REG - Empiric Student Prop - Business and Trading Update

Empiric Student PropertyAnnouncement

02/11/2023 07:00

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RNS Number : 1028S  Empiric Student Property PLC  02 November 2023

Empiric Student Property plc

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

 

BUSINESS AND TRADING UPDATE

 

Strong rental growth underpins confident outlook and increased dividend target

 

Empiric Student Property plc (ticker: ESP), the owner and operator of premium,
studio-led, student accommodation across the UK, is pleased to provide a
business and trading update as at 02 November 2023.

 

Highlights

 

·      99% revenue occupancy achieved for academic year 2023/24

·      Like-for-like growth in average weekly rents for academic year
2023/24 at 10.5%

·      EPRA EPS of approximately 4.0 pence per share anticipated for
financial year 2023

·      Dividend target for 2023 financial year increased to 3.5p, 27%
ahead of 2022

·      Minimum like-for-like rental growth of 5.0% targeted for academic
year 2024/25

 

 

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

"The booking cycle for academic year 2023/24 has exceeded all expectations,
with the estate effectively full and like-for-like rental growth above ten per
cent. Notwithstanding the inflationary backdrop, this is a superb result
demonstrating the increasing quality of our portfolio, customer service
proposition and the power of our operating platform, providing confidence in
outlook and dividend expectations.

 

"Underpinned by the continued attractiveness of the UKs Top Tier Universities,
the demand for high quality student accommodation remains strong. With demand
and supply imbalance expected to continue for the foreseeable future, our
premium accommodation offering and high quality customer service, positions us
well for growth within this resilient and growing market."

 

 

Academic year 2023/24

Building on our best ever re-booker campaign, the booking cycle for academic
year 2023/24 has tracked significantly ahead of the prior year. For the second
year running, our accommodation is effectively full with revenue occupancy
ahead of target at 99 per cent (AY 2022/23: 99 per cent).

 

Like-for-like rental growth of 10.5 per cent has been achieved. The revision
upwards is largely the result of a higher level of late cancellation and
rebooking activity, crystalising further the benefits of dynamic pricing.

 

The Group continues to have a greater proportion of UK students than in
previous years, with demographics largely unchanged since our half year
report. UK students represent 50 per cent of all bookings, the balance
comprising 31 per cent Chinese and 19 per cent other international.

 

Disposals and refurbishments

Steady progress continues to be made on disposals and refurbishments. The sale
of Grosvenor Apartments, London completed as anticipated in August 2023,
generating gross proceeds of £7.0 million. We remain under offer on
properties valued at over £25.0 million.

 

The annual refurbishment cycle was completed to plan, delivering 254 newly
refurbished beds and associated amenity areas across six core locations. In
addition, our second Post-Grad exclusive site at Talbot Studios in Nottingham
has been completed and welcomed students from September 2023.

 

As previously announced, we took the decision to close one of our larger
properties, Brunswick Apartments, Southampton for the duration of the 2023/24
academic year. Works have now begun on this 173 bed property which will reopen
to students from September 2024 following a full room and amenity
refurbishment, alongside fire safety, energy efficiency and decarbonisation
works.

 

In response to recent concerns surrounding the use of Reinforced Autoclaved
Aerated Concrete ("RAAC"), we commissioned external surveyors and structural
engineers to assist with a portfolio wide review based on construction type
and building age. Onsite inspections have now been undertaken and we have not
identified this material at any of our highest risk properties.

 

Acquisitions and growth

 

Properties valued at over £40.0 million are under offer in Top Tier
university cities, which are complementary to our core strategy and in
locations where we have an existing operational presence.

 

As announced in our half year report, the Board has continued to explore
opportunities to accelerate the roll out of its Post-Graduate product. PwC on
the Board's behalf, has commenced conversations with appropriate parties to
establish suitable partnership interest as well as the potential, and
appropriate timing, for a joint venture as a means to facilitate continued
growth.

 

Debt & liquidity

 

As at 30 September 2023, property LTV was 28.2 per cent (based on 30 June 2023
valuations) with a weighted average cost of debt of 4.4 per cent, and a
weighted average term to maturity of 4.2 years. Cash and available facilities
totalled £109.5 million.

 

As previously announced, we expect to amalgamate and refinance all 2024 and
2025 maturities in early 2024. Following refinancing, based on current forward
interest rates, we anticipate the weighted average cost of debt to be within
the range of 4.5 to 4.7 per cent

 

Dividends

With EPRA earnings of approximately 4.0 pence per share anticipated for the
financial year ended 31 December 2023, the Board now confirms its intention to
increase its dividend target.

 

Alongside full year results in March 2023, the Company set out a dividend
target for the year of 3.25 pence per share, an 18 per cent increase on the
full year dividend paid in respect of the 2022 financial year. With stronger
than expected growth in like-for-like rents achieved and occupancy having
exceeded our target of 97 per cent, sufficient confidence exists to increase
the full year target to 3.5 pence per share. If achieved, this would represent
a 27 per cent increase in dividends paid, year on year.

 

The dividend will continue to be paid to shareholders quarterly. As such,
today we have declared a 0.9375 pence per share third quarter dividend, in
line with this revised target.

 

Key appointments

 

Joanne Pollard joined the business in October 2023 as Chief Operating Officer,
a newly created role to further support the business and its operational
platform. Joanne joins with over ten years' experience in student housing and
the wider living sector. Most recently she worked for Prime Student Living,
where she worked as Managing Director for three years.

 

Also joining in October 2023 as Wellbeing Manager was Frances Abbott. Frances
has held a number of operational and wellbeing-focused positions over the last
decade, and brings expertise as an accredited Mental Health First Aid
Instructor and Sexual Violence Liaison Officer. Frances joined from Unite
Students where she worked as Regional Student Support Manager.

 

Joanne and Frances's appointments further support the Group's service
proposition and our ability to provide an outstanding level of service to
students, ensuring residents are safe, happy and healthy throughout their stay
with us.

 

Financial year 2024

 

For the academic year 2024/25 we expect revenue occupancy to remain strong. We
will target like-for-like weekly rental growth of at least 5 per cent,
offsetting the impact of ongoing inflationary pressure and we expect to
deliver a gross margin above 70 per cent.

 

Further guidance will be provided alongside our annual results in March 2024.

 

 

ENDS

 

 

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. The Company is classified as a commercial company listed under
chapter 6 of the UK Listing rules and as such is not an alternative investment
fund ("AIF") for the purposes of the Alternative Investment Fund Managers
Directive ("AIFMD") and is not required to provide investors with a Key
information Document ("KID") in accordance with the Packaged Retail and
Insurance-based Investment Products ("PRIIPs") regulations.

 

 

 

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