Unite Group confident in its ability to deliver significant growth

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Unite Group plc (LON:UTG) has announced its interim results for the six months to 30 June 2022.

	H1 2022	H1 2021	FY2021	Change from H1 2021
Adjusted earnings¹	£96.0m	£72.6m	£110.1m	32%
Adjusted earnings per share¹	24.0p	18.2p	27.6p	32%
IFRS profit before tax	£334.1m	£130.4m	£343.1m	156%
IFRS basic EPS	82.9p	32.7p	85.9p	154%
Dividend per share	11.0p	6.5p	22.1p	69%
Total accounting return²	8.3%	3.9%	10.2%
As at	30 Jun 2022	30 Jun 2021	31 Dec 2021	Change from 31 Dec 2021
EPRA NTA per share²	940p	837p	882p	7%
IFRS NAV per share	948p	833p	880p	8%
See-through net debt^3,4	£1,727m	£1,501m	£1,522m	13%
Loan to value^3,4	30%	30%	29%	1%

HIGHLIGHTS

Earnings and dividend ahead of their pre-pandemic peak

· Adjusted earnings up 32% to £96.0 million (H1 2021: £72.6 million)

· Adjusted EPS up 32% to 24.0p (H1 2021: 18.2p) ¹

· IFRS profit before tax of £334.1 million (H1 2021: £130.4 million), driven by adjusted earnings and a valuation gain of £214.9 million in the period (H1 2021: £54.3 million)

· EPRA NTA per share of 940p, up 7% (31 December 2021: 882p)

· IFRS NAV per share up 8% to 948p (31 December 2020: 880p)

· Total accounting return of 8.3% for H1 (H1 2021: 3.9%)

· Interim dividend of 11.0p (H1 2021: 6.5p), targeting 80% payout of adjusted EPS for full year

Strong outlook for student demand

· University applications for 2022/23 up 7% on pre-pandemic levels

· Record application rate for school leavers and significant demographic growth over the next decade

· Reservations ahead of pre-pandemic levels at 92% (2021/22: 83%, 2020/21: 82%, 2019/20: 91%)

· Confident of achieving 97% occupancy and rental growth of 3.5-4.0% for 2022/23 (previously 3.0-3.5%)

· Targeting rental growth of 4-5% for 2023/24

Protection against rising costs

· Annual repricing of rents through multi-year nomination agreements and direct-let sales

· Cost protection through hedging, implemented platform efficiencies and growing fee income

· Interest rates 85% fixed or capped, with 3.2% cost of debt (31 December 2021: 3.0%)

· Adjusted EPS guidance of 40-41p for FY2022, reflecting higher interest costs

Growth underpinned by development pipeline

You might also enjoy reading Unite Students expect to deliver rental growth of at least 7% for the 2024/25 academic year

· 5.0% increase in property values in H1 for like-for-like portfolio⁵, reflecting strength of investor demand

· Secured pipeline of £1,032 million and 6,192 beds, generating a 6.0% yield on cost

· 2022 development completions fully let, adding 2p to adjusted EPS from 2023

· £42 million of asset management schemes completing for 2022/23, delivering 7% yield on cost, with growing pipeline of future opportunities

Ongoing capital discipline

· LTV increased to 30% at 30 June 2022³ (31 December 2021: 29%)

· £236 million of disposals contracted in H1 (Unite share) at a blended yield of 5.7%

· Acquisition of £141 million of USAF units (equivalent to GAV of £181 million) at an effective yield of 5.1%

¹ Adjusted earnings and adjusted EPS remove the impact of the LSAV performance fee and abortive acquisition costs from EPRA earnings and EPRA EPS. See glossary for definitions and note 7 for calculations and reconciliations

² The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). These financial highlights are based on the European Public Real Estate Association (EPRA) best practice recommendations and these performance measures are published as they are intended to help users in the comparability of these results across other listed real estate companies in Europe. The metrics are also used internally to measure and manage the business and to align to the performance related conditions for Directors’ remuneration. See glossary for definitions

³ Excludes IFRS 16 related balances recognised in respect of leased properties. See glossary for definitions

⁴ Wholly-owned balances plus Unite’s share of balances relating to USAF and LSAV

⁵ Like-for-like properties owned at both 31 December 2021 and 30 June 2022

PRESENTATION

There will be a presentation for analysts and investors this morning at 8:30 a.m. BST. A live webcast can be accessed here. To register for the event or to receive dial-in details, please contact [email protected].

Richard Smith, Chief Executive of Unite Students, commented:
“We have seen continued momentum in the first half, as earnings and dividends have grown strongly and reservations for the 2022/23 academic year are now ahead of pre-pandemic levels.
“Our business model offers inflationary protection but, like others, we are not immune from the impact of rising costs and interest rates. We are also very conscious of the current cost of living pressures facing students and parents. Our customer offer provides students with significant savings on their bills, as part of a simple, fixed price all-inclusive rental payment.
“Despite increased economic uncertainty, we remain confident in our ability to deliver significant growth over the medium to long term. Demand for Higher Education has proven to be resilient through economic cycles and we have significant opportunities for growth through our alignment to the strongest universities and by leveraging our best-in-class platform.”

Unite Group provides purpose built student accommodation across the United Kingdom.