Full year results to 31 December 2018

RNS Number : 3702T

Empiric Student Property PLC

20 March 2019

 

20 March 2019

Empiric Student Property plc

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

RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER 2018

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 2018.

Financial headlines

	As at 31 December 2018	As at 31 December 2017	Change
Revenue	£64.2m	£51.2m	+25%
Gross margin	62%	57%	+9%
Administration expenses	£9.1m	£13.5m	-33%
Profit before tax	£40.3m	£20.8m	+94%
Basic earnings per share	6.68p	3.84p	+74%
Adjusted earnings per share	3.20p	1.86p	+72%
Dividends declared per share	5.0p	5.55p	-10%
Dividend cover	64%	34%	+88%
Property valuation	£970.6m	£890.1m	+9%
EPRA NAV per share	106.2p	104.5p	+2%

Financial Performance

·      Revenue increased 25% to £64.2 million (2017: £51.2 million).

·      Gross margin increased to 62% (2017: 57%), reflecting good progress in increasing occupancy levels and reducing property costs.

·      Administration expenses reduced by 33% to £9.1 million (2017: £13.5 million).

·      Profit for the year increased by 94% to £40.3 million.

·      Basic earnings per share were 6.68 pence with adjusted earnings per share up 72% to 3.20 pence (2017: 1.86 pence).

·      Dividends declared in relation to 2018 totalled 5.0 pence per share, and in line with our target, dividend cover increased to 64% (2017 :34%).

·      Property portfolio valued at £970.6 million at 31 December 2018 (31 December 2017: £890.1 million) an increase of 9% (4.8% on a like for like basis).

·      EPRA net asset value per share up 2% to 106.2 pence (2017: 104.5 pence).

·      Net debt of £324 million at 31 December 2018 (31 December 2017: £298 million), resulting in a loan-to-value ratio of 31% (31 December 2017: 28%), below our long-term target of 35% and maximum of 40%.

Operational Performance

·      Current occupancy of 96% (2017: 92%), benefiting from a rigorous focus on driving revenue, although below our target of 97%. Further robust action is continuing to be taken to enhance sales capabilities and attract short-term lets for the 2018/19 academic year.

·      All operating properties brought onto the Hello Student® platform from 1 September 2018.

·      Facilities management for 27 assets brought in-house ahead of the 2018/19 academic year, with the remainder to come in-house by 1 April 2019.

·      Wide range of other improvements underway to enhance operational performance and reduce costs, helping to ensure our business is fit for the long term.

·      95 assets with 9,397 beds contracted as at 31 December 2018 (31 December 2017: 94 assets with 9,158 beds).

·      91 operating or revenue-generating assets at the year-end with 8,711 beds (31 December 2017: 85 assets with 7,903 beds), with an average valuation yield of 5.64%.

Post Period End

·      On 1 March 2019, Alice Avis MBE joined as a Non-Executive Director of the Company, bringing over 25 years of experience in advertising, branding, marketing, e-commence and consultancy across the consumer goods and retail sectors. Her expertise is across both large FTSE 100 organisations as well as smaller, entrepreneurial businesses in the UK and internationally and in both executive and non-executive roles. On the same date, Stephen Alston notified the Board of his intention to step down from his position as a Non-Executive Director of the Company with effect from 29 March 2019.

·      Resolution proposed for the Annual General Meeting on 2 May 2019 to change Empiric's listing category from a closed-ended investment fund to a commercial company, to increase strategic flexibility and reduce compliance costs.

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

"We expect 2019 to be a year of further significant progress. We have taken swift action to maximise revenue for the remainder of this academic year and bookings for the 2019/20 academic year are progressing well. The benefits of the operational improvements we have made will continue to come through in 2019 and we are taking action to drive additional efficiencies.

In 2019, we are targeting a gross margin of 67% and a dividend of 5p per share¹, which we expect to be around 85% covered on an adjusted basis.

While there are economic and political uncertainties, particularly regarding Brexit, we are yet to see any material adverse consequences. We have a quality portfolio of assets, which coupled with the improvements in our operations, gives us confidence in the outlook for the business."

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.

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

Empiric Student Property plc	(via Maitland/AMO below)
Tim Attlee (Chief Executive Officer)
Lynne Fennah (Chief Financial & Operating Officer)
Jefferies International Limited	Tel: [phone]
Gary Gould
Stuart Klein
Maitland/AMO (Communications Adviser)	Tel: [phone]
James Benjamin	Email: [e-mail]

The Company's LEI is 213800FPF38IBPRFPU87.

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

Notes:

Empiric Student Property plc is a leading provider and operator of modern, direct-let, nominated or leased student accommodation across the UK. Investing in both operating and development assets, Empiric is a multi-niche student property company focused on, (i) providing good quality first year accommodation managed through its Hello Student® operating platform in partnership with universities, (ii) offering a variety of second and third year purpose-built accommodation options for individual students and those wanting a group living environment, and (iii) continuing to expand the Group's existing premium, studio-led accommodation portfolio which is attractive to international and postgraduate students.

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

A meeting for investors and analysts will be held at 8:45am today at:

Maitland

3 Pancras Square

London

N1C 4AG

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 Maitland 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 2019, on or around 22 March 2019.

CHAIRMAN'S STATEMENT

In last year's report, the Executive Team set out a strategic programme of change, to rectify some fundamental issues with the Group's performance. We have made solid progress with this programme, which has improved our operations and supporting infrastructure, while reducing costs and maintaining high levels of service. However, there is still much more to do and the Board remains focused on the next stage of our improvement activities as we enter 2019.

A year of progress

MARK PAIN

Non-Executive Chairman

20 March 2019

Dear Fellow Shareholder

I am pleased to report to you for the first time as Chairman of Empiric.

Performance and Business Review

To deliver the financial performance the Group is capable of, we need to maximise the occupancy of our assets. We achieved an improved level of occupancy for the 2018/19 academic year of 96%, up from 92% in the previous year. However, this was still below the 97% we consider full occupancy. As explained in the Chief Executive Officer's Review, we are taking action to generate additional bookings for this academic year.

The Group has taken big strides with efficiency improvements, in particular by bringing facilities management for 27 of our assets in-house, with the remainder coming in-house from April 2019. This will help us to deliver better service and reduce costs. Combined with our other operational efficiencies, this enabled us to achieve a gross margin of 62% for the year, up from 57% in 2017 and on the way to our target of 70%. We also applied the same rigorous focus to administrative expenses, which were significantly lower than our target of £10 million for the year. This contributed to adjusted earnings per share increasing by 72%, improving our dividend cover, as discussed below.

We continue to explore the potential disposal of non-core assets from the portfolio. Our strategy is to recycle disposal proceeds, where there are attractive opportunities to do so. The Group is financed with an LTV of 30.6%. Towards the end of 2018 we agreed a new £86.1 million ten-year debt facility, with a fixed interest rate of 3.196%. We now have £390 million of financing facilities, with an average term of 7.6 years and average interest cost of 3.26%.

Dividend

The Board has declared four quarterly dividends in respect of 2018, of 1.25 pence per share each. We therefore met our dividend target for the year of 5.0 pence per share. Adjusted earnings per share were 3.2 pence, resulting in a marked improvement in dividend cover to 64% (2017: 34%).

Board, Management and People

We were greatly saddened by the loss of Baroness Brenda Dean, who chaired Empiric from its IPO until her death in March 2018. She made an enormous contribution to the Group and more widely in her long career. In recognition, we have established the Brenda Dean Scholarship. This will run for a minimum of three years and is aimed at entrepreneurial women who need financial support to start a business. The scholarship is open to students coming through the business programmes at Nottingham University, where Brenda was a member of the University Council.

Stuart Beevor was Acting Non-Executive Chairman between March and September and I want to thank him for his considerable efforts in that position. I joined the Board on 1 September 2018, at which date Stuart resumed his former role as a Non-Executive Director and Chairman of the Remuneration Committee.

There were two other changes to Board roles during the year. In July, we appointed Lynne Fennah to the dual roles of Chief Financial Officer and Chief Operating Officer, formalising the responsibility she had already taken for our operations. In November, we appointed Tim Attlee as Chief Executive Officer. Tim was a co-founder of Empiric and our Chief Investment Officer, in addition to being Acting Chief Executive Officer since December 2017. We are delighted that Tim and Lynne are leading our Senior Leadership Team, which we have further strengthened with a number of key appointments. More information can be found in Tim's statement on page 13 in the annual report.

Since the end of the year, we have announced the appointment of Alice Avis as a Non-Executive Director. She brings a wealth of invaluable experience in driving digital transformation and operational excellence in customer-focused, multi-site businesses, which will be important for the Board as Empiric focuses on further enhancing its operations.

After nearly five years on the Board, Stephen Alston has decided not to seek re-election as a Non-Executive Director at the Annual General Meeting on 2 May 2019. On behalf of the Board, I thank him for his important contribution to the Group and wise counsel.

Bringing the running of our properties and facilities management in-house has made a considerable difference to the number of people Empiric employs. I want to welcome our new people to the Group and thank everyone for their hard work this year and their contribution to the Group's ongoing transformation.

Summary

The Group has made solid progress in 2018 but there is still more to be done to deliver the performance it is capable of. We have a strong leadership team and the right plans in place to deliver. We are also working on a longer-term strategy to grow shareholder value, so we can take advantage of the attractive opportunities that will present themselves in our market.

OUR BUSINESS MODEL

Our business model combines strong operations, delivered in-house, with a differentiated portfolio of student properties. Together, our operations and assets enable us to create value for all our stakeholders.

Key Strengths	How We Add Value	Outputs
Buildings We have a diversified and attractive portfolio of properties that offer high-quality accommodation to customers ranging from first year undergraduates to postgraduates. Our People We have a strong and growing pool of talent, which allows us to deliver a high level of service and management. Specialist Knowledge We understand how to successfully develop, acquire and operate student accommodation assets. Brand Hello Student® is a leading brand, which gives us a clear identity in the student property market. Financing We finance our business through a combination of shareholder equity and debt facilities. Our debt has a weighted average term of 7.6 years and average interest costs of 3.26%, of which 57% are fixed and 9% are capped. Technology We continue to enhance our systems, to support our operations, booking and accounting.	Select Locations We are highly selective about where we invest, with a focus on the towns and cities that are home to the most successful universities and where student numbers are rising faster than average. We select sites based on their compatibility with the types of accommodation we provide (see below) and their proximity to universities and amenities. Our investment policy enables us to invest in studio, one, two and three-bed apartments, modern townhouses and affordable apartments. These four different accommodation niches enable us to invest more deeply in a city, to generate economies of scale and better margins. 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 and have a lower risk profile, as the planning, construction and time risk lies with the third-party developer. These projects also have lower staffing requirements and benefit from a forward funding coupon charged to the developer. However, direct development delivers higher yielding assets than forward funding. We have a strong track record in direct development. Operate We market our assets through the Hello Student® platform. Having all our assets on one 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 insights into asset performance, so we can adjust rents to increase occupancy, and exceed students' needs, so we can further improve our offering. Reinvest We intend to hold our investments for the long term. However, we may sell an asset if we see an opportunity to create more value for shareholders by reinvesting the proceeds. We therefore continually review the portfolio to ensure our capital is effectively allocated.	Customers Our student customers benefit from having a great place to live during their studies, at a rent that represents value for money. Our People Our employees have the opportunity to develop their careers in an exciting and growing sector. Shareholders Shareholders benefit from the rising capital value of our portfolio and growing rents, which support our dividends. Communities The communities around our assets benefit from reduced pressure on local housing stock and from the improvements we fund to social infrastructure in the surrounding area.

Our Strategic Objectives

A successful strategy

We have a well-defined strategy, which is designed to deepen and widen our engagement with, and understanding of, all our stakeholders and to deliver attractive and sustainable benefits to them for the long term.

Key Performance Indicators

To see how our strategy links to our Key Performance Indicators see page 16 in the annual report

Principal Risks & Uncertainties

To see how our strategy links to our Principal Risks see page 28 in the annual report

	1.	2.	3.	4.	5.
Objectives	Customers	Brand	People and Operations	Buildings	Shareholder Outcomes
	-    Ensure high levels of tenant satisfaction are achieved in every location -    Build intimate communities through building design and on-site management programme -    Enable loyal customers to move building to building and city to city, while keeping them attracted to the Hello Student® brand and platform	-    Improve the student experience through a consistent and high-quality approach to branding, operation and management, through the Hello Student® platform -    Raise awareness of the Hello Student® consumer brand among students, to support our "fresher-to-PhD" accommodation and service offering	-    Provide the majority of operational functions in-house -    Improve operational efficiency -    Develop our people, to help them provide the best customer service experience -    Continue to give our people opportunities to grow and excel within the Group -    Build gross income -    Reduce costs per bed	-    Continue to purchase core assets -    Diversify income between different markets and product types, to spread operational risk, concentrating on specific cities to increase efficiencies -    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 -    Maximise the value from the asset portfolio by growing the portfolio profitably and sustainably	-    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 -    Improve profitability through higher income per bed and rental growth
Progress	-    We achieved a student satisfaction rating of 8.1 out of 10 -    We achieved a rebookers rate of 21.3% -    We continued to create communities in our buildings, through our approach to offering a more personal service to our students and through other channels, such as organising social events	-    Bringing all properties on the Hello Student® platform from September 2018 will help to ensure a consistent approach to branding, operations and management, which will enhance the brand in the eyes of students -    We have a new learning management system and are investing in training to promote excellent service -    We launched a very successful blog on the Hello Student® website, written by students for students	-    All properties are now branded Hello Student®. We are on track to have facilities management in-house for all buildings from 1 April 2019 -    We continually develop and train our staff, to support them in their journey with the Group -    We increased future gross income through our acquisition, development and redevelopment programmes -    We run an ongoing review of the Group and are continually finding operational and financial improvements and cost savings	-    We purchased Southampton Emily Davies Hall -    We completed three developments for the 2018/19 academic year, all in locations where we already have assets -    We completed our second townhouse development in York, to expand our offering -    We expanded the Hello Student® platform, giving us operating efficiencies in locations with multiple assets -    We are conducting an ongoing review of all assets and city groups, which continually informs the process of reshaping the investment portfolio	-    We increased the operating margin and dividend cover generated by the portfolio -    We added to our pipeline of forward funded and direct developments -    We developed plans to fine tune the portfolio and add further depth to cities where we can earn attractive returns

CHIEF EXECUTIVE OFFICER'S REVIEW

In 2018, we took tough decisions and implemented the actions required to improve our performance. We are now well over the halfway stage of our transformation programme and we are starting to see results coming through. We are confident that we will see further improvements as we continue to implement our programme in 2019.

Reinvigorating the business

TIM ATTLEE

Chief Executive Officer

20 March 2019

Enhancing Performance

Our fundamental focus is on maximising revenue from our assets and minimising the associated costs, while maintaining the high standard of personal service that distinguishes us from our competitors.

The business is now in substantially better shape than at the start of 2018 and the many improvements we have made are detailed in the Operational and Financial Review. However, we were somewhat disappointed that occupancy was slightly below our target, as a number of students signed leases with us but did not arrive. To help fill the gap, we recruited a central sales team to target semester lets. This team began work on 3 January 2019. We are also evolving our sales processes and training, which will augment our ability to deliver full occupancy in the years ahead.

With all of our assets now on the Hello Student^® platform and with all facilities management to be performed in-house from April 2019, we will have full operational control over our properties for first time since Empiric was founded. This will allow us to pull every available lever that affects revenue or cost.

Maximising occupancy is critical to driving revenue. During the year, we enhanced our management information and combined it with improved data and analysis from the Hello Student^® website (see Operational and Financial Review), to give us detailed insights into bookings at each asset. We also tightened our processes for converting bookings into signed leases, highlighting buildings where action is needed to increase bookings. We introduced bi-weekly sales meetings, attended by the Executive Directors, Operations Director, marketing and our internal analyst, which result in documented actions and rental rate decisions by asset, helping us to drive bookings. Optimising rents in this way has given us a more sustainable level of rents across the portfolio, increasing the potential for like-for-like rental growth for the 2019/20 academic year. We are continuing to enhance our sales capabilities, including improvements to our sales processes and training.

Protecting Shareholder Value

While we are relentlessly focused on generating income to increase our dividend cover, we also recognise that we must protect the balance sheet and long-term shareholder value. This means we must constantly analyse and evaluate the portfolio. Our market is polarising, as students are increasingly attracted to the best-performing universities and turning away from lower ranked institutions. We therefore need to focus future investments in these growing markets and recycle capital from non-core assets. Our intention is to continue to redeploy capital to add depth to our offering in existing cities, so we have a broader range of product and price points that suit everyone from first year undergraduates to postgraduate students. This will also underpin our ability to enable loyal customers to move between buildings or cities, while staying with the Hello Student^® brand.

People and Culture

One effect of our transformation programme has been a significant increase in the number of people we directly employ, as we bring operations in-house. At the start of the year, we directly employed just over 130 people. This had risen to 248 by the year end, with a further 69 people scheduled to join us when we take on the remainder of the facilities management from April 2019. Importantly, we have recruited an HR Director and heads of IT, facilities management and property, who have all joined the Senior Leadership Team. This gives us both the management capacity and the specialist skills we will need to take the business forward.

We continue to build a collaborative and communicative culture and look to help our people succeed in their roles through training and development. We introduced a number of changes to the way we manage, assess and train our people in 2018, with further improvements to come as we establish our in-house HR function in 2019. More information can be found in the Corporate and Social Responsibility section on page 25 in the annual report.

Portfolio Summary

At 31 December 2018, we owned or were committed to owning 95 assets, representing 9,397 beds (31 December 2017: 94 assets, 9,158 beds). Of these, 91 were revenue generating (31 December 2017: 85 assets). The revenue-generating properties had gross rent of £73.9 million for the 2018/19 academic year (2017/18 academic year: £65.3 million). Commercial revenue was £1.7 million, representing 2.1% of gross annualised rent (31 December 2017: £1.8 million, representing 2.8% of gross annualised rent). The gross rent roll is expected to increase to £79.3 million for the 2019/20 academic year, with three development projects set to become revenue generating for that year. A further two development projects are scheduled to complete for subsequent academic years.

Like-for-like income growth for the academic year 2018/19 averaged around 2% across the portfolio. We expect further rental growth for the academic year 2019/20, while continuing to prioritise occupancy levels.

Valuation

Each property in the portfolio has been independently valued by CBRE, in accordance with the Royal Institution of Chartered Surveyors ("RICS") Valuation - Professional Standards January 2014 (the "Red Book"). At 31 December 2018, the portfolio was valued at £970.6 million, an increase of 9% for the year (31 December 2017: £890.1 million).

The valuation benefited from the increased occupancy and income growth compared to the end of 2017 and some yield compression, particularly in the first half of 2018. The valuation also reflected the acquisition of one standing asset and the realisation of development profit on the projects which reached practical completion ahead of the 2018/19 academic year (see overleaf). The like-for-like increase in the portfolio valuation was 4.8%.

Asset Acquisition

The Group acquired one standing asset during the year, the 240-bed Emily Davies Hall in Southampton. The property comprises affordable accommodation arranged in three-and four-bed apartments and is leased to Southampton Solent University until September 2019, at which point we intend to directly let it. The purchase price was £10.6 million, excluding costs. The acquisition has broadened our offer in Southampton, where we now have 459 beds. At the year end, the asset was valued at £11.2 million, an increase of 6% on the purchase price.

Developments and Redevelopments

We made further good progress with our development and redevelopment projects during 2018. Two forward funded developments completed ahead of the 2018/19 academic year: Princess Road in Leicester (110 beds) and Percys Place in York (106 beds). Princess Road offers studio accommodation while Percys Place contains studios and apartments, as well as five- and six-bed townhouses. More information on our townhouse offering can be found in the case study on page 21 in the annual report.

Practical completion of a third forward funded development, The Emporium in Birmingham, was delayed as a result of the late delivery of the final part of the communal space. In total, 171 of the 184 beds were delivered and 155 of those are occupied. Forward funded developments have the advantage of protecting us from late completion, as the risk largely remains with the developer. We have been fully compensated by the developer for the lost return and the additional management time we have incurred. We were also able to mitigate damage to the Hello Student^® brand by offering refunds to students at the developer's expense.

In addition to the forward funded developments, we completed a major refurbishment and redevelopment of Blocks 3 and 4 at Victoria Point, Manchester. The blocks contain 169 beds in total and provide affordable accommodation that suits returning undergraduates. We continue to see the potential for targeted redevelopments that increase capital values and income, although we aim to limit the impact on income and dividend cover by carefully timing these projects. We are constantly reviewing opportunities to redevelop buildings, implementing a detailed appraisal process to weigh up all risks.

Outlook

We expect 2019 to be a year of further progress. We have taken swift action to maximise revenue for the remainder of this academic year and bookings for the 2019/20 academic year are progressing in line with expectations. The benefits of the operational improvements we have made to date will continue to come through in 2019 and we are taking action to drive additional efficiencies.

For 2019, the Board is continuing to target a dividend of 5.0 pence per share. The Board is expecting the total dividend for 2019 to be around 85% covered by adjusted earnings.

While there are economic and political uncertainties, particularly regarding Brexit, we are yet to see any material adverse consequences. We have a quality portfolio of assets, which coupled with the improvements in our operations, gives us confidence in the outlook for the business.

OUR MARKET

Student accommodation is one of the largest alternative real estate sectors in the UK, sustained by strong demand for higher education from domestic and international students. However, the market is polarising as students are attracted to the best universities, meaning that we must remain highly selective about the towns and cities we choose to invest in.

Selectivity remains key

Total Annual UK Increase in Bed Numbers

Full-time students are the core customers for Purpose Built Student Accommodation ("PBSA"), since they are most likely to study away from home. There are currently around 1.8 million full-time students in the UK. Of these, 77% are from the UK, 7% are from the EU and 16% are non-EU international students (Source: HESA). There are now almost 630,000 PBSA bed spaces in the UK, which means that the majority of students still live in other forms of accommodation such as houses in multiple occupation ("HMOs"). However, the proportion living in PBSA continues to rise strongly, particularly in the private sector which now makes up almost half of the PBSA provision, reflecting the attractiveness of the buildings and the service and amenities they offer.

Demand for Higher Education Remains Strong

Applications for university places are an important leading indicator of demand for PBSA. For the 2018/19 academic year, total applications were down 0.6%. This was driven almost entirely by a fall in the number of people making the maximum of five applications to different universities through the main UCAS scheme before the 30th June deadline. The number of students applying to between one and four universities either increased or was stable, as more students chose not to include lower performing universities on their application list. The number of applications to institutions requiring lower grades fell by 6%, while those to mid-tier institutions fell by 3%. Applications to top-tier institutions increased by 1%. Empiric's portfolio is targeted at the higher performing universities, with 65% of our beds in Russell Group university cities.

UCAS data indicates that the UK continues to be an attractive place to study, with the number of applications from EU students in 2018/19 up over 2%, while non-EU international applications were up over 6%. The Migration Advisory Committee published its report on international students in September 2018. It found that international students bring a clear economic benefit to the UK, citing the 2015 Department for Education estimate of £17.6 billion of export value, as well as the 2018 Higher Education Policy Institute/Kaplan International Pathways estimate of £20.3 billion. The report suggested that there should continue to be no cap on the number of international students and although it did not recommend removing international students from the migration statistics, it did suggest a number of small policy changes to make the UK more welcoming to international students.

While trends in applications from UK, EU and international students are important, overall the number of applications remains well above the number of places available at UK universities. In 2018/19, there were 695,565 undergraduate applicants to UK universities and 533,360 acceptances, with the latter falling by just 0.1% compared to the prior year (Source: UCAS). Analysis of acceptances by tier of university also shows the polarisation of the market, with bottom-tier universities struggling to attract more students.

Early applications for the 2019/20 academic year were promising. Most medicine, dentistry and veterinary science courses, and all courses at Oxford and Cambridge universities, required students to apply by October 2018. UCAS statistics show that 65,870 people applied for these courses, up 7% on last year. Applications from UK students were up 9%, non-EU applications students increased by 6% and demand from the EU was little changed from last year.

There was an 11% rise in the number of 18-year-olds from England applying for October deadline courses, despite the population of young people decreasing by 2.1% this year. This decline is part of a long-term demographic trend which will bottom out in 2020, with the number of 18-year-olds rebounding sharply from 2021. This rebound, coupled with higher participation rates, should further increase demand for higher education and PBSA in future years.

The UCAS statistics cited above only consider undergraduate admissions. Since the introduction of postgraduate loans in the UK in 2016/17, the number of placed postgraduates has grown, with a 5.7% increase in the year after their introduction (Source: HESA). This provides an additional source of demand for PBSA.

A concern for the higher education sector is the Augar review; this is currently low on the government's list of priorities and so most likely will be implemented in the next Parliament. The consensus is that the outcome will be a reduction in fees of around 25% (to c.£6,000 per annum for UK students) which should help to bolster the number of applicants, and the reduction in revenue for universities could give them a further incentive to increase their student numbers. Overall the review should be beneficial for PBSA, but the uncertainty until the publication of its conclusions will remain unhelpful.

Supply of PBSA

The supply of PBSA has grown rapidly, with a 24% increase in rooms available nationally in the four years to academic year 2018/19, including a 127% increase in the number of studios.

However, the development pipeline for student accommodation is becoming smaller in some city markets as they mature and other land uses out-compete PBSA, such as build to rent.

Attractive development opportunities remain available but site and city selectivity are key, with the cities that are home to the best-performing universities offering the greatest potential.

In addition, the majority of university towns and cities now have Article 4 Directions in place, which prevent local housing stock being converted into HMOs. This means that in locations with rising demand for student housing, new PBSA will be required to meet it. The outlook for student accommodation in the right locations therefore remains healthy.

Investment Demand

Investment demand for PBSA continues to be strong. Large volumes of funds are available for the alternative property sectors as investors turn away from major asset classes such as retail and offices. This demand comes from both UK and international investors. Investment volumes in 2018 are expected to be around £3.2 billion. In contrast to previous high-volume years, this is the result of a larger number of smaller transactions rather than fewer but larger portfolio deals. As a result, portfolios continue to attract premiums but there is now also more liquidity for smaller transactions, as the market has matured.

Investment yields for stabilised assets compressed in the first half of 2018 and were broadly stable in the second half. The level of demand and the tightening of yields make it challenging to acquire standing assets, pointing to a maturing PBSA market.

Market Yields

	Direct Let		25-Year FRI Lease
	Current	Forecast	Current	Forecast
Prime London	4.00%	Stable	3.50%	Strengthening
Inner London	4.50%	Strengthening	3.75%	Strengthening
Prime Regional	5.25%-5.50%	Strengthening	4.00%	Strengthening
Secondary Regional	6.00%	Stable	4.00%	Stable
Other Regional	7.00%+	Weakening	4.25%	Strengthening

Source: JLL

Note: Referenced against appropriate cash flows and applies to single "best in class" assets typically 250-500 bed assets excluding any portfolio premium. These yields are intended as a guide and we would emphasise the need to appraise individual schemes on a case-by-case basis.

KEY PERFORMANCE INDICATORS

We have made a number of changes to our key performance indicators ("KPIs"), in particular introducing non-financial metrics that show our operational performance. As a result, we have focused our financial KPIs and no longer include the LTV ratio, dividend per share or basic earnings per share. All of these metrics continue to be reported in the Operational and Financial Review on pages 18 to 23 in the annual report.

Non-Financial KPIs

	Rebookers Rate (%)	Student Happiness (out of 10)
Performance	21.3%	8.1
Purpose	The rebookers rate demonstrates our ability to retain tenants within the Hello Student® brand, which in turn is an indicator of the quality of service we provide. Note: Due to the entire portfolio only moving onto the Hello Student® platform from September 2018 we do not have comparative information for this year.	Student satisfaction reflects the quality of service we provide and the attractiveness of our buildings.
Strategic Link	1 2 3 4 5 Current Occupancy (%)	1 2 3 4 5
Performance	96%	Health and Safety
Purpose	Occupancy is a key driver of our revenue and demonstrates the quality and location of our assets, the strength of our sales process and our ability to set appropriate rents.	We have a duty to protect the health and safety of our people and the students living in our buildings. We have a strong track record and look to build upon this now that all buildings are managed by Hello Student®. As a result, going forward one of our KPIs will be the health and safety in and around our buildings.
Strategic Link	1 2 3 4 5	1 2 3 4 5

Financial KPIs
	Gross Margin (%)	Adjusted Earnings per Share (p)
Performance	62%	3.20p
Purpose	The gross margin reflects our ability to drive occupancy and to rigorously control our operating costs.	Adjusted earnings per share is the earnings measure that best demonstrates our ability to reward shareholders through dividends.
Strategic Link	1 2 3 4 5	1 2 3 4 5
	Dividend Cover (%)	Net Asset Value per Share (p)
Performance	64%	106.14p
Purpose	Dividend cover shows our ability to pay dividends out of current year earnings.	Growth in the NAV per share reflects the quality of our assets and our ability to generate revenue from them.
Strategic Link	1 2 3 4 5	1 2 3 4 5
	Total Return (%)
Performance	6.48%
Purpose	The total return shows the aggregate value we have created for shareholders, through both capital growth of NAV and dividends.
Strategic Link	1 2 3 4 5

Strategic Link

1. Customers

2. Brand

3. People and Operations

4. Buildings

5. Shareholder Outcomes

Definitions

For definitions see page 98 in the annual report

OPERATIONAL AND FINANCIAL REVIEW

This section of the report details our actions to improve our operating performance and our financial results in 2018.

Improving delivery

LYNNE FENNAH

Chief Financial and Operating Officer

20 March 2019

Operational Review

Facilities management ("FM") is one of our largest costs. Providing these services in-house saves us the outsourced providers' profit margin and VAT, which we are unable to reclaim as a VAT-exempt business. Ahead of the 2018/19 academic year, we brought FM in-house for 27 buildings, with the rest of the portfolio to follow from 1 April 2019. Our FM help desk is up and running and we have established a database to ensure an effective and compliant programme of maintenance. To ensure we have the in-house expertise required, we recruited a Head of Facilities Management, who joined us on 4 December 2018.

Insourcing FM also offers other efficiency benefits. It saves management time, as we no longer have to manage four separate FM providers, and allows us to consolidate contracts for ancillary services such as pest control and lift maintenance, so we can achieve better rates by procuring single contracts across the portfolio. During 2018, we also used our improved management reporting to tighten control of ad hoc expenditure by our outsourced FM providers, with a corresponding benefit to our property costs during the year.

We have also focused on reducing our other operating costs. For example, we brought the administration of utilities in‑house from 1 July 2018 and entered into fixed price contracts from 1 October 2018 onwards. Initiatives to reduce energy use, with a corresponding cost and environmental benefit, are outlined on page 26 in the annual report.

At the start of the year, we had 62 assets on our Hello Student^® platform. From 1 September 2018, all of our direct let properties were branded Hello Student^®. This enables us to manage costs ourselves, gives us full control over the marketing of those assets and the interaction with students, and provides us with live data on our entire portfolio, helping us to drive occupancy and revenue.

As noted above, we benefited from the improved Hello Student^® website, which we had relaunched towards the end of the previous year. It has improved design, functionality and analytics, allowing us to review the number of hits for a given property and track how those translate into enquiries, viewings, bookings and signed leases. Visits to the website were up over 45% compared with 2017.

We employ a "social first" marketing approach, which uses Facebook as an important channel for driving traffic to the Hello Student^® website. During the year, we refocused our marketing spend by targeting our activity and reducing wastage, helping us to cut costs and improve effectiveness. We are undertaking a review of our marketing function in order to exploit inspirational and relevant content for the Hello Student^® website and social media. In addition to Facebook, we will test and engage other social media platforms.

We made good progress with streamlining our administrative costs in 2018, including reducing the number of head office roles and using fewer consultants and contractors. The restructured finance team is providing essential support and enhanced information to the Executive Team, underpinning our granular approach to business performance and cost control.

The recruitment of a Director of Human Resources, who joined us on 2 January 2019, will enable us to bring our HR function in-house in 2019. The new function will replace our current outsourced supplier, which provides purely transactional support, and we will be able to align HR to support our business objectives.

Information Technology is another important area of focus for 2019. We currently have two managed service providers for our IT systems, with one covering head office and the other for student properties. Moving to one provider will give us a single integrated system, as well as enabling us to obtain a better price for a larger contract. Our new Head of IT joined Empiric on 1 November 2018 and will have a significant role in helping us to build the commercial platforms we need to run the business in future. A key objective will be to support the development of a revenue management system, enabling us to process bookings, rent demands and rent collection in-house, with the potential for significant savings over the current outsourced provider's costs. We plan to trial this system in a single property in November 2019, with a further roll out across the portfolio from 2020.

In addition to the new senior leaders noted above, we recruited a Head of Property during the year. Our Senior Leadership Team now comprises the Executive Directors, the Group Financial Controller and the Operations Director, HR Director and Heads of IT, FM and Property. This gives us the strength, depth and breadth of leadership we need and reflects the Group's shift to an operational business that provides key functions in-house.

Financial Performance

Revenue in 2018 was £64.2 million, up 25% from £51.2 million in 2017. The increase resulted from the acquisition of Emily Davies Hall in February, the initial contribution from developments completed in 2018, a full year of the assets acquired and developments completed in 2017, as well as increased occupancy and income growth, which benefited the final four months of the year.

Operating profit under IFRS was £53.0 million, an increase of 63% compared to the £32.5 million achieved in 2017. This included an aggregate revaluation uplift on our property portfolio at the year end of £22.4 million, net of property acquisition costs (2017: £15.8 million including a £1.1 million gain on the sale of Forthside Way in Stirling). The gross margin for the year was 62% (2017: 57%).

Administration expenses were driven down to £9.1 million in 2018, lower than our guidance (2017: £13.5 million). For 2019, we continue to expect administration costs of approximately £10 million, with the additional costs of recruitment in areas such as HR and IT offset by savings elsewhere.

Net financing costs for the year were £12.7 million, net of money market investment income and the fair value gain on interest rate swaps of £0.1 million (2017: £11.8 million and £0.1 million, respectively).

Profit before tax was £40.3 million, up 94% (2017: £20.8 million). No corporation tax was charged, as the Group fulfilled all of its obligations as a UK Real Estate Investment Trust ("REIT"). Basic earnings per share ("EPS") were therefore 6.68 pence (6.67 pence on a diluted basis) (2017: 3.84 pence and 3.83 pence (diluted)).

The Net Asset Value ("NAV") per share as at 31 December 2018 was 106.14 pence, prior to adjusting for the interim dividend for the quarter ended 31 December 2018 of 1.25 pence per share (31 December 2017: 104.37 pence, prior to adjusting for the interim dividend of 1.25 pence per share). The NAV is shown net of all property acquisition costs and dividends paid during the year.

Dividends

Quarter to	Declared	Paid	Amount (p)
31 March 2018	23 May 2018	15 June 2018	1.25
30 June 2018	21 August 2018	14 September 2018	1.25
30 September 2018	14 November 2018	7 December 2018	1.25
31 December 2018	20 February 2019	Due 22 March 2019	1.25
			5.00

The dividends declared in respect of the 2018 financial year are shown in the table above.

Of the total dividends, 1.32 pence per share was declared as property income distributions and 3.68 pence per share was declared as ordinary UK dividends (2017: 2.94 pence per share and 2.61 pence per share respectively).

Adjusted EPS is the most relevant measure of earnings when assessing dividend distributions. It increased by 72% from 1.86 pence in 2017 to 3.2 pence in 2018, to give dividend cover of 64%. Adjusted EPS is defined on page 98 in the annual report.

At 31 December 2018, the Company had distributable reserves of £58 million. We therefore continue to have substantial headroom for the payment of dividends.

At the AGM on 2 May 2019, shareholders will be asked to vote on a resolution to cancel the Company's share premium account, which stood at £467 million at 31 December 2018. When companies issue shares at a premium to their nominal value, that premium must be recorded in the share premium account. The Companies Act restricts the use of this capital which cannot, for example, be used to declare dividends or to repurchase the Company's shares. Cancelling the share premium account will release this capital, which will then be treated as realised profit. While we have no current intention to do so, this will give us increased flexibility to declare dividends or to make other distributions to shareholders. If shareholders approve the resolution, we will promptly apply for the necessary court order to confirm the cancellation.

Debt Financing

On 20 December 2018, we announced the refinancing of £86.1 million of our debt with a new ten-year, fixed rate term loan facility with Scottish Widows Limited. The new facility is secured against a portfolio of our operating assets, held as a lending group through a wholly owned subsidiary. The new facility is interest only until final repayment in 2028 and fixed at 3.196% per annum, which reduces our cost of debt to 3.26%. The facility also extends our average debt maturity profile across all our facilities to 7.6 years.

We drew down £30.6 million of the new facility on 20 December 2018, to repay an expiring facility with NatWest. We expect to draw down the remaining £55.5 million towards the end of October 2019, to repay a second expiring NatWest facility. Drawing down funds on the expiry of these facilities ensures we do not incur any break fees.

Our loan-to-value ("LTV") ratio at the year end was 30.6% (31 December 2017: 28.2%) below our threshold of 40% and our long-term target of 35%. We have changed the way we measure LTV during the year to ensure that we are consistent with our peers. Our LTV is now calculated as total drawn borrowings net of cash held and fixed term deposits divided by gross asset value.

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 engages a specialist compliance consultancy, Portman Compliance Consulting LLP, to ensure that it adheres to all of its regulatory obligations.

Change in Listing Chapter

Under the Listing Rules, Empiric is currently categorised as a premium listed closed-ended investment fund. This requires us to follow an investment policy, which limits our operational flexibility. The Board has reviewed our listing category and concluded that given Empiric's evolution from a pure real estate company to an operating business, we would be better served by being classified as a commercial company. Rather than pursuing an investment policy, we would then be able to follow a business strategy set by the Board. We do not believe this would significantly change our strategic or operational focus but it would enhance our ability to manage the portfolio, bring us into line with the majority of internally managed REITs on the London market and reduce our compliance costs.

The change of listing category requires shareholder approval and we have included a resolution to this effect for the forthcoming AGM. If approved, we expect the change to take effect from 3 June 2019. More information on the proposal can be found in the Notice of Annual General Meeting, which is available on our website, www.empiric.co.uk.

PRINCIPAL RISKS AND UNCERTAINTIES

Robust risk culture

Empiric has a strong culture of managing risk and a well-defined risk management process. This process is designed to identify, evaluate and mitigate (rather than eliminate) the significant risks we face. The process can therefore only provide reasonable, rather than absolute, assurance. 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 risk environment we operate in continues to evolve and this is reflected in the principal risks and uncertainties that are set out on the following pages.

We have expanded the definition of the risk that we focus exclusively on the student accommodation sector (SR1) to identify a number of macro factors that are or could influence the higher education sector. We have expanded financing risk (FR1) to cover capital raising in general, rather than specifically debt financing. We have also identified health and safety as a separate risk (OR2), rather than including it in the risk relating to legal and regulatory compliance (OR1). We have removed one principal risk, which was the risk that our operations and management of cost bases relied on third-party managers. This is no longer relevant, given the insourcing of our property management and FM services. We have also added a principal risk (OR3) relating to the need to keep our operating costs under control.

The trends relating to all the principal risks and uncertainties are set out in the table on pages 29 to 33 in the annual report.

Our Risk Appetite

The Group's risk appetite in relation to our portfolio is covered by our Investment Policy (see page 24 in the annual report). It contains a range of criteria, such as limits on the amount of development we can undertake at any one time, which ensures that the business is not exposed to excessive risk in respect of its assets. The Board also looks to ensure that the Group is conservatively financed, with a target LTV ratio of 35% in the long term and a maximum of 40%. In addition, the Board has zero tolerance to health and safety risk within our control and looks to go beyond its statutory requirements, as described on page 26 in the annual report.

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.

Brexit

The Board continues to review the potential impact of Brexit on the Group's business. While we do not deem it to be a principal risk at this stage, we are monitoring developments. There are two primary ways in which Brexit may affect Empiric.

First, it could reduce student numbers coming from the EU. These students currently comprise 7% of the UK undergraduate population, so any reduction is unlikely to have a material effect on overall student numbers, particularly when taking into account excess demand for university places, as discussed in the Our Market section on page 4 in the annual report. Second, Brexit may have a wider impact on universities themselves, through the loss of research funding and academics from the EU. This could make UK universities less attractive places to study. We believe our focus on the towns and cities with the most successful universities will help to mitigate this risk.

Risk		Strategy	Impact and Probability	Mitigation	Trend
Strategic Risks
SR1	We focus exclusively on the student accommodation sector. We 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. Specific factors that could affect the higher education sector, and which present both risks and opportunities for us, include: -    the risk of some universities becoming insolvent; -    the possible introduction of two-year degree courses; -    the Government's review of the level of tuition fees; -    the potential for an economic slowdown in the UK; -    the impact of Brexit - see statement above; and -    the Augar review.	1,2,3,4,5	Medium impact, medium to high probability. 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 monitor government policy and its actual or potential impact on UK, EU and international student numbers. We pay particular attention to proposals relating to Brexit and how these affect the UK as a whole, as well as specific regions. We acquire or develop well-located assets serving leading universities. Maintaining competitive rental levels should ensure high occupancy, even during periods of weaker demand. Our strategy allows us to diversify across niches that appeal to a broad range of students. For example, recently completed developments expanded our townhouse offer and we have further townhouses in the pipeline. We also seek to ensure that our developments and, where possible, acquisitions of standing assets, are fit for alternative use such as private residential, subject to planning.	Increasing
SR2	We face competition from new and existing UK and international property investors, who may have larger financial resources and/or be targeting lower investment returns.	1,2,3,4,5	High impact, low to medium probability. Increased competition may lead to an oversupply of rooms through overdevelopment, to inflated prices for existing properties or development land, or reduction of rents we can achieve.	The UK's full-time student population was 1.8 million for the 2018/19 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 undersupply 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. We continue to diversify our product and price points, for example through rolling out our townhouse format.	No change
Investment Risks
IR 1	The performance of our portfolio depends on general property and investment market conditions. There remains uncertainty in the property market following the EU referendum in June 2016, which could prevail beyond the conclusion of the Brexit negotiations, depending on their outcome.	4,5	Medium to high impact, low to medium probability. Market conditions may reduce our revenues, which would affect our ability to make distributions to shareholders. A fall in property valuations due to market conditions may reduce our GAV, which could lead to a breach of the LTV covenants in our borrowings.	Our assets are in multiple prime locations, diversifying the risk of adverse changes to the portfolio. We maintain a prudent borrowing limit of 40% of our GAV, with a target of 35%. The LTV covenants have been negotiated to be as flexible as possible. 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. 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. The higher education sector is not reliant on students from the EU, who comprise only 7% of all full-time students in the UK, compared with 77% from the UK and 16% from non-EU countries.	No change
IR 2	Our ability to achieve our Investment Policy depends on both the rental income we receive and the appreciation in property values.	2,4,5	Medium impact, medium probability. 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 is becoming increasingly diversified by product type and rental level. Where we have 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. We manage our properties directly through the Hello Student® platform and will have all facilities management in-house from 1 April 2019, giving us full control over our operational performance. In addition, we are training Hello Student® staff to deliver a high-quality service. We are evolving our procedures in areas such as debt collection, to ensure we have tight controls. Bad debts have had only a minimal impact on our profits.	No change
Development Risk
DR1	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.	3,4,5	Low to medium impact, medium probability. 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 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 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.	No change
Funding Risk
FR1	The Group may not be able to raise equity or debt on acceptable terms.	4,5	Low to medium impact, low to medium probability. Without the continued availability of equity or 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.	At the year end, the Group had headroom in its debt facilities of £60 million. The Group agreed a new ten-year fixed rate facility of £86.1 million in December 2018, extending the average maturity of its debt facilities to 7.6 years.	No change
People Risk
PR1	Our ability to achieve our investment objective depends on the performance of the Executive Directors and key staff 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	1,2,5	High impact, low to medium probability. 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 senior member of staff, and either a delay or failure in recruiting a suitable replacement, could affect the Group's performance.	The Board believes the Executive Directors are performing well, as demonstrated by the decisions to appoint Tim Attlee as CEO and to expand Lynne Fennah's remit to include the responsibilities of COO, and by the improvement in the Group's operational and financial performance in 2018. We have expanded our Senior Leadership Team below Board level, as described on pages 13 and 19 in the annual report, reducing our reliance on the Executive Directors.	No change
Operational Risks
OR1	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.	1,2,3,5	Medium impact, low probability. 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.	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.	No change
OR 2	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.	1,2,3,5	High impact, low probability. 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.	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. More information on our approach to health and safety can be found on page 26 in the annual report.	Increasing
OR 3	We need to maintain rigorous control of our operating costs.	5	Medium to high impact, medium to high probability. Operating costs that are greater than expected will reduce our profitability and our dividend cover.	The actions we have taken have materially improved our ability to manage our costs. Bringing facilities management in-house and putting all our properties onto the Hello Student® platform give us direct control of all the significant elements of our cost base, and we will drive further efficiencies in 2019. We have also made substantial improvements to the quality of our management information, enabling us to identify any cost issues quickly and take action to address them.	Decreasing
OR 4	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.	5	High impact, low probability. 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's and broker's reports on shareholdings. Our compliance processes are embedded throughout the business and in particular in the finance team. KPMG provides REIT compliance monitoring services and Portman Compliance Consulting LLP assists us with compliance matters.	No change
OR 5	We may not be able to maintain the occupancy rates of our properties or any other properties we acquire.	1,2,5	Medium to high impact, medium to high probability. 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.	We have a rigorous focus on revenue management and have brought all our properties onto the Hello Student® platform. 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. We continue to enhance our sales processes, as discussed in the Chief Executive Officer's Review on page 13 in the annual report.	Increasing
OR 6	Our business depends on the integrity and availability of our computer systems, so we must maintain high standards of cyber security. We collect and retain information regarding our business dealings, our customers and our suppliers. Securely processing, maintaining and transmitting this information are critical to our business and we must comply with restrictions on the handling of sensitive information (including employee and customer information).	1,2,3,5	Medium to high impact, low to medium probability. A major cyber security or information security breach could have a significant impact on our reputation and could result in the inability to use our computer systems or 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 backup procedures also in place. We have employed an in-house Head of IT, who joined us on 1 November 2018. His remit includes enhancing our controls and optimising 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 costeffective 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. We also provide training in compliance and the General Data Protection Regulation. The new learning management system supports training for people on our sites.	Increasing

Strategic Link

1. Customers 2. Brand 3. People and Operations 4. Buildings 5. Shareholder Outcomes

APPROVAL OF STRATEGIC REPORT

The strategic report for the year ended 31 December 2018 has been approved by the Board and was signed on its behalf by:

Tim Attlee

Chief Executive Officer | 20 March 2019

DIRECTORS' RESPONSIBILITIES

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

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

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

-       select suitable accounting policies and then apply them consistently;

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

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

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

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

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

Website Publication

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

Directors' Responsibilities Pursuant to DTR4

The Directors confirm that to the best of their knowledge:

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

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

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

Mark Pain

Chairman | 20 March 2019

GROUP STATEMENT OF COMPREHENSIVE INCOME

		Year ended	Year ended
		31 December	31 December
		2018	2017
	Note	£'000	£'000
Continuing operations
Revenue	2	64,156	51,205
Property expenses	3	(24,500)	(22,220)
Net rental income		39,656	28,985
Administrative expenses	4	(9,071)	(13,454)
Change in fair value of investment property	13	22,375	15,836
Gain on disposal of investment property		-	1,122
Operating profit		52,960	32,489
Finance cost		(12,788)	(11,882)
Finance income		104	87
Net finance costs	5	(12,684)	(11,795)
Share of results from joint ventures		-	56
Profit before income tax		40,276	20,750
Corporation tax	7	-	-
Profit for the year		40,276	20,750
Other comprehensive income
Items that will be reclassified to Statement of Comprehensive Income
Fair value gain on cash flow hedge		402	508
Total comprehensive income for the year		40,678	21,258
Earnings per share expressed in pence per share	8		3.84
Basic		6.68
Diluted		6.67	3.83

GROUP STATEMENT OF FINANCIAL POSITION

		At	At
		31 December	31 December
		2018	2017
	Note	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment	11	366	475
Intangible assets	12	1,253	1,423
Investment property - Operational assets	13	929,371	848,537
Investment property - Development assets	13	41,670	42,045
Derivative financial assets	18	-	1
Total non-current assets		972,660	892,481
Current assets
Trade and other receivables	14	13,747	27,792
Fixed term deposit	15	10,000	-
Cash and cash equivalents	15	23,473	52,721
Total current assets		47,220	80,513
Total assets		1,019,880	972,994
LIABILITIES
Current liabilities
Trade and other payables	16	28,535	22,620
Borrowings	17	55,260	20,767
Derivative financial liability	18	237	424
Deferred income	16	26,968	22,286
Total current liabilities		111,000	66,097
Non-current liabilities
Borrowings	17	268,990	277,382
Derivative financial liability	18	-	257
Total non-current liabilities		268,990	277,639
Total liabilities		379,990	343,736
Total net assets		639,890	629,258
Equity
Called up share capital	19	6,029	6,029
Share premium	20	467,268	467,268
Capital reduction reserve	21	45,458	75,602
Retained earnings		121,215	80,841
Cash flow hedge reserve		(80)	(482)
Total equity		639,890	629,258
Total equity and liabilities		1,019,880	972,994
Net Asset Value per share basic (pence)	9	106.14	104.37
Net Asset Value per share diluted (pence)	9	105.96	104.15
EPRA Net Asset Value per share (pence)	9	106.18	104.49

These financial statements were approved by the Board of Directors on 20 March 2019 and signed on its behalf by:

Lynne Fennah

Chief Financial Officer

COMPANY STATEMENT OF FINANCIAL POSITION

Company Registration Number: 08886906

		At	At
		31 December	31 December
		2018	2017
	Note	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment	11	366	475
Intangible assets	12	627	491
Investments in subsidiaries	30	8,623	12,571
Total non-current assets		9,616	13,537
Current assets
Trade and other receivables	14	202	4,267
Amounts due from Group undertakings	14	517,778	807,451
Cash and cash equivalents	15	15,955	17,091
Total current assets		533,935	828,809
Total assets		543,551	842,346
LIABILITIES
Current liabilities
Trade and other payables	16	2,198	2,130
Amounts due to Group undertakings	16	11	306,173
Total current liabilities		2,209	308,303
Non-current liabilities
Borrowings	17	9,965	9,933
Total non-current liabilities		9,965	9,933
Total liabilities		12,174	318,236
Total net assets		531,377	524,110
Equity
Called up share capital	19	6,029	6,029
Share premium	20	467,268	467,268
Capital reduction reserve	21	45,458	75,602
Retained earnings		12,622	(24,789)
Total equity		531,377	524,110
Total equity and liabilities		543,551	842,346

The Company made a profit for the year of £37,313,000 (2017: £11,296,000 loss).

These financial statements were approved by the Board of Directors on 20 March 2019 and signed on its behalf by:

Lynne Fennah

Director

GROUP STATEMENT OF CHANGES IN EQUITY

			Capital
	Called-up	Share	reduction	Retained	Cash flow	Total
	share capital	premium	reserve	earnings	hedge reserve	equity
	£'000	£'000	£'000	£'000	£'000	£'000
Year ended 31 December 2018
Balance at 1 January 2018	6,029	467,268	75,602	80,841	(482)	629,258
Changes in equity
Profit for the year	-	-	-	40,276	-	40,276
Fair value gain on cash flow hedge	-	-	-	-	402	402
Total comprehensive income for the year	-	-	-	40,276	402	40,678
Share-based payments	-	-	-	98	-	98
Dividends	-	-	(30,144)	-	-	(30,144)
Total contributions and distribution recognised directly in equity	-	-	(30,144)	98	-	(30,046)
Balance at 31 December 2018	6,029	467,268	45,458	121,215	(80)	639,890
Year ended 31 December 2017
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

COMPANY STATEMENT OF CHANGES IN EQUITY

			Capital
	Called-up	Share	reduction	Retained	Total
	share capital	premium	reserve	earnings	equity
	£'000	£'000	£'000	£'000	£'000
Year ended 31 December 2018
Balance at 1 January 2018	6,029	467,268	75,602	(24,789)	524,110
Changes in equity
Profit for the year	-	-	-	37,313	37,313
Total comprehensive income for the year	-	-	-	37,313	37,313
Share-based payments	-	-	-	98	98
Dividends	-	-	(30,144)	-	(30,144)
Total contributions and distribution recognised directly in equity	-	-	(30,144)	98	(30,046)
Balance at 31 December 2018	6,029	467,268	45,458	12,622	531,377
Year ended 31 December 2017
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

GROUP STATEMENT OF CASH FLOWS

	Year ended	Year ended
	31 December	31 December
	2018	2017
	£'000	£'000
Cash flows from operating activities
Profit before income tax	40,276	20,750
Share-based payments	98	161
Depreciation and amortisation	299	251
Finance income	(104)	(87)
Finance costs	12,788	11,882
Share of results from joint venture	-	(56)
Intangible asset impairment	248	-
Change in fair value of investment property	(22,375)	(15,836)
Gain in disposal of investment property	-	(1,122)
	31,230	15,943
Decrease/(increase) in trade and other receivables	15,451	(3,003)
Increase in trade and other payables	791	1,959
Increase in deferred rental income	4,682	6,526
	20,924	5,482
Net cash flows generated from operations	52,154	21,425
Cash flows from investing activities
Purchases of tangible fixed assets	(1)	(88)
Purchases of intangible assets	(267)	(535)
Purchase of investment property	(54,169)	(154,479)
Disposal of investment property	-	2,000
Interest received	104	87
Fixed term deposit	(10,000)	-
Net cash flows from investing activities	(64,333)	(153,015)
Cash flows from financing activities
Share issue proceeds	-	110,000
Share issue costs	-	(2,430)
Dividends paid	(30,144)	(30,596)
Bank borrowings drawn	66,801	69,446
Bank borrowings repaid	(40,630)	(9,534)
Loan arrangement fee paid	(2,058)	(2,016)
Finance cost (excluding fair value loss on derivatives)	(11,038)	(9,958)
Net cash flows from financing activities	(17,069)	124,912
Decrease in cash and cash equivalents	(29,248)	(6,678)
Cash and cash equivalents at beginning of year	52,721	59,399
Cash and cash equivalents at end of year	23,473	52,721

COMPANY STATEMENT OF CASH FLOWS

	Year ended	Year ended
	31 December	31 December
	2018	2017
	£'000	£'000
Cash flows from operating activities
Profit/(loss) before income tax	37,313	(11,296)
Share-based payments	98	161
Depreciation and amortisation	165	159
Dividends received	(44,000)	-
Gain on sale of subsidiaries	(1,571)	-
Finance income	(60)	(43)
Finance costs	285	197
	(7,770)	(10,822)
Decrease/(increase) in trade and other receivables	4,065	(3,665)
Increase in trade and other payables	68	544
	4,133	(3,121)
Net cash flows generated from operations	(3,637)	(13,943)
Cash flows from investing activities
Purchases of tangible fixed assets	(1)	(88)
Purchases of intangible assets	(191)	(401)
Investments in subsidiaries	-	(4,650)
Payments to/on behalf of subsidiaries	325,051	89,868
Repayments from subsidiaries	(292,021)	(155,498)
Interest received	60	43
Net cash flows from investing activities	32,898	(70,726)
Cash flows from financing activities
Share issue proceeds	-	110,000
Share issue costs	-	(2,430)
Dividends paid	(30,144)	(30,596)
Bank borrowings drawn	-	10,000
Loan arrangement fee paid	-	(93)
Finance cost (excluding fair value loss on derivatives)	(253)	(118)
Net cash flows from financing activities	(30,397)	86,763
Decrease in cash and cash equivalents	(1,136)	2,094
Cash and cash equivalents at beginning of year	17,091	14,997
Cash and cash equivalents at end of year	15,955	17,091

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 2018 to 31 December 2018.

The consolidated financial statements of the Group for the year ended 31 December 2018 comprise the results of Empiric Student Property plc ("the Company") and its subsidiaries and were approved by the Board for issue on 20 March 2019. The Company is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are admitted to the official list of the UK Listing Authority, a division of the Financial Conduct Authority, and traded on the London Stock Exchange. The registered address of the Company is disclosed in the Company Information.

1.2 Basis of Preparation

The consolidated financial statements of the Group for the year to 31 December 2018 comprise the results of Empiric Student Property plc (the "Company") and its subsidiaries (together, the "Group"). These financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union.

The Group's financial statements have been prepared on a historical cost basis, except for investment property and derivative financial instruments which have been measured at fair value. The consolidated financial statements are presented in Sterling which is also the Company's, 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 profit after taxation of £37,313,000 (2017: loss of £11,296,000) 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 2018 or the year ended 31 December 2017 but is derived from those accounts. The Group's statutory accounts for the year ended 31 December 2017 have been delivered to the Registrar of Companies. The Group's statutory accounts for the year ended 31 December 2018 will be delivered to the Registrar of Companies in due course. The Auditor has reported on both the December 2018 and December 2017 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.

Changes in Accounting Policies

New Standards, Interpretations and Amendments Effective from 1 January 2018

New standards impacting the Group that have been adopted in the annual financial statements for the year ended 31 December 2018, and which have given rise to changes in the Group's accounting policies are:

-       IFRS 9 Financial Instruments (IFRS 9); and

-       IFRS 15 Revenue from Contracts with Customers (IFRS 15).

Details of the impact these two standards have had are given in Note 1.5.

Details of the other new standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early are also given in Note 1.5.

1.3 Going Concern

The consolidated financial statements have been prepared on a going concern basis as discussed in the Directors' Report on page 62 in 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.

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 2018. Subsidiaries are those investee entities where control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

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

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

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

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

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

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

(b)     rights arising from other contractual arrangements; and

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

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

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

Financial Assets

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

Fair Value Through Profit or Loss

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

Amortised Cost

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

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

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

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

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

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

Financial Liabilities

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

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

Fair Value Through Profit or Loss

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

Other Financial Liabilities

Other financial liabilities include the following items:

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

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

Hedge Accounting

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

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

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

Cash Flow Hedges

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

Intangible Assets

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

Amortisation has been charged to the 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 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 when control is passed to the purchaser, expected to be on legal completion. The difference between the net disposal proceeds and the carrying amount of the asset would result in either gains or losses at the retirement or disposal of investment property. Any gains or losses are recognised in the Statement of Comprehensive Income in the period of retirement or disposal.

Operating Leases

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

Property, Plant and Equipment

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

Depreciation has been charged to the 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 Statement of Comprehensive Income due to its operating nature.

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

Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the 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 UK.

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 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 Statement of Comprehensive Income over the remaining vesting period. National Insurance obligations with respect to equity-settled share-based payments awards are accrued over the vesting period.

Share Capital

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

Taxation

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

Taxation in respect of profits and losses outside of the property rental business comprises current and deferred taxes. Taxation is recognised in the 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 New Standards Issued and Effective from 1 January 2018

The Group has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2018:

-       IFRS 9 Financial Instruments

-       IFRS 15 Revenue from Contracts with Customers

-       Classification and Measurement of Share-based Payment Transactions -   Amendments to IFRS 2

The Group had to change its accounting policies following the adoption of IFRS 9 and IFRS 15. As a result of the transition there was no requirement to make any retrospective amendments and the changes are not expected to significantly affect the current or future periods.

IFRS 9

IFRS 9 has replaced IAS 39 Financial Instruments: Recognition and Measurement, and has had the following effect on the Group.

-       Management has reviewed the requirements of IFRS 9. The Group's principal financial assets comprise interest rate derivatives which will continue to be measured at fair value, and trade receivables, which will continue to be measured at amortised cost. The following change has been identified:

-       The Group applied the expected credit loss model when calculating impairment losses on its financial assets measured at amortised cost (such as trade and other receivables). This resulted in greater judgement due to the need to factor in forward-looking information when estimating the appropriate amount of provisions. To measure expected credit losses the Group considered the probability of a default occurring over the contractual life of its trade receivables. This resulted in no change in impairment provisions so there is no retrospective adjustment.

1.6 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 16 - Leases (effective year ending 31 December 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 been quantified and will not be material to the Group.

As Lessor

The Group's accounting for lessors will not materially change as the Group only operates 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 consider that these amendments will not materially impact the financial statements.

2. REVENUE

	Group
	Year ended	Year ended
	31 December	31 December
	2018	2017
	£'000	£'000
Student rental income	62,454	49,450
Commercial rental income	1,702	1,755
Total revenue	64,156	51,205

3. PROPERTY EXPENSES

	Group
	Year ended	Year ended
	31 December	31 December
	2018	2017
	£'000	£'000
Direct site costs	10,413	8,563
Technology services	1,025	1,001
Site office and utilities	8,200	8,500
Cleaning and service contracts	2,591	2,611
Repairs and maintenance	2,271	1,545
Total property expenses	24,500	22,220

4. ADMINISTRATIVE EXPENSES

	Group
	Year ended	Year ended
	31 December	31 December
	2018	2017
	£'000	£'000
Salaries and Directors' remuneration	3,372	4,256
Legal and professional fees	2,708	3,642
Other administrative costs	2,012	2,295
IT expenses	471	414
Irrecoverable VAT	-	1,578
	8,563	12,185
Auditor's fees
Fees payable for the audit of the Group's annual accounts	210	200
Fees payable for the review of the Group's interim accounts	40	40
Fees payable for the audit of the Group's subsidiaries	125	125
Total auditor's fees	375	365
Abortive acquisition costs	133	904
Total administrative expenses	9,071	13,454

5. NET FINANCE COST

	Group
	Year ended	Year ended
	31 December	31 December
	2018	2017
	£'000	£'000
Finance costs
Fair value loss on interest rate cap	1	18
Interest expense on bank borrowings	11,037	10,330
Amortisation of loan transaction costs	1,750	1,534
	12,788	11,882
Finance income
Fair value gain on interest rate swap	42	43
Interest received on bank deposits	62	44
	104	87
Net finance cost	12,684	11,795

6. EMPLOYEES AND DIRECTORS

	Group		Company
	Year ended	Year ended	Year ended	Year ended
	31 December	31 December	31 December	31 December
	2018	2017	2018	2017
	£'000	£'000	£'000	£'000
Total wages and salaries	4,954	5,353	2,455	3,479
Less: Hello Student® wages and salaries included in property expenses	(2,499)	(2,005)	-	-
Total wages and salaries included in administrative expenses	2,455	3,348	2,455	3,479
Pension costs	216	245	216	114
Cash bonus	243	91	243	91
Share-based payments	98	161	98	161
National Insurance	360	411	360	411
	3,372	4,256	3,372	4,256

The average monthly number of employees of the Group during the year was as follows:

	Group		Company
	Year ended	Year ended	Year ended	Year ended
	31 December	31 December	31 December	31 December
	2018	2017	2018	2017
	Number	Number	Number	Number
Management	4	4	4	4
Administration - ESP	22	21	22	21
Administration - Hello Student®	222	113	-	-
	248	138	26	25
			Group and Company
			Year ended	Year ended
			31 December	31 December
			2018	2017
Directors' remuneration			£'000	£'000
Salaries and fees			903	1,147
Pension costs			95	131
Cash bonus			145	38
Share-based payments			28	161
Payments for loss of office			-	690
			1,171	2,167

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

7. CORPORATION TAX

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

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

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

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

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

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

The Group met all of the relevant REIT conditions for the year ended 31 December 2018.

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

	Group
	Year ended	Year ended
	31 December	31 December
	2018	2017
	£'000	£'000
Current tax
Income tax charge/(credit) for the year	-	-
Adjustment in respect of prior year	-	-
Total current income tax charge/(credit) in the income statement	-	-
Deferred tax
Total deferred income tax charge/(credit) in the income statement	-	-
Total current income tax charge/(credit) in the income statement	-	-

The tax assessed for the year is lower than the standard rate of corporation tax in the year.

	Group
	Year ended	Year ended
	31 December	31 December
	2018	2017
	£'000	£'000
Profit for the year	40,276	20,750
Profit before tax multiplied by the rate of corporation tax in the UK of 19% (2017: 19.25%)	7,652	3,994
Exempt property rental profits in the year	(4,836)	(3,526)
Exempt property revaluations in the year	(4,251)	(3,049)
Effects of:	-
Non-allowable expenses	83	310
Residual property revaluations in the year	-	-
Unutilised current year tax losses	1,352	2,271
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 amounting to £1,352,000 (31 December 2017: £2,271,000) in the current year 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 totalling £3,823,000 (2017: £3,222,000) has not been recognised in respect of such losses.

8. EARNINGS PER SHARE

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

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.

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

Adjusted earnings is a performance measure used by the Board to assess the Group's dividend payments. Licence fees, development rebates, 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 period of completed construction during the period, multiplied by the total licence fee receivable on a given forward funded asset.

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

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

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

Reconciliations are set out below:

			Calculation	Calculation
	Calculation of	Calculation of	of EPRA	of EPRA	Calculation of
	basic EPS	diluted EPS	basic EPS	diluted EPS	adjusted EPS
	£'000	£'000	£'000	£'000	£'000
Year to 31 December 2018
Earnings	40,276	40,276	40,276	40,276	40,276
Adjustment to include licence fee receivable on forward funded developments in the year	-	-	-	-	1,406
Adjustment to include discounts on acquisition due to rental guarantees in the year	-	-	-	-	5
Adjustments to remove:
Changes in fair value of investment properties (Note 13)	-	-	(22,375)	(22,375)	(22,375)
Changes in fair value of interest rate derivatives (Note 18)	-	-	1	1	1
Earnings/adjusted earnings	40,276	40,276	17,902	17,902	19,313
Weighted average number of shares ('000)	602,888	602,888	602,888	602,888	602,888
Adjustment for employee share options ('000)	-	984	-	984	-
Total number shares ('000)	602,888	603,872	602,888	603,872	602,888
Per-share amount (pence)	6.68	6.67	2.97	2.96	3.20
Year to 31 December 2017
Earnings	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 18)	-	-	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

9. NET ASSET VALUE PER SHARE (NAV)

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

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

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

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

Net asset values have been calculated as follows:

	Group
	31 December	31 December
	2018	2017
	£'000	£'000
Net assets per Statement of Financial Position	639,890	629,258
Adjustment to exclude the fair value loss of financial instruments	238	700
EPRA NAV	640,128	629,958
Adjustment to include the fair value of debt	(13,163)	(11,399)
Adjustment to include the fair value loss of financial instruments	(238)	(700)
EPRA NNNAV	626,727	617,859
Ordinary shares	Number	Number
Issued share capital	602,887,740	602,887,740
Issued share capital plus employee options	603,871,448	604,175,057
	Pence	Pence
NAV per share basic	106.14	104.37
NAV per share diluted	105.96	104.15
EPRA NAV per share basic	106.18	104.49
EPRA NAV per share diluted	106.00	104.27
EPRA NNNAV per share basic	103.95	102.48
EPRA NNNAV per share diluted	103.78	102.26

10. DIVIDENDS PAID

	Group and Company
	Year ended	Year ended
	31 December	31 December
	2018	2017
	£'000	£'000
Interim dividend of 1.5 pence per ordinary share in respect of the quarter ended 31 December 2016	-	7,770
Interim dividend of 1.5 pence per ordinary share in respect of the quarter ended 31 March 2017	-	7,645
Interim dividend of 1.5 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
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 31 December 2017	7,536	-
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 31 March 2018	7,536	-
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 30 June 2018	7,536	-
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 30 September 2018	7,536	-
	30,144	30,596

On 20 February 2019, the Company announced the declaration of a final interim dividend in respect of the financial year ended 31 December 2018, of 1.25 pence per ordinary share amounting to £7.536 million, to be paid on 22 March 2019 to ordinary shareholders.

11. FIXED ASSETS

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

12. INTANGIBLE ASSETS

	Group				Company
	Hello Student®	Hello Student®
	application	website	NAVision		NAVision
	development	development	development	Total	development	Total
Year ended 31 December 2018	£'000	£'000	£'000	£'000	£'000	£'000
Costs
As at 1 January 2018	311	802	528	1,641	528	528
Additions	-	76	191	267	191	191
As at 31 December 2018	311	878	719	1,908	719	719
Amortisation
As at 1 January 2018	16	165	37	218	37	37
Charge for the year	47	87	55	189	55	55
Write-off	248	-	-	248		-
As at 31 December 2018	311	252	92	655	92	92
Net book value
As at 31 December 2018	-	626	627	1,253	627	627
	Group				Company
	Hello Student®	Hello Student®
	application	website	NAVision		NAVision
	development	development	development	Total	development	Total
Year ended 31 December 2017	£'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

13. INVESTMENT PROPERTY

	Group
	Investment	Investment	Total	Properties	Total
	properties	properties	operational	under	investment
	freehold	long leasehold	assets	development	property
Year ended 31 December 2018	£'000	£'000	£'000	£'000	£'000
As at 1 January 2018	735,355	113,182	848,537	42,045	890,582
Property additions	13,180	7,832	21,012	37,072	58,084
Transfer of completed developments	42,055	-	42,055	(42,055)	-
Change in fair value during the year	6,050	11,717	17,767	4,608	22,375
As at 31 December 2018	796,640	132,731	929,371	41,670	971,041
	Group
	Investment	Investment	Total	Properties	Total
	properties	properties	operational	under	investment
	freehold	long leasehold	assets	development	property
	£'000	£'000	£'000	£'000	£'000
Year ended 31 December 2017
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

During the year £10,171,000 (31 December 2017: £17,367,000) of additions related to subsequent expenditure recognised in the carrying value of operating 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 2018, in accordance with the Appraisal & Valuation Standards of RICS, on the basis of market value. Properties have been valued on an individual basis. This value has been incorporated into the financial statements.

The valuation of all property assets uses market evidence and 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 between the fair value of the investment property per the Consolidated Group Statement of Financial Position and investment property per the independent valuation performed in respect of each period end.

	Group
	As at	As at
	31 December	31 December
	2018	2017
	£'000	£'000
Value per independent valuation report	970,570	890,110
Add:
Head lease	471	472
Fair value per Group Statement of Financial Position	971,041	890,582

Fair Value Hierarchy

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

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

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

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

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

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

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

(a)     Unobservable input: rental income

The rent at which space could be let in the market conditions prevailing at the date of valuation.
Range £92-£343 per week (31 December 2017: £95-£347 per week).

(b)     Unobservable input: rental growth

The estimated average increase in rent based on both market estimations and contractual arrangements.
Assumed growth of 2.63% used in valuations (31 December 2017: 3.08%).

(c)     Unobservable input: net initial yield

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

Range: 4.50%-6.75% per week (31 December 2017: 4.65%-6.30%).

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

	-3% Change in	+3% Change in	-0.25% Change	+0.25% Change
	rental income	rental income	in yield	in 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)

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

14. TRADE AND OTHER RECEIVABLES

	Group		Company
	31 December	31 December	31 December	31 December
	2018	2017	2018	2017
	£'000	£'000	£'000	£'000
Trade receivables	704	470	-	-
Other receivables	2,112	2,412	90	154
Amounts owed by property managers	6,696	10,777	-	3,881
Prepayments	4,170	11,318	105	225
VAT recoverable	65	2,815	7	7
	13,747	27,792	202	4,267
Amounts due from Group undertakings	-	-	517,778	807,451
	13,747	27,792	517,980	811,718

At 31 December 2018, there were no material trade receivables overdue at the year end, and no aged analysis of trade receivables has been included. The carrying value of trade and other receivables classified at amortised cost approximates fair value.

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

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

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

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

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

15. FIXED TERM DEPOSITS AND CASH AND CASH EQUIVALENTS

Fixed term deposits are amounts held as part of our refinancing. This deposit is interest bearing and maturing in October 2019.

The amounts disclosed on the Statement of Cash Flow as cash and cash equivalents are in respect of the following amounts shown in the Statement of Financial Position:

	Group		Company
	31 December	31 December	31 December	31 December
	2018	2017	2018	2017
	£'000	£'000	£'000	£'000
Cash and cash equivalents	23,473	52,721	15,955	17,091

16. TRADE AND OTHER PAYABLES

	Group		Company
	31 December	31 December	31 December	31 December
	2018	2017	2018	2017
	£'000	£'000	£'000	£'000
Trade payables	2,723	2,376	-	484
Other payables	2,408	3,950	146	274
Accrued expenses	23,013	16,122	1,661	1,200
Directors' bonus accrual	391	172	391	172
	28,535	22,620	2,198	2,130
Amounts owed to Group undertakings	-	-	11	306,173
	28,535	22,620	2,209	308,303

At 31 December 2018, there was deferred rental income of £26,968,000 (31 December 2017: £22,286,000) which was rental income that had been booked that relates to future periods.

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

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

17. BANK BORROWINGS

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

	Group
	Bank borrowings	Bank borrowings	Total	Bank borrowings	Bank borrowings	Total
	drawn	undrawn	31 December	drawn	undrawn	31 December
	31 December 2018	31 December 2018	2018	31 December 2017	31 December 2017	2017
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2018	303,829	86,201	390,030	243,917	66,113	310,030
Bank borrowings from new facilities in the year	30,600	-	30,600	10,000	70,000	80,000
Bank borrowings assumed on acquisition of joint venture	-	-	-	9,534	-	9,534
Bank borrowings drawn in the year	36,201	(26,201)	10,000	49,912	(49,912)	-
Bank borrowings repaid during the year	(40,630)	-	(40,630)	(9,534)	-	(9,534)
At 31 December 2018	330,000	60,000	390,000	303,829	86,201	390,030

The Group has entered into one new separate banking facility during the year, fully repaid another facility and started to draw down on one existing available facility. A total of £66,801,000 (31 December 2017: £59,912,000) of additional debt was drawn and a total of £40,630,000 was repaid during the year. There is an undrawn debt facility available of £60,000,000 at 31 December 2018 (31 December 2017: £86,201,000).

The weighted average term to maturity of the Group's debt as at the year end is 7.6 years (31 December 2017: 6.71 years).

Bank borrowings are secured by charges over individual investment properties held by certain asset-holding subsidiaries. These assets have a fair value of £853,220,000 at 31 December 2018 (31 December 2017: £829,765,000). In some cases, the lenders also hold charges over the shares of the subsidiaries and the intermediary holding companies of those subsidiaries.

The Company has a £10 million facility (2017: £10 million) repayable in two years, fully drawn. The balance net of loan arrangement fees carried as at 31 December 2018 was £9,965,000 (31 December 2017: £9,933,000).

The Group entered into a new facility during the year for £30,600,000 which it fully drew down. As at 31 December 2018 there were £1,075,000 of unamortised loan fees. The loan is due to be repaid during the year ended 31 December 2028.

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	31 December
	2018	2017
Non-current	£'000	£'000
Balance brought forward	282,639	243,917
Total bank borrowings in the year	66,801	69,446
Bank borrowings becoming non-current in the year	21,190	-
Less: Bank borrowings becoming current in the year	(55,500)	(21,190)
Less: Bank borrowings repaid in the year	(40,630)	(9,534)
Bank borrowings drawn: due in more than one year	274,500	282,639
Less: Unamortised costs	(5,510)	(5,257)
Bank borrowings due in more than one year	268,990	277,382
	Group
	31 December	31 December
	2018	2017
Current	£'000	£'000
Balance brought forward	21,190	-
Total bank borrowings in the year	9,440	-
Less: Bank borrowings repaid in the year	(30,630)	-
Bank borrowings becoming current in the year	55,500	21,190
Bank borrowings drawn: due in less than one year	55,500	21,190
Less: Unamortised costs	(240)	(423)
Bank borrowings due in less than one year	55,260	20,767

Maturity of Bank Borrowings

	Group
	31 December	31 December
	2018	2017
	£'000	£'000
Repayable between one and two years	42,800	55,500
Repayable between two and five years	10,000	36,039
Repayable in over five years	221,700	191,100
Bank borrowings drawn: due in more than one year	274,500	282,639

Each of the Group's facilities has an interest charge which is payable quarterly. Four of the facilities have an interest charge that is based on a margin above LIBOR whilst the other five facility interest charges are fixed at 3.97%, 3.52%, 3.24%, 3.64% and 3.20%. The weighted average margin payable by the Group on its debt portfolio as at the year end was 3.26% (31 December 2017: 3.25%).

18. 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 24 October 2014 a derivative swap contract was taken out to hedge the interest rate risk on long-term debt. The change in valuation of this derivative at 31 December 2018 was £0.5 million gain (31 December 2017: £0.5 million gain) recognised in Other Comprehensive Income. £nil of this derivative liability has been recognised as a non-current liability (31 December 2017: £0.3 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	31 December
	2018	2017
	£'000	£'000
Non-current assets: Interest rate derivatives - cap	-	1
Current liabilities: Interest rate derivatives - swap	(237)	(424)
Non-current liabilities: Interest rate derivatives - swap	-	(257)

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

	31 December	31 December
	2018	2017
	£'000	£'000
Interest rate cap premium - opening fair value	1	19
Changes in fair value of interest rate derivatives	(1)	(18)
Closing fair value	-	1
	31 December	31 December
	2018	2017
	£'000	£'000
Total bank borrowings	330,000	303,829
Total fixed borrowings	(221,700)	(191,100)
Total floating rate borrowings	108,300	112,729
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	32.8%	31.5%

Fair Value of Debt

	Group
			Fair value
	Fair value	Book value	less book value
	£'000	£'000	£'000
At 31 December 2018	230,677	217,514	13,163
At 31 December 2017	199,039	187,640	11,399

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 that 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	Significant	Significant
			in active	observable	unobservable
			markets	inputs	inputs
			(Level 1)	(Level 2)	(Level 3)
Assets/(liability) measured at fair value:	Date of valuation	£'000	£'000	£'000	£'000
	31 December 2018
Interest rate derivative - cap		-	-	-	-
Interest rate derivative - swap		(237)	-	(237)	-
	31 December 2017
Interest rate derivative - cap		1	-	1	-
Interest rate derivative - swap		(681)	-	(681)	-

The fair value of these contracts is recorded in the Group 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 year.

19. SHARE CAPITAL

Ordinary Shares Issued and Fully Paid at 1 Pence Each

	Group and Company		Group and Company
	31 December	31 December	31 December	31 December
	2018	2018	2017	2017
	Number	£'000	Number	£'000
Balance brought forward	602,887,740	6,029	501,279,071	5,013
Issue in relation to an equity issuance	-	-	100,917,432	1,009
Issue in relation to LTIP equity issuance	-	-	691,237	7
Balance carried forward	602,887,740	6,029	602,887,740	6,029

There have been no share issues during the year.

20. SHARE PREMIUM

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

	Group and Company
	31 December	31 December
	2018	2017
	£'000	£'000
Balance brought forward	467,268	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	467,268

21. CAPITAL REDUCTION RESERVE

	Group and Company
	31 December	31 December
	2018	2017
	£'000	£'000
Balance brought forward	75,602	106,198
Less interim dividends declared and paid per Note 10	(30,144)	(30,596)
Balance carried forward	45,458	75,602

The capital reduction reserve account is a distributable reserve.

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

22. LEASING AGREEMENTS

Future total minimum lease payments under non-cancellable operating leases fall due as follows:

On Office Space Currently Rented

	Group
	31 December	31 December
	2018	2017
	£'000	£'000
Less than one year	361	361
Between one and five years	1,446	1,446
More than five years	994	1,355
Total	2,801	3,162

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

	Group
	31 December	31 December
	2018	2017
	£'000	£'000
Less than one year	45,564	41,180
Between one and five years	9,757	12,648
More than five years	10,630	11,887
Total	65,951	65,715

The above relates to commercial leases and nomination agreements with UK universities in place as at 31 December 2018. The impact of student leases for the forthcoming academic year signed by 31 December 2018 have not been included as the certainty of income does not arise until the tenant takes occupation of the accommodation.

23. CONTINGENT LIABILITIES

There were no contingent liabilities at 31 December 2018 (31 December 2017: £nil).

24. CAPITAL COMMITMENTS

The Group had capital commitments relating to forward funded developments totalling £37,950,000 at 31 December 2018 (31 December 2017: £22,821,000).

25. RELATED PARTY DISCLOSURES

Key Management Personnel

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

Share Capital

Share transactions of related parties during the year ended 31 December 2018 were as follows:

Name	How related	No of shares	Transaction	Date
Mark Pain	Director	100,000	Acquisition	21 August 2018

Share-based Payments

On 1 May 2018, nil-cost options were granted to Executive Directors in the amounts of:

Lynne Fennah           369,976 shares

On 23 August 2018, Executive Directors exercised vested nil-cost options in the amounts of:

Lynne Fennah    69,046 shares

During the year the Remuneration Committee exercised its discretion and lapsed any outstanding payments to Michael Enright.

Details of the shares granted and lapsed are outlined in Note 27 - Share-based Payments.

Dividends paid to Directors

Dividends amounting to £52,445 (31 December 2017: £145,947) were paid to Directors during the year.

26. SUBSEQUENT EVENTS

Since the year end there have been no subsequent events to report.

27. 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.

Issued

On 1 May 2018, the Company granted Lynne Fennah, the Company's Chief Financial Officer, nil-cost options over a total of 26,115 in the Company ("ordinary shares") relating to the deferred shares element of the annual bonus award for the financial period to 31 December 2017 (the "Annual Bonus Award") as well as 343,861 ordinary shares pursuant to the LTIP pursuant to the 2018 financial year.

On 23 August 2018, the Company granted Lynne Fennah, an Executive Director of the Company, nil-cost options over a total of 69,046 ordinary shares in the Company ("ordinary shares") pursuant to the LTIP.

Lapsed Awards

Michael Enright was the Chief Financial Officer until March 2017. As part of his termination agreement, he retained the nil-cost share options relating to the annual deferred annual bonus awards from 2015 and 2016. In view of the performance issues which were not apparent when Michael Enright's employment ceased, the Committee exercised its discretion and lapsed these outstanding awards.

At the year end Tim Attlee had vested but not exercised 129,253 nil-cost options. The weighted average remaining contractual life of these options was 1.6 years (2017: 1.5 years).

During the year to 31 December 2018, the amount recognised relating to the options was £98,000.

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

	31 December	31 December	31 December	30 June
	2018	2017	2016	2016
Outstanding number brought forward	1,477,817	3,913,420	2,880,391	1,220,423
Granted during the year	439,022	207,198	1,033,029	1,659,968
Vested and exercised during the year	(139,325)	(691,237)	-	-
Lapsed during the year	(725,806)	(1,951,564)	-	-
Outstanding number carried forward	1,051,708	1,477,817	3,913,420	2,880,391

The fair value for the nil-cost options under the 2017-2020 LTIP Awards will be fixed at 100% of the share price when the respective awards were granted.

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

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

		Annual Bonus Award
(a)	Weighted average share price at grant date	£0.85
(b)	Exercise price	£nil
(c)	Contractual life	3 years
(d)	Expected volatility	15.29%
(e)	Expected dividend yield	7.10%
(f)	Risk-free rate	1.17%
(g)	The volatility assumption is based on a statistical analysis of daily share prices of comparator companies over the last three years.
(h)	The TSR performance conditions have been considered when assessing the fair value of the options.

28. FINANCIAL RISK MANAGEMENT

Financial Instruments

The Group's principal financial assets and liabilities are those which arise directly from its operations: trade and other receivables, trade and other payables and cash and cash equivalents.

Set out below is a comparison by class of the carrying amounts and fair value of the Group's financial instruments that are shown in the financial statements:

Risk Management

The 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.

(b) Credit Risk

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

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

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

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

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

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

(i) Tenant Receivables

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

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

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

Credit ratings (Moody's)	Long term	Outlook
AIB Group	Baa3	Positive
Canada Life	Aa3	Stable
Mass Mutual	Aa2	Negative
Royal Bank of Scotland Plc	Baa2	Positive
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 that 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
		Less than 3	3 to 12	1 to 5
	On demand	months	months	years	> 5 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 December 2018
Bank borrowings and interest	-	3,183	65,048	87,895	262,435	418,561
Swap derivatives	-	94	282	-	-	376
Trade and other payables	-	28,535	-	-	-	28,535
	-	31,812	65,330	87,895	262,435	447,472
	Group
		Less than 3	3 to 12	1 to 5
	On demand	months	months	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
	Company
		Less than 3	3 to 12	1 to 5
	On demand	months	months	years	> 5 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 December 2018
Bank borrowings and interest	-	68	203	10,046	-	10,317
Swap derivatives	-	-	-	-	-	-
Trade and other payables	-	2,198	-	-	-	2,198
	-	2,266	203	10,046	-	12,515
	Company
		Less than 3	3 to 12	1 to 5
	On demand	months	months	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

29. 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 maintain sustainable returns for shareholders.

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

30. SUBSIDIARIES

Those subsidiaries listed on the following pages are considered to be all subsidiaries of the Company at 31 December 2018, 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.

The only subsidiaries exempt from audit are those which are dormant.

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

	Company
	31 December	31 December
	2018	2017
	£'000	£'000
As at 1 January 2017	12,571	5,118
Additions in the year	8,622	7,453
Disposals	(12,570)	-
Balance at 31 December 2018	8,623	12,571

During the year there were a number of subsidiaries which moved around the Group, due to reorganisations relating to debt, these were all non cash movements.

	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 St Mary's) 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 Wndsr House) Leasing Limited	Dormant	100%	Property Leasing
Empiric (Cardiff Wndsr House) Limited	Active	100%	Property Investment
Empiric (Centro Court) Limited	Active	100%	Property Investment
Empiric (Claremont Newcastle) Limited	Active	100%	Property Investment
Empiric (College Green) Limited	Active	100%	Property Investment
Empiric (Developments) Limited	Active	100%	Development Management
Empiric (Durham St Margarets) Limited	Active	100%	Property Investment
Empiric (Edge Apartments) Limited	Active	100%	Property Investment
Empiric (Edinburgh KSR) Limited	Active	100%	Property Investment
Empiric (Edinburgh South Bridge) Limited	Active	100%	Property Investment
Empiric (Egham High Street) Limited	Dormant	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 Mary Morris) Limited	Dormant	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 (Norwich Edwin Gooch) Limited	Dormant	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 (Southampton Emily Davies) 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

 

END

 

 

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