Last checked at 26 Aug 2010 07:00
26 August 2010
THE UNITE GROUP PLC
("UNITE" / "Group" / the "Company")
HALF YEAR RESULTS FOR THE SIX MONTHS TO 30 JUNE 2010
UNITE REPORTS GOOD PROGRESS AGAINST STRATEGIC OBJECTIVES
- Solid growth in NAV and recurring profits -
The UNITE Group plc, the UK's leading developer and manager of student accommodation, today announces its half year results for the six months ended 30 June 2010.
FINANCIAL HIGHLIGHTS:
·; Adjusted fully diluted NAV per share up 8% to 286 pence (31 December 2009: 265 pence)
·; Profit at a net portfolio contribution level increased by 11% to £4.2m (30 June 2009: £3.8m), driven by rental growth achieved in 2009/10 and an increase in the number of beds under management
·; The value of the Group's stabilised property portfolio grew by 3.8%, driven by 2.3% rental growth and 1.5% from yield compression, delivering £27.7m of net valuation uplift
- A further £9.7m of net valuation uplift relating to properties under construction has been recognised in adjusted net asset value
·; IFRS profit of £9.8m (30 June 2008: loss of £29.7m) and adjusted loss for the period of £4.1m (30 June 2009: loss of £13.3 m)
·; Asset sales to USAF totalling approximately £145m are expected to complete during the second half of 2010, resulting in approximately £40m of cash being released to the Group after the repayment of associated debt
·; Adjusted net debt of £409m (31 December 2009: £390m) with adjusted gearing at 89% (31 December 2009: 92% and 30 June 2009: 161%). Both measures are expected to fall in the second half as proceeds from asset sales to USAF are likely to exceed development capital expenditure.
OPERATIONAL HIGHLIGHTS
·; Solid progress in reservations for 2010/11, with 87% of the portfolio let as at 25 August 2010 (2009: 87%)
·; Rental growth of 2.3% in the period, with rental growth of 3-4% expected for the full year
·; 2010 development programme of 1,119 beds substantially completed on time and on budget, ready for 2010/11 occupation
·; Strong progress on pipeline assembly: 2,300 beds secured in London for delivery in 2012 and beyond. This has an average expected total development cost of £95,000 per bed and is expected to deliver a development yield of approximately 9%-9.5%
·; A further 1,158 beds will be delivered in 2011. The three schemes, located in London, Glasgow and Reading, have a total development cost of £79m, with all necessary funding in place.
Mark Allan, Chief Executive of The UNITE Group, commented:
"The Group has made substantial progress in the period under review against each of its strategic objectives, delivering positive growth in both our key metrics of net asset value and recurring profits. Operationally, we have made progress during the period with regard to our current and future development pipeline, the proactive asset management of our existing investments, acquisition and repositioning of assets and ensuring we are best placed to work in partnership with universities.
"Taking into account healthy reservations levels, our progress in securing an attractive development pipeline for the next academic year and beyond and the Group's strong financial position, we are well placed to build on this success over the remainder of 2010 and into 2011. We believe that our strategy positions the Group to deliver growth in a changing market."
There will be a presentation for analysts this morning at 11am. To access the dial in facility for the meeting, please dial: 0808 238 7377
Enquiries
The UNITE Group plc Tel: 0117 302 7004
Mark Allan
Joe Lister
Financial Dynamics Tel: 020 7831 3113
Stephanie Highett / Dido Laurimore unite@fd.com
Rachel Drysdale / Laurence Jones
Overview
During the first six months of 2010 the Group made good progress against each of its strategic objectives and delivered solid growth in net asset value and recurring profits. The student accommodation sector continues to demonstrate strong fundamentals and, even taking account of potential funding changes for UK Universities, remains well positioned to deliver non-cyclical growth.
- Adjusted diluted net assets value per share increased by 8% to 286 pence at 30 June 2010 from 265 pence at 31 December 2009.
- Net portfolio contribution increased by 11% to £4.2 million in the six months to June 2010 compared to £3.8 million in the six months to June 2009.
- The value of the Group's stabilised property portfolio grew by 3.8%, driven by 2.3% rental growth and 1.5% from yield compression, delivering £27.7 million of net valuation uplift. A further £9.7 million of profit relating to properties under construction has been recognised in adjusted net asset value.
- The Group expects to make asset sales totalling approximately £145 million to USAF during the second half of 2010. These sales will release approximately £40 million of cash after the repayment of associated debt.
- The Group's financing position remains robust. Adjusted net debt at 30 June 2010 was £409 million and adjusted gearing stood at 89%. Both measures are expected to fall in the second half as proceeds from asset sales to USAF are likely to exceed development capital expenditure. Taking into account its available capital and planned USAF sales, the Group has sufficient equity capital available to secure approximately a further 1,500 to 2,000 bed spaces.
- The Group has made good progress in reservations for 2010/11, achieving 87% as at 25 August 2010 compared with 87% in 2009. Based on the current weekly rate of sales we expect final occupancy for 2010/11 to be in line with 2009/10 (96.5%) and rental growth of 3-4% to be booked for the full year.
- 2010 development programme of 1,119 beds is substantially complete on time and on budget, ready for 2010/11 occupation.
- The Group has secured a total of 2,300 beds in London for delivery in 2012 and beyond. This pipeline has an average expected total development cost of £95,000 per bed and is expected to deliver a development yield of approximately 9.0%-9.5%.
- In addition to these beds, a further 1,158 beds will be delivered in 2011. The three schemes, located in London, Glasgow and Reading, have a total development cost of £79 million and a development yield of between 8.25% and 8.5%. All necessary funding is in place.
The student accommodation market
The student accommodation market continues to benefit from strong and growing underlying tenant demand coupled with a shortage of supply, which underpins it's strong fundamentals. The demand/supply gap will widen in 2010/11. A capped increase of 10,000 in the first year undergraduate intake will contribute to overall student population growth of approximately 70,000 whilst the supply of new purpose built accommodation for 2010/11 is limited to around 5,000 additional bed spaces. As at 30 June 2010 applications to study at University were up 12% year on year (source: UCAS).
Much has been written in the press regarding the possible impact of funding cuts in the Higher Education sector. Given the scale of cuts that the coalition Government is seeking, change is inevitable and will be influenced heavily by the Browne Review (findings expected in October 2010).
Despite the discussion this will generate about the future direction of Higher Education, when assessing the potential impact on the student accommodation sector and UNITE, we believe there are four important factors to take into consideration:
1. The student accommodation market is still not in equilibrium, with demand far outstripping supply. In the short term we believe this will continue to be the main driver of market performance with the most undersupplied local markets continuing to offer good growth prospects.
2. We do not expect overall UK student numbers to decline, given the political challenges inherent in such a policy. We expect UK-based undergraduate intake to be flat from 2011, leading to a slowdown in overall population growth over the next two to three years, but international intake to continue growing strongly. Particularly in cities with strong international student populations, demand for purpose built accommodation will continue to grow.
3. Assuming that Higher Education will become more expensive over time, students' study patterns and choices are likely to change. More students will choose to study from home or by other means. However, we expect this trend to be most pronounced amongst students who might not have been viewed as traditional University attendees in the past and for whom the total cost of Higher Education is already a stretch. This demographic tends not to form part of the market that UNITE has historically targeted, nor is it one that it currently caters for.
4. Universities will increasingly adopt new strategies for the provision of their own, typically on-campus, accommodation and this will create new opportunities for Universities and private sector providers to work together. We expect this to provide a new source of liquidity in student accommodation investment stock in the coming years, and to lead to other opportunities such as third party management.
The factors outlined above clearly suggest that Universities and their local markets will be affected in different ways and that understanding market dynamics at a city level is critical to future success. Given its historic focus on strong local markets and strong University partners, we believe that UNITE's business is well positioned to withstand and, where appropriate, benefit from likely changes to the student accommodation market in the future.
UNITE strategy
We set out the Group's strategy with our full year announcement in March. Building on the period from 2007 during which we ensured that the Group is on a sustainable and scalable footing, both operationally and financially, the strategy positions the Group to succeed in a changing market.
Our financial objectives are twofold:
1. To increase the value of the Group's student accommodation investments over time; and
2. To increase profits generated from the management of the Group's operational portfolio.
This is based on four strategic drivers against which we have made good progress in the period under review, as set out below:
| Strategic drivers
| Value driver | Delivered in 2010 |
| Targeted development of 4,000-5,000 purpose built student accommodation rooms, focusing exclusively on strong markets | Add development profit - realised through sale to USAF
Increase profits from operation of new beds
| Secured 3,458 beds in H1, delivering c.£74m NAV and c.£ 25m NOI when complete
Delivered 1,119 beds on schedule and budget for 2010/11 occupation |
| Proactive asset management of existing investments | Market knowledge ensures optimal portfolio positioning
Rental growth delivers NAV growth
Upgrade of existing properties drives further NAV growth
| Delivered 2.3% rental growth in H1, with further growth anticipated in H2
Refurbished six assets during Summer 2010, delivering approximately £4m of NAV (UNITE share £2m) in 2010 |
| Acquisition and repositioning of assets | Increase local market share
Add value through the introduction of UNITE operating platform to acquired stock
Increase value of assets under management
| Exchanged contracts to acquire a £25m asset in Newcastle for USAF
|
| Working in partnership with universities | Increase operational scale
Increase value of assets under management
Strengthen University relationships | Good progress made in formal tendering for acquisition/management of over 4,000 University beds
|
We will seek to build on this progress, as set out below, during the remainder of 2010.
Development activity
- The 2010 development programme will be completed and let and the 2011 and 2012 secured pipeline will be progressed in line with plan. Further site acquisitions, primarily in London, will be pursued where target returns can be achieved.
- The Group will sell approximately £145 million of stabilised assets to USAF, releasing cash of £40 million and development profits of £10 million. These sales relate mainly to assets completed in 2009.
Asset management
- Reservations for 2010/11 will conclude in early October. Based on current run rates we expect to achieve occupancy in line with 2009/10 levels (96.5%) and book rental growth of 3-4% for the full year.
- At this early stage, we expect to deliver a similar level of rental growth for the 2011/12 academic year.
Acquisition opportunities
- Following the £25 million acquisition referred to above and the planned sales from UNITE, USAF is likely to be close to its full investment capacity. Having raised capital into USAF regularly since its inception we would anticipate that USAF will continue to raise new capital regularly, provided it continues to deliver attractive returns and the investment climate remains supportive.
University partnership opportunities
- At the time of its 2009 results, UNITE outlined its intention to explore and where possible pursue opportunities to work in partnership with Universities to develop, upgrade and manage their on campus accommodation. The opportunity exists through the evident requirement of Universities to manage their estates as efficiently as possible, particularly due to funding pressures. We believe that this could become a significant trend in the sector and, in the remainder of 2010 we will continue to take part in the competitive tender processes in which we are involved. We are pursuing these opportunities on the basis of co-investing a minority stake alongside third party investment partners and acting and receiving fees as property and asset manager and, where appropriate, development manager. We have been short listed on a major transaction and are considering several smaller transactions. We will update shareholders later this year.
Financial review
Income statement
The Group uses a net portfolio contribution ("NPC") profit measure to assess its operational business performance and this improved by 11% to £4.2m in the six months to June 2010 from £3.8m in 2009. Gross margin improved to 73% (from 72%) and operational overheads fell by 11% to £6.8m following the successful conclusion of the Group's "Blueprint" operational change programme. The component parts of NPC are set out below.
Net portfolio contribution
|
| 30 June 2010 | 30 June 2009 |
|
| £m | £m |
|
|
|
|
| Total income from managed portfolio | 96.0 | 85.3 |
| UNITE's share of rental income | 46.2 | 41.9 |
| UNITE share of total income | 48% | 49% |
| UNITE's share of operating costs | (12.4) | (11.7) |
| Gross margin | 33.8 | 30.2 |
|
| 73% | 72% |
| Management fee income | 3.8 | 3.4 |
| Finance costs* | (23.8) | (19.1) |
| Operational overheads | (6.8) | (7.6) |
| Investment segment | 7.0 | 6.9 |
| Corporate costs and share of joint venture overheads | (2.8) | (3.1) |
| Net portfolio contribution | 4.2 | 3.8 |
| * includes loan interest, interest rate swap payments, finance income and operating lease rentals | ||
The growth in NPC has been driven by the rental growth that was achieved in 2009/10 and the increase in the number of beds under management. These increases have been partly offset by cost pressure on utilities, the earlier phasing of maintenance works, (resulting in £1.3 million of spend, that would normally be undertaken over the summer holidays, being brought forward to the first half), increased financing costs on borrowings against newly completed, stabilising properties and a dilution in UNITE's share of total portfolio income to 48% following asset sales to USAF in late 2009.
The Group's financing costs have increased from £19.1 million for the six months to 30 June 2009 to £23.8 million in the six months to June 2010. The increase has been driven largely by the increase in borrowings against completed properties and the lower levels of development activity during 2010 that have reduced the amount of interest capitalised. In addition, finance costs include £0.7 million of lease costs associated with the sale and leaseback of a property in Bristol that was completed in November 2009.
On an adjusted basis (consistent with EPRA guidelines) the loss for the first six months was £4.1 million (2009: loss of £13.3 million). The difference between NPC and the adjusted loss is largely the impact of the Development Segment result. The key components of the Development Segment are pre-contract costs of £1.3 million, valuation reductions of £2.8 million on assets held as trading stock and losses at UNITE Modular Solutions ("UMS") of £4.6 million arising as a result of its surplus capacity. UMS losses are expected to be substantially lower in the second half of 2010 as production volumes begin to increase. Nevertheless, current performance at UMS is unsatisfactory and the operation remains under close review.
On an IFRS basis, the Group reported a profit of £9.8 million attributable to UNITE shareholders, compared to a loss of £29.7 million for the six months to June 2009.
EPRA adjusted and IFRS profit
|
| 30 June 2010 | 30 June 2009 |
|
| £m | £m |
| Net portfolio contribution | 4.2 | 3.8 |
| Development segment | (8.7) | (16.3) |
| Other costs and income* | 0.4 | 0.1 |
| Restructuring costs | - | (0.9) |
| Adjusted loss (EPRA) | (4.1) | (13.3) |
| Net valuation movements on properties / loss on disposal | 27.9 | (25.4) |
| Net changes in valuation of swaps | (11.9) | 9.7 |
| Deferred tax | (2.1) | (0.7) |
| Profit / (loss) for the period (IFRS) | 9.8 | (29.7) |
* Other costs and income relate to share option fair value charges and current tax, including UNITE's share of joint ventures
Balance Sheet
The recovery of commercial property values during the second half of 2009 continued into 2010, with the IPD Index showing that UK commercial property values rose by an average of 6% in the six months to June 2010. The value of UNITE's stabilised investment portfolio increased by an average of 3.8% over the same period with this difference largely attributable to less pronounced yield compression in the student accommodation sector. The value increase was driven by rental growth of 2.3% and yield compression of 10 basis points, equivalent to a further 1.5% of capital growth.
Reported net asset value attributable to UNITE shareholders at June 2010 was £371.9 million (31 December 2009: £365.9 million). The Group's adjusted net asset value increased to £459.6 million (286 pence per share) from £423.1 million (265 pence per share) at 31 December 2009. As set out in the graph below, the main factors behind the growth in adjusted net assets were:
- The growth in value of the Group's share in investment assets as a result of rental growth and yield compression (+16 pence per share)
- The uplift in value of UNITE's development assets (+5 pence per share)
- The positive impact of net portfolio contribution (+2 pence per share)
- The impact of UMS losses (-2 pence per share)
http://www.rns-pdf.londonstockexchange.com/rns/6608R_1-2010-8-25.pdf
Adjusted gearing at 30 June 2010 was 89% compared with 92% at December 2009 and 161% at 30 June 2009. Net debt increased by £19 million to £409 million at 30 June 2010 as the Group started to commit capital to its 2011 pipeline. We would expect net debt to fall over the remainder of 2010 as proceeds from the sale of assets to USAF are likely to exceed development capital expenditure. Covenant headroom has improved across all key measures (loan to value, interest cover and minimum net worth) such that values could fall by 25% before any of the covenants would be breached.
The operating and investment portfolio
The Group is currently operating 38,083 beds across 128 properties for the 2009/10 academic year. This will increase to 39,728 beds including the USAF acquisition of the Newcastle asset and the three new properties opening for the 2010/11 academic year. Assets are typically owned either directly or through funds and joint ventures in which the Group has a significant minority stake, as outlined in the following table.
Operating and investment portfolio analysis
|
|
| USAF | UCC | USV | Wholly owned | Leased | Total | UNITE % |
|
|
|
|
|
|
|
|
|
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| London | Value (£m) | 91 | 334 | 0 | 243 | 0 | 668 | 358 |
|
| Beds | 573 | 2,433 | 0 | 2,191 | 260 | 5,457 | 37% |
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| Major Provincial | Value (£m) | 641 | 0 | 62 | 230 | 0 | 933 | 365 |
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| Beds | 12,962 | 0 | 1,383 | 4,254 | 2,036 | 20,635 | 39% |
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| Provincial | Value (£m) | 240 | 0 | 0 | 125 | 0 | 365 | 164 |
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| Beds | 5,129 | 0 | 0 | 2,981 | 1,785 | 9,895 | 17% |
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| Varsity | Value (£m) | 72 | 42 | 0 | 38 | 0 | 152 | 63 |
|
| Beds | 798 | 437 | 0 | 545 | 316 | 2,096 | 7% |
|
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|
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| Total at 30 June 2010 | Value (£m) | 1,044 | 376 | 62 | 636 | 0 | 2,118 | 950 |
| Beds | 19,462 | 2,870 | 1,383 | 9,971 | 4,397 | 38,083 |
| |
| 2010 openings | Value (£m) |
|
|
|
|
| 217 | 52 |
| Beds |
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| 1,645 |
| |
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| Total for AY | Value (£m) |
|
|
|
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| 2,335 | 1,002 |
| 2010/11 | Beds |
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| 39,728 |
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| UNITE ownership share | 16% | 30% | 51% | 100% | n/a |
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| |
In recent years the Group has pursued a clear strategy to increase the proportion of its capital invested in London and other strong markets which offer the best combination of resilience and growth potential. As a result of this strategy, at 30 June 2010, 83% of the Group's net investment in its portfolio was in London, Varsity or major provincial locations.
Taking into account its wholly owned portfolio, various co-investment stakes in the fund and joint ventures, together with associated liabilities, the Group's net assets at 30 June 2010 are outlined in the following table.
NAV breakdown
|
| Property Assets | Other assets /liabilities | Adjusted NAV | % of net assets |
|
| £m | £m | £m |
|
|
|
|
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|
| Group assets |
|
|
|
|
| Stabilised | 443 | (263) | 180 | 39% |
| Stabilising | 193 | (93) | 100 | 21% |
| Development | 53 | (46) | 7 | 2% |
| Wholly owned assets | 689 | (402) | 287 | 62% |
|
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|
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|
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| Share of co-investment assets |
|
|
|
|
| USAF | 171 | (65) | 106 | 23% |
| UCC | 113 | (76) | 37 | 8% |
| OCB | 44 | (23) | 21 | 5% |
| USV | 31 | (22) | 9 | 2% |
| Group assets | 1,048 | (588) | 460 | 100% |
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Reservations
As at 24 August 2010, reservations had been received for 87% of the portfolio compared with 87% of the portfolio at the same time last year. The period between now and the end of September represents an important stage in the sales cycle as places at Universities are confirmed following the announcement of 'A' level results.
The Group has maintained its focus on its on-line sales and marketing activity, driving enquiries and bookings through its on-line platform supported by planned promotional campaigns in certain markets. The Group has also continued to target the overseas market, to drive sales from customers both in their country of origin and when they arrive in the UK. This has included renewed investment in foreign language websites and an increase in foreign language speakers in the Group's contact centre. The timing of University place and visa confirmations means that the majority of these students are unable to secure accommodation until August and September, contributing to the high weekly sales rate experienced by the Group at this time of year.
Reservations at 25 August 2010
|
| Beds | % Reserved 10/11 year | % Reserved 09/10 year |
|
|
|
|
|
| USAF | 19,462 | 87% | 87% |
| UCC | 2,870 | 68% | 76% |
| USV | 1,383 | 83% | 92% |
|
|
|
|
|
| Wholly owned | 9,971 | 87% | 86% |
|
|
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| Leased | 4,397 | 100% | 98% |
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|
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|
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| Total | 38,083 | 87% | 87% |
|
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| 2010 openings | 1,645 | 64% | n/a |
Investment portfolio valuation
The valuation of the Group's investment portfolio as at 30 June 2010, including its share of gross assets held in USAF and joint ventures, was £950 million compared to £929 million at 31 December 2009 and £827 million at 30 June 2009.
Investment portfolio valuation movement
|
| 31 Dec 09 | Yield movement | Rental growth | Disposals / costs | 30 Jun 10 | Avg NOI yield |
|
| £m | £m | £m | £m | £m | % |
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| Wholly owned |
|
|
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| Stabilised | 434 | 5 | 12 | (8) | 443 | 6.5% |
| Stabilising | 191 | 2 | - | - | 193 | 6.5% |
|
| 625 | 7 | 12 | (8) | 636 | 6.5% |
| USAF | 1,003 | 20 | 19 | 2 | 1,044 | 6.7% |
| UCC | 370 | 5 | 1 | - | 376 | 6.3% |
| USV | 59 | - | 3 | - | 62 | 6.8% |
| Total portfolio | 2,057 | 32 | 35 | (6) | 2,118 | 6.6% |
| UNITE share | 929 | 12 | 16 | (7) | 950 | 6.6% |
Valuation yields have stabilised at an average of 6.6% at 30 June 2010 (31 December 2009: 6.7%) across UNITE's managed portfolio following the rapid expansion from 6.2% to 6.8% in the first half of June 2009. The graph below demonstrates that the yield on UNITE's portfolio has been markedly less volatile than the IPD All Property Yield over the last few years, reflecting the sustained high occupancy and rental growth that the Group has delivered.
Relative yield performance
http://www.rns-pdf.londonstockexchange.com/rns/6608R_-2010-8-25.pdf
Yields across UNITE's operational portfolio range from 6.0% to 7.2%. Keener yields continue to apply to the strongest locations, particularly in London, and to assets where the income stream is underwritten by a University. The yield differential between direct let assets and those with secure income streams has stabilised at approximately 50 basis points.
Looking forward we expect yields for student accommodation assets to remain at or around current levels, in line with the outlook for UK commercial property generally, with capital growth largely derived from ongoing rental growth.
Property management
During the first half of 2010 the main priority for the Group's property management business was to embed the Group's new operating model, following the implementation of the "Blueprint" change programme in 2009. Given the scale of change involved there were understandable teething problems in ensuring that the operating model worked as designed and delivered the requisite customer service standards. These challenges have been successfully addressed and the Group will enter the 2010/11 academic year with a properly established operating platform designed to deliver good customer service consistently.
One element of the Blueprint programme was the outsourcing of maintenance activities to a venture with Connaught plc (UNITE Connaught Services or "UCS"). In terms of maintenance service levels and operating cost efficiency the venture has been a significant success although the Group is now monitoring developments at Connaught itself closely in order to ensure that the challenges being faced by Connaught do not adversely affect service levels at UCS. In this regard it is important to note that UCS is a largely self contained operation in which UNITE retains a 60% stake and ongoing operational oversight. Based on current arrangements the Group does not anticipate any significant operational challenges arising in UCS and expects service levels to remain at or above current levels.
Development activity
During the first half of 2010 the Group secured a total of 2,300 beds in London for delivery in 2012 and 2013. Having initially deployed its capital more slowly than anticipated in the early part of the year the Group gained good traction in the second quarter as site prices eased to sensible levels and the Group was able to contract at prices in line with plan. Forecast total development cost for the 2012-13 programme is approximately £95,000 per bed and the expected stabilised yield on cost is approximately 9.0%-9.5%.
In addition to its 2012-13 programme the Group has successfully committed to deliver 1,158 beds across three projects for occupation in 2011, for which full funding has been secured. Total capital expenditure for the 2011 programme will be £79 million with stabilised yields on cost expected to be approximately 8.25%-8.5%. The three projects are located in Reading, Glasgow and London.
Taken together, the Group's secured 2012-13 development pipeline and 2011 development programme demonstrate the progress made by the Group in deploying the capital it raised from shareholders in 2009 for this purpose. Taking into account its current uncommitted capital and further capital expected to be realised through asset sales to USAF later this year, the Group has sufficient equity capital available to secure an additional 1,500 to 2,000 beds. Further debt facilities will be required in due course (see below).
The 2010 development programme, being developed in joint venture with OCB, is largely complete and will be ready for occupation for the 2010/11 academic year as planned. Overall development cost budgets have been met and letting is ongoing.
£9.7 million of development uplift has been recognised in the Group's adjusted net asset value in the first half of the year, in respect of its 2010 and 2011 completions.
Looking forward, we expect site prices to be stable, or even drift down, as banks start to reduce their existing development exposure and the level of new development lending remains limited. Against this backdrop, and with capital available to deploy, we will remain vigilant in ensuring that we do not overpay for sites and plan to retain capacity to acquire further sites in 2011.
The following table summarises the Group's secured development pipeline as at 30 June 2010.
Development pipeline
|
| Beds | Total completed value | Total development cost | Capex in period | Capex remaining | UNITE NAV remaining | Stabilised yield on cost |
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| £m | £m | £m | £m | £m | % |
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| 2010 - UNITE share | 1,119 | 48 | 39 | 8 | 3 | 1 | 8.3% |
| 2011 | 1,158 | 92 | 79 | 10 | 53 | 7 | 8.25%-8.5% |
| 2012-13 | 2,300 | 285 | 218 | - | 218 | 67 | 9.0%-9.5% |
| Secure pipeline | 3,458 | 377 | 297 | 10 | 271 | 74 | 8.75%-9.25% |
The potential future net asset value uplift on the secured development pipeline of £74 million outlined above is equivalent to approximately 46 pence per share. Stabilised yield on cost is based on 2010/11 net operating income and rental growth of 3% per annum.
Development funding
During the first half of 2010 debt funding was secured for the Group's development programme of 2011 deliveries. Approximately £175 million will be required to build out the secured 2012-2013 beds, of which around £100 million will be funded from existing facilities. New facilities will be required to finance the remaining £75 million. The market for new development finance remains relatively tight with only a small number of banks currently offering terms to favoured partners. The Group has made good progress in its discussions with lenders regarding new facilities and remains satisfied that new debt can be secured on terms in line with plan. The Group does not commit to development projects without having full funding in place.
Development profits and valuation
A key element of the Group's business model and source of competitive advantage is its track record in selling stabilised assets, typically to USAF, and realising development profits. Since 2006 the Group has sold over £1.2 billion of assets that it has developed at an average profit on cost of 31%, releasing development profits of £291 million.
These sales released significant cash surpluses to the Group which enabled it to manage its balance sheet effectively during the severe downturn of 2008 and 2009. In the second half of 2010 the Group expects to sell further stabilised assets to USAF of approximately £145 million. Based on the 30 June 2010 valuation of these assets, the Group would realise a profit on cost of £10 million (7%) and a cash surplus, after repayment of associated debt, of approximately £40 million. These sales relate mainly to assets completed in 2009 and the profit on cost is below historic levels due to the higher land prices paid and subsequent falls in commercial property values experienced in 2008 and 2009. Actual and planned asset sales are summarised in the following table.
Realised development profits
|
| 2006 £m | 2007 £m | 2008 £m | 2009 £m | 2010 forecast £m |
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|
| Asset sales | 519 | 238 | 301 | 160 | 145 |
| Development capital expenditure | (387) | (157) | (234) | (149) | (135) |
|
|
|
|
|
|
|
| Development profit | 132 | 81 | 67 | 11 | 10 |
| Profit on cost | 34% | 52% | 28% | 7% | 7% |
Following the establishment of USAF, certain of the Group's development assets are classified as current assets and are held at the lower of cost and net realisable value, whilst certain others continue to be held at open market value. However, in recognising the Group's development pipeline we consider it appropriate that all development properties, regardless of accounting classification, are independently valued. A full valuation of the Group's development portfolio has been carried out at 30 June 2010 and is summarised below.
Development portfolio valuation
|
| 30 June 2010 £m | 31 December 2009 £m |
|
|
|
|
| Property under development | 48 | 38 |
| Share of joint venture investment property under development | 44 | 31 |
| Total | 92 | 69 |
|
|
|
|
| Valuation gain not recognised on property held at cost | 6 | 1 |
| Value at end of period | 98 | 70 |
UNITE Modular Solutions ("UMS")
UMS, which manufactures and installs lightweight steel frame modular bedrooms into many of the Group's developments, has been an integral part of the Group's development success; over 17,500 modular units have been deployed with real time, cost and quality benefits. However, with production volumes now significantly reduced and the facility operating well below capacity, UMS is currently loss-making due to unrecovered overhead and direct labour costs. In the six months to 30 June, during which production totalled 300 modules, UMS reported a loss of £4.6 million which is included in the Development Segment result.
Production volumes will increase in the second half of 2010 and UMS losses will reduce substantially. UMS is also pursuing third party contracts, having secured and successfully delivered its first in 2009/10, which deliver volume over and above the Group's own demand, thereby improving overhead recovery and profitability. However the construction market remains extremely competitive at this time and no further third party contracts have yet been secured. Whilst this remains our preferred strategy for UMS, the operation remains under close review.
Co-investing asset management
UNITE acts as co-investing manager of four specialist student accommodation investment vehicles which it has established, as outlined in the following table.
Co-investment vehicles
| Vehicle | Fund/JV | Maturity | Property assets | Other assets / liabilities | Adjusted net assets | UNITE share of adjusted net assets |
|
|
|
| £m | £m | £m | £m |
| USAF | Fund | infinite life | 1,044 | (398) | 646 | 106 |
| UCC | JV | 2013 | 376 | (252) | 124 | 37 |
| OCB | JV | 2014 | 177 | (93) | 84 | 21 |
| USV | JV | 2009* | 62 | (44) | 18 | 9 |
* Whilst the joint venture agreement technically matured in 2009, any termination is subject to the pre-emption provisions in the agreement.
Fund/JV performance
http://www.rns-pdf.londonstockexchange.com/rns/6608R_3-2010-8-25.pdf
UNITE UK Student Accommodation Fund ("USAF", "the Fund")
Following the £167 million equity raise in December 2009 and the subsequent acquisition of £95 million of assets from UNITE, USAF has exchanged contracts to acquire a direct let asset for £25 million from a third party, which it expects to deliver attractive returns in the future. USAF is also planning to acquire a portfolio of assets of approximately £145 million in the fourth quarter from UNITE, at which point it is likely to be close to fully invested. As usual, the sale of these assets reduces the Group's share of income from stabilised assets and will have a dilutive impact on net portfolio contribution for the year.
The Group has raised fresh equity into USAF in each year since its inception in 2006. The Fund offers investors diversified exposure to direct let student accommodation assets and is the only institutional vehicle of its type and scale. Provided that the Fund continues to deliver attractive returns and attractive acquisition opportunities remain, either from UNITE or in the open market, then we would anticipate that USAF will seek to raise new capital regularly provided that the investment climate remains supportive.
There has been limited new information with regard to the USAF's deposit with Landsbanki. As previously stated, USAF has been confirmed as a Priority Creditor and, as such, should recover a substantial part of the deposit. The timing of the recovery remains unclear and is still subject to potential legal challenge from other creditors. USAF continues to carry a full provision against this deposit.
UNITE Capital Cities Joint Venture ("UCC")
Having completed its development programme UCC is now focused on the proactive asset management of its investment portfolio. The joint venture matures in 2013 and UNITE and GIC Real Estate, its joint venture partner, are beginning to consider the most appropriate future strategy for the venture in this regard.
Oasis Capital Bank Joint Venture ("OCB")
The three development schemes are substantially complete and are being let for the 2010/11 academic year. The joint venture is focused on stabilising the assets over the next one to two years.
UNITE Student Village Joint Venture ("USV")
USV, which owns one building in Sheffield is a joint venture with Lehman Brothers which is now in administration. The administrators marketed their 49% stake in the joint venture in 2009 but were unable to meet their price aspirations and are therefore continuing to hold the investment. Whilst the joint venture agreement technically matured in 2009, any termination is subject to the pre-emption provisions in the agreement.
Financing
The Group's financing position remains robust. Net debt and gearing are being maintained at sustainable levels, the Group has good investment capacity, plenty of covenant headroom and no near term debt maturities. Debt market conditions are improving slowly and credit is available selectively, for investment and development purposes, to borrowers with a good track record and a strong balance sheet. UNITE meets these criteria.
Notwithstanding this improvement in conditions, we continue to believe that the ongoing deleveraging of the UK commercial property sector will take a number of years and that conditions will remain challenging. As a result we will continue to manage the Group's balance sheet prudently.
The Group has sought and secured terms for approximately £200 million of new investment and development facilities during the period and, based on this experience, we remain satisfied that credit will be available to the Group at levels and pricing in line with expectations.
Key debt ratios for UNITE Group
|
| 30 Jun 10 | 30 Jun 09 | 31 Dec 09 |
|
|
|
|
|
| Group net debt (adjusted) | £409m | £584m | £390m |
| Adjusted gearing (adjusted net debt / equity) | 89% | 161% | 92% |
| Adjusted LTV (adjusted net debt / property assets) | 59% | 69% | 59% |
| Weighted average debt maturity | 4 years | 4 years | 4 years |
| Weighted average cost of investment debt | 5.5% | 6.0% | 5.6% |
| Proportion of investment debt hedged | 71% | 95% | 75% |
The small increase in adjusted net debt to £409 million from £390 million is a result of the capital expenditure on the 2011 development schemes. Adjusted gearing has reduced to 89% from 92% at December 2009 as the increased NAV has offset the small growth in net debt. We expect net debt to fall in the remainder of 2010 as proceeds from asset sales to USAF are expected to exceed capital expenditure. Over time, however, net debt and gearing are likely to rise from these levels as capital expenditure increases. However, gearing will be managed within a strategic range of 100%-130%.
The Group has a cash balance, net of overdraft, of £55 million and a further £55 million of undrawn committed facilities. There has been a small reduction in the Group's cost of debt as result of the cancellation of interest rate swaps in 2009 and the impact of lower floating rates.
The Group has no facilities maturing in 2010 or 2011 but recognises the high proportion of maturities in 2013 and 2014 and will begin to address this proactively during 2011. There is one asset that requires an extension to its £30 million facility late this year and we are confident in our ability to deliver this extension following discussions with the current lender.
On balance sheet facility maturity
http://www.rns-pdf.londonstockexchange.com/rns/6608R_2-2010-8-25.pdf
The Group is in full compliance with all of its borrowing covenants at 30 June 2010. The covenant levels provide headroom for asset values to fall by 25%.
Covenant headroom
Covenants are tested at the facility level. All of the investment facilities have interest cover covenants, £244 million have loan to value covenants and £41 million have minimum net worth covenants. The performance against covenants is outlined below.
|
| 30 Jun 10 | 30 Jun 09 | 31 Dec 09 | ||||||
|
| Weighted covenant | Weighted actual | Weighted covenant | Weighted actual | Weighted covenant | Weighted actual | |||
|
| |||||||||
| Loan to value | 74% | 49%** | 75% | 60% | 74% | 59% | |||
| Interest cover | 1.08 | 1.88 | 1.10 | 1.46 | 1.08 | 1.63 | |||
| Minimum net worth | £250m* | £460m | £200m* | £312m | £250m* | £423m | |||
|
|
|
|
|
|
|
| |||
| * based on highest minimum net worth covenant |
|
|
|
|
|
| |||
| ** if available cash is used to pay down debt, otherwise 64% |
|
|
|
|
|
| |||
Debt facilities in co-investment vehicles
The break-down of debt in co-investment vehicles and its maturity is outlined in the following table and graph.
Co-investment vehicle facility maturity
http://www.rns-pdf.londonstockexchange.com/rns/6608R_4-2010-8-25.pdf
Key debt ratios for co-investment vehicles
|
| Debt at 30 Jun 10 | Average interest rate | % fixed/ capped | Average maturity (years) | First maturity |
|
| £m |
|
|
|
|
| USAF | 481 | 5.4 | 100% | 3.4 | Dec-12 |
| UCC | 253 | 5.5 | 100% | 4.2 | Sep-14 |
| OCB | 89 | 3.8 | 100% | 2.3 | Sep-11 |
| USV | 45 | 5.3 | 100% | 2.1 | Sep-11 |
The Fund and joint ventures are in full compliance with all of their borrowing covenants at 30 June 2010. USAF has received credit approved terms for £135 million of investment debt that will be used to fund the acquisitions from UNITE later in 2010. The other joint ventures are fully funded and do not require any new debt. As with its own debt, the Group will review options for the refinance or extension of medium term maturities in its co-investment vehicles during 2011.
Dividend
The Group suspended its dividend in 2009 in order to conserve capital. Taking into account the ongoing challenges for the UK economy and investment opportunities available to the Group, the Board does not propose reinstating the dividend at this stage. However, it is the Board's intention to do so once the Group's net portfolio contribution reaches a level sufficient to provide cover for a meaningful dividend. The Board will review this in 2011.
Summary and outlook
The Group has made good progress during 2010 against each of its strategic and operational objectives, delivering positive growth in net asset value and recurring profits. Taking into account reservations levels, progress in securing an attractive development pipeline and its strong financial position the Group is well placed to build on this success over the remainder of 2010 and into 2011.
The outlook for the UK economy and, in particular, the ongoing deleveraging of the commercial property sector remains challenging and we expect capital markets and investment yields to be relatively subdued. Consequently we will continue to manage the Group's balance sheet prudently.
From a tenant demand perspective, the student accommodation market remains compelling and capable of delivering solid rental growth. The Higher Education sector is likely to change markedly in the coming years as funding pressures bite but this will create opportunities to outperform provided that our business and portfolio are properly positioned. With an unquestionable track record and clear, considered strategy we firmly believe this to be the case.
Responsibility statement of the directors in respect of the half-yearly financial report
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;
• the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of theDisclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of theDisclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
Mark Allan Joe Lister
Chief Executive Chief Financial Officer
26 August 2010
Consolidated Income Statement
For the 6 months to 30 June 2010
|
| Note | Unaudited 6 months to 30 June 2010 | Unaudited 6 months to 30 June 2009 |
Year to 31 Dec 2009 |
|
|
|
| Restated |
|
|
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
|
| Revenue | 3 | 48,579 | 41,360 | 265,352 |
|
|
|
|
|
|
| Cost of sales | 3 | (34,079) | (38,170) | (246,960) |
|
|
|
|
|
|
| Administrative expenses | 3 | (11,133) | (12,129) | (23,097) |
|
|
| 3,367 | (8,939) | (4,705) |
|
|
|
|
|
|
| Loss on disposal of property |
| (656) | (2,493) | (3,416) |
| Net valuation gains / (losses) on property |
| 13,390 | (14,542) | (15,337) |
|
|
|
|
|
|
| Profit / (loss) before net financing costs |
| 16,101 | (25,974) | (23,458) |
|
|
|
|
|
|
| Loan interest and similar charges |
| (7,469) | (5,953) | (13,308) |
| Changes in fair value of interest rate swaps |
| (17,141) | 6,140 | (6,737) |
| Finance costs |
| (24,610) | 187 | (20,045) |
| Finance income |
| 482 | 470 | 891 |
| Net financing costs |
| (24,128) | 657 | (19,154) |
|
|
|
|
|
|
| Share of joint venture profit / (loss) | 8 | 20,125 | (4,062) | 6,929 |
| Profit / (loss) before tax |
| 12,098 | (29,379) | (35,683) |
|
|
|
|
|
|
| Tax (charge) / credit |
| (872) | (951) | 1,233 |
| Profit / (loss) for the period |
| 11,226 | (30,330) | (34,450) |
|
|
|
|
|
|
| Profit / (loss) for the period attributable to |
|
|
|
|
| Owners of the parent company |
| 9,788 | (29,734) | (34,861) |
| Minority Interest |
| 1,438 | (596) | 411 |
|
|
| 11,226 | (30,330) | (34,450) |
Consolidated Statement of Comprehensive Income
For the 6 months to 30 June 2010
|
|
| Unaudited 6 months to 30 June 2010 | Unaudited 6 months to 30 June 2009 |
Year to 31 Dec 2009 |
|
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
|
| Profit / (loss) for the period |
| 11,226 | (30,330) | (34,450) |
|
|
|
|
|
|
| Movements in effective hedges |
| 145 | 1,942 | 1,854 |
| Share of joint venture movements in effective hedges |
| (4,506) | 3,333 | 574 |
| Other comprehensive income for the period |
| (4,361) | 5,275 | 2,428 |
|
|
|
|
|
|
| Total comprehensive income for the period |
| 6,865 | (25,055) | (32,022) |
|
|
|
|
|
|
| Attributable to |
|
|
|
|
| Owners of the parent company |
| 5,545 | (24,543) | (32,553) |
| Minority Interest |
| 1,320 | (512) | 531 |
|
|
| 6,865 | (25,055) | (32,022) |
|
|
|
|
|
|
All movements above are shown net of deferred tax.
Consolidated Balance Sheet
At 30 June 2010
|
| Note | Unaudited 30 June 2010 | Unaudited 30 June 2009 |
31 Dec 2009 |
|
|
|
| Restated |
|
|
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
|
| Assets |
|
|
|
|
| Investment property | 6 | 412,090 | 389,955 | 403,600 |
| Investment property under development | 6 | - | 44,210 | - |
| Property, plant and equipment |
| 7,263 | 7,749 | 7,351 |
| Investment in joint ventures | 8 | 161,126 | 120,995 | 148,344 |
| Joint venture investment loans | 8 | 12,700 | 5,771 | 12,239 |
| Intangible assets |
| 6,015 | 6,830 | 6,542 |
| Other receivables |
| - | 497 | - |
| Total non-current assets |
| 599,194 | 576,007 | 578,076 |
|
|
|
|
|
|
| Completed property | 6 | 198,825 | 116,605 | 204,113 |
| Properties under development | 6 | 47,538 | 273,243 | 38,097 |
| Inventories | 7 | 5,829 | 2,646 | 8,166 |
| Trade and other receivables |
| 33,764 | 37,733 | 44,714 |
| Cash and cash equivalents |
| 65,269 | 53,686 | 48,764 |
| Total current assets |
| 351,225 | 483,913 | 343,854 |
| Total assets |
| 950,419 | 1,059,920 | 921,930 |
|
|
|
|
|
|
| Liabilities |
|
|
|
|
| Borrowing and financial derivatives | 9 | (51,436) | (122,759) | (179) |
| Trade and other payables |
| (45,551) | (76,490) | (72,581) |
| Current tax creditor |
| (581) | (466) | (475) |
| Total current liabilities |
| (97,568) | (199,715) | (73,235) |
|
|
|
|
|
|
| Borrowings and financial derivatives | 9 | (464,803) | (549,845) | (467,648) |
| Total non-current liabilities |
| (464,803) | (549,845) | (467,648) |
| Total liabilities |
| (562,371) | (749,560) | (540,883) |
|
|
|
|
|
|
| Net Assets |
| 388,048 | 310,360 | 381,047 |
|
|
|
|
|
|
| Equity |
|
|
|
|
| Issued share capital |
| 40,068 | 31,589 | 39,902 |
| Share premium |
| 248,979 | 177,924 | 247,539 |
| Merger reserve |
| 40,177 | 40,177 | 40,177 |
| Retained earnings |
| 59,758 | 56,211 | 51,097 |
| Hedging reserve |
| (17,070) | (9,944) | (12,827) |
| Equity attributable to the owners of the parent company |
| 371,912 | 295,957 | 365,888 |
| Minority interest |
| 16,136 | 14,403 | 15,159 |
| Total equity |
| 388,048 | 310,360 | 381,047 |
Consolidated Statement of Changes in Shareholders' Equity
For the 6 months to 30 June 2010
|
| Issued share capital £'000 |
Share premium £'000 |
Merger reserve £'000 |
Retained earnings £'000 |
Revaluation reserve £'000 |
Hedging reserve £'000 | Minority Interest £'000 |
Total £'000 |
|
|
|
|
|
|
|
|
|
|
| At 1 January 2010 | 39,902 | 247,539 | 40,177 | 51,097 | - | (12,827) | 15,159 | 381,047 |
|
|
|
|
|
|
|
|
|
|
| Profit for the period | - | - | - | 9,788 | - | - | 1,438 | 11,226 |
| Other comprehensive income for the period |
- |
- |
- |
- |
- |
(4,243) |
(118) |
(4,361) |
| Shares issued | 166 | 1,440 | - | - | - | - | - | 1,606 |
| Fair value of share based payments |
- |
- |
- |
490 |
- |
- |
- |
490 |
| Own shares acquired | - | - | - | (1,617) | - | - | - | (1,617) |
| Dividends to minority interest | - | - | - | - | - | - | (343) | (343) |
| At 30 June 2010 | 40,068 | 248,979 | 40,177 | 59,758 | - | (17,070) | 16,136 | 388,048 |
|
|
|
|
|
|
|
|
|
|
|
| Issued share capital £'000 |
Share premium £'000 |
Merger reserve £'000 |
Retained earnings £'000 |
Revaluation reserve £'000 |
Hedging reserve £'000 | Minority Interest £'000 |
Total £'000 |
|
|
|
|
|
|
|
|
|
|
| At 1 January 2009 | 31,079 | 176,541 | 40,177 | 85,699 | 1,805 | (15,135) | 15,200 | 335,366 |
|
|
|
|
|
|
|
|
|
|
| Loss for the period | - | - | - | (29,734) | - | - | (596) | (30,330) |
| Other comprehensive income for the period |
- |
- |
- |
- |
- |
5,191 |
84 |
5,275 |
| Transfer | - | - | - | 1,805 | (1,805) | - | - | - |
| Shares issued | 510 | 1,383 | - | - | - | - | - | 1,893 |
| Fair value of share based payments |
- |
- |
- |
335 |
- |
- |
- |
335 |
| Own shares acquired | - | - | - | (1,894) | - | - | - | (1,894) |
| Dividends to minority interest | - | - | - | - | - | - | (285) | (285) |
| At 30 June 2009 | 31,589 | 177,924 | 40,177 | 56,211 | - | (9,944) | 14,403 | 310,360 |
|
|
|
|
|
|
|
|
|
|
|
| Issued share capital £'000 |
Share premium £'000 |
Merger reserve £'000 |
Retained earnings £'000 |
Revaluation reserve £'000 |
Hedging reserve £'000 | Minority interest £'000 |
Total £'000 |
|
|
|
|
|
|
|
|
|
|
| At 1 January 2009 | 31,079 | 176,541 | 40,177 | 85,699 | 1,805 | (15,135) | 15,200 | 335,366 |
|
|
|
|
|
|
|
|
|
|
| Loss for the period | - | - | - | (34,861) | - | - | 411 | (34,450) |
| Other comprehensive income for the period |
- |
- |
- |
- |
- |
2,308 |
120 |
2,428 |
| Transfer | - | - | - | 1,805 | (1,805) | - | - | - |
| Shares issued | 8,823 | 70,998 | - | - | - | - | - | 79,821 |
| Fair value of share based payments |
- |
- |
- |
413 |
- |
- |
- |
413 |
| Own shares acquired | - | - | - | (1,959) | - | - | - | (1,959) |
| Dividends to minority interest | - | - | - | - | - | - | (572) | (572) |
| At 31 December 2009 | 39,902 | 247,539 | 40,177 | 51,097 | - | (12,827) | 15,159 | 381,047 |
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Cash Flows
For the 6 months to 30 June 2010
|
|
| Unaudited 6 months to 30 June 2010 | Unaudited 6 months to 30 June 2009 |
Year to 31 Dec 2009 |
|
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
|
| Operating activities |
|
|
|
|
| Profit / (loss) for the period |
| 11,226 | (30,330) | (34,450) |
| Adjustments for non cash / non operating items |
| (5,048) | 23,864 | 31,274 |
| Cashflows from operating activities before changes in working capital |
|
6,178 |
(6,466) |
(3,176) |
| Change in property under development |
| (4,153) | (65,510) | 82,128 |
| Change in inventories |
| 2,337 | 7,666 | 2,145 |
| Other changes in working capital |
| (13,239) | 17,603 | (16,108) |
| Cashflows from operating activities |
| (8,877) | (46,707) | 64,989 |
| Cashflows from taxation |
| (191) | (314) | (476) |
| Cashflows from investing activities |
| 4,210 | 4,206 | 33,935 |
| Cashflows from financing activities |
| 10,043 | (2,924) | (136,452) |
| Net increase / (decrease) in cash and cash equivalents |
| 5,185 | (45,739) | (38,004) |
| Cash and cash equivalents at start of period |
| 48,764 | 86,768 | 86,768 |
| Cash and cash equivalents at end of period |
| 53,949 | 41,029 | 48,764 |
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
This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
As required by the Disclosure and Transparency Rules of the Financial Services Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the company's published consolidated financial statements for the year ended 31 December 2009.
The comparative figures for the financial year ended 31 December 2009 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 (i) unqualified, (ii) did not include a reference to any matter to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
Going Concern
The Interim Report has been prepared on a going concern basis, which assumes the Group will be able to meet its liabilities as they fall due, for the foreseeable future. The Directors have prepared cash flow forecasts on the basis of which they expect that the Group will continue as a going concern.
The principle area of risk and uncertainty is the impact of further falls in property valuations resulting in breaches of covenants that cannot be avoided by payments from cash resources. The cashflow forecasts show that the Group has improved its headroom in covenant compliance.
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 the use of short-term summer tenancies. However, the second half-year typically has lower revenues from the existing portfolio.
Conversely, the Group's build cycle for new properties is to plan to complete construction shortly before the start of the academic year in September each year. The addition of these completed properties in the second half increases the segment's revenues in that period.
3. Segment reporting
Segment information for the Group is presented in respect of the Group's business segments based on the Group's management and internal reporting structure. The Group undertakes its Development and Investment activities directly and in joint ventures with third parties. The joint ventures are an integral part of each segment and have similar economic and other characteristics to the Group's direct activities. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis and is reported excluding mark to market and valuation movements.
The Directors do not consider that the group has meaningful geographical segments as it operated exclusively in the United Kingdom in the year.
The Group's Development segment undertakes the acquisition and development of properties, (including the manufacture and sale of modular building components) to practical completion. Many of the Group's properties are acquired with a view to a future sale to the UNITE UK Student Accommodation Fund. The Development segment's revenue predominantly comprises the sales proceeds of properties, including those sold to the UNITE UK Student Accommodation Fund; it also includes revenue from the sale of modules to third parties and joint ventures, and development management fees earned from joint ventures.
The Investment segment comprises the asset and property management of completed properties, owned directly by the Group or by joint ventures. Its revenues are derived from net rental income and asset management fees earned from joint ventures.
Notes to the consolidated interim financial statements
| 3. | Segment reporting (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
| (a) Segment revenues and costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited 30 June 2010 |
Investment segment |
Development segment | Unallocated corporate costs |
Total |
|
|
| £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
| Revenue | 37,547 | 11,032 | - | 48,579 |
|
| Cost of sales | (15,574) | (15,846) | - | (31,420) |
|
| Write down of work in progress, property under development and completed property |
- |
(2,659) |
- |
(2,659) |
|
| Total cost of sales | (15,574) | (18,505) | - | (34,079) |
|
| Administrative expenses | (6,767) | (1,247) | (3,119) | (11,133) |
|
|
| 15,206 | (8,720) | (3,119) | 3,367 |
|
| Loan interest and similar charges | (7,469) | - | - | (7,469) |
|
| Interest rate swap payment on ineffective hedges | (5,651) | - | - | (5,651) |
|
| Interest income on deposits | 104 | - | - | 104 |
|
| Share of joint venture investment segment result | 4,802 | - | - | 4,802 |
|
| Adjust asset management fee for minority interest | 81 | - | - | 81 |
|
| Segment result / corporate costs | 7,073 | (8,720) | (3,119) | (4,766) |
|
|
|
|
|
|
|
|
| Unaudited 30 June 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue | 32,948 | 8,412 | - | 41,360 |
|
| Cost of sales | (13,852) | (12,685) | - | (26,537) |
|
| Write down of property under development, completed property and work in progress |
- |
(11,633) |
- |
(11,633) |
|
| Total cost of sales | (13,852) | (24,318) | - | (38,170) |
|
| Administrative expenses | (7,567) | (427) | (4,135) | (12,129) |
|
|
| 11,529 | (16,333) | (4,135) | (8,939) |
|
| Loan interest and similar charges | (5,953) | - | - | (5,953) |
|
| Interest rate swap receipts | (3,554) | - | - | (3,554) |
|
| Interest income on deposits | 352 | - | - | 352 |
|
| Share of joint venture investment segment result | 4,380 | - | - | 4,380 |
|
| Adjust asset management fee for minority interest | 99 | - | - | 99 |
|
| Segment result / corporate costs | 6,853 | (16,333) | (4,135) | (13,615) |
|
|
|
|
|
|
|
|
| 31 December 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue | 64,405 | 200,947 | - | 265,352 |
|
| Cost of sales | (29,416) | (197,935) | - | (227,351) |
|
| Write down of work in progress, property under development and completed property |
- |
(19,609) |
- |
(19,609) |
|
| Total cost of sales | (29,416) | (217,544) | - | (246,960) |
|
| Administrative expenses | (13,875) | (657) | (8,565) | (23,097) |
|
|
| 21,114 | (17,254) | (8,565) | (4,705) |
|
| Loan interest and similar charges | (13,284) | - | - | (13,284) |
|
| Interest rate swap payment on ineffective hedges | (9,684) | - | - | (9,684) |
|
| Interest income on deposits | 480 | - | - | 480 |
|
| Share of joint venture investment segment result | 7,430 | - | - | 7,430 |
|
| Adjust asset management fee for minority interest | 160 | - | - | 160 |
|
| Adjust property sales for minority interest | - | 430 | - | 430 |
|
| Segment result / corporate costs | 6,216 | (16,824) | (8,565) | (19,173) |
|
|
|
|
|
|
|
Notes to the consolidated interim financial statements
| 3. | Segment reporting (continued) |
|
|
|
|
| (a) Segment revenues and costs (continued) |
| Investment segment revenue |
|
|
|
|
|
|
| Unaudited 30 June 2010 | Unaudited 30 June 2009 |
31 Dec 2009 |
|
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
|
| Management fees (note 3c) |
| 4,078 | 3,615 | 6,404 |
| Adjust asset management fee for minority interest |
| (81) | (99) | (160) |
| Management fee per income statement |
| 3,997 | 3,516 | 6,244 |
| Rental income from wholly owned and leased assets (note 3c) |
|
33,550 |
29,432 |
58,161 |
| Investment segment revenue |
| 37,547 | 32,948 | 64,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Development segment revenue |
|
|
|
|
|
|
| Unaudited 30 June 2010 | Unaudited 30 June 2009 |
31 Dec 2009 |
|
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
|
| Property sales from completed properties and properties under development |
|
2,540 |
8,302 |
189,973 |
| Manufacturing revenue |
| 7,115 | - | 9,902 |
| Development management fee |
| 1,377 | 110 | 1,072 |
| Development segment revenue |
| 11,032 | 8,412 | 200,947 |
|
|
|
|
|
|
|
| (b) Segment result and adjusted loss |
|
|
|
|
|
|
|
|
|
|
|
|
| The Group reports an adjusted loss, on the basis recommended for real estate companies by EPRA, the European Public Real Estate Association, which excludes movements relating to changes in values of investment properties and interest rate swaps, profits on disposal of investment properties and the related tax effects. The components of this loss are shown below together with a reconciliation to the profit / (loss) reported under IFRS. The items shown in this table represent the amounts attributable to the parent company shareholders, hence excluding any minority interest. Items affected in this way have been marked as "net of minority interest". | ||||
|
|
|
|
|
|
|
|
|
|
Note | Unaudited 30 June 2010 | Unaudited 30 June 2009 |
31 Dec 2009 |
|
|
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
| Investment segment result | 3(c) | 7,073 | 6,853 | 6,216 |
|
|
|
|
|
|
|
|
| Development segment result |
| (8,720) | (16,333) | (16,824) |
|
|
|
|
|
|
|
|
| Other unallocated items |
|
|
|
|
|
| Corporate costs (excluding share option fair value charges) |
| (2,629) | (2,875) | (5,118) |
|
| Share option fair value charges |
| (490) | (335) | (412) |
|
| Restructuring costs |
| - | (925) | (3,035) |
|
| Share of joint venture overheads (net of minority interest) |
| (216) | (178) | (464) |
|
| Loan break costs and costs written off on refinancing |
| - | - | (24) |
|
| Swap loss realised on cancellation |
| - | - | (9,560) |
|
| Share of joint venture current tax credit |
| 46 | 683 | 683 |
|
| Current tax credit / (charge) (net of minority interest) |
| 865 | (195) | (201) |
|
| Adjusted loss for the year attributable to owners of the parent company |
|
(4,071) |
(13,305) |
(28,739) |
|
|
|
|
|
|
|
Notes to the consolidated interim financial statements
| 3. | Segment reporting (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
| (b) Segment result and adjusted loss (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
| Reconciliation of adjusted loss to IFRS reported profit / (loss) |
|
|
|
|
|
|
|
| Unaudited 30 June 2010 | Unaudited 30 June 2009 |
31 Dec 2009 |
|
|
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
| Adjusted loss for the year attributable to owners of the parent company |
|
(4,071) |
(13,305) |
(28,739) |
|
| Net valuation gains / (losses) on properties |
| 13,390 | (14,542) | (15,337) |
|
| Loss on sale of property |
| (656) | (2,493) | (3,416) |
|
| Share of joint venture valuation gains / (loss) |
| 16,160 | (9,506) | (1,472) |
|
| Minority interest share of valuations (gains) / losses |
| (1,012) | 1,044 | (71) |
|
| Share of joint venture (loss) / profit on disposal |
| (13) | 55 | 62 |
|
| Changes in fair value of interest rate swaps |
| (17,141) | 6,140 | 2,823 |
|
| Share of joint venture changes in fair value of interest rate swaps |
|
(384) |
- |
(55) |
|
| Interest rate swap payment on ineffective hedges allocated to the investment segment |
3(c) |
5,651 |
3,554 |
9,684 |
|
| Deferred tax |
| (1,681) | (672) | 1,619 |
|
| Share of joint venture deferred tax |
| (455) | (9) | 41 |
|
| Profit / (loss) for the year attributable to owners of the parent company |
|
9,788 |
(29,734) |
(34,861) |
|
|
|
|
|
|
|
|
| The Group measures its operational performance by considering the income generated from properties compared with its overhead, which can be calculated as follows: | ||||
|
|
|
|
|
|
|
|
| Net portfolio contribution |
|
|
|
|
|
|
|
| Unaudited 30 June 2010 | Unaudited 30 June 2009 |
31 Dec 2009 |
|
|
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
| Investment segment result |
| 7,073 | 6,853 | 6,216 |
|
| Corporate costs (excluding share option fair value charges) |
| (2,629) | (2,875) | (5,118) |
|
| Share of joint venture overheads |
| (216) | (178) | (464) |
|
|
|
| 4,228 | 3,800 | 634 |
|
|
|
|
|
|
|
|
| The Group's wholly owned properties are split between several categories of fixed and current assets. Those held as fixed assets are carried at fair value with profits or losses on disposal shown separately in the income statement. Whereas properties in current assets are carried at cost unless fair value is lower and disposals are included in sales and cost of sales. Additionally revaluation and disposal profits or losses of properties held by joint ventures are accounted for separately as part of the Group's share of joint ventures. The overall impact of the movement in property valuations and profits or losses on disposal on the interests of the parent company shareholders is summarised on the next page: | ||||
|
|
|
|
|
|
|
Notes to the consolidated interim financial statements
| 3. | Segment reporting (continued) |
|
|
|
|
| (b) Segment result and adjusted loss (continued) |
|
| Property valuation movements |
|
|
|
|
|
|
|
| Current assets | Fixed assets |
| ||
|
|
Unaudited 30 June 2010 | Cost of sales impairments | Revenue / cost of sales disposal |
Net valuation movement | Loss on disposal | Total |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
|
| Development |
|
|
|
|
|
|
| Property under development | (526) | - | - | - | (526) |
|
| Completed property | (2,049) | (184) | - | - | (2,233) |
|
| Share of joint venture | - | - | 5,310 | - | 5,310 |
|
| Work in progress write downs | (84) | - | - | - | (84) |
|
|
| (2,659) | (184) | 5,310 | - | 2,467 |
|
| Investment |
|
|
|
|
|
|
| Investment property | - | - | 13,371 | - | 13,371 |
|
| Share of joint venture | - | - | 9,838 | (13) | 9,825 |
|
| Loss on disposal of investment property | - | - | - | (656) | (656) |
|
|
| - | - | 23,209 | (669) | 22,540 |
|
| Tangible fixed assets | - | - | 19 | - | 19 |
|
|
| (2,659) | (184) | 28,538 | (669) | 25,026 |
|
| Impact of unbooked NAV: |
|
|
|
|
|
|
| - post property completion | - | 7,418 | - | - | 7,418 |
|
| - arising from development | - | 4,963 | - | - | 4,963 |
|
|
| (2,659) | 12,197 | 28,538 | (669) | 37,407 |
|
|
|
|
|
|
|
|
|
| Property valuation movements |
|
|
|
|
|
|
|
| Current assets | Fixed assets |
| ||
|
|
Unaudited 30 June 2009 | Cost of sales impairments | Revenue / cost of sales disposal |
Net valuation movement | Loss on disposal | Total |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
|
| Development |
|
|
|
|
|
|
| Property under development | (7,970) | - | - | - | (7,970) |
|
| Investment property under development | - | - | (5,602) | - | (5,602) |
|
| Completed property | (1,177) | (4,320) | - | - | (5,497) |
|
| Share of joint venture | - | - | (40) | - | (40) |
|
| Work in progress write downs | (2,486) | - | - | - | (2,486) |
|
|
| (11,633) | (4,320) | (5,642) | - | (21,595) |
|
| Investment |
|
|
|
|
|
|
| Investment property | - | - | (8,774) | - | (8,774) |
|
| Share of joint venture | - | - | (8,422) | 55 | (8,367) |
|
| Loss on disposal of investment property | - | - | - | (2,493) | (2,493) |
|
|
| - | - | (17,196) | (2,438) | (19,634) |
|
| Tangible fixed assets | - | - | (166) | - | (166) |
|
|
| (11,633) | (4,320) | (23,004) | (2,438) | (41,395) |
|
| Impact of unbooked NAV: |
|
|
|
|
|
|
| - post property completion | - | 1,804 | - | - | 1,804 |
|
| - arising from development | - | (6,242) | - | - | (6,242) |
|
|
| (11,633) | (8,758) | (23,004) | (2,438) | (45,833) |
|
|
|
|
|
|
|
|
Notes to the consolidated interim financial statements
| 3. | Segment reporting (continued) |
|
|
|
|
| (b) Segment result and adjusted loss (continued) |
|
| Property valuation movements |
|
|
|
|
|
|
|
| Current assets | Fixed assets |
| ||
|
|
31 December 2009 | Cost of sales impairments | Revenue / cost of sales disposal |
Net valuation movement | Loss on disposal | Total |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
|
| Development |
|
|
|
|
|
|
| Property under development | (11,691) | (5,686) | - | - | (17,377) |
|
| Investment property under development | - | - | (6,682) | - | (6,682) |
|
| Completed property | (5,330) | 9,963 | - | - | 4,633 |
|
| Share of joint venture | - | - | 1,997 | - | 1,997 |
|
| Work in progress write downs | (2,588) | - | - | - | (2,588) |
|
|
| (19,609) | 4,277 | (4,685) | - | (20,017) |
|
| Investment |
|
|
|
|
|
|
| Investment property | - | - | (8,460) | - | (8,460) |
|
| Share of joint venture | - | - | (3,540) | 62 | (3,478) |
|
| Loss on disposal of investment property | - | - | - | (3,416) | (3,416) |
|
|
| - | - | (12,000) | (3,354) | (15,354) |
|
| Tangible fixed assets | - | - | (195) | - | (195) |
|
|
| (19,609) | 4,277 | (16,880) | (3,354) | (35,566) |
|
| Impact of unbooked NAV: |
|
|
|
|
|
|
| - post property completion | - | 2,695 | - | - | 2,695 |
|
| - arising from development | - | (13,646) | - | - | (13,646) |
|
|
| (19,609) | (6,674) | (16,880) | (3,354) | (46,517) |
|
|
|
|
|
|
|
|
Notes to the consolidated interim financial statements
|
| (c) Investment segment result (see through basis) |
|
|
|
|
| |||||||||||||
|
|
|
| |||||||||||||||||
|
| Information on the Group's investment activities on a see through basis (showing the Group's share of joint ventures), including an allocation of interest, is set out below. | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Unaudited 30 June 2010 |
|
|
|
|
|
|
|
| Group on see through basis | |||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
100% Unite |
Share of co-invested joint ventures | ||||||||||||||||
|
|
| Wholly Owned | Leased/Other |
Total |
USAF | Capital Cities | Student Village |
OCB |
Total |
Total | |||||||||
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Rental income | 24,138 | 9,412 | 33,550 | 7,763 | 3,411 | 1,500 | - | 12,674 | 46,224 | |||||||||
|
| Property operating expenses (excl. lease rentals) |
(6,194) |
(3,361) |
(9,555) |
(1,895) |
(616) |
(352) |
- |
(2,863) |
(12,418) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Net operating income |
17,944 |
6,051 |
23,995 |
5,868 |
2,795 |
1,148 |
- |
9,811 |
33,806 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Management fees | - | 4,078 | 4,078 | - | (236) | - | - | (236) | 3,842 | |||||||||
|
| Administrative expenses |
- |
(6,767) |
(6,767) |
- |
- |
- |
- |
- |
(6,767) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Investment segment result before interest and operating lease rentals |
17,944 |
3,362 |
21,306 |
5,868 |
2,559 |
1,148 |
- |
9,575 |
30,881 | |||||||||
|
| Operating lease rentals |
- |
(6,019) |
(6,019) |
- |
- |
- |
- |
- |
(6,019) | |||||||||
|
| Loan interest and similar charges |
(7,469) |
- |
(7,469) |
(2,167) |
(2,025) |
(615) |
- |
(4,807) |
(12,276) | |||||||||
|
| Interest rate swap payments |
(5,651) |
- |
(5,651) |
- |
- |
- |
- |
- |
(5,651) | |||||||||
|
| Interest income on deposits |
104 |
- |
104 |
28 |
3 |
2 |
1 |
34 |
138 | |||||||||
|
| Financing costs | (13,016) | (6,019) | (19,035) | (2,139) | (2,022) | (613) | 1 | (4,773) | (23,808) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Investment segment result |
4,928 |
(2,657) |
2,271 |
3,729 |
537 |
535 |
1 |
4,802 |
7,073 | |||||||||
Property operating expenses and operating lease rentals are shown as cost of sales in note 3(a). Operating lease rental result from sale and leaseback transactions which are considered a form of financing, hence the costs are shown next to interest above.
Notes to the consolidated interim financial statements
| 3. | Segment reporting (continued) |
|
|
|
| |||||||
|
|
|
|
|
|
| |||||||
|
| (c) Investment segment see through basis (continued) |
|
|
|
| |||||||
|
|
| |||||||||||
|
| Unaudited 30 June 2009 |
|
|
|
|
|
|
| Group on see through basis | |||
|
|
|
|
|
|
|
|
|
| ||||
|
|
| 100% Unite | Share of co-invested joint ventures | |||||||||
|
|
| Wholly Owned | Leased/Other |
Total |
USAF | Capital Cities | Student Village |
Total |
Total | |||
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
| Rental income | 21,176 | 8,256 | 29,432 | 7,828 | 3,286 | 1,337 | 12,451 | 41,883 | |||
|
| Property operating expenses (excl. lease rentals) |
(5,804) |
(2,774) |
(8,578) |
(2,127) |
(624) |
(403) |
(3,154) |
(11,732) | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
| Net rental income | 15,372 | 5,482 | 20,854 | 5,701 | 2,662 | 934 | 9,297 | 30,151 | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
| Management fees | - | 3,615 | 3,615 | - | (227) | - | (227) | 3,388 | |||
|
| Administrative expenses |
- |
(7,567) |
(7,567) |
- |
- |
- |
- |
(7,567) | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
| Investment segment result before interest and operating lease rentals |
15,372 |
1,530 |
16,902 |
5,701 |
2,435 |
934 |
9,070 |
25,972 | |||
|
| Operating lease rentals |
- |
(5,274) |
(5,274) |
- |
- |
- |
- |
(5,274) | |||
|
| Loan interest and similar charges |
(5,953) |
- |
(5,953) |
(2,486) |
(1,595) |
(654) |
(4,735) |
(10,688) | |||
|
| Interest income on deposits |
352 |
- |
352 |
22 |
10 |
13 |
45 |
397 | |||
|
| Interest rate swap payments |
(3,554) |
- |
(3,554) |
- |
- |
- |
- |
(3,554) | |||
|
| Financing costs | (9,155) | (5,274) | (14,429) | (2,464) | (1,585) | (641) | (4,690) | (19,119) | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
| Investment segment result |
6,217 |
(3,744) |
2,473 |
3,237 |
850 |
293 |
4,380 |
6,853 | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
| Property operating expenses and operating lease rentals are shown as cost of sales in note 3(a). Operating lease rental result from sale and leaseback transactions which are considered a form of financing, hence the costs are shown next to interest above. | |||||||||||
Notes to the consolidated interim financial statements
| 3. | Segment reporting (continued) |
|
|
|
|
| ||||||||||||
|
|
|
| ||||||||||||||||
|
| (c) Investment segment see through basis (continued) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| 31 December 2009 |
|
|
|
|
|
|
| Group on see through basis | |||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
100% Unite |
Share of co-invested joint ventures | |||||||||||||||
|
|
| Wholly Owned | Leased/Other |
Total |
USAF | Capital Cities | Student Village |
OCB |
Total |
Total | ||||||||
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Rental income | 43,200 | 14,961 | 58,161 | 14,522 | 6,610 | 2,587 | - | 23,719 | 81,880 | ||||||||
|
| Property operating expenses (excl. lease rentals) |
(12,921) |
(5,767) |
(18,688) |
(4,016) |
(1,266) |
(759) |
- |
(6,041) |
(24,729) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Net operating income |
30,279 |
9,194 |
39,473 |
10,506 |
5,344 |
1,828 |
- |
17,678 |
57,151 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Management fees | - | 6,404 | 6,404 | - | (446) | - | - | (446) | 5,958 | ||||||||
|
| Administrative expenses |
- |
(13,875) |
(13,875) |
- |
- |
- |
- |
- |
(13,875) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Investment segment result before interest and operating lease rentals |
30,279 |
1,723 |
32,002 |
10,506 |
4,898 |
1,828 |
- |
17,232 |
49,234 | ||||||||
|
| Operating lease rentals |
- |
(10,728) |
(10,728) |
- |
- |
- |
- |
- |
(10,728) | ||||||||
|
| Loan interest and similar charges |
(13,284) |
- |
(13,284) |
(4,970) |
(3,614) |
(1,270) |
- |
(9,854) |
(23,138) | ||||||||
|
| Interest rate swap payments |
(9,684) |
- |
(9,684) |
- |
- |
- |
- |
- |
(9,684) | ||||||||
|
| Interest income on deposits |
480 |
- |
480 |
22 |
12 |
16 |
2 |
52 |
532 | ||||||||
|
| Financing costs | (22,488) | (10,728) | (33,216) | (4,948) | (3,602) | (1,254) | 2 | (9,802) | (43,018) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Investment segment result |
7,791 |
(9,005) |
(1,214) |
5,558 |
1,296 |
574 |
2 |
7,430 |
6,216 | ||||||||
Property operating expenses and operating lease rentals are shown as cost of sales in note 3(a). Operating lease rental result from sale and leaseback transactions which are considered a form of financing, hence the costs are shown next to interest above.
Notes to the consolidated interim financial statements
| 3. | Segment reporting (continued) | ||||||||||||
|
|
|
| |||||||||||
|
| (d) Segment assets and liabilities (see through basis) | ||||||||||||
|
|
|
| |||||||||||
|
| Unaudited 30 June 2010 |
|
|
|
|
|
|
Group on see through basis | |||||
|
|
|
100% Unite Wholly Owned |
|
|
|
|
| ||||||
|
|
| Share of co-invested joint ventures | |||||||||||
|
|
|
USAF | Capital Cities | Student Village |
OCB |
Total |
Total | ||||||
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Investment property | 412,090 | 170,511 | 112,878 | 31,085 | - | 314,474 | 726,564 | |||||
|
| Investment property under development |
- |
- |
138 |
- |
44,290 |
44,428 |
44,428 | |||||
|
| Completed property | 198,825 | - | - | - | - | - | 198,825 | |||||
|
| Property under development | 47,538 | - | - | - | - | - | 47,538 | |||||
|
| Investment & development property |
658,453 |
170,511 |
113,016 |
31,085 |
44,290 |
358,902 |
1,017,355 | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Cash - investment | 65,124 | 14,861 | 2,013 | 2,675 | 887 | 20,436 | 85,560 | |||||
|
| Other assets - investment | 42,925 | 225 | 232 | 19 | - | 476 | 43,401 | |||||
|
| Other assets - development | 9,943 | - | 2 | - | 753 | 755 | 10,698 | |||||
|
| Other assets | 117,992 | 15,086 | 2,247 | 2,694 | 1,640 | 21,667 | 139,659 | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Debt - investment | (279,288) | (77,915) | (76,004) | (22,568) | - | (176,487) | (455,775) | |||||
|
| Debt - development | (194,777) | - | - | - | (22,105) | (22,105) | (216,882) | |||||
|
| Other liabilities - investment | (37,475) | (2,207) | (1,901) | (2,365) | - | (6,473) | (43,948) | |||||
|
| Other liabilities - development | (8,490) | - | (49) | - | (2,822) | (2,871) | (11,361) | |||||
|
| Interest rate swaps | (42,174) | (2,493) | (9,258) | (1,517) | (1,694) | (14,962) | (57,136) | |||||
|
| Total liabilities | (562,204) | (82,615) | (87,212) | (26,450) | (26,621) | (222,898) | (785,102) | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Net assets attributable to owners of the parent company |
214,241 |
102,982 |
28,051 |
7,329 |
19,309 |
157,671 |
371,912 | |||||
|
| Minority Interest | (19) | 16,155 | - | - | - | 16,155 | 16,136 | |||||
|
| Net assets | 214,222 | 119,137 | 28,051 | 7,329 | 19,309 | 173,826 | 388,048 | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Adjusted net assets |
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Net assets attributable to owners of the parent company |
214,241 |
102,982 |
28,051 |
7,329 |
19,309 |
157,671 |
371,912 | |||||
|
| Mark to market of interest rate swaps |
41,976 |
2,493 |
9,258 |
1,517 |
1,694 |
14,962 |
56,938 | |||||
|
| Valuation gain not recognised on property held at cost |
30,367 |
- |
- |
- |
- |
- |
30,367 | |||||
|
| Deferred tax | - | - | - | 362 | - | 362 | 362 | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Adjusted net assets | 286,584 | 105,475 | 37,309 | 9,208 | 21,003 | 172,995 | 459,579 | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
| |||||||||||
Development debt shown above comprises all debt relating to the development segment including that secured on completed properties. Notes to the consolidated interim financial statements
|
| (d) Segment assets and liabilities (see through basis) |
| |||||
|
|
|
|
|
| |||
|
| Unaudited 30 June 2009 (Restated) | 100% Unite | Share of co-invested joint ventures | Group on see through basis | |||
|
|
| Wholly Owned | USAF | Capital Cities | Student Village | Total | Total |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
|
|
| Investment property | 389,955 | 161,168 | 114,045 | 28,850 | 304,063 | 694,018 |
|
| Investment property under development | 44,210 | - | 150 | - | 150 | 44,360 |
|
| Completed property | 116,605 | - | - | - | - | 116,605 |
|
| Property under development | 273,243 | - | - | - | - | 273,243 |
|
| Investment and development property | 824,013 | 161,168 | 114,195 | 28,850 | 304,213 | 1,128,226 |
|
|
|
|
|
|
|
|
|
|
| Cash | 53,686 | 4,407 | 1,730 | 3,160 | 9,297 | 62,983 |
|
| Other assets - investment | 47,713 | 108 | 219 | 3,505 | 3,832 | 51,545 |
|
| Other assets - development | 7,245 | - | 5 | - | 5 | 7,250 |
|
| Interest rate swaps | 497 | - | - | - | - | 497 |
|
| Other assets | 109,141 | 4,515 | 1,954 | 6,665 | 13,134 | 122,275 |
|
|
|
|
|
|
|
|
|
|
| Debt - investment | (391,642) | (89,132) | (76,005) | (22,924) | (188,061) | (579,703) |
|
| Debt - development | (245,654) | - | - | - | - | (245,654) |
|
| Other liabilities - investment | (38,858) | (1,545) | (1,153) | (5,799) | (8,497) | (47,355) |
|
| Other liabilities - development | (38,016) | - | (679) | - | (679) | (38,695) |
|
| Interest rate swaps | (35,308) | (1,580) | (5,088) | (1,161) | (7,829) | (43,137) |
|
| Total liabilities | (749,478) | (92,257) | (82,925) | (29,884) | (205,066) | (954,544) |
|
|
|
|
|
|
|
|
|
|
| Net assets attributable to owners of the parent company | 183,676 | 73,426 | 33,224 | 5,631 | 112,281 | 295,957 |
|
| Minority interest | (82) | 14,485 | - | - | 14,485 | 14,403 |
|
| Net assets | 183,594 | 87,911 | 33,224 | 5,631 | 126,766 | 310,360 |
|
|
|
|
|
|
|
|
|
|
| Adjusted net assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net assets attributable to owners of the parent company | 183,676 | 73,426 | 33,224 | 5,631 | 112,281 | 295,957 |
|
| Mark to market of interest rate swaps | 33,954 | 1,580 | 5,088 | 1,161 | 7,829 | 41,783 |
|
| Valuation gain not recognised on property held at cost | 24,499 | - | - | - | - | 24,499 |
|
| Deferred tax | - | - | - | 56 | 56 | 56 |
|
|
|
|
|
|
|
|
|
|
| Adjusted net assets | 242,129 | 75,006 | 38,312 | 6,848 | 120,166 | 362,295 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Notes to the consolidated interim financial statements
| 3. | Segment reporting (continued) | ||||||||||||
|
|
|
| |||||||||||
|
| (d) Segment assets and liabilities (see through basis) | ||||||||||||
|
|
|
| |||||||||||
|
| 31 December 2009 |
|
|
|
|
|
|
Group on see through basis | |||||
|
|
|
100% Unite Wholly Owned |
|
|
|
|
| ||||||
|
|
| Share of co-invested joint ventures | |||||||||||
|
|
|
USAF | Capital Cities | Student Village |
OCB |
Total |
Total | ||||||
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Investment property | 403,600 | 163,747 | 110,922 | 29,495 | - | 304,164 | 707,764 | |||||
|
| Investment property under development |
- |
- |
150 |
- |
30,938 |
31,088 |
31,088 | |||||
|
| Completed property | 204,113 | - | - | - | - | - | 204,113 | |||||
|
| Property under development | 38,097 | - | - | - | - | - | 38,097 | |||||
|
| Investment & development property |
645,810 |
163,747 |
111,072 |
29,495 |
30,938 |
335,252 |
981,062 | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Cash - investment | 48,429 | 13,684 | 2,043 | 2,241 | 2,047 | 20,015 | 68,444 | |||||
|
| Other assets - investment | 54,239 | 160 | 183 | 80 | - | 423 | 54,662 | |||||
|
| Other assets - development | 12,534 | - | 2 | - | 730 | 732 | 13,266 | |||||
|
| Other assets | 115,202 | 13,844 | 2,228 | 2,321 | 2,777 | 21,170 | 136,372 | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Debt - investment | (276,020) | (77,834) | (76,004) | (22,735) | - | (176,573) | (452,593) | |||||
|
| Debt - development | (162,406) | - | - | - | (14,493) | (14,493) | (176,899) | |||||
|
| Other liabilities - investment | (45,040) | (2,376) | (1,750) | (1,920) | - | (6,046) | (51,086) | |||||
|
| Other liabilities - development | (27,831) | - | (267) | - | (3,717) | (3,984) | (31,815) | |||||
|
| Interest rate swaps | (29,401) | (1,756) | (6,148) | (1,302) | (546) | (9,752) | (39,153) | |||||
|
| Total liabilities | (540,698) | (81,966) | (84,169) | (25,957) | (18,756) | (210,848) | (751,546) | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Net assets attributable to owners of the parent company |
220,314 |
95,625 |
29,131 |
5,859 |
14,959 |
145,574 |
365,888 | |||||
|
| Minority Interest | 150 | 15,009 | - | - | - | 15,009 | 15,159 | |||||
|
| Net assets | 220,464 | 110,634 | 29,131 | 5,859 | 14,959 | 160,583 | 381,047 | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Adjusted net assets |
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Net assets attributable to owners of the parent company |
220,314 |
95,625 |
29,131 |
5,859 |
14,959 |
145,574 |
365,888 | |||||
|
| Mark to market of interest rate swaps |
29,533 |
1,756 |
6,148 |
1,302 |
546 |
9,752 |
39,285 | |||||
|
| Valuation gain not recognised on property held at cost |
17,986 |
- |
- |
- |
- |
- |
17,986 | |||||
|
| Deferred tax | - | - | - | (33) | - | (33) | (33) | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
| Adjusted net assets | 267,833 | 97,381 | 35,279 | 7,128 | 15,505 | 155,293 | 423,126 | |||||
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
| |||||||||||
Notes to the consolidated interim financial statements
| 4. | Tax |
|
|
|
|
| Current Tax |
|
| Current tax expense for the periods presented is the estimated tax payable or receivable on the taxable result for the 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 tax rate expected to apply for the periods in which the assets and liabilities are anticipated to reverse.
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 |
| ||||
|
|
|
| ||||
|
|
| Note | Unaudited 30 June 2010 | Unaudited 30 June 2009 | 31 Dec 2009 | |
|
|
|
|
| Restated | As previously reported |
|
|
|
|
| £'000 | £'000 | £'000 | £'000 |
|
| Earnings |
|
|
|
|
|
|
| Basic (and diluted) |
| 9,788 | (29,734) | (29,734) | (34,861) |
|
|
|
|
|
|
|
|
|
| Adjusted | 3(b) | (4,071) | (13,305) | (13,305) | (28,739) |
|
|
|
|
|
|
|
|
|
| Weighted Average number of shares (thousands) |
|
|
|
|
|
|
| Basic |
| 159,876 | 126,564 | 125,162 | 134,747 |
|
| Dilutive potential ordinary shares |
| 135 | - | - | 3 |
|
| Diluted |
| 160,011 | 126,564 | 125,162 | 134,750 |
|
|
|
|
|
|
|
|
|
| Earnings per share (pence) |
|
|
|
|
|
|
| Basic |
| 6.1 | (23.5) | (23.8) | (25.9) |
|
| Diluted |
| 6.1 | (23.5) | (23.8) | (25.9) |
|
| Adjusted |
| (2.5) | (10.5) | (10.6) | (21.3) |
|
|
|
|
|
|
|
|
Movements in the weighted average number of shares have resulted from the firm placing, placing and open offer in October 2009 and the issue of shares arising from the employee share based payment schemes.
The calculation of earnings per share for the period-ended 30 June 2009 and the net asset value per share as at 30 June 2009 have been restated in accordance with the retrospective adjustment requirements of IAS 33 Earnings per Share with regard to the firm placing, placing and open offer in October 2009. The issue comprised 32,819,972 shares and gave rise to proceeds of £82.050m, £77.272m net of issue costs. The adjustments arising from the reclassification of joint venture investment loans explained in note 8 have no impact on earnings or net asset value per share. Notes to the consolidated interim financial statements
| 5. | Earnings per share and net asset value per share (continued) | |||||
|
|
|
| ||||
|
| Net asset value per share |
| ||||
|
|
|
| ||||
|
|
| Note | Unaudited 30 June 2010 | Unaudited 30 June 2009 | 31 Dec 2009 | |
|
|
|
|
| Restated | As previously reported |
|
|
|
|
| £'000 | £'000 | £'000 | £'000 |
|
| Net assets |
|
|
|
|
|
|
| Basic |
| 371,912 | 373,229 | 295,957 | 365,888 |
|
|
|
|
|
|
|
|
|
| Adjusted - pre dilution | 3(d) | 459,579 | 439,567 | 362,295 | 423,126 |
|
| Outstanding share options |
| 1,422 | 1,342 | 1,342 | 1,514 |
|
| Adjusted - diluted |
| 461,001 | 440,909 | 363,637 | 424,640 |
|
|
|
|
|
|
|
|
|
| Number of shares (thousands) |
|
|
|
|
|
|
| Basic |
| 160,268 | 159,177 | 126,357 | 159,607 |
|
| Outstanding share options |
| 734 | 709 | 709 | 778 |
|
| Diluted |
| 161,002 | 159,886 | 127,066 | 160,385 |
|
|
|
|
|
|
|
|
|
| Net assets value per share (pence) |
|
|
|
|
|
|
| Basic |
| 232 | 234 | 234 | 229 |
|
| Adjusted - pre dilution |
| 287 | 276 | 287 | 265 |
|
| Adjusted - diluted |
| 286 | 276 | 286 | 265 |
|
|
|
|
|
|
|
|
| 6. | Investment and development property |
|
|
|
| |
|
|
|
|
|
|
| |
|
| Unaudited 30 June 2010 |
|
|
|
| |
|
|
|
Investment property | Investment property under development |
Completed property |
Property under development |
Total |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
|
| Balance at start of period | 403,600 | - | 204,113 | 38,097 | 645,810 |
|
| Cost capitalised | 1,140 | - | 414 | 8,365 | 9,919 |
|
| Interest capitalised | - | - | - | 469 | 469 |
|
| Transfer from property under development |
- |
- |
(1,133) |
1,133 |
- |
|
| Disposals | (6,021) | - | (2,520) | - | (8,541) |
|
| Net realisable value provision | - | - | (2,049) | (526) | (2,575) |
|
| Valuation gains | 14,596 | - | - | - | 14,596 |
|
| Valuations losses | (1,225) | - | - | - | (1,225) |
|
| Net valuation gains | 13,371 | - | - | - | 13,371 |
|
| Balance at end of period | 412,090 | - | 198,825 | 47,538 | 658,453 |
Notes to the consolidated interim financial statements
| 6. | Investment and development property (continued) |
|
|
| ||
|
|
|
|
|
|
| |
|
| Unaudited 30 June 2009 |
|
|
|
| |
|
|
|
Investment property | Investment property under development |
Completed property |
Property under development |
Total |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
|
| Balance at start of period | 403,700 | 52,989 | 75,214 | 249,124 | 781,027 |
|
| Cost capitalised | 1,137 | 11,567 | 308 | 75,071 | 88,083 |
|
| Interest capitalised | 115 | 766 | - | 6,308 | 7,189 |
|
| Transfer from investment property under development |
15,510 |
(15,510) |
- |
- |
- |
|
| Transfer from property under development |
- |
- |
42,260 |
(42,260) |
- |
|
| Disposals | (21,733) | - | - | (7,030) | (28,763) |
|
| Net realisable value provision | - | - | (1,177) | (7,970) | (9,147) |
|
| Valuation gains | 3,861 | - | - | - | 3,861 |
|
| Valuations losses | (12,635) | (5,602) | - | - | (18,237) |
|
| Net valuation losses | (8,774) | (5,602) | - | - | (14,376) |
|
| Balance at end of period | 389,955 | 44,210 | 116,605 | 273,243 | 824,013 |
|
| 31 December 2009 |
|
|
|
| |
|
|
|
Investment property | Investment property under development |
Completed property |
Property under development |
Total |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
|
| Balance at start of period | 403,700 | 52,989 | 75,214 | 249,124 | 781,027 |
|
| Cost capitalised | 3,401 | 13,063 | - | 95,415 | 111,879 |
|
| Interest capitalised | 138 | 1,229 | - | 9,255 | 10,622 |
|
| Transfer from property under development |
- |
- |
214,898 |
(214,898) |
- |
|
| Transfer from investment property under development |
60,599 |
(60,599) |
- |
- |
- |
|
| Transfer from work in progress | - | - | - | 503 | 503 |
|
| Disposals | (55,778) | - | (80,669) | (89,611) | (226,058) |
|
| Net realisable value provision | - | - | (5,330) | (11,691) | (17,021) |
|
| Valuation gains | 5,670 | 486 | - | - | 6,156 |
|
| Valuations losses | (14,130) | (7,168) | - | - | (21,298) |
|
| Net valuation losses | (8,460) | (6,682) | - | - | (15,142) |
|
| Balance at end of period | 403,600 | - | 204,113 | 38,097 | 645,810 |
Notes to the consolidated interim financial statements
| 6. | Investment and development property (continued) | |||||
|
|
| |||||
|
| Properties owned by the Group, shown below, and joint ventures, have been valued on the basis of "market value" as defined in the RICS Appraisal and Valuation Manual issued by the Royal Institution of Chartered Surveyors as determined by CB Richard Ellis Ltd, Jones Lang LaSalle Ltd and Messrs King Sturge, Chartered Surveyors, as external valuers. Investment property and investment property under development are carried at fair value. Property under development of £47.538m (30 June 2009: £273.243m) and completed property of £198.825m (30 June 2009: £116.605) held in current assets are carried at cost less a net realisable value provision, but their fair value has been determined on the same basis and is disclosed below.
Following the formation of the UNITE UK Student Accommodation Fund (USAF) it is likely that the Fund will acquire the Group's future developments. Hence properties acquired with the intention of selling them to the UNITE UK Student Accommodation Fund following completion are now treated as property under development in current assets, (carried at the lower of cost and NRV), rather than fixed assets, (carried at fair value). The impact if these properties were carried at fair value rather than cost is as follows: | |||||
|
|
| |||||
|
|
|
|
|
|
| |
|
| Unaudited 30 June 2010 |
|
|
|
| |
|
|
|
Investment property | Investment property under development |
Completed property |
Property under development |
Total |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
|
| Balance at end of period | 412,090 | - | 198,825 | 47,538 | 658,453 |
|
| Valuation gain not recognised on property held at cost |
- |
- |
24,595 |
5,772 |
30,367 |
|
| Fair value at end of period | 412,090 | - | 223,420 | 53,310 | 688,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unaudited 30 June 2009 |
|
|
|
|
|
|
|
|
Investment property | Investment property under development |
Completed property |
Property under development |
Total |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
|
| Balance at end of period | 389,955 | 44,210 | 116,605 | 273,243 | 824,013 |
|
| Valuation gain not recognised on property held at cost |
- |
- |
16,145 |
8,354 |
24,499 |
|
| Fair value at end of period | 389,955 | 44,210 | 132,750 | 281,597 | 848,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 31 December 2009 |
|
|
|
|
|
|
|
|
Investment property | Investment property under development |
Completed property |
Property under development |
Total |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
|
| Balance at end of period | 403,600 | - | 204,113 | 38,097 | 645,810 |
|
| Valuation gain not recognised on property held at cost |
- |
- |
17,177 |
809 |
17,986 |
|
| Fair value at end of period | 403,600 | - | 221,290 | 38,906 | 663,796 |
|
|
|
|
|
|
|
|
Notes to the consolidated interim financial statements
| 7. | Inventories | ||||
|
|
| ||||
|
|
|
| Unaudited 30 June 2010 | Unaudited 30 June 2009 |
31 Dec 2009 |
|
|
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
| Finished goods |
| 327 | - | 5,206 |
|
| Work in progress |
| 4,711 | 1,096 | 1,364 |
|
| Raw materials and consumables |
| 791 | 1,550 | 1,596 |
|
|
|
| 5,829 | 2,646 | 8,166 |
|
|
|
|
|
|
|
| 8. | Investments in joint ventures |
Reclassification of joint venture loans and investments
The Group finances its joint ventures through a mixture of interest free loans and capital contributions. In the financial statements for the year ended 31 December 2009, following a request for information from the Financial Reporting Review Panel, the Group identified a classification error and reclassified certain of the loans and capital contributions it makes to its joint ventures from current other receivables to non-current asset joint venture investment loans and investment in joint ventures to reflect their respective terms. In these financial statements the comparative figures for the period to 30 June 2009 have also been restated to correct this misclassification.
All partners finance the joint ventures on the same terms; hence the finance income now arising on these receivables equals the increase in the share of joint venture loss. This adjustment therefore has no effect on the result for the year or net assets.
The amounts reclassified from current other receivables (30 June 2009: £51.913m) have been taken to joint venture investment loans (30 June 2009: £2.262m) and investment in joint ventures (30 June 2009: £49.651m). The Group has also now discounted the joint venture loans already held as non-current other receivables, of £3.667m in 2009 reducing this amount by £158,000 and increasing the investment in joint ventures by the same amount. These loans are now amalgamated with the other reclassified receivables in joint venture investment loans.
The unwinding of the discount on the interest free loans has increased the Group's finance income in the period to 30 June 2009 by £118,000. As noted above this is offset by an increase in the share of joint venture loss and so has no effect on the result for the period.
Notes to the consolidated interim financial statements
| 8. | Investments in joint ventures (continued) |
|
| Unaudited 30 June 2010 | Unaudited to 30 June 2009 (Restated) | ||||
|
| Investment in joint venture | Joint venture investment loan | Total interest | Investment in joint venture | Joint venture investment loan | Total interest |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share of profit: |
|
|
|
|
|
|
| Investment segment result | 4,802 | - | 4,802 | 4,380 | - | 4,380 |
| Minority interest share of investment segment result |
576 |
- |
576 |
646 |
- |
646 |
| Overheads | (229) | - | (229) | (193) | - | (193) |
| Net revaluation gain / (loss) | 16,160 | - | 16,160 | (9,506) | - | (9,506) |
| Current tax | 46 | - | 46 | 683 | - | 683 |
| Deferred tax | (455) | - | (455) | (9) | - | (9) |
| Impact of discounting on interest free loans |
(378) |
378 |
- |
(118) |
118 |
- |
| Ineffective swaps recognised in income statement |
(384) |
- |
(384) |
- |
- |
- |
| Other | (13) | - | (13) | 55 | - | 55 |
|
| 20,125 | 378 | 20,503 | (4,062) | 118 | (3,944) |
|
|
|
|
|
|
|
|
| Share of items recognised directly in reserves: |
|
|
|
|
|
|
| Movement in effective hedges |
(4,944) |
- |
(4,944) |
2,329 |
- |
2,329 |
| Deferred tax on movement in effective hedges |
60 |
- |
60 |
38 |
- |
38 |
|
|
|
|
|
|
|
|
| Disposals | - | (28) | (28) | - | - | - |
| Profit adjustment related to trading with joint venture |
(738) |
111 |
(627) |
(861) |
35 |
(826) |
| Distributions received | (1,721) | - | (1,721) | (1,930) | - | (1,930) |
|
| 12,782 | 461 | 13,243 | (4,486) | 153 | (4,333) |
| At start of period | 148,344 | 12,239 | 160,583 | 125,481 | 5,618 | 131,099 |
| At end of period | 161,126 | 12,700 | 173,826 | 120,995 | 5,771 | 126,766 |
|
|
|
|
|
|
|
|
The impact of discounting the interest free joint venture loans is included in the finance income as disclosed in the income statement. Notes to the consolidated interim financial statements
| 8. | Investments in joint ventures (continued) |
|
| 31 December 2009 | ||
|
| Investment in joint venture | Joint venture investment loan | Total interest |
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
|
|
| Share of profit: |
|
|
|
| Investment segment result | 7,430 | - | 7,430 |
| Minority interest share of investment segment result | 1,150 | - | 1,150 |
| Overheads | (499) | - | (499) |
| Net revaluation loss | (1,473) | - | (1,473) |
| Current tax | 683 | - | 683 |
| Deferred tax | 41 | - | 41 |
| Impact of discounting on interest free loans | (411) | 411 | - |
| Ineffective swaps recognised in income statement | (55) | - | (55) |
| Other | 63 | - | 63 |
|
| 6,929 | 411 | 7,340 |
|
|
|
|
|
| Share of items recognised directly in reserves: |
|
|
|
| Movement in effective hedges | 497 | - | 497 |
| Deferred tax on movement in effective hedges | 77 | - | 77 |
|
|
|
|
|
| Additions | 25,825 | 6,082 | 31,907 |
| Profit adjustment related to trading with joint venture |
(3,542) |
128 |
(3,414) |
| Distributions received | (6,923) | - | (6,923) |
|
| 22,863 | 6,621 | 29,484 |
| At start of year | 125,481 | 5,618 | 131,099 |
| At end of year | 148,344 | 12,239 | 160,583 |
|
|
|
|
|
| 9. | Borrowings and financial derivatives | ||||
|
|
| ||||
|
|
|
| Unaudited 30 June 2010 | Unaudited 30 June 2009 |
31 Dec 2009 |
|
|
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
| Non-current |
|
|
|
|
|
| Bank and other loans |
| 422,629 | 516,447 | 438,247 |
|
| Interest rate swaps |
| 42,174 | 33,398 | 29,401 |
|
|
|
| 464,803 | 549,845 | 467,648 |
|
| Current |
|
|
|
|
|
| Overdrafts |
| 11,320 | 12,657 | - |
|
| Bank loans |
| 40,116 | 108,192 | 179 |
|
| Interest rate swaps |
| - | 1,910 | - |
|
|
|
| 51,436 | 122,759 | 179 |
|
|
|
|
|
|
|
Independent review report to The UNITE Group plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 which comprises of the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in shareholders' equity, the consolidated statement of cashflows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
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 Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). 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 half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.
As disclosed in note1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.
Stephen Bligh for and on behalf of KPMG Audit Plc
Chartered Accountants
London
26 August 2010