Unite Group pleased with half-year progress ahead of next academic year
Student accommodation developer and manager the Unite Group issued its half year results for the six months to 30 June on Tuesday, reporting a 31% improvement in EPRA earnings to £52.9m.
The FTSE 250 company said its dividend was being hoisted 30% to 9.5p, driven by growing earnings and higher pay out.
Profit before tax rose 70% to £142.5m.
The board said it was in a “strong” financial position, with its loan-to-value ratio falling to 27% from 30% at the start of the period, and its cost of debt remaining stable at 4.1%.
Unite Group was assigned an investment grade corporate rating of BBB from Standard & Poor's and Baa2 from Moody's, the board also highlighted.
On the operational front, Unite said it was enjoying “high-quality” income, portfolio and university relationships to support its rental growth, with reservations for the 2018-2019 academic year now at 91%, in line with the same time last year.
It said that supported its rental growth outlook for the academic year of between 3.0% and 3.5%.
Nomination agreements with universities represented 60% of accommodation, up from 59% a year ago, with an average remaining life of six years providing income and rental growth certainty on over half of its revenue.
More than 9,000 beds were in a secured pipeline across development, university partnerships and forward funds, which Unite said was driving its future earnings growth.
The company also pointed to the acquisition of a 678-bed forward-funded development in Wembley for £102m for delivery in 2020, which was expected to deliver a yield on cost of over 6% and be valued at a net initial yield of 4.5%.
Two new off-campus university partnership schemes in Oxford and London were also secured in the period, delivering around 1,900 beds with target openings of 2019 and 2021 respectively.
It development pipeline contained 6,500 beds for delivery over the next three years, which was down from 7,550 beds this time last year, but was generating a 7.7% yield on cost.
Unite said it was on track to open 3,075 beds across seven new buildings for the 2018-2019 academic year, with all schemes on time and on budget, with reservations in line with the broader portfolio.
It said a “growing number” of opportunities in London were being evaluated.
In total, Unite said it would have 52,000 operational beds for the 2018-2019 academic year, with a value of £5bn.
Its share of that would be share £2.7bn.
The board said 85% of the firm’s portfolio was now located at high and mid-ranked universities, up from 82% year-on-year, and increasing to 90% on completion of its development and university partnership pipeline and planned acquisitions and disposals.
“The first half of 2018 has been another active and successful period for Unite,” said Unite Students chief executive Richard Smith.
“We have delivered further increases in our sustainable and recurring earnings and maintained strong cash flows.”
Smith said the focus on the company’s operating platform, property portfolio and university partnerships, supported by “attractive” market dynamics, continued to drive growth.
“We have expanded our university partnership activity and further aligned our portfolio to the strongest universities where student demand is at its highest.
“We are opening seven new properties over the summer and will be operating 52,000 beds for the 2018/19 academic year.”
Smith added that, as the UK's largest provider of such accommodation, Unite had “unparalleled insights” into the needs of students, which allowed it to constantly enhance the service it provided.
“Our continued focus on excellent customer service for both students and universities supports reservations of a record number of beds, with 91% of beds already reserved for the 2018-2019 academic year and like-for-like rental growth expected to be within our target of 3.0-3.5%.
“Looking ahead, our market leading brand, scalable operating platform and deep development pipeline leave us on track to deliver expected earnings and dividend growth for the full year.”