TIDMUTG
RNS Number : 0829M
Unite Group PLC
26 July 2017
PRESS RELEASE
26 July 2017
THE UNITE GROUP PLC
("Unite Students", "Unite", the "Group", or the "Company")
FOCUS ON QUALITY AND PARTNERSHIPS DRIVING INCOME GROWTH
The Unite Group plc, the UK's leading manager and developer of
student accommodation, announces its half year results for the six
months to 30 June 2017.
HIGHLIGHTS
Strong financial performance: increased earnings, dividend and
NAV
EPRA earnings up 12% to GBP40.4 million or 18.0p (30 June 2016: GBP36.1
-- million, 16.3p)
Profit before tax GBP83.9 million or 36.7p basic EPS (30 June 2016: GBP122.8
million, 48.3p) due to lower level of revaluation surplus as a result of
-- yield compression in 2016
Interim dividend increased 22% to 7.3 pence per share (2016 interim: 6.0
pence). Policy remains to distribute 75% of full year recurring EPRA earnings
-- by way of dividend each year
-- EPRA NAV per share up 4% to 669 pence (31 December 2016: 646 pence)
Reduced leverage to 30% LTV with net debt at GBP696 million (31 December
-- 2016: 34% and GBP776 million)
Highest quality income, portfolio and University
relationships
-- 91% of rooms reserved at 25 July for 2017/18 (2016: 89%) at pricing that
supports full-year rental growth of 3.0-3.5%, with 59% of rooms let under
nominations agreements with an average unexpired term of six years
-- Increased alignment to strongest Universities and enhancement of portfolio
following disposals of GBP472 million (Unite share: GBP181 million), generating
a profit on sale of GBP5 million on a see-through basis
-- Acquisition of Aston University's 3,100-bed student village for GBP227
million (Unite share: GBP113 million), enhanced by 2017/18 nominations
agreement
-- Continued enhancement of customer service through 'Living with Unite'
app and initiatives to address major needs of students
Highly visible earnings growth trajectory
-- Focus on quality of brand, operating system, portfolio and University relationships
underpin future performance
-- Student numbers remain strong, with applicants expected to outnumber University
acceptances by around 150,000 in 2017/18
-- Focus on operational efficiencies delivering GBP5 million of full-year
savings (Unite share: GBP3.8 million) to deliver cost efficiency targets
in 2018 and fund ongoing customer service enhancements
-- Highly accretive development pipeline of over 8,500 beds combined with
stable rental growth could add 14 to 16 pence to earnings over the next
few years
Richard Smith, Chief Executive of Unite Students, commented:
"It has been a highly active and successful first half of the
year in which we have aligned the portfolio to the strongest
Universities and enhanced the service we provide, based on our
unique insight into the needs of today's students.
"Our high levels of service combined with our quality properties
in attractive locations have resulted in continued demand from both
first, second and third year students as well as from our
University partners, with reservations currently at record levels
of 91% for the 2017/18 academic year.
"Safety and fire safety is a key priority for us. Our buildings
are specifically designed for students and have a wide range of
fire detection and prevention measures in place, supported by our
fire management processes and fully trained staff. Following the
tragedy at Grenfell Tower, we have completed a full review of fire
safety of our estate, together with advice and support from the
relevant local fire authorities, our buildings remain safe for
occupation.
"Looking ahead, our market leading brand, scalable operating
platform and active development pipeline leave us on track to
deliver earnings and dividend growth for the full year."
PRESENTATION AND DATE OF CAPITAL MARKETS DAY EVENT
There will be a presentation for analysts this morning at 09:30.
The live webcast will be available at: www.unite-group.co.uk.
Please contact Bell Pottinger for further details. Dial-in number
for the presentation: + 44 20 3059 8125. Participants will need to
quote "Unite Students".
The Company announces that it will be hosting a Capital Markets
Day in Birmingham on 26 September 2017. Further details of the
event will be circulated in the coming days.
For further information, please contact:
Unite Students Tel: +44 117
Richard Smith / Joe Lister / Candice Macdonald 302 7109
Bell Pottinger Tel: +44 20
Clinton Manning / Elizabeth Snow 3772 2582
OVERVIEW
We have continued to make excellent progress with our focus on
quality: to build the leading brand in our sector based on
high-quality service, University partnerships and an unparalleled
property portfolio and to deliver sustainable and growing
earnings.
Our market leading brand is underpinned by our core purpose of
creating a Home for Success, based on operating buildings designed
specifically for students in the right locations with high levels
of services that our students and University partners value.
With 49,000 beds across 24 cities, we have the only scalable
operating platform in the sector and it is driving tangible
efficiencies and enhanced levels of service. This is demonstrated
in our financial results: EPRA earnings for the six months were up
12% to GBP40.4 million (30 June 2016: GBP36.1 million), an increase
of 10% on a per share basis to 18.0 pence (30 June 2016: 16.3
pence). EPRA NAV per share increased 4% over the six months to 669
pence (31 December 2016: 646 pence). We also ensure investment
discipline to maintain a strong capital structure, with leverage at
30% LTV at the end of the period (31 December 2016: 34%).
As a result of the ongoing growth in earnings and our transition
to become a REIT, we are increasing our interim dividend by 22%,
declaring an interim dividend of 7.3p (2016: 6.0p). Our dividend
policy remains to pay out 75% of recurring EPRA earnings each
year.
Our key financial performance indicators are set out below:
Financial highlights Six months Six months
to to Year to
30 Jun 2017 30 Jun 2016 31 Dec 2016
EPRA earnings GBP40.4m GBP36.1m GBP62.7m
EPRA EPS 18.0p 16.3p 28.4p
Adjusted EPRA EPS 18.0p 16.3p 27.7p*
Dividend per share 7.3p 6.0p 18.0p
Profit before tax GBP83.9m GBP122.8m GBP201.4m
Basic EPS 36.7p 48.3p 101.3p
EPRA NAV per share 669p 620p 646p
See-through LTV ratio 30% 37% 34%
* Adjusted EPRA EPS excludes the yield related element of the
USAF performance fee
The business continues to benefit from our focus of aligning our
portfolio with the strongest University locations. Reservations are
at record levels with growing numbers of returning students,
supported by our relationships with Universities and continued
investment in our service platform. Reservations for the 2017/18
academic year are currently 91% (2016: 89%), a record for this time
of year. 59% of this income is highly visible, underpinned by
University nominations agreements, which have a remaining average
life of six years with annual inflation-linked rental uplifts. Of
the remaining income, over two-thirds is from returning direct-let
students, demonstrating the value and broad appeal of our customer
proposition. Our focus on quality locations has resulted in over
85% of income now coming from the UK's best Universities, measured
both by traditional rankings and the recently published Teaching
Excellence Framework (TEF). We aim to increase this to 90% over the
next few years.
The strength of our brand and service was a major factor in our
successful acquisition of Aston University's entire accommodation
provision in February. Our partnership approach has also resulted
in a short-term nominations agreement for 2,000 of the 3,100-bed
portfolio for the 2017/18 academic year, delivering returns ahead
of original expectations. We are undertaking the planned capital
works to improve the standard of the accommodation and expect to
put a new long-term University partnership agreement in place in
time for the 2018/19 academic year.
We have actively managed our property portfolio using our deep
local market knowledge and customer insight to enhance the quality
of our properties, focusing on the strongest Higher Education
institutions where there is significant demand for PBSA, and where
we have strong relationships with Universities. In addition to the
Aston Student Village acquisition, we have further extended our
earnings accretive, high-quality development pipeline, adding a
development scheme in Manchester planned for delivery in 2020.
Through USAF, we acquired three forward funded sites, two in Durham
and one in Birmingham, that will be delivered in 2018 and 2019.
Taking advantage of positive investor sentiment, we disposed
GBP472 million (Unite share: GBP181 million) of investment assets
at a 3% premium to book value on a see-through basis, reducing our
presence in cities and locations with less demand or lower-ranked
Universities. We have also disposed of higher-priced studio
accommodation schemes, in line with our strategy of focusing on
more affordable, shared flats that mainstream students want to live
in, reflecting their clear preference to live within a community
where they can socialise, study together and make friends.
We have maintained our approach to capital discipline and
see-through LTV has reduced to 30% (31 December 2016: 34%),
primarily as a result of the conversion of the GBP90 million of
convertible bonds into equity that was completed in June 2017. We
expect LTV to return to our targeted level around the mid-30% level
as we deliver the remainder of our development pipeline. The
business completed its planned conversion to become a REIT on 1
January 2017, supporting our focus on earnings, capital discipline
and commitment to distribute earnings to shareholders.
Student numbers remain robust. We expect student intake in the
2017/18 academic year to be around 530,000, in line with the record
levels last year, with the proportion of applicants accepted onto
courses increasing to around 78%, demonstrating the flexibility
that Universities have to manage student recruitment proactively.
Whilst overall applications to UK Universities for 2017/18 are down
by 4%, this was driven mainly by: fewer applications from EU
students; students on medical related courses (such as nursing and
physiotherapy following a shift from grant to loan funding); and
older students who are choosing to remain in employment.
These reductions have been largely offset by growing numbers of
applications from UK 18-year olds and non-EU international
students, as Higher Education participation rates continue to grow
and the UK remains the second most popular destination for
international students, after the USA, thanks to the globally
recognised standard of UK Universities. We have continued to see
strongest application growth at the higher ranked Universities with
declines at lower ranked institutions. The strength of the sector
underpins a positive outlook for the student accommodation market
over the next few years with the most positive student number
growth expected within cities in which we operate.
The Teaching Excellence Framework (TEF) was introduced by the
Government in June 2017 to provide students with greater visibility
of the quality of teaching and student outcomes at Universities.
Universities are awarded either a gold, silver or bronze status
depending on their relative performance. Whilst the full impact of
the TEF will take some time to become clear, our insight supports
the view that it will become an increasingly relevant factor for
applicants making their choice of University. Our proactive
portfolio management activity means that our portfolio aligns well
against these rankings and we will use the rankings alongside other
measures of University quality to ensure we maintain alignment to
quality Universities.
Our business strategy remains consistent, focused and resilient.
We are continuing to invest in strengthening our market leading
brand and operating platform, particularly by leveraging our
proprietary technology, to create efficiencies of scale and deliver
higher operating margins which support our investment in enhancing
our customer service.
We also continue to conservatively manage our balance sheet by
ensuring that asset and financing strategies are aligned and
leverage is controlled.
We remain focused on creating a high-quality portfolio aligned
to the strongest Universities. The development pipeline and our
leading operational platform continues to provide visibility over
the future growth in earnings, adding to our long-term income
stability and rental growth. The Group remains well placed to
continue growing sustainable earnings in the years ahead.
FIRE SAFETY
The recent fire at Grenfell Tower has raised widespread concern
about the fire safety of high-rise buildings across the UK. Whilst
it is clear that multiple factors contributed to the tragedy at
Grenfell, one key focus has been the cladding materials on
high-rise buildings. In the wake of the fire, the Department of
Communities and Local Government (DCLG) quickly instituted a
programme to test Aluminium Composite Material (ACM) cladding
panels from buildings.
We submitted testing samples from our estate of 132 properties
to the Building Research Establishment (BRE) who are carrying out
the testing on behalf of the DCLG. DCLG informed us last week that
samples from six buildings did not meet the standards as set out in
the initial test. ACM cladding represents around 25% of the total
cladding on four of the buildings and around 70% on the remaining
two.
Since receipt of the test results, experts from local fire and
rescue authorities have undertaken a detailed inspection of the
overall design of all six properties and the safety measures and
procedures in place. In each case, they have concluded that,
subject to some minor adjustments (that have all now been
implemented), the buildings remain safe for occupation. The
buildings are: Sky Plaza and Concept Place in Leeds; Greetham
Street in Portsmouth; Olympic Way and St Pancras Way in London; and
Waverley House in Bristol.
DCLG has now announced a second phase of testing to establish
how in different combinations, several commonly used types of ACM
panel and insulation material behave in real fire situations. This
follows all test samples, from over 250 buildings (not Unite owned)
across the UK, not passing the initial test. The purpose of this
second phase is to understand the 'real world' performance of
different cladding systems. The outcome of the second phase testing
will be made public in the next one to two weeks.
As stage two of the testing programme progresses, we are working
closely with BRE and DCLG and are awaiting the results of the
second phase of testing to fully understand what long-term actions
might be required across our buildings. In the event that all ACM
cladding needs to be replaced and using current available
information, the number of beds we have available for part of the
2017/18 academic year could reduce by a maximum of 600 as we
undertake remedial work, with an earnings impact of GBP0.5 million
- GBP1.5 million and an anticipated cost of remedial work in the
region of GBP1 million - GBP2 million. All estimates represent the
cost to Unite Group and would be incurred across the 2017 and 2018
financial years. No provision has been recognised in the financial
statements at the half year due to the uncertainty.
The remedial measures we have already taken and our commitment
to take further action where necessary following the second phase
of BRE's testing demonstrate our determination to put the safety of
our residents first. Our buildings are modern, well maintained and
built with advanced fire management specifications and have
rigorous fire safety management and maintenance regimes. We work in
partnership with the Avon Fire Authority, as our Primary Fire
Authority, in the development of our fire systems and management
strategies and have been externally audited by the British Safety
Council in the past year.
An addendum to the interim statement sets out the fire safety
systems that are in place across our portfolio.
PERFORMANCE REVIEW
The Group continues to report on an IFRS basis and to also
present its performance in line with best practice recommended by
EPRA. The Performance Review focuses on EPRA measures as these are
our key internal measures and aid comparability across the real
estate sector.
In the first six months of 2017, we delivered a 12% increase in
EPRA earnings to GBP40.4 million or 18.0 pence per share (30 June
2016: GBP36.1 million, 16.3 pence per share). This increase was
driven by high occupancy, rental growth, operational efficiencies
driven by PRISM, active portfolio management and the latest
additions to the portfolio.
Summary income statement Six months Six months
to to Year to
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Unite's share of rental
income 92.4 86.9 159.1
Unite's share of property
operating expenses (21.7) (20.6) (42.8)
----------- ----------- --------
Net operating income (NOI) 70.7 66.3 116.3
----------- ----------- --------
NOI margin 76.5% 76.3% 73.1%
Management fees 7.5 7.0 14.0
Operating expenses (12.2) (12.2) (23.1)
Finance costs (23.6) (22.2) (45.9)
USAF acquisition and performance
fee 0.8 0.5 6.9
Development and other costs (2.8) (3.3) (5.5)
----------- ----------- --------
EPRA earnings 40.4 36.1 62.7
----------- ----------- --------
Yield related element of
performance fee - - (1.4)
Adjusted EPRA earnings 40.4 36.1 61.3
Adjusted EPRA EPS 18.0p 16.3p 27.7p
Rental income has increased by 6%, with organic rental growth
driving around half of the uplift and portfolio activity the rest.
The scalability of the operating platform has resulted in this
uplift in rental income delivering a 12% increase in EPRA
earnings.
Market leading service platform
PRISM, our proprietary technology platform, is now fully
operational and delivering enhanced customer service benefits and
is supporting the ongoing improvement in the Group's NOI margin to
76.5% for the six months (30 June 2016: 76.3%). The seasonal nature
of the academic year means that we expect the margin for the full
year to be around 74% and we remain on track to deliver further
improvements in NOI margins from these levels to meet our target of
75% in 2018.
As we continue to improve the scale and quality of the portfolio
through our refurbishment, development, acquisition and forward
fund activity, we expect to generate further efficiencies of scale.
Overheads have remained flat year on year and this is driving
further improvements in our overhead efficiency measure to 40 basis
points of gross asset value on an annualised basis and we remain on
track to deliver our target of 25-30 basis points in 2018 based on
current yields.
We have completed restructuring activity in the first half that
will deliver annual savings of GBP5 million (Unite share: GBP3.8
million) across operating costs and overheads and have incurred
one-off restructuring costs of GBP0.8 million (Unite share: GBP0.7
million) in the first half of the year. These savings have been
made possible by the efficiencies and improvements created from our
investment in PRISM, and will ensure that we hit our 2018
efficiency targets.
Finance costs have increased to GBP23.6 million (30 June 2016:
GBP22.2 million), driven by a higher level of average investment
debt during the six-month period. Whilst net debt at the end of
June is GBP696 million, GBP80 million lower than in December, this
reduction is largely due to the conversion of the GBP90 million
convertible bond at the end of June 2017 with minimal impact on
finance costs or cost of debt in the first half of the year. The
cost of debt remained stable at 4.2% (31 December 2016: 4.2%).
High occupancy, secured income and rental growth
Occupancy and rental growth continue to be driven by the quality
of our brand, the portfolio and its positioning alongside, and our
partnerships with, quality Universities. We will be operating
49,000 beds for the 2017/18 academic year and our lettings
performance has been strong throughout the sales cycle, with
reservations levels at 25 July at 91% for 2017/18 compared with 89%
at the same time last year.
The lettings position is underpinned by a higher level of
nominations agreements with 59% of beds secured by Universities
(2016: 57%), demonstrating their confidence in their ability to
recruit students, as well as the strength of our brand in the
Higher Education sector. We will maintain our focus on the
proportion of secured income and visible rental growth by
increasing the quality of the income and rental growth under
nominations agreements with strong University partners over the
next few years. This performance is supported by an improvement in
our independently verified University Trust Score that is now at
its highest ever level.
The reservations performance has also been supported by a high
level of rebookings from existing customers with 26% of direct-let
sales being made to students rebooking to live in Unite Students
accommodation. This growth means that over two-thirds of our
direct-let rooms are now let to students in their 2nd and 3rd years
choosing to live in purpose-built accommodation rather than private
rented sector housing, reflecting a growing trend in this
direction.
Our customer base for the 2016/17 academic year is made up of
66% UK and 34% international students (EU students make up 6% of
our direct-let customers). The Government has confirmed that all
existing EU students and those starting courses in 2017/18 will
have funding provided for the duration of their courses. Whilst
there has been a slight shift in the make-up of applications, we
expect this split to remain broadly consistent in 2017/18.
The PRISM booking system has led to more streamlined, automated
processes with faster and higher levels of conversion from offered
bookings to reserved sales. As a result of our positive sales
performance, we expect rental growth for the full year to be
between 3.0-3.5%, in line with the average over the past five
years. This rental growth is being delivered across our nominations
agreements and direct-let accommodation and we expect this trend to
continue over the coming few years.
Service enhancements
As our operating system continues to drive operational
efficiencies, we remain committed to reinvesting a significant
proportion of savings in enhanced customer services that support
our purpose in creating a Home for Success. Based on insights
generated from regular student feedback, this year we are
introducing a number of valuable new initiatives such as
improvements to our digital engagement with students through our
'Living with Unite' app, increasing Wi-Fi speeds to 70Mbps in all
of our buildings and adding an additional 100 student ambassadors
to provide peer-to-peer support and employment opportunities for
students.
In addition, we have introduced new practices and initiatives to
address major priorities for applicants and students, beyond
accommodation. We have created a framework that is being adopted by
University partners to help students settle in at University and
support their resilience. By helping students through what can be a
challenging transition, this will help Universities with student
retention. We have also recently formed a partnership with the
National Centre for Universities and Business and Jisc (a
membership organisation providing digital solutions for education
and research) to create a new app-based digital platform to help
link students with businesses and charities to find valuable work
experience and intern opportunities whilst at University.
Ongoing service enhancements are important to be able to deliver
value for money and to maintain an ongoing differentiation in
service levels to students and Universities. Our independent
customer satisfaction scores remain consistently high and in the
top third of benchmark European service companies. The enhancements
are being funded by savings generated by PRISM and are consistent
with our efficiency targets in 2018.
Property portfolio growth
EPRA NAV per share increased by 4% to 669 pence at 30 June 2017
(31 December 2016: 646 pence). In total, EPRA net assets were
GBP1,616 million at 30 June 2017, up from GBP1,557 million six
months earlier. Net assets on an IFRS basis were GBP1,598 million
at 30 June 2017 (31 December 2016: GBP1,452 million).
The main drivers of the GBP59 million (23 pence per share)
movement in EPRA NAV were:
-- The growth in the value of the investment portfolio
as a result of rental growth (+GBP30 million, +12
pence)
-- Growth in the value of the development portfolio
(+GBP11 million, +4 pence) as a result of planning
consents and progress on site
-- The positive impact of retained profits after dividends
paid (+GBP18 million, +7 pence)
The valuation of our property portfolio at 30 June 2017 on a
see-through basis (i.e. including our share of gross assets held in
USAF and LSAV) was GBP2,343 million (31 December 2016: GBP2,277
million). The GBP66 million increase in portfolio value reflects
the valuation movements outlined above together with capital
expenditure on developments of GBP69 million, acquisitions of
GBP118 million and disposals of GBP181 million.
Our focus on the strongest University locations means that our
portfolio is well placed to deliver continued rental growth.
Summary balance sheet
30 June 2017 30 June 2016 31 December
2016
-------------------------- -------------------------- --------------------------
Wholly Share Total Wholly Share Total Wholly Share Total
owned of GBPm owned of GBPm owned of GBPm
GBPm Fund/JV GBPm Fund/JV GBPm Fund/JV
GBPm GBPm GBPm
Rental properties 1,051 1,015 2,066 1,062 869 1,931 1,062 1,023 2,085
Properties
under development 263 14 277 222 110 332 185 7 192
------- -------- ------- ------- -------- ------- ------- -------- -------
Total property 1,314 1,029 2,343 1,284 979 2,263 1,247 1,030 2,277
------- -------- ------- ------- -------- ------- ------- -------- -------
Adjusted net
debt (425) (271) (696) (514) (313) (827) (432) (344) (776)
Other assets
/ (liabilities) (17) (14) (31) (16) (13) (29) (15) (14) (29)
Convertible
bond - - - 84 - 84 85 - 85
------- -------- ------- ------- -------- ------- ------- -------- -------
EPRA net assets 872 744 1,616 838 653 1,491 885 672 1,557
======= ======== ======= ======= ======== ======= ======= ======== =======
The proportion of the property portfolio that is income
generating is 88%, slightly down from 92% at 31 December 2016, with
12% now under development as we have made progress with the
development pipeline. We will continue to manage the development
weighting of our balance sheet to remain within our internal cap of
20% going forward. Geographically, 45% of the investment portfolio
(on a see-through basis) is located in London with the remainder in
strong regional locations.
Student accommodation yields
The level of transactions in the student accommodation sector
has remained high, with GBP1.9 billion of assets traded in the
first half of the year, and this high volume of transactions is
expected to continue over the remainder of the year. Competition
for those portfolios has remained strong from a variety of
institutional, long-term investors who have been prepared to pay a
modest premium to build scale and acquire portfolios of
accommodation. No portfolio premium is reflected in the Unite Group
valuations.
The average net initial yield across the portfolio is 5.3%
compared to 5.4% at December 2016. The change in yield is the
result of changes to the mix of the portfolio following the
acquisition of the Aston Student Village and portfolio disposals
made in the first six months of the year. Investor appetite remains
strongest for assets in good locations, close to high-performing
Universities and this has led to a further differentiation in
yields between assets, although the average yield is unchanged on a
like-for-like basis.
An indicative spread of direct let yields at 30 June 2017 by
location is outlined below:
30 Jun 30 Jun 31 Dec
2017 2016 2016
London 4.25-5.0% 4.5-5.25% 4.5-5.0%
Prime provincial 5.25-5.75% 5.25-5.8% 5.25-5.75%
Provincial 6.0-6.75% 6.0-6.5% 6.0-6.5%
Buildings designed for students
The focus of our property activity is to provide buildings
designed specifically for students in the best locations alongside
high-performing Universities to support our brand. We continually
look to enhance the specification of our estate, using technology
to enhance customer service and drive efficiency savings through
energy and water savings, enhanced Wi-Fi speeds and new features to
improve the living experience. Our development and portfolio
activity is designed to support this strategic approach to ensure
that the portfolio is best placed to drive full occupancy and
rental growth in the medium term.
Development activity
Development activity continues to be a significant driver of
growth in future earnings and NAV. Returns on new projects in
strong regional locations remain attractive and within our target
range of 8.0-8.5% yield on cost. Returns on potential new projects
in London remain below our hurdle rate of 7.0% due principally to
higher alternative use values for prospective sites and planning
levies. The London development market remains competitive for all
student accommodation developers and the pipeline of new schemes is
now limited. We will continue to monitor the London market and
deploy capital if we can generate returns in line with our hurdle
rates.
The 2017 development pipeline is nearing completion on time and
to budget. We are opening 2,150 beds across five properties, with
100% of the rooms let to students attending high and mid-ranked
Universities and 62% of the beds secured under nominations
agreement, supporting our ongoing focus on quality of income. These
openings will add around 3 pence per share to 2018 earnings.
In the first half of 2017, we have secured a site in Manchester
on a subject-to-planning basis - our first site for delivery in
2020, in line with our target returns. We have also secured three
forward funded developments through USAF, two in Durham for
delivery in 2018 and one in Birmingham for delivery in 2019. We
will continue to deploy capital into development and forward fund
opportunities that meet our target returns and enhance the quality
of our portfolio.
We have secured planning permission on St Vincent's, Sheffield
during the first half of 2017 and have commenced construction,
under fixed price contracts, on all of the 2018 deliveries. We will
lock into construction contracts on the 2019 pipeline over the next
six to nine months.
Secured development pipeline
Secured Total Total Capex Capex Forecast Forecast
beds completed development in remaining NAV yield
value costs period remaining on cost
No. GBPm GBPm GBPm GBPm GBPm %
Wholly owned
2017 completions
St Leonard's Edinburgh 581 65 41 10 3 9 9.5%
Millennium
Way Coventry 391 34 24 10 2 4 8.8%
Tara House Liverpool 776 63 46 10 3 5 9.3%
2018 completions
Newgate
Street Newcastle 575 45 37 4 25 7 8.5%
Brunel House Bristol 232 28 21 0 10 5 8.5%
Chaucer
House Portsmouth 484 41 33 5 22 6 8.0%
St Vincent's Sheffield 600 47 37 8 29 10 8.2%
International
House Birmingham 586 48 38 10 26 10 8.0%
2019 completions
Skelhorne
Street Liverpool 1,085 92 74 5 55 15 8.0%
Old BRI(1) Bristol 751 96 79 1 61 19 8.4%
Constitution
Street Aberdeen 600 50 41 - 34 2 8.4%
2020 completions
New Wakefield
Street(1) Manchester 552 67 52 1 51 15 8.2%
-------- ----------- ------------- -------- ----------- ----------- ---------
Total wholly owned 7,213 674 521 64 322 106 8.5%
-------- ----------- ------------- -------- ----------- ----------- ---------
USAF
2017 completions
Lutton
Court Edinburgh 237 30 29 6 3 2 5.6%
Beech
House Oxford 167 25 18 6 2 5 5.4%
2018
completions
Old Hospital Durham 363 37 32 12 20 5 6.1%
Houghall
College Durham 222 20 16 3 13 4 6.1%
2019
completions
Battery
Park Birmingham 418 43 37 0 37 6 6.6%
-------- ----------- ------------- -------- ----------- ----------- ---------
Total
USAF 1,407 153 131 27 75 21 6.0%
-------- ----------- ------------- -------- ----------- ----------- ---------
Unite share of
USAF - 36 31 6 18 5 6.0%
======== =========== ============= ======== =========== =========== =========
Total pipeline
(Unite share) 8,620 710 552 70 339 111 8.3%
======== =========== ============= ======== =========== =========== =========
(1) subject to obtaining planning consent
The secured pipeline remains a significant source of value
creation and the following table summarises the potential impact on
future NAV and earnings per share.
Illustrative returns
Future
NAVps Future EPS
Secured regional projects (wholly
owned) 44 14-16
Secured USAF projects (our share) 2 -
--------- ------------
Total secured pipeline 46 14-16
========= ============
University partnerships
In addition to growing the value of income underpinned by
University backed nominations agreement, we have made further
progress with our strategy of delivering ongoing growth through
partnerships with Universities. In February, we acquired Aston
University's entire accommodation provision, Aston Student Village,
totalling 3,100 beds, for GBP227 million (Unite share: GBP113
million) in LSAV, our 50:50 joint venture with GIC, Singapore's
sovereign wealth fund. The acquisition, which was supported by
Aston University, demonstrates the depth of our relationship with
the University and the strength of Unite Students brand amongst
Universities. Since completion, we have entered into a one-year
agreement for 2,000 of the beds for the 2017/18 academic year. The
remainder of the beds have been sold on a direct-let basis and the
portfolio is now fully reserved for the forthcoming academic year.
The refurbishment works to common areas and shared kitchens are
well underway and, along with the lettings performance, are
supporting financial performance ahead of plan. We are continuing
to deepen our partnership with Aston University and are working
towards a longer-term commitment in 2018/19.
Building on our reputation with Universities, we are also in
discussion with several other Universities to develop opportunities
to grow our University partnership business. These opportunities to
work in partnership with high-quality Universities in the UK are
expected to drive long-term secure income.
Asset disposals
During the first six months of 2017, GBP472 million of assets
across 4,800 beds (Unite share: GBP181 million) have been sold in
third-party transactions, generating a GBP5 million profit on a
see-through basis. The assets were selected for disposal based on
their relative performance and forecast future rental growth. The
disposals form part of our strategy to align our portfolio to high
and mid-ranked Universities and to focus on more affordable cluster
flat accommodation. Disposal proceeds have been used to fund our
share of the ASV acquisition and our ongoing investment into the
2019 and 2020 development pipeline.
FINANCIAL PERFORMANCE
Income statement
EPRA earnings per share is our key income performance measure
and the detail of this performance is set out in the Performance
Review section of this report. The following table shows the
further elements that are included within the International
Financial Reporting Standards profit after tax measure.
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
EPRA earnings 40.4 36.1 62.7
Valuation gains and profit
/ loss on disposal 42.2 84.2 136.3
Changes in valuation of
interest rate swaps and
debt break costs 0.3 - (1.0)
Minority interest & tax 1.0 2.5 3.4
------- ------- -------
Profit before tax 83.9 122.8 201.4
======= ======= =======
EPRA earnings per share 18.0 16.3p 28.4p
Basic earnings per share 36.7p 48.3p 101.3p
EPRA earnings of GBP40.4 million for the six months to 30 June
2017 (30 June 2016: GBP36.1 million) is stated after deducting
current tax charges, share option costs and abortive / pre-contract
development spend. A full reconciliation of EPRA earnings to profit
attributable to the owners of the parent company is given in
Section 2 of the financial statements. The reduction in profit
before tax in the first six months of 2017 is the result of lower
valuation gains due to property valuation yield compression
experienced in 2016.
Cash flow and net debt
The Operations business has generated GBP38 million of net cash
in the six months to 30 June 2017 (30 June 2016: GBP32 million) and
see-through net debt decreased to GBP696 million (31 December 2016:
GBP776 million). The key components of the movement in net debt
were the operational cash flow and net proceeds from portfolio
activity of GBP30 million, the conversion of GBP90 million of
convertible bonds into equity offset by development capital
expenditure of GBP65 million and dividends paid of GBP23
million.
Dividend
We are declaring an interim dividend payment of 7.3 pence per
share (30 June 2016: 6.0 pence), an increase of 22% over 2016. Of
the 7.3 pence dividend, 6.0 pence will comprise a Property Income
Distribution (PID). Our dividend policy remains to pay out 75% full
year recurring EPRA earnings each year.
The dividend will be paid on 3 November 2017 to shareholders on
the register at close of business on 6 October 2017.
Tax and REIT conversion
The Group converted to REIT status and is exempt from tax on its
property business, with effect from 1 January 2017. The deferred
tax liability relating to unrealised gains on joint venture
investments of GBP17.0 million, which are not exempt from tax,
exceeds the deferred tax asset relating to tax adjusted losses
carried forward of GBP11.9 million. As the losses can be set
against gains as they arise, the deferred tax asset relating to the
losses can be recognised in full against deferred tax
liabilities.
Certain activities, primarily the investment management of joint
ventures, whilst expected to fall within the limits of the balance
of business tests, will incur a tax charge which we expect to be in
the region of GBP2-3 million per annum.
Debt financing
As in previous years, we continue to focus on controlling
gearing levels in line with our targets, extending debt maturities
and minimising financing costs whilst ensuring that asset and
financing strategies are properly aligned.
Key debt statistics (see-through 30 Jun 30 Jun 31 Dec
basis) 2017 2016 2016
Net debt GBP696m GBP827m GBP776m
LTV 30% 35%* 34%
Average debt maturity 5.2 years 5.5 years 4.9 years
Average cost of debt 4.2% 4.4% 4.2%
Proportion of investment debt
at fixed rate 93% 84% 100%
The Group's see-through LTV reduced to 30% (31 December 2016:
34%). The reduction in net debt of GBP80 million has been driven
primarily by portfolio activity, the conversion of the GBP90
million of convertible loan notes into equity and the deployment of
capital into development activity. We will continue to manage our
gearing proactively and intend to maintain our LTV around the
mid-30% level going forward, assuming current yields. With greater
focus on the earnings profile of the business, we are continuing to
monitor our net debt to EBITDA ratio, which we expect to remain
within our targeted range of 6-7x.
Interest rate hedging arrangements and cost of debt
Our average cost of debt has remained at 4.2% (31 December 2016:
4.2%) and the Group has 93% of investment debt subject to a fixed
interest rate (31 December 2016: 100%) for an average term of 5.2
years (31 December 2016: 4.9 years). We will continue to
proactively manage debt maturity profiles and to lock into longer
term debt at rates below our current average cost of debt.
Convertible bond
The Group's GBP90 million convertible bond fully converted into
equity in June. The conversion has resulted in a reduction in net
debt of GBP90 million and the issue of 18,593,589 ordinary shares
in Unite Group plc. The reduction in net debt has reduced LTV by 4%
points. The additional shares were reflected in the calculation of
NAV per share in December 2016.
Adjusted EPRA EPS has been diluted by 0.2p in the first half of
2017 and this is expected to be around 0.5p for the whole year.
Funds and joint ventures
The table below summarises the key financials at 30 June 2017
for each vehicle:
Property Net Other Net assets Unite share Maturity Unite
Assets debt assets GBPm of NAV share
GBPm GBPm GBPm GBPm
USAF 2,076 (499) (18) 1,559 366 Infinite 23%
LSAV 1,084 (307) (21) 756 378 2022 50%
USAF and LSAV have performed well in the six months to 30 June
2017 in line with the broader performance of the business. The
secondary market for USAF units continues to operate effectively
with GBP35 million of units trading so far this year at a small
premium to NAV. There have been no redemption requests from
investors during 2017.
USAF has approximately GBP90 million of acquisition capacity
following disposals and the acquisition of three forward funded
assets during the first half of the year, comprising 1,000 beds in
Birmingham and Durham that will be opened in 2018 and 2019.
LSAV funded the acquisition of Aston Student Village from new
equity and has GBP125 million remaining available for deployment
into London development opportunities.
Fees
During the six months to June 2017, the Group recognised net
fees of GBP8.3 million from its fund and asset management
activities (30 June 2016: GBP8.1 million) as follows:
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
USAF
Asset management fee 5.2 5.0 10.0
Acquisition fee 0.3 0.4 0.4
Net performance fee - - 6.5
LSAV
Asset and property management
fee 2.3 2.0 4.0
Acquisition fee 0.5 - -
Development management fee - 0.7 1.0
Total fees 8.3 8.1 21.9
------- ------- -------
The overall level of recurring asset management fees has
increased to GBP7.5 million (30 June 2016: GBP7.0 million) as a
result of the growth in portfolio size and value. No USAF
performance fee has been recognised in the first half of the year
(30 June 2016: GBPnil) and no fee is expected over the remainder of
2017 as a result of the strong growth in net asset value of the
fund in 2015 and 2016, making it more challenging to reach the
hurdle rate required to generate a fee.
Outlook
The outlook for the business remains positive. The fundamentals
of the sector provide a supportive backdrop, as UK Universities
continue to demonstrate their ability to adapt to a changing
landscape and retain their globally recognised status. The student
intake in 2017/18 is expected to be in line with the record level
seen in 2016/17, driving another year of overall student number
growth of around 20,000 students.
We continue to deliver a strong financial performance against
all of our key metrics and remain well placed to deliver further
growth in underlying earnings over the years to come. This
financial performance is supported by our clear strategy to align
our portfolio with the best performing Universities in the UK,
providing high-quality service to students and leveraging this to
strengthen our relationships with those Universities.
We see opportunities to build on our market leading position,
enhancing our operating platform, delivering growth through
development, forward funds, acquisitions and further University
partnerships.
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 EU
-- The interim management report includes a fair review of the information required by:
(a) 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
(b) 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 Officer Chief Financial Officer
26 July 2017
Introduction and table of contents
These financial statements are prepared in accordance with IFRS.
The Board of Directors also present the Group's performance on the
basis recommended for real estate companies by the European Public
Real Estate Association (EPRA). The reconciliation between IFRS
performance measures and EPRA performance measures can be found in
Section 2. 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.
We have grouped the notes to the financial statements under
three main headings:
-- Results for the period, including segmental information, EPRA
earnings and EPRA NAV
-- Asset management
-- Funding
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
Consolidated income statement
For the 6 months to 30 June 2017
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2017 2016 2016
Total Total Total
Note GBPm GBPm GBPm
Rental income 2.4 53.5 54.5 97.1
Property sales and other income 2.4 9.2 8.8 23.6
----------------------------------- ---- --------- --------- -------------
Total revenue 62.7 63.3 120.7
Cost of sales (21.0) (22.6) (44.9)
Operating expenses (12.9) (12.8) (25.0)
=================================== ==== ========= ========= =============
Results from operating activities 28.8 27.9 50.8
Gain / (Loss) on disposal of
property 0.5 (0.3) 0.4
Net valuation gains on property 3.1a 28.3 48.7 77.2
Profit before net financing
costs 57.6 76.3 128.4
=================================== ==== ========= ========= =============
Loan interest and similar charges (9.3) (9.9) (20.9)
Swap cancellation costs - - (1.0)
=================================== ==== ========= ========= =============
Finance costs (9.3) (9.9) (21.9)
Finance income - - 0.1
=================================== ==== ========= ========= =============
Net financing costs (9.3) (9.9) (21.8)
=================================== ==== ========= ========= =============
Share of joint venture profit 3.3a 35.6 56.4 94.8
=================================== ==== ========= ========= =============
Profit before tax 83.9 122.8 201.4
Current tax (0.6) (1.5) (2.3)
Deferred tax - (13.0) 27.3
=================================== ==== ========= ========= =============
Profit for the period 83.3 108.3 226.4
=================================== ==== ========= ========= =============
Profit for the period attributable
to
Owners of the parent company 2.2c 82.4 106.7 224.0
Minority interest 0.9 1.6 2.4
=================================== ==== ========= ========= =============
83.3 108.3 226.4
=================================== ==== ========= ========= =============
Earnings per share
Basic 2.2c 36.7 48.3p 101.3p
=================================== ==== ========= ========= =============
Diluted 2.2c 36.5 45.2p 94.7p
=================================== ==== ========= ========= =============
Consolidated statement of comprehensive income
For the 6 months to 30 June 2017
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
Profit for the period 83.3 108.3 226.4
Movements in effective hedges 1.4 (14.5) (9.2)
* Deferred tax in relation to movements in effective
hedges - 2.6 (1.1)
Share of joint venture movements in
effective hedges 0.9 (2.9) (1.4)
* Deferred tax in relation to share of joint venture
movements in effective hedges - 0.5 (0.5)
Other comprehensive income / (expense)
for the period 2.3 (14.3) (12.2)
Total comprehensive income for the
period 85.6 94.0 214.2
========================================================== ========= ========= ============
Attributable to
Owners of the parent company 84.5 92.4 211.8
Minority interest 1.1 1.6 2.4
========================================================== ========= ========= ============
85.6 94.0 214.2
========================================================== ========= ========= ============
All other comprehensive income may be classified as profit and
loss in the future.
Consolidated balance sheet
At 30 June 2017
Unaudited Unaudited
30 June 30 June 31 December
2017 2016 2016
Note GBPm GBPm GBPm
Assets
Investment property 3.1a 1,051.1 1,062.3 1,061.6
Investment property under development 3.1a 263.4 221.6 184.6
Investment in joint ventures 3.3a 765.2 672.2 692.9
Other non-current assets 30.8 28.8 29.8
Deferred tax asset - 0.6 -
====================================== ==== ========= ========= ===========
Total non-current assets 2,110.5 1,985.5 1,968.9
====================================== ==== ========= ========= ===========
Inventories 3.2 3.7 6.6 2.9
Trade and other receivables 54.8 47.4 77.9
Cash and cash equivalents 35.3 31.0 42.7
====================================== ==== ========= ========= ===========
Total current assets 93.8 85.0 123.5
====================================== ==== ========= ========= ===========
Total assets 2,204.3 2,070.5 2,092.4
====================================== ==== ========= ========= ===========
Liabilities
Borrowings 4.1 (1.3) (1.4) (1.3)
Trade and other payables (104.3) (97.3) (123.7)
Current tax creditor (2.2) (2.2) (2.4)
====================================== ==== ========= ========= ===========
Total current liabilities (107.8) (100.9) (127.4)
====================================== ==== ========= ========= ===========
Borrowings 4.1 (459.1) (543.9) (473.5)
Interest rate swaps 4.2 (10.2) (16.8) (11.6)
Deferred tax liability (4.5) (41.1) (4.4)
Total non-current liabilities (473.8) (601.8) (489.5)
====================================== ==== ========= ========= ===========
Total liabilities (581.6) (702.7) (616.9)
====================================== ==== ========= ========= ===========
Net assets 1,622.7 1,367.8 1,475.5
====================================== ==== ========= ========= ===========
Equity
Issued share capital 60.2 55.5 55.5
Share premium 579.2 493.5 493.6
Merger reserve 40.2 40.2 40.2
Retained earnings 931.6 762.7 867.9
Hedging reserve (12.7) (17.1) (15.0)
Equity portion of convertible
instrument - 9.4 9.4
====================================== ==== ========= ========= ===========
Equity attributable to the owners
of the parent company 1,598.5 1,344.2 1,451.6
Minority interest 24.2 23.6 23.9
====================================== ==== ========= ========= ===========
Total equity 1,622.7 1,367.8 1,475.5
====================================== ==== ========= ========= ===========
Consolidated statement of changes in shareholders' equity
For the 6 months to 30 June 2017
Attributable
to
Equity owners
Issued portion of
share Share Merger Retained Hedging of convertible the Minority
capital premium reserve earnings reserve instrument parent interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2017 55.5 493.6 40.2 867.9 (15.0) 9.4 1,451.6 23.9 1,475.5
(Unaudited)
======== ======== ======== ========== ======== =============== ============ ========= =======
Profit for the
period - - - 82.4 - - 82.4 0.9 83.3
Other
comprehensive
income
for the period - - - - 2.3 - 2.3 - 2.3
======== ======== ======== ========== ======== =============== ============ ========= =======
Total
comprehensive
income
for the period - - - 82.4 2.3 - 84.7 0.9 85.6
Shares issued 4.7 82.7 - - - - 87.4 87.4
Deferred tax
on share based - - - - - -
payments - - -
Fair value of
share based
payments - - - 0.6 - - 0.6 - 0.6
Own shares
acquired - - - (1.9) - - (1.9) - (1.9)
Redemption of
convertible
bond - 2.9 - 5.8 - (9.4) (0.7) - (0.7)
Dividends paid
to owners
of the parent
company - - - (23.2) - - (23.2) - (23.2)
Dividends to
minority
interest - - - - - - - (0.6) (0.6)
=============== ======== ======== ======== ========== ======== =============== ============ ========= =======
At 30 June 2017 60.2 579.2 40.2 931.6 (12.7) - 1,598.5 24.2 1,622.7
Attributable
to
Equity owners
Issued portion of
share Share Merger Retained Hedging of convertible the Minority
capital premium reserve earnings reserve instrument parent interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2016 55.5 493.3 40.2 679.5 (2.8) 9.4 1,275.1 22.6 1,297.7
(Unaudited)
======== ======== ======== ========== ======== =============== ============ ========= =======
Profit for the
period - - - 106.7 - - 106.7 1.6 108.3
Other
comprehensive
expense
for the period - - - - (14.3) - (14.3) - (14.3)
======== ======== ======== ========== ======== =============== ============ ========= =======
Total
comprehensive
income
for the period - - - 106.7 (14.3) - 92.4 1.6 94.0
Shares issued - 0.2 - - - - 0.2 - 0.2
Deferred tax
on share based
payments - - - - - - - - -
Fair value of
share based
payments - - - (0.3) - - (0.3) - (0.3)
Own shares
acquired - - - (2.2) - - (2.2) - (2.2)
Dividends paid
to owners
of the parent
company - - - (21.0) - - (21.0) - (21.0)
Dividends to
minority
interest - - - - - - - (0.6) (0.6)
=============== ======== ======== ======== ========== ======== =============== ============ ========= =======
At 30 June 2016 55.5 493.5 40.2 762.7 (17.1) 9.4 1,344.2 23.6 1,367.8
Attributable
to
Equity owners
Issued portion of
share Share Merger Retained Hedging of convertible the Minority
capital premium reserve earnings reserve instrument parent interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2016 55.5 493.3 40.2 679.5 (2.8) 9.4 1,275.1 22.6 1,297.7
Profit for the
period - - - 224.0 - - 224.0 2.4 226.4
Other
comprehensive
expense
for the period - - - - (12.2) - (12.2) - (12.2)
======== ======== ======== ========== ======== =============== ============ ========= =======
Total
comprehensive
income
for the period - - - 224.0 (12.2) - 211.8 2.4 214.2
Shares issued - 0.3 - - - - 0.3 - 0.3
Deferred tax
on share based
payments - - - (0.1) - - (0.1) - (0.1)
Fair value of
share based
payments - - - 1.2 - - 1.2 - 1.2
Own shares
acquired - - - (2.5) - - (2.5) - (2.5)
Dividends paid
to owners
of the parent
company - - - (34.2) - - (34.2) - (34.2)
Dividends to
minority
interest - - - - - - - (1.1) (1.1)
=============== ======== ======== ======== ========== ======== =============== ============ ========= =======
At 31 December
2016 55.5 493.6 40.2 867.9 (15.0) 9.4 1,451.6 23.9 1,475.5
=============== ======== ======== ======== ========== ======== =============== ============ ========= =======
Consolidated statement of cash flows
For the 6 months to 30 June 2017
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
===================================== ========= ========= ============
Cash flows from operating activities 9.2 26.8 70.3
Cash flows from taxation (0.7) (1.6) (2.2)
Investing activities
Proceeds from sale of investment
property 29.3 (0.3) 126.1
Loans to joint ventures - - -
Dividends received 17.5 15.1 29.2
Interest received - - 0.1
Investment in joint ventures (48.6) - -
Acquisition of intangible assets (3.2) (4.5) (8.2)
Acquisition of property (42.8) (63.5) (131.0)
Acquisition of plant and equipment (1.0) (1.4) (3.1)
====================================== ========= ========= ============
Cash flows from investing activities (48.8) (54.6) 13.1
====================================== ========= ========= ============
Financing activities
Interest paid in respect of
financing activities (12.0) (11.3) (23.7)
Ineffective swap payments - - -
Swap cancellation costs - - (1.0)
Proceeds from the issue of share
capital 0.3 0.2 0.3
Payments to acquire own shares (1.9) (2.2) (2.5)
Proceeds from non-current borrowings 71.0 99.0 99.0
Repayment of borrowings (0.7) (30.7) (102.3)
Dividends paid to the owners
of the parent company (23.2) (21.0) (34.2)
Dividends paid to minority interest (0.6) (0.6) (1.1)
====================================== ========= ========= ============
Cash flows from financing activities 32.9 33.4 (65.5)
====================================== ========= ========= ============
Net increase/(decrease) in cash
and cash equivalents (7.4) 4.0 15.7
Cash and cash equivalents at
start of period 42.7 27.0 27.0
====================================== ========= ========= ============
Cash and cash equivalents at
end of period 35.3 31.0 42.7
====================================== ========= ========= ============
Notes to the interim financial statements
Section 1: Basis of preparation
This section details the Group's accounting policies that relate
to the interim financial statements.
Basis of preparation
This condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU.
As required by the Disclosure and Transparency Rules of the
Financial Conduct Authority, the condensed set of financial
statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the company's
published consolidated financial statements for the year ended 31
December 2016.
The comparative figures for the financial year ended 31 December
2016 are not the company's statutory financial statements for that
financial year. Those financial statements have been reported on by
the company's auditor and delivered to the registrar of companies.
The report of the auditor was (i) unqualified, (ii) did not include
a reference to any matter to which the auditor drew attention by
way of emphasis without qualifying their report, and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The Board has continued to consider the principal risks and the
appropriateness of risk management systems and consider that the
principal risks remain largely consistent with those noted in the
Annual Report for the year ended 31 December 2016 (pages 26 to 29).
These are summarised as follows:
i. Reduction in demand as a result of a change in government
policy or changes in behaviour of students
ii. Increased competition leading to higher levels of new supply
iii. Reputational damage
iv. Property cycle risk
v. Development risks
vi. Availability of finance, change in interest rate and risks associated with fund management.
Going concern
The Group's business activities, together with the factors
likely to affect its future development and position are set out in
the Business Review.
The Group has prepared cash flow forecasts to the end of 2019.
The Group has sufficient levels of cash headroom to meet all of its
commitments. The Group continues to maintain positive relationships
with its lending banks and has historically been able to secure
facilities before maturity dates. The Group is in full compliance
with its borrowing covenants and is forecast to continue to do
so.
The Directors consider that the Group has adequate resources to
continue in operational existence for the foreseeable future. The
Group financial statements have therefore been prepared on a going
concern basis.
Seasonality of operations
The results of the Group's operation 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. The Group
mitigates the seasonal impact by the use of short-term summer
tenancies. However, the second half-year typically has lower
revenues from the existing portfolio.
Conversely, the Group's build cycle for new properties is to
plan to complete construction shortly before the start of the
academic year in September each year. The addition of these
completed properties in the second half increases the Operations
segment's revenues in that period.
Section 2: Results for the period
This section focuses on the results and performance of the Group
and provides a reconciliation between the primary statements and
EPRA performance measures. On the following pages you will find
disclosures explaining the Group's results for the period,
segmental information, earnings and net asset value (NAV) per
share.
The Group uses EPRA earnings and NAV movement as key comparable
indicators across other real estate companies in Europe.
Performance measures
Unaudited Unaudited
30 June 30 June 31 December
2017 2016 2016
Note GBP GBP GBP
=================================== ==== ========= ========= ===========
Earnings basic 2.2c 82.4m 106.7m 224.0m
Earnings diluted 2.2c 83.9m 108.3m 227.7m
Basic earnings per share (pence) 2.2c 36.7p 48.3p 101.3p
Diluted earnings per share (pence) 2.2c 36.5p 45.2p 94.7p
Net assets basic 2.3c 1,598.5 1,344.2 1,451.6m
Basic NAV per share (pence) 2.3d 663p 605p 653p
=================================== ==== ========= ========= ===========
EPRA performance measures
Unaudited Unaudited
30 June 30 June 31 December
2017 2016 2016
Note GBP GBP GBP
================================= ==== ========= ========= ===========
EPRA earnings 2.2a 40.4m 36.1m 62.7m
EPRA earnings per share (pence) 2.2c 18.0p 16.3p 28.4p
Adjusted EPRA earnings 2.2a 40.4m 36.1m 61.3m
Adjusted EPRA earnings per share
(pence) 2.2c 18.0p 16.3p 27.7p
EPRA NAV 2.3a 1,616.3m 1,491.5m 1,557.3m
EPRA NAV per share (pence) 2.3d 669p 620p 646p
EPRA NNNAV 2.3c 1,615.4m 1,418.7m 1,517.3m
EPRA NNNAV per share (pence) 2.3d 668p 589p 630p
--------------------------------- ---- --------- --------- -----------
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 2017 and 30 June 2016 and for the year ended
31 December 2016 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.
The Group's properties are located exclusively in the United
Kingdom. The Board therefore does not consider that the Group has
meaningful geographical segments.
2.2 Earnings
IFRS profits include unrealised investment property gains and
losses. The Group's performance is also presented on the basis
recommended for real estate companies by the European Public Real
Estate Association (EPRA). EPRA earnings excludes these unrealised
gains and losses such that users of the financials are able to see
the extent to which dividend payments (dividend per share) are
underpinned by earnings arising from purely operational activity.
The reconciliation between Profit attributable to owners of the
parent company and EPRA earnings is available in note 2.2 (b).
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 30 - 33 of the 2016
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.
a) EPRA earnings
Unaudited 30 June 2017
Group
on see
through
UNITE Share of joint ventures basis
============================
Total USAF LSAV Total Total
GBPm GBPm GBPm GBPm GBPm
============================================ ========== ======== ======== ======== ============
Rental income 53.5 20.7 18.2 38.9 92.4
Property operating expenses (14.1) (5.1) (2.5) (7.6) (21.7)
-------------------------------------------- ---------- -------- -------- -------- ------------
Net operating income 39.4 15.6 15.7 31.3 70.7
Management fees 11.3 (1.5) (2.3) (3.8) 7.5
Operating expenses (11.8) (0.2) (0.2) (0.4) (12.2)
-------------------------------------------- ---------- -------- -------- -------- ------------
38.9 13.9 13.2 27.1 66.0
Operating lease rentals* (6.4) - - - (6.4)
Net financing costs (9.3) (2.8) (5.1) (7.9) (17.2)
-------------------------------------------- ---------- -------- -------- -------- ------------
Operations segment result 23.2 11.1 8.1 19.2 42.4
-------------------------------------------- ---------- -------- -------- -------- ------------
Property segment result (0.5) - - - (0.5)
Unallocated to segments (1.2) (0.1) (0.2) (0.3) (1.5)
EPRA earnings 21.5 11.0 7.9 18.9 40.4
-------------------------------------------- ---------- -------- -------- -------- ------------
Included in the above is rental income of GBP11.9 million and property operating
expenses of GBP3.8 million relating to sale and leaseback properties. The unallocated
to segments balance includes the fair value of share based payments of (GBP0.7 million),
UNITE Foundation of (GBP0.6 million), JV acquisition fees of GBP0.8 million, current
tax charges of (GBP0.7 million) and deferred tax charges of (GBP0.2 million).
* Operating lease rentals arise from properties which the Group
has sold and is now leasing back. These properties were sold to
generate financing and they now contribute to the Group's rental
income and incur property operating expenses. Therefore the Group
consider these lease costs to be a form of financing.
Unaudited 30 June 2016
Group
on see
through
UNITE Share of joint ventures basis
============================
Total USAF LSAV Total Total
GBPm GBPm GBPm GBPm GBPm
============================================ ========== ======== ======== ======== ============
Rental income 54.5 20.0 12.4 32.4 86.9
Property operating expenses (14.3) (5.1) (1.2) (6.3) (20.6)
-------------------------------------------- ---------- -------- -------- -------- ------------
Net operating income 40.2 14.9 11.2 26.1 66.3
Management fees 10.2 (1.3) (1.9) (3.2) 7.0
Operating expenses (11.8) (0.2) (0.2) (0.4) (12.2)
-------------------------------------------- ---------- -------- -------- -------- ------------
38.6 13.4 9.1 22.5 61.1
Operating lease rentals* (7.0) - - - (7.0)
Net financing costs (9.9) (2.8) (2.5) (5.3) (15.2)
-------------------------------------------- ---------- -------- -------- -------- ------------
Operations segment result 21.7 10.6 6.6 17.2 38.9
-------------------------------------------- ---------- -------- -------- -------- ------------
Property segment result (0.6) - - - (0.6)
Unallocated to segments (2.2) - - - (2.2)
EPRA earnings 18.9 10.6 6.6 17.2 36.1
-------------------------------------------- ---------- -------- -------- -------- ------------
Included in the above is rental income of GBP12.2 million and property operating
expenses of GBP3.3 million relating to sale and leaseback properties. The unallocated
to segments balance includes the fair value of share based payments of (GBP0.2 million),
UNITE Foundation of (GBP0.7 million), USAF acquisition fee of GBP0.5 million and
current tax charges of (GBP1.8 million).
* Operating lease rentals arise from properties which the Group
has sold and is now leasing back. These properties were sold to
generate financing and they now contribute to the Group's rental
income and incur property operating expenses. Therefore the Group
consider these lease costs to be a form of financing.
31 December 2016
Group
on see
through
UNITE Share of joint ventures basis
============================
Total USAF LSAV Total Total
GBPm GBPm GBPm GBPm GBPm
============================================ ========= ========= ======= ======== ===========
Rental income 97.1 36.9 25.1 62.0 159.1
Property operating expenses (29.3) (10.7) (2.8) (13.5) (42.8)
-------------------------------------------- --------- --------- ------- -------- -----------
Net operating income 67.8 26.2 22.3 48.5 116.3
Management fees 20.8 (2.8) (4.0) (6.8) 14.0
Operating expenses (22.4) (0.4) (0.3) (0.7) (23.1)
-------------------------------------------- --------- --------- ------- -------- -----------
Operating lease rentals* (13.5) - - - (13.5)
Net financing costs (20.8) (5.7) (5.9) (11.6) (32.4)
-------------------------------------------- --------- --------- ------- -------- -----------
Operations segment result 31.9 17.3 12.1 29.4 61.3
-------------------------------------------- --------- --------- ------- -------- -----------
Property segment result (1.0) - - - (1.0)
Unallocated to segments 2.4 - - - 2.4
EPRA earnings 33.3 17.3 12.1 29.4 62.7
-------------------------------------------- --------- --------- ------- -------- -----------
Yield related USAF performance
fees (1.4) - - - (1.4)
Adjusted EPRA earnings 31.9 17.3 12.1 29.4 61.3
-------------------------------------------- --------- --------- ------- -------- -----------
Included in the above is rental income of GBP18.5 million and property operating
expenses of GBP5.9 million relating to sale and leaseback properties. The unallocated
to segments includes the fair value of share based payments of (GBP1.2 million),
UNITE Foundation of (GBP1.0 million), fees received from USAF relating to acquisitions
of GBP0.4 million, net USAF performance fee of GBP6.5 million, deferred tax of (GBP0.3
million) and current tax charges of (GBP2.0 million).
* Operating lease rentals arise from properties which the Group
has sold and is now leasing back. These properties were sold to
generate financing and they now contribute to the Group's rental
income and incur property operating expenses. Therefore the Group
consider these lease costs to be a form of financing.
b) IFRS reconciliation to EPRA earnings
EPRA earnings excludes movements relating to changes in values
of investment properties and interest rate swaps, profits from the
disposal of properties and property impairments, which are included
in the profit reported under IFRS. EPRA earnings reconcile to the
profit attributable to owners of the parent company as follows:
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2017 2016 2016
Note GBPm GBPm GBPm
EPRA earnings 2.2a 40.4 36.1 62.7
Net valuation gains on investment
property 28.3 48.7 77.2
Property disposals and write
downs 0.5 (0.3) 0.3
Share of joint venture gains
on investment property 3.3a 11.7 35.8 58.8
Share of joint venture property
disposals and write downs 1.7 - -
Swap cancellation costs - - (1.0)
Share of joint venture swap
cancellation costs (0.3) - -
Deferred tax relating to properties
and investments in joint ventures 0.3 (12.6) 27.6
Minority interest share of reconciling
items* (0.2) (1.0) (1.6)
Profit attributable to owners
of the parent company 82.4 106.7 224.0
--------------------------------------- ---- --------- --------- ------------
* The minority 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.
c) Earnings per share
The Basic EPS calculation is based on the earnings attributable
to the equity shareholders of 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. EPRA EPS and Adjusted EPRA EPS (pre yield related USAF
performance fee) are calculated using EPRA earnings.
The calculations of basic, diluted and EPRA EPS for the 6 months
ended 30 June 2017 are as follows:
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2017 2016 2016
Note GBPm GBPm GBPm
Earnings
Basic 82.4 106.7 224.0
Diluted 83.9 108.3 227.7
EPRA 2.2a 40.4 36.1 62.7
Adjusted EPRA 2.2a 40.4 36.1 61.3
Weighted average number of
shares (thousands)
Basic 224,416 220,941 221,013
Dilutive potential ordinary
shares (share options and
convertible bond) 5,563 18,849 19,315
============================ ==== ========= ========= ============
Diluted 229,979 239,790 240,328
============================ ==== ========= ========= ============
Earnings per share (pence)
Basic 36.7p 48.3p 101.3
============================ ==== ========= ========= ============
Diluted 36.5p 45.2p 94.7
============================ ==== ========= ========= ============
EPRA EPS 18.0p 16.3p 28.4
============================ ==== ========= ========= ============
Adjusted EPRA EPS 18.0p 16.3p 27.7
============================ ==== ========= ========= ============
2.3 Net Assets
Net Asset Value reported under IFRS includes deferred tax in
relation to investments in joint ventures and the fair value of
financial derivatives. The Group's NAV is also presented on the
basis recommended for real estate companies by the EPRA. EPRA NAV
excludes these elements of deferred tax and the fair value of
financial derivatives. The reconciliation between IFRS NAV and EPRA
NAV is available in note 2.3 (c).
The Group's Property business undertakes the acquisition and
development of properties. The Property segment's revenue comprises
revenue from development management fees earned from joint
ventures. The way in which the Property segment adds value to the
business is set out in the Property review on pages 34 - 39 of the
2016 Annual Report.
a) EPRA net assets
Unaudited 30 June 2017
===============================
Share of
Wholly owned JV's Total
GBPm GBPm GBPm
======================================== ============ ======== =======
Investment properties 1,051.1 1,015.1 2,066.2
Investment properties under development 263.4 13.8 277.2
Total property portfolio 1,314.5 1,028.9 2,343.4
---------------------------------------- ------------ -------- -------
Debt on properties (460.4) (411.0) (871.4)
Cash 35.3 140.4 175.7
---------------------------------------- ------------ -------- -------
Net debt (425.1) (270.6) (695.7)
---------------------------------------- ------------ -------- -------
Other liabilities (16.7) (14.7) (31.4)
EPRA net assets (pre convertible) 872.7 743.6 1,616.3
======================================== ============ ======== =======
Convertible bond * - - -
EPRA net assets 872.7 743.6 1,616.3
======================================== ============ ======== =======
Loan to value 32% 26% 30%
======================================== ============ ======== =======
* During the period Unite redeemed the full principal value of
GBP89.9 of the convertible bond in exchange for 18,593,589
shares.
Unaudited 30 June 2016
===============================
Share
Wholly owned of JV's Total
GBPm GBPm GBPm
======================================== ============ ======== =======
Investment properties 1,062.3 869.1 1,931.4
Investment properties under development 221.6 109.6 331.2
Total property portfolio 1,283.9 978.7 2,262.6
---------------------------------------- ------------ -------- -------
Debt on properties (545.3) (341.2) (886.5)
Cash 31.0 28.6 59.6
---------------------------------------- ------------ -------- -------
Net debt (514.3) (312.6) (826.9)
---------------------------------------- ------------ -------- -------
Other liabilities (15.7) (12.7) (28.4)
EPRA net assets (pre convertible) 753.9 653.4 1,407.3
======================================== ============ ======== =======
Convertible bond * 84.2 - 84.2
EPRA net assets 838.1 653.4 1,491.5
======================================== ============ ======== =======
Loan to value 40% 32% 37%
======================================== ============ ======== =======
* Under the terms of the Convertible Bond, early conversion of
the debt into equity could have been triggered if the share price
trades over 1.3 times the conversion price for a period of
time.
31 December 2016
===============================
Share of
Wholly owned JV's Total
GBPm GBPm GBPm
======================================== ============ ======== =======
Investment properties 1,061.6 1,023.2 2,084.8
Investment properties under development 184.6 7.2 191.8
Total property portfolio 1,246.2 1,030.4 2,276.6
---------------------------------------- ------------ -------- -------
Debt on properties (474.8) (366.8) (841.6)
Cash 42.7 23.1 65.8
---------------------------------------- ------------ -------- -------
Net debt (432.1) (343.7) (775.8)
---------------------------------------- ------------ -------- -------
Other liabilities (14.6) (14.3) (28.9)
EPRA net assets (pre convertible) 799.5 672.4 1,471.9
======================================== ============ ======== =======
Convertible bond* 85.4 - 85.4
EPRA net assets 884.9 672.4 1,557.3
======================================== ============ ======== =======
Loan to value 35% 33% 34%
======================================== ============ ======== =======
* Under the terms of the Convertible Bond, early conversion of
the debt into equity could have been triggered if the share price
trades over 1.3 times the conversion price for a period of
time.
b) Movement in EPRA NAV during the period
Contributions to EPRA NAV by each segment during the period are
as follows:
Unaudited 30 June 2017
Group
on see
through
UNITE Share of joint ventures basis
---------------------------
Total USAF LSAV Total Total
GBPm GBPm GBPm GBPm GBPm
========================== ====== ======== ======== ======= ========
Operations
Operations segment
result 23.2 11.1 8.1 19.2 42.4
Property
Rental growth 18.6 4.6 4.1 8.7 27.3
Yield movement (1.9) 0.9 1.0 1.9 -
Disposals and acquisition
costs 0.5 (1.0) 2.8 1.8 2.3
Investment property
gains 17.2 4.5 7.9 12.4 29.6
Development property
gains 11.6 0.2 - 0.2 11.8
Pre-contract and other
development costs (0.5) - - - (0.5)
-------------------------- ------ -------- -------- ------- --------
Total property 28.3 4.7 7.9 12.6 40.9
-------------------------- ------ -------- -------- ------- --------
Unallocated
Shares issued 87.4 - - - 87.4
Investment in joint
ventures (39.9) (2.3) 42.2 39.9 --
Convertible bond (85.5) - - - (85.5)
Dividends paid (23.2) - - - (23.2)
JV acquisition fee 0.8 - - - 0.8
Swap losses & debt
exit fees - - (0.3) (0.3) (0.3)
Other (3.3) (0.1) (0.1) (0.2) (3.5)
-------------------------- ------ -------- -------- ------- --------
Total unallocated (63.7) (2.4) 41.8 39.4 (24.3)
-------------------------- ------ -------- -------- ------- --------
Total EPRA NAV movement
in the period (12.2) 13.4 57.8 71.2 59.0
-------------------------- ------ -------- -------- ------- --------
Total EPRA NAV brought
forward 884.9 352.1 320.3 672.4 1,557.3
-------------------------- ------ -------- -------- ------- --------
Total EPRA NAV carried
forward 872.7 365.5 378.1 743.6 1,616.3
-------------------------- ------ -------- -------- ------- --------
The GBP3.5 million charge that comprises the other balance
within the unallocated segment includes a tax charge of GBP0.9
million, a contribution of GBP0.6 million to the UNITE Foundation,
fair value of share options charge of GBP0.7 million and own shares
acquired of GBP1.3 million.
Unaudited 30 June 2016
Group
on see
through
UNITE Share of joint ventures basis
---------------------------
Total USAF LSAV Total Total
GBPm GBPm GBPm GBPm GBPm
========================== ====== ======== ======== ======= ========
Operations
Operations segment
result 21.7 10.6 6.6 17.2 38.9
Property
Rental growth 22.3 3.8 5.7 9.5 31.8
Yield movement 15.2 11.6 3.7 15.3 30.5
Disposals and acquisition
costs (0.3) - - - (0.3)
Investment property
gains 37.2 15.4 9.4 24.8 62.0
Development property
gains 11.2 (0.7) 10.8 10.1 21.3
Pre-contract and other
development costs (0.6) - - - (0.6)
-------------------------- ------ -------- -------- ------- --------
Total property 47.8 14.7 20.2 34.9 82.7
-------------------------- ------ -------- -------- ------- --------
Unallocated
Shares issued 0.2 - - - 0.2
Investment in joint
ventures (11.2) 16.5 (5.3) 11.2 -
Dividends paid 1.1 - - - 1.1
Swap losses and debt
exit costs (21.0) - - - (21.0)
Other (4.8) - - - (4.8)
-------------------------- ------ -------- -------- ------- --------
Total unallocated (35.7) 16.5 (5.3) 11.2 (24.5)
-------------------------- ------ -------- -------- ------- --------
Total EPRA NAV movement
in the period 33.8 41.8 21.5 63.3 97.1
-------------------------- ------ -------- -------- ------- --------
Total EPRA NAV brought
forward 804.3 305.3 284.8 590.1 1,394.4
-------------------------- ------ -------- -------- ------- --------
Total EPRA NAV carried
forward 838.1 347.1 306.3 653.4 1,491.5
-------------------------- ------ -------- -------- ------- --------
The GBP4.8 million charge that comprises the other balance
within the unallocated segment includes a tax charge of GBP1.7
million, a contribution of GBP0.7 million to the UNITE Foundation,
fair value of share options charge of GBP0.2 million and own shares
acquired of GBP2.2 million.
31 December 2016
Group
on see
through
UNITE Share of joint ventures basis
---------------------------
Total USAF LSAV Total Total
GBPm GBPm GBPm GBPm GBPm
========================== ====== ======== ======== ======= ========
Operations
Operations segment
result 31.9 17.3 12.1 29.4 61.3
Property
Rental growth 35.8 14.8 12.0 26.8 62.6
Yield movement 4.9 7.2 7.5 14.7 19.6
Disposals and acquisition
costs 1.0 - - - 1.0
Investment property
gains 41.7 22.0 19.5 41.5 83.2
Development property
gains 36.5 0.4 14.5 14.9 51.4
Pre-contract and other
development costs (1.0) - - - (1.0)
-------------------------- ------ -------- -------- ------- --------
Total property 77.2 22.4 34.0 56.4 133.6
-------------------------- ------ -------- -------- ------- --------
Unallocated
Shares issued 0.3 - - - 0.3
Investment in joint
ventures 3.5 7.1 (10.6) (3.5) -
Convertible bond 2.3 - - - 2.3
Dividends paid (34.2) - - - (34.2)
USAF performance fee 6.5 - - - 6.5
USAF property acquisition
fee 0.4 - - - 0.4
Swap losses and debt
exit costs (1.0) - - - (1.0)
Other (6.3) - - - (6.3)
-------------------------- ------ -------- -------- ------- --------
Total unallocated (28.5) 7.1 (10.6) (3.5) (32.0)
-------------------------- ------ -------- -------- ------- --------
Total EPRA NAV movement
in the period 80.6 46.8 35.5 82.3 162.9
-------------------------- ------ -------- -------- ------- --------
Total EPRA NAV brought
forward 804.3 305.3 284.8 590.1 1,394.4
-------------------------- ------ -------- -------- ------- --------
Total EPRA NAV carried
forward 884.9 352.1 320.3 672.4 1,557.3
-------------------------- ------ -------- -------- ------- --------
The GBP6.3 million charge that comprises the other balance
within the unallocated segment includes a tax charge of GBP2.3
million, a contribution of GBP1.0 million to the UNITE Foundation
and a fair value of share options charge of GBP3.0 million.
c) Reconciliation to IFRS
To determine EPRA NAV, net assets reported under IFRS are
amended to exclude mark to market valuation of swaps, deferred tax
liabilities and to recognise all properties at market value.
The Group also manages NAV using EPRA NNNAV, which adjusts EPRA
NAV to include the fair value of swaps and debt. Under EPRA best
practice guidelines this is considered to give stakeholders the
most relevant information on the current fair value of all the
assets and liabilities in the Group.
The Net Assets reported under IFRS reconcile to EPRA NAV and
EPRA NNNAV as follows:
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2017 2016 2016
Note GBPm GBPm GBPm
Net asset value reported under
IFRS 1,598.5 1,344.2 1,451.6
Mark to market interest rate
swaps 12.7 21.7 14.9
Deferred tax * 5.1 41.4 5.4
EPRA NAV (pre convertible) 1,616.3 1,407.3 1,471.9
Convertible bond - 84.2 85.4
=============================== ==== ========= ========= ============
EPRA NAV 2.3a 1,616.3 1,491.5 1,557.3
Mark to market of fixed rate
debt 16.9 (9.7) (19.7)
Mark to market interest rate
swaps (12.7) (21.7) (14.9)
Deferred tax (5.1) (41.4) (5.4)
EPRA NNNAV 1,615.4 1,418.7 1,517.3
=============================== ==== ========= ========= ============
* With effect from 1 January 2017, the Group converted to REIT
status and is exempt from tax on its property business. The
deferred tax liability relating to unrealised gains on joint
venture investments of GBP17.0 million, which are not exempt from
tax, exceeds the deferred tax asset relating to tax adjusted losses
carried forward of GBP11.9 million. As the losses can be set
against gains as they arise, the deferred tax asset relating to the
losses can be recognised in full against deferred tax liabilities,
giving the GBP5.1m net liability shown above.
d) NAV per share
Basic NAV is based on the net assets attributable to the equity
shareholders of Unite Group plc and the number of shares in issue
at the end of the period. The Board uses EPRA NAV and EPRA NNNAV to
monitor the performance of the Property segment on a day to day
basis.
Unaudited Unaudited
30 June 30 June 31 December
2017 2016 2016
Note GBPm GBPm GBPm
Net assets
Basic 2.3c 1,598.5 1,344.2 1,451.6
================================== ==== ========= ========= ===========
EPRA 2.3a 1,616.3 1,491.5 1,557.3
================================== ==== ========= ========= ===========
EPRA diluted 1,618.8 1,493.7 1,559.9
================================== ==== ========= ========= ===========
EPRA NNNAV (diluted) 1,617.9 1,420.9 1,520.0
================================== ==== ========= ========= ===========
Number of shares (thousands)
Basic 241,187 222,327 222,268
Convertible bond - 18,124 18,426
Outstanding share options 951 654 762
================================== ==== ========= ========= ===========
Diluted 242,138 241,105 241,456
================================== ==== ========= ========= ===========
Net asset value per share (pence)
Basic 663p 605p 653p
================================== ==== ========= ========= ===========
EPRA 670p 620p 647p
================================== ==== ========= ========= ===========
EPRA (fully diluted) 669p 620p 646p
================================== ==== ========= ========= ===========
EPRA NNNAV (fully diluted) 668p 589p 630p
================================== ==== ========= ========= ===========
2.4. Revenue and costs
Revenue included in the consolidated income statement is
allocated to the Group's segments as follows:
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2017 2016 2016
Note GBPm GBPm GBPm
Rental income Operations segment 2.2a 53.5 54.5 97.1
Management fees Operations segment 8.5 7.8 15.6
Development fees Property segment - 0.7 1.0
LSAV acquisition
fee Unallocated 0.5 - -
USAF acquisition
fee Unallocated 0.3 0.4 0.4
USAF performance
fee Unallocated - - 7.0
62.8 63.4 121.1
Impact of minority interest
on management fees (0.1) (0.1) (0.4)
Total revenue 62.7 63.3 120.7
====================================== ==== ========= ========= ============
Rental income in the above analysis is based on the Group's
wholly owned properties, with the rental income arising in relation
to the group share of the Joint Ventures being included within
Share of joint venture profit.
The cost of sales included in the consolidated income statement
includes property operating expenses of GBP14.1 million (30 June
2016: GBP14.8 million), operating lease rentals of GBP6.4 million
(30 June 2016: GBP7.0 million), costs associated with development
fees of GBP0.5 million (30 June 2016: GBP0.8 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 Net
Asset Value (NAV), 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 two
groups on the balance sheet at the carrying values detailed below.
In the Group's EPRA NAV, all these groups are shown at market
value.
i) Investment property (fixed assets)
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 under development (fixed assets)
These are assets which are currently in the course of
construction and which will be transferred to 'Investment property'
on completion.
a) Valuation process
The valuation 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 Knight Frank, Chartered Surveyors were
the valuers in the 6 months ending 30 June 2017 and throughout
2016.
The valuations are based on both:
-- Information provided by the Group such as current rents,
occupancy, operating costs, terms and conditions of leases and
nomination agreements, capital expenditure, etc. This information
is derived from the Group's financial systems and is subject to the
Group's overall control environment.
-- Assumptions and valuation models used by the valuers - the
assumptions are typically market related, such as yield and
discount rates. These are based on their professional judgement and
market observation.
The information provided to the valuers - and the assumptions
and the valuation models used by the valuers - are reviewed by the
Executive Committee. This includes a review of the fair value
movements over the period.
The movements in the carrying value of the Group's wholly owned
property portfolio during the period ended 30 June 2017 are shown
in the table below.
Unaudited 30 June 2017
Investment
property
Investment under
property development Total
GBPm GBPm GBPm
================================ ========== ============ =======
At 1 January 2017 1,061.6 184.6 1,246.2
Cost capitalised 1.5 62.6 64.1
Interest capitalised - 3.8 3.8
Transfer from work in progress - 0.8 0.8
Disposals (28.7) - (28.7)
Valuation gains 21.2 14.5 35.7
Valuation losses (4.5) (2.9) (7.4)
========== ============ =======
Net valuation gains 16.7 11.6 28.3
================================ ========== ============ =======
Carrying value and market value
at 30 June 2017 1,051.1 263.4 1,314.5
-------------------------------- ---------- ------------ -------
The movements in the carrying value of the Group's wholly owned
property portfolio during the period ended 30 June 2016 and the
fair value of the Group's wholly owned property portfolio at the
year ended 30 June 2016 is as follows:
Unaudited 30 June 2016
Investment
property
Investment under
property development Total
GBPm GBPm GBPm
================================ ========== ============ =======
At 1 January 2016 1,024.4 149.8 1,174.2
Cost capitalised 0.4 57.4 57.8
Interest capitalised - 3.2 3.2
Valuation gains 41.9 17.1 59.0
Valuation losses (4.4) (5.9) (10.3)
========== ============ =======
Net valuation gains 37.5 11.2 48.7
================================ ========== ============ =======
Carrying value and market value
at 30 June 2016 1,062.3 221.6 1,283.9
-------------------------------- ---------- ------------ -------
The movements in the carrying value of the Group's wholly owned
property portfolio during the period ended 31 December 2016 and the
fair value of the Group's wholly owned property portfolio at the
year ended 31 December 2016 is as follows:
31 December 2016
Investment
Investment property
property under development Total
GBPm GBPm GBPm
==================================================== ========== ================== =======
At 1 January 2016 1,024.4 149.8 1,174.2
Cost capitalised 7.6 101.7 109.3
Interest capitalised - 5.9 5.9
Transfer from investment property under development 36.6 (36.6) -
Transfer from work in progress - 8.0 8.0
Disposals (44.0) (84.4) (128.4)
Valuation gains 44.9 41.2 86.1
Valuation losses (7.9) (1.0) (8.9)
========== ================== =======
Net valuation gains 37.0 40.2 77.2
==================================================== ========== ================== =======
Carrying value and market value at 31 December 2016 1,061.6 184.6 1,246.2
---------------------------------------------------- ---------- ------------------ -------
b) Fair value measurement
All investment and development properties are classified as
Level 3 in the fair value hierarchy. Whilst completed property are
held at cost in the balance sheet, the Group discloses the fair
value of these assets and includes them at fair value in EPRA NAV.
Completed property fair value measurements are categorised as Level
3 in the fair value hierarchy and their fair value is measured
using the same techniques as for investment properties and
investment properties under development.
6 months 6 months
to to
30 June 30 June 31 December
2017 2016 2016
Class of asset GBPm GBPm GBPm
London - rental properties 431.6 420.0 424.9
Major provincial - rental properties 429.4 450.1 440.2
Other provincial - rental properties 190.1 192.2 196.5
Major provincial - development properties 220.8 132.7 158.4
Other provincial - development properties 42.6 88.9 26.2
========================================== ======== ======== ===========
Market value 1,314.5 1,283.9 1,246.2
========================================== ======== ======== ===========
The valuation technique for investment properties is a
discounted cash flow using the following inputs: net rental income,
estimated future costs, occupancy and property management
costs.
Where the asset is leased to a University, the valuation also
reflects the length of the lease, the allocation of maintenance and
insurance responsibilities between the Group and the lessee, and
the market's general perception of the lessee's credit
worthiness.
The resulting valuations are cross-checked against the initial
yields and the capital value per bed derived from actual market
transactions.
For development properties, the fair value is usually calculated
by estimating the fair value of the completed property (using the
discounted cash flow method) less estimated costs to
completion.
c) Fair value using unobservable inputs (Level 3)
6 months 6 months
to to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
Opening fair value 1,246.2 1,174.2 1,174.2
Gains and losses recognised in income
statement 28.3 48.7 77.2
Acquisitions - - -
Capital expenditure 68.7 61.0 123.2
Disposals (28.7) - (128.4)
====================================== ======== ======== ===========
Closing fair value 1,314.5 1,283.9 1,246.2
====================================== ======== ======== ===========
d) Quantitative information about fair value measurements using
unobservable inputs (Level 3)
Fair
value Valuation Unobservable Weighted
GBPm technique inputs Range average
Net rental income GBP183
London Discounted (GBP per week) - GBP345 GBP256
Estimated future
* rental properties 431.6 cash flows rent (%) 1% - 6% 3%
Discount rate 4.5% -
(yield) (%) 5.2% 4.7%
------------------------------ ------ ---------- ----------------- ----------- --------
Net rental income GBP106
Major provincial Discounted (GBP per week) - GBP157 GBP134
Estimated future
* rental properties 429.4 cash flows rent (%) 1% - 6% 3%
Discount rate 5.2% -
(yield) (%) 7.0% 5.7%
------------------------------ ------ ---------- ----------------- ----------- --------
Net rental income GBP94 -
Other provincial Discounted (GBP per week) GBP164 GBP132
Estimated future
* rental properties 190.1 cash flows rent (%) 0% - 8% 4%
Discount rate 5.4% -
(yield) (%) 12.5% 6.2%
------------------------------ ------ ---------- ----------------- ----------- --------
Estimated cost
to complete GBP4.1m
Major provincial Discounted (GBPm) - GBP61.6m GBP36.5m
Estimated future
* development properties 220.8 cash flows rent (%) 3% 3%
Discount rate 4.7% -
(yield) (%) 6.2% 5.6%
------------------------------ ------ ---------- ----------------- ----------- --------
Estimated cost
to complete GBP3.7m
Other provincial Discounted (GBPm) - 23.3m GBP15.0m
Estimated future
* development properties 42.6 cash flows rent (%) 3% 3%
Discount rate 5.7% -
(yield) (%) 5.8% 5.7%
------------------------------ ------ ---------- ----------------- ----------- --------
Fair value at
30 June 2017 1314.5
============================== ====== ========== ================= =========== ========
Fair
value Valuation Unobservable Weighted
GBPm technique inputs Range average
Net rental income GBP179
London Discounted (GBP per week) - GBP327 GBP242
Estimated future
* rental properties 420.0 cash flows rent (%) 2% - 4% 3%
Discount rate 4.5% -
(yield) (%) 5.2% 4.7%
------------------------------ ------- ---------- ----------------- ----------- --------
Net rental income GBP102
Major provincial Discounted (GBP per week) - GBP149 GBP125
Estimated future
* rental properties 450.1 cash flows rent (%) 1% - 6% 4%
Discount rate 5.2% -
(yield) (%) 7.0% 5.8%
------------------------------ ------- ---------- ----------------- ----------- --------
Net rental income GBP77 -
Other provincial Discounted (GBP per week) GBP148 GBP122
Estimated future
* rental properties 192.2 cash flows rent (%) 2% - 6% 4%
Discount rate 5.7% -
(yield) (%) 9.9% 6.2%
------------------------------ ------- ---------- ----------------- ----------- --------
Estimated cost
to complete GBP1.9m
Major provincial Discounted (GBPm) - GBP59.4m GBP30.7m
Estimated future
* development properties 132.7 cash flows rent (%) 3% 3%
Discount rate 5.1% -
(yield) (%) 6.3% 5.8%
------------------------------ ------- ---------- ----------------- ----------- --------
Estimated cost
to complete GBP2.3m
Other provincial Discounted (GBPm) - 20.2m GBP8.3m
Estimated future
* development properties 88.9 cash flows rent (%) 3% 3%
Discount rate 5.8% -
(yield) (%) 5.9% 5.9%
------------------------------ ------- ---------- ----------------- ----------- --------
Fair value at
30 June 2016 1,283.9
============================== ======= ========== ================= =========== ========
Fair
value Valuation Unobservable Weighted
GBPm technique inputs Range average
Net rental income GBP179
London Discounted (GBP per week) - GBP327 GBP249
Estimated future
* rental properties 424.9 cash flows rent (%) 1% - 6% 4%
Discount rate 4.5% -
(yield) (%) 5.2% 4.7%
------------------------------ ------- ---------- ----------------- ----------- --------
Net rental income GBP105
Major provincial Discounted (GBP per week) - GBP162 GBP129
Estimated future
* rental properties 440.2 cash flows rent (%) 1% - 7% 4%
Discount rate 5.2% -
(yield) (%) 7.0% 5.7%
------------------------------ ------- ---------- ----------------- ----------- --------
Net rental income GBP95 -
Other provincial Discounted (GBP per week) GBP153 GBP126
Estimated future
* rental properties 196.5 cash flows rent (%) 2% - 8% 3%
Discount rate 5.5% -
(yield) (%) 12.0% 6.2%
------------------------------ ------- ---------- ----------------- ----------- --------
Estimated cost
to complete GBP10.5m
Major provincial Discounted (GBPm) - GBP59.5m GBP36.1m
Estimated future
* development properties 158.4 cash flows rent (%) 3% 3%
Discount rate 4.8% -
(yield) (%) 5.9% 5.6%
------------------------------ ------- ---------- ----------------- ----------- --------
Estimated cost
to complete GBP12.3m
Other provincial Discounted (GBPm) - GBP26.5m GBP20.1m
Estimated future
* development properties 26.2 cash flows rent (%) 3% 3%
Discount rate 5.7% -
(yield) (%) 5.8% 5.7%
------------------------------ ------- ---------- ----------------- ----------- --------
Fair value at
31 December 2016 1,246.2
============================== ======= ========== ================= =========== ========
A decrease in net rental income, estimated future rents or
occupancy will result in a decrease in the fair value, whereas a
decrease in the discount rate (yield) or the estimated costs to
complete will result in an increase in fair value. There are
interrelationships between these rates as they are partially
determined by market rate conditions.
3.2 Inventories
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
Interests in land 1.1 2.7 0.8
Other stocks 2.6 3.9 2.1
================== ========= ========= ============
Inventories 3.7 6.6 2.9
================== ========= ========= ============
3.3 Investments in joint ventures
The Group has two joint ventures:
Group's share Legal entity
of in which
assets/results Group has
Joint venture 2017 (2016) Objective Partner interest
The UNITE 25.0%* (24.6%) Invest and operate Consortium UNITE Student
UK Student student accommodation of investors Accommodation
Accommodation throughout the UK Fund,
Fund (USAF) a Jersey
Unit Trust
=============== =============== ======================== ================== ==================
London Student 50% (50%) Develop and operate GIC Real LSAV Unit
Accommodation student accommodation Estate Pte, Trust, a Jersey
Venture (LSAV) in London and Edinburgh Ltd Unit Trust,
Real estate LSAV (Holdings)
investment Ltd, incorporated
vehicle in Jersey
of the Government and
of Singapore LSAV (Aston
Student Village)
Unit Trust,
a Jersey Unit
Trust
=============== =============== ======================== ================== ==================
* Part of the Group's interest is held through a subsidiary,
USAF (Feeder) Guernsey Ltd, in which there is an external investor.
A minority 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
23.5% (30 June 2016 and 31 December 2016: 23.0%) of USAF.
a) 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 GBP72.3 million during the 6 months ended 30 June
2017 (30 June 2016: GBP61.6 million), resulting in an overall
carrying value of GBP765.2 million (30 June 2016: GBP672.2
million). The following table shows how the increase has been
achieved.
Unaudited Unaudited
6 months 6 months Year
to to to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
========================================================= ========= ========= ============
Recognised in the income statement:
Operations segment result 19.2 17.2 29.4
Minority interest share of Operations segment result 0.7 0.7 1.2
Management fee adjustment relating to trading with joint
venture 2.8 2.5 5.4
Net revaluation gains 11.7 35.8 58.8
Loss on cancellation of interest rate swaps (0.3) - -
Profit on disposal of investment property 1.7 - -
Other (0.2) 0.2 -
35.6 56.4 94.8
Recognised in equity:
Movement in effective hedges 0.9 (2.9) (1.4)
Other adjustments to the carrying value:
Profit adjustment related to trading
with joint venture (3.4) (2.4) (6.3)
Performance fee units issued in USAF 8.1 25.6 25.6
Additional capital invested in LSAV 48.6 - (1.2)
Distributions received (17.5) (15.1) (29.2)
========================================================= ========= ========= ============
Increase in carrying value 72.3 61.6 82.3
Carrying value brought forward 692.9 610.6 610.6
========================================================= ========= ========= ============
Carrying value carried forward 765.2 672.2 692.9
========================================================= ========= ========= ============
b) 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 investment management fees
from USAF and LSAV, which collectively include performance fees if
the joint ventures outperform certain benchmarks, and property
acquisition fees. The Group receives an enhanced equity interest in
the JV's as consideration for the performance fee. The Group has
recognised the following management fees in its results for the
year.
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
USAF 6.6 4.9 12.8
LSAV 4.7 2.7 8.0
Property management fees 11.3 7.6 20.8
LSAV - 0.7 1.0
============================ ========= ========= ============
Development management fees - 0.7 1.0
USAF performance fee - - 8.1
USAF acquisition fee 0.3 0.5 0.5
LSAV acquisition fee 1.0 - --
---------------------------- --------- --------- ------------
Investment management fees 1.3 0.5 8.6
Total fees 12.6 8.8 30.4
---------------------------- --------- --------- ------------
Section 4: Funding
The Group finances its development and investment activities
through a mixture of retained earnings, borrowings and equity. The
Group continuously monitors its financing arrangements to manage
its gearing.
Interest rate swaps are used to manage the Group's risk to
fluctuations in interest rate movements.
The following pages provide disclosures about the Group's
funding position, including borrowings and hedging instruments.
4.1 Borrowings
The table below analyses the Group's borrowings which comprise
bank and other loans by when they fall due for payment:
Unaudited Unaudited
6 month 6 month Year to
to 30 June to 30 June 31 December
2017 2016 2016
---------------------------------- ----------- ----------- ------------
GBPm GBPm GBPm
---------------------------------- ----------- ----------- ------------
Current
In one year or less, or on demand 1.3 1.4 1.3
================================== =========== =========== ============
Non-current
In more than one year but not
more than two years 22.8 1.5 108.1
In more than two years but not
more than five years 305.5 302.6 126.3
In more than five years 130.8 239.8 239.1
================================== =========== =========== ============
459.1 543.9 473.5
================================== =========== =========== ============
Total borrowings 460.4 545.3 474.8
================================== =========== =========== ============
During the first half of the year Unite redeemed the full
principal value of GBP89.9 million of the convertible bond in
exchange for 18,593,589 shares.
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
6 months to 6 months to Year to 31
30 June 2017 30 June 2016 December 2016
Carrying Fair Carrying Fair Carrying Fair
value value value value value value
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- -------- ------ -------- ------ -------- ------
Level 1 IFRS fair value hierarchy 90.0 98.4 174.3 212.2 176.2 215.0
================================== ======== ====== ======== ====== ======== ======
Level 2 IFRS fair value hierarchy 239.7 217.9 240.9 209.1 240.3 212.5
Other loans 130.7 130.7 130.1 124.5 58.3 54.7
================================== ======== ====== ======== ====== ======== ======
Total borrowings 460.4 447.0 545.3 545.8 474.8 482.2
================================== ======== ====== ======== ====== ======== ======
The fair value of loans classified as Level 1 in the IFRS fair
value hierarchy is determined using quoted prices in active markets
for identical liabilities.
The fair value of loans classified as Level 2 in the IFRS fair
value hierarchy has been calculated by a third party expert
discounting estimated future cash flows on the basis of market
expectation of future interest rates.
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
6 months 6 months
to to Year to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
Current - - -
Non-current 10.2 16.8 11.6
================================== ========= ========= ============
Fair value of interest rate swaps 10.2 16.8 11.6
================================== ========= ========= ============
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. The IFRS 13 level
categorisation relates to the extent the fair value can be
determined by reference to comparable market values. The
classifications range from level 1 where instruments are quoted on
an active market through to level 3 where the assumptions used to
arrive at fair value do not have comparable market data.
4.3 Dividends
During the 6 months to 30 June 2017, the Company declared and
paid a final dividend of GBP23.2 million (30 June 2016: GBP21.0
million). After the period end, the Directors proposed an interim
dividend of 7.3p per share (30 June 2016: 6.0p per share). No
provision has been made in relation to this dividend.
Independent review report to The UNITE Group plc
Introduction
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 2017 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in shareholders' equity, the consolidated statement of
cash flows and the related notes 1 to 4.3. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Provided by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. 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.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, 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 Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. 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 European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making 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 Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2017 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, UK
26 July 2017
Company information
Registered office
South Quay House
Temple Back
Bristol BS1 6FL
Auditor
Deloitte LLP
London
Registrars
Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Financial advisers and brokers
J.P. Morgan Cazenove Limited
25 Bank Street
London E14 5JP
Numis Securities Limited
10 Paternoster Square
London EC4M 7LT
Financial PR
Bell Pottinger
Holborn Gate
26 Southampton Buildings
London WC2A 1PB
Registered number
3199160
ADDENDUM
The buildings within our estate are all designed and built with
students in mind. The details of the fire and management systems in
place in our buildings are set out below:
-- All of Unite's properties have been designed to meet stringent fire safety
requirements and have life safety systems installed that match the individual
requirements of each building. This may include but will not be limited
to alarm systems, sprinklers, dry/wet risers and automatic smoke ventilation
-- We have fully addressable L (Life) type fire alarm systems in all of our
properties that means that all areas of the premises are covered with smoke
or heat detection, including bedrooms, kitchens, plant rooms and communal
areas. This alarm is also connected to an internal Alarm Receiving Centre
(ARC) that is manned 24/7 and 365 days of the year. We routinely work closely
with experts from local fire services to make sure these are effective
-- All of our buildings are designed to ensure compartmentation in the event
of an incident, for example, fire doors with self-closers are fitted as
standard. We work closely with members of the Association for Specialist
Fire Protection to ensure the fire strategy of our buildings is not compromised
through a series of regular checks as part of our Fire Assessment Regime
-- All of our systems and fire safety procedures are tested rigorously and
regularly
-- In addition to the physical fire safety measures we have in place, all our
staff are trained in proactive and reactive fire safety management, which
includes building inspections, routine fire alarm testing, evacuations and
inductions for residents. In the event of smoke or heat being detected,
our systems assume that a fire situation is present and students are prompted
to evacuate. Our fire policy everywhere is for students to leave the building
-- All our life systems are robustly tested in line with British Standards
guidelines by competent staff and accredited third parties to ensure that
they are operational at all times. We conduct routine inspections on all
plant and equipment including electrical and gas systems using accredited
personal and third parties
-- We have control over our physical estate, including the provision of all
white goods as well as the installation, management and maintenance of areas
such as fire doors, door closers and smoke and heat detectors. We physically
inspect our buildings through regular building patrols, the purpose of which
is to check key fire management equipment
-- We provide fire education to all of our students
This information is provided by RNS
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