Unite Group’s (UTG) strategy to focus on providing accommodation for students of the UK’s best universities has paid off handsomely in the first half of 2018. While it’s true that a significant portion of the jump in profits is due to unrealised valuation gains, it also achieved a 31 per cent increase in EPRA earnings – those calculated in accordance with the recommendations of the European Public Real Estate Association.
Immediate occupancy looks solid, along with prospects for expansion, with 91 per cent of beds secured for the upcoming academic year and plans to add 6,500 new beds between now and 2021 with an average yield of 7.7 per cent on cost. The year 2021 is significant, as it is when the demographic decline in the number of people aged 18-20 is expected to bottom out and start to rebound.
The current pipeline, once completed, will serve to increase the group’s focus on top institutions. The group currently receives 85 per cent of its income from universities ranked 'Gold' or 'Silver' in the Teaching Excellence Framework ranking. Once the current development pipeline is complete, it will derive 90 per cent of income from top institutions.
Analyst Peel Hunt raised forecasts following the results announcement and now expects adjusted net asset value (NAV) per share of 795p at the end of 2018.
| UNITE GROUP (UTG) | ||||
| ORD PRICE: | 846p | MARKET VALUE: | £2.23bn | |
| TOUCH: | 845.5-846.5p | 12-MONTH HIGH: | 873p | LOW: 641p |
| DIVIDEND YIELD: | 2.9% | DEVELOPMENT PROP: | £331m | |
| PREMIUM TO NAV: | 12% | |||
| INVESTMENT PROP: | £2.14bn* | NET DEBT: | 39% | |
| Half-year to 30 Jun | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 663 | 84 | 37 | 7.3 |
| 2018 | 758 | 143 | 54 | 9.5 |
| % change | +14 | +70 | +47 | +30 |
| Ex-div: | 20 Sep | |||
| Payment: | 2 Nov | |||
| *Includes joint ventures | ||||
