REG - Empiric Student Prop - BUSINESS AND TRADING UPDATE

Empiric Student PropertyAnnouncement

31/10/2022 07:01

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RNS Number : 5614E  Empiric Student Property PLC  31 October 2022

Empiric Student Property plc

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

BUSINESS AND TRADING UPDATE

 

Strong operational metrics and resilience of higher education sector underpin
outlook

 

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

 

Highlights

 

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

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

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

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

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

 

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

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

 

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

 

Academic year 2022/23

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

 

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

 

Developments

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

 

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

 

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

 

Disposals

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

 

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

 

Debt

 

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

 

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

 

Dividends

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

 

Change in Chief Financial & Sustainability Officer

 

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

 

Financial Year 2023

 

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

 

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

 

 

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

 Empiric Student Property plc                                 (via FTI Consulting below)
 Duncan Garrood (Chief Executive Officer)
 Donald Grant (Chief Financial & Sustainability Officer)

 Jefferies International Limited                              020 7029 8000
 Tom Yeadon
 Andrew Morris

 Peel Hunt LLP                                                020 7418 8900
 Capel Irwin

 Carl Gough

 FTI Consulting                                               020 3727 1000

 Dido Laurimore                                               empiric@fticonsulting.com (mailto:empiric@fticonsulting.com)

 Eve Kirmatzis

The Company's LEI is 213800FPF38IBPRFPU87.

 

Further information on Empiric can be found on the Company's website at
www.empiric.co.uk (http://www.empiric.co.uk/) .

 

Notes:

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

 

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

 

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