GCP STUDENT LIVING PLC
Half-yearly report and
condensed consolidated financial statements for the six months
ended 31 December 2018
(the “Company” or “GCP Student”,
together with its subsidiaries the “Group”)
LEI: 2138004J4ID66FK38H25
GCP Student, the UK’s first REIT focused on student residential
assets, is pleased to announce its results for the six months ended
31 December 2018.
The full half-yearly report and condensed consolidated financial
statements can be accessed via the Company's website at
www.gcpstudent.com or by contacting the Company Secretary by
telephone on 01392 477500.
ABOUT US
GCP Student was the first real estate
investment trust in the UK to focus on student residential
assets.
The Company seeks to provide shareholders with attractive total
returns in the longer term through the potential for modest capital
appreciation and regular, sustainable, long-term dividends
with inflation-linked income characteristics.
It invests in properties located primarily in and around
London where the Investment
Manager believes the Company is likely to benefit from supply and
demand imbalances for student residential accommodation and a
growing number of international students.
The Company has a premium listing on the Official List of the
FCA and trades on the Premium Segment of the Main Market of the
London Stock Exchange. The Company had a market capitalisation of
c.£610 million at 31 December 2018.
AT A GLANCE
|
HY 2016 |
HY 2017 |
HY 2018 |
Value of property portfolio |
£465.7m |
£739.6m |
£841.5m |
EPRA NAV1,2 per
share |
138.17p |
146.31p |
157.93p |
Dividends per share |
2.86p |
2.96p |
3.06p |
Net operating
margin2 |
79% |
78% |
78% |
Loan-to-value |
16% |
23% |
26% |
|
AY 2016 |
AY 2017 |
AY 2018 |
Student rental
growth2 |
3.9% |
4.1% |
3.5% |
HIGHLIGHTS FOR THE
PERIOD3
- Annualised shareholder total return since IPO3
of 11.9%, compared to the Company’s target return of
8-10%.
- Dividends of 3.06 pence per
share paid in respect of the period.
- EPRA NAV3 (cum-income) per ordinary share of
157.93 pence and EPRA NAV (ex-income)
per ordinary share of 156.40 pence at
31 December 2018.1
- Total rental income for the period of £20.9 million.
- Successful equity raise of £38.1 million (before issue
costs) through a placing of new ordinary shares.
- New debt facilities for an aggregate amount of up to £100
million with Wells Fargo.
- Entry into a conditional contract to acquire and forward fund
Scape Brighton, which is expected to provide c.550 beds for the
2020/21 academic year.
- The Company benefits from a future
contractual arrangement to acquire Scape Canalside, a
new-build asset located adjacent to Queen Mary University of
London.
- High-quality portfolio of ten assets with c.3,600 beds located
primarily in and around London,
with a valuation of £841.5 million at 31
December 2018. The Company’s properties continue to
benefit from the supply/demand imbalances for modern student
facilities, with the portfolio fully occupied and rental growth of
3.5% for the 2018/19 academic year.
- Completion of the refurbishment of Scape Bloomsbury ahead
of schedule for the 2018/19 academic year, providing 432 beds in
London WC1.
- Construction of the forward-funded project Circus Street,
Brighton continues in line with
expectations and is expected to complete for the 2019/20 academic
year, providing c.450 beds.
1. EPRA NAV is equivalent to the NAV
calculated under IFRS for the year.
2. APM – see glossary for definitions and
calculation methodology.
3. The Company’s financial statements are
prepared in accordance with IFRS. The financial highlights above
include performance measures based on EPRA best practice
recommendations, which are designed to enhance transparency and
comparability across the European real estate sector. See glossary
for definitions.
Robert Peto, Chairman,
commented:
“On behalf of the Board, I am pleased
to report a period of strong performance for the Company. The focus
on assets in and around London has
delivered the Company’s strongest NAV performance for an interim
period since 2015, with the NAV per share rising by 5.9% to
157.93 pence per share over the
six-month period.
The Company’s NAV performance has
been underpinned by rental growth of 3.5% achieved for the current
academic year from a fully occupied portfolio of private student
accommodation assets. Accordingly, the Company has been able to
increase its dividend during the period.
It is encouraging to note the
Company’s shareholder total return performance over the period of
3.0%. Over the same period, the FTSE EPRA NAREIT Index declined by
13.8%, with the Company one of only a handful of UK REITs to
deliver positive total returns to investors.
The highly selective approach adopted by the Board and
Gravis, the Investment Manager, to asset selection and the
locations in which the Company operates, has demonstrably benefited
shareholders through strong NAV performance and dividend growth,
generating annualised total returns of 11.9% since IPO.
Since the EU referendum in 2016, the
Board has repeatedly noted that the future risks of Brexit remain
unknown and difficult to quantify. Notwithstanding, the attraction
of the UK, and London in
particular, for domestic and global students alike remains evident.
The UK has some of the highest-ranking universities in the world,
with three in the top ten institutions in 2017/181.
Education remains a core sector for the UK economy. With the number
of international students in the UK continuing to rise (a
substantial number of whom choose to study in and around
London) the Board remains
confident that the Company will continue to deliver stable
performance.
The Company has been highly
successful in securing new, modern properties through future
contractual arrangements secured by the Investment Manager. The
Company benefits from a conditional forward purchase agreement to
acquire Scape Canalside, a high-specification, new-build asset
located immediately adjacent to Queen Mary University of
London. With the property expected
to open to students for the 2019/20 academic year, the Board and
Gravis are considering the optimum way to finance its acquisition
ahead of 30 June 2019.”
1. Time Higher Education World University Rankings 2018
For further information, please contact:
Gravis Capital Management Limited
+44 020 3405
8500
Nick
Barker
Dion Di
Miceli
Stifel Nicolaus Europe Limited
+44 020 7710 7600
Neil
Winward
Mark
Young
Tom
Yeadon
Buchanan / Quill
+44 020 7466 5000
Helen Tarbet
Henry Wilson
INVESTMENT OBJECTIVES AND KPIs
The Company invests in UK student accommodation to meet the
following key objectives:
TOTAL RETURN |
PORTFOLIO QUALITY |
DIVERSIFICATION |
To provide shareholders
with attractive total returns in the longer term. |
To focus on
high-quality, modern, private student residential
accommodation primarily in and around London. |
To invest and manage
assets with the objective of spreading risk. |
KEY PERFORMANCE
INDICATORS |
|
|
The Company has
generated an annualised shareholder total return since
IPO1 of 11.9%. |
The Company’s
investment portfolio has been fully occupied since IPO, with
average annual rental growth1 of 3.8%. |
At 31 December 2018,
the Company’s property portfolio comprised ten high-quality, modern
student accommodation assets. |
3.06p
Dividends paid or
declared for the period |
FULL
Occupancy1 for the
2018/19 academic year |
3,561
Number of beds
at 31 December 2018 |
|
|
|
11.9%
Annualised shareholder total return
since IPO1 |
3.5%
Student rental growth1 |
10
Number of assets |
|
|
|
Further information on Company performance can be found
below.
1. APM – see glossary for definitions and calculation
methodology.
CHAIRMAN’S STATEMENT
Introduction
On behalf of the Board, I am pleased to report a period of
strong performance for the Company. The focus on assets in and
around London has delivered the
Company’s strongest NAV performance for an interim period since
2015, with the NAV per share rising by 5.9% to 157.93 pence per share.
It is also encouraging to note the Company’s shareholder total
return performance over the period of 3.0%. Over the same period,
the FTSE EPRA NAREIT Index declined by 13.8%, with the Company one
of only a handful of UK REITs to deliver positive total
returns to investors.
Against a backdrop of concerns over weakening valuations and
cash flows for the wider UK commercial property sector, the Company
has reported strong NAV performance. This has been underpinned by
the rental growth of 3.5% achieved for the current academic year
from a fully occupied portfolio of private student accommodation
assets.
Accordingly, the Company has been able to increase its dividend
during the period, paying a total of 3.06
pence per share. Since IPO in 2013, the Company has
generated annualised shareholder total returns of 11.9%.
Investment activity
During the period, the Company entered into a conditional contract
to acquire and forward fund the construction of Scape Brighton, its
second asset in Brighton. The
property is expected to provide c.550 beds and extensive communal
areas for students for the 2020/21 academic year. The Company
benefits from licensing fees which provide a 5.5% coupon per annum
throughout the construction phase. Scape Brighton will add to the Company’s presence in
the Brighton market, with the
construction of Circus Street, Brighton expected to complete ahead of the
upcoming 2019/20 academic year.
Financial results
The Company has generated a strong set of results in both absolute
and relative terms. The Company’s investment portfolio delivered
rental income of £20.9 million over the period. Its NAV per share
increased from 149.12 pence at the financial year end,
30 June 2018, to 157.93 pence at 31 December 2018.
Dividends
The Company has paid dividends in respect of the six-month period
ended 31 December 2018 of 3.06
pence per share.
The Board is pleased to report the substantial improvement to
the Company’s dividend cover, which has been driven by Scape
Bloomsbury opening to students in September
2018 and the Company’s reduced cash balances as
Circus Street, Brighton nears
completion of its construction.
Financing
On 25 September 2018, the Company
raised £38.1 million by way of a non pre-emptive placing of new
ordinary shares which will be used, together with the Company’s
debt facilities, to fund the development of Scape Brighton and
Circus Street, Brighton.
On 20 December 2018, the Company
entered into an agreement with Wells Fargo in respect of a
development facility for an amount of up to £55 million. The
development facility is intended to be drawn over time, partly to
fund the construction of Scape Brighton. The development
facility has a margin during the construction phase of 3.1% per
annum above LIBOR (reducing to 2% per annum above LIBOR once the
asset is operational and stabilised).
It is repayable on 21 December
2021 with an option to extend by a further twelve months (at
the Company’s discretion, subject to certain conditions being met)
and will be solely secured against Scape Brighton.
Accordingly, the Group’s available banking facilities total £335
million. These facilities include the drawn fixed interest rate
term facilities with PGIM for an aggregate amount of £235 million,
which are secured against certain of the Group’s operational
assets, and have a weighted average term of seven years. In
addition, the Group has £100 million of floating rate
borrowing facilities with Wells Fargo (which were undrawn as at
31 December 2018) comprising the development facility detailed
above and a £45 million redrawable credit facility.
At 31 December 2018, the Group’s
current blended cost of borrowing on its drawn debt was 2.96% with
an average weighted maturity of seven years.
The loan-to-value of the Group at that date was 26%.
Outlook
The Company provides shareholders with access to a portfolio of
private student accommodation assets which continue to benefit from
strong supply and demand imbalances through full occupancy, rental
growth and yield compression. The highly selective approach adopted
by the Board and Investment Manager to asset selection and the
locations in which the Company operates, has demonstrably benefited
shareholders through strong NAV performance and dividend growth
since IPO.
Since the EU referendum in 2016, the Board has repeatedly noted
that the future risks of Brexit remain unknown and difficult to
quantify. At the time of writing, there remains considerable
uncertainty as to the possible outcomes for Brexit.
Notwithstanding, the attraction of the UK, and London in particular, for domestic and global
students alike remains evident. The UK has some of the
highest-ranking universities in the world, with three in the top
ten institutions in 2017/18.1 Further, education remains
a core sector for the UK economy, generating £95 billion and
supporting nearly one million jobs across
the nation.2
With the number of international students in the UK continuing
to rise (a substantial number of whom choose to study in and around
London) the Board remains
confident that the Company will continue to deliver stable
performance.
The Company has been highly successful in securing new, modern
properties through future contractual arrangements secured by the
Investment Manager. As detailed in the Company’s announcement on
3 October 2017, the Company benefits from a conditional
forward purchase agreement to acquire Scape Canalside, a
high-specification, new-build asset located immediately adjacent to
Queen Mary University of London.
With the property expected to open to students for the 2019/20
academic year, the Board and Investment Manager are considering the
optimum way to finance its acquisition ahead of acquiring the
property.
Robert Peto
Chairman
19 March 2019
1. Times Higher Education World University Rankings
2018.
2. The Impact of Universities on the UK Economy,
Universities UK.
INVESTMENT MANAGER’S REPORT
The UK student accommodation
market
The Investment Manager remains positive regarding the outlook
for the student accommodation sector in the UK, particularly in
relation to the Company’s ‘core’ markets (including London, Brighton and Bristol) which continue to benefit from
attractive demand characteristics supported by constrained supply.
The Investment Manager continues to believe that the location of
assets is fundamental to their ability to support long-term returns
to shareholders.
Student numbers supportive
of occupancy and growth
UCAS data for the 2018/19 academic year shows year-on-year
growth of 4.4% in the number of international students accepted
onto full-time courses in the UK, a sixth consecutive year of
growth. Acceptances from both EU and non-EU students have
increased, with the former continuing to remain above the levels
seen prior to the EU referendum.
Whilst total acceptances to full-time higher education in the UK
for the 2018/19 academic year remain broadly consistent
with prior years, a combination of the cost of tuition and the
removal of student number controls continues to benefit the top
ranked universities most, suggesting a flight to quality as
students increasingly view their choice of university in terms of
expected future earnings.
Demand for full-time higher education courses in London remains strong relative to the rest of
the UK. London is home to
23 universities, with more universities ranked in the top 40
by The Times Higher Education World University Rankings than any
other city in the world. Approximately one-third of the 2.3 million
students in the UK study in London
and the South East. International students in particular favour
London as a destination for higher
education given its continued reputation as a global centre of
academic excellence; a quarter of all international students in the
UK choose to study in London.
With 92% of the Company’s portfolio located in and around
London and 77% of the tenants
being international students, current market dynamics are strongly
supportive of the Company’s investment objective and underpin its
continued ability to deliver fully occupied assets with long-term
rental growth prospects.
Strong supply-side barriers
The supply of private student accommodation varies substantially
across the UK with increasing divergence of returns between cities
with an undersupply of student housing and those with less
restrictive planning regulations. The Investment Manager targets
markets which suffer from a structural undersupply of such assets.
High land values and the difficult planning environment, which
prioritises social housing and residential schemes over student
accommodation, has seen the London market remain severely undersupplied.
Brighton, like London, also remains severely undersupplied,
as shown below.
The beneficial impact of these supply-side barriers on the
Company’s portfolio, coupled with strong demand for accommodation
in its assets, is reflected by the valuation increases and rental
growth achieved since its IPO in 2013.
Transactional activity
Investment volumes in 2018 exceeded £3.2 billion in
2018. At the date of this report, we estimate that there is a
further £1.4 billion of stock on the market. Overseas buyers
continue to dominate the market for UK student residential
assets.
Of particular note was the acquisition by Allianz of a £350
million holding in the £1.5 billion Chapter portfolio, comprising
c.5,100 beds in and around London.
The Investment Manager estimates the Chapter portfolio traded at a
yield just above 4%. Such investment activity, combined with the
anticipated impact of the London Plan (which may create additional
barriers to the development of student schemes and drive increased
demand for existing assets), continues to drive yield compression
across the London market.
This is reflected in the increased valuation of the
Company’s portfolio over the period under review.
Students per bed
ratio
London
3.6
Brighton
4.5
Bristol
2.8
National average
2.0
Source: HESA.
WHERE, WHAT AND HOW
THE THREE FUNDAMENTALS
Where the assets are located
- Primary focus in and around London
- Proximity to HEI and/or major transport hub
- High supply side barriers
What the Company buys
- Intelligent design to optimise long-term returns
- Large-scale assets benefiting from operating efficiencies
- Modern purpose-built accommodation
How the Company operates
- High-specification facilities
- Hotel level service
- Competitive pricing
Portfolio performance update
The key drivers of the Company’s returns are based on the three
fundamentals shown above which form the basis of how the Investment
Manager seeks to add value over the long term.
The Company’s portfolio continues to perform in line with the
Investment Manager’s expectations. The operational properties are
fully occupied with respect to the 2018/19 academic year. The
portfolio generated rental income of £20.9 million for the
six-month period to 31 December 2018
and average rental growth of 3.5% year-on-year. The Company is able
to achieve strong rental growth through its focus on markets
benefiting from strong supply and demand imbalances and the
location of its assets, all of which are within a 10-minute
walk of an HEI or major transport links.
Over the period under review, the Company has achieved strong
NAV growth driven by a like-for-like portfolio valuation uplift of
4.8%. The external market valuation of the portfolio was £841.5
million at 31 December 2018. The
valuation uplift has been driven by rental growth, full occupancy
and yield compression across its portfolio, with notable valuation
uplifts on Scape Bloomsbury of £9.9 million, Scape Shoreditch of
£7.7 million and Scape East of £10.0 million. The blended net
initial yield of the Company’s operational portfolio at
31 December 2018 was 4.74%.
London continues to attract the
attention of institutional and sovereign wealth fund investors,
with competitive market activity for private student accommodation
assets further driving yield compression, which has positively
impacted the valuation of the Company’s assets. As detailed
above, 92% of the Company’s portfolio by value is located in
and around London.
During the period under review, the comprehensive refurbishment
of Scape Bloomsbury was completed ahead of schedule with the
property open to students for the beginning of the current academic
year, providing 432 beds in London
WC1. The asset is currently fully occupied.
The forward-funded construction of Circus Street, Brighton continues in line with the Investment
Manager’s expectations. The asset is expected to complete for the
2019/20 academic year and will provide a further 450 beds in
addition to c.30,000 sq ft of commercial office space, which will
complete by March 2020. The student
accommodation will be let on a 21-year lease, with annual uplifts
of RPI plus 50 basis points, capped at 5% and floored at 2% to a
subsidiary guaranteed by Kaplan Inc, a global education provider.
The Company has benefited from a licensing fee providing a 5.5%
coupon on drawn funding through the construction phase.
In July 2018, the Company entered
into a conditional contract to acquire and forward fund Scape
Brighton. Scape Brighton will
provide c.550 beds, extensive communal areas and c.1,500 sq ft of
retail space. It is currently expected that Scape Brighton will be
operational for the 2020/21 academic year.
Outlook
The Company provides shareholders with a property portfolio
which continues to benefit from supply and demand imbalances for
student residential accommodation in its core markets. The
attraction of these core markets for owners of private student
residential accommodation remains evident, as demonstrated by the
occupancy levels, rental growth and yield compression seen across
the Company’s portfolio. The Investment Manager believes
investment demand is increasingly selective, with the weight of
institutional capital focusing on the supply of ‘core’ locations.
This is illustrated by the substantial yield differential between
private student residential accommodation assets in and around
London and in super-prime regional locations as compared to
those located in secondary and tertiary regional locations.
Notwithstanding the ongoing uncertainties surrounding Brexit and
weakness in the wider real estate markets, international student
numbers and institutional demand for assets in London both remain resilient.
Looking ahead, the Investment Manager believes the Company
remains well positioned to benefit from the supply and demand
imbalances in core markets, with institutional investment demand
and restrictive planning regimes in the markets in which it
operates. The UK, and London in
particular, remains a global centre of education and the Investment
Manager believes that this is set to continue, particularly given
the importance of the education sector to the UK economy.
The Investment Manager has been highly successful in securing
new, modern properties through future contractual arrangements
which have enabled the Company to create its own pipeline of assets
in attractive locations where existing properties may not have
otherwise been available. Forward purchase agreements, through
which the Company has committed to acquire assets under development
once they become operational, have been used for the acquisition of
its Scape Shoreditch, The Pad and Podium assets. The Company has
benefited from valuation gains since acquisition of, in aggregate,
£40.5 million on these properties, representing an average
valuation uplift on purchase prices of c.18%.
On 3 October 2017, the Company
announced that it had entered into a conditional forward purchase
agreement to acquire Scape Canalside, a high-specification,
new-build asset located immediately adjacent to Queen Mary
University of London, and in the
same locality as the Group’s existing c.590-bed Scape East asset.
The property is on track to open to students for the 2019/20
academic year, providing approximately 410 beds. If the conditional
contract is completed, the Company’s portfolio will include c.1,000
beds in the same locality as Queen Mary University of London, providing the opportunity to take
advantage of operational economies of scale.
The Investment Manager believes the acquisition of Scape
Canalside should enable the Company to secure a new asset in a
highly attractive London location
and which is expected to provide rental and earnings growth for the
Company over the long term. Based on current market conditions and
the terms of the forward purchase agreement the Investment Manager
currently anticipates that, if acquired, the Company will benefit
from an uplift in the valuation of Scape Canalside at the time of
its first full independent valuation at 30
September 2019. Accordingly, the Investment Manager
believes that Scape Canalside represents an attractive opportunity
for the Company.
FINANCIAL REVIEW OF THE PERIOD
Financial results
The Company has delivered robust results for the six-month
period to 31 December 2018, with
average rental growth of 3.5% across the portfolio for the 2018/19
academic year and generating total rental income for the period of
£20.9 million. Profit before tax and fair value gains on investment
properties of £9.0 million was generated in the period. The
increase in profitability year-on-year is due to scale, with a
further asset becoming operational in the period, increasing gross
profit, with administration and finance expenses remaining broadly
consistent year-on-year.
Property expenditure
The Company’s net operating margin has remained stable at c.78%
with the continued efficient management of costs by
the Company’s Asset and Facilities Managers. Property
expenditure of £4.5 million was incurred during the period, which
is in line with expectations.
Administration expenditure
Total administration expenses of £4.0 million comprise
fund running costs, including the Investment Manager’s fee and
other third party service provider costs in the period in line with
the Company’s service provider contracts.
Dividends and earnings
The Company increased its dividend, paying a dividend of
3.06 pence per share for the period.
The dividend was 81% covered by adjusted EPS¹ of 2.49 pence. Whilst the Company targets a
fully-covered dividend over the longer term, where assets in its
portfolio are being refurbished or are under development (as is the
case with development projects such as Circus Street and the
recently completed Scape Bloomsbury), cover may be adversely
affected over the short term.
The dividends were paid as 2.35
pence per ordinary share as PID in respect of the Group’s
tax exempt property rental business and 0.71
pence per ordinary share as ordinary dividends.
Ongoing charges percentage
The Company’s ongoing charges ratio for the twelve months to
31 December 2018, based on the AIC’s
methodology, excluding direct property costs, was 1.27%.
Financial performance
Summary profit and
loss
|
Six
months
ended
31 December
2018
£’000 |
Six
months
ended
31 December
2017
£’000 |
Rental income
|
20,868 |
17,317 |
Operating
expenses |
(4,517) |
(3,860) |
Gross profit (net
operating income) |
16,351 |
13,457 |
Net operating
margin |
78% |
78% |
Administration
expenses |
(3,959) |
(3,614) |
Net finance costs |
(3,430) |
(3,354) |
Profit before tax
and fair value gains on investment properties |
8,962 |
6,489 |
Fair value gains on
investment properties |
39,898 |
32,357 |
Profit before tax
for the period |
48,860 |
38,846 |
1. Refer to Note 7.
Valuation
The valuation of the Company’s property portfolio has increased
to £841.5 million. Total gains on investment properties through
revaluation of the Company’s investment portfolio were
£39.9 million for the period ended 31
December 2018. The portfolio is fully occupied for the
2018/19 academic year.
Debt financing
The Company has continued to utilise its debt facilities during
the period. The four facilities amount to £335 million, including
two fixed interest rate term facilities for an aggregate amount of
£235 million which are secured against certain of the Group’s
operational assets. In addition, the Group has £100 million of
floating rate borrowing facilities with Wells Fargo (undrawn at
31 December 2018) comprising a £55 million development
facility and a £45 million redrawable credit facility.
The Group’s current blended cost of borrowing on its drawn debt
at the period end is 2.96% with an average weighted maturity of
seven years. The loan-to-value of the Group is 26%.
Lifecycle reserve
The Company’s lifecycle cash reserves were £1.7 million at the
period end. The reserves are held for future expenditure to ensure
the properties are maintained at the level needed to sustain the
current rents and any assumed future rental growth.
EPRA NAV¹
Net assets attributable to equity holders at 31 December
2018 were £648.4 million, up from £563.4 million as at 31 December 2017. The EPRA NAV has increased from
149.12 pence as at 30 June 2018 to 157.93
pence per ordinary share, a 5.9% increase for the six-month
period to 31 December 2018, primarily
driven by increases in portfolio valuations due to strong rental
growth, gains at completion and yield compression.
Cash flow generation
The Company held cash and cash equivalents of £19.8 million at
the end of the financial period under review. Operating cash flows
of £10.5 million were generated by the Company’s student
accommodation portfolio. Total equity capital raised in the year
amounted to £38.1 million, which was used in part to fund the
development of Scape Brighton and Circus Street, Brighton. The remaining cash outflows relate
to the cost of servicing the Company’s debt facilities in addition
to the payment of dividends, resulting in a net decrease in cash
and cash equivalents at the period end.
Financial performance
Summary balance sheet
|
As
at
31 December
2018
£’000 |
As at
31 December
2017
£’000 |
Investment
property2 |
838,964 |
739,585 |
Trade and other
receivables |
47,011 |
16,731 |
Cash and cash
equivalents |
19,781 |
61,943 |
Total assets
|
905,756 |
818,259 |
Liabilities
|
|
|
Trade and other
payables |
(7,068) |
(8,212) |
Deferred income |
(18,574) |
(14,057) |
Interest-bearing loans
and borrowings |
(231,679) |
(232,594) |
Total liabilities
|
(257,321) |
(254,863) |
Net assets
|
648,435 |
563,396 |
Number of
shares |
410,576,707 |
385,064,556 |
EPRA
NAV1 per share (cum-income) (pps) |
157.93 |
146.31 |
EPRA
NAV1 per share (ex-income) (pps) |
156.40 |
144.83 |
1. EPRA NAV is equivalent to the NAV
calculated under IFRS for the period. See glossary for
definitions.
2. Net of lease incentives held as
receivables.
COMPANY PERFORMANCE
Annualised shareholder total return since
IPO1
11.9% HY 2018
12.0% HY 2017
Relevance to strategy: Shareholder total return measures the
delivery of the Company’s strategy, to provide shareholders
with attractive total returns in the longer term.
Adjusted earnings per ordinary
share1
2.49p HY 2018
1.92p HY 2017
Relevance to strategy: Adjusted earnings per share reflects the
Company’s ability to generate earnings
from its portfolio.
Dividends per ordinary share
for the period
3.06p HY 2018
2.96p HY 2017
Relevance to strategy: The total dividend reflects the Company’s
ability to deliver regular, sustainable, long-term dividends
and is a key element of total return.
Occupancy1
FULL HY 2018
FULL HY 2017
Relevance to strategy: Occupancy is a key measure of portfolio
quality and ability to drive rental growth.
Loan-to-value1
26% HY 2018
23% HY 2017
Relevance to strategy: The LTV ratio measures the level of
gearing and the Company’s cost of debt.
Student rental growth1
(like-for-like)
3.5% AY 2018
4.1% AY 2017
Relevance to strategy: Student rental growth is a key measure of
the quality of the portfolio.
EPRA performance
measures2
The data below include performance measures based on EPRA best
practice recommendations which are designed to enhance
transparency and comparability across the European real estate
sector.
EPRA earnings1
£9.0m HY 2018
£6.5m HY 2017
Purpose: A key measure of the Company’s underlying operating
results and an indication of the extent to which the current
dividend payments are supported by earnings.
EPRA NAV1
157.93p HY 2018
146.31p HY 2017
Purpose: Makes adjustments to the IFRS NAV to provide
stakeholders with the most relevant information on the fair
value of the assets and liabilities within a true real estate
investment company.
EPRA net initial yield1
4.74% HY 2018
5.04% HY 2017
Purpose: A comparable measure for portfolio valuations. This
measure increases the comparability of two portfolios.
1. APM – see glossary for definitions and
calculation methodology.
2. In respect of the operational portfolio in line
with EPRA Best Practice Recommendation Guidelines.
INTERIM MANAGEMENT REPORT AND
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
Interim management report
The important events that have occurred during the period under
review, the key factors influencing the condensed consolidated
financial statements and the principal factors that could impact
the remaining six months of the financial year are set out in the
Chairman’s statement and the Investment Manager’s report above.
The Directors consider that the principal risks facing the
Company are substantially unchanged since the date of the
annual report for the year ended 30 June
2018 and continue to be as set out in that report.
Risks faced by the Group include, but are not limited
to:
Operational risk:
- reliance on the Investment Manager and third party service
providers;
- due diligence;
- concentration risk;
- net income and capital values;
- property valuation and liquidity; and
- compliance with laws and regulations.
Market risk:
- UK property market conditions; and
- government policy and Brexit.
Financial risk:
- breach of loan covenants and gearing limits.
Responsibility statement
The Directors confirm that to the best of their knowledge:
- the half-yearly report and consolidated financial statements
have been prepared in accordance with IAS 34 Interim Financial
Reporting issued by the IASB;
- the half-yearly report and consolidated financial statements
give a true and fair view of the assets, liabilities, financial
position and return of the Group; and
- the half-yearly report and condensed consolidated financial
statements include a fair review of the information required
by:
a) 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the consolidated financial statements; and a
description of the principal risks and uncertainties for the
remaining six months of the year; and
b) 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial
position or performance of the Group during that period; and any
changes in the related party transactions described in the last
annual report that could do so.
The half-yearly report and condensed consolidated financial
statements were approved by the Board of Directors and the above
responsibility statement was signed on its behalf by:
Robert Peto
Chairman
19 March 2019
INDEPENDENT REVIEW REPORT
To the members of GCP
Student Living plc
Introduction
We have been engaged by GCP Student Living plc (the “Company”)
to review the consolidated financial statements in the half-yearly
financial report for the six months ended 31
December 2018, which comprise the condensed consolidated
statement of comprehensive income, the condensed consolidated
statement of financial position, the condensed consolidated
statement of changes in equity, the condensed consolidated
statement of cash flows, basis of preparation and accounting
policies and all related notes (together the “condensed
consolidated financial statements”). We have read the other
information contained in the half-yearly report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed consolidated
financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) ‘Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity’ issued by the Auditing Practices Board. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our work, for
this report, or for the conclusions we have formed.
Directors’ responsibilities
The half-yearly report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for
preparing the half-yearly report in accordance with the Disclosure
Guidance and Transparency Rules of the United Kingdom’s Financial
Conduct Authority.
As disclosed in the basis of preparation and accounting
policies, the annual financial statements of the Group are prepared
in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union. The consolidated
financial statements included in this half-yearly report have been
prepared in accordance with International Accounting Standard 34,
Interim Financial Reporting, as adopted by the European Union.
Our responsibilities
Our responsibility is to express to the Company a conclusion on
the condensed consolidated financial statements in the half-yearly
report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial
Information Performed by the Independent Auditor of the Entity’
issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated financial
statements in the half-yearly report for the six months ended
31 December 2018 is not prepared, in
all material respects, in accordance with as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom’s Financial Conduct Authority.
Ernst & Young LLP
London, United Kingdom
19 March 2019
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
FOR THE SIX MONTHS ENDED 31
DECEMBER 2018
Continuing operations |
Notes |
Six
months
ended
31 December
2018
£’000 |
Six
months
ended
31 December
2017
£’000 |
Rental income |
|
20,868 |
17,317 |
Property operating
expenses |
|
(4,517) |
(3,860) |
Gross
profit |
|
16,351 |
13,457 |
Administration
expenses |
|
(3,959) |
(3,614) |
Operating profit
before gains on investment properties |
|
12,392 |
9,843 |
Fair value gains on
investment properties |
3 |
39,898 |
32,357 |
Operating
profit |
|
52,290 |
42,200 |
Finance income |
|
531 |
255 |
Finance expenses |
4 |
(3,961) |
(3,609) |
Profit before
tax |
|
48,860 |
38,846 |
Tax charge on residual
income |
5 |
— |
— |
Total comprehensive
income for the period |
|
48,860 |
38,846 |
EPS (basic and
diluted) (pps) |
7 |
12.26 |
10.13 |
The accompanying notes 1 to 12 form an integral part of these
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 31 DECEMBER
2018
|
Notes |
31
December
2018
£’000 |
30
June
2018
£’000 |
Assets |
|
|
|
Non-current
assets |
|
|
|
Investment
property |
3 |
838,964 |
784,424 |
Deposits for
investment property |
|
2,648 |
2,648 |
Retention account |
|
308 |
308 |
|
|
841,920 |
787,380 |
Current
assets |
|
|
|
Cash and cash
equivalents |
|
19,781 |
29,213 |
Trade and other
receivables |
|
19,877 |
9,005 |
Loans receivable |
12 |
24,178 |
— |
|
|
63,836 |
38,218 |
Total
assets |
|
905,756 |
825,598 |
Liabilities |
|
|
|
Non-current
liabilities |
|
|
|
Interest-bearing loans
and borrowings |
8 |
(231,679) |
(232,771) |
Retention account |
|
(308) |
(308) |
|
|
(231,987) |
(233,079) |
Current
liabilities |
|
|
|
Trade and other
payables |
|
(6,760) |
(8,183) |
Deferred income |
|
(18,574) |
(10,126) |
|
|
(25,334) |
(18,309) |
Total
liabilities |
|
(257,321) |
(251,388) |
Net
assets |
|
648,435 |
574,210 |
Equity |
|
|
|
Share
capital |
9 |
4,106 |
3,851 |
Share premium |
|
445,824 |
408,617 |
Special reserve |
|
41,362 |
44,497 |
Retained earnings |
|
157,143 |
117,245 |
Total
equity |
|
648,435 |
574,210 |
Number of shares in
issue |
|
410,576,707 |
385,064,556 |
EPRA NAV per share
(pps) |
10 |
157.93 |
149.12 |
The accompanying notes 1 to 12 form an integral part of these
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
FOR THE SIX MONTHS ENDED 31
DECEMBER 2018
|
Share
capital
£’000 |
Share
premium
£’000 |
Special
reserve
£’000 |
Retained
earnings
£’000 |
Total
£’000 |
Balance at 1 July
2018 |
3,851 |
408,617 |
44,497 |
117,245 |
574,210 |
Total comprehensive
income |
— |
— |
— |
48,860 |
48,860 |
Ordinary shares
issued |
255 |
37,886 |
— |
— |
38,141 |
Share issue costs |
— |
(679) |
— |
— |
(679) |
Dividends paid in
respect of the previous period |
— |
— |
(2,509) |
(3,306) |
(5,815) |
Dividends paid in
respect of the current period |
— |
— |
(626) |
(5,656) |
(6,282) |
Balance at 31
December 2018 |
4,106 |
445,824 |
41,362 |
157,143 |
648,435 |
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 |
The accompanying notes 1 to 12 form an integral part of these
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS
FOR THE SIX MONTHS ENDED 31
DECEMBER 2018
|
Six
months
ended
31 December
2018
£’000 |
Six
months
ended
31 December
2017
£’000 |
Cash flows from
operating activities |
|
|
Operating profit |
52,290 |
42,200 |
Adjustments to
reconcile profit for the period to net operating cash flows: |
|
|
Gains from change in
fair value of investment properties |
(39,898) |
(32,357) |
Decrease in other
receivables and prepayments |
8,338 |
6,201 |
Decrease in other
payables and accrued
expenses |
(10,252) |
(6,052) |
Net cash flow
generated from operating activities |
10,478 |
9,992 |
Cash flows from
investing activities |
|
|
Acquisition of
investment properties |
— |
(29,532) |
Capital expenditure on
investment properties |
(16,010) |
(42,646) |
Increase in loans
receivable |
(24,178) |
— |
Net cash used in
investing activities |
(40,188) |
(72,178) |
Cash flows from
financing activities |
|
|
Proceeds from issue of
ordinary shares |
38,141 |
70,000 |
Share issue costs |
(679) |
(1,123) |
Proceeds from
interest-bearing loans and borrowings |
17,470 |
15,000 |
Repayment of
interest-bearing loans and borrowings |
(17,470) |
— |
Finance income |
20 |
20 |
Finance expenses |
(5,196) |
(3,587) |
Dividends paid in
the period |
(12,008) |
(11,291) |
Net cash flow
generated from financing activities |
20,278 |
69,019 |
Net
(decrease)/increase in cash and cash
equivalents |
(9,432) |
6,833 |
Cash and cash
equivalents at start of the period |
29,213 |
55,110 |
Cash and cash
equivalents at end of the period |
19,781 |
61,943 |
The accompanying notes 1 to 12 form an integral part of these
financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
1. General information
GCP Student Living plc is a REIT incorporated in England and Wales on 26 February
2013. The registered office of the Company is located at 51
New North Road, Exeter
EX4 4EP. The Company’s shares are listed on the Premium
Segment of the Official List of the UKLA and trade on the Premium
Segment of the Main Market of the London Stock Exchange.
2. Basis of preparation
The condensed consolidated financial statements for the six
months ended 31 December 2018 have
been prepared in accordance with IAS 34 Interim Financial
Reporting. They do not include all financial information required
for full annual financial statements and have been prepared using
the accounting policies adopted in the audited financial statements
for the year ended 30 June 2018. The
audited financial statements were prepared in accordance with IFRS
issued by the IASB as adopted by the European Union.
The financial information contained within this half-yearly
report does not constitute full statutory accounts as defined in
the Companies Act 2006. The financial information for the six
months ended 31 December 2018 has been reviewed by the
Company’s Auditor, Ernst & Young LLP, in accordance with
International Standard on Review Engagements 2410 (UK and
Ireland) ‘Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity’ and were approved for issue on 19 March 2019.
The latest published audited financial statements for the year
ended 30 June 2018 have been
delivered to the Registrar of Companies; the report of the
independent Auditor thereon was unqualified and did not contain a
statement under section 498 of the Companies Act 2006. The
financial information for the year ended 30
June 2018 is an extract from those financial statements.
The condensed consolidated interim financial statements have
been prepared under the historical cost convention, except for
investment property, which has been measured at fair value. The
financial statements are presented in Pound Sterling and all values
are rounded to the nearest thousand pounds (£’000), except when
otherwise indicated.
The Group has chosen to adopt the EPRA best practice guidelines
for calculating key metrics such as net asset value and earnings,
which are presented alongside the IFRS measures.
The condensed consolidated interim financial information
includes the financial statements of the Company and its
wholly-owned subsidiaries for the six months ended 31 December 2018.
2.1 Significant
accounting policies
Accounting policies are consistent with those of the annual
report for the year ended 30 June 2018.
2.2 Segmental
reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being the investment and provision of
student accommodation facilities (including ancillary retail,
commercial and teaching facilities) in the UK.
2.3 Significant
accounting judgements and estimates
The preparation of these financial statements in accordance with
IFRS requires the Directors of the Company to make judgements,
estimates and assumptions that affect the reported amounts
recognised in the financial statements. However, uncertainty about
these assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of the asset
or liability in the future.
IFRS 9 Financial Instruments came into effect for periods
beginning on or after 1 January 2018. This has not had a
material effect on the Company or its operations.
Judgements
In the process of applying the Group’s accounting policies,
management has made the following judgements which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
Valuation of property
The valuations of the Group’s investment property are at fair
value as determined by the external valuer on the basis of market
value in accordance with the internationally accepted RICS
Valuation – Global Standards 2017 and in accordance with
IFRS 13. Refer to note 11 for further details of the
judgements and estimates made in determining the valuation of
property.
Operating lease commitments – Group
as lessor
The Group has entered into commercial property leases on its
investment property portfolio. The Group has determined, based on
evaluation of the terms and conditions of the arrangements, such as
the lease term not constituting a substantial portion of the
economic life of the commercial property, that it retains all the
significant risks and rewards of ownership of these properties and
recognises the contracts as operating leases.
Going concern
The Directors have made an assessment of the Group’s ability to
continue as a going concern and are satisfied that the Group has
the resources to continue in business for the foreseeable future,
for a period of not less than twelve months from the date of this
report. Furthermore, the Directors are not aware of any material
uncertainties that may cast significant doubt upon the Group’s
ability to continue as a going concern. Therefore, the financial
statements have been prepared on a going concern basis.
3. UK investment property
|
Properties
under
development
£’000 |
Leasehold
£’000 |
Freehold
£’000 |
Total
£’000 |
As at 1 July 2018 |
30,490 |
248,460 |
505,474 |
784,424 |
Expenditure on
properties |
— |
27 |
4,962 |
4,989 |
Land and development
costs |
9,653 |
— |
— |
9,653 |
Fair value gains on
investment properties |
6,327 |
5,987 |
27,584 |
39,898 |
As at 31 December
2018 |
46,470 |
254,474 |
538,020 |
838,964 |
As at 1 July 2017 |
59,100 |
229,460 |
346,080 |
634,640 |
Acquisition of
investment property |
— |
— |
29,532 |
29,532 |
Expenditure on
properties |
— |
— |
4,362 |
4,362 |
Land and development
costs |
38,694 |
— |
— |
38,694 |
Transfer between
properties under development and freehold properties |
(79,030) |
— |
79,030 |
— |
Fair value gains on
investment properties |
746 |
13,270 |
18,341 |
32,357 |
As at 31 December
2017 |
19,510 |
242,730 |
477,345 |
739,585 |
As at 1 July 2017 |
59,100 |
229,460 |
346,080 |
634,640 |
Acquisition of
investment property |
— |
— |
29,536 |
29,536 |
Expenditure on
properties |
— |
33 |
23,544 |
23,577 |
Land and development
costs |
49,106 |
— |
— |
49,106 |
Transfer between
properties under development and freehold properties |
(79,030) |
— |
79,030 |
— |
Fair value gains on
investment properties |
1,314 |
18,967 |
27,284 |
47,565 |
As at 30 June
2018 |
30,490 |
248,460 |
505,474 |
784,424 |
During the period, the Group continued construction of Circus
Street, Brighton.
The carrying value of investment property is shown net of lease
incentives held as receivables.
4. Finance expenses
|
Six
months
ended
31 December
2018
£’000 |
Six
months
ended
31 December
2017
£’000 |
Bank charges |
4 |
4 |
Agency fees |
12 |
— |
Loan interest |
3,588 |
3,413 |
Commitment fees |
138 |
— |
Loan arrangement fees
amortised |
219 |
177 |
Other expenses |
— |
15 |
Total |
3,961 |
3,609 |
5. Taxation
As a REIT, the Group is exempt from corporation tax on the
profits and gains from its property rental business, provided it
continues to meet certain conditions as per the REIT regulations.
Non-qualifying profits and gains of the Group (residual income)
continue to be subject to corporation tax.
Corporation tax has arisen as follows:
|
Six
months
ended
31 December
2018
£’000 |
Six
months
ended
31 December
2017
£’000 |
Corporation tax on
residual income |
— |
— |
Total |
— |
— |
6. Dividends
|
|
Six months ended
31 December 2018 |
|
Six months ended
31 December 2017 |
|
Dividend |
Total Pence |
PID |
Ordinary
dividend |
£’000 |
|
Total
Pence |
PID |
Ordinary
dividend |
£’000 |
Current
period dividends |
|
|
|
|
|
|
|
|
|
31 December
20181 |
Second
interim dividend |
1.53 |
1.22 |
0.31 |
— |
|
1.48 |
1.09 |
0.39 |
— |
30 September 2018 |
First
interim dividend |
1.53 |
1.13 |
0.40 |
6,282 |
|
1.48 |
1.07 |
0.41 |
5,699 |
Total |
|
3.06 |
2.35 |
0.71 |
6,282 |
|
2.96 |
2.16 |
0.80 |
5,699 |
Prior
period dividends |
|
|
|
|
|
|
|
|
|
30 June 2018 |
Fourth
interim dividend |
1.51 |
0.94 |
0.57 |
5,815 |
|
1.46 |
0.95 |
0.51 |
5,622 |
Total |
|
1.51 |
0.94 |
0.57 |
5,815 |
|
1.46 |
0.95 |
0.51 |
5,622 |
Dividends in statement of changes in equity |
|
|
|
12,097 |
|
|
|
|
11,321 |
Movement
in withholding tax accrual |
|
|
|
(89) |
|
|
|
|
(30) |
Dividends in statement of cash flows |
|
|
|
12,008 |
|
|
|
|
11,291 |
1. The current second interim dividend was declared
after the period ended and therefore not accrued for as a provision
in the financial statements.
On 5 February 2019, the Company
declared a second interim dividend of 1.53
pence per ordinary share amounting to £6.3 million. The
dividend was paid to shareholders on the register at close of
business on 11 March 2019.
As a REIT, the Company is required to pay PIDs equal to at least
90% of the property rental business profits of the Group.
7. Earnings per share
Basic EPS is calculated by dividing profit for the period
attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares during the period. As
there are no dilutive instruments in issue, basic and diluted EPS
are identical. The following reflects the earnings and share data
used in the basic and diluted share computations:
|
Six
months
ended
31 December
2018
£’000 |
Six
months
ended
31 December
2017
£’000 |
Group earnings for
basic and diluted EPS |
48,860 |
38,846 |
Fair value gains on
investment properties |
(39,898) |
(32,357) |
Group earnings for
basic and diluted EPRA EPS |
8,962 |
6,489 |
Group specific
adjustments: |
|
|
Licence fees on
forward-funded developments |
976 |
876 |
Group specific
adjusted earnings |
9,938 |
7,365 |
|
Six
months
ended
31 December
2018
Pence
per share |
Six
months
ended
31 December
2017
Pence
per share |
Basic Group
EPS |
12.26 |
10.13 |
Basic Group EPRA
EPS |
2.25 |
1.69 |
Diluted Group
EPS |
12.26 |
10.13 |
Diluted Group EPRA
EPS |
2.25 |
1.69 |
Group specific
adjusted EPS |
2.49 |
1.92 |
|
31
December
2018
Number
of shares |
31
December
2017
Number
of shares |
Weighted average
number of shares in issue |
398,652,549 |
383,457,085 |
A third Group specific adjusted EPS calculation has been
calculated to show EPRA earnings including licence fees on
forward-funding agreements which are treated as capital items in
the financial statements. The items have arisen from the
following:
1. For the period ended 31 December
2018:
i. licence fees from the developer of Circus
Street in respect of a forward-funding agreement of £976,000.
2. For the period ended 31 December
2017:
i. licence fees from the developer of Circus
Street in respect of a forward-funding agreement of £46,000;
and
ii. licence fees from the developer of Scape
Wembley in respect of a forward-funding agreement of £830,000.
8. Interest-bearing loans and
borrowings
|
31
December
2018
£’000 |
30
June
2018
£’000 |
Borrowings at the
start of the period |
235,000 |
220,000 |
Borrowings drawn down
in the period |
17,470 |
15,000 |
Borrowings repaid in
the period |
(17,470) |
— |
Borrowings at the
end of the period |
235,000 |
235,000 |
Unamortised loan
arrangement fees brought forward |
(2,229) |
(2,531) |
Amortised in the
period |
219 |
355 |
Loan arrangement fees
incurred in the period |
(1,311) |
(53) |
Unamortised loan
arrangement fees carried forward |
(3,321) |
(2,229) |
Borrowings less
unamortised loan arrangement fees |
231,679 |
232,771 |
The Group has debt facilities of £335 million, comprising the
following:
Secured fixed rate credit facilities totalling £235 million with
PGIM:
Amount |
Facility |
Interest
rate % |
Maturity |
£130,000,000
|
1 |
3.07 |
September 2024 |
£40,000,000 |
1 |
2.83 |
September 2024 |
£65,000,000 |
2 |
2.82 |
April
2029 |
Secured credit facilities totalling £100 million with Wells
Fargo:
Amount |
Facility |
Interest rate % |
Maturity |
£45,000,000 |
Redrawable credit facility |
LIBOR
+1.85% |
July
2021 |
£55,000,000 |
Development loan |
LIBOR
+3.1% |
December
2021 + 1 year |
The Group uses gearing to seek to enhance returns over the long
term and for the purpose of funding acquisitions in line with the
Company’s investment policy. The level of gearing is governed by
careful consideration of the cost of borrowing.
The debt facilities include gearing and interest cover covenants
that are measured in accordance with the respective facility
agreement. The Group has maintained significant headroom
against all measures throughout the financial period and is in full
compliance with all loan covenants at 31
December 2018.
9. Share capital
|
Number of
shares |
Issued
share price |
31
December
2018
£’000 |
30
June
2018
£’000 |
Issued and fully
paid: |
|
|
|
|
At the start of the
period |
|
|
3,851 |
3,358 |
Shares issued on 7
July 2017 |
49,295,774 |
142.00p |
— |
493 |
Shares issued on 25
September 2018 |
25,512,151 |
149.50p |
255 |
— |
Balance at the end
of the period |
|
|
4,106 |
3,851 |
10. Net asset value per ordinary
share
Basic NAV per share amounts are calculated by dividing net
assets attributable to ordinary equity holders of the Company in
the statement of financial position by the number of ordinary
shares outstanding at the end of the period. As there are no
dilutive instruments in issue, basic and diluted NAV per share are
identical. The following reflects the net asset and share data used
in the NAV per share computations:
|
31
December
2018 |
30
June
2018 |
EPRA NAV (pps) |
157.93 |
149.12 |
The EPRA NAV may be calculated as:
|
31
December
2018
£’000 |
30
June
2018
£’000 |
Net assets
attributable to ordinary shareholders |
648,435 |
574,210 |
Net assets for
calculation of EPRA NAV |
648,435 |
574,210 |
Number of ordinary
shares in issue |
410,576,707 |
385,064,556 |
11. Fair value
IFRS 13 defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The following methods and assumptions were used to estimate the
fair values.
The fair value of cash and short-term deposits, trade
receivables, trade payables and other current liabilities
approximate their fair value due to the short-term maturities
of these instruments.
Interest-bearing loans and borrowings are disclosed at amortised
cost. The carrying value of the loans and borrowings approximate
their fair value due to the contractual terms and conditions
of the loan.
Quarterly valuations of investment property are performed by
Knight Frank LLP, an accredited external valuer with recognised and
relevant professional qualifications and recent experience of the
location and category of the investment property being valued,
however, the valuations are the ultimate responsibility of the
Directors, who appraise these quarterly.
The valuation of the Company’s investment property at fair value
is determined by the external valuer on the basis of market value
in accordance with the internationally accepted RICS
Valuation, Global Standards 2017 and in accordance with IFRS
13.
The determination of the fair value of investment property
requires the use of estimates such as future cash flows from assets
such as lettings, tenants’ profiles, future revenue streams,
the capital values of fixtures and fittings, plant and machinery,
any environmental matters and the overall repair and condition
of the property and discount rates applicable to those assets.
The following tables show an analysis of the fair values of
assets recognised in the statement of financial position by level
of the fair value hierarchy1:
|
31 December 2018 |
Assets
and liabilities measured at fair value
|
Level
1
£’000 |
Level
2
£’000 |
Level
3
£’000 |
Total
£’000 |
Investment
properties |
— |
— |
841,470 |
841,470 |
|
— |
— |
841,470 |
841,470 |
|
30 June 2018 |
Assets and liabilities measured at fair value |
Level
1
£’000 |
Level
2
£’000 |
Level
3
£’000 |
Total
£’000 |
Investment
properties |
— |
— |
784,424 |
784,424 |
|
— |
— |
784,424 |
784,424 |
1. Explanation of the fair value hierarchy:
-
Level 1 – quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
-
Level 2 – use of a model with inputs (other than quoted prices
included in Level 1) that are directly or indirectly observable
market data; and
- Level 3 – use of a model with inputs that are not based on
observable market data.
There have been no transfers between Level 1, Level 2 or Level 3
during the period or the comparative period.
Valuation techniques and significant
inputs within the valuation of investment properties
The following table analyses:
-
the fair value measurements at the end of the reporting
period;
-
a description of the valuation techniques applied;
-
the inputs used in the fair value measurement, including the
ranges of rent charged to different units within the same building;
and
-
for Level 3 fair value measurements, quantitative information
about significant unobservable inputs used in the fair value
measurement.
Class of property |
Fair value |
Valuation
technique |
Key unobservable
inputs |
Range |
Operational
student property
31 December 2018 |
£795,000,000 |
Income
capitalisation |
Estimated rental value – 2018/19
Rental growth
Tenancy period
Sundry income
Facilities management cost
Initial yield
|
£165 –
£670 per bed per week
2.5% – 3.0%
40/51 weeks
£50 – £100 per bed p.a.
£2,100 – £2,350 per bed p.a.
4.15% – 5.80% blended
(4.15% – 7.50%) |
Development
student property
31 December 2018 |
£46,470,000 |
Income
capitalisation/
Residual land value (plus cost spend to date) |
Residual land value
Build cost spend to date |
£14,720,000
£31,750,000 |
Operational
student property
30 June 2018 |
£753,934,000 |
Income
capitalisation |
Estimated
rental value – 2017/18
Rental growth
Tenancy period
Sundry income
Facilities management cost
Initial yield
|
£165 –
£465 per bed per week
2.5% – 3.0%
40/51 weeks
£50 – £100 per bed p.a.
£2,050 – £2,250 per bed p.a.
4.5% – 5.75% blended
(4.75% – 7.50%) |
Development
student property
30 June 2018 |
£30,490,000 |
Income
capitalisation/
residual land value (plus cost spend to date) |
Residual
land value
Build cost spend to date |
£8,640,000
£21,850,000 |
Sensitivity analysis to significant
changes in unobservable inputs within the valuation of investment
properties
Significant increases/decreases in the ERV (per sq ft p.a.) and
rental growth p.a. in isolation would result in a significantly
higher/lower fair value measurement. Significant
increases/decreases in the long-term vacancy rate and discount rate
(and exit yield) in isolation would result in a significantly
lower/higher fair value measurement.
Generally, a change in the assumption made for the ERV (per sq
ft p.a.) is accompanied by:
- a similar change in the rent growth p.a. and discount rate
(and exit yield); and
- an opposite change in the long-term vacancy rate.
Gains and losses recorded in profit or loss for recurring fair
value measurements categorised within Level 3 of the fair value
hierarchy amount to £39,898,000 (31 December
2017: £32,357,000) and are presented in the condensed
consolidated statement of comprehensive income in line item ‘fair
value gains on investment properties’.
All gains and losses recorded in profit or loss for recurring
fair value measurements categorised within Level 3 of the fair
value hierarchy are attributable to changes in unrealised gains or
losses relating to investment property held at the end of the
reporting period.
The carrying amount of the Company’s assets and liabilities is
considered to be the same as their fair value.
12. Related party transactions
Directors
The Directors (all non-executive Directors) of the Company and
subsidiaries are considered to be the key management personnel of
the Group. Directors’ remuneration for the six months totalled
£97,000 (six months ended 31 December
2017: £87,500) and as at 31 December
2018, a balance of £nil (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 respective assets on a day-to-day basis in
accordance with the Company’s investment objective and policy,
subject to the overall supervision and direction by the Board of
Directors. For its services to the Company, the Investment Manager
receives an annual fee at the rate of 1% of the NAV of the Company
(or such lesser amount as may be demanded by the Investment Manager
at its own absolute discretion).
The Investment Manager has committed additional resource in
providing its client funds, including the Company, a more
comprehensive service which strengthens the level of transaction
and marketing support for the Company, in a cost-efficient manner.
The Investment Manager receives a fee of 0.3% of the aggregate
gross proceeds from any issue of new shares in consideration for
the provision of marketing and investor introduction services. The
Investment Manager has appointed Highland Capital Partners Limited
to assist it with the provision of such services and pays all fees
due to Highland Capital Partners Limited out of the fees it
receives from the Company.
The Investment Manager has been appointed as the Company’s AIFM
under the investment management agreement in respect of which it
receives an annual fee of £24,000, subject to an annual RPI
increase. The Company has provided disclosures on its website
incorporating the disclosure requirements of the AIFMD
regulations.
During the six months ended 31 December
2018, the Group incurred £3,258,000 (six months ended
31 December 2017: £2,588,000) in
respect of investment management fees, AIFM fees and
transaction management and document services. A total of £3,144,000
is included within administration expenses in the condensed
consolidated statement of comprehensive income and £114,000 is
included within share issue costs relating to shares issued during
the period; at 31 December 2018, £1,669,000
(31 December 2017: £1,196,000) was
outstanding.
The investment management agreement is terminable by the Company
on not less than twelve months’ written notice to the Investment
Manager at any time, such notice to expire no earlier than
21 September 2021, and is terminable
by the Investment Manager on not less than twelve months’ written
notice to the Company at any time, such notice to expire no earlier
than 31 October 2025. The investment
management agreement can be terminated at any time in the event of
the insolvency of the Company or the Investment Manager.
The Company and the Investment Manager entered into the
investment management agreement on 12 April
2013. The agreement was novated from Gravis Capital Partners
LLP to Gravis Capital Management Limited on 20 April 2017.
On 3 October 2017, the Company
entered into a conditional forward purchase agreement to acquire
Scape Canalside. With the property on track to open to students for
the 2019/20 academic year, the Board and the Investment Manager are
considering the optimum way to finance its acquisition ahead of
30 June 2019. The directors of the
Investment Manager and their spouses directly or indirectly own, in
aggregate approximately 45% of Leopard Guernsey Westway Limited,
the vendor of Scape Canalside. If acquired, Scape Canalside will be
purchased on the basis of independent valuation and approval by the
independent Board of Directors.
On 25 July 2018, the Group entered
into a conditional contract with GCP Scaperfield Limited to acquire
and forward-fund the construction of Scape Brighton. The directors
of the Investment Manager and their spouses directly or indirectly
own, in aggregate approximately 80% of Scaperfield Limited, the
vendor of Scape Brighton. Scape Brighton is being acquired on the basis of
independent valuation and approval by the independent Board of
Directors. At 31 December 2018, a
loan of £24.2 million was advanced to Scaperfield Limited to fund
construction costs and is included within loans receivable in the
condensed consolidated statement of financial position. Interest of
£474,000 has been accrued on the loan and is included within
finance income in the condensed consolidated statement of
comprehensive income.
SHAREHOLDER INFORMATION
Electronic communications
from the Company
Shareholders now have the opportunity to be notified by email
when the Company’s annual report, half-yearly report and other
formal communications are available on the Company’s website,
instead of receiving printed copies by post. This has environmental
benefits in the reduction of paper, printing, energy and water
usage, as well as reducing costs to the Company.
If you have not already elected to receive electronic
communications from the Company and wish to do so, visit
www.signalshares.com. To register, you will need your investor
code, which can be found on your share certificate or your dividend
tax voucher.
Alternatively, you can contact Link’s Customer Support
Centre which is available to answer any queries you have in
relation to your shareholding:
- by phone: from
the UK, call 0871 664 0300, from overseas call +44 (0) 371 664 0300
(calls cost 12 pence per minute plus your phone company’s
access charge. Calls outside the UK will be
charged at the applicable
international rate. Link is open between 09:00am – 5:30pm,
Monday to Friday excluding public holidays in England and
Wales);
- by email:
enquiries@linkgroup.co.uk; or
- by post: Link
Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent,
BR3 4TU.
Frequency of NAV publication
The Company’s NAV is released to the London Stock Exchange
via RNS on a quarterly basis and is published on the Company’s
website.
Sources of further information
Copies of the Company’s annual and half-yearly reports, stock
exchange announcements, investor reports and further information on
the Company can be obtained from the Company’s website.
Key dates
March
Half-yearly results announced
Payment of second interim dividend
June
Company’s year end
Payment of third interim dividend
September Annual results announced
Payment of fourth interim dividend
November Annual general
meeting
December Company’s half-year
end
Payment of first interim dividend
GLOSSARY OF KEY TERMS
Adjusted EPS
|
EPS adjusted for
exceptional items and licence fees receivable on forward-funded
developments (refer to note 7) |
AIC
|
Association of Investment
Companies |
Asset and Facilities Managers
|
Scape Student Living
Limited and Collegiate Accommodation Consulting Limited |
AIFM
|
Alternative Investment Fund
Manager |
AIFMD
|
Alternative Investment Fund
Managers Directive |
APM
|
Alternative performance measure |
Annualised shareholder total return since
IPO
|
Total shareholder
return expressed as a weighted annual percentage. Calculated
with reference to the IPO issue price of 100 pence
per ordinary share |
Average annual rental growth |
Average student rental
growth since IPO |
AY
|
Academic year |
Company
|
GCP Student Living plc |
Cost of borrowing
|
Cost of borrowing
expressed as a percentage weighted according to period |
EPRA
|
European Public Real Estate
Association |
EPRA earnings
|
Earnings from operational
activities |
EPRA EPS
|
Recurring earnings from
core operational activities excluding movements relating to
revaluation of investment properties and interest rate swaps and
the related tax effects, divided by the number of shares in issue
(refer to note 7) |
EPRA
NAV
|
Net assets divided by
number of shares. Includes all property at market value but
excludes the mark to market of interest rate swaps (refer to
note 10) |
EPRA NAV (cum-income)
|
Net asset value before
deduction of proposed dividend |
EPRA NAV (ex-income)
|
Net asset value after
deduction of proposed dividend |
EPRA net initial yield
|
Annualised rental
income based on the cash rents passing at the balance sheet date,
less non-recoverable property operating expenses, divided by the
market value of the property, increased with (estimated)
purchasers’ costs |
EPS
|
Earnings per share (refer to note
7) |
ERV
|
Estimated rental value |
EU
|
European Union |
FCA
|
Financial Conduct Authority |
Gearing
|
Debt expressed as a
percentage of gross assets (refer to note 8) |
Gross assets
|
The aggregate value of the total
assets of the Company |
Group
|
GCP Student Living plc and its
subsidiaries |
HEI
|
Higher education institution |
HESA
|
Higher Education Statistics
Agency |
HY
|
Half year |
IAS
|
International Accounting
Standard |
IASB
|
International Accounting Standards
Board |
IFRS
|
International Financial Reporting
Standards |
IPO
|
Initial public offering |
LIBOR
|
London interbank offered rate |
Loan-to-value or LTV
|
A measure of borrowings
used by property investment companies calculated as borrowings, net
of cash, as a proportion of property value |
NAV
|
Net asset value |
Net operating margin
|
Gross profit expressed
as a percentage of rental income |
NIY
|
Net initial yield |
Occupancy
|
Full occupancy is
determined as occupancy across the Company’s operational portfolio
of properties being no less than 97%. This is consistent with
terminology used across the private purpose-built student
accommodation market and the methodology applied by the Company
since its IPO in 2013 |
Ongoing charges ratio
|
Annual percentage
reduction in shareholder returns as a result of
recurring operational expenses |
PGIM
|
PGIM Real Estate Finance |
PID
|
Property income distribution |
pps
|
Pence per share |
REIT
|
Real Estate Investment Trust |
RICS
|
Royal Institution of Chartered
Surveyors |
RNS
|
Regulatory News Service |
RPI
|
Retail price index |
Student rental growth
|
Annual rental growth
measured on a like-for-like basis across the portfolio |
Shareholder total return
|
Share price growth with
dividends deemed to be reinvested on the dividend payment date |
UCAS
|
Universities and Colleges Admissions
Service |
Wells Fargo
|
Wells Fargo Bank N.A. |
CORPORATE INFORMATION
Directors
Robert Peto (Chairman)
Malcolm Naish (Senior Independent
Director)
Gillian Day
Marlene Wood
Administrator
Link Alternative Fund Administrators
Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
Auditor
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London E14 5EY
Contact
gcpstudentliving@linkgroup.co.uk
Corporate website
www.gcpstudent.com
Depositary
Langham Hall UK Depositary LLP
5 Old Bailey
London EC4M 7BA
Investment Manager and AIFM
Gravis Capital
Management Limited
24 Savile Row
London W1S 2ES
Tel: 020 3405 8500
Principal banker
Barclays Bank plc
1 Churchill Place
London E14 5HP
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Tel: 0871 664 0300
email: enquiries@linkgroup.co.uk
Secretary and registered office
Link Company
Matters Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
Tel: 01392 477500
Solicitor
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
Stockbroker
Stifel Nicolaus Europe Limited
4th Floor, 150 Cheapside
London EC2V 6ET
Tel: 020 7710 7600
Valuer
Knight Frank LLP
55 Baker Street
London W1U 8AN
National Storage Mechanism
A copy of the Half-Yearly Report and Financial Statements will
be submitted shortly to the National Storage Mechanism (“NSM”) and
will be available for inspection at the NSM, which is situated at:
www.morningstar.co.uk/uk/NSM
Neither the contents of GCP Student Living plc’s website nor the
contents of any website accessible from hyperlinks on the website
(or any website) is incorporated into, or forms part of this
announcement.
ENDS