TIDMUTG
RNS Number : 3972U
Unite Group PLC (The)
29 July 2020
PRESS RELEASE
29 July 2020
THE UNITE GROUP PLC
("Unite Students", "Unite", the "Group", or the " Company ")
HALF YEAR RESULTS FOR THE SIX MONTHS TO 30 JUNE 2020
Richard Smith, Chief Executive of Unite Students, commented:
"I am proud of the response of our business through this
uniquely challenging period. Our focus has been on doing the right
thing for all stakeholders. We were the first student accommodation
provider to forgo summer term rents and one of the first to have
Covid Secure status accredited by the British Safety Council. I
believe our decisive actions have enhanced our reputation with
Universities, students and parents.
"We have growing visibility over our income for 2020/21 and our
market-leading operating platform gives us the flexibility to
rapidly adjust marketing strategies in response to changes in
demand. 97% of Universities plan to provide in-person teaching this
Autumn and UCAS data reveals a record share of 18-year-olds
applying to University. With the Government providing strong
financial support, we are confident in the prospects for the UK's
world-class Higher Education sector and expect strong demand for
the 2021/22 academic year.
"We see significant opportunities for growth through University
Partnerships, new developments and by attracting more of the
855,000 students currently living in Houses of Multiple Occupancy.
The proceeds of our recent placing will be used to accelerate
growth opportunities in those markets where we see strongest demand
from students."
H1 2020 H1 2019 FY2019 Change
======================= ============= ============= ============ =============
EPRA earnings(1,3) GBP74.8m GBP61.2m GBP110.6m 22%
EPRA earnings per
share(1,3) 20.5p 23.2p 39.1p (12)%
(Loss)/profit before GBP(101.2)m n/m
tax GBP(73.9)m GBP125.5m
Dividend per share 0.0p 10.25p 10.25p (100)%
Total accounting
return(1) (2.3)% 6.3% 11.7%
EBIT margin(1) 71.7% 76.0% 71.7%
As at 30 June 2020 30 June 2019 31 December Change from
2019 31 December
2019
----------------------- ------------- ------------- ------------ -------------
EPRA NAV per share(1) 833p 820p 853p (2)%
EPRA NTA per share(1) 828p 812p 847p (2)%
IFRS NAV GBP3,273m GBP2,165m GBP3,072m 7%
Net debt(2) GBP1,688m GBP897m GBP1,884m (10)%
Loan to value(2) 33% 29% 37%
======================= ============= ============= ============ =============
HIGHLIGHTS
EPRA earnings of GBP74.8 million, up 22% (H1 2019: GBP61.2
million) and EPRA EPS of 20.5 pence, down 12% (H1 2019: 23.2
pence)(3)
-- Reflecting the acquisition of Liberty Living in H2 2019 and
rent forgone for the summer term of 2019/20 in response to
Covid-19
-- Loss before tax of GBP73.9 million (H1 2019: GBP 125.5
million profit), driven by a valuation loss of GBP138.4 million in
the period (H1 2019: GBP74.3 million gain)
-- (2.3) % total accounting return (H1 2019: 6.3 %)
-- Guidance for EPRA EPS of 22-25 pence for FY2020 (2019: 39.1 pence)
-- Anticipate reinstating dividend payments following the start
of the 2020/21 academic year, assuming occupancy and income in line
with our expectations and a positive outlook for 2021/22
Focused on doing the right thing for students, employees and
other stakeholders
-- First PBSA provider to forgo summer term rents for students returning home
-- First student accommodation provider to have Covid Secure
status accredited by the British Safety Council
-- Decisive actions have enhanced our reputation with
Universities, creating new partnership opportunities
Growing visibility and confidence over income for the 2020/21
academic year
-- 97% of Universities plan to provide in-person teaching in the Autumn term of 2020/21(4)
-- 1% growth in UCAS acceptances compared to 2019/20, reflecting
record participation from 18-yearolds. Deferrals also reduced YoY,
albeit higher risk around international student numbers
-- Reservations for 2020/21 academic year at 84 % (2019/20: 93
%), of which half underpinned by nomination agreements
-- Targeting 90% occupancy for 2020/21, resulting in a 10-20%
anticipated reduction in rental income compared to 2019/20 (prior
to the impact of cancellations in 2019/20 due to Covid-19)
Growing pipeline of University Partnerships and developments,
driving future earnings growth
-- Secured pipeline of 5,370 beds (2019: 6,580 beds), generating a 6.6% yield on cost
-- GBP300 million placing, enabling continued investment in the
company's best-in-class platform
o Exchanged contracts for a 300-bed development site in central
Edinburgh
o Two further sites currently under offer for a total
development cost of c.GBP225 million
-- Continue to see opportunities to add to University
Partnership and development pipeline at enhanced returns
Successful integration of Liberty Living
-- All Liberty Living employees and properties now moved across
to the Unite operating platform
-- Secured cost synergies of GBP5-6 million in 2020 and GBP15 million p.a. from 2021
-- Now targeting additional costs synergies from energy efficiency and procurement
High-quality portfolio aligned to the strongest Universities
-- 76,354 operational beds for 2020/21 academic year, with a
value of GBP 7.8 billion; Unite share GBP 5.0 billion (31 December
2019: 74,108 beds, valued at GBP7.7 billion; Unite share GBP4.8
billion)
-- EPRA NAV of 833 pence, down 2% (31 December 2019: 853 pence)
-- IFRS NAV of GBP3,273 million, up 7% (31 December 2019: GBP3,072 million)
-- 2.6% reduction in property values in H1 on a like-for-like
basis, reflecting income deductions for disruption to rental income
and stable property yields
-- Removal of material uncertainty clause for valuations of
student accommodation by RICS post-period end
-- 88% of Unite's portfolio located at High and Mid-ranked Universities (30 June 2019: 90%)
Robust balance sheet and liquidity position
-- LTV of 33 % at 30 June (2) (31 December 2019: 37%),
maintaining 35% target over the medium-term
-- Planned repayment of GBP207 million of Group secured debt at
a blended coupon of 4.8%, incurring swap breakage costs of GBP24
million
-- Continued targeting of disposals in 2020 and 2021 to enhance portfolio quality
1. 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
2. Excludes IFRS 16 related balances recognised in respect of
leased properties. See glossary for definitions
3. Excludes integration and acquisition costs in relation to the
acquisition of Liberty Living
4. Universities UK survey published 17 June 2020
PRESENTATION
There will be a presentation for analysts and investors this
morning at 8:15 a.m. A live webcast can be accessed via this link .
To register for the event or to receive dial-in details, please
contact unite@powerscourt-group.com .
For further information, please contact:
Unite Students
Richard Smith / Joe Lister / Michael Burt Tel: +44 117 302 7005
Unite press office Tel: +44 7754 749 301
Powerscourt
Justin Griffiths / Victoria Heslop Tel: +44 20 7250 1446
OVERVIEW
The Covid-19 pandemic has made for a uniquely challenging period
for the business. Against this backdrop, I am proud of our
response. Our focus has been on doing the right thing for all our
customers, employees and other stakeholders. Our recent GBP300
million placing also positions us to capitalise on growth
opportunities arising from disruption caused by Covid-19.
With 76,000 operational beds across 27 cities for the 2020/21
academic year, we have a best-in-class platform that is able to
quickly adapt to changing operating conditions. Following the onset
of the Covid-19 pandemic in March, most UK Universities chose to
close their campuses, suspending all face-to-face teaching for the
remainder of the 2019/20 academic year. In response, Unite was the
first corporate PBSA provider to offer students refunds on their
summer term rents.
Our results in the first half reflect the disruption caused by
Covid-19 and our acquisition of Liberty Living's 24,000-bed
portfolio, which completed in November 2019. Reflecting the
increased scale of the portfolio, EPRA earnings for the six months
increased by 22 % to GBP 74.8 million (H1 2019: GBP61.2 million).
This translates to a 12% reduction in EPRA EPS to 20.5 pence (H1
2019: 23.2 pence) due to the impact of our decision to forgo summer
term rents and the increased share count associated with the
Liberty Living acquisition.
We anticipate reinstating dividend payments later in the year,
on the basis of delivering , supportive of our guidance for EPRA
EPS of 22-25 pence for FY 2020 and a continuing positive outlook
for the 2021/22 academic year.
EPRA NAV per share reduced by 2 % to 833 pence (31 December
2019: 853 pence) which, given no dividends were paid in the period,
translates to a total accounting return of (2.3) % in the first six
months of the year (H1 2019: 6.3%). The Group recorded an IFRS loss
before tax of GBP73.9 million (H1 2019: GBP125.5 million profit),
driven by a valuation loss resulting from income reductions as a
result of Covid-19.
Our key financial performance indicators are set out below:
Financial highlights H1 2020 H1 2019 FY2019
-------------------------- ----------- ---------- ------------
EPRA earnings GBP74.8m GBP61.2m GBP110.6m
EPRA EPS 20.5p 23.2p 39.1p
Dividend per share 0.0p 10.25p 10.25p
Total accounting return (2.3)% 6.3% 11.7%
(Loss)/profit before tax GBP(73.9)m GBP125.5m GBP(101.2)m
Basic EPS (20.4)p 53.3p (31.5)p
EPRA NAV per share 833p 820p 853p
EPRA NTA per share 828p 812p 847p
See-through LTV ratio 33% 29% 37%
We have increasing visibility over income as we approach the
start of the 2020/21 academic year. Reservations are currently at
84% (2019/20: 93%), of which over half are underpinned by
nomination agreements. Reflecting delays by some students and
Universities in making their accommodation choices at this stage,
we expect a higher than usual volume of sales activity later in the
booking cycle.
We are targeting 90% occupancy for 2020/21 (2019/20: 98%),
underpinned by the income security provided by our multi-year
nomination agreements. Overall, we expect a 10-20% reduction in
rental income for 2020/21 compared to 2019/20 (prior to the impact
of cancellations in 2019/20 due to Covid-19), which also includes
contingency for a reduction in pricing and shorter tenancy
lengths.
We have adapted our marketing efforts to place a greater
emphasis on domestic students and those international students
already in the UK. The success of this approach can be seen in the
increased share of 2(nd) and 3(rd) -year UK customers, who account
for 28% of direct-let bookings to date compared to 24% in 2019/20.
Including international customers, 2(nd) and 3(rd) -year customers
account for 56% of all direct-let bookings secured to date for
2020/21 (2019/20: 52%).
Our response to Covid-19
As mitigation for the rent refunds for those students who
returned home, we have taken various actions to conserve cash in
the business and reduce costs. This included the delay of our two
2021 development completions into 2022, deferral of non-essential
operational capex and GBP12-15 million of cost savings from
insourcing of work over the summer, savings to utility and
broadband costs and reductions in salary and pensions for Executive
Directors, Non-Executive Directors and senior managers for a
four-month period from 1 April. The Company did not furlough any
employees under the Government's Coronavirus job retention scheme.
We also took the decision to cancel the 2019 final dividend to
conserve cash in the business.
We are introducing a number of new and enhanced Covid-19 secure
operating practices to comply with Government guidance, all of
which can be delivered without an increase in operating costs due
to efficiencies achieved in other areas. Reflecting these measures,
we were the first UK student accommodation provider to receive a
Covid assurance statement from the British Safety Council (BSC) and
have been accredited as a BSC Covid Secure accredited
workplace.
Strong student demand
We know through our own research that students are keen to start
or get back to University as soon as it is safe to do so. This is
reflected in UCAS data as at the 18 June deadline, showing a 1%
increase in the number of applicants with an offer to start
University this Autumn compared to 2019/20. A record 40.5% of UK
18-year-olds have applied to University this year, reflecting
growing awareness of the opportunities and life experience it
provides. This has driven a 3% increase in acceptances by UK
18-year-olds, more than offsetting the impact of fewer young people
in the population.
The number of students with a deferred start date was down 1%
compared to 2019/20 as of 18 June, reflecting the clear desire of
young people to attend University, weaker employment prospects and
fewer gap year opportunities for school leavers.
The Universities UK survey published on 17 June outlined that
97% of Universities plan to provide in-person teaching in the
Autumn term of 2020/21. Teaching will be delivered on a 'blended'
basis, with face-to-face tutorials, seminars and practical work
complemented by online lectures to observe social distancing
guidelines. We expect University campuses to be open from the
Autumn.
There remains a risk that student numbers and demand for student
accommodation could be materially impacted by a second wave of
Covid-19. In particular, there is uncertainty over international
student numbers, given travel restrictions. Recent survey results
from the British Council highlight that between one-third and
two-thirds of non-EU international students may choose to cancel or
delay their travel plans for 2020/21. This is in line with our
assumptions.
Our guidance for occupancy and income for 2020/21 assumes no
return to more stringent lockdown measures at a national level and
that University campuses will open in the Autumn, reflecting social
distancing requirements.
Government financial support for Higher Education
The Government has announced a series of support measures for
the Higher Education sector in recent months. Universities will be
able to recruit up to 5% above their forecasts for UK and EU
undergraduate students in 2020/21, which already assumed modest
growth. Universities can also bid for a further 10,000 places in
subjects of strategic importance, such as science, engineering,
teaching training and healthcare. In total, this provides
Universities with the opportunity to recruit an additional 40,000
UK students from the pool of surplus applications, which totalled
101,000 in the 2019/20 academic year.
The Government has also taken significant steps to support
Universities' cash flow for the 2020/21 academic year, by bringing
forward GBP2.6 billion in tuition fee income and GBP100 million in
research funding, as well as making available GBP280 million
through extensions of research grants. In addition, the Government
will cover up to 80% of a University's income losses from
international students for 2020/21, reflecting the importance of
tuition fees from international students in helping to fund
University research activity.
This combination of measures should help to ensure less
volatility in student admissions across the sector and ensure the
financial viability of all Universities. In addition, the
Government recently made available a restructuring regime for any
Universities facing severe financial difficulties. Universities
will be able to access this support, provided they make changes to
meet wider Government objectives, including delivery of
high-quality courses with strong graduate outcomes, improving their
offer of qualifications available and reducing administrative
costs.
We expect the Government's response to the Augar review of
post-18 education and funding to be published this Autumn. Recent
comments suggest the Government strongly supports the combination
of world-class research-intensive Universities and teaching-led
Universities delivering high-quality courses. Through our strategic
alignment to High and Mid-ranked Universities, we are well
positioned to navigate these potential policy changes. At the same
time, Government comments suggest a greater emphasis on Further
Education and technical qualifications, with these potentially
being delivered through Lower-ranked Universities.
In recent announcements, the Government has reaffirmed its
commitment to growth in international student numbers. From the
2020/21 academic year, international students will benefit from a
new two-year post-study visa (rising to three years for PHD
students), which significantly improves the UK HE sector's global
competitiveness. In addition, the Department for Education recently
announced the appointment of Professor Sir Steve Smith, one of our
Non-Executive Directors, as International Education Champion in
support of its target to deliver 25% growth in the number of
international students to 600,000 by 2030.
Significant progress on integration of Liberty Living
We have made significant progress on the acquisition of Liberty
Living during the first half. Liberty Living city-based employees
have now transferred over to Unite and the 24,000 Liberty Living
beds have been fully integrated into our operating platform, PRISM,
slightly ahead of the planned timings. This means that all property
sales for the 2020/21 academic year, property management and
maintenance now occur through PRISM. In addition, the Unite
customer offer has been extended to all former Liberty Living
customers, including access to the MyUnite app and the
comprehensive range of student welfare and support services we
provide. The final elements of the integration programme will
conclude, in line with the plan, by the end of September 2020. In
particular, I want to thank all of the former Liberty Living
employees for their professionalism and commitment through the
transition.
The continued positive progress on integration will realise cost
synergies of GBP5-6 million in 2020 and provides confidence in
delivering GBP15 million of annual cost synergies from 2021. We
expect to incur integration costs of GBP8 million in 2020, of which
almost the entirety were recognised in H1. There are also
opportunities for further cost synergies to be realised over time
in areas such as procurement and energy efficiency in the Liberty
Living portfolio.
There have been significant operational learnings during the
integration process and we remain committed to combining the best
of both businesses. A range of initiatives have been implemented,
including an improved allocation and communication process for our
University partners, establishment of a virtual sales and service
centre for the entire portfolio and optimisation of marketing and
social media campaigns.
Successful share placing to fund continued investment
In June, we successfully raised GBP300 million of gross proceeds
from an equity issue, equivalent to 9.5% of existing shares in
issue at a price of 870 pence. The placing will enable the Company
to continue to invest in its market-leading platform and drive
earnings growth.
The net proceeds, coupled with debt up to our 35% LTV target,
will be used to:
-- Grow the development pipeline by targeting three new schemes
for a total development cost of approximately GBP250 million in
central London and prime provincial markets for 2023/24
delivery
-- Capitalise on new University Partnership and development
opportunities in key cities, reflecting financial and operational
constraints on Universities and the goodwill created with
Universities by the Company's recent actions
We have already exchanged contracts to acquire one of the three
identified schemes; a 300-bed development site in central Edinburgh
with a total development cost of GBP24 million.
The placing and repayment of GBP207 million of secured debt will
be immediately accretive to total accounting returns and earnings
neutral, with earnings accretion as new development opportunities
are delivered.
OUTLOOK
We have growing visibility and confidence over our income for
the 2020/21 academic year, reflective of the strength of our
University relationships and demand from UK students. Our
best-in-class operating platform also provides the flexibility to
rapidly adjust our marketing strategies and reduce costs. There
remains a higher risk than usual of cancellations to reservations
by international students for 2020/21 and we continue to closely
monitor the risks surrounding a potential second wave of
Covid-19.
Moving forward, we expect strong student demand in 2021/22
bolstered by an enhanced campus experience, a significant recovery
in international student numbers as well as an increase in the
18-year-old population. Participation rates also continue to grow,
reflecting the value young adults place on a higher level of
education and the financial stability it offers. We anticipate a
continued flight to quality by students, with Government policy
expected to focus on the quality and value of courses. Through our
increasing strategic alignment to High and Mid-ranked Universities,
which account for 88% of our income, the Company is well positioned
for anticipated growth in student numbers over the next decade.
A return to growth in student numbers from 2021/22 is supportive
of a positive rental growth outlook for our portfolio. This
reflects the value-for-money offered by our high quality,
affordable accommodation and a growing opportunity to capture
market share from the 855,000 student beds in houses of multiple
occupancy (HMOs). The proceeds of our recent placing will be used
to accelerate growth opportunities through new University
Partnerships and developments to enhance earnings and total
returns.
OPERATIONS REVIEW
The Group continues to report on an IFRS basis and presents its
performance in line with best practices as recommended by EPRA. The
Operations and Property reviews focus on EPRA measures as these are
our key internal measures and aid comparability across the real
estate sector.
Sales, rental growth and profitability
The key strengths of our operating business are our people, our
PRISM operating platform, our reputation and our relationships with
Universities. We leveraged these capabilities through our
acquisition of Liberty Living in November 2019, resulting in a 43%
increase in rental income to GBP154.9 million, up from GBP108.3
million in H1 2019. This reflected GBP63.3 million of income
delivered from the acquisition of Liberty Living's 24,000-bed
portfolio, partially offset by GBP26.9 million of rental income
forgone through cancellations for the summer term of 2019/20 in
response to Covid-19.
This resulted in a 22% increase in EPRA earnings to GBP74.8
million (H1 2019: GBP61.2 million). Reflecting the predominantly
fixed nature of our cost base and the increased share count
associated with the Liberty Living acquisition, the loss of income
from cancellations resulted in a 12% reduction in ERPA EPS to 20.5
pence (H1 2019: 23.2 pence). EPRA earnings excludes integration and
acquisition costs associated with the acquisition of Liberty
Living, which totalled GBP8.1 million in the period (H1 2019:
GBP5.4 million).
Summary income statement H1 2020 H1 2019 2019
GBPm GBPm GBPm
-------------------------------------- -------- -------- -------
Rental income 154.9 108.3 213.9
Property operating expenses (37.5) (23.9) (53.1)
-------- -------- -------
Net operating income (NOI) 117.4 84.4 160.8
-------- -------- -------
NOI margin 75.9% 78.0% 75.2%
Management fees 7.7 7.2 14.4
Operating expenses (14.1) (9.3) (21.8)
Finance costs (33.5) (20.7) (43.9)
Acquisition and net performance fees - - 6.8
Development and other costs (2.7) (0.4) (5.7)
-------- -------- -------
EPRA earnings 74.8 61.2 110.6
-------- -------- -------
EPRA EPS 20.5 23.2 39.1p
-------- -------- -------
EBIT margin 71.7% 76.0% 71.7%
A reconciliation of (loss)/profit after tax to EPRA earnings is
set out in note 2.2b of the financial statements
The loss of income through summer term cancellations reduced the
Group's NOI margin to 75.9 % for the six months (H1 2019: 78.0 %)
and the EBIT margin to 71.7% (H1 2019: 76.0%). Overheads increased
YoY, reflecting the impact of the Liberty Living acquisition and
initial cost synergies realised in the period. In response to
Covid-19, GBP12-15 million of cost savings measures have been
identified for 2020 from insourcing of work over the summer,
savings to utility and broadband costs and reductions in salary and
pensions for Executive Directors, Non-Executive Directors and
senior managers.
Finance costs have increased to GBP 33.5 million (H1 2019:
GBP20.7 million), reflecting higher net debt of GBP 1,688 million
following our acquisition of Liberty Living in H2 2019 (30 June
2019: GBP897 million). GBP 3.3 million of interest costs were
capitalised in the first half, a reduction from GBP5.1 million in
H1 2019, due to the reduced level of development activity. The cost
of debt has reduced to 2.9% (31 December 2019: 3.3%), following
drawdown of our remaining Group debt facilities during the first
half.
2019/20 academic year
We anticipate a c.15% reduction in income for the 2019/20
academic year, reflecting our decision to refund rents for students
who have chosen to return home for the summer term. Unite was the
first corporate PBSA provider to offer students refunds on their
summer term rents, reflecting our core value of doing the right
thing for our customers, people and other stakeholders. This
resulted in the loss of GBP26.9 million of previously contracted
rent (Unite share) in the first half.
Reflecting the strength of our University relationships, we have
collected 97% of rent due to date for the summer term under
nomination or lease agreements, where Universities collect rent
directly from students.
2020/21 academic year
We have increasing visibility over income as we approach the
start of the 2020/21 academic year. Reservations of 84% are below
the prior year (2019/20: 93%), reflecting delays by some students
and Universities in making their accommodation choices at this
stage. We expect a higher than usual volume of sales activity later
in the booking cycle.
We are targeting 90% occupancy for 2020/21 (2019/20: 98%),
underpinned by the income security provided by our multi-year
nomination agreements. This target makes allowance for around 4,000
no-shows and cancellations, representing around 30% of existing
direct-let bookings by international customers. To mitigate the
risk to income, we are in the process of contacting all UK and
international customers to reconfirm bookings.
Overall, we expect a 10-20% reduction in rental income for
2020/21 compared to 2019/20 (prior to the impact of cancellations
in 2019/20 due to Covid-19). This includes contingency for a
reduction in pricing and shorter tenancy lengths, alongside lower
occupancy. Our 2020/21 income guidance also assumes no return to
more stringent lockdown measures at a national level and that
University campuses open in the Autumn, reflecting social
distancing requirements.
Breakdown of reservations (2020/21, total Group)
Gross rental income
Type Beds % of beds to sell (GBPm)
---------------------------------- ------ ----------------- -------------------
Nomination agreements, contracted 31,442 42% 218.9
Nomination agreements, unsigned 7,412 10% 50.7
UK direct let 10,064 14% 61.8
International direct let 13,713 18% 112.8
Total 62,631 84% 444.2
================================== ====== ================= ===================
Nomination agreements
Nomination reservations total c.38,900 beds or 52% of available
beds for the 2020/21 academic year (2019/20: 41,500 beds or 56%),
of which 90% is aligned to High and Mid-ranked Universities. 31,400
of these nominated beds (42% of total beds) are already contracted,
of which c.27,000 beds (36% of total) have income underwritten by
the University. As usual at this stage of the cycle, we have
reservations under nomination agreements that are yet to be
contracted. We have a high degree of confidence that the
substantial majority of the c.7,400 unsigned nomination beds (10%
of total beds) will complete in the coming weeks.
Direct- let sales
Direct-let reservations account for c.23,800 beds or 32% of
total beds. We are targeting the sale of an additional 5,000 beds
on a direct-let basis to reach our occupancy target of 90% for
2020/21.
We are seeing healthy levels of demand from UK undergraduate
students. UK customers account for 42% of our direct-let bookings
to date, which we expect to rise to around 60% by the end of the
sales cycle (2019/20: 39%). We have achieved a higher proportion of
UK sales from rebookers, showing progress in attracting students
from HMOs. We have also seen an encouraging improvement in
international reservations in recent weeks after a period of
subdued sales. 2(nd) and 3(rd) -year students account for just
under half of international sales, providing greater certainty over
income.
Breakdown of reservations for 2020/21 by domicile and year of
study
Nominations* Direct let
--------------------------------- ------
UK China EU Other Intl. Total
--------------------- ------------ ------ ----- ----- ----------- ------
First year n/a 3,158 977 773 376 n/a
2(nd) and 3(rd) year n/a 6,640 3,420 1,516 1,629 n/a
Postgraduate n/a 266 4,278 247 497 n/a
--------------------- ------------ ------ ----- ----- ----------- ------
Total 38,854 10,064 8,675 2,536 2,502 62,631
% of reservations 62% 16% 14% 4% 4% 100%
% of beds sold 52% 14% 12% 3% 3% 84%
===================== ============ ====== ===== ===== =========== ======
* All years and domiciles
There remains a higher risk than usual of cancellations to our
direct-let reservations, particularly for international students,
given some caution on the part of students as well as travel
restrictions and quarantine measures imposed to combat
Covid-19.
Reservations secured to date have delivered pricing increases
compared to 2019/20 and we have not yet seen widespread discounting
activity by our competitors. We will seek to maintain price
discipline through the remainder of the booking cycle but our
guidance for a 10-20% YoY reduction in income for 2020/21 provides
some contingency for price reductions or increased use of
incentives to drive sales and optimise occupancy.
Operating model for 2020/21
We remain focused on delivering a safe and secure living
environment for students.
We are introducing a number of new and enhanced Covid-19 secure
operating practices for the 2020/21 academic year to comply with
Government guidance. These will include enhanced cleaning and new
physical and social distancing measures such as floor markings,
signage, communication in reception areas and repurposed common
areas. Reflecting these measures, we are a British Safety Council
Covid Secure accredited workplace.
Our investments in our sector-leading operating platform, PRISM,
and our MyUnite app already facilitate a range of digital
interactions between Unite staff and students - such as bookings,
maintenance requests, parcel collections and logging of issues -
and provide opportunities for enhanced service to students. We will
use the app to manage arrivals and check-ins to ensure students are
welcomed in a safe and secure environment. All of these
enhancements can be delivered without an increase in operating
costs, due to efficiencies achieved in other areas.
PROPERTY REVIEW
EPRA NAV growth
EPRA NAV per share reduced by 2% to 833 pence at 30 June 2020
(31 December 2019: 853 pence). In total, EPRA net assets were
GBP3,325 million at 30 June 2020, up from GBP3,110 million six
months earlier.
The main drivers of the GBP215 million increase in EPRA NAV and
20 pence reduction in EPRA NAV per share were:
-- The reduction in the value of the Group's share of investment
assets as a result of income reductions relating to Covid-19
disruption (GBP(106) million, (26) pence) and modest yield
expansion (GBP(12) million, (3) pence)
-- A small reduction in the value of the development portfolio (GBP(4) million, (1) pence)
-- A provision for the replacement of High Pressure Laminate
('HPL') cladding (GBP(13) million, (3) pence)
-- The positive impact of retained profits (+GBP56 million, +12 pence)
-- The impact of the share placing (+GBP294 million, +1 pence)
Changes in EPRA guidelines
In October 2019, EPRA issued updated best practice
recommendations, including new definitions of NAV measures, which
became effective for the Group on 1 January 2020. The revision
includes the introduction of EPRA Net Tangible Assets (NTA), which
is expected to become the most relevant NAV measure for the Group,
and we expect this to be our primary NAV measure going forward.
EPRA NTA adjusts EPRA NAV, our existing key NAV measure, by
excluding intangible assets.
During 2020, we will continue to monitor and report on a
combination of the previous and new EPRA NAV measures as set out
below:
30 June 2020 30 June 2019 31 December Change from
2019 31 December
2019
-------------------- ------------- ------------- ------------ -------------
EPRA NAV per share 833p 820p 853p (2)%
EPRA NTA per share 828p 812p 847p (2)%
==================== ============= ============= ============ =============
Property portfolio
The valuation of our property portfolio at 30 June 2020,
including our share of gross assets held in USAF and LSAV, was
GBP5,154 million (31 December 2019: GBP5,225 million). The GBP71
million reduction in portfolio value reflects the valuation
movements outlined above, together with capital expenditure and
interest capitalised on developments of GBP67 million.
Summary balance sheet
30 June 2020 30 June 2019 31 December 2019
----------------------------- ---------------------------- -----------------------------
Wholly Share Wholly Share Wholly Share
owned of Fund/JV Total owned of Fund/JV Total owned of Fund/JV Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ------- ----------- ------- ------ ----------- ------- ------- ----------- -------
Rental properties 3,317 1,272 4,589 1,468 1,242 2,710 3,407 1,296 4,703
Rental properties
(leased) 107 - 107 111 - 111 110 - 110
Properties under
development 458 - 458 369 3 372 412 - 412
------- ----------- ------- ------ ----------- ------- ------- ----------- -------
Total property 3,882 1,272 5,154 1,948 1,245 3,193 3,929 1,296 5,225
------- ----------- ------- ------ ----------- ------- ------- ----------- -------
Net debt (1,261) (427) (1,688) (484) (413) (897) (1,450) (434) (1,884)
Lease liability (97) - (97) (100) - (100) (99) - (99)
Other
assets/(liabilities) (24) (20) (44) (13) (13) (26) (120) (13) (133)
EPRA net assets 2,500 825 3,325 1,351 819 2,170 2,260 849 3,109
======= =========== ======= ====== =========== ======= ======= =========== =======
Student accommodation yields
The purpose-built student accommodation sector has continued to
deliver strong performance relative to the wider UK real estate
sector amid the disruption caused by Covid-19. Strong sector
fundamentals and a track record of consistent rental growth
continue to attract significant volumes of capital to the
sector.
This was underlined by Blackstone's acquisition of iQ's
28,000-bed portfolio for GBP4.7 billion in February 2020. The price
translated to a material premium to the underlying market value of
iQ's property portfolio, illustrating the willingness of investors
to attribute value to the brand, operating and development
capabilities of major operators.
Since the outbreak of Covid-19, transaction activity has slowed.
However, in recent weeks, a portfolio of provincial assets was sold
to an international buyer at pricing broadly in line with
pre-Covid-19 levels. Given greater uncertainty over occupancy for
the 2020/21 academic year, pricing is likely to be stronger where
sellers are willing to provide a one-year income guarantee to
buyers.
The average net initial yield across the portfolio is 5.0%
(December 2019: 5.0%), unchanged over the first six months of the
year. At a city level, we have seen modest yield compression in
London and other super prime provincial markets, offset by a
further increase in yields in more fully-supplied provincial
markets.
In light of the market uncertainty created by Covid-19, the
valuations for 30 June 2020 have been reported on the basis of
'material valuation uncertainty'. Following the period end, the
RICS recommended that the material uncertainty clause is no longer
appropriate for valuations of institutional grade, student
accommodation which is professionally managed.
An indicative spread of direct-let yields by location is
outlined below:
30 Jun 2020 30 Jun 2019 31 Dec 2019
London 3.9-4.25% 4.0-4.25% 3.75-4.25%
Prime provincial 4.5-5.15% 4.5-5.0% 4.5-5.0%
Major provincial 5.0-6.00% 5.0-5.5% 5.25-5.75%
Provincial 6.25-7.25% 6.0-7.0% 6.25-6.75%
----------------- ------------ ------------ ------------
Development and University Partnership activity
Development and University Partnership activity continues to be
a significant driver of growth in future earnings and NAV. Our
pipeline of traditional development and University Partnerships
includes 5,370 beds with a total development cost of GBP693
million. We expect to maintain a run-rate of around 2,000 beds p.a.
funded from the proceeds of our recent GBP300 million placing and
internally generated sources.
The anticipated yield on cost of this secured pipeline is 6.6%.
We are targeting enhanced returns on new developments, with yields
on cost of 7.5% in London and 8.5% in provincial markets. This
reflects our expectation for reductions in land and construction
prices, resulting from a broader economic slowdown. We have lower
hurdle rates for developments that are supported by Universities or
where another developer is undertaking the higher-risk activities
of planning and construction. The new London Plan requires that new
developments of student accommodation allocate a majority of beds
to nomination agreements with Universities, meaning we expect most
new London developments will be delivered as University
Partnerships. Given our long-term relationships with London
Universities, this leaves us well placed to secure new development
opportunities.
2020/21 completions
We will deliver 2,257 beds across three development schemes for
the 2020/21 academic year. White Rose View in Leeds, where we have
a 559-bed 30-year nomination agreement with the University of
Leeds, will be completed on time and budget for student arrivals
this September.
Due to temporary site closures and reduced levels of operatives
on site as a result of social distancing measures, we are expecting
completion of First Way, London and Artisan Heights, Manchester to
be delayed until Q4 2020. We will provide alternative accommodation
to those students affected and expect both buildings to be fully
operational from January 2021. Due to fixed-price build contracts,
we are not liable for any cost overruns. We expect to generate
income from these buildings during the 2020/21 academic year
through the usual January intake by some Universities.
Deferral of 2021/22 completions
As part of our response to Covid-19, we took the decision
earlier this year to defer delivery of our schemes at Middlesex
Street, London and Old BRI, Bristol into 2022. We expect to restart
construction in Q1 2021, following the start of the 2020/21
academic year. The total cost of delays is expected to be GBP2
million.
New opportunities
We continue to identify new development and University
Partnership opportunities, with three schemes totalling GBP250
million in total development cost either contracted or under offer.
In July, we exchanged contracts to acquire a 300-bed development
site in central Edinburgh, with a total development cost of GBP24
million. We are targeting delivery of the direct-let development
for the 2023/24 academic year but may be able to accelerate this
timetable subject to planning consent.
The two remaining new sites include a development in central
London and a forward-funded acquisition in a prime provincial
market. All three new schemes are expected to deliver yields on
cost 50-75 basis points above pre-Covid levels. In addition, the
placing provides capacity to pursue additional University
Partnership and development opportunities that may emerge in the
current environment.
Our development activity is analysed in more detail below.
Secured development and University Partnerships pipeline
Target Secured Total Total Capex in Capex Forecast Forecast
delivery beds completed development period remaining NAV yield on
value costs remaining cost
No. GBPm GBPm GBPm GBPm GBPm %
--------------- ------------ ----------- ---------- ------------ ----------- ----------- ---------- ----------
Traditional development
First Way,
London 2020 678 132 103 10 22 12 6.0%
Artisan
Heights,
Manchester 2020 603 82 57 12 6 11 7.8%
Derby Road,
Nottingham(1) 2023 620 64 48 1 46 16 8.0%
Wyvil Road,
London(1) 2023 270 100 80 - 62 21 6.2%
Abbey Lane,
Edinburgh(1) 2023 298 33 24 1 23 9 8.3%
Total wholly owned 2,469 411 312 24 159 69 6.9%
University Partnerships
White Rose
View, Leeds 2020 976 122 84 17 8 14 7.4%
Middlesex
Street,
London 2022 913 277 187 57 86 52 6.0%
Old BRI,
Bristol 2022 416 57 43 3 19 7 6.2%
Temple
Quarter,
Bristol(1) 2023 596 85 67 1 65 18 6.2%
----------- ---------- ------------ ----------- ----------- ---------- ----------
Total University
Partnerships 2,901 541 381 78 178 91 6.4%
Total pipeline 5,370 952 693 102 337 160 6.6%
=========== ========== ============ =========== =========== ========== ==========
(1) Subject to obtaining planning consent
University Partnerships
We continue to make progress with our strategy of delivering
ongoing growth through partnerships with Universities. Reflecting
the financial and operational constraints faced by Universities,
there is a growing appetite for partnerships with leading
operators. We see opportunities to capitalise on our brand and the
goodwill created by our response to Covid-19 to accelerate and
enhance our pipeline of University Partnerships.
Through our Higher Education engagement team, we have a pipeline
of active discussions for new partnerships, with 14 different
Universities across a range of different models, including further
off-campus developments, long-term nomination agreements, stock
transfer and third-party management arrangements. Our experience
suggests that we will convert 10-20% of these opportunities over
time. As a result, we expect to add one or two new deals per year
as previously outlined.
In the first half, we completed a new University Partnership
with the University of Bristol, covering around 3,000 beds in
Bristol. This will include a large proportion of Unite's existing
operational assets in the city, following targeted investments as
well as the 416-bed Old BRI development and the 596-bed Temple
Quarter development in close proximity to the University's new
campus.
Our development at Middlesex Street in London has been supported
through planning by King's College London, with both parties
working towards a long-term nomination agreement. Both partnerships
reflect Unite's strategy of aligning its property portfolio to the
best locations and High-ranking Universities where student numbers
are growing fastest.
Type Number of deals Beds Execution risk
------------------------ -------------------- ---------------- ------- ---------------
Multi-year nominations Existing portfolio 11 11,400 Low/Medium
Off-campus development New 5 3,100 Medium
On-campus development New 8 7,500 High
Stock transfer New 4 8,000 High
---------------- -------
Total 28 30,000
---------------- -------
Disposal activity
We will continue to manage the quality of the portfolio and our
balance sheet leverage by recycling capital through disposals and
reinvesting into developments and acquisitions of assets aligned to
the best Universities.
We intend to dispose of approximately GBP100-150 million of
assets in 2020, with higher levels of disposals planned for 2021
and 2022. Given market disruption and uncertainty created by
Covid-19, there is an increased execution risk in delivering
planned disposals in the near term.
These target disposals, together with our investment activity,
will further enhance our alignment to High and Mid-ranked
Universities and underpin our ability to sustain rental growth over
a longer-time horizon. In addition, capital recycling will provide
the funding capacity to pursue future growth opportunities.
Cladding
In January 2020. new Government Building Safety Advice was
issued, which referenced the use of HPL cladding and new safety
concerns. We have identified 19 properties with HPL cladding within
our portfolio. All of the affected buildings have been assessed by
independent fire safety experts and remain safe for students to
occupy.
For eight properties, we have identified the work needed to
remove and replace different areas of the cladding. For the
remaining 11 properties with HPL cladding, further testing is
required to determine whether there is a need to complete
rectification works. We have therefore made a GBP13.4 million
provision (Unite share) for the cost of remediation works in the
balance sheet as at 30 June. In addition, special measures have
been put in place at the affected buildings, including increased
building patrols by staff and additional alarm measures. Works to
remove the cladding will take place over the next 6-24 months.
FINANCIAL PERFORMANCE
Income statement
A reconciliation of loss/profit before tax to EPRA earnings
measures is set out in summary below and expanded in section 7 of
the financial statements.
The move to a loss before tax is the result of valuation losses
of GBP139 million being recognised in the first six months of 2020,
compared with the GBP73 million gains recognised in H1 2019 and an
increase in costs relating to the acquisition and integration of
Liberty Living to GBP8.1 million (H1 2019: GBP5.4 million).
H1 2020 H1 2019 FY2019
GBPm GBPm GBPm
---------------------------------------- -------- -------- --------
EPRA earnings 74.8 61.2 110.6
Valuation losses/gains and profit/loss
on disposal (138.9) 73.3 198.1
Impairment of goodwill and intangibles - - (384.1)
Integration/acquisition costs (8.1) (5.4) (22.8)
Amortisation of fair value of debt
recognised on acquisition 2.2 - 0.4
Changes in valuation of interest
rate swaps and debt break costs (5.6) (2.9) (5.4)
Minority interest and tax 1.7 (0.7) 2.0
-------- -------- --------
(Loss)/profit before tax (73.9) 125.5 (101.2)
======== ======== ========
EPRA earnings per share 20.5p 23.2p 39.1p
Basic (loss)/earnings per share (20.4)p 53.3p (31.5)p
Cash flow and net debt
The Operations business generated GBP27.8 million of net cash in
H1 2020 (H1 2019: GBP47.0 million) and net debt reduced to GBP1,688
million (31 December 2019: GBP1,884 million). The key components of
the movement in net debt were the operational cash flow (generating
total inflows of GBP24 million) and net proceeds of GBP294 million
from the share placing, offset by total capital expenditure of
GBP103 million, costs associated with the acquisition of Liberty
Living of GBP10 million and withholding tax payments of GBP3
million.
Cash headroom and liquidity
As of 30 June, the Group had GBP541 million of unrestricted cash
reserves, having fully drawn its revolving credit facilities during
the period and received GBP294 million in net proceeds from the
share placing. The Company has been confirmed as an eligible issuer
under the HM Treasury and Bank of England Covid Corporate Financing
Facility (CCFF). At this stage, we have no plans to drawdown under
the CCFF. In addition, we have received credit approval for a
GBP100 million extension to our unsecured Group debt facility.
We remain confident in our cash headroom and liquidity through
the 2020/21 academic year based on income visibility provided
through our contracted nomination agreements. We have GBP35 million
of committed capex remaining for 2020 development completions and
average cash consumption is c.GBP11-13 million per month.
Debt financing, covenants and going concern
The Group maintains a disciplined approach to leverage, with
see-through LTV of 33% at 30 June 2020 (31 December 2019: 37%). The
Unite Group plc has maintained investment grade corporate ratings
of BBB from Standard & Poor's and Baa2 from Moody's, reflecting
Unite's robust capital position, cash flows and track record.
We continue to monitor our banking covenants, which vary between
facilities but are principally based on LTV and ICR ratios. Given
the interruption to income caused by Covid-19, our principal focus
is on our ICR covenants, which vary between 1.5-2.0x depending on
the facility.
We are confident in our headroom under ICR covenants at both a
Group and fund level. There is headroom for occupancy to fall to
c.55% for the 2020/21 academic year before a breach of our tightest
ICR covenant. Based on contracted nomination agreements, totalling
41% of beds, this would require only limited conversion of our
reserved but unsigned nomination agreements or check-ins by
customers under existing direct-let reservations to maintain
compliance with the ICR covenants.
The Directors have considered a range of scenarios for future
performance, including a disruption to term start dates and a
potential second wave of Covid-19. We have growing income
visibility through nomination agreements and other direct-let
reservations for 2020/21. Moreover, the demand outlook for students
starting this Autumn is supported by UCAS data, showing a 1%
increase in acceptances compared to 2019/20. Additionally, in a
downside scenario, the Group has the ability to conserve cash
through a variety of measures, such as cost reduction programmes,
deferral of capital expenditure and dividends and, if required, to
discuss terms of banking agreements with its lenders. Accordingly,
the Directors continue to adopt the going concern basis in
preparing the Group condensed financial statements. Further details
can be found in note 1 of the financial statements.
Interest rate hedging arrangements and cost of debt
Our see-through average cost of debt has reduced to 3.0% (31
December 2019: 3.3%) and 77% of see-through investment debt is
subject to a fixed interest rate (31 December 2019: 93%) for an
average term of 4.6 years (31 December 2019: 5.4 years). Following
the period end, we will repay GBP207 million of Group secured debt
at a blended coupon of 4.8%, as well as incurring swap breakage
costs of GBP24 million. Pro forma for the repayment of the secured
debt, our cost of debt reduces to 2.8%.
Following the repayment of the secured debt, the Group will move
to a fully unsecured debt platform with an earliest debt maturity
of November 2022. We intend to raise further debt over the next
6-12 months to extend the maturity profile of our debt and
diversify our funding sources.
Key debt statistics (Unite share Pro forma for secured debt repayment 30 Jun 2020 30 Jun 2019 31 Dec 2019
basis)
------------------------------------- ------------------------------------- ------------ ------------ ------------
Net debt GBP1,713m GBP1,688m GBP897m GBP1,884m
LTV 34% 33% 29% 37%
Net debt:EBITDA ratio* 7.3 6.1 6.8
Interest cover ratio 3.3 4.1 3.5
Average debt maturity 4.7 years 4.6 years 5.4 years 5.4 years
Average cost of debt 2.8% 3.0% 3.8% 3.3%
Proportion of investment debt at
fixed rate 74% 77% 100% 93%
* 2019 calculation based on average net debt, pro rata for
completion of Liberty Living acquisition in late November 2019
Share placing
We completed a placing of 34.5 million new ordinary shares in
June 2020 at a price of 870 pence per share, raising gross proceeds
of GBP300 million. The net proceeds, coupled with debt up to our
35% LTV target, will be used to commit to three new schemes now
contracted or under offer for a total development cost of
approximately GBP250 million in central London and prime provincial
markets for 2023/24 delivery and to capitalise on new University
Partnership and development opportunities in key cities. The
Company consulted with a significant number of its shareholders
prior to the Placing and respected the principles of pre-emption
through the allocation process insofar as possible.
The Placing and repayment of secured debt will be immediately
accretive to total accounting returns and earnings neutral, with
earnings accretion as new development opportunities are
delivered.
Dividend
Following the outbreak of Covid-19 and a period of highly
uncertain trading conditions, the Board took the decision to cancel
the 2019 final dividend to retain cash within the business.
We anticipate reinstating dividend payments in 2020, on the
basis of delivering of occupancy and income supportive of our
guidance for EPRA EPS of 22-25 pence for FY 2020 and based on a
positive outlook for the 2021/22 academic year. There is the
potential to announce an interim dividend later this year (H1 2019:
10.25 pence), although timing of the reinstatement is still to be
confirmed. Dividends for the 2020 financial year will reflect a
portion of EPRA EPS with the payout ratio still to be
determined.
There is no further Property Income Distribution (PID) to be
paid by the Company in respect of the 2019 financial year.
Tax and REIT status
The Group holds REIT status and is exempt from tax on its
property business. During the first half of 2020, we recognised a
current tax charge of GBP0.4 million, relating primarily to our
property management activities.
Funds and joint ventures
The table below summarises the key financials at 30 June 2020
for each vehicle.
Property Assets Net debt Other assets Net assets GBPm Unite share Maturity Unite
GBPm GBPm GBPm of NAV share
GBPm
------ ---------------- --------- ------------- ---------------- ------------ ---------- -------
USAF 2,789 (854) (16) 1,919 423 Infinite 22%
LSAV 1,316 (478) (33) 805 402 2022/2027 50%
The performance of USAF and LSAV in the first half was impacted
by disruption caused by Covid-19, consistent with the performance
of the wider business. Property valuations reduced by 2.2% and 1.5%
for USAF and LSAV respectively over the first half of the year on a
like-for-like basis, reflecting income deductions relating to
summer income and the anticipated impact of Covid-19 disruption on
2020/21 income.
Fees
During the six months to June 2020, the Group recognised net
fees of GBP7.7 million from its fund and asset management
activities (H1 2019: GBP7.2 million). The increase was driven by
increases in GAV and NAV over the past 12 months, partially offset
by reductions in NOI from disruption relating to Covid-19.
The London portion of our LSAV joint venture has a maturity in
2022. Discussions are ongoing with our joint venture partner, GIC,
over the future of the vehicle. The joint venture has performed
well over its life and we continue to see an opportunity to realise
value from the performance fee payable to Unite at maturity. An
initial GBP5.7 million of this fee was recognised in the 2019
results. We remain confident in receiving at least this amount
under the performance fee based on the conservative valuation
assumptions used in the calculation and valuation evidence for
student accommodation since the outbreak of Covid-19.
The performance fee is payable at the end of the life of the
joint venture and is based on the cash realised to the joint
venture partners. The remaining fee will be realised over the
period until the vehicle's scheduled maturity in 2022, subject to
the performance, outlook and discussions with GIC over the future
of the fund.
H1 2020 H1 2019 FY2019
GBPm GBPm GBPm
---------------------------------------- -------- -------- -------
USAF asset management fee 6.0 5.3 11.2
LSAV asset and property management fee 1.7 1.6 3.2
USAF acquisition fee - 0.3 2.2
Net performance fee - - 5.7
Unite disposal management fee - - 2.4
-------- --------
Total fees 7.7 7.2 22.3
-------- -------- -------
Principal risks and uncertainties
The Group's principal strategic risks and uncertainties are
those which might prevent it from achieving its principal financial
aim of delivering attractive total returns through recurring income
and capital growth, while maintaining a strong capital structure.
Details of how we manage risk are set out on pages 42 to 46 of our
2019 Annual Report.
The principal risks and uncertainties facing the Group for the
remaining six months of the financial year remain those detailed on
pages 47 to 55 of the 2019 Annual Report. Covid-19 has increased
and intensified these risks in some cases, as discussed below:
-- Market risks with the potential to reduce demand for UK HE
and student accommodation, either due to macro events, such as the
Covid-19 pandemic, Government policy around HE or immigration,
uncertainty related to Brexit, geo-political relations between the
UK and China, lower affordability of our product or increasing
supply of PBSA beds. Covid-19 has increased uncertainty over
student demand and reservations for the 2020/21 academic year
-- Operational risks linked to major health and safety
incidents. In response to the operational risks associated with
Covid-19, the Group continues to closely monitor guidance from the
Government and public health authorities
-- Risks relating to the acquisition of Liberty Living and the
Group's ability to successfully integrate the business onto the
Unite operating platform
-- The ability to secure the best sites on the right terms for
the development business and deliver committed projects on time and
budget. Covid-19 has led to the deferral of some development
activity during the first half to conserve cash. The Company
expects to resume development activity on the affected sites in Q1
2021
-- The underlying cyclicality of property markets and the
influence of general economic factors on performance. Increased
volatility in financial markets as a result of Covid-19 and a
weaker macro-economic outlook increase the potential risks
surrounding property valuations and performance
-- Environmental and social challenges to the Group's long-term sustainability
-- Financial risks linked to balance sheet liquidity and
compliance with debt covenants, due to the increased level of
uncertainty around income created by Covid-19
Covid-19 continues to have a significant impact on the business,
increasing the level of these risks in some cases. The Board and
the Group's Risk Committee are closely monitoring guidance from the
Government and public health authorities in relation to Covid-19,
as well as the operating plans of Universities for the Autumn term
of the 2020/21 academic year. As a result, the Group's forecasts
and business plans continue to be prepared under a variety of
scenarios and stress tests to assess the Group's preparedness and
ability to withstand adverse market conditions.
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 and gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the issuer, or the
undertakings included in the consolidation as a whole as required
by DTR 4.2.4R
-- The interim management report includes a fair review of the information required by:
(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
29 July 2020
Forward-looking statements
The preceding interim statement has been prepared for the
shareholders of the Company, as a body, and for no other persons.
Its purpose is to assist shareholders of the Company to assess the
strategies adopted by the Company and the potential for those
strategies to succeed and for no other purpose. The interim
statement contains forward-looking statements that are subject to
risk factors associated with, amongst other things, the economic,
regulatory and business circumstances occurring from time to time
in the sectors and markets in which the Group operates. It is
believed that the expectations reflected in these statements are
reasonable but they may be affected by a wide range of variables
that could cause actual results to differ materially from those
currently anticipated. No assurances can be given that the
forward-looking statements will be realised. The forward-looking
statements reflect the knowledge and information available at the
date of preparation. Nothing in the interim statement should be
considered or construed as a profit forecast for the Group. Except
as required by law, the Group has no obligation to update
forward-looking statements or to correct any inaccuracies
therein.
INTRODUCTION AND TABLE OF CONTENTS
These financial statements are prepared in accordance with IFRS.
The 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 2.2b for EPRA Earnings and 2.3c for EPRA net asset value
(NAV). 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
Section 5: Related party transactions
Section 6: Post balance sheet events
Section 7: Alternative performance measures
CONSOLIDATED INCOME STATEMENT
For the 6 months to 30 June 2020
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2020 2019 2019
Note GBPm GBPm GBPm
------------------------------------------ ---- --------- --------- -------------
Rental income 2.4 114.9 66.2 134.1
Other income 2.4 7.7 7.3 22.1
------------------------------------------ ---- --------- --------- -------------
Total revenue 122.6 73.5 156.2
Cost of sales (27.5) (14.6) (33.0)
Operating expenses (15.0) (10.6) (26.6)
========================================== ==== ========= ========= =============
Results from operating activities 80.1 48.3 96.6
Loss on disposal of property (0.5) (0.9) (7.3)
Net valuation (losses)/gains on property
(owned) 3.1a (102.1) 53.3 154.8
Net valuation losses on property (leased) 3.1a (3.2) (2.3) (8.1)
Impairment of goodwill and intangible
asset - - (384.1)
Acquisition costs - (5.4) (22.8)
Integration costs (8.1) - -
========================================== ==== ========= ========= =============
(Loss)/profit before net financing
costs (33.8) 93.0 (170.9)
Loan interest and similar charges (22.1) (10.0) (23.8)
Mark to market changes in interest
rate swaps - (2.4) (2.7)
Swap cancellation and loan break costs (5.6) (0.5) (2.7)
Interest on lease liability (4.4) (4.7) (9.2)
========================================== ==== ========= ========= =============
Finance costs (32.1) (17.6) (38.4)
Finance income 2.9 1.9 5.5
========================================== ==== ========= ========= =============
Net financing costs (29.2) (15.7) (32.9)
Share of joint venture (loss)/profit 3.3a (10.9) 48.2 102.6
========================================== ==== ========= ========= =============
(Loss)/profit before tax (73.9) 125.5 (101.2)
Current tax 0.1 1.3 (0.1)
Deferred tax (1.1) 14.4 13.7
========================================== ==== ========= ========= =============
(Loss)/profit for the period (74.9) 141.2 (87.6)
(Loss)/profit for the period attributable
to
Owners of the parent company 2.2c (74.3) 140.3 (89.2)
Minority interest (0.6) 0.9 1.6
========================================== ==== ========= ========= =============
(74.9) 141.2 (87.6)
------------------------------------------ ---- --------- --------- -------------
(Loss)/earnings per share
Basic 2.2c (20.4)p 53.3p (31.5)p
Diluted 2.2c (20.3)p 53.1p (31.4)p
All results are derived from continuing activities.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 6 months to 30 June 2020
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
---------------------------------------------- --------- --------- ------------
(Loss)/profit for the period (74.9) 141.2 (87.6)
Movements in effective hedges (17.0) (4.4) (4.8)
Share of joint venture movements in effective
hedges (0.2) (0.5) (0.5)
============================================== ========= ========= ============
Other comprehensive loss for the period (17.2) (4.9) (5.3)
Total comprehensive (loss)/income for the
period (92.1) 136.3 (92.9)
---------------------------------------------- --------- --------- ------------
Attributable to
Owners of the parent company (91.5) 135.4 (94.5)
Minority interest (0.6) 0.9 1.6
---------------------------------------------- --------- --------- ------------
(92.1) 136.3 (92.9)
---------------------------------------------- --------- --------- ------------
All other comprehensive income may be classified as profit and
loss in the future.
There are no tax effects on items of other comprehensive
(loss)/income.
CONSOLIDATED BALANCE SHEET
At 30 June 2020
Unaudited Unaudited
30 June 30 June 31 December
2020 2019 2019
Note GBPm GBPm GBPm
----------------------------------------- ---- --------- --------- -----------
Assets
Investment property (owned) 3.1a 3,317.2 1,468.5 3,406.9
Investment property (leased) 3.1a 107.5 110.7 110.4
Investment property under development 3.1a 458.0 368.4 411.8
Investment in joint ventures 3.3a 850.4 844.6 875.2
Other non-current assets 22.8 25.5 26.0
Right of use assets 5.0 3.8 5.5
Deferred tax asset 1.5 2.8 2.9
========================================= ==== ========= ========= ===========
Total non-current assets 4,762.4 2,824.3 4,838.7
Inventories 3.2 5.9 11.2 4.0
Trade and other receivables 62.1 62.8 87.1
Cash and cash equivalents 557.6 106.9 86.9
========================================= ==== ========= ========= ===========
Total current assets 625.6 180.9 178.0
----------------------------------------- ---- --------- --------- -----------
Total assets 5,388.0 3,005.2 5,016.7
----------------------------------------- ---- --------- --------- -----------
Liabilities
Borrowings 4.1 (1.4) (86.2) (1.4)
Lease liability (4.0) (1.3) (3.9)
Trade and other payables (114.6) (110.2) (234.7)
Current tax liability - (4.6) (4.0)
========================================= ==== ========= ========= ===========
Total current liabilities (120.0) (202.3) (244.0)
Borrowings 4.1 (1,845.6) (502.1) (1,566.2)
Lease liability (98.8) (102.7) (100.9)
Interest rate swaps 4.2 (24.6) (6.9) (7.6)
Total non-current liabilities (1,969.0) (611.7) (1,674.7)
========================================= ==== ========= ========= ===========
Total liabilities (2,089.0) (814.0) (1,918.7)
----------------------------------------- ---- --------- --------- -----------
Net assets 3,299.0 2,191.2 3,098.0
----------------------------------------- ---- --------- --------- -----------
Equity
Issued share capital 99.5 66.0 90.9
Share premium 2,160.3 740.6 1,874.9
Merger reserve 40.2 40.2 40.2
Retained earnings 994.1 1,321.1 1,069.0
Hedging reserve (20.8) (3.0) (3.5)
Equity attributable to the owners of the
parent company 3,273.3 2,164.9 3,071.5
Minority interest 25.7 26.3 26.5
----------------------------------------- ---- --------- --------- -----------
Total equity 3,299.0 2,191.2 3,098.0
----------------------------------------- ---- --------- --------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the 6 months to 30 June 2020
Attributable
Issued Share Merger Hedging to owners Minority
share capital premium reserve Retained earnings reserve of the parent interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2020 90.9 1,874.9 40.2 1,069.0 (3.5) 3,071.5 26.5 3,098.0
(Unaudited)
-------------- -------- -------- ----------------- -------- -------------- --------- -------
Loss for the
period - - - (74.3) - (74.3) (0.6) (74.9)
Other
comprehensive
loss for the
period:
Movement in
effective hedges - - - - (17.0) (17.0) - (17.0)
Share of joint
venture
movements in
effective hedges - - - - (0.2) (0.2) - (0.2)
-------------- -------- -------- ----------------- -------- -------------- --------- -------
Total
comprehensive
loss for the
period - - - (74.3) (17.2) (91.5) (0.6) (92.1)
Shares issued 8.6 285.4 - - - 294.0 - 294.0
Fair value of
share based
payments - - - - - - - -
Deferred tax on
share based
payments - - - 0.1 - 0.1 - 0.1
Own shares
acquired - - - (0.7) - (0.7) - (0.7)
Unwind of
realised swap
gain - - - - (0.1) (0.1) - (0.1)
Dividends to
owners
of the parent
company - - - - - - - -
Dividends to
minority
interest - - - - - - (0.2) (0.2)
----------------- -------------- -------- -------- ----------------- -------- -------------- --------- -------
At 30 June 2020 99.5 2,160.3 40.2 994.1 (20.8) 3,273.3 25.7 3,299.0
----------------- -------------- -------- -------- ----------------- -------- -------------- --------- -------
Attributable
Issued Share Merger Hedging to owners Minority
share capital premium reserve Retained earnings reserve of the parent interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------------- -------- -------- ----------------- -------- -------------- --------- -------
At 1 January 2019 65.9 740.5 40.2 1,224.4 2.0 2,073.0 25.8 2,098.8
(Unaudited)
Effect of initial
application of
IFRS 16 - - - 3.2 - 3.2 - 3.2
-------------- -------- -------- ----------------- -------- -------------- --------- -------
At 1 January 2019
- As restated 65.9 740.5 40.2 1,227.6 2.0 2,076.2 25.8 2,102.0
-------------- -------- -------- ----------------- -------- -------------- --------- -------
Profit for the
period - - - 140.3 - 140.3 0.9 141.2
Other
comprehensive
loss for the
period:
Movement in
effective hedges - - - - (4.4) (4.4) - (4.4)
Share of joint
venture
movements in
effective hedges - - - - (0.5) (0.5) - (0.5)
-------------- -------- -------- ----------------- -------- -------------- --------- -------
Total
comprehensive
income/(loss)
for the period - - - 140.3 (4.9) 135.4 0.9 136.3
Shares issued 0.1 0.1 - - - 0.2 - 0.2
Fair value of
share based
payments - - - 0.8 - 0.8 - 0.8
Deferred tax on
share based
payments - - - - - - - -
Own shares
acquired - - - - - - - -
Unwind of
realised swap
gain - - - - (0.1) (0.1) - (0.1)
Dividends to
owners
of the parent
company - - - (47.6) - (47.6) - (47.6)
Dividends to
minority
interest - - - - - - (0.4) (0.4)
----------------- -------------- -------- -------- ----------------- -------- -------------- --------- -------
At 30 June 2019 66.0 740.6 40.2 1,321.1 (3.0) 2,164.9 26.3 2,191.2
----------------- -------------- -------- -------- ----------------- -------- -------------- --------- -------
Attributable
Issued Share Merger Hedging to owners Minority
share capital premium reserve Retained earnings reserve of the parent interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------------- -------- -------- ----------------- -------- -------------- --------- -------
At 1 January 2019 65.9 740.5 40.2 1,224.4 2.0 2,073.0 25.8 2,098.8
Effect of initial
application of
IFRS 16 - - - 3.2 - 3.2 - 3.2
-------------- -------- -------- ----------------- -------- -------------- --------- -------
At 1 January 2019
- As restated 65.9 740.5 40.2 1,227.6 2.0 2,076.2 25.8 2,102.0
-------------- -------- -------- ----------------- -------- -------------- --------- -------
(Loss)/profit for
the year - - - (89.2) - (89.2) 1.6 (87.6)
Other
comprehensive
loss for the
year:
Movement in
effective hedges - - - - (4.8) (4.8) - (4.8)
Share of joint
venture
movements in
effective hedges - - - - (0.5) (0.5) - (0.5)
-------------- -------- -------- ----------------- -------- -------------- --------- -------
Total
comprehensive
(loss)/income
for the year - - - (89.2) (5.3) (94.5) 1.6 (92.9)
Shares issued 25.0 1,134.4 - - - 1,159.4 - 1,159.4
Fair value of
share based
payments - - - 1.9 - 1.9 - 1.9
Deferred tax on
share based
payments - - - 0.2 - 0.2 - 0.2
Own shares
acquired - - - (0.8) - (0.8) - (0.8)
Unwind of
realised swap
gain - - - - (0.2) (0.2) - (0.2)
Dividends to
owners
of the parent
company - - - (70.7) - (70.7) - (70.7)
Dividends to
minority
interest - - - - - - (0.9) (0.9)
----------------- -------------- -------- -------- ----------------- -------- -------------- --------- -------
At 31 December
2019 90.9 1,874.9 40.2 1,069.0 (3.5) 3,071.5 26.5 3,098.0
----------------- -------------- -------- -------- ----------------- -------- -------------- --------- -------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 6 months to 30 June 2020
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
------------------------------------------- --------- --------- ------------
Net cash flows from operating activities 26.0 37.0 78.5
Investing activities
Cash consideration for acquisition of
Liberty Living - - (492.0)
Cash acquired on acquisition of Liberty
Living - - 22.4
Acquisition costs (3.9) - (17.5)
Integration costs (5.6) - -
Proceeds from sale of investment property
(owned) - 69.5 295.4
Dividends received 10.3 19.2 32.8
Interest received 0.1 1.9 0.9
Acquisition of intangible assets (0.5) (2.3) (4.6)
Acquisition of property (106.8) (80.4) (179.9)
Acquisition of plant and equipment (0.4) (0.1) (0.4)
============================================ ========= ========= ============
Cash flows from investing activities (106.8) 7.8 (342.9)
Financing activities
Interest paid in respect of financing
activities (12.9) (10.9) (32.0)
Swap cancellation costs (5.6) (0.5) (2.7)
Proceeds from the issue of share capital 293.8 - 254.7
Payments to acquire own shares (0.1) - (0.8)
Proceeds from non-current borrowings 305.0 - 175.0
Repayment of borrowings (25.3) (5.3) (96.0)
Dividends paid to the owners of the parent
company (3.4) (44.4) (69.6)
Dividends paid to minority interest - (0.4) (0.9)
-------------------------------------------- --------- --------- ------------
Cash flows from financing activities 551.5 (61.5) 227.7
-------------------------------------------- --------- --------- ------------
Net increase/(decrease) in cash and cash
equivalents 470.7 (16.7) (36.7)
Cash and cash equivalents at start of
period 86.9 123.6 123.6
-------------------------------------------- --------- --------- ------------
Cash and cash equivalents at end of period 557.6 106.9 86.9
-------------------------------------------- --------- --------- ------------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Section 1
General information
The information for the year ended 31 December 2019 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditors
reported on those accounts: their report was unqualified, did not
draw attention to any matters by way of emphasis and did not
contain a statement under section 498(2) or (3) of the Companies
Act 2006.
Basis of preparation
The annual financial statements of The Unite Group plc are
prepared in accordance with IFRSs as adopted by the 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.
Going concern
In response to Covid-19, the Directors have considered a range
of scenarios for future performance. The Directors' base case
scenario is informed by their reasoned opinion that UK Universities
will open providing a blend of face-to-face teaching and online
learning for the 2020/21 academic year and accordingly there will
be demand for student accommodation from UK students. The greater
level of uncertainty around international students' behaviour and
their ability to travel to the UK could lead to a reduction in
demand from this group. The Directors further considered a range of
downside scenarios involving a disruption to term start dates and
an associated decline in the value of income compared to the base
case over the next 12 months as follows:
-- A Delayed Start Case - assuming a 4-week delay to the start of term and tenancies.
-- A Reasonable Worst Case - contemplating a second wave of the
virus causing Universities to be unable to start term 1 in the
Autumn in line with stated plans, shifting to online learning only.
This assumes that Universities re-open in January and are able to
offer a blend of face-to-face and on-line learning for Terms 2 and
3
Under each of these scenarios, the Directors are satisfied that
the Group has sufficient liquidity and will maintain or 'cure'
covenant compliance over the next 12 months.
To support the Directors' going concern assessment, a "Reverse
Stress Test" was performed to determine the level of performance at
which adopting the going concern basis of preparation may not be
appropriate. This involved assessing the minimum amount of income
required to ensure financial covenants would not be breached.
Within the tightest covenant, net operating income could fall by a
further 13% from the reasonable worst case scenarios before there
would be a breach, with the exception of one facility which could
be repaid from unrestricted cash before a forecast covenant breach
materialised.
The Directors are satisfied that the possibility of such an
outcome is sufficiently remote that adopting the going concern
basis of preparation is appropriate.
As at the date of this report, the global outlook as a result of
Covid-19 is significantly uncertain and the range of potential
outcomes is wide-ranging and unknown. In particular, should the
impacts of the pandemic on trading conditions be more prolonged or
severe than currently forecast by the Directors or considered under
the downside cases referenced above, namely if there is a further
sustained national lockdown for a period longer than the initial
lockdown in 2020 that results in Universities not opening
physically and students either not arriving at University or
returning home, the Group's going concern status would be dependent
on its ability to seek interest cover covenant waivers from
lenders. The Directors consider that this eventuality is
remote.
The Directors, therefore, have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. Thus, they continue to adopt the going
concern basis in preparing the interim financial statements.
Seasonality of operations
The results of the Group's Operations segment, a separate
business segment (see Section 2), are closely linked to the level
of occupancy achieved in its portfolio of property. Occupancy
typically falls over the summer months (particularly July and
August) as students leave for the summer holidays. Following the
onset of the Covid-19 pandemic in March most UK Universities chose
to close their campuses, suspending all face-to-face teaching for
the remainder of the 2019/20 academic year. In response, the Group
offered students refunds on their summer term rents.
The second half-year typically has lower revenues and EBIT
margins from existing portfolio. We are targeting 90% occupancy for
2020/21 (2019/20: 98%) and overall we expect a 10-20% reduction in
rental income for 2020/21 compared to 2019/20 (prior to the impact
of cancellations in 2019/20 due to Covid-19).
Conversely, the Group's build cycle for new properties plan for
construction to complete shortly before the start of the academic
year in September each year. The addition of these completed
properties in the second half increases the Operations segment's
revenues in that period. We will deliver 2,257 beds across three
development schemes for the 2020/21 academic year. White Rose View
in Leeds will be completed on time and budget for student arrivals
this September. Due to temporary site closures and reduced levels
of operatives on site as a result of social distancing measures, we
are expecting completion of First Way, Wembley and Artisan Heights,
Manchester to be delayed until Q4 2020. We will provide alternative
accommodation to those students affected and expect both buildings
to be fully operational from January 2021.
Changes in accounting policies
The Group has not adopted any new accounting standards in the
period or changed any accounting policies from those included in
the 2019 Annual Report.
Changes in EPRA guidelines
In October 2019, EPRA issued updated best practice
recommendations including new definitions of NAV measures, which
became effective for the Group on 1 January 2020. The revision
includes the introduction of EPRA Net Tangible Assets (NTA), which
is considered to become the most relevant NAV measure for the Group
and we expect this to be our primary NAV measure going forward.
EPRA NTA adjusts EPRA NAV, our existing key NAV measure, by
excluding intangible assets.
During 2020, we will continue to monitor and report on a
combination of the previous and new EPRA NAV measures.
A reconciliation between EPRA NAV and EPRA NTA is included in
Section 7.
Critical accounting estimates and judgements
Full details of significant accounting judgements and estimation
uncertainty are given on page 178 of the 2019 Annual Report and
Accounts. This includes detail of the Group's approach to valuation
of investment property and investment property under development,
and the use of external valuers in the process. In respect of
valuations undertaken for the interim financial statement, the
Group's three valuers are including an industry standard market
uncertainty clause in their reports, set out as follows:
"Material uncertainty clause
The outbreak of the Novel Coronavirus (Covid-19), declared by
the World Health Organisation as a "Global Pandemic" on the 11th
March 2020, has impacted global financial markets. Travel
restrictions have been implemented by many countries.
Market activity is being impacted in many sectors. As at the
valuation date, we consider that we can attach less weight to
previous market evidence for comparison purposes, to inform
opinions of value. Indeed, the current response to Covid-19 means
that we are faced with an unprecedented set of circumstances on
which to base a judgement.
Our valuations are therefore reported on the basis of 'material
valuation uncertainty' as per VPS 3 and VPGA 10 of the RICS Red
Book Global. Consequently, less certainty - and a higher degree of
caution - should be attached to our valuation than would normally
be the case. Given the unknown future impact that Covid-19 might
have on the real estate market, we recommend that you keep the
valuation of the properties under frequent review.
For the avoidance of doubt, the inclusion of the 'material
valuation uncertainty' declaration above does not mean that the
valuation cannot be relied upon. Rather, the phrase is used in
order to be clear and transparent with all parties, in a
professional manner that - in the current extraordinary
circumstances - less certainty can be attached to the valuation
than would otherwise be the case.
The valuations exercise is an extensive process which includes
the use of historical experience, estimates and judgements. The
Directors are satisfied that the valuations agreed with our
external valuers are a reasonable representation of property values
in the circumstances known and evidence available at the reporting
date. Actual results may differ from these estimates. Estimates and
assumptions are reviewed on an on-going basis with revisions
recognised in the period in which the estimates are revised and in
any future periods affected."
Following the period end, the RICS recommended that the material
uncertainty clause is no longer be appropriate for valuations of
institutional grade, student accommodation which is professionally
managed.
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. In October
2019, EPRA issued updated best practice recommendations including
new definitions of NAV measures, which became effective for the
Group on 1 January 2020. The revision includes the introduction of
EPRA Net Tangible Assets (NTA), which is expected to become the
most relevant NAV measure for the Group and we expect this to be
our primary NAV measure going forward. EPRA NTA adjusts EPRA NAV,
our existing key NAV measure, by excluding intangible assets.
During 2020, we will continue to monitor and report on a
combination of the previous and new EPRA NAV measures.
IFRS performance measures
Unaudited Unaudited
30 June 30 June 31 December
Note 2020 2019 2019
================================ ==== =========== =========== ===========
(Loss)/profit after tax 2.2c GBP(74.3)m GBP140.3m GBP(89.2)m
Basic (loss)/earnings per share 2.2c (20.4)p 53.3p (31.5)p
Net assets 2.3c GBP3,273.3m GBP2,164.9m GBP3,071.5m
NAV per share 2.3d 822p 820p 845p
-------------------------------- ---- ----------- ----------- -----------
EPRA performance measures
Unaudited Unaudited
30 June 30 June 31 December
Note 2020 2019 2019
=============================== ==== =========== =========== ===========
EPRA earnings 2.2a GBP74.8m GBP61.2m GBP110.6m
EPRA earnings per share 2.2c 20.5p 23.2p 39.1p
EPRA NAV 2.3a GBP3,325.9m GBP2,170.4m GBP3,109.7m
EPRA NAV per share 2.3d 833p 820p 853p
EPRA NTA 7 GBP3,306.1m GBP2,148.0m GBP3,087.1m
EPRA NTA (diluted) 7 GBP3,309.9m GBP2,150.9m GBP3,091.4m
EPRA NTA per share 7 830p 813p 849p
EPRA NTA per share (diluted) 7 828p 812p 847p
EPRA NNNAV (diluted) 2.3d GBP3,207.2m GBP2,114.0m GBP3,012.6m
EPRA NNNAV per share (diluted) 2.3d 803p 798p 826p
------------------------------- ---- ----------- ----------- -----------
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 2020 and 30 June 2019 and for the year ended
31 December 2019 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 Group therefore has one geographical segment.
2.2 Earnings
EPRA earnings amends IFRS measures by removing principally the
unrealised investment property valuation gains and losses such that
users of the Financials are able to see the extent to which
dividend payments (dividends per share) are underpinned by earnings
arising from purely operational activity. In 2020, in consideration
of EPRA's focus on recurring income, EPRA earnings excludes
integration costs. The reconciliation between Profit attributable
to owners of the parent company and EPRA earnings is available in
note 2.2b.
The Operations segment manages rental properties, owned directly
by the Group or by joint ventures. Its revenues are derived from
rental income and asset management fees earned from joint ventures.
The way in which the Operations segment adds value to the business
is set out in the Operations review on pages 56 - 61 of the 2019
Annual Report. The Operations segment is the main contributor to
EPRA earnings and EPRA EPS and these are therefore the key
indicators which are used by the Board to manage the Operations
business.
The Board does not manage or monitor the Operations segment
through the balance sheet and therefore no segmental information
for assets and liabilities is provided for the Operations
segment.
2.2a EPRA earnings
Unaudited 30 June 2020
Group on see-through
Share of joint ventures basis
-------------------------
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
---------------------------- ------ ------------ ----------- --------------------
Rental income 114.9 20.6 19.4 154.9
Property operating expenses (27.5) (6.0) (4.0) (37.5)
---------------------------- ------ ------------ ----------- --------------------
Net operating income 87.4 14.6 15.4 117.4
Management fees 11.0 (1.6) (1.7) 7.7
Operating expenses (13.8) (0.1) (0.2) (14.1)
Lease liability interest (4.4) - - (4.4)
Net financing costs (21.3) (3.3) (4.5) (29.1)
---------------------------- ------ ------------ ----------- --------------------
Operations segment result 58.9 9.6 9.0 77.5
Property segment result (0.9) - - (0.9)
Unallocated to segments (1.6) (0.1) (0.1) (1.8)
EPRA earnings 56.4 9.5 8.9 74.8
---------------------------- ------ ------------ ----------- --------------------
Included in the above is rental income of GBP8.2 million and
property operating expenses of GBP3.5 million relating to sale and
leaseback properties.
The unallocated to segments balance includes the fair value of
share based payments of (GBP0.1 million), contributions to the
Unite Foundation of (GBP0.4 million), current tax of (GBP0.3
million) and deferred tax of (GBP1.0 million).
EPRA earnings excludes integration costs associated with the
acquisition of Liberty Living, which totalled GBP8.1 million in the
period.
Unaudited 30 June 2019
Group on see-through
Share of joint ventures basis
-------------------------
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
-------------------------------------- --------- ------------- ---------- --------------------------
Rental income 66.2 22.0 20.1 108.3
Property operating expenses (14.6) (5.5) (3.8) (23.9)
-------------------------------------- --------- ------------- ---------- --------------------------
Net operating income 51.6 16.5 16.3 84.4
Management fees 10.6 (1.8) (1.6) 7.2
Operating expenses (9.0) (0.1) (0.2) (9.3)
Lease liability interest (4.7) - - (4.7)
Net financing costs (8.1) (3.3) (4.6) (16.0)
Operations segment result 40.4 11.3 9.9 61.6
Property segment result (0.7) - - (0.7)
Unallocated to segments 0.5 (0.1) (0.1) 0.3
EPRA earnings 40.2 11.2 9.8 61.2
-------------------------------------- --------- ------------- ---------- --------------------------
Included in the above is rental income of GBP10.1 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), contributions to the Unite Foundation of
(GBP0.4 million), fees received from USAF relating to acquisitions of
GBP0.2 million, deferred tax charge of (GBP0.1 million) and current tax
credit of GBP1.3 million.
31 December 2019
Group on see-through
Share of joint ventures basis
-------------------------
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
------------------------------ ------ ------------- ---------- --------------------
Rental income 134.1 41.5 38.3 213.9
Property operating expenses (33.0) (12.2) (7.9) (53.1)
------------------------------ ------ ------------- ---------- --------------------
Net operating income 101.1 29.3 30.4 160.8
Management fees 21.0 (3.4) (3.2) 14.4
Operating expenses (21.1) (0.3) (0.4) (21.8)
Interest on lease liabilities (9.2) - - (9.2)
Net financing costs (18.7) (6.7) (9.3) (34.7)
------------------------------ ------ ------------- ---------- --------------------
Operations segment result 73.1 18.9 17.5 109.5
Property segment result (1.5) - - (1.5)
Unallocated to segments 8.7 (0.2) (5.9) 2.6
EPRA earnings 80.3 18.7 11.6 110.6
------------------------------ ------ ------------- ---------- --------------------
Included in the above is rental income of GBP17.3 million and
property operating expenses of GBP7.0 million relating to sale and
leaseback properties.
The unallocated to segments balance includes the fair value of
share-based payments of (GBP2.2 million), contributions to the
Unite Foundation of (GBP1.0 million), fees received from USAF
relating to acquisitions of GBP2.2 million, LSAV performance fee of
GBP5.7 million, deferred tax charge of (GBP0.5 million) and current
tax charge of (GBP0.4 million).
2.2b IFRS reconciliation to EPRA earnings
EPRA earnings excludes movements relating to changes in values
of investment properties (owned and leased), profits/losses from
the disposal of properties, swap/debt break costs, impairment of
goodwill and acquisition/integration costs, which are included in
the profit/loss reported under IFRS. EPRA earnings reconcile to the
(loss)/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
2020 2019 2019
Note GBPm GBPm GBPm
EPRA earnings 2.2a 74.8 61.2 110.6
Net valuation (losses)/gains on investment
property (owned) (102.1) 53.3 154.8
Property disposals (owned) (0.5) 0.2 (6.2)
Net valuation loss on investment property
(leased) (3.2) (2.3) (8.1)
Property disposals (leased) - (1.1) (1.1)
Impairment of goodwill and acquired intangible
asset - - (384.1)
Acquisition costs - (5.4) (22.8)
Integration costs (8.1) - -
Amortisation of fair value of debt recognised
on acquisition 2.2 - 0.4
Share of joint venture net valuation (losses)/gains
on investment property 3.3a (33.1) 23.3 58.3
Share of joint venture property disposals - - 0.4
Interest rate swap payments on ineffective
hedges - (2.4) (2.7)
Swap cancellation and loan break costs (5.6) (0.5) (2.7)
Current tax relating to Liberty Living
acquisition 0.1 - 0.5
Deferred tax relating to properties 0.2 14.5 14.3
Minority interest share of reconciling
items* 1.0 (0.5) (0.8)
(Loss)/profit attributable to owners of
the parent company (74.3) 140.3 (89.2)
---------------------------------------------------- ---- --------- --------- ------------
* 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.
2.2c Earnings per share
The Basic EPS calculation is based on the earnings attributable
to the equity shareholders of The Unite Group plc and the weighted
average number of shares which have been in issue during the
period. Basic EPS is adjusted in line with EPRA guidelines in order
to allow users to compare the business performance of the Group
with other listed real estate companies in a consistent manner and
to reflect how the business is managed and measured on a day to day
basis.
The calculations of basic, diluted and EPRA EPS are as
follows:
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
Note 2020 2019 2019
---------------------------------------------- ----- ---------- --------- ------------
(Loss)/earnings
Basic GBP(74.3)m GBP140.3m GBP(89.2)m
Diluted GBP(74.3)m GBP140.3m GBP(89.2)m
EPRA 2.2a GBP74.8m GBP61.2m GBP110.6m
Weighted average number of shares (thousands)
Basic 364,054 263,186 282,802
Dilutive potential ordinary shares (share
options) 959 818 1,156
----------------------------------------------------- ---------- --------- ------------
Diluted 365,013 264,004 283,958
----------------------------------------------------- ---------- --------- ------------
(Loss)/earnings per share
Basic (20.4)p 53.3p (31.5)p
Diluted (20.3)p 53.1p (31.4)p
EPRA EPS 20.5p 23.2p 39.1p
The total number of ordinary shares in issue as at 30 June 2020
is 398,168,000 (30 June 2019: 264,030,000, 31 December 2019:
363,618,000).
At 30 June 2020 there were 8,313 shares excluded from the
potential dilutive shares that did not affect the diluted weighted
average number of shares (30 June 2019: nil, 31 December 2019:
15,545).
2.3 Net Assets
EPRA NAV per share makes adjustments to IFRS measures by
principally removing some items that are not expected to
materialise in normal circumstances like items of deferred tax and
the fair value of financial derivatives. The reconciliation between
IFRS NAV and EPRA NAV is available in note 2.3c.
The Group's Property business undertakes the acquisition and
development of properties. The way in which the Property segment
adds value to the business is set out in the Property review on
pages 62 - 66 of the 2019 Annual Report.
2.3a EPRA net assets
Unaudited 30 June 2020
Group on
Share of joint ventures EPRA basis
-------------------------
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
---------------------------------------- --------- ============ =========== ===========
Investment properties (owned) 3,317.2 614.0 657.8 4,589.0
Investment properties (leased) 107.5 - - 107.5
Investment properties under development 458.0 - - 458.0
---------------------------------------- --------- ------------ ----------- -----------
Total property portfolio 3,882.7 614.0 657.8 5,154.5
Debt on properties (1,818.6) (195.8) (267.9) (2,282.3)
Lease liability (97.2) - - (97.2)
Cash 557.6 7.6 29.0 594.2
---------------------------------------- --------- ------------ ----------- -----------
Net debt (1,358.2) (188.2) (238.9) (1,785.3)
Other liabilities (24.1) (2.7) (16.5) (43.3)
---------------------------------------- --------- ------------ ----------- -----------
EPRA net assets 2,500.4 423.1 402.4 3,325.9
Loan to value* 33% 31% 36% 33%
Loan to value post-IFRS 16 35% 31% 36% 35%
* LTV calculated excluding leased investment property and the corresponding lease liability.
Unaudited 30 June 2019
Group on
Share of joint ventures EPRA basis
-------------------------
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
---------------------------------------- ------- ------------ ----------- -----------
Investment properties (owned) 1,468.5 603.9 637.7 2,710.1
Investment properties (leased) 110.7 - - 110.7
Investment properties under development 368.4 3.2 - 371.6
Total property portfolio 1,947.6 607.1 637.7 3,192.4
Debt on properties (590.4) (177.6) (267.3) (1,035.3)
Lease liability (100.2) - - (100.2)
Cash 106.9 5.9 25.7 138.5
---------------------------------------- ------- ------------ ----------- -----------
Net debt (583.7) (171.7) (241.6) (997.0)
Other liabilities (12.5) (4.4) (8.1) (25.0)
---------------------------------------- ------- ------------ ----------- -----------
EPRA net assets 1,351.4 431.0 388.0 2,170.4
======================================== ======= ============ =========== ===========
Loan to value* 26% 28% 38% 29%
Loan to value post-IFRS 16 30% 28% 38% 31%
* LTV calculated excluding leased investment property and the corresponding lease liability.
31 December 2019
Group on
Share of joint ventures EPRA basis
-------------------------
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
---------------------------------------- --------- ------------ ----------- -----------
Investment properties (owned) 3,406.9 628.0 667.5 4,702.4
Investment properties (leased) 110.4 - - 110.4
Investment properties under development 411.8 - - 411.8
---------------------------------------- --------- ------------ ----------- -----------
Total property portfolio 3,929.1 628.0 667.5 5,224.6
Debt on properties (1,537.2) (194.4) (267.6) (1,999.2)
Lease liabilities (98.9) - - (98.9)
Cash 86.9 5.2 22.8 114.9
---------------------------------------- --------- ------------ ----------- -----------
Net debt (1,549.2) (189.2) (244.8) (1,983.2)
Other liabilities (119.3) (1.5) (10.9) (131.7)
---------------------------------------- --------- ------------ ----------- -----------
EPRA net assets 2,260.6 437.3 411.8 3,109.7
======================================== ========= ============ =========== ===========
Loan to value* 38% 30% 37% 37%
Loan to value post-IFRS 16 40% 30% 37% 38%
* LTV calculated excluding investment properties (leased) and
the corresponding lease liabilities.
2.3b Movement in EPRA NAV during the period
Contributions to EPRA NAV by each segment during the period are
as follows:
Unaudited 30 June 2020
Share of joint Group on see-through
ventures basis
----------------
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
------------------------------------ ------- ------- ------- --------------------
Operations
Operations segment result 58.9 9.6 9.0 77.5
Property
Lost rental income due to Covid-19 (79.9) (13.6) (10.7) (104.2)
Cladding provision (5.9) (4.0) (3.5) (13.4)
Yield movement (12.0) (0.1) (0.1) (12.2)
Disposal losses (0.5) - - (0.5)
Investment property losses (owned) (98.3) (17.7) (14.3) (130.3)
Investment property losses (leased) (3.2) - - (3.2)
Development property losses (4.3) - - (4.3)
Pre-contract/other development
costs (0.9) - - (0.9)
------------------------------------ ------- ------- ------- --------------------
Total property (106.7) (17.7) (14.3) (138.7)
Unallocated
Shares issued 293.8 - - 293.8
Investment in joint ventures 10.0 (6.0) (4.0) -
Integration costs (8.1) - - (8.1)
Dividends paid - - - -
Joint venture property acquisition
fee - - - -
Swap cancellation and loan break
costs (5.6) - - (5.6)
Other (2.5) (0.1) (0.1) (2.7)
------------------------------------ ------- ------- ------- --------------------
Total unallocated 287.6 (6.1) (4.1) 277.4
------------------------------------ ------- ------- ------- --------------------
Total EPRA NAV movement in the
period 239.8 (14.2) (9.4) 216.2
Total EPRA NAV brought forward 2,260.6 437.3 411.8 3,109.7
------------------------------------ ------- ------- ------- --------------------
Total EPRA NAV carried forward 2,500.4 423.1 402.4 3,325.9
------------------------------------ ------- ------- ------- --------------------
The GBP2.7 million that comprises the other balance within the
unallocated segment includes a tax charge of (GBP1.3 million), fair
value of share-based payments charge of (GBP0.1 million), (GBP0.4
million) for contributions to the Unite Foundation and (GBP0.7
million) purchase of own shares.
Unaudited 30 June 2019
Share of joint Group on see-through
ventures basis
--------------
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
------------------------------------------- ------- -------------- --------- -----------
Operations
Operations segment result 40.4 11.3 9.9 61.6
Property
Rental growth 26.8 7.4 10.5 44.7
Yield movement 8.6 0.7 4.3 13.6
Disposal gains 0.2 - - 0.2
Investment property gains (owned) 35.6 8.1 14.8 58.5
Investment property losses (leased) (2.3) - - (2.3)
Disposal losses (leased) (1.1) - - (1.1)
Development property gains 17.9 - - 17.9
Pre-contract/other development costs (0.7) - - (0.7)
------------------------------------------- ------- -------------- --------- -----------
Total property 49.4 8.1 14.8 72.3
Unallocated
Shares issued 0.2 - - 0.2
Investment in joint ventures 18.5 (11.2) (7.3) -
Acquisition costs (5.4) - - (5.4)
Dividends paid (47.6) - - (47.6)
Joint venture property acquisition
fee 0.3 (0.1) - 0.2
Swap cancellation and loan break costs (0.5) - - (0.5)
Other 1.4 (0.3) (0.1) 1.0
------------------------------------------- ------- -------------- --------- -----------
Total unallocated (33.1) (11.6) (7.4) (52.1)
------------------------------------------- ------- -------------- --------- -----------
Total EPRA NAV movement in the period 56.7 7.8 17.3 81.8
Total EPRA NAV brought forward as reported 1,291.5 423.2 370.7 2,085.4
IFRS 16 transition 3.2 - - 3.2
------------------------------------------- ------- -------------- --------- -----------
Total EPRA NAV brought forward revised 1,294.7 423.2 370.7 2,088.6
------------------------------------------- ------- -------------- --------- -----------
Total EPRA NAV carried forward 1,351.4 431.0 388.0 2,170.4
------------------------------------------- ------- -------------- --------- -----------
The GBP1.0 million that comprises the other balance within the
unallocated segment includes a tax credit of GBP1.3 million, fair
value of share-based payments charge of (GBP0.7 million) and
(GBP0.4 million) for contributions to the Unite Foundation.
31 December 2019
Share of joint Group on see-through
ventures basis
----------------
Unite USAF LSAV Total
GBPm GBPm GBPm GBPm
------------------------------------------- ------- ------- ------- --------------------
Operations
Operations segment result 73.1 18.9 17.5 109.5
Property
Rental growth 54.2 11.7 24.6 90.5
Yield movement 20.4 2.3 18.3 41.0
Disposal (losses)/gains (5.5) 0.2 - (5.3)
Investment property gains (owned) 69.1 14.2 42.9 126.2
Investment property losses (leased) (8.1) - - (8.1)
Disposal losses (leased) (1.1) - - (1.1)
Development property gains 80.2 - - 80.2
Pre-contract/other development costs (1.5) - - (1.5)
------------------------------------------- ------- ------- ------- --------------------
Total property 138.6 14.2 42.9 195.7
Unallocated
Shares issued 254.3 - - 254.3
Investment in joint ventures 31.7 (18.2) (13.5) -
Acquisition of Liberty Living 531.0 - - 531.0
Dividends paid (70.7) - - (70.7)
LSAV performance fee 11.4 - (5.7) 5.7
Joint venture property acquisition
fee 2.8 (0.6) - 2.2
Swap cancellation and loan break costs (2.7) - - (2.7)
Other (3.6) (0.2) (0.1) (3.9)
------------------------------------------- ------- ------- ------- --------------------
Total unallocated 754.2 (19.0) (19.3) 715.9
------------------------------------------- ------- ------- ------- --------------------
Total EPRA NAV movement in the year 965.9 14.1 41.1 1,021.1
Total EPRA NAV brought forward as reported 1,291.5 423.2 370.7 2,085.4
IFRS 16 transition 3.2 - - 3.2
------------------------------------------- ------- ------- ------- --------------------
Total EPRA NAV brought forward revised 1,294.7 423.2 370.7 2,088.6
------------------------------------------- ------- ------- ------- --------------------
Total EPRA NAV carried forward 2,260.6 437.3 411.8 3,109.7
------------------------------------------- ------- ------- ------- --------------------
The GBP531.0 million acquisition of Liberty Living balance
represents the fair value of the net assets that were acquired of
GBP1,045.8 million less the cash consideration of GBP492.0 million
and acquisition costs of GBP22.8 million (further details can be
found in note 6 of the 2019 Annual Report).
The GBP3.9 million other balance within the unallocated segment
includes a tax charge of (GBP0.7 million), fair value of
share-based payments charge of (GBP2.2 million) and (GBP1.0
million) for contributions to the Unite Foundation.
2.3c 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. The net assets reported
under IFRS reconcile to EPRA NAV and EPRA NNNAV as follows:
Unaudited Unaudited
30 June 30 June 31 December
2020 2019 2019
Note GBPm GBPm GBPm
------------------------------------------ ---- --------- --------- -----------
Net asset value reported under IFRS 3,273.3 2,164.9 3,071.5
Mark to market interest rate swaps 25.4 7.6 8.3
Unamortised swap gain (2.0) (2.1) (2.1)
Unamortised fair value of debt recognised
on acquisition 30.2 - 32.4
Current tax - - (0.4)
Deferred tax (1.0) - -
EPRA NAV 2.3a 3,325.9 2,170.4 3,109.7
Mark to market of fixed rate debt (98.2) (51.7) (93.5)
Mark to market interest rate swaps (25.4) (7.6) (8.3)
Current tax - - 0.4
Deferred tax 1.0 - -
------------------------------------------ ---- --------- --------- -----------
EPRA NNNAV 3,203.3 2,111.1 3,008.3
------------------------------------------ ---- --------- --------- -----------
2.3d NAV per share
Basic NAV is based on the net assets attributable to the equity
shareholders of The Unite Group plc and the number of shares in
issue at the end of the period. The Board uses EPRA NAV and EPRA
NNNAV to monitor the performance of the Property segment on a
periodic basis.
Unaudited Unaudited
30 June 30 June 31 December
Note 2020 2019 2019
----------------------------- ----- ----------- ----------- -----------
Net assets
Basic 2.3c GBP3,273.3m GBP2,164.9m GBP3,071.5m
EPRA NAV 2.3a GBP3,325.9m GBP2,170.4m GBP3,109.7m
EPRA NAV (diluted) GBP3,329.7m GBP2.173.3m GBP3,114.0m
EPRA NNNAV (diluted) GBP3,207.2m GBP2,114.0m GBP3,012.6m
Number of shares (thousands)
Basic 398,168 264,138 363,618
Outstanding share options 1,441 856 1,309
------------------------------------ ----------- ----------- -----------
Diluted 399,609 264,994 364,927
------------------------------------ ----------- ----------- -----------
Net asset value per share
Basic 822p 820p 845p
EPRA NAV 835p 822p 855p
EPRA NAV (diluted) 833p 820p 853p
EPRA NNNAV (diluted) 803p 798p 826p
2.4. Revenue and costs
The Group earns revenue from the following activities:
Unaudited Unaudited
6 months 6 months Year to
to to 31 December
30 June 2020 30 June 2019 2019
Note GBPm GBPm GBPm
------------------------------- -------------------- ---- ------------- ------------- ------------
Rental income* Operations segment 2.2a 114.9 66.2 134.1
Management fees Operations segment 7.8 7.4 14.4
LSAV performance
fee Unallocated - - 5.7
USAF acquisition
fee Unallocated - - 2.2
------------------------------- -------------------- ---- ------------- ------------- ------------
122.7 73.6 156.4
Impact of minority interest on
management fees (0.1) (0.1) (0.2)
-------------------------------- ------------------------- ------------- ------------- ------------
Total revenue 122.6 73.5 156.2
----------------------------------------------------- ---- ------------- ------------- ------------
* EPRA earnings includes GBP154.9 million (30 June 2019:
GBP108.3 million, 31 December 2019: GBP213.9 million) of rental
income, which is comprised of GBP114.9 million (30 June 2019:
GBP66.2million, 31 December 2019: GBP134.1 million) recognised on
wholly owned assets and a further GBP40.0 million (30 June 2019:
GBP42.1 million, 31 December 2019: GBP79.8 million) from joint
ventures which is included in share of joint venture profit in the
consolidated income statement.
The cost of sales included in the consolidated income statement
includes property operating expenses of GBP27.5 million (30 June
2019: GBP14.6 million, 31 December 2019: GBP33.0 million).
Section 3: Asset management
The Group holds its property portfolio directly and through its
joint ventures. The performance of the property portfolio whether
wholly owned or in joint ventures is the key factor that drives
EPRA Net Asset Value (NAV), one of the Group's key performance
indicators and EPRA NTA.
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 three
groups on the balance sheet at the carrying values detailed below.
In the Group's EPRA NAV and EPRA NTA, all these groups are shown at
market value.
i) Investment property (owned)
These are assets that the Group intends to hold for a long
period to earn rental income or capital appreciation. The assets
are held at fair value in the balance sheet with changes in fair
value taken to the income statement.
ii) Investment property (leased)
These are assets the Group sold to institutional investors and
simultaneously leased back. The assets are held at fair value in
the balance sheet with changes in fair value taken to the income
statement.
iii) Investment property under development
These are assets which are currently in the course of
construction and which will be transferred to 'Investment property'
on completion. These assets are held at fair value in the balance
sheet with changes in fair value taken to the income statement.
3.1a 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 2020 and throughout
2019.
The valuations are based on both:
-- Information provided by the Group such as current rents,
occupancy, operating costs, terms and conditions of leases and
nomination agreements, capital expenditure, etc. This information
is derived from the Group's financial systems and is subject to the
Group's overall control environment.
-- Assumptions and valuation models used by the valuers - the
assumptions are typically market related, such as yield and
discount rates. These are based on their professional judgement and
market observation.
The information provided to the valuers - and the assumptions
and the valuation models used by the valuers - are reviewed by the
Property Board and the CFO. This includes a review of the fair
value movements over the period.
In respect of valuations undertaken as at 30 June 2020, the
Group's three valuers are including an industry standard market
uncertainty clause in their reports, which is set out in Section
1.
The movements in the carrying value of the Group's wholly owned
property portfolio during the period ended 30 June 2020 are shown
in the table below. The fair value of the Group's wholly owned
property portfolio at the period ended 30 June 2020 is also shown
below:
Unaudited 30 June 2020
Investment Investment Investment
property property property
(owned) (leased) under development Total
GBPm GBPm GBPm GBPm
------------------------------------------- ---------- ---------- ------------------ -------
At 1 January 2020 3,406.9 110.4 411.8 3,929.1
Cost capitalised 8.1 0.3 47.2 55.6
Interest capitalised - - 3.3 3.3
Transfer from work in progress - - - -
Disposals - - - -
Valuation gains 24.3 - 10.2 34.5
Valuation losses (122.1) (3.2) (14.5) (139.8)
========== ========== ================== =======
Net valuation losses (97.8) (3.2) (4.3) (105.3)
------------------------------------------- ---------- ---------- ------------------ -------
Carrying value and market value at 30 June
2020 3,317.2 107.5 458.0 3,882.7
------------------------------------------- ---------- ---------- ------------------ -------
The movements in the carrying value of the Group's wholly owned
property portfolio during the period ended 30 June 2019 are shown
in the table below. The fair value of the Group's wholly owned
property portfolio at the period ended 30 June 2019 is also shown
below:
Unaudited 30 June 2019
Investment Investment Investment
property property property
(owned) (leased) under development Total
GBPm GBPm GBPm GBPm
=========================================== ========== ========== ================== =======
At 1 January 2019 1,497.1 - 278.9 1,776.0
IFRS 16 transition - 128.0 - 128.0
Cost capitalised 5.4 0.7 66.5 72.6
Interest capitalised - - 5.1 5.1
Transfer from work in progress - - - -
Disposals (69.4) (15.7) - (85.1)
Valuation gains 48.5 - 23.1 71.6
Valuation losses (13.1) (2.3) (5.2) (20.6)
========== ========== ================== =======
Net valuation gains / (losses) 35.4 (2.3) 17.9 51.0
------------------------------------------- ---------- ---------- ------------------ -------
Carrying value and market value at 30 June
2019 1,468.5 110.7 368.4 1,947.6
------------------------------------------- ---------- ---------- ------------------ -------
The movements in the carrying value of the Group's wholly owned
property portfolio during the year ended 31 December 2019 are shown
in the table below. The fair value of the Group's wholly owned
properties at the year ended 31 December 2019 is also shown
below.
31 December 2019
Investment Investment Investment
property property property
(owned) (leased) under development Total
GBPm GBPm GBPm GBPm
======================================== ========== ========== ================== =======
At 1 January 2019 1,497.1 - 278.9 1,776.0
IFRS 16 transition - 128.0 - 128.0
Acquired through business combination 1,933.7 - 18.4 1,952.1
Cost capitalised 6.5 6.3 208.2 221.0
Interest capitalised - - 9.1 9.1
Transfer from investment property under
development 189.8 - (189.8) -
Transfer from work in progress - - 6.8 6.8
Disposals (294.8) (15.8) - (310.6)
Valuation gains 88.1 - 86.1 174.2
Valuation losses (13.5) (8.1) (5.9) (27.5)
========== ========== ================== =======
Net valuation gains / (losses) 74.6 (8.1) 80.2 146.7
---------------------------------------- ---------- ---------- ------------------ -------
Carrying value and market value at 31
December 2019 3,406.9 110.4 411.8 3,929.1
---------------------------------------- ---------- ---------- ------------------ -------
3.1b Fair value measurement
All investment and development properties are classified as
Level 3 in the fair value hierarchy.
6 months to 6 months to 31 December
30 June 2020 30 June 2019 2019
Class of asset GBPm GBPm GBPm
------------------------------------------ ------------- ------------- -----------
London - Rental properties 1,014.8 531.4 1,015.0
Prime provincial - Rental properties 867.4 306.1 876.5
Major provincial - Rental properties 1,151.1 409.6 1,198.1
Other provincial - Rental properties 283.9 221.4 317.3
London - Development properties 255.5 71.2 245.1
Prime provincial - Development properties 95.3 159.4 76.1
Major provincial - Development properties 107.2 137.8 90.6
Other provincial - Development properties - - -
------------------------------------------ ------------- ------------- -----------
Investment property (owned) 3,775.2 1,836.9 3,818.7
Investment property (leased) 107.5 110.7 110.4
------------------------------------------ ------------- ------------- -----------
Market value 3,882.7 1,947.6 3,929.1
------------------------------------------ ------------- ------------- -----------
The valuation technique for investment properties is a
discounted cash flow using the following inputs: net rental income,
estimated future costs, occupancy and property management
costs.
Where the asset is leased to a University, the valuation also
reflects the length of the lease, the allocation of maintenance and
insurance responsibilities between the Group and the lessee, and
the market's general perception of the lessee's credit
worthiness.
The resulting valuations are cross-checked against the initial
yields and the capital value per bed derived from actual market
transactions.
For development properties, the fair value is usually calculated
by estimating the fair value of the completed property (using the
discounted cash flow method) less estimated costs to
completion.
3.1c Quantitative information about fair value measurements
using unobservable inputs (Level 3)
Fair value Valuation Weighted
GBPm technique Unobservable inputs Range average
------------------------ ---------- ----------- -------------------------- ----------------- --------
London - 1,014.8 Discounted
Rental properties cash flows
------------------------ -----------
Net rental income (GBP
per week) GBP190-GBP370 GBP291
Estimated future rent
(%) 2%-3% 3%
Discount rate (yield)
(%) 3.9%-5.0% 4.0%
------------------------ ---------- ----------- -------------------------- ----------------- --------
Prime provincial 867.4 Discounted
- cash flows
Rental properties
------------------------ -----------
Net rental income (GBP
per week) GBP140-GBP229 GBP168
Estimated future rent
(%) 2%-3% 3%
Discount rate (yield)
(%) 4.0%-6.2% 4.8%
------------------------ ---------- ----------- -------------------------- ----------------- --------
Major provincial 1,151.1 Discounted
- cash flows
Rental properties
------------------------ -----------
Net rental income (GBP
per week) GBP82-GBP162 GBP130
Estimated future rent
(%) 1%-3% 3%
Discount rate (yield)
(%) 4.7%-7.0% 5.8%
------------------------ ---------- ----------- -------------------------- ----------------- --------
Other provincial 283.9 Discounted
- cash flows
Rental properties
------------------------ -----------
Net rental income (GBP
per week) GBP87-GBP188 GBP136
Estimated future rent
(%) 3%-4% 3%
Discount rate (yield)
(%) 5.0%-13.8% 6.8%
------------------------ ---------- ----------- -------------------------- ----------------- --------
London - 255.5 Discounted
Development properties cash flows
------------------------ -----------
Estimated cost to complete
(GBPm) GBP21.5m-GBP86.2m GBP58.6m
Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 4.0% 4.0%
------------------------ ---------- ----------- -------------------------- ----------------- --------
Prime provincial 95.3 Discounted
- cash flows
Development properties
------------------------
Estimated cost to complete
(GBPm) GBP5.9m-GBP65.3m GBP29.9m
Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 4.3%-5.0% 4.7%
------------------------ ---------- ----------- -------------------------- ----------------- --------
Major provincial 107.2 Discounted
- cash flows
Development properties
------------------------
Estimated cost to complete
(GBPm) GBP7.8m-GBP45.9m GBP22.6m
Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 4.5% 4.5%
------------------------ ---------- ----------- -------------------------- ----------------- --------
3,775.2
------------------------ ---------- ----------- -------------------------- ----------------- --------
Investment property 107.5 Discounted Net rental income (GBP
(leased) per week) GBP129-GBP185 GBP147
cash flows Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 6.8% 6.8%
Fair value at 30
June 2020 3,882.7
======================== ========== =========== ========================== ================= ========
Fair value Valuation Weighted
GBPm technique Unobservable inputs Range average
------------------------ ---------- ----------- -------------------------- ------------------ ---------
London - 531.4 Discounted
Rental properties cash flows GBP274
------------------------ ---------- ----------- -------------------------- ------------------
3%
------------------------ ---------- -----------
Net rental income (GBP
per week) GBP192-GBP367
Estimated future rent
(%) 3%-7%
Discount rate (yield)
(%) 3.9%-5.0% 4.1%
------------------------ ---------- ----------- -------------------------- ------------------ ---------
Prime provincial 306.1 Discounted
- cash flows
Rental properties GBP159
------------------------ ---------- ----------- -------------------------- ------------------
3%
------------------------ ---------- -----------
Net rental income (GBP
per week) GBP142-GBP171
Estimated future rent
(%) 1%-4%
Discount rate (yield)
(%) 4.5%-6.0% 5.0%
------------------------ ---------- ----------- -------------------------- ------------------ ---------
Major provincial 409.6 Discounted
- cash flows
Rental properties GBP137
------------------------ ---------- ----------- -------------------------- ------------------
3%
------------------------ ---------- -----------
Net rental income (GBP
per week) GBP98-GBP152
Estimated future rent
(%) 2%-6%
Discount rate (yield)
(%) 4.8%-6.1% 5.6%
------------------------ ---------- ----------- -------------------------- ------------------ ---------
Other provincial 221.4 Discounted
- cash flows
Rental properties GBP147
------------------------ ---------- ----------- -------------------------- ------------------
4%
------------------------ ---------- -----------
Net rental income (GBP
per week) GBP107-GBP181
Estimated future rent
(%) 4%-7%
Discount rate (yield)
(%) 5.0%-15.5% 6.1%
------------------------ ---------- ----------- -------------------------- ------------------ ---------
London - 71.2 Discounted
Development properties cash flows GBP108.0m
------------------------ ---------- ----------- -------------------------- ------------------
3%
------------------------ ---------- -----------
Estimated cost to complete
(GBPm) GBP42.2m-GBP173.8m
Estimated future rent
(%) 3%
Discount rate (yield)
(%) 4.0% 4.0%
------------------------ ---------- ----------- -------------------------- ------------------ ---------
Prime provincial 159.4 Discounted
- cash flows
Development properties GBP33.5m
------------------------ ---------- ----------- -------------------------- ------------------
3%
------------------------ ---------- -----------
Estimated cost to complete
(GBPm) GBP3.5m-GBP76.9m
Estimated future rent
(%) 3%
Discount rate (yield)
(%) 4.4%-5.4% 4.6%
------------------------ ---------- ----------- -------------------------- ------------------ ---------
Major provincial 137.8 Discounted
- cash flows
Development properties GBP34.1m
------------------------ ---------- ----------- -------------------------- ------------------
3%
------------------------ ---------- -----------
Estimated cost to complete
(GBPm) GBP4.7m-GBP49.5m
Estimated future rent
(%) 3%
Discount rate (yield)
(%) 5.2%-5.6% 5.3%
------------------------ ---------- ----------- -------------------------- ------------------ ---------
1,836.9
------------------------ ---------- ----------- -------------------------- ------------------ ---------
Investment property 110.7 Discounted
(leased) cash flows GBP141
3%
Net rental income (GBP
per week) GBP121-GBP167
Estimated future rent
(%) 3%
Discount rate (yield)
(%) 6.8% 6.8%
Fair value at 30
June 2019 1,947.6
======================== ========== =========== ========================== ================== =========
Fair value Valuation Weighted
GBPm technique Unobservable inputs Range average
------------------------ ---------- ------------ -------------------------- ----------------- --------
London - 1,015.0 Discounted
Rental properties cash flows GBP277
------------------------ ---------- ------------ -------------------------- -----------------
4%
------------------------ ---------- ------------
Net rental income (GBP
per week) GBP192-GBP367
Estimated future rent
(%) 3%-5%
Discount rate (yield)
(%) 3.9%-5.0% 4.0%
------------------------ ---------- ------------ -------------------------- ----------------- --------
Prime provincial 876.5 Discounted Net rental income (GBP
- per week) GBP137-GBP212 GBP163
Rental properties cash flows Estimated future rent
(%) 2%-5% 3%
Discount rate (yield)
(%) 4.5%-6.0% 5.0%
Major provincial 1,198.1 Discounted Net rental income (GBP
- per week) GBP74-GBP157 GBP129
Rental properties cash flows Estimated future rent
(%) 2%-5% 3%
Discount rate (yield)
(%) 4.8%-6.1% 5.7%
Other provincial 317.3 Discounted
- cash flows
Rental properties GBP138
------------------------ ---------- ------------ -------------------------- -----------------
3%
------------------------ ---------- ------------
Net rental income (GBP
per week) GBP107-GBP181
Estimated future rent
(%) 1%-4%
Discount rate (yield)
(%) 5.0%-15.5% 6.6%
------------------------ ---------- ------------ -------------------------- ----------------- --------
London - 245.1 Discounted Estimated cost to complete
(GBPm) GBP30.8m-GBP91.4m GBP65.6
Development properties cash flows Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 4.0% 4.0%
Prime provincial 76.1 Discounted Estimated cost to complete
- (GBPm) GBP16.8m-GBP76.4m GBP43.2m
Development properties cash flows Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 4.8%-5.0% 4.9%
------------------------ ---------- ------------ -------------------------- ----------------- --------
Major provincial 90.6 Discounted Estimated cost to complete GBP35.1m -
- (GBPm) GBP46.8m GBP39.6m
Development properties cash flows Estimated future rent
(%) 3% 3%
Discount rate (yield)
(%) 4.5% 4.5%
------------------------ ---------- ------------ -------------------------- ----------------- --------
3,818.7
------------------------ ---------- ------------ -------------------------- ----------------- --------
Investment property 110.4 Discounted
(leased) cash flows
------------------------ ---------- ------------
Net rental income (GBP
per week) GBP121-GBP167
Estimated future rent
(%) 3%
Discount rate (yield)
(%) 6.8%
------------------------ ---------- ------------ -------------------------- ----------------- --------
Fair value at 31
December 2019 3,929.1
======================== ========== ============ ========================== ================= ========
Fair value sensitivity analysis
A decrease in net rental income or occupancy will result in a
decrease in the fair value, whereas a decrease in the discount rate
(yield) will result in an increase in fair value. There are
inter-relationships between these rates as they are partially
determined by market rate conditions.
+25 bps -25 bps
+5% change -5% change change in change in
Fair value in estimated in estimated nominal nominal
at 30 June net rental net rental equivalent equivalent
2020 income income yield yield
Class of assets GBPm GBPm GBPm GBPm GBPm
----------------------- ----------- ------------- ------------- ----------- -----------
Rental properties
London 1,014.8 1,076.4 974.9 965.5 1,094.0
Prime provincial 867.4 836.8 758.6 789.8 876.5
Major provincial 1,151.1 1,116.2 1,010.7 1,067.6 1,163.6
Other provincial 283.9 304.7 275.6 279.3 301.9
Development properties
London 255.5 273.6 239.5 239.0 275.8
Prime provincial 95.3 102.5 90.7 91.8 101.5
Major provincial 107.2 116.5 98.2 103.6 111.7
----------------------- ----------- ------------- ------------- ----------- -----------
Market value 3,775.2 3,826.7 3,448.2 3,536.6 3,925.0
======================= =========== ============= ============= =========== ===========
3.2 Inventories
Unaudited Unaudited
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
------------------ --------- --------- -----------
Interests in land 2.9 8.1 1.5
Other stocks 3.0 3.1 2.5
------------------ --------- --------- -----------
Inventories 5.9 11.2 4.0
------------------ --------- --------- -----------
3.3 Investments in joint ventures
The Group has two joint ventures:
Group's share
of
assets/results Legal entity in
2020 (December which
Joint venture 2019) Objective Partner Group has interest
---------------------- --------------- ---------------------- ----------------------- ---------------------------
The UNITE UK 23.4%* (23.4%) Invest and operate Consortium of investors UNITE Student Accommodation
Student Accommodation student accommodation Fund,
Fund (USAF) throughout the a Jersey Unit
UK Trust
---------------------- --------------- ---------------------- ----------------------- ---------------------------
London Student 50% (50%) Invest and operate GIC Real Estate LSAV Unit Trust,
Accommodation student accommodation Pte, Ltd a Jersey Unit Trust,
Venture (LSAV) in London and Real estate and LSAV (Holdings)
Birmingham investment vehicle Ltd, incorporated
of the Government in Jersey
of Singapore
---------------------- --------------- ---------------------- ----------------------- ---------------------------
* Part of the Group's interest is held through a subsidiary,
USAF (Feeder) Guernsey Ltd, in which there is an external investor.
A 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
22.0% of USAF (30 June 2019: 25.3%, 31 December 2019: 22.0%).
3.3a Movement in carrying value of the Group's investments in
joint ventures
The carrying value of the Group's investment in joint ventures
has decreased by GBP24.84 million during the 6 months ended 30 June
2020 (30 June 2019: GBP24.9 million increase, 30 December 2019:
GBP55.5 million increase), resulting in an overall carrying value
of GBP850.4 million (30 June 2019: GBP844.6 million, 30 December
2018: GBP875.2 million). The following table shows how the decrease
has arisen.
Unaudited Unaudited
6 months 6 months
to to Year to
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
---------------------------------------------- --------- --------- ------------
Recognised in the income statement:
Operations segment result 18.6 21.2 36.4
Minority interest share of Operations segment
result 0.6 0.7 1.1
Management fee adjustment relating to trading
with joint venture 3.3 3.5 6.8
Net revaluation (losses)/gains (33.1) 23.3 58.3
Profit on disposal of properties - - 0.4
Other (0.3) (0.5) (0.4)
---------------------------------------------- --------- --------- ------------
(10.9) 48.2 102.6
Recognised in equity:
Movement in effective hedges (0.2) (0.5) (0.5)
Other adjustments to the carrying value:
Profit adjustment related to trading with
joint venture (3.4) (3.5) (8.1)
LSAV performance fee - - (5.7)
Distributions received (10.3) (19.3) (32.8)
---------------------------------------------- --------- --------- ------------
(Decrease)/increase in carrying value (24.8) 24.9 55.5
Carrying value brought forward 875.2 819.7 819.7
---------------------------------------------- --------- --------- ------------
Carrying value carried forward 850.4 844.6 875.2
---------------------------------------------- --------- --------- ------------
3.3b Transactions with joint ventures
The Group acts as asset and property manager for the joint
ventures and receives management fees in relation to these
services. In addition, the Group is entitled to performance fees
from USAF and LSAV, if the joint ventures outperform certain
benchmarks. The Group receives either cash or an enhanced equity
interest in the Joint Ventures as consideration for the performance
fee.
The Group has recognised the following gross fees in its results
for the period.
Unaudited Unaudited
6 months 6 months Year to
to to 31 December
30 June 2020 30 June 2019 2019
GBPm GBPm GBPm
----------------------------------- ------------- ------------- ------------
USAF 7.7 7.5 14.6
LSAV 3.3 3.1 6.4
----------------------------------- ------------- ------------- ------------
Asset and property management fees 11.0 10.6 21.0
LSAV performance fee - - 11.4
USAF acquisition fee - 0.3 2.8
----------------------------------- ------------- ------------- ------------
Investment management fees - 0.3 14.2
----------------------------------- ------------- ------------- ------------
Total fees 11.0 10.9 35.2
----------------------------------- ------------- ------------- ------------
On an EPRA basis, fees from joint ventures are shown net of the
Group's share of the cost to the joint venture. The Group's share
of the cost to the joint ventures is GBP3.3 million (30 June 2019:
GBP3.4 million, 31 December 2019: GBP6.6 million), which results in
management fees from joint ventures of GBP7.7 million (30 June
2019: GBP7.2 million, 31 December 2019: GBP14.4 million) being
shown in the Operations segment result in note 2.2a.
Section 4: Funding
The Group finances its development and investment activities
through a mixture of retained earnings, borrowings and equity. The
Group continuously monitors its financing arrangements to manage
its gearing.
Interest rate swaps are used to manage the Group's risk to
fluctuations in interest rate movements.
The following pages provide disclosures about the Group's
funding position, including borrowings and hedging instruments.
4.1 Borrowings
The table below analyses the Group's borrowings which comprise
bank and other loans by when they fall due for payment:
Unaudited Unaudited 31 December
30 June 2020 30 June 2019 2019
GBPm GBPm GBPm
------------------------------------------ ------------- ------------- -----------
Current
In one year or less, or on demand 1.4 86.2 1.4
Non-current
In more than one year but not more than
two years 1.5 1.4 1.5
In more than two years but not more than
five years 1,246.0 229.1 964.7
In more than five years 567.9 271.6 567.6
------------------------------------------ ------------- ------------- -----------
1,815.4 502.1 1,533.8
Unamortised fair value of debt recognised
on acquisition 30.2 - 32.4
------------------------------------------ ------------- ------------- -----------
Total borrowings 1,847.0 588.3 1,567.6
------------------------------------------ ------------- ------------- -----------
The carrying value of borrowings is considered to be approximate
to fair value, except for the Group's fixed rate loans as analysed
below:
Unaudited Unaudited
30 June 2020 30 June 2019 31 December 2019
Carrying Carrying Carrying
value Fair value value Fair value value Fair value
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- -------- ---------- -------- ---------- -------- ----------
Level 1 IFRS fair value hierarchy 905.3 888.3 365.0 382.2 907.4 930.9
Level 2 IFRS fair value hierarchy 206.6 216.4 232.5 246.9 231.9 244.6
Other loans and unamortised
arrangement fees 735.1 735.1 (9.2) (9.2) 428.3 428.3
---------------------------------- -------- ---------- -------- ---------- -------- ----------
Total borrowings 1,847.0 1,839.8 588.3 619.9 1,567.6 1,603.8
---------------------------------- -------- ---------- -------- ---------- -------- ----------
4.2 Interest rate swaps
The Group uses interest rate swaps to manage the Group's
exposure to interest rate fluctuations. In accordance with the
Group's treasury policy, the Group does not hold or issue interest
rate swaps for trading purposes and only holds swaps which are
considered to be commercially effective.
The following table shows the fair value of interest rate
swaps:
Unaudited Unaudited
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
-------------------------------------------- --------- --------- -----------
Current - - -
Non-current 24.6 6.9 7.6
-------------------------------------------- --------- --------- -----------
Fair value of interest rate swaps liability 24.6 6.9 7.6
-------------------------------------------- --------- --------- -----------
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.
4.3 Dividends
Following the outbreak of Covid-19 and a period of highly
uncertain trading conditions, the Board took the decision to cancel
the 2019 final dividend to retain cash within the business (30 June
2019: GBP47.6 million, 19.5p per share payment of the 2018 final
dividend).
We anticipate reinstating dividend payments in 2020, following
delivery of occupancy and income supportive of our guidance for
EPRA EPS of 22-25 pence for FY 2020 and based on a positive outlook
for the 2021/22 academic year. There is the potential to announce
an interim dividend later this year (H1 2019: 10.25 pence),
although timing of the reinstatement is still to be confirmed.
Dividends for the 2020 financial year will reflect a portion of
EPRA EPS with the payout ratio still to be determined.
There is no further Property Income Distribution (PID) to be
paid by the Company in respect of the 2019 financial year.
Section 5: Related party transactions
On 26 June 2020, the Group announced completion of a share
placing. The key management personnel of the Group participated and
a total of 20,113 new ordinary shares in the Company were issued to
these individuals for total consideration of GBP175,000.
Section 6: Post balance sheet events
On 20 July 2020, LDC (Portfolio 20) Limited, a wholly owned
subsidiary of the Unite Group, repaid its loan with Mass Mutual of
GBP99.4m in cash, in full. The early repayment of this loan
resulted in debt exit fees of GBP16.9m. The loan was originally
secured against 4 properties in the Unite portfolio.
Section 7: Alternative performance measures
The Group uses alternative performance measures ("APMs"), which
are not defined or specified under IFRS. These APMs, which are not
considered to be a substitute for IFRS measures, provide additional
helpful information. APMs are consistent with how business
performance is planned, reported and assessed internally by
management and the Board, and provide comparable information across
the Group. The APMs below have been calculated on a see-through /
Unite share basis, as referenced to the notes to the financial
statements. Reconciliations to equivalent IFRS measures are
included in notes 2.2b and 2.3c. Definitions can also be found in
the glossary.
6 months
to 30 June 6 months to Year to 31
2020 30 June 2019 December 2019
Note GBPm GBPm GBPm
------------------------------ ---- ----------- -------------- --------------
EBIT
Net operating income (NOI) 2.2a 117.4 84.4 160.8
Management fees 2.2a 7.7 7.2 14.4
Operating expenses 2.2a (14.1) (9.3) (21.8)
------------------------------ ---- ----------- -------------- --------------
111.0 82.3 153.4
------------------------------ ---- ----------- -------------- --------------
EBIT margin %
Rental income 2.2a 154.9 108.3 213.9
EBIT 7 111.0 82.3 153.4
------------------------------ ---- ----------- -------------- --------------
71.7% 76.0% 71.7%
------------------------------ ---- ----------- -------------- --------------
EBITDA
Net operating income (NOI) 2.2a 117.4 84.4 160.8
Management fees 2.2a 7.7 7.2 14.4
Operating expenses 2.2a (14.1) (9.3) (21.8)
Depreciation and amortisation 4.7 3.7 7.6
------------------------------ ---- ----------- -------------- --------------
115.7 86.0 161.0
30 June 31 December
2020 30 June 2019 2019
Note GBPm GBPm GBPm
------------------------------ ---- ----------- -------------- --------------
Net debt
Cash 2.3a 594.2 138.5 114.9
Debt 2.3a (2,282.3) (1,035.3) (1,999.2)
------------------------------ ---- ----------- -------------- --------------
Net debt (1,688.1) (896.8) (1,884.3)
------------------------------ ---- ----------- -------------- --------------
Net debt (adjusted)
Cash 240.6 (1) 138.5 114.9
Debt (adjusted) (1,631.5) (1,035.3) (1,209.3) (2)
------------------------------ ---- ----------- -------------- --------------
(1,390.9)
Net debt (adjusted) (3) (896.8) (1,094.4)
============================== ==== =========== ============== ==============
1 Calculated on a 12 month look back basis. Average of GBP138.5
million and GBP114.9 million in respect of H2 2019 and GBP590.4
million and GBP114.9 million in respect of H1 2020.
2 Calculated as Unite debt of GBP1,137.5 million and Liberty
Living debt of GBP71.8 million (GBP861.7 million pro-rated for 33
days of ownership).
3 Calculated on a 12 month look back basis. Average of GBP896.8
million and GBP1,094.4 million in respect of H2 2019 and GBP1,884.3
million and GBP1,688.1 million in respect of H1 2020.
6 months 6 months to
to 30 June 30 June 2019 Year to 31
2020 GBPm December 2019
Note GBPm GBPm
------------------------------- ---- ----------- ------------- --------------
Net debt: EBITDA (adjusted)
Net debt (adjusted) 7 (1,390.9) (896.8) (1,094.4)
EBITDA 7 190.7 (3) 147.9 161.0
------------------------------- ---- ----------- ------------- --------------
Ratio 7.3 6.1 6.8
------------------------------- ---- ----------- ------------- --------------
3 Calculated on a 12 month look back basis. GBP115.7 million in respect
of H1 2020 and GBP75.0 million in respect of H2 2019.
Interest cover (Unite share)
EBIT 7 111.0 82.3 153.4
Net financing costs 2.2a (29.1) (16.0) (34.7)
Interest on lease liability 2.2a (4.4) (4.7) (9.2)
------------------------------- ---- ----------- ------------- --------------
Total interest (33.5) (20.7) (43.9)
------------------------------- ---- ----------- ------------- --------------
Ratio 3.3 4.1 3.5
------------------------------- ---- ----------- ------------- --------------
Reconciliation: EPRA earnings to IFRS loss before tax
6 months 6 months
to to Year to
30 June 30 June 31 December
2020 2019 2019
Note GBPm GBPm GBPm
------------------------------------------- ---- -------- -------- ------------
EPRA earnings 2.2a 74.8 61.2 110.6
Net valuation (losses)/gains on investment
property (owned) 2.2b (135.2) 76.6 213.1
Property disposals (owned) 2.2b (0.5) 0.2 (5.8)
Net valuation losses on investment
property (leased) 2.2b (3.2) (2.3) (8.1)
Property disposals (leased) 2.2b - (1.1) (1.1)
Impairment of goodwill 2.2b - - (384.1)
Acquisition costs 2.2b - (5.4) (22.8)
Integration costs 2.2b (8.1) - -
Amortisation of fair value of debt
recognised on acquisition 2.2b 2.2 - 0.4
Changes in valuation of interest rate
swaps 2.2b - (2.4) (2.7)
Debt exit costs 2.2b (5.6) (0.5) (2.7)
Minority interest and tax 1.7 (0.8) 2.0
------------------------------------------- ---- -------- -------- ------------
IFRS loss before tax (73.9) 125.5 (101.2)
------------------------------------------- ---- -------- -------- ------------
EPRA Performance Measures
31 December
30 June 2020 30 June 2019 2019
Note GBPm GBPm GBPm
---------------------------------- ---- ------------ ------------ -----------
Net assets
EPRA NTA 7 3,306.1 2,148.0 3,087.1
EPRA NTA (diluted) 3,309.9 2,150.9 3,091.4
Number of shares (thousands)
Basic 2.3d 398,168 264,138 363,618
Outstanding share options 2.3d 1,441 856 1,309
---------------------------------- ---- ------------ ------------ -----------
Diluted 2.3d 399,609 264,994 364,927
Net asset value per share (pence)
EPRA NTA 830p 813p 849p
EPRA NTA (diluted) 828p 812p 847p
---------------------------------- ---- ------------ ------------ -----------
NAV metric reconciliations & bridge
31 December
30 June 2020 30 June 2019 2019
Note GBPm GBPm GBPm
------------------------------------------ ---- ------------ ------------ -----------
Net asset value reported under IFRS 3,273.3 2,164.9 3,071.5
Mark to market interest rate swaps 2.3c 25.4 7.6 8.3
Unamortised swap gain 2.3c (2.0) (2.1) (2.1)
Unamortised fair value of debt recognised
on acquisition 2.3c 30.2 - 32.4
Current tax 2.3c - - (0.4)
Deferred tax 2.3c (1.0) - -
Real estate transfer taxes 265.3 188.8 280.5
------------------------------------------ ---- ------------ ------------ -----------
EPRA NRV 3,591.2 2,359.2 3,390.2
Real estate transfer taxes (265.3) (188.8) (280.5)
------------------------------------------ ---- ------------ ------------ -----------
EPRA NAV 3,325.9 2,170.4 3,109.7
Intangible assets (19.8) (22.4) (22.6)
------------------------------------------ ---- ------------ ------------ -----------
EPRA NTA 3,306.1 2,148.0 3,087.1
Intangible assets 19.8 22.4 22.6
Mark to market of fixed rate debt 2.3c (98.2) (51.7) (93.5)
Mark to market interest rate swaps 2.3c (25.4) (7.6) (8.3)
Current tax 2.3c - - 0.4
Deferred tax 2.3c 1.0 - -
------------------------------------------ ---- ------------ ------------ -----------
EPRA NNNAV 3,203.3 2,111.1 3,008.3
------------------------------------------ ---- ------------ ------------ -----------
EPRA like-for-like rental income
Properties owned
throughout the Development Acquisitions Total Rental
period property and disposals income
GBPm GBPm GBPm GBPm
---------------------------------- ---------------- ----------- -------------- ------------
6 months to 30 June 2020
Rental income 84.3 5.2 65.4 154.9
Property operating expenses (20.7) (1.3) (15.5) (37.5)
---------------------------------- ---------------- ----------- -------------- ------------
Net rental income 63.6 3.9 49.9 117.4
---------------------------------- ---------------- ----------- -------------- ------------
Year to 31 December 2019
Rental income 93.8 - 14.5 108.3
Property operating expenses (21.2) - (2.7) (23.9)
---------------------------------- ---------------- ----------- -------------- ------------
Net rental income 72.6 - 11.8 84.4
---------------------------------- ---------------- ----------- -------------- ------------
Like-for-like gross rental income (10.1%)
Like-for-like net rental income (12.3%)
---------------------------------- ---------------- ----------- -------------- ------------
EPRA Cost ratio
Year to
6 months to 31 December
30 June 2020 2019
GBPm GBPm
------------------------------------------------- ------------- ------------
Property operating expenses 27.5 33.0
Operating expenses 13.8 21.1
Development / pre contract costs 0.9 1.5
Unallocated expenses 0.5 4.4
------------------------------------------------- ------------- ------------
42.7 60.0
Share of JV property operating expenses 10.0 20.1
Share of JV operating expenses 0.3 0.7
------------------------------------------------- ------------- ------------
53.0 80.8
Less: Joint venture management fees (7.7) (14.4)
------------------------------------------------- ------------- ------------
Total costs (A) 45.3 66.4
------------------------------------------------- ------------- ------------
Group vacant property costs - -
Share of JV vacant property costs - -
------------------------------------------------- ------------- ------------
Total costs excluding vacant property costs
(B) 45.3 66.4
------------------------------------------------- ------------- ------------
Rental income 114.9 134.1
Share of JV rental income 40.0 79.8
------------------------------------------------- ------------- ------------
Total gross rental income (C) 154.9 213.9
------------------------------------------------- ------------- ------------
Total EPRA cost ratio (including vacant property
costs) (A)/(C) 29.2% 31.1%
------------------------------------------------- ------------- ------------
Total EPRA cost ratio (excluding vacant property
costs) (B)/(C) 29.2% 31.1%
------------------------------------------------- ------------- ------------
Unite's EBIT margin excludes non-operational expenses which are
included within the EPRA cost ratio above.
EPRA Valuation movement (Unite share)
Valuation Change
GBPm GBPm %
-------------------------------------- --------- ------ ------
Wholly owned 3,317 (98) (2.9)%
USAF 614 (18) (2.8)%
LSAV 658 (14) (2.1)%
-------------------------------------- --------- ------ ------
Rental properties 4,589 (131) (2.8)%
Leased properties 107 (3) (2.9)%
Properties under development 458 (4) (1.0%)
-------------------------------------- --------- ------ ------
Properties held throughout the period 5,154 (137) (2.6%)
Acquisitions - - -
Disposals - - -
-------------------------------------- --------- ------ ------
Total property portfolio 5,154 (137) (2.6%)
-------------------------------------- --------- ------ ------
Property related capital expenditure
30 June 2020 31 December 2019
----------------------------------- -----------------------------------
Share of Share of
Wholly owned JVs Group share Wholly owned JVs Group share
----------------------- ------------ -------- ----------- ------------ -------- -----------
Acquisitions - - - - 51 51
Developments 47 - 47 208 6 214
Rental properties 8 9 17 7 9 16
Other 3 - 3 9 - 9
Total property related
capex 58 9 67 224 66 290
----------------------- ------------ -------- ----------- ------------ -------- -----------
INDEPENT REVIEW REPORT TO THE UNITE GROUP PLC
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 2020 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 related sections 1 to 7. 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.
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 Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in section 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 Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Emphasis of matter - External valuation of property
portfolio
We draw attention to section 1, which describes the effects of
the uncertainties created by the coronavirus (Covid-19) pandemic on
the valuation of the group's investment property portfolio. As
noted by the group's external valuers, the outbreak has caused
extensive disruptions to businesses and economic activities and the
uncertainties created have increased the estimation uncertainty
over the fair value of the investment property portfolio at the
balance sheet date. Our review report is not modified in respect of
this matter.
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 three months ended 30
June 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Use of our report
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 Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, UK
29 July 2020
GLOSSARY
Adjusted net debt Gross asset value Net operating income (NOI)
The Group's debt, net Rental properties, plus The Group's rental income
of cash and unamortised leased properties and development from rental properties
debt raising costs, excluding properties. GAV is reported (owned and leased) less
the mark to market of on a fair value basis. those operating costs
interest rates swaps. directly related to the
Gross financing costs property, therefore excluding
Basis points (BPS) All interest paid by the central overheads.
A basis point is a term Group, including those
used to describe a small capitalised into developments NOI margin
percentage, usually in and operating lease rentals. The Group's NOI expressed
the context of change, It includes all receipts as a percentage of rental
and equates to 0.01%. and payments under interest income.
rate swaps whether they
Direct let are effective or ineffective Nomination agreements
Properties where short-hold under IFRS. Properties where Universities
tenancy agreements are have entered into a contract
made directly between The Group to guarantee occupancy.
Unite and the student. Wholly owned balances plus The Universities nominate
Unite's interests relating students to live in the
EBIT to USAF and LSAV. building and Unite enters
The Group's NOI plus into short-hold tenancies
management fees and less Group debt with the students.
operating expenses. Wholly owned borrowings
plus Unite's share of borrowings Other provincial
EBITDA attributable to USAF and Properties located in
The Group's EPRA earnings LSAV. Bedford, Bournemouth,
before charging interest, Coventry, Exeter, Loughborough,
tax, depreciation and Interest cover ratio (ICR) Medway, Preston, Portsmouth,
amortisation. The profit Calculated as EBIT divided Reading, Stoke, Swindon
number is used to calculate by the sum of net financing and Wolverhampton.
the ratio to net debt. costs and IFRS 16 lease
liability interest costs. Prime provincial
EBIT margin Properties located in
The Group's EBIT expressed Lease Bristol, Bath, Edinburgh,
as a percentage of rental Properties which are leased Manchester and Oxford.
income. to Universities for a number
of years and have no Unite Rental properties
EPRA management presence. Investment properties
The European Public Real whose construction has
Estate Like-for-like rental growth been completed and are
Association, who produce Like-for-like rental growth used by the Operations
best practice recommendations is the growth in gross segment to generate NOI.
for financial reporting. rental income on properties
owned throughout the current Rental properties (leased)
EPRA earnings and previous years under / Sale and leaseback
EPRA earnings exclude review. Properties that have been
movements relating to sold to a third party
changes in values of Loan to value (LTV) investor then leased back
investment properties Net debt as a proportion to the Group. Unite is
and interest rate swaps of the carrying value of also responsible for the
and the related tax effects. the total property portfolio, management of these assets
In 2020, in consideration excluding balances recognised on behalf of the owner.
of EPRA's focus on recurring in respect of leased properties
income, EPRA earnings under IFRS 16. See-through (also Unite
excludes integration share)
costs. Wholly owned balances
LSAV plus Unite's share of
The London Student Accommodation balances relating to USAF
Joint Venture (LSAV) is and LSAV.
EPRA earnings per share a joint venture between
The earnings per share Unite and GIC, in which
based on EPRA earnings. both hold a 50% stake. TCFD
LSAV has a maturity date The Taskforce on Climate-related
EPRA net asset value of September 2022. Financial Disclosures
(NAV) develops voluntary, consistent
EPRA NAV includes all Major Provincial climate-related financial
property at market value Properties located in Aberdeen, risk disclosures for use
but excludes the mark Birmingham, Cardiff, Durham, by companies in providing
to market of financial Glasgow, Leeds, Leicester, information to investors,
instruments and deferred Liverpool, Newcastle, Nottingham, lenders, insurers, and
tax. EPRA NAV provides Sheffield and Southampton. other stakeholders.
a consistent measure
of NAV on a going concern Net debt Total accounting return
basis. Group debt, net of cash Growth in EPRA NAV per
and unamortised debt issue share plus dividends paid,
EPRA net asset value costs, excluding IFRS 16 expressed as a percentage
(NAV) per share investment property (leased) of EPRA NAV per share
The diluted NAV per share and associated lease liabilities. at the beginning of the
figure based on EPRA period.
NAV. Net debt: EBITDA
Net debt as a proportion Total shareholder return
EPRA NNNAV of EBITDA. The growth in value of
EPRA NAV adjusted for a shareholding over a
the fair value of debt Net financing costs (EPRA) specified period, assuming
and financial instruments Gross financing costs net dividends are reinvested
and deferred tax. EPRA of interest capitalised to purchase additional
NNNAV provides a 'spot' into developments and interest shares.
measure of NAV with all received on deposits.
assets and liabilities USAF/the fund
at their fair value. Net initial yield (NIY The Unite UK Student Accommodation
or yield) Fund (USAF) is Europe's
EPRA Net Tangible Assets The net operating income largest fund focused purely
(NTA) generated by a property on income-producing student
EPRA NTA includes all expressed as a percentage accommodation investment
property at market value of its value, taking into assets.
but excludes the mark account notional acquisition The fund is an open- ended
to market of financial costs. infinite life vehicle
instruments, deferred with unique access to
tax and intangible assets. Unite's development pipeline.
EPRA NTA provides a consistent Unite acts as fund manager
measure of tangible NAV for the fund, as well
on a going concern basis. as owning a significant
minority stake.
EPRA Net Tangible Assets
per share WAULT
The diluted NTA per share Weighted average unexpired
figure based on EPRA lease term to expiry.
NTA.
Wholly owned
ESG Balances relating to properties
Environmental, Social that are 100% owned by
and Governance. The Unite Group plc or
its 100% subsidiaries.
GRESB
GRESB is a benchmark
of the Environmental,
Social and Governance
(ESG) performance of
real assets.
COMPANY INFORMATION
Registered office
South Quay House
Temple Back
Bristol BS1 6FL
Registered Number in England
03199160
Auditor
Deloitte LLP
1 New Street Square, London EC4 3HQ
Financial Advisers
J.P. Morgan Cazenove
25 Bank Street, London E14 5JP
Numis Securities
The London Stock Exchange Building
10 Paternoster Square, London EC4M 7LT
Registrars
Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Financial PR Consultants
Powerscourt
1 Tudor Street, London, EC4Y OAH
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR KKFBDKBKBQOB
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