REG - Unite Group PLC - Interim Results
24/07/2023 16:45
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RNS Number : 0078H Unite Group PLC (The) 24 July 2023
PRESS RELEASE
24 July 2023
THE UNITE GROUP PLC
("Unite Students", "Unite", the "Group", or the "Company")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023
RECORD RESERVATIONS, INCREASING UNIVERSITY DEMAND AND SIGNIFICANT GROWTH
OPPORTUNITIES
Richard Smith, Chief Executive of Unite Students, commented:
"We have had a strong first half, with growth in earnings driven by a return
to full occupancy.
"The need for new student homes is the greatest we have seen for several
years. The private rental sector is in retreat and a supply crunch is building
amid growing student numbers. We are focused on delivering our substantial
development and asset management pipeline across the UK, as well as working
with university partners to help unlock the potential of their campuses. In
doing this, Unite will continue to play a major role in creating new supply of
high-quality, affordable accommodation where the need is greatest.
"We continue to invest in our portfolio and customer offer and our rental
increases have tracked the rise in our costs. Our all-inclusive, fixed-price
offer, which allows students to benefit from our buying power on utilities,
compares very favourably to HMOs and, in many cases, we remain cheaper.
"We expect market conditions and our alignment to the UK's strongest
universities to support a positive outlook for our business for a number of
years. This creates a range of compelling investment opportunities, which we
will balance with ongoing capital discipline. We remain confident in our
continued growth."
H1 2023 H1 2022 FY 2022 Change from
H1 2022
Adjusted earnings(1) £110.2m £96.0m £163.4m 15%
Adjusted earnings per share(1) 27.5p 24.0p 40.9p 15%
IFRS profit before tax £116.9m £334.1m £358.0m (65)%
IFRS basic EPS 28.8p 82.9p 88.9p (65)%
Dividend per share 11.8p 11.0p 32.7p 7%
Total accounting return(2) 2.4% 8.3% 8.1%
As at 30 Jun 2023 30 Jun 2022 31 Dec 2022 Change from
31 Dec 2022
EPRA NTA per share(2) 928p 940p 927p 0%
IFRS NAV per share 954p 948p 945p 1%
See-through net debt(3,4) £1,742m £1,727m £1,734m 0%
Loan to value(3,4) 31% 30% 31% 0%
HIGHLIGHTS
Return to full occupancy, record demand for 2023/24
· Adjusted EPS up 15% to 27.5p (H1 2022: 24.0p)(1)
· Record reservations of 98% for 2023/24 and rental growth of
around 7% (2022/23: 92% and 3.5%)
· Growing demand from university partners, accounting for 54% of
beds for 2023/24 (2022/23: 52%)
Housing supply unable to keep pace with student demand
· Significant unmet need for high-quality, affordable student homes
· HMO landlords leaving the sector at a time of limited new PBSA
supply
Market conditions support sustainable growth in rent and earnings
· FY2023 EPS guidance increased to upper end of 43-44p range
· Targeting rental growth of at least 5% for the 2024/25 academic
year
Property valuations supported by growing income
· 0.8% increase in property values in the first half for
like-for-like portfolio(5)
· 3.4% rental value growth more than offsetting 13 basis points of
yield expansion
Continued investment in our portfolio and customer offer
· Launched 24/7/365 physical presence and Support to Stay wellbeing
programme in past year
· £150-200m annual investment in building improvements, fire
safety and sustainability
Significant opportunities to grow our platform
· Committed pipeline of £623 million and 3,659 beds, generating a
forecast 6.7% yield on cost
· Future pipeline of £227 million at 6.7% yield on cost
· Enhancing portfolio quality through £140 million refurbishment
pipeline at over 8% yield on cost
· Clear opportunity for strategic university partnerships for
on-campus acquisition and new development
High-quality balance sheet and disciplined capital allocation
· LTV of 31% at 30 June 2023(3) (31 December 2022: 31%)
· Trailing 12-month net debt to EBITDA reduced to 6.8x (June 2022:
7.6x)
· Interest rates 100% fixed or capped, with 3.3% cost of debt (31
December 2021: 85% and 3.4%)
(1) Adjusted earnings and adjusted EPS remove the impact of abortive
acquisition costs in 2022 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). The Group uses alternative performance
measures (APMs), which are not defined or specified under IFRS. These APMs,
which are not considered 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 also
used internally to measure and manage the business. 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. 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 30 June 2023 and 31 December 2022
PRESENTATION
A live webcast of the presentation including Q&A will be held tomorrow at
8:30am BST for investors and analysts. The webcast can be accessed via
https://brrmedia.news/UTG-HY23 (https://brrmedia.news/UTG-HY23) and will be
available for playback on our website (https://www.unitegroup.com
(https://protect-eu.mimecast.com/s/5EfkCBrYAtPpADoH6b1_g?domain=unitegroup.com)
) after the event.
To register for the event or to receive dial-in details, please contact
unite@powerscourt-group.com (mailto: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 an extremely strong performance in the first half,
with earnings and dividends at record levels. We have also delivered record
reservations for the 2023/24 academic year, which reflects the strength of
student demand and appeal of our affordable, well-located portfolio.
Adjusted earnings for the period increased by 15% to £110.2 million (H1 2022:
£96.0 million). This increase was driven by higher occupancy and rental
growth for the 2022/23 academic year, with rental income growing 11%. This
growth in income helped to offset the impact of inflationary pressures in
staff and property costs as well as higher interest costs. On a per share
basis, adjusted EPS increased 15% to 27.5p (H1 2022: 24.0p).
We are announcing an interim dividend of 11.8p (H1 2022: 11.0p), an increase
of 7% on H1 2022, which reflects the growth in our earnings and a positive
outlook for the 2023/24 academic year. We plan to distribute 80% of adjusted
EPS for 2023.
EPRA NTA per share was broadly unchanged at 928p (31 December 2022: 927p),
with modest valuation growth offset by maintenance and fire safety capex. This
resulted in a total accounting return of 2.4% in the first six months of the
year (H1 2022: 8.3%), including the final dividend paid in the period. The
Group recorded an IFRS profit before tax of £116.9 million (H1 2022: £334.1
million), driven by adjusted earnings and the positive revaluation of interest
rate swaps on the back of rising interest rates. IFRS NAV per share increased
by 1% to 954p over the half (31 December 2022: 945p).
Our key financial performance indicators are set out below:
Financial highlights H1 2023 H1 2022 FY 2022
Adjusted earnings £110.2m £96.0m £163.4m
Adjusted EPS 27.5p 24.0p 40.9p
Dividend per share 11.8p 11.0p 32.7p
Total accounting return 2.4% 8.3% 8.1%
IFRS profit before tax £116.9m £334.1m £358.0m
IFRS basic EPS 28.8p 82.9p 88.9p
EPRA NTA per share 928p 940p 927p
IFRS NAV per share 954p 948p 945p
Loan to value 31% 30% 31%
Growing shortage of quality student homes
Structural factors continue to drive a growing supply / demand imbalance for
student accommodation. Demographic growth will see the population of UK
18-year-olds increase by 140,000 (19%) by 2030. Application rates to
university have also grown steadily over recent years, reflecting the value
young adults place on a higher level of education and the life experience and
opportunities it offers. Demand from international students also continues to
grow, as reflected in the 2% increase in undergraduate applications for the
2023/24 academic year.
The supply of student accommodation cannot keep pace with student demand, and
many university cities are already facing housing shortages. There has been a
20-40% reduction in the availability of homes to rent in most UK regions when
compared to prior to the pandemic (source: Zoopla). Private landlords are
choosing to leave the sector in response to rising costs from higher mortgage
rates and increasing regulation, such as EPC certification and the anticipated
Renters Reform Act. Annual mortgage repayment costs for buy-to-let landlords
are expected to rise on average by £3,300 by the end of 2025. We expect these
additional costs to either be passed on to students or result in a further
reduction in the supply of HMOs. The recent reduction in private housing
supply has significantly increased demand for our product in many cities and
we expect this trend to continue for a number of years.
New supply of PBSA is also down 60% on pre-pandemic levels, reflecting
viability challenges created by higher build and funding costs. In many
markets, property valuations are now below replacement costs, further
constraining new supply. Once allowance is made for first generation
university-owned beds leaving the market each year through obsolescence, we
expect to see almost no net growth in PBSA supply in the near term.
Higher quality homes
Our purpose is providing a Home for Success for the young people who live with
us. 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 comparable
in cost to HMOs once bills are included and provides students and parents with
cost certainty through a single, fixed price. We have invested £232 million
in capital projects over the past year to deliver new beds, improve student
experience and ensure our portfolio is safe and sustainable. We are committed
to becoming a net zero carbon business for both our operations and
developments, based on SBTi-validated targets.
We know that life at university can be challenging for young people in many
ways and so, in 2022, we launched our Support to Stay programme and invested
in 24/7 on-site staff presence. These measures help to ensure a proactive
approach to supporting our students whenever needed, while also being
responsive to situations and experiences which challenge their wellbeing.
The government's Renters' Reform Bill will further increase standards and
regulation for private landlords, adding to existing pressures to improve
energy efficiency through EPC certification. This creates a significant
opportunity to capture market share from the one million students living in
the HMO sector. This year's record reservations show we are already making
progress.
Record reservations, underpinning strong rental growth
Across the Group's entire property portfolio, 98% of rooms are now sold for
the 2023/24 academic year (2022/23: 92%), with reservation rates consistently
tracking ahead of previous years throughout the sales cycle. We have seen
strong demand from both UK and international students, who have looked to
secure accommodation earlier in the sales cycle than previous years, leading
to a 10% increase in the number of non-first year students choosing to rebook
with us. This reflects the appeal of our fixed-price, all-inclusive offer, and
a reduction in competing supply from the traditional HMO sector.
We are confident in delivering full occupancy for the 2023/24 academic year
and achieving rental value growth of around 7%. We expect this strong
performance to be sustained into the 2024/25 sales cycle, where we anticipate
delivering rental growth of at least 5%.
Breakdown of reservations for 2023/24 by domicile and year of study:
Nominations(*) Direct let
UK China India Other Intl. Total
First year 7% 2% -% 1%
Returning students 15% 5% 1% 3%
Postgraduate 1% 8% 2% 1%
% of reservations 54% 23% 15% 3% 5% 100%
% of portfolio 54% 22% 14% 3% 5% 98%
(*) All years and domiciles
Deepening partnerships with universities
Nominations agreements with universities cover 54% of total beds for 2023/24
(2022/23: 52%), representing an increase of around 2,000 beds compared to the
prior year, as universities increasingly rely on partners to meet their
accommodation needs. This includes new multi-year agreements with three
Russell Group universities for over 1,800 beds.
Our long-standing relationships mean that we have been able to support this
additional demand. Rental growth from our nomination agreements has exceeded
the portfolio average of around 7%, despite the rental caps in place on many
of our multi-year nomination agreements. This reflects our success in agreeing
increased rental levels on renewals of single-year deals and new multi-year
agreements where our university partners recognise the value our accommodation
provides at a time of increasing costs.
We have also seen a growing willingness from universities to explore more
strategic options to grow and improve their accommodation offer, given the
vital role it plays in helping them to attract and grow student numbers. This
includes a number of advanced discussions for strategic partnerships with
universities for the development of new accommodation on- and off-campus, as
well as the stock transfer and refurbishment of existing university
accommodation. We are uniquely positioned to unlock this opportunity with
universities, thanks to our longstanding relationships, best-in-class
operating platform and development capabilities.
Significant opportunities for growth
These market conditions have created the strongest investment opportunity for
a number of years. Our development pipeline totals £850 million and 4,806
beds in the strongest university cities. We are committed to the delivery of
six developments, delivering 3,659 beds, and expect to commit to additional
developments at attractive returns in the next 6-12 months.
In many of Unite's markets, property valuations are now below replacement
costs, following a sharp increase in build costs over the past two years. This
creates a significant opportunity to invest in income-enhancing asset
management opportunities across our £8.5 billion estate (Unite share: £5.4
billion), which will also drive meaningful improvements in customer
experience. Our pipeline of asset management schemes has grown to c.£140
million, with a targeted yield on cost of over 8%, which we plan to deliver
over the next 24-36 months.
We also continue to track a number of opportunities to add further schemes at
attractive returns. These include a number of development schemes in London
and prime regional markets and strategic partnerships with universities.
Maintaining capital discipline
We are focused on delivering growth while maintaining a high-quality balance
sheet. We will maintain capital discipline to ensure that new investment
activity supports long-term earnings growth and attractive total accounting
returns.
Higher interest rates have reduced the attractiveness of debt as a funding
source for new investment. We will seek to fund future capital commitments
through equity, where accretive to shareholder returns, and continue to make
disposals to improve portfolio quality and increase our alignment to the
strongest universities. We expect to sell around £150-200 million of assets
this year (Unite share), subject to market conditions.
Well positioned for Higher Education policy changes
International students contribute £42 billion to the UK economy and the
government recently reiterated its commitment to hosting 600,000 international
students each year. Changes to UK visa rules mean postgraduate taught students
will no longer be able to be accompanied by family members. Given our product
offering is focused on single occupancy rooms, we expect limited direct impact
from this change.
The government also recently announced measures to cap student numbers on
courses seen as low value for the UK taxpayer. The Office for Students will
monitor course continuation and completion rates, as well as graduate
outcomes, in determining whether courses should be subject to student number
caps. Any restrictions are unlikely to take effect ahead of the next general
election. Our portfolio is aligned to high-quality universities with 94% by
value located in Russell Group cities. As a result, we would not expect
greater oversight of student outcomes to meaningfully impact the number of
university places in our markets.
Outlook
We have delivered a record sales performance for the 2023/24 academic year,
driven by the strength of student demand and growing appeal of our customer
offer. This supports an increase in our 2023 EPS guidance to the upper end of
our 43-44p range (FY2022: 40.9p).
Market conditions are the strongest we have seen for many years. There is
growing unmet need for high-quality, affordable student housing at a time when
HMO landlords are leaving the sector and new supply of PBSA is limited. There
is growing appeal for students in our all-inclusive, fixed-price offer, which
compares favourably in price to HMOs. This supports sustainable growth in rent
and earnings in 2024 and beyond.
We also see a variety of compelling investment opportunities. Thanks to our
partnership with the strongest universities and the capabilities of our
best-in-class operating platform, we are uniquely positioned to take advantage
of these opportunities.
PROPERTY REVIEW
The first half has seen a resilient valuation performance for our investment
portfolio, with rental growth more than offsetting the negative impact of
yield expansion. We continue to improve the quality of the portfolio and our
alignment to the strongest universities by investing into our development
pipeline and asset management initiatives in our existing estate. We will
deliver 705 new beds this year and complete the full refurbishment of a
further 919 beds, which we expect to be fully let for the 2023/24 academic
year.
Our development pipeline remains close to its record size at over 4,800 beds,
over 70% of which is already committed.
Valuation performance
Our property portfolio saw a 0.9% increase in valuations on a like-for-like
basis during the half (Unite share: 0.8%), reflecting the resilience of
purpose-built student accommodation (PBSA) as the market adjusts to a higher
interest rate environment. The valuations reflect strong rental growth on the
back of our letting performance for the 2023/24 academic year, which more than
offset a 13 basis points expansion in property yields.
£m 30 June 2023 Yield Rental growth LfL capital growth
valuation Expansion /other
Wholly owned(1) 3,573 (91) 112 21
USAF 2,923 (57) 93 36
LSAV 1,940 (65) 84 19
Total (Gross) 8,436 (213) 289 76
Total (Unite share) 5,365 41
Capital growth
Wholly owned (2.6)% 3.2% 0.6%
USAF (2.0)% 3.2% 1.2%
LSAV (3.4)% 4.3% 0.9%
Total (Gross) (2.5)% 3.4% 0.9%
Total (Unite share) 0.8%
1. Excludes Build-to-Rent
Student accommodation yields
The PBSA sector has continued to deliver a resilient performance during the
first half. The combination of a structurally favourable outlook for demand
and supply and growing income returns have supported values. Investment
volumes for student accommodation totalled £1.0 billion in H1 (Source: CBRE),
with transaction activity concentrated towards prime and major regional
cities. We anticipate a significant increase in transaction volumes in the
second half of the year, following conclusion of the letting cycle for the
2023/24 academic year.
The average net initial yield across the portfolio is 4.9% at 30 June 2023 (31
December 2022: 4.7%), an increase of 13 basis points over the first six months
of the year and a total of 27 basis points since June 2022. We have seen more
significant yield expansion in London and prime regional markets, which have
lower income yields.
An indicative spread of direct-let yields by location is outlined below:
30 Jun 2023 30 Jun 2022 31 Dec 2022
London 3.90-4.50% 3.50-4.00% 3.70-4.30%
Prime regional 4.60-5.10% 4.40-4.65% 4.40-5.00%
Major regional 5.20-6.20% 5.00-5.65% 5.10-6.10%
Provincial 6.25-7.75% 6.00-7.50% 6.10-7.50%
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 4,806 beds, with a
total development cost of £850 million.
The anticipated yield on cost of the total pipeline is 6.7%. 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. During the period, we recognised an £18 million valuation loss
for developments, reflecting higher property yield assumptions.
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.
We continue to see opportunities for new development and university
partnership schemes at attractive returns, and are seeing land pricing adjust
downwards to reflect increased costs of funding and construction.
Committed pipeline
We have committed to deliver six development schemes with a total development
cost of £623 million and blended yield on cost of 6.7% for the student
accommodation elements. We have future capital commitments of £208 million
for these projects, which will be funded through the Group's cash and
committed debt headroom of £393 million at 30 June and planned disposals.
Our 705-bed scheme at Morriss House in Nottingham is on track for delivery on
time and on budget for the 2023/24 academic year. We have entered a
nominations agreement with the University of Nottingham for 25% of the beds,
with the remainder sold on a direct-let basis. The scheme is 99% let for the
2023/24 academic year at rents ahead of our previous expectations, supporting
an increase in the development yield to 8.5% (previously: 8.2%).
We have made good progress at our 271-bed scheme on Lower Parliament Street in
Nottingham, which we now expect to deliver a year earlier than previously
planned, in time for the 2024/25 academic year.
We have started on site at our Jubilee House scheme in Stratford. The 716-bed
scheme is scheduled for delivery in the 2026/27 academic year. We have agreed
terms with an existing university partner for a 10-year nomination agreement
for half of the beds. The development includes a new 60,000 sq. ft. academy
school, which is pre-let to the Secretary of State for Levelling Up, Housing
and Communities for 35 years on an index-linked rent.
At Meridian Square in Stratford, we are targeting planning approval for 952
beds in the second half. The development, which we expect to deliver in 2027,
has a total development cost of £199 million and a yield on cost of 6.4%.
Together with our committed scheme at Jubilee House, the two projects will
increase our scale in Stratford to 3,400 beds, helping to address the
significant growth in student numbers anticipated in the area following the
opening of new campuses by UCL and University of the Arts London.
We are also committed to the development of a further two projects, at Temple
Quarter in Bristol and Abbey Lane in Edinburgh. We expect construction
activity to start in the second half, supporting delivery of both projects in
time for the 2025/26 academic year.
Future pipeline
Our future pipeline includes two secured but uncommitted schemes in Bristol
and London, which we expect to commit to following receipt of planning
approvals. The future pipeline totals 1,147 beds, with a total development
cost of £227 million, and we expect to deliver both schemes as university
partnerships.
Development costs
We are beginning to see a moderation in inflationary pressure on build costs,
which typically account for around 50% and 80% of our total development costs
in London and regional markets respectively. Although costs are still rising,
the rate of increase has slowed significantly, and we have been able to
maintain or improve the expected development yield on future pipeline schemes
through planning enhancements and the strength of rental growth for the
2023/24 academic year.
Secured development and University partnerships pipeline
Type Target delivery Secured beds Total completed value Total development costs Capex in period Capex remaining Forecast NTA remaining Forecast yield on cost
No. £m £m £m £m £m %
Committed pipeline
Morriss House, Nottingham DL 2023 705 82 60 18 0 7 8.5%
Lower Parliament Street, Nottingham DL 2024 271 46 36 2 26 12 7.1%
Temple Quarter, Bristol UPT 2025 614 118 78 1 56 34 7.3%
Abbey Lane, Edinburgh DL 2025 401 69 56 1 43 14 7.1%
Jubilee House, Stratford(2) UPT 2026 716 242 194 6 110 58 6.1%
Meridian Square, Stratford(1) UPT 2027 952 265 199 4 191 66 6.4%
Total committed 3,659 822 623 32 426 191 6.7%
Future pipeline
Freestone Island, Bristol(1) UPT 2026 575 73 0 71 7.2%
TP Paddington, London(1) UPT 2027 572 154 0 147 6.4%
Total future pipeline 1,147 227 0 218 6.7%
Total development pipeline 4,806 850 32 644 6.7%
UPT - university partnership, DL - direct let
(1)Subject to obtaining planning consent
(2) Student element development cost £141 million, forecast 6.4% yield on
cost
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. There is a growing appetite for partnerships to create the housing to
support university growth ambitions and provide funding for new investment.
In April, we secured planning approval for enhanced welfare and common spaces
at Rushford Court in Durham, which we will redevelop in partnership with
Durham University. Following completion and use as a temporary home for Hild
Bede college, we expect it to become Durham's eighteenth college for a 30-year
initial term.
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 Higher Education provider. The developments will
help to meet the growing need for high-quality PBSA in London and have been
supported through planning by our university partners, with a view to agreeing
long-term nomination agreements.
In addition, we are in active discussions with a number of 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 seeing increased engagement from our partners
and hope to progress these opportunities over the next 12 months, albeit there
remains a high degree of execution risk given the strategic nature of these
decisions for 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 deliver extremely attractive
risk-adjusted returns.
We have identified a pipeline of £140 million of asset management
opportunities in our strongest markets, which supports an annual run-rate of
£50 million p.a. for the next 2-3 years at yield on cost of over 8%.
This year, we will complete three asset management schemes in London,
Edinburgh and Birmingham. Investment across the three projects is £24 million
in aggregate and will deliver a 9% yield on cost. The projects will deliver
additional beds, refurbish existing rooms and enhance the environmental
performance of the properties. We have secured new nomination agreements for
over half of the refurbished beds and are confident of achieving full
occupancy for the 2023/24 academic year.
Fire safety
Providing a safe home is a core part of our strategy and we remain committed
to leading the sector in improving fire safety. During the period, we
completed works on three properties and remediation work is progressing on
another 18, based on contractual or legal obligations under the Building
Safety Bill, spending a total of £49.6 million (Unite share: £25.6 million).
During the period, we recognised a further £8.6 million (Unite share: £11.6
million) of provisions in relation to planned fire safety works. Our balance
sheet at 30 June includes provisions and accruals for fire safety remediation
costs across our estate, at a cost of £72.3 million (Unite share: £45.2
million), which will be incurred over the next two years. During the period we
agreed a settlement with a contractor for £3 million in respect of fire
safety defects, representing around 80% of our claim for that property. We
continue to progress a number of claims against contractors in respect of
defects and expect to recover 50-75% of our total remediation cost.
Build-to-rent
During the period, we have transferred operational management of our pilot
build-to-rent (BTR) asset in Stratford onto our PRISM platform. There are
clear opportunities to leverage our existing operating platform to deliver
cost efficiencies and use our BTR product to retain our student customers
seeking a more independent living experience. Rental growth continues to
outperform our assumptions from the time of acquisition, with new lettings and
renewals 12% above previous rental levels in the first half.
We do not expect to increase our capital commitment to BTR in the short term.
We are continuing to explore opportunities to increase the scale of our BTR
operations through co-investment with institutional investors, where Unite
would act as asset manager. Subject to identifying suitable opportunities,
this structure would enhance returns for the Group while limiting capital
requirements as we develop our understanding of the opportunity in the BTR
sector.
Disposal activity
Disposals remain a key part of our strategy to improve the quality of our
portfolio and increase alignment to the strongest universities. They also help
to manage our balance sheet leverage and provide funding for development and
asset management opportunities, offering superior risk-adjusted returns.
Subject to market pricing, we expect to make disposals of up to £150-200
million in 2023 (Unite share) by reducing our exposure to markets with weaker
prospects for student number growth or more peripheral locations in our
largest markets.
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 2023, with rental income
increasing by 11% to £197.0 million, up from £177.4 million in H1 2022,
reflecting the impact of increased occupancy and rental growth for the 2022/23
academic year. Adjusted EPS also increased by 15% to 27.5p (H1 2022: 24.0p).
Based on progress to date on reservations, we anticipate delivering occupancy
of 99% for the 2023/24 academic year (2022/23: 99%). This income visibility
underpins our confidence in delivering adjusted EPS for 2023 at the upper end
of our previously guided range of 43-44p.
Summary income statement H1 2023 H1 2022 FY 2022
£m £m £m
Rental income 197.0 177.4 339.7
Property operating expenses (50.2) (45.5) (98.7)
Net operating income (NOI) 146.8 131.9 241.0
NOI margin 74.5% 74.4% 70.9%
Management fees 9.0 9.2 17.4
Operating expenses (12.1) (13.7) (27.7)
Finance costs (30.7) (28.9) (63.0)
Development and other costs (2.8) (4.0) (5.8)
EPRA earnings 110.2 94.5 161.9
Abortive acquisition costs - 1.5 1.5
Adjusted earnings 110.2 96.0 163.4
Adjusted EPS 27.5p 24.0p 40.9p
EPRA EPS 27.5p 23.6p 40.5p
EBIT margin 72.9% 71.8% 67.9%
A reconciliation of profit after tax to EPRA earnings is set out in note 2.2b
of the financial statements
Operations result
Like-for-like rental income, excluding the impact of disposals and major
refurbishments, increased by 11% during the first half. This was partially
offset by the 14% increase in operating expenses for like-for-like properties
in the period, primarily driven by increased staff costs and variable costs
linked to higher occupancy. This resulted in the Group's NOI margin remaining
broadly flat at 74.5% for the six months (H1 2022: 74.4%).
H1 2023 H1 2022 YoY change
Wholly owned Share of Fund/JV Total Wholly owned Share of Fund/JV Total
£m £m £m £m
£m £m £m %
Rental income
Like-for-like properties 127.9 58.1 186.0 118.4 48.8 167.2 18.8 11%
Non-like-for-like properties 11.0 - 11.0 9.3 0.9 10.2 0.8 8%
Total rental income 138.9 58.1 197.0 127.7 49.7 177.4 19.6 11%
Property operating expenses
Like-for-like properties (32.9) (14.7) (47.6) (30.7) (10.9) (41.6) (6.0) 14%
Non-like-for-like properties (2.6) - (2.6) (3.6) (0.3) (3.9) 1.3 (33%)
Total property operating expenses (35.5) (14.7) (50.2) (34.3) (11.2) (45.5) (4.7) 10%
Net operating income
Like-for-like properties 95.0 43.4 138.4 87.7 37.9 125.6 12.8 10%
Non-like-for-like properties 8.4 - 8.4 5.7 0.6 6.3 2.1 33%
Total net operating income 103.4 43.4 146.8 93.4 38.5 131.9 14.9 11%
The increase in property operating expenses in the first half was driven by an
average 10% pay increase for frontline staff and higher spend on marketing,
insurance and other property costs. Our utility costs are hedged in advance of
letting rooms, providing visibility over our cost base at the point of sale.
Our hedging, together with a non-recurring benefit from reallocated hedges on
2022 disposals, reduced utility costs by 4% or £0.5 million during the
period. Our utility costs are fully hedged through H2 2023 and 75% for 2024.
As cheaper hedges put in place before the war in Ukraine expire, we expect the
cost of utilities to increase by around 15% in H2 2023 and 30% in 2024,
equivalent to 2% growth in rental income.
Property operating expenses breakdown H1 2023 H1 2022 2022 Change
£m £m £m
Staff costs (14.6) (12.8) (29.6) 14%
Utilities (11.7) (12.4) (22.8) (6%)
Summer cleaning (0.7) (0.6) (5.1) 17%
Marketing (4.1) (2.9) (6.7) 41%
Central costs (7.5) (7.5) (11.3) -%
Other (11.6) (9.3) (23.2) 25%
Property operating expenses (50.2) (45.5) (98.7) 10%
Our EBIT margin improved to 72.9% in the period (H1 2022: 71.8%) due to lower
overheads following non-recurring restructuring costs in 2022. Our rental
income is more heavily weighted to the first half of the financial year due to
lower occupancy during July and August. We expect to deliver a positive
progression in EBIT margin for 2023 as a whole, when compared to 2022 (67.9%).
Finance costs increased to £30.7 million (H1 2022: £28.9 million) due to
impact of the LSAV loan refinanced at higher rates in H1 2022 and increases in
the cost of the floating rate portion of our debt, which saw the cost of debt
rise to 3.3% over the period (H1 2022: 3.2%). £3.4 million of interest costs
were capitalised in the first half, a decrease from £4.2 million in H1 2022,
due to development completions in the second half of 2022.
IFRS earnings
IFRS profit before tax decreased to £116.9 million in the first half (H1
2022: £334.1 million), driven by the net revaluation loss of £10.8 million
(H1 2022: £199.7 million gain) and the positive revaluation of interest rate
swaps on the back of rising interest rates.
H1 2023 H1 2022 FY 2022
£m £m £m
Adjusted earnings 110.2 96.0 163.4
Abortive acquisition costs - (1.5) (1.5)
EPRA earnings 110.2 94.5 161.9
Valuation gains/(losses) (10.8) 199.7 119.2
Changes in valuation of interest rate swaps and debt break costs 16.2 39.2 70.7
Minority interest and tax 1.3 0.7 6.2
IFRS profit before tax 116.9 334.1 358.0
EPRA earnings per share 27.5p 23.6p 40.9p
IFRS basic earnings per share 28.8p 82.9p 88.9p
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, was
effectively unchanged at 928 pence at 30 June 2023 (31 December 2022: 927
pence). EPRA net tangible assets were £3,746 million at 30 June 2023, up from
£3,715 million six months earlier.
The main drivers of the £31 million increase in see-through EPRA NTA and 1
pence increase in EPRA NTA per share were:
· Valuation growth (£180 million, 45 pence), reflecting sales
progress for 2023/24
· Yield movement (£(140) million, (35) pence)
· Development deficit (£(18) million, (4) pence)
· Capital expenditure on maintenance, fire safety and
sustainability (£(40) million, (10) pence)
· A further provision for fire safety capex (£(11) million, (3)
pence)
· The positive impact of retained profits and other movements (£60
million, 8 pence)
Property portfolio
The valuation of our property portfolio at 30 June 2023, including our share
of properties held in USAF and LSAV, was £5,744 million (31 December 2022:
£5,690 million). The £54 million increase in portfolio value reflects the
valuation movements outlined above, capital expenditure and interest
capitalised on developments.
Summary balance sheet
30 June 2023 30 June 2022 31 December 2022
Wholly owned Share of Fund/JV Total Wholly owned Share of Fund/JV Total Wholly owned Share of Fund/JV Total
£m £m £m £m £m £m £m £m £m
Rental properties 3,646 1,792 5,438 3,443 1,806 5,249 3,623 1,773 5,396
Rental properties (leased) 89 - 89 93 - 93 90 - 90
Properties under development 217 - 217 429 - 429 204 - 204
Total property 3,952 1,792 5,744 3,965 1,806 5,771 3,917 1,773 5,690
Net debt (1,214) (528) (1,742) (1,208) (519) (1,727) (1,210) (524) (1,734)
Lease liability (86) - (86) (93) - (93) (90) - (90)
Other assets/(liabilities) (120) (50) (170) (139) (41) (180) (97) (54) (151)
EPRA net tangible assets 2,532 1,214 3,746 2,525 1,246 3,771 2,520 1,195 3,715
IFRS NAV 3,842 3,806 3,792
LTV 31% 30% 31%
Cash flow and net debt
The Operations business generated £126 million of net cash in H1 2023 (H1
2022: £100 million) and net debt increased to £1,742 million (31 December
2022: £1,734 million). The key components of the movement in net debt were
the operational cash flow offset by total capital expenditure of £78 million
and dividend payments of £66 million.
Interest rate hedging arrangements and cost of debt
During the first half, there has been a further increase in market interest
rates, which has 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.
100% of see-through investment debt is subject to a fixed or capped interest
rate (31 December 2022: 97%) for an average term of 4.1 years (31 December
2022: 4.1 years), and we have forward hedged £300 million of future debt
issuance at rates meaningfully below prevailing market levels.
Our see-through borrowing cost reduced to 3.3% during the first half as a
result of additional hedges at interest rates below previous floating rate
costs (December 2022: 3.4%). Based on our hedging protection and current
market interest rates, we forecast a cost of debt of 3.5% for FY2023 as a
whole. Yields on our investment portfolio and secured development pipeline
continue to show a healthy positive spread against our funding costs.
Reflecting the return to full occupancy and growth in adjusted earnings, our
Net debt to EBITDA improved to 6.8x and interest cover to 3.8x in the first
half (December 2022: 7.3x and 3.7x respectively).
Key debt statistics (Unite share basis) 30 Jun 2023 30 Jun 2022 31 Dec 2022
Net debt £1,742m £1,727m £1,734m
LTV 31% 30% 31%
Net debt to EBITDA ratio(1) 6.8 7.6 7.3
Interest cover ratio(1) 3.8 3.3 3.7
Average debt maturity 4.1 years 4.5 years 4.1 years
Average cost of debt 3.3% 3.2% 3.4%
Proportion of investment debt at fixed rate 100% 85% 97%
(1) Calculated on a 12-month look-back basis
Debt financing and liquidity
As at 30 June 2023, the wholly-owned Group had £393 million of cash and debt
headroom (31 December 2022: £397 million), comprising of £55 million of
drawn cash balances and £338 million of undrawn debt (31 December 2022: £29
million and £368 million respectively).
The Group maintains a disciplined approach to leverage and capital allocation,
with LTV of 31% at 30 June 2023 (31 December 2022: 31%). In response to an
environment of rising interest rates, the Group intends to reduce its target
LTV to around 30% on a built-out basis (previously: 30-35%). This will enable
the Group to maintain an interest cover ratio of 3.5-4.0% (2022: 3.7x) and
supports a reduction in net debt to EBITDA to 6-7x (2022: 7.3x).
During the period, USAF completed a new £400 million secured loan,
refinancing its £380 million bond which matured in June 2023. The seven-year
loan has a fixed rate of 5.4%.
We have commenced planning to refinance the £300 million Liberty Living bonds
due to mature in November 2024 and have fully pre-hedged the refinancing at an
expected cost of 4.5%, assuming prevailing market credit spreads.
Dividend
We are proposing an interim dividend payment of 11.8p per share, which
represents an increase of 7% compared to the prior year (H1 2022: 11.0p). The
interim dividend will be fully paid as a Property Income Distribution (PID) of
11.8p. The interim dividend will be paid on 27 October 2023 to shareholders on
the register at close of business on 15 September 2023.
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 participate in 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 6 October
2023. Details of the scrip scheme, terms and conditions and the process for
election 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 2023, we recognised a current tax charge of £1.1
million (H1 2022: £nil).
Funds and joint ventures
The table below summarises the key financials at 30 June 2023 for each
vehicle.
Property assets Net Other liabilities Net Unite share Maturity Unite share
£m debt £m assets of NTA
£m £m £m
USAF 2,923 (776) (73) 2,074 583 Infinite 28%
LSAV 1,940 (620) (60) 1,260 631 2032 50%
Property valuations increased by 1.2% and 0.9% for USAF and LSAV respectively
over the first half of the year on a like-for-like basis, as rental growth was
offset by modest increases in valuation yields.
Fees
During the six months to June 2023, the Group recognised net fees of £9.0
million from its fund and asset management activities (H1 2022: £9.2
million). The decrease compared to the prior year reflects Unite's higher
ownership share in USAF in the period, more than offsetting growth in property
valuations and NOI over the past 12 months.
H1 2023 H1 2022 FY 2022
£m £m £m
USAF asset management fee 6.6 6.9 12.6
LSAV asset and property management fee 2.4 2.3 4.8
Total fees 9.0 9.2 17.4
Principal risks and uncertainties
The principal risks of the business are set out on pages 76-88 of the 2022
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 Higher Education 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 · 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 2023
Note Unaudited Unaudited Year to 31 December
6 months to
6 months to
2022
30 June 2023
30 June 2022
£m
£m
£m
Rental income 2.4 139.1 127.7 241.7
Other income 2.4 9.0 9.1 17.6
Total revenue 148.1 136.8 259.3
Cost of sales (34.7) (34.3) (70.3)
Expected credit losses (0.9) - (1.7)
Operating expenses (13.5) (16.6) (31.0)
Results from operating activities before gains/(losses) on property 99.0 85.9 156.3
Gains/ (losses) on disposal of property 19.2 (9.9) (15.6)
Net valuation (losses)/ gains on property (owned and under development) 3.1a (28.2) 128.6 112.7
Net valuation losses on property (leased) 3.1a (4.3) (4.9) (9.3)
Profit before net financing costs 85.7 199.7 244.1
Loan interest and similar charges (13.8) (13.2) (29.3)
Interest on lease liability (3.9) (4.1) (8.1)
Mark to market changes in interest rate swaps 14.1 37.1 70.7
Finance costs (3.6) 19.8 33.3
Finance income 0.4 - 0.2
Net financing (costs)/gains (3.2) 19.8 33.5
Share of joint venture profit 3.3a 34.4 114.6 80.4
Profit before tax 116.9 334.1 358.0
Current tax (1.1) (0.4) (0.7)
Deferred tax 0.1 (1.0) (0.9)
Profit for the period 115.9 332.7 356.4
Profit for the period attributable to
Owners of the parent company 2.2c 115.2 331.0 355.1
Non-controlling interest 0.7 1.7 1.3
115.9 332.7 356.4
Earnings per share
Basic 2.2c 28.8p 82.9p 88.9p
Diluted 2.2c 28.7p 82.7p 88.7p
All results are derived from continuing activities.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 6 months to 30 June 2023
Unaudited Unaudited Year to 31 December
6 months to
6 months to
2022
30 June 2023
30 June 2022
£m
£m
£m
Profit for the period 115.9 332.7 356.4
Share of joint venture mark to market movements on hedging instruments 0.9 1.9 4.7
Other comprehensive income for the period 0.9 1.9 4.7
Total comprehensive income for the period 116.8 334.6 361.1
Attributable to
Owners of the parent company 116.1 332.9 359.8
Non-controlling interest 0.7 1.7 1.3
116.8 334.6 361.1
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 2023
Note Unaudited Unaudited 31 December
30 June 2023
30 June 2022
2022
£m
£m
£m
Assets
Investment property (owned) 3.1a 3,646.1 3,226.1 3,623.4
Investment property (leased) 3.1a 89.0 93.5 90.3
Investment property (under development) 3.1a 216.9 428.7 202.7
Investment in joint ventures 3.3a 1,246.6 1,275.7 1,226.6
Other non-current assets 24.0 18.2 21.5
Interest rate swaps 4.2 87.3 - 73.2
Right of use assets 2.2 3.1 2.7
Deferred tax asset 2.0 1.8 2.1
Total non-current assets 5,314.1 5,047.1 5,242.5
Assets classified as held for sale 3.1a - 216.4 -
Interest rate swaps 4.2 - 39.6 -
Inventories 3.2 17.4 10.1 12.8
Trade and other receivables 84.8 68.6 105.2
Cash and cash equivalents 65.5 57.8 38.0
Total current assets 167.7 392.5 156.0
Total assets 5,481.8 5,439.6 5,398.5
Liabilities
Lease liabilities (4.8) (4.4) (4.8)
Trade and other payables (203.9) (190.4) (191.5)
Current tax liability (0.1) (0.2) (0.8)
Provisions 5.1 (26.9) (33.6) (29.5)
Total current liabilities (235.7) (228.6) (226.6)
Borrowings 4.1 (1,294.9) (1,286.2) (1,265.9)
Lease liabilities (82.5) (91.0) (87.5)
Total non-current liabilities (1,377.4) (1,377.2) (1,353.4)
Total liabilities (1,613.1) (1,605.8) (1,580.0)
Net assets 3,868.7 3,833.8 3,818.5
Equity
Issued share capital 100.6 100.0 100.1
Share premium 2,161.8 2,161.4 2,162.0
Merger reserve 40.2 40.2 40.2
Retained earnings 1,532.8 1,501.4 1,483.6
Hedging reserve 7.0 3.4 6.2
Equity attributable to the owners of the parent company 3,842.4 3,806.4 3,792.1
Non-controlling interest 26.3 27.4 26.4
Total equity 3,868.7 3,833.8 3,818.5
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the 6 months to 30 June 2023
Issued Share Merger Retained earnings Hedging Attributable Non-controlling Total
share capital
premium
reserve
£m
reserve
to owners
interest
£m
£m
£m
£m
£m
of the parent
£m
£m
At 1 January 2023 100.1 2,162.0 40.2 1,483.6 6.2 3,792.1 26.4 3,818.5
(Unaudited)
Profit for the period - - - 115.2 - 115.2 0.7 115.9
Other comprehensive income for the period: - - - - - - - -
Mark to market movements on hedging instruments - - - - - - - -
Share of joint venture mark to market movements on hedging instruments - - - - 0.9 0.9 - 0.9
Total comprehensive income for the period - - - 115.2 0.9 116.1 0.7 116.8
Shares issued 0.5 (0.2) - - - 0.3 - 0.3
Fair value of share based payments - - - 0.6 - 0.6 - 0.6
Deferred tax on share based payments - - - 0.4 - 0.4 - 0.4
Own shares acquired - - - (0.6) - (0.6) - (0.6)
Unwind of realised swap gain - - - - (0.1) (0.1) - (0.1)
Dividends to owners - - - (66.4) - (66.4) - (66.4)
of the parent company
Dividends to non-controlling interest - - - - - - (0.8) (0.8)
At 30 June 2023 100.6 2,161.8 40.2 1,532.8 7.0 3,842.4 26.3 3,868.7
Issued Share Merger Retained earnings Hedging Attributable Non-controlling Total
share capital
premium
reserve
£m
reserve
to owners
interest
£m
£m
£m
£m
£m
of the parent
£m
£m
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 - - - (53.3) - (53.3) - (53.3)
of the parent company
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
Issued Share Merger Retained earnings Hedging Attributable Non-controlling Total
share capital
premium
reserve
£m
reserve
to owners
interest
£m
£m
£m
£m
£m
of the parent
£m
£m
At 1 January 2022 99.8 2,161.2 40.2 1,225.0 1.6 3,527.8 26.6 3,554.4
Profit for the year - - - 355.1 - 355.1 1.3 356.4
Other comprehensive income for the year: - - - - - - - -
Mark to market movement on hedging instruments - - - - - - - -
Hedges reclassified to profit or loss - - - - - - - -
Share of joint venture mark to market movements on hedging instruments - - - - 4.7 4.7 - 4.7
Total comprehensive income for the year - - - 355.1 4.7 359.8 1.3 361.1
Shares issued 0.3 0.8 - - - 1.1 - 1.1
Fair value of share based payments - - - 1.3 - 1.3 - 1.3
Deferred tax on share based payments - - - 0.3 - 0.3 - 0.3
Own shares acquired - - - (1.7) - (1.7) - (1.7)
Unwind of realised swap gain - - - - (0.1) (0.1) - (0.1)
Dividends to owners - - - (96.4) - (96.4) - (96.4)
of the parent company
Dividends to non-controlling interest - - - - - - (1.5) (1.5)
At 31 December 2022 100.1 2,162.0 40.2 1,483.6 6.2 3,792.1 26.4 3,818.5
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 6 months to 30 June 2023
Note Unaudited Unaudited Year to 31 December
6 months to
6 months to
2022
30 June 2023
30 June 2022
£m
£m
£m
Net cash flows from operating activities 5.2 152.2 89.9 160.2
Investing activities
Investment in joint ventures (1.0) (140.9) (144.6)
Capital expenditure on property (73.4) (99.3) (316.5)
Acquisition of intangible assets (5.4) (2.6) (8.4)
Acquisition of plant and equipment (0.6) (0.1) (1.3)
Proceeds from the sale of investment property - 12.7 234.1
Interest received 0.4 - 0.2
Dividends received 12.9 23.8 38.5
Net cash flows from investing activities (67.1) (206.4) (198.0)
Financing activities
Proceeds from the issue of share capital 0.3 0.4 1.1
Payments to acquire own shares (0.6) (1.4) (1.7)
Interest paid in respect of financing activities (14.5) (10.0) (43.6)
Proceeds from non-current borrowings 30.1 125.0 105.7
Dividends paid to the owners of the parent company (65.6) (44.6) (85.1)
Withholding tax paid on distributions (6.5) (3.7) (8.7)
Dividends paid to non-controlling interest (0.8) (0.8) (1.3)
Net cash flows from financing activities (57.6) 64.9 (33.6)
Net (decrease)/increase in cash and cash equivalents 27.5 (51.6) (71.4)
Cash and cash equivalents at start of period 38.0 109.4 109.4
Cash and cash equivalents at end of period 65.5 57.8 38.0
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Section 1
General information
The information for the year ended 31 December 2022 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 and the Disclosure and
Transparency Rules of the United Kingdom's Financial Services Authority.
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 have considered a range of scenarios for future performance through the 2023/24 academic year. This included a base case assuming cash collection and performance for the 2023/24 academic year remains in line with current expectations and reservations; and a reasonable worst case scenario where income for the 2023/24 academic year is impacted by reduced income, equivalent to occupancy of around 90%. The costs of delivering our net zero carbon asset transition plans are included within the cashflows which have been modelled. Under each of these scenarios, the Directors are satisfied that the Group has sufficient liquidity and will maintain covenant compliance over the next 12 months. To further support the Directors' going concern assessment, a 'Reverse Stress Test' was performed to determine the level of performance at which adopting the going concern basis of preparation may not be appropriate. This involved assessing the minimum amount of income required to ensure financial covenants would not be breached. Within the tightest covenant, occupancy could fall to approximately 75% before there would be a breach. The Group has capacity for property valuations to fall by around 35% before there would be a breach of LTV and gearing covenants in facilities where such covenants exist. Were income or asset values to fall beyond these levels, the Group has certain cure rights, such that an immediate default could be avoided.
The Directors are satisfied that the possibility of the 'Reverse Stress Test' outcome is sufficiently remote that adopting the going concern basis of preparation is appropriate.
Accordingly, after making enquiries and having considered forecasts and appropriate sensitivities, the Directors have formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being at least 12 months from the date of 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. Accordingly, there will be second half-year net income benefit from one newly completing asset in 2023.
Changes in accounting policies
The Group has not adopted any new accounting standards in the period and has
adopted one new accounting policy in addition to those included in the 2022
Annual Report.
Cloud computing arrangements
The Group has a number of contracts for Software as a Service (SaaS) cloud
computing arrangements. These contracts permit the Group to access vendor
hosted software and platform services over the term of the arrangement. The
Group does not control the underlying assets in these arrangements, which are
treated as service contracts and as such, costs are expensed as incurred.
The Group also incurs implementation costs in respect of these contracts.
Implementation costs are capitalised as intangible assets where costs meet the
definition and recognition criteria of an intangible asset under IAS 38. Such
costs typically relate to software coding which is capable of providing
benefit to the Group on a standalone basis. Other implementation costs,
primarily relating to the configuration and customisation of SaaS, are
assessed to determine where the implementation activity relating to these
costs is distinct from the arrangement, in which case costs are expensed as
the activity occurs. Conversely, where the configuration and customisation
costs relate to activities that are integral to the SaaS, such that the
benefit of the activity is received over the term of the arrangement, such
costs are recognised as a prepayment and expensed over the contracted term.
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 187 of the 2022 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. There have been no changes to critical accounting judgements and
key sources of estimation uncertainty.
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.
The following disclosures explain 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
Note Unaudited Unaudited 31 December
30 June 2023
30 June 2022
2022
£m pps £m pps £m pps
Profit after tax(1) 2.2c 115.2 28.8p 331.0 82.9p 355.1 88.9p
Net assets(1) 2.3d 3,842.4 954p 3,806.4 948p 3,792.1 945p
(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
Note Unaudited Unaudited 31 December
30 June 2023
30 June 2022
2022
£m pps £m pps £m pps
EPRA earnings 2.2c 110.2 27.5p 94.5 23.6p 161.9 40.5p
Adjusted earnings(2) 2.2c 110.2 27.5p 96.0 24.0p 163.4 40.9p
EPRA NTA 2.3d 3,746.0 928p 3,770.8 940p 3,715.2 927p
(2 In 2022, adjusted earnings are calculated as EPRA Earnings excluding
abortive acquisition costs, 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 2023 and 30 June 2022 and for the year ended 31 December 2022 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 has
been adjusted in 2022 to remove the impact of abortive acquisition costs. 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 32 - 34 of the 2022 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 2023
Share of joint ventures Group on EPRA
basis
£m Unite USAF LSAV Total
Rental income 139.1 30.7 27.2 197.0
Property operating expenses (35.5) (8.6) (6.1) (50.2)
Net operating income 103.6 22.1 21.1 146.8
Management fees 11.4 (2.4) - 9.0
Overheads (11.6) (0.2) (0.3) (12.1)
Lease liability interest (3.9) - - (3.9)
Net financing costs (15.6) (3.9) (7.3) (26.8)
Operations segment result 83.9 15.6 13.5 113.0
Property segment result (0.8) - - (0.8)
Unallocated to segments (1.8) (0.1) (0.1) (2.0)
EPRA earnings 81.3 15.5 13.4 110.2
Adjusted earnings 81.3 15.5 13.4 110.2
Included in the above is rental income of £10.3 million and property
operating expenses of £4.7 million relating to sale and leaseback properties.
The unallocated to segments balance includes the fair value of share-based
payments of (£0.8 million), contributions to the Unite Foundation of (£0.3
million), deferred tax credit of £0.2 million and a current tax charge of
(£1.1 million).
Depreciation and amortisation totalling £4.1 million is included within
overheads.
Unaudited 30 June 2022
Share of joint ventures Group on EPRA
basis
£m 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
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 £9.9 million and property operating
expenses of £4.7 million relating to sale and leaseback properties.
The unallocated to segments balance includes abortive acquisition costs of
(£1.5 million), the fair value of share-based payments of (£1.4 million),
contributions to the Unite Foundation of (£0.3 million), deferred tax credit
of £0.2 million and other costs of (£0.4 million).
Depreciation and amortisation totalling £3.8 million is included within
overheads.
31 December 2022
Share of joint ventures Group on EPRA
basis
£m Unite USAF LSAV Total
Rental income 241.7 48.8 49.2 339.7
Property operating expenses (72.0) (15.9) (10.8) (98.7)
Net operating income 169.7 32.9 38.4 241.0
Management fees 21.4 (4.0) - 17.4
Overheads (26.4) (0.7) (0.6) (27.7)
Interest on lease liabilities (8.1) - - (8.1)
Net financing costs (33.4) (7.7) (13.8) (54.9)
Operations segment result 123.2 20.5 24.0 167.7
Property segment result (1.2) - - (1.2)
Unallocated to segments (4.3) (0.2) (0.1) (4.6)
EPRA earnings 117.7 20.3 23.9 161.9
Abortive costs 1.5 - - 1.5
Adjusted earnings 119.2 20.3 23.9 163.4
Included in the above is rental income of £18.1 million and property
operating expenses of £9.7 million relating to sale and leaseback
properties.
The unallocated to segments balance includes the fair value of share-based
payments of (£1.6 million), contributions to the Unite Foundation of (£0.6
million), a deferred tax charge of (£0.2 million), a current tax charge of
(£0.7 million) and abortive costs of (£1.5 million).
Depreciation and amortisation totalling £7.8 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:
Note Unaudited Unaudited 31 December
30 June 2023
30 June 2022
2022
£m
£m
£m
Profit attributable to owners of the parent company 115.2 331.0 355.1
Net valuation losses/(gains) on investment property (owned) 3.1a 28.2 (128.6) (112.7)
Property disposals (owned) (gains)/losses (19.2) 9.9 15.6
Net valuation loss on investment property (leased) 3.1a 4.3 4.9 9.3
Amortisation of fair value of debt recognised on acquisition (2.1) (2.1) (4.3)
Share of joint venture gains on investment property 3.3a (2.4) (86.3) (32.3)
Share of joint venture property disposals 3.3a - 0.4 0.9
Mark to market changes on interest rate swaps (14.1) (37.1) (70.7)
Current tax relating to property disposals - - (0.2)
Deferred tax 0.2 0.6 0.7
Non-controlling interest share of reconciling items(*) 0.1 1.8 0.5
EPRA earnings 2.2a 110.2 94.5 161.9
Abortive acquisition costs 2.2a - 1.5 1.5
Adjusted earnings 2.2a 110.2 96.0 163.4
(*) 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:
Note Unaudited Unaudited 31 December
30 June 2023
30 June 2022
2022
£m pps £m pps £m pps
Basic 115.2 28.8p 331.0 82.9p 355.1 88.9p
Diluted 115.2 28.7p 331.0 82.7p 355.1 88.7p
EPRA 2.2a 110.2 27.5p 94.5 23.6p 161.9 40.5p
Diluted EPRA 110.2 27.4p 94.5 23.6p 161.9 40.5p
Adjusted 2.2a 110.2 27.5p 96.0 24.0p 163.4 40.9p
Diluted adjusted 110.2 27.4p 96.0 24.0p 163.4 40.8p
Weighted average number of shares (thousands) Unaudited Unaudited 31 December 2022
30 June 2023 30 June 2022
Basic 400,534 399,412 399,581
Dilutive potential ordinary shares (share options) 1,526 681 584
Diluted 402,060 400,093 400,165
The total number of ordinary shares in issue at 30 June 2023 was 402,581,000
(30 June 2022: 400,110,400, 31 December 2022: 400,317,000). At 30 June 2023
there were 16,505 shares excluded from the potential dilutive shares that did
not affect the diluted weighted average number of shares (30 June 2022:
17,939, 31 December 2022: 19,015).
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 35-39 of the 2022 Annual Report.
2.3a EPRA net assets
Unaudited 30 June 2023
Share of joint ventures Group on EPRA basis
Unite USAF LSAV Total
£m
£m
£m
£m
Investment properties (owned)(*) 3,646.1 821.7 970.7 5,438.5
Investment properties (leased) 89.0 - - 89.0
Investment properties (under development) 216.9 - - 216.9
Total property portfolio 3,952.0 821.7 970.7 5,744.4
Debt on properties (1,279.1) (243.6) (336.2) (1,858.9)
Lease liability on properties (86.1) - - (86.1)
Cash 65.5 25.4 26.4 117.3
Net debt (1,299.7) (218.2) (309.8) (1,827.7)
Other assets and (liabilities) (99.9) (20.5) (29.8) (150.2)
Intangibles per IFRS balance sheet (20.5) - - (20.5)
EPRA NTA 2,531.9 583.0 631.1 3,746.0
Loan to value(*) 31% 27% 32% 31%
Loan to value post-IFRS 16 33% 27% 32% 32%
EPRA loan to value 34%
* LTV calculated excluding leased investment property and the corresponding
lease liability. LTV is an APM - see note 7.
Unaudited 30 June 2022
Share of joint ventures Group on EPRA basis
Unite USAF LSAV Total
£m
£m
£m
£m
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 on properties (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.
* 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 2022
Share of joint ventures Group on EPRA basis
Unite USAF LSAV Total
£m
£m
£m
£m
Investment properties (owned)(*) 3,623.4 813.0 960.4 5,396.8
Investment properties (leased) 90.3 - - 90.3
Investment properties (under development) 202.7 - - 202.7
Total property portfolio 3,916.4 813.0 960.4 5,689.8
Debt on properties (1,247.8) (239.8) (385.2) (1,872.8)
Lease liability on properties (90.4) - - (90.4)
Cash 38.0 35.6 65.6 139.2
Net debt (1,300.2) (204.2) (319.6) (1,824.0)
Other liabilities (78.3) (33.6) (20.4) (132.3)
Intangibles per IFRS balance sheet (18.3) - - (18.3)
EPRA NTA 2,519.6 575.2 620.4 3,715.2
Loan to value(*) 32% 25% 33% 31%
Loan to value post-IFRS 16 33% 25% 33% 32%
EPRA loan to value 34%
(*) 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 2023
Share of joint ventures Group on see through basis
Unite USAF LSAV Total
£m
£m
£m
£m
Operations
Operations segment result 83.9 15.6 13.5 113.0
Add back amortisation of intangibles 3.2 - - 3.2
Total operations 87.1 15.6 13.5 116.2
Property
Rental growth 81.2 20.6 29.8 131.6
Yield movement (91.5) (16.0) (32.5) (140.0)
Disposal gains (owned) 19.3 - - 19.3
Investment property gains (owned) 9.0 4.6 (2.7) 10.9
Investment property losses (leased) (4.3) - - (4.3)
Investment property losses (under development) (17.9) - - (17.9)
Pre-contract/other development costs (0.8) - - (0.8)
Total property (14.0) 4.6 (2.7) (12.1)
Unallocated
Shares issued 0.3 - - 0.3
Investment in joint ventures 12.3 (12.3) - -
Dividends paid (66.4) - - (66.4)
Acquisition of intangibles (5.4) - - (5.4)
Other (1.6) (0.1) (0.1) (1.8)
Total unallocated (60.8) (12.4) (0.1) (73.3)
Total EPRA NTA movement in the period 12.3 7.8 10.7 30.8
Total EPRA NTA brought forward 2,519.6 575.2 620.4 3,715.2
Total EPRA NTA carried forward 2,531.9 583.0 631.1 3,746.0
The £1.8 million other balance within the unallocated segment includes a tax
charge of (£0.8 million), the purchase of own shares of (£0.6 million) and
contributions to the Unite Foundation of (£0.4 million).
Unaudited 30 June 2022
Share of joint ventures Group on see through basis
Unite USAF LSAV Total
£m
£m
£m
£m
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)
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 £2.3 million other balance within the unallocated segment includes a tax
charge of (£0.3 million), the purchase of own shares of (£1.4 million) and
contributions to the Unite Foundation of (£0.3 million).
31 December 2022
Share of joint ventures Group on see through basis
Unite USAF LSAV Total
£m
£m
£m
£m
Operations
Operations segment result 123.2 20.5 24.0 167.7
Add back amortisation of intangibles 5.9 - - 5.9
Total operations 129.1 20.5 24.0 173.6
Property
Rental growth 117.1 0.5 32.6 150.2
Yield movement (11.0) 2.2 (3.0) (11.8)
Disposal losses (owned) (15.6) (0.9) - (16.5)
Investment property gains (owned) 90.5 1.8 29.6 121.9
Investment property losses (leased) (9.3) - - (9.3)
Investment property gains (under development) 6.6 - - 6.6
Pre-contract/other development costs (1.2) - - (1.2)
Total property 86.6 1.8 29.6 118.0
Unallocated
Shares issued 1.1 - - 1.1
Investment in joint ventures (102.4) 122.0 (19.6) -
Dividends paid (96.4) - - (96.4)
Abortive acquisition costs (1.5) - - (1.5)
Acquisition of intangibles (8.0) - - (8.0)
Other (3.3) (0.3) (0.2) (3.8)
Total unallocated (210.5) 121.7 (19.8) (108.6)
Total EPRA NTA movement in the year 5.2 144.0 33.8 183.0
Total EPRA NTA brought forward 2,514.4 431.2 586.6 3,532.2
Total EPRA NTA carried forward 2,519.6 575.2 620.4 3,715.2
The £3.8 million other balance within the unallocated segment includes a tax
charge of (£0.9 million), the purchase of own shares of (£1.7 million) and
contributions to the Unite Foundation of (£0.6 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 2023
NTA NRV NDV
£m
£m
£m
Net asset value reported under IFRS 3,842.4 3,842.4 3,842.4
Mark to market interest rate swaps (92.5) (92.5) -
Unamortised swap gain (1.3) (1.3) (1.3)
Mark to market of fixed rate debt - - 70.4
Unamortised fair value of debt recognised on acquisition 17.0 17.0 17.0
Current tax 0.5 0.5 -
Deferred tax 0.4 0.4 -
Intangibles per IFRS balance sheet (20.5) - -
Real estate transfer tax - 301.7 -
EPRA reporting measure 3,746.0 4,068.2 3,928.5
Unaudited 30 June 2022
NTA NRV NDV
£m
£m
£m
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
31 December 2022
NTA NRV NDV
£m
£m
£m
Net asset value reported under IFRS 3,792.1 3,792.1 3,792.1
Mark to market interest rate swaps (77.4) (77.4) -
Unamortised swap gain (1.4) (1.4) (1.4)
Mark to market of fixed rate debt - - 154.7
Unamortised fair value of debt recognised on acquisition 19.5 19.5 19.5
Current tax 0.7 0.7 -
Intangibles per IFRS balance sheet (18.3) - -
Real estate transfer tax - 300.7 -
EPRA reporting meagsure 3,715.2 4,034.2 3,964.9
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.
Note Unaudited Unaudited 31 December Unaudited Unaudited 31 December
30 June 2023
30 June 2022
2022
30 June 2023
30 June 2022
2022
£m £m £m pps pps pps
Net assets
Basic 2.3c 3,842.4 3,806.4 3,792.1 954 948 945
EPRA NTA 2.3a 3,746.0 3,770.8 3,715.2 930 942 928
EPRA NTA (diluted) 3,748.2 3,774.9 3,718.3 928 940 927
EPRA NRV 2.3c 4,068.2 4,086.7 4,034.2 1,011 1,021 1,008
EPRA NRV (diluted) 4,070.4 4,090.8 4,037.3 1,008 1,019 1,006
EPRA NDV 2.3c 3,928.5 3,896.0 3,964.9 976 974 991
EPRA NDV (diluted) 3,930.7 3,900.1 3,968.0 973 972 989
Number of shares (thousands)
Basic 402,582 400,110 400,292
Outstanding share options 1,401 1,273 895
Diluted 403,983 401,383 401,187
2.4 Revenue and costs
The Group earns revenue from the following activities:
Note Unaudited Unaudited 31 December
30 June 2023
30 June 2022
2022
£m
£m
£m
Rental income(*) Operations segment 2.2a 139.1 127.7 241.7
Management fees Operations segment 9.0 9.2 17.6
148.1 136.9 259.3
Impact of non-controlling interest on management fees (0.1) (0.1) (0.2)
Total revenue 148.0 136.8 259.1
(*) EPRA earnings includes £197.0 million of rental income (30 June 2022:
£177.4million, 31 December 2022: £339.7 million), which is comprised of
£139.1 million recognised on wholly owned assets (30 June 2022: £127.7
million, 31 December 2022: £241.7 million) and a further £57.9 million from
joint ventures (30 June 2022: £49.7 million, 31 December 2022: £98.0
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 £34.7 million (30 June 2022: £34.3 million,
31 December 2022: £70.3 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 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. The
assets are presented as current 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 2023 and throughout 2022.
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 and include rental value, 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 2023 is shown in the table below:
Unaudited 30 June 2023
£m Investment property (owned) Investment property (leased) Investment property (under development) Total
At 1 January 2023 3,623.4 90.3 202.7 3,916.4
Cost capitalised 33.0 3.0 28.7 64.7
Interest capitalised - - 3.4 3.4
Valuation gains 41.9 - 15.9 57.8
Valuation losses (52.2) (4.3) (33.8) (90.3)
Net valuation gains/(losses) (10.3) (4.3) (17.9) (32.5)
Carrying value and market value at 30 June 2023 3,646.1 89.0 216.9 3,952.0
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
£m Investment property (owned) Investment property (leased) Investment property (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 at 30 June 2022 were equal to £216.4 million. These assets
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 £3,964.7 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 year ended 31
December 2022 is shown in the table below:
31 December 2022
£m Investment property (owned) Investment property (leased) Investment property (under development) Total
At 1 January 2022 3,095.1 97.7 324.1 3,516.9
Additions 71.1 - - 71.1
Cost capitalised 38.6 1.9 187.7 228.2
Interest capitalised 0.5 - 5.9 6.4
Transfer from investment property 326.5 - (326.5) -
Transfer to assets classified as held for sale - - 4.9 4.9
Disposals (14.5) - - (14.5)
Valuation gains 168.6 - 19.4 188.0
Valuation losses (62.5) (9.3) (12.8) (84.6)
Net valuation gains/(losses) 106.1 (9.3) 6.6 103.4
Carrying value and market value at 31 December 2022 3,623.4 90.3 202.7 3,916.4
3.1b Fair value measurement
All investment and development properties are classified as Level 3 in the
fair value hierarchy.
Class of asset Unaudited Unaudited 31 December
30 June 2023
30 June 2022
2022
£m
£m
£m
London - Rental properties 1,196.7 906.1 1,212.8
Prime provincial - Rental properties 1,119.4 1,047.2 1,105.6
Major provincial - Rental properties 1,153.2 1,285.3 1,130.0
Other provincial - Rental properties 104.3 203.9 103.9
London - Development properties 82.5 291.0 91.9
Prime provincial - Development properties 40.3 96.7 32.4
Major provincial - Development properties 83.8 41.0 64.1
London Build to Rent - Rental properties 72.5 - 71.1
Prime provincial Build to Rent - Development properties 10.3 - 14.3
Investment property (owned) 3,863.0 3,871.2 3,826.1
Investment property (leased) 89.0 93.5 90.3
Market value (including assets classified as held for sale) 3,952.0 3,964.7 3,916.4
Investment property (classified as held for sale) - (216.4) -
Market value 3,952.0 3,748.3 3,916.4
The valuations have been prepared in accordance with the latest version of the
RICS Valuation - Global Standards (incorporating the International Valuation
Standards) and the UK national supplement (the "Red Book") based on net rental
income, estimated future costs, occupancy, property management costs and the
net initial yield or discount rate.
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 comparable 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 £m Valuation technique Unobservable inputs Range Weighted average
London - RICS Red Book Net rental income (£ per week) £197-£520 £325
Rental properties Estimated future rent (%) 2% - 4% 3%
Discount rate (yield) (%) 3.9%-4.5% 4.01%
1,196.7
Prime provincial - RICS Red Book Net rental income (£ per week) £150-£405 £192
Rental properties Estimated future rent (%) 2% - 4% 3%
Discount rate (yield) (%) 4.2%-6.8% 4.83%
1,119.4
Major provincial - RICS Red Book Net rental income (£ per week) £81-£284 £143
Rental properties Estimated future rent (%) 2% - 4% 3%
Discount rate (yield) (%) 4.6%-7.6% 5.74%
1,153.2
Other provincial - RICS Red Book Net rental income (£ per week) £92-£197 £139
Rental properties Estimated future rent (%) 2% - 4% 3%
Discount rate (yield) (%) 7.0%-24.6% 8.76%
104.3
London - RICS Red Book Estimated cost to complete (£m) £110m-£191m £154m
Development properties Net rental income (£ per week) £187-£384 £258
Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 3.90% 3.90%
82.5
Prime provincial - RICS Red Book Estimated cost to complete (£m) £43m-£56m £51m
Development properties Net rental income (£ per week) £230-£242 £237
Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 4.35%-5.25% 4.73%
40.3
Major provincial - RICS Red Book Estimated cost to complete (£m) £26m £26m
Development properties Net rental income (£ per week) £171-£245 £190
Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 5.15% 5.15%
83.8
Fair value at 30 June 2023 3,780.2
Investment property - London Build to Rent 72.5 RICS Red Book Net rental income (£ per week) £376 £376
Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 4.0% 4.0%
Development Property - Prime provincial Build to Rent 10.3 RICS Red Book Estimated cost to complete (£m) £13m £13m
Net rental income (£ per week) £272-£800 £410
Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 4.10% 4.10%
Fair value at 30 June 2023 3,863.0
Investment property - Leased 89.0 Discounted cash flows Net rental income (£ per week) £99-191 £154
Estimated future rent (%) 1% - 3% 2%
Discount rate (yield) (%) 6.3% 6.3%
Fair value at 30 June 2023 3,952.0
Fair value £m Valuation technique Unobservable inputs Range Weighted average
London - RICS Red Book Net rental income (£ per week) £198-£391 £294
Rental properties Estimated future rent (%) 3%-5% 4%
Discount rate (yield) (%) 3.5% - 4.4% 3.7%
906.1
Prime provincial - RICS Red Book Net rental income (£ per week) £148-£246 £179
Rental properties Estimated future rent (%) 3%-5% 4%
Discount rate (yield) (%) 3.9% - 6.1% 4.6%
1,047.2
Major provincial - RICS Red Book Net rental income (£ per week) £70-£179 £133
Rental properties Estimated future rent (%) 0%-5% 3%
Discount rate (yield) (%) 4.4% - 7.0% 5.6%
1,285.3
Other provincial - RICS Red Book Net rental income (£ per week) £105-£194 £142
Rental properties Estimated future rent (%) 0% - 5% 3%
Discount rate (yield) (%) 5.1% - 14.4% 7.1%
203.9
London - RICS Red Book Estimated cost to complete (£m) £12.8m-£184.4m £127.4m
Development properties Net rental income (£ per week) £185-£382 £289
Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 3.6% 3.6%
291.0
Prime provincial - RICS Red Book Estimated cost to complete (£m) £1.3m-£62.1m £32.5m
Development properties Net rental income (£ per week) £176-£260 £187
Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 4.0% - 4.75% 4.2%
96.7
Major provincial - RICS Red Book Estimated cost to complete (£m) £26.8m-£38.0m £35.0m
Development properties Net rental income (£ per week) £171-£228 £181
Estimated future rent (%) 3% - 4% 3%
Discount rate (yield) (%) 4.75% - 4.9% 4.9%
41.0
Fair value at 30 June 2022 3,871.2
Investment property - Leased 93.5 Discounted Net rental income (£ per week) £98-£191 £151
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 £m Valuation technique Unobservable inputs Range Weighted average
London - RICS Red Book Net rental income (£ per week) £208-£392 £308
Rental properties Estimated future rent (%) 2% - 4% 3%
Discount rate (yield) (%) 3.7% - 4.5% 3.9%
1,212.8
Prime provincial - RICS Red Book Net rental income (£ per week) £148-£243 £163
Rental properties Estimated future rent (%) 2% - 5% 3%
Discount rate (yield) (%) 4.1% - 6.2% 4.7%
1,105.6
Major provincial - RICS Red Book Net rental income (£ per week) £99-£178 £128
Rental properties Estimated future rent (%) 2% - 3% 3%
Discount rate (yield) (%) 4.5% - 7% 5.7%
1,130.0
Other provincial - RICS Red Book Net rental income (£ per week) £107-£156 £123
Rental properties Estimated future rent (%) 2% - 3% 3%
Discount rate (yield) (%) 6.8% - 21.5% 8.6%
103.9
London - RICS Red Book Estimated cost to complete (£m) £111.4m-£177.1m £150.2m
Development properties Net rental income (£ per week) £183-£366 £248
Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 3.7% 3.7%
91.9
Prime provincial - RICS Red Book Estimated cost to complete (£m) £17.5m-£58.3m £44.7m
Development properties Net rental income (£ per week) £171-£235 £184
Estimated future rent (%) 2.5% - 3% 3%
Discount rate (yield) (%) 4.3% - 5.0% 4.5%
32.4
Major provincial - RICS Red Book Estimated cost to complete (£m) £18.2m-£28.4m £21.1m
Development properties Net rental income (£ per week) £185-£287 £198
Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 4.9% - 5.0% 4.9%
64.1
Fair value at 31 December 2022 3,740.7
Investment property - London Build to Rent 71.1 RICS Red Book Net rental income (£ per week) £359 £359
Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 3.9% 3.9%
Development Property - Prime provincial Build to Rent 14.3 RICS Red Book Estimated cost to complete (£m) £12.8m-£20.4m £15.6m
Net rental income (£ per week) £170-£614 £312
Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 3.9%-4.3% 4.03%
Fair value at 31 December 2022 3,826.1
Investment property - Leased 90.3 Discounted cash flows Net rental income (£ per week) £99-191 £154
Estimated future rent (%) 1%-3% 2%
Discount rate (yield) (%) 6.3% 6.3%
Fair value at 31 December 2022 3,916.4
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:
Class of assets Fair value at +5% -5% +25bps -25bps
30 June 2023
change in estimated
change in estimated
change in
change in
net rental income
net rental income
nominal equivalent yield
nominal equivalent yield
Rental properties (£m)
London 1,196.7 1,255.9 1,137.3 1,126.3 1,276.4
Prime provincial 1,119.4 1,175.1 1,064.1 1,063.7 1,181.8
Major provincial 1,153.2 1,211.7 1,095.7 1,104.6 1,207.5
Other provincial 104.3 111.1 100.4 102.7 109.0
Development properties
London 82.5 85.4 79.6 79.9 84.7
Prime provincial 40.3 42.2 38.4 38.4 42.5
Major provincial 83.8 87.7 79.7 80.0 88.0
Build to Rent
London 72.5 76.1 68.9 68.3 77.3
Prime provincial 10.3 10.8 9.8 11.0 9.7
Market value 3,863.0 4,056.0 3,673.9 3,674.9 4,076.9
3.2 Inventories
Unaudited Unaudited 31 December
30 June 2023
30 June 2022
2022
£m
£m
£m
Interests in land 15.9 8.9 11.4
Other stocks 1.5 1.2 1.4
Inventories 17.4 10.1 12.8
3.3 Investments in joint ventures
The Group has two joint ventures:
Joint venture Group's share of Objective Partner Legal entity in which
assets/results 2022 (December 2021)
Group has interest
The UNITE UK Student Accommodation Fund (USAF) 29.52%(*) (23.4%) Invest and operate Consortium of investors UNITE Student Accommodation Fund,
student accommodation throughout the UK
a Jersey Unit Trust
London Student Accommodation Venture (LSAV) 50% (50%) Invest and operate student accommodation in London and Birmingham GIC Real Estate Pte, Ltd. Real estate LSAV Unit Trust, a Jersey Unit Trust, and LSAV (Holdings) Ltd, incorporated in
investment vehicle Jersey
of the Government
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 2022: 22.0%, 31 December 2022: 28.2%).
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 £20.0 million during the 6 months ended 30 June 2023 (30 June 2022:
£231.6 million, 30 December 2022: £182.5 million), resulting in an overall
carrying value of £1,246.6 million (30 June 2022: £1,275.7 million, 30
December 2022: £1,226.6 million). The following table shows how the increase
has arisen.
Unaudited Unaudited Year to 31 December
6 months to
6 months to
2022
30 June 2023
30 June 2022
£m
£m
£m
Recognised in the income statement:
Operations segment result 29.1 26.4 44.5
Non-controlling interest share of Operations segment result 0.8 0.7 1.3
Management fee adjustment relating to trading with joint venture 2.4 2.0 4.0
Net valuation gains on investment property 2.4 86.3 32.3
Property disposals - (0.4) (0.9)
Other (0.3) (0.4) (0.8)
34.4 114.6 80.4
Recognised in equity:
Movement in effective hedges 0.9 1.9 4.7
Other adjustments to the carrying value:
Profit adjustment related to trading with joint venture (2.4) (2.0) (4.0)
Additional capital invested in USAF - 140.9 140.9
Distributions received (12.9) (23.8) (39.5)
Increase in carrying value 20.0 231.6 182.5
Carrying value brought forward 1,226.6 1,044.1 1,044.1
Carrying value carried forward 1,246.6 1,275.7 1,226.6
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 Year to
6 months to
6 months to
31 December
30 June 2023
30 June 2022
2022
£m
£m
£m
USAF 9.0 8.8 16.6
LSAV 2.4 2.3 4.8
Asset and property management fees 11.4 11.1 21.4
Total fees 11.4 11.1 21.4
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 £2.4 million (30 June 2022: £1.9 million, 31 December 2022: £4.0 million), which results in management fees from joint ventures of £9.0 million being shown in the Operations segment result in note 2.2a (30 June 2022: £9.2 million, 31 December 2022: £17.4 million).
During the period the Group earned £20.5 million of deferred consideration from LSAV, as a result of a property sold in 2021 subject to additional contingent consideration, dependent on property valuation movements.
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 30 June 2023 Unaudited 30 June 2022 31 December 2022
£m £m £m
Current
In one year or less, or on demand - - -
Non-current
In more than one year but not more than two years 557.6 - 298.7
In more than two years but not more than five years - 572.2 228.0
In more than five years 721.4 693.8 721.1
1,279.0 1,266.0 1,247.8
Unamortised fair value of debt recognised on acquisition 15.9 20.2 18.1
Total borrowings 1,294.9 1,286.2 1,265.9
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 31 December 2022
30 June 2023
30 June 2022
Carrying value Fair value Carrying value Fair value Carrying value Fair value
£m £m £m £m £m £m
Level 1 IFRS fair value hierarchy 875.0 818.6 875.0 832.1 875.0 759.3
Level 2 IFRS fair value hierarchy - - - - - -
Other loans and unamortised arrangement fees 419.9 405.9 411.2 364.5 372.8 333.8
Total borrowings 1,294.9 1,224.5 1,286.2 1,196.6 1,247.8 1,093.1
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 31 December
30 June 2023
30 June 2022
2022
£m
£m
£m
Current - 39.6 -
Non-current 87.3 - 73.2
Fair value of interest rate swaps asset 87.3 39.6 73.2
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 2023, the Company declared and paid a final
dividend of £65.6 million, 21.7p per share (30 June 2022: final dividend of
£53.3 million (15.6p 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 2022 final dividend of
21.7p per ordinary share. This resulted in the issue of 2,176,083 new fully
paid shares.
After the period end, the Directors proposed an interim dividend of 11.8p per
share (30 June 2022: 11.0p per share). No provision has been made in relation
to this dividend.
The Group has modelled tax adjusted property business profits for 2022 and
2023 and the PID requirement in respect of the year ended 31 December 2022 is
expected to be satisfied by the end of 2023.
Section 5: Working capital
5.1 Provisions
The Government's Building Safety Bill, covering building standards, was passed
in April 2022 and has introduced stringent fire safety regulations. We have
undertaken a thorough review of cladding materials and fire safety across our
portfolio. We have identified 38 properties to date, which require fire safety
remedial works, 7 of which are wholly owned.
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 or constructive 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 completed the remediation works at 13 properties and work is ongoing
at another 18. The remaining cost of completing remedial works is expected to
be £72.3 million (Unite Share: £45.2 million), of which £26.9 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 12-24
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.
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 owned USAF LSAV Total Wholly owned USAF LSAV Total
£m £m £m £m £m £m £m £m
At 1 January 2022 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
(Decreases)/ Additions (1.6) 33.2 23.4 55.0 (1.6) 9.5 11.7 19.6
Utilisation (2.5) (20.8) (1.3) (24.6) (2.5) (6.0) (0.6) (9.1)
At 31 December 2022 29.5 55.6 28.2 113.3 29.5 15.6 14.1 59.2
Additions/ (Decreases) 12.6 (4.5) 0.5 8.6 12.6 (1.3) 0.3 11.6
Utilisation (15.2) (31.4) (3.0) (49.6) (15.2) (8.9) (1.5) (25.6)
At 30 June 2023 26.9 19.7 25.7 72.3 26.9 5.4 12.9 45.2
5.2 Cash and cash equivalents
Note Unaudited Unaudited Year to
6 months to
6 months to
31 December 2022
30 June 2023
30 June 2022
£m
£m
£m
Profit for the period 115.9 332.7 356.4
Adjusted for:
Depreciation and amortisation 4.1 3.8 7.8
Fair value of share based payments 2.2a 0.8 1.4 1.6
Change in value of investment property 2.2b 28.2 (128.6) (112.7)
Change in value of investment property (leased) 2.2b 4.3 4.9 9.3
Net finance costs 17.3 17.3 37.2
Mark to market changes in interest rate swaps (14.1) (37.1) (70.7)
(Gain)/loss on disposal of investment property (owned) 2.2b (19.2) 9.9 15.6
Share of joint venture profit (34.4) (114.3) (80.4)
Trading with joint venture adjustment 2.4 1.9 4.0
Tax charge 1.0 1.4 1.6
Cash flows from operating activities before changes in working capital 106.3 93.3 169.7
Decrease in trade and other receivables 41.0 40.3 3.6
Increase in inventories (4.7) (2.9) (1.0)
Increase/ (decrease) in trade and other payables 10.5 (40.8) (10.7)
Cash flows from operating activities 153.1 89.9 161.6
Tax paid (0.9) - (1.4)
Cash flows from operating activities 152.2 89.9 160.2
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 for 2022, is an APM excluding the
non-recurring impact of abortive acquisition costs, to improve comparability
of the underlying earnings of the Group year-on-year.
Non-EPRA measures may not have comparable calculation bases between companies
and therefore may not provide meaningful industry-wide comparability.
Note 6 months to 6 months to Year to 31 December 2022
30 June 2023
30 June 2022
£m
£m £m
EBIT
Net operating income (NOI) 2.2a 146.8 131.9 241.0
Management fees 2.2a 9.0 9.2 17.4
Overheads 2.2a (12.1) (13.7) (27.7)
143.7 127.4 230.7
EBIT margin %
Rental income 2.2a 197.0 177.4 339.7
EBIT 7 143.7 127.4 230.7
72.9% 71.8% 67.9%
EBITDA
Net operating income (NOI) 2.2a 146.8 131.9 241.0
Management fees 2.2a 9.0 9.2 17.4
Overheads 2.2a (12.1) (13.7) (27.7)
Depreciation and amortisation 2.2a 4.1 3.9 7.8
147.8 131.3 238.5
Note 30 June 2023 30 June 2022 31 December 2022
£m
£m
£m
Net debt
Cash 2.3a 117.3 180.1 139.2
Debt on properties 2.3a (1,858.9) (1,907.2) (1,872.8)
Net debt (1,741.6) (1,727.1) (1,733.6)
Note 12 months to 12 months to Year to 31 December 2022
30 June 2023
30 June 2022
£m
£m
£m
Net debt (adjusted)
Cash (adjusted) 143.9(1) 261.1 139.2
Debt on properties (adjusted) (1,877.9) (2) (1,828.9) (1,872.8)
Net debt (adjusted) (1,734.0) (1,567.8) (1,733.6)
(1) Calculated on a 12 month look back basis. Average of £117.3 million and
£139.2 million in respect of H1 2023 and average of £180.1 million and
£139.2 million in respect of H2 2022.
(2) Calculated on a 12 month look back basis. Average of £1,858.9 million and
£1,872.8 million in respect of H1 2023 and average £1,907.2 million and
£1,872.8 million in respect of H2 2022.
Note 12 months to 12 months to Year to 31
30 June 2023
30 June 2022
December 2022
£m
£m
£m
Net debt: EBITDA
Net debt (adjusted) 7 (1,734.0) (1,567.8) (1,733.6)
EBITDA 7 255.0(1) 205.2 238.5
Ratio 6.8 7.6 7.3
(1) Calculated on a 12 month look back basis. £147.8 million in respect of H1
2023 and £107.2 million in respect of H2 2022.
12 months to 12 months to Year to 31
30 June 2023
30 June 2022
December 2022
£m
£m
£m
Interest cover (Unite share)
EBIT 7 247.0(1) 197.3 230.7
Net financing costs 2.2a (56.9)(2) (51.2) (54.9)
Interest on lease liability 2.2a (7.9)(3) (8.4) (8.1)
Total interest (64.8) (59.6) (63.0)
Ratio 3.8 3.3 3.7
(1) Calculated on a 12 month look back basis. £143.7 million in respect of
H1 2023 and £103.3 million in respect of H2 2022
(2) Calculated on a 12 month look back basis. £26.8 million in respect of
H1 2023 and £30.1 million in respect of H2 2022.
(3) Calculated on a 12 month look back basis. £3.9 million in respect of H1
2023 and £4.0 million in respect of H2 2022.
Reconciliation: IFRS profit before tax to EPRA earnings and adjusted earnings
Note 6 months to 6 months to Year to 31 December 2022
30 June 2023
30 June 2022
£m
£m
£m
IFRS profit before tax 116.9 334.1 358.0
Net valuation losses/(gains) on investment property (owned) 2.2b 25.8 (214.9) (145.0)
Property disposal (gains)/losses (owned) 2.2b (19.2) 10.3 16.5
Net valuation losses on investment property (leased) 2.2b 4.3 4.9 9.3
Amortisation of fair value of debt recognised on acquisition 2.2b (2.1) (2.1) (4.3)
Changes in valuation of interest rate swaps 2.2b (14.1) (37.1) (70.7)
Non-controlling interest and tax (1.4) (0.7) (1.9)
EPRA earnings 110.2 94.5 161.9
Abortive acquisition costs 2.2a - 1.5 1.5
Adjusted earnings 110.2 96.0 163.4
Adjusted EPS yield
Note 30 June 2023 30 June 2022 31 December 2022
£m
£m
£m
Adjusted EPS (A) 2.2c 27.5p 24.0p 40.9p
Opening EPRA NTA (B) 2.3d 927p 882p 882p
Adjusted EPS yield (A/B) 3.0% 2.7% 4.6%
Total accounting return
Note 30 June 2023 30 June 2022 31 December 2022
pps
pps
pps
Opening EPRA NTA (A) 2.3d 926.8p 882.2p 882.2p
Closing EPRA NTA 2.3d 927.8p 940.2p 926.8p
Movement 1.0p 58.0p 44.6p
H1 dividend paid 4.3 21.7p 15.6p 15.6p
H2 dividend paid 4.3 - - 11.0p
Total movement in NTA (B) 22.7p 73.6p 71.2p
Total accounting return (B/A) 2.4% 8.3% 8.1%
EPRA Performance Measures
Summary of EPRA performance measures
30 June 2023 30 June 2022 31 Dec 2022 30 June 2023 30 June 31 Dec
£m
£m
£m
2022 2022
EPRA earnings / EPS 110.2 94.5 161.9 27.5p 23.6p 40.5p
Adjusted earnings / Adjusted EPS ((*)) 110.2 96.0 163.4 27.5p 24.0p 40.9p
EPRA NTA (diluted) 3,748.2 3,774.9 3,718.3 928p 940p 927p
EPRA NRV (diluted) 4,070.4 4,090.8 4,037.3 1,008p 1,019p 1,006p
EPRA NDV (diluted) 3,930.7 3,900.1 3,968.0 973p 972p 989p
EPRA Like-for-like gross rental income 10% 23% 23%
EPRA Cost ratio (including vacancy costs) 28% 30% 33%
EPRA Cost ratio (excluding vacancy costs) 28% 28% 32%
EPRA Loan to value 34% 33% 34%
(*) Adjusted earnings calculated as EPRA earnings excluding abortive
acquisition costs in 2022.
EPRA like-for-like rental income (calculated based on total portfolio value of
£8.5 billion)
Properties owned throughout the period Development property Acquisitions and disposals Total EPRA
£m £m £m £m
Other
£m
6 months to 30 June 2023
Rental income 186.0 8.8 2.2 - 197.0
Property operating expenses (47.6) (1.6) (1.0) - (50.2)
Net rental income 138.4 7.2 1.2 - 146.8
6 months to 30 June 2022
Rental income 167.2 - 10.2 - 177.4
Property operating expenses (41.7) - (3.8) - (45.5)
Net rental income 125.5 - 6.4 - 131.9
Like-for-like net rental income (£m) 12.9
Like-for-like net rental income (%) 11%
Like-for-like gross rental income (£m) 18.8
Like-for-like gross rental income (%) 10%
EPRA cost ratio 6 months to 30 June 2023 6 months to 30 June 2022 Year to 31 Dec 2022
£m
£m
£m
Property operating expenses 35.5 34.3 72.0
Overheads (*) 11.6 12.9 26.4
Development / pre contract costs 0.8 0.6 1.2
Unallocated expenses 1.8 1.7 2.8
49.7 49.5 102.4
Share of JV property operating expenses 14.7 11.2 26.7
Share of JV overheads 0.5 0.8 1.3
Share of JV unallocated expenses 0.2 0.2 0.3
65.1 61.7 130.7
Less: Joint venture management fees (9.0) (9.2) (17.4)
Total costs (A) 56.1 52.5 113.3
Group vacant property costs ((**)) (1.1) (2.1) (2.5)
Share of JV vacant property costs ((**)) (0.4) (0.7) (0.9)
Total costs excluding vacant property costs (B) 54.6 49.7 109.9
Rental income 139.1 127.7 241.7
Share of JV rental income 57.9 49.7 98.0
Total gross rental income (C) 197.0 177.4 339.7
Total EPRA cost ratio (including vacant property costs) (A)/(C) 28% 30% 33%
Total EPRA cost ratio (excluding vacant property costs) (B)/(C) 28% 28% 32%
* Excludes amounts in respect of abortive acquisition costs in 2022.
** 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 %
£m £m
Wholly owned 3,646(*) 23 0.6%
USAF 822 9 1.2%
LSAV 970 10 0.9%
Rental properties 5,438 42 0.8%
Leased properties 89
23/24 development completions 75
Properties under development 142
Properties held throughout the period 5,744
Acquisitions -
Disposals -
Total property portfolio 5,744
(*) Includes PBSA and BTR properties.
EPRA yield movement
NOI yield Yield movement (bps)
% H1 H2 FY
Wholly owned 4.9% 14 - 14
USAF 5.1% 10 - 10
LSAV 4.3% 14 - 14
Rental properties (Unite share) 4.9% 13 - 13
EPRA property related capital expenditure
30 June 2023 31 Dec 2022
Wholly owned Share of Group share Wholly owned Share of Group share
JVs JVs
London 6.5 16.2 22.7 3.3 10.5 13.8
Prime provincial 7.0 1.5 8.5 31.6 7.3 38.9
Major provincial 16.0 10.8 26.8 16.5 11.2 27.7
Other provincial 4.8 0.3 5.1 8.1 1.0 9.1
Total rental properties 34.3 28.8 63.1 59.5 30.0 89.5
Increase in beds - - - 2.1 2.0 4.1
BTR 1.7 - 1.7 1.3 - 1.3
Developments 28.7 - 28.7 193.0 - 193.0
Capitalised interest 3.4 - 3.4 6.3 - 6.3
Total property related capex 68.1 28.8 96.9 262.2 32.0 294.2
EPRA loan to value
6 months to 6 months to Year to
30 June 2023
30 June 2022
31 Dec 2022
£m £m £m
Investment property (owned) 5,438.5 5,248.7 5,396.8
Investment property (under development) 216.9 428.7 202.7
Intangibles 20.5 15.6 18.3
Total property value and other eligible assets 5,675.9 5,693.0 5,617.8
Cash at bank and in hand 117.3 180.1 139.2
Borrowings (1,858.9) (1,907.2) (1,872.8)
Net other payables (173.4) (179.8) (150.6)
EPRA net debt (1,915.0) (1,906.9) (1,884.2)
EPRA loan to value 34% 33% 34%
INDEPENDENT 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 2023 which comprises the consolidated income statement, consolidated
statement of comprehensive income, consolidated balance sheet, consolidated
statement of changes in equity, consolidated statement of cash flows 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 2023 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the United Kingdom and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services 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 (ISRE (UK) 2410). 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 Section 1, the annual financial statements of the group are
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
ISRE (UK) 2410; 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 and Transparency Rules of the United
Kingdom's Financial Services 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 report, we are responsible for expressing to the
company 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 ISRE (UK) 2410.
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
24 July 2023
GLOSSARY
Adjusted earnings EBIT EPRA Net Tangible Assets per share
An alternative performance measure based on EPRA earnings, adjusted to remove The Group's NOI plus management fees and less overheads. In the opinion of the The diluted NTA per share figure based on EPRA NTA.
the impact of non-underlying items. Directors, adjusted EBIT is a useful measure to monitor our cost discipline
and performance of the Group.
Non-underlying items are excluded from adjusted earnings to improve the
comparability of results across reporting periods. EPRA Net Reinstatement Value (NRV)
EBIT margin EPRA NRV includes all property at market value but excludes the mark to market
of financial instruments, deferred tax and includes real estate transfer tax.
Adjusted earnings per share / EPS The Group's EBIT expressed as a percentage of rental income. In the opinion of EPRA NRV assumes that entities never sell assets and represents the value
the Directors, adjusted EBIT margin is a useful measure to monitor our cost required to rebuild the entity.
The earnings per share based on adjusted earnings and weighted average number discipline and performance of the Group.
of shares in issue (basic).
EPRA Net Disposal Value (NDV)
EBITDA
Adjusted EPS yield
EPRA NDV includes all property at market value, excludes the mark to market of
The Group's EBIT, adding back depreciation and amortisation. financial instruments, but includes the fair value of fixed interest rate debt
Adjusted EPS as a percentage of opening EPRA NTA (diluted).
and the carrying value of intangible assets. EPRA NDV represents the
shareholders' value in a disposal scenario.
EPRA
Adjusted net debt
The European Public Real Estate ESG
Net debt per the balance sheet, adjusted to remove IFRS 16 lease liabilities
and the unamortised fair value of debt recognised on the acquisition of Association, who produce best practice recommendations for financial Environmental, Social and Governance.
Liberty Living. reporting.
Full occupancy
Basis points (BPS) EPRA Cost Ratio Full occupancy is defined as occupancy in excess of 97%.
A basis point is a term used to describe a small percentage, usually in the The ratio of property operating expenses, overheads and management fees,
context of change, and equates to 0.01%. against rental income, calculated on an EPRA basis.
GRESB
GRESB is a benchmark of the Environmental, Social and Governance (ESG)
Diluted earnings / EPS EPRA earnings performance of real assets.
Where earnings values per share are used "basic" measures divide the earnings EPRA earnings exclude movements relating to changes in values of investment
by the weighted average number of issued shares in issue throughout the properties, profits/losses from the disposal of properties, swap/debt break
period, whilst the diluted measure also takes into account the effect of share costs and interest rate swaps and the related tax effects. Gross asset value (GAV)
options which have been granted and which are expected to be converted into
shares in the future. The fair value of rental properties, leased properties and development
properties.
EPRA earnings per share / EPS
Diluted NTA/NAV The earnings per share based on EPRA earnings and weighted average number of
shares in issue (basic). The Group
Where NTA/NAV per share is used, "basic" measures divide the NTA/NAV by the
number of shares issued at the reporting date, whilst the diluted measure also Wholly owned balances plus Unite's interests relating to USAF and LSAV.
takes into account the effect of share options which have been granted and
which are expected to be converted into shares in the future (both for the EPRA like-for-like rental growth
additional number of shares that will be issued and the value of additional
consideration that will be received in issuing them). The growth in rental income measured by reference to the part of the portfolio Group debt
of the Group that has been consistently in operation, and not under
development nor subject to disposal, and which accordingly enables more Wholly owned borrowings plus Unite's share of borrowings attributable to USAF
meaningful comparison in underlying rental income levels. and LSAV.
Direct let
Properties where short-hold tenancy agreements are made directly between Unite
and the student. EPRA Net Initial Yield (NIY) HMO
Annualised NOI generated by the Group's rental properties expressed as a
percentage of their fair value, taking into account notional acquisition costs Houses in multiple occupation, where buildings or flats are shared by multiple
tenants who rent their own rooms and the property's communal spaces on an
individual basis.
EPRA Net Tangible Assets (NTA)
EPRA NTA includes all property at market value but excludes the mark to market IFRS NAV per share
of financial instruments, deferred tax and intangible assets. EPRA NTA
IFRS equity attributable to the owners of the parent company from the
provides a consistent measure of NAV on a going concern basis. consolidated balance sheet divided by the total number of shares of the Parent
Company in issue at the reporting date.
Net debt per balance sheet
Interest cover ratio (ICR) Borrowings, IFRS 16 lease liabilities and the mark to market of interest rate
swaps, net of cash.
Calculated as EBIT divided by the sum of net financing costs and IFRS 16 lease
liability interest costs.
Net debt to EBITDA Rental properties
Lease Net debt as a proportion of EBITDA. Investment properties (owned and leased) whose construction has been completed
and are used by the Operations segment to generate NOI.
Properties which are leased to universities for a number of years.
Net financing costs (EPRA)
Rental properties (leased) / Sale and leaseback
Like-for-like metrics Interest payable on borrowings less interest capitalised into developments and
finance income. Properties that have been sold to a third-party investor then leased back to
Like-for-like is the change in metric, on a gross basis, calculated using
the Group. Unite is also responsible for the management of these assets on
properties owned throughout the current and previous period. behalf of the owner.
Net operating income (NOI)
LSAV The Group's rental income less property operating expenses. Resident ambassadors
The London Student Accommodation Joint Venture (LSAV) is a joint venture Student representatives who engage with students living in the property to
between Unite and GIC, in which both hold a 50% stake. LSAV has a maturity
create a community and sense of belonging.
date of September 2032. NOI margin
The Group's NOI expressed as a percentage of rental income
See-through (also Unite share)
Loan to value (LTV)
Nomination agreements Wholly owned balances plus Unite's share of balances relating to USAF and
Net debt as a proportion of the value of the rental properties, excluding
LSAV.
balances in respect of leased properties under IFRS 16. Prepared on a see Agreements at properties where universities have entered into a contract to
through basis. In the opinion of the directors, this measure enables an reserve rooms for their students, usually guaranteeing occupancy. The
appraisal of the indebtedness of the business, which closely aligns with key Universities usually either nominate students to live in the building and
covenants in the Group's lending arrangements. Unite enters into short-hold tenancies with the students or the University TCFD
enters into a contract with Unite and makes payment directly to Unite.
The Taskforce on Climate-related Financial Disclosures develops voluntary,
consistent climate-related financial risk disclosures for use by companies in
LTV post IFRS 16
providing information to investors, lenders, insurers, and other stakeholders.
Other provincial
Net debt as a proportion of the value of the rental properties, including
balances in respect of leased properties under IFRS 16. Prepared on a Properties located in Bedford, Bournemouth, Coventry, Loughborough, Medway,
see-through basis. Portsmouth, Reading and Swindon. Total accounting return
Growth in diluted EPRA NTA per share plus dividends paid, expressed as a
percentage of diluted EPRA NTA per share at the beginning of the period. In
LTV (EPRA) PBSA the opinion of the Directors, this measure enables an appraisal of the return
generated by the business for shareholders during the year.
Net debt as a proportion of the value of the rental properties including Purpose-built student accommodation.
balances in respect of leased properties and all other assets and liabilities.
Total shareholder return
Prime provincial
Major provincial
The growth in value of a shareholding over a specified period, assuming
Properties located in Bristol, Bath, Durham Edinburgh, Manchester and Oxford. dividends are reinvested to purchase additional shares.
Properties located in Aberdeen, Birmingham, Cardiff, Glasgow, Leeds,
Leicester, Liverpool, Newcastle, Nottingham, Sheffield and Southampton.
Property operating expenses USAF/the fund
Net asset value (NAV) Operating costs directly related to rental properties, therefore excluding The Unite UK Student Accommodation Fund (USAF) is Europe's largest fund
central overheads. focused purely on income-producing student accommodation investment assets.
The total of all assets less the value of all liabilities at each reporting
date. The fund is an open-ended infinite life vehicle with unique access to Unite's
development pipeline. Unite acts as fund manager for the fund, as well as
Rental growth owning a significant minority stake.
Net debt (EPRA) Calculated as the year-on-year change in average annual price for sold beds.
In the opinion of the Directors, this measure enables a more meaningful
Borrowings net of cash. IFRS 16 lease liabilities are excluded from net debt comparison in rental income as it excludes the impact of changes in occupancy. WAULT
on an EPRA basis. In the opinion of the Directors, net debt is a useful
measure to monitor the overall cash position of the Group. Weighted average unexpired lease term to expiry.
Rental income
Income generated by the Group from rental properties. Wholly owned
Balances relating to properties that are 100% owned by The Unite Group plc or
its 100% subsidiaries.
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 EC4A 3HQ
Financial Advisers
J.P. Morgan Cazenove
25 Bank Street
London E14 5JP
Numis Securities
45 Gresham Street
London EC2V 7BF
Registrars
Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Financial PR Consultants
Powerscourt
1 Tudor Street
London, EC4Y OAH
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