Interim Results
Unite Group PLC
14 September 2006
Date: 14 September 2006
On behalf of: The UNITE Group plc ('UNITE' / 'Group')
The UNITE Group plc - Interim Results
The UNITE Group plc, the UK's largest provider of student hospitality, today
announces its interim results for the six months to 30 June 2006.
Highlights:
Net Asset Value per share rose 16% to 365p (31 December 2005: 314p); adjusted,
fully diluted NAV per share increased by 15% to 416p (31 December 2005: 363p)
Net rental growth and yield compression contributed £15m and £41m respectively
to the Group's capital growth; development activity contributed £13m
Total portfolio revenue including joint ventures rose by 28% to £54.6m (2005:
£42.8m); Total portfolio operating margin consistent at 65.0% (2005: 65.6%)
4,276 new bed spaces successfully completed, commissioned and opened for the
academic year 2006/07; of which 2,848 delivered using the Group's modular build
technology. Group on track to deliver circa 4,000 bed spaces for the 2007/08
academic year and 5,000 in 2008/09
New site acquisition activity strong, with new opportunities secured comprising
8,656 beds for delivery from 2007
Group continues to explore the creation of a dedicated student accommodation
fund for which UNITE would act as property and fund manager, thereby shifting
the emphasis of UNITE's business model to that of a co-investing fund and asset
manager and developer
Appointment of new Chief Financial Officer announced today; Mark Allan and Nick
Porter to assume roles of Chief Executive Officer and Deputy Chairman,
respectively, with immediate effect
Commenting, Geoffrey Maddrell, Chairman of The UNITE Group plc, said:
'Customer demand for good quality, well located student accommodation remains
strong and UNITE is as well placed as ever to meet this need. With occupier
demand firmly established, the sector's consistent low risk rental growth
profile is helping to demonstrate the investment credentials of the sector.
UNITE is a strong advocate of this evolution and continues to drive investment
into the sector.
'From a development perspective, it is not surprising that we are beginning to
see increasing competition in our market. However, the Group's track record,
expertise and reputation, coupled with a consistent focus on customer
experience, mean that it is well placed to benefit from the development of its
sector and build on its market-leading position.'
- ends -
Enquiries:
The UNITE Group plc
Mark Allan / Tabitha Birchall Tel: 0117 302 7000
Financial Dynamics
Stephanie Highett / Dido Laurimore Tel: 020 7831 3113
A copy of the investor presentation is available on our website: www.unite-group.co.uk
Publication quality photographs are available on request.
Notes to Editors:
UNITE is the UK's leading student hospitality company. Listed in the FTSE 250
index of the London Stock Exchange, and with a property portfolio valued at some
£1.1 billion located across the United Kingdom, the Group focuses on the
provision and management of high quality, well-located student accommodation and
hospitality services in strong higher education markets.
UNITE delivers the real student experience, whilst at the same time helping to
regenerate cities as part of the community and contributing to the improvement
of the country's housing. It undertakes the planning, development and
management of sites, often working closely with the universities and colleges,
to deliver accommodation for students across all ages and nationalities. UNITE
developments typically show high occupancy levels and robust rental growth as
demand continues to rise for places in UK Higher Education and for safe, high
quality accommodation for students.
Further information on UNITE is available at www.unite-group.co.uk
CHAIRMAN'S STATEMENT
Introduction
Over the past three years, UNITE has increasingly strengthened its market
leading position in student accommodation and, based on a clear, consistent
strategy, remains well positioned to benefit from the recent positive evolution
of the sector from an investment perspective.
UNITE's performance in the six months under review has been strong. Net asset
value per share increased 16% to 365 pence from 314 pence at 31 December 2005.
When adjusted to exclude movements in provisions for deferred tax and the market
value of interest rate swaps, adjusted net asset value per share increased by
14% to 420 pence (31 December 2005: 367 pence). On a fully diluted basis,
adjusted net asset value per share increased 15% over the six months to 416
pence, from 363 pence at the previous year end, reflecting the strong business
performance in both our investment and development portfolios. This final
measure is the one most commonly used to benchmark the valuation of quoted
property companies.
Profit before tax for the six months to June 2006, as disclosed in the income
statement, was £61.5m, up from £9.7m for the same period in 2005. This includes
revaluation gains and movements in relation to ineffective hedges. When these
movements are excluded, adjusted profit increased 44% to £2.3m (2005: £1.6m).
Market update
During 2006, the UK student accommodation market has evolved importantly from
both a demand and supply perspective. On the demand side, September 2006 sees
the introduction of variable fees across England and, whilst this has had a
predictable impact on the number of university applications, the medium term
trend remains robust. As at 30 August, applications to study at University in
2006/07 were down 3.2% year on year; when the extraordinary annual increase in
applications for 2005/06 (8.0%) is taken into account, 2006/07 applications
still represent an average annual increase of 2.3% since 2004/05.
Over the medium term we expect continued, steady growth in student enrolment,
underpinned by three factors: the demographic profile of the UK population over
the next five years; the Government's policy of encouraging participation in
Higher Education amongst young people; and continued increases in the
recruitment of overseas students by UK universities. However, the introduction
of variable fees will introduce a stronger consumer attitude amongst students
and some universities may well struggle to meet enrolment and therefore funding
targets. UNITE's strategic approach to investment acknowledges and anticipates
this and we do not expect occupancy across our portfolio to be materially
affected.
On the supply side, it is recognised by local authorities that student
accommodation can play a major role in regeneration, in increasing housing
supply and in rebalancing the accommodation provision for students in our
cities. April 2006 saw the coming into force of those provisions of the
Housing Act 2004 relating to houses in multiple occupation. Those provisions
bring stringent standards and a licensing regime to the private rented sector,
which are intended to improve the quality of private rented housing. It is too
early to expect a discernable impact on supply, whilst many landlords are still
in the process of obtaining licences; but in the medium term we expect this to
both reduce supply and encourage upgrade investment amongst smaller private
landlords. This is likely to happen more quickly in cities where student
housing is a sensitive political issue. The quality and high specification of
UNITE's portfolio leaves the Group well placed to benefit from this legislation.
In terms of the investment market for student accommodation, 2006 has seen a
considerable increase in activity. Various funds have been established to
target investment in the sector and, in total, approximately 7,750 student bed
spaces have been sold or have been marketed for sale so far in 2006. The
combined value of these transactions is around £360m, equating to an average
value per bed of over £46,000 and implying net initial yields well below 6%.
When the effect of stabilisation, which drives higher rental growth in the early
years of operation, is factored in this suggests stabilised yields of
approximately 6%. Notwithstanding the increased investment appetite for student
accommodation, there still remains a shortage of good quality, well located
property, which we expect to firmly underpin valuations moving forward.
Net asset value performance
The Group's net asset value at 30 June 2006 was £448m (365 pence per share). On
an adjusted, fully diluted basis, net asset value per share increased 15% to 416
pence from 363 pence at December 2005. The key components of the Group's strong
net asset value performance, including our share of joint venture companies,
were as follows:
• Taking into account top line rental growth and movements in our
operating cost base, net rental growth within the completed investment portfolio
contributed to capital growth of 1.4% or £15m;
• Yield compression across the investment portfolio delivered further
capital growth of £41m (3.8%). The average stabilised yield across the Group's
portfolio, now stands at 6.05%, compared to 6.32% at December 2005;
• Our development activity contributed £13m of net asset value growth
during the period.
Development activity
UNITE is very active in development, which continues to form a crucial element
of the Group's future growth plans. For the academic year 2006/07 the Group has
successfully completed, commissioned and opened 4,276 new bed spaces, of which
2,848 were delivered using the Group's unique modular build technology and 1,808
are operated within joint ventures. Modular technology again proved its value
to the Group in helping to ensure that projects were delivered on time and
within budget; cost, time and quality benefits continue to accrue to the Group.
We are committed to increasing the use of modular technology as a Group still
further and are investing to advance our capabilities in this area accordingly.
In November 2005, the Group raised £30m of new equity (net of issue costs) in
part to enable it to fund new development opportunities. Following this
fundraising, the Group has been very active in the acquisition marketplace and,
in total, has now secured opportunities comprising 8,656 beds for delivery in
2007, 2008 and beyond. We expect to deliver approximately 4,000 bed spaces for
the 2007/08 academic year and approximately 5,000 more for 2008/09. The
pipeline of further opportunities remains promising.
The evolution of the investment market for student accommodation will inevitably
filter into the development marketplace and we expect competition for sites to
increase. The Group's long track record, unrivalled in-house experience,
established reputation and modular capabilities will all help to ensure that
UNITE remains well positioned, although the increasing competition is likely to
constrain development margins in the near term.
Joint ventures
Our Capital Cities and Student Village joint ventures continue to perform well,
together contributing £6.5m to profit in the period. The increase in
contribution was primarily due to revaluation gains (net of deferred tax) of
£6.1m within the joint venture companies (2005: £0.4m).
Approximately 1,000 bed spaces per annum for 2007 and 2008 will be delivered
through the Group's 'Capital Cities' joint venture with GIC RE, in which the
Group has a 30% stake and for which it acts and receives fees as development
manager, asset manager and property manager. The joint venture was established
in March 2005 with a business plan to develop and operate a portfolio of 4,000
bed spaces in the capital cities of London and Edinburgh. The joint venture is
performing well and, based on the number of sites it has secured in recent
months subject to planning, the Group is on track to deliver this business plan.
Consequently we would expect the joint venture's capital to be fully allocated
by the end of 2006.
From this point onwards it is our intention that new projects in those cities
will be undertaken solely by UNITE - we anticipate continued development
opportunities in the medium term within the markets currently covered by the
joint venture and consider that best value will be attained for shareholders by
pursuing this strategy. This will increase the proportion of development profit
accruing solely to the Group from its development activities from 2007 onwards,
with a consequential impact on capital requirements.
Portfolio performance
In the first six months of the year UNITE managed 30,729 completed bed spaces
(2005: 26,913) and a further 4,276 are being opened for the 2006/07 academic
year. Rental income growth remains strong with total portfolio revenue
(including 100% of the joint venture companies) up by 28%, compared with the
first six months of last year. Adjusting for our share of joint venture
companies, portfolio revenues grew by 17% to £48.9m.
We continue to see competitor activity in a small number of well supplied
cities, which will constrain short term rental growth in these markets.
However, we remain confident that our strategy of investing in high quality
locations and customer service will deliver strong relative performance and long
term returns. We expect occupancy levels for the 2006/07 academic year of 92%.
This small drop in average occupancy is more than off-set by the improved
tenancy mix (5,156 12 month tenancies, up from 4,095 in 2005/2006) and the
expected like-for-like revenue growth of 6.5%, of which 3.7% relates to core
rental growth.
The Group's portfolio operating margin (defined as net rents after operating
costs expressed as a percentage of gross rents; for the full operational
portfolio including joint ventures and managed assets) was broadly flat at 65.0%
in first six months of the year as expected (2005:65.6%). This was achieved
despite the continuing impact of rising utility costs which were partially
offset by strong cost management elsewhere. Whilst some of the cost increases
will be recovered through rental increases for the 2006/07 academic year,
operating margins are not expected to grow in 2006.
Portfolio profit (UNITE's share of portfolio operating profit less attributable
interest charge) grew strongly, up 52% to £6.8m (2005: £4.5m), driven by the
benefits of UNITE's increasing scale, underlying rental growth and the
performance of our joint ventures, which contributed £0.9m to portfolio profit
(2005: £nil).
Development revenues
UNITE undertakes a number of non-rental activities, including the provision of
management, consultancy and modular construction services to its joint ventures
and the periodic disposal of certain non-core elements of development sites.
These activities make up the development revenues disclosed within the income
statement.
The number and value of non-core development assets sold in the period has
fallen compared with the high levels seen last year, which has resulted in a
significant drop in revenue to £5.6m in the six months from £19.1m in the same
period last year.
These activities, together with our pre-contract costs, contributed a loss of
£2.6m in the period (2005: £0.2m loss). Pre-contract development costs
increased 19% to £1.9m (2005: £1.6m), reflecting increased acquisition activity
in building our future development pipeline. This increased level of activity
is expected to continue for the rest of the year.
Our people
As UNITE continues to grow, develop its brand, open more new properties and
provide services to more customers, the focus we give to the attraction,
retention and development of talent becomes ever more important.
Our training, development and support infrastructure has been strengthened
during the period and we have continued to expand our management development
activity at all levels of the business. The importance of leadership
development and, in particular, values-based leadership remains in focus and
this was a key element in both our receipt of Investors in People accreditation
and being recognised as one of the UK's leading employers by The Guardian for
the second year running. Our values led approach has also helped build a
culture that supports our strategy and has resulted in employee retention and
stability well ahead of comparable sectors.
During 2006 we have concluded a major restructuring of our Hospitality Services
business, which is responsible for the ongoing management of our portfolio and
the service we provide to our customers. With the focus of this initiative very
much on improved service to our student customers, we have accordingly increased
the number of people in customer-facing, property based roles and reduced the
layers of supporting management. This has given the Group a truly scaleable
people platform and allowed us to provide 24/7 cover at all of our sites. The
restructuring has increased the level of on-site operating costs, which has been
reflected in the valuation of our assets. We are confident, however, that this
increased resource will positively impact long term rental growth and asset
values across the portfolio.
Financing and investment
During 2006, the Group's development and investment activities have been funded
from the proceeds of the Group's November 2005 share placing, from debt advanced
under its revolving development and investment financing facilities and through
its joint venture arrangements. In total, the Group funded £102m of capital
expenditure, including that financed through joint ventures, and its net debt
increased by £23m to £745m (excluding adjustments for the market value of
interest rate swaps). Adjusted gearing, defined as net debt as a percentage of
shareholders' funds excluding provisions for deferred tax and the market value
of interest rate swaps, reduced to 145% from 162% at December 2005, due
primarily to the strong upward revaluation of the Group's investment portfolio.
The Group has followed a consistent financing and investment strategy since
early 2004 and has successfully increased the diversity and flexibility of its
capital base as a result. This has included the sale of lower yielding assets
worth over £110m to investors with a more appropriate cost of capital and the
establishment of carefully defined joint ventures to increase development
activity in capital intensive situations; all of which has provided us with a
platform for a more substantial restructuring of our capital base and business
model.
As disclosed in our pre-close trading announcement in July, we are exploring the
establishment of a dedicated student accommodation fund that would acquire
substantially all of our completed, stabilised properties except those held as
security for the UNITE Finance One plc bond issue of 2002. UNITE would expect
to retain a substantial minority stake in such a fund, would also act and
receive fees as fund manager and property manager, as well as being entitled to
a performance-related incentive fee. The fund is expected to be sufficiently
capitalised such that it can acquire further stabilised properties from UNITE in
future years.
In anticipation of the successful establishment of this fund, we are taking
steps to restructure our debt facilities to ensure maximum financial advantage
is secured for the Group as and when the transaction is closed. This includes
the arrangement of a short term debt facility that will be used to prepay
certain existing borrowings and allow financial restructuring to proceed ahead
of the transaction.
The anticipated transaction would effectively shift the emphasis of the Group's
business model to that of a co-investing fund and asset manager and developer,
building on the success of its joint venture initiatives, and would release
capital for reinvestment. This would leave the Group well placed to capitalise
on further opportunities as the student accommodation market continues to
evolve.
Given the size of the potential transaction, we would anticipate a need to
obtain shareholder approval and expect to consult shareholders in this regard
before the end of this calendar year.
Dividend
In accordance with our stated policy, your Board recommends that the interim
dividend be maintained at 0.83 pence per share (2005: 0.83 pence). The dividend
becomes payable on 10 November 2006 to shareholders on the register at 13
October 2006.
Outlook
Customer demand for good quality, well located student accommodation remains
strong and UNITE is as well placed as ever to meet this need. With occupier
demand firmly established, the consistent low risk rental growth profile of the
asset class is helping to demonstrate the investment credentials of the sector.
UNITE is a strong advocate of this evolution and continues to drive investment
into the sector.
From a development perspective, it is not surprising that we are seeing
increased competition in our market. However, the Group's track record,
expertise and reputation, coupled with a consistent focus on customer
experience, mean that it is well placed to benefit from the development of its
sector and build on its market-leading position.
Consolidated income statement
For the 6 months to 30 June 2006
Note Unaudited Unaudited
6 months to 6 months to Year to
30 June 2006 30 June 2005 31 Dec 2005
£'000 £'000 £'000
Revenue 3 55,047 60,904 113,799
Cost of sales (22,841) (29,761) (54,864)
Administrative expenses (9,731) (8,712) (15,671)
Profit on disposal of property 200 402 2,534
Net valuation gains on investment property 6 49,004 10,550 23,377
Net operating profit before net financing 71,679 33,383 69,175
costs
Loan interest & similar charges (21,393) (22,190) (44,212)
Change in fair value of ineffective hedges 4,135 (2,829) (4,317)
Finance costs (17,258) (25,019) (48,529)
Finance income 541 973 1,541
Net financing costs (16,717) (24,046) (46,988)
Share of joint venture profit 8 6,535 365 5,944
Profit before tax 61,497 9,702 28,131
Tax (expense)/ credit 4 (11,156) 606 4,179
Profit for the period 50,341 10,308 32,310
Profit for the period is wholly attributable to equity holders of The UNITE Group plc.
Earnings per share
Basic 5 41.2p 9.3p 28.7p
Diluted 5 40.8p 9.1p 28.3p
Dividends
Total paid in period 2,040 1,861 2,787
Paid per ordinary share 1.67p 1.67p 2.5p
Total proposed 1,018 925 2,033
Proposed per ordinary share 0.83p 0.83p 1.67p
Consolidated balance sheet
At 30 June 2006
Note Unaudited Unaudited
30 June 2006 30 June 2005 31 Dec 2005
£'000 £'000 £'000
Assets
Investment property 6 1,079,157 952,428 1,028,747
Investment property under 7 121,967 169,818 80,004
development
Property, plant and equipment 9,643 15,560 19,303
Investment in joint ventures 8 32,023 9,195 18,861
Intangible assets 5,860 4,619 5,465
Other receivables 7,386 6,579 8,618
Total non-current assets 1,256,036 1,158,199 1,160,998
Inventories 26,321 8,618 13,418
Trade and other receivables 29,916 26,277 66,011
Cash and cash equivalents 32,851 36,728 30,297
Total current assets 89,088 71,623 109,726
Total assets 1,345,124 1,229,822 1,270,724
Liabilities
Borrowings and financial 9 (121,910) (127,816) (124,541)
derivatives
Trade and other payables (54,589) (63,587) (73,559)
Total current liabilities (176,499) (191,403) (198,100)
Borrowings and financial 9 (659,293) (672,487) (644,671)
derivatives
Deferred tax liabilities (61,287) (45,476) (45,255)
Total non-current liabilities (720,580) (717,963) (689,926)
Total liabilities (897,079) (909,366) (888,026)
Net Assets 448,045 320,456 382,698
Equity
Issued share capital 30,648 27,871 30,435
Share premium 172,130 141,560 169,957
Merger reserve 40,177 40,177 40,177
Retained earnings 179,528 99,489 129,508
Revaluation reserve 23,192 17,590 17,531
Hedging reserve 2,370 (6,231) (4,910)
Total equity 448,045 320,456 382,698
Total equity is wholly attributable to equity holders of The UNITE Group plc.
Consolidated statement of changes in shareholders' equity
For the 6 months to 30 June 2006
Note Unaudited Unaudited
6 months to 6 months to Year to
30 June 2006 30 June 2005 31 Dec 2005
£'000 £'000 £'000
Investment property under development: - revaluation 7 8,130 811 6,208
- deferred tax (2,439) (243) (1,843)
Other property - revaluation (580) - 3,933
- deferred tax 174 - (1,180)
Effective hedges - movements 8,497 (5,973) (4,212)
- deferred tax (2,549) 1,792 1,264
Share of joint venture valuation gain (net of related tax) 8 4,009 794 2,898
Share of joint venture movements in effective hedges 8
(net of related tax) 1,314 (933) (845)
Net (losses) / gains recognised directly in equity 16,556 (3,752) 6,223
Profit for the period 50,341 10,308 32,310
Total recognised income and expense for the period 66,897 6,556 38,533
Dividends paid (2,040) (1,861) (2,787)
Own shares acquired (2,130) - -
Shares issued 2,386 282 31,243
Fair value of share options expensed 234 213 443
65,347 5,190 67,432
Equity at start of period 382,698 321,809 321,809
Recognition of hedges under IAS39 at 1 January 2006 - (6,543) (6,543)
Equity at end of period 448,045 320,456 382,698
Consolidated statement of cash flows
For the 6 months to 30 June 2006
Unaudited Unaudited
6 months to 6 months to Year to
30 June 2006 30 June 2005 31 Dec 2005
£'000 £'000 £'000
Operating activities
Profit for the period 50,341 10,308 32,310
Adjustments for non cash / non operating items (26,562) 13,595 13,883
Operating profit before changes in working capital 23,779 23,903 46,193
Changes in working capital 934 251 (20,992)
Cash flows from operating activities 24,713 24,154 25,201
Cash flows from investing activities (21,275) (7,540) 13,322
Cash flows from financing activities 797 (19,464) (47,102)
Net increase / (decrease) in cash and cash equivalents 4,235 (2,850) (8,579)
Cash and cash equivalents at start of period 19,917 28,496 28,496
Cash and cash equivalents at end of period 24,152 25,646 19,917
Cash and cash equivalents are stated net of operational overdrafts which are disclosed in note 9.
Notes to the consolidated interim financial statements
1. Basis of preparation
The UNITE Group plc (the 'Company') is a company domiciled in The United Kingdom. These condensed
consolidated interim financial statements for the 6 months ended 30 June 2006 comprise the Company and its
subsidiaries (together referred to as the 'Group') and the Group's interests in its joint ventures.
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34
Interim Financial Reporting and on the basis of the accounting policies disclosed in the financial statements
for the year ending 31 December 2005. They do not include all of the information required for full annual
financial statements and should be read in conjunction with the consolidated financial statements of the
Group as at and for the year ended 31 December 2005.
2. Seasonality of operations
The results of the Group's investment division, a separate business segment (see note 3), 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. The Group attempts to
minimise the seasonal impact by encouraging the take up of 52 week tenancies, however, the second half-year
typically has lower revenues for the existing portfolio.
Conversely, the Group's build cycle for new investment property is planned to complete construction shortly
before the start of the academic year in September each year. The addition of these properties to the
investment division in the second half increases the division's revenues in the second half of the year.
3. Segment reporting
Segment information is presented in respect of the Group's business segments based on the Group's
management and internal reporting structure. The Directors do not consider that the Group has
meaningful geographical segments as it operated exclusively in the United Kingdom in the year.
Segment results include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis.
The Group comprises the following main business segments:
• Investment (the management and holding of investment property)
• Development (construction of investment property, primarily for the Investment business segment).
Unaudited Unaudited
30 June 2006 30 June 2005 31 Dec 2005
£'000 £'000 £'000
Segment revenue
Investment 49,474 41,820 81,677
Development 5,573 19,084 32,122
Total revenue 55,047 60,904 113,799
Segment results
Investment 28,164 25,765 47,676
Development (2,698) (240) 1,094
Unallocated - corporate costs (2,461) (2,611) (5,012)
- other 27,336 (12,606) (11,448)
Profit for the period 50,341 10,308 32,310
Notes to the consolidated interim financial statements
3. Segment reporting (continued)
Portfolio profit is calculated as follows:
Investment segment result 28,164 25,765 47,676
Net financing costs (16,717) (24,046) (46,988)
Add back: changes in fair value of ineffective hedges (4,135) 2,829 4,317
Ineffective swap payments (987) (101) (1,069)
Share of joint ventures 513 62 392
6,838 4,509 4,328
4. Tax
Current Tax
Current tax expense for the interim periods presented is the expected tax payable on the taxable
income for the period, calculated as the estimated average annual effective income tax rate (nil for
all periods due to the effect of tax losses) applied to the pre-tax income of the interim period.
Deferred tax
The amount of deferred tax provided is based on the expected manner of realisation or settlement of
the carrying amount of assets and liabilities, using the estimated average annual effective income
tax rate for the interim periods presented.
The primary components of the deferred tax expense are related to increases in deferred tax
liabilities, arising primarily from the group's investment property and interest rate swaps.
5. Earnings per share and net asset value per share
Earnings per share
The calculations of basic and adjusted earnings per share are as follows:-
Unaudited Unaudited
30 June 2006 30 June 2005 31 Dec 2005
£'000 £'000 £'000
Earnings
Basic (and diluted) 50,341 10,308 32,310
Adjustments:
Net valuation gains on investment property (inc.
share of joint ventures) (55,874) (10,946) (29,599)
Movements in ineffective hedges (4,135) 2,829 4,317
Deferred tax (inc. share of joint ventures) 11,960 (606) (3,646)
Adjusted 2,292 1,585 3,382
Weighted Average number of shares (thousands)
Basic 122,170 111,416 112,633
Dilutive potential ordinary shares 1,325 1,552 1,526
Diluted 123,495 112,968 114,159
Earnings per share (pence)
Basic 41.2 9.3 28.7
Diluted 40.8 9.1 28.3
Adjusted 1.9 1.4 3.0
Notes to the consolidated interim financial statements
5. Earnings per share and net asset value per share (continued)
Net asset value per share
The calculations of basic, diluted and adjusted net asset value per share are as follows:-
Unaudited Unaudited
30 June 2006 30 June 2005 31 Dec 2005
£'000 £'000 £'000
Net assets
Basic 448,045 320,456 382,698
Mark to market of interest rate swaps (inc share of joint 2,518 19,033 17,687
ventures)
Deferred tax (inc joint ventures) 64,698 45,731 46,575
Adjusted - pre dilution 515,261 385,220 446,960
Outstanding share options 4,714 6,233 5,458
Adjusted - diluted 519,975 391,453 452,418
Number of shares (thousands)
Basic 122,591 111,484 121,470
Outstanding share options 2,383 3,580 2,895
Diluted 124,974 115,064 124,365
Net assets value per share (pence)
Basic 365 287 314
Adjusted - pre dilution 420 346 367
Adjusted - diluted 416 340 363
6. Investment property
Unaudited Unaudited
30 June 2006 30 June 2005 31 Dec 2005
£'000 £'000 £'000
Balance at start of period 1,028,747 991,460 991,460
Acquisitions 713 450 1,102
Transfer from investment property under development - - 120,723
Transfer from property, plant and equipment 693 - -
Disposals - (50,032) (107,915)
Valuation gains 67,117 22,191 43,357
Valuation losses (18,113) (11,641) (19,980)
Balance at end of period 1,079,157 952,428 1,028,747
The carrying amount of investment property is the fair value of the property as determined by CB
Richard Ellis Ltd and Messrs King Sturge, Chartered Surveyors as external valuers.
Notes to the consolidated interim financial statements
7. Investment property under development
Unaudited Unaudited
30 June 2006 30 June 2005 31 Dec 2005
£'000 £'000 £'000
Balance at start of period 80,004 119,732 119,732
Cost capitalised 31,333 56,229 99,507
Interest capitalised 2,500 5,001 10,728
Disposals - (11,955) (35,448)
Transfer to investment property - - (120,723)
Valuation gains 11,437 6,540 9,497
Valuation losses (3,307) (5,729) (3,289)
Balance at end of period 121,967 169,818 80,004
The carrying amount of investment property under development is the fair value of the property as
determined by CB Richard Ellis Ltd and Messrs King Sturge, Chartered Surveyors as external valuers.
8. Investments in joint ventures
Unaudited Unaudited
30 June 2006 30 June 2005 31 Dec 2005
£'000 £'000 £'000
Share of profit
- net valuation gains 6,870 396 6,222
- deferred tax (804) (533)
- other 469 (31) 255
6,535 365 5,944
Share of items recognised directly in reserves:
- Valuation gains (net of deferred tax) 4,009 794 2,898
- Movements in effective hedges (net of deferred 1,314 (933) (845)
tax)
Other movements:
Additions 1,398 8,152 10,047
Distributions received (94) - -
13,162 8,378 18,044
At start of period 18,861 817 817
At end of period 32,023 9,195 18,861
9. Borrowings and financial derivatives
Unaudited Unaudited
30 June 2006 30 June 2005 31 Dec 2005
£'000 £'000 £'000
Non-current
Bank and other loans 652,988 650,866 624,450
Finance lease liabilities 247 594 474
Interest rate swaps 6,058 21,027 19,747
659,293 672,487 644,671
Current
Overdrafts 8,699 11,082 10,380
Bank loans 9,707 12,864 61,185
Build loans 103,095 103,495 52,601
Finance lease liabilities 409 375 375
121,910 127,816 124,541
Independent review report to The UNITE Group plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2006, which comprises the group income statement,
the group balance sheet, the group statement of changes in shareholders' equity,
the group statement of cash flows and the related notes. We have read the other
information contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the financial
information.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the company those matters we are required to state to it
in this 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 reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the UK. A review consists
principally of making enquiries of group management and applying analytical
procedures to the financial information and underlying financial data and, based
thereon, assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with International Statements on Auditing (UK and Ireland) and
therefore provides a lower level of assurance than an audit. Accordingly, we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2006.
KPMG Audit Plc
Chartered Accountants
London
14 September 2006
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