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With the special dividend, there's more for U and I

U and I Group pay a sector-leading dividend, yet the shares remain at a steep discount to net asset value
May 3, 2016

U and I Group (UAI)- formerly Development Securities - spent the last year implementing its strategic objective of building a portfolio of larger regeneration projects, and over the next three to five years it is targeting post-tax total returns (net asset growth and dividends) of 12 per cent, and over £50m of development and trading gains per year. Management’s confident approach is reflected in the payment of another special dividend which, together with the ordinary dividend, gives a sector-leading yield of nearly 7 per cent.

IC TIP: Buy at 203.25p

Headline profits were down because there was virtually no revaluation gain on the portfolio which remained unchanged at £203m. But, crucially, total rental income grew by 8 per cent to £22.4m. Emphasis remained on sweating existing assets to generate revenue, and development and trading gains rose by 11.8 per cent to a record £51.1m. However, this came at a cost, with development expenses rising from £143m to £185m.

Key investment gains included a mixed-use site in north London, where it built a Morrisons food store and sold off the remainder of the site for retail and restaurants. Profits realised came to £8m. Two significant Public Private Partnership projects were also won, with a combined gross development value of £480m.

Analysts at Peel Hunt are forecasting adjusted net asset value (NAV) of 293p at the February 2017 year-end, from 290p a year earlier.

U AND I GROUP (UAI)
ORD PRICE:203.25pMARKET VALUE:£254m
TOUCH:203-204.25p12-MONTH HIGH:293pLOW: 178p
DIVIDEND YIELD:2.9%TRADING PROPERTIES:£200m
DISCOUNT TO NAV:30% 
INVESTMENT PROP:£254m#NET DEBT:44%

Year to 29 FebNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2012**256-10.2-10.35.6
20132510.82.05.6
201426219.514.95.6
201527634.826.85.9*
201629125.817.55.9*
% change+5-26-35-

Ex-div: 21 Jul

Payment: 19 Aug

*Not including special dividend of 8p in 2015 and 2016

**14-month period

#Including joint ventures