14th Sep 2006 07:03
Unite Group PLC14 September 2006 Date: 14 September 2006On behalf of: The UNITE Group plc ("UNITE" / "Group") The UNITE Group plc - Interim Results The UNITE Group plc, the UK's largest provider of student hospitality, todayannounces its interim results for the six months to 30 June 2006. Highlights: Net Asset Value per share rose 16% to 365p (31 December 2005: 314p); adjusted,fully diluted NAV per share increased by 15% to 416p (31 December 2005: 363p) Net rental growth and yield compression contributed £15m and £41m respectivelyto the Group's capital growth; development activity contributed £13m Total portfolio revenue including joint ventures rose by 28% to £54.6m (2005:£42.8m); Total portfolio operating margin consistent at 65.0% (2005: 65.6%) 4,276 new bed spaces successfully completed, commissioned and opened for theacademic year 2006/07; of which 2,848 delivered using the Group's modular buildtechnology. Group on track to deliver circa 4,000 bed spaces for the 2007/08academic year and 5,000 in 2008/09 New site acquisition activity strong, with new opportunities secured comprising8,656 beds for delivery from 2007 Group continues to explore the creation of a dedicated student accommodationfund for which UNITE would act as property and fund manager, thereby shiftingthe emphasis of UNITE's business model to that of a co-investing fund and assetmanager and developer Appointment of new Chief Financial Officer announced today; Mark Allan and NickPorter to assume roles of Chief Executive Officer and Deputy Chairman,respectively, with immediate effect Commenting, Geoffrey Maddrell, Chairman of The UNITE Group plc, said: "Customer demand for good quality, well located student accommodation remainsstrong and UNITE is as well placed as ever to meet this need. With occupierdemand firmly established, the sector's consistent low risk rental growthprofile is helping to demonstrate the investment credentials of the sector.UNITE is a strong advocate of this evolution and continues to drive investmentinto the sector. "From a development perspective, it is not surprising that we are beginning tosee increasing competition in our market. However, the Group's track record,expertise and reputation, coupled with a consistent focus on customerexperience, mean that it is well placed to benefit from the development of itssector and build on its market-leading position." - ends - Enquiries: The UNITE Group plcMark Allan / Tabitha Birchall Tel: 0117 302 7000 Financial DynamicsStephanie Highett / Dido Laurimore Tel: 020 7831 3113 A copy of the investor presentation is available on our website: www.unite-group.co.uk Publication quality photographs are available on request. Notes to Editors: UNITE is the UK's leading student hospitality company. Listed in the FTSE 250index of the London Stock Exchange, and with a property portfolio valued at some£1.1 billion located across the United Kingdom, the Group focuses on theprovision and management of high quality, well-located student accommodation andhospitality services in strong higher education markets. UNITE delivers the real student experience, whilst at the same time helping toregenerate cities as part of the community and contributing to the improvementof the country's housing. It undertakes the planning, development andmanagement of sites, often working closely with the universities and colleges,to deliver accommodation for students across all ages and nationalities. UNITEdevelopments typically show high occupancy levels and robust rental growth asdemand continues to rise for places in UK Higher Education and for safe, highquality accommodation for students. Further information on UNITE is available at www.unite-group.co.uk CHAIRMAN'S STATEMENT Introduction Over the past three years, UNITE has increasingly strengthened its marketleading position in student accommodation and, based on a clear, consistentstrategy, remains well positioned to benefit from the recent positive evolutionof the sector from an investment perspective. UNITE's performance in the six months under review has been strong. Net assetvalue per share increased 16% to 365 pence from 314 pence at 31 December 2005.When adjusted to exclude movements in provisions for deferred tax and the marketvalue of interest rate swaps, adjusted net asset value per share increased by14% to 420 pence (31 December 2005: 367 pence). On a fully diluted basis,adjusted net asset value per share increased 15% over the six months to 416pence, from 363 pence at the previous year end, reflecting the strong businessperformance in both our investment and development portfolios. This finalmeasure is the one most commonly used to benchmark the valuation of quotedproperty companies. Profit before tax for the six months to June 2006, as disclosed in the incomestatement, was £61.5m, up from £9.7m for the same period in 2005. This includesrevaluation gains and movements in relation to ineffective hedges. When thesemovements are excluded, adjusted profit increased 44% to £2.3m (2005: £1.6m). Market update During 2006, the UK student accommodation market has evolved importantly fromboth a demand and supply perspective. On the demand side, September 2006 seesthe introduction of variable fees across England and, whilst this has had apredictable impact on the number of university applications, the medium termtrend remains robust. As at 30 August, applications to study at University in2006/07 were down 3.2% year on year; when the extraordinary annual increase inapplications for 2005/06 (8.0%) is taken into account, 2006/07 applicationsstill represent an average annual increase of 2.3% since 2004/05. Over the medium term we expect continued, steady growth in student enrolment,underpinned by three factors: the demographic profile of the UK population overthe next five years; the Government's policy of encouraging participation inHigher Education amongst young people; and continued increases in therecruitment of overseas students by UK universities. However, the introductionof variable fees will introduce a stronger consumer attitude amongst studentsand some universities may well struggle to meet enrolment and therefore fundingtargets. UNITE's strategic approach to investment acknowledges and anticipatesthis and we do not expect occupancy across our portfolio to be materiallyaffected. On the supply side, it is recognised by local authorities that studentaccommodation can play a major role in regeneration, in increasing housingsupply and in rebalancing the accommodation provision for students in ourcities. April 2006 saw the coming into force of those provisions of theHousing Act 2004 relating to houses in multiple occupation. Those provisionsbring stringent standards and a licensing regime to the private rented sector,which are intended to improve the quality of private rented housing. It is tooearly to expect a discernable impact on supply, whilst many landlords are stillin the process of obtaining licences; but in the medium term we expect this toboth reduce supply and encourage upgrade investment amongst smaller privatelandlords. This is likely to happen more quickly in cities where studenthousing is a sensitive political issue. The quality and high specification ofUNITE's portfolio leaves the Group well placed to benefit from this legislation. In terms of the investment market for student accommodation, 2006 has seen aconsiderable increase in activity. Various funds have been established totarget investment in the sector and, in total, approximately 7,750 student bedspaces have been sold or have been marketed for sale so far in 2006. Thecombined value of these transactions is around £360m, equating to an averagevalue per bed of over £46,000 and implying net initial yields well below 6%.When the effect of stabilisation, which drives higher rental growth in the earlyyears of operation, is factored in this suggests stabilised yields ofapproximately 6%. Notwithstanding the increased investment appetite for studentaccommodation, there still remains a shortage of good quality, well locatedproperty, which we expect to firmly underpin valuations moving forward. Net asset value performance The Group's net asset value at 30 June 2006 was £448m (365 pence per share). Onan adjusted, fully diluted basis, net asset value per share increased 15% to 416pence from 363 pence at December 2005. The key components of the Group's strongnet asset value performance, including our share of joint venture companies,were as follows: • Taking into account top line rental growth and movements in ouroperating cost base, net rental growth within the completed investment portfoliocontributed to capital growth of 1.4% or £15m; • Yield compression across the investment portfolio delivered furthercapital growth of £41m (3.8%). The average stabilised yield across the Group'sportfolio, now stands at 6.05%, compared to 6.32% at December 2005; • Our development activity contributed £13m of net asset value growthduring the period. Development activity UNITE is very active in development, which continues to form a crucial elementof the Group's future growth plans. For the academic year 2006/07 the Group hassuccessfully completed, commissioned and opened 4,276 new bed spaces, of which2,848 were delivered using the Group's unique modular build technology and 1,808are operated within joint ventures. Modular technology again proved its valueto the Group in helping to ensure that projects were delivered on time andwithin budget; cost, time and quality benefits continue to accrue to the Group.We are committed to increasing the use of modular technology as a Group stillfurther and are investing to advance our capabilities in this area accordingly. In November 2005, the Group raised £30m of new equity (net of issue costs) inpart to enable it to fund new development opportunities. Following thisfundraising, the Group has been very active in the acquisition marketplace and,in total, has now secured opportunities comprising 8,656 beds for delivery in2007, 2008 and beyond. We expect to deliver approximately 4,000 bed spaces forthe 2007/08 academic year and approximately 5,000 more for 2008/09. Thepipeline of further opportunities remains promising. The evolution of the investment market for student accommodation will inevitablyfilter into the development marketplace and we expect competition for sites toincrease. The Group's long track record, unrivalled in-house experience,established reputation and modular capabilities will all help to ensure thatUNITE remains well positioned, although the increasing competition is likely toconstrain development margins in the near term. Joint ventures Our Capital Cities and Student Village joint ventures continue to perform well,together contributing £6.5m to profit in the period. The increase incontribution was primarily due to revaluation gains (net of deferred tax) of£6.1m within the joint venture companies (2005: £0.4m). Approximately 1,000 bed spaces per annum for 2007 and 2008 will be deliveredthrough the Group's 'Capital Cities' joint venture with GIC RE, in which theGroup has a 30% stake and for which it acts and receives fees as developmentmanager, asset manager and property manager. The joint venture was establishedin March 2005 with a business plan to develop and operate a portfolio of 4,000bed spaces in the capital cities of London and Edinburgh. The joint venture isperforming well and, based on the number of sites it has secured in recentmonths subject to planning, the Group is on track to deliver this business plan.Consequently we would expect the joint venture's capital to be fully allocatedby the end of 2006. From this point onwards it is our intention that new projects in those citieswill be undertaken solely by UNITE - we anticipate continued developmentopportunities in the medium term within the markets currently covered by thejoint venture and consider that best value will be attained for shareholders bypursuing this strategy. This will increase the proportion of development profitaccruing solely to the Group from its development activities from 2007 onwards,with a consequential impact on capital requirements. Portfolio performance In the first six months of the year UNITE managed 30,729 completed bed spaces(2005: 26,913) and a further 4,276 are being opened for the 2006/07 academicyear. Rental income growth remains strong with total portfolio revenue(including 100% of the joint venture companies) up by 28%, compared with thefirst six months of last year. Adjusting for our share of joint venturecompanies, portfolio revenues grew by 17% to £48.9m. We continue to see competitor activity in a small number of well suppliedcities, which will constrain short term rental growth in these markets.However, we remain confident that our strategy of investing in high qualitylocations and customer service will deliver strong relative performance and longterm returns. We expect occupancy levels for the 2006/07 academic year of 92%.This small drop in average occupancy is more than off-set by the improvedtenancy mix (5,156 12 month tenancies, up from 4,095 in 2005/2006) and theexpected like-for-like revenue growth of 6.5%, of which 3.7% relates to corerental growth. The Group's portfolio operating margin (defined as net rents after operatingcosts expressed as a percentage of gross rents; for the full operationalportfolio including joint ventures and managed assets) was broadly flat at 65.0%in first six months of the year as expected (2005:65.6%). This was achieveddespite the continuing impact of rising utility costs which were partiallyoffset by strong cost management elsewhere. Whilst some of the cost increaseswill be recovered through rental increases for the 2006/07 academic year,operating margins are not expected to grow in 2006. Portfolio profit (UNITE's share of portfolio operating profit less attributableinterest charge) grew strongly, up 52% to £6.8m (2005: £4.5m), driven by thebenefits of UNITE's increasing scale, underlying rental growth and theperformance of our joint ventures, which contributed £0.9m to portfolio profit(2005: £nil). Development revenues UNITE undertakes a number of non-rental activities, including the provision ofmanagement, consultancy and modular construction services to its joint venturesand the periodic disposal of certain non-core elements of development sites.These activities make up the development revenues disclosed within the incomestatement. The number and value of non-core development assets sold in the period hasfallen compared with the high levels seen last year, which has resulted in asignificant drop in revenue to £5.6m in the six months from £19.1m in the sameperiod last year. These activities, together with our pre-contract costs, contributed a loss of£2.6m in the period (2005: £0.2m loss). Pre-contract development costsincreased 19% to £1.9m (2005: £1.6m), reflecting increased acquisition activityin building our future development pipeline. This increased level of activityis expected to continue for the rest of the year. Our people As UNITE continues to grow, develop its brand, open more new properties andprovide services to more customers, the focus we give to the attraction,retention and development of talent becomes ever more important. Our training, development and support infrastructure has been strengthenedduring the period and we have continued to expand our management developmentactivity at all levels of the business. The importance of leadershipdevelopment and, in particular, values-based leadership remains in focus andthis was a key element in both our receipt of Investors in People accreditationand being recognised as one of the UK's leading employers by The Guardian forthe second year running. Our values led approach has also helped build aculture that supports our strategy and has resulted in employee retention andstability well ahead of comparable sectors. During 2006 we have concluded a major restructuring of our Hospitality Servicesbusiness, which is responsible for the ongoing management of our portfolio andthe service we provide to our customers. With the focus of this initiative verymuch on improved service to our student customers, we have accordingly increasedthe number of people in customer-facing, property based roles and reduced thelayers of supporting management. This has given the Group a truly scaleablepeople platform and allowed us to provide 24/7 cover at all of our sites. Therestructuring has increased the level of on-site operating costs, which has beenreflected in the valuation of our assets. We are confident, however, that thisincreased resource will positively impact long term rental growth and assetvalues across the portfolio. Financing and investment During 2006, the Group's development and investment activities have been fundedfrom the proceeds of the Group's November 2005 share placing, from debt advancedunder its revolving development and investment financing facilities and throughits joint venture arrangements. In total, the Group funded £102m of capitalexpenditure, including that financed through joint ventures, and its net debtincreased by £23m to £745m (excluding adjustments for the market value ofinterest rate swaps). Adjusted gearing, defined as net debt as a percentage ofshareholders' funds excluding provisions for deferred tax and the market valueof interest rate swaps, reduced to 145% from 162% at December 2005, dueprimarily to the strong upward revaluation of the Group's investment portfolio. The Group has followed a consistent financing and investment strategy sinceearly 2004 and has successfully increased the diversity and flexibility of itscapital base as a result. This has included the sale of lower yielding assetsworth over £110m to investors with a more appropriate cost of capital and theestablishment of carefully defined joint ventures to increase developmentactivity in capital intensive situations; all of which has provided us with aplatform for a more substantial restructuring of our capital base and businessmodel. As disclosed in our pre-close trading announcement in July, we are exploring theestablishment of a dedicated student accommodation fund that would acquiresubstantially all of our completed, stabilised properties except those held assecurity for the UNITE Finance One plc bond issue of 2002. UNITE would expectto retain a substantial minority stake in such a fund, would also act andreceive fees as fund manager and property manager, as well as being entitled toa performance-related incentive fee. The fund is expected to be sufficientlycapitalised such that it can acquire further stabilised properties from UNITE infuture years. In anticipation of the successful establishment of this fund, we are takingsteps to restructure our debt facilities to ensure maximum financial advantageis secured for the Group as and when the transaction is closed. This includesthe arrangement of a short term debt facility that will be used to prepaycertain existing borrowings and allow financial restructuring to proceed aheadof the transaction. The anticipated transaction would effectively shift the emphasis of the Group'sbusiness model to that of a co-investing fund and asset manager and developer,building on the success of its joint venture initiatives, and would releasecapital for reinvestment. This would leave the Group well placed to capitaliseon further opportunities as the student accommodation market continues toevolve. Given the size of the potential transaction, we would anticipate a need toobtain shareholder approval and expect to consult shareholders in this regardbefore the end of this calendar year. Dividend In accordance with our stated policy, your Board recommends that the interimdividend be maintained at 0.83 pence per share (2005: 0.83 pence). The dividendbecomes payable on 10 November 2006 to shareholders on the register at 13October 2006. Outlook Customer demand for good quality, well located student accommodation remainsstrong and UNITE is as well placed as ever to meet this need. With occupierdemand firmly established, the consistent low risk rental growth profile of theasset class is helping to demonstrate the investment credentials of the sector.UNITE is a strong advocate of this evolution and continues to drive investmentinto the sector. From a development perspective, it is not surprising that we are seeingincreased competition in our market. However, the Group's track record,expertise and reputation, coupled with a consistent focus on customerexperience, mean that it is well placed to benefit from the development of itssector and build on its market-leading position. Consolidated income statementFor the 6 months to 30 June 2006 Note Unaudited Unaudited 6 months to 6 months to Year to 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000 Revenue 3 55,047 60,904 113,799 Cost of sales (22,841) (29,761) (54,864) Administrative expenses (9,731) (8,712) (15,671)Profit on disposal of property 200 402 2,534Net valuation gains on investment property 6 49,004 10,550 23,377 Net operating profit before net financing 71,679 33,383 69,175costs Loan interest & similar charges (21,393) (22,190) (44,212)Change in fair value of ineffective hedges 4,135 (2,829) (4,317)Finance costs (17,258) (25,019) (48,529)Finance income 541 973 1,541Net financing costs (16,717) (24,046) (46,988) Share of joint venture profit 8 6,535 365 5,944Profit before tax 61,497 9,702 28,131 Tax (expense)/ credit 4 (11,156) 606 4,179Profit for the period 50,341 10,308 32,310 Profit for the period is wholly attributable to equity holders of The UNITE Group plc. Earnings per shareBasic 5 41.2p 9.3p 28.7pDiluted 5 40.8p 9.1p 28.3p DividendsTotal paid in period 2,040 1,861 2,787Paid per ordinary share 1.67p 1.67p 2.5pTotal proposed 1,018 925 2,033Proposed per ordinary share 0.83p 0.83p 1.67p Consolidated balance sheet At 30 June 2006 Note Unaudited Unaudited 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000Assets Investment property 6 1,079,157 952,428 1,028,747 Investment property under 7 121,967 169,818 80,004development Property, plant and equipment 9,643 15,560 19,303 Investment in joint ventures 8 32,023 9,195 18,861 Intangible assets 5,860 4,619 5,465 Other receivables 7,386 6,579 8,618Total non-current assets 1,256,036 1,158,199 1,160,998 Inventories 26,321 8,618 13,418 Trade and other receivables 29,916 26,277 66,011 Cash and cash equivalents 32,851 36,728 30,297Total current assets 89,088 71,623 109,726Total assets 1,345,124 1,229,822 1,270,724 Liabilities Borrowings and financial 9 (121,910) (127,816) (124,541)derivatives Trade and other payables (54,589) (63,587) (73,559)Total current liabilities (176,499) (191,403) (198,100) Borrowings and financial 9 (659,293) (672,487) (644,671)derivatives Deferred tax liabilities (61,287) (45,476) (45,255)Total non-current liabilities (720,580) (717,963) (689,926)Total liabilities (897,079) (909,366) (888,026) Net Assets 448,045 320,456 382,698 Equity Issued share capital 30,648 27,871 30,435 Share premium 172,130 141,560 169,957 Merger reserve 40,177 40,177 40,177 Retained earnings 179,528 99,489 129,508 Revaluation reserve 23,192 17,590 17,531 Hedging reserve 2,370 (6,231) (4,910)Total equity 448,045 320,456 382,698 Total equity is wholly attributable to equity holders of The UNITE Group plc. Consolidated statement of changes in shareholders' equityFor the 6 months to 30 June 2006 Note Unaudited Unaudited 6 months to 6 months to Year to 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000 Investment property under development: - revaluation 7 8,130 811 6,208 - deferred tax (2,439) (243) (1,843)Other property - revaluation (580) - 3,933 - deferred tax 174 - (1,180)Effective hedges - movements 8,497 (5,973) (4,212) - deferred tax (2,549) 1,792 1,264 Share of joint venture valuation gain (net of related tax) 8 4,009 794 2,898Share of joint venture movements in effective hedges 8(net of related tax) 1,314 (933) (845)Net (losses) / gains recognised directly in equity 16,556 (3,752) 6,223 Profit for the period 50,341 10,308 32,310Total recognised income and expense for the period 66,897 6,556 38,533 Dividends paid (2,040) (1,861) (2,787)Own shares acquired (2,130) - -Shares issued 2,386 282 31,243Fair value of share options expensed 234 213 443 65,347 5,190 67,432 Equity at start of period 382,698 321,809 321,809Recognition of hedges under IAS39 at 1 January 2006 - (6,543) (6,543) Equity at end of period 448,045 320,456 382,698 Consolidated statement of cash flowsFor the 6 months to 30 June 2006 Unaudited Unaudited 6 months to 6 months to Year to 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000Operating activitiesProfit for the period 50,341 10,308 32,310Adjustments for non cash / non operating items (26,562) 13,595 13,883Operating profit before changes in working capital 23,779 23,903 46,193 Changes in working capital 934 251 (20,992)Cash flows from operating activities 24,713 24,154 25,201Cash flows from investing activities (21,275) (7,540) 13,322Cash flows from financing activities 797 (19,464) (47,102)Net increase / (decrease) in cash and cash equivalents 4,235 (2,850) (8,579)Cash and cash equivalents at start of period 19,917 28,496 28,496Cash and cash equivalents at end of period 24,152 25,646 19,917 Cash and cash equivalents are stated net of operational overdrafts which are disclosed in note 9. Notes to the consolidated interim financial statements 1. Basis of preparation The UNITE Group plc (the "Company") is a company domiciled in The United Kingdom. These condensed consolidated interim financial statements for the 6 months ended 30 June 2006 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interests in its joint ventures. These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and on the basis of the accounting policies disclosed in the financial statements for the year ending 31 December 2005. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2005. 2. Seasonality of operations The results of the Group's investment division, a separate business segment (see note 3), are closely linked to the level of occupancy achieved in its portfolio of property. Occupancy typically falls over the summer months (particularly July and August) as students leave for the summer holidays. The Group attempts to minimise the seasonal impact by encouraging the take up of 52 week tenancies, however, the second half-year typically has lower revenues for the existing portfolio. Conversely, the Group's build cycle for new investment property is planned to complete construction shortly before the start of the academic year in September each year. The addition of these properties to the investment division in the second half increases the division's revenues in the second half of the year. 3. Segment reporting Segment information is presented in respect of the Group's business segments based on the Group's management and internal reporting structure. The Directors do not consider that the Group has meaningful geographical segments as it operated exclusively in the United Kingdom in the year. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. The Group comprises the following main business segments: • Investment (the management and holding of investment property) • Development (construction of investment property, primarily for the Investment business segment). Unaudited Unaudited 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000 Segment revenue Investment 49,474 41,820 81,677 Development 5,573 19,084 32,122 Total revenue 55,047 60,904 113,799 Segment results Investment 28,164 25,765 47,676 Development (2,698) (240) 1,094 Unallocated - corporate costs (2,461) (2,611) (5,012) - other 27,336 (12,606) (11,448) Profit for the period 50,341 10,308 32,310 Notes to the consolidated interim financial statements 3. Segment reporting (continued) Portfolio profit is calculated as follows: Investment segment result 28,164 25,765 47,676 Net financing costs (16,717) (24,046) (46,988) Add back: changes in fair value of ineffective hedges (4,135) 2,829 4,317 Ineffective swap payments (987) (101) (1,069) Share of joint ventures 513 62 392 6,838 4,509 4,3284. Tax Current Tax Current tax expense for the interim periods presented is the expected tax payable on the taxable income for the period, calculated as the estimated average annual effective income tax rate (nil for all periods due to the effect of tax losses) applied to the pre-tax income of the interim period. Deferred tax The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using the estimated average annual effective income tax rate for the interim periods presented. The primary components of the deferred tax expense are related to increases in deferred tax liabilities, arising primarily from the group's investment property and interest rate swaps. 5. Earnings per share and net asset value per share Earnings per share The calculations of basic and adjusted earnings per share are as follows:- Unaudited Unaudited 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000 Earnings Basic (and diluted) 50,341 10,308 32,310 Adjustments: Net valuation gains on investment property (inc. share of joint ventures) (55,874) (10,946) (29,599) Movements in ineffective hedges (4,135) 2,829 4,317 Deferred tax (inc. share of joint ventures) 11,960 (606) (3,646) Adjusted 2,292 1,585 3,382 Weighted Average number of shares (thousands) Basic 122,170 111,416 112,633 Dilutive potential ordinary shares 1,325 1,552 1,526 Diluted 123,495 112,968 114,159 Earnings per share (pence) Basic 41.2 9.3 28.7 Diluted 40.8 9.1 28.3 Adjusted 1.9 1.4 3.0 Notes to the consolidated interim financial statements 5. Earnings per share and net asset value per share (continued) Net asset value per share The calculations of basic, diluted and adjusted net asset value per share are as follows:- Unaudited Unaudited 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000 Net assets Basic 448,045 320,456 382,698 Mark to market of interest rate swaps (inc share of joint 2,518 19,033 17,687 ventures) Deferred tax (inc joint ventures) 64,698 45,731 46,575 Adjusted - pre dilution 515,261 385,220 446,960 Outstanding share options 4,714 6,233 5,458 Adjusted - diluted 519,975 391,453 452,418 Number of shares (thousands) Basic 122,591 111,484 121,470 Outstanding share options 2,383 3,580 2,895 Diluted 124,974 115,064 124,365 Net assets value per share (pence) Basic 365 287 314 Adjusted - pre dilution 420 346 367 Adjusted - diluted 416 340 363 6. Investment property Unaudited Unaudited 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000 Balance at start of period 1,028,747 991,460 991,460 Acquisitions 713 450 1,102 Transfer from investment property under development - - 120,723 Transfer from property, plant and equipment 693 - - Disposals - (50,032) (107,915) Valuation gains 67,117 22,191 43,357 Valuation losses (18,113) (11,641) (19,980) Balance at end of period 1,079,157 952,428 1,028,747 The carrying amount of investment property is the fair value of the property as determined by CB Richard Ellis Ltd and Messrs King Sturge, Chartered Surveyors as external valuers. Notes to the consolidated interim financial statements 7. Investment property under development Unaudited Unaudited 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000 Balance at start of period 80,004 119,732 119,732 Cost capitalised 31,333 56,229 99,507 Interest capitalised 2,500 5,001 10,728 Disposals - (11,955) (35,448) Transfer to investment property - - (120,723) Valuation gains 11,437 6,540 9,497 Valuation losses (3,307) (5,729) (3,289) Balance at end of period 121,967 169,818 80,004 The carrying amount of investment property under development is the fair value of the property as determined by CB Richard Ellis Ltd and Messrs King Sturge, Chartered Surveyors as external valuers. 8. Investments in joint ventures Unaudited Unaudited 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000 Share of profit - net valuation gains 6,870 396 6,222 - deferred tax (804) (533) - other 469 (31) 255 6,535 365 5,944 Share of items recognised directly in reserves: - Valuation gains (net of deferred tax) 4,009 794 2,898 - Movements in effective hedges (net of deferred 1,314 (933) (845) tax) Other movements: Additions 1,398 8,152 10,047 Distributions received (94) - - 13,162 8,378 18,044 At start of period 18,861 817 817 At end of period 32,023 9,195 18,861 9. Borrowings and financial derivatives Unaudited Unaudited 30 June 2006 30 June 2005 31 Dec 2005 £'000 £'000 £'000 Non-current Bank and other loans 652,988 650,866 624,450 Finance lease liabilities 247 594 474 Interest rate swaps 6,058 21,027 19,747 659,293 672,487 644,671 Current Overdrafts 8,699 11,082 10,380 Bank loans 9,707 12,864 61,185 Build loans 103,095 103,495 52,601 Finance lease liabilities 409 375 375 121,910 127,816 124,541 Independent review report to The UNITE Group plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006, which comprises the group income statement,the group balance sheet, the group statement of changes in shareholders' equity,the group statement of cash flows and the related notes. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. This report is made solely to the company in accordance with the terms of ourengagement to assist the company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the company those matters we are required to state to itin 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 forour review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the UK. A review consistsprincipally of making enquiries of group management and applying analyticalprocedures to the financial information and underlying financial data and, basedthereon, assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Statements on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. KPMG Audit PlcChartered AccountantsLondon14 September 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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