Empiric Regulatory News (ESP)

17 March 2021

Empiric Student Property plc

("Empiric" or the "Company" or, together with its subsidiaries, the "Group")

FULL YEAR RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER 2020

Despite the pandemic disruption, 2020 was still a year of delivery and Empiric is well placed to drive future performance and improve returns for shareholders

Empiric Student Property plc (ticker: ESP), the owner and operator of premium student accommodation across the UK, today reports its annual results for the 12 months ended 31 December 2020.

Duncan Garrood, Chief Executive Officer of Empiric Student Property plc, said:

"As we entered 2020, we were making good progress against our medium-term objectives, creating an in-house operating platform, growing revenue, reducing costs, and increasing our operating margin and dividend cover. The pandemic clearly brought challenges, but we reacted quickly to support our customers and brand reputation.

We recognise that these are particularly challenging times for all students, and we remain committed to supporting and doing the right thing by each student on a case-by-case basis. Protecting and supporting our customers, colleagues and other stakeholders whilst underpinning the value of our assets, preserving sufficient liquidity, and protecting the long-term value of the Group for shareholders will continue to guide our actions.

The Group has remained resilient and is well placed to benefit from opportunities when the market recovers, and our underlying business outlook is positive with customer demand set to grow. Our Hello Student® brand proposition, especially in a COVID-19 affected world, gives us a competitive advantage with predominately self-contained studio apartments, and a friendly supportive service focused on student well-being. There is still more to be done to maximise the benefits of our operating model and we remain intensely focused on delivering further value for all our stakeholders.

On 31 March 2020, due to uncertainty created by COVID-19, the Group announced a number of actions to strengthen further its cash position. This included the Board's decision, whilst remaining mindful of its REIT tax obligations, to suspend dividend distributions until market conditions stabilised. The Board recognises the importance of the dividend to shareholders and will seek to resume dividends at an appropriate level as soon as there is sufficient clarity of outlook."

Financial performance

· Revenue in 2020 was £59.4 million, down 16% from £70.9 million in 2019. The decrease was due to three key factors:

o £6.5 million of refunds were provided to students for the period from April to September 2020, as we released students from their obligations on a case-by-case basis. We consider this action also supports shareholders as this helps protect our brand.

o Expected summer lets in 2020 of around £700,000 were lost due to the pandemic.

o At the start of the 2020/21 academic year, we reported revenue occupancy rates of 70%, compared to 94% in 2019/20. This meant that the final four months of the 2020 financial year had significantly reduced occupancy compared to 2019.

o The underlying performance was robust, and our like for like rental growth would have been 3.1%, excluding the COVID-19 refunds for academic year 2019/20.

o At this point, for the current academic year 2020/21 like for like rental growth is 1.8%.

· The business remained cash generative, with Adjusted Earnings of £13.9 million (2019: £26.7 million).

· Adjusted EPS is the most relevant measure of earnings when assessing dividend distributions. It decreased by 48% to 2.30 pence (2019: 4.43 pence), showing that the underlying operating business continues to generate cash despite the impact of the pandemic.

· Property costs were £22.7 million, down 3% both in total and on a per bed basis, as we cut discretionary costs and delayed expenditure where appropriate and continued to make efficiency improvements while also continuing to see the benefit of the operational transformation.

· Due to the COVID-19 pandemic reducing our occupancy levels, council tax has been suffered on our empty rooms which has reduced the cost savings we have made. If we exclude the impact of this increased council tax bill during the year, our average cost per bed fell by over 6%.

· The impact on revenue and property costs above produced a gross margin for the year of 61.9% (2019: 67.1%).

· Administration expenses were £9.8 million in 2020, lower than our initial guidance of £10 million (2019: £9.1 million).

· The net loss from a change in the fair value of investment properties during the year was £37.6 million (2019: £29.2 million gain), due to the following components.

o At our half year in August 2020, we reported a £42 million deduction in the portfolio valuation due to CBRE's assumption of 50% occupancy for the following 15 months. At the year-end, CBRE have revised this assumption to 60% occupancy for the following nine months, reducing the £42 million deduction to £21 million for the full year.

o £9 million of the decrease is in the valuation of operational assets over the year for two reasons:

§ There has been a polarisation in the valuation of prime vs. secondary assets which has resulted in a slight softening of the portfolio's Net Initial Yield from 5.55% to 5.61%.

§ A reduction in Net Operating Income projections on secondary assets.

o £6 million of the decrease is on the value of our commercial portfolio, reflecting yields moving out.

o £2 million of the decrease is on our development assets, reflecting extended timetables on our development assets, which were put on hold for a period due to the pandemic.

· The overall result is a loss before tax of £24.0 million (2019: profit £54.8 million). No corporation tax was charged, as the Group fulfilled all of its obligations as a UK Real Estate Investment Trust ("REIT").

· Basic loss per share ("EPS") was therefore (3.97) pence and also (3.97) pence on a diluted basis (2019: earnings 9.08 pence and 9.07 pence diluted).

· Total dividends of 1.25 pence per share for 2020 (2019: 5.0 pence per share).

· At 31 December 2020, the portfolio was valued at £1,005 million, a decrease of 2% from prior year (31 December 2019: £1,029 million), due to the fall in fair value of investment properties detailed above, and £13 million spent on capital expenditure and developments during the year.

· As at 31 December 2020, we owned or were committed to owning 95 assets, representing 9,396 beds (31 December 2019: 95 assets, 9,401 beds). Of these, 91 were revenue-generating assets, with 8,887 beds (31 December 2019: 93 assets, with 8,830 beds).

· The EPRA Net Tangible Asset value ("NTA") per share as at 31 December 2020 was 105.00 pence, (31 December 2019: 110.21 pence, prior to adjusting for the 2019 fourth quarter dividend of 1.25 pence per share). The NTA is net of dividends paid during the year.

· At the year end, we had committed investment debt facilities of £420 million, of which £390 million (31 December 2019: £355 million) had been drawn down, resulting in an LTV of 35.4%* (31 December 2019: 32.9%), in line with our long-term target of 35% and below our stated maximum of 40%. The aggregate cost of our investment debt is 2.9%, with a weighted average term to maturity of 5.9 years at 31 December 2020. We fully complied with all of our banking covenants during the period and continue to do so.

· We have no re-financing requirements until November 2022 and have taken measures to preserve liquidity. The relationship with our lending banks is strong and we have also agreed waivers or an easing of covenant requirements on all of our debt, leaving us well placed to trade through until the market recovers and then maximise the value from our business to our shareholders and wider stakeholders.

Operational performance

· We were in good shape as we began 2020. We had completed the majority of our insourcing journey and were seeing the benefits through improved financial performance from our more robust operating model.

· Our underlying business (excluding the valuation impact on our portfolio) continued to trade profitably during 2020.

· 2020 was, however, a challenging year due to the COVID-19 pandemic, but the changes we have implemented over the past few years, and in this year, have ensured a more resilient business model.

o As a responsible owner and operator of predominantly direct-let, premium UK student accommodation, we implemented actions to ensure that we operated safely throughout the pandemic, continuing to provide COVID-19 secure homes, critical services, and enhanced programmes to ensure the safety and well-being of our students and colleagues.

o We experienced physical occupancy levels of above 50% during each of the three national lockdowns.

o During the year, we conducted a comprehensive review of the operational team structure, and as a result moved to a more optimal structure, which enables us to improve customer service delivery.

o In November 2020, we successfully launched our new revenue management system and all bookings for the academic year 2021/22 are now managed in-house.

· The COVID-19 pandemic has affected our ability to optimise the impact of our operational changes, in particular our asset disposal programme, and our ability to deliver a stable dividend to our shareholders.

· Whilst uncertainty remains, we are confident the changes made to our operations and the commitment of our staff will enable us to manage successfully through the COVID-19 challenges and put us in a strong position to drive sustainable shareholder value in the future.

Post Period End

· The Group supported its students throughout 2020 and remains committed to supporting students who have been further impacted by the UK Government's latest COVID-19 lockdown and associated restrictions. We continue to look favourably upon requests on a case-by-case basis from students seeking to amend their rent and lease obligations for the current semester if they are unable to occupy their rooms at this time. The rating we achieved in the recent National Student Housing Survey was significantly ahead of the average for the sector, which indicates that our students have appreciated this flexibility and unprecedented level of support.

· We also remain committed to supporting residents who currently occupy their rooms at the Group's properties. Our accommodation is a person's home and often residents do not have alternative accommodation. This is particularly important for international students who comprise around 60% of Hello Student's residents for the current academic year 2020/21. All our buildings remain open, staffed, maintained, and operating strictly in line with Government guidance and we are ensuring that our residents, colleagues, business partners and the communities in which we operate remain safe and secure, and their well-being remains a key priority.

· Following further progress with the late checking-in of students and adjusting for the support we have provided to students since January 2021 as a result of the current national lockdown, revenue occupancy remains at 65% currently, which includes 2% of students still to check-in now or at a later date in the academic year. The collection of rents remains in line with our usual collection profile and the physical occupancy level in our buildings is currently approximately 57% of total operational rooms.

· Current bookings for the 21/22 academic year are 20%, significantly slower than in pre Covid-19 cycles, although we have started to see an uplift in bookings since the Government's recent announcement of the roadmap to exit lockdown.

· Universities are very late in advising places for the 2021/22 academic year and we expect the sales cycle to be significantly back ended. We welcome the vaccination programme, and this gives us cautious optimism about a return to increasingly normal levels of occupancy. UCAS applications for the 2021/22 academic year are also encouraging, with the non-EU international market up by 17% overall, and within this, Chinese applications are up by 21%. UK applications are also showing strong demand growth reflecting an increase of 11% so far.

· The Group recently completed on the sale of three properties in Portsmouth for £7.4 million, above the latest book value as at 31 December 2020.

Notes

* Total drawn borrowings, net of cash and fixed term deposits, as a percentage of Gross Asset Value.

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

The Company's LEI is 213800FPF38IBPRFPU87.

Further information on Empiric can be found on the Company's website at www.empiric.co.uk.

Notes:

Empiric Student Property plc is a leading provider and operator of modern, predominantly direct-let, premium student accommodation located in high-demand university towns and cities across the UK. Investing in both operating and development assets, Empiric is a fully integrated operational student property business focused on premium studio-led accommodation managed through its Hello Student® operating platform, that is attractive to affluent growing student segments.

The Company, an internally managed real estate investment trust ("REIT") incorporated in England and Wales, listed on the premium listing segment of the Official List of the Financial Conduct Authority and was admitted to trading on the main market for listed securities of the London Stock Exchange in June 2014.

Results Presentation

The Company presentation for investors and analysts will take place via a webcast and conference call at 8.30am on the day.

This Company presentation is available from 7am today via the Company website:

http://www.empiric.co.uk/investor-information/company-documents 

For those who wish to access the live webcast, please register here:

https://www.investis-live.com/empiric/603e5228dd22a114007da96d/wlww

For those who wish to access the live conference call, please contact Maitland/AMO at empiric-maitland@maitland.co.uk or by telephone on +44 (0) 20 7379 5151.

The recording of the webcast/conference call will also be made available later in the day via the Company website: http://www.empiric.co.uk/investor-information/company-documents

Annual Report

Hard copies of the Annual Report and Accounts will be sent to shareholders, along with the proxy form and notice for Annual General Meeting to be held on 25 May 2021. These documents will also be made available on the Company's website at www.empiric.co.uk. In accordance with Listing Rule 9.6.1, copies of these documents will be submitted to the National Storage Mechanism and will be available for viewing shortly at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

STRATEGIC REPORT

Chairman's Statement

Sustainable long term growth delivery

"Our people have shown tireless commitment and skill in addressing the challenges posed by the COVID-19 pandemic. We kept all of our properties open and appropriately staffed, whilst continuing to serve our customers in a safe, secure environment. We remain committed to supporting and doing the right thing by each student on a case-by-case basis."

As we entered 2020 we were making good progress against our medium-term objectives; creating an in-house operating platform, growing revenue, reducing costs, and increasing our operating margin and dividend cover.

However, since March 2020, we have, like many others, faced challenges on an unprecedented scale as a result of the COVID-19 pandemic which has caused significant disruption to our business and had a substantial impact on our financial performance. Nevertheless, we remain well positioned to continue to respond effectively to the challenge today and into the future.

Our People

Our continued progress is only possible because of the dedication and ability of all of our people. I would like to thank everyone in our business for their contribution over the past year.

The views of our people are extremely important because they are at the heart of our customer proposition and core to us living our brand. We carried out two colleague engagement surveys in 2020. Response rates were over 70% and engagement scores were in excess of 80%. Comments provided by survey respondents helped the business and Board to understand what needs to be done to make Empiric a great place to work.

Our Colleague Forum, formed of colleagues across the Group, met ten times during the year to discuss a variety of topics.

Health and Safety

Having insourced our FM activities, we now have complete control of our health and safety environment. We continue to enhance our monitoring and make our buildings as safe as possible.

Environmental, Social and Governance ("ESG")

Having spent the past two and a half years restructuring the business, insourcing, and building a responsible and effective operating platform, we are now in a position to reflect on: how we perform as stewards of the environment, how we meet our social obligations to employees, suppliers, customers and the communities in which we operate to deliver a more resilient, sustainable and responsible business and create further value to our stakeholders.

At the core of our proposition is a commitment to create a sustainable, positive, environmental, social and economic legacy for our shareholders, customers, colleagues and wider stakeholders.

During 2020 we created a Board-level ESG committee, which will meet quarterly, tasked with providing a roadmap to deliver a significant step change in our approach to ESG which is a strategic priority for the next 12 months. This will further help us to confirm and disclose the actual and potential impacts of ESG-related risks and opportunities that are material to our business, strategy, and financial planning.

Board Appointments and Succession

On 18 March 2020 we announced that Tim Attlee would be stepping down from his role as Chief Executive Officer of the Company at the end of June 2020. Tim co-founded and helped float Empiric in 2014. As the Company's Chief Investment Officer, Tim led the Company's asset acquisition and development programme.

On 26 June, after a rigorous selection process, we appointed Duncan Garrood as our new Chief Executive. Duncan is an experienced and proven business leader with excellent business development and operational capabilities in PLCs and large privately- owned businesses in the UK and overseas. He has strong operational, sales and marketing skills, and extensive experience in commercial businesses with significant real estate assets. Duncan joined Empiric on 28 September 2020.

The Board effectiveness review concluded that the Board and its Committees continued to operate effectively throughout 2020.

Dividends

On 17 February 2020, the Board declared a dividend of 1.25 pence per ordinary share in respect of the quarter ended 31 December 2019, which was paid on 20 March 2020.

On 31 March 2020, due to uncertainty created by COVID -19, the Group announced a number of actions to strengthen further its cash position. This included the Board's decision, whilst remaining mindful of its REIT tax obligations, to suspend all future dividend distributions until market conditions stabilised.

The Board is mindful of the importance of the dividend to many shareholders and will seek to resume dividends at an appropriate level as soon as there is sufficient clarity of outlook. For this, we would need to see more commitment in the approach of universities to face-to-face teaching and a significant improvement in occupation and rental income.

AGM

Our 2020 AGM will be held on 25 May 2021. We are monitoring developments in UK regulations in relation to how AGMs may be held during this period. Further details about the AGM will be provided in the AGM Notice.

Looking Forward

The operational transformation of the business is largely complete, and we are now embedding and driving sustainable performance from our new operating model. There is still more to be done to deliver the performance we are capable of and we remain focused intensely on delivering for all our stakeholders.

At the time of writing, we are facing the challenges being posed by the COVID-19 pandemic. We remain vigilant and are closely monitoring the situation and will provide updates as appropriate. Protecting and supporting our customers, colleagues and other stakeholders whilst underpinning the value of our assets for shareholders will continue to guide our actions over the coming months.

MARK PAIN

Non-Executive Chairman

16 March 2021

Handling the COVID-19 crisis

Our response to the COVID-19 pandemic has been underpinned by three key priorities: keeping our people, customers and communities safe, maintaining critical services for our customers while supporting their wellbeing and protecting value for our shareholders.

Our Senior Leadership Team has shown tireless commitment and skill in responsibly addressing the challenges posed by the COVID-19 pandemic. We kept all of our properties open, COVID-19 secure and appropriately staffed, serving our customers in a safe, secure environment.

Colleague Engagement Score83%(2019: 75%)

At a Glance

Our top priority remains the health, safety and welfare of our residents, employees and wider stakeholders. We recognise that these are particularly challenging times for all students, and we remain committed to supporting and doing the right thing by each student on a case-by-case basis, whilst also protecting the long-term value of the Group

Empiric offers students places where they want to live. Our properties are some of the best in the market and our people get to know our students well, so we provide a more responsible and responsive service. This approach - combined with the smaller size and individual character of our buildings - helps to foster a strong sense of community, encouraging students to stay with us in future years. In short, we offer our students homes, not halls.

Beds contracted by region

Revenue Generating Assets 91 (2019 - 92)

Group Key Stats

324 Employees

6 Years in operation

86% of portfolio by value considered prime real estate or better

Responding to COVID-19

Keeping our People, Customers and Communities Safe

- Reporting tool to monitor the safety of our people and customers

- Regular communication

- Updated HR policies

- Strong IT infrastructure which easily facilitated working-from-home

Maintaining Critical Services for our Customers

- PPE, safety infrastructure and new procedures introduced

- Refund programme launched

- Virtual tours

- New pledges, such as the "Book with confidence" scheme

Protecting and Driving Value for Shareholders

- Non-essential cost cutting

- Reducing capital commitments

- Liquidity improvements

- Maintaining close relationships with our banks

- Detailed scenario planning and modelling

COVID-19 Impact timeline 2020

February

- Audit Committee and Board discussed COVID-19 as a risk to the business and the adequacy of disclosures in the Annual Report.

March

- Announced various cost saving and capital preservation measures across the business.

- Revised procedures to ensure that social distancing is maintained.

- Announced our refund programme.

April

- Commencement of furlough for c100 colleagues; the Board took the decision to fund this directly and not take government support.

May

- We commenced virtual viewings, allowing prospective students to see our offering remotely.

June

- All furloughed colleagues returned to work in COVID-19 secure locations around the country.

July

- We raised an additional £20 million of debt on our RCF facility with Lloyds Bank to ensure we had sufficient working capital to weather even our worst case scenario planning.

August

- We achieved significant cost savings, due to the high number of vacant rooms allowing our in-house staff to clean and turn around rooms for the upcoming academic year rather than using external contractors.

September

- Check-ins for the new academic year began, students booked slots for paperless check ins, which were done so we limited the number of touch points.

October

- Due to the staggered return of students, our check-in period spread well into October.

November

- Launch of Hello Student® Live Festival, which was a series of live events and activities ranging from yoga to baking tutorials.

December

- We launched our student wellbeing helpline with our insurance provider.

The resilience in our in-house operational model

The pandemic has proved that the decision to turn Hello Student® into a responsible in-house operational model was the correct one. The agility which we had to be able to change processes, look after staff and increase safety would not have been possible had we still been using third-party operators to run our buildings. This resilience will continue to stand us in good stead as we go into a challenging 2021.

Differentiated customer proposition well suited to COVID-19 environment

The average size of our buildings is circa 100 beds, and in 83% of our rooms people can self-isolate effectively. This smaller size of building with self-contained studios means that our buildings are more aligned with a socially distanced world and there is much less footfall going through them compared to some other larger buildings.

Protecting and creating long term sustainable value

Throughout the pandemic there were a number of challenging decisions that had to be made. When making decisions the impact on our stakeholders was carefully considered in the short and long term at each juncture. We always seek to act in the best interests of our stakeholders.

"As we weather the challenges that have arisen as a result of COVID-19, we continue to trade profitably and remain very confident about our long-term future, to deliver enhanced sustainable value for all of our stakeholders."

Our Market

Attractive, stable and compelling

Growing Maturity

Despite being considered an alternative investment, PBSA is cementing itself as a mature real estate asset class, with the potential to generate significant income and be resilient even in periods of economic downturn. As reported by CBRE's 2020 Student Accommodation Index, PBSA was the best performing asset class in the year to September 2020. Looking forward, Savills's five-year forecast released in January 2021 had PBSA as the third best performing sector.

These strong returns are also associated with lower volatility, meaning the sector has produced risk-adjusted returns roughly three times as high as the mainstream market. Like all sectors, PBSA has been affected by the COVID -19 pandemic with capital values falling 0.4% in the year to September 2020, its only fall in the past decade. However, PBSA saw one of the smallest decline in capital values when compared with other sectors and still saw rental growth of 1.6% in the year to September 2020, the fifth consecutive year of outperformance against the mainstream market. Only Industrial saw higher rental growth in 2020 (at 2.0%) while both Office and Retail saw rental values fall (2.2% and 8.1% respectively).

CBRE's 2020 Index also highlighted an increasingly clear polarisation in the PBSA market with London and Super Prime Regional assets outperforming Prime Regional and Secondary assets. In the year to September 2020, assets in London and Super Prime Regional locations experienced positive capital growth, while assets in Secondary markets saw capital values fall 9.9%. This is also mirrored with rental growth where in the same period, Super Prime markets saw a 2.8% rise in net rental growth and Prime Regional saw a 1.7% rental growth, whereas Secondary markets saw net rents fall 2.3%. The Empiric portfolio is well aligned to the high-growth locations with 86% by value classified as either London, Super Prime Regional or Prime Regional.

Positive Student Demographics

In UCAS's End of Cycle Report 2020, positive demand statistics for the 2020 admissions cycle were reported. The data indicates that 728,780 students applied to higher education ("HE") providers in the UK in 2020, up by 22,345 students (+3.2%) on 2019. Applications from non-EU domiciled students rose 12.2% to 98,660, significantly offsetting the small fall in applications from EU domiciled students.

Overall student acceptances reflected stronger growth with 29,235 extra students (+5.4%) which included EU students increasing by 1.7% and non-EU domiciled students by 7,615 (+16.9%), highlighting the continued appeal of HE providers in the UK for overseas students, despite short-term restrictions on international mobility. Notably, UCAS report 24% and 35% year on year increases in applicants from China and India respectively with also significant demand from the USA.

The UK's International Education Strategy continues to secure the country's position in the global HE sector and support graduates with a generous post-study work visa system.

Student Demographics

UCAS End of Cycle Report 2020

Alongside positive international demand, domestic demand for HE continues to grow. In the coming decade, growth in the full time (FT) student population is forecast to be driven by a higher participation rate and the absolute growth of the 18-year- old cohort in the UK which has been in decline over the past 5 years. UCAS reports that the proportion of UK domiciled 18-year-olds accepted by UK providers increased from 34.1% in 2019 to 37% in 2020. The research also projects that the population of 18 -year-olds will rise from around 710,000 in 2020 to 850,000 in 2026.

In 2020, demand was also boosted by centre assessed grades, which resulted in a greater number of school leavers with the required grades needed for acceptance into higher ranked universities. Higher ranked universities have benefited the most, with applications rising 31% since the cap on student numbers was lifted in 2012. Conversely, applications to medium ranked providers only rose by 4% and lower ranked universities fell by 15% in an ongoing trend. In HESA's latest data release, 384,030 people were reported to have enrolled on a postgraduate course in AY 2019/20, up 10% on the previous year. This rise in postgraduate student numbers is expected to continue, repeating previous counter-cyclical behaviour in periods of economic downturn. Following the global financial crisis, full time postgraduates grew from 161,015 in 2007 to 207,595 in 2010.

Constrained Supply

The long-term fundamentals of PBSA including the demand supply imbalance remain compelling particularly when focusing on high-quality assets in desirable locations. According to research combining HESA 2018/19 data and PBSA supply for 2020/21, only 57% of demand for PBSA is currently being met, 65% including consented pipeline. In 2019, JLL reported that the pipeline had declined by 25% in the three previous years, a trend which appears to have been exacerbated by COVID-19 restrictions, which paused construction on many sites leading to delayed completions for the year to September 2020. StuRents report that in Q3 2020, developers applied for consents for fewer than 3,000 beds, with 3,395 being approved, showing falls of 73% and 44% respectively on Q3 2019. Comparatively, in 2016 planning applications peaked at 50,000 beds. This decline has been in part due to the rise of alternative living sectors such as PRS refocusing developer attention, the growing difficulty in gaining suitable PBSA consents in increasing restrictive planning environments, along with several Secondary markets becoming oversupplied.

The Flight to Quality

Whilst some property sectors experienced a virtual shutdown in transactions in 2020, largely due to the impacts of COVID-19 and Brexit-related uncertainty, PBSA remained comparatively resilient. The global investment appetite for UK PBSA was very strong at the start of 2020 with portfolio and M&A activity continuing to be a key feature of the market, following significant portfolio acquisitions in 2019. In Q1, the sector's attention focused on Blackstone's purchase of the iQ student portfolio for £4.66 billion, the largest ever private real estate transaction in the UK. With several well-funded prospective buyers willing to pay premium pricing for the 32,000-bed portfolio, this transaction affirmed that PBSA was more attractive than ever for investors in Q1 2020. Following a reduced level of activity during the first lockdown, the market has been gathering pace with a further £1 billion traded since March 2020. With the iQ transaction and the recovering activity in H2 2020, the year saw the highest transaction volume ever for UK PBSA at £6 billion.

To reflect the short-term income uncertainty caused by the pandemic and the long-term strength of the sector, rental guarantees from vendors for the 2020/21 academic year have been widely used to support transactions. These have facilitated the market by protecting the purchasers' short term income position. The flight to quality continued in 2020, with investors focusing on high-quality assets in markets with strong universities and compelling supply and demand characteristics, reflected by transactions in Super Prime and Prime Regional locations. Despite COVID-19, July 2020 saw KWAP acquire 700 operational beds in Leeds and Sheffield for £89 million. This purchase of Symons House (351 beds) and Crown House (335 beds) reflected £127,000 per bed and a yield of 5.50%. In August 2020, GSA & Harrison Street added further stock to a growing portfolio with the acquisition of Print Hall (267 beds) and Unity Street (217 beds) in Bristol, for £58.2 million, reflecting £120,247 per bed and yield of 4.90%.

The ever maturing and polarising nature of the PBSA market has been reflected in yield compression in the best -quality segments. CBRE report that between Q4 2019 and Q4 2020, best-in-class direct let Super Prime Regional and Central London yields compressed by 25 basis points and 10 basis points respectively, while Prime Regional yields stabilised and further softening in Secondary Regional locations was experienced.

In the post-COVID-19 landscape, investors are expected to be drawn to sectors such as PBSA, which exhibit stable income returns and counter-cyclical behaviour. Unlike other sectors facing structural challenges, the long-term demand for HE and the undersupply of high-quality PBSA beds will underpin investment demand in the coming years.

Increase in higher ranked university applications in 2020+31%

Market Yields - Best in Class, Direct Let

Source: CBRE Student Sector Investment Yields.

Business Model

Our business model combines an attractive portfolio of high-quality student homes with an efficient and responsible in-house operational platform. Together, our operations and assets enable us to create value for all our stakeholders. This allows us to generate attractive returns for our shareholders and build a strong platform for long-term growth.

Key Strengths

Buildings

We have a diversified and attractive portfolio of properties that offer high-quality and safe accommodation to our customers.

Our People

Our people are key to our customer journey.

Our passionate and committed colleagues allow us to deliver a high level of service to our customers while maintaining cost control.

Specialist Knowledge

We have the knowledge to develop, acquire and operate high quality, sustainable student accommodation assets.

Brand

The Hello Student® brand has continued to grow, becoming a leading brand and giving us a clear identity in the student property market.

Financing

We finance our business through a combination of shareholder equity and debt facilities. We have strong liquidity and good relationships with our lenders.

Technology

We continue to leverage technology to augment business processes that drive efficiencies operationally, financially and commercially whilst also improving our user and customer experiences.

How We Add Value

Our Culture

Our people and customers are our key focus and we are here to deliver excellent seamless service and financial returns through working together.

Select Locations/Specifications

We are selective about where we invest, with a focus on the towns and cities that are home to the most successful universities and where student numbers are rising faster than average. We select sites based on their compatibility with the types of accommodation we provide and their proximity to universities and amenities.

Our buildings are on average around 100 beds, which helps to foster a more homely, collegiate feeling to living.

Develop/Buy

Developing assets allows us to acquire them at a greater yield on cost than buying standing assets. Forward-funded projects are typically less complex than direct developments and have a lower risk profile, as the planning, construction and time risk lies with the third-party developer. These projects also have lower staffing requirements and benefit from a forward -funding coupon charged to the developer. However, direct development delivers higher-yielding assets than forward funding. We have a strong proven track record in direct development.

We also buy standing assets when a specific opportunity arises which complements our portfolio.

Operate

Our assets are marketed through our Hello Student® platform. This platform gives us a clearly identifiable brand which helps to offer our customers a range of options. Encouraging our people to follow our values helps to increase ownership and pride in our homes. This ensures that customers have the best experience possible, helping to drive occupancy, rents and profit.

We have a student welfare programme in place to ensure that we provide the support that our customers need during their stay with us.

Reinvest

We intend to hold our buildings for the long term. However, we may sell an asset if we see an opportunity to create more value for shareholders by reinvesting the proceeds. We therefore continually review the portfolio to ensure our capital is effectively allocated.

Outputs for our Stakeholders

Customers

Our customers benefit from having a great home to live in during their studies, at a rent that represents value for money.

Customer Satisfaction7.6 out of 10

Our People

Our people have the opportunity to develop their careers in an exciting and growing sector.

Colleague Engagement Score83%

Shareholders

Shareholders benefit from total returns which are underpinned by income. The positive long term returns have been impacted by COVID-19.

Total Return for 2020(3.6)%

Communities

The communities around our assets benefit from increased employment, reduced pressure on local housing stock, and from the improvements we fund to social infrastructure in the surrounding area.

Amount of Government Support Taken£nil

Our Strategy

Making progress against our strategic objectives in spite of COVID-19.

KPI Links

A. Rebooker Rate

B. Customer Happiness

C. Revenue Occupancy

D. Safety - Number of Accidents

E. Colleague Engagement

F. Gross Margin

G. Adjusted Earnings per Share

H. Dividend Cover

I. Net Asset Value per Share

J. Total Return

Risks Links

External Risks

E1. Student Demand Risk

E2. Competition Risk

E3. Property Market Risk

E4. Regulatory Risk

E5. Funding Risk

E6. Revenue Risk

Internal Risks

I1. Health and Safety Risk

I2. Cyber Security Risk

I3. People Risk

Chief Executive Officer's Review

Ensuring our customers safety

"We have continued to progress with our strategy through investment in our people, customers and assets."

We recognise that these are particularly challenging times for all students, and we remain committed to supporting and doing the right thing by each student on a case-by-case basis, whilst also protecting the long-term value of the Group.

2020 has brought significant challenges to the business, but the Group has remained resilient and is well placed to benefit from opportunities when the market recovers.

Our top priority has been the safety and wellbeing of our colleagues, customers, communities and stakeholders, and we have devoted significant resources to ensure this is the case.

Despite these challenges, we have progressed our strategy through investment in our people, customers and assets.

Supporting our Customers

In December 2020, we launched a Student Assistance Programme in partnership with Endsleigh and Health Assured. This scheme provides a suite of wellbeing services for our customers, offering them support to deal with physical and mental health issues or financial difficulties. The provision of this scheme has also supported some universities that have faced challenges in providing sufficient wellbeing support to their students throughout 2020 and this will not just be in place during COVID-19 times but a permanent enhancement of our student wellbeing support.

Developing our People

In January 2020, we appointed a Training & Development Manager to design and deliver programmes to our people for their personal and professional growth.

We overhauled our e-learning platform and provided support for new learning opportunities to various roles within the business. This change in emphasis from classroom to online webinar delivery has been efficient, and we have continued to focus on key sessions such as sales and customer services to increase the knowledge and skills of our operational teams.

Our aims in 2021 include an increased focus on mandatory training with a new measure to track compliance levels and ensure high standards are being achieved. For example, we will deliver our plans to enhance the variety of skills of colleagues within our maintenance teams. This will allow for cost efficiencies as a broader range of repairs and maintenance works can be conducted in -house, and will also develop the network of our regional teams so they are able to support each other across the country.

We will also be optimising the new management structure across our operational teams so that local training support and coaching is integrated into our ways of working and culture.

During 2020, we recognised the contribution that our front-line operational teams have made to our customers and the business. From 1 January 2021, we will increase pay to align with the Real Living Wage for 2021 as our minimum, and we are committed to pay a fair wage for all core roles. We have recently gained accreditation from the Real Living Wage Foundation and have undertaken to uphold those standards for years to come.

In May, we undertook the Group's third colleague engagement survey which achieved a response rate of 72% and an overall colleague engagement score of 83% against the UK all-sector average of 68% and previous year's result of 69%. These results were delivered despite the current pandemic and help to give us a better understanding of what matters to our people and to ensure we deliver improvements.

Towards the end of 2020, we conducted a shorter 'pulse' colleague engagement survey which had a 73% response rate and 81% overall colleague engagement score. The Senior Leadership Team have worked with the Colleague Forum to devise an action plan in response to their feedback.

We have taken a number of actions as a result of the feedback we received from these surveys, for example launching the Student Assistance programme detailed above, pledging to review our values in 2021 and launching monthly townhalls to bring all of our people together.

Developments Delivered in 2020

Future Development Pipeline

"For the first time this year, our electricity portfolio is run off 100% renewable energy."

As part of an increasing focus on our ESG agenda, we have established an ESG Committee at board level which will work with the Senior Leadership Team to define the strategy, identify key topics, and implement initiatives and policies. We will be publishing the Terms of Reference for the ESG Committee on our website shortly.

Our Environmental Duty

As part of our ESG responsibility, we have launched a Sustainability working group which will work with the Board and Senior Leadership Team on projects that improve the sustainability of our operational business and ways in which we can be more environmentally supportive.

For the first time this year, our electricity portfolio is run off 100% renewable energy. This means the electricity we use is generated in renewable ways ranging from solar and wind turbines to biomass plants.

Our team is also working with our third-party energy provider, Amber Energy, to identify assets where energy usage is currently higher than our target and methods by which we can reduce this.

Our Brand

The Hello Student® brand has continued to evolve throughout 2020 as a result of a variety of activities, including the goodwill generated through our support for both our customers and universities during COVID-19.

Hello Student® has strong brand awareness and a positive reputation, but we have work to do in making it more prominent and visible and to reflect more closely the priorities of our wider stakeholders. Through our portfolio management programme, we will make the brand execution tighter, more consistent, and powered by researched customer insight. A programme of refining the Hello Student® brand proposition in depth, and particularly in specifying our service model, is underway and will help us to grow Hello Student® to a leadership position in our sector.

We continue to invest in our online and social media marketing platforms to reach both domestic and international customers efficiently. We have also used direct customer feedback and experiences to provide a more personal touch to our marketing strategies. The opportunity our new booking platform brings us, plus a refreshment of our website, will lead to a new digital experience for prospective customers.

Our aim is to build further on the strength of our brand within our properties and ensure the Hello Student® name becomes more prominent within the student accommodation sector.

Our Portfolio

As at 31 December 2020, we owned or were committed to owning 95 assets, representing 9,396 beds (31 December 2019: 95 assets, 9,401 beds). Of these, 91 were revenue-generating assets, with 8,887 beds (31 December 2019: 92 assets, with 8,830 beds).

We have undertaken a strategic review of our portfolio, with the aim of rationalising it to maximise the expertise, positive reputation, and commercial power of the Hello Student® brand. We plan to dispose of non core assets, and this gives us an opportunity for capital recycling, which we will undertake whilst focusing on the best interests of shareholders. This includes consideration of investment in refurbishments or reconfigurations, as we aim to bring the portfolio to a consistently high standard.

Portfolio Safety

Safety remains our top priority as a business and to that end we ensure that our buildings comply with not only all relevant regulations but also with best practice within the industry. We are in the process of updating our fire risk and mitigation strategies throughout our estate, and where that is appropriate it includes undertaking detailed External Wall Surveys. Such surveys will ensure any residual cladding or firebreak risks are clearly identified and are being undertaken by highly experienced professional teams and where necessary qualified fire experts. Should remedial actions be identified as necessary, these will be addressed.

Independent Valuation

Each property in our portfolio has been independently valued by CBRE, in accordance with the Royal Institution of Chartered Surveyors ("RICS") Valuation - Professional Standards January 2014 (the "Red Book"). At 31 December 2020, the portfolio was valued at £1,005 million, a decrease of 2% from prior year (31 December 2019: £1,029 million). See valuation bridge to the right.

Average valuation yield (before COVID-19 deductions)5.61%

(31 December 2019: 5.55%)

Number of beds added through completion of developments284

Across two development projects

Developments and Redevelopments

On 30 June 2020, we completed a forward-funded, 52-bed development in Leicester. In December we then completed the major refurbishment works of Emily Davies in Southampton, adding 232 beds. We also recommenced the direct development of St Mary's in Bristol which is expected to be completed in time to operate for the 2021/22 academic year.

Due to COVID-19 we have paused two projects, a development in Canterbury called Franciscans and a refurbishment in Edinburgh, called Southbridge. We are reviewing whether to proceed with these projects on a monthly basis, clearly predicated by our prudent approach to cash management during the pandemic.

In December 2020 we secured planning permission for the redevelopment of Francis Gardner Apartments in London. The new seven-storey development will provide 18 new bedrooms with a mix of two, three and four-bed flats with shared kitchens and living facilities.

Strategy in Action

Customers

Prioritising safety and welfare

We are committed to supporting and doing the right thing by each student on a case-by-case basis, whilst also protecting the long-term value of the Group.

We have strived to ensure that all of our customers have felt safe during these difficult times. These were focused on ensuring our customers were safe and their welfare was monitored. Our smaller, more flexible buildings have adapted well to many of the challenges posted by the pandemic.

During May and June 2020 our buildings remained at a level of around 55% occupancy.

Strategy in Action

People and Operations

Agile, effective and responsive

In-sourcing programme progress

We have found significant benefits from the in-sourcing programme completed to date, including having the organizational agility to respond quickly and effectively to the impact of COVID-19. We have found that our people acted amazingly well and were incredibly responsive to the challenges that we faced.

We have also restructured our operational staffing model. This will help to ensure that we remain agile and effective and even more resilient.

Back office revenue management system will deliver cost saving of £1.5million per year from Q4 2021.

Key Performance Indicators

Monitoring our performance

Non-Financial KPIs

Our key performance indicators ("KPIs") are central to how we run our business and allow us to drive the performance of the business for our shareholders. Due to the impact of COVID-19 during the year, a number of our usual KPIs are showing anomalous figures during this reporting period. We expect this impact to carry forward into our 2021 KPI reporting.

Financial KPIs 

DUNCAN GARROOD

Chief Executive Officer

16 March 2021

CFO and COO Statement

Driving efficiencies

"Cost saving of £1.5 million annually from Q4, with the first full year of savings in 2022 - there is a significant cost saving as we will no longer rely on an external third-party revenue management platform provider."

Despite the impact of COVID-19 our operational performance has been robust. We have continued to focus on revenue generation, reducing costs and increasing efficiency, as we complete and embed the changes made as part of the operational transformation and in-sourcing programme. In this respect we completed two key projects during the year, the first being a comprehensive review of the operational team structure and the second was the successful go-live of the revenue management system.

Operations Team Restructure

As part of the operational transformation programme, we have directly employed all staff working in our buildings since 2019, as we brought all activities in-house from several third-party managers. The organisational structure we inherited was inefficient and not aligned to optimal customer service delivery.

We therefore conducted a review during the year and moved to a more optimal structure, which has the following key benefits:

- Investment in more sales and customer service roles.

- Increasing the "out of hours" presence in our buildings, resulting in 24-hour/7 days a week coverage in our cities. This helps to make our buildings safer and allows us to provide a better welfare service to our students.

- Centralising tasks to the customer relations team (a centralised hub). This has made the support we provide to our site teams more efficient and has removed several administrative tasks from the site teams allowing them to focus on customer service.

- The above changes to the structure are cost neutral, but facilitate improved customer service delivery overall.

The proposed restructure was sponsored by the Senior Leadership Team and presented to the Board for approval.

As the restructure impacted more than 20 of our people, we had a statutory legal duty to consult collectively, and this consultation was conducted through our Colleague Forum.

Revenue Management System

In November 2020 we successfully launched our new revenue management system and have started to take bookings for the academic year 2021/22. This system has been in development for three years and I would like to thank the entire team involved for the successful delivery of this platform, which is a key milestone for the Group.

The revenue management platform will form the basis of our ability to generate revenue efficiently and effectively end to end moving forward. The immediate benefits that this new system delivers are:

- More timely pricing adjustments - we have already seen the benefit of being able to make more timely pricing adjustments, which facilitates maximising revenue streams.

- Improving the journey, communication and interaction with the customer - we now have much greater access to and ability to communicate with our customers. We are now able to monitor in real time the progress of each customer as they move through the booking journey and to provide timely support as required.

- Ease of use by our people, as all activity is on one platform - this has significantly reduced inefficiency and cost.

- Revenue management platform and finance system are one integrated platform - this has removed the need to transfer financial transaction data between systems. The result is real-time financial information and reduced cost.

- Cost saving of £1.5 million annually from Q4, with the first full year of savings in 2022 - there is a significant cost saving as we will no longer rely on an external third-party revenue management platform provider.

Health and Safety

Health and Safety is of paramount importance to the Group. We have a legal and moral responsibility to ensure that everyone who is living, working in or visiting our buildings are kept safe.

Our buildings are inspected on a regular basis by the site staff to ensure that we identify and eliminate hazards. To assess the buildings for significant issues on an ongoing basis, we engage with specialist consultants to undertake thorough assessments of general safety/hazards, fire risks/ prevention and water systems/treatment against legionella.

During 2020 we had planned to launch formal Health and Safety training by the Institute of Occupational Safety and Health ("IOSH"), and this was booked for H1 2020 but was cancelled due to the COVID-19 pandemic. However, through discussions with IOSH, we have established an IOSH-approved online training programme, with the first course delivered in December 2020 and to continue throughout 2021.

We have also prepared a series of Toolbox Talks which are in document and video format for 2021 launch, and this will enable all site teams to have continual access to informal training.

We have also designed and agreed upon the format of a Health & Safety Forum to be implemented during 2021. This will include representatives from site teams throughout the country, as well as members of the Senior Leadership team and the Board.

"Our "cloud first" strategy allowed us to apply business continuity with minimal disruption to productivity."

IT Infrastructure Improvements

During the year we also further strengthened our IT infrastructure. We gained Cyber Essentials Plus accreditation in April 2020 at the height of the pandemic, as well as implementing advanced cloud security tools to enhance our risk management strategy for the increased levels of remote and flexible working expected in the post COVID- 19 landscape. Our "cloud first" strategy allowed us to apply business continuity with minimal disruption to productivity and greater flexibility to address challenges as we are not dependent on traditional on-premise solutions.

Financial Performance

Over the last three years we have delivered a positive financial improvement across all metrics year on year, as a direct result of the operational transformation we have implemented.

At the start of 2020 this operational transformation was largely complete, we had started to see the benefits with our gross margin approaching 70% and we were close to achieving dividend cover of 100%.

However, then the COVID- 19 pandemic hit. Whilst we are encouraged by the underlying performance of the business, the impact of the pandemic is clear.

Revenue in 2020 was £59.4 million, down 16% from £70.9 million in 2019. The decrease was due to three key factors;

- £6.5 million of refunds were provided to students for the period from April to September 2020.This allowed us to release students who were in need from their obligations on a case-by-case basis and also helped to protect our brand.

- At the start of the 2020/21 academic year, we reported occupancy rates of 70%, compared to 94% in 2019/20. This meant that the final four months of the 2020 financial year had significantly reduced occupancy compared to 2019.

- Historically we have also sold around £700,000 of summer lets each year, clearly due to the COVID-19 pandemic we were not able to utilise this source of income in 2020.

However, the underlying performance of revenue was still robust, excluding the COVID- 19 refunds for academic year 2019/20 our like for like rental growth would have been 3.1%. At this point, for the current academic year 2020/21 like for like rental growth is 1.8%.

Property costs were £22.7 million, down 3% overall as we cut discretionary costs and delayed expenditure where appropriate and continued to make efficiency improvements while also continuing to see the benefit of the operational transformation.

Dividends

Loan to Value35.4%(2019: 32.9%)

Refunds provided to students in need£6.5mFor 2019/20 academic year

On a cost per bed basis our cost was down 3%. Due to the COVID-19 pandemic reducing our occupancy levels we have been required to pay council tax on these empty rooms which has reduced the cost savings we have made. If we exclude the impact of this increased council tax bill during the year, our average cost per bed fell by over 6%.

The impact on revenue and property costs above produced a gross margin for the year of 61.9% (2019: 67.1%).

Administration expenses were £9.8 million in 2020, lower than our initial guidance of £10 million (2019: £9.2 million). We made savings in a number of areas such as not paying any employee or Director bonuses for 2020.

The net loss from a change in the fair value of investment properties during the year was £37.6 million (2019: £29.2 million gain). This loss is made up of four key components which are explained below;

- £21 million of the decrease is due to CBRE making a capital deduction to reflect the perceived risk to occupancy for the remainder of the 2020/21 academic year.

- £9 million of the decrease is in the valuation of operational assets over the year for two reasons:

- There has been a polarisation of prime v secondary assets which has resulted in a softening of Net Initial Yield from 5.55% to 5.61%.

- a reduction in Net Operating Income projections on secondary assets.

- £6m of the decrease is on the value of our commercial portfolio, reflecting yields moving out on retail property.

- £2m of the decrease is on our development assets reflecting the increased timetables on some of our development assets which are currently on hold due to our cash preservation approach.

Net financing costs for the year were £13.3 million, net of money market investment income (2019: £12.7 million). This net financing cost was slightly more than 2019 due to a higher level of drawn down debt through the year, as well as slightly lower interest received.

The result of this is a Loss before tax of £24.0 million, (2019: profit £54.8 million). No corporation tax was charged, as the Group fulfilled all of its obligations as a UK Real Estate Investment Trust ("REIT"). Basic loss per share ("EPS") was therefore (3.97) pence and also (3.97) pence on a diluted basis (2019: earnings 9.08 pence and 9.07 pence (diluted).

Adjusted EPS is the most relevant measure of earnings when assessing dividend distributions. It decreased by 48% from 4.43 pence in 2019 to 2.30 pence in 2020. This shows that the underlying operating business is continuing to generate cash despite the impact of the pandemic.

The Net Asset Value ("NAV") per share as at 31 December 2020 was 105.00 pence, (31 December 2019: 110.21 pence, prior to adjusting for the interim dividend of 1.25 pence per share in respect of the quarter ended 31 December 2019). The NAV is shown net of all property acquisition costs and dividends paid during the year.

Dividends

The dividends declared in respect of the 2020 financial year are shown in the table on the previous page.

Of the total dividends, 0.85 pence per share was declared as property income distributions and 0.40 pence per share was declared as ordinary UK dividends (2019: 2.75 pence per share and 2.25 pence per share, respectively).


The reduced dividend in the period has given dividend cover of 184% (2019: 88.5%).

On 31 March 2020, due to uncertainty created by COVID -19, the Group announced a number of actions to strengthen further its cash position. This included the Board's decision, whilst remaining mindful of its REIT tax obligations, to suspend all future dividend distributions until market conditions stabilised. The Board is mindful of the importance of the dividend to shareholders and will seek to resume dividends at an appropriate level as soon as there is sufficient clarity of outlook. For this, we would need to see more commitment in the approach of universities to face-to-face teaching and a significant improvement in occupation and rental income.

Debt

In January 2020 we raised £22.5 million of development debt with NatWest bank to complete the existing pipeline.

In March 2020 we re- financed an expiring uncharged facility with FCB and at the same time increased the facility from £10 to £20 million.

In April 2020 we re-financed early an expiring £32.8 million facility with AIB on more favourable terms.

Throughout the year we have conducted extensive scenario planning and in July 2020 we took the prudent step of increasing our £70 million RCF with Lloyds Bank to £90 million.

At the year end, before deduction of loan arrangement fees, the group had committed investment debt facilities of £420 million, of which £390 million were drawn down (2019: £355 million drawn down).

Of our drawn investment debt £277 million of this debt is fixed and £113 million is floating. The aggregate cost of our investment debt was 2.9%, with a weighted average term of 5.9 years.

The Loan to Value for the group was 35.4% (2019: 32.9%), broadly in line with our long-term LTV target of 35%.

We have also agreed waivers or an easing of covenant requirements on all our debt to ensure that we remain covenant compliant throughout the pandemic. We would like to thank all of our lenders for the support which they have provided through this period.

We currently have around £52 million of unencumbered assets and as at the year end we had £63.9 million of undrawn investment facilities and cash.

As we have no re-financing requirements until November 2022 and have taken protective measures to preserve liquidity, we are well placed to trade through until the market recovers.

Responsible Business

Progressive, responsible

Progression on our ESG journey is a priority at Board level.

Our ESG Journey and Commitment to Stakeholders

As a business we are committed to creating and operating a responsible and sustainable business which has a positive impact on all of our stakeholders while maintaining a profitable and sustainable business.

Our ESG journey is aligned to our culture and will be reflected in our relaunched values in 2021. ESG is important to all of our key stakeholders, who all receive benefits. ESG and our approach also becomes part of our approach to risk management.

Due to the impact of COVID -19 we have not been able to push on as far as we had expected with our ESG roadmap. However, we have still been able to make some very valuable key steps forward. We have also set out our plan for progressing our ESG agenda in 2021, through the Board, Senior Leadership Team and new committees' guidance. The Board has placed ESG as one of its key priorities.

This section provides more information on the various stakeholder engagement activities and our future plans.

ESG Management Framework

The Board

The Board has overall responsibility for…

the Group's ESG strategy and the direction which the Group will take.

ESG Committee

The Committee will oversee…

the creation of overall ESG strategy from the Group, ensuring that there is Board level discussion and input.

Sustainability working group

The group will oversee…

the delivery of environmental sustainability initiatives and commitments throughout the business.

People & Community working group

The group will oversee…

the delivery of initiatives impacting our people and the communities we operate in.

Governance working group

The group will oversee…

the levels of governance and oversight across the business continue to be upheld to a high standard.

Senior Leadership Team

Senior management are responsible for…

ensuring this ESG strategy is embedded throughout the business and provide key support to the communities above.

Our People

The successful delivery of an ESG strategy across our business will require the collaboration and support of all our people.

Priorities and targets for 2021

Our Key Stakeholders

Customers

The needs of our customers inspire our brand and provide insightful feedback on how we can improve our service offering to them and better fulfil our purpose. We have a responsibility to provide our customers with a safe place to live and to care for their wellbeing, which is critical to the Board's strategic decision-making and our review of any operational changes.

Communities

Our communities help us to fulfil our purpose of enhancing the university experience for our customers. The Board aims to understand the local markets in which we operate and the key issues we face which assists its decision-making around new opportunities through which we can contribute to our local communities.

Environment

Our environment is fundamental to our future. We have a duty to operate our business in an efficient way, giving specific regard to the impact of our operations on the environment and utilising methods throughout our properties (both development and operational sites) that mitigate the risk of environmental damage.

People

Our people are vital to the successful delivery of our business performance. We have a responsibility to provide our people with a safe place to work and to care for their wellbeing.

The tone and culture of our organisation comes alive through the actions of our people.

Shareholders

Our shareholders are key stakeholders in our business.

The Board has a responsibility and desire to communicate key matters relating to the Group openly and honestly to our shareholders.

The Group also has a wider responsibility to shareholders to enhance the value of the business and fulfil its purpose ethically.

Stakeholder Engagement

Customers

Customer Pledge

Our pledge to our customer is that we will always strive to fulfil our purpose (see inside front cover) which involves providing our students a safe place in which to live. Due to the impact of COVID- 19 we implemented a wide-ranging number of initiatives to keep our customers safe and improve their wellbeing, from monitoring of students self isolating to implementing protective measures within our buildings.

Refund Programme

In April 2020 we launched a refund programme to help our customers who had been impacted by the COVID-19 pandemic, and we launched this programme because we felt that ethically it was the right thing to do. The Board's considerations are set out within the s.172 statement.

Wellbeing

In 2020 we launched in partnership with Endsleigh, a student assistance programme. This programme provides our customers with unlimited access to a 24/7 mental health and confidential counselling (BACP accredited) through a telephone helpline. Calls are answered by an experienced counsellor or therapist who will offer support for a variety of issues. Our customers may also have up to six sessions of structured telephone counselling including CBT counselling per issue each year. We believe supporting our customer's wellbeing is paramount.

Our People

Prioritising Health and Wellbeing During COVID-19

Ensuring our people were safe during the pandemic was of paramount importance to the Group. We implemented a wide-ranging number of initiatives to keep our people safe, from monitoring of any staff showing symptoms or self isolating to implementing protective measures within our buildings and adapting our sickness and leave policies. More detail of all of our responses to COVID-19 are detailed on page 6.

Reward and Recognition

Due to the effects that COVID- 19 has had on the Group, the decision was taken to suspend the Group's formal bonus scheme. A pay freeze among all managerial roles and above was also implemented to protect our business.

As part of the Group reorganisation discussed in more detail on page 30, we rebased the pay of our frontline staff looking at the latest benchmarking and also with a view to being a Real Living Wage employer. From January 2021 the Group will pay all staff at least the Real Living Wage and has an ambition to ensure they remain at this level in the future.

Internal Communications

In a time where people felt more isolated than ever during the pandemic, ensuring internal communications were kept current and frequent was a key priority. During the year we revamped our internal communications to offer weekly communications and monthly townhalls.

We held two townhalls during 2020 and will move to a monthly basis in 2021. They have already heralded strong feedback and favourable support from our people.

Equality, Diversity and Inclusion

Group employees are committed to promoting an inclusive, positive and collaborative culture. We treat everyone equally irrespective of age, sex, sexual orientation, race, colour, nationality, ethnic origin, religion, religious or other philosophical belief, disability, gender identity, gender reassignment, marital or civil partner status, or pregnancy or maternity.

We continued to review our approach to diversity, equality and inclusion, including the use of targets during 2020. We recognise this as a key building block of our social strategy and it will form part of the Governance working group's 2021 agenda. Our workforce and customers are from a diverse range of people so we need to ensure that our workplace remains inclusive and allows our people and our customers a place where they can thrive.

Case study

Workforce Representation

Listening to our people

The Colleague Forum

The Colleague Forum is a formal workforce advisory panel set-up in May 2019, consisting of 12 employee representatives across the Group. Its main purpose is to give the wider workforce a platform through which they can share their ideas on enhancing business performance and improving efficiencies, as well as their experience with the business.

The Colleague Forum is supported by Alice Avis (Non-Executive Board member) who attends at least one Colleague Forum meeting every year and is available as a direct Board contact for the forum.

During 2020 the Colleague Forum consulted with the Senior Leadership Team and HR team on key decisions including the Group's response to COVID-19 and the restructure of our operational teams. It was a good platform for the wider workforce to communicate their key questions and priorities during a year of change, allowing the business to respond effectively and understand best what support our people and customers needed.

Social - our people

Communities

Supporting local communities during COVID-19

During the year we continued to support our local communities in any ways we could during this difficult time. The way we helped and supported local communities varied from organising fundraisers to buy PPE for local hospitals and care homes to donating unwanted goods left behind by students to the British Heart Foundation. In 2021 as part of our ESG roadmap we hope to pull together all the support we give back to our local communities.

Modern Slavery

Protecting human rights and preventing modern slavery is important to us. We are fundamentally opposed to slavery and committed to understanding the risk of it and ensuring it does not occur anywhere within our business or supply chain.

Our most significant risk area in relation to slavery and human trafficking is in our supply chain, particularly in connection with the sourcing by suppliers of construction material, certain goods and the provision of manual labour in property development and management services.

While nearly all our direct suppliers are based in the UK, some of these suppliers source some materials from around the world.

As part of our broader initiative to identify and mitigate risk in our supply chain, we have updated our consideration of factors such as:

- reviewing our current contractors and suppliers, particularly in relation to supply chain, with a view to developing preferred supplier list arrangements based on robust selection;

- centralising more contracts as a core part of our supplier management strategy;

- strengthening our compliance review processes within procurement practices;

- developing strong relationships with UK- based suppliers and contractors that align to our business code of conduct expectations; and

- ensuring systems are in place to encourage the reporting of concerns and the protection of whistleblowers in our supply chain.

We believe there is minimal risk of slavery and human trafficking in our colleague base. We continue to review this risk assessment and monitor our activity as part of our broader approach to ensuring we are a responsible and sustainable business.

For our full statement please refer to www.hellostudent.co.uk.

Shareholders

ESG Reporting

Shareholders are becoming even more conscious and question the ESG credentials of the businesses in which they want to be involved with. We have received feedback from our investors that they wish to gain a greater understanding of the ESG credentials of the Group. The shareholders are the ultimate beneficiary of all of the actions taken throughout this section and will further benefit from the actions and targets we have set out for.

Ethical Business

We are committed to carrying out business fairly, honestly and openly. Our anti-bribery policy mandates a zero-tolerance approach, which all our people must read and consent to, both during their induction and when any updates are made to the policy. We require employees to take regular compliance training and to certify each year that they have complied with our policies.

Our people are important to our business maintaining the highest standards of honesty, openness and accountability. Our whistleblowing policy explains how our people can report a whistleblowing concern and reassures them that any such disclosure is made in full confidence. The Board monitors and reviews the policy on at least an annual basis to ensure it complies with UK legislation. There were no incidents of whistleblowing during the year.

OUR VALUES

Our core values ensure that everyone understands and is aligned behind what we are and how we want to operate.

Honest

We act with integrity and have courage to do the right things.

Open

We are transparent in what we do. We engage, involve and share.

Creative

We do things differently, delighting our customers, colleagues and shareholders.

Strive

We are always looking for better ways to do things for our customers, colleagues and shareholders.

Environment

Energy Usage

Our total direct and indirect greenhouse gas emissions like-for-like have decreased by 8% since 2019. Our electricity consumption has reduced by 11% on a like for like basis compared to 2019.

We believe that while some of the energy savings have been due to initiatives we have implemented, COVID- 19 has also had an impact in the reduction of GHG and electricity consumption in 2020.

Water Usage

Our total water usage has decreased by 7% since 2019. we believe that there would have been a greater reduction in 2020, however, we increased our flushing activities to ensure the sites were well sanitised before the return of students, increasing consumption in 2020.

Methodology

We have used the EPRA Best Practices Recommendations on Sustainability Reporting (3rd Edition) and GHG Protocol Standard (revised edition), using a financial control organisational boundary to prepare this disclosure. The UK Government Conversion Factors for Company Reporting have been applied to convert energy data into greenhouse gas emissions. Whole building data has been reported and any missing data has been estimated using either direct comparison, pro rata calculation or based on an average consumption value per bed.

Green Energy

The electricity we use in our buildings is 100% renewable. This is backed by UK-based renewable generation certificates administered by Ofgem. This means the electricity we use is generated in renewable ways ranging from solar and wind turbines to anaerobic digestion and biomass plants.

We have also planned a workshop in 2021 with our energy consultant to identify new opportunities for green energy that can be implemented at our existing sites and how this will impact our energy consumption and costs.

Waste Management

All sites currently have recycling facilities that are used by our customers and people. We aim to review our overall waste management arrangement to identify more efficient ways to manage our recycling throughout the whole Group. The Sustainability working group will review our waste strategy in 2021.

The tables below contain our EPRA performance data for each relevant impact area.

2020 - % of total assets included: LfL - 100% / Abs - 100%2020 - % of data estimated: LfL - 0.5% / Abs - 0.5%

2020 - % of total assets included: LfL - 100% / Abs - 100%2020 - % of data estimated: LfL - 0.5% / Abs - 0.5%

2020 - % of total assets included: LfL - 100% / Abs - 100%2020 - % of data estimated: LfL - 49% / Abs - 49%

Section 172

Section 172(1) Companies Act 2006 'Duty to promote the success of the company'

A director of a company must act in the way he/she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:

The likely consequences of any decision in the long-term

The Board provides oversight over the Company's performance and gives guidance as to the long-term strategy of the Company. The day-to-day management and decision-making is delegated by the Board to the Senior Leadership Team who provide regular updates to the Board. This allows the Board to monitor the performance of the Company and that the Company is progressing in line with the long-term strategy.

The interests of the Company's employees

Our people are crucial to the Company's success; they provide our customers with exceptional service to ensure they feel at home. The Board recognises how vital our people are and as such all decisions taken by the Board consider the interests of the Company's employees.

The Board has designated Alice Avis (Non-Executive Director) to liaise with the Colleague Forum. This allows a direct conduit between the Board and our people. This gives the Board insight into the views and concerns of our people and allows them to ensure their decisions are aligned with the interests of the Company's employees.

The need to foster the Company's business relationships with suppliers, customers and others

The Company has a few key suppliers and the Board is involved in reviewing and approving any key contracts which the Company enters into. As such the Board provides oversight and challenge to key suppliers. Day-to-day relationships with Company suppliers are delegated to the Senior Leadership Team to ensure a close relationship is fostered.

Without customers the Company could not exist, and as such the Board takes great interest in fostering relationships with these customers. The Board reviews the results of the biannual customer survey, as well as receiving and reviewing other ad hoc reports on our customer's preferences and wishes. As part of the CEO's Board reporting, our customers sit as a standing agenda item. The Board believes that fostering a close relationship and a deep understanding of our customers is key to the Company's success.

The impact of the Company's operations on the community and the environment

The community and environment in which the Company operates in is a key priority for the Board. The Board identified that the Company's ESG strategy was not strong enough and so set about reviewing this in 2020 for launch in 2021. The Board takes the impact of the Group's operations on the community and environment into account in each decision. The decisions which the Board take can have widespread ramifications. Reviewing this impact is not a perfunctory exercise but one which the Board believes is a key responsibility, which includes robust challenge of all decisions.

The desirability of the Company maintaining a reputation for high standards of business conduct

The Board recognises the importance of maintaining a reputation for high standards of business conduct. The Board always seeks to make the "right" decision which while taking into account the needs of all of our stakeholders also reflects morally on our obligations as a Company.

The Board encourages this principle throughout the business and directs the Company's ethos through the Company purpose and values. The Board is reviewing alongside the Senior Leadership Team and our people, the Company values in 2021 to ensure they continue to remain fit for purpose.

The Board also encourages the Company to go above and beyond in certain areas and one particular example is mental health welfare, where the Board pushed for support for both our people and our customers to be set up.

The need to act fairly as between shareholders of the Company

The Board believes transparency and accountability of the business is paramount to encourage shareholder confidence. The Board listens to and reviews the views across our shareholder base.

The need to act fairly between all of our shareholders underpins the Board's decisions; and the Board receives regular feedback from shareholders after our annual and interim results release. The Board also receives and reviews feedback from research analysts throughout the year. This helps to identify key shareholder trends which the Board takes note of. The capital structure of the Company as a REIT, limiting individual shareholdings to a maximum of 10% of issued share capital helps to ensure there are no dominant shareholders and that all shareholders are treated equally.

LYNNE FENNAH

Chief Financial and Operating Officer

16 March 2021

Principal Risks and Uncertainties

2020 has been a year of change with the COVID -19 pandemic having a significant impact on our principal risks and uncertainties. The Board has maintained constant review of the Group's risk environment, ensuring operational platforms are flexible in adapting to risks whilst remaining in line with our strategic objectives. With the key challenges faced this year, the Group has maintained its strong culture of mitigating significant risks and responding to changes efficiently.

The Board regularly assesses the risk appetite of the Group, with the Audit Committee formally reviewing the effectiveness of our risk management process and internal control systems biannually. During the year, the Audit Committee has not identified or been advised of any material failings or weaknesses.

Changes to Principal Risks

COVID-19 has revealed a number of factors that will be impacted either directly by the ongoing pandemic, or life in a post COVID-19 world as the 'new normal' is defined.

As a result, the Board has introduced a new risk - "Revenue Risk" - which highlights the risk of reduced revenue from changes to university operations (for example, university teaching moving to an online platform or universities facing financial difficulties due to reduced student demand for higher education) and travel restrictions (for example, reduced domestic and international travel or issues with international student visas).

Now all assets are operating under the Hello Student® platform, cost control has become part of our culture and the business has better processes in place to operate efficiently. As such, we have removed the Cost Control Risk from our principal risks. With less developments in the pipeline, we have removed the Development Risk.

The health and safety of our people, customers and visitors to our sites is paramount, and the Board puts health and safety and the associated risks on every meeting agenda. With increasing focus on fire safety and greater regulations in place, we believe our Regulatory Risk and Health & Safety Risk has increased.

The Audit Committee has reviewed and approved the above changes to our principal risks and risk appetite

Brexit

The UK has now formally left the European Union after a transition period. To date we have not seen any impact from this event. The Board takes comfort that this government is committed to growing international student numbers - from the current level of almost 450,000 to 600,000 by 2030. The Treasury has also recognised the value of higher education exports by making visa applications and postgraduate employment limitations less onerous. As a result no principal risk has been added due to Brexit.

Risk Responsibilities

The Board

The Board has overall responsibility for…

the determination of the Group's risk appetite, the setting of objectives and policies, and has ultimate responsibility for managing risk.

Audit Committee

The Audit Committee formally reviews…

the effectiveness of our risk management processes and internal control systems biannually.

Senior Leadership Team

Senior management are responsible for…

reviewing and monitoring the Group's key risks, and overseeing the implementation and operation of the risk management and internal control systems.

Our People

Everyone at Empiric has a role to play…

in identifying key risks facing the Group, and in the day-to-day management of risk through applying the appropriate controls, policies and processes.

Adapting risk management in a changing environment

The COVID-19 pandemic has created global economic uncertainty, and in particular an uncertainty around income for the 2020/21 and 2021/22 academic years. Accordingly, the Group has conducted a detailed going concern review and considered its liquidity position and banking covenant compliance strength.

On 31 March 2020 the Group announced the difficult decision to suspend dividend distributions and guidance. The Group also took decisive action to focus on liquidity. All development spend was paused and other discretionary costs were reviewed with reductions identified and implemented. The Group also announced it would look favorably upon requests on a case-by-case basis from its customers who were either no longer in occupation or, due to university closures, plan not to return to their accommodation, to be released from their rent and lease obligations from 25 April 2020 onwards. The worst-case estimate for this was a £21 million cash impact, however the final actual impact of releasing students their rent obligations for the academic year 2020/21 was much less at £6.5m.

As at 31 December 2020 the Group had £34 million in cash and £30 million of undrawn investment debt facilities. The Group is well funded and has no refinancing requirements until November 2022.

The Group's debt facilities include covenants in respect of LTV and interest cover, both projected and historic, and all debt facilities are ring fenced with each specific lender. The Group maintains regular dialogue with all of its lenders as part of the ordinary course of business, however during the pandemic we have increased the frequency of this dialogue. As part of these discussions with our lenders we have had conversations specifically around the interest cover covenants to ensure we either temporarily restructure these or gain the relevant waivers from the banks to ensure that no issues arise. To date all of our banks have been supportive during this period and have expressed commitment to the long-term relationship they wish to build with Empiric.

Management has evaluated a number of scenarios in its going concern model. The critical assumption is the revenue occupancy for the 2021/22 academic year. Upside, central and downside cases have been constructed showing 2021/22 academic year occupancy of between 80% and 95%. A downside stress scenario has also been considered which has set 2021/22 revenue occupancy at similar levels to the 2020/21 academic year.

In Scenario 1, 2 & 3 above the Group continues to maintain covenant compliance for all its interest cover covenants. It maintains adequate levels of liquidity and does not need to utilise the additional £20 million RCF facility negotiated with Lloyds Bank plc throughout the same assessment period. In addition, no assumption is made as to the level of additional cost cutting measures or mitigating actions which could potentially be undertaken.

In Scenario 4, under our Downside Stress Scenario, we would not meet interest cover covenants at the 30 June 2021 measurement date for two lenders. However, the Group has cure rights under the lending agreements and sufficient cash headroom to cure any ICR breaches if required.

For one lender, under scenario 4, we would not meet a specific 80% occupancy covenant requirement by October 2021. Under this scenario we would be dependent on the further support of this lender, and we would expect this support to be forthcoming.

To support the Directors' going concern assessment, the management also evaluated the occupancy level at which all ICR covenant tests were breached and, additionally, the impact of a 'Reverse Stress Test' which was performed to determine the level of revenue occupancy for the 2021/22 academic year at which the Group would need to seek alternative sources of funding. For this modeling we kept revenue occupancy for the 2020/21 academic year at 65%.

The Director's noted that if occupancy falls below 44% then the Group would be in breach of all ICR covenants, and at 18% revenue occupancy for the 2021/22 academic year (47% lower revenue occupancy than our Downside Stress Scenario) the Group would need to seek alternative sources of funding.

Having reviewed and considered three modelled scenarios, a Downside Stress Scenario, the 2021/22 academic year occupancy level at which ICR covenants would be breached and the level at which alternative sources of funding would be required, the Directors consider that the Group has adequate resources in place for at least 12 months from the date of these results and have therefore adopted the going concern basis of accounting in preparing the annual financial statements.

Going concern - Viability Statement

The Group continues to maintain covenant compliance for its LTV thresholds throughout the going concern assessment period. Property values would have to fall by more than 15% from December 2020 valuations before LTV covenants are breached.

External Risks Table

Internal Risks Table

Emerging Risks

The Audit committee also considers emerging risks. These are new or unforeseen risks that we are conscious of however their potential impact is not fully known. The Committee reviews these biannually alongside the Principal Risks and Uncertainties. The Audit Committee has detailed below the risks it believes are emerging and the potential impact it may have on our Principal Risks.

Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare the Group and Company financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements and have elected to prepare the Company financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss for the Group for that year.

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

- select suitable accounting policies and then apply them consistently;

- make judgements and accounting estimates that are reasonable and prudent;

- state whether they have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies to the European Union, subject to any material departures disclosed and explained in the financial statements;

- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business; and

- prepare a Directors' Report, a Strategic Report and Directors' Remuneration Report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. The Directors are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website Publication

The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the UK governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Directors' Responsibilities Pursuant to DTR4

The Directors confirm that to the best of their knowledge:

- the Group financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies to the European Union and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group and the undertakings included in the consolidation as a whole;

- the Annual Report includes a fair review of the development and performance of the business and the financial position of the Group and the Parent Company, together with a description of the principal risks and uncertainties that they face; and

- the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's performance, business model and strategy.

Mark Pain

Chairman | 16 March 2021

Group Statement of Comprehensive Income

Group Statement of Financial Position

These financial statements were approved by the Board of Directors on 16 March 2021 and signed on its behalf by:

Lynne Fennah

Chief Financial Officer

Company Statement of Financial Position

The Company made a profit for the year of £46,198,000 (2019: £8,179,000 loss).

These financial statements were approved by the Board of Directors on 16 March 2021 and signed on its behalf by:

Lynne Fennah

Director

Group Statement of Changes in Equity

Company Statement of Changes in Equity

Group Statement of Cash Flows

Notes to the Financial Statements

1. ACCOUNTING POLICIES

1.1 Period of Account

The consolidated financial statements of the Group are in respect of the reporting period from 1 January 2020 to 31 December 2020.

The consolidated financial statements of the Group for the year ended 31 December 2020 comprise the results of Empiric Student Property plc (the "Company") and its subsidiaries and were approved by the Board for issue on 16 March 2021. The Company is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are admitted to the official list of the UK Listing Authority, a division of the Financial Conduct Authority, and traded on the London Stock Exchange. The registered address of the Company is disclosed in the Company information.

1.2 Basis of Preparation

The consolidated financial statements of the Group for the year to 31 December 2020 comprise the results of Empiric Student Property plc (the "Company") and its subsidiaries (together, the "Group"). These financial statements have been prepared on a going concern basis and in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies to the European Union. The Parent Company financial statements have been prepared in accordance with FRS 101, Financial Reporting Standards Reduced Disclosure Framework.

The "requirements of the Companies Act 2006" here means accounts being prepared in accordance with "international accounting standards" as defined in section 474(1) of that Act, as it applied immediately before the Implementation Period (IP) completion day (end of transition period), including where the company also makes use of standards which have been adopted for use within the United Kingdom in accordance with regulation 1(5) of the International Accounting Standards and European Public Limited Liability Company (Amendment etc.) (EU Exit) Regulations 2019".

The Group's financial statements have been prepared on a historical cost basis, except for investment property and derivative financial instruments which have been measured at fair value. The consolidated financial statements are presented in Sterling which is also the Company and the Group's functional currency.

The Company has applied the exemption allowed under section 408(1b) of the Companies Act 2006 and has therefore not presented its own Statement of Comprehensive Income in these financial statements. The Group loss for the year includes a profit after taxation of £46,198,000: (2019 loss of £8,179,000) for the Company, which is reflected in the financial statements of the Company.

The financial information does not constitute the Group's statutory accounts for the year ended 31 December 2020 or the year ended 31 December 2019 but is derived from those accounts. The Group's statutory accounts for the year ended 31 December 2019 have been delivered to the Registrar of Companies. The Group's statutory accounts for the year ended 31 December 2020 will be delivered to the Registrar of Companies in due course. The Auditor has reported on both the December 2020 and December 2019 accounts; the reports were unqualified, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and did not contain any statement under Section 498 of the Companies Act 2006.

1.3 Disclosure Exemptions Adopted

In preparing the financial statements of the Parent Company, advantage has been taken of all disclosure exemptions conferred by FRS 101. The Parent Company financial statements do not include:

● certain comparative information as otherwise required by international accounting standards;

● a statement of cash flows;

● the effect of future accounting standards not yet adopted; and

● disclosure of related party transactions with other wholly owned members of the Group headed by Empiric Student Property plc.

In addition, and in accordance with FRS 101, further disclosure exemptions have been adopted because equivalent disclosures are included in the consolidated financial statements of Empiric Student Property Plc. The Parent Company Financial Statements do not include certain disclosures in respect of:

● Financial Instruments (other than certain disclosures required as a result of recording financial instruments at fair value); and

● Fair value measurement (other than certain disclosures required as a result of recording financial instruments at fair value).

The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and does not present its own profit and loss account in these financial statements.

1.4 Going Concern

The COVID-19 pandemic has created global economic uncertainty, and in particular an uncertainty around income for the 2020/21 and 2021/22 academic years. Accordingly, the Group has conducted a detailed going concern review and considered its liquidity position and banking covenant compliance strength.

On 31 March 2020 the Group announced the difficult decision to suspend dividend distributions and guidance. The Group also took decisive action to focus on liquidity. All development spend was paused and other discretionary costs were reviewed with reductions identified and implemented. The Group also announced it would look favorably upon requests on a case -by -case basis from its customers who were either no longer in occupation or, due to university closures, plan not to return to their accommodation, to be released from their rent and lease obligations from 25 April 2020 onwards. The worst-case estimate for this was a £21 million cash impact, however the final actual impact of releasing students their rent obligations for the academic year 2020/21 was much less at £6.5m.

As at 31 December 2020 the Group had £34 million in cash and £30 million of undrawn investment debt facilities. The Group is well funded and has no refinancing requirements until November 2022.

The Group's debt facilities include covenants in respect of LTV and interest cover, both projected and historic, and all debt facilities are ring fenced with each specific lender. The Group maintains regular dialogue with all of its lenders as part of the ordinary course of business, however during the pandemic we have increased the frequency of this dialogue. As part of these discussions with our lenders we have had conversations specifically around the interest cover covenants to ensure we either temporarily restructure these or gain the relevant waivers from the banks to ensure that no issues arise. To date all of our banks have been supportive during this period and have expressed commitment to the long-term relationship they wish to build with Empiric.

Management has evaluated a number of scenarios in its going concern model. The critical assumption is the revenue occupancy for the 2021/22 academic year. Upside, central and downside cases have been constructed showing 2021/22 academic year occupancy of between 80% and 95%. A downside stress scenario has also been considered which has set 2021/22 revenue occupancy at similar levels to the 2020/21 academic year.

The Group continues to maintain covenant compliance for its LTV thresholds throughout the going concern assessment period. Property values would have to fall by more than 15% from December 2020 valuations before LTV covenants are breached.

In Scenario 1, 2 & 3 above the Group continues to maintain covenant compliance for all its interest cover covenants. It maintains adequate levels of liquidity and does not need to utilise the additional £20 million RCF facility negotiated with Lloyds Bank plc throughout the same assessment period. In addition, no assumption is made as to the level of additional cost cutting measures or mitigating actions which could potentially be undertaken.

In Scenario 4, under our Downside Stress Scenario, we would not meet interest cover covenants at the 30 June 2021 measurement date for two lenders. However, the Group has cure rights under the lending agreements and sufficient cash headroom to cure any ICR breaches if required. For one lender, under scenario 4, we would not meet a specific 80% occupancy covenant requirement by October 2021. Under this scenario we would be dependent on the further support of this lender, and we would expect this support to be forthcoming.

To support the Directors' going concern assessment, the management also evaluated the occupancy level at which all ICR covenant tests were breached and, additionally, the impact of a 'Reverse Stress Test' which was performed to determine the level of revenue occupancy for the 2021/22 academic year at which the Group would need to seek alternative sources of funding. For this modeling we kept revenue occupancy for the 2020/21 academic year at 65%.

The Director's noted that if occupancy falls below 44% then the Group would be in breach of all ICR covenants, and at 18% revenue occupancy for the 2021/22 academic year (47% lower revenue occupancy than our Downside Stress Scenario) the Group would need to seek alternative sources of funding.

Having reviewed and considered three modelled scenarios, a Downside Stress Scenario, the 2021/22 academic year occupancy level at which ICR covenants would be breached and the level at which alternative sources of funding would be required, the Directors consider that the Group has adequate resources in place for at least 12 months from the date of these results and have therefore adopted the going concern basis of accounting in preparing the annual financial statements.

1.5 Significant Accounting Judgements, Estimates and Assumptions

The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Estimates

In the process of applying the Group's accounting policies, management has made the following estimates, which have the most significant effect on the amounts recognised in the consolidated financial statements:

(a) Fair Valuation of Investment Property

The market value of investment property is determined, by an independent external real estate valuation expert, to be the estimated amount for which a property should exchange on the date of the valuation in an arm's length transaction. Properties have been valued on an individual basis. The valuation experts use recognised valuation techniques and the principles of IFRS 13.

The valuations have been prepared in accordance with the RICS Valuation - Professional Standards January 2014 (the "Red Book"). Factors reflected include current market conditions, annual rentals, lease lengths and location. The significant methods and assumptions used by valuers in estimating the fair value of investment property are set out in Note 13.

For properties under development the fair value is calculated by estimating the fair value of the completed property using the income capitalisation technique less estimated costs to completion and an appropriate developer's margin.

Judgements

In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements:

(b) Operating Lease Contracts - the Group as Lessor

The Group has investment properties which have various categories of leases in place with tenants. The judgements by lease type are detailed below:

Student leases: As these leases are all have a term of less than one year, the Group retains all the significant risks and rewards of ownership of these properties and so accounts for the leases as operating leases.

Nominations and Commercial leases: The Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the lease terms, insurance requirements and minimum lease payments, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the leases as operating leases.

Summary of Significant Accounting Policies

Basis of Consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2020. Subsidiaries are those investee entities where control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Specifically, the Group controls an investee if, and only if, it has:

(a) power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

(b) exposure, or rights, to variable returns from its involvement with the investee; and

(c) the ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

(a) the contractual arrangement with the other vote holders of the investee;

(b) rights arising from other contractual arrangements; and

(c) the Group's voting rights and potential voting rights.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.

The financial statements of the subsidiaries are prepared for the same reporting period as the Parent Company, using consistent accounting policies. All intra-Group balances, transactions and unrealised gains and losses resulting from intra-Group transactions are eliminated in full.

Financial Assets

The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. Other than financial assets in a qualifying hedging relationship, the Group's accounting policy for each category is as follows:

Fair Value Through Profit or Loss

This category comprises only in-the-money derivatives (see "Financial liabilities" section of out-of- money derivatives) . They are carried in the Statement of Financial Position at fair value with changes in fair value recognised in the Statement of Comprehensive Income in the finance income or expense line. Other than derivative financial instruments which are not designated as hedging instruments, the Group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.

Amortised Cost

These assets are primarily from the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivable is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within cost of sales in the Statement of Comprehensive Income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Impairment provisions for intercompany receivables are recognised based on a forward-looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, 12-month expected credit losses against gross interest income are recognised. For those where the credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and, in consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in the Statement of Comprehensive Income (operating profit).

The Group's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the Statement of Financial Position.

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and - for the purpose of the Statement of Cash Flows - bank overdrafts. Bank overdrafts are shown within loans and borrowings in current liabilities on the Statement of Financial Position.

Financial Liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired.

Other than financial liabilities in a qualifying hedging relationship (see below), the Group's accounting policy for each category is as follows:

Fair Value Through Profit or Loss

This category comprises only out-of-the-money derivatives (see "Financial assets" for in-the-money derivatives). They are carried in the Statement of Financial Position at fair value with changes in fair value recognised in the Statement of Comprehensive Income. The Group does not hold or issue derivative financial instruments for speculative purposes, but for hedging purposes. Other than these derivative financial instruments, the Group does not have any liabilities held for trading nor has it designated any financial liabilities as being at fair value through profit or loss.

Other Financial Liabilities

Other financial liabilities include the following items:

- Bank borrowing is initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the Consolidated Statement of Financial Position. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

- Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Hedge Accounting

Hedge accounting is applied to financial assets and financial liabilities only where all of the following criteria are met:

- at the inception of the hedge there is formal designation and documentation of the hedging relationship and the Group's risk management objective and strategy for undertaking the hedge; and

- the hedge relationship meets all of the hedge effectiveness requirements, including that an economic relationship exists between the hedged item and the hedging instrument, the credit risk effect does not dominate the value changes, and the hedge ratio is designated based on actual quantities of the hedged item and hedging instrument.

Cash Flow Hedges

The effective part of forward contracts designated as a hedge of the variability in cash flows of interest rate risk arising from firm commitments, and highly probable forecast transactions, are measured at fair value with changes in fair value recognised in Other Comprehensive Income and accumulated in the cash flow hedge reserve. The Group uses such contracts to fix the cost interest payments.

Intangible Assets

Intangible assets are initially recognised at cost and then subsequently carried at cost less accumulated amortisation and impairment losses.

Amortisation has been charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over ten years.

Investment Property

Investment property comprises property that is held to earn rentals or for capital appreciation, or both, and property under development rather than for sale in the ordinary course of business or for use in production or administrative functions.

Investment property is measured initially at cost including transaction costs and is included in the financial statements on unconditional exchange. Transaction costs include transfer taxes, professional fees and initial leasing commissions to bring the property to the condition necessary for it to be capable of operating.

Once purchased, investment property is stated at fair value. Gains or losses arising from changes in the fair values are included in the Consolidated Statement of Comprehensive Income in the period in which they arise.

Investment property is derecognised when it has been disposed of, or permanently withdrawn from use, and no future economic benefit is expected from its disposal. The investment property is derecognised upon unconditional exchange. The difference between the net disposal proceeds and the carrying amount of the asset would result in either gains or losses at the retirement or disposal of investment property. Any gains or losses are recognised in the Consolidated Statement of Comprehensive Income in the period of retirement or disposal.

Property, Plant and Equipment

All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure which is directly attributable to the acquisition of the asset.

Depreciation has been charged to the Consolidated Statement of Comprehensive Income on the following basis:

Rental Income

The Group is the lessor in respect of operating leases. Rental income arising from operating leases on investment property is accounted for on a straight-line basis over the lease term and is included in gross rental income in the Consolidated Statement of Comprehensive Income due to its operating nature.

Tenant lease incentives are recognised as a reduction of rental revenue on a straight-line basis over the term of the lease. The lease term is the non‑cancellable period of the lease together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the Directors are reasonably certain that the tenant will exercise that option.

Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the Consolidated Statement of Comprehensive Income when the right to receive them arises.

Where a student requested a rent refund and they met the criteria set out, including leaving the property, the Group recognise no further income in relation to that let, reduce cash with the cash amount refunded, wrote off any deferred income in relation to the refund and any difference between cash and deferred income was debited or credited to revenue in the Statement of Comprehensive Income.

Segmental Information

The Directors are of the opinion that the Group is engaged in a single segment business, being the investment in student and commercial lettings, within the United Kingdom.

Share-Based Payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the Consolidated Statement of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. So long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the Consolidated Statement of Comprehensive Income over the remaining vesting period. National Insurance obligations with respect to equity-settled share-based payments awards are accrued over the vesting period.

Share Capital

Ordinary shares are classified as equity. External costs directly attributable to the issuance of shares are recognised as a deduction from equity.

Taxation

As the Group is a UK REIT, profits arising in respect of the property rental business are not subject to UK corporation tax.

Taxation in respect of profits and losses outside of the property rental business comprises current and deferred taxes. Taxation is recognised in the Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised as direct movement in equity, in which case it is also recognised as a direct movement in equity.

Current tax is the total of the expected corporation tax payable in respect of any non-REIT taxable income for the year and any adjustment in respect of previous periods, based on tax rates applicable to the periods.

Deferred tax is calculated in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases, based on tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax liabilities are recognised in full (except to the extent that they relate to the initial recognition of assets and liabilities not acquired in a business combination). Deferred tax assets are only recognised to the extent that it is considered probable that the Group will obtain a tax benefit when the underlying temporary differences unwind.

1.6 Impact of New Accounting Standards and Changes in Accounting Policies

At the date of authorisation of these financial statements, the following accounting standards had been issued which are not yet applicable to the Group:

- IAS 1/8 definition of materiality amendment

- IFRS 3 definition of a business

- IBOR reform phase 1

- IFRS 16 amendment for rent concessions

The above standards or interpretations not yet effective are expected to have a material impact on these condensed consolidated financial statements of the Group.

2. REVENUE

3. PROPERTY EXPENSES

4. ADMINISTRATIVE EXPENSES

5. NET FINANCE COST