With a new management team in place, Empiric Student Property (ESP) made solid progress in the six months to June towards achieving its performance targets, which include a 10 per cent total return on assets and gross margins of 70 per cent by 2019.
And while dividends are currently just 60 per cent covered by adjusted earnings, full cover is expected by next year. Steps have been taken to reduce administrative expenses, with targeted costs of £10m for the full year down more than a quarter from the previous year. Facilities management is the largest single cost, and as Empiric is unable to reclaim VAT, taking this function in-house will save both VAT and the current provider’s profit margin.
Management is also working to boost occupancy levels, helped by its Hello Student website, and in mid August bookings were up from 78 per cent a year earlier at 87 per cent, and Empiric remains on target to achieve 97 per cent occupancy for the 2018-19 academic year.
Profits were boosted by a £13.6m valuation uplift in the portfolio, while there was also a 2 per cent increase in annualised rental income. Just one asset was acquired during the first half – a 240-bed property in Southampton for £10.6m.
Analysts at Stifel are forecasting adjusted net asset value at the December 2018 year-end of 109p, up from 104p a year earlier.
| EMPIRIC STUDENT PROPERTY (ESP) | ||||
| ORD PRICE: | 95.5p | MARKET VALUE: | £575m | |
| TOUCH: | 95.5-95.8p | 12-MONTH HIGH: | 114p | LOW: 81p |
| DIVIDEND YIELD: | 5.2% | DEVELOPMENT PROP: | £52.5m | |
| DISCOUNT TO NAV: | 11% | |||
| INVESTMENT PROP: | £893m | NET DEBT: | 49% | |
| Half-year to 30 Jun | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 106 | 14.5 | 2.9 | 3.1 |
| 2018 | 106 | 21.7 | 3.6 | 2.5 |
| % change | - | +50 | +25 | -18 |
| Ex-div: | 30 Aug | |||
| Payment: | 14 Sep | |||
| Dividends paid quarterly. XD and pay dates refer to 1.25p per share dividend | ||||
