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Unite profit jumps, launches placing to fund two projects
FTSE 250 student accommodation provider Unite Group posted a jump in full-year profit as it announced plans for a placing of up to 22.2m new shares to raise around £170m to fund two university projects.
In the year to the end of December 2017, pre-tax profit increased to £229.4m from £201.4m, while EPRA earnings were up 12% to £70.5m and the dividend per share was lifted 26% to 22.7p.
The company said earnings growth was underpinned by nomination agreements, the development pipeline and improved margins.
Chief executive Richard Smith said: "I am pleased to report on another successful year for Unite. Our continuing focus is to deliver sustainable growth in our recurring earnings and cash flows. Our strong results are underpinned by our brand, our sector leading operating system, our deep and valuable University relationships and sector fundamentals. These factors combine in our purpose, to provide all students who live with us a home for success.
"We continue to align our high-quality portfolio to the strongest Universities in the UK where student demand is at its strongest. During the year, we made significant progress with our university partnerships and further increased the proportion of our beds secured under nomination agreements to 60%. This, alongside our development pipeline, is a key driver of continued growth and forward visibility of our earnings."
Unite said that reservations for the 2018/19 academic year at a record levels for this time of year, supporting its rental growth guidance of 3% to 3.5% on a like-for-like basis.
The group also said on Wednesday that it plans to place around 9.2% of its existing issued ordinary share capital through an accelerated bookbuilding process to fund two university partnership transactions.
The first is an 887 bed development scheme in partnership with Oxford Brookes University with a 25 year nomination agreement, requiring around £73m of capital expenditure. The second is a 1,000 bed development scheme in Middlesex Street, London E1, which is being supported through planning by Kings College London, requiring around £195m of capital expenditure.
Unite said the placing will enable it to retain 100% ownership of its pipeline of university partnership opportunities to optimise its earnings growth and to re-enter the London development market while maintaining balance sheet strength.
Overall returns from these two partnership transactions, taking into account the equity issuance, are expected to be accretive to net asset value immediately and to earnings per share from 2020 and beyond.
At 0845 GMT, the shares were down 1% to 772.50p.