Unite posts strong earnings and dividend growth – Student accommodation specialist Unite Group, which is in the middle of a £1.4bn acquisition of Liberty Living, posted earnings growth of 16% in its half-year report, boosting its dividend by 8%.
EPRA earnings rose to £61.2m in the first half of 2019, compared to £52.9m in H1 2018. Unite increased its dividend to 10.25p per share while its EPRA NAV per share notched up 4% to 820p.
Unite did however report a 12% fall in first-half profit, from £142.5m in H1 2018 to £125.5m H1 2019. It put this down to lower property valuation gains in the period.
Outlook
The company said its outlook was positive with reservations for the 2019/20 academic year at record levels of 92% (2018: 91%). This supports its rental growth outlook for 2019/20 of 3.0-3.5%. The company’s nomination agreements with universities represents 60% of beds with a WAULT of six years, providing it with visibility over income and rental growth. It reported further progress with its University partnerships, with one deal secured so far in 2019 and a pipeline of 10 active discussions across a range of different models.
Unite’s development pipeline stands at 6,580, which will be delivered over the next four years, generating a 7% yield on costs and significant earnings growth.
Acquisition of Liberty Living
Unite announced earlier this month that it had agreed a deal to buy Liberty Living for £1.4bn, which is due to complete in Q4 this year. The combined company will have around 75,000 student beds. The Liberty Living assets will be integrated into Unite’s operating platform, PRISM. The company said this would deliver £15m a year synergies from 2021.
Chief executive Richard Smith said: “Our proposed £1.4bn acquisition of Liberty Living will create a portfolio with a gross asset value of £7bn, comprising approximately 75,000 beds across the UK, with some 1.5 million students requiring accommodation each year.
“The Liberty Living business is complementary to our own, with a shared commitment to providing high-quality, affordable student accommodation and a portfolio strategically aligned with many high and mid-ranked Universities where student demand is strongest. The acquisition will utilise our best-in-class operating platform to accelerate and extend earnings and dividends growth.
Financial position
Unite’s LTV stands at 29% with its cost of debt at 3.8%.
Unite said it would continue to recycle capital through disposals and reinvesting into developments and acquisitions of assets aligned to the best universities. During the first half, it agreed to sell a portfolio of three assets to USAF for £105m (Unite share: £79m), representing a net initial yield of 5.5%.
Following the acquisition of Liberty Living, it intends to dispose of approximately £150-200m of assets a year during the next three years. These target disposals, combined with rental growth, are intended to ensure its target LTV of 35% is met.
UTG : Unite posts strong earnings and dividend growth