Full Year Results

RNS Number : 5406G

Empiric Student Property PLC

18 March 2020

 

18 March 2020

Empiric Student Property plc

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

RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER 2019

The Board of Empiric Student Property plc (ticker: ESP), the owner and operator of student accommodation across the UK, today announces the Company's full year results for the 12 months ended 31 December 2019.

Financial headlines

	As at 31 December 2019	As at 31 December 2018	Change
Revenue	£70.9m	£64.2m	+11%
Gross margin	67.1%	61.8%	+9%
Administration expenses	£9.2m	£9.1m	+1%
Profit before tax	£54.8m	£40.3m	+36%
Basic earnings per share	9.08p	6.68p	+36%
Adjusted earnings per share	4.43p	3.20p	+38%
Dividends declared per share	5.0p	5.0p	0%
Dividend cover	88.5%	64.1%	+38%
Property valuation	£1,029m	£971m	+6%
EPRA NAV per share	110.2p	106.2p	+4%

Financial Performance

· Revenue increased 11% to £70.9 million (2018: £64.2 million) driven by an increase in number of beds as well as higher occupancy levels and ongoing rental growth.

· Gross margin increased to 67% (2018: 62%), reflecting further good progress in increasing revenue and reducing property costs.

· Profit for the year increased by 36% to £54.8 million (2018: £40.3 million).

· Dividends declared in relation to 2019 totalled 5.0 pence per share, dividend cover increased to 88.5% (2018: 64.1%).

· Property portfolio valued at £1,029 million at 31 December 2019 (31 December 2018: £971 million) an increase of 6% (3.6% on a like for like basis).

· EPRA net asset value per share up 4% to 110.2 pence (2018: 106.2 pence).

· Total Return for the 2019 financial year of 8.6% (2018: 6.5%).

· LTV at year end of 32.9% (31 December 2018: 30.6%) below our long-term target of 35% and maximum of 40%, with £35m of undrawn facilities.

· We have raised an additional £32.5 million of debt since the year end and currently have £67.5 million of undrawn facilities.

Operational Performance

· Facilities management for the remaining 57 operating assets was brought in-house at the end of March 2019.

· Significant progress has been made with the in-sourcing programme, with revenue management on track for delivery in 2021.

· Direct led model continues to drive numerous benefits for the business with rental growth across the portfolio on a like for like basis of around 3% for the 2018/19 academic year (2017/18: 2%)

· Improvements in operating efficiencies and cost management has led to a reduction in the average cost per bed of 9% compared to 2018

· 95 assets with 9,401 beds contracted as at 31 December 2019 (31 December 2018: 9,397 beds).

· Development pipeline of 356 beds delivered in 2019 averaging a profit on cost of 14%.

COVID-19

· The safety and welfare of our students and our employees remains our number one priority. The Senior Leadership Team are holding daily calls to monitor the situation and the Company's approach. We continue to operate all of our buildings and closely follow and implement advice from the World Health Organisation, Public Health England and Public Health Scotland.

· Bookings for the 2020/21 academic year are in line with this time last year. Contingency plans are well advanced, and we benefit from a conservative financing structure.

Tim Attlee, Chief Executive Officer of Empiric Student Property plc, commented:

"This is the second successive year of improved margins, dividend cover and total returns, financial indicators which reflect the continuing benefits of our business transformation.

Positive customer satisfaction results and significantly improved colleague engagement scores demonstrate that the business transformation is benefitting customers and colleagues as well as shareholders.

In 2020, we expect to build on the progress we have made in 2019, as we continue to drive revenue and reduce costs, creating a solid base for sustainable growth."

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

Empiric Student Property plc	(via M aitland/AMO below)
Tim Attlee (Chief Executive Officer)
Lynne Fennah (Chief Financial & Operating Officer)
Jefferies International Limited	Tel: [phone]
Stuart Klein
Tom Yeadon
RBC Europe Limited  (trading as RBC Capital Markets)	Tel: [phone]
Charlie Foster
Marcus Jackson
M aitland/AMO (Communications Adviser)	Tel: [phone]
James Benjamin	Email: [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, direct-let, nominated or leased student accommodation across the UK. Investing in both operating and development assets, Empiric is a multi-niche student property company focused on, (i) providing good quality first year accommodation managed through its Hello Student® operating platform in partnership with universities, (ii) offering a variety of second and third year purpose-built accommodation options for individual students and those wanting a group living environment, and (iii) continuing to expand the Group's existing premium, studio-led accommodation portfolio which is attractive to international and postgraduate students.

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.

The Company presentation of its full year results for analysts and investors will still take place at 9.00am on Wednesday, 18 March 2020 but it will now only be accessible via a live conference call and webcast.

As a precautionary measure, there will be no face to face Company presentation to help ensure the health and safety of the Company's shareholders, staff and other stakeholders.

For those wishing to access the live webcast please register here: https://www.investis-live.com/empiric/5e626dd1422218100083ff40/lmlm

For those who have not yet responded and wish to access the live conference call please contact Maitland/AMO at [e-mail]   or by telephone on [phone].

The recording of the presentation will also be accessible on-demand later in the day via the Company website: https://www.empiric.co.uk/investor-information/company-documents .

The Annual Report and Accounts will today be available on the Company's website at www.empiric.co.uk . In accordance with Listing Rule 9.6.1, copies of these documents will also be submitted today to the UK Listing Authority via the National Storage Mechanism and will be available for viewing shortly at www.morningstar.co.uk/uk/NSM.

Hard copies of the Annual Report and Accounts will be sent to shareholders, along with the notice for Annual General Meeting 2020, on or around 27 March 2020.

Chairman's Statement

Focused progress

MARK PAIN
Non-Executive Chairman
17 March 2020

We have once again improved performance against our key financial and operational metrics. This year we delivered double-digit revenue growth, reduced costs per bed, generated further improvements in our gross margin and achieved a material improvement in dividend cover. This stands us in strong stead to maximise our returns to shareholders by delivering sustainable future growth.

Our People

Our continued good progress is only possible because of the dedication and ability of our management team and all of our people. I would like to thank everyone in our business for their contribution over the past year. I would particularly like to welcome the 69 people who joined this year as we completed the in-sourcing of our Facilities Management (FM) activities in relation to 57 buildings.

The views of our people are important to the Board. We carried out two colleague engagement surveys in 2019. Response rates were strong and engagement scores were very encouraging. Additional comments provided by survey respondents helped the business to understand what needs to be done to make Empiric a great place to work.

Our Colleague Forum, established in May 2019 and formed of colleagues across the Group, met four times during the year to discuss a variety of topics including the design and results of the colleague engagement survey, new and revised HR policies, the in-housing of FM as well as a review of the summer turnaround process. Representatives from the Forum supported by the HR Director presented a colleague engagement update to the Board in November 2019. To further enhance the Board's engagement with colleagues, the Board appointed Alice Avis, our newest Non-Executive Director and a member of the Remuneration Committee, as the designated Non-Executive Director to support workforce engagement. Alice will attend at least one Colleague Forum meeting each year and will act as a contact point for Forum Representatives to update the Board in respect of any key issues raised at meetings. Individual representatives from the Colleague Forum will continue to be invited to attend an annual end-of-year Board meeting to update on what they have worked on, the key issues and changes made.

Health, Safety and the Environment

The insourcing of our FM activities also means we have complete control of our health and safety environment. We can continue to enhance our monitoring and make our buildings as safe as possible.

During the year we have reviewed how we interact with our key stakeholder groups and fulfil our aim as a responsible, sustainable business. Whilst there is still work to do, good progress has been made with our key stakeholders and encouraging feedback has been obtained, highlighting that we are heading in the right direction.

Board Appointments and Succession

At the beginning of 2019, we announced the appointment of Alice Avis as a Non-Executive Director. Alice brings a wealth of invaluable experience in driving digital transformation and operational excellence in customer-focused, multi-site businesses, which are important for the Board as Empiric focuses on further enhancing its operations.

At the same time, and, after nearly five years on the Board, we announced that Stephen Alston had decided not to seek re-election as a Non-Executive Director at the Annual General Meeting on 2 May 2019. On behalf of the Board, I would like to thank Stephen for his contribution and time committed since the IPO.

No further appointments were made to the Board during the year. The Board effectiveness review supported the view that following Alice's appointment the Board currently comprises the appropriate skills and experience to drive the delivery of our strategy forward.

Dividends

The Board has declared four quarterly dividends in respect of 2019, of 1.25 pence per share each. We therefore met our dividend target for the year of 5.0 pence per share. Adjusted earnings per share were 4.43 pence, resulting in a marked improvement in dividend cover to 88.5% (2018: 64.1%).

Summary

We have continued to make significant progress with the Operational transformation of the business and we are now embedding and driving improved performance from our new operating model. There is still more to be done to deliver the performance we are capable of and we remain focused intensely on delivering for our shareholders and all other stakeholders in our business. At the time of writing, we are facing into the challenges being posed by the COVID-19 pandemic. As of today, bookings for the 2020/21 academic year are very much in line with the bookings we had taken for the 2019/ 20 at this time last year. The situation is rapidly evolving and it is not yet clear how the student population and University sector will respond to the impact of the virus. We remain vigilant and are closely monitoring the situation and will provide updates as appropriate. Protecting and supporting our Customers, colleagues and other stakeholders whilst underpinning the value of our assets for shareholders will guide our actions over the coming months.

Another successful year of transformation. Much of the heavy lifting has been completed and we are now embedding and driving improved performance from our new operating model.

Our Values

The success of our business is grounded in our culture - the way we think, behave and act towards our key stakeholders (each other, our customers and our investors). Our culture is based on our core values listed below and behaviours demonstrated by our people across our business who are working towards our purpose detailed on the inside front cover. During 2019 we have spent a great deal of time aligning our purpose, our brand and our culture and have held meetings across the business to ensure that everyone understands and is aligned behind what we are and how we want to operate.

Honest

We act with integrity and have courage to do the right things.

Creative

We do things differently, delighting our customers, colleagues and shareholders.

Open

We are transparent in what we do. We engage, involve and share.

Strive

We are always looking for better ways to do things for our customers, colleagues and shareholders.

Reasons to Invest

1
Differentiated business model within the popular PBSA property sector

We target investment in regional cities which attract students from the growing pool of international, postgraduate and returning undergraduates, whose premium accommodation requirements are relatively under-served by the PBSA market. This segmented supply and demand imbalance drives both occupancy and rental growth, creating relatively high-yielding investment providing attractive total returns.

2
Industry-leading operating brand

Hello Student, our operating platform, has become one of the most recognisable in the sector. Its online presence continues to grow with 3.25 million page views of its website in 2019 compared with 2.00 million in 2018.

3
Sustainable long-term business model

There has been consistently strong growth in student numbers over the past decade, and our premium, smaller, characterful and collegiate accommodation with generous communal facilities help us stand out in the market.

4
Strengthening financial performance

We have produced a total return of 8.6% up from 6.5% in 2018 while remaining below our long-term gearing target of 35%.

5
Progressive culture embedded by core values and purpose

We believe in our strong culture which is supported by the core values we live by each day throughout the business from the Board down.

6
Socially and environmentally responsible

We seek to conduct and run our business in a socially and environmentally responsible way through charity partnerships and monitoring emissions.

Our Market

Rising demand for higher education

A ccording to the latest HESA data, the number of full-time students exceeded 1.88 million in 2018/19. This is the largest number of students to have ever enrolled full time in UK higher education.

Understanding changing trends in applications and acceptances provides an indication of current and future demand for our accommodation. Ahead of the 2020/21 academic year, more than 568,330 students applied to UK universities to start a full-time undergraduate course (Source: UCAS January 2020Applicant Deadline Analysis) - this is the first year-on-year rise for four years.

Despite 2020 being the lowest point in the population of 18-year olds in the UK - there are 771,000 this year. In 2015 there were 787,000 and by 2030 there will be 887,000 - participation rates are at their highest this year. According to UCAS research 39.5% of UK 18-year-olds applied for university. The growth in the participation rate and the absolute size of the 18-year old cohort in the UK are expected to drive growth in the full-time student population in the coming decade.

Meanwhile, this year, 20% of all applicants were from outside of the UK. (Source: UCAS January 2019Applicant Deadline Analysis). Over 73,080 students from outside the EU had applied by January 2020, which represents an increase of 15% compared to 2019. Interestingly, international student numbers grew despite the heightened level of political uncertainty surrounding Brexit, highlighting the ongoing global appeal of UK higher education - and the relative value of Sterling.

The numbers of applicants from China, India, Hong Kong, the USA and Singapore continue to grow, with UCAS reporting a 30% year-on-year increase in applicants from China and India. Chinese students still make up the largest proportion of the UK's international student population.

Full-time students in 2018/19
1.88 million

Over the same time period, there was also a 1% increase in applications from within the EU - now comprising 7% of the total student population. For the 2020/21 academic year, the UK government has extended the same terms of enrolment and finance to EU students as UK students enjoy, but future funding and admission arrangements for EU students will emerge from the Brexit trade discussions being conducted this year. The shape of that deal will determine the future of the EU's participation in the UK higher education sector including the fate of EU teaching and research staff employed in HE, and the Pan-European medical and science research programmes.

Government Policy

Over the past year, the UK government has begun to change the previously negative migration environment for skilled immigrants and has encouraged applications from overseas students. The International Education Strategy, announced in March 2019, aims to increase international student numbers in the UK to 600,000 by 2030. This would mark an increase in the present international student population of over 30% (Source: International Education Strategy, March 2019). As part of this strategy, more pragmatic post-study work visa arrangements have been reintroduced.

The UK is home to 18 of the world's top 100 universities, another factor that will entice the increasingly affluent and mobile global student population to Britain (Source: International EducationStrategy, March 2019).

The UK government also published the Augar Review, in May 2019. This focused on lowering the maximum undergraduate tuition fee to £7,500 per annum, from the 2021/22 academic year. It also endorses the renewal of maintenance grants, which were ceased in 2016. These policy changes, should they be enacted, will provide further support to the existing high participation rates.

The introduction of student loans to UK residents wishing to embark on postgraduate study have also stimulated demand. Since these loans were introduced in the 2016/17 academic year, the annual growth rate in the number of full-time postgraduate student numbers has risen from 3% to 5%. The total number of full-time postgraduates has increased from 321,215 in AY 2016 to 356,650 in AY 2018 (Source: HESA 2018/19).

Demand for PBSA is set to remain strong and is reflected by the total number of students living in PBSA continuing to rise year-on-year. Whilst there are around 114,000 PBSA beds in the development pipeline, the demand for bed spaces in the UK is rising at a rate approximately 30% faster than the supply. 1.1 million students are now studying away from home, further supporting the PBSA market (Source: Cushman & Wakefield/UK local authorities). This recurring and growing demand drives the strong income streams that have stimulated investment activity in the PBSA sector.

All of this is positive news for the PBSA sector, and according to JLL's Q4 2019 Living Bulletin this combination of demographic growth and government stimuli could lead to a 500,000 increase in the number of HE students in the UK by 2030.

The growth feeds into all segments of the PBSA market, both for the majority of PBSA investors who specialise in providing accommodation for first-year undergraduates, and for us whose target market is returning UK undergraduate, postgraduate and international students.

Supply of PBSA

The supply of PBSA has continued to grow, with around 32,000 beds completing across the UK for the start of the 2019/20 academic year. This raises the overall number of PBSA beds to over 650,000.

According to JLL's Q4 2019 Living Bulletin, the national development pipeline has declined in size over the last three years by 25%. This decline in the delivery pipeline arises from the relative strength of competing land uses and planning policies which now seek to restrict the number of PBSA beds being built.

Analysis carried out by Knight Frank shows that the type of stock in the pipeline is also changing, with a shift towards the delivery of ensuite rooms arranged in cluster flats. This trend highlights a reduction in the delivery of studio bed spaces which is at 32% of stock in 2018.

This change in unit composition is partly a reaction to affordability pressures. A recent survey of students identified value for money as a key factor when deciding where to live. It also highlights the importance of quality and convenience (Source: Knight FrankResearch).

Our own customer surveys consistently identify location, convenience, quality of service, and security as the key drivers of decision-making by residents. Value for money is more of a secondary concern than affordability for them.

Market Yields - Best in Class, Direct Let

	December 2019			December 2018
	Current	Trend	Current		Trend
Central London	4.00%	Stronger	4.00%		Stronger
Super Prime Regional	5.00%	Stronger	5.00%		Stronger
Prime Regional	5.25%	Stronger	5.50%		Stronger
Secondary Regional	7.75%	Weaker	7.00%		Weaker

Source: CBRE Student Sector Investment Yields.

Investment Demand for PBSA

Valued at over £50 billion by Knight Frank, the UK is the second largest PBSA market outside of North America. Investors remain attracted to the sector due to the favourable demand statistics and established nature of the UK PBSA market. More specifically, long-term and stable growth in rents, the popularity of the UK higher education sector and the continued undersupply of quality accommodation are all factors for the continuing rise in the number of investors (Source: Global StudentProperty 2019, Knight Frank).

Whilst some property sectors have experienced a slowdown in transactions, largely due to Brexit-related uncertainty and challenges in the retail sector, PBSA has remained resilient.

JLL reports that £5.2 billion of PBSA investment transactions were completed in 2019. The acquisition of Liberty Living by Unite at £1.4 billion and 24,021 beds was the largest single transaction by far although not directly comparable to our own portfolio.

More relevant was the purchase by Singapore Press Holdings in December of the 2,383-bed Student Castle Portfolio sold for £448 million at a NIY of 5.35% This provides supportive comparable evidence for us since we operate in 71.4% of the cities in that portfolio. It follows the comparable sale in June 2019 of the 3,195-bed, £590 million Vita Student portfolio to DWS at a yield of 5.3%.

2020 looks set to be another big year as the sale of the iQ portfolio by its owners Goldman Sachs and Wellcome Trust to Blackstone has been agreed subject to regulatory approval. The portfolio comprises some 32,000 beds, with over 80% in Russell Group towns and a sale price of £4.7 billion. JLL suggests in its Q4 2019 Living Sector report that the value of transactions in 2020 could be as high as £7.5 billion, a record year.

This investment demand is not evenly spread, so it is important to own assets in the right markets where there is strong demand. During 2019, CBRE reported on a number of asset sales in secondary cities such as Dundee and Derby, all of which traded at yields of 6.50% or higher. As outlined above, this trend has been driven by investors - predominantly international funds and large investor operators - looking to move away from secondary locations and towards mature markets, with at least one strong university and compelling supply and demand characteristics (Source: Student SectorInvestment Yields, CBRE).

The result of this trend - the continued shift in demand towards good-quality assets - has resulted in yield compression at the top end of the quality spectrum. CBRE reported that between Q4 2018 and Q4 2019, best-in-class direct let Prime Regional yields1 compressed by 25 basis points, from 5.50% to 5.25%, whilst best-in-class2 direct let Super Prime Regional3 yields stayed flat but continued to strengthen. Given that over 85% of Empiric's portfolio was classified as either Prime Regional or Super Prime Regional in December 2019, the trends outlined above support Empiric's investment strategy (Source: CBRE Student SectorInvestment Yields, 2019).

PBSA investment transactions in 2019:
£5.2 billion

1  Mature markets with healthy supply and demand ratio and generally more than one university. There are a spread of towns and cities from this level to our secondary locations.

2  CBRE define "best-in-class" as: "well located modern purpose-built property of an operationally efficient scale with a strong letting track record and appropriate room mix". These yields are intended as a guide and we would emphasise the need to appraise individual schemes on a case-by-case basis.

3  Towns and cities with restricted supply or restrictive planning policies.

Our Business Model

Our business model combines an attractive portfolio of high-quality student homes with an efficient in-house operational platform. Together, our operations and assets enable us to create value for all our stakeholders. This in turn allows us to generate maximum returns for our shareholders and build a strong platform for future growth.

Key Strengths	How We Add Value	Outputs
Buildings We have a diversified and attractive portfolio of properties that offer high-quality accommodation to customers ranging from first-year undergraduates to postgraduates. Our People Our people are key to our customer journey. Our passionate and committed colleagues allow us to deliver a high level of service while maintaining cost control. Specialist Knowledge We have the knowledge to develop, acquire and operate successfully student accommodation assets. Brand The Hello Student® brand has continued to grow, becoming a leading brand and giving us a clear identity in the student property market. Financing We finance our business through a combination of shareholder equity and debt facilities. Our debt has a weighted average term of 6.6 years and average interest costs of 3.2%, 71% of our debt is fixed rate and the remainder is variable rate. Technology We continue to leverage technology to augment business processes that drive efficiencies operationally, financially, and commercially whilst also improving our user and customer experiences.	Our Culture We put customers and our people at the heart of everything we do. We treat our customers and our people as individuals by building meaningful, long - term relationships based on happiness and creating amazing places to live. Select Locations/Specifications We are selective about where we invest, with a focus on the towns and cities that are home to the most successful universities and where student numbers are rising faster than average. We select sites based on their compatibility with the types of accommodation we provide and their proximity to universities and amenities. Develop/Buy Developing assets allows us to acquire them at a greater yield on cost than buying standing assets. Forward funded projects are typically less complex than direct developments and have a lower risk profile, as the planning, construction and time risk lies with the third-party developer. These projects also have lower staffing requirements and benefit from a forward funding coupon charged to the developer. However, direct development delivers higher yielding assets than forward funding. We have a strong proven track record in direct development. We also buy standing assets when a specific opportunity arises which complements our portfolio. Operate Our assets are marketed through our Hello Student® platform. This platform gives us a clearly identifiable brand which helps to offer our customers a range of options. Encouraging our people to follow our values helps to increase ownership and pride in our homes. This ensures that customers have the best experience possible, helping to drive occupancy, rents and profit. Reinvest We intend to hold our buildings for the long term. However, we may sell an asset if we see an opportunity to create more value for shareholders by reinvesting the proceeds. We therefore continually review the portfolio to ensure our capital is effectively allocated.	Customers Our customers benefit from having a great home to live in during their studies, at a rent that represents value for money. Customer Satisfaction 7.8 out of 10 Our People Our people have the opportunity to develop their careers in an exciting and growing sector. Internal Promotions During the Year 19 Shareholders Shareholders benefit from strong property sector leading total returns which are underpinned by income. Total Return for 2019 8.6% Communities The communities around our assets benefit from increased employment, reduced pressure on local housing stock, and from the improvements we fund to social infrastructure in the surrounding area. Jobs created in Falmouth and Edinburgh as a result of our completed developments 11

Our Strategic Objectives

Our strategic objectives are designed so that we can create the maximum returns to shareholders and create long-term sustainable value growth.

1.
Customers
We want to achieve customer satisfaction by building welcoming communities in our homes and by giving our customers a sense of security and belonging.

Key Aims for 2020
Further focus on finding out what the students of today really want from their home. The market is ever evolving and we can never stop learning.

2.
Brand
We want to raise awareness of the Hello Student® consumer brand among students, to support our premium accommodation and service offering. We want to become known as the provider of homes not halls.

Key Aims for 2020
Launching a reinvigorated mystery shopper campaign across our buildings so we can ensure our customer service experience is positive and consistent across the Group.

3.
People and Operations
We will continue to develop a culture where our people are engaged and proud to continue to work for the business, making Empiric a destination choice for candidates wanting to work in the student accommodation sector and simply "a great place to work".

We will aim to continually improve operational efficiency through enhancing our in-house functions and performance coaching our colleagues to help them provide the best and most efficient customer service experience.

Key Aims for 2020
We have invested in a Training and Development Manager who joined the HR team in January 2020 to develop our in-house Learning and Development offer across the business.

4.
Buildings
We will maximise the value from the asset portfolio by growing the portfolio profitably and sustainably. This will be done by maintaining a portfolio of attractively high yielding investments with rental growth record and further growth potential.

Key Aims for 2020
284 beds across two developments due for completion for the 2020/21 academic year.

5.
Shareholders
We want to provide our shareholders with attractive sustainable returns. This is achieved through improving profitability and growing our portfolio.

Key Aims for 2020
In 2020 we are targeting dividend cover of around 95% and an improved gross margin.

Progress in the year

1 2 3 4 5	We achieved a customer rating of 7.8 out of 10 and a rebooker rate of 21.3%
1 2 3 4 5	We clearly defined our Purpose, Vision and Values
1 2 3 4 5	We introduced the Colleague Forum
1 2 3 4 5	This is the first year we have had all properties on the Hello Student® platform which helps us ensure a consistent approach to branding, operations and management, which will enhance the brand in the eyes of our customers
1 2 3 4 5	We completed two developments for the 2019/20 academic year providing an additional 356 beds in locations where we already have assets
1 2 3 4 5	Our portfolio achieved like-for-like valuation uplift of 3.6%
1 2 3 4 5	We completed two employee surveys in the year
1 2 3 4 5	We launched the central Customer Relations Team in January, based in Glasgow
1 2 3 4 5	We finalised bringing all FM in-house providing us with complete control of our cost base
1 2 3 4 5	We achieved rental growth of 3% for the 2018/19 academic year
1 2 3 4 5	We introduced Workplace by Facebook to all of our people

Chief Executive Officer's Review

Delivering our promise

TIM ATTLEE
Chief Executive Officer
17 March 2020

This is the second successive year of improved total return and dividend cover growth, financial indicators which clearly reflect the benefits of the continuing transformation of the business. The greatly improved colleague engagement scores during the year and positive customer satisfaction results show that the transformation is benefitting all stakeholders in the business: residents, colleagues and shareholders alike.

T he revenue we generate drives the Group's gross margin and profit. Now that we have direct control of all of our assets, we have been able to implement a number of actions to ensure we maximise the revenue from our buildings.

In January 2019, we launched our Customer Relations Team ("CRT") to support customer relations and sales across our sites. This centralised team helps us to provide consistently high levels of service to all our residents and helps us to generate revenue during an academic year.

Now that we have a clear view of day-to-day occupancy across the whole operational portfolio, we can identify opportunities to "backfill" buildings with semester lets when vacancies arise during the academic year. We use the CRT to lead the effort to make these sales. The CRT follow up on and close leads generated by our digital marketing activity and the marketing is directed by the occupancy data we have.

Growing revenue is a top priority and we are encouraged in achieving like-for-like rental growth for the 2018/19 academic year of 3% - this compares with average growth of 2% in the previous academic years and is further evidence of the benefit of owner operation of this class of asset.

The CRT also helped to tackle areas where we could improve service, such as our website, which we developed further during the year. For example, we have enhanced the enquiries function which gives us an early warning if we are not dealing promptly with a resident's enquiry. Because we can now track the customer's booking journey we also know if we are losing potential bookings because of issues with process.

The biannual resident surveys we run give us great insight into our customers' views and opinions. Our customers are at the heart of what we do, so the detailed feedback from these surveys influences our future customer proposition. With a resident satisfaction rating of 7.8, our check-out score is very similar to last year. We have listened to the feedback we have been given and look forward to improving this score in 2020. We remain committed to providing the best service possible.

75% colleague engagement Score which is above the UK national average of 68%.

Timely management information ("MI") is key to making effective decisions, and we continue to develop reporting that fully supports the business. Our emerging suite of increasingly sophisticated MI reporting tools is transforming both the way we deliver service and how we respond to the changing needs of our customers.

Value-driven Culture

As a result of our in-housing programme we have nearly doubled our headcount since 31 December 2017. It has therefore become increasingly important to define and communicate our purpose, vision and values so that everyone can understand and align their behaviour and actions accordingly.

Our purpose is defined on the inside front cover of this report and this is at the heart of what we do, it's why we get excited about coming to work and why we exist as a business.

We deliver our vision of providing our residents with "homes not halls" through our four values, which are: Honest, Creative, Open and Strive and behaviours which form part of our performance development processes.

We treat our people and our customers as individuals and strive to create meaningful long-term relationships with both groups.

Our values drive our culture, ensuring that everyone knows how they are expected to act, even when no one is watching. These values will provide the foundation that the business needs to succeed.

Pride in Our People

From 1 May 2019, the HR function of our Group was brought in-house. As well as this being a cost-saving initiative, it also brought us a wealth of opportunities with new, skilled team members who have been able to provide value-adding HR services and support across the business.

We now have a Colleague Forum made up of volunteer elected representatives from across the business, supported by the HR team and a nominated Non-Executive Director. It has proved to be a highly effective channel of communication, encouraging the free flow of ideas and opinions.

The Colleague Forum helps us to meet our obligations under the Corporate Governance Code but more importantly it provides all our colleagues with a named representative who is able to raise matters on their behalf, and seek a response from the management team or Board.

In May, the HR team launched the Group's first ever colleague engagement survey which achieved a response rate of 66% and an overall colleague engagement score of 69% against the UK all-sector average of 68%. The full survey results were shared with all colleagues and with the help of the Colleague Forum an action plan has been developed to focus on key areas for improvement.

Developments Delivered in 2019

Site	Development basis	Beds	Completed
King's Stables Road, Edinburgh	Forward funded	166	August 2019
Ocean View, Falmouth	Direct development	190	September 2019
Future Development Pipeline
Site	Development basis	Beds	Delivery year
140/142 New Walk, Leicester	Forward funded	52	Forecast April 2020
Emily Davies, Southampton	Major refurbishment/development	232	2020
FISC, Canterbury	Major refurbishment/development	134	2021
St Mary's, Bristol	Direct development	153	2021

An extract from our action plan is shown below:

Area of focus	Action taken
Senior Leadership Team ("SLT")	We've increased the visibility of the SLT members as the majority were new to the business in 2019. A weekly communication from an SLT member provides a business update to all colleagues.
Caring	We launched an employee assistance programme, supported by a third party, to provide confidential 24/7 advice and support for our colleagues and their immediate family.
Communication	We promoted "Workplace by Facebook" to increase the number of active users and ran 14 roadshows across the business in the autumn to engage our colleagues in understanding our business strategy and direction as well as providing key updates on our full action plan aimed to make us a "great place to work".
Pay and Reward	We completed pay and benefit benchmarking across the Group supported by an external consultancy. We have also created a banding structure including revised terms and conditions as well as benefits in some instances so that we now offer a more competitive and market-aligned offer.

A shorter "pulse" colleague engagement survey was conducted in November 2019 to review progress. This achieved a 5% higher response rate at 74% and an increase in the colleague engagement score of 6% to 75% which strongly confirmed we are on the right track. Our next survey will be in May 2020 and following the recent results we have refreshed our action plan, adding "cost control" and "summer turnaround planning" as new focus areas. The focus areas are each sponsored by a member of the Senior Leadership Team and we are committed to continued improvements.

Diversified Portfolio

Operating under the unifying Hello Student® platform we have a diversified portfolio of assets which are on average around 100 beds in size, occupying prime locations in strong university cities and with unique character. At 31 December 2019, we owned or were committed to owning 95 assets, representing 9,401 beds (31 December 2018: 95 assets, 9,397 beds). Of these, 92 were revenue generating (31 December 2018: 91 assets). Of our total beds 65% are in Russell Group university towns or cities. At this point, like-for-like revenue growth for the academic year 2019/20 averaged approximately 3% across the portfolio.

Independent Valuation

Each property in the portfolio has been independently valued by CBRE, in accordance with the Royal Institution of Chartered Surveyors ("RICS") Valuation - Professional Standards January 2014 (the "Red Book"). At 31 December 2019, the portfolio was valued at £1,028.6 million, an increase of 6% for the year (31 December 2018: £970.6 million).

The valuation benefited from increased income growth alongside modest positive yield shift. Yields in the Prime and Super Prime regional markets strengthened while secondary markets were weaker, reflecting demand and demonstrating why it is vital to have a well-located portfolio. The valuation also includes the recognition of development profit on the projects which reached practical completion ahead of the 2019/20 academic year. The like-for-like increase in the portfolio valuation was 3.6%.

Recycling Our Assets

Now we have full control of our buildings, we have a full suite of granular operational and financial management information which allows us to make informed decisions about the status and performance of all our assets in a market where both supply and demand change over time.

Applying this information, we have identified a small number of properties which are "non-core" to the Company's investment and operational strategy and we will make orderly disposals of these buildings over the coming months.

To safeguard and ultimately improve the financial KPIs of the business, the proceeds of these sales will be promptly deployed into the Company's core strategies through the purchase of standing assets, forward funding agreements and direct development.

Developments and Redevelopments

We completed two developments during 2019, adding 356 beds to our operating portfolio. One was a forward funded development in Edinburgh. The second was a direct development in Falmouth, adjacent to our existing site, Maritime Studios, providing us with a broader offering in the town while allowing us to gain economies of scale.

The forward funded development in Leicester did not complete in time for the 2019/20 academic year, as the site suffered from a series of delays. However, the development agreement protects our position with a rental guarantee. We suffered no reputational damage for the late site as the rooms were not marketed for the 2019/20 academic year.

Our future development pipeline ensures we have a steady supply of quality assets to add to our portfolio.

Outlook

In 2020 we expect to build on the progress we have made in 2019, as we continue to drive revenue and reduce costs, creating a solid base for sustainable growth.

For 2020, the Board is continuing to target a dividend of 5.0 pence per share, which it expects to be around 95% covered by adjusted earnings with an enhanced gross margin.

Despite the uncertainty caused by Brexit we believe that the sector and our proposition are largely insulated from this potential impact and from other economic conditions.

At the time of writing, we are facing into the challenges being posed by the COVID-19 pandemic.

The market continues to polarise with a focus on prime locations and key university towns and cities. We believe we have the right portfolio and an improving operational platform.

The Board is positive about the outlook for the business and is excited about its potential.

Select Locations

More than just a location

We pride ourselves on the locations of our buildings. We aim to locate them in the areas which students want to live in, within walking distances of university while close to all the local amenities. This was supported by our recent resident survey which reconfirmed that while high-quality accommodation is a prerequisite, it is the location which is the most important factor for students when they choose their accommodation.

Edinburgh is a city with three universities and a student population in excess of 49,000 (HESA 2017/18). At the start of the year we had 152 beds operating in the city and in September 2019 a further 166 were added when we opened the King's Stables Road property.

Edinburgh King's Stables Road is situated just ten minutes' walk from the University of Edinburgh. As can be seen from the roof terrace, the property is situated in the heart of the city with fantastic views of the castle.

Edinburgh Student Population
49,000

Key Performance Indicators

Driving our performance

Our key performance indicators ("KPIs") are central to how we run our business and allow us to drive the performance of the business for our shareholders. During the year we have made two small changes to our KPIs. We have introduced one additional non-financial metric around colleague engagement. We have also amended our occupancy KPI so that it now reflects the revenue occupancy we have achieved for an academic year as a percentage of the gross annualised rent.

Strategic Links for below KPIs

1.  Customers

2.  Brand

3.  People and Operations

4.  Buildings

5.  Shareholder Outcomes

Non-Financial KPIs

	Rebooker Rate (%) 21.3%		Customer Happiness (Out of 10) 7.8
Performance	2019	21.3%	2019	7.8
	2018	21.3%	2018	8.1
Purpose	The rebooker rate demonstrates our ability to retain customers within the Hello Student® brand, which in turn is an indicator of the quality of service we provide.		Student satisfaction reflects the quality of service we provide and the attractiveness of our buildings.
Strategic Link	1 2 3 4 5		1 2 3 4 5

	Revenue Occupancy (%) 93.9%		Safety - Number of Accidents 3
Performance	2019/20 As at the end of February 2020	93.9%	2019	3
	2018/19 As at the end of February 2019	93.3%	2018	N/A
Purpose	Occupancy is a key driver of our revenue and demonstrates the quality and location of our assets, the strength of our sales process and our ability to set appropriate rents.		The number of reportable accidents throughout the Group each year. This is a key reporting metric to the Health & Safety Executive as well as a measure of our health and safety strategy and procedures.
Strategic Link	1 2 3 4 5		1 2 3 4 5

	Colleague Engagement 75.0%
Performance	2019	75.0%
	2018	N/A
Purpose	Colleague engagement scores provide an insight into the happiness of our people across a range of topics regarding their working environment.
Strategic Link	1 2 3 4 5

Financial KPIs

	Gross Margin (%) 67.1%		Adjusted Earnings per Share (p) 4.43p
Performance	2019	67.1%	2019	4.43
	2018	61.8%	2018	3.20
Purpose	The gross margin reflects our ability to drive occupancy and to rigorously control our operating costs.		Adjusted earnings per share is the earnings measure that best demonstrates our ability to reward shareholders through dividends.
Strategic Link	1 2 3 4 5		1 2 3 4 5

	Dividend Cover (%) 88.5%		Net Asset Value per Share (p) 110.21p
Performance	2019/20	88.5%	2019	110.21
	2018/19	64.1%	2018	106.14
Purpose	Dividend cover shows our ability to pay dividends out of current year earnings.		Growth in the NAV per share reflects the quality of our assets and our ability to generate revenue from them.
Strategic Link	1 2 3 4 5		1 2 3 4 5

	Total Return (%) 8.6%
Performance	2019	8.6%
	2018	6.5%
Purpose	The total return shows the aggregate value we have created for shareholders, through both capital growth of NAV and dividends.
Strategic Link	1 2 3 4 5

Operational and Financial Review

Driving efficiencies

LYNNE FENNAH
Chief Financial and Operating Officer
17 March 2020

O ur operational performance has continued to improve over the last year with a strong emphasis on controlling costs. We have reduced our average cost per bed by 9% as a result of our in-housing journey and a range of other initiatives we have implemented which are detailed below:

-  In-housing means that we save both the outsourced providers, profit margin and the VAT which we cannot reclaim, while gaining complete control of our own properties, staff working in our buildings and data.

-  Accurate and timely information has allowed us to target specific areas of savings on a property-by-property basis. This granularity has helped to identify a number of key supply streams which have been rationalised.

-  For the first time the staff in all of our buildings work for us, rather than for an outsourced provider. This aligns all of our staff to the business objectives and means that they can truly support our revenue generation and cost-saving initiatives. The finance team provides each building with a monthly update on the performance against their budget to help our people understand their buildings and ensure that our targets are met.

-  Control over procurement allows us to benefit from economies of scale and serve our customers better. For example, our customer survey showed internet speed was one of the top three criteria for our customers. We have procured a national broadband contract which will double speeds up to 200 megabytes per second while reducing per unit costs.

-  As well as the new and improved services the HR team are delivering, having HR in-house allows us to develop and implement new initiatives. For example, we will be launching our own careers website in 2020 backed up by a new applicant tracking system to recruit a greater number of candidates directly as well as focusing on internal development to "grow our own", with both approaches aimed at saving on agency recruitment fees.

-  The rationalisation of our IT platform has provided another huge opportunity. During the year we completed an IT asset audit, which means for the first time we have a clear picture of the IT estate across our portfolio. This will allow us to ensure that we are using all of our resources as efficiently as possible.

-  In November 2019 we moved all of our people onto a single managed IT service provider. This reduced cost and gave us the opportunity to enhance automation, and use our data to ensure our business is run as profitably as possible and is fit for the future.

-  The last step of our in-housing journey is to bring the revenue management system in-house. The development of the revenue management system is on track for full rollout for the 2021/22 academic year. This system will allow us to process bookings, raise rent demands and handle rent collection in-house, resulting in a significant cost saving. We will then also be able to be even more dynamic in our revenue generation, allowing us to maximise the output of our portfolio.

As well as driving down direct property costs, we have also focused on our administrative expenses. The largest category after people costs are legal and professional fees. We have reduced this year-on-year by 30%, as a result of a greater capability within the finance team and the Group generally, meaning that we are less reliant on professional advisers.

Now that the majority of our systems, processes and infrastructure are internalised, our key focus is now on embedding the changes made to the business and ensuring efficiencies are maximised so that we can achieve our 2020 targets.

Our In-Housing Journey

2018

July	-  Utility management and purchasing brought in-house
September	-  Facilities Management for 27 buildings in-housed
November	-  All buildings operated by Hello Student® for the first time -  IT strategic lead brought in-house

2019

January	-  Central Customer Relations Team established
April	-  FM for remaining 57 buildings in-housed
May	-  Senior Leadership Team recruitment largely completed
	-  HR brought in-house
November	-  IT platform rationalised from two platforms to one

2021

September

-  Commence the migration in-house of the back-office revenue management system once our contract with our current provider ends

HelloStudent.co.uk page views
3.25m
2018 - 2.00m

We seek to go above and beyond the statutory fire requirements to ensure the safety of our buildings. The safety of our customers and people is paramount.

Health and Safety ("H&S")

The data we now have access to not only leads to cost-savings but more importantly gives us greater control of the H&S environment. We have enhanced our H&S reporting and improved our compliance dashboard, which is reviewed daily to ensure that we are fully compliant across the Group on such things from fire safety to water testing. We want to ensure that all of our buildings are as safe as possible, giving comfort to our customers, our people and anyone who may visit our sites.

Fire safety management is critical and we aim above and beyond the statutory fire requirements to ensure the safety of our buildings. In the wake of Grenfell, we commissioned a report across our entire portfolio which found no buildings contained any ACM cladding material, and all are of sound construction.

In Q1 2020 we will commission a portfolio-wide survey on enhanced fire safety in our buildings as well as reviewing all building fire strategy documents. We also complete regular testing on fire alarms, sprinklers, emergency lighting, fire extinguishers and building evacuations. Our Fire Risk Assessments are completed annually on each building by our external H&S Consultants. We have a strong moral obligation and commitment to ensuring that our homes are safe for anyone to reside in.

Our Brand and Marketing

Our brand strength continues to grow, allowing us to attract and retain customers. We continue to invest in our online and social media marketing to reach potential customers in a cost-effective way. As well as the revenue-generating changes, we have sought to ensure our branding is consistent across the Group. We have utilised mystery shopping and now also conduct on-site monthly audits to ensure we are following consistent processes across sites. In 2019 we had 3.25 million page views on the website, up 63% on 2018; this shows our targeted marketing strategy is adding value.

Financial Performance

Revenue in 2019 was £70.9 million, up 11% from £64.2 million in 2018. The increase resulted from the initial contribution from developments completed in 2019, a full year of the developments completed in 2018, as well as increased occupancy and income growth, which benefited the final four months of the year.

Property costs were £23.4 million, down 5% overall and 9% on a cost per bed basis due to lower property management fees, procurement savings and other efficiencies. The gross margin for the year was 67.1% (2018: 61.8%).

Operating profit under IFRS was £67.5 million, an increase of 27% compared to the £53.0 million achieved in 2018. This included an aggregate revaluation uplift on our property portfolio at the year end of £29.2 million, net of property acquisition costs (2018: £22.4 million).

Administration expenses were £9.2 million in 2019, lower than our initial guidance of £10 million (2018: £9.1 million). For 2020, we continue to expect administration costs of approximately £10 million, with the additional costs of recruitment in areas such as HR and IT offset by savings elsewhere.

Net financing costs for the year were £12.7 million, net of money market investment income and the fair value gain on interest rate swaps of £0.1 million (2018: £12.7 million and £0.1 million, respectively).

Profit before tax was £54.8 million, up 36% (2018: £40.3 million). No corporation tax was charged, as the Group fulfilled all of its obligations as a UK Real Estate Investment Trust ("REIT"). Basic earnings per share ("EPS") were therefore 9.08 pence (9.07 pence on a diluted basis) (2018: 6.68 pence and 6.67 pence (diluted)).

The Net Asset Value ("NAV") per share as at 31 December 2019 was 110.21 pence, prior to adjusting for the interim dividend for the quarter ended 31 December 2019 of 1.25 pence per share (31 December 2018: 106.14 pence, prior to adjusting for the interim dividend of 1.25 pence per share). The NAV is shown net of all property acquisition costs and dividends paid during the year.

Adjusted EPS is the most relevant measure of earnings when assessing dividend distributions. It increased by 38% from 3.20 pence in 2018 to 4.43 pence in 2019, to give dividend cover of 88.5% (2018: 64.1%).

Purpose-built for students

Developing our own assets allows us to build the homes we want in the best locations.

King's Stables Road in Edinburgh comprises a mix of studio flats and is built to our premium specification, which helps us to target our market segment.

We developed King's Stables Road using a forward funded deal structure. Forward funded deals give us protection against any risk around late deliveries through the provision of a rental guarantee. We also receive a licence fee under the agreement which supports dividend cover through the development period of the building.

Across the PBSA sector nearly one third of student properties are completed late, which causes significant disruption to students. We do not advertise a building for bookings until we have a high degree of certainty that the buildings will be completed on time. King's Stables was completed on time, and Falmouth Ocean View was partially completed. However, we did not market the incomplete rooms ensuring there was no disruption to our customers.

Forward funding and developing our own assets also allows us to unlock additional value from our expertise in developments. On King's Stables Road we achieved a profit on cost of 14%. This helps deliver value to our shareholders by driving out total return.

Accommodating spaces

Statistics for King's Stables Road this year

Friendliness of Staff
9.0/10

Overall Quality of Welcome
8.5/10

Efficiency of Check-in
8.4/10

We want to make all of our customers feel as though they are living in homes not halls.

Therefore our biannual student surveys are crucial to us. They allow us to understand the customers' experience in each and every building.

These results are just a snapshot across our portfolio and are a testament to all the hard work our people put in to get to know each and every customer who lives in their building.

For example, we also host events in all of our buildings to foster a sense of community and ensure people do not feel lonely. Our people in King's Stables Road have already held eight events this year. These have ranged from Fruity Friday to Guy Fawkes night and received great feedback from our customers. The check-in survey indicated that 65% of King's Stables Road customers have attended at least one Hello Student® event.

Dividends

Quarter to	Declared	Paid	Amount (p)
31 March 2019	29 May 2019	28 June 2019	1.25
30 June 2019	19 August 2019	20 September 2019	1.25
30 September 2019	27 November 2019	20 December 2019	1.25
31 December 2019	17 February 2020	Due 20 March 2020	1.25
			5.00

Dividends

The dividends declared in respect of the 2019 financial year are shown in the table above.

Of the total dividends, 2.75 pence per share was declared as property income distributions and 2.25 pence per share was declared as ordinary UK dividends (2018: 1.32 pence per share and 3.68 pence per share, respectively).

At the period end, the Company had distributable reserves of over £500 million, offering substantial headroom for dividend payments. At the Annual General Meeting ("AGM") on 2 May 2019, shareholders approved a resolution to cancel the Company's share premium account, which stood at £467 million. The court order to confirm the cancellation was received on 4 June 2019, following which the share premium account was cancelled. Cancellation results in this capital being treated as distributable profit, giving us the flexibility to declare dividends, or make other distributions to shareholders, although there is no current intention to do so.

Debt Financing

Our debt facilities were unchanged during the period. At the year end, we had committed debt facilities of £390 million, of which £355 million (31 December 2018: £330 million) had been drawn down. This resulted in an LTV of 32.9% (31 December 2018: 30.6%). The aggregate cost of debt is 3.2%, with a weighted average term to maturity of 6.6 years at 31 December 2019. We fully complied with our covenants during the year.

Of our total drawn down facilities, £277 million is at fixed interest rates and £78 million is at floating rates.

In October 2019, we drew down the remaining £55.5 million of the facility we entered into with Scottish Widows Limited in December 2018. This was used to repay an expiring NatWest facility.

On 27 February 2020, we refinanced an expiring £10 million unsecured facility with First Commercial Bank on a three-year term and extended the facility value to £20 million.

On 16 March 2020, we entered into a four and a half-year £22.5 million development debt facility with RBS.

We have a further £32.8 million of debt due for repayment in October 2020 which we are in an advanced stage of refinancing on more favourable terms.

Transfer of Listing Category

At IPO, Empiric was categorised as a premium listed closed-ended investment fund, under the Listing Rules. This required us to follow an investment policy, operating within specific parameters. Given our evolution into an operating business, the Board concluded that we would be better served by being classified as a commercial company. Shareholders approved the transfer of listing category at the AGM and it became effective on 3 June 2019.

The Board believes that the transfer of its listing category to that of a commercial company more appropriately reflects the current management and operating structure, improves comparability with the majority of internally managed REITs on the London Stock Exchange, and incurs lower compliance costs.

Principal Risks and Uncertainties

Robust risk management

E mpiric has a strong culture of managing risk and a well-defined risk management process. This process is designed to identify, evaluate and mitigate (rather than eliminate) the significant risks we face. The process can therefore only provide reasonable, rather than absolute, assurance.

The Audit Committee formally reviews the effectiveness of our risk management processes and internal control systems bi-annually, on the Board's behalf. During the course of these reviews, the Committee has not identified or been advised of any material failings or weaknesses.

Changes to Risks During the Year

The risk environment we operate in continues to evolve and this is reflected in the principal risks and uncertainties that are set out on the following pages. During the year the Audit Committee had the following considerations on the Group's principal risks:

As a result of Empiric's change in listing category the Group is no longer required to have a formal Investment Policy, and we therefore removed the risk of the Group not adhering to this.

The prior year tax risk has been removed. The Group has significant headroom on all of its REIT tests and through an experienced finance team and the use of a professional tax adviser the Committee feel this risk should no longer be classed as a principal risk.

Given the recent events at Grenfell Tower and The Cube in Bolton, the Committee considered whether a further principal risk should be added for fire safety.

However, it was agreed that this would be within the health and safety risk, where a specific sub-point will be raised around fire safety.

The Committee reviewed the occupancy risk, student demand risk and competition risk and agreed that the occupancy risk held last year comfortably fits in to the student demand risk and competition risk, and so would be removed. The Committee aims to ensure that the principal risks to the business remain concise and relevant.

The Committee did not consider there to be any additional risks which should be added to our principal risks at this time.

Our Risk Appetite

The Board is ultimately responsible for defining the level and type of risk that the Group considers appropriate, ensuring it remains in line with our overall strategy of delivering sustainable shareholder returns.

The Board reviews the risk appetite of the business biannually and reassesses the internal and external information available and the relevant risk factors. This ensures our risk exposure remains appropriate when the risks we face are dynamic.

The Group is conservatively financed, with a target LTV ratio of 35% in the long term and a maximum of 40%. The Board has zero tolerance to health and safety risk within our control and looks to go beyond its statutory requirements. The safety of our people, customers and visitors to our sites is paramount.

Viability Statement

The Directors have assessed the prospects of the Group over a three-year period to December 2022 and confirm that they have a reasonable expectation that the Group will continue to operate and meet its liabilities, as they fall due.

This period has been chosen for the assessment period as this is the horizon for reasonably predicting the following:

-  occupancy levels;

-  rental growth;

-  interest rates;

-  debt planning cycle;

-  practical completion of development pipeline; and

-  impact of principal risks.

The three-year plan review is underpinned by regular Board briefings provided by the Executive Directors and any new strategies which may be undertaken by the Board in its normal course of business. These reviews consider both the market opportunity and the associated risks.

The strategic plan is built using a bottom-up model, on an asset-by-asset basis. The model makes certain prudent assumptions about the acquisition of properties (both standing assets and development assets), the ability to refinance debt as it falls due and/or recycle capital, the performance of the property portfolio both in terms of income generation and capital appreciation and the payment of dividends to shareholders, in line with the Company's obligations under the UK REIT regime.

We have assumed the refinancing of our current borrowings of £42.8 million during 2020. As at the date of this report we have already refinanced £10 million of this expiring debt with credit approved terms on the remaining £32.8 million. Our model assumes the Group enters into no further debt facilities other than the RBS development debt of £22.5 million (see note 26) or undertakes any asset disposals although the Group had £148.7 million of unencumbered assets at 31 December 2019 should further security be required. We expect to refinance the facility due in October 2020 in advance of our half year results.

The model is subject to sensitivity analysis, which involves flexing a number of key assumptions underlying the forecast, both individually and in aggregate as set out below:

Sensitised assumptions	Sensitivities	Associated principal risk
Revenue occupancy	(4%)	E1, E2, E3,
Cost increase	10%	E4, I1, I2, I3, I4
Fall in property values	(10%)	E1, E2, E3, E5, I5

We model a worst-case scenario with all worst-case assumptions being applied. The results of these sensitised assumptions on the three-year plan led to the Director's conclusion on viability.

Principal Risks

The principal risks and uncertainties we face have the potential to materially affect our business, either favourably or unfavourably. Some risks may be unknown to us at present, and there are some risks that we currently regard as immaterial, and have therefore not included here, may become material in the future.

Brexit

Until Brexit negotiations are finalised it is hard to say what impact leaving the EU will have. This government is, however, committed to growing international student numbers - from the current level of almost 450,000 to 600,000 by 2030 - the Treasury has also recognised the value of higher education exports by making visa applications and postgraduate employment limitations less onerous. In the context of the previous administration these moves are positively enlightened, and we are inclined to hope that common sense will prevail in Brexit negotiations to preserve this forward momentum. Having said all of that, EU international students make up about 7.0% of the full-time student population in the UK - a relatively small proportion. Of equal potential significance to the sector is the fate of EU teaching and research staff employed in higher education, and the European medical and science research programmes.

Coronavirus

Since the outbreak of the coronavirus has worsened, there has been regular near-daily communication across the Group with the fundamental concern being the safety of our customers and our people.

We have been regularly reviewing the guidance issued by Public Health England and the World Health Organization as well as communicating with our peers.

We believe COVID-19 falls under our Student Demand risk, however to date, we have not seen a negative impact on reservations from international students for the 2020/21 academic year.

In addition to our sensitivity analysis we have modeled severe stress tests on all of our loan covenants and have significant headroom.

We will continue to develop our planned mitigations to this very dynamic situation and will provide update as appropriate.

Change in Risk Trends

Competition risk

The Directors believe the competition risk has increased during the year due to the consolidation in the market exemplified by Unite's acquisition of Liberty Living.

Regulatory Risk

The Directors believe the regulatory risk has increased due to the growing level of fire and safety legislation which is being applied to the property industry.

Cyber Security Risk

Cyber security attacks are becoming more frequent across the globe and as such has increased the risk profile.

Strategic Links

1.  Customers

2.  Brand

3.  People and Operations

4.  Buildings

5.  Shareholder Outcomes

Strategic Links

˄ Increasing

˂ No change

˅ Decreasing

External Risks

	Risk and brief description	Potential impact	Mitigation in place	Trend
E1	Student Demand Risk There is a risk that the level of student demand will decrease. Link to Strategy 1 2 3 4 5	-  Loss of revenue -  Erosion of asset values -  High void costs -  Potential breach in bank covenants	-  Senior Leadership Team and the Board closely monitor government policy, student numbers and other micro and macro-economic factors. -  Through a detailed selection process, we ensure our assets are well located serving established leading universities. -  Where possible, we ensure our buildings are fit for alternative use, such as private residential, subject to planning. -  High-quality management information is provided across the business. -  All properties are now managed in-house under the Hello Student® brand.	˂
E2	Competition Risk The risk of an increased level of competition and supply in the student sector. Link to Strategy 1 2 3 4 5	-  Oversupply of student accommodation -  Reduction of student rental growth -  Inflated asset and land prices	-  UK student numbers are due to increase from 2021. See page 6. -  Through a detailed selection process, we ensure our assets are well located serving established leading universities. -  Assets in prime locations, in varying formats and at different price points. -  High-quality management information is provided across the business. -  All properties are now managed in-house under the Hello Student® brand helping to provide a unique identity.	˄
E3	Property Market Risk The potential for a downturn in the property market. Link to Strategy 1 2 3 4 5	-  Erosion of asset values -  Potential breach in bank covenants -  Lower Total Return for shareholders	-  Assets in multiple prime locations, diversifying the risk. -  We maintain prudent levels of gearing, with a LTV limit of 40% and a long-term target of 35%. -  The higher education sector is made up of a wide range of students from the UK, EU and non-EU countries. This range helps to insulate the student accommodation market.	˂
E4	Regulatory Risk Large levels of regulation being applied to the student accommodation market. Link to Strategy 1 2 3 4 5	-  Potential impact on our Total Return -  Reputational damage and penalties if we fall foul -  Higher compliance costs	-  Hello Student® is ANUK accredited, and Lynne Fennah sits on the Student Accommodation Committee of the British Property Federation. -  Involvement with these bodies means that we are well informed of any potential upcoming regulatory change. It also provides a basis for industry lobbying if required. -  Our operational teams try to build close working relationships with local authorities to keep abreast of any changes.	˄
E5	Funding Risk The availability of debt or equity and ability to raise it on acceptable terms. Link to Strategy 1 2 3 4 5	-  Stifling of future growth potential -  Forced sale of assets to repay debt -  Reduction of profit	-  Our average maturity of debt is 6.6 years with £35 million undrawn as at 31 December 2019. -  We maintain prudent levels of gearing, with a LTV limit of 40% and a long-term target of 35%. -  Experienced finance team with a strong track record in delivering both debt and equity.	˂

Internal Risks

	Risk and brief description	Potential impact	Mitigation in place	Trend
I1	Health and Safety Risk The occurrence of a major health and safety incident including a fire. Link to Strategy 1 2 3 4 5	-  Injury and impact on customers, contractors, staff and visitors -  Compensation costs incurred -  Reputational impact -  Loss of life in a worst-case scenario	-  Health and safety metrics are reported monthly. -  Policies, procedures and training for all staff. -  Ultimate Board responsibility involving regular Board reporting from the Head of FM. -  Live compliance dashboard which is monitored daily. -  Going above and beyond our statutory fire requirements. Read more on page 29.
I2	Cyber Security Risk The Group suffering from a cyber security breach. Link to Strategy 1 2 3 4 5	-  Reputational damage -  Deteriorated customer experience -  Higher costs and reduced profitability	-  Developed a business continuity plan to enable Group operations to continue in the event of a breach. -  Centralised our IT network across the Group and recruited an in-house IT team. -  Deployed an updated training programme across all staff. -  Implemented a data monitoring system to protect our platforms across the IT estate.
I3	People Risk Inability to retain and attract top Link to Strategy 1 2 3 4 5	-  Loss of key business knowledge -  Higher costs -  Impact on customer service	-  HR department has been brought in-house, meaning greater support for our people. -  Senior Leadership Team is largely in place, meaning less reliance on the Executive Directors. -  Exit interviews are used to identify any areas for improvement within the business.
I4	Cost Control Risk Costs rising out of control across the Group. Link to Strategy 1 2 3 4 5	-  Higher costs and reduced profitability -  Impact on dividend cover -  Deterioration of asset values	-  High-quality management information is provided across the business. -  All properties are now managed in-house under the Hello Student® brand. -  There is a detailed annual budget cycle with monthly annual reforecasting. This helps us stringently control costs.
I5	Development Risk The potential for developments to be delivered late or incomplete. Link to Strategy 1 2 3 4 5	-  Customer experience would be disrupted -  Loss of income -  Reputational damage -  Total Return would be impacted	-  We put in place suitable contracts with our developers which afford us good levels of protection, contingencies and other arrangements to cover the impact of any delay. -  Action plans are drafted for a site if there is any indication that a development may be delivered late or incomplete. -  Experienced development team with a strong track record of on-time project delivery.

Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare the Group and Company financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements and have elected to prepare the Company financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss for the Group for that year.

In preparing these financial statements, the Directors are required to:

-  select suitable accounting policies and then apply them consistently;

-  make judgements and accounting estimates that are reasonable and prudent;

-  state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements;

-  prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business; and

-  prepare a Directors' Report, a Strategic Report and Directors' Remuneration Report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. The Directors are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website Publication

The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the UK governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Directors' Responsibilities Pursuant to DTR4

The Directors confirm that to the best of their knowledge:

-  the Group financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group and the undertakings included in the consolidation as a whole;

-  the Annual Report includes a fair review of the development and performance of the business and the financial position of the Group and the Parent Company, together with a description of the principal risks and uncertainties that they face; and

-  the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's performance, business model and strategy.

Mark Pain
Chairman | 17 March 2020

Group Statement of Comprehensive Income

		Year ended	Year ended
		31 December	31 December
		2019	2018
	Note	£'000	£'000
Continuing operations
Revenue	2	70,908	64,156
Property expenses	3	(23,351)	(24,500)
Net rental income		47,557	39,656
Administrative expenses	4	(9,222)	(9,071)
Change in fair value of investment property	13	29,176	22,375
Operating profit		67,511	52,960
Finance cost		(13,148)	(12,788)
Finance income		409	104
Net finance costs	5	(12,739)	(12,684)
Profit before income tax		54,772	40,276
Corporation tax	7	-	-
Profit for the year		54,772	40,276
Other comprehensive income
Items that will be reclassified to Statement of Comprehensive Income
Fair value gain on cash flow hedge		80	402
Total comprehensive income for the year		54,852	40,678
Earnings per share expressed in pence per share	8
Basic		9.08	6.68
Diluted		9.07	6.67
Margin		67.1%	61.8%

Group Statement of Financial Position

		At	At
		31 December	31 December
		2019	2018
	Note	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment	11	352	366
Intangible assets	12	1,619	1,253
Investment property - Operational Assets	13	999,380	929,371
Investment property - Development Assets	13	29,700	41,670
Total non-current assets		1,031,051	972,660
Current assets
Trade and other receivables	14	10,538	13,747
Fixed term deposit	15	-	10,000
Cash and cash equivalents	15	16,517	23,473
Total current assets		27,055	47,220
Total assets		1,058,106	1,019,880
LIABILITIES
Current liabilities
Trade and other payables	16	14,372	28,535
Borrowings	17	42,675	55,260
Derivative financial liability	18	-	237
Deferred income	16	29,204	26,968
Total current liabilities		86,251	111,000
Non-current liabilities
Borrowings	17	307,097	268,990
Total non-current liabilities		307,097	268,990
Total liabilities		393,348	379,990
Total net assets		664,758	639,890
Equity
Called up share capital	19	6,032	6,029
Share premium	20	257	467,268
Capital reduction reserve	21	482,578	45,458
Retained earnings		175,891	121,215
Cash flow hedge reserve		-	(80)
Total equity		664,758	639,890
Total equity and liabilities		1,058,106	1,019,880
Net Asset Value per share basic (pence)	9	110.21	106.14
Net Asset Value per share diluted (pence)	9	109.99	105.96
EPRA Net Asset Value per share (pence)	9	110.21	106.18

These financial statements were approved by the Board of Directors on 17 March 2020 and signed on its behalf by:

Lynne Fennah

Chief Financial Officer

Company Statement of Financial Position

		At	At
		31 December	31 December
		2019	2018
	Note	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment	11	288	366
Intangible assets	12	1,080	627
Investments in subsidiaries	30	81,686	8,623
Total non-current assets		83,054	9,616
Current assets
Trade and other receivables	14	304	202
Amounts due from Group undertakings	14	420,006	517,778
Cash and cash equivalents	15	12,407	15,955
Total current assets		432,717	533,935
Total assets		515,771	543,551
LIABILITIES
Current liabilities
Trade and other payables	16	2,841	2,198
Amounts due to Group undertakings	16	9,721	11
Borrowings	17	9,995	-
Total current liabilities		22,557	2,209
Non-current liabilities
Borrowings	17	-	9,965
Total non-current liabilities		-	9,965
Total liabilities		22,557	12,174
Total net assets		493,214	531,377
Equity
Called up share capital	19	6,032	6,029
Share premium	20	257	467,268
Capital reduction reserve	21	482,578	45,458
Retained earnings		4,347	12,622
Total equity		493,214	531,377
Total equity and liabilities		515,771	543,551

The Company made a loss for the year of £8,179,000 (2018: £37,313,000 profit).

These financial statements were approved by the Board of Directors on 17 March 2020 and signed on its behalf by:

Lynne Fennah

Director

Group Statement of Changes in Equity

	Called up	Share	Capital	Retained	Cash flow	Total
	share capital	premium	reduction reserve	earnings	hedge reserve	equity
Year ended 31 December 2019	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2019	6,029	467,268	45,458	121,215	(80)	639,890
Changes in equity
Profit for the year	-	-	-	54,772	-	54,772
Fair value gain on cash flow hedge	-	-	-	-	80	80
Total comprehensive income for the year	-	-	-	54,772	80	54,852
Share-based payments	-	-	-	164	-	164
Share premium cancellation	-	(467,268)	467,268	-	-	-
Share options exercised	3	257	-	(260)	-	-
Dividends	-	-	(30,148)	-	-	(30,148)
Total contributions and distribution recognised directly in equity	3	(467,011)	437,120	(96)	-	(29,984)
Balance at 31 December 2019	6,032	257	482,578	175,891	-	664,758
Year ended 31 December 2018
Balance at 1 January 2018	6,029	467,268	75,602	80,841	(482)	629,258
Changes in equity
Profit for the year	-	-	-	40,276	-	40,276
Fair value gain on cash flow hedge	-	-	-	-	402	402
Total comprehensive income for the year	-	-	-	40,276	402	40,677
Share-based payments	-	-	-	98	-	98
Dividends	-	-	(30,144)	-	-	(30,144)
Total contributions and distribution recognised directly in equity	-	-	(30,144)	98	-	(30,046)
Balance at 31 December 2018	6,029	467,268	45,458	121,215	(80)	639,890

Company Statement of Changes in Equity

	Called up	Share	Capital	Retained	Total
	share capital	premium	reduction reserve	earnings	equity
Year ended 31 December 2019	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2019	6,029	467,268	45,458	12,622	531,377
Changes in equity
Loss for the year	-	-	-	(8,179)	(8,179)
Total comprehensive loss for the year	-	-	-	(8,179)	(8,179)
Share-based payments	-	-	-	164	164
Share premium cancellation	-	(467,268)	467,268	-	-
Share options exercised	3	257	-	(260)	-
Dividends	-	-	(30,148)	-	(30,148)
Total contributions and distribution recognised directly in equity	3	(467,011)	437,120	(96)	(29,984)
Balance at 31 December 2019	6,032	257	482,578	4,347	493,214
Year ended 31 December 2019
Balance at 1 January 2018	6,029	467,268	75,602	(24,789)	524,110
Changes in equity
Profit for the year	-	-	-	37,313	37,313
Total comprehensive income for the year	-	-	-	37,313	37,313
Share-based payments	-	-	-	98	98
Dividends	-	-	(30,144)	-	(30,144)
Total contributions and distribution recognised directly in equity	-	-	(30,144)	98	(30,046)
Balance at 31 December 2018	6,029	467,268	45,458	12,622	531,377

Group Statement of Cash Flows

	Year ended	Year ended
	31 December	31 December
	2019	2018
	£'000	£'000
Cash flows from operating activities
Profit before income tax	54,772	40,276
Share-based payments	164	98
Depreciation and amortisation	283	299
Finance income	(409)	(104)
Finance costs	13,148	12,788
Intangible asset impairment	-	248
Change in fair value of investment property	(29,176)	(22,375)
	38,782	31,230
Decrease in trade and other receivables	958	15,451
(Decrease)/increase in trade and other payables	(1,269)	791
Increase in deferred rental income	2,236	4,682
	1,92 5	20,924
Net cash flows generated from operations	40,707	52,154
Cash flows from investing activities
Purchases of tangible fixed assets	(85)	(1)
Purchases of intangible assets	(552)	(267)
Purchase of investment property	(39,620)	(54,169)
Interest received	409	104
Fixed term deposit	10,000	(10,000)
Net cash flows from investing activities	(29,848)	(64,333)
Cash flows from financing activities
Dividends paid	(30,148)	(30,144)
Bank borrowings drawn	115,500	66,801
Bank borrowings repaid	(90,500)	(40,630)
Loan arrangement fee paid	(1,064)	(2,058)
Finance cost (excluding fair value loss on derivatives)	(11,603)	(11,038)
Net cash flows from financing activities	(17,815)	(17,069)
Decrease in cash and cash equivalents	(6,956)	(29,248)
Cash and cash equivalents at beginning of year	23,473	52,721
Cash and cash equivalents at end of year	16,517	23,473

Company Statement of Cash Flows

	Year ended	Year ended
	31 December	31 December
	2019	2018
	£'000	£'000
Cash flows from operating activities
(Loss)/profit before income tax	(8,179)	37,313
Share-based payments	164	98
Depreciation and amortisation	189	165
Dividends received	-	(44,000)
Gain on sale of subsidiaries	-	(1,571)
Finance income	(101)	(60)
Finance costs	304	285
	(7,623)	(7,770)
(Increase)/decrease in trade and other receivables	(102)	4,065
Increase in trade and other payables	643	68
	541	4,133
Net cash flows generated from operations	(7,082)	(3,637)
Cash flows from investing activities
Purchases of tangible fixed assets	(12)	(1)
Purchases of intangible assets	(552)	(191)
Payments and receipts to/from subsidiaries, net	3 4,419	33,030*
Interest received	101	60
Net cash flows from investing activities	33,956	32,898
Cash flows from financing activities
Dividends paid	(30,148)	(30,144)
Finance cost (excluding fair value loss on derivatives)	(274)	(253)
Net cash flows from financing activities	(30,422)	(30,397)
Decrease in cash and cash equivalents	(3,548)	(1,136)
Cash and cash equivalents at beginning of year	15,955	17,091
Cash and cash equivalents at end of year	12,407	15,955

*In accordance with IAS 7 the Group has decided to show inter-company loan movements net. In the previous year such balances were shown gross.

Notes to the Financial Statements

1. ACCOUNTING POLICIES

1.1 Period of Account

The consolidated financial statements of the Group are in respect of the reporting period from 1 January 2019 to 31 December 2019.

The consolidated financial statements of the Group for the year ended 31 December 2019 comprise the results of Empiric Student Property plc (the "Company") and its subsidiaries and were approved by the Board for issue on 17 March 2020. The Company is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are admitted to the official list of the UK Listing Authority, a division of the Financial Conduct Authority, and traded on the London Stock Exchange. The registered address of the Company is disclosed in the Company information.

1.2 Basis of Preparation

The consolidated financial statements of the Group for the year to 31 December 2019 comprise the results of Empiric Student Property plc (the "Company") and its subsidiaries (together, the "Group"). These financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union.

The Group's financial statements have been prepared on a historical cost basis, except for investment property and derivative financial instruments which have been measured at fair value. The consolidated financial statements are presented in Sterling which is also the Company and the Group's functional currency.

The Company has applied the exemption allowed under section 408(1b) of the Companies Act 2006 and has therefore not presented its own Statement of Comprehensive Income in these financial statements. The Group profit for the year includes a loss after taxation of £8,179,000 2018: (profit of£37,313,000) for the Company, which is reflected in the financial statements of the Company.

The financial information does not constitute the Group's statutory accounts for the year ended 31 December 2019 or the year ended 31 December 2018 but is derived from those accounts. The Group's statutory accounts for the year ended 31 December 2018 have been delivered to the Registrar of Companies. The Group's statutory accounts for the year ended 31 December 2019 will be delivered to the Registrar of Companies in due course. The Auditor has reported on both the December 2019 and December 2018 accounts; the reports were unqualified, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and did not contain any statement under Section 498 of the Companies Act 2006.

1.3 Going Concern

The consolidated financial statements have been prepared on a going concern basis as discussed in the Director's Report.

At the year-end the Group had £42.8 million of debt due for repayment in less than one year spread across 2 facilities. Since the year-end the Group has re-financed one of these facilities for £10 million. The remaining facility of £32.8 million falls due for repayment in October 2020. The Group is in advanced negotiations to refinance this facility and expects to complete the re-financing well in advance of the repayment date. In addition to these loans we have also entered into a development debt facility for £22.5 million subsequent to the year end.

1.4 Significant Accounting Judgements, Estimates and Assumptions

The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. 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 affected in future periods.

Estimates

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:

(a) Fair Valuation of Investment Property

The market value of investment property is determined, by an independent external real estate valuation expert, to be the estimated amount for which a property should exchange on the date of the valuation in an arm's length transaction. Properties have been valued on an individual basis. The valuation experts use recognised valuation techniques and the principles of IFRS 13.

The valuations have been prepared in accordance with the RICS Valuation - Professional Standards January 2014 (the "Red Book"). Factors reflected include current market conditions, annual rentals, lease lengths and location. The significant methods and assumptions used by valuers in estimating the fair value of investment property are set out in Note 13.

For properties under development the fair value is calculated by estimating the fair value of the completed property using the income capitalisation technique less estimated costs to completion and an appropriate developer's margin.

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:

(b) Operating Lease Contracts - the Group as Lessor

The Group has acquired investment properties which have commercial property leases in place with tenants. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the lease terms and minimum lease payments, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the leases as operating leases.

Summary of Significant Accounting Policies

Basis of Consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2019. Subsidiaries are those investee entities where control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Specifically, the Group controls an investee if, and only if, it has:

(a)  power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

(b)  exposure, or rights, to variable returns from its involvement with the investee; and

(c)  the ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

(a)  the contractual arrangement with the other vote holders of the investee;

(b)  rights arising from other contractual arrangements; and

(c)  the Group's voting rights and potential voting rights.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.

The financial statements of the subsidiaries are prepared for the same reporting period as the Parent Company, using consistent accounting policies. All intra-Group balances, transactions and unrealised gains and losses resulting from intra-Group transactions are eliminated in full.

Financial Assets

The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. Other than financial assets in a qualifying hedging relationship, the Group's accounting policy for each category is as follows:

Fair Value Through Profit or Loss

This category comprises only in-the-money derivatives (see "Financial liabilities" section of out-of-money derivatives). They are carried in the Statement of Financial Position at fair value with changes in fair value recognised in the Statement of Comprehensive Income in the finance income or expense line. Other than derivative financial instruments which are not designated as hedging instruments, the Group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.

Amortised Cost

These assets are primarily from the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivable is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within cost of sales in the Statement of Comprehensive Income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward-looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, 12-month expected credit losses against gross interest income are recognised. For those where the credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and, in consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in the Statement of Comprehensive Income (operating profit).

The Group's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the Statement of Financial Position.

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and - for the purpose of the Statement of Cash Flows - bank overdrafts. Bank overdrafts are shown within loans and borrowings in current liabilities on the Statement of Financial Position.

Financial Liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired.

Other than financial liabilities in a qualifying hedging relationship (see below), the Group's accounting policy for each category is as follows:

Fair Value Through Profit or Loss

This category comprises only out-of-the-money derivatives (see "Financial assets" for in-the-money derivatives). They are carried in the Statement of Financial Position at fair value with changes in fair value recognised in the Statement of Comprehensive Income. The Group does not hold or issue derivative financial instruments for speculative purposes, but for hedging purposes. Other than these derivative financial instruments, the Group does not have any liabilities held for trading nor has it designated any financial liabilities as being at fair value through profit or loss.

Other Financial Liabilities

Other financial liabilities include the following items:

-  Bank borrowing is initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the Consolidated Statement of Financial Position. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

-  Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Hedge Accounting

Hedge accounting is applied to financial assets and financial liabilities only where all of the following criteria are met:

-  at the inception of the hedge there is formal designation and documentation of the hedging relationship and the Group's risk management objective and strategy for undertaking the hedge; and

-  the hedge relationship meets all of the hedge effectiveness requirements, including that an economic relationship exists between the hedged item and the hedging instrument, the credit risk effect does not dominate the value changes, and the hedge ratio is designated based on actual quantities of the hedged item and hedging instrument.

Cash Flow Hedges

The effective part of forward contracts designated as a hedge of the variability in cash flows of interest rate risk arising from firm commitments, and highly probable forecast transactions, are measured at fair value with changes in fair value recognised in Other Comprehensive Income and accumulated in the cash flow hedge reserve. The Group uses such contracts to fix the cost interest payments.

Intangible Assets

Intangible assets are initially recognised at cost and then subsequently carried at cost less accumulated amortisation and impairment losses.

Amortisation has been charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over ten years, except for the Hello Student® application, which is being amortised on a straight-line basis over five years due to the nature of the asset.

Investment Property

Investment property comprises property that is held to earn rentals or for capital appreciation, or both, and property under development rather than for sale in the ordinary course of business or for use in production or administrative functions.

Investment property is measured initially at cost including transaction costs and is included in the financial statements on unconditional exchange. Transaction costs include transfer taxes, professional fees and initial leasing commissions to bring the property to the condition necessary for it to be capable of operating.

Once purchased, investment property is stated at fair value. Gains or losses arising from changes in the fair values are included in the Consolidated Statement of Comprehensive Income in the period in which they arise.

Investment property is derecognised when it has been disposed of, or permanently withdrawn from use, and no future economic benefit is expected from its disposal. The investment property is derecognised upon unconditional exchange. The difference between the net disposal proceeds and the carrying amount of the asset would result in either gains or losses at the retirement or disposal of investment property. Any gains or losses are recognised in the Consolidated Statement of Comprehensive Income in the period of retirement or disposal.

Operating Leases

Rentals paid under operating leases are charged to the Consolidated Statement of Income on a straight-line basis over the period of the lease within administrative expenses.

Property, Plant and Equipment

All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure which is directly attributable to the acquisition of the asset.

Depreciation has been charged to the Consolidated Statement of Comprehensive Income on the following basis:

-  Fixtures and fittings:  15% per annum on a reducing balance basis; and

-  Computer equipment:  straight-line basis over three years.

Rental Income

The Group is the lessor in respect of operating leases. Rental income arising from operating leases on investment property is accounted for on a straight-line basis over the lease term and is included in gross rental income in the Consolidated Statement of Comprehensive Income due to its operating nature.

Tenant lease incentives are recognised as a reduction of rental revenue on a straight-line basis over the term of the lease. The lease term is the non ‑ cancellable period of the lease together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the Directors are reasonably certain that the tenant will exercise that option.

Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the Consolidated Statement of Comprehensive Income when the right to receive them arises.

Segmental Information

The Directors are of the opinion that the Group is engaged in a single segment business, being the investment in student and commercial lettings, within the United Kingdom.

Share-Based Payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the Consolidated Statement of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. So long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the Consolidated Statement of Comprehensive Income over the remaining vesting period. National Insurance obligations with respect to equity-settled share-based payments awards are accrued over the vesting period.

Share Capital

Ordinary shares are classified as equity. External costs directly attributable to the issuance of shares are recognised as a deduction from equity.

Taxation

As the Group is a UK REIT, profits arising in respect of the property rental business are not subject to UK corporation tax.

Taxation in respect of profits and losses outside of the property rental business comprises current and deferred taxes. Taxation is recognised in the Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised as direct movement in equity, in which case it is also recognised as a direct movement in equity.

Current tax is the total of the expected corporation tax payable in respect of any non-REIT taxable income for the year and any adjustment in respect of previous periods, based on tax rates applicable to the periods.

Deferred tax is calculated in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases, based on tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax liabilities are recognised in full (except to the extent that they relate to the initial recognition of assets and liabilities not acquired in a business combination). Deferred tax assets are only recognised to the extent that it is considered probable that the Group will obtain a tax benefit when the underlying temporary differences unwind.

1.5 Impact of New Accounting Standards and Changes in Accounting Policies

IFRS 16: Leases became effective on 1 January 2019 and as a result this is the first period under this new standard.

The Group has applied IFRS 16 using the cumulative catch-up approach, without restatement of the comparative information. For leases the Group previously treated as operating leases, the Group elected to measure its right-of-use assets with a lease commencement date of the date of adoption of IFRS 16 (1 January 2019).

The Group has also made use of the allowance available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 14 will continue to be applied to those leases entered into or altered before 1 January 2019.

As expected and detailed in the Group's Annual Report and Accounts for the year to 31 December 2018, the Group's application of IFRS 16 did not cause a material impact on the classification, measurement and recognition of leases within the consolidated financial statements.

While the Group has chosen the method of retrospective transitional approach on adopting IFRS 16, management determined the adjustment required was not material to the accounts and so no adjustment nor disclosures were made in respect to the adoption.

2. REVENUE

	Group
	Year ended	Year ended
	31 December	31 December
	2019	2018
	£'000	£'000
Student rental income	69,209	62,454
Commercial rental income	1,699	1,702
Total revenue	70,908	64,156

3. PROPERTY EXPENSES

	Group
	Year ended	Year ended
	31 December	31 December
	2019	2018
	£'000	£'000
Direct site costs	7,128	10,413
Technology services	936	1,025
Site office and utilities	9,832	8,200
Cleaning and service contracts	2,729	2,591
Repairs and maintenance	2,726	2,271
Total property expenses	23,351	24,500

4. ADMINISTRATIVE EXPENSES

	Group
	Year ended	Year ended
	31 December	31 December
	2019	2018
	£'000	£'000
Salaries and Directors' remuneration	5,024	3,372
Legal and professional fees	1,776	2,708
Other administrative costs	1,604	2,012
IT expenses	333	471
	8,737	8,563
Auditor's fees
Fees payable for the audit of the Group's annual accounts	210	210
Fees payable for the review of the Group's interim accounts	40	40
Fees payable for the audit of the Group's subsidiaries	136	125
Total auditor's fees	386	375
Abortive acquisition costs	99	133
Total administrative expenses	9,222	9,071

5. NET FINANCE COST

	Group
	Year ended	Year ended
	31 December	31 December
	2019	2018
	£'000	£'000
Finance costs
Fair value loss on interest rate cap	-	1
Interest expense on bank borrowings	11,947	11,037
Amortisation of loan transaction costs	1,201	1,750
	13,148	12,788
Finance income
Fair value gain on interest rate swap	181	42
Interest received on bank deposits	228	62
	409	104
Net finance cost	12,739	12,684

6. EMPLOYEES AND DIRECTORS

	Group				Company
		Year ended December 2019 £'000	Year ended  December2018  '000			Year ended December 2019 £'000	Year ended December 2018 £'000
Wages and salaries		6,994	4,642			3,542	2,455
Pension costs		327	281			206	216
Cash bonus		878	294			656	243
Share-based payments		164	98			164	98
National insurance		750	557			455	360
		9,113	5,872			5,024	3,372
Less: Hello Student amounts included in property expenses		(4,089)	(2,500)			-	-
Amounts included in administrative expenses		5,024	3,372			5,024	3,372
The average monthly number of employees of the Group during the year was as follows:
Management			5		4	5	4
Administration - ESP			27		22	27	22
Operations - Hello Student®			335		222	-	-
			367		248	32	26

	Group and Company
	Year ended	Year ended
	31 December	31 December
	2019	2018
Directors' remuneration	£'000	£'000
Salaries and fees	1,007	903
Pension costs	107	95
Cash bonus	212	145
Share-based payments	164	28
	1,490	1,171

A summary of the Directors' emoluments, including the disclosures required by the Companies Act 2006 is set out in the Directors' Remuneration Report.

7. CORPORATION TAX

The Group became a REIT on 1 July 2014 and as a result does not pay UK corporation tax on its profits and gains from its qualifying property rental business in the UK provided it meets certain conditions. Non-qualifying profits and gains of the Group continue to be subject to corporation tax as normal.

In order to achieve and retain REIT status, several conditions have to be met on entry to the regime and on an ongoing basis, including:

-  at the start of each accounting period, the assets of the property rental business (plus any cash and certain readily realisable investments) must be at least 75% of the total value of the Group's assets;

-  at least 75% of the Group's total profits must arise from the tax-exempt property rental business; and

-  at least 90% of the tax exempt profit of the property rental business (excluding gains) of the accounting period must be distributed.

In addition, the full UK corporation tax exemption in respect of the profits of the property rental business will not be available if the profit: financing cost ratio in respect of the property rental business is less than 1.25.

The Group met all of the relevant REIT conditions for the year ended 31 December 2019.

The Directors intend that the Group should continue as a REIT for the foreseeable future, with the result that deferred tax is not required to be recognised in respect of temporary differences relating to the property rental business.

	Group
	Year ended	Year ended
	31 December	31 December
	2019	2018
	£'000	£'000
Current tax
Income tax charge/(credit) for the year	-	-
Adjustment in respect of prior year	-	-
Total current income tax charge/(credit) in the income statement	-	-
Deferred tax
Total deferred income tax charge/(credit) in the income statement	-	-
Total current income tax charge/(credit) in the income statement	-	-
The tax assessed for the year is lower than the standard rate of corporation tax in the year.
Profit for the year	54,772	40,276
Profit before tax multiplied by the rate of corporation tax in the UK of 19% (2018: 19%)	10,407	7,652
Exempt property rental profits in the year	(4,194)	(2,725)
Exempt property revaluations in the year	(5,543)	(4,251)
Effects of:
Non-allowable expenses	47	83
Capital Allowances	(1,143)	(1,393)
Unutilised current year tax losses	426	634
Total current income tax charge/(credit) in the income statement	-	-

A deferred tax asset in respect of the tax losses generated by the residual (non-tax exempt) business of the Group £426,000 31 (December 2018:£634,000) will be recognised to the extent that their utilisation is probable. On the basis that the residual business is not expected to be income generating in future periods, a deferred tax asset of £3,818,000 (2018: £3,823,000) has not been recognised in respect of such losses.

8. EARNINGS PER SHARE

The ordinary number of shares is based on the time-weighted average number of shares throughout the year.

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.

EPRA EPS, reported on the basis recommended for real estate companies by EPRA, is a key measure of the Group's operating results.

Adjusted earnings is a performance measure used by the Board to assess the Group's dividend payments. Licence fees, development rebates and rental guarantees are added to EPRA earnings on the basis noted below as the Board sees these cash flows as supportive of dividend payments.

-  The adjustment for licence fee receivable is calculated by reference to the fraction of the total period of completed construction during the period, multiplied by the total licence fee receivable on a given forward funded asset.

-  The development rebate is due from developers in relation to late completion on forward funded agreements as stipulated in development agreements.

-  The discounts on acquisition are in respect of the vendor guaranteeing a rental shortfall for the first year of operation as stipulated in the sale and purchase agreement.

Reconciliations are set out below:

			Calculation	Calculation
	Calculation of	Calculation of	of EPRA	of EPRA	Calculation of
	basic EPS	diluted EPS	basic EPS	diluted EPS	adjusted EPS
	£'000	£'000	£'000	£'000	£'000
Year to 31 December 2019
Earnings	54,772	54,772	54,772	54,772	54,772
Adjustment to include licence fee receivable on forward funded developments in the year	-	-	-	-	1,038
Adjustment to include discounts on acquisition due to rental guarantees in the year	-	-	-	-	229
Adjustments to remove:
Changes in fair value of investment properties (Note 13)	-	-	(29,176)	(29,176)	(29,176)
Changes in fair value of interest rate derivatives (Note 18)	-	-	(181)	(181)	(181)
Earnings/Adjusted Earnings	54,772	54,772	25,415	25,415	26,682
Weighted average number of shares ('000)	602,929	602,929	602,929	602,929	602,929
Adjustment for employee share options ('000)	-	1,215	-	1,215	-
Total number shares ('000)	602,929	604,144	602,929	604,144	602,929
Per-share amount (pence)	9.08	9.07	4.22	4.21	4.43
Year to 31 December 2018
Earnings	40,276	40,276	40,276	40,276	40,276
Adjustment to include licence fee receivable on forward funded developments in the year	-	-	-	-	1,406
Adjustment to include discounts on acquisition due to rental guarantees in the year	-	-	-	-	5
Adjustments to remove:
Changes in fair value of investment properties (Note 13)	-	-	(22,375)	(22,375)	(22,375)
Changes in fair value of interest rate derivatives (Note 18)	-	-	1	1	1
Earnings/Adjusted Earnings (£'000)	40,276	40,276	17,902	17,902	19,313
Weighted average number of shares ('000)	602,888	602,888	602,888	602,888	602,888
Adjustment for employee share options ('000)	-	984	-	984	-
Total number shares ('000)	602,888	603,872	602,888	603,872	602,888
Per-share amount (pence)	6.68	6.67	2.97	2.96	3.20

9. NET ASSET VALUE PER SHARE

Basic NAV per share is calculated by dividing net assets in the Statement of Financial Position attributable to ordinary equity holders of the Parent by the number of ordinary shares outstanding at the end of the year.

Diluted NAV per share is calculated using the number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.

EPRA NAV is calculated as net assets per the Consolidated Statement of Financial Position excluding fair value adjustments for debt-related derivatives.

EPRA NNNAV is the EPRA NAV adjusted to include the fair values of financial instruments and debt.

Net asset values have been calculated as follows:

	Group
	31 December	31 December
	2019	2018
	£'000	£'000
Net assets per Statement of Financial Position	664,758	639,890
Adjustment to exclude the fair value loss of financial instruments	-	238
EPRA NAV	664,758	640,128
Adjustment to include the fair value of debt (Note 18)	(23,527)	(13,163)
Adjustment to include the fair value loss of financial instruments (Note 18)	-	(238)
EPRA NNNAV	641,231	626,727

Ordinary shares	Number	Number
Issued share capital	603,160,958	602,887,740
Issued share capital plus employee options	604,375,503	603,871,448

	Pence	Pence
NAV per share basic	110.21	106.14
NAV per share diluted	109.99	105.96
EPRA NAV per share basic	110.21	106.18
EPRA NAV per share diluted	109.99	106.00
EPRA NNNAV per share basic	106.31	103.95
EPRA NNNAV per share diluted	106.10	103.78

10. DIVIDENDS PAID

	Group and Company
	Year ended	Year ended
	31 December	31 December
	2019	2018
	£'000	£'000
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 31 December 2017	-	7,536
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 31 March 2018	-	7,536
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 30 June 2018	-	7,536
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 30 September 2018	-	7,536
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 31 December 2018	7,536	-
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 31 March 2019	7,536	-
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 30 June 2019	7,536	-
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 30 September 2019	7,540	-
	30,148	30,144

On 17 February 2020, the Company announced the declaration of a final interim dividend in respect of the financial year ended 31 December 2019, of 1.25 pence per ordinary share amounting to £7.5 million, which will be paid on 20 March 2020 to ordinary shareholders.

11. FIXED ASSETS

		Group			Company
	Fixtures and	Computer		Fixtures and	Computer
	fittings	equipment	Total	fittings	equipment	Total
Year ended 31 December 2019	£'000	£'000	£'000	£'000	£'000	£'000
Costs
As at 1 January 2019	490	181	671	490	181	671
Additions	-	85	85	-	12	12
As at 31 December 2019	490	266	756	490	193	683
Depreciation
As at 1 January 2019	165	140	305	165	140	305
Charge for the year	58	41	99	49	41	90
As at 31 December 2019	223	181	404	214	181	395
Net book value
As at 31 December 2019	267	85	352	276	12	288

		Group			Company
	Fixtures and	Computer		Fixtures and	Computer
	fittings	equipment	Total	fittings	equipment	Total
Year ended 31 December 2018	£'000	£'000	£'000	£'000	£'000	£'000
Costs
As at 1 January 2018	490	180	670	490	180	670
Additions	-	1	1	-	1	1
As at 31 December 2018	490	181	671	490	181	671
Depreciation
As at 1 January 2018	108	87	195	108	87	195
Charge for the year	57	53	110	57	53	110
As at 31 December 2018	165	140	305	165	140	305
Net book value
As at 31 December 2018	325	41	366	325	41	366

12. INTANGIBLE ASSETS

	Group					Company
	Hello Student®	Hello Student®
	application	website	NAVision			NAVision
	development	development	development	Total		development	Total
Year ended 31 December 2019	£'000	£'000	£'000	£'000		£'000	£'000
Costs
As at 1 January 2019	311	878	719	1,908		719	719
Additions	-	-	552	552		552	552
As at 31 December 2019	311	878	1,271	2,460		1,271	1,271
Amortisation
As at 1 January 2019	311	252	92	655		92	92
Charge for the year	-	87	99	186		99	99
As at 31 December 2019	311	339	191	841		191	191
Net book value
As at 31 December 2019	-	539	1,080	1,619		1,080	1,080

	Group					Company
	Hello Student®	Hello Student®
	application	website	NAVision			NAVision
	development	development	development	Total		development	Total
Year ended 31 December 2018	£'000	£'000	£'000	£'000		£'000	£'000
Costs
As at 1 January 2018	311	802	528	1,641		528	528
Additions	-	76	191	267		191	191
As at 31 December 2018	311	878	719	1,908		719	719
Amortisation
As at 1 January 2018	16	165	37	218		37	37
Charge for the year	47	87	55	189		55	55
Write off	248	-	-	248			-
As at 31 December 2018	311	252	92	655		92	92
Net book value
As at 31 December 2018	-	626	627	1,253		627	627

13. INVESTMENT PROPERTY

	Group
		Investment
	Investment	properties	Total	Properties	Total
	properties	long	operational	under	investment
	freehold	leasehold	assets	development	property
Year ended 31 December 2019	£'000	£'000	£'000	£'000	£'000
As at 1 January 2019	796,640	132,731	929,371	41,670	971,041
Property additions	4,206	410	4,616	24,247	28,863
Transfer of completed developments	34,441	-	34,441	(34,441)	-
Change in fair value during the year	26,352	4,600	30,952	(1,776)	29,176
As at 31 December 2019	861,639	137,741	999,380	29,700	1,029,080

	Group
	Investment	Investment	Total	Properties	Total
	properties	properties long	operational	under	investment
	freehold	leasehold	assets	development	property
Year ended 31 December 2018	£'000	£'000	£'000	£'000	£'000
As at 1 January 2018	735,355	113,182	848,537	42,045	890,582
Property additions	13,180	7,832	21,012	37,072	58,084
Transfer of completed developments	42,055	-	42,055	(42,055)	-
Change in fair value during the year	6,050	11,717	17,767	4,608	22,375
As at 31 December 2018	796,640	132,731	929,371	41,670	971,041

During the year £5,418,000 (31 December 2018: £10,171,000) of additions related to expenditure were recognised in the carrying value of standing assets.

In accordance with IAS 40, the carrying value of investment property is their fair value as determined by independent external valuers. This valuation has been conducted by CBRE Limited, as external valuer, and has been prepared as at 31 December 2019, in accordance with the Appraisal & Valuation Standards of the RICS, on the basis of market value. Properties have been valued on an individual basis. This value has been incorporated into the financial statements.

The valuation of all property assets uses market evidence and includes assumptions regarding income expectations and yields that investors would expect to achieve on those assets over time. Many external economic and market factors, such as interest rate expectations, bond yields, the availability and cost of finance and the relative attraction of property against other asset classes, could lead to a reappraisal of the assumptions used to arrive at current valuations. In adverse conditions, this reappraisal can lead to a reduction in property values and a loss in Net Asset Value.

The table below reconciles between the fair value of the investment property per the Consolidated Group Statement of Financial Position and investment property per the independent valuation performed in respect of each year end.

	Group
	As at	As at
	31 December	31 December
	2019	2018
	£'000	£'000
Value per independent valuation report	1,028,610	970,570
Add:	1,028,610	970,570
Head lease	470	471
Fair value per Group Statement of Financial Position	1,029,080	971,041

Fair Value Hierarchy

The following table provides the fair value measurement hierarchy for investment property:

		Quoted prices	Significant	Significant
		in active	observable	unobservable
		markets	inputs	inputs
	Total	(Level 1)	(Level 2)	(Level 3)
Date of valuation 31 December 2019	£'000	£'000	£'000	£'000
Assets measured at fair value:
Student properties	1,004,450	-	-	1,004,450
Commercial properties	24,160	-	-	24,160
As at 31 December 2019	1,028,610	-	-	1,028,610

		Quoted prices	Significant	Significant
		in active	observable	unobservable
		markets	inputs	inputs
	Total	(Level 1)	(Level 2)	(Level 3)
Date of valuation 31 December 2018	£'000	£'000	£'000	£'000
Assets measured at fair value:
Student properties	945,990	-	-	945,990
Commercial properties	24,580	-	-	24,580
As at 31 December 2018	970,570	-	-	970,570

There have been no transfers between Level 1 and Level 2 during the year, nor have there been any transfers between Level 2 and Level 3 during the year.

The valuations have been prepared on the basis of market value which is defined in the RICS Valuation Standards, as:

"The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion."

Market value as defined in the RICS Valuation Standards is the equivalent of fair value under IFRS.

The following descriptions and definitions relate to valuation techniques and key unobservable inputs made in determining fair values. The valuation techniques for student properties uses a discounted cash flow with the following inputs:

(a)  Unobservable input: Rental income

The rent at which space could be let in the market conditions prevailing at the date of valuation. Range £97 per week-£347 per week (31 December 2018: £92-£343 per week).

(b)  Unobservable input: Rental growth

The estimated average increase in rent based on both market estimations and contractual arrangements. Assumed growth of 3.55% used in valuations (31 December 2018: 2.63%).

(c)  Unobservable input: Net initial yield

The net initial yield is defined as the initial gross income as a percentage of the market value (or purchase price as appropriate) plus standard costs of purchase.

Range: 4.50%-7.25% (31 December 2018: 4.50%-6.75%).

(d)  Unobservable input: Physical condition of the property

(e)  Unobservable input: Planning consent

No planning enquiries undertaken for any of the development properties.

(f)  Sensitivities of measurement of significant unobservable inputs

As set out in the significant accounting estimates and judgements, the Group's portfolio valuation is open to judgements and is inherently subjective by nature.

As a result, the following sensitivity analysis has been prepared by the valuer:

			-0.25%	+0.25%
	-3% change in	+3% change in	change	change
	rental income	rental income	in yield	in yield
As at 31 December 2019	£'000	£'000	£'000	£'000
(Decrease)/increase in the fair value of the investment properties	(39,190)	39,270	46,520	(42,350)

	-3% change in	+3% change in	-0.25% change	+0.25% change
	rental income	rental income	in yield	in yield
As at 31 December 2018	£'000	£'000	£'000	£'000
(Decrease)/increase in the fair value of the investment properties	(40,320)	40,290	47,270	(43,210)

(g)  The key assumptions for the commercial properties are net initial yield, current rent and rental growth. A movement of 3% in passing rent and 0.25% in the net initial yield will not have a material impact on the financial statements.

14. TRADE AND OTHER RECEIVABLES

	Group			Company
	31 December	31 December		31 December	31 December
	2019	2018		2019	2018
	£'000	£'000		£'000	£'000
Trade receivables	314	704		-	-
Other receivables	470	2,112		20	90
Amounts owed by property managers	5,144	6,696		-	-
Prepayments	4,355	4,170		277	105
VAT recoverable	255	65		7	7
	10,538	13,747		304	202
Amounts due from Group undertakings	-	-		420,006	517,778
	10,538	13,747		420,310	517,980

At 31 December 2019, there were no material trade receivables overdue at the year end, and no aged analysis of trade receivables has been included. The carrying value of trade and other receivables classified at amortised cost approximates fair value.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivable and contract assets.

To measure expected credit losses on a collective basis, trade receivable and contract assets are grouped together based on similar credit risk and ageing. The contract assets have similar risk characteristics to the trade receivables for similar types of contracts.

The expected credit loss rates are based on the Group's historical credit losses experienced over the three-year period prior to the year end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers. Both the expected credit loss provision and the incurred loss provision in the current and prior year are immaterial. No reasonably possible changes in the assumptions underpinning the expected credit loss provision would give rise to a material expected credit loss.

The Company applies the expected credit losses approach to amounts due from Group undertakings. These amounts are interest free and repayable on demand; however, as these amounts are primarily utilised to pay for the property acquisition and therefore are considered not to be immediately recoverable, they are deemed to be categorised as stage 3. The expected credit losses are based on management's assessment of the Group undertaking's ability to repay the funds.

The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the underlying companies, property value sensitivities alongside the potential sale values of the properties, cash flow projections arising from the underlying properties and the ability to hold the assets to ensure recovery of the amounts due from the Group undertakings. Both the expected credit loss provision and the incurred loss provision in the current and prior year and immaterial. No reasonably possible changes in the assumptions underpinning the expected credit loss provision would give rise to a material expected credit loss.

15. FIXED TERM DEPOSITS AND CASH AND CASH EQUIVALENTS

Fixed term deposits were amounts held as part of our debt renewal. This deposit was interest bearing and matured in October 2019.

The amounts disclosed on the statement of cash flow as cash and cash equivalents are in respect of the following amounts shown in the Consolidated Statement of Financial Position:

	Group			Company
	31 December	31 December		31 December	31 December
	2019	2018		2019	2018
	£'000	£'000		£'000	£'000
Cash and cash equivalents	16,517	23,473		12,407	15,955

16. TRADE AND OTHER PAYABLES

	Group			Company
	31 December	31 December		31 December	31 December
	2019	2018		2019	2018
	£'000	£'000		£'000	£'000
Trade payables	3,294	2,723		533	-
Other payables	1,287	2,408		325	146
Accrued expenses	8,821	23,013		1,013	1,661
Directors' bonus accrual	970	391		970	391
	14,372	28,535		2,841	2,198
Amounts owed to Group undertakings	-	-		9,721	11
	14,372	28,535		12,562	2,209

At 31 December 2019, there was deferred rental income of £29,204,000 (31 December 2018: £26,968,000) which was rental income that had been booked that relates to future periods.

The Directors consider that the carrying value of trade and other payables approximates to their fair value.

Amounts due to Group undertakings are interest free and repayable on demand.

17. BANK BORROWINGS

A summary of the drawn and undrawn bank borrowings in the year is shown below:

	Group
	Bank	Bank		Bank	Bank
	borrowings	borrowings	Total	borrowings	borrowings	Total
	drawn	undrawn	31 Dec	drawn	undrawn	31 Dec
	31 Dec 2019	31 Dec 2019	2019	31 Dec 2018	31 Dec 2018	2018
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January	330,000	60,000	390,000	303,829	86,201	390,030
Bank borrowings from new facilities in the year	55,500	-	55,500	30,600	-	30,600
Bank borrowings drawn in the year	60,000	(25,000)	35,000	36,201	(26,201)	10,000
Bank borrowings repaid during the year	(90,500)	-	(90,500)	(40,630)	-	(40,630)
At 31 December	355,000	35,000	390,000	330,000	60,000	390,000

The Group has fully repaid one facility, continued to draw down on an existing facility and fully drew down the second tranche of another existing facility. A total of £115,500,000 (31 December 2018: £66,801,000) of additional debt was drawn and a total of £90,500,000 was repaid during the year. There is an undrawn debt facility available of £35,000,000 at 31 December 2018 (31 December 2018: £60,000,000). The weighted average term to maturity of the Group's debt as at the year end is 6.6 years (31 December 2018: 7.6 years).

Bank borrowings are secured by charges over individual investment properties held by certain asset-holding subsidiaries. These assets have a fair value of £879,910,000 at 31 December 2019 (31 December 2018: £853,220,000). In some cases, the lenders also hold charges over the shares of the subsidiaries and the intermediary holding companies of those subsidiaries.

The Company has a £10 million unsecured facility (2018: £10 million) repayable in less than one year, fully drawn. The balance net of loan arrangement fees carried as at 31 December 2019 was £9,995,000 (31 December 2018: £9,965,000).

The Group drew down a further £55,500,000 of the Scottish Widows facility, the second tranche of the existing facility. This was used to repay the RBS facility of £55,500,000.

Any associated fees in arranging the bank borrowings unamortised as at the year end are offset against amounts drawn on the facilities as shown in the table below:

	Group
	31 December	31 December
	2019	2018
Non-current	£'000	£'000
Balance bought forward	274,500	282,639
Total bank borrowings in the year	115,500	66,801
Bank borrowings becoming non-current in the year	55,500	21,190
Less: Bank borrowings becoming current in the year	(42,800)	(55,500)
Less: Bank borrowings repaid during the year	(90,500)	(40,630)
Bank borrowings drawn: due in more than one year	312,200	274,500
Less: Unamortised costs	(5,103)	(5,510)
Bank borrowings due in more than one year	307,097	268,990

	Group
	31 December	31 December
	2019	2018
Current	£'000	£'000
Balance bought forward	55,500	21,190
Total bank borrowings in the year	-	9,440
Less: Bank borrowings repaid during the year	(55,500)	(30,630)
Bank borrowings becoming current in the year	42,800	55,500
Bank borrowings drawn: due in less than one year	42,800	55,500
Less: Unamortised costs	(125)	(240)
Bank borrowings due in less than one year	42,675	55,260

Maturity of Bank Borrowings

	Group
	31 December	31 December
	2019	2018
	£'000	£'000
Repayable between one and two years	35,000	42,800
Repayable between two and five years	-	10,000
Repayable in over five years	277,200	221,700
Bank borrowings drawn: due in more than one year	312,200	274,500

Each of the Group's facilities has an interest charge which is payable quarterly. Four of the facilities have an interest charge that is based on a margin above LIBOR whilst the other five facility interest charges are fixed at 3.97%, 3.52%, 3.24%, 3.64% and 3.20%. The weighted average rate payable by the Group on its debt portfolio as at the year end was 3.20% (31 December 2018: 3.26%).

18. INTEREST RATE DERIVATIVES

To mitigate the interest rate risk that arises as a result of entering into variable rate linked loans, the Group entered into an interest rate cap and interest rate swap. The interest rate cap has been taken out to cap the rate to which three-month LIBOR can rise and is coterminous with the initial term of the facility. The premium of £238,500 has been settled over the five-year life of the loan.

On 24 October 2014 a derivative swap contract was taken out to hedge the interest rate risk on long-term debt. The change in valuation of this derivative at 31 December 2019 was £nil (31 December 2018: £0.5 million gain) recognised in Other Comprehensive Income. £nil of this derivative liability has been recognised as a non-current liability (31 December 2018: £nil). The contract matured on 23 October 2019.

The Group will continue to review the level of its hedging in the light of the current low interest rate environment.

Fair Value of Derivative Instruments

	31 December	31 December
	2019	2018
	£'000	£'000
Non-current assets: Interest rate derivatives - cap	-	-
Current liabilities: Interest rate derivatives - swap	-	(237)
Non-current liabilities: Interest rate derivatives - swap	-	-

The interest rate derivatives are marked to market by the relevant counterparty banks on a quarterly basis in accordance with IAS 39. Any movement in the fair values of the interest rate cap are taken to the net finance costs in the Group Statement of Comprehensive Income.

	31 December	31 December
	2019	2018
	£'000	£'000
Interest rate cap premium - opening fair value	-	1
Changes in fair value of interest rate derivatives	-	(1)
Closing fair value	-	-

	31 December	31 December
	2019	2018
	£'000	£'000
Total bank borrowings	355,000	330,000
Total fixed borrowings	(277,200)	(221,700)
Total floating rate borrowings	77,800	108,300
Notional value of borrowings hedged by interest rate derivative - swap	-	35,500
Proportion of notional value of interest rate swap derivative to floating rate bank borrowings	0.0%	32.8%

Fair Value of Debt

	Group
			Fair value
	Fair value	Book value	less book value
	£'000	£'000	£'000
At 31 December 2019	295,498	271,971	23,527
At 31 December 2018	230,677	217,514	13,163

The fair value of the fixed rate debt has been valued by the independent valuation expert, Chatham Financial. The floating rate debt has been excluded as it is assumed the carrying value will be similar to the fair value.

The fair value of these contracts is determined by discounting the future cash flows estimated to be paid or received under these contracts using a valuation technique based on forward rates derived from short-term rates, futures, swap rates and implied option volatility.

Fair Value Hierarchy

The following table provides the fair value measurement hierarchy for interest rate derivatives:

		Group
				Significant	Significant
			Quoted prices in	observable	unobservable
			active markets	inputs	inputs
			(Level 1)	(Level 2)	(Level 3)
Assets/(liability) measured at fair value:	Date of valuation	£'000	£'000	£'000	£'000
	31 December 2019
Interest rate derivative - cap		-	-	-	-
Interest rate derivative - swap		-	-	-	-
	31 December 2018
Interest rate derivative - cap		-	-	-	-
Interest rate derivative - swap		(237)	-	(237)	-

The fair value of these contracts is recorded in the Group Consolidated Statement of Financial Position and is determined by forming an expectation that interest rates will exceed strike rates and discounting these future cash flows at the prevailing market rates as at the year end.

There have been no transfers between Level 1 and Level 2 during the year, nor have there been any transfers between Level 2 and Level 3 during the year.

19. SHARE CAPITAL

Ordinary shares issued and fully paid at 1p each

	Group and Company			Group and Company
	31 December	31 December		31 December	31 December
	2019	2019		2018	2018
	Number	£'000		Number	£'000
Balance brought forward	602,887,740	6,029		602,887,740	6,029
Share options exercised	273,218	3		-	-
Balance carried forward	603,160,958	6,032		602,887,740	6,029

There were two share issues in the year relating to vesting share options; see Note 27 for further details. One was on 2 October 2019 for 120,833 ordinary shares and the other on 26 November 2019 for 152,385 ordinary shares.

20. SHARE PREMIUM

The share premium relates to amounts subscribed for share capital in excess of nominal value:

	Group and Company
	31 December	31 December
	2019	2018
	£'000	£'000
Balance brought forward	467,268	467,268
Share premium cancellation	(467,268)	-
Share premium on share options exercised	257	-
Balance carried forward	257	467,268

Cancellation

At the AGM on 2 May 2019, shareholders approved a resolution to cancel the Company's share premium account, which stood at £467 million. The court order to confirm the cancellation was received on 4 June 2019, following which the share premium account was cancelled. Cancellation results in this capital being treated as realised profit, giving us the flexibility to declare dividends or make other distributions to shareholders, although there is no current intention to do so.

21. CAPITAL REDUCTION RESERVE

	Group and Company
	31 December	31 December
	2019	2018
	£'000	£'000
Balance brought forward	45,458	75,602
Less interim dividends declared and paid per Note 10	(30,148)	(30,144)
Share premium cancellation	467,268	-
Balance carried forward	482,578	45,458

The capital reduction reserve account is a distributable reserve.

Refer to Note 10 for details of the declaration of dividends to shareholders.

22. LEASING AGREEMENTS

Future total minimum lease receivables under non-cancellable operating leases on investment properties are as follows:

	Group
	31 December	31 December
	2019	2018
	£'000	£'000
Less than one year	49,278	45,564
Between one and five years	7,377	9,757
More than five years	9,851	10,630
Total	66,506	65,951

The above relates to commercial leases and nomination agreements with UK universities in place as at 31 December 2019. The impact of student leases for the forthcoming academic year signed by 31 December 2019 have not been included as the certainty of income does not arise until the tenant takes occupation of the accommodation. As at 31 December 2019 £29,204,000 (31 December 2018: £26,968,000) of the future minimum lease receivables have been received as cash.

23. CONTINGENT LIABILITIES

There were no contingent liabilities at 31 December 2019 (31 December 2018: £nil).

24. CAPITAL COMMITMENTS

The Group had capital commitments relating to developments totalling £31,542,000 at 31 December 2019 31 (December 2018: £37,950,000).

25. RELATED PARTY DISCLOSURES

Key Management Personnel

Key management personnel are considered to comprise the Board of Directors. Please refer to Note 6 for details of the remuneration for the key management.

Share Capital

Share transactions of related parties during the year ended 31 December 2019 were as follows:

Name	How related	No of shares	Transaction	Date
Tim Attlee	Director	120,833	Exercise of options	02 October 2019
Tim Attlee	Director	64,000	Disposal	15 October 2019
Tim Attlee	Director	152,385	Exercise of options	26 November 2019
Tim Attlee	Director	94,500	Disposal	02 December 2019

Share-based Payments

On 24 April 2019, nil cost options were granted to Executive Directors in the amounts of:

Lynne Fennah	560,316 shares
Tim Attlee	43,818 shares

On 2 October 2019, Executive Directors exercised vested nil-cost options in the amounts of:

Tim Attlee

120,833 shares

On 26 November 2019, Executive Directors exercised vested nil-cost options in the amounts of:

Tim Attlee

152,385 shares

Details of the shares granted and exercised are outlined in Note 27.

26. SUBSEQUENT EVENTS

On 27 February 2020 we refinanced an expiring £10 million unsecured facility with First Commercial Bank on a three year term and extended the facility value to £20 million.

On 16 March 2020 we entered into a four and a half year £22.5 million development debt facility with RBS.

27. SHARE-BASED PAYMENTS

The Company operates three equity-settled share-based remuneration schemes for Executive Directors under the deferred annual bonus, LTIP and the VDP. The details of the schemes are included in the Remuneration Committee Report.

Issued

On 24 April 2019, the Company granted nil-cost options over a total of 101,377 (Tim Attlee 43,818 and Lynne Fennah 57,559) ordinary shares pursuant to the deferred shares element of the annual bonus awards for the financial period ended 31 December 2018 (the "Annual Bonus Awards").

Further, and also on 24 April 2019, Lynne Fennah was granted nil-cost options over 502,757 ordinary shares pursuant to the Empiric 2014 Long-Term Incentive Plan (the "2017-20 LTIP Awards") for the 2019 financial year.

Lapsed Awards

Exercised

On 2 October 2019 Tim Attlee, Director of the Company, exercised vested nil-cost options over 120,833 ordinary shares in the Company ("ordinary shares") pursuant to the Empiric Student Property Plc 2014 Long-Term Incentive Plan (the "Exercise").

On 26 November 2019 Tim Attlee, Director of the Company, exercised vested nil-cost options over 152,385 ordinary shares in the Company ("ordinary shares") pursuant to the Empiric Student Property Plc 2014 Long-Term Incentive Plan (the "Exercise").

None of the nil-cost options is currently exercisable. The weighted average remaining contractual life of these options was 1.7 years (2018: 1.6 years). During the year to 31 December 2019 the amount recognised relating to the options was £164,000 (2018: £98,000).

The awards have the benefit of dividend equivalence. The Remuneration Committee will determine on or before vesting whether the dividend equivalent will be provided in the form of cash and/or shares.

	12/31/19	12/31/18	12/31/17	12/31/16
Outstanding number brought forward	1,051,708	1,477,817	3,913,420	2,880,391
Granted during the period	604,134	439,022	207,198	1,033,029
Vested and exercised during the period	(129,253)	(139,325)	(691,237)	-
Lapsed during the period	(276,544)	(725,806)	(1,951,564)	-
Outstanding number carried forward	1,250,045	1,051,708	1,477,817	3,913,420

The fair value on date of grant for the nil-cost options under the 2017-20 LTIP Awards and Annual Bonus Awards were priced using the Monte Carlo pricing model.

The following information is relevant in the determination of the fair value of these nil-cost options in the year:

		Annual Bonus Award
(a)	Weighted average share price at grant date of	£0.93
(b)	Exercise price of	£nil
(c)	Contractual life of	3 years
(d)	Expected volatility of	14.80%
(e)	Expected dividend yield of	6.09%
(f)	Risk-free rate of	1.20%
(g)	The volatility assumption is based on a statistical analysis of daily share prices of comparator companies over the last three years
(h)	The TSR performance conditions have been considered when assessing the fair value of the options

28. FINANCIAL RISK MANAGEMENT

Financial Instruments

The Group's principal financial assets and liabilities are those which arise directly from its operations: trade and other receivables, trade and other payables and cash and cash equivalents. Set out below is a comparison by class of the carrying amounts and fair value of the Group's financial instruments that are shown in the financial statements:

Risk Management

The Company and Group is exposed to market risk (including interest rate risk), credit risk and liquidity risk.

The Board of Directors oversees the management of these risks.

The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.

(a) Market Risk

Market risk is the risk that the fair values of financial instruments will fluctuate because of changes in market prices. The financial instruments held by the Company and Group that are affected by market risk are principally the Company and Group bank balances along with the interest rate derivatives (swap and cap) entered into to mitigate interest rate risk.

(b) Credit Risk

Credit risk is the risk of financial loss to the Company and Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company and Group is exposed to credit risks from both its leasing activities and financing activities, including deposits with banks and financial institutions.

The Group has established a credit policy under which each new tenant is assessed based on an extensive credit rating scorecard at the time of entering into a lease agreement.

The Group's review includes external rating, when available, and in some cases bank references.

The Group determines concentrations of credit risk by monthly monitoring the creditworthiness rating of existing customers and through a monthly review of the trade receivables' ageing analysis.

Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only independently rated parties with minimum rating "B" are accepted.

Further disclosures regarding trade and other receivables, which are neither past due nor impaired, are provided in Note 14.

(i) Tenant Receivables

Tenant receivables, primarily tenant rentals, are presented in the Group Statement of Financial Position net of allowances for doubtful receivables and are monitored on a case-by-case basis. Credit risk is primarily managed by requiring tenants to pay rentals in advance and performing tests around strength of covenant prior to acquisition. There are no trade receivables past due as at the year end.

(ii) Credit Risk Related to Financial Instruments and Cash Deposits

One of the principal credit risks of the Company and Group arises with the banks and financial institutions. The Board of Directors believes that the credit risk on short-term deposits and current account cash balances are limited because the counterparties are banks, which are committed lenders to the Company and Group, with high credit ratings assigned by international credit rating agencies.

Credit ratings (Moody's)	Long-term	Outlook
AIB Group	Baa2	Positive
Canada Life	Aa3	Stable
Mass Mutual	Aa2	Negative
Scottish Widows	A2	Positive
Lloyds Bank Plc	Aa3	Stable

(c) Liquidity Risk

Liquidity risk arises from the Company and Group management of working capital and going forward, the finance charges and principal repayments on any borrowings, of which currently there are none. It is the risk that the Company and Group will encounter difficulty in meeting their financial obligations as they fall due as the majority of the Company and Group assets are property investments and are therefore not readily realisable. The Company and Group objective is to ensure they have sufficient available funds for their operations and to fund their capital expenditure. This is achieved by continuous monitoring of forecast and actual cash flows by management.

The following table sets out the contractual obligations (representing undiscounted contractual cash flows) of financial liabilities:

	Group
		Less than	3 to 12	1 to 5
	On demand	3 months	months	years	> 5 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 December 2019
Bank borrowings and interest	-	13,101	41,801	149,450	317,287	521,639
Trade and other payables	-	14,372	-	-	-	14,372
	-	27,473	41,801	149,450	317,287	536,011
	Group
		Less than	3 to 12	1 to 5
	On demand	3 months	months	years	> 5 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 December 2018
Bank borrowings and interest	-	3,183	65,048	87,895	262,435	418,561
Swap derivatives	-	94	282	-	-	376
Trade and other payables	-	28,535	-	-	-	28,535
	-	31,812	65,330	87,895	262,435	447,472

	Company
		Less than	3 to 12	1 to 5
	On demand	3 months	months	years	> 5 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 December 2019
Bank borrowings and interest	-	10,045	-	-	-	10,045
Trade and other payables	-	2,841	-	-	-	2,841
	-	12,886	-	-	-	12,886
	Company
		Less than	3 to 12	1 to 5
	On demand	3 months	months	years	> 5 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 December 2018
Bank borrowings and interest	-	68	203	10,046	-	10,317
Trade and other payables	-	2,198	-	-	-	2,198
	-	2,266	203	10,046	-	12,515

29. CAPITAL MANAGEMENT

The primary objectives of the Group's capital management are to ensure that it remains a going concern and continues to qualify for UK REIT status.

The Board of Directors monitors and reviews the Group's capital so as to promote the long-term success of the business, facilitate expansion and to maintain sustainable returns for shareholders.

Capital consists of ordinary shares, other capital reserves and retained earnings.

30. SUBSIDIARIES

Those subsidiaries listed below are considered to be all subsidiaries of the Company at 31 December 2019, with the shares issued being ordinary shares. All subsidiaries are registered in London at the following address: 6th Floor, Swan House, 17-19 Stratford Place, London, England, W1C 1BQ.

In each case the country of incorporation is England and Wales.

	Company
	31 December	31 December
	2019	2018
	£'000	£'000
As at 1 January	8,623	12,571
Additions in the year	73,063	8,622
Disposals	-	(12,570)
Balance at 31 December	81,686	8,623

During the current year and prior year there were a number of subsidiaries which moved around the Group, due to reorganisations relating to debt, these were all non ‑ cash movements whereby PLC forgave intercompany debt owned by subsidiaries in return for the issue of further shares.

Company	Status	Ownership	Principle activity
Brunswick Contracting Limited	Active	100%	Property Contracting
Empiric (Alwyn Court) Limited	Active	100%	Property Investment
Empiric (Baptists Chapel) Limited	Active	100%	Property Investment
Empiric (Bath Canalside) Limited	Active	100%	Property Investment
Empiric (Bath James House) Limited	Active	100%	Property Investment
Empiric (Bath JSW) Limited	Active	100%	Property Investment
Empiric (Bath Oolite Road) Limited	Active	100%	Property Investment
Empiric (Bath Piccadilly Place) Limited	Active	100%	Property Investment
Empiric (Birmingham Emporium) Limited	Active	100%	Property Investment
Empiric (Birmingham) Limited	Active	100%	Property Investment
Empiric (Bristol St Mary's) Limited	Active	100%	Property Investment
Empiric (Bristol St Mary's) Leasing Limited	Dormant	100%	Property Leasing
Empiric (Bristol) Leasing Limited	Dormant	100%	Property Leasing
Empiric (Bristol) Limited	Active	100%	Property Investment
Empiric (Buccleuch Street) Leasing Limited	Dormant	100%	Property Leasing
Empiric (Buccleuch Street) Limited	Active	100%	Property Investment
Empiric (Canterbury Franciscans) Limited	Active	100%	Property Investment
Empiric (Canterbury Pavilion Court) Limited	Active	100%	Property Investment
Empiric (Cardiff Wndsr House) Leasing Limited	Dormant	100%	Property Leasing
Empiric (Cardiff Wndsr House) Limited	Active	100%	Property Investment
Empiric (Centro Court) Limited	Active	100%	Property Investment
Empiric (Claremont Newcastle) Limited	Active	100%	Property Investment
Empiric (College Green) Limited	Active	100%	Property Investment
Empiric (Developments) Limited	Active	100%	Development Management
Empiric (Durham St Margarets) Limited	Active	100%	Property Investment
Empiric (Edge Apartments) Limited	Active	100%	Property Investment
Empiric (Edinburgh KSR) Limited	Active	100%	Property Investment
Empiric (Exeter Bishop Blackall School) Limited	Active	100%	Property Investment
Empiric (Exeter Bonhay Road) Leasing Limited	Dormant	100%	Property Leasing
Empiric (Exeter Bonhay Road) Limited	Active	100%	Property Investment
Empiric (Exeter City Service) Limited	Active	100%	Property Investment
Empiric (Exeter DCL) Limited	Active	100%	Property Investment
Empiric (Exeter Isca Lofts) Limited	Active	100%	Property Investment
Empiric (Exeter LL) Limited	Active	100%	Property Investment
Empiric (Falmouth Maritime Studios) Limited	Active	100%	Property Investment
Empiric (Falmouth Ocean Bowl) Limited	Active	100%	Property Investment
Empiric (Glasgow Ballet School) Limited	Active	100%	Property Investment
Empiric (Glasgow Bath St) Limited	Active	100%	Property Investment
Empiric (Glasgow George Square) Leasing Limited	Dormant	100%	Property Leasing
Empiric (Glasgow George Square) Limited	Active	100%	Property Investment
Empiric (Glasgow George St) Leasing Limited	Active	100%	Property Leasing
Empiric (Glasgow George St) Limited	Active	100%	Property Investment
Empiric (Glasgow) Leasing Limited	Active	100%	Property Leasing
Empiric (Glasgow) Limited	Active	100%	Property Investment
Empiric (Hatfield CP) Limited	Active	100%	Property Investment
Empiric (Huddersfield Oldgate House) Leasing Limited	Dormant	100%	Property Leasing
Empiric (Huddersfield Oldgate House) Limited	Active	100%	Property Investment
Empiric (Huddersfield Snow Island) Leasing Limited	Active	100%	Property Leasing
Empiric (Lancaster Penny Street 1) Limited	Active	100%	Property Investment
Empiric (Lancaster Penny Street 2) Limited	Active	100%	Property Investment
Empiric (Lancaster Penny Street 3) Limited	Active	100%	Property Investment
Empiric (Leeds Algernon) Limited	Active	100%	Property Investment
Empiric (Leeds Mary Morris) Limited	Active	100%	Property Investment
Empiric (Leeds Pennine House) Limited	Active	100%	Property Investment
Empiric (Leeds St Marks) Limited	Active	100%	Property Investment
Empiric (Leicester 134 New Walk) Limited	Active	100%	Property Investment
Empiric (Leicester 136-138 New Walk) Limited	Active	100%	Property Investment
Empiric (Leicester 140-142 New Walk) Limited	Active	100%	Property Investment
Empiric (Leicester 160 Upper New Walk) Limited	Active	100%	Property Investment
Empiric (Leicester Bede Park) Limited	Active	100%	Property Investment
Empiric (Leicester De Montfort Square) Limited	Active	100%	Property Investment
Empiric (Leicester Hosiery Factory) Limited	Active	100%	Property Investment
Empiric (Leicester Peacock Lane) Limited	Active	100%	Property Investment
Empiric (Leicester Shoe & Boot Factory) Limited	Active	100%	Property Investment
Empiric (Leicester West Walk) Limited	Dormant	100%	Property Investment
Empiric (Liverpool Art School/Maple House) Limited	Active	100%	Property Investment
Empiric (Liverpool Chatham Lodge) Limited	Active	100%	Property Investment
Empiric (Liverpool Grove Street) Limited	Active	100%	Property Investment
Empiric (Liverpool Hahnemann Building) Limited	Active	100%	Property Investment
Empiric (Liverpool Octagon/Hayward) Limited	Active	100%	Property Investment
Empiric (London Camberwell) Limited	Active	100%	Property Investment
Empiric (London Francis Gardner) Limited	Active	100%	Property Investment
Empiric (London Road) Limited	Active	100%	Property Investment
Empiric (Manchester Ladybarn) Limited	Active	100%	Property Investment
Empiric (Manchester Victoria Point) Limited	Active	100%	Property Investment
Empiric (Newcastle Metrovick) Limited	Active	100%	Property Investment
Empiric (Northgate House) Limited	Active	100%	Property Investment
Empiric (Nottingham 95 Talbot) Limited	Active	100%	Property Investment
Empiric (Nottingham Frontage) Leasing Limited	Dormant	100%	Property Leasing
Empiric (Nottingham Frontage) Limited	Active	100%	Property Investment
Empiric (Oxford Stonemason) Limited	Active	100%	Property Investment
Empiric (Picturehouse Apartments) Limited	Active	100%	Property Investment
Empiric (Portobello House) Limited	Active	100%	Property Investment
Empiric (Portsmouth Elm Grove Library) Limited	Active	100%	Property Investment
Empiric (Portsmouth Europa House) Leasing Limited	Active	100%	Property Leasing
Empiric (Portsmouth Europa House) Limited	Active	100%	Property Investment
Empiric (Portsmouth Kingsway House) Limited	Active	100%	Property Investment
Empiric (Portsmouth Registry) Limited	Active	100%	Property Investment
Empiric (Provincial House) Leasing Limited	Active	100%	Property Leasing
Empiric (Provincial House) Limited	Active	100%	Property Investment
Empiric (Reading Saxon Court) Leasing Limited	Active	100%	Property Leasing
Empiric (Reading Saxon Court) Limited	Active	100%	Property Investment
Empiric (Snow Island) Limited	Active	100%	Property Investment
Empiric (Southampton) Leasing Limited	Active	100%	Property Leasing
Empiric (Southampton) Limited	Active	100%	Property Investment
Empiric (St Andrews Ayton House) Leasing Limited	Active	100%	Property Leasing
Empiric (St Andrews Ayton House) Limited	Active	100%	Property Investment
Empiric (St Peter Street) Limited	Active	100%	Property Investment
Empiric (Stirling Forthside) Leasing Limited	Dormant	100%	Property Leasing
Empiric (Stirling Forthside) Limited	Active	100%	Property Investment
Empiric (Stoke Caledonia Mill) Limited	Active	100%	Property Investment
Empiric (Summit House) Limited	Active	100%	Property Investment
Empiric (Talbot Studios) Limited	Active	100%	Property Investment
Empiric (Trippet Lane) Limited	Active	100%	Property Investment
Empiric (Twickenham Grosvenor Hall) Limited	Active	100%	Property Investment
Empiric (York Foss Studios 1) Limited	Active	100%	Property Investment
Empiric (York Lawrence Street) Limited	Active	100%	Property Investment
Empiric (York Percy's Lane) Limited	Active	100%	Property Investment
Empiric Acquisitions Limited	Active	100%	Intermediate Holding Company
Empiric Investment Holdings (Five) Limited	Active	100%	Holding Company
Empiric Investment Holdings (Four) Limited	Active	100%	Holding Company
Empiric Investment Holdings (Six) Limited	Active	100%	Holding Company
Empiric Investment Holdings (Three) Limited	Active	100%	Holding Company
Empiric Investment Holdings (Two) Limited	Active	100%	Holding Company
Empiric Investments (Five) Limited	Active	100%	Immediate Holding Company
Empiric Investments (Four) Limited	Active	100%	Immediate Holding Company
Empiric Investments (One) Limited	Active	100%	Immediate Holding Company
Empiric Investments (Six) Limited	Active	100%	Immediate Holding Company
Empiric Investments (Three) Limited	Active	100%	Immediate Holding Company
Empiric Investments (Two) Limited	Active	100%	Immediate Holding Company
Empiric Investments (Seven) Limited	Dormant	100%	Immediate Holding Company
Empiric Investment Holdings (Seven) Limited	Dormant	100%	Holding Company
Empiric Student Property Trustees Limited	Active	100%	Trustee of EBT
Empiric (Edinburgh South Bridge) Limited	Active	100%	Property Investment
Hello Student® Management Limited	Active	100%	Property Management

Definitions

Adjusted EPS - Adjusted earnings per share is a performance measure used by the Board to assess the Group's dividend payments. Licence fees, development rebates, rental guarantees and cumulative gains made on disposals of assets are added to EPRA earnings on the basis noted below as the Board sees these cash flows as supportive of dividend payments. This is then divided by the weighted average number of ordinary shares outstanding during the period (refer to Note 8).

AIFM - Alternative Investment Fund Manager

AIFMD - Alternative Investment Fund Managers Directive

ANUK - Accreditation Network UK is a central resource for tenants, landlords and scheme operators interested in accreditation of private rented housing.

Average Interest Cost - The weighted interest cost of our drawn debt portfolio at the balance sheet date.

Average term of debt - The weighted average term of our debt facilities at the balance sheet date.

Basic EPS - The earnings attributed to ordinary shareholders divided by the weighted average number of ordinary shares outstanding during the period (refer to Note 8).

Company - Empiric Student Property plc

Dividend Cover - Adjusted earnings divided by dividend paid during the year.

EPRA - European Public Real Estate Association

EPRA EPS - Reported on the basis recommended for real estate companies by EPRA (refer to Note 8).

EPRA NAV - EPRA NAV is calculated as net assets per the Consolidated Statement of Financial Position excluding fair value adjustments for debt-related derivatives (refer to Note 9).

EU - European Union

Executive Team - The Executive Directors made up of the CEO and CFO/COO.

GHG - Greenhouse gas

Gross Asset Value or GAV - The total value of the Group's wholly owned property portfolio (refer to Note 13).

Gross Rent - The total rents achievable if the portfolio was 100% occupied for an academic year.

Gross margin - Gross profit expressed as a percentage of rental income.

Group - Empiric Student Property plc and its subsidiaries.

Hello Student® platform - Our customer-facing brand and operating system which we operate all of our buildings under.

HMO - Homes of multiple occupants

IASB - International Accounting Standards Board

IFRS - International Financial Reporting Standards

IPO - The Group's Initial Public Offering in June 2014.

LIBOR - London interbank offered rate

Loan-to-value or LTV - A measure of borrowings used by property investment companies calculated as total drawn borrowings, net of cash and fixed term deposits, as a percentage of Gross Asset Value (refer to Notes 13 and 17).

Net Asset Value or NAV - Net Asset Value is the net assets in the Statement of Financial Position attributable to ordinary equity holders.

Non-PID - Non ‑ property income distribution

PBSA - Purpose Built Student Accommodation

PID - Property income distribution

RCF - Revolving credit facility

REIT - Real estate investment trust

RICS - Royal Institution of Chartered Surveyors

Senior Leadership Team - The senior management team which sits beneath the Executive Team and is made up of the six department heads.

Total Shareholder return - Share price growth with dividends deemed to be reinvested on the dividend payment date.

The Code - UK Code of Corporate Governance, as published in 2018.

UKLA - United Kingdom Listing Authority

VDP - Value Delivery Plan

 

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