REG - Empiric Student Prop - Final Results <Origin Href="QuoteRef">ESP.L</Origin> - Part 4
14/09/2015 07:01
- Part 4: For the preceding part double click ID:nRSN8970Yc
238,500
Changes in fair value of interest rate derivatives (9,239)
229,261
30 June 2015 £
Total bank borrowings 85,342,553
Total fixed borrowings (at 3.97%) (31,100,000)
Total floating rate borrowings 54,242,553
Notional value of borrowings under interest rate derivative - swap 35,500,000
Proportion of notional value of interest rate swap derivative to floating rate borrowings 65.4%
Fair value hierarchy
The following table provides the fair value measurement hierarchy for interest
rate derivatives:
Group
Date of valuation Total£ Quoted prices in active markets (Level 1)£ Significant observable inputs (Level 2)£ Significant unobservable inputs (Level 3)£
Assets/(liability) measured at fair value: 30 June 2015
Interest rate derivative - cap 229,261 - 229,261 -
Interest rate derivative - swap (448,907) - (448,907) -
The fair value of these contracts are recorded in the Group Consolidated
Statement of Financial Position and is determined by forming an expectation
that interest rates will exceed strike rates and discounting these future cash
flows at the prevailing market rates as at the period end.
There have been no transfers between Level 1 and Level 2 during the period,
nor have there been any transfers between Level 2 and Level 3 during the
period.
20. Share Capital
Ordinary shares issued and fully paid at 1 pence each
Group and Company
30 June 2015 Number 30 June 2015 £
Issued on incorporation 11 February 2014 1 -
Issued at IPO 30 June 2014 85,000,000 850,000
Issued in relation to share issuance programme 24 November 2014 65,000,000 650,000
Issued in relation to share issuance programme 17 March 2015 82,926,829 829,268
As at 30 June 2015 232,926,830 2,329,268
Restricted shares
Group and Company
30 June 2015 Number 30 June 2015 £
Issued and fully paid £1.00 shares 29 April 2014 50,000 50,000
Redeemed at par value 30 June 2014 (50,000) (50,000)
As at 30 June 2015 - -
On 30 June 2014 the Company's ordinary shares were listed on the Official List
of the Financial Conduct Authority and admitted to trading on the Main Market
for listed securities of the London Stock Exchange. The Company's ticker
symbol is ESP. The Company issued 85 million shares of £0.01 at a price of
£1.00 and raised gross proceeds of £85 million.
The Company put in place a share issuance programme permitting the issue of up
to 300 million shares over a 12 month period concluding in October 2015. On 24
November 2014 the Company issued 65 million Ordinary Shares of £0.01 as the
first tranche of the Share Issuance Programme at an issue price of £1.01,
raising £65.65 million.
On 17 March 2015 a further 82.9 million shares of £0.01 were issued as part of
the programme at an issue price of £1.025, raising £85 million.
21. Share Premium
The share premium relates to amounts subscribed for share capital in excess of
nominal value:
Group and Company £
Share premium on Ordinary Shares issued in relation to IPO 30 June 2014 84,150,000
Share issue expenses in relation to IPO 30 June 2014 (1,868,576)
Transfer to Capital Reduction Reserve (see note 22) 30 July 2014 (82,281,424)
Share premium on Ordinary Shares issued in relation to share issuance programme 24 November 2014 65,000,000
Share issue expenses in relation to share issuance programme 31 October 2014 (1,510,265)
Transfer to Capital Reduction Reserve (see note 22) 4 February 2015 (63,489,735)
Share premium on Ordinary Shares issued in relation to share issuance programme 17 March 2015 84,170,732
Costs associated with the issue of ordinary shares (1,890,629)
As at 30 June 2015 82,280,103
22. Capital reduction reserve
Group and Company £
Balance on incorporation -
Transfer from share premium 145,771,159
First interim dividend (1,275,000)
Second interim dividend (750,000)
Third interim dividend (2,329,268)
As at 30 June 2015 141,416,891
On 30 July 2014 the Company cancelled the then value of its share premium
account, by an Order of the High Court of Justice, Chancery Division. The
cancellation resulted in £82.3 million being transferred from the share
premium account into the capital reduction reserve.
On the 4 February 2015 the Company cancelled the then value of its share
premium account, by way of an Order of the High Court of Justice, Chancery
Division. The cancellation resulted in £63.5 million being transferred from
the share premium account into the capital reduction reserve account.
The capital reduction reserve account is a distributable reserve.
Refer to note 11 for details of the declaration of dividends to Shareholders.
23. Other Reserves
Group
Share premium£ Capitalreductionreserve£ Retained Earnings£ Cashflowhedgereserve£ Totalreserves£
Changes in reserves
Profit for the period - - 14,219,418 - 14,219,418
Fair value loss on cashflow hedge - - - (206,331) (206,331)
Total comprehensive income for the period - - 14,219,418 (206,331) 14,013,087
Issue of share capital 233,320,732 - - - 233,320,732
Share issue costs (5,269,470) - - - (5,269,470)
Share-based payments - - 355,625 - 355,625
Reduction in share premium (145,771,159) 145,771,159 - - -
Dividends - (4,354,268) - - (4,354,268)
Total contributions and distribution recognised directly in reserves 82,280,103 141,416,891 355,625 - 224,052,619
Balance at 30 June 2015 82,280,103 141,416,891 14,575,043 (206,331) 238,065,706
24. Leasing Agreements
Future total minimum lease payments under non-cancellable operating leases
fall due as follows:
On office space currently rented Group£
Less than one year 140,840
Between one and five years 422,520
563,360
Future total minimum lease receivables under non-cancellable operating leases
on investment properties are as follows:
Group£
Less than one year 6,073,330
Between one and five years 2,295,059
More than five years 4,345,993
12,714,382
25. Contingent Liabilities
There were no contingent liabilities at 30 June 2015.
26. Capital Commitments
The Group and Company had capital commitments amounting to £13 million in
respect of its two direct joint venture developments, Brunswick (Southampton)
and Willowbank (Glasgow) as at 30 June 2015.
The Group had capital commitments relating to forward funded developments
totalling £44 million as at 30 June 2015.
27. 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.
Property purchases
There were a number of properties that were acquired from a joint venture
between London Cornwall Property Partners Ltd (LCPP) and an affiliated
investment fund of Revcap. These properties comprise College Green,
Picturehouse Apartments, Summit House and Edge Apartments.
Name Location Vendor Related party associated with the Vendor Acquisition Price (£m) Acquisition Date
College Green Bristol Bristol Student Housing LLP LCPP1Revcap2Michael Enright4 9.97 1 July 2014
Picturehouse Apartments Exeter Prime Student Housing (Exeter) LLP LCPP1Revcap2Michael Enright3 11.41 1 July 2014
Summit House Cardiff Prime Student Housing (Cardiff) LLP LCPP1Revcap2Michael Enright3 9.58 1 July 2014
Edge Apartments Birmingham Prime Student Housing (Birmingham) Limited (Jersey) LCPP1Revcap2 8.94 21 August 2014
1 Paul Hadaway and Tim Attlee are directors and shareholders in LCPP.
2 Stephen Alston is a partner of Real Estate Venture Capital Management LLP.
3 Michael Enright was a shareholder in the vendor for Picturehouse Apartments
and Summit House.
4 College Green was purchased from Bristol Student Housing LLP to whom Mr
Enright was a senior debt provider.
Share capital
The table below details the share transactions of related parties over the
period.
Name How related No of shares Transaction Date
Tim Attlee Director 875,000 Purchased 30 June 2014
Paul Hadaway Director 1875,000 PurchasedPurchased 11 February 201430 June 2014
Michael Enright Director 520,000 Purchased 30 June 2014
Baroness Brenda Dean Chairman 33,500 Purchased 30 June 2014
Platform Securities Nominees Ltd (Jim Prower) Director 23,760 Purchased 30 June 2014
Stephen Alston Director 7,500 Purchased 17 March 2015
Share-based payments
Upon admission nil cost options were granted to Executive Directors in the
amounts of:
Paul Hadaway 375,000 shares
Tim Attlee 375,000 shares
Michael Enright 187,500 shares
Details of the shares granted are outlined in note 30 - Share-based payments.
Other
Payments for professional services totalling £242,670 (excluding VAT) were
made to Revcap during the period. Revcap is deemed to be a related party as a
partner of one of its affiliated companies, Stephen Alston, is a Non-Executive
Director of the Company.
28. Subsequent Events
Property transactions
Manchester
On 1 July 2015, the Group entered into a forward funding development agreement
with Xian Developments Manchester Limited to develop a 93 bed student
accommodation scheme on the site of the Grade II* listed, Welsh Baptist Chapel
which the Group acquired in May 2015.
The investment required to complete the development in September 2017 of a
direct-let, premium accommodation scheme is £6.9 million (which is in addition
to the £1 million already paid for the acquisition of the site).
Stirling
On 3 August 2015, the Group concluded missives (equivalent to exchange of
contracts under English law) to acquire the freehold of part of a site off
Forthside Way in Stirling, which the Group also proposes to develop into a
direct-let, premium student accommodation scheme.
The acquisition price is £650,000 (excluding acquisition costs) and the
investment required to complete the scheme in September 2017 is £13 million.
Portsmouth
On 13 August 2015, the Group exchanged contracts to acquire on practical
completion the freehold of a property which comprises a high quality turnkey
student accommodation scheme converted from the former Portsmouth Land
Registry on St Michael's Road, in central Portsmouth.
The acquisition price is £4.45 million and the Group will benefit from a 100%
rental guarantee from the developer for the 2015/16 academic year.
Sheffield
On 14 August 2015, the Group acquired a forward funded development in
Sheffield, known as Portobello House, a 134 bed new-build premium student
accommodation scheme, for a total investment of £10.7 million.
Glasgow
On 10 September 2015, the Group exchanged contracts to acquire on practical
completion the long leasehold of a property which comprises a conversion of an
office block into a high quality turnkey student accommodation scheme on Bath
Street, Glasgow. The acquisition price is £7.4 million and the Group will
benefit from a 100% rental guarantee for the 2015/16 academic year.
Nottingham
On 19 August 2015, the Group acquired a forward funded, development in
Nottingham, known as The Frontage, a 162 bed new-build premium student
accommodation scheme, for a total investment of £18.4 million.
Bath
On 24 August 2015 the Group has exchanged contracts to acquire on practical
completion the long leasehold (125 years) on a site to be developed into a
high quality turnkey student accommodation scheme on James Street West, in
Bath, for a price of £7.65 million (excluding acquisition costs) and on 20
August the Group also exchanged contracts to acquire on practical completion
the freehold on a site to be developed into a high quality turnkey student
accommodation scheme on James Street West, in Bath, for a total investment of
£25 million (excluding acquisition costs).
Falmouth
On the 17 August 2015, the Group acquired the freehold of a high quality
purpose-built student accommodation scheme on Pendennis Rise, in Falmouth, for
£8.1 million (excluding costs).
Newcastle
On 10 September 2015, the Group exchanged contracts to acquire on practical
completion the freehold of a turnkey student accommodation and retail scheme
in central Newcastle for £7.4 million (excluding costs) known as Metrovick
House.
During the period, the Group exchanged conditional contracts on Library Lofts,
Claremont Place and William & Matthew House for aggregate consideration of
£25.7 million (excluding costs). Conditions had not been satisfied as at 30
June 2015 on these property acquisitions. Since the period end William &
Matthew House had all conditions satisfied. Library Lofts and Claremont Place
will become unconditional on practical completion which is expected by the end
of September 2015, when operations commence.
Other Transactions
On 8 July 2015, the Board declared a final interim dividend of 1.0 pence per
share in respect of the quarter ended 30 June 2015, paid on 4 August 2015 to
shareholders on the register on 17 July 2015.
On 23 July, the Board announced 70,921,985 shares to be issued at a price of
105.75 pence per share.
29. Reconciliation of profit before income tax to cash generated from
operations
Company£ Group£
Profit before income tax (3,904,155) 14,219,418
Share-based payments 355,625 355,625
Depreciation charge 16,404 16,404
Finance income (122,989) (161,131)
Finance costs - 1,324,106
Share of results from joint venture - (2,759,836)
Investment in subsidiaries (18) -
Change in fair value of investment property - (11,283,174)
(3,655,133) 1,711,412
Increase in trade and other receivables (403,877) (4,174,311)
Increase in trade and other payables 1,035,820 3,816,652
Deferred rental income - 2,376,990
Cash (used in)/generated from operations (3,023,190) 3,730,743
30. Share-based Payments
The Company operates a share based remuneration scheme for Executive
Directors.
Upon admission 937,500 nil cost options were granted to the Executive
Directors (Paul Hadaway 375,000, Tim Attlee 375,000, and Michael Enright
187,500). The options will become exercisable subject to the Company meeting
Total Shareholder Return (TSR) targets over the three year period to 30 June
2017. The methodology to be used to determine those TSR targets is set out in
the Remuneration Report. Subject to the TSR targets being met an award would
vest after 30 June 2017 in shares. Directors valued the nil cost options at £1
per share. As at 30 June 2015 the amount recognised relating to the options
was £355,625.
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.
Granted during the period 937,500
Outstanding at 30 June 2015 937,500
31. 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 that counterparty will not meet its obligations under
a financial instrument or customer contract, leading to a financial loss. The
Group is exposed to credit risks from both its leasing activities and
financing activities, including deposits with banks and financial
institutions. Credit risk is managed by requiring tenants to pay rentals in
advance. The credit quality of the tenant is assessed based on an extensive
credit rating scorecard at the time of entering into a lease agreement.
Outstanding tenants' receivables are regularly monitored. The maximum exposure
to credit risk at the reporting date is the carrying value of each class of
financial asset.
(i) Tenant Receivables
Tenant receivables, primarily tenant rentals, are presented in the
Consolidated Statement of Financial Position net of allowances for doubtful
receivables and are monitored on a case by case basis. Credit risk is primary
managed by requiring tenants to pay rentals in advance and performing tests
around strength of covenant prior to acquisition. There are no trade
receivables past due as at the period end.
(ii) Credit Risk Related to Financial Instruments and Cash Deposits
One of the principal credit risks of the Group arises with the banks and
financial institutions. The Board of Directors believes that the credit risk
on short term deposits and current account cash balances are limited because
the counterparties are banks, who are committed lenders to the Group, with
high credit ratings assigned by international credit-rating agencies.
(c) Liquidity Risk
Liquidity risk arises from the Group's management of working capital and going
forward, the finance charges and principal repayments on any borrowings, of
which currently there are none. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due as the
majority of the Group's assets are property investments and are therefore not
readily realisable. The Group's objective is to ensure it has sufficient
available funds for its operations and to fund its capital expenditure. This
is achieved by continuous monitoring of forecast and actual cash flows by
management.
The following table sets out the contractual obligations (representing
undiscounted contractual cashflows) of financial liabilities:
30 June 2015 On demand£ Less than 3 months £ 3 to 12 months£ 1 to 5 years£ > 5 years£ Total£
Bank borrowings and interest - 850,905 2,570,440 62,720,832 48,236,543 114,378,720
Swap derivatives - 155,811 476,089 2,096,523 - 2,728,423
Trade and other payables - 4,055,157 - - - 4,055,157
- 5,061,873 3,046,529 64,817,355 48,236,543 121,162,300
32. Capital Management
The primary objectives of the Group's capital management is to ensure that it
remains a going concern and continues to qualify for UK REIT status.
The Board of Directors monitors and reviews the Group's capital so as to
promote the long-term success of the business, facilitate expansion and to
maintain sustainable returns for shareholders.
Capital consists of ordinary shares, other capital reserves and retained
earnings.
33. Subsidiaries
Those subsidiaries listed below are considered to be all subsidiaries of the
Company at 30 June 2015, with the shares issued being ordinary shares.
Company£
As at 11 February 2014 -
Additions in the period 18
As at 30 June 2015 18
In each case the country of incorporation is the UK.
Ownership % Principalactivity
Empiric (Alwyn Court) Limited 100% Property investment
Empiric (Baptists Chapel) Leasing Limited 100% Property leasing
Empiric (Baptists Chapel) Limited 100% Property investment
Empiric (Birmingham) Limited 100% Property investment
Empiric (Bristol) Leasing Limited 100% Property leasing
Empiric (Bristol) Limited 100% Property investment
Empiric (Buccleuch Street) Limited 100% Property investment
Empiric (Buccleuch Street) Leasing Limited 100% Property leasing
Empiric (Centro Court) Limited 100% Property investment
Empiric (Claremont Newcastle) Limited 100% Property investment
Empiric (College Green) Limited 100% Property investment
Empiric (Developments) Limited 100% Development management
Empiric (Durham St Margarets) Limited 100% Property investment
Empiric (Edge Apartments) Limited 100% Property investment
Empiric (Exeter DCL) Limited 100% Property investment
Empiric (Exeter LL) Limited 100% Property investment
Empiric (Framwellgate Durham) Leasing Limited 100% Property leasing
Empiric (Framwellgate Durham) Limited 100% Property investment
Empiric (Glasgow Ballet School) Limited 100% Property investment
Empiric (Glasgow Bath St) Limited 100% Property investment
Empiric (Glasgow Otago Street) Leasing Limited 100% Property leasing
Empiric (Glasgow Otago Street) Limited 100% Property investment
Empiric (Hatfield CP) Limited 100% Property leasing
Empiric (Huddersfield Oldgate House) Leasing Limited 100% Property investment
Empiric (Huddersfield Oldgate House) Limited 100% Property leasing
Empiric (Huddersfield Snow Island) Leasing Limited 100% Property investment
Empiric (Lancaster Penny Street 1) Limited 100% Property investment
Empiric (Lancaster Penny Street 2) Limited 100% Property investment
Empiric (Lancaster Penny Street 3) Limited 100% Property investment
Empiric (Leeds Algernon) Limited 100% Property investment
Empiric (Leeds St Marks) Limited 100% Property investment
Empiric (Leicester Peacock Lane) Limited 100% Property investment
Empiric (London Camberwell) Limited 100% Property investment
Empiric (London Road) Limited 100% Property investment
Empiric (Northgate House) Limited 100% Property investment
Empiric (Nottingham 95 Talbot) Leasing Limited 100% Property leasing
Empiric (Nottingham 95 Talbot) Limited 100% Property investment
Empiric (Picturehouse Apartments) Limited 100% Property investment
Empiric (Portobello House) Leasing Limited 100% Property leasing
Empiric (Portobello House) Limited 100% Property investment
Empiric (Snow Island) Limited 100% Property investment
Empiric (St Peter Street) Leasing Limited 100% Property leasing
Empiric (St Peter Street) Limited 100% Property investment
Empiric (Stirling Forthside) Leasing Limited 100% Property leasing
Empiric (Stirling Forthside) Limited 100% Property investment
Empiric (Summit House) Limited 100% Property investment
Empiric (Talbot Studios) Limited 100% Property investment
Empiric Acquisitions Limited 100% Intermediate holding company
Empiric Investment Holdings (Four) Limited 100% Intermediate holding company
Empiric Investment Holdings (Three) Limited 100% Intermediate holding company
Empiric Investment Holdings (Two) Limited 100% Intermediate holding company
Empiric Investments (Four) Limited 100% Intermediate holding company
Empiric Investments (One) Limited 100% Intermediate holding company
Empiric Investments (Three) Limited 100% Intermediate holding company
Empiric Investments (Two) Limited 100% Intermediate holding company
Empiric Student Property Trustees Limited 100% Trustee of the EBT
Empiric (Bath James House) Limited 100% Property investment
Empiric (Bath JSW) Limited 100% Property investment
Liverpool Edge Limited 100% Property investment
Grove St Studios Limited 100% Property investment
This information is provided by RNS
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