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Trading Update

7th May 2020

The Board of Empiric Student Property plc (ticker: ESP), the owner and operator of premium student accommodation across the UK, is today providing a further business and trading update.

2019/20 academic year

The Group's top priority remains the health, safety and welfare of its residents, employees and wider stakeholders, whilst protecting the long-term value of the Group. Despite the UK Government lockdown measures currently in place, the Group's buildings continue to be staffed and maintained and operated strictly in line with these measures. The Board remains hugely grateful to all our colleagues and business partners who continue to work tirelessly during these challenging times.

As announced on 31 March 2020, the Group has looked favourably on requests from residents - who are either no longer in occupation or, due to university closures, plan not to return to their accommodation - to be released from their rent and lease obligations from 25 April 2020. Accordingly, the Group expects a total reduction in income for the current academic year 2019/20 of up to 12% (£8 million), which is below the worst-case reduction in revenue of up to c.£21 million as previously announced by the Company.

Despite the fact that almost all universities have closed their campuses for person to person teaching for the balance of the current academic year and are using online learning instead, 55% of the Group's student accommodation bedrooms continue to be occupied by residents.

2020/21 academic year

The Group is continuing to receive bookings for the forthcoming academic year 2020/21, with 47% of rooms now reserved, compared with 54% at the same point last year.

Demand from international students is continuing albeit at lower levels, but the Group is starting to see an increase in bookings from the UK domestic market. The Group's digital marketing platform, Hello Student, is now in-house and well-established and continues to effectively target both international and domestic students who are interested in premium student accommodation in key university towns and cities across the UK.

The Group is beginning to see an increase in requests for self-contained studios and en-suite accommodation as a result of the current social distancing measures in place in the UK. Empiric's strategy of owning and managing premium student accommodation across the UK means that the Group is well placed to meet this demand, with 83% of the Group's beds meeting these requirements. Similarly, the Group's smaller buildings have a relatively low reliance on lifts, lending themselves readily to adaptation to meet current social distancing measures.

The Group continues to focus on further embedding the operational transformation of the business, which is largely complete. In particular, the delivery of a new in-house revenue management platform remains on track for launch on 1 November 2020. The key benefits of the new platform will be a significant annual cost reduction of c.£1.5 million from Q4 2021 and no longer having reliance on a third-party legacy platform. The Group currently has full revenue management capability on its existing platform.

The Group's 52 bed development at New Walk in Leicester is expected to complete later this month, in time for the forthcoming academic year 2020/21. Given Empiric's priority of conserving cash during this period of uncertainty, the Group has deferred the delivery of three developments until market conditions stabilise (Emily Davies, Southampton (232 beds); Canterbury (134 beds, refurbishment); and St Mary's, Bristol (153 beds)).

Debt position and cash and cost saving measures

The Group remains well capitalised with a healthy balance sheet and significant headroom against its financial covenants.

In line with previous announcements, based on drawn facilities at 31 December 2019 and calculated on an average basis, the Group's covenant positions are as follows: loan to value ("LTV") covenant of 65% compared to actual LTV of 35%*, and interest cover ratio ("ICR") covenant of 216% compared to actual ICR of 397%. In addition to this, the Group has £134 million of uncharged assets.

On 24 April 2020, the Group announced that it had successfully refinanced £32.8 million of existing debt with AIB Group (UK) plc, extending the term by four years on more favourable terms, resulting in no further refinancing requirements for the Group until November 2022.

The Group is in discussions with its banks around potential future funding requirements.

As announced on 31 March 2020, the Group is continuing to focus on reducing operational costs, non-essential capital expenditure remains cancelled, its development pipeline (save for New Walk in Leicester which is expected to complete this month) and the corresponding development debt of £22 million continues to be deferred and all future dividend payments remain suspended until market conditions stabilise. These measures have strengthened the Group's cash position and the Board retains its previous guidance of a reduction in net cash outflows of c.£26 million for the 2020 calendar year.

The Group currently has £12 million of cash and £35 million of undrawn debt facilities available.


Empiric's strategy of owning and operating premium student accommodation in high-demand towns and cities combined with a strong and robust balance sheet puts the Group in a strong position to withstand the challenges presented by the COVID-19 pandemic. The long-term drivers for the sector and the structural demand from both domestic and international students for the Group's UK accommodation remains strong, but in the near-term Empiric is focused on continuing to manage through the impacts of COVID-19 effectively.

The UK Government's current plan is for the 2020/21 academic year to start broadly in line with the usual cycle, however, there remains uncertainty over start and finish dates for the first term and the impact on teaching due to the continuing disruptions caused by the COVID-19 pandemic, which may affect the demand for accommodation from both domestic and international students.

Calculated in line with that required by banking covenants, which excludes cash holdings. If cash holdings are included, which is in line with the usual reporting calculation, the LTV is 34% at the date of this release.

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The Empiric plc management team has a long track record in the acquisition, development and management of student accommodation assets in the UK.

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