Results for the 12 months ended 31 December 2017

RNS Number : 3694I

Empiric Student Property PLC

21 March 2018

 

21 March 2018

Empiric Student Property plc

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

RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER 2017

The Board of Empiric Student Property plc (ticker: ESP), the owner and operator of student accommodation across the UK, today announced the Company's full year results for the 12 months ended 31 December 2017.

HEADLINES

Financial

	As at 31 December 2017	31 December 2016
Portfolio valuation	£890.1m	£721.3m
NAV per share (basic)	104.37p	105.90p
Dividend declared per share	5.55p	3.05p1
Gross annualised rent2	£65.3m	£52.1m
Adjusted Earnings Per Share	1.86p	0.72p1
Revenue	£51.2m	£19.2m1
Earnings Per Share (basic)	3.84p	3.38p1
EPRA Earnings Per Share	0.70p	0.38p1

^{1 The comparative figures are for the six months to 31 December 2016 and so are not directly comparable.}

^{2 Gross Annualised rent includes commercial revenue and marketed student revenue for the academic year 2016/17 at full occupancy (the Group considers student occupancy levels of 97% and above as fully let).}

Financial Performance¹

·      2017 Adjusted Earnings for the year were £10.1 million.

·      Adjusted Basic Earnings per share for the year were 1.86 pence.

·      Revenue was £51.2 million for the year.

·      Declared and paid dividends per share of 5.55 pence in respect of the year to 31 December 2017, in line with the reduced target announced in the business review and trading update on 23 November 2017.

·      Portfolio valued at £890.1 million at 31 December 2017, up 23.4%.

·      Targeting gross annualised rent of £72.2 million for the 2018/19 academic year.

·      Occupancy of 92% for academic year 2017/18, which was affected by local property management issues and local economic conditions in some cities. Pricing review, earlier marketing and process monitoring have been put in place to support the target of 97% occupancy for the coming academic year.

·      Operating margins and dividend cover reduced by a number of financial and operational inefficiencies within the Group and its supply chain. A full review of the Group was completed, the results of which were announced in November 2017 and immediately began implementing significant financial and operational improvements and cost savings.

·      Operating margin of 57% for 2017.

·      Administration expenses of £13.5 million for 2017, (H1 2017 £7.6 million, £5.9 million for H2 2017).

·      Raised net proceeds of £107.6 million through the issue of 100,917,432 shares at 109 pence per share in July 2017.

·      Agreed a new £10 million, three-year unsecured loan, which has been fully drawn down, and a £70 million, three-year secured revolving credit facility, which was undrawn at the year end.

·      Dividend cover on an adjusted basis of 33%.

·      Loan to value ratio ("LTV") of 33% at 31 December 2017, which is within both the long-term LTV target of 35% and our maximum LTV of 40%. The aggregate cost of debt was 3.25% with a weighted average term to maturity of 6.7 years.

Operational Performance

·      94 assets with 9,158 beds contracted at 31 December 2017, in 29 prime university cities and towns.

·      1,460 new beds in the 2017/18 academic year including 1,031 beds from nine newly completed developments.

·      85 operating or revenue-generating properties at the year end, with an average valuation yield of 5.7% and average yield on cost of 6.7%.

·      Increased the number of assets on the Hello Student® platform by 26 to 62 during the year, meaning Hello Student® is marketing or managing 73% of the Company's operational buildings.

·      During the year acquired four standing assets (429 beds), one forward funded asset (106 beds), one development site (153 beds) and Revcap's 50% interest in the Willowbank joint venture (178 beds).

·      Sold the Forthside development site in Sterling (208 beds).

Business Review

As advised in the 23 November 2017 business review and trading update, a top to bottom review of the business has been undertaken.  A summary of the scope of the review and resulting key actions taken to date are as follows:

Scope of Review	Actions
Finance team structure and experience	Replaced 8 out of 12 people including recruitment of a new Group Financial Controller.
Reporting and forecasting process	Stronger budget and forecasting process with input from all key personnel.
External service providers	Reviewed all contracts and performance, bringing facilities management in-house over a twelve-month period.  Further scope to review bringing in-house Revenue Management and HR capability, and to rationalise our IT platforms and providers moving forward.
End to end sales process	Improved accuracy of data and constant monitoring, with timely corrective action taken where necessary.
Broader team collaboration and engagement	Performance metrics aligned to business objectives and more effective collaboration across the business.

Post Period End

·      Purchased Emily Davies Halls of Residence in Southampton, adding an affordable price to complement our studio schemes, in line with our investment strategy, bringing the current number of assets to 95.

Outlook

·      Revenue projections for academic year 2017/18 remain unchanged based on 92% occupancy until the start of the new academic year.

·      For the 2018/19 academic year, we are targeting occupancy levels of 97% supported by an increased focus on the end to end sales process.

·      Bookings for the 2018/19 academic year are currently 48% compared to 22% at the same time last year, an increase of more than double.

·      A modest increase in gross margin is forecast for FY 2018, with a significant uplift in the fourth quarter as occupancy levels increase from September onwards and as the cost of third party property management and facilities management begins to fall away. 

·      Targeting an operating margin of 70% in 2019 with tangible progress towards that target in FY 2018.

·      Reshape the investment portfolio by reinvesting the proceeds of the sale of a parcel of non-core assets into our core markets. This will involve less than 10% of the Group's property assets by value.

·      Unlock the value of our development assets through joint ventures.

·      Targeting administration expenses of £10 million in 2018, a reduction of 26% on FY 2017.

·      Targeting a dividend of 5.0 pence per share for the year ending 31 December 2018.

·      On an adjusted basis we expect to see a fully covered dividend by the year ending 31 December 2019¹  with significant progress towards that target in FY 2018.^.

^{1 The figures in relation to prospective dividends set out above are not intended to be, and should not be taken as, a profit forecast or estimate, or a dividend declaration.}

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

"We have a very strong property portfolio which operationally underperformed in 2017. We have identified the causes of that underperformance and are implementing the changes necessary to allow the business to deliver the improvements we all want to see.

We expect these actions will deliver growth in operating margin and dividend cover during 2018 and beyond. As a result, we continue to target a total return of 10% per annum over the medium term."

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

Empiric Student Property plc	(via Newgate below)
Tim Attlee (Acting Chief Executive Officer)
Lynne Fennah (Chief Financial Officer)
Jefferies International Limited	Tel: [phone]
Gary Gould
Stuart Klein
Newgate (PR Adviser)	Tel: [phone]
James Benjamin	Em: [e-mail]
Anna Geffert
Leena Patel

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.

A meeting for investors and analysts will be held at 9:00am today at:

Gowling WLG (UK) LLP

4 More London Riverside

London

SE1 2AU

The presentation will also be accessible via a live conference call and on-demand via the Company website: https://www.empiric.co.uk/investor-information/company-documents

Those wishing to attend the presentation or access the live conference call are kindly asked to contact Newgate at [e-mail] or by telephone on [phone].

In addition, a recorded webcast of this meeting and the presentation will also be available to download from the Company's website: www.empiric.co.uk.

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 2018, on or around 22 March 2018.

CHAIRMAN'S STATEMENT

Dear Fellow Shareholder

The Rt Honourable the Baroness Brenda Dean of Thornton-le-Fylde was Non-Executive Chairman of the Board of Empiric from 28 May 2014 until her death on 13 March 2018.

She presided over the Company for the financial year reported on in this Annual Report and she was involved in preparing the document until 13 March when it had reached an advanced stage. It is due to this involvement that the Company has decided that the Chairman's Statement, Chairman's Introduction to Corporate Governance and the Nominations Committee Report should be published in her name.

As Acting Chairman as of 14 March 2018, I confirm that I fully support and endorse the statements made in this report.

The Board and staff of Empiric are deeply saddened by her loss, but immensely grateful for Brenda's contribution to the Company and the impact she had more widely during her illustrious career.

Brenda will be hugely missed.

Stuart Beevor

Acting Chairman

Dear Fellow Shareholder

The Board is acutely aware that performance was below expectations in what was a difficult year for Empiric. We have identified the reasons for this and have taken quick and decisive action to rectify it. The work we are doing will transform Empiric's performance and support delivery of our target total return of 10% per annum.

Performance and Business Review

The Group has grown significantly since the IPO in 2014 and particularly between June 2016 and the start of the 2017/18 academic year. During this time, we increased the number of operating beds by more than 70% and more than trebled the number of buildings on the Hello Student^® operating platform. The performance of the operating portfolio this year has been affected by financial and operational inefficiencies, both in the Group and in its supply chain. In addition, while the majority of the operating portfolio is fully let¹ for the current academic year, lettings at a number of our properties including in Aberdeen and Cardiff were significantly below target (see page 20 of the Annual Report for more detail), contributing to overall occupancy of 92%. Together, these factors reduced our operating margin for 2017 to 57%. This in turn affected dividend cover, requiring the Board to reduce its dividend target for the third and fourth quarters of 2017 and for 2018.

Lynne Fennah, who joined us as Chief Financial Officer ("CFO") on 26 June 2017 has led a full review of the Group. As a result, with the strengthened finance team, we have implemented significant financial and operational improvements to the Group's processes, reporting and procedures.

Since the end of the financial year, the Board has also decided to bring the remaining buildings managed by third parties onto the Hello Student^® platform ahead of the 2018/19 academic year, helping us to drive occupancy and revenue. We are also bringing facilities management in-house, which will further reduce costs. (See page 18 of the Annual Report for more detail.) The Board is targeting an operating margin of above 70% and we expect to make significant progress towards this during 2018.

The Group is also rigorously focused on reducing administration expenses, which totalled £13.5 million for the year (H1: £7.6 million, H2: £5.9 million). This included a number of one-off costs, and we have also identified further savings (see page 18 of the Annual Report for more detail). The Board is now targeting administration expenses of £10 million in 2018.

The Group continued to grow its portfolio at a manageable rate during the year, through selected acquisitions and the successful completion of a number of developments.

At the year end, the property portfolio was independently valued at £890.1 million, an increase of 23.4% for the year. More information about the portfolio and the valuation can be found in the Chief Executive Officer's review.

Dividends

Our dividend target for 2017 was 6.1 pence per share. We paid interim dividends in line with this target in respect of the first two quarters of the year, totalling 3.05 pence per share. However, with dividend cover falling below our original expectations, on 23 November the Board announced a reduced target for 2017 of 5.55 pence per share. We declared dividends of 1.25 pence per share in respect of both the third and fourth quarters and therefore met this revised target.

For 2018, the Board is targeting a dividend of 5.0 pence per share. We expect to see a significant improvement in dividend cover during 2018 on an adjusted earnings basis, and for the 2019 dividend to be fully covered.

Strategy

In 2016, we set out a long-term strategy for Empiric, which is described on page 8 of the Annual Report for more detail. The Board continues to believe this is the right strategy for the Group and that it will deliver attractive returns for shareholders. However, our priority for the coming months is to maximise the returns from our existing asset base, through the operational improvements discussed above and by fine tuning the portfolio and reshaping our investment portfolio. The Chief Executive Officer's review explains more about our strategic priorities.

Board, Management and Staff

We were delighted to appoint Lynne Fennah and her experience in the real estate and hospitality sectors is already proving invaluable to the Group. Lynne replaced Michael Enright, who resigned on 14 March 2017.

On 11 December 2017, the Board gave Paul Hadaway notice to terminate his employment with the Company and he formally stepped down as Director on 12 December 2017. The Board acknowledges his contribution to the business and wishes him well.

Tim Attlee, Chief Investment Officer and co-founder of Empiric, agreed to assume the additional role of acting Chief Executive Officer. The Board firmly believes that Tim, with his in-depth knowledge of the business and sector, is the right person to lead us through this period of transformation. Following Paul Hadaway's departure, Lynne Fennah has also taken on responsibility for the Group's operations.

The new team has made a great start in bringing about the improvements arising from the review of the Group.

The Board has been deeply involved in the business in recent months and has taken difficult decisions that are in the long-term interests of Empiric and its shareholders. It is healthy for the Board to regularly review how it functions and therefore conducted an external review of the performance of the Board and its Committees, which was completed in February 2018. More information can be found on page 46 of the Annual Report.

This has been a challenging time for Empiric and our people have responded superbly. Their energy and commitment to the Group's success has been unfaltering, and I thank all of them on behalf of the Board for their contribution.

Shareholders

Since the IPO, we have worked hard to build strong relationships with our shareholders and we will continue to regularly engage with them, so they are informed about our plans and progress. On behalf of the Board, I want to thank our shareholders for their continued support. The Board has a strong sense of responsibility to our shareholders and we are determined to ensure positive outcomes for them and for all our stakeholders.

Summary

The Board is confident that the actions we are taking, coupled with Empiric's excellent portfolio, will ensure a bright future for the business. We expect these actions will deliver growth in operating margin and dividend cover during 2018 and beyond. As a result, we continue to target a total return of 10% per annum over the medium term.

The Rt Hon the Baroness

Dean of Thornton-le-Fylde

Statement made prior to her death and approved by the Acting Chairman below:

Stuart Beevor

Acting Chairman

21 March 2018

^{1 The Group considers occupancy levels of 97% and above as fully let.}

OUR STRATEGIC OBJECTIVES

Locations	Buildings	Management
Objectives	Objectives	Objectives
·      Selectively invest in 36 towns and cities ·      Create efficiencies in locations with existing assets, plus some additional leading university locations ·      Develop in-house metrics of university performance and trajectory, to refine product types and assess locational risk	·      Continue to purchase core assets ·      Increase development options ·      Diversify income between different markets and product types, to spread operational risk and increase efficiencies	·      Provide the majority of operational functions in-house ·      Grow at a sustainable rate ·      Build gross income ·      Reduce costs per bed ·      Improve operational efficiency

Progress	Progress	Progress
·      Completed nine developments for the 2017/18 academic year, all in locations where we already have assets ·      Expanded the Hello Student® platform, giving us operating efficiencies in locations with multiple assets ·      Created an in-house research function, giving us a much deeper understanding of individual locations and the demand for different product types ·      Completed a review of all assets and city groups, which is informing the process of reshaping the investment portfolio	·      Acquired four standing assets, one forward funded development, a development site and Revcap's 50% interest in the Willowbank joint venture ·      Trialled the premium townhouse concept in Exeter and let the development to the University of Exeter for one year ·      Trialling the affordable apartment concept in Victoria Point, Manchester	·      Added 26 assets to the Hello Student® platform during the year and after the year end agreed to bring the remaining assets onto the platform for the 2018/19 academic year. There is also a phased approach to bring facilities management in-house ·      Increased future gross income through our acquisition, development and redevelopment programmes ·      Completed a detailed review of the Group and began to implement significant operational and financial improvements and cost savings ·      Began to rationalise staffing levels to improve efficiency

Brand	Customers	Shareholder Outcomes
Objectives	Objectives	Objectives
·      Improve the student experience through a consistent and high-quality approach to branding, operation and management through the Hello Student® platform ·      Build on the Hello Student® consumer brand and capture first year students as new customers and then provide a fresher-to-PhD" accommodation and service offering	·      Enable loyal customers to move building to building and city to city but keep them attracted to the Hello Student® brand and platform ·      Ensure high levels of tenant satisfaction are achieved in every location ·      Build communities through building design and on-site management programme	·      Improve profitability through lower cost base per city and bed ·      Mitigate risk of a single-niche approach and broaden growth opportunities ·      Continue to grow a high yield on cost portfolio through development

Progress	Progress	Progress
·      62 assets with 5,819 beds marketed by Hello Student® for 2017/18 academic year ·      Hello Student® now operating in 24 cities at the year end, up from 17 at 31 December 2016 ·      Introduced a new Hello Student® website and enhanced booking system ·      Increased the brand reach, with web traffic 3.6 times greater than 2016 and Facebook driving over 50% of referrals to our website	·      Conducted Voice of the Tenant research, to understand how Hello Student® is perceived by students and how our buildings perform ·      Achieved accreditation by Accreditation Network UK ("ANUK") in January 2017, through the National Code Standards for Larger Student Developments, showing our support for high standards in management and practice	·      Added 17 assets to the operating portfolio for the start of the 2017/18 academic year ·      Added to our pipeline of forward funded and direct developments ·      Developed plans to fine tune the portfolio and add further depth to cities where we can earn attractive returns

OUR BUSINESS MODEL

Physical Assets

We have a diversified and attractive portfolio of properties that offers high-quality accommodation to customers ranging from first year undergraduates to postgraduates.

Specialist Knowledge

We understand how to successfully develop, acquire and operate student accommodation assets.

Relationships

We have strong relationships with universities, developers and potential vendors of PBSA assets.

Financial Assets

We finance our business through a combination of shareholder equity and debt facilities. Our debt has a weighted average term of 6.7 years and interest costs which are predominantly fixed or capped.

Technology

We are developing fit-for-purpose systems to support our operations, booking and accounting.

Select Locations

We are highly selective about where we invest. We currently operate in 29 towns and cities, which are home to some of the most successful universities in the UK and where student numbers are rising faster than average. We select sites based on their compatibility with our operating models and proximity to universities and amenities.

Our investment policy enables us to invest in studio and small-group assets, modern townhouses and affordable apartments, as well as building unique relationships with universities. These four different accommodation niches enable us to invest more deeply in each city.

Investment

Our Investment Policy allows us to invest our capital in a variety of ways. We can acquire freehold or long leasehold interests in individual buildings and portfolios and undertake forward funded and direct developments, on our own or in joint ventures (see below). Over time, we will redevelop selected assets in our portfolio, increasing rental income and capital values. This approach allows us to be flexible, investing our capital in the way that best suits us at the time, so we can prioritise generating revenue in the near term, the delivery of longer-term returns or a balance of the two.

Whichever route we choose, we select buildings with character that fit our strategic niches and where we can create future goals. Specifications are tailored to each building, with high-quality interiors and the generous provision of communal space. Our buildings have an average of around 100 beds, making them the right size for creating cohesive communities of friends, and are usually clustered together for operational efficiency.

Manage

Our Hello Student^® platform currently markets and manages most of our assets and all of our assets will be on the platform for the 2018/19 academic year. Adding assets to the platform gives us economies of scale, helps us to cross-sell as customers move between buildings and cities, and assists with recruiting experienced and dedicated staff. Empowering our property managers to feel ownership and pride helps us to drive occupancy and increase the number of students who rebook with us. The platform also gives us improved data on asset performance and insight into students' needs, so we can improve our offering.

Develop

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, have a lower risk profile as the planning, construction and time risk lies with the third-party developer, have lower staffing requirements and benefit from a forward funding coupon charged to the developer.

Direct development delivers higher yielding assets than forward funding. We have a strong track record, having completed all our direct developments to date on time or ahead of schedule.

Reinvest

We intend to hold our investments for the long term but we may sell an asset if we see an opportunity to create more value for shareholders by reinvesting the proceeds.

Stakeholders

Shareholders

Shareholders benefit from the rising capital value of our portfolio and growing rents, which support our dividends.

Employees

Our employees have the opportunity to develop their careers in an exciting and growing sector.

Communities

The communities around our assets benefit from reduced pressure on local housing stock.

Customers

Our student customers benefit from having a great place to live during their studies, at a rent that represents value for money.

CHIEF EXECUTIVE OFFICER'S REVIEW

Clear lessons have been learned from the shortfall in our operating performance in 2017. The Board has asked me to take on the additional role of Acting CEO during this challenging period and I am confident that our relentless focus on increasing revenue, cutting costs and unleashing the potential of our staff will deliver the transformation the business needs to fulfil its potential for all stakeholders.

We continued to enhance the Group's portfolio during the year, through acquisitions and completed developments, and we are now improving profitability through an investment strategy tailored to our current circumstances. Empiric has excellent assets and we are confident that our transformation programme will maximise the value we generate from them.

Strategic Priorities

In our 2025 plan, we set out our vision to be the UK's leading provider of premium student accommodation, offering exemplary locations, buildings and tenant experience, and this remains the case. In the near term, we are tailoring our investment strategy to our current circumstances, with increasing dividend cover being our absolute priority. Empiric has excellent assets, with a total asset value of £973 million, and our transformation programme will maximise the operational profitability of our standing asset portfolio and realise the value of our developments.

Our strategy targets 36 key university towns and cities in the UK. We currently have investments in 29 of these locations, and these remain our primary focus as we look to enhance our operational effectiveness. We are reviewing every asset to determine whether we could enhance returns by disposing of it and reinvesting the proceeds, bearing in mind the transaction costs of disposal and acquisition. This process considers the asset's financial performance, alongside the growth profile of the university it serves, the supply pipeline in its market and the implications for rental growth, recognising that supply in some cities is strong and this has challenged occupancy levels. The scale of this portfolio fine tuning will be modest and is likely to involve no more than 5-10% of our assets by value.

Where we dispose of assets, we will look to drive efficiencies by re-investing more deeply in existing markets and increasing our range of product and price points, as we are already doing successfully in Exeter, Leicester, York and Manchester. This will ensure we have something to offer everyone from first year undergraduates to postgraduates and help us to cross sell within the Hello Student^® brand. Markets with excellent universities and constrained supply of PBSA will be prime candidates for investment. We will look to acquire standing assets rather than development opportunities where possible, to ensure any acquisitions contribute to rental income from day one.

Completing the transition of assets to the Hello Student^® platform is a core goal, as it will help us to drive occupancy and efficiencies, so we maximise revenue and margins. More information about Hello Student^®'s progress in 2017 can be found on page 19 of the Annual Report.

Portfolio Summary

At 31 December 2017, the Group owned, or was committed on, 94 assets representing 9,158 beds (31 December 2016: 89 assets, representing 8,504 beds). The portfolio included 85 revenue-generating assets (31 December 2016: 75 assets). This will increase to 91 for the 2018/19 academic year, with a further three for later years.

The gross annualised rent for the 85 revenue-generating properties at the year end was approximately £65.3 million (31 December 2016: £52.1 million). Of this, £1.8 million was attributable to commercial revenue, representing 2.8% of the gross annualised rent (31 December 2016: £1.8 million, representing 3.5% of the gross annualised rent). The gross annualised rent roll is expected to increase to £72.2 million for the 2018/19 academic year, following completion of the four developments and two redevelopment projects that are currently under way. In November 2017 we announced a like-for-like rental growth target of 3.2% for the 2018/19 academic year. With 44% of rooms let under assured short-hold tenancies, as at the date of publication, 3.2% is at the upper end of our expectations but we have made demonstrable progress towards that target.

Valuation

Each property in the portfolio has been independently valued by CBRE, in accordance with the RICS Valuation - Professional Standards January 2014 (the "Red Book"). At 31 December 2017, the portfolio was valued at £890.1 million, an increase of 23.4% for the year (31 December 2016: £721.3 million).

The increase in valuation has been driven by a combination of acquisitions, yield compression and rental growth in the majority of our cities, which are continuing to see strong demand, tempered by a reduction in the valuation of assets located in certain cities, including Aberdeen and Cardiff, where we have faced operational challenges (see page 20 of the Annual Report for more detail).

Asset Acquisitions

During the year, we announced the acquisition of four standing assets, one forward funded project and one development site, at a total cost of £64.5 million. These purchases added 429 operational beds to the portfolio, with the potential to add over 500 further beds once the developments are complete. Details of the acquisitions can be found in the table on page 31 of the Annual Report. In addition to these transactions, we also purchased Revcap's 50% share in the Willowbank joint venture in Glasgow.

The standing assets acquired primarily comprise our core studio accommodation, as well as a number of townhouses and apartments. The property we acquired at South Bridge, Edinburgh, is let to the University of Edinburgh until March 2020 on an internal repairing lease, guaranteeing us full occupancy for the remaining term.

The development projects will provide further studios, as well as two and three bed apartments and six bed townhouses, in line with our strategy of diversifying our product types.

Developments

The Group made significant progress with its development projects during the year, with 1,031 new beds being completed for September 2017. These included our first premium townhouses, at Clifton Place, Exeter, which we let to the University of Exeter for the 2017/18 academic year. Once we have completed the projects which are currently in progress, we will have delivered more than £250 million of assets at cost through forward funded and direct developments, showing the importance of development to the Group's growth.

In total, seven forward funded projects reached completion and became operational in 2017. An eighth forward funded project, Trippet Lane in Sheffield, was delayed and is due to be completed in April 2018. Trippet Lane was therefore subject to a rental guarantee from the developer for the 2017/18 academic year. Rental guarantees on forward funded developments give us full protection in the first year of selling, mitigating construction risk for us.

The delay to Trippet Lane highlighted the benefit of owning a number of properties in a city. We completed our development project at Provincial House in Sheffield ahead of schedule, allowing us to offer places to students who had booked a place in Trippet Lane. In addition, we were able to offer places to students on the waiting list at our other Sheffield property, Portobello House. The completion of Provincial House maintains our record of completing all direct developments on time or early.

In November 2017, we obtained planning permission at Ocean Bowl, Falmouth, for 190 beds. This development will contribute much needed student accommodation and relieve pressure on the local housing market. Falmouth has one of the fastest growing student populations in the UK, with a student to bed ratio of 2.7:1, against the national average of 2.3:1. Ocean Bowl complements our scheme next door, Maritime Studios, and will allow us to benefit from operational efficiencies. Details of completed and current development projects can be found in the tables on page 31 of the Annual Report.

Redevelopments

Victoria Point is a flagship asset in Manchester, comprising six blocks which between them contain the three direct let asset types in our portfolio. Four of the blocks are currently operational, while blocks 3 and 4 are undergoing redevelopment to provide affordable accommodation suitable for returning undergraduates. These blocks will be operational for the 2018/19 academic year.

We have identified eight other operating assets which are suitable for redevelopment, giving us the potential to enhance the properties and increase rental income and capital values. Any redevelopment would be subject to the availability of finance and would be carefully timed to minimise the impact on dividend cover.

Disposal

On 27 November 2017, we completed the disposal of the Forthside Way development site in Stirling for £2.0 million. Our focus is on building critical mass in our target cities and this was our only asset in Stirling. We sold the property with the benefit of planning permission we obtained for a 208-bed PBSA development, resulting in a substantial uplift in value above the original acquisition price.

Safety

The safety of our students is always a top priority for us. Following the devastating fire at Grenfell Tower in June 2017, we commissioned an independent building-control approved inspector and fire-risk assessor, to undertake a full fire risk review of all our operating properties, from both a construction and operational perspective. While all buildings have been physically inspected, the formal reporting process will be ongoing during Q1 2018. The initial reports indicate that all the buildings in the portfolio are physically fully fire safety compliant and the on-site operating staff are trained in fire risk awareness and fire safety procedures. Monitoring of the physical assets continues and our staff are receiving ongoing training.

People and Culture

The entire team is focused on transforming Empiric's performance, and this is at the heart of the cultural change that is now under way. Everything we do is with the aim of increasing revenue, reducing cost or helping the team to perform more effectively. Applying our energy to these three areas is a key part of successfully turning our financial and operational performance around.

We are therefore striving to build a positive, collaborative and communicative culture, where our people bring forward suggestions for improvement, take responsibility for execution and are empowered to act, with appropriate oversight. Everyone will have the opportunity to learn new things, increase their skills and develop their careers.

Our aim is to reward commitment and success, so we are putting in place measurable objectives for all our people and will appraise their performance against them. These individual objectives will align with the three main Group objectives - maximising revenue, reducing cost and building a strong team ethic - to ensure rigorous focus on what is important.

We have significantly strengthened the team this year, to ensure we have the right calibre of people, not least in finance (see page 21 of the Annual Report for more detail).

We recognise that diversity can lead to better decision making and improved business outcomes. The changes to our team this year have further improved our gender diversity, particularly at a senior level. More information can be found on page 26 of the Annual Report.

Post Balance Sheet Events

Since the end of the financial year, we have acquired Emily Davies Halls of Residence in Southampton, which diversifies our portfolio in the city and extends our ability to provide affordable accommodation and diversifies our portfolio in the city. We have also completed the land purchases of Falmouth Ocean Bowl and Edinburgh King's Stables Road.

Outlook

Our challenge for 2018 is to drive the profitability of our entire portfolio, while bringing all externally resourced operational functions in-house and completing their integration.

The strength of the underlying investment thesis coupled with the high quality of our assets will support this transformation and provide a platform for the resumption of the Empiric's growth.

Tim Attlee

Acting Chief Executive Officer

21 March 2018

OPERATIONAL AND FINANCIAL REVIEW

Operational Review

As discussed in the Chairman's Statement, we completed a full review of the Group's operations and financial performance and announced our findings on 23 November 2017. The review identified a number of inefficiencies within the Group and its supply chain, which we are rapidly rectifying. This has resulted in more focus on revenue management and on achieving the levels of revenue we expect by returning to full occupancy at 97%, alongside reviewing and reducing both our direct and administrative costs.

We have been working to rationalise costs internally, as we consolidate our lettings operations. Central buying of utilities, for instance, has now been secured and will be effective from September 2018.

The Board has also approved two key actions which will significantly improve our operational effectiveness, reduce our direct costs and contribute to margin. First, we will bring all the properties currently being managed by third-party PBSA managers onto the Hello Student® platform, ahead of the 2018/19 academic year. This will enable us to directly manage costs, give us full control over the marketing of those assets and the interactions with students, and provide us with live data on our entire portfolio, so we can respond dynamically to changes in the market and drive occupancy and revenue.

The second critical change is that we will start to in-source the facilities management services from their current outsourced service providers, and we have appointed GVA to assist us with both building in-house capability and the transition plan. Internalising of facilities management will save us the providers' profit margin and VAT, thereby generating a saving after recruiting staff and other costs to undertake this process. Cost savings will start to be delivered from the start of the 2018/19 academic year.

Administration expenses in 2017 included a number of one-offs, as explained in the Financial Review. We are also taking action to cut administration expenses further, including reducing consultancy agreements and contractor headcount. Administration costs in the second half of 2017 came in at £5.9 million, as forecast, and we are working to bring further tasks in-house to reduce this over the next year. Changes to our forecasting process during the year have resulted in much more accurate information being provided for decision making, and we will continue to evolve these forecasting models.

Hello Student^®

We continued to increase the number of assets on the Hello Student^® platform during the year. At 31 December 2017, 62 of our 85 revenue generating assets were on the platform, up from 36 a year earlier. With the exception of one asset in Exeter, all new assets during the year went onto the platform, rather than to third-party managers. Hello Student^®'s ability to support the mobilisation of new assets was shown by the performance of Samuel Tuke Apartments and George Street, which were both full in their first year of operation.

We launched the new Hello Student^® website in November 2017. This enables us to track enquiries and provides improved reporting, as well as offering us better control of the content and having a smarter, more visually engaging customer interface. We also upgraded our bookings software, which has provided greater levels of analytics.

The Hello Student^® brand is building and engagement with the website is continually growing, with a 460% increase in web traffic in 2017, compared with the previous year. Social media is central to our sales platform, as we use it to engage with students, raise awareness of the Hello Student^® brand and drive website traffic. In 2017, we had a total of 74,000 Facebook followers and the total reach of all our posts was 2.2 million. Facebook was also responsible for driving over 50% of referrals to the Hello Student^® website.

The increasing scale of the Hello Student^® platform offers rationalisation opportunities, as we look to make sure it is as efficient as possible in each city. We therefore began reviewing staffing levels towards the end of 2017. We also introduced more robust performance management for our people, as described in the Chief Executive Officer's review.

During the year, we trialled a new in-house capability to manage the back office processing of bookings and payments, and transferred our four properties in Cardiff onto the new system. However, issues with the new system were a significant contributor to low levels of occupancy in Cardiff, as discussed in more detail below, and we therefore discontinued the trial and moved the properties back to the existing Hello Student^® system.

We continue to review the student booking journey, to ensure it is the best user experience it can be, and that the interface between the online processes and our physical presence is as seamless and effective as possible.

Research and Development

An important output from our operating platform is improved data on students' needs and preferences, and the performance of our assets. Our programme of student satisfaction and innovation research gives us valuable insight into how we can improve our offer. We conduct deep analyses of our cities, including the financial performance of the universities, the type of students they attract, where those students come from, the supply, quality and price of accommodation, and the niches we can successfully target there. This has benefits in honing operational reporting and acquisition insight, as well as allowing us to further develop relationships with universities.

Financial Performance

Comparative Figures

The change in our financial year end from June to December during 2016 has resulted in the comparative period for this set of results being the six months to 31 December 2016. Comparisons of amounts in the income statement between the two periods are therefore not meaningful and the discussion below focuses on performance in 2017 on a standalone basis.

Financial Results

Revenue from our assets was £51.2 million in 2017 (H2 2016: £19.2 million). Growth in the year resulted from the increase in revenue-producing assets from 75 to 85 and higher average annual rents. However, the portfolio was only 92% let for the 2017/18 academic year (2016/17: 97%). The large majority of the shortfall was the result of poor lettings in Aberdeen and Cardiff. Aberdeen was affected by local economic conditions, resulting from the oil price slump causing a mass increase in housing supply in the city. Cardiff had new supply entering the market, causing price disruption in existing buildings during their mobilisation year. In addition, Cardiff transitioned management into Hello Student^® mid sales cycle, there were local management conflicts and the systems problems noted above, which have now been resolved.

There were also a number of other cities where occupancy was affected to a lesser extent. The transition of a large number of assets to the emerging Hello Student^® platform was a factor, as well as operational issues in cities such as Glasgow and Newcastle. In response, we have adopted earlier and more strategic transition programmes, reduced initial listed rents in Cardiff and Aberdeen, which are offset by higher than average rents in other cities, and introduced rigorous weekly monitoring of bookings. We continue to monitor opportunities to maximise income by adjusting rents in light of demand throughout the bookings cycle.

The shortfall in occupancy and the operational inefficiencies outlined above resulted in operating profit under IFRS of £32.5 million for 2017 (H2 2016: £20.2 million). This included an aggregate revaluation uplift of £15.8 million, net of property acquisition costs, on our property portfolio at the year end (H2 2016: £14.5 million), and a gain of £1.1 million (H2 2016: £nil) on the sale of Forthside Way in Stirling. The operating margin for the year was 57%.

Administration expenses for the year were £13.5 million (H2 2016: £5.3 million), with £7.6 million incurred in first half and £5.9 million in the second half. There were a number of one-off costs in the first half, including the settlement agreement with the previous Chief Financial Officer and the cost of temporary finance staff, to support our migration to a new accounting platform. The second half of the year contained one-off costs for the settlement agreement with the previous Chief Executive Officer.

Net financing costs for the year were £11.8 million, net of money market investment income and the fair value gain on interest rate swaps of £0.1 million (H2 2016: £4.2 million and £0.3 million, respectively).

Profit before tax for 2017 was £20.8 million (H2 2016: £16.9 million). No corporation tax was charged, as the Group fulfilled all of its obligations as a REIT. Basic earnings per share were therefore 3.84 pence (3.83 pence on a diluted basis) (H2 2016: 3.38 pence and 3.35 pence (diluted)).

The Net Asset Value ("NAV") per share as at 31 December 2017 was 104.37 pence, prior to adjusting for the interim dividend for the quarter ended 31 December 2017 of 1.25 pence per share (31 December 2016: 105.9 pence, prior to adjusting for the interim dividend of 1.55 pence per share). The NAV is shown net of all property acquisition costs and dividends paid during the year.

Dividends

The dividends declared and paid in respect of the 2017 financial year are shown in the table overleaf. The changes to our dividend targets for 2017 and 2018 are covered by the Chairman on page 4 of the Annual Report.

Of the total dividends in respect of the year, 2.94 pence per share was declared as a property income distribution ("PID") and 2.61 pence per share was declared as ordinary UK dividends (H2 2016: 0.93 pence per share and 2.12 pence per share respectively).

Dividends

Quarter to	Declared	Paid	Amount (p)
31 March 2017	10 May 2017	31 May 2017	1.525
30 June 2017	4 July 2017	1 August 2017	1.525
30 September 2017	23 November 2017	15 December 2017	1.25
31 December 2017	26 February 2018	Due 23 March 2018	1.25
			5.55

Our adjusted earnings per share, which we see as the most relevant measure when assessing dividend distributions, were 1.86 pence (H2 2016: 0.72 pence). Adjusted earnings per share is defined under Key Performance Indicators on page 22 of the Annual Report.

At 31 December 2017, the Company had distributable reserves of £75.6 million, which compares with the cash cost for the total dividend for 2017 of £30.6 million. We therefore have substantial headroom for the payment of future dividends.

Equity Financing

On 24 July 2017, we completed a placing, open offer and offer for subscription for 100,917,432 shares, at an issue price of 109 pence per share. This raised net proceeds of £107.6 million. At 31 December 2017, £73.8 million of the proceeds had been committed.

Debt Financing

On 6 March 2017, we agreed a new unsecured term loan facility of £10 million, which was drawn down in full. This was our first facility at the Company level, reflecting the maturity of the business. The facility has a three-year term and an all-in cost of 2.15% p.a. On 20 November 2017, we announced a new secured, three-year £70 million revolving credit facility ("RCF") with Lloyds Bank. The RCF has a margin of 1.75% above three-month LIBOR and can be extended by 12 months, by mutual consent, on each of the first and second anniversaries, to give a total term of five years. The RCF was undrawn at the year end.

During the year, we also extended the terms of two existing facilities. These were:

·      the £32.8 million facility with AIB Group (UK) PLC, which is now repayable in October 2020; and

·      the £30.63 million facility with Royal Bank of Scotland, which now becomes repayable in December 2018.

In addition, following our acquisition of Revcap's 50% share of the Willowbank joint venture, we repaid the joint venture's outstanding debt of £9.5 million.

As at 31 December 2017, the Group had committed debt facilities of £390 million, of which £303.8 million had been drawn down (31 December 2016: £310 million of facilities, with £243.9 million drawn down). Of our total facilities, £191.1 million is at fixed interest rates and £198.9 million is at floating rates, with a further £35.5 million of the floating rate debt subject to interest rate caps or swaps. The aggregate cost of debt is 3.25%, with a weighted average term of 6.7 years at 31 December 2017. We fully complied with our covenants during the year.

Our LTV ratio at the year end was 32.9% (31 December 2016: 31.1%). Our borrowing policy is to maintain a conservative level of aggregate borrowings, with a long-term LTV target of 35% and a maximum of 40%.

Total Shareholder Return

The total shareholder return (see page 22 of the Annual Report for definition) for the year to 31 December 2017 was -7.2%, this compared with 12.3% for the FTSE All-Share REIT Index.

Finance Team

We restructured the finance team during the year. While the size of the team is unchanged, eight of the 12 team members are new, including me as CFO. This has given the team a much greater skillset and much higher capability. I want to thank the team for their considerable efforts in recent months, which have proved invaluable as we have begun to transform the business.

Alternative Investment Fund Manager ("AIFM")

The Company continues to be authorised as a full-scope AIFM and is regulated by the Financial Conduct Authority. The Company has engaged a specialist compliance consultancy, Portman Compliance Consulting LLP, to ensure that it adheres to all of its regulatory obligations.

Lynne Fennah

Chief Financial Officer

21 March 2018

KEY PERFORMANCE INDICATORS

Total Shareholder Return ("TSR") | %		NAV per share (basic) class="pu" valign="top"> -7.2		2017	104.37
20162	1.1	20161	105.9
Definition: the growth in share price plus dividends paid, as a percentage of the mid-market price at the start of the financial period.		Definition: the value of the Group's total assets less the book value of its liabilities attributable to shareholders divided by the number of shares in issue at the year end.

LTV ratio | %		Di vidend against target " valign="top"> 2017		32.9	2017	5.55
20162	31.1	20161	3.05
Definition: the proportion of borrowings compared to Gross Asset Value (defined as total assets less current liabilities).		Definition: dividends declared in respect of the financial period divided by the number of shares in issue at the year end.

Earnings per share (basic) | p		Adjusted earnings per share span>
20162	3.38	20162	0.72
Definition: post-tax earnings generated that are attributable to shareholders, divided by the weighted average number of shares in issue in the period.		Definition: post-tax adjusted earnings per share attributable to shareholders adjusted to include License fees, development rebates, rental guarantees and cumulative gains made on disposal of assets. For more information on the adjustments see page 86 of the Annual Report.

EPRA PERFORMANCE INDICATORS

EPRA earnings (basic) Earnings from operational activities.	£m 2017        3.8 20162           1.9		p per share 2017           0.7 20162               0.4
Purpose A key measure of a company's underlying operating results and an indication of the extent to which current dividend payments are supported by earnings.

EPRA NAV (basic) NAV adjusted to include properties and other investment interests at fair value and to exclude certain items not expected to crystallise in a long-term investment property business.		£m 2017     630.0 20161    532.1		p per share 2017       104.5 20161     106.2
Purpose Makes adjustments to International Financial Reporting Standards ("IFRS") NAV to provide stakeholders with the most relevant information on the fair value of the assets and liabilities for a true real estate investment company.

EPRA NNNAV (basic) EPRA NAV adjusted to include the fair values of: (i) financial instruments; (ii) debt; and (iii) deferred taxes.	£m 2017    617.9 20161    519.6		p per share 2017     102.5 20161      103.7
Purpose Adjusts EPRA NAV to provide stakeholders with the most relevant information on the current fair value of all the assets and liabilities within a real estate company.

EPRA net initial yield ("NIY") Annualised rental income, based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property net of (estimated) purchasers' costs.	% 2017       4.0 20161         4.2
Purpose A comparable measure for portfolio valuations. This measure should make it easier for investors to judge how the valuation of portfolios compare.

^{1               As at 31 December 2016}

^{2               For the six-month period ending 31 December 2016}

PRINCIPAL RISKS AND UNCERTAINTIES

Approach to Managing Risk

The Group's risk management 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. We outsource certain services to our administrator, FIM Capital Limited (the "Administrator"), and other service providers, and rely to an extent on their systems and controls.

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

Changes to Risks During the Year

The principal risks and uncertainties we face changed during the year, as we encountered new challenges.

The Board considered that there was one new risk which presented itself this year. This is a risk around property costs, which is discussed further in Risk 13.

Risk 11 increased during 2017, due to lower occupancy in some cities, as detailed on page 20 of the Annual Report. The Board has also merged Risk 11 with the Hello Student^® occupancy risk set out in the last Annual Report, as all the properties are being brought onto the Hello Student^® platform in 2018.

Risk 8 increased during the year, due to the changes in the Executive Directors and their responsibilities, as explained in the Chairman's Statement.

The Board has also amalgamated some risk categories during the year, so they more accurately reflect the principal risks we face. The two development risks described in the 2016 annual report have been combined into a single risk (Risk 5), and the Health and Safety and Laws and Regulations risks are now expressed in a single operational risk (Risk 9).

Finally, the Board considers that commercial revenue is no longer a principal risk, due to its immaterial impact on the Group's financial statements and the low likelihood of occurrence.

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 some risks that we currently regard as immaterial, and have therefore not included here, may become material in the future.

Risk	Impact	Mitigation
Strategic risks
1    We will continue to focus exclusively on the student accommodation sector. We will, therefore, rely on the development of the higher education market in the UK generally, or in specific regions, including any change in demand from international students.	An adverse change in the higher education market could reduce student numbers and demand for student accommodation, either across the UK or in specific regions. This, in turn, could reduce our rental income and the value of all, or a significant proportion of, our portfolio.	We constantly monitor government policy and its actual or potential impact on UK, EU and international student numbers studying in the UK. We pay particular attention to proposals relating to the UK's exit from the EU and how these affect the UK as a whole and specific regions, such as Scotland. We acquire or develop assets serving leading university cities and towns. The properties are well located and we believe maintaining competitive rental levels should ensure high occupancy levels across the portfolio, during periods of weaker demand. Our strategy allows us to diversify across several niches, giving us an offer that appeals to a broad range of students, from first years to post-graduates. We also seek to ensure that our developments and, where possible, acquisitions of standing assets, are fi t for alternative use such as private residential, subject to planning.
2.   We face competition from a number of UK and international property investors, both existing and new, which may have larger financial resources and/or be targeting lower investment returns.	Increased competition may lead to an oversupply of rooms through overdevelopment, to inflated prices for existing properties or development land, or reduce the rents we can achieve.	The UK's full-time student population was 1.8 million for the 2016/17 academic year. We are focused on the cities and towns with high-quality and growing higher education institutions and where our research indicates that there is a significant under supply of PBSA. Our assets are in prime locations, in varying formats and at different price points. In times of reduced demand, they should be more attractive to potential customers than the competition, at the right price.
Investment risks
3.   The performance of our portfolio depends on general property and investment market conditions. There remains uncertainty in the property market following the result of the EU referendum in June 2016, which could prevail until Brexit negotiations are concluded and beyond, depending on the outcome of the negotiations. If market conditions deteriorate and, as a result, the value of our assets falls, our NAV will reduce. Furthermore, our borrowings contain Loan to value ("LTV") covenants.	Market conditions may reduce our revenues, which may affect our ability to make distributions to shareholders. A fall in property valuations may lead to the Group breaching its banking covenants.	Our assets are in multiple prime locations, diversifying the risk of adverse changes to the portfolio. Our Investment Policy contains a prudent borrowing limit of 40% of our Gross Asset Value, with a target of 35%. We regularly review property market conditions and would take action, should it look like any property used as collateral had decreased in value to the extent that there was a risk that we might breach any of our LTV covenants. The LTV covenants have been negotiated to be as flexible as possible. In addition, international students pay in advance, meaning we maintain substantial cash balances on account. The student property sector has demonstrated considerable robustness, underpinned by the supply and demand imbalance. Nevertheless, we do not overstretch annual rent increases, which we vary according to the local market conditions for each area or building. EU students are only 7% of all full-time students in the UK. With the high number of other international students applying to study in the UK, the higher education sector is not reliant on students from the EU.
4    Our ability to achieve our investment objective depends on both the rental income we receive and the appreciation in property values.	Rental income and property values may be affected by increased supply of student accommodation, failure to collect rents, increasing costs or any deterioration in the quality of our properties.	Our portfolio is geographically diversified and where there is more than one property serving a town or university, the total number of beds equates to no more than 5% of the location's full-time student population. We are not therefore unduly exposed to any one student market. Each operational property is managed either directly by Hello Student® or by reputable property management companies. Our Operations Director liaises with the property managers, to ensure rent is collected on time (usually in advance at the start of an academic year), that the properties are well maintained and the desired level of customer service is provided.
Development Risk
5    Our development activities are likely to involve more risk than operating our properties. This includes general construction risks such as delays, late delivery, developments not being completed (while associated costs are still incurred) or changes in market conditions, which could result in completed developments having substantial vacancies.	Any of the risks associated with our development activities could reduce the value of our assets. A delay in constructing assets under development could result in one or more of the assets not being delivered in time for the start of the academic year, with a resultant impact on occupancy and revenue.	Our Investment Policy only allows us to commit up to 15% of NAV to expenditure on development (excluding the cost of the land or property to be developed). Since IPO, we have undertaken a greater proportion of our development activities through forward funded projects, rather than by direct development. Forward funding projects reduces the risk to us, as the developer takes on the construction risk and the risk of cost over-runs. These projects also generally benefit from a rental guarantee for the first year of operations, if the asset is not delivered in time for the start of the academic year. For assets we develop directly, we put in place suitable contingencies, insurance cover and other arrangements with the responsible contractor or sub-contractor, to cover the impact of any delay. Our development activities span a range of towns and cities and there is little or no overlap in the developers acting on these projects (with the maximum exposure to any one developer restricted to 20% of GAV for forward funded projects), further reducing the impact of any delays or changes in market conditions.
Funding Risks
6    Our strategy allows us to take on debt with variable interest rates. We may therefore hedge or partly hedge our interest rate exposure. However, this might not be sufficient to protect us from adverse movements in interest rates.	Increases in interest payable would reduce our profitability.	At 31 December, the Group had committed debt facilities of £390 million, of which £191.1 million was at fixed interest rates. Of the £198.9 million of facilities with floating rates, £35.5 million was subject to interest rate caps or swaps.
7    The Group may not be able to secure further debt on acceptable terms.	Without the continued availability of debt on acceptable terms, we may be unable to progress investment opportunities as they arise and continue to grow the Group, in line with the long-term strategy.	During the year, we agreed a new term loan of £10 million, a new revolving credit facility of £70 million and extended the terms of two existing facilities. At the year end, our debt had a weighted average term of 6.7 years and the headroom in our facilities was £86.2 million.
People Risk
8    Our ability to achieve our investment objective depends on the performance of the Executive Directors, which cannot be guaranteed. As a result, our performance will, to a large extent, depend on our ability to align the incentives of the Executive Directors to shareholders' interests, retain key staff and/or recruit people of the right calibre and experience.	The Executive Directors' failure to acquire and manage assets effectively could materially affect our profitability, NAV and share price. Similarly, the departure of an Executive Director or member of senior staff, and either a delay or failure in recruiting a suitable replacement, could affect the Group's performance.	As a result of poor performance, the previous CFO resigned and the CEO was served notice. See page 5 of the Annual Report for more detail. The Board appointed a new and experienced CFO during the year, to improve the performance of the Executive Directors. There is also a new division of roles within the Executive team to improve performance, which is detailed further on page 5 of the Annual Report.
Operational Risks
9    Our operations, including our development activities, are subject to laws and regulations enacted by national and local government. Our ability to respond and adapt to the changing planning and regulatory environment is key to our future business performance. We need to comply with health and safety laws and regulations, to protect the health and wellbeing of our employees, contractors, customers and the general public.	Failing to comply with laws or regulations may affect our ability to deliver or acquire further buildings, or result in one or more existing buildings being temporarily or permanently closed, which may have a material adverse effect on our performance. Any change in the laws or regulations relating to our operations or development activities may have a material adverse impact on our ability to implement our Investment Policy and our returns to shareholders. A serious health and safety incident could result in criminal or civil proceedings and severely damage our reputation. It could also lead to delays in development projects.	Our investment team has significant experience and, together with its advisers, closely monitors the planning environment both nationally and in our target markets. The Executive Directors are ultimately responsible for ensuring that planning submissions are well prepared, address local concerns and demonstrate good design, and that all our buildings comply with building regulations, are sustainable and environmentally efficient. For health and safety, we undertake landlord risk assessments for every property prior to occupation. In addition, all our student property is insured as occupied residential property, our property managers receive training to minimise the risk of a health and safety incident occurring, and our buildings are inspected on a sample basis, as part of our ANUK accreditation.
10   The Company operates as a UK REIT and has a tax-efficient corporate structure, which benefits UK shareholders. Any change to our tax status, UK tax legislation or interpretation of that legislation could affect our ability to achieve our investment objective or provide favourable returns to shareholders.	If we fail to remain a REIT for UK tax purposes, our profits and gains will be subject to UK Corporation Tax.	The Board is responsible for ensuring we adhere to the UK REIT regime. It monitors the compliance reports provided by the Executive Directors on potential transactions, the Administrator's reports on asset levels and our registrar and broker's reports on shareholdings. Our Head of Compliance provides internal compliance support. In addition, Ernst & Young LLP provides REIT compliance monitoring services and Portman Compliance Consulting LLP assists us with compliance matters.
11   We may not be able to maintain the occupancy rates of our properties or any other properties we acquire.	If we cannot maintain attractive occupancy levels (or maintain them on economically favourable terms), there may be a material adverse effect on our profitability, NAV and share price.	Following the shortfall in occupancy in 2017, we have introduced a rigorous focus on revenue management, including bringing all the properties currently managed by third parties onto the Hello Student® platform for the 2018/19 academic year. This gives us full control over marketing and student interaction, and provides live data across the portfolio, so we can respond rapidly to changes in the market and drive occupancy and revenue.
12   We collect and retain information in computer systems regarding our business dealings, our customers and our suppliers. Securely processing, maintaining and transmitting this information is critical to our business and we must comply with restrictions on the handling of sensitive information (including employee and customer information).	A major information security breach could have a significant impact on our reputation and could result in the loss of business-critical information. This in turn could affect our ability to do business or result in fines or compensation, reducing our profitability.	Our networks are protected by firewalls and anti-virus protection systems, with back-up procedures also in place. We have retained a specialist information technology consultancy to enhance our controls and optimise our systems design, to minimise the risk of hacking. This is particularly critical as we expand our portfolio and our operational capabilities, to ensure our investment in computer systems aligns with our overall business strategy, is cost-effective and designed to reduce as far as possible the risk of security breaches. All staff are given appropriate training to identify emails and other communications that could result in a security breach.
13   Our operations and management of cost bases are currently reliant on a number of third party property managers. As a result there is a risk that we may not be able to have full control over our cost base.	A lack of direct oversight could mean that the Group is not minimising its cost base and in turn is not maximising its profitability.	We undertake rigorous analysis of our cost base on a monthly basis, with input from finance, operations and asset management. In addition, there is a concerted effort to bring the facilities management of the Group in house. This is detailed on page 18 of the Annual Report.

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 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 period.

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 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 Company's transactions and disclose with reasonable accuracy at any time the financial position of 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. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the Annual Report and Accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for shareholders to assess the Group's performance, business model and strategy.

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 United Kingdom 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 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.

·      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.

Stuart Beevor

Acting Chairman

21 March 2018

GROUP STATEMENT OF COMPREHENSIVE INCOME

		Year ended	Six months to	Unaudited year ended
		31 December 2017	31 December 2016	31 December 2016
	Note	£'000	£'000	£'000
Continuing operations
Revenue	2	51,205	19,210	31,415
Property expenses	3	(22,220)	(8,152)	(11,587)
Net rental income		28,985	11,058	19,828
Administrative expenses	4	(13,454)	(5,323)	(9,431)
Change in fair value of investment property	13	15,836	14,474	24,806
Gain on disposal of investment property		1,122	-	-
Operating profit		32,489	20,209	35,203
Finance cost		(11,882)	(4,231)	(6,815)
Finance income		87	255	782
Net finance costs	5	(11,795)	(3,976)	(6,033)
Share of results from joint ventures		56	713	1,874
Profit before income tax		20,750	16,946	31,044
Corporation tax	7	-	-	-
Profit for the year/period		20,750	16,946	31,044
Other comprehensive income
Items that will be reclassified to statement of comprehensive income
Fair value gain or (loss) on cashflow hedge		508	453	(602)
Total comprehensive income for the year/period		21,258	17,399	30,442
Earnings per share expressed in pence per share	8
Basic		3.84	3.38	6.51
Diluted		3.83	3.35	6.45

GROUP STATEMENT OF FINANCIAL POSITION

		At	At
		31 December 2017	31 December 2016
	Note	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment	11	475	509
Intangible assets	12	1,423	1,017
Investment property - Operational Assets	13	848,537	644,510
Investment property - Development Assets	13	42,045	67,380
Investment in joint venture	14	-	4,923
Derivative financial assets	19	1	19
Total non-current assets		892,481	718,358
Current assets
Trade and other receivables	15	27,792	24,852
Cash and cash equivalents	16	52,721	59,399
Total current assets		80,513	84,251
Total assets		972,994	802,609
LIABILITIES
Current liabilities
Trade and other payables	17	22,620	16,033
Borrowings	18	20,767	-
Derivative financial liability	19	424	485
Deferred income	17	22,286	15,760
Total current liabilities		66,097	32,278
Non-current liabilities
Borrowings	18	277,382	238,718
Derivative financial liability	19	257	748
Total non-current liabilities		277,639	239,466
Total liabilities		343,736	271,744
Total net assets		629,258	530,865
Equity
Called-up share capital	20	6,029	5,013
Share premium	21	467,268	359,958
Capital reduction reserve	22	75,602	106,198
Retained earnings		80,841	60,686
Cashflow hedge reserve		(482)	(990)
Total equity		629,258	530,865
Total equity and liabilities		972,994	802,609
Net Asset Value per share basic (pence)	9	104.37	105.90
Net Asset Value per share diluted (pence)	9	104.15	105.07
EPRA Net Asset Value per share (pence)	9	104.49	106.15

These financial statements were approved by the Board of Directors on 21 March 2018 and signed on its behalf by:

Lynne Fennah
Chief Financial Officer

COMPANY STATEMENT OF FINANCIAL POSITION

Company Registration Number: 08886906

		At	At
		31 December 2017	31 December 2016
	Note	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment	11	475	509
Intangible assets	12	491	127
Investments in subsidiaries	31	12,571	5,118
Investment in joint venture	14	-	2,965
Total non-current assets		13,537	8,719
Current assets
Trade and other receivables	15	4,267	602
Amounts due from Group undertakings	15	807,451	651,897
Cash and cash equivalents	16	17,091	14,997
Total current assets		828,809	667,496
Total assets		842,346	676,215
LIABILITIES
Current liabilities
Trade and other payables	17	2,130	1,639
Amounts due to Group undertakings	17	306,173	216,305
Total current liabilities		308,303	217,944
Non-current liabilities
Borrowings	18	9,933	-
Total non-current liabilities		9,933	-
Total liabilities		318,236	217,944
Total net assets		524,110	458,271
Equity
Called-up share capital	20	6,029	5,013
Share premium	21	467,268	359,958
Capital reduction reserve	22	75,602	106,198
Retained earnings		(24,789)	(12,898)
Total equity		524,110	458,271
Total equity and liabilities		824,346	676,215

The Company made a loss for the year of £11,296,000 (six months to December 2016 loss of: £4,619,000).

These financial statements were approved by the Board of Directors on 21 March 2018 and signed on its behalf by:

Lynne Fennah

Chief Financial Officer

GROUP STATEMENT OF CHANGES IN EQUITY

	Called-up	Share	Capital reduction	Retained	Cash flow	Total
	share capital	premium	reserve	earnings	hedge reserve	equity
Year ended 31 December 2017	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2017	5,013	359,958	106,198	60,686	(990)	530,865
Changes in equity
Profit for the year	-	-	-	20,750	-	20,750
Fair value gain on cash flow hedge	-	-	-	-	508	508
Total comprehensive income for the year	-	-	-	20,750	508	21,258
Issue of share capital	1,009	108,991	-	-	-	110,000
Share options exercised	7	749	-	(756)	-	-
Share issue costs	-	(2,430)	-	-	-	(2,430)
Share-based payments	-	-	-	161	-	161
Dividends	-	-	(30,596)	-	-	(30,596)
Total contributions and distribution recognised directly in equity	1,016	107,310	(30,596)	(595)	-	77,135
Balance at 31 December 2017	6,029	467,268	75,602	80,841	(482)	629,258
Period ended 31 December 2016
Balance at 1 July 2016	5,013	359,958	121,236	43,345	(1,443)	528,109
Changes in equity
Profit for the period	-	-	-	16,946	-	16,946
Fair value gain on cash flow hedge	-	-	-	-	453	453
Total comprehensive income for the period	-	-	-	16,946	453	17,399
Share-based payments	-	-	-	395	-	395
Dividends	-	-	(15,038)	-	-	(15,038)
Total contributions and distribution recognised directly in equity	-	-	(15,038)	395	-	(14,643)
Balance at 31 December 2016	5,013	359,958	106,198	60,686	(990)	530,865

COMPANY STATEMENT OF CHANGES IN EQUITY

	Called-up	Share	Capital reduction	Retained	Total
	share capital	premium	reserve	earnings	equity
Year ended 31 December 2017	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2017	5,013	359,958	106,198	(12,898)	458,271
Changes in equity
Loss for the year	-	-	-	(11,296)	(11,296)
Total comprehensive loss for the year	-	-	-	(11,296)	(11,296)
Issue of share capital	1,009	108,991	-	-	110,000
Share options exercised	7	749	-	(756)	-
Share issue costs	-	(2,430)	-	-	(2,430)
Share-based payments	-	-	-	161	161
Dividends	-	-	(30,596)	-	(30,596)
Total contributions and distribution recognised directly in equity	1,016	107,310	(30,596)	(595)	77,135
Balance at 31 December 2017	6,029	467,268	75,602	(24,789)	524,110
Period ended 31 December 2016
Balance at 1 July 2016	5,013	359,958	121,236	(8,674)	477,533
Changes in equity
Loss for the period	-	-	-	(4,619)	(4,619)
Total comprehensive loss for the period	-		-	(4,619)	(4,619)
Share-based payments	-	-	-	395	395
Dividends	-	-	(15,038)	-	(15,038)
Total contributions and distribution recognized directly in equity	-	-	(15,038)	395	(14,643)
Balance at 31 December 2016	5,013	359,958	106,198	(12,898)	458,271

GROUP STATEMENT OF CASH FLOWS

	Year ended	Six months to
	31 December 2017	31 December 2016
	£'000	£'000
Cash flows from operating activities
Profit before income tax	20,750	16,946
Share-based payments	161	395
Depreciation and amortisation	251	73
Finance income	(87)	(255)
Finance costs	11,882	4,231
Share of results from joint venture	(56)	(713)
Change in fair value of investment property	(15,836)	(14,474)
Gain on disposal of investment property	(1,122)	-
	15,943	6,203
Increase in trade and other receivables	(3,003)	(6,135)
Increase in trade and other payables	1,959	1,059
Increase in deferred rental income	6,526	11,342
	5,482	6,266
Net cash flows generated from operations	21,425	12,469
Cash flows from investing activities
Purchases of tangible fixed assets	(88)	(240)
Purchases of intangible assets	(535)	(325)
Investments in joint ventures	-	(13)
Purchase of investment property	(154,479)	(183,222)
Disposal of investment property	2,000	-
Interest received	87	254
Net cash flows from investing activities	(153,015)	(183,546)
Cash flows from financing activities
Share issue proceeds	110,000	-
Share issue costs	(2,430)	-
Dividends paid	(30,596)	(15,038)
Bank borrowings drawn	69,446	97,346
Bank borrowings repaid	(9,534)	(9,286)
Loan arrangement fees paid	(2,016)	(2,789)
Finance cost (excluding fair value loss on derivatives)	(9,958)	(3,680)
Net cash flows from financing activities	124,912	66,553
Increase in cash and cash equivalents	(6,678)	(104,524)
Cash and cash equivalents at beginning of period	59,399	163,923
Cash and cash equivalents at end of period	52,721	59,399

COMPANY STATEMENT OF CASH FLOWS

	Year ended	Six months to
	31 December 2017	31 December 2016
	£'000	£'000
Cash flows from operating activities
Loss before income tax	(11,296)	(4,619)
Share-based payments	161	395
Depreciation and amortisation	159	28
Finance income	(43)	(227)
Finance costs	197	-
	(10,822)	(4,423)
Increase in trade and other receivables	(3,665)	(91)
Increase/(decrease) in trade and other payables	544	(42)
	(3,121)	(133)
Net cash flows absorbed by operations	(13,943)	(4,556)
Cash flows from investing activities
Purchases of tangible fixed assets	(88)	(404)
Purchases of intangible assets	(401)	(127)
Investments in subsidiaries	(4,650)	(1)
Investments in joint ventures	-	(13)
Payments to/on behalf of subsidiaries	89,868	(196,358)
Repayments from subsidiaries	(155,498)	87,448
Interest received	43	227
Net cash flows from investing activities	(70,726)	(109,228)
Cash flows from financing activities
Share issue proceeds	110,000	-
Share issue costs	(2,430)	-
Dividends paid	(30,596)	(15,038)
Bank borrowings drawn	10,000	-
Loan arrangement fee paid	(93)	-
Finance cost (excluding fair value loss on derivatives)	(118)	-
Net cash flows from financing activities	86,763	(15,038)
Increase in cash and cash equivalents	2,094	(128,822)
Cash and cash equivalents at beginning of period	14,997	143,819
Cash and cash equivalents at end of period	17,091	14,997

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 2017 to 31 December 2017.

1.2 Basis of Preparation

The consolidated financial statements of the Group for the year to 31 December 2017 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 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 £11,296,000 (six month period ended 31 December 2016: £4,619,000) 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 2017 or the six month period ended 31 December 2016 but is derived from those accounts. The Group's statutory accounts for the six month period ended 31 December 2016 have been delivered to the Registrar of Companies. The Group's statutory accounts for the year ended 31 December 2017 will be delivered to the Registrar of Companies in due course. The Auditor has reported on both the December 2017 and December 2016 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 on page 63 of the Annual Report.

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.

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:

(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.

(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.

(c) Fair Valuation of Interest Derivatives

In accordance with IAS 39, the Group values its interest rate derivatives at fair value. The fair values are estimated by JCRA Limited with revaluation occurring on a six monthly basis. The financial valuation expert will use a number of assumptions in determining the fair values including estimations of future interest rates and therefore future cash flows. The fair value represents the net present value of the difference between the cash flows produced by the contracted rate and the valuation rate.

(d) Business Combinations

The Group acquires subsidiaries that own investment properties. At the time of acquisition, the Group considers whether each acquisition represents the acquisition of a business or the acquisition of an asset. The Group accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition to the property.

Where such acquisitions are not judged to be the acquisition of a business, they are not treated as business combinations, rather the cost to acquire the corporate equity is allocated between the identifiable assets and liabilities of the entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred tax arises.

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 2017. 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 - Loans and Receivables

The Group classifies its financial assets into one of the categories required by the accounting standards, depending on the purpose for which the asset was acquired. The Group has not classified any of its financial assets as "held to maturity".

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently impaired if there is doubt over recovery.

The Group's loans and receivables comprise "trade and other receivables" and "cash and cash equivalents" in the Consolidated Statement of Financial Position.

"Cash and cash equivalents" includes cash in hand, deposits held at call with banks, and other short-term, highly liquid investments with original maturities of three months or less from inception.

Financial Liabilities

The Group's financial liabilities predominantly comprise 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.

Forward Funded Developments

Under the terms of certain funding agreements, the Group commits to pay the total fixed price construction cost to the developer upon entering into the agreement. As construction costs are incurred, funds are released subject to the authorisation of the Group's subsidiary that has contracted the development, along with the appropriate monitoring surveyor certification.

During the period between initial investment in a forward funded agreement and the practical completion date, the Group typically earns licence fee income. This is payable by the developer to the Group once the development is complete. Under IFRS, such licence fees are deducted from the cost of the investment and are shown as a receivable until settled. Any economic benefit of the licence fee is reflected within the Group Statement of Comprehensive Income as a movement in the fair value of investment property.

Hedge Accounting

The Group's activities expose it to the financial risks of changes in interest rates.

The use of financial derivatives (interest rate swaps and caps) is approved by the Board of Directors and is consistent with the Group's risk management strategy.

Derivative financial instruments are initially measured at fair value on the contract date and are subsequently remeasured to fair value at each reporting date. Any difference between the transaction price and the initial fair value is recognised immediately in the Consolidated Statement of Comprehensive Income. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, no longer qualifies for hedge accounting or the Group chooses to end the hedging relationship.

Cash Flow Hedges

The Group has entered into a derivative contract in order to convert its floating rate debt to a fixed rate to hedge the interest rate risk. This hedging instrument was designated as a cash flow hedge at inception. Changes in fair value of the hedging instrument are recognised in Other Comprehensive Income to the extent that they represent an effective hedge, otherwise fair value changes are recognised as financial costs in the Consolidated Statement of Comprehensive Income.

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 results 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.

Joint Ventures

The Group was party to a joint arrangement when there was a contractual arrangement that confers joint control over the relevant activities of the arrangement to the Group and at least one other party. Joint control is assessed under the same principles as control over subsidiaries.

The Group classifies its interests in joint arrangements as either:

·      Joint ventures: where the Group has rights to only the net assets of the joint arrangement.

·      Joint operations: where the Group has both the rights to assets and obligations for the liabilities of the joint arrangement.

In assessing the classification of interests in joint arrangements, the Group considers:

·      The structure of the joint arrangement.

·      The legal form of joint arrangements structured through a separate vehicle.

·      The contractual terms of the joint arrangement agreement.

·      Any other facts and circumstances (including any other contractual arrangements).

Joint ventures are initially recognised in the Consolidated Statement of Financial Position at cost and are subsequently accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the Consolidated Statement of Comprehensive Income (except for losses in excess of the Group's investment in the joint venture unless there is an obligation to make good those losses).

Profits and losses arising on transactions between the Group and its joint venture are recognised only to the extent of unrelated investor's interests in the joint venture. The investor's share in the joint venture's profits and losses resulting from these transactions is eliminated against the carrying value of the joint venture.

Any premium paid for an investment in a joint venture above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the investment in joint venture. Where there is objective evidence that the investment in a joint venture has been impaired, the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

The Group accounts for its interests in joint operations by recognising its share of assets, liabilities, revenues and expenses in accordance with its contractually conferred rights and obligations.

Operating Leases

Rentals paid under operating leases are charged to the Consolidated Statement of Profit or Loss on a straight-line basis over the period of the lease.

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;

·      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 not 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.

Rent and Other Receivables

Rent and other receivables are recognised at their original invoiced value net of VAT. A provision is made when there is objective evidence that the Group will not be able to recover balances in full.

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 Real Estate Investment Trust ("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 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 Accounting Standards and Interpretations Issued but Not Yet Effective

At the date of authorisation of these financial statements, the following accounting standards had been issued which are not yet applicable to the Group:

IFRS 9 - Financial Instruments (effective periods beginning 1 January 2018)

The Group has assessed the impact of the new standard on the Group's results and financial position.

The Group does not expect any material impact on its financial assets. These are held at amortised cost currently and the Group does not consider a change in this basis of measurement. The Group has determined that there is no material impact on moving to the expected credit loss model on the date of transition as generally income from students is received in advance.

The Group has assessed the impact on financial liabilities under the new standard and again does not foresee a material impact.

The key impact to the Company will be the impact on amounts due from Group undertakings. These balances are interest free and repayable on demand, which are used to fund asset purchases. Under IFRS 9, an 'expected loss' impairment model applies which requires a loss allowance to be recognised based on expected credit losses. The Group does not consider that there is any material impairment as the Group undertakings would in theory be able to generate sufficient cash from the operation and/or the proceeds of a sale of their investment properties in order to repay any amounts due. As a result, no cash loss is anticipated. At the present time there is no necessity for these Group undertakings to sell any investment properties and these amounts have not been demanded.

There may however be limited changes to presentation and disclosure for both the Group and the Company.

IFRS 15 - Revenue from Contracts with Customers (effective periods beginning 1 January 2018)

The new standard combines a number of previous standards, setting out a new model for the recognition of revenue. The Group has assessed this new five-step recognition model and there will not be a material impact on the Group due to the simple structure of its rental leases.

IFRS 16 - Leases (effective periods beginning 1 January 2019)

As Lessee

The Group's lease commitment for head office space will be brought onto the statement of financial position together with the corresponding asset. The expected impact has will be less than 0.3% of gross assets and so will not be material to the Group.

As Lessor

The Group's accounting for lessors will not materially change as the Group only holds short-term operating leases.

Other Amendments

Additionally, amendments to existing standards have been issued by the IASB, including:

·      IFRS 2 (amendments) 'Classification and Measurement of Share-Based Payment Transactions'

·      IAS 7 (amendments) 'Disclosure Initiative'

·      IAS 12 (amendments) 'Recognition of Deferred Tax Assets for Unrealised Losses'

·      IFRS 10 and IAS 28 (amendments) 'Sale or Contribution of Assets between an Investor and its Associate or Joint Venture'

The Directors do not consider that these amendments will materially impact the financial statements.

2. REVENUE

	Group
	Year ended	Six months to
	31 December 2017	31 December 2016
	£'000	£'000
Student rental income	49,450	18,320
Commercial rental income	1,755	890
Total revenue	51,205	19,210
3. PROPERTY EXPENSES
	Group
	Year ended	Six months to
	31 December 2017	31 December 2016
	£'000	£'000
Direct site costs	8,563	3,143
Technology services	1,001	358
Site office and utilities	8,500	2,000
Cleaning and service contracts	2,611	991
Repairs and maintenance	1,545	1,660
Total property expenses	22,220	8,152
4. ADMINISTRATIVE EXPENSES
	Group
	Year ended	Six months to
	31 December 2017	31 December 2016
	£'000	£'000
Salaries and Directors' remuneration	4,256	2,018
Legal and professional fees	4,546	1,148
Other administrative costs	2,295	1,179
IT expenses	414	-
Irrecoverable VAT	1,578	717
	13,089	5,062
Auditor's fees
Fees payable for the audit of the Group's annual accounts	200	175
Fees payable for the review of the Group's interim accounts	40	-
Fees payable for the audit of the Group's subsidiaries	125	86
Total auditor's fees	365	261
Total administrative expenses	13,454	5,323

The Auditor has also received £80,000 (2016: £nil) in respect of providing reporting accountant services in connection with the equity issue in July 2017. The fees relating to the share issue have been treated as share issue expenses and offset against share premium account.

5. NET FINANCE COST

			Group
			Year ended	Six months to
			31 December 2017	31 December 2016
Finance costs			£'000	£'000
Fair value loss on interest rate cap			18	-
Interest expense on bank borrowings			10,330	3,680
Amortisation of loan transaction costs			1,534	551
			11,882	4,231
Finance income
Fair value gain on interest rate swap			43	-
Fair value gain on interest rate cap			-	1
Interest received on bank deposits			44	254
			87	255
Net finance cost			11,795	3,976

6. EMPLOYEES AND DIRECTORS
	Group			Company
	Year ended	Six months to	Year ended		Six months to
	31 December 2017	31 December 2016	31 December 2017		31 December 2016
	£'000	£'000	£'000		£'000
Total wages and salaries	5,353	1,469	3,479		1,021
Less: capitalised salary costs	-	(31)	-		(31)
Less: Hello Student® wages and salaries included in property
expenses	(2,005)	(448)	-		-
Total wages and salaries included in administrative expenses	3,348	990	3,479		990
Pension costs	245	134	114		134
Cash bonus	91	164	91		164
Share-based payments	161	395	161		395
National insurance	411	335	411		335
	4,256	2,018	4,256		2,018
The average monthly number of employees of the Group during
the period was as follows:
Management	4	3	4		3
Administration - ESP	21	21	21		21
Administration - Hello Student®1	113	57	-		-
	138	81	25		24
1       This number includes Community Ambassadors.
			Group and Company
			Year ended		Six months to
			31 December 2017		31 December 2016
Directors' remuneration			£'000		£'000
Salaries and fees			1,147		625
Pension costs			131		74
Cash bonus			38		164
Share-based payments			161		395
Payments for loss of office			690		-
			2,167		1,258

£nil (2016: £31,000) of wages and salaries are directly related to the costs necessary to develop the Hello Student® application and NAVision software and have therefore been capitalised within intangible assets.

A summary of the Directors' emoluments, including payments for loss of office, and including the disclosures required by the Companies Act 2006 is set out in the Directors' Remuneration Report on pages 53 to 62 of the Annual Report.

7. CORPORATION TAX

The Group became a Real Estate Investment Trust ("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 2017.

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	Six months to
	31 December 2017	31 December 2016
	£'000	£'000
Current tax	-	-
Income tax charge/(credit) for the period	-	-
Adjustment in respect of prior period	-	-
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 period is lower than the standard rate of corporation tax in the period.
	Group
	Year ended	Six months to
	31 December 2017	31 December 2016
	£'000	£'000
Profit for the period	20,750	16,946
Profit before tax multiplied by the rate of corporation tax in the UK of 19.25% (2016: 20.00%)	3,994	3,389
Exempt property rental profits in the period	(3,526)	(856)
Exempt property revaluations in the period	(3,049)	(2,895)
Effects of:
Non-allowable expenses	310	15
Residual property revaluations in the year	-	-
Unutilised current year tax losses	2,271	347
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 of £2,271,000 (31 December 2016: £347,000) 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 £3,222,000 (2016: £951,000) has not been recognised in respect of such losses.

8. EARNINGS PER SHARE

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

Reconciliations are set out below:

					Calculation of
	Calculation of	Calculation of	Calculation of	Calculation of	Adjusted
	Basic EPS	Diluted EPS	EPRA Basic EPS	EPRA Diluted EPS	Basic EPS
	£'000	£'000	£'000	£'000	£'000
Year to 31 December 2017
Profit for the year	20,750	20,750	20,750	20,750	20,750
Adjustment to include licence fee receivable on forward funded developments in the year	-	-	-	-	2,633
Adjustment to include development rebate on forward funded developments in the year	-	-	-	-	1,166
Adjustment to include discounts on acquisition due to rental guarantees in the year	-	-	-	-	1,346
Adjustments to remove:
Changes in fair value of investment properties (Note 13)	-	-	(15,836)	(15,836)	(15,836)
Gain on disposal of investment property	-	-	(1,122)	(1,122)	-
Changes in fair value of interest rate derivatives (Note 19)	-	-	18	18	18
Earnings/Adjusted Earnings	20,750	20,750	3,810	3,810	10,077
Weighted average number of shares ('000)	540,521	540,521	540,521	540,521	540,521
Adjustment for employee share options ('000)	-	1,287	-	1,287	-
Total number shares ('000)	540,521	541,808	540,521	541,808	540,521
Per-share amount (pence)	3.84	3.83	0.70	0.70	1.86
Period to 31 December 2016
Profit for the period	16,946	16,946	16,946	16,946	16,946
Adjustment to include licence fee receivable on forward funded developments in the period	-	-	-	-	1,201
Adjustment to include development rebate on forward funded developments in the period	-	-	-	-	496
Adjustments to remove:
Changes in fair value of investment properties (Note 13)	-	-	(14,474)	(14,474)	(14,474)
Changes in fair value of share of joint venture investment	-	-	(557)	(557)	(557)
Changes in fair value of interest rate derivatives (Note 19)	-	-	(1)	(1)	(1)
Earnings/Adjusted Earnings	16,946	16,946	1,914	1,914	3,616
Weighted average number of shares ('000)	501,279	501,279	501,279	501,279	501,279
Adjustment for employee share options ('000)	-	3,990	-	3,990	-
Total number shares ('000)	501,279	505,269	501,279	505,269	501,279
Per-share amount (pence)	3.38	3.35	0.38	0.38	0.72

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

EPRA EPS, reported on the basis recommended for real estate companies by the European Public Real Estate Association, 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, 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.

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

The development rebate is due from developers in relation to late completion on forward funded developments 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.

Gains on disposal are the cumulative gains made at the point of disposal.

9. NET ASSET VALUE PER SHARE (NAV)

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

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 2017	31 December 2016
	£'000	£'000
Net assets per Statement of Financial Position	629,258	530,865
Adjustment to exclude the fair value loss of financial instruments	700	1,232
EPRA NAV	629,958	532,097
Adjustment to include the fair value of debt	(11,399)	(11,285)
Adjustment to include the fair value loss of financial instruments	(700)	(1,232)
EPRA NNNAV	617,859	519,580
Ordinary shares	Number	Number
Issued share capital	602,887,740	501,279,071
Issued share capital plus employee options	604,175,057	505,269,491
	Pence	Pence
NAV per share basic	104.37	105.90
NAV per share diluted	104.15	105.07
EPRA NAV per share basic	104.49	106.15
EPRA NAV per share diluted	104.27	105.31
EPRA NNNAV per share basic	102.48	103.65
EPRA NNNAV per share diluted	102.26	102.83
10. DIVIDENDS PAID
	Group and Company
	Year ended	Period ended
	31 December 2017	31 December 2016
	£'000	£'000
Interim dividend in respect of period ended 30 June 2016 at 1.5 pence per ordinary share	-	7,519
Interim dividend of 1.5 pence per ordinary share in respect of the quarter ended 30 September 2016	-	7,519
Interim dividend of 1.55 pence per ordinary share in respect of the quarter ended 31 December 2016	7,770	-
Interim dividend of 1.525 pence per ordinary share in respect of the quarter ended 31 March 2017	7,645	-
Interim dividend of 1.525 pence per ordinary share in respect of the quarter ended 30 June 2017	7,645	-
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 30 September 2017	7,536	-
	30,596	15,038

On 26 February 2018, the Company announced the declaration of a final interim dividend in respect of the financial year ended 31 December 2017, of 1.25 pence per ordinary share amounting to £7.5 million, which will be paid on 23 March 2018 to ordinary shareholders.

11. FIXED ASSETS

		Group			Company
	Fixtures	Computer		Fixtures	Computer
	and fittings	equipment	Total	and fittings	equipment	Total
Year ended 31 December 2017	£'000	£'000	£'000	£'000	£'000	£'000
Costs
As at 1 January 2017	455	127	582	455	127	582
Additions	35	53	88	35	53	88
As at 31 December 2017	490	180	670	490	180	670
Depreciation
As at 1 January 2017	42	31	73	42	31	73
Charge for the year	66	56	122	66	56	122
As at 31 December 2017	108	87	195	108	87	195
Net book value
As at 31 December 2017	382	93	475	382	93	475

								Group								Company
						Fixtures and		Computer						Fixtures and		Computer
						fittings		equipment				Total		fittings		equipment		Total
	Period ended 31 December 2016					£'000		£'000				£'000		£'000		£'000		£'000
	Costs
	As at 1 July 2016					242		140				382		94		84		178
	Additions					460		43				503		361		43		404
	Transfer to Investment Property					(247)		(56)				(303)		-		-		-
	As at 31 December 2016					455		127				582		455		127		582
	Depreciation
	As at 1 July 2016					54		31				85		29		16		45
	Charge for the period					13		15				28		13		15		28
	Depreciation on assets transferred to Investment Property					(25)		(15)				(40)		-		-		-
	As at 31 December 2016					42		31				73		42		31		73
	Net book value
	As at 31 December 2016					413		96				509		413		96		509
12. INTANGIBLE ASSETS
		Group											Company
		Hello Student®		Hello Student®							Hello Student®				Hello Student®
		Application		Website			NAVision				Application				Website		NAVision
		Development		Development			Development			Total	Development				Development		Development			Total
Year ended 31 December 2017		£'000		£'000			£'000			£'000	£'000				£'000		£'000			£'000
Costs
As at 1 January 2017		187		792			127			1,106	-				-		127			127
Additions		124		10			401			535	-				-		401			401
As at 31 December 2017		311		802			528			1,641	-				-		528			528
Amortisation
As at 1 January 2017		-		89			-			89	-				-		-			-
Charge for the year		16		76			37			129	-				-		37			37
As at 31 December 2017		16		165			37			218	-				-		37			37
Net book value
As at 31 December 2017		295		637			491			1,423	-				-		491			491
		Group											Company
		Hello Student®		Hello Student®							Hello Student®				Hello Student®
		Application		Website			NAVision				Application				Website		NAVision
		Development		Development			Development			Total	Development				Development		Development			Total
Period ended 31 December 2016		£'000		£'000			£'000			£'000	£'000				£'000		£'000			£'000
Costs
As at 1 July 2016		-		781			-			781	-				-		-			-
Additions		187		11			127			325	-				-		127			127
As at 31 December 2016		187		792			127			1,106	-				-		127			127
Amortisation
As at 1 July 2016		-		44			-			44	-				-		-			-
Charge for the period		-		45			-			45	-				-		-			-
As at 31 December 2016		-		89			-			89	-				-		-			-
Net book value
As at 31 December 2016		187		703			127			1,017	-				-		127			127

13. INVESTMENT PROPERTY

	Group
		Investment
	Investment	properties long	Total operational	Properties under	Total investment
	properties freehold	leasehold	assets	development	property
Year ended 31 December 2017	£'000	£'000	£'000	£'000	£'000
As at 1 January 2017	564,882	79,628	644,510	67,380	711,890
Property additions	77,846	7,890	85,736	77,935	163,671
Disposals	-	-	-	(815)	(815)
Transfer of completed developments	82,305	23,938	106,243	(106,243)	-
Change in fair value during the year	10,322	1,726	12,048	3,788	15,836
As at 31 December 2017	735,355	113,182	848,537	42,045	890,582
	Group
	Investment properties	Investment properties	Total operational	Properties under	Total investment
	freehold	long leasehold	assets	development	property
Period ended 31 December 2016	£'000	£'000	£'000	£'000	£'000
As at 1 July 2016	368,260	75,180	443,440	70,754	514,194
Property additions	151,036	1,658	152,694	30,528	183,222
Transfer of completed developments	40,495	-	40,495	(40,495)	-
Change in fair value during the period	5,091	2,790	7,881	6,593	14,474
As at 31 December 2016	564,882	79,628	644,510	67,380	711,890

During the year £17,637,000 (31 December 2016: £4,917,000) of additions related to expenditure on existing 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 valuers, and has been prepared as at 31 December 2017, in accordance with the RICS Valuation - Professional Standards January 2014 (the "Red Book"). 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 also 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 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 period end.

			Group
			As at 31 December	As at 31 December
			2017	2016
			£'000	£'000
Value per independent valuation report			890,110	721,345
Less:
Investment in joint ventures			-	(9,455)
			890,110	711,890
Add:
Head leases			472	-
Fair value per Group Statement of Financial Position			890,582	711,890
Fair Value Hierarchy
The following table provides the fair value measurement hierarchy for investment property:
		Quoted prices in	Significant	Significant
		active markets	observable inputs	unobservable inputs
	Total	(Level 1)	(Level 2)	(Level 3)
Date of valuation 31 December 2017	£'000	£'000	£'000	£'000
Assets measured at fair value:
Student properties	865,870	-	-	865,870
Commercial properties	24,240	-	-	24,240
As at 31 December 2017	890,110	-	-	890,110

			Significant observable	Significant
		Quoted prices in active	inputs	unobservable inputs
	Total	markets (Level 1)	(Level 2)	(Level 3)
Date of valuation 31 December 2016	£'000	£'000	£'000	£'000
Assets measured at fair value:
Student properties	688,390	-	-	688,390
Commercial properties	23,500	-	-	23,500
As at 31 December 2016	711,890	-	-	711,890

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

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 a transaction after proper marketing wherein the parties had each acted knowledgably, 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 £95 per week-£347 per week (31 December 2016: £89-£337 per week).

(b)     Unobservable input: Rental growth

The estimated average increase in rent based on both market estimations and contractual arrangements.

Assumed growth of 3.08% used in valuations (31 December 2016: 2.16%).

(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: 4.65%-6.30% (31 December 2016: 5.20%-6.80%).

(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:

	-3% Change in	+3% Change in	-0.25% Change in	+0.25% Change in
	Rental Income	Rental Income	Yield	Yield
As at 31 December 2017	£'000	£'000	£'000	£'000
(Decrease)/increase in the fair value of the investment properties	(36,260)	36,260	42,070	(38,500)
	-3% Change in	+3% Change in	-0.25% Change in	+0.25% Change
	Rental Income	Rental Income	Yield	in Yield
As at 31 December 2016	£'000	£'000	£'000	£'000
(Decrease)/increase in the fair value of the investment properties	(30,320)	29,590	34,230	(31,350)

(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 of the commercial properties will not have a material impact on the financial statements.

14. JOINT VENTURES

In March 2017, the Group bought Revcap Advisors Limited's 50% share of the Glasgow joint venture, Empiric (Glasgow) Limited for £4,650,000. At the date of this transaction, this joint venture had external debt of £9,534,000 which was repaid to the lender.

Additions of investment property of £18,707,000 were recognised. This acquisition of Willowbank (and the full valuation) is reflected in the investment property movement for the year.

15. TRADE AND OTHER RECEIVABLES

	Group			Company
	31 December 2017	31 December 2016	31 December 2017		31 December 2016
	£'000	£'000	£'000		£'000
Trade receivables	470	729	-		11
Other receivables	2,412	6,346	154		85
Amounts owed by property managers	10,777	9,743	3,881		-
Prepayments	11,318	5,591	225		506
VAT recoverable	2,815	2,443	7		-
	27,792	24,852	4,267		602
Amounts due from Group undertakings	-	-	807,451		651,897
	27,792	24,852	811,718		652,499

At 31 December 2017, there were no material trade receivables overdue at the year end, no aged analysis of trade receivables has been included. The Directors consider that the carrying values of trade and other receivables approximate to their fair value.

Amounts due from Group undertakings are interest free and due on demand.

16. CASH AND CASH EQUIVALENTS

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 2017	31 December 2016	31 December 2017		31 December 2016
	£'000	£'000	£'000		£'000
Cash and cash equivalents	52,721	59,399	17,091		14,997
17. TRADE AND OTHER PAYABLES
	Group			Company
	31 December 2017	31 December 2016	31 December 2017		31 December 2016
	£'000	£'000	£'000		£'000
Trade payables	2,376	1,974	484		-
Other payables	3,950	3,362	274		640
Accrued expenses	16,122	10,080	1,200		382
Directors' bonus accrual	172	617	172		617
	22,620	16,033	2,130		1,639
Amounts owed to Group undertakings	-	-	306,173		216,305
	22,620	16,033	308,303		217,944

At 31 December 2017, there was deferred rental income of £22,286,000 (31 December 2016: £15,760,000) which was rental income that had been booked that relates to future periods.

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

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

18. BANK BORROWINGS

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

	Group
	Bank borrowings	Bank borrowings	Total	Bank borrowings	Bank borrowings	Total
	drawn	undrawn	31 Dec	drawn	undrawn	31 Dec
	31 Dec 2017	31 Dec 2017	2017	31 Dec 2016	31 Dec 2016	2016
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2017	243,917	66,113	310,030	155,857	60,773	216,630
Bank borrowings from new facilities in the period	10,000	70,000	80,000	97,346	-	97,346
Bank borrowings assumed on acquisition of joint venture	9,534	-	9,534	-	-	-
Bank borrowings drawn in the period	49,912	(49,912)	-	(9,286)	-	(9,286)
Bank borrowings repaid during the period	(9,534)	-	(9,534)	-	5,340	5,340
At 31 December 2017	303,829	86,201	390,030	243,917	66,113	310,030

The Group has entered into two new separate banking facilities during the year and drawn down on two existing available facilities. A total of £59,912,000 (31 December 2016: £97,346,000) of additional debt was drawn whilst having an undrawn debt facility available of £86,201,000 at 31 December 2017 (31 December 2016: £66,113,000). The weighted average term to maturity of the Group's debt as at the year end is 6.71 years (31 December 2016: 7.5 years).

Bank borrowings are secured by charges over individual investment properties held by certain asset-holding subsidiaries. These assets have a fair value of £829,765,000 at 31 December 2017 (31 December 2016: £573,015,000). In some cases, the lenders also hold charges over the shares of the subsidiaries and the intermediary holding companies of those subsidiaries.

The Company entered into a new facility during the year for £10,000,000 which it fully drew down. As at 31 December 2017 there were £67,000 of unamortised loan fees. The loan is due to be repaid during the year ended 31 December 2020.

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

	Group
	31 December 2017	31 December 2016
Non-Current	£'000	£'000
Balance brought forward	243,917	155,857
Total bank borrowings in the period	69,446	97,346
Less: Bank borrowings becoming current in the period	(21,190)	-
Less: Bank borrowings repaid during the period	(9,534)	(9,286)
Bank borrowings drawn: due in more than one year	282,639	243,917
Less: Unamortised costs	(5,257)	(5,199)
Bank borrowings due in more than one year	277,382	238,718
	Group
	31 December 2017	31 December 2016
Current	£'000	£'000
Balance brought forward	-	-
Bank borrowings becoming current in the period	21,190	-
Bank borrowings drawn: due in less than one year	21,190	-
Less: Unamortised costs	(423)	-
Bank borrowings due in less than one year	20,767	-
Maturity of Bank Borrowings
	Group
	31 December 2017	31 December 2016
	£'000	£'000
Repayable between one and two years	55,500	23,117
Repayable between two and five years	36,039	35,500
Repayable in over five years	191,100	185,300
Bank borrowings drawn: due in more than one year	282,639	243,917

Each of the Group's facilities has an interest charge which is payable quarterly. Three 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 2.51%. The weighted average margin payable by the Group on its debt portfolio as at the period end was 3.25% (31 December 2016: 3.46%).

19. INTEREST RATE DERIVATIVES

To mitigate the interest rate risk that arises as a result of entering into variable rate linked loans, the Group has 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 is being settled over the five-year life of the loan.

On the 24 October 2014 a derivative swap contract was taken out to hedge the interest rate risk on long-term debt of £35.5 million. The change in valuation of this derivative at 31 December 2017 was £0.5 million gain (31 December 2016: £0.5 million gain) recognised in other comprehensive income. £0.3 million of this derivative liability has been recognised as a non-current liability (31 December 2016: £0.7 million).

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 2017	31 December 2016
	£'000	£'000
Non-current assets: Interest rate derivatives - cap	1	19
Current liabilities: Interest rate derivatives - swap	(424)	(485)
Non-current liabilities: Interest rate derivatives - swap	(257)	(748)

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 2017	31 December 2016
	£'000	£'000
Interest rate cap premium - opening fair value	19	18
Changes in fair value of interest rate derivatives	(18)	1
Closing fair value	1	19
	31 December 2017	31 December 2016
	£'000	£'000
Total bank borrowings	303,829	243,917
Total fixed borrowings	(191,100)	(185,300)
Total floating rate borrowings	112,729	58,617
Notional value of borrowings hedged by interest rate derivative - swap	35,500	35,500
Proportion of notional value of interest rate swap derivative to floating rate bank borrowings	31.5%	60.6%

Fair Value of Debt

	Group
			Fair Value
			less
	Fair Value	Book Value	Book Value
	£'000	£'000	£'000
At 31 December 2017	199,039	187,640	11,399
At 31 December 2016	193,092	181,807	11,285

The fair value of the fixed rate debt has been valued by the independent valuation expert, JCRA. 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
			Quoted prices in	Significant observable	Significant
			active markets	inputs	unobservable inputs
			(Level 1)	(Level 2)	(Level 3)
Assets/(liability) measured at fair value:	Date of Valuation	£'000	£'000	£'000	£'000
	31 December 2017
Interest rate derivative - cap		1	-	1	-
Interest rate derivative - swap		(681)	-	(681)	-
	31 December 2016
Interest rate derivative - cap		19	-	19	-
Interest rate derivative - swap		(1,232)	-	(1,232)	-

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 period end.

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

20. SHARE CAPITAL

Ordinary Shares Issued and Fully Paid at 1p Each

	Group and Company			Group and Company
	31 December 2017	31 December 2017	31 December 2016		31 December 2016
	Number	£'000	Number		£'000
Balance brought forward	501,279,071	5,013	501,279,071		5,013
Issue in relation to an equity issuance on 24 July 2017	100,917,432	1,009	-		-
Issue in relation to LTIP equity issuances	691,237	7	-		-
Balance carried forward	602,887,740	6,029	501,279,071		5,013

On 24 July 2017 100,917,432 shares of £0.01 were issued at an issue price of £1.09, raising £110,000,000.

On 11 August 2017 (552,990) and 4 October 2017 (138,247), a total of 691,237 ordinary shares of £0.01 were issued as part of the Directors' LTIP. See Note 28 for more detail.

21. SHARE PREMIUM

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

	Group and Company
	31 December 2017	31 December 2016
	£'000	£'000
Balance brought forward	359,958	359,958
Share premium on ordinary shares issued in relation to further equity share issuance	108,991	-
Costs associated with the issue of ordinary shares	(2,430)	-
Share premium on share options exercised	749	-
Balance carried forward	467,268	359,958
22. CAPITAL REDUCTION RESERVE
	Group and Company
	31 December 2017	31 December 2016
	£'000	£'000
Balance brought forward	106,198	121,236
Less interim dividends declared and paid per Note 10	(30,596)	(15,038)
Balance carried forward	75,602	106,198
The capital reduction reserve account is a distributable reserve.
Refer to Note 10 for details of the declaration of dividends to Shareholders.
23. LEASING AGREEMENTS
Future total minimum lease payments under non-cancellable operating leases fall due as follows:
	Group
	31 December 2017	31 December 2016
	£'000	£'000
Less than one year	361	361
Between one and five years	1,446	1,446
More than five years	1,355	1,717
Total	3,162	3,524
Future total minimum lease receivables under non-cancellable operating leases on investment properties are as follows:
	Group
	31 December 2017	31 December 2016
	£'000	£'000
Less than one year	41,180	32,834
Between one and five years	12,648	12,862
More than five years	11,887	10,727
Total	65,715	56,423

The above relates to contracted student rent, commercial leases and nomination agreements with UK universities in place as at 31 December 2017. The impact of student leases for the forthcoming academic year signed by 31 December 2017 have not been included as the certainty of income does not arise until the tenant takes occupation of the accommodation.

24. CONTINGENT LIABILITIES

There were no contingent liabilities at 31 December 2017 (31 December 2016: £nil).

25. CAPITAL COMMITMENTS

The Group had capital commitments relating to forward funded developments totalling £22,821,000 at 31 December 2017 (31 December 2016: £61,443,000).

26. 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, and page 60 of the Annual Report for dividends received by Directors in the year.

Share Capital

Share transactions of related parties during the year ended 31 December 2017 were as follows:

Name	How related	No of shares	Transaction	Date
Tim Attlee	Director	186,300	Disposal	19 January 2017
Paul Hadaway	Ex-Director	276,495	Exercised Options	11 August 2017
Tim Attlee	Director	276,495	Exercised Options	11 August 2017
Paul Hadaway	Ex-Director	130,521	Disposal	17 August 2017
Tim Attlee	Director	130,521	Disposal	17 August 2017
Paul Hadaway	Director	46,000	Purchased	15 September 2017
Michael Enright	Ex-Director	138,247	Exercised Options	4 October 2017
Lynne Fennah	Director	55,400	Purchased	21 December 2017

Share-based Payments

On 25 April 2017, nil cost options were granted to Executive Directors in the amounts of:

Paul Hadaway   35,779 shares

Tim Attlee         35,779 shares

On 11 August 2017, Executive Directors exercised vested nil cost options in the amounts of:

Paul Hadaway   276,495 shares

Tim Attlee         276,495 shares

On 4 October 2017, an ex-Executive Director exercised vested nil cost options in the amount of:

Michael Enright  138,247 shares

On 12 December 2017, nil cost options were granted to an Executive Director in the amount of:

Lynne Fennah    135,610 shares

Details of the shares granted are outlined in Note 28 - Share-based payments.

Payment for Service

Payments for professional services totalling £150,000 (excluding VAT) were made to Real Estate Venture Capital Management LLP (Revcap). Revcap is deemed to be a related party as one of their employees, Stephen Alston, is a Non-Executive Director of the Company.

Acquisition of Joint Venture Company

On 31 March 2017, the Group acquired the remaining 50% shareholding in Empiric (Glasgow) Limited from the joint venture partner, Revcap Advisors Limited for £4,560,000. Revcap Advisors Limited is a sister company of Real Estate Venture Capital Management LLP.

27. SUBSEQUENT EVENTS

Property Transactions

Edinburgh - King's Stables Road

On 10 January 2018, the Group acquired the freehold land for £5.0 million (excluding costs). The land is part of a forward funded agreement for a 166-bed development.

Falmouth - Ocean Bowl

On 25 January 2018, the Group acquired the freehold land for £1.9 million (excluding costs). The land has planning permission for a 190-bed development.

Southampton - Emily Davies

On 12 February 2018, the Group acquired the freehold of a 240-bed student accommodation scheme in Southampton for £10.6 million (excluding costs). The property is fully occupied and leased by Southampton Solent University ("SSU") on a Full Repairing and Insuring basis until September 2019.

28. SHARE-BASED PAYMENTS

The Company operates three equity-settled share-based remuneration schemes for Executive Directors under the deferred annual bonus, long-term incentive plan and the value delivery plan. The details of the schemes are included in the Remuneration Committee Report on page 59 of the Annual Report.

Issued

On 25 April 2017, the Company granted nil-cost options over a total of 71,558 (Paul Hadaway 35,779, Tim Attlee 35,779) ordinary shares pursuant to the deferred shares element of the annual bonus awards for the financial period ended 31 December 2016 (the "Annual Bonus Awards").

On 12 December 2017, the Company granted nil-cost options over a total of 135,610 ordinary shares pursuant to the Empiric 2014 Long-Term Incentive Plan (the "2017-2020 LTIP Awards") to Lynne Fennah the Company's Chief Financial Officer.

Exercised

On 11 August 2017 Paul Hadaway and Tim Attlee, Directors of the Company, each exercised vested nil-cost options over 276,495 ordinary shares in the Company ("ordinary shares") pursuant to the Empiric Student Property Plc 2014 Long-Term Incentive Plan (the "Exercise").

On 4 October 2017, Michael Enright, an ex-Director of the Company, exercised vested nil-cost options over 138,247 ordinary shares in the Company ("ordinary shares") pursuant to the Empiric Student Property Plc 2014 Long-Term Incentive Plan.

None of the nil-cost options are currently exercisable. The weighted average remaining contractual life of these options was 1.5 years (2016: 1.8 years).

During the year to 31 December 2017, the amount recognised relating to the options was £161,000.

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.

	Group and Company
	31 December 2017	31 December 2016
Outstanding number brought forward	3,913,420	2,880,391
Granted during the period	207,198	1,033,029
Vested & exercised during the period	(691,237)	-
Lapsed during the period1	(1,951,564)	-
Outstanding number carried forward	1,477,817	3,913,420

1       A number of these related to past Directors. See pages 59 and 60 of the Annual Report for more detail.

The fair value on date of grant for the nil-cost options under the 2017-2020 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 period:

		Annual Bonus Award	LTIP Awards
(a)	Weighted average share price at grant date of	£1.11	£1.07
(b)	Exercise price of	£nil	£nil
(c)	Contractual life of	3 years	3 years
(d)	Expected volatility of	15.60%	17.86%
(e)	Expected dividend yield of	6.30%	8.31%
(f)	Risk free rate of	0.79%	1.07%
(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.

29. 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 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 Group that are affected by market risk are principally the Group's bank balances along with the interest rate derivatives (swap and cap) entered into to mitigate interest rate risk.

The Group monitors its interest rate exposure on a regular basis. A sensitivity analysis performed to ascertain the impact on profit or loss and net assets of a 50 basis point shift upwards in interest rates would result in an increase in finance costs of £386,000 (2016: £116,000).

(b) Credit Risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risks from both its leasing activities and financing activities, including deposits with banks and financial institutions. Credit risk is managed by requiring tenants to pay rentals in advance. The credit quality of the tenant is assessed based on an extensive credit rating scorecard at the time of entering into a lease agreement.

Outstanding tenants' receivables are regularly monitored. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial asset.

(i) Tenant Receivables

Tenant receivables, primarily tenant rentals, are presented in the Consolidated 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 period end.

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

One of the principal credit risks of the 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, who are committed lenders to the Group, with high credit ratings assigned by international credit-rating agencies.

Credit Ratings (Moody's)	Long Term	Outlook
AIB Group	Baa1	Positive
Canada Life	Aa3	Stable
Mass Mutual	Aa2	Negative
Royal Bank of Scotland Plc	Baa3	Stable
Lloyds Bank Plc	Aa3	Stable

(c) Liquidity Risk

Liquidity risk arises from the Group's 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 Group will encounter difficulty in meeting its financial obligations as they fall due as the majority of the Group's assets are property investments and are therefore not readily realisable. The Group's objective is to ensure it has sufficient available funds for its operations and to fund its 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
	On demand	Less than 3 months	3 to 12 months	1 to 5 years	> 5 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 December 2017
Bank borrowings and interest	-	2,608	29,015	121,685	233,663	386,971
Swap derivatives	-	123	365	342	-	830
Trade and other payables	-	22,620	-	-	-	22,620
	-	25,351	29,380	122,027	233,663	410,421
	Group
	On demand	Less than 3 months	3 to 12 months	1 to 5 years	> 5 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 December 2016
Bank borrowings and interest	-	2,129	6,387	94,067	217,196	319,779
Swap derivatives	-	123	365	830	-	1,318
Trade and other payables	-	16,033	-	-	-	16,033
	-	18,285	6,752	94,897	217,196	337,130
	Company
	On demand	Less than 3 months	3 to 12 months	1 to 5 years	> 5 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 December 2017
Bank borrowings and interest	-	54	161	10,252	-	10,467
Swap derivatives	-	-	-	-	-	-
Trade and other payables	-	2,130	-	-	-	2,130
	-	2,184	161	10,252	-	12,597

	Company
	On demand	Less than 3 months	3 to 12 months	1 to 5 years	> 5 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 December 2016
Bank borrowings and interest	-	-	-	-	-	-
Swap derivatives	-	-	-	-	-	-
Trade and other payables	-	1,639	-	-	-	1,639
	-	1,639	-	-	-	1,639

30. CAPITAL MANAGEMENT

The primary objectives of the Group's capital management is 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.

31. SUBSIDIARIES

Those subsidiaries listed below are considered to be all subsidiaries of the Company at 31 December 2017, 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 2017	31 December 2016
	£'000	£'000
As at 1 January 2017	5,118	5,117
Additions in the period	7,453	1
Balance at 31 December 2017	12,571	5,118

	Status	Ownership	Principal Activity
Brunswick Contracting Limited	Active	100%	Property Contracting
Empiric (Alwyn Court) Limited	Active	100%	Property Investment
Empiric (Baptist 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)	Active	100%	Property Investment
Empiric (Bath Piccadilly Place)	Active	100%	Property Investment
Empiric (Birmingham Emporium) Limited	Active	100%	Property Investment
Empiric (Birmingham) Limited	Active	100%	Property Investment
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 Court) Limited	Active	100%	Property Investment
Empiric (Canterbury Pavilion Court) Limited	Active	100%	Property Investment
Empiric (Cardiff Wndsor House) Leasing Limited	Dormant	100%	Property Leasing
Empiric (Cardiff Wndsor 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 (Egham High Street) 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 Otago Street) Limited	Dormant	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 Cookridge) 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 (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) Leasing Limited	Dormant	100%	Property Leasing
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) Leasing Limited	Active	100%	Property Leasing
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 (Four) Limited	Active	100%	Holding Company
Empiric Investment Holdings (Three) Limited	Active	100%	Holding Company
Empiric Investment Holdings (Two) Limited	Active	100%	Holding Company
Empiric Investment Holdings (Five) Limited	Active	100%	Holding Company
Empiric Investment Holdings (Six) Limited	Active	100%	Holding Company
Empiric Investments (Five) Limited	Active	100%	Immediate Holding Company
Empiric Investments (Three) 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 (Two) Limited	Active	100%	Immediate Holding Company
Empiric Student Property Limited	Active	100%	Property Management
Empiric Student Property Trustees Limited	Active	100%	Trustee of EBT
Hello Student Management Limited	Active	100%	Property Management
Grove St Studios Ltd	In liquidation	100%	Property Investment
Spring Roscoe Limited	In liquidation	100%	Property Investment

 

END

 

 

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