DIGS.L Regulatory News (DIGS)

GCP Student Living Plc - Half-year Report

PR Newswire

London, March 15

GCP STUDENT LIVING PLCHalf-yearly report and condensed consolidated financial statements for the six months ended 31 December 2018

(the “Company” or “GCP Student”, together with its subsidiaries the “Group”)

LEI: 2138004J4ID66FK38H25

GCP Student, the UK’s first REIT focused on student residential assets, is pleased to announce its results for the six months ended 31 December 2018.

The full half-yearly report and condensed consolidated financial statements can be accessed via the Company's website at www.gcpstudent.com or by contacting the Company Secretary by telephone on 01392 477500.

ABOUT US

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

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

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

The Company has a premium listing on the Official List of the FCA and trades on the Premium Segment of the Main Market of the London Stock Exchange. The Company had a market capitalisation of c.£610 million at 31 December 2018.

AT A GLANCE

HIGHLIGHTS FOR THE PERIOD3

- Annualised shareholder total return since IPO3 of 11.9%, compared to the Company’s target return of 8-10%.

- Dividends of 3.06 pence per share paid in respect of the period.

- EPRA NAV3 (cum-income) per ordinary share of 157.93 pence and EPRA NAV (ex-income) per ordinary share of 156.40 pence at 31 December 2018.1

- Total rental income for the period of £20.9 million.

- Successful equity raise of £38.1 million (before issue costs) through a placing of new ordinary shares.

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

- Entry into a conditional contract to acquire and forward fund Scape Brighton, which is expected to provide c.550 beds for the 2020/21 academic year.

- The Company benefits from a future contractual arrangement to acquire Scape Canalside, a new-build asset located adjacent to Queen Mary University of London.

- High-quality portfolio of ten assets with c.3,600 beds located primarily in and around London, with a valuation of £841.5 million at 31 December 2018. The Company’s properties continue to benefit from the supply/demand imbalances for modern student facilities, with the portfolio fully occupied and rental growth of 3.5% for the 2018/19 academic year.

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

- Construction of the forward-funded project Circus Street, Brighton continues in line with expectations and is expected to complete for the 2019/20 academic year, providing c.450 beds.

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

2. APM – see glossary for definitions and calculation methodology.

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

Robert Peto, Chairman, commented:

“On behalf of the Board, I am pleased to report a period of strong performance for the Company. The focus on assets in and around London has delivered the Company’s strongest NAV performance for an interim period since 2015, with the NAV per share rising by 5.9% to 157.93 pence per share over the six-month period.

The Company’s NAV performance has been underpinned by rental growth of 3.5% achieved for the current academic year from a fully occupied portfolio of private student accommodation assets. Accordingly, the Company has been able to increase its dividend during the period.

It is encouraging to note the Company’s shareholder total return performance over the period of 3.0%. Over the same period, the FTSE EPRA NAREIT Index declined by 13.8%, with the Company one of only a handful of UK REITs to deliver positive total returns to investors.

The highly selective approach adopted by the Board and Gravis, the Investment Manager, to asset selection and the locations in which the Company operates, has demonstrably benefited shareholders through strong NAV performance and dividend growth, generating annualised total returns of 11.9% since IPO.

Since the EU referendum in 2016, the Board has repeatedly noted that the future risks of Brexit remain unknown and difficult to quantify. Notwithstanding, the attraction of the UK, and London in particular, for domestic and global students alike remains evident. The UK has some of the highest-ranking universities in the world, with three in the top ten institutions in 2017/181. Education remains a core sector for the UK economy. With the number of international students in the UK continuing to rise (a substantial number of whom choose to study in and around London) the Board remains confident that the Company will continue to deliver stable performance.

The Company has been highly successful in securing new, modern properties through future contractual arrangements secured by the Investment Manager. The Company benefits from a conditional forward purchase agreement to acquire Scape Canalside, a high-specification, new-build asset located immediately adjacent to Queen Mary University of London. With the property expected to open to students for the 2019/20 academic year, the Board and Gravis are considering the optimum way to finance its acquisition ahead of 30 June 2019.”

1. Time Higher Education World University Rankings 2018

For further information, please contact:

Gravis Capital Management Limited +44 020 3405 8500 Nick Barker Dion Di Miceli

Stifel Nicolaus Europe Limited +44 020 7710 7600Neil Winward Mark Young Tom Yeadon

Buchanan / Quill +44 020 7466 5000Helen Tarbet Henry Wilson

INVESTMENT OBJECTIVES AND KPIs

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

Further information on Company performance can be found below.

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

CHAIRMAN’S STATEMENT

Introduction

On behalf of the Board, I am pleased to report a period of strong performance for the Company. The focus on assets in and around London has delivered the Company’s strongest NAV performance for an interim period since 2015, with the NAV per share rising by 5.9% to 157.93 pence per share.

It is also encouraging to note the Company’s shareholder total return performance over the period of 3.0%. Over the same period, the FTSE EPRA NAREIT Index declined by 13.8%, with the Company one of only a handful of UK REITs to deliver positive total returns to investors.

Against a backdrop of concerns over weakening valuations and cash flows for the wider UK commercial property sector, the Company has reported strong NAV performance. This has been underpinned by the rental growth of 3.5% achieved for the current academic year from a fully occupied portfolio of private student accommodation assets.

Accordingly, the Company has been able to increase its dividend during the period, paying a total of 3.06 pence per share. Since IPO in 2013, the Company has generated annualised shareholder total returns of 11.9%.

Investment activityDuring the period, the Company entered into a conditional contract to acquire and forward fund the construction of Scape Brighton, its second asset in Brighton. The property is expected to provide c.550 beds and extensive communal areas for students for the 2020/21 academic year. The Company benefits from licensing fees which provide a 5.5% coupon per annum throughout the construction phase. Scape Brighton will add to the Company’s presence in the Brighton market, with the construction of Circus Street, Brighton expected to complete ahead of the upcoming 2019/20 academic year.

Financial resultsThe Company has generated a strong set of results in both absolute and relative terms. The Company’s investment portfolio delivered rental income of £20.9 million over the period. Its NAV per share increased from 149.12 pence at the financial year end, 30 June 2018, to 157.93 pence at 31 December 2018.

DividendsThe Company has paid dividends in respect of the six-month period ended 31 December 2018 of 3.06 pence per share.

The Board is pleased to report the substantial improvement to the Company’s dividend cover, which has been driven by Scape Bloomsbury opening to students in September 2018 and the Company’s reduced cash balances as Circus Street, Brighton nears completion of its construction.

FinancingOn 25 September 2018, the Company raised £38.1 million by way of a non pre-emptive placing of new ordinary shares which will be used, together with the Company’s debt facilities, to fund the development of Scape Brighton and Circus Street, Brighton.

On 20 December 2018, the Company entered into an agreement with Wells Fargo in respect of a development facility for an amount of up to £55 million. The development facility is intended to be drawn over time, partly to fund the construction of Scape Brighton. The development facility has a margin during the construction phase of 3.1% per annum above LIBOR (reducing to 2% per annum above LIBOR once the asset is operational and stabilised). It is repayable on 21 December 2021 with an option to extend by a further twelve months (at the Company’s discretion, subject to certain conditions being met) and will be solely secured against Scape Brighton.

Accordingly, the Group’s available banking facilities total £335 million. These facilities include the drawn fixed interest rate term facilities with PGIM for an aggregate amount of £235 million, which are secured against certain of the Group’s operational assets, and have a weighted average term of seven years. In addition, the Group has £100 million of floating rate borrowing facilities with Wells Fargo (which were undrawn as at 31 December 2018) comprising the development facility detailed above and a £45 million redrawable credit facility.

At 31 December 2018, the Group’s current blended cost of borrowing on its drawn debt was 2.96% with an average weighted maturity of seven years. The loan-to-value of the Group at that date was 26%.

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

Since the EU referendum in 2016, the Board has repeatedly noted that the future risks of Brexit remain unknown and difficult to quantify. At the time of writing, there remains considerable uncertainty as to the possible outcomes for Brexit. Notwithstanding, the attraction of the UK, and London in particular, for domestic and global students alike remains evident. The UK has some of the highest-ranking universities in the world, with three in the top ten institutions in 2017/18.1 Further, education remains a core sector for the UK economy, generating £95 billion and supporting nearly one million jobs across the nation.2

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

The Company has been highly successful in securing new, modern properties through future contractual arrangements secured by the Investment Manager. As detailed in the Company’s announcement on 3 October 2017, the Company benefits from a conditional forward purchase agreement to acquire Scape Canalside, a high-specification, new-build asset located immediately adjacent to Queen Mary University of London. With the property expected to open to students for the 2019/20 academic year, the Board and Investment Manager are considering the optimum way to finance its acquisition ahead of acquiring the property.

Robert PetoChairman

19 March 2019

1. Times Higher Education World University Rankings 2018.

2. The Impact of Universities on the UK Economy, Universities UK.

INVESTMENT MANAGER’S REPORT

The UK student accommodation market

The Investment Manager remains positive regarding the outlook for the student accommodation sector in the UK, particularly in relation to the Company’s ‘core’ markets (including London, Brighton and Bristol) which continue to benefit from attractive demand characteristics supported by constrained supply. The Investment Manager continues to believe that the location of assets is fundamental to their ability to support long-term returns to shareholders.

Student numbers supportive of occupancy and growth

UCAS data for the 2018/19 academic year shows year-on-year growth of 4.4% in the number of international students accepted onto full-time courses in the UK, a sixth consecutive year of growth. Acceptances from both EU and non-EU students have increased, with the former continuing to remain above the levels seen prior to the EU referendum.

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

Demand for full-time higher education courses in London remains strong relative to the rest of the UK. London is home to 23 universities, with more universities ranked in the top 40 by The Times Higher Education World University Rankings than any other city in the world. Approximately one-third of the 2.3 million students in the UK study in London and the South East. International students in particular favour London as a destination for higher education given its continued reputation as a global centre of academic excellence; a quarter of all international students in the UK choose to study in London.

With 92% of the Company’s portfolio located in and around London and 77% of the tenants being international students, current market dynamics are strongly supportive of the Company’s investment objective and underpin its continued ability to deliver fully occupied assets with long-term rental growth prospects.

Strong supply-side barriers

The supply of private student accommodation varies substantially across the UK with increasing divergence of returns between cities with an undersupply of student housing and those with less restrictive planning regulations. The Investment Manager targets markets which suffer from a structural undersupply of such assets. High land values and the difficult planning environment, which prioritises social housing and residential schemes over student accommodation, has seen the London market remain severely undersupplied. Brighton, like London, also remains severely undersupplied, as shown below.

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

Transactional activity

Investment volumes in 2018 exceeded £3.2 billion in 2018. At the date of this report, we estimate that there is a further £1.4 billion of stock on the market. Overseas buyers continue to dominate the market for UK student residential assets.

Of particular note was the acquisition by Allianz of a £350 million holding in the £1.5 billion Chapter portfolio, comprising c.5,100 beds in and around London. The Investment Manager estimates the Chapter portfolio traded at a yield just above 4%. Such investment activity, combined with the anticipated impact of the London Plan (which may create additional barriers to the development of student schemes and drive increased demand for existing assets), continues to drive yield compression across the London market. This is reflected in the increased valuation of the Company’s portfolio over the period under review.

Students per bed ratio

London 3.6

Brighton 4.5

Bristol 2.8

National average 2.0

Source: HESA.

WHERE, WHAT AND HOW

THE THREE FUNDAMENTALS

Where the assets are located

- Primary focus in and around London

- Proximity to HEI and/or major transport hub

- High supply side barriers

What the Company buys

- Intelligent design to optimise long-term returns

- Large-scale assets benefiting from operating efficiencies

- Modern purpose-built accommodation

How the Company operates

- High-specification facilities

- Hotel level service

- Competitive pricing

Portfolio performance update

The key drivers of the Company’s returns are based on the three fundamentals shown above which form the basis of how the Investment Manager seeks to add value over the long term.

The Company’s portfolio continues to perform in line with the Investment Manager’s expectations. The operational properties are fully occupied with respect to the 2018/19 academic year. The portfolio generated rental income of £20.9 million for the six-month period to 31 December 2018 and average rental growth of 3.5% year-on-year. The Company is able to achieve strong rental growth through its focus on markets benefiting from strong supply and demand imbalances and the location of its assets, all of which are within a 10-minute walk of an HEI or major transport links.

Over the period under review, the Company has achieved strong NAV growth driven by a like-for-like portfolio valuation uplift of 4.8%. The external market valuation of the portfolio was £841.5 million at 31 December 2018. The valuation uplift has been driven by rental growth, full occupancy and yield compression across its portfolio, with notable valuation uplifts on Scape Bloomsbury of £9.9 million, Scape Shoreditch of £7.7 million and Scape East of £10.0 million. The blended net initial yield of the Company’s operational portfolio at 31 December 2018 was 4.74%.

London continues to attract the attention of institutional and sovereign wealth fund investors, with competitive market activity for private student accommodation assets further driving yield compression, which has positively impacted the valuation of the Company’s assets. As detailed above, 92% of the Company’s portfolio by value is located in and around London.

During the period under review, the comprehensive refurbishment of Scape Bloomsbury was completed ahead of schedule with the property open to students for the beginning of the current academic year, providing 432 beds in London WC1. The asset is currently fully occupied.

The forward-funded construction of Circus Street, Brighton continues in line with the Investment Manager’s expectations. The asset is expected to complete for the 2019/20 academic year and will provide a further 450 beds in addition to c.30,000 sq ft of commercial office space, which will complete by March 2020. The student accommodation will be let on a 21-year lease, with annual uplifts of RPI plus 50 basis points, capped at 5% and floored at 2% to a subsidiary guaranteed by Kaplan Inc, a global education provider. The Company has benefited from a licensing fee providing a 5.5% coupon on drawn funding through the construction phase.

In July 2018, the Company entered into a conditional contract to acquire and forward fund Scape Brighton. Scape Brighton will provide c.550 beds, extensive communal areas and c.1,500 sq ft of retail space. It is currently expected that Scape Brighton will be operational for the 2020/21 academic year.

Outlook

The Company provides shareholders with a property portfolio which continues to benefit from supply and demand imbalances for student residential accommodation in its core markets. The attraction of these core markets for owners of private student residential accommodation remains evident, as demonstrated by the occupancy levels, rental growth and yield compression seen across the Company’s portfolio. The Investment Manager believes investment demand is increasingly selective, with the weight of institutional capital focusing on the supply of ‘core’ locations. This is illustrated by the substantial yield differential between private student residential accommodation assets in and around London and in super-prime regional locations as compared to those located in secondary and tertiary regional locations.

Notwithstanding the ongoing uncertainties surrounding Brexit and weakness in the wider real estate markets, international student numbers and institutional demand for assets in London both remain resilient.

Looking ahead, the Investment Manager believes the Company remains well positioned to benefit from the supply and demand imbalances in core markets, with institutional investment demand and restrictive planning regimes in the markets in which it operates. The UK, and London in particular, remains a global centre of education and the Investment Manager believes that this is set to continue, particularly given the importance of the education sector to the UK economy.

The Investment Manager has been highly successful in securing new, modern properties through future contractual arrangements which have enabled the Company to create its own pipeline of assets in attractive locations where existing properties may not have otherwise been available. Forward purchase agreements, through which the Company has committed to acquire assets under development once they become operational, have been used for the acquisition of its Scape Shoreditch, The Pad and Podium assets. The Company has benefited from valuation gains since acquisition of, in aggregate, £40.5 million on these properties, representing an average valuation uplift on purchase prices of c.18%.

On 3 October 2017, the Company announced that it had entered into a conditional forward purchase agreement to acquire Scape Canalside, a high-specification, new-build asset located immediately adjacent to Queen Mary University of London, and in the same locality as the Group’s existing c.590-bed Scape East asset. The property is on track to open to students for the 2019/20 academic year, providing approximately 410 beds. If the conditional contract is completed, the Company’s portfolio will include c.1,000 beds in the same locality as Queen Mary University of London, providing the opportunity to take advantage of operational economies of scale.

The Investment Manager believes the acquisition of Scape Canalside should enable the Company to secure a new asset in a highly attractive London location and which is expected to provide rental and earnings growth for the Company over the long term. Based on current market conditions and the terms of the forward purchase agreement the Investment Manager currently anticipates that, if acquired, the Company will benefit from an uplift in the valuation of Scape Canalside at the time of its first full independent valuation at 30 September 2019. Accordingly, the Investment Manager believes that Scape Canalside represents an attractive opportunity for the Company.

FINANCIAL REVIEW OF THE PERIOD

Financial results

The Company has delivered robust results for the six-month period to 31 December 2018, with average rental growth of 3.5% across the portfolio for the 2018/19 academic year and generating total rental income for the period of £20.9 million. Profit before tax and fair value gains on investment properties of £9.0 million was generated in the period. The increase in profitability year-on-year is due to scale, with a further asset becoming operational in the period, increasing gross profit, with administration and finance expenses remaining broadly consistent year-on-year.

Property expenditure

The Company’s net operating margin has remained stable at c.78% with the continued efficient management of costs by the Company’s Asset and Facilities Managers. Property expenditure of £4.5 million was incurred during the period, which is in line with expectations.

Administration expenditure

Total administration expenses of £4.0 million comprise fund running costs, including the Investment Manager’s fee and other third party service provider costs in the period in line with the Company’s service provider contracts.

Dividends and earnings

The Company increased its dividend, paying a dividend of 3.06 pence per share for the period. The dividend was 81% covered by adjusted EPS¹ of 2.49 pence. Whilst the Company targets a fully-covered dividend over the longer term, where assets in its portfolio are being refurbished or are under development (as is the case with development projects such as Circus Street and the recently completed Scape Bloomsbury), cover may be adversely affected over the short term.

The dividends were paid as 2.35 pence per ordinary share as PID in respect of the Group’s tax exempt property rental business and 0.71 pence per ordinary share as ordinary dividends.

Ongoing charges percentage

The Company’s ongoing charges ratio for the twelve months to 31 December 2018, based on the AIC’s methodology, excluding direct property costs, was 1.27%.

Financial performanceSummary profit and loss

1. Refer to Note 7.

Valuation

The valuation of the Company’s property portfolio has increased to £841.5 million. Total gains on investment properties through revaluation of the Company’s investment portfolio were £39.9 million for the period ended 31 December 2018. The portfolio is fully occupied for the 2018/19 academic year.

Debt financing

The Company has continued to utilise its debt facilities during the period. The four facilities amount to £335 million, including two fixed interest rate term facilities for an aggregate amount of £235 million which are secured against certain of the Group’s operational assets. In addition, the Group has £100 million of floating rate borrowing facilities with Wells Fargo (undrawn at 31 December 2018) comprising a £55 million development facility and a £45 million redrawable credit facility.

The Group’s current blended cost of borrowing on its drawn debt at the period end is 2.96% with an average weighted maturity of seven years. The loan-to-value of the Group is 26%.

Lifecycle reserve

The Company’s lifecycle cash reserves were £1.7 million at the period end. The reserves are held for future expenditure to ensure the properties are maintained at the level needed to sustain the current rents and any assumed future rental growth.

EPRA NAV¹

Net assets attributable to equity holders at 31 December 2018 were £648.4 million, up from £563.4 million as at 31 December 2017. The EPRA NAV has increased from 149.12 pence as at 30 June 2018 to 157.93 pence per ordinary share, a 5.9% increase for the six-month period to 31 December 2018, primarily driven by increases in portfolio valuations due to strong rental growth, gains at completion and yield compression.

Cash flow generation

The Company held cash and cash equivalents of £19.8 million at the end of the financial period under review. Operating cash flows of £10.5 million were generated by the Company’s student accommodation portfolio. Total equity capital raised in the year amounted to £38.1 million, which was used in part to fund the development of Scape Brighton and Circus Street, Brighton. The remaining cash outflows relate to the cost of servicing the Company’s debt facilities in addition to the payment of dividends, resulting in a net decrease in cash and cash equivalents at the period end.

Financial performanceSummary balance sheet

1. EPRA NAV is equivalent to the NAV calculated under IFRS for the period. See glossary for definitions.

2. Net of lease incentives held as receivables.

COMPANY PERFORMANCE

Annualised shareholder total return since IPO1 

11.9% HY 2018

12.0% HY 2017

Relevance to strategy: Shareholder total return measures the delivery of the Company’s strategy, to provide shareholders with attractive total returns in the longer term.

Adjusted earnings per ordinary share1

2.49p HY 2018

1.92p HY 2017

Relevance to strategy: Adjusted earnings per share reflects the Company’s ability to generate earnings from its portfolio.

Dividends per ordinary share for the period

3.06p HY 2018

2.96p HY 2017

Relevance to strategy: The total dividend reflects the Company’s ability to deliver regular, sustainable, long-term dividends and is a key element of total return.

Occupancy1

FULL HY 2018

FULL HY 2017

Relevance to strategy: Occupancy is a key measure of portfolio quality and ability to drive rental growth.

Loan-to-value1

26% HY 2018

23% HY 2017

Relevance to strategy: The LTV ratio measures the level of gearing and the Company’s cost of debt.

Student rental growth1 (like-for-like)

3.5% AY 2018

4.1% AY 2017

Relevance to strategy: Student rental growth is a key measure of the quality of the portfolio.

EPRA performance measures2

The data below include performance measures based on EPRA best practice recommendations which are designed to enhance transparency and comparability across the European real estate sector.

EPRA earnings1

£9.0m HY 2018

£6.5m HY 2017

Purpose: A key measure of the Company’s underlying operating results and an indication of the extent to which the current dividend payments are supported by earnings.

EPRA NAV1

157.93p HY 2018

146.31p HY 2017

Purpose: Makes adjustments to the IFRS NAV to provide stakeholders with the most relevant information on the fair value of the assets and liabilities within a true real estate investment company.

EPRA net initial yield1

4.74% HY 2018

5.04% HY 2017

Purpose: A comparable measure for portfolio valuations. This measure increases the comparability of two portfolios.

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

2. In respect of the operational portfolio in line with EPRA Best Practice Recommendation Guidelines.

INTERIM MANAGEMENT REPORT AND STATEMENT OF DIRECTORS’ RESPONSIBILITIES

Interim management report

The important events that have occurred during the period under review, the key factors influencing the condensed consolidated financial statements and the principal factors that could impact the remaining six months of the financial year are set out in the Chairman’s statement and the Investment Manager’s report above.

The Directors consider that the principal risks facing the Company are substantially unchanged since the date of the annual report for the year ended 30 June 2018 and continue to be as set out in that report.

Risks faced by the Group include, but are not limited to:

Operational risk:

- reliance on the Investment Manager and third party service providers;

- due diligence;

- concentration risk;

- net income and capital values;

- property valuation and liquidity; and

- compliance with laws and regulations.

Market risk:

- UK property market conditions; and

- government policy and Brexit.

Financial risk:

- breach of loan covenants and gearing limits.

Responsibility statement

The Directors confirm that to the best of their knowledge:

- the half-yearly report and consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting issued by the IASB;

- the half-yearly report and consolidated financial statements give a true and fair view of the assets, liabilities, financial position and return of the Group; and

- the half-yearly report and condensed consolidated financial statements include a fair review of the information required by:

a) 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the consolidated financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b) 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.

The half-yearly report and condensed consolidated financial statements were approved by the Board of Directors and the above responsibility statement was signed on its behalf by:

Robert PetoChairman

19 March 2019

INDEPENDENT REVIEW REPORTTo the members of GCP Student Living plc

Introduction

We have been engaged by GCP Student Living plc (the “Company”) to review the consolidated financial statements in the half-yearly financial report for the six months ended 31 December 2018, which comprise the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows, basis of preparation and accounting policies and all related notes (together the “condensed consolidated financial statements”). We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors’ responsibilities

The half-yearly report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

As disclosed in the basis of preparation and accounting policies, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union. The consolidated financial statements included in this half-yearly report have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union.

Our responsibilities

Our responsibility is to express to the Company a conclusion on the condensed consolidated financial statements in the half-yearly report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements in the half-yearly report for the six months ended 31 December 2018 is not prepared, in all material respects, in accordance with as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

Ernst & Young LLPLondon, United Kingdom

19 March 2019

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE SIX MONTHS ENDED 31 DECEMBER 2018

The accompanying notes 1 to 12 form an integral part of these financial statements.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2018

The accompanying notes 1 to 12 form an integral part of these financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED 31 DECEMBER 2018

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED 31 DECEMBER 2017

The accompanying notes 1 to 12 form an integral part of these financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE SIX MONTHS ENDED 31 DECEMBER 2018

The accompanying notes 1 to 12 form an integral part of these financial statements.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 31 DECEMBER 2018

1. General information

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

2. Basis of preparation

The condensed consolidated financial statements for the six months ended 31 December 2018 have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all financial information required for full annual financial statements and have been prepared using the accounting policies adopted in the audited financial statements for the year ended 30 June 2018. The audited financial statements were prepared in accordance with IFRS issued by the IASB as adopted by the European Union.

The financial information contained within this half-yearly report does not constitute full statutory accounts as defined in the Companies Act 2006. The financial information for the six months ended 31 December 2018 has been reviewed by the Company’s Auditor, Ernst & Young LLP, in accordance with International Standard on Review Engagements 2410 (UK and Ireland) ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ and were approved for issue on 19 March 2019. The latest published audited financial statements for the year ended 30 June 2018 have been delivered to the Registrar of Companies; the report of the independent Auditor thereon was unqualified and did not contain a statement under section 498 of the Companies Act 2006. The financial information for the year ended 30 June 2018 is an extract from those financial statements.

The condensed consolidated interim financial statements have been prepared under the historical cost convention, except for investment property, which has been measured at fair value. The financial statements are presented in Pound Sterling and all values are rounded to the nearest thousand pounds (£’000), except when otherwise indicated.

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

The condensed consolidated interim financial information includes the financial statements of the Company and its wholly-owned subsidiaries for the six months ended 31 December 2018.

2.1 Significant accounting policies

Accounting policies are consistent with those of the annual report for the year ended 30 June 2018.

2.2 Segmental reporting

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

2.3 Significant accounting judgements and estimates

The preparation of these financial statements in accordance with IFRS requires the Directors of the Company to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability in the future.

IFRS 9 Financial Instruments came into effect for periods beginning on or after 1 January 2018. This has not had a material effect on the Company or its operations.

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:

Valuation of property

The valuations of the Group’s investment property are at fair value as determined by the external valuer on the basis of market value in accordance with the internationally accepted RICS Valuation – Global Standards 2017 and in accordance with IFRS 13. Refer to note 11 for further details of the judgements and estimates made in determining the valuation of property.

Operating lease commitments – Group as lessor

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

Going concern

The Directors have made an assessment of the Group’s ability to continue as a going concern and are satisfied that the Group has the resources to continue in business for the foreseeable future, for a period of not less than twelve months from the date of this report. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the financial statements have been prepared on a going concern basis.

3. UK investment property

During the period, the Group continued construction of Circus Street, Brighton.

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

4. Finance expenses

5. Taxation

As a REIT, the Group is exempt from corporation tax on the profits and gains from its property rental business, provided it continues to meet certain conditions as per the REIT regulations. Non-qualifying profits and gains of the Group (residual income) continue to be subject to corporation tax.

Corporation tax has arisen as follows:

6. Dividends

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

On 5 February 2019, the Company declared a second interim dividend of 1.53 pence per ordinary share amounting to £6.3 million. The dividend was paid to shareholders on the register at close of business on 11 March 2019.

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

7. Earnings per share

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

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

1. For the period ended 31 December 2018:

i. licence fees from the developer of Circus Street in respect of a forward-funding agreement of £976,000.

2. For the period ended 31 December 2017:

i. licence fees from the developer of Circus Street in respect of a forward-funding agreement of £46,000; and

ii. licence fees from the developer of Scape Wembley in respect of a forward-funding agreement of £830,000.

8. Interest-bearing loans and borrowings

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

Secured fixed rate credit facilities totalling £235 million with PGIM:

Secured credit facilities totalling £100 million with Wells Fargo:

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

The debt facilities include gearing and interest cover covenants that are measured in accordance with the respective facility agreement. The Group has maintained significant headroom against all measures throughout the financial period and is in full compliance with all loan covenants at 31 December 2018.

9. Share capital

10. Net asset value per ordinary share

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

The EPRA NAV may be calculated as:

11. Fair value

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

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

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

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

The valuation of the Company’s investment property at fair value is determined by the external valuer on the basis of market value in accordance with the internationally accepted RICS Valuation, Global Standards 2017 and in accordance with IFRS 13.

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

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

1. Explanation of the fair value hierarchy:

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

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

There have been no transfers between Level 1, Level 2 or Level 3 during the period or the comparative period.

Valuation techniques and significant inputs within the valuation of investment properties

The following table analyses:

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

a description of the valuation techniques applied;

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

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

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

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

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

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

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

Gains and losses recorded in profit or loss for recurring fair value measurements categorised within Level 3 of the fair value hierarchy amount to £39,898,000 (31 December 2017: £32,357,000) and are presented in the condensed consolidated statement of comprehensive income in line item ‘fair value gains on investment properties’.

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

The carrying amount of the Company’s assets and liabilities is considered to be the same as their fair value.

12. Related party transactions

Directors

The Directors (all non-executive Directors) of the Company and subsidiaries are considered to be the key management personnel of the Group. Directors’ remuneration for the six months totalled £97,000 (six months ended 31 December 2017: £87,500) and as at 31 December 2018, a balance of £nil (2017: £nil) was outstanding.

Investment Manager

The Company is party to an investment management agreement with the Investment Manager, pursuant to which the Company has appointed the Investment Manager to provide investment management services relating to the respective assets on a day-to-day basis in accordance with the Company’s investment objective and policy, subject to the overall supervision and direction by the Board of Directors. For its services to the Company, the Investment Manager receives an annual fee at the rate of 1% of the NAV of the Company (or such lesser amount as may be demanded by the Investment Manager at its own absolute discretion).

The Investment Manager has committed additional resource in providing its client funds, including the Company, a more comprehensive service which strengthens the level of transaction and marketing support for the Company, in a cost-efficient manner. The Investment Manager receives a fee of 0.3% of the aggregate gross proceeds from any issue of new shares in consideration for the provision of marketing and investor introduction services. The Investment Manager has appointed Highland Capital Partners Limited to assist it with the provision of such services and pays all fees due to Highland Capital Partners Limited out of the fees it receives from the Company.

The Investment Manager has been appointed as the Company’s AIFM under the investment management agreement in respect of which it receives an annual fee of £24,000, subject to an annual RPI increase. The Company has provided disclosures on its website incorporating the disclosure requirements of the AIFMD regulations.

During the six months ended 31 December 2018, the Group incurred £3,258,000 (six months ended 31 December 2017: £2,588,000) in respect of investment management fees, AIFM fees and transaction management and document services. A total of £3,144,000 is included within administration expenses in the condensed consolidated statement of comprehensive income and £114,000 is included within share issue costs relating to shares issued during the period; at 31 December 2018, £1,669,000 (31 December 2017: £1,196,000) was outstanding.

The investment management agreement is terminable by the Company on not less than twelve months’ written notice to the Investment Manager at any time, such notice to expire no earlier than 21 September 2021, and is terminable by the Investment Manager on not less than twelve months’ written notice to the Company at any time, such notice to expire no earlier than 31 October 2025. The investment management agreement can be terminated at any time in the event of the insolvency of the Company or the Investment Manager.

The Company and the Investment Manager entered into the investment management agreement on 12 April 2013. The agreement was novated from Gravis Capital Partners LLP to Gravis Capital Management Limited on 20 April 2017.

On 3 October 2017, the Company entered into a conditional forward purchase agreement to acquire Scape Canalside. With the property on track to open to students for the 2019/20 academic year, the Board and the Investment Manager are considering the optimum way to finance its acquisition ahead of 30 June 2019. The directors of the Investment Manager and their spouses directly or indirectly own, in aggregate approximately 45% of Leopard Guernsey Westway Limited, the vendor of Scape Canalside. If acquired, Scape Canalside will be purchased on the basis of independent valuation and approval by the independent Board of Directors.

On 25 July 2018, the Group entered into a conditional contract with GCP Scaperfield Limited to acquire and forward-fund the construction of Scape Brighton. The directors of the Investment Manager and their spouses directly or indirectly own, in aggregate approximately 80% of Scaperfield Limited, the vendor of Scape Brighton. Scape Brighton is being acquired on the basis of independent valuation and approval by the independent Board of Directors. At 31 December 2018, a loan of £24.2 million was advanced to Scaperfield Limited to fund construction costs and is included within loans receivable in the condensed consolidated statement of financial position. Interest of £474,000 has been accrued on the loan and is included within finance income in the condensed consolidated statement of comprehensive income.

SHAREHOLDER INFORMATION

Electronic communications from the Company

Shareholders now have the opportunity to be notified by email when the Company’s annual report, half-yearly report and other formal communications are available on the Company’s website, instead of receiving printed copies by post. This has environmental benefits in the reduction of paper, printing, energy and water usage, as well as reducing costs to the Company. If you have not already elected to receive electronic communications from the Company and wish to do so, visit www.signalshares.com. To register, you will need your investor code, which can be found on your share certificate or your dividend tax voucher.

Alternatively, you can contact Link’s Customer Support Centre which is available to answer any queries you have in relation to your shareholding:

- by phone: from the UK, call 0871 664 0300, from overseas call +44 (0) 371 664 0300 (calls cost 12 pence per minute plus your phone company’s access charge. Calls outside the UK will be charged at the applicable international rate. Link is open between 09:00am – 5:30pm, Monday to Friday excluding public holidays in England and Wales);

- by email: enquiries@linkgroup.co.uk; or

- by post: Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU.

Frequency of NAV publication

The Company’s NAV is released to the London Stock Exchange via RNS on a quarterly basis and is published on the Company’s website.

Sources of further information

Copies of the Company’s annual and half-yearly reports, stock exchange announcements, investor reports and further information on the Company can be obtained from the Company’s website.

Key dates

March Half-yearly results announced

Payment of second interim dividend

June Company’s year end

Payment of third interim dividend

September Annual results announced

Payment of fourth interim dividend

November Annual general meeting

December Company’s half-year end

Payment of first interim dividend

GLOSSARY OF KEY TERMS

CORPORATE INFORMATION

DirectorsRobert Peto (Chairman)Malcolm Naish (Senior Independent Director)Gillian DayMarlene Wood

AdministratorLink Alternative Fund Administrators LimitedBeaufort House51 New North RoadExeter EX4 4EP

AuditorErnst & Young LLP25 Churchill PlaceCanary WharfLondon E14 5EY

Contactgcpstudentliving@linkgroup.co.uk

Corporate websitewww.gcpstudent.com

DepositaryLangham Hall UK Depositary LLP5 Old BaileyLondon EC4M 7BA

Investment Manager and AIFMGravis Capital Management Limited24 Savile RowLondon W1S 2ESTel: 020 3405 8500

Principal bankerBarclays Bank plc1 Churchill PlaceLondon E14 5HP

RegistrarLink Asset ServicesThe Registry34 Beckenham RoadBeckenhamKent BR3 4TUTel: 0871 664 0300email: enquiries@linkgroup.co.uk

Secretary and registered officeLink Company Matters LimitedBeaufort House51 New North RoadExeter EX4 4EPTel: 01392 477500

SolicitorGowling WLG (UK) LLP4 More London RiversideLondon SE1 2AU

StockbrokerStifel Nicolaus Europe Limited4th Floor, 150 CheapsideLondon EC2V 6ETTel: 020 7710 7600

ValuerKnight Frank LLP55 Baker StreetLondon W1U 8AN

National Storage Mechanism

A copy of the Half-Yearly Report and Financial Statements will be submitted shortly to the National Storage Mechanism (“NSM”) and will be available for inspection at the NSM, which is situated at: www.morningstar.co.uk/uk/NSM

Neither the contents of GCP Student Living plc’s website nor the contents of any website accessible from hyperlinks on the website (or any website) is incorporated into, or forms part of this announcement.

ENDS