DIGS.L Regulatory News (DIGS)

GCP STUDENT LIVING PLC

LEI: 2138004J4ID66FK38H25

ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

GCP Student Living plc, (the "Company" or together with its subsidiaries, the "Group"), which was the first student accommodation REIT in the UK, today announces its results for the financial year ended 30 June 2019.

The full annual report and financial statements and the Notice of the annual general meeting can be accessed via the Company's website at www.gcpstudent.com or by contacting the Company Secretary by telephone on 01392 477500.

AT A GLANCE

HIGHLIGHTS3

·; Annualised total shareholder return since IPO4 of 12.9%, compared to the Company's target return of 8-10%.

·; Dividends of 6.15 pence per share in respect of the year.

·; Total rental income for the year of £44.4 million.

·; Equity raised of £43.1 million through the placing of ordinary shares.

·; New debt facilities for an aggregate amount of up to £100 million with Wells Fargo.

·; Completion of the refurbishment of Scape Bloomsbury ahead of schedule for the 2018/19 academic year, providing 432 beds in London WC1.

·; Second forward-funded development asset, Circus Street, Brighton, will be completed for the 2019/20 academic year, providing a further 450 beds.

·; Commenced construction of Scape Brighton, which is expected to provide c.555 beds for the 2020/21 academic year.

·; The Company benefits from a future contractual arrangement to acquire Scape Canalside, a new-build asset located adjacent to QMUL, which the Company expects to acquire before the end of 2019.

·; EPRA NAV2,4 (cum-income) per share of 165.52 pence and EPRA NAV (ex-income) per share of 163.96 pence at 30 June 2019.

·; High-quality portfolio of eleven assets with 4,116 beds located primarily in and around London, with a valuation of £921.6 million5 at 30 June 2019.5

·; The Company's properties continue to benefit from the supply/demand imbalances for high-quality, modern student facilities, with the portfolio fully occupied and student rental growth4 of 3.5% for the 2018/19 academic year.

·; Post year end the Company's operational portfolio achieved full occupancy with respect to the 2019/20 academic year, with student rental growth of 4.4%4 year-on-year.

1. Share price at 28 June 2019.

2. EPRA NAV is equivalent to the NAV calculated under IFRS for the year.

3. The Company's financial statements are prepared in accordance with IFRS. The financial highlights above include performance measures based on EPRA best practice recommendations which are designed to enhance transparency and comparability across the European real estate sector. See glossary for definitions.

4. APM - see glossary for definitions and calculation methodology.

5. Includes lease incentives held as receivables.

Robert Peto, Chairman, commented:

"I am pleased to report on a sixth consecutive year of robust results for the Company.

The Company's focus on student residential accommodation assets in locations which benefit from supply and demand imbalances, including its core London market, has delivered total shareholders returns of 14.8% for the year. On a relative basis, the Company has substantially outperformed the FTSE EPRA NAREIT index of UK REITs, which declined by 6.0% over the same period. The Company's annualised total shareholder return since IPO1 is 12.9%, exceeding the 8-10% target set at launch and more than double the return of the FTSE All-Share index over that period.

The Company's performance has been underpinned by strong operational drivers including full occupancy across the portfolio and year-on‑year rental growth in excess of both inflation and the national average for student accommodation. This has enabled the Company to increase its annual dividend to 6.15 pence per share from 5.95 pence per share in the prior year. In addition, the Company's investments continue to benefit from yield compression arising from competitive market demand for student accommodation assets. This has been reflected in the upward valuation of the Company's portfolio and a concomitant rise in its NAV during the year."

About the Company

GCP Student Living plc was the first real estate investment trust in the UK to focus on student residential assets.

The Company seeks to provide shareholders with attractive total returns in the longer term through the potential for modest capital appreciation and regular, sustainable, long‑term dividends with inflation‑linked income characteristics.

It invests in properties located primarily in and around London where the Investment Manager believes the Company is likely to benefit from supply and demand imbalances for student residential accommodation and a growing number of international students.

The Company has a premium listing on the Official List of the FCA and trades on the Premium Segment of the Main Market of the London Stock Exchange. The Company had a market capitalisation of £670.9 million at 30 June 2019.

Investment Objectives and KPIs

The Company invests in UK student accommodation to meet the following key objectives:

Further information on Company performance can be found below.

1. APM - see glossary for definitions and calculation methodology.

Portfolio overview

At 30 June 2019, the Company's portfolio comprised eleven assets with c.4,100 beds, providing high-quality modern student accommodation.

Chairman's Statement

Introduction

On behalf of the Board, I am pleased to report on a sixth consecutive year of robust results for the Company. The focus on assets in locations which benefit from supply and demand imbalances for student accommodation, including the Company's core London market, has delivered a total shareholder return1 of 14.8% for the year. On a relative basis, the Company has substantially outperformed the FTSE EPRA NAREIT index of UK REITs, which declined by 6.0% over the same period. The Company's annualised total shareholder return since IPO1 is 12.9%, exceeding the 8-10% target set at launch and more than double the return of the FTSE All-Share index over that period.

The Company's performance has been underpinned by strong operational drivers including full occupancy across the portfolio and year-on‑year rental growth in excess of both inflation and the national average for student accommodation. This has enabled the Company to increase its annual dividend to 6.15 pence per share from 5.95 pence per share in the prior year. In addition, the Company's investments continue to benefit from yield compression arising from competitive market demand for student accommodation assets. This has been reflected in the upward valuation of the Company's portfolio and a concomitant rise in its NAV during the year.

Investment activity

In May 2019, the Company acquired Scape Brighton, its second asset in Brighton. The property is a forward‑funded development which, once construction is complete, will provide 555 beds and extensive communal areas for students with the expected delivery for the 2020/21 academic year. The Company benefits from licensing fees which will provide a 5.5% coupon per annum throughout the construction phase. Scape Brighton will add to the Company's presence in the Brighton market, with the construction of Circus Street, Brighton expected to be completed ahead of the 2019/20 academic year.

The Company also benefits from a future contractual arrangement to acquire Scape Canalside, a new-build 412 bed asset located adjacent to QMUL, and in the same locality as the Company's Scape Mile End2 asset. The property is expected to complete before the end of 2019.

1. APM - see glossary for definitions and calculation methodology.

2. Formerly Scape East.

Financial results

The Company has generated a strong set of results in both absolute and relative terms. The Company's investment portfolio delivered rental income of £44.4 million over the period, generating profit (including valuation gains) of £92.8 million (£18.9 million excluding valuation gains). Its EPRA NAV (cum-income) per share has increased by 11% during the year from 149.12 pence to 165.52 pence at 30 June 2019. This is against a backdrop of concerns over weakening valuations and cash flows for the UK commercial property sector.

Dividends

The Company has paid or declared dividends in respect of the year ended 30 June 2019 of 6.15 pence per share. The dividends were paid as 4.54 pence per share as PID and 1.61 pence per share as non-PID. The Company increased its dividend by 3.4% year‑on-year.

The Board is pleased to report the substantial improvement to the Company's dividend cover, from 67% at 30 June 2018 to 85% at 30 June 2019 on an adjusting basis1. This has been primarily driven by Scape Bloomsbury opening to students in September 2018. On the basis of a fully operational portfolio, the Board expects the dividend to be fully covered.

Financing

During the financial year, the Company raised gross proceeds of £43.1 million by way of two non pre-emptive placings of new ordinary shares. In addition, the Company secured additional debt facilities with Wells Fargo for an aggregate amount of £100 million. These facilities comprise a three‑year redrawable credit facility of up to £45 million and a development facility for an amount of up to £55 million, which is repayable on 21 December 2021 (with an option to extend by a further twelve months, at the Company's discretion subject to certain conditions being met), which will be drawn over time to fund the construction of Scape Brighton.

At 30 June 2019, the Group's available banking facilities totalled £335 million. At that date its blended cost of borrowing on its drawn debt was 2.94% with an average weighted maturity of c.7 years. The loan-to-value of the Group at 30 June 2019 was 26%.

Further details of the Company's borrowing facilities are set out in the notes to the financial statements below.

The Board

The Board is pleased to welcome David Hunter who was appointed as a non-executive Director of the Company on 1 May 2019. David brings substantial real estate experience with a long-standing track record of serving on the boards of publicly listed property investment companies, including REITs.

The Board recognises the importance of the Company operating within a framework of high standards of corporate governance including with regard to the matter of Directors' tenure. In 2018 the Board welcomed Gillian Day as a new non-executive Director, with Peter Dunscombe stepping down having served on the Board since the Company's IPO in 2013. Looking forward, it is my intention to retire from the Board following the annual general meeting to be held in late 2020, having served as Chairman since IPO. The Board intends to appoint David Hunter as Chairman of the Company at that time. The Board believes that the above steps will deliver new insight and perspectives whilst allowing an appropriate timeframe for the passing on of knowledge and experience.

Outlook

The Company provides shareholders with access to a portfolio of private student accommodation assets which continue to benefit from strong supply and demand imbalances resulting in full occupancy, rental growth and yield compression. The selective approach adopted by the Board and Investment Manager to asset selection and the locations in which the Company operates has demonstrably benefited shareholders through strong total shareholder returns since IPO.

Since the EU referendum in 2016, the Board has repeatedly noted that the impact of Brexit remains unknown and difficult to quantify. At the time of writing, there remains considerable uncertainty as to the possible outcomes of any form of Brexit. Notwithstanding this, the attraction of the UK and London in particular, for domestic and global students alike remains evident. The UK has some of the highest‑ranking universities in the world, with three of the top ten institutions in 20192. Furthermore, education remains a core sector for the UK economy, generating £95 billion and supporting nearly one million jobs.3

The Board and the Investment Manager continue to monitor global macroeconomic events as they relate to student numbers, including relations between the US, the UK and China which may impact the global mobility of Chinese students as well as their choice of destination.

With the number of international students in the UK continuing to rise (a substantial number of whom choose to study in and around London) the Board remains confident that the Company will continue to deliver stable NAV performance.

Robert Peto

Chairman

3 September 2019

1. Refer to note 3 to the financial statements.

2. Times Higher Education World University rankings 2019.

3. Universities UK 'The economic impact of universities' 2014-15'.

STRATEGIC REPORT

Strategic overview

The Company's investment objective is to provide shareholders with attractive total returns in the longer term.

12.9%

Annualised total shareholder return since IPO

6.15p

Dividend in respect of the year

Business model

The Company's investment strategy is set out in its investment objective and policy below. It should be considered in conjunction with the Chairman's statement and the strategic report which provide an in-depth review of the Company's performance and future strategy.

Further information on the business model is set out below.

Investment objective

The Company's investment objective is to provide shareholders with attractive total shareholder returns in the longer term through the potential for modest capital appreciation and regular, sustainable, long-term dividends with inflation‑linked characteristics.

Investment policy

The Company intends to meet its investment objective through owning, leasing and licensing student residential accommodation and teaching facilities to a diversified portfolio of direct let tenants and HEIs. The Company will mostly invest in modern, purpose-built, private student residential accommodation and teaching facilities located primarily in and around London, where the Investment Manager believes the Company is likely to benefit from supply and demand imbalances for student residential accommodation. The Company may also invest in development and forward‑funded projects which are consistent with the objective of providing shareholders with regular, sustainable dividends and have received planning permission for student accommodation, subject to the Board being satisfied as to the reputation, track record and financial strength of the relevant developer and building contractor.

Rental income will predominantly derive from a mix of contractual arrangements including direct leases and/or licences to students ("direct let agreements"), leases and/or licences to students guaranteed by HEIs and/or leases and/or licences directly to HEIs. The Company may enter into soft nominations agreements (pari passu marketing arrangements with HEIs to place their students in private accommodation) or hard nominations agreements (longer-term marketing arrangements with HEIs of between two and 30 years in duration). Where the Company invests in properties which contain commercial or retail space, it may derive further income through leases of such space. Where the Company invests in development and forward‑funded projects, development costs will typically be paid in stages through construction, with a bullet payment at completion.

The Company intends to focus primarily on accommodation and teaching facilities for students studying at Russell Group universities and other leading academic institutions, regional universities with satellite teaching facilities in and around London and specialist colleges.

The Company may invest directly or through holdings in special purpose vehicles and its assets may be held through limited partnerships, trusts or other vehicles with third party co-investors.

Borrowing and gearing policy

The Company may seek to use gearing to enhance returns over the long term. The level of gearing will be governed by careful consideration of the cost of borrowing and the Company may seek to use hedging or otherwise seek to mitigate the risk of interest rate increases. Gearing, represented by borrowings as a percentage of gross assets, will not exceed 55% at the time of investment. It is the Directors' current intention to target gearing of less than 30% of gross assets in the long term and to comply with the REIT condition relating to the ratio between the Group's 'property profits' and 'property finance costs'.

Use of derivatives

The Company may invest through derivatives for efficient portfolio management. In particular, the Company may engage in interest rate hedging or otherwise seek to mitigate the risk of interest rate increases as part of the Company's efficient portfolio management.

Investment restrictions

The Company invests and manages its assets with the objective of spreading risk through the following restrictions:

·; the Company will derive its rental income from a portfolio of not less than 500 studios;

·; the value of any newly acquired single property will be limited to 25% of gross assets, calculated as at the time of investment;

·; the Company mostly invests in modern, purpose-built, private student residential accommodation and teaching facilities located primarily in and around London. Accordingly, no less than 75% of the Group's property portfolio will comprise assets which are located in and around London, calculated as at the time of investment;

·; at least 90% by value of the properties directly or indirectly owned by the Company shall be in the form of freehold or long leasehold (over 60 years remaining at the time of acquisition) properties or the equivalent;

·; the Company will not:

(i) invest more than 20% of its gross assets in undeveloped land; and

(ii) commit more than 15% of its gross assets to forward-funded projects in respect of such undeveloped land, such commitment to be determined on the basis of the net construction funding requirements (and associated advisory costs) of such projects at the time of commitment up to their completion, in both cases as measured at the time of investment;

·; the Company will not invest in completed assets which are not income generative at, or shortly following, the time of acquisition; and

·; the Company will not invest in closed-ended investment companies.

The Directors currently intend, at all times, to conduct the affairs of the Company so as to enable it to qualify as the principal company of a REIT group for the purposes of Part 12 of the CTA (and the regulations made thereunder).

In the event of a breach of the investment guidelines and restrictions set out above, the Investment Manager shall inform the Directors upon becoming aware of the same and, if the Directors consider the breach to be material, notification will be made to a Regulatory Information Service.

No material change will be made to the investment policy without the approval of shareholders by ordinary resolution.

Business and status of the Company

The Company is registered as a public limited company and is an investment company within the terms of section 833 of the Companies Act 2006. The Company is a REIT for the purposes of Part 12 of the CTA. The Company will be treated as a REIT so long as it continues to meet the REIT conditions in relation to any accounting period.

The Company was incorporated on 26 February 2013. Its shares trade on the Premium Segment of the Main Market of the London Stock Exchange.

The Company's performance, along with the important events that have occurred during the period under review, the key factors influencing the financial statements and the principal risks and uncertainties for the financial period are set out in the Chairman's statement and the strategic report.

Business Model

The Company's primary objective is to provide shareholders with attractive total returns in the longer term through the potential for modest capital appreciation and regular, sustainable, long‑term dividends.

INVESTMENT MANAGER'S REPORT

The UK continues to attract substantial numbers of international students, with acceptances to full-time courses for the 2018/19 academic year up 4.4% year-on-year.

The UK student accommodation market

The UK remains a global leader in the provision of higher education, with some of the highest ranking universities in the world, including three in the top ten in 20191, making it attractive to both domestic and international students, for whom the UK is the second most popular destination for further education after the USA.

Student numbers supportive of occupancy and growth

UCAS data for the 2018/19 academic year shows total acceptances to full-time education in the UK remains broadly consistent with prior years, with the number of students applying to higher education continuing to substantially exceed the number of places available, resulting in nearly one in four of all applicants unable to secure a place in higher education, equating to c.162,000 applicants.

The UK continues to attract substantial numbers of international students, with acceptances to full-time courses for the 2018/19 academic year up 4.4% year-on-year. The total number of EU and non-EU international students accepted to courses in the UK is at the highest level ever seen.

Non-EU student numbers have increased by 4.9% year-on-year, with acceptances of EU students increasing 3.8% and to levels above those seen prior to the EU referendum in 2016. Initial data published by UCAS indicates that applications by EU students and non-EU students for the 2019/20 year have increased by 1.0% and 7.9% respectively on the previous year.

The number of acceptances for UK students has shown a modest year-on-year decline of 0.8% for the 2018/19 academic year. This decrease has been widely attributed to the decline in the population of 18 year-olds in the UK, which is forecast to reverse after 20202. This should be considered in the wider context of entry rates for higher education which represent the proportion of the population who are placed in higher education and which, for UK 18 year-olds, has increased by 0.4 percentage points to 33% in 2018/19.3

Whilst total acceptances to full-time higher education in the UK for the 2018/19 academic year remain broadly consistent with prior years, a combination of the cost of tuition and the removal of student number controls continues to benefit the top ranked universities most, suggesting a flight to quality as students increasingly view their choice of university in terms of expected future earnings.

1. Times Higher Education World University Rankings 2019.

2. The Office of National Statistics.

3. UCAS end of cycle report 2018.

Demand for full-time higher education is not evenly distributed across the UK, with certain locations attracting greater demand for places from domestic and international students alike. Demand for courses in London remains strong. London is home to 23 universities, with more universities ranked in the top 40 by The Times Higher Education World University Rankings than any other city in the world. Approximately one-third of the 2.3 million students in the UK study in London and the south east of England1.

International students favour London as a destination for higher education; a quarter of all international students in the UK choose to study in London. With 87% of the Company's portfolio located in and around London and 77% of its tenants being international students, current market dynamics are strongly supportive of the Company's investment objective and underpin its continued ability to deliver fully occupied assets with long-term rental growth prospects. These demand dynamics are also in play in the Brighton market, which is home to both the University of Sussex (a UK top 20 university) and the University of Brighton, with in aggregate c.32,000 students, including c.8,000 international students. The city is also home to two of the largest English language foundation course providers in the UK.

Strong supply-side barriers

The supply of private student accommodation varies substantially across the UK, with increasing divergence of investment returns between those cities with an undersupply of student housing resulting from restrictive planning and/or limited land availability, and those with less restrictive planning regulations.

The Investment Manager targets markets which suffer from a structural undersupply of private student residential accommodation. Severe undersupply in London, driven by high land values and a challenging planning environment, means that it remains more restricted than the UK average in terms of the number of beds per student. Brighton, like London, also remains severely undersupplied, primarily due to a restrictive planning environment which means that currently only c.700 beds have been consented for private development in Brighton, excluding the Company's Scape Brighton and Circus Street properties.

Based on current provision rates, London is undersupplied by c.35,000 beds2. Further, modern student accommodation is in short supply, with an estimated two-thirds of existing university beds in London being more than 17 years old.

The extent of undersupply is likely to be compounded by the slowing pace of the delivery of new student accommodation developments in London. The number of beds delivered in London in 2017/18 represented the lowest rate of growth for more than a decade. In addition, the development pipeline for new schemes remains constrained, with the development pipeline having decreased by 41% in the last three years and increasingly focused on developments outside central London, as illustrated by the decrease in the percentage of pipeline developments located in London Zone 1 from 36% in 2014/15 to only 12% in 2017/18.

The beneficial impact of these supply-side barriers on the Company's portfolio, coupled with strong demand for accommodation in its assets, is reflected by the valuation increases and rental growth achieved since its IPO in 2013.

Transactional activity

Investment volumes exceeded £3.2 billion in 2018. At the date of this report, the Investment Manager estimates that there is a further c.£2 billion of stock on the market. Overseas and institutional buyers continue to dominate the market for UK student residential assets.

Notable transactions in 2018/19 include the acquisition by Allianz of a £350 million holding in the £1.5 billion Chapter portfolio, comprising c.5,100 beds in and around London, at an estimated yield of c.4.00% and the acquisition by Chapter of a c.460-bed asset in Shoreditch at an estimated yield of 3.75%.

Such investment activity, combined with the anticipated impact of the new London Plan (see the Q&A section in the full Annual Report), continues to drive yield compression across the London market. This is reflected in the increased valuation on a like-for-like basis of the Company's portfolio during the year under review.

1. HESA.

2. JLL London Student Housing.

Portfolio performance update

The key drivers of the Company's returns are based on the three fundamentals shown above, which form the basis of how the Investment Manager seeks to add value over the long term. The Company's portfolio continues to perform in line with the Investment Manager's expectations. The operational properties are fully occupied with respect to the 2018/19 academic year. The portfolio generated rental income of £44.4 million for the year to 30 June 2019 and average rental growth of 3.5% year-on-year.

Post year end, the operational portfolio is fully occupied for the 2019/20 academic year, with year-on-year rent at growth of 4.4%.

The Company is able to achieve strong rental growth through its focus on markets benefiting from strong supply and demand imbalances and the location of its assets, all of which are within a ten-minute walk of an HEI or major transport links. In the year under review, the Company has achieved strong NAV growth driven by a like‑for‑like portfolio valuation uplift of 10.3%. The external market valuation of the portfolio was £921.6 million at 30 June 2019. The valuation uplift for the year has been driven by rental growth, full occupancy and yield compression across the portfolio, with notable valuation uplifts on Scape Bloomsbury of £18.7 million, Scape Shoreditch of £15.9 million and Scape Mile End1 of £15.5 million.

The blended net initial yield of the Company's operational portfolio at 30 June 2019 was 4.54% (30 June 2018: 5.04%). London continues to attract the attention of institutional and sovereign wealth fund investors, with competitive market activity for private student accommodation assets further driving yield compression, which has positively impacted the valuation of the Company's assets. As detailed above, 87% of the Company's portfolio by value is located in and around London. During the year under review, the comprehensive refurbishment of Scape Bloomsbury was completed ahead of schedule, with the property open to students for the beginning of the 2018/19 academic year, providing 432 beds in London WC1.

The planning consents for this property permit occupation by non-students outside of the academic year, which the Investment Manager believes will enable the Company to benefit from additional revenue given the location of this asset and demand for hotel-like accommodation in London over the summer months.

The forward-funded construction of Circus Street, Brighton continues in line with the Investment Manager's expectations and is expected to open for the 2019/20 academic year. Circus Street will provide 450 beds in addition to c.30,000 sq ft of commercial office space, which is expected to complete in Q2 2020. The student accommodation will be let on a 21-year lease, with annual uplifts of RPI plus 50 basis points, capped at 5% and floored at 2%, to a subsidiary guaranteed by Kaplan Inc, a global education provider.

Outlook

The Company provides shareholders with a property portfolio which continues to benefit from supply and demand imbalances for student residential accommodation in its core markets. The attraction of these core markets for owners of private student residential accommodation remains evident, as demonstrated by the occupancy levels, rental growth and yield compression seen across the Company's portfolio.

The Investment Manager believes investment demand is increasingly selective, with the weight of institutional capital focusing on the supply of 'core' locations with attractive supply and demand characteristics. This is illustrated by the substantial yield differential between private student residential accommodation assets in and around London and in super prime regional locations such as Brighton as compared to those located in secondary and tertiary regional locations. It is the Investment Manager's belief that this trend is likely to continue, particularly in those locations where local government policy may further limit the development in future of private student accommodation, which is further discussed under the Q&A section in the full Annual Report.

The combination of increasing demand for higher education in the locations in which the Group's assets are located and ongoing supply constraints should continue to support occupancy, rental growth and property valuations across the Company's portfolio going forward.

1. Formerly Scape East.

REVIEW OF THE FINANCIAL YEAR

The Company generated rental income of £44.4 million, paid or declared dividends of 6.15 pence per share and delivered a total shareholder return1 of 14.8%.

Rental income

The Company achieved student rental growth1 of 3.5% on a like-for-like basis for the 2018/19 academic year, generating rental income for the year ended 30 June 2019 of £44.4 million from the Company's property portfolio, driven by full occupancy throughout the year. Rental income has increased year-on-year principally due to the opening of Scape Bloomsbury in September 2018 which generates gross rental income of c.£9 million per annum.

Property operating costs

Property expenditure of £9.4 million was incurred during the year, which is in line with expectations. The Company's net operating margin has remained broadly stable at c.79% with the ongoing efficient management of costs by the Company's Asset and Facilities Managers.

Administration expenses

Total administration expenses of £8.8 million comprise fund running costs, including the Investment Manager's fee, Asset and Facilities Managers' fees and other service provider costs in the period. Administration costs are carefully monitored and controlled by the Investment Manager and the Board to ensure that the Company receives good value for services received.

Net financing costs

Net finance costs of £7.3 million in the year principally comprise loan interest associated with the Company's financing arrangements. These costs have increased year-on-year due to the Company entering into and drawing on a £45 million redrawable credit facility (refer to note 17), in line with expectations.

Profitability

Profit before tax and fair value gains on investment properties of £18.9 million was generated in the period.

Total fair value gains on investment properties through revaluation of the Company's investment portfolio were £73.9 million for the year, positively impacting operating profit and generating EPS of 22.9 pence. The adjusted EPS1 for the period was 5.23 pence (excluding fair value gains on investment properties and adjusting for licence fees receivable on forward‑funded developments).2

Further information on property valuations is given in note 13 to the financial statements.

1. APM - see glossary for definitions and calculation methodology.

2. Refer to note 3 for detailed calculation.

Financial performance

Condensed profit and loss

Ongoing charges

The Company's ongoing charges ratio1 was 1.31% for the year ended 30 June 2019, calculated in line with the AIC methodology, excluding direct property costs.

Dividends

In order to maintain its REIT status, the Company is required to meet a minimum distribution test for each accounting period for which it is a REIT. This test requires the Company to distribute at least 90% of the property rental profits from its property rental business for each accounting period, as adjusted for tax purposes.

In respect of the financial year ended 30 June 2019, the Company paid or declared dividends of 6.15 pence per ordinary share. The dividends were paid or declared as 4.54 pence per ordinary share as a REIT PID in respect of the Group's tax exempt property rental business and 1.61 pence per ordinary share as an ordinary UK dividend. The Company fulfilled all of its obligations under the UK REIT regime and was in full compliance with the REIT requirements at 30 June 2019 and at the date of this report.

Dividend cover

The substantial improvement to the Company's dividend cover this year has been driven predominantly by the opening of Scape Bloomsbury to students in September 2018. The total dividend of 6.15 pence for the year was 85% covered by adjusted EPS1 of 5.23 pence.2

The Company targets a fully covered dividend over the medium term. On the basis of a fully operational portfolio, the Board expects the dividend to be fully covered.

Capital raises

The Company completed two equity capital raises in September 2018 and May 2019, raising gross proceeds of £43.1 million. The issue prices were 149.50 pence and 162.50 pence respectively. Shares issued in the September 2018 capital raise were at a 3.10 pence discount to the closing price per ordinary share on 7 September 2018 of 152.60 pence and a 1.89 pence premium to the prevailing EPRA NAV (ex-income). Shares issued in the May 2019 issue were at a 2.47 pence premium to the Company's prevailing EPRA NAV (ex-income) of 160.03 pence per ordinary share.

Cash flow generation

The Company held cash and cash equivalents of £15.5 million at the end of the financial year. A total of £25.6 million of operating cash flows were generated in relation to the Company's student accommodation portfolio. Total equity capital raised in the year amounted to £43.1 million, which was used in part to fund the construction of Circus Street, Brighton and Scape Brighton. The remaining cash outflows during the year relate to the cost of servicing the Company's debt facility in addition to payment of dividends, resulting in a net decrease in cash and cash equivalents at the year end, in line with expectations.

Debt financing

The Company's loan facilities total £335 million (of which £252.2 million was drawn at 30 June 2019). These facilities include fully drawn fixed interest rate term facilities with PGIM for an aggregate amount of £235 million, which are secured against certain of the Group's operational assets, and have an average weighted maturity of c.7 years. In addition, the Group has £100 million of floating rate borrowing facilities with Wells Fargo (of which £17.2 million was drawn as at 30 June 2019) comprising a development facility of £55 million and a £45 million redrawable credit facility. The loan‑to‑value of the Group at the year-end date was approximately 26%.

1. APM - see glossary for definitions and calculation methodology.

2. Refer to note 3.

Asset performance

The Company experienced 3.5% student rental growth1 for the 2018/19 academic year and benefited from yield compression. The valuation of the Company's property portfolio has increased by £191.1 million or c.26% since the Company's IPO or its acquisition of assets. The portfolio was fully occupied for the 2018/19 academic year.

Lifecycle reserve

The Company's lifecycle cash reserves were £1.5 million at the year end which is held within cash and cash equivalents. The reserves are held for future lifecycle expenditure to ensure the properties are maintained at the level needed to sustain the current rents and any assumed future rental growth.

Net assets

Net assets attributable to equity holders at 30 June 2019 were £684.7 million, up from £574.2 million at 30 June 2018. The increase in net assets since the prior year end is primarily driven by the increase in the valuation of the property portfolio. At 30 June 2019, there were 413.7 million shares in issue, giving an EPRA NAV (cum-income) per ordinary share of 165.52 pence.

NAV and share price return

The Company's ordinary shares have traded at an average premium to EPRA NAV (ex-income)1 of 4.1% since IPO, with an average discount over the financial year of 0.4%.

EPRA NAV (cum income)1 has increased from 149.12 pence as at 30 June 2018 to 165.52 pence per share as at 30 June 2019, an 11% increase year-on-year. Dividends of 6.15 pence per ordinary share were paid, or declared, to shareholders. At the Group level, the annualised total shareholder return since IPO1 was 12.9%, compared to the annualised target return of 8 to 10%.

Financial performance

Condensed balance sheet

1. APM - see glossary for definitions and calculation methodology.

2. Excludes lease incentives held as receivables.

PROPERTY PORTFOLIO

The Company's property portfolio consists of high-quality, modern student accommodation, located primarily in and around London.

11

Number of assets at 30 June 2019

87%

Percentage of portfolio in and around London

At 30 June 2019, the Company's portfolio comprised eleven high‑quality, modern student accommodation buildings, of which 87% of the total capital value was located in and around London.

1. Formerly Scape East.

2. Formerly Scape Surrey.

3. Includes lease incentives held as receivables.

FEATURED ASSETS

SCAPE SHOREDITCH

45 Brunswick Place,

London N1 6DX

541

Number of beds

Scape Shoreditch is situated in a prime London location in Shoreditch. The property was acquired by the Company in September 2015.

Built over eleven floors, the building comprises 541 studio bedrooms and c.10,000 sq ft of communal areas. The rooms are fully equipped for city living, with integrated storage and work space, fitted kitchenette and dining area and an en suite shower room. Located in the building are a gym, study lounge, games room, cinema and large communal kitchen. On the upper levels are landscaped rooftop gardens with four pavilions, including a barbecue terrace, offering spectacular views over London and down through the central glass roof into the commercial space.

Since acquisition in September 2015, the Group has benefited from a valuation uplift of £42.1 million. The property generates c.£10 million of gross revenue per annum, through a combination of direct let tenancies and commercial income. The commercial lease at the property generates c.25% of total gross annual revenues for Scape Shoreditch.

At 30 June 2019, Scape Shoreditch was occupied by students from 46 HEIs and of 66 different nationalities, with c.86% of students coming from outside the UK.

ASSET LOCATION

Scape Shoreditch offers students a complete London living solution in one of London's most fashionable districts, Tech City, London's technology and media district. The property is located two minutes from Old Street station, within a 15-minute walk of City, University of London (c.18,000 students) and CASS Business School, with LSE, UCL and QMUL all located within a short journey from the location of the property.

COMMERCIAL SPACE

The commercial facilities are let to WeWork on a 15-year fully repairing and insuring lease. WeWork is a global provider of shared workspaces. The typical member is an entrepreneur who is working on an early-stage idea, predominantly in the creative industries. Scape partners with WeWork to give students a platform to meet potential employers, sharpen their skills and gain valuable experience. Students also gain exclusive access to an ever‑growing list of internships available at start-ups.

SCAPE BLOOMSBURY

19-29 Woburn Place,

London WC1H 0AQ

432

Number of beds

In April 2017, the Company acquired Scape Bloomsbury, a private student accommodation asset located at a prime central London position in Bloomsbury, WC1.

The property is a 110,000 sq ft ten-storey building situated on half an acre of freehold land which was previously used as a government office in the mid‑20th century, before being converted into student accommodation in 2008 by Unite Students.

Following acquisition in April 2017, the Group reconfigured and refurbished the property to the high specification typical of the Group's existing standing assets and the Scape brand. The refurbishment involved diversifying the mix of accommodation units, offering modern studios and single and double occupancy apartment style accommodation, to optimise rental growth and occupancy levels. The refurbishment also included the construction of a gym, cinema room, communal kitchens and study rooms.

The refurbished property opened to students for the 2018/19 academic year, providing 432 beds in London WC1. The asset is currently fully occupied generating c.£10 million in gross revenue per annum, through a combination of long‑term contracts and short‑term lets. The acquisition of the property has been both earnings and dividend cover accretive to the Company, generating a valuation uplift of £9.9 million at completion of the refurbishment in August 2018 and £18.7 million for the year to 30 June 2019. 

At 30 June 2019, Scape Bloomsbury was occupied by students from 28 HEIs and of 55 different nationalities, with c.88% of students coming from outside the UK.

ASSET LOCATION

Scape Bloomsbury is one of the most prime private student accommodation schemes in London, located in Bloomsbury within a few hundred metres of some of the world's leading universities. The property is within short walking distance of UCL, SOAS and two teaching hospitals, UCH and GOSH. LSE, KCL, City, University of London and UAL are also within walking distance, bringing the total number of students in close proximity to Scape Bloomsbury to c.100,000.

SHORT TERM LETS

The property has the benefit of an approved 'C2 Residential Institutions' planning consent outside of the academic year, enabling the Asset and Facilities Manager to let the property under short-term lets to non-students who would traditionally take hotel, hostel or serviced accommodation in a location heavily used by tourists during the summer months.

SCAPE BRIGHTON

Lewes Road,

Brighton BN2 4GL

555

Number of beds

Scape Brighton was acquired by the Company in May 2019, under a contract to acquire and forward fund its construction.

Scape Brighton is a large-scale development with planning consent for the construction of purpose‑built private student accommodation located on the primary campus of the University of Brighton and less than ten minutes from the University of Sussex.

Once constructed it will provide c.555 beds and extensive communal areas with c.1,500 sq ft of retail space. It is currently expected that Scape Brighton will be operational for the 2020/21 academic year. The Company will benefit from licensing fees which will provide a c.5.5% per annum coupon through the construction phase. It is currently expected that the construction of Scape Brighton will continue to be funded through the Company's development facility.

Brighton, like London, is structurally undersupplied with c.7,800 beds available to students, of which only c.500 beds are in direct let, private purpose‑built student accommodation. Looking forward, restrictive planning on further private student accommodation developments means that currently only c.700 beds have been consented for private development, excluding Circus Street and Scape Brighton. These supply and demand dynamics make Brighton a highly attractive market which the Investment Manager believes shares many of the attractions of the London market.

CIRCUS STREET

5 Market Square, Circus Street, Brighton BN2 9AS

450

Number of beds

Circus Street is a private student residence located in Brighton. The scheme was forward funded by the Company and is due to complete for the 2019/20 academic year.

Circus Street is the Company's second forward‑funded development asset, following on from the successful completion of construction of Scape Wembley. The property provides 450 beds and 30,000 sq ft of commercial office space in a prime Brighton location ahead of, and during, the 2019/20 academic year respectively.

The student accommodation is contracted on a 21-year lease, with annual uplifts of RPI plus 50 basis points, capped at 5% and floored at 2%, to a subsidiary guaranteed by Kaplan Inc, a global education provider. The Company has benefited from a licensing fee providing a 5.5% coupon on drawn funding through the construction phase.

ASSET LOCATIONS

The city of Brighton is home to both the University of Sussex (a UK top 30 university) and the University of Brighton, with in aggregate c.32,000 students, including c.8,000 international students. The city is also home to two of the largest English language foundation course providers. The buildings are situated in prime locations. Scape Brighton is located on the primary campus of the University of Brighton. Circus Street is located in the heart of Brighton city centre, within short walking distance of its iconic pier, shopping district and transport links.

THE ASSET AND FACILITIES MANAGERS

The living experience forms a mainstay of each student's university life. The Company has put the quality, design, experience and performance of its assets at the heart of its operational strategy. This is achieved through the Company's investment selection and its choice of Asset and Facilities Managers.

Collegiate

The Asset and Facilities Manager for Water Lane Apartments is Collegiate. Collegiate's management philosophy is based on enhancing the university experience for their residents. It specialises in managing high-specification, design-led schemes with a focus on superior service quality. Collegiate's team has experience in managing a range of diverse student accommodation assets, in over 25 cities, and across over 40 student blocks, serving some 30,000 student tenants.

Scape

Scape is the Asset and Facilities Manager for the Company's 'Scape' branded assets, in addition to The Pad and Podium. The vision of the Scape brand was to create a new kind of student accommodation; one that was affordable but with modern design.

In 2012, the first Scape building, Scape Mile End1, was launched in London. Today, Scape designs, builds and operates buildings for students across the globe, with over 18,000 beds in operation or under development.

The Company has been highly successful in securing new, modern purpose-built properties through its relationship with Scape.

'We know that the better we take care of students today, the better they will take care of tomorrow; their wellbeing remains the top priority throughout all of our planning, the focal point of our internal training and the driving force behind all our teams'.

Tom Devaney,

Global COO

1. Formerly Scape East.

Focus on service and student wellbeing

Personal touches underpin Scape's student welfare initiatives such as offering pre‑arrival familiarisation and 24 hour support, to personalised wellbeing and health and lifestyle events. Trained staff provide consistent student welfare that is at the forefront, driving both individual and collective responsibility across the business.

Exceptional events to create opportunities

Scape believes that careers start before degrees finish. By creating events that enrich residents' experiences, skills are developed that open doors for life after university. Their Future Shapers series invites students to pitch their ideas to a panel of entrepreneurial judges, with exclusive partnerships with WeWork and Inspiring Interns & Graduates, read more below.

Award-winning provider of student living

Every Scape operated building is expertly shaped around the students who call it home. From the design and layout to the materials and finish, the rooms are designed to give students everything they need in the smartest way possible. By making the most efficient use of space in the rooms, it frees up space for the cinemas, gyms, shared kitchens and other spaces that build communities and lifelong connections.

ENVIRONMENTAL, SOCIAL, GOVERNANCE

The Company aims to operate a fully sustainable business model with a low carbon footprint for all its stakeholders.

Responsible investment

The Investment Manager is a signatory to the UN Principles for Responsible Investment ("UNPRI"). The UNPRI, established in 2006, is a global collaborative network of investors working together to put the six Principles for Responsible Investment into practice. The principles are a voluntary and aspirational set of investment principles for incorporating ESG issues into investment practice. More information can be found on the UNPRI website: www.unpri.org.

The Investment Manager has established a dedicated sustainability committee to assess ESG issues and integrate sustainability across its business, including the embedding of responsible investing policies in its investment management processes.

1000 Companies to Inspire Britain

The Company was listed in the London Stock Exchange Group's 1000 Companies to Inspire Britain 2019 publication, a celebration of some of the fastest‑growing and most dynamic small and medium‑sized enterprises ("SMEs") in the UK. The report tells a fantastic story about the ability of British businesses to thrive in the face of a challenging environment and celebrates some of the most exciting new SMEs in the UK.

Environmental impact

The Group is committed to being both socially and environmentally responsible and recognises the impact it has on the environment. It has delegated the day-to-day asset and facilities management to the Asset and Facilities Managers, who are responsible for the provision of energy supplies, including the procurement of renewable energy, managing the Group's waste schemes and raising general awareness of environmental impact and waste reduction amongst the Group's employees and residents. This year has seen notable improvements made around sustainability, energy efficiency and links to charity.

Scape encourages sustainable living through communications with advice on recycling, energy saving and transportation. This year, a key focus was the issue of single use plastic. Scape commissioned 600 limited edition reusable water bottles featuring bespoke artwork which were given out to encourage students and staff to reduce plastic use. Students were invited to exchange their plastic bottle for a reusable one, which gave front of house staff the opportunity to engage with them on the issue.

The initiative helped students to live in a more sustainable way, consider the environment and also drink more water. The statistics below demonstrate how much of a difference a simple switch can make.

The environmental impact of this campaign helped to save c.105,000 plastic bottles1, the equivalent of:

·; 2,528 kg plastic waste

·; 7,585 kg CO2 emissions

·; 45 barrels of oil

In addition to environmental campaigns, Scape also worked with The Student Energy Project to educate their residents on how to live a more energy efficient life, with on-site campaigns and email communications.

'When our residents said that eliminating single use plastic and recycling was a priority for them, we listened. It has been very rewarding to see the positive reception of this initiative and seeing the students enjoy using the Scape water bottles'.

Neil Smith,

Managing Director, Scape

1. https://www.london.gov.uk/what-we-do/environment/waste-and-recycling/single-use-plastic-bottles

2. http://veragon.com/eic/

Sustainable buildings

The Group's environmental sustainability measures include the use of highly efficient combined heat and power ("CHP") systems, ground source heat pumps and intelligent interior heating and lighting to minimise GHG emissions. CHP is a highly efficient process that captures and utilises the heat that is a by-product of the electricity generation process. By generating heat and power simultaneously, CHP can reduce carbon emissions by up to 30% compared to the separate means of conventional generation via a boiler and power station.

The Company's property portfolio incorporates green roof space, rainwater harvesting and sustainable waste management, including diverting waste from landfill to generate renewable electricity via the waste management process. In the year to 30 June 2019, a total of 702 tonnes of property waste, has been diverted from landfill, with Scape procuring the conversion of 86% of all property waste into renewable energy and 14% into national recycling schemes. The property waste has been recycled into various consumer products such as cups and bottles and renewable energy, with approximately 330,000 kWh of electricity being generated during the year.

Energy efficiency

The Company's buildings are either constructed, or acquired as newly operational properties and therefore conform to the Company's requirements for the highest standards of energy efficiency. The properties are designed with this in mind, with 100% of the portfolio with an EPC rated B or above.

An energy performance certificate ("EPC") is required by law whenever a building is bought, sold or rented. An EPC is a key measure of an asset's energy efficiency, and grades the property from A (most efficient) to G (least efficient).

At Scape Mile End the Asset and Facilities Manager is in the process of replacing all existing fluorescent lighting with LED lighting to improve energy efficiency across the building. Energy consumption for a florescent lamp is up to 10 times the usage of LED equivalents and therefore significant financial savings can be achieved by upgrading building light fittings.

The Company portfolio (by gross internal area)

is rated as follows:

24% = A

76% = B

ENERGY AND CARBON DATA

Greenhouse gas emissions

Methodology/notes:

The principal methodology used to calculate the emissions reflects the UK Government's Environmental Reporting Guidelines (2019 version). The Company has reported on all the emission sources required under the Regulations. An operational control approach was used to define the Company's organisational boundary and responsibility for GHG emissions. The Company owns 100% of the property assets it operates and has therefore reported on that basis. All material emission sources within this boundary have been reported upon, in line with the requirements of the Regulations.

Methodology/notes:

Total consumption on an absolute basis has increased year-on-year due to Scape Bloomsbury becoming operational.

Like-for-like data: Scape Bloomsbury has been excluded in the current year like-for-like data to ensure a comparable portfolio year-on-year. The asset became operational part way through the current reporting year.

District heating: Scape Greenwich is the only property with district heating and cooling systems and therefore consumption and like-for-like data is identical.

Appropriate denominator: Consumption per bed has been chosen as the denominator.

Methodology/notes:

Appropriate denominator: Consumption per bed has been chosen as the denominator.

Methodology/notes:

Like-for-like data: Scape Bloomsbury has been excluded in the current year like-for-like data to ensure a comparable portfolio year-on-year. The asset became operational part way through the reporting year.

Appropriate denominator: Consumption per bed has been chosen as the denominator.

Methodology/notes:

Like-for-like data: Scape Bloomsbury has been excluded in the current year like-for-like data to ensure a comparable portfolio year-on-year. The asset became operational part way through the reporting year.

Methodology/notes:

Scape has overall responsibility for the supervision and provision of asset management services through oversight and management of the employees of GCP Operations Limited, a subsidiary of the Company. GCP Operations Limited experiences a high employee turnover rate due to the nature of the roles in the business which include temporary staff and are predominantly service based.

RISK MANAGEMENT

Robust risk assessments and reviews of internal controls are undertaken regularly in the context of the Company's overall investment objective.

Role of the Board

The Directors have overall responsibility for risk management and internal controls within the Group. They recognise that risk is inherent in the operation of the Group and that effective risk management is an important element in the success of the organisation. The Directors have delegated responsibility for the assurance of the risk management process and the review of mitigating controls to the audit and risk committee.

The Directors, when setting the risk management strategy, also determine the nature and extent of the significant risks and the Company's risk appetite in implementing this strategy. A formal risk identification and assessment process has been in place since IPO, resulting in a risk framework document which summarises the key risks and their mitigants.

The Directors undertake a formal risk review with the assistance of the audit and risk committee at least twice a year in order to assess the effectiveness of the Group's risk management and internal control systems. During the year under review, the Directors have not identified, nor been advised of, any failings or weaknesses which they have determined to be of a material nature. The principal risks and uncertainties which the Group faces are set out below.

Internal control review

The Board is responsible for the internal controls relating to the Group including the reliability of the financial reporting process and for reviewing their effectiveness.

The Directors have reviewed and considered the guidance supplied by the Financial Reporting Council on risk management, internal control and related finance and business reporting. An ongoing process has been established for identifying, evaluating and managing the principal and emerging risks faced by the Group and is kept under regular review by the Board, through the audit and risk committee. This process, together with key procedures established with a view to providing effective financial control, was in place during the year under review and at the date of this report.

The internal control systems are designed to ensure that proper accounting records are maintained, that the financial information on which business decisions are made, and which is issued for publication, is reliable and that the assets of the Group are safeguarded.

The following are the main features of the Group's internal control and risk management systems:

- a defined schedule of matters reserved for decision by the Board, which is reviewed by the Board at least annually;

- the audit and risk committee regularly reviews the Company's internal controls, risk management systems and risk matrix;

- the Company has defined investment criteria, as set out in the investment policy. Compliance with these criteria is regularly reviewed by the Investment Manager, particularly when considering possible new investments;

- the Board has a procedure to ensure that the Company can continue to be approved as an investment company by complying with sections 1158/1159 of the Corporation Tax Act 2010;

- the Investment Manager and Administrator prepare forecasts and management accounts which allow the Board to assess the Company's activities and to review its performance;

- contractual agreements with the Investment Manager and other third party service providers, and adherence to them, are regularly reviewed;

- the services and controls at the Investment Manager and at other service providers are reviewed annually and assurance letters are provided by service providers to the Company on an annual basis;

- the audit and risk committee receives and reviews assurance reports on the controls of all third party service providers, including the Depository, Investment Manager and Administrator, undertaken by professional service providers; and

- the Investment Manager's Risk Officer continually reviews the Investment Manager's controls in its capacity as AIFM to the Company. Risk Officer reports are submitted to the committee on a six-monthly basis.

The risk management process and Group systems of internal control are designed to manage rather than eliminate the risk of failure to achieve the Company's objectives. It should be recognised that such systems can only provide reasonable, not absolute, assurance against material misstatement or loss.

The Directors have carried out a review of the effectiveness of the systems of internal control as they have operated over the period and up to the date of approval of the report and financial statements.

There were no matters arising from this review that required further investigation and no significant failings or weaknesses were identified.

Internal control assessment process

Robust risk assessments and reviews of internal controls are undertaken regularly in the context of the Company's overall investment objective. The Board, through the audit and risk committee, has categorised risk management controls under the following key headings:

·; operational risk;

·; market risk;

·; financial risk; and

·; reputational risk.

In arriving at its judgement of what risks the Group faces, the Board has considered the Group's operations in the light of the following factors:

·; the nature and extent of risks which it regards as acceptable for the Group to bear within its overall business objective;

·; the threat of such risks becoming reality;

·; the Group's ability to reduce the incidence and impact of risk on its performance;

·; the cost to the Group and benefits related to the review of risk and associated controls of the Group; and

·; the extent to which the third parties operate the relevant controls.

A risk matrix is in place against which the risks identified and the controls to mitigate those risks can be monitored. The risks are assessed on the basis of:

·; the likelihood of them happening;

·; the impact on the business if they were to occur; and

·; the effectiveness of the controls in place to mitigate them.

This risk register is reviewed at least every six months by the audit and risk committee and at other times as necessary.

Most of the day-to-day management functions of the Group are sub-contracted, and the Directors therefore obtain regular assurances and information from key third party suppliers regarding the internal systems and controls operating in their organisations. In addition, each of the third parties is requested to provide a copy of its report on internal controls each year, where available, which is reviewed by the audit and risk committee.

Principal risks and uncertainties

The Directors have identified the following principal risks and uncertainties and the actions taken to manage each of these. If one or more of these risks materialised, it could have the potential to significantly impact the Group's ability to meet its investment objective.

1. APM - see glossary for definitions and calculation methodology.

2. Excludes lease incentives.

Emerging risks

The Board notes emerging risks as a new area of focus within the 2019 AIC Code. Emerging risks include trends which are characterised by a high degree of uncertainty in terms of their occurrence, probability and their potential impact. As part of the Company's risk management processes, emerging risks are considered at the formal reviews of the Company's risk matrix. Emerging risks are by their very nature uncertain; examples include climate change, demographic trends, global financial volatility, new technologies and natural resources management, all areas which have been considered as part of the Company's risk reviews.

Going concern

In assessing the Group's ability to continue as a going concern, the Directors have considered the Company's investment objective, risk management policies, capital management (see note 21 to the financial statements), the quarterly NAV and the nature of its portfolio and expenditure projections. The Directors believe that the Group has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future, being a period of at least twelve months from the date of this report. In addition, the Board has had regard to the Group's investment performance, the price at which the Company's shares trade relative to the NAV and ongoing investor interest in the continuation of the Company (including feedback from meetings and conversations with shareholders by the Group's advisers).

Based on their assessment and considerations, the Directors have concluded that the financial statements of the Company and the Group should continue to be prepared on a going concern basis and the financial statements have been prepared accordingly.

The Directors have also made an assessment of the viability of the Company.

Viability statement

The Directors have carried out a robust assessment of each of the Company's principal risks and uncertainties detailed above, in particular the risk and impact of a downturn in the UK commercial property market or the international student market which could materially affect the valuation and cash flows of the Company's investments and therefore, impact the viability of the Company. They have also considered the Company's policy for monitoring, managing and mitigating its exposure to these risks.

The Directors have assessed the prospects of the Group over a period longer than the twelve months required by the going concern provision. The Board has determined that a five-year period constitutes an appropriate period to provide its viability statement. The Company does not have a fixed life. It assumes long-term hold periods for the assets in its portfolio and analyses its financial model over a five-year horizon.

This assessment involved an evaluation of the potential impact on the Group of these risks occurring. Where appropriate, the Group's financial model was subject to a sensitivity analysis involving flexing a number of key assumptions in the underlying financial forecasts in order to analyse the effect on the Group's net cash flows and other key financial ratios including loan covenants.

This analysis included modelling the impact of severe but plausible downside scenarios that incorporate the principal risks or a combination of these risks as follows:

·; reductions in rental income;

·; reductions in property values;

·; increases in the Company's operating expenses; and

·; deflationary scenarios that could impact on the Company's ability to meet its loan covenants.

The Company's assets generate revenues considered to be dependable due to the inherent supply/demand imbalances of the market in which the Company operates. Additionally, the Company's leverage predominantly comprises fixed-rate facilities which mature beyond the five-year horizon. Therefore, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five-year period of their assessment.

This strategic report has been approved by the Board and signed on its behalf by:

Robert Peto

Chairman

3 September 2019

GOVERNANCE

Board of Directors

Robert Peto - Chairman

Malcolm Naish - Senior Independent Director and Chair of the management engagement committee

Marlene Wood - Chair of the audit and risk committee

Gillian Day - Chair of the remuneration committee

David Hunter - Director

Peter Dunscombe retired as a Director with effect from 6 November 2018.

EXTRACTS FROM THE DIRECTORS' REPORT

Share capital

On 25 September 2018, the Company issued 25,512,151 ordinary shares at a price of 149.50 pence per share, with an aggregate nominal value of £255,121.51, raising gross proceeds of £38.1 million. The placing price represented a 3.10 pence discount to the closing mid-price per ordinary share on 7 September 2018 of 152.60 pence. The shares were issued under the existing shareholder authorities granted at the Company's annual general meeting held on 25 October 2017, to issue up to 38,506,400 ordinary shares on a non-pre-emptive basis.

The shares were issued to institutional investors and professionally advised private investors and admitted to trading on the Premium Segment of the London Stock Exchange's Main Market on 25 September 2018.

At the annual general meeting held on 6 November 2018, the Company was granted authority to allot ordinary shares of the Company up to 10% of the Company's total issued share capital at that date, amounting to 38,506,400 ordinary shares.

On 4 June 2019, the Company issued 3,076,923 ordinary shares at a price of 162.50 pence per share, with an aggregate nominal value of £30,769.23, raising gross proceeds of £5.0 million. The placing price represented a 2.47 pence premium to the Company's prevailing EPRA NAV (ex-income) on 31 March 2019 of 160.03 pence per ordinary share. The shares were issued to institutional investors and professionally advised private investors and admitted to trading on the Premium Segment of the London Stock Exchange's Main Market on 4 June 2019.

As at the date of this report, the Company may allot further ordinary shares up to an aggregate nominal amount of £354,294.77 under its existing authority.

At the annual general meeting held on 6 November 2018, the Company was granted authority to purchase up to 14.99% of the Company's ordinary share capital in issue at that date on which the notice of AGM was published, amounting to 57,721,176 ordinary shares. No ordinary shares have been bought back under this authority. This authority will expire at the conclusion of, and renewal will be sought at, the annual general meeting to be held on 6 November 2019. Shares bought back by the Company may be held in treasury, from where they could be re-issued at or above the prevailing NAV quickly and cost effectively. This provides the Company with additional flexibility in the management of its capital base. No shares were held in treasury during the year or at the year end.

At the year end, and as at the date of this report, the issued share capital of the Company comprised 413,653,630 ordinary shares. At general meetings of the Company, ordinary shareholders are entitled to one vote on a show of hands and, on a poll, to one vote for every ordinary share held. At 30 June 2019, the total voting rights of the Company were 413,653,630, and as at the date of this report are 413,653,630.

Dividends

Dividends totalling 6.15 pence per ordinary share have been paid or declared in respect of the year ended 30 June 2019 as follows:

FINANCIAL STATEMENTS

Statement of Directors' responsibilities

In respect of the annual report and financial statements

The Directors are responsible for preparing the annual report and financial statements in accordance with applicable UK law and IFRS as adopted by the EU.

Under company law, the Directors must not approve the financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Group for that year.

In preparing the financial statements, the Directors are required to:

·; select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;

·; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

·; provide additional disclosures when compliance with specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance;

·; state that the Group has complied with IFRS, subject to any material departures disclosed and explained in the financial statements;

·; make judgements and estimates that are reasonable and prudent; and

·; prepare financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They 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.

Under applicable law and regulations, the Directors are also responsible for preparing a strategic report, Directors' report, Directors' remuneration report and corporate governance statement that comply with that law and those regulations, and for ensuring that the annual report includes information required by the Listing Rules and Disclosure Guidance and Transparency Rules of the FCA.

The financial statements are published on the Company's website, www.gcpstudent.com, which is maintained on behalf of the Company by the Investment Manager. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the financial statements since they were initially presented on the website.

Under the investment management agreement, the Investment Manager is responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Visitors to the website need to be aware that legislation in the UK covering the preparation and dissemination of the financial statements may differ from legislation in their jurisdiction.

We confirm that to the best of our knowledge:

·; the financial statements, prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the Group; and

·; this annual report includes a fair review of the development and performance of the business and the position of the Company and the Group, together with a description of the principal risks and uncertainties that it faces.

The Directors consider that the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

On behalf of the Board

Robert Peto

Chairman

3 September 2019

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the year ended 30 June 2019 or the year ended 30 June 2018 but is derived from those accounts. Statutory accounts for the year ended 30 June 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full annual report and financial statements at www.gcpstudent.com.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2019

The accompanying notes form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2019

These financial statements were approved by the Board of Directors of GCP Student Living plc on 3 September 2019 and signed on its behalf by:

Robert Peto

Chairman

Company number: 08420243

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2019

Consolidated statement of changes in equity

For the year ended 30 June 2018

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 30 June 2019

Part 1. Basis of preparation

This section includes the Company’s accounting policies applied to the financial statements in accordance with IFRS. Accounting policies specific to a particular note have been included with the note to the financial statements and are identified by way of a coloured panel.

1. General information

GCP Student Living plc is a REIT incorporated in England and Wales on 26 February 2013. The registered office of the Company is located at 51 New North Road, Exeter EX4 4EP. The Company's shares are listed on the Premium Segment of the Main Market of the London Stock Exchange.

2. Basis of preparation

These financial statements are prepared in accordance with IFRS issued by the IASB as adopted by the European Union. The financial statements have been prepared under the historical cost convention, except for investment property, which has been measured at fair value and property under development which is measured at cost less any impairment, further information is given in note 10. The audited financial statements are presented in Pound Sterling and all values are rounded to the nearest thousand pounds (£'000), except when otherwise indicated.

These financial statements are for the year ended 30 June 2019. Comparative figures are for the previous accounting period, the year ended 30 June 2018.

The Group has chosen to adopt the EPRA best practice guidelines for calculating key metrics such as NAV and earnings, which are presented alongside the IFRS measures where applicable.

2.1 Changes to accounting standards and interpretations

New standards, amendments to standards and interpretations which came into effect for accounting periods starting on or after 1 January 2018 have had an impact on the financial statements as follows:

·; IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018). The Group now applies an expected credit loss model when calculating impairment losses on its trade and other receivables. Rental guarantees included with trade and other receivables are classified as a financial asset and valued at fair value; and

·; IFRS 15 Revenue from Contracts (effective for annual periods beginning on or after 1 January 2018). The Group's revenue is outside the scope of IFRS 15.

A review of comparative figures has taken place and it has been determined that the accounting policy change has not had a material impact on the impairment of debtors at 30 June 2018.

The following new standards and amendments to existing standards have been published and, once approved by the EU, will be mandatory for the Group's accounting periods beginning after 1 July 2019 or later periods. The Group has decided not to adopt them early.

·; IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2019). IFRS 16 has minimal impact on lessors like the Group.

·; IFRS 3 Business Combinations - Definition of a Business, to be applied to transactions that are either business combinations or asset acquisitions for which the acquisition date is on or after the first annual reporting period beginning on or after 1 January 2020. Whilst this will not affect historic transactions of the Company, as and when an acquisition takes place the accounting treatment will be reviewed in line with the new standard.

The Group does not expect the adoption of new accounting standards issued but not yet effective to have a significant impact on its financial statements.

2.2 Significant accounting judgements and estimates

The preparation of these financial statements in accordance with IFRS requires the Directors of the Company to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements. 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 in the future.

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:

Operating lease commitments - Group as lessor

The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a substantial portion of the economic life of the commercial property, that it retains all the significant risks and rewards of ownership of these properties and recognises the contracts as operating leases.

Going concern

The Directors have made an assessment of the Group's ability to continue as a going concern and are satisfied that the Company has the resources to continue in business for the foreseeable future, for a period of not less than twelve months from the date of this report.

Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern. Therefore, the financial statements have been prepared on the going concern basis.

Estimates

Valuation of property

The Group's investment properties are held at fair value as determined by the external valuer in accordance with the RICS Valuation Global Standards 2017 and IFRS 13. Refer to note 10 for further details of the judgements and estimates made in determining the valuation of property.

2.3 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are stated in the notes to the financial statements.

a) Basis of consolidation

As a real estate entity, the Company does not meet the definition of an investment entity and therefore does not qualify for the consolidation exception under IFRS 10. The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 30 June 2019. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtained control, and will continue to be consolidated until the date that such control ceases. An investor controls an investee when the investor 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. In preparing these financial statements, intra-group balances, transactions and unrealised gains or losses have been eliminated in full. The subsidiaries all have the same year end as the Company. Uniform accounting policies are adopted in the financial statements for transactions and events in similar circumstances.

b) Functional and presentation currency

The overall objective of the Group is to generate returns in Pound Sterling and the Group's performance is evaluated in Pound Sterling. Therefore, the Directors consider Pound Sterling as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions and have therefore adopted it as the functional and presentation currency.

c) Segmental reporting

The Directors are of the opinion that the Group is engaged in a single segment of business, being the investment and provision of student accommodation facilities (including ancillary retail, commercial and teaching facilities) in the UK.

Part 2. Review of the financial year

This section includes information on performance of the Company, including rental income, EPRA metrics, operating and administration expenses and information of dividends for the year. The EPRA metrics have been reconciled to the IFRS measures where appropriate and are included to enhance comparability across the real estate sector. 

3. EPRA metrics

3.1 EPRA earnings

Basic EPS is calculated by dividing profit for the year attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares during the year. As there are no dilutive instruments in issue, basic and diluted EPS are identical. The following reflects the earnings and share data used in the basic and diluted EPS computations:

1. APM - see glossary for definitions and calculation methodology

A third Group-specific adjusted EPS calculation has been calculated to show EPRA earnings including the non-recurring transactions arising in the year, adding licence fees on forward-funding agreements which are treated as capital in the financial statements. The items have arisen from the following:

1. For the year ended 30 June 2019:

i. licence fees of £2,263,000 from the developers of Scape Brighton and Circus Street, Brighton in respect of forward-funding agreements.

2. For the year ended 30 June 2018:

i. costs relating to professional advisory fees of £354,000;

ii. capital goods scheme adjustments of £73,000; and

iii. licence fees £1,490,000 from the developers of Scape Wembley and Circus Street, Brighton in respect of forward-funding agreements.

3.2 EPRA NAV

Basic NAV per share amounts are calculated by dividing net assets in the statement of financial position attributable to ordinary equity holders of the Company by the number of ordinary shares outstanding at the end of the year. As there are no dilutive instruments in issue, basic and diluted NAV per share are identical. The following reflects the net asset and share data used in the basic and diluted NAV per share computations:

The EPRA NAV is be calculated as:

EPRA NNNAV is equivalent to EPRA NAV, as the Company has not made a provision for deferred tax and carrying value of financial instruments.

3.3 EPRA cost ratio

Further EPRA metrics are disclosed in notes 11 and 12 to the financial statements.

4. Rental income

Ancillary income includes income received through services provided to students such as laundry, cleaning and vending machines.

Accounting policy

Rental income, including direct lets to students, nomination agreements to HEIs and leases to commercial tenants receivable under operating leases, is recognised on a straight‑line basis over the term of the lease, except for contingent income in respect of rental guarantees which is recognised when it arises.

Incentives for lessees to enter into lease agreements are spread evenly over the lease term, even if the payments are not made on such a basis. 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.

5. Property operating and administration expenses

Investment management fees are further disclosed in note 28 and Directors' remuneration is further disclosed in note 26.

Asset and facilities management agreement

During the year under review, the Company had two Asset and Facilities Managers.

Scape Student Living Limited

Under the terms of its asset and facilities management agreements, Scape is entitled to a fee which is calculated and paid quarterly in arrears and is one-quarter of the Investment Manager's fee attributable to those assets in the Group's portfolio for which it provides asset and facilities management services. The fee paid to Scape is paid from the Investment Manager's fee. The executive directors of the Investment Manager indirectly own a c.25% interest in Scape. In addition to this, Mr Nigel Taee, a non-executive director of the Investment Manager, owns approximately 25% of Scape. Mr Taee holds a c.20% interest in Gravis Capital Management Limited, of which he is a non-executive director and in which capacity he is excluded from any involvement in investment management activities relating to the Company. Mr Taee is chairman of Scape.

Collegiate Accommodation Consulting Limited

Under the terms of its asset and facilities management agreement, Collegiate is entitled to a fee of 5.5% of the total rental income collected per annum attributable to Water Lane Apartments. The fee is calculated and paid monthly in arrears.

Administration agreements

Link Alternative Fund Administrators Limited has been appointed as the Administrator to the Company and its subsidiaries. It provides the day-to-day administration services for these entities. It is also responsible for the Company's general administrative functions, such as the calculation and publication of the NAV and maintenance of the Company's accounting and statutory records. Under the terms of its administration agreement, Link Alternative Fund Administrators Limited is entitled to an administration fee of £145,000 per annum (exclusive of VAT). The administration agreement is terminable upon six months' written notice.

Secretarial agreement

Link Company Matters Limited has been appointed by the Company to provide company secretarial functions required by the Companies Act 2006. The Secretary is entitled to a fee of £68,807 per annum in respect of the Company and £1,936 per annum in respect of each UK subsidiary. The company secretarial fees are subject to an annual RPI increase. The secretarial agreement is terminable upon six months' written notice.

Depositary agreement

Langham Hall UK Depositary LLP has been appointed as depositary to the Company. The Depositary is responsible for ensuring the Company's cash flows are properly monitored; the safekeeping of custody assets and the non-custody assets of the Company entrusted to it (held on trust for the Company as applicable); and the oversight and supervision of the Investment Manager and the Company. Under the terms of the depositary agreement, the Depositary is entitled to a fee of £49,722 per annum, subject to annual RPI increase. The depositary agreement is terminable by either the Company and/or the Investment Manager upon six months' written notice.

Accounting policy

All property operating expenses and administration expenses are charged to the income statement and are accounted for on an accruals basis.

6. Auditor's remuneration

The Company reviews the scope and nature of all proposed non-audit services before engagement, to ensure that the independence and objectivity of the Auditor are safeguarded. Audit fees are comprised of the following items:

For the year ended 30 June 2019, the Auditor provided non-audit services, being a review of the half-yearly report and financial statements for a fee of £9,000 (2018: £9,000).

The audit and risk committee has considered the independence and objectivity of the Auditor and has conducted a review of non-audit services which the Auditor has provided during the year under review. The audit and risk committee receives an annual assurance from the Auditor that its independence is not compromised by the provision of such non-audit services.

7. Taxation

Corporation tax has arisen as follows:

Reconciliation of tax charge to profit before tax:

The Group has unrelieved excess tax losses of £14,161,000 (2018: £10,016,000) and a non-trade loan relationship deficit of £2,003,000 (2018: £2,003,000). As it is unlikely that the Group will generate sufficient taxable profits in the future to utilise these amounts, no deferred tax asset has been recognised in respect of these items.

Accounting policy

Corporation tax is recognised in the income statement except where in certain circumstances corporation tax may be recognised in other comprehensive income.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

As a REIT, the Group is exempt from corporation tax on the profits and gains from its property rental business, provided it continues to meet certain conditions as per REIT regulations.

Non-qualifying profits and gains of the Group (residual income) continue to be subject to corporation tax. Therefore, current tax is the expected tax payable on the non-qualifying taxable income for the year if applicable, using tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

8. Dividends

1. The fourth interim dividend was declared after the year ended and therefore not accrued for as a provision in the financial statements.

On 1 August 2019, the Company declared a fourth interim dividend of 1.56 pence per ordinary share amounting to £6.5 million. The dividend will be paid on 9 September 2019 to shareholders on the register at close of business on 9 August 2019.

As a REIT, the Company is required to pay PIDs equal to at least 90% of the property rental business profits of the Group.

Accounting policy

Dividends due to the Company's shareholders are recognised when they become payable. For interim dividends this is when they are paid.

Part 3. Asset management

This section includes information on the Company's investment portfolio, valuation methodology and its performance over the year. The Group's investment properties are valued at fair value as determined by the external valuer in accordance with the RICS Valuation Global Standards 2017 and IFRS 13.

9. Operating leases

Leases are typically direct let agreements with individual students or HEIs for an academic year or shorter period. The Group also has a small number of leases on commercial areas, teaching and retail spaces and a number of nomination agreements whereby multiple beds are let out for a set number of years. The Company additionally has granted a 21 year lease over its Circus Street asset.

Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2019 are as follows:

Accounting policy

When the Group acts as lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risk and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term.

10. UK investment property

1. The carrying value of investment property is shown net of lease incentives held as receivables.

During the year, the Group commenced construction of Scape Brighton and continued construction work on Circus Street, Brighton. The properties are included above as properties under construction with a value of £42,060,000 and £55,480,000 respectively.

In October 2017, the Group entered into a conditional forward purchase agreement to acquire a private student accommodation residence currently under construction immediately adjacent to QMUL. A deposit and related cost of £2,648,000 relating to this agreement are included within current assets on the consolidated statement of financial position for the current year and non-current assets for the prior year.

Accounting policy

Investment property comprises property held to earn rental income or for capital appreciation, or both. Investment property is measured initially at cost including transaction costs. Transaction costs include transfer taxes and professional fees to bring the property to the condition necessary for it to be capable of operating. The carrying amount also includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met.

Subsequent to initial recognition, investment property is stated at fair value in accordance with IFRS 13. Gains or losses arising from changes in the fair values are included in the income statement in the period in which they arise under IAS 40 Investment Property.

The determination of the fair value of investment property requires the use of estimates such as future cash flows from assets (from lettings and future revenue streams) capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property and discount rates applicable to those assets.

Gains or losses on the disposal of investment property are determined as the difference between net disposal proceeds and the carrying value of the asset.

Investment properties under construction are measured at fair value if the fair value is considered to be reliably determinable. Investment properties under construction for which the fair value cannot be determined reliably but for which the Company expects that the fair value of the property will be reliably determinable when construction is completed, are measured at cost less any impairment until the fair value becomes reliably determinable or construction is completed, whichever is earlier.

Licence fees (where income is receivable from a developer in respect of a forward-funding agreement) are deducted from the cost of investment properties and shown as a receivable until settled.

11. EPRA NIY

Calculated as the value of investment properties divided by annualised net rents:

Property-related capital expenditure analysis

Methodology/notes:

Acquisitions: The cost of acquisition of investment properties and capital expenditure in respect of development properties.

Subsequent capital expenditure: Capital expenditure post acquisition includes the costs of refurbishment.

12. EPRA vacancy rate

The Company's buildings were fully occupied for the 2018/19 academic year and for the previous academic year.

13. Fair value

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used to estimate the fair values.

The fair value of cash and short-term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts due to the short‑term maturities of these instruments.

Interest-bearing loans and borrowings are disclosed at amortised cost. The carrying value of the loans and borrowings approximate to their fair value due to the contractual terms and conditions of the loan.

Quarterly valuations of investment property are performed by Knight Frank LLP, an accredited external valuer with recognised and relevant professional qualifications and recent experience of the location and category of the investment property being valued; however the valuations are the ultimate responsibility of the Directors, who appraise these quarterly.

The Group's investment properties are held at fair value as determined by the external valuer in accordance with the RICS Valuation Global Standards 2017 and IFRS 13.

The determination of the fair value of investment property requires the use of estimates such as future cash flows from assets (such as lettings and future revenue streams), the capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property and discount rates applicable to those assets.

The following tables show an analysis of the fair values of assets recognised in the statement of financial position by level of the fair value hierarchy1:

1. Explanation of the fair value hierarchy:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

Level 2 - use of a model with inputs (other than quoted prices included in Level 1) that are directly or indirectly observable market data; and

Level 3 - use of a model with inputs that are not based on observable market data.

2. Includes lease incentives held as receivables

Valuation techniques and significant inputs within the valuation of investment properties

The following table analyses:

·; the fair value measurements at the end of the reporting period;

·; a description of the valuation techniques applied;

·; the inputs used in the fair value measurement, including the ranges of rent charged to different units within the same building; and

·; for Level 3 fair value measurements, quantitative information about significant unobservable inputs used in the fair value measurement.

Sensitivity analysis to significant changes in unobservable inputs within the valuation of investment properties

Significant increases/decreases in the ERV (per sq ft p.a.) and rental growth p.a. in isolation would result in a significantly higher/lower fair value measurement. Significant increases/decreases in the long-term vacancy rate and discount rate (and exit yield) in isolation would result in a significantly lower/higher fair value measurement.

Generally, a change in the assumption made for the ERV (per sq ft p.a.) is accompanied by:

·; a discretionary similar change in the rent growth p.a. and discount rate (and exit yield); and

·; an opposite change in the long-term vacancy rate.

Gains and losses recorded in profit or loss for recurring fair value measurements categorised within Level 3 of the fair value hierarchy amount to £73,865,000 (2018: £47,565,000) and are presented in the income statement in line item 'fair value gains on investment properties'.

All gains and losses recorded in profit or loss for recurring fair value measurements categorised within Level 3 of the fair value hierarchy are attributable to changes in unrealised gains or losses relating to investment property held at the end of the reporting period.

The carrying amount of the Company's other assets and liabilities is considered to approximate their fair value.

14. Events after the reporting period

There were no events after the reporting period which require disclosure.

Part 4. Borrowings and equity

This section includes information on the Company’s interest‑bearing loans and borrowings, leverage, capital position and exposure to financial risk. The Group manages its capital requirements through a combination of debt and equity.

15. Finance income

Income from interest-bearing loans and borrowings is interest accrued in respect of a loan made to the developer of Scape Brighton; further information is given in note 28.

Accounting policy

Interest income on cash and short-term deposits is recognised on an effective interest rate basis and shown within the income statement as finance income. Interest income from interest-bearing loans and borrowing is accrued at the interest rate per the loan agreement and shown within the income statement as finance income.

16. Finance expenses

Accounting policy

Any finance costs that are separately identifiable and directly attributable to a liability are amortised as part of the cost of the liability. All other finance costs are expensed in the period in which they occur. Finance costs consist of interest and other costs that an entity incurs in connection with bank and other borrowings.

17. Interest‑bearing loans and borrowings

The Group has debt facilities of £335 million, comprising the following:

Fixed-rate secured facilities totalling £235 million with PGIM:

Secured credit facilities totalling £100 million with Wells Fargo:

As at 30 June 2019, £17,150,000 had been drawn down on the redrawable credit facility.

The Group uses gearing to seek to enhance returns over the long term and for the purpose of funding acquisitions in line with the Company's investment policy. The level of gearing is governed by careful consideration of the cost of borrowing.

The debt facilities include gearing and interest cover covenants that are measured in accordance with the respective facility agreement. The Group has maintained significant headroom against all measures throughout the financial year and is in full compliance with all loan covenants at 30 June 2019.

Leverage

For the purposes of the AIFMD, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company's exposure and its NAV and is calculated under the gross and commitment methods, in accordance with AIFMD.

The Company is required to state its maximum and actual leverage levels, calculated as prescribed by AIFMD, and as at 30 June 2019, the figures are as follows:

Accounting policy

Loans and borrowings are initially recognised as the proceeds received net of directly attributable transaction costs. Loans and borrowings are subsequently measured at amortised cost with interest charged to the income statement at the effective interest rate and shown within finance costs. Transaction costs are spread over the term of loan.

18. Share capital

The share capital comprises one class of ordinary shares. At general meetings of the Company, ordinary shareholders are entitled to one vote on a show of hands and on a poll, to one vote for every share held. There are no restrictions on the size of a shareholding or the transfer of shares, except for the UK REIT restrictions.

19. Share premium

20. Capital and reserves

Share capital

Share capital is the nominal amount of the Company's ordinary shares in issue.

Share premium

Share premium relates to amounts subscribed for share capital in excess of nominal value less associated issue costs of the subscriptions.

Share premium comprises the following cumulative amounts:

1. On 31 July 2013, the Company, by way of special resolution, cancelled the value of its share premium account, by an Order of the High Court of Justice, Chancery Division. As a result of this cancellation, £67.4 million was transferred from share premium to retained earnings in the financial period ended 30 June 2014.

Special reserve

The special reserve represents the cancelled share premium less dividends paid from this reserve.

The special reserve comprises the following cumulative amounts:

Retained earnings

Retained earnings represent the profits of the Group less dividends paid from revenue profits to date. Unrealised gains on the revaluation of investment properties contained within this reserve are not distributable until they crystallise on the sale of the investment property.

Retained earnings comprise the following cumulative amounts:

21. Capital management

The Group's capital is represented by share capital, reserves and borrowings.

The primary objective of the Group's capital management is to ensure that it remains within its quantitative banking covenants and maintains a strong credit rating. No changes were made in the objectives, policies or processes during the period.

The Group may use gearing to enhance returns over the long term. The level of gearing will be governed by careful consideration of the cost of borrowing and the Group may use hedging or otherwise seek to mitigate the risk of interest rate increases. As at the year end, the Group was operating with a loan-to-value of 26% (30 June 2018: 26%).

The debt facilties include gearing and interest cover covenants that are measured in accordance with the respective facility agreement. The Group has maintained significant headroom against all measures throughout the financial year and is in full compliance with all loan covenants at 30 June 2019.

22. Financial risk management objectives and policies

The Company's principal financial liabilities are long-term liabilities and borrowings. The main purpose of the Company's loans and borrowings is to finance the acquisition of the Company's property portfolio. The Company has trade and other receivables, trade and other payables, and cash and short-term deposits that arise directly from its operations.

The Company is exposed to market risk, interest rate risk, credit risk and liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

Market risk

Market risk is the risk that future values of investments in property and related investments will fluctuate due to changes in market prices. The total exposure at the statement of financial position date is £921,602,000 and, to manage this risk, the Group diversifies its portfolio across a number of assets.

Market risk is also the risk that the fair values of financial instruments will fluctuate because of changes in market prices. See principal risks above where market risk is discussed in more detail.

Interest rate risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates is minimal as it has taken out the majority of the debt as fixed rate bank loans of £170,000,000 with a maturity of September 2024 and £65,000,000 with a maturity of April 2029.

The Company also has a variable rate facility of up to £100,000,000, of which £17,200,000 has been drawn down.

Liquidity risk

Liquidity risk is defined as the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Exposure to liquidity risk arises because of the possibility that the Group could be required to pay its liabilities earlier than expected. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank deposits and loans.

The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments:

Part 5. Working capital

This section includes information on the Company's cash reserves and working capital management, including trade receivables and payables.

23. Cash and cash equivalents

Accounting policy

Cash and cash equivalents comprise cash at bank and short‑term deposits with banks and other financial institutions, with an initial maturity of three months or less.

24. Trade and other receivables

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its leasing activities and its financing activities, including deposits with banks and financial institutions.

Credit risk is managed by requiring tenants to pay rentals in advance. The credit quality of the tenant is assessed at the time of entering into a lease agreement. Outstanding tenants' receivables are regularly monitored. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial asset.

The following table analyses the Group's exposure to credit risk:

The retention account and cash and cash equivalents are held with Barclays Bank PLC, which holds an A-1 credit rating.

Accounting policy

Trade and other receivables are recognised initially at fair value and subsequently carried at amortised cost less provision for impairment. Where the time value of money is material, receivables are carried at amortised cost using the effective interest method. Impairment provisions are recognised based on the expected credit loss model detailed within IFRS 9.

The Group recognises a loss allowance for expected credit losses ("ECL") on trade and other receivables where necessary. The loss allowance is based on lifetime expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition. The expected credit losses on these financial assets are estimated based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date. Impaired balances are reported net, however impairment provisions are recorded within a separate provision account with the loss being recognised within administration costs within the consolidated 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.

Licence fees represent income receivable from a developer in respect of a forward-funding agreement which is deducted from the cost of investment and shown as a receivable until settled.

Lease incentives including rent-free periods and payments to tenants are allocated to the statement of comprehensive income on a straight-line basis over the lease term.

25. Payables and accrued expenses

Accounting policy

Payables and accrued expenses are initially recognised at fair value and subsequently held at amortised cost.

Deferred income is rental income received in advance during the accounting period. The income is deferred and is unwound to revenue on a straight‑line basis over the period in which it is earned.

Part 6. Staff and key management

The following pages detail wages and salaries of the Group.

26. Directors' remuneration

A summary of the Directors' emoluments, including the disclosures required by the Companies Act 2006, is set out in the Directors' remuneration report in the full Annual Report.

27. Staff costs

With the exception of the Directors, whose remuneration is shown in the Directors' remuneration report in the full Annual Report, as at 30 June 2019, the Group employed 124 (2018: 128) members of staff, with an average of 117 (2018: 112) employees during the year.

The Group operates a defined contributions pension scheme for 83 (2018: 76) of its employees. The costs for the year ended 30 June 2019 totalled £40,000 (30 June 2018: £29,000).

28. Related party transactions

Directors

The Directors (all non-executive Directors) of the Company and subsidiaries are considered to be the key management personnel of the Group. Directors' remuneration for the year totalled £186,000 (2018: £176,000) and at 30 June 2019, a balance of £nil (2018: £nil) was outstanding. Further information is given in note 26. The Directors of the Company are also the directors of all subsidiaries apart from GCP Operations Limited where the directors are representatives from the Investment Manager and Scape.

Investment Manager

From its investment management fee the Investment Manager is responsible for the payment of annual asset and facilities management fees of up to 0.25% of the Group's NAV, including fees payable to Scape.

The investment management agreement also appoints the Investment Manager as the Company's AIFM and it receives an annual fee of £25,000, subject to an annual RPI increases.

The Investment Manager also receives a fee of 0.30% of the aggregate gross proceeds from any issue of new shares in consideration for the provision of marketing and investor introduction services. The Investment Manager has appointed Highland Capital Partners Limited to assist it with the provision of such services and pays all fees due to Highland Capital Partners Limited out of the fees it receives from the Company.

During the year, the Group incurred £6,582,000 (2018: £5,698,000) in respect of investment management fees, the AIFM fee and marketing and investor introduction services. A total of £6,455,000 (2018: £5,488,000) is included within administration expenses in the consolidated income statement and £127,000 (2018: £210,000) is included within the share issue costs relating to shares issued during the year; at 30 June 2019, £1,707,000 (2018: £1,437,000) was outstanding.

Transactions with persons connected to the Investment Manager

The following transactions are disclosed for the purpose of transparency and are not required to be disclosed as related party transactions under IAS 24.

On 25 July 2018, the Group entered into a conditional contract with Scaperfield Limited to acquire and forward-fund the construction of Scape Brighton. The Company completed the acquisition of Scape Brighton on 22 May 2019. The directors of the Investment Manager and their family members, directly or indirectly, own in aggregate approximately 80% of Scaperfield Limited. Included within investment properties on the consolidated statement of financial position is an amount of £39.0 million consisting of the purchase price and further development costs paid to Scaperfield Limited. Interest of £1.1 million has been accrued on a part of the purchase price which was advanced as a loan prior to acquisition and is included within finance income in the consolidated statement of comprehensive income.

On 2 May 2019, the Company entered into a conditional forward purchase agreement with Kernal Court Limited to acquire a high specification, purpose-built, private student accommodation residence in the same locality as its Scape Surrey asset in Guildford. The directors of the Investment Manager and their family members, directly or indirectly, own in aggregate approximately 40% of Kernel Court Limited.

The Company benefits from a future contractual arrangement to acquire Scape Canalside . The directors of the Investment Manager and their family members, directly or indirectly, owned in aggregate approximately 45% of Leopard Guernsey Westway Limited, the vendor of Scape Canalside.

Each of the above assets has been or will be acquired, as appropriate, on the basis of an independent valuation and approval by the independent Board of Directors.

Part 7. Company subsidiaries

This section includes information on the subsidiaries of the Company and inter‑company transactions. All subsidiaries are consolidated from the date on which the Company obtained control of the entity.

29. Subsidiaries

The financial statements comprise the financial statements of the Company and its subsidiaries listed below.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtained control, and will continue to be consolidated until the date when such control ceases. 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, unrealised gains and losses resulting from intra-group transactions and distributions are eliminated in full. The Company has a 100% beneficial interest (whether directly or indirectly), in the issued share capital of all subsidiaries.

1. Indirect subsidiaries.

2. Registered office: Beaufort House, 51 New North Road, Exeter EX4 4EP.

3. Registered office: Hirzel House, Smith Street, St Peter Port, Guernsey GY1 2NG.

Accounting policy

Where property is acquired, via corporate acquisition or otherwise, management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business.

Where such acquisitions are not judged to be an acquisition of a business, they are not treated as business combinations. Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities of the entity based on their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred taxation arises. Otherwise, acquisitions are accounted for as business combinations.

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree.

For each business combination, the acquirer measures the non-controlling interest in the acquiree at fair value of the proportionate share of the acquiree's identifiable net assets. Acquisition costs (except for costs of issue of debt or equity) are expensed in accordance with IFRS 3 Business Combinations.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

Contingent consideration is deemed to be equity or a liability in accordance with IAS 32. If the contingent consideration is classified as equity, it is not re‑measured and its subsequent settlement shall be accounted for within equity. If the contingent consideration is classified as a liability, subsequent changes to the fair value are recognised in profit or loss.

30. Ultimate controlling party

It is the view of the Directors that there is no ultimate controlling party.

COMPANY STATEMENT OF FINANCIAL POSITION

As at 30 June 2019

The comprehensive income of the Company was £92,786,000 (2018: £61,058,000).

The financial statements were approved by the Board of Directors of GCP Student Living plc on 3 September 2019 and signed on its behalf by:

Robert Peto

Chairman

Company number: 08420243

COMPANY STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2019