TIDMUTG
RNS Number : 8376T
Unite Group PLC (The)
27 July 2022
PRESS RELEASE
27 July 2022
THE UNITE GROUP PLC
("Unite Students", "Unite", the "Group", or the "Company")
INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2022
Richard Smith, Chief Executive of Unite Students, commented:
"We have seen continued momentum in the first half, as earnings
and dividends have grown strongly and reservations for the 2022/23
academic year are now ahead of pre-pandemic levels.
"Our business model offers inflationary protection but, like
others, we are not immune from the impact of rising costs and
interest rates. We are also very conscious of the current cost of
living pressures facing students and parents. Our customer offer
provides students with significant savings on their bills, as part
of a simple, fixed price all-inclusive rental payment.
"Despite increased economic uncertainty, we remain confident in
our ability to deliver significant growth over the medium to long
term. Demand for Higher Education has proven to be resilient
through economic cycles and we have significant opportunities for
growth through our alignment to the strongest universities and by
leveraging our best-in-class platform ."
H1 2022 H1 2021 FY2021 Change from
H1 2021
---------------------------- ------------ ------------ ------------ -------------
Adjusted earnings(1) GBP96.0m GBP72.6m GBP110.1m 32%
Adjusted earnings
per share(1) 24.0p 18.2p 27.6p 32%
IFRS profit before
tax GBP334.1m GBP130.4m GBP343.1m 156%
IFRS basic EPS 82.9p 32.7p 85.9p 154%
Dividend per share 11.0p 6.5p 22.1p 69%
Total accounting return(2) 8.3% 3.9% 10.2%
As at 30 Jun 2022 30 Jun 2021 31 Dec 2021 Change from
31 Dec 2021
---------------------------- ------------ ------------ ------------ -------------
EPRA NTA per share(2) 940p 837p 882p 7%
IFRS NAV per share 948p 833p 880p 8%
See-through net debt(3,4) GBP1,727m GBP1,501m GBP1,522m 13%
Loan to value(3,4) 30% 30% 29% 1%
---------------------------- ------------ ------------ ------------ -------------
HIGHLIGHTS
Earnings and dividend ahead of their pre-pandemic peak
-- Adjusted earnings up 32% to GBP96.0 million (H1 2021: GBP72.6 million)
-- Adjusted EPS up 32% to 24.0p (H1 2021: 18.2p) (1)
-- IFRS profit before tax of GBP334.1 million (H1 2021: GBP
130.4 million), driven by adjusted earnings and a valuation gain of
GBP214.9 million in the period (H1 2021: GBP54.3 million)
-- EPRA NTA per share of 940p, up 7% (31 December 2021: 882p)
-- IFRS NAV per share up 8% to 948p (31 December 2020: 880p)
-- Total accounting return of 8.3% for H1 (H1 2021: 3.9%)
-- Interim dividend of 11.0p (H1 2021: 6.5p), targeting 80%
payout of adjusted EPS for full year
Strong outlook for student demand
-- University applications for 2022/23 up 7% on pre-pandemic levels
-- Record application rate for school leavers and significant
demographic growth over the next decade
-- Reservations ahead of pre-pandemic levels at 92 % (2021/22:
83%, 2020/21: 82%, 2019/20: 91 %)
-- Confident of achieving 97% occupancy and rental growth of
3.5-4.0% for 2022/23 (previously 3.0-3.5%)
-- Targeting rental growth of 4-5% for 2023/24
Protection against rising costs
-- Annual repricing of rents through multi-year nomination agreements and direct-let sales
-- Cost protection through hedging, implemented platform efficiencies and growing fee income
-- Interest rates 85% fixed or capped, with 3.2% cost of debt (31 December 2021: 3.0%)
-- Adjusted EPS guidance of 40-41p for FY2022, reflecting higher interest costs
Growth underpinned by development pipeline
-- 5.0% increase in property values in H1 for like-for-like
portfolio(5) , reflecting strength of investor demand
-- Secured pipeline of GBP1,032 million and 6,192 beds, generating a 6.0% yield on cost
-- 2022 development completions fully let, adding 2p to adjusted EPS from 2023
-- GBP42 million of asset management schemes completing for
2022/23, delivering 7% yield on cost, with
growing pipeline of future opportunities
Ongoing capital discipline
-- LTV increased to 30 % at 30 June 2022 (3) (31 December 2021: 29%)
-- GBP236 million of disposals contracted in H1 (Unite share) at a blended yield of 5.7%
-- Acquisition of GBP141 million of USAF units (equivalent to
GAV of GBP181 million) at an effective yield of 5.1%
(1) Adjusted earnings and adjusted EPS remove the impact of the
LSAV performance fee and abortive acquisition costs from EPRA
earnings and EPRA EPS. See glossary for definitions and note 7 for
calculations and reconciliations
(2) The financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS). These financial
highlights are based on the European Public Real Estate Association
(EPRA) best practice recommendations and these performance measures
are published as they are intended to help users in the
comparability of these results across other listed real estate
companies in Europe. 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
(3) Excludes IFRS 16 related balances recognised in respect of
leased properties. See glossary for definitions
(4) Wholly-owned balances plus Unite's share of balances
relating to USAF and LSAV
(5) Like-for-like properties owned at both 31 December 2021 and
30 June 2022
PRESENTATION
There will be a presentation for analysts and investors this
morning at 8:30 a.m. BST. A live webcast can be accessed here . 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 the first
half, following removal of the last remaining Covid-19 restrictions
on Higher Education (HE), with earnings and dividends surpassing
their pre-pandemic peak. We have also seen good progress with
reservations for the 2022/23 academic year, which underpins further
growth in income in the second half and into 2023.
Adjusted earnings for the period increased by 32 % to GBP 96.0
million (H1 2021: GBP72.6 million), which excludes the impact of
non-recurring items relating to performance fees received from LSAV
in 2021 and abortive acquisition costs in the first half. This
increase was driven by higher occupancy for the 2021/22 academic
year and the rental discounts offered to students in H1 2021 in
response to Covid-19 restrictions, as well as broadly stable costs.
On a per share basis, adjusted EPS increased 32% to 24.0p (H1 2021:
18.2 p).
We are announcing an interim dividend of 11.0p (H1 2021: 6.5p),
an increase of 69% on H1 2021, which reflects the growth in our
earnings and a positive outlook for reservations for the 2022/23
academic year. We plan to distribute 80% of adjusted EPS for
2022.
EPRA NTA per share increased by 7% to 940p (31 December 2021:
882p) which, including the final dividend paid in the period,
results in a total accounting return of 8.3% in the first six
months of the year (H1 2021: 3.9%). The Group recorded an IFRS
profit before tax of GBP334.1 million (H1 2020: GBP130.4 million),
driven by adjusted earnings and a valuation gain on the back of our
sales performance for 2022/23 and strong valuation evidence from
student accommodation transactions during H1. IFRS NAV per share
increased by 8% to 948p over the half (31 December 2021: 880p).
Our key financial performance indicators are set out below:
Financial highlights H1 2022 H1 2021 FY 2021
------------------------- ---------- ---------- ----------
Adjusted earnings GBP96.0m GBP72.6m GBP110.1m
Adjusted EPS 24.0p 18.2p 27.6p
Dividend per share 11.0p 6.5p 22.1p
Total accounting return 8.3% 3.9% 10.2%
IFRS profit before tax GBP334.1m GBP130.4m GBP343.1m
IFRS basic EPS 82.9p 32.7p 85.9p
EPRA NTA per share 940p 837p 882p
IFRS NAV per share 948p 833p 880p
Loan to value 30% 30% 29%
------------------------- ---------- ---------- ----------
Demand ahead of pre-pandemic levels
We are anticipating strong student numbers for the 2022/23
academic year, with UCAS data showing a 7% increase in the number
of applicants as at the 30 June deadline compared to pre-pandemic
levels in 2019/20. A record 44.1% of UK 18-year-olds have applied
to university this year, reflecting growing awareness of the
opportunities and life experience it provides. Applications from
non-EU students are up 9%, including notable growth from China and
India, which has helped to substantially offset the expected
decline in EU applications (-18%) as a result of Brexit.
We expect the exceptional grade inflation of the past two years
to partially unwind for this year's A-level results, following a
return to exams, which will support a more normal distribution of
students across universities and cities. Universities have also
been more selective in their offer-making, which points to greater
availability of places during the Clearing period following A-level
results in mid-August.
Positive momentum
We have continued to make good progress in sales during the
first half. Across the Group's entire property portfolio, 92% of
rooms are now sold for the 2022/23 academic year, ahead of
pre-pandemic reservation levels (2021/22: 83%, 2020/21: 82%,
2019/20: 91%).
We have seen healthy demand from both UK and international
students. We expect the share of international students to increase
to around 35% of total reservations for 2022/23, up from 30% for
2021/22, with particularly strong growth from India (5% of
direct-let reservations), but still modestly below the pre-pandemic
level of 40%. This reflects a return to face-to-face teaching by
universities and fewer travel restrictions than experienced over
the past two years.
Reservations under nomination agreements currently account for
51% of total beds. We expect this figure to grow slightly by the
end of the sales cycle once universities have full visibility over
student intake for 2022/23. There remains an opportunity to deepen
relationships with our existing university partners and we have
recently agreed terms for a new 30-year nomination agreement with a
Russell Group university.
Breakdown of reservations for 2022/23 by domicile and year of
study
Nominations(*) Direct let
------------------------------- ------
UK China EU Other Intl. Total
-------------------- --------------- ---- ------ --- ------------ ------
First year 9% 2% 0% 1%
Returning students 15% 4% 1% 3%
Postgraduate 1% 7% 0% 2%
-------------------- --------------- ---- ------ --- ------------ ------
% of reservations 55% 25% 13% 1% 6% 100%
% of portfolio 51% 21% 12% 2% 6% 92%
-------------------- --------------- ---- ------ --- ------------ ------
(*) All years and domiciles
We have also seen positive progress in both pricing and the pace
of lettings, particularly in the second half of the sales cycle, as
concerns around the impact of the Omicron Covid-19 variant have
eased. This progress has been driven by inflation-linked rental
uplifts for our multi-year nomination agreements and the strength
of demand for direct-let beds.
Given the strong sales performance to date, we are increasingly
confident in delivering occupancy of 97% for the 2022/23 academic
year and achieving rental growth of 3.5-4.0% (previous guidance of
3.0-3.5%).
We continue to monitor Covid-19 cases, travel restrictions for
international students and the potential for further lockdowns,
particularly in China. There are no Covid restrictions on UK HE,
and Government guidance emphasises that universities should
prioritise delivery of face-to-face teaching. Demand also remains
strong from international students across multiple markets, and we
expect that international students will be able to travel to the UK
for the start of the 2022/23 academic year in September.
Value for money
Our customer offer is built around a value-for-money,
hassle-free living experience, with support on hand when it is
needed. Our pricing is inclusive of utilities, Wi-Fi, contents
insurance and on-hand maintenance teams. In addition, we have
invested over GBP100 million over the past year to enhance our
portfolio, service and experience to meet student needs, such as a
24/7 physical presence by staff, with a particular focus on student
welfare support.
We recognise the cost of living pressures being faced by
students and are confident our pricing will continue to offer value
for money compared to alternatives in the purpose-build student
accommodation (PBSA) and houses in multiple occupation (HMO)
sectors. Our pricing is comparable in cost to HMOs once bills are
included. This is before allowing for the additional product and
service features that we provide in locations close to campus.
Given increases in energy prices, we estimate that students
living in HMO will pay around GBP840 per year for their utilities,
Wi-Fi and contents insurance. Thanks to our scale and forward
purchasing of utilities, these same services will cost the Company
less than GBP600 for the 2022/23 academic year. We pass these
savings on to students through a single price, fixed at the time of
booking, giving our customers certainty over their living
costs.
Inflation protection
Inflation is resulting in cost pressures in parts of our
operations and development activity. Positively, the business is
well protected from these impacts through the inflation-hedging
characteristics of our income and risk management through cost
hedging.
Earnings
Our rooms are either resold each year through direct-lets and
single-year nomination agreements or repriced based on RPI, CPI or
fixed rental inflators under our multi-year nomination agreements.
We also have a high degree of visibility over our largest P&L
costs - staff, utilities and interest - which together account for
around 70% of our total cost base. We will seek to offset
operational cost increases through rental growth of 4-5% for the
2023/24 academic year.
Interest costs are fixed or capped on 85% of our investment debt
and we have limited near-term refinancing requirements, with less
than 10% of see-through debt maturing before late 2024. As a result
of rising interest rates on the variable portion of our debt, our
see-through borrowing cost has increased to 3.2% at the end of H1
(December 2021: 3.0%). Reflecting the impact of higher interest
costs, we are reducing our guidance for 2022 adjusted EPS to 40-41p
(previously 41-43p).
Development pipeline
We manage cost risk in our development pipeline through
fixed-price contracts. Costs are already fixed for our 2022 and
2023 schemes, which remain in line with budget and on track for
their scheduled delivery dates. However, we are seeing cost
increases for schemes yet to be procured for delivery in 2024 and
2025, totalling 2,854 beds. We can partially mitigate these cost
pressures through design efficiencies and increased rental levels
but expect yields on cost to be reduced by around 20bps compared to
our initial assumptions. The weighted average yield on cost of 6.0%
on our secured pipeline continues to offer an attractive spread
compared to our funding costs and investment yields for completed
assets.
Higher Education policy
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. In addition, the Government is focused on ensuring the
sector delivers value for money for students and the taxpayer. The
Office for Students (OfS) recently closed a consultation on student
outcomes in the HE sector. This may lead to the introduction of
minimum standards for HE providers based on course completion rates
and the proportion of students going on to employment or further
study. However, we do not expect any material changes in HE policy
in the short term following changes in Government leadership.
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.
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 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.
During the period, we completed remedial works on one building
and are on site at a further eight, spending a total of GBP25.9
million (Unite share: GBP10.3 million) in the period. Our balance
sheet at 30 June includes provisions and accruals for cladding
remediation costs across our estate, at a cost of GBP82.9 million
(Unite share: GBP48.7 million), which will be incurred over the
next 12-36 months.
The Government's Building Safety Bill, covering building
standards, was passed in April and has introduced more stringent
fire safety regulations. Our proactive approach means that we 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 due
to uncertainty over the timing of any recoveries. The Building
Safety Bill extended the limitation period for claims to up to 30
years, meaning that nearly all of our affected buildings now have
the potential to submit a claim.
Delivering our sustainability strategy
Following the publication of our net zero carbon roadmap at the
end of 2021, we have increased our investment into energy
efficiency projects aimed at improving the environmental
performance of our buildings. During the first half, we invested
c.GBP2.7million (GBP1.1 million at Unite share) in capital
projects, including LED lighting, heating controls and low-carbon
heating solutions, and expect to invest a further c.GBP10 million
(GBP8 million at Unite share) during the second half of the year.
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. These measures have been
incorporated as part of the refurbishment of 1,629 beds in
Manchester for the 2022/23 academic year, increasing EPC ratings
from an average of D to B and reducing energy intensity by an
average of 17%.
As part our sustainability strategy, we have committed to
donating 1% of annual profits to social initiatives going forward.
These initiatives will be closely aligned to our purpose of
providing a Home for Success for students and supporting wider
participation in HE. The two main initiatives in 2022 are
Leapskills and the Unite Foundation. The Leapskills programme is an
interactive set of workshops designed to prepare school leavers for
independent living at university. We have recently partnered with
UCAS to increase the reach of Leapskills and assist students in
their preparations for university. The Unite Foundation, the
charitable trust founded by Unite Students in 2012, provides free
accommodation for care leavers and estranged students while at
university. To mark the Foundation's 10(th) anniversary, Unite
Students is providing financial support for 100 student
scholarships for the 2022/23 academic year and home starter kits
for over 200 additional students.
Positioned for growth
We have now completed the disposal programme set out at the time
of our acquisition of Liberty Living in 2019. We contracted GBP306
million of disposals in the first half (Unite share: GBP236
million) at a blended yield of 5.7%. These disposals have increased
the focus of our portfolio in the strongest university cities and
ensure our ability to sustain rental growth.
See-through LTV stands at 30%, which provides investment
capacity to deliver our significant development pipeline and pursue
further investment opportunities to extend our best-in-class
platform.
Our development pipeline totals GBP1,032 million in total cost,
following the addition of GBP296 million of new schemes in H1, and
is expected to deliver 5p of upside to EPS on delivery. In
addition, the recent increase in financing costs is starting to
create opportunities to acquire new investment or developments at
enhanced returns.
Increasing our investment in USAF
The proceeds from announced disposals have been partially
redeployed to increase our investment in USAF. During the period,
we acquired GBP141 million of units at a price in line with USAF's
March 2022 NAV and equivalent to a property yield of 5.1%. This
investment increases Unite's exposure to USAF's high-quality
portfolio in strong regional markets. Like our wider portfolio, the
fund has positive future prospects through rental growth and
investment opportunities in asset management initiatives. We will
continue to monitor opportunities to increase our investment in
USAF at attractive valuations.
Extending our platform
There is a 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.
We are currently under offer for a pilot Build-to-Rent
investment in London, located in close proximity to an existing
cluster of our student properties. The operational asset offers the
potential to test our operational capability to extend our customer
offer to young professionals and retain customers as they move on
to the next stage in their lives .
Outlook
We are confident of a strong sales performance for the 2022/23
academic year, reflecting the depth of student demand, reduced
disruption from grade inflation and fewer travel restrictions for
international students. This underpins our guidance for 97%
occupancy and rental growth of 3.5-4.0% for 2022/23.
Our business model has inflationary protection through annual
repricing of our income and cost hedging but, like others, we are
not immune from the impact of rising costs and interest rates. We
will seek to offset higher operating costs through our pricing,
while ensuring we continue to offer value-for-money accommodation
to students.
The outlook for the business remains strong, reflecting growing
student demand, our alignment and partnership with the strongest
universities and the capabilities of our best-in-class operating
platform. We are well positioned to benefit from the strength of
HE, which has historically become more attractive during economic
downturns. Despite increased economic uncertainty, we are well
positioned to deliver sustainable earnings growth and attractive
total returns of 8.5-10% p.a. over the medium term, driven by
rental growth, delivery of our secured development pipeline and
further opportunities to deploy capital at attractive returns.
PROPERTY REVIEW
The first half has seen a strong valuation performance for our
investment portfolio, driven by our reservations progress for
2022/23 and investment activity in the sector. We continue to
improve the quality of the portfolio and our alignment to the
strongest universities by disposing of non-strategic assets and
redeploying the capital into our development pipeline and the
refurbishment of our existing estate. We will deliver 1,351 new
beds this year and have fully refurbished a further 1,629 beds, all
of which are fully let for the 2022/23 academic year.
Our development pipeline remains close to its record size at
over 6,100 beds, having added three further schemes in H1. We are
seeing increases in development costs which, although partially
mitigated by fixed-price contracts and enhanced rental levels, will
slightly reduce development returns. 64% of our development
pipeline now has planning consent, but we are seeing pressure on
our delivery programme for unconsented schemes due to planning
delays as a result of the pandemic.
Valuation performance
Our property portfolio saw a 5.0 % increase in valuations on a
like-for-like basis during the half (Unite share: 4.7 %),
reflecting the strength of investor demand for student
accommodation. Approximately two-thirds of the increase was driven
by yield compression, following strong recent transactional
evidence in the sector. In addition, the valuations reflect rental
growth crystallised through reservations for the 2022/23 academic
year and the completion of asset management initiatives driving NOI
increases. Stronger rental growth in LSAV was predominantly driven
by the strength of the London market.
Yield Asset Rental growth
GBPm 30 June 2022 valuation compression management /other LfL capital growth
-------------------- ---------------------- ------------ ----------- ------------- ------------------
Wholly owned 3,443 81 14 37 131
LSAV 1,942 82 1 40 123
USAF 2,966 106 15 28 149
---------------------- ------------ ----------- ------------- ------------------
Total (Gross) 8,351 269 3 0 105 403
Total (Unite share) 5,249 226
---------------------- ------------ ----------- ------------- ------------------
Capital growth
Wholly owned 2.4% 0.4% 1.1% 4.0%
LSAV 4.5% 0.0% 2.2% 6.8%
USAF 3.7% 0.5% 1.0% 5.3%
---------------------- ------------ ----------- ------------- ------------------
Total (Gross) 3.4% 0.4% 1.3% 5.0%
Total (Unite share) 4.7%
---------------------- ------------ ----------- ------------- ------------------
Student accommodation yields
The PBSA sector has continued to deliver strong performance
during the first half. Strong sector fundamentals and a long-term
track record of rental growth continue to attract significant
volumes of capital to the sector. Investment volumes for student
accommodation totalled GBP5.8 billion in H1, including GBP0.3
billion sold by the Group and GBP5.5 billion of third-party
transactions (Source: CBRE). The GBP3.3 billion acquisition of
Student Roost by GIC and Greystar, announced in May, has
particularly benefitted regional assets in our wholly-owned
portfolio and USAF.
The average net initial yield across the portfolio is 4.7 % at
30 June 2022 (31 December 2021: 4.9 %), a reduction of 15 basis
points over the first six months of the year. We have seen more
significant yield compression in London and stronger regional
markets, continuing the trend witnessed over recent years.
An indicative spread of direct-let yields by location is
outlined below:
30 Jun 2022 30 Jun 2021 31 Dec 2021
3.50 3.80-4.25% 3.65
- -
4.00 4.10
London % %
4.40 4.25-5.00 4.50
- % -
4.65 4.75
Prime regional % %
5.00 5.00-6.00% 5.00
- -
5.65 5.75
Major regional % %
6.00 6.25-7.50% 6.00
- -
7.50 7.50
Provincial % %
--------------- ------------ ------------ ------------
Development and university partnership activity
Development and university partnership activity continues to be
a significant driver of future growth in earnings and EPRA NTA and
is aligned to our strategic focus on high and mid-ranked
universities. Our pipeline of direct-let development and university
partnerships includes 6,192 beds, with a total development cost of
GBP 1,032 million. We expect to maintain a run-rate of around
GBP200 million p.a. of development capex, funded from property
disposals and internally generated sources.
The anticipated yield on cost of this secured pipeline is 6.0 %
. 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.
We have increased our yield-on-cost targets by 50-100bps in
London and the regions to reflect increased funding costs. We
continue to see opportunities for new development and university
partnership schemes at attractive returns and are starting to see
land pricing adjust downwards to reflect increased costs of funding
and construction in the current environment.
2022 completions
Our schemes at Hayloft Point, London and Campbell House, Bristol
are on track for delivery on time and budget for the 2022/23
academic year. Campbell House is let to the University of Bristol
under a 15-year nomination agreement, and we have agreed a 5-year
nomination agreement at Hayloft Point with King's College London
for approximately two-thirds of beds. Both schemes are fully let
for the 2022/23 academic year, adding 2p to EPS on an annualised
basis.
2023-2026 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
support 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 certain of the schemes in our
pipeline.
In January 2022, we added a further 268-bed scheme to our
pipeline in Nottingham city centre to be delivered for the 2024/25
academic year. The 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 May, we received resolution to grant planning permission for
our 716-bed development site in East London. The scheme is
scheduled for delivery in the 2026/27 academic year, subject to
vacant possession, 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 early March, the planning application for our development in
Paddington, London was rejected by Westminster City Council. We
continue to have good levels of engagement with the local
authority, who are supportive of student use on the site. We are
currently reviewing our options for the best route to securing
planning consent for the site; however, this delay now means that
we will no longer deliver the scheme for the 2024/25 academic
year.
In March, we received planning approval for our 596-bed Temple
Quarter development in Bristol. We intend to acquire the site in
time for delivery for the 2024/25 academic year. The completed
development will be fully let on a 15-year nomination agreement to
the University of Bristol, further strengthening our relationship
with the university.
At the end of H1, we acquired the land for a consented 298-bed
student and 66-unit Build-to-Rent development at Abbey Lane in
Edinburgh. Due to delays in securing vacant possession for the
site, we now expect to deliver the project for the 2026/27 academic
year.
Development costs
We continue to see inflationary pressure on build costs, which
typically account for around 50% and 80% of our total development
costs in London and regional markets respectively, reflective of
ongoing supply chain disruption created by the pandemic as well as
rising energy and materials prices, which have been exacerbated by
the war in Ukraine.
Our 2022 and 2023 schemes are secured under fixed-price build
contracts and remain in line with budget. However, we are
continuing to see cost increases for schemes yet to be procured for
delivery in 2024 and 2025. As a result, we now expect the yield on
cost for our 2024 and 2025 schemes to be reduced by 20bps compared
to our initial assumptions. These schemes remain attractive, and we
will seek to mitigate the impact of increasing build costs through
design efficiency and increased rental levels where possible.
Secured development and University partnerships pipeline
Target Secured Total Total Capex in Capex Forecast Forecast
delivery beds completed development period remaining NTA yield on
value costs remaining cost
No. GBPm GBPm GBPm GBPm GBPm %
-------------- ------------ ----------- ----------- ------------ ----------- ----------- ---------- ----------
Traditional development
Derby Road,
Nottingham 2023 705 88 58 7 38 20 8.1%
Lower
Parliament
St,
Nottingham 2024 268 48 35 7 28 13 7.3%
Abbey Lane,
Edinburgh(2) 2026 298 47 29 8 19 16 8.8%
Total wholly owned 1,271 183 122 22 85 49 8.1%
University partnerships
Hayloft
Point,
London 2022 920 304 187 21 12 15 6.0%
Campbell
House,
Bristol(3) 2022 431 64 44 6 1 10 6.2%
Feeder Road,
Bristol 2024 596 94 80 16 62 13 5.8%
Meridian
Square,
London(1) 2025 943 240 181 1 178 59 5.7%
Freestone
Island,
Bristol(1) 2025 690 103 76 0 76 27 6.0%
Paddington,
London(1) 2025 625 208 157 1 152 51 5.5%
East London,
London(4) 2026 716 246 185 1 184 61 5.4%
----------- ----------- ------------ ----------- ----------- ---------- ----------
Total university
partnerships 4,921 1,259 910 46 665 236 5.7%
Total development pipeline 6,192 1,442 1,032 68 750 285 6.0%
----------- ----------- ------------ ----------- ----------- ---------- ----------
Major refurbishments (Unite
share)(5) 1,629 n/m 24 7 13 9 6.9%
----------- ----------- ------------ ----------- ----------- ---------- ----------
(1) Subject to obtaining planning consent
(2) Additional 66 BTR units
(3) Additional 74 BTR units
(4) Student element development cost GBP136m, forecast 6.0%
yield on cost
(5) Creating 138 additional beds
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 intend to deliver our three future London schemes as
university partnerships, in line with requirements in the 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 PBSA in London and will incorporate a range of design
features to reduce 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 long-term
nomination agreements.
In addition, we are in active discussions with two high-quality
universities for new partnerships, focused on delivery of new
on-campus accommodation and the potential transfer and
refurbishment of their existing student accommodation. We are
looking to progress these transactions over the next 12 months,
albeit there remains a high degree of execution risk given the
strategic nature of these decisions for the universities.
Asset management
In addition to our development activity, we see significant
opportunities to create value through asset management projects in
our estate. 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.
This September, we will complete three asset management schemes
in Manchester. Investment across the three projects is GBP42
million in aggregate and will deliver a 7% yield on cost. The
projects will deliver new accommodation, refurbish existing rooms
and enhance the environmental performance of the properties. The
upgraded assets are fully let for the 2022/23 academic year and
will support our segmentation strategy, with new specification and
service tailored to the postgraduate market.
We are making good progress in growing our pipeline of future
opportunities and are increasingly confident in our ability to
deliver stronger rental growth through refurbishment and
repositioning of our existing portfolio for the 2023/24 and 2024/25
academic years.
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, investments and refurbishments
aligned to the best universities.
During the period, the Group contracted GBP306 million of
disposals (Unite share: GBP236 million) to an affiliate of Lone
Star Funds. Completion occurred for GBP24 million of the disposals
in March, with the remaining GBP282 million to complete at the end
of August, which are held for sale in the half-year balance sheet.
The sale completes the disposal programme set out at the time of
our acquisition of Liberty Living in 2019 and sees the Group exit
less attractive markets and certain smaller, less operationally
efficient assets in cities such as Bristol and Leeds. The disposals
are priced in line with prevailing book value, which reflects an
NOI yield of 5.7%.
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. We will
selectively explore opportunities to exit weaker assets, where the
proceeds can be redeployed at superior risk-adjusted returns. We
expect the pace of disposals to reduce to around GBP100-150 million
p.a. (Unite share).
FINANCIAL REVIEW
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 include, among others, measures based on
the European Public Real Estate Association (EPRA) best practice
recommendations. The metrics are used internally to measure and
manage the business.
EPRA and adjusted earnings
We delivered a strong operating performance in H1 2022, with
rental income increasing by 16% to GBP177.4 million, up from
GBP152.9 million in H1 2021, reflecting the impact of increased
occupancy for the 2021/22 academic year and removal of
pandemic-related restrictions and rental discounts.
Adjusted earnings increased by 32% to GBP96.0 million (H1 2021:
GBP72.6 million), reflecting the increase in rental income and
broadly stable costs including interest when compared to the prior
year. Adjusted EPS also increased by 32% to 24.0p (H1 2021:
18.2p).
Based on a positive outlook for student demand and progress to
date on reservations, we anticipate an increase to 97% occupancy
for the 2022/23 academic year (2021/22: 94%). This income
visibility underpins strong growth in adjusted EPS for the full
year to 40-41p (previously 41-43p). The slight reduction in our
guidance reflects higher interest rates on our floating rate debt
and non-recurring costs incurred in the first half.
Summary income statement H1 2022 H1 2021 FY 2021
GBPm GBPm GBPm
-------------------------------------- -------- -------- --------
Rental income 177.4 152.9 282.7
Property operating expenses (45.5) (41.8) (90.9)
-------- -------- --------
Net operating income (NOI) 131.9 111.1 191.8
-------- -------- --------
NOI margin 74.4% 72.7% 67.8%
Management fees 9.2 8.2 15.9
Operating expenses (13.7) (13.0) (31.5)
Finance costs (28.9) (32.6) (63.3)
Acquisition and net performance fees - 15.7 41.9
Development and other costs (4.0) (1.1) (2.8)
-------- -------- --------
EPRA earnings 94.5 88.3 152.0
-------- -------- --------
LSAV performance fee - (15.7) (41.9)
Abortive acquisition costs 1.5 - -
-------- -------- --------
Adjusted earnings 96.0 72.6 110.1
======== ======== ========
Adjusted EPS 24.0p 18.2p 27.6p
EPRA EPS 23.6p 22.2p 38.1p
EBIT margin 71.8% 69.5% 62.3%
-------------------------------------- -------- -------- --------
A reconciliation of profit/(loss) after tax to EPRA earnings is
set out in note 2.2b of the financial statements
Like-for-like rental income, excluding the impact of disposals
and major refurbishments, increased by 23% during H1. This exceeded
the 15% increase in operating expenses for like-for-like properties
in the period, primarily driven by increased utility and marketing
costs linked to higher occupancy. This improved the Group's NOI
margin to 74.4% for the six months (H1 2021: 72.7%).
The increase in operating expenses in the first half was driven
by the implementation costs of a corporate restructure (GBP1.5
million). Our EBIT margin improved to 71.8% in the period (H1 2021:
69.5%) or 72.7% excluding the non-recurring restructuring costs.
Our rental income is more heavily weighted to the first half of the
financial year due to lower occupancy during July and August. As a
result, we expect to deliver an EBIT margin of around 70% for 2022
as a whole.
Reflecting our cost discipline and the growth in rental income,
we are targeting an improvement in our EBIT margin to 72% over the
medium term.
Operations result
H1 2022 H1 2021 YoY change
-------------------------------------- -------------------------------------- --------------
GBPm Wholly owned Share of Total Wholly owned Share of Total GBPm %
Fund/JV Fund/JV
------------------ ------------- -------------- ------- ------------- -------------- ------- ------ ------
Rental income
Like-for-like
properties 127.7 46.0 173.7 105.0 35.8 140.8 32.9 23.4%
New properties(1) - - - - - - -
Sold properties
(to third party) - 0.2 0.2 2.1 0.6 2.7 (2.5)
Sold properties
(to Fund/JV) - 3.5 3.5 7.1 - 7.1 (3.6)
Properties closed
for
refurbishment - - - 2.3 - 2.3 (2.3)
Total rental
income 127.7 49.7 177.4 116.5 36.4 152.9 24.5 16.0%
Property
operating
expenses
Like-for-like
properties (34.3) (10.2) (44.5) (28.4) (10.3) (38.7) (5.8) 15.0%
New properties(1) - - - - - - -
Sold properties
(to third party) - - - (1.0) (0.2) (1.2) 1.2
Sold properties
(to Fund/JV) - (1.0) (1.0) (1.3) - (1.3) 0.3
Properties closed
for
refurbishment - - - (0.6) - (0.6) 0.6
Total property
operating
expenses (34.3) (11.2) (45.5) (31.3) (10.5) (41.8) (3.7) 8.9%
Net operating
income
Like-for-like
properties 93.4 35.8 129.2 76.6 25.5 102.1 27.1 26.5%
New properties(1) - - - - - - -
Sold properties
(to third party) - 0.2 0.2 1.1 0.4 1.5 (1.3)
Sold properties
(to Fund/JV) - 2.5 2.5 5.8 - 5.8 (3.3)
Properties closed
for
refurbishment - - - 1.7 - 1.7 (1.7)
Total net
operating income 93.4 38.5 131.9 85.2 25.9 111.1 20.8 18.7%
============= ============== ======= ============= ============== ======= ====== ======
(1 Includes both development completions and acquisitions)
We are well protected but not immune from the impacts of
inflation on our cost base. We have a high degree of visibility
over our two largest costs, staff and utilities, which together
account for around 60% of our combined operating costs and
overheads. Our utility costs are fully hedged through 2022 and 2023
and for a substantial portion of 2024. In addition, a recently
completed review of our operating model will deliver further
efficiencies, which partially mitigate wider cost pressures.
Finance costs decreased slightly to GBP28.9 million (H1 2021:
GBP32.6 million) due to reduced borrowings in the period versus the
prior year, more than offsetting the increase in the cost of the
floating portion of our debt. GBP4.2 million of interest costs were
capitalised in the first half, an increase from GBP2.1 million in
H1 2021, due to the increased level of development activity in the
period. Due to delays in certain development starts, we now expect
capitalised interest to be GBP5-6 million for the year (previously
GBP7-8 million). The cost of debt increased to 3.2% over the period
(31 December 2021: 3.0%), reflecting increases in the cost of our
floating rate debt.
IFRS earnings
IFRS profit before tax increased to GBP334.1 million in the
first half (H1 2021: GBP130.4 million), driven by the rise in
adjusted earnings, a revaluation gain net of losses on disposal of
GBP199.7 million (H1 2021: GBP40.0 million) and the positive
revaluation of interest rate swaps on the back of rising interest
rates.
H1 2022 H1 2021 FY 2021
GBPm GBPm GBPm
----------------------------------- -------- -------- --------
Adjusted earnings 96.0 72.6 110.1
LSAV Performance fee - 15.7 41.9
Abortive acquisition costs (1.5) - -
EPRA earnings 94.5 88.3 152.0
Valuation gains and profit/(loss)
on disposal 199.7 40.0 182.2
Changes in valuation of interest
rate swaps and debt break costs 39.2 3.7 6.7
Minority interest and tax 0.7 (1.6) 2.2
-------- -------- --------
IFRS profit before tax 334.1 130.4 343.1
======== ======== ========
EPRA earnings per share 23.6p 22.2p 38.1p
IFRS Basic earnings per share 82.9p 32.7p 85.9p
----------------------------------- -------- -------- --------
A reconciliation of profit before tax to EPRA earnings measures
is expanded in section 7 of the financial statements .
EPRA NTA growth
EPRA net tangible assets (NTA) per share, our key measure of
NAV, increased by 7% to 940 pence at 30 June 2022 (31 December
2021: 882 pence). EPRA net tangible assets were GBP3,771 million at
30 June 2022, up from GBP3,532 million six months earlier.
The main drivers of the GBP239 million increase in see-through
EPRA NTA and 58 pence increase in EPRA NTA per share were:
-- Valuation growth (GBP191 million, 48 pence), reflecting sales
progress for 2022/23 and yield compression
-- Development surplus (GBP25 million, 6 pence)
-- Disposals and associated property transaction costs (GBP(10) million, (3) pence)
-- A further provision for fire safety capex (GBP(8) million, (2) pence)
-- The positive impact of retained profits (GBP40 million, 9 pence)
Property portfolio
The valuation of our property portfolio at 30 June 2022,
including our share of properties held in USAF and LSAV, was
GBP5,771 million (31 December 2021: GBP5,287 million). The GBP484
million increase in portfolio value reflects the valuation
movements outlined above, GBP24 million of completed disposals, a
GBP181 million increase in the Group's see-through share of USAF
and capital expenditure and interest capitalised on developments of
GBP79 million.
Summary balance sheet
30 Jun 2022 30 Jun 2021 31 Dec 2021
--------------------------- --------------------------- ------------------------------
Wholly Share Wholly Share Wholly Share
owned of Total owned of Total owned of Fund/JV Total
GBPm Fund/JV GBPm GBPm Fund/JV GBPm GBPm GBPm GBPm
GBPm GBPm
---------------------- ------- --------- ------- ------- --------- ------- ------- ---------- -------
Rental properties(1) 3,443 1,806 5,249 3,249 1,467 4,716 3,323 1,542 4,865
Rental properties
(leased) 93 - 93 100 - 100 98 - 98
Properties under
development 429 - 429 236 - 236 324 - 324
------- --------- ------- ------- --------- ------- ------- ---------- ---------
Total property 3,965 1,806 5,771 3,585 1,467 5,052 3,745 1,542 5,287
------- --------- ------- ------- --------- ------- ------- ---------- ---------
Net debt (1,208) (519) (1,727) (1,013) (488) (1,501) (1,030) (492) (1,522)
Lease liability (93) - (93) (95) - 95 (94) - (94)
Other
assets/(liabilities) (139) (41) (180) (74) (30) (104) (107) (32) (139)
EPRA net tangible
assets 2,525 1,246 3,771 2,403 949 3,352 2,514 1,018 3,532
======= ========= ======= ======= ========= ======= ======= ========== =========
IFRS NAV 3,806 3,339 3,528
------- --------- ------- ------- --------- ------- ------- ---------- ---------
LTV 30% 30% 29%
(1) Including properties held for sale
Cash flow and net debt
The Operations business generated GBP 100 million of net cash in
H1 2021 (H1 2021: GBP80 million) and net debt increased to GBP
1,727 million (31 December 2021: GBP1,522 million). The key
components of the movement in net debt were the operational cash
flow and net proceeds of GBP24 million from the sale of investment
property, offset by total capital expenditure of GBP 111 million,
the acquisition of units in USAF for GBP141 million and dividend
payments of GBP 49 million.
Interest rate hedging arrangements and cost of debt
During the first half, there has been a significant increase in
market interest rates as well as a rise in credit spreads for
publicly traded debt, including our own. Together, these factors
have resulted in higher costs for new debt issuance or refinancing
of existing debt facilities. The business is partially protected
from these cost pressures through its interest rate hedging
policies. Moreover, the Group's borrowings are well diversified
across lenders and maturities with less than 10% of see-through
debt maturing before late 2024.
85% of see-through investment debt is subject to a fixed or
capped interest rate (31 December 2021: 90%) for an average term of
4.5 years (31 December 2021: 5.0 years) and we have forward hedged
GBP300 million of future debt issuance at rates meaningfully below
prevailing market levels.
As a result of rising interest rates on the variable portion of
our debt, our see-through borrowing cost has increased to 3.2% at
the end of H1 (December 2021: 3.0%). Based on our hedging
protection and current market interest rates, we forecast a cost of
debt of 3.4% for FY2022 as a whole, rising to 3.6% for FY2023. On
this basis, yields on our investment portfolio and secured
development pipeline continue to show a healthy positive spread
against our funding costs.
Key debt statistics (Unite share basis) 30 Jun 2022 30 Jun 2021 31 Dec 2021
--------------------------------------------- ------------ ------------ ------------
Net debt GBP1,727m GBP1,501m GBP1,522m
LTV 30% 30% 30%
Net debt:EBITDA ratio(1) 7.6 10.0 8.3
Interest cover ratio(1) 3.3 2.5 2.8
Average debt maturity 4.5 years 4.6 years 5.0 years
Average cost of debt 3.2% 3.0% 3.0%
Proportion of investment debt at fixed rate 85% 91% 90%
(1) Calculated on a 12-month look back basis
Debt financing and liquidity
As at 30 June 2022, the wholly-owned Group had GBP248 million of
cash and debt headroom (31 December 2021: GBP421 million),
comprising of GBP48 million of drawn cash balances and GBP200
million of undrawn debt (31 December 2021: GBP96 million and GBP325
million respectively). Previously announced wholly-owned disposals
of GBP213 million will complete in August, adding to this headroom.
The Group maintains a disciplined approach to leverage, with LTV of
30% at 30 June 2022 (31 December 2021: 29%).
During the period, LSAV raised a new GBP400 million loan with
Bank of America for a term of five years, using the proceeds to pay
down existing facilities approach maturity. LSAV has a further
GBP100 million secured loan expiring in January 2023, which we have
agreed terms to refinance during the second half.
In addition, we are preparing to refinance USAF's 2023 secured
bonds through a new unsecured borrowing structure, which will
provide greater operational flexibility for the fund.
Dividend
We have declared an interim dividend payment of 11.0p per share
(2021: 6.5p). The interim dividend will be fully paid as a Property
Income Distribution (PID) on 28 October 2022 to shareholders on the
register at close of business on 16 September 2022.
We will continue to distribute 80% of adjusted EPS as this level
of payout enables the Company to retain capital to invest in growth
opportunities, the improvement of the operational portfolio and
delivery of our sustainability strategy, including our 2030 target
for net zero carbon.
For those shareholders electing to the Company's scrip dividend
scheme, this interim dividend will be paid in new ordinary shares.
The last date for receipt of scrip elections for this interim
dividend is 7 October 2022. Details of the scrip scheme, terms and
conditions and the process for election to the scrip scheme are
available at the Company's website.
Tax and REIT status
The Group holds REIT status and is exempt from tax on its
property business. During the first half of 2022, we recognised a
current tax charge of GBPnil (2021: credit of GBP1.7 million).
Funds and joint ventures
The table below summarises the key financials at 30 June 2022
for each vehicle.
Property Assets Net Other assets Net Unite share of NTA Maturity Unite share
GBPm debt GBPm assets GBPm
GBPm GBPm
------ ---------------- ------ ------------- -------- ------------------- --------- ------------
USAF 2,966 (720) (116) 2,130 600 Infinite 28%
LSAV 1,942 (632) (18) 1,292 646 2032 50%
------ ---------------- ------ ------------- -------- ------------------- --------- ------------
Property valuations increased by 5.3% and 6.8% for USAF and LSAV
respectively over the first half of the year on a like-for-like
basis, principally reflecting a reduction in valuation yields of 19
basis-points in each vehicle.
During the period, Unite increased its investment in USAF
through the acquisition of GBP141 million of units through
participation in an equity raise and acquisition of existing units
in the secondary market. In aggregate, the purchases, which were
priced in line with USAF's March 2022 NAV, increase Unite's USAF
ownership to 28.2% on a proforma basis (31 December 2021: 22.0%).
This investment equates to an increase in Unite's see-through GAV
of GBP181 million, at an effective property yield of 5.1%.
The acquisitions increase Unite's exposure to USAF's
high-quality portfolio in strong regional markets. It also
substantially redeploys the proceeds from the disposals announced
earlier in the year at attractive risk-adjusted returns.
Fees
During the six months to June 2022, the Group recognised net
fees of GBP9.2 million from its fund and asset management
activities (H1 2021: GBP23.9 million). The reduction reflects the
recognition of a GBP15.7 million non-recurring performance fee from
LSAV in H1 2021. Growth in property valuations and NOI over the
past 12 months together contributed to growth in recurring fee
income received from USAF and LSAV.
H1 2022 H1 2021 FY 2021
GBPm GBPm GBPm
---------------------------------------- -------- -------- --------
USAF asset management fee 6.9 6.5 12.0
LSAV asset and property management fee 2.3 1.7 3.9
Net performance fee - 15.7 41.9
Total fees 9.2 23.9 57.8
-------- -------- --------
Principal risks and uncertainties
The principal risks of the business are set out on pages 76-88
of the 2021 Annual Report that was published in April. The Board
has reviewed the principal risks again and concluded that they have
not changed since the year-end report. Our principal risks fall
into six categories and are summarised as follows:
Category Risk
Market risk
* Demand reduction: driven by macro events (such as
Covid-19, Government policy around HE or immigration
and Brexit uncertainty)
* Demand reduction: value for money/affordability
* Supply increase: maturing PBSA sector and increasing
supply of PBSA beds
Operational risk
* Major health and safety (H&S) incident in a property
or a development site
* Information Security and Cyber threat
Property/development risk
* Inability to secure the best sites on the right
terms. Failure or delay to complete a development
within budget and on time for the scheduled academic
year
* Property markets are cyclical and performance depends
on general economic conditions
Sustainability/ESG risk
* ESG risk: failing to proactively address the
environmental, social and governance risks demanded
of Unite Students as a responsible business
Financing risk
* Balance sheet liquidity risk/compliance with debt
covenants
People risk
* Unable to attract, develop and retain an
appropriately skilled, diverse and engaged workforce
------------------------- ------------------------------------------------------------------
Responsibility statement of the directors in respect of the
interim report and accounts
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the United Kingdom and gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the issuer,
or the undertakings included in the consolidation as a whole as
required by DTR 4.2.4R
The interim management report includes a fair review of the
information required by:
-- DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
-- DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
Richard Smith Joe Lister
Chief Executive Chief Financial Officer
Forward-looking statements
The preceding interim 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 interim
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 interim 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 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 include measures based on the European
Public Real Estate Association (EPRA) best practice
recommendations. The metrics are used internally to measure and
manage the business. 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
Consolidated statement of cash flows
Section 1: Basis of preparation
Section 2: Results for the period
2.1 Segmental information
2.2 Earnings
2.3 Net assets
2.4 Revenue and costs
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 Dividends
Section 5: Working capital
5.1 Provisions
5.2 Cash and cash equivalents
Section 6: Post balance sheet events
Section 7: Alternative performance measures
CONSOLIDATED INCOME STATEMENT
For the 6 months to 30 June 2022
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2022 2021 2021
Note GBPm GBPm GBPm
---------------------------------------------------- ---- --------- --------- -------------
Rental income 2.4 127.7 116.8 209.0
Other income 2.4 9.1 23.8 57.9
---------------------------------------------------- ---- --------- --------- -------------
Total revenue 136.8 140.6 266.9
Cost of sales (34.3) (30.5) (64.4)
Expected credit losses - (0.8) (3.3)
Operating expenses (16.6) (15.2) (36.3)
==================================================== ==== ========= ========= =============
Results from operating activities before gains/(losses)
on property 85.9 94.1 162.9
Loss on disposal of property (9.9) (11.0) (12.0)
Net valuation gains on property (owned and
under development) 3.1a 128.6 32.5 116.9
Net valuation losses on property (leased) 3.1a (4.9) (2.6) (11.1)
Profit before net financing costs 199.7 113.0 256.7
Loan interest and similar charges (13.2) (18.5) (34.2)
Interest on lease liability (4.1) (4.2) (8.5)
Mark to market changes in interest rate
swaps 37.1 3.0 10.9
Swap cancellation FV settlements and loan
break costs - (1.5) (4.2)
Finance costs 19.8 (21.2) (36.0)
Finance income - - -
==================================================== ==== ========= ========= =============
Net financing costs 19.8 (21.2) (36.0)
Share of joint venture profit 3.3a 114.6 38.6 122.4
==================================================== ==== ========= ========= =============
Profit before tax 334.1 130.4 343.1
Current tax (0.4) 0.6 0.9
Deferred tax (1.0) 0.2 0.5
==================================================== ==== ========= ========= =============
Profit for the period 332.7 131.2 344.5
Profit for the period attributable to
Owners of the parent company 2.2c 331.0 130.3 342.4
Non-controlling interest 1.7 0.9 2.1
==================================================== ==== ========= ========= =============
332.7 131.2 344.5
==================================================== ==== ========= ========= =============
Earnings per share
Basic 2.2c 82.9p 32.7p 85.9p
Diluted 2.2c 82.7p 32.6p 85.7p
All results are derived from continuing activities.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 6 months to 30 June 2022
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
------------------------------------------------ --------- --------- ------------
Profit for the period 332.7 131.2 344.5
Mark to market movements on hedging instruments - 16.2 16.2
Hedges reclassified to profit or loss - - (0.9)
Share of joint venture mark to market movements
on hedging instruments 1.9 0.2 0.6
================================================ ========= ========= ============
Other comprehensive income for the period 1.9 16.4 15.9
Total comprehensive income for the period 334.6 147.6 360.4
================================================ ========= ========= ============
Attributable to
Owners of the parent company 332.9 146.7 358.3
Non-controlling interest 1.7 0.9 2.1
================================================ ========= ========= ============
334.6 147.6 360.4
================================================ ========= ========= ============
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 30 June 2022
Unaudited Unaudited
30 June 30 June 31 December
2022 2021 2021
Note GBPm GBPm GBPm
---------------------------------------- ---- --------- --------- -----------
Assets
Investment property (owned) 3.1a 3,226.1 3,236.3 3,095.1
Investment property (leased) 3.1a 93.5 99.7 97.7
Investment property (under development) 3.1a 428.7 235.7 324.1
Investment in joint ventures 3.3a 1,275.7 974.6 1,044.1
Other non-current assets 18.2 20.1 18.9
Right of use assets 3.1 4.2 3.6
Deferred tax asset 1.8 2.2 3.0
======================================== ==== ========= ========= ===========
Total non-current assets 5,047.1 4,572.8 4,586.5
Assets classified as held for sale 3.1a 216.4 13.0 228.2
Interest rate swaps 4.2 39.6 - 6.1
Inventories 3.2 10.1 11.3 12.1
Trade and other receivables 68.6 88.1 108.8
Cash and cash equivalents 57.8 502.1 109.4
---------------------------------------- ---- --------- --------- -----------
Total current assets 392.5 614.5 464.6
---------------------------------------- ---- --------- --------- -----------
Total assets 5,439.6 5,187.3 5,051.1
======================================== ==== ========= ========= ===========
Liabilities
Interest rate swaps - - (3.6)
Lease liabilities (4.4) (4.3) (4.9)
Trade and other payables (190.4) (152.4) (200.7)
Current tax liability (0.2) - (0.1)
Provisions 5.1 (33.6) (27.7) (33.5)
======================================== ==== ========= ========= ===========
Total current liabilities (228.6) (184.4) (242.8)
Borrowings 4.1 (1,286.2) (1,539.1) (1,162.0)
Lease liabilities (91.0) (94.7) (91.9)
Interest rate swaps 4.2 - (4.4) -
---------------------------------------- ---- --------- --------- -----------
Total non-current liabilities (1,377.2) (1,638.2) (1,253.9)
---------------------------------------- ---- --------- --------- -----------
Total liabilities (1,605.8) (1,822.6) (1,496.7)
---------------------------------------- ---- --------- --------- -----------
Net assets 3,833.8 3,364.7 3,554.4
======================================== ==== ========= ========= ===========
Equity
Issued share capital 100.0 99.7 99.8
Share premium 2,161.4 2,160.8 2,161.2
Merger reserve 40.2 40.2 40.2
Retained earnings 1,501.4 1,036.4 1,225.0
Hedging reserve 3.4 2.2 1.6
Equity attributable to the owners of
the parent company 3,806.4 3,339.3 3,527.8
Non-controlling interest 27.4 25.4 26.6
======================================== ==== ========= ========= ===========
Total equity 3,833.8 3,364.7 3,554.4
======================================== ==== ========= ========= ===========
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the 6 months to 30 June 2022
Attributable
Issued Share Merger Retained Hedging to owners Non-controlling
share capital premium reserve earnings reserve of the parent interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2022 99.8 2,161.2 40.2 1,225.0 1.6 3,527.8 26.6 3,554.4
(Unaudited)
------------- -------- -------- ------------- -------- -------------- --------------- -------
Profit for the
period - - - 331.0 - 331.0 1.7 332.7
Other
comprehensive
income for the
period:
Mark to market
movements on
hedging
instruments - - - - - - - -
Share of joint
venture mark to
market
movements on
hedging
instruments - - - - 1.9 1.9 - 1.9
------------- -------- -------- ------------- -------- -------------- --------------- -------
Total
comprehensive
income for the
period - - - 331.0 1.9 332.9 1.7 334.6
Shares issued 0.2 0.2 - - - 0.4 - 0.4
Fair value of
share based
payments - - - - - - - -
Deferred tax on
share based
payments - - - 0.1 - 0.1 - 0.1
Own shares
acquired - - - (1.4) - (1.4) - (1.4)
Unwind of
realised swap
gain - - - - (0.1) (0.1) - (0.1)
Dividends to
owners
of the parent
company - - - (53.3) - (53.3) - (53.3)
Dividends to
non-controlling
interest - - - - - - (0.9) (0.9)
================ ============= ======== ======== ============= ======== ============== =============== =======
At 30 June 2022 100.0 2,161.4 40.2 1,501.4 3.4 3,806.4 27.4 3,833.8
================ ============= ======== ======== ============= ======== ============== =============== =======
Attributable
Issued Share Merger Retained Hedging to owners Non-controlling
share capital premium reserve earnings reserve of the parent interest Total
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
(Unaudited)
Profit for the
period - - - 130.3 - 130.3 0.9 131.2
Other
comprehensive
income for the
period:
Mark to market
movements on
hedging
instruments - - - - 16.2 16.2 - 16.2
Share of joint
venture mark to
market
movements on
hedging
instruments - - - - 0.2 0.2 - 0.2
------------- -------- -------- ------------- -------- -------------- --------------- -------
Total
comprehensive
income for the
period - - - 130.3 16.4 146.7 0.9 147.6
Shares issued 0.2 0.5 - - - 0.7 - 0.7
Fair value of
share based
payments - - - 0.9 - 0.9 - 0.9
Deferred tax on
share based
payments - - - - - - - -
Own shares
acquired - - - (1.3) - (1.3) - (1.3)
Unwind of
realised swap
gain - - - - (0.1) (0.1) - (0.1)
Dividends to
owners
of the parent
company - - - (42.5) - (42.5) - (42.5)
Dividends to
non-controlling
interest - - - - - - (0.6) (0.6)
================ ============= ======== ======== ============= ======== ============== =============== =======
At 30 June 2021 99.7 2,160.8 40.2 1,036.4 2.2 3,339.3 25.4 3,364.7
================ ============= ======== ======== ============= ======== ============== =============== =======
Attributable
Issued Share Merger Retained Hedging to owners Non-controlling
share capital premium reserve earnings reserve of the parent interest Total
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
movement on
hedging
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
hedging
instruments - - - - 0.6 0.6 - 0.6
------------- -------- -------- ------------- -------- -------------- --------------- -------
Total
comprehensive
income for the
year - - - 342.4 15.9 358.3 2.1 360.4
Shares issued 0.3 0.9 - - - 1.2 - 1.2
Fair value of
share based
payments - - - 2.4 - 2.4 - 2.4
Deferred tax on
share based
payments - - - 0.3 - 0.3 - 0.3
Own shares
acquired - - - (1.3) - (1.3) - (1.3)
Unwind of
realised swap
gain - - - - (0.2) (0.2) - (0.2)
Dividends to
owners
of the parent
company - - - (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
================ ============= ======== ======== ============= ======== ============== =============== =======
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 6 months to 30 June 2022
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2022 2021 2021
Note GBPm GBPm GBPm
================================================= ==== ========= ========= ============
Net cash flows from operating activities 5.2 89.9 73.0 171.3
Investing activities
Investment in joint ventures (140.9) - -
Capital expenditure on property (99.3) (38.1) (95.9)
Acquisition of intangible assets (2.6) (1.3) (3.2)
Acquisition of plant and equipment (0.1) (0.2) (0.4)
Proceeds from the sale of investment property 12.7 309.0 307.3
Dividends received 23.8 23.3 37.1
================================================= ==== ========= ========= ============
Net cash flows from investing activities (206.4) 292.7 244.9
Financing activities
Proceeds from the issue of share capital 0.4 0.5 1.1
Payments to acquire own shares (1.4) (1.3) (1.3)
Interest paid in respect of financing activities (10.0) (13.4) (47.9)
Swap cancellation FV settlements and debt
exit costs - (1.5) (4.2)
Proceeds from non-current borrowings 125.0 150.0 147.0
Repayment of borrowings - (300.0) (675.0)
Dividends paid to the owners of the parent
company (44.6) (35.5) (57.2)
Withholding tax paid on distributions (3.7) - (7.0)
Dividends paid to non-controlling interest (0.8) (0.7) (0.6)
------------------------------------------------- ---- --------- --------- ------------
Net cash flows from financing activities 64.9 (201.9) (645.1)
------------------------------------------------- ---- --------- --------- ------------
Net (decrease)/increase in cash and cash
equivalents (51.6) 163.8 (228.9)
Cash and cash equivalents at start of period 109.4 338.3 338.3
------------------------------------------------- ---- --------- --------- ------------
Cash and cash equivalents at end of period 57.8 502.1 109.4
------------------------------------------------- ---- --------- --------- ------------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Section 1
General information
The information for the year ended 31 December 2021 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006 but is derived from those accounts. A copy of
the statutory accounts for that year has been delivered to the
Registrar of Companies. The auditors reported on those accounts:
their report was unqualified, did not draw attention to any matters
by way of emphasis and did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
Basis of preparation
The annual financial statements of The Unite Group plc are
prepared in accordance with IFRSs as adopted by the United Kingdom.
The condensed set of financial statements included in this half
yearly financial report has been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting',
as adopted by the United Kingdom.
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 at
least 12 months from the date of this report.
The Directors' Base Case scenario, assuming 97% occupancy for
the 2022/23 academic year, is informed by their reasoned opinion
that universities are expected to welcome students for the 2022/23
academic year in September and there will be continued demand for
rented student accommodation from both UK and international
students. The Directors expect that international students will be
able to travel to the UK for the start of the 2022/23 academic year
in September, consistent with the 2021/22 year, as Covid-19
restrictions have further eased.
The Directors are satisfied that the Group has sufficient
liquidity and will maintain covenant compliance over the next 12
months. To 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 lender covenants would
not be breached. Within the tightest covenant, income could fall to
around 60% of forecast levels before there would be a breach. The
Group has capacity for valuations to fall by 37% before there would
be a breach of LTV covenants in the facilities where such covenants
exist. The Directors are satisfied that the possibility of these
outcomes is sufficiently remote that adopting the going concern
basis of preparation is appropriate. The Group recognises the
challenge of climate change and has adopted an ambitious
Sustainability Strategy. The worst impacts of climate change are
expected to be longer term than would impact the Group's going
concern assessment.
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 these financial
statements.
Seasonality of operations
The results of the Group's Operations segment, a separate
business segment (see Section 2), are closely linked to the level
of occupancy achieved in its portfolio of property. Occupancy
typically falls over the summer months (particularly July and
August) as students leave for the summer holidays.
Conversely, the Group's build cycle for new properties plan for
construction to complete shortly before the start of the academic
year in September each year. Accordingly, there will be second
half-year net income benefit from two newly completing assets in
2022.
Changes in accounting policies
The Group has not adopted any new accounting standards in the
period or changed any accounting policies from those included in
the 2021 Annual Report.
Critical accounting judgements and key sources of estimation
uncertainty
Full details of critical accounting judgements and key sources
of estimation uncertainty are given on page 192 of the 2021 Annual
Report and Accounts. This includes detail of the Group's approach
to valuation of investment property and investment property under
development, the recognition and valuation of provisions for
cladding remediation and the classification of joint venture
vehicles.
Section 2: Results for the period
This section focuses on the results and performance of the Group
and provides a reconciliation between the primary statements and
EPRA performance measures. On the following pages you will find
disclosures explaining the Group's results for the period,
segmental information, earnings and net tangible asset value (NTA)
per share.
The Group uses EPRA earnings, adjusted earnings and NTA movement
as key comparable indicators across other real estate companies in
Europe.
IFRS performance measures
Unaudited Unaudited 31 December
Note 30 June 2022 30 June 2021 2021
GBPm pps GBPm pps GBPm pps
==================== ==== ======== ===== ======== ===== ======= =====
Profit after tax(1) 2.2c 331.0 82.9p 130.3 32.7p 342.4 85.9p
Net assets(1) 2.3d 3,806.4 948p 3,339.3 833p 3,527.8 880p
-------------------- ---- -------- ----- -------- ----- ------- -----
(1 Profit after tax represents profit attributable to the owners
of the parent company and net assets represents equity attributable
to the owners of the parent company.)
EPRA performance measures
Unaudited Unaudited 31 December
Note 30 June 2022 30 June 2021 2021
GBPm pps GBPm pps GBPm pps
===================== ==== ======== ===== ======== ===== ======= =====
EPRA earnings 2.2c 94.5 23.6p 88.3 22.2p 152.0 38.1p
Adjusted earnings(2) 2.2c 96.0 24.0p 72.6 18.2p 110.1 27.6p
EPRA NTA 2.3d 3,770.8 940p 3,352.1 837p 3,532.2 882p
--------------------- ---- -------- ----- -------- ----- ------- -----
(2 Adjusted earnings are calculated as EPRA Earnings excluding
abortive acquisition costs and the LSAV performance fee, in order
to reflect the comparable performance of the Group's underlying
operating activities.)
2.1 Segmental information
The Board of Directors monitor the business along two activity
lines, Operations and Property. The reportable segments for the 6
months ended 30 June 2022 and 30 June 2021 and for the year ended
31 December 2021 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 and 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 amends 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 (dividends per share) are
underpinned by earnings arising from purely operational activity.
In order to improve comparability of results year-on-year, an
alternative performance measure based on EPRA earnings, adjusted to
remove the impact of abortive acquisition costs and the LSAV
performance fee is presented. The reconciliation between profit
attributable to owners of the parent company and EPRA 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 way in which the Operations segment adds value to the business
is set out in the Operations review on pages 56 - 61 of the 2021
Annual Report. The Operations segment is the main contributor to
EPRA earnings and EPRA EPS and these are therefore the key
indicators which are used by the Board to manage 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
Unaudited 30 June 2022
Group on EPRA
Share of joint ventures basis
=========================
GBPm Unite USAF LSAV Total
============================ ====== ============ =========== =============
Rental income 127.7 24.0 25.7 177.4
Property operating expenses (34.3) (6.7) (4.5) (45.5)
---------------------------- ------ ------------ ----------- -------------
Net operating income 93.4 17.3 21.2 131.9
Management fees 11.1 (1.9) - 9.2
Overheads (12.9) (0.4) (0.4) (13.7)
Lease liability interest (4.1) - - (4.1)
Net financing costs (15.4) (3.5) (5.9) (24.8)
---------------------------- ------ ------------ ----------- -------------
Operations segment result 72.1 11.5 14.9 98.5
Property segment result (0.6) - - (0.6)
Unallocated to segments (3.2) (0.1) (0.1) (3.4)
EPRA earnings 68.3 11.4 14.8 94.5
LSAV performance fee - - - -
Abortive acquisition
costs 1.5 - - 1.5
---------------------------- ------ ------------ ----------- -------------
Adjusted earnings 69.8 11.4 14.8 96.0
---------------------------- ------ ------------ ----------- -------------
Included in the above is rental income of GBP9.9 million and
property operating expenses of GBP4.7 million relating to sale and
leaseback properties.
The unallocated to segments balance includes abortive
acquisition costs of (GBP1.5 million), the fair value of
share-based payments of (GBP1.4 million), contributions to the
Unite Foundation of (GBP0.3 million), deferred tax credit of GBP0.2
million and other costs of (GBP0.4 million).
Depreciation and amortisation totalling GBP3.8 million is
included within overheads.
Unaudited 30 June 2021
Group on EPRA
Share of joint ventures basis
=========================
GBPm Unite USAF LSAV Total
============================ ====== =========== ============ =============
Rental income 116.8 19.5 16.6 152.9
Property operating expenses (31.3) (6.3) (4.2) (41.8)
---------------------------- ------ ----------- ------------ -------------
Net operating income 85.5 13.2 12.4 111.1
Management fees 9.8 (1.6) - 8.2
Overheads (12.6) (0.2) (0.2) (13.0)
Lease liability interest (4.2) - - (4.2)
Net financing costs (20.7) (3.3) (4.4) (28.4)
---------------------------- ------ ----------- ------------ -------------
Operations segment result 57.8 8.1 7.8 73.7
Property segment result (1.0) - - (1.0)
Unallocated to segments 31.8 (0.1) (16.1) 15.6
EPRA earnings 88.6 8.0 (8.3) 88.3
LSAV performance fee (31.4) - 15.7 (15.7)
---------------------------- ------ ----------- ------------ -------------
Adjusted earnings 57.2 8.0 7.4 72.6
---------------------------- ------ ----------- ------------ -------------
Included in the above is rental income of GBP9.1 million and
property operating expenses of GBP4.1 million relating to sale and
leaseback properties.
The unallocated to segments balance includes the fair value of
share-based payments of (GBP1.0 million), contributions to the
Unite Foundation of (GBP0.6 million), LSAV performance fee of
GBP15.7 million, other costs of (GBP0.3 million), current tax
credit of GBP1.7 million and deferred tax credit of GBP0.2
million.
Depreciation and amortisation totalling GBP3.8 million is
included within overheads.
31 December 2021
Group on EPRA
Share of joint ventures basis
=========================
GBPm Unite USAF LSAV Total
============================== ====== ============ =========== =============
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, current tax credit of GBP2.0 million and a
deferred tax credit of GBP0.8 million.
Depreciation and amortisation totalling GBP7.8 million is
included within overheads.
2.2b IFRS reconciliation to EPRA earnings and adjusted
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 cancellation
fair value settlements and debt break costs, which are included in
the profit/loss reported under IFRS. EPRA earnings and adjusted
earnings reconcile to the profit attributable to owners of the
parent company as follows:
Unaudited Unaudited
30 June 30 June 31 December
2022 2021 2021
Note GBPm GBPm GBPm
Profit attributable to owners of the parent
company 331.0 130.3 342.4
Net valuation gains on investment property
(owned) 3.1 (128.6) (32.5) (116.9)
Property disposals (owned) 9.9 11.0 12.0
Net valuation loss on investment property
(leased) 3.1 4.9 2.6 11.1
Amortisation of fair value of debt recognised
on acquisition (2.1) (2.2) (4.3)
Share of joint venture gains on investment
property 3.3a (86.3) (21.8) (88.7)
Share of joint venture property disposals 3.3a 0.4 0.7 0.3
Swap cancellation fair value settlements
and debt break costs - 1.5 4.2
Mark to market changes on interest rate
swaps (37.1) (3.0) (10.9)
Current tax relating to property disposals - 1.2 1.1
Deferred tax 0.6 - 0.3
Non-controlling interest share of reconciling
items1(*) 1.8 0.5 1.4
EPRA earnings 2.2a 94.5 88.3 152.0
Net LSAV performance fee 2.4 - (15.7) (41.9)
Abortive acquisition costs 2.2a 1.5 - -
---------------------------------------------- ---- --------- --------- -----------
Adjusted earnings 2.2a 96.0 72.6 110.1
---------------------------------------------- ---- --------- --------- -----------
(*) The non-controlling interest share, or non-controlling
interest, arises as a result of the Group not owning 100% of the
share capital of one of its subsidiaries, USAF (Feeder) Guernsey
Ltd. More detail is provided in note 3.3.
2.2c Earnings per share
The Basic EPS calculation is based on the earnings attributable
to the equity shareholders of The Unite Group plc and the weighted
average number of shares which have been in issue during the
period. 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 and measured on a day-to-day
basis.
The calculations of earnings and EPS on a basic, diluted, EPRA
and adjusted basis are as follows:
Unaudited Unaudited 31 December
Note 30 June 2022 30 June 2021 2021
GBPm pps GBPm pps GBPm pps
========= ==== ======= ====== ======= ====== ====== =====
Basic 331.0 82.9p 130.3 32.7p 342.4 85.9p
Diluted 331.0 82.7p 130.3 32.6p 342.4 85.7p
EPRA 2.2a 94.5 23.6p 88.3 22.2p 152.0 38.1p
Adjusted 2.2a 96.0 24.0p 72.6 18.2p 110.1 27.6p
--------- ---- ------- ------ ------- ------ ------ -----
Unaudited Unaudited
30 June 30 June 31 December
Weighted average number of shares (thousands) 2022 2021 2021
Basic 399,412 398,227 398,742
Dilutive potential ordinary shares (share
options) 681 863 829
----------------------------------------------- --------- --------- -----------
Diluted 400,093 399,873 399,571
----------------------------------------------- --------- --------- -----------
The total number of ordinary shares in issue as at 30 June 2022
is 400,110,040 (30 June 2021: 399,010,000, 31 December 2021:
399,140,000). At 30 June 2022 there were 17,939 shares excluded
from the potential dilutive shares that did not affect the diluted
weighted average number of shares (30 June 2021: 16,841, 31
December 2021: none).
2.3 Net Assets
EPRA NTA per share 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.
The Group's Property business undertakes the acquisition and
development of properties. The way in which the Property segment
adds value to the business is set out in the Property review on
pages 62 - 69 of the 2021 Annual Report.
In February 2022 EPRA updated their reporting guidance to
include a new loan-to-value (LTV) measure which is presented below,
which includes net other payables within the net debt value, and
also includes intangibles within the property and other eligible
assets value. Further details of the calculation is set out in note
7.
2.3a EPRA net assets
Unaudited 30 June 2022
Group
on EPRA
Share of joint ventures basis
=========================
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
========================================== ========= ============ =========== =========
Investment properties (owned)(*) 3,442.5 835.1 971.1 5,248.7
Investment properties (leased) 93.5 - - 93.5
Investment properties (under development) 428.7 - - 428.7
Total property portfolio 3,964.7 835.1 971.1 5,770.9
Debt on properties (1,266.0) (256.8) (384.4) (1,907.2)
Lease liability (93.2) - - (93.2)
Cash 57.8 54.0 68.3 180.1
------------------------------------------ --------- ------------ ----------- ---------
Net debt (1,301.4) (202.8) (316.1) (1,820.3)
Other assets and (liabilities) (122.7) (32.7) (8.8) (164.2)
Intangibles per IFRS balance sheet (15.6) - - (15.6)
------------------------------------------ --------- ------------ ----------- ---------
EPRA NTA 2,525.0 599.6 646.2 3,770.8
------------------------------------------ --------- ------------ ----------- ---------
Loan to value(**) 31% 24% 33% 30%
Loan to value post-IFRS 16 33% 24% 33% 32%
EPRA loan to value 33%
* Investment property (owned) includes assets classified as held
for sale in the IFRS balance sheet.
** LTV calculated excluding leased investment property and the
corresponding lease liability. LTV is an APM - see note 7.
Unaudited 30 June 2021
Group
on EPRA
Share of joint ventures basis
=========================
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
===================================== ========= ============ =========== =========
Investment properties (owned)(*) 3,249.3 616.0 850.9 4,716.2
Investment properties (leased) 99.7 - - 99.7
Investment properties (under
development) 235.7 - - 235.7
Total property portfolio 3,584.7 616.0 850.9 5,051.6
Debt on properties (1,514.8) (201.1) (337.8) (2,053.7)
Lease liability (95.2) - - (95.2)
Cash 502.1 21.3 30.0 553.4
------------------------------------- --------- ------------ ----------- ---------
Net debt (1,107.9) (179.8) (307.8) (1,595.5)
Other liabilities (57.0) (16.2) (13.5) (86.7)
Intangibles per IFRS balance sheet (17.3) - - (17.3)
------------------------------------- --------- ------------ ----------- ---------
EPRA NTA 2,402.5 420.0 529.6 3,352.1
------------------------------------- --------- ------------ ----------- ---------
Loan to value(**) 29% 29% 36% 30%
Loan to value post-IFRS 16 31% 29% 36% 32%
EPRA loan to value 32%
(*) Investment property (owned) includes assets classified as
held for sale in the IFRS balance sheet.
(**) LTV calculated excluding leased investment property and the
corresponding lease liability. LTV is an APM - see note 7.
31 December 2021
Group
on EPRA
Share of joint ventures basis
=========================
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
========================================== ========= ============ =========== =========
Investment properties (owned)(*) 3,323.3 632.0 909.5 4,864.8
Investment properties (leased) 97.7 - - 97.7
Investment properties (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 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%
EPRA loan to value 32%
(*) Investment property (owned) includes assets classified as
held for sale in the IFRS balance sheet.
(**) LTV calculated excluding leased investment property and the
corresponding lease liability. LTV is an APM - see note 7.
2.3b Movement in EPRA NTA during the period
Contributions to EPRA NTA by each segment during the period are
as follows:
Unaudited 30 June 2022
Share of joint Group on see
ventures through basis
----------------
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
============================================== ======= ======= ======= ==============
Operations
Operations segment result 72.1 11.5 14.9 98.5
Add back amortisation of intangibles 3.1 - - 3.1
---------------------------------------------- ------- ------- ------- --------------
Total operations 75.2 11.5 14.9 101.6
Property
Rental growth 22.5 3.3 16.4 42.2
Yield movement 80.9 24.1 40.8 145.8
Disposal losses (owned) (9.9) (0.4) - (10.3)
Investment property gains (owned)(*) 93.5 27.0 57.2 177.7
Investment property losses (leased) (4.9) - - (4.9)
Investment property gains (under development) 25.2 - - 25.2
Pre-contract/other development costs (0.6) - - (0.6)
---------------------------------------------- ------- ------- ------- --------------
Total property 113.2 27.0 57.2 197.4
Unallocated
Shares issued 0.4 - - 0.4
Investment in joint ventures (117.8) 130.1 (12.3) -
Dividends paid (53.3) - - (53.3)
LSAV performance fee - - - -
Abortive acquisition fees (1.5) - - (1.5)
Swap cancellation FV settlements and
debt break costs - - - -
Acquisition of intangibles (3.7) - - (3.7)
Other (1.9) (0.2) (0.2) (2.3)
---------------------------------------------- ------- ------- ------- --------------
Total unallocated (177.8) 129.9 (12.5) (60.4)
---------------------------------------------- ------- ------- ------- --------------
Total EPRA NTA movement in the period 10.6 168.4 59.6 238.6
Total EPRA NTA brought forward 2,514.4 431.2 586.6 3,532.2
---------------------------------------------- ------- ------- ------- --------------
Total EPRA NTA carried forward 2,525.0 599.6 646.2 3,770.8
---------------------------------------------- ------- ------- ------- --------------
(*) Investment property (owned) includes assets classified as
held for sale in the IFRS balance sheet.
The GBP2.3 million other balance within the unallocated segment
includes a tax charge of (GBP0.3 million), the purchase of own
shares of (GBP1.4 million) and contributions to the Unite
Foundation of (GBP0.3 million).
Unaudited 30 June 2021
Share of joint Group on see
ventures through basis
----------------
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
====================================== ======= ======= ======= ==============
Operations
Operations segment result 57.8 8.1 7.8 73.7
Add back amortisation of intangibles 3.0 - - 3.0
-------------------------------------- ------- ------- ------- --------------
Total operations 60.8 8.1 7.8 76.7
Property
Lost rental income due to Covid-19 13.3 6.4 10.7 30.4
Yield movement 7.6 0.8 3.5 11.9
Disposal losses (owned) (11.0) (0.7) - (11.7)
Investment property losses (owned) 9.9 6.5 14.2 30.6
Investment property losses (leased) (2.6) - - (2.6)
Investment property losses (under
development) 11.6 - - 11.6
Pre-contract/other development costs (1.0) - - (1.0)
-------------------------------------- ------- ------- ------- --------------
Total property 17.9 6.5 14.2 38.6
Unallocated
Shares issued 0.7 - - 0.7
Investment in joint ventures (105.0) (12.2) 117.2 -
Dividends paid (42.5) - - (42.5)
LSAV performance fee 31.4 - (15.7) 15.7
Swap cancellation FV settlements and
debt break costs (1.5) - - (1.5)
Acquisition of intangibles (1.3) - - (1.3)
Other 0.1 (0.2) (0.4) (0.5)
-------------------------------------- ------- ------- ------- --------------
Total unallocated (118.1) (12.4) 101.1 (29.4)
-------------------------------------- ------- ------- ------- --------------
Total EPRA NTA movement in the period (39.4) (2.2) 123.1 85.9
Total EPRA NTA brought forward 2,441.9 417.8 406.5 3,266.2
-------------------------------------- ------- ------- ------- --------------
Total EPRA NTA carried forward 2,402.5 420.0 529.6 3,352.1
-------------------------------------- ------- ------- ------- --------------
The GBP0.5 million other balance within the unallocated segment
includes a tax credit of GBP1.8 million, the purchase of own shares
of (GBP1.3 million) and contributions to the Unite Foundation of
(GBP0.6 million).
31 December 2021
Group on
Share of joint see through
ventures basis
----------------
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
============================================== ======= ======= ======= ============
Operations
Operations segment result 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) (11.1) - - (11.1)
Investment property gains (under development) 50.3 - - 50.3
Pre-contract/other development costs (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 (4.2) - - (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 (owned) includes 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).
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:
Unaudited 30 June 2022
NTA NRV NDV
GBPm GBPm GBPm
Net asset value reported under IFRS 3,806.4 3,806.4 3,806.4
Mark to market interest rate swaps (41.4) (41.4) -
Unamortised swap gain (1.4) (1.4) (1.4)
Mark to market of fixed rate debt - - 69.4
Unamortised fair value of debt recognised
on acquisition 21.6 21.6 21.6
Current tax 0.6 0.6 -
Deferred tax 0.6 0.6 -
Intangibles per IFRS balance sheet (15.6) - -
Real estate transfer tax - 300.3 -
EPRA reporting measure 3,770.8 4,086.7 3,896.0
=========================================== ======= ======= =======
Unaudited 30 June 2021
NTA NRV NDV
GBPm GBPm GBPm
Net asset value reported under IFRS 3,339.3 3,339.3 3,339.3
Mark to market interest rate swaps 4.9 4.9 -
Unamortised swap gain (1.7) (1.7) (1.7)
Mark to market of fixed rate debt - - (68.8)
Unamortised fair value of debt recognised
on acquisition 26.0 26.0 26.0
Current tax 0.9 0.9 -
Deferred tax - - -
Intangibles per IFRS balance sheet (17.3) - -
Real estate transfer tax - 247.8 -
EPRA reporting measure 3,352.1 3,617.2 3,294.8
=========================================== ======= ======= =======
31 December 2021
NTA NRV NDV
GBPm GBPm GBPm
Net asset value 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
=========================================== ======= ======= =======
2.3d 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 period. The Board uses EPRA NTA to monitor
the performance of the Property segment on a periodic basis.
Unaudited Unaudited 31 December Unaudited Unaudited 31 December
30 June 30 June 2021 30 June 30 June 2021
Note 2022 2021 2022 2021
GBPm GBPm GBPm pps pps pps
---------------------- ---- --------- --------- ----------- --------- --------- -----------
Net assets
Basic 2.3c 3,806.4 3,339.3 3,527.8 948 833 880
EPRA NTA 2.3a 3,770.8 3,352.1 3,532.2 942 840 885
EPRA NTA (diluted) 3,774.9 3,357.0 3,536.1 940 837 882
EPRA NRV 2.3a 4,086.7 3,617.2 3,825.9 1,021 907 959
EPRA NRV (diluted) 4,090.8 3,622.1 3,829.7 1,019 904 955
EPRA NDV 2.3a 3,896.0 3,294.8 3,499.7 974 826 877
EPRA NDV (diluted) 3,900.1 3,299.7 3,503.6 972 823 874
---------------------- ---- --------- --------- ----------- --------- --------- -----------
Number of shares
(thousands)
Basic 400,110 399,010 399,140
Outstanding share options 1,273 1,845 1,687
---------------------------- --------- --------- -----------
Diluted 401,383 400,855 400,827
---------------------- ---- --------- --------- -----------
2.4. Revenue and costs
The Group earns revenue from the following activities:
Unaudited Unaudited
30 June 30 June 31 December
2022 2021 2021
Note GBPm GBPm GBPm
Rental income(*) Operations segment 2.2a 127.7 116.8 209.0
Management fees Operations segment 9.2 8.2 16.2
LSAV performance fee Unallocated - 15.7 41.9
136.9 140.7 267.1
Impact of non-controlling interest on
management fees (0.1) (0.1) (0.2)
Total revenue 136.8 140.6 266.9
========================================== ==== ========= ========= ============
(*) EPRA earnings includes GBP177.4 million of rental income (30
June 2021: GBP152.9 million, 31 December 2021: GBP282.7 million),
which is comprised of GBP127.7 million recognised on wholly owned
assets (30 June 2021: GBP116.8 million, 31 December 2021: GBP209.0
million) and a further GBP49.7 million from joint ventures (30 June
2021: GBP36.1 million, 31 December 2021: GBP73.7 million) which is
included in share of joint venture profit/loss in the consolidated
IFRS income statement.
The cost of sales included in the consolidated IFRS income
statement includes property operating expenses of GBP34.3 million
(30 June 2021: GBP31.3 million, 31 December 2021: GBP64.4
million).
Section 3: Asset management
The Group holds its property portfolio directly and through its
joint ventures. The performance of the property portfolio whether
wholly owned or in joint ventures is the key factor that drives
EPRA Net Tangibles Asset Value (NTA), one of the Group's key
performance indicators.
The following pages provide disclosures about the Group's
investments in property assets and joint ventures and their
performance over the period.
3.1 Wholly owned property assets
The Group's wholly owned property portfolio is held in four
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, except where otherwise stated.
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 held 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. These 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.
iii) 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.
3.1a 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 6 months ending 30 June 2022 and
throughout 2021.
The valuations are based on both:
-- 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 Leadership Team and the CFO. This includes a review of the
fair value movements over the period.
The fair value of the Group's wholly owned properties and the
movements in the carrying value of the Group's wholly owned
properties during the period ended 30 June 2022 is shown in the
table below:
Unaudited 30 June 2022
Investment Investment Investment
property property property
GBPm (owned) (leased) (under development) Total
----------------------------------- ---------- ---------- -------------------- -------
At 1 January 2022 3,095.1 97.7 324.1 3,516.9
Cost capitalised 27.3 0.7 70.6 98.6
Interest capitalised 0.3 - 3.9 4.2
Transfer from work in progress - - 4.9 4.9
Transfer to assets held for sale - - - -
Disposals - - - -
Valuation gains 141.0 - 25.3 166.3
Valuation losses (37.6) (4.9) (0.1) (42.6)
========== ========== ==================== =======
Net valuation gains/(losses) 103.4 (4.9) 25.2 123.7
----------------------------------- ---------- ---------- -------------------- -------
Carrying value and market value at
30 June 2022 3,226.1 93.5 428.7 3,748.3
----------------------------------- ---------- ---------- -------------------- -------
Assets classified as Held for Sale and presented within current
assets in the IFRS Balance Sheet (30 June 2022: GBP216.4 million,
30 June 2021: GBP13.0 million, 31 December 2021: GBP228.2 million)
are included within the total Investment Property values for EPRA
reporting purposes (note 2.3a). At 30 June 2022 the EPRA carrying
value and market value totals GBP3,964.7 million.
The fair value of the Group's wholly owned properties and the
movements in the carrying value of the Group's wholly owned
properties during the period ended 30 June 2021 is shown in the
table below:
Unaudited 30 June 2021
Investment Investment Investment
property property property
GBPm (owned) (leased) (under development) Total
----------------------------------- ---------- ---------- -------------------- -------
At 1 January 2021 3,614.7 101.8 187.2 3,903.7
Cost capitalised 14.9 0.5 34.8 50.2
Interest capitalised - - 2.1 2.1
Transfer from work in progress - - - -
Transfer to assets held for sale (13.0) - - (13.0)
Disposals (401.2) - - (401.2)
Valuation gains 60.6 - 11.8 72.4
Valuation losses (39.7) (2.6) (0.2) (42.5)
========== ========== ==================== =======
Net valuation gains/(losses) 20.9 (2.6) 11.6 29.9
----------------------------------- ---------- ---------- -------------------- -------
Carrying value and market value at
30 June 2021 3,236.3 99.7 235.7 3,571.7
----------------------------------- ---------- ---------- -------------------- -------
The fair value of the Group's wholly owned properties and the
movements in the carrying value of the Group's wholly owned
properties during the year ended 31 December 2021 is shown in the
table below:
31 December 2021
Investment Investment Investment
property property property
GBPm (owned) (leased) (under development) Total
-------------------------------------- ---------- ---------- -------------------- -------
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 gains/(losses) 66.6 (11.1) 50.3 105.8
-------------------------------------- ---------- ---------- -------------------- -------
Carrying value and market value at
31 December 2021 3,095.1 97.7 324.1 3,516.9
-------------------------------------- ---------- ---------- -------------------- -------
3.1b Fair value measurement
All investment and development properties are classified as
Level 3 in the fair value hierarchy.
Unaudited Unaudited
30 June 30 June 31 December
2022 2021 2021
Class of asset GBPm GBPm GBPm
London - Rental properties 906.1 812.9 849.8
Prime provincial - Rental properties 1,047.2 958.4 992.9
Major provincial - Rental properties 1,285.3 1,257.8 1,263.5
Other provincial - Rental properties 203.9 220.2 217.1
London - Development properties 291.0 199.8 249.9
Prime provincial - Development properties 96.7 33.1 48.4
Major provincial - Development properties 41.0 2.8 25.8
Other provincial - Development properties - - -
--------------------------------------------- --------- --------- -----------
Investment property (owned) 3,871.2 3,485.0 3,647.4
Investment property (leased) 93.5 99.7 97.7
============================================= ========= ========= ===========
Market value (including assets classified as
held for sale) 3,964.7 3,584.7 3,745.1
Investment property (classified as held for
sale) (216.4) (13.0) (228.2)
============================================= ========= ========= ===========
Market value 3,748.3 3,571.7 3,516.9
============================================= ========= ========= ===========
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 valuation also
reflects 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 credit
worthiness.
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.
3.1c Quantitative information about fair value measurements
using unobservable inputs (Level 3)
Fair
value Valuation Weighted
GBPm technique Unobservable inputs Range average
London - 906.1 Discounted
Rental properties cash flows
------------------------ -----------
Net rental income (GBP
per week) GBP198-GBP391 GBP294
Estimated future rent
(%) 3%-5% 4%
Discount rate (yield)
(%) 3.5%-4.4% 3.7%
------------------------ ------- ----------- -------------------------- ------------------ ---------
Prime regional - 1,047.2 Discounted
Rental properties cash flows
------------------------ -----------
Net rental income (GBP
per week) GBP148-GBP246 GBP179
Estimated future rent
(%) 3%-5% 4%
Discount rate (yield)
(%) 3.9%-6.1% 4.6%
------------------------ ------- ----------- -------------------------- ------------------ ---------
Major regional - 1,285.3 Discounted
Rental properties cash flows
------------------------ -----------
Net rental income (GBP
per week) GBP70-GBP179 GBP133
Estimated future rent
(%) 0%-5% 3%
Discount rate (yield)
(%) 4.4%-7.0% 5.6%
------------------------ ------- ----------- -------------------------- ------------------ ---------
Provincial - 203.9 Discounted
Rental properties cash flows
------------------------ -----------
Net rental income (GBP
per week) GBP105-GBP194 GBP142
Estimated future rent
(%) 0%-5% 3%
Discount rate (yield)
(%) 5.1%-14.4% 7.1%
------------------------ ------- ----------- -------------------------- ------------------ ---------
London - 291.0 Discounted
Development properties cash flows
------------------------ -----------
Estimated cost to complete
(GBPm) GBP12.8m-GBP184.4m GBP127.4m
Net rental income (GBP
per week) GBP185-GBP382 GBP289
Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 3.6% 3.6%
------------------------ ------- ----------- -------------------------- ------------------ ---------
Prime regional - 96.7 Discounted
Development properties cash flows
------------------------
Estimated cost to complete
(GBPm) GBP1.3m-GBP62.1m GBP32.5m
Net rental income (GBP
per week) GBP176-GBP260 GBP187
Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 4.0%-4.75% 4.2%
------------------------ ------- ----------- -------------------------- ------------------ ---------
Major regional - 41.0 Discounted
Development properties cash flows
------------------------
Estimated cost to complete
(GBPm) GBP26.8m-GBP38.0m GBP35.0m
Net rental income (GBP
per week) GBP171-GBP228 GBP181
Estimated future rent
(%) 3%-4% 3.3%
Discount rate (yield)
(%) 4.75%-4.9% 4.9%
------------------------ ------- ----------- -------------------------- ------------------ ---------
3,871.2
------------------------ ------- ----------- -------------------------- ------------------ ---------
Investment property 93.5 Discounted Net rental income (GBP
(leased) per week) GBP98-GBP191 GBP151
cash flows Estimated future rent
(%) 0%-4% 3%
Discount rate (yield)
(%) 6.8% 6.8%
Fair value at 30
June 2022 3,964.7
======================== ======= =========== ========================== ================== =========
Fair
value Valuation Weighted
GBPm technique Unobservable inputs Range average
London - 812.9 Discounted
Rental properties cash flows
------------------------ -----------
Net rental income (GBP
per week) GBP191-GBP378 GBP289
Estimated future rent
(%) 2%-3% 3%
Discount rate (yield)
(%) 3.9%-4.9% 4.0%
------------------------ ------- ----------- -------------------------- ------------------ --------
Prime regional - 958.4 Discounted
Rental properties cash flows
------------------------ -----------
Net rental income (GBP
per week) GBP144-GBP235 GBP173
Estimated future rent
(%) 2%-3% 2%
Discount rate (yield)
(%) 4.0%-6.4% 4.8%
------------------------ ------- ----------- -------------------------- ------------------ --------
Major regional - 1,257.8 Discounted
Rental properties cash flows
------------------------ -----------
Net rental income (GBP
per week) GBP62-GBP174 GBP132
Estimated future rent
(%) 1%-3% 2%
Discount rate (yield)
(%) 4.6%-7.0% 5.7%
------------------------ ------- ----------- -------------------------- ------------------ --------
Provincial - 220.2 Discounted
Rental properties cash flows
------------------------ -----------
Net rental income (GBP
per week) GBP109-GBP187 GBP139
Estimated future rent
(%) 1%-3% 2%
Discount rate (yield)
(%) 5.0%-14.0% 6.8%
------------------------ ------- ----------- -------------------------- ------------------ --------
London - 199.8 Discounted
Development properties cash flows
------------------------ -----------
Estimated cost to complete
(GBPm) GBP56.6m-GBP146.6m GBP99.4m
Net rental income (GBP
per week) GBP185-GBP382 GBP289
Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 3.9% 3.9%
------------------------ ------- ----------- -------------------------- ------------------ --------
Prime regional - 33.1 Discounted
Development properties cash flows
------------------------
Estimated cost to complete
(GBPm) GBP12.7m-GBP64.8m GBP38.2m
Net rental income (GBP
per week) GBP171-GBP213 GBP172
Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 4.3% 4.3%
------------------------ ------- ----------- -------------------------- ------------------ --------
Major regional - 2.8 Discounted
Development properties cash flows
------------------------
Estimated cost to complete
(GBPm)
Estimated future rent GBP55.7m GBP55.7m
(%)
Discount rate (yield) 3% 3%
(%) - -
------------------------ ------- ----------- -------------------------- ------------------ --------
3,485.0
------------------------ ------- ----------- -------------------------- ------------------ --------
Investment property 99.7 Discounted Net rental income (GBP
(leased) per week) GBP95-GBP185 GBP144
cash flows Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 6.8% 6.8%
Fair value at 30
June 2021 3,584.7
======================== ======= =========== ========================== ================== ========
Fair Valuation
value technique Weighted
GBPm Unobservable inputs Range average
London - 849.8 Discounted
Rental properties cash flows GBP291
------------------------ ------- ------------ -------------------------- ------------------
4%
------------------------ ------- ------------
Net rental income (GBP
per week) GBP191-GBP373
Estimated future rent
(%) 3%-4%
Discount rate (yield)
(%) 3.7%-4.9% 3.9%
------------------------ ------- ------------ -------------------------- ------------------ ---------
Prime regional 992.9 Discounted Net rental income (GBP
- per week) GBP144-GBP235 GBP191
Rental properties cash flows Estimated future rent
(%) 1%-4% 3%
Discount rate (yield)
(%) 4.0%-7.0% 4.7%
Major regional 1,263.6 Discounted Net rental income (GBP
- per week) GBP62-GBP173 GBP131
Rental properties cash flows Estimated future rent
(%) 0%-4% 2%
Discount rate (yield)
(%) 4.7%-7.0% 5.7%
Provincial - 217.1 Discounted
Rental properties cash flows GBP135
------------------------ ------- ------------ -------------------------- ------------------
3%
------------------------ ------- ------------
Net rental income (GBP
per week) GBP109-GBP188
Estimated future rent
(%) 1%-4%
Discount rate (yield)
(%) 5.1%-14.2% 7.0%
------------------------ ------- ------------ -------------------------- ------------------ ---------
London - 249.9 Discounted Estimated cost to complete
(GBPm) GBP34.0m-GBP177.3m GBP126.5m
Development properties cash flows Net rental income (GBP
per week) GBP185-GBP382 GBP289
Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 3.6% 3.6%
Prime regional 48.4 Discounted Estimated cost to complete
- (GBPm) GBP7.1m-GBP64.3m GBP35.9m
Development properties cash flows Net rental income (GBP
per week) GBP176-GBP258 GBP181
Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 4.0% 4.0%
------------------------ ------- ------------ -------------------------- ------------------ ---------
Major regional 25.8 Discounted Estimated cost to complete
- (GBPm) GBP33.9m-GBP45.2m GBP42.1m
Development properties cash flows Net rental income (GBP
per week) GBP171-GBP213 GBP172
Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 5.0% 5.0%
------------------------ ------- ------------ -------------------------- ------------------ ---------
3,647.4
------------------------ ------- ------------ -------------------------- ------------------ ---------
Investment property 97.7 Discounted
(leased) cash flows GBP144
------------------------ ------- ------------ -------------------------- ------------------
3%
------------------------ ------- ------------
Net rental income (GBP
per week) GBP95-GBP185
Estimated future rent
(%) 3%
Discount rate (yield)
(%) 6.8% 6.8%
------------------------ ------- ------------ -------------------------- ------------------ ---------
Fair value at
31 December 2021 3,745.1
======================== ======= ============ ========================== ================== =========
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. These two key sources of
estimation uncertainty are considered to represent those most
likely to have a material impact on the valuation of the Group's
investment property within the next 12 months as a result of
reasonably possible changes in assumptions used. The potential
effect of such reasonably possible changes has been assessed by the
Group and is set out below:
+25bps -25bps
+5% -5% change change
Fair value change change in in
at in estimated in estimated nominal nominal
30 June net rental net rental equivalent equivalent
Class of assets 2022 income income yield yield
---------------------------- ----------- ------------- ------------- ----------- -----------
Rental properties (GBPm)(*)
London 906.1 951.0 861.2 849.4 971.0
Prime provincial 1,047.2 1,098.8 995.6 993.1 1,107.7
Major provincial 1,285.3 1,349.1 1,221.4 1,229.9 1,346.0
Other provincial 203.9 213.9 193.5 196.3 211.7
Development properties
London 291.0 308.1 264.6 269.5 316.1
Prime provincial 96.7 101.4 92.1 91.5 103.2
Major provincial 41.0 42.8 38.2 39.2 43.0
----------------------------- ---------- ------------- ------------- ----------- -----------
Market value 3,871.2 4,065.1 3,666.6 3,668.9 4,098.7
----------------------------- ---------- ------------- ------------- ----------- -----------
(*) Includes assets classified as held for sale in the IFRS
balance sheet.
3.2 Inventories
Unaudited Unaudited
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Interests in land 8.9 9.1 10.8
Other stocks 1.2 2.2 1.3
------------------ --------- --------- -----------
Inventories 10.1 11.3 12.1
------------------ --------- --------- -----------
3.3 Investments in joint ventures
The Group has two joint ventures:
Group's share
of
assets/results Legal entity in
2022 (December which
Joint venture 2021) Objective Partner Group has interest
The UNITE 29.52%(*) (23.4%) Invest and operate Consortium of UNITE Student Accommodation
UK Student student accommodation investors Fund,
Accommodation throughout the UK a Jersey Unit Trust
Fund (USAF)
=============== ================= ========================= =================== ===========================
London Student 50% (50%) Invest and operate GIC Real Estate LSAV Unit Trust,
Accommodation student accommodation Pte, Ltd. Real a Jersey Unit Trust,
Venture (LSAV) in London and Birmingham estate and LSAV (Holdings)
investment vehicle Ltd, incorporated
of the Government in Jersey
of Singapore
=============== ================= ========================= =================== ===========================
(*) Part of the Group's interest is held through a subsidiary,
USAF (Feeder) Guernsey Ltd, 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
28.2% of USAF (30 June 2021: 22.0%, 31 December 2021: 22.0%).
3.3a Movement in carrying value of the Group's investments in
joint ventures
The carrying value of the Group's investment in joint ventures
has increased by GBP231.6 million during the 6 months ended 30 June
2022 (30 June 2021: GBP125.6 million, 30 December 2021: GBP195.1
million), resulting in an overall carrying value of GBP1,275.7
million (30 June 2021: GBP974.6 million, 30 December 2021:
GBP1,044.1 million). The following table shows how the increase has
arisen.
Unaudited
6 months Unaudited
to 6 months Year to
30 June to 31 December
2022 30 June 2021 2021
GBPm GBPm GBPm
================================================== ========= ============= ============
Recognised in the income statement:
Operations segment result 26.4 15.8 30.2
Non-controlling interest share of Operations
segment result 0.7 0.5 1.1
Management fee adjustment relating to trading
with joint venture 2.0 1.8 3.0
Net valuation gains on investment property 86.3 21.8 88.7
Property disposals (0.4) (0.7) (0.3)
Other (0.4) (0.6) (0.3)
114.6 38.6 122.4
Recognised in equity:
Movement in effective hedges 1.9 0.2 0.6
Other adjustments to the carrying value:
Profit adjustment related to trading with
joint venture (2.0) (1.8) (3.4)
Profit adjustment related to the sale of property
to LSAV - (3.6) (1.9)
Additional capital invested in USAF 140.9 - -
Additional capital invested in LSAV - 131.2 157.6
LSAV performance fee - (15.7) (42.2)
-------------------------------------------------- --------- ------------- ------------
Distributions received (23.8) (23.3) (38.0)
================================================== ========= ============= ============
Increase in carrying value 231.6 125.6 195.1
Carrying value brought forward 1,044.1 849.0 849.0
================================================== ========= ============= ============
Carrying value carried forward 1,275.7 974.6 1,044.1
================================================== ========= ============= ============
3.3b 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 period.
Unaudited Unaudited
6 months 6 months Year to
to to 31 December
30 June 2022 30 June 2021 2021
GBPm GBPm GBPm
USAF 8.8 8.0 15.2
LSAV 2.3 1.8 3.9
Asset and property management fees 11.1 9.8 19.1
LSAV performance fee - 31.4 41.9
Investment management fees - 31.4 41.9
----------------------------------- ------------- ------------- ------------
Total fees 11.1 41.2 61.0
----------------------------------- ------------- ------------- ------------
On an EPRA basis, fees from joint ventures are shown net of the
Group's share of the cost to the joint venture.
The Group's share of the cost to the joint ventures is GBP1.9
million (30 June 2021: GBP1.6 million, 31 December 2021: GBP3.2
million), which results in management fees from joint ventures of
GBP9.2 million being shown in the Operations segment result in note
2.2a (30 June 2021: GBP8.2 million, 31 December 2021: GBP15.9
million).
Investment management fees are included within the unallocated
to segments section in note 2.2a.
Section 4: Funding
The Group finances its development and investment activities
through a mixture of retained earnings, borrowings and equity. The
Group continuously monitors its financing arrangements to manage
its gearing.
Interest rate swaps are used to manage the Group's risk to
fluctuations in interest rate movements.
The following pages provide disclosures about the Group's
funding position, including borrowings and hedging instruments.
4.1 Borrowings
The table below analyses the Group's borrowings which comprise
bank and other loans by when they fall due for payment:
Unaudited Unaudited 31 December
30 June 2022 30 June 2021 2021
GBPm GBPm GBPm
-------------------------------------------- ------------- ------------- -----------
Current
In one year or less, or on demand - - -
Non-current
In more than one year but not more than two
years - 496.8 -
In more than two years but not more than
five years 572.2 297.6 419.2
In more than five years 693.8 718.7 719.0
============================================ ============= ============= ===========
1,266.0 1,513.1 1,138.2
Unamortised fair value of debt recognised
on acquisition 20.2 26.0 23.8
============================================ ============= ============= ===========
Total borrowings 1,286.2 1,539.1 1,162.0
============================================ ============= ============= ===========
The carrying value of borrowings is considered to be approximate
to fair value, except for the Group's fixed rate loans as analysed
below:
Unaudited Unaudited
30 June 2022 30 June 2021 31 December 2021
Carrying Carrying Carrying
value Fair value value Fair value value Fair value
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- -------- ---------- -------- ---------- -------- ----------
Level 1 IFRS fair value hierarchy 875.0 832.1 901.0 952.6 898.8 936.7
Level 2 IFRS fair value hierarchy - - 150.0 141.2 - -
Other loans and unamortised
arrangement fees 411.2 364.5 488.1 488.1 263.2 263.2
================================== ======== ========== ======== ========== ======== ==========
Total borrowings 1,286.2 1,196.6 1,539.1 1,581.9 1,162.0 1,199.9
---------------------------------- -------- ---------- -------- ---------- -------- ----------
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:
Unaudited Unaudited
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Current (39.6) - (2.5)
Non-current - 4.4 -
==================================================== ========= ========= ===========
Fair value of interest rate swaps liability/(asset) (39.6) 4.4 (2.5)
==================================================== ========= ========= ===========
The fair values of interest rate swaps 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.
4.3 Dividends
During the 6 months to 30 June 2022, the Company declared and
paid a final gross dividend of GBP53.3 million, 15.6p per share (30
June 2021: final dividend of GBP42.5 million (12.75p per
share)).
Under the terms of the Company's scrip dividend scheme,
shareholders were able to elect to receive ordinary shares in place
of the 2021 final dividend of 15.6p per ordinary share. This
resulted in the issue of 764,622 new fully paid shares.
After the period end, the Directors proposed an interim dividend
of 11.0p per share (30 June 2021: 6.5p per share). 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 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 25 properties with HPL that needs replacing
across our estate, seven of which are wholly owned. We are
continuing to carry 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 the HPL cladding is expected to be
GBP82.9 million (Unite Share: GBP48.7 million), of which GBP33.6
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 12-36 months. The regulations
continue to evolve in this area and we will ensure that our
buildings are safe for occupation and compliant with laws and
regulations.
The Government's Building Safety Bill, covering building
standards, was passed in April and has introduced 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.
The Group has recognised provisions for the costs of these
cladding works as follows:
Gross Unite share
----------------------------- ----------------------------
Wholly USAF LSAV Total Wholly USAF LSAV Total
owned GBPm GBPm GBPm owned GBPm GBPm GBPm
GBPm GBPm
-------------------- ------ ------ ----- ------ ------ ----- ----- ------
At 1 January 2021 15.7 50.0 14.2 79.9 15.7 11.0 7.1 33.8
Additions 12.0 16.7 - 28.7 12.0 3.6 - 15.6
Utilisation - (6.8) (5.4) (12.2) - (1.5) (2.7) (4.2)
==================== ====== ====== ===== ====== ====== ===== ===== ======
At 30 June 2021 27.7 59.9 8.8 96.4 27.7 13.1 4.4 45.2
Additions 6.0 6.7 0.5 13.2 6.0 1.5 0.3 7.8
Utilisation (0.2) (10.3) (7.1) (17.6) (0.2) (2.3) (3.6) (6.1)
-------------------- ------ ------ ----- ------ ------ ----- ----- ------
At 31 December 2021 33.5 56.3 2.2 92.0 33.5 12.3 1.1 46.9
Additions 3.5 6.9 6.4 16.8 3.5 1.9 3.2 8.6
Utilisation (3.4) (20.0) (2.5) (25.9) (3.4) (5.6) (1.3) (10.3)
Change in ownership
% - - - - - 3.5 - 3.5
==================== ====== ====== ===== ====== ====== ===== ===== ======
At 30 June 2022 33.6 43.2 6.1 82.9 33.6 12.1 3.0 48.7
==================== ====== ====== ===== ====== ====== ===== ===== ======
5.2 Cash and cash equivalents
Unaudited Unaudited
6 months 6 months
to 30 June to 30 June Year to 31
2022 2021 GBPm December 2021
Note GBPm GBPm
---------------------------------------- ---- ----------- ----------- --------------
Profit for the period 332.7 131.2 344.6
Adjusted for:
Depreciation and amortisation 3.8 3.8 7.8
Fair value of share based payments 2.2a 1.4 1.0 2.4
Change in value of investment property 2.2b (128.6) (32.5) (116.1)
Change in value of investment property
(leased) 2.2b 4.9 2.6 11.1
Net finance costs 17.3 22.8 42.7
Swap cancellation FV settlements and
debt break costs 2.2b - 1.5 4.2
Mark to market changes in interest rate
swaps (37.1) (3.0) (10.9)
Loss on disposal of investment property
(owned) 2.2b 9.9 11.0 12.0
Share of joint venture profit (114.3) (38.9) (122.2)
Trading with joint venture adjustment 1.9 17.4 19.1
Tax charge/(credit) 1.4 (0.8) (1.5)
---------------------------------------- ---- ----------- ----------- --------------
Cash flows from operating activities
before changes in working capital 93.3 116.1 192.4
Decrease/(increase) in trade and other
receivables 40.3 (28.5) (52.5)
Decrease/(increase) in inventories (2.9) (2.4) (2.9)
(Decrease)/increase in trade and other
payables (40.8) (12.0) 34.2
---------------------------------------- ---- ----------- ----------- --------------
Cash flows from operating activities 89.9 73.2 171.3
Tax paid - - -
---------------------------------------- ---- ----------- ----------- --------------
Cash flows from operating activities 89.9 73.2 171.3
---------------------------------------- ---- ----------- ----------- --------------
Section 6: Post balance sheet events
There were no post balance sheet events.
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 2.3c. Definitions can also be found in
the glossary.
Adjusted earnings, as set out below, is an APM reflecting a more
meaningful measure of the underlying earnings of the Group,
excluding the non-recurring impact of abortive acquisition costs
and the net LSAV performance fee, and therefore improve
comparability.
Non-EPRA measures may not have comparable calculation bases
between companies and therefore may not provide meaningful
industry-wide comparability.
6 months 6 months
to 30 June to 30 June Year to 31
2022 2021 December 2021
Note GBPm GBPm GBPm
EBIT
Net operating income (NOI) 2.2a 131.9 111.1 191.8
Management fees 2.2a 9.2 8.2 15.9
Overheads 2.2a (13.7) (13.0) (31.5)
------------------------------ ---- ----------- -------------- --------------
127.4 106.3 176.2
------------------------------ ---- ----------- -------------- --------------
EBIT margin %
Rental income 2.2a 177.4 152.9 282.7
EBIT 7 127.4 106.2 176.2
------------------------------ ---- ----------- -------------- --------------
71.8% 69.5% 62.3%
------------------------------ ---- ----------- -------------- --------------
EBITDA
Net operating income (NOI) 2.2a 131.9 111.1 191.8
Management fees 2.2a 9.2 8.2 15.9
Overheads 2.2a (13.7) (13.0) (31.5)
Depreciation and amortisation 3.9 3.8 7.8
------------------------------ ---- ----------- -------------- --------------
131.3 110.1 184.0
30 June 31 December
2022 30 June 2021 2021
Note GBPm GBPm GBPm
------------------------------ ---- ----------- -------------- --------------
Net debt
Cash 2.3a 180.1 553.4 155.5
Debt on properties 2.3a (1,907.2) (2,053.7) (1,677.3)
------------------------------ ---- ----------- -------------- --------------
Net debt (1,727.1) (1,500.3) (1,521.8)
------------------------------ ---- ----------- -------------- --------------
12 months 12 months
to 30 June to 30 June Year to 31
2022 2021 GBPm December 2021
Note GBPm GBPm
------------------------------ ---- ----------- -------------- --------------
Net debt (adjusted)
Cash (adjusted) 261.1 (1) 482.4 155.5
(1,828.9)
Debt on properties (adjusted) (2) (2,150.4) (1,677.3)
------------------------------ ---- ----------- -------------- --------------
Net debt (adjusted) (1,567.8) (1,668.0) (1,521.8)
------------------------------ ---- ----------- -------------- --------------
(1) Calculated on a 12 month look back basis. Average of
GBP180.1 million and GBP155.5 million in respect of H1 2022 and
average of GBP155.5 million and GBP553.4 million in respect of H2
2021.
(2) Calculated on a 12 month look back basis. Average of
GBP1,907.2 million and GBP1,677.3 million in respect of H1 2022 and
average of GBP1,677.3 million and GBP2,053.7 million in respect of
H2 2021.
12 months 12 months
to 30 June to 30 June Year to 31
2022 2021 December 2021
Note GBPm GBPm GBPm
Net debt: EBITDA
Net debt (adjusted) 7 (1,567.8) (1,668.0) (1,521.8)
EBITDA 7 205.2 (1) 167.2 184.0
-------------------------------- ----- ----------- ----------- ---------------
Ratio 7.6 10.0 8.3
-------------------------------- ----- ----------- ----------- ---------------
(1) Calculated on a 12 month look back basis. GBP131.3 million in respect
of H1 2022 and GBP73.9 million in respect of H2 2021.
12 months 12 months
to 30 June to 30 June Year to 31
2022 2021 December 2021
GBPm GBPm GBPm
Interest cover (Unite share)
EBIT 7 197.3 (1) 158.7 176.2
Net financing costs 2.2a (51.2) (55.4) (54.8)
Interest on lease liability 2.2a (8.4) (8.6) (8.5)
-------------------------------- ----- ----------- ----------- ---------------
Total interest (59.6) (64.0) (63.3)
-------------------------------- ----- ----------- ----------- ---------------
Ratio 3.3 2.5 2.8
================================ ===== =========== =========== ===============
(1) Calculated on a 12 month look back basis. GBP127.4 million
in respect of H1 2022 and GBP69.9 million in respect of H2 2021
Reconciliation: IFRS profit before tax to EPRA earnings and
adjusted earnings
6 months 6 months
to 30 June to 30 June Year to 31
2022 2021 GBPm December 2021
Note GBPm GBPm
---------------------------------------------- ---- ----------- ----------- --------------
IFRS profit before tax 334.1 130.4 343.1
Net valuation gains on investment property
(owned) 2.2b (214.9) (54.3) (205.6)
Property disposals (owned) 2.2b 10.3 11.7 12.3
Net valuation losses on investment property
(leased) 2.2b 4.9 2.6 11.1
Amortisation of fair value of debt recognised
on acquisition 2.2b (2.1) (2.2) (4.3)
Changes in valuation of interest rate
swaps 2.2b (37.1) (3.0) (10.9)
Swap cancellation FV settlements and
debt exit costs 2.2b - 1.5 4.2
Non-controlling interest and tax (0.7) 1.6 2.1
---------------------------------------------- ---- ----------- ----------- --------------
EPRA earnings 94.5 88.3 152.0
LSAV performance fee 2.4 - (15.7) (41.9)
Abortive acquisition costs 2.2a 1.5 - -
---------------------------------------------- ---- ----------- ----------- --------------
Adjusted earnings 96.0 72.6 110.1
---------------------------------------------- ---- ----------- ----------- --------------
Adjusted EPS yield
30 June 30 June 2021 31 December
2022 GBPm 2021
Note GBPm GBPm
------------------------- ---- ------- ------------ -----------
Adjusted earnings (A) 2.2c 24.0p 18.2p 27.6p
Opening EPRA NTA (B) 2.3d 882p 818p 818p
------------------------- ---- ------- ------------ -----------
Adjusted EPS yield (A/B) 2.7% 2.2% 3.4%
------------------------- ---- ------- ------------ -----------
Total accounting return
30 June 30 June 2021
2022 pps 31 December 2021
Note pps pps
------------------------------ ---- ------- ------------ ----------------
Opening EPRA NTA (A) 2.3d 882p 818p 818p
Closing EPRA NTA 2.3d 940p 837p 882p
------------------------------ ---- ------- ------------ ----------------
Movement 58p 19p 64p
H1 dividend paid 4.3 15.6p 12.75p 12.75p
H2 dividend paid 4.3 - - 6.5p
Total movement in NTA (B) 73.6p 31.75p 83.25p
------------------------------ ---- ------- ------------ ----------------
Total accounting return (B/A) 8.3% 3.9% 10.2%
------------------------------ ---- ------- ------------ ----------------
EPRA Performance Measures
Summary of EPRA performance measures
30 June 30 June 31 Dec 30 June 30 June
2022 2021 2021 2022 2021 31 Dec
GBPm GBPm GBPm 2021
----------------------------------- ------- ------- ------- ------- ------- ------
EPRA earnings 94.5 88.3 152.0 23.6p 22.2p 38.1p
Adjusted earnings ((*) ) 96.0 72.6 110.1 24.0p 18.2p 27.6p
EPRA NTA (diluted) 3,774.9 3,357.0 3,536.1 940p 837p 882p
EPRA NRV (diluted) 4,090.8 3,622.1 3,829.7 1,019p 904p 955p
EPRA NDV (diluted) 3,900.1 3,299.7 3,503.6 972p 823p 874p
EPRA Like-for-like gross rental
income 23% (5.3%) 4.7%
EPRA Cost ratio (including vacancy
costs) 30% 31% 39%
EPRA Cost ratio (excluding vacancy
costs) 28% 28% 37%
EPRA Loan to value 33% 32% 32%
* Adjusted earnings calculated as EPRA earnings excluding
abortive acquisition costs and the LSAV performance fee income
EPRA like-for-like rental income (calculated based on total
portfolio value of GBP8.4 billion)
Properties owned Acquisitions and
throughout the period Development property disposals Other Total EPRA
GBPm GBPm GBPm GBPm GBPm
6 months to 30 June 2022
Rental income 173.7 - 3.7 - 177.4
Property operating
expenses (44.5) - (1.0) - (45.5)
Net rental income 129.2 - 2.7 - 131.9
6 months to 30 June 2021
Rental income 140.8 - 9.8 2.3 152.9
Property operating
expenses (38.7) - (2.5) (0.6) (41.8)
Net rental income 102.1 - 7.3 1.7 111.1
Like-for-like net rental
income GBP27.1m
Like-for-like gross
rental income 23.4%
EPRA cost ratio 6 months 6 months
to 30 June to 30 June Year to
2022 2021 31 Dec 2021
GBPm GBPm GBPm
Property operating expenses 34.3 31.3 67.7
Overheads (*) 12.9 12.6 30.7
Development / pre contract costs 0.6 1.0 2.2
Unallocated expenses (*) 1.7 (0.4) 0.5
49.5 44.5 101.1
Share of JV property operating expenses 11.2 10.5 23.2
Share of JV overheads 0.8 0.4 0.8
Share of JV unallocated expenses ((*)
) 0.2 0.5 0.4
61.7 55.9 125.5
Less: Joint venture management fees (9.2) (8.2) (15.9)
Total costs (A) 52.5 47.7 109.6
Group vacant property costs ((**) ) (2.1) (3.7) (4.1)
Share of JV vacant property costs ((**)
) (0.7) (1.3) (1.4)
Total costs excluding vacant property
costs (B) 49.7 42.7 104.1
Rental income 127.7 116.8 209.0
Share of JV rental income 49.7 36.1 73.7
Total gross rental income (C) 177.4 152.9 282.7
Total EPRA cost ratio (including vacant
property costs) (A)/(C) 30% 31% 39%
Total EPRA cost ratio (excluding vacant
property costs) (B)/(C) 28% 28% 37%
* Excludes amounts in respect of abortive acquisition costs in
2022 and the LSAV performance fee in 2021.
** 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 3,443 131 4.0%
USAF 654 33 5.3%
LSAV 971 62 6.8%
Rental properties 5,068 226 4.7%
Leased properties 93
22/23 development completions 332
Properties under development 97
Properties held throughout the period 5,590
Acquisitions 181
Disposals -
Total property portfolio 5,771
EPRA yield movement
NOI yield Yield movement (bps)
% H1 H2 FY
Wholly owned 4.9% (13) - (13)
USAF 4.9% (19) - (19)
LSAV 3.9% (19) - (19)
Rental properties (Unite share) 4.7% (15) - (15)
EPRA property related capital expenditure
30 June 2022 31 Dec 2021
Wholly Share of Wholly Share of
owned JVs Group share owned JVs Group share
London 1.4 2.8 4.2 4.8 3.1 7.9
Prime regional 17.4 2.7 20.1 16.7 2.9 19.6
Major regional 7.4 5.1 12.5 8.1 10.8 18.9
Provincial 1.5 0.4 1.9 2.8 0.6 3.4
Total rental properties 27.7 11.0 38.7 32.4 17.4 49.8
Increase in beds 1.5 1.1 2.6 - - -
Acquisitions - - - - - -
Developments 75.5 - 75.5 81.4 - 81.4
Capitalised interest 4.2 - 4.2 5.2 - 5.2
Total property related
capex 108.9 12.1 121.0 119.0 17.4 136.4
EPRA loan to value
6 months 6 months
to 30 June to 30 June Year to
2022 2021 31 Dec 2021
GBPm GBPm GBPm
Investment property (owned) 5,248.7 4,716.2 4,864.8
Investment property (under development) 428.7 235.7 324.1
Intangibles 15.6 17.3 16.1
Total property value and other eligible assets 5,693.0 4,969.2 5,205.0
Cash at bank and in hand 180.1 553.4 155.5
Borrowings (1,907.2) (2,053.7) (1,677.3)
Net other payables (179.8) (104.0) (138.9)
EPRA net debt (1,906.9) (1,604.3) (1,660.6)
EPRA loan to value 33% 32% 32%
INDEPENT REVIEW REPORT TO THE UNITE GROUP PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated cash flow statement and
related sections 1 to 7.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of the
group will be prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE (UK), however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the group a conclusion on the
condensed set of financial statement in the half-yearly financial
report. Our conclusion, including our Conclusions Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council. Our work
has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the
conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
27 July 2022
GLOSSARY
Adjusted earnings Diluted NTA/NAV EPRA Net Tangible Assets
An alternative performance Where NTA/NAV per share per share
measure based on EPRA is used, "basic" measures The diluted NTA per share
earnings, adjusted to divide the NTA/NAV by the figure based on EPRA NTA.
remove the impact of number of shares issued
abortive acquisition at the reporting date, EPRA Net Reinstatement
costs and the LSAV performance whilst the diluted measure Value (NRV)
fee which was settled also takes into account EPRA NRV includes all
in 2021. The items have the effect of share options property at market value
been excluded from adjusted which have been granted but excludes the mark
earnings to improve the and which are expected to market of financial
comparability of results to be converted into shares instruments, deferred
year-on-year. in the future (both for tax and includes real
the additional number of estate transfer tax. EPRA
Adjusted earnings per shares that will be issued NRV assumes that entities
share / EPS and the value of additional never sell assets and
The earnings per share consideration that will represents the value required
based on adjusted earnings be received in issuing to rebuild the entity.
and weighted average them).
number of shares in issue EPRA Net Disposal Value
(basic). Direct let (NDV)
Properties where short-hold EPRA NDV includes all
Adjusted EBIT tenancy agreements are property at market value,
The Group's NOI plus made directly between Unite excludes the mark to market
management fees and less and the student. of financial instruments,
overheads. In the opinion but includes the fair
of the Directors, adjusted EBITDA value of fixed interest
EBIT is a useful measure The Group's adjusted EBIT, rate debt and the carrying
to monitor our cost discipline adding back depreciation value of intangible assets.
and performance of the and amortisation. EPRA NDV represents the
Group. shareholders' value in
EPRA a disposal scenario.
Adjusted EBIT margin The European Public Real
The Group's EBIT expressed Estate ESG
as a percentage of rental Association, who produce Environmental, Social
income. In the opinion best practice recommendations and Governance.
of the Directors, adjusted for financial reporting.
EBIT margin is a useful GRESB
measure to monitor our EPRA Cost Ratio GRESB is a benchmark of
cost discipline and performance The ratio of property operating the Environmental, Social
of the Group. expenses, overheads and and Governance (ESG) performance
management fees, against of real assets.
Adjusted EPS yield rental income, calculated
Adjusted EPS as a percentage on an EPRA basis. Gross asset value (GAV)
of opening EPRA NTA (diluted). The fair value of rental
EPRA earnings properties, leased properties
Adjusted net debt EPRA earnings exclude movements and development properties.
Net debt per the balance relating to changes in
sheet, adjusted to remove values of The Group
IFRS 16 lease liabilities investment properties, Wholly owned balances
and the unamortised fair profits/losses from the plus Unite's interests
value of debt recognised disposal of properties, relating to USAF and LSAV.
on the acquisition of swap/debt break costs and
Liberty Living. interest rate swaps and Group debt
the related tax effects. Wholly owned borrowings
Basis points (BPS) plus Unite's share of
A basis point is a term EPRA earnings per share borrowings attributable
used to describe a small / EPS to USAF and LSAV.
percentage, usually in The earnings per share
the context of change, based on EPRA earnings HMO
and equates to 0.01%. and weighted average number Houses in multiple occupation,
of shares in issue (basic). where buildings or flats
Diluted earnings / EPS are shared by multiple
Where earnings values EPRA like-for-like rental tenants who rent their
per share are used "basic" growth own rooms and the property's
measures divide the earnings The growth in rental income communal spaces on an
by the weighted average measured by reference to individual basis.
number of issued shares the part of the portfolio
in issue throughout the of the Group that has been Interest cover ratio
period, whilst the diluted consistently in operation, (ICR)
measure also takes into and not under development Calculated as EBIT divided
account the effect of nor subject to disposal, by the sum of net financing
share options which have and which accordingly enables costs and IFRS 16 lease
been granted and which more meaningful comparison liability interest costs.
are expected to be converted in underlying rental income
into shares in the future. levels. Lease
Properties which are leased
EPRA Net Tangible Assets to universities for a
(NTA) number of years.
EPRA NTA includes all property
at market value but excludes
the mark to market of financial
instruments, deferred tax
and intangible assets. Resident ambassadors
EPRA NTA provides a consistent Student representatives
Like-for-like metrics measure of NAV on a going who engage with students
Like-for-like is the concern basis. living in the property
change in metric, on to create a community
a gross basis, calculated Net financing costs (EPRA) and sense of belonging.
using properties owned Interest payable on borrowings
throughout the current less interest capitalised See-through (also Unite
and previous period. into developments and finance share)
income. Wholly owned balances
LSAV plus Unite's share of
The London Student Accommodation Net operating income (NOI) balances relating to USAF
Joint Venture (LSAV) The Group's rental income and LSAV.
is a joint venture between less property operating
Unite and GIC, in which expenses. TCFD
both hold a 50% stake. The Taskforce on Climate-related
LSAV has a maturity date Nomination agreements Financial Disclosures
of September 2032. Agreements at properties develops voluntary, consistent
where universities have climate-related financial
Loan to value (LTV) entered into a contract risk disclosures for use
Net debt as a proportion to reserve rooms for their by companies in providing
of the value of the rental students, usually guaranteeing information to investors,
properties, excluding occupancy. The Universities lenders, insurers, and
balances in respect of usually either nominate other stakeholders.
leased properties under students to live in the
IFRS 16. Prepared on building and Unite enters Total accounting return
a see through basis. into short-hold tenancies Growth in diluted EPRA
In the opinion of the with the students or the NTA per share plus dividends
directors, this measure University enters into paid, expressed as a percentage
enables an appraisal a contract with Unite and of diluted EPRA NTA per
of the indebtedness of makes payment directly share at the beginning
the business, which closely to Unite. of the period. In the
aligns with key covenants opinion of the Directors,
in the Group's lending PBSA this measure enables an
arrangements. Purpose-built student accommodation. appraisal of the return
generated by the business
LTV post IFRS 16 Prime regional for shareholders during
Net debt as a proportion Properties located in Bristol, the year.
of the value of the rental Bath, Edinburgh, Manchester
properties, including and Oxford. Total shareholder return
balances in respect of The growth in value of
leased properties under Property operating expenses a shareholding over a
IFRS 16. Prepared on Operating costs directly specified period, assuming
a see-through basis. related to rental properties, dividends are reinvested
therefore excluding central to purchase additional
LTV (EPRA) overheads. shares.
Net debt as a proportion
of the value of the rental Provincial USAF/the fund
properties including Properties located in Bedford, The Unite UK Student Accommodation
balances in respect of Bournemouth, Coventry, Fund (USAF) is Europe's
leased properties and Loughborough, Medway, Portsmouth, largest fund focused purely
all other assets and Reading and Swindon . on income-producing student
liabilities. accommodation investment
Rental growth assets.
Major regional Calculated as the year-on-year The fund is an open-ended
Properties located in change in average annual infinite life vehicle
Aberdeen, Birmingham, price for sold beds. In with unique access to
Cardiff, Durham, Glasgow, the opinion of the Directors, Unite's development pipeline.
Leeds, Leicester, Liverpool, this measure enables a Unite acts as fund manager
Newcastle, Nottingham, more meaningful comparison for the fund, as well
Sheffield and Southampton. in rental income as it as owning a significant
excludes the impact of minority stake.
Net asset value (NAV) changes in occupancy.
The total of all assets WAULT
less the value of all Rental income Weighted average unexpired
liabilities at each reporting Income generated by the lease term to expiry.
date. Group from rental properties.
Wholly owned
Net debt (EPRA) Rental properties Balances relating to properties
Borrowings net of cash. Investment properties (owned that are 100% owned by
IFRS 16 lease liabilities and leased) whose construction The Unite Group plc or
are excluded from net has been completed and its 100% subsidiaries.
debt on an EPRA basis. are used by the Operations
In the opinion of the segment to generate NOI.
Directors, net debt is
a useful measure to monitor Rental properties (leased)
the overall cash position / Sale and leaseback
of the Group. Properties that have been
sold to a third party investor
Net debt per balance then leased back to the
sheet Group. Unite is also responsible
Borrowings, IFRS 16 lease for the management of these
liabilities and the mark assets on behalf of the
to market of interest owner.
rate swaps, net of cash.
Net debt to EBITDA
Net debt as a proportion
of EBITDA.
COMPANY INFORMATION
Executive Team
Richard Smith
Chief Executive
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
IR UNORRUKUBUUR
(END) Dow Jones Newswires
July 27, 2022 02:00 ET (06:00 GMT)
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