Empiric Student Property H2 2024 Earnings Report

Empiric Student Property EPS Results

• Actual EPS: GBX 4
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Empiric Student Property Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Empiric Student Property Announcement Details

• Quarter: H2 2024
• Date: 3/14/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, March 13, 2025
• Conference Call Time: 5:00AM ET

Empiric Student Property (LON:ESP) is a leading provider and operator of modern, predominantly direct-let, premium student accommodation serving key UK universities. 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.

Empiric Student Property H2 2024 Earnings Call Transcript

Key Takeaways

• Achieved effectively full occupancy for the third consecutive year and delivered a record blended like-for-like rental growth of 9.3%, well above inflation.
• Revenue rose 5% to $84.2 m, gross margin improved to 70%, EPRA earnings per share increased 5% to 4.2 p, and the dividend was lifted 6% to 3.7 p per share.
• Strengthened the balance sheet with a record low LTV of 27%, maintained over £70 m of liquidity, and completed a well-supported £56 m equity raise to fund strategic acquisitions, including a new Manchester asset.
• Sold 24 non-core assets for over £145 m at book value and fully refurbished Brunswick Apartments in Southampton, surpassing a 12% IRR target.
• Advanced ESG progress by achieving 64% of the portfolio at EPC B or better—well ahead of 2025 targets—and reducing energy intensity per bed by 3%.

Presentation

[Duncan Garrood, CEO at Empiric Student Property]

Very good morning, everybody, and thank you for joining Donald and myself. Our agenda today will be as follows. I'll give a short introduction. Donald will talk us through the financial and ESG performance. I'll then talk in more detail about the business, and then we'll take any questions you may have. Let me start with a summary. Four years ago, we presented a transformation plan designed with a strategic focus to deliver results that would benchmark well. Today, we give those results on a suite of KPIs that show our transformation has delivered. Here are the headlines. Focusing on locations with growing long-term market demand and declining market supply, we've delivered effectively full occupancy for three consecutive years. Our Hello Student operating platform, with the dynamic pricing capability we added in 2021, has delivered record like-for-like rental growth.

[Duncan Garrood, CEO at Empiric Student Property]

In 2024, this rose to a blended 9.3%, with 10.5% for academic year 2023/2024, and for the current academic year 2024/2025, it's reached 7%, well above inflation. Our gross margin reached 70% as promised and ahead of peers. LTV was at 27%, the lowest ever at year-end. Our portfolio valuation was up 4.2% like-for-like, excluding the Multiple Dwellings Relief tax impact. Continuing this focused strategy and to drive growth, in Q4 2024, we raised GBP 56 million in a well-supported equity raise. We're successfully deploying this capital as promised. This included the acquisition of a new asset in Manchester in December, and we're currently at an advanced due diligence stage of a further strategic acquisition. We also acquired two additional sites in Bristol and Glasgow, with more acquisitions in the pipeline. We continue to actively manage our portfolio.

[Duncan Garrood, CEO at Empiric Student Property]

Our disposal program has completed, and in aggregate, we sold 24 assets for over GBP 145 million, broadly in line with book value. We fully refurbished Brunswick Apartments, Southampton, with significantly uplifted rent and have exceeded our target 9-11% IRR. Three years ago, our customer service had a Net Promoter Score of only +10. By 2024, this rose to +32, significantly above our peers at +19. Our customer satisfaction has reached an all-time high of 86%. We've had a record number of rebookers, with 53% of all eligible rebookers choosing to stay a further year. Our dividend is up 6% on the previous year. ESP is delivering best-ever metrics as a result of this transformation. Our results benchmark well within our sector, and we're pivoting to growth to drive shareholder value. Now I'll hand over to Donald to take us through the financial performance.

[Donald Grant, CFO at Empiric Student Property]

Thank you, Duncan, and a very good morning to you all. I'll now talk you through the financial performance and ESG highlights of 2024. This time last year, we messaged that the business had materially completed its transformation, including its non-core disposal program, and we're seeking to shift its focus toward growth. I'm pleased to say that despite some challenges, we've made a good start to delivery of this growth agenda. Let's look first at the income statement highlights. Revenue for the year increased 5% to GBP 84.2 million. This masks underlying growth and blended like-for-like rents of 9.3%, which have been achieved across the financial year of 2024. We'll look into this a little further shortly. Gross margin has continued to improve in line with guidance, with a 1 percentage point increase to 70%, demonstrating the efficiencies that can be generated from our clustering model.

[Donald Grant, CFO at Empiric Student Property]

Cost challenges anticipated in 2025 will see us expect to hold this gross margin at about 70% for the year ahead. Administrative costs increased 10%, primarily in support of the group's growth agenda, together with the full-year impact of the inflationary environment we all experienced during 2023. The increase includes a non-recurring GBP 0.5 million charge related to abortive joint venture costs, which, when removed, result in underlying costs very much in line with guidance at GBP 15 million. Finance costs have also increased by 12% to GBP 19.5 million. This includes a non-recurring charge of GBP 0.9 million related to refinancing activity concluded earlier in the year, which, when removed, results in a change of 7% year on year, with the increase linked to higher overall drawn debt carried at a marginally higher average cost. EPRA earnings have increased 5% to 4.2 pence on a per-share basis.

[Donald Grant, CFO at Empiric Student Property]

This time last year, we set out a 2024 minimum dividend target of 3.5p. To date, dividends paid have been in line with this target. However, the full-year performance of the business continues to support a progressive dividend, and we are pleased to be in a position to increase our total 2024 dividend to GBP 0.037 per share, a 6% increase on the prior year. Our fourth quarter payment of GBP 0.01075 will be made to shareholders in April. This chart breaks down the key components of revenue across the year. With strong occupancy in both the current and prior periods, the 5% increase in revenue to GBP 84.2 million includes, firstly, like-for-like growth of GBP 7.4 million, a little over 9%. This follows the 2023 and 2024 sales programs and the benefit of our dynamic pricing capabilities.

[Donald Grant, CFO at Empiric Student Property]

Three properties acquired during the year contributed a further GBP 0.7 million in revenue, this being offset by the disposal of eight non-core properties that had contributed GBP 3.4 million in aggregate to income during 2023. The impact of capital and refurbishment works reduced 2024 headline rent by a further GBP 1 million. The short-term refurbishment cost is expected to add a little over GBP 1 million in annualized incremental revenue as this returns in 2025. Now on to the balance sheet. EPRA NTA per share has decreased 0.9% to 119.6 pence. The decrease is largely due to the company's equity placement in October, which was 2.5% dilutive to NTA. Although dilutive to NTA, income increase can be expected from 2025, with the proceeds of the placement earmarked for deployment toward accretive operational acquisitions and to fund the conversion of sites for postgraduate exclusive use, which are also expected to deliver attractive returns.

[Donald Grant, CFO at Empiric Student Property]

The portfolio delivered a net 1.6% like-for-like valuation increase in 2024. This is inclusive of increased purchase cost adjustments of GBP 26.5 million, reflecting the abolition of Multiple Dwelling Relief earlier in the year in England and more recently in Wales. On the assumption these legislative changes had been in effect at the start of the year, the portfolio's underlying like-for-like growth would have been 4.2%. We continue to hold comfortable levels of liquidity with over GBP 70 million on hand and no near-term refinancing needs. Borrowings have increased modestly to GBP 374 million, with a lower overall EPRA LTV of 27.2%. On a pro forma basis, assuming the proceeds of the placement are fully deployed, EPRA LTV would be around 29%. Finally, NAV growth and dividends paid over the past three years has delivered an annualized total accounting return of over 6.5%.

[Donald Grant, CFO at Empiric Student Property]

One-year TAR of 2% reflects the impact of Multiple Dwelling Relief and the dilutive impact of the placement, both discussed earlier. This next slide bridges the evolution of net asset value, highlighting its key value drivers. EPRA earnings of GBP 25.9 million added 4.2 pence per share. Net valuation gains a further 2.5 pence, with the payment of quarterly dividends returning 3.6 pence to shareholders in the year. The dilutive impact of the equity placement shaved 3.1 pence off NTA, with losses recognized on the disposal of eight non-core properties during the year, reducing NTA by a further 0.7 pence. On a look-back basis, non-core asset disposals have, on average, traded very close to their valuation, with almost GBP 150 million in total disposed of at just 0.2% below valuation. The portfolio net initial yield has remained stable across the year.

[Donald Grant, CFO at Empiric Student Property]

The reversionary yield has also held at 5.7%, providing confidence that as the letting cycle advances for the new 2025/2026 academic year, further valuation rise could be expected. I'd next like to provide an update on the deployment of proceeds from October's placement. We raised a little over GBP 54 million after costs. Firstly, GBP 30 million was earmarked for deployment into two well-aligned acquisition opportunities in key university cities where we could benefit from the efficiencies of clustering nearby our existing operational sites and the potential for future refurbishment and its associated rental growth. Both acquisitions were expected to deliver a net initial yield of 6%+.

[Donald Grant, CFO at Empiric Student Property]

Secondly, GBP 24 million was to fund the conversion of seven further sites to the group's postgraduate exclusive product, a product designed with postgraduate needs in mind, with larger fully contained rooms designed for dual occupancy, less social amenity space, and well located for ease of access to the universities. To date, we have completed the acquisition of Tatton House in Manchester. This 136-bed all-studio scheme was acquired in December 2024 for GBP 19.75 million. The property is located opposite our existing Victoria Point hub site and close to the University of Manchester, allowing us to unlock clustering benefits immediately whilst presenting refurbishment upside and future potential to expand the site through development. More on that from Duncan shortly. This operational asset is expected to deliver a 7% yield from September 2025. A second acquisition is currently under offer and in advanced due diligence and anticipated to conclude shortly.

[Donald Grant, CFO at Empiric Student Property]

We will provide a further update once this is concluded. Preparatory work for postgraduate conversion is ahead of our original plan, with three existing sites in progress and over GBP 10 million on track for investment in 2025. Furthermore, our academic year 2025/2026 sales program has been amended to facilitate the refurbishment of a further four sites during 2026, and we continue to expect these refurbishments to deliver unlevered IRRs of at least 12%. Here we set out the key buckets where CapEx is planned for investment through to the end of 2025. Good progress has been made this year with over GBP 25 million invested. Firstly, in respect to undergraduate refurbishments, over GBP 10 million has been invested primarily toward one of our larger properties in Southampton, which was closed for the duration of the 2023/2024 academic year to facilitate a full building refurbishment reconfiguration and alongside fire safety and decarbonization work.

[Donald Grant, CFO at Empiric Student Property]

Upon reopening in September, the scheme delivered an increase in average weekly rents of over 50% when compared to its pre-refurbishment year of operation. This performance surpassed our expectations, delivering a yield on cost above 6.5% and an IRR in excess of target at 12%. Another great example of the attractive returns refurbishments done well can deliver for us. GBP 13 million was invested in our fire safety works program during the year, and we now have 73% of the portfolio certified. A pound-for-pound deduction for the residual cost of these works is fully reflected within our valuations, and we remain comfortable with the overall cost of this program. GBP 2.4 million has been applied towards green investments in the year, with good progress made on our key ESG objectives, which I'll discuss shortly. Turning next to debts and liquidity.

[Donald Grant, CFO at Empiric Student Property]

During the first half of 2024, we completed a GBP 125 million seven-year refinancing, consolidating four small near-term facilities and removing refinancing risk until 2028. The facility provides for a significantly lower overall ICR covenant and greater flexibility with respect to the use of the security pool. Weighted average maturity has been extended to 4.7 years, with all drawn debt currently fixed or subject to an interest rate cap, which will provide some benefit should interest rates continue to fall. Next, a snapshot of our ESG progress in 2024. I will just highlight a couple of key achievements and also targets for the year ahead. In our net zero strategy, we set an interim target to have 50% of the portfolio rated EPC B or better by 2025. This is a target we have achieved earlier than planned, with 64% of the portfolio now achieving the standard.

[Donald Grant, CFO at Empiric Student Property]

Furthermore, our energy intensity per bed has reduced 3% this year, demonstrating good progress in these core pillars of our net zero strategy and evidence that our green investments are beginning to deliver reduced consumption and with it associated cost savings. Our ambitious on-site decarbonization plan targets achieving fossil fuel-free status across 40% of the portfolio by the end of 2025. In respect to health and safety, we've delivered a new lone worker support system, and during the year ahead, we will seek to install external defibrillators at appropriate sites where they are not currently available within the near vicinity. The mental health and well-being of our customers and our people will always be a key priority for the business, and we were proud to have our efforts recognized at the GSLI Awards in 2024, where we were awarded the accolade of Best Student Wellbeing.

[Donald Grant, CFO at Empiric Student Property]

In the forthcoming year, we will seek to further grow our collaboration with universities on this important topic. In 2024, we launched our apprenticeship scheme and developed a bespoke future leaders program for the rising stars within our business. In 2025, alongside the now annual sustainability awareness campaigns, we will seek to improve recycling plans at all our sites, providing our people and our customers with the knowledge and opportunity to make a real difference in waste diverted from landfill. Now on to the outlook for the year ahead. Despite a return to pre-COVID booking patterns, the continued increase in student application numbers, the growing cohort of 18-year-olds, and significantly greater focus on international recruitment by universities continues to provide confidence that we will again secure occupancy rates of 97% or above, with rental growth of around 5% for the forthcoming 2025/2026 academic year.

[Donald Grant, CFO at Empiric Student Property]

We expect costs to remain broadly in line with 2024, with higher compensation-related costs on the horizon and our historic energy hedge having now expired and rebased. We expect the rate of improvement in gross margin to be somewhat tempered and hold at around 70% during the year ahead. The decision to terminate joint venture discussions in favor of our independent growth strategy has precipitated a review of the resources that were established in its anticipation, and we expect, therefore, only a modest overall increase in administrative costs during 2025. With downside risk protection in place, finance costs are expected to remain at 4.5% for the year ahead. We are currently letting around 7,650 beds for the next academic year starting September, with our refurbishment work largely planned during summer vacancies rather than creating year-long voids.

[Donald Grant, CFO at Empiric Student Property]

Finally, the board was pleased to be in a position to declare a dividend in excess of its initial target in 2024. We remain committed to a progressive dividend policy and will therefore initially target a minimum dividend of GBP 0.037 in 2025 and will again revisit this as the year progresses. That brings to a close my part of this morning's presentation. Thank you all for joining us, and now back to Duncan.

[Duncan Garrood, CEO at Empiric Student Property]

Thank you, Donald. The latest UCAS undergraduate applications data for academic year 2025/2026 shows growth of 1%, with domestic students up 0.5%. Non-EU international applications grew by 3.1% despite what was widely reported in the media. Within the international undergraduate group, American, Indian, Singaporean applications are all up, and our largest category, Chinese applicants, increased by a bumper 8.9%. This shows the compelling attraction of a UK student experience despite the changes in visa rules.

[Duncan Garrood, CEO at Empiric Student Property]

For several years, we've seen a flight to quality amongst students, and there is no exception this year, with applications to the higher tariff universities growing 4.3% at the expense of the lower tariff ones, which declined by 3.2%. This increasing polarisation validates our strategy of focus on top quality universities as we attract better funded students seeking modern, homely, high-quality accommodation in prestigious locations. With speculation in the media about the fall in international postgraduate applications due to dependent visa changes, we might have expected a significant reduction. However, postgrad numbers in the higher tariff universities that we serve remained stable and above pre-COVID levels. As predicted, there were large falls in applications to lower tariff universities, which were favored by the students most affected by the cessation of dependent visas, but this has had no impact on our business as we do not serve them.

[Duncan Garrood, CEO at Empiric Student Property]

Postgrads grew 2 percentage points of our customer mix, making up 41% of all our customers, showing we've grown market share as our focus on this key customer segment grows. The proportion of international customers within our business for academic year 2024/2025 grew to 69%, our strongest ever. Our Chinese customer base was very strong, representing 40% of total customers, and pleasingly, our other international customers grew from 18% of the total to 29%, showing our marketing strategies and product appeal are impactful. This growing and diversified student demand profile, particularly in higher tariff locations, is set against only 20,000 new PBSA beds delivered in the last two years and a significant reduction in HMO and buy-to-let housing stock. This means demand for our accommodation is good, and we are effectively full for a third consecutive year and anticipate the same for 2025/2026.

[Duncan Garrood, CEO at Empiric Student Property]

Let me remind you of the key strategies of the business that have remained consistent for the last four years. We've made good progress on each of these, but today I'll just focus on some to explain the advances made. We first presented our portfolio segmentation in March 2021, and four years on, I'm pleased to say it's no longer relevant. Our disposal program is complete, although you should expect to see ongoing prudent portfolio management as we continue to optimize our cluster management strategy and our focus on aligning with top quality universities. As you can see, we've exited six cities and remain in 23. We'd expect further concentration over time as opportunities arise to consolidate around the top-tier universities and grow our alignment above 90%. Today, 97% of our portfolio are in prime or super prime real estate markets.

[Duncan Garrood, CEO at Empiric Student Property]

Growing cluster quality and density through operational site acquisitions, asset transformation, refurbishment, and development through planning enhancements forms our ongoing process for continuous portfolio improvement and growth. Since launch, this has delivered strong uplift in valuations, like-for-like rental increases, and attractive IRRs. As part of this, we've brought about product innovation and differentiation, for example, our Postgraduate by Hello Student brand. After successful pilots, this is now in rollout phase with 16 conversions of existing sites to be included in our capital program. We often see many development opportunities in real estate that few others want. Offices, retail, dilapidated apartments can suit us well, with only modest competition even in prime locations.

[Duncan Garrood, CEO at Empiric Student Property]

To exploit these growth opportunities, we successfully raised GBP 56 million in quarter four 2024 by issuing new equity in a well-supported process, with a commitment to shareholders that we'd acquire at least two new operating assets and hold on to the compelling returns from our conversion to our postgrad assets. This process is on track, and we completed the first of the asset acquisitions on time as promised and expect to complete the second shortly. Tatton House in Manchester lies directly opposite our existing Victoria Point site. It has 136 excellent oversized studio bedrooms but no amenities, making it the perfect complement for our well-amenitised adjacent Victoria Point offering, providing all students first-class facilities immediately. It brings instant margin-enhancing cluster benefits, plus the opportunity for a refurbishment IRR boost in due course.

[Duncan Garrood, CEO at Empiric Student Property]

There's also development potential to add a further 40 beds on the underdeveloped rear of the site, providing yet more upside. We're very pleased that our planning application for a 310-bed extension and refurbishment of our Victoria Point cluster was approved in full. This consented scheme will unlock significant value, and we're considering delivery options, including a phased development allowing the site to remain operational in part throughout. This overall master plan will be the most significant undertaken in our 10-year history, combining our in-house development and refurbishment expertise, and we're currently considering funding options. We've delivered significant shareholder value through our extensive refurbishment program, and an excellent example of that is Brunswick Apartments in Southampton. We closed the site for a year and completed all fire safety works, decarbonising programs, and room upgrades, reconfigured more rooms to studios, and centralised the expanded amenity spaces with a very impactful redesign.

[Duncan Garrood, CEO at Empiric Student Property]

This building has sold well, with rents 50% higher than pre-closure, and is delivering a refurbishment IRR above 12% with outstanding customer feedback. In 2025, outside of the postgrad program, we'll refurbish a further two assets with more than 230 beds plus amenities and drive our net zero pathway whilst completing any associated fire safety works as we go. As mentioned, our capital raise has allowed us to fund our postgrad conversion program. Seven sites will be completed within the coming two academic years, including three for academic year 2025/2026. 17% of the portfolio comprise assets with the potential to convert to our postgrad by Hello Student brand. We see a bright and growing future for this differentiated segment-leading brand. With an in-house revenue management platform, marketing, and dynamic pricing, we've delivered significant improvements in revenue occupancy since academic year 2019/2020.

[Duncan Garrood, CEO at Empiric Student Property]

We're very pleased that revenue occupancy for academic year 2022/2023 and 2023/2024 reached a post-COVID catch-up of 99%, and for academic year 2024/2025, this has reached 97%, a level we'd consider effectively full and sustainable. We also delivered a like-for-like rent increase of 7% for academic year 2024/2025, a very strong performance given falling inflation and prior year double-digit rental growth. Academic year 2025/2026 bookings are returning to pre-COVID patterns that we believe will most likely be the pattern for the future, and this includes another strong rebooker performance following an early launch date that helps reduce customer acquisition costs and validates value. This normalisation of the booking cycle, while still ahead of the last pre-COVID academic year of 2019/2020 and the current strong rate of demand, leads us to anticipate being effectively full again in academic year 2025/2026, assuming a conducive geopolitical environment.

[Duncan Garrood, CEO at Empiric Student Property]

With rising rents, our customers expect an increasingly high-quality experience, a good value for money. Therefore, our drive for high standards of service and memorable customer experiences has never been more in focus. Better customer experiences drive higher customer satisfaction measured as Net Promoter Score, and this in turn allows rents to support sustainable increases. The record proportion of eligible rebookers choosing to remain with us shows our offer is attractive and good value. We're continually improving our check-in processes, and our app is making a significant impact on customers' ability to communicate with us and in driving up our service responsiveness. We also launched a brand-new website. We've developed a new events and CRM program to further engage customers in our community, recognizing the cultural mix in our buildings and creating a homely, engaging, and fulfilling stay with us.

[Duncan Garrood, CEO at Empiric Student Property]

We're pleased that because of these and many other improvements, our autumn Net Promoter Score has risen to +32, which is significantly above our peer group, which is at +19 and ahead of our 2023 NPS. Our rebooker rates are also record levels, with 53% of those eligible booking another year with us, an all-time high rate. Great service is only delivered through capable, well-motivated people, and we've continued to invest in them. We launched a new development and personal growth plan with internal promotions now providing over 60% of all non-entry-level vacancies. Having invested in communications and wellbeing programs, our colleague engagement is strong at nearly 80%, and our retention remains high, also at nearly 80%.

[Duncan Garrood, CEO at Empiric Student Property]

Recent unforeseen cost pressures resulting from the October U.K. budget will inevitably impact our people cost, and together with our decision not to produce a joint venture has meant we're pursuing efficiencies and looking to technology shifts to keep our costs tightly managed. In summary, our plans are focused on delivering continually improving and sustainable shareholder returns. Our strategy and ever-improving operating platform is driving performance with more opportunities ahead. We've delivered strong and sustained occupancies, like-for-like rental growth, and good margins. To date, we've deployed the raised capital on plan, completing one acquisition with a second expected to follow shortly. The postgrad refurbishment and conversion program has been accelerated as promised. Our proven cluster management strategy, the success of our postgrad product, planning enhancements, and refurbishments are all delivering attractive growth and IRR opportunities. We've made good acquisitions in line with our promises and have an encouraging pipeline.

[Duncan Garrood, CEO at Empiric Student Property]

We've completed the disposal program, and our year-end LTV was at a record low, protecting shareholder interests in this challenging market. We expect to pay a minimum dividend of GBP 0.037 this year, fully covered, and it is progressive. In conclusion, our transformation has substantially delivered and is generating the performance metrics that we promised. The opportunity ahead is to drive home the advantages gained and continue to grow. Thank you very much, and we'll now be happy to take your questions.

[John Cahill, Managing Director and Head of UK Equity Research at Stifel]

Thanks. Morning, John Cahill from Stifel. Thanks for a great presentation. Just wanted to ask, really, the dividend guidance that you've given every year is a minimum usually of what you've paid the last year, and that's fair enough.

[John Cahill, Managing Director and Head of UK Equity Research at Stifel]

I just wonder, how does that conversation go between you and the board that presumably you've given them a presentation like this where everything is going in the right direction, everything? The debt cost is finalized in the best sector that you could probably be in, except occupancy, rents going up, etc., etc. You say, "Right, well, what will we tell the market on dividend?" "Oh, well, at least the same as last year." It feels a bit like a sort of shoulders down moment, and you really don't need to do that. You see what I'm getting at? Why not be more? I'm not expecting you to change this year's guidance, but why not just be a bit more optimistic?

[Duncan Garrood, CEO at Empiric Student Property]

I guess partly I belong to the surprise and delight philosophy of life, as does Donald.

[Duncan Garrood, CEO at Empiric Student Property]

I think the non-sort of flippant answer would be there is always uncertainty in the world. We have, unlike most businesses, a long booking cycle, and at the time of presenting today, we are about halfway through that booking cycle. As we've indicated, we're very confident, and every indication is that we'll complete the booking cycle with a 97% occupancy, but that's never a certainty, of course. We would always want to deliver the promises that we make to our shareholders, and therefore, when we look forward, we will take a view on the conservative side of ensuring that we deliver, and then hopefully with the ability to deliver a little upside. I would, of course, remind that as a REIT, our dividend is relatively a fixed formula so that this is not an entirely discretionary formula for the board.

[Duncan Garrood, CEO at Empiric Student Property]

We will be distributing according to the PID payments that we have as a REIT, naturally, of course, and that's something that people can clearly calculate. The philosophical point, John, I understand.

[John Cahill, Managing Director and Head of UK Equity Research at Stifel]

Thank you.

[Matthew Saperia, Real Estate Analyst at Peel Hunt]

Morning, it's Matt Saperia here from, excuse me, Peel Hunt. Can I just ask about balance sheet capacity? You mentioned record low LTV. The slide shows how you're going to spend the money that you raised in the final quarter of last year. I'm guessing beyond that, though, the balance sheet has given you scope to potentially invest more. Is that the case? Could you put a number on it and perhaps sort of talk about the options available for that surplus investment capacity? Is it more refurbishments? Is it acquisitions? Is it Victoria Point? Others?

[Donald Grant, CFO at Empiric Student Property]

Sure, no problem there. 27% LTV at 31 December.

[Donald Grant, CFO at Empiric Student Property]

I think we must assume that the proceeds of the capital raise will be deployed, and you would expect LTV on that assumption to be around about 29%. We guide LTV between 30% and 35%, but I guess with interest rates the way they are, it's got to be quite a compelling opportunity to tap new debt. We do have the ability within our longer-term fixed-rate facilities to deploy disposal proceeds, which are in the region of GBP 30 million. I think you can see that being deployed during the course of 2025. Where's it going to go? I think the refurbishment plan and our CapEx program is fully funded already, so I think you can expect that to go towards acquisition opportunities, and my money would go on operational acquisition opportunities, so immediately income generating.

[Matthew Saperia, Real Estate Analyst at Peel Hunt]

Mike. That's too much.

[Donald Grant, CFO at Empiric Student Property]

Thank you.

[Donald Grant, CFO at Empiric Student Property]

A couple for me, please.

[Donald Grant, CFO at Empiric Student Property]

Interesting to see that Oxford and London University drop out your definition of super prime or prime universities in terms of the tail end of the scale there. NPS score 32 is very good and especially good against the competition, but that's out of 100, though, isn't it?

[Donald Grant, CFO at Empiric Student Property]

Yes, it is.

[Donald Grant, CFO at Empiric Student Property]

Okay. Perhaps you can give some guidance on that. The dilution of 2.5% of the net asset value instead of the joint venture. What would have the cost of the joint venture have been compared to the dilution you've taken on the placing? The implication seemed to be in that comment just now, there seemed to be an increase in people costs through the joint venture, which presumably would have been shared with somebody. Perhaps you could actually give some color on that as well, please.

[Duncan Garrood, CEO at Empiric Student Property]

Sure. Let me cover another Net Promoter Score.

[Duncan Garrood, CEO at Empiric Student Property]

As you know, Mike, my background prior to joining Empiric was in hospitality, and I have been known publicly to say I would have been shot for an NPS of +32 in hospitality, but you have to look at this in a relativity. One of the things I would say about our sector as opposed to retail and hospitality, where Net Promoter Score is a very commonly used measure of customer service, is that in hospitality you'll typically have a customer interaction that lasts about two hours, maybe three if it's a long dinner. In our case, our customers are with us for a year. The result of their evaluation on Net Promoter Score is one formed over many weeks and months.

[Duncan Garrood, CEO at Empiric Student Property]

Of course, that reflects their experience in terms of not just the interaction with people, but also things like service, maintenance, fixes, and so on. This sector has come from a relatively low start point in service and scoring. I think what's most pleasing and most important is to see the relative improvements year on year. I think certainly my experience back into hospitality to take something from +10 to +30 with that level in a three-year period is quite unusual and something we're proud of. Is +30 to a place where we rest? Absolutely not. There's competitive advantage there to be gone much beyond that, for sure. On the JV, do you want to pick up Mike's comments on 2028?

[Donald Grant, CFO at Empiric Student Property]

Mike, look, 2.5% dilution, not an insignificant impact on total return for this year, point well noted.

[Donald Grant, CFO at Empiric Student Property]

I think it's probably fair to say that the pricing on a joint venture wouldn't have been necessarily at book either, so there would have been an element of a discount there. Ultimately, the board needed to take a view as to whether or not the final terms on a joint venture discussion were in the best interest of shareholders. It was concluded that actually the more independent approach based on the share price that we managed to raise at was simply in the best interest to keep the business significantly more streamlined and simple. I think you also asked about London, Oxford. London, I'll leave that one to you.

[Duncan Garrood, CEO at Empiric Student Property]

The London and Oxford. The reality is those are fantastic markets if you could get a strategic position in them. Oxford and Cambridge, obviously two of our best universities.

[Duncan Garrood, CEO at Empiric Student Property]

The real estate for accommodation is virtually exclusively owned by the university. As the Vice Chancellor told me at a dinner fairly recently, we've owned it since 1350. We're not about to sell it. I think there's a purely practical reason why those are markets we can't get in. The property that we did have in Oxford didn't serve the university in Oxford. It served Brookes, and it was a solo small building with very low efficiency. Similarly, in London, it's extremely hard to get a cluster of buildings located together near one of the prime universities, as per our model. If we could do so, we would love to.

[Duncan Garrood, CEO at Empiric Student Property]

We see plenty of value opportunity in there, but the practicalities are it's very hard to find a speedy pathway to acquiring that level of real estate over a meaningful period of time, and therefore we've concentrated on other markets. It's purely practicality.

[Duncan Garrood, CEO at Empiric Student Property]

Perhaps then as a follow-on, at the other end of the scale, you're in Manchester, significantly your largest market, and it's a very good town, like city rather, and multiple further education sort of establishments there. Are you at risk of going overweight because you're buying now in Manchester again, aren't you? Is there a ceiling at which you want to be exposed to any of these one markets?

[Duncan Garrood, CEO at Empiric Student Property]

Yeah, it's a great question. We will have our first over 1,000-bed market.

[Duncan Garrood, CEO at Empiric Student Property]

When you compare that to the size of the university, we are still a minnow in our market share for providing accommodation in that university. Of course, this is a university that's significantly investing in its own asset base and its own faculties. We are seeing planned future growth for Manchester. At the moment, we see absolutely nothing but upside in Manchester. There is an interesting question in there, Mike, which is what is the maximum size of a cluster that you can have? The truthful answer is we do not know, but we will let you know when we find it. Thus far, in most of our markets, we would consider ourselves to be certainly subscale. Thanks.

[Donald Grant, CFO at Empiric Student Property]

We have a couple of questions online. I have one from Mike from Symetra. First, there are a few questions here.

[Donald Grant, CFO at Empiric Student Property]

The first one, for the refurbishment works, how many years on average is the cycle? I think it's fair to say, Mike, that we would typically do this over the course of one year. We would ordinarily, when refurbishing a building, sell it short for the academic year ahead. Depending on the amount of work that needs doing on the site, we'll either sell it for 44-48 weeks rather than the standard 51 weeks to provide us with a window of 8-10-12 weeks to complete the refurbishment. Question two was, what do you need to do to improve your target IRR on refurbishment works closer to market standard, i.e., above the 11% target? Look, great question. We're very much focused on this, especially where interest rates are at the moment, trying to target the upper end of the return range.

[Donald Grant, CFO at Empiric Student Property]

I think you see that this year with a real focus on postgraduate refurbishments, which typically deliver the higher returns. We say 12% is our target there, and that's very much where we are focusing our efforts in 2025.

[Duncan Garrood, CEO at Empiric Student Property]

I think as well, Mike, it's worth noting that the Brunswick Apartments refurbishment that we referred to in the presentation did beat our target of 9%-11%, was certainly well above that.

[Donald Grant, CFO at Empiric Student Property]

Question three, how much of the refurbishment works are taken on a rolling room basis during the term to maximize ROI, and what is stopping increasing this? Look, we do do that. We'll either do a summer refurbishment or we'll take a rolling refurbishment program. Of course, if we roll, we're taking rooms out for a full academic year as we move through the building. We've done it before.

[Donald Grant, CFO at Empiric Student Property]

We'll do it again, I'm sure, but we have to be mindful of the impact on our customers in the building. We typically take out a floor rather than working on a floor which has students in situ. This year, looking forward, the refurbishment plan is primarily summer. We do not have many rooms out for the full year at all. Your final question, Mike, was for fire door inspection, maintenance, and installation works. Are these being combined where possible with room refurbishment works to improve our ROI? Absolutely. We would always look to combine these works when we are intervening in a building. Second question from Bjorn. Hi, Bjorn, Panmure Liberum. Question one, can you run us through what has offset revenue growth considering Like-for-like was 9% versus revenue growth, headline revenue growth, this is of 5%? Was it just disposals?

[Donald Grant, CFO at Empiric Student Property]

Bjorn, slide seven is probably where I'd direct you. Yes, it's disposals, but also the impact of capital works. We did have some rooms out for the duration of this year, primarily this building in Southampton, so that did have an impact on headline revenue as well. Question number two, are the admin costs increased by circa GBP 600,000? Is that line item purely the abort of JV costs? Look, we did have abort of JV costs in the region of GBP 500,000, but otherwise, the underlying growth in admin costs was simply the impact of inflation across 2024. You remember we tipped the 11% during 2023, so that is now impacting the first full year in 2024. Yes, there's an underlying inflationary adjustment as well.

[Donald Grant, CFO at Empiric Student Property]

Bjorn, your next question, final question, can you run us through all the one-off costs to strip out of your EPS calc to get a more recurring EPS number? Actually, the number of 4.2 pence is a recurring EPS number. You're allowed now to strip out one-off costs. For transparency, there's only two. They tot to GBP 1.4 million. It's the abort of JV costs, GBP 500,000, and GBP 900,000 of costs associated with the refinancing done in the first half of 2024. Another question just come in from Andrew, TIME Investments. Good morning, Andrew. Your question is, valuation growth slowed in the second half of 2024. Does this tend to be a pattern for valuers because of the booking cycle, or did they become more cautious? Great question.

[Donald Grant, CFO at Empiric Student Property]

The valuers, there'll be many strands to the answer here, but the main issue here is that the valuers typically look forward to the next academic year and take our income assumptions where we have secured occupancy above 80%. Where we haven't done so, and I think you see in the graph there, we're sitting around 50% currently. They use their own income assumptions, which are typically a little lighter than our own. What you can expect to see is potentially a bigger tick up in the first half valuation from an NTA perspective, as they recognize then the fact we'll be much more advanced in our sales program, and they will have no choice but to adopt our rents. I think that might be it.

[John Cahill, Managing Director and Head of UK Equity Research at Stifel]

Can I just ask a more strategic question about the cost base and your ability to leverage it?

[John Cahill, Managing Director and Head of UK Equity Research at Stifel]

Looking at your actual cost ratio, it's pretty high, and the acquisitions that you can do on balance sheet are not really going to move the dial a huge amount in dropping that cost. Are there more strategic kind of acquisition type deals that you can do that can add meaningful number of properties to the group that will help you drop that down considerably rather than just in small increments? It's hard because of where the share price is, obviously. Is there an opportunity for doing any kind of share-for-share type deals with private companies? Is that something you've explored?

[Donald Grant, CFO at Empiric Student Property]

Yeah, that's a great question.

[Donald Grant, CFO at Empiric Student Property]

You have put your finger on exactly the nub of the strategic option for the business, and that is we are subscale, and growth is exactly the right route to leveraging those relatively fixed overheads. We have done two things, or we are in the process of doing two things. One is, as Don has been describing, making sure those overheads are as efficient as they possibly can be, and hence going through the exercises we are at the moment to improve our efficiency to make sure that that base of administrative cost does not grow beyond that which it needs to be. Much more importantly, though, getting growth through acquisition of more assets. There are a few routes to doing that. One we already explored last year, which is potentially to form a joint venture.

[Donald Grant, CFO at Empiric Student Property]

We decided in the end it was better value for shareholders to go out and raise capital on the market, which we did in October. We do not discount other routes to getting growth into the future, and that could leverage the business certainly. The second thing is if the markets are suitably inclined, which at the moment looks challenging, but one would hope in the not too distant future will change, further injections of capital into the business of the nature that we have done would be something we would like to do. Most importantly, we are seen to deploy the money that we did raise in a prudent manner, and that does improve the EPRA cost ratio, as you rightly say, as well as obviously all the margin benefits that go with that scaling. Are there other strategic options available?

[Donald Grant, CFO at Empiric Student Property]

There are always other strategic options available, though they're not exclusive. They are under our control. Those are things that, of course, we would consider doing if they were appropriate. The interesting thing, of course, in the PBSA market is there are already two listed companies, and everything else is in private hands. Therefore, those discussions become much more complicated with that nature of ownership. Scaling this business and using the benefit of its now, as I hope you will see, very efficient operating platform across a greater asset base is absolutely the number one priority.

[Duncan Garrood, CEO at Empiric Student Property]

Do we have any more questions?

[Donald Grant, CFO at Empiric Student Property]

Nothing more online now.

[Duncan Garrood, CEO at Empiric Student Property]

Nothing more online. In which case, thank you very much indeed. We really appreciate everybody coming, and we appreciate your support. Thank you so much.

Participants

Executives

• Donald Grant, CFO
• Duncan Garrood, CEO

Analysts

• Matthew Saperia, Real Estate Analyst at Peel Hunt
• John Cahill, Managing Director and Head of UK Equity Research at Stifel
• Analyst