BUSINESS AND TRADING UPDATE

RNS Number : 5614E

Empiric Student Property PLC

31 October 2022

 

Empiric Student Property plc

("Empiric" or the "Company" or, together with its subsidiaries, the "Group")

BUSINESS AND TRADING UPDATE

Strong operational metrics and resilience of higher education sector underpin outlook

Empiric Student Property plc (ticker: ESP), the owner and operator of premium student accommodation across the UK, is pleased to provide a business and trading update.

Highlights

· Record high revenue occupancy of 98% achieved for academic year 2022/23

· Growth in like for like average weekly rent of 5.2%

· Adjusted EPS for financial year 2022 is expected to be broadly in-line with consensus at 3.2 pence per share

· Contracts exchanged on 20 October 2022 for the disposal of a further non-core property generating £13.0m, which is above book value

· Minimum like for like rental growth of 5.0% targeted for academic year 2023/24

Duncan Garrood, Chief Executive Officer of Empiric Student Property plc, said:

"We enter the 2022/23 academic year in a strong position, driven by the improvements we continue to make to our operational platform and portfolio. This is underpinned by resilient demand for high quality student accommodation. We have achieved record high revenue occupancy and are effectively full at 98 per cent, ahead of previous guidance. Against the backdrop of rising inflation, we have delivered like for like average weekly rental growth of 5.2 per cent."

"The wider economic outlook remains uncertain, however the higher education sector is known for its resilience and we expect UK universities to remain attractive to both domestic and international students. We are firmly focused on our premium accommodation offering and believe our approach to high quality customer service delivered through our Hello Student brand places us in a strong position."

Academic year 2022/23

We are pleased with the strong performance at the start of the academic year 2022/23 ("AY22/23") having achieved a record 98 per cent revenue occupancy across our portfolio (AY21/22: 86 per cent) and like for like average weekly rental growth of 5.2 per cent. This is the highest revenue occupancy we have recorded in the Company's history, reflecting the strong demand from students for our premium accommodation combined with high levels of customer service through our Hello Student platform.  This has exceeded the revenue occupancy guidance range provided on 11 August 2022 of between 90 to 95 per cent.

The Group currently has a greater proportion of UK students than in previous years, the result of targeted marketing during the period of the pandemic. UK students now represent 50 per cent of bookings, the balance being 29 per cent Chinese and 21 per cent other international.  This compares to our pre-pandemic breakdown of approximately one third each for UK, Chinese and other international.

Developments

St Marys, Bristol (153 bed scheme) has been completed and delivers a best in class building next to the University of Bristol, with our residents having moved in on schedule in September. The property provides great student wellbeing amenities and strong sustainability credentials, with a BREEAM Excellent accreditation expected.  

South Bridge, Edinburgh (59 bed scheme), located adjacent to University of Edinburgh, has been largely pre-let and has been extensively refurbished to deliver our first bespoke Post Graduate product with completion on target for November.

Given the current market volatility we have largely paused our development and acquisition pipeline.

Disposals

Contracts were recently exchanged for the disposal of a non-core property in London for £13.0 million, which is above book value. Completion is set for mid-November.

Since March 2021, including the above, the Company has generated £57.6 million from the disposal of non-core assets. A further £30 million remains under offer, however we do expect current market conditions to impact the timing of the residual disposal programme.

Debt

As at 30 September 2022, LTV was 29.7 per cent (based on 30 June 2022 valuations) with a weighted average cost of debt of 3.7 per cent, and a weighted average term to maturity of 4.8 years. Two thirds of our debt is fixed and one third floating. Cash and undrawn committed facilities totalled £100.6 million.

We are in active and constructive discussion with lenders in respect of refinancing requirements. The only refinancing requirement in 2023 is in respect of a £20 million facility which falls due in March.

Dividends

Adjusted earnings are expected to be broadly in-line with analyst consensus of 3.2 pence per share for the year ended 31 December 2022. In this context, the Board reconfirms its intention to pay a minimum 2.5 pence for the financial year to December 2022. The Company intends its dividend to be progressive, however given the significant recent change in macro-economic outlook, in particular the impact of inflation and rising interest rates, it is prudent to keep forward looking dividend targets under review at this time. We'll provide further guidance during the first quarter of 2023.

Change in Chief Financial & Sustainability Officer

Further to the Company's announcement on 4 August 2022, Donald Grant joined the business on 12 September 2022 and has been working closely with Lynne Fennah on an orderly transition during the past seven weeks. Lynne will step down from the Board later today and will no longer be involved in the day-to-day operations of the business. Lynne will however remain available to support the team as necessary into the new year. The Board once again extends Lynne its sincere thanks and very best wishes for the future.

Financial Year 2023

For the academic year 2023/24 we expect revenue occupancy to remain strong. We target like for like weekly rental growth of at least 5 per cent, offsetting the impact of inflationary pressure. The Company's energy costs will remain hedged throughout AY23/24. Based on current forward interest rates and debt profile, we anticipate the weighted average cost of debt to be in the range of 4.3 to 4.5 per cent.

We will provide further guidance alongside our annual results in March 2023.

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

Empiric Student Property plc (via FTI Consulting below) Duncan Garrood (Chief Executive Officer) Donald Grant (Chief Financial & Sustainability Officer) Jefferies International Limited 020 7029 8000 Tom Yeadon Andrew Morris Peel Hunt LLP 020 7418 8900 Capel Irwin Carl Gough FTI Consulting Dido Laurimore Eve Kirmatzis 020 3727 1000 [e-mail]

The Company's LEI is 213800FPF38IBPRFPU87.

Further information on Empiric can be found on the Company's website at www.empiric.co.uk .

Notes:

Empiric Student Property plc is a leading provider and operator of modern, predominantly direct-let, premium student accommodation located in high-demand university towns and cities across the UK. Investing in both operating and development assets, Empiric is a fully integrated operational student property business focused on premium studio-led accommodation managed through its Hello Student® operating platform, that is attractive to affluent growing student segments.

The Company, an internally managed real estate investment trust ("REIT") incorporated in England and Wales, listed on the premium listing segment of the Official List of the Financial Conduct Authority and was admitted to trading on the main market for listed securities of the London Stock Exchange in June 2014.

 

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