Unite Group confident after strong results

(Sharecast News) - Unite Group reported a sharp rise in earnings for 2024 on Tuesday, supported by strong rental growth and high occupancy rates. The FTSE 100 student accommodation provider said adjusted earnings rose 16% to £213.8m, while adjusted earnings per share increased by 5% to 46.6p.

It posted an IFRS profit attributable to owners of £441.9m, a more than fourfold increase on the prior year, with IFRS diluted earnings per share surging 291% to 96.1p.

The full-year dividend rose 5% to 37.3p per share, and the total accounting return improved to 9.6% from 2.9% in 2023.

Unite said it achieved 8.2% rental growth for the 2024-2025 academic year, with occupancy at 97.5%, significantly ahead of the 94% sector average.

That performance was underpinned by nomination agreements with university partners, which accounted for 57% of bookings for the upcoming academic year.

Demand remained strong, with university applications from UK 18-year-olds increasing by 2% for 2025-2026 and visa issuance for international students rising 14% year-on-year.

Unite said it expected continued earnings growth, guiding for a 4% to 5% increase in rental income and 97% to 98% occupancy for 2025-2026.

Adjusted earnings per share were projected to reach between 47.5p and 48.25p, as the company targeted a total accounting return of 8% to 10%, excluding potential changes in property yields.

The company continued to align its portfolio with the UK's strongest universities, completing £281m in acquisitions and £304m in disposals.

Unite also invested £48m to enhance its rental portfolio, achieving a 10% yield on cost.

Its £1.05bn development pipeline was fully funded and concentrated in Russell Group cities, with expected net operating income of £71m over the next four years.

The portfolio valuation increased by 4.8% to £6bn, driving a 6% rise in EPRA net tangible assets per share to 972p.

Unite improved its balance sheet position, reducing its net debt-to-EBITDA ratio to 5.5x from 6.1x, while loan-to-value fell to 24% from 28%.

However, the company anticipated its cost of debt will rise to 4.1% in 2025 from 3.6% in 2024.

Unite also highlighted progress on its sustainability goals, with over 99% of its portfolio rated EPC A-C and a 9% reduction in energy intensity since 2019.

The company completed its lowest-ever embodied carbon development at Bromley Place in Nottingham.

"The business performed strongly in 2024 and demonstrated resilience in a challenging market," said chief executive officer Joe Lister.

"We continue to deliver growth in our earnings over the year and our record development pipeline supports this into the medium term.

"This is underpinned by our strong university relationships, sustainable rental growth and substantial investment in our portfolio."

Lister said the outlook for 2025 was encouraging with growing momentum, driven by increasing demand and a more supportive policy environment for international students.

"Additionally, private HMO landlords continue to leave the sector, creating a shortage of student housing.

"We are well-positioned to respond, with a robust development pipeline and new university joint-venture partnerships.

"This not only provides students with high-quality homes but also frees up family housing in local communities."

Reporting by Josh White for Sharecast.com.