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

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

IR UNORRUKUBUUR

(END) Dow Jones Newswires

July 27, 2022 02:00 ET (06:00 GMT)

Unite (LSE:UTG)
Gráfica de Acción Histórica
De Ago 2022 a Sep 2022 Haga Click aquí para más Gráficas Unite.
Unite (LSE:UTG)
Gráfica de Acción Histórica
De Sep 2021 a Sep 2022 Haga Click aquí para más Gráficas Unite.