GCP Student results show modest COVID hit – GCP Student Living has announced results for the financial year ended 30 June 2020. Highlights are:
- EPRA NAV per share of 171.78p at 30 June 2020.
- Total shareholder return of -20.6% for the period. Annualised total shareholder return since IPO of 7.4%, compared to the company’s target return of 8-10%.
- Dividends of 6.15 pence per share paid in respect of the year.
- Total rental income for the year of £47.8m (30 June 2019: £44.4m).
- Gross proceeds of approximately £77m raised through a substantially oversubscribed placing of new ordinary shares [in happier times].
- Inclusion in the FTSE 250 Index from 18 September 2019.
- Eleven assets with 4,116 beds located primarily in and around London, with a valuation of £1.0bn at 30 June 2020.
- Prior to Covid-19, the portfolio was fully occupied and achieved rental growth of 4.4% for the 2019/20 academic year.
- Blended NIY of operational portfolio of 4.44% (30 June 2019:4.45%).
- Available debt facilities total £335m of which £281.7m was drawn at 30 June. LTV was 22% and the blended cost of debt was 2.95% with a weighted average maturity of about six years.
- Lower fees – as announced at the end of August
As the chairman says “the company’s performance has been adversely impacted by students vacating their rooms in response to the pandemic, the closure of academic institutions and forgoing rents” but actually the fund collected 92% of its budgeted income for the year to the end of June. At the date of the report, 68% of rooms across the group’s portfolio of student accommodation had been booked for the 2020/21 academic year.
The pandemic has curtailed the fund’s expansion plans. The pipeline agreement between the company and Scape has lapsed, the forward purchase agreement that the company had over the Scape Canalside development in Mile End has been terminated. There is a new building in Guildford (expected to be completed in the 2020/21 academic year, providing 403 beds) which the company might still buy. It also has a new facility in Brighton coming on stream for the new academic year – albeit a little later than planned because of COVID-related delays.
New year
The chairman concludes by saying “The substantial majority of HEIs to which the company is exposed are providing on-campus learning for the upcoming 2020/21 academic year, with the expectation that students will attend in person. Student applications for full-time higher education in the UK for the 2020/21 academic year have increased by 2.3% on the previous year.”
The manager expands on this: “Applications by domestic students should also be considered in the wider context of entry rates for higher education which represent the proportion of the population who are placed in higher education. At 30 June 2020, a record 41% of all UK 18 year-olds applied to attend full-time higher education for the 2020/21 academic year, the first time more than four out of ten have applied by that point in the enrolment cycle.
The UK continues to attract substantial numbers of EU and non-EU international students, with the number of applications from international students increasing by 5.1% year-on-year. The total number of applications from international students is at the highest level ever seen.
The number of applications by non-EU students at 30 June 2020 increased by almost 10% year‑on‑year to 89,130, also the highest level ever seen. EU student applications remain above the levels seen prior to the EU referendum in 2016, having decreased by 2% from the previous academic year.
The UCAS applications data for the 2020/21 academic year above supports the Investment Manager’s view that students will continue to invest in their education and enrol in courses to further their future employment prospects, more so in times of recession where alternative employment opportunities may be scarce. Further, the continued rise in the number of applications from international students suggests that students remain willing to travel to study abroad in order to obtain qualifications delivered in the English language and are making applications on the basis that they will do so.
The number of students applying to higher education continues to substantially exceed the number of places available. For the 2019/20 academic year, nearly one in four of all applications were unable to secure a place in higher education, equating to c.165,000 applicants.
The Covid-19 pandemic has resulted in students being unable to sit A-level examinations, the results of which form the basis of acceptances by HEIs in the UK. Prior to the UK Government’s eventual decision to allow A-level grades to be determined by way of teacher assessments, 27.6% of A-were graded at ‘A’ or above, compared with 25.2% in 20192. The Investment Manager expects that the increase in top grades being awarded as a result of the intervention will occur. This, coupled with the UK Government’s decision to suspend a proposed cap on the number of students HEIs can accept for the 2020/21 academic year, will benefit higher-ranked HEIs and accelerate the ongoing trend suggesting a wider flight to quality in the UK.”
We should know soon how full or otherwise the group’s accommodation is going to be for the current academic year.