FINANCE: The Unite Group has posted a 34% hike in earnings after a strong H1, which has prompted it to accelerate its earnings growth targets.
The student accommodation provider, which has a £1.5bn owned and part-owned portfolio, delivered EPRA earnings of £20.4m with EPS rising 17.2% to 10.9p.
Its EPRA NAV was up 5.2% to 402p, equating together with dividends to a total return of 6.1% on opening NAV per share for the six months to 30 June.
Chief executive Mark Allan said: “The strength of our business is such that we are accelerating our earnings growth targets and are now targeting a 4.5% EPS yield on NAV for the current financial year, brought forward from 2015.
“Furthermore, due to the excellent long-term visibility of rental growth and development completions, we expect our consistent earnings growth to continue into 2015 and beyond.”
Unite increased its interim dividend by 37.5% to 2.2p a share.
Looking ahead, the group said it was well positioned for growth as reservations for the 2014/15 academic year are 92%, compared with 90% at the same time last year.
This is supportive of rental growth of at least 3% for the full year, it added.
Unite’s 11-strong secured development pipeline, which has a total completed value of £524m including joint venture shares, is on track to add 32p per share to NAV and 12p per share to earnings by 2017 if expected returns are achieved.
The group recapped on a busy first half during which it strengthened and simplified its capital structure, which resulted in see-through adjusted LTV falling from 49% to 44%.
It reduced the number of co-investment vehicles from four to two following the sale of the OCB joint venture properties and increased its UCC stake to 50%, triggering a merger with LSAV.
Finally, it increased its stake in USAF to 21% as part of a wider £115m capital raise by the fund.
Commenting on investment activity in student accommodation, Allan said activity remains elevated.
He expects transaction volumes in 2014 to exceed £2bn for the third consecutive year as the recapitalisation of distressed portfolios approaches conclusion.
This heightened level of interest has translated into only modest yield compression to date, with the group’s portfolio only rising in value by 1.5% on a like-for-like basis, reflected in four basis points of yield compression taking the average portfolio yield to 6.48%.
But, he added, as the supply of available stabilised assets slows in line with diminishing distressed opportunities in the sector, yields are likely to strengthen.
bridget.o’connell@estatesgazette.com
