfolio, with a
number of value creating projects completed. Notable deals include
a five year lease with a café operator on a long-term vacant unit
in Cardiff. A five-year lease renewal was secured in Bristol and
two further five year renewals were completed in Lancaster.
A number of asset management initiatives are planned for 2023 to
drive value and enhance the student offering. We have agreed terms
with a convenience store operator to take a lease, subject to
planning, on a parade of shops in Manchester. Planning has also
been submitted for the conversion of another vacant unit in
Newcastle for further student accommodation, adding bedspaces and
improving student amenities. In Bristol, terms have been agreed for
the part letting of one vacant unit where we have an opportunity to
also create a new gym amenity in the remaining space, leaving only
one vacant unit in the portfolio where there are advanced
discussions ongoing.
Acquisitions and developments
In February 2022 we acquired the 92 bed Market Quarter scheme in
Bristol. The property was pre-let on acquisition and has been
extremely well received by our customers. The property was fully
occupied for the academic year 2022/23 and is in high demand from
re-bookers for the recently launched 2023/24 academic year. Since
acquisition, the property has delivered an IRR in excess of 20 per
cent.
Also in Bristol, our 153 bed St Mary's development opened to
students at the start of the 2022/23 academic year. The property, a
former Victorian hospital, has been lovingly developed in to
best-in-class student accommodation which is well located only a
few minutes' walk from the University of Bristol. The development
has delivered an IRR in excess of 20 per cent.
Together with the acquisition of Market Quarter, the Group more
than doubled its bed offer in Bristol during 2022, allowing the
benefits of clustering to be realised. Gross margin has improved
from 69 per cent to 76 per cent, a seven percentage point increase,
whilst enabling a better quality service offer for our Bristol
based customers.
In late November 2022, our first post-graduate scheme at
Southbridge, Edinburgh opened to students. The 59 bed property was
developed to pilot a unique offer aimed exclusively at
port-graduates, delivering a bespoke product aimed at a growing
segment of the market. The property has delivered an yield on cost
of 6.0 per cent and IRR above 12 per cent.
Refurbishment pipeline
Looking ahead to 2023, we have allocated GBP6.0 million from our
five year refurbishment programme toward major refurbishment
activity encompassing over 250 beds. Most significant of which is
at our St. Mark's, Leeds property, Brook Studios in Birmingham and
Summit House in Cardiff. Two of these schemes are currently within
Segment B and are expected to be moved to our on-brand Segment
A.
Works are typically completed over the summer, following a short
selling or via rolling refurbishment programme throughout the year,
with no more than 25-30 beds impacted at any one time.
For academic year 2023/24 we have taken the decision to close
our 173 bed Brunswick House scheme in Southampton. This is to
facilitate an extensive refurbishment of the scheme alongside fire
safety works. As above, Brunswick House is currently a Segment B
property, which we expect will reopen to students as a Segment A
property for the start of academic year 2024/25.
We continue to target an IRR of 9-11 per cent on all
refurbishment works.
Global Student Living Index
Our Hello Student brand delivered an improved net promoter score
of +27 in the 2022 Global Student Living Index survey. This score,
up from +22 at December 2021, compares very favourably with
University Halls which scored +9 and Private Halls of +14.
Proximity to place of study, feeling safe and secure and the
condition and quality of accommodation remain the most important
factors for students selecting their accommodation. Overall a
stronger retention intent has been received, with a significant
increase in students saying they plan to stay in their
accommodation.
Over 70 per cent of students responding said that their
accommodation had a positive impact on their well-being and that
our people care about their well-being. In 2022 Hello Student were
proud winners of the Global Student Living Index's award for
student well-being.
Financial review
I'm delighted to present my first financial review as successor
to Lynne Fennah, who left the business in October 2022. I would
like to thank her for a thorough handover, but also for her sound
stewardship of the business during her tenure.
Overview of the year
The business achieved record revenue occupancy for academic year
2022/23, with 99 per cent now achieved following January letting
activity. Capitalizing on strong post-pandemic demand, our brand
and service proposition, coupled with the implementation of our
demand-led pricing model delivered like-for-like growth in revenues
of 5.2 per cent, and revenue for the financial year to 31 December
2022 of GBP73 million. This is a great result given the continued
effects of the pandemic on academic year 2021/22, which impacted
eight months of the 2022 financial year. Gross margin improved to
67 per cent, in line with guidance.
Rising interest rates and cost inflation created challenges,
however, having fixed utility costs through to September 2024 we
are able to mitigate this pressure on a significant cost line in
our income statement.
One third of our debt structure was exposed to rising interest
rates, which exposed the income statement to some volatility,
particularly in the final quarter of the year. Finance costs
totalled GBP15.0 million, roughly 15 per cent higher than we had
originally anticipated. Although the Group's weighted average cost
of debt has significantly increased, long-term rates have softened
providing an opportunity to secure further interest rate protection
post year end.
IFRS profit for the year was GBP67.7 million, including a
GBP45.6 million valuation uplift, whilst EPRA earnings, our measure
of recurring earnings, were GBP20.6 million, representing 3.4 pence
per share.
Total accounting return, including both dividends paid in the
year of 2.5 pence per share plus growth in EPRA Net Tangible Asset
value being 8.7 pence, was 10.5 per cent.
Income statement
Non-core
Core (bucket
portfolio D) 2022 2021
GBPm GBPm GBPm GBPm
-------------------------------------- ----------- --------- ------- -------
Revenue 66.3 6.7 73.0 56.0
Property expenses (20.1) (3.9) (24.0) (23.1)
-------------------------------------- ----------- --------- ------- -------
Gross profit 46.2 2.8 49.0 32.9
Gross margin 70% 42% 67% 59%
Administrative expenses (13.4) (10.6)
Operating profit 35.6 22.3
Revaluation 45.6 17.6
Gains on disposals 1.5 1.7
Net finance costs (15.0) (12.4)
-------------------------------------- ----------- --------- ------- -------
IFRS Profit 67.7 29.2
-------------------------------------- ----------- --------- ------- -------
Weighted average ordinary shares (m) 603.3 603.2
IFRS EPS (pence) 11.2 4.8
EPRA EPS (pence) 3.4 1.6
Revenue has increased 2.7 per cent like-for-like for the
financial year of 2022. Revenue occupancy for the current 2022/23
academic year is strong at 99 per cent, resulting in 90.5 per cent
occupancy across the financial year.
The Group seeks to achieve a gross margin of greater than 70 per
cent. For 2022 we achieved 67 per cent, in line with guidance and
largely due to the poorer margins achieved on our non-core
portfolio, as set out above. Pleasingly, gross margin on our core
portfolio achieved 70 per cent in 2022. The delay in our disposal
programme does, however, mean achieving greater than 70 per cent
across the Group in 2023 will be challenging, as non-core assets
are typically located in single asset cities where the benefits of
clustering cannot be realized.
Administrative expenses were GBP13.4 million, representing 18.4
per cent of revenue. This has increased from GBP10.6 million in
2021. The Group has undergone a transformation of its operating
capabilities, to position itself for growth and has invested in its
people and processes in order to deliver this. However, most
administrative cost lines are also exposed to inflationary
pressures, which contributed to the increase. We expect the cost
base as a percentage of revenue to decrease as the business targets
growth.
Balance sheet
2022 2021
GBPm GBPm
---------------------------- -------- --------
Property (market value) 1,078.9 1,021.3
Cash on hand 55.8 37.1
Bank borrowings drawn (391.2) (375.0)
Other net liabilities (42.7) (35.8)
---------------------------- -------- --------
Net assets 700.8 647.6
Diluted number of shares 607.2 606.6
EPRA NTA per share (pence) 115.4 106.7
Property LTV 31.1% 33.1%
EPRA LTV 32.7% 34.3%
Strong valuation gains were recorded on development properties,
most notably St Mary's, Bristol and Southbridge, Edinburgh, both of
which have now completed and are operational for academic year
2022/23. The Group's net asset value increased 8.2 per cent in 2022
primarily due to an increase in the value of our properties of
GBP45.6 million and retained current year EPRA earnings (net of
dividend paid) as set out below.
Evolution of net asset value GBPm
------------------------------- -------
31 December 2021 647.6
EPRA earnings 20.6
Like-for-like revaluation 22.9
Non-like-for-like revaluation 22.7
Dividends (15.2)
Other 2.2
------------------------------- -------
31 December 2022 700.8
------------------------------- -------
Portfolio valuation
2022 2021 Gain/(loss)(1) Change
GBPm GBPm GBPm %
---------------------------------- -------- -------- --------------- -------
Like-for-like property portfolio 990.5 952.8 22.9 2.4
Acquisitions 25.9 - 6.4 24.7
Disposals - 39.8 (2.1) (5.3)
Developments 62.5 28.7 18.4 29.5
Portfolio valuation 1,078.9 1,021.3 45.6
(1) net of capital expenditure and head lease amortisation
In 2022, the like-for-like ("LfL") portfolio increased by
GBP22.9 million or 2.4 per cent with non-LfL properties (most
notably development properties) increasing GBP22.7 million. The
portfolio net initial yield was 5.2 per cent, stable since June
with a 10 basis point contraction on December 2021. The
reversionary yield stands at 5.5 per cent. This was a strong
valuation performance in a challenging year when many other sectors
experienced considerable outward yield shift, particularly in the
second half of 2022, demonstrating the sub-sector's resilience and
strong demand led income underpin.
Market Quarter Studios, a strategically aligned high quality
asset in Bristol, was acquired during the year for GBP19.3 million.
Since acquisition its valuation has increased by GBP6.4 million
(25.2 per cent, net of capex).
Six assets were disposed during the year. Disposal proceeds were
GBP39.7 million, resulting in a profit of GBP1.5 million, after
costs. Contracts were exchanged for a further property disposal,
Emily Davies, Southampton, was exchanged pre year end with
completion targeted for April 2023.
Capital expenditure for the year on both the LfL and development
portfolio was GBP30.4 million.
Debt
Bank borrowings drawn at 31 December 2022 was GBP391.2 million,
of which 71 per cent is at a fixed rate. Fixed rate debt carries a
weighted average term to maturity of 5.7 years and a weighted
average cost of 3.4 per cent. Floating rate debt of GBP114.0
million carries a weighted average cost of debt of 5.4 per cent and
weighted average term to maturity of 2.5 years. Since year end,
with the stabilisation of longer term interest rates, we have
extended interest rate protection to cover 89 per cent of drawn
debt by putting in place an interest rate cap on an additional
GBP67.4 million of floating rate debt.
The overall weighted average cost of debt at 31 December 2022
was 4.0 per cent and average term to maturity was 4.8 years.
Property loan to value was 31.1 per cent at the year end, below
our longer term target of 35 per cent, primarily due to valuation
gains. Cash reserves at 31 December 2022 totalled GBP55.8 million,
earmarked for working capital, dividend payments and capital
expenditure. Undrawn committed facilities were GBP20.0 million at
the balance sheet date, increasing to GBP40.0 million post year end
following the refinancing of an unsecured facility which was repaid
in late 2022. The Group has no further refinancing risk in 2023,
with GBP64.0 million maturing in 2024. See note 1.4 for further
information.
All loan covenants were fully compliant during the year.
Cashflow
2022 2021
GBPm GBPm
----------------------------------------------- ------- -------
Operating cash flow 43.6 42.4
Property acquisitions and capital expenditure (49.1) (16.6)
Property disposals 39.7 17.9
----------------------------------------------- ------- -------
Net cash flows from investing activities (9.4) 1.3
Dividends paid (16.7) (13.6)
Net borrowings drawn/(repaid) 14.6 (15.1)
Finance costs (13.4) (11.8)
----------------------------------------------- ------- -------
Financing cash flows (15.5) (40.5)
Net cash flow 18.7 3.2
----------------------------------------------- ------- -------
Strategic capital recycling continued with proceeds from the
disposal of non-core assets directed into acquisitions aimed at
advancing our clustering strategy in key cities, or into our core
portfolio development, refurbishment and remediation programme.
Cash paid in relation to dividends includes the payment of 2022
dividends and resulting withholding tax, but also the withholding
tax settled in early 2022 arising on the 2021 dividend paid to
shareholders in the final quarter of that year.
In respect of financing cashflows, GBP25.0 million was drawn
from our revolving credit facility, largely to fund acquisitions
and GBP11.2 million of development financing in relation to works
at St Mary's, Bristol. GBP20.0 million was repaid in December 2022
towards settling a facility due to mature in March 2023, on which
no early termination fees were due.
Finance costs paid have increased in line with further
borrowings and increasing interest rates charged on the Group's
floating rate debt.
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.
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 2024. The Directors therefore concluded that it remains
appropriate to adopt the going concern basis of preparation when
compiling the annual report and accounts for the year ended 31
December 2022.
Attention is drawn to note 1.4 of the financial statements and
to the Company's statement in respect of viability as set out
within the annual report, once published, for further details
surrounding the conclusion reached.
Dividends
A final interim dividend of 0.875 pence per share has been
declared for the final quarter of 2022, bringing total dividends
paid and payable in respect of 2022 to 2.75 pence. This represents
an 81 per cent pay out on EPRA earnings per share. The dividend
will be paid as a Property Income Distribution on 14 April 2023 to
shareholders on the register at 31 March 2023.
DONALD GRANT
Chief Financial & Sustainability Officer
16 March 2023
EPRA and other alternative performance measures
Analysing our performance in line with industry standard
measures
EPRA disclosures
The following is a summary of the EPRA performance measure
included in the Group's results. As defined by the EPRA Best
Practice Recommendations, these are a set of standard disclosures
for the property industry designed to drive consistency in
reporting.
EPRA Measure Definition of measure Note/ reference 2022 2021
---------------------------------------- --------------------------------------- ---------------- ------ -----
The companies underlying earnings from
Earnings (GBPm) operational activities 8 20.6 9.9
The underlying value of the company
Net tangible assets (NTA) assuming it buys and sells assets 9 115.4 106.7
The value of the company assuming
assets are sold, and the liabilities
are settled, not held
Net disposal value (NDV) to maturity. 9 117.9 104.4
The value of the assets on a long-term
basis, assets and liabilities are not
expected to crystallise
Net reinstatement value (NRV) under normal circumstances. 9 121.8 112.4
Rental income less operating costs
divided by the market value of the
property, increased
Net initial yield with purchasers costs. Below 5.2% 5.3%
Administrative & operating costs
including costs of direct vacancy
divided by gross rental
Cost ratio (incl. direct vacancy costs) income. Below 51% 60%
Administrative & operating costs
excluding costs of direct vacancy
divided by gross rental
Cost ratio (excl. direct vacancy costs) income. Below 47% 46%
Compares the growth in rental income
that has been in operation and not
under development,
Like-for-like rental income (in respect throughout both the current and
of academic year) comparative year Financial review 5.2% 2.6%
Compares the growth in capital values
of the Group's portfolio which was
controlled by the
Group and both balance sheet dates,
net of capital expenditure and
Like-for-like capital excluding development properties Financial review 2.4% 3.0%
Ratio of net debt, including net
payables, to the sum of the net
assets, including net receivables,
of the Group, expressed as a
Loan to value(1) percentage below 32.7% 34.3%
---------------------------------------- -------------------------------------- ---------------- ------ -----
(1) EPRA LTV is a new measure introduced by EPRA in the current period. The EPRA measure
differs from the Property LTV presented in Note 31 as it includes net payables and receivables.
EPRA LTV was not presented in the financial statements at 31 December 2021 as the measure
had not yet been introduced. EPRA LTV would have been presented as 34.3% at 31 December 2021.
Other alternative performance measures
An alternative performance measure ("APM") is a financial
measure of historical or future financial performance, financial
position or cash flows of an entity which is not a financial
measure defined or specified in International Financial Reporting
Standards ("IFRS").
APM's are presented to provide useful information to readers and
have been, or are still, consistent with industry standards. The
table below sets out the additional non-EPRA derived APM's included
within the annual report and accounts.
Measure Definition of measure Note/ reference 2022 2021
----------------------- ------------------------------------------------------------- --------------- ------ -----
Growth in EPRA NTA plus dividends paid as a percentage of
Total Return opening EPRA NTA 31 10.5% 4.6%
Net debt (GBPm) Borrowings less cash and cash equivalents 31 335.4 337.9
Property loan to value Net debt divided by property market value 31 31.1% 33.1%
Dividend cover EPRA earnings relative to dividends declared for the year 31 124% 64%
Dividend pay-out ratio Dividends declared relative to EPRA earnings 31 81% 156%
----------------------- ------------------------------------------------------------- --------------- ------ -----
Group
----------------------------
Year ended Year ended
31 December 31 December
2022 2021
EPRA Net Initial Yield and topped-up NIY GBP'm GBP'm
-------------
Investment Property 1,078.9 1,021.3
Less: development (3.3) (28.7)
--------------------------------------------------- ------------- -------------
Completed property portfolio 1,075.6 992.6
Allowance for purchases cost 38.5 34.2
--------------------------------------------------- ------------- -------------
Grossed up completed property portfolio valuation 1,114. 1 1,026.8
Annualised cash passing rental income 81.6 77.5
Property outgoings (24.0) (23.1)
--------------------------------------------------- ------------- -------------
Annualised net rents 57.6 54.4
Add: notional rent expiration of rent-free
periods or other lease incentives 0.1 0.2
--------------------------------------------------- ------------- -------------
Topped-up net annualised rent 57.7 54. 6
EPRA NIY 5.2% 5.3%
EPRA "topped-up" NIY 5.2% 5.3%
EPRA Cost ratios
--------------------------------------------------- ------------- -------------
Operating expense line per IFRS income statement 24.0 23.1
Administration costs 13.4 10.6
Ground rent costs - -
--------------------------------------------------- ------------- -------------
EPRA Costs (including direct vacancy costs) 37.4 33.7
Direct vacancy costs (3.2) (8.1)
--------------------------------------------------- ------------- -------------
EPRA Costs (excluding direct vacancy costs) 34.2 25.6
Gross Rental Income less ground rents - per
IFRS 73.0 56.0
Less : service fee and service charge costs - -
components of Gross Rental
--------------------------------------------------- ------------- -------------
Gross Rental Income 73.0 56.0
EPRA Cost Ratio (including direct vacancy
costs) 51% 60%
EPRA Cost Ratio (excluding direct vacancy
costs) 47% 46%
EPRA Loan to Value ("LTV")
--------------------------------------------------- ------------- -------------
Bank borrowings drawn 391.2 375.0
Net payables 17.8 12.2
Less cash held at the year end ( 55.8) ( 37.1)
--------------------------------------------------- ------------- -------------
Net borrowings 353 .2 350 .1
--------------------------------------------------- ------------- -------------
Investment property at fair value 1,061.9 966.7
Property held for sale 13.7 25.9
Property under development 3.3 28.7
Property value 1,078.9 1,021.3
--------------------------------------------------- ------------- -------------
EPRA LTV 32.7% 34.3%
Statement of Directors' responsibilities
The statement of Directors' responsibilities has been prepared
in relation to the Group's Annual Report 2022. Certain parts of the
Annual Report are not included in this announcement.
We confirm to the best of our knowledge:
-- the Group financial statements, which have been prepared in
accordance with IFRS, give a true and fair view of the assets,
liabilities, financial position and profit of the Group; and
-- the strategic report includes a fair review of the
development and performance of the business and the position of the
Group.
Signed on behalf of the Board on 16 March 2023.
DONALD GRANT
Director
Group Statement of Comprehensive Income
Year ended Year ended
31 December 31 December
2022 2021
Note GBP m GBP m
--------------------------------------------------- ---- ------------ --------------
Continuing operations
Revenue 2 73.0 56.0
Property expenses 3 (24.0) (23.1)
--------------------------------------------------- ---- ------------ ------------
Gross profit 49.0 32.9
Administrative expenses 4 (13.4) (10.6)
Change in fair value of investment property 11 45.6 17.6
Operating profit 81.2 39.9
Finance cost 5 (15.0) (12.4)
Net gain on disposal of investment property 1.5 1.7
--------------------------------------------------- ---- ------------ ------------
Profit/(loss) before income tax 67.7 29.2
Corporation tax 7 - -
--------------------------------------------------- ---- ------------ ------------
Profit for the year and total comprehensive income 67.7 29.2
--------------------------------------------------- ---- ------------ ------------
Earnings per share expressed in pence per share 8
Basic 11.2 4.8
Diluted 11.1 4.8
--------------------------------------------------- ---- ------------ ------------
Group Statement of Financial Position
At At
31 December 31 December
2022 2021
Note GBP m GBP m
------------------------------------------ ---- ------------ ------------
ASSETS
Non-current assets
Investment property - Operational Assets 11 1,062. 4 967.2
Investment property - Development Assets 11 3.3 28.7
Property, plant and equipment 13 1.1 0.4
Intangible assets 12 1.9 1.3
Right of use asset 1.3 1.0
Total non-current assets 1, 070.0 998.6
------------------------------------------ ---- ------------ ------------
Current assets
Trade and other receivables 14 7.0 7.8
Assets classified as held for sale 15 13.7 25.9
Cash and cash equivalents 16 55.8 37.1
------------------------------------------ ---- ------------ ------------
Total current assets 76.5 70.8
------------------------------------------ ---- ------------ ------------
Total assets 1, 146.5 1,069.4
------------------------------------------ ---- ------------ ------------
LIABILITIES
Current liabilities
Trade and other payables 17 24.8 20.0
Borrowings 18 - 44.7
Lease liability 0.1 0.1
Deferred income 17 33.1 29.9
------------------------------------------ ---- ------------ ------------
Total current liabilities 58.0 94.7
------------------------------------------ ---- ------------ ------------
Non-current liabilities
Borrowings 18 386.5 326.2
Lease liability 1.2 0.9
------------------------------------------ ---- ------------ ------------
Total non-current liabilities 387.7 327.1
------------------------------------------ ---- ------------ ------------
Total liabilities 445.7 421.8
------------------------------------------ ---- ------------ ------------
Total net assets 700.8 647.6
------------------------------------------ ---- ------------ ------------
Equity
Called up share capital 19 6.0 6.0
Share premium 20 0.3 0.3
Capital reduction reserve 21 444.7 459.9
Retained earnings 249.8 181.4
------------------------------------------ ---- ------------ ------------
Total equity 700.8 647.6
------------------------------------------ ---- ------------ ------------
Total equity and liabilities 1, 146.5 1,069.4
------------------------------------------ ---- ------------ ------------
Net Asset Value per share basic (pence) 9 116.1 107.4
Net Asset Value per share diluted (pence) 9 115.4 106.7
EPRA NTA per share (pence) 9 115.4 106.7
------------------------------------------ ---- ------------ ------------
These financial statements were approved by the Board of
Directors on 16 March 2023 and signed on its behalf by:
DONALD GRANT
Director
Company Statement of Financial Position
At At
31 December 31 December
2022 2021
Note GBP m GBP m
------------------------------------ ---- ------------ ------------
ASSETS
Fixed assets
Investments in subsidiaries 30 222.6 187.6
Property, plant and equipment 13 1.0 0.3
Intangible assets 12 1.9 1.3
Right of use asset 1.3 1.0
Total fixed assets 226.8 190.2
------------------------------------ ---- ------------ ------------
Current assets
Amounts due from Group undertakings 14 400.5 369.0
Trade and other receivables 14 0. 3 0.3
Cash and cash equivalents 16 4.3 2.0
------------------------------------ ---- ------------ ------------
Total current assets 405.1 371.3
------------------------------------ ---- ------------ ------------
Total assets 631.9 561.5
------------------------------------ ---- ------------ ------------
CREDITORS
Current creditors
Amounts due to Group undertakings 17 87.8 27.2
Trade and other payables 17 3.1 5.1
Lease Liability 0.1 0.1
------------------------------------ ---- ------------ ------------
Total non-current creditors 91.0 32.4
------------------------------------ ---- ------------ ------------
Non-current creditors
Borrowings 18 - 19.9
Lease liability 1.2 0.9
------------------------------------ ---- ------------ ------------
Total non-current creditors 1.2 20.8
------------------------------------ ---- ------------ ------------
Total creditors 92.2 53.2
------------------------------------ ---- ------------ ------------
Total net assets 539.7 508.3
------------------------------------ ---- ------------ ------------
Capital and reserves
Called up share capital 19 6.0 6.0
Share premium 20 0.3 0.3
Capital reduction reserve 21 444.7 459.9
Retained earnings 88.7 42.1
------------------------------------ ---- ------------ ------------
Total capital and reserves 539.7 508.3
------------------------------------ ---- ------------ ------------
The Company made a profit for the year of GBP45.9 million (2021:
GBP8.7 million loss).
These financial statements were approved by the Board of
Directors on 16 March 2023 and signed on its behalf by:
DONALD GRANT
Director
Group Statement of Changes in Equity
Capital
Called up Share reduction Retained Total
share capital premium reserve earnings equity
Year ended 31 December 2022 GBP m GBP m GBP m GBP m GBP m
---------------------------------------- -------------- -------- ---------- --------- -------
Balance at 1 January 2022 6.0 0.3 459.9 181.4 647.6
Profit for the year - - - 67.7 67.7
---------------------------------------- -------------- -------- ---------- --------- -------
Total comprehensive income for the year - - - 67.7 67.7
---------------------------------------- -------------- -------- ---------- --------- -------
Share-based payments - - - 0.7 0.7
Dividends - - (15.2) - (15.2)
---------------------------------------- -------------- -------- ---------- --------- -------
Amounts recognised directly in equity - - (15.2) 0.7 (14.5)
---------------------------------------- -------------- -------- ---------- --------- -------
Balance at 31 December 2022 6.0 0.3 444.7 249.8 700.8
---------------------------------------- -------------- -------- ---------- --------- -------
Balance at 1 January 2021 6.0 0.3 475.0 152.0 633.3
Profit for the year - - - 29.2 29.2
---------------------------------------- -------------- -------- ---------- --------- -------
Total comprehensive income for the year - - - 29.2 29.2
---------------------------------------- -------------- -------- ---------- --------- -------
Share-based payments - - - 0.2 0.2
Dividends - - (15.1) - (15.1)
---------------------------------------- -------------- -------- ---------- --------- -------
Amounts recognised directly in equity - - (15.1) 0.2 (14.9)
---------------------------------------- -------------- -------- ---------- --------- -------
Balance at 31 December 2021 6.0 0.3 459.9 181. 4 647.6
---------------------------------------- -------------- -------- ---------- --------- -------
Company Statement of Changes in Equity
Capital
Called up Share reduction Retained Total
share capital premium reserve earnings equity
Year ended 31 December 2022 GBP m GBP m GBP m GBP m GBP m
---------------------------------------- -------------- -------- ---------- --------- -------
Balance at 1 January 2022 6.0 0.3 459.9 42.1 508.3
Profit for the year - - - 45.9 45.9
---------------------------------------- -------------- -------- ---------- --------- -------
Total comprehensive profit for the year - - - 45.9 45.9
---------------------------------------- -------------- -------- ---------- --------- -------
Share-based payments - - - 0.7 0.7
Dividends - - (15.2) - (15.2)
---------------------------------------- -------------- -------- ---------- --------- -------
Amounts recognised directly in equity - - (15.2) 0.7 (14.5)
---------------------------------------- -------------- -------- ---------- --------- -------
Balance at 31 December 2022 6.0 0.3 444.7 88.7 539.7
---------------------------------------- -------------- -------- ---------- --------- -------
Balance at 1 January 2021 6.0 0.3 475.0 50.6 531.9
Loss for the year - - - (8.7) (8.7)
---------------------------------------- -------------- -------- ---------- --------- -------
Total comprehensive loss for the year - - - (8.7) (8.7)
---------------------------------------- -------------- -------- ---------- --------- -------
Share-based payments - - - 0. 2 0. 2
---------------------------------------- -------------- -------- ---------- --------- -------
Dividends - - (15.1) - (15.1)
---------------------------------------- -------------- -------- ---------- --------- -------
Amounts recognised directly in equity - - (15.1) 0.2 (14.9)
---------------------------------------- -------------- -------- ---------- --------- -------
Balance at 31 December 2021 6.0 0.3 459.9 42. 1 508. 3
---------------------------------------- -------------- -------- ---------- --------- -------
Group Statement of Cash Flows
Year ended Year ended
31 December 31 December
2022 2021
GBP m GBP m
------------------------------------------------------------------ ------------ ------------
Cash flows from operating activities
Profit before income tax 67.7 29.2
Share-based payments expense 0. 7 0.2
Depreciation and amortisation 0.6 0.5
Finance costs 15.0 12.4
Gain on disposal of investment property (1.5) (1.7)
Change in fair value of investment property (45.6) (17.6)
------------------------------------------------------------------ ------------ ------------
36.9 23.0
------------------------------------------------------------------ ------------ ------------
Decrease in trade and other receivables 0.2 6.7
Increase in trade and other payables 3.3 3.5
Increase in deferred rental income 3.2 9.2
------------------------------------------------------------------ ------------ ------------
6.7 19.4
------------------------------------------------------------------ ------------ ------------
Net cash flows generated from operations 43.6 42.4
------------------------------------------------------------------ ------------ ------------
Cash flows from investing activities
Purchases of tangible fixed assets ( 1.0) (0.4)
Purchases of intangible assets (0.9) (0.5)
Purchase and development of investment property (47.2) (15.7)
Proceeds on disposal of asset held for sale, net of selling costs 26. 7 -
------------------------------------------------------------------ ------------ ------------
Proceeds on disposal of investment property, net of selling costs 13.0 17.9
------------------------------------------------------------------ ------------ ------------
Net cash flows from investing activities ( 9.4) 1.3
------------------------------------------------------------------ ------------ ------------
Cash flows from financing activities
Dividends paid (16.7) (13.6)
Bank borrowings drawn 36.2 -
Bank borrowings repaid (20.0) (15.0)
Loan arrangement fee paid (1.6) (0.1)
Lease liability paid (0.1) -
Finance cost (13.3) (11.8)
------------------------------------------------------------------ ------------ ------------
Net cash flows from financing activities (15.5) (40.5)
------------------------------------------------------------------ ------------ ------------
Increase in cash and cash equivalents 18.7 3.2
Cash and cash equivalents at beginning of year 37.1 33.9
------------------------------------------------------------------ ------------ ------------
Cash and cash equivalents at end of year 55.8 37.1
------------------------------------------------------------------ ------------ ------------
Notes to the Financial Statements
1. ACCOUNTING POLICIES
1.1 Period of Account
The consolidated financial statements of the Group are in
respect of the reporting period from 1 January 2022 to 31 December
2022.
The consolidated financial statements of the Group for the year
ended 31 December 2022 comprise the results of Empiric Student
Property plc (the "Company") and its subsidiaries and were approved
by the Board for issue on 16 March 2023. The Company is a public
limited company incorporated and domiciled in England and Wales.
The Company's ordinary shares are admitted to the official list of
the UK Listing Authority, a division of the Financial Conduct
Authority, and traded on the London Stock Exchange. The registered
address of the Company is disclosed in the Company information.
1.2 Basis of Preparation
The consolidated financial statements of the Group for the year
to 31 December 2022 comprise the results of Empiric Student
Property plc (the "Company") and its subsidiaries (together, the
"Group"). The Group and Parent Company financial statements have
been prepared on a going concern basis. The Group financial
statements have been prepared in accordance with UK adopted
international accounting standards. The Parent Company financial
statements have been prepared in accordance with FRS 101, Financial
Reporting Standards Reduced Disclosure Framework.
The Group's financial statements have been prepared on a
historical cost basis, except for investment property which have
been measured at fair value. The consolidated financial statements
are presented in Pounds Sterling which is also the Company and the
Group's functional currency.
The Company has applied the exemption allowed under section
408(1b) of the Companies Act 2006 and has therefore not presented
its own Statement of Comprehensive Income in these financial
statements. The Group profit for the year includes a profit after
taxation of GBP45.9 million (2021: loss of GBP8.7 million) for the
Company, which is reflected in the financial statements of the
Company.
The financial information contained within this release does not
constitute the Group's statutory accounts for the year ended 31
December 2022 or the year ended 31 December 2021 but is derived
from those accounts. The Group's statutory accounts for the year
ended 31 December 2021 have been delivered to the Registrar of
Companies. The Group's statutory accounts for the year ended 31
December 2022 will be delivered to the Registrar of Companies in
due course. The Auditor has reported on both the December 2022 and
December 2021 accounts; the reports were unqualified, did not
include a reference to any matters to which the Auditor drew
attention by way of emphasis without qualifying their report and
did not contain any statement under Section 498 of the Companies
Act 2006.
1.3 Disclosure Exemptions Adopted
In preparing the financial statements of the Parent Company,
advantage has been taken of all disclosure exemptions conferred by
FRS 101. The Parent Company financial statements do not
include:
- certain comparative information as otherwise required by
international accounting standards;
- a statement of cash flows;
- the effect of future accounting standards not yet adopted; and
- disclosure of related party transactions with other wholly
owned members of the Group headed by Empiric Student Property
plc.
In addition, and in accordance with FRS 101, further disclosure
exemptions have been adopted because equivalent disclosures are
included in the consolidated financial statements of Empiric
Student Property plc. The Parent Company financial statements do
not include certain disclosures in respect of:
- Financial instruments (other than certain disclosures required
as a result of recording financial instruments at fair value);
and
- Fair value measurement (other than certain disclosures
required as a result of recording financial instruments at fair
value).
1.4 Going Concern
At 31 December 2022, the Group's cash and undrawn committed
facilities were GBP75.8 million and its capital commitments were
GBP2.3 million. Subsequent to the year end, a further GBP20.0
million committed facility was secured.
Occupancy is a key driver of profitability and cash flows, and
at 16 March 2023 occupancy, based on forward reservations for the
upcoming 2023/24 academic year was 65 per cent, compared to 36 per
cent for the 2022/23 academic year at 2 March 2022.
At the year end three facilities fell due for repayment during
the going concern period:
- GBP20.0 million with Canada Life due to expire in March 2024
- GBP32.8 million with AIB due to expire in October 2024
- GBP11.2 million with NatWest due to expire in December 2024.
It is intended that these will be refinanced at maturity and
good relationships are maintained with all lenders, discussions
have been initiated and lender appetite for the sector remains
strong.
In February 2023 an interest rate cap was put in place on the
GBP70.0 million drawn Lloyds facility, capping SONIA at 5 per cent.
At time of signing these financial statements the Group had GBP44.0
million of floating rate debt.
As part of the Group's going concern and viability modelling,
certain scenarios are considered to model the impact on liquidity.
All of the groups covenants are currently compliant and we envisage
compliance to continue to be achieved in a reasonably severe
downside scenario. The Group's portfolio could currently withstand
a 25 per decline in property valuations before a breach in loan to
value covenants are triggered. The Group's average interest cover
ratio across all facilities is 2.0 times, whereas gross profit is
currently in excess of 3.0 times total finance costs, providing a
good degree of comfort. Interest cover ratios in place across the
Group's debt facilities could currently withstand a 2.5 per cent
increase in interest rates before a breach would occur.
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 maybe required to mitigate any potential breach. The
Group's borrowings are spread across a range of lenders and
maturities so as to minimise any potential concentration of
risk.
The Directors have considered the Group's principal risks and
severe but plausible downside scenarios in assessing the Group's
and Company's going concern for the period to 31 December 2024. The
Directors have considered, in particular:
- a material reduction in revenue, both in terms of occupancy and growth rate;
- inflation remains high, at eight per cent;
- utilities costs increase by 1.5 times current market expectation;
- interest rates increase by 1.5 per cent over current
forecasts, impacting the Group's floating rate debt;
- an immediate valuation shock of minus 15 per cent in property valuations; and
- rates at which the expiring debt facilities totalling GBP64.0
million in the period, could be refinanced. These were assumed to
be refinanced at floating rates applicable at the point of expiry
and subject to an interest rate uplift of 1.5 per cent.
In addition, the Directors considered potential mitigants to the
downside scenario which include, but are not limited to, utilising
existing liquidity reserves, further asset disposals, pledging as
security ungeared properties and suspending non committed capital
expenditure.
Having made enquiries, the Directors have reasonable expectation
that the Group and Company have adequate resources to continue in
operational existence for the period to 31 December 2024. In
addition, having reassessed the Group and Company's principal
risks, the Directors considered it appropriate to adopt the going
concern basis of accounting in preparing these financial
statements.
1.5 Significant Accounting Estimates and Judgements
The preparation of the Group's financial statements requires
management to make estimates and judgements 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 estimates and judgements could
result in outcomes that require a material adjustment to the
carrying amount of the asset or liability affected in future
periods.
Estimates
In the process of applying the Group's accounting policies,
management has made the following estimates, which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
(a) Fair Valuation of Investment Property
The market value of investment property is determined, by an
independent external 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. The significant methods and assumptions used by valuers
in estimating the fair value of investment property are set out in
Note 11.
For properties under development, the fair value is calculated
by estimating the fair value of the completed property using the
income capitalisation technique less estimated costs to completion
and an appropriate developer's margin.
Judgements
In the process of applying the Group's accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
(b) 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.
Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 31 December
2022. Subsidiaries are those investee entities where control is
achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, it
has:
(a) power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee);
(b) exposure, or rights, to variable returns from its involvement with the investee; and
(c) the ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar
rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group's voting rights and potential voting rights.
The Group reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the
subsidiary.
The financial statements of the subsidiaries are prepared for
the same reporting period as the Parent Company, using consistent
accounting policies. All intra-Group balances, transactions and
unrealised gains and losses resulting from intra-Group transactions
are eliminated in full.
Financial Assets
The Group classifies its financial assets into one of the
categories discussed below, depending on the purpose for which the
asset was acquired.
Fair Value Through Profit or Loss
These are carried in the Statement of Financial Position at fair
value with changes in fair value recognised in the Statement of
Comprehensive Income in the finance income or expense line. The
Group does not have any assets held for trading nor does it
voluntarily classify any financial assets as being at fair value
through profit or loss.
Amortised Cost
These assets are primarily from the provision of goods and
services to customers (e.g. trade receivables). They are initially
recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue and are subsequently
carried at amortised cost using the effective interest rate method,
less provision for impairment.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 using the lifetime
expected credit losses. During this process the probability of the
non-payment of the trade receivable is assessed. This probability
is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
trade receivables. For trade receivables, which are reported net,
such provisions are recorded in a separate provision account with
the loss being recognised within cost of sales in the Statement of
Comprehensive Income. On confirmation that the trade receivable
will not be collectable, the gross carrying value of the asset is
written off against the associated provision.
Impairment provisions for intercompany receivables are
recognised based on a forward-looking expected credit loss model.
The methodology used to determine the amount of the provision is
based on whether there has been a significant increase in credit
risk since initial recognition of the financial asset. For those
where the credit risk has not increased significantly since initial
recognition of the financial asset, 12-month expected credit losses
against gross interest income are recognised. For those where the
credit risk has increased significantly, lifetime expected credit
losses along with the gross interest income are recognised. For
those that are determined to be credit impaired, lifetime expected
credit losses along with interest income on a net basis are
recognised.
From time to time, the Group elects to renegotiate the terms of
trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to
changes in the timing of payments rather than changes to the
amounts owed and, in consequence, the new expected cash flows are
discounted at the original effective interest rate and any
resulting difference to the carrying value is recognised in the
Statement of Comprehensive Income (operating profit).
The Group's financial assets measured at amortised cost comprise
trade and other receivables and cash and cash equivalents in the
Statement of Financial Position.
Cash and cash equivalents includes cash held on deposit with
banks.
Financial Liabilities
The Group classifies its financial liabilities into one of two
categories, depending on the purpose for which the liability was
acquired.
Fair Value Through Profit or Loss
These are carried in the Statement of Financial Position at fair
value with changes in fair value recognised in the Statement of
Comprehensive Income.
Other Financial Liabilities
Other financial liabilities include the following items:
- Bank borrowing is initially recognised at fair value net of
any transaction costs directly attributable to the issue of the
instrument. Such interest-bearing liabilities are subsequently
measured at amortised cost using the effective interest rate
method, which ensures that any interest expense over the period to
repayment is at a constant rate on the balance of the liability
carried in the Consolidated Statement of Financial Position. For
the purposes of each financial liability, interest expense includes
initial transaction costs and any premium payable on redemption, as
well as any interest or coupon payable while the liability is
outstanding.
- Trade payables and other short-term monetary liabilities,
which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest method.
Intangible Assets
Intangible assets are initially recognised at cost and then
subsequently carried at cost less accumulated amortisation and
impairment losses.
Amortisation has been charged to the Consolidated Statement of
Comprehensive Income on a straight-line basis over ten years.
Investment Property
Investment property comprises property that is held to generate
rental income or for capital appreciation. This includes property
under development rather than for sale in the ordinary course of
business.
Investment property is measured initially at cost including
transaction costs and is included in the financial statements on
unconditional exchange. Transaction costs include transfer taxes,
professional fees and initial leasing commissions to bring the
property to the condition necessary for it to be capable of
operating.
Once purchased, investment property is stated at fair value.
Gains or losses arising from changes in the fair values are
included in the Consolidated Statement of Comprehensive Income in
the period in which they arise.
A property ceases to be recognised as investment property and is
transferred at its fair value to property held for sale when it
meets the criteria of IFRS 5. Under IFRS 5 the asset must be
available for immediate sale in its present condition subject only
to the terms that are usual and customary for sales of such assets
and its sale must be highly probable.
The criteria for a sale being highly probable per IFRS 5 are as
follows:
-- management is committed to a plan to sell;
-- the asset is available for immediate sale;
-- an active programme to locate a buyer has been initiated;
-- the sale is highly probable (within twelve months of classification as held for sale unless circumstances are beyond the control of the Group);the asset is being actively marketed for sale at a sales price reasonable in relation to its fair value; and
-- actions required to complete the plan indicate that it is
unlikely that plan will be significantly changed or withdrawn
Investment property is derecognised when it has been disposed
of, or permanently withdrawn from use, and no future economic
benefit is expected from its disposal. The investment property is
derecognised upon unconditional exchange. The difference between
the net disposal proceeds and the carrying amount of the asset
would result in either gains or losses at the retirement or
disposal of investment property. Any gains or losses are recognised
in the Consolidated Statement of Comprehensive Income in the period
of retirement or disposal.
Property, Plant and Equipment
All property, plant and equipment is stated at historical cost
less depreciation. Historical cost includes expenditure which is
directly attributable to the acquisition of the asset.
Depreciation has been charged to the Consolidated Statement of
Comprehensive Income on the following basis:
- Fixtures and fittings: 15% per annum; and
- Computer equipment: straight-line basis over three years.
Rental Income
The Group is the lessor in respect of operating leases. Rental
income arising from operating leases on investment property is
accounted for on a straight-line basis over the lease term and is
included in gross rental income in the Consolidated Statement of
Comprehensive Income due to its operating nature.
Tenant lease incentives are recognised as a reduction of rental
revenue on a straight-line basis over the term of the lease. The
lease term is the non - cancellable period of the lease together
with any further term for which the tenant has the option to
continue the lease, where, at the inception of the lease, the
Directors are reasonably certain that the tenant will exercise that
option.
Amounts received from tenants to terminate leases or to
compensate for dilapidations are recognised in the Consolidated
Statement of Comprehensive Income when the right to receive them
arises.
Where a student requests a rent refund and they meet the
necessary criteria, including leaving the property, the Group
recognise no further income in relation to that tenancy.
Segmental Information
The Directors are of the opinion that the Group is engaged in a
single segment business, being the investment in student and
commercial lettings, within the United Kingdom.
Share-based Payments
Where share options are awarded to employees or Directors, the
fair value of the options at the date of grant is charged to the
Consolidated Statement of Comprehensive Income over the vesting
period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of
options that eventually vest. Non-vesting conditions and market
vesting conditions are factored into the fair value of the options
granted. So long as all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting
conditions are satisfied.
Share Capital
Ordinary shares are classified as equity. External costs
directly attributable to the issuance of shares are recognised as a
deduction from equity.
Taxation
As the Group is a UK REIT, profits arising in respect of the
property rental business are not subject to UK corporation tax.
Taxation in respect of profits and losses outside of the
property rental business comprise current and deferred taxes.
Taxation is recognised in the Consolidated Statement of
Comprehensive Income except to the extent that it relates to items
recognised as a direct movement in equity, in which case it is also
recognised as a direct movement in equity.
Current tax is the total of the expected corporation tax payable
in respect of any non-REIT taxable income for the year and any
adjustment in respect of previous periods, based on tax rates
applicable to the periods.
Deferred tax is calculated in respect of temporary differences
between the carrying amount of assets and liabilities for financial
reporting purposes and their tax bases, based on tax rates enacted
or substantively enacted at the balance sheet date.
Deferred tax liabilities are recognised in full (except to the
extent that they relate to the initial recognition of assets and
liabilities not acquired in a business combination). Deferred tax
assets are only recognised to the extent that it is considered
probable that the Group will obtain a tax benefit when the
underlying temporary differences unwind.
1.6 Impact of New Accounting Standards and Changes in Accounting
Policies
At the date of authorisation of these financial statements, the
following accounting standards had been issued which are not yet
applicable to the Group:
- IAS 1 Classification of Liabilities as Current or Non-current
- IAS 8 Definition of Accounting Estimates
- IAS 1 IFRS Practice Statement 2 - Disclosure of Accounting policies
- IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction
- IFRS 7/9 Application and Comparative Information
- IFRS 16 Leases: Lease Liability in a Sale and Leaseback
The above standards or interpretations not yet effective are not
expected to have a material impact on these consolidated financial
statements of the Group.
2. REVENUE
Group
--------------------------
Year ended Year ended
31 December 31 December
2022 2021
GBP'm GBP'm
---------------------------------------------------------------------------------------- ------------ ------------
Student rental income 71.4 56.0
Student rental refunds* - (1.8)
Commercial rental income 1.6 1.5
Other income - 0.3
---------------------------------------------------------------------------------------- ------------ ------------
Total revenue 73.0 56.0
---------------------------------------------------------------------------------------- ------------ ------------
* These were Covid-19 related concessions in the prior year. No such concessions were
offered
in 2022.
3. PROPERTY EXPENSES
Group
--------------------------
Year ended Year ended
31 December 31 December
2022 2021
GBP'm GBP'm
------------------------------------------------- ------------ ------------
Direct site costs (income generating properties) 5.7 7.0
Technology services 0.6 0.7
Site office and utilities 12.2 10.4
Cleaning and service contracts 3.3 3.0
Repairs and maintenance 2.2 2.0
------------------------------------------------- ------------ ------------
Total property expenses 24.0 23.1
------------------------------------------------- ------------ ------------
4. ADMINISTRATIVE EXPENSES
Group
--------------------------
Year ended Year ended
31 December 31 December
2022 2021
GBP'm GBP'm
------------------------------------------------------------ ------------ ------------
Salaries and Directors' remuneration 7.4 5.3
Legal and professional fees 2.3 2.3
Other administrative costs 1.6 1.5
Depreciation and amortisation 0.6 0.5
IT expenses 0.8 0.5
------------------------------------------------------------ ------------ ------------
12.7 10.1
------------------------------------------------------------ ------------ ------------
Auditor's fees
------------------------------------------------------------ ------------ ------------
Fees payable for the audit of the Group's annual accounts 0.4 0.3
Fees payable for the review of the Group's interim accounts - -
Fees payable for the audit of the Group's subsidiaries 0.1 0.1
------------------------------------------------------------ ------------ ------------
Total auditor's fees 0.5 0.4
------------------------------------------------------------ ------------ ------------
Abortive acquisition costs 0.2 0.1
------------------------------------------------------------ ------------ ------------
Total administrative expenses 13.4 10.6
------------------------------------------------------------ ------------ ------------
5. NET FINANCE COST
Group
--------------------------
Year ended Year ended
31 December 31 December
2022 2021
GBP'm GBP'm
--------------------------------------- ------------ ------------
Finance costs
Interest expense on bank borrowings 14.0 11.6
Amortisation of loan transaction costs 1.0 0.8
--------------------------------------- ------------ ------------
Net finance cost 15.0 12.4
--------------------------------------- ------------ ------------
6. EMPLOYEES AND DIRECTORS
Company Group
-------------------------- --------------------------
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2022 2021 2022 2021
GBP'm GBP'm GBP'm GBP'm
------------------------------------------------------------ ------------ ------------ ------------ ------------
Wages and salaries 4.4 3.5 10.7 8.8
Pension costs 0.2 0.1 0.5 0.4
Cash bonus 0.5 - 0.9 0.1
Share-based payments 0.7 0.2 0.7 0.2
National insurance 0.6 0.5 1.1 0.9
------------------------------------------------------------ ------------ ------------ ------------ ------------
6.4 4.3 13.9 10.4
------------------------------------------------------------ ------------ ------------ ------------ ------------
Less: Hello Student(R) employee costs included within
property expenses - - (6.5) (5.1)
------------------------------------------------------------ ------------ ------------ ------------ ------------
Amounts included in administrative expenses 6.4 4.3 7.4 5.3
------------------------------------------------------------ ------------ ------------ ------------ ------------
The average monthly number of employees:
Management - Company 8 8 8 8
Administration - Company 52 49 52 49
Operations - Hello Student Management Limited - - 280 238
------------------------------------------------------------ ------------ ------------ ------------ ------------
60 57 340 295
------------------------------------------------------------ ------------ ------------ ------------ ------------
Group
--------------------------
Year ended Year ended
31 December 31 December
2022 2021
Directors' remuneration GBP'm GBP'm
------------------------ ------------ ------------
Salaries and fees 1.1 1.0
Pension costs 0.1 0.1
Cash bonus 0.3 0.1
Share-based payments 0.6 0.2
2.1 1.4
------------------------ ------------ ------------
A summary of the Directors' emoluments, including the
disclosures required by the Companies Act 2006 is set out in the
Directors' Remuneration Report.
7. CORPORATION TAX
The Group became a REIT on 1 July 2014 and as a result does not
pay UK corporation tax on its profits and gains from its qualifying
property rental business in the UK provided it meets certain
conditions. Non-qualifying profits and gains of the Group continue
to be subject to corporation tax as normal.
In order to achieve and retain REIT status, several conditions
have to be met on entry to the regime and on an ongoing basis,
including:
- at the start of each accounting period, the assets of the
property rental business (plus any cash and certain readily
realisable investments) must be at least 75% of the total value of
the Group's assets;
- at least 75% of the Group's total profits must arise from the
tax-exempt property rental business; and
- at least 90% of the tax exempt profit of the property rental
business (excluding gains) of the accounting period must be
distributed.
In addition, the full UK corporation tax exemption in respect of
the profits of the property rental business will not be available
if the profit financing cost ratio in respect of the property
rental business is less than 1.25.
The Directors intend that the Group should continue as a REIT
for the foreseeable future, with the result that deferred tax is
not required to be recognised in respect of temporary differences
relating to the property rental business.
Group
--------------------------
Year ended Year ended
31 December 31 December
2022 2021
GBP'm GBP'm
---------------------------------------------------------------------------------------- ------------ ------------
Current tax
Income tax charge for the year - -
Adjustment in respect of prior year - -
---------------------------------------------------------------------------------------- ------------ ------------
Total current income tax charge in the income statement - -
---------------------------------------------------------------------------------------- ------------ ------------
Deferred tax
Total deferred income tax charge in the income statement - -
---------------------------------------------------------------------------------------- ------------ ------------
Total current income tax charge in the income statement - -
---------------------------------------------------------------------------------------- ------------ ------------
The tax assessed for the year is lower than the standard rate of corporation tax in the
year
Profit for the year 67.7 29.2
---------------------------------------------------------------------------------------- ------------ ------------
Profit before tax multiplied by the rate of corporation tax in the UK of 19% (2021: 19%) 12.9 5.5
Exempt property rental profits in the year (6.4) (4.1)
Exempt property revaluations in the year (8.7) (3.3)
Effects of:
Non-allowable expenses 0.2 0.1
Capital allowances - (1.1)
Gain on disposal not taxable - 0.3
Unutilised current year tax losses 2.0 2.6
---------------------------------------------------------------------------------------- ------------ ------------
Total current income tax charge in the income statement - -
---------------------------------------------------------------------------------------- ------------ ------------
No deferred tax asset has been recognised in respect of gross
tax losses of GBP34.5 million (2021: GBP20.6 million), accelerated
capital allowances of GBP2.7 million (2021: GBP2.5 million) and
share based payments of GBP1.5m (of which GBP901k relates to the
profit and loss account and GBP619k relates to equity) (2021:
GBP0.6 million) on the basis that the business is not expected to
generate taxable profits in future periods against which these
amounts can be applied. Therefore, a deferred tax asset of GBP9.7
million (2021: GBP5.2 million) has not been recognised in respect
of such timing differences.
The current tax rate used for the year is 19% based on rates
already enacted in previous periods. An increase in the UK
corporation rate from 19% to 25% (effective 1 April 2023) was
substantively enacted on 24 May 2021. By virtue of the company's
status as a UK REIT, this should not materially increase the
company's future current tax charge. . The deferred tax at 31
December 2022 has been calculated based on these rates, reflecting
the expected timing of reversal of the related temporary
differences.
8. EARNINGS PER SHARE
The number of shares used in the calculation of basic earnings
per share is based on the time weighted average number of shares
throughout the year.
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 year.
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, and used by the Board to assess the Group's dividend
payments.
The calculation of each of the measures set out below:
Calculation Calculation Calculation Calculation
of basic of diluted of EPRA of EPRA
EPS EPS basic EPS diluted EPS
GBP m GBP m GBP m GBP m
------------------------------------------------------ ----------- ----------- ----------- ------------
Year to 31 December 2022
Earnings per IFRS statement of comprehensive income 67.7 67.7 67.7 67.7
Adjustments to remove:
Changes in fair value of investment properties (Note
11) - - (45.6) (45.6)
Gain on disposal of investment property - - (1.5) (1.5)
------------------------------------------------------- ----------- ----------- ----------- ------------
Earnings 67.7 67.7 20.6 20.6
------------------------------------------------------- ----------- ----------- ----------- ------------
Weighted average number of shares (m) 603.3 603.3 603.3 603.3
Adjustment for employee share options (m) - 3.9 - 3.9
------------------------------------------------------- ----------- ----------- ----------- ------------
Total number shares (m) 603.3 607.2 603.3 607.2
------------------------------------------------------- ----------- ----------- ----------- ------------
Earnings per share (pence) 11.2 11.1 3.4 3.4
------------------------------------------------------- ----------- ----------- ----------- ------------
Year to 31 December 2021
Earnings per IFRS statement of comprehensive income 29.2 29.2 29.2 29.2
Adjustments to remove:
Gain/loss on disposal of investment property - - (1.7) (1.7)
Changes in fair value of investment properties (Note
11) - - (17.6) (17.6)
------------------------------------------------------- ----------- ----------- ----------- ------------
Earnings 29.2 29.2 9.9 9.9
------------------------------------------------------- ----------- ----------- ----------- ------------
Weighted average number of shares (m) 603.2 603.2 603.2 603.2
Adjustment for employee share options (m) - 0.3 - 0.3
------------------------------------------------------- ----------- ----------- ----------- ------------
Total number shares (m) 603.2 603.5 603.2 603.5
------------------------------------------------------- ----------- ----------- ----------- ------------
Earnings per share (pence) 4.8 4.8 1.6 1.6
------------------------------------------------------- ----------- ----------- ----------- ------------
9. NET ASSET VALUE PER SHARE
The principles of the three EPRA measures are set out below:
EPRA Net Reinstatement Value: Assumes that entities never sell
assets and aims to represent the value required to reinstate entity
assets.
EPRA Net Tangible Assets: Assumes that entities buy and sell
assets, which crystalises unavoidable deferred tax.
EPRA Net Disposal Value: Represents the shareholders' value
under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated to the
full extent of their liability, net of any resulting tax. As the
Group is a REIT, no adjustment is made for deferred tax.
The Group considers EPRA NTA to be the most relevant measure and
this is used as the group primary NAV measure.
A reconciliation of the three EPRA NAV metrics from IFRS NAV is
shown in the table below.
NAV EPRA NAV measures
EPRA EPRA EPRA
IFRS NTA NRV NDV
Year ended 31 December 2022 GBP m GBP m GBP m GBP m
----------------------------------------------- ------ ------ ------ ------
Net assets per Statement of Financial Position 700.8 700.8 700.8 700.8
Adjustments
Fair value of fixed rate debt - - - 15.3
Purchaser's costs(1) - - 38.5 -
----------------------------------------------- ------ ------ ------ ------
Net assets used in per share calculation 700.8 700.8 739.3 716.1
----------------------------------------------- ------ ------ ------ ------
Number of shares in issue
----------------------------------------------- ------ ------ ------ ------
Issued share capital (m) 603.4 603.4 603.4 603.4
Issued share capital plus employee options (m) 607.2 607.2 607.2 607.2
Net Asset Value per share
----------------------------------------------- ------ ------ ------ ------
Basic Net Asset Value per share (pence) 116.1
Diluted Net Asset Value per share (pence) 115.4 115.4 121.8 117.9
----------------------------------------------- ------ ------ ------ ------
NAV EPRA NAV measures
----------------------------------------------- ------ ----------------------
EPRA EPRA EPRA
IFRS NTA NRV NDV
Year ended 31 December 2021 GBP m GBP m GBP m GBP m
----------------------------------------------- ------ ------ ------ ------
Net assets per Statement of Financial Position 647.6 647.6 647.6 647.6
Adjustments
Fair value of fixed rate debt - - - (14.3)
Purchaser's costs(1) - - 34.2 -
----------------------------------------------- ------ ------ ------ ------
Net assets used in per share calculation 647.6 647.6 681.8 633.3
----------------------------------------------- ------ ------ ------ ------
Number of shares in issue
----------------------------------------------- ------ ------ ------ ------
Issued share capital (m) 603.2 603.2 603.2 603.2
Issued share capital plus employee options (m) 606.6 606.6 606.6 606.6
Net Asset Value per share GBP GBP GBP GBP
----------------------------------------------- ------ ------ ------ ------
Basic Net Asset Value per share (pence) 107.4
Diluted Net Asset Value per share (pence) 106.7 106.7 112.4 104.4
----------------------------------------------- ------ ------ ------ ------
(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.
10. DIVIDS PAID
Group and Company
--------------------------
Year ended Year ended
31 December 31 December
2022 2021
GBP m GBP m
---------------------------------------------------------------------------------------- ------------ ------------
Interim dividend of 2.50 pence per ordinary share in respect of the quarter ended 30
September
2021 - 15.1
Interim dividend of 0.625 pence per ordinary share in respect of the quarter ended 31
December
2021 3.8
Interim dividend of 0.625 pence per ordinary share in respect of the quarter ended 31
March
2022 3.8 -
Interim dividend of 0.625 pence per ordinary share in respect of the quarter ended 30
June
2022 3.8 -
Interim dividend of 0.625 pence per ordinary share in respect of the quarter ended 30
September
2022 3.8 -
15.2 15.1
---------------------------------------------------------------------------------------- ------------ ------------
As at 31 December 2022 there was no accrual relating to
withholding tax on the 2022 dividend (2021: GBP1.5 million). On 16
March 2023 the Company declared a dividend of 0.875 pence per share
to be paid on 14 April 2023.
11. INVESTMENT PROPERTY
Group
------------------------------------- -----------------------------------------------------------------
Investment
Investment properties Total Properties Total
properties long operational under investment
freehold leasehold assets development property
Year ended 31 December 2022 GBP m GBP m GBP m GBP m GBP m
------------------------------------- ----------- ----------- ------------ ------------ -----------
As at 1 January 2022 835.5 131.7 967.2 28.7 995.9
Capital expenditure 12.9 2.3 15.2 15.2 30.4
Property acquisitions 19.3 - 19.3 - 19.3
Reclassification (8.6) 8.6 - - -
Transfer of completed developments 52.9 - 52.9 (52.9) -
Sale of investment property (11.8) - (11.8) - (11.8)
Transfer to held for sale asset (13.7) - (13.7) - (13.7)
Change in fair value during the year 33.9 (0.6) 33.3 12.3 45.6
------------------------------------- ----------- ----------- ------------ ------------ -----------
As at 31 December 2022 920.4 142.0 1,062.4 3.3 1,065.7
------------------------------------- ----------- ----------- ------------ ------------ -----------
Group
-----------------------------------------------------------------
Investment
Investment properties Total Properties Total
properties long operational under investment
freehold leasehold assets development property
Year ended 31 December 2021 GBP m GBP m GBP m GBP m GBP m
------------------------------------- ----------- ----------- ------------ ------------ -----------
As at 1 January 2021 849.2 132.1 981.3 23.8 1,005.1
Capital expenditure 6.2 1.8 8.0 7.4 15.4
Sale of investment property (16.3) - (16.3) - (16.3)
Transfer to held for sale asset (25.9) - (25.9) - (25.9)
Change in fair value during the year 22.3 (2.2) 20.1 (2.5) 17.6
------------------------------------- ----------- ----------- ------------ ------------ -----------
As at 31 December 2021 835.5 131.7 967.2 28.7 995.9
------------------------------------- ----------- ----------- ------------ ------------ -----------
During the year GBP15.2 million (31 December 2021: GBP8.0
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 their 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 31 December 2022, in
accordance with the Appraisal & Valuation Standards of the
RICS, on the basis of market value. Properties have been valued on
an individual basis. 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 table below reconciles between the fair value of the
investment property per the Consolidated Group Statement of
Financial Position and investment property per the independent
valuation performed in respect of each year end.
Group
------------------------
As at As at
31 December 31 December
2022 2021
GBP m GBP m
----------------------------------------------------- ----------- -----------
Value per independent valuation report 1,078.9 1,021.3
----------------------------------------------------- ----------- -----------
Add: Head lease 0.5 0.5
----------------------------------------------------- ----------- -----------
Deduct: Assets held for sale (13.7) (25.9)
----------------------------------------------------- ----------- -----------
Fair value per Group Statement of Financial Position 1,065.7 995.9
----------------------------------------------------- ----------- -----------
Fair Value Hierarchy
The following table provides the fair value measurement
hierarchy for investment property:
Quoted
prices Significant Significant
inputs observable unobservable
markets inputs inputs
Total (Level 1) (Level 2) (Level 3)
Date of valuation 31 December 2022 GBP m GBP m GBP m GBP m
----------------------------------- ------- --------- ----------- ------------
Assets measured at fair value:
Student properties 1,046.5 - - 1,046.5
Commercial properties 19.2 - - 19.2
----------------------------------- ------- --------- ----------- ------------
As at 31 December 2022 1,065.7 - - 1,065.7
----------------------------------- ------- --------- ----------- ------------
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
Total (Level 1) (Level 2) (Level 3)
Date of valuation 31 December 2021 GBP m GBP m GBP m GBP m
----------------------------------- ----- ------------- ----------- ------------
Assets measured at fair value:
Student properties 976.9 - - 976.9
Commercial properties 19.0 - - 19.0
----------------------------------- ----- ------------- ----------- ------------
As at 31 December 2021 995.9 - - 995.9
----------------------------------- ----- ------------- ----------- ------------
There have been no transfers between Level 1 and Level 2 during
the year, nor have there been any transfers between Level 2 and
Level 3 during the year.
The valuations have been prepared on the basis of market value
which is defined in the RICS Valuation Standards, as:
"The estimated amount for which a property should exchange on
the date of valuation between a willing buyer and a willing seller
in an arm's-length transaction after proper marketing wherein the
parties had each acted knowledgeably, prudently and without
compulsion."
Market value as defined in the RICS Valuation Standards is the
equivalent of fair value under IFRS.
The following descriptions and definitions relate to valuation
techniques and key unobservable inputs made in determining fair
values. The valuation techniques for student properties uses a
discounted cash flow with the following inputs:
(a) Unobservable input: Rental income
The rent at which space could be let in the market conditions
prevailing at the date of valuation. Range GBP91 per week-GBP461
per week with a weighted average weekly rent of GBP184 (31 December
2021: GBP85-GBP387 per week, weighted average GBP179).
(b) Unobservable input: Rental growth
The estimated average increase in rent based on both market
estimations and contractual arrangements. Assumed rental growth of
5.22% used in valuations (31 December 2021: decline of 1.56%).
(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.
Range: 4.50%-8.65%, with a weighted average of 5.2% (31 December
2021: 4.25%-8.15%, weighted average 5.3%).
(d) Unobservable input: Physical condition of the property
At the interim we indicated we would spend GBP37 million on
health and safety works over the next five years. CBREs assumption
is that GBP24.4 million of this cost should now be reflected in the
valuation at the year end in respect of work on external wall
systems and fire stopping on buildings over 11 metres.
(e) Unobservable input: Planning consent
The development site at FISC, Canterbury is pending planning
consent for phase 2. CBRE have determined the fair value as the
sales price for a development in progress including a profit
margin, discount and risk factors to complete the project.
(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 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 -3% change +3% change -0.25% +0.25%
in cost of EWS in rental in rental change change
works income income in yield in yield
As at 31 December 2022 GBP m GBP m GBP m GBP m GBP m
---------------------------------------------------------- -------------- ---------- ---------- -------- --------
(Decrease)/increase in the fair value of the investment
properties (3.4) (43.3) 45.6 54.3 (47.2)
---------------------------------------------------------- -------------- ---------- ---------- -------- --------
15% increase -3% change +3% change -0.25% +0.25%
in cost of EWS in rental in rental change change
Works income income in yield in yield
As at 31 December 2021 GBPm GBP m GBP m GBP m GBP m
---------------------------------------------------------- -------------- ---------- ---------- -------- --------
(Decrease)/increase in the fair value of the investment
properties (2.4) (41.5) 40.7 48.5 (44.9)
---------------------------------------------------------- -------------- ---------- ---------- -------- --------
(g) The key assumptions for the commercial properties are net
initial yield, current rent and rental growth. A movement of 3% in
passing rent and 0.25% in the net initial yield will not have a
material impact on the financial statements.
12. INTANGIBLE ASSETS
Group Company
-------------------------------------- --------------------
Hello Student(R)
website NAVision NAVision
development development Total development Total
Year ended 31 December 2022 GBP'm GBP'm GBP'm GBP'm GBP'm
---------------------------- ---------------- ------------ ------ ------------ ------
Costs
As at 1 January 2022 0.9 2.2 3.1 2.2 2.2
Additions - 0.8 0.8 0.8 0.8
---------------------------- ---------------- ------------ ------ ------------ ------
As at 31 December 2022 0.9 3.0 3.9 3.0 3.0
---------------------------- ---------------- ------------ ------ ------------ ------
Amortisation
As at 1 January 2022 0.9 0.9 1.8 0.9 0.9
Charge for the year - 0.2 0.2 0.2 0.2
As at 31 December 2022 0.9 1.1 2.0 1.1 1.1
---------------------------- ---------------- ------------ ------ ------------ ------
Net book value
As at 31 December 2022 - 1.9 1.9 1.9 1.9
---------------------------- ---------------- ------------ ------ ------------ ------
Group Company
----------------- ------------- ------- --------------------
Hello Student(R)
website NAVision NAVision(1)
development development Total development Total
Year ended 31 December 2021 GBP m GBP m GBP m GBP m GBP m
---------------------------- --- ---------------- ------------ ------ ------------ ------
Costs
As at 1 January 2021 0.9 1.6 2.5 1.6 1.6
Additions - 0.6 0.6 0.6 0.6
---------------------------------- ---------------- ------------ ------ ------------ ------
As at 31 December 2021 0.9 2.2 3.1 2.2 2.2
---------------------------------- ---------------- ------------ ------ ------------ ------
Amortisation
As at 1 January 2021 0.8 0.7 1.5 0.7 0.7
Charge for the year 0.1 0.2 0.3 0.2 0.2
As at 31 December 2021 0.9 0.9 1.8 0.9 0.9
---------------------------------- ---------------- ------------ ------ ------------ ------
Net book value
As at 31 December 2021 - 1.3 1.3 1.3 1.3
---------------------------------- ---------------- ------------ ------ ------------ ------
13. PROPERTY, PLANT AND EQUIPMENT
Group Company
-------------------------------- --------------------------------
Fixtures and Computer Fixtures and Computer
fittings equipment Total fittings equipment Total
Year ended 31 December 2022 GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
---------------------------- ------------ ---------- ------ ------------ ---------- ------
Costs
As at 1 January 2022 0.9 0.4 1.3 0.9 0.2 1.1
Additions 0.8 0.2 1.0 0.8 0.1 0.9
---------------------------- ------------ ---------- ------ ------------ ---------- ------
As at 31 December 2022 1.7 0.6 2.3 1.7 0.3 2.0
---------------------------- ------------ ---------- ------ ------------ ---------- ------
Depreciation
As at 1 January 2022 0.6 0.3 0.9 0.6 0.2 0.8
Charge for the year 0.2 0.1 0.3 0.2 - 0.2
---------------------------- ------------ ---------- ------ ------------ ---------- ------
As at 31 December 2022 0.8 0.4 1.2 0.8 0.2 1.0
---------------------------- ------------ ---------- ------ ------------ ---------- ------
Net book value
As at 31 December 2022 0.9 0.2 1.1 0.9 0.1 1.0
---------------------------- ------------ ---------- ------ ------------ ---------- ------
Group Company
-------------------------------- --------------------------------
Fixtures and Computer Fixtures and Computer
fittings equipment Total fittings equipment Total
Year ended 31 December 2021 GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
---------------------------- ------------ ---------- ------ ------------ ---------- ------
Costs
As at 1 January 2021 0.5 0.3 0.8 0.5 0.2 0.7
Additions 0.4 0.1 0.5 0.4 - 0.4
---------------------------- ------------ ---------- ------ ------------ ---------- ------
As at 31 December 2021 0.9 0.4 1.3 0.9 0.2 1.1
---------------------------- ------------ ---------- ------ ------------ ---------- ------
Depreciation
As at 1 January 2021 0.5 0.2 0.7 0.5 0.2 0.7
Charge for the year 0.1 0.1 0.2 0.1 - 0.1
---------------------------- ------------ ---------- ------ ------------ ---------- ------
As at 31 December 2021 0.6 0.3 0.9 0.6 0.2 0.8
---------------------------- ------------ ---------- ------ ------------ ---------- ------
Net book value
As at 31 December 2021 0.3 0.1 0.4 0.3 - 0.3
---------------------------- ------------ ---------- ------ ------------ ---------- ------
14. TRADE AND OTHER RECEIVABLES
Group Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2022 2021 2022 2021
GBP m GBP m GBP m GBP m
------------------------------------ ----------- ----------- ----------- -----------
Trade receivables 1.4 2.5 - -
Other receivables 2.2 1.8 0.1 0.1
Prepayments 3.2 2.9 0.1 0.2
VAT recoverable 0.2 0.6 0.1 -
------------------------------------ ----------- ----------- ----------- -----------
7.0 7.8 0.3 0.3
Amounts due from Group undertakings - - 400.5 369.0
------------------------------------ ----------- ----------- ----------- -----------
7.0 7.8 400.8 369.3
------------------------------------ ----------- ----------- ----------- -----------
In the Company, amounts owed from Group undertakings are
classified as due within one year due to their legal agreements
with the debtor, however, could be recovered after more than one
year should the debtors' circumstance not permit repayment on
demand.
Movements on the Group provision for impairment of trade
receivables were as follows:
Group
------------------------
31 December 31 December
2022 2021
GBP m GBP m
------------------------------------------------- ----------- -----------
At 1 January (1.5) (1.4)
Increase in provision for receivables impairment (0.4) (0.1)
------------------------------------------------- ----------- -----------
At 31 December (1.9) (1.5)
------------------------------------------------- ----------- -----------
Provisions for impaired receivables have been included in
property expenses in the income statement. Amounts charged to the
impairment provision are generally written off, when there is no
expectation of recovery.
The maximum exposure to credit risk at the reporting date is the
book value of each class of receivable mentioned above and its cash
and cash equivalents. The Group does not hold any collateral as
security, though in some instances students provide guarantors.
Management believes that the concentration of credit risk with
respect to trade receivables is limited due to the Group's customer
base being large, unrelated and living with us. As such we have
regular communication with them.
At 31 December 2022, there were no material trade receivables
overdue at the year end, and no aged analysis of trade receivables
has been included. The carrying value of trade and other
receivables classified at amortised cost approximates fair value.
The Company performed a review of the expected credit loss on the
amounts due from Group undertakings; there was no provision made
during the year (2021: GBPnil). There are no security obligations
related to these amounts due from Group undertakings.
15. HELD FOR SALE ASSETS
Management considers that one property (2021: five properties)
meets the conditions relating to assets held for sale under IFRS 5:
Non-current Assets Held for Sale. Contracts were exchanged for the
sale of the Emily Davies property in Southampton for GBP13.9
million in December 2022. Completion is expected within the first
half of 2023, subject to satisfactory completion of works relating
to fire doors. The fair value of this property in these financial
statements is GBP13.7 million (2021: GBP25.9 million).
All Non-current Assets Held for Sale fall within 'Level 3' as
defined by IFRS. There has been no transfers within the fair value
hierarchy during the year.
16. CASH AND CASH EQUIVALENTS
Group Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2022 2021 2022 2021
GBP m GBP m GBP m GBP m
-------------------------- ----------- ----------- ----------- -----------
Cash and cash equivalents 55.8 37.1 4.3 2.0
-------------------------- ----------- ----------- ----------- -----------
17. TRADE AND OTHER PAYABLES
Group Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2022 2021 2022 2021
GBP m GBP m GBP m GBP m
----------------------------------- ----------- ----------- ----------- -----------
Trade payables 1.9 5.1 0.6 3.3
Other payables 5.4 2.1 0.3 0.2
Accruals 17.5 12.8 2.2 1.6
24.8 20.0 3.1 5.1
----------------------------------- ----------- ----------- ----------- -----------
Amounts owed to Group undertakings - - 87.8 27.2
----------------------------------- ----------- ----------- ----------- -----------
24.8 20.0 90.9 32.3
----------------------------------- ----------- ----------- ----------- -----------
At 31 December 2022, there was deferred rental income of GBP33.1
million (2021: GBP29.9 million) which was rental income that had
been charged that relates to future periods.
The Directors consider that the carrying value of trade and
other payables approximates to their fair value.
Amounts owed to Group undertakings are interest free and
repayable on demand.
18. BANK BORROWINGS
A summary of the drawn and undrawn bank borrowings in the year
is shown below:
Group
----------------------------------------------------------------------------
Bank Bank Bank Bank
borrowings borrowings borrowings borrowings
drawn undrawn Total drawn undrawn Total
31 December 31 December 31 December 31 December 31 December 31 December
2022 2022 2022 2021 2021 2021
GBP m GBP m GBP m GBP m GBP m GBP m
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
At 1 January 375.0 67.5 442.5 390.0 52.5 442.5
Bank borrowings drawn in the year 36.2 (36.2) - - - -
Bank borrowings repaid or cancelled
during the year (20.0) (11.3) (31.3) (15.0) 15.0 -
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
At 31 December 391.2 20.0 411.2 375.0 67.5 442.5
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
There is an undrawn RCF debt facility available of GBP20 million
at 31 December 2022 (2021: GBP45 million). The weighted average
term to maturity of the Group's debt as at the year end is 4.8
years (2021: 4.9 years). The Company repaid a separate facility of
GBP20 million prior to the year end (31 December 2021 balance:
GBP19.9 million). See note 26 for details of a related refinancing
post year end.
Bank borrowings are secured by charges over individual
investment properties held by certain asset-holding subsidiaries.
These assets have a fair value of GBP1,042.9 million at 31 December
2022 (2021: GBP977.1 million). In some cases, the lenders also hold
charges over the shares of the subsidiaries and the intermediary
holding companies of those subsidiaries.
Any associated fees in arranging the bank borrowings unamortised
as at the year end are offset against amounts drawn on the
facilities as shown in the table below:
Group
------------------------
31 December 31 December
2022 2021
Non-current GBP m GBP m
--------------------------------------------------- ----------- -----------
Balance brought forward 330.0 390.0
Total bank borrowings in the year 36.2 -
Bank borrowings becoming non-current in the year 45.0 -
Less: Bank borrowings becoming current in the year - (45.0)
Less: Bank borrowings repaid during the year (20.0) (15.0)
--------------------------------------------------- ----------- -----------
Bank borrowings drawn: due in more than one year 391.2 330.0
Less: Unamortised costs (4.7) (3.8)
--------------------------------------------------- ----------- -----------
Bank borrowings due in more than one year 386.5 326.2
--------------------------------------------------- ----------- -----------
Group
------------------------
31 December 31 December
2022 2021
Current GBP m GBP m
------------------------------------------------------- ----------- -----------
Balance brought forward 45.0 -
Total bank borrowings in the year - -
Less: Bank borrowings becoming non-current in the year (45.0) -
Bank borrowings becoming current in the year - 45.0
------------------------------------------------------- ----------- -----------
Bank borrowings drawn: due in less than one year - 45.0
Less: Unamortised costs - (0.3)
------------------------------------------------------- ----------- -----------
Bank borrowings due in less than one year - 44.7
------------------------------------------------------- ----------- -----------
Maturity of Bank Borrowings
Group
------------------------
31 December 31 December
2022 2021
GBP m GBP m
------------------------------------- ----------- -----------
Repayable in less than one year - 45.0
Repayable between one and two years 64.0 20.0
Repayable between two and five years 70.0 52.8
Repayable in over five years 257.2 257.2
------------------------------------- ----------- -----------
Bank borrowings 391.2 375.0
------------------------------------- ----------- -----------
Each of the Group's facilities has an interest charge which is
payable quarterly. Three of the facilities have an interest charge
that is based on a margin above SONIA whilst other facilities
interest charges are fixed at 4.0%, 3.5%, 3.2%, 3.6% and 3.2%. The
weighted average rate payable by the Group on its debt portfolio as
at the year end was 4.0% (2021: 3.0%).
Fair value of fixed rate borrowings
The Group considers that all bank loans fall within 'Level 3' as
defined by IFRS 13 'Fair value measurement'. The nominal value of
floating rate borrowings is considered to be a reasonable
approximation of fair value. However, the fair value of fixed rate
borrowings at the reporting date has been calculated by discounting
cash flows under the relevant agreements at indicative interest
rates for similar debt instruments using indicative rates provided
by lenders or advisers, which are considered unobservable.
Group
------------------------
31 December 31 December
2022 2021
GBP m GBP m
---------------------------------------- ----------- -----------
Carrying value of fixed rate borrowings 277.2 277.2
Fair value adjustment (15.3) 14.3
Fair value of fixed rate borrowings 261.9 291.5
---------------------------------------- ----------- -----------
The Group has bank loans with a total carrying value of GBP391.2
million, including the carrying value of fixed rate borrowings of
GBP277.2 million. The fair value equivalent at the reporting date
of the fixed rate debt was GBP261.9 million. The discount rate was
arrived at after considering the weighted average cost of capital,
an unlevered property discount rate, the market rate and the loan
to value.
An increase in the discount rate by twenty basis points would
result in a decrease of the fair value of the fixed rate borrowings
by GBP1.3 million. A decrease in the discount rate by twenty basis
points would result in an increase of the fair value of the fixed
rate borrowings by GBP1.3 million.
19. SHARE CAPITAL
Group and Company Group and Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2022 2022 2021 2021
Number GBP m Number GBP m
--------------------------------------------------------- ----------- ----------- ----------- -----------
Balance brought forward 603,203,052 6.0 603,160,940 6.0
Share options exercised (including dividend equivalence) 148,828 - 42,112 -
--------------------------------------------------------- ----------- ----------- ----------- -----------
Balance carried forward 603,351,880 6.0 603,203,052 6.0
--------------------------------------------------------- ----------- ----------- ----------- -----------
During the year there were two issues of 56,810 and 92,018
shares on 10 July and 17 August 2022 respectively. These related to
exercise of options under the deferred bonus scheme and save as you
earn share plans.
20. SHARE PREMIUM
The share premium relates to amounts subscribed for share
capital in excess of nominal value:
Group and Company
------------------------
31 December 31 December
2022 2021
GBP m GBP m
------------------------ ----------- -----------
Balance brought forward 0.3 0.3
Balance carried forward 0.3 0.3
------------------------ ----------- -----------
21. CAPITAL REDUCTION RESERVE
Group and Company
------------------------
31 December 31 December
2022 2021
GBP m GBP m
----------------------------------------------------- ----------- -----------
Balance brought forward 459.9 475.0
Less interim dividends declared and paid per Note 10 (15.2) (15.1)
----------------------------------------------------- ----------- -----------
Balance carried forward 444.7 459.9
----------------------------------------------------- ----------- -----------
The capital reduction reserve account is a distributable
reserve.
Refer to Note 10 for details of the declaration of dividends to
shareholders.
22. LEASING AGREEMENTS
Future total minimum lease receivables under non-cancellable
operating leases on investment properties are as follows:
Group
------------------------
31 December 31 December
2022 2021
GBP m GBP m
----------------------------- ----------- -----------
Less than one year 56.2 42.9
Between one and two years 1.5 1.4
Between two and three years 1.4 1.4
Between three and four years 1.3 1.3
Between four and five years 1.1 1.3
More than five years 6.0 7.8
----------------------------- ----------- -----------
Total 67.5 56.1
----------------------------- ----------- -----------
The above relates to assured shorthold tenancies (AST's) and
commercial leases in place as at 31 December 2022. The impact of
student leases for the forthcoming academic year signed by 31
December 2022 have not been included as the certainty of income
does not arise until the tenant takes occupation of the
accommodation. As at 31 December 2022, GBP31.1 million (31 December
2021: GBP32.0 million) of the future minimum lease receivables have
been received as cash.
23. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 December 2022 (31
December 2021: GBPnil).
24. CAPITAL COMMITMENTS
The Group was contractually committed to expenditure of GBP2.3
million at 31 December 2022 (31 December 2021: GBP8.6 million) for
the future development and enhancement of investment property.
25. RELATED PARTY DISCLOSURES
Key Management Personnel
Key management personnel are considered to comprise the Board of
Directors. Please refer to Note 6 for details of the remuneration
for the key management.
Share Capital
On 10 July 2022 56,810 shares were issued to a former Director
and certain employees under the Save As You Earn scheme.
On 17 August 2022 92,018 shares were issued to Lynne Fennah, a
Director, upon her exercise of options under the Deferred Bonus
Scheme.
Share-based Payments
On 24 March 2022, the Company granted nil-cost options over a
total of 1,292,559 (Duncan Garrood 721,898 and Lynne Fennah
570,661) ordinary shares pursuant to the Empiric Long Term
Incentive Plan for the 2021 financial year. Following Lynne
Fennah's resignation, 554,784 of her awards lapsed and the 15,877
awards relating to the deferred bonus element remained.
Details of the Director share ownership and dividends received
are included int the Directors' Remuneration Report.
Details of the shares granted and exercised are outlined in Note
27.
26. SUBSEQUENT EVENTS
On 31 January 2023, contracts were exchange for the sale of Bede
Park (Leicester) for GBP2.6 million. Completion occurred on 14
February 2023.
The renewal of a GBP20.0 million flexible unsecured loan
facility with First Commercial Bank completed on 3 February
2023.
27. SHARE-BASED PAYMENTS
The Company operates two equity-settled share-based remuneration
schemes for Executive Directors (deferred annual bonus and LTIP
schemes) and certain members of the Senior Leadership Team ("SLT")
who participate in the LTIP scheme. The details of the schemes are
included in the Remuneration Committee Report. The Group also
operates a Save As You Earn (SAYE) scheme for employees.
On 24 March 2022, the Company granted nil-cost options over a
total of 1,292,559 (Duncan Garrood 721,898 and Lynne Fennah
570,661) ordinary shares pursuant to the Empiric Long Term
Incentive Plan for the 2021 financial year. Following Lynne
Fennah's resignation, 554,784 of her awards lapsed and the 15,877
awards relating to the deferred bonus element remained.
During the year, the Company granted nil-cost options over a
total of 599,281 ordinary shares to members of the Senior
Leadership Team ("SLT") pursuant to the Empiric Long Term Incentive
Plan for the 2021 financial year. Following resignation of two of
the SLT members, 188,292 of these options also lapsed during the
year.
During the year, the Company granted options over a total of
213,655 ordinary shares in relation to the Save As You Earn scheme
at an exercise price of GBP0.75. The earliest date on which the
options will become exercisable is 1 July 2025.
Of the nil-cost options, 168,389 are currently exercisable. The
weighted average remaining contractual life of these options was
2.0 years (2021: 1.7 years).
During the year to 31 December 2022 the amount recognised
relating to the options was GBP0.7 million (2021: GBP0.2
million).
The awards have the benefit of dividend equivalence. The
Remuneration Committee will determine on or before vesting whether
the dividend equivalent will be provided in the form of cash and/or
shares.
31/12/2022 31/12/2021 31/12/2020 31/12/2019 31/12/2018 31/12/2017
--------------------------------------- ------------ ---------- ---------- ---------- ---------- -----------
Outstanding number brought forward 3,446,320 2,314,539 1,250,045 1,051,708 1,477,817 3,913,420
Granted during the period 2,430,279 1,725,577 1,064,494 604,134 439,022 207,198
Vested and exercised during the period (127,492) (35,779) - (129,253) (139,325) (691,237)
Lapsed during the period (1,992,233) (558,017) - (276,544) (725,806) (1,951,564)
--------------------------------------- ------------ ---------- ---------- ---------- ---------- -----------
Outstanding number carried forward 3,756,874 3,446,320 2,314,539 1,250,045 1,051,708 1,477,817
--------------------------------------- ------------ ---------- ---------- ---------- ---------- -----------
The fair value on date of grant for the nil-cost options under
the LTIP Awards and Annual Bonus Awards were priced using the Monte
Carlo pricing model.
The following information is relevant in the determination of
the fair value of the options granted in the year, for those
related to market based vesting conditions:
LTIPs (market based LTIPs (Total Return
Deferred bonus shares conditions) conditions) SAYE Award
----------- ---------------------- ---------------------- --------------------- ---------------------- ----------
Share price at grant GBP0.88 GBP0.88 GBP0.85
(a) date of GBP0.88
(b) Exercise price of GBPnil GBPnil GBPnil GBP0.75
(c) Vesting period 3 years 3 years 3 years 3 years
(d) Expected volatility of N/A 30.0% N/A 28.5%
Expected dividend
(e) yield of N/A 3.5% 2.8% 4.4%
(f) Risk-free rate of N/A 1.4% 1.4% 1.6%
The volatility assumption is based
on a statistical analysis of daily
share prices of comparator
companies over the last three
years
The TSR performance conditions have
been considered when assessing the
fair value of the options
----------------------------------- ---------------------- --------------------- ---------------------- ----------
28. FINANCIAL RISK MANAGEMENT
Financial Instruments
The Group's principal financial assets and liabilities are those
which arise directly from its operations: trade and other
receivables, trade and other payables; and cash and cash
equivalents. Set out below is a comparison by class of the carrying
amounts and fair value of the Group's financial instruments that
are shown in the financial statements:
Reconciliation of liabilities to cash flows from financing
activities
31 December 31 December
2022 2021
GBP m GBP m
------------------------------------------------------------- ----------- -----------
Bank borrowings and leasehold liability at start of the year 372.0 385.3
------------------------------------------------------------- ----------- -----------
Cash flows from financing activities
Bank borrowings drawn 36.2 -
Bank borrowings repaid (20.0) (15.0)
Lease liability paid (0.2)
Loan arrangement fees paid (1.6) (0.2)
------------------------------------------------------------- ----------- -----------
Non-cash movements
Amortisation of loan arrangement fees 1.0 0.8
Recognition of lease liabilities 0.4 1.1
------------------------------------------------------------- ----------- -----------
Bank borrowings and leasehold liability at end of the year 387.8 372.0
------------------------------------------------------------- ----------- -----------
Risk Management
The Company and Group is exposed to market risk (including
interest rate risk), credit risk and liquidity risk.
The Board of Directors oversees the management of these
risks.
The Board of Directors reviews and agrees policies for managing
each of these risks which are summarised below.
(a) Market Risk
Market risk is the risk that the fair values of financial
instruments will fluctuate because of changes in market prices. The
financial instruments held by the Company and Group that are
affected by market risk are principally the Company and Group bank
balances.
(b) Credit Risk
Credit risk is the risk of financial loss to the Company and
Group if a customer or counterparty to a financial instrument fails
to meet its contractual obligations. The Company and Group is
exposed to credit risks from both its leasing activities and
financing activities, including deposits with banks and financial
institutions.
The Group has established a credit policy under which each new
tenant is assessed based on an extensive credit rating scorecard at
the time of entering into a lease agreement.
The Group's review includes external rating, when available, and
in some cases bank references.
The Group determines concentrations of credit risk by monthly
monitoring the creditworthiness rating of existing customers and
through a monthly review of the trade receivables' ageing
analysis.
Credit risk also arises from cash and cash equivalents and
deposits with banks and financial institutions. For banks and
financial institutions, only independently rated parties with
minimum rating "B" are accepted.
Further disclosures regarding trade and other receivables, which
are neither past due nor impaired, are provided in Note 14.
(i) Tenant Receivables
Tenant receivables, primarily tenant rentals, are presented in
the Group Statement of Financial Position net of allowances for
doubtful receivables and are monitored on a case -by-case basis.
Credit risk is primarily managed by requiring tenants to pay
rentals in advance and performing tests around strength of covenant
prior to acquisition.
(ii) Credit Risk Related to Financial Instruments and Cash
Deposits
One of the principal credit risks of the Company and Group
arises with the banks and financial institutions. The Board of
Directors believes that the credit risk on short-term deposits and
current account cash balances are limited because the
counterparties are banks, which are committed lenders to the
Company and Group, with high credit ratings assigned by
international credit rating agencies.
Credit ratings (Moody's) Long-term Outlook
------------------------ --------- -------
AIB Group A3 Stable
Canada Life Aa3 Stable
Mass Mutual A2 Stable
Scottish Widows A2 Stable
Lloyds Bank Plc A1 Stable
Natwest A3 Stable
------------------------ --------- -------
(c) Liquidity Risk
Liquidity risk arises from the Company and Group management of
working capital, and going forward, the finance charges and
principal repayments on any borrowings, of which currently there
are none. It is the risk that the Company and Group will encounter
difficulty in meeting their financial obligations as they fall due
as the majority of the Company and Group assets are property
investments and are therefore not readily realisable. The Company
and Group objective is to ensure they have sufficient available
funds for their operations and to fund their capital expenditure.
This is achieved by continuous monitoring of forecast and actual
cash flows by management.
The monitoring of liquidity is also assisted by the quarterly
review of covenants which are ordinarily imposed by lenders, such
as loan to value and interest cover ratios. The loan to value ratio
is typically expressed as the outstanding loan principal as a
percentage of a lender approved valuation of the underlying
properties secured under the facility. Interest cover ratio's
reflect the quantum or finance costs (either historic or forecast)
as a multiple of recurring earnings, normally a measure of gross
profit. As part of the Group's viability modelling, certain
scenarios are considered to model the impact on liquidity. All of
the groups covenants are currently compliant and we envisage
compliance to continue to be achieved in a reasonably severe
downside scenario. The Group's portfolio could currently withstand
a 25 per decline in property valuations before a breach in loan to
value covenants are triggered. The Group's average interest cover
ratio across all facilities is 2.0 times, whereas gross profit is
currently in excess of 3.0 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 maybe required to mitigate any potential breach. The
Group's borrowings are spread across a range of lenders and
maturities so a to minimise any potential concentration of
risk.
The following table sets out the contractual obligations
(representing undiscounted contractual cash flows) of financial
liabilities:
Group
----------------------------------------------------------
Less than 3 3 to 12 1 to 5
On demand months months years > 5 years Total
GBP m GBP m GBP m GBP m GBP m GBP m
----------------------------- ---------- ----------- ------- ------ --------- -----
At 31 December 2022
Bank borrowings and interest - 3.9 11.7 178.3 266.4 460.3
Trade and other payables - 24.8 - - - 24.8
----------------------------- ---------- ----------- ------- ------ --------- -----
- 28.7 11.7 178.3 266.4 485.1
---------------------------------------- ----------- ------- ------ --------- -----
Group
----------------------------------------------------------
Less than 3 3 to 12 1 to 5
On demand months months years > 5 years Total
GBP m GBP m GBP m GBP m GBP m GBP m
----------------------------- ---------- ----------- ------- ------ --------- -----
At 31 December 2021
Bank borrowings and interest - 3.2 54.4 194.2 189.1 440.9
Trade and other payables - 20.0 - - - 20.0
----------------------------- ---------- ----------- ------- ------ --------- -----
- 23.2 54.4 194.2 189.1 460.9
---------------------------------------- ----------- ------- ------ --------- -----
Company
----------------------------------------------------------
Less than 3 3 to 12 1 to 5
On demand months months years > 5 years Total
GBP m GBP m GBP m GBP m GBP m GBP m
----------------------------- ---------- ----------- ------- ------ --------- -----
At 31 December 2022
Bank borrowings and interest - - - - - -
Trade and other payables - 3.1 - - - 3.1
----------------------------- ---------- ----------- ------- ------ --------- -----
- 3.1 - - - 3.1
---------------------------------------- ----------- ------- ------ --------- -----
Company
----------------------------------------------------------
Less than 3 3 to 12 1 to 5
On demand months months years > 5 years Total
GBP m GBP m GBP m GBP m GBP m GBP m
----------------------------- ---------- ----------- ------- ------ --------- -----
At 31 December 2021
Bank borrowings and interest - 0.1 0.4 20.1 - 20.6
Trade and other payables - 5.0 - - - 5.0
----------------------------- ---------- ----------- ------- ------ --------- -----
- 5.1 0.4 20.1 - 25.6
---------------------------------------- ----------- ------- ------ --------- -----
29. CAPITAL MANAGEMENT
The primary objectives of the Group's capital management are to
ensure that it remains a going concern and continues to qualify for
UK REIT status.
The Board of Directors monitors and reviews the Group's capital
so as to promote the long-term success of the business, facilitate
expansion and to maintain sustainable returns for shareholders.
Capital consists of ordinary shares, other capital reserves and
retained earnings.
30. INVESTMENTS IN SUBSIDIARIES
Those entities listed below are considered subsidiaries of the
Company at 31 December 2022, with the shares issued being ordinary
shares. All subsidiaries are registered at the following address:
1st Floor Hop Yard Studios, 72 Borough High Street, London, SE1
1XF.
In each case the country of incorporation is England and
Wales.
Company
------------------------
31 December 31 December
2022 2021
GBP'm GBP'm
----------------------- ----------- -----------
As at 1 January 187.6 187.6
Additions in the year 41.4 -
Disposals (6.4) -
----------------------- ----------- -----------
Balance at 31 December 222.6 187.6
----------------------- ----------- -----------
During the current and prior year there were a number of
subsidiaries which moved within the Group, due to reorganisations
relating to debt structures; these were all non - cash movements
whereby the parent company forgave intercompany debt owned by
subsidiaries in return for the issue of further shares.
Company Status Ownership Principal activity
---------------------------------------------------- ------- --------- -------------------------
Brunswick Contracting Limited Active 100% Property Contracting
Empiric (Alwyn Court) Limited Active 100% Property Investment
Empiric (Baptists Chapel) Limited Active 100% Property Investment
Empiric (Bath Canalside) Limited Active 100% Property Investment
Empiric (Bath James House) Limited Active 100% Property Investment
Empiric (Bath JSW) Limited Active 100% Property Investment
Empiric (Bath Oolite Road) Limited Active 100% Property Investment
Empiric (Bath Piccadilly Place) Limited Active 100% Property Investment
Empiric (Birmingham Emporium) Limited Active 100% Property Investment
Empiric (Birmingham) Limited Active 100% Property Investment
Empiric (Bristol St Mary's) Leasing Limited Active 100% Property Leasing
Empiric (Bristol St Mary's) Limited Active 100% Property Investment
Empiric (Bristol) Leasing Limited Dormant 100% Property Leasing
Empiric (Bristol) Limited Active 100% Property Investment
Empiric (Buccleuch Street) Limited Active 100% Property Investment
Empiric (Canterbury Franciscans) Limited Active 100% Property Investment
Empiric (Canterbury Pavilion Court) Limited Active 100% Property Investment
Empiric (Cardiff Wndsr House) Leasing Limited Dormant 100% Property Leasing
Empiric (Cardiff Wndsr House) Limited Active 100% Property Investment
Empiric (Centro Court) Limited Active 100% Property Investment
Empiric (Claremont Newcastle) Limited Active 100% Property Investment
Empiric (College Green) Limited Active 100% Property Investment
Empiric (Developments) Limited Active 100% Development Management
Empiric (Durham St Margarets) Limited Active 100% Property Investment
Empiric (Edge Apartments) Limited Active 100% Property Investment
Empiric (Edinburgh KSR) Leasing Limited Active 100% Property Leasing
Empiric (Edinburgh KSR) Limited Active 100% Property Investment
Empiric (Edinburgh South Bridge) Limited Active 100% Property Investment
Empiric (Exeter Bishop Blackall School) Limited Active 100% Property Investment
Empiric (Exeter Bonhay Road) Leasing Limited Dormant 100% Property Leasing
Empiric (Exeter Bonhay Road) Limited Active 100% Property Investment
Empiric (Exeter City Service) Limited Dormant 100% Property Investment
Empiric (Exeter DCL) Limited Active 100% Property Investment
Empiric (Exeter Isca Lofts) Limited Active 100% Property Investment
Empiric (Exeter LL) Limited Active 100% Property Investment
Empiric (Falmouth Maritime Studios) Limited Active 100% Property Investment
Empiric (Falmouth Ocean Bowl) Leasing Limited Active 100% Property Leasing
Empiric (Falmouth Ocean Bowl) Limited Active 100% Property Investment
Empiric (Glasgow Ballet School) Limited Active 100% Property Investment
Empiric (Glasgow Bath St) Limited Active 100% Property Investment
Empiric (Glasgow George Square) Leasing Limited Dormant 100% Property Leasing
Empiric (Glasgow George Square) Limited Dormant 100% Property Investment
Empiric (Glasgow George St) Leasing Limited Active 100% Property Leasing
Empiric (Glasgow George St) Limited Active 100% Property Investment
Empiric (Glasgow) Leasing Limited Active 100% Property Leasing
Empiric (Glasgow) Limited Active 100% Property Investment
Empiric (Hatfield CP) Limited Active 100% Property Investment
Empiric (Huddersfield Oldgate House) Leasing Limited Dormant 100% Property Leasing
Empiric (Huddersfield Oldgate House) Limited Active 100% Property Investment
Empiric (Huddersfield Snow Island) Leasing Limited Active 100% Property Leasing
Empiric (Lancaster Penny Street 1) Limited Active 100% Property Investment
Empiric (Lancaster Penny Street 2) Limited Active 100% Property Investment
Empiric (Lancaster Penny Street 3) Limited Active 100% Property Investment
Empiric (Leeds Algernon) Limited Active 100% Property Investment
Empiric (Leeds Mary Morris) Limited Dormant 100% Property Investment
Empiric (Leeds Pennine House) Limited Active 100% Property Investment
Empiric (Leeds St Marks) Limited Active 100% Property Investment
Empiric (Leicester 134 New Walk) Limited Active 100% Property Investment
Empiric (Leicester 136-138 New Walk) Limited Active 100% Property Investment
Empiric (Leicester 140-142 New Walk) Limited Active 100% Property Investment
Empiric (Leicester 160 Upper New Walk) Limited Active 100% Property Investment
Empiric (Leicester Bede Park) Limited Active 100% Property Investment
Empiric (Leicester De Montfort Square) Limited Active 100% Property Investment
Empiric (Leicester Hosiery Factory) Limited Active 100% Property Investment
Empiric (Leicester Peacock Lane) Limited Active 100% Property Investment
Empiric (Leicester Shoe & Boot Factory) Limited Active 100% Property Investment
Empiric (Leicester West Walk) Limited Dormant 100% Property Investment
Empiric (Liverpool Art School/Maple House) Limited Active 100% Property Investment
Empiric (Liverpool Chatham Lodge) Limited Active 100% Property Investment
Empiric (Liverpool Grove Street) Limited Active 100% Property Investment
Empiric (Liverpool Hahnemann Building) Limited Active 100% Property Investment
Empiric (Liverpool Octagon/Hayward) Limited Active 100% Property Investment
Empiric (London Camberwell) Limited Active 100% Property Investment
Empiric (London Francis Gardner) Limited Active 100% Property Investment
Empiric (London Road) Limited Active 100% Property Investment
Empiric (Manchester Ladybarn) Limited Active 100% Property Investment
Empiric (Manchester Victoria Point) Limited Active 100% Property Investment
Empiric (Newcastle Metrovick) Limited Active 100% Property Investment
Empiric (Northgate House) Limited Active 100% Property Investment
Empiric (Nottingham 95 Talbot) Limited Active 100% Property Investment
Empiric (Nottingham Frontage) Leasing Limited Dormant 100% Property Leasing
Empiric (Nottingham Frontage) Limited Active 100% Property Investment
Empiric (Oxford Stonemason) Limited Active 100% Property Investment
Empiric (Picturehouse Apartments) Limited Active 100% Property Investment
Empiric (Portobello House) Limited Active 100% Property Investment
Empiric (Portsmouth Elm Grove Library) Limited Active 100% Property Investment
Empiric (Portsmouth Europa House) Leasing Limited Active 100% Property Leasing
Empiric (Portsmouth Europa House) Limited Active 100% Property Investment
Empiric (Portsmouth Kingsway House) Limited Active 100% Property Investment
Empiric (Portsmouth Registry) Limited Active 100% Property Investment
Empiric (Provincial House) Leasing Limited Active 100% Property Leasing
Empiric (Provincial House) Limited Active 100% Property Investment
Empiric (Reading Saxon Court) Leasing Limited Active 100% Property Leasing
Empiric (Reading Saxon Court) Limited Active 100% Property Investment
Empiric (Snow Island) Limited Active 100% Property Investment
Empiric (Southampton Emily Davies) Limited Active 100% Property Investment
Empiric (Southampton) Leasing Limited Active 100% Property Leasing
Empiric (Southampton) Limited Active 100% Property Investment
Empiric (St Andrews Ayton House) Leasing Limited Active 100% Property Leasing
Empiric (St Andrews Ayton House) Limited Active 100% Property Investment
Empiric (St Peter Street) Limited Active 100% Property Investment
Empiric (Stirling Forthside) Leasing Limited Dormant 100% Property Leasing
Empiric (Stirling Forthside) Limited Dormant 100% Property Investment
Empiric (Stoke Caledonia Mill) Limited Active 100% Property Investment
Empiric (Summit House) Limited Active 100% Property Investment
Empiric (Talbot Studios) Limited Active 100% Property Investment
Empiric (Trippet Lane) Limited Active 100% Property Investment
Empiric (Twickenham Grosvenor Hall) Limited Active 100% Property Investment
Empiric (York Foss Studios 1) Limited Active 100% Property Investment
Empiric (York Lawrence Street) Limited Active 100% Property Investment
Empiric (York Percy's Lane) Limited Active 100% Property Investment
Empiric Acquisitions Limited Active 100% Immediate Holding Company
Empiric Investment Holdings (Two) Limited Active 100% Holding Company
Empiric Investment Holdings (Three) Limited Active 100% Holding Company
Empiric Investment Holdings (Four) Limited Active 100% Holding Company
Empiric Investment Holdings (Five) Limited Active 100% Holding Company
Empiric Investment Holdings (Six) Limited Active 100% Holding Company
Empiric Investment Holdings (Seven) Limited Active 100% Holding Company
Empiric Investments (One) Limited Dormant 100% Immediate Holding Company
Empiric Investments (Two) Limited Active 100% Immediate Holding Company
Empiric Investments (Three) Limited Active 100% Immediate Holding Company
Empiric Investments (Four) Limited Active 100% Immediate Holding Company
Empiric Investments (Five) Limited Active 100% Immediate Holding Company
Empiric Investments (Six) Limited Active 100% Immediate Holding Company
Empiric Investments (Seven) Limited Active 100% Immediate Holding Company
Hello Student(R) Management Limited Active 100% Property Management
---------------------------------------------------- ------- --------- -------------------------
31. ALTERNATIVE PERFORMANCE MEASURES
The below sets out our alternative performance measures.
Gross margin - Gross profit expressed as a percentage of rental
income. A business KPI to monitor how efficiently we are running
our buildings.
Group
------------------------
31 December 31 December
2022 2021
Gross Margin GBP m GBP m
------------------------------------------------ ----------- -----------
Revenue 73.0 56.0
Property Expenses (24.0) (23.1)
------------------------------------------------ ----------- -----------
Gross profit 49.0 32.9
------------------------------------------------ ----------- -----------
Gross Margin calculated as Gross profit/Revenue 67.1% 58.8%
------------------------------------------------ ----------- -----------
Total Return ("TR") - The growth of EPRA NTA per share plus
dividends per share measured as a percentage. A key business
indicator used to monitor the level of overall return the Group is
generating.
Group
------------------------
31 December 31 December
2022 (1) 2021
Total Return GBP m GBP m
------------------------------------------------------------------------------------------ ----------- -----------
EPRA NTA per share at start of year 106.7 105.0
EPRA NTA per share at end of year 115.4 107.4
------------------------------------------------------------------------------------------ ----------- -----------
NTA growth per share in period 8.7 2.4
------------------------------------------------------------------------------------------ ----------- -----------
Dividend per share 2.5 2.5
------------------------------------------------------------------------------------------ ----------- -----------
Dividends plus growth in NTA 11.2 4.9
------------------------------------------------------------------------------------------ ----------- -----------
Total return calculated as Dividends plus EPRA NTA Growth in year per share/ NTA at start
of year 10.5% 4.6%
------------------------------------------------------------------------------------------ ----------- -----------
(1) EPRA NTA per share calculated on a fully dilutive basis, in
line with EPRA guidance.
Property Loan-to-value ("LTV") - A measure of gearing. A
business KPI monitored to ensure the group remains in line with our
long-term target of < 35 per cent.
Group
------------------------
31 December 31 December
2022 2021
Property Loan to value ("LTV") GBP m GBP m
--------------------------------------------------------------- ----------- -----------
Bank borrowings drawn 391.2 375.0
Less cash held at the year end (55.8) (37.1)
--------------------------------------------------------------- ----------- -----------
Net borrowings 335.4 337.9
--------------------------------------------------------------- ----------- -----------
Property valuation 1,078.9 1,021.3
--------------------------------------------------------------- ----------- -----------
Property LTV calculated as net borrowings / property valuation 31.1% 33.1%
--------------------------------------------------------------- ----------- -----------
Dividend cover - a measure of EPRA earnings relative to
dividends declared for the year. This was 124 per cent for the year
(2021: 64 per cent).
Dividend pay out ratio - a measure of dividends relative to EPRA
earnings. This was 81 per cent for the year (2021: 156 per
cent).
FIVE YEAR HISTORICAL RECORD
31 December 31 December 31 December 31 December 31 December
2022 2021 2020 2019 2018
GBP m GBP m GBP m GBP m GBP m
------------------------------- ----------- ----------- ----------- ----------- -----------
Revenue 73.0 56.0 59.4 70.9 64.2
Direct costs (24.0) (23.1) (22.7) (23.4) (24.5)
Gross profit 49.0 32.9 36.7 47.5 39.7
-------------------------------- ----------- ----------- ----------- ----------- -----------
Gross margin 67.1% 58.8% 61.8% 67.0% 61.8%
Administrative expenses (13.4) (10.6) (9.8) (9.2) (9.1)
-------------------------------- ----------- ----------- ----------- ----------- -----------
Operating profit 35.6 22.3 26.9 38.3 30.6
-------------------------------- ----------- ----------- ----------- ----------- -----------
Property revaluation 45.6 17.6 (37.6) 29.2 22.4
-------------------------------- ----------- ----------- ----------- ----------- -----------
Finance costs (15.0) (12.4) (13.3) (12.7) (12.7)
-------------------------------- ----------- ----------- ----------- ----------- -----------
Gain or loss on disposals 1.5 1.7 - - -
-------------------------------- ----------- ----------- ----------- ----------- -----------
Net profit 67.7 29.2 (24.0) 54.8 40.3
EPRA EPS (pence) 3.41 1.65 2.26 4.22 2.97
Portfolio valuation 1,065.7 995.9 1,005.1 1,029.1 971.0
-------------------------------- ----------- ----------- ----------- ----------- -----------
Borrowings (386.5) (371.0) (385.3) (349.8) (324.3)
-------------------------------- ----------- ----------- ----------- ----------- -----------
Other net assets/liabilities 21.6 22.7 13.5 (14.5) (6.8)
Net assets 700.8 647.6 633.3 664.8 639.9
-------------------------------- ----------- ----------- ----------- ----------- -----------
EPRA NTA 700.8 647.6 633.3 664.8 639.9
-------------------------------- ----------- ----------- ----------- ----------- -----------
EPRA NTA per share 115.4 106.8 104.6 110.0 106.0
-------------------------------- ----------- ----------- ----------- ----------- -----------
Share in issue 603,351,880 603,203,052 603,160,940 603,160,940 602,887,740
-------------------------------- ----------- ----------- ----------- ----------- -----------
Weighted average cost of debt 4.0% 3.0% 2.9% 3.2% 3.3%
-------------------------------- ----------- ----------- ----------- ----------- -----------
Weighted average debt maturity 4.7 years 4.9 years 5.9 years 6.6 years 7.6 years
------------------------------- ----------- ----------- ----------- ----------- -----------
Property LTV 31.1% 33.1% 35.4% 32.9% 30.6%
-------------------------------- ----------- ----------- ----------- ----------- -----------
GLOSSARY
Alternative Performance Measures ("APM") - Performance measures
to supplement IFRS to provide users of the Annual Report with a
better understanding of the underlying performance of the Group's
property portfolio.
Colleague Engagement - Calculated using the results of our
biannual colleague engagement surveys.
Company - Empiric Student Property plc.
Dividend Cover - EPRA earnings divided by dividends declared for
the year.
Dividend pay-out ratio - Dividends declared relative to EPRA
earnings .
EPRA - European Public Real Estate Association.
EPRA basic EPS - EPRA Earnings divided by the weighted average
number of ordinary shares outstanding during the period (refer to
Note 8).
EPRA Earnings - the IFRS profit after taxation excluding
investment and development property revaluations, gains/losses on
investing property disposals and changes in the fair value of
financial instruments.
EPRA EPS - EPRA Earnings divided by the weighted average number
of ordinary shares.
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
HMO - Homes of multiple occupants.
IFRS - International Financial Reporting Standards.
IFRS EPS - IFRS earnings divided by the weighted average number
of ordinary shares outstanding during the period.
Like-for-like rental growth - Compares the growth in rental
income for operational assets, throughout both the current and
comparative year, and excludes acquisitions, disposals and
developments.
Like-for-like valuation (gross) - Compares the growth in capital
values of the Group's standing portfolio from the prior year end to
the current year end, excluding acquisitions and disposals.
Like-for-like valuation (net) - Compares the growth in capital
values of the Group's standing portfolio from the prior year end to
the current year end, excluding acquisitions, disposals, capital
expenditure and development properties.
Property loan-to-value or LTV - Borrowings net of cash, as a
percentage of portfolio valuation.
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 at a more advanced level.
RCF - Revolving credit facility.
REIT - Real estate investment trust.
Revenue Occupancy - 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 for the period expressed as a percentage of
opening EPRA NTA
Weighted average cost of debt - Debt weighted by value
multiplied by the interest rate.
Weighted average debt maturity - The weighted average term of
our debt facilities at the balance sheet date.
Company Information and Corporate Advisers
Empiric Student Property plc
1st Floor Hop Yard Studios
72 Borough High Street
London
SE1 1XF
T +44 (0)20 3828 8700
E info@empiric.co.uk
More information on
www.empiric.co.uk
Company Registration Number: 08886906
Incorporated in the UK
(Registered in England)
Empiric Student Property plc is a public company limited by
shares
Registered Office
1st Floor Hop Yard Studios,
72 Borough High Street,
London, SE1 1XF
DIRECTORS AND ADVISERS
Directors
Mark Pain (Chairman)
Duncan Garrood (Chief Executive Officer)
Donald Grant (Chief Financial and Sustainability Officer)
Alice Avis (Non-Executive Director, Senior Independent
Director)
Martin Ratchford (Non-Executive Director)
Clair Preston-Beer (Non-Executive Director)
Broker and Joint Financial Adviser
Jefferies International Ltd
Vintners Place
68 Upper Thames Street
London EC4V 3BJ
Broker and Joint Financial Adviser
Peel Hunt LLP
7th Floor,
100 Liverpool St,
London
EC2M 2AT
Legal Adviser to the Company
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
Company Secretary
Apex Secretaries LLP
6th Floor, Bastion House,
140 London Wall,
London,
United Kingdom,
EC2Y 5DN
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
External Auditor
BDO LLP
55 Baker Street
London W1U 7EU
Communications Adviser
FTI Consulting LLP
200 Aldersgate
Aldersgate Street,
London,
EC1A 4H
Valuer
CBRE Limited
Henrietta House
Henrietta Place
London W1G 0NB
Tax adviser
KPMG
15 Canada Square
London
E14 5GL
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END
FR EAXDSFDXDEFA
(END) Dow Jones Newswires
March 16, 2023 03:00 ET (07:00 GMT)
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