TIDMUTG
RNS Number : 5048C
Unite Group PLC (The)
23 February 2022
PRESS RELEASE
23 February 2022
THE UNITE GROUP PLC
('Unite Students', 'Unite', the 'Group', or the ' Company ')
RESULTS FOR THE YEARED 31 DECEMBER 2021
Richard Smith, Chief Executive of Unite Students, commented:
"The business has seen a strong recovery in performance in 2021
and is well positioned for further growth due to our alignment to
the strongest universities, an enhanced reputation thanks to our
supportive actions during the pandemic and our best-in-class
operating platform. We have ambitious goals for our environmental
and social impact, as underlined by the recent publication of our
pathway to net zero carbon by 2030.
"The outlook for the business and the UK Higher Education sector
is strong, driven by rising participation rates, increased demand
for our product from returning students, significant and sustained
demographic growth and Government support for growth in
international student numbers.
"We have our biggest ever development pipeline and the balance
sheet capacity to pursue new growth opportunities through
university partnerships and targeted acquisitions. We are confident
in our ability to attract more of the students currently living in
the HMO sector and also see potential to extend our platform to
cater to the growing number of young professional renters living in
major UK cities. Together this underpins significant future
earnings growth and attractive total returns for shareholders."
Year ended 31 December 2021 31 December 2020 Change
------------------------------- ----------------- ----------------- -------
Adjusted earnings(1,3) GBP110.1m GBP91.6m 20%
Adjusted EPS(1,3) 27.6p 24.0p 15%
IFRS profit/(loss) before tax GBP343.1m GBP(120.1)m n/m
IFRS basic EPS 85.9p (31.8)p n/m
Dividend per share 22.1p 12.8p 73%
Total accounting return(1) 10.2% (3.4)%
As at 31 December 2021 31 December 2020 Change
------------------------------- ----------------- ----------------- -------
EPRA NTA per share(1) 882p 818p 8%
IFRS net assets per share 880p 809p 9%
See-through net debt(2) GBP1,522m GBP1,742m (13)%
Loan to value(2) 29% 34% (5)%
------------------------------- ----------------- ----------------- -------
MSCI ESG AA rating AA rating
GRESB score 85/100 81/100 +4
------------------------------- ----------------- ----------------- -------
HIGHLIGHTS
Return to earnings growth
-- Adjusted earnings of GBP110.1 million, up 20% (2020: GBP91.6
million) and adjusted EPS of 27.6p, up 15% (2020: 24.0p)(3)
-- IFRS profit before tax of GBP343.1 million (2020: loss of
GBP120.1 million) , driven by a valuation gain of GBP182.2 million
(2020: GBP178.8 million loss)
-- EPRA NTA up 8% to 882p (31 December 2020: 818p)
-- IFRS NAV up 9% to 880p (31 December 2020: 809p)
-- T otal accounting return of 10.2% for the year (2020: (3.4)%)
-- Dividend of 22.1p (2020: 12.8p), reflecting a payout ratio of
80% of adjusted EPS (2020: 53%)
Recovery in 2021/22 and s trong student demand for 2022/23
-- 94% occupancy and 2.3% rental growth for 2021/22 (2020/21:
88% and (0.6)%, 2019/20: 98% and 3.4%)
-- Reservations at 67% for 2022/23, with increased customer
retention (2020/21: 60%, 2019/20: 73%)
-- University applications for 2022/23 up 7% on pre-pandemic levels
-- Inflation protection through multi-year nomination agreements and annual sales cycle
Record development pipeline, funded through active capital
recycling
-- Secured development and university partnerships pipeline of
GBP967 million (c.6,000 beds) for delivery over the next four
years, delivering 10p of upside to EPRA EPS
-- Acquisition of GBP177 million development in East London, providing 700 beds
-- GBP261 million of disposals, improving portfolio quality
-- Further opportunities to add to university partnerships and development pipeline
Best-in-class platform supporting attractive financial
returns
-- Anticipate total accounting returns of c.10% in 2022,
excluding any impact from yield movements
-- Return to 97% occupancy and rental growth of 3.0-3.5% for 2022/23
-- EPRA EPS guidance of 41-43p for 2022
-- Targeting adjusted EBIT margin of above 72% over the medium term (2021: 62.3%)
Balance sheet positioned for growth
-- LTV reduced to 29% (2020: 34%), demonstrating ongoing capital discipline
-- LSAV joint venture extended by 10 years to 2032 and receipt
of GBP53 million performance fee
Committed to being a responsible and resilient business
-- Publication of net zero carbon pathway and SBTi validated carbon reduction targets
-- Proactive improvements in fire safety, demonstrating leadership on removal of HPL cladding
1. The financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS). The Group uses
alternative performance measures (APMs), which are not defined or
specified under IFRS. These APMs, which are not considered to be a
substitute for IFRS measures, provide additional helpful
information and are based on the European Public Real Estate
Association (EPRA) best practice recommendations. The metrics are
also used internally to measure and manage the business and to
align to the performance related conditions for Directors'
remuneration. See glossary for definitions and note 7 for
calculations and reconciliations.
2. Excludes IFRS 16 related balances recognised in respect of
leased properties. See glossary for definitions.
3. Adjusted earnings and adjusted EPS remove the impact of the
LSAV performance fee and integration costs in relation to Liberty
Living from EPRA earnings and EPRA EPS. See glossary for
definitions and note 7 for calculations and reconciliations.
PRESENTATION
There will be a presentation for analysts this morning at 08:30
GMT. A live webcast will be available via this link . To register
for the event or to receive dial-in details, please contact
unite@powerscourt-group.com .
For further information, please contact:
Unite Students
Richard Smith / Joe Lister / Michael Burt Tel: +44 117 302
7005
Unite press office Tel: +44 117 450 6300
Powerscourt
Justin Griffiths / Victoria Heslop Tel: +44 20 7250 1446
CHIEF EXECUTIVE'S REVIEW
The business has delivered a strong performance in 2021, despite
the ongoing challenges presented by the Covid-19 pandemic. We have
once again proven the quality and resilience of our operating
platform, with all properties remaining open during national
lockdowns at the start of the year, as they did throughout 2020.
This reflects the commitment of our teams, as well as the value of
our best-in-class operating platform, PRISM, which allowed us to
quickly adapt to the changing circumstances.
As a business, we are committed to acting responsibly and 'doing
what's right'. This principle has shaped our response to the
pandemic and led to the further rental discounts and complimentary
tenancy extensions offered to students unable to use their
accommodation at the start of 2021. We have also increased the
support offered to students and our employees to ensure their
health, safety and wellbeing. We believe these actions have
enhanced our reputation with students, parents, universities and
Government and will create further opportunities in the future.
Return to growth
The business delivered a strong recovery in financial
performance in 2021, with adjusted earnings of GBP110.1 million and
adjusted EPS of 27.6p, up 15% year-on-year. This reflects an
increase in occupancy to 94% for the 2021/22 academic year
(2020/21: 88%) and a lower impact from rental discounts when
compared to 2020. The profit before tax of GBP343.1 million also
reflects the valuation growth of our property portfolio during the
year. We have proposed a dividend of 22.1p for the full year, which
represents a payout ratio of 80% of adjusted EPS, underlining our
confidence in future business performance.
Total accounting returns for the year improved to 10.2%,
reflecting an 8% increase in EPRA NTA to 882p. Our LTV ratio
reduced to 29% during the year through revaluation gains, disposal
proceeds and receipt of our LSAV performance fee. This provides the
financial headroom to deliver our secured development pipeline and
pursue new growth opportunities.
Our key financial performance indicators are set out below:
Financial highlights (4) 2021 2020
------------------------------- ---------- ------------
Adjusted earnings GBP110.1m GBP91.6m
Adjusted EPS 27.6p 24.0p
IFRS profit/(loss) before tax GBP343.1m GBP(120.1)m
IFRS basic EPS 85.9p (31.8)p
Dividend per share 22.1p 12.75p
Adjusted EPS yield 3.4% 2.8%
Total accounting return 10.2% (3.4)%
EPRA NTA per share 882p 818p
IFRS net assets per share 880p 809p
Loan to value 29% 34%
4. See glossary for definitions and note 7 for alternative
performance measure calculations and reconciliations. A
reconciliation of profit/loss before tax to EPRA earnings and
adjusted earnings is set out in note 7 of the financial
statements.
Continued support for students and universities
Since the outbreak of Covid-19, we have strived to play our part
and do the right thing for our students and university partners in
a fair and proportionate way. In response to the national lockdown
announced in January 2021, students not living in their
accommodation were able to apply for a ten-week rental discount and
four-week complimentary tenancy extension.
We have now provided over GBP100 million in financial support to
students during the Covid-19 pandemic through a combination of rent
waivers and flexibility offered to students. We believe this is the
largest package of financial support offered in the Higher
Education (HE) sector and reflects our commitment to show
leadership in the sector, as well as encouraging others to act
accordingly.
All our properties remained, and continue to remain, open and
operational, employing a range of measures to reduce transmission
of Covid-19 where possible. With the removal of the remaining
Government restrictions during the first quarter of 2022, students
will be able to enjoy the full experience of university life.
Positive outlook for 2022/23
We see strong demand for accommodation this autumn, with UCAS
applications up 7% on pre-pandemic levels. Reservations for the
2022/23 academic year are encouraging at 67%, which is ahead of the
prior year level of 60%. This is underpinned by the 50% of beds
secured under nomination agreements for an average term of seven
years.
We expect bookings under nomination agreements to grow as a
percentage of bookings by the end of the current annual sales cycle
and to increase to 55% of total beds over the next two academic
years. This reflects the opportunity to deepen relationships with
our existing university partners. We have recently secured new
multi-year agreements to let 1,000 beds to two Russell Group
universities from the 2022/23 academic year.
We expect strong student demand for 2022/23 from both domestic
and international students. We have maintained our focus on
retaining existing direct-let customers, which has led to an
increased share of sales to re-bookers. The attractiveness of PBSA
over HMO is being clearly proven.
This supports our anticipated return to 97% occupancy and
3.0-3.5% rental growth for the 2022/23 academic year.
Strategic overview
Having shown real resilience during the pandemic, the business
is now well positioned for growth. Our best-in-class operating
platform provides us with strong foundations to adapt to evolving
student needs and deliver an enhanced customer experience. There
are also significant opportunities to invest in our well located
and affordable estate to drive rental growth and improve the
environmental performance of our buildings.
Our strategy is focused on three key objectives, which will
deliver value for our range of stakeholders:
-- Delivering for our customers and universities - Our purpose
is to deliver a Home for Success for our customers by delivering a
highly valued experience during their time with us. We will also
support our university partners to deliver their accommodation
needs and future growth ambitions
-- Attractive returns for shareholders - Delivered through a
combination of growing recurring income, rental growth and
value-add through our development activities, supported by a robust
and flexible balance sheet
-- A responsible and resilient business - We are committed to
doing what's right by raising standards for our customers,
investors and employees to ensure we build on our sector-leading
position in the student housing sector
Delivering for our customers and universities
We have a best-in-class operating platform in the student
accommodation sector, underpinned by our PRISM technology platform,
passionate front-line teams and sector-leading welfare and support.
However, we recognise that student expectations are evolving, with
higher expectations for rooms, social spaces, amenities and
technology. In response, we are investing in the next generation of
our PRISM technology platform to enable the seamless digital
experience expected by students and to further improve our
sector-leading efficiency.
We also see an opportunity to tailor our customer offer to
better meet the needs of different segments in the student market.
We are already successful in catering to undergraduate 1(st) year
students, as reflected in the large number of beds let to
universities under nomination agreements. We also see opportunities
to tailor our customer proposition to better meet the needs of
non-1(st) year students seeking greater independence, as well as
postgraduate and international students who may be willing to pay a
premium for a higher level of service. In 2021, we conducted
successful trials of a postgraduate-focused customer offer at seven
properties, which delivered increases in rental income and net
promoter scores. As a result, we have increased our product and
service segmentation for postgraduates for the 2022/23 sales
cycle.
These initiatives will enhance student experience, increase
customer retention and support higher operating margins over time.
Improving our hassle-free, value-for-money offer will also help us
capture market share from the one million students currently living
in houses of multiple occupancy (HMOs). We are already seeing
success in this area, with direct-let sales to UK students for
2021/22 up 33% on pre-pandemic levels and a meaningful increase in
re-booking activity for 2022/23.
We remain convinced in the opportunity for strategic
partnerships with universities to meet their long-term
accommodation needs. The pandemic has increased the operational and
financial challenges faced by universities and there is a growing
appetite for partnerships with leading operators of student
accommodation. This is reflected in over 80% of our development
pipeline by value being underpinned by university partnerships. For
developments completing in 2022, 78% are let under nomination
agreements for an average of nine years. We also see further
opportunities to capitalise on our brand and the goodwill created
by our response to Covid-19 to accelerate and enhance our pipeline
of university partnerships through traditional off-campus
development, on-campus development or stock transfer.
Attractive returns for shareholders
The quality, location and scale of our portfolio is a key
component of our business model and long-term strategy. We are
focused on growing our alignment to the strongest universities
seeing the greatest student number growth, reflected in 90% of our
rental portfolio and 100% of our development pipeline being located
in Russell Group university cities. We expect our portfolio to
become more concentrated towards the strongest markets over time,
with our weighting to London increasing from 35% to 44% on a Unite
share basis through delivery of our development pipeline.
Over the past 12 months, we have sold GBP261 million of assets
to enhance our overall portfolio quality and fund reinvestment into
the improvement of our estate. These proactive sales have reduced
our footprint from 27 to 25 markets and largely completes the
disposals of non-strategic assets identified following our
acquisition of Liberty Living in 2019.
Our development capability and track record is a major
differentiator in the student accommodation sector. This, combined
with our strong reputation and relationships with universities,
supports our future growth through development and new university
partnerships. Our new investments are focused on 8-10 cities,
including London and prime regional markets with the strongest
demand outlook. Our development pipeline is now at a record level,
totalling c.6,000 beds and GBP967 million in total development
cost. This is expected to deliver 10p of upside to EPRA EPS and
generate an NTA uplift of 78p on completion. We continue to see a
positive flow of development opportunities and expect to add
further schemes to the pipeline during 2022.
Our portfolio activity supports our target to deliver
sustainable rental growth of 3.0-3.5% p.a. and significant future
growth in recurring earnings. Together with the combination made by
our development activities, this underpins our target for total
accounting returns of 8.5-10% p.a.
A responsible and resilient business
Our new sustainability strategy was launched in March 2021,
building on our existing work to reduce our environmental impact
and improve student outcomes. Reflecting the expectations of our
stakeholders, our targets are now more ambitious, as reflected in
our commitment to become a net zero carbon business by 2030. We
recently published our net zero carbon pathway, including targets
validated by the SBTi, which sets out the activities and investment
required to reach net zero for both our operations and development
activities.
We are increasing our investment in energy initiatives to reduce
consumption, save carbon and ensure ongoing compliance with
regulations, such as energy performance certificates. We invested
GBP3 million in these initiatives in 2021, taking our total
investment to over GBP30 million since 2014. We have identified a
further c.GBP100 million of opportunities for capital investment to
help us achieve our environmental targets, which equates to an
annual investment of c.GBP10 million from 2022 onwards (GBP5-7
million p.a. at Unite share). As well as being the right thing to
do, there is also a strong business case for this investment, with
a payback of under 10 years through operating cost savings.
We have a strong track record in delivering positive social
impact at Unite, with a clear link to our purpose of providing a
Home for Success. Our initiatives are focused on helping young
people to succeed through supporting the transition from school to
university and helping to widen access to Higher Education. The
Unite Foundation celebrates its 10(th) anniversary this year and,
to date, our support has helped provide accommodation scholarships
for over 500 care leavers and students who are estranged from their
family. We are committed to delivering positive social impact for
our students and communities over the long term, which is reflected
in our investment of 1% of profits into these initiatives each
year.
Fire safety
Fire safety is a critical part of our health and safety strategy
and how we operate as a responsible business. We are committed to
being leaders in fire safety standards, through a proactive
risk-based approach, which is embedded across our entire business,
to ensure that students and our employees are kept safe. All our
buildings are independently confirmed as safe to operate and occupy
by fire safety experts.
We have undertaken a thorough review of the use of high-pressure
laminate (HPL) cladding on our properties. During the period, we
completed remedial works on four buildings and are now on site at a
further eight, spending a total of GBP38 million (Unite share:
GBP18 million) in the year. Our year-end balance sheet includes
provisions and accruals for cladding remediation costs across our
estate at a cost of GBP107 million (Unite share: GBP55 million),
which will be incurred over the next 12-36 months.
The Government has proposed a Building Safety Bill, covering
building standards, which is likely to result in more stringent
fire safety regulations. We will ensure we remain aligned to fire
safety regulations as they evolve and will continue to make any
required investment to ensure our buildings are compliant and
remain safe to occupy.
We are seeking to mitigate the costs of cladding replacement
through claims from contractors under build contracts, where
appropriate. To date, we have recovered GBP10 million from
completed claims, representing 70% of the costs of remediation on
those buildings. We expect to recover 50-75% of total replacement
costs over time, but this is not reflected in our balance
sheet.
Well protected against inflation
Like many businesses, rising inflation is resulting in cost
pressures in parts of our operations and development supply chains.
Positively, the business is well protected from these impacts
through the inflation-hedging characteristics of our income and
risk management through cost hedging.
Our rooms are either resold each year on a direct-let basis or
repriced based on RPI, CPI or fixed rental inflators under our
multi-year nomination agreements. These multi-year agreements are
expected to deliver contracted rental increase of c.4% for the
2022/23 academic year, supporting rental growth across the total
portfolio of 3.0-3.5%. We remain focused on providing
value-for-money accommodation for students and recognise that
affordability is key to the sustainability of our rental growth
over the long term.
Our cost base is also protected from some inflationary pressures
through hedging of utility costs, interest payments and fixed-price
contracts for committed development projects. At current energy
prices, our utilities hedging will save the Group GBP24 million in
2022, representing around 0.5% of rental income. We remain
confident in our ability to manage inflation in the short term
through efficiencies across the operations business and by
factoring higher build costs into our development appraisals.
Growing demand for Higher Education
The outlook for student accommodation remains positive, with
structural factors continuing to drive a demand-supply imbalance
for our product. Demographic growth will see the population of UK
18-year-olds increase by 22% by 2030. Participation rates in the UK
also continue to grow and are now at their highest ever level,
reflecting the value young adults place on a higher level of
education and the life experience and opportunities it offers.
The Government is targeting growth in international student
numbers, aided by the two-year post-study visa (three years for
postgraduates). This ambition is underpinned by the UK HE sector's
global standing and the strength of its universities. Given
constraints on new supply of university-owned stock and
private-rented housing, the vast majority of this new demand will
need to be met by corporate PBSA providers.
Brexit has had a negative impact on EU student numbers due to
the loss of home fee status and access to a tuition fee loan, with
student acceptances falling from 32,000 to 16,000 in 2021/22. EU
customers represent 5% of occupancy in 2021/22, down from 10% in
2019/20. We anticipate a more marginal reduction in EU student
numbers over the next two years, which we expect to be more than
offset through increasing demand from UK and non-EU students.
The Skills for Jobs white paper, published in 2021, underlines
the Government's commitment to widening participation in post-18
education and strengthening the global standing of the UK HE
sector. Ahead of the Government's final response to the Augar
Report on post-18 education and funding, the Office for Students
(OfS) has launched a consultation on student outcomes in the HE
sector. It will consider the quality of HE provision and value for
money for students and the taxpayer and may lead to the
introduction of minimum standards for HE providers based on course
completion rates and the share of students going on to employment
or further study.
We are confident that our strategic alignment to high and
mid-ranked universities positions us to successfully navigate
future changes to the Government's HE policy. Around half of our
income comes from universities in the top quartile of the OfS's
quality metrics, with only 4% coming from universities in the
bottom quartile.
Opportunities to grow our platform
There remain significant opportunities to grow the business in
the UK PBSA sector through our secured development pipeline,
targeted acquisitions and partnerships with universities. We have
also periodically considered opportunities to expand our PBSA
footprint outside of the UK. However, we strongly believe that the
core strengths of our best-in-class operating platform, stakeholder
relationships and development expertise are best leveraged in
growing the business within the UK.
Demand for student accommodation continues to grow due to rising
student numbers and the increasing awareness of the benefits of
PBSA among non-1(st) year students. The HMO sector, which provides
homes to one million students, is increasingly expensive and not
fit-for-purpose in a backdrop of rising environmental standards
through EPC certification. The cost to HMO landlords of addressing
this issue is substantial, which we expect to result in increased
costs for students and a reduction in the availability of private
rented homes. Through our ambitious sustainability commitments and
leadership in the student accommodation sector, we are well
positioned to attract more students over time.
There is also a potentially significant opportunity to grow our
platform in the wider living sector by catering to the growing
number of young professional renters living in major UK cities.
There is an acute shortage of high-quality, professionally-managed
and sustainable rental accommodation in the UK. We believe our
operating platform and development capability would enable us to be
successful in the young professional living market. We are
trialling a new product for the non-student element of our
development at Campbell House in Bristol and, more broadly, we are
reviewing the relative attractiveness and scale of opportunities in
this sector.
Outlook
The outlook for the business remains strong, reflecting the
underlying strength of student demand, our alignment to the
strongest universities, the capabilities of our best-in-class
operating platform and our track record of delivering growth.
We are confident in our ability to deliver significant growth in
earnings and attractive total accounting returns for shareholders.
We expect strong demand for the 2022/23 academic year, with reduced
disruption from travel restrictions and grade inflation. This
supports a return to 97% occupancy, 3.0-3.5% rental growth and the
delivery of total accounting returns of c.10% for 2022, excluding
any impact from yield movements. We therefore remain confident in
the prospects for the business.
OPERATIONS REVIEW
Sales, rental growth and profitability
The key strengths of our operating business are our
highly-committed people, our PRISM operating platform, our brand
and the strength of our relationships with universities. These
capabilities helped to deliver a recovery in financial performance
in 2021, despite the ongoing disruption created by Covid-19,
delivering adjusted EPS of 27.6p (2020: 24.0p). The 15% increase in
adjusted EPS reflects higher occupancy for the 2021/22 academic
year (2020/21: 88%) and a lower impact from rental discounts
offered to students in response to the pandemic.
Based on a positive outlook for student demand and
progress-to-date on reservations, we anticipate an increase to 97%
occupancy for the academic year. This supports our guidance for
EPRA EPS of 41-43p for the 2022 financial year.
The Group continues to report on an IFRS basis and presents its
performance in line with best practices as recommended by EPRA. The
Operations and Property reviews focus on EPRA measures as these are
our key internal measures and aid comparability across the real
estate sector.
2021 2020
Summary income statement GBPm GBPm
----------------------------- ------- -------
Rental income 282.7 263.2
Property operating expenses (90.9) (82.9)
------- -------
Net operating income (NOI) 191.8 180.3
------- -------
NOI margin 67.8% 68.5%
Management fees 15.9 14.0
Overheads (31.5) (30.9)
Finance costs (63.3) (64.9)
Development and other costs (2.8) (6.9)
LSAV performance fee 41.9 5.7
------- -------
EPRA earnings 152.0 97.3
------- -------
LSAV performance fee (41.9) (5.7)
------- -------
Adjusted earnings 110.1 91.6
------- -------
Adjusted EPS 27.6p 24.0p
EPRA EPS 38.1p 25.5p
Adjusted EBIT margin 62.3% 62.1%
A reconciliation of profit/loss after tax to EPRA earnings and
adjusted earnings is set out in note 2.2b to the financial
statements.
Rental income increased by GBP19.5 million to GBP282.7 million,
up 7%, as a result of higher occupancy and a reduced level of
rental discounts. The total value of discounts offered to students
in 2021 was c.GBP10 million, reflecting 40% take-up of the 10-week
rental discount offered to students not staying in their
accommodation between January and March 2021.
Net operating income increased by 6% to GBP191.8 million,
reflecting the uplift in rental income and a 10% year-on-year
increase in property operating expenses. The increase in property
operating expenses reflects the resumption of certain costs not
incurred during 2020 due to one-off cost saving measures, including
summer cleaning costs and staff bonus payments, as well as
increased utilities costs as a result of higher occupancy over the
year and underlying price increases. In addition, increased
investment was made into marketing to drive sales for the 2021/22
academic year.
Our electricity costs are fully hedged in 2022 and 85% hedged
for 2023, and gas (which accounts for less than 0.5% of our rent)
is hedged through 2023. We are exploring opportunities to fix
energy costs through further power purchase agreements (PPAs) in
support of new renewable energy capacity. PPAs provide competitive
pricing compared to wholesale energy markets as well as cost
certainty through multi-year contracts, while aligning to our
commitment to source 100% renewable electricity.
2021 2020
Property operating expenses breakdown GBPm GBPm Change
--------------------------------------- ------- ------- -------
Staff costs (28.4) (26.6) (1.8)
--------------------------------------- ------- ------- -------
Utilities (21.9) (19.8) (2.1)
--------------------------------------- ------- ------- -------
Summer cleaning (3.3) (2.4) (0.9)
--------------------------------------- ------- ------- -------
Marketing (5.8) (3.3) (2.5)
--------------------------------------- ------- ------- -------
Central cost allocation (9.7) (7.9) (1.8)
--------------------------------------- ------- ------- -------
Other (21.8) (22.9) 1.1
--------------------------------------- ------- ------- -------
Property operating expenses (90.9) (82.9) (8.0)
--------------------------------------- ------- ------- -------
Overheads increased by GBP0.6 million, principally reflecting
increases in staff costs. Recurring management fee income from
joint ventures increased to GBP15.9 million (2020: GBP14.0
million), driven by higher NOI and property valuations in USAF and
LSAV.
Our adjusted EBIT margin increased to 62.3% in 2021 (2020:
62.1%), reflecting a reduction in overheads net of recurring
management fees as a percentage of rental income. Reflecting our
cost discipline and the anticipated recovery in rental income from
2021/22 onwards, we are targeting an improvement in our adjusted
EBIT margin to around 70% in 2022 and above 72% over the medium
term. This will be delivered through growth in occupancy and rents,
development completions and further efficiencies over time in areas
such as staff costs, procurement, utilities and the enhanced use of
technology.
Finance costs reduced to GBP63.3 million (2020: GBP64.9
million), reflecting a reduction in average borrowings during the
year as cash balances reduced to more typical levels on the back of
an improved trading outlook. This impact was partially offset by a
higher average cost of finance in 2021 of 2.9% (2020: 2.7%) as we
repaid revolving credit facilities at lower average rates. Interest
capitalised into development schemes increased to GBP5.2 million
(2020: GBP4.6 million), driven by resumption of development
activity at Middlesex Street in London and Campbell House in
Bristol, as well as a development start at Derby Road in
Nottingham. We expect capitalised interest to increase to around
GBP7-8 million in 2022 as development activity increases ahead of
deliveries in 2022, 2023 and 2024.
Development (pre-contract) and other costs were lower at GBP2.8
million (2020: GBP6.9 million), reflecting the cost of development
overheads, the earnings impact of share-based incentives, deferred
and current tax and our contribution to the Unite Foundation. The
year-on-year reduction reflects a credit of GBP2.8 million for tax
in 2021 (2020: GBP2.0 million expense).
EPRA earnings includes GBP41.9 million of performance fees in
the year (2020: GBP5.7 million) in relation to the performance fee
received from LSAV as well as the unwind of tax provided against
the performance fee in previous years. The fee became payable on
extension of the joint venture and represents out-performance
compared to our expectation at the start of the year due to the
strong valuation performance of LSAV's London properties. Given the
quantum of the performance fee in the year, it has been excluded
from adjusted earnings to improve the comparability of results
year-on-year.
Improved occupancy for 2021/22
We achieved occupancy of 94% across our total portfolio for the
2021/22 academic year (2020/21: 88%, 2019/20: 98%), reflecting a
meaningful improvement from the disrupted booking cycle in 2020/21.
This represented significant outperformance of our PBSA peers, who
delivered average occupancy of 83% for 2021/22 (JLL).
We continue to sell over half of our beds through nomination
agreements with universities. This represents a key differentiator
for Unite in the PBSA sector, with our nomination agreements
accounting for around 40% of all beds leased by universities across
the UK. Occupancy through nomination agreements has reduced
slightly during the past two pandemic-affected leasing cycles,
reflecting understandable caution from universities over student
demand.
Occupancy by type and domicile by academic year
Direct let
------------ -------------------------- ------
Nominations UK China EU Non-EU Total
--------- ------------ ---- ------ --- ------- ------
2019/20 57% 16% 15% 4% 6% 98%
------------ ---- ------ --- ------- ------
2020/21 53% 16% 11% 4% 4% 88%
------------ ---- ------ --- ------- ------
2021/22 51% 21% 13% 3% 6% 94%
--------- ------------ ---- ------ --- ------- ------
Student acceptances for 2021/22 were broadly stable at 562,000
(2020/21: 570,000), with a record share of UK school leavers
entering universities and the highest ever admissions for non-EU
students but, as expected, this was offset by a significant
reduction in EU student numbers following Brexit.
The gap to pre-pandemic occupancy levels of 97-98% in 2021/22
could be principally attributed to two reasons. The first is the
disruption created by higher grade attainment due to
teacher-assessed grades, which has distorted the distribution of
students among our cities. More students attained the entry
requirements for their first-choice universities than in a normal
year, reflecting the 44% of students awarded A* or A grades in this
year's A levels, compared with 25% in 2019. We sold out in the
majority of our markets, with significant waiting lists in a number
of key cities where students struggled to find suitable
accommodation. However, we have seen a concentration of voids in a
small number of cities where we expect universities to have lost
market share of students, or which are adjusting to new supply.
Our waiting lists for 2021/22 equated to an additional c.1-2% in
potential occupancy, which we would expect to be redistributed
among our other cities as disruption from higher grading unwinds.
The Government has confirmed that grade boundaries will return to
pre-pandemic levels over the next two years, and we do not expect
the same level of disruption for the student intake in 2022. This
year's strong undergraduate intake in higher-ranked cities will
also support student numbers and rental growth prospects in these
markets over the next three years.
The second factor is the ongoing impact of the pandemic on
international travel. Despite a record level of non-EU admissions
in 2021/22, this did not fully translate into bookings. In
particular, we have continued to see an effect on demand from
China, accounting for a two percentage-point reduction in occupancy
compared to 2019/20. To mitigate the challenges posed by the
pandemic, we offered international students needing to isolate on
arrival in the UK the opportunity to arrive at their accommodation
up to three weeks early at no extra cost. We continue to monitor
international travel closely and expect an increase in the number
of international students travelling to the UK for the 2022/23
academic year.
Return to rental growth
Annual rents increased by 2.3% on a like-for-like basis for
2021/22 (2020/21: (0.6)%), reflecting increases of 1.2% through
nomination agreements and 3.3% average increases in direct-let
rents. Occupancy was broadly consistent across our wholly owned
portfolio, USAF and LSAV.
2020/21 rental growth and occupancy Rental growth(1) Occupancy(2)
------------------------------------- ----------------- -------------
Nomination agreements 1.2%
----------------- -------------
Direct let 3.3%
----------------- -------------
Total 2.3% 94%
----------------- -------------
1. Like-for-like properties based on annual value of core
student tenancies
2. Beds sold
We have maintained a high proportion of income let to
universities, with 37,359 beds sold (51% of total) for 2021/22
under nomination agreements (2020/21: 39,250 and 53%). The slight
reduction in the number of beds under nomination agreements
reflects the decision of some universities not to renew rolling
single-year agreements in light of uncertainty over student numbers
and occupancy created by Covid-19.
62% of our nomination agreements, by income, are multi-year and
therefore benefit from annual fixed or inflation-linked uplifts
based on RPI or CPI. These agreements are expected to secure
average annual rental growth of 4% in 2022/23 based on current
levels of inflation and contractual caps on RPI/CPI-linked rental
increases. The remaining agreements are single year, and we
achieved a renewal rate of 74% on these agreements for 2020/21
(2020/21: 76%).
Enhanced service levels and our extensive understanding of
student needs have resulted in longer-term and more robust
partnerships with universities over recent years. The unexpired
term of our nomination agreements is 6.7 years, up from 6.4 years
in 2020/21. We expect the share of beds let under nomination
agreements to increase to around 55% over the next two years and
have recently secured new multi-year agreements to let 1,000 beds
to two Russell Group universities from the 2022/23 academic
year.
A balance of nomination agreements and direct-let beds provides
the benefit of having income secured by universities, as well as
the ability to offer rooms to re-bookers and postgraduates and
determine market pricing on an annual basis.
Agreement length Beds Beds % Income
2021/22 2020/21 2021/22
------------------ --------- --------- ---------
Single year 14,529 17,709 38%
2-5 years 7,754 5,748 22%
6-10 years 6,034 6,873 17%
11-20 years 6,608 6,724 17%
20+ years 2,434 2,196 6%
--------- --------- ---------
Total 37,359 39,250 100%
UK students account for 70% of our customers for 2021/22
(2020/21: 66%), making up a large proportion of the beds under
nomination agreements with universities. In addition, 25% and 5% of
our customers come from non-EU and EU countries respectively
(2020/21: 25% and 9%), reflecting the relative appeal of our
hassle-free product when compared with alternatives in the
private-rented sector. Our proactive decision to increase sales to
UK customers has offset a reduction in demand from EU customers
following Brexit.
Re-bookers accounted for 20% of our direct-let bookings for the
2021/22 year (2020/21: 25%) reducing our exposure to less
predictable 1(st) year undergraduate customers. Postgraduates now
make up 25% of our direct-let customer base, driven by strong
growth in UK postgraduate numbers and increasing awareness of the
benefits of PBSA.
Positive outlook for 2022/23
Reservations for the 2022/23 academic year are progressing
positively with 67% of rooms now sold (2021/22: 60%, 2020/21: 73%).
We expect strong student demand for 2022/23 from both domestic and
international students, but anticipate a slightly later sales cycle
for international students than in a typical year due to
uncertainty relating to Covid-19. As a result, we have increased
our focus on retaining existing direct-let customers, which has led
to an increased share of sales to re-bookers.
Applications data for the 2022/23 academic year is encouraging,
with total applications broadly in line with record levels in
2021/22 (-1%) and 7% ahead of pre-pandemic demand in 2020/21. This
reflects a 5% increase in applications by UK school leavers, who
represent one of our largest customer groups, driven by a record
application rate of 43.4% (2020/21: 42.6%) and demographic growth.
Demand is also strong from our other key customer demographic of
non-EU students. Non-EU applications are 5% higher year-on-year,
reflecting strong demand from China and India as well as less
mature markets such as Nigeria, offsetting a further reduction in
demand from EU students following Brexit.
Current reservations under nomination agreements deliver 50%
occupancy (2021/22: 51%). Discussions are ongoing with universities
over potential additional demand once they have greater visibility
on student numbers, which we expect to increase occupancy from
nomination agreements towards our target of 55%. Direct-let
reservations account for the remaining 17% of reserved occupancy,
which is significantly ahead of the same point last year, thanks to
an increase in UK re-bookers and international sales.
This is supportive of our guidance for full occupancy and rental
growth of 3.0-3.5% for the 2022/23 academic year.
Delivering for our customers
Our best-in-class operating platform continues to drive both
service enhancements and operational efficiency. We are committed
to investing in an enhanced student experience that delivers
value-for-money for students and supports our purpose of creating a
Home for Success. This includes a segmented product offering,
tailoring student activities and community building alongside
improvements to our MyUnite app, our Resident Ambassador programme
and the provision of student welfare services.
Enhancements to our student experience
During 2021, we have focused on using data and insight to
deliver an enhanced student experience across the academic year
tailored to the communities in each property. Insight was drawn
from both an applicant survey of 1,000 prospective students to
gauge the sentiment of the new cohort and from data shared directly
by our customers ahead of their arrival regarding their
preferences, interests, hopes and fears.
Key themes were both a desire for, and a fear of, meeting new
people and making friends, the need for support in finding
part-time work, and advice and support regarding wellbeing and life
skills for independent living. Peer-to-peer support and engagement
was also a high priority. We responded by increasing our Resident
Ambassador programme through recruitment of over 190 paid student
ambassadors, who have provided support and organised events based
on the community's needs.
A series of events was held for our city teams during the summer
months to ensure a great welcome and arrival experience for the
class of 2021/22. The teams generated over 1,900 ideas to tailor
and improve the student experience during the crucial first six
weeks of the new term, leading to our highest ever net promoter
score in our autumn student survey (+39) and a significant
improvement in reviews on Trustpilot.
As part of our evolving approach to customer segmentation,
trials were conducted in seven properties to define our offer for
postgraduate students for the 2021/22 academic year. The look and
feel, amenity spaces and student experience were all enhanced,
based on our student insight, which delivered increased occupancy,
rental income and some of the highest net promoter scores in the
portfolio. The postgraduate offer has been extended for the 2022/23
sales cycle, with further refinements included. Our refurbishment
and extension of Kincardine Court in Manchester, due for delivery
this September, is also being tailored to postgraduate students
based on the smaller flat sizes available.
A number of digital experience enhancements were delivered
during 2021 aimed at allowing students to increasingly self-serve
and to allow our property teams to deliver service in the moment.
These included a new, multilingual, dynamic FAQ tool, allowing
customers to submit questions in any language.
In February 2021, we launched a new group booking tool and
marketing campaign to target groups of students who might otherwise
look to house share in the private-rented sector. This function
generated GBP11 million of sales to domestic returning students,
further supporting our capture of market share from the HMO
sector.
Students often wish to book a specific room and we are in the
process of rolling out a room selector tool, which enables our
students to browse the available rooms in a property, review the
details and select a specific room which best meets their
requirements. When room selector is used, there has been a 35%
increase in conversion rate compared to other web-based sales. We
have also enhanced our technology and processes to facilitate
easier room moves by students if they are not satisfied with their
allocated rooms or flats.
Health, safety and wellbeing
All our properties have remained open and operational throughout
the pandemic, and we continue to employ a range of measures in our
buildings to reduce transmission of Covid-19, where possible. This
includes enhanced cleaning and physical and social distancing
measures, as well as offering support to those students needing to
self-isolate.
We have also increased provision and access to student wellbeing
and mental health support through enhanced student welfare
services, including bespoke support for students who are shielding,
support for those self-isolating, online welfare checks and a pilot
peer-to-peer scheme. We have dedicated welfare leads in each of our
cities and also provide 24/7 support through our Emergency Contact
Centre and a partnership with Nightline. We also work closely with
universities' student welfare and wellbeing teams to ensure
students are signposted to available help and support.
PROPERTY REVIEW
EPRA NTA growth
EPRA NTA per share increased by 8 % to 882 p at 31 December 2021
(31 December 2020: 818p) with IFRS net assets per share up 9 % to
880 p (31 December 2020: 809p). In total, EPRA NTA were GBP3,532
million at 31 December 2021, up from GBP3,266 million a year
earlier.
Summary balance sheet (Unite share basis)
31 December 2021 31 December 2020
Wholly Share Total Wholly Share Total
owned of Fund/JV GBPm owned of Fund/JV GBPm
GBPm GBPm GBPm GBPm
------------------------------ -------- ------------ ---------------- -------- ------------ ---------------
Rental properties 3,323 1,542 4,865 3,615 1,278 4,893
Rental properties (leased) 98 - 98 102 - 102
Properties under development 324 - 324 187 - 187
-------- ------------ ---------------- -------- ------------ ---------------
Total property 3,745 1,542 5,287 3,904 1.278 5,182
Net debt (1,030) (492) (1,522) (1,326) (416) (1,742)
Lease liability (94) - (94) (96) - (96)
Other assets/(liabilities) (107) (32) (139) (40) (38) (78)
-------- ------------ ---------------- -------- ------------ ---------------
EPRA net tangible assets 2,514 1,018 3,532 2,442 824 3,266
======== ============ ================ ======== ============ ===============
IFRS NAV 2,510 1,018 3,528 2,412 823 3,235
-------- ------------ ---------------- -------- ------------ ---------------
LTV 29% 34%
The main drivers of the 64 p per share increase in EPRA NTA per
share were the increase in the value of the Group's share of
investment assets due to rental growth, higher occupancy and modest
yield compression. In addition, the EPRA NTA movement reflects
development surpluses, recognition of the remaining LSAV
performance fee and a further provision for the replacement of HPL
cladding.
GBPm Diluted pence per share
-------------------------------------------- ------- ------------------------
EPRA NTA as at 31 Dec 2020 3,266 818
Rental growth 72 18
Yield movement 107 27
Cladding provision (23) (6)
Development surplus 50 13
LSAV performance fee 42 10
Swap cancellation and debt break fees (4) (1)
Disposals and associated transaction costs (21 ) (5)
Retained profits/other 43 8
------- ------------------------
EPRA NTA as at 31 Dec 2021 3,53 2 882
IFRS net assets increased by 9% in the year to GBP3,527.8
million (31 December 2020: GBP3,234.9 million), principally driven
by positive revaluation movements, further recognition of the LSAV
performance fee and retained profits. On a per share basis, IFRS
NAV increased by 9% to 880p.
The movement in other assets and liabilities in 2021 was due to
an increase in deferred income, arising from higher occupancy, an
increase in accruals and provisions for cladding remediation works
and settlement of the LSAV performance fee.
Total accounting return
Growth in EPRA NTA was the key component of the 10.2% total
accounting return delivered in the year (2020: (3.4)%), alongside
dividends paid of 19.25p (2020: nil).
We are targeting delivery of attractive total accounting returns
of 8.5-10% through a balance of recurring income and capital
growth. This includes allowance for GBP1,000/bed p.a. of investment
into protective capex for lifecycle maintenance, improvements in
environmental performance and cladding remediation. Our balance
sheet already provides for all committed spend on fire safety
improvements and we will make future investments, as required, to
ensure our buildings remain compliant and safe to occupy.
In 2022, we expect total accounting return to be at the top end
of this range due to growth in recurring earnings, rental growth
and development surpluses from a number of significant planning
milestones. Our guidance does not include any impact from movements
in property yields in the year.
Property portfolio
The valuation of our property portfolio at 31 December 2021,
including our share of gross assets held in USAF and LSAV, was GBP
5,287 million (31 December 2020: GBP5,182 million). The GBP 105
million increase in portfolio value (Unite share) was principally
attributable to a valuation surplus of GBP211 million on the
investment and development portfolios, capital expenditure of
GBP144 million and disposals of GBP246 million.
Our property portfolio saw a 5.2% increase in valuations on a
like-for-like basis during the year (Unite share: 4.6%). Just under
half of the increase was driven by yield compression, particularly
in London and other prime regional markets. The remaining increase
was split broadly evenly between rental growth and the unwinding of
deductions relating to Covid-19 as occupancy recovered.
The see-through net initial yield of the portfolio was 4.9 % at
31 December 2021 (December 2020: 5.0%). This reflected reductions
in property yields for the wholly-owned portfolio, USAF and LSAV of
9 basis points (11 basis points and 23 basis points
respectively).
LSAV's predominantly London-based portfolio saw the strongest
valuation performance in the year, reflecting more significant
yield compression in London and partial realisation of reversion
potential on certain assets approaching the end of nomination
agreements.
Breakdown of like-for-like capital growth
GBPm 31 Dec 2021 Yield compression Occupancy Rental growth LfL capital
valuation recovery /other growth
------------------- ----------------- ------------------ ------------------ ------------------ ------------------
Wholly owned 3,323 49 39 22 110
LSAV 1,819 70 17 51 138
USAF 2,867 58 57 12 127
----------------- ------------------ ------------------ ------------------ ------------------
Total (Gross) 8,009 177 113 85 375
Total (Unite
share) 4,865 207
----------------- ------------------ ------------------ ------------------ ------------------
% capital growth
Wholly owned 1.5% 1.2% 0.7% 3.4%
LSAV 5.2% 1.3% 3.9% 10.4%
USAF 2.1% 2.1% 0.4% 4.6%
----------------- ------------------ ------------------ ------------------ ------------------
Total (Gross) 2.4% 1.6% 1.2% 5.2%
Total (Unite
share) 4.6%
----------------- ------------------ ------------------ ------------------ ------------------
The proportion of the property portfolio that is income
generating is 94 % by value, down from 96% at 31 December 2020.
Properties under development have increased to 6 % of our property
portfolio by value (31 December 2020: 4%), following resumption of
development activity in the year and new commitments to deliveries
in 2023. Our development pipeline carries greater operational risk
than the income generating portfolio but delivers attractive
risk-adjusted returns, which we expect to materially contribute to
the Group's future earnings growth.
The investment portfolio is 35 % weighted to London by value on
a Unite share basis, which will rise to 44 % on a built-out basis
following completion of our secured development pipeline.
Unite investment portfolio analysis at 31 December 2021
Wholly Unite
owned USAF LSAV Lease Total share
---------------- -------------- ------- ------- ------- ------ ------- -------
London Value (GBPm) 849 425 1,545 16 2,835 1,733
Beds 2,882 1,863 6,649 260 11,654 35%
Properties 10 6 14 1 31
------------------------------- ------- ------- ------- ------ ------- -------
Prime regional Value (GBPm) 993 692 - 24 1,709 1,169
Beds 7,645 5,337 - 618 13,600 24%
Properties 17 18 - 2 37
------------------------------- ------- ------- ------- ------ ------- -------
Major regional Value (GBPm) 1,264 1,511 274 28 3,077 1,762
Beds 17,721 19,403 3,067 753 40,944 35%
Properties 36 47 1 2 86
------------------------------- ------- ------- ------- ------ ------- -------
Provincial Value (GBPm) 217 239 - 30 486 299
Beds 3,730 2,920 - 1,059 7,709 6%
Properties 8 7 - 3 18
------------------------------- ------- ------- ------- ------ ------- -------
Total Value (GBPm) 3,323 2,867 1,819 98 8,107 4,962
Beds 31,978 29,523 9,716 2,690 73,907 100%
Properties 71 78 15 8 172
------------------------------- ------- ------- ------- ------ ------- -------
Unite ownership share 100% 22% 50% 100%
Value (GBPm) 3,323 632 910 98 4,962
------------------------------- ------- ------- ------- ------ ------- -------
Development and university partnership activity
Development and university partnership activity continues to be
a significant driver of growth in future earnings and NTA and is
aligned to our strategic focus on high and mid-ranked universities.
Our pipeline of traditional development and university partnerships
includes 5,956 beds, with a total development cost of GBP 967
million, of which 3,661 beds or 77 % by development cost will be
delivered in central London.
We continue to identify new development and university
partnership opportunities that deliver our target returns in both
London and the regions. We expect to add to our pipeline during
2022 and maintain a run-rate of c.1,500-2,000 new beds p.a.
The anticipated yield on cost of this secured pipeline is 6.2 %.
Prospective returns on new direct-let schemes remain attractive at
around 7.5-8.0% in provincial markets. We have lower hurdle rates
for developments that are supported by universities or where
another developer is undertaking the higher-risk activities of
planning and construction. The London Plan requires student
accommodation to secure a nomination agreement with one or more
universities for the majority of rooms, meaning we expect new
London developments to be delivered as university partnerships,
with development yields of around 6.0%. University partnerships
make up around 83 % by value of our secured development
pipeline.
2022 completions
We are due to complete GBP231 million of development,
representing 1,351 new beds, for the 2022/23 academic year at our
schemes at Middlesex Street in London and Campbell House in
Bristol. Development is on track across both sites from a
programme, cost and letting perspective.
Campbell House is let to the University of Bristol under a
15-year nomination agreement. We are in advanced negotiations with
a high-tariff university partner for a 5-year nomination agreement
at our Middlesex Street scheme for approximately two-thirds of the
total beds. Middlesex Street will be a landmark asset for the
business, becoming our highest value property across the Group.
2023 completions
During the year, we received planning consent for an enlarged
700-bed development at Derby Road in Nottingham, due for completion
for the 2023/24 academic year, which is located adjacent to the
University of Nottingham campus. We were successful in securing
additional beds for the scheme through the planning process,
resulting in total development costs of GBP58 million. The scheme
will deliver a development yield of 8% .
The development will target a BREEAM Excellent rating and net
zero carbon in operations through optimised design, integration of
solar panels at roof level and an all-electric heating solution,
including high efficiency air-source heat pumps. The development
will also deliver a substantial biodiversity improvement through
opening and improving access to the River Leen.
Development pipeline
There remains widespread acknowledgement from local authorities
of the need for new PBSA supply to address growing student numbers
and relieve pressure on housing supply. Universities also remain
willing to support our planning applications as a means of
delivering the high-quality, affordable accommodation required to
deliver their growth ambitions. However, we have experienced delays
in the planning process as a result of the pandemic which have put
pressure on delivery timelines for some of the schemes in our
pipeline.
We continue to make progress on our London development pipeline,
with two significant new schemes secured over the past 12 months.
Our total secured London pipeline includes 3,661 beds and a total
development cost of GBP740m. In total, we expect these schemes to
contribute 63p of development surplus by completion and materially
contribute to growing our quality of earnings once let.
During the year, we submitted a planning application for our
768-bed scheme at Paddington in central London, which we now expect
to deliver for the 2024/25 academic year. We also exchanged
contracts to acquire a c.1,000-bed development site in Stratford,
East London, on a subject-to-planning basis. Total development
costs are estimated to be c.GBP160 million, with the scheme
targeted for delivery for the 2025/26 academic year, subject to
planning approval. The development will be delivered as a
university partnership, delivering a development yield in line with
our targets in London, and will help to serve the growing cluster
of universities with campuses in the area. Both UCL and University
of the Arts London are developing new campuses in Stratford, which
are due to bring a further 10,500 full-time students to the area.
The site adds to our two existing operational assets in Stratford,
providing opportunities to segment our customer base, including a
more tailored offer for postgraduates.
In January 2022, we added a further 270-bed scheme to our
pipeline in Nottingham city centre. The newly acquired site is
located in a prime location on Lower Parliament Street in the heart
of the city centre, close to Nottingham Trent University's campus
as well as the University of Nottingham's planned city centre
campus development for final year and postgraduate students.
In February 2022, we exchanged contracts to acquire a 700-bed
development site in East London on a subject-to-planning basis. The
scheme is targeted for delivery for the 2026/27 academic year,
subject to vacant possession and planning approval, and will target
a long-term nomination agreement with one of the Group's existing
university partners in London. The development, which is located in
a prime location close to transport links and university campuses,
will increase the Group's operational scale in East London.
In addition to our secured pipeline, we continue to progress a
number of further development opportunities in London and prime
regional markets at attractive returns.
Development costs
We are seeing some upward pressure on build costs, which
typically account for 50-70% of our total development costs,
reflective of supply chain pressures in securing materials and a
reduced supply of EU labour post-Brexit. We anticipate build cost
inflation of 3-5% over the next 12 months.
As part of our commitment to become a net zero business, we are
targeting a 48% reduction in the embodied carbon of our
developments by 2030. Building to a net zero standard is expected
to result in small increases in construction costs. However, we
expect this cost increase to be reflected in reduced land pricing
over time and ultimately rewarded through a valuation premium for
more sustainable buildings.
Development costs are already fixed for our 2022 completions
through design and build contracts. We have recently procured the
build contracts for our 2023 delivery at Derby Road in Nottingham,
which reflects recent inflation in materials and labour costs as
well as incorporating low-carbon construction methods where
possible. We expect that the combination of inflation and
environmental enhancements will result in a reduction in our
forecast yield on cost of c.10-20 basis points on deliveries in
2024 and 2025 compared to initial underwriting assumptions.
Despite current cost pressures, we continue to see opportunities
to add to our development pipeline at attractive returns and will
factor this expected inflation into our appraisal of future
schemes.
University partnerships pipeline
We continue to make progress with our strategy of delivering
growth through strategic partnerships with universities where
student numbers are growing fastest. Reflecting the financial and
operational constraints faced by universities, there is a growing
appetite for partnerships. We see opportunities to capitalise on
our brand and the goodwill created by our response to Covid-19 to
accelerate and enhance our pipeline of university partnerships.
We intend to deliver our three London schemes as university
partnerships, in line with requirements in the new London Plan for
the majority of new beds to be leased to a HE provider. The
developments will help to meet the growing need for high-quality,
purpose-built student accommodation in London and will incorporate
a range of design features to reduce its embodied and operational
carbon. We have secured planning support for the schemes from
university partners and discussions are already underway with a
view to agreeing a long-term nomination agreement.
In addition, we are in active discussions with a range of
high-quality universities for new partnerships, which we are
looking to progress over the next 12-18 months. We also continue to
make progress with a significant further pipeline of medium-term
opportunities.
Secured development and partnerships pipeline
Target Secured Total Total Capex in Capex Forecast Forecast
delivery beds completed development period remaining NAV yield on
value costs remaining cost
No. GBPm GBPm GBPm GBPm GBPm %
------------- ------------ ----------- ----------- ------------ ----------- ----------- ---------- -----------
Direct-let development
Derby Road,
Nottingham 2023 700 84 58 11 45 17 8.0%
Abbey Lane,
Edinburgh 2024 298 33 24 1 21 9 8.3%
Wyvil Road,
London(1) 2024 265 75 60 - 41 18 6.2%
Lower
Parliament
Street,
Nottingham 2024 270 43 34 - 34 9 7.0%
Total Wholly Owned 1,533 235 176 12 141 53 7.2%
Long-term university
agreements
Middlesex
Street,
London 2022 920 296 187 51 34 29 6.0%
Campbell
House,
Bristol 2022 431 63 44 12 7 8 6.2%
Temple
Quarter,
Bristol (1) 2024 596 85 67 1 64 18 6.2%
TP
Paddington,
London (1) 2024 768 203 156 3 151 48 6.0%
Stratford,
East London
(1) 2025 1,008 251 160 - 158 92 6.3%
East London
(1) 2026 700 241 177 - 177 63 5.4%
----------- ----------- ------------ ----------- ----------- ---------- -----------
Total university
partnerships 4,423 1,139 791 67 591 258 6.0%
----------- ----------- ------------ ----------- ----------- ---------- -----------
Total pipeline 5,956 1,374 967 79 732 311 6.2%
=========== =========== ============ =========== =========== ========== ===========
(1) Subject to obtaining planning consent
Asset management
In addition to our development activity, we see significant
opportunities to create value through asset management projects in
our estate. Our customer base is currently dominated by 1(st) year
and international students, but we see opportunities to segment our
portfolio to better address the needs of returning and postgraduate
students. These opportunities will be particularly focused on those
cities where we have gained additional scale through our
acquisition of Liberty Living. This activity will consider upgrades
to the specification of our buildings and amenity spaces, as well
as incorporating investments to improve energy and carbon
performance.
These asset management projects typically have shorter lead
times than new developments (often carried out over the summer
period) and have the potential to deliver attractive risk-adjusted
returns. We intend to invest GBP35-50 million p.a. into such
opportunities, delivering uplifts to rental income equivalent to an
additional 0.5-1.0% of annual rental growth across the Group
portfolio.
During 2021, we committed to three asset management schemes in
Manchester. Investment across the three projects is GBP42 million
in aggregate, which is expected to deliver a 7% yield on cost. The
projects will deliver new accommodation, refurbish existing rooms
and enhance the environmental performance of the underlying assets.
The upgraded assets will support our segmentation strategy, with
new specification and service tailored to the postgraduate
market.
Disposal activity
We continue to manage the quality of the portfolio and our
balance sheet leverage by recycling capital through disposals and
reinvesting into developments and acquisitions of assets aligned to
the best universities.
During the year, the Group contracted GBP261 million of
disposals on a Unite share basis. This included a GBP133 million
(Unite share: GBP90 million) portfolio of eight assets in Coventry,
Wolverhampton, Birmingham, Exeter and Manchester to Aventicum at a
6.5% yield and a 2% discount to book value. Completion occurred
during the year for seven of the assets, with the sale of the
remaining property in Manchester completing early in 2022. In June,
we completed the sale of two London assets in Whitechapel and
Wembley to LSAV for GBP342 million (Unite share: GBP171 million) at
a 4.0% yield and in line with book value.
As part of our ongoing portfolio optimisation, we are in
negotiations to sell a c.GBP235 million portfolio (Unite share)
during the first half of 2022, which has been treated as held for
sale in our year-end balance sheet.
Following these disposals, we will have largely completed the
disposal programme set out at the time of our acquisition of
Liberty Living in 2019. These disposals have helped to increase the
alignment of our portfolio to the strongest university cities and
our ability to sustain rental growth over a longer time horizon.
Following our planned portfolio sale in 2022, we expect disposals
to reduce to a lower level.
FINANCIAL PERFORMANCE
Income statement
The performance of the business has continued to be impacted by
the Covid-19 pandemic during 2021 through lower occupancy,
principally as a result of lower demand from international
students, and rental discounts offered to students during national
lockdowns.
A reconciliation of profit before tax to adjusted earnings and
EPRA earnings is set out in summary below and expanded in section 7
of the financial statements.
2021 2020
GBPm GBPm
------------------------------------------------------------------ ------ --------
Adjusted earnings 110.1 91.6
LSAV performance fee 41.9 5.7
------ --------
EPRA earnings 152.0 97.3
Valuation gains/(losses) and loss on disposal 182.2 (178.8)
Changes in valuation of interest rate swaps and debt break costs 6.7 (35.9)
Non-controlling interest and other items 2.2 (2.7)
------ --------
IFRS profit/(loss) before tax 343.1 (120.1)
====== ========
Adjusted earnings per share 27.6p 24.0p
IFRS basic earnings per share 85.9p (31.8)p
The profit before tax of GBP 343.1 million (2020: GBP120.1
million loss) includes adjusted earnings of GBP 110.1 million
(2020: GBP91.6 million) and the GBP41.9 million performance fee
received in respect of LSAV performance (2020: GBP5.7 million).
Valuation gains and losses on disposal of GBP 182.2 million (2020:
GBP178.8 million loss), reflecting recovery of the income shortfall
resulting from Covid-19, as well as GBP 6.7 million of gains
associated with changes in the valuation of interest rate swaps
(2020: GBP35.9 million costs).
Cash flow and net debt
The Operations business generated GBP 108.1 million of net cash
in 2021 (2020: GBP57.3 million) and see-through net debt reduced to
GBP 1,522 million (2020: GBP1,742 million). The key components of
the movement in see-through net debt were:
-- Disposal proceeds of GBP241 million
-- Operational cash flow of GBP 114 million on a see-through basis
-- Receipt of the LSAV performance fee of GBP53 million
-- Total capital expenditure of GBP 101 million
-- Dividends paid of GBP65 million
-- A GBP 22 million outflow for other items including lease
payments and swap cancellation fees
In 2022, we expect see-through net debt to increase as planned
capital expenditure on investment and development activity will
exceed anticipated asset disposals.
Debt financing and liquidity
As at 31 December 2021, the wholly-owned Group had GBP421
million of cash and debt headroom (31 December 2020: GBP379
million), comprising of GBP96 million of drawn cash balances and
GBP325 million of undrawn debt (2020: GBP329 million and GBP50
million respectively).
The Group maintains a disciplined approach to managing leverage,
with LTV reducing to 29% at 31 December 2021 (31 December 2020:
34%). The reduction in LTV during the year was primarily driven by
proceeds from property disposals, the impact of valuation gains and
the receipt of the LSAV performance fee, which more than offset the
impact of capital expenditure in the period. We intend to dispose
of GBP200-250 million of assets in 2022 (Unite share basis) to fund
our development activity and manage our LTV target to 35% on a
built-out basis. The level of disposals going forward will be lower
than recent years, following delivery of asset sales planned
following our acquisition of Liberty Living.
With greater focus on the earnings profile of the business, we
are continuing to monitor our net debt to EBITDA ratio, which we
target to return to 6-7x over the medium term. The improvement in
net debt to EBITDA in the year to 8.3x (2020: 10.1x) reflects the
improved operational performance of the business and the reduction
in gearing during the year.
During the year, the Group refinanced and extended its GBP450
million revolving credit facility (RCF) with HSBC, NatWest and
Royal Bank of Canada. The facility has an initial term of 3.5
years, which may be extended by a maximum of a further two years at
Unite's request, subject to lender consent. The RCF incorporates
three sustainability-linked performance targets linked to
reductions in scope 1 and 2 carbon emissions, improvements in EPC
certifications and investments in social impact initiatives.
The Group published its Sustainable Finance Framework during the
year. The framework sets up the criteria for financing projects
through sustainable bonds, loans and other debt products.
Underlying projects have a positive environmental and/or social
impact, thereby contributing to the United Nations Sustainable
Development Goals, while supporting the company's business
strategy. These include green buildings, projects aimed at
improving the energy efficiency of our properties and renewable
energy as well as social initiatives including the provision of
affordable housing, financial support for students through the
Covid-19 pandemic and projects aimed at widening participation in
post-18 education.
The Unite Group has maintained investment grade corporate
ratings of BBB from Standard & Poor's and Baa2 from Moody's,
reflecting Unite's robust capital position, cash flows and track
record. During the year, Moody's upgraded the Group's credit
outlook from Stable to Positive, and Standard & Poor's upgraded
from Negative to Stable, following recovery from the impact of
Covid-19.
Interest rate hedging arrangements and cost of debt
Our average cost of debt based on current drawn amounts has
reduced to 3.0% (31 December 2020: 3.1%). The Group has 90% of
investment debt subject to a fixed or capped interest rates (31
December 2020: 75%), providing protection against future changes in
interest rates. The repayment of amounts drawn from our RCF, as
confidence in trading recovered from Covid-19, resulted in an
increase in the average term and hedge ratio on our investment
debt.
Our average debt maturity is 5.0 years (31 December 2020: 4.2
years) and we will continue to proactively manage our debt maturity
profile, diversify our lending base and seek to lock into
longer-term debt at rates below our current average cost of debt.
Borrowings for the combined Group are well diversified across
lenders and maturities and we are in the process of refinancing
LSAV debt due to expire this year.
During the period, we published our Sustainable Finance
Framework, aligned to our new Sustainability Strategy, which will
enable future sustainable debt issuance and provide the opportunity
to further diversify our sources of debt.
Key debt statistics (Unite share basis) 31 Dec 2021 31 Dec 2020
--------------------------------------------- ------------ ------------
See-through net debt GBP1,522m GBP1,742m
LTV 29% 34%
Net debt:EBITDA ratio 8.3 10.1
Interest cover ratio 2.8 2.5
Average debt maturity 5.0 years 4.2 years
Average cost of debt 3.0% 3.1%
Proportion of investment debt at fixed rate 90% 75%
Dividend
We are proposing a final dividend payment of 15.6p per share
(2020: 12.75p), making 22.1p for the full year (2020: 12.75p). The
final dividend will be fully paid as a Property Income Distribution
(PID) of 15.6p, which we expect to fully satisfy our PID
requirement for the 2021 financial year.
This represents a payout ratio of 80% of adjusted EPS for
FY2021, which will remain our target dividend payout ratio going
forwards.
Subject to approval at Unite's Annual General Meeting on 12 May
2022, the dividend will be paid in either cash or new ordinary
shares (a "scrip dividend alternative") on 20 May 2022 to
shareholders on the register at close of business on 19 April 2022.
The last date for receipt of scrip elections will be 4 May
2022.
During 2021, scrip elections were received for 17.8% and 2.4% of
shares in issue for the 2020 final dividend and 2021 interim
dividend respectively. Further details of the scrip scheme, the
terms and conditions and the process for election to the scrip
scheme are available on the Company's website.
Tax and REIT status
The Group holds REIT status and is exempt from tax on its
property business. During the year, we recognised a corporation tax
credit of GBP2.8 million (2020: GBP2.0 million charge), relating
primarily to a GBP2.3 million tax credit in respect of prior years
(2020: GBP0.3 million).
The Government has confirmed that it does not expect
purpose-built student accommodation to be subject to the
Residential Property Developer Tax, aimed at funding remediation of
cladding defects.
Funds and joint ventures
The table below summarises the key financials at 31 December
2021 for our co-investment vehicles.
Property Net debt Other assets Net assets Unite share Total return Maturity Unite share
Assets GBPm GBPm GBPm of NAV
GBPm GBPm
------ ------------- --------- ------------- ----------- ------------- ------------- ------------ ------------
USAF 2,867 (806) (105) 1,956 431 8.9% Infinite 22%
LSAV 1,819 (628) (18) 1,173 587 19.9% 2032 50%
USAF and LSAV have delivered a strong performance in the year,
despite the challenging environment resulting from Covid-19. USAF's
total returns reflect the payment of distributions retained from
2020 which, if excluded, decrease the effective total return of the
fund to 6.9%. LSAV's stronger underlying total return reflects a
greater increase in property valuations over the year, due to yield
compression in London.
USAF is a high-quality, large-scale portfolio of 29,500 beds in
leading university cities. The fund has positive future prospects
through rental growth and investment opportunities in asset
management initiatives, forward funds and targeted acquisitions.
Unite is currently engaging with unitholders in its role as fund
manager to determine the best way to fund both USAF's ongoing
capital requirements and continued growth. Unite is currently
considering increasing its investment in USAF, either by way of a
purchase of secondary units or subscription to new equity, subject
to availability of units and pricing. This will provide an
additional route for Unite to gain access to high-quality income
producing assets.
USAF reinstated distributions in April, having suspended them in
2020 to preserve cash in response to Covid-19. The secondary market
for USAF units continues to operate effectively, with GBP52 million
of units trading in 2021 at a 2% average discount to NAV.
During the year, Unite extended the LSAV joint venture with GIC
for a further 10 years to 2032. Unite will be entitled to receive a
performance fee from LSAV equivalent to 12.5% of returns in excess
of 8% p.a. in the period from 2021 to 2032. Unite will continue to
act as property and asset manager for the duration of the new joint
venture on existing terms and fee levels.
Fees
During the year, the Group recognised net fees of GBP15.9
million from its fund and asset management activities (2020:
GBP14.0 million). The increase was driven by the recovery in NOI
and growth in asset valuations as a result of yield compression and
Covid-19 disruption unwinding.
Following the quarterly LSAV valuation at 30 September 2021,
Unite received a payment of GBP53 million from GIC in full
settlement of the LSAV performance fee due from 2012-2021, with
GBP41.9 million being recognised in the year, representing the
balancing amount not previously recognised in 2019 and 2020. The
increase in the fee was due primarily to the strong performance of
valuations in LSAV in 2021 and the certainty created by the
extension of the joint venture.
2021 2020
GBPm GBPm
---------------------------------------- ------ ------
USAF asset management fee 12.0 10.7
LSAV asset and property management fee 3.9 3.3
LSAV performance fee 41.9 5.7
------ ------
Total fees 57.8 19.7
------ ------
Responsibility statement of the directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
-- The financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the company and the undertakings included in the consolidation
taken as a whole
-- The strategic report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face
-- We consider the annual report and accounts, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's position and
performance, business model and strategy.
Richard Smith Joe Lister
Chief Executive Officer Chief Financial Officer
23 February 2022
Forward-looking statements
The preceding preliminary statement has been prepared for the
shareholders of the Company, as a body, and for no other persons.
Its purpose is to assist shareholders of the Company to assess the
strategies adopted by the Company and the potential for those
strategies to succeed and for no other purpose. The preliminary
statement contains forward-looking statements that are subject to
risk factors associated with, among other things, the economic,
regulatory and business circumstances occurring from time to time
in the sectors and markets in which the Group operates. It is
believed that the expectations reflected in these statements are
reasonable, but they may be affected by a wide range of variables
that could cause actual results to differ materially from those
currently anticipated. No assurances can be given that the
forward-looking statements will be realised. The forward-looking
statements reflect the knowledge and information available at the
date of preparation. Nothing in the preliminary statement should be
considered or construed as a profit forecast for the Group. Except
as required by law, the Group has no obligation to update
forward-looking statements or to correct any inaccuracies
therein.
INTRODUCTION AND TABLE OF CONTENTS
These financial statements are prepared in accordance with IFRS.
The Board of Directors also present the Group's performance on the
basis recommended for real estate companies by the European Public
Real Estate Association (EPRA). The reconciliation between IFRS
performance measures and EPRA performance measures can be found in
section 2.2b for EPRA earnings and 2.3c for EPRA net tangible
assets (NTA). The adjustments to the IFRS results are intended to
help users in the comparability of these results across other
listed real estate companies in Europe and reflect how the
Directors monitor the business.
Primary statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in shareholders' equity
Statement of cash flows
Section 1: Basis of preparation
Section 2: Results for the year
2.1 Segmental information
2.2 Earnings
2.3 Net assets
2.4 Revenue and costs
2.5 Tax
Section 3: Asset management
3.1 Wholly owned property assets
3.2 Inventories
3.3 Investments in joint ventures
Section 4: Funding
4.1 Borrowings
4.2 Interest rate swaps
4.3 Net financing costs
4.4 Gearing
4.5 Covenant compliance
4.6 Equity
4.7 Dividends
Section 5: Working capital
5.1 Cash and cash equivalents
5.2 Credit risk
5.3 Provisions
Section 6: Post balance sheet events
Section 7: Alternative performance measures
Glossary
Company information
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2021
2021 2020
Note GBPm GBPm
------------------------------------------ ------ ------ -------
Rental income 2.4 209.0 196.1
Other income 2.4 57.9 19.5
------------------------------------------ ------ ------ -------
Total revenue 266.9 215.6
Cost of sales (64.4) (53.3)
Expected credit losses (3.3) (8.6)
Operating expenses (36.3) (34.7)
------------------------------------------ ------ ------ -------
Results from operating activities 162.9 119.0
Loss on disposal of property (12.0) (1.9)
Net valuation gains/(losses) on property
(owned and under development) 3.1 116.9 (124.2)
Net valuation losses on property (leased) 3.1 (11.1) (11.2)
Integration costs - (9.2)
------------------------------------------ ------ ------ -------
Profit/(loss) before net financing costs
and share of joint venture profit/(loss) 256.7 (27.5)
Loan interest and similar charges 4.3 (34.2) (41.9)
Interest on lease liability 4.3 (8.5) (8.8)
Mark to market changes on interest rate
swaps 4.3 10.9 (5.8)
Swap cancellation fair value settlements
and loan break costs 4.3 (4.2) (30.1)
------------------------------------------ ------ ------ -------
Finance costs (36.0) (86.6)
Finance income 4.3 - 5.6
------------------------------------------ ------ ------ -------
Net financing costs (36.0) (81.0)
Share of joint venture profit/(loss) 3.3b 122.4 (11.6)
------------------------------------------ ------ ------ -------
Profit/(loss) before tax 343.1 (120.1)
Current tax 2.5a 0.9 (1.2)
Deferred tax 2.5a 0.5 (0.9)
------------------------------------------ ------ ------ -------
Profit/(loss) for the year 344.5 (122.2)
Profit/(loss) for the year attributable
to
Owners of the parent company 342.4 (121.0)
Non-controlling interest 2.1 (1.2)
------------------------------------------ ------ ------ -------
344.5 (122.2)
------------------------------------------ ------ ------ -------
Profit/(loss) per share
Basic 2.2c 85.9p (31.8p)
Diluted 2.2c 85.7p (31.8p)
All results are derived from continuing activities.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2021
2021 2020
Note GBPm GBPm
-------------------------------------- ---- ----- -------
Profit/(loss) for the year 344.5 (122.2)
Mark to market movements on hedged
instruments 16.2 (12.8)
Hedges reclassified to profit or loss (0.9) 2.5
Share of joint venture mark to market
movements on hedged instruments 3.3b 0.6 (0.1)
-------------------------------------- ---- ----- -------
Other comprehensive income/(loss)
for the year 15.9 (10.4 )
Total comprehensive income/(loss)
for the year 360.4 (132.6)
-------------------------------------- ---- ----- -------
Attributable to
Owners of the parent company 358.3 (131.4)
Non-controlling interest 2.1 (1.2)
-------------------------------------- ---- ----- -------
360.4 (132.6)
-------------------------------------- ---- ----- -------
All other comprehensive income may be classified as profit and
loss in the future.
There are no tax effects on items of other comprehensive
income.
CONSOLIDATED BALANCE SHEET
At 31 December 2021 Note 2021 2020
GBPm GBPm
----------------------------------------- ---- --------- ---------
Assets
Investment property (owned) 3.1 3,095.1 3,614.7
Investment property (leased) 3.1 97.7 101.8
Investment property ( under development) 3.1 324.1 187.2
Investment in joint ventures 3.3b 1,044.1 849.0
Other non-current assets 18.9 21.9
Right of use assets 3.6 4.3
Deferred tax asset 2.5d 3.0 1.9
----------------------------------------- ---- --------- ---------
Total non-current assets 4,586.5 4,780.8
Assets classified as held for sale 3.1 228.2 -
Interest rate swaps 4.2 6.1 -
Inventories 3.2 12.1 8.8
Trade and other receivables 108.8 104.0
Cash and cash equivalents 5.1 109.4 338.3
----------------------------------------- ---- --------- ---------
Total current assets 464.6 451.1
----------------------------------------- ---- --------- ---------
Total assets 5,051.1 5,231.9
----------------------------------------- ---- --------- ---------
Liabilities
Interest rate swaps 4.2 (3.6) (5.8)
Lease liabilities (4.9) (4.4)
Trade and other payables (200.7) (141.3)
Current tax liability (0.1) (0.3)
Provisions 5.3 (33.5) (15.7)
----------------------------------------- ---- --------- ---------
Total current liabilities (242.8) (167.5)
Borrowings 4.1 (1,162.0) (1,689.9)
Lease liabilities (91.9) (96.7)
Interest rate swaps 4.2 - (17.8)
----------------------------------------- ---- --------- ---------
Total non-current liabilities (1,253.9) (1,804.4)
----------------------------------------- ---- --------- ---------
Total liabilities (1,496.7) (1,971.9)
----------------------------------------- ---- --------- ---------
Net assets 3,554.4 3,260.0
----------------------------------------- ---- --------- ---------
Equity
Issued share capital 4.6 99.8 99.5
Share premium 4.6 2,161.2 2,160.3
Merger reserve 40.2 40.2
Retained earnings 1,225.0 949.0
Hedging reserve 1.6 (14.1)
----------------------------------------- ---- --------- ---------
Equity attributable to the owners of
the parent company 3,527.8 3,234.9
Non-controlling interest 26.6 25.1
----------------------------------------- ---- --------- ---------
Total equity 3,554.4 3,260.0
----------------------------------------- ---- --------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended 31 December 2021
Attributable
Issued to owners
share Share Merger Retained Hedging of the Non-controlling
capital premium reserve earnings reserve parent interest Total
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---- --------- --------- --------- --------- --------- ------------ ---------------- -------
At 1 January
2021 99.5 2,160.3 40.2 949.0 (14.1) 3,234.9 25.1 3,260.0
Profit for the
year - - - 342.4 - 342.4 2.1 344.5
Other
comprehensive
income
for the year:
Mark to market
movements
on
hedged
instruments - - - - 16.2 16.2 - 16.2
Hedges
reclassified
to profit or
loss - - - - (0.9) (0.9) - (0.9)
Share of joint
venture
mark to market
movements
on hedged
instruments 3.3b - - - - 0.6 0.6 - 0.6
--------- --------- --------- --------- --------- ------------ ---------------- -------
Total
comprehensive
income for the
year - - - 342.4 15.9 358.3 2.1 360.4
Shares issued 4.6 0.3 0.9 - - - 1.2 - 1.2
Deferred tax on
share-based
payments - - - 0.3 - 0.3 - 0.3
Fair value of
share-based
payments - - - 2.4 - 2.4 - 2.4
Own shares
acquired - - - (1.3) - (1.3) - (1.3)
Unwind of
realised swap
gain - - - - (0.2) (0.2) - (0.2)
Dividends paid
to owners
of the parent
company 4.7 - - - (67.8) - (67.8) - (67.8)
Dividends to
non-controlling
interest - - - - - - (0.6) (0.6)
---------------- ---- --------- --------- --------- --------- --------- ------------ ---------------- -------
At 31 December
2021 99.8 2,161.2 40.2 1,225.0 1.6 3,527.8 26.6 3,554.4
---------------- ---- --------- --------- --------- --------- --------- ------------ ---------------- -------
Attributable
Issued to owners
share Share Merger Retained Hedging of the Non-controlling
capital premium reserve earnings reserve parent interest Total
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---- --------- --------- --------- ---------- --------- ------------ --------------- -------
At 1 January
2020 90.9 1,874.9 40.2 1,069.0 (3.5) 3,071.5 26.5 3,098.0
Loss for the
year - - - (121.0) - (121.0) (1.2) (122.2)
Other
comprehensive
loss for the
year:
Mark to market
movements
on
hedged
instruments - - - - (12.8) (12.8) - (12.8)
Hedges
reclassified
to profit or
loss - - - - 2.5 2.5 - 2.5
Share of joint
venture
mark to market
movements
on hedged
instruments 3.3b - - - - (0.1) (0.1) - (0.1)
--------- --------- --------- ---------- --------- ------------ --------------- -------
Total
comprehensive
loss for the
year - - - (121.0) (10.4) (131.4) (1.2) (132.6)
Shares issued 4.6 8.6 285.4 - - - 294.0 - 294.0
Deferred tax on
share-based
payments - - - 0.1 - 0.1 - 0.1
Fair value of
share-based
payments - - - 1.6 - 1.6 - 1.6
Own shares
acquired - - - (0.7) - (0.7) - (0.7)
Unwind of
realised
swap gain - - - - (0.2) (0.2) - (0.2)
Dividends paid
to owners
of the parent
company 4.7 - - - - - - - -
Dividends to
non-controlling
interest - - - - - - (0.2) (0.2)
---------------- ---- --------- --------- --------- ---------- --------- ------------ --------------- -------
At 31 December
2020 99.5 2,160.3 40.2 949.0 (14.1) 3,234.9 25.1 3,260.0
---------------- ---- --------- --------- --------- ---------- --------- ------------ --------------- -------
STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
2021 2020
Note GBPm GBPm
------------------------------------------------- ---- ------- -------
Net cash flows from operating activities 5.1 171.3 73.3
Investing activities
Investment in joint ventures - (7.5)
Capital expenditure on properties (95.9) (148.5)
Acquisition of intangible assets (3.2) (2.7)
Acquisition of plant and equipment (0.4) (0.7)
Proceeds from sale of investment property 307.3 -
Interest received - 0.1
Dividends received 37.1 10.2
Net cash flows from investing activities 244.9 (149.1)
Financing activities
Proceeds from the issue of share capital 1.1 294.0
Payments to acquire own shares (1.3) (0.7)
Interest paid in respect of financing activities (47.9) (54.2)
Swap cancellation fair value settlements
and debt exit costs (4.2) (30.1)
Proceeds from non-current borrowings 147.0 355.1
Repayment of borrowings (675.0) (233.3)
Dividends paid to the owners of the parent
company (57.2) -
Withholding tax paid on distributions (7.0) (3.4)
Dividends paid to non-controlling interest (0.6) (0.2)
------------------------------------------------- ---- ------- -------
Net cash flows from financing activities (645.1) 327.2
------------------------------------------------- ---- ------- -------
Net (decrease)/increase in cash and cash
equivalents (228.9) 251.4
Cash and cash equivalents at start of year 338.3 86.9
------------------------------------------------- ---- ------- -------
Cash and cash equivalents at end of year 109.4 338.3
------------------------------------------------- ---- ------- -------
NOTES TO THE FINANCIAL STATEMENTS
Section 1: Basis of preparation
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2021
or 2020 but is derived from those accounts. Statutory accounts for
2020 have been delivered to the Registrar of Companies, and those
for 2021 will be delivered in due course. The auditors have
reported on those accounts; their reports were (i) unqualified (ii)
did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying their report
and (iii) did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006 in respect of the accounts for 2020 or
2021.
Going concern
In determining the appropriate basis of preparation of the
financial statements, the Directors are required to consider
whether the Group can continue in operational existence for the
foreseeable future.
The Directors have considered a range of scenarios for future
performance through the remainder of the 2021/22 and 2022/23
academic years, with a focus on forecast liquidity and ICR covenant
performance. This included a base case assuming cash collection and
performance for the 2021/22 academic year remains in line with
current trends and a return to 97% occupancy for the 2022/23
academic year; and a reasonable worst case scenario where income
for the 2022/23 academic year was impacted by reduced sales broadly
equivalent to the 2020/21 academic year where occupancy was 88%.
Under each of these scenarios, the Directors are satisfied that the
Group has sufficient liquidity and will maintain covenant
compliance over the next 12 months. To further support the
Directors' going concern assessment, a 'Reverse Stress Test' was
performed to determine the level of performance at which adopting
the going concern basis of preparation may not be appropriate. This
involved assessing the minimum amount of income required to ensure
financial covenants would not be breached. Within the tightest
covenant, occupancy could fall to approximately 60% before there
would be a breach.
As at the date of this report, whilst the global outlook as a
result of Covid-19 is improving, it continues to be uncertain and
the range of potential outcomes is significant. In particular,
should the impact on trading conditions be more prolonged or severe
than currently forecast by the Directors, namely if there is a
further sustained national lockdown that results in Universities
not opening physically and students either not arriving at
University or returning home, the Group's going concern status may
be dependent on its ability to seek interest cover covenant waivers
from its lenders. The Directors are satisfied that the possibility
of such an outcome is sufficiently remote that adopting the going
concern basis of preparation is appropriate.
Accordingly, after making enquiries and having considered
forecasts and appropriate sensitivities, the Directors have formed
a judgement, at the time of approving the financial statements,
that there is a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future, being at least 12 months from the date of authorisation of
these financial statements.
Section 2: Results for the year
IFRS performance measures
2021 2020 2021 2020
Note GBPm GBPm pps pps
------------------------ ------ ------- ------- ----- -------
Profit/(loss) after tax 2.2c 342.4 (121.0) 85.9p (31.8p)
Net assets 2.3d 3,527.8 3,234.9 880p 809p
------------------------ ------ ------- ------- ----- -------
EPRA performance measures
2021 2020 2021 2020
Note GBPm GBPm pps pps
---------------------- ------ ------- ------- ----- -----
EPRA earnings 2.2c 152.0 97.3 38.1p 25.5p
Adjusted earnings (*) 2.2c 110.1 91.6 27.6p 24.0p
EPRA NTA 2.3d 3,532.2 3,266.2 882p 818p
---------------------- ------ ------- ------- ----- -----
* See glossary for definition and note 2.2b for reconciliation
to IFRS measure.
2.1 Segmental information
The Board of Directors monitors the business along two activity
lines, Operations and Property. The reportable segments for the
years ended 31 December 2021 and 31 December 2020 are Operations
and Property. The Group undertakes its Operations and Property
activities directly and through joint ventures with third parties.
The joint ventures are an integral part of each segment and are
included in the information used by the Board to monitor the
business. Detailed analysis of the performance of each of these
reportable segments is provided in the following sections 2.2 to
2.3.
The Group's properties are located exclusively in the United
Kingdom. The Group therefore has one geographical segment.
2.2 Earnings
EPRA earnings and adjusted earnings amend IFRS measures by
removing principally the unrealised investment property valuation
gains and losses such that users of the financials are able to see
the extent to which dividend payments (dividend per share) are
underpinned by earnings arising from purely operational activity.
In 2021, an alternative performance measure based on EPRA earnings,
adjusted to remove the impact of the LSAV performance fee has been
presented. Given the quantum of the LSAV performance fee in the
year, it has been excluded from adjusted earnings to improve the
comparability of results year-on-year. In 2020, in consideration of
EPRA's focus on presenting clear comparability in results from
recurring operational activities, EPRA earnings excludes
integration costs. The reconciliation between profit/(loss)
attributable to owners of the parent company and EPRA earnings and
adjusted earnings is available in note 2.2b.
The Operations segment manages rental properties, owned directly
by the Group or by joint ventures. Its revenues are derived from
rental income and asset management fees earned from joint ventures.
The Operations segment is the main contributor to adjusted earnings
and adjusted EPS and these are therefore the key indicators which
are used by the Board to monitor the Operations business.
The Board does not manage or monitor the Operations segment
through the balance sheet and therefore no segmental information
for assets and liabilities is provided for the Operations
segment.
2.2a) EPRA earnings
2021
Share of joint ventures
------------------------------ ------ -----------
Group on
EPRA basis
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
------------------------------ ------ ------------ ----------- -----------
Rental income 209.0 37.6 36.1 282.7
Property operating expenses (67.7) (13.0) (10.2) (90.9)
------------------------------ ------ ------------ ----------- -----------
Net operating income 141.3 24.6 25.9 191.8
Management fees 19.1 (3.2) - 15.9
Overheads (30.7) (0.3) (0.5) (31.5)
Interest on lease liabilities (8.5) - - (8.5)
Net financing costs (38.5) (6.7) (9.6) (54.8)
------------------------------ ------ ------------ ----------- -----------
Operations segment result 82.7 14.4 15.8 112.9
Property segment result (2.2) - - (2.2)
Unallocated to segments 83.9 (0.2) (42.4) 41.3
------------------------------ ------ ------------ ----------- -----------
EPRA earnings 164.4 14.2 (26.6) 152.0
LSAV performance fee (84.1) - 42.2 (41.9)
------------------------------ ------ ------------ ----------- -----------
Adjusted earnings 80.3 14.2 15.6 110.1
------------------------------ ------ ------------ ----------- -----------
Included in the above is rental income of GBP16.3 million and
property operating expenses of GBP8.3 million relating to sale and
leaseback properties.
The unallocated to segments balance includes the fair value of
share-based payments of (GBP2.4 million), contributions to the
Unite Foundation of (GBP1.0 million), LSAV performance fee of
GBP41.9 million, deferred tax credit of GBP0.8 million and current
tax credit of GBP2.0 million. Depreciation and amortisation
totalling GBP7.8 million is included within overheads.
2020
Share of joint ventures
------------------------------ ------ -----------
Group on
EPRA basis
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
------------------------------ ------ ------------- ---------- -----------
Rental income 196.1 34.2 32.9 263.2
Property operating expenses (61.9) (12.8) (8.2) (82.9)
------------------------------ ------ ------------- ---------- -----------
Net operating income 134.2 21.4 24.7 180.3
Management fees 20.1 (2.8) (3.3) 14.0
Overheads (30.1) (0.3) (0.5) (30.9)
Interest on lease liabilities (8.8) - - (8.8)
Net financing costs (40.6) (6.6) (8.9) (56.1)
------------------------------ ------ ------------- ---------- -----------
Operations segment result 74.8 11.7 12.0 98.5
Property segment result (2.2) - - (2.2)
Unallocated to segments 7.1 (0.3) (5.8) 1.0
------------------------------ ------ ------------- ---------- -----------
EPRA earnings 79.7 11.4 6.2 97.3
LSAV performance fee (11.4) - 5.7 (5.7)
------------------------------ ------ ------------- ---------- -----------
Adjusted earnings 68.3 11.4 11.9 91.6
------------------------------ ------ ------------- ---------- -----------
Included in the above is rental income of GBP14.6 million and
property operating expenses of GBP7.3 million relating to sale and
leaseback properties.
The unallocated to segments balance includes the fair value of
share-based payments of (GBP1.7 million), contributions to the
Unite Foundation of (GBP1.0 million), LSAV performance fee of
GBP5.7 million, deferred tax charge of (GBP0.8 million) and current
tax charge of (GBP1.2 million).
Depreciation and amortisation totalling GBP9.2 million is
included within overheads. EPRA earnings excludes integrations
costs following the acquisition of Liberty Living, which total
GBP9.2 million in the year.
2.2b) IFRS reconciliation to EPRA earnings
EPRA earnings excludes movements relating to changes in values
of investment properties (owned, leased and under development),
profits/losses from the disposal of properties, swap/debt break
costs, impairment of goodwill and integration costs, which are
included in the profit/loss reported under IFRS. EPRA earnings and
adjusted earnings reconcile to the profit/(loss) attributable to
owners of the parent company as follows:
Note 2021 2020
GBPm GBPm
---------------------------------------------- ---- ------- -------
Profit/(loss) attributable to owners
of the parent company 342.4 (121.0)
Net valuation (gains)/losses on investment
property (owned) 3.1 (116.9) 124.2
Property disposals (owned) 12.0 1.9
Net valuation losses on investment property
(leased) 3.1 11.1 11.2
Integration costs - 9.2
Amortisation of fair value of debt recognised
on acquisition (4.3) (4.3)
Share of joint venture (gains)/losses
on investment property 3.3b (88.7) 41.5
Share of joint venture property disposals 3.3b 0.3 -
Swap cancellation fair value settlements
and loan break costs 4.3 4.2 30.1
Mark to market changes on interest rate
swaps 4.3 (10.9) 5.8
Current tax relating to property disposals 1.1 -
Deferred tax 2.5d 0.3 0.1
Non-controlling interest share of reconciling
items * 1.4 (1.4)
---------------------------------------------- ---- ------- -------
EPRA earnings 2.2a 152.0 97.3
---------------------------------------------- ---- ------- -------
LSAV performance fee (41.9) (5.7)
---------------------------------------------- ---- ------- -------
Adjusted earnings 2.2a 110.1 91.6
---------------------------------------------- ---- ------- -------
* The non-controlling interest arises as a result of the Company
not owning 100% of the share capital of one of its subsidiaries,
USAF (Feeder) Guernsey Limited. More detail is provided in note
3.3.
2.2c) Earnings per share
Basic EPS is calculated using earnings/loss attributable to the
equity shareholders of The Unite Group PLC and the weighted average
number of shares which have been in issue during the year. Basic
EPS is adjusted in line with EPRA guidelines in order to allow
users to compare the business performance of the Group with other
listed real estate companies in a consistent manner and to reflect
how the business is managed on a day-to-day basis.
The calculations of basic, EPRA EPS and adjusted EPS for the
year ended 31 December 2021 and 2020 are as follows:
2021 2020 2021 2020
Note GBPm GBPm pps pps
----------------------------------- ------ ----- ------- ------- -------
Earnings/(loss)
Basic 342.4 (121.0) 85.9p (31.8p)
Diluted 342.4 (121.0) 85.7p (31.8p)
EPRA 2.2b 152.0 97.3 38.1p 25.5p
Adjusted 2.2b 110.1 91.6 27.6p 24.0p
----------------------------------- ------ ----- ------- ------- -------
2021 2020
----------------------------------- ------ ----- ------- ------- -------
Weighted average number of shares
(thousands)
Basic 398,742 381,379
Dilutive potential ordinary shares
(share options) 829 872
----------------------------------- ------ ----- ------- ------- -------
Diluted 399,571 382,251
----------------------------------- ------ ----- ------- ------- -------
Movements in the weighted average number of shares have resulted
from the issue of shares arising from the employee share-based
payment schemes and the full year impact of the 2020 equity raise.
In 2021, there were no (2020: 11,278) options excluded from the
potential dilutive shares that did not affect the diluted weighted
average number of shares.
2.3 Net assets
2.3a) EPRA NAV and NTA
EPRA NTA makes adjustments to IFRS measures by removing the fair
value of financial instruments and the carrying value of
intangibles. The reconciliation between IFRS NAV and EPRA NTA is
available in note 2.3c.
Share of JVs
---------------------------------------- --------- -----------
Group on
Unite USAF LSAV EPRA basis
2021 GBPm GBPm GBPm GBPm
---------------------------------------- --------- --------------- -------------- -----------
Investment property (owned) * 3,323.3 632.0 909.5 4,864.8
Investment property (leased) 97.7 - - 97.7
Investment property (under development) 324.1 - - 324.1
---------------------------------------- --------- --------------- -------------- -----------
Total property portfolio 3,745.1 632.0 909.5 5,286.6
Debt on properties (1,139.7) (201.0) (336.6) (1,677.3)
Lease liabilities (93.8) - - (93.8)
Cash 109.4 23.4 22.7 155.5
---------------------------------------- --------- --------------- -------------- -----------
Net debt (1,124.1) (177.6) (313.9) (1,615.6)
Other assets and (liabilities) (90.5) (23.2) (9.0) (122.8)
Intangibles per IFRS balance sheet (16.1) - - (16.1)
---------------------------------------- --------- --------------- -------------- -----------
EPRA NTA 2,514.4 431.2 586.6 3,532.2
---------------------------------------- --------- --------------- -------------- -----------
Loan to value ** 28% 28% 35% 29%
Loan to value post IFRS 16 30% 28% 35% 31%
* Investment property (owned) includes assets classified as held
for sale in the IFRS balance sheet.
** LTV calculated excluding investment properties (leased) and
the corresponding lease liabilities.
Share of JVs
---------------------------------------- --------- -----------
Group on
Unite USAF LSAV EPRA basis
2020 GBPm GBPm GBPm GBPm
---------------------------------------- --------- --------------- -------------- -----------
Investment property (owned) 3,614.7 616.7 661.8 4,893.2
Investment property (leased) 101.8 - - 101.8
Investment property (under development) 187.2 - - 187.2
---------------------------------------- --------- --------------- -------------- -----------
Total property portfolio 3,903.7 616.7 661.8 5,182.2
Debt on properties (1,663.5) (201.1) (268.2) (2,132.8)
Lease liabilities (96.3) - - (96.3)
Cash 338.3 15.4 37.3 391.0
---------------------------------------- --------- --------------- -------------- -----------
Net debt (1,421.5) (185.7) (230.9) (1,838.1)
Other assets and (liabilities) (21.3) (13.2) (24.4) (58.9)
Intangibles per IFRS balance sheet (19.0) - - (19.0)
---------------------------------------- --------- --------------- -------------- -----------
EPRA NTA 2,441.9 417.8 406.5 3,266.2
---------------------------------------- --------- --------------- -------------- -----------
Loan to value * 35% 30% 35% 34%
Loan to value post IFRS 16 36% 30% 35% 35%
* LTV calculated excluding investment properties (leased) and
the corresponding lease liabilities.
2.3b) Movement in EPRA NTA during the year
Contributions to EPRA NTA by each segment during the year is as
follows:
2021
Share of joint
ventures
---------------------------------------------- ---- ------ -----------
Group on
EPRA basis
Unite USAF LSAV Total
Note GBPm GBPm GBPm GBPm
---------------------------------------------- ---- ------ ------------ ------------ -----------
Operations
Operations segment result 2.2a 82.7 14.4 15.8 112.9
Add back amortisation of intangibles 6.1 - - 6.1
---------------------------------------------- ---- ------ ------------ ------------ -----------
Total Operations 88.8 14.4 15.8 119.0
Property
Rental growth 17.4 4.5 25.8 47.7
Yield movement 49.2 12.7 44.6 106.5
Disposal losses (owned) (12.0) (0.3) - (12.3)
---------------------------------------------- ---- ------ ------------ ------------ -----------
Investment property gains (owned) * 54.6 16.9 70.4 141.9
Investment property losses (leased) 3.1a (11.1) - - (11.1)
Investment property gains (under development) 3.1a 50.3 - - 50.3
Pre-contract/other development costs 2.2a (2.2) - - (2.2)
---------------------------------------------- ---- ------ ------------ ------------ -----------
Total Property 91.6 16.9 70.4 178.9
Unallocated
Shares issued 1.2 - - 1.2
Investment in joint ventures (118.6) (17.7) 136.3 -
Dividends paid (67.8) - - (67.8)
LSAV performance fee 84.1 - (42.2) 41.9
Swap cancellation FV settlements and
debt break costs 4.3 (4.2) - - (4.2)
Acquisition of intangibles (3.3) - - (3.3)
Other 0.7 (0.2) (0.2) 0.3
------------------------------------- --- ------- ------ ------ -------
Total Unallocated (107.9) (17.9) 93.9 (31.9)
------------------------------------- --- ------- ------ ------ -------
Total EPRA NTA movement in the year 72.5 13.4 180.1 266.0
Total EPRA NTA brought forward 2,441.9 417.8 406.5 3,266.2
------------------------------------- --- ------- ------ ------ -------
Total EPRA NTA carried forward 2,514.4 431.2 586.6 3,532.2
------------------------------------- --- ------- ------ ------ -------
* Investment property gains (owned) includes gains on assets
classified as held for sale in the IFRS balance sheet.
The GBP0.3 million other balance within the unallocated segment
includes a tax credit of GBP2.8 million, the purchase of own shares
of (GBP1.3 million) and contributions to the Unite Foundation of
(GBP1.0 million).
2020
Share of joint
ventures
----------------------------------------------- ---- ------- -----------
Group on
EPRA basis
Unite USAF LSAV Total
Note GBPm GBPm GBPm GBPm
----------------------------------------------- ---- ------- ------------ ------------ -----------
Operations
Operations segment result 2.2a 74.8 11.7 12.0 98.5
Add back amortisation of intangibles 6.4 - - 6.4
----------------------------------------------- ---- ------- ------------ ------------ -----------
Total Operations 81.2 11.7 12.0 104.9
Property
Rental growth (102.4) (24.0) (15.0) (141.4)
Yield movement (17.6) (1.1) 0.1 (18.6)
Disposal losses (owned) (1.9) - - (1.9)
----------------------------------------------- ---- ------- ------------ ------------ -----------
Investment property losses (owned) (121.9) (25.1) (14.9) (161.9)
Investment property losses (leased) 3.1a (11.2) - - (11.2)
Investment property losses (under development) 3.1a (4.2) - - (4.2)
Pre-contract/other development costs 2.2a (2.2) - - (2.2)
----------------------------------------------- ---- ------- ------------ ------------ -----------
Total Property (139.5) (25.1) (14.9) (179.5)
Unallocated
Shares issued 294.0 - - 294.0
Investment in joint ventures 2.3 (5.7) 3.4 -
Acquisition of Liberty Living - - - -
Dividends paid - - - -
LSAV performance fee 11.4 - (5.7) 5.7
Joint venture property acquisition fee (30.1) - - (30.1)
Swap cancellation FV settlements and
debt break costs 4.3 (2.7) - - (2.7)
Acquisition of intangibles (9.2) - - (9.2)
Other (3.4) (0.4) (0.1) (3.9)
--------------------------------------- --- ------- ------ ----- -------
Total Unallocated 262.3 (6.1) (2.4) 253.8
--------------------------------------- --- ------- ------ ----- -------
Total EPRA NTA movement in the year 204.0 (19.5) (5.3) 179.2
Total EPRA NTA brought forward 2,237.9 437.3 411.8 3,087.0
--------------------------------------- --- ------- ------ ----- -------
Total EPRA NTA carried forward 2,441.9 417.8 406.5 3,266.2
--------------------------------------- --- ------- ------ ----- -------
The GBP3.9 million other balance within the unallocated segment
includes a tax charge of (GBP2.1 million), the purchase of own
shares of (GBP0.7 million) and contributions to the Unite
Foundation of (GBP1.0 million).
2.3c) Reconciliation to IFRS
To determine EPRA NTA, net assets reported under IFRS are
amended to exclude the fair value of financial instruments,
associated tax and the carrying value of intangibles.
To determine EPRA NRV, net assets reported under IFRS are
amended to exclude the fair value of financial instruments,
associated tax and real estate transfer tax.
To determine EPRA NDV, net assets reported under IFRS are
amended to exclude the fair value of financial instruments, but
include the fair value of fixed interest rate debt and the carrying
value of intangibles.
The net assets reported under IFRS reconcile to EPRA NTA, NRV
and NDV as follows:
2021
NTA NRV NDV
GBPm GBPm GBPm
------------------------------------------ ------- ------- -------
Net assets reported under IFRS 3,527.8 3,527.8 3,527.8
Mark to market interest rate swaps (2.4) (2.4) -
Unamortised swap gain (1.5) (1.5) (1.5)
Mark to market of fixed rate debt - - (50.3)
Unamortised fair value of debt recognised
on acquisition 23.7 23.7 23.8
Current tax 0.7 0.7 -
Intangibles per IFRS balance sheet (16.1) - -
Real estate transfer tax - 277.5 -
------------------------------------------- ------- ------- -------
EPRA reporting measure 3,532.2 3,825.8 3,499.7
------------------------------------------- ------- ------- -------
2020
NTA NRV NDV
GBPm GBPm GBPm
------------------------------------------ ------- ------- -------
Net assets reported under IFRS 3,234.9 3,234.9 3,234.9
Mark to market interest rate swaps 24.4 24.4 -
Unamortised swap gain (1.8) (1.8) (1.8)
Mark to market of fixed rate debt - - (85.2)
Unamortised fair value of debt recognised
on acquisition 28.1 28.1 28.1
Current tax (0.4) (0.4) -
Intangibles per IFRS balance sheet (19.0) - -
Real estate transfer tax - 312.0 -
------------------------------------------- ------- ------- -------
EPRA reporting measure 3,266.2 3,597.2 3,176.0
------------------------------------------- ------- ------- -------
2.3d) NAV, NTA, NRV and NDV per share
Basic NAV is based on the net assets attributable to the equity
shareholders of The Unite Group PLC and the number of shares in
issue at the end of the year. The Board uses EPRA NTA to monitor
the performance of the Property segment on a day-to-day basis.
2021 2020 2021 2020
Note GBPm GBPm pps pps
------------------- ---- ------- ------- ---- ----
Basic 3,527.8 3,234.9 880p 809p
EPRA NTA 2.3a 3,532.2 3,266.2 885p 820p
EPRA NTA (diluted) 3,536.1 3,271.0 882p 818p
EPRA NRV 2.3c 3,825.9 3,597.2 959p 903p
EPRA NRV (diluted) 3,829.7 3,601.9 955p 901p
EPRA NDV 3,499.7 3,176.0 877p 798p
EPRA NDV (diluted) 3,503.6 3,180.7 874p 796p
------------------- ---- ------- ------- ---- ----
Number of shares (thousands) 2021 2020
----------------------------- ------- -------
Basic 399,140 398,226
Outstanding share options 1,687 1,484
----------------------------- ------- -------
Diluted 400,827 399,710
----------------------------- ------- -------
2.4 Revenue and costs
The Group earns revenue from the following activities:
2021 2020
Note GBPm GBPm
--------------------- ------------------- ---- ----- -----
Rental income * Operations segment 2.2a 209.0 196.1
Management fees Operations segment 16.2 14.0
LSAV performance fee Unallocated 41.9 5.7
USAF acquisition fee Unallocated - -
--------------------- ------------------- ---- ----- -----
267.1 215.8
Impact of non-controlling interest on
management fees (0.2) (0.2)
------------------------------------------ ---- ----- -----
Total revenue 266.9 215.6
------------------------------------------ ---- ----- -----
* EPRA earnings includes GBP282.7 million (2020: GBP263.2
million) of rental income, which is comprised of GBP209.0 million
(2020: GBP196.1 million) recognised on wholly owned assets and a
further GBP73.7 million (2020: GBP67.1 million) from joint
ventures, which is included in share of joint venture (loss)/profit
in the consolidated income statement.
The LSAV performance fee was constrained in earlier years due to
an inability to meet the highly probable criteria that the fee
would be earned. In the year to 31 December 2021, the catch-up
recognised in respect of the release of this constraint represents
GBP36.0 million of the total GBP41.9 million fee recognised.
The cost of sales included in the consolidated income statement
includes property operating expenses of GBP64.4 million (2020:
GBP53.3 million).
2.5 Tax
As a REIT, rental profits and gains on disposal of investment
properties are exempt from corporation tax. The Group pays UK
corporation tax on the profits from its residual business,
including management fees received from joint ventures, together
with UK income tax on rental income that arises from investments
held by offshore subsidiaries in which the Group holds a
non-controlling interest.
2.5a) Tax - income statement
The total taxation (credit)/charge in the income statement is
analysed as follows:
2021 2020
GBPm GBPm
---------------------------------------------------- ----- -----
Corporation tax on residual business income arising
in UK companies 1.0 1.2
Income tax on UK rental income arising in non-UK
companies 0.3 0.3
Adjustments in respect of prior periods (2.2) (0.3)
---------------------------------------------------- ----- -----
Current tax (credit)/charge (0.9) 1.2
Origination and reversal of temporary differences (0.2) 0.9
Effect of change in tax rate (0.2) (0.1)
Adjustments in respect of prior periods (0.1) 0.1
---------------------------------------------------- ----- -----
Deferred tax (credit)/charge (0.5) 0.9
---------------------------------------------------- ----- -----
Total tax (credit)/charge in income statement (1.4) 2.1
---------------------------------------------------- ----- -----
The movement in deferred tax provided is shown in more detail in
note 2.5d.
In the income statement, a tax credit of GBP1.4 million arises
on a profit before tax of GBP343.1 million. The taxation credit
that would arise at the standard rate of UK corporation tax is
reconciled to the actual tax charge as follows:
2021 2020
GBPm GBPm
----------------------------------------------------- ------ -------
Profit/(loss) before tax 343.1 (120.1)
Income tax using the UK corporation tax rate of
19% (2020: 19%) 65.2 (22.8)
Property rental business profits exempt from tax
in the REIT Group (18.4) (7.4)
Release of deferred tax liability due to legislative
change - 0.1
Non-taxable items relating to the acquisition of
Liberty Living - (0.8)
Property revaluations not subject to tax (43.3) 31.2
Mark to market changes in interest rate swaps not
subject to tax (2.9) 1.1
Effect of indexation on investments - 0.7
Effect of other permanent differences 0.2 0.1
Effect of tax deduction transferred to equity on
share schemes 0.3 -
Rate difference on deferred tax (0.2) -
Prior year adjustments (2.3) (0.1)
----------------------------------------------------- ------ -------
Total tax (credit)/charge in income statement (1.4) 2.1
----------------------------------------------------- ------ -------
As a UK REIT, the Group is exempt from UK corporation tax on the
profits from its property rental business. Accordingly, the element
of the Group's profit before tax relating to its property rental
business has been separately identified in the reconciliation
above.
No deferred tax asset has been recognised in respect of the
Group's accumulated tax losses on the basis that they are not
expected to be utilised in future periods. At 31 December 2021
these losses totalled GBP14.6 million (2020: GBP24.3 million).
Although the Group does not pay UK corporation tax on the
profits from its property rental business, it is required to
distribute 90% of the profits from its property rental business
after accounting for tax adjustments as a Property Income
Distribution (PID). PIDs are charged to tax in the same way as
property income in the hands of the recipient. For the year ended
31 December 2021 the required PID is expected to be fully paid by
the end of 2022.
2.5b) Tax - other comprehensive income
Within other comprehensive income a tax charge totalling GBPnil
(2020: GBPnil) has been recognised representing deferred tax.
2.5c) Tax - statement of changes in equity
Within the statement of changes in equity a tax credit totalling
GBP0.6 million (2020: GBP0.1 million charge) has been recognised
representing deferred tax. An analysis of this is included below in
the deferred tax movement table.
2.5d) Tax - balance sheet
The table below outlines the deferred tax (assets)/liabilities
that are recognised in the balance sheet, together with their
movements in the year:
2021
At 31 December Charged/(credited) Charged/(credited) At 31 December
2020 in income in equity 2021
GBPm GBPm GBPm GBPm
------------------------------ -------------- ------------------ ------------------ --------------
Investments - - - -
Property, plant and machinery
and provisions (0.6) (0.6) - (1.2)
Share schemes (1.3) (0.2) (0.3) (1.8)
Tax value of carried forward
losses recognised - 0.3 (0.3) -
------------------------------ -------------- ------------------ ------------------ --------------
Net tax (assets)/liabilities (1.9) (0.5)* (0.6) (3.0)
------------------------------ -------------- ------------------ ------------------ --------------
* The GBP0.5 million balance above includes tax movements
totalling GBP0.2m in respect of Property, plant and machinery,
share schemes and losses which are included in EPRA earnings and
therefore not shown as a reconciling item in the IFRS
reconciliation in note 2.2b. Removing them results in the GBP0.3
million movement shown in note 2.2b.
2020
At 31 December Charged/(credited) Charged/(credited) At 31 December
2019 in income in equity 2020
GBPm GBPm GBPm GBPm
------------------------------ -------------- ------------------ ------------------ --------------
Investments - - - -
Property, plant and machinery
and provisions (0.9) 0.3 - (0.6)
Share schemes (1.3) (0.2) 0.2 (1.3)
Tax value of carried forward
losses recognised (0.7) 0.8 (0.1) -
------------------------------ -------------- ------------------ ------------------ --------------
Net tax liabilities/(assets) (2.9) 0.9* 0.1 (1.9)
------------------------------ -------------- ------------------ ------------------ --------------
* The GBP0.9 million balance above includes tax movements
totalling GBP0.8m in respect of Property, plant and machinery,
share schemes and losses which are included in EPRA earnings and
therefore not shown as a reconciling item in the IFRS
reconciliation in note 2.2b. Removing them results in the GBP0.1
million movement shown in note 2.2b.
Section 3: Asset management
3.1 Wholly owned property assets
The Group's wholly owned property portfolio is held in three
groups on the balance sheet at the carrying values detailed
below.
In the Group's EPRA NTA all these groups are shown at market
value.
i) Investment property (owned)
These are assets that the Group intends to hold for a long
period to earn rental income or capital appreciation. The assets
are held at fair value in the balance sheet with changes in fair
value taken to the income statement.
ii) Investment property (leased)
These are assets the Group sold to institutional investors and
simultaneously leased back. These right-of-use assets are measured
at fair value in the balance sheet with changes in fair value taken
to the income statement.
iii) Investment property (under development)
These are assets which are currently in the course of
construction and which will be transferred to Investment property
on completion. The assets are initially recognised at cost and are
subsequently measured at fair value in the balance sheet with
changes in fair value taken to the income statement.
iv) Investment property classified as held for sale
These are assets whose carrying amount will be recovered through
a sale transaction rather than to hold for long-term rental income
or capital appreciation. This condition is regarded as met only
when the sale is highly probable and the investment property is
available for immediate sale in its present condition. Management
must be committed to the sale which should be expected to qualify
for recognition as a completed sale within one year from the date
of classification. The assets are measured at fair value in the
balance sheet, with changes in fair value taken to the income
statement. They are presented as current assets in the IFRS balance
sheet.
Valuation process
The valuations of the properties are performed twice a year on
the basis of valuation reports prepared by external, independent
valuers, having an appropriate recognised professional
qualification. The fair values are based on market values as
defined in the RICS Appraisal and Valuation Manual, issued by the
Royal Institution of Chartered Surveyors. CB Richard Ellis Ltd,
Jones Lang LaSalle Ltd and Messrs Knight Frank LLP, Chartered
Surveyors were the valuers in the years ended 31 December 2021 and
2020.
The valuations are based on:
-- Information provided by the Group such as current rents,
occupancy, operating costs, terms and conditions of leases and
nomination agreements, capital expenditure, etc. This information
is derived from the Group's financial systems and is subject to the
Group's overall control environment.
-- Assumptions and valuation models used by the valuers - the
assumptions are typically market related, such as yield and
discount rates. These are based on their professional judgement and
market observation.
The information provided to the valuers - and the assumptions
and the valuation models used by the valuers - are reviewed by the
Property Board and the CFO. This includes a review of the fair
value movements over the year.
The fair value of the Group's wholly owned properties and the
movements in the carrying value of the Group's wholly owned
property portfolio during the year ended 31 December 2021 are shown
in the table below.
2021
Investment
Investment Investment property
property property ( under
(owned) (leased) development) Total
GBPm GBPm GBPm GBPm
--------------------------------- ---------- ---------- ------------- -------
At 1 January 2021 3,614.7 101.8 187.2 3,903.7
Cost capitalised 43.1 7.0 79.3 129.4
Interest capitalised - - 5.2 5.2
Transfer from work in progress - - 2.1 2.1
Transfer to assets classified as
held for sale (228.2) - - (228.2)
Disposals (401.1) - - (401.1)
---------- ---------- ------------- -------
Valuation gains 125.6 - 52.3 177.9
Valuation losses (59.0) (11.1) (2.0) (72.1)
---------- ---------- ------------- -------
Net valuation gain/(losses) 66.6 (11.1) 50.3 105.8
--------------------------------- ---------- ---------- ------------- -------
Carrying and market value at 31
December 2021 3,095.1 97.7 324.1 3,516.9
--------------------------------- ---------- ---------- ------------- -------
Total assets classified as held for sale at 31 December 2021 of
GBP228.2 million (2020: GBPnil) comprised entirely investment
property (owned). Assets classified as held for sale are reported
within the operations segment, and represents a portfolio of
properties intended to be sold within the next 12 months.
The fair value of the Group's wholly owned properties and the
movements in the carrying value of the Group's wholly owned
property portfolio during the year ended 31 December 2020 are shown
in the table below.
2020
Investment
Investment Investment property
property property ( under
(owned) (leased) development) Total
GBPm GBPm GBPm GBPm
----------------------------------------- ---------- ---------- ------------- -------
At 1 January 2020 3,406.9 110.4 411.8 3,929.1
Cost capitalised 25.0 2.6 87.6 115.2
Interest capitalised - - 4.6 4.6
Transfer from investment property
under development 312.6 - (312.6) -
Transfer from work in progress - - - -
Disposals (9.8) - - (9.8)
---------- ---------- ------------- -------
Valuation gains 56.5 - 6.4 62.9
Valuation losses (176.5) (11.2) (10.6) (198.3)
---------- ---------- ------------- -------
Net valuation losses (120.0) (11.2) (4.2) (135.4)
----------------------------------------- ---------- ---------- ------------- -------
Carrying and market value at 31 December
2020 3,614.7 101.8 187.2 3,903.7
----------------------------------------- ---------- ---------- ------------- -------
Included within investment properties at 31 December 2021 are
GBP28.8 million (2020: GBP29.7 million) of assets held under a long
leasehold and GBP0.1 million (2020: GBP0.1 million) of assets held
under short leasehold.
Total interest capitalised in investment properties (owned) and
investment properties under development at 31 December 2021 was
GBP57.4 million (2020: GBP52.2 million) on a cumulative basis.
Total internal costs capitalised in investment properties (owned)
and investment properties under development was GBP74.3 million at
31 December 2021 (2020: GBP66.8 million) on a cumulative basis.
Recurring fair value measurement
All investment and development properties are classified as
Level 3 in the fair value hierarchy.
2021 2020
Class of asset GBPm GBPm
---------------------------------------- ------- -------
London - rental properties 849.8 1,137.0
Prime regional - rental properties 992.9 949.3
Major regional - rental properties 1,263.5 1,255.8
Provincial - rental properties 217.1 272.6
London - development properties 249.9 158.8
Prime regional - development properties 48.4 25.6
Major regional - development properties 25.8 2.8
---------------------------------------- ------- -------
Investment property (owned) 3,647.4 3,801.9
Investment property (leased) 97.7 101.8
-------------------------------------------------- ------- -------
Market value (including assets classified as held
for sale) 3,745.1 3,903.7
Investment property (classified as held for sale) (228.2) -
-------------------------------------------------- ------- -------
Market value 3,516.9 3,903.7
-------------------------------------------------- ------- -------
The valuation technique for investment properties is a
discounted cash flow using the following inputs: net rental income,
estimated future costs, occupancy and property management
costs.
Where the asset is leased to a University, the valuations also
reflect the length of the lease, the allocation of maintenance and
insurance responsibilities between the Group and the lessee, and
the market's general perception of the lessee's
creditworthiness.
The resulting valuations are cross-checked against the initial
yields and the capital value per bed derived from actual market
transactions.
For development properties, the fair value is usually calculated
by estimating the fair value of the completed property (using the
discounted cash flow method) less estimated costs to
completion.
Fair value using unobservable inputs (Level 3)
2021 2020
GBPm GBPm
-------------------------------------------------- ------- -------
Opening fair value 3,903.7 3,929.1
Gains and (losses) recognised in income statement 105.8 (135.4)
Transfer to current assets classified as held for
sale (228.2) -
Capital expenditure 136.7 119.8
Disposals (401.1) (9.8)
-------------------------------------------------- ------- -------
Closing fair value 3,516.9 3,903.7
Investment property (classified as held for sale) 228.2 -
-------------------------------------------------- ------- -------
Closing fair value (including assets classified
as held for sale) 3,745.1 3,903.7
-------------------------------------------------- ------- -------
Quantitative information about fair value measurements using
unobservable inputs (Level 3)
2021
Fair value Valuation Weighted
GBPm technique Unobservable inputs Range average
------------------------- ---------- ------------ ----------------------- ------------------ ---------
London - 849.8 Discounted Net rental income GBP191-GBP373 GBP291
(GBP per week)
rental properties cash flows Estimated future 3%-4% 4%
rent increase (%)
Discount rate (yield) 3.7%-4.9% 3.9%
(%)
------------------------- ---------- ------------ ----------------------- ------------------ ---------
Prime regional - 992.9 Discounted Net rental income GBP144-GBP235 GBP191
(GBP per week)
rental properties cash flows Estimated future 1%-4% 3%
rent increase (%)
Discount rate (yield) 4.0%-6.3% 4.7%
(%)
------------------------- ---------- ------------ ----------------------- ------------------ ---------
Major regional - 1,263.6 Discounted Net rental income GBP62-GBP173 GBP131
(GBP per week)
rental properties cash flows Estimated future 0%-4% 2%
rent increase (%)
Discount rate (yield) 4.7%-7.0% 5.7%
(%)
------------------------- ---------- ------------ ----------------------- ------------------ ---------
Provincial - 217.1 Discounted Net rental income GBP109-GBP188 GBP135
(GBP per week)
rental properties cash flows Estimated future 1%-4% 3%
rent increase (%)
Discount rate (yield) 5.1%-14.2% 7.0%
(%)
------------------------- ---------- ------------ ----------------------- ------------------ ---------
London - 249.9 Discounted Estimated cost to GBP34.0m-GBP177.3m GBP126.5m
complete (GBPm)
development properties cash flows Net rental income GBP185-GBP382 GBP289
(GBP per week)
Estimated future 3% 3%
rent increase (%)
Discount rate (yield) 3.6% 3.6%
(%)
------------------------- ---------- ------------ ----------------------- ------------------ ---------
Prime regional - 48.4 Discounted Estimated cost to GBP7.1m-GBP64.3m GBP35.9m
complete (GBPm)
development properties cash flows Net rental income GBP176-GBP258 GBP181
(GBP per week)
Estimated future 3% 3%
rent increase (%)
Discount rate (yield) 4.0% 4.0%
(%)
------------------------- ---------- ------------ ----------------------- ------------------ ---------
Major regional - 25.8 Discounted Estimated cost to GBP33.9m-GBP45.2m GBP42.1m
complete (GBPm)
development properties cash flows Net rental income GBP171-GBP213 GBP172
(GBP per week)
Estimated future 3% 3%
rent increase (%)
Discount rate (yield) 5.0% 5.0%
(%)
------------------------- ---------- ------------ ----------------------- ------------------ ---------
3,647.4
------------------------- ---------- ------------ ----------------------- ------------------ ---------
Investment property 97.7 Discounted Net rental income GBP95-GBP185 GBP144
(GBP per week)
(leased) cash flows Estimated future 3% 3%
rent increase (%)
Discount rate (yield) 6.8% 6.8%
(%)
------------------------- ---------- ------------ ----------------------- ------------------ ---------
Fair value at 31
December 2021 3,745.1
------------------------- ---------- ------------ ----------------------- ------------------ ---------
2020
Fair value Valuation Weighted
GBPm technique Unobservable inputs Range average
-------------------------- ---------- ------------ ----------------------- ------------------ ---------
London - 1,137.0 Discounted Net rental income GBP164-GBP370 GBP267
(GBP per week)
rental properties cash flows Estimated future 2%-3% 3%
rent increase (%)
Discount rate (yield) 3.9%-5.0% 4.0%
(%)
-------------------------- ---------- ------------ ----------------------- ------------------ ---------
Prime regional - 949.3 Discounted Net rental income GBP140-GBP229 GBP169
(GBP per week)
rental properties cash flows Estimated future 2%-3% 3%
rent increase (%)
Discount rate (yield) 4.0%-6.2% 4.8%
(%)
-------------------------- ---------- ------------ ----------------------- ------------------ ---------
Major regional - 1,255.8 Discounted Net rental income GBP82-GBP167 GBP132
(GBP per week)
rental properties cash flows Estimated future 1%-3% 2%
rent increase (%)
Discount rate (yield) 4.7%-7.0% 5.7%
(%)
-------------------------- ---------- ------------ ----------------------- ------------------ ---------
Provincial - 272.6 Discounted Net rental income GBP87-GBP188 GBP136
(GBP per week)
rental properties cash flows Estimated future 1%-3% 2%
rent increase (%)
Discount rate (yield) 5.0%-13.8% 6.8%
(%)
-------------------------- ---------- ------------ ----------------------- ------------------ ---------
London - 158.8 Discounted Estimated cost to GBP84.9m-GBP147.9m GBP114.9m
complete (GBPm)
development properties cash flows Estimated future 3% 3%
rent increase (%)
Discount rate (yield) 4.0% 4.0%
(%)
-------------------------- ---------- ------------ ----------------------- ------------------ ---------
Prime regional - 25.6 Discounted Estimated cost to GBP19.1m-GBP65.3m GBP40.8m
complete (GBPm)
development properties cash flows Estimated future 3% 3%
rent increase (%)
Discount rate (yield) 4.3% 4.3%
(%)
-------------------------- ---------- ------------ ----------------------- ------------------ ---------
Major regional - 2.8 Discounted Estimated cost to GBP45.5m GBP45.5m
development properties cash flows complete (GBPm) 3% 3%
Estimated future - -
rent increase (%)
Discount rate (yield)
(%)
-------------------------- ---------- ------------ ----------------------- ------------------ ---------
3,801.9
-------------------------- ---------- ------------ ----------------------- ------------------ ---------
Investment property 101.8 Discounted Net rental income GBP129-GBP185 GBP147
(GBP per week)
(leased) cash flows Estimated future 3% 3%
rent increase (%)
Discount rate (yield) 6.8% 6.8%
(%)
-------------------------- ---------- ------------ ----------------------- ------------------ ---------
Fair value at 31 December
2020 3,903.7
-------------------------- ---------- ------------ ----------------------- ------------------ ---------
Fair value sensitivity analysis
A decrease in net rental income or occupancy will result in a
decrease in the fair value, whereas a decrease in the discount rate
(yield) will result in an increase in fair value. There are
inter-relationships between these rates as they are partially
determined by market rate conditions.
+5% -5% +25 bps -25 bps
Fair value change change change change
at in estimated in estimated in nominal in nominal
31 December net rental net rental equivalent equivalent
2021 income income yield yield
Class of assets GBPm GBPm GBPm GBPm GBPm
----------------------- ------------ ------------- ------------- ----------- -----------
Rental properties
London 849.8 892.0 807.9 798.9 908.0
Prime regional 992.9 1,046.7 949.7 948.4 1,053.8
Major regional 1,263.5 1,335.1 1,208.8 1,218.3 1,330.7
Provincial 217.1 228.4 206.7 209.5 226.2
Development properties
London 249.9 265.0 226.8 233.0 273.1
Prime regional 48.4 53.6 44.5 44.8 53.9
Major regional 25.8 26.9 23.9 24.7 27.0
----------------------- ------------ ------------- ------------- ----------- -----------
Market value 3,647.4 3,847.8 3,468.3 3,477.7 3,872.7
----------------------- ------------ ------------- ------------- ----------- -----------
3.2 Inventories
2021 2020
GBPm GBPm
------------------ ----- -----
Interests in land 10.8 6.7
Other stocks 1.3 2.1
------------------ ----- -----
Inventories 12.1 8.8
------------------ ----- -----
At 31 December 2021, the Group had interests in two pieces of
land (2020: four pieces of land).
3.3 Investments in joint ventures
The Group has two joint ventures:
Group's share Legal entity in
of assets/results which
Joint venture 2021 (2020) Objective Partner Group has interest
---------------------- ------------------ ---------------------- ----------------------- -------------------
The UNITE UK 23.4%* (23.4%) Invest and operate Consortium of investors UNITE UK Student
Student Accommodation student accommodation Accommodation
Fund (USAF) throughout the Fund,
UK a Jersey Unit
Trust
---------------------- ------------------ ---------------------- ----------------------- -------------------
London Student 50% (50%) Operate student GIC Real Estate LSAV Unit Trust,
Accommodation accommodation Pte, Ltd Real estate a Jersey Unit
Venture (LSAV) in London and investment vehicle Trust and LSAV
Birmingham of (Holdings) Ltd,
the Government incorporated in
of Singapore Jersey
---------------------- ------------------ ---------------------- ----------------------- -------------------
* Part of the Group's interest is held through a subsidiary,
USAF (Feeder) Guernsey Limited, in which there is an external
investor. A non-controlling interest therefore occurs on
consolidation of the Group's results representing the external
investor's share of profits and assets relating to its investment
in USAF. The ordinary shareholders of The Unite Group PLC are
beneficially interested in 22.0% (2020: 22.0%) of USAF.
3.3a) Net assets and results of the joint ventures
The summarised balance sheets and results for the year, and the
Group's share of these joint ventures are as follows:
2021
USAF LSAV Total
GBPm GBPm GBPm
-------------------------- ------------------------ ---------------- ------------------
Gross MI Share Gross Share Gross Share
-------------------------- ------- ------ ------- ------- ------- --------- -------
Investment property 2,867.4 39.3 631.9 1,819.0 909.5 4,686.4 1,580.7
Cash 106.2 1.5 23.4 45.4 22.7 151.6 47.6
Debt (912.1) (12.5) (201.0) (673.0) (336.5) (1,585.1) (550.0)
Swap assets/(liabilities) 0.5 - 0.1 (0.2) (0.1) 0.3 -
Other current assets 106.6 1.5 23.5 22.0 11.0 128.6 36.0
Other current liabilities (211.5) (3.5) (46.6) (40.2) (20.1) (251.7) (70.2)
-------------------------- ------- ------ ------- ------- ------- --------- -------
Net assets 1,957.1 26.3 431.3 1,173.0 586.5 3,130.1 1,044.1
Non-controlling interest - (26.3) - - - - (26.3)
Swap (liabilities)/assets (0.5) - (0.1) 0.2 0.1 (0.3) -
-------------------------- ------- ------ ------- ------- ------- --------- -------
EPRA NTA 1,956.6 - 431.2 1,173.2 586.6 3,129.8 1,017.8
-------------------------- ------- ------ ------- ------- ------- --------- -------
Profit for the year 146.9 2.1 34.2 172.2 86.1 319.1 122.4
2020
USAF LSAV Total
GBPm GBPm GBPm
-------------------------- ------------------------ ---------------- ------------------
Gross MI Share Gross Share Gross Share
-------------------------- ------- ------ ------- ------- ------- --------- -------
Investment property 2,798.3 38.3 616.7 1,323.6 661.8 4,121.9 1,316.8
Cash 69.7 1.0 15.4 74.6 37.3 144.3 53.7
Debt (912.7) (12.5) (201.1) (536.4) (268.2) (1,449.1) (481.8)
Swap liabilities - - - (1.2) (0.6) (1.2) (0.6)
Other current assets 1.0 - 0.2 0.4 0.2 1.4 0.4
Other current liabilities (61.0) (1.5) (13.4) (49.2) (24.6) (110.2) (39.5)
-------------------------- ------- ------ ------- ------- ------- --------- -------
Net assets 1,895.3 25.3 417.8 811.8 405.9 2,707.1 849.0
Non-controlling interest - (25.3) - - - - (25.3)
Swap liabilities - - - 1.2 0.6 1.2 0.6
-------------------------- ------- ------ ------- ------- ------- --------- -------
EPRA NTA 1,895.3 - 417.8 813.0 406.5 2,708.3 824.3
-------------------------- ------- ------ ------- ------- ------- --------- -------
Profit/(loss) for the
year (42.6) (0.8) (11.1) 0.6 0.3 (42.0) (11.6)
Net assets and profit/(loss) for the year above include the
non-controlling interest, whereas EPRA NTA excludes the
non-controlling interest.
3.3b) Movement in carrying value of the Group's investments in
joint ventures
The carrying value of the Group's investment in joint ventures
increased by GBP195.1 million during the year ended 31 December
2021 (2020: GBP26.2 million decrease), resulting in an overall
carrying value of GBP1,044.1 million (2020: GBP849.0 million).
The following table shows how the increase has arisen.
2021 2020
GBPm GBPm
----------------------------------------------------- ----- ------
Recognised in the income statement:
Operations segment result 30.2 23.7
Non-controlling interest share of Operations segment
result 1.1 0.6
Management fee adjustment related to trading with
joint venture 3.0 6.3
Net valuation gains/(losses) on investment property 88.7 (41.5)
Property disposals (0.3) -
Other (0.3) (0.7)
----------------------------------------------------- ----- ------
122.4 (11.6)
Recognised in equity:
Movement in effective hedges 0.6 (0.1)
Other adjustments to the carrying value:
Profit adjustment related to trading with joint
venture (3.4) (6.3)
Profit adjustment related to sale of property with
LSAV (1.9) -
Additional capital invested in LSAV 157.6 7.5
LSAV performance fee (42.2) (5.7)
USAF distributions received (18.6) -
LSAV distributions received (19.4) (10.0)
--------------------------------------------------- ------- ------
Increase/(decrease) in carrying value 195.1 (26.2)
Carrying value at 1 January 849.0 875.2
--------------------------------------------------- ------- ------
Carrying value at 31 December 1,044.1 849.0
--------------------------------------------------- ------- ------
3.3c) Transactions with joint ventures
The Group acts as asset and property manager for the joint
ventures and receives management fees in relation to these
services.
In addition, the Group is entitled to performance fees from USAF
and LSAV if the joint ventures outperform certain benchmarks. The
Group receives either cash or an enhanced equity interest in the
joint ventures as consideration for the performance fee. The Group
has recognised the following gross fees in its results for the
year.
2021 2020
GBPm GBPm
----------------------------------- ----- -----
USAF 15.2 13.5
LSAV 3.9 6.6
Asset and property management fees 19.1 20.1
LSAV performance fee 41.9 11.4
USAF acquisition fee - -
----------------------------------- ----- -----
Investment management fees 41.9 11.4
----------------------------------- ----- -----
Total fees 61.0 31.5
----------------------------------- ----- -----
On an EPRA basis, fees from joint ventures are shown net of the
Group's share of the cost to the joint ventures.
The Group's share of the cost to the joint ventures is GBP3.2
million (2020: GBP6.1 million), which results in management fees
from joint ventures of GBP15.9 million being shown in the Operating
segment result in note 2.2a (2020: GBP14.0 million).
Investment management fees are included within the unallocated
to segments section in note 2.2a.
During 2021, the Group sold two properties to LSAV for gross
proceeds of GBP341.9 million. Both properties had been held on
balance sheet as investment property within non-current assets. The
proceeds and carrying value of the property are therefore
recognised in profit on disposal of property and the cash flows in
investing activities. The profits relating to the sales, associated
disposal costs and related cash flows are set out below:
Profit and loss
------------------------------------------------- -----------------
2021 2020
GBPm GBPm
------------------------------------------------- -------- -------
Included in loss on disposal of property (net of
joint venture trading adjustment) 6.6 -
------------------------------------------------- -------- -------
Loss on disposal of property 6.6 -
------------------------------------------------- -------- -------
Cash flow
----------------------------------------------------- -------------
2021 2020
GBPm GBPm
----------------------------------------------------- ------ -----
Gross proceeds 341.9 -
Less amounts settled by transfer of property (99.4) -
----------------------------------------------------- ------ -----
Net cash flows included in cash flows from investing
activities 242.5 -
----------------------------------------------------- ------ -----
Section 4: Funding
4.1 Borrowings
The table below analyses the Group's borrowings which comprise
bank and other loans by when they fall due for payment:
Group - Carrying
value
--------------------------------------------------------- ------------------
2021 2020
GBPm GBPm
--------------------------------------------------------- -------- --------
Current
In one year or less, or on demand - -
Non-current
In more than one year but not more than two years - 795.9
In more than two years but not more than five years 419.2 297.3
In more than five years 719.0 568.6
--------------------------------------------------------- -------- --------
1,138.2 1,661.8
Unamortised fair value of debt recognised on acquisition 23.8 28.1
--------------------------------------------------------- -------- --------
Total borrowings 1,162.0 1,689.9
--------------------------------------------------------- -------- --------
In addition to the borrowings currently drawn as shown above,
the Group has available undrawn facilities of GBP325.0 million
(2020: GBP50.0 million). A further overdraft facility of GBP10.0
million (2020: GBP10.0 million) is also available.
The carrying value and fair value of the Group's borrowings is
analysed below:
2021 2020
---------------------------------------- -------------------- --------------------
Carrying Carrying
value Fair value value Fair value
GBPm GBPm GBPm GBPm
---------------------------------------- -------- ---------- -------- ----------
Level 1 IFRS fair value hierarchy 898.8 936.7 903.1 932.2
Other loans and unamortised arrangement
fees 263.2 263.2 786.8 786.8
---------------------------------------- -------- ---------- -------- ----------
Total borrowings 1,162.0 1,199.9 1,689.9 1,719.0
---------------------------------------- -------- ---------- -------- ----------
The fair value of loans classified as Level 1 in the IFRS fair
value hierarchy is determined using quoted prices in active markets
for identical liabilities.
The following table shows the changes in liabilities arising
from financing activities:
2021
at 31
at 1 January Financing Fair Value Other December
2021 cash flows adjustments changes 2021
-------------------------------------------- ------------ ----------- ------------ -------- ---------
Borrowings 1,689.9 (563.8) (4.3) 40.2 1,162.0
Lease liabilities 101.1 (13.2) - 8.9 96.8
Interest rate swaps 23.6 (3.1) (23.9) 0.9 (2.5)
-------------------------------------------- ------------ ----------- ------------ -------- ---------
Total liabilities from financing activities 1,814.6 (580.1) (28.2) 50.0 1,256.3
-------------------------------------------- ------------ ----------- ------------ -------- ---------
2020
at 31
at 31 December Financing Fair Value Other December
2019 cash flows adjustments changes 2020
-------------------------------------------- -------------- ----------- ------------ -------- ---------
Borrowings 1,567.6 52.1 (4.3) 74.5 1,689.9
Lease liabilities 104.8 (13.1) - 9.4 101.1
Interest rate swaps 7.6 (1.5) 17.5 - 23.6
-------------------------------------------- -------------- ----------- ------------ -------- ---------
Total liabilities from financing activities 1,680.0 117.4 11.7 5.5 1,814.6
-------------------------------------------- -------------- ----------- ------------ -------- ---------
4.2 Interest rate swaps
The Group uses interest rate swaps to manage the Group's
exposure to interest rate fluctuations. In accordance with the
Group's treasury policy, the Group does not hold or issue interest
rate swaps for trading purposes and only holds swaps which are
considered to be commercially effective.
The following table shows the fair value of interest rate
swaps:
2021 2020
GBPm GBPm
---------------------------------- ----- -----
Current (2.5) 5.8
Non-current - 17.8
---------------------------------- ----- -----
Fair value of interest rate swaps (2.5) 23.6
---------------------------------- ----- -----
The fair value of interest rate swaps (a debit balance in 2021
and a credit balance in 2020) have been calculated by a third party
expert, discounting estimated future cash flows on the basis of
market expectations of future interest rates, representing Level 2
in the IFRS 13 fair value hierarchy. At 31 December 2021 the net
current asset fair value above comprises assets of GBP6.1 million
offset by liabilities of GBP3.6 million (2020: all
liabilities).
4.3 Net financing costs
2021 2020
Recognised in the income statement: GBPm GBPm
-------------------------------------------------- ------ -----
Interest income - (5.6)
-------------------------------------------------- ------ -----
Finance income - (5.6)
Gross interest expense on loans 43.7 50.8
Interest capitalised (5.2) (4.6)
Amortisation of fair value of debt recognised on
acquisition (4.3) (4.3)
-------------------------------------------------- ------ -----
Loan interest and similar charges 34.2 41.9
Interest on lease liabilities 8.5 8.8
Mark to market changes on interest rate swaps (10.9) 5.8
Swap cancellation fair value settlements and loan
break costs 4.2 30.1
-------------------------------------------------- ------ -----
Finance costs 36.0 86.6
-------------------------------------------------- ------ -----
Net financing costs 36.0 81.0
-------------------------------------------------- ------ -----
The average cost of the Group's wholly owned investment debt for
the year ended 31 December 2021 is 3.0% (2020: 3.2%). The overall
average cost of investment debt on an EPRA basis is 3.0% (2020:
3.2%).
4.4 Gearing
LTV is a key indicator that the Group uses to manage its
indebtedness. The Group also monitors gearing, which is calculated
using EPRA net tangible assets (NTA) and adjusted net debt.
Adjusted net debt excludes IFRS 16 lease liabilities, the
unamortised fair value of debt recognised on acquisition and mark
to market of interest rate swaps as shown below.
The Group's gearing ratios are calculated as follows:
2021 2020
Note GBPm GBPm
------------------------------------------ ---- --------- ---------
Cash and cash equivalents 5.1 109.4 338.3
Current borrowings 4.1 - -
Non-current borrowings 4.1 (1,162.0) (1,689.9)
Lease liabilities 4.6a (96.8) (101.1)
Interest rate swaps 4.2 2.5 (23.6)
------------------------------------------ ---- --------- ---------
Net debt per balance sheet (1,146.9) (1,476.3)
Lease liabilities 4.6a 96.8 101.1
Unamortised fair value of debt recognised
on acquisition 2.3c 23.8 28.1
------------------------------------------ ---- --------- ---------
Adjusted net debt (1,026.3) (1,347.1)
------------------------------------------ ---- --------- ---------
Reported net asset value 2.3c 3,527.8 3,234.9
EPRA NTA 2.3c 3,532.2 3,266.2
Gearing
Basic (net debt/reported net asset value) 33% 46%
Adjusted gearing (adjusted net debt/EPRA
NTA) 29% 41%
Loan to value 2.3a 29% 34%
------------------------------------------ ---- --------- ---------
4.5 Covenant compliance
The Group monitors its covenant position and the forecast
headroom available on a monthly basis. At 31 December 2021, the
Group was in full compliance with all of its borrowing
covenants.
The Group's unsecured borrowings carry several covenants. The
covenant regime is IFRS based and gives the Group substantial
operational flexibility, allowing property acquisitions, disposals
and developments to occur with relative freedom.
2021 2020
-------------------------- ----------------- ----------------
Covenant Actual Covenant Actual
-------------------------- --------- ------ -------- ------
Gearing < 1.50 0.30 < 1.50 0.42
Unencumbered assets ratio > 1.70 3.25 > 1.70 2.81
Secured gearing < 0.25 0.0 < 0.25 0.0
Development assets ratio < 30% 7% < 30% 4%
Joint venture ratio < 55% 23% < 55% 18%
Interest cover > 2.00 5.49 > 2.00 3.9
-------------------------- --------- ------ -------- ------
The Group also has bonds which carry several covenants which the
Group was also in full compliance with as set out below.
2021 2020
------------------ -------------------- -------------------
Weighted Weighted Weighted Weighted
covenant actual covenant actual
------------------ ---------- -------- --------- --------
Net gearing < 60% 30% < 60% 35%
Secured gearing < 25% 0% < 25% 0%
Unsecured gearing > 1.67 3.31 > 1.67 2.87
Interest cover > 1.75 2.79 > 1.75 2.67
------------------ ---------- -------- --------- --------
4.6 Equity
The Company's issued share capital has increased during the year
as follows:
2021 2020
---------------------------------- ------------------------------------ -------------------------------
Called up, allotted and fully
paid Ordinary Ordinary Share
ordinary shares of GBP0.25p No. of shares Share Premium No. of shares Premium
each shares GBPm GBPm shares GBPm GBPm
---------------------------------- ----------- -------- ------------- ----------- -------- --------
At 1 January 398,170,432 99.5 2,160.3 363,591,882 90.9 1,874.9
Shares issued (placing) - - - 34,502,872 8.6 285.1
Shares issued (scrip dividend) 789,927 0.2 (0.2) - - -
Shares issued (options exercised) 179,277 0.1 1.1 75,678 - 0.3
---------------------------------- ----------- -------- ------------- ----------- -------- --------
At 31 December 399,139,636 99.8 2,161.2 398,170,432 99.5 2,160.3
---------------------------------- ----------- -------- ------------- ----------- -------- --------
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company. All shares rank equally with
regard to the Company's residual assets.
4.7 Dividends
During the year, the Company paid the final 2020 dividend of
GBP42.4m - 12.75p per share - and an interim 2021 dividend of
GBP25.4 million - 6.5p per share (2020: cancelled the proposed
final 2019 dividend and paid no interim dividend).
After the year-end, the Directors proposed a final dividend per
share of 15.6p - totalling GBP62.3 million (2020: 12.75p), bringing
the total dividend per share for the year to 22.1p (2020: 12.75p).
No provision has been made in relation to this dividend.
The Group has modelled tax adjusted property business profits
for 2021 and 2022 and the PID requirement in respect of the year
ended 31 December 2021 is expected to be satisfied by the end of
2022.
Section 5: Working capital
5.1 Cash and cash equivalents
The Group's cash position at 31 December 2021 was GBP109.4
million (2020: GBP338.3 million).
The Group's cash balances include GBP2.0 million (2020: GBP1.2
million) whose use at the balance sheet date is restricted by
funding agreements to pay operating costs.
The Group generates cash from its operating activities as
follows:
2021 2020
Note GBPm GBPm
---------------------------------------------------------- ---- ------- -------
Profit/(loss) for the year 344.6 (122.2)
Adjustments for:
Depreciation and amortization 7.8 9.2
Fair value of share-based payments 2.4 1.7
Change in value of investment property (owned and
under development) 3.1 (116.8) 124.2
Change in value of investment property (leased) 3.1 11.1 11.2
Net finance costs excluding interest on lease liabilities 4.3 34.2 36.3
Interest payments for leased assets 4.3 8.5 8.8
Mark to market changes in interest rate swaps 4.3 (10.9) 5.8
Swap break fair value settlements and debt exit costs 4.3 4.2 30.1
Loss on disposal of investment property (owned) 12.0 1.9
Share of joint venture (profit)/loss 3.3b (122.2) 11.6
Trading with joint venture adjustment 19.1 12.0
Tax (credit)/charge 2.5a (1.5) 2.1
---------------------------------------------------------- ---- ------- -------
Cash flows from operating activities before changes in
working capital 192.5 132.7
(Increase) in trade and other receivables (52.5) (0.3)
(Increase) in inventories (2.9) (4.5)
Increase/(decrease) in trade and other payables 34.2 (53.3)
---------------------------------------------------------- ---- ------- -------
Cash flows from operating activities 171.3 74.6
Tax paid - (1.3)
Net cash flows from operating activities 171.3 73.3
---------------------------------------------------------- ---- ------- -------
Cash flows consist of the following segmental cash
inflows/(outflows): operations GBP108.1 million (2020: GBP57.3
million), property (GBP324.8 million) (2020: GBP78.2 million) and
unallocated (GBP12.2 million) (2020: GBP272.3 million).
The unallocated net cash outflow is comprised of dividends paid
totalling GBP64.8 million (2020: GBPnil), amounts received from
shares issued of GBPnil (2020: GBP294.0 million), LSAV performance
fee received of GBP53.3 million (2020: GBPnil), tax paid of GBPnil
(2020: GBP1.3 million) and investment in joint venture of GBPnil
(2020: GBP7.5 million).
During the year the Group acquired an additional investment in
its LSAV joint venture as a non-cash transaction as part of the
disposal of property to the joint venture.
5.2 Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. It arises principally from the Group's
cash balances, the Group's receivables from customers and joint
ventures and loans provided to the Group's joint ventures.
At the year-end, the Group's maximum exposure to credit risk was
as follows:
2021 2020
Note GBPm GBPm
-------------------------------- ------ ----- -----
Cash 5.1 109.4 338.3
Trade receivables 27.9 16.4
Amounts due from joint ventures 56.8 48.0
-------------------------------- ------ ----- -----
194.1 402.7
-------------------------------- ------ ----- -----
5.2a) Cash
The Group operates investment guidelines with respect to surplus
cash. Counterparty limits for cash deposits are largely based upon
long-term ratings published by credit rating agencies and credit
default swap rates. Deposits were placed with financial
institutions with A- or better credit ratings.
5.2b) Trade receivables
The Group's customers can be split into two groups - (i)
students (individuals) and (ii) commercial organisations including
universities. The Group's exposure to credit risk is influenced by
the characteristics of each customer. The Group holds customer
deposits of GBP0.8 million (2020: GBP0.8 million) as collateral
against individual customers.
5.2c) Joint ventures
Amounts receivable from joint ventures fall into two categories
- working capital balances and investment loans. The Group has
strong working relationships with its joint venture partners and
therefore views this as a low credit risk balance.
5.3 Provisions
During 2020, and in accordance with the Government's Building
Safety Advice of 20 January 2020, we undertook a thorough review of
the use of High-Pressure Laminate (HPL) cladding on our properties.
We have identified 24 properties with HPL that needs replacing
across our estate, seven of which are wholly owned. We are
currently carrying out replacement works for properties with HPL
cladding, with activity prioritised according to our risk
assessments, starting with those over 18 metres in height. The
remaining cost of replacing HPL cladding is expected to be GBP92.0
million (Unite Share: GBP46.9 million), of which GBP33.5 million is
in respect of wholly owned properties. Whilst the overall timetable
for these works is uncertain, we anticipate this will be incurred
over the next 2 years.
The Government has proposed a Building Safety Bill, covering
building standards, which is likely to result in more stringent
fire safety regulations. We will ensure we remain aligned to fire
safety regulations as they evolve and will continue to make any
required investment to ensure our buildings remain safe to occupy.
We have provided for the costs of remedial work where we have a
legal obligation to do so. The amounts provided reflect the current
best estimate of the extent and future cost of the remedial works
required and are based on known costs and quotations where
possible, and reflect the most likely outcome. However, these
estimates may be updated as work progresses or if Government
legislation and regulation changes.
We have not recognised any assets in respect of future
claims.
Management have performed a sensitivity analysis to assess the
impact of a change in their estimate of total costs. A 20% increase
in the estimated remaining costs would affect net valuation
gains/losses on property in the IFRS P&L and would reduce the
Group's NTA by 2.3 pence on a Unite share basis. Whilst provisions
are expected to be utilised within two years, there is uncertainty
over this timing.
The Group has recognised provisions for the cost of these
cladding works as follows:
Gross Unite Share
GBPm GBPm
-------------------- ------------------------------------ ----------------------------------
Wholly owned USAF LSAV Total Wholly owned USAF LSAV Total
-------------------- ------------ ------ ------ ------ ------------ ----- ----- ------
At 31 December 2019 0.3 1.4 - 1.7 0.3 0.4 - 0.7
Additions 15.7 50.6 14.4 80.7 15.7 11.0 7.2 33.9
Utilisation (0.3) (2.0) (0.2) (2.5) (0.3) (0.4) (0.1) (0.8)
-------------------- ------------ ------ ------ ------ ------------ ----- ----- ------
At 31 December 2020 15.7 50.0 14.2 79.9 15.7 11.0 7.1 33.8
Additions 18.0 23.4 0.5 41.9 18.0 5.1 0.3 23.4
Utilisation (0.2) (17.1) (12.5) (29.8) (0.2) (3.8) (6.3) (10.3)
-------------------- ------------ ------ ------ ------ ------------ ----- ----- ------
At 31 December 2021 33.5 56.3 2.2 92.0 33.5 12.3 1.1 46.9
-------------------- ------------ ------ ------ ------ ------------ ----- ----- ------
Section 6: Post balance sheet events
In February 2022 we exchanged contracts to acquire a development
site in East London on a subject to planning basis. This site is
anticipated to provide 700 beds, with a total development cost of
GBP177 million.
Section 7: Alternative performance measures
The Group uses alternative performance measures ('APMs'), which
are not defined or specified under IFRS. These APMs, which are not
considered to be a substitute for IFRS measures, provide additional
helpful information. APMs are consistent with how business
performance is planned, reported and assessed internally by
management and the Board, and provide comparable information across
the Group. The APMs below have been calculated on a see
through/Unite share basis, as referenced to the notes to the
financial statements. Reconciliations to equivalent IFRS measures
are included in notes 2.2b and 2.2c. Definitions can also be found
in the glossary.
Adjusted earnings, as set out below, is a new APM reflecting a
more meaningful measure of the underlying earnings of the Group,
excluding the non-recurring impact of the LSAV performance fee, and
therefore aiding comparability.
Non-EPRA measures may not have comparable calculation bases
between companies and therefore may not provide meaningful
industry-wide comparability.
2021 2020
Note GBPm GBPm
--------------------------- ---- ------ ------
Adjusted EBIT
Net operating income (NOI) 2.2a 191.8 180.3
Management fees 2.2a 15.9 14.0
Overheads 2.2a (31.5) (30.9)
--------------------------- ---- ------ ------
176.2 163.4
--------------------------- ---- ------ ------
Adjusted EBIT margin %
Rental income 2.2a 282.7 263.2
EBIT 7 176.2 163.4
--------------------------- ---- ------ ------
62.3% 62.1%
--------------------------- ---- ------ ------
EBITDA
Net operating income (NOI) 2.2a 191.8 180.3
Management fees 2.2a 15.9 14.0
Overheads 2.2a (31.5) (30.9)
Depreciation and amortisation 7.8 8.4
-------------------------------------------- ---- --------- ---------
184.0 171.8
-------------------------------------------- ---- --------- ---------
Net debt
Cash 2.3a 155.5 391.0
Debt on properties 2.3a (1,677.3) (2,132.8)
-------------------------------------------- ---- --------- ---------
(1,521.8) (1,741.8)
-------------------------------------------- ---- --------- ---------
EBITDA : Net debt
EBITDA 7 184.0 171.8
Net debt 7 (1,521.8) (1,741.8)
-------------------------------------------- ---- --------- ---------
Ratio 8.3 10.1
-------------------------------------------- ---- --------- ---------
Interest cover (Unite share)
Adjusted EBIT 7 176.2 163.4
Net financing costs 2.2a (54.8) (56.1)
Interest on lease liability/operating lease
rentals 2.2a (8.5) (8.8)
-------------------------------------------- ---- --------- ---------
Total interest (63.3) (64.9)
-------------------------------------------- ---- --------- ---------
Ratio 2.8 2.5
-------------------------------------------- ---- --------- ---------
Reconciliation: IFRS loss before tax to EPRA earnings and
Adjusted earnings
2021 2020
Note GBPm GBPm
---------------------------------------------- ---- ------- -------
IFRS profit/(loss)loss before tax 343.1 (120.1)
Net valuation (gains)/losses on investment
property (owned) 2.2b (205.6) 165.7
Property disposals (owned) 2.2b 12.3 1.9
Net valuation losses on investment property
(leased) 2.2b 11.1 11.2
Integration costs 2.2b - 9.2
Amortisation of fair value of debt recognised
on acquisition 2.2b (4.3) (4.3)
Changes in valuation of interest rate swaps 2.2b (10.9) 5.8
Swap cancellation fair value settlements
and loan break costs 2.2b 4.2 30.1
Non-controlling interest and tax 2.1 (2.2)
---------------------------------------------- ---- ------- -------
EPRA earnings 152.0 97.3
LSAV performance fee (41.9) (5.7)
---------------------------------------------- ---- ------- -------
Adjusted earnings 110.1 91.6
---------------------------------------------- ---- ------- -------
Adjusted EPS yield
Note 2021 2020
------------------------- ---- ----- -----
Adjusted earnings (A) 2.2c 27.6p 24.0p
Opening EPRA NTA (B) 2.3d 818p 847p
------------------------- ---- ----- -----
Adjusted EPS yield (A/B) 3.4% 2.8%
------------------------- ---- ----- -----
Total accounting return
Note 2021 2020
------------------------------ ---- ------ ------
Opening EPRA NTA (A) 2.3d 818p 847p
Closing EPRA NTA 2.3d 882p 818p
------------------------------ ---- ------ ------
Movement 64p (29)p
H1 dividend paid 4.9 12.75p -
H2 dividend paid 4.9 6.5p -
------------------------------ ---- ------ ------
Total movement in NTA (B) 83.25p (29)p
------------------------------ ---- ------ ------
Total accounting return (B/A) 10.2% (3.4%)
------------------------------ ---- ------ ------
EPRA Performance Measures
Summary of EPRA performance measures
2021 2020
GBPm GBPm 2021 2020
--------------------------- ------- ------- ----- -------
EPRA earnings 152.0 97.3 38.1p 25.5p
Adjusted earnings 110.1 91.6 27.6p 24.0p
EPRA NTA (diluted) 3,536.1 3,271.0 882p 818p
EPRA NRV (diluted) 3,829.7 3,601.9 955p 901p
EPRA NDV (diluted) 3,503.6 3,180.7 874p 796p
---------------------------- ------- ------- ----- -------
EPRA Net initial yield 4.0% 3.8%
EPRA Topped-up Net initial
yield 4.0% 3.8%
EPRA Like-for-like gross
rental income 4.7% (12.9%)
EPRA Vacancy rate 5.6% 13.0%
EPRA Cost ratio (including
vacancy costs) 38.8% 40.0%
EPRA Cost ratio (excluding
vacancy costs) 36.8% 36.2%
---------------------------- ------- ------- ----- -------
EPRA like-for-like rental income (calculated based on total
portfolio value of GBP8 billion)
Properties
owned throughout Development Acquisitions
GBPm the period property and disposals Total EPRA
---------------------------------- ----------------- ----------- -------------- ----------
2021
Rental income 265.3 15.5 1.9 282.7
Property operating expenses (86.6) (3.4) (0.9) (90.9)
---------------------------------- ----------------- ----------- -------------- ----------
Net rental income 178.7 12.1 1.0 191.8
---------------------------------- ----------------- ----------- -------------- ----------
2020
Rental income 253.3 2.3 7.6 263.2
Property operating expenses (78.7) (0.8) (3.4) (82.9)
---------------------------------- ----------------- ----------- -------------- ----------
Net rental income 174.6 1.5 4.2 180.3
---------------------------------- ----------------- ----------- -------------- ----------
Like-for-like net rental income 4.1 10.6 (3.2) 11.5
---------------------------------- ----------------- ----------- -------------- ----------
Like-for-like gross rental income 4.7%
---------------------------------- ----------------- ----------- -------------- ----------
EPRA Vacancy Rate
2021 2020
GBPm GBPm
---------------------------------------------- ----- -----
Estimated rental value of vacant space 13.8 31.5
Estimated rental value of the whole portfolio 246.5 241.8
---------------------------------------------- ----- -----
EPRA Vacancy Rate 5.6% 13.0%
---------------------------------------------- ----- -----
EPRA Net Initial Yield
2021 2020
--------------------------------------- ------- --------
Annualised net operating income (GBPm) 205.1 197.7
Property market value (GBPm) 4,864.8 4,893.2
Notional acquisition costs (GBPm) 254.3 256.0
--------------------------------------- ------- --------
5,119.1 5,149.2
4.0%
Net initial yield (%) * 0% 3.8%
Unite Net initial yield (%) ** 4.9% 5.0%
--------------------------------------- ------- --------
* No lease incentives are provided by the Group and accordingly
EPRA Topped Up Net Initial Yield is also 4.0% (2020: 3.8%).
** The Unite measure of Net Initial Yield assumes full occupancy
on newly developed properties.
EPRA Cost ratio
2021 2020
GBPm GBPm
-------------------------------------------------------- ------ ------
Property operating expenses 67.7 61.9
Overheads 30.7 30.1
Development/pre contract costs 2.2 2.2
Unallocated expenses * 0.5 3.2
-------------------------------------------------------- ------ ------
101.1 97.4
Share of JV property operating expenses 23.2 21.0
Share of JV overheads 0.8 0.8
Share of JV unallocated expenses * 0.4 0.4
-------------------------------------------------------- ------ ------
125.5 119.6
Less: Joint venture management fees (15.9) (14.0)
-------------------------------------------------------- ------ ------
Total costs (A) 109.6 105.6
-------------------------------------------------------- ------ ------
Group vacant property costs ** (4.1) (7.4)
Share of JV vacant property costs ** (1.4) (2.5)
-------------------------------------------------------- ------ ------
Total costs excluding vacant property costs (B) 104.1 95.7
-------------------------------------------------------- ------ ------
Rental income 209.0 196.1
Share of JV rental income 73.7 67.1
-------------------------------------------------------- ------ ------
Total gross rental income (C) 282.7 263.2
-------------------------------------------------------- ------ ------
Total EPRA cost ratio (including vacant property costs)
(A)/(C) 39% 40%
-------------------------------------------------------- ------ ------
Total EPRA cost ratio (excluding vacant property costs)
(B)/(C) 37% 36%
-------------------------------------------------------- ------ ------
* Excludes amounts in respect of the LSAV performance fee.
** Vacant property costs reflect the per bed share of operating
expenses allocated to vacant beds.
Unite's EBIT margin excludes non-operational expenses which are
included within the EPRA cost ratio above.
The Group capitalises costs in relation to staff costs and
professional fees associated with property development
activity.
EPRA Valuation movement (Unite share)
Valuation Change
GBPm GBPm %
------------------------------------ --------- ------ -----
Wholly owned 3,323.3 109.8 3.4%
USAF 632.0 28.0 4.6%
LSAV 730.9 69.1 10.4%
------------------------------------ --------- ------ -----
Rental properties 4,686.2 206.9 4.6%
Leased properties 97.7
2021/22 development completions -
Properties under development 324.1
------------------------------------ --------- ------ -----
Properties held throughout the year 5,108.0
Disposals to LSAV 178.6
------------------------------------ --------- ------ -----
Total property portfolio 5,286.6
------------------------------------ --------- ------ -----
EPRA Yield movement
NOI yield Yield movement (bps)
-------------------------------- ---------
% H1 H2 FY
-------------------------------- --------- ------ ------- -------
Wholly owned 5.0% (2) (7) (9)
USAF 5.2% (1) (10) (11)
LSAV 4.1% (3) (20) (23)
--------- ------ ------- -------
Rental properties (Unite share) 4.9% (2) (10) (12)
--------- ------ ------- -------
Property related capital expenditure
2021 2020
Share of Share of
Wholly owned JVs Group share Wholly owned JVs Group share
London 4.8 3.1 7.9 0.6 1.9 2.5
Prime regional 16.7 2.9 19.6 2.7 0.8 3.5
Major regional 8.1 10.8 18.9 5.3 2.2 7.5
R egional 2.8 0.6 3.4 2.7 0.2 2.9
Total rental properties 32.4 17.4 49.8 11.3 5.1 16.4
Increase in beds (lettable
space) - - - - - -
Acquisitions - - - - - -
Developments 81.4 - 81.4 87.6 - 87.6
Capitalised interest 5.2 - 5.2 4.6 - 4.6
Total property related
capex 119.0 17.4 136.4 103.5 5.1 108.6
Glossary
Adjusted earnings Diluted NTA/NAV EPRA Net Disposal Value
An alternative performance Where NTA/NAV per share (NDV)
measure based on EPRA is used, "basic" measures EPRA NDV includes all
earnings, adjusted to divide the NTA/NAV by property at market value,
remove the impact of the the number of shares issued excludes the mark to market
LSAV performance fee which at the reporting date, of financial instruments
was settled in the year. whilst the diluted measure but includes the fair
Given the quantum of the also takes into account value of fixed interest
performance fee in the the effect of share options rate debt and the carrying
year, it has been excluded which have been granted value of intangible assets.
from adjusted earnings and which are expected EPRA NDV represents the
to improve the comparability to be converted into shares shareholders' value in
of results year-on-year. in the future (both for a disposal scenario.
the additional number
Adjusted earnings per of shares that will be EPRA Net Initial Yield
share (EPS) issued and the value of (NIY)
EPRA earnings per share, additional consideration Annualised NOI generated
adjusted to remove the that will be received by the Group's rental
impact of the LSAV performance in issuing them). properties expressed as
fee which was settled a percentage of their
in the year. Given the Direct let fair value, taking into
quantum of the performance Properties where short-hold account notional acquisition
fee in the year, it has tenancy agreements are costs.
been excluded from adjusted made directly between
earnings to improve the Unite and the student. EPRA Topped Up Net Initial
comparability of results Yield (NIY)
year-on-year. EBITDA EPRA Net Initial Yield
The Group's adjusted EBIT, adjusted to include the
Adjusted EBIT adding back depreciation effect of the expiration
The Group's NOI plus management and amortisation. of rent free periods (or
fees and less overheads. other unexpired lease
In the opinion of the EPRA incentives such as discounted
Directors, adjusted EBIT The European Public Real rent periods or step rents).
is a useful measure to Estate
monitor our cost discipline Association, who produce EPRA Vacancy Rate
and performance of the best practice recommendations The ratio of the estimated
Group. for financial reporting. market rental value of
vacant spaces against
Adjusted EBIT margin EPRA earnings the estimated market rental
The Group's EBIT expressed EPRA earnings exclude value of the entire property
as a percentage of rental movements relating to portfolio (including vacant
income. In the opinion changes in values of investment spaces).
of the Directors, adjusted properties, profits/losses
EBIT margin is a useful from the disposal of properties, EPRA Cost Ratio
measure to monitor our swap/debt break costs The ratio of property
cost discipline and performance and integration costs. operating expenses, overheads
of the Group. and management fees, against
EPRA earnings per share rental income, calculated
Adjusted EPS yield The earnings per share on an EPRA basis.
Adjusted EPS as a percentage based on EPRA earnings.
of opening EPRA NTA (diluted). ESG
EPRA like-for-like rental Environmental, Social
Adjusted net debt growth and Governance.
Net debt per the balance The growth in rental income
sheet, adjusted to remove based on properties that GRESB
IFRS 16 lease liabilities have been in operation GRESB is a benchmark of
and the unamortised fair throughout both the current the Environmental, Social
value of debt recognised and prior year, and not and Governance (ESG) performance
on the acquisition of under development nor of real assets.
Liberty Living. subject to disposal.
Gross asset value (GAV)
Basis points (BPS) EPRA Net Tangible Assets The fair value of rental
A basis point is a term (NTA) properties, leased properties
used to describe a small EPRA NTA includes all and development properties.
percentage, usually in property at market value
the context of change, but excludes the mark The Group
and equates to 0.01%. to market of financial Wholly owned balances
instruments, deferred plus Unite's interests
Diluted earnings tax and intangible assets. relating to USAF and LSAV.
Where earnings values EPRA NTA provides a consistent
per share are used "basic" measure of NAV on a going Group debt
measures divide the earnings concern basis. Wholly owned borrowings
by the weighted average plus Unite's share of
number of issued shares EPRA Net Tangible Assets borrowings attributable
in issue throughout the per share to USAF and LSAV.
period, whilst the diluted The diluted NTA per share
measure also takes into figure based on EPRA NTA. HMO
account the effect of Houses in multiple occupation,
share options which have EPRA Net Reinstatement where buildings or flats
been granted and which Value (NRV) are shared by multiple
are expected to be converted EPRA NRV includes all tenants who rent their
into shares in the future. property at market value own rooms and the property's
but excludes the mark communal spaces on an
to market of financial individual basis.
instruments, deferred
tax and real estate transfer
tax. EPRA NRV assumes
that entities never sell
assets and represents
the value required to
rebuild the entity.
IFRS NAV per share Net debt to EBITDA Resident ambassadors
IFRS equity attributable Net debt as a proportion Student representatives
to the owners of the of EBITDA. who engage with students
parent company from living in the property
the consolidated balance Net financing costs to create a community
sheet divided by the (EPRA) and sense of belonging.
total number of shares Interest payable on
of the Parent Company borrowings less interest See-through (also Unite
in issue at the reporting capitalised into developments share)
date and finance income. Wholly owned balances
plus Unite's share of
Interest cover ratio Net operating income balances relating to
(ICR) (NOI) USAF and LSAV.
Calculated as adjusted The Group's rental income
EBIT divided by the less property operating See-through net debt
sum of net financing expenses. See-through borrowings
costs and IFRS 16 lease net of cash. IFRS 16
liability interest costs. NOI margin lease liabilities are
The Group's NOI expressed excluded from net debt
Lease as a percentage of rental on an EPRA basis. In
Properties which are income. the opinion of the Directors,
leased to universities net debt is a useful
for a number of years. Nomination agreements measure to monitor the
Agreements at properties overall cash position
Like-for-like capital where Universities have of the Group.
growth entered into a contract
Like-for-like capital to reserve rooms for TCFD
growth is the growth their students, usually The Taskforce on Climate-related
in Gross Asset Value guaranteeing occupancy. Financial Disclosures
on properties owned The Universities usually develops voluntary,
throughout the current either nominate students consistent climate-related
and prior year. to live in the building financial risk disclosures
and Unite enters into for use by companies
Loan to value (LTV) short-hold tenancies in providing information
Net debt as a proportion with the students or to investors, lenders,
of the value of the the University enters insurers and other stakeholders.
rental properties, excluding into a contract with
balances in respect Unite and makes payment Total accounting return
of leased properties directly to Unite. Growth in diluted EPRA
under IFRS 16. Prepared NTA per share plus dividends
on a see-through basis. Provincial paid, expressed as a
In the opinion of the Properties located in percentage of diluted
Directors, this measure Bedford, Bournemouth, EPRA NTA per share at
enables an appraisal Coventry, Loughborough, the beginning of the
of the indebtedness Medway, Portsmouth, period. In the opinion
of the business, which Reading and Swindon. of the Directors, this
closely aligns with measure enables an appraisal
key covenants in the Prime regional of the return generated
Group's agreements. Properties located in by the business for
Bristol, Bath, Edinburgh, shareholders during
Loan to value post IFRS Manchester and Oxford. the year.
16
Net debt as a proportion Property operating expenses Total shareholder return
of the value of the Operating costs directly The growth in value
rental properties, including related to rental properties, of a shareholding over
balances in respect therefore excluding a specified period,
of leased properties central overheads assuming dividends are
under IFRS 16. Prepared reinvested to purchase
on a see-through basis. Rental growth additional shares.
Calculated as the year-on-year
LSAV change in the average USAF/the fund
The London Student Accommodation annual price for sold The Unite UK Student
Joint Venture (LSAV) beds. In the opinion Accommodation Fund (USAF)
is a joint venture between of the Directors, this is Europe's largest
Unite and GIC, in which measure enables a more fund focused purely
both hold a 50% stake. meaningful comparison on income-producing
LSAV has a maturity in rental income as student accommodation
date of September 2032. it excludes the impact investment assets.
of changes in occupancy. The fund is an open-ended
Major regional infinite life vehicle
Properties located in Rental income with unique access to
Aberdeen, Birmingham, Income generated by Unite's development
Cardiff, Durham, Glasgow, the Group from rental pipeline. Unite acts
Leeds, Leicester, Liverpool, properties. as fund manager for
Newcastle, Nottingham, the fund, as well as
Sheffield and Southampton. Rental properties owning a significant
Investment properties minority stake.
Net asset value (NAV) (owned and leased) whose
The total of all assets construction has been WAULT
less the value of all completed and are used Weighted average unexpired
liabilities at each by the Operations segment lease term to expiry.
reporting date. to generate NOI.
Wholly owned
Net debt Rental properties (leased) Balances relating to
Borrowings, net of cash. / Sale and leaseback properties that are
IFRS 16 lease liabilities Properties that have 100% owned by The Unite
are excluded. been sold to a third Group PLC or its 100%
party investor then subsidiaries.
Net debt per balance leased back to the Group.
sheet Unite is also responsible
Borrowings, IFRS 16 for the management of
lease liabilities and these assets on behalf
the mark to market of of the owner.
interest rate swaps,
net of cash.
Company information
Unite Group
Executive Team
Richard Smith
Chief Executive Officer
Joe Lister
Chief Financial Officer
Registered office
South Quay House, Temple Back, Bristol BS1 6FL
Registered Number in England
03199160
Auditor
Deloitte LLP
1 New Street Square, London EC4 3HQ
Financial Advisers
J.P. Morgan Cazenove
25 Bank Street, London E14 5JP
Numis Securities
45 Gresham Street, London EC2V 7BF
Registrars
Computershare Investor Services plc
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Financial PR Consultants
Powerscourt
1 Tudor Street, London, EC4Y OAH
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END
FR EAEADALPAEEA
(END) Dow Jones Newswires
February 23, 2022 02:00 ET (07:00 GMT)
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