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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Empiric Student Property Plc | LSE:ESP | London | Ordinary Share | GB00BLWDVR75 | ORD GBP0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -1.60 | -1.76% | 89.50 | 89.20 | 89.50 | 91.30 | 89.00 | 91.30 | 868,332 | 16:35:16 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 80.5M | 53.4M | 0.0885 | 10.10 | 539.35M |
From Apr 2019 to Apr 2024
TIDMESP
RNS Number : 3702T
Empiric Student Property PLC
20 March 2019
20 March 2019
Empiric Student Property plc
("Empiric" or the "Company" or, together with its subsidiaries, the "Group")
RESULTS FOR THE 12 MONTHSED 31 DECEMBER 2018
The Board of Empiric Student Property plc (ticker: ESP), the owner and operator of student accommodation across the UK, today announced the Company's full year results for the 12 months ended 31 December 2018.
Financial headlines
Hot Features
Premium
As at 31 December As at 31 December Change
2018 2017
Revenue GBP64.2m GBP51.2m +25%
------------------ ------------------ -------
Gross margin 62% 57% +9%
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Administration expenses GBP9.1m GBP13.5m -33%
------------------ ------------------ -------
Profit before tax GBP40.3m GBP20.8m +94%
------------------ ------------------ -------
Basic earnings per share 6.68p 3.84p +74%
------------------ ------------------ -------
Adjusted earnings per share 3.20p 1.86p +72%
------------------ ------------------ -------
Dividends declared per share 5.0p 5.55p -10%
------------------ ------------------ -------
Dividend cover 64% 34% +88%
------------------ ------------------ -------
Property valuation GBP970.6m GBP890.1m +9%
------------------ ------------------ -------
EPRA NAV per share 106.2p 104.5p +2%
------------------ ------------------ -------
Financial Performance
-- Revenue increased 25% to GBP64.2 million (2017: GBP51.2 million).
-- Gross margin increased to 62% (2017: 57%), reflecting good progress in increasing occupancy levels and reducing property costs.
-- Administration expenses reduced by 33% to GBP9.1 million (2017: GBP13.5 million). -- Profit for the year increased by 94% to GBP40.3 million.
-- Basic earnings per share were 6.68 pence with adjusted earnings per share up 72% to 3.20 pence (2017: 1.86 pence).
-- Dividends declared in relation to 2018 totalled 5.0 pence per share, and in line with our target, dividend cover increased to 64% (2017 :34%).
-- Property portfolio valued at GBP970.6 million at 31 December 2018 (31 December 2017: GBP890.1 million) an increase of 9% (4.8% on a like for like basis).
-- EPRA net asset value per share up 2% to 106.2 pence (2017: 104.5 pence).
-- Net debt of GBP324 million at 31 December 2018 (31 December 2017: GBP298 million), resulting in a loan-to-value ratio of 31% (31 December 2017: 28%), below our long-term target of 35% and maximum of 40%.
Operational Performance
-- Current occupancy of 96% (2017: 92%), benefiting from a rigorous focus on driving revenue, although below our target of 97%. Further robust action is continuing to be taken to enhance sales capabilities and attract short-term lets for the 2018/19 academic year.
-- All operating properties brought onto the Hello Student(R) platform from 1 September 2018.
-- Facilities management for 27 assets brought in-house ahead of the 2018/19 academic year, with the remainder to come in-house by 1 April 2019.
-- Wide range of other improvements underway to enhance operational performance and reduce costs, helping to ensure our business is fit for the long term.
-- 95 assets with 9,397 beds contracted as at 31 December 2018 (31 December 2017: 94 assets with 9,158 beds).
-- 91 operating or revenue-generating assets at the year-end with 8,711 beds (31 December 2017: 85 assets with 7,903 beds), with an average valuation yield of 5.64%.
Post Period End
-- On 1 March 2019, Alice Avis MBE joined as a Non-Executive Director of the Company, bringing over 25 years of experience in advertising, branding, marketing, e-commence and consultancy across the consumer goods and retail sectors. Her expertise is across both large FTSE 100 organisations as well as smaller, entrepreneurial businesses in the UK and internationally and in both executive and non-executive roles. On the same date, Stephen Alston notified the Board of his intention to step down from his position as a Non-Executive Director of the Company with effect from 29 March 2019.
-- Resolution proposed for the Annual General Meeting on 2 May 2019 to change Empiric's listing category from a closed-ended investment fund to a commercial company, to increase strategic flexibility and reduce compliance costs.
Tim Attlee, Chief Executive Officer of Empiric Student Property plc, commented:
"We expect 2019 to be a year of further significant progress. We have taken swift action to maximise revenue for the remainder of this academic year and bookings for the 2019/20 academic year are progressing well. The benefits of the operational improvements we have made will continue to come through in 2019 and we are taking action to drive additional efficiencies.
In 2019, we are targeting a gross margin of 67% and a dividend of 5p per share(1) , which we expect to be around 85% covered on an adjusted basis.
While there are economic and political uncertainties, particularly regarding Brexit, we are yet to see any material adverse consequences. We have a quality portfolio of assets, which coupled with the improvements in our operations, gives us confidence in the outlook for the business."
1 The figures in relation to prospective dividends set out above are not intended to be, and should not be taken as, a profit forecast or estimate, or a dividend declaration.
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Empiric Student Property plc (via Maitland/AMO below) Tim Attlee (Chief Executive Officer) Lynne Fennah (Chief Financial & Operating Officer) Jefferies International Limited Tel: 020 7029 8000 Gary Gould Stuart Klein Maitland/AMO (Communications Adviser) Tel: 020 7379 5151 James Benjamin Email: empiric-maitland@maitland.co.uk
The Company's LEI is 213800FPF38IBPRFPU87.
Further information on Empiric can be found on the Company's website at www.empiric.co.uk.
Notes:
Empiric Student Property plc is a leading provider and operator of modern, direct-let, nominated or leased student accommodation across the UK. Investing in both operating and development assets, Empiric is a multi-niche student property company focused on, (i) providing good quality first year accommodation managed through its Hello Student(R) operating platform in partnership with universities, (ii) offering a variety of second and third year purpose-built accommodation options for individual students and those wanting a group living environment, and (iii) continuing to expand the Group's existing premium, studio-led accommodation portfolio which is attractive to international and postgraduate students.
The Company, an internally managed real estate investment trust ("REIT") incorporated in England and Wales, listed on the premium listing segment of the Official List of the Financial Conduct Authority and was admitted to trading on the main market for listed securities of the London Stock Exchange in June 2014.
A meeting for investors and analysts will be held at 8:45am today at:
Maitland
3 Pancras Square
London
N1C 4AG
The presentation will also be accessible via a live conference call and on-demand via the Company website: https://www.empiric.co.uk/investor-information/company-documents
Those wishing to attend the presentation or access the live conference call are kindly asked to contact Maitland at empiric-maitland@maitland.co.uk or by telephone on +44 (0) 20 7379 5151.
In addition, a recorded webcast of this meeting and the presentation will also be available to download from the Company's website: www.empiric.co.uk.
The Annual Report and Accounts will today be available on the Company's website at www.empiric.co.uk. In accordance with Listing Rule 9.6.1, copies of these documents will also be submitted today to the UK Listing Authority via the National Storage Mechanism and will be available for viewing shortly at www.morningstar.co.uk/uk/NSM.
Hard copies of the Annual Report and Accounts will be sent to shareholders, along with the notice for Annual General Meeting 2019, on or around 22 March 2019.
CHAIRMAN'S STATEMENT
In last year's report, the Executive Team set out a strategic programme of change, to rectify some fundamental issues with the Group's performance. We have made solid progress with this programme, which has improved our operations and supporting infrastructure, while reducing costs and maintaining high levels of service. However, there is still much more to do and the Board remains focused on the next stage of our improvement activities as we enter 2019.
A year of progress
MARK PAIN
Non-Executive Chairman
20 March 2019
Dear Fellow Shareholder
I am pleased to report to you for the first time as Chairman of Empiric.
Performance and Business Review
To deliver the financial performance the Group is capable of, we need to maximise the occupancy of our assets. We achieved an improved level of occupancy for the 2018/19 academic year of 96%, up from 92% in the previous year. However, this was still below the 97% we consider full occupancy. As explained in the Chief Executive Officer's Review, we are taking action to generate additional bookings for this academic year.
The Group has taken big strides with efficiency improvements, in particular by bringing facilities management for 27 of our assets in-house, with the remainder coming in-house from April 2019. This will help us to deliver better service and reduce costs. Combined with our other operational efficiencies, this enabled us to achieve a gross margin of 62% for the year, up from 57% in 2017 and on the way to our target of 70%. We also applied the same rigorous focus to administrative expenses, which were significantly lower than our target of GBP10 million for the year. This contributed to adjusted earnings per share increasing by 72%, improving our dividend cover, as discussed below.
We continue to explore the potential disposal of non-core assets from the portfolio. Our strategy is to recycle disposal proceeds, where there are attractive opportunities to do so. The Group is financed with an LTV of 30.6%. Towards the end of 2018 we agreed a new GBP86.1 million ten-year debt facility, with a fixed interest rate of 3.196%. We now have GBP390 million of financing facilities, with an average term of 7.6 years and average interest cost of 3.26%.
Dividend
The Board has declared four quarterly dividends in respect of 2018, of 1.25 pence per share each. We therefore met our dividend target for the year of 5.0 pence per share. Adjusted earnings per share were 3.2 pence, resulting in a marked improvement in dividend cover to 64% (2017: 34%).
Board, Management and People
We were greatly saddened by the loss of Baroness Brenda Dean, who chaired Empiric from its IPO until her death in March 2018. She made an enormous contribution to the Group and more widely in her long career. In recognition, we have established the Brenda Dean Scholarship. This will run for a minimum of three years and is aimed at entrepreneurial women who need financial support to start a business. The scholarship is open to students coming through the business programmes at Nottingham University, where Brenda was a member of the University Council.
Stuart Beevor was Acting Non-Executive Chairman between March and September and I want to thank him for his considerable efforts in that position. I joined the Board on 1 September 2018, at which date Stuart resumed his former role as a Non-Executive Director and Chairman of the Remuneration Committee.
There were two other changes to Board roles during the year. In July, we appointed Lynne Fennah to the dual roles of Chief Financial Officer and Chief Operating Officer, formalising the responsibility she had already taken for our operations. In November, we appointed Tim Attlee as Chief Executive Officer. Tim was a co-founder of Empiric and our Chief Investment Officer, in addition to being Acting Chief Executive Officer since December 2017. We are delighted that Tim and Lynne are leading our Senior Leadership Team, which we have further strengthened with a number of key appointments. More information can be found in Tim's statement on page 13 in the annual report.
Since the end of the year, we have announced the appointment of Alice Avis as a Non-Executive Director. She brings a wealth of invaluable experience in driving digital transformation and operational excellence in customer-focused, multi-site businesses, which will be important for the Board as Empiric focuses on further enhancing its operations.
After nearly five years on the Board, Stephen Alston has decided not to seek re-election as a Non-Executive Director at the Annual General Meeting on 2 May 2019. On behalf of the Board, I thank him for his important contribution to the Group and wise counsel.
Bringing the running of our properties and facilities management in-house has made a considerable difference to the number of people Empiric employs. I want to welcome our new people to the Group and thank everyone for their hard work this year and their contribution to the Group's ongoing transformation.
Summary
The Group has made solid progress in 2018 but there is still more to be done to deliver the performance it is capable of. We have a strong leadership team and the right plans in place to deliver. We are also working on a longer-term strategy to grow shareholder value, so we can take advantage of the attractive opportunities that will present themselves in our market.
OUR BUSINESS MODEL
Our business model combines strong operations, delivered in-house, with a differentiated portfolio of student properties. Together, our operations and assets enable us to create value for all our stakeholders.
Key Strengths How We Add Value Outputs
----------------------------------- ------------------------------------ ------------------------------
Buildings Select Locations Customers
We have a diversified We are highly selective Our student customers
and attractive portfolio about where we invest, benefit from having a
of properties that offer with a focus on the towns great place to live during
high-quality accommodation and cities that are home their studies, at a rent
to customers ranging from to the most successful that represents value
first year undergraduates universities and where for money.
to postgraduates. student numbers are rising Our People
Our People faster than average. We Our employees have the
We have a strong and growing select sites based on opportunity to develop
pool of talent, which their compatibility with their careers in an exciting
allows us to deliver a the types of accommodation and growing sector.
high level of service we provide (see below) Shareholders
and management. and their proximity to Shareholders benefit from
Specialist Knowledge universities and amenities. the rising capital value
We understand how to successfully Our investment policy of our portfolio and growing
develop, acquire and operate enables us to invest in rents, which support our
student accommodation studio, one, two and three-bed dividends.
assets. apartments, modern townhouses Communities
Brand and affordable apartments. The communities around
Hello Student(R) is a These four different accommodation our assets benefit from
leading brand, which gives niches enable us to invest reduced pressure on local
us a clear identity in more deeply in a city, housing stock and from
the student property market. to generate economies the improvements we fund
Financing of scale and better margins. to social infrastructure
We finance our business Develop in the surrounding area.
through a combination Developing assets allows
of shareholder equity us to acquire them at
and debt facilities. Our a greater yield on cost
debt has a weighted average than buying standing assets.
term of 7.6 years and Forward funded projects
average interest costs are typically less complex
of 3.26%, of which 57% than direct developments
are fixed and 9% are capped. and have a lower risk
Technology profile, as the planning,
We continue to enhance construction and time
our systems, to support risk lies with the third-party
our operations, booking developer. These projects
and accounting. also have lower staffing
requirements and benefit
from a forward funding
coupon charged to the
developer. However, direct
development delivers higher
yielding assets than forward
funding. We have a strong
track record in direct
development.
Operate
We market our assets through
the Hello Student(R) platform.
Having all our assets
on one platform gives
us economies of scale,
helps us to cross-sell
as customers move between
buildings and cities,
and assists with recruiting
experienced and dedicated
staff.
Empowering our property
managers to feel ownership
and pride helps us to
drive occupancy and increase
the number of students
who rebook with us. The
platform also gives us
insights into asset performance,
so we can adjust rents
to increase occupancy,
and exceed students' needs,
so we can further improve
our offering.
Reinvest
We intend to hold our
investments for the long
term. However, we may
sell an asset if we see
an opportunity to create
more value for shareholders
by reinvesting the proceeds.
We therefore continually
review the portfolio to
ensure our capital is
effectively allocated.
Our Strategic Objectives
A successful strategy
We have a well-defined strategy, which is designed to deepen and widen our engagement with, and understanding of, all our stakeholders and to deliver attractive and sustainable benefits to them for the long term.
Key Performance Indicators
To see how our strategy links to our Key Performance Indicators see page 16 in the annual report
Principal Risks & Uncertainties
To see how our strategy links to our Principal Risks see page 28 in the annual report
1. 2. 3. 4. 5.
People and Shareholder
Objectives Customers Brand Operations Buildings Outcomes
----------- ---------------------------------------------------------- --------------------------------------------------------- ----------------------------------------------------------- ------------------------------------------------------------ -----------------------------------------------------------
* Ensure high levels of tenant satisfaction are * Improve the student experience through a consistent * Provide the majority of operational functions * Continue to purchase core assets * Improve profitability through lower cost base per
achieved in every location and high-quality approach to branding, operation an in-house city and bed
d
management, through the Hello Student(R) platform * Diversify income between different markets and
* Build intimate communities through building design * Improve operational efficiency product types, to spread operational risk, * Mitigate risk of a single-niche approach and broaden
and on-site management programme concentrating on specific cities to increase growth opportunities
* Raise awareness of the Hello Student(R) consumer efficiencies
brand among students, to support our "fresher-to-Ph * Develop our people, to help them provide the best
* Enable loyal customers to move building to building D" customer service experience * Continue to grow a high yield on cost portfolio
and city to city, while keeping them attracted to th accommodation and service offering * Create efficiencies in locations with existing assets, through development
e plus some additional leading university locations
Hello Student(R) brand and platform * Continue to give our people opportunities to grow and
excel within the Group * Improve profitability through higher income per bed
* Develop in-house metrics of university performance and rental growth
and trajectory, to refine product types and assess
* Build gross income locational risk
* Reduce costs per bed * Maximise the value from the asset portfolio by
growing the portfolio profitably and sustainably
----------- ---------------------------------------------------------- --------------------------------------------------------- ----------------------------------------------------------- ------------------------------------------------------------ -----------------------------------------------------------
Progress
* We achieved a student satisfaction rating of 8.1 out * Bringing all properties on the Hello Student(R) * All properties are now branded Hello Student(R) . We * We purchased Southampton Emily Davies Hall * We increased the operating margin and dividend cover
of 10 platform from September 2018 will help to ensure a are on track to have facilities management in-house generated by the portfolio
consistent approach to branding, operations and for all buildings from 1 April 2019
management, which will enhance the brand in the eye * We completed three developments for the 2018/19
* We achieved a rebookers rate of 21.3% s academic year, all in locations where we already have * We added to our pipeline of forward funded and direct
of students * We continually develop and train our staff, to assets developments
support them in their journey with the Group
* We continued to create communities in our buildings,
through our approach to offering a more personal * We have a new learning management system and are * We completed our second townhouse development in York, * We developed plans to fine tune the portfolio and add
service to our students and through other channels, investing in training to promote excellent service * We increased future gross income through our to expand our offering further depth to cities where we can earn attractive
such as organising social events acquisition, development and redevelopment programmes returns
* We launched a very successful blog on the Hello * We expanded the Hello Student(R) platform, giving us
Student(R) website, written by students for student * We run an ongoing review of the Group and are operating efficiencies in locations with multiple
s continually finding operational and financial assets
improvements and cost savings
* We are conducting an ongoing review of all assets and
city groups, which continually informs the process of
reshaping the investment portfolio
----------- ---------------------------------------------------------- --------------------------------------------------------- ----------------------------------------------------------- ------------------------------------------------------------ -----------------------------------------------------------
CHIEF EXECUTIVE OFFICER'S REVIEW
In 2018, we took tough decisions and implemented the actions required to improve our performance. We are now well over the halfway stage of our transformation programme and we are starting to see results coming through. We are confident that we will see further improvements as we continue to implement our programme in 2019.
Reinvigorating the business
TIM ATTLEE
Chief Executive Officer
20 March 2019
Enhancing Performance
Our fundamental focus is on maximising revenue from our assets and minimising the associated costs, while maintaining the high standard of personal service that distinguishes us from our competitors.
The business is now in substantially better shape than at the start of 2018 and the many improvements we have made are detailed in the Operational and Financial Review. However, we were somewhat disappointed that occupancy was slightly below our target, as a number of students signed leases with us but did not arrive. To help fill the gap, we recruited a central sales team to target semester lets. This team began work on 3 January 2019. We are also evolving our sales processes and training, which will augment our ability to deliver full occupancy in the years ahead.
With all of our assets now on the Hello Student(R) platform and with all facilities management to be performed in-house from April 2019, we will have full operational control over our properties for first time since Empiric was founded. This will allow us to pull every available lever that affects revenue or cost.
Maximising occupancy is critical to driving revenue. During the year, we enhanced our management information and combined it with improved data and analysis from the Hello Student(R) website (see Operational and Financial Review), to give us detailed insights into bookings at each asset. We also tightened our processes for converting bookings into signed leases, highlighting buildings where action is needed to increase bookings. We introduced bi-weekly sales meetings, attended by the Executive Directors, Operations Director, marketing and our internal analyst, which result in documented actions and rental rate decisions by asset, helping us to drive bookings. Optimising rents in this way has given us a more sustainable level of rents across the portfolio, increasing the potential for like-for-like rental growth for the 2019/20 academic year. We are continuing to enhance our sales capabilities, including improvements to our sales processes and training.
Protecting Shareholder Value
While we are relentlessly focused on generating income to increase our dividend cover, we also recognise that we must protect the balance sheet and long-term shareholder value. This means we must constantly analyse and evaluate the portfolio. Our market is polarising, as students are increasingly attracted to the best-performing universities and turning away from lower ranked institutions. We therefore need to focus future investments in these growing markets and recycle capital from non-core assets. Our intention is to continue to redeploy capital to add depth to our offering in existing cities, so we have a broader range of product and price points that suit everyone from first year undergraduates to postgraduate students. This will also underpin our ability to enable loyal customers to move between buildings or cities, while staying with the Hello Student(R) brand.
People and Culture
One effect of our transformation programme has been a significant increase in the number of people we directly employ, as we bring operations in-house. At the start of the year, we directly employed just over 130 people. This had risen to 248 by the year end, with a further 69 people scheduled to join us when we take on the remainder of the facilities management from April 2019. Importantly, we have recruited an HR Director and heads of IT, facilities management and property, who have all joined the Senior Leadership Team. This gives us both the management capacity and the specialist skills we will need to take the business forward.
We continue to build a collaborative and communicative culture and look to help our people succeed in their roles through training and development. We introduced a number of changes to the way we manage, assess and train our people in 2018, with further improvements to come as we establish our in-house HR function in 2019. More information can be found in the Corporate and Social Responsibility section on page 25 in the annual report.
Portfolio Summary
At 31 December 2018, we owned or were committed to owning 95 assets, representing 9,397 beds (31 December 2017: 94 assets, 9,158 beds). Of these, 91 were revenue generating (31 December 2017: 85 assets). The revenue-generating properties had gross rent of GBP73.9 million for the 2018/19 academic year (2017/18 academic year: GBP65.3 million). Commercial revenue was GBP1.7 million, representing 2.1% of gross annualised rent (31 December 2017: GBP1.8 million, representing 2.8% of gross annualised rent). The gross rent roll is expected to increase to GBP79.3 million for the 2019/20 academic year, with three development projects set to become revenue generating for that year. A further two development projects are scheduled to complete for subsequent academic years.
Like-for-like income growth for the academic year 2018/19 averaged around 2% across the portfolio. We expect further rental growth for the academic year 2019/20, while continuing to prioritise occupancy levels.
Valuation
Each property in the portfolio has been independently valued by CBRE, in accordance with the Royal Institution of Chartered Surveyors ("RICS") Valuation - Professional Standards January 2014 (the "Red Book"). At 31 December 2018, the portfolio was valued at GBP970.6 million, an increase of 9% for the year (31 December 2017: GBP890.1 million).
The valuation benefited from the increased occupancy and income growth compared to the end of 2017 and some yield compression, particularly in the first half of 2018. The valuation also reflected the acquisition of one standing asset and the realisation of development profit on the projects which reached practical completion ahead of the 2018/19 academic year (see overleaf). The like-for-like increase in the portfolio valuation was 4.8%.
Asset Acquisition
The Group acquired one standing asset during the year, the 240-bed Emily Davies Hall in Southampton. The property comprises affordable accommodation arranged in three-and four-bed apartments and is leased to Southampton Solent University until September 2019, at which point we intend to directly let it. The purchase price was GBP10.6 million, excluding costs. The acquisition has broadened our offer in Southampton, where we now have 459 beds. At the year end, the asset was valued at GBP11.2 million, an increase of 6% on the purchase price.
Developments and Redevelopments
We made further good progress with our development and redevelopment projects during 2018. Two forward funded developments completed ahead of the 2018/19 academic year: Princess Road in Leicester (110 beds) and Percys Place in York (106 beds). Princess Road offers studio accommodation while Percys Place contains studios and apartments, as well as five- and six-bed townhouses. More information on our townhouse offering can be found in the case study on page 21 in the annual report.
Practical completion of a third forward funded development, The Emporium in Birmingham, was delayed as a result of the late delivery of the final part of the communal space. In total, 171 of the 184 beds were delivered and 155 of those are occupied. Forward funded developments have the advantage of protecting us from late completion, as the risk largely remains with the developer. We have been fully compensated by the developer for the lost return and the additional management time we have incurred. We were also able to mitigate damage to the Hello Student(R) brand by offering refunds to students at the developer's expense.
In addition to the forward funded developments, we completed a major refurbishment and redevelopment of Blocks 3 and 4 at Victoria Point, Manchester. The blocks contain 169 beds in total and provide affordable accommodation that suits returning undergraduates. We continue to see the potential for targeted redevelopments that increase capital values and income, although we aim to limit the impact on income and dividend cover by carefully timing these projects. We are constantly reviewing opportunities to redevelop buildings, implementing a detailed appraisal process to weigh up all risks.
Outlook
We expect 2019 to be a year of further progress. We have taken swift action to maximise revenue for the remainder of this academic year and bookings for the 2019/20 academic year are progressing in line with expectations. The benefits of the operational improvements we have made to date will continue to come through in 2019 and we are taking action to drive additional efficiencies.
For 2019, the Board is continuing to target a dividend of 5.0 pence per share. The Board is expecting the total dividend for 2019 to be around 85% covered by adjusted earnings.
While there are economic and political uncertainties, particularly regarding Brexit, we are yet to see any material adverse consequences. We have a quality portfolio of assets, which coupled with the improvements in our operations, gives us confidence in the outlook for the business.
OUR MARKET
Student accommodation is one of the largest alternative real estate sectors in the UK, sustained by strong demand for higher education from domestic and international students. However, the market is polarising as students are attracted to the best universities, meaning that we must remain highly selective about the towns and cities we choose to invest in.
Selectivity remains key
Total Annual UK Increase in Bed Numbers
Full-time students are the core customers for Purpose Built Student Accommodation ("PBSA"), since they are most likely to study away from home. There are currently around 1.8 million full-time students in the UK. Of these, 77% are from the UK, 7% are from the EU and 16% are non-EU international students (Source: HESA). There are now almost 630,000 PBSA bed spaces in the UK, which means that the majority of students still live in other forms of accommodation such as houses in multiple occupation ("HMOs"). However, the proportion living in PBSA continues to rise strongly, particularly in the private sector which now makes up almost half of the PBSA provision, reflecting the attractiveness of the buildings and the service and amenities they offer.
Demand for Higher Education Remains Strong
Applications for university places are an important leading indicator of demand for PBSA. For the 2018/19 academic year, total applications were down 0.6%. This was driven almost entirely by a fall in the number of people making the maximum of five applications to different universities through the main UCAS scheme before the 30th June deadline. The number of students applying to between one and four universities either increased or was stable, as more students chose not to include lower performing universities on their application list. The number of applications to institutions requiring lower grades fell by 6%, while those to mid-tier institutions fell by 3%. Applications to top-tier institutions increased by 1%. Empiric's portfolio is targeted at the higher performing universities, with 65% of our beds in Russell Group university cities.
UCAS data indicates that the UK continues to be an attractive place to study, with the number of applications from EU students in 2018/19 up over 2%, while non-EU international applications were up over 6%. The Migration Advisory Committee published its report on international students in September 2018. It found that international students bring a clear economic benefit to the UK, citing the 2015 Department for Education estimate of GBP17.6 billion of export value, as well as the 2018 Higher Education Policy Institute/Kaplan International Pathways estimate of GBP20.3 billion. The report suggested that there should continue to be no cap on the number of international students and although it did not recommend removing international students from the migration statistics, it did suggest a number of small policy changes to make the UK more welcoming to international students.
While trends in applications from UK, EU and international students are important, overall the number of applications remains well above the number of places available at UK universities. In 2018/19, there were 695,565 undergraduate applicants to UK universities and 533,360 acceptances, with the latter falling by just 0.1% compared to the prior year (Source: UCAS). Analysis of acceptances by tier of university also shows the polarisation of the market, with bottom-tier universities struggling to attract more students.
Early applications for the 2019/20 academic year were promising. Most medicine, dentistry and veterinary science courses, and all courses at Oxford and Cambridge universities, required students to apply by October 2018. UCAS statistics show that 65,870 people applied for these courses, up 7% on last year. Applications from UK students were up 9%, non-EU applications students increased by 6% and demand from the EU was little changed from last year.
There was an 11% rise in the number of 18-year-olds from England applying for October deadline courses, despite the population of young people decreasing by 2.1% this year. This decline is part of a long-term demographic trend which will bottom out in 2020, with the number of 18-year-olds rebounding sharply from 2021. This rebound, coupled with higher participation rates, should further increase demand for higher education and PBSA in future years.
The UCAS statistics cited above only consider undergraduate admissions. Since the introduction of postgraduate loans in the UK in 2016/17, the number of placed postgraduates has grown, with a 5.7% increase in the year after their introduction (Source: HESA). This provides an additional source of demand for PBSA.
A concern for the higher education sector is the Augar review; this is currently low on the government's list of priorities and so most likely will be implemented in the next Parliament. The consensus is that the outcome will be a reduction in fees of around 25% (to c.GBP6,000 per annum for UK students) which should help to bolster the number of applicants, and the reduction in revenue for universities could give them a further incentive to increase their student numbers. Overall the review should be beneficial for PBSA, but the uncertainty until the publication of its conclusions will remain unhelpful.
Supply of PBSA
The supply of PBSA has grown rapidly, with a 24% increase in rooms available nationally in the four years to academic year 2018/19, including a 127% increase in the number of studios.
However, the development pipeline for student accommodation is becoming smaller in some city markets as they mature and other land uses out-compete PBSA, such as build to rent.
Attractive development opportunities remain available but site and city selectivity are key, with the cities that are home to the best-performing universities offering the greatest potential.
In addition, the majority of university towns and cities now have Article 4 Directions in place, which prevent local housing stock being converted into HMOs. This means that in locations with rising demand for student housing, new PBSA will be required to meet it. The outlook for student accommodation in the right locations therefore remains healthy.
Investment Demand
Investment demand for PBSA continues to be strong. Large volumes of funds are available for the alternative property sectors as investors turn away from major asset classes such as retail and offices. This demand comes from both UK and international investors. Investment volumes in 2018 are expected to be around GBP3.2 billion. In contrast to previous high-volume years, this is the result of a larger number of smaller transactions rather than fewer but larger portfolio deals. As a result, portfolios continue to attract premiums but there is now also more liquidity for smaller transactions, as the market has matured.
Investment yields for stabilised assets compressed in the first half of 2018 and were broadly stable in the second half. The level of demand and the tightening of yields make it challenging to acquire standing assets, pointing to a maturing PBSA market.
Market Yields
Direct Let 25-Year FRI Lease
-------------------------- ----------------------
Current Forecast Current Forecast
------------------- ----------- ------------- ------- -------------
Prime London 4.00% Stable 3.50% Strengthening
Inner London 4.50% Strengthening 3.75% Strengthening
Prime Regional 5.25%-5.50% Strengthening 4.00% Strengthening
Secondary Regional 6.00% Stable 4.00% Stable
Other Regional 7.00%+ Weakening 4.25% Strengthening
------------------- ----------- ------------- ------- -------------
Source: JLL
Note: Referenced against appropriate cash flows and applies to single "best in class" assets typically 250-500 bed assets excluding any portfolio premium. These yields are intended as a guide and we would emphasise the need to appraise individual schemes on a case-by-case basis.
KEY PERFORMANCE INDICATORS
We have made a number of changes to our key performance indicators ("KPIs"), in particular introducing non-financial metrics that show our operational performance. As a result, we have focused our financial KPIs and no longer include the LTV ratio, dividend per share or basic earnings per share. All of these metrics continue to be reported in the Operational and Financial Review on pages 18 to 23 in the annual report.
Non-Financial KPIs
Rebookers Rate (%) Student Happiness (out
of 10)
Performance 21.3% 8.1
--------------- -------------------------------- ----------------------------------
Purpose The rebookers rate demonstrates Student satisfaction reflects
our ability to retain tenants the quality of service
within the Hello Student(R) we provide and the attractiveness
brand, which in turn is of our buildings.
an indicator of the quality
of service we provide.
Note: Due to the entire
portfolio only moving onto
the Hello Student(R) platform
from September 2018 we
do not have comparative
information for this year.
--------------- -------------------------------- ----------------------------------
1 2 3 4 5
Strategic Link Current Occupancy (%) 1 2 3 4 5
--------------- -------------------------------- ----------------------------------
Performance 96% Health and Safety
--------------- -------------------------------- ----------------------------------
Purpose Occupancy is a key driver We have a duty to protect
of our revenue and demonstrates the health and safety of
the quality and location our people and the students
of our assets, the strength living in our buildings.
of our sales process and We have a strong track
our ability to set appropriate record and look to build
rents. upon this now that all
buildings are managed by
Hello Student(R) . As a
result, going forward one
of our KPIs will be the
health and safety in and
around our buildings.
--------------- -------------------------------- ----------------------------------
Strategic Link 1 2 3 4 5 1 2 3 4 5
--------------- -------------------------------- ----------------------------------
Financial KPIs
Gross Margin (%) Adjusted Earnings per Share
(p)
--------------- ------------------------------- -----------------------------------
Performance 62% 3.20p
--------------- ------------------------------- -----------------------------------
Purpose The gross margin reflects Adjusted earnings per share
our ability to drive occupancy is the earnings measure
and to rigorously control that best demonstrates
our operating costs. our ability to reward shareholders
through dividends.
--------------- ------------------------------- -----------------------------------
Strategic Link 1 2 3 4 5 1 2 3 4 5
Dividend Cover (%) Net Asset Value per Share
(p)
--------------- ------------------------------- -----------------------------------
Performance 64% 106.14p
--------------- ------------------------------- -----------------------------------
Purpose Dividend cover shows our Growth in the NAV per share
ability to pay dividends reflects the quality of
out of current year earnings. our assets and our ability
to generate revenue from
them.
--------------- ------------------------------- -----------------------------------
Strategic Link 1 2 3 4 5 1 2 3 4 5
Total Return (%)
--------------- ------------------------------- -----------------------------------
Performance 6.48%
--------------- ------------------------------- -----------------------------------
Purpose The total return shows
the aggregate value we
have created for shareholders,
through both capital growth
of NAV and dividends.
--------------- ------------------------------- -----------------------------------
Strategic Link 1 2 3 4 5
--------------- ------------------------------- -----------------------------------
Strategic Link
1. Customers
2. Brand
3. People and Operations
4. Buildings
5. Shareholder Outcomes
Definitions
For definitions see page 98 in the annual report
OPERATIONAL AND FINANCIAL REVIEW
This section of the report details our actions to improve our operating performance and our financial results in 2018.
Improving delivery
LYNNE FENNAH
Chief Financial and Operating Officer
20 March 2019
Operational Review
Facilities management ("FM") is one of our largest costs. Providing these services in-house saves us the outsourced providers' profit margin and VAT, which we are unable to reclaim as a VAT-exempt business. Ahead of the 2018/19 academic year, we brought FM in-house for 27 buildings, with the rest of the portfolio to follow from 1 April 2019. Our FM help desk is up and running and we have established a database to ensure an effective and compliant programme of maintenance. To ensure we have the in-house expertise required, we recruited a Head of Facilities Management, who joined us on 4 December 2018.
Insourcing FM also offers other efficiency benefits. It saves management time, as we no longer have to manage four separate FM providers, and allows us to consolidate contracts for ancillary services such as pest control and lift maintenance, so we can achieve better rates by procuring single contracts across the portfolio. During 2018, we also used our improved management reporting to tighten control of ad hoc expenditure by our outsourced FM providers, with a corresponding benefit to our property costs during the year.
We have also focused on reducing our other operating costs. For example, we brought the administration of utilities in--house from 1 July 2018 and entered into fixed price contracts from 1 October 2018 onwards. Initiatives to reduce energy use, with a corresponding cost and environmental benefit, are outlined on page 26 in the annual report.
At the start of the year, we had 62 assets on our Hello Student(R) platform. From 1 September 2018, all of our direct let properties were branded Hello Student(R) . This enables us to manage costs ourselves, gives us full control over the marketing of those assets and the interaction with students, and provides us with live data on our entire portfolio, helping us to drive occupancy and revenue.
As noted above, we benefited from the improved Hello Student(R) website, which we had relaunched towards the end of the previous year. It has improved design, functionality and analytics, allowing us to review the number of hits for a given property and track how those translate into enquiries, viewings, bookings and signed leases. Visits to the website were up over 45% compared with 2017.
We employ a "social first" marketing approach, which uses Facebook as an important channel for driving traffic to the Hello Student(R) website. During the year, we refocused our marketing spend by targeting our activity and reducing wastage, helping us to cut costs and improve effectiveness. We are undertaking a review of our marketing function in order to exploit inspirational and relevant content for the Hello Student(R) website and social media. In addition to Facebook, we will test and engage other social media platforms.
We made good progress with streamlining our administrative costs in 2018, including reducing the number of head office roles and using fewer consultants and contractors. The restructured finance team is providing essential support and enhanced information to the Executive Team, underpinning our granular approach to business performance and cost control.
The recruitment of a Director of Human Resources, who joined us on 2 January 2019, will enable us to bring our HR function in-house in 2019. The new function will replace our current outsourced supplier, which provides purely transactional support, and we will be able to align HR to support our business objectives.
Information Technology is another important area of focus for 2019. We currently have two managed service providers for our IT systems, with one covering head office and the other for student properties. Moving to one provider will give us a single integrated system, as well as enabling us to obtain a better price for a larger contract. Our new Head of IT joined Empiric on 1 November 2018 and will have a significant role in helping us to build the commercial platforms we need to run the business in future. A key objective will be to support the development of a revenue management system, enabling us to process bookings, rent demands and rent collection in-house, with the potential for significant savings over the current outsourced provider's costs. We plan to trial this system in a single property in November 2019, with a further roll out across the portfolio from 2020.
In addition to the new senior leaders noted above, we recruited a Head of Property during the year. Our Senior Leadership Team now comprises the Executive Directors, the Group Financial Controller and the Operations Director, HR Director and Heads of IT, FM and Property. This gives us the strength, depth and breadth of leadership we need and reflects the Group's shift to an operational business that provides key functions in-house.
Financial Performance
Revenue in 2018 was GBP64.2 million, up 25% from GBP51.2 million in 2017. The increase resulted from the acquisition of Emily Davies Hall in February, the initial contribution from developments completed in 2018, a full year of the assets acquired and developments completed in 2017, as well as increased occupancy and income growth, which benefited the final four months of the year.
Operating profit under IFRS was GBP53.0 million, an increase of 63% compared to the GBP32.5 million achieved in 2017. This included an aggregate revaluation uplift on our property portfolio at the year end of GBP22.4 million, net of property acquisition costs (2017: GBP15.8 million including a GBP1.1 million gain on the sale of Forthside Way in Stirling). The gross margin for the year was 62% (2017: 57%).
Administration expenses were driven down to GBP9.1 million in 2018, lower than our guidance (2017: GBP13.5 million). For 2019, we continue to expect administration costs of approximately GBP10 million, with the additional costs of recruitment in areas such as HR and IT offset by savings elsewhere.
Net financing costs for the year were GBP12.7 million, net of money market investment income and the fair value gain on interest rate swaps of GBP0.1 million (2017: GBP11.8 million and GBP0.1 million, respectively).
Profit before tax was GBP40.3 million, up 94% (2017: GBP20.8 million). No corporation tax was charged, as the Group fulfilled all of its obligations as a UK Real Estate Investment Trust ("REIT"). Basic earnings per share ("EPS") were therefore 6.68 pence (6.67 pence on a diluted basis) (2017: 3.84 pence and 3.83 pence (diluted)).
The Net Asset Value ("NAV") per share as at 31 December 2018 was 106.14 pence, prior to adjusting for the interim dividend for the quarter ended 31 December 2018 of 1.25 pence per share (31 December 2017: 104.37 pence, prior to adjusting for the interim dividend of 1.25 pence per share). The NAV is shown net of all property acquisition costs and dividends paid during the year.
Dividends
Quarter to Declared Paid Amount (p)
------------------ ------------ ------------- ----------
31 March 2018 23 May 2018 15 June 2018 1.25
21 August 14 September
30 June 2018 2018 2018 1.25
14 November 7 December
30 September 2018 2018 2018 1.25
20 February Due 22 March
31 December 2018 2019 2019 1.25
------------------ ------------ ------------- ----------
5.00
--------------------------------------------- ----------
The dividends declared in respect of the 2018 financial year are shown in the table above.
Of the total dividends, 1.32 pence per share was declared as property income distributions and 3.68 pence per share was declared as ordinary UK dividends (2017: 2.94 pence per share and 2.61 pence per share respectively).
Adjusted EPS is the most relevant measure of earnings when assessing dividend distributions. It increased by 72% from 1.86 pence in 2017 to 3.2 pence in 2018, to give dividend cover of 64%. Adjusted EPS is defined on page 98 in the annual report.
At 31 December 2018, the Company had distributable reserves of GBP58 million. We therefore continue to have substantial headroom for the payment of dividends.
At the AGM on 2 May 2019, shareholders will be asked to vote on a resolution to cancel the Company's share premium account, which stood at GBP467 million at 31 December 2018. When companies issue shares at a premium to their nominal value, that premium must be recorded in the share premium account. The Companies Act restricts the use of this capital which cannot, for example, be used to declare dividends or to repurchase the Company's shares. Cancelling the share premium account will release this capital, which will then be treated as realised profit. While we have no current intention to do so, this will give us increased flexibility to declare dividends or to make other distributions to shareholders. If shareholders approve the resolution, we will promptly apply for the necessary court order to confirm the cancellation.
Debt Financing
On 20 December 2018, we announced the refinancing of GBP86.1 million of our debt with a new ten-year, fixed rate term loan facility with Scottish Widows Limited. The new facility is secured against a portfolio of our operating assets, held as a lending group through a wholly owned subsidiary. The new facility is interest only until final repayment in 2028 and fixed at 3.196% per annum, which reduces our cost of debt to 3.26%. The facility also extends our average debt maturity profile across all our facilities to 7.6 years.
We drew down GBP30.6 million of the new facility on 20 December 2018, to repay an expiring facility with NatWest. We expect to draw down the remaining GBP55.5 million towards the end of October 2019, to repay a second expiring NatWest facility. Drawing down funds on the expiry of these facilities ensures we do not incur any break fees.
Our loan-to-value ("LTV") ratio at the year end was 30.6% (31 December 2017: 28.2%) below our threshold of 40% and our long-term target of 35%. We have changed the way we measure LTV during the year to ensure that we are consistent with our peers. Our LTV is now calculated as total drawn borrowings net of cash held and fixed term deposits divided by gross asset value.
Alternative Investment Fund Manager ("AIFM")
The Company continues to be authorised as a full-scope AIFM and is regulated by the Financial Conduct Authority. The Company engages a specialist compliance consultancy, Portman Compliance Consulting LLP, to ensure that it adheres to all of its regulatory obligations.
Change in Listing Chapter
Under the Listing Rules, Empiric is currently categorised as a premium listed closed-ended investment fund. This requires us to follow an investment policy, which limits our operational flexibility. The Board has reviewed our listing category and concluded that given Empiric's evolution from a pure real estate company to an operating business, we would be better served by being classified as a commercial company. Rather than pursuing an investment policy, we would then be able to follow a business strategy set by the Board. We do not believe this would significantly change our strategic or operational focus but it would enhance our ability to manage the portfolio, bring us into line with the majority of internally managed REITs on the London market and reduce our compliance costs.
The change of listing category requires shareholder approval and we have included a resolution to this effect for the forthcoming AGM. If approved, we expect the change to take effect from 3 June 2019. More information on the proposal can be found in the Notice of Annual General Meeting, which is available on our website, www.empiric.co.uk.
PRINCIPAL RISKS AND UNCERTAINTIES
Robust risk culture
Empiric has a strong culture of managing risk and a well-defined risk management process. This process is designed to identify, evaluate and mitigate (rather than eliminate) the significant risks we face. The process can therefore only provide reasonable, rather than absolute, assurance. We outsource certain services to our administrator, FIM Capital Limited (the "Administrator"), and other service providers, and rely to an extent on their systems and controls.
The Audit Committee formally reviews the effectiveness of our risk management processes and internal control systems, on the Board's behalf. During the course of these reviews, the Board has not identified or been advised of any material failings or weaknesses.
Changes to Risks During the Year
The risk environment we operate in continues to evolve and this is reflected in the principal risks and uncertainties that are set out on the following pages.
We have expanded the definition of the risk that we focus exclusively on the student accommodation sector (SR1) to identify a number of macro factors that are or could influence the higher education sector. We have expanded financing risk (FR1) to cover capital raising in general, rather than specifically debt financing. We have also identified health and safety as a separate risk (OR2), rather than including it in the risk relating to legal and regulatory compliance (OR1). We have removed one principal risk, which was the risk that our operations and management of cost bases relied on third-party managers. This is no longer relevant, given the insourcing of our property management and FM services. We have also added a principal risk (OR3) relating to the need to keep our operating costs under control.
The trends relating to all the principal risks and uncertainties are set out in the table on pages 29 to 33 in the annual report.
Our Risk Appetite
The Group's risk appetite in relation to our portfolio is covered by our Investment Policy (see page 24 in the annual report). It contains a range of criteria, such as limits on the amount of development we can undertake at any one time, which ensures that the business is not exposed to excessive risk in respect of its assets. The Board also looks to ensure that the Group is conservatively financed, with a target LTV ratio of 35% in the long term and a maximum of 40%. In addition, the Board has zero tolerance to health and safety risk within our control and looks to go beyond its statutory requirements, as described on page 26 in the annual report.
Principal Risks
The principal risks and uncertainties we face have the potential to materially affect our business, either favourably or unfavourably. Some risks may be unknown to us at present, and some risks that we currently regard as immaterial, and have therefore not included here, may become material in the future.
Brexit
The Board continues to review the potential impact of Brexit on the Group's business. While we do not deem it to be a principal risk at this stage, we are monitoring developments. There are two primary ways in which Brexit may affect Empiric.
First, it could reduce student numbers coming from the EU. These students currently comprise 7% of the UK undergraduate population, so any reduction is unlikely to have a material effect on overall student numbers, particularly when taking into account excess demand for university places, as discussed in the Our Market section on page 4 in the annual report. Second, Brexit may have a wider impact on universities themselves, through the loss of research funding and academics from the EU. This could make UK universities less attractive places to study. We believe our focus on the towns and cities with the most successful universities will help to mitigate this risk.
Impact and
Risk Strategy Probability Mitigation Trend
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
Strategic Risks
-----------------------------------------------------------------------------------------------------------------------------
SR1 We focus exclusively 1,2,3,4,5 Medium impact, We monitor Increasing
on the student accommodation medium government
sector. We therefore to high policy and its
rely on the development probability. actual
of the higher education An adverse change or potential
market in the UK generally in the higher impact
or in specific regions, education on UK, EU and
including any change market could international
in demand from international reduce student numbers.
students. student numbers We pay
Specific factors that and demand for particular
could affect the higher student attention to
education sector, and accommodation, proposals
which present both risks either relating to
and opportunities for across the UK or Brexit
us, include: in specific and how these
* the risk of some universities becoming insolvent; regions. affect
This, in turn, the UK as a
could whole,
* the possible introduction of two-year degree courses; reduce our rental as well as speci
income and the c regions.
value We acquire or
* the Government's review of the level of tuition fees; of all, or a develop
signi well-located
cant proportion assets
* the potential for an economic slowdown in the UK; of, our serving leading
portfolio. universities.
Maintaining
* the impact of Brexit - see statement above; and competitive
rental
levels should
* the Augar review. ensure
high occupancy,
even during
periods
of weaker
demand.
Our strategy
allows
us to diversify
across niches
that
appeal to a
broad
range of
students.
For example,
recently
completed
developments
expanded our
townhouse
offer and we
have
further
townhouses
in the pipeline.
We also seek to
ensure that our
developments
and,
where possible,
acquisitions of
standing assets,
are t for
alternative
use such as
private
residential,
subject
to planning.
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
SR2 We face competition 1,2,3,4,5 High impact, low The UK's No
from new and existing to medium full-time change
UK and international probability. student
property investors, Increased population
who may have larger competition was 1.8 million
financial resources may lead to an for the 2018/19
and/or be targeting oversupply academic year.
lower investment returns. of rooms through We
overdevelopment, are focused on
to inflated the
prices cities and towns
for existing with
properties high-quality
or development and growing
land, higher
or reduction of education
rents we can institutions
achieve. and where our
research
indicates that
there
is a significant
undersupply of
PBSA.
Our assets are
in
prime locations,
in varying
formats
and at different
price points. In
times of reduced
demand, they
should
be more
attractive
to potential
customers
than the
competition,
at the right
price.
We continue to
diversify
our product and
price points,
for
example through
rolling out our
townhouse
format.
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
Investment Risks
-----------------------------------------------------------------------------------------------------------------------------
IR 1 The performance of our 4,5 Medium to high Our assets are No
portfolio depends on impact, in change
general property and low to medium multiple prime
investment market conditions. probability. locations,
There remains uncertainty Market conditions diversifying the
in the property market may reduce our risk of adverse
following the EU referendum revenues, changes to the
in June 2016, which which would portfolio.
could prevail beyond affect We maintain a
the conclusion of the our ability to prudent
Brexit negotiations, make borrowing limit
depending on their outcome. distributions to of 40% of our
shareholders. GAV,
A fall in with a target of
property 35%. The LTV
valuations due to covenants
market conditions have been
may reduce our negotiated
GAV, to be as exible
which could lead as possible. We
to a breach of regularly review
the property market
LTV covenants in conditions and
our borrowings. would
take action,
should
it look like any
property used as
collateral had
decreased
in value to the
extent that
there
was a risk that
we might breach
any of our LTV
covenants.
In addition,
international
students pay in
advance, meaning
we maintain
substantial
cash balances on
account.
The student
property
sector has
demonstrated
considerable
robustness,
underpinned by
the
supply and
demand
imbalance.
Nevertheless,
we do not
overstretch
annual rent
increases,
which we vary
according
to the local
market
conditions for
each
area or
building.
The higher
education
sector is not
reliant
on students from
the EU, who
comprise
only 7% of all
full-time
students in the
UK, compared
with
77% from the UK
and 16% from
non-EU
countries.
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
IR 2 Our ability to achieve 2,4,5 Medium impact, Our portfolio is No
our Investment Policy medium geographically change
depends on both the probability. diversified
rental income we receive Rental income and and is becoming
and the appreciation property values increasingly
in property values. may be affected diversified
by increased by product type
supply and rental
of student level.
accommodation, Where we have
failure to more
collect than one
rents, increasing property
costs or any serving a town
deterioration or
in the quality of university, the
our properties. total number of
beds equates to
no more than 5%
of the
location's
full-time
student
population. We
are
not therefore
unduly
exposed to any
one
student market.
We manage our
properties
directly through
the Hello
Student(R)
platform and
will
have all
facilities
management
in-house
from 1 April
2019,
giving us full
control
over our
operational
performance. In
addition, we are
training Hello
Student(R)
staff to deliver
a high-quality
service.
We are evolving
our procedures
in
areas such as
debt
collection, to
ensure
we have tight
controls.
Bad debts have
had
only a minimal
impact
on our profits.
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
Development Risk
-----------------------------------------------------------------------------------------------------------------------------
DR1 Our development activities 3,4,5 Low to medium Our Investment No
are likely to involve impact, Policy change
more risk than operating medium allows us to
our properties. This probability. commit
includes general construction Any of the risks up to 15% of NAV
risks such as delays, associated with to expenditure
late delivery, developments our development on
not being completed activities could development
(while associated costs reduce the value (excluding
are still incurred) of our assets. the cost of the
or changes in market A delay in land or property
conditions, which could constructing to be
result in completed assets under developed).
developments having development Since IPO, we
substantial vacancies. could result in have
one or more of undertaken a
the greater
assets not being proportion of
delivered in time our
for the start of development
the academic activities
year, through forward
with a resultant funded projects,
impact on rather than by
occupancy direct
and revenue. development.
Forward
funding projects
reduces the risk
to us, as the
developer
takes on the
construction
risk and the
risk
of cost
over-runs.
These projects
also
generally bene t
from a rental
guarantee
for the rst year
of operations,
if
the asset is not
delivered in
time
for the start of
the academic
year.
For assets we
develop
directly, we put
in place
suitable
contingencies,
insurance
cover and other
arrangements
with
the contractor
or
sub-contractor,
to cover the
impact
of any delay.
Our development
activities span
a range of towns
and cities and
there
is little or no
overlap in the
developers
acting on these
projects (with
the
maximum exposure
to any one
developer
restricted to
20%
of GAV for
forward
funded
projects),
further reducing
the impact of
any
delays or
changes
in market
conditions.
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
Funding Risk
-----------------------------------------------------------------------------------------------------------------------------
FR1 The Group may not be 4,5 Low to medium At the year end, No
able to raise equity impact, the Group had change
or debt on acceptable low to medium headroom
terms. probability. in its debt
Without the facilities
continued of GBP60
availability of million.
equity or debt on The Group agreed
acceptable terms, a new ten-year
we may be unable fixed
to progress rate facility of
investment GBP86.1 million
opportunities as in December
they arise and 2018,
continue extending the
to grow the average
Group, maturity of its
in line with the debt facilities
long-term to 7.6 years.
strategy.
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
People Risk
-----------------------------------------------------------------------------------------------------------------------------
PR1 Our ability to achieve 1,2,5 High impact, low The Board No
our investment objective to medium believes change
depends on the performance probability. the Executive
of the Executive Directors The Executive Directors
and key staff which Directors' are performing
cannot be guaranteed. failure to well,
As a result, our performance acquire as demonstrated
will, to a large extent, and manage assets by the decisions
depend on our ability effectively could to appoint Tim
to align the incentives materially affect Attlee
of the Executive Directors our pro tability, as CEO and to
to shareholders' interests, NAV and share expand
retain key staff and/or price. Lynne Fennah's
recruit people of the Similarly, the remit
right calibre and experience departure to include the
of an Executive responsibilities
Director or of COO, and by
senior the
member of staff, improvement in
and either a the
delay Group's
or failure in operational
recruiting and financial
a suitable performance
replacement, in 2018.
could affect the We have expanded
Group's our Senior
performance. Leadership
Team below Board
level, as
described
on pages 13 and
19 in the annual
report, reducing
our reliance on
the Executive
Directors.
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
Operational Risks
-----------------------------------------------------------------------------------------------------------------------------
OR1 Our operations, including 1,2,3,5 Medium impact, Our investment No
our development activities, low team change
are subject to laws probability. has significant
and regulations enacted Failing to comply experience and,
by national and local with laws or together with
government. regulations its
Our ability to respond may affect our advisers,
and adapt to the changing ability closely
planning and regulatory to deliver or monitors the
environment is key to acquire planning
our future business further environment both
performance. buildings, nationally and
or result in one in
or more existing our target
buildings being markets.
temporarily or The Executive
permanently Directors
closed, which may are ultimately
have a material responsible
adverse effect on for ensuring
our performance. that
Any change in the planning
laws or submissions
regulations are well
relating to our prepared,
operations or address local
development concerns
activities may and demonstrate
have good design, and
a material that all our
adverse buildings
impact on our comply with
ability building
to implement our regulations, are
Investment Policy sustainable and
and our returns environmentally
to shareholders. efficient.
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
OR 2 We need to comply with 1,2,3,5 High impact, low We undertake Increasing
health and safety laws probability. landlord
and regulations, to A serious health risk assessments
protect the health and and safety for every
wellbeing of our employees, incident property
contractors, customers could result in prior to
and the general public. criminal or civil occupation.
proceedings and In addition, all
severely damage our student
our reputation. property
It could also is insured as
lead occupied
to delays in residential
development property,
projects. our property
managers
receive training
to minimise the
risk of a health
and safety
incident
occurring, and
our
buildings are
inspected
on a sample
basis,
as part of our
ANUK
accreditation.
More information
on our approach
to health and
safety
can be found on
page 26 in the
annual
report.
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
OR 3 We need to maintain 5 Medium to high The actions we Decreasing
rigorous control of impact, have
our operating costs. medium to high taken have
probability. materially
Operating costs improved our
that are greater ability
than expected to manage our
will costs.
reduce our Bringing
profitability facilities
and our dividend management
cover. in-house
and putting all
our properties
onto
the Hello
Student(R)
platform give us
direct control
of
all the
significant
elements of our
cost base, and
we
will drive
further
efficiencies in
2019. We have
also
made substantial
improvements to
the quality of
our
management
information,
enabling us to
identify
any cost issues
quickly and take
action to
address
them.
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
OR 4 The Company operates 5 High impact, low The Board is No
as a UK REIT and has probability. responsible change
a tax-ef cient corporate If we fail to for ensuring we
structure, which benefits remain adhere to the UK
UK shareholders. Any a REIT for UK tax REIT regime. It
change to our tax status, purposes, our pro monitors the
UK tax legislation or ts and gains will compliance
interpretation of that be subject to UK reports provided
legislation could affect corporation tax. by the Executive
our ability to achieve Directors on
our investment objective potential
or provide favourable transactions,
returns to shareholders. the
Administrator's
reports on asset
levels and our
registrar's
and broker's
reports
on
shareholdings.
Our compliance
processes
are embedded
throughout
the business and
in particular in
the finance
team.
KPMG provides
REIT
compliance
monitoring
services and
Portman
Compliance
Consulting
LLP assists us
with
compliance
matters.
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
OR 5 We may not be able to 1,2,5 Medium to high We have a Increasing
maintain the occupancy impact, rigorous
rates of our properties medium to high focus on revenue
or any other properties probability. management and
we acquire. If we cannot have
maintain brought all our
attractive properties onto
occupancy the Hello
levels (or Student(R)
maintain platform. This
them on gives
economically us full control
favourable over marketing
terms), and
there may be a student
material interaction,
adverse effect on and provides
our pro tability, live
NAV and share data across the
price. portfolio, so we
can respond
rapidly
to changes in
the
market and drive
occupancy and
revenue.
We continue to
enhance
our sales
processes,
as discussed in
the Chief
Executive
Officer's Review
on page 13 in
the
annual report.
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
OR 6 Our business depends 1,2,3,5 Medium to high Our networks are Increasing
on the integrity and impact, protected by
availability of our low to medium rewalls
computer systems, so probability. and anti-virus
we must maintain high A major cyber protection
standards of cyber security. security systems, with
We collect and retain or information backup
information regarding security procedures also
our business dealings, breach could have in place.
our customers and our a signi cant We have employed
suppliers. Securely impact an in-house Head
processing, maintaining on our reputation of IT, who
and transmitting this and could result joined
information are critical in the inability us on 1 November
to our business and to use our 2018. His remit
we must comply with computer includes
restrictions on the systems or the enhancing
handling of sensitive loss our controls and
information (including of optimising our
employee and customer business-critical systems
information). information. This design, to
in turn could minimise
affect the risk of
our ability to do hacking.
business or This is
result particularly
in nes or critical as we
compensation, expand
reducing our pro our portfolio
tability. and
our operational
capabilities, to
ensure our
investment
in computer
systems
aligns with our
overall business
strategy, is
costeffective
and designed to
reduce as far as
possible the
risk
of security
breaches.
All staff are
given
appropriate
training
to identify
emails
and other
communications
that could
result
in a security
breach.
We also provide
training in
compliance
and the General
Data Protection
Regulation. The
new learning
management
system supports
training for
people
on our sites.
---- ----------------------------------------------------------- --------- ----------------- ---------------- ----------
Strategic Link
1. Customers 2. Brand 3. People and Operations 4. Buildings 5. Shareholder Outcomes
APPROVAL OF STRATEGIC REPORT
The strategic report for the year ended 31 December 2018 has been approved by the Board and was signed on its behalf by:
Tim Attlee
Chief Executive Officer | 20 March 2019
DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare the Group and Company financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements and have elected to prepare the Company financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss for the Group for that year.
In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently; - make judgements and accounting estimates that are reasonable and prudent;
- state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements;
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business; and
- prepare a Directors' Report, a Strategic Report and Directors' Remuneration Report which comply with the requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website Publication
The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the UK governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.
Directors' Responsibilities Pursuant to DTR4
The Directors confirm that to the best of their knowledge:
- The Group financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group and the undertakings included in the consolidation as a whole;
- The Annual Report includes a fair review of the development and performance of the business and the financial position of the Group and the Parent Company, together with a description of the principal risks and uncertainties that they face; and
- The Annual Report and Accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for shareholders to assess the Group's performance, business model and strategy.
Mark Pain
Chairman | 20 March 2019
GROUP STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 31 December
2018 2017
Note GBP'000 GBP'000
--------------------------------------------------------------------- ---- ----------- -----------
Continuing operations
Revenue 2 64,156 51,205
Property expenses 3 (24,500) (22,220)
--------------------------------------------------------------------- ---- ----------- -----------
Net rental income 39,656 28,985
Administrative expenses 4 (9,071) (13,454)
Change in fair value of investment property 13 22,375 15,836
Gain on disposal of investment property - 1,122
--------------------------------------------------------------------- ---- ----------- -----------
Operating profit 52,960 32,489
----------- -----------
Finance cost (12,788) (11,882)
Finance income 104 87
----------- -----------
Net finance costs 5 (12,684) (11,795)
Share of results from joint ventures - 56
--------------------------------------------------------------------- ---- ----------- -----------
Profit before income tax 40,276 20,750
Corporation tax 7 - -
--------------------------------------------------------------------- ---- ----------- -----------
Profit for the year 40,276 20,750
Other comprehensive income
Items that will be reclassified to Statement of Comprehensive Income
Fair value gain on cash flow hedge 402 508
--------------------------------------------------------------------- ---- ----------- -----------
Total comprehensive income for the year 40,678 21,258
--------------------------------------------------------------------- ---- ----------- -----------
Earnings per share expressed in pence per share 8 3.84
Basic 6.68
Diluted 6.67 3.83
--------------------------------------------------------------------- ---- ----------- -----------
GROUP STATEMENT OF FINANCIAL POSITION
At At
31 December 31 December
2018 2017
Note GBP'000 GBP'000
------------------------------------------ ----- ----------- -----------
ASSETS
Non-current assets
Property, plant and equipment 11 366 475
Intangible assets 12 1,253 1,423
Investment property - Operational assets 13 929,371 848,537
Investment property - Development assets 13 41,670 42,045
Derivative financial assets 18 - 1
------------------------------------------ ----- ----------- -----------
Total non-current assets 972,660 892,481
------------------------------------------ ----- ----------- -----------
Current assets
Trade and other receivables 14 13,747 27,792
Fixed term deposit 15 10,000 -
Cash and cash equivalents 15 23,473 52,721
------------------------------------------ ----- ----------- -----------
Total current assets 47,220 80,513
------------------------------------------ ----- ----------- -----------
Total assets 1,019,880 972,994
------------------------------------------ ----- ----------- -----------
LIABILITIES
Current liabilities
Trade and other payables 16 28,535 22,620
Borrowings 17 55,260 20,767
Derivative financial liability 18 237 424
Deferred income 16 26,968 22,286
------------------------------------------ ----- ----------- -----------
Total current liabilities 111,000 66,097
------------------------------------------ ----- ----------- -----------
Non-current liabilities
Borrowings 17 268,990 277,382
Derivative financial liability 18 - 257
------------------------------------------ ----- ----------- -----------
Total non-current liabilities 268,990 277,639
------------------------------------------ ----- ----------- -----------
Total liabilities 379,990 343,736
------------------------------------------ ----- ----------- -----------
Total net assets 639,890 629,258
------------------------------------------ ----- ----------- -----------
Equity
Called up share capital 19 6,029 6,029
Share premium 20 467,268 467,268
Capital reduction reserve 21 45,458 75,602
Retained earnings 121,215 80,841
Cash flow hedge reserve (80) (482)
------------------------------------------ ----- ----------- -----------
Total equity 639,890 629,258
------------------------------------------ ----- ----------- -----------
Total equity and liabilities 1,019,880 972,994
------------------------------------------ ----- ----------- -----------
Net Asset Value per share basic (pence) 9 106.14 104.37
Net Asset Value per share diluted (pence) 9 105.96 104.15
EPRA Net Asset Value per share (pence) 9 106.18 104.49
------------------------------------------ ----- ----------- -----------
These financial statements were approved by the Board of Directors on 20 March 2019 and signed on its behalf by:
Lynne Fennah
Chief Financial Officer
COMPANY STATEMENT OF FINANCIAL POSITION
Company Registration Number: 08886906
At At
31 December 31 December
2018 2017
Note GBP'000 GBP'000
------------------------------------ ---- ----------- -----------
ASSETS
Non-current assets
Property, plant and equipment 11 366 475
Intangible assets 12 627 491
Investments in subsidiaries 30 8,623 12,571
------------------------------------ ---- ----------- -----------
Total non-current assets 9,616 13,537
------------------------------------ ---- ----------- -----------
Current assets
Trade and other receivables 14 202 4,267
Amounts due from Group undertakings 14 517,778 807,451
Cash and cash equivalents 15 15,955 17,091
------------------------------------ ---- ----------- -----------
Total current assets 533,935 828,809
------------------------------------ ---- ----------- -----------
Total assets 543,551 842,346
------------------------------------ ---- ----------- -----------
LIABILITIES
Current liabilities
Trade and other payables 16 2,198 2,130
Amounts due to Group undertakings 16 11 306,173
------------------------------------ ---- ----------- -----------
Total current liabilities 2,209 308,303
Non-current liabilities
Borrowings 17 9,965 9,933
------------------------------------ ---- ----------- -----------
Total non-current liabilities 9,965 9,933
------------------------------------ ---- ----------- -----------
Total liabilities 12,174 318,236
------------------------------------ ---- ----------- -----------
Total net assets 531,377 524,110
------------------------------------ ---- ----------- -----------
Equity
Called up share capital 19 6,029 6,029
Share premium 20 467,268 467,268
Capital reduction reserve 21 45,458 75,602
Retained earnings 12,622 (24,789)
------------------------------------ ---- ----------- -----------
Total equity 531,377 524,110
------------------------------------ ---- ----------- -----------
Total equity and liabilities 543,551 842,346
------------------------------------ ---- ----------- -----------
The Company made a profit for the year of GBP37,313,000 (2017: GBP11,296,000 loss).
These financial statements were approved by the Board of Directors on 20 March 2019 and signed on its behalf by:
Lynne Fennah
Director
GROUP STATEMENT OF CHANGES IN EQUITY
Capital
Called-up Share reduction Retained Cash flow Total
share capital premium reserve earnings hedge reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------ ------------- ------- --------- -------- ------------- --------
Year ended 31 December 2018
Balance at 1 January 2018 6,029 467,268 75,602 80,841 (482) 629,258
Changes in equity
Profit for the year - - - 40,276 - 40,276
Fair value gain on cash flow hedge - - - - 402 402
------------------------------------------------ ------------- ------- --------- -------- ------------- --------
Total comprehensive income for the year - - - 40,276 402 40,678
------------------------------------------------ ------------- ------- --------- -------- ------------- --------
Share-based payments - - - 98 - 98
Dividends - - (30,144) - - (30,144)
------------------------------------------------ ------------- ------- --------- -------- ------------- --------
Total contributions and distribution recognised
directly in equity - - (30,144) 98 - (30,046)
------------------------------------------------ ------------- ------- --------- -------- ------------- --------
Balance at 31 December 2018 6,029 467,268 45,458 121,215 (80) 639,890
------------------------------------------------ ------------- ------- --------- -------- ------------- --------
Year ended 31 December 2017
Balance at 1 January 2017 5,013 359,958 106,198 60,686 (990) 530,865
Changes in equity
Profit for the year - - - 20,750 - 20,750
Fair value gain on cash flow hedge - - - - 508 508
------------------------------------------------ ------------- ------- --------- -------- ------------- -------- Total comprehensive income for the year - - - 20,750 508 21,258 ------------------------------------------------ ------------- ------- --------- -------- ------------- -------- Issue of share capital 1,009 108,991 - - - 110,000 Share options exercised 7 749 - (756) - - Share issue costs - (2,430) - - - (2,430) Share-based payments - - - 161 - 161 Dividends - - (30,596) - - (30,596) ------------------------------------------------ ------------- ------- --------- -------- ------------- -------- Total contributions and distribution recognised directly in equity 1,016 107,310 (30,596) (595) - 77,135 ------------------------------------------------ ------------- ------- --------- -------- ------------- -------- Balance at 31 December 2017 6,029 467,268 75,602 80,841 (482) 629,258 ------------------------------------------------ ------------- ------- --------- -------- ------------- --------
COMPANY STATEMENT OF CHANGES IN EQUITY
Capital
Called-up Share reduction Retained Total
share capital premium reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------------------- ------------- ------- --------- -------- --------
Year ended 31 December 2018
Balance at 1 January 2018 6,029 467,268 75,602 (24,789) 524,110
Changes in equity
Profit for the year - - - 37,313 37,313
--------------------------------------------------------------- ------------- ------- --------- -------- --------
Total comprehensive income for the year - - - 37,313 37,313
--------------------------------------------------------------- ------------- ------- --------- -------- --------
Share-based payments - - - 98 98
Dividends - - (30,144) - (30,144)
--------------------------------------------------------------- ------------- ------- --------- -------- --------
Total contributions and distribution recognised directly in
equity - - (30,144) 98 (30,046)
--------------------------------------------------------------- ------------- ------- --------- -------- --------
Balance at 31 December 2018 6,029 467,268 45,458 12,622 531,377
--------------------------------------------------------------- ------------- ------- --------- -------- --------
Year ended 31 December 2017
Balance at 1 January 2017 5,013 359,958 106,198 (12,898) 458,271
Changes in equity
Loss for the year - - - (11,296) (11,296)
--------------------------------------------------------------- ------------- ------- --------- -------- --------
Total comprehensive loss for the year - - - (11,296) (11,296)
--------------------------------------------------------------- ------------- ------- --------- -------- --------
Issue of share capital 1,009 108,991 - - 110,000
Share options exercised 7 749 - (756) -
Share issue costs - (2,430) - - (2,430)
Share-based payments - - - 161 161
Dividends - - (30,596) - (30,596)
--------------------------------------------------------------- ------------- ------- --------- -------- --------
Total contributions and distribution recognised directly in
equity 1,016 107,310 (30,596) (595) 77,135
--------------------------------------------------------------- ------------- ------- --------- -------- --------
Balance at 31 December 2017 6,029 467,268 75,602 (24,789) 524,110
--------------------------------------------------------------- ------------- ------- --------- -------- --------
GROUP STATEMENT OF CASH FLOWS
Year ended Year ended
31 December 31 December
2018 2017
GBP'000 GBP'000
-------------------------------------------------------- ----------- -----------
Cash flows from operating activities
Profit before income tax 40,276 20,750
Share-based payments 98 161
Depreciation and amortisation 299 251
Finance income (104) (87)
Finance costs 12,788 11,882
Share of results from joint venture - (56)
Intangible asset impairment 248 -
Change in fair value of investment property (22,375) (15,836)
Gain in disposal of investment property - (1,122)
-------------------------------------------------------- ----------- -----------
31,230 15,943
Decrease/(increase) in trade and other receivables 15,451 (3,003)
Increase in trade and other payables 791 1,959
Increase in deferred rental income 4,682 6,526
-------------------------------------------------------- ----------- -----------
20,924 5,482
-------------------------------------------------------- ----------- -----------
Net cash flows generated from operations 52,154 21,425
-------------------------------------------------------- ----------- -----------
Cash flows from investing activities
Purchases of tangible fixed assets (1) (88)
Purchases of intangible assets (267) (535)
Purchase of investment property (54,169) (154,479)
Disposal of investment property - 2,000
Interest received 104 87
Fixed term deposit (10,000) -
-------------------------------------------------------- ----------- -----------
Net cash flows from investing activities (64,333) (153,015)
-------------------------------------------------------- ----------- -----------
Cash flows from financing activities
Share issue proceeds - 110,000
Share issue costs - (2,430)
Dividends paid (30,144) (30,596)
Bank borrowings drawn 66,801 69,446
Bank borrowings repaid (40,630) (9,534)
Loan arrangement fee paid (2,058) (2,016)
Finance cost (excluding fair value loss on derivatives) (11,038) (9,958)
-------------------------------------------------------- ----------- -----------
Net cash flows from financing activities (17,069) 124,912
-------------------------------------------------------- ----------- -----------
Decrease in cash and cash equivalents (29,248) (6,678)
Cash and cash equivalents at beginning of year 52,721 59,399
-------------------------------------------------------- ----------- -----------
Cash and cash equivalents at end of year 23,473 52,721
-------------------------------------------------------- ----------- -----------
COMPANY STATEMENT OF CASH FLOWS
Year ended Year ended
31 December 31 December
2018 2017
GBP'000 GBP'000
-------------------------------------------------------- ----------- -----------
Cash flows from operating activities
Profit/(loss) before income tax 37,313 (11,296)
Share-based payments 98 161
Depreciation and amortisation 165 159
Dividends received (44,000) -
Gain on sale of subsidiaries (1,571) -
Finance income (60) (43)
Finance costs 285 197
-------------------------------------------------------- ----------- -----------
(7,770) (10,822)
-------------------------------------------------------- ----------- -----------
Decrease/(increase) in trade and other receivables 4,065 (3,665)
Increase in trade and other payables 68 544
-------------------------------------------------------- ----------- -----------
4,133 (3,121)
Net cash flows generated from operations (3,637) (13,943)
-------------------------------------------------------- ----------- -----------
Cash flows from investing activities
Purchases of tangible fixed assets (1) (88)
Purchases of intangible assets (191) (401)
Investments in subsidiaries - (4,650)
Payments to/on behalf of subsidiaries 325,051 89,868
Repayments from subsidiaries (292,021) (155,498)
Interest received 60 43
-------------------------------------------------------- ----------- -----------
Net cash flows from investing activities 32,898 (70,726)
-------------------------------------------------------- ----------- -----------
Cash flows from financing activities
Share issue proceeds - 110,000
Share issue costs - (2,430)
Dividends paid (30,144) (30,596)
Bank borrowings drawn - 10,000
Loan arrangement fee paid - (93)
Finance cost (excluding fair value loss on derivatives) (253) (118)
-------------------------------------------------------- ----------- -----------
Net cash flows from financing activities (30,397) 86,763
-------------------------------------------------------- ----------- -----------
Decrease in cash and cash equivalents (1,136) 2,094
Cash and cash equivalents at beginning of year 17,091 14,997
-------------------------------------------------------- ----------- -----------
Cash and cash equivalents at end of year 15,955 17,091
-------------------------------------------------------- ----------- -----------
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 2018 to 31 December 2018.
The consolidated financial statements of the Group for the year ended 31 December 2018 comprise the results of Empiric Student Property plc ("the Company") and its subsidiaries and were approved by the Board for issue on 20 March 2019. 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 2018 comprise the results of Empiric Student Property plc (the "Company") and its subsidiaries (together, the "Group"). These financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union.
The Group's financial statements have been prepared on a historical cost basis, except for investment property and derivative financial instruments which have been measured at fair value. The consolidated financial statements are presented in Sterling which is also the Company's, 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 GBP37,313,000 (2017: loss of GBP11,296,000) for the Company, which is reflected in the financial statements of the Company.
The financial information does not constitute the Group's statutory accounts for the year ended 31 December 2018 or the year ended 31 December 2017 but is derived from those accounts. The Group's statutory accounts for the year ended 31 December 2017 have been delivered to the Registrar of Companies. The Group's statutory accounts for the year ended 31 December 2018 will be delivered to the Registrar of Companies in due course. The Auditor has reported on both the December 2018 and December 2017 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.
Changes in Accounting Policies
New Standards, Interpretations and Amendments Effective from 1 January 2018
New standards impacting the Group that have been adopted in the annual financial statements for the year ended 31 December 2018, and which have given rise to changes in the Group's accounting policies are:
- IFRS 9 Financial Instruments (IFRS 9); and - IFRS 15 Revenue from Contracts with Customers (IFRS 15).
Details of the impact these two standards have had are given in Note 1.5.
Details of the other new standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early are also given in Note 1.5.
1.3 Going Concern
The consolidated financial statements have been prepared on a going concern basis as discussed in the Directors' Report on page 62 in the annual report.
1.4 Significant Accounting Judgements, Estimates and Assumptions
The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.
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:
(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 - Professional Standards January 2014 (the "Red Book"). Factors reflected include current market conditions, annual rentals, lease lengths, and location. The significant methods and assumptions used by valuers in estimating the fair value of investment property are set out in Note 13.
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.
(b) Operating Lease Contracts - the Group as Lessor
The Group has acquired investment properties which have commercial property leases in place with tenants. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the lease terms 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 2018. 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. Other than financial assets in a qualifying hedging relationship, the Group's accounting policy for each category is as follows:
Fair Value Through Profit or Loss
This category comprises only in-the-money derivatives (see "Financial liabilities" section for out-of-money derivatives). They 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. Other than derivative financial instruments which are not designated as hedging instruments, 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 arise principally from the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. 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 receivables 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 receivables from related parties and loans to related parties 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 along with 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 in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and - for the purpose of the Statement of Cash Flows -bank overdrafts. Bank overdrafts are shown within loans and borrowings in current liabilities on the Statement of Financial Position.
Financial Liabilities
The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired.
Other than financial liabilities in a qualifying hedging relationship (see below), the Group's accounting policy for each category is as follows:
Fair Value Through Profit or Loss
This category comprises only out-of-the-money derivatives (see "Financial assets" for in the money derivatives). They are carried in the Statement of Financial Position at fair value with changes in fair value recognised in the Statement of Comprehensive Income. The Group does not hold or issue derivative instruments for speculative purposes, but for hedging purposes. Other than these derivative financial instruments, the Group does not have any liabilities held for trading nor has it designated any financial liabilities as being at fair value through profit or loss.
Other Financial Liabilities
Other financial liabilities include the following items:
Bank borrowings are 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.
Hedge Accounting
Hedge accounting is applied to financial assets and financial liabilities only where all of the following criteria are met:
- At the inception of the hedge there is formal designation and documentation of the hedging relationship and the Group's risk management objective and strategy for undertaking the hedge; and
- The hedge relationship meets all of the hedge effectiveness requirements, including that an economic relationship exists between the hedged item and the hedging instrument, the credit risk effect does not dominate the value changes, and the hedge ratio is designated based on actual quantities of the hedged item and hedging instrument.
Cash Flow Hedges
The effective part of forward contracts designated as a hedge of the variability in cash flows of interest rate risk arising from firm commitments, and highly probable forecast transactions, are measured at fair value with changes in fair value recognised in Other Comprehensive Income and accumulated in the cash flow hedge reserve. The Group uses such contracts to fix the cost interest payments.
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 Statement of Comprehensive Income on a straight-line basis over ten years, except for the Hello Student(R) Application, which is being amortised on a straight-line basis over five years due to the nature of the asset.
Investment Property
Investment property comprises property that is held to earn rentals or for capital appreciation, or both, and property under development rather than for sale in the ordinary course of business or for use in production or administrative functions.
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 Statement of Comprehensive Income in the period in which they arise.
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 when control is passed to the purchaser, expected to be on legal completion. 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 Statement of Comprehensive Income in the period of retirement or disposal.
Operating Leases
Rentals paid under operating leases are charged to the Statement of Comprehensive Income on a straight-line basis over the period of the lease within administrative expenses.
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 Statement of Comprehensive Income on the following basis:
- Fixtures and fittings: 15% per annum on a reducing balance basis; - 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 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 Statement of Comprehensive Income when the right to receive them arises.
Rent and Other Receivables
Rent and other receivables are recognised at their original invoiced value net of VAT. A provision is made when there is objective evidence that the Group will not be able to recover balances in full.
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 UK.
Share-based Payments
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the 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.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the Statement of Comprehensive Income over the remaining vesting period. National Insurance obligations with respect to equity-settled share-based payments awards are accrued over the vesting period.
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 comprises current and deferred taxes. Taxation is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised as direct movement in equity, in which case it is also recognised as a direct movement in equity.
Current tax is 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 amounts 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.
1.5 New Standards Issued and Effective from 1 January 2018
The Group has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2018:
- IFRS 9 Financial Instruments - IFRS 15 Revenue from Contracts with Customers - Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2
The Group had to change its accounting policies following the adoption of IFRS 9 and IFRS 15. As a result of the transition there was no requirement to make any retrospective amendments and the changes are not expected to significantly affect the current or future periods.
IFRS 9
IFRS 9 has replaced IAS 39 Financial Instruments: Recognition and Measurement, and has had the following effect on the Group.
- Management has reviewed the requirements of IFRS 9. The Group's principal financial assets comprise interest rate derivatives which will continue to be measured at fair value, and trade receivables, which will continue to be measured at amortised cost. The following change has been identified:
- The Group applied the expected credit loss model when calculating impairment losses on its financial assets measured at amortised cost (such as trade and other receivables). This resulted in greater judgement due to the need to factor in forward-looking information when estimating the appropriate amount of provisions. To measure expected credit losses the Group considered the probability of a default occurring over the contractual life of its trade receivables. This resulted in no change in impairment provisions so there is no retrospective adjustment.
1.6 Accounting Standards and Interpretations Issued But Not Yet Effective
At the date of authorisation of these financial statements, the following accounting standards had been issued which are not yet applicable to the Group:
IFRS 16 - Leases (effective year ending 31 December 2019)
As Lessee
The Group's lease commitment for head office space will be brought onto the Statement of Financial Position together with the corresponding asset. The expected impact has been quantified and will not be material to the Group.
As Lessor
The Group's accounting for lessors will not materially change as the Group only operates operating leases.
Other Amendments
Additionally, amendments to existing standards have been issued by the IASB, including:
- IFRS 2 (amendments) Classification and Measurement of Share-based Payment Transactions - IAS 7 (amendments) Disclosure Initiative - IAS 12 (amendments) Recognition of Deferred Tax Assets for Unrealised Losses
- IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets Between an Investor and its Associate or Joint Venture
The Directors consider that these amendments will not materially impact the financial statements.
2. REVENUE
Group
------------------------
Year ended Year ended
31 December 31 December
2018 2017
GBP'000 GBP'000
------------------------- ----------- -----------
Student rental income 62,454 49,450
Commercial rental income 1,702 1,755
------------------------- ----------- -----------
Total revenue 64,156 51,205
------------------------- ----------- -----------
3. PROPERTY EXPENSES
Group
------------------------
Year ended Year ended
31 December 31 December
2018 2017
GBP'000 GBP'000
------------------------------- ----------- -----------
Direct site costs 10,413 8,563
Technology services 1,025 1,001
Site office and utilities 8,200 8,500
Cleaning and service contracts 2,591 2,611
Repairs and maintenance 2,271 1,545
------------------------------- ----------- -----------
Total property expenses 24,500 22,220
------------------------------- ----------- -----------
4. ADMINISTRATIVE EXPENSES
Group
------------------------
Year ended Year ended
31 December 31 December
2018 2017
GBP'000 GBP'000
------------------------------------------------------------ ----------- -----------
Salaries and Directors' remuneration 3,372 4,256
Legal and professional fees 2,708 3,642
Other administrative costs 2,012 2,295
IT expenses 471 414
Irrecoverable VAT - 1,578
------------------------------------------------------------ ----------- -----------
8,563 12,185
------------------------------------------------------------ ----------- -----------
Auditor's fees
Fees payable for the audit of the Group's annual accounts 210 200
Fees payable for the review of the Group's interim accounts 40 40
Fees payable for the audit of the Group's subsidiaries 125 125
------------------------------------------------------------ ----------- -----------
Total auditor's fees 375 365
------------------------------------------------------------ ----------- -----------
Abortive acquisition costs 133 904
------------------------------------------------------------ ----------- -----------
Total administrative expenses 9,071 13,454
------------------------------------------------------------ ----------- -----------
5. NET FINANCE COST
Group
------------------------
Year ended Year ended
31 December 31 December
2018 2017
GBP'000 GBP'000
--------------------------------------- ----------- -----------
Finance costs
Fair value loss on interest rate cap 1 18
Interest expense on bank borrowings 11,037 10,330
Amortisation of loan transaction costs 1,750 1,534
--------------------------------------- ----------- -----------
12,788 11,882
--------------------------------------- ----------- -----------
Finance income
Fair value gain on interest rate swap 42 43
Interest received on bank deposits 62 44
--------------------------------------- ----------- -----------
104 87
--------------------------------------- ----------- -----------
Net finance cost 12,684 11,795
--------------------------------------- ----------- -----------
6. EMPLOYEES AND DIRECTORS
Group Company
------------------------------------------------------------------ ------------------------ ------------------------
Year ended Year ended Year ended Year ended
------------------------------------------------------------------
31 December 31 December 31 December 31 December
----------- ----------- ----------- -----------
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------------ ----------- ----------- ----------- -----------
Total wages and salaries 4,954 5,353 2,455 3,479
Less: Hello Student(R) wages and salaries included in property
expenses (2,499) (2,005) - -
------------------------------------------------------------------ ----------- ----------- ----------- -----------
Total wages and salaries included in administrative expenses 2,455 3,348 2,455 3,479
Pension costs 216 245 216 114
Cash bonus 243 91 243 91
Share-based payments 98 161 98 161
National Insurance 360 411 360 411
------------------------------------------------------------------ ----------- ----------- ----------- -----------
3,372 4,256 3,372 4,256
------------------------------------------------------------------ ----------- ----------- ----------- -----------
The average monthly number of employees of the Group during the year was as follows:
Group Company
------------------------ ------------------------
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2018 2017 2018 2017
Number Number Number Number
---------------------------------- ----------- ----------- ----------- -----------
Management 4 4 4 4
Administration - ESP 22 21 22 21
Administration - Hello Student(R) 222 113 - -
---------------------------------- ----------- ----------- ----------- -----------
248 138 26 25
---------------------------------- ----------- ----------- ----------- -----------
Group and Company
------------------------
Year ended Year ended
31 December 31 December
2018 2017
Directors' remuneration GBP'000 GBP'000
------------------------------------------------------------ ----------- -----------
Salaries and fees 903 1,147
Pension costs 95 131
Cash bonus 145 38
Share-based payments 28 161
Payments for loss of office - 690
------------------------------------------------------------ ----------- -----------
1,171 2,167
------------------------------------------------------------ ----------- -----------
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 Group met all of the relevant REIT conditions for the year ended 31 December 2018.
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
2018 2017
GBP'000 GBP'000
----------------------------------------------------------------- ----------- -----------
Current tax
Income tax charge/(credit) for the year - -
Adjustment in respect of prior year - -
----------------------------------------------------------------- ----------- -----------
Total current income tax charge/(credit) in the income statement - -
----------------------------------------------------------------- ----------- -----------
Deferred tax
Total deferred income tax charge/(credit) in the income statement - -
----------------------------------------------------------------- ----------- -----------
Total current income tax charge/(credit) in the income statement - -
----------------------------------------------------------------- ----------- -----------
The tax assessed for the year is lower than the standard rate of corporation tax in the year.
Group
------------------------
Year ended Year ended
31 December 31 December
2018 2017
GBP'000 GBP'000
-------------------------------------------------------------------------------------------- ----------- -----------
Profit for the year 40,276 20,750
-------------------------------------------------------------------------------------------- ----------- -----------
Profit before tax multiplied by the rate of corporation tax in the UK of 19% (2017: 19.25%) 7,652 3,994
Exempt property rental profits in the year (4,836) (3,526)
Exempt property revaluations in the year (4,251) (3,049)
Effects of: -
Non-allowable expenses 83 310
Residual property revaluations in the year - -
Unutilised current year tax losses 1,352 2,271
-------------------------------------------------------------------------------------------- ----------- -----------
Total current income tax charge/(credit) in the income statement - -
-------------------------------------------------------------------------------------------- ----------- -----------
A deferred tax asset in respect of the tax losses generated by the residual (non-tax exempt) business of the Group amounting to GBP1,352,000 (31 December 2017: GBP2,271,000) in the current year will be recognised to the extent that their utilisation is probable. On the basis that the residual business is not expected to be income generating in future periods, a deferred tax asset totalling GBP3,823,000 (2017: GBP3,222,000) has not been recognised in respect of such losses.
8. EARNINGS PER SHARE
The ordinary number of shares is based on the time-weighted average number of shares throughout the period.
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.
EPRA EPS, reported on the basis recommended for real estate companies by EPRA, is a key measure of the Group's operating results.
Adjusted earnings is a performance measure used by the Board to assess the Group's dividend payments. Licence fees, development rebates, rental guarantees and cumulative gains made on disposals of assets are added to EPRA earnings on the basis noted below as the Board sees these cash flows as supportive of dividend payments.
- The adjustment for licence fee receivable is calculated by reference to the fraction of the total period of completed construction during the period, multiplied by the total licence fee receivable on a given forward funded asset.
- The development rebate is due from developers in relation to late completion on forward funded agreements as stipulated in development agreements.
- The discounts on acquisition are in respect of the vendor guaranteeing a rental shortfall for the first year of operation as stipulated in the sale and purchase agreement.
- Gains on disposal are the cumulative gains at the point of disposal.
Reconciliations are set out below:
Calculation Calculation
Calculation of Calculation of of EPRA of EPRA Calculation of
basic EPS diluted EPS basic EPS diluted EPS adjusted EPS
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- -------------- -------------- ----------- ----------- --------------
Year to 31 December 2018
Earnings 40,276 40,276 40,276 40,276 40,276
Adjustment to include licence fee receivable
on forward funded developments in the year - - - - 1,406
Adjustment to include discounts on
acquisition due to rental guarantees in the
year - - - - 5
Adjustments to remove:
Changes in fair value of investment
properties (Note 13) - - (22,375) (22,375) (22,375)
Changes in fair value of interest rate
derivatives (Note 18) - - 1 1 1
-------------------------------------------- -------------- -------------- ----------- ----------- --------------
Earnings/adjusted earnings 40,276 40,276 17,902 17,902 19,313
-------------------------------------------- -------------- -------------- ----------- ----------- --------------
Weighted average number of shares ('000) 602,888 602,888 602,888 602,888 602,888
Adjustment for employee share options ('000) - 984 - 984 -
-------------------------------------------- -------------- -------------- ----------- ----------- --------------
Total number shares ('000) 602,888 603,872 602,888 603,872 602,888
-------------------------------------------- -------------- -------------- ----------- ----------- --------------
Per-share amount (pence) 6.68 6.67 2.97 2.96 3.20
-------------------------------------------- -------------- -------------- ----------- ----------- --------------
Year to 31 December 2017
Earnings 20,750 20,750 20,750 20,750 20,750
Adjustment to include licence fee receivable
on forward funded developments in the year - - - - 2,633
Adjustment to include development rebate on
forward funded developments in the year - - - - 1,166
Adjustment to include discounts on
acquisition due to rental guarantees in the
year 1,346
Adjustments to remove:
Changes in fair value of investment
properties (Note 13) - - (15,836) (15,836) (15,836)
Gain on disposal of investment property - - (1,122) (1,122) -
Changes in fair value of interest rate
derivatives (Note 18) - - 18 18 18
-------------------------------------------- -------------- -------------- ----------- ----------- --------------
Earnings/adjusted earnings 20,750 20,750 3,810 3,810 10,077
-------------------------------------------- -------------- -------------- ----------- ----------- --------------
Weighted average number of shares ('000) 540,521 540,521 540,521 540,521 540,521
Adjustment for employee share options ('000) - 1,287 - 1,287 -
-------------------------------------------- -------------- -------------- ----------- ----------- --------------
Total number shares ('000) 540,521 541,808 540,521 541,808 540,521
-------------------------------------------- -------------- -------------- ----------- ----------- --------------
Per-share amount (pence) 3.84 3.83 0.70 0.70 1.86
-------------------------------------------- -------------- -------------- ----------- ----------- --------------
9. NET ASSET VALUE PER SHARE (NAV)
Basic NAV per share is calculated by dividing net assets in the Statement of Financial Position attributable to ordinary equity holders of the parent by the number of ordinary shares outstanding at the end of the year.
Diluted NAV per share is calculated using the number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.
EPRA NAV is calculated as net assets per the Consolidated Statement of Financial Position excluding fair value adjustments for debt-related derivatives.
EPRA NNNAV is the EPRA NAV adjusted to include the fair values of financial instruments and debt.
Net asset values have been calculated as follows:
Group
------------------------
31 December 31 December
2018 2017
GBP'000 GBP'000
------------------------------------------------------------------- ----------- -----------
Net assets per Statement of Financial Position 639,890 629,258
Adjustment to exclude the fair value loss of financial instruments 238 700
EPRA NAV 640,128 629,958
Adjustment to include the fair value of debt (13,163) (11,399)
Adjustment to include the fair value loss of financial instruments (238) (700)
EPRA NNNAV 626,727 617,859
------------------------------------------------------------------- ----------- -----------
Ordinary shares Number Number
------------------------------------------------------------------- ----------- -----------
Issued share capital 602,887,740 602,887,740
Issued share capital plus employee options 603,871,448 604,175,057
------------------------------------------------------------------- ----------- -----------
Pence Pence
------------------------------------------------------------------- ----------- -----------
NAV per share basic 106.14 104.37
NAV per share diluted 105.96 104.15
EPRA NAV per share basic 106.18 104.49
EPRA NAV per share diluted 106.00 104.27
EPRA NNNAV per share basic 103.95 102.48
EPRA NNNAV per share diluted 103.78 102.26
------------------------------------------------------------------- ----------- -----------
10. DIVIDS PAID
Group and Company
------------------------
Year ended Year ended
31 December 31 December
2018 2017
GBP'000 GBP'000
-------------------------------------------------------------------------------------------- ----------- -----------
Interim dividend of 1.5 pence per ordinary share in respect of the quarter ended 31 December
2016 - 7,770
Interim dividend of 1.5 pence per ordinary share in respect of the quarter ended 31 March
2017 - 7,645
Interim dividend of 1.5 pence per ordinary share in respect of the quarter ended 30 June
2017 - 7,645
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 30
September
2017 - 7,536
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 31
December
2017 7,536 -
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 31 March
2018 7,536 -
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 30 June
2018 7,536 -
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 30
September
2018 7,536 -
-------------------------------------------------------------------------------------------- ----------- -----------
30,144 30,596
-------------------------------------------------------------------------------------------- ----------- -----------
On 20 February 2019, the Company announced the declaration of a final interim dividend in respect of the financial year ended 31 December 2018, of 1.25 pence per ordinary share amounting to GBP7.536 million, to be paid on 22 March 2019 to ordinary shareholders.
11. FIXED ASSETS
Group Company
-------------------------------- --------------------------------
Fixtures and Computer Fixtures and Computer
fittings equipment Total fittings equipment Total
Year ended 31 December 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------ --------- ------- ------------ --------- -------
Costs
As at 1 January 2018 490 180 670 490 180 670
Additions - 1 1 - 1 1
---------------------------- ------------ --------- ------- ------------ --------- -------
As at 31 December 2018 490 181 671 490 181 671
---------------------------- ------------ --------- ------- ------------ --------- -------
Depreciation
As at 1 January 2018 108 87 195 108 87 195
Charge for the year 57 53 110 57 53 110
---------------------------- ------------ --------- ------- ------------ --------- -------
As at 31 December 2018 165 140 305 165 140 305
---------------------------- ------------ --------- ------- ------------ --------- -------
Net book value
As at 31 December 2018 325 41 366 325 41 366
---------------------------- ------------ --------- ------- ------------ --------- -------
Group Company
-------------------------------- --------------------------------
Fixtures and Computer Fixtures and Computer
fittings equipment Total fittings equipment Total
Year ended 31 December 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------ --------- ------- ------------ --------- -------
Costs
As at 1 January 2017 455 127 582 455 127 582
Additions 35 53 88 35 53 88
---------------------------- ------------ --------- ------- ------------ --------- ------- As at 31 December 2017 490 180 670 490 180 670 ---------------------------- ------------ --------- ------- ------------ --------- ------- Depreciation As at 1 January 2017 42 31 73 42 31 73 Charge for the year 66 56 122 66 56 122 ---------------------------- ------------ --------- ------- ------------ --------- ------- As at 31 December 2017 108 87 195 108 87 195 ---------------------------- ------------ --------- ------- ------------ --------- ------- Net book value As at 31 December 2017 382 93 475 382 93 475 ---------------------------- ------------ --------- ------- ------------ --------- -------
12. INTANGIBLE ASSETS
Group Company
-------------------------------------------------------- --------------------
Hello Student(R) Hello Student(R)
application website NAVision NAVision
development development development Total development Total
Year ended 31 December 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
Costs
As at 1 January 2018 311 802 528 1,641 528 528
Additions - 76 191 267 191 191
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
As at 31 December 2018 311 878 719 1,908 719 719
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
Amortisation
As at 1 January 2018 16 165 37 218 37 37
Charge for the year 47 87 55 189 55 55
Write-off 248 - - 248 -
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
As at 31 December 2018 311 252 92 655 92 92
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
Net book value
As at 31 December 2018 - 626 627 1,253 627 627
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
Group Company
-------------------------------------------------------- --------------------
Hello Student(R) Hello Student(R)
application website NAVision NAVision
development development development Total development Total
Year ended 31 December 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
Costs
As at 1 January 2017 187 792 127 1,106 127 127
Additions 124 10 401 535 401 401
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
As at 31 December 2017 311 802 528 1,641 528 528
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
Amortisation
As at 1 January 2017 - 89 - 89 - -
Charge for the year 16 76 37 129 37 37
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
As at 31 December 2017 16 165 37 218 37 37
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
Net book value
As at 31 December 2017 295 637 491 1,423 491 491
---------------------------- ---------------- ---------------- ----------- ------- ----------- -------
13. INVESTMENT PROPERTY
Group
----------------------------------------------------------------
Investment Investment Total Properties Total
properties properties operational under investment
freehold long leasehold assets development property
Year ended 31 December 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- -------------- ----------- ----------- ----------
As at 1 January 2018 735,355 113,182 848,537 42,045 890,582
Property additions 13,180 7,832 21,012 37,072 58,084
Transfer of completed developments 42,055 - 42,055 (42,055) -
Change in fair value during the year 6,050 11,717 17,767 4,608 22,375
------------------------------------- ---------- -------------- ----------- ----------- ----------
As at 31 December 2018 796,640 132,731 929,371 41,670 971,041
------------------------------------- ---------- -------------- ----------- ----------- ----------
Group
----------------------------------------------------------------
Investment Investment Total Properties Total
properties properties operational under investment
freehold long leasehold assets development property
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- -------------- ----------- ----------- ----------
Year ended 31 December 2017
------------------------------------- ---------- -------------- ----------- ----------- ----------
As at 1 January 2017 564,882 79,628 644,510 67,380 711,890
Property additions 77,846 7,890 85,736 77,935 163,671
Disposals - - - (815) (815)
Transfer of completed developments 82,305 23,938 106,243 (106,243) -
Change in fair value during the year 10,322 1,726 12,048 3,788 15,836
------------------------------------- ---------- -------------- ----------- ----------- ----------
As at 31 December 2017 735,355 113,182 848,537 42,045 890,582
------------------------------------- ---------- -------------- ----------- ----------- ----------
During the year GBP10,171,000 (31 December 2017: GBP17,367,000) of additions related to subsequent expenditure recognised in the carrying value of operating assets.
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 valuers, and has been prepared as at 31 December 2018, in accordance with the Appraisal & Valuation Standards of 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 also includes assumptions regarding income expectations and yields that investors would expect to achieve on those assets over time. Many external economic and market factors, such as interest rate expectations, bond yields, the availability and cost of finance and the relative attraction of property against other asset classes, could lead to a reappraisal of the assumptions used to arrive at current valuations. In adverse conditions, this reappraisal can lead to a reduction in property values and a loss in 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 period end.
Group
------------------------
As at As at
31 December 31 December
2018 2017
GBP'000 GBP'000
----------------------------------------------------- ----------- -----------
Value per independent valuation report 970,570 890,110
Add:
Head lease 471 472
----------------------------------------------------- ----------- -----------
Fair value per Group Statement of Financial Position 971,041 890,582
----------------------------------------------------- ----------- -----------
Fair Value Hierarchy
The following table provides the fair value measurement hierarchy for investment property:
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
Total (Level 1) (Level 2) (Level 3)
Date of valuation 31 December 2018 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------- ------------- ----------- ------------
Assets measured at fair value:
Student properties 945,990 - - 945,990
Commercial properties 24,580 - - 24,580
----------------------------------- ------- ------------- ----------- ------------
As at 31 December 2018 970,570 - - 970,570
----------------------------------- ------- ------------- ----------- ------------
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
Total (Level 1) (Level 2) (Level 3)
Date of valuation 31 December 2017 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------- ------------- ----------- ------------
Assets measured at fair value:
Student properties 865,870 - - 865,870
Commercial properties 24,240 - - 24,240
----------------------------------- ------- ------------- ----------- ------------
As at 31 December 2017 890,110 - - 890,110
----------------------------------- ------- ------------- ----------- ------------
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 GBP92-GBP343 per week (31 December 2017: GBP95-GBP347 per week).
(b) Unobservable input: rental growth
The estimated average increase in rent based on both market estimations and contractual arrangements.
Assumed growth of 2.63% used in valuations (31 December 2017: 3.08%).
(c) Unobservable input: net initial yield
The net initial yield is defined as the initial gross income as a percentage of the market value (or purchase price as appropriate) plus standard costs of purchase.
Range: 4.50%-6.75% per week (31 December 2017: 4.65%-6.30%).
(d) Unobservable input: physical condition of the property. (e) Unobservable input: planning consent
No planning enquiries undertaken for any of the development properties.
(f) Sensitivities of measurement of significant unobservable inputs
As set out in the significant accounting estimates and judgements, the Group's portfolio valuation is open to judgements and is inherently subjective by nature.
As a result, the following sensitivity analysis has been prepared by the valuer:
-3% Change in +3% Change -0.25% +0.25% Change
in Change
rental income rental in yield in yield
income
As at 31 December 2018 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------------- ---------- -------- -------------
(Decrease)/increase in the fair value
of the investment properties (40,320) 40,290 47,270 (43,210)
-------------------------------------- ------------- ---------- -------- -------------
-3% Change in +3% Change -0.25% +0.25% Change
in Change
rental income rental in yield in yield
income
As at 31 December 2017 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------------- ---------- -------- -------------
(Decrease)/increase in the fair value
of the investment properties (36,260) 36,260 42,070 (38,500)
-------------------------------------- ------------- ---------- -------- -------------
(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.
14. TRADE AND OTHER RECEIVABLES
Group Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ----------- ----------- ----------- -----------
Trade receivables 704 470 - -
Other receivables 2,112 2,412 90 154
Amounts owed by property managers 6,696 10,777 - 3,881
Prepayments 4,170 11,318 105 225
VAT recoverable 65 2,815 7 7
------------------------------------ ----------- ----------- ----------- -----------
13,747 27,792 202 4,267
------------------------------------ ----------- ----------- ----------- -----------
Amounts due from Group undertakings - - 517,778 807,451
------------------------------------ ----------- ----------- ----------- -----------
13,747 27,792 517,980 811,718
------------------------------------ ----------- ----------- ----------- -----------
At 31 December 2018, 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 Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract assets.
To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped together based on similar credit risk and ageing. The contract assets have similar risk characteristics to the trade receivables for similar types of contracts.
The expected loss rates are based on the Group's historical credit losses experienced over the three-year period prior to the year end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers. Both the expected credit loss provision and the incurred loss provision in the current and prior year are immaterial. No reasonably possible changes in the assumptions underpinning the expected credit loss provision would give rise to a material expected credit loss.
The Company applies the expected credit losses approach to amounts due from Group undertakings. These amounts are interest free and repayable on demand; however, as these amounts are primarily utilised to pay for the property acquisition and therefore are considered to not be immediately recoverable, they are deemed to be categorised as stage 3. The expected credit losses are based on management's assessment of the Group undertaking's ability to repay the funds.
The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the underlying companies, property value sensitivities alongside the potential sale values of the properties, cash flow projections arising from the underlying properties and the ability to hold the assets to ensure recovery of the amounts due from the Group undertakings. Both the expected credit loss provision and the incurred loss provision in the current and prior year are immaterial. No reasonably possible changes in the assumptions underpinning the expected credit loss provision would give rise to a material expected credit loss.
15. FIXED TERM DEPOSITS AND CASH AND CASH EQUIVALENTS
Fixed term deposits are amounts held as part of our refinancing. This deposit is interest bearing and maturing in October 2019.
The amounts disclosed on the Statement of Cash Flow as cash and cash equivalents are in respect of the following amounts shown in the Statement of Financial Position:
Group Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ----------- ----------- ----------- -----------
Cash and cash equivalents 23,473 52,721 15,955 17,091
-------------------------- ----------- ----------- ----------- -----------
16. TRADE AND OTHER PAYABLES
Group Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ----------- ----------- -----------
Trade payables 2,723 2,376 - 484
Other payables 2,408 3,950 146 274
Accrued expenses 23,013 16,122 1,661 1,200
Directors' bonus accrual 391 172 391 172
----------------------------------- ----------- ----------- ----------- -----------
28,535 22,620 2,198 2,130
----------------------------------- ----------- ----------- ----------- -----------
Amounts owed to Group undertakings - - 11 306,173
----------------------------------- ----------- ----------- ----------- -----------
28,535 22,620 2,209 308,303
----------------------------------- ----------- ----------- ----------- -----------
At 31 December 2018, there was deferred rental income of GBP26,968,000 (31 December 2017: GBP22,286,000) which was rental income that had been booked that relates to future periods.
The Directors consider that the carrying value of trade and other payables approximates to their fair value.
Amounts due to Group undertakings are interest free and repayable on demand.
17. BANK BORROWINGS
A summary of the drawn and undrawn bank borrowings in the year is shown below:
Group
------------------------------------------------------------------------------------------------
Bank borrowings Bank borrowings Total Bank borrowings Bank borrowings Total
drawn undrawn 31 December drawn undrawn 31 December
31 December 2018 31 December 2018 2018 31 December 2017 31 December 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ---------------- ---------------- ----------- ---------------- ---------------- -----------
At 1 January 2018 303,829 86,201 390,030 243,917 66,113 310,030
Bank borrowings from
new facilities in
the year 30,600 - 30,600 10,000 70,000 80,000
Bank borrowings
assumed on
acquisition of
joint venture - - - 9,534 - 9,534
Bank borrowings
drawn in the year 36,201 (26,201) 10,000 49,912 (49,912) -
Bank borrowings
repaid during the
year (40,630) - (40,630) (9,534) - (9,534)
-------------------- ---------------- ---------------- ----------- ---------------- ---------------- -----------
At 31 December 2018 330,000 60,000 390,000 303,829 86,201 390,030
-------------------- ---------------- ---------------- ----------- ---------------- ---------------- -----------
The Group has entered into one new separate banking facility during the year, fully repaid another facility and started to draw down on one existing available facility. A total of GBP66,801,000 (31 December 2017: GBP59,912,000) of additional debt was drawn and a total of GBP40,630,000 was repaid during the year. There is an undrawn debt facility available of GBP60,000,000 at 31 December 2018 (31 December 2017: GBP86,201,000).
The weighted average term to maturity of the Group's debt as at the year end is 7.6 years (31 December 2017: 6.71 years).
Bank borrowings are secured by charges over individual investment properties held by certain asset-holding subsidiaries. These assets have a fair value of GBP853,220,000 at 31 December 2018 (31 December 2017: GBP829,765,000). In some cases, the lenders also hold charges over the shares of the subsidiaries and the intermediary holding companies of those subsidiaries.
The Company has a GBP10 million facility (2017: GBP10 million) repayable in two years, fully drawn. The balance net of loan arrangement fees carried as at 31 December 2018 was GBP9,965,000 (31 December 2017: GBP9,933,000).
The Group entered into a new facility during the year for GBP30,600,000 which it fully drew down. As at 31 December 2018 there were GBP1,075,000 of unamortised loan fees. The loan is due to be repaid during the year ended 31 December 2028.
Any associated fees in arranging the bank borrowings unamortised as at the period end are offset against amounts drawn on the facilities as shown in the table below:
Group
------------------------
31 December 31 December
2018 2017
Non-current GBP'000 GBP'000
--------------------------------------------------- ----------- -----------
Balance brought forward 282,639 243,917
Total bank borrowings in the year 66,801 69,446
Bank borrowings becoming non-current in the year 21,190 -
Less: Bank borrowings becoming current in the year (55,500) (21,190)
Less: Bank borrowings repaid in the year (40,630) (9,534)
--------------------------------------------------- ----------- -----------
Bank borrowings drawn: due in more than one year 274,500 282,639
Less: Unamortised costs (5,510) (5,257)
--------------------------------------------------- ----------- -----------
Bank borrowings due in more than one year 268,990 277,382
--------------------------------------------------- ----------- -----------
Group
------------------------
31 December 31 December
2018 2017
Current GBP'000 GBP'000
--------------------------------------------------- ----------- -----------
Balance brought forward 21,190 -
Total bank borrowings in the year 9,440 -
Less: Bank borrowings repaid in the year (30,630) -
Bank borrowings becoming current in the year 55,500 21,190
--------------------------------------------------- ----------- -----------
Bank borrowings drawn: due in less than one year 55,500 21,190
Less: Unamortised costs (240) (423)
--------------------------------------------------- ----------- -----------
Bank borrowings due in less than one year 55,260 20,767
--------------------------------------------------- ----------- -----------
Maturity of Bank Borrowings
Group
------------------------
31 December 31 December
2018 2017
GBP'000 GBP'000
------------------------------------------------- ----------- -----------
Repayable between one and two years 42,800 55,500
Repayable between two and five years 10,000 36,039
Repayable in over five years 221,700 191,100
------------------------------------------------- ----------- -----------
Bank borrowings drawn: due in more than one year 274,500 282,639
------------------------------------------------- ----------- -----------
Each of the Group's facilities has an interest charge which is payable quarterly. Four of the facilities have an interest charge that is based on a margin above LIBOR whilst the other five facility interest charges are fixed at 3.97%, 3.52%, 3.24%, 3.64% and 3.20%. The weighted average margin payable by the Group on its debt portfolio as at the year end was 3.26% (31 December 2017: 3.25%).
18. INTEREST RATE DERIVATIVES
To mitigate the interest rate risk that arises as a result of entering into variable rate linked loans, the Group has entered into an interest rate cap and interest rate swap. The interest rate cap has been taken out to cap the rate to which three-month LIBOR can rise and is coterminous with the initial term of the facility. The premium of GBP238,500 is being settled over the five-year life of the loan.
On 24 October 2014 a derivative swap contract was taken out to hedge the interest rate risk on long-term debt. The change in valuation of this derivative at 31 December 2018 was GBP0.5 million gain (31 December 2017: GBP0.5 million gain) recognised in Other Comprehensive Income. GBPnil of this derivative liability has been recognised as a non-current liability (31 December 2017: GBP0.3 million).
The Group will continue to review the level of its hedging in the light of the current low interest rate environment.
Fair Value of Derivative Instruments
31 December 31 December
2018 2017
GBP'000 GBP'000
---------------------------------------------------------- ----------- -----------
Non-current assets: Interest rate derivatives - cap - 1
Current liabilities: Interest rate derivatives - swap (237) (424)
Non-current liabilities: Interest rate derivatives - swap - (257)
---------------------------------------------------------- ----------- -----------
The interest rate derivatives are marked to market by the relevant counterparty banks on a quarterly basis. Any movement in the fair values of the interest rate cap are taken to the net finance costs in the Group Statement of Comprehensive Income.
31 December 31 December
2018 2017
GBP'000 GBP'000
----------------------------------------------------- ----------- -----------
Interest rate cap premium - opening fair value 1 19
Changes in fair value of interest rate derivatives (1) (18)
----------------------------------------------------- ----------- -----------
Closing fair value - 1
----------------------------------------------------- ----------- -----------
31 December 31 December
2018 2017
GBP'000 GBP'000
----------------------------------------------------- ----------- -----------
Total bank borrowings 330,000 303,829
Total fixed borrowings (221,700) (191,100)
----------------------------------------------------- ----------- -----------
Total floating rate borrowings 108,300 112,729
----------------------------------------------------- ----------- -----------
Notional value of borrowings hedged by interest rate
derivative - swap 35,500 35,500
----------------------------------------------------- ----------- -----------
Proportion of notional value of interest rate swap
derivative to floating rate bank borrowings 32.8% 31.5%
----------------------------------------------------- ----------- -----------
Fair Value of Debt
Group
---------------------------------------
Fair value
Fair value Book value less book value
GBP'000 GBP'000 GBP'000
-------------------- ---------- ---------- ---------------
At 31 December 2018 230,677 217,514 13,163
At 31 December 2017 199,039 187,640 11,399
-------------------- ---------- ---------- ---------------
The fair value of the fixed rate debt has been valued by the independent valuation expert, JCRA. The floating rate debt has been excluded as it is assumed that the carrying value will be similar to the fair value.
The fair value of these contracts is determined by discounting the future cash flows estimated to be paid or received under these contracts using a valuation technique based on forward rates derived from short-term rates, futures, swap rates and implied option volatility.
Fair Value Hierarchy
The following table provides the fair value measurement hierarchy for interest rate derivatives:
Group
----------------------------------------
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level 1) (Level 2) (Level 3)
Assets/(liability) measured at fair value: Date of valuation GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ------------------ ------- ------------- ----------- ------------
31 December 2018
Interest rate derivative - cap - - - -
Interest rate derivative - swap (237) - (237) -
31 December 2017
Interest rate derivative - cap 1 - 1 -
Interest rate derivative - swap (681) - (681) -
--------------------------------------------------------------- ------- ------------- ----------- ------------
The fair value of these contracts is recorded in the Group Statement of Financial Position and is determined by forming an expectation that interest rates will exceed strike rates and discounting these future cash flows at the prevailing market rates as at the period end.
There have been no transfers between Level 1 and Level 2 during the period, nor have there been any transfers between Level 2 and Level 3 during the year.
19. SHARE CAPITAL
Ordinary Shares Issued and Fully Paid at 1 Pence Each
Group and Company Group and Company
------------------------ ------------------------
31 December 31 December 31 December 31 December
2018 2018 2017 2017
Number GBP'000 Number GBP'000
------------------------------------------ ----------- ----------- ----------- -----------
Balance brought forward 602,887,740 6,029 501,279,071 5,013
Issue in relation to an equity issuance - - 100,917,432 1,009
Issue in relation to LTIP equity issuance - - 691,237 7
------------------------------------------ ----------- ----------- ----------- -----------
Balance carried forward 602,887,740 6,029 602,887,740 6,029
------------------------------------------ ----------- ----------- ----------- -----------
There have been no share issues during the year.
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
2018 2017
GBP'000 GBP'000
------------------------------------------------------------------------------------- ----------- -----------
Balance brought forward 467,268 359,958
Share premium on ordinary shares issued in relation to further equity share issuance - 108,991
Costs associated with the issue of ordinary shares - (2,430)
Share premium on share options exercised - 749
------------------------------------------------------------------------------------- ----------- -----------
Balance carried forward 467,268 467,268
------------------------------------------------------------------------------------- ----------- -----------
21. CAPITAL REDUCTION RESERVE
Group and Company
------------------------
31 December 31 December
2018 2017
GBP'000 GBP'000
----------------------------------------------------- ----------- -----------
Balance brought forward 75,602 106,198
Less interim dividends declared and paid per Note 10 (30,144) (30,596)
----------------------------------------------------- ----------- -----------
Balance carried forward 45,458 75,602
----------------------------------------------------- ----------- -----------
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 payments under non-cancellable operating leases fall due as follows:
On Office Space Currently Rented
Group
------------------------
31 December 31 December
2018 2017
GBP'000 GBP'000
--------------------------- ----------- -----------
Less than one year 361 361
Between one and five years 1,446 1,446
More than five years 994 1,355
--------------------------- ----------- -----------
Total 2,801 3,162
--------------------------- ----------- -----------
Future total minimum lease receivables under non-cancellable operating leases on investment properties are as follows:
Group
------------------------
31 December 31 December
2018 2017
GBP'000 GBP'000
--------------------------- ----------- -----------
Less than one year 45,564 41,180
Between one and five years 9,757 12,648
More than five years 10,630 11,887
--------------------------- ----------- -----------
Total 65,951 65,715
--------------------------- ----------- -----------
The above relates to commercial leases and nomination agreements with UK universities in place as at 31 December 2018. The impact of student leases for the forthcoming academic year signed by 31 December 2018 have not been included as the certainty of income does not arise until the tenant takes occupation of the accommodation.
23. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 December 2018 (31 December 2017: GBPnil).
24. CAPITAL COMMITMENTS
The Group had capital commitments relating to forward funded developments totalling GBP37,950,000 at 31 December 2018 (31 December 2017: GBP22,821,000).
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
Share transactions of related parties during the year ended 31 December 2018 were as follows:
Name How related No of shares Transaction Date --------- ----------- ------------ ----------- -------------- Mark Pain Director 100,000 Acquisition 21 August 2018 --------- ----------- ------------ ----------- --------------
Share-based Payments
On 1 May 2018, nil-cost options were granted to Executive Directors in the amounts of:
Lynne Fennah 369,976 shares
On 23 August 2018, Executive Directors exercised vested nil-cost options in the amounts of:
Lynne Fennah 69,046 shares
During the year the Remuneration Committee exercised its discretion and lapsed any outstanding payments to Michael Enright.
Details of the shares granted and lapsed are outlined in Note 27 - Share-based Payments.
Dividends paid to Directors
Dividends amounting to GBP52,445 (31 December 2017: GBP145,947) were paid to Directors during the year.
26. SUBSEQUENT EVENTS
Since the year end there have been no subsequent events to report.
27. SHARE-BASED PAYMENTS
The Company operates three equity-settled share-based remuneration schemes for Executive Directors under the deferred annual bonus, long-term incentive plan and the Value Delivery Plan. The details of the schemes are included in the Remuneration Committee Report.
Issued
On 1 May 2018, the Company granted Lynne Fennah, the Company's Chief Financial Officer, nil-cost options over a total of 26,115 in the Company ("ordinary shares") relating to the deferred shares element of the annual bonus award for the financial period to 31 December 2017 (the "Annual Bonus Award") as well as 343,861 ordinary shares pursuant to the LTIP pursuant to the 2018 financial year.
On 23 August 2018, the Company granted Lynne Fennah, an Executive Director of the Company, nil-cost options over a total of 69,046 ordinary shares in the Company ("ordinary shares") pursuant to the LTIP.
Lapsed Awards
Michael Enright was the Chief Financial Officer until March 2017. As part of his termination agreement, he retained the nil-cost share options relating to the annual deferred annual bonus awards from 2015 and 2016. In view of the performance issues which were not apparent when Michael Enright's employment ceased, the Committee exercised its discretion and lapsed these outstanding awards.
At the year end Tim Attlee had vested but not exercised 129,253 nil-cost options. The weighted average remaining contractual life of these options was 1.6 years (2017: 1.5 years).
During the year to 31 December 2018, the amount recognised relating to the options was GBP98,000.
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 December 31 December 31 December 30 June
2018 2017 2016 2016
------------------------------------- ----------- ----------- ----------- ---------
Outstanding number brought forward 1,477,817 3,913,420 2,880,391 1,220,423
Granted during the year 439,022 207,198 1,033,029 1,659,968
Vested and exercised during the year (139,325) (691,237) - -
Lapsed during the year (725,806) (1,951,564) - -
------------------------------------- ----------- ----------- ----------- ---------
Outstanding number carried forward 1,051,708 1,477,817 3,913,420 2,880,391
------------------------------------- ----------- ----------- ----------- ---------
The fair value for the nil-cost options under the 2017-2020 LTIP Awards will be fixed at 100% of the share price when the respective awards were granted.
The fair value on date of grant for the nil-cost options under the Annual Bonus Awards were priced using the Monte Carlo pricing model.
The following information is relevant in the determination of the fair value of these nil-cost options in the year:
Annual Bonus
Award
------------------------------------------------------------- ------------
(a) Weighted average share price at grant date GBP0.85
(b) Exercise price GBPnil
(c) Contractual life 3 years
(d) Expected volatility 15.29%
(e) Expected dividend yield 7.10%
(f) Risk-free rate 1.17%
(g) The volatility assumption is based on a statistical analysis
of daily share prices of comparator companies over the last
three years.
(h) 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:
Risk Management
The 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 Group that are affected by market risk are principally the Group's bank balances along with the interest rate derivatives (swap and cap) entered into to mitigate interest rate risk.
(b) Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The 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 ratings, 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. There are no trade receivables past due as at the year end.
(ii) Credit Risk Related to Financial Instruments and Cash Deposits
One of the principal credit risks of the 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 Group, with high credit ratings assigned by international credit rating agencies.
Credit ratings (Moody's) Long term Outlook -------------------------- --------- -------- AIB Group Baa3 Positive Canada Life Aa3 Stable Mass Mutual Aa2 Negative Royal Bank of Scotland Plc Baa2 Positive Lloyds Bank Plc Aa3 Stable -------------------------- --------- --------
(c) Liquidity Risk
Liquidity risk arises from the Group's 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 Group will encounter difficulty in meeting its financial obligations as they fall due as the majority of the Group's assets are property investments and are therefore not readily realisable. The Group's objective is to ensure that it has sufficient available funds for its operations and to fund its capital expenditure. This is achieved by continuous monitoring of forecast and actual cash flows by management.
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'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ----------- ------- ------- --------- -------
At 31 December 2018
Bank borrowings and interest - 3,183 65,048 87,895 262,435 418,561
Swap derivatives - 94 282 - - 376
Trade and other payables - 28,535 - - - 28,535
----------------------------- --------- ----------- ------- ------- --------- -------
- 31,812 65,330 87,895 262,435 447,472
----------------------------- --------- ----------- ------- ------- --------- -------
Group
------------------------------------------------------------
Less than 3 3 to 12 1 to 5
On demand months months years > 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ----------- ------- ------- --------- -------
At 31 December 2017
Bank borrowings and interest - 2,608 29,015 121,685 233,663 386,971
Swap derivatives - 123 365 342 - 830
Trade and other payables - 22,620 - - - 22,620
----------------------------- --------- ----------- ------- ------- --------- -------
- 25,351 29,380 122,027 233,663 410,421
----------------------------- --------- ----------- ------- ------- --------- -------
Company
------------------------------------------------------------
Less than 3 3 to 12 1 to 5
On demand months months years > 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ----------- ------- ------- --------- -------
At 31 December 2018
Bank borrowings and interest - 68 203 10,046 - 10,317
Swap derivatives - - - - - -
Trade and other payables - 2,198 - - - 2,198
----------------------------- --------- ----------- ------- ------- --------- -------
- 2,266 203 10,046 - 12,515
----------------------------- --------- ----------- ------- ------- --------- -------
Company
------------------------------------------------------------
Less than 3 3 to 12 1 to 5
On demand months months years > 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ----------- ------- ------- --------- -------
At 31 December 2017
Bank borrowings and interest - 54 161 10,252 - 10,467
Swap derivatives - - - - - -
Trade and other payables - 2,130 - - - 2,130
----------------------------- --------- ----------- ------- ------- --------- -------
- 2,184 161 10,252 - 12,597
----------------------------- --------- ----------- ------- ------- --------- -------
29. CAPITAL MANAGEMENT
The primary objectives of the Group's capital management is 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 maintain sustainable returns for shareholders.
Capital consists of ordinary shares, other capital reserves and retained earnings.
30. SUBSIDIARIES
Those subsidiaries listed on the following pages are considered to be all subsidiaries of the Company at 31 December 2018, with the shares issued being ordinary shares. All subsidiaries are registered in London at the following address: 6th Floor, Swan House, 17-19 Stratford Place, London, England, W1C 1BQ.
The only subsidiaries exempt from audit are those which are dormant.
In each case the country of incorporation is England and Wales.
Company
------------------------
31 December 31 December
2018 2017
GBP'000 GBP'000
---------------------------- ----------- -----------
As at 1 January 2017 12,571 5,118
Additions in the year 8,622 7,453
Disposals (12,570) -
---------------------------- ----------- -----------
Balance at 31 December 2018 8,623 12,571
---------------------------- ----------- -----------
During the year there were a number of subsidiaries which moved around the Group, due to reorganisations relating to debt, these were all non cash movements.
Status Ownership Principal Activity
-------------------------------------- ------- --------- ----------------------
Brunswick Contracting Limited Active 100% Property Contracting
Empiric (Alwyn Court) Limited Active 100% Property Investment
Empiric (Baptist 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) Active 100% Property Investment
Empiric (Bath Piccadilly Place) Active 100% Property Investment
Empiric (Birmingham Emporium) Limited Active 100% Property Investment
Empiric (Birmingham) Limited Active 100% Property Investment
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) Leasing Dormant 100% Property Leasing
Limited
Empiric (Buccleuch Street) Limited Active 100% Property Investment
Empiric (Canterbury Franciscans Active 100% Property Investment
Court) Limited
Empiric (Canterbury Pavilion Court) Active 100% Property Investment
Limited
Empiric (Cardiff Wndsr House) Leasing Dormant 100% Property Leasing
Limited
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) Limited Active 100% Property Investment
Empiric (Edinburgh South Bridge) Active 100% Property Investment
Limited
Empiric (Egham High Street) Limited Dormant 100% Property Investment
Empiric (Exeter Bishop Blackall Active 100% Property Investment
School) Limited
Empiric (Exeter Bonhay Road) Leasing Dormant 100% Property Leasing
Limited
Empiric (Exeter Bonhay Road) Limited Active 100% Property Investment
Empiric (Exeter City Service) Limited Active 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) Active 100% Property Investment
Limited
Empiric (Falmouth Ocean Bowl) Limited Active 100% Property Investment
Empiric (Glasgow Ballet School) Active 100% Property Investment
Limited
Empiric (Glasgow Bath St) Limited Active 100% Property Investment
Empiric (Glasgow George Square) Dormant 100% Property Leasing
Leasing Limited
Empiric (Glasgow George Square) Active 100% Property Investment
Limited
Empiric (Glasgow George St) Leasing Active 100% Property Leasing
Limited
Empiric (Glasgow George St) Limited Active 100% Property Investment
Empiric (Glasgow Otago Street) Dormant 100% Property Investment
Limited
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) Dormant 100% Property Leasing
Leasing Limited
Empiric (Huddersfield Oldgate House) Active 100% Property Investment
Limited
Empiric (Huddersfield Snow Island) Active 100% Property Leasing
Leasing Limited
Empiric (Lancaster Penny Street Active 100% Property Investment
1) Limited
Empiric (Lancaster Penny Street Active 100% Property Investment
2) Limited
Empiric (Lancaster Penny Street Active 100% Property Investment
3) Limited
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) Active 100% Property Investment
Limited
Empiric (Leicester 136-138 New Active 100% Property Investment
Walk) Limited
Empiric (Leicester 140-142 New Active 100% Property Investment
Walk Limited)
Empiric (Leicester 160 Upper New Active 100% Property Investment
Walk) Limited
Empiric (Leicester Bede Park) Limited Active 100% Property Investment
Empiric (Leicester De Montfort Active 100% Property Investment
Square) Limited
Empiric (Leicester Hosiery Factory) Active 100% Property Investment
Limited
Empiric (Leicester Peacock Lane) Active 100% Property Investment
Limited
Empiric (Leicester Shoe & Boot Active 100% Property Investment
Factory) Limited
Empiric (Liverpool Art School/Maple Active 100% Property Investment
House) Limited
Empiric (Liverpool Chatham Lodge) Active 100% Property Investment
Limited
Empiric (Liverpool Grove Street) Active 100% Property Investment
Limited
Empiric (Liverpool Hahnemann Building) Active 100% Property Investment
Limited
Empiric (Liverpool Octagon/Hayward) Active 100% Property Investment
Limited
Empiric (London Camberwell) Limited Active 100% Property Investment
Empiric (London Francis Gardner) Active 100% Property Investment
Limited
Empiric (London Road) Limited Active 100% Property Investment
Empiric (Manchester Ladybarn) Limited Active 100% Property Investment
Empiric (Manchester Victoria Point) Active 100% Property Investment
Limited
Empiric (Newcastle Metrovick) Limited Active 100% Property Investment
Empiric (Northgate House) Limited Active 100% Property Investment
Empiric (Norwich Edwin Gooch) Limited Dormant 100% Property Investment
Empiric (Nottingham 95 Talbot) Active 100% Property Investment
Limited
Empiric (Nottingham Frontage) Leasing Dormant 100% Property Leasing
Limited
Empiric (Nottingham Frontage) Limited Active 100% Property Investment
Empiric (Oxford Stonemason) Limited Active 100% Property Investment
Empiric (Picturehouse Apartments) Active 100% Property Investment
Limited
Empiric (Portobello House) Limited Active 100% Property Investment
Empiric (Portsmouth Elm Grove Library) Active 100% Property Investment
Limited
Empiric (Portsmouth Europa House) Active 100% Property Leasing
Leasing Limited
Empiric (Portsmouth Europa House) Active 100% Property Investment
Limited
Empiric (Portsmouth Kingsway House) Active 100% Property Investment
Limited
Empiric (Portsmouth Registry) Limited Active 100% Property Investment
Empiric (Provincial House) Leasing Active 100% Property Leasing
Limited
Empiric (Provincial House) Limited Active 100% Property Investment
Empiric (Reading Saxon Court) Leasing Active 100% Property Leasing
Limited
Empiric (Reading Saxon Court) Limited Active 100% Property Investment
Empiric (Snow Island) Limited Active 100% Property Investment
Empiric (Southampton) Leasing Limited Active 100% Property Leasing
Empiric (Southampton) Limited Active 100% Property Investment
Empiric (Southampton Emily Davies) Active 100% Property Investment
Limited
Empiric (St Andrews Ayton House) Active 100% Property Leasing
Leasing Limited
Empiric (St Andrews Ayton House) Active 100% Property Investment
Limited
Empiric (St Peter Street) Leasing Dormant 100% Property Leasing
Limited
Empiric (St Peter Street) Limited Active 100% Property Investment
Empiric (Stirling Forthside) Leasing Dormant 100% Property Leasing
Limited
Empiric (Stirling Forthside) Limited Active 100% Property Investment
Empiric (Stoke Caledonia Mill) Active 100% Property Investment
Limited
Empiric (Summit House) Limited Active 100% Property Investment
Empiric (Talbot Studios) Limited Active 100% Property Investment
Empiric (Trippet Lane) Leasing Active 100% Property Leasing
Limited
Empiric (Trippet Lane) Limited Active 100% Property Investment
Empiric (Twickenham Grosvenor Hall) Active 100% Property Investment
Limited
Empiric (York Foss Studios 1) Limited Active 100% Property Investment
Empiric (York Lawrence Street) Active 100% Property Investment
Limited
Empiric (York Percy's Lane) Limited Active 100% Property Investment
Empiric Acquisitions Limited Active 100% Intermediate Holding
Company
Empiric Investment Holdings (Four) Active 100% Holding Company
Limited
Empiric Investment Holdings (Three) Active 100% Holding Company
Limited
Empiric Investment Holdings (Two) Active 100% Holding Company
Limited
Empiric Investment Holdings (Five) Active 100% Holding Company
Limited
Empiric Investment Holdings (Six) Active 100% Holding Company
Limited
Empiric Investments (Five) 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 (One) Limited Active 100% Immediate Holding
Company
Empiric Investments (Six) Limited Active 100% Immediate Holding
Company
Empiric Investments (Two) Limited Active 100% Immediate Holding
Company
Empiric Student Property Limited Active 100% Property Management
Empiric Student Property Trustees Active 100% Trustee of EBT
Limited
Hello Student Management Limited Active 100% Property Management
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END
FR GGUMAWUPBPGB
(END) Dow Jones Newswires
March 20, 2019 03:01 ET (07:01 GMT)
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