The UK’s leading developer and
manager of student accommodation
Annual Report & Accounts 2008
NITE Parkway Gate, home to 728 students in Manchester
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The UNITE Group plc
The Core
40 St Thomas Street
Bristol BS1 6JX
Tel: 0117 302 7000
Fax: 0117 302 7400
info@unite-group.co.uk
www.unite-group.co.uk
www.unite-students.com
www.livocity.co.uk
This report is printed on Revive 100 Offset,
which is 100% recycled paper.
Designed and produced by Proteus
www.proteus-uk.com
We’re
number
The UK’s leading developer and
manager of student accommodation
1
Contents
Section 1: Introduction
Section 2: Business review
Section 3: Business review:
Measures and growth
Section 4: Reports
Section 5: Financial statements
Section 6: Further information
2008 Highlights
Overview of UNITE
Chairman’s statement
Executing our strategy
The student accommodation market
Financial results
Investment portfolio valuations
Co-investing asset management
Development activity
Livocity
Financing
Looking ahead
Risks and uncertainties
Key performance indicators
New properties for 2009
A sustainable business
Livocity
The Board of Directors
Directors’ report
Corporate governance
Directors’ remuneration report
Independent auditors’ report
Consolidated income statement
Consolidated balance sheet
Company balance sheet
Statement of changes in shareholder equity
Statement of cash flows
Notes to the financial statements
5 year financial record
Notice of AGM
Appendix: Notes of principal changes
Glossary
Company information and UNITE management
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Taking stock – financial highlights
Against an extremely challenging economic backdrop, UNITE has delivered strong operational
performance whilst taking a proactive approach to managing its balance sheet.
99%
record occupancy
5%
drop in portfolio valuation
Record occupancy of 99% achieved for the
academic year 2008/09 with year on year rental
growth of 9.5%. 65% of rooms already reserved
for the forthcoming academic year, indicating
rental growth in the range of 7% to 10%.
Investment portfolio valuation fell by only 5%,
compared to the IPD index average fall of 27%.
The outperformance is predominantly attributable
to rental growth and rental growth prospects.
£12m
savings in 2009
£12 million identified savings across
the Group’s operations in 2009.
325pence
adjusted fully diluted net asset value
£531m
net debt, reduced from a peak of £862m
Adjusted diluted net
asset value per share
(pence per share)
The adjusted fully diluted net asset value per share
fell 21% at December 2008 from 410 pence at
December 2007.
Adjusted net debt reduced from a peak of
£862 million in November 2006 to £531
million at 31 December.
2006
2007
2008
425
410
325
In 2008, we were home to some...
303670
,
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£57m
cash available
The Group is in full compliance with all
borrowing covenants and has a cash balance
of £57 million for general purposes. Coupled
with the rental growth, this provides insulation
to absorb a further yield expansion of 60bps
to 75bps.
£325m
asset sales in 2008
£154 million of non-core assets sold to third
parties during 2008 and a further £171 million
of sales made to USAF in December 2008
following a successful £58 million capital raise
in October 2008.
1,125
new beds in London for 2010
Scaled back, fully funded, development pipeline
scheduled to deliver 1,125 new bed spaces in
2010, all of which will be located in London.
Net asset value
per share
(pence per share)
Managed
portfolio value
2006
2007
2008
391
364
258
2006
2007
2008
£1,435m
£1,723m
£1,829m
03670 ...students,
and counting.
4
Overview of UNITE
UNITE is the UK’s leading developer and manager of student accommodation. Underpinning this is
a sound business model, in-depth customer research and a unique online booking system providing
a robust platform to drive record occupancy levels and continued rental growth in a challenging
economic environment. London, which is home to 21% of all UK students, remains a key focus for
UNITE; as such 64% (by value) of the Group’s new bed spaces will be delivered in the Capital in
2009, along with our full pipeline for 2010.
Equity investment
As an active asset manager, UNITE continually
monitors the performance of its portfolio,
identifying non-core assets for disposal.
The cash generated from this activity,
coupled with the sale of assets to the
Fund, reduces debt.
UNITE UK Student
Accommodation Fund (‘The Fund’)
The UNITE UK Student Accommodation Fund
is in a unique position to acquire properties
from the UNITE portfolio. UNITE maintains full
operational management of these assets as
well as having a significant minority stake
in the Fund. UNITE also has other joint
venture relationships.
Management
UNITE conducts in-depth customer
research to ensure its products and
services are continually evolving in line
with customer expectations. As such,
UNITE offers dedicated property teams,
24 hour monitored CCTV and have
embarked on a new joint venture to
service all maintenance enquiries.
Co-Invest
Develop
What we do
Stabilise
Stabilising new assets
Once a new property is opened
outside of London, it typically takes
1 year to stabilise. This means that
the property is not yet generating
its optimal net income. For those
properties delivered in London,
there is generally no stabilisation
period required.
Marketing and sales
As the only student accommodation
provider offering customers the
ease of online booking, UNITE
is driving occupancy across its
portfolio, achieving 99% for
the 08/09 academic year.
www.unite-students.com
Acquisition
By understanding where students want
to live, and focusing on high growth
markets, UNITE’s portfolio is located in
prime locations.
Planning
In 2008, UNITE secured 10 planning consents,
5 of which were in London. By working
in partnership with the local councils and
conducting thorough public consultations,
UNITE continue to contribute towards
balanced communities.
Project management and off-site
modular production
Working in partnership with UNITE’s project
management team, UNITE Modular Solutions
are expert in delivering professional purpose-
built accommodation. The key benefits of
utilising modular technology are:
1. Faster build time: typically delivering
a reduction in build time of 30%-50%
vs. traditional methods
2. Reduced waste: UMS is ISO 14001:2004
accredited for its environmental
management and reduced waste process.
3. Quality control: ISO 9001:2000 accredited
for quality management systems, UMS
delivers predictable quality on all products
from a controlled environment.
Our Market
Demand / supply imbalance:
4 3 ,1 9 7 *
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S a v i
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*
n e w s u p p l y o f
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N e t
Our investment portfolio
Market segmentation of portfolio under management by value:
1. London
2. Sheffield
3. Liverpool
4. Manchester
5. Bristol
6. Birmingham
7. Leeds
8. Aberdeen
9. Leicester
10. Glasgow
11. All other markets
1
27%
With a continued strong
focus on London and
the delivery of an
additional 1,368
bed spaces in
2008, UNITE is
bolstering its
leading position
in the Capital.
11
18%
10
9
8
4%
4%
5%
5%
5%
7
6
9%
2
8%
7%
8%
3
5
4
How our portfolio is let:
100%
Direct let
Lease
Nominations
74%
51%
0%
2
0
0
2
8
0
0
2
30%
10%
2
0
0
2
8
0
0
2
19%
16%
2
0
0
2
8
0
0
2
“To reach a mature level of provision,
London requires AT LEAST another
100,000
student bedrooms.”***
***source: Knight Frank, London student accommodation review 2009
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Chairman’s statement
We are acutely aware of the extreme unpredictability in the financial markets and are actively
and rigorously managing our assets, balance sheet and cost base.
Overview and financial
performance
For the academic year 2008/09 UNITE has
achieved record occupancy across its portfolio of
99% and secured year on year rental growth of
9.5%. This performance is testament to the
resilience of student accommodation during a
recession and the professionalism of the Group’s
operational business, in particular its on-line
platform. However, as a business with investment
in and management responsibility for a £1.8
billion student accommodation property portfolio,
UNITE has not been immune to the severe
deterioration in the condition of global capital
markets and the resultant impact on valuations
across the commercial property market.
Values across the Group’s total operational
portfolio (including those assets held in
co-investment vehicles) fell by 5% during 2008,
despite the Group’s success in increasing
occupancy and rent levels. The value of the
Group’s investment in this portfolio also fell by
5% and expected margins on the Group’s
development programme have also fallen, the
impact of which has been fully recognised in the
independent valuation of the Group’s development
portfolio as at 31 December 2008. It is worth
noting, however, that this performance is
considerably better than the returns achieved on
UK commercial property generally, where capital
values fell by an average of 27% according to the
IPD index. In addition we have taken a provision
of £28 million against the value of land held for
development. Following the decision to scale back
our development commitments in light of the
prevailing market conditions, it was necessary
to make the provision to ensure that the land
is carried at the lower of the cost and net
realisable value.
There continues to be solid interest from
investors interested in purchasing student
accommodation investments, particularly for
smaller transaction sizes. Investment transaction
volumes held up well during 2008, with a total of
approximately £550 million of property being
bought and sold in the sector. This compares
with 2007, when transaction volumes totalled
£700 million, and has given a degree of certainty
and transparency to pricing not available in other
sectors of the market.
As a result of the decline in property values, the
Group reported a 21% fall in adjusted fully diluted
net asset value per share for the year, to 325
pence at December 2008 from 410 pence at
December 2007. On an IFRS basis, net assets
excluding minority interests fell to £320 million
(258 pence per share) from £450 million (364
pence per share) a year earlier.
The Group’s adjusted profit for the year to 31
December 2008 reflects the continued shift of
the Group towards its developer and co-investing
manager model, in particular the dilution of its
share in the rental performance of stabilised
assets (the majority of which have been sold to
USAF, in which UNITE had an average stake of
20% during the year). Adjusted profit for the year
shows a loss of £44.8 million compared to a loss
of £62.9 million for 2007. The reported loss for
the year after minority interests is £115.9 million
(2007: £37.5 million) and includes £25.3 million
of losses on the revaluation of investment
properties and a negative £32.4 million movement
in the fair value of ineffective hedges. Excluding
one-off costs, primarily relating to the market
conditions, the Group’s decision to scale back its
development activity and actions taken to reduce
the overhead base of the business, adjusted profit
shows a loss of £5.7 million for 2008 (2007:
£3.6 million loss). This is stated after pre-contract
and abortive development costs of
£6.3 million (2007: £3.7 million).
Strategy
Since late 2006 UNITE has pursued a strategy to
establish itself as a developer and co-investing
manager specialising in student accommodation.
The successful execution of this strategy means
that the Group has been, and remains in, a
stronger position to weather the ongoing
economic challenges. Adjusted net debt has been
reduced from a peak of £862 million in November
2006 to £531 million at December 2008 and the
7
Group has shifted the focus of its equity
investment into stronger markets, particularly
London, where it believes it will achieve better
long term returns. At 31 December 2008, 40% of
the Group’s gross property assets were invested
in London, up from 12% at June 2006 and 30%
at December 2007.
As the economy continued to deteriorate in 2008,
particularly in the last quarter, and financing
conditions became extremely challenging, the
Board took a number of decisive steps to mitigate
the potentially significant impact on the Group:
• In January 2008 the Group launched a full
scale operational change programme,
designed to improve customer service whilst
also reducing operating costs across the
portfolio. Savings of £10 million per annum are
being targeted across the entire operational
portfolio and the Group is on track to achieve
this in 2009. Approximately 70% of these
savings will benefit the Group directly,
including a £4 million reduction in operating
overhead, with the remainder of savings
accruing to our co-investment partners.
• The Group successfully raised £58 million
of new equity into the UNITE UK Student
Accommodation Fund (“USAF” / the “Fund”) in
October 2008 and subsequently sold a £171
million portfolio to the Fund in December
2008, enabling USAF to increase further
the size, quality and diversification of its
portfolio whilst allowing the Group to reduce
its borrowings.
• In addition to asset sales made to USAF, the
Group successfully sold £154 million of non-
core assets to third parties during the year,
well in excess of its original target for the year
of £100 million. In total, proceeds from asset
sales by the Group of £325 million in the year
(including those to USAF) exceeded total cash
spent on the development programme of £302
million and the cash released from these sales,
after the repayment of associated senior debt,
totalled £77 million.
• In October 2008, in response to the deepening
banking crisis, the Group substantially reduced
its development commitments for 2010 and
2011 project deliveries. The Group now
intends to deliver 1,125 new bed spaces in
2010, all of which are in London and are fully
funded. The total capital expenditure of £155
million on these projects represents a
reduction of approximately 50% from the
programme that was originally planned. UNITE
is unlikely to commit to any new developments
for delivery in 2011 and is now more likely to
focus on securing attractive opportunities for
delivery in 2012 and beyond.
• In response to the scaling back of its planned
development activity, the Group reduced the
number of roles in its development and group
support functions by 29% during December
2008. Since the year end, it has also
commenced consultation to reduce the number
of roles at its modular manufacturing facility by
27%. Taken together with the £4 million
operational overhead savings outlined above,
these steps will reduce the Group’s total
annual overhead costs by approximately
£9 million to £36 million.
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The Group remains committed to development as
a driver of long term growth and the programme
of 2010 deliveries is strong, with yields on cost
in excess of 8%. However, given the extreme
uncertainty in financing markets at this time,
the Group is not currently committing to any
new development projects and will not do so
until markets stabilise. Instead, it is focusing
on generating and conserving cash to enable it
to manage its balance sheet effectively.
We remain confident that, in time, the Group
will be able to secure extremely attractive
development opportunities for delivery in 2012
and beyond, and we are currently evaluating the
most effective way to finance such development
activity, including the possibility of investing
alongside other parties in a logical extension of
our co-investment model.
Year on year rental growth of
9.5%
achieved for the 2008/09 academic year
8
Chairman’s statement
Financial position
Given the sharp fall in general commercial
property values during 2008 and the recent
rights issues by a number of quoted property
companies, the financing arrangements of
companies have understandably become a key
focus for investors and we include full details of
UNITE’s debt structure later in this statement.
The Board views the current financial instability
extremely seriously, but it is important to note
the following:
• At 31 December 2008 the Group was, and it
remains, in full compliance with all of its
borrowing covenants and had cash balances
of £112 million at the same date, of which
£57 million was available for general
purposes, after full provision for committed
development expenditure.
• The Group has continued to successfully raise
new debt facilities throughout the latter part of
2008 and into 2009 – a total of £250 million
since December 2008. It has two facilities
with debt totalling £97 million expiring later
in 2009, for which it has already received
satisfactory credit approved terms to
refinance. The Group has no further material
facilities scheduled for repayment before
summer 2011.
• Following the proactive sharp reduction in
the Group’s future development plans, the
restructure of its operating business, and in
light of the certainty of refinancing outlined
above, the Group has sufficient cash resources
available to it to meet all of its remaining
development commitments, and meet its
expected deleveraging requirements over the
next 12 months, before recourse to asset
sales. Taking into account the cash buffer
and the anticipated rental growth performance
across the portfolio, we estimate that the
Group could withstand an expansion of yields
of between 60bps and 75bps without
breaching its borrowing covenants and before
recourse to asset sales.
9
• Notwithstanding the headroom outlined above,
during 2009 the Group intends to continue as
planned to sell stabilised investment assets,
either to USAF or to third parties, and is
seeking to sell approximately £150 million of
such assets during the year. This would
increase the Group’s yield expansion headroom
to a range of 90 bps to 125 bps. Investor
demand for smaller investment assets (less
than £20 million) remains relatively robust, and
it is worth noting that the average value of
UNITE’s on balance sheet assets was £14
million at the year end. As at 6 March 2009,
asset sales with a value of £15 million had
been unconditionally exchanged, at
consideration levels supportive of December
2008 values, and a further £30 million of asset
sales are in solicitors’ hands. This provides
encouraging evidence of continued demand for
student accommodation assets, despite the
broader economic challenges. The extent to
which USAF has capacity to acquire assets
from UNITE in 2009 will depend upon yield
movements and whether it is able to access
cash resources on deposit with Landsbanki,
the Icelandic bank that is in a form of
administration. Consequently, the Group is not
relying on such capacity being available.
To the extent that the Board feels the Group
would benefit from additional capital in the future
it intends at this time that such capital be raised
through asset sales and the extension of existing,
or creation of new, co-investment vehicles along
the lines of USAF or UCC (the Group’s joint
venture with GIC Real Estate). The Group has
established a strong track record in executing
such transactions in recent years and is actively
considering a number of options at this time.
Dividend
In light of the Group’s desire to conserve capital,
the Board does not recommend the payment of a
final dividend for the year (2007: 1.67 pence per
share). This means that the total dividend for the
year to 31 December 2008 will be 0.83 pence
per share (2007: 2.5 pence per share).
Operations
A key element of UNITE’s strategy has been to
improve the professionalism of the Group’s
operating platform. Through its focus on this area,
UNITE is seeking to improve the customer
experience that it offers whilst enhancing the
efficiency with which this service is delivered.
During 2008 the primary advance has been the
successful integration of the Group’s on-line
booking and payment engine, which has
emphatically met both the customer service and
efficiency objectives. For 2009, and reflecting
customer feedback, the Group’s priorities are to
build on this success with major improvements to
our internet provision and maintenance service,
both working with specialist partner providers,
and refining our city staffing model to provide a
more responsive, yet efficient, service.
People
Unlike most property companies UNITE has a
significant operational business and, even with
systems investment and process redesign, the
business’ value is fundamentally tied to the
quality of services its employees provide to the
Group’s customers.
Cash balances of
£57m
available for general purposes
During 2008 our ‘Blueprint’ business change
programme has provided us with an opportunity
to refine our core people processes and provide a
more structured approach to learning and
development. This is best signified with the
opening of our national training academy in
Birmingham, which is supported by a range of
multi-media training tools, where the Group’s
core service standards will be trained.
Periods of change are always testing times
for employees of an organisation and, with
important asset disposals in a number of cities
and a large scale operational business change
programme well under way, UNITE is certainly
undergoing change. It is testament to the
commitment and professionalism of our people
that the business has been able to perform
strongly through this period.
Board change
As announced at the Group’s preliminary results
in March 2008, I will step down as Chairman of
the Company at this year’s Annual General
Meeting, after almost ten years in the role.
In January 2009 the Group announced the
appointment of Phil White as an additional Non-
Executive Director and Chairman Designate of the
Company. He will assume the chairmanship at the
AGM. Phil is also Non-Executive Chairman
of Kier Group plc, the support services and
property development group and Non-Executive
Chairman of Lookers plc, the franchised motor
dealership group.
We are delighted to welcome him to the Board
and are confident that we will benefit from his
broad range of experience across a number of
industries, both in the public and private sector.
Outlook
The Board expects the outlook for 2009 to remain
positive from an operational perspective but
challenging from a financing perspective.
• According to UCAS statistics released on
16 February 2009, University applications for
2009/2010 have increased by 7.8% year
on year.
• As at 6 March 2009, reservations had been
received for 65% of the Group’s operational
portfolio for the forthcoming academic year at
rental levels that suggest rental growth in the
range of 7% to 10% year on year. This
compares to 62% reservations at the same
point in 2008, which itself resulted in record
occupancy and rental growth.
• This strong sales performance, coupled with
the annualised impact of the cost savings
arising from the restructure in 2008, means
that, with effect from 2009 the Group expects
to be able to cover all operational and
corporate overhead costs out of cash flow
arising from operating activities.
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• The Group will continue to focus on generating
and conserving cash to maintain its balance
sheet strength whilst the uncertain financial
market conditions remain. Consequently, the
Group will retain an extremely cautious stance
to new development commitments, and will
continue its programme of asset disposals.
• The Board recognises that the ongoing
deleveraging of the property sector is likely to
persist for a number of years and is planning
accordingly. To the extent that we feel the
Group would benefit from additional capital in
the future, in light of this, and also the
compelling development opportunities that are
likely to emerge in due course, it remains our
preference to raise such capital at the asset
level, through individual asset sales and by
raising new capital through co-investment
vehicles.
The Board’s immediate priority is to ensure that
the Group remains in a position to withstand
further deterioration in the wider economic
environment. With a clear financing and cash
position at the start of 2009, strong operating
performance and clear plans to protect the
Group’s balance sheet from further falls in
property values, the Board believes that this
objective is well in hand; and, in due course, the
Group will be able to secure a position to benefit
from the attractive development opportunities that
we expect to emerge.
Geoffrey Maddrell
Chairman
9 March 2009
10
Business review
With 99% occupancy across our portfolio, annual rental growth of 9.5% achieved last year and
reservations for the 2009/10 academic year already at 65%, student accommodation performance
is clearly standing up well in the face of a severe recession.
Executing our strategy
Since 2006 UNITE has set out to establish itself as
a developer and co-investing manager of student
accommodation, based around a scalable financing
and operating platform well suited to its resilient
core market. The transition to this business model
is substantially complete and has enabled the
Group to reduce its adjusted net debt considerably,
from a peak of £862 million in November 2006 to
£531 million as at 31 December 2008, and to
focus its capital investment in areas that are
expected to deliver higher returns over time,
particularly development activity and London.
At the beginning of 2007 the Group set itself a very
clear growth strategy – to double the net operating
income from the UK student portfolio it manages
within five years. Two years in, and despite
challenging economic circumstances, UNITE
remains on track to deliver against that objective,
with portfolio net operating income having already
grown 29% from £77 million in 2006 to £99
million in the year to December 2008. Taking into
account its committed development programme
and the rental growth the Group expects to achieve
in the coming years, its £150 million net operating
income target is firmly in range.
The key events in executing this strategy
have been:
• The successful establishment of the UNITE UK
Student Accommodation Fund in December
2006 and subsequent sale of assets to it at that
time and also in 2007 and 2008. In total UNITE
has sold assets totalling £988 million to USAF
since its formation.
• Subsequent capital raisings into USAF in April
2007 and October 2008, which have increased
third party equity commitments to a total of
£428 million and allowed the Group to dilute its
own stake down to its intended target of
approximately 20%.
• The disposal of £183 million of non-core assets
to third parties during 2007 and 2008.
UNITE share of gross assets
• The reinvestment of a proportion of asset sale
proceeds into the London market, primarily
through new development activity.
During 2008, despite the deteriorating economic
environment, the Group continued to successfully
execute its strategy, raising an additional £58
million of third party equity into USAF, selling a
£171 million portfolio of assets to the Fund and
disposing of £154 million of further, non-core,
assets to third parties. These steps have helped to
strengthen the business in the face of broader
economic challenges, particularly through the
reduction in net debt from the various asset sales
and the reinvestment of proceeds into London, the
largest and most resilient student market in the UK.
The table below summarises the shift in the
Group’s investment profile and net debt levels
since 30 June 2006 (the last reported balance
sheet prior to the formation of USAF):
30 Jun 2006
£m
31 Dec 2007
£m
31 Dec 08
£m
12%
55%
30%
3%
12%
88%
157
727
395
35
1,314
156
1,158
1,314
745
145%
30%
37%
26%
7%
380
460
331
82
1,253
40%
37%
15%
8%
447
422
169
85
1,123
390
863
31%
69%
326
797
29%
71%
1,253
540
106%
1,123
531
131%
London
Major provincial
Other provincial
Varsity cities
Total
Development
Investment
Adjusted net debt
Adjusted gearing
(net debt/equity)
Portfolio net operating income up
29%
in 2 years
11
This market data is clearly positive on a national
scale. However, as in earlier years, there will
continue to be local variations and a clear
understanding of these is vital in forming and
developing investment strategy. UNITE’s
investment strategy has always been research-led
and will remain so in the future. Of particular note
is the Group’s continued, successful focus on
London as its core market. With over 250,000 full
time students, London accounts for approximately
21% of the UK’s total full time student population
but has only approximately 50,000 purpose built
beds, or 12% of the UK total. This situation has
translated into consistently high occupancy and
rental growth which we expect to continue for
the foreseeable future.
2
n
o
i
t
c
e
S
The student
accommodation market
The market for student accommodation in the
UK continues to be characterised by strong and
growing demand and a lack of supply of good
quality, well located and managed
accommodation. For 2008/09 the number of
new entrants to Universities increased by 10.4%,
equating to 43,197 additional students (source:
UCAS 15 January 2009) and taking the total
number of full time students living away from
home to over 1.2 million for the first time.
The net new supply of bed spaces was
9,200 year on year (source: Savills research),
leading to a substantial widening of the
demand/supply imbalance. This is reflected in
high occupancy across the sector and UNITE’s
portfolio in particular.
This trend looks set to continue, with the latest
UCAS statistics indicating that, as at 16 February
2009, University applications were up a further
7.8% year on year. At the same time, the level
of new supply will be declining for the next few
years as financing constraints impact
development feasibility.
The latest UCAS application statistics, and our
own reservations data, support the notion that
student numbers typically increase during a
recession. However, it is important to note that UK
Higher Education is now less subsidised than in
previous downturns, such as the early 1990s, and
levels of both student debt and parental support
are much higher than previously. We are
monitoring all lead indicators of demand very
closely and, at this time, all are tracking positively
year on year. Whilst we will continue to examine
these indicators closely, we attribute the
continued positive market outlook to three
main factors:
• Full time student numbers have more than
doubled since the early 1990s, equating to
approximately 600,000 additional students.
Over the same period, we estimate that
purpose built accommodation supply
increased by only 45%, or 120,000 bed
spaces. The demand/supply imbalance is,
and will remain, acute.
• The profile of a typical student’s parent is likely
to be resilient to the immediate pressures of a
recession, in terms of their age, earnings and
financial position. This is supported by a
detailed customer profiling exercise undertaken
on our database of parental guarantors.
• Demand for UK Higher Education amongst
international students remains high and is
likely to be further supported by the relative
weakness of sterling.
For the 2008/09 academic year
the number of new entrants to
University increased by:
equating to
10.4%
43,197
additional students
12
Business review
Financial results
Adjusted net asset value
The financial performance of each element of the
Group’s business model (development and
co-investing asset management) is not easily
presented under International Financial Reporting
Standards (“IFRS”) and, as in previous years, we
have provided a detailed segmental analysis within
the notes to the consolidated financial statements as
well as a thorough commentary within this review.
We consider the key measure of the Group’s
financial performance to be growth in adjusted fully
diluted net asset value per share together with, to a
lesser extent, adjusted profit. The adjustments
made to the reported IFRS numbers are intended to
provide a clearer understanding of the Group’s
financial performance and are consistent with the
guidelines laid down by The European Public Real
Estate Association (“EPRA”).
Adjusted, fully diluted net asset value
General commercial property values in the UK
have fallen dramatically during 2008 (by 27%
according to the IPD index). Despite achieving
record occupancy levels of 99% and rental
growth of 9.5% across its portfolio, the value of
the Group’s student accommodation related
investments correspondingly fell during the year,
by an average of 5%. Primarily as a result of this,
the Group’s adjusted net asset value also
decreased during 2008.
Reported net asset value after minority interests
was £320 million (258 pence per share) at 31
December 2008 (2007: £450 million, 364 pence
per share). The Group’s adjusted net asset value
was £406 million or 325 pence per share on a fully
diluted basis, compared to 410 pence per share
at 31 December 2007, representing a fall of
21% across the year.
The main factors affecting the NAV performance
were the outward movement in property valuations
yields to an average of 6.2% at 31 December
2008 (2007: 5.8%) and UNITE’s decision to scale
back its development pipeline during the year in
order to preserve cash and minimise the impact of
valuation falls on gearing. The component parts,
which are explained later in this statement, of the
movement in adjusted, fully diluted net asset value
during 2008 are shown in the table below:
6 months to
30 Jun 2008
£m
6 months to
31 Dec 2008
£m
Total
2008
£m
6 months to
30 Jun 2008
pps
6 months to
31 Dec 2008
pps
Total
2008
pps
Land write downs
Net valuation gains/(losses) in period
- Rental growth
- Yield movement
Losses on asset sales
Impact of valuation reduction
Development value recognised in period
Share of Landsbanki provision
Restructuring costs
Adjusted loss before one off items and development asset sales
Swap costs and dividends
(8)
26
(34)
(6)
(22)
16
-
-
(4)
(2)
Total adjusted, fully diluted NAV movement in period
(12)
(20)
4
(38)
(9)
(63)
(9)
(6)
(5)
(8)
(1)
(92)
(28)
30
(72)
(15)
(85)
7
(6)
(5)
(12)
(3)
(104)
(6)
20
(27)
(5)
(18)
12
-
-
(3)
(3)
(12)
(16)
3
(30)
(7)
(49)
(7)
(5)
(4)
(6)
(1)
(73)
(22)
23
(57)
(12)
(68)
5
(5)
(4)
(9)
(4)
(85)
Proceeds from asset sales during 2008 totalled £325 million, whilst cash spent on the development programme was £302 million. Primarily as a result of this,
the Group’s adjusted net debt fell to £531 million from £540 million at 31 December 2007. Adjusted gearing (adjusted net debt as a percentage of adjusted net
assets) increased in the year to 131% (31 December 2007: 106%) as a result of the reduction in asset values during the period.
13
Adjusted loss
One off Items
- Write down in carrying value of land
- Restructuring costs
- Provision against Landsbanki cash deposit
- Loan break costs and costs written off on refinancing
- Interest rate swap cancellation
Adjusted loss before one off items
Notes
Notes
1
2
3
2008
£m
(44.8)
27.7
4.8
6.1
0.5
-
(5.7)
2007
£m
(62.9)
-
-
-
57.4
1.9
(3.6)
2
n
o
i
t
c
e
S
1.
2.
3.
As a result of the dramatic deterioration in the economic conditions, particularly in the last quarter of 2008, UNITE took the decision to
significantly scale back its development commitments in order to preserve cash. As a result of this decision, several of the Group’s development
sites are unlikely to be built out for some time and may be sold. To reflect this uncertainty, and to ensure that the land is carried at the lower of
cost and net realisable value, the carrying value of this land was reduced by £27.7 million during the year, to a value of £26.7 million.
Restructuring costs of £4.8 million have been incurred as a result of a substantial reorganisation of the Group that is expected to result in annual
overhead savings of £12 million. Further detail of these savings is provided later in this statement.
Following the sale of assets by USAF in September 2008, £30 million of its cash resources were placed on deposit with Landsbanki for a period
of two months. Following the extraordinary events in the global banking sector in late 2008, precipitated by the collapse of Lehman Brothers,
Landsbanki was placed into a form of administration on 8 October and, as a result, the funds are currently not accessible. Whilst work is ongoing
to recover the cash deposit and initial indications point to substantial recovery, a full provision has been made in USAF until such time as any
recovery is made. UNITE’s share of this provision is £6.1 million.
Adjusted profit
In the year to 31 December 2008, the Group
reported a loss excluding minority interests of
£115.9 million compared to a loss of £37.5
million in 2007. £71.1 million of this loss was
attributable to movements in asset valuations
(both properties and financial instruments) and
the associated tax impact of these movements.
Adjusted profit, which excludes these items,
showed a loss of £44.8 million, compared to a
loss of £62.9 million in 2007 and is stated after
several one off items, primarily relating to market
conditions, the Group’s decision to scale back
its development activity and actions taken to
reduce the overhead base of the business.
These items are summarised and explained
in the adjacent table:
As highlighted in previous years, the Group’s
business model involves the sale of revenue
generating stabilised investment assets to external
parties (most notably USAF) and the reinvestment
of proceeds into development activity (non
revenue generating). As a result, the Group’s
share of revenues from its stabilised investment
portfolio has fallen in recent years, although its
earnings will grow over time as management
fees increase.
The following table summarises the impact of this shift in recent years:
Total net operating income from managed portfolio
UNITE’s share of income
UNITE’s net operating income
Management fee income
Interest costs (including lease costs)
Operational and corporate overhead
Net portfolio contribution
2006
£m
77.2
90%
69.8
1.1
(53.1)
(15.7)
2.1
2007
£m
88.4
64%
56.7
6.9
(44.5)
(17.4)
1.7
2008
£m
98.8
53%
52.0
4.9
(42.3)
(20.0)
(5.4)
Net portfolio contribution is an important performance measure for the Group as it represents the net profit
to UNITE from managing the entire operational portfolio.
In the current economic climate, the Board recognises the importance of ensuring that the Group’s net
portfolio contribution is positive such that the business can cover all corporate overhead, regardless of
whether it relates to operations or development. Following the restructuring of the business in 2008, and
in light of the continuing strong reservations performance, the Board believes that the business is on track
to achieve this in 2009.
14
Business review
The operating and
investment portfolio
For the 2008/09 academic year UNITE is operating
36,700 bed spaces across 119 properties. The
Group’s ownership stake in these assets varies
from the management of sale and leaseback assets
to full ownership, depending upon the type of asset
and its phase of operation. Assets in which the
Group has a minority stake are as follows:
• Stabilised direct let assets, other than those
in London and Edinburgh, are typically held
in USAF. At 31 December 2008 UNITE had a
beneficial interest of 18.6% in USAF.
• The majority of stabilised direct let assets in
London and Edinburgh are held in the UNITE
Capital Cities joint venture (“UCC”) with GIC RE.
At 31 December 2008 UNITE had a 30% stake
in UCC.
• One asset remains in the UNITE Student Village
joint venture with Lehman Brothers (“USV”)
where UNITE has a 51% interest. Lehman
Brothers was placed in administration in October
2008 and the administrators are currently
marketing their 49% share of the joint venture.
Investment assets held wholly on the Group’s
balance sheet fall into three principal categories:
• Stabilising assets; these are properties that
have recently been completed and are not yet
generating their optimal net operating income.
Historically, the impact of lower initial occupancy
and asset mobilisation costs have tended to
reduce net operating income by approximately
30% compared to a stabilised asset. However,
recent improvements in our sales and
operational platforms have significantly improved
the performance of these assets. Once these
assets stabilise fully, our intention is to sell
them to USAF, subject to it having sufficient
investment capacity, or to other co-investment
vehicles. A total of £171 million of assets were
sold to USAF in 2008.
• Assets with redevelopment or active asset
management potential.
• Non-core legacy assets; these are properties
which do not fit with the Group’s long term
investment strategy, either because of their
location or because they are let to universities
under long term agreements and deliver lower
ongoing returns. Since commencing a disposal
programme of these assets in 2007, the Group
has completed sales totalling £183 million from
its balance sheet. This disposal programme
will continue throughout 2009 as the Group
completes its business model transition.
The following table summarises the Group’s operating and investment portfolio by segment at 31 December 2008:
London
- Value
- Beds
Major provincial
- Value
- Beds
Other provincial
- Value
- Beds
Varsity
- Value
- Beds
Total at 31 December 2008
- Value
- Beds
USAF*
UCC*
USV*
Owned
stabilising
Other
Leased
Total
£54m
270
£347m
2,427
-
-
£55m
502
£46m
466
-
260
£502m
3,925
£600m
12,876
£218m
5,128
-
-
-
-
£25m
289
£43m
437
£58m
1,383
£137m
2,634
£97m
2,551
-
1,644
£892m
21,088
-
-
-
-
-
-
£129m
3,379
-
1,785
£347m
10,292
£11m
135
£9m
218
-
316
£88m
1,395
£897m
18,563
£390m
2,864
£58m
1,383
£203m
3,271
£281m
6,614
-
4,005
£1,829m
36,700
UNITE investment
19%
30%
51%
100%
100%
-
-
* The value shown represents the gross value (as opposed to UNITE’s share)
15
Extremely strong rental growth was delivered
across UNITE’s operating and investment portfolio
during 2008 with like for like sales growth of 9.5%
achieved for the 2008/09 academic year compared
to 6.2% in 2007/08. The average stabilised yield
across the portfolio was 6.2% as at 31 December
2008, compared to 6.0% at 30 June 2008 and
5.8% at 31 December 2007. The portfolio is 99%
let for the current academic year, compared to
92% in 2007/08.
Sales performance for the 2009/10 academic year
is very strong across the portfolio. As at 6 March
2009, reservations had been received for 25,285
bed spaces, or 65% of the portfolio, compared
to 62% a year earlier. This is summarised in the
adjacent table:
Sales and rental growth
Joint venture
- USAF
- UCC
- USV
Wholly owned
- Stabilising
- Other
Leased
Total
Beds
% Reserved
09/10 year
% Reserved
08/09 year
Like for like
rental growth
08/09
18,563
2,864
1,383
22,810
5,972
6,144
12,116
4,005
38,931
59%
50%
56%
58%
44%
92%
68%
98%
65%
55%
68%
28%
55%
57%
81%
69%
94%
62%
2
n
o
i
t
c
e
S
8.9%
6.7%
8.0%
8.6%
16.8%
8.6%
9.0%
6.1%
9.5%
Operating costs and overhead
Impact of ‘Blueprint’ programme
As identified at the end of 2007, over recent years
the Group’s operating costs and overheads have
grown at a faster rate than revenues, principally
reflecting insufficient infrastructure required to
cope with nationwide growth and difficulty in
delivering sustainable economies of scale. The
financial impact of this has been emphasised more
recently with the establishment of our developer
and co-investing asset manager business model,
which distinguishes more effectively between
the economics of asset ownership and asset
management.
The Group began to address this in 2007 with the
successful launch of its on-line accommodation
management system, which has been further
supported through the creation of a national sales
framework. The results of this investment are
clearly evident in the strong sales performance for
academic year 2008/09 and 2009/10, reported in
this statement.
Since January 2008, we have extended the
reach of this programme to encompass a more
comprehensive process re-engineering and
organisational change exercise – to define and
deliver our operational ‘Blueprint’ and in late 2008
we accelerated the implementation of certain
elements of the programme to improve the Group’s
cash generation. The following table summarises
the positive impact of these initiatives on the
Group’s cost base:
Cost of sales
UNITE share
Overheads
- Development
- UMS
- Operations and Group
Impact on UNITE
Profit and Loss
Balance Sheet
Total
2008
£m
Identified savings
2009*
£m
45
26
5
8
32
71
51
20
71
6
3
2
2
5
12
6
6
12
*The total cost of the restructure was £4.8 million in 2008 with a further £1.4 million to be incurred in 2009
It is important to note that the objectives of our
Blueprint programme extend beyond cost savings.
Our detailed feasibility work identified clear
opportunities to improve customer service whilst
becoming more cost effective and we will continue
to progress this in 2009:
• Our most significant progress in 2008
related to our on-line accommodation
booking and payment engine, which has
transformed the way in which students
search for and book accommodation.
Usage of the www.unite-students.com
website has increased dramatically and in
January and February 2009, for example,
the site recorded 134,000 visits.
• Our main priorities in 2009 are to improve
the quality of our maintenance service and
internet provision, both in response to customer
feedback. In both cases we have been working
with specialist partners on long term solutions
since early 2008 and will launch our revised
offering fully for the 2009/10 academic year.
• In addition, we are substantially revising
our city staffing model for the 2009/10
academic year to provide a more responsive
service tailored to the times preferred by our
customers. This important step, which will
improve both service and efficiency, is only
possible as a result of our earlier progress
with systems and process development.
16
Business review
Investment portfolio valuation
The Group’s investment portfolio, including those assets held in co-investment vehicles, has been independently valued at 31 December 2008 by CB Richard Ellis Ltd,
Jones Lang LaSalle Ltd and Messrs King Sturge. As expected, we have seen yield expansion across most of the portfolio offset by strong rental growth in our direct let
assets. Performance has been weakest in properties subject to long term agreements and strongest in high quality direct let assets (see table below):
Investment portfolio movements
Leased/nominations assets
Direct let assets *
London
Major provincial
Other provincial
Varsity cities
Total
*Includes UNITE’s share of JVs
Asset
classification
changes
£m
Sales,
completions and
redevelopment
£m
Dec 2007
£m
Yield shift
£m
Rental growth
£m
Dec 2008
£m
317
50
304
172
21
864
(79)
45
24
10
-
-
(28)
68
13
(98)
15
(30)
(21)
(12)
(27)
(9)
(3)
(72)
9
13
2
5
1
30
198
164
316
80
34
792
This is firmly reflected in our asset sale strategy
and it is worth noting that the average value of
UNITE’s on balance sheet investment assets is
£14 million. Taking this into account, we believe
that yield expansion in student accommodation
investments will continue to be less pronounced
than across the broader property market, with
rental growth prospects providing an effective
buffer. Nonetheless, we expect values to continue
to decline until such time as banking markets
stabilise. Typical yields as at 31 December 2008
are set out below:
Typical stabilised yield range
London
Direct let
University agreement
Major provincial
Direct let
University agreement
Other provincial
Direct let
University agreement
‘Varsity’ cities
Direct let
Dec 06
Dec 07
Dec 08
5.5%-6.0%
4.75%-5.25%
5.0%-5.5%
5.0%-5.75%
5.6%-6.0%
5.5%-6.25%
5.6%-6.1%
5.0%-5.5%
5.5%-6.0%
5.5%-6.0%
6.0%-6.75%
6.0%-6.75%
5.65%-6.25%
5.25%-5.75%
5.75%-6.25%
5.5%-6.0%
6.25%-7.0%
6.25%-7.0%
5.5%-6.0%
5.25%-5.75%
5.75%-6.25%
Portfolio average
IPD All Property benchmark
5.80%
4.55%
5.78%
5.00%
6.20%
6.87%
The average net initial yield of the portfolio at 31
December 2008 is 6.20% (2007: 5.78%). The
expansion of 42 basis points, representing a 7%
movement, has been positively impacted by the
increased proportion of London assets, where
valuation declines have been less pronounced.
The average net initial yield for assets outside
London increased by an average of 75 basis
points. These yield movements were partially offset
by the rental growth of 9.5%. UNITE’s consistent
record of delivering rental growth, together with
the continued demand/supply imbalance, has been
a significant factor in supporting the valuation
yields to a greater extent than in other commercial
property sectors.
Demand for good quality, well-located investment
assets remained robust for the majority of 2008,
and transactions over the course of the year
provided meaningful valuation evidence across all
major segments of the portfolio. Looking forward,
demand for smaller investment assets (up to £20
million) in the student sector remains solid whereas
the market for larger assets is more challenging.
17
During 2008, UNITE sold a total of £325 million of investment properties at an average yield of 5.9%, of which £171 million were sold to USAF and the remainder
to external parties. In addition to this £63 millon of investment assets were sold by USAF during the year at an average yield of 5.7%. Particulars relating to these
disposals were as follows:
UNITE sales
Sale and Leaseback transactions
Non-core sales
Sales to USAF
- Investment assets
- Assets held at cost
Valuation
£m*
Gross proceeds
£m
Profit/ (loss)
investment assets
£m
Profit/ (loss) on
disposal assets
held at cost
£m
Average yield
£m
51.0
106.2
111.9
n/a
47.5
106.5
106.8
64.5
325.3
(4.4)
(0.8)
(7.2)
-
(12.4)
-
-
-
13.1
13.1
2
n
o
i
t
c
e
S
5.7%
5.8%
6.2%
6.2%
5.9%
USAF sales
62.4
62.9
(0.2)
-
5.7%
* Valuation figures represent last balance sheet valuation prior to sale i.e. 31 December 2007 or 30 June 2008
Asset sales have been an integral part of UNITE’s business strategy in recent years and the graph below illustrates the level of sales achieved and the pricing of
those transactions:
Asset sales track record
m
£
s
d
e
e
c
o
r
p
l
s
e
a
S
600
500
400
300
200
100
0
7.00%
6.50%
6.00%
5.50%
5.00%
4.50%
4.00%
3.50%
3.00%
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
3rd party
JVs/Funds
NOI yield sales
NOI yield UNITE
balance sheet
18
The performance of USAF during the period was
sound on a sector relative basis, generating a total
return of -22% in the period compared with an IPD
UK Pooled Property Funds Index average of -32%.
The total return includes -8.0% from the impact of
the mark to market of interest rate swaps in the
year. Given the reduction in property valuations and
the mark to market impact of interest rate swaps,
USAF did not generate any performance fees in the
period, as the Fund’s absolute performance was
below the level at which such fees become payable.
UCC and USV are closed funds and any
performance fees only become payable and
recognisable on exit.
Net asset value movements (reported on an IFRS
basis) and returns in USAF and UCC during 2008
were as follows:
Net asset value movements and returns
Fund consolidated net assets at 31 December 2007
Revaluation of investment portfolio
Development profits recognised
Earnings less distributions
Equity issued less costs
Other reserve movements*
Fund consolidated net assets at 31 December 2008
UNITE share
Return on NAV
Capital
Income
Total
UCC
£m
125.1
3.6
7.4
2.0
-
(23.5)
114.6
30%
8.7%
1.8%
10.5%
USAF
£m
446.1
(54.3)
-
-
58.9
(38.0)
412.7
18.6%
(26.8%)
5.2%
(21.6%)
*includes non-cash items, market value movements in ineffective hedges & other movements.
Further details of the financial performance and position of USAF and UCC is provided in notes 2 and 9 to the
consolidated financial statements.
Business review
Co-investing asset management
UNITE acts as co-investing manager of two
significant specialist student accommodation
investment vehicles which it established: The UNITE
UK Student Accommodation Fund (“USAF”) and the
UNITE Capital Cities joint venture (“UCC”). In
addition, one asset remains in the UNITE Student
Village joint venture (“USV”) with Lehman Brothers.
USAF was established in December 2006 to invest
in direct let student accommodation across the UK.
It is a semi open-ended, infinite life vehicle with a
carefully structured redemption mechanism
designed to protect the interests of non-redeeming
investors. Redemptions are not permissible before
December 2009. Any redemption requests received
will be met by either cash or increased gearing in
the first instance and then through the proceeds
from asset sales, although these are limited to
10% of gross asset value per annum. The main
reason for adopting an open-ended structure was
to allow the Fund to increase in size through further
injections of capital. Upon establishment, USAF
acquired a £515 million portfolio of direct let
accommodation from UNITE, and during 2007 and
2008 it acquired a further £425 million of assets
from the Group.
UCC was established in March 2005 as a joint
venture between UNITE and GIC RE. It is a
closed-ended fund due to mature in 2013 and
was established by UNITE to develop and operate
student accommodation in London and Edinburgh,
markets in which UNITE’s growth was capital
constrained at that time. Following an intensive
period of acquisition and development activity,
UCC equity is now fully invested and all
development projects have been completed.
During the year to December 2008, the Group
received fees from USAF, UCC and USV as follows:
Managements fees received
Management
fees
£m
2008
Performance
fees
£m
2.7
2.5
-
5.2
-
-
-
-
Total
fees
£m
2.7
2.5
-
5.2
Management
fees
£m
2007
Performance
fees
£m
2.3
1.8
-
4.1
1.5
-
1.5
3.0
Total
fees
£m
3.8
1.8
1.5
7.1
USAF
UCC
USV
Total
19
UNITE UK Student Accommodation Fund
UNITE Student Village Joint Venture
Development activity
USV owns one building located in Sheffield which
was independently valued at £58.1 million as at
31 December 2008 resulting in USV having net assets
of £9.4 million at 31 December 2008 (2007: £15.7
million). The reduction in property valuations resulted
in a total return of -44% in the year. Lehman Brothers,
which owns a 49% stake in USV, was placed into
administration in October 2008 and the administrators
have informed UNITE that they are currently marketing
the 49% stake. UNITE has certain pre-emptive rights
within the joint venture agreement and is currently
considering its options in this regard.
In October 2008, in response to the deepening
banking crisis, the Group decided to reduce
substantially its development commitments for 2010
and 2011 project deliveries. The Group now intends
to deliver 1,125 new bed spaces in 2010, all of
which are fully funded. The total capital expenditure of
£155 million on these projects represents a reduction
of approximately 50% relative to the programme
that was originally planned. UNITE is yet to commit
to any new developments for delivery in 2011 and
is now more likely to focus on securing attractive
opportunities for delivery in 2012 and beyond. It is
anticipated that a number of favourable opportunities
will arise, in light of the widespread re-pricing of
assets. The Group’s development commitments at
31 December 2008 are summarised below:
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Development pipeline
Bed spaces
Total
development cost
£m
Capex
remaining
£m
Equity
total
£m
Equity
remaining
£m
2009 deliveries
2010 deliveries
2,701
1,125
3,826
249
155
404
92
80
172
49
29
78
-
8
8
As at 31 December 2008, USAF’s investment portfolio
comprised 53 properties in 17 cities with a total of
18,563 bed spaces. The portfolio was independently
valued by CBRE at £897 million, resulting in the Fund
having net assets (on an IFRS basis) as at that date of
£412.7 million as shown in the table opposite. The
Group successfully raised £58 million of new equity
into USAF in October, in what proved to be extremely
challenging and deteriorating markets. The first signs
of a secondary market in the units also began to
emerge with £40 million of units trading at the same
time at a small discount to net asset value. Across the
course of the year, USAF delivered asset sales of £63
million at an average yield of 5.7% and subsequently
acquired a portfolio of £171 million of assets from
UNITE. This asset management activity is in line with
USAF’s strategy of focusing on markets that
demonstrate the greatest prospects for capital and
income growth. Having been at around 20%
throughout the year, the Group’s stake in USAF was
18.6% at the year end, following the most recent
portfolio sale and is likely to remain at around this
level for the foreseeable future.
Following the sale of assets by USAF in August 2008,
a deposit of £30 million was placed with Landsbanki
Islands hf. (“Landsbanki”). Landsbanki was placed into
administration under emergency legislation in October
2008 and the funds are currently not accessible. The
first public creditors meeting was held on 20 February
2009 where it was confirmed that depositors will be
treated as priority creditors. A statement of recoverable
assets and liabilities was presented at the meeting,
indicating that a substantial recovery of the deposit
should be achievable. The timing of recovery, and any
legal challenge to the priority status afforded to
creditors, remain as the main areas of uncertainty.
Whilst work is ongoing to recover the deposit, a full
provision has been made in the accounts of USAF
and UNITE.
The UNITE Capital Cities Joint Venture
As at 31 December 2008, all of UCC’s development
projects have been completed and UCC’s investment
portfolio now comprises 16 properties in London and
Edinburgh. The portfolio was independently valued at
31 December 2008 at £389.7 million resulting in UCC
having net assets at 31 December of £114.6 million
(reported on an IFRS basis). Strong rental growth
performance and completion of the final development
schemes have ensured a further year of strong returns
for UCC, with a total return of 11% in the year.
20
Business review
In determining which of its developments to
proceed with for 2010 delivery, the Group has
prioritised those with the highest anticipated
returns and greatest resilience to ongoing
adverse economic conditions. As a result of this
review, the Group’s pipeline of developments for
delivery in 2010 is located entirely in London,
where demand and rental growth prospects are
strongest, and is expected to deliver an initial
yield on cost of 8.0%. The programme of 2009
deliveries is expected to show an initial yield on
cost of 6.9%.
The outlook for development margins on our
secured development pipeline is, of course, more
challenging than has historically been the case,
and we are actively managing our exposure in this
area, as evidenced by the deferral or cancellation
of certain projects. However, the outlook for
occupier demand in our sector, the prime
positioning of our developments and clear signs of
easing build cost inflationary pressure all help to
offset the principal downside risk concerning the
level of future investment yields.
Notwithstanding the significant reduction in future
development commitments outlined above, the
Group continues to manage the delivery of its
current pipeline projects effectively. During the
year, UNITE completed its development pipeline of
3,774 beds for the 2008/09 academic year and
is also well progressed on the delivery of its 2009
pipeline of 2,701 beds. UNITE, including where
appropriate its joint venture partners, invested a
total of £275 million of capital expenditure
as follows:
Development expenditure
2008 completions
- UNITE
- Joint ventures
2009 completions
- UNITE
2010 and later completions
- UNITE
Total
Gross
£m
UNITE’s share
£m
80
34
102
59
275
80
10
102
59
251
The decision to scale back the development programme has had a significant impact on the secured pipeline as follows:
Committed future developments
31 Dec 07
beds
Secured
beds
Strategic review &
scheme revision of beds
31 Dec 08
beds
Completed
value £m
Development
yield
2009 completions
2010 completions
Total beds
3,931
2,326
6,257
-
1,183
1,183
(1,203)
(2,384)
(3,587)
2,701
1,125
3,826
288
207
495
6.9%
8.0%
7.3%
2,701new bed spaces scheduled
for delivery in 2009.
21
Following the establishment of USAF, and in
accordance with IFRS, certain of the Group’s
development assets are now classified as current
assets and are held at cost, whilst certain others
continue to be held at open market value. However,
in recognising the full value of 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 as at 31 December 2008 and is summarised in
the adjacent table:
In total, the Group has recognised £7 million of
revaluation gains on developments during the year
in the calculation of its adjusted net asset value. The
investment yields applied in arriving at a valuation of
the development portfolio are typically 25 bps higher
than those applied to completed properties, reflecting
the particular challenges of development at this time.
This differential will be reversed upon completion.
In addition to the above portfolio, the Group had £26.7
million of land at 31 December 2008 (2007: £91.3
million) which is carried at the lower of cost and net
realisable value. Given the Group’s decision to scale
back its development pipeline as outlined above,
together with the dramatic falls in land values, the
value of the land has been written down by £27.7
million during the year. With the exception of one site,
valued at £3.0 million, all land held for development
has planning consent for development as student
accommodation. The Group will be reviewing its
options for these sites over the next six months.
Not surprisingly, the sharp reduction in planned
development activity has resulted in a significant
contraction in the size of the Group’s development
team. During 2008 we reduced the number of
employees engaged in development activity by 23
to 25 at the year end and moved the team’s base to
London. Annualised development overhead, taking into
account these and other savings, has reduced
by 40%.
Development portfolio valuation
31 Dec 2008
£m
31 Dec 2007
£m
Investment property under development
Property under development
Share of joint ventures investment property under development
Total
Valuation gain not recognised on property held at cost
Value at end of period
53
249
-
302
24
326
102
122
36
260
39
299
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UNITE Modular Solutions
Financing
The financing of the business and the ongoing
strength of the Group’s balance sheet remain a
primary focus. Despite the dramatic deterioration in
the global financial markets, UNITE has made solid
progress in extending its re-financing horizon, ensuring
all borrowing covenants are met and reducing net
debt in the period.
The Group (including co-investment vehicles’) primary
bank facilities are arranged through a small number
of key banks and it has enjoyed continued and fresh
support from these lenders. This support is confirmed
by new facilities totalling £485 million being arranged
since January 2008, of which £250 million has been
arranged since December 2008 (£100 million requires
final documentation to be signed). This ongoing
support from our lenders provides confirmation of the
resilient nature of the asset class and the underlying
cashflows that the assets generate.
The Group’s modular manufacturing facility remains a
key element in the Group’s development philosophy.
During 2008 it formed a key part of the change
programme designed to improve the efficiency of
developments being delivered in 2009 and 2010. The
modular content of each project has been increased
and this, together with a number of supply chain
initiatives, is expected to contribute to meaningful build
cost savings, particularly in the 2010 programme.
However, the Group’s reduced development pipeline
has significant implications for manufacturing volumes
at the plant. In response to this, management has
recently concluded a consultation with the plant’s
workforce that will lead to a reduction in the number of
roles at the facility of approximately 27% from March
2009. Longer term, we are more actively considering
our strategy for the numerous approaches received
regarding module manufacture for third parties.
Livocity – accommodation
for graduates and young
career professionals
The Group currently operates one project under
its ‘Livocity’ concept (62 beds near Regent’s Park,
London), providing accommodation for graduates
and young career professionals. This project remains
fully let and has delivered encouraging rental growth
during 2008. Two further properties will be opening
during March 2009, located in Fulham and Camden.
Customer demand for these properties is also healthy
and our focus for Livocity in 2009 is to ensure that all
three assets reach a stable level of occupancy and
rental levels in good time. No further developments are
planned under the Livocity brand at this time.
22
Business review
Key debt ratios for UNITE Group
Adjusted gearing
Net debt to assets
Weighted average debt maturity
Weighted average cost of investment debt
Proportion of investment debt hedged
Cash position
31 Dec 2008
31 Dec 2007
131%
65%
4 years
6.2%
87%
106%
57%
4 years
6.6%
89%
UNITE has a cash balance of £111.8 million at 31 December 2008. An analysis of the cash that is
available for managing the Group’s debt facilities in the event that property valuations fall and banks seek
to enforce repayment through the use of LTV covenants is provided in the following table:
Cash balance at 31 December
Held for re-financing
Restricted for debt servicing
Development equity remaining on committed schemes
Cash available for general purposes
£m
111.8
(30.8)
(16.3)
(7.8)
56.9
We anticipate that the strong rental growth performance together with the cost savings as a result of the
restructure will mean that the cashflow from operations is sufficient to cover all overheads during 2009.
Therefore the available cash outlined above can be used to manage the Group’s debt facilities in the event
that property valuations continue to fall.
The group successfully raised
£58m
of new equity into USAF in October 2008
Overview of debt facilities
The majority of the Group’s debt is arranged on
an asset specific basis within committed facilities.
The facilities are structured as either investment
facilities, development / investment facilities
whereby an asset transfers to the investment
vehicle upon completion and a small proportion
of land facilities. In addition, UNITE has working
capital facilities of £49 million including a £20
million overdraft facility.
In accordance with the terms of the loan
agreements, the Group is required to comply
with certain financial covenants. UNITE’s facilities
typically have interest cover ratio covenants, and
more recently loan to value covenants have been
introduced to new facilities. Where loan to value
covenants are in place, these are based upon
a valuation performed upon instruction by the
lending bank. UNITE also has four facilities with
minimum net worth covenants. All of the Group’s
major covenants are outlined below.
Compliance with financial covenants is constantly
monitored. Potential breaches can be discussed
with lenders which could result in a re-negotiation
or a possible waiving of the covenants. Actual
covenant breaches can be rectified by a number
of remedies, primarily the repayment of debt
either on a temporary or a permanent basis,
before an event of default occurs.
The principal areas of focus associated with
UNITE’s financing are as follows:
• Maintaining covenant compliance, primarily
loan to value (‘LTV’) covenants in the event
that property values continue to fall and, to
a much lesser extent, the risk of breaching
minimum net worth and interest cover ratios
(‘ICR’) covenants.
• Refinancing facilities that expire in 2009.
• Refinancing development schemes upon
completion within existing facilities and
ensuring facilities are in place for the 2009
and 2010 development programme.
• Managing gearing levels in an environment
of falling asset values.
23
Financial covenants
As at 31 December 2008, the Group was in full compliance with all of its financial covenants.
Loan to value covenants
Where loan to value covenants are in place, these are tested using the latest valuation prepared for the
bank, rather than using UNITE’s balance sheet valuations. In the event of a breach or a potential breach,
UNITE has the ability to avoid or rectify the breach by repaying debt to ensure compliance. The following
table uses the independent valuations at 31 December 2008:
Total facility
£m
Investment
debt drawn
£m
Development
debt drawn
£m
Total drawn
£m
Weighted
LTV covenant
Weighted
LTV at 31 Dec
Facilities with LTV covenants
Facilities with no LTV covenants
Working capital facilities
Total debt
Cash
Adjusted net debt
773.1
364.1
1,137.2
288.9*
113.7
402.6
78.8
135.5
214.3
75.7%
-
70.6%
-
367.7
249.2
616.9
25.4
642.3
(111.8)
530.5
* The £288.9 million includes £30.8 million of debt drawn held as cash pending re-financing of an asset.
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Interest cover covenants
Investment facilities are subject to interest cover
covenants. The covenants are measured on a
portfolio basis for each facility and vary by facility.
The covenant, on a weighted average basis is
110%. The actual performance on a look forward
basis, as reported to the banks, is currently 135%
and we would expect rental growth to improve this
headroom further in the future.
24
Business review
Minimum net worth covenants
UNITE debt maturity profile
350
300
250
200
150
100
50
0
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
+
5
1
0
2
Facilities at 31 December
Facilities including new £100 million facility
Given the positive sales performance, the principal
risk is the level of yield expansion prior to the
assets transferring to the investment facility in
the third quarter of 2008. We have taken this
into account in our calculation of covenant
headroom opposite.
UNITE has signed, committed development debt
facilities in place to complete all of its 2009 and
2010 development programme. In total UNITE
had unutilised debt capacity of £520 million as at
31 December 2008. Of this amount, £160 million
is committed to the development programme,
leaving £360 million of surplus capacity, of which
Anglo Irish Bank is currently providing £260
million. Following the recent nationalisation and
subsequent concerns surrounding the bank,
UNITE considers this facility to be unavailable
and is in no way reliant upon it.
Covenant headroom
The group was in full compliance with all of its
borrowing covenants at 31 December 2008
and remains so at this time. In considering the
likelihood of the Group breaching any covenants
during 2009, the Board believes that the greatest
risk relates to a continued outward movement
in yields resulting in a potential breach of LTV
covenants and/or a refinancing shortfall in relation
to the Group’s 2009 development programme.
The Group has three main mitigants in
addressing this risk:
• Continued strong rental growth in the portfolio
will help offset outward yield movements;
• The Group’s available cash resources can be
used to prepay facilities to avoid LTV covenant
breaches or to meet a refinancing shortfall with
respect to the 2009 development programme;
• Ongoing asset sales will reduce investment
net debt and release further cash for general
purposes. The Group is targeting gross
proceeds from sales, including those to USAF,
of £150 million which it would expect to
release between £25 million and £40 million
of net cash proceeds.
UNITE has four facilities with minimum net worth
covenants. The highest of the covenants is set
at £250 million based on adjusted net assets.
This compares to the reported position at
31 December 2008 of £406 million. Two of the
facilities with minimum net worth covenants
expire in 2009 and will be refinanced at that time.
UNITE debt maturity profile
UNITE has two investment facilities that expire
in the fourth quarter of 2009. The total amount
drawn under these facilities at 31 December
was £96.8 million. The Group has sought to
proactively manage this refinancing risk by:
• Creating capacity in an existing facility for
approximately £60 million of the debt. Approval
has been secured for the transfer of these
assets into this facility.
• Arranging a new £100 million investment
facility to create capacity for the remaining
debt and also to provide further debt
headroom. Full credit approval for this facility
was obtained in February 2009 and it is
currently being documented for anticipated
completion in April.
The next major refinancing event occurs in May
2011 when a £116 million facility with Bank
of Ireland expires. UNITE also has three small
development facilities that expire in 2009 with
drawn debt of £12.7 million. This debt all relates
to land that will not be built and is likely to be
sold in the year. All three sites are currently
under offer at levels in excess of the drawn debt.
Development debt capacity
and refinancing requirements
The development debt is not subject to LTV
covenants during the development phase.
However, upon completion of a development,
an updated valuation is required. This event will
result in either a release of cash to UNITE or, if
values fall beyond a certain level, for UNITE to
repay an element of the debt secured against
that asset.
25
Taking into account these risks, the Group believes that it can withstand future yield expansion as follows:
NOI yield movement (bps)
Rental growth in 2009/2010 (7%-10%)
Cash resources to avoid LTV covenant breaches and meet refinancing shortfalls
NOI yield headroom before asset sales
Impact of targeted asset sales
Total NOI yield headroom including asset sales
40-50
20-25
60-75
30-50
90-125
The above NOI yield expansion headroom, quoted after full provision has been made to fund the commited
development pipeline, compares to a total of 42 basis points expansion in 2008, of which approximately
25 basis points occurred in the last quarter. The Board is satisfied that this headroom is adequate for the
time being, and that the rental growth and asset sale assumptions in particular, are appropriate. However,
until such time as the actual delivery of these items can be viewed with more certainty, the Board believes
that an extremely cautious stance remains appropriate.
Gearing and net debt
The Group has reduced the adjusted net debt position at 31 December 2008 to £531 million
(2007: £540 million). This reduction has been delivered through its focus on asset sales during the year.
Reduction in net debt
Net debt at 31 December 2007
Asset sales
Cash spent on development programme
Operational cash / inc dividends and tax
Net debt at 31 December 2008
£m
540
(325)
302
14
531
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Adjusted gearing was 131% (2007: 106%) and
debt as a percentage of gross assets value was
65% (2007: 57%). UNITE will maintain its focus
on gearing levels and intends to sell assets to at
least the same value as the level of expenditure
on development activity going forward.
The Group will continue to follow its strategy of
generating cash from asset sales both to USAF
and third parties in order to strengthen the
balance sheet and also to provide resources to
take advantage of the development opportunities
when the banking market starts to ease.
Interest rate hedging
During the first half of 2008 interest rates
gradually increased with 5 year swap rates rising
from around 5% to peak at 6% in June. In the
third quarter of 2008, long term interest rates
receded towards levels at the start of the year.
As markets responded to the crisis in the Banking
sector and the resultant government support for
banks, a rapid downward shift in market interest
rates occurred. The 5 year swaps rate fell to
around 3% at 31 December 2008.
The Group seeks to minimise its exposure to
interest rate fluctuations and therefore seeks to
hedge at least 80% of its investment debt. Whilst
interest rates swaps offer protection from higher
interest rates and provide a high degree of
predictability on future cashflows, they provide
no opportunity to gain when interest rates fall.
Furthermore, the movement in revaluation of
interest rate swaps affects the Group’s income
statement. For the year to 31 December 2008 a
deficit of £32.4 million was recorded (2007: £7.5
million). The Group seeks to minimise its cost of
debt finance and has reduced the cost of
investment debt from 6.6% in 2007 to 6.2%
in 2008.
26
Business review
Financing within co-investment vehicles
The debt facilities within co-investment vehicles are structured broadly in line with the Group’s wholly owned debt. As at 31 December 2008 each of the
co-investment vehicles was in full compliance with all of the respective covenants. The following table outlines the principal covenants on these facilities.
Total facility £m
Drawn £m
LTV covenant
LTV at 31 Dec
ICR covenant
ICR at 31 Dec
USV
UCC
USAF
- With LTV covenants
- No LTV covenants
46.1
300.0
235.0
280.0
46.1
248.8
200.6
280.0
84%
-
62%
-
81%
-
53%
-
1.24
1.00
1.30
1.40
1.33
1.40
2.1
2.0
The facilities are structured so there is no recourse to the Group with the exception of the UCC facility which is limited recourse. There is £35 million headroom in
USAF’s banking facilities to fund further acquisitions and £51 million of capacity in UCC facilities.
27
Dividend
In light of the Group’s desire to conserve capital,
the Board does not recommend the payment of a
final dividend for the year (2007: 1.67 pence per
share). This means that the total dividend for the
year to 31 December 2008 will be 0.83 pence
per share (2007: 2.5 pence per share).
People and organisation
UNITE’s achievements are underpinned by a
culture which, together with our success in
pioneering a new sector and first class people
practice, make our organisation a place to
achieve a challenging, rewarding and meaningful
career. The role of our people in delivering the
strategic priorities of the business is clearly
recognised through our approach to talent
management and development.
Throughout 2008 we focused our organisational
development approach around ensuring our
people were effectively executing our strategy and
managing transformational change. Key initiatives
in 2008 included:
• Organisation structure - we organised
our core business operations to align with
our business model. We restructured to four
key business units: Development, Modular
Solutions, Operations and Fund & Asset
Management. We also restructured our key
support functions (Finance, HR, Procurement,
IT) to ensure lean, value add support service
delivery aligned to the goals of our core
business units.
• Values / competency model – we defined
and developed a core competency framework
(Job Fitness Model) aligned to our values, for
our operations and support functions.
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• Aligning our talent strategy to our
business strategy to ensure that we have
the right mix of people in the right roles
to execute effectively. We are focused on
ensuring that the positions that exert the
greatest degree of influence on company
performance are filled with top talent and
that we have tailored development plans for
potential successors. We have added four new
roles to our Leadership Executive to ensure we
are developing leaders who understand our
business challenges at a global level whilst
delivering in their specific business areas.
• Driving our performance culture to
ensure our people are engaged and motivated
to deliver results from a combination of
understanding what motivates our workforce,
effective leadership, clarity of purpose,
accountability for results and rewards that
are commensurate with performance and
contribution. We will continue to drive
our performance by living our values and
our approach to customers, people and
shareholders.
Looking ahead
The Board expects the outlook for 2009 to
remain positive from an operational perspective
but challenging from a financing perspective.
Accordingly, the Board’s immediate priority is
to ensure that the Group remains in a position
to withstand further deterioration in the wider
economic environment. With a resilient market,
sound financing and cash position, strong
operating performance and clear plans to protect
the Group’s balance sheet from further falls in
property values, the Board believes that this
objective is well in hand; and in due course, the
Group will be able to secure a position to benefit
from the attractive development opportunities that
we expect to emerge.
• Change management - through the delivery
of our operational and development change
programmes we embedded effective change
management skills into our business. These
core skills will stand us in good stead as we
continue with the implementation of change
through 2009.
• Learning and development - we opened our
Operations Training Academy in Birmingham.
A purpose built facility, within our flagship
student accommodation, designed for
inducting and training our frontline teams in
the consistent delivery of our customer service
standards.
• Leadership development - we designed
and delivered a new programme to our
senior managers around effective execution
of strategy. We continued the roll-out of our
core Leadership and Mentoring programmes
ensuring key successors to develop their
leadership practice.
• Performance management and reward
– through our Performance Development
Programme (PDP) we developed a consistent
approach to performance measurement and
management and clearly linked our reward
structures to the performance of our key
strategic priorities.
• Employee engagement – we embedded an
online employee survey and our organisation
was benchmarked within the top 30% of
UK companies. UNITE also featured in the
Guardian Britain’s Top Employers 2008 for
Best Examples of HR Management.
Looking forward to 2009, we are focused on
three critical areas to align our people strategy
with our business strategy:
• Ensuring our strategy is clear from the
boardroom to the front line. We have
embedded a high quality business planning
process to allow individual employees to
have line of sight to our strategic goals. Our
framework ensures that we have an aligned
set of goals, clear performance measures,
with a more integrated risk and resource
planning process.
28
Risks and uncertainties
The assessment and management of risk is designed into the way we operate our business.
A summary of major operational and strategic risks and mitigating actions is set out below:
Risk description
General risks
People
Impact
Mitigation
• Ability to attract, retain and motivate the best people
• Critical to delivering business strategy
Reputational risk
• Inability to grow and protect UNITE’s brand
• Reduced lettings
• Difficult to attract the best people
• Weaker relationships with university clients, planners
and other stakeholders
• UNITE is a values based organisation. This means we
recruit to a clear set of values and seek to develop our
people to their full potential
• We measure employee satisfaction through regular
surveys and act on employee feedback
• Experienced brand, sales and marketing teams
• Measurement of customer satisfaction and
response to customer feedback
• Strong focus on delivering the service our
customers want
• Strong focus on safety of our customers and
staff with regular audits
Property investment risks
Market cycles
• Property markets are cyclical
Portfolio risk
• Concentration of assets in student market
Letting risk
• Risk arising from short term nature of tenancies
• Under/over performance of investment portfolio
• Clear and active asset management strategy
• Reduced student numbers impacting
financial performance
• Geographical diversification
• Long term growth for student accommodation
underpinned by government policy
• In-depth market intelligence
• Revenues are uncertain
• Reduced lettings as a result of economic downturn
• Geographical diversification
• Long term growth for student accommodation
underpinned by government policy
• Supply/demand imbalance
Finance
Funding
• Lack of available funds
• Movement in valuations leads to
covenant breach
• Unable to progress development opportunities
• Inability to refinance investment debt
• Requirement to repay debt
• Creation of UNITE UK Student Accommodation Fund
as a means of raising equity
• Proactive management of debt with significant long
term debt and early renewal of expiring facilities
• Strong relationships with our banking partners
• Ability to sell assets
• Significant cash balance
• Increased borrowing costs
• UNITE hedges 70% – 90% of its investment debt
Interest
• Interest rates rise
Property development risks
Planning risk
• Development projects do not achieve sufficient
support to achieve planning consent
• Unable to progress developments in line with plans
Construction risk
• Construction projects are delivered late or over budget
• Returns are reduced and cash tied up
Our process for managing risk is set out in more detail on page 44 of the Corporate Governance section of this Annual report.
with appropriate risk sharing
29
Development expertise including:
• Strong and open relationships with key stakeholders
• Skilled development teams with a good understanding
of the sector
• Strong reputation
• Strong organisational focus on project delivery
• Use of UNITEs unique modular technology and off site
manufacturing reducing delivery and cost risk
• Strong relationships with key construction partners
Key performance indicators
Objective
Measure
Performance
To maintain a strong and
profitable development pipeline
(see pages 20 to 22 of the business review )
Development NAV per share (pence per share)
This measure indicates how much value our development activities
have added in the year.
Secured pipeline (£m)
This measures the value of our future secured development pipeline.
Planning permissions secured
This measure indicates how successful we have been obtaining
planning consents on our secured schemes and is a key driver of value.
To maximise the returns from
our co-investing funds
(see pages 19 to 20 of the business review)
Return on NAV
This measure indicates the combined capital and revenue returns
from our major co-investing funds.
To manage our assets effectively
(see pages 11 to 18 of the business review)
USAF (%)
UNITE Capital Cities (%)
Adjusted fully diluted NAV per share added (pence per share)
This measures how much value has been added in the year to our
balance sheet before one off items.
Assets sales in period (£m)
This measures how successful we have been in selling assets in the
period including assets sold from our co-investing vehicles.
Net portfolio contribution (£m)
This measures the contribution of our investment and stabilising
properties to the business.
To manage the strength
of our balance sheet
(see pages 22 to 26 of the business review)
Adjusted net debt (£m)
This measures the net indebtedness of the business and our ability to
generate cash and control expenditure.
Adjusted gearing (%)
This measures the net indebtedness of the business as a proportion
of adjusted net asset value.
Deliver consistent and high
levels of customer satisfaction
(see page 16 of the business review)
Customer satisfaction
We regular survey our 36,700 customers using an independent
agency to understand how we our performing from a customers
perspective.
To develop and retain high
performing people, teams and
leaders that live UNITE’s values.
(see page 28 of the business review)
Employee satisfaction
Regular reviews carried out by independent agency to understand
engagement.
2008
5
495
10
(21.6)
10.5
(54)
388
(5.4)
531
131
52
63
2007
40
1,028
16
12.7
33.9
32
327
1.7
540
106
55
67
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New properties opening in 2009
UNITE is on target to deliver an additional 2,701 purpose-built student beds during 2009,
of which 64% (by value) will be located in London (2008: 23%). This supports UNITE’s strategy
to focus on the Capital, where supply / demand characteristics are most acute and the outlook
for student accommodation values remains the most robust.
Quantum Court, London – 132 Beds
Newington Court, London – 87 Beds
Blithehale Court, London – 306 Beds
Bartholomew Road, London – 54 Beds
Ferry Lane, London – 687 Beds
31
Property Overview
Quantum Court offers customers a range of cluster flats, 1 bed duplex
flats (flats split over 2 floors) and studios all with Internet and onsite
laundry facilities. The property includes a student lounge, private
outdoor space and communal roof terrace. Quantum Court is only
5 minutes walk from Shadwell DLR, taking just 10 minutes to get
to Bank station.
Total Number of Beds
En-suite
Studios
Rent (£/per week)*
Lease Type
132
112
20
From £188 – £290
Direct Let
Property Overview
Located a short 10 minute walk away from the cafes, bars and
restaurants of Angel Islington, Newington Court offers a range of
cluster flats and studios ideally situated for many London universities
with onsite laundry facilities, terraced garden, student lounge, bike
storage and Internet.
Total Number of Beds
En-suite
Studios
Rent (£/per week)*
Lease Type
87
40
47
From £185 – £290
Direct Let
Property Overview
Blithehale Court is less than 5 minutes walk from Bethnal Green tube
station (central line) meaning easy access to Queen Mary, University
of London, London Metropolitan University and London School of
Economics. The property comprises of a selection of 5 and 6 bedroom
cluster flats and studios, onsite laundry, bike storage, common room and
a large garden terrace with stunning views of the City.
Total Number of Beds
En-suite
Studios
Rent (£/per week)*
Lease Type
306
243
63
From £196 – £305
Direct Let
Property Overview
Bartholomew Road is located on a quiet residential street and
provides a further choice of accommodation for students across
London. Made up of 54 studios and 1 bed flats, it is a 5 minute walk
from Kentish Town Road and Camden Town with their stylish cafes,
bars and restaurants. This smaller property provides onsite laundry,
bike storage, Internet and an outdoor courtyard.
Total Number of Beds
En-suite
Studios
Rent (£/per week)*
Lease Type
54
0
54
From £310 – £378
Direct Let
Property Overview
UNITE’s largest development in the Capital, Ferry Lane will be the
first scheme to complete on the wider Hale Village regeneration
programme. Delivering 687 bed spaces, Ferry Lane has excellent
transport links direct into central London, a large central courtyard
and rents starting from £141 per week including utilities and Internet.
Total Number of Beds
En-suite
Studios
Rent (£/per week)*
Lease Type
687
645
42
From £141 – £145
Nominations
Elisabeth Croll House, London – 102 Beds
Charlton Court, Bath – 327 Beds
Chalmers Street, Edinburgh – 253 Beds
Exeter Trust House, Exeter – 124 Beds
Sky Plaza, Leeds – 535 Beds
Gibson Street, Glasgow – 94 Beds
*2009 / 2010 guide price
Property Overview
Ideally located for University of London SOAS students, Elisabeth Croll
House is situated on campus and only a 10 minute walk from Kings
Cross St. Pancras Station. The property offers customers a choice
of flat sizes and premium studios, along with Internet, bike storage,
laundry facilities, a common room and a landscaped garden.
Total Number of Beds
En-suite
Studios
Rent (£/per week)*
Lease Type
102
12
90
From £240 – £253
Nominations
Property Overview
Located in the most popular student area in Bath, Oldfield Park,
Charlton Court provides a range of cluster flats and studios exclusively
to first year students studying at Bath Spa University. This latest
development offers views over the river Avon, a landscaped garden
along with student essentials such as Internet, bike storage, onsite
laundry facilities and a large common room.
Total Number of Beds
En-suite
Studios
Rent (£/per week)*
Lease Type
327
291
36
From £117 – £173
Direct Let
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Property Overview
With the University of Edinburgh and Edinburgh College of Arts just
a short 5 minute walk away and Princes Street a 10 minute walk,
Chalmers Street is ideally situated at the heart of the Scottish Capital.
The property offers customers a choice of 3-5 bedroom cluster flats
and studios, along with Internet, bike storage, laundry facilities, a
common room and landscaped garden.
Total Number of Beds
En-suite
Studios
Rent (£/per week)*
Lease Type
253
218
35
From £145 – £210
Direct Let
*2009 / 2010 guide price
Property Overview
Only a 2 minute walk to the city centre, Exeter Trust House is
conveniently located for the city’s bars, clubs and shops. Offering a
choice of flat sizes and studios, this latest development is just a 15
minute walk from the University of Exeter’s Streatham Campus. Other
features at the property include a terraced garden, bike storage,
Internet and onsite laundry facilities.
Total Number of Beds
En-suite
Studios
Rent (£/per week)*
Lease Type
124
113
11
From £125 – £215
Direct Let
Property Overview
Sky Plaza is the second phase of this UNITE development in the heart of
Leeds city centre, offering accommodation for some 1,500 students in
total. Located within walking distance to Leeds Metropolitan University,
University of Leeds, Leeds Technology College and Leeds College of
Music, Sky Plaza offers a range of room types including premium rooms
from the 19th to the 37th floor, with stunning views and luxury fixtures.
Total Number of Beds
En-suite
Studios
Rent (£/per week)*
Lease Type
535
424
111
From £113 – £199
Direct Let
Property Overview
With its fantastic location in the west end of Glasgow, amongst an
abundance of bars and restaurants, Gibson Street is within a 1 minute
walk of the University of Glasgow. Customers have a choice of 3-6
bedroom cluster flats as well studios. Features at this property include
Internet, riverside views and balconies.
Total Number of Beds
En-suite
Studios
Rent (£/per week)*
Lease Type
94
76
18
From £109 – £195
Direct Let
32
A sustainable business
The Group made significant strides towards creating a more sustainable business throughout 2008.
Working in conjunction with The Carbon Trust, UNITE implemented a Carbon Management
programme to drive reductions in the Group’s carbon footprint. Following through on this initial
impetus, the Group is committed to embed good practice within its core processes through its
‘Blueprint’ change programme.
Highlights • Launch of UNITE’s pilot ‘Sustainable Living Campaign’
• New properties secure “Very Good” BREEAM certification
• UNITE Modular Solutions achieves ISO 14001:2004 accreditation
• CO2 associated with Internal Operations reduced by 19%
• CO2 associated with business travel reduced by 21%
The initiatives identified during 2007 have begun to
be implemented across the portfolio during 2008.
The focus of the project has been on those areas
of the Group’s activities that would yield the best
carbon abatement opportunities. The intention is
that these and other measures will continue to be
rolled out during 2009:
• Improving existing built portfolio;
• Incorporating sustainable design in the
development of new properties; and
• Introducing sustainable living to our customers
through an extensive awareness campaign.
Carbon emissions
UNITE is committed to reporting on all material
emissions associated with its operations (see figure
1). The Group follows the principles set out in the
Green House Gas (“GHG”) protocol. The latest
DEFRA guidance regarding conversion factors,
released in April 2008, has been used as outlined
in figure 2. The Group’s 2008 reporting period
is the calendar year 1 January 2008 to 31
December 2008.
Carbon emission summary 2008 (figure 1)
Residential
operations
Residences Gas
Residences Electricity
Internal
operations
Offices Gas
Offices Electricity
Manufacturing Gas
Manufacturing Electricity
Business
travel
Company Cars
Commercial Vehicles
Private Cars
GHG
scope
1
2
GHG
scope
1
2
1
2
GHG
scope
1
1
1
Energy
kWh
13,862,913
108,179,807
122,042,720
Energy
kWh
76,093
345,565
1,768,305
1,237,509
3,427,472
Distance
km
1,267,738
294,332
563,610
2,125,680
2008
Total C02
tonnes
2,856
58,095
60,950
Total C02
tonnes
16
186
364
665
1,230
Percent
of total
4.6%
92.9%
97.5%
Percent
of total
0.0%
0.3%
0.6%
1.1%
2.0%
% Change in
C02 compared
to 2007*
10.7%
% Change
-18.6%
Total C02
tonnes
Percent
of total
% Change
194
48
86
329
0.3%
0.1%
0.1%
0.5%
Total carbon emissions
62,509
100.0%
* Comparison CO2 is based on a like for like comparison between 2007 and 2008 emissions.
Key GHG Scope 1 – refers to direct emissions which must be reported to comply with the GHG protocol
GHG Scope 2 – refers to indirect emissions which must be reported to comply with the GHG protocol
Conversion factors comparison (figure 2)
Electricity:
Gas:
2008
2007
Conversion factors
0.537
0.206
0.523
0.206
Company car average emission **
164
153
-20.7%
9.7%
kg/kWh
kg/kWh
g/km
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** Company car emission rates are taken as the average of the fleet each year. This average emission rate is also applied to business
journeys made in private vehicles.
Drivers of carbon emissions
KPI table (figure 3)
The main driver of the Group’s carbon footprint
at 98% remains its customers’ use of their
residential properties.
UNITE CO2 Emmissions 2008
2
4.6%
1
92.9%
3
2.0%
4
0.5%
Element
2008
Measures
2008
Kg C02
Residential CO2 / Bed
Manufacturing C02 / Module
Business Travel C02 / 000 km
36,992
1,723
2,126
60,950,480
1,028,838
328,671
2008
KPI
1,648
597
155
% Change in CO2
Compared to 2007*
4.4%
13.4%
-4.7%
* Comparison CO2 is based on a like for like comparison between 2007 and 2008 emissions.
1
3
Residences electricity
Offices & factory energy
2
4
Residences gas
Travel & haulage
Key performance indicators
The Group’s level of residential CO2 emissions
has increased by 11% compared to the
equivalent 2007 value. The number of beds
operated by UNITE has increased during the
same period by 6%. This would indicate that the
carbon intensity of the residential operations has
increased by 4.4% per bedspace (see figure 3),
however, for 2008, a new method has been used
to calculate the number of bedspaces. This now
includes an adjustment for beds which UNITE
operated for only part of the year (i.e. which were
purchased or sold during the year). The new
calculation method represents a move to more
robust reporting.
The Group’s second KPI is related to the
manufacture of modular units, and here there
has been an increase of 13% in CO2 per module
(see figure 3). This is based on a reduction
in the number of modules produced during
the year, and the fact that a proportion of the
CO2 emissions from its manufacturing facility
are fixed.
Finally, the Group’s internal measure which
gauges the CO2 intensity of company travel and
module haulage has decreased by 5% over the
year (see figure 3). This is largely due to the
significant improvement in the fuel efficiency of
the car fleet.
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Existing built portfolio
Sustainable living campaign
As part of the Carbon Management Programme,
the Group has highlighted a number of potential
investment opportunities in the existing building
portfolio to improve energy efficiency. Three key
investments were made during 2008:
1. Voltage reduction: Reducing the incoming
supply voltages at seven of its larger properties
resulted in energy and CO2 savings ranging
between 2% and 7% in these buildings, as well
as a likely reduction in reactive maintenance as
equipment is subjected to lower stresses.
2. Aerating shower heads and taps: Installation of
over 3,750 new showerheads and tap aerators
across 12 properties will significantly reduce
water consumption and electricity consumption
associated with hot water use.
With a current customer base of 36,700 students
and an on-site management presence, UNITE is in
a unique position to engage with its customers
and implement measures to help foster more
responsible attitudes in those that will one day
lead and inspire others as graduates and young
professionals. In 2008, the Group initiated a pilot
scheme across six cities, targeting over 9,000
customers. The Sustainable Living Campaigns’
key objectives were:
• To emphasise the impact of individual customer
behaviour in driving our carbon footprint;
• To encourage behavioural change by
recognising, rewarding and publicising the
efforts of those customers who actively seek to
meet campaign goals; and
3. Piloting the use of new heating controls at a
• To reduced CO2 output per bed.
property in Manchester: Initial studies suggest
that by improving control systems for space
heating in the Group’s properties, electricity
consumption could be reduced by up to 15%.
The design of the scheme recognised customers’
views on environmental issues, including having a
provision for recycling and rewards for reducing
energy use, and benefited from consultation from
behavioural change specialists.
UNITE’s sustainable
living campaign
Customers are being challenged to reduce their
electricity and water consumption via a
communications campaign providing information
and energy saving tips. The most successful
customers are awarded high street vouchers as a
recognition and reward. The campaign will run
for six months in 27 properties with a target
energy reduction of 10%. Through close
collaboration with local charities, we should also
be able to divert unwanted items (books, CD’s,
TV’s, DVD’s, bedding, clothes etc) from landfill.
34
GHG Scope 1 – refers to direct emissions which must be reported to comply with the GHG protocol
GHG Scope 2 – refers to indirect emissions which must be reported to comply with the GHG protocol
Developments to be delivered in 2009 will
incorporate combined heat and power units. As
part of this strategy, the way in which the Group
procures its energy has been developed over the
last twelve months, and it is now in a position to
manage energy costs much more effectively by
accessing the wholesale markets through flexible
procurement contracts for gas and electricity.
Mr M C Allan, Chief Executive of the Group,
has responsibility for ensuring that the policies
described above are observed. The Board, as a
whole, regularly reviews implementation of such
policies and considers any amendments thought
necessary or desirable.
A sustainable business
New properties
BREEAM assessments
The Group’s development objectives are to provide
high standards of accommodation to its customers,
to comply fully with new standards of sustainability,
and to minimise disruption during the construction
process. The process of improving the sustainability
of the Group’s buildings has become embedded
within the culture of UNITE and new solutions are
incorporated at the earliest design phase for each
new project.
UNITE remain committed to building on brownfield
sites in urban locations, and during 2008, 85%
of our new buildings were built on such land,
allowing redevelopment of some 3.14 hectares
of brownfield sites.
The Group makes highly intensive use of the sites it
develops. In 2008 it achieved an average of 1,039
habitable rooms per hectare in its new properties,
compared with density of around 200 habitable
rooms per hectare indicated in supplementary
planning guidance on high density housing.
UNITE Modular Solutions were certified during
2008 with the recognised standard for the
environmental management of business, ISO
14001:2004, looking at ways to minimise waste,
dispose of it more effectively and implement
practices on using energy more effectively.
During 2008 five of the Group’s new developments
undertook BREEAM assessments (BREEAM is the
world’s most widely used environmental
assessment method for buildings). All of these
achieved a ‘Very Good’ rating which confirms a
thoughtful and progressive approach to sustainable
design. Specific examples of measures that have
been incorporated within the developments include
high degrees of thermal insulation, rainwater
harvesting, green roofs, biomass boilers, solar
thermal collectors, detailed travel plans and
enhanced lighting designs.
Future proofing
UNITE are currently devising the best
response to the forthcoming Carbon Reduction
Commitment by looking at further infrastructure
investment and talking to its energy suppliers
about smart metering.
The Group’s specification is evolving to ensure that
its developments are sensibly future proofed and
adapted to the challenges of climate change. By
incorporating energy efficiency improvements and
a measure of on-site energy generation, UNITE are
able to hedge its exposure to increasingly volatile
energy markets.
Modular construction
Modular techniques reduce build time
by up to half when compared with traditional
building, bringing less disruption to the
immediate site environment and surrounding
community. Advanced manufacturing processes
mean that both factory production and on-site
assembly are simplified, thereby decreasing
overall energy consumption and the amount of
waste generated during construction.
35
2008 has been a busy and successful year
for Livocity. Following its opening in 2007,
Livocity’s pilot project Devonshire Street has
been fully let throughout 2008 and two new
sites have undergone development to open
this year in Fulham and Camden increasing
its total bed spaces to 134. Alongside this the
operational platform has been streamlined
with the launch, at the beginning of 2009,
of an online booking and management
system complete with interactive customer
homepages to drive operational efficiency
and customer service.
Livocity has continued to attract its
customers exclusively through its online
platform and has been successful in driving
rental growth at Devonshire Street through
its focus on providing shorter term lets and
additional services inclusive in its rents.
With the launch of the new online system,
Livocity is positioned to further drive
performance at Devonshire Street and its new
openings at Camden Road and Fulham Road.
The system delivers online bookings; tenancy
acceptance; automatic card payments and
customer homepages to efficiently deliver
excellent customer service supported by a
streamlined City Living Support Team on
hand when customers need them.
The appeal of all-inclusive rental packages
and flexible tenancy terms has been proven
by the success at Devonshire Street. As
a result, Livocity continues to develop its
unique approach to rental accommodation
offering recent graduates and young
professionals a real alternative to the
traditional rented accommodation and
serviced accommodation sectors.
The Livocity portfolio:
Devonshire Street
Fullham Road
Camden Road
In a fantastic Central London location, just off
Great Portland Street, Devonshire Street has
continued to attract new and returning customers
throughout 2008, with a high proportion of
customers choosing to extend their stay. Offering
a premium location and service, Devonshire Street
has proven to be a great success on which to build
the Livocity brand, delivering rental growth of
11% in the last 16 months.
Total Number of Beds:
Rent (£/per week):
Tenancy Length:
Additional Features:
62
£325 - £450
1 week – 1 year
Communal lounge
Broadband and
internet TV
Due for completion in March 2009, Fulham Road
offers a selection of refurbished studios, one bed
flats and two and three bed flat shares in a vibrant
West London location. The Fulham Road property
offers a more affordable option through flat shares,
whilst retaining the other aspects of Livocity’s
unique living experience.
Total Number of Beds:
Rent (£/per week):
Tenancy Length:
Additional Features:
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£230 - £455
1 week – 1 year
Broadband and
internet TV
Following a successful 8 month build programme,
Camden Road is due to open its doors in March 2009
offering 38 brand new studios delivered to a high
specification using innovative modular construction.
The first non-student scheme to be delivered by
UNITE Modular Solutions, Camden Road has
pioneered many new technologies resulting in a
collection of studios providing the best in modern
studio living only 10 minutes from King’s Cross.
Total Number of Beds:
Rent (£/per week):
Tenancy Length:
Additional Features:
38
£285 - £450
1 week – 1 year
Communal garden
Broadband and
internet TV
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The Board of Directors
1
4
7
2
5
8
3
6
9
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1 Geoffrey Maddrell Chairman
2 Mark Allan Chief Executive
3 Joe Lister Chief Financial Officer
Aged 72, Geoffrey, in addition to being Chairman of
UNITE, is also Chairman of BuildStore Limited, F&C UK
Select Trust plc and of Economic Lifestyle Property
Development Company Limited. He is also the founding
Chairman of Research Autism. Geoffrey has a long-
standing and successful involvement in the strategic
direction and expansion of businesses, with a particular
interest in building related activities. His continued
chairmanship of the Board until the 2009 Annual
General Meeting of the Company will be of considerable
benefit to the Group.
Mark, 36, was appointed to the role of Chief Executive
in September 2006, having previously served as Chief
Financial Officer for three years. Mark held a variety of
other roles in the business prior to that, having joined
the Group in 1999. As Chief Executive he chairs the
Group’s Leadership Executive and has overall
responsibility for the Group’s performance against its
business plan targets, whilst continuing to develop
UNITE’s growth strategy.
Joe, 37, joined UNITE in 2002 from
PricewaterhouseCoopers where he worked in the
Corporate Finance practise. Joe has held a variety of
roles at UNITE, including Corporate Finance and
Investment Director and in 2007 as the Managing
Director of Livocity, UNITE’s graduate housing business
before being appointed as CFO in January 2008. As
such, Joe has in-depth knowledge of the Group’s
finances and investment strategy, for which, as CFO,
he now has overall responsibility, as well as being
responsible for the Finance and Company Secretarial
functions. Joe also acts as Chairman of UNITE’s Project
Approval Meetings.
4 John Tonkiss Chief Operating Officer
5 Nicholas Porter Non-Executive Deputy Chairman
6 Nigel Hall Non-Executive Director, Senior Independent
John, 41, joined UNITE in 2001 as General Manager of
the Group’s off-site manufacturing facility. John joined
UNITE’s Leadership Support Board in 2002 and
subsequently was promoted to the role of Group
Development Director in 2004. In 2006, John was
appointed Managing Director of UNITE’s Student
Hospitality UK Business and, in 2007, was made
UNITE’s Chief Operating Officer to reflect his
responsibility for strategic and tactical business
operations throughout the Group.
Aged 39, Nicholas Porter founded UNITE in 1991
and held the position of Chief Executive Officer until
September 2006. Under his leadership UNITE
developed a proven and sustainable business model
and set the benchmark for student community living.
Nicholas has subsequently founded The Capital
Values Group and continues to provide focused
support to the Company in his role of Non-Executive
Deputy Chairman.
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Director and Chairman of the Audit Committee
Aged 53, Nigel, who qualified as a Chartered
Accountant in 1980 with Price Waterhouse, was
Group Finance Director of Arcadia Group plc (formerly
The Burton Group plc) until February 2003. He joined
the Burton Group in 1984 and was appointed to its
Board in 1997, becoming Group Finance Director in
November of that year. Nigel is also Chairman of
Countrywide Farmers plc and a Non-Executive
Director of Pinewood Shepperton plc and C&J Clark
Limited. With his considerable experience of finance
and operations in multi-site businesses, Nigel
provides strong leadership of the Audit Committee.
7 Stuart Beevor Non-Executive Director and Chairman
8 Richard Walker Non-Executive Director
9 Phil White CBE Non-Executive Director
of the Remuneration Committee
Aged 52, Stuart is Managing Director of Grosvenor Fund
Management Limited and a member of the Board of
Grosvenor Group Limited, the international property group,
which he joined in 2002. Prior to joining Grosvenor, Stuart
was Managing Director at Legal and General Property
Limited, having previously held a number of roles dealing
with development, investment, property management and
unitised funds at Norwich Union. Stuart brings a
knowledge of property investment, property funds and
investor demand that uniquely supports the Board and the
business in its role as a Co-investing Asset Manager.
Aged 42, Richard is Senior Director at Talk Talk (Telco
Arm of Carphone Warehouse Group) and is responsible
for the customer experience change programme. Prior
to this role, Richard was Chief Operating Officer of
Carphone Warehouse UK, with responsibility for the
Group’s 750 UK stores, websites, direct sales and
insurance services. Richard was previously Managing
Director of Carphone Warehouse’s European retail
business, operating in 14 countries, and UK Sales
Director. He holds a law degree from Nottingham
University and trained as an accountant with Coopers
and Lybrand. His main supporting strengths are built
around his operational expertise and 18 years of
experience of having the customer at the heart of
every decision made.
and Chairman Designate
Phil, 59, was appointed Non-Executive Director and
Chairman Designate of the Group in January 2009.
The majority of Phil’s executive career was spent in
the public transport sector, during an exciting period of
deregulation and privatisation. He was Chief Executive
of National Express Group plc from 1997 to 2006,
leading the business through a period of considerable
growth both in the UK and overseas. Phil is currently
Non-Executive Chairman of Kier Group plc and Non-
Executive Chairman of Lookers plc. His experience
gained in leading customer focused businesses,
both in an executive and non-executive capacity,
will be invaluable to the Group.
38
Directors’ report
The Directors present their annual report and audited financial
statements for the year ended 31 December 2008.
Mr White offers himself for re-election at the Annual General Meeting, as do each of Messrs S R H Beevor, N
A Porter and N P Hall who retire by rotation. Brief biographies of all the Directors, including those standing for
re-election, are set out on page 38. Those biographies describe the reasons why those of the Directors standing for
re-election should be re-elected.
Directors’ interests
The interests of the Directors and their families in the ordinary shares of the Company are set out below.
Details of Directors’ share options are set out in the Directors’ Remuneration Report.
Directors
M C Allan 1
J Tonkiss 2
J J Lister 3
G K Maddrell 4
N A Porter 5
N P Hall
S R H Beevor
R Walker
Ordinary Shares of 25p each
31 December 2008
Ordinary Shares of 25p each
31 December 2007
363,606
148,832
87,121
262,541
1,512,630
9,849
-
-
239,312
81,036
17,702
262,541
3,006,685
9,849
-
-
1 Mr Allan’s interests include 259,584 ordinary shares conditionally awarded to him pursuant to the terms of the
Company’s Long Term Incentive Plan (the “LTIP”). The number of such shares that will unconditionally vest in
Mr Allan pursuant to those awards will be determined following the end of the relevant three year measurement
periods.
2 Mr Tonkiss’s interests include 130,016 ordinary shares conditionally awarded to him pursuant to the LTIP. The
number of such shares that will unconditionally vest in Mr Tonkiss pursuant to those awards will be determined
following the end of the relevant three year measurement periods.
3 Mr Lister’s interests include 82,270 ordinary shares conditionally awarded to him pursuant to the LTIP. The
number of such shares that will unconditionally vest in Mr Lister pursuant to those awards will be determined
following the end of the relevant three year measurement periods.
4 Mr Maddrell’s interests include his interest in 12,250 ordinary shares held by his wife, Winifred Maddrell, and
170,291 ordinary shares held by the trustees of the Geoffrey Maddrell Jersey Trust, the beneficiaries of which
include himself, his wife and his three children.
5 Mr Porter’s interests include his interest in (a) 866,000 ordinary shares held by the trustees of The Porter Family
Discretionary Trust, the beneficiaries of which are Mr Porter’s children; (b) 142,340 ordinary shares held by the
trustees of the Jane Louise Discretionary Settlement Trust, the beneficiaries of which are certain of Mr Porter’s
children; and (c) 151,882 ordinary shares held by the trustees of The Red Shoes Charitable Trust, one of whom
is Heather Porter (Mr Porter’s wife).
None of the Directors has a beneficial interest in the shares of any other Group company. Since 31 December 2008,
there have been no changes in the Directors’ interests in shares.
Principal activities
The principal activities of the Group during the year
were the development and management of student
residential accommodation in the United Kingdom.
Details of the Company’s principal subsidiaries are set
out on page 76.
Operating and financial reviews
The information that fulfils the requirements of the
Business Review can be found in the following
sections, which are incorporated into this report
by reference:
• Financial performance (pages 13 and 14);
• Key performance indicators (page 30);
• Risks and uncertainties (page 29).
Further information on the Group’s operations and
financial affairs that are in addition to the requirements
of the Business Review are set out on pages 3 to 38
of this report.
Profit and dividends
The Group loss for the year attributable to
shareholders amounted to £115.9 million (2007:
£37.5 million). The Directors do not recommend
payment of a final dividend for the year (2007: 1.67p
per ordinary share), making a total dividend for the
year of 0.83p per share (2007: 2.50p per share).
Directors
Each of Messrs G K Maddrell, N A Porter, N P Hall,
S R H Beevor, R Walker, M C Allan and J M Tonkiss
served as Directors throughout the year. Mr Maddrell
acted as Chairman of the Board throughout the period.
On 2 January 2008, Mr A C Harris resigned from the
Board, on which date Mr J J Lister was appointed to
the Board in his place as Chief Financial Officer.
On 21 January 2009, Mr P M White was appointed
to the Board, as an additional Non-Executive of the
Company and as Chairman Designate. At the Annual
General Meeting, Mr G K Maddrell will, as planned
and after 10 years, step down from the Board and
from being Chairman of the Company.
39
Changes in Share Capital
Donations
During the year, a total of 24,508 ordinary shares of
25p each were allotted and issued pursuant to the
exercise of options granted under The UNITE Group
plc Savings Related Share Option Scheme (10,801
at 131p per share; 13,199 at 188p per share; and
508 at 249p per share). In addition, a total of 46,593
ordinary shares were allotted and issued pursuant
to the exercise of options granted under The UNITE
Group plc Approved Company Share Option Scheme
1999 (8,986 at a price of 158.5p per share; 10,204
at a price of 191p per share; 12,903 at a price of
232.5p per share; 12,500 at a price of 240p per
share; and 2,000 at a price of 300p per share).
A further 41,886 shares were allotted and issued
pursuant to the exercise of options granted under The
UNITE Group plc Unapproved Share Option Scheme
(10,338 at a price of 129p per share; 11,501 at a
price of 191p per share; and 19,997 at a price of
232.5p per share).
On 15 April 2008, the Company also allotted
and issued 707,612 ordinary shares of 25p each
at a price of 309.75p per share pursuant to the
Group’s LTIP.
Substantial interests in the share
capital of the Company
As at 9 February 2009, those shareholders, other
than Directors, who had notified the Company of a
disclosable interest amounting to 3% or more of the
total voting rights in the Company were as follows:
Shareholder
Deutsche Bank AG
Perennial Investment Partners (Australia) Limited
Lloyds TSB Group Plc
FMR LLL
AXA S.A.
Morgan Stanley Investment Management Limited
Standard Life Investments Ltd
Legal & General Group Plc
Allianz S.E.
The Company made no political donations during
the course of the year but made charitable donations
of £15,000 to Uniaid Foundation (2007: £25,000)
and £5,000 to Student In Free Enterprise (SIFE).
The Company also donated 55 accommodation
bursaries for 2007/08 to Uniaid Foundation across
the UK equating to £247,500 (2007: £175,000).
In addition, the Company made donations to a number
of charities through its “matched funding” policy.
Pursuant to that policy, the Company agrees, subject
to certain conditions and limits, to match the donations
made to charities by employees through fund raising
activities of their own. During the year, those
“matched funding” donations of the Company
amounted in aggregate to £6,206 (2007: £8,604).
Policy and practice on payment
of creditors
During the year the Company maintained its policy
of agreeing and abiding by supplier payment terms.
The Group has not followed any recognised code
for payment practice. As at 31 December 2008 the
Group’s trade creditors were equivalent to 32 days’
purchases (2007: 32 days). The Company does not
have any trade creditors (2007: nil).
Health and safety
The Group’s policy is to provide and maintain safe and
healthy working conditions, equipment and systems
of work for all its employees and to provide such
information, training and supervision as they need for
this purpose.
Percentage of Share Capital
7.03%
5.01%
4.98%
4.96%
4.92%
4.87%
4.13%
3.98%
3.27%
The Group continues to advance its development of a
transparent, scalable and robust safety management
system. External consultants have reviewed the
Group’s fire risk management responsibilities, whilst
in April 2008, the Group entered into a Local Authority
Partnership with Avon Fire and Rescue Service. UNITE
is the only student accommodation operator to have
entered into such a partnership.
Employment Policies
The Company encourages employee involvement
and consultation and places emphasis on keeping
its employees informed of the Group’s activities
and financial performance. To that end, the UNITE
Employee Forum has been established, consisting of
elected representatives from throughout the business.
The UNITE Code of Ethics (the full text of which can
be found on the Company’s website), confirms that
the Group seeks at all times to conduct its business
in accordance with, and to ensure that each of its
employees and directors adheres to, the highest
standards of business and personal ethics. An
independent “whistle-blowing” channel also enables
employees to report any incidents of improper or illegal
conduct of which they may become aware whilst, if
they wish, maintaining their anonymity.
The UNITE Group plc Approved Company Share
Option Scheme, The UNITE Group plc Unapproved
Share Option Scheme and The UNITE Group plc
Savings Related Share Option Scheme are intended
to help develop employees’ interest in the Company’s
performance. In addition, The UNITE Group plc Long
Term Incentive Plan was introduced with the aim of
being better able to structure remuneration packages
so as to retain, motivate and reward selected
Executive Directors and Senior Managers.
The Company operates a non-discriminatory
employment policy. Full and fair consideration is given
to applicants for employment from the disabled where
they have the appropriate skills and abilities and to
the continued employment of staff who become
disabled. The Company places particular emphasis
on and encourages the continuous development and
training of its employees and the provision of equal
opportunities for the training and career development
of disabled employees.
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40
Directors’ report
Auditors
A resolution for the re-appointment of KPMG Audit Plc
as auditors of the Company is to be proposed at the
forthcoming Annual General Meeting.
Disclosure of information
to auditors
The Directors who held office at the date of
approval of this Directors’ Report confirm that, so
far as they are each aware, there is no relevant
audit information of which the Company’s auditors
are unaware; and each Director has taken all the
steps that he ought to have taken as a director
to make himself aware of any relevant audit
information and to establish that the Company’s
auditors are aware of that information.
Annual General Meeting
The Annual General Meeting of the Company will
be held at The Core, 40 St Thomas Street, Bristol
BS1 6JX at 9.30 a.m. on 15 May 2009. Formal
notice of the meeting is given on pages 90 to 92.
In addition to the ordinary business of the meeting,
an ordinary resolution will be proposed to authorise
the Directors to allot up to £10,359,653 in nominal
value of the authorised but unissued share capital
of the Company (representing one third of the
issued share capital of the Company as at 9 March
2009). In accordance with guidelines issued by the
Association of British Insurers, this resolution also
grants the Directors authority to allot further equity
securities up to an aggregate nominal value of
£10,359,653, again representing one third of the
nominal value of the issued ordinary share capital
of the Company as at 9 March 2009. This
additional authority may only be applied to fully pre-
emptive rights issues.
A special resolution will also be proposed to dis-
apply statutory pre-emption rights in respect of the
allotment of shares in connection with any rights
issue or other issue by way of rights and otherwise
up to an aggregate nominal amount of £1,553,948
(representing five per cent of the issued share
capital of the Company as at 9 March 2009).
The Board has no current intention of exercising
either of the authorities conferred by the above
resolutions. Unless revoked, varied or extended,
those authorities will expire at the conclusion of the
next Annual General Meeting of the Company or
the date falling 15 months from the passing of the
resolutions, whichever is the earlier.
41
Disclosures
The Company’s share capital is made up of one
class of ordinary shares, which carry no restrictions
on transfer or voting rights (other than as set out in
the Company’s Articles of Association).
Details of those persons who have significant
holdings of shares in the Company are set out on
page 40 under the heading “Substantial Interests
in the Share Capital of the Company”. No holder of
shares in the Company has any special rights with
regard to the control of the Company, nor does the
Company have an employee share scheme, shares
in relation to which have rights with regard to the
control of the Company.
There are no agreements known to the Company
between holders of shares in the Company which
may result in restrictions on the transfer of shares
or on voting rights in relation to the Company.
The Company has no rules regarding the
appointment and replacement of Directors or
regarding the amendment to the Company’s
Articles of Association, save as set out in the
Company’s Articles of Association.
Other than certain of the Group’s banking facilities,
there are no significant agreements to which the
Company is a party that effect, alter or terminate
upon a change of control of the Company following
a takeover bid. Nor are there any agreements
between the Company and its Directors or
employees providing for compensation for loss of
office or employment that occurs because of a
takeover bid.
Details of proposals to be put to the AGM in
relation to the power of Directors to issue shares in
the Company are set out above under the heading
“Annual General Meeting”. The Directors have no
authority to buy-back the Company’s shares.
By order of the Board
A D Reid
Secretary
9 March 2009
In addition to the share allotment authorities
referred to above, two further items of special
business will be proposed at the Annual General
Meeting.
The first is the proposal of a special resolution
to adopt new articles of association (the “New
Articles”), primarily to take account of changes
in English company law brought about by those
provisions of the Companies Act 2006 which have
come into force since the Company’s articles were
last amended in 2003. An explanation of the main
changes between the New Articles and the existing
articles is set out in the appendix to the notice of
Annual General Meeting. Due to the phased nature
of implementation of the Companies Act 2006 it
is likely that, in common with other companies,
further related changes to the Company’s articles
will be proposed at a future Annual General
Meeting.
In line with the Companies Act 2006, the New
Articles provide that all general meetings, other
than Annual General Meetings, can be held on 14
clear days’ notice. Under the EU Shareholder Rights
Directive, which is due to be implemented into
English law on 3 August 2009 by the Companies
(Shareholders’ Rights) Regulations 2009 (the
“Regulations”), prior sanction of shareholders at a
company’s Annual General Meeting is required to
enable subsequent general meetings to be held on
less than 21 clear days’ notice.
Therefore the second of the two further items of
special business comprises a special resolution
to enable the Company to hold general meetings
(other than the Company’s Annual General
Meeting) on 14 clear days’ notice, conditional upon
the adoption of the New Articles. This enabling
resolution is being proposed in accordance with
the recommendations given by the Institute of
Chartered Secretaries and Administrators and the
Department for Business, Enterprise and Regulatory
Reform in advance of the implementation of the
Regulations to enable such meetings to be held on
14 clear days’ notice. General meetings will only
be held on 14 clear days’ notice where appropriate
electronic voting facilities are made available to
shareholders as prescribed by the Regulations. In
accordance with the Regulations, this resolution,
which is proposed as a special resolution, will not
be passed on a show of hands if any votes are
taken against it. In such event, the chairman of the
meeting will exercise his right to call for a poll vote
(requiring a 75 per cent majority).
Corporate governance
During the course of the year, the Company complied (except as specifically set out below), with the
principles of best practice set out in the Combined Code issued by the Financial Reporting Council in
June 2006 and as subsequently amended (the “Combined Code”).
Board of Directors
The Company’s corporate governance procedures
provide that the full Board of Directors shall meet
at least six times a year. During 2008, there were
10 meetings of the full Board, all of which were
attended by each of the Directors then appointed,
other than one, which Mr S R H Beevor was unable
to attend.
The Board receives regular reports from each of
the Group’s business units, but itself retains full
and effective control of the Group’s activities, with
a formal schedule of matters specifically reserved
for decision by the full Board. In particular, the
full Board sets the strategic objectives, business
plan and annual budgets for the Group, with major
investment decisions also requiring Board approval.
Operational responsibility is delegated to the Group’s
Leadership Executive.
Terms of reference have been set by the Board
for its various committees and for the Chairman
and the Chief Executive. The terms of reference
for the Chairman and the Chief Executive are such
as to clearly establish the division of responsibility
between the two roles. In addition, all Directors have
access to the advice and services of the Company
Secretary, whilst procedures are in place allowing
for individual Directors to take independent legal
advice. A programme for the training of Directors
has been put in place.
The current Board consists of three Executive
Directors, namely Mr M C Allan (Chief Executive);
Mr J M Tonkiss (Chief Operating Officer); and Mr J
J Lister (Chief Financial Officer); as well as Mr G K
Maddrell (Chairman), Mr N A Porter (Non-Executive
Deputy Chairman), Mr N P Hall (Senior Independent
Non-Executive Director) and three other Non-
Executive Directors (Messrs S R H Beevor, R Walker
and P M White). Mr Maddrell will, as planned and
after 10 years, step down from the Board and
as Chairman at the Annual General Meeting, on
which date Mr P M White will take on the role of
Chairman.
Each of the Non-Executive Directors, other than
Mr N A Porter, is considered by the Board to be
independent of management and free from any
personal, business or other relationship with the
Group, save for the receipt of Directors’ fees and
interests in shares of the Company. As Mr Porter
was, until 14 September 2006, Chief Executive
Officer of the Company, he is not considered to be
independent. Consequently, whilst the Company
was a member of the FTSE 350, the Company
did not meet the requirement of the Combined
Code that at least half of its Board, excluding
the Chairman, be made up of independent Non-
Executive Directors. However, in December 2008,
the Company ceased to be a member of the FTSE
350, in which case the requirement that at least
half its Board (excluding the Chairman), be made up
of independent Non-Executives does not currently
apply to the Company.
Each of the Executive Directors has a written service
contract, whilst each of the Non-Executive Directors
has a formal letter of engagement. Executive
Directors have rolling contracts of employment
with twelve months notice periods, whilst Non-
Executive Directors are appointed by the full Board
for a term not exceeding three years. The letters of
appointment relating to the Non-Executive Directors
are available for inspection at the Company’s
registered office during normal business hours and
for the 15 minutes prior to and during the Annual
General Meeting.
The Board has appointed an Audit Committee,
a Remuneration Committee and a Nominations
Committee. The terms of reference for each such
committee (which are published on the Company’s
website) are reviewed annually by the relevant
committee, as is the effectiveness of each such
committee. Set out below are sections describing
the work of the committees in discharging their
respective responsibilities.
Audit Committee
During the year, the Audit Committee comprised
Mr N P Hall (who chaired the Committee through
the year), Mr S R H Beevor and Mr R Walker, all
being independent Non-Executive Directors. Mr Hall
is a Chartered Accountant and was, until February
2003, finance director of Arcadia Group plc
(formerly The Burton Group plc).
During the year, the Audit Committee met on four
occasions, each of which meetings was attended by
all members of the Committee.
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The Audit Committee meets with the Chief Financial
Officer and with the external auditors and reviews
the annual accounts and the preliminary and interim
financial results announcements prior to submission
to the Board. The Audit Committee also reviews
compliance with accounting standards, the scope
and extent of the external audit programme and the
appointment, independence and remuneration of
the auditors. The chairman of the Audit Committee
reports to the Board on matters discussed at
meetings of the Audit Committee.
During the course of the year, the Audit Committee
reviewed the need for an internal audit function
within the Group. The conclusion of that review
was that, in view of the existing controls in place
(including an operational compliance audit regime),
and the size of the Group, a Group internal audit
function was not required. However, the position is
being kept under review.
The Audit Committee has established a formal
policy with regard to the Company’s appointment
of the external audit firm for the supply of non-
audit services. In addition, the Audit Committee
reviews any potential threat to the objectivity and
independence of the external auditor, including,
in particular, those potential threats identified by
the Auditing Practices Board in its independence
guidelines. The Committee determines and then
reports to the Board, whether or not it is satisfied
that the independence of the external auditor is
not jeopardised, taking into account the external
auditor’s own submissions to the Committee and/
or the Board.
During the course of the year, the non-audit
services provided to the Group related to tax
advisory and compliance matters and the review of
management accounts of certain subsidiaries as
part of a bank lending due diligence process.
Remuneration Committee
During the year, the Remuneration Committee
comprised Mr S R H Beevor (who chaired the
Committee throughout the year), Mr N P Hall and
Mr R Walker (all being independent Non-Executive
Directors), together with Mr G K Maddrell. As Mr
Maddrell, being Chairman of the Company, was
considered independent on his appointment to
that role, his membership of the Remuneration
42
Corporate governance
Committee is in accordance with the provisions of
the Combined Code, as amended in June 2006.
The Committee determines remuneration policy
and advises the Board accordingly. In particular,
the Committee makes recommendations regarding
the terms of employment of executive directors and
senior managers, including terms of remuneration,
the award of share options, long term incentive plan
awards and other incentives. Mr M C Allan is invited
to attend meetings of the Remuneration Committee
but takes no part in the discussions concerning his
own remuneration and does not attend those parts
of the meetings of the Committee that consider that
issue. The Directors’ Remuneration Report is set out
on pages 45 to 51.
During the course of 2008, the Remuneration
Committee met on four occasions, each of which
meetings was attended by all members of the
Committee.
Nominations Committee
During the year, the Nominations Committee was
chaired by Mr G K Maddrell (other than for meetings
where the appointment of a new Chairman to the
Board was being considered, in which cases Mr N A
Porter, as Non-Executive Deputy Chairman, chaired
the Committee). The exact composition of the
Committee is variable, provided that each meeting
has a majority represented by independent Non-
Executive Directors. During the course of 2008, five
meetings of the Nominations Committee were held,
one of which was attended by Messrs G K Maddrell,
N P Hall and S R H Beevor, with the other four
(concerning the appointment of a new Chairman to
the Board), being attended by Messrs N A Porter,
N P Hall, S R H Beevor, R Walker and M C Allan.
The Committee is responsible for making
recommendations to the Board on any appointment
or re-appointment to the Board and at senior
executive level. It is also responsible for ensuring
that plans are in place for an orderly succession
of appointments to the Board and at senior
management level, so as to maintain an appropriate
balance of skills and experience within the Company
and on the Board.
Following determination by the Board that a new
Non-Executive Director should be appointed, the
Nominations Committee draws-up a personal
and professional profile of the ideal candidate
it would like to see appointed in order that
a recruitment and selection process can be
undertaken. The Committee then appoints an
independent search and selection agency to
approach potential candidates who it identifies
as meeting the specification supplied by the
43
Nominations Committee. Initial interviews are
conducted by the search agency, which then
compiles a short list of appropriate candidates to
be interviewed by the Nominations Committee. A
recommendation of a proposed candidate is then
made following those second round interviews.
Following a recommendation from the Committee
for the appointment of a candidate to the Board, the
Chairman (or the Deputy Chairman, in the case of
the proposed appointment of a new Chairman to the
Board), may be requested by the Board to approach
the nominated candidate to agree terms for the
appointment according to the criteria set out in the
Group’s remuneration policies.
Consideration of the appointment of an internal
candidate to the position of Executive Director
will follow a request from the Chief Executive to
the Nominations Committee that the appropriate
candidate be considered for nomination. This will
only follow a record of successful achievement in
the candidate’s current role and the gathering of
data from an independent external assessment
centre that the candidate will have been asked to
attend. At that centre, the proposed candidate is
assessed in the areas of commercial and strategic
ability; leadership; technical ability; ability to build
peer relations; values and behaviours. The results of
those assessments are compared against a global
norm group of highly performing directors and
senior managers. After gathering the assessment
data, the Nominations Committee interviews
the proposed candidate, following which it may
recommend his or her appointment to the Board.
If the Board accepts the recommendation of the
Committee, it will, through the Chairman and Chief
Executive, invite the proposed candidate to join the
Board according to terms and conditions of service
agreed by the Remuneration Committee. That
follows an external benchmarking of remuneration
for the role.
For the appointment of external candidates to the
role of Executive Director, the process outlined
above in relation to Non-Executive Directors is
followed, with the addition that such external
candidates are, as is the case with internal
candidates, required to attend an external
assessment centre prior to final interviews by
the Nominations Committee.
The process for evaluating the performance of the
Executive Directors flows from the setting of the
overall business strategy for the Group. Once agreed
by the Board, the Executive Directors produce
business unit strategies and milestone action plans
designed to deliver the agreed overall strategy.
Such strategies and plans, which are challenged
and may be revised prior to being ratified by the
Board, then form the basis of personal objectives
that are set for each of the Executive Directors.
The personal objectives of the Chief Executive are
agreed between him and the Chairman as part of
the annual Performance Development Programme
(“PDP”) cycle. The other Executive Directors agree
their objectives with the Chief Executive, again as
part of the PDP process. Progress in achieving
objectives is monitored at least monthly through
one to one meetings between the Chairman and the
Chief Executive and between the Chief Executive
and the other Executive Directors. Progress reviews
are also carried out at Board level through the
review of key performance indicators.
Formal performance measurement is undertaken
through half-year reviews of progress made
against milestones, key performance indicators
and other personal objectives. The annual PDP
review of performance takes place shortly after
the year-end. That review considers performance
against objectives, including key performance
indicators, and the Group’s values and behaviours.
The key performance indicators, which include
financial performance and customer and employee
satisfaction, also form the basis of the bonus
formulae as set out in the Remuneration Report.
The performance of the Non-Executive Directors
is reviewed annually by the Chairman, whilst the
performance of the Chairman is considered annually
by the Non-Executive Directors (in the absence of
the Chairman), in both cases taking account of the
views of the Executive Directors. The Chairman
and the Non-Executive Directors (also on an annual
basis) meet to consider the overall effectiveness of
the Board and its Committees. Those meetings are
then followed by full Board review meetings, which
are attended by all members of the Board.
Internal control
The Board has overall responsibility for the Group’s
system of internal control. However, such a system
is designed to achieve business objectives and can
only provide reasonable and not absolute assurance
against material mis-statement.
The provisions of the Combined Code in respect
of internal controls require that directors review all
controls including operational, compliance and risk
management, as well as financial control. Through
reports from the Group’s Leadership Executive, the
Board has reviewed the effectiveness of the Group’s
system of internal controls for the period covered by
the annual report and accounts.
The Company has an established framework of
internal controls which, amongst other things,
includes the following:
Financial reporting
Investor relations
The Group has a comprehensive budgeting
system with an annual business plan approved by
the Board. Operating results and cash flows are
reported on monthly and compared against budget.
Forecasts are reviewed throughout the year and
revised as necessary. The Company reports to
shareholders on a half-yearly basis.
Investment appraisal
The Company has clearly defined guidelines for
capital expenditure. These include annual budgets,
detailed appraisal and review procedures, levels
of authority and due diligence requirements where
investment or development properties are being
acquired. Post-investment appraisals are performed
for major investments.
Business risk assessment
The Group has developed a comprehensive risk
management system whereby strategic threats to
the business are identified and the management
and control of those threats prioritised. As a result of
this system, the Board is satisfied with the high level
controls in place, although all areas of the business
are kept under review and new controls introduced
as appropriate. An analysis of the more important
risks and uncertainties faced by the Group is set
out on page 29. The Group’s objectives and policies
with regard to the management of financial risks are
set out in note 20 to the Financial Statements.
Social responsibility
The Company has formal procedures for
considering the significance to its business of social,
environmental and ethical (SEE) matters, which are
considered as part of the Group’s risk management
system (referred to above in relation to Business
Risk Assessment). The results of the benchmarking
reviews which form part of that system (which are
carried out by the Group’s Leadership Executive),
are reported to and considered by the full Board
on a six monthly basis. Details of the risks and
uncertainties that are considered most significant to
the Group are set out on page 29.
In light of the above, the Board believes that it has
in place appropriate procedures to identify and
assess the significant risks to the Company’s short
and long term value arising from SEE matters, as
well as opportunities to enhance value that may
arise from an appropriate response. In that respect,
the Board considers that it receives adequate
information to make those assessments and that
the Company has in place effective measures for
managing significant risks. Account is taken of SEE
matters in relation to the training of Directors.
The Executive Directors have a programme of
meetings with institutional shareholders and
analysts. Feedback from such meetings regarding
shareholder opinion is provided to the Board as a
whole. In addition, the Senior Independent Non-
Executive Director is available to meet with major
shareholders if requested. The Company’s Annual
General Meeting provides an opportunity, which
the Board encourages, for private investors to
communicate with the Company.
Going concern
After making enquiries, the Directors have a
reasonable expectation that the Group and the
Company have adequate resources to continue in
operational existence for the foreseeable future.
For this reason, they continue to adopt the going
concern basis in preparing the accounts.
Statement of Directors’
responsibilities
The Directors are responsible for preparing the
Annual Report and Accounts and the Group and
parent company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare
Group and parent company financial statements
for each financial year. Under that law they
are required to prepare the Group financial
statements in accordance with IFRSs as adopted
by the EU and applicable law and have elected to
prepare the parent company financial statements
on the same basis.
The Group and parent company financial statements
are required by law and IFRSs as adopted by the EU
to present fairly the financial position of the Group
and the parent company and the performance for
that period; the Companies Act 1985 provides
in relation to such financial statements that
references in the relevant part of that Act to
financial statements giving a true and fair view are
references to their achieving a fair presentation.
In preparing each of the Group and parent company
financial statements, the Directors are required to:
• select suitable accounting policies and then
apply them consistently;
• make judgments and estimates that are
reasonable and prudent;
• state whether they have been prepared in
accordance with IFRSs as adopted by the EU;
and
• prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the Group and the parent company
will continue in business.
The Directors are responsible for keeping proper
accounting records that disclose with reasonable
accuracy at any time the financial position of the
parent company and enable them to ensure that
its financial statements comply with the Companies
Act 1985. They have general responsibility for
taking such steps as are reasonably open to them
to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the Directors
are also responsible for preparing a Directors’
Report, Directors’ Remuneration Report and
Corporate Governance Statement that comply with
that law and those regulations.
The Directors are responsible for the maintenance
and integrity of the corporate and financial
information included on the Company’s website.
Legislation in the UK governing the preparation and
dissemination of financial statements may differ
from legislation in other jurisdictions.
Responsibility statement of the
Directors in respect of the annual
financial report
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance
with the applicable set of accounting standards,
give a true and fair view of the assets, liabilities,
financial position and profit or loss of the
company and the undertakings included in the
consolidation taken as a whole; and
• the Directors’ report includes a fair review
of the development and performance of the
business and the position of the issuer and the
undertakings included in the consolidation taken
as a whole, together with a description of the
principal risks and uncertainties that they face.
MC Allan
Director
9 March 2009
JJ Lister
Director
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44
Directors’ remuneration report
Introduction
Remuneration Committee
The Board reports to shareholders on Directors’
remuneration as set out below. In preparing this
report, the Remuneration Committee of the Board
(the “Committee”) has complied with the Directors’
Remuneration Report Regulations 2002 (the
“Regulations”). The Report also meets the relevant
requirements of the Listing Rules of the Financial
Services Authority and describes how the Board
has applied the Principles of Good Governance in
relation to directors’ remuneration. A resolution
to approve the Report will be proposed at the
forthcoming Annual General Meeting.
The Regulations require the auditors to report to the
Company’s members on the “auditable part” of the
Remuneration Report and to state whether, in their
opinion, that part of the Report has been properly
prepared in accordance with the Companies
Act 1985 (as amended by the Regulations). The
Report has therefore been divided into separate
sections for the unaudited and audited information.
Within the unaudited section, the report deals with
the remuneration policy that is to be followed in
2009, summarises the results of remuneration
surveys that have been undertaken and describes
arrangements which applied during 2008.
During the year, the Remuneration Committee of
the Board consisted Mr S R H Beevor (who chaired
the Committee), Mr G K Maddrell, Mr N P Hall and
Mr R Walker. Mr M C Allan is invited to attend
meetings of the Committee.
The Committee is required annually to consider
and review all aspects of the Executive Directors’
employment, performance and remuneration and
the Group’s policies on those matters. Mr Allan
takes no part in the discussions concerning his
own remuneration, nor does he attend those parts
of the meetings of the Committee which discuss
that issue.
The Committee is able to obtain independent
professional advice from remuneration and other
consultants in order to carry out its duties. During
the year, such advice was received from Hewitt
New Bridge Street, which did not provide any
other services to the Company during the course
of the year. In addition, Mr S Spiers, the Group
HR Director, provided advice and services to the
Committee during the course of the year.
The members of the Committee attend the
Company’s Annual General Meeting and are
available to answer shareholders’ questions about
the Directors’ remuneration.
The terms of reference of the Remuneration
Committee are available on the Company’s
website.
Policy on remuneration of
Executive Directors and
Senior Executives
The policy in respect of Directors’ remuneration
for the following and subsequent years is to
ensure that the remuneration packages it offers
are competitive and designed to attract, retain and
motivate executive directors and senior executives
of an appropriate calibre. Performance-related
reward policies are operated which are designed
to provide a significant element of “at risk” pay,
which is only available when good results are
achieved. Remuneration packages are designed to
promote long term sustainable performance and to
promote alignment between the interests of senior
executives and the Company’s shareholders.
During 2008, a review of the current market
positioning of the Group’s executive remuneration
was undertaken on behalf of the Committee by
Hewitt New Bridge Street using a comparator of
other Real Estate companies and a pan sector
of companies of similar size to the Company.
That review, which compared all elements
of remuneration for companies of a similar
size, indicated that the base salary and total
remuneration of Mr M C Allan was broadly at the
market median, whilst the remuneration of the
other Executive Directors was positioned below
market levels. Over time, it is anticipated that
the salaries of those Executives will progress to
a broadly market median position, depending on
experience and performance.
45
Directors’ remuneration report
The Committee confirmed its policy to pay
base salaries at or around the median level for
companies of a similar size (taking account of
individual experience and performance), and to
provide the opportunity for Executives to achieve
total remuneration at the upper quartile level when
justified by very strong performance against clearly
identified measures.
In determining the remuneration of Executive
Directors and other senior executives, the
Committee also takes into account the level
of remuneration and pay awards generally to
employees of the Group.
The main components of the Directors’
remuneration packages are:
Basic salary
The basic salary of each Executive Director is
reviewed each year. Basic salaries are determined
taking account of advice received from independent
sources on the rates of salary for similar roles in
selected groups of comparable companies and
the individual performance and experience of
each Executive. As stated above, the Company
has agreed the principle that base salaries should
be set broadly in line with the market median.
However, due to a challenging market currently,
the Committee has confirmed that there will be
no increases to the base salaries of Executive
Directors in 2009.
Benefits in kind include a company car or car
allowance and private health insurance.
Only basic salary is pensionable.
Performance related bonus
The Group operates an annual performance
related bonus scheme which is designed to reward
contributions and encourage the achievement
of targeted levels of performance over the short
term. For 2008, a new bonus structure was put
in place for Executive Directors, under which
Executive Directors’ basic bonus entitlements
have been calculated by reference to performance
targets set in relation to profitability and increases
in net asset value (each accounting for 30%
of the scheme); and customer satisfaction and
employee satisfaction (each accounting for 20%
of the scheme). Subject to minimum targets being
achieved in relation to those performance criteria,
basic bonus entitlements have been calculated on
a sliding scale of amounts equivalent to between
50% and 120% of base salary, in accordance
with which “on target” performance would have
resulted in a basic bonus entitlement of an amount
equivalent to 75% of base salary. In 2007, “on
target” performance would have resulted in a
bonus entitlement equivalent to 80% of base salary
and, prior to that, the entitlement was to an amount
equivalent to 100% of base salary.
The performance related bonus is not pensionable
and Non-Executive Directors do not participate in
the scheme.
To determine the actual bonus payment of an
Executive Director, a multiplier, ranging between
0.5 and 1.2 was applied against the basic bonus
entitlement of the relevant Executive Director.
That multiplier was determined following the
Performance Development Programme (“PDP”)
review of the Executive Director (which is carried
out at the start of each year) and reflects the
strength of that Director’s individual performance
over the course of the year.
As a result of the above, 2008 bonus payments
for Executive Directors could have ranged in
amounts equivalent to between 25% and 144%
of base salary. However, bonus payments at the
higher end of that range would only have been
made subject to the achievement of extremely
stretching performance targets by the Company
and exceptional individual performance by the
relevant Director.
The performance related bonuses awarded in
respect of the year ended 31 December 2008,
reflect a basic bonus entitlement (calculated
in accordance with the sliding scale referred
to above), of 40% of basic salary. That 40%
basic bonus entitlement was arrived at as a
result of the Group having achieved its “stretch”
target in relation to profitability (by reference to
its annualised net portfolio contribution for the
2008/2009 academic year), leading to the full
30% attributable to profitability being brought into
the basic bonus entitlement. In addition, 50% of
that element of the bonus referable to employee
satisfaction (i.e. 10%) has been included in the
basic bonus entitlement as a result of the Group
having partly achieved its target in that area.
Targets in relation to increases in net asset value
and customer satisfaction were not met.
After application of the individual performance
multiplier, the above has resulted in the actual
performance related bonus payments awarded
to Messrs M C Allan, J M Tonkiss and J J Lister
ranging between 34% and 43% of their respective
base salaries. In 2007, bonus payments to the
Executive Directors ranged in amounts equivalent
to between 65% and 70% of base salary.
Although the Company’s Guidance for Executive
Directors’ Shareholdings (see below), provides
that 50% of an Executive Director’s bonus will be
satisfied by an allocation of shares in the Company
until the required shareholding level has been
acquired, it has been agreed (in view of the current
economic environment), that 75% of such bonuses
for 2008 will be satisfied by an allocation of shares
in the Company, held in an Employee Share
Ownership Trust for three years. The remaining
25% of such bonuses will be paid in cash.
For 2009, the bonus structure has been amended
such that greater emphasis is placed on the
achievement of financial targets, which will
represent 75% of the basic bonus entitlement, as
opposed to 60%, which was the case for 2008.
Otherwise, the basic structure of the bonus scheme
for 2009 will remain the same.
4
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46
Directors’ remuneration report
Long term incentives
The Group seeks to encourage and reward long
term performance by providing incentives linked
to the long term performance of the Company’s
shares. These incentives were, prior to the adoption
of The UNITE Group plc Long Term Incentive Plan
(“LTIP”), provided in the form of share options and
details of all options awarded to the Directors are
set out in the “auditable part” of this Report.
Under the LTIP, Executive Directors and senior
managers may receive a conditional award of
shares in the Company each year, which vest
dependent on the extent to which performance
conditions selected by the Remuneration Committee
are satisfied over a three year measurement period.
The maximum limit for individual awards is 100%
of base salary per annum.
For awards in 2009, it is intended that performance
conditions will be based on growth in net asset
value and total shareholder return performance
of the Company, each applying to 50 per cent of
an award. For that element of an award based on
growth in net asset value, a target net asset value
for the end of the three year measurement period
will be set by the Remuneration Committee and
lodged with the Company’s auditors. However, for
reasons of commercial sensitivity, the target is not
publicly disclosed. At the end of the measurement
period, if the actual net asset value is less than 80
per cent of the target value, none of the shares the
subject of that element of the award will vest. If the
actual net asset value is 116 per cent or more of
the target value, then all the shares the subject of
that element of the award will vest.
If the actual net asset value is equal to or greater
than 80 per cent of the target value, but less than
116 per cent, then the number of shares that will
vest will be calculated on a straight line basis.
Under previous awards, 45 per cent of the total
number of shares the subject of that element of
the award would vest if the actual net asset value
was 80 per cent of the target value, with 100 per
cent of such shares vesting if the actual value was
116 per cent or more of the target value. However,
it has now been agreed that it would be more
appropriate for only 30 per cent of an award to
vest if 80 per cent of the target value is achieved.
That amendment to the sliding scale of vesting will
appear in the LTIP awards to be made in 2009 and
in subsequent years.
In relation to that element of an award referable
to total shareholder return, the performance of the
Company will be measured, over the three year
measurement period, against the performance
of a comparator group of companies. For awards
made in 2009, the comparator group of companies
will be those companies comprising the FTSE All
Share Real Estate Index at the beginning of the
measurement period and which are still quoted
at the end of that period. The Remuneration
Committee believes that the constituents of
the comparator group provide an appropriate
comparison external benchmark for the Company’s
performance.
For the achievement of median ranked
performance 33 per cent of that part of the award
vests. If the Company is ranked in the top 25 per
cent of the comparator group, then all the shares
the subject of that element of the award will vest,
whilst no such shares will vest if it is in the lower
half. If the Company is ranked in the upper half,
but not the top 25 per cent, then the number of
shares that will vest will be between 33 per cent
and 100 per cent of the total number of shares the
subject of that element of the award, calculated on
a straight-line basis.
Irrespective of the net asset value and total
shareholder return performance, no shares will
vest under either element of an award unless
the Remuneration Committee is satisfied that the
underlying financial performance of the Company
over the performance period is satisfactory. No
element of the LTIP awards made in 2006 will vest
and it is considered unlikely that any element of the
LTIP awards made in 2007 will vest.
47
Service contracts
and notice periods
In accordance with general market practice, each
of the Executive Directors has a rolling service
contract requiring twelve months’ notice of
termination on either side. Such contracts contain
no specific provision for compensation for loss of
office, other than an obligation to pay for any notice
period waived by the Company.
The dates of the current Executive Directors’
service contracts are as follows:
M C Allan
J M Tonkiss
J J Lister
31 October 1999
22 June 2001
28 March 2002
Each of the Non-Executive Directors has a specific
letter of engagement, the dates of which are set
out below:
G K Maddrell
N P Hall
S R H Beevor
R Walker
N A Porter
P M White
13 August 1999
6 March 2003
20 February 2004
3 November 2005
21 March 2006
10 January 2009
Non-Executive Directors are appointed for an initial
term of three years, subject to normal provisions
as to retirement by rotation. Subsequent terms of
three years may be awarded. Current appointments
will expire at the annual general meeting in 2009 in
the case of Mr G K Maddrell (who will, as planned,
after 10 years, step down from the Board); on 14
September 2009 in the case of Mr N A Porter; at
the annual general meeting in 2010 in the case of
Mr S R H Beevor; at the annual general meeting
in 2011 in the case of Mr R Walker and at the
annual general meeting in 2012 in the case of
Messrs N P Hall and P M White. The appointment
and re-appointment and the remuneration of Non-
Executive Directors are matters reserved for the
full Board.
Total shareholder return
The following graph charts the total shareholder return of the Company and the FTSE Real Estate Index over the
five year period from 1 January 2004 to 31 December 2008.
350
300
250
200
150
100
50
0
J
a
n
A
p
ril
J
uly
O
ct
2
J
a
n
2
0
0
4
2
0
0
4
2
0
0
4
0
0
4
2
0
0
5
A
p
ril
J
uly
2
O
ct
2
0
0
5
0
0
5
J
a
n
A
p
ril
2
J
uly
2
0
0
5
2
0
0
6
2
0
0
6
0
0
6
O
ct
J
a
n
2
0
0
6
2
0
0
7
A
p
ril
J
uly
O
J
ct
2
0
a
n
2
2
0
0
7
2
0
0
7
0
7
0
0
8
A
p
ril
J
uly
2
0
2
0
O
ct
2
0
8
0
8
0
0
8
4
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UNITE
Real Estate Index
Whilst there is no comparator index or group of companies which truly reflects the activities of the Group, the FTSE
Real Estate Index (the constituent members of which are all property holding and/or development companies within
the UK), was chosen as it reflects trends within the UK property market generally and tends to be the index against
which analysts judge the performance of the Company.
Executive Director shareholding guidelines
The Group’s policy in relation to shareholdings in the Company by Executive Directors is for the Chief
Executive to acquire a holding (excluding shares held conditionally pursuant to LTIP awards), equivalent in
value to twice basic salary. For other Executive Directors, the policy is for them to accumulate a holding
(again excluding shares held conditionally pursuant to LTIP awards), equivalent in value to one times basic
salary. The valuation of the respective holdings is made by reference to the closing mid-market price of the
Company’s shares on the day following the preliminary announcement of the Company’s year-end results.
If on that date the valuation of the relevant Director’s holding is below the guideline level, then, ordinarily,
50 per cent of the bonus payable to that Director in respect of the previous financial year is satisfied by an
allocation of shares in the Company held in the Company’s Employee Share Ownership Trust. Subject to the
Director’s continued employment within the Group, such shares are transferred to the Director on or around
the third anniversary of the original allocation.
As referred to above, in view of the current economic environment, it has been agreed that the Executive
Directors will receive 75% of their 2008 bonuses in the form of share allocations.
It is considered that the above guidelines promote strong alignment of the interests of Executives and
shareholders; adds a strong retention element to the remuneration package; and enables Executives to
build a significant shareholding in the Company.
48
Directors’ remuneration report
Audited Information – Remuneration Summary
Fees
£’s
Basic
salaries
£’s
Performance
bonus *
£’s
Deferred
bonus **
£’s
Other
benefits ***
£’s
Total
remuneration
2008 £’s
Total
remuneration
2007 £’s
Executive Directors
M C Allan
J M Tonkiss
A C Harris 1
JJ Lister 2
-
-
-
-
380,833
210,000
1,022
198,907
41,195
22,470
-
123,585
67,410
-
19,961
12,561
54
17,400
52,200
14,637
Non Executive Directors
G K Maddrell
117,500
N A Porter 3
N P Hall
S R H Beevor 4
R Walker
50,000
46,500
43,475
35,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
565,574
312,441
1,076
283,144
603,676
295,506
175,340
-
117,500
107,083
50,000
46,500
43,475
35,000
90,582
41,917
37,000
31,667
* Payable in cash.
** Satisfied by an allocation of shares in the Company held in an Employee Share Ownership Trust.
*** Benefits receivable consist primarily of company car or car allowance and private health care insurance.
1 Payments in relation to Mr A C Harris for 2008 relate only to his normal salary for the period to 2 January 2008, on which date Mr Harris resigned from the Board. In
addition, Mr Harris received an amount of £103,281 representing payment in lieu of notice following his resignation together with a termination payment of £61,160.
2 Payments in relation to Mr J J Lister relate to the period from 2 January 2008, on which date he was appointed to the Board.
3 The 2007 comparative figures for Mr N A Porter only reflect the fees he received as Non-Executive Deputy Chairman. In addition to those fees, Mr Porter received an
amount of £49,064 in 2007, representing payment in lieu of notice (following his stepping-down on 14 September 2006 as Chief Executive Officer), and £3,603 in
respect of other benefits for the period 1 January 2007 to 16 March 2007.
4 The fees paid in respect of Mr S R H Beevor were paid to Grosvenor Investments Limited, which company made available the services of Mr Beevor.
During the year Mr J M Tonkiss, Mr A C Harris and Mr J J Lister participated in The UNITE Group Personal Pension Scheme, which is a money purchase scheme, in
relation to whom the Company contributed respectively the sums of £26,250, £9,592 and £25,951 in the year. The Company also made contributions of £38,052 to a
personal pension scheme of Mr M C Allan.
49
Share options
Director
M C Allan
J M Tonkiss
J J Lister
A C Harris**
G K Maddrell
N A Porter
N P Hall
S R H Beevor
R Walker
As at
31.12.07
Granted during
the year
Exercised
during the year*
As at
31.12.08**
Exercise
price
Normal exercise dates
11,823
10,388
60,733
1,545
5,235
50,000
8,255
3,154
5,235
58,662
-
-
393,706
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,388
6,000
-
-
-
-
-
-
-
-
-
-
-
-
-
11,823
-
54,733
1,545
5,235
50,000
8,255
3,154
5,235
58,662
-
-
323.5p
129p
191p
323.5p
191p
232.5p
129p
158.5p
191p
232.5p
-
-
21.03.2005 – 20.03.2012
11.10.2005 – 10.10.2012
04.05.2007 – 03.05.2014
21.03.2005 – 20.03.2012
04.05.2007 – 03.05.2014
16.09.2007 – 15.09.2014
11.10.2005 – 10.10.2012
25.09.2006 – 24.09.2013
04.05.2007 – 03.05.2014
16.09.2007 – 15.09.2014
-
-
393,706
146.5p
22.10.2005 – 21.10.2012
-
-
-
-
-
-
-
-
-
4
n
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*The closing mid-market price on the day of exercise was 341p per share. Gains made by Mr Allan equate to £30,858.68.
** The closing position for Mr A C Harris relates to 2 January 2008 when he resigned from the Board, and not 31 December 2008.
Of the above, 20,477 of the options awarded
to Mr N A Porter were awarded pursuant to
The UNITE Group plc Approved Company Share
Option Scheme (the “Approved Scheme”). All
other options were granted pursuant to The UNITE
Group plc Unapproved Share Option Scheme (the
“Unapproved Scheme”). All options have been
granted for no consideration.
Options granted under the Approved Scheme
have not been made subject to performance
conditions, which is considered appropriate in
view of the relatively small number of options
that may be granted to individuals under such
schemes (i.e. options over shares with an
aggregate market value, as at the date of grant,
of no more than £30,000).
Options granted to Directors prior to 2004 under
the Unapproved Scheme are exercisable as to 50
per cent provided the total shareholder return for
the Company is such that it is equal to or exceeds
the median total shareholder return of companies
included in the FTSE Small Companies Index
(excluding investment trusts) over the three year
period from the date of grant. The remaining 50
per cent are exercisable provided the Company’s
net asset growth exceeds the average net asset
growth of companies included in the FTSE Small
Companies Index (excluding investment trusts) over
the three year period from the date of grant. Such
performance criteria were agreed with institutional
shareholders at the time the Unapproved Scheme
was adopted. However, options granted under the
Unapproved Scheme after 1 January 2004 are
subject to revised performance criteria based solely
on total shareholder return, such that options will
be exercisable only as to 50 per cent if the total
shareholder return for the Company, over the three
year period from the date of grant, is such that it
is equal to the median total shareholder return of
companies included in the FTSE Small Companies
Index (excluding investment trusts) over that
period. If the Company’s performance would put
it in the upper quartile (upon the basis described
above), 100 per cent of the options awarded will
be exercisable. Between median and upper quartile
performance, the number of options which may be
exercised will be calculated on a straight line basis.
50
LTIP awards
Director
M C Allan
J M Tonkiss
J J Lister
A C Harris*
G K Maddrell
N A Porter
N P Hall
S R H Beevor
R Walker
Interests held
at 01.01.08
Interests awarded
during year (ordinary
shares of 25p each
in the Company)
Market price per
share when awarded
Interests held at
31.12.08 (ordinary
shares of 25p each
in the Company)
Period of qualifying
conditions
Interests
vested during
year
80,194
55,096
-
29,162
33,058
-
4,860
12,842
-
34,894
-
-
-
-
-
-
-
124,294
-
-
67,796
-
-
64,568
-
-
-
-
-
-
411.5p
544.5p
309.75p
411.5p
544.5p
309.75p
411.5p
544.5p
309.75p
544.5p
-
-
-
-
-
80,194
55,096
124,294
29,162
33,058
67,796
4,860
12,842
64,568
-
-
-
-
-
-
11.04.2006 – 11.04.2009
11.04.2007 – 11.04.2010
15.04.2008 – 15.04.2011
11.04.2006 – 11.04.2009
11.04.2007 – 11.04.2010
15.04.2008 – 15.04.2011
11.04.2006 – 11.04.2009
11.04.2007 – 11.04.2010
15.04.2008 – 15.04.2011
11.04.2007 – 11.04.2010
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* The interests Mr A C Harris lapsed on his leaving the employment of the Company on 31 January 2008.
Details of the qualifying performance conditions in relation to the above referred to awards are set out above under the heading “Long Term Incentives”. Those details should also
be taken as forming part of the “auditable part” of this Report. No variations have been made to the terms or conditions of any awards.
The fair value in respect of Directors’ share options and LTIP awards recognised in the Income Statement
is as follows:
M C Allan
J M Tonkiss
J J Lister
A C Harris
2008
£
118,217
61,654
41,205
-
221,076
2007
£
114,762
60,478
-
30,458
205,698
As at 31 December 2008, the middle market price for ordinary shares in the Company was 146.25p per
share. During the course of the year, the market price of the Company’s shares ranged from 360.25p to
65p per ordinary share.
By order of the Board
S R H Beevor
Chairman of the Remuneration Committee
9 March 2009
51
Independent Auditors’ Report
to the members of The UNITE Group plc
We have audited the group and parent company
financial statements (the ‘‘financial statements’’)
of The UNITE Group plc for the year ended 31
December 2008 which comprise the Consolidated
Income Statement, the Consolidated and Company
Balance Sheets, the Group and Company
Statements of Changes in Shareholder Equity, the
Group and Company Statements of Cash Flows and
the related notes. These financial statements have
been prepared under the accounting policies set
out therein. We have also audited the information
in the Directors’ Remuneration Report that is
described as having been audited.
This report is made solely to the company’s
members, as a body, in accordance with section
235 of the Companies Act 1985. Our audit work
has been undertaken so that we might state to the
company’s members those matters we are required
to state to them in an auditor’s 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 and the company’s
members as a body, for our audit work, for this
report, or for the opinions we have formed.
Respective responsibilities of
directors and auditors
The directors’ responsibilities for preparing
the Annual Report and Accounts, Directors’
Remuneration Report and the financial statements
in accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted
by the EU, are set out in the Statement of Directors’
Responsibilities on page 44.
Our responsibility is to audit the financial
statements and the part of the Directors’
Remuneration Report to be audited in
accordance with relevant legal and regulatory
requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the
financial statements give a true and fair view and
whether the financial statements and the part of
the Directors’ Remuneration Report to be audited
have been properly prepared in accordance with
the Companies Act 1985 and, as regards the
group financial statements, Article 4 of the IAS
Regulation. We also report to you whether in our
opinion the information given in the Directors’
Report is consistent with the financial statements.
The information given in the Directors’ Report
includes that specific information presented in the
Business Review that is cross referred from the
Business Review section of the Directors’ Report.
In addition we report to you if, in our opinion, the
company has not kept proper accounting records,
if we have not received all the information and
explanations we require for our audit,
or if information specified by law regarding
Directors’ Remuneration and other transactions
is not disclosed.
We review whether the Corporate Governance
Statement reflects the company’s compliance with
the nine provisions of the 2006 FRC Combined
Code specified for our review by the Listing Rules
of the Financial Services Authority, and we report
if it does not. We are not required to consider
whether the board’s statements on internal
control cover all risks and controls, or form
an opinion on the effectiveness of the group’s
corporate governance procedures or its risk
and control procedures.
We read the other information contained in
the Annual Report and consider whether it is
consistent with the audited financial statements.
We consider the implications for our report if we
become aware of any apparent misstatements
or material inconsistencies with the financial
statements. Our responsibilities do not extend to
any other information.
Basis of audit opinion
We conducted our audit in accordance with
International Standards on Auditing (UK and Ireland)
issued by the Auditing Practices Board. An audit
includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the
financial statements and the part of the Directors’
Remuneration Report to be audited. It also includes
an assessment of the significant estimates and
judgments made by the directors in the preparation
of the financial statements, and of whether the
accounting policies are appropriate to the group’s
and company’s circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to
obtain all the information and explanations which
we considered necessary in order to provide
us with sufficient evidence to give reasonable
assurance that the financial statements and the
part of the Directors’ Remuneration Report to
be audited are free from material misstatement,
whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information
in the financial statements and the part of the
Directors’ Remuneration Report to be audited.
Opinion
In our opinion:
•
•
•
the group financial statements give a true and
fair view, in accordance with IFRSs as adopted
by the EU, of the state of the group’s affairs as
at 31 December 2008 and of its loss for the
year then ended;
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the parent company financial statements give
a true and fair view, in accordance with IFRSs
as adopted by the EU as applied in accordance
with the provisions of the Companies Act 1985,
of the state of the parent company’s affairs as
at 31 December 2008;
the financial statements and the part of the
Directors’ Remuneration Report to be audited
have been properly prepared in accordance
with the Companies Act 1985 and, as regards
the group financial statements, Article 4 of the
IAS Regulation; and
•
the information given in the Directors’ Report is
consistent with the financial statements
KPMG Audit Plc
Chartered Accountants
Registered Auditor
9 March 2009
PO Box 695
8 Salisbury Square
London
EC4Y 8BB
52
Note
2008
£’000
2007
£’000
2
2
2
5
5
5
5
9
6
9
133,594
72,140
(121,765)
(29,974)
(31,115)
(19,286)
(12,396)
(2,464)
(25,342)
(21,082)
21,084
(4,205)
1,803
(2,733)
(59,488)
15,949
(28,365)
(32,414)
(478)
(61,257)
1,877
(59,380)
(9,985)
(128,853)
12,511
(116,342)
(115,942)
(400)
(116,342)
(30,953)
(7,472)
(57,392)
(95,817)
1,763
(94,054)
10,978
(67,127)
29,652
(37,475)
(37,475)
-
(37,475)
18
18
(93.4p)
(93.4p)
(30.4p)
(30.4p)
Consolidated Income Statement
For the year ended 31 December 2008
Revenue
Cost of sales
Administrative expenses
Loss on disposal of property
(Loss) / profit on part disposal of joint venture
Net valuation losses on investment property
(Loss) / profit before net financing costs
Loan interest and similar charges
Changes in fair value of interest rate swaps
Bond and loan redemption costs
Finance costs
Finance income
Net financing costs
Share of joint venture (loss) / profit
Loss before tax
Tax
Loss for the year
Loss for the year attributable to
Owners of the parent company
Minority interest
Earnings per share
Basic
Diluted
53
Consolidated Balance Sheet
At 31 December 2008
Assets
Investment property
Investment property under development
Property, plant and equipment
Investments in joint ventures
Intangible assets
Other receivables
Total non-current assets
Completed property
Property under development
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Borrowings and financial derivatives
Trade and other payables
Total current liabilities
Borrowings and financial derivatives
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Share premium
Merger reserve
Retained earnings
Revaluation reserve
Hedging reserve
Minority interest
Total equity
These financial statements were approved by the Board of Directors on 9 March 2009 and were signed on its behalf by:
MC Allan JJ Lister
Director
Director
Note
2008
£’000
2007
£’000
7
7
8
9
10
12
7
7
11
12
13
15
14
15
16
17
17
17
17
17
17
9
403,700
52,989
8,030
75,519
7,219
3,667
551,124
75,214
249,124
10,311
107,308
111,845
553,802
1,104,926
(136,876)
(80,544)
(217,420)
(552,140)
-
(552,140)
(769,560)
597,747
102,180
9,094
86,013
8,089
4,770
807,893
-
121,936
104,557
94,019
56,316
376,828
1,184,721
(240,234)
(117,801)
(358,035)
(363,720)
(12,873)
(376,593)
(734,628)
335,366
450,093
31,079
176,541
40,177
85,699
1,805
(15,135)
320,166
15,200
335,366
30,874
174,333
40,177
187,957
17,644
(892)
450,093
-
450,093
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54
Company Balance Sheet
At 31 December 2008
Assets
Investments in subsidiaries
Investments in joint ventures
Total investments
Other receivables
Total non-current assets
Trade and other receivables
Total current assets
Total assets
Liabilities
Borrowings and financial derivatives
Trade and other payables
Total liabilities
Net assets
Equity
Issued share capital
Share premium
Merger reserve
Retained earnings
Total equity
Total equity is wholly attributable to equity holders of The UNITE Group plc.
These financial statements were approved by the Board of Directors on 9 March 2009 and were signed on its behalf by:
MC Allan JJ Lister
Director
Director
Note
2008
£’000
2007
£’000
9
9
12
12
15
14
17
17
17
17
115,810
558
116,368
3,667
120,035
253,270
253,270
373,305
(1,730)
(40,573)
(42,303)
238,195
3,912
242,107
3,667
245,774
257,125
257,125
502,899
(648)
(42,239)
(42,887)
331,002
460,012
31,079
176,541
40,177
83,205
331,002
30,874
174,333
40,177
214,628
460,012
55
Statements of Changes in Shareholder Equity
For the year ended 31 December 2008
Note
Group
Company
2008
£’000
2007
£’000
2008
£’000
2007
£’000
Investment property under
development:
Other property
Effective hedges
- revaluation
- deferred tax
- revaluation
- deferred tax
- movements
- deferred tax
Losses / (gains) on hedging instruments transferred to income statement
Deferred tax on losses / (gains) transferred
Revaluation of investment in subsidiaries and joint ventures
Share of joint venture valuation gain on investment property under development (net of related tax)
Share of joint venture movements in effective hedges (net of related tax)
Net (losses) / profit recognised directly in equity
Loss for the year
Total recognised income and expense for the year
Dividends paid
Own shares acquired
Shares issued
Fair value of share based payments
Minority interest
Equity at start of year
Equity at end of year
16
16
5
17
17
17
2,097
(587)
-
-
(7,604)
1,779
1,586
(444)
-
1,309
(9,960)
7,368
(1,591)
159
-
(1,280)
384
(101)
30
-
4,810
(1,076)
-
-
-
-
-
-
-
-
(125,739)
-
-
-
-
-
-
-
-
-
-
(29,210)
-
-
(11,824)
8,703
(125,739)
(29,210)
(116,342)
(128,166)
(3,090)
(2,192)
2,413
308
(130,727)
(37,475)
(28,772)
(3,073)
(1,096)
1,436
411
(31,094)
(2,594)
(128,333)
(3,090)
-
2,413
-
(129,010)
(2,440)
(31,650)
(3,073)
-
1,436
-
(33,287)
9
800
-
-
-
450,093
481,187
460,012
493,299
320,166
450,093
331,002
460,012
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56
Statements of Cash Flows
For the year ended 31 December 2008
Operating activities
Loss for the year
Adjustments for:
Depreciation and amortisation
Fair value of share based payments
Change in value of investment property
Net finance costs
Loss on disposal of investment property
Profit on part disposal of joint venture
Share of joint venture profit
Trading with joint venture adjustment
Tax credit
Cash flows from operating activities before changes in working capital
Increase in trade and other receivables
Increase in property under development
Decrease / (increase) in inventories
(Decrease) / increase in trade and other payables
Cash flows from operating activities
Note
Group
Company
2008
£’000
2007
£’000
2008
£’000
2007
£’000
(116,342)
(37,475)
(2,594)
(2,440)
4
5
9
9
6
3,356
308
25,342
59,380
12,396
2,464
9,985
2,402
(12,511)
(13,220)
(9,653)
(202,402)
94,246
(27,375)
(158,404)
2,094
411
2,733
94,054
4,205
(1,803)
(10,978)
3,220
(29,652)
26,809
(13,673)
(103,902)
(81,575)
43,615
(128,726)
-
-
-
35
-
-
-
-
-
(2,559)
139
-
-
(1,852)
(4,272)
Cash flows from taxation
(396)
-
-
Investing activities
Proceeds from sale of investment property
Proceeds from part disposal of joint venture
Payments to / on behalf of subsidiaries
Payments from subsidiaries
Equity invested in joint ventures
Dividends received
Interest received
Acquisition of intangible assets
Acquisition of property, plant and equipment
Acquisition and construction of investment property
Cash flows from investing activities
Financing activities
Interest paid
Bond and loan redemption costs
Proceeds from the issue of share capital
Payments to acquire own shares
Proceeds from non-current borrowings
Repayment of borrowings
Payment of finance lease liabilities
Investment received from minority interest
Dividends paid
Cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
57
251,553
-
-
-
(16,117)
5,258
1,877
(1,182)
(766)
(53,371)
187,252
(34,922)
(478)
2,413
(2,192)
347,865
(320,762)
(35)
16,000
(3,090)
4,799
33,251
53,517
86,768
270,702
21,078
-
-
(2,135)
10,314
1,763
(3,986)
(993)
(195,480)
101,263
(38,413)
(49,846)
1,436
(1,096)
713,267
(591,319)
(419)
-
(3,073)
30,537
3,074
50,443
53,517
13
-
-
(1,843)
5,745
-
-
-
-
-
-
3,902
(35)
-
2,413
-
-
-
-
-
(3,090)
(712)
(1,082)
(648)
(1,730)
-
-
-
33
-
-
-
-
-
(2,407)
157
-
-
2,323
73
-
-
-
(17,935)
19,957
-
-
-
-
-
-
2,022
(33)
-
1,436
-
-
-
-
-
(3,073)
(1,670)
425
(1,073)
(648)
Notes to the Financial Statements
1. Significant accounting policies
The UNITE Group plc (the “Company”) is a company
domiciled in The United Kingdom.
(a) Basis of preparation
The group financial statements consolidate those of
the Company and its subsidiaries (together referred
to as the “Group”) and equity account the Group’s
interest in jointly controlled entities. The parent
company financial statements present information
about the Company as a separate entity and
not about its group.
Both the parent company financial statements and
the group financial statements have been prepared
and approved by the directors in accordance with
International Financial Reporting Standards as
adopted by the EU (“Adopted IFRS”). On publishing
the parent company financial statements here
together with the group financial statements, the
Company is taking advantage of the exemption in
s230 of the Companies Act 1985 not to present its
individual income statement and related notes.
The accounting policies set out below have,
unless otherwise stated, been applied consistently
to all periods presented in these consolidated
financial statements.
Going concern
The Annual 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 have a
reasonable expectation that the Group will continue
as a going concern.
In preparing those forecasts, including incorporating
the outcomes of various down-side scenarios, the
Directors have taken into account various risks and
uncertainties as outlined here and in more detail in
the Chairman’s Statement and Business Review.
The principal areas of risk and uncertainty are: the
impact of further falls in property valuations resulting
in breaches of covenants that cannot be avoided by
payments from cash resources (pages 25 and 26);
finalisation of the documentation of the approved
new banking facilities (page 25); the Group’s ability
to continue raising capital through the sale of assets,
some of which are included within the down-side
scenarios, (note 20); and the achievement of
operating targets, in particular projected occupancy
levels and rental increases.
These risks and uncertainties are discussed in more
detail in the Chairman’s Statement and Business
Review. In addition to these risks and uncertainties,
the financial and operational risks that impact upon
the group’s performance and their mitigation are
outlined on page 29 and financial risks including
interest rate risk, liquidity risk, market risk and credit
risk are outlined in note 20 to the consolidated
financial statements.
The sections of the business review headed “UNITE
debt maturity profile” on page 25 and “Covenant
Headroom” on pages 25 and 26 form part of the
audited financial statements.
Measurement convention
The financial statements are prepared on the
historical cost basis except that the following assets
and liabilities are stated at their fair value:
•
•
•
•
Investment property
Investment property under development
Interest rate swaps
Land and buildings included in property,
plant and equipment
Accounting standards adopted
IFRIC 11 IFRS 2 ‘Group and Treasury Share
Transactions’ requires a share-based payment
arrangement in which an entity receives goods
or services as consideration for its own equity
instruments to be accounted for as an equity-settled
share-based payment transaction, regardless of
how the equity instruments are obtained. IFRIC 11
requires retrospective application, however it has
not had any impact on the comparatives within the
consolidated financial statements.
Accounting standards and interpretations
issued but not adopted
Revised IAS 23 ‘Borrowing Costs’ removes the
option to expense borrowing costs and requires
that an entity capitalise borrowing costs directly
attributable to the acquisition, construction or
production of a qualifying asset as a part of the
cost of that asset. Although revised IAS 23 will be
mandatory for the Group’s 2009 financial statements
it will not constitute a change in accounting policy
for the Group.
The majority of amendments made as part of the
IASB’s Annual Improvement programme affect
accounting periods beginning on or after 1 January
2009. Included within the amendments is a change
in the accounting treatment for investment properties
under development. Currently, such properties are
accounted for under IAS 16, but they will in future be
5
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accounted for under IAS 40. This change will mean
that revaluation surpluses and deficits on investment
properties under development will in future be
recognised in the income statement rather than
equity. However, completed property and property
under development will continue to be accounted for
under IAS 2 (see section (i) below).
Significant judgements and estimates
The preparation of financial statements in conformity
with Adopted IFRS requires management to make
judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets
and liabilities, income and expenses. The estimates
and associated assumptions are based on historical
experience and various other factors that are believed
to be reasonable under the circumstances, the results
of which form the basis of making the judgements
about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results
may differ from these estimates.
The accounting policy descriptions set out the
areas where judgement needs exercising, the most
significant of which are as follows:
Valuation of investment property and investment
property under development
•
The Group uses the valuation performed by
its independent valuers as the fair value of its
investment properties. The valuation is based
upon assumptions including future rental
income, anticipated maintenance costs and the
appropriate discount rate. The valuers also make
reference to market evidence of transaction
prices for similar properties. Valuations and
current market conditions are discussed further
in the Business Review.
Completed property, properties under
development and inventories
•
Completed property, properties under development
and inventories are carried at the lower of cost
and net realisable value. However the valuation
of properties under development is disclosed
in the notes to the financial statements and the
same factors affecting investment properties as
described above apply. These properties are also
valued by the independent valuers.
Trade and other receivables
•
The Group is required to judge when there
is sufficient objective evidence to require the
impairment of individual trade and
other receivables
58
1. Significant accounting policies (continued)
Classification of properties acquired
•
All properties acquired that are intended for
development as student accommodation
have been classified as in current assets
as, in accordance with the Group’s business
model, it is intended to sell these assets
when completed and stabilised to UNITE UK
Student Accommodation Fund or another
co-investment vehicle.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in
which the estimate is revised if the revision affects
only that period, or in the period of the revision and
future periods if the revision affects both current and
future periods.
(b) Basis of consolidation
(i) Subsidiaries
Subsidiaries are those entities controlled by the
Company. Control exists when the Company has the
power, directly or indirectly, to govern the financial
and operating policies of an enterprise so as to obtain
benefits from its activities. In assessing control,
potential voting rights that are presently exercisable
are taken into account. The financial statements of
subsidiaries are included in the consolidated financial
statements from the date that control commences
until the date that control ceases.
(ii) Joint ventures
Joint ventures are those entities over whose
activities the Group has joint control, established by
contractual agreement. The consolidated financial
statements include joint ventures initially at cost
subsequently increased or decreased by the Group’s
share of total recognised gains and losses of joint
ventures on an equity accounted basis.
(iii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any
unrealised gains and losses arising from intra-
group transactions, are eliminated in preparing
the consolidated financial statements. Unrealised
gains arising from transactions with joint ventures
are eliminated to the extent of the Group’s retained
interest in the entity. Unrealised losses are eliminated
in the same way as unrealised gains except where
the loss provides evidence of a reduction in the net
realisable value of current assets or an impairment in
value of fixed assets.
59
(iv) Goodwill
Goodwill represents the difference between the cost
of an acquisition and the fair value of the Group’s
share of the identifiable net assets and contingent
liabilities of the acquired subsidiary at the effective
date of acquisition. Goodwill on acquisitions is
reported in the balance sheet as an intangible asset
and is impairment tested annually. The carrying
amount of goodwill is assessed annually and written
down to its recoverable amount.
The profit or loss on disposal of assets is calculated
by reference to the carrying value at the date
of disposal, including the attributable amount of
goodwill which remains unimpaired.
(c) Financial instruments
(i) Derivative financial instruments
The Group uses derivative financial instruments to
hedge its exposure to interest rate risks arising from
operational, financing and investment activities.
Derivative financial instruments are recognised
initially and subsequently at fair value, with
movements recognised in the income statement
except where cash flow hedge accounting is applied
(see below).
The fair value of interest rate swaps is the estimated
amount that the Group would receive or pay to
terminate the swap at the balance sheet date, taking
into account current interest rates and the current
credit worthiness of the swap counterparties.
In accordance with its treasury policy, the
Group does not hold or issue derivative financial
instruments for trading purposes. However,
derivatives that do not qualify for hedge accounting
are accounted for as trading instruments.
(ii) Hedge accounting for interest rate swaps
Where an interest rate swap is designated as a
hedge of the variability in cash flows of an existing
or a highly probable forecast loan interest payment,
the effective part of any gain or loss on the swap
instrument is recognised directly in equity in the
hedging reserve. The cumulative gain or loss
is removed from equity and recognised in the
income statement at the same time as the hedged
transaction. The ineffective part of any gain or loss is
recognised in the income statement immediately.
When a hedging instrument or hedge relationship
is terminated but the hedged transaction is still
expected to occur, the cumulative gain or loss
at that point remains in equity and is recognised
in accordance with the above policy when the
transaction occurs. If the hedged transaction is no
longer probable, the cumulative unrealised gain or
loss recognised in equity is recognised in the income
statement immediately.
(d) Investment property
Investment properties are those held to earn
rental income or for capital appreciation or both.
Investment properties are stated at fair value.
External, independent valuers, having an appropriate
recognised professional qualification, value the
portfolio every six months. The fair values are based
on the market values, being the estimated amount
for which a property could be exchanged on the
date of valuation between a willing buyer and a
willing seller in an arm’s length transaction where
the parties had each acted knowledgeably, prudently
and without compulsion.
The valuations are prepared by considering the
aggregate of the net annual rents receivable from
the properties and where relevant, associated costs.
Valuations reflect, where appropriate, the type
of tenants actually in occupation or responsible
for meeting lease commitments or likely to be in
occupation after letting of vacant accommodation
and the market’s general perception of their credit
worthiness; the allocation of maintenance and
insurance responsibilities between lessor and lessee;
and the remaining economic life of the property.
It has been assumed that whenever rent reviews
or lease renewals are pending with anticipated
reversionary increases, all notices and where
appropriate counter notices have been served validly
and within the appropriate time.
Any gain or loss arising from a change in fair value is
recognised in the income statement. Rental income
is accounted for as described in accounting
policy (n).
(e) Investment property
under development
Property that is being constructed or developed for
future use as investment property is classified as
investment property under development, whereas
properties purchased with the intention of selling
them to the UNITE UK Student Accommodation Fund
are classified as property under development (see
(i) below). Investment property under development
is stated at fair value. External, independent valuers,
having an appropriate recognised professional
qualification, value the portfolio every six months.
The fair values are on the same basis as those used
for investment properties but including adjustments
to remove the fair value of construction, which
has yet to take place and making reasonable
assumptions regarding expected rentals and costs.
Gains arising from changes in fair value are
recognised directly in equity (in the revaluation
reserve) as are losses to the extent that they reverse
amounts previously credited directly to equity.
Revaluation losses in excess of amounts previously
credited to equity are recognised in the income
statement.
When construction or development is complete,
the property is reclassified and subsequently
accounted for as investment property. At the date
of transfer, the difference between fair value and
the previous carrying amount is recognised in the
consolidated income statement and a transfer is
made from revaluation reserve to retained earnings
for valuations and related deferred tax previously
recognised in relation to that property.
All costs directly associated with the purchase
and construction of a property, and all subsequent
qualifying expenditure is capitalised.
Borrowing costs are capitalised if they are directly
attributable to the acquisition, construction or
production of a qualifying asset. Capitalisation of
borrowing costs commences when the activities to
prepare the asset are in progress and expenditures
and borrowing costs are being incurred.
Capitalisation of borrowing costs continues until
the assets are substantially ready for their intended
use. If the resulting carrying amount of the asset
exceeds its recoverable amount, an impairment loss
is recognised. The capitalisation rate is arrived at by
reference to the actual rate payable on borrowings
for development purposes or, with regard to that
part of the development cost financed out of general
borrowings, to the average rate.
(f) Property, plant and equipment
(i) Owned assets
Other than land and buildings, property, plant and
equipment are stated at cost less accumulated
depreciation (see below) and impairment losses.
The cost of self constructed assets includes the
cost of materials, direct labour and an appropriate
proportion of production overheads.
Land and buildings held in property, plant and
equipment are stated at fair value. The valuation has
been carried out by an external, independent valuer,
having an appropriate recognised professional
qualification. The fair values are based on the market
values, being the estimated amount for which a
property could be exchanged on the date of valuation
between a willing buyer and a willing seller in an
arm’s length transaction where the parties had
each acted knowledgeably, prudently and
without compulsion.
(ii) Leased assets
Leases under which the Group assumes substantially
all the risks and rewards of ownership are classified
as finance leases. Property held under finance leases
and leased out under operating leases is classified
as investment property and carried at fair value
(see accounting policy (d)).
(iii) Depreciation
Depreciation is charged to the income statement on
a straight-line basis over the estimated useful lives
of items of property, plant and equipment. Freehold
land is not depreciated. The estimated useful lives
are as follows:
• Freehold buildings
• Leasehold improvements
• Fixtures and fittings
• Motor vehicles
• Plant & equipment
50 years
Shorter of life
of lease and
economic life
4 years
4 years
4-20 years
Assets held under finance leases which do not
transfer title of the assets to the Group at the end
of the lease, are depreciated over the shorter of the
estimated useful lives shown above and the term of
the lease. The residual value, if not insignificant, is
reassessed annually.
(g) Investments in subsidiaries
and joint ventures
The treatment of these investments in the Group’s
consolidated financial statements is set out in the
“basis of preparation” section above.
In the financial statements of the Company,
investments in subsidiaries and joint ventures are
carried at fair value with movements in fair value
being recognised directly in equity.
(h) Intangible assets
Expenditure on research activities is recognised in
the income statement as an expense as incurred.
Expenditure on development activities is capitalised
if the product or process is technically and
commercially feasible and the Group has sufficient
resources to complete development. The expenditure
capitalised includes the cost of materials, direct
labour and an appropriate proportion of overheads.
Other development expenditure is recognised in
the income statement as an expense as incurred.
Capitalised development expenditure is stated
at cost less accumulated amortisation and
impairment losses.
Other intangible assets that are acquired by
the Group are stated at cost less accumulated
amortisation and impairment losses.
Amortisation is charged to the income statement on
a straight-line basis over the estimated useful lives
of intangible assets unless such lives are indefinite.
Goodwill is systematically tested for impairment at
each balance sheet date. Other intangible assets are
amortised from the date they are available for use
over the following periods:
• Development cost
• Computer software
4-5 years
4-5 years
(i) Completed property, property
under development and
inventories
Completed properties and properties under
development are properties purchased with the
intention of selling them to the UNITE UK Student
Accommodation Fund following completion.
These properties and inventories are shown at the
lower of cost and net realisable value. Net realisable
value is the estimated selling price in the ordinary
course of business less the estimated costs of
completion and selling expenses. Costs are arrived
at in the same way as used for investment property
under development (see note (e) above).
Inventories include land held for development, which
are sites, purchased without planning permission.
Once planning permission is obtained the assets
transfer to either property under development or
investment property under development.
5
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60
1. Significant accounting policies (continued)
(j) Trade receivables and payables
Trade receivables and payables are initially
recognised at fair value and subsequently measured
at amortised cost and discounted as appropriate.
share options that are expected to vest except where
forfeiture is only due to share prices not achieving
the threshold for vesting. When the options are
exercised, equity is increased by the amount of the
proceeds received.
(k) Cash and cash equivalents
Cash and cash equivalents comprise cash balances
and call deposits. Cash equivalents are short term,
highly liquid investments that are readily convertible
to known amounts of cash and which are subject
to an insignificant risk of changes in value. Bank
overdrafts that are repayable on demand and form
an integral part of the Group’s cash management
are included as a component of cash and cash
equivalents for the purpose of the statement
of cash flows.
(l) Share capital
(i) Ordinary share capital
Ordinary shares are classified as equity. External
costs directly attributable to the issue of new shares,
other than on a business combination, are shown as
a deduction, net of tax, in equity from the proceeds.
Share issue costs incurred directly in connection
with a business combination are deducted from the
proceeds of the issue.
(ii) Dividends
Dividends are recognised as a liability in the year in
which they are approved.
(m) Interest bearing borrowings
Interest bearing borrowings are recognised initially
at fair value, less attributable transaction costs.
Subsequent to initial recognition, interest bearing
borrowings are stated at amortised cost with any
difference between cost and redemption value being
recognised in the income statement over the period
of the borrowings on an effective interest basis.
(n) Employee benefits
(i) Defined contribution plans
Obligations for contributions to defined contribution
pension plans are recognised as an expense in the
income statement as incurred.
(ii) Share based payment transactions
The Group’s share option schemes allow employees
to acquire shares of the Company. The fair value is
measured at grant date and spread over the period
during which employees become unconditionally
entitled to the options. The amount recognised as
an expense is adjusted to reflect the number of
61
The Group funds the purchase of its own shares by
the “Employee share ownership trust” to meet the
obligations of the Long term incentive plan (LTIP)
and executive bonus scheme. These purchases are
shown as “Own shares acquired” in the retained
earnings in note 17.
(o) Revenue
(i) Rental income
Rental income from investment property leased out
under operating leases is recognised in the income
statement on a straight line basis over the term of
the lease. Lease incentives granted are recognised
as an integral part of the total rental income and
spread over the period to the first break clause or
over the term of the lease where no break
clause exists.
(ii) Management and promote fees
Management and promote fees are recognised, in
line with the property management contracts, in
the period to which they relate. The Group earns
promote fees relative to criteria specified in the joint
venture agreements.
(iii) Development income
In addition to development management fees,
detailed above, income relating to the sale of trading
properties is recognised once contracts for sale have
been unconditionally exchanged.
(iv) Goods sold and services rendered
Revenue from the sale of goods is recognised in the
income statement when the significant risks and
rewards of ownership have been transferred to the
buyer. Revenue from services rendered is recognised
in the income statement in proportion to the stage of
completion of the transaction at the balance
sheet date.
No revenue is recognised if there are significant
uncertainties regarding recovery of the
consideration due, associated costs or the possible
return of goods.
(p) Expenses
(i) Lease payments
Payments made under operating leases are
recognised in the income statement on a straight line
basis over the term of the lease. Lease incentives
received are recognised in the income statement as
an integral part of the total lease expense.
Where the property interest under an operating lease
is classified as an investment property, the property
interest is accounted for as if it were a finance
lease and the fair value model is used for the asset
recognised.
(ii) Net financing costs
Net financing costs comprise interest payable
on borrowings less interest receivable on funds
invested (both calculated using the effective interest
rate method) and gains and losses on hedging
instruments that are recognised in the income
statement (refer accounting policy ( c )).
(q) Income tax
Income tax on the profit or loss for the year
comprises current and deferred tax. Income tax is
recognised in the income statement except to the
extent that it relates to items recognised directly to
equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the
taxable income for the year, using tax rates enacted
or substantively enacted at the balance sheet date,
and any adjustment to tax payable in respect of
previous years.
Deferred tax is provided using the balance sheet
liability method, providing for temporary differences
between the carrying amounts of assets and
liabilities for financial reporting purposes and the
amounts used for taxation purposes. The following
temporary differences are not provided for: the initial
recognition of goodwill, the initial recognition of
assets or liabilities that affect neither accounting nor
taxable profit, and differences relating to investments
in subsidiaries and joint ventures to the extent that
they will probably not reverse in the foreseeable
future. 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
tax rates enacted or substantively enacted at the
balance sheet date. The deferred tax provision in
respect of property assets is calculated on the basis
that assets will not be held indefinitely and therefore
takes account of available indexation.
A deferred tax asset is recognised only to the extent
that it is probable that future taxable profits will be
available against which the asset can be utilised.
Deferred tax assets are reduced to the extent that it
is no longer probable that the related tax benefit will
be realised.
2. 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 undertakes the acquisition and development of properties and then manages the completed assets generating both rental income and management fees. Many
of the Group’s properties are acquired with a view to selling them to the UNITE UK Student Accommodation Fund when they are complete and appropriate levels of rental
income have been achieved.
The operation of the completed properties is managed as a separate activity and is reported below as the investment segment. The acquisition and development activities
comprise the Group’s development segment below and therefore include the sales proceeds of properties sold to the UNITE UK Student Accommodation Fund in revenue.
(a) Segment revenues and costs
31 December 2008
Revenue
Cost of sales
Write down of land held for development and property under development
Total cost of sales
Administrative expenses
Loan interest and similar charges
Interest rate swap receipts
Finance income
Share of joint venture investment segment result
Segment result / corporate costs
31 December 2007
Revenue
Cost of sales
Administrative expenses
Loan interest and similar charges
Finance income
Share of joint venture investment segment result
Segment result / corporate costs
Note
Investment
segment
£’000
Development
segment
£’000
Unallocated
corporate
costs
£’000
63,080
(30,028)
-
(30,028)
(13,680)
19,372
(28,365)
1,409
1,877
6,654
947
69,945
(27,613)
(11,548)
30,784
(30,953)
1,763
5,921
7,515
70,514
(60,248)
(31,489)
(91,737)
(6,300)
(27,523)
-
-
-
-
(27,523)
2,195
(2,361)
(3,656)
(3,822)
-
-
-
(3,822)
-
-
-
-
(11,135)
(11,135)
-
-
-
-
(11,135)
-
-
(5,878)
(5,878)
-
-
-
(5,878)
2 (b)
2 (b)
Total
£’000
133,594
(90,276)
(31,489)
(121,765)
(31,115)
(19,286)
(28,365)
1,409
1,877
6,654
(37,711)
72,140
(29,974)
(21,082)
21,084
(30,953)
1,763
5,921
(2,185)
5
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62
2. Segment reporting (continued)
(b) Segment results and adjusted profit
Investment segment result
Development segment result
Other unallocated items
Corporate costs
Restructuring costs
Share of joint venture overheads
Share of joint venture Landsbanki provision
Loan break costs and costs written off on refinancing
Share of joint venture loan break costs
Swap loss realised on cancellation
Share of joint venture swap gain
Current tax charge
Adjusted loss for the year
Net valuation losses on investment property
Loss on sale of property
(Loss) / profit on part disposal of investment in joint venture
Share of joint venture loss on disposal
Share of joint venture tax charge
Changes in fair value of interest rate swaps
Interest rate swap receipts on ineffective hedges allocated to investment segment
Share of joint venture valuation (losses) / (gains)
Minority interest share of valuation gains
Share of joint venture deferred tax
Deferred tax
Loss for the year
Note
31 Dec
2008
£’000
2(c)
947
31 Dec
2007
£’000
7,515
(27,523)
(3,822)
(6,326)
(4,809)
(290)
(6,120)
(478)
(137)
-
-
(24)
(44,760)
(25,342)
(12,396)
(2,464)
(56)
-
(32,414)
(1,409)
(10,360)
480
244
12,535
(115,942)
(5,878)
-
(632)
-
(57,392)
-
(2,120)
186
(795)
(62,938)
(2,733)
(4,205)
1,803
(81)
(1,438)
(5,352)
-
5,179
-
1,843
30,447
(37,475)
63
(c) Segment result (see through basis)
Information on the Group’s investment activities on a see through basis, including an allocation of interest, is set out below.
31 December 2008
100% UNITE
Share of co-invested joint ventures
Group on
see through
basis
Wholly
Owned
£’000
Leased /
Other
£’000
Total
£’000
USAF
£’000
Capital
Cities
£’000
Student
Village
£’000
Total
£’000
Total
£’000
Rental income
Property operating expenses (excl. lease rentals)
Operating lease rentals
44,895
(15,209)
-
12,948
(5,710)
(9,109)
57,843
(20,919)
(9,109)
13,032
(3,990)
-
5,016
(708)
-
2,343
(568)
-
20,391
(5,266)
-
78,234
(26,185)
(9,109)
Net rental income
29,686
(1,871)
27,815
9,042
4,308
1,775
15,125
42,940
Joint venture management fees
Overheads
-
-
5,237
(13,680)
5,237
(13,680)
-
-
(336)
-
-
-
(336)
-
4,901
(13,680)
Investment segment result before interest
29,686
(10,314)
19,372
9,042
3,972
1,775
14,789
34,161
Loan interest & similar charges
Finance income
Interest rate swap receipts
(28,365)
1,877
1,409
-
-
-
(28,365)
1,877
1,409
(4,505)
342
-
(2,646)
95
-
(1,561)
140
-
(8,712)
577
-
(37,077)
2,454
1,409
Investment segment result
4,607
(10,314)
(5,707)
4,879
1,421
354
6,654
947
31 December 2007
100% UNITE
Share of co-invested joint ventures
5
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Group on
see through
basis
Wholly
Owned
£’000
Leased /
Other
£’000
Total
£’000
USAF
£’000
Capital
Cities
£’000
Student
Village
£’000
Total
£’000
Total
£’000
Rental income
Property operating expenses (excl. lease rentals)
Operating lease rentals
53,110
(16,917)
-
9,698
(3,595)
(7,101)
62,808
(20,512)
(7,101)
12,622
(3,671)
-
3,816
(516)
-
3,033
(886)
-
19,471
(5,073)
-
82,279
(25,585)
(7,101)
Net rental income
36,193
(998)
35,195
8,951
3,300
2,147
14,398
49,593
Joint venture management fees
Joint venture promote fee
Overheads
-
-
-
4,172
2,965
(11,548)
4,172
2,965
(11,548)
-
-
-
(250)
-
-
-
-
-
(250)
-
-
3,922
2,965
(11,548)
Investment segment
36,193
(5,409)
30,784
8,951
3,050
2,147
14,148
44,932
Loan interest & similar charges
Finance income
(30,953)
1,763
-
-
(30,953)
1,763
(4,642)
299
(2,249)
213
(1,980)
132
(8,871)
644
(39,824)
2,407
Investment segment result
7,003
(5,409)
1,594
4,608
1,014
299
5,921
7,515
64
2. Segment reporting (continued)
(d) Segment assets and liabilities (see through basis)
31 December 2008
Investment property
Investment property under development
Completed property
Property under development
Investment and development property
Cash
Other assets - investment
Other assets - development
Other assets
Debt - completed properties
Debt - development properties
Other liabilities - investment
Other liabilities - development
Interest rate swaps
Other liabilities - unallocated
Total liabilities
100% UNITE
Wholly
Owned
£’000
Share of co-invested joint ventures
USAF
£’000
Capital
Cities
£’000
Student
Village
£’000
Total
£’000
Total
£’000
Group on
see through
basis
403,700
52,989
75,214
249,124
781,027
111,845
121,551
14,934
248,330
(381,587)
(259,653)
(53,272)
(27,272)
(47,776)
-
(769,560)
166,381
-
-
-
166,381
3,998
(51,327)
-
(47,329)
(89,132)
-
(3,040)
-
(2,001)
-
(94,173)
116,919
150
-
-
117,069
2,310
142
166
2,618
(74,989)
-
(1,354)
(1,926)
(7,046)
-
(85,315)
29,040
-
-
-
29,040
3,576
(162)
-
3,414
(22,972)
-
(7,252)
-
(1,027)
(85)
(31,336)
312,340
150
-
-
312,490
9,884
(51,347)
166
(41,297)
(187,093)
-
(11,646)
(1,926)
(10,074)
(85)
(210,824)
716,040
53,139
75,214
249,124
1,093,517
121,729
70,204
15,100
207,033
(568,680)
(259,653)
(64,918)
(29,198)
(57,850)
(85)
(980,384)
Net assets attributable to ordinary shareholders
259,797
24,879
34,372
1,118
60,369
320,166
Minority interest
Net assets
50
15,150
-
-
15,150
15,200
259,847
40,029
34,372
1,118
75,519
335,366
Joint venture investment loans and minority interest
(55,630)
36,763
-
3,667
40,430
(15,200)
Underlying capital employed
204,217
76,792
34,372
4,785
115,949
320,166
Mark to market of interest rate swaps
Valuation gain not recognised on property held at cost
Deferred tax
46,668
28,937
-
2,001
-
-
7,046
-
-
1,027
-
85
10,074
-
85
56,742
28,937
85
Adjusted net assets
Investment assets
Development assets
Total assets
Investment liabilities
Development liabilities
Unallocated liabilities
Total liabilities
279,822
78,793
41,418
5,897
126,108
405,930
581,516
392,261
973,777
170,964
-
170,964
119,371
316
119,687
(486,544)
(283,016)
-
(769,560)
(94,172)
-
-
(94,172)
(83,389)
(1,926)
-
(85,315)
36,121
-
36,121
(31,251)
-
(85)
(31,336)
326,456
316
326,772
(208,812)
(1,926)
(85)
(210,823)
907,972
392,577
1,300,549
(695,356)
(284,942)
(85)
(980,383)
In order to show the Group’s full investment in joint ventures their net assets have been adjusted for loans that are capital in nature to show the underlying capital
employed in the above table.
See through gearing is calculated on an adjusted basis as 174% (2007: 136%).
65
(d) Segment assets and liabilities (see through basis - continued)
31 December 2007
Investment property
Investment property under development
Property under development
Investment and development property
Cash
Other assets - investment
Other assets - development
Interest rate swaps
Other assets
Debt - completed properties
Debt - development properties
Other liabilities - investment
Other liabilities - development
Interest rate swaps
Other liabilities - unallocated
Total liabilities
Net assets
Joint venture investment loans
Underlying capital employed
100% UNITE
Wholly
Owned
£’000
Share of co-invested joint ventures
USAF
£’000
Capital
Cities
£’000
Student
Village
£’000
Total
£’000
Total
£’000
Group on
see through
basis
597,747
102,180
121,936
821,863
56,316
107,698
111,728
1,103
276,845
(409,253)
(185,898)
(62,471)
(55,330)
(8,803)
(12,873)
(734,628)
167,042
-
-
167,042
67,593
36,001
-
103,594
4,158
(45,136)
-
-
(40,978)
(78,398)
-
(3,293)
-
(228)
-
(81,919)
2,522
1,113
365
-
4,000
(43,696)
(20,458)
(1,228)
(4,247)
(434)
-
(70,063)
31,826
-
-
31,826
3,910
(3,572)
-
338
676
(23,552)
-
(3,895)
-
-
(718)
(28,165)
266,461
36,001
-
302,462
10,590
(47,595)
365
338
(36,302)
(145,646)
(20,458)
(8,416)
(4,247)
(662)
(718)
(180,147)
864,208
138,181
121,936
1,124,325
66,906
60,103
112,093
1,441
240,543
(554,899)
(206,356)
(70,887)
(59,577)
(9,465)
(13,591)
(914,775)
364,080
44,145
37,531
4,337
86,013
450,093
(49,312)
45,645
-
3,667
49,312
-
314,768
89,790
37,531
8,004
135,325
450,093
5
n
o
i
t
c
e
S
Mark to market of interest rate swaps
Valuation gain not recognised on property held at cost
Deferred tax
6,828
38,726
12,873
228
-
-
434
-
-
(338)
-
718
324
-
718
7,152
38,726
13,591
Adjusted net assets
Investment assets
Development assets
Total assets
Investment liabilities
Development liabilities
Unallocated liabilities
Total liabilities
373,195
90,018
37,965
8,384
136,367
509,562
713,552
335,844
1,049,396
171,709
-
171,709
71,228
36,366
107,594
(480,527)
(241,228)
(12,873)
(734,628)
(81,919)
-
-
(81,919)
(45,358)
(24,705)
-
(70,063)
36,169
-
36,169
(27,447)
-
(718)
(28,165)
279,106
36,366
315,472
(154,724)
(24,705)
(718)
(180,147)
992,658
372,210
1,364,868
(635,251)
(265,933)
(13,591)
(914,775)
In order to show the Group’s full investment in joint ventures their net assets have been adjusted for loans that are capital in nature to show the underlying capital
employed in the above table.
See through gearing is calculated on an adjusted basis as 136%.
66
3. Expenses
Group result before tax is stated after charging / (crediting):
2008
2007
£’000
£’000
£’000
£’000
Auditor’s remuneration:
Fees payable to the company’s auditor for the audit of the company’s financial statements
Fees payable to the company’s auditor for other services:
- The audit of the company’s subsidiaries
- Taxation
- Relating to corporate finance transactions entered into by the company
- Other services
Depreciation of property, plant and equipment
Net valuation losses on investment property:
- Investment property
- Write down of investment property under development
- Freehold land and buildings
Loss on disposal of property to:
- USAF (see note 9)
- Other purchasers
Loss / (profit) on the part disposal of joint ventures
Amortisation of intangible assets other than goodwill (included in administrative expenses)
Rentals paid under operating leases
186
65
238
500
10
1,403
25,342
12,396
2,464
1,953
11,899
2,733
-
-
849
3,356
20,379
4,638
325
5,412
6,984
The auditor’s remuneration in respect of corporate finance transactions entered into by the company includes £0.196m (2007: £0.453m) relating to the UNITE UK Student
Accommodation Fund.
Non-audit fees in respect of the parent company are included within the group amounts as disclosed above.
4. Staff numbers and costs
The average number of persons employed by the Group (including directors) during the year, analysed by category, was as follows:
Managerial and administration
Site operatives
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Pension costs
Fair value of share based payments
Company
Number of employees
2008
466
542
1,008
2008
£’000
30,741
3,141
788
308
34,978
181
44
275
679
10
1,555
2,733
4,205
(1,803)
539
9,790
2007
456
552
1,008
2007
£’000
29,771
3,096
565
411
33,843
The employees are paid by one of the Company’s wholly owned subsidiaries, UNITE Integrated Solutions plc, which recharges various corporate costs to the Company (see note 22).
67
4. Staff numbers and costs (continued)
Directors’ Remuneration
Group
Directors’ emoluments
2008
£’000
1,611
2007
£’000
1,943
The aggregate amount paid to money purchase pension schemes in respect of the directors for the year was £99,845 (2007: £68,318). Retirement benefits accrued to 4 directors
during the year (2007: 4 directors).
Full details of Directors’ Remuneration are disclosed on pages 45 to 51.
Company
The directors are paid by one of the Company’s wholly owned subsidiaries, UNITE Integrated Solutions plc, which recharges various corporate costs to the Company (see note 22).
Included within these recharges is £0.580m (2007: £0.686m) in respect of Board services.
5. Net financing costs
Group
Recognised in the income statement:
Finance income - Interest income on deposits
Gross interest expense on loans
Interest capitalised
Loan interest and similar charges
Exceptional item:
Bond redemption premium
Loan break costs
Loan set up costs written off on refinancing
Bond and loan redemption costs
Changes in fair value of interest rate swaps
- transferred from equity
- relating to ineffective hedges
Finance costs
Net financing costs
Recognised directly in equity:
Changes in fair value of interest rate swaps
- transferred to income statement
- relating to effective hedges
2008
£’000
(1,877)
48,789
(20,424)
28,365
-
478
-
478
1,586
30,828
32,414
61,257
59,380
(1,586)
7,604
6,018
5
n
o
i
t
c
e
S
2007
£’000
(1,763)
47,951
(16,998)
30,953
46,586
3,260
7,546
57,392
(101)
7,573
7,472
95,817
94,054
101
1,280
1,381
On 18 October 2007 the Group completed the early redemption of the UNITE Finance One plc bonds in order to allow the management of the related portfolio in accordance with the
Group’s strategy. The costs associated with this early redemption totalled £57.392m as analysed above.
68
6. Tax credit
Group
Recognised in the income statement:
Current tax expense
Current year
Income tax on UK rental income arising in overseas group company
Corporation tax in respect of UK rental income arising in overseas group company
Adjustments for prior years
Deferred tax credit
Origination and reversal of temporary differences
- On exceptional bond and loan redemption costs
- Other
Adjustments for prior years
Total tax credit in income statement
Reconciliation of effective tax rate
2008
£’000
-
301
101
(378)
24
-
(12,093)
(442)
(12,535)
(12,511)
2008
2007
%
£’000
%
Loss before tax
(100.0)%
(128,853)
(100.0)%
Income tax using the domestic corporation tax rate
Effect of indexation on investment and development property
Non-deductible expenses
Capital allowances gain crystallised
Share of joint venture profit
Movement on unprovided deferred tax asset
Effect of property disposals to USAF
Adjustments for prior years - deferred tax
Adjustments for prior years - current tax
Rate difference on deferred tax
Deferred tax recognised directly in equity:
Relating to hedging reserve movements
Relating to net valuation gains recognised directly in equity
(28.5)%
0.8%
3.4%
-
0.5%
19.1%
(4.7)%
(0.3)%
(0.3)%
0.3%
(9.7)%
(36,723)
986
4,433
-
639
24,613
(6,053)
(442)
(378)
414
(12,511)
(30.0)%
(12.9)%
4.5%
0.8%
(1.4)%
3.2%
(26.2)%
17.8%
0.1%
(0.1)%
(44.2)%
2008
£’000
(1,579)
797
(782)
2007
£’000
-
514
187
94
795
(16,070)
(26,298)
11,921
(30,447)
(29,652)
£’000
(67,127)
(20,138)
(8,634)
3,015
550
(935)
2,143
(17,578)
11,921
94
(90)
(29,652)
2007
£’000
(761)
2,265
1,504
69
7. Investment and development property
2008
Balance at start of year
Cost capitalised
Interest capitalised
Transfer from property under development
Transfer from land held for development
Transfer from investment property under development
Transfer from work in progress
Disposals
Net realisable value provision
Valuation gains
Valuation losses
Net valuation (losses) / gains
Balance at end of year
Investment
property
under
development
£’000
Completed
Property
£’000
Property
under
development
£’000
102,180
37,808
3,894
-
-
(88,352)
-
-
-
3,389
(5,930)
(2,541)
52,989
-
-
-
87,757
-
-
40,119
(51,434)
(1,228)
-
-
-
75,214
121,936
146,833
15,011
(87,757)
70,297
-
2,291
-
(19,487)
-
-
-
249,124
Investment
property
£’000
597,747
4,577
311
-
-
88,352
-
(266,908)
-
15,387
(35,766)
(20,379)
403,700
Total
£’000
821,863
189,218
19,216
-
70,297
-
42,410
(318,342)
(20,715)
18,776
(41,696)
(22,920)
781,027
Carrying value of properties on which borrowings are secured
402,190
52,989
75,214
249,124
779,517
2007
Balance at start of year
Acquisitions
Cost capitalised
Interest capitalised
Transfer from investment property
Transfer from land held for development
Transfer from investment property under development
Disposals
Valuation gains
Valuation losses
Net valuation losses
Balance at end of year
Investment
property
under
development
£’000
Property
under
development
£’000
Investment
property
£’000
656,969
77,506
7,473
230
(5,941)
-
146,770
(282,527)
28,669
(31,402)
(2,733)
597,747
124,980
-
108,090
8,512
-
-
(146,770)
-
10,224
(2,856)
7,368
102,180
12,093
-
96,668
3,501
5,941
3,733
-
-
-
-
-
121,936
5
n
o
i
t
c
e
S
Total
£’000
794,042
77,506
212,231
12,243
-
3,733
-
(282,527)
38,893
(34,258)
4,635
821,863
Carrying value of properties on which borrowings are secured
597,747
95,389
90,606
783,742
Property has 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 £249.124m (2007: £121.936m) and Completed property of £75.214m (2007: £nil) held in current assets are carried at cost, but their fair values have
been determined as described below.
70
7. Investment and development (continued)
Following the formation of the UNITE UK Student Accommodation Fund 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 net
realisable value), rather than fixed assets, (carried at fair value). The impact if these properties were carried at fair value rather than cost is as follows:
2008
Balance at end of year
Valuation gain not recognised on property held at cost
Fair value at end of year
2007
Balance at end of year
Valuation gain not recognised on property held at cost
Fair value at end of year
Investment
property
under
development
£’000
52,989
-
52,989
Investment
property
£’000
403,700
-
403,700
Completed
Property
£’000
75,214
5,026
80,240
Property
under
development
£’000
249,124
23,911
273,035
Investment
property
under
development
£’000
Property
under
development
£’000
Investment
property
£’000
597,747
-
597,747
102,180
-
102,180
121,936
38,726
160,662
Included within investment properties and investment properties under development are the following values in respect of leasehold interests:
2008
Valuation and net book value
Long leasehold
Short leasehold
2007
Valuation and net book value
Long leasehold
Short leasehold
Investment
property
under
development
£’000
Completed
Property
£’000
Property
under
development
£’000
-
-
-
-
-
-
-
-
-
Investment
property
£’000
46,170
10,660
56,830
Investment
property
under
development
£’000
Property
under
development
£’000
32,320
-
32,320
-
-
-
Investment
property
£’000
105,230
11,920
117,150
Total
£’000
781,027
28,937
809,964
Total
£’000
821,863
38,726
860,589
Total
£’000
46,170
10,660
56,830
Total
£’000
137,550
11,920
149,470
The total interest included in investment and development properties at 31 December 2008 was £40.772m (2007: £29.197m). Total internal costs relating to manufacturing, construction
and development costs of group properties, which have been deducted in arriving at the revaluation uplifts recognised on these properties, amount to £56.119m at 31 December 2008
(2007: £52.271m).
71
8. Property, plant and equipment
Year ended 31 December 2008
Cost or valuation
Balance at start of year
Additions
Disposals
Revaluation
Balance at end of year
Depreciation and impairment losses
Balance at start of year
Depreciation charge for the year
Balance at end of year
Carrying amount
at 31 December 2008
Year ended 31 December 2007
Cost or valuation
Balance at start of year
Additions
Disposals
Revaluation
Balance at end of year
Depreciation and impairment losses
Balance at start of year
Depreciation charge for the year
Balance at end of year
Carrying amount
at 31 December 2007
Valuation
Freehold land
and buildings
£’000
Leasehold
improvements
£’000
Motor vehicles,
plant and
equipment
£’000
Fixtures,
fittings and
equipment
£’000
1,745
-
-
(325)
1,420
245
175
420
2,021
256
(102)
-
2,175
607
251
858
6,306
348
-
-
6,654
2,962
384
3,346
7,746
162
-
-
7,908
4,910
593
5,503
Total
£’000
17,818
766
(102)
(325)
18,157
8,724
1,403
10,127
1,000
1,317
3,308
2,405
8,030
Freehold land
and buildings
£’000
Leasehold
improvements
£’000
Motor vehicles,
plant and
equipment
£’000
Fixtures,
fittings and
equipment
£’000
1,586
-
-
159
1,745
85
160
245
1,898
132
(9)
-
2,021
406
201
607
6,019
287
-
-
6,306
2,456
506
2,962
7,199
574
(27)
-
7,746
4,222
688
4,910
5
n
o
i
t
c
e
S
Total
£’000
16,702
993
(36)
159
17,818
7,169
1,555
8,724
1,500
1,414
3,344
2,836
9,094
Freehold land and buildings are carried at fair value 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 Messrs King Sturge, Chartered Surveyors as external valuers.
The freehold land and buildings carried at value have an historical cost of £1.807m (2007: £1.807m).
Assets subject to finance leases
At 31 December 2008 plant and machinery with a carrying amount of £nil (2007: £0.885m) were subject to finance lease agreements under which the group has the option to
purchase the assets at a beneficial price at the end of the lease.
72
9. Investments in subsidiaries and joint ventures
Group
Share of profit:
- investment segment result
- overheads
- net revaluation (loss) / gains
- current tax
- deferred tax
- shared of Landsbanki provision
- other
Share of items recognised directly in reserves:
- valuation gains (net of deferred tax)
- movements in effective hedges (net of deferred tax)
Additions
Disposals
Profit adjustment related to trading with joint venture
Distributions received
At start of year
At end of year
Joint Venture
Undertakings
2007
£’000
5,921
(632)
5,179
(1,438)
1,843
-
105
10,978
5,483
(1,423)
6,797
(28,575)
(3,220)
(10,314)
(20,274)
106,287
86,013
2008
£’000
6,654
(293)
(10,360)
-
244
(6,120)
(110)
(9,985)
1,519
(9,761)
18,317
(2,924)
(2,402)
(5,258)
(10,494)
86,013
75,519
During the year USAF Feeder (Guernsey) Ltd was formed, as a subsidiary of the Group, to invest in the UNITE UK Student Accommodation Fund. Some of the Group’s unit holding in the
fund was transferred to this company. In addition, USAF Feeder (Guernsey) Ltd issued a further £16m of share capital to an investor, the proceeds of which were used to purchase new
units in the fund. The investor’s interest in USAF Feeder (Guernsey) Ltd is accounted for as a minority interest in the consolidated accounts. Note 2(d) Segment assets and liabilities (see
through basis) shows details of the value of the minority interest’s investment.
The Group’s interests in joint ventures are held at a carrying value equivalent to its share of the underlying net asset value of the undertaking. The Group’s share of joint ventures’ results
are as follows:
Capital Cities JV
Student Village JV’s
- LDC (Project 110) Ltd
- LDC (Project 170) Ltd
UNITE UK Student Accommodation Fund
2008
Losses
recognised
directly
in equity
£’000
(5,082)
-
(987)
(2,173)
(8,242)
2008
Profit
£’000
3,093
(2,350)
108
(10,836)
(9,985)
2007
Gains/(losses)
recognised
directly
in equity
£’000
4,584
(296)
-
(228)
4,060
2007
Profit
£’000
4,254
(846)
503
7,067
10,978
The UNITE UK Student Accommodation Fund is the joint venture formed with a consortium of investors in December 2006. This joint venture takes the form of a Jersey unit trust
that controls a number of English limited partnerships in which the general partners are USAF GP No.1 Ltd, USAF GP No.4 Ltd, USAF GP No.5 Ltd, USAF GP No.6 Ltd, USAF GP No.8
and USAF GP No.10 Ltd, companies incorporated in England and Wales.
The agreements integral to the above, which include the Group assuming delegated responsibility for property and asset management of the venture, result in the Group having
joint control of these entities with the investors.
73
9. Investments in subsidiaries and joint ventures (continued)
The Group receives management fees and is entitled to a promote fee if the venture outperforms certain benchmarks. This promote fee takes the form of increasing the Group’s
capital participation in the joint venture. The impact of these fees on the Group results is summarised below.
During the year the Group sold a further 13 (2007: 15) properties into the joint venture for £171.915m (2007: £252.574m), this includes £64.492m (2007: £nil) of completed property
held as stock. The investment property previously held in the Student Village JV LDC (Project 170) Ltd was sold to the UNITE UK Student Accommodation Fund in October 2007 for
£49.500m. The profits relating to these sales and associated disposal costs are set out below:
Included in turnover
Included in cost of sales
(Loss) / profit relating to the sale of investment properties to USAF pre disposal costs
Disposal costs
Goodwill impairment
Profit / (loss) on disposal of property
Profit and loss
2008
£’000
Profit and loss
2007
£’000
61,890
(51,481)
(5,080)
(268)
(64)
4,997
-
-
1,034
(1,341)
(542)
(849)
The goodwill impairment charged against the loss on disposal relates to synergistic benefits associated with the disposed properties.
During the year the Group increased it’s interest in the UNITE UK Student Accommodation Fund from 20.1% to 22.2%. Some of this holding represents the beneficial interest of the
minority; the ordinary shareholders of The UNITE Group Plc are beneficially interested in 18.5% of the fund (2007: 20.1%).
The Capital Cities JV is the joint venture formed with GIC Real Estate Pte Ltd, a real estate investment vehicle of the Government of Singapore, to develop and operate student
accommodation in the capital cities of London, Edinburgh, Dublin and Belfast, in which the Group owns a 30% equity share. This joint venture takes the form of a English limited
partnership in which the general partner is LDC (Capital Cities) Ltd, a company incorporated in England and Wales.
The agreements integral to the above, which include the Group assuming primary responsibility for development, property and asset management of the venture, result in the Group
having joint control of this entity in conjunction with the majority partner.
The Group receives management fees from the joint venture and recharges other costs in relation to the investment property under development. The impact of these fees on the Group
results is summarised below.
The Group’s joint venture in student villages with Lehman Brothers is held in LDC (Project 110) Ltd and LDC (Project 170) Ltd, companies incorporated in England and Wales, whose
principal activity is the construction and letting of investment property. Under the Articles of Association, the Group cannot exercise control over these companies and its interest amounts
to a 51% share of the profits and assets of the joint venture, although it holds a 75% interest in the ordinary shares. Under the articles of LDC (Project 170) Ltd, the Group is additionally
entitled to the first £1.250m of net assets on any winding up of the company. The impact of amounts charged to LDC (Project 110) Ltd and LDC (Project 170) Ltd in respect of fees and
construction costs on the Groups results is summarised below.
On 3 October 2007 the investment property previously held in LDC (Project 170) Ltd was sold to UNITE Student Accommodation Fund for £49.500m. Following this disposal outstanding
shareholder loans and the Group’s additional entitlement to the first £1.250m of the net assets of the company were settled. A promote fee was also paid to the Group by LDC (Project
170) Ltd as detailed below.
5
n
o
i
t
c
e
S
The impact of joint venture management and promote fees and development sales on the Group results is as follows:
Management Fees
UNITE UK Student Accommodation Fund
Capital Cities JV
Promote Fees
UNITE UK Student Accommodation Fund
Student Village JV’s
- LDC (Project 170) Ltd
Development Sales
Capital Cities JV
Student Village JV’s
- LDC (Project 110) Ltd
- LDC (Project 170) Ltd
2008
£’000
2,758
2,479
5,237
-
-
-
698
42
-
740
2007
£’000
2,332
1,840
4,172
1,499
1,466
2,965
1,771
424
-
2,195
74
9. Investments in subsidiaries and joint ventures (continued)
Summary financial information on joint ventures –
UNITE UK Student Accommodation Fund
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets / equity
Represented by:
Net assets attributable to the USAF fund unitholders
Direct interest in partnership reserves
Total equity / joint venture carrying value
Minority partnership loans (classified as debt)
Underlying capital employed
(Loss) / profit for the period
Capital Cities joint venture
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets/equity
Profit for the period
Student Village JV - LDC (Project 110) Limited
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets/equity
Loss for the period
Student Village JV - LDC (Project 170) Limited
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets/equity
Profit for the period
100%
UNITE share
2008
£’000
2007
£’000
2008
£’000
2007
£’000
897,126
24,713
(22,100)
(487,043)
412,696
371,033
(10,497)
360,536
52,160
412,696
(64,521)
366,848
8,573
(10,884)
(249,963)
114,574
10,310
56,026
2,274
(7,459)
(49,665)
1,176
(4,700)
-
5,123
(4,063)
-
1,060
216
834,544
22,175
(17,992)
(392,585)
446,142
400,925
(501)
400,424
45,718
446,142
16,299
343,990
12,831
(17,872)
(213,847)
125,102
14,180
63,600
2,787
(6,100)
(52,463)
7,824
(1,693)
-
5,951
(5,101)
-
850
1,007
50,526
(10,497)
40,029
51,913
91,942
44,646
(501)
44,145
45,645
89,790
34,372
37,531
588
3,912
530
425
Investments in joint ventures per balance sheet
75,519
86,013
75
9. Investments in subsidiaries and joint ventures (continued)
Company
Cost or valuation
At start of year
Revaluation
At end of year
The Company has the following investments in principal subsidiaries and joint ventures:
Unlisted
subsidiary
undertakings
Joint venture
undertakings
2008
£’000
2007
£’000
2008
£’000
238,195
(122,385)
115,810
266,200
(28,005)
238,195
3,912
(3,354)
558
LDC (Holdings) plc
UNITE Holdings plc
UNITE Finance Ltd
LDC (Portfolio Four) Ltd
UNITE London Ltd
Unilodge Holding Ltd
LDC (Project 110) Ltd
UNITE Integrated Solutions plc
UNITE Modular Solutions Ltd
USAF LP Ltd
USAF Jersey Investments Ltd
UNITE (Capital Cities) Jersey Ltd
LDC (Imperial Wharf) Ltd
LDC (MTF Portfolio) Ltd
LDC (Project 170) Ltd
UNITE Finance One (Property) Ltd
USAF Feeder (Guernsey) Ltd
Country of
Incorporation
Class of
Shares held
Ownership
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Guernsey
England and Wales
England and Wales
England and Wales
England and Wales
Jersey
Jersey
England and Wales
England and Wales
England and Wales
England and Wales
Guernsey
2008
100%
100%
100%
100%
100%
100%
75%
100%
100%
100%
100%
100%
100%
100%
75%
100%
50%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
The Company’s interest in LDC (Project 110) Ltd and LDC (Project 170) Ltd gives rise to joint control as explained above.
The Company owns a controlling interest in USAF Feeder (Guernsey) Ltd.
5
n
o
i
t
c
e
S
2007
£’000
5,118
(1,206)
3,912
2007
100%
100%
100%
100%
100%
100%
75%
100%
100%
100%
100%
100%
100%
100%
75%
100%
-
76
10. Intangible assets
Group
Year ended 31 December 2008
Cost
Balance at start of year
Additions
Balance at end of year
Amortisation
Balance at start of year
Amortisation charge for the year
Impairment charge
Balance at end of year
Carrying amount
at 31 December 2008
Year ended 31 December 2007
Cost
Balance at start of year
Additions
Balance at end of year
Amortisation
Balance at start of year
Amortisation charge for the year
Impairment charge
Balance at end of year
Carrying amount
at 31 December 2007
11. Inventories
Land held for development
Work in progress
Raw materials and consumables
Goodwill
£’000
Development
costs
£’000
Computer
software
£’000
2,625
-
2,625
2,194
-
99
2,293
332
2,625
-
2,625
1,620
-
574
2,194
431
578
114
692
81
136
-
217
475
433
145
578
-
81
-
81
497
10,754
1,068
11,822
3,593
1,817
-
5,410
6,412
6,913
3,841
10,754
3,135
458
-
3,593
7,161
2008
£’000
5,000
3,664
1,647
10,311
Total
£’000
13,957
1,182
15,139
5,868
1,953
99
7,920
7,219
9,971
3,986
13,957
4,755
539
574
5,868
8,089
2007
£’000
91,324
12,360
873
104,557
The land held for development has been written down by £10.774m to market value during the year (2007: £nil).
Security has been given by way of a first charge over the land held for development to secure the Group’s borrowings.
77
12. Trade and other receivables
Non-current
Amounts owed by joint ventures
Interest rate swaps
Current
Other trade receivables
Amounts due from group undertakings
Amounts owed by joint ventures
Prepayments and accrued income
Other receivables
13. Cash and cash equivalents
Bank balances
Overdrafts (note 15)
Cash and cash equivalents per cash flow
2008
£’000
3,667
-
3,667
20,577
-
64,963
11,716
10,052
107,308
2008
£’000
111,845
(25,077)
86,768
Group
Company
2007
£’000
3,667
1,103
4,770
14,900
-
57,356
11,370
10,393
94,019
2008
£’000
3,667
-
3,667
-
253,263
-
-
7
253,270
2007
£’000
3,667
-
3,667
-
256,979
-
43
103
257,125
Group
Company
2007
£’000
56,316
(2,799)
53,517
2008
£’000
-
(1,730)
(1,730)
5
n
o
i
t
c
e
S
2007
£’000
-
(648)
(648)
Bank balances include £16.3m (2007: 16.1m) whose use at the balance sheet date is restricted by funding agreements to paying operating costs and loan interest relating to
specific properties, a further £30.8m (2007: £nil) is secured against bank debt pending the refinancing of a property.
14. Trade and other payables
Trade payables
Amounts due to group undertakings
Tax payable
Other payables and accrued expenses
Group
Company
2008
£’000
15,269
-
372
64,903
80,544
2007
£’000
23,844
-
873
93,084
117,801
2008
£’000
-
37,804
-
2,769
40,573
Trade payables include £6.329m (2007: £5.296m) in relation to retentions on construction contracts.
2007
£’000
-
37,617
-
4,622
42,239
78
15. Borrowings and financial derivatives
Non-current
Bank and other loans
Interest rate swaps
Current
Overdrafts
Bank and other loans
Interest rate swaps
Finance lease liabilities
Maturity analysis
Financial liabilities fall due as follows:
Group
2008
Non derivative financial liabilities
Bank and other loans
Bank overdrafts
Trade and other payables
Derivative financial liabilities
Interest rate swaps
2007
Non derivative financial liabilities
Bank and other loans
Finance lease liabilities
Bank overdrafts
Trade and other payables
Derivative financial liabilities
Interest rate swaps
79
2008
£’000
507,739
44,401
552,140
25,077
108,424
3,375
-
136,876
Group
Company
2007
£’000
2008
£’000
2007
£’000
354,917
8,803
363,720
2,799
237,400
-
35
240,234
-
-
-
1,730
-
-
-
1,730
-
-
-
648
-
-
-
648
Carrying
value
£’000
616,163
25,077
80,544
Within
1 year
£’000
108,424
25,077
80,544
1-2 years
£’000
2-5 years
£’000
More than
5 years
£’000
1,252
-
-
257,269
-
-
249,218
-
-
47,776
3,375
-
1,478
42,923
Carrying
value
£’000
592,317
35
2,799
117,801
Within
1 year
£’000
237,400
35
2,799
117,801
1-2 years
£’000
2-5 years
£’000
95,898
-
-
-
156,768
-
-
-
More than
5 years
£’000
102,251
-
-
-
8,803
-
32
-
8,771
15. Borrowings and financial derivatives (continued)
The maturity of the Group’s obligations under hire purchase agreements is as follows:
Within one year
In the second to fifth years
Minimum
Lease
Payments
2008
£’000
-
-
-
Interest
2008
£’000
Principal
2008
£’000
-
-
-
-
-
-
Minimum
Lease
Payments
2007
£’000
35
-
35
Interest
2007
£’000
-
-
-
Principal
2007
£’000
35
-
35
The Group has various borrowing facilities available to it. The undrawn committed facilities available at 31 December 2008 in respect of which all conditions precedent had been met
at that date were as follows:
Expiring in one year or less
Build facilities
Other facilities
2008
£’000
-
56
56
2007
£’000
13
20,000
20,013
In addition, there are further committed facilities available where not all conditions precedent have yet been met amounting to £268m (2007: £330m). Of this amount £8m
(2007: £49m) remains available only for completed properties and £20m (2007: £50m) only for development properties, the remaining £240m (2007: £231m) is available for both.
Security for the Group’s property development and investment financing is by way of first charges over the properties to which they relate. In certain instances, cross guarantees
are provided within the Group.
The Company has guaranteed £311.435m of its subsidiary companies borrowings (2007: £164.523m). The guarantees have been entered into in the normal course of business.
A liability would only arise in the event of the subsidiary failing to fulfil its contractual obligations. These guarantees are accounted for in accordance with IFRS 4.
5
n
o
i
t
c
e
S
The Group’s gearing ratios are calculated as follows:
Net debt per balance sheet:
Cash and cash equivalents
Current borrowings
Non-current borrowings
Interest rate swaps liabilities
Interest rate swaps assets
Mark to market of interest rate swaps
Adjusted net debt
Basic net asset value
Adjusted net asset value (note 2(d))
Basic gearing
Adjusted gearing
Note
13
15
15
15
12
2008
Total
£’000
111,845
(133,501)
(507,739)
(47,776)
-
(577,171)
2007
Total
£’000
56,316
(240,234)
(354,917)
(8,803)
1,103
(546,535)
46,668
6,828
(530,503)
(539,707)
320,166
450,093
405,930
509,562
180%
131%
121%
106%
80
16. Deferred tax liabilities
Group
Recognised deferred tax assets and liabilities are attributable to the following:
Assets
2008
£’000
2007
£’000
Liabilities
2008
£’000
2007
£’000
Net
2008
£’000
2007
£’000
Investment property
Investment property under development
Development property held as stock
Property, plant and machinery
Investments in joint ventures
Financial instruments
Financial instruments relating to investments in joint ventures
Tax value of losses carried forward
Tax (assets) / liabilities
Set off of tax
Net tax liabilities
-
-
(4,883)
-
-
(12,735)
-
-
(17,618)
17,618
-
-
-
(457)
(390)
-
(2,048)
(199)
(8,243)
(11,337)
11,337
-
9,988
(156)
-
282
7,504
-
-
-
17,618
(17,618)
-
11,563
5,182
-
-
7,465
-
-
-
24,210
(11,337)
12,873
9,988
(156)
(4,883)
282
7,504
(12,735)
-
-
-
-
-
11,563
5,182
(457)
(390)
7,465
(2,048)
(199)
(8,243)
12,873
-
12,873
At 31 December 2008 the Group has calculated a potential deferred tax asset of £24.613m (2007: £nil), however, due to the uncertainty of future taxable profits against which this
asset could be realised, it is not appropriate to recognise this asset in the financial statements.
Movement in temporary timing differences during the year:
Year ended 31 December 2008
Investment property
Investment property under development
Development property held as stock
Property, plant and equipment
Investments in joint ventures
Financial instruments
Tax value of losses carried forward
Year ended 31 December 2007
Investment property
Investment property under development
Development property held as stock
Property, plant and equipment
Investments in joint ventures
Financial instruments
Tax value of losses carried forward
At 31 Dec
2007
£’000
Transfers
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
At 31 Dec
2008
£’000
11,563
5,182
(457)
(390)
7,266
(2,048)
(8,243)
12,873
5,067
(5,067)
-
-
-
-
-
-
(6,642)
(858)
(4,426)
672
(171)
(8,909)
8,243
(12,091)
-
587
-
-
409
(1,778)
-
(782)
9,988
(156)
(4,883)
282
7,504
(12,735)
-
-
At 31 Dec
2007
£’000
Transfers
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
At 31 Dec
2008
£’000
27,103
7,254
-
(449)
9,741
129
(1,962)
41,816
3,140
(3,663)
523
-
-
-
-
-
(18,680)
-
(980)
59
(2,801)
(1,763)
(6,281)
(30,446)
-
1,591
-
-
326
(414)
-
1,503
11,563
5,182
(457)
(390)
7,266
(2,048)
(8,243)
12,873
Company
Deferred tax has not been recognised on temporary timing differences of £14.462m (2007: £72.632m) in respect of revaluation of subsidiaries and investment in joint ventures as it is
probable that the temporary timing difference will not reverse in the foreseeable future.
81
17. Capital and reserves
Group
Issued
share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Retained Revaluation
reserve
earnings
£’000
£’000
Hedging
reserve
£’000
Total
£’000
At 1 January 2007
30,763
173,008
40,177
218,035
18,053
1,151
481,187
Loss for the year
Investment property under development - revaluation
- deferred tax
- revaluation
- movements
- deferred tax
Other property
Effective hedges
Gains on hedging instruments transferred to income statement
Deferred tax on gains transferred
Share of joint venture valuation gain (net of related tax)
Share of joint venture movements in effective hedges (net of related tax)
Transfer on completion or disposal of investment property
Shares issued
Fair value of share based payments
Own shares acquired
Dividends to shareholders
At 31 December 2007 and 1 January 2008
Loss for the year
Investment property under development - revaluation
- deferred tax
- movements
- deferred tax
Effective hedges
Gains on hedging instruments transferred to income statement
Deferred tax on gains transferred
Share of joint venture valuation gain (net of related tax)
Share of joint venture movements in effective hedges (net of related tax)
Transfer on completion or disposal of investment property
Shares issued
Fair value of share based payments
Own shares acquired
Dividends to shareholders
Transfer to minority interest
At 31 December 2008
-
-
-
-
-
-
-
-
-
-
-
111
-
-
-
30,874
-
-
-
-
-
-
-
-
-
-
205
-
-
-
-
31,079
-
-
-
-
-
-
-
-
-
-
-
1,325
-
-
-
174,333
-
-
-
-
-
-
-
-
-
-
2,208
-
-
-
-
176,541
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
40,177
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
40,177
(37,475)
-
-
-
-
-
-
-
-
-
11,155
-
411
(1,096)
(3,073)
187,957
(116,342)
-
-
-
-
-
-
-
-
18,658
-
308
(2,192)
(3,090)
400
85,699
-
7,368
(1,591)
159
-
-
-
-
4,810
-
(11,155)
-
-
-
-
17,644
-
2,097
(587)
-
-
-
-
1,309
-
(18,658)
-
-
-
-
-
1,805
-
-
-
-
(1,280)
384
(101)
30
-
(1,076)
-
-
-
-
-
(892)
-
-
-
(7,604)
1,779
1,586
(444)
-
(9,960)
-
-
-
-
-
400
(15,135)
(37,475)
7,368
(1,591)
159
(1,280)
384
(101)
30
4,810
(1,076)
-
1,436
411
(1,096)
(3,073)
450,093
(116,342)
2,097
(587)
(7,604)
1,779
1,586
(444)
1,309
(9,960)
-
2,413
308
(2,192)
(3,090)
800
320,166
5
n
o
i
t
c
e
S
82
17. Capital and reserves (continued)
Company
Reconciliation of movement in capital and reserves
At 1 January 2007
Loss for the year
Revaluation of investment in subsidiaries and joint ventures
Share options exercised
Dividends to shareholders
At 31 December 2007 and 1 January 2008
Loss for the year
Revaluation of investment in subsidiaries and joint ventures
Share options exercised
Dividends to shareholders
At 31 December 2008
Share capital
Authorised shares of 25p each
Issued at start of year – fully paid
Shares issued to long term incentive plan
Share options exercised
Issued at end of year - fully paid
Issued
share
capital
£’000
30,763
-
-
111
-
30,874
-
-
205
-
31,079
Share
premium
£’000
173,008
-
-
1,325
-
174,333
-
-
2,208
-
176,541
Merger
reserve
£’000
40,177
-
-
-
-
40,177
-
-
-
-
40,177
Retained
earnings
£’000
249,351
(2,440)
(29,210)
-
(3,073)
214,628
(2,594)
(125,739)
-
(3,090)
83,205
Total
£’000
493,299
(2,440)
(29,210)
1,436
(3,073)
460,012
(2,594)
(125,739)
2,413
(3,090)
331,002
Number of Ordinary shares
2008
2007
155,000,000
155,000,000
123,495,242
707,612
112,987
124,315,841
123,050,658
157,662
286,922
123,495,242
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
All shares rank equally with regard to the Company’s residual assets.
Merger reserve
This reserve represents the excess of the fair value over nominal value of shares issued as part consideration for assets acquired.
Revaluation reserve
The revaluation reserve represents revaluations relating to investment properties under development and land and buildings included in property, plant and equipment less
any related deferred tax.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments where the hedged transaction has not yet occurred,
less any related deferred tax.
Dividends
The following dividends were declared and paid during the year:
Final dividend for 2007 of 1.67p (2006: 1.67p) per 25p ordinary share
Interim dividend of 0.83p (2007: 0.83p) per 25p ordinary share
After the balance sheet date the following dividends were proposed by the directors, for which no provision has been made:
Final dividend proposed of nil (2007: 1.67p) per 25p ordinary share
83
2008
£’000
2,061
1,029
3,090
2008
£’000
-
2007
£’000
2,051
1,022
3,073
2007
£’000
2,062
18. Earnings per share and net asset value per share
The calculations of basic and adjusted earnings per share for the Group are as follows:
Earnings
Basic (and diluted)
Adjusted
Weighted average number of shares (thousands)
Basic
Dilutive potential ordinary shares (share options)
Diluted
Earnings per share (pence)
Basic
Diluted
Adjusted
Note
2008
Total
£’000
2007
Total
£’000
(115,942)
(37,475)
2(b)
(44,760)
(62,938)
124,095
303
124,398
123,239
1,257
124,496
(93.4)
(93.4)
(36.0)
(30.4)
(30.4)
(50.6)
Movements in the weighted average number of shares have resulted from the issue of shares arising from the employee share based payment schemes.
The calculations of basic, adjusted and diluted net asset value per share for the Group are as follows:
Net assets attributable to ordinary shareholders
Basic
Adjusted pre dilution
Outstanding share options
Adjusted diluted
Number of shares (thousands)
Basic
Outstanding share options
Diluted
Net asset value per share (pence)
Basic
Adjusted pre dilution
Adjusted diluted
5
n
o
i
t
c
e
S
Note
2(d)
2008
£’000
2007
£’000
320,166
450,093
405,930
2,985
408,915
124,316
1,560
125,876
258
327
325
509,562
3,550
513,112
123,495
1,670
125,165
364
413
410
84
19. Employee benefits
Share based payments
The UNITE Group plc operates the following schemes: two executive share option schemes (“the Approved Scheme” and the “Unapproved Scheme”), an executive Long Term Incentive
Plan (the “LTIP”), a Save As You Earn scheme (the “SAYE scheme”) and an Employee Share Ownership Trust (ESOT).
Details of the two executive schemes and share options held by directors are detailed in the Directors’ Remuneration report.
The SAYE scheme issues options to employees with vesting periods of 3 to 5 years. The only condition attaching to this scheme is a service condition.
The ESOT is used to award part of directors’ and senior managers’ bonuses in shares. These shares vest after 3 years continued service.
The number and weighted average exercise prices of share options is as follows:
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at the end of the year
Exercisable at the end of the year
Weighted
average
exercise price
2008
Number of
options
(thousands)
2008
Weighted
average
exercise price
2007
Number of
options
(thousands)
2007
£2.12
£3.02
£1.96
£1.90
£1.96
£1.82
1,670
(237)
(113)
287
1,607
1,088
£2.07
£2.88
£2.02
£2.99
£2.12
£1.83
1,899
(138)
(287)
196
1,670
1,174
The weighted average remaining contractual life of outstanding options was 3.0 years (2007: 3.9 years).
The weighted average share price on the date of exercise for options exercised during the year was £3.21 (2007: £4.07)
Fair value of share options and assumptions
The fair value of services received in return for share options granted after 7 November 2002 is measured by reference to the fair value of share options granted. Service conditions
and non-market performance conditions are not taken into account in the grant date fair value measurement. The estimates of the fair value of the share options granted is measured
based on the following models:
Option scheme
Model used
Reason for model used
Unapproved and approved share option schemes,
LTIP – TSR component
Monte Carlo simulations combined with binomial lattice
SAYE share option scheme
Black-Scholes
ESOT bonus awards, LTIP – NAV component
Discounted share price at grant
For share options granted in the year, the fair values and assumptions made in applying the valuation models are as follows:
Weighted average fair value at measurement date
Share price
Exercise price
Expected volatility
Option life
Expected dividends
Risk free interest rate (based on UK government bonds)
Monte Carlo simulations used to model FTSE
comparator groups (for TSR performance condition)
combined with (for share options) binomial lattice to
incorporate 7 year exercise window
Service condition only, short exercise window
makes a fixed date model appropriate
Awards equate to a gift of free shares with a
performance / service condition. Discounted for
dividends not receivable during the service
period (ESOT only)
2008
200p
227-310p
190p
17% - 37%
3-5 years
1.0%
4.1% - 4.2%
2007
318p
489-545p
299p
22% - 24%
3-5 years
1.0%
4.9% - 5.1%
The expected volatility is based on the historic volatility (based on a period commensurate with the expected term of the options), adjusted for any expected changes to future volatility
due to publicly available information.
The fair value expense recognised in the income statement is disclosed in note 4.
85
20. Financial Instruments
The Group holds or issues financial instruments for two
main purposes:
•
•
To finance the development and subsequent
retention of investment properties;
To manage the interest rate risks arising from its
operations and from its sources of finance.
In addition, various financial instruments – such as trade
debtors and trade creditors – arise directly from the
Group’s operations. All financial instruments are sterling
denominated. The Group does not trade in financial
instruments or derivatives.
The Group finances its development and investment
activities through a mixture of retained earnings,
borrowings and fresh issues of equity. The Group
borrows from major banking institutions primarily at fixed
rates of interest, using derivatives where appropriate to
generate the desired effective interest rate basis. The
derivatives used for this purpose are interest rate swaps.
The main risks arising from the Group’s financial
instruments are interest rate risk and market price risk.
The Board reviews and agrees policies for managing
each of these risks, they are discussed in the Business
Review and are summarised below.
Interest rate risk
The Group’s exposure to interest rate fluctuations on its
borrowings and deposits are managed by using interest
rate swaps and in some cases, simple fixed rate borrowing.
The Group’s policy is separated into three areas:
(i) Development finance
After taking account of interest rate swaps, just under half
of the Group’s development borrowing at 31 December
2008 is fixed, which is a significant increase over 2007.
The Group will continue to review the level of its hedging
in the light of the current low interest rate environment.
(ii) Refinancing risk
The Group’s principal exposure to interest rate
fluctuations during development relates to movements
in longer term interest rates, which affect the quantum
of debt the property income is capable of servicing at
completion. Significant adverse movements undermine
the Group’s capital recycling strategy.
The Group manages this risk via a programme of pre-
hedging, through the use of forward starting interest rate
swaps. At 31 December 2008 approximately £65.4m
(2007: £154.0m) of the Group’s anticipated refinancing
was hedged for an average term of 5.7 years
(2007: 4 years).
(iii) Medium and long term finance
The Group holds its medium and long-term bank finance
under floating rate arrangements. The majority of this
debt is hedged through the use of interest rate swap
agreements, although not all these arrangements qualify
for hedge accounting under IAS 39. During 2008,
the Group’s policy has been to hedge in excess of 80%
of the Group’s exposure for terms of approximately
2-15 years.
At 31 December 2008, after taking account of interest
rate swaps, 87% (2007: 89%) of the Group’s medium
and long-term investment borrowing was held at fixed
rates. This is fixed at an average rate of 6.21% (2007:
6.74%) for an average period of 4 years (2007: 6 years).
Liquidity risk
With respect to its development activities, the directors
have adopted a policy whereby the Group injects
substantially the full amount of equity required for each
development before drawing debt under associated
facilities. In this way, the funding requirements of each
scheme are substantially “ring fenced” and secured at
the outset of works.
Some of the Group’s banking facilities contain loan to
value covenants, which if property values fall far enough
may require some debt to be repaid. This position is
closely monitored on a regular basis and the Group
develops strategies that will minimise the impact of any
such repayments on other operations.
Some of the Group’s medium-term banking facilities are
revolving, allowing the Group to apply its cash surpluses
in the temporary reduction of its debt obligations.
Market risk
The Group’s primary market risk is interest rate
exposure. It monitors this exposure through a process
of sensitivity analysis, estimating the effect on operating
cash flow over various periods of a range of possible
changes in interest rates.
At 31 December 2008, it is estimated that a general
increase of one percentage point in interest rates would
decrease the Group’s profit before tax by approximately
£0.9m (2007: £1.3m). Effective and ineffective interest
rate swaps have been included in this calculation.
The Group’s policy is to accept a degree of interest rate
risk, provided the effects of the various potential changes
in rates remain within certain prescribed parameters.
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Interest rate swaps maturity
Within 1 year
1 – 2 years
2 – 5 years
More than 5 years
2008
Nominal amount
hedged
£’000
2008
Applicable
interest rates
£’000
2007
Nominal amount
hedged
£’000
2007
Applicable
interest rates
£’000
158,205
-
18,244
364,551
3.36% - 4.98%
-
4.79% - 5.15%
5.12% - 5.63%
26,000
105,361
-
364,620
5.0%
3.1% - 5.4%
-
5.1% - 5.6%
The Group intends to dispose of certain property assets; at the present time conditions in the banking markets are very volatile and as a result these sales could be at risk as a result of
potential purchaser’s inability to raise any necessary debt finance.
Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. At the balance sheet date there were no significant concentrations of credit
risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.
86
20. Financial Instruments (continued)
Cash
Other trade receivables
Interest rate swaps
Amounts due by joint ventures (excluding loans that are capital in nature)
Other trade receivables represent amounts due from the Group’s external customers as follows:
2008
Commercial tenants
Individual tenants
Manufacturing debtors
Provisions carried
2007
Commercial tenants
Individual tenants
Manufacturing debtors
Provisions carried
2008
£’000
111,845
20,577
-
13,050
145,472
2007
£’000
56,316
14,900
1,103
11,711
84,030
Total
£’000
7,003
4,359
11,362
10,896
(1,681)
20,577
2008/09
£’000
Academic year
2007/08
£’000
Prior years
£’000
4,100
1,371
5,471
10,896
(652)
15,715
1,514
2,988
4,502
-
(671)
3,831
1,389
-
1,389
-
(358)
1,031
Total
£’000
Academic year
2007/08
£’000
2006/07
£’000
Prior years
£’000
4,052
7,047
11,099
4,945
(1,144)
14,900
3,440
5,429
8,869
4,945
(665)
13,149
612
1,618
2,230
-
(479)
1,751
-
-
-
-
-
-
The Group holds £8.450m (2007: £8.157m) in tenant deposits as collateral on the above debts.
Effective interest rates
Interest rate swaps with fair value liabilities of £47.776m (2007: £7.700m) and remaining lives of 1 to 15 years have been accounted for in creditors and debtors.
The Group’s overall average cost of debt as at 31 December 2008 is 5.7% (2007: 7.0%).
Fair value of financial assets and liabilities
The fair value of the Group’s financial assets and liabilities do not differ from their book values other than as shown below:
Fixed rate loans
(20,900)
(23,211)
-
-
Fair values have been calculated by discounting future cash flows at prevailing interest rates.
2008
Book value
£’000
2008
Fair value
£’000
2007
Book value
£’000
2007
Fair value
£’000
87
20. Financial Instruments (continued)
Capital management
The Group’s financing strategy is based around its developer and co-investing manager business model, which allows capital from stabilised developments sold to UNITE UK Student
Accommodation Fund to be recycled into new schemes. The Board has adopted this business model to achieve an appropriate balance between the capital deployed in mature, lower
return investments and higher yielding development opportunities.
The Board regularly reviews the capital available to the business with a view to ensuring that the Group has an appropriate capital base to maintain investor, creditor and market
confidence and sustain the future development of the business.
The Board has processes in place to ensure capital is only committed to new schemes, for site purchase or build, when there is sufficient capital available. These processes also ensure
that capital is allocated to the opportunities offering the greatest return.
The Group regards its available capital as the amount of its adjusted net assets, as this excludes deferred tax and the fair value of financial instruments, which will not be crystallised in
the normal course of trade and includes all property assets at market value. At 31 December 2008 capital on this basis amounted to £406m (2007: £510m).
21. Operating leases
Leases as lessee
The future minimum lease rentals payable under non-cancellable operating leases are as follows:
Less than one year
Between one and five years
More than five years
Leases for commercial properties typically run for 5 – 15 years with market rent reviews every 5 years.
2008
£’000
10,993
41,426
150,316
202,735
2007
£’000
7,974
30,441
108,761
147,176
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Leases of residential accommodation properties run for periods between 18 and 26 years and are generally subject to annual RPI based rent reviews. One property is subject to a fixed
annual rent increase of 2%.
Leases as lessor
The Group leases out its investment property under operating leases. The future minimum lease payments receivable under non-cancellable operating leases are as follows:
Less than one year
Between one and five years
More than five years
2008
£’000
31,894
27,665
28,907
88,466
2007
£’000
26,622
11,323
44,763
82,708
88
22. Related parties
Group
The Group has had a number of transactions with its joint ventures, which are disclosed in notes 9 and 12.
Company
During the year, the company entered into various interest free loans with its subsidiaries, the aggregate of which are disclosed in the cash flow statement. In addition, the following
material transactions took place.
Intercompany recharges for corporate costs
UNITE Integrated Solutions plc
As a result of these intercompany transactions, the following amounts were due (to)/from the company’s subsidiaries at the year end.
Intercompany recharges for corporate costs
UNITE Holdings plc
UNITE Finance One (Property) Ltd
UNITE Finance Ltd
UNITE Modular Solutions Ltd
LDC (Frogmore) Ltd
LDC (Portfolio One) Ltd
Amounts due from group undertakings
LDC (Holdings) plc
Unilodge Holding Ltd
Unilodge Holdings (UK) Ltd
Amounts due to group undertakings
The Company has had a number of transactions with its joint ventures, which are disclosed in notes 9 and 12.
2008
£’000
2,354
2008
£’000
130,694
99,772
12,767
-
-
10,030
253,263
(8,130)
(13,862)
(15,812)
(37,804)
2007
£’000
2,120
2007
£’000
134,400
99,772
12,767
7
3
10,030
256,979
(7,943)
(13,862)
(15,812)
(37,617)
Transactions with key management personnel
Directors’ Remuneration is disclosed in note 4.
Five Year Record
Adjusted diluted net asset value per share (pence)*
Net asset value per share (pence)
Adjusted net assets (£m)
IFRS net assets (£m)
Managed portfolio value (£m)
Gearing
- adjusted (%)
- including share of co investment funds (%)
- on balance sheet (%)
Rental income
- from wholly owned assets (£m)
- including share of co investment funds (£m)
Investment segment result (£m)
Adjusted (loss)/profit before tax (£m)
(Loss)/profit before tax (£m)
Earnings per share - adjusted (pence)
- basic (pence)
2008
2007
2006
2005
2004
325
258
406
320
1,829
131
174
180
58
78
1
(45)
(116)
(36)
(93)
410
364
510
450
1,723
106
136
121
63
82
8
(63)
(37)
(51)
(30)
379
391
526
481
1,435
78
111
85
92
98
8
(9)
71
(7)
58
317
314
447
383
1,165
162
172
193
81
86
4
3
32
3
29
282
289
373
322
1,006
197
192
228
67
67
4
(4)
17
(3)
16
*2006 and prior years have been restated to show the 46 pence per share impact of redeeming the UNITE Finance One bond.
89
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting
of The UNITE Group plc (the “Company”) will be held at
The Core, 40 St Thomas Street, Bristol BS1 6JX at 9.30
a.m. on 15 May 2009 for the purpose of considering
and, if thought fit, passing the following resolutions which,
in the case of resolutions numbered 1 to 8 (inclusive), will
be proposed as ordinary resolutions and, in the case of
resolutions numbered 9 to 11 (inclusive), will be proposed
as special resolutions.
Ordinary business
1. To receive the audited annual accounts of the
Company for the year ended 31 December 2008,
together with the Directors’ Report and Auditor’s
Report on those accounts.
2. To approve the Directors’ Remuneration Report for
the year ended 31 December 2008.
3. To re-appoint Mr P M White as a Director of the
Company.
4. To re-appoint Mr S R H Beevor as a Director of the
Company.
5. To re-appoint Mr N A Porter as a Director of the
Company.
6. To re-appoint Mr N P Hall as a Director of the
Company.
7. To re-appoint KPMG Audit Plc as auditors to hold
office from the conclusion of the meeting until
the conclusion of the next general meeting of the
Company at which accounts are laid and to authorise
the Directors to determine their remuneration.
Special business
8. THAT the Directors be generally and unconditionally
authorised, in accordance with Section 80 of the
Companies Act 1985 (the “Act”):
(a) to exercise all powers of the Company to allot
relevant securities (as defined for the purposes of
that Section) up to a maximum nominal amount
of £10,359,653; and further
(b) to allot equity securities (as defined by Section
94 of the Act) in connection with a rights issue in
favour of holders of ordinary shares in the capital
of the Company, where the equity securities
respectively attributable to the interests of such
holders are proportionate (as nearly as may be),
to the respective number of ordinary shares in the
capital of the Company held by them, up to an
aggregate nominal amount of £10,359,653
provided that this authority shall expire at the
conclusion of the next annual general meeting of the
Company after the passing of this Resolution or fifteen
months after the passing of the Resolution, whichever
shall be sooner (unless previously renewed, varied or
revoked by the Company in general meeting), save that
the Company may, before this authority expires, make
an offer of agreement which would or might require
relevant securities to be allotted after it expires and the
Directors may allot relevant securities in pursuance of
such an offer or agreement as if this authority had not
expired and provided further that this authority shall
supersede and revoke all previous authorities under
Section 80 of the Act.
9. THAT, in accordance with Section 95 of the Act,
the Directors be given power to allot for cash equity
securities (as defined for the purpose of Section 94 of
the Act) pursuant to the general authority conferred
on them by Resolution 8 above as if Section 89 (1) of
the Act did not apply to the allotment, but this power
shall be limited:
(a) to the allotment of equity securities in connection
with an offer or issue to or in favour of ordinary
shareholders on the register on a date fixed
by the Directors where the equity securities
respectively attributable to the interests of all
those shareholders are proportionate (as nearly
as practicable) to the respective numbers of
ordinary shares held by them on that date, but
the Directors may make such exclusions or
other arrangements as they consider expedient
in relation to fractional entitlements, legal or
practical problems under the laws in any territory
or the requirements of any relevant regulatory
body or stock exchange; and
(b) to the allotment (other than under (a) above)
of equity securities having a nominal value not
exceeding in aggregate £1,553,948
and this authority shall expire at the conclusion of the
next annual general meeting of the Company after
the passing of this resolution or fifteen months after
the passing of this resolution, whichever shall be
the sooner, save that the Company may, before this
authority expires, make an offer or agreement which
would or might require equity securities to be allotted
after it expires and the Directors may allot equity
securities in pursuance of such offer or agreement as
if this authority had not expired and provided further
that this authority shall supersede and revoke all
previous authorities under Section 95 of the Act.
10. THAT the draft regulations produced to the meeting
and for the purposes of identification signed by the
Chairman be and are hereby adopted by the Company
in substitution for its existing Articles of Association.
11. THAT, subject to and conditional upon the passing of
Resolution 10 above, a general meeting other than an
annual general meeting may be called upon not less
than 14 clear days’ notice.
BY ORDER OF THE BOARD
A D Reid
SECRETARY
Dated 9 March 2009
Registered office:
The Core
40 St Thomas Street
Bristol
BS1 6JX
Notes
1.
A member who is entitled to attend, speak and vote may appoint
a proxy to attend, speak and vote instead of him. A proxy need not
also be a member of the Company but must attend the AGM in order
to represent his appointor. A member may appoint more than one
proxy provided each proxy is appointed to exercise rights attached to
different shares (so a member must have more than one share to be
able to appoint more than one proxy). A form of proxy is enclosed. The
notes to the form of proxy include instructions on how to appoint the
Chairman of the AGM or another person as proxy and how to appoint
a proxy electronically or by using the CREST proxy appointment
service. To be effective the form must reach the Company’s registrar,
Computershare Investor Services PLC, The Pavilions, Bridgewater
Road, Bristol BS13 3FB so as to be received not later than 9.30 a.m.
on 13 May 2009.
2.
The following documents are available for inspection at the registered
office of the Company during the usual business hours on any
weekday (Saturday, Sunday or public holidays excluded) from the date
of this notice until the conclusion of the AGM and will also be available
for inspection at the place of the AGM from 9.15 a.m. on the day of
the AGM until its conclusion:
3.
4.
5.
6.
7.
(a)
(b)
copies of the executive directors’ service contracts with the
Company and any of its subsidiary undertakings and letters of
appointment of the non-executive directors; and
a copy of the proposed new articles of association of the Company,
and a copy of the existing articles of association marked to show
the changes being proposed in resolution 10.
Pursuant to regulation 41 of the Uncertificated Securities Regulations
2001, the Company specifies that only those persons registered in
the register of members of the Company at 9.30 a.m. on 13 May
2009 (or if the AGM is adjourned, 48 hours before the time fixed for
the adjourned AGM) shall be entitled to attend and vote at the AGM
in respect of the number of shares registered in their name at that
time. Any changes to the register of members after such time shall be
disregarded in determining the rights of any person to attend or vote at
the AGM.
Please note that communications regarding the matters set out in this
notice of Annual General Meeting will not be accepted in electronic
form other than as specified in the enclosed form of proxy.
If you are a person who has been nominated by a member to enjoy
information rights in accordance with section 146 of the Companies
Act 2006, Note 1 above does not apply to you but you may have a
right under an agreement between you and the member by whom you
were nominated to be appointed or to have someone else appointed,
as a proxy for the meeting. If you have no such right or do not wish
to exercise it, you may have a right under such an agreement to give
instructions to the member as to the exercise of voting rights.
As at 6 March 2009 (being the last business day prior to the
publication of this Notice) the Company’s issued share capital
consists of 124,315,841 ordinary shares, carrying one vote each.
Therefore, the total voting rights in the Company as at 6 March
2009 are 124,315,841.
In order to facilitate voting by corporate representatives at the
meeting, arrangements will be put in place at the meeting so that
(a) if a corporate shareholder has appointed the chairman of the
meeting as its corporate representative with instructions to vote on
a poll in accordance with the directions of all of the other corporate
representatives for that shareholder at the meeting, then on a
poll those corporate representatives will give voting directions to
the chairman and the chairman will vote (or withhold a vote) as
corporate representative in accordance with those directions; and
(b) if more than one corporate representative for the same corporate
shareholder attends the meeting but the corporate shareholder
has not appointed the chairman of the meeting as its corporate
representative, a designated corporate representative will be
nominated, from those corporate representatives who attend, who will
vote on a poll and the other corporate representatives will give voting
directions to that designated corporate representative. Corporate
shareholders are referred to the guidance issued by the Institute of
Chartered Secretaries and Administrators on proxies and corporate
representatives (www.icsa.org.uk) for further details of this procedure.
The guidance includes a sample form of representation letter if the
chairman is being appointed as described in (a) above.
90
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Appendix
Explanatory notes of principal changes to the Company’s articles of association
1. Articles which duplicate
statutory provisions
Provisions in the existing articles of association (the
“Current Articles”) which relate to provisions contained
in the Companies Act 2006 are in the main amended
to bring them into line with the Companies Act 2006.
Certain examples of such provisions include articles as
to the form of resolutions, the variation of class rights,
the requirement to keep accounting records and
provisions regarding the period of notice required to
convene general meetings. The main changes made
to reflect this approach are detailed below.
2. Variation of class rights
The Current Articles contain provisions regarding the
variation of class rights. The proceedings and specific
quorum requirements for a meeting convened to
vary class rights are contained in the Companies Act
2006. The relevant provisions have therefore been
amended in the articles proposed to be adopted at the
forthcoming AGM (the “New Articles”).
3. Convening extraordinary and
annual general meetings
The provisions in the Current Articles dealing with
the convening of general meetings and the length
of notice required to convene general meetings are
being amended to conform to new provisions in the
Companies Act 2006. In particular an extraordinary
general meeting to consider a special resolution
can be convened on 14 days’ notice (provided that,
for meeting convened after 3 August 2009, certain
requirements set out in the Companies (Shareholders’
Rights) Regulations are met) whereas previously 21
days’ notice was required.
4. Votes of members
6. Conflicts of interest
Under the Companies Act 2006 proxies are entitled to
vote on a show of hands whereas under the Current
Articles proxies are only entitled to vote on a poll.
The time limits for the appointment or termination
of a proxy appointment have been altered by the
Companies Act 2006 so that the articles cannot
provide that they should be received more than 48
hours before the meeting or in the case of a poll taken
more than 48 hours after the meeting, more than
24 hours before the time for the taking of a poll, with
weekends and bank holidays being permitted to be
excluded for this purpose. Multiple proxies may be
appointed provided that each proxy is appointed to
exercise the rights attached to a different share held
by the shareholder. Multiple corporate representatives
may be appointed. The chairman of a general meeting
no longer has a casting vote. The New Articles reflect
all of these new provisions.
5. Age of directors on
appointment
The Current Articles contain a provision which
stipulates that the Company may by ordinary resolution
require a director to retire on account of age, render
him ineligible for appointment or re-appointment or
require notice of his age to be included in the notice
of the resolution appointing or re-appointing him.
Such provisions could now fall foul of the Employment
Equality (Age) Regulations 2006 and so have been
removed from the New Articles.
The Companies Act 2006 sets out directors’ general
duties which largely codify the existing law but with
some changes. Under the Companies Act 2006, from
1 October 2008 a director must avoid a situation
where he has, or can have, a direct or indirect
interest that conflicts, or possibly may conflict with the
Company’s interests. The requirement is very broad
and could apply, for example, if a director becomes
a director of another company or a trustee of another
organisation. The Companies Act 2006 allows
directors of public companies to authorise conflicts
and potential conflicts, where appropriate, where the
articles of association contain a provision to this effect.
The Companies Act 2006 also allows the articles of
association to contain other provisions for dealing with
directors’ conflicts of interest to avoid a breach of
duty. The New Articles give the directors authority to
approve such situations and to include other provisions
to allow conflicts of interest to be dealt with in a similar
way to the current position.
There are safeguards which will apply when directors
decide whether to authorise a conflict or potential
conflict. First, only directors who have no interest in
the matter being considered will be able to take the
relevant decision, and secondly, in taking the decision
the directors must act in a way they consider, in good
faith, will be most likely to promote the Company’s
success. The directors will be able to impose limits or
conditions when giving authorisation if they think this
is appropriate.
It is also proposed that the New Articles should
contain provisions relating to confidential information,
attendance at board meetings and availability of
board papers to protect a director being in breach
of duty if a conflict of interest or potential conflict of
interest arises. These provisions will only apply where
the position giving rise to the potential conflict has
previously been authorised by the directors.
91
7. Notice of board meetings
Under the Current Articles, when a director is
abroad he is not entitled to receive notice while he is
away. This provision has been removed, as modern
communications mean that there may be no particular
obstacle to giving notice to a director who is abroad. It
has been replaced with a more general provision that
a director is treated as having waived his entitlement
to notice, unless he supplies the Company with the
information necessary to ensure that he receives
notice of a meeting before it takes place.
8. Electronic and web
communications
Provisions of the Companies Act 2006 which
came into force in January 2007 enable
companies to communicate with members by
electronic and/or website communications. The
New Articles allow communications to members
in electronic form and, in addition, they also
permit the Company to take advantage of the new
provisions relating to website communications.
Before the Company can communicate with a
member by means of website communication,
the relevant member must be asked individually
by the Company to agree that the Company may
send or supply documents or information to him
by means of a website, and the Company must
either have received a positive response or have
received no response within the period of 28 days
beginning with the date on which the request was
sent. The Company will notify the member (either
in writing, or by other permitted means) when a
relevant document or information is placed on the
website and a member can always request a hard
copy version of the document or information.
9. Directors’ indemnities and
loans to fund expenditure
The existing articles of association, which were
last amended in 2003, enable the Company to
indemnify the directors against liability in certain
limited circumstances. The Companies (Audit,
Investigations and Community Enterprise) Act 2004
(“CAICE”) amended the Companies Act 1985
to broaden the scope of permitted indemnities
which a company may grant to a director. In broad
terms, the changes introduced by CAICE enable
a company to indemnify its directors against any
liability incurred by a director to any person (other
than the Company or any associated company) in
connection with any negligence, default, breach of
duty or breach of trust in relation to the Company
(which was previously prohibited under section 310
Companies Act 1985), and to provide its directors
with funds to cover the costs incurred by a director
in defending legal proceedings against him or
her. Previously, a company was only able to fund
a director’s defence costs once final judgment in
their favour had been reached.
The Companies Act 2006 has in some areas
widened further the scope of the powers of a
company to indemnify its directors and to fund
expenditure incurred in connection with certain
actions against directors. In particular, a company
that is a trustee of an occupational pension scheme
can now indemnify a director against liability incurred
in connection with the Company’s activities as
trustee of the scheme. In addition, the exemption
afforded by CAICE allowing a company to provide
money for the purpose of funding a director’s
defence costs now expressly covers regulatory
proceedings and applies to associated companies.
As directors are increasingly being added as
defendants in legal actions against companies, and
litigation is often very lengthy and expensive, the
Board believes that the risk of directors being placed
under significant personal financial strain is increasing.
Further, the Board believes that the ability to provide
appropriate indemnities and to fund directors’ defence
costs as they are incurred, as permitted by the
Companies Act 2006, afford the directors reasonable
protection, and are important to ensure that the
Company continues to attract and retain the highest
calibre of directors.
Individual directors of the Company would still be liable
to pay damages awarded to the Company in an action
against them by the Company, and to repay their
defence costs (to the extent funded by the Company) if
their defence is unsuccessful.
10. General
Generally the opportunity has been taken to bring
clearer language into the New Articles and in some
areas to conform the language of the New Articles.
In addition statutory references have been updated
where necessary.
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UCAS
USAF / the Fund
UCAS is the central organisation that processes
applications for full time undergraduate courses at
UK universities and colleges (www.ucas.co.uk).
Uniaid
Uniaid Foundation is a charity that supports
students coping with the financial hurdles to
higher education by providing online money
management tools and practical support to
students (www.uniaid.org.uk).
SIFE
Students In Free Enterprise, is an international
organisation that mobilises university students
around the world to make a difference in their
communities while developing the skills to
become socially responsible business leaders
(www.sife.org).
UNITE letting arrangements
Direct let
Properties where short hold tenancy agreements
are made directly between the commercial
operator and the student.
Lease
Properties which are leased to universities for
a number of years and have no UNITE
management presence.
Nominations
Properties where short hold tenancy agreements
are made with students, with the university
providing a long term occupancy guarantee in
respect of a significant proportion of rooms.
Sale and lease back
Properties which have been sold to a third party
investor then leased back to the Company.
UNITE are responsible for the management of
these assets on behalf of the owner.
UNITE UK Student Accommodation Fund is
Europe’s largest fund that purely focus’ on
investment in direct let student accommodation
investment assets. The Fund is an open ended
infinite life vehicle which has unique buying
access to UNITE’s portfolio. UNITE act as Fund
Manager of the Fund, as well as owning a
significant minority stake.
UCC
UNITE Capital Cities was established in 2005 as
a joint venture between UNITE and GIC RE. It is
a closed-ended fund due to mature in 2013 and
was established by UNITE to develop and operate
student accommodation in London and Edinburgh,
markets in which UNITE’s growth was capital
constrained at that time. UCC equity is now fully
invested and all development projects have
been completed.
USV
UNITE Student Village was established in 2004
as a joint venture between UNITE and Lehman
Brothers to develop large student village schemes
of c. 1,000 bedspaces. It is a closed ended fund
with one remaining operational asset located
in Sheffield.
Blueprint
‘Blueprint’ is the business change programme
UNITE initiated at the end of 2007.
The programme has since identified £12 million
in savings across the Group’s operational
business, which will be realised during 2009.
LTV
The loan to value ratio is the amount of debt
secured on a property as a percentage of the
value of the property.
ICR
The interest cover ratio is the income generated
by a property as a multiple of the interest charge
on the debt secured on the property.
Glossary
Adjusted, fully diluted net asset
value per share
The basic NAV per share figure is recalculated
to take account of the existence of outstanding
share options and adjusted to:
• exclude the impact of deferred tax;
•
exclude the mark to market of interest
rate swaps;
include the valuation gain not recognised
on properties held at cost.
•
Adjusted gearing
Adjusted net debt (excluding mark to market of
interest rates swaps) as a percentage of
adjusted net assets.
Adjusted profit
Adjusted profit adjusts the profit for the year
calculated under International Financial Reporting
Standards to exclude:
•
•
•
•
the impact of deferred tax;
the mark to market of interest rate swaps;
valuation gains and losses on investment
properties and;
the profit or loss on disposal of investment
properties (but not trading properties).
Adjusted earnings per share
The diluted earnings per share based on
adjusted profit.
Net rental growth
The annual growth in income less costs
from a property.
Stabalising assets
Properties that have recently been developed
and are not yet generating their optimal net
operating income.
Non-core assets
Properties which do not fit with the Group’s
long term investment strategy, either because
of their location or because they are let to
universities under long term agreements
and deliver lower returns.
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Company information
Registered office
The Core
40 St Thomas Street
Bristol
BS1 6JX
Registered number
3199160
www.unite-group.co.uk
www.unite-students.com
www.livocity.co.uk
Auditors
KPMG Audit Plc
PO Box 695
8 Salisbury Square
London
EC4Y 8BB
Registrars
Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol
BS99 7NH
Financial adviser and broker
Financial PR
UBS Ltd
1 Finsbury Square
London
EC2M 2PP
Financial Dynamics
Holborn Gate
26 Southampton Buildings
London
WC2A 1PB
UNITE management
Leadership Executive
Mark Allan
Chief Executive
Joe Lister
Chief Financial Officer
John Tonkiss
Chief Operating Officer
Matthew McAdden
Managing Director, Special Projects
Shane Spiers
Group HR Director
Richard Simpson
Managing Director, Development
Mark Morgan
Operational Excellence Director
Will Garrard
Manufacturing Director
Nathan Goddard
Sales & Marketing Director
James Granger
Business Change Director
Steve Grant
Head of Fund & Asset Management
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The UK’s leading developer and
manager of student accommodation
Annual Report & Accounts 2008
NITE Parkway Gate, home to 728 students in Manchester
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The UNITE Group plc
The Core
40 St Thomas Street
Bristol BS1 6JX
Tel: 0117 302 7000
Fax: 0117 302 7400
info@unite-group.co.uk
www.unite-group.co.uk
www.unite-students.com
www.livocity.co.uk
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