TIDMDIGS
RNS Number : 2532R
GCP Student Living PLC
05 March 2021
GCP STUDENT LIVING PLC
Half-yearly report and condensed consolidated financial
statements for the six months ended 31 December 2020
("GCP Student" or the "Company", together with its subsidiaries
the "Group")
GCP Student, the only UK REIT focused on modern, purpose-built
private student accommodation in and around London, today announces
its results for the six months ended 31 December 2020.
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 THE COMPANY
GCP Student is a FTSE 250 constituent and the only UK REIT
focused on modern, purpose-built private student accommodation in
and around London.
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
GBP652 million at 31 December 2020.
AT A GLANCE(2)
HY18 HY19 HY20
--------------------------------- ------ ------ -------
Value of property portfolio GBPm 841.5 987.3 1,029.7
Market capitalisation GBPm 609 901 652
Dividends per share p 3.06 3.15 0.50
EPRA NTA(1,3) per share p 157.93 174.71 171.38
Loan-to-value(1) % 26 19 24
AY18 AY19 AY20
------ ------ -------
Student rental growth(1) % 3.5 4.4 2.6
--------------------------------- ------ ------ -------
HIGHLIGHTS FOR THE PERIOD(2)
- Total shareholder return(1) of 16.9% for the period, driven by
a recovery in the share price since the year end. Annualised total
shareholder return(1) since IPO of 9.1%, compared to the Company's
long-term target return of 8-10%.
- Dividends of 0.50 pence per share paid or declared in respect
of the period (31 December 2019: 3.15 pence per share).
- EPRA NTA(1,3) (cum-income) per ordinary share of 171.38 pence
and EPRA NTA(1,3) (ex-income) per ordinary share of 171.13 pence at
31 December 2020.
- Total rental income for the period of GBP16.7 million (31
December 2019: GBP24.6 million). The Company's rental income is
being materially adversely impacted as a result of the disruption
caused by the Covid-19 pandemic.
- High-quality portfolio of eleven assets with c.4,100 beds
located primarily in and around London, with a valuation of
GBP1,029.7 million at 31 December 2020.
- At the period end, bookings across the Group's portfolio for
the 2020/21 academic year stood at 69%, with the majority (c.64%)
of rooms booked being occupied or subject to nominations
arrangements.
- Net initial yield(1) for the operational portfolio of 4.52%.
1. Alternative performance measure ("APM") - see APMs section
below for definitions and calculation methodology.
2. The Company's financial statements are prepared in accordance
with IFRS. The financial highlights above include performance
measures based on the EPRA best practice recommendations; refer to
the notes to the financial statements for calculation
methodology.
3. EPRA NTA has been adopted by the Company as its principal
measure of NAV following updates to the EPRA best practice
recommendations.
David Hunter, Chairman, commented:
'The Covid-19 pandemic has dominated global markets throughout
the second half of 2020. Travel restrictions combined with national
and regional lockdowns and the closure of academic institutions in
the UK have restricted the ability of students to attend
universities and occupy their student accommodation, which in many
cases has been booked but not occupied. The period under review
also saw the UK depart from the EU.
It is therefore encouraging to note that the Group's portfolio
continues to benefit from resilient valuations supported by the
strength of investor demand for student accommodation assets in
attractive locations, including the Company's core London market.
Positive news flow regarding Covid-19 vaccines has given cause for
optimism for a gradual easing of restrictions on mobility,
including for international travel.
The Board and the Investment Manager continue to monitor global
events as they relate to student numbers, including the impact of
the Covid-19 pandemic on the ability of students to attend their
universities (and therefore occupy rooms) and relations between the
US, the UK and China. Despite these challenges, the Board and the
Investment Manager are confident that the Company's portfolio has
the resilience to take full advantage when students resume physical
attendance at university.'
For further information please contact:
Gravis Capital Management Limited +44 020 3405 8500
Nick Barker
Joe McDonagh
Jefferies International Limited +44 020 7029 8000
Neil Winward
Stuart Klein
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
with attractive total modern, private student assets with the objective
returns in the longer residential accommodation of spreading risk.
term. primarily in and around
London.
-------------------------------- --------------------------- ---------------------------
KEY PERFORMANCE INDICATORS
-------------------------------- --------------------------- ---------------------------
The Company has generated The Company's portfolio At 31 December 2020,
an annualised total shareholder has predominantly been the Company's property
return(1) since IPO of fully occupied since portfolio comprised eleven
9.1%. IPO, with average high--quality, modern
annual student rental student accommodation
growth(1) of 3.7%. assets.
0.50p 69% 4,116
Dividends paid or Bookings(1) for the Number of beds in the
declared for the period 2020/21 academic year portfolio
at the period end
16.9% 2.6% 11
Total shareholder return(1) Student rental growth(1,2) Number of assets in the
for the period for the academic year portfolio
2020/21
-------------------------------- --------------------------- ---------------------------
Further information on Company performance can be found
below.
1. Alternative performance measure ("APM") - see APMs section
below for definitions and calculation methodology.
2. Calculated based on student lettings on a like for like
basis.
CHAIRMAN'S STATEMENT
Despite significant operating challenges which have impacted
income, investor demand for student accommodation has sustained
valuations.
Introduction
The Covid-19 pandemic has continued to dominate global markets
throughout the second half of 2020. Travel restrictions combined
with national and regional lockdowns and the closure of academic
institutions in the UK have restricted the ability of students to
attend universities and occupy their student accommodation, which
in many cases has been booked but not occupied. The period under
review also saw the UK depart from the EU.
It is against this backdrop that I report on a period which has
been operationally challenging for the Company. It is therefore
encouraging to note that the Group's portfolio continues to benefit
from resilient valuations supported by the strength of investor
demand for student accommodation assets in attractive locations,
including the Company's core London market.
At the period end, bookings across the Group's portfolio for the
2020/21 academic year stood at 69%, with the majority (c.64%) of
rooms booked being occupied or subject to nominations arrangements.
Post period end, the Board agreed to rental concessions of up to
100% for a six-week period, which will be applied to final
instalments for the academic year, due in April 2021. The maximum
loss of rental income arising from this rent concession is
estimated to be c.GBP1.9 million (c.0.43 pence per share). Bookings
at the date of the report have reduced to 68%.
In light of the operational challenges facing the Company during
this period, the Directors decided to reduce the dividend in order
to preserve the Company's capital resources. Dividends declared for
the period totalled 0.50 pence per share (31 December 2019: 3.1
pence per share).
The Company delivered a total shareholder return of 16.9% over
the period, driven by a recovery in the share price since the year
end. The annualised total shareholder return(1) since IPO was 9.1%
and the Company's annualised NAV total return(1) for the period
since IPO was 12.1%.
1. Alternative performance measure ("APM") - see APMs section
below for definitions and calculation methodology.
Student welfare
The Company is mindful of its social responsibilities. The
wellbeing of the residents and staff in the Group's buildings
remains of paramount importance to the Board, the Investment
Manager and the Property Managers. Further information on the
safeguarding provisions that have been put in place at the
Company's buildings can be found below. The Company's willingness
to offer rental concessions demonstrates to students, the Group's
current and future customers, that it continues to support them in
this difficult period.
Investment activity
In September 2020, the Company's forward--funded development,
Scape Brighton, became operational and began to welcome students.
The property opened to students in two stages across Q4 2020, with
minor construction work outstanding at the period end. Scape
Brighton adds to the Company's presence in the Brighton market
alongside Circus Street, Brighton.
In light of the disruption and market uncertainty caused by the
Covid-19 pandemic, the Directors decided not to exercise the
Company's right to acquire a second asset in the same locality as
Scape Guildford.
Financial results
The Company's investment portfolio generated rental income of
GBP16.7 million over the six-month period to 31 December 2020 (31
December 2019: GBP24.6 million).
The Company's rental income for the financial year ended 30 June
2021 is being materially adversely impacted as a result of the
disruption caused by the Covid-19 pandemic.
Its EPRA NTA(1) (cum-income) decreased from 171.78 pence per
share at the financial year end to 171.38 pence per share at 31
December 2020, representing a reduction over the period of
0.3%.
Dividends
The Company has paid or declared dividends in respect of the
period ended 31 December 2020 of 0.50 pence per share (31 December
2019: 3.15 pence per share). The dividends were paid in full as
PID.
Noting the ongoing uncertainties relating to the Covid-19
pandemic, the impact on the Company's revenues and a desire to
manage the business in a prudent and conservative manner, in
November 2020, the Directors decided to reduce the Company's
dividend payments to shareholders. The quantum of the dividend will
be reviewed on a quarterly basis with a view to increasing payments
when there is greater visibility on the Company's revenue
generation prospects.
The Company's dividend cover ratio(1) on an adjusted earnings
basis (refer to note 3) was 142% for the six months to 31 December
2020, reflecting the reduction in dividend noted above. The Company
continues to target a fully covered dividend over the longer
term.
1. Alternative performance measure ("APM") - see APMs section
below for definitions and calculation methodology.
Financing
At 31 December 2020, the Group's available banking facilities
totalled GBP335 million, of which GBP288.2 million was drawn. At
that date, the Group's blended cost of borrowing on its drawn debt
was 2.93% with an average weighted maturity of four years. The
loan--to--value(1) of the Group at the period end was 24%.
Further details of the Group's borrowing facilities are set out
in note 10 to the financial statements.
At the period end, the Company had cash resources of GBP43.9
million in addition to a redrawable credit facility, of which GBP30
million was available to draw at that date.
1. Alternative performance measure ("APM") - see APMs section
below for definitions and calculation methodology.
ESG
The Board considers the integration of responsible investment
principles across the Group, the assets within its investment
portfolio and the operations of its advisers to be of fundamental
importance. The Company has an 'A' MSCI ESG rating, an EPRA sBPR
silver award and has a GRESB two 'green star' rating. The Board is
in the process of establishing an ESG Committee and a Board member
has been allocated specific responsibility for ESG matters. The
Company has set a long-term target of a 0.5% per annum
like-for-like reduction in energy consumption, water consumption
and general waste production from a baseline of 2018 to 2021.The
Investment Manager is a signatory to the UN Principles for
Responsible Investment. Its policy on Responsible Investment may be
found on its website, www.graviscapital.com.
Board changes
A number of Board changes have taken place during the year.
Robert Peto retired as a Director and Chairman of the Company on 4
November 2020 and I was appointed as Chairman in his place. On
behalf of the Board, I would like to thank Robert for his
leadership of the Company and his service to shareholders since the
IPO in 2013.
Post period end, the Board appointed Russell Chambers as a
Director of the Company, with effect from 1 February 2021. Russell
is an investment banker with 35 years of experience advising
companies and boards on various strategic priorities including
mergers and acquisitions and raising capital in the debt and equity
markets. Russell is currently a senior adviser with both Bain
Capital and Teneo and a founder shareholder in the Five Guys
European restaurant business and, until recently, was a senior
adviser at Credit Suisse after acting as the CEO for the bank in
the UK and Ireland. We are delighted that Russell has joined the
Board and look forward to his contribution to the development of
the Company.
Investment management and property management arrangements
In the period under review, as detailed in the Company's 2020
annual report, the Company entered into revised contractual
arrangements with the Investment Manager, Gravis, and its primary
Property Manager, Scape. The revised arrangements are set out
below. The arrangements came into effect on 1 July 2020.
Post period end, ORIX Corporation, a diversified financial
services company based in Japan, acquired a 70% stake in the
Investment Manager. The Directors have been reassured that there
will be no changes to the team currently providing services to the
Company and that service levels will be uninterrupted by the
acquisition.
Continuation vote
In accordance with the Company's articles of association, a
continuation vote will be held at the annual general meeting in
November 2021. While the Board will provide shareholders with its
formal recommendation as to voting in relation to the continuation
resolution later in the year when the notice of the annual general
meeting is published, it is the Directors' current expectation that
they will be recommending that shareholders vote for the Company to
continue as presently constituted.
Outlook
The second half of 2020 continued to be dominated by the
Covid-19 pandemic. Since the period end, positive news flow
regarding Covid-19 vaccines has given cause for optimism for a
gradual easing of restrictions on mobility, including for
international travel.
The period under review also saw the end of the Brexit
transition period. The long-term effects of the UK's departure from
the EU remain difficult to assess at this stage. Brexit will mark
the end of the UK's participation in the Erasmus Scheme. In
February 2021, the British Council launched the Turing Scheme,
which seeks to replace Erasmus. The Board and Investment Manager
are monitoring developments, noting that only a small minority of
students in the Group's buildings came through the Erasmus scheme
previously.
There is clear evidence of strong application trends for UK
universities both from domestic and international students alike,
although restrictions have temporarily reduced the benefits for
owners of student accommodation. Whilst vaccination programmes in
the UK and abroad will improve the prospects of a complete
reopening of UK universities for in-person teaching and improve
national and global student mobility, with national or localised
lockdowns remaining likely over the short term, a return to full
attendance at universities and full occupation of student
accommodation facilities will take time.
The Company provides shareholders with access to a portfolio of
private student accommodation assets in prime locations which have
historically benefited from strong supply and demand imbalances,
resulting in full occupancy, rental growth and yield
compression.
The Board and the Investment Manager believe the Company is well
positioned to benefit from a gradual return to 'normal' and remain
confident of the Company's long-term prospects. In the shorter
term, the Company benefits from being defensively positioned, with
conservative borrowing levels.
The Board and the Investment Manager continue to monitor global
events as they relate to student numbers, including the impact of
the Covid-19 pandemic on the ability of students to attend their
universities (and therefore occupy rooms) and relations between the
US, the UK and China, which may impact the global mobility of
Chinese students as well as their choice of destination. Despite
these challenges, the Board and the Investment Manager are
confident that the Company's portfolio has the resilience to take
full advantage when students resume physical attendance at
university.
David Hunter
Chairman
4 March 2021
For more information, please refer to the Investment Manager's
report below.
INVESTMENT MANAGER'S REPORT
Following the unprecedented challenges of 2020, the Investment
Manager considers the long term outlook for the student sector to
be positive.
Travel restrictions combined with lockdowns and the closure of
academic institutions have restricted the ability of students to
attend universities.
Introduction
The Company has faced a challenging financial period with the
Covid--19 pandemic continuing to dominate throughout the second
half of 2020. Travel restrictions combined with lockdowns and the
closure of academic institutions have restricted the ability of
students to attend universities and occupy their student
accommodation. These factors have resulted in a reduction to
occupancy levels across the portfolio.
Portfolio performance update
The key drivers of the Company's returns are based on the three
fundamentals set out in the full half yearly report, which form the
basis of how the Investment Manager seeks to add value over the
long term.
The portfolio generated rental income of GBP16.7 million for the
six-month period to 31 December 2020 (31 December 2019: GBP24.6
million) comprising income from direct lets of rooms to students,
nominations agreements with HEIs and long-term commercial
leases.
The Group's buildings remain operational with the Investment
Manager and Property Managers remaining focused on ensuring the
wellbeing of residents and staff by providing a safe and secure
environment in line with government regulations.
On 5 November 2020, the Company announced that bookings across
its portfolio for the 2020/21 academic year stood at 69%, with the
substantial majority (c.86%) of those rooms being occupied by
residents and/or subject to nominations agreements.
The intensification of international and national travel
restrictions and changes in government guidance in January 2021 has
made it difficult for many of the Group's residents to occupy their
rooms. This has resulted in a reduction to occupancy levels post
period end. At the date of this report, approximately 64% of booked
rooms were occupied and/or subject to nominations agreements.
Cancellations of bookings have slightly reduced booking levels to
68%.
The Company's academic year runs for a period of 51 weeks from
mid-September. It receives direct let income in three tranches for
each academic year: c.40% in each of September and January and the
remaining c.20% in April. Approximately 92% of the direct let rents
due on bookings for the 2020/21 academic year in respect of the
September 2020 and January 2021 tranches have been collected at the
date of the report. Based on the current level of contracted
occupancy, reduced rental rates on direct lets and the Investment
Manager's assumptions in relation to nominations agreements and
long--term leases across the Group's portfolio, it is expected the
Company will collect between 55% and 60% of budgeted total income
of GBP60.1 million for the 2020/21 academic year.
In order to support direct let students during this difficult
period, post period end the Company offered rental concessions of
up to 100% for a six-week period, commencing on 5 January 2021
(subject to conditions) and which will be applied to final
instalments for the academic year due in April 2021.
The Investment Manager estimates the maximum loss of rental
income arising from this rent concession to be approximately GBP1.9
million (c.0.43 pence per share).
The Group's budgeted direct let revenues represent c.86% of all
budgeted revenues for the current financial year.
The Board, the Investment Manager and the Property Managers have
all prioritised the safety and wellbeing of students and the
Group's employees from the outset.
The Property Managers have implemented comprehensive safety
procedures to ensure the Company's buildings are a safe place to
live and work and have received assurance on the protocols from the
British Safety Council.
Thermal cameras have been installed in reception areas for
temperature screening. Cleaning at every location has been
increased with regular deep cleaning throughout the buildings.
Signage is in place to advise students and employees on the social
distancing rules and raise awareness on symptoms, self-isolation
and correct hygiene. Dedicated health practitioners are on hand to
provide advice on symptoms and help with self-isolation. Scape are
also offering access to online fitness classes and online mental
health and wellbeing resources.
Rental income in respect of the Group's lease at Circus Street,
Brighton continues to be received in line with expectations. The
Company receives c.GBP3.0 million per annum of rental income in
respect of this lease. During the period under review, the Company
also received a full settlement of arrears of GBP1.9 million due
from a subsidiary of INTO University Partnerships, a provider of
foundation courses, in respect of the 2019/20 academic year.
Further, it has received all payments due from INTO in respect of
the 2020/21 academic year.
Post period end, in February 2021, the Company terminated the
long-term lease of commercial premises at Scape Shoreditch to a
WeWork subsidiary ("WeWork"). The lease was part-guaranteed by
WeWork's US parent company, WeWork Companies LLC.
Ahead of termination, the Company collected a payment of
c.GBP3.1 million (including VAT) covering all arrears and rent due
to the end of June 2021. The payment is equal to the maximum amount
available of WeWork's parent company guarantee.
The Company has taken vacant possession of the commercial space
at Scape Shoreditch. The Investment Manager notes that Scape
Shoreditch is a modern property located in a prime London location
and a two-minute walk from Old Street underground station.
The Group's budgeted nominations agreements and long-term
leases, including those above, represent c.14% in aggregate of all
budgeted revenues for the current financial year.
It is pleasing to note that during the period under review the
Company's forward-funded development at Scape Brighton became
operational, notwithstanding reduced levels of activity across the
construction sector.
Scape Brighton opened to students in two stages in September and
early November 2020. Its construction costs have been part-funded
through the Company's GBP55.0 million development facility, of
which GBP38.2 million was drawn at 31 December 2020, with the
remainder of approximately GBP1.0 million funded through the
Company's cash resources.
At 31 December 2020, the Company's outstanding capital
commitments, including in respect of the construction costs at
Scape Brighton, were approximately GBP5.0 million and will be
funded through the Company's available cash resources.
The Company's EPRA NTA(1) per share declined from 171.78 pence
at year end to 171.38 pence at 31 December 2020, a decrease of
0.3%. This was driven by a reduction in rental receipts for the
period as detailed above, largely offset by a reduction in the
dividend.
At 31 December 2020, the net initial yield(1) of the Company's
operational portfolio as calculated by the Company's independent
valuer was 4.52%.
The UK student accommodation market
The UK remains a global leader in the provision of higher
education, with some of the highest-ranking universities in the
world, including two in the top ten in 2021(2) . This makes it
attractive to both domestic and international students, for whom
the UK is the second most popular destination for further education
after the USA(3) .
1. Alternative performance measure ("APM") - see below for
definitions and calculation methodology.
2. The Times Higher Education World University Rankings
2021.
3. OECD.
Student acceptances supportive of long term outlook for
occupancy
The Covid-19 pandemic has created unprecedented challenges for
global mobility, including that of students. With this backdrop, it
is encouraging to note that applications for higher education
courses are at record levels.
UCAS end of cycle data for the 2020/21 academic year showed that
570,475 students had accepted places onto higher education courses
in the UK, representing a year-on-year increase on pre-pandemic
levels of 5.4%. This growth has been driven by a year--on--year
increase in acceptances of 16.9% for non--EU international students
to 52,755 and a 4.5% increase in domestic students to 485,400. The
number of EU students has also increased by 1.7% to 32,320. The
increase in acceptances for domestic students has, in part, been
underpinned by record entry rates of 18-year-olds into higher
education.
Looking forward, UCAS data relating to the January application
deadline for the upcoming 2021/22 academic year shows record
numbers of applications for places onto higher education courses in
the UK with a year-on-year increase of 8.5%, driven by record
numbers of domestic and international student applications.
UCAS applications and acceptance data support the Investment
Manager's view that students will continue to invest in their
education and enrol in courses to further their future employment
prospects, particularly in times of recession where alternative
employment opportunities may be scarce.
Furthermore, the continued rise in the demand for places from
international students suggests that such students remain committed
to obtaining qualifications delivered in the English language and
are making applications on the basis that they will do so.
The number of students applying to higher education continues to
substantially exceed the number of places available.
For the 2020/21 academic year, nearly one in four of all
applicants were unable to secure a place in higher education,
equating to c.158,000 applicants(1) .
With total acceptances rising, the combination of the costs of
tuition and the removal of student number controls continues to
disproportionately benefit the top-ranked (or 'higher tariff')
universities.
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 (four) ranked in the top 40 by
The Times Higher Education World University Rankings than any other
city in the world. Approximately 32% of the 2.5 million students in
the UK study in London and the South East(2) . 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. Approximately 80% of the Company's
portfolio is located in and around London.
1. UCAS.
2. HESA.
Strong supply-side barriers
The Group's portfolio of assets has been carefully constructed
since IPO to focus on those markets which demonstrate a structural
undersupply of private student accommodation. Furthermore,
short-term supply dynamics, driven by the consequences of the
pandemic, should not detract from the longer-term divergence of
returns from student accommodation between cities in the UK with an
undersupply of student housing and those with less restrictive
planning regulations.
The Investment Manager expects London and Brighton to remain
undersupplied as a result of a combination of high land values and
challenging planning restrictions. Modern student accommodation is
in short supply in both markets, as illustrated by existing
university stock in London, of which an estimated two--thirds is
over 20 years old(1) .
The beneficial impact of these supply--side barriers on the
Company's portfolio, coupled with the outlook for demand for
accommodation in its assets and investment activity in the student
accommodation sector, is reflected by the valuation increases
achieved both during the period and since the Company's IPO in
2013.
Transactional activity
The GBP4.7 billion acquisition of the iQ Student portfolio by
Blackstone Group in May 2020 was the largest-ever student property
transaction in the UK, at an estimated yield of 4.2%.
Private capital continues to be deployed in the acquisition of
student accommodation in the UK through the pandemic, with
transactions for 2020 totalling approximately GBP5.9 billion, a
12.8% increase on 2019(2) . A large proportion of this was made up
of the iQ portfolio sale.
Investment volumes during the period included the acquisition of
a c.GBP600 million mixed portfolio of student accommodation and
residential units by Quadreal in November 2020, for a reported
yield for the student element of below 4.0%. Further, the sale of
Scape Canalside to an institutional buyer was completed in 2020,
for a price of c.GBP100 million, believed to reflect an estimated
yield of 4.2%.
Outlook
The Company provides shareholders with a property portfolio
focused in and around London and which the Investment Manager
believes will benefit from supply and demand imbalances for student
residential accommodation over the longer term.
Private student residential accommodation assets in and around
London and in super prime regional locations such as Brighton
continue to see a substantial yield differential when compared to
those located in other regional locations.
This is underpinned by a long-term demand for student
accommodation and high barriers to entry for further development in
those locations.
The Covid--19 pandemic has disrupted the delivery of higher
education globally, with clear implications for providers of
student accommodation including the Company. The remainder of the
2020/21 academic year will continue to present challenges for
student mobility and the provision of in--person teaching.
In the short term, Brexit is expected to result in a reduction
to the number of students from the EU wishing to study in the UK.
The longer term implications however remain uncertain. Brexit will
mark the end of the UK's participation in the Erasmus Scheme. In
February 2021 the British Council launched the Turing Scheme, which
seeks to replace Erasmus. The Board and Investment Manager are
monitoring developments, noting that only a small minority of
students in the Group's buildings came through the Erasmus scheme
previously.
Looking forward, it is the Investment Manager's belief that
demand from students for higher education and ongoing supply
constraints in the locations in which the Group's assets are
located should continue to support occupancy, rental prospects and
property valuations across the Company's portfolio over the long
term.
1. JLL Student Housing.
2. Knight Frank.
PORTFOLIO DATA AT 31 DECEMBER 2020
NUMBER OF DATE OF
PROPERTY BEDS ACQUISITION BOOK COST VALUATION NIY(1,4)
------------------------ --------- ------------ --------- --------- --------
1. Scape Mile
End 588 May 2013 GBP94.4m GBP163.1m 4.42%
2. Scape Wembley 578 Jun 2016 GBP78.0m GBP106.5m 4.65%
3. Scape Brighton 555 Jul 2018 GBP92.5m GBP100.0m 5.11%
4. Scape Shoreditch 541 Sep 2015 GBP166.8m GBP209.7m 4.32%
5. Circus Street(2) 450 Aug 2017 GBP62.1m GBP79.0m 4.00%
6. Scape Bloomsbury 432 Apr 2017 GBP167.3m GBP194.7m 4.00%
7. Scape Greenwich 280 May 2014 GBP40.5m GBP61.0m 4.59%
8. The Pad 220 Dec 2013 GBP28.6m GBP33.4m 5.80%
9. Podium 178 Dec 2017 GBP29.6m GBP31.3m 5.65%
10. Water Lane
Apartments 153 Feb 2016 GBP18.8m GBP23.0m 5.25%
11. Scape Guildford 141 Sep 2015 GBP19.1m GBP28.0m 5.15%
------------------------ --------- ------------ --------- --------- --------
5 5 4.52% 80%
Top five HEIs Top five nationalities Net initial yield(4) Studio rooms
attended represented in the Company's
buildings
1. Royal Holloway 1. British
2. UCL 2. Chinese
3. QMUL 3. Indian
4. Sussex 4. French
5. Brighton 5. American
----------------------- --------------------- -----------------
1. Net initial yield calculated by the Company's independent
valuer on operational assets only.
2. The student accommodation element of the development is
operational. The office element remains under construction at 31
December 2020.
3. Excluding Circus Street, Brighton which is let under a 20 --
year FRI lease to Kaplan.
4. Alternative performance measure ("APM") - see below for
definitions and calculation methodology.
FINANCIAL REVIEW OF THE PERIOD
The Company generated rental income of GBP16.7 million and paid
or declared dividends of 0.50 pence per share for the period.
Financial results
It has been a challenging period for the Group due to the
ongoing Covid-19 pandemic which has impacted revenues for the
period. The Group generated total rental income of GBP16.7 million
which represents 68% of total revised budgeted revenues. Profit
before tax and fair value gains on investment properties and
financial assets of GBP1.2 million was generated in the period,
down from GBP9.8 million in the prior period.
Operating expenses
The Company's net operating margin has reduced to 63% for the
period, due to the reduction in revenue detailed above. Property
operating expenditure of GBP6.2 million was incurred during the
period, an increase of GBP1.0 million compared to the prior period.
This is primarily due to the Scape property management fees,
previously paid by the Investment Manager from its fee, now being
paid directly by the Company and recognised in property operating
costs.
The opening of Scape Brighton has also impacted operating
expense for the period, offset by reduced utilities costs
associated with lower occupancy across the portfolio.
Administration expenditure
Total administration expenses of GBP4.2 million in the period
comprise fund running costs, including the Investment Manager's fee
and other third party service provider costs, in line with the
Company's service provider contracts. Administration expenses have
decreased due to the Scape property management fees being
recognised in property operating costs as detailed above.
Dividends and earnings
During the period under review the Directors decided to reduce
the Company's dividend in order to preserve the Company's capital
resources. The Company paid or declared dividends in respect of the
period of 0.50 pence per share (31 December 2019: 3.15 pence per
share).
The dividends were paid in full as PID in respect of the Group's
tax exempt property rental business. The dividend was 142% covered
by adjusted EPS(1) of 0.71 pence (refer to note 3) reflecting the
reduction in the dividend for the period. As detailed in the
Chairman's statement, the Directors intend to review the quantum of
the dividend on a quarterly basis with a view to increasing
payments when there is greater visibility on the Company's revenue
prospects.
Ongoing charges ratio
The Company's ongoing charges ratio(1) for the twelve months to
31 December 2020, based on the AIC's methodology, excluding direct
property costs, was 1.2% (31 December 2019: 1.3%)
Financial performance
Condensed profit and loss
Six months Six months
ended ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------------------------------------------------- ----------- -----------
Total Income 16,949 24,587
Property operating expenses (6,248) (5,236)
------------------------------------------------------------------------------------- ----------- -----------
Gross profit (net operating income) 10,701 19,351
------------------------------------------------------------------------------------- ----------- -----------
Net operating margin(1) 63% 79%
------------------------------------------------------------------------------------- ----------- -----------
Administration expenses (4,242) (4,738)
Aborted transaction costs (119) -
Net finance costs (5,105) (4,856)
------------------------------------------------------------------------------------- ----------- -----------
Profit before tax and fair value gains on investment properties and financial assets 1,235 9,757
------------------------------------------------------------------------------------- ----------- -----------
Fair value gains on investment properties 4,535 37,987
Fair value gains on financial assets 32 22
------------------------------------------------------------------------------------- ----------- -----------
Profit before tax for the period 5,802 47,766
------------------------------------------------------------------------------------- ----------- -----------
1. Alternative performance measure ("APM") - see APMs section
below for definitions and calculation methodology.
Valuation
The valuation of the Company's property portfolio has increased
to GBP1,029.7 million from GBP1,000.8 million at the year end.
Total gains on investment properties through revaluation of the
Company's investment portfolio were GBP4.5 million for the period
ended 31 December 2020.
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; refer to note
10 for further detail.
The Group's blended cost of borrowing on its drawn debt at the
period end is 2.93% with an average weighted maturity of four
years.
The loan-to-value(1) of the Group at that date was 24%. The debt
facilities include gearing and interest cover covenants that are
measured in accordance with the respective facility agreement. The
Group was not in breach of its banking covenants at 31 December
2020.
Lifecycle reserves
The Company's lifecycle cash reserves were GBP2.0 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 NTA(1)
In October 2019, EPRA announced updated best practice
recommendations which included new NAV metrics to replace EPRA NAV.
The Company has adopted EPRA NTA(1,2) as its principal measure of
NAV. Net assets attributable to equity holders at 31 December 2020
were GBP779.6 million, down from GBP795.0 million at 31 December
2019.
The EPRA NTA(1,2) has decreased from 171.78 pence at the year
end to 171.38 pence per ordinary share, a 0.3% decrease for the
six--month period to 31 December 2020, primarily driven by a
reduction in revenue impacting profitability. Further EPRA metrics
are given in note 3.
Cash flow generation
The Company held cash and cash equivalents of GBP43.9 million at
the end of the period under review. Operating cash flows of GBP6.6
million were generated by the Company's student accommodation
portfolio. The Company drew down GBP6.1 million on the Company's
development facility and continued the forward funding of the
construction of Circus Street and Scape 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
Condensed balance sheet
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------------------------------------------------- ----------- -----------
Investment property 1,039,040 996,283
Trade and other receivables 17,341 26,694
Cash and cash equivalents 43,911 59,277
---------------------------------------------------------------- ----------- -----------
Total assets 1,100,292 1,082,254
---------------------------------------------------------------- ----------- -----------
Liabilities
Trade and other payables (8,510) (9,747)
Deferred income (13,892) (19,777)
Lease liability (11,751) (11,610)
Interest-bearing loans and borrowings and financial derivatives (286,517) (246,135)
---------------------------------------------------------------- ----------- -----------
Total liabilities (320,670) (287,269)
---------------------------------------------------------------- ----------- -----------
Net assets 779,622 794,985
---------------------------------------------------------------- ----------- -----------
Number of shares 455,019,030 455,019,030
EPRA NTA(1,2) per share (cum-income) (pps) 171.38 174.71
EPRA NTA(1,2) per share (ex-income) (pps) 170.13 173.13
---------------------------------------------------------------- ----------- -----------
1. Alternative performance measure ("APM") - see APMs section
below for definitions and calculation methodology.
2. EPRA NTA is equivalent to the NAV calculated under IFRS
adjusted for derivatives; refer to note 3.
COMPANY PERFORMANCE
Annualised total shareholder return(1) since IPO
9.1%
HY 2020
15.6%
HY 2019
Relevance to strategy: Total shareholder return measures the
delivery of the Company's strategy, to provide shareholders with
attractive total returns in the longer term.
Adjusted earnings per share(1)
0.71p
HY 2020
2.9p
HY 2019
Relevance to strategy: Adjusted earnings per share(1) reflects
the Company's ability to generate earnings from its portfolio.
Dividends per share for the period
0.50p
HY 2020
3.15p
HY 2019
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.
Bookings(1)
69%
HY 2020
FULL
HY 2019
Relevance to strategy: Booking are a key measure of portfolio
quality and ability to drive rental growth.
Loan-to-value(1)
24%
HY 2020
19%
HY 2019
Relevance to strategy: The LTV ratio measures the level of
gearing used to enhance returns over the long term.
Student rental growth(1) (like-for-like)
2.6%
AY20
4.4%
AY19
Relevance to strategy: Student rental growth is a key measure of
the quality of the portfolio.
EPRA performance measures(2)
The data below includes performance measures based on EPRA 'Best
Practices Recommendations Guidelines', which are designed to
enhance transparency and comparability across the European real
estate sector.
EPRA earnings(1)
GBP1.2m
HY 2020
GBP9.8m
HY 2019
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 NTA(1)
171.38p
HY 2020
174.71
HY 2019
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 real estate investment
company.
EPRA net initial yield(1)
4.52%
HY 2020
4.42%
HY 2019
Purpose: A comparable measure for portfolio valuations. This
measure increases the comparability of two portfolios.
1. Alternative performance measure ("APM") - see APMs section
below for definitions and calculation methodology.
2. In respect of the operational portfolio in line with EPRA
'Best Practices Recommendations 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, the Investment Manager's report and the
financial review above.
Following review, the Directors concluded that Covid--19 should
no longer be considered as an emerging risk to the Company but
rather as an operational risk. The principal risks and
uncertainties facing the Company are otherwise substantially
unchanged since the date of the annual report for the year ended 30
June 2020 and continue to be as set out on pages 47 to 52 of 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 property values;
- property valuation;
- compliance with laws and regulations; and
- Covid-19.
Market risk:
- UK property market conditions;
- government policy and Brexit; and
- geopolitical.
Financial risk:
- breach of loan covenants and gearing limits.
Emerging risks:
- climate change; and
- university funding.
Responsibility statement
The Directors confirm that to the best of their knowledge:
- the half--yearly report and condensed consolidated financial
statements have been prepared in accordance with IAS 34 Interim
Financial Reporting issued by the IASB;
- the half--yearly report and condensed 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
condensed 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:
David Hunter
Chairman
4 March 2021
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 condensed set of financial statements in the
half-yearly financial report for the six months ended 31 December
2020 which comprises the condensed consolidated statement of
comprehensive income, condensed consolidated statement of financial
position, condensed consolidated statement of changes in equity,
condensed consolidated statement of cash flows and explanatory
notes that have been reviewed. We have read the other information
contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
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 financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual consolidated and parent
company financial statements of the Company are prepared in
accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half--yearly
financial report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial 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 set of financial statements
in the half-yearly financial report for the six months ended 31
December 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 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
4 March 2021
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 December 2020
Six months Six months
ended ended
31 December 31 December
2020 2019
Continuing operations Notes GBP'000 GBP'000
------------------------------------------------------- ----- ----------- -----------
Rental income 16,720 24,587
Other income 229 -
Property operating expenses (6,248) (5,236)
------------------------------------------------------- ----- ----------- -----------
Gross profit 10,701 19,351
Administration expenses (4,242) (4,738)
Aborted transaction costs (119) -
------------------------------------------------------- ----- ----------- -----------
Operating profit before gains on investment properties 6,340 14,613
Fair value gains on investment properties 7 4,535 37,987
------------------------------------------------------- ----- ----------- -----------
Operating profit 10,875 52,600
------------------------------------------------------- ----- ----------- -----------
Finance income 36 43
Finance expenses 9 (5,109) (4,877)
------------------------------------------------------- ----- ----------- -----------
Profit before tax 5,802 47,766
Tax charge on residual income 5 - -
------------------------------------------------------- ----- ----------- -----------
Total comprehensive income for the period 5,802 47,766
------------------------------------------------------- ----- ----------- -----------
EPS (basic and diluted) (pence per share) 3 1.28 11.52
------------------------------------------------------- ----- ----------- -----------
The accompanying notes 1 to 13 form an integral part of these
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2020
31 December 30 June
2020 2020
Notes GBP'000 GBP'000
---------------------------------------- ----- ----------- -----------
Assets
Non-current assets
Investment property 7 1,039,040 1,009,838
---------------------------------------- ----- ----------- -----------
Total non-current assets 1,039,040 1,009,838
---------------------------------------- ----- ----------- -----------
Current assets
Cash and cash equivalents 43,911 60,358
Retention account - 308
Trade and other receivables 17,341 17,671
---------------------------------------- ----- ----------- -----------
Total current assets 61,252 78,337
---------------------------------------- ----- ----------- -----------
Total assets 1,100,292 1,088,175
---------------------------------------- ----- ----------- -----------
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 10 (233,547) (279,456)
Lease liability (11,406) (11,266)
Financial derivatives (201) (233)
---------------------------------------- ----- ----------- -----------
Total non-current liabilities (245,154) (290,955)
---------------------------------------- ----- ----------- -----------
Current liabilities
Interest-bearing loans and borrowings 10 (52,769) -
Trade and other payables (8,510) (9,066)
Deferred income (13,892) (6,085)
Lease liability (345) (342)
Retention account - (308)
---------------------------------------- ----- ----------- -----------
Total current liabilities (75,516) (15,801)
---------------------------------------- ----- ----------- -----------
Total liabilities (320,670) (306,756)
---------------------------------------- ----- ----------- -----------
Net assets 779,622 781,419
---------------------------------------- ----- ----------- -----------
Equity
Share capital 11 4,550 4,550
Share premium 525,748 525,748
Special reserve 19,976 26,340
Retained earnings 229,348 224,781
---------------------------------------- ----- ----------- -----------
Total equity 779,622 781,419
---------------------------------------- ----- ----------- -----------
Number of shares in issue 455,019,030 455,019,030
EPRA NDV(1) per share (pence per share) 4 171.34 171.73
EPRA NTA(1) per share (pence per share) 4 171.38 171.78
EPRA NRV(1) per share (pence per share) 4 191.20 184.46
---------------------------------------- ----- ----------- -----------
The accompanying notes 1 to 12 form an integral part of these
financial statements.
1. Alternative performance measure ("APM") - see APMs section
below for definitions and calculation methodology.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2020
Share Share Special Retained
capital premium reserve earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- ----- ------- ------- ------- -------- -------
Balance at 1 July 2020 4,550 525,748 26,340 224,781 781,419
-------------------------------------------- ----- ------- ------- ------- -------- -------
Total comprehensive income - - - 5,802 5,802
Dividends in respect of the previous period 6 - - (6,364) (97) (6,461)
Dividends in respect of the current period 6 - - - (1,138) (1,138)
-------------------------------------------- ----- ------- ------- ------- -------- -------
Balance at 31 December 2020 4,550 525,748 19,976 229,348 779,622
-------------------------------------------- ----- ------- ------- ------- -------- -------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2019
Share Share Special Retained
capital premium reserve earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- ----- ------- ------- ------- -------- -------
Balance at 1 July 2019 4,137 450,658 38,759 191,109 684,663
-------------------------------------------- ----- ------- ------- ------- -------- -------
Total comprehensive income - - - 47,766 47,766
Ordinary shares issued 413 76,526 - - 76,939
Share issue costs - (1,436) - - (1,436)
Dividends in respect of the previous period 6 - - (2,344) (4,109) (6,453)
Dividends in respect of the current period 6 - - (846) (5,648) (6,494)
-------------------------------------------- ----- ------- ------- ------- -------- -------
Balance at 31 December 2019 4,550 525,748 35,569 229,118 794,985
-------------------------------------------- ----- ------- ------- ------- -------- -------
The accompanying notes 1 to 13 form an integral part of these
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 December 2020
Six months Six months
ended ended
31 December 31 December
2020 2019
Notes GBP'000 GBP'000
---------------------------------------------------------------------------- ----- ----------- -----------
Cash flows from operating activities
Operating profit 10,875 52,600
Adjustments to reconcile profit for the period to net operating cash flows:
Gains from change in fair value of investment properties 7 (4,535) (37,987)
Increase in other receivables and prepayments (7,098) (9,546)
Increase in other payables and accrued expenses 7,402 7,665
---------------------------------------------------------------------------- ----- ----------- -----------
Net cash flow generated from operating activities 6,644 12,732
---------------------------------------------------------------------------- ----- ----------- -----------
Cash flows from investing activities
Land and development expenditure on properties under construction (21,159) (24,064)
Reimbursement for shared development works 4,427 -
Capital expenditure on investment properties (2) (141)
---------------------------------------------------------------------------- ----- ----------- -----------
Net cash used in investing activities (16,734) (24,205)
---------------------------------------------------------------------------- ----- ----------- -----------
Cash flows from financing activities
Proceeds from issue of ordinary shares - 76,939
Share issue costs - (1,180)
Proceeds from interest-bearing loans and borrowings 6,100 24,655
Repayment of interest-bearing loans and borrowings - (28,220)
Repayment of lease liability (175) -
Loan arrangement fees - (42)
Finance income 80 13
Finance expenses (4,244) (4,186)
Dividends paid (8,118) (12,738)
---------------------------------------------------------------------------- ----- ----------- -----------
Net cash flow (used in)/generated from financing activities (6,357) 55,241
---------------------------------------------------------------------------- ----- ----------- -----------
Net (decrease)/increase in cash and cash equivalents (16,447) 43,768
Cash and cash equivalents at start of the period 60,358 15,509
---------------------------------------------------------------------------- ----- ----------- -----------
Cash and cash equivalents at end of the period 43,911 59,277
---------------------------------------------------------------------------- ----- ----------- -----------
The accompanying notes 1 to 13 form an integral part of these
financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 31 December 2020
PART 1. BASIS OF PREPARATION
This section includes the Company's accounting policies applied
to the financial statements in accordance with IFRS. Specific
accounting policies have been included with the note to the
financial statements and are identified by way of a grey panel.
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 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.GBP652 million at 31
December 2020.
2. Basis of preparation
The condensed consolidated financial statements for the six
months ended 31 December 2020 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 2020. 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 2020 has been reviewed by the Company's
Auditor, Ernst & Young LLP, in accordance with International
Standard on Review Engagements 2410 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity' and
was approved for issue on 4 March 2021. The latest published
audited financial statements for the year ended 30 June 2020 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 2020 is an extract
from those financial statements.
The condensed consolidated financial statements have been
prepared under the historical cost convention, except for
investment property and derivative financial liabilities, which
have 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 where
applicable.
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 2020.
2.1 Significant accounting policies
Accounting policies are consistent with those of the annual
report for the year ended 30 June 2020.
2.2 Changes to accounting standards and interpretations
In the current period, the Group has applied a number of
amendments to IFRS including IFRS16 Covid--19 related rent
concessions and changes to interest rate benchmark reform. The
adoption of these updates has not had a significant impact on the
Group's financial statements. These also include annual
improvements to IFRS, changes in standards, legislative and
regulatory amendments, changes in disclosure and presentation
requirements, including updates relating to Covid-19.
Further to the above, there are no new IFRS or IFRIC
interpretations that are issued but not effective that would be
expected to have a significant impact on the Group's financial
statements.
2.3 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.
2.4 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.
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 condensed
consolidated financial statements:
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 Company 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.
In making the assessment, the Directors have considered the
potential impacts of the Covid-19 pandemic on the Group, operations
and the investment portfolio. The Directors have a reasonable
expectation that the Group has sufficient cash resources and
financing available to meet its liabilities as they fall due over
the next twelve months. The Investment Manager is in discussion
with the Group's lenders in relation to the refinancing of its debt
facilities falling due over this period and the Directors note
there are a number of possible financing options available. In
forming this expectation, the Directors have considered the results
of forecasting and stress testing carried out by the Investment
Manager.
The Group is a REIT traded on the London Stock Exchange, where
assets are not required to be liquidated to meet day-to-day
redemptions. Whilst the economic future is uncertain, the Directors
believe it is possible the Group could experience further
reductions in income and/or property valuations, however this
should not be to a level which would threaten the Group's ability
to continue as a going concern. The Directors, the Investment
Manager and other service providers have put in place contingency
plans to minimise disruption. 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 and the
Group's financial position in respect of its cash flows, borrowing
facilities and investment commitments. Therefore, the financial
statements have been prepared on the going concern basis.
Estimates
Valuation of property
The Group's investment properties are valued at fair value as
determined by the external valuer in accordance with the RICS
Valuation Global Standards 2017 and IFRS 13. Refer to note 8 for
further details of the judgements and estimates made in determining
the valuation of property.
PART 2. REVIEW OF THE FINANCIAL PERIOD
This section includes information on the performance of the
Company, EPRA metrics, NAV and information on dividends for the
period. The EPRA metrics have been reconciled to the IFRS measures
where appropriate and are included to enhance comparability across
the real estate sector.
3. EPRA earnings
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, EPRA EPS(1) and
Group-specific adjusted EPS(1) computations.
Six months Six months
ended ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------------- ----------- -----------
Group earnings for EPS and diluted EPS 5,802 47,766
Fair value gains on investment properties (4,535) (37,987)
Fair value gains on financial assets (32) (22)
------------------------------------------------- ----------- -----------
Group earnings for basic and diluted EPRA EPS(1) 1,235 9,757
------------------------------------------------- ----------- -----------
Group-specific adjustments:
Licence fees on forward-funded developments 1,867 2,281
Aborted transaction costs 119 -
------------------------------------------------- ----------- -----------
Group-specific adjusted earnings 3,221 12,038
------------------------------------------------- ----------- -----------
Six months Six months
ended ended
31 December 31 December
2020 2019
pence per pence per
share share
------------------------------- ----------- -----------
Basic Group EPS 1.28 11.52
------------------------------- ----------- -----------
Basic Group EPRA EPS(1) 0.27 2.35
------------------------------- ----------- -----------
Diluted Group EPS 1.28 11.52
------------------------------- ----------- -----------
Diluted Group EPRA EPS(1) 0.27 2.35
------------------------------- ----------- -----------
Group-specific adjusted EPS(1) 0.71 2.90
------------------------------- ----------- -----------
Total dividends 0.50 3.15
------------------------------- ----------- -----------
Dividend cover ratio(1) 142% 92%
------------------------------- ----------- -----------
31 December 31 December
2020 2019
Number Number
of of
shares shares
------------------------------------------- ----------- -----------
Weighted average number of shares in issue 455,019,030 414,777,690
------------------------------------------- ----------- -----------
1. Alternative performance measure ("APM") - see APMs section
below for definitions and calculation methodology.
A Group-specific adjusted EPS(1) has been calculated above to
show EPRA earnings(1) excluding non-recurring transaction costs and
adding licence fees on forward-funding agreements which are treated
as capital items in the financial statements. The capital items
have arisen from the following:
1. For the period ended 31 December 2020:
i. licence fees of GBP278,000 from the developer of Circus
Street, Brighton in respect of a forward-funding agreement;
ii. licence fees of GBP1,589,000 from the developer of Scape
Brighton in respect of a forward-funding agreement; and
iii. aborted transaction costs of GBP119,000 in relation to the
forward purchase agreement of a second asset in the same locality
as Scape Guildford.
2. For the period ended 31 December 2019:
i. licence fees of GBP787,000 from the developer of Circus
Street, Brighton in respect of a forward-funding agreement; and
ii. licence fees of GBP1,494,000 from the developer of Scape
Brighton in respect of a forward-funding agreement.
4. EPRA metrics
In October 2019, EPRA announced updated best practice
recommendations which included revised NAV metrics to replace EPRA
NAV(1) . These comprise: EPRA NDV(1) , EPRA NTA(1) and EPRA NRV(1)
. The Company has adopted EPRA NTA(1) as its principal measure of
NAV for the period ended 31 December 2020 and for future periods.
The revised EPRA metrics are shown below.
31 December 30 June
2020 2020
GBP'000 GBP'000
------------------------------------------ ----------- -----------
NAV reported under IFRS and EPRA NDV(1) 779,622 781,419
Fair value of financial instruments 201 233
------------------------------------------ ----------- -----------
EPRA NTA(1) 779,823 781,652
Investment property uplift to gross value 90,193 57,674
------------------------------------------ ----------- -----------
EPRA NRV(1) 870,016 839,326
------------------------------------------ ----------- -----------
Number of shares in issue 455,019,030 455,019,030
------------------------------------------ ----------- -----------
EPRA NDV(1) pence per share 171.34 171.73
------------------------------------------ ----------- -----------
EPRA NTA(1) pence per share 171.38 171.78
------------------------------------------ ----------- -----------
EPRA NRV(1) pence per share 191.20 184.46
------------------------------------------ ----------- -----------
1. Alternative performance measure ("APM") - see APMs section
below for definitions and calculation methodology.
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 months Six months
ended ended
31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------------------- ----------- -----------
Corporation tax on residual income - -
---------------------------------- ----------- -----------
Total - -
---------------------------------- ----------- -----------
6. Dividends
Six months ended Six months ended
31 December 2020 31 December 2019
Total Ordinary Total Ordinary
Dividend pence(2) PID(2) dividend(2) GBP'000 pence(2) PID(2) dividend(2) GBP'000
------------------ -------------- -------- ------ ----------- ------- -------- ------ ----------- -------
Current period
dividends
31 December Second
2020/2019 interim(1) 0.25 0.25 - - 1.58 1.42 0.16 -
30 September
2020/2019 First interim 0.25 0.25 - 1,138 1.57 1.49 0.08 6,494
------------------ -------------- -------- ------ ----------- ------- -------- ------ ----------- -------
Total 0.50 0.50 - 1,138 3.15 2.91 0.24 6,494
---------------------------------- -------- ------ ----------- ------- -------- ------ ----------- -------
Prior period
dividends
Fourth
30 June 2020/2019 interim 1.42 1.26 0.16 6,461 1.56 1.08 0.48 6,453
------------------ -------------- -------- ------ ----------- ------- -------- ------ ----------- -------
Total 1.42 1.26 0.16 6,461 1.56 1.08 0.48 6,453
---------------------------------- -------- ------ ----------- ------- -------- ------ ----------- -------
Dividends
in statement
of changes
in equity 7,599 12,947
Movement
in withholding
tax accrual 519 (209)
---------------------------------- -------- ------ ----------- ------- -------- ------ ----------- -------
Dividends
in statement
of cash flows 8,118 12,738
---------------------------------- -------- ------ ----------- ------- -------- ------ ----------- -------
1. The second interim dividend was declared after the period
ended and therefore is not accrued for as a provision in the
financial statements.
2. Amounts are shown in pence per share.
On 5 February 2021, the Company declared a second interim
dividend of 0.25 pence per ordinary share amounting to GBP1.1
million. The dividend will be paid on 26 March 2021 to shareholders
on the register at close of business on 19 February 2021.
As a REIT, the Company is required to pay PIDs equal to at least
90% of the property rental business profits of the Group.
PART 3. ASSET MANAGEMENT
This section includes information on the Company's investment
portfolio, valuation methodology and its performance over the
period. The Group's investment properties are valued at fair value
as determined by the independent external valuer in accordance with
the RICS Valuation Global Standards 2017 and IFRS 13.
7. UK investment property
Properties
under
development Leasehold Freehold Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------------------- ----------- --------- -------- ---------
Carrying value at 1 July 2020 81,482 348,537 579,819 1,009,838
Capitalised expenditure 24,491 - (56) 24,435
Transfer from properties under construction (99,699) 99,699 - -
Fair value gains on investment properties(1) 3,712 636 187 4,535
Adjustment in respect of right-of-use asset - 232 - 232
------------------------------------------------------------------------- ----------- --------- -------- ---------
Carrying value at 31 December 2020 9,986 449,104 579,950 1,039,040
------------------------------------------------------------------------- ----------- --------- -------- ---------
Right-of-use asset - (11,751) - (11,751)
Lease incentives - 2,401 - 2,401
------------------------------------------------------------------------- ----------- --------- -------- ---------
Fair value at 31 December 2020 9,986 439,754 579,950 1,029,690
------------------------------------------------------------------------- ----------- --------- -------- ---------
Carrying value at 1 July 2019 97,540 264,651 557,012 919,203
Capitalised expenditure 27,471 24 (12) 27,483
Transfer from properties under construction (67,350) 67,350 - -
Fair value gains on investment properties 1,567 7,172 29,248 37,987
Adjustment in respect of right-of-use asset recognised on first
application of IFRS 16 - 11,610 - 11,610
------------------------------------------------------------------------- ----------- --------- -------- ---------
Carrying value at 31 December 2019 59,228 350,807 586,248 996,283
------------------------------------------------------------------------- ----------- --------- -------- ---------
Right-of-use asset(1) (11,610) (11,610)
Lease incentives - 2,625 - 2,625
------------------------------------------------------------------------- ----------- --------- -------- ---------
Fair value at the 31 December 2019 59,228 341,822 586,248 987,298
------------------------------------------------------------------------- ----------- --------- -------- ---------
Carrying value at 1 July 2019 97,540 264,651 557,012 919,203
Capitalised expenditure 44,958 27 136 45,121
Transfer from properties under construction (67,350) 67,350 - -
Fair value gains on investment properties(1) 6,334 4,899 22,671 33,904
Adjustment in respect of right-of-use asset recognised on first
application of IFRS 16 - 11,610 - 11,610
------------------------------------------------------------------------- ----------- --------- -------- ---------
Carrying value at 30 June 2020 81,482 348,537 579,819 1,009,838
------------------------------------------------------------------------- ----------- --------- -------- ---------
Right-of-use asset (11,522) - (11,522)
Lease incentives - 2,514 - 2,514
------------------------------------------------------------------------- ----------- --------- -------- ---------
Fair value at 30 June 2020 81,482 339,529 579,819 1,000,830
------------------------------------------------------------------------- ----------- --------- -------- ---------
1. Included in fair value gains on investment properties is a
loss of GBP2,000 (30 June 2020: loss of GBP88,000) which relates to
the adjustment in the period in respect of the right-of-use
asset.
During the period, the Group completed construction of the
student accommodation element of Scape Brighton, which opened to
students in September 2020. The Group received GBP4.4 million from
the owner of the residential development adjacent to Circus Street,
Brighton as reimbursement for the cost of shared development
works.
8. 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 to their carrying amounts 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 independent 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 Group's investment properties are held at fair value as
determined by the external valuer in accordance with the RICS
Valuation Global Standards 2017 and 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 outbreak of the Covid-19 pandemic has impacted global
financial markets. Travel restrictions have been implemented by
many countries. In the UK, market activity is being impacted in all
sectors. Given the unknown future impact that Covid-19 might have
on the property market, the Directors intend to keep the valuation
of the portfolio under frequent review.
The following tables show an analysis of the fair values of
assets and liabilities recognised in the statement of financial
position by level of the fair value hierarchy(1) :
31 December 2020
--------------------------------------
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair value GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- ------- ------- --------- ---------
Investment properties - - 1,029,690 1,029,690
Financial derivatives - (201) - (201)
---------------------------------------------- ------- ------- --------- ---------
Total - (201) 1,029,690 1,029,489
---------------------------------------------- ------- ------- --------- ---------
30 June 2020
--------------------------------------
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair value GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- ------- ------- --------- ---------
Investment properties - - 1,000,830 1,000,830
Financial derivatives - (233) - (233)
---------------------------------------------- ------- ------- --------- ---------
Total - (233) 1,000,830 1,000,597
---------------------------------------------- ------- ------- --------- ---------
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 levels during the
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.
Key unobservable
Class Fair value Valuation technique inputs Range
----------------- ---------------- --------------------- ---------------------- ----------------------------------
Operational GBP1,019,704,000 Income capitalisation ERV - 2020/21 GBP165 - GBP700 per bed per week
student property Rental growth 2% - 3%
31 December Tenancy period 40 - 51 weeks
2020 Sundry income GBP50 - GBP100 per bed per annum
Facilities management GBP2,200 - GBP2,500 per bed per
cost annum
Portfolio initial 4.00% - 5.80% blended
yield (4.00% - 7.50%)
----------------- ---------------- --------------------- ---------------------- ----------------------------------
Development GBP9,986,000 GDV (less cost GDV GBP15,000,000
office property to complete) Costs to complete GBP5,800,000
31 December
2020
----------------- ---------------- --------------------- ---------------------- ----------------------------------
Operational GBP919,348,000 Income capitalisation ERV - 2019/20 GBP165 - GBP670 per bed per week
student property Rental growth 2% - 3%
30 June 2020 Tenancy period 40/51 weeks
Sundry income GBP50 - GBP100 per bed per annum
Facilities management GBP2,150 - GBP2,550 per bed per
cost annum
Portfolio initial 4.00% - 5.80% blended
yield (4.00% - 7.50%)
----------------- ---------------- --------------------- ---------------------- ----------------------------------
Development GBP81,482,000 RLV (less cost RLV GBP9,910,000 - GBP72,670,000
student property left to spend Build cost left GBP4,244,000 - GBP12,281,000
30 June 2020 ) to spend
----------------- ---------------- --------------------- ---------------------- ----------------------------------
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 other assets and
liabilities is considered to be the same as their fair value.
The following sensitivity analysis has been prepared by the
valuer:
-3% change +3% change -0.25% +0.25%
in in change change
-------------------------------------------------------------------
rental rental
income income in yield in yield
As at 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------------- ---------- ---------- -------- --------
(Decrease)/increase in the fair value of the investment properties (33,060) 33,050 65,180 (57,230)
------------------------------------------------------------------- ---------- ---------- -------- --------
-3% change +3% change -0.25% +0.25%
in in change change
rental rental
income income in yield in yield
As at 30 June 2020 GBP'000 GBP'000 GBP'000 GBP'000
(Decrease)/increase in the fair value of the investment properties (26,091) 26,661 54,750 (47,020)
------------------------------------------------------------------- ---------- ---------- -------- --------
PART 4. BORROWINGS AND EQUITY
This section includes information on the Company's
interest-bearing loans and borrowings and capital position. The
Group manages its capital requirements through a combination of
debt and equity.
9. Finance expenses
Six months Six months
ended ended
31 December 31 December
2020 2019
GBP'000 GBP'000
-------------------------------- ----------- -----------
Bank charges 6 6
Commitment and other fees 297 540
Lease liability interest 86 -
Loan arrangement fees amortised 412 418
Loan interest 4,308 3,913
-------------------------------- ----------- -----------
Total 5,109 4,877
-------------------------------- ----------- -----------
10. Interest --bearing loans and borrowings
31 December 30 June
2020 2020
GBP'000 GBP'000
------------------------------------------------------------- ----------- --------
Borrowings at the start of the period 281,720 252,150
Borrowings drawn down in the period 6,448 57,790
Borrowings repaid in the period - (28,220)
------------------------------------------------------------- ----------- --------
Borrowings at the end of the period 288,168 281,720
------------------------------------------------------------- ----------- --------
Unamortised loan arrangement fees at the start of the period (2,264) (3,039)
Amortised during the period 412 824
Loan arrangement fees incurred during the period - (49)
------------------------------------------------------------- ----------- --------
Unamortised loan arrangement fees at the end of the period (1,852) (2,264)
------------------------------------------------------------- ----------- --------
Borrowings less unamortised loan arrangement fees 286,316 279,456
------------------------------------------------------------- ----------- --------
Current liabilities - less than 1 year 52,769 -
------------------------------------------------------------- ----------- --------
Non-current liabilities - more than 1 year 233,547 279,456
------------------------------------------------------------- ----------- --------
286,316 279,456
------------------------------------------------------------- ----------- --------
At 31 December 2020, the Group had debt facilities of GBP335
million, comprising the following:
Fixed-rate secured credit facilities totalling GBP235 million
with PGIM:
Interest rate
Amount Facility % Maturity Drawn
--------------- -------- ------------- -------------- --------------
GBP130,000,000 1 3.07 September 2024 GBP130,000,000
GBP40,000,000 1 2.83 September 2024 GBP40,000,000
GBP65,000,000 2 2.82 April 2029 GBP65,000,000
--------------- -------- ------------- -------------- --------------
Floating rate secured credit facilities totalling GBP100 million
with Wells Fargo:
Interest rate
Amount Facility % Maturity Drawn
------------- ---------------- ------------- ------------- -------------
Redrawable
GBP45,000,000 credit facility LIBOR +1.85 July 2021 GBP15,000,000
Development December 2021
GBP55,000,000 loan LIBOR +3.10 + 1 year GBP38,170,000
------------- ---------------- ------------- ------------- -------------
The Group has entered into interest rate hedging arrangements in
relation to the Wells Fargo development loan. The arrangements
expire on the maturity of the loan in December 2021. Under the
arrangements, the Group has entered into an interest rate cap of
1.75% and an interest rate swap of 0.676%, both with respect to
LIBOR. The notional amounts of the cap and swap each follow a
profile equal to 50% of the anticipated drawdown profile of the
loan.
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 was not in breach of its banking covenants at
31 December 2020.
11. Share capital
Number
of Share issue
shares price GBP'000
---------------------------------- ----------- ----------- -------
Issued and fully paid:
Balance at 1 July 2019 413,653,630 - 4,137
Shares issued on 27 December 2019 41,365,400 186.00p 413
---------------------------------- ----------- ----------- -------
Balance at 30 June 2020 455,019,030 - 4,550
---------------------------------- ----------- ----------- -------
Shares issued - - -
---------------------------------- ----------- ----------- -------
Balance at 31 December 2020 455,019,030 - 4,550
---------------------------------- ----------- ----------- -------
The share capital comprises one class of ordinary shares. At
general meetings of the Company, ordinary shareholders are entitled
to one vote on a show of hands and on a poll for every share held.
There are no restrictions on the size of a shareholding or the
transfer of shares, except for the UK REIT restrictions.
PART 5. STAFF AND KEY MANAGEMENT
This section includes information on the Group's employees and
related party transactions, including information pertaining to the
Directors and the Investment Manager.
12. Related party transactions
Directors
The Directors (all non-executive) of the Company and its
subsidiaries are considered to be the key management personnel of
the Group. Directors' remuneration for the six months totalled
GBP100,000 (six months ended 31 December 2019: GBP106,000) and at
31 December 2020, a balance of GBPnil (30 June 2020: GBPnil) was
outstanding.
The Directors are also the directors of all subsidiaries apart
from GCP Operations Limited, where the directors are
representatives from the Investment Manager and the Property
Manager, Scape, who are not considered key management personnel of
the Group.
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 of the Board of
Directors. The contractual arrangements were revised during the
period, with the new arrangements detailed below taking effect from
1 July 2020.
For its services to the Company, the Investment Manager receives
an annual fee which is payable quarterly in arrears based on the
prevailing NAV of the Group, as set out below:
Investment
management fee
NAV (annualised)
---------------------------------------------- --------------
Up to GBP950 million 0.7500%
Above GBP950 million and up to GBP1.5 billion 0.6375%
Above GBP1.5 billion 0.5625%
---------------------------------------------- --------------
The Group is responsible for the payment of all property
management fees incurred.
The investment management agreement between the Company and the
Investment Manager can be terminated by the Company or the
Investment Manager at any time with not less than 24 months'
written notice to the other party. If the investment management
agreement is terminated by the Company or the Investment Manager on
24 months' notice in the event of certain change of control events
relating to the Company, the investment management fees payable in
such circumstances will be based on the prevailing published NAV at
the time immediately preceding the change of control.
The Investment Manager is also appointed as the Company's AIFM
and receives an annual fee of GBP25,000, subject to an annual RPI
increase.
During the six-month period, the Group incurred GBP2,928,000 (31
December 2019: GBP3,668,000) in respect of investment management
fees and the AIFM fee. A total of GBP2,928,000 (31 December 2019:
GBP3,607,000) is included within administration expenses in the
consolidated statement of comprehensive income and GBPnil (31
December 2019: GBP81,000) is included within the share issue costs
relating to shares issued during the period; at 31 December 2020,
GBP1,468,000 (30 June 2020: GBP1,949,000) was outstanding.
Transactions with persons connected to the Investment
Manager
The following transactions are disclosed for the purpose of
transparency and are not classed as related party transactions
under IAS 24.
During the period the Group recharged GBP229,000 to Scape and
the owners of properties managed by Scape but not held by the Group
for services provided by Group employees.
The Group is party to a contract with Scaperfield Limited to
acquire and forward-fund the construction of Scape Brighton, which
completed for the 2020/21 academic year. The directors of the
Investment Manager and their family members, directly or
indirectly, owned in aggregate approximately 30% of Scaperfield
Limited during the period, post period end this reduced to 25%.
The above asset has been acquired, on the basis of an
independent valuation and approval by the independent Board of
Directors.
13. Events after the reporting period
Post period end, in February 2021, the Company terminated the
long--term lease of commercial premises at Scape Shoreditch to a
WeWork subsidiary ("WeWork"). The lease was part--guaranteed by
WeWork's US parent company, WeWork Companies LLC. Ahead of
termination, the Company collected a payment of c.GBP3.1 million
(including VAT) covering all arrears and rent due to the end of
June 2021. The payment is equal to the maximum amount available of
WeWork's parent company guarantee. The Company has taken vacant
possession of the commercial space at Scape Shoreditch.
ALTERNATIVE PERFORMANCE MEASURES
The Board and the Investment Manager assess the Company's
performance using a variety of measures that are not defined under
IFRS and are therefore classed as alternative performance measures
("APMs"). Where possible, reconciliations to IFRS are presented
from the APMs to the most appropriate measure prepared in
accordance with IFRS. All items listed below are IFRS financial
statement line items unless otherwise stated.
APMs should be read in conjunction with the condensed
consolidated statement of comprehensive income, condensed
consolidated statement of financial position and condensed
consolidated statement of cash flows, which are presented in the
financial statements section of this report.
The APMs below may not be directly comparable with measures used
by other companies.
Adjusted EPS
EPS adjusted for non-recurring transactions and licence fees
receivable on forward-funded developments (refer to note 3).
Annualised total shareholder return since IPO
Total shareholder return(1) expressed as a weighted annual
percentage. Calculated with reference to the IPO issue price of 100
pence per ordinary share.
Source: Bloomberg
Bookings
Confirmed student room bookings either through direct lets or
nomination agreements.
Dividend cover ratio
Total dividends per share divided by adjusted EPS, expressed as
a percentage (refer to note 3).
EPRA EPS
Recurring earnings from core operational activities excluding
movements relating to revaluation of investment properties and
financial derivatives and the related tax effects, divided by the
number of shares in issue (refer to note 3).
EPRA NDV (EPRA Net Disposal Value)
Represents shareholders' value under a disposal scenario, where
deferred tax, financial instruments and certain other adjustments
are calculated to the full extent of their liability, net of any
resulting tax. Calculated in accordance with EPRA guidelines (refer
to note 4).
EPRA NIY
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.
EPRA NRV (EPRA Net Reinstatement Value)
Net assets attributable to shareholders measured with the aim of
reflecting the cost to recreate the company based on its current
capital and financing structure. Property transfers costs and taxes
are included, while assets and liabilities not expected to
crystallise in the normal course of business are excluded.
Calculated in accordance with EPRA guidelines (refer to note
4).
EPRA NTA (EPRA Net Tangible Assets)
The value of net assets attributable to shareholders, excluding
the fair value of financial instruments and intangible assets.
Assumes that entities buy and sell assets, thereby crystallising
certain levels of unavoidable deferred tax. Calculated in
accordance with EPRA guidelines (refer to note 4).
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.
As at As at
31 December 30 June
2020 2020
Loan-to-value GBP'000 GBP'000
------------------------------------- ----------- ---------
Interest-bearing loans and borrowing 288,168 281,720
Cash and cash equivalents (43,911) (60,358)
------------------------------------- ----------- ---------
Total 244,257 221,362
Investment property 1,029,690 1,000,830
------------------------------------- ----------- ---------
Loan-to-value 24% 22%
------------------------------------- ----------- ---------
1. Refer to relevant APM.
NAV total return
A measure showing how the NAV per share has performed over a
period of time, taking into account both capital returns and
dividends paid to shareholders, expressed as a percentage.
It assumes that dividends paid to shareholders are reinvested at
NAV at the time the shares are quoted ex-dividend. This is a
standard performance metric across the investment industry and
allows comparability across the sector.
Source: Bloomberg
Net operating margin
Gross profit expressed as a percentage of total income.
NIY
Net initial yield of the operational portfolio as determined by
the Company's valuer.
Ongoing charges
Ongoing charges (previously total expense ratios or TERs) is a
measure of the annual percentage reduction in shareholder returns
as a result of recurring operational expenses assuming markets
remain static and the portfolio is not traded. Calculated based on
the AIC's methodology, excluding direct property costs.
31 December 30 June
2020 2020
Ongoing charges GBP'000 GBP'000
Investment management fees 6,788 7,467
Directors' fees 206 212
Administration expenses 2,372 2,182
--------------------------- ----------- -------
Total expenses 9,366 9,861
--------------------------- ----------- -------
Non-recurring expenses (233) (50)
--------------------------- ----------- -------
Total recurring expenses 9,133 9,811
--------------------------- ----------- -------
Average NAV 780,644 765,132
Ongoing charges ratio 1.17% 1.28%
--------------------------- ----------- -------
Student rental growth
Annual increase in direct let rental rates, expressed as a
percentage.
Total shareholder return
A measure of the performance of a company's shares over time. It
combines share price movements and dividends to show the total
return to the shareholder expressed as a percentage.
It assumes that dividends are reinvested in the shares at the
time the shares are quoted ex-dividend. This is a standard
performance metric across the investment industry and allows
comparability across the sector.
Source: Bloomberg
GLOSSARY OF KEY TERMS
Adjusted EPS
Refer to APMs section above
AIC
Association of Investment Companies
Annualised total shareholder return since IPO
Refer to APMs section above
APM
Alternative performance measure
AY
Academic year
Blended cost of borrowing
Cost of borrowing expressed as a percentage weighted according
to period drawn down (refer to notes 9 and 10)
Bookings
Refer to APMs section above
Collegiate
Collegiate AC Limited - Property Manager for Water Lane
Apartments, Bristol
Company
GCP Student or GCP Student Living plc
Dividend cover ratio
Refer to APMs section above
EPRA
European Public Real Estate Association
EPRA cost ratio
Refer to APMs section above
EPRA EPS
Refer to APMs section above
EPRA NDV
Refer to APMs section above
EPRA NIY
Refer to APMs section above
EPRA NRV
Refer to APMs section above
EPRA NTA
Refer to APMs section above
EPRA NTA per share (cum-income)
EPRA NTA before deduction of proposed dividend
EPRA NTA per share (ex-income)
EPRA NTA after deduction of proposed dividend
EPRA sBPR
EPRA Sustainability Best Practices Recommendations
EPS
Earnings per share (refer to note 3)
ERV
Estimated rental value (refer to page 31)
ESG
Environmental, social, governance
EU
European Union
FCA
Financial Conduct Authority
FRC
Financial Reporting Council
Full 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
GDV
Gross development value
GRESB
Global Real Estate Sustainability Benchmark
Group
GCP Student Living plc and its subsidiaries
HEI
Higher education institution
HY
Half year
IASB
International Accounting Standards Board
IFRIC
International Financial Reporting Interpretations Committee
IFRS
International Financial Reporting Standards
INTO
INTO University Partnerships
IPO
Initial public offering
LIBOR
London interbank offered rate
Loan-to-value or LTV
Refer to APMs section above
MSCI ESG Rating
ESG ratings provided by MSCI Inc.
NAV
Net asset value (refer to note 4)
NAV total return
Refer to APMs section above
Net operating margin
Refer to APMs section above
NIY
Refer to APMs section above
OECD
Organisation for Economic Co-operation and Development
Ongoing charges ratio
Refer to APMs section above
PGIM
PGIM Real Estate Finance
PID
Property income distribution
pps
Pence per share
REIT
Real estate investment trust
RICS
Royal Institution of Chartered Surveyors
RLV
Residual land value
RPI
Retail price index
Scape
Scape Student Living Limited or Scape Student Limited - Property
Manager for Scape Shoreditch, Scape Mile End, Scape Greenwich,
Scape Guildford, Scape Wembley, Scape Bloomsbury, Podium, Scape
Brighton, Circus Street and The Pad
Student rental growth
Refer to APMs section above
Total shareholder return
Refer to APMs section above
UCAS
Universities and Colleges Admissions Service
UK AIFM
Alternative Investment Fund Manager
CORPORATE INFORMATION
Directors
David Hunter (Chairman)
Russell Chambers
Gillian Day
Malcolm Naish (Senior Independent Director)
Marlene Wood
Administrator
Link Alternative Fund Administrators Limited
(trading as Link Group)
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
8th Floor, 1 Fleet Place
London EC4M 7RA
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
Property Managers
Scape Student Limited
45 Brunswick Place
London W1 6DX
Collegiate AC Limited
Home Farm
Ardington OX12 8PD
Registrar
Link Group
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
Jefferies International Limited
(appointed 1 October 2020)
100 Bishopsgate
London EC2N 4JL
Tel: 020 7548 4329
Stifel Nicolaus Europe Limited
(resigned 1 October 2020)
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
https://data.fca.org.uk/a/nsm/nationalstoragemechanism.
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
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END
IR FLFVTVLISIIL
(END) Dow Jones Newswires
March 05, 2021 02:00 ET (07:00 GMT)
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