Results from Unite Group (UTG) for 2012 more than justify the dramatic re-rating of its shares over the past year. Its adjusted profit more than tripled to £15.9m or 9.9p per share, allowing a huge hike in the dividend to 4p, which was covered two and a half times by operating cash flow. Management wants to maintain that level of cover, so this year's increase is a one-off, yet there's still scope for dividend growth as earnings recover further.
For the first time, chief executive Mark Allan even had the confidence to set a target for earnings yield (adjusted EPS as a proportion of adjusted book value). He wants to raise it from 3.1 per cent last year to 4.5 per cent by 2015. This implies EPS growth of 60 per cent, believes broker Espirito Santo, which expects net asset value (NAV) of 380p per share at the year-end.
Unite's profit growth last year was due to a strong improvements in rental income plus tight cost control. The group completed four developments, worth £209m, at a cost of £147m - a profit on cost of 42 per cent. Like-for-like rental growth of 3 per cent also helped, though this figure was lower than the 4 per cent figure achieved in previous years because of the government's changes to student funding. Developments and rental growth also pushed Unite's adjusted book value up 10 per cent to 350p.
UNITE (UTG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 307p | MARKET VALUE: | £493m | |
| TOUCH: | 306-308p | 12-MONTH HIGH: | 312p | LOW: 178p |
| DIVIDEND YIELD: | 1.3% | TRADING PROP: | £64.1m | |
| DISCOUNT TO NAV: | 5% | |||
| INVESTMENT PROP: | £958m* | NET DEBT: | 114%* | |
| Year to 31 Dec | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 253 | -128.9 | -91.7 | 0.81 |
| 2009 | 229 | -35.7 | -25.9 | nil |
| 2010 | 242 | 24.2 | 12.2 | nil |
| 2011 | 242 | 4.7 | 1.3 | 1.75 |
| 2012 | 322 | 126.2 | 78.3 | 4.00 |
| % change | +33 | – | – | +129 |
Ex-div: 17 Apr Payment: 20 May *Including share of joint ventures | ||||
