Interim Results
Unite Group PLC
09 September 2003
Date: 9 September 2003
On behalf of: The UNITE Group plc ('UNITE')
Embargoed until: 0700hrs
The UNITE Group plc
INTERIM RESULTS 2003
The UNITE Group plc, the UK's leading provider of student and NHS key worker
accommodation services, today announced its interim results for the six months
ended 30 June 2003. The highlights were:
• Net assets of £312 million (290 pence per share) +44%
(June 2002: £217 million)
• Strong growth in rental income to £23.3 million in the first half +55%
(June 2002: £15.0 million)
• 3,848 beds secured for development during the first half bringing the total to +15%
30,194: (December 2002: 26,346)
• 6,437 beds completing in Autumn 2003, bringing total completed portfolio to +44%
1,215 (September 2002: 14,778)
• Profit on the investment portfolio after interest and before tax of £3.5 million +£4.3m
(June 2002: £(0.8) million loss)
• Reduced loss on ordinary activities before tax, exceptional items and goodwill +57%
amortisation of £(2.1) million (June 2002: loss of £(4.9) million)
• 92.5 % of available beds booked for the forthcoming academic year 2003/2004 +4.3%
(September 2002: 88.7%)
Commenting on the interim results, Geoffrey Maddrell, Chairman of UNITE, said:
'The first six months of the year have seen UNITE focus on its strategic plan,
with good progress over all elements of the business. By concentrating on high
quality developments in towns and cities where student demand is strong,
combined with good progress on our customer service offer, the financial
performance of UNITE has improved in the half. '
Enquiries to:
UNITE Group plc
Nicholas Porter, Chief Executive Officer Tel: 020 7902 5055
Simon Bernstein, Chief Financial Officer
Redleaf Communications Ltd Tel: 020 7955 1410
Emma Kane Mob: 07876 338339
INTERIMS 2003
Chairman's Statement
UNITE is the UK's leading provider of student and NHS key worker accommodation
services. We have set out to achieve real growth in our portfolio of assets and
in rental income by providing a unique value proposition in the growing and
under-supplied student accommodation market.
Our stated strategy is based on a framework of three operating divisions,
Accommodation Services, Development and Manufacturing, whose individual scale
brings each of them benefits, whilst together they add incremental value in
consolidating UNITE's leading position in the sector.
Our aim is to achieve the highest standards of service for our customers, to
offer a stimulating working environment for our UNITE team and, for the
business, to deliver real shareholder value in this exciting sector.
Our performance in the first half of 2003 demonstrates continued achievement in
line with our strategy.
• Net assets of £312 million (290 pence per share) + 44%
(June 2002: £217 million)
• Strong growth in rental income to £23.3 million in the first half +55%
(June 2002: £15.0 million)
• 3,848 beds secured for development during the first half bringing the total to 30,194: + 15%
(December 2002: 26,346)
• 6,437 beds completing in Autumn 2003, bringing total completed portfolio to 21,215 +44%
(September 2002: 14,778)
• Profit on the investment portfolio after interest and before tax of £3.5 million +£4.3m
(June 2002: £(0.8) million loss)
• Reduced loss on ordinary activities before tax, exceptional items and goodwill +57%
amortisation of £(2.1) million (June 2002: loss of £(4.9) million)
• 92.5 % of available beds booked for the forthcoming academic year 2003/2004 +4.3%
(September 2002: 88.7%)
Financial Review
Capital expenditure on site acquisitions and on construction totalled £99
million. This, together with the £8.3 million net asset value added in relation
to developments, increased the gross value of our property assets by 15% to £816
million, compared to the position as at December 2002. Net assets have increased
from £308 million at the end of 2002 to £312 million and on a per share basis
have increased to 290 pence (December 2002: 286 pence).
The total loss in the first half was reduced to £3.5 million (compared to a loss
of £18.7 million for the first half of 2002). The profit on the investment
portfolio after interest and before tax was £3.5 million, compared to £(0.8)
million loss in the first half of 2002, reflecting the increased contribution of
the completed portfolio and reduced overheads as reported in March. Pre-contract
costs charged to the profit and loss account amounted to £2.2 million (June
2002: £2.8 million). These costs are incurred to generate future net asset
value uplift, which will be credited to the revaluation reserve. Non-recurring
costs of £1.9 million (2002: £1.4 million) relate to manufacturing (£1.2
million), property disposals of (£0.3 million) and the redundancy of an
executive director.
The goodwill amortisation charged in the first half reflects the net asset value
uplift recognised on schemes in the pipelines of acquired businesses (Unilodge
and Peabody UNITE). This amortisation will increase in the second half as more
uplift is recognised on these schemes.
On completion, our current secured schemes are expected to have a gross value of
some £1.2 billion. In line with our capital recycling strategy and substantial
growth in the portfolio of completed properties, gearing increased to 157% (60%
loan to value) compared with 133% at the end of last year. We have secured an
additional £165 million of development debt facilities and £70 million of
additional warehousing facilities enabling us to refinance all of our assets
completing this year. As a result, debt facilities available to the Group now
total £927 million.
Dividend
The Board is pleased to recommend that, in line with the dividend policy
announced in June 2002, the interim dividend be maintained at 0.83 pence per
share.
Key dates relating to the interim dividend:
Ex dividend date 15 October 2003
Record date 17 October 2003
Payment date 14 November 2003
Operational Review
Accommodation Services Division
The Accommodation Services team was responsible for the management of some
14,778 beds in the first half. A further 6,437 will be added in the second half
as new beds come on stream at the start of the new academic year. UNITE operates
in 31 cities across the UK. As the premier provider, the division undertakes all
aspects of property management based upon a retail service model. During the
first half of 2003 the benefits of this strategy have emerged with significant
improvements in margins and rental income. The net margin on the portfolio has
improved to 63% compared with 53% in the first half of last year. The division
has also achieved further progress in the efficiency of its core operational
processes and infrastructure, particularly its 24-hour service centre, training
and maintenance activities.
Due to the significant increase in scale and rental income, together with
improved efficiencies, profit on the portfolio before interest and taxation rose
by 85% to £14.6 million (2002: £7.9 million). Interest cover on the completed
portfolio was 1.3 times (against, for instance, our securitisation covenant of
1.2 times). As a result, the portfolio generated a profit of £3.5 million after
interest and before tax (2002: £0.8 million loss).
Accommodation Services has seen growth in the demand for its services, supported
by regional marketing and sales campaigns. Enquiries through the customer
service centre, website and on-site show flats average around 7,000 per month.
92.5% of the portfolio is now reserved for the 2003/04 academic year (September
2002: 88.7%).
In the period to 30 June 2003 new relationships have been forged with one NHS
Trust and ten higher education partners including University of Bristol,
University of Leeds and the London School of Economics.
Market research is helping Accommodation Services to learn more about the needs
of our customers. We have gained insight into the services that customers
particularly value, such as a fitness room, quiet study area and coffee shop.
In making urban living exciting and affordable for students, these new
facilities are set to enhance our offering at larger schemes. They will be
available for the first time at Grand Central (Liverpool), UNITE's newest and
largest student village which will be home to 1,185 students on completion.
Development Division
Our five regional development teams have responsibility for securing student
accommodation sites in UNITE's target towns. Good locations coupled with strong
financial returns are the imperative criteria for our acquisitions. During the
period to 30 June 2003, 3,848 new beds were secured for development bringing
UNITE's total portfolio to 30,194. We are particularly pleased to announce major
planning successes in the first half, including consents for schemes in Bristol,
Southampton, Plymouth, Birmingham, Bath and Cardiff.
As a result of the planning consents achieved in the first half, net asset value
added on development projects in the period was £8.3 million. As of the end of
June, we estimate that we have £98 million of unrecognised development profits
from our secured pipeline of 30,194 beds, assuming that the out-turn in relation
to planning, build prices and end rental values is in line with current
estimates. This would increase net asset value per share to 375 pence. The
development margins on the 3,848 beds secured in the first half are in line with
our target development profit.
This Autumn many more schemes will be completed than last year, a total of 6,437
beds across 12 cities. These will contribute to the delivery of strong net asset
value growth in the second half. Construction work continues on the pipeline of
schemes for 2004, bringing added scale to many of our target towns. Delivery of
all new schemes by the Development Division is scheduled for the second half of
our financial year, to coincide with the start of the academic year.
Our scale makes UNITE a significant construction procurer, with an annual spend
approaching £200 million per annum. We have developed close partnerships and
working agreements with eight building contractors, which are adding major
benefits in supply chain management, in predicting outcomes on project costs,
quality and time scales and also in facilitating the sharing of knowledge
concerning modular building techniques within the partner network.
Manufacturing Division
Modular prefabrication allows improved control over the construction process, to
manage build cost, speed and quality. In the first half of this ramp-up year of
UNITE's automated modular manufacturing plant, over 300 modular bedrooms were
produced and production is set to increase significantly in the second half.
The factory's output is currently exclusively used for UNITE schemes. Since all
of its sales are internal, no profits will be recognised in relation to factory
production (the costs of which will be included as any other construction cost
in the value of the asset). However, in the first half of 2003, as production
commenced in accordance with our ramp-up plan, there was an under-recovery of
overheads of £1.2 million due to the relatively low production volumes, which is
expensed through the Profit and Loss account. Our production plans currently
indicate that overheads will be fully recovered in the second half.
UNITE Team
To support the growth of the business, development and training continues to be
a major priority, with particular emphasis on leadership training. Twelve
training programmes have been rolled out, eight of which were designed and
delivered in-house.
Particular focus on the Accommodation Services division has enabled an increase
in the skill levels of its area managers, who now have responsibility for sales,
marketing and customer service across a regional network of properties.
116 new starters joined UNITE in the period bringing headcount to 444 (December
2002: 374).
Outlook
The first six months of the year have seen UNITE focus on its strategic plan,
with good progress over all elements of the business. By concentrating on high
quality developments in towns and cities where student demand is strong,
combined with good progress on our customer service offer, the financial
performance of UNITE has improved in the half.
Against a backdrop of continued commitment by the Government to increasing the
proportion of adults with access to higher education, it is clear that the
market for high quality, affordable accommodation will continue to grow. UNITE
is uniquely placed to capitalise on this opportunity and, through satisfying the
needs of a growing and demanding student population, deliver growth in value to
our shareholders.
Geoffrey Maddrell
Chairman
9 September 2003
Our investor presentation is available on our website: www.unite-group.co.uk
Consolidated balance sheet
at 30 June 2003
Unaudited Unaudited Audited
30 June 2003 30 June 2002 31 Dec 2002
Note £'000 £'000 £'000
Fixed assets
Intangible assets 9,335 13,174 10,710
Tangible assets
Investment and development properties 2 815,625 545,541 709,595
Other fixed assets 21,666 17,680 21,713
837,291 563,221 731,308
Current assets
Stock and work in progress 1,836 1,606 1,551
Debtors 16,816 22,923 18,509
Cash at bank and in hand 7,109 6,302 10,258
25,761 30,831 30,318
Creditors: amounts falling due within one year 3 (199,205) (105,362) (115,785)
Net current liabilities (173,444) (74,531) (85,467)
Total assets less current liabilities 673,182 501,864 656,551
Creditors: amounts falling due after more than one year 4 (361,180) (284,572) (348,433)
Provisions for liabilities and charges - - -
Net assets 312,002 217,292 308,118
Capital and Reserves
Called up share capital 26,901 18,687 26,901
Share premium account 136,233 89,425 136,233
Merger reserve 40,177 40,177 40,177
Revaluation reserve 142,563 93,753 135,654
Profit and loss account (33,872) (24,750) (30,847)
Equity shareholders' funds 312,002 217,292 308,118
Net asset value per share 290p 291p 286p
Consolidated profit and loss account
for the six months to 30 June 2003
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 2003 30 June 2002 31 Dec 2002
Note £'000 £'000 £'000
Group turnover and share of joint venture 23,300 16,377 33,872
Less: share of turnover of joint venture - (414) (999)
Group turnover 23,300 15,963 32,873
Cost of sales (5,447) (4,766) (8,388)
Gross profit 17,853 11,197 24,485
Administrative expenses - ordinary (8,618) (8,526) (16,583)
- exceptional - (1,303) (1,303)
Goodwill amortisation (1,375) (2,793) (5,472)
Group operating profit/(loss) 7,860 (1,425) 1,127
Share of results of joint venture - 292 299
(Loss)/profit on disposal of investment properties (268) 470 461
Profit/(Loss) on ordinary activities before interest 5 7,592 (663) 1,887
and taxation
Net interest payable and similar charges - group - ordinary 6 (11,096) (8,132) (17,567)
- exceptional (9,705) (9,744)
- joint venture - (249) (211)
Loss on ordinary activities before taxation,
exceptional items
and goodwill amortisation (2,129) (4,948) (9,116)
Loss on ordinary activities before taxation (3,504) (18,749) (25,635)
Taxation 7 - - -
Loss on ordinary activities after taxation (3,504) (18,749) (25,635)
Dividends paid and proposed (894) (897) (2,685)
Retained loss for the financial period (4,398) (19,646) (28,320)
Loss per share 8
Basic 3.26p 25.85p 30.02p
Excluding goodwill amortisation and exceptional items 1.98p 6.82p 10.67p
Diluted 3.26p 25.85p 30.02p
Statement of total recognised gains and losses
for the six months to 30 June 2003
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 2003 30 June 2002 31 Dec 2002
£'000 £'000 £'000
Loss for the financial period (3,504) (18,749) (25,635)
Unrealised surplus on revaluation of properties 8,282 15,424 59,732
Unrealised surplus on revaluation of joint venture - - 221
Unrealised profit on trading with joint venture - 18 (33)
Total recognised gains and losses relating to the 4,778 (3,307) 34,285
period
Prior year adjustment - (5,812) (5,812)
Total gains and losses recognised 4,778 (9,119) 28,473
Consolidated cash flow statement
for the six months to 30 June 2003
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 2003 30 June 2002 31 Dec 2002
£'000 £'000 £'000
Cash flow from operating activities 9,572 5,659 5,987
Returns on investments and servicing of finance (15,710) (15,113) (28,323)
Taxation - - -
Capital expenditure and financial investment (72,077) (92,135) (193,187)
Acquisitions and disposals - (1,518) (1,210)
Equity dividends paid (1,793) (1,231) (2,131)
Cash outflow before management of liquid resources and
financing (80,008) (104,338) (218,864)
Financing
Issue of shares (net of costs) - 2 55,024
Increase in debt 76,859 104,654 168,114
76,859 104,656 223,138
(Decrease)/increase in cash in the period (3,149) 318 4,274
Reconciliation of net cash flow to movement in net debt
for the six months to 30 June 2003
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 2003 30 June 2002 31 Dec 2002
£'000 £'000 £'000
(Decrease)/increase in cash in the period (3,149) 318 4,274
Cash inflows from increase in debt financing (76,859) (104,654) (168,114)
Loans acquired with subsidiaries - (55,039) (54,807)
New hire purchase contracts - (27) -
Amortisation of debt issue costs (599) (60) (3,039)
Movement in net debt in the period (80,607) (159,462) (221,686)
Net debt at beginning of the period (409,987) (188,301) (188,301)
Net debt at end of the period (490,594) (347,763) (409,987)
Note of consolidated historical cost profits and losses
for the six months to 30 June 2003
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 2003 30 June 2002 31 Dec 2002
£'000 £'000 £'000
Reported loss on ordinary activities before taxation (3,504) (18,749) (25,635)
Realisation of property revaluation gains of previous
years 73 487 514
Historical cost loss on ordinary activities before
taxation (3,431) (18,262) (25,121)
Historical cost loss for the year retained
after taxation and dividends (4,325) (19,159) (27,806)
Reconciliation of movement in shareholders' funds
for the six months to 30 June 2003
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 2003 30 June 2002 31 Dec 2002
£'000 £'000 £'000
Loss attributable to ordinary shareholders (3,504) (18,749) (25,635)
Dividends paid and proposed (894) (897) (2,685)
(4,398) (19,646) (28,320)
Net surplus on revaluations 8,282 15,442 59,920
New share capital subscribed (net of issue costs) - 19,438 74,460
Net addition to shareholders' funds 3,884 15,234 106,060
Opening equity shareholders' funds (as restated) 308,118 202,058 202,058
Closing equity shareholders' funds 312,002 217,292 308,118
Notes to the Interim Report
1 Basis of preparation
The interim results of the group for the six months ended 30 June 2003
incorporate the results of the company and its subsidiary undertakings for the
period then ended. The results have been prepared on the basis of the
accounting policies adopted in the accounts of the group for the year ended 31
December 2002.
The comparative figures for the financial year ended 31 December 2002 are not
the company's statutory accounts for that financial year. Those accounts have
been reported on by the company's auditors and delivered to the registrar of
companies. The report of the auditors was unqualified and did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.
2 Investment and development properties
Properties
Completed Developments in Held for future
developments progress development Total
£'000 £'000 £'000 £'000
Cost or valuation
At 1 January 2003 541,824 143,315 24,457 709,596
Additions 2,222 72,270 24,038 98,530
Transfers - 18,185 (18,185) -
Disposals - - (783) (783)
Revaluations (458) 3,296 5,444 8,282
At 30 June 2003 543,588 237,066 34,971 815,625
At 30 June 2002 386,710 127,271 31,560 545,541
At 31 December 2002 541,824 143,315 24,456 709,595
3 Creditors: amounts falling due within one year
Unaudited Audited
Unaudited 30 June 2002 31 Dec 2002
30 June 2003 £'000 £'000
£'000
Build loans and other short term 139,029 71,398 74,359
financing
Other creditors 60,176 33,964 41,426
199,205 105,362 115,785
4 Creditors: amounts falling due after more than one year
Unaudited Audited
Unaudited 30 June 2002 31 Dec 2002
30 June 2003 £'000 £'000
£'000
Long term borrowings 358,674 282,036 345,886
Other creditors 2,506 2,536 2,547
361,180 284,572 348,433
5 Analysis of operations
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 2003 30 June 2002 31 Dec 2002
£'000 £'000 £'000
Turnover
Investment activities 23,300 14,143 31,356
Development activities - 1,820 1,517
Corporate activities - - -
23,300 15,963 32,873
Profit before interest and tax
Investment activities 14,633 7,596 18,736
Development activities - ordinary (3,401) (2,588) (6,000)
- exceptional - - (1,303)
Corporate costs (1,997) (2,022) (4,535)
(Loss)/profit on disposal of investment
properties (268) 470 461
Goodwill amortisation (1,375) (2,793) (5,472)
7,592 (663) 1,887
Included in the development loss for the period to 30 June 2003 is the loss
relating to the under recovery of manufacturing overheads (£1,188,000), which is
not expected to recur.
Included in corporate costs for the period are non recurring costs relating to
the redundancy of an Executive Director (£465,000).
Portfolio profit is arrived at by deducting net interest payable from the profit
before interest and tax on investment activities.
6 Interest
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 2003 30 June 2002 31 Dec 2002
£'000 £'000 £'000
Bank loans and overdrafts 7,599 4,797 11,179
Interest on other loans 9,757 4,718 14,380
17,356 9,515 25,559
Transfer to development properties (5,926) (1,217) (7,411)
11,430 8,298 18,148
Less: interest receivable (334) (166) (581)
Net interest payable 11,096 8,132 17,567
7 Taxation
There is no corporation tax or deferred taxation charge in the period due to the
availability of capital allowances and tax losses to offset both the taxable
profits accrued in the period and deferred tax assets and liabilities arising
from timing differences between the recognition of gains and losses in the
financial statements and their recognition in the tax computations.
8 Earnings per Share
Basic earnings per share has been calculated using a weighted average number of
shares of 107,604,772 (2002 interims - 72,531,971; 2002 final - 85,398,488) as
follows:
Earnings EPS
After goodwill Before goodwill After goodwill Before goodwill
amortisation amortisation amortisation amortisation
£'000 £'000 pence pence
Period ended 30 June 2003
Basic earnings (3,504) (2,129) (3.26) (1.98)
Period ended 30 June 2002
Basic earnings (18,749) (15,956) (25.85) (22.00)
Bond issue - loan cancellation costs 9,705 9,705 13.38 13.38
PPP bid costs written off 1,303 1,303 1.80 1.80
Prior to exceptional costs (7,741) (4,948) (10.67) (6.82)
Year ended 31 December 2002
Basic earnings (25,635) (20,163) (30.02) (23.61)
Bond issue - loan cancellation costs 9,744 9,744 11.41 11.41
PPP bid costs written off 1,303 1,303 1.53 1.53
Prior to exceptional costs (14,588) (9,116) (17.08) (10.67)
The share options and convertible loan stock in issue during 2002 and 2003 do
not give rise to any dilutive potential ordinary shares and therefore the basic
and diluted loss per share are the same.
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