GCP STUDENT LIVING PLC
Half-yearly report and
consolidated financial statements for the six months ended
31 December 2017
(the “Company” or “GCP Student”,
together with its subsidiaries the “Group”)
LEI: 2138004J4ID66FK38H25
GCP Student, the UK’s first REIT focused on student residential
assets, is pleased to announce its results for the six months ended
31 December 2017.
The full half-yearly report and consolidated financial
statements can be accessed via the Company's website at
www.graviscapital.com/funds/gcp-student or by contacting the
Company Secretary by telephone on 01392 477500.
ABOUT US
GCP Student Living plc was the first
real estate investment trust in the UK to focus on student
residential assets.
The Company seeks to provide shareholders with attractive total
returns in the longer term through the potential for modest
capital appreciation and regular, sustainable, long-term
dividends with RPI 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 UKLA and trades on the Premium Segment of the Main Market
of the LSE.
AT A GLANCE
|
HY 2015 |
HY 2016 |
HY 2017 |
Value of property portfolio |
£400.5m |
£465.7m |
£739.6m |
EPRA NAV1 per ordinary share |
135.35p |
138.17p |
146.31p |
Dividends for the period |
2.82p |
2.86p |
2.96p |
Net operating margin |
76% |
79% |
78% |
Share price per ordinary share |
136.50p |
147.50p |
144.00p |
|
AY 2015 |
AY 2016 |
AY 2017 |
Rental growth |
4.5% |
3.9% |
4.1% |
HIGHLIGHTS FOR THE
PERIOD2
- Annualised shareholder return since IPO of 12%, in excess of
the Company’s target return of 8-10%.
- Dividends of 2.96 pence per share
paid in respect of the period.
- The Company delivered a strong set of results, generating total
rental income for the period of £17.3 million.
- The Company successfully raised £70 million through a
substantially oversubscribed placing of ordinary shares.
- The Company’s first forward-funded development at Scape
Wembley, London completed on
schedule for the 2017/18 academic year, providing a further c.580
modern beds.
- Construction of the Company’s second forward-funded development
asset, Circus Street, Brighton
commenced, which is expected to provide c.450 beds on completion
ahead of the 2019/20 academic year.
- The Company acquired Podium, which offers c.180 beds, in the
same locality as the Company’s The Pad asset, together providing
c.400 beds adjacent to Royal
Holloway, University of London.
- EPRA NAV (cum-income) per ordinary share of 146.31 pence and EPRA NAV (ex-income) per
ordinary share of 144.83 pence at 31
December 2017.1
- High-quality portfolio of ten assets with c.3,600 beds located
primarily in and around London,
with a valuation of £739.6 million at 31 December
2017.
- The Company’s properties continue to benefit from the
supply/demand imbalances for high-quality, modern student
facilities, with the portfolio fully occupied and rental growth of
4.1% for the 2017/18 academic year.
- EPRA NAV is equivalent to the NAV calculated under IFRS for the
period. See glossary for definitions.
- The Company’s financial statements are prepared in accordance
with IFRS. The financial highlights above include performance
measures based on EPRA best practice recommendations which are
designed to enhance transparency and comparability across the
European real estate sector. See glossary for definitions.
Robert Peto, Chairman,
commented:
“On behalf of the Board, I am pleased
to report a period of robust portfolio performance for the Company.
The valuation of the Company’s portfolio continues to benefit from
yield compression arising from a combination of full occupancy,
rental growth, operational efficiencies and competitive market
activity for private student accommodation in and around
London.
The NAV per share increase of 5.2%
over the six-month period and rental growth of 4.1% for the 2017/18
academic year have been driven by three core fundamentals.
Firstly, where the assets are
located, with a primary focus in and around London with additional locations targeted,
Bristol and Brighton, where strong supply and demand
imbalances exist. Secondly, what the Company chooses to buy, with
the Board and the Investment Manager focused on large scale modern
purpose-built private student assets which offer scope for greater
operational efficiencies. And thirdly, how the Company operates,
through the delivery of high specification facilities providing
hotel level service to students with intelligent design allowing
for competitive pricing.
The Board is pleased to note the
completion of construction of its 580-bed property at Scape
Wembley, the Company’s first forward funded development, during the
period. Acquiring assets in this manner enables the Company to
secure properties located in areas which benefit from strong supply
and demand characteristics where appropriate operational assets may
not be available.
Further, the forward funding by the
Company of Scape Wembley, which is now operational and fully
occupied, has enhanced the overall quality of the portfolio through
a material valuation uplift and earnings per share accretion. Scape
Wembley is a practical illustration of the benefits of acquiring
forward funded developments where short-term periods of reduced
dividend cover are offset through longer term contributions to
shareholder returns. The Board look forward to the completion of
refurbishment works later this year at Scape Bloomsbury (formerly
Woburn Place), London and
completion of construction of the Company’s second forward funded
development for the 2019/20 academic year at Circus Street,
Brighton.
The Company provides shareholders
with a property portfolio which continues to benefit from strong
supply and demand characteristics, which support occupancy and
rental growth. The location of those properties is fundamental to
those characteristics, with valuation differentials increasing
between ‘core’ and ‘non-core’ markets which separate those
locations with substantial supply and demand imbalances from those
which lack demand or suffer from oversupply. The characteristics
which the Company focuses on are not necessarily limited to
London, as illustrated by the
Company’s investments in Bristol
and, more recently, central Brighton. Looking forward, the Board and the
Investment Manager will continue to focus on delivering attractive
returns to shareholders through strong portfolio performance,
ongoing operational efficiencies and will only seek to make
investments where they believe investments are supportive of
long-term returns to shareholders through strong rental growth
prospects.”
For further information, please contact:
Gravis Capital Management
Limited |
|
+44 20 3405 8500 |
Tom Ward |
tom.ward@graviscapital.com |
|
Nick Barker |
nick.barker@graviscapital.com |
|
Dion Di Miceli |
dion.dimiceli@graviscapital.com |
|
|
|
|
Stifel Nicolaus Europe
Limited |
|
+44 20 7710 7600 |
Neil Winward |
neil.winward@stifel.com |
|
Mark Young |
mark.young@stifel.com |
|
Tom Yeadon |
tom.yeadon@stifel.com |
|
|
|
|
Buchanan |
|
+44 20 7466 5000 |
Charles Ryland |
charlesr@buchanan.uk.com |
|
Vicky Hayns |
victoriah@buchanan.uk.com |
|
INVESTMENT OBJECTIVES
Dividend income |
Capital appreciation |
Portfolio quality |
To provide shareholders with
regular, sustainable, long-term dividends, with RPI
inflation-linked characteristics. |
To provide modest capital
appreciation over the long term. |
Focus on high-quality,
modern, purpose-built, private student residential accommodation
and teaching facilities for students studying at leading academic
institutions. |
The Company has paid a total of
2.96 pence per ordinary share in respect of the period,
increasing the Company’s dividend on an annualised basis in line
with RPI.
|
The valuation of the Company’s
property portfolio has increased since IPO, driven by a combination
of yield compression, full occupancy and increasing rental
rates. |
At 31 December 2017,
the Company’s property portfolio comprised ten high-quality, modern
student accommodation assets, eight operational, one development
and one under refurbishment. |
2.96p |
5.1% |
FULL |
Dividends in respect of the
period |
Capital appreciation |
Occupancy for the 2017/18 academic
year |
|
|
|
3.5% |
£739.6m |
4.1% |
Year on year dividend growth |
Valuation of property portfolio |
Rental growth |
CHAIRMAN’S STATEMENT
Introduction
I am pleased to report a period of robust portfolio performance
for the Company. The focus on assets in and around London has delivered the Company’s strong NAV
performance with the NAV per share rising by 5.2% over
the six-month period to 31 December
2017.
This performance has been driven by a combination of
year-on-year rental growth of 4.1% across the portfolio
(substantially ahead of the national average of 2.9%)1,
full occupancy, valuation gains on Scape Wembley at completion and
yield compression arising from competitive market activity for
private student accommodation assets in and around London.
Further, I am pleased to note that the Company has been able to
increase its dividend during the period, paying a total
of 2.96 pence per share. Since IPO in 2013, the Company has
delivered annualised shareholder returns of 12%.
Financing
In July 2017, the Company raised
£70 million by way of an oversubscribed non pre-emptive placing of
new shares, the net proceeds of which have been used to acquire
Circus Street, Brighton and
Podium, located adjacent to Royal Holloway University of
London.
Portfolio
The Company’s property portfolio has achieved full occupancy for
the 2017/18 academic year, generating rental income of £17.3
million for the period to 31 December
2017 and average rental growth of 4.1% year-on-year.
The external market valuation of the Company’s property
portfolio was £739.6 million, which represents a valuation
uplift of £32.4 million in the six-month period to 31 December 2017. The valuation uplift has been
driven by rental growth, full occupancy and yield
compression. The blended net initial yield of the
operational portfolio at 31 December 2017 was 5.04%.
In September 2017, Scape Wembley
opened its doors to students. It was the Company’s first
forward-funded development asset, acquired in September 2016. The property is a
large-scale asset providing c.580 beds adjacent to Wembley
Stadium.
The purchase of assets under development will typically reduce
the level of the Company’s dividend cover over the short term
during the period of construction. Conversely, such investments
enable the Company to secure properties located in areas which
benefit from strong supply and demand characteristics, where
appropriate operational assets may not be available, and which the
Directors believe will provide regular, sustainable dividends with
rental growth prospects over the longer term.
Acquisitions
During the period, the Company completed on the acquisitions of
Circus Street and Podium.
Circus Street is the Company’s second forward-funded development
asset, which is expected to provide c.450 beds and c.30,000 square
feet of commercial office space in a prime central Brighton location ahead of the 2019/20
academic year.
The student accommodation will be contracted on a 21-year
lease, with upward only annual RPI plus 50 basis point uplifts to a
subsidiary guaranteed by Kaplan UK Limited. The Directors believe
that Brighton demonstrates many of
the characteristics of the London
market, including substantial supply constraints and high numbers
of international students.
Podium, which offers c.180 beds, is in the same locality as the
Company’s “The Pad” asset, together providing c.400 beds adjacent
to Royal Holloway, University of
London. The aggregation of
beds in the same locality providing scale in proximity to a leading
HEI should benefit the Company through greater operational
efficiencies over the longer term, particularly relative to smaller
offerings.
Podium, which is operational, was acquired through a forward
purchase agreement entered into in April
2016. As with forward-funded developments, the use of
forward purchase agreements to acquire assets enables the Company
to secure attractively located assets, in areas with few existing
properties and scarce development opportunities.
In October 2017, the Company
entered into a similar arrangement to acquire a c.400 bed asset
located adjacent to Queen Mary University of London (in the same locality as its 590-bed
Scape East asset) and which, if acquired, will provide c.400 beds
for the 2019/20 academic year and offer the potential for the
Company to benefit from operational efficiencies through scale of
its offering in the locality over the longer term.
Financial results
The Company has generated a strong set of results with a rental
income of £17.3 million generated from the Company’s investment
portfolio. The Company’s NAV per share has increased from
139.08 pence at the year end to
146.31 pence at 31 December 2017.
Dividends
The Company has paid dividends in respect of the financial
period ended 31 December 2017 of 2.96 pence per ordinary share.
The Board
We are delighted to welcome Gillian
Day to the Board. Ms Day was appointed as a non-executive
Director of the Company on 23 February
2018. Over the course of 20 years in finance, Ms Day has
advised a broad range of private and public companies across a
number of sectors, working extensively with institutional
investors, multilateral agencies and governments. She is currently
Head of Private and Institutional Capital Engagement at CDC
Group.
Continuation vote
The Company’s articles of association include provisions for a
continuation vote to be held at its fifth annual general meeting in
November 2018, and at each third
annual general meeting thereafter.
The Directors will provide shareholders with their
recommendation as to voting in relation to the continuation
resolution at the time the notice for the 2018 annual general
meeting is posted. Noting in particular the Company’s performance
since IPO, the quality of its investment portfolio and the ongoing
support from shareholders as a whole, it is the Directors’ current
expectation that they will be recommending that shareholders vote
for the Company to continue as presently constituted at the
appropriate time.
Outlook
The Company provides shareholders with a property portfolio
which continues to benefit from strong supply and demand
characteristics, which support occupancy and rental growth. The
location of those properties is fundamental to those
characteristics, with valuation differentials increasing between
‘core’ and ‘non-core’ markets which separate those locations with
substantial supply and demand imbalances from those which lack
demand or suffer from oversupply.
The characteristics which the Investment Manager focuses on are
not necessarily limited to London,
with locations such as Brighton,
Bath, Bristol, Cambridge and Oxford all displaying similar characteristics
to the Company’s core London
market. However, the Company remains highly cautious about
locations at risk of oversupply.
The attractions of London
remain evident as illustrated by the rental growth and
occupancy levels which the Company continues to achieve. These have
been further highlighted by yield compression arising from
competitive market activity for private student accommodation
assets in and around London.
The future risks of Brexit remain broadly unknown and
unquantifiable, although in the period since the UK referendum the
number of international students in the UK has continued to rise,
with numbers of EU students at levels consistent with those seen in
the year prior to the referendum. Education remains one of the UK’s
most successful exports, with London being perceived globally as an
international centre of academic excellence.
The Board remains confident that the Company’s portfolio will
continue to deliver stable performance and continues to be
encouraged by the Investment Manager’s ability to secure attractive
assets in locations which will support the Company’s long-term
prospects.
Robert Peto
Chairman
21 March 2018
1. Source: Cushman & Wakefield, Student Accommodation Report
2017.
INVESTMENT MANAGER’S REPORT
Portfolio update
The Company’s portfolio continues to perform in line with the
Investment Manager’s expectations. London continues to attract the attention of
institutional and sovereign wealth fund investors, with competitive
market activity for private student accommodation assets further
driving yield compression, which has positively impacted the
valuation of the Company’s assets.
During the period under review, the Company’s Woburn Place
asset, which has been rebranded as Scape Bloomsbury, was closed in
order for it to be reconfigured and refurbished, as set out at the
time of its acquisition in April
2017. The refurbishment of Scape Bloomsbury will
involve diversifying the mix of accommodation units, offering
modern studios and single and double occupancy apartment-style
accommodation, which is expected to optimise rental growth and
occupancy levels. Scape Bloomsbury remains on track to reopen later
this year.
Likewise, the forward-funded construction of Circus Street
remains on track. The Company benefits from a licensing fee
providing a 5.5% coupon on drawn funding through the construction
phase and the asset is expected to open ahead of the 2019/20
academic year. The property will provide c.450 beds
and c.30,000 square feet of commercial office space. The
student accommodation will be contracted on a 21-year lease, with
upward only annual uplifts of RPI plus 50 basis points capped at 5%
and floored at 2%, to a subsidiary guaranteed by Kaplan, a global
education provider.
Performance drivers
The key drivers of the Company’s returns are based on the three
fundamentals below which form the basis of how the Investment
Manager seeks to add value.
These key drivers support occupancy levels and the Company’s
ability to grow its rental income, in addition to providing
for the substantial valuation gains enjoyed on its portfolio
since IPO.
WHERE the assets are located
- Primary focus in and around London
- Proximity to HEI and/or major transport hub
- High supply-side barriers
WHAT the Company buys
- Modern purpose-built accommodation
- Large-scale assets benefiting from operating efficiencies
- Intelligent design to optimise long-term returns
HOW the Company operates
- High-specification facilities
- Hotel level service
- Competitive pricing
Over the period under review, the Company has achieved NAV per
share growth of 7.23 pence, which
illustrates the benefits to shareholders of owning a portfolio of
assets located in a highly selective number of markets (primarily
London) which meet the needs of
discerning students and offer operational efficiencies through
scale and design.
Within this increase it is particularly pleasing to note the
contribution to performance of Scape Wembley of 2.4 pence per share, with rental growth and yield
compression, arising from the competitive market activity for
private student accommodation assets in and around London,
further contributing to performance.
Dividend cover
The Investment Manager’s core focus is on delivering a
diversified portfolio of investments which will provide
sustainable, long-term dividends through strong occupancy levels
and rental growth. This long-term focus may result in short-term
periods of reduced dividend cover as investments are made, which
dilute dividend cover in the short term but which are
expected to contribute positively in the future.
Whilst the Company is forward funding a construction (such as
Circus Street) or refurbishing an entire asset (such as Scape
Bloomsbury) its earnings relative to those generated by operational
assets will be reduced, thereby reducing its dividend cover.
The Investment Manager does not believe it to be appropriate to
focus on short-term dividend cover in such cases as these
investments enhance the overall quality of the portfolio and
provide the Company with access to stock where suitable operational
properties may be unavailable. Notwithstanding, in both cases where
the Company has invested in forward-funded developments, the
Investment Manager has been successful in securing a coupon through
the construction phase. By way of illustration, Circus Street
provides a 5.5% coupon through its construction phase.
Further, Scape Bloomsbury and Circus Street are expected to add
2.8 pence to earnings per share once
operational and will, therefore, be accretive to dividend cover,
providing the Company with attractive income and rental growth
prospects over the longer term¹.
¹ Information set out above is for illustrative purposes only
and is not intended to be, and should not be, taken as a profit
forecast or estimate.
Supply and demand imbalances
supporting occupancy and growth
The Investment Manager maintains a positive outlook for the
student accommodation sector in the UK and, more specifically,
in a limited number of ‘core’ markets which it believes benefit
from attractive demand characteristics, including London.
Student numbers supportive of
occupancy and growth
Demand for higher education remains strong. Acceptances to
full-time higher education courses in the UK for the 2017/18
academic year were broadly consistent with the prior year, which in
turn saw the highest number of acceptances on record. Furthermore,
application numbers continue to exceed the number of places
available with one in four applicants unable to secure a place
in higher education, equating to c.170,000 applicants.
The attraction of the UK to international students is evidenced
by the continued growth in the number of international
students accepted to full-time courses, which has grown for
the fifth consecutive year with 2017/18 being the highest level on
record. Non-EU student acceptances have grown 5% year-on-year, with
the number of EU students being accepted continuing to remain above
the levels seen prior to the EU referendum.
Demand for full-time higher education courses in London remains strong relative to the rest of
the UK. London is home to 22
universities, with more universities ranked in the top 40 by The
Times Higher Education World University Rankings than any other
city in the world. One third of the 2.3 million students in the UK
study in London and the South
East.
International students in particular favour London as a destination for higher education
given its reputation as a global centre of academic excellence; a
quarter of all international students in the UK choose
to study in London.
With 95% of the Company’s portfolio located in and around
London and 74% of the tenants
being international students, current market dynamics are strongly
supportive of the Company’s investment objective and underpin its
ability to deliver fully occupied assets with long-term rental
growth prospects.
Strong supply-side barriers
The supply of purpose-built student accommodation varies
substantially across the UK. The Company focuses on the
London market as it presents not
only strong demand characteristics supported by large international
student numbers, but because London also suffers from a
structural undersupply of private purpose-built student
accommodation.
High land values and the difficult planning environment which
prioritises social housing and residential schemes over student
accommodation in London has seen
the London market continue to be
severely undersupplied, with only 3,000 new private student beds
delivered in 2017/18, the lowest level in a decade. Planning for
new private student accommodation developments remains tightly
constrained, with a 77% decrease in the number of beds now under
development as compared with five years ago.1
The beneficial impact on the Company’s portfolio of properties
of these barriers, when coupled with high student numbers in
London, is reflected by the NAV
per share and rental growth achieved to date. Looking forward, the
latest draft London Plan issued in December
2017 for consultation, has proposed policies which may end
up creating additional barriers to the development of student
schemes. These would include requirements for affordable student
rooms which may negatively impact viability.
Source: JLL London Housing 2017 Report.
London and beyond
The Company invests in private purpose-built student
accommodation assets primarily in and around London. Its investment policy does permit
limited investment outside London,
with the Investment Manager focusing on those markets where it
believes the sector fundamentals mirror that of the
London market.
This is illustrated by the Company’s acquisition of the Circus
Street forward-funded development. The property is located in the
heart of Brighton city centre
within a short walking distance of its iconic pier, shopping
district and transport links. The University of Sussex (a UK top-20 university located in
Brighton) and Brighton University have c.36,000 students
including c.6,100 international students.
Brighton, like London, is severely undersupplied with c.6,800
beds available to students in Brighton, of which only 240 beds are in
private purpose-built student accommodation. Further, planning for
new private student accommodation development in Brighton remains highly constrained.
These supply and demand dynamics make Brighton a highly attractive market which the
Investment Manager believes shows most, if not all of the
attractions of the London market.
Other markets of interest to the Investment Manager for similar
reasons, include Bath,
Bristol, Cambridge and Oxford.
Pipeline and outlook
Looking forward to the Company’s investment pipeline, the
Investment Manager continues to review a number of attractive
investment opportunities. The Company will only seek to make
investments where it and the Investment Manager believes
investments are supportive of long-term returns to shareholders
through strong rental growth prospects.
The Company has been highly successful in securing new, modern
properties through future contractual arrangements with Scape which
has enabled it to create its own pipeline of assets in attractive
locations where existing properties may not have otherwise been
available. The Investment Manager was successful in securing
another such future arrangement in respect of a second property in
the same locality as Scape East, adjacent to Queen Mary University
of London.
Further opportunities remain under review, which include
operational assets in London and
those markets identified above and a second forward funding
opportunity in Brighton.
Financial results
The Company has delivered robust results for the six-month
period to 31 December 2017, with average rental growth of
4.1% across the portfolio for the 2017/18 academic year and total
rental income for the period of £17.3 million.
Property expenditure
The Company’s net operating margin has remained broadly stable
at c.78% with the ongoing efficient management of costs by the
Company’s Asset and Facilities Managers. Property expenditure of
£3.8 million was incurred during the period, which is in line with
expectations.
Administration expenditure
Total administration expenses of £3.6 million comprise fund
running costs, including the Investment Manager’s fee and other
third party service provider costs in the period in line with the
Company’s service provider contracts.
Finance costs
Ongoing net finance costs of £3.4 million in the period includes
loan interest associated with the Company’s financing arrangements.
The increase year-on-year is in respect of the increase in the
facility from £130 million at 31 December 2016 to two
facilities totalling £235 million at the period end.
Dividends and earnings
The Company increased its dividend for the current financial
year in line with RPI, paying a dividend of 2.96 pence per share. The dividend was 65%
covered by adjusted EPS¹ of 1.92
pence for the period. Whilst the Company targets a
fully-covered dividend over the longer term, where assets in its
portfolio are being refurbished or are under development (as is the
case with Scape Bloomsbury (formerly Woburn Place) and Circus
Street), cover may be adversely affected over the short term.
The dividends were paid 2.16 pence
per ordinary share as PIDs in respect of the Group’s tax exempt
property rental business and 0.80
pence per ordinary share as non-PIDs.
¹ Refer to Note 7.
Profitability
Profit before tax and fair value gains on investment properties
of £6.5 million was generated in the period. The increase in
profitability year-on-year is due to scale, with two further assets
added to the portfolio increasing gross profit in absolute terms,
with administration expenses remaining broadly consistent
year-on-year.
Total profit after tax of £38.8 million includes unrealised
valuation gains of £32.4 million recognised as a result of yield
compression, full occupancy and rental growth in the portfolio.
Further information on property valuations is given in note 11 to
the financial statements.
Ongoing charges percentage
The Company’s ongoing charges ratio for the twelve months to
31 December 2017, based on the AIC’s
methodology, excluding direct property costs, was 1.17%.
Financial performance
Income statement
|
Six
months |
Six
months |
|
ended |
ended |
|
31
December |
31
December |
|
2017 |
2016
|
|
£’000 |
£’000
|
Rental income |
17,317 |
13,035
|
Operating
expenses |
(3,860) |
(2,742) |
Gross profit (net
operating income) |
13,457 |
10,293 |
Net operating
margin |
78% |
79%
|
Administration
expenses |
(3,614) |
(3,576) |
Ongoing net finance
costs |
(3,354) |
(2,137) |
Profit before tax
and fair value gains on investment properties |
6,489 |
4,580 |
Fair value gains on
investment properties |
32,357 |
6,306 |
Profit before tax
for the period |
38,846 |
10,886 |
Valuation
The valuation of the Company’s property portfolio has increased
to £739.6 million in the period. Total gains on investment
properties through revaluation of the Company’s investment
portfolio were £32.4 million for the period 31 December 2017. The portfolio is fully occupied
for the 2017/18 academic year.
Debt financing
The Company has continued to utilise its debt facilities during
the period. The two facilities advanced in three tranches amount to
£235 million. The facilities are fixed-rate loans at a blended rate
of 2.96%, with a weighted average remaining term of nine years.
At 31 December 2017, total
borrowings of the Group were £235 million following the drawdown of
£15 million in September 2017
to part-finance the acquisition of Podium. At the period
end, the Company’s total Gearing, calculated as borrowings as a
percentage of gross assets was 29%. Its Loan-to-value was 23%.
EPRA NAV¹
Net assets attributable to equity holders at 31 December
2017 were £563.4 million, up from £467 million at 30 June 2017. The EPRA NAV has increased from
139.08 pence as at 30 June 2017
to 146.31 pence per ordinary share, a
5.2% increase for the six-month period to 31
December 2017, primarily driven by increases in portfolio
valuations due to strong rental growth, gains at acquisition and
yield compression.
Cash flow generation
The Company held cash and cash equivalents of £61.9 million at
the end of the financial period under review. Operating cash flows
of £10 million were generated by the Company’s student
accommodation portfolio. The Company invested £72.2 million in
the acquisition and development of assets, financed by way of a
share issue in the period. Total dividends paid in the period were
£11.3 million, with remaining cash outflows utilised in servicing
the Company’s debt facility.
Financial performance
Net assets
|
As
at
31 December
2017
£’000
|
As
at
30 June
2017
£’000 |
|
|
|
Investment property |
739,585 |
634,640 |
Trade and other receivables |
16,731 |
7,825 |
Cash and cash equivalents |
61,943 |
55,110 |
Total assets |
818,259 |
697,575 |
Liabilities |
|
|
Trade and other payables |
(8,212) |
(4,840) |
Deferred income |
(14,057) |
(8,272) |
Interest bearing loans and borrowings |
(232,594) |
(217,469) |
Total liabilities |
(254,863) |
(230,581) |
Net assets |
563,396 |
466,994 |
Number of shares |
385,064,556 |
335,768,782 |
EPRA NAV per share (cum-income) (pps) |
146.31 |
139.08 |
EPRA NAV per share (ex-income) (pps) |
144.83 |
137.62 |
¹ EPRA NAV is equivalent to the NAV calculated under IFRS for
the period. See glossary for definitions.
COMPANY PERFORMANCE
The Company continues to deliver robust performance.
|
HY 2016 |
HY
2017 |
Annualised shareholder return since
IPO |
16.3% |
12% |
Basic earnings per ordinary
share |
4.1p |
10.1p |
Dividends per ordinary share for the
period |
2.86p |
2.96p |
EPRA NAV per ordinary share |
138.17p |
146.31p |
Loan-to-value |
16% |
23% |
Rental growth |
3.9% |
4.1% |
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
Interim management report
The important events that have occurred during the period under
review, the key factors influencing the consolidated financial
statements and the principal factors that could impact the
remaining six months of the financial year are set out in the
Chairman’s statement and the Investment Manager’s report on
above.
The Directors consider that the principal risks facing the
Company are substantially unchanged since the date of the
annual report for the year ended 30 June
2017 and continue to be as set out in that report.
Risks faced by the Group include, but are not limited
to:
Execution
- Reliance on the Investment Manager and third party service
providers
- Due diligence
Portfolio
- UK property market conditions
- Concentration risk
- Development risk
- Net income and capital values
- Property valuation and liquidity
Financial
- Breach of financial covenants
Regulatory
- Compliance with laws and regulations
- Government policy and Brexit
Responsibility statement
The Directors confirm that to the best of their knowledge:
- the half-yearly report and consolidated financial statements
have been prepared in accordance with IAS 34 Interim Financial
Reporting issued by the IASB;
- the half-yearly report and consolidated financial statements
give a true and fair view of the assets, liabilities, financial
position and return of the Group; and
- the half-yearly report and consolidated financial statements
include a fair review of the information required by:
- 4.2.7R of the Disclosure Guidance and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
consolidated financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
- 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 consolidated financial statements
were approved by the Board of Directors and the above
responsibility statement was signed on its behalf by:
Robert Peto
Chairman
21 March 2018
INDEPENDENT REVIEW REPORT
To GCP Student Living plc
Introduction
We have been engaged by GCP Student Living plc (the “Company”)
to review the consolidated financial statements in the half-yearly
report for the six months ended 31 December
2017, which comprise the consolidated statement of
comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity, the
consolidated statement of cash flows, basis of preparation and
accounting policies and all related notes (together the
“consolidated financial statements”). We have read the other
information contained in the half-yearly report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the consolidated 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 report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for
preparing the half-yearly report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom’s Financial Conduct Authority.
As disclosed in the basis of preparation and accounting
policies, the annual financial statements of the Group are prepared
in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union. The consolidated financial
statements included in this half-yearly financial report have 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 consolidated financial statements in the half-yearly report
based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial
Information Performed by the Independent Auditor of the Entity’
issued by the Auditing Practices Board for use in the
United Kingdom. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the consolidated financial statements in
the half-yearly report for the six months ended 31 December 2017 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
21 March 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 December
2017
|
|
Six
months
ended
31 December
2017
£’000 |
Six
months
ended
31 December
2016
£’000 |
|
|
|
|
|
|
Continuing operations |
Notes |
Rental income |
|
17,317 |
13,035 |
Property operating expenses |
|
(3,860) |
(2,742) |
Gross profit |
|
13,457 |
10,293 |
Administration expenses |
|
(3,614) |
(3,576) |
Operating profit before gains on investment
properties |
|
9,843 |
6,717 |
Fair value gains on investment properties |
3 |
32,357 |
6,306 |
Operating profit |
|
42,200 |
13,023 |
Finance income |
|
255 |
18 |
Finance expenses |
4 |
(3,609) |
(2,155) |
Profit before tax |
|
38,846 |
10,886 |
Tax charge on residual income |
5 |
— |
(41) |
Total comprehensive income for the
period |
|
38,846 |
10,845 |
EPS (basic and diluted) (pps) |
7 |
10.13 |
4.12 |
The accompanying notes 1 to 13 form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2017
|
|
31
December
2017
£’000 |
30 June
2017
£’000 |
|
|
|
Notes |
Assets |
|
|
|
Non-current assets |
|
|
|
Investment property |
3 |
739,585 |
634,640 |
Retention account |
|
308 |
308 |
|
|
739,893 |
634,948 |
Current assets |
|
|
|
Cash and cash equivalents |
|
61,943 |
55,110 |
Trade and other receivables |
|
16,423 |
7,517 |
|
|
78,366 |
62,627 |
Total assets |
|
818,259 |
697,575 |
Liabilities |
|
|
|
Non-current liabilities |
|
|
|
Interest-bearing loans and borrowings |
8 |
(232,594) |
(217,469) |
Retention account |
|
(308) |
(308) |
|
|
(232,902) |
(217,777) |
Current liabilities |
|
|
|
Trade and other payables |
|
(8,212) |
(4,840) |
Deferred income |
|
(13,749) |
(7,964) |
|
|
(21,961) |
(12,804) |
Total liabilities |
|
(254,863) |
(230,581) |
Net assets |
|
563,396 |
466,994 |
Equity |
|
|
|
Share capital |
9 |
3,851 |
3,358 |
Share premium |
|
408,617 |
340,233 |
Special reserve |
|
48,891 |
53,576 |
Retained earnings |
|
102,037 |
69,827 |
Total equity |
|
563,396 |
466,994 |
Number of shares in issue |
|
385,064,556 |
335,768,782 |
IFRS and EPRA NAV per share (pps) |
10 |
146.31 |
139.08 |
The accompanying notes 1 to 13 form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December
2017
|
Share
capital
£’000 |
Share
premium
£’000 |
Special
reserve
£’000 |
Retained
earnings
£’000 |
|
Total
£’000 |
|
Balance at 1 July 2017 |
3,358 |
340,233 |
53,576 |
69,827 |
466,994 |
Total comprehensive income |
— |
— |
— |
38,846 |
38,846 |
Ordinary shares issued |
493 |
69,507 |
— |
— |
70,000 |
Share issue costs |
— |
(1,123) |
— |
— |
(1,123) |
Dividends paid in respect of the previous
period |
— |
— |
(3,076) |
(2,546) |
(5,622) |
Dividends paid in respect of the current
period |
— |
— |
(1,609) |
(4,090) |
(5,699) |
Balance at 31 December 2017 |
3,851 |
408,617 |
48,891 |
102,037 |
563,396 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December
2016
|
Share
capital
£’000 |
Share
premium
£’000 |
Special
reserve
£’000 |
Retained
earnings
£’000 |
|
Total
£’000 |
|
Balance at 1 July 2016 |
2,618 |
239,653 |
58,371 |
57,826 |
358,468 |
Total comprehensive income |
— |
— |
— |
10,845 |
10,845 |
Ordinary shares issued |
164 |
22,836 |
— |
— |
23,000 |
Share issue costs |
— |
(401) |
— |
— |
(401) |
Dividends paid in respect of the previous
period |
— |
— |
(1,299) |
(2,445) |
(3,744) |
Dividends paid in respect of the current
period |
— |
— |
(1,650) |
(2,094) |
(3,744) |
Balance at 31 December 2016 |
2,782 |
262,088 |
55,422 |
64,132 |
384,424 |
The accompanying notes 1 to 13 form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 December
2017
|
Six
months
ended
31 December
2017
£’000 |
Six
months
ended
31 December
2016
£’000 |
|
|
|
|
Cash flows from operating activities |
|
|
Operating profit |
42,200 |
13,023 |
Adjustments to reconcile profit for the period to
net operating cash flows: |
|
|
Gains from changes in fair value of investment
properties |
(32,357) |
(6,306) |
Corporation tax payments |
— |
(39) |
Decrease/(increase) in other receivables and
prepayments |
6,201 |
(4,851) |
(Decrease)/increase in other payables and accrued
expenses |
(6,052) |
5,030 |
Net cash flow generated from operating
activities |
9,992 |
6,857 |
Cash flows from investing activities |
|
|
Acquisitions of investment properties |
(29,532) |
(30,702) |
Capital expenditure on investment properites |
(42,646) |
(939) |
Net cash used in investing activities |
(72,178) |
(31,641) |
Cash flows from financing activities |
|
|
Proceeds from issue of ordinary shares |
70,000 |
23,000 |
Share issue costs |
(1,123) |
(401) |
Proceeds from borrowings |
15,000 |
— |
Finance income |
20 |
18 |
Finance expenses |
(3,587) |
(2,019) |
Dividends paid in the period |
(11,291) |
(7,441) |
Net cash flow generated from financing
activities |
69,019 |
13,157 |
Net increase/(decrease) in cash and cash
equivalents |
6,833 |
(11,627) |
Cash and cash equivalents at start of the
period |
55,110 |
66,337 |
Cash and cash equivalents at end of the
period |
61,943 |
54,710 |
The accompanying notes 1 to 13 form an integral part of these
financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 31 December
2017
1. General information
GCP Student Living plc is a real estate investment trust
incorporated in the UK 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 UKLA
and trades on the Premium Segment of the Main Market of the
LSE.
2. Basis of preparation
The consolidated financial statements for the six months ended
31 December 2017 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 2017. The audited
financial statements were prepared in accordance with IFRS issued
by the IASB as adopted by the EU.
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 2017 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 21 March 2018. The
latest published audited financial statements for the year ended
30 June 2017 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 2017 is an extract from
those financial statements.
The consolidated financial statements have been prepared under
the historical cost convention, except for investment property,
which has been measured at fair value. The financial
statements are presented in Pound Sterling and all values are
rounded to the nearest thousand pounds (£’000), except when
otherwise indicated.
The Group has chosen to adopt the EPRA best practice guidelines
for calculating key metrics such as net asset value and earnings,
which are presented alongside the IFRS measures.
The consolidated interim financial information includes the
financial statements of the Company and its wholly-owned
subsidiaries for the six months ended 31
December 2017.
2.1 Significant
accounting policies
Accounting policies are consistent with those of the annual
report for the year ended 30 June 2017.
2.2 Segmental
reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being the investment and provision of
student accommodation facilities (including ancillary retail,
teaching and commercial facilities) in the UK.
2.3 Significant
accounting judgements and estimates
The preparation of these financial statements in accordance with
IFRS requires the Directors of the Company to make judgements,
estimates and assumptions that affect the reported amounts
recognised in the financial statements. However, uncertainty about
these assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of the asset
or liability in the future.
Judgements
In the process of applying the Group’s accounting policies,
management has made the following judgements which
have the most significant effect on the amounts recognised in
the consolidated financial statements:
Valuation of property
The valuations of the Group’s investment property are at fair
value as determined by the external valuer on the basis of market
value in accordance with the internationally accepted RICS
Valuation, Global Standards 2017 and in accordance with IFRS
13. Refer to note 11 for further details of the judgements and
estimates made in determining the valuation property.
Operating lease commitments – Group
as lessor
The Group has entered into commercial property leases on its
investment property portfolio. The Group has determined, based on
evaluation of the terms and conditions of the arrangements, such as
the lease term not constituting a substantial portion of the
economic life of the commercial property, that it retains all the
significant risks and rewards of ownership of these properties and
recognises the contracts as operating leases.
Going concern
The Directors have made an assessment of the Group’s ability to
continue as a going concern and are satisfied that it 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.
The Company’s articles of association include provisions for a
continuation vote to be held at its fifth annual general meeting in
November 2018 and at each third
annual general meeting thereafter. The Directors will provide
shareholders with their recommendation as to voting in relation to
the continuation resolution at the time the notice for the 2018
annual general meeting is posted. It is the Directors’ current
expectation that they will be recommending shareholders vote for
the Company to continue as presently constituted at that time.
Furthermore, the Directors are not aware of any material
uncertainties that may cast significant doubt upon the Group’s
ability to continue as a going concern. Therefore, the financial
statements have been prepared on a going concern basis.
3. UK investment property
|
Properties
under
development |
Leasehold |
Freehold |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
As at 1 July 2017 |
59,100 |
177,710 |
397,830 |
634,640 |
Acquisition of investment property |
— |
— |
29,532 |
29,532 |
Expenditure on properties |
— |
— |
4,362 |
4,362 |
Land and development costs |
38,694 |
— |
— |
38,694 |
Movement between properties under development and
freehold properties |
(79,030) |
— |
79,030 |
— |
Fair value gains on revaluation of investment
property |
746 |
10,330 |
21,281 |
32,357 |
As at 31 December 2017 |
19,510 |
188,040 |
532,035 |
739,585 |
As at 1 July 2016 |
— |
173,070 |
251,717 |
424,787 |
Expenditure on properties |
— |
— |
939 |
939 |
Land and development costs |
33,665 |
— |
— |
33,665 |
Fair value gains on revaluation of investment
property |
965 |
3,220 |
2,121 |
6,306 |
As at 31 December 2016 |
34,630 |
176,290 |
254,777 |
465,697 |
As at 1 July 2016 |
— |
173,070 |
251,717 |
424,787 |
Acquisition of investment property |
— |
— |
138,952 |
138,952 |
Expenditure on properties |
— |
614 |
235 |
849 |
Land and development costs |
58,197 |
— |
— |
58,197 |
Fair value gains on revaluation of investment
property |
903 |
4,026 |
6,926 |
11,855 |
As at 30 June 2017 |
59,100 |
177,710 |
397,830 |
634,640 |
During the period, the Group commenced construction of Circus
Street, Brighton. The Company also
completed on the acquisition of Podium via a wholly-owned
subsidiary, GCP RHUL 2 Limited and commenced refurbishment of Scape
Bloomsbury (formerly Woburn Place) acquired in April 2017.
4. Finance expenses
|
Six
months
ended
31 December
2017
£’000 |
Six
months
ended
31 December
2016
£’000 |
|
|
|
|
Bank charges |
4 |
2 |
Loan interest |
3,413 |
2,029 |
Loan arrangement fees amortised |
177 |
124 |
Other |
15 |
— |
Total |
3,609 |
2,155 |
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
ended
31 December
2017
£’000 |
Six
months
ended
31 December
2016
£’000 |
|
|
|
|
Corporation tax on residual income |
— |
41 |
Total |
— |
41
|
6. Dividends
|
Six months ended
31 December 2017 |
Six months ended
31 December 2016 |
|
|
Pence
per share |
|
Pence
per share |
|
Current period dividends |
£’000 |
£’000 |
First interim dividend paid on 5 December
2017 |
1.48 |
5,699 |
1.43 |
3,744 |
Second interim dividend paid on 12 March 2018 |
1.48 |
5,699 |
1.43 |
3,978 |
Total |
2.96 |
11,398 |
2.86 |
7,722 |
Prior year dividends |
|
|
|
|
Fourth interim dividend paid on 5 September
2017 |
1.46 |
5,622 |
1.43 |
3,744 |
Current period dividends paid as |
|
|
|
|
PIDs |
2.16 |
8,317 |
2.86 |
7,722 |
Ordinary dividends |
0.80 |
3,081 |
— |
— |
Total |
2.96 |
11,398 |
2.86 |
7,722 |
The second interim dividend was declared and paid after the
period end and therefore is not accrued in the financial
statements.
As a REIT, the Company is required to pay PIDs equal to at least
90% of the property rental business profits of the Group.
7. Earnings per share
Basic EPS is calculated by dividing the total comprehensive
income for the period attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares during
the period. As there are no dilutive instruments in issue, basic
and diluted EPS are identical. The following reflects the earnings
and share data used in the basic and diluted share
computations:
|
Six
months
ended
31 December
2017
£’000 |
Six
months
ended
31 December
2016
£’000 |
|
|
|
|
Group earnings for EPS |
38,846 |
10,845 |
Fair value gains on investment properties |
(32,357) |
(6,306) |
Group earnings for EPRA EPS |
6,489 |
4,539 |
Group specific adjustments: |
|
|
Non-recurring items |
— |
867 |
Licence fees on forward-funded developments |
876 |
— |
Group specific adjusted earnings |
7,365 |
5,406 |
|
Six
months
ended
31 December
2017
Pence
per share |
Six
months
ended
31 December
2016
Pence
per share |
|
|
|
|
|
Basic Group EPS |
10.13 |
4.12 |
Basic Group EPRA EPS |
1.69 |
1.72 |
Diluted Group EPS |
10.13 |
4.12 |
Diluted Group EPRA EPS |
1.69 |
1.72 |
Group specific adjusted EPS |
1.92 |
2.05 |
|
31
December
2017
Number
of shares |
31
December
2016
Number
of shares |
|
|
|
Weighted average number of shares in issue |
383,457,085 |
263,295,015 |
A third Group specific adjusted EPS calculation has been
calculated to show EPRA earnings excluding the non-recurring
transactions arising in the period and adding licence fees on
forward-funded agreements, which are treated as capital in the
financial statements. The transactions have arisen from the
following:
1. For the period ended 31
December 2017:
- licence fees from the developer of Circus Street in respect of
a forward-funding agreement of £46,000; and
- licence fees from the developer of Scape Wembley in respect of
a forward-funding agreement of £830,000.
2. For the period ended 31 December 2016:
- share issue costs relating to committed costs of the issue of
new ordinary shares through the 2017 placing programme of £473,000;
and
- costs relating to the migration from the SFS to the Premium
Segment of the Main Market of the London Stock Exchange, of
£394,000.
8. Interest-bearing loans and
borrowings
|
31
December
2017
£’000 |
30 June
2017
£’000 |
|
|
Borrowings at the start of the period |
220,000 |
130,000 |
Proceeds from borrowings |
15,000 |
90,000 |
Total loan drawn down |
235,000 |
220,000 |
Unamortised loan arrangement fees brought
forward |
(2,531) |
(1,826) |
Loan arrangement fees incurred in the period |
(52) |
(953) |
Loan arrangements fees amortised |
177 |
248 |
Unamortised loan arrangement fees at the end of
the period |
(2,406) |
(2,531) |
Borrowings less unamortised loan arrangement
fees |
232,594 |
217,469 |
The Group has secured fixed rate facilities totalling £235
million with PGIM which are comprised as follows:
Amount |
Facility |
Interest rate
% |
Maturity |
£130,000,000 |
1 |
3.07 |
September 2024 |
£40,000,000 |
2 |
2.83 |
April 2029 |
£65,000,000 |
2 |
2.82 |
April 2029 |
The Group uses gearing to enhance returns over the long term.
The level of gearing is governed by careful consideration of the
cost of borrowing.
The debt facilities include loan-to-value and interest cover
covenants that are measured in accordance with the facility
agreement at a Group level. The Group has maintained significant
headroom against all measures throughout the financial period and
is in full compliance with all loan covenants at 31 December 2017.
9. Share capital
|
Number
of shares |
Issued
share price |
31
December
2017
£’000 |
30 June
2017
£’000 |
|
Issued and fully paid: |
|
|
|
|
At the start of the period |
|
|
3,358 |
2,618 |
Shares issued on 20 December 2016 |
16,428,572 |
140.00p |
— |
164 |
Shares issued on 24 February 2017 |
57,545,195 |
140.00p |
— |
576 |
Shares issued on 7 July 2017 |
49,295,774 |
142.00p |
493 |
— |
Balance at the end of the period |
|
|
3,851 |
3,358 |
10. Net asset value per ordinary share
Basic NAV per share amounts are calculated by dividing net
assets attributable to ordinary equity holders of the Company in
the statement of financial position by the number of
ordinary shares outstanding at the end of the period. As there are
no dilutive instruments in issue, basic and diluted NAV per
share are identical. The following reflects the net asset and share
data used in the basic and diluted NAV per share
computations:
|
31
December
2017
Pence
per share |
30 June
2017
Pence
per share |
|
|
|
EPRA NAV (pps) |
146.31 |
139.08 |
The EPRA NAV may be calculated as:
|
31
December
2017
£’000 |
30 June
2017
£’000 |
|
|
Net assets attributable to ordinary
shareholders |
563,396 |
466,994 |
Net assets for calculation of EPRA NAV |
563,396 |
466,994 |
|
|
|
Number of ordinary shares in issue |
385,064,556 |
335,768,782 |
11. Fair value
IFRS 13 defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The following methods and assumptions were used to estimate the
fair values.
The fair value of cash and short-term deposits, trade
receivables, trade payables and other current liabilities
approximate their 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 accredited external valuer with recognised and
relevant professional qualifications and recent experience of the
location and category of the investment property being valued,
however, the valuations are the ultimate responsibility of the
Directors, who appraise these quarterly.
The valuation of the Company’s investment property at fair value
is determined by the external valuer on the basis of market value
in accordance with the internationally accepted RICS
Valuation, Global Standards 2017.
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)
capital values of fixtures and fittings, plant and machinery, any
environmental matters and the overall repair and condition of the
property and discount rates applicable to those assets.
The following tables show an analysis of the fair values of
investment properties recognised in the consolidated statement of
financial position by level of the fair value
hierarchy1:
|
31
December 2017 |
|
Level
1
£’000 |
Level
2
£’000 |
Level
3
£’000 |
Total
£’000 |
Assets and liabilities measured at fair
value |
Investment properties |
— |
— |
739,585 |
739,585 |
|
— |
— |
739,585 |
739,585 |
|
30 June
2017 |
|
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
Assets and liabilities measured at fair value |
Investment properties |
— |
— |
634,640 |
634,640 |
|
— |
— |
634,640 |
634,640 |
- 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.
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.
Asset class |
Fair value |
Valuation technique |
Key unobservable inputs |
Range |
Operational
student property
31 December 2017 |
£576,995,000 |
Income
capitalisation |
ERV –
2017/18 |
£160 – £465 per bed
per week |
Rental
growth |
2% – 3% |
Tenancy
period |
51 weeks |
Sundry
income |
£50 – £100 per bed
per annum |
Facilities
management cost |
£2,050 – £2,250 per
bed per annum |
Initial
yield |
4.62%
– 5.75% blended
(4.45% – 7.50%) |
Development
student property
31 December 2017 |
£162,590,000 |
Income capitalisation/
RLV (plus
cost spend to date) |
RLV |
£147,600,000 |
Build cost spend to
date |
£14,993,000 |
ERV –
2017/18 |
£165 – £632 per bed
per week |
ERV (summer lets) –
2017/18 |
£75 –
£200 per bed per night |
Student property
30 June 2017 |
£575,540,0001 |
Income capitalisation |
ERV – 2016/17 |
£164 – £610 per week |
Rental growth |
2% – 3% |
Tenancy period |
51 weeks |
Sundry income |
£50 – £100 per bed per
annum |
Facilities management
cost |
£2,050 – £2,500 per bed
per annum |
Initial yield |
4.76% –
5.75% blended
(4.75% – 7.50%) |
1. The fair value of student property as at 30 June 2017 (£575,540,000) above excludes Scape
Wembley, which has been valued at the sum of RLV plus build cost
spend to date (£59,100,000) which is assessed to be equivalent to
the fair value at the year end.
Sensitivity analysis to significant
changes in unobservable inputs within the valuation of investment
properties
Significant increases/decreases in the ERV (per sq ft p.a.) and
rental growth p.a. in isolation would result in a significantly
higher/lower fair value measurement. Significant
increases/decreases in the long-term vacancy rate and discount rate
(and exit yield) in isolation would result
in a significantly higher/lower fair value
measurement.
Generally, a change in the assumption made for the ERV (per sq
ft p.a.) is accompanied by:
Gains and losses recorded in profit or loss for recurring fair
value measurements categorised within Level 3 of the fair value
hierarchy amount to £32,357,000 (31
December 2016: £6,306,000) and are presented in the
consolidated statement of comprehensive income in line item ‘fair
value gains on investment properties’.
All gains and losses recorded in profit or loss for recurring
fair value measurements categorised within Level 3 of the fair
value hierarchy are attributable to changes in unrealised gains or
losses relating to investment property held at the end of the
reporting period.
The carrying amount of the Company’s assets and liabilities is
considered to be the same as their fair value.
12. Related party transactions
Directors
The Directors (all non-executive) of the Company and its
subsidiaries are considered to be the key management personnel of
the Group. Directors’ remuneration for the six months totalled
£87,500 (31 December 2016: £85,000)
and at 31 December 2017,
a balance of £nil (30 June
2017: £nil) was outstanding.
Investment
Manager
The Company is party to an investment management agreement with
the Investment Manager, pursuant to which the Company has appointed
the Investment Manager to provide investment management services
relating to the Group’s assets on a day-to-day basis in accordance
with the Company’s objective and policy, subject to the
overall supervision and direction of the Board of Directors. The
Investment Manager is entitled to receive from the Company a
management fee which is calculated and paid quarterly in arrears at
an annual rate of 1% of the prevailing NAV. The management fee is
reduced to offset fees payable to the Asset and Facilities
Managers. In respect of the six-month period ended 31 December 2017, the net annualised investment
management fee paid to the Investment Manager was 0.85%.
The Investment Manager has committed additional resource in
providing its client funds, including the Company, a more
comprehensive service which strengthens the level of
transaction and marketing support for the Company, in a cost
efficient manner. The Investment Manager receives a fee of 0.3% of
the aggregate gross proceeds from any issue of new shares in
consideration for the provision of marketing and
investor introduction services, from which it pays Highland
Capital Partners Limited in connection with the provision of such
services.
The Investment Manager receives an annual fee of £22,500 in
relation to its role as the Company’s AIFM, subject to an annual
RPI increase.
During the six months, the Group incurred £2,588,000
(31 December 2016: £1,946,000), in
respect of investment management fees, AIFM fee and
transaction management and documentation services. A total of
£2,378,000 is included within administration expenses in the
consolidated statement of comprehensive income and £210,000 is
included within share issue costs
charged to equity during the period. At 31 December 2017, £1,196,000 was outstanding
(31 December 2016: £896,000).
13. Events after the reporting period
On 23 February 2018, the Company
appointed a new non-executive Director of the Company, Ms
Gillian Day.
GLOSSARY OF KEY TERMS
AIC |
Association of Investment
Companies |
AIFM |
Alternative Investment Fund
Manager |
AY |
Academic year |
Company |
GCP Student Living plc |
Cost of borrowing |
Cost of borrowing expressed as a
percentage weighted according to period |
EPRA |
European Public Real Estate
Association |
EPRA EPS |
Recurring earnings from core
operational activities excluding movements relating to revaluation
of investment properties and interest rate swaps and the related
tax effects, divided by the number of shares in issue |
EPRA NAV |
Includes all property at market
value but excludes the mark to market of interest rate
swaps |
EPRA NAV per share (cum-income) |
Net asset value before deduction of
proposed dividend |
EPRA NAV per share
(ex-income) |
Net asset value after deduction of
proposed dividend |
EPS |
Earnings per share |
ERV |
Estimated rental value |
EU |
European Union |
Gearing |
Debt expressed as a percentage of
gross assets |
Gross assets |
The aggregate value of the total
assets of the Company |
Group |
GCP Student Living plc and its
subsidiaries |
HEI |
Higher education institution |
HY |
Half year |
IAS |
International Accounting
Standard |
IASB |
International Accounting Standards
Board |
IFRS |
International Financial Reporting
Standards |
IPO |
Initial public offering |
Loan-to-value |
A measure of borrowings used by
property investment companies calculated as borrowings, net of
cash, as a proportion of property value |
LSE |
London Stock Exchange |
NAV |
Net asset value |
Net operating margin |
Gross profit divided by rental
income expressed as a percentage |
NIY |
Net initial yield |
Non-PID |
Ordinary UK dividend |
Ongoing charges ratio |
Annual percentage reduction in
shareholder returns as a result of recurring operational
expenses |
PGIM |
PGIM Real Estate Finance |
PID |
Property income distribution |
PPS |
Pence per share |
REIT |
Real Estate Investment Trust |
Rental growth |
Annual rental growth measured on a
like-for-like basis across the portfolio |
RICS |
Royal Institution of Chartered
Surveyors |
RLV |
Residual land value |
RNS |
Regulatory News Service |
RPI |
Retail price index |
Scape |
Scape Student Living Limited – Asset
and Facilities Manager for Scape Shoreditch, Scape East, Scape
Greenwich, Scape Surrey, Scape Wembley, The Pad and Podium |
SFS |
Specialist Fund Segment of the Main
Market of the LSE |
UCAS |
Universities and Colleges Admissions
Service |
UKLA |
United Kingdom Listing Authority
|
SHAREHOLDER INFORMATION
Electronic communications from
the Company
Shareholders now have the opportunity to be notified by email
when the Company’s annual report, half-yearly report and other
formal communications are available on the Company’s website,
instead of receiving printed copies by post. This has environmental
benefits in the reduction of paper, printing, energy and water
usage, as well as reducing costs to the Company. If you have not
already elected to receive electronic communications from the
Company and wish to do so, visit www.signalshares.com. To register,
you will need your investor code, which can be found on your share
certificate or your dividend tax voucher.
Alternatively, you can contact Link’s Customer Support
Centre which is available to answer any queries you have in
relation to your shareholding:
By phone: from the UK, call 0871 664 0300, from overseas call
+44 (0) 371 664 0300 (calls cost 12 pence per minute plus your
phone company’s access charge. Calls outside the UK will be charged
at the applicable international rate. Link is open between
09:00 - 17:30, Monday to Friday excluding public holidays
in England and Wales).
By email: enquiries@linkgroup.co.uk
By post: Link Asset Services, The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU.
Frequency of NAV publication
The Company’s NAV is released to the LSE via RNS on a
quarterly basis and is published on the Company’s website.
Sources of further information
Copies of the Company’s annual and half-yearly reports, stock
exchange announcements, investor reports and further information on
the Company can be obtained from the Company’s website.
Key dates
March |
Half-yearly results
announced |
|
Payment of second interim
dividend |
June |
Company’s year end |
|
Payment of third interim
dividend |
September |
Annual results announced |
|
Payment of fourth interim
dividend |
November |
Annual general meeting |
December |
Company’s half-year end |
|
Payment of first interim
dividend |
Directors
Robert Peto (Chairman)
Peter Dunscombe (Senior Independent
Director)
Malcolm Naish
Marlene Wood
Gillen Day (appointed on
23 February 2018)
Administrator
Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
Auditor
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London E14 5EY
Contact
gcpstudentliving@linkgroup.co.uk
Corporate website
www.graviscapital.com/funds/gcp-student
Depositary
Langham Hall UK Depositary LLP
5 Old Bailey
London EC4M 7BA
Investment Manager and AIFM
Gravis Capital Management Limited
24 Savile Row
London W1S 2ES
Tel: 020 3405 8500
Principal banker
Barclays Bank plc
1 Churchill Place
London E14 5HP
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Tel: 0871 664 0300
email: enquiries@linkgroup.co.uk
Secretary and registered office
Link Company Matters Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
Tel: 01392 477500
Solicitor
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
Stockbroker
Stifel Nicolaus Europe Limited
4th Floor, 150 Cheapside
London EC2V 6ET
Tel: 020 7710 7600
Valuer
Knight Frank LLP
55 Baker Street
London W1U 8AN
National Storage Mechanism
A copy of the Half-Yearly Report and Financial Statements will
be submitted shortly to the National Storage Mechanism (“NSM”) and
will be available for inspection at the NSM, which is situated at:
www.morningstar.co.uk/uk/NSM
Neither the contents of GCP Student Living plc’s website nor the
contents of any website accessible from hyperlinks on the website
(or any website) is incorporated into, or forms part of this
announcement.
ENDS