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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Gcp Student Living Plc | LSE:DIGS | London | Ordinary Share | GB00B8460Z43 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 212.50 | 212.50 | 213.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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GCP STUDENT LIVING PLC
Half-yearly report and condensed consolidated financial statements for the six
months ended 31 December 2018
(the "Company" or "GCP Student", together with its subsidiaries the "Group")
LEI: 2138004J4ID66FK38H25
GCP Student, the UK's first REIT focused on student residential assets, is
pleased to announce its results for the six months ended 31 December 2018.
The full half-yearly report and condensed consolidated financial statements can
be accessed via the Company's website at www.gcpstudent.com or by contacting
the Company Secretary by telephone on 01392 477500.
ABOUT US
GCP Student was the first real estate investment trust in the UK to focus on
student residential assets.
The Company seeks to provide shareholders with attractive total returns in the
longer term through the potential for modest capital appreciation and regular,
sustainable, long-term dividends with inflation-linked income characteristics.
It invests in properties located primarily in and around London where the
Investment Manager believes the Company is likely to benefit from supply and
demand imbalances for student residential accommodation and a growing number of
international students.
The Company has a premium listing on the Official List of the FCA and trades on
the Premium Segment of the Main Market of the London Stock Exchange. The
Company had a market capitalisation of c.GBP610 million at 31 December 2018.
AT A GLANCE
HY 2016 HY 2017 HY 2018
Value of property portfolio GBP465.7m GBP739.6m GBP841.5m
EPRA NAV1,2 per share 138.17p 146.31p 157.93p
Dividends per share 2.86p 2.96p 3.06p
Net operating margin2 79% 78% 78%
Loan-to-value 16% 23% 26%
AY 2016 AY 2017 AY 2018
Student rental growth2 3.9% 4.1% 3.5%
HIGHLIGHTS FOR THE PERIOD3
- Annualised shareholder total return since IPO3 of 11.9%, compared to the
Company's target return of 8-10%.
- Dividends of 3.06 pence per share paid in respect of the period.
- EPRA NAV3 (cum-income) per ordinary share of 157.93 pence and EPRA NAV
(ex-income) per ordinary share of 156.40 pence at 31 December 2018.1
- Total rental income for the period of GBP20.9 million.
- Successful equity raise of GBP38.1 million (before issue costs) through a
placing of new ordinary shares.
- New debt facilities for an aggregate amount of up to GBP100 million with Wells
Fargo.
- Entry into a conditional contract to acquire and forward fund Scape Brighton,
which is expected to provide c.550 beds for the 2020/21 academic year.
- The Company benefits from a future contractual arrangement to acquire Scape
Canalside, a new-build asset located adjacent to Queen Mary University of
London.
- High-quality portfolio of ten assets with c.3,600 beds located primarily in
and around London, with a valuation of GBP841.5 million at 31 December 2018.
The Company's properties continue to benefit from the supply/demand imbalances
for modern student facilities, with the portfolio fully occupied and rental
growth of 3.5% for the 2018/19 academic year.
- Completion of the refurbishment of Scape Bloomsbury ahead of schedule for the
2018/19 academic year, providing 432 beds in London WC1.
- Construction of the forward-funded project Circus Street, Brighton continues
in line with expectations and is expected to complete for the 2019/20 academic
year, providing c.450 beds.
1. EPRA NAV is equivalent to the NAV calculated under IFRS for the year.
2. APM - see glossary for definitions and calculation methodology.
3. The Company's financial statements are prepared in accordance with
IFRS. The financial highlights above include performance measures based on EPRA
best practice recommendations, which are designed to enhance transparency and
comparability across the European real estate sector. See glossary for
definitions.
Robert Peto, Chairman, commented:
"On behalf of the Board, I am pleased to report a period of strong performance
for the Company. The focus on assets in and around London has delivered the
Company's strongest NAV performance for an interim period since 2015, with the
NAV per share rising by 5.9% to 157.93 pence per share over the six-month
period.
The Company's NAV performance has been underpinned by rental growth of 3.5%
achieved for the current academic year from a fully occupied portfolio of
private student accommodation assets. Accordingly, the Company has been able to
increase its dividend during the period.
It is encouraging to note the Company's shareholder total return performance
over the period of 3.0%. Over the same period, the FTSE EPRA NAREIT Index
declined by 13.8%, with the Company one of only a handful of UK REITs to
deliver positive total returns to investors.
The highly selective approach adopted by the Board and Gravis, the Investment
Manager, to asset selection and the locations in which the Company operates,
has demonstrably benefited shareholders through strong NAV performance and
dividend growth, generating annualised total returns of 11.9% since IPO.
Since the EU referendum in 2016, the Board has repeatedly noted that the future
risks of Brexit remain unknown and difficult to quantify. Notwithstanding, the
attraction of the UK, and London in particular, for domestic and global
students alike remains evident. The UK has some of the highest-ranking
universities in the world, with three in the top ten institutions in 2017/181.
Education remains a core sector for the UK economy. With the number of
international students in the UK continuing to rise (a substantial number of
whom choose to study in and around London) the Board remains confident that the
Company will continue to deliver stable performance.
The Company has been highly successful in securing new, modern properties
through future contractual arrangements secured by the Investment Manager. The
Company benefits from a conditional forward purchase agreement to acquire Scape
Canalside, a high-specification, new-build asset located immediately adjacent
to Queen Mary University of London. With the property expected to open to
students for the 2019/20 academic year, the Board and Gravis are considering
the optimum way to finance its acquisition ahead of 30 June 2019."
1. Time Higher Education World University Rankings 2018
For further information, please contact:
Gravis Capital Management Limited +44 020 3405
8500
Nick Barker
Dion Di Miceli
Stifel Nicolaus Europe Limited +44 020
7710 7600
Neil Winward
Mark Young
Tom Yeadon
Buchanan / Quill
+44 020 7466 5000
Helen Tarbet
Henry Wilson
INVESTMENT OBJECTIVES AND KPIs
The Company invests in UK student accommodation to meet the following key
objectives:
TOTAL RETURN PORTFOLIO QUALITY DIVERSIFICATION
To provide shareholders To focus on high-quality, To invest and manage assets
with attractive total modern, private student with the objective of
returns in the longer term. residential accommodation spreading risk.
primarily in and around
London.
KEY PERFORMANCE INDICATORS
The Company has generated The Company's investment At 31 December 2018, the
an annualised shareholder portfolio has been fully Company's property portfolio
total return since IPO1 of occupied since IPO, with comprised ten high-quality,
11.9%. average annual rental modern student accommodation
growth1 of 3.8%. assets.
3.06p FULL 3,561
Dividends paid or Occupancy1 for the Number of beds
declared for the period 2018/19 academic year at 31 December 2018
11.9% 3.5% 10
Annualised shareholder Student rental growth1 Number of assets
total return since IPO1
Further information on Company performance can be found below.
1. APM - see glossary for definitions and calculation methodology.
CHAIRMAN'S STATEMENT
Introduction
On behalf of the Board, I am pleased to report a period of strong performance
for the Company. The focus on assets in and around London has delivered the
Company's strongest NAV performance for an interim period since 2015, with the
NAV per share rising by 5.9% to 157.93 pence per share.
It is also encouraging to note the Company's shareholder total return
performance over the period of 3.0%. Over the same period, the FTSE EPRA NAREIT
Index declined by 13.8%, with the Company one of only a handful of UK REITs to
deliver positive total returns to investors.
Against a backdrop of concerns over weakening valuations and cash flows for the
wider UK commercial property sector, the Company has reported strong NAV
performance. This has been underpinned by the rental growth of 3.5% achieved
for the current academic year from a fully occupied portfolio of private
student accommodation assets.
Accordingly, the Company has been able to increase its dividend during the
period, paying a total of 3.06 pence per share. Since IPO in 2013, the Company
has generated annualised shareholder total returns of 11.9%.
Investment activity
During the period, the Company entered into a conditional contract to acquire
and forward fund the construction of Scape Brighton, its second asset in
Brighton. The property is expected to provide c.550 beds and extensive communal
areas for students for the 2020/21 academic year. The Company benefits from licensing fees which provide a 5.5% coupon per annum throughout the construction phase. Scape Brighton will add to the Company's presence in the Brighton market, with the construction of Circus Street, Brighton expected to complete ahead of the upcoming 2019/20 academic year. Financial results The Company has generated a strong set of results in both absolute and relative terms. The Company's investment portfolio delivered rental income of GBP20.9 million over the period. Its NAV per share increased from 149.12 pence at the financial year end, 30 June 2018, to 157.93 pence at 31 December 2018. Dividends The Company has paid dividends in respect of the six-month period ended 31 December 2018 of 3.06 pence per share. The Board is pleased to report the substantial improvement to the Company's dividend cover, which has been driven by Scape Bloomsbury opening to students in September 2018 and the Company's reduced cash balances as Circus Street, Brighton nears completion of its construction. Financing On 25 September 2018, the Company raised GBP38.1 million by way of a non pre-emptive placing of new ordinary shares which will be used, together with the Company's debt facilities, to fund the development of Scape Brighton and Circus Street, Brighton. On 20 December 2018, the Company entered into an agreement with Wells Fargo in respect of a development facility for an amount of up to GBP55 million. The development facility is intended to be drawn over time, partly to fund the construction of Scape Brighton. The development facility has a margin during the construction phase of 3.1% per annum above LIBOR (reducing to 2% per annum above LIBOR once the asset is operational and stabilised). It is repayable on 21 December 2021 with an option to extend by a further twelve months (at the Company's discretion, subject to certain conditions being met) and will be solely secured against Scape Brighton. Accordingly, the Group's available banking facilities total GBP335 million. These facilities include the drawn fixed interest rate term facilities with PGIM for an aggregate amount of GBP235 million, which are secured against certain of the Group's operational assets, and have a weighted average term of seven years. In addition, the Group has GBP100 million of floating rate borrowing facilities with Wells Fargo (which were undrawn as at 31 December 2018) comprising the development facility detailed above and a GBP45 million redrawable credit facility. At 31 December 2018, the Group's current blended cost of borrowing on its drawn debt was 2.96% with an average weighted maturity of seven years. The loan-to-value of the Group at that date was 26%. Outlook The Company provides shareholders with access to a portfolio of private student accommodation assets which continue to benefit from strong supply and demand imbalances through full occupancy, rental growth and yield compression. The highly selective approach adopted by the Board and Investment Manager to asset selection and the locations in which the Company operates, has demonstrably benefited shareholders through strong NAV performance and dividend growth since IPO. Since the EU referendum in 2016, the Board has repeatedly noted that the future risks of Brexit remain unknown and difficult to quantify. At the time of writing, there remains considerable uncertainty as to the possible outcomes for Brexit. Notwithstanding, the attraction of the UK, and London in particular, for domestic and global students alike remains evident. The UK has some of the highest-ranking universities in the world, with three in the top ten institutions in 2017/18.1 Further, education remains a core sector for the UK economy, generating GBP95 billion and supporting nearly one million jobs across the nation.2 With the number of international students in the UK continuing to rise (a substantial number of whom choose to study in and around London) the Board remains confident that the Company will continue to deliver stable performance. The Company has been highly successful in securing new, modern properties through future contractual arrangements secured by the Investment Manager. As detailed in the Company's announcement on 3 October 2017, the Company benefits from a conditional forward purchase agreement to acquire Scape Canalside, a high-specification, new-build asset located immediately adjacent to Queen Mary University of London. With the property expected to open to students for the 2019/20 academic year, the Board and Investment Manager are considering the optimum way to finance its acquisition ahead of acquiring the property. Robert Peto Chairman 19 March 2019 1. Times Higher Education World University Rankings 2018. 2. The Impact of Universities on the UK Economy, Universities UK. INVESTMENT MANAGER'S REPORT The UK student accommodation market The Investment Manager remains positive regarding the outlook for the student accommodation sector in the UK, particularly in relation to the Company's 'core' markets (including London, Brighton and Bristol) which continue to benefit from attractive demand characteristics supported by constrained supply. The Investment Manager continues to believe that the location of assets is fundamental to their ability to support long-term returns to shareholders. Student numbers supportive of occupancy and growth UCAS data for the 2018/19 academic year shows year-on-year growth of 4.4% in the number of international students accepted onto full-time courses in the UK, a sixth consecutive year of growth. Acceptances from both EU and non-EU students have increased, with the former continuing to remain above the levels seen prior to the EU referendum. Whilst total acceptances to full-time higher education in the UK for the 2018/ 19 academic year remain broadly consistent with prior years, a combination of the cost of tuition and the removal of student number controls continues to benefit the top ranked universities most, suggesting a flight to quality as students increasingly view their choice of university in terms of expected future earnings. Demand for full-time higher education courses in London remains strong relative to the rest of the UK. London is home to 23 universities, with more universities ranked in the top 40 by The Times Higher Education World University Rankings than any other city in the world. Approximately one-third of the 2.3 million students in the UK study in London and the South East. International students in particular favour London as a destination for higher education given its continued reputation as a global centre of academic excellence; a quarter of all international students in the UK choose to study in London. With 92% of the Company's portfolio located in and around London and 77% of the tenants being international students, current market dynamics are strongly supportive of the Company's investment objective and underpin its continued ability to deliver fully occupied assets with long-term rental growth prospects. Strong supply-side barriers The supply of private student accommodation varies substantially across the UK with increasing divergence of returns between cities with an undersupply of student housing and those with less restrictive planning regulations. The Investment Manager targets markets which suffer from a structural undersupply of such assets. High land values and the difficult planning environment, which prioritises social housing and residential schemes over student accommodation, has seen the London market remain severely undersupplied. Brighton, like London, also remains severely undersupplied, as shown below. The beneficial impact of these supply-side barriers on the Company's portfolio, coupled with strong demand for accommodation in its assets, is reflected by the valuation increases and rental growth achieved since its IPO in 2013. Transactional activity Investment volumes in 2018 exceeded GBP3.2 billion in 2018. At the date of this report, we estimate that there is a further GBP1.4 billion of stock on the market. Overseas buyers continue to dominate the market for UK student residential assets. Of particular note was the acquisition by Allianz of a GBP350 million holding in the GBP1.5 billion Chapter portfolio, comprising c.5,100 beds in and around London. The Investment Manager estimates the Chapter portfolio traded at a yield just above 4%. Such investment activity, combined with the anticipated impact of the London Plan (which may create additional barriers to the development of student schemes and drive increased demand for existing assets), continues to drive yield compression across the London market. This is reflected in the increased valuation of the Company's portfolio over the period under review. Students per bed ratio London 3.6 Brighton 4.5 Bristol 2.8 National average 2.0 Source: HESA. WHERE, WHAT AND HOW THE THREE FUNDAMENTALS Where the assets are located - Primary focus in and around London - Proximity to HEI and/or major transport hub - High supply side barriers What the Company buys - Intelligent design to optimise long-term returns - Large-scale assets benefiting from operating efficiencies - Modern purpose-built accommodation How the Company operates - High-specification facilities - Hotel level service - Competitive pricing Portfolio performance update The key drivers of the Company's returns are based on the three fundamentals shown above which form the basis of how the Investment Manager seeks to add value over the long term. The Company's portfolio continues to perform in line with the Investment Manager's expectations. The operational properties are fully occupied with
respect to the 2018/19 academic year. The portfolio generated rental income of
GBP20.9 million for the six-month period to 31 December 2018 and average rental
growth of 3.5% year-on-year. The Company is able to achieve strong rental
growth through its focus on markets benefiting from strong supply and demand
imbalances and the location of its assets, all of which are within a 10-minute
walk of an HEI or major transport links.
Over the period under review, the Company has achieved strong NAV growth driven
by a like-for-like portfolio valuation uplift of 4.8%. The external market
valuation of the portfolio was GBP841.5 million at 31 December 2018. The
valuation uplift has been driven by rental growth, full occupancy and yield
compression across its portfolio, with notable valuation uplifts on Scape
Bloomsbury of GBP9.9 million, Scape Shoreditch of GBP7.7 million and Scape East of
GBP10.0 million. The blended net initial yield of the Company's operational
portfolio at 31 December 2018 was 4.74%.
London continues to attract the attention of institutional and sovereign wealth
fund investors, with competitive market activity for private student
accommodation assets further driving yield compression, which has positively
impacted the valuation of the Company's assets. As detailed above, 92% of the
Company's portfolio by value is located in and around London.
During the period under review, the comprehensive refurbishment of Scape
Bloomsbury was completed ahead of schedule with the property open to students
for the beginning of the current academic year, providing 432 beds in London
WC1. The asset is currently fully occupied.
The forward-funded construction of Circus Street, Brighton continues in line
with the Investment Manager's expectations. The asset is expected to complete
for the 2019/20 academic year and will provide a further 450 beds in addition
to c.30,000 sq ft of commercial office space, which will complete by March
2020. The student accommodation will be let on a 21-year lease, with annual
uplifts of RPI plus 50 basis points, capped at 5% and floored at 2% to a
subsidiary guaranteed by Kaplan Inc, a global education provider. The Company
has benefited from a licensing fee providing a 5.5% coupon on drawn funding
through the construction phase.
In July 2018, the Company entered into a conditional contract to acquire and
forward fund Scape Brighton. Scape Brighton will provide c.550 beds, extensive
communal areas and c.1,500 sq ft of retail space. It is currently expected that
Scape Brighton will be operational for the 2020/21 academic year.
Outlook
The Company provides shareholders with a property portfolio which continues to
benefit from supply and demand imbalances for student residential accommodation
in its core markets. The attraction of these core markets for owners of private
student residential accommodation remains evident, as demonstrated by the
occupancy levels, rental growth and yield compression seen across the Company's
portfolio. The Investment Manager believes investment demand is increasingly
selective, with the weight of institutional capital focusing on the supply of
'core' locations. This is illustrated by the substantial yield differential
between private student residential accommodation assets in and around
London and in super-prime regional locations as compared to those located in
secondary and tertiary regional locations.
Notwithstanding the ongoing uncertainties surrounding Brexit and weakness in
the wider real estate markets, international student numbers and institutional
demand for assets in London both remain resilient.
Looking ahead, the Investment Manager believes the Company remains well
positioned to benefit from the supply and demand imbalances in core markets,
with institutional investment demand and restrictive planning regimes in the
markets in which it operates. The UK, and London in particular, remains a
global centre of education and the Investment Manager believes that this is set
to continue, particularly given the importance of the education sector to the
UK economy.
The Investment Manager has been highly successful in securing new, modern
properties through future contractual arrangements which have enabled the
Company to create its own pipeline of assets in attractive locations where
existing properties may not have otherwise been available. Forward purchase
agreements, through which the Company has committed to acquire assets under
development once they become operational, have been used for the acquisition of
its Scape Shoreditch, The Pad and Podium assets. The Company has benefited from
valuation gains since acquisition of, in aggregate, GBP40.5 million on these
properties, representing an average valuation uplift on purchase prices of
c.18%.
On 3 October 2017, the Company announced that it had entered into a conditional
forward purchase agreement to acquire Scape Canalside, a high-specification,
new-build asset located immediately adjacent to Queen Mary University of
London, and in the same locality as the Group's existing c.590-bed Scape East
asset. The property is on track to open to students for the 2019/20 academic
year, providing approximately 410 beds. If the conditional contract is
completed, the Company's portfolio will include c.1,000 beds in the same
locality as Queen Mary University of London, providing the opportunity to take
advantage of operational economies of scale.
The Investment Manager believes the acquisition of Scape Canalside should
enable the Company to secure a new asset in a highly attractive London location
and which is expected to provide rental and earnings growth for the Company
over the long term. Based on current market conditions and the terms of the
forward purchase agreement the Investment Manager currently anticipates that,
if acquired, the Company will benefit from an uplift in the valuation of Scape
Canalside at the time of its first full independent valuation at 30 September
2019. Accordingly, the Investment Manager believes that Scape Canalside
represents an attractive opportunity for the Company.
FINANCIAL REVIEW OF THE PERIOD
Financial results
The Company has delivered robust results for the six-month period to 31
December 2018, with average rental growth of 3.5% across the portfolio for the
2018/19 academic year and generating total rental income for the period of GBP
20.9 million. Profit before tax and fair value gains on investment properties
of GBP9.0 million was generated in the period. The increase in profitability
year-on-year is due to scale, with a further asset becoming operational in the
period, increasing gross profit, with administration and finance expenses
remaining broadly consistent year-on-year.
Property expenditure
The Company's net operating margin has remained stable at c.78% with the
continued efficient management of costs by the Company's Asset and Facilities
Managers. Property expenditure of GBP4.5 million was incurred during the period,
which is in line with expectations.
Administration expenditure
Total administration expenses of GBP4.0 million comprise fund running costs,
including the Investment Manager's fee and other third party service provider
costs in the period in line with the Company's service provider contracts.
Dividends and earnings
The Company increased its dividend, paying a dividend of 3.06 pence per share
for the period. The dividend was 81% covered by adjusted EPS¹ of 2.49 pence.
Whilst the Company targets a fully-covered dividend over the longer term, where
assets in its portfolio are being refurbished or are under development (as is
the case with development projects such as Circus Street and the recently
completed Scape Bloomsbury), cover may be adversely affected over the short
term.
The dividends were paid as 2.35 pence per ordinary share as PID in respect of
the Group's tax exempt property rental business and 0.71 pence per ordinary
share as ordinary dividends.
Ongoing charges percentage
The Company's ongoing charges ratio for the twelve months to 31 December 2018,
based on the AIC's methodology, excluding direct property costs, was 1.27%.
Financial performance
Summary profit and loss
Six Six
months months
ended ended
31 31
December December
2018 2017
GBP'000 GBP'000
Rental income 20,868 17,317
Operating expenses (4,517) (3,860)
Gross profit (net operating income) 16,351 13,457
Net operating margin 78% 78%
Administration expenses (3,959) (3,614)
Net finance costs (3,430) (3,354)
Profit before tax and fair value gains on investment properties 8,962 6,489
Fair value gains on investment properties 39,898 32,357
Profit before tax for the period 48,860 38,846
1. Refer to Note 7.
Valuation
The valuation of the Company's property portfolio has increased to GBP841.5
million. Total gains on investment properties through revaluation of the
Company's investment portfolio were GBP39.9 million for the period ended 31
December 2018. The portfolio is fully occupied for the 2018/19 academic year.
Debt financing
The Company has continued to utilise its debt facilities during the period. The
four facilities amount to GBP335 million, including two fixed interest rate term
facilities for an aggregate amount of GBP235 million which are secured against
certain of the Group's operational assets. In addition, the Group has GBP100
million of floating rate borrowing facilities with Wells Fargo (undrawn at
31 December 2018) comprising a GBP55 million development facility and a GBP45
million redrawable credit facility.
The Group's current blended cost of borrowing on its drawn debt at the period
end is 2.96% with an average weighted maturity of seven years. The
loan-to-value of the Group is 26%.
Lifecycle reserve
The Company's lifecycle cash reserves were GBP1.7 million at the period end. The
reserves are held for future expenditure to ensure the properties are
maintained at the level needed to sustain the current rents and any assumed
future rental growth.
EPRA NAV¹
Net assets attributable to equity holders at 31 December 2018 were GBP648.4
million, up from GBP563.4 million as at 31 December 2017. The EPRA NAV has
increased from 149.12 pence as at 30 June 2018 to 157.93 pence per ordinary
share, a 5.9% increase for the six-month period to 31 December 2018, primarily
driven by increases in portfolio valuations due to strong rental growth, gains
at completion and yield compression.
Cash flow generation
The Company held cash and cash equivalents of GBP19.8 million at the end of the
financial period under review. Operating cash flows of GBP10.5 million were
generated by the Company's student accommodation portfolio. Total equity
capital raised in the year amounted to GBP38.1 million, which was used in part to
fund the development of Scape Brighton and Circus Street, Brighton. The
remaining cash outflows relate to the cost of servicing the Company's debt
facilities in addition to the payment of dividends, resulting in a net decrease
in cash and cash equivalents at the period end.
Financial performance
Summary balance sheet
As at As at
31 December 31 December
2018 2017
GBP'000 GBP'000
Investment property2 838,964 739,585
Trade and other receivables 47,011 16,731
Cash and cash equivalents 19,781 61,943
Total assets 905,756 818,259
Liabilities
Trade and other payables (7,068) (8,212)
Deferred income (18,574) (14,057)
Interest-bearing loans and borrowings (231,679) (232,594)
Total liabilities (257,321) (254,863)
Net assets 648,435 563,396
Number of shares 410,576,707 385,064,556
EPRA NAV1 per share (cum-income) (pps) 157.93 146.31
EPRA NAV1 per share (ex-income) (pps) 156.40 144.83
1. EPRA NAV is equivalent to the NAV calculated under IFRS for the period.
See glossary for definitions.
2. Net of lease incentives held as receivables.
COMPANY PERFORMANCE
Annualised shareholder total return since IPO1
11.9% HY 2018
12.0% HY 2017
Relevance to strategy: Shareholder total return measures the delivery of the
Company's strategy, to provide shareholders with attractive total returns in
the longer term.
Adjusted earnings per ordinary share1
2.49p HY 2018
1.92p HY 2017
Relevance to strategy: Adjusted earnings per share reflects the Company's
ability to generate earnings from its portfolio.
Dividends per ordinary share for the period
3.06p HY 2018
2.96p HY 2017
Relevance to strategy: The total dividend reflects the Company's ability to
deliver regular, sustainable, long-term dividends and is a key element of total
return.
Occupancy1
FULL HY 2018
FULL HY 2017
Relevance to strategy: Occupancy is a key measure of portfolio quality and
ability to drive rental growth.
Loan-to-value1
26% HY 2018
23% HY 2017
Relevance to strategy: The LTV ratio measures the level of gearing and
the Company's cost of debt.
Student rental growth1 (like-for-like)
3.5% AY 2018
4.1% AY 2017
Relevance to strategy: Student rental growth is a key measure of the quality of
the portfolio.
EPRA performance measures2
The data below include performance measures based on EPRA best practice
recommendations which are designed to enhance transparency and comparability
across the European real estate sector.
EPRA earnings1
GBP9.0m HY 2018
GBP6.5m HY 2017
Purpose: A key measure of the Company's underlying operating results and an
indication of the extent to which the current dividend payments are supported
by earnings.
EPRA NAV1
157.93p HY 2018
146.31p HY 2017
Purpose: Makes adjustments to the IFRS NAV to provide stakeholders with the
most relevant information on the fair value of the assets and liabilities
within a true real estate investment company.
EPRA net initial yield1
4.74% HY 2018
5.04% HY 2017
Purpose: A comparable measure for portfolio valuations. This measure increases
the comparability of two portfolios.
1. APM - see glossary for definitions and calculation methodology.
2. In respect of the operational portfolio in line with EPRA Best Practice
Recommendation Guidelines.
INTERIM MANAGEMENT REPORT AND STATEMENT OF DIRECTORS' RESPONSIBILITIES
Interim management report
The important events that have occurred during the period under review, the key
factors influencing the condensed consolidated financial statements and the
principal factors that could impact the remaining six months of the financial
year are set out in the Chairman's statement and the Investment Manager's
report above.
The Directors consider that the principal risks facing the Company
are substantially unchanged since the date of the annual report for the year
ended 30 June 2018 and continue to be as set out in that report.
Risks faced by the Group include, but are not limited to:
Operational risk:
- reliance on the Investment Manager and third party service providers;
- due diligence;
- concentration risk;
- net income and capital values;
- property valuation and liquidity; and
- compliance with laws and regulations.
Market risk:
- UK property market conditions; and
- government policy and Brexit.
Financial risk:
- breach of loan covenants and gearing limits.
Responsibility statement
The Directors confirm that to the best of their knowledge:
- the half-yearly report and consolidated financial statements have been
prepared in accordance with IAS 34 Interim Financial Reporting issued by the
IASB;
- the half-yearly report and consolidated financial statements give a true and
fair view of the assets, liabilities, financial position and return of the
Group; and
- the half-yearly report and condensed consolidated financial statements
include a fair review of the information required by:
a) 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the consolidated financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
b) 4.2.8R of the Disclosure Guidance and Transparency Rules, being related
party transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial
position or performance of the Group during that period; and any changes in the
related party transactions described in the last annual report that could do
so.
The half-yearly report and condensed consolidated financial statements were
approved by the Board of Directors and the above responsibility statement was
signed on its behalf by:
Robert Peto
Chairman
19 March 2019
INDEPENT REVIEW REPORT
To the members of GCP Student Living plc
Introduction
We have been engaged by GCP Student Living plc (the "Company") to review the
consolidated financial statements in the half-yearly financial report for the
six months ended 31 December 2018, which comprise the condensed consolidated
statement of comprehensive income, the condensed consolidated statement of
financial position, the condensed consolidated statement of changes in equity,
the condensed consolidated statement of cash flows, basis of preparation and
accounting policies and all related notes (together the "condensed consolidated
financial statements"). We have read the other information contained in the
half-yearly report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed
consolidated financial statements.
This report is made solely to the Company in accordance with guidance contained
in International Standard on Review Engagements 2410 (UK and Ireland) 'Review
of Interim Financial Information Performed by the Independent Auditor of the
Entity' issued by the Auditing Practices Board. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the half-yearly report
in accordance with the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in the basis of preparation and accounting policies, the annual
financial statements of the Group are prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European Union. The
consolidated financial statements included in this half-yearly report have been
prepared in accordance with International Accounting Standard 34, Interim
Financial Reporting, as adopted by the European Union.
Our responsibilities
Our responsibility is to express to the Company a conclusion on the condensed
consolidated financial statements in the half-yearly report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed consolidated financial statements in the half-yearly
report for the six months ended 31 December 2018 is not prepared, in all
material respects, in accordance with as adopted by the European Union and the
Disclosure Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Ernst & Young LLP
London, United Kingdom
19 March 2019
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 31 DECEMBER 2018
Six Six
months months
ended ended
31 31
Continuing operations Notes December December
2018 2017
GBP'000 GBP'000
Rental income 20,868 17,317
Property operating expenses (4,517) (3,860)
Gross profit 16,351 13,457
Administration expenses (3,959) (3,614)
Operating profit before gains on investment properties 12,392 9,843
Fair value gains on investment properties 3 39,898 32,357
Operating profit 52,290 42,200
Finance income 531 255
Finance expenses 4 (3,961) (3,609)
Profit before tax 48,860 38,846
Tax charge on residual income 5 - -
Total comprehensive income for the period 48,860 38,846
EPS (basic and diluted) (pps) 7 12.26 10.13
The accompanying notes 1 to 12 form an integral part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2018
31 December 30 June
2018 2018
Notes GBP'000 GBP'000
Assets
Non-current assets
Investment property 3 838,964 784,424
Deposits for investment property 2,648 2,648
Retention account 308 308
841,920 787,380
Current assets
Cash and cash equivalents 19,781 29,213
Trade and other receivables 19,877 9,005
Loans receivable 12 24,178 -
63,836 38,218
Total assets 905,756 825,598
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 8 (231,679) (232,771)
Retention account (308) (308)
(231,987) (233,079)
Current liabilities
Trade and other payables (6,760) (8,183)
Deferred income (18,574) (10,126)
(25,334) (18,309)
Total liabilities (257,321) (251,388)
Net assets 648,435 574,210
Equity
Share capital 9 4,106 3,851
Share premium 445,824 408,617
Special reserve 41,362 44,497
Retained earnings 157,143 117,245
Total equity 648,435 574,210
Number of shares in issue 410,576,707 385,064,556
EPRA NAV per share (pps) 10 157.93 149.12
The accompanying notes 1 to 12 form an integral part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 31 DECEMBER 2018
Share Share Special Retained
capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 July 2018 3,851 408,617 44,497 117,245 574,210
Total comprehensive income - - - 48,860 48,860
Ordinary shares issued 255 37,886 - - 38,141
Share issue costs - (679) - - (679)
Dividends paid in respect of the - - (2,509) (3,306) (5,815)
previous period
Dividends paid in respect of the - - (626) (5,656) (6,282)
current period
Balance at 31 December 2018 4,106 445,824 41,362 157,143 648,435
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 31 DECEMBER 2017
Share Share Special Retained
capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 July 2017 3,358 340,233 53,576 69,827 466,994
Total comprehensive income - - - 38,846 38,846
Ordinary shares issued 493 69,507 - - 70,000
Share issue costs - (1,123) - - (1,123)
Dividends paid in respect of the - - (3,076) (2,546) (5,622)
previous period
Dividends paid in respect of the - - (1,609) (4,090) (5,699)
current period
Balance at 31 December 2017 3,851 408,617 48,891 102,037 563,396
The accompanying notes 1 to 12 form an integral part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 31 DECEMBER 2018
Six Six
months months
ended ended
31 31
December December
2018 2017
GBP'000 GBP'000
Cash flows from operating activities
Operating profit 52,290 42,200
Adjustments to reconcile profit for the period to net operating
cash flows:
Gains from change in fair value of investment properties (39,898) (32,357)
Decrease in other receivables and prepayments 8,338 6,201
Decrease in other payables and accrued expenses (10,252) (6,052)
Net cash flow generated from operating activities 10,478 9,992
Cash flows from investing activities
Acquisition of investment properties - (29,532)
Capital expenditure on investment properties (16,010) (42,646)
Increase in loans receivable (24,178) -
Net cash used in investing activities (40,188) (72,178)
Cash flows from financing activities
Proceeds from issue of ordinary shares 38,141 70,000
Share issue costs (679) (1,123)
Proceeds from interest-bearing loans and borrowings 17,470 15,000
Repayment of interest-bearing loans and borrowings (17,470) -
Finance income 20 20
Finance expenses (5,196) (3,587)
Dividends paid in the period (12,008) (11,291)
Net cash flow generated from financing activities 20,278 69,019
Net (decrease)/increase in cash and cash equivalents (9,432) 6,833
Cash and cash equivalents at start of the period 29,213 55,110
Cash and cash equivalents at end of the period 19,781 61,943
The accompanying notes 1 to 12 form an integral part of these financial
statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31 DECEMBER 2018
1. General information
GCP Student Living plc is a REIT incorporated in England and Wales on 26
February 2013. The registered office of the Company is located at 51 New North
Road, Exeter EX4 4EP. The Company's shares are listed on the Premium Segment of
the Official List of the UKLA and trade on the Premium Segment of the Main
Market of the London Stock Exchange.
2. Basis of preparation
The condensed consolidated financial statements for the six months ended 31
December 2018 have been prepared in accordance with IAS 34 Interim Financial
Reporting. They do not include all financial information required for full
annual financial statements and have been prepared using the accounting
policies adopted in the audited financial statements for the year ended 30 June
2018. The audited financial statements were prepared in accordance with IFRS
issued by the IASB as adopted by the European Union.
The financial information contained within this half-yearly report does not
constitute full statutory accounts as defined in the Companies Act 2006. The
financial information for the six months ended 31 December 2018 has been
reviewed by the Company's Auditor, Ernst & Young LLP, in accordance with
International Standard on Review Engagements 2410 (UK and Ireland) 'Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity' and were approved for issue on 19 March 2019. The latest published
audited financial statements for the year ended 30 June 2018 have been
delivered to the Registrar of Companies; the report of the independent Auditor
thereon was unqualified and did not contain a statement under section 498 of
the Companies Act 2006. The financial information for the year ended 30 June
2018 is an extract from those financial statements.
The condensed consolidated interim financial statements have been prepared
under the historical cost convention, except for investment property, which has
been measured at fair value. The financial statements are presented in Pound
Sterling and all values are rounded to the nearest thousand pounds (GBP'000),
except when otherwise indicated.
The Group has chosen to adopt the EPRA best practice guidelines for calculating
key metrics such as net asset value and earnings, which are presented alongside
the IFRS measures.
The condensed consolidated interim financial information includes the financial
statements of the Company and its wholly-owned subsidiaries for the six months
ended 31 December 2018.
2.1 Significant accounting policies
Accounting policies are consistent with those of the annual report for the year
ended 30 June 2018.
2.2 Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being the investment and provision of student accommodation
facilities (including ancillary retail, commercial and teaching facilities) in
the UK.
2.3 Significant accounting judgements and estimates
The preparation of these financial statements in accordance with IFRS requires
the Directors of the Company to make judgements, estimates and assumptions that
affect the reported amounts recognised in the financial statements. 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
in the future.
IFRS 9 Financial Instruments came into effect for periods beginning on or after
1 January 2018. This has not had a material effect on the Company or its
operations.
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:
Valuation of property
The valuations of the Group's investment property are at fair value as
determined by the external valuer on the basis of market value in accordance
with the internationally accepted RICS Valuation - Global Standards 2017 and in
accordance with IFRS 13. Refer to note 11 for further details of the judgements
and estimates made in determining the valuation of property.
Operating lease commitments - Group as lessor
The Group has entered into commercial property leases on its investment
property portfolio. The Group has determined, based on evaluation of the terms
and conditions of the arrangements, such as the lease term not constituting a
substantial portion of the economic life of the commercial property, that it
retains all the significant risks and rewards of ownership of these properties
and recognises the contracts as operating leases.
Going concern
The Directors have made an assessment of the Group's ability to continue as a
going concern and are satisfied that the Group has the resources to continue in
business for the foreseeable future, for a period of not less than twelve
months from the date of this report. Furthermore, the Directors are not aware
of any material uncertainties that may cast significant doubt upon the Group's
ability to continue as a going concern. Therefore, the financial statements
have been prepared on a going concern basis.
3. UK investment property
Properties
under
development Leasehold Freehold Total
GBP'000 GBP'000 GBP'000 GBP'000
As at 1 July 2018 30,490 248,460 505,474 784,424
Expenditure on properties - 27 4,962 4,989
Land and development costs 9,653 - - 9,653
Fair value gains on investment properties 6,327 5,987 27,584 39,898
As at 31 December 2018 46,470 254,474 538,020 838,964
As at 1 July 2017 59,100 229,460 346,080 634,640
Acquisition of investment property - - 29,532 29,532
Expenditure on properties - - 4,362 4,362
Land and development costs 38,694 - - 38,694
Transfer between properties under development (79,030) - 79,030 -
and freehold properties
Fair value gains on investment properties 746 13,270 18,341 32,357
As at 31 December 2017 19,510 242,730 477,345 739,585
As at 1 July 2017 59,100 229,460 346,080 634,640
Acquisition of investment property - - 29,536 29,536
Expenditure on properties - 33 23,544 23,577
Land and development costs 49,106 - - 49,106
Transfer between properties under development (79,030) - 79,030 -
and freehold properties
Fair value gains on investment properties 1,314 18,967 27,284 47,565
As at 30 June 2018 30,490 248,460 505,474 784,424
During the period, the Group continued construction of Circus Street, Brighton.
The carrying value of investment property is shown net of lease incentives held
as receivables.
4. Finance expenses
Six Six
months months
ended ended
31 31
December December
2018 2017
GBP'000 GBP'000
Bank charges 4 4
Agency fees 12 -
Loan interest 3,588 3,413
Commitment fees 138 -
Loan arrangement fees amortised 219 177
Other expenses - 15
Total 3,961 3,609
5. Taxation
As a REIT, the Group is exempt from corporation tax on the profits and gains
from its property rental business, provided it continues to meet certain
conditions as per the REIT regulations. Non-qualifying profits and gains of the
Group (residual income) continue to be subject to corporation tax.
Corporation tax has arisen as follows:
Six Six
months months
ended ended
31 31
December December
2018 2017
GBP'000 GBP'000
Corporation tax on residual income - -
Total - -
6. Dividends
Six months ended Six months ended
31 December 2018 31 December 2017
Total Ordinary Total Ordinary
Dividend Pence PID dividend GBP'000 Pence PID dividend GBP'000
Current period dividends
31 December Second interim 1.53 1.22 0.31 - 1.48 1.09 0.39 -
20181 dividend
30 September First interim 1.53 1.13 0.40 6,282 1.48 1.07 0.41 5,699
2018 dividend
Total 3.06 2.35 0.71 6,282 2.96 2.16 0.80 5,699
Prior period dividends
30 June 2018 Fourth interim 1.51 0.94 0.57 5,815 1.46 0.95 0.51 5,622
dividend
Total 1.51 0.94 0.57 5,815 1.46 0.95 0.51 5,622
Dividends in statement of 12,097 11,321
changes in equity
Movement in withholding tax (89) (30)
accrual
Dividends in statement of 12,008 11,291
cash flows
1. The current second interim dividend was declared after the period ended
and therefore not accrued for as a provision in the financial statements.
On 5 February 2019, the Company declared a second interim dividend of 1.53
pence per ordinary share amounting to GBP6.3 million. The dividend was paid to
shareholders on the register at close of business on 11 March 2019.
As a REIT, the Company is required to pay PIDs equal to at least 90% of the
property rental business profits of the Group.
7. Earnings per share
Basic EPS is calculated by dividing profit for the period attributable to
ordinary shareholders of the Company by the weighted average number of ordinary
shares during the period. As there are no dilutive instruments in issue, basic
and diluted EPS are identical. The following reflects the earnings and share
data used in the basic and diluted share computations:
Six Six
months months
ended ended
31 31
December December
2018 2017
GBP'000 GBP'000
Group earnings for basic and diluted EPS 48,860 38,846
Fair value gains on investment properties (39,898) (32,357)
Group earnings for basic and diluted EPRA EPS 8,962 6,489
Group specific adjustments:
Licence fees on forward-funded developments 976 876
Group specific adjusted earnings 9,938 7,365
Six Six
months months
ended ended
31 31
December December
2018 2017
Pence Pence
per share per share
Basic Group EPS 12.26 10.13
Basic Group EPRA EPS 2.25 1.69
Diluted Group EPS 12.26 10.13
Diluted Group EPRA EPS 2.25 1.69
Group specific adjusted EPS 2.49 1.92
31 December 31 December
2018 2017
Number Number
of shares of shares
Weighted average number of shares in issue 398,652,549 383,457,085
A third Group specific adjusted EPS calculation has been calculated to show
EPRA earnings including licence fees on forward-funding agreements which are
treated as capital items in the financial statements. The items have arisen
from the following:
1. For the period ended 31 December 2018:
i. licence fees from the developer of Circus Street in respect of a
forward-funding agreement of GBP976,000.
2. For the period ended 31 December 2017:
i. licence fees from the developer of Circus Street in respect of a
forward-funding agreement of GBP46,000; and
ii. licence fees from the developer of Scape Wembley in respect of a
forward-funding agreement of GBP830,000.
8. Interest-bearing loans and borrowings
31 30 June
December 2018
2018 GBP'000
GBP'000
Borrowings at the start of the period 235,000 220,000
Borrowings drawn down in the period 17,470 15,000
Borrowings repaid in the period (17,470) -
Borrowings at the end of the period 235,000 235,000
Unamortised loan arrangement fees brought forward (2,229) (2,531)
Amortised in the period 219 355
Loan arrangement fees incurred in the period (1,311) (53)
Unamortised loan arrangement fees carried forward (3,321) (2,229)
Borrowings less unamortised loan arrangement fees 231,679 232,771
The Group has debt facilities of GBP335 million, comprising the following:
Secured fixed rate credit facilities totalling GBP235 million with PGIM:
Amount Facility Interest rate % Maturity
GBP130,000,000 1 3.07 September 2024
GBP40,000,000 1 2.83 September 2024
GBP65,000,000 2 2.82 April 2029
Secured credit facilities totalling GBP100 million with Wells Fargo:
Amount Facility Interest rate % Maturity
GBP45,000,000 Redrawable credit LIBOR +1.85% July 2021
facility
GBP55,000,000 Development loan LIBOR +3.1% December 2021 + 1
year
The Group uses gearing to seek to enhance returns over the long term and for
the purpose of funding acquisitions in line with the Company's investment
policy. The level of gearing is governed by careful consideration of the cost
of borrowing.
The debt facilities include gearing and interest cover covenants that are
measured in accordance with the respective facility agreement. The Group has
maintained significant headroom against all measures throughout the financial
period and is in full compliance with all loan covenants at 31 December 2018.
9. Share capital
31 30 June
Number of Issued December 2018
shares share 2018 GBP'000
price GBP'000
Issued and fully paid:
At the start of the period 3,851 3,358
Shares issued on 7 July 2017 49,295,774 142.00p - 493
Shares issued on 25 September 2018 25,512,151 149.50p 255 -
Balance at the end of the period 4,106 3,851
10. Net asset value per ordinary share
Basic NAV per share amounts are calculated by dividing net assets attributable
to ordinary equity holders of the Company in the statement of financial
position by the number of ordinary shares outstanding at the end of the period.
As there are no dilutive instruments in issue, basic and diluted NAV per share
are identical. The following reflects the net asset and share data used in the
NAV per share computations:
31 30 June
December 2018
2018
EPRA NAV (pps) 157.93 149.12
The EPRA NAV may be calculated as:
31 December 30 June
2018 2018
GBP'000 GBP'000
Net assets attributable to ordinary shareholders 648,435 574,210
Net assets for calculation of EPRA NAV 648,435 574,210
Number of ordinary shares in issue 410,576,707 385,064,556
11. Fair value
IFRS 13 defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The following methods and assumptions
were used to estimate the fair values.
The fair value of cash and short-term deposits, trade receivables, trade
payables and other current liabilities approximate their fair value due to the
short-term maturities of these instruments.
Interest-bearing loans and borrowings are disclosed at amortised cost. The
carrying value of the loans and borrowings approximate their fair value due to
the contractual terms and conditions of the loan.
Quarterly valuations of investment property are performed by Knight Frank LLP,
an accredited external valuer with recognised and relevant professional
qualifications and recent experience of the location and category of the
investment property being valued, however, the valuations are the ultimate
responsibility of the Directors, who appraise these quarterly.
The valuation of the Company's investment property at fair value is determined
by the external valuer on the basis of market value in accordance with the
internationally accepted RICS Valuation, Global Standards 2017 and in
accordance with IFRS 13.
The determination of the fair value of investment property requires the use of
estimates such as future cash flows from assets such as lettings, tenants'
profiles, future revenue streams, the capital values of fixtures and fittings,
plant and machinery, any environmental matters and the overall repair and
condition of the property and discount rates applicable to those assets.
The following tables show an analysis of the fair values of assets recognised
in the statement of financial position by level of the fair value hierarchy1:
31 December 2018
Assets and liabilities measured at fair value Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investment properties - - 841,470 841,470
- - 841,470 841,470
30 June 2018
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair value GBP'000 GBP'000 GBP'000 GBP'000
Investment properties - - 784,424 784,424
- - 784,424 784,424
1. Explanation of the fair value hierarchy:
* Level 1 - quoted prices (unadjusted) in active markets for identical assets
or liabilities that the entity can access at the measurement date;
* Level 2 - use of a model with inputs (other than quoted prices included in
Level 1) that are directly or indirectly observable market data; and
* Level 3 - use of a model with inputs that are not based on observable
market data.
There have been no transfers between Level 1, Level 2 or Level 3 during the
period or the comparative period.
Valuation techniques and significant inputs within the valuation of investment
properties
The following table analyses:
* the fair value measurements at the end of the reporting period;
* a description of the valuation techniques applied;
* the inputs used in the fair value measurement, including the ranges of rent
charged to different units within the same building; and
* for Level 3 fair value measurements, quantitative information about
significant unobservable inputs used in the fair value measurement.
Class of Fair value Valuation Key unobservable inputs Range
property technique
Operational GBP795,000,000 Income Estimated rental value - GBP165 - GBP670 per bed
capitalisation 2018/19 per week
student Rental growth 2.5% - 3.0%
property Tenancy period 40/51 weeks
31 December Sundry income GBP50 - GBP100 per bed
2018 Facilities management p.a.
cost GBP2,100 - GBP2,350 per
Initial yield bed p.a.
4.15% - 5.80%
blended
(4.15% - 7.50%)
Development GBP Income Residual land value GBP14,720,000
student 46,470,000 capitalisation/ Build cost spend to date GBP31,750,000
property Residual land
31 December value (plus cost
2018 spend to date)
Operational GBP753,934,000 Income Estimated rental value - GBP165 - GBP465 per bed
capitalisation 2017/18 per week
student Rental growth 2.5% - 3.0%
property Tenancy period 40/51 weeks
30 June Sundry income GBP50 - GBP100 per bed
2018 Facilities management p.a.
cost GBP2,050 - GBP2,250 per
Initial yield bed p.a.
4.5% - 5.75% blended
(4.75% - 7.50%)
Development GBP Income Residual land value GBP8,640,000
student 30,490,000 capitalisation/ Build cost spend to date GBP21,850,000
property residual land
30 June value (plus cost
2018 spend to date)
Sensitivity analysis to significant changes in unobservable inputs within the
valuation of investment properties
Significant increases/decreases in the ERV (per sq ft p.a.) and rental growth
p.a. in isolation would result in a significantly higher/lower fair value
measurement. Significant increases/decreases in the long-term vacancy rate and
discount rate (and exit yield) in isolation would result in a significantly
lower/higher fair value measurement.
Generally, a change in the assumption made for the ERV (per sq ft p.a.) is
accompanied by:
- a similar change in the rent growth p.a. and discount rate (and exit yield);
and
- an opposite change in the long-term vacancy rate.
Gains and losses recorded in profit or loss for recurring fair value
measurements categorised within Level 3 of the fair value hierarchy amount to GBP
39,898,000 (31 December 2017: GBP32,357,000) and are presented in the condensed
consolidated statement of comprehensive income in line item 'fair value gains
on investment properties'.
All gains and losses recorded in profit or loss for recurring fair value
measurements categorised within Level 3 of the fair value hierarchy are
attributable to changes in unrealised gains or losses relating to investment
property held at the end of the reporting period.
The carrying amount of the Company's assets and liabilities is considered to be
the same as their fair value.
12. Related party transactions
Directors
The Directors (all non-executive Directors) of the Company and subsidiaries are
considered to be the key management personnel of the Group. Directors'
remuneration for the six months totalled GBP97,000 (six months ended 31 December
2017: GBP87,500) and as at 31 December 2018, a balance of GBPnil (2017: GBPnil) was
outstanding.
Investment Manager
The Company is party to an investment management agreement with the Investment
Manager, pursuant to which the Company has appointed the Investment Manager to
provide investment management services relating to the respective assets on a
day-to-day basis in accordance with the Company's investment objective and
policy, subject to the overall supervision and direction by the Board of
Directors. For its services to the Company, the Investment Manager receives an
annual fee at the rate of 1% of the NAV of the Company (or such lesser amount
as may be demanded by the Investment Manager at its own absolute discretion).
The Investment Manager has committed additional resource in providing its
client funds, including the Company, a more comprehensive service which
strengthens the level of transaction and marketing support for the Company, in
a cost-efficient manner. The Investment Manager receives a fee of 0.3% of the
aggregate gross proceeds from any issue of new shares in consideration for the
provision of marketing and investor introduction services. The Investment
Manager has appointed Highland Capital Partners Limited to assist it with the
provision of such services and pays all fees due to Highland Capital Partners
Limited out of the fees it receives from the Company.
The Investment Manager has been appointed as the Company's AIFM under the
investment management agreement in respect of which it receives an annual fee
of GBP24,000, subject to an annual RPI increase. The Company has provided
disclosures on its website incorporating the disclosure requirements of the
AIFMD regulations.
During the six months ended 31 December 2018, the Group incurred GBP3,258,000
(six months ended 31 December 2017: GBP2,588,000) in respect of investment
management fees, AIFM fees and transaction management and document services. A
total of GBP3,144,000 is included within administration expenses in the condensed
consolidated statement of comprehensive income and GBP114,000 is included within
share issue costs relating to shares issued during the period;
at 31 December 2018, GBP1,669,000 (31 December 2017: GBP1,196,000) was outstanding.
The investment management agreement is terminable by the Company on not less
than twelve months' written notice to the Investment Manager at any time, such
notice to expire no earlier than 21 September 2021, and is terminable by the
Investment Manager on not less than twelve months' written notice to the
Company at any time, such notice to expire no earlier than 31 October 2025. The
investment management agreement can be terminated at any time in the event of
the insolvency of the Company or the Investment Manager.
The Company and the Investment Manager entered into the investment management
agreement on 12 April 2013. The agreement was novated from Gravis Capital
Partners LLP to Gravis Capital Management Limited on 20 April 2017.
On 3 October 2017, the Company entered into a conditional forward purchase
agreement to acquire Scape Canalside. With the property on track to open to
students for the 2019/20 academic year, the Board and the Investment Manager
are considering the optimum way to finance its acquisition ahead of 30 June
2019. The directors of the Investment Manager and their spouses directly or
indirectly own, in aggregate approximately 45% of Leopard Guernsey Westway
Limited, the vendor of Scape Canalside. If acquired, Scape Canalside will be
purchased on the basis of independent valuation and approval by the independent
Board of Directors.
On 25 July 2018, the Group entered into a conditional contract with GCP
Scaperfield Limited to acquire and forward-fund the construction of Scape
Brighton. The directors of the Investment Manager and their spouses directly or
indirectly own, in aggregate approximately 80% of Scaperfield Limited, the
vendor of Scape Brighton. Scape Brighton is being acquired on the basis of
independent valuation and approval by the independent Board of Directors. At 31
December 2018, a loan of GBP24.2 million was advanced to Scaperfield Limited to
fund construction costs and is included within loans receivable in the
condensed consolidated statement of financial position. Interest of GBP474,000
has been accrued on the loan and is included within finance income in the
condensed consolidated statement of comprehensive income.
SHAREHOLDER INFORMATION
Electronic communications from the Company
Shareholders now have the opportunity to be notified by email when the
Company's annual report, half-yearly report and other formal communications are
available on the Company's website, instead of receiving printed copies by
post. This has environmental benefits in the reduction of paper, printing,
energy and water usage, as well as reducing costs to the Company. If you have
not already elected to receive electronic communications from the Company and
wish to do so, visit www.signalshares.com. To register, you will need your
investor code, which can be found on your share certificate or your dividend
tax voucher.
Alternatively, you can contact Link's Customer Support Centre which is
available to answer any queries you have in relation to your shareholding:
- by phone: from the UK, call 0871 664 0300, from overseas call +44
(0) 371 664 0300 (calls cost 12 pence per minute plus your phone company's
access charge. Calls outside the UK will be charged at the
applicable international rate. Link is open between 09:00am - 5:30pm, Monday to
Friday excluding public holidays in England and Wales);
- by email: enquiries@linkgroup.co.uk; or
- by post: Link Asset Services, The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU.
Frequency of NAV publication
The Company's NAV is released to the London Stock Exchange via RNS on a
quarterly basis and is published on the Company's website.
Sources of further information
Copies of the Company's annual and half-yearly reports, stock exchange
announcements, investor reports and further information on the Company can be
obtained from the Company's website.
Key dates
March Half-yearly results announced
Payment of second interim dividend
June Company's year end
Payment of third interim dividend
September Annual results announced
Payment of fourth interim dividend
November Annual general meeting
December Company's half-year end
Payment of first interim dividend
GLOSSARY OF KEY TERMS
Adjusted EPS EPS adjusted for exceptional items
and licence fees receivable on
forward-funded developments (refer to
note 7)
AIC Association of Investment Companies
Asset and Facilities Managers Scape Student Living Limited and
Collegiate Accommodation Consulting
Limited
AIFM Alternative Investment Fund Manager
AIFMD Alternative Investment Fund
Managers Directive
APM Alternative performance measure
Annualised shareholder total return since IPO Total shareholder return expressed as
a weighted annual percentage.
Calculated with reference to the IPO
issue price of 100 pence per ordinary
share
Average annual rental growth Average student rental growth since
IPO
AY Academic year
Company GCP Student Living plc
Cost of borrowing Cost of borrowing expressed as a
percentage weighted according to
period
EPRA European Public Real Estate
Association
EPRA earnings Earnings from operational activities
EPRA EPS Recurring earnings from core
operational activities excluding
movements relating to revaluation of
investment properties and interest
rate swaps and the related tax
effects, divided by the number of
shares in issue (refer to note 7)
EPRA NAV Net assets divided by number of
shares. Includes all property at
market value but excludes the mark to
market of interest rate swaps (refer
to note 10)
EPRA NAV (cum-income) Net asset value before deduction of
proposed dividend
EPRA NAV (ex-income) Net asset value after deduction of
proposed dividend
EPRA net initial yield Annualised rental income based on the
cash rents passing at the balance
sheet date, less non-recoverable
property operating expenses, divided
by the market value of the property,
increased with (estimated)
purchasers' costs
EPS Earnings per share (refer to note 7)
ERV Estimated rental value
EU European Union
FCA Financial Conduct Authority
Gearing Debt expressed as a percentage
of gross assets (refer to note 8)
Gross assets The aggregate value of the total
assets of the Company
Group GCP Student Living plc and its
subsidiaries
HEI Higher education institution
HESA Higher Education Statistics Agency
HY Half year
IAS International Accounting Standard
IASB International Accounting Standards
Board
IFRS International Financial Reporting
Standards
IPO Initial public offering
LIBOR London interbank offered rate
Loan-to-value or LTV A measure of borrowings used by
property investment companies
calculated as borrowings, net of
cash, as a proportion of property
value
NAV Net asset value
Net operating margin Gross profit expressed as a
percentage of rental income
NIY Net initial yield
Occupancy Full occupancy is determined as
occupancy across the Company's
operational portfolio of properties
being no less than 97%. This is
consistent with terminology used
across the private purpose-built
student accommodation market and the
methodology applied by the Company
since its IPO in 2013
Ongoing charges ratio Annual percentage reduction in
shareholder returns as a result of
recurring operational expenses
PGIM PGIM Real Estate Finance
PID Property income distribution
pps Pence per share
REIT Real Estate Investment Trust
RICS Royal Institution of Chartered
Surveyors
RNS Regulatory News Service
RPI Retail price index
Student rental growth Annual rental growth measured on a
like-for-like basis across the
portfolio
Shareholder total return Share price growth with dividends
deemed to be reinvested on the
dividend payment date
UCAS Universities and Colleges Admissions
Service
Wells Fargo Wells Fargo Bank N.A.
CORPORATE INFORMATION
Directors
Robert Peto (Chairman)
Malcolm Naish (Senior Independent Director)
Gillian Day
Marlene Wood
Administrator
Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
Auditor
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London E14 5EY
Contact
gcpstudentliving@linkgroup.co.uk
Corporate website
www.gcpstudent.com
Depositary
Langham Hall UK Depositary LLP
5 Old Bailey
London EC4M 7BA
Investment Manager and AIFM
Gravis Capital Management Limited
24 Savile Row
London W1S 2ES
Tel: 020 3405 8500
Principal banker
Barclays Bank plc
1 Churchill Place
London E14 5HP
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Tel: 0871 664 0300
email: enquiries@linkgroup.co.uk
Secretary and registered office
Link Company Matters Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
Tel: 01392 477500
Solicitor
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
Stockbroker
Stifel Nicolaus Europe Limited
4th Floor, 150 Cheapside
London EC2V 6ET
Tel: 020 7710 7600
Valuer
Knight Frank LLP
55 Baker Street
London W1U 8AN
National Storage Mechanism
A copy of the Half-Yearly Report and Financial Statements will be submitted
shortly to the National Storage Mechanism ("NSM") and will be available for
inspection at the NSM, which is situated at: www.morningstar.co.uk/uk/NSM
Neither the contents of GCP Student Living plc's website nor the contents of
any website accessible from hyperlinks on the website (or any website) is
incorporated into, or forms part of this announcement.
ENDS
END
(END) Dow Jones Newswires
March 20, 2019 03:00 ET (07:00 GMT)
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