Empiric Student Property confident after solid first half

Empiric Student Property reported a strong financial and operational first-half performance on Thursday, with a strategic shift towards growth as the company capitalised on favourable market conditions.

The FTSE 250 company reported a 10.5% like-for-like increase in rental growth, driving a 2.7% rise in revenue to £42.4m, up from £41.3m in the same period last year.

Its gross margin improved slightly to 72.2%, with expectations of a full-year moderation to around 70%, in line with guidance.

Despite inflationary pressures, the company maintained stable EPRA earnings at 2.3p per share, representing a 2.8% increase on a company-adjusted basis.

The portfolio's valuation rose to £1.13bn, reflecting a 1.3% net like-for-like increase, while the net initial yield slightly decreased to 5.4% from 5.5% at the end of 2023.

Meanwhile, EPRA net tangible assets (NTA) per share grew by 1.7% to 122.8p.

Empiric paid and declared first-half dividends of 1.75p per share, marking a 7.7% increase over the prior year.

Looking ahead, Empiric said it was on track for its most successful re-booker campaign, with occupancy for the 2024-2025 academic year already at 92%, and expectations of exceeding 97%.

The firm also anticipated like-for-like rent growth of over 6% for the upcoming academic year, and re-booker rates were set to surpass last year’s 22%.

Empiric said it had actively managed its property portfolio, completing two acquisitions in key cities - Bristol and Glasgow - and progressing with significant refurbishment projects, such as the Brunswick Apartments in Southampton, which was on schedule for a September reopening.

Additionally, a planning application was submitted for a 200-plus bed extension at Victoria Point in Manchester.

The company said it continued to streamline its operations by disposing of five non-core properties, with sales outperforming book values.

Empiric’s balance sheet remained robust, with an EPRA loan-to-value ratio of 33.8%, below its long-term target of 35%.

The refinancing of 2024 and 2025 variable debt maturities reduced refinancing risks until 2028, with the weighted average cost of debt at 4.6%, and 95% of debt protected against interest rate fluctuations.

Empiric added that it maintained a strong liquidity position, with £44.7m in cash and undrawn committed facilities.

The ‘Hello Student’ operating platform meanwhile continued to deliver service, with the Global Student Living Index net promoter score improving to 37, significantly above industry averages.

Customer satisfaction meanwhile reached a record 87%, compared to the purpose-built student accommodation (PBSA) average of 79%.

Empiric was optimistic for the second half of 2024, with revenue occupancy for the upcoming academic year reinforcing confidence in maintaining near-full portfolio occupancy for the third consecutive year.

The company was targeting a minimum dividend of 3.5p per share for the full year, and was poised to capitalise on growth opportunities in a strengthening investment market.

“It has been an active first half of the year with good progress made across the board, including the growth of our portfolio through acquisitions, the submission of planning applications and our successful refurbishments programme,” said chief executive officer Duncan Garrood.

“We continue to experience strong demand for our high-quality, well-located accommodation, with the booking cycle for the forthcoming 2024-2025 academic year providing confidence in the delivery of strong occupancy and rental growth that surpasses inflation.

“Operationally, the business continues to perform very well with our net promoter score and customer satisfaction rate advancing year-on-year, underpinning improved re-booker rates, which are on track to be our best ever.”

At 1020 BST, shares in Empiric Student Property were down 0.92% at 97.1p.

Reporting by Josh White for Sharecast.com.