ANNUAL REPORT & ACCOUNTS 2021
Safe, homely
and modern
living spaces
Strategic Report
001 Highlights
002 Chairman’s Statement
004 At a Glance
006 Our Market
010 Business Model
012 Our Strategy
018 Chief Executive Officer’s Review
028 Key Performance Indicators
030 CFO and CSO Statement
034 Responsible Business
041 Stakeholders
048 Principal Risks and Uncertainties
049 Going Concern –
Viability Statement
Governance Report
054 Board of Directors
056 Chairman’s Introduction to
Corporate Governance and
Corporate Governance Statement
063 Nomination Committee Report
064 Audit and Risk Committee Report
066 Statement from the Chairman of the
Remuneration Committee
068 Remuneration Committee Report
071 Annual Report on Remuneration
078 Directors’ Report
080 Directors’ Responsibilities
Financial Statements
081 Independent Auditor’s Report
086 Group Statement of Comprehensive
Income
087 Group Statement of Financial Position
088 Company Statement of Financial
Position
089 Group Statement of Changes
in Equity
090 Company Statement of Changes
in Equity
091 Group Statement of Cash Flows
092 Notes to the Financial Statements
117 D e fi n i t i o n s
119 Company Information and
Corporate Advisers
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021
Customer
proposition
We provide fully serviced,
modern but characterful
student homes,
that are safe and convenient,
within a friendly and
supportive community
environment
Responsibility
We are inclusive and
thoughtful about ESG,
embedding throughout our
business and strategy,
thereby creating long-term
sustainable value for all
ourstakeholders
Culture
Our team are our key area of
focus; by working together
we deliver a safe, friendly
environment and high-quality
personalised service for
our customers
Mission
To build and operate clusters
of high-quality student
homes in desirable locations,
that create vibrant
communities for discerning
customers, and in doing so
deliver attractive
shareholder returns
Purpose
To help students make
the most of their university
life by providing safe and
modern living spaces with
service that makes them
feel at home
Long-term
success and
stakeholder value
We create long-term
sustainable value for
all our stakeholders
Guided by
our purpose
and mission
and underpinned
by our culture and
ESG approach
delivering sustainable
value
Our
approach
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021
Highlights
Financial
We are seeing improving trends in demand
and occupancy for 2022/23 academic year
with bookings to date broadly returning to
pre-COVID-19 levels. We are increasingly
encouraged by the outlook for our business
and the wider sector.
Operational
Throughout the pandemic, we have taken a
supportive approach to our students’ situation, granting
later check-ins, deferments, cost-free cancellations and
refunds. Online reviews suggest this has helped enhance
our brand reputation and drive future customer acquisition.
– In November 2020, we successfully launched our
new revenue management system and all bookings for
the academic year 2021/22 are now managed in-house.
We expect this to deliver annualised cost savings of about
£1.5 million per annum from September 2021 onwards as
well as increase customer acquisition and revenue.
– We established an ESG Committee at Board level
and undertook a detailed materiality assessment deriving
our four key pillars which we will focus on.
– We are announcing our net zero target of no later
than 2035 after completing a detailed assessment.
– We continue to make good progress on all five of
the key commercial priorities for the Group, which we are
confident will further strengthen the Group’s position:
actively managing our property portfolio; strengthening
our brand proposition; driving performance through data
analytics; delivering consistently high customer service;
and developing our people.
Financial
Our financial performance has continued to be
materially impacted by the COVID-19 pandemic. We have
explained the impact of COVID-19 on our results on
page 30.
– Sale of four assets for £18 million completed during
the year in line with our portfolio realignment strategy,
leading to a £1.7 million profit on disposal.
– We were pleased to resume dividend payments
in Q4 2021 with a payment of 2.5p. In 2022, we intend
to start paying a minimum dividend of 2.5p per share
per annum, with a view to increasing this as occupancy
levels normalise.
Post year end
– Further sale of five assets completed post year
end for proceeds of £27 million in line with our portfolio
realignment strategy.
– Purchase of Bristol Market Quarter for £19 million
which helps to build out our presence in a key target city.
– As at 2 March 2022 bookings of 36% for the
2022/23 academic year (20% for the 2021/22 academic
year as at 16 March 2021).
1 – Adjusted Performance Measure (“APM”) see page 117 for definitions and
see Note 8 for definition and calculation of Adjusted Earnings per share.
See Note 31 for calculation of remaining APMs.
Revenue
£56.0m
(2020 — £59.4m Change — (6)%
Gross Margin (%)1
58.8%
2020 — 61.9% Change — (5)%
Adjusted Earnings Per Share 1
1.65p
2020 — 2.30p Change — (28)%
Property Valuation
£1,022m
2020 — £1,005m Change — 2%
Net Asset Value Per Share (p)
107.4p
2020 — 105.0p Change — 2%
Total Return (%) 1
4.6%
2020 — (3.6) Change — (228)%
Loan to Value (%) 1
33.1%
2020 — 35.4% Change — (6)%
—
Customers:
Caring for our customers
on page 14.
—
People and Operations:
Supporting our people
on page 16.
—
Buildings:
Refurbishing our key assets
on page 24.
Strategy in action
STRATEGIC REPORT001ANNUAL REPORT & ACCOUNTS 2021
Chairman’s Statement
Driving
sustainable
value
We have made good progress on actively
managing our portfolio, with asset sales
during the year and an acquisition post
year end. We have continued to support
our students as well as resuming dividend
payments, announcing new Group targets
and strengthening our team.
MARK PAIN
Non-Executive Chairman
2 March 2022
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021002
2021 was a difficult year.
COVID-19 having had a full
12-month impact on occupancy,
and, as a result, our financial
performance (see page 30).
However, we have made good
progress in implementing our
strategic priorities laid out
last year, we have continued
to strengthen our leadership
team, and have successfully
completed the full insourcing
of the business.
Environmental, Social and Governance (“ESG”)
At the core of our proposition is a
commitment to create a sustainable, positive,
environmental, social and economic legacy for all
our stakeholders.
During 2020 we created a Board-level ESG
Committee, tasked with providing a road map to
deliver a significant step change in our approach
toESG.
I am delighted that Lynne Fennah, our
experienced CFO and COO, has been appointed
our Chief Sustainability Officer, relinquishing her
COO role, bringing a real focus to ESG whilst
ensuring that we continue to deliver a sustainable
business for all stakeholders.
During 2021 we completed our first formal
materiality assessment where we identified our four
key topics which we will build our ESG Road map
around. We can also announce that we will target
becoming net zero within our business by 2035
(pages 34 to 41 have more detail on our approach
to ESG).
Health and Safety
Health and Safety remains a critical area of
attention for your Board. Having insourced our FM
activities we have complete control of our health
and safety environment. We continue to enhance
our monitoring and make our buildings as safe as
possible. We continue to focus, in particular, on
ensuring that our approach to fire safety takes full
cognisance of current and emerging best practice
(see page 22 for more detail on health and safety).
Our People
Our continued progress is only possible
because of the dedication and ability of all of our
people. I would like to thank everyone in our
business for their contribution over the past year.
Our people are extremely important, they are at the
heart of our customer proposition and at the core of
us living our brand. Our 2021 colleague
engagement survey showed engagement scores of
82% as set out on page 22.
Our Colleague Forum, formed of colleagues
across the Group, met a number of times during the
year to discuss a variety of topics.
Board Appointments and Succession
On 27 September 2021, we announced that
Jim Prower would be stepping down from his role
as Senior Independent Director of the Company
with effect from 1 October 2021, as part of a planned
succession process. Jim had served on the Board
for over seven years, providing valuable insights
and supporting the financial and operational
transformation of the Group. The Board has
benefitted significantly from his expertise,
commitment and wise counsel and Jim leaves
withour very best wishes for the future.
On 1 October 2022, Martin Ratchford was
appointed to the Board as an independent
Non-Executive Director and Chair of the Audit
andRisk Committee. Martin brings a wealth of
invaluable real estate and finance experience,
having held a range of senior finance and
leadership roles in a number of UK and
Internationalreal estate companies.
Also, on 1 October 2022, Alice Avis was
appointed Senior Independent Director.
The Board effectiveness review (see page
60 for more details) concluded that the Board and
its Committees continued to operate effectively
throughout 2021.
Dividends
On 29 October 2021, the Board announced
its intention to recommence dividend payments
which were suspended in March 2020 due to the
uncertainty arising from the COVID-19 pandemic. On
3 December 2021, a payment of 2.5 pence per
share was made. The payment comprised the
PID distribution requirement of 1 pence per share
for the 2019 financial year and 1.5 pence per share
for 2020.
Regular dividend payments have been
reinstated from 1 January 2022, paid quarterly, fully
covered, and progressive in nature. Given our
current assessment of our 2021/22 academic year
revenue levels, and assuming no further adverse
impact from the pandemic, the Board is expecting
to pay a minimum dividend of 2.5 pence per share
per annum in 2022 with a view to increasing this as
occupancy levels normalise.
AGM
Our 2022 AGM will be held on 23 May 2022.
Further details about the AGM will be provided in
the AGM Notice.
Looking Forward
Whilst near-term uncertainty, caused by the
COVID-19 pandemic, remains, we are seeing
improving trends in demand and occupancy in our
target market. We are making good progress in
implementing our revised strategy, our senior
leadership team is now fully in place and the
operational transformation of the business is now
complete. We have recommenced dividend
payments, albeit at prudent levels, and remain
committed to a policy of progressive, fully covered
dividend payments going forward. We remain
confident that we have the right proposition,
targeted at the right market segment, and can see
robust and consistent future growth.
Occupancy levels as at 28
February 2022 for the
2021/22 academic year
84%
STRATEGIC REPORT003ANNUAL REPORT & ACCOUNTS 2021
At a Glance
Home from
home
—
See more on our portfolio in the CEO’s
Review on page 19.
As at 31 December 2021:
Revenue Generating Assets
87
(31 December 2020: 91)
Cities and Towns
29
(31 December 2020: 29)
Assets Contracted
91
(31 December 2020: 95)
Beds Contracted
9,170
(31 December 2020: 9,396)
Group Key Stats
295
Employees
7
Years in operation
92%
of portfolio by value considered prime real estate or better
North West
1,457
Scotland
1,167
South East
1,417
South West
1,442
Wales
519
West
Midlands
1,866
Yorkshire
1,041
North East
261
Beds contracted by region
as at 31 December 2021
Scale is representative of beds
contracted in region
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021004
Reasons to Invest
1 5
Differentiated Business Model within
the Popular PBSA Property Sector
We target investment in prime regional cities which attract
students from the growing pool of affluent international,
postgraduate and returning undergraduates, whose
premium accommodation requirements are relatively
under-served by the PBSA market. This segmented supply
and demand imbalance drives both occupancy and rental
growth, creating relatively high-yielding investments
providing attractive total returns.
Socially and Environmentally
Responsible
We are a company who is socially and environmentally
responsible. We have set an ambitious net zero target
of no later than 2035 and have ring fenced capital to
invest in ESG projects in the future.
—
Read more on page 21.
—
Read more on page 34.
2 6
Responsible and Industry-Leading
Operating Brand
Hello Student®, our operating brand, has become one
of the most effective, responsible and recognisable in the
sector. In the 2021 National Student Housing Survey,
Hello Student® outperformed all benchmarks for student
satisfaction, exceeding the average for university and
private halls. We achieved a positive NPS score of 22;
a higher score compared to the NPS benchmarks for
private halls of 20. We pride ourselves on high quality
customer service and amenities.
Progressive Culture Embedded
by Core Values and Purpose
We believe in our strong culture which is supported
by the core values we live by each day throughout
the business from the Board down.
—
Read more on page 21.
—
Read more on page 26.
3
Sustainable Long-Term
Business Model
There has been consistently strong growth in student
numbers over the past decade, with the UK demographic
turning positive from 2021. This, coupled with the
government’s strong support for international student growth,
gives us a strengthening market to operate in.
—
Read more on page 10.
4
Delivering attractive sustainable
shareholder returns
Targeting, when occupancy normalises, a Gross Margin
over 70% and a Total Return of 7%-9%.
—
Read more on page 12.
STRATEGIC REPORT005ANNUAL REPORT & ACCOUNTS 2021
Our Market
A resilient
sector
In 2021, the PBSA sector rebounded from the
COVID-19 pandemic in a buoyant fashion, driven by
the underlying growth in the UK’s full-time (“FT”)
student population. Confidence is returning to the
market following reduced low occupancy rates in
2020/21 as learning shifted online and restrictions
on travel were implemented due to COVID-19.
International mobility has been impacted by the
pandemic, but the PBSA sector has remained much
more resilient than analysts had initially projected.
Domestic students partially filled the void left by
international students, while in some markets,
certain groups of international students rose to
boost overall occupancy rates.
Remote study has worked for many students,
although it is a weak substitute for on-campus
tuition and the holistic student experience. As a
result, PBSA occupancy rates recovered
considerably in 2021 as restrictions gradually lifted.
At the end of Q3 2021, JLL reported that 90% of
beds were leased for the 2021/22 academic year,
compared with 83% for the comparative period
in2020/21.
In the year to September 2021, the CBRE
PBSA Index reported total returns of 7.7% for the
250 assets in the index; 2.8% higher than in 2020.
Capital value growth for PBSA assets recovered
from -0.4% in the year to September 2020 to 2.2%
in 2021. Notably, capital growth in Super Prime
Regional markets grew from 0.3% in the year to
September 2020 to 4.7% in the same period to
September 2021. The performance gap between
the regional markets (Super Prime and Prime) and
Central London narrowed. Assets in the capital
achieved total returns that were 0.3% higher than
those in the regions, a fall from the 2%-4%
outperformance seen over the previous four years,
mainly due to falling net income return for London
assets. Assets in Secondary locations saw capital
values fall again in 2021, but not as dramatically as
in 2020. The Empiric portfolio is well aligned to the
best-performing locations with 92% by value
classified as either London, Super Prime Regional or
Prime Regional in the December 2021 portfolio
valuation, compared with 86% in December 2020.
58%
Only 58% of demand
forPBSA is currently
being met
The Empiric portfolio is well
aligned to the high-growth
locations with
92%
by value classified as either
London, Super Prime Regional
or Prime Regional
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021006
In UCAS’s latest End of Cycle Report,
strengthening demand statistics for the 2021
admissions cycle were published. In 2021, 749,570
students applied to higher education institutions in
the UK; 20,790 students (+2.9%) higher than 2020.
Applications from non-EU domiciled students rose
12.8% to 111,255, somewhat offsetting the significant
fall in applications from EU domiciled students,
which fell 40.1% to 31,670.
Overall student acceptances fell slightly from
a record in 2020, with 562,060 students accepted
by higher education institutions, mainly due to a
50% fall in acceptances from EU students. However,
only higher tariff providers reported year-on-year
growth in acceptances (1.33%), with both medium
and lower tariff providers reporting declines of
3.72% and 1.88% respectively.
Following Brexit, the UK left the EU’s
Erasmus+ scheme in 2020, before which it was the
fourth most popular destination for Erasmus+
students. The UK created the “Turing Scheme” as a
replacement for UK domiciled students, but the
scheme does not provide reciprocal funding for UK
inbound placements. Acceptances from UK and
non-EU domiciled students rose by 6,605 (+1.4%)
and 1,275 (+2.4%) respectively. In 2020, UCAS
reported 24% and 35% year-on-year increases in
applicants from China and India respectively with
growing demand from the USA. This trend
continued in 2021, with Chinese applicants growing
by a further 4,135 (+15.8%) and India by 1,980
(+21.7%). Demand from overseas students is
predicted to continue growing as the appeal of UK
higher education institutions strengthens and levels
of household wealth in these countries rise. Savills
report that between 2021 and 2026, the number of
households earning above $70,000 per annum is
forecast to grow annually by 13% in China and 24%
in India.
Growing domestic demand for places at UK
higher education institutions has been fuelled by
sustained growth in the UK’s 18-year-old population
and increasing participation rates. UCAS reports
that the proportion of UK domiciled 18-year-olds
accepted by UK providers increased from 37% in
2020 to 38% in 2021, the ninth consecutive
year-on-year increase. The demographic surge is
expected to increase the number of 18-year-olds in
the UK by over 160,000 in the next decade.
Postgraduate courses are also becoming
increasingly popular. HESA report that 468,575
students enrolled on a full-time postgraduate
course in the UK in AY 2020/21; 16% higher than the
previous year. Enrolments from non-EU domiciled
postgraduates also rose by 16%.
Increase in UCAS
Applicants for 2021/22
academic year
3%
1
Strengthening
Student
Demographics
2
PBSA Development
Pipeline –
Constrained Supply
The demand-supply imbalance of high-
quality assets in the prime locations market remains.
According to research combining HESA 2019/20
data and PBSA supply for 2021/22, only 58% of
demand for PBSA is currently being met, 66%
including consented pipeline. The UK market has
seen development volume recover significantly as
students return to campus. Over 30,000 beds were
completed in 2021, more than double the 14,000
achieved in 2020, a year in which the pandemic
disrupted construction programmes and put many
developments on hold. A further 21,000 beds are
estimated to be in the pipeline for delivery in time
for the 2022/23 academic year. However, in the last
five years planning application activity has slowed
significantly. In the first seven months of 2021, less
than 15,000 were submitted for approval, compared
with 32,000 during the same period in 2017. This is
partly due to some early adopted markets
becoming saturated, reducing opportunities for
developers. Some markets have been more
popular as developers preempt emerging and
increasingly restrictive local planning authority
policies. These include affordable housing
requirements and location-specific policies
intended to control future development.
Furthermore, the impacts of Brexit, COVID-19 and
inflationary pressure has led to rapidly rising
construction costs, raising challenges for
developers over the viability of some projects.
These factors may compound to restrict the supply
of new PBSA beds in 2022, despite the projected
demand growth.
Student Demographics
Applicants Acceptances
Domicile 2020 2021 Change
%
Change 2020 2021 Change
%
Change
UK 577,260 606,645 29,385 5.1 485,400 492,005 6,605 1.4
EU 52,865 31,670 -21,195 -40.1 32,320 16,025 -16,295 -50.4
Non-EU 98,660 111,255 12,595 12.8 52,755 54,030 1,275 2.4
Total 728,785 749,570 20,785 2.9 570,475 562,060 -8,415 -1.5
Source: UCAS End of Cycle Report 2021
STRATEGIC REPORT007ANNUAL REPORT & ACCOUNTS 2021
Our Market continued
3
Sector Investment
– Strong Investor
Appetite
4
Market Yields –
Best in Class,
Direct Let
Investor appetite continued to be strong
throughout 2021, reflected in the year’s
transactional activity. In the second half of 2021,
investors spent over £2.5 billion on UK PBSA, taking
total investment volume for the year to £4.4 billion.
In 2020, investment reached £5.9 billion, of which
Blackstone’s acquisition of the IQ portfolio
contributed £4.7 billion. Analysis of transaction
volume in 2021 shows a much more active market
in 2021, with 35% more deals being struck than in
2020 and 6% more than in 2019. The year saw
numerous landmark portfolio deals as an influx of
overseas capital was drawn to UK PBSA. Most
notably, in December 2021, Blackstone and APG
acquired the GCP Student Living portfolio for
£1.1billion, reflecting £277,300 per bed across
4,100beds in 11 assets.
In the 18 months from March 2020, when COVID-19
lockdown restrictions began, pricing held firm at pre-
pandemic levels, reflecting the reliance of the sector. With
agreater variety and larger weight of capital targeting the
sector, the deals in the markets are now reflecting record
sharper yields. Subsequently, the year saw some record-
breaking single asset deals such as iQ’s purchase of 347
beds from Nido in West Hampstead for over £120 million,
reflecting a yield of 3.80%. Portfolio deals were prevalent in
Super Prime Regional and Prime Regional markets at
sharper yields too. Notably, in February 2021, Greystar
purchased 2,163 beds from Roundhill for £291 million (4.75%)
across five assets in London, Glasgow, Coventry and Bristol
and Apollo’s purchase of 1,655 from Crown Student for
£210 million based in Cardiff, Norwich and Portsmouth
reflected a yield of 5.25%. In 2021, Asian investors
committed over £400 million to UK PBSA. Greystar
continued a trend of portfolio deals in January, securing the
acquisition of “Project Jura” from Downing for £365 million.
The portfolio of 1,807 beds in London, Manchester and
Coventry traded for £202,120 per bed.
Market transactions in 2021 have supported
yield compressions reported by the leading valuers.
CBRE report that between Q4 December 2020 and
Q4 December 2021, Best-In-Class Direct Let Central
London, Super Prime Regional and Prime Regional
yields compressed by 25 basis points, 10 basis
points and 25 basis points respectively. After
considerable softening in previous years,
Secondary Regional yields have stabilised, but
remain more polarised from the stronger markets
with a risk of further weakening.
In the coming years, more investment is expected to
bedrawn to the PBSA sector as investors look for stable
diversified income returns and counter-cyclical performance
inthe face of potential economic downturn. With the worst of
COVID-19 restrictions widely accepted to be in the past,
investors are looking past short-term issues to a growing
demand pool. The subsequent growth in demand for
high-quality PBSA will continue to outstrip the supply of beds,
particularly in the prime market. In addition to this undersupply,
ongoing uncertainty and investment risk in other global
markets is likely to be a key driver for investment into UK
student assets. This also follows a wider trend as institutional
investors pivot towards assets in the residential sector.
Market Yields – Best-In-Class, Direct Let
December 2021 December 2020
Current Trend Current Trend
Central London 3.65% Stronger 3.90% Stronger
Super Prime Regional 4.65% Stronger 4.75% Stronger
Prime Regional 5.00% Stronger 5.25% Stable
Secondary Regional 8.00% Stable 8.00% Weaker
Source: CBRE Student Sector Investment Yields, December 2021.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021008
STRATEGIC REPORT009ANNUAL REPORT & ACCOUNTS 2021
Select Locations/
Specifications
We are 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 and their
proximity to universities and amenities.
Our buildings have on average around
100 beds, which helps to foster a more
homely, collegiate feeling to living. However,
through our clustering strategy we are able
to yield the economies of scale which are
generated from larger buildings.
Develop/Buy
Developing assets allows us to acquire
themat a greater yield on cost than buying
standing assets. Forward-funded projects
aretypically 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
proven track record in direct development.
We also buy standing assets when a specific
opportunity arises which compliments
ourportfolio.
Business Model
Our business model combines an attractive portfolio of high-quality
student homes with an efficient in-house operational platform.
Together, our operations and assets enable us to create value for
all our stakeholders. This allows us to generate attractive returns for
our shareholders and build a strong platform for long-term growth.
Buildings
We have a diverse and attractive portfolio of
properties that offer high-quality and safe
accommodation to our customers.
Our People
Our people are key to our customer journey.
Our passionate and committed colleagues
allow us to deliver a high level of service
toour customers whilst maintaining
costcontrol.
Specialist Knowledge
We have the knowledge to develop, acquire
and operate high-quality, sustainable
student accommodation assets.
Brand
The Hello Student® brand has continued
togrow, becoming a leading brand and
giving us a clear identity in the student
property market.
Financing
We finance our business through a
combination of shareholder equity and
debtfacilities. We have strong liquidity
andgood relationships with our lenders.
Technology
We continue to leverage technology to
augment business processes that drive
efficiencies operationally, financially and
commercially whilst also improving our
userand customer experiences.
Our Culture
Our people and customers are
our key focus and we are here
to deliver excellent seamless
service and financial returns
through working together.
Key Strengths
How We Add Value
— —
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021010
R
e
i
n
v
e
s
t
O
p
e
r
a
t
e
Creating
homely,
modern
living
spaces
S
e
l
e
c
t
L
o
c
a
t
i
o
n
s
/
S
p
e
c
i
fi
c
a
t
i
o
n
s
D
e
v
e
l
o
p
/
B
u
y
Operate
Our assets are marketed through our Hello
Student® platform. This platform gives us a
clearly identifiable brand which helps to
offer our customers a range of options.
Encouraging our people to follow our values
helps to increase ownership and pride in
our homes. This ensures that customers
have the best experience possible, helping
to drive occupancy, rents and profit.
We have a student welfare programme in
place to ensure that we provide the support
that our customers need during their stay
with us.
Reinvest
We intend to hold our buildings 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 customers benefit from having a great
home to live in during their studies, at a rent
that represents value for money.
NPS in the Global Student Living Index
+22
Higher than PBSA private hall average +20
Our People
Our people have the opportunity to develop
their careers in an exciting and growing sector.
Colleague Engagement Score
82%
Shareholders
Shareholders benefit from Total Returns
which are underpinned by income and
continued rental growth.
Total Return target of
7-9%
Communities
The communities around our assets benefit
from increased employment, reduced
pressure on local housing stock, and from
the improvements we fund to social
infrastructure in the surrounding area.
Net Carbon Neutral Target
2035
Outputs for our Stakeholders
— —
STRATEGIC REPORT011ANNUAL REPORT & ACCOUNTS 2021
Our Strategy
Continuing to make progress
against our strategic objectives.
Strategic area Strategic objective Progress in the year Associated KPIs Key aims for 2022 Associated risks
1.
Customers
Our customers are at the heart of what we do. We
want our customers to have a great experience and
stay with us year after year and to recommend us to
their friends. We aim to achieve customer satisfaction
by building welcoming communities in our homes and
by giving our customers a sense of safety, wellbeing
and belonging in an environment of high-quality
communal areas and facilities.
We aim to deliver a friendly personalised service and
be there when our customers need us.
– Our net promoter score was +22, compared to
PBSA private hall average +20.
– Developing our 24-hour, seven-days-a-week, staff
cover in all our cities and seeing the benefits which
come from this.
– We continued to strengthen our relationship with
anumber of key universities.
A B C
D E
– Roll out a student app so that students can
access all services in one place.
– Increase customer NPS score even further
in2022.
E1
I1
E2 E4
I2
2.
Brand
We want to raise awareness of the Hello Student®
brand among students, to support our premium
accommodation and service offering. We want to
become known as a responsible provider.
– We have undertaken in-depth customer research
to understand what is important to them and how
we will shape our future brand proposition.
– Begun to develop and built a new brand platform
that steers how we communicate with our
customers, our look and feel and how we deliver
our customer experience.
A B C
E F
– Review the design and layout of both the Hello
Student® and Empiric corporate website.
– Launch a rebranding exercise to ensure that
the Hello Student® brand is relevant and
appropriate for the coming years.
E1
I1
E2 E4
I2 I4
3.
Our People
and Operations
We are committed to making Empiric “a great place
to work” and destination of choice for candidates
wanting to work in the student accommodation
sector; through this we will be able to deliver a high
standard of customer service.
We will continually enhance our in-house functions
and performance coach our colleagues to help
themprovide the best and most efficient customer
service experience.
– We have refreshed our Company values, read
more on page 26.
– We have provided mental health first aid training to
all people managers, read more on page 38.
– We received a “One to Watch” rating by the Best
Companies survey on our debut rating.
A B C
D E F
– Embed the new Operations Director who joined
in January 2022.
– Open a new strategic hub in Birmingham where
we will embed our support teams.
E1
I1
E2 E4
I2 I4
4.
Building
We will maximise the value from the asset portfolio by
actively managing the portfolio to recycle capital and
to improve returns and sustainability. This is achieved
by maintaining a portfolio of investments with
attractive yields and rental growth opportunities.
– We disposed of four non-core assets at a premium
to their book value.
– We completed two refurbishments in Bristol and
Leeds. We achieved this while students remained
in residence around the refurbishment site with no
disruption. Read more on page 24.
A B C
D E J
– Complete the Bristol St Mary’s development,
providing an additional 153 beds in the city.
– To launch new redevelopment schemes and
continue our portfolio review, looking at
disposal, refurbishment and acquisition targets.
E1
I4
E2 E5
5.
Shareholders
We want to provide our shareholders with attractive
sustainable returns. This is achieved through
improving the profitability, performance and size
ofour portfolio.
– We recommenced the payment of dividends in Q4
2021 with a view to returning to quarterly dividend
payments in 2022.
– Completed a materiality assessment of our key
ESG priorities and have commenced our road map.
– The progress achieved in all of the above strategic
areas contributes to shareholder returns.
A B C
D
I
G H
– Continue to deliver on our five key priorities as
laid out on pages 18 to 23.
– Beyond COVID-19, we are positioned to return
to full occupancy and optimise profitability
enabling us to resume paying an attractive
dividend. For 2022 we are targeting a 2.5p
dividend.
– We will continue to engage closely with all
shareholders.
E1 E2 E3
I1 I2 I3
E4 E5
I4
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021012
Strategic area Strategic objective Progress in the year Associated KPIs Key aims for 2022 Associated risks
1.
Customers
Our customers are at the heart of what we do. We
want our customers to have a great experience and
stay with us year after year and to recommend us to
their friends. We aim to achieve customer satisfaction
by building welcoming communities in our homes and
by giving our customers a sense of safety, wellbeing
and belonging in an environment of high-quality
communal areas and facilities.
We aim to deliver a friendly personalised service and
be there when our customers need us.
– Our net promoter score was +22, compared to
PBSA private hall average +20.
– Developing our 24-hour, seven-days-a-week, staff
cover in all our cities and seeing the benefits which
come from this.
– We continued to strengthen our relationship with
anumber of key universities.
A B C
D E
– Roll out a student app so that students can
access all services in one place.
– Increase customer NPS score even further
in2022.
E1
I1
E2 E4
I2
2.
Brand
We want to raise awareness of the Hello Student®
brand among students, to support our premium
accommodation and service offering. We want to
become known as a responsible provider.
– We have undertaken in-depth customer research
to understand what is important to them and how
we will shape our future brand proposition.
– Begun to develop and built a new brand platform
that steers how we communicate with our
customers, our look and feel and how we deliver
our customer experience.
A B C
E F
– Review the design and layout of both the Hello
Student® and Empiric corporate website.
– Launch a rebranding exercise to ensure that
the Hello Student® brand is relevant and
appropriate for the coming years.
E1
I1
E2 E4
I2 I4
3.
Our People
and Operations
We are committed to making Empiric “a great place
to work” and destination of choice for candidates
wanting to work in the student accommodation
sector; through this we will be able to deliver a high
standard of customer service.
We will continually enhance our in-house functions
and performance coach our colleagues to help
themprovide the best and most efficient customer
service experience.
– We have refreshed our Company values, read
more on page 26.
– We have provided mental health first aid training to
all people managers, read more on page 38.
– We received a “One to Watch” rating by the Best
Companies survey on our debut rating.
A B C
D E F
– Embed the new Operations Director who joined
in January 2022.
– Open a new strategic hub in Birmingham where
we will embed our support teams.
E1
I1
E2 E4
I2 I4
4.
Building
We will maximise the value from the asset portfolio by
actively managing the portfolio to recycle capital and
to improve returns and sustainability. This is achieved
by maintaining a portfolio of investments with
attractive yields and rental growth opportunities.
– We disposed of four non-core assets at a premium
to their book value.
– We completed two refurbishments in Bristol and
Leeds. We achieved this while students remained
in residence around the refurbishment site with no
disruption. Read more on page 24.
A B C
D E J
– Complete the Bristol St Mary’s development,
providing an additional 153 beds in the city.
– To launch new redevelopment schemes and
continue our portfolio review, looking at
disposal, refurbishment and acquisition targets.
E1
I4
E2 E5
5.
Shareholders
We want to provide our shareholders with attractive
sustainable returns. This is achieved through
improving the profitability, performance and size
ofour portfolio.
– We recommenced the payment of dividends in Q4
2021 with a view to returning to quarterly dividend
payments in 2022.
– Completed a materiality assessment of our key
ESG priorities and have commenced our road map.
– The progress achieved in all of the above strategic
areas contributes to shareholder returns.
A B C
D
I
G H
– Continue to deliver on our five key priorities as
laid out on pages 18 to 23.
– Beyond COVID-19, we are positioned to return
to full occupancy and optimise profitability
enabling us to resume paying an attractive
dividend. For 2022 we are targeting a 2.5p
dividend.
– We will continue to engage closely with all
shareholders.
E1 E2 E3
I1 I2 I3
E4 E5
I4
KPI Links
A. Rebooker Rate
B. Net Promoter Score
C. Revenue Occupancy
D. Safety – Number of Accidents
E. Colleague Engagement
F. Gross Margin
G. Adjusted Earnings per Share
H. Dividend Cover
I. Net Asset Value per Share
J. Total Return
Risks Links
External Risks
E1. Revenue Risk
E2. Competition Risk
E3. Property Market Risk
E4. Regulatory Risk
E5. Funding Risk
Internal Risks
I1. Health and Safety Risk
I2. Cyber Security Risk
I3. People Risk
I4. Safe and Sustainable Buildings Risk
STRATEGIC REPORT013ANNUAL REPORT & ACCOUNTS 2021
Strategy in Action
Customers
Caring for
our customers
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021014
Customer service is key to
retaining customers and
ensuring our brand is
spread by word of mouth.
Delivering Consistently
High Customer Service
The Group undertakes a biannual
survey with the Global Student Living
Index. The outcome in Q4 was a
Net Promoter Score (“NPS”) of +22 –
slightly lower than spring 2021 (+27)
but in line with autumn last year (+21).
82% rated their accommodation positively, in line with private
hall and large operator benchmarks (83%). 70% said their
accommodation had a positive impact on their wellbeing,
an improvement on spring and autumn 2020 (67%). The
wellbeing impact score is an encouraging 4 percentage points
above the benchmark for UK private halls (66%). 28% said they
would be staying in their current accommodation next year,
higher than the average for private halls. 77% of students rated
their moving-in experience as good or very good, with the
highest rating score being the staff welcome. All of these
scores were ahead of our peers despite the difficulty COVID-19
has brought.
STRATEGIC REPORT015ANNUAL REPORT & ACCOUNTS 2021
Strategy in Action
Our People and Operations
Supporting
our people
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021016
Moved in here three months ago and really
glad I chose this place. The location couldn’t
have been better, given the proximity to the city
centre as well as uni. The staff is super sweet
and friendly, always a delight to chat with,
and they’ve gone above and beyond their duties
to ensure our comfort and safety. Barring the
ongoing COVID-19 situation, they organise
events and socials so I think that’s cool. Overall,
the facilities and everything about this place
has fairly exceeded my expectations so there’s
no complaints so far. Oh, and the best part?
Free coffee in the common room!
Training Our People
Our key focus as a business is providing
the best experience for our students.
Our people are on the front line of
providing that experience and, as such,
any investment in our people means
happy customers.
We have a dedicated in-house training resource which
specialises in ensuring all our people provide great customer
service. These skills stay with our people for a lifetime and so
will help them through all stages of their career. Despite the
challenges posed by COVID-19 we have delivered 120 hours
of sales and customer training to our people.
The impact of this training is clear to see in the reviews our
students leave across various platforms. We have selected
two examples here out of the many we read.
Throughout the pandemic we continued to ensure
our training schedule was unaffected, delivering
training through video conferences.
Perfect location within a short
walk to town, the uni and the
beaches. Incredible staff who
are on-site most days, no issue
is too big or small, there is
always someone to help,
whether that’s a maintenance
issue or just for someone to
talk to. Best accommodation
I’ve stayed in, this is one of
the reasons why I rebooked.
RESIDENT –
York Foss Studios
RESIDENT –
Ocean View
STRATEGIC REPORT017ANNUAL REPORT & ACCOUNTS 2021
Chief Executive Officer’s Review
DUNCAN GARROOD
Chief Executive Officer
2 March 2022
Delivering
our strategic
priorities
We have made good progress executing
our strategy through investment in our
people, customers, assets and systems,
despite the challenges of the pandemic.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021018
Throughout the year, we
remained committed to
supporting and doing the
right thing by each student on
a case-by-case basis,focusing
on health and safety, whilst also
protecting the long-term value
of the Group, even though 2021
brought further challenging
times as the pandemic continued
to disrupt many students’
education plans.
In March 2021, we identified
five key priorities that would
drive value for shareholders:
Safety remains our top
priority as a business.
Total operational beds
March 2022
8,391
Academic Year 2022/23
8,603
I will expand on this, as we look at the progress
of each of these priorities in turn:
Actively Managing the Property Portfolio
As at 31 December 2021, we owned or
were committed to owning 91 assets with 9,170
beds (31 December 2020: 95 assets, representing
9,396 beds). Of these, 87 were revenue-generating
assets, with 8,543 beds (31 December 2020: 91
were revenue-generating assets, with 8,887 beds).
Portfolio Safety
Safety remains our top priority as a business
and to that end we ensure that our buildings
comply with not only all relevant regulations but
also with best practice within the industry. We have
fi
throughout our estate, and where appropriate that
includes undertaking detailed External Wall
Surveys. Such surveys will ensure any potential
fi
by highly experienced professional teams and,
fi
fi
are being addressed. In our interim results, we
previously advised that we planned to spend
fi
However, we are uncertain how much we will
recover from developers so we have increased
Independent Valuation
Each property in our 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 2021, the portfolio
was valued at £1,022 million, an increase of 2% from
prior year (31 December 2020: £1,005 million). See
valuation bridge on page 32 which details the
breakdown of the fair value movement in the year.
Property Portfolio Management
As described last year, we have undertaken
a strategic review of our portfolio, with the aim of
rationalising it to maximise the expertise, positive
reputation, and commercial power of the Hello
Student® brand. We have made good progress
disposing of non-core assets, and to date we have
sold £45 million of these, which on aggregate have
sold above book value.
This gives us an opportunity for capital
recycling, which we will undertake whilst focusing
on the best interests of shareholders. This includes
consideration of investment in refurbishments or
fi
a consistently high standard, where we have
fi
fi
a hurdle rate of 9%-11% IRR. During the year, we
completed two pilot refurbishment schemes to
upgrade rooms, both of which were successfully
completed and achieved target IRR. As a result, we
have drawn up plans to roll out the refurbishment
programme and will make progress on this in 2022.
Five Key Priorities
1.
Actively Managing
the Property Portfolio
2.
Strengthening our
Brand Proposition
3.
Driving Performance
through Data Analytics
4.
Delivering Consistent
Customer Service
5.
Developing
Our People
Driving performance
to improve shareholder
returns
An overriding focus that spans everything
we do is the safety and wellbeing of our colleagues,
customers, communities and stakeholders, and we
fi
is the case.
STRATEGIC REPORT019ANNUAL REPORT & ACCOUNTS 2021
Chief Executive Officer’s Review continued
We help build futures by providing the
best and safest buildings, environments
and support for our students to study
and flourish. We continuously focus
on improving our offer.
As a refresher on the portfolio segmentation:
Segment A comprises properties we regard
as core Hello Student® sites. They are in great
fi
best results. Apart from a continuous programme of
ensuring they remain in great condition, there are
fi
existing sites. This segment is targeted for growth
through either acquisitions or developments, as
described below.
Segment B comprises sites which
fundamentally meet the Hello Student® criteria, but
need investment in refurbishment or modest
fi
Student® brand standards, and thus command an
improved rental yield. We will invest in these sites,
fi
Segment C comprises sites which are not
core Hello Student® sites for various reasons, but
have good commercial characteristics. This
ff
ff
explore further. They can be divided into two
subcategories.
fi
fi
Hello Student® customers). However, with
nomination agreements for these sites, they
represent attractive commercial propositions.
Should this not be possible for any reason, they
could be disposal targets, as has already been
fi
The second sub-category comprises sites
fi
are ideal for mature graduates or postgraduates
who often look for accommodation in quieter
locations, or in city centres, or perhaps something
more suitable for couples. In 2022 or 2023 we will
be trialling a sub-brand of Hello Student® aimed at
more mature students, enabling us to retain, and
“upgrade” existing customers as they continue their
fi
loyalty through their Hello Student® experiences.
Segment D comprises properties that
currently represent approximately 8% of the value
of our portfolio, which for various reasons no
longer remain core. The disposal programme has
realised £45 million in gross proceeds so far, and
fi
will be sold over the course of the next 18 months,
after which segment D will no longer exist.
Proceeds from disposal are being deployed
in the best interests of shareholders, and a variety
of opportunities will be evaluated. This will include
reinvestment in new developments,
refurbishments or acquisitions to grow our
Segment A core Hello Student® portfolio,
especially on a cluster density increase basis.
Developments and Redevelopments
Work is progressing well at St Mary’s
Hospital in Bristol which will be completed in time
to operate for the 2022/23 academic year.
development in Canterbury called Franciscans,
and a refurbishment in Edinburgh called
Southbridge. The latter is now scheduled to begin
construction in 2022.
In December 2020 we secured planning
permission for the redevelopment of Francis
Gardner Apartments in London. The new
seven-storey development will provide 18 new
bedrooms with a mix of two, three and four-bed
fl
Portfolio Growth Strategy
As we release cash through the disposal
programme, reinvestment will take place in two
separate ways. Firstly, there is the capex
fi
existing portfolio to standard, and secondly there
is the development or acquisition of new bed
stock. We have undertaken a strategic review of
growth locations and will invest in growing bed
stock in those cities with Russell Group, or closely
international student participation is targeted for
growth over the next ten years or longer.
Development Pipeline
Site Development basis Beds Delivery year
St Mary’s, Bristol Direct Development 2022
Southbridge, Edinburgh 2022
Francis Gardner, London 72 TBC
FISC, Canterbury TBC
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021020
University is a time for making new friends,
learning new things and having new experiences.
Experiences that create memories to last a lifetime.
And Hello Student is more than just a home from
home, we’re basecamp for your next adventure.
ffi
acquiring or developing new sites in these cities
that are close to well-located existing sites. This
fi
additional beds, whilst maintaining the personalised
service and positioning requirements of being a
Hello Student® property, with that key homely
boutique feel.
Strengthening Our Brand Proposition (including
Our Sustainability Approach)
It is critical that we enshrine data-driven
customer insight into our property and service
ff
should also drive innovation and our marketing and
communications strategies. In 2021 we undertook
extensive qualitative and quantitative customer
research which is informing our plans, especially on
are working on an overhaul of our website and
communications.
Our Hello Student® brand has good
awareness and reputation, and we have used the
fi
Its execution in the various media we use to
communicate will be revisited to ensure we have
the right reach in the right channels. Our aim is to
build further on the strength of our brand within our
properties and ensure the Hello Student® name
becomes more prominent within the student
accommodation sector.
Our customers mostly belong to the late
Millennial or early Generation Z demographic
groupings, and, as such, it is highly important for
them to choose service providers who act in a
sustainable and responsible way. As such, ESG is
customer necessity. We have covered this key area
ffi
inspire colleagues, customers and investors.
Driving Performance through Data Analytics
Our Hello Hub operating platform has given
us a complete in-house solution to managing our
own revenues. Not only do we have the technical
systems in place, with the help of experts in this
fi
management processes, accountabilities and now
systemised our dynamic pricing approach.
Algorithms have been written, data management
expertise has been brought in-house, and this is
fi
decisions, enabling us to improve rental yields
over time.
As an example, we used our data analytics
fifi
categorisation was too complicated, not understood
by potential customers, and as a result they
abandoned their search with Hello Student® and
went to competitors. Changes were made to
simplify room types and their digital route to market,
and within two weeks this city grew their occupancy
over 50% more than the average occupancy growth
across the portfolio.
Dynamic pricing gives us a formalised
time-bound process to maximise our revenues on
sites that are in high demand, and similarly to
fi
premium positioning and improvements in quality
and customer service will enable us to command
better rents. The use of data is now giving us the
best possible direct control of room categorisation
and price setting, informed by real-time sales and
competitor data.
Delivering Consistent Customer Service
Since foundation, the Company has been on
largely outsourced with relatively little direct control
over its nature, quality or consistency. Operations
were fully brought in-house three years ago, and
since then we have been building the people
management expertise, and now it is time to really
drive a service culture and put customer experience
at the heart of what we deliver.
In 2021 we changed our working patterns
and introduced 24-hour service at our sites,
improving safety and security and customer
engagement. Our reception desks are now manned
when our customers most need to talk to us, not
shared between clusters of sites, so that we can
ff
only call in experts when more complex
maintenance is required.
Service requirements and standards are set
through researched customer insight and are
measured through satisfaction surveys. In 2021,
extensive customer insight has been gathered in
order to determine the most important elements,
in order to benchmark our performance against
others. Through this, we get a Net Promoter Score
(“NPS”) twice yearly, where we can benchmark
progress, areas of shortfall that need addressing,
and understand our competitive position.
The most recent result gave us an NPS of
+22 which has grown 1 point over the last 12
months, and compares to an all-sector average of
-8 and a private halls average of +20. This means
we are 2 points above the average for our
comparator group competitors, which we need to
be in order to earn our premium positioning.
24hr
service at our sites
NPS
+22
against PBSA Private halls average of +20
STRATEGIC REPORT021ANNUAL REPORT & ACCOUNTS 2021
Chief Executive Officer’s Review continued
needs is critical to maintaining competitive edge,
and delivering a consistent experience remains the
challenge. We also understand that knowing our
residents’ families, especially their parents, is a key
part of reassurance that makes the Hello Student®
ff
residence or HMOs.
Supporting Our Customers
During 2021 we have provided a Student
Assistance Programme in partnership with
Endsleigh and Health Assured. This scheme
provides a suite of wellbeing services for our
ff
fi
ffi
be in place during COVID-19 times but a permanent
enhancement of our student wellbeing support.
In addition, we have invested in mental
fi
in partnership with MHFA England. Whilst we do not
profess to be medical experts, our team are now
equipped to identify potential issues and assist
students to get the professional support they
require, particularly at times of stress such as
examinations.
Developing our People
At the heart of any service business are the
people that design, support and deliver the
customer experience. It has been a key priority in
2021, and will remain so, to invest in our people to
ensure we remain at the competitive leading edge
providing premium experiences.
Health and Safety
Health and safety is of paramount importance
to the Group. We have a legal and moral
responsibility to ensure that everyone who is living
in, working in or visiting our buildings is kept safe.
Our customer insight shows it is the number one
priority, by some margin, for our students.
fi
ensuring that we are ahead of any legislative
changes and that we have risk assessments,
fi
processes and we invest in prevention and
mitigation. To this end, we have allocated £37
fi
any building changes required.
Our buildings are inspected on a regular
basis to ensure that we identify and eliminate
hazards. To assess the buildings we have engaged
with specialist consultants to undertake thorough
fi
and prevention and water systems and treatment
against Legionella.
During 2021 we have undertaken extensive
formal health and safety training by the Institute of
Occupational Safety and Health (“IOSH”) for our
teams, from the Board to the front line.
We have delivered a series of Toolbox Talks
which are in document and e-learning format,
enabling all site teams to have continual access to
training.
A Health & Safety Forum has been
implemented during 2021 which includes
representatives from teams throughout the country.
Investments in People
In January 2020, we appointed a Training &
Development Manager to design and deliver
programmes to our people for their personal and
professional growth, which range from mandatory
training for governance to selling and practical
skills. We have further enhanced this, with the
engagement of an experienced performance
improvement coach who is helping the leadership
ff
We overhauled our e-learning platform and
provided support for new learning opportunities to
various roles within the business. This change in
emphasis from classroom to online webinar
ffi
restrictions from the pandemic, and we have
continued to focus on key sessions such as sales
and customer services to increase the knowledge
and skills of our operational teams.
We increased focus on mandatory training
with new measures to track compliance levels and
ensure high standards are being achieved. In
2022 we will enhance the skills of colleagues
within our maintenance teams. This will allow for
ffi
maintenance works can be conducted in-house,
and will also develop the network of our regional
teams so they are able to support each other
across the country.
We recognised the contribution that our
front-line operational teams have made to our
customers and the business and in 2021, we
increased pay to align with the Real Living Wage
as our minimum, and we are committed to paying
a fair wage for all core roles. We have
accreditation from the Real Living Wage
Foundation and have undertaken to uphold those
standards for years to come.
Colleague Engagement Score
82%
(2020: 83%)
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021022
As in previous years, we have undertaken a
colleague engagement survey which achieved a
response rate of 64% and an overall colleague
average of 68% and previous year’s result of 83%.
These results were delivered despite the current
pandemic and help to give us a better
understanding of what matters to our people and to
ensure we deliver improvements.
To provide a higher quality, consistent, 24/7
personalised service, we need the right calibre of
people, appropriately rewarded, who are trained
and developed. That process is underway and we
have already made changes to our site
management structure and invested in quality
colleagues to reduce turnover and increase our
service engagement. To deliver a personalised
homely service we need our front-line colleagues
to be in their positions for a long time to develop
those critical customer relationships, so measuring
turnover and retention will be key.
We will put more focus and resources into
fi
raising the proportion of internal promotions versus
external recruitment.
STRATEGIC REPORT023ANNUAL REPORT & ACCOUNTS 2021
Strategy in Action
Buildings
Refurbishing
our key assets
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021024
A newly renovated room in Leeds Pennine House.
28%
rental uplift achieved on the newly
refurbished rooms
Leeds Pennine House &
Bristol College Green
fi
refurbishment programme as outlined on page 20. This
consisted of a refurbishment of 37 beds across two buildings
and a refreshing of our communal areas in Leeds. These
refurbishments were completed over the summer while
students were still in situ within the building with no disruption.
undertaken which will ensure the second phase of renovations
in these buildings can be completed at a lower cost.
The studio suites have been adapted and fully upgraded to
include new kitchen, study, bedspace and extended storage
facilities. Bathrooms were refreshed, including new shower
enclosures, equipment and accessories. All works were carried
out to a market-leading standard.
Summer Refurbishments
All refurbished rooms are
100% occupied for the
2021/22 academic year.
STRATEGIC REPORT025ANNUAL REPORT & ACCOUNTS 2021
Strategy in Action
Developing
Our People
Introducing
our new
values
We have redefined and relaunched
our values from the grassroots up.
On 1 July 2021 we relaunched our
values; in developing our values we
started with interactive colleague
workshops, mainly as face-to-face
sessions, delivered at locations
across the UK.
Where this was not possible we also ran some virtual
sessions, meaning everyone had the opportunity to
contribute their ideas. This ranged from colleagues
to customers who all had an opportunity to feed
into our values. The outputs were then put to the
Colleague Forum who reviewed them and formulated
the acronym HOMES. The final values were then
shared across the business and were met with very
positive sentiment.
Our new values
Honest
We value
transparency and
integrity in our
words and actions.
One Team
We work as one
team to develop
safe, friendly
and inclusive
communities for
our customers
and colleagues.
Memorable
We create positive
experiences and
lifelong memories.
Equal
We welcome
individual differences
and support each
other with the same
amount of respect
and kindness.
Successful
We provide high-
quality services that
deliver results now
and for the future.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021026
Value in Action
One Team
We believe that we are all truly one equal team where we want
to work hard to ensure we develop safe, friendly and inclusive
communities for our customers. We ensure all people managers
in the Group have undertaken mental health first aid training
and that colleagues endeavour to respond to customers as soon
as they can. This value stretches throughout the organisation
and helps underpin everything else that we do.
Value in Action
Equal
We believe and support everyone from all backgrounds. For the
first time in 2021 we started an exercise to understand the ethnicity
of our workforce and how we could ensure that we continue to be
a welcoming business.
We have also continued our obligations to report under the gender
paygap. For another year our gender paygap is actually negative,
which means that on average within our business women are paid
more than men. We want to ensure that we are always an equal
employer but also always ensure we welcome people from all
backgrounds in our buildings as well.
STRATEGIC REPORT027ANNUAL REPORT & ACCOUNTS 2021
A B
C D
E
2021 2021
2021
2021
2021/22
2020 2020
2020
2020
2020/21
16% 22.0
0
82%
84%
23% 21.0
0
83%
65%
As at the end of February 2021
As at the end of February 2022
Key Performance Indicators
Non-Financial KPIs Financial KPIs
Rebooker Rate (%)
16%
Net Promoter Score
+22
Gross Margin (%)
58.8%
Adjusted Earnings per Share (p)
1.65p
Performance Performance
Purpose
The rebooker rate demonstrates our ability to retain
customers within the Hello Student® brand, which is an
indicator of the quality of service we provide.
NPS calculated by the Global Student Living Index which
also allows us to benchmark against our peers.
Purpose
fl
and to rigorously control our operating costs.
that best demonstrates our ability to reward
shareholders through dividends.
Strategic Link 1 2 3 4 5 1 2 3 4 5 Strategic Link 1 2 3 4 5 1 2 3 4 5
Revenue Occupancy (%)
84%
Safety – Number of Accidents
0
Dividend Cover (%)
66.0%
Net Asset Value per Share (p)
107.36p
Performance Performance
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.
The number of reportable accidents throughout the
Group each year. This is a key reporting metric to the
Health & Safety Executive as well as a measure of our
health and safety strategy and procedures.
Purpose
Dividend cover shows our ability to pay dividends
out of current year earnings. Note that in the past two
years dividends were suspended. See page 33 for
details.
fl
of our assets and our ability to generate revenue
from them.
Strategic Link 1 2 3 4 5 1 2 3 4 5 Strategic Link 1 2 3 4 5 1 2 3 4 5
Colleague Engagement
82%
Total Return (%)
4.6%
Performance Performance
Purpose
Colleague engagement scores provide an insight into
the happiness of our people across a range of topics
regarding their working environment.
Purpose
The Total Return shows the aggregate value
(lost)/gained for shareholders, through both capital
(decline)/growth of NAV and dividends.
Strategic Link 1 2 3 4 5 Strategic Link 1 2 3 4 5
Monitoring our
performance
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021028
F G
H I
J
2021
2021
2021
2021
2021
2020
2020
2020
2020
2020
58.8%
66.0%
4.6%
1.65
107.36
61.9%
183.8%
(3.6)%
2.30
105.00
Our key performance indicators (“KPIs”)
are central to how we run our business and
allow us to drive the performance of the
business for our shareholders. Due to the
impact of COVID-19 during this and the
previous year, several of our usual KPIs
are showing anomalous figures during this
reporting period. We expect this impact to
carry forward into our 2022 KPI reporting.
Non-Financial KPIs Financial KPIs
Rebooker Rate (%)
16%
Net Promoter Score
+22
Gross Margin (%)
58.8%
Adjusted Earnings per Share (p)
1.65p
Performance Performance
Purpose
The rebooker rate demonstrates our ability to retain
customers within the Hello Student® brand, which is an
indicator of the quality of service we provide.
NPS calculated by the Global Student Living Index which
also allows us to benchmark against our peers.
Purpose
fl
and to rigorously control our operating costs.
that best demonstrates our ability to reward
shareholders through dividends.
Strategic Link 1 2 3 4 5 1 2 3 4 5 Strategic Link 1 2 3 4 5 1 2 3 4 5
Revenue Occupancy (%)
84%
Safety – Number of Accidents
0
Dividend Cover (%)
66.0%
Net Asset Value per Share (p)
107.36p
Performance Performance
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.
The number of reportable accidents throughout the
Group each year. This is a key reporting metric to the
Health & Safety Executive as well as a measure of our
health and safety strategy and procedures.
Purpose
Dividend cover shows our ability to pay dividends
out of current year earnings. Note that in the past two
years dividends were suspended. See page 33 for
details.
fl
of our assets and our ability to generate revenue
from them.
Strategic Link 1 2 3 4 5 1 2 3 4 5 Strategic Link 1 2 3 4 5 1 2 3 4 5
Colleague Engagement
82%
Total Return (%)
4.6%
Performance Performance
Purpose
Colleague engagement scores provide an insight into
the happiness of our people across a range of topics
regarding their working environment.
Purpose
The Total Return shows the aggregate value
(lost)/gained for shareholders, through both capital
(decline)/growth of NAV and dividends.
Strategic Link 1 2 3 4 5 Strategic Link 1 2 3 4 5
Strategic Links
1. Customers
2. Brand
3. People and Operations
4. Buildings
5. Shareholders
Definitions
For definitions see page 12.
During the year we have amended our customer-related
which was internally measured, to a NPS score calculated
by the Global Student Living Index which also allows us to
benchmark against our peers.
fl
fifi
STRATEGIC REPORT029ANNUAL REPORT & ACCOUNTS 2021
CFO and CSO Statement
We have had a busy year,
embedding new systems and
change so that we have a strong
platform for growth.
LYNNE FENNAH
Chief Financial and Sustainability Officer
2 March 2022
Driving
efficiencies
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021030
2021 has seen us complete what
can be viewed as the first phase of
our operational transformation
which we started in 2018, with
all activities now safely migrated
in-house. The key final milestone
this year was the previous
external revenue management
contract ending in October 2021
with the academic year 2020/21
being the final one externally
managed. In November 2020 we
had already started selling for the
academic year 2021/22 on our
in-house platform for the first
time, and throughout 2021 we
have now also successfully taken
payments directly from students
for the first time.
Like-for-Like rental growth for
Academic Year 2020/21
1.3%
fi
fi
to thank the entire team for their contribution in
making this happen.
The next phase of our transformation will see
us focusing on continuing to drive performance and
ffi
operational focus in this respect in 2021 having
been:
– Completed the induction and establishment
in the senior team of the CEO and Property Director,
fi
– Embedding the day-to-day management of
the in-house revenue management platform and
the related dynamic pricing model.
– Re-structuring of the IT team and the
ffi
further rationalisation of our IT platforms and
automation of processes.
– An external review of cyber security and IT
enterprise architecture.
Revenue Management System
fi
management system concluded in October when
we brought the process for the collection of
Receivables in-house. This is now a centralised
fi
This system gives us direct control of our
revenue management, enabling us to make price
ffi
– it allows us to manage the relationship with
our customers directly end to end;
– it makes debt collection easier, and,
importantly, we are delivering annualised cost
savings of £1.5 million which started in September.
Financial Performance
Our performance in 2021 continued to
improvement as restrictions relaxed during the year
and despite the Omicron surge in December we
fi
conditions are starting to normalise for the 2022/23
academic year.
Revenue decreased 6% to £56.0 million, as
fi
65% compared to 84% for the same period in 2020.
We started the academic year 2021/22 at 81%
occupancy and this has increased to 84% since
then.
Like-for-like rental growth for the 2020/21
academic year was 1.3% as reported previously, as
we prioritised occupancy levels over rental growth.
Property Expenses were up 2% mainly driven
by having to pay council tax on empty rooms as a
result of lower occupancy levels.
Gross Margin decreased from 62% to 59% as
a result of a £3.5 million fall in revenue.
During the period, we sold four assets with a
net gain on disposal of £1.7 million.
Since the year end you will have seen that
fi
also above book value, alongside one acquisition.
These have been reported on as assets held for
sale as at the balance sheet date.
fi
of investment properties was £17.6 million compared
to a £37.6 million loss the previous year.
STRATEGIC REPORT031ANNUAL REPORT & ACCOUNTS 2021
Valuation Movement
1,005.1
988.8(16.3)
(17.2)
(2.5) 15.2
15.4
21.3
0.8 1,021.8
(25.9)
995.9
December
2020
Valuation
Opening Increase FinalDecrease
Revaluation on
Developments
Revaluation
on Commercial
Units
December 2020
Valuation Post
Disposals
Capital and
Development
Expenditure
Remove HFS
Assets
Property
Disposals
Change in
COVID-19
Shortfall
Deduction
December 2021
Valuation
Deduction for
fire works
Revaluation
on Standing
Student
Investments
December 2021
Valuation
excluding HFS
Assets
CFO and CSO Statement continued
fi
less than last year due to maintaining the RCF at a
lower level and continued low interest rates.
fi
£29.2 million (2020: loss £24.0 million). No
fi
Trust (“REIT”). Basic earnings per share (“EPS”) was
therefore 4.84 pence and also 4.84 pence on a
diluted basis (2020: loss (3.97) pence and (3.97)
pence (diluted).
earnings when assessing dividend distributions.
2.30 pence). This shows that the underlying
operating business is continuing to generate cash
despite the impact of the pandemic.
The Net Asset Value (“NAV”) per share
The NAV is shown net of all property
acquisition costs and dividends paid during
Valuation Movement
The chart below shows a breakdown of the
movement in our portfolio valuation since the end
of 2020.
During 2021 we sold four assets for
£16.3 million. After that disposal the portfolio was
valued at £988.8 million.
In August 2021 we indicated we would spend
£30 million on health and safety works over the next
fi
recover from developers so we have increased this
to £37 million. CBRE accepted management’s
assumption is that £17.2 million of this cost should
fl
fi
The value of developments has fallen by
consent on Canterbury.
At the end of December 2020, we reported a
COVID-19 related reduction in the year-end portfolio
valuation of £21.4 million, mainly due to CBRE’s
assumption of 50% occupancy for the balance of
the 2020/21 academic year.
Our ‘cloud first’ strategy
allowed us to apply business
continuity with minimal
disruption to productivity.
Valuation Average Net Initial Yield
5.3%
(December 2020: 5.6%)
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021032
Our future dividend policy will be
progressive, whilst also ensuring that dividends are
paid on a fully covered basis. Driving long-term
shareholder value remains top of our agenda as we
drive value-enhancing changes in our business.
Debt
At the year end, before deduction of loan
arrangement fees, the Group had committed
investment debt facilities of £420 million, of which
£375 million were drawn down (2020: £390 million
drawn down).
Of our drawn investment debt, £277 million of
fifl
aggregate cost of our investment debt was 3.0%,
with a weighted average term of 4.9 years.
The Loan to Value for the Group was 33.1%
(2020: 35.4%), broadly in line with our long-term LTV
target of 35%.
We have also agreed waivers or an easing of
covenant requirements on all our debt to ensure
that we remain covenant compliant throughout the
pandemic.
We currently have around £44 million of
unencumbered assets and as at the year end we
had £81 million of undrawn investment facilities and
cash.
We have one facility which is due in less than
one year. The facility totals £90million of which
£45million was drawn at the end of the year. Post
year end we have signed an extension for a further
three years. Once completed we expect to have no
fi
Loan to Value
33.1%
(2020: 35.4%)
Dividends
Quarter ending Declared Paid Amount (p)
30 September 2021 29 October 2021 3 December 2021 2.50
We are now reporting a £15.2 million move in
our favour as CBRE reduced their COVID-19
deduction to £6.2 million.
This deduction of £6.2 million relates to
2022/23.
During the year, we spent £8.0 million on
capital expenditure and £7.4 million on
development.
Our operational assets increased in value by
£21.3 million, driven by improved rental growth on
ff
reduction in secondary assets.
Our commercial portfolio, which comprises
convenience stores and restaurants within our sites,
went up £0.8 million.
The valuation at the end of December, before
the year end, was £1.022 billion.
Over the year, Net Initial Yield has slightly
improved from 5.6% to 5.3%.
Dividends
The dividends declared in respect of the
fi
We are pleased to report that we resumed
dividend payments in Q4 2021 with a payment of
2.5p per share. This comprises the PID distribution
fi
2019 and 1.5p per share for 2020. In 2022, we plan
to start paying a minimum dividend of 2.5p per
share per annum, with a view to increasing this as
occupancy levels normalise.
STRATEGIC REPORT033ANNUAL REPORT & ACCOUNTS 2021
IMPORTANCE TO STAKEHOLDERS
Low High
Low
High
IMPORTANCE TO EMPIRIC STUDENT PROPERTY PLC
ffi
Sustainable properties
Health & safety
Mental health & wellbeing
Water
management
Climate change
adaptation
Community investment
& engagement
Fair compensation &
executive remuneration
Regulation
Biodiversity
Responsible supply
chain management
Climate change
mitigation
Sustainable lifestyles
& behaviours
Sustainable
construction
Diversity, equality
& inclusion
Transparency
& disclosure
Brand, culture
& values
Responsible Business – ESG
Responsible
and sustainable
approach
The Board believes that ESG
must be fully embedded within
all activities within the Group
for it to succeed.
Our ESG Journey and Commitment to
Stakeholders
We are committed to creating and operating
a responsible and sustainable business which has a
positive impact on all of our stakeholders. During
2020 we established a Board-level ESG Committee
tasked with providing a road map to deliver a
fi
Our purpose is to help students make the
most of their university life by providing safe and
modern living spaces with service that makes them
feel at home.
In 2021 the ESG Committee undertook our
fi
undertake a materiality assessment was driven by a
number of considerations. Firstly, a materiality
assessment would help inform the Group’s future
sustainability strategy. It would allow the Group to
identify what organisational changes would be
required and what tools, resources or investment
would be needed to implement a robust ESG
strategy. Importantly, a materiality assessment
would enable the Group to prioritise what the
business can or should do to support its key
stakeholders whilst communicating this both
internally and externally. Finally, completing a
materiality assessment would allow the Group to
rationalise to key stakeholders why it was
prioritising certain topics within its future
sustainability strategy and disclosure.
Materiality Matrix
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021034
O
u
r
P
e
o
p
l
e
O
u
r
P
e
o
p
l
e
S
e
n
i
o
r
L
e
a
d
e
r
s
h
i
p
T
e
a
m
S
e
n
i
o
r
L
e
a
d
e
r
s
h
i
p
T
e
a
m
The Board
The Board
The Board has overall responsibility for…
the Group’s ESG strategy and the direction which the Group will take.
ESG Committee
The Committee will oversee…
the creation of overall ESG strategy for the Group, ensuring
that there is Board-level discussion and input.
Our People
The successful delivery of an ESG strategy across our business
will require the collaboration and support of all our people.
Senior Leadership Team
Senior management are responsible for…
ensuring this ESG strategy is embedded throughout the
business and providing key support to communities.
E
S
G
C
o
m
m
i
t
t
e
e
E
S
G
C
o
m
m
i
t
t
e
e
Responsible
and sustainable
approach
The assessment, led by our Board and ESG
Committee, was undertaken by an independent
fi
The assessment was conducted according to
reporting standards.
To ensure that we fully understood the
priorities and needs of our stakeholders, we:
– Listened to over 1,700 students to better
understand our customers’ needs and expectations.
–
groups with our colleagues.
– Conducted one-to-one interviews with other
stakeholders, such as investors, banks, professional
advisers and analysts.
Following the assessments above, our
external adviser analysed and assessed qualitative
fi
stakeholders, with the output of the materiality
matrix detailed opposite.
The ESG Committee reviewed the
materiality matrix and decided to combine the
ffi
properties” topics under one heading. The
Committee also decided to add a fourth topic
around how Empiric aims to provide opportunities
for all through its business activities.
We have structured our Responsible
Business section so that we have an individual
section for each of our four key topics:
– Becoming a sustainable business and
achieving net zero
Page 36
– Excelling in providing health and safety
Page 37
– Enhancing mental health and wellbeing
Page 38
– Providing opportunities for all
Page 39
We are committed to improving our
contribution to the environment, our social
obligations to employees, suppliers, customers and
the communities in which we operate. Our activities
will be guided by setting ambitious and challenging
targets that will guide our strategy, operations and
employees over the coming years.
ESG
Management
Framework
STRATEGIC REPORT035ANNUAL REPORT & ACCOUNTS 2021
Responsible Business – ESG continued
Becoming a
sustainable
business
and achieving
net zero
We intend to become net zero in
our operations, property portfolio
and energy consumption by
2035 or before. We will reduce
the environmental impact of the
buildings annually as part of a
strategy through investment in
energy and resource efficiencies
and encourage our students
to increase their sustainable
behaviour. We have also set a
wider target of being net zero in
all our emissions (adding scope 3)
by 2050 or sooner.
Actions Undertaken During 2021
As part of our ambition to achieve net zero
we have appointed CBRE to undertake an
overarching Net Zero report, this will help us to
fi
stronger governance. As part of this report, there
will be a section that we publish on our website
under a new ESG section.
We have also commissioned our utilities
adviser to build an asset-by-asset road map of our
existing portfolio. This will contain yearly targets and
activities and highlight to us where best to invest
Interim Report we announced that we had ring
fenced £4 million of green expenditure over the
fi
fi
pilot green initiative in Manchester on two assets.
heaters in the building which were then connected
in energy savings over a period of less than two
years. This pilot initiative was completed without
any disturbance to our customers and has helped
design the blueprint for future initiatives.
During 2021 we also replaced all of our
on-site vans with electric vehicles; see case study
for more detail. These vans can then be charged
on-site where the electricity we use in our buildings
fi
Ofgem. This means the electricity we use is
generated in renewable ways ranging from solar
and wind turbines to anaerobic digestion and
biomass plants.
Finally, in 2021 we signed up to become a
fi
complying with disclosures in line with TCFD
recommendations except as set out on page 44. We
expect these disclosures to evolve as we start to
fi
become fully compliant in the future.
Key Aims for 2022
– Disclosure of our EPC position across the
Group and steps being taken to improve this.
– Continue our road map of planned energy
ffi
– Increase the ESG disclosures on our
corporate website to increase transparency.
– Publish CBRE’s Net Zero report on
Electric Vans
case study
During 2021 the lease on our six diesel
work vans came up for renewal and the
decision was quickly made to replace
these with green electric work vans.
Although this came at a slight
premium, it was an important message
to make to underline our commitment
to ESG. As part of the project we
installed electric charging stations at six
buildings and were able to utilise our
renewable electricity. Our people and
students reacted very positively to the
roll-out of the new electric vans, with
posts being made on Workplace, our
internal social media site.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021036
Excelling in
Providing Health
and Safety
We will continue to build on
our established good practice
in health and safety where
we operate. We will do this
by continuing to target zero
RIDDORs each year as defined
by the HSE. We also understand
the need to create environments
that make our students and
employees feel safe. Needing to
feel safe always scores highly in
our customer surveys and we
have a duty to address that.
Actions Undertaken During 2021
In our 2021 Interim Report we announced
fi
safety works in our buildings. However, we are
uncertain how much we will recover from
developers so we have increased this estimate to
£37 million.
This workstream was split into two sections.
fifi
where we undertook works on 29 buildings in 2021,
with a further 30 buildings planned for 2022 and
2023. The second part of the workstream was
external wall system (“EWS”) surveys. We undertook
EWS surveys on our 20 buildings which were
classed as high risk due to their height being over
18 metres. The actions are currently being worked
through by our property team.
always of paramount importance to us. We have
continued to maintain a number of initiatives within
our buildings to ensure safety during the COVID-19
pandemic, and we have also been agile and
amended these safety measures in line with
government guidance.
We undertook a large training programme
with the Institute of Occupational Safety and Health
(“IOSH”) during the year; see case study for detail.
One outcome of this training was the decision to
review and relaunch our existing health and safety
policy to ensure it was up to date and relevant. This
was relaunched in October 2021 alongside a
secondary document which gives guidance on the
key aspects of the policy document which are
Key Aims for 2022
– We have hired a full-time in-house health and
safety expert to increase the resource and
knowledge with the business. We also require an
internal expert to help us facilitate and embed a
culture change throughout the business.
– fi
reporting around Colleague Engagement, Training,
Incident Reporting and Student Feedback.
– Continue to undertake capital expenditure on
fi
IOSH Training
case study
During the year, we undertook a
number of training courses with IOSH.
There were two main streams of
training, firstly the frontline IOSH
training programme. This consisted of
three separate courses: Managing Safely,
Working Safely and Fire Safety. This
was delivered as a hybrid of in-person
and online teaching to our people. We
had 120 of our front line people
complete the course and the feedback we
had was overwhelmingly positive.
The second stream of training was the
IOSH Leading Safely course. This was
a full day in-person course delivered to
three Board members and three
Executive Committee members. Each
attendee made a number of key safety
commitments which will be woven into
our health and safety strategy.
STRATEGIC REPORT037ANNUAL REPORT & ACCOUNTS 2021
Responsible Business – ESG continued
Enhancing Mental
Health and
Wellbeing
The wellbeing and mental health
of our students and employees is a
top priority for us. We also know
how it can make a positive impact
on our business and the wider
community.
Actions Undertaken During 2021
During 2021 we undertook a number of
ff
wellbeing for both colleagues and our customers.
One of the key actions undertaken was mental
health training undertaken with Mental Health First
Aid England, discussed further in our case study.
We launched a series of awareness and
wellbeing weeks across the business. In May we
had our Mental Health Awareness Week with the
theme of nature; we encouraged colleagues to get
outdoors and share their pictures on a new ESG
working group on Workplace and used the
opportunity to remind everyone how to access
support to improve their wellbeing and mental
health. In October we launched a series of
ff
aspect of wellbeing each week, encouraging
managers to engage their team members in
discussions that will increase awareness about the
ff
care about the health and wellbeing of our people.
We also launched a “How are you Feeling?”
ffi
colleagues following an extended period of remote
ffi
move to London Bridge later in the year. The survey
results indicated a strong preference for “hybrid
working” to become the new norm. A working party
was set up to further review and respond to the
results, combined with communication updates for
ffi
We launched a further round of refunds and
discounts to help our customers who had been
impacted by the COVID-19 pandemic. One of the
ff
was the impact of stress on our customers’
In 2021 we have continued in partnership
with Endsleigh, a student assistance programme.
This programme provides our customers with
unlimited access to a 24/7 mental health and
fi
through a telephone helpline. We believe
supporting our customers’ wellbeing is paramount.
Key Aims for 2022
– Improve our Best Companies score as well
as our student satisfaction score.
– fi
approach to the wellbeing of all our stakeholders
fi
Mental Health &
Wellbeing Training
case study
We partnered with Mental Health First
Aid England (“MHFA”) to deliver
training to all people managers to
improve their knowledge, awareness
and understanding in supporting both
team members and students. Separate
shorter sessions were also delivered for
key frontline roles, Customer Service
Advisers and Night Caretakers initially.
This meant that everyone from our
CEO to our front-line colleagues had
undertaken some form of mental health
first aid training to ensure we can help
protect our customers and our people as
well as ourselves. We want to continue
to progress this training in future years
with regular top-up sessions and
forumdiscussions.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021038
2020
2021
Male Female
155
166
2021
2020
4 2
140
4 2
158
2
138
154
2020
2021
4
2020
2021
151
162
2
4
Gender Diversity
Board
Executive Committee
Other Employees
Total
Providing
Opportunities
For All
We believe that being inclusive
improves opportunities for our
students, employees and people
living in the communities we
operate in. This will not only
create long-term value to our
business, but also society.
Actions Undertaken During 2021
fi
Living Wage Employer from 1 January 2021. We are
committed to ensuring that we continue to hold this
accreditation as we strongly believe our people
should be fairly rewarded.
established for monthly tracking and reporting. This
has shown a 44% increase in the year. Secondly, a
roles; this is currently running at 23%, meaning that
fifi
internally by promotion.
To help assist internal promotions we have
launched a skills matrix for maintenance operatives
and day/night caretakers. This self-assessment
allows us to gauge current levels of ability and
fi
highlights areas where we will develop a training
plan to increase capability and reduce external
spend as well as upskilling our people. This allows
our people to work as one team and to treat others
as equals. These feed into our Values as a business
which we relaunched in the year; see the case
study for more detail.
Key Aims for 2022
– Continue to support and help local causes in
our communities.
–
diversity issues and targets.
Equality, Diversity and Inclusion
Group employees are committed to
promoting an inclusive, positive and collaborative
culture. We treat everyone equally irrespective of
age, sex, sexual orientation, race, colour, nationality,
ethnic origin, religion, religious or other
philosophical belief, disability, gender identity,
gender reassignment, marital or civil partner status,
or pregnancy or maternity.
We continue to review our approach to
diversity, equality and inclusion, including the use
STRATEGIC REPORT039ANNUAL REPORT & ACCOUNTS 2021
Responsible Business – ESG continued
Modern Slavery
Protecting human rights and preventing
modern slavery is important to us. We are
fundamentally opposed to slavery and committed to
understanding the risk of it and ensuring it does not
occur anywhere within our business or supply
chain.
fi
ffi
particularly in connection with the sourcing by
suppliers of construction material, certain goods
and the provision of manual labour in property
development and management services.
While nearly all our direct suppliers are
some materials from around the world.
As part of our broader initiative to identify
and mitigate risk in our supply chain, we have
updated our consideration of factors such as:
– reviewing our current contractors and
suppliers, particularly in relation to supply chain,
with a view to developing preferred supplier list
arrangements based on robust selection;
– centralising more contracts as a core part of
our supplier management strategy;
– strengthening our compliance review
processes within procurement practices;
– developing strong relationships with
business code of conduct expectations; and
– ensuring systems are in place to encourage
the reporting of concerns and the protection of
whistleblowers in our supply chain.
We believe there is minimal risk of slavery
ffi
continue to review this risk assessment and monitor
our activity as part of our broader approach to
ensuring we are a responsible and sustainable
business.
For our full statement please refer to
www.hellostudent.co.uk
Ethical Business
We are committed to carrying out business
fairly, honestly and openly. Our anti-bribery policy
mandates a zero-tolerance approach, which all our
people must read and consent to, both during their
induction and when any updates are made to the
policy. We require employees to take regular
compliance training and to certify each year that
they have complied with our policies.
Our people are important to our business
maintaining the highest standards of honesty,
openness and accountability. Our whistleblowing
policy explains how our people can report a
whistleblowing concern and reassures them that
fi
Board monitors and reviews the policy on at least
legislation. There were no incidents of
whistleblowing during the year. In 2022 we are
going to seek to develop an externally managed
whistleblowing hotline as well as reviewing
Opportunities
For All
case study
We also look to provide opportunities
for all in our wider community.
During the year, the BBC undertook
filming at one of our buildings and as
payment we requested they make a
donation to a charity on our behalf.
The local site team chose Kind in
Liverpool, a charity which focuses on
helping disadvantaged children and
families from across Liverpool and
Merseyside. The image here shows the
filming outside our Hahnemann
Building.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021040
Our key
stakeholders
and how
we engage
with them
This section provides more
information on the various
stakeholder engagement activities
and our future plans. Please refer
to the section 172 (“s.172”)
statement on page 46 for more
detail on the Board’s engagement
with our key stakeholders.
STRATEGIC REPORT041ANNUAL REPORT & ACCOUNTS 2021
Responsible Business – ESG continued
Stakeholder Why We Engage How We Engage Material Issues Actions Taken in 2021
Customers
The needs of our customers inspire our brand and
provide insightful feedback on how we can improve
fffi
purpose. We have a responsibility to provide our
customers with a safe place to live and to care for
their wellbeing, which is critical to the Board’s
strategic decision-making and our review of any
operational changes.
On a day-to-day basis within our buildings.
Through biannual customer surveys.
Through our social media presence.
Through building relationships with universities in
the towns and cities which we operate in.
– Safety in their homes
– Customer service
– Value for money
– ff
by COVID-19 pandemic in Q1 2021.
– Moved our student assistance
programme onto a student app.
Page 22
– Embedded our new operational
structure, meaning there was cover
Page 22
People
Our people are vital to the successful delivery of
our business performance. We have a responsibility
to provide our people with a safe place to work
The tone and culture of our organisation comes
alive through the actions of our people.
On a day-to-day basis we use Workplace as an
internal communication tool.
Quarterly townhalls are held where our people
can raise questions and contribute.
Through the Colleague Forum.
– Safety at work
– Pay and reward
– Fair and equal treatment
– Communication
– Relaunched our Company values after
a consultation with our people.
Page 26
– Rated as “One to Watch” by the Best
Companies survey.
Page 22
– Becoming a Real Living Wage
Employer from January 2021.
Page 22
Communities
fi
enhancing the university experience for our
customers. The Board aims to understand the local
markets in which we operate and the key issues we
face which assists its decision-making around new
opportunities through which we can contribute to
our local communities.
Through on-site communication with members of
the public and local communities.
We have membership with the British Property
Federation where we can interact with
communities and government on a wider basis.
We also have interaction with communities
through the property licensing disclosures we
have to undertake.
– Job creation
– Housing stock
– Supporting local charities
– Supported a number of local charities
and donated items to the British
– fi
Page 40
Shareholders
Our shareholders are key stakeholders in our
business. The Board has a responsibility and desire
to communicate key matters relating to the Group
openly and honestly to our shareholders.
The Group also has a wider responsibility to
shareholders to enhance the value of the business
fi
Through face-to-face meetings with investors.
Through our Annual and Interim Report.
At our Annual General Meeting.
– ESG reporting and disclosure
– Sustainable business
– Financial results
– Dividend payments
–
Page 34
– Resumption of paying dividends
Page 33
– Protecting the business and
and going concern.
Page 33
Environment
Our environment is fundamental to our future. We
ffi
fi
operations on the environment and utilising
methods throughout our properties (both
development and operational sites) that mitigate
the risk of environmental damage.
On an annual basis there is detailed ESG
reporting within our Annual Report.
We are looking to increase the level of reporting
and policies available on our website.
– Reduction in greenhouse gas emissions
– Sustainable business
– Replacing all of our diesel vans with
electric vans.
Page 36
– ffi
fi
fi
Page 36
Stakeholder
Engagement
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021042
Stakeholder Why We Engage How We Engage Material Issues Actions Taken in 2021
Customers
The needs of our customers inspire our brand and
provide insightful feedback on how we can improve
fffi
purpose. We have a responsibility to provide our
customers with a safe place to live and to care for
their wellbeing, which is critical to the Board’s
strategic decision-making and our review of any
operational changes.
On a day-to-day basis within our buildings.
Through biannual customer surveys.
Through our social media presence.
Through building relationships with universities in
the towns and cities which we operate in.
– Safety in their homes
– Customer service
– Value for money
– ff
by COVID-19 pandemic in Q1 2021.
– Moved our student assistance
programme onto a student app.
Page 22
– Embedded our new operational
structure, meaning there was cover
Page 22
People
Our people are vital to the successful delivery of
our business performance. We have a responsibility
to provide our people with a safe place to work
The tone and culture of our organisation comes
alive through the actions of our people.
On a day-to-day basis we use Workplace as an
internal communication tool.
Quarterly townhalls are held where our people
can raise questions and contribute.
Through the Colleague Forum.
– Safety at work
– Pay and reward
– Fair and equal treatment
– Communication
– Relaunched our Company values after
a consultation with our people.
Page 26
– Rated as “One to Watch” by the Best
Companies survey.
Page 22
– Becoming a Real Living Wage
Employer from January 2021.
Page 22
Communities
fi
enhancing the university experience for our
customers. The Board aims to understand the local
markets in which we operate and the key issues we
face which assists its decision-making around new
opportunities through which we can contribute to
our local communities.
Through on-site communication with members of
the public and local communities.
We have membership with the British Property
Federation where we can interact with
communities and government on a wider basis.
We also have interaction with communities
through the property licensing disclosures we
have to undertake.
– Job creation
– Housing stock
– Supporting local charities
– Supported a number of local charities
and donated items to the British
– fi
Page 40
Shareholders
Our shareholders are key stakeholders in our
business. The Board has a responsibility and desire
to communicate key matters relating to the Group
openly and honestly to our shareholders.
The Group also has a wider responsibility to
shareholders to enhance the value of the business
fi
Through face-to-face meetings with investors.
Through our Annual and Interim Report.
At our Annual General Meeting.
– ESG reporting and disclosure
– Sustainable business
– Financial results
– Dividend payments
–
Page 34
– Resumption of paying dividends
Page 33
– Protecting the business and
and going concern.
Page 33
Environment
Our environment is fundamental to our future. We
ffi
fi
operations on the environment and utilising
methods throughout our properties (both
development and operational sites) that mitigate
the risk of environmental damage.
On an annual basis there is detailed ESG
reporting within our Annual Report.
We are looking to increase the level of reporting
and policies available on our website.
– Reduction in greenhouse gas emissions
– Sustainable business
– Replacing all of our diesel vans with
electric vans.
Page 36
– ffi
fi
fi
Page 36
STRATEGIC REPORT043ANNUAL REPORT & ACCOUNTS 2021
Responsible Business – ESG continued
Task Force on Climate-
related Financial
Disclosures (“TCFD”)
We’re committed to implementing the recommendations of the
Task Force on Climate-related Financial Disclosures. In 2021
we signed up to become an official supporter of the TCFD.
Area Disclosure
Governance
a) Describe the Board’s oversight of climate-
related risks and opportunities.
b) Describe management’s role in assessing
and managing climate-related risks and
opportunities.
a) The Board is ultimately responsible for risk management, including the consideration of
climate-related risks, though this responsibility is delegated to the Audit and Risk Committee.
See pages 48 to 53 for our risk management framework.
b) The ESG Committee’s terms of reference set out that the Committee is responsible for:
“Identifying, managing and mitigating or eliminating ESG risks in connection with the Group’s
operations and corporate activity:” The ESG Committee is a Board-level Committee chaired
by the Chairman. Management is informed through reports and feedback from the CFO/CSO
who manages the day-to-day ESG working Group.
Strategy
a) Describe the climate-related risks and
fi
the short, medium, and long term.
b) Describe the impact of climate-related risks
and opportunities on the organisation’s
fi
c) Describe the resilience of the organisation’s
ff
climate-related scenarios, including a 2°C or
lower scenario.
a) We have undertaken an initial review of the climate-related risks over the short, medium
and long term as set out below. We will identify risks and opportunities on a continual basis.
net carbon neutral target. This includes greater disclosure requirements as well as
ffi
Medium term (5-10 years): Customer choice will become more environmentally driven, with
ffi
which our buildings will have to be able to withstand and thrive in.
b) The Board will ensure that climate risks and ESG factors are included as key metrics when
ffi
ffi
ffi
c) We do not currently comply with this. We will in the near future undertake an analysis into
Risk management
a) Describe the organisation’s processes for
identifying and assessing climate-related risks.
b) Describe the organisation’s processes for
managing climate-related risks.
c) Describe how processes for identifying,
assessing, and managing climate-related risks
are integrated into the organisation’s overall
risk management.
a) The Group does not yet fully comply with this, the organisation has included climate-
related risks into some elements of its decision making, such as any property investment /
fi
fi
frameworks will be.
b&c) The Board recognises that climate change is an increasingly important priority and is
one of our top emerging risks. Our risk matrix is regularly reviewed and updated to keep
track of the changing nature of these risks. See page 48 to 53 for the Group’s Principal Risks
Metrics and targets
a) Disclose the metrics used by the organisation
to assess climate-related risks and opportunities
in line with its strategy and risk management
process.
b) Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 greenhouse gas (“GHG”) emissions, and
the related risks.
c) Describe the targets used by the organisation
to manage climate-related risks and opportunities
and performance against targets.
a,b&c) We do not currently fully comply with this. As we develop our ESG strategy and our
climate-related risk management we will publish further metrics in this area and announce
targets for these.
We disclose Scope 1 and 2 greenhouse gas (“GHG”) emissions in our Annual Report; see
page 45. We are looking to include Scope 3 emissions in the future, once we further
develop our ESG reporting. We do not believe Scope 3 emissions will have a material impact
fi
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021044
Energy
Usage Data
Energy Usage
Energy usage remains a key focus for our
business, reducing usage both through changing
how our customers act and also employing capital
– 8.6% reduction in like-for-like direct GHG
emissions since 2020.
– 0.1% increase in like-for-like electricity
consumption since 2020.
– COVID-19 had an impact in the reduction
Due to the various lockdowns under government
guidelines, we expect the consumption to start
increasing in line with pre COVID-19 levels
Water Usage
Our total water usage has decreased
marginally since 2020. However, on a normalised
basis per bed the usage levels have increased. This
is due to more accurate data being available due to
the installation of smart meters.
Methodology
We have used the EPRA Best Practices
Recommendations on Sustainability Reporting
fi
Government Conversion Factors for Company
Reporting have been applied to convert energy
data into greenhouse gas emissions. Whole
building data has been reported and any missing
data has been estimated using either direct
comparison, pro rata calculation or based on
Waste Management
All sites currently have recycling facilities that
are used by our customers and people. We aim to
review our overall waste management arrangement
ffi
recycling throughout the whole Group.
The EPRA performance data set out on this
page provides the information required for the
Group to comply with The Companies (Directors’
Report) and Limited Liability Partnerships (Energy
and Carbon Report) Regulations 2018. Direct
emissions are the emissions from activities for
combustion of fuel and operation of facilities
are emissions from purchase of electricity, heat,
steam and colling purchased for own use (known
The tables below contain our EPRA performance data for each relevant impact area.
Greenhouse Gas EPRA Code 2021 2020
Like-for-like:
Total direct GHG emissions (tCO
2
e) GHG-Dir-LfL 3,309 3,622
Total indirect GHG emissions (tCO
2
e) GHG-Indir-LfL 3,772 4,139
Absolute:
Total direct GHG emissions (tCO
2
e) GHG-Dir-Abs 3,309 3,622
Total indirect GHG emissions (tCO
2
e) GHG-Indir-Abs 3,772 4,139
Normalised:
GHG intensity from building energy consumption
(tCO
2
e per operating bed) GHG-Int 0.82 0..88
2021 – % of total assets included: LfL – 100% / Abs – 100%
2021 – % of data estimated: LfL – 9.1% / Abs – 9.1%
Energy EPRA Code 2021 2020
Like-for-like:
Total fuel consumption (kWh) Fuels-LfL 18,068,259 19,699,010
Total district heating & cooling consumption (kWh) DH&C-Abs 628,636 669,120
Total electricity consumption (kWh) Elec-LfL 17,763,204 17,753,011
Absolute:
Total fuel consumption (kWh) Fuels-Abs 18,068,259 19,699,010
Total district heating & cooling consumption (kWh) DH&C-Abs 628,636 669,120
Total electricity consumption (kWh) Elec-Abs 17,763,204 17,753,011
Normalised:
Building energy intensity (kWh per operating bed) Energy-Int 4,228.73 4,339.84
2021 – % of total assets included: LfL – 100% / Abs – 100%
2021 – % of data estimated: LfL – 9.1% / Abs – 9.1%
Water EPRA Code 2021 2020
Like-for-like:
Total water consumption (m
3
) Water-LfL 353,826 356,979
Absolute:
Total water consumption (m
3
) Water-Abs 353,826 356,979
Normalised:
Building water intensity (m
3
per operating bed) Water-Int 41.04 40.64
2021 – % of total assets included: LfL – 100% / Abs – 100%
2021 – % of data estimated: LfL – 59% / Abs – 59%
STRATEGIC REPORT045ANNUAL REPORT & ACCOUNTS 2021
Section 172
Section 172(1) of the Companies
Act 2006 “Duty to promote the
success of the company”
A director of a company must
act in the way he/she considers,
in good faith, would be most
likely to promote the success of
the company for the benefit of
its members as a whole, and in
doing so have regard (amongst
other matters) to:
The Likely Consequences of Any Decision
in the Long Term
The Board provides oversight over the
Company’s performance and gives guidance as
day-to-day management and decision-making is
delegated by the Board to the Executive Committee
which provides regular updates to the Board.
progressing in line with the long-term strategy.
which the Board reviews, which are supplemented
by further detailed reporting.
The Interests of the Company’s Employees
Our people are crucial to the Company’s
success; they provide our customers with
exceptional service to ensure they feel at home.
The Board recognises how vital our people are and,
as such, all decisions taken by the Board consider
the interests of the Company’s employees.
The Board has designated Alice Avis (Senior
Independent Non-Executive Director) to liaise with
the Colleague Forum. This allows a direct conduit
between the Board and our people. This gives the
Board insight into the views and concerns of our
people and allows it to ensure its decisions are
aligned with the interests of the Company’s
employees.
The Need to Foster the Company’s Business
Relationships with Suppliers, Customers
and Others
The Company has a few key suppliers and
the Board is involved in reviewing and approving
any key contracts which the Company enters into.
As such, the Board provides oversight and
challenge to key suppliers. Day-to-day relationships
with Company suppliers are delegated to the
relationship is fostered.
Without customers the Company could not
exist, and, as such, the Board takes great interest in
fostering relationships with these customers. The
Board reviews the results of the biannual customer
survey, as well as receiving and reviewing other ad
hoc reports on our customers’ preferences and
wishes. As part of the CEO’s Board reporting, our
customers sit as a standing agenda item. The Board
believes that fostering a close relationship and a
deep understanding of our customers is key to the
Company’s success.
The Impact of the Company’s Operations on the
Community and the Environment
The community and environment in which the
Company operates in is a key priority for the Board.
fi
strategy was not strong enough and so set about
reviewing this. See page 34 to 45 for detail. The
Board takes the impact of the Group’s operations
on the community and environment into account in
each decision. The decisions which the Board take
fi
impact is not a perfunctory exercise but one which
the Board believes is a key responsibility, which
includes robust challenge of all decisions.
The Desirability of the Company Maintaining
a Reputation for High Standards of Business
Conduct
The Board recognises the importance of
maintaining a reputation for high standards of
business conduct. The Board always seeks to make
the best decision for the Company which, while
taking into account the needs of all of our
fl
obligations as a Company.
The Board encourages this principle
throughout the business and directs the Company’s
ethos through the Company purpose and values. In
2021 the Board approved the relaunched values;
see page 26 for detail.
The Board also encourages the Company to
go above and beyond in certain areas and one
particular example is mental health welfare, where
the Board pushed for support for both our people
and our customers to be set up.
The Need to Act Fairly Between Shareholders
ofthe Company
The Board believes transparency and
accountability of the business is paramount to
fi
listens to and reviews the views across our
shareholder base.
The need to act fairly between all of our
shareholders underpins the Board’s decisions’ and
the Board receives regular feedback from
shareholders after our annual and interim results
release. The Board also receives and reviews
feedback from research analysts throughout the
year. This helps to identify key shareholder trends
which the Board takes note of. The capital structure
of the Company as a REIT, limiting individual
shareholdings to a maximum of 10% of issued share
capital, helps to ensure there are no dominant
shareholders and that all shareholders are
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021046
Principal Decision 1 – January 2021 – Commencing the disposal programme
fifi
four proposed disposals should proceed and that the Group should look into the future of our segment D assets.
(See page 20 for detail).
Long-term success
considerations
The actions which the Board undertook were focused on
ensuring that the Group’s property portfolio was in the best
position possible to enact the Group’s strategy.
fi
into segment D of our segmentation analysis. (See page 20
for detail).
The Board then agreed that the sales proceeds would be
reinvested into the business either in refurbishment
programmes or in further purchases of standing assets or
development opportunities.
Stakeholder impact
considerations
Customers – The Board considered that when our customers
book a Hello Student® room then they should receive a
ff
would not give customers a consistent stay when compared
to our segment A or B assets would help achieve this.
People – The Board considered how these decisions would
impact people. The main impact would be that by creating a
better aligned property portfolio we would place the Group in
a stronger position, which will create a better company to
work for in the future.
Shareholders – The Board considered that our shareholders
fi
protect the long-term viability of the Company through having
a well aligned property portfolio.
Community/Environment – The Board considered whether
there were any adverse impacts on either the community or
environment and concluded that the above decision would
have no adverse impact.
Outcomes
The actions taken by the Board allowed four properties to be
sold in the year. As part of the sanctioning of the disposal of
fi
exchanged at the year end and completed in January 2022.
The Group has successfully sold nine of its non-core category
D assets.
The Board’s belief is that this principal decision taken was a
positive decision for all stakeholders.
Principal Decision 2 – May 2021 – Further investment in our internal platform
fifi
platform to give us a far greater understanding of our customers through data analytics. As such, the Board agreed to embark upon a road map to
invest further into our internal revenue management platform.
Long-term success
considerations
Through gaining a better understanding of our data and getting
ff
process we will be able to improve our booking conversion
rate. Ensuring that we maximise the revenue from all of our
buildings allows us to maximise returns and generate further
capital which we can reinvest in the future. In addition, having
the whole platform in-house means the investment we make
can be utilised for years to come.
Stakeholder impact
considerations
Customers – The Board considered that by improving the data
we have about customers we can improve all aspects of the
more tailored and seamless booking experience. This will
help to increase customer satisfaction as well as customer
retention.
People – The Board considered that by increasing our
understanding of the booking process, we can help train our
people on what our customers really want. This helps our
people ensure that our buildings are full year after year and
thus increases their progression prospects within the Group.
Shareholders – The Board considered that our shareholders
fi
internal platform would quickly be repaid by higher
occupancy, each percentage point of revenue occupancy
gained is around £750,000. This means there is a short
payback period for any investment made.
Community/Environment – The Board considered whether
there were any adverse impacts on either the community or
environment and concluded that the above decision would
have no adverse impact.
Outcomes
The outcome was that the Board approved the investment into
fi
introducing a new dynamic pricing model and platform that
take into account occupancy and market conditions and
allows us to optimise revenue opportunity.
The Board’s belief is that this principal decision taken was a
positive decision for all stakeholders.
STRATEGIC REPORT047ANNUAL REPORT & ACCOUNTS 2021
HighLow Medium
IMPACT
LowHigh Medium
PROBABILITY
E1
E5
I1
E3
I2
I4
E2
I3
E4
Principal Risks and Uncertainties
Risk Responsibilities
The Board
The Board has overall
responsibility for…
the determination of the Group’s risk
appetite, the setting of objectives
and policies, and has ultimate
responsibility for managing risk.
Our People
Everyone at Empiric has a role to play…
in identifying key risks facing the Group,
and in the day-to-day management of
risk through applying the appropriate
controls, policies and processes.
Senior Leadership Team
Senior management are
responsible for…
reviewing and monitoring the Group’s
key risks, and overseeing the
implementation and operation of
the risk management and internal
control systems.
Audit & Risk Committee
The Committee formally reviews…
the effectiveness of our risk
management processes and internal
control systems biannually.
D
uring 2021, COVID-19 has continued to
have a material impact on our business.
ff
demographic, reducing the proportion of interna-
tional students. Health and safety risks around
cladding and the impact of climate change continue
to dominate the environment in which we operate
in, and our risks, their impact and probability have
been amended as appropriate.
The risk pertaining to Brexit has decreased
materially and while there are some impacts around
supply chain and people costs, these are expected
to reduce.
The Board regularly assesses the risk
appetite of the Group, with the Audit and Risk
ff
our risk management process and internal control
systems biannually. During the year, the Committee
fi
failings or weaknesses.
Changes to Principal Risks
The Committee decided to amalgamate two
risks, “Student Demand Risk” and “Revenue Risk”,
under one centralised Revenue Risk (E1). The key
driver of revenue risk is the level of student demand
for our product, which can be broken down into a
number of factors. Some of these factors are
directly correlated with COVID-19, such as the
pandemic means international students choose to
stay away as a result of travel restrictions. Other
seen in the international marketplace and whether
fl
The Committee decided to add a new
internal risk, “Safe and Sustainable Buildings Risk”
fi
safety – the capital expenditure to ensure our
fi
and safety legislation. Second, sustainability of our
buildings – the physical risks to our buildings
fl
change between hot summers and cold winters.
These physical risks need to be managed through
ensuring our buildings are designed and operated
in the correct manner.
The Committee reviewed the emerging risks
and considered whether climate change should be
added as a principal risk due to the increase in
regulation around compliance and reporting on
ffi
is also the impact of transitioning to a low-carbon
economy, with the risk of rising costs meaning that
some properties become unviable in their current
format. The Committee considered that some of the
physical risks around climate change had been
included under I4, and so at this time would not be
including a separate climate change principal risk.
The Committee will continue to keep this under
review.
The Audit and Risk Committee has reviewed
and approved the above changes to our principal
risks and risk appetite. The trends relating to all the
principal risks and uncertainties are set out in the
table on pages 50 to 51 with our emerging risks on
page 52.
External Risks
E1 Revenue Risk
E2 Competition Risk
E3 Property Market Risk
E4 Regulatory Risk
E5 Funding Risk
Adapting risk management in a changing environment
Internal Risks
I1 Health & Safety Risk
I2 Cyber Security Risk
I3 People Risk
I4 Safe and Sustainable Buildings Risk
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021048
Going concern – Viability Statement
The COVID-19 pandemic has created global
economic uncertainty, and in particular an
uncertainty around income for the upcoming
2022/23 academic year. Accordingly, the Group has
conducted a detailed going concern review and
considered its liquidity position and banking
covenant compliance strength.
As at 31 December 2021 the Group had
£37 million in cash and £45 million of undrawn
investment debt facilities. During the going concern
fi
one for £90 million with Lloyd’s due to expire in
November 2022 and one with First Commercial
Bank for £20 million due in March 2023.
Subsequent to the year end, the Group signed an
agreement to extend its Lloyd’s RCF out to
November 2025. This means the Group is well
fi
March 2023 where we intend to extend the
£20 million facility.
The Group’s debt facilities include covenants
and historic, and all debt facilities are ring fenced
fi
regular dialogue with all of its lenders as part of the
ordinary course of business; however, during the
pandemic we have increased the frequency of this
dialogue. As part of these discussions with our
fi
around the interest cover covenants to ensure we
either temporarily restructure these or gain the
relevant waivers from the banks to ensure that no
issues arise. To date all of our banks have been
supportive during this period and have expressed
commitment to the long-term relationship they wish
to build with Empiric.
Management has evaluated a number of
scenarios in its going concern model. The critical
assumption is the revenue occupancy for the
downside stress cases have been constructed
showing 2022/23 academic year occupancy of
between 65% and 90%.
The Group continues to maintain covenant
compliance for its LTV thresholds throughout the
going concern assessment period. Property
December 2021 valuations before LTV covenants
are breached.
In Scenario 1, and 2 above, the Group
continues to maintain covenant compliance for all
its interest cover covenants. It maintains adequate
levels of liquidity throughout. In addition, no
assumption is made as to the level of additional
cost-cutting measures or mitigating actions which
could potentially be undertaken.
In Scenario 3, under our Downside Stress
cover covenants at the 31 March 2022
measurement date for one lender. We would also
have further breaches on two other facilities in the
going concern period. The Group has cure rights
under the lending agreements but would need to
raise an additional £22million in cash to have
ffi
considers this scenario as extremely unlikely and
that it is a severe downside scenario.
As at 2 March 2022, booking levels for the
upcoming 2022/23 academic year are currently at
35%; this compared to 20% for the 2021/22
academic year as at 16 March 2021. As such, the
Board is expecting that Scenario 1 is the most likely
scenario at this time.
To support the Directors’ going concern
assessment, the management also evaluated the
occupancy level at which all ICR covenant tests
were breached and, additionally, the impact of a
“Reverse Stress Test” which was performed to
determine the level of revenue occupancy for the
2022/23 academic year at which the Group would
need to seek alternative sources of funding. For this
modelling we kept revenue occupancy for the
2021/22 academic year at 84%.
The Directors noted that if occupancy falls
below 45% then the Group would be in breach of all
ICR covenants, and at 47% revenue occupancy for
the 2022/23 academic year (18% lower revenue
occupancy than our Downside Stress Scenario)
of funding.
Having reviewed and considered the three
modelled scenarios, the 2022/23 academic year
occupancy level at which ICR covenants would be
breached and the level at which alternative sources
of funding would be required, the Directors
consider that the Group has adequate resources in
place for at least 12 months from the date of these
results and have therefore adopted the going
concern basis of accounting in preparing the annual
fi
Scenario
Revenue occupancy
for 2021/22 academic
year
Revenue occupancy
for 2022/23 academic
year
Scenario 1 – Upside Scenario 84% 90%
Scenario 2 – Central Scenario 84% 85%
Scenario 3 – Downside Stress Scenario 84% 65%
STRATEGIC REPORT049ANNUAL REPORT & ACCOUNTS 2021
Principal Risks and Uncertainties continued
External Risks Table
Risk and brief description Potential impact Mitigation in place Trend
E1
Revenue Risk
There is a risk that the student
demand for our product will
decrease, e.g. changes in
student demographic and
travel restrictions.
—
Link to Strategy
1 2 3 4 5
– Loss of revenue
– Erosion of asset values
– High void costs
– Potential breach in
– Executive Committee and the Board closely
monitor government policy, student numbers
and other micro and macro-economic factors.
– Monitoring all travel restrictions and
international markets.
– We ensure our assets are well located, serving
established leading universities.
– fi
for alternative use, such as private residential,
Increase due to
current uncertainty
through COVID-19.
E2
Competition Risk
The risk of an increased level of
competition and supply in the
student sector. This risk varies
for each city we are in as the
market polarises and some
universities have had declining
student numbers year on year.
—
Link to Strategy
1 2 3 4 5
– Oversupply of student
accommodation
– Pressure on student
rental growth
– fl
land prices
–
are increasing year on year from 2021 which
fi
– Continuous review and analysis of which cities
we want to target and those which we wish to
diversify from depending on this risk.
– We ensure our assets are well located, serving
established leading universities.
– High-quality management information is
provided across the business.
– All properties are managed in-house under the
Hello Student® brand which provides a strong
brand identity.
Stable as PBSA
market remains
stable.
E3
Property Market Risk
The potential for a downturn
in the property market.
—
Link to Strategy
1 2 3 4 5
– Erosion of asset values
– Potential breach in bank
covenants
– Lower Total Return
– Our assets are in prime locations, diversifying
fi
prime or better.
– We maintain prudent levels of gearing, with an
LTV limit of 40% and a long-term target of 35%.
– The higher education sector is made up of a
student accommodation market.
Decrease due to the
resilience shown
through COVID-19.
E4
Regulatory Risk
Large levels of regulation
being applied to the student
accommodation market.
Note we have moved the
fi
regulations to risk I4.
—
Link to Strategy
1 2 3 4 5
– Potential impact on
– Reputational damage
– Higher compliance costs
–
Lynne Fennah sits on the Student
Accommodation Committee of the British
Property Federation.
– Involvement with these bodies means that we
are well informed of any potential upcoming
regulatory change. It also provides a basis for
industry lobbying if required.
– Our operational teams try to build close working
relationships with local authorities to keep
abreast of any changes.
Stable as minimal
change to the
regulatory
environment.
E5
Funding Risk
The availability of debt or
equity and ability to raise
it on acceptable terms.
—
Link to Strategy
1 2 3 4 5
– fl
– Forced sale of assets
– fi
– Average maturity of debt of 4.9 years with
£45 million undrawn as at 31 December 2021.
– We maintain prudent levels of gearing, with an
LTV limit of 40% and a long-term target of 35%.
– fi
record in procuring both debt and equity.
Stable as minimal
change to the
funding environment.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021050
Internal Risks Table
Risk and brief description Potential impact Mitigation in place Trend
I1
Health & Safety Risk
health and safety incident,
fi
outbreak.
—
Link to Strategy
1 2 3 4 5
–
customers, contractors,
ff
– Compensation costs incurred
– Reputational impact
– Loss of life in a
– Health and safety metrics are reported monthly.
– ff
–
Board reporting from the Executive and
recruitment of a Head of Health and Safety
on track for Q1 2022.
– Live compliance dashboard which is
monitored daily.
– fi
and checks to ensure our buildings remain
compliant with standards, going above and
fi
Stable due to
minimal change
in the health and
safety environment.
I2
Cyber Security Risk
ff
a cyber security breach,
or the impact of a loss
or mismanagement of
personal customer data.
—
Link to Strategy
1 2 3 4 5
– Reputational damage
– Deteriorated customer
experience
– Higher costs and
fi
– Financial impact due
fi
– Developed a business continuity plan to enable
Group operations to continue in the event
of a breach.
– Centralised our IT network across the Group
and recruited an in-house IT team.
– Deployed an updated training programme
ff
– Implemented a data monitoring system to
protect our platforms across the IT estate.
Increase due to
current geopolitical
uncertainty.
I3
People Risk
ff
and the knock-on impact on
customer service.
—
Link to Strategy
1 2 3 4 5
– Higher costs due
fl
– Impact on customer service
due to lack of familiar faces
– Loss of key business
knowledge
– We are a Living Wage Employer ensuring that
we attract and retain talent where possible.
–
increase employee engagement.
– Ongoing training and development programme
ff
forward with their career within the business.
– Exit interviews are used to identify any areas
for improvement within the business.
Stable as minimal
change to the
employment market.
I4
Safe and Sustainable
Buildings Risk
How our buildings will
withstand increased legislation
fi
increased pressure from
climate change and extreme
weather conditions.
—
Link to Strategy
1 2 3 4 5
– High costs for compliance
– Reputational impact
– Potential challenges around
insuring our buildings
– Compensation claims
– Decreased liquidity of
– In our June 2021 Interim Report we announced
a £30 million capital expenditure plan to ensure
fi
legislation. However, we are uncertain how
much we will recover from developers so we
have increased this estimate to £37 million.
– fi
checks to ensure our buildings, at a minimum,
remain compliant with standards.
– Continuous assessment of our buildings as well
as undertaking £4 million of capital expenditure
fi
Increase due to
fi
safety and potential
upcoming legislation.
Strategic Links
1. Customers
2. Brand
3. People and Operations
4. Buildings
5. Shareholder Outcomes
Strategic Links
Increasing
No change
Decreasing
STRATEGIC REPORT051ANNUAL REPORT & ACCOUNTS 2021
Emerging Risks
The Audit and Risk Committee considers emerging risks. These are new or unforeseen risks that the
Committee is conscious of; however, their potential impact is not fully known. The Committee reviews these
biannually alongside the principal risks and uncertainties. The Audit and Risk Committee has detailed below
the risks it believes are emerging and the potential impact it may have on our principal risks:
Emerging risk Impact on principal risk probabilities Mitigating factors
Geopolitical Crisis
A geopolitical dispute between China or
governments placing embargoes on their
This includes the unfolding crisis
– Increase – E1 – Revenue Risk
– Increase – E3 – Property Market Risk
– Increase – E5 – Funding Risk
– Involvement with the BPF Student
Accommodation Committee which
lobbies the government on issues
impacting the sector.
–
support for international students and
Increasing Use of Online
University Courses
The COVID-19 pandemic has
forced universities and students to use
online teaching methods. The fact that
the pandemic has shown that this style of
ff
could result in a long-term move towards
online courses which would not require
purpose-built student accommodation.
– Increase – E1 – Revenue Risk
– Increase – E3 – Property Market Risk
– fi
–
educational stepping stone.
Climate Change
Climate change has the potential to
impact every business in the world.
Climate change could impact planning
legislation restricting supply of PBSA,
fl
legislation across a wide range of areas
and many other impacts.
Our customer base of young students are
very attuned to climate change, much
more so than generations before them.
The increased awareness around this
issue is going to bring these issues and
risks to the foreground.
– Increase – E1 – Revenue Risk
– Increase – E3 – Property Market Risk
– Increase – E5 – Funding Risk
– Increase – I1 – Health and Safety Risk
– Increase – I4 – Safe and Sustainable Buildings Risk
– ESG has become a key focus for the
Group. Our progress will be monitored by
our ESG Committee; read more on pages
34 to 35.
– We have announced that we will be a net
zero business by 2035.
University Funding
The level of funding, and how universities
fi
over the last 20 years. A number of
fifi
stress as a result of COVID-19 and there is
a risk that a number of universities fall into
administration.
fi
student populations in the cities of the
ff
– Increase – E1 – Revenue Risk
– Increase – E2 – Competition Risk
– Increase – E3 – Property Market Risk
– Increase – E5 – Funding Risk
– Reviewing our portfolio to ensure that
one university and which have strong
fi
Principal Risks and Uncertainties continued
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021052
Emerging risk Impact on principal risk probabilities Mitigating factors
Introduction of Regulation
of the Student Accommodation
Industry
The COVID-19 pandemic has drawn
attention to the vast range of level of
service within the student
accommodation industry. Some providers,
such as Empiric, provided a supportive
approach to students, whereas other
providers took a more hard-line approach
which raised negative media attention.
The industry is one which varies from
HMO owners operating a handful of beds
up to providers who operate tens of
thousands of beds.
This disparity and additional attention on
the industry results in a risk that
regulation may be applied to the industry.
– Increase – E1 – Revenue Risk
– Increase – E3 – Property Market Risk
– Increase – E4 – Regulatory Risk
– Increase – I4 – Safe and Sustainable Buildings Risk
– We act as a responsible owner of student
accommodation which does the right
thing. Further legislation within the market
may have a positive impact for the Group
as less scrupulous suppliers are forced
out of the market.
Pandemic
The COVID-19 pandemic is constantly
evolving and there is a continued
potential threat that new strains of the
virus become more damaging.
This could impact many areas, such as
travel, both international and domestic, or
future lockdowns.
There is also the potential risk of future
pandemics from viruses which are as yet
unknown.
– Increase – E1 – Revenue Risk
– Increase – E3 – Property Market Risk
– Increase – E4 – Regulatory Risk
– Increase – E5 – Funding Risk
– Increase – I1 – Health and Safety Risk
– Increase – I4 – Safe and Sustainable Buildings Risk
– Reviewing our marketing strategy and
ff
alongside international students.
– The COVID-19 pandemic has shown that
the robust and detailed protocols we
have in place within our business can
manage any impact.
Approval of the Strategic Report
ff
Company Secretary | 2 March 2022
STRATEGIC REPORT053ANNUAL REPORT & ACCOUNTS 2021
Board of Directors
MARK PAIN DUNCAN GARROOD LYNNE FENNAH ALICE AVIS MBE STUART BEEVOR MARTIN RATCHFORD
Non-Executive Chairman Chief Executive Officer
Chief Financial and
SustainabilityOfficer
Senior Independent
Non-ExecutiveDirector Non-Executive Director
Non-ExecutiveDirector
Appointed
1 September 2018 28 September 2020 26 June 2017 1 March 2019 1 January 2016 – Not standing for
re-election at the AGM
1 October 2021
Independent
Ye s No No Ye s Ye s Yes
Committee
Memberships
N
E
R
E E R
N
E
A
R
A
N
E
A
R
N
E
Relevant Skills
and Experience
– Chartered accountant
– Strong financial, customer and
shareholder focus
– Extensive experience of executive
and non-executive roles in the real
estate, financial services and
consumer/leisure sectors
– Strong operational, sales and
marketing skills
– Extensive experience of
executiveroles in the consumer/
leisure sectors
– Significant expertise in the
consumer and leisure sectors
– Chartered accountant
– Over 35 years’ experience in real
estate and hospitality sectors,
covering finance, operations, tax,
regulatory compliance, HR and IT
– Marketing, e-commerce, strategy
and operational experience
acrossthe consumer goods and
retail sectors
– Expertise ranges across both large
FTSE 100 organisations as well as
smaller, entrepreneurial businesses
in the UK and internationally and
inboth executive and non-
executive roles
– Chartered surveyor
– Over 35 years’ real
estateexperience
– Strong leadership experience,
as executive and non-executive
director of a number of public and
private entities
– Chartered accountant
– Over two decades of strong
leadership experience in UK and
International real estate, listed and
funds space, including student
accommodation
– In-depth experience of raising
debt and equity, managing large
teams, complex real estate
transactions, systems & control
environments
Principal External
Appointments
– Non-executive director – AXA
Insurance UK
– Chairman – London Square
– Non-executive director – Close
Brothers Group plc
– None – Vice Chair – the Student
Accommodation Committee of the
British Property Federation
– Non-executive Chairman –
Home REIT plc
– Non-executive director of BGF
(the Business Growth Fund)
– Non-executive director of
The Edrington Group Limited
– Non-executive director of
CydenLtd
– Non-executive director –
ICG Longbow Senior Secured UK
Property Debt Investments Limited
– Chairman – Investment Advisory
Board, Diversified Property Fund
for Charities
– Member – investment committees
of two DTZ Investors Pension Fund
clients
– Legal & General Group UK Senior
Pension Scheme trustee director
– Chief finance officer at Frasers
Property UK Limited, part of
Frasers Property, a global real
estate group
Significant Previous
ExternalExperience
– Group finance director –
Abbey National plc
– Group finance director –
Barratt Developments plc
– Non-executive director – Ladbroke
Coral Group plc, Aviva Insurance
Limited, Spirit Pub Group plc,
Johnston Press plc, Northern Rock,
LSL Property Services and Punch
Taverns plc
– Vice chairman and senior
independent director –
Yorkshire Building Society
– CEO Ten Entertainment Group Plc
– CEO Bills Restaurants
– CEO Punch Taverns plc
– President M.H. Alshaya
– Commercial Director BAA plc
– CFO – Palmer Capital Partners
– European CFO – TOGA Group
– Various senior roles, including
group financial and IT director
ofThe Goodwood Estate
CompanyLimited
– Executive chairman of Lumene Oy
– CEO of The Sanctuary Spa Group
– Director of marketing and
e-commerce at Marks and Spencer
Group Plc
– Global brand director for Johnnie
Walker at Diageo PLC
– Managing director –
Grosvenor Fund Management
– Managing director –
Legal & General Property Limited
– Non-executive director and
chairman of remuneration
committee The Unite Group plc
– Finance director of Real Estate
andFunds – Thomas Cook plc
– Head of Europe – Finance
– BritishLand plc
– Finance director – The Unite
Groupplc
Committees
N
Nomination
A
Audit and Risk
R
Remuneration
E
ESG
Chair
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021054
MARK PAIN DUNCAN GARROOD LYNNE FENNAH ALICE AVIS MBE STUART BEEVOR MARTIN RATCHFORD
Non-Executive Chairman Chief Executive Officer
Chief Financial and
SustainabilityOfficer
Senior Independent
Non-ExecutiveDirector Non-Executive Director
Non-ExecutiveDirector
Appointed
1 September 2018 28 September 2020 26 June 2017 1 March 2019 1 January 2016 – Not standing for
re-election at the AGM
1 October 2021
Independent
Ye s No No Ye s Ye s Yes
Committee
Memberships
N
E
R
E E R
N
E
A
R
A
N
E
A
R
N
E
Relevant Skills
and Experience
– Chartered accountant
– Strong financial, customer and
shareholder focus
– Extensive experience of executive
and non-executive roles in the real
estate, financial services and
consumer/leisure sectors
– Strong operational, sales and
marketing skills
– Extensive experience of
executiveroles in the consumer/
leisure sectors
– Significant expertise in the
consumer and leisure sectors
– Chartered accountant
– Over 35 years’ experience in real
estate and hospitality sectors,
covering finance, operations, tax,
regulatory compliance, HR and IT
– Marketing, e-commerce, strategy
and operational experience
acrossthe consumer goods and
retail sectors
– Expertise ranges across both large
FTSE 100 organisations as well as
smaller, entrepreneurial businesses
in the UK and internationally and
inboth executive and non-
executive roles
– Chartered surveyor
– Over 35 years’ real
estateexperience
– Strong leadership experience,
as executive and non-executive
director of a number of public and
private entities
– Chartered accountant
– Over two decades of strong
leadership experience in UK and
International real estate, listed and
funds space, including student
accommodation
– In-depth experience of raising
debt and equity, managing large
teams, complex real estate
transactions, systems & control
environments
Principal External
Appointments
– Non-executive director – AXA
Insurance UK
– Chairman – London Square
– Non-executive director – Close
Brothers Group plc
– None – Vice Chair – the Student
Accommodation Committee of the
British Property Federation
– Non-executive Chairman –
Home REIT plc
– Non-executive director of BGF
(the Business Growth Fund)
– Non-executive director of
The Edrington Group Limited
– Non-executive director of
CydenLtd
– Non-executive director –
ICG Longbow Senior Secured UK
Property Debt Investments Limited
– Chairman – Investment Advisory
Board, Diversified Property Fund
for Charities
– Member – investment committees
of two DTZ Investors Pension Fund
clients
– Legal & General Group UK Senior
Pension Scheme trustee director
– Chief finance officer at Frasers
Property UK Limited, part of
Frasers Property, a global real
estate group
Significant Previous
ExternalExperience
– Group finance director –
Abbey National plc
– Group finance director –
Barratt Developments plc
– Non-executive director – Ladbroke
Coral Group plc, Aviva Insurance
Limited, Spirit Pub Group plc,
Johnston Press plc, Northern Rock,
LSL Property Services and Punch
Taverns plc
– Vice chairman and senior
independent director –
Yorkshire Building Society
– CEO Ten Entertainment Group Plc
– CEO Bills Restaurants
– CEO Punch Taverns plc
– President M.H. Alshaya
– Commercial Director BAA plc
– CFO – Palmer Capital Partners
– European CFO – TOGA Group
– Various senior roles, including
group financial and IT director
ofThe Goodwood Estate
CompanyLimited
– Executive chairman of Lumene Oy
– CEO of The Sanctuary Spa Group
– Director of marketing and
e-commerce at Marks and Spencer
Group Plc
– Global brand director for Johnnie
Walker at Diageo PLC
– Managing director –
Grosvenor Fund Management
– Managing director –
Legal & General Property Limited
– Non-executive director and
chairman of remuneration
committee The Unite Group plc
– Finance director of Real Estate
andFunds – Thomas Cook plc
– Head of Europe – Finance
– BritishLand plc
– Finance director – The Unite
Groupplc
GOVERNANCE REPORT055ANNUAL REPORT & ACCOUNTS 2021
Chairman’s Introduction to Corporate Governance
and Corporate Governance Statement
MARK PAIN
Non-Executive Chairman
Our Approach to Corporate Governance
As Chairman I am responsible for leading the
Board and ensuring that it maintains the highest
standards of corporate governance whilst
promoting long-term sustainable success. We have
a clear framework in place for the way in which the
Board operates to ensure we are working for the
benefit of all our stakeholders, in a legal, ethical and
transparent manner.
Our approach to corporate governance
isbased upon the principles and provisions of
theUK Corporate Governance Code (the “Code”)
published by the Financial Reporting Council
(“FRC”).
In previous years, the Company did not
comply with Provision 24 of the Code as I had been
made a member of the Audit and Risk Committee
on joining the Board due to my significant level of
experience as a chartered accountant.
However, on 29 July 2021, I stepped down
from the Audit and Risk Committee with Alice Avis
joining the Committee. From this point the Company
fully complied with all provisions of the Code and
expects to continue to do so.
The following Corporate Governance Report
sets out how the Company has applied the Code
during the 2021 financial year.
Board Leadership and Company Purpose
The Board
The Board’s role is to promote the long-term
success of the Company, generating value for
shareholders and contributing to its key wider
stakeholder groups. The Board leads and provides
direction for the Executive Directors, by setting our
Company objectives and overseeing the
implementation of key operational policies
throughout the business. The Executive Directors
are responsible for managing our daily business
activities and operations.
The Board delegates appropriate matters
to its Committees and reviews their terms of
reference at least every other year. The last review
of the terms of reference took place in December
2021. Copies of these are available from the
Company Secretary or the Company’s website
www.empiric.co.uk
Company Purpose and Culture
The Board believes that having a clear
purpose and a values-based culture is the key
tocreating a business with strong governance.
Lastyear we defined the Company’s purpose
assetout on the inside front cover, ensuring it
alignedwith the Company’s strategic objectives
(seepage 12) and the interests of the Company’s
keystakeholder groups.
During the year, we revisited our values
toensure they were fit for purpose. Through
speaking with our colleagues and understanding
what meant the most to them we were able to
derive an updated set of values. We launched
these values from 1 July 2021 (see page 26
fordetails).
The Board will continue to regularly assess
how the purpose and values have been
embedded into the Company culture through
enquiries of the Senior Leadership Team, review
of business performance and engagement with
our people.
Strategy Meetings
In October, the Board held a full-day
strategy session. The strategy meeting was
structured to provide the Executive Directors and
the Non-Executive Directors, in particular, with an
opportunity to focus on the development and
execution of, and provide challenge to, the
Company’s corporate strategy.
The Executive Directors, members of the
Management Committee and other external
specialists delivered a number of presentations,
providing in-depth analysis on a number of areas.
The meetings were carefully structured to
achievea balance between presentations,
debateand discussion.
Engagement with Our Key Stakeholders
The new Code expects that the Board
understands the views of the Company’s key
stakeholders and takes account of their interests
in discussions and decision-making. In order to be
a sustainable business, the Company is committed
to being financially secure so our shareholders
can rely on us for the long term. The Board’s
approach to corporate governance is also
determined by, and takes account of, the interests
of other key stakeholders, including customers,
colleagues, and the communities in which we
operate, as well as wider society.
As per Provision 5 of the Code, the Board
has chosen to engage with our people through a
formal workforce advisory panel – the Colleague
Forum. Further details of the Board’s engagement
with the Colleague Forum can be found within the
s.172 statement on page 46.
We have a clear
framework in place
for the way in which
the Board operates to
ensure we are working
for the benefit of all
our stakeholders.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021056
Governance
Structure
The Board
Senior Leadership Team
Nomination
Committee
—
Read more on page 63
Remuneration
Committee
—
Read more on page 66
Audit and Risk
Committee
—
Read more on page 64
ESG
Committee
—
Read more on page 34
Managing Conflicts
The Board has a commitment to consider the
interests of all key stakeholders to the business,
ensuring it manages any conflicts effectively.
The key focus for the Board over the past
few years has been on the interests of our
shareholders. The Board, and senior management,
have implemented various changes that have
transformed the business to not only restore
shareholder returns, but also place the business in
a position where it is now able to grow sustainably
and achieve our purpose.
Since 2020, we have put greater focus within
the business on our ESG agenda, forming an ESG
Committee. The Board believes that the successful
delivery of an ESG strategy is beneficial for the
interests of all our key stakeholders while also
placing us in a strong position for the future.
The Board is mindful that as the business
develops and grows, the interests of the key
stakeholder groups will change, and the Board will
continue to monitor these interests.
There is continued significant interest shown
in the need for effective corporate governance and
there are a number of developments in legislation,
regulation and guidance expected to be
implemented in the coming years. One example
ofthis is the new TCFD disclosures shown on
page44.
We are committed to ensuring we have the
highest standards of corporate governance and
during 2022 will continue to monitor all future
developments, implementing changes to enhance
our existing good practice if required.
Division of Responsibilities
At the year end, the Board consisted of two
Executive Directors and four Non-Executive
Directors, including the Chairman. Changes to the
Board membership during the year are discussed in
the Chairman’s Statement on page 2 of the
Strategic Report. Biographical information on each
of the Directors is set out on pages 54 and 55.
GOVERNANCE REPORT057ANNUAL REPORT & ACCOUNTS 2021
Corporate Governance continued
Board Roles
There is a clear division of responsibilities
between the Chairman and Chief Executive. Their
roles have been set out in writing and agreed by
the Board. The primary responsibilities of the
Directors are as follows:
Board Member Primary Responsibilities
Chairman – Mark Pain
– Leading the Board and ensuring its effectiveness;
– Reviewing the Company’s general progress and long-term development; and
– Ensuring the Company is meeting its responsibilities to all stakeholders.
CEO – Duncan Garrood
– Leading and developing the Company’s profitable operation and development;
– Overseeing all activities of the business and leading the sales, marketing and
operations functions;
– Ensuring the objectives are in line with operational activities; and
– Creating shareholder value over the long term.
CFO and CSO – Lynne Fennah
– Overseeing sustainability across the business;
– Leading the finance and IT functions;
– Producing timely and accurate financial information and analysis;
– Raising and managing debt;
– Ensuring tax and regulatory compliance; and
– Maintaining financial control.
Senior Independent Non-Executive
Director – Alice Avis
– Acting as a sounding board for the Chairman and intermediary for the
otherDirectors;
– Leading the evaluation of the Chair on behalf of the other Directors; and
– Being available to shareholders to raise their concerns if they cannot be resolved
through other channels.
Non-Executive Directors –
Martin Ratchford, Stuart Beevor
– Providing constructive challenge;
– Overseeing the Senior Leadership Team’s progress on implementing strategy
and meeting objectives; and
– Monitoring the reporting of performance.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021058
Director Independence
The Board reviews the independence of
theChairman and Non-Executive Directors on
anannual basis. For the financial year ending
31December 2021, all of the Non-Executive
Directors, including the Chairman, are considered
tobe independent for the purposes of the Code.
Advice for Directors
The Directors have access to independent
advice at the Company’s expense, if they judge
itnecessary to discharge their responsibilities.
AllDirectors have access to the advice and
servicesofThrogmorton, which acts as our
Company Secretary.
Board and Committee Meetings
The Board holds regular formal, scheduled
meetings and additional meetings as required. The
agenda for each meeting is typically set by the
Chairman, with assistance from the Executive
Directors. The agenda, along with the Board
papers, are sent well in advance allowing sufficient
time to the Directors which enable effective
decision making in the meetings. Any decisions and
actions arising from the meetings are implemented
by the Executive Directors and monitored by the
Company Secretary.
During the year, there were seven regular
Board meetings and two ad hoc meetings. The
table below shows the Directors’ attendance at
Board meetings in 2021. The figures in brackets
show the number of meetings each Director was
eligible to attend:
Board and Committee Meetings
Board Regular Ad Hoc
Mark Pain 7 (7) 2 (2)
Duncan Garrood 7 (7) 2 (2)
Lynne Fennah 7 (7) 2 (2)
Jim Prower resigned
30 September 2021 5 (5) 2 (2)
Stuart Beevor 7 (7) 2 (2)
Alice Avis 7 (7) 2 (2)
Martin Ratchford appointed
1 October 2021 2 (2) 0 (0)
Prior to each regular Board meeting, and
subject to requirements, the Non-Executive
Directors hold their own meeting to discuss matters
they want to raise with the Executive Directors and
any other relevant issues. The Non-Executive
Directors also meet once without the Chairman to
appraise his performance. This process is led by
Alice Avis as the Senior Independent Director and
considers the views of the Executive Directors.
Key Focus for 2022
– Board succession planning
– Delivering our key priorities as set out on
page 19
– Continuing investment in our employees
– Optimising business performance as we exit
COVID-19
– Developing and growing in stakeholder
engagement and environmental
sustainability
Board Activities During the Year
Strategic Topic Areas of Focus
Customer
Focus
– Ensuring the continued safety of our customers.
– 2021 Global Student Living Index result.
People
– Achieving “One to Watch” in the Best Companies survey.
– 2021 colleague engagement survey.
Capital
Efficiency
– Refinancing and capital allocation to ensure liquidity and
covenant headroom.
– Investor engagement.
ESG
– Undertaking a materiality review of our key ESG pillars.
– Starting to develop our ESG strategy and road map.
Board Agenda and Board Papers
The formal agenda for regular Board
meetings includes:
– health and safety;
– a review of the performance of our
propertyportfolio;
– an assessment of our progress with new
investment opportunities (the detailed
proposals are prepared by the Executive
Directors and reviewed and approved by
the Board, as appropriate);
– a review of our strategy;
– a review of our financial performance,
forecasts and debt;
– an update on the student accommodation
sector;
– an update on investor relations and
shareholder analysis;
– a report on shareholder feedback;
– updates on regulatory, compliance or
governance matters advised by the
Company Secretary or other advisers;
andareport on public relations and
presscommentary.
These agenda items are also included within
a comprehensive set of Board papers ahead of
each Board meeting.
GOVERNANCE REPORT059ANNUAL REPORT & ACCOUNTS 2021
Corporate Governance continued
The Board effectiveness
review delivered a
set of largely positive
results with evidence
of incremental
improvements over
the past year.
Composition, Succession and Evaluation
Board Composition
The Board has a combination of property,
operational, financial and marketing skills and a
variety of knowledge and experience for it to
scrutinise business performance and propose
changes accordingly.
Each Board member’s length of service is
reviewed on an annual basis and membership
refreshed in line with the Code.
Appointment of Directors
The Executive Directors have contracts with
the Company which include, for the CEO, a
six-month notice period and for the CFO/CSO a
12-month notice period; both contracts include
restrictive covenants. The Non-Executive Directors
have letters of appointment, which can be
terminated in accordance with our Articles of
Association and do not specify a notice period. The
terms and conditions of appointment for the
Non-Executive Directors are available for inspection
at our registered office and at each Annual General
Meeting (“AGM”).
Directors who are appointed to the Board are
required to be elected by shareholders at the next
AGM. Martin Ratchford, our new Audit and Risk
Chair, is proposed for election to the Board at the
AGM on 23 May 2022.
All appointments to the Board are subject to
a formal, rigorous and transparent process. Further
details can be found on page 63.
Board Induction and Training
Martin Ratchford received a thorough formal
induction on his appointment. This included
meeting members of the Board and Senior
Leadership Team, and meetings with key advisers.
The Chairman reviews and discusses each
Director’s individual training and development
needs. The Board as a whole also receives
briefings and training on relevant topics. Empiric
also benefits from the Non-Executive Directors’
membership of other boards. This gives them
experience and training they can apply directly to
our business. In addition, the Board receives regular
publications on key topics from our advisers and
other professional services firms.
The Chairman and the two Executive
Directors attended the Leading Safely training
course ran by the Institute of Safety and Health.
Time Commitment of Non-Executive Directors
and External Appointments
Non-Executive Directors are required to
devote sufficient time to fulfil their responsibilities to
the Group, to prepare for meetings, and to regularly
refresh and update their skills and knowledge. Each
Director’s other significant commitments are
disclosed to the Board at the time of their
appointment and they are required to notify the
Board of any subsequent changes. Each Director is
also required to seek permission from the Chairman
of the Company prior to accepting any other
directorships of publicly quoted companies.
The Chairman has reviewed the availability of
the Non-Executive Directors and considers that
each of them is able to, and in practice does,
devote the necessary amount of time to the
Group’sbusiness.
The Senior Independent Director has
reviewed the availability of the Chairman and
considers that he is able to, and in practice does,
devote the necessary amount of time to the
Group’sbusiness.
Board Succession and Elections
Board succession is reviewed at every
Nominations Committee meeting. See page 63
fordetail.
In line with leading practice, Directors will
submit themselves annually for re-election at the
AGM. Mark Pain, Duncan Garrood, Lynne Fennah
and Alice Avis will therefore stand for re-election at
the AGM on 23 May 2022. Martin Ratchford will be
submitted for election at the AGM as he was
appointed during the year. Stuart Beevor will not be
seeking re-election at the AGM. The formal
performance evaluation carried out in December
2021 confirmed that the performance of each of the
Directors continues to be effective and that they
demonstrate commitment to their roles.
Board Performance and Evaluation
In November 2021, the Chairman led an
internal evaluation of the effectiveness of the Board
and its Committees.
The key topics covered in the evaluation
included:
– Board composition, including the mix of skills,
experience, knowledge and diversity;
– succession planning for the Board and the
Senior Leadership Team;
– roles and responsibilities of the Board as
awhole, and each of the Committees;
– Board discussions, including risk
management and stakeholder engagement, and
areview of the decisions arising from these
discussions;
– conduct of Board meetings and access to
information by the Board;
– induction for new Board members, and
training and support available to all Board members;
– Chairman’s performance (led by the Senior
Independent Director); and
– Committee effectiveness.
The results of the evaluation were reviewed
by the Chairman and reported to the Board in the
January 2022 meeting.
The Board effectiveness review concluded
that the Board and Committees continued to
operate effectively throughout 2021. Nevertheless,
a number of suggested enhancements are
proposed for 2022, which include:
For the Board:
– Ensuring that the organisation’s vision, values
and culture are embedded in all levels of the
organisation.
– Developing the strategic plan further to
optimise shareholder returns.
– Ensuring that the optimisation of the Hello
Student operating platform is driving improvements
in digital customer service.
– Continued focus on delivering the ESG
Strategy with further development of ESG KPIs to
enable the Board to assess progress.
For the Audit and Risk Committee:
– Ensuring that the Committee has appropriate
understanding, review and oversight of operational
process controls across the business.
These topics will be progressed at the Board
and Audit and Risk Committee in 2022.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021060
3+ years
0-3 years
3
3
Exec
Non-Exec
2
4
Male
Female
2
4
Board Diversity
Independence
Tenure
Gender
Update on Actions Arising from the 2020
Board Evaluation
In December 2020, the Chairman conducted an
internal evaluation of the effectiveness of the Board
and its Committees. The table below outlines the
improvement areas identified in this evaluation, and
the progress made on these during 2021.
Key Findings Actions Taken
The Board needs to develop
a more comprehensive
succession plan for the
Executive Directors and
Senior Leadership Team,
including an assessment of
organisational talent.
– Non-Executive Director succession plan reviewed and agreed at the
Nominations Committee.
– A detailed and comprehensive Executive Director succession plan was
reviewed at the Board in May 2021.
There is a requirement to
refresh, lead and drive the
organisation’s vision, values
and culture, ensuring
consistent leadership and
behaviours through all
levels of the organisation.
– Through internal consultation with all our colleagues we revisited our values
and introduced a new set of Group values from 1 July 2021. See page 26
fordetails.
– Widened the Senior Leadership team to include a number of senior
colleagues. These are the key people managers and leaders in our business,
and were tasked with driving the organisation’s vision and values across
theGroup.
With a new CEO in place,
the Board needs to ensure
that there is a clear strategy,
aligned with the values and
culture of the organisation.
– Held a full-day strategy session in October 2021, which started to develop a
new strategy. This will continue to be worked on through 2022.
The Audit and Risk
Committee needs to ensure
that the Committee has an
appropriate understanding,
review, and approval of
internal control work activity
and that there is an
embedded and fully
functioning risk framework
with appropriate risk
appetites and limits.
– During the year, the Audit and Risk Committee reviewed the internal controls
of the Group through a paper tabled at the Committee. The Committee did
not find any control deficiencies.
– We have continued to develop our risk framework with the inclusion of
disclosure around relevant emerging risks in the year.
GOVERNANCE REPORT061ANNUAL REPORT & ACCOUNTS 2021
Corporate Governance continued
Audit, Risk and Internal Control
The Board is responsible for maintaining the
Company’s systems of internal controls and risk
management, in order to safeguard the Company’s
assets. These processes are designed to identify,
manage and mitigate both the key principal risks
and emerging risks inherent to the business. The
system is also designed to manage, rather than
eliminate, the risk of failure to achieve business
objectives and can only provide reasonable, but not
absolute, assurance against material misstatement
or loss. Please refer to pages 48 to 53 for more
information on our principal risks and uncertainties.
The Board regularly monitors the Company’s
risk management and internal control systems
which have been in place for the year under review
and up to the date of approval of the Annual Report
and Accounts, including receiving reports from the
external auditor. The Board also conducts a formal
risk assessment (for both principal and emerging
risks) on a bi-annual basis.
Our non-financial internal controls include the
systems of operational and compliance controls
maintained by our finance team. We also have our
Company Secretary which has its own systems of
internal controls in relation to these matters, details
of which the Board reviewed.
The Board is reviewing the need for an
internal audit function, with a view that some form of
internal audit function will be in place by the end of
2022. Please refer to page 54 of the Audit and Risk
Committee Report for more information.
Going Concern
The financial position of the Company and
Group, its cash flows, liquidity position and
borrowing facilities are described in the CFO and
CSO Statement on pages 30 to 33. Detailed
forecasts have been prepared and the Directors
have considered the future cash requirements of
the Group and concluded that they have sufficient
capacity to meet all their commitments. A full
summary of equity and debt financing are detailed
on page 33.
As such, the Directors believe that the
Company and Group are well placed to manage
their financing and other business risks. The Board
is, therefore, of the opinion that the going concern
basis of accounting adopted in the preparation
ofthe Annual Report is appropriate for at least
12months from the date of approval of the
AnnualReport.
Compliance Statements
The Directors confirm that to the best of
ourknowledge:
– The Group is well placed to manage its
financing and other business risks. The Board is
therefore of the opinion that it is appropriate to
adopt the going concern basis of accounting in
preparing the Annual Report and Accounts (see
page 49 for more information).
– The Strategic Report, which the Board has
approved, includes a review of the performance of
the Group taken as a whole, together with a
description of the principal risks and the
uncertainties it faces.
– Taking into account the Group’s current
position and the impact of the principal risks
documented in the Strategic Report, the Directors
have a reasonable expectation that the Company
will remain viable and continue to operate and meet
its liabilities as they fall due, over the period to 31
December 2026. Further details are set out in the
Viability Statement on page 49, and in the Principal
Risks and Uncertainties section on pages 48 to 53.
– The Company has a continuing process for
identifying, evaluating and managing the risks it
faces. Further details are set out on page 48.
– The Directors have carried out a robust
assessment of the principal risks facing the
Company, including those that would threaten its
business model, future performance, solvency or
liquidity. The principal risks, and the procedures for
managing or mitigating them, are set out on pages
48 to 53.
– The Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and
provides the information necessary for shareholders
to assess the Group’s position and performance,
business model and strategy. See page 79 for
moreinformation.
MARK PAIN
Non-Executive Chairman | 2 March 2022
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021062
Nomination Committee Report
MARK PAIN
Nomination Committee Chairman
Meetings and Activities
The Nomination Committee met four times
during the year. The main issues the Committee
discussed were:
– The retirement of the Operations Director.
– The creation of a new senior Executive role,
Marketing Director.
– Changes to the Senior Leadership Team.
– Succession planning for the Board.
Appointment of an Operations Director and
a new Marketing Director
The Nominations Committee oversaw the
appointment of two members of the senior
Executive leadership team. Both appointments
followed a similar process. A detailed role
specification was put together and reviewed by
members of the Nominations Committee. Redgrave
Partners, a leading external search firm with
extensive experience of the Group, were appointed
to lead the search process. Redgrave has no
connection with the Group, other than providing this
type of service. Having conducted a market-wide
search across a range of industry sectors, long lists
were generated, and reviewed by the CEO and
CFO/CSO. A short list of candidates was then taken
through for formal assessment which included
interviews with a number of Board members.
Selected candidates were then taken through for
psychometric testing and independent referencing.
The Board unanimously agreed to the appointments
of Wes Brown who was appointed Operations
Director, replacing Nan Richards, following her
planned retirement at the end of 2021, and Gemma
Le Marquer with effect from June 2021 to the newly
created position of Marketing Director, with a focus
on driving occupancy and revenue.
Succession Planning
The Committee is responsible for reviewing
the succession plans for the Board. The succession
plans for the Executive Directors are prepared on a
short and long-term basis, whilst the Non-Executive
Directors’ succession planning mirrors the breadth
of skills and experience the current Board holds.
During the year, Jim Prower informed the
Board of his intention to stand down as the Senior
Independent Director and Chair of the Audit and
Risk Committee. Redgrave Partners were appointed
to lead the search process in finding his
replacement. Having conducted a market-wide
search across a range of industry sectors, a long list
was generated, and reviewed by the Board. The
focus of the agency was to get the most suitable
candidate and candidates from diverse
backgrounds. A short list of candidates were then
taken through a formal assessment process which
included interviews with Board members.
On 1 October 2021, Martin Ratchford was
appointed as a Director of the Company and
Chairman of the Audit and Risk Committee. Alice
Avis was appointed Senior Independent Director.
The Committee will continue to review the
succession plan throughout 2022.
Independence and Re-election
All Directors are subject to annual
re-election at the AGM, and the Board will
recommend reappointment as part of the AGM
notice. Prior to recommending the reappointment
of any Director to the Board, the Committee
assesses their continued independence, the time
commitment required and whether the
reappointment would be in the best interests of
the Group.
Biographies for each Director can be found
on pages 54 to 55.
Board Diversity
Whilst much of the focus of analysis and
guidance in relation to diversity and ethnicity is
centred on companies which sit within the FTSE
350, of which Empiric is not a part, the Committee,
Board and Group recognise the benefits of
diversity in its broadest sense, including gender,
ethnicity, age and educational and professional
background.
In terms of gender diversity, 33% of the
Board are women, in line with the voluntary target
set by the Hampton-Alexander Review, with two of
the senior Board positions, CFO/CSO and Senior
Independent Director, held by women. Below the
Board, the senior Executive leadership team also
consists of 33% women. More information about
gender diversity in the Group as a whole can be
found on page 39.
The Parker Review (2017) made
recommendations to increase the ethnic diversity
of UK boards within the FTSE-350. In terms of
ethnic diversity, the Company is diverse with 11% of
the Group’s employees identifying as being from
an ethnic minority. The Company has also
invested in additional support and career
pathways to increase diversity in the workforce.
During the process to replace Jim Prower as a
Non-Executive Director, the Board considered a
long list of candidates which were appropriately
gender and ethnicity balanced. More information
about ethnicity in the Group as a whole can be
found on page 39.
We will continue to target diversity at Board,
Senior Leadership team, and throughout the
Company and will comply with all emerging best
practice in this area. We intend to maintain an
appropriately diverse Board and Senior
Leadership team and will actively seek to continue
to increase diversity. Where vacancies arise, we
only accept diverse candidate lists; diversity is,
and will remain, core to our decision making whilst
at all times looking to appoint the best candidate
for the role.
MARK PAIN
Nomination Committee Chairman | 2 March 2022
During the year, the
Committee oversaw
the appointment of
an Operations Director
and a new Marketing
Director. It also led the
appointment of a new
Non-Executive Director.
Committee membership
and meetings
Meetings
Mark Pain 4 (4)
Jim Prower 3 (3)
Stuart Beevor 4 (4)
Alice Avis 4 (4)
Martin Ratchford 1 (1)
GOVERNANCE REPORT063ANNUAL REPORT & ACCOUNTS 2021
Audit and Risk Committee Report
MARTIN RATCHFORD
Audit and Risk Committee
Chairman
The Audit and Risk
Committee continued its
focus on monitoring the
quality and integrity of
financial management
and reporting, including
the valuation process.
Committee membership
and meetings
Meetings
Martin Ratchford 1 (1)
Stuart Beevor 4 (4)
Alice Avis 1 (1)
Mark Pain 2 (2)
Jim Prower 3 (3)
Having been appointed as a Non-Executive
Director and Chair of the Committee on
1 October 2021, I am pleased to present the Audit
and Risk Committee report for the year ended
31 December 2021. I would like to thank Jim
Prower for his successful stewardship during the
previous seven years, which included a period of
challenge, including the unique issues posed by
COVID-19.
Role and Responsibilities of the
Audit and Risk Committee
– Review the work of the external auditor and
valuers and the significant financial judgements
made by management.
– Monitor the integrity of the Company’s
financial statements and any formal announcements
relating to financial performance, and consider
significant financial reporting issues, judgements
and estimates.
– Review the integrity of the full and half-year
financial statements, including consideration of
material estimates and areas of judgement
exercised in their preparation.
– Advise the Board on various statements
made in the Annual Report, including those on
viability, going concern, risk and controls and
whether, when read as a whole, the Annual Report
is fair, balanced and understandable and provides
the information necessary for shareholders to
assess performance, the business model and
strategy.
– Oversight and remuneration of the external
auditor, assessing effectiveness and making
recommendations to the Board on the appointment
of, and the policy for non-audit services provided
by, the external auditor.
– Review the risk management framework and
ensure that risks are carefully identified and
assessed, and that systems of risk management
and internal control are in place and effective.
– Consider the need for an internal audit
function.
– Review the whistleblowing arrangements.
The Audit and Risk Committee’s terms of reference
are on Empiric’s website at: www.empiric.co.uk/
investor-information/company-documents
Meetings and Activities
The Audit and Risk Committee met four times
during the year, coinciding with key events in the
annual financial reporting cycle. I become Chair of
the Committee on 1 October 2021. Members’
attendance at Committee meetings is set out on the
table opposite. In addition, Committee meetings
were attended by the CEO, the Chief Financial and
Sustainability Officer and representatives of our
external auditor BDO LLP (“BDO”), our external
valuer CBRE and the Company Secretary. The
Committee also met with the auditor without any
representative of the Executive team present.
External Auditor and Other Services
BDO has been our auditor since 2014 and
during the year we reviewed BDO’s appointment as
the Group’s external auditor. Following this review,
we decided to retain BDO and have therefore
recommended a resolution for BDO’s
reappointment to be proposed to shareholders
atthe AGM.
We considered BDO’s compensation,
performance and independence during the year.
The Committee met with key members of the audit
team, including the lead audit engagement partner,
and BDO has formally confirmed its independence,
as part of the annual reporting process. The
Committee regularly liaises with the lead audit
partner to discuss any issues arising from the audit,
as well as its cost-effectiveness.
The Committee recognises the importance of
auditor objectivity and has developed the
Company’s policy on engaging the external auditor
to supply non-audit services, by considering the
Financial Reporting Council’s Ethical Standard
Number Five (revised 2019). This relates to
non-audit services provided to audited entities and
sets out the six principal threats to objectivity and
independence. Our aim is to ensure that providing
such services does not impair the auditor’s
independence and objectivity.
We keep the policy and its application under
constant review, particularly at the time of new
engagements, to make sure that audit
independence and objectivity is not impaired.
During the year, BDO did not provide any non-audit
services to the Group outside of the Interim Report.
KPMG LLP continues to support us as a
provider of tax compliance and advisory services to
the Group.
Internal Audit
The Audit and Risk Committee has reviewed
and concluded that the Group will develop an
internal audit function in 2022. This follows the
completion of the internalisation of the operational
platform in 2021.
The Committee looks forward to outlining in
more detail in the 2022 Annual Report the
progressmade on the establishment of the internal
audit function.
During 2021, the Committee has continued to
review the effectiveness of the internal control
environment through receiving and challenging
reports prepared by the Group Financial Controller
and CFO/CSO on the internal controls in place
within the Group. No significant weaknesses were
identified through the course of the Committee’s
reviews which gave the Committee comfort over
the robustness and effectiveness of the controls
inplace.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021064
External Valuers
The Committee monitored the objectivity and
independence of CBRE during the year. The valuers
have confirmed that they are appropriately qualified
to carry out the valuations and that fees received
are not a material part of their overall fee income.
The Committee remains satisfied that the valuers
are objective and independent.
Whistleblowing
The Committee is responsible for reviewing
the arrangements by which staff can raise concerns,
in confidence, about any possible improprieties
relating to financial reporting or other matters.
During the year we have reviewed our
Whistleblowing Policy and ensured it has been
widely published throughout the Group. One area
of improvement highlighted that will be addressed
in 2022 was that the whistleblowing hotline was not
externally managed.
The Committee has concluded that the
Group has suitable arrangements for
proportionately and independently investigating
such matters and for appropriate follow-up action.
Share Capital Structures
The share capital structure and restrictions
are covered in detail in the Directors’ Report on
pages 78 and 79.
Financial Reporting and Significant Judgement
The Committee monitors the integrity of the
financial information published in the half-year and
annual financial statements and considers the
extent to which suitable accounting policies have
been adopted, presented and disclosed. In
assessing this, we consider whether management
has made suitable and appropriate estimates and
judgements and seek support from the external
auditor to assess them.
The significant issues considered by the
Committee in relation to the financial statements
during the year ended 31 December 2021, and the
actions taken to address these issues, are set out in
the following table:
Significant issues considered How these issues were addressed
Going Concern and Viability Statement
The appropriateness of preparing the Group financial
statements on a going concern basis. Whether the
assessment undertaken by management regarding the
Group’s long-term viability appropriately reflects the prospects
of the Group and covers an appropriate period of time.
– The Committee considered whether management’s assessment adequately
reflected the Group’s low-risk appetite and principal risks as disclosed on
pages 48 to 53; whether the five-year period covered by the statement was
reasonable given the strategy of the Group and the current environment in
which the business operates in.
– The Committee also reviewed whether the assumptions and sensitivities
stress tested were adequate and whether the stress testing represented
severe enough scenarios.
– The Committee concurred with management’s assessment and recommended
the viability statement to the Board. The viability statement, together with
details on the assessment undertaken and stress tests applied, is set out on
page 49.
Valuation of Property Portfolio
The valuation of investment and development properties
conducted by external valuers is inherently subjective as it is
undertaken on the basis of assumptions made by the valuers
which may not prove to be accurate. The outcome of the
valuation is significant to the Group in terms of investment
decisions and results.
– CBRE independently values the individual properties in accordance with IAS
40: Investment Property. The Committee has reviewed the assumptions in
respect of the property valuations, discussed and challenged them with
management and our external valuers CBRE, and concluded that the valuation
is appropriate.
– Separately, our auditor has met with CBRE a number of times in the year to
challenge and independently audit their valuation.
Conclusions in Respect of the Company’s
Annual Report
The production and the audit of the Annual
Report is a comprehensive process, requiring input
from several different contributors. To reach a
conclusion on whether the Annual Report taken as
a whole is fair, balanced and understandable, as
required by the Code, the Board has requested
thatthe Audit and Risk Committee advises on
whether it considers that the Annual Report fulfils
these requirements.
In outlining our advice, we considered
thefollowing:
– the controls in place for the production of the
Annual Report, including the verification processes
to confirm the factual content; and
– the detailed reviews undertaken at various
stages of the production process by the Executive
Directors, Company Secretary, legal adviser,
brokers, auditor and the Audit and Risk Committee,
which are intended to ensure consistency and
overall balance.
As a result of this work, the Committee has
concluded and reported to the Board that the
Annual Report for the year ended 31 December
2021, taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
Company’s performance, business model and
strategy. The Board’s conclusions in this respect are
set out in the Directors’ Responsibilities Statement
on page 79.
MARTIN RATCHFORD
Audit and Risk Committee Chairman | 2 March 2022
GOVERNANCE REPORT065ANNUAL REPORT & ACCOUNTS 2021
Statement from the Chairman of the Remuneration Committee
STUART BEEVOR
Remuneration Committee Chairman
The COVID-19
pandemic continued
to create significant
challenges in 2021 and,
notwithstanding the
huge efforts made
by all staff and the
ongoing improvements
to operations, our
approach continues to
seek prudent alignment
between executive
remuneration and
shareholder returns.
Activities
– Alignment with the Company’s
strategy and shareholders’ interests
– The impact of COVID-19
– Reward decisions
– Workplace engagement
– fi
wider workforce, including gender
pay and pensions
– CEO pay ratio and internal
proportionality
Committee membership
and meetings
Meetings
Stuart Beevor 4 (4)
Mark Pain 4 (4)
Jim Prower 3 (3)
Alice Avis 4 (4)
Martin Ratchford 1 (1)
Dear Shareholders
On behalf of the Board, I am pleased to
present the Directors’ Remuneration Report for the
year ended 31 December 2021.
The report is divided into three parts:
– The Annual Statement which summarises the
remuneration outcomes in 2021, the key decisions
taken and how the Remuneration Policy (“Policy”)
fi
– A summary of the Policy which was approved
by shareholders in May 2020.
– The Annual Report on Remuneration which
sets out full details of all remuneration matters.
2021 performance and reward
The operational improvements and in-
housing of operations undertaken in recent years
has enabled Empiric to manage the challenges of
the ongoing impact of COVID-19. In 2021 further
changes were made to our operational structure to
improve customer experience with provision of 24
ffi
and the full delivery of the revenue management
ff
fl
approach to refunding rent when customers were
unable to occupy their rooms, our customer
fl
strong reputation and demonstrates our customer-
led approach is adding value to our customers,
ff
ff
ff
As outlined earlier in this Annual Report, 2021
fi
fi
purpose operating business. This progress is
fl
prudent cost control and delivery of key individual
of 55% of maximum. The Committee then
considered the appropriateness of this outcome in
fi
particular focus on net income performance which
was below target. Following that review, the
Committee exercised its discretion to reduce the
bonus outcome to 10% of maximum which it felt was
a fair recognition of overall performance delivery.
The vesting of the LTIP awards granted to
Lynne Fennah on 23 August 2018 and on 24 April
of Total Return (Net Asset Value growth and
dividends) assessed over performance periods
ending in 2021. Actual performance was below
shares vested.
Duncan Garrood and Lynne Fennah were
each granted an LTIP award in April 2021 over
shares worth 150% of their respective 2021 salaries.
In determining the number of shares, the
Remuneration Committee considered using the
average share price for the 12-month period to 31
March 2021 of 66.45 pence (our standard
methodology) was not appropriate due to the
depressed level of the share price, due to the
exceptional COVID-19 pandemic circumstances
pertaining at the time. The Committee therefore
exercised discretion in deciding use of a higher
share price, 75 pence, was more appropriate, as the
share price was 76.6 pence when the 2020 Annual
Results were announced and 75 pence was also
used in determining Duncan Garrood’s LTIP award
in October 2020. This use of discretion reduced the
number of shares awarded by approximately 11%.
Full details of 2021 reward outcomes are set
out on page 72.
Workplace Engagement and Remuneration
ff
ffff
our buildings. This has led to a number of new roles
ff
turnover. To ensure we can attract the right calibre
ff
fl
ff
ff
ff
Alongside the Company’s commitment to pay the
fi
conditions are appropriate and that turnover levels
should stabilise at an appropriate level.
The Colleague Forum is well established
of 12 employee representatives across the Group.
ff
2021 and we thank them for their insight and
positive contribution. Twelve new colleagues have
Two colleague engagement surveys were
undertaken in 2021 with the output showing a good
result, bearing in mind the organisational
ff
information see page 22, Investments in People).
Gender Pay
The Group believes in creating a diverse and
fl
customers and communities we serve and we
provide training and support that ensures our
colleagues can deliver their best at work. This is the
third year where we are required to report upon the
gender pay gap within our subsidiary, Hello
Student® Management Limited. The fact that we
placed some of our people in 2020 on furlough
ff
the results slightly. Our analysis based on data
available on 5 April 2021 shows that the mean
gender pay gap is 4.99% (with females paid more
than males) and the mean gender bonus gap is
-448.9% (females paid higher bonuses than males).
Note the reporting period is for the year to April
2021 and the fact that no bonuses were paid in
2021 has impacted this year’s gender pay reporting.
We are committed to minimising any gender pay
and bonus gaps, to providing fair and competitive
fi
the experience of all colleagues in respect of
equality, diversity and inclusion. Full details with a
supporting narrative are published on Hello
Student® website, www. hellostudent.co.uk, in
accordance with the reporting required under the
UK Equality Act 2010 (Gender Pay Gap Information)
Regulations Act 2017.
CEO Pay Ratio and Internal Proportionality
Under the requirements introduced by The
Companies (Miscellaneous Reporting) Regulations
2018 we have calculated the CEO to employee pay
ratio for the Group.
Using the methodology, the CEO pay ratio
when compared against the median employee was
20:1; full details are set out on page 75. The
Remuneration Committee believes in reward
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021066
packages that are externally competitive and
internally proportionate, meaning the CEO is the
employee with the highest proportion of variable
pay as he has the highest level of responsibility.
The Remuneration Committee has
considered remuneration throughout the Company
and, with support from the Board, it was decided
that no employee will be paid less than the Living
ff
bands 3 and 4 (the Company has six bands with
senior managers in band 6) receive 7.5% pension
contribution and that the Senior Leadership Team
(the level immediately below the Executive
comprising six members) were awarded an LTIP in
as Executive.
Following shareholder approval at the AGM
in May 2021 the save as you earn share scheme
was launched to allow our people the opportunity
to buy into the success of our Company.
Remuneration Policy
The Remuneration Policy was approved by
shareholders at the AGM in May 2020 and will be
next fully reviewed in 2023.
Our current Policy remains compliant with
key remuneration requirements of the UK Corporate
Governance Code, including discretion for
Committee override to formulaic outcomes from
fi
for LTIP awards, alignment of pension provision for
new Executive Directors with the rate available to
employment shareholding requirement.
A summary of our Remuneration Policy is set
out on pages 68 to 70.
Executive pension alignment
The Committee, and the Board, are aware
to align existing Executive pension contributions
Fennah’s current contribution rate of 15% is
therefore non-compliant and, following
ff
2022 Reward Decisions
The Committee undertook a thorough review
of Executive salaries taking advice from Deloitte,
our Remuneration Consultant. As a result, salaries
ff
fi
was last changed in January 2020. The Board is
extremely conscious of the need to manage costs,
but the Remuneration Committee feel it is
ff
2.5% is the minimum increase to be prudent in the
present circumstances.
The Executive bonus plan arrangements for
2022 follow the same structure as 2021, with a
maximum payout of 110% of salary and three equally
occupancy, the level of fully covered dividends
fi
Both Executive Directors will receive LTIP
awards in 2022, as in 2021, over shares worth 150%
and maximum targets, with TAR being the combined
Net Asset Value growth and dividends. 25% of the
award will vest for meeting a threshold TAR target
of 6% pa, increasing to 100% vesting for meeting a
maximum target of 10% pa. Secondly, TSR relative to
the FTSE All Share Real Estate Companies peer
group, with 25% of the award vesting for median
performance and 100% for 75th percentile
performance (straight line between).
Strategic and Shareholder Alignment
In setting Executive remuneration in 2022,
the Committee has continued to seek alignment
with Empiric’s strategic priorities and shareholder
interests. In particular:
– Annual bonus performance measures
delivering the improvement in corporate
performance optimising revenue occupancy and the
level of fully covered dividends, and individual
fi
– Executives are aligned with the principle of
shareholder value creation through participation in
the long-term incentive plan that rewards growth in
NAV plus dividends and relative shareholder returns.
– The Executive Directors are required to build
fi
equivalent to 200% of salary which directly align
them with other shareholders.
– The Remuneration Committee is acutely
aware of the need to align Executive remuneration,
and that of the rest of the workforce, with
shareholder returns, whilst fully recognising that
remuneration should motivate and reward continued
performance, hard work and commitment.
fi
fi
restructuring which has been undertaken and
fi
shareholder returns, improved Executive variable
rewards will follow.
Full details of how the Remuneration Policy
will be applied during 2022, as well as how
Directors were paid in 2021, are set out on pages 71
to 77. There will be an advisory shareholder vote
2022 AGM.
Committee Changes
October 2021 following Jim Prower’s retirement.
AGM and Alice Avis will succeed me as take the
responsibility as the Chair of the Remuneration
ff
grateful to shareholders for their candid
engagement during my tenure. We greatly value
engagement with our shareholders and look
forward to your support at the forthcoming AGM.
STUART BEEVOR
Remuneration Committee Chairman | 2 March 2022
GOVERNANCE REPORT067ANNUAL REPORT & ACCOUNTS 2021
Policy Table for Executive Directors
Fixed pay
Component
Purpose and
link to strategy Operation Maximum Performance framework
Base salary Core element of
remuneration set at
a level to attract and
retain Executive
Directors of the
required calibre to
deliver the
Company’s
investment
successfully.
Fixed cash paid monthly
generally reviewed annually.
The review takes into
consideration a number of
factors, including but not
limited to:
– the individual Director’s role,
experience and performance;
– business performance;
– relevant data on
remuneration levels paid for
comparable roles; and
– pay and conditions elsewhere
in the Company.
To avoid setting the
expectations of Executive
Directors and other employees,
there is no overall maximum
salary for Executive Directors
under the Remuneration Policy.
Any increase in salaries will be
determined by the
Remuneration Committee,
taking into account the factors
stated in this table and the
following principles:
– Salary increases for Executive
Directors will typically be in
line with the average salary
increase (in percentage of
salary terms) for other
permanent employees.
– Increases may be made
above this in certain
circumstances, such as:
– progression within the role;
– increase in scope and
responsibility of the role;
– increase in experience
where an individual has
been recruited on a lower
salary initially; and increase
in size and complexity of
the Company.
None.
Benefits To provide
market-competitive
fi
fifi
take into account local market
practice.
fi
are not limited to) reimbursed
travel expenses, medical
insurance, disability and life
insurance and a car allowance.
There is no overall maximum
fi
fi
nature of the role and depend
on the annual cost of providing
fi
None.
Pension To provide
market-competitive
fi
The Company either contributes
to the Directors’ personal
pension arrangements or direct
to their pension plans.
Alternatively, Directors may
receive a cash allowance in lieu
of pension.
Current Executive Directors
receive a contribution of up to
15% of base salary to a pension
plan and/or as a cash allowance
in lieu of pension.
The level of pension provision
for any future Executive Director
appointment will be limited to
ff
the workforce.
None.
Remuneration Committee Report
Our Directors’ Remuneration Policy
was approved by shareholders at the
Annual General Meeting held on
7 May 2020 and came into effect
immediately thereafter.
Summary of Policy Report
There is no shareholder vote on the Policy at the 2022
AGM but, for shareholders’ reference, an extract from the
Policy containing the Policy Tables for Executive and
Non-Executive Directors has been included below. The full
Policy can be found in the Notice of Annual General Meeting
issued on 27 March 2020 which is on our website at
www.empiric.co.uk/investor-information and in the 2019
Annual Report pages 52-58.
A new Policy will be presented to Shareholders for
approval at the 2023 AGM.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021068
Variable Remuneration
Component
Purpose and
link to strategy Operation Maximum Performance framework
Annual and
deferred annual
bonus
To link reward to the
achievement of key
for the year.
To provide
additional alignment
with shareholders’
interests through
the operation of
bonus deferral.
The Executive Directors are
participants in the annual bonus
plan which is reviewed annually
to ensure bonus opportunity,
performance measures and
appropriate and support the
business strategy.
The Committee will determine
the level of bonus to be
awarded, taking into account
the extent to which the targets
have been met and overall
business and personal
performance.
Up to 60% of an Executive
Director’s annual bonus will be
paid in cash following the
release of the audited results of
the business.
At least 40% of any bonus is
deferred into an award over
Company shares issued as a
nil-cost option pursuant to the
terms of the LTIP, which will
usually be deferred for three
years.
Dividend equivalents will be
paid usually in additional shares
when the deferred shares are
released.
The maximum annual bonus
opportunity is 150% of base
salary per annum.
Each year the Remuneration
Committee will determine the
maximum annual bonus
opportunity for each individual
Executive Director within this
limit.
The bonus is based on
performance assessed over one
fi
strategic and personal
performance measures.
The selected measures for the
fi
in the Remuneration section of
the Annual Report for that year.
LTIP To link reward for
the Executive
Directors to the
achievement of
long-term
performance
Company which are
aligned to the
strategic goals and
to retain executives.
Awards under the LTIP will
usually be made in the form of a
contingent award of shares or
grant of nil-cost options or
nominal value options.
Vesting of the award is
dependent on the achievement
of performance targets, typically
measured over a three-year
period.
Vested awards (relating to
awards granted from 2019
additional two-year holding
period.
Dividend equivalents will be
paid usually in additional shares
when the LTIP awards are
released.
The maximum LTIP award that
may be made is up to 150% of
base salary per annum as
provided for in plan rules, but
for the avoidance of doubt this
excludes any nil-cost options
issued pursuant to an award
under the annual bonus
scheme.
Vesting of LTIP awards is
dependent on the achievement
of performance measures
determined by the Committee
ahead of each award. These
details will be disclosed in the
Annual Report on Remuneration
section of the Remuneration
Report.
Performance will usually be
measured over a three-year
performance period. For
achieving a “threshold” level of
performance against a
performance measure, no more
than 25% of the award will vest.
Vesting then increases on a
sliding scale to 100% for
achieving a stretching maximum
performance target.
GOVERNANCE REPORTANNUAL REPORT & ACCOUNTS 2021 069 GOVERNANCE REPORT
Remuneration Committee Report continued
Value Delivery Plan (VDP)
Removed from
Policy. No further
VDP awards will
be granted
Component
Purpose and
link to strategy Operation Maximum Performance framework
Employee Share
Option Plan;
Executive Directors
will only be
granted share
options under
theESOP in
exceptional
circumstances
To reward
employees for
long-term
shareholder value.
The ESOP permits the grant of
share options with an exercise
price of not less than the market
value of a share (as determined
by the Committee) at the time
Options will usually be
exercisable between three and
ten years following the grant.
If ESOP awards were, in
exceptional circumstances,
granted to an Executive Director,
appropriate performance
condition as determined by
All-employee
share plans
To reward
employees for
long-term
shareholder value.
Executive Directors may
participate on the same basis
Shareholding
guideline
To align interests
shareholders.
The standard guideline is that
Executive Directors are
expected to build up and retain
a shareholding worth at least
200% of salary.
Directors are required to
maintain their shareholding in
accordance with this guideline
for two years post employment.
(Unless the Committee
considers a lower limit to be
appropriate in a particular
participant’s circumstances.)
Policy Table for Non-Executive Directors
Purpose and link to strategy Operation Opportunity
To attract and retain Non-
Executive Directors of the
required calibre by offering
market-competitive fees.
The Chairman of the Board receives an all-inclusive fee.
Non-Executive Directors receive a basic Board fee.
Additional fees may be payable for additional Board
responsibilities such as acting as the Senior
Independent Director, chairmanship or membership of a
Board Committee.
The Remuneration Committee reviews the fees paid to
the Chairman and the Board reviews the fees paid to
the Non-Executive Directors periodically.
Additional fees may be paid to Non-Executive Directors
fl
commitment in certain limited circumstances.
Expenses incurred in the performance of non-executive
duties for the Company may be reimbursed or paid
directly by the Company, as appropriate, including
fi
to enable them to undertake their duties.
Fees are set at an appropriate level that is market
fl
fi
The total aggregate fees payable to the Chairman and
Non-Executive Directors will not exceed the limit stated
in the Company’s Articles of Association.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021070
Annual Report on Remuneration
The Annual Report on Remuneration will be subject to an
advisory shareholder vote at the 2022 Annual General Meeting.
Implementation of the Remuneration Policy in 2022
This section provides an overview of how the Committee is proposing to implement the Remuneration Policy during 2022.
Base Salary
ff
following a comprehensive review and having taken advice from Deloitte, our Remuneration Consultants. The prior and current salaries are set out
below. For information, there was no salary increase in 2021.
Executive Director Prior salary Current salary
Duncan Garrood fi ff
Lynne Fennah fi ff
Pension and Benefits
fi
insurance, life insurance, and car allowance (£15,000 for CEO and £10,000 for CFO/CSO).
ff
Annual and Deferred Annual Bonus
fi
The annual bonus will continue to be determined by three equally weighted performance measures which for 2022 are:
– Revenue Occupancy (one third of bonus)
– Fully covered dividend (one third of bonus)
– fi
to manage out of the COVID-19 pandemic period and optimises the opportunities following the in-housing of all functions and the strengthening of the
senior management team. Notwithstanding the formulaic outcome against these measures, the Remuneration Committee will carefully consider overall
business performance at the year-end and determine whether it should exercise discretion.
fi
For Duncan Garrood these are: further development and successful implementation of the corporate strategy; workplace engagement, culture,
talent development and people retention; and further improvement in customer service.
fi
fi
The targets for these measures will be disclosed, and performance against them will be provided, in the next Remuneration Report. Any bonus
fifi
fi
and clawback may be applied to a deferred annual bonus up to three years from the date of award.
LTIP
As in 2021, Duncan Garrood and Lynne Fennah will be awarded an LTIP for 2022 equivalent to 150% of salary, with the number of shares
determined by the average share price in the 12 months preceding grant, or in exceptional circumstances such other share price deemed appropriate
(“TAR”) relative to threshold and maximum targets for the period 1 January 2022 to 31 December 2024, with TAR being the combined Net Asset Value
growth and dividends. 25% of the award will vest for meeting a threshold TAR target of 6% pa, increasing to 100% vesting for meeting a maximum target
of 10% pa. Secondly, Total Shareholder Return (TSR) relative to the FTSE All Share Real Estate Companies peer group, with 25% of the award for median
performance and 100% for 75th percentile performance (straight line between) for the period 1 January 2022 to 31 December 2024.
fi
fi
fi
Non-Executive Director Remuneration
The unchanged fee structure applying from 1 January 2022 is outlined in the table below. Non-Executive Director fees are determined by the full
Board, except for the fee for the Chairman of the Board, which is determined by the Remuneration Committee.
Annual fees (£)
Base fee £40,000
Audit and Risk Committee Chairman additional fee £8,000
Remuneration Committee Chairman additional fee £8,000
Senior Independent Director additional fee £9,000 (£4,500 if role is held by an individual who is also a Committee Chairman)
Chairman £115,000
GOVERNANCE REPORTANNUAL REPORT & ACCOUNTS 2021 071 GOVERNANCE REPORT
Annual Report on Remuneration continued
Remuneration Outcomes in 2021
Single Total Figure of Remuneration (Audited)
The following table sets out the total remuneration for Executive Directors and Non-Executive Directors for the year ended 31 December 2021
alongside the equivalent data for the previous year.
Year ended 31 December 2021
Salary
and fees
(£)
Benefits
(£)
Pension
(£)
Total
Fixed
(£)
Annual
bonus
(£)
Long-term
incentives
(£)
Total
Variable
(£)
Total
(£)
Executive Directors
Duncan Garrood 400,000 17,829 30,000 447,829 44,000 – 44,000 491,829
Lynne Fennah 316,200 14,073 47,430 377,703 34,782 – 34,782 412,485
Non-Executive Directors
Mark Pain 115,000 – – 115,000 – – – 115,000
Jim Prower 39,375 – – 39,375 – – – 39,375
Stuart Beevor 48,000 – – 48,000 – – – 48,000
Alice Avis 42,250 – – 42,250 – – – 42,250
Martin Ratchford 12,000 – – 12,000 – – – 12,000
Year ended 31 December 2020
Salary
and fees
(£)
Benefits
(£)
Pension
(£)
Total
Fixed
(£)
Annual
bonus
(£)
Long-term
incentives
(£)
Total
Variable
(£)
Total
(£)
Executive Directors
Tim Attlee 204,000 12,784 30,600 247,384 – – – 247,384
Duncan Garrood 101,538 4,504 7,615 113,657 – – – 113,657
336,200 13,933 47,430 397,563 – – – 397,563
Non-Executive Directors
Mark Pain 115,000 – – 115,000 – – – 115,000
Jim Prower 52,500 – – 52,500 – – – 52,500
Stuart Beevor 48,000 – – 48,000 – – – 48,000
Alice Avis 40,000 – – 40,000 – – – 40,000
Notes to the Table – Methodology
Salary and fees fi
Benefits fifi
fi
Annual bonus fi
Long-term incentive – These columns relate to the value of long-term awards whose performance period ends in the period under review.
accordingly none of these awards vest.
Pension – Duncan Garrood received a Company contribution worth 7.5% of base salary: Lynne Fennah received a contribution of 15% of base
salary; during the year the Executive Directors each elected to receive a cash allowance in lieu of pension.
ff
2 – Tim Attlee was CEO and a Director until 30 June 2020.
3 – Duncan Garrood became CEO and a Director on 28 September 2020.
4 – Lynne Fennah’s salary was temporarily enhanced by an acting-up allowance of £20,000 in 2020 due to her additional responsibilities and
ffi
Additional Disclosures in Respect of the Single Figure Table (Audited)
2021 Annual Bonus
Duncan Garrood and Lynne Fennah participated in the 2021 annual bonus scheme with a maximum annual bonus opportunity of 110% of salary
based on the performance targets set out below.
The maximum potential annual bonus that could be paid to the Executive Directors in respect of the year ended 31 December 2021
fi
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021072
Performance targets are set out below.
Performance measure
Proportion of bonus
determined by measure
Threshold
performance
0% payable
Maximum
performance
100% payable
Actual
performance
1
% of maximum
bonus payable
Revenue 33.33% 90% of budget 110% of budget 83.5% 0%
Costs 33.33% 105% of budget 95% of budget 96.1% 29.6%
fi
Duncan Garrood
Lynne Fennah
33.34% See below 75% 25.0%
Total before application of Committee discretion 54.6%
Total after application of Committee discretion 10%
In setting the revenue and costs performance targets for 2021, the Remuneration Committee recognised the uncertainty caused by the
total revenue, which ultimately determines the level of potential covered dividends, thus aligning executive reward to shareholders. As the actual net
fi
fi
fi
performance warranted a 75% score for both Executives. Applying this to one-third of the total bonus payable resulted in 25% of maximum payout. The
fi
10% of maximum bonus for both Executives. This will be paid 60% cash and 40% deferred shares. More detail is provided on achievements on each
fi
Duncan Garrood
Objective Outturn
The completion and appropriate implementation of a Board
approved 2022-24 Strategic Plan, including the delivery of the 2021
elements of the Portfolio Segmentation Plan, particularly asset
disposals, and the evolution of the Hello Student Brand proposition.
Strategic Plan approved, portfolio segmentation analysis
fi
completed or unconditionally exchanged, Hello Student Brand
proposition progressed but delayed due to COVID-19.
Optimising the Hello Hub operating platform, including the
implementation of a new revenue optimisation programme, and
tangible digital customer service improvements.
Revenue management pricing programme implemented, online
booking process time partly reduced, customer conversion rate
improved by 35%.
Develop workplace engagement and culture, to bring an improved
performance on customer service, internal talent development and
ESG traction.
82% Colleague survey engagement achieved, NPS measured
ff
from 13% to 23%.
Lynne Fennah
Objective Outturn
The completion and appropriate implementation of a Board
approved 2022-24 strategic plan, including a forensic review of the
cost base.
Strategic plan approved, strategic cost plan achieved and
fi
Provide oversight across all business processes, to ensure
ffi
and regulatory compliance.
New revenue management platform successfully completed,
ffi
Develop and execute a Board-approved ESG strategy, including a
stakeholder engagement and communication plan.
Five-year ESG plan approved by Board, ESG communication plan
covering all stakeholders agreed, Board governance review
completed and new Company Secretary appointed at year end.
Key: Some progress
Good progress
Excellent progress
fi
Bonus award percentage
of maximum Bonus paid in cash
Bonus awarded in
deferred shares Total bonus
Duncan Garrood 10% £26,400 £17,600 £44,000
Lynne Fennah 10% £20,869 £13,913 £34,782
Note: Receipt of shares will be deferred for three years.
GOVERNANCE REPORTANNUAL REPORT & ACCOUNTS 2021 073 GOVERNANCE REPORT
Annual Report on Remuneration continued
LTIP Vesting
Return (Net Asset Value growth and dividends) relative to threshold and maximum targets for the period 1 July 2018 to 30 June 2021 and 31 December
2018 to 31 December 2021 respectively.
TR means combined Net Asset Value growth and dividends. 25% of the awards vest for meeting a threshold TR target of 8% pa., increasing to
100% vesting for meeting a maximum target of 12% pa.
Actual performance was below the threshold level for both awards so no LTIP shares vested.
Scheme Interests Awarded during the Financial Period (Audited)
Long-Term Incentive Plan Awards
Long-term incentive plan awards are granted over the Company’s shares with the number of shares under award determined by reference to a
percentage of base salary. Vesting of the awards is conditional upon satisfaction of performance conditions and is usually also conditional upon
The following table provides details of the LTIP awards granted to Duncan Garrood and Lynne Fennah on 22 April 2021.
Type of award
Maximum
number
of shares
Face value
£
Threshold
vesting
End of
performance
period
Duncan Garrood LTIP 800,000 600,000 25% of award 31 December 2023
Lynne Fennah LTIP 632,400 474,300 25% of award 31 December 2023
Duncan Garrood and Lynne Fennah were each entitled to a LTIP award over shares worth 150% of annual salary at the start of the year. The
number of shares in the award (and the face value in the above table) was calculated using a Company share price of 75 pence. The Remuneration
Committee considered using the average share price for the 12-month period to 31 March 2021 of 66.45 pence (our standard methodology) was not
appropriate due to the depressed level of the share price due to the exceptional conditions arising from the COVID-19 pandemic. The 75 pence amount
was considered appropriate as the share price was 76.6 pence when the 2021 Annual Results were announced and 75 pence was also used in
Firstly, Total Accounting Return (“TAR”) relative to threshold and maximum targets for the periods 1 January 2021 to 31 December 2023, with TAR being
the combined Net Asset Value growth and dividends. 25% of the award will vest for meeting a threshold TAR target of 6% pa., increasing to 100%
vesting for meeting a maximum target of 10% pa. Secondly, Total Shareholder Return (TSR) relative to the FTSE All Share Real Estate Companies peer
group, with 25% of the award for median performance and 100% for 75th percentile performance (straight line between) for the period 1 January 2021 to
31 December 2023.
Payments to Past Directors (Audited)
There were no payments to past Directors during 2021 other than those relating to the former CEO previously outlined in the 2020
Remuneration Report.
Payments for Loss of Office (Audited)
ffi
Statement of Directors’ Shareholdings and Share interests (Audited)
The table below shows the Directors’ share ownership as at 31 December 2021.
The standard shareholding guideline is that Executive Directors are expected to build up and retain a shareholding worth at least 200% of salary.
fifi
introduction of the guideline or, if later, their appointment to the Board.
Executive Directors are now required to maintain their shareholding in accordance with this guideline for two years post employment (unless the
Committee considers a lower limit to be appropriate in a particular participant’s circumstances).
Dividends
received during
the year ended
31 December 2021
Beneficially
owned shares at
31 December 2021
(number of shares) % of salary
1
Outstanding LTIP
awards subject to
performance and
employment conditions
at 31 December 2021
2
(number of shares)
Outstanding annual
bonus awards subject to
employment conditions
at 31 December 2021
3
(number of shares)
Mark Pain £2,500 100,000 – – –
Duncan Garrood – – – 1,200,000 –
Lynne Fennah £1,385 55,400 15% 1,647,139 156,070
Jim Prower – – – – –
Stuart Beevor £500 20,000 – – –
Alice Avis – – – – –
Martin Ratchford – – – – –
ff
3 These are outstanding deferred awards granted pursuant to the annual bonus plan.
4 Figures up to point of cessation as Director.
Between 31 December 2021 and the date of this Report, there were no changes in the shareholdings outlined in the above table.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021074
Performance Graph and CEO Remuneration Table
The chart below compares the TSR performance of the Company during the period since IPO to the FTSE All-Share Index and the FTSE All-Share
the chart for the Company equates to the IPO price of 100 pence.
Dec-21Jun-21Dec-20Jun-20Dec-19Jun-19Dec-18Jun-18Dec-17Jun-17Dec-16Jun-16Dec-15Jun-15Dec-14Jun-14
ESP TSR vs. FTSE All-Share and FTSE All-Share REIT Indices
Empiric Student Property FTSE All-Share Index FTSE All-Share REIT Index
£70
£80
£90
£100
£110
£120
£130
£150
£140
£170
£160
Chief Executive Officer Remuneration Outcomes
fi
of the maximum opportunity.
12 months
ended
30 June
2015
12 months
ended
30 June
2016
6 months
ended
31 December
2016
12 months
ended
31 December
2017
12 months
ended
31 December
2018
1
12 months
ended
31 December
2019
12 months
ended
31 December
2020
2
12 months
ended
31 December
2021
fi £576,263 £748,160 £314,455 £731,442 £539,500 £670,557 £361,041 £491,829
Annual bonus payout (% of maximum) 100% 100% 50% 0% 25.1% 42% 0% 10%
LTIP ves ting n/a n/a n/a 63.7% 0% 0% 0% 0%
1 Includes Acting CEO for period 1 January to 31 October 2018.
2 Combination of Tim Attlee as CEO from 1 January to 30 June 2020 and Duncan Garrood as CEO from 28 September to 31 December 2020.
CEO Pay Ratio
The UK Companies (Miscellaneous Reporting) Regulations 2018 introduces a requirement for certain UK listed companies to publish the ratio
ff
Year Option 25th percentile pay ratio Median pay ratio 75th percentile pay ratio
2021 A 23:1 20:1 15:1
2020 A 24:1 23:1 19:1
2019 A 33:1 31:1 25:1
Lower quartile Median quartile Upper quartile
Method Total pay and benefits Salary Total pay and benefits Salary Total pay and benefits Salary
2021 A £20,963 £19,500 £22,535 £20,963 £29,025 £27,000
We have used Option A as the statistically preferred method for calculating the pay ratio.
Figures are calculated based on a reference date of 31 December 2021 (295 headcount employed at this date).
Remuneration for Non-Executive Directors has not been included in the calculations.
The conversion for part-time colleagues to FTE equivalent uses a standard working week of 37.5 hours and 52 weeks a year.
The summary above shows that the CEO pay ratios at all percentiles has reduced. This is due to the fact that the Company has taken a company
approach to ensure our colleagues are fairly rewarded, alongside the impact of us becoming a Living Wage Employer.
The Group adopts a reward framework which is based on a set of principles for all our people. The remuneration should be competitive
compared to other comparative roles and always equal to or more than the Real Living Wage. All our people are paid using the same principles
progression policies.
GOVERNANCE REPORTANNUAL REPORT & ACCOUNTS 2021 075 GOVERNANCE REPORT
Remuneration Committee Report continued
Percentage Change in Remuneration of the Directors
The table below shows the change in the various elements of Director remuneration relative to the change in average employee remuneration
between 2020 and 2021 (plus between 2019 and 2020 as set out in last year’s Remuneration Report).
Year to
31 December 2021
Mark Pain
change
Alice Avis
change
Stuart Beevor
change
Martin Ratchford
change
Lynne Fennah
change
Duncan Garrood
change
Average employee
change
Base salary +0% +0% +0% +0% +0% +0% +4.0%
fi +0% +0% +0% +0% +0% +0% +0%
Annual bonus +0% +0% +0% +0% +100% +100% -100%
Year to
31 December 2020
Mark Pain
change
Alice Avis
change
Stuart Beevor
change
Martin Ratchford
change
Lynne Fennah
change
Duncan Garrood
change
Average employee
change
Base salary +0% +0% +0% +0% +2.0% +0% +10.0%
fi +0% +0% +0% +0% +0% +0% +0%
Annual bonus +0% +0% +0% +0% -100% +0% +100%
fi
Relative Importance of Spend on Pay
The table below sets out the total expenditure on pay for all of the Company’s employees, compared to distributions to shareholders by way
Year ended
31 December 2021
Year ended
31 December 2020
ff £10.3m £9.0m
Total dividends £15.1m £7.6m
Consideration by Directors of Matters Relating to Directors’ Remuneration
The Remuneration Committee is responsible for reviewing and making recommendations to the Board regarding the Remuneration Policy of the
Group and for reviewing compliance with Policy. During the year ended 31 December 2021, the Remuneration Committee consisted of the following
Directors: Stuart Beevor, Mark Pain, Jim Prower (until 30 September), Alice Avis and Martin Ratchford (from 1 October). The Committee met four times
during the year ended 31 December 2021.
Internal Advice
No individual was present when their own remuneration was being discussed. The Company Secretary acted as secretary to the Remuneration
External Advice
Deloitte LLP was appointed by the Company in 2015 to provide advice on executive remuneration matters. During the year, the Committee
Deloitte was paid £18,700 in fees during the year ended 31 December 2021 for these services (charged on a time plus expense basis). Deloitte is a
founding member of the Remuneration Consultants Group and, as such, voluntarily operates under the Code of Conduct in relation to executive
remuneration consulting in the UK. Deloitte provided no other services to the Company during this period.
Compliance with the UK Corporate Governance Code
The Committee is mindful of the UK Corporate Governance Code and considers that it has appropriately addressed the principles of Provision 40
in the Code:
– Clarity – This Remuneration Report provides a straightforward and transparent disclosure of our executive remuneration arrangements.
– Simplicity and alignment to culture – Our variable remuneration arrangements are straightforward with individuals eligible for an annual bonus
sustainable value creation.
– Predictability – The Policy Table on page 68 contains maximum opportunity levels for Executive Directors’ bonus and LTIP awards and pension
provision. The charts on page 56 of the 2019 Annual Report provide indications of the potential total reward opportunity for the Executive
Directors.
– Proportionality and risk – Our variable remuneration arrangements are designed to provide a fair and proportionate link between Group
outcomes so as to prevent disproportionate results. Additionally, we ensure there is a clear link between executive remuneration and the
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stretching shareholding requirements that apply during and post employment.
– fifi
clawback provisions also apply to both the annual bonus and LTIP.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021076
Shareholder Voting
Shareholder support was received for our resolutions on remuneration as summarised below:
Votes for Votes against Votes withheld
Approval of the Directors’ Remuneration Report (May 2021 Annual General Meeting) 367,934,030 (98.9%) 4,222,310 (1.1%) 4,205,421
Approval of the Remuneration Policy (May 2020 Annual General Meeting) 349,871,083 (97.7%) 8,367,331 (2.3%) 134,527
External Board Appointments
Executive Directors are normally entitled to accept appointments outside the Company with the consent of the Board. Any fees received may be
ff
This report was approved by the Board on 2 March 2022.
On behalf of the Board:
STUART BEEVOR
Remuneration Committee Chairman | 2 March 2022
GOVERNANCE REPORTANNUAL REPORT & ACCOUNTS 2021 077 GOVERNANCE REPORT
Directors’ Report
Introduction
The Directors are pleased to present their
Annual Report, including the Company’s audited
fi
Disclosure and Transparency Rule 4.1.5R.
Statutory Information Contained Elsewhere in
the Annual Report
Information required to be part of this
Directors’ Report can be found elsewhere in the
Annual Report and is incorporated into this report
by reference, as indicated below.
Financial Results and Dividends
fi
found in the Group Statement of Comprehensive
Income on page 87.
The interim dividends declared and paid in
relation to the year are set out on page 103.
Directors
The names of the Directors of the Company
who served during the year are set out on page 59.
The biographical details of the current Board are on
pages 54 and 55.
Directors’ and Officers’ Liability Insurance
The Company maintains Directors’ and
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of the Directors.
Directors’ Interests in Shares and Dividends
The Directors’ interests in ordinary shares
and dividends are disclosed in the Annual Report
on Remuneration on page 74.
Future Developments
An indication of the likely future
developments of the Company is set out in the
Strategic Report on page 13.
Political Donations
The Company made no political donations
and incurred no political expenditure during
Employees
Information about the Group’s employees
can be found in the Strategic Report on page 39.
Financial Instruments
fi
fi
fi
Share Capital
At 31 December 2021, the total number of
ordinary shares in issue was 603,203,052.
Restrictions on Transfer of Securities in
the Company
There are no restrictions on the transfer of
securities in the Company, except pursuant to:
– the Listing Rules of the Financial Conduct
Authority (the “Listing Rules”), whereby certain
individuals require approval to deal in the
Company’s shares; and
– the Company’s Articles of Association,
whereby the Board may decline to register a
transfer of shares or otherwise impose a restriction
on shares, to prevent the Company breaching any
law or regulation.
The Company is not aware of any
agreements between holders of securities that may
result in restrictions on the transfer of securities in
the Company.
Securities Carrying Special Rights
No person holds securities in the Company
carrying special rights with regard to control of
Going Concern
The Directors believe that the Company is
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business risks. Greater detail on this is provided on
page 49. The Board is, therefore, of the opinion that
the going concern basis adopted in the preparation
of the Annual Report is appropriate.
Greenhouse Gas Emissions, Energy
Consultation and Energy Efficiency Action
This information, required by Sch 7 of the
Companies Act 2006, is included in the Strategic
Report on page 45.
Substantial Shareholdings
As at 31 December 2021, the Company had
fi
Transparency Rules (“DTR 5”) of the following
substantial holdings in its ordinary shares:
As at 31 December 2021
Investor
Number of
ordinary
shares
Percentage of
ordinary
shares
CCLA Investment
Management 47,514,278 7.88%
Investec Wealth &
Investment 40,738,337 6.75%
BlackRock 30,883,450 5.12%
East Riding of Yorkshire 28,293,515 4.69%
Premier Miton Investors 28,067,345 4.65%
Transact (EO) 21,495,603 3.56%
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021078
Amendment of Articles
The Articles may be amended by a special
resolution of the Company’s shareholders.
Powers of the Directors
2006 and any directions given to the Company by
special resolution, the business of the Company will
be managed by the Board, which may exercise all
the powers of the Company.
Powers in Relation to the Company Issuing or
Purchasing its Shares
At the Company’s AGM held on 25 May 2021,
the Directors were granted general authority to allot
shares in the Company in accordance with section
551 of the Companies Act 2006 up to an aggregate
nominal amount of £2,010,536. Of these ordinary
shares, the Directors were granted authority to
issue up to an aggregate nominal amount of
£301,580 of equity securities non-pre-emptively and
wholly for cash. In addition, the Directors were
granted a further authority to issue up to an
aggregate nominal amount of £301,580 of equity
securities non-pre-emptively where such allotment
fi
fi
months after the original transaction) a transaction
which the Board determines to be an acquisition or
other capital investment of a kind contemplated by
the Statement of Principles on Disapplying
Pre-Emption Rights. These authorities expire at the
conclusion of the Company’s next AGM.
At the AGM, the Directors were granted
authority to make one or more market purchases of
ordinary shares in the Company, in accordance with
sections 693 and 701 of the Companies Act 2006,
up to an aggregate number of 60,316,094 ordinary
shares, within certain price parameters. No ordinary
shares have been purchased by the Company
under this authority, which will expire at the
conclusion of the Company’s next AGM.
Appointment and Replacement of Directors
Details of the process by which Directors can
be appointed or replaced are included in the
Corporate Governance Statement on page 56.
Post Balance Sheet Events
For all details occurring since the balance
sheet date, please refer to Note 26 on page 111.
Independent Auditor
BDO LLP has expressed its willingness
fi
31 December 2022 and a resolution relating to
Disclosure of Information to Auditor
The Directors who were members of the
Board at the time of approving the Directors’ Report
fi
– so far as each Director is aware, there is no
relevant audit information of which the Company’s
auditor is not aware; and
– each Director has taken all the steps that
they ought to have taken as a Director in order to
make themselves aware of any relevant audit
information and to establish that the Company’s
auditor is aware of that information.
AGM
The 2022 AGM will be held on 23 May 2022.
Further details about the AGM will be provided in
the AGM Notice.
This report was approved by the Board on
2 March 2022.
MARK PAIN
Chairman | 2 March 2022
GOVERNANCE REPORT079ANNUAL REPORT & ACCOUNTS 2021
Directors’ Responsibilities
The Directors are responsible for preparing
fi
accordance with applicable law and regulations.
Company law requires the Directors to
fi
fi
the Directors are required to prepare the Group
fi
fi
the requirements of the Companies Act 2006.
Under company law the Directors must not approve
fifi
that they give a true and fair view of the state of
fffi
or loss for the Group for that year.
fi
Directors are required to:
– select suitable accounting policies and then
apply them consistently;
–
that are reasonable and prudent;
– state whether they have been prepared in
accordance with international accounting standards
in conformity with the requirements of the
departures disclosed and explained in the
fi
– fi
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
The Directors are responsible for keeping
ffi
show and explain the Group and the Company’s
transactions and disclose with reasonable accuracy
fi
the Company and enable them to ensure that the
fi
fi
statements, Article 4 of the IAS Regulation. The
Directors 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
fi
made available on a website. Financial statements
are published on the Company’s website in
accordance with legislation in the UK governing the
fi
statements, which may vary from legislation in other
Company’s website is the responsibility of the
Directors. The Directors’ responsibility also extends
fi
contained therein.
Directors’ Responsibilities Pursuant to DTR4
fi
– fi
prepared in accordance with international
accounting standards in conformity with the
requirements of the Companies Act 2006 and
Article 4 of the IAS Regulation and give a true
fi
fi
– the Annual Report includes a fair review of
the development and performance of the business
fi
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
provide the information necessary for shareholders
to assess the Group’s performance, business model
and strategy.
MARK PAIN
Chairman | 2 March 2022
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021080
Independent Auditor’s Report to the
Members of Empiric Student Property plc
Opinion on the financial statements
In our opinion:
– the financial statements give a true and fair view of the state of the
Group’s and of the Parent Company’s affairs as at 31 December 2021
and of the Group’s profit for the year then ended;
– the Group financial statements have been properly prepared in
accordance with UK adopted international accounting standards;
– the Parent Company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
– the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements of Empiric Student Property
plc (the “Parent Company”) and its subsidiaries (the “Group”) for the
year ended 31 December 2021 which comprise the Group Statement
of Comprehensive Income, the Group Statement of Financial Position,
the Company Statement of Financial Position, the Group Statement of
Changes in Equity, the Company Statement of Changes in Equity, the
Group Statement of Cash Flows and notes to the financial statements,
including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is
applicable law and UK adopted international accounting standards
and as regards the Parent Company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities
for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion. Our audit opinion is consistent with the
additional report to the Audit and Risk Committee.
Independence
Following the recommendation of the Audit and Risk Committee, we
were appointed by the Board of Directors on 4 August 2015 to audit the
financial statements for the year ending 30 June 2015 and subsequent
financial periods. The period of total uninterrupted engagement
including retenders and reappointments is eight years, covering the
financial years ending 30 June 2015 to 31 December 2021. We remain
independent of the Group and the Parent Company in accordance with
the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied
to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. The non-audit
services prohibited by that standard were not provided to the Group or
the Parent Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. We considered
the ability of the Group and the Parent Company to continue as a going
concern to be a key audit matter based on our assessment of the
significance of the risk and the effect on our audit strategy and this is
reported in the key audit matters section of this report below.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group and the Parent
Company’s ability to continue as a going concern for a period of at least
12 months from when the financial statements are authorised for issue.
In relation to the Parent Company’s reporting on how it has applied the
UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the Directors’ statement in the financial
statements about whether the Directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect
to going concern are described in the relevant sections of this report.
Overview
Coverage
100% (2020: 100%) of Group profit before tax
100% (2020: 100%) of Group revenue
100% (2020: 100%) of Group total assets
Key audit
matters
2021 2020
Valuation of
investment
property
Yes Yes
Going concern Yes Yes
Materiality
Group financial statements as a whole
£10,700,000 (2020: £10,550,000) based on 1%
(2020: 1%) of Group total assets
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group’s system of internal
control, and assessing the risks of material misstatement in the
financialstatements. We also addressed the risk of management
override of internal controls, including assessing whether there was
evidence of bias by the Directors that may have represented a risk
ofmaterial misstatement.
The Group operates solely in the United Kingdom and through one
segment, the investment property portfolio. None of the individually
subsidiaries were considered to be significant components, and, as
such, the audit approach included undertaking audit work on the
key risks of material misstatement identified for the Group across the
segment. The Group audit team performed all the work necessary to
issue the Group and Parent Company audit opinions.
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
081081
Independent Auditor’s Report to the
Members of Empiric Student Property plc continued
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified,
including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of
theengagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Key audit matter How the scope of our audit addressed the key audit matter
Valuation of investment Property
Refer to Note 1.5 (Accounting Policies) and
Note 13 (Investment Property).
The Group’s investment property portfolio
includes:
– Operational assets: these are existing
properties that are currently let or
available to let.
– Development assets: these are
properties being built. Such assets have
a different risk and investment profile to
the standing assets.
The valuation of investment property
requires significant judgement and
estimates by the Directors and the
independent valuer (“the Valuer”) and
is therefore considered a significant risk
due to the subjective nature of certain
assumptions inherent in each valuation.
Any input inaccuracies or unreasonable
bases used in the valuation judgements
(such as capitalisation yields, future lease
income, future capital expenditure, and in
the case of properties under construction
costs to complete) could result in a material
misstatement of the financial statements.
There is also a risk that the Directors may
influence the significant judgements and
estimates in respect of property valuations
in order to achieve property valuation
andother performance targets to meet
market expectations.
We met with the Group’s external valuer, who valued all of the Group’s investment properties
(including those under development), to understand the assumptions and methodologies used
in valuing these properties, the market evidence supporting the valuation assumptions and the
valuation movements in the year.
We assessed the competency, independence and objectivity of the external valuer, which
includedmaking enquiries regarding interests and relationships that may have created a threat
tothe valuer’s objectivity.
We used our knowledge and experience to evaluate and challenge the valuation assumptions,
methodologies and the inputs used. This included establishing our own range of expectations for
the valuation of investment property based on externally available metrics and wider economic
and commercial factors. We assessed the valuation for each of the investment properties against
our own expectation and challenged the external valuer in respect of those properties where
the valuations fell outside of our range of expectation through discussion and inspection of
corroborating information to determine the appropriate valuation.
We checked the data provided to the valuer by the Group was consistent with the data we had
audited. This data included inputs such as current rent and lease terms, which we have agreed on a
sample basis to executed lease agreements as part of our audit work.
We reviewed management’s assessment of the future capital expenditure including fire
safety works. We obtained a copy of a report detailing the expected works that management
commissioned from an external expert, checked that it agreed to management’s estimate and
assessed the competency, independence and objectivity of the external expert.
For properties under development we agreed a sample of the costs incurred to date to supporting
documentation and tested the forecasted costs to complete to supporting documentation, including
budgeted development spend and development contract agreements.
We assessed whether the disclosures in the financial statements are appropriate and in accordance
with relevant accounting standards.
Key observations:
Based on the procedures we performed, we considered the assumptions and methodologies used
to value the Group’s investment portfolio to be appropriate and that the disclosures in the financial
statements are appropriate and in accordance with relevant accounting standards.
Going Concern
Refer to Note 1.4 (Accounting Policies).
We considered the ability of the Group and
the Parent Company to continue as a going
concern to be a key audit matter based on
our assessment of the significance of the
risk and the effect on our audit strategy.
There is a risk that any potential breaches
in future covenant compliance may result in
the bank loans being called due.
We assessed the appropriateness of the Group’s cash flow forecasts in the context of the Group’s
31 December 2021 financial position and the expected student occupancies and compared the
Directors’ downside sensitivities against results achieved in the current and previous years along
with letting levels obtained for the next student year.
We have considered the potential effects of the continuing COVID pandemic, including further
lockdowns and restrictions, as part of the downside sensitivity scenarios.
We evaluated the key assumptions in these forecasts and considered whether these appear
reasonable, for example by comparing rental revenue to expected student occupancy.
We assessed the appropriateness of the forecasted student occupancy against our own
expectations given available third party evidence.
We obtained the Directors’ views on their ability to cure potential covenant breaches, through
either partial loan repayments or pledging unencumbered assets, and the Directors’ views on and
evidence of the continued support of their lenders.
The Group has a two facilities that fall due for repayment in the going concern period as disclosed in
Note 18. One facility was extended post period end from 17 November 2022 to 17 November 2025,
which we agreed to the executed facility agreement. For the second facility we considered the
ability of the Company to refinance with their recent track record of refinancing loans and availability
of finance in the market place.
We compared the overhead to previous years and considered the nature of spend and challenged
management as to what they considered discretionary.
We reviewed the disclosures relating to the going concern basis of preparation and considered
whether these were consistent with the Directors’ going concern assessment.
Key observations:
Our conclusions are reported in the Conclusions relating to going concern section of our report.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021082
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality
to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on
the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated
as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Group financial statements Parent Company financial statements
2021
£m
2020
£m
2021
£m
2020
£m
Materiality £10,700,000 £10,550,000 £9,630,000 £9,495,000
Basis for
determining
materiality
1% of Group total assets. 90% of Group materiality.
Rationale for
the benchmark
applied
We determined that Group total assets would be the most
appropriate basis for determining overall materiality as we
consider this to be one of the principal considerations for
users of the financial statements in assessing the financial
performance of the Group.
Capped at 90% of Group materiality given the assessment of
the components aggregation risk.
Performance
materiality
£8,025,000 £7,900,000 £7,220,000 £7,100,000
Basis for
determining
performance
materiality
75% of materiality – in determining performance materiality
we have considered the following factors:
– Our risk assessment, including our assessment of the
Group’s overall control environment; and
– Our past experience of the audit, which has indicated a
low number of corrected and uncorrected misstatements
identified in prior periods and Management’s willingness
to investigate and correct these.
75% of materiality – in determining performance materiality
wehave considered the following factors:
– Our risk assessment, including our assessment of the
Group’s overall control environment; and
– Our past experience of the audit, which has indicated a
low number of corrected and uncorrected misstatements
identified in prior periods and Management’s willingness
to investigate and correct these.
Specific materiality
We also determined that for other classes of transactions and account balances not related to investment properties, a misstatement of less than
materiality for the financial statements as a whole, specific materiality, could influence the economic decisions of users. As a result, we determined
that specific materiality for the measurement of these items based on 5% of three-year average of European Public Real Estate Association (“EPRA”)
earnings being £810,000 (2020: 5% of three-year average EPRA earnings being £950,000). EPRA earnings excludes the impact of the net surplus
on revaluation of investment properties and profit on disposal of investment properties. We further applied a performance materiality level of 75%
(2020: 75%) of specific materiality to ensure that the risk of errors exceeding specific materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit and Risk Committee that we would report to them all individual audit differences in excess of £214,000 (2020: £211,000),
and for amounts impacting EPRA earnings in excess of £41,000 (2020: £48,000). We also agreed to report differences below this threshold that, in
our view, warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report and
Accounts other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Parent Company’s compliance with the provisions of the UK Corporate Governance Code specified for our
review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement
is materially consistent with the financial statements or our knowledge obtained during the audit.
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
083083
Independent Auditor’s Report to the
Members of Empiric Student Property plc continued
Going concern and
longer-termviability
– The Directors’ statement with regards to the appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set out on page 49; and
– The Directors’ explanation as to their assessment of the Group’s prospects, the period this assessment
covers and why the period is appropriate set out on page 49.
Other Code provisions – Directors’ statement on fair, balanced and understandable set out on page 80;
– Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on
page 48;
– The section of the Annual Report that describes the review of effectiveness of risk management and internal
control systems set out on page 62; and
– The section describing the work of the Audit and Risk Committee set out on page 64.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006
and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and
Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
– the information given in the Strategic report and the Directors’ report for the financial year for which
thefinancial statements are prepared is consistent with the financial statements; and
– the Strategic report and the Directors’ report have been prepared in accordance with applicable
legalrequirements.
In the light of the knowledge and understanding of the Group and Parent Company and its environment
obtainedin the course of the audit, we have not identified material misstatements in the Strategic report
ortheDirectors’ report.
Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Matters on which we
are required to report
byexception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
– adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit
have not been received from branches not visited by us; or
– the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are
not in agreement with the accounting records and returns; or
– certain disclosures of Directors’ remuneration specified by law are not made; or
– we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities, the Directors are responsible for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021084
Extent to which the audit was capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws
and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud is detailed below:
– Agreement of the financial statement disclosures to underlying
supporting documentation to assess compliance with those laws and
regulations having an impact on the financial statements;
– Enquiries of management and the Audit and Risk Committee as to
their identification of any non-compliance with laws or regulations, or
any actual or potential claims;
– Review of minutes of Board meetings throughout the period;
– Obtaining an understanding of the control environment in monitoring
compliance with laws and regulations and performing our own
checks of compliance with relevant requirements, including the
Companies Act 2006, the UK Listing Rules and the REIT tax regime
requirements;
– In relation to the risk of management override of internal controls, by
undertaking procedures to review journal entries processed during
and subsequent to the year end and evaluating whether there was
evidence of bias that represented a risk of material misstatement due
to fraud;
– We assessed the susceptibility of the Group’s financial statements
to material misstatement, including how fraud might occur by
considering the key risks impacting the financial statements.
We identified specific fraud risks with respect to the valuation of
investment property, which have been included as a key audit
matter and our audit response is set out in that section of our
audit report. We also identified specific fraud risks with respect to
revenue recognition through management override to reflect higher
occupancy and increase property valuations; and
– We communicated relevant identified laws and regulations and
potential fraud risks to all engagement team members and remained
alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit.
Our audit procedures were designed to respond to risks of material
misstatement in the financial statements, recognising that the risk of
not detecting a material misstatement due to fraud is higher than the
risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery, misrepresentations or
through collusion. There are inherent limitations in the audit procedures
performed and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial
statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Ouraudit work has been undertaken so that we might state to
the Parent Company’s members those matters we are required to state
to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Parent Company and the Parent Company’s
members asa body, for our audit work, for this report, or for the opinions
we haveformed.
Thomas Edward Goodworth (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
2 March 2022
BDO LLP is a limited liability partnership registered in England and
Wales (with registered number OC305127).
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
085085
Group Statement of Comprehensive Income
Note
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Continuing operations
Revenue 2 5 5,96 7 59 ,444
Property expenses 3 (2 3 , 0 6 1 ) (2 2 , 651 )
Net rental income 32 ,90 6 36 ,793
Administrative expenses 4 (1 0 , 5 47 ) (9 , 8 41 )
Change in fair value of investment property 13 17 , 5 6 7 (3 7, 6 0 3 )
Operating profit/(loss) 39, 92 6 (1 0 , 651 )
Finance cost (1 2 , 3 8 2 ) (1 3,34 1 )
Finance income 1 22
Net finance costs 5 (12 , 3 81 ) (13,3 1 9 )
Gain on disposal of investment property 1,6 52 –
Profit/(loss) before income tax 29 ,197 (23,970 )
Corporation tax 7 – –
Profit/(loss) for the year and total comprehensive income/(loss) 29 ,197 (23,970 )
Earnings/(loss) per share expressed in pence per share 8
Basic 4 . 84 (3.97 )
Diluted 4 . 84 (3.97 )
Gross margin 58.8% 61.9%
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021086
Group Statement of Financial Position
Note
At
31 December
2021
£’000
At
31 December
2020
£’000
ASSETS
Non-current assets
Property, plant and equipment 11 4 26 135
Intangible assets 12 1 , 318 1, 0 5 4
Right of use asset 1, 010 –
Investment property – Operational Assets 13 9 67,19 4 9 81, 3 69
Investment property – Development Assets 13 2 8 , 692 2 3 , 7 51
Total non-current assets 99 8 , 6 40 1, 0 0 6 , 3 0 9
Current assets
Trade and other receivables 14 7,839 14 , 51 0
Assets classified as held for sale 15 25, 87 0 -
Cash and cash equivalents 16 37, 1 27 33 ,927
Total current assets 70 , 83 6 4 8 , 437
Total assets 1,0 69 ,47 6 1, 05 4 , 74 6
LIABILITIES
Current liabilities
Trade and other payables 17 19 ,9 9 0 1 5,527
Borrowings 18 4 4 ,7 12 –
Lease liability 10 7 –
Deferred income 17 29, 8 62 2 0 , 67 6
Total current liabilities 9 4 ,67 1 36 ,203
Non-current liabilities
Borrowings 18 32 6 , 2 4 4 385,266
Lease liability 963 –
Total non-current liabilities 3 27, 2 0 7 385,266
Total liabilities 4 21, 8 7 8 4 21 , 4 69
Total net assets 6 4 7, 59 8 6 33 , 277
Equity
Called up share capital 19 6 ,03 2 6 , 032
Share premium 20 2 95 257
Capital reduction reserve 21 459 ,9 5 8 475 , 0 38
Retained earnings 181 , 31 3 151 , 9 5 0
Total equity 6 4 7,5 9 8 633 , 27 7
Total equity and liabilities 1, 0 69 , 47 6 1,0 5 4 ,74 6
Net Asset Value per share basic (pence) 9 107. 3 6 10 5 . 0 0
Net Asset Value per share diluted (pence) 9 10 6 .75 10 4 .6 0
EPRA NTA per share (pence) 9 107. 3 6 10 4 . 8 0
These financial statements were approved by the Board of Directors on 2 March 2022 and signed on its behalf by:
Lynne Fennah
Director
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
087087
Company Statement of Financial Position
Note
At
31 December
2021
£’000
At
31 December
2020
£’000
ASSETS
Fixed assets
Property, plant and equipment 11 338 56
Intangible assets 12 1,318 968
Right of use asset 1,010 –
Investments in subsidiaries 30 187,598 187,598
Total fixed assets 190,264 188,622
Current assets
Trade and other receivables 14 311 353
Amounts due from Group undertakings 14 369,048 350,578
Cash and cash equivalents 16 1,977 24,775
Total current assets 371,336 375,706
Total assets 561,600 564,328
CREDITORS
Current creditors
Trade and other payables 17 5,047 2,918
Amounts due to Group undertakings 17 27,177 9,548
Lease liability 107 –
Total non-current creditors 32,331 12,466
Non-current creditors
Borrowings 18 19,980 19,961
Lease liability 963 –
Total non-current creditors 20,943 19,961
Total creditors 53,274 32,427
Total net assets 508,326 531,901
Capital and reserves
Called up share capital 19 6,032 6,032
Share premium 20 295 257
Capital reduction reserve 21 459,958 475,038
Retained earnings 42,041 50,574
Total capital and reserves 508,326 531,901
The Company made a loss for the year of £8,699,000 (2020: £46,198,000 profit).
These financial statements were approved by the Board of Directors on 2 March 2022 and signed on its behalf by:
Lynne Fennah
Director
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021088
Year ended 31 December 2021
Called up
share capital
£’000
Share
premium
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
Balance at 1 January 2021 6 ,032 257 475 , 03 8 151 , 9 5 0 6 33 ,27 7
Changes in equity
Profit for the year – – – 29 ,19 7 2 9 ,19 7
Total comprehensive income for the year – – – 29 ,19 7 2 9 ,19 7
Share-based payments – – – 204 204
Share options exercised – 38 – (3 8 ) –
Dividends – – (15 , 0 8 0 ) – (15 , 0 8 0 )
Total contributions and distribution recognised directly in equity – 38 (15 , 0 8 0 ) 16 6 (14 , 87 6 )
Balance at 31 December 2021 6 ,032 295 459 , 9 5 8 181 , 31 3 6 4 7, 59 8
Year ended 31 December 2020
Balance at 1 January 2020 6 ,0 32 257 4 8 2 ,57 8 17 5 , 8 9 1 664,7 5 8
Changes in equity
Loss for the year – – – (23 ,970 ) (23,970 )
Total comprehensive income for the year – – – (23 ,970 ) (23,970 )
Share-based payments – – – 29 29
Dividends – – (7, 5 4 0 ) – (7, 5 4 0 )
Total contributions and distribution recognised directly in equity – – (7, 5 4 0 ) 29 (7, 511 )
Balance at 31 December 2020 6 ,0 32 257 475, 0 3 8 151 , 9 5 0 6 33 , 277
Group Statement of Changes in Equity
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS089089
Company Statement of Changes in Equity
Year ended 31 December 2021
Called up
share capital
£’000
Share
premium
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
Balance at 1 January 2021 6,032 257 475,038 50,574 531,901
Changes in equity
Loss for the year – – – (8,699) (8,699)
Total comprehensive loss for the year – – – (8,699) (8,699)
Share-based payments – – – 204 204
Share options exercised – 38 – (38) –
Dividends – – (15,080) – (15,080)
Total contributions and distribution recognised directly in equity – 38 (15,080) 166 (14,876)
Balance at 31 December 2021 6,032 295 459,958 42,041 508,326
Year ended 31 December 2020
Balance at 1 January 2020 6,032 257 482,578 4,347 493,214
Changes in equity
Profit for the year – – – 46,198 46,198
Total comprehensive loss for the year – – – 46,198 46,198
Share-based payments – – – 29 29
Dividends – – (7,540) – (7,540)
Total contributions and distribution recognised directly in equity – – (7,540) 29 (7,511)
Balance at 31 December 2020 6,032 257 475,038 50,574 531,901
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021090
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Cash flows from operating activities
Profit/(loss) before income tax 29 ,197 (23,970 )
Share-based payments 20 4 29
Depreciation and amortisation 457 32 6
Finance income (1 ) (2 2 )
Finance costs 12 , 3 82 13,34 1
Intangible asset impairment – 89 8
Gain on disposal of investment property (1 , 6 5 2 ) –
Change in fair value of investment property (17, 5 6 7 ) 3 7, 6 0 3
Decrease/(increase) in trade and other receivables 6 , 67 0 (3 ,9 71 )
Increase in trade and other payables 3 ,532 1, 653
Increase/(decrease) in deferred rental income 9 ,18 6 (8 ,52 8 )
Net cash flows generated from operations 4 2 , 40 8 17, 3 5 9
Cash flows from investing activities
Purchases of tangible fixed assets (4 2 7 ) (72 )
Purchases of intangible assets (537 ) (370 )
Purchase of investment property (15 ,7 0 1 ) (14 , 2 5 8 )
Interest received 1 22
Proceeds on disposal of investment property, net of selling costs 17, 9 8 2 –
Net cash flows from investing activities 1, 318 (14 , 6 7 8 )
Cash flows from financing activities
Dividends paid (1 3 , 5 8 9 ) (7, 5 4 0 )
Bank borrowings drawn – 77 ,800
Bank borrowings repaid (1 5,0 0 0 ) (42 , 8 0 0 )
Loan arrangement fee paid (16 8 ) (1, 0 0 9 )
Finance cost (excluding fair value loss on derivatives) (11 , 7 6 9 ) (11 , 7 2 2 )
Net cash flows from financing activities (40 ,526 ) 14 , 7 2 9
Increase in cash and cash equivalents 3 , 20 0 17, 41 0
Cash and cash equivalents at beginning of year 33 ,9 27 16 , 517
Cash and cash equivalents at end of year 37,1 2 7 33 ,927
Group Statement of Cash Flows
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS091091
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 2021 to 31 December 2021.
The consolidated financial statements of the Group for the year ended 31 December 2021 comprise the results of Empiric Student Property plc
(the “Company”) and its subsidiaries and were approved by the Board for issue on 2 March 2022. The Company is a public limited company
incorporated and domiciled in England and Wales
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 2021 comprise the results of Empiric Student Property plc (the
“Company”) and its subsidiaries (together, the “Group”). The Group and Parent Company financial statements have been prepared on a going
concern basis. The Group financial statements have been prepared in accordance with UK adopted international accounting standards. The Parent
Company financial statements have been prepared in accordance with FRS 101, Financial Reporting Standards Reduced Disclosure Framework.
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 and the Group’s
functional currency.
The Company has applied the exemption allowed under section 408(1b) of the Companies Act 2006 and has therefore not presented its own
Statement of Comprehensive Income in these financial statements. The Group profit for the year includes a loss after taxation of £8,699,000
(2020:Profit of £46,198,000) for the Company, which is reflected in the financial statements of the Company.
1.3 Disclosure Exemptions Adopted
In preparing the financial statements of the Parent Company, advantage has been taken of all disclosure exemptions conferred by FRS 101.
The Parent Company financial statements do not include:
– certain comparative information as otherwise required by international accounting standards;
– a statement of cash flows;
– the effect of future accounting standards not yet adopted; and
– disclosure of related party transactions with other wholly owned members of the Group headed by Empiric Student Property plc.
In addition, and in accordance with FRS 101, further disclosure exemptions have been adopted because equivalent disclosures are included in the
consolidated financial statements of Empiric Student Property plc. The Parent Company financial statements do not include certain disclosures in
respect of:
– Financial instruments (other than certain disclosures required as a result of recording financial instruments at fair value); and
– Fair value measurement (other than certain disclosures required as a result of recording financial instruments at fair value).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and does not present its own profit
and loss account in these financial statements.
1.4 Going Concern
The COVID-19 pandemic has created global economic uncertainty, and in particular an uncertainty around income for the upcoming 2022/23
academic year. Accordingly, the Group has prepared projections to 30 September 2023 and conducted a detailed going concern review and
considered its liquidity position and banking covenant compliance strength.
As at 31 December 2021 the Group had £37 million in cash and £45 million of undrawn investment debt facilities. During the going concern period
we have two facilities due for refinancing, one for £90 million with Lloyd’s due to expire in November 2022 and one with FCB for £20 million due in
March 2023. Subsequent to the year end the Group signed an agreement to extend its Lloyd’s RCF out to November 2025. This means the Group is
well funded and has no refinancing requirements until March 2023 where we intend to extend the £20 million facility.
The Group’s debt facilities include covenants in respect of LTV and interest cover, both projected and historic, and all debt facilities are ring fenced
with each specific lender. The Group maintains regular dialogue with all of its lenders as part of the ordinary course of business; however, during the
pandemic we have increased the frequency of this dialogue. As part of these discussions with our lenders we have had conversations specifically
around the interest cover covenants to ensure we either temporarily restructure these or gain the relevant waivers from the banks to ensure that no
issues arise. To date all of our banks have been supportive during this period and have expressed commitment to the long-term relationship they
wish to build with Empiric.
Notes to the Financial Statements
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021092
Management has evaluated a number of scenarios in its going concern model. The critical assumption is the revenue occupancy for the 2022/23
academic year. Upside, central and downside stress cases have been constructed showing 2022/23 academic year occupancy of between 65%
and 90%.
Scenario
Revenue occupancy
for 2021/22
academic year
Revenue occupancy
for 2022/23
academic year
Scenario 1 – Upside Scenario 84% 90%
Scenario 2 – Central Scenario 84% 85%
Scenario 3 – Downside Stress Scenario 84% 65%
The Group continues to maintain covenant compliance for its LTV thresholds throughout the going concern assessment period. Property values
would have to fall by more than 18% from December 2021 valuations before LTV covenants are breached.
In Scenario 1 and 2 above the Group continues to maintain covenant compliance for all its interest cover covenants. It maintains adequate levels
of liquidity throughout. In addition, no assumption is made as to the level of additional cost-cutting measures or mitigating actions which could
potentially be undertaken.
In Scenario 3, under our Downside Stress Scenario, we would not meet projected interest cover covenants at the 31 March 2022 measurement date
for one lender. We would also have further breaches on two other facilities in the going concern period. The Group has cure rights under the lending
agreements; however, the Group would need to raise an additional £22 million in cash to have sufficient cash headroom to cure this ICR breach. The
Board considers this scenario as extremely unlikely and that it is a severe downside scenario.
As at 2 March 2022 booking levels for the upcoming 2022/23 academic year are currently at 36%; this compared to 20% for the 2021/22 academic
year as at 16 March 2021. As such the Board is expecting that Scenario 1 is the most likely scenario at this time.
To support the Directors’ going concern assessment, the management also evaluated the occupancy level at which all ICR covenant tests were
breached and, additionally, the impact of a “Reverse Stress Test” which was performed to determine the level of revenue occupancy for the
2022/23 academic year at which the Group would need to seek alternative sources of funding. For this modelling we kept revenue occupancy for
the 2021/22 academic year at 84%.
The Directors noted that if occupancy falls below 45% then the Group would be in breach of all ICR covenants, and at 47% revenue occupancy for
the 2022/23 academic year (18% lower revenue occupancy than our Downside Stress Scenario) the Group would need to seek alternative sources
of funding.
Having reviewed and considered the three modelled scenarios, the 2022/23 academic year occupancy level at which ICR covenants would be
breached and the level at which alternative sources of funding would be required, the Directors consider that the Group has adequate resources
in place for at least 12 months from the date of these results and have therefore adopted the going concern basis of accounting in preparing the
annual financial statements.
1.5 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.
Estimates
In the process of applying the Group’s accounting policies, management has made the following estimates, 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.
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
093093
Notes to the Financial Statements continued
1. ACCOUNTING POLICIES continued
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:
(b) Operating Lease Contracts – the Group as Lessor
The Group has investment properties which have various categories of leases in place with tenants. The judgements by lease type are
detailedbelow:
– Student leases: As these leases all have a term of less than one year, the Group retains all the significant risks and rewards of ownership of these
properties and so accounts for the leases as operating leases.
– Nominations and Commercial leases: The Group has determined, based on an evaluation of the terms and conditions of the arrangements,
particularly the lease terms, insurance requirements 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 2021. 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 the “Financial liabilities” section of 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 are primarily 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 receivable 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.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021094
Impairment provisions for intercompany receivables 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 against 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 financial 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 borrowing is 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 whilst 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.
Intangible Assets
Intangible assets are initially recognised at cost and then subsequently carried at cost less accumulated amortisation and impairment losses.
Amortisation has been charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over either five or ten years
depending on the nature of the asset’s useful life.
Investment Property
Investment property comprises property that is held to earn rentals or for capital appreciation, or both, and property under development rather than
for sale in the ordinary course of business or for use in production or administrative functions.
Investment property is measured initially at cost including transaction costs and is included in the financial statements on unconditional exchange.
Transaction costs include transfer taxes, professional fees and initial leasing commissions to bring the property to the condition necessary for it to
be capable of operating.
Once purchased, investment property is stated at fair value. Gains or losses arising from changes in the fair values are included in the Consolidated
Statement of Comprehensive Income in the period in which they arise.
Investment property is derecognised when it has been disposed of, or permanently withdrawn from use, and no future economic benefit is
expected from its disposal. The investment property is derecognised upon unconditional exchange. The difference between the net disposal
proceeds and the carrying amount of the asset would result in either gains or losses at the retirement or disposal of investment property. Any gains
or losses are recognised in the Consolidated Statement of Comprehensive Income in the period of retirement or disposal.
Property, Plant and Equipment
All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure which is directly attributable to
the acquisition of the asset.
Depreciation has been charged to the Consolidated Statement of Comprehensive Income on the following basis:
– Fixtures and fittings: 15% per annum on a reducing balance basis; and
– Computer equipment: straight-line basis over three years.
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
095095
Notes to the Financial Statements continued
Rental Income
The Group is the lessor in respect of operating leases. Rental income arising from operating leases on investment property is accounted for on a
straight-line basis over the lease term and is included in gross rental income in the Consolidated Statement of Comprehensive Income due to its
operating nature.
Tenant lease incentives are recognised as a reduction of rental revenue on a straight-line basis over the term of the lease. The lease term is the
non-cancellable period of the lease together with any further term for which the tenant has the option to continue the lease, where, at the inception
of the lease, the Directors are reasonably certain that the tenant will exercise that option.
Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the Consolidated Statement of
Comprehensive Income when the right to receive them arises.
Where a student requested a rent refund and they met the criteria set out, including leaving the property, the Group recognised no further income in
relation to that let, reduced cash with the cash amount refunded, wrote off any deferred income in relation to the refund and any difference between
cash and deferred income was debited or credited to revenue in the Statement of Comprehensive Income.
Segmental Information
The Directors are of the opinion that the Group is engaged in a single segment business, being the investment in student and commercial lettings,
within the United Kingdom.
Share-based Payments
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the Consolidated Statement
of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity
instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the
number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted.
So long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before
and after the modification, is also charged to the Consolidated Statement of Comprehensive Income over the remaining vesting period. National
Insurance obligations with respect to equity-settled share-based payments awards are accrued over the vesting period.
Share Capital
Ordinary shares are classified as equity. External costs directly attributable to the issuance of shares are recognised as a deduction from equity.
Taxation
As the Group is a UK 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
Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised as a 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.
1.6 Impact of New Accounting Standards and Changes in Accounting Policies
At the date of authorisation of these financial statements, the following accounting standards had been issued which are not yet applicable to
theGroup:
– IAS 1/8 Definition of Materiality Amendment
– IFRS 3 Definition of a Business
– IBOR Reform Phase 1
– IFRS 16 Amendment for Rent Concessions
The above standards or interpretations not yet effective are expected to have a material impact on these condensed consolidated
financial statements of the Group.
1. ACCOUNTING POLICIES continued
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021096
2. REVENUE
Group
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Student rental income 55,977 64,218
Student rental refunds (1,805) (6,539)
Commercial rental income 1,475 1,765
Other income 320 –
Total revenue 55,967 59,444
3. PROPERTY EXPENSES
Group
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Direct site costs 7,006 7,575
Technology services 672 671
Site office and utilities 10,428 9,371
Cleaning and service contracts 2,989 2,922
Repairs and maintenance 1,966 2,112
Total property expenses 23,061 22,651
4. ADMINISTRATIVE EXPENSES
Group
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Salaries and Directors’ remuneration 5,278 4,655
Legal and professional fees 2,218 1,976
Other administrative costs 1,979 2,453
IT expenses 522 326
9,997 9,410
Auditor’s fees
Fees payable for the audit of the Group’s annual accounts 224 210
Fees payable for the review of the Group’s interim accounts 44 40
Fees payable for the audit of the Group’s subsidiaries 150 136
Total auditor’s fees 418 386
Abortive acquisition costs 132 45
Total administrative expenses 10,547 9,841
5. NET FINANCE COST
Group
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Finance costs
Interest expense on bank borrowings 11,567 11,838
Amortisation of loan transaction costs 815 1,503
12,382 13,341
Finance income
Interest received on bank deposits 1 22
1 22
Net finance cost 12,381 13,319
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
097097
Notes to the Financial Statements continued
6. EMPLOYEES AND DIRECTORS
Group
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Wages and salaries 8,766 8,021
Pension costs 350 295
Cash bonus 150 –
Share-based payments 204 29
National insurance 914 725
10,384 9,070
Less: Hello Student® amounts included in property expenses (5,106) (4,415)
Amounts included in administrative expenses 5,278 4,655
The average monthly number of employees of the Group during the year was as follows:
Management 8 5
Administration – ESP 49 44
Operations – Hello Student® 238 316
295 365
Group
Directors’ remuneration
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Salaries and fees 993 928
Pension costs 77 86
Cash bonus 54 –
Payment in lieu of notice – 351
Share-based payments 204 29
1,328 1,394
A summary of the Directors’ emoluments, including the disclosures required by the Companies Act 2006 is set out in the Directors’
RemunerationReport.
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
asnormal.
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 2021.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021098
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
31 December
2021
£’000
Year ended
31 December
2020
£’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
Profit for the year 29,197 (23,970)
Profit before tax multiplied by the rate of corporation tax in the UK of 19% (2020: 19%) 5,547 (4,554)
Exempt property rental profits in the year (4,160) (2,042)
Exempt property revaluations in the year (3,338) 7,144
Effects of:
Non-allowable expenses 121 70
Capital allowances (1,066) (1,006)
Gain on disposal not taxable 314 –
Unutilised current year tax losses 2,582 388
Total current income tax charge/(credit) in the income statement – –
A deferred tax asset in respect of the tax losses generated by the residual (non-tax exempt) business of the Group of £2,581,000 (31 December
2020: £388,000) will be recognised to the extent that their utilisation is probable. On the basis that the residual business is not expected to
generate taxable profits in future periods against which the losses will be applied, a deferred tax asset of £5,160,000 (2020: £3,027,000) 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 year.
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 year.
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 and
rental guarantees 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.
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
099099
Notes to the Financial Statements continued
Reconciliations are set out below:
Calculation
of basic
EPS
£’000
Calculation
of diluted
EPS
£’000
Calculation
of EPRA
basic EPS
£’000
Calculation
of EPRA
diluted EPS
£’000
Calculation
of adjusted
EPS
£’000
Year to 31 December 2021
Earnings per IFRS statement of comprehensive income 29,197 29,197 29,197 29,197 29,197
Adjustments to remove:
Gain/loss on disposal of investment property – – (1,652) (1,652) (1,652)
Changes in fair value of investment properties (Note 13) – – (17,573) (17,573) (17,573)
Earnings/Adjusted Earnings 29,197 29,197 9,972 9,972 9,972
Weighted average number of shares (’000) 603,185 603,185 603,185 603,185 603,185
Adjustment for employee share options (’000) – 254 – 254 –
Total number shares (’000) 603,185 603,439 603,185 604,439 603,185
Per-share amount (pence) 4.84 4.84 1.65 1.65 1.65
Year to 31 December 2020
Earnings (23,970) (23,970) (23,970) (23,970) (23,970)
Adjustment to include discounts on acquisition due to rental guarantees in the year – – – – 221
Adjustments to remove:
Changes in fair value of investment properties (Note 13) – – 37,603 37,603 37,603
Earnings/Adjusted Earnings (23,970) (23,970) 13,633 13,633 13,854
Weighted average number of shares (’000) 603,161 603,161 603,161 603,161 603,161
Adjustment for employee share options (’000) – –
1
– 551 –
Total number shares (’000) 603,161 603,161 603,161 603,712 603,161
Per-share amount (pence) (3.97) (3.97) 2.26 2.26 2.30
1 Due to the Group making a loss in the year, under IAS 33 the share options become antidilutive and thus are excluded from the above calculation.
9. NET ASSET VALUE PER SHARE
The principles of the three measures per EPRA are below:
EPRA Net Reinstatement Value: Assumes that entities never sell assets and aims to represent the value required to rebuild the entity.
EPRA Net Tangible Assets: Assumes that entities buy and sell assets, thereby crystallising certain levels of unavoidable deferred tax.
EPRA Net Disposal Value: Represents the shareholders’ value under a disposal scenario, where deferred tax, financial instruments and certain other
adjustments are calculated to the full extent of their liability, net of any resulting tax. As the Group is a REIT, no adjustment is made for deferred tax.
8. EARNINGS PER SHARE continued
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021100
The Group considers NAV to be the most relevant measure of the NAV measures and we expect this to be our primary NAV measure going forward.
A reconciliation of the three EPRA NAV metrics from IFRS NAV is shown in the table below.
NAV EPR A NAV measures
Year ended 31 December 2021
IFRS
£’000
EPRA
NRV
£’000
EPRA
NTA
£’000
EPRA
NDV
£’000
Net assets per Statement of Financial Position 647,598 647,598 647,598 647,598
Adjustments
Fair value of fixed rate debt – – – (14,333)
Purchaser’s costs
1
– 34,168 – –
Net assets used in per share calculation 647,598 681,766 647,598 633,265
Number of shares in issue
Issued share capital (’000) 603,203 603,203 603,203 603,203
Issued share capital plus employee options (’000) 606,649 606,649 606,649 606,649
Net Asset Value per share
£ £ £ £
Basic Net Asset Value per share 1.074 1.130 1.074 1.050
Diluted Net Asset Value per share 1.068 1.124 1.068 1.044
NAV EPRA NAV measures
Year ended 31 December 2020
IFRS
£’000
EPRA
NRV
£’000
EPRA
NTA
£’000
EPRA
NDV
£’000
Net assets per Statement of Financial Position 633,278 633,278 633,278 633,278
Adjustments
Fair value of fixed rate debt – – – (30,545)
Purchaser’s costs
1
– 32,830 – –
Net assets used in per share calculation 633,278 666,108 633,278 602,733
Number of shares in issue
Issued share capital (’000) 603,161 603,161 603,161 603,161
Issued share capital plus employee options (’000) 605,475 605,475 605,475 605,475
Net Asset Value per share
£ £ £ £
Basic Net Asset Value per share 1.050 1.104 1.050 0.999
Diluted Net Asset Value per share 1.046 1.100 1.046 0.995
1 EPRA NTA and EPRA NDV reflect IFRS values which are net of purchaser’s costs. Any purchaser’s costs deducted from the market value are added back when calculating
EPRA NRV.
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS101101
Notes to the Financial Statements continued
10. DIVIDENDS PAID
Group and Company
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Interim dividend of 1.25 pence per ordinary share in respect of the quarter ended 31 December 2020 – 7,540
Interim dividend of 2.50 pence per ordinary share in respect of the quarter ended 30 September 2021 15,080 –
15,080 7,540
As at 31 December 2021 an accrual of £1,491,000 was being held relating to withholding tax on the 2021 dividend (31 December 2020: nil)
On 23 February 2022 the Company declared a 0.625 pence dividend to be paid on 25 March 2022.
11. PROPERTY PLANT AND EQUIPMENT
Group Company
Year ended 31 December 2021
Fixtures and
fittings
£’000
Computer
equipment
£’000
Total
£’000
Fixtures and
fittings
£’000
Computer
equipment
£’000
Total
£’000
Costs
As at 1 January 2021 490 338 828 490 219 709
Additions 347 82 429 347 18 365
As at 31 December 2021 837 420 1,257 837 237 1,074
Depreciation
As at 1 January 2021 471 222 693 462 191 653
Charge for the year 65 73 138 65 18 83
As at 31 December 2021 536 295 831 527 209 736
Net book value
As at 31 December 2021 301 125 426 310 28 338
Group Company
Year ended 31 December 2020
Fixtures and
fittings
£’000
Computer
equipment
£’000
Total
£’000
Fixtures and
fittings
£’000
Computer
equipment
£’000
Total
£’000
Costs
As at 1 January 2020 490 266 756 490 193 683
Additions – 72 72 – 26 26
As at 31 December 2020 490 338 828 490 219 709
Depreciation
As at 1 January 2020 223 181 404 214 181 395
Charge for the year 49 41 90 49 10 59
Impairment 199 – 199 199 – 199
As at 31 December 2020 471 222 693 462 191 653
Net book value
As at 31 December 2020 19 116 135 28 28 56
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021102
12. INTANGIBLE ASSETS
Group Company
Year ended 31 December 2021
Hello Student®
website
development
£’000
NAVision
1
development
£’000
Total
£’000
NAVision
1
development
£’000
Total
£’000
Costs
As at 1 January 2021 878 1,641 2,519 1,641 1,641
Additions – 537 537 537 537
As at 31 December 2021 878 2,178 3,056 2,178 2,178
Amortisation
As at 1 January 2021 792 673 1,465 673 673
Charge for the year 86 187 273 187 187
Impairment – – – – –
As at 31 December 2021 878 860 1,738 860 860
Net book value
As at 31 December 2021 – 1,318 1,318 1,318 1,318
Group Company
Year ended 31 December 2020
Hello Student®
application
development
£’000
Hello Student®
website
development
£’000
NAVision
1
development
£’000
Total
£’000
NAVision
1
development
£’000
Total
£’000
Costs
As at 1 January 2020 311 878 1,271 2,460 1,271 1,271
Additions – – 370 370 370 370
As at 31 December 2020 311 878 1,641 2,830 1,641 1,641
Amortisation
As at 1 January 2020 311 339 191 841 191 191
Charge for the year – 87 149 236 149 149
Impairment – 366 333 699 333 333
As at 31 December 2020 311 792 673 1,776 673 673
Net book value
As at 31 December 2020 – 86 968 1,054 968 968
1. Relates to the development of our accounting system which enables us to bring our revenue management system in-house; see page 31 fordetail.
Impairment
Hello Student® website development
During the prior year we conducted a review of our intangible asset relating to the Hello Student® website. As can be seen on page 21, we have
identified that overhauling our website is a priority. As such, there was an impairment during the prior year writing off £366,000 of costs relating to
the old website which have been deemed to be obsolete.
NAVision development
During the prior year we launched our new revenue management system, see page 31 for detail. This new system has provided us with a number
of benefits. As a result of the launch of this new release we conducted a review of our intangible asset relating to the NAVision development. It was
found that there were a number of costs identified which were for parts of the system no longer in use under the new revenue management system.
As such, there was an impairment during the prior year writing off £333,000 of costs relating to the items within the NAVision system which were
replaced by the new system.
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
103103
Notes to the Financial Statements continued
13. INVESTMENT PROPERTY
Group
Year ended 31 December 2021
Investment
properties
freehold
£’000
Investment
properties
long
leasehold
£’000
Total
operational
assets
£’000
Properties
under
development
£’000
Total
investment
property
£’000
As at 1 January 2021 849,220 132,149 981,369 23,751 1,005,120
Property additions 6,173 1,808 7,981 7,418 15,399
Sale of investment property (16,330) – (16,330) – (16,330)
Transfer to held for sale asset (25,870) – (25,870) – (25,870)
Change in fair value during the year 22,259 (2,215) 20,044 (2,477) 17,567
As at 31 December 2021 835,452 131,742 967,194 28,692 995,886
Group
Year ended 31 December 2020
Investment
properties
freehold
£’000
Investment
properties
long
leasehold
£’000
Total
operational
assets
£’000
Properties
under
development
£’000
Total
investment
property
£’000
As at 1 January 2020 861,639 137,741 999,380 29,700 1,029,080
Property additions 3,915 352 4,267 9,376 13,643
Transfer to/from developments 13,082 – 13,082 (13,082) –
Change in fair value during the year (29,416) (5,944) (35,360) (2,243) (37,603)
As at 31 December 2020 849,220 132,149 981,369 23,751 1,005,120
During the year £7,981,000 (31 December 2020: £4,267,000) of additions related to expenditure were recognised in the carrying value of
standingassets.
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 valuer, and has been prepared as at 31 December 2021, in accordance with the
Appraisal & Valuation Standards of the 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 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 year end.
Group
As at
31 December
2021
£’000
As at
31 December
2020
£’000
Value per independent valuation report 1,021,288 1,004,651
Add: Head lease 468 469
Deduct: Assets held for sale (25,870) –
Fair value per Group Statement of Financial Position 995,886 1,005,120
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021104
Fair Value Hierarchy
The following table provides the fair value measurement hierarchy for investment property:
Date of valuation 31 December 2021
Total
£’000
Quoted
prices
in active
markets
(Level 1)
£’000
Significant
observable
inputs
(Level 2)
£’000
Significant
unobservable
inputs
(Level 3)
£’000
Assets measured at fair value:
Student properties 1,002,748 – – 1,002,748
Commercial properties 19,008 – – 19,008
As at 31 December 2021 1,021,756 – – 1,021,756
Date of valuation 31 December 2020
Total
£’000
Quoted prices
in active
markets
(Level 1)
£’000
Significant
observable
inputs
(Level 2)
£’000
Significant
unobservable
inputs
(Level 3)
£’000
Assets measured at fair value:
Student properties 986,899 – – 986,899
Commercial properties 18,221 – – 18,221
As at 31 December 2020 1,005,120 – – 1,005,120
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: £85 per week–£387 per week
(31 December 2020: £95–£357 per week).
(b) Unobservable input: Rental growth
The estimated average increase in rent based on both market estimations and contractual arrangements. Assumed decline of 1.56% used in
valuations (31 December 2020: 1.48%).
(c) Unobservable input: Net initial yield
The net initial yield is defined as the initial net income as a percentage of the market value (or purchase price as appropriate) plus standard
costs of purchase. Range: 4.25%–8.15% (31 December 2020: 4.45%–8.50%).
(d) Unobservable input: COVID-19 rent deduction
The COVID-19 rent deduction which impacted the 2020 valuation has now fallen away. See prior year annual report for basis of this deduction.
We have allowed for a total capital deduction totalling £6,368,080 to reflect occupancy shortfall. This is based on CBRE’s market perception
that 2021/22 is going to be an unaffected year and that no risk deduction in respect of COVID-19 uncertainties is required.
(e) Unobservable input: Physical condition of the property
At the interim we indicated we would spend £30 million on health and safety works over the next five years. CBREs assumption is that
£17.2 million of this cost should now be reflected in the valuation at the year-end in respect of work on external wall systems and fire stopping
on buildings over 18 metres. Management has performed a sensitivity analysis to assess the impact of a change in their estimate of total costs
relating to the £17.2 million deduction. A 20% increase in the estimated remaining costs would affect net valuation gains/losses on property in
the IFRS P&L by £3.4 million and would reduce the Group’s NTA by less than 0.1 pence on a per share basis. Whilst the spend is expected to be
utilised within two years, there is uncertainty over this timing.
(f) Unobservable input: Planning consent
No planning enquiries were undertaken for any of the development properties.
(g) 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.
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
105105
Notes to the Financial Statements continued
As a result, the following sensitivity analysis has been prepared by the valuer:
As at 31 December 2021
-3% change
in rental
income
£’000
+3% change
in rental
income
£’000
-0.25%
change
in yield
£’000
+0.25%
change
in yield
£’000
(Decrease)/increase in the fair value of the investment properties (41,520) 40,710 48,480 (44,900)
As at 31 December 2020
-3% change
in rental
income
£’000
+3% change
in rental
income
£’000
-0.25%
change
in yield
£’000
+0.25%
change
in yield
£’000
(Decrease)/increase in the fair value of the investment properties (40,020) 40,060 46,340 (42,230)
(h) 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
2021
£’000
31 December
2020
£’000
31 December
2021
£’000
31 December
2020
£’000
Trade receivables 2,471 2,539 11 –
Other receivables 1,769 1,063 108 5
Amounts owed by property managers 8 6,505 – –
Prepayments 2,949 4,157 192 341
VAT recoverable 642 246 – 7
7,839 14,510 311 353
Amounts due from Group undertakings – – 369,048 350,578
7,839 14,510 369,359 350,931
In the Company, amounts owed from Group undertakings are classified as due within one year due to their legal agreements with the debtor,
however, could be recovered after more than one year should the debtors’ circumstance not permit repayment on demand.
Movements on the Group provision for impairment of trade receivables were as follows:
Group
31 December
2021
£’000
31 December
2020
£’000
At 1 January (1,449) (594)
(Increase) in provision for receivables impairment (100) (855)
At 31 December (1,549) (1,449)
Provisions for impaired receivables have been included in property expenses in the income statement. Amounts charged to the impairment
provision are generally written off, when there is no expectation of recovering additional cash.
The maximum exposure to credit risk at the reporting date is the book value of each class of receivable mentioned above and its cash and cash
equivalents. The Group does not hold any collateral as security, though in some instances students provide guarantors.
Management believes that the concentration of credit risk with respect to trade receivables is limited due to the Group’s customer base being large,
unrelated and living with us. As such we have a high level of communication with them.
At 31 December 2021, 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 Company performed a review
of the expected credit loss on the amounts due from Group undertakings; there was no provision made during the year (2020: £nil). There are no
security obligations related to these amounts due from Group undertakings.
13. INVESTMENT PROPERTY continued
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021106
15. ASSETS CLASSIFIED AS HELD FOR SALE
Management considers that five properties meet the conditions relating to assets held for sale, as per IFRS 5: Non-current Assets Held for Sale.
The properties are expected to be disposed of during the next 12 months. The fair value of properties has been determined by a third-party
valuer,CBRE.
All non-current assets, of these disposal assets, classified as held for sale are disclosed at their fair value.
These assets were subsequently disposed of on 1 February 2022; see Note 26 Subsequent Events for more detail.
The fair value of these properties are £25.87 million.
16. CASH AND CASH EQUIVALENTS
Group Company
31 December
2021
£’000
31 December
2020
£’000
31 December
2021
£’000
31 December
2020
£’000
Cash and cash equivalents 37,127 33,927 1,977 24,775
17. TRADE AND OTHER PAYABLES
Group Company
31 December
2021
£’000
31 December
2020
£’000
31 December
2021
£’000
31 December
2020
£’000
Trade payables 5,147 3,406 3,309 848
Other payables 2,070 1,800 178 251
Accrued expenses 12,015 9,574 802 1,072
Directors’ bonus accrual 758 747 758 747
19,990 15,527 5,047 2,918
Amounts owed to Group undertakings – – 27,177 9,548
19,990 15,527 32,224 12,466
At 31 December 2021, there was deferred rental income of £29,862,000 (31 December 2020: £20,676,000) 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 owed to Group undertakings are interest free and repayable on demand.
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
107107
Notes to the Financial Statements continued
18. BANK BORROWINGS
A summary of the drawn and undrawn bank borrowings in the year is shown below:
Group
Bank
borrowings
drawn
31 December
2021
£’000
Bank
borrowings
undrawn
31 December
2021
£’000
Total
31 December
2021
£’000
Bank
borrowings
drawn
31 December
2020
£’000
Bank
borrowings
undrawn
31 December
2020
£’000
Total
31 December
2020
£’000
At 1 January 390,000 52,500 442,500 355,000 35,000 390,000
Bank borrowings from new facilities in the year – – – 52,800 42,500 95,300
Bank borrowings drawn in the year – – – 25,000 (25,000) –
Bank borrowings repaid during the year (15,000) 15,000 – (42,800) – (42,800)
At 31 December 375,000 67,500 442,500 390,000 52,500 442,500
In the previous year the Group refinanced two facilities, one with AIB for £32.8 million and the second with FCB for £10 million which was also
extended to £20million. In July 2020 we extended our RCF with Lloyd’s Bank from £70 million to £90 million. The Group also entered into a
development facility with NatWest for £22.5 million during the 2020 financial year. At 31December 2021 no balance has been drawn down.
There is an undrawn RCF debt facility available of £45,000,000 at 31 December 2021 (31 December 2020: £30,000,000). The weighted average
term to maturity of the Group’s debt as at the year end is 4.9 years (31December 2020: 5.9 years).
Bank borrowings are secured by charges over individual investment properties held by certain asset-holding subsidiaries. These assets have a fair
value of £977,148,000 at 31 December 2021 (31 December 2020: £952,441,000). 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 £20 million unsecured facility with FCB – see above (2020: £20 million) repayable in more than one year, fully drawn. The
balance net of loan arrangement fees carried as at 31 December 2021 was £19,980,000 (31 December 2020: £19,961,000).
Any associated fees in arranging the bank borrowings unamortised as at the year end are offset against amounts drawn on the facilities as shown in
the table below:
Group
Non-current
31 December
2021
£’000
31 December
2020
£’000
Balance brought forward 390,000 312,200
Total bank borrowings in the year – 77,800
Less: Bank borrowings becoming current in the year (45,000) –
Less: Bank borrowings repaid during the year (15,000) –
Bank borrowings drawn: due in more than one year 330,000 390,000
Less: Unamortised costs (3,756) (4,734)
Bank borrowings due in more than one year 326,244 385,266
Group
Current
31 December
2021
£’000
31 December
2020
£’000
Balance brought forward – 42,800
Less: Bank borrowings repaid during the year – (42,800)
Bank borrowings becoming current in the year 45,000 –
Bank borrowings drawn: due in less than one year 45,000 –
Less: Unamortised costs (288) –
Bank borrowings due in less than one year 44,712 –
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021108
Maturity of Bank Borrowings
Group
31 December
2021
£’000
31 December
2020
£’000
Repayable in less than one year 45,000 –
Repayable between one and two years 20,000 –
Repayable between two and five years 52,800 132,800
Repayable in over five years 257,200 257,200
Bank borrowings 375,000 390,000
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 SONIA whilst the other five facility interest charges are fixed at 3.97%, 3.52%, 3.24%, 3.64% and 3.20%. The weighted average rate payable
by the Group on its investment debt portfolio as at the year end was 3.00% (31 December 2020: 2.90%). All variable rate loans have transitioned
from LIBOR + margin to SONIA + margin, with the margin set at a rate that is intended to give an overall return to the lender equivalent to the LIBOR
linked rate.
19. SHARE CAPITAL
Group and Company Group and Company
31 December
2021
Number
31 December
2021
£’000
31 December
2020
Number
31 December
2020
£’000
Balance brought forward 603,160,940 6,032 603,160,940 6,032
Share options exercised 42,112 – – –
Balance carried forward 603,203,052 6,032 603,160,940 6,032
During the year there was one issue of 42,112 shares, on 2 June 2021, these related to an issue to an ex-Director under the deferred bonus scheme.
20. SHARE PREMIUM
The share premium relates to amounts subscribed for share capital in excess of nominal value:
Group and Company
31 December
2021
£’000
31 December
2020
£’000
Balance brought forward 257 257
Share premium on share options exercised 38 –
Balance carried forward 295 257
21. CAPITAL REDUCTION RESERVE
Group and Company
31 December
2021
£’000
31 December
2020
£’000
Balance brought forward 475,038 482,578
Less interim dividends declared and paid per Note 10 (15,080) (7,540)
Balance carried forward 459,958 475,038
The capital reduction reserve account is a distributable reserve.
Refer to Note 10 for details of the declaration of dividends to shareholders.
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
109109
Notes to the Financial Statements continued
22. LEASING AGREEMENTS
Future total minimum lease receivables under non-cancellable operating leases on investment properties are as follows:
Group
31 December
2021
£’000
31 December
2020
£’000
Less than one year 42,888 39,625
Between one and two years 1,353 1,169
Between two and three years 1,352 1,123
Between three and four years 1,331 1,102
Between four and five years 1,271 1,042
More than five years 7,759 6,269
Total 55,954 50,330
The above relates to commercial leases and nomination agreements with UK universities in place as at 31 December 2021. The impact of student
leases for the forthcoming academic year signed by 31 December 2021 have not been included as the certainty of income does not arise until the
tenant takes occupation of the accommodation. As at 31 December 2021, £32,038,000 (31 December 2020: £17,689,000) of the future minimum
lease receivables have been received as cash.
23. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 December 2021 (31 December 2020: £nil).
24. CAPITAL COMMITMENTS
The Group had capital commitments relating to developments totalling £8,567,000 at 31 December 2021 (31 December 2020: £11,331,000).
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
keymanagement.
Share Capital
There were no share transactions with related parties during the year ended 31 December 2021.
Share-based Payments
On 22 April 2021, the Company granted nil-cost options over a total of 1,432,400 (Duncan Garrood 800,000 and Lynne Fennah 632,400) ordinary
shares pursuant to the Empiric 2014 Long Term Incentive Plan (the “2017–2020 LTIP Awards”) for the 2021 financial year.
Details of the Director share ownership and dividends received are detailed on page 74.
Details of the shares granted and exercised are outlined in Note 27.
26. SUBSEQUENT EVENTS
On 1 February 2022 the Group sold five properties for a total of £27 million. The sale price was in line with the market value as at 31 December 2021.
On 7 February 2022 the Group purchased one asset in Bristol for £19 million.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021110
27. SHARE-BASED PAYMENTS
The Company operates two equity-settled share-based remuneration schemes for Executive Directors under the deferred annual bonus and LTIP.
The details of the schemes are included in the Remuneration Committee Report.
Issued
On 22 April 2021, the Company granted nil-cost options over a total of 1,432,400 (Duncan Garrood 800,000 and Lynne Fennah 632,400) ordinary
shares pursuant to the Empiric 2014 Long Term Incentive Plan (the “2017–2020 LTIP Awards”) for the 2021 financial year.
During the year, the Company granted nil-cost options over a total of 293,177 ordinary shares to members of the Senior Leadership Team pursuant
to the Empiric 2014 Long Term Incentive Plan (the “2017–2020 LTIP Awards”) for the 2021 financial year.
Of the nil-cost options, 52,115 are currently exercisable. The weighted average remaining contractual life of these options was 1.7 years
(2020:1.7years).
During the year to 31 December 2021 the amount recognised relating to the options was £204,000 (2020: £29,000).
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.
31/12/2021 31/12/2020 31/12/2019 31/12/2018 31/12/2017 31/12/2016
Outstanding number brought forward 2,314,539 1,250,045 1,051,708 1,477,817 3,913,420 2,880,391
Granted during the period 1,725,577 1,064,494 604,134 439,022 207,198 1,033,029
Vested and exercised during the period (35,779) – (129,253) (139,325) (691,237) –
Lapsed during the period (558,017) – (276,544) (725,806) (1,951,564) –
Outstanding number carried forward 3,446,320 2,314,539 1,250,045 1,051,708 1,477,817 3,913,420
The fair value on date of grant for the nil-cost options under the 2018-22 LTIP Awards and Annual Bonus Awards were priced using the Monte Carlo
pricing model.
The following information is relevant in the determination of the fair value of these nil-cost options in the year:
Annual Bonus
Award
(a) Weighted average share price at grant date of 0.88
(b) Exercise price of £nil
(c) Contractual life of 3 years
(d) Expected volatility of 26.30%
(e) Expected dividend yield of 2.84%
(f) Risk-free rate of 0.09%
(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:
Reconciliation of liabilities to cash flows from financing activities
31 December
2021
£’000
31 December
2020
£’000
Bank borrowings and leasehold liability at start of the year 385,266 349,771
Cash flows from financing activities
Bank borrowings drawn – 77,800
Bank borrowings repaid (15,000) (42,800)
Loan arrangement fees paid (168) (1,008)
Non-cash movements
Amortisation of loan arrangement fees 815 1,503
Recognition of lease liabilities 1,114 –
Bank borrowings and leasehold liability at end of the year 372,027 385,266
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
111111
Notes to the Financial Statements continued
28. FINANCIAL RISK MANAGEMENT continued
Risk Management
The Company and 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 Company and Group that are affected by market risk are principally the Company and Group 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 Company and Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The Company and 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 rating, 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 Company and 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 Company and Group, with high credit ratings assigned by international credit rating agencies.
Credit ratings (Moody’s) Long-term Outlook
AIB Group Baa1 Stable
Canada Life Aa3 Stable
Mass Mutual Aa3 Stable
Scottish Widows A2 Stable
Lloyd’s Bank Plc A2 Stable
(c) Liquidity Risk
Liquidity risk arises from the Company and Group 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 Company and Group will encounter difficulty in meeting their financial
obligations as they fall due as the majority of the Company and Group assets are property investments and are therefore not readily realisable.
The Company and Group objective is to ensure they have sufficient available funds for their operations and to fund their capital expenditure. This is
achieved by continuous monitoring of forecast and actual cash flows by management.
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021112
The following table sets out the contractual obligations (representing undiscounted contractual cash flows) of financial liabilities:
Group
On demand
£’000
Less than 3
months
£’000
3 to 12
months
£’000
1 to 5
years
£’000
> 5 years
£’000
Total
£’000
At 31 December 2021
Bank borrowings and interest – 3,182 54,379 194,206 189,087 440,854
Trade and other payables – 19,990 – – – 19,990
– 23,172 54,379 194,206 189,087 460,844
Group
On demand
£’000
Less than 3
months
£’000
3 to 12
months
£’000
1 to 5
years
£’000
> 5 years
£’000
Total
£’000
At 31 December 2020
Bank borrowings and interest – 3,021 9,063 199,749 283,925 495,758
Trade and other payables – 15,527 – – – 15,527
– 18,548 9,063 199,749 283,925 511,285
Company
On demand
£’000
Less than 3
months
£’000
3 to 12
months
£’000
1 to 5
years
£’000
> 5 years
£’000
Total
£’000
At 31 December 2021
Bank borrowings and interest – 119 357 20,076 – 20,552
Trade and other payables – 5,047 – – – 5,047
– 5,166 357 20,076 – 25,599
Company
On demand
£’000
Less than 3
months
£’000
3 to 12
months
£’000
1 to 5
years
£’000
> 5 years
£’000
Total
£’000
At 31 December 2020
Bank borrowings and interest – 96 289 20,447 – 20,832
Trade and other payables – 2,918 – – – 2,918
– 3,014 289 20,447 – 23,750
29. CAPITAL MANAGEMENT
The primary objectives of the Group’s capital management are 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.
30. SUBSIDIARIES
Those subsidiaries listed below are considered to be all subsidiaries of the Company at 31 December 2021, with the shares issued being ordinary
shares. All subsidiaries are registered in London at the following address: 1st Floor Hop Yard Studios, 72 Borough High Street, London, SE1 1XF.
In each case the country of incorporation is England and Wales.
Company
31 December
2021
£’000
31 December
2020
£’000
As at 1 January 187,598 81,686
Additions in the year – 106,215
Disposals – (303)
Balance at 31 December 187,598 187,598
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
113113
Notes to the Financial Statements continued
30. SUBSIDIARIES continued
During the prior year there were a number of subsidiaries which moved around the Group, due to reorganisations relating to debt; these were all
non-cash movements whereby the plc forgave intercompany debt owned by subsidiaries in return for the issue of further shares.
Company Status Ownership Principal activity
Brunswick Contracting Limited Active 100% Property Contracting
Empiric (Alwyn Court) Limited Active 100% Property Investment
Empiric (Baptists 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) Limited Active 100% Property Investment
Empiric (Bath Piccadilly Place) Limited 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 St Mary’s) Leasing Limited Dormant 100% Property Leasing
Empiric (Bristol) Leasing Limited Dormant 100% Property Leasing
Empiric (Bristol) Limited Active 100% Property Investment
Empiric (Buccleuch Street) Limited Active 100% Property Investment
Empiric (Canterbury Franciscans) 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 KSR) Leasing Limited Active 100% Property Leasing
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 (Falmouth Ocean Bowl) Leasing Limited Active 100% Property Leasing
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) 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 Active 100% Property Investment
Empiric (Leeds Pennine House) Limited Active 100% Property Investment
Empiric (Leeds St Marks) Limited Active 100% Property Investment
Empiric (Leicester 134 New Walk) Limited Active 100% Property Investment
Empiric (Leicester 136-138 New Walk) Limited Active 100% Property Investment
Empiric (Leicester 140-142 New Walk) Limited Active 100% Property Investment
Empiric (Leicester 160 Upper New Walk) Limited Active 100% Property Investment
Empiric (Leicester Bede Park) Limited Active 100% Property Investment
Empiric (Leicester De Montfort Square) Limited Active 100% Property Investment
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021114
Company Status Ownership Principal activity
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 (Leicester West Walk) Limited Dormant 100% Property Investment
Empiric (Liverpool Art School/Maple House) Limited Active 100% Property Investment
Empiric (Liverpool Chatham Lodge) Limited Active 100% Property Investment
Empiric (Liverpool Grove Street) Limited Active 100% Property Investment
Empiric (Liverpool Hahnemann Building) Limited Active 100% Property Investment
Empiric (Liverpool Octagon/Hayward) Limited Active 100% Property Investment
Empiric (London Camberwell) Limited Active 100% Property Investment
Empiric (London Francis Gardner) Limited Active 100% Property Investment
Empiric (London Road) Limited Active 100% Property Investment
Empiric (Manchester Ladybarn) Limited Active 100% Property Investment
Empiric (Manchester Victoria Point) Limited Active 100% Property Investment
Empiric (Newcastle Metrovick) Limited Active 100% Property Investment
Empiric (Northgate House) Limited Active 100% Property Investment
Empiric (Nottingham 95 Talbot) Limited Active 100% Property Investment
Empiric (Nottingham Frontage) Leasing Limited Dormant 100% Property Leasing
Empiric (Nottingham Frontage) Limited Active 100% Property Investment
Empiric (Oxford Stonemason) Limited Active 100% Property Investment
Empiric (Picturehouse Apartments) Limited Active 100% Property Investment
Empiric (Portobello House) Limited Active 100% Property Investment
Empiric (Portsmouth Elm Grove Library) Limited Active 100% Property Investment
Empiric (Portsmouth Europa House) Leasing Limited Active 100% Property Leasing
Empiric (Portsmouth Europa House) Limited Active 100% Property Investment
Empiric (Portsmouth Kingsway House) Limited Active 100% Property Investment
Empiric (Portsmouth Registry) Limited Active 100% Property Investment
Empiric (Provincial House) Leasing Limited Active 100% Property Leasing
Empiric (Provincial House) Limited Active 100% Property Investment
Empiric (Reading Saxon Court) Leasing Limited Active 100% Property Leasing
Empiric (Reading Saxon Court) Limited Active 100% Property Investment
Empiric (Snow Island) Limited Active 100% Property Investment
Empiric (Southampton) Leasing Limited Active 100% Property Leasing
Empiric (Southampton) Limited Active 100% Property Investment
Empiric (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) 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) 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% Immediate Holding Company
Empiric Investment Holdings (Five) Limited Active 100% Holding Company
Empiric Investment Holdings (Four) Limited Active 100% Holding Company
Empiric Investment Holdings (Six) Limited Active 100% Holding Company
Empiric Investment Holdings (Three) Limited Active 100% Holding Company
Empiric Investment Holdings (Two) Limited Active 100% Holding Company
Empiric Investments (Five) 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 (Three) Limited Active 100% Immediate Holding Company
Empiric Investments (Two) Limited Active 100% Immediate Holding Company
Empiric Investments (Seven) Limited Dormant 100% Immediate Holding Company
Empiric Investment Holdings (Seven) Limited Dormant 100% Holding Company
Empiric Student Property Trustees Limited Active 100% Trustee of EBT
Empiric (Edinburgh South Bridge) Limited Active 100% Property Investment
Hello Student® Management Limited Active 100% Property Management
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
115115
Notes to the Financial Statements continued
31. ALTERNATIVE PERFORMANCE MEASURES
The below sets out our alternative performance measures.
Gross margin – Gross profit expressed as a percentage of rental income. A key business KPI to monitor how efficiently we are running our buildings.
Group
Gross Margin
31 December
2021
£’000
31 December
2020
£’000
Revenue 55,967 59,444
Property Expenses (23,061) (22 ,651)
Net rental income 32,906 36,793
Gross Margin calculated as Net rental income/Revenue 58.8% 61.9%
Total Return (“TR”) – The growth of NAV per share plus dividends per share measured as a percentage. A key business KPI to monitor the level of
overall return the Group is generating.
Group
Total Return
31 December
2021
£’000
31 December
2020
£’000
NAV per share brought forward 105.00 110.21
NAV per share carried forward 107.36 105.00
NAV growth per share in period 2.36 (5.21)
Dividend per share 2.50 1.25
Dividends plus NAV Growth in period per share 4.86 (3.96)
Total return calculated as Dividends plus NAV Growth in period per share/ NAV brought forward 4.6% (3.6%)
Loan-to-value (“LTV”) – A measure of borrowings used by property investment companies calculated as total drawn borrowings, net of cash, as a
percentage of Property Value. A key business KPI to ensure we stay in line with our long-term target of 35%.
Group
Loan to value (“LTV”)
31 December
2021
£’000
31 December
2020
£’000
Drawn borrowings (375,000) (390,000)
Less cash held at the year end 37,127 33,927
Net borrowings 337,873 356,073
Property valuation 1,021,288 1,004,651
LTV calculated as net borrowings / property valuation 33.1% 35.4%
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021116
Definitions
Adjusted EPS – Adjusted earnings per share 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. This is then divided by the weighted average number of ordinary shares
outstanding during the period (refer to Note 8).
Alternative Performance Measures (“APM”) – The Group uses alternative performance measures, including the European Public Real Estate
(“EPRA”) Best Practice Recommendations (“BPR”), to supplement IFRS as the Board considers that these measures give users of the Annual Report
and Financial Statements the best understanding of the underlying performance of the Group’s property portfolio.
The EPRA measures are widely recognised and used by public real estate companies and investors and seek to improve transparency,
comparability and relevance of published results in the sector.
Reconciliations between EPRA and other alternative performance measures and the IFRS financial statements can be found in Notes 8 and 9 and in
the definitions below.
ANUK – Accreditation Network UK is a central resource for tenants, landlords and scheme operators interested in accreditation of private
rentedhousing.
Average Interest Cost – The weighted interest cost of our drawn debt portfolio at the balance sheet date.
Average term of debt – The weighted average term of our debt facilities at the balance sheet date.
Basic EPS – The earnings attributed to ordinary shareholders divided by the weighted average number of ordinary shares outstanding during the
period (refer to Note 8).
Colleague Engagement – KPI – Non-IFRS measure – Calculated as per the results of our biannual colleague engagement surveys.
Company – Empiric Student Property plc.
Customer Happiness – KPI – Non-IFRS measure – Calculated per the results of our biannual customer surveys.
Dividend Cover – Adjusted earnings divided by dividend paid during the year.
EPRA – European Public Real Estate Association.
EPRA EPS – Reported on the basis recommended for real estate companies by EPRA (refer to Note 8).
EPRA NAV – EPRA NAV is calculated as net assets per the Consolidated Statement of Financial Position excluding fair value adjustments for debt-
related derivatives (refer to Note 9).
EPRA Net Disposal Value (“NDV”) – Represents the shareholders’ value under a disposal scenario, where deferred tax, financial instruments and
certain other adjustments are calculated to the full extent of their liability, net of any resulting tax. As the Group is a REIT, no adjustment is made for
deferred tax.
EPRA Net Reinvestment Value (“NRV”) – Assumes that entities never sell assets and aims to represent the value required to rebuild the entity.
EPRA Net Tangible Assets (“NTA”) – Assumes that entities buy and sell assets, thereby crystallising certain levels of unavoidable deferred tax.
EU – European Union.
Executive Team – The Executive Directors made up of the CEO and CFO/CSO.
GHG – Greenhouse gas.
Gross Asset Value or GAV – The total value of the Group’s wholly owned property portfolio (refer to Note 13).
Gross rent – The total rents achievable if the portfolio was 100% occupied for an academic year.
Gross margin – Gross profit expressed as a percentage of rental income.
Group – Empiric Student Property plc and its subsidiaries.
Hello Student® platform – Our customer-facing brand and operating system which we operate all of our buildings under.
HE – Higher education.
HMO – Homes of multiple occupants.
IASB – International Accounting Standards Board.
IFRS – International Financial Reporting Standards.
IPO – The Group’s Initial Public Offering in June 2014.
LIBOR – London interbank offered rate.
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
117117
Loan-to-value or LTV – A measure of borrowings used by property investment companies calculated as total drawn borrowings, net of cash, as a
percentage of Property Value (refer to Notes 13 and 17).
Net Asset Value or NAV – Net Asset Value is the net assets in the Statement of Financial Position attributable to ordinary equity holders.
Non-PID – Non-property income distribution.
PBSA – Purpose Built Student Accommodation.
PID – Property income distribution.
RCF – Revolving credit facility.
Rebooker Rate – KPI – Non-IFRS measure – Calculated as the percentage of students staying with us in the previous year who chose to stay living
with us for another academic year.
REIT – Real estate investment trust.
Revenue Occupancy – KPI – Non-IFRS measure – Calculated as the percentage of our Gross Annualised Revenue we have achieved for an
academic year.
RICS – Royal Institution of Chartered Surveyors.
Safety – Number of accidents – KPI – Non-IFRS measure – Calculated as the number of RIDDOR accidents reported to the Health and
SafetyExecutive.
Senior Leadership Team – The senior management team which sits beneath the Executive Team and is made up of the six department heads.
SONIA – Sterling Over Night Index Average is the effective reference for overnight indexed swaps for unsecured transactions in the Sterling
market. The SONIA itself is a risk-free rate.
The Code – UK Code of Corporate Governance, as published in 2018.
Total Return (“TR” or “TAR”) – The growth of NAV per share plus dividends per share measured as a percentage.
Total Shareholder Return – Share price growth with dividends deemed to be reinvested on the dividend payment date.
UKLA – United Kingdom Listing Authority.
Definitions continued
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021118
Company Information and Corporate Advisers
Company Registration Number: 08886906
Incorporated in the UK
(Registered in England)
Empiric Student Property plc is a public company limited by shares
Registered Office
DIRECTORS AND ADVISERS
Directors
Mark Pain (Chairman)
Duncan Garrood (Chief Executive Officer)
Lynne Fennah (Chief Financial and Sustainability Officer)
Martin Ratchford (Non-Executive Director)
Stuart Beevor (Non-Executive Director)
Alice Avis (Non-Executive Director)
Broker and Joint Financial Adviser
Jefferies International Ltd
Vintners Place
68 Upper Thames Street
London EC4V 3BJ
Broker and Joint Financial Adviser
RBC Europe Limited
Riverbank House
2 Swan Lane
London EC4R 3BF
Legal Adviser to the Company
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
Company Secretary
Throgmorton UK Limited
6th Floor, 140 London Wall,
London, EC2Y 5DN
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Auditor
BDO LLP
55 Baker Street
London W1U 7EU
Communications Adviser
Maitland/AMO
3 Pancras Square
London N1C 4AG
Valuer
CBRE Limited
Henrietta House
Henrietta Place
London W1G 0NB
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
119119
Notes
EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021120
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EMPIRIC STUDENT PROPERTY PLC ANNUAL REPORT & ACCOUNTS 2021
Empiric Student Property plc
1st Floor Hop Yard Studios
72 Borough High Street
London
SE1 1XF
T +44 (020 8078 8791
E info@empiric.co.uk
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www.empiric.co.uk