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
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Delivering the best
accommodation
experience for students
Annual Report & Accounts 2009
Our business
Company Information
Our core purpose at UNITE is to
deliver the best accommodation
experience for students, with
passion and pride.
Our mission statement explained:
to deliver
– means we do what we say we will
the best
– we lead, we’re research based and we’re recognised
for our innovation
accommodation experience
– it’s the service we provide, as much as the bricks and
mortar, that creates our customers’ experience
for students
– and no-one else
with passion and pride
– the way we work, we love what we do and
we are proud to tell people who we work for
UNITE management
Leadership Executive
Mark Allan
Chief Executive
Joe Lister
Chief Financial Officer
John Tonkiss
Chief Operating Officer
James Granger
Corporate Development Director
Nathan Goddard
Business Development Director
Caroline Mallin
Communications Director
Shane Spiers
Managing Director, Property Management
Richard Simpson
Managing Director, Development
Mark Creedy
Managing Director, Fund Management
Steve Grant
Managing Director, Asset Management
Will Garrard
Managing Director, UNITE Modular Systems
Registered Office
The Core,
40 St Thomas Street,
Bristol BS1 6JX
Registered Number in England
3199160
Company Secretary
Andrew Reid
Auditors
KPMG Audit Plc
8 Salisbury Square
London EC4Y 8BB
Financial Advisers
J.P. Morgan Cazenove
20 Moorgate
London EC2R 6DA
Numis Securities
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Registrars
Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Financial PR Consultants
Financial Dynamics
Holborn Gate
26 Southampton Buildings
London WC2A 1PB
UNITE is the UK’s leading developer and
co-investing manager of purpose built
student accommodation.
Designed and produced by Radley Yeldar (London) | www.ry.com
Financial highlights
UNITE
Annual Report & Accounts 2009
Against a backdrop of challenging financial and
uncertain market conditions UNITE reports a
profitable operating business, increased financial
flexibility and balance sheet strength,
positioning the Group for growth.
Contents
2009 Highlights
Overview of UNITE
Case studies
Chairman’s statement
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Business review overview
The student accommodation market
Business strategy
Financial results
Development
Co-investing asset management
Financing
People and organisation
Looking ahead
Corporate responsibility
Risks and uncertainties
Key performance indicators
The Board of Directors
Directors’ report
Corporate governance
Statement of Directors’ responsibilities
Directors’ remuneration report
Independent Auditors’ report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
Company balance sheet
Consolidated statement of changes
in shareholders’ equity
Company statement of changes
in shareholders’ equity
Statements of cash flows
Notes to the financial statements
5 year financial record
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Notice of AGM
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Glossary
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Company information and UNITE management ibc
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Highlights
– Profit at a net portfolio contribution
level of £0.6 million
– Adjusted fully diluted NAV per share down
13% to 265 pence
– Like-for-like rental growth of 9.7% and
96.5% occupancy
– Completion of Blueprint operational change
programme delivering annualised cost savings
of £12 million
– Balanced sheet strength and flexibility
improved – adjusted net debt reduced to
£390 million and adjusted gearing reduced
to 92% as a result of proactive steps taken:
– £246 million of asset sales completed
– Joint venture created with Oasis Capital Bank
– Successful equity raise through a Placing
and Open Offer raised £82 million
– £167 million capital raise by the UNITE UK
Student Accommodation Fund (‘USAF’)
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
02
Overview of UNITE
Market opportunity
A record number of almost 500,000 new
students were accepted into university in
2009 ensuring strong demand for purpose
built student accommodation. As the
leading developer and manager of student
accommodation across the UK, UNITE has
established a unique business model designed
to create growth opportunities. With 20 years’
experience, UNITE has pioneered the UK
student accommodation sector.
UK student accommodation sources of supply
9
51
18 %
22
Houses of multiple
occupancy
University maintained halls
Parental/guardian home
Purpose built commercially
provided
Source: Department of Communities
and Local Government
UNITE strategy
1
2
Development
Management
Property
Management
3
4
Asset
Management
Fund
Management
Using our sector expertise, based on a scalable operating platform
and financial strength, UNITE’s growth strategy is based on
targeted development opportunities, proactive asset management
and working in partnership with universities to support their
changing accommodation needs.
Strategic activities
1. Development Management
2. Property Management
3. Asset Management
4. Fund Management
1
2
Development Management
Property Management
Research-led, customer-driven development
of new purpose built student accommodation
is an important part of our growth strategy.
The development business identifies, acquires,
designs and constructs schemes that best meet
the needs of students in key targeted locations.
During 2009 UNITE developed 14 properties
across the UK.
UNITE Property Management is a highly professional
and scalable national operating platform through
which UNITE provides a world class letting and
management service to its customers. The division
is responsible for securing and managing lettings
through its unique market leading online booking
system and ongoing property maintenance through
our dedicated city management teams.
Activities
– Deliver a growth strategy by developing 4,000 to 5,000 bed spaces for
Activities
– Maintain UNITE’s unique, market leading online sales and
completion between 2012 and 2014
marketing platform
– Continue UNITE’s research-led, customer-driven strategy of identifying
key brownfield sites bringing regeneration to local communities
– Provide a safe and secure environment for our customers
– Work closely in partnership with universities and other key stakeholders
– Innovate design and specification standards to ensure the best quality
to seek both development and management opportunities
of student accommodation for the Group’s customers, property
managers and investors
Key performance indicator
To build and maintain a strong and profitable development pipeline.
Key performance indicator
To manage our assets effectively.
For further information turn to page 04
For further information turn to page 05
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
UNITE portfolio
UNITE is the UK’s leading provider of student
accommodation with 38,300 bed spaces in
129 properties across 24 university towns
and cities.
UNITE delivered 2,853 new bed spaces across
14 properties in 2009 of which 1,526 bed
spaces were located in London – a region
which remains a key focus for UNITE.
Top ten
City
London
Sheffield
Liverpool
Leeds
Bristol
Manchester
Birmingham
Aberdeen
Leicester
Portsmouth
Rank
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2
3
4
5
6
7
8
9
10
Source: UNITE/HESA
Completed
beds
2009/2010
Full time
students
2007/2008
5,457 254,445
42,250
3,734
37,955
3,327
49,390
3,137
35,420
3,036
59,092
2,595
19,635
1,832
25,290
1,685
25,290
1,658
14,600
1,402
Projected
market
share
2.1%
8.8%
8.9%
6.4%
8.6%
4.4%
9.3%
6.7%
6.7%
9.6%
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Asset Management
Fund Management
Proactive asset management of UNITE’s existing
portfolio investments delivers returns to the Group by
focusing on the quality and location of its investment
and operational portfolio, refurbishing and upgrading
facilities where appropriate. This business unit is also
responsible for identifying acquisition and disposal
opportunities on behalf of UNITE and its indirect
investment vehicles.
UNITE’s Fund Management business is responsible
for overseeing the management of the Group’s
co-investment vehicles. The largest of these
vehicles is the £1 billion UNITE UK Student
Accommodation Fund, the leading fund for
indirect institutional investment in the UK student
accommodation sector.
The Funds team also manages the UNITE Capital
Cities Joint Venture with GIC Real Estate, the UNITE
Student Village Joint Venture with Lehman Brothers
and a joint venture with Oasis Capital Bank.
Activities
– Continuously review current performance and performance outlook
for all operational assets
Activities
– Maximise fund returns
– Maintain and develop the financing capacity of the vehicles under
– Deliver value adding strategies to manage those assets where further
management
opportunities are identified
– Maintain USAF as the pre-eminent fund for institutional investment
– Work collaboratively with the wider business to complete any upgrade
in the student sector
or refurbishment works
– Develop the range and scale of funds and joint ventures under
management
Key performance indicator
To manage our assets effectively including the effective buying
and selling of assets.
Key performance indicator
To manage funds/joint ventures efficiently, maximise medium-term total
returns and maintain investor support and trust.
For further information turn to page 06
For further information turn to page 07
UNITE
Annual Report & Accounts 2009
04
1
Case study:
Development Management
Our development programme is
research led, based on where and
how students want to live.
University of the Arts students
at Emily Bowes Court, N17,
one of UNITE’s new buildings
to open in 2009.
Charlton Court – riverside
living in Bath for students
at Bath Spa University.
Emily Bowes Court,
Tottenham, London
Emily Bowes Court is the first student village to be built in
London by UNITE. The £54 million development was built
on vacant industrial land in Tottenham Hale, London on
a 1.5 acre site. Opened by the Mayor of London’s Housing
Advisor, Richard Blakeway, in September 2009, it provides
687 en-suite study bedrooms for students.
The student accommodation is part of a major mixed-use
regeneration scheme known as Hale Village, linked by
footbridge to Tottenham Hale tube and only three stops to
the university precinct with easy access to Central London.
By utilising UNITE’s modular construction techniques, the team
are able to reduce build time and waste, as well as ensuring
consistently high quality standards throughout the development.
Emily Bowes Court is let to the University of the Arts through a
one year nominations agreement.
Located in a popular student area in Bath, Charlton Court
provides a range of cluster flats and studios exclusively to
first year students studying at Bath Spa University through a
nominations agreement. Opened in September 2009 by local
Liberal Democrat MP, Don Foster, the development provides
much needed professionally managed, safe, secure student
accommodation in a residential area.
Sited next to a Grade II listed building and in the conservation
area of Bath, the £22 million student accommodation scheme
required sensitive planning and design and has helped alleviate
housing pressures in the surrounding area.
UNITE
Annual Report & Accounts 2009
05
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Case study:
Property Management
We provide a professional letting
and management service
throughout all our buildings.
UNITE’s online booking
service with easy access
via the internet.
Students at home
with UNITE
UNITE Property Management delivers the letting and
management of the Group’s portfolio across the UK providing a
market leading accommodation experience for all its customers.
UNITE provides customer support from initial viewing, through
property booking, to students’ ongoing living experience.
Its unique and market-leading online sales and marketing
platform means that rooms can be viewed and booked online,
with virtual tours of UNITE’s properties available on our website.
Our accommodation is built to high specifications, with a
contemporary design, and a wide choice of style from studio
rooms through to flatshares for up to seven people. UNITE
caters for a wide range of budgets starting from £129 per week
in London and £63 per week in Aberdeen and our rental
agreements are inclusive of utility bills, contents insurance and
in-room internet access so students don’t have to budget for
unexpected bills.
All properties are well located for student needs, typically found
close to the city centre and/or university campus. Safety and
security are provided through city management teams with
24 hour support from their professional security teams and
dedicated maintenance teams. This city based operating
platform is fully supported by a national contact centre for
account queries, sales and 24 hour on call assistance.
Living with your friends
UNITE style.
UNITE continues to build and maintain its close relationships with
universities and other higher education stakeholders across the
UK, supporting their evolving student accommodation needs.
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
06
Unite House,
Bristol
Case study:
Asset Management
3
We proactively manage our assets
to continuously add value.
Refurbished in 2008 to a high
a standard, Culver House is a
popular choice with students
studying in Bristol.
Refurbished in 2009, Unite
House was sold on a sale
and lease back agreement
to M&G Secured Property
Income Fund.
As one of UNITE’s earliest additions to its portfolio, Unite House
in Bristol opened its doors for the first time in September 2000
and has been a popular choice for students during the last
10 years. Due to its location and nominations agreement with the
University of Bristol, UNITE’s Asset Management team identified
further potential to improve the offering at Unite House to its
customers while at the same time achieving renegotiated rents
and an uplift in valuation of the property.
During the summer of 2009, UNITE completed a comprehensive
refurbishment of all 395 beds at Unite House, and as a result
successfully raised rents by 26%.
The nature of Unite House’s tenancy arrangement with the
University of Bristol meant that it did not meet the required
criteria of USAF and was therefore actively marketed to
external investors.
Following the completion of its refurbishment in September,
Unite House was sold in November 2009 for a cash
consideration of £21.5 million at a net initial yield of 6.07%.
UNITE has retained a 25 year lease of the asset, based on
an annual rent starting at £1.4 million and subject to annual
increases linked to RPI, maintaining the management, brand
presence and a strong relationship with the University of Bristol.
For the 2009/10 academic year, UNITE expects the property to
generate a net operating income of £1.5 million, meaning that it
will retain a profit rent of approximately £0.1 million from
the operation of the asset for this academic year.
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
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Gibson Street,
Glasgow
Case study:
Fund Management
4
We are recognised as the leading
co-investing manager in the
student accommodation sector.
Chalmers Street is UNITE’s
latest development in
Edinburgh, offering purpose
built, professionally managed
accommodation to 251 students
studying in the area.
Chalmers Street was sold
to USAF in December as part
its recent portfolio acquisition
from UNITE.
As part of USAF’s latest portfolio
acquisition, Exeter Trust House
is conveniently located and
offers accommodation to 123
students studying in Exeter.
In December 2009, USAF announced the successful and over
subscribed conclusion of its capital raise, delivering £167 million
of new equity inclusive of UNITE’s co-investment. A substantial
proportion of these commitments were secured from investors
who have not previously invested in the Fund. Following the
equity raise the number of unitholders in the Fund is now
over 100.
A proportion of the proceeds were used to acquire a portfolio
of five assets from UNITE for £95 million at a net initial yield of
6.35%. The portfolio comprised 905 bed spaces across five
properties in London, Edinburgh, Exeter and Glasgow, further
enhancing the Fund’s portfolio of high quality, direct let student
accommodation.
The disposals to USAF enables UNITE to continue its focus on
growth through site acquisitions and the progression of future
developments, whilst also maintaining an economic interest in
the income generating properties held within USAF through its
co-investment stake in the Fund.
The aggregate size of the Fund’s portfolio following the
acquisition in December 2009 is over £1 billion with 19,500
bed spaces in 58 properties across 18 UK markets.
The Fund now has the capacity to invest £200–£250 million in
acquisitions from UNITE or other third parties. The Fund will also
complete a programme of refurbishments of certain properties
within its existing portfolio.
The ability to attract significant investment into the sector through
USAF further demonstrates the institutional appetite for a diversified
direct let portfolio of direct let student accommodation.
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
08
Chairman’s statement
Phil White
Chairman and Non-Executive Director
UNITE has secured an enviable market leading
position in the UK student accommodation
sector. In doing so, it has developed skills and
expertise that leave it well placed to succeed
in the coming years.
Introduction
In my first set of full year results as Chairman of UNITE, I am
delighted to report a robust financial performance for the business
against a backdrop of the most challenging financial conditions
I have ever experienced.
Much of 2009 was characterised by considerable uncertainty.
At UNITE we responded carefully and decisively to the conditions
we faced. We focused on moving the Group’s operating business
into profit, selling non-core assets at sensible prices, managing our
borrowings and securing growth capital from a range of sources
only when we felt the time was appropriate. In addition, we have
carefully evaluated and refined our business model in the face of
the emerging market conditions to ensure that our business is best
placed to continue to deliver growth.
Financial results
Increasing balance sheet flexibility and moving our operating
business into profit were our two key financial objectives for 2009.
Both were successfully achieved.
– The Group reported a net portfolio contribution of £0.6 million for
the year, a significant improvement over the loss of £5.4 million
recorded at this level in 2008. This improvement was mainly
attributable to strong like-for-like rental growth (+9.7%) and the
successful reduction of operating costs.
This was achieved despite the dilutive impact of the Group’s
effective ownership share of its operating portfolio income
reducing from 54% to 50% as a result of the full year effect
of assets being sold to USAF in late 2008;
– Group adjusted net debt fell from £531 million to £390 million
and adjusted gearing from 131% to 92%, as a result of
a programme of asset sales, the establishment of a joint
venture with Oasis Capital Bank (OCB) to build out our 2010
development programme and the Group’s successful Placing
and Open Offer. Importantly, the Group was not forced to raise
capital at a time when it would have been significantly dilutive
to shareholders and all asset sales and capital raising initiatives
were secured at prices which minimised any dilutive impact.
The Group’s adjusted fully diluted NAV per share fell by 13% during
the year to 265 pence (2008: 306 pence restated for the impact of
the Placing and Open Offer in October), predominantly as a result
of rising yields causing a decline in the valuation of the Group’s
investment and development portfolios in spite of the strong rental
growth secured.
Investment yields for direct let student accommodation, which
accounts for 88% of the Group’s investment portfolio, have yet
to show the extent of compression evident across the broader
commercial property sector. As a result of this, and the fact that the
majority of rental growth tends to be booked in the first half of each
year, the Group’s net asset value was broadly flat in the second half
of 2009 save for two one-off items, each of which has been
previously disclosed to shareholders:
Exeter Trust House,
Exeter
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UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
– £10 million (6pps) of swap break costs incurred following the sale
of a portfolio of assets to USAF in December and the repayment
of associated senior debt. Following this, the Group’s average
cost of investment debt reduced to 5.6%.
– £4 million (3pps) of costs expensed in the second half relating
to the final element of the ‘Blueprint’ restructuring and the cost
of overcapacity at UMS, our modular manufacturing facility.
After taking these items into account, adjusted diluted net asset
value declined by 11 pence per share from the restated position
at 30 June 2009 of 276 pence per share.
The student accommodation market
Overview
The student accommodation market demonstrated remarkable
resilience throughout 2009, despite the wider challenges faced by
the UK economy. Following record applications, full-time student
numbers increased by approximately 50,000 to 1.55 million whilst
the net new supply of purpose built bed spaces was restricted to
approximately 9,000 (source: King Sturge), the demand-supply
gap in purpose built student accommodation is widening.
These fundamentals contributed to another strong rental growth
performance across UNITE’s portfolio (+9.7%) and helped offset
yield expansion of 50bps over the year.
The investment market
In common with all parts of the UK commercial property sector,
the value of student accommodation assets fell during the first half
of 2009. However, the fall in values was far less marked than in
other sectors as strong rental growth helped offset the impact of
rising yields. As a result, between January and June 2009, UNITE’s
investment portfolio fell in value by 2%, compared to a decline in
general commercial property values of 13%, as measured by IPD.
In the broader commercial property sector, asset values showed
clear signs of stabilisation in the third quarter before recovering
strongly in the fourth quarter, driven by sharp compression
in yields rather than rental growth. In the student sector, similar
characteristics were evident for assets with long term lease
agreements in place, where revenue risk is effectively underwritten
by the university. Whilst the Group’s focus on direct let assets has
allowed it to deliver annual rental growth, the recovery in values has
so far been less pronounced in direct let student accommodation,
with the result that UNITE’s portfolio value grew less strongly than
the broader property market in the second half of 2009, with the
average NOI yield moving in only 10bps to 6.7% from 6.8% at
30 June. We consider this an undemanding valuation, particularly
as the yield shift was mostly attributable to an increased London
weighting in the investment portfolio.
It is important to note that investor demand for diversified exposure
to well managed direct let assets remains strong, as evidenced by
USAF’s successful £167 million capital raise in December. In 2010,
with its significant investment capacity, USAF is likely to be one of
very few large scale purchasers of purpose built direct let student
accommodation assets. Much of the historic investment in the
student accommodation sector has been funded with high levels
of debt. We expect the lack of available high leverage today to
restrict investment activity in the near term and possibly lead to
buying opportunities for USAF and/or UNITE later in 2010.
We are keen to see how this unfolds before we form a firmer
view on investment yields.
The occupational market
UK student numbers continued to grow in 2009, driven by strong
growth in accepted applications from both UK and international
students, up 5% and 10% respectively. This provides a solid
background for sector fundamentals although regional variations
are continuing to emerge and a good understanding of these is
critical to ongoing success. UNITE achieved 96.5% occupancy for
the 2009/10 academic year, with like-for-like rental growth of 9.7%.
As at the end of February 2010, UNITE had reservations in place
for the 2010/11 academic year across 59% of its portfolio,
compared to 63% at the same time in 2009. Part of this lower
reservations level is attributable to a higher direct let weighting
in the portfolio (88% vs 85% in 2008) but we are also seeing
evidence of consumers delaying buying decisions. However, with
the significant demand-supply imbalance still prevalent in student
accommodation and UNITE’s proven sales and marketing
capability, we believe that this will reverse substantially in the
coming months.
Looking forward there are a number of planned or potential
changes likely to have an impact on the future occupational market.
These relate mainly to university and student funding. In the case of
university funding, cuts amounting to £450 million have already been
announced and more may follow. On balance, in light of the Group’s
strong reputation, specialist expertise and financial strength, we see
this as presenting a new opportunity as universities increasingly seek
ways to release capital from their estates or provide ‘non-core’
services, such as accommodation, more efficiently, by seeking a
solid and experienced financial and operational partner.
The future of student funding is the subject of the Browne review,
which is scheduled to report later in 2010. Many commentators
expect this to lead to a further rise in tuition fees. A rise in tuition
fees, were it to occur, may have some impact on domestic
university applications. However, with applications currently well
in excess of available places and the continued high demand from
international students to study in the UK, we consider it unlikely
that overall student numbers will fall in the near term. As a result,
the demand-supply imbalance for purpose built accommodation
is likely to remain significant.
9.7%
like-for-like rental growth
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
10
Chairman’s statement continued
Our strategy
UNITE has secured an enviable market leading position in the UK
student accommodation sector. In doing so, it has developed skills
and expertise that leave it well placed to succeed in the coming
years and extend its market-leading credentials:
locations outside London where UNITE has an existing
operational presence and we intend to pursue these as part of
a balanced development strategy. Our plans remain to develop
4,000 to 5,000 new bed spaces for delivery and occupation
between 2012 and 2014.
– In-depth knowledge of the sector on a national and
local level, informed by detailed research, which helps it
to focus investment on locations that display the most
attractive fundamentals;
– A professional and scalable operating platform from which it
can deliver a consistent level of customer service and derive
economies of scale as its portfolio of properties grows;
– A strong financial foundation, based upon a diverse range of
capital sources, which has enabled the Group to grow without
excessive reliance on any one source of capital and to have
navigated the turbulent financial market conditions of the past
two years;
– The potential to lock in higher returns through its ‘developer
and co-investing manager’ business model. USAF provides
its investors with access to a highly diversified, professionally
managed portfolio in a resilient sector and provides UNITE with
a dedicated, well funded purchaser of its completed and let
development assets, and an ongoing management fee stream.
Looking forward, we have determined that the significantly different
market environment in which we are now operating requires a
further evolution of our strategy and business model. Development
activity, traditionally our primary source of growth, will continue to
provide attractive opportunities but we also recognise there is the
potential to grow our business in other ways, particularly as our
operating platform is more scalable than our balance sheet.
We have identified four drivers of growth in the medium term:
– Targeted development activity
Following our successful Placing and Open Offer in
October 2009, we have made solid progress in identifying new
development sites in London, securing contractual or exclusive
positions on three sites that we expect to deliver approximately
900 bed spaces for occupation in 2012 and 2013, in line with
our target returns. The market for good development sites in
London has proven to be extremely competitive and our strategy
has been, and will remain, to pursue off-market transactions
and avoid competitive bidding situations in order to protect
shareholder returns. Additionally opportunities which we believe
offer good value are beginning to emerge in a small number of
– Proactive asset management of existing student
accommodation investments
We estimate that the wider student accommodation sector
is likely to deliver rental growth in the region of 2% to 3% per
annum in the medium term. By focusing carefully on the quality
and location of its investment and operational portfolio,
refurbishing and upgrading selected facilities profitably and
further developing its market-leading on-line sales and marketing
platform, the Group is well placed to outperform this sector
benchmark significantly. We believe annual rental growth of
3% to 5% to be achievable.
– Acquisition and repositioning of existing student
accommodation assets
Following its successful £167 million capital raise in December,
USAF now has sufficient investment capacity to consider the
acquisition of non-UNITE properties. Such acquisitions will
be restricted to assets where UNITE is able to add value by
applying its operating platform and expertise and may include
assets where existing owners are forced to consider disposal
as a result of unresolved financing concerns. Initially in 2010
the Group is seeking to acquire up to £100 million of such
assets through USAF. UNITE will benefit from these acquisitions
through its significant minority stake in USAF and increased
management fees.
– Working in partnership with universities to develop, upgrade and
manage their on-campus accommodation
At present we are aware of approximately 20,000 bed spaces
where universities are considering outsourcing and we expect
this number to rise further during 2010 as funding cuts prompt
alternative strategies. UNITE would source the majority of capital
for such opportunities from third parties, co-investing a smaller
amount itself and acting and receiving fees as property and
asset manager for the investing entity. With our proven track
record in raising third party capital into the sector and
our scalable operating platform, we are ideally placed to provide
valuable solutions to universities in this area.
We believe that the above multi-tiered strategy will allow the Group
to increase both profitability and net asset value in a balanced way
in the coming years.
£12m
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to see significant changes in the ways universities approach their
accommodation requirements, the demands of students as
consumers and the nature of competition in the sector. I am
confident that our strategy anticipates and understands these
changes and, as a result, we are well placed to succeed.
We have four key priorities for 2010, closely aligned to our strategy:
– To deliver solid rental growth and occupancy across our portfolio
for the 2010/11 academic year, through the continued
application of our market leading on-line platform and proactive
asset management and, as a result, grow profits. With demand/
supply dynamics still favourable and our unrivalled sector
expertise, we remain confident of securing annual rental growth
in the region of 3% to 5%;
– To secure a development programme for delivery and
occupation between 2012 and 2014, with a strong focus
on London. We currently have three sites secured which
we expect to deliver approximately 900 beds in London for 2012
or 2013 occupation. We aim to have 4,000 to 5,000 bed spaces
of development secured by March 2011, of which the significant
majority are expected to be in London. Development profits from
this activity in 2010 are likely to be limited, taking into account the
lead time required to secure planning consents. We would
expect development profits to accrue from 2011 onwards;
– To acquire, through USAF, high quality existing student
accommodation investments that the Group can then reposition
and seek to add value. We expect USAF to acquire up to
£100 million of such assets during 2010;
– To pursue a small number of university partnership opportunities,
provided that the potential for the Group to add value and secure
sustainable profits is clear and properly aligned with our strategy.
With our strategy in place, I believe 2010 will see the Group further
establish the foundations for long term profitable growth.
Dividend
In light of market conditions and the Group’s decision to invest in
development opportunities, we are not proposing a dividend for
the year. We will consider re-instating the dividend as soon as the
business is generating a meaningful level of profits such that any
dividend would be properly covered.
People and organisation
Over the past two years we have pursued and recently
completed a large scale programme of business change. We have
re-engineered our core business processes, invested in technology
to support these, up-skilled many of our customer-facing roles and
invested heavily in training and development to sustain and build
on these changes. As a result, we now have a highly professional
and scalable national operating platform; something that I am
confident is unique in our sector and a significant source of
competitive advantage.
The financial impact of these changes is impressive, with £12 million
of annual operating cost savings now secured. However, it is our
targeted improvement in customer service quality that will ultimately
be the most important outcome from this initiative and hold most
resonance for students, universities and investors. We expect
these results to become evident during 2010 and 2011 as our
improvements are embedded.
The scale of change was considerable, with nearly 350 roles being
materially affected and over 1,500 training days being provided
through our dedicated facility in support of the new organisation.
I am immensely proud of the way this change was planned and
managed but, most importantly, embraced across the business.
My thanks to our teams for their continued dedication
and commitment.
We also experienced change at Board level in 2009. After ten years
of dedicated service and counsel, Geoffrey Maddrell retired as
Chairman in May and, at the same time, Nick Porter (who founded
the Group in 1991) stepped down from his role as Non-Executive
Deputy Chairman. I am grateful to both Geoffrey and Nick for their
enormous contribution to UNITE and for their support to me as
incoming Chairman.
Outlook
Following its actions in response to extremely challenging market
conditions, UNITE has emerged from 2009 as a stronger business
with an increased competitive advantage in its specialist sector.
The environment in which UNITE will be operating in the future is
fundamentally different to that of the past. As a result we expect
Chalmers Street,
Edinburgh
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
12
Business review
The market for student accommodation
has continued to demonstrate strong
fundamentals with growing demand
and limited new supply throughout 2009.
Overview
During 2009 there was significant uncertainty in the economy and
both the property and higher education sectors, all of which had an
impact on UNITE. The business responded carefully and decisively
to these challenges at the beginning of the year, with the result that,
in the latter part of the year, the Group was able to position itself to
take advantage of the improved market sentiment and subsequent
capital flows.
UNITE significantly strengthened its financial position in 2009
through a number of “self-help” measures. It continued to focus on
its operational performance to deliver a profit for the year at the net
portfolio contribution level, selling non-core assets at valuations
ahead of its targets, securing a significant joint venture with a new
partner, Oasis Capital Bank, and renegotiating maturities for a small
number of debt facilities. These actions strengthened the Group’s
financial position and consequently enabled it to raise £82 million
from shareholders, at a small discount to net asset value, to fund
its future development business. In December, the Group
successfully raised £167 million of capital into the UNITE UK
Student Accommodation Fund (“USAF”), providing the Fund with
further capacity to acquire assets from UNITE and explore other
acquisition opportunities.
Chief Executive,
Mark Allan (left),
pictured with Joe Lister,
Chief Financial Officer
UNITE
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Annual Report & Accounts 2009
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With the exception of the ongoing supply shortfall, the outlook,
however, is less clear. Whilst the growth in the number of
applications is continuing, with applications for the 2010/11
academic year up 23% according to UCAS figures released
on 8 February 2010, there is clear emerging pressure on Higher
Education budgets. The Higher Education Funding Council
announced on 1 February 2010 that university funding would
be cut for the 2010/11 academic year by £450 million. Of this,
£215 million relates to teaching budgets representing a reduction
of 1.6% in real terms which we believe is likely to lead to a
reduction in the number of UK students being accepted onto
courses in 2010. However, a CBRE report into university funding,
issued in February 2010, has estimated that a substantial part of
any fall is likely to be offset by growth in the numbers of overseas
and post-graduate students and that the net fall in intake will be
only between 3,000 and 4,000. The CBRE report also suggests
that because the reduction in student numbers will be thinly spread
across the UK and that there will be an increased trend for more
affluent students to attend university, there should only be a limited
impact on student accommodation in the 2010/11 academic year.
Orient House,
Fulham, London
Looking forward, it is evident that the environment in which UNITE
operates has changed considerably and, indeed, is still changing.
Conditions that have existed for much of the past ten years, such
as the availability of cheap and abundant debt, rapid growth in
student numbers and university funding and consistent economic
growth can no longer be assumed for the future. However, this
change in environment will also present new opportunities for a
strong financial and operating partner such as UNITE and, using
its sector expertise, the Group is refining its business strategy to
ensure that it is best positioned to exploit these opportunities.
Having raised capital at a sensible price and reduced gearing to
conservative levels, and unlike the majority of our peers in the
student sector, UNITE and USAF are both now in a good position
to invest in sector opportunities; UNITE specifically by acquiring
development sites and USAF by securing direct let investment
assets from parties other than UNITE. We believe that good
acquisition opportunities exist as yields for direct let assets (an
average of 6.7% for the UNITE portfolio at 31 December 2009)
have not yet contracted to the same degree as yields in the
broader commercial real estate sector or for student
accommodation assets subject to long term leasing agreements
with universities. However, for good quality assets that are
well-managed, direct let rents continue to offer good growth
prospects. This is clearly understood by investors, as
demonstrated by the strong take-up for the USAF equity
raise in December.
These decisive steps leave UNITE well positioned to take
advantage of the opportunities that are emerging from this
changing landscape.
The student accommodation market
Despite the dramatic deterioration in economic conditions and the
financial markets in 2008 and the first half of 2009, the market for
student accommodation has continued to demonstrate strong
fundamentals with growing demand and limited new supply
throughout 2009.
There was a further year of growth in the number of students
attending university in 2009 with full time student numbers
increasing by 50,000 to 1.55 million. By contrast, the new supply
of beds delivered by corporate providers in the year was
approximately 9,000 according to King Sturge thereby adding to
the strong demand-supply imbalance prevalent in the UK market.
50,000
Additional university students
UNITE
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
14
Business review continued
The Browne Review of Higher Education funding and Student
Finance, commissioned by Lord Mandelson, is also due to report
later in 2010. There is a reasonable expectation that this could lead
to an increase in the cap on tuition fees currently set at £3,225 per
annum. However, any impact will be contingent on the result of the
election later in 2010.
It is the Company’s strong belief that, although the Higher
Education budgetary pressures raise inevitable uncertainty about
student numbers, this shift in funding patterns will actually create
new opportunities for UNITE. Regional variances will begin to
emerge and UNITE’s research-led approach, in-depth market
knowledge and sector leading position will ensure it will be well
placed to take advantage of these opportunities. UNITE will also
look to work closely in partnership with certain universities who are
looking for innovative ways to fund and manage their existing and
ongoing accommodation requirements in order to reduce costs
and who will be attracted by UNITE’s financial strength and
operational reputation – especially compared to the majority
of its peers.
Alongside the changing nature of the demand for student
accommodation, there is an ongoing shift in the supply landscape.
Whilst there is less activity from traditional competitors, the relative
outperformance of the sector over the past few years has resulted
in more capital targeting the sector. This is being seen most
evidently through increased demand for investment properties
subject to long term leases and for development sites in London
that have planning permission in place.
By contrast a number of our traditional competitors are managing
high levels of debt and gearing which has led to lower levels of
investment activity from these parties. We will continue to monitor
the position of these highly leveraged competitors closely in order
to establish whether any investment opportunities might emerge.
Business strategy
UNITE is the UK’s leading developer and co-investing manager of
purpose built student accommodation, having developed and now
operating a portfolio of approximately 38,300 purpose built bed
spaces across the UK. From a financial perspective, the Group’s
objectives are twofold:
– To increase, over time, the value of its student accommodation
related investments. These take the form of properties owned
outright by the Group and stakes owned by the Group in various
joint ventures and funds which themselves own student
accommodation properties operated by the Group. We seek to
grow value through proactive asset management, increasing the
annual rent of completed investment properties, and through the
targeted development of new properties. The key measure of
value of our investments is net asset value (NAV) per share.
– To profit from the management of the Group’s operational
portfolio. Returns take the form of rent receivable from wholly-
owned properties less interest payable on associated
borrowings; dividends receivable from the Group’s various
stakes in funds and joint ventures and management fees
receivable from third party investors in these funds and joint
ventures. These sources of income are required to cover our
central overhead costs and we measure profitability in the form
of net portfolio contribution.
Historically, the Group’s business model has been to develop new
purpose built accommodation in carefully selected locations and
let the property directly to students. Thereafter, it has sold the
completed and let assets to funds or joint ventures managed
by the Group and in which it has a significant minority stake.
The Group has then reinvested a proportion of the proceeds into
new development activity and continued to provide management
services across the entire operational portfolio for the long term.
We refer to this as the Group’s ‘developer and co-investing
manager’ business model.
Looking forward, this will continue to form a significant proportion
of the Group’s growth strategy. However, as the sector matures,
we believe that the level of new development opportunities offering
sufficient shareholder returns may start to reduce. In addition, we
believe that the dramatic change in the economic environment
affords us the opportunity to grow our business in other ways that
will generate strong recurring income.
Taking the above into account we have identified four drivers of
growth in the medium term:
1. Targeted development of new purpose built student
accommodation
In October 2009 the Group raised £82 million of equity from its
shareholders to pursue a London focused development strategy.
We are committed to achieving strong returns from our
development activities and believe that, in London, this is best
achieved through pursuing “off-market” transactions rather than
competitive bidding situations, where competition is currently very
high and pricing levels above what the Group is prepared to pay.
The Group is making solid progress in its identification of
appropriate London sites at present. However, having given careful
consideration to prospective returns, we also believe that
opportunities are beginning to emerge in a small number of
carefully selected locations outside London where we already have
an existing presence and infrastructure and where a demand-
supply imbalance remains.
We plan to develop between 4,000 and 5,000 new bed spaces for
delivery and occupation between 2012 and 2014.
£0.6m
Net portfolio contribution
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
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2. Proactive asset management of existing student
accommodation investments
Taking into account anticipated demographic changes over the
next few years, we believe that average rental growth in the UK
student accommodation sector generally will be in the region of
2% to 3% per annum in the medium term.
However, by focusing carefully on the quality and location of its
investment and operational portfolio, by refurbishing and upgrading
selected facilities and by further developing its market-leading
on-line sales and marketing platform, the Group will be well placed
to outperform this sector benchmark. We believe annual rental
growth of between 3% and 5% to be achievable across the
Group’s portfolio.
3. Acquisition and repositioning of existing student
accommodation assets
The Group has a clear track record of raising third party capital
into the student accommodation sector, most notably through
the establishment and evolution of USAF. As the student
accommodation sector matures across the UK, the Group will
seek to acquire operational assets from third parties; predominantly
through USAF, where it believes an opportunity exists to add
value through the application of its proven property and asset
management capabilities. Acquisition opportunities may also arise
as a result of the high levels of debt secured against assets owned
and operated by some of our competitors and which might
therefore be classified as “distressed”.
The Group will benefit financially through its stake in the acquiring
entity (such as USAF) and through fees received subsequently as
property and asset manager. Initially in 2010, the Group is seeking
to acquire up to £100 million of such property, using existing
investment capacity within USAF.
4. Working in partnership with universities to develop, upgrade and
manage their on-campus accommodation
UK universities are facing the prospect of further funding cuts over
the next few years as the Government seeks to address its
significant borrowing through reductions in public sector spending.
It is becoming clear that universities are increasingly seeking ways
to generate capital from their estates and to provide “non-core”
services, such as accommodation, in a more efficient manner.
At present, we believe that universities across the UK are actively
considering the outsourcing of a combined 20,000 bed spaces
and we expect this number to rise in the future.
With its proven track record in raising third party capital into the
student accommodation sector and its professional and scalable
operating platform, the Group is ideally placed to be able to provide
universities with a valuable solution in this regard. The Group itself
would benefit financially from management fees receivable as well
as receiving an appropriate return on any of its own capital that it
chooses to co-invest into such opportunities.
The scale of opportunity in this area, in terms of bed spaces,
could be significantly larger than the Group’s ongoing
development programme.
Financial results
The Group’s financial performance, in common with the market
generally, has been affected by the difficult market conditions
experienced during the year. However, as a result of the strong
sales and rental growth performance and the successful
conclusion of the Blueprint programme (to re-engineer core
processes, reduce operating costs and improve service quality),
UNITE has delivered a profit at the net portfolio contribution level.
These initiatives have also been an important factor in partially
offsetting the impact of outward yield movements on net asset
value.
Despite the resilience of the student accommodation market
and the Group’s strong operational performance, UNITE was
not immune to the severe deterioration in valuations experienced
across the commercial property market. In recognition of this and
the impact of the current economic downturn, the Company acted
quickly to accelerate or initiate a number of important measures
to strengthen its financial position. In 2008, UNITE scaled back
its development activity substantially and in 2009, it delivered
£246 million of asset sales, including the assets sold to the joint
venture it created with OCB, and secured £12 million of annualised
operational cost savings.
Together these factors ensured UNITE was ultimately well placed
to be able to raise capital through its Placing and Open Offer in
October 2009. The issue was priced at a small discount to net
asset value, thereby minimising the dilutive impact to its
shareholders, and was sized at £82 million to allow the business to
capitalise on development opportunities, predominantly in London,
over the next two to three years. The continuing institutional
investor appetite for the sector was further demonstrated in
December, when USAF raised £167 million of new equity, thereby
providing UNITE with further take-out capacity for its development
programme.
£246 m
Asset sales
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
16
Business review continued
Income statement
The Group uses a net portfolio contribution profit measure to
assess its operational business performance and this improved
to £0.6 million for 2009 compared to a loss of £5.4 million in 2008.
This measure has become increasingly important to the Group as it
has focused on delivering a profit from this segment of its business.
This follows a number of years when its performance was affected
by the impact of selling significant volumes of assets, and thereby
reducing its rental income streams, in order to realise profits for the
development segment of its business and generate capital to fund
further growth.
The strong sales and rental growth performance in 2009, together
with new openings, underpinned the increase in total income
from its managed portfolio to £164.3 million, an increase of 14%
from 2008. In addition, the Group also generated £5.9 million
from management fees as assets under management in joint
ventures increased to £1,432 million as at 31 December 2009
from £1,345 million as at 31 December 2008. The Group’s rental
income was also affected by the dilution of UNITE’s share of
income from its total portfolio to 50% in 2009 from 54% in
2008 as a result of the £171 million asset disposal to USAF in
December 2008.
Total income from managed portfolio
UNITE’s share of rental income
UNITE share of total income
UNITE’s share of operating costs
Net operating income
NOI margin
Management fee income
Financing costs*
Operational overheads
Investment segment result
Corporate costs and share of joint
venture overheads
Net portfolio contribution
2009
2008
£m
£m
164.3 143.8
78.2
54%
(26.2)
52.0
66%
4.9
(42.3)
(13.7)
0.9
81.9
50%
(24.7)
57.2
70%
5.9
(43.0)
(13.9)
6.2
(5.6)
0.6
(6.3)
(5.4)
* Includes loan interest, interest rate swap payments, finance income and operating lease rentals
The Group’s Blueprint programme was completed in 2009.
The programme has delivered annualised cost savings of
£12 million, of which £10 million arose in 2009. Of these savings,
£5 million have been recognised in the income statement.
These savings have offset an increase in the proportion of the
Group’s overhead costs being expensed through the income
statement as the level of development activity (and therefore
overhead capitalisation into projects) has declined. The cost
savings were an important component behind the improvement
in the Group’s margin from 66% in 2008 to 70% in 2009.
The Group’s gross financing costs (before interest capitalised)
have reduced to £54.4 million from £65.2 million as a result of
both the quantum of debt and the average interest rate during
2009. The amount of interest capitalised into development projects
reduced to £10.9 million for 2009 (2008: £20.4 million).
The Group reported an adjusted loss for the period of £28.7 million
(2008: £44.8 million). The components of this result are outlined in
the following table:
Net portfolio contribution
Development segment
Restructuring costs
Swap and loan break costs
Other
Provision against Landsbanki cash deposit
Adjusted loss
2009
£m
0.6
(16.8)
(3.0)
(9.6)
0.1
–
(28.7)
2008
£m
(5.4)
(27.5)
(4.8)
(0.6)
(0.4)
(6.1)
(44.8)
The principal components of the Development segment
performance relate to the write-down in value of development
property and land as a result of movements of yields during the
year and the loss incurred by UMS as a result of its surplus
capacity. These amounts were offset by development
management fees from the OCB Joint Venture and profits on
the sale of certain development assets.
As indicated in the Interim Statement for the six months to 30 June
2009, the conclusion of the Blueprint programme resulted in
restructuring costs related to the implementation of changes to our
customer-facing team structures. These amounted to £3 million in
the year.
Following the sale of properties to USAF in December 2009, UNITE
took the decision to pay down related swaps. This lead to a one-off
£9.6 million charge, but has reduced the Group’s average cost of
investment debt from 6.2% to 5.6%.
On an IFRS basis, the Group reported a loss after tax of
£34.5 million (2008: £116.3 million).
14%
Increase in income from
managed portfolio
UNITE
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
17
– A valuation reduction of 26 pence per share as a result of the
downward revaluation or loss on disposal of development
properties and land. The majority of this amount, 24 pence,
was recognised in the first half of 2009;
– The cancellation of swaps reduced NAV by 6 pence per share;
– Restructuring costs associated with the Blueprint programme
and the loss incurred by UMS as a result of over capacity
reduced NAV by 3 pence per share;
– The dilutive impact of the Placing and Open Offer reduced NAV
per share by 10 pence.
NAV Bridge (pence per share)
58
(71)
325
(26)
450
400
350
300
250
200
286 (10)
276
1
3
1
(3)
(6)
(2)
(1)
(4)
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O th er E arnin gs
H 1 R e ntal G ro w th
S N et L oss
3 0 Ju n 0 9 N A V
D evelo p m e nt
w a p Break C osts
R estru cturin g C osts
H 1 W rite d o w ns/oth er
Placin g Im p act
H 1 Yield
H 2 R e ntal G ro w th
3 1 D ec 0 9 N A V
3 1 D ec 0 8 N A V
H 2 Yield
Profor m a H 1 N A V
L oss o n Dis p osal
S
U
M
UNITE has proactively managed and consequently strengthened
its balance sheet in 2009 such that it is now in a position to grow
its business. The Group has reduced adjusted gearing from 131%
to 92%, reduced adjusted net debt (adjusted to add back mark to
market valuation) from £531 million as at 31 December 2008 to
£390 million and dramatically improved covenant headroom across
the key measures of loan to value, interest cover and minimum
net worth.
The operating and investment portfolio
For the 2009/10 academic year, UNITE is operating 38,300 bed
spaces across 129 properties. The Group’s interest in these assets
ranges from wholly owned, part-ownership through USAF, UCC or
USV or as manager of properties held under long leaseholds.
Balance sheet
The dramatic falls in commercial property values in 2008 continued
into the first half of 2009, with the IPD Index showing that UK
commercial property values fell by an average of 13.2% in the six
months to June 2009. As a result of UNITE’s strong reservations
and rental growth performance in the first half of 2009, the value of
the Group’s investments fell by a much smaller amount, an average
of 2% over the same period.
In the second half of the year, this trend reversed with the IPD index
showing that values increased by 8.7% as a result of yield
compression, rather than rental growth. In the same period the
value of UNITE’s investments increased by 1% taking the overall
reduction in values over the 12 month period to £14 million,
representing a 1% fall over the year.
The average yield of UNITE’s portfolio moved from 6.8% at 30 June
2009 to 6.7% at 31 December 2009, although approximately half of
this movement reflects the impact of the greater London weighting
of the investment portfolio following the completion of the 2009
development programme. As the value of UNITE’s property did not
fall as rapidly as in the broader property sector, so the recovery in
values was also less marked. The second half NAV performance
was also affected by the lower levels of occupancy in London as a
result of stabilisation which meant that more conservative rents and
occupancy assumptions were used to derive valuations. In our
experience the impact of this should unwind as the assets stabilise.
Reported net asset value attributable to UNITE shareholders
was £366 million at 31 December 2009 (31 December 2008:
£320 million). The Group’s adjusted net asset value was £423
million or 265 pence per share on a fully diluted basis. This
compares to 325 pence per share reported at 31 December 2008
and 286 pence per share at 30 June 2009. Adjusting for the
dilutive impact of the Placing and Open Offer, the adjusted
net asset value at 31 December 2008 and 30 June 2009 on
a restated basis was 306 pence per share and 276 pence per
share respectively.
As set out in the graph below, the main factors behind the
reduction in adjusted net assets per share over the year were:
– A fall of 9 pence per share due to the revaluation of
investment properties;
USAF*
UCC*
USV*
Wholly owned
Leased
Total
UNITE %
£94m
573
£618m
12,962
£221m
5,129
£70m
798
London
Value
Beds
Major provincial
Value
Beds
Other provincial
Value
Beds
Varsity
Value
Beds
Total at 31 December 2009
Value
Beds
UNITE investment
£1,003m
19,462
16%
£329m
2,433
–
–
–
–
£41m
437
£370m
2,870
30%
–
–
£59m
1,383
–
–
–
–
£59m
1,383
51%
£245m
2,191
£225m
4,433
£121m
2,981
£34m
545
£625m
10,150
100%
–
260
–
2,036
–
1,785
–
316
–
4,397
£668m
5,457
£902m
20,814
£342m
9,895
£145m
2,096
£2,057m
38,262
£358m
39%
£356m
38%
£157m
17%
£58m
6%
£929m
100%
* The value of properties represents the gross value; UNITE share is shown in the right hand column
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
18
Business review continued
The Group delivered like-for-like rental growth of 9.7% and 96.5%
occupancy across the operating and investment portfolio for the
2009/10 academic year compared to 9.5% rental growth and 99%
occupancy in 2008/09. The sales growth performance over the
past two years has been exceptional, driven by the demand-supply
imbalance and the professional focus of the Group’s sales and
marketing activities. Given the pressures on Higher Education
funding, a more normalised level of rental growth of approximately
3–5% is anticipated over the next few years although this should
still deliver outperformance in comparison to the student
accommodation sector generally.
The overall level of occupancy across the portfolio has been
affected by the impact of stabilisation in London. UNITE opened
1,526 new beds in London during 2009, a 39% increase in the
number of beds under management in the city within a single year,
along with a further 1,829 new beds being brought to market by
competitors. The impact of stabilisation was more significant than
we anticipated, but is in line with our previous experiences in other
cities where the portfolio has increased significantly in size within a
single year. We would expect new assets to stabilise, in terms of
occupancy and rent levels, within one to two years of opening.
Partially in response to the increased void rate caused by
stabilisation, UNITE has successfully developed its approach
to selling beds to students and universities in London on a
semester basis which will provide additional revenue in the
stabilising properties.
As at the end of February 2010, reservations had been received for
59% of the portfolio compared to 63% a year earlier. As set out in
the Chairman’s statement, there is evidence of consumers delaying
buying decisions, which will always be more noticeable for the
direct let market at this stage in the letting cycle.
However, with the significant demand-supply imbalance still
prevalent in student accommodation and our proven sales and
marketing expertise, we expect this to reverse substantially in the
coming months.
USAF
UCC
USV
Wholly owned/OCB
Leased
Total
Like-for-like
% Reserved % Reserved rental growth
09/10
9.9%
4.4%
9.9%
15.5%
5.3%
9.7%
10/11 year 09/10 year
58%
48%
54%
65%
98%
63%
56%
41%
37%
54%
99%
59%
Beds
19,462
2,870
1,383
11,269
4,397
39,381
Operating costs and overhead
During 2009 the Group completed its Blueprint change
programme, which has been running since late 2007. The
programme will deliver £12 million of annualised cash savings
of which £10 million has been recognised in 2009. Of these
savings, £5 million will be reflected in the Group’s income
statement. These savings have offset an increase in the proportion
of the Group’s overhead costs being expensed through the income
statement as the level of development expenditure (and therefore
central overhead capitalised into development projects costs)
has reduced.
The programme resulted in restructuring costs of £3 million
being incurred in 2009. The Group does not expect any further
exceptional restructuring costs to be incurred in 2010.
Investment portfolio valuation
The valuation of the Group’s investment properties as at
31 December 2009, including its share of gross assets held
in USAF and joint ventures was £929 million compared to
£796 million at 31 December 2008. Valuation yields expanded
significantly over the first six months of 2009, from an average
of 6.2% across UNITE’s assets at 31 December 2008 to 6.8%
at 30 June 2009, thereby causing asset values to fall. Whilst not as
marked as in other segments of the commercial real estate sector,
yields began to stabilise and then contract over the second half of
2009, taking the average yield to 6.7% at 31 December 2009.
The rental growth performance was an important factor in partially
offsetting the outward movement of yields over the year, leading
to relative outperformance against other types of real estate.
Over the full year, UNITE’s portfolio fell in value by an average of
1%, compared to a fall for the broader sector of 5.6%, as
measured by IPD.
3–5%
Anticipated rental growth
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During 2009, UNITE sold a total of £150 million of investment
properties at an average yield of 6.4%, of which £95 million were
sold to USAF and the remainder to external parties. In addition,
UNITE sold its 2010 development pipeline to the joint venture it
formed with OCB for £88 million and a further £8 million of land
previously held for development. The evidence from transactions
that have taken place since 30 June 2009 indicates that there is
a gap emerging between yields for direct let assets and assets
subject to leases or nominations agreements as investors are
prepared to pay a premium for assets with secured income
streams equivalent to a 50-75 bps keener yield. UNITE has
focused increasingly on direct let assets over the past few
years allowing it to drive consistent annual increases in rents.
Investor demand for diversified direct let exposure is strong, as
evidenced by USAF’s successful equity raise and we believe this
will translate to asset values over time.
Investment assets
Land
Sales to joint ventures
Valuation at
Dec 08/Jun ‘09
£m*
55
13
187
255
Gross proceeds
£m
54
8
184
246
Loss on disposal*
£m
3
4
4
11
* Based on market value at December or June prior to sale, including any subsequent costs.
Development Management
Following the Group’s decision in 2008 to significantly reduce its
forward development pipeline commitments, the Group has
focused on the delivery of its 2009 programme and the timely
commencement of works on its remaining 2010 projects.
The Group delivered 2,853 beds across 14 properties for letting in
the 2009/10 academic year, of which 1,526 beds are in London.
The construction of the 1,119 beds that were sold to the OCB joint
venture is progressing well. The assets are fully funded and on
track to be delivered on time and to budget for occupation in
September 2010 with a further £3 million of NAV (UNITE’s share)
to be recognised in 2010.
The Group has started to make progress in rebuilding its
development pipeline. As at 1 March 2010, it has exchanged an
option for one site and entered exclusive negotiations for a further
two sites, comprising approximately 900 beds in total. The market
for acquiring land in London, especially sites with planning
permission, became more competitive over the second half of
2009. UNITE is unlikely to acquire sites in highly competitive bid
situations, particularly where the product mix is studio biased or
the location is not within our core target zones.
UNITE vs IPD All Property NIY
8.5%
8.0%
7.5%
7.0%
6.5%
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
YE 2004 HY 2005 YE 2005 HY 2006 YE 2006 HY 2007 YE 2007 HY 2008 YE 2008 HY 2009 YE 2009
UNITE Completed Portfolio
IPD All Property
The following table shows the movement in asset values by
portfolio over the course of the year:
2009
31 Dec
Yield Rental
£m
484
Wholly owned
897
USAF
390
UCC
USV
58
Total portfolio 1,829
796
UNITE share
31 Dec Avg NOI
yield
Disposals/
2008 movement growth c ompletions
£m
147
625 6.6%
95 1,003 6.8%
370 6.4%
59 6.9%
242 2,057 6.7%
929 6.7%
141
£m
£m
(50) 44
(58) 69
25
(45)
6
(5)
(158) 144
(72) 63
–
–
£m %
There has been a significant increase in the volume of investment
transactions undertaken by the Group in the second half of 2009.
UNITE has sold £217 million of assets since June, at an average
valuation yield of 6.4% compared to the average yield across
its portfolio of 6.7%. The higher average yield in the December
valuation when compared to transactional evidence partly reflects
geographic differences but also a more conservative approach to
valuing stabilising assets at the year end. We would expect both
the gap between transaction and portfolio yields and the
stabilisation impact on valuations to unwind over time.
Sky Plaza,
Leeds
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
20
Business review continued
In order to address the currently high levels of competition for
consented land in London, UNITE has focused on securing more
sites ‘off-market’ from owner occupiers and, as a result, the
acquisition of the pipeline is likely to continue into early 2011.
Whilst taking longer than previously anticipated to secure sites, this
approach will provide UNITE with greater opportunity to add value
through the planning process. We will also review existing land
holdings, valued at an aggregate of £33 million at 31 December
2009, excluding sites exchanged for sale, to review the feasibility of
delivering beds in 2011. Capital expenditure in 2010 will be limited
to option monies or deposits for land and for construction of any
sites chosen for 2011 delivery and should not exceed £50 million
in aggregate.
Banks have, to date, generally played a supportive role to their
borrowers but this may well change in 2010. We will therefore
maintain an active dialogue with the banks to assess what
opportunities might arise from distressed assets as the leading
specialist operator in this sector. In addition, certain cities outside
of London are becoming more attractive from a development
perspective as land prices continue to fall and the competition
for sites is considerably less intense. The Group will continue to
monitor a small number of key target cities outside London and
consider acquisition opportunities during 2010.
UNITE Modular Solutions
To counter the impact of the recession, and specifically the scaling
back of UNITE’s development programme, UMS has been actively
pursuing a number of opportunities to establish an external market
for its modular units, both within and beyond the student
accommodation sector. It was therefore encouraging to report
earlier this year that UMS had secured its first third party contract
in 2009, with Berkeley First Student, to supply and install 483
modules for a student accommodation development in Oxford.
The contract has a total value of £5.8 million.
As outlined in November’s Interim Management Statement,
there has been a change in the accounting treatment for UMS
as a result of the creation of the OCB joint venture, such that all
trading is essentially now external and recognised in the income
statement. As the factory is running below full capacity, a net
loss of £1.1 million arises which has been taken through the
income statement.
Looking forward, the level of UNITE driven production demand for
UMS is likely to remain low until late 2011. There are a number of
external contract opportunities that UMS is pursuing and we would
expect to secure a proportion of these in the second half of 2010,
which will utilise some of the plant’s surplus capacity. However,
given the high level of competition in the construction sector at
present and consequently the pressure on margins, it is likely that
UMS will remain loss making in 2010.
The commercial viability and advantages of UMS’s products are
proven and well understood. As a result, we are confident that the
business will be well placed to benefit from a recovery within the
next 18 months. At that time, with third party demand established
and increasing, we will review the Group’s long term investment
in the business.
Livocity – accommodation for graduates
In March 2007 the Group stated its intention to pilot a new business,
providing professionally managed rental accommodation for young
professionals in London under the brand name “Livocity”. Three
projects, comprising 130 bed spaces, have since been completed
and lettings progressed well. However, as outlined in the Interim
Statement, taking into account the severe contraction in available
financing over the past year, the likely continued rationing of capital
for the foreseeable future and the impact of the economic downturn
on graduate recruitment, the Group has decided not to extend this
pilot programme further. The three Livocity assets are now being
managed as part of our operational portfolio and, as such, there has
been no significant impact on earnings or net asset value.
Co-investing asset management
UNITE acts as co-investing manager of four significant specialist
student accommodation investment vehicles which it has
established, as outlined in the following table:
31 December 2009
Property
assets
Vehicle Fund/JV Established
£m
USAF Fund 2006 1,003
370
UCC
124
OCB
59
USV
JV
2005
JV 2009
2004
JV
Net debt
£m
(393)
(247)
(50)
(40)
Other
UNITE share
Adjusted of adjusted
liabilities net assets net assets
£m
97
35
16
7
£m
596
118
62
14
£m
(14)
(5)
(12)
(5)
UNITE UK Student Accommodation Fund
USAF generated a total return of 8% in 2009, placing it as the sixth
best performing fund in the IPD Index for Pooled Funds. The Fund
successfully raised £167 million of equity in December 2009 from a
range of existing and new investors. Following the completion of
the fund raise, USAF acquired a £95 million portfolio of assets from
UNITE, at an average yield of 6.4%, and has capacity to acquire
approximately £200 million of further assets, based on the Fund’s
target leverage, either from UNITE or third parties.
It has been confirmed that the Fund will be treated as a Priority
Creditor in relation to its deposit in Landsbanki. Following the
publication of a statement of recoverable assets and liabilities, it
has been announced that Priority Creditors should recover the
substantial part of their deposit. The timing of a recovery, and any
legal challenge to the priority status remain as areas of uncertainty
and therefore the full provision of £30 million within the Fund
remains in place. UNITE’s share of this provision is £6 million.
UNITE Capital Cities Joint Venture
UCC generated a total return of –14% in 2009. This was impacted
by the stabilisation effect in London. UCC has fully invested all of its
equity and will continue to focus on the operation of its investment
assets and any asset management opportunities within its estate.
Its return on equity since inception in 2005 is 18% per annum.
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Key debt ratios for UNITE Group
Group net debt (adjusted)
Adjusted gearing
Adjusted net debt to property assets
Weighted average debt maturity
Weighted average cost of investment debt
Proportion of investment debt hedged
2009
31
31
December December
2008
£390m £ 531m
92% 131%
65%
59%
4 years 4 years
5.6% 6.2%
87%
75%
The reduction in net debt has been driven by asset sales
concluded during the year and the cash raised through the Placing
and Open Offer in October. Going forward, the Group anticipates
that adjusted gearing will increase as equity and debt are deployed
into its development pipeline, but will seek to manage gearing
within a strategic range of 100–130%.
The Group has extended the maturity of its loan facilities, such that
the first maturity date has been extended until 2012. The Group
currently has £220 million of debt capacity, of which £150 million
can be used for development. A further £150 million of new debt
will therefore be required during 2011 in order to deliver the Group’s
development plans. The Group paid careful attention to its banking
relationships during 2009 and will continue to work closely with key
lenders and build new relationships in order to deliver its funding
strategy, enhance further the quality of its lenders, secure the
requisite £150 million of new development capacity and renew or
extend facilities over the next three years.
On balance sheet debt maturity (£m)
400
350
300
250
200
150
100
50
0
2010
2011
2012
2013
2014
2015
2016+
Drawn at 31 Dec 08
Drawn at 31 Dec 09
Oasis Capital Bank Joint Venture
In August, UNITE established a five-year joint venture with Oasis
Capital Bank, a Bahrain-based investor, to develop three student
accommodation properties in London with an estimated value on
completion of £194 million. Having invested £13 million, UNITE has
a 25% stake in the vehicle with OCB holding the remaining 75%.
The three properties to be developed in the joint venture,
amounting to 1,119 bed spaces, represent the Group’s entire
2010 development programme. The joint venture acquired the
three projects for a consideration of £88 million, reflecting an
anticipated development yield of approximately 8%, and will fund
the remaining costs to complete them, anticipated at £69 million
as at the transaction date. As part of the financing of the
transaction, UNITE’s existing banking facilities relating to each
property were reduced by an aggregate of £14 million and
transferred to the joint venture. As a result, the joint venture has
access to total debt facilities of £109 million, of which £59 million
was drawn as at 31 December 2009.
The transaction, completed in a very challenging market
environment, clearly demonstrated both UNITE’s ability to attract
co-investment and grow its management business, building on the
previous successes of UCC and USAF, and highlighted the relative
resilience of the student accommodation market versus the wider
commercial market.
The Group has been retained by the Joint Venture, and will
receive fees, both as development manager for the duration of
construction (a fee equivalent to 5% of build costs) and property
and asset manager thereafter (70bps of gross asset value).
A performance fee of up to £2.5 million is also payable at exit.
UNITE Student Village Joint Venture
USV, which owns one building located in Sheffield, generated
a total return of 16% in 2009. Lehman Brothers, which owns
the remaining 49% stake in USV, was placed in administration in
October 2008. The administrators marketed the 49% shareholding
in the Joint Venture during 2009 but were unable to meet their
price aspirations. UNITE has certain pre-emptive rights with regards
to the Joint Venture and will continue to monitor the situation
going forward.
Financing
As a result of the proactive steps it has taken, the Group has
significantly improved its financing position during the year to
31 December 2009 as follows:
– Adjusted net debt has been reduced from £531 million to
£390 million;
– Adjusted gearing has reduced from 131% to 92%;
– Covenant headroom has increased across the key covenant
measures; loan to value, interest cover and minimum net worth;
– Debt maturity has been extended, with facilities repayable before
2012 being reduced from £208 million to £nil;
– Debt capacity has been increased from £110 million to
£220 million.
UNITE
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
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Business review continued
The Group is actively managing its interest cost base. During the
course of the year, the Group terminated £80 million of interest rate
swaps in order to benefit from the significantly reduced market
rates and to ensure its hedging position more adequately reflects
the risks of the business. An exceptional charge of £9.6 million
arose from these terminations. As a result of these actions, 75%
of the Group’s investment debt was at fixed rates and the average
cost of investment debt at 31 December 2009 was 5.6%
compared with 6.2% at 31 December 2008. The Group has used
£37 million of surplus cash to pay down revolving investment
facilities that can be redrawn on demand.
The Group is in full compliance with all of its borrowing covenants
at 31 December 2009 and continues actively to monitor all of its
covenants. The covenant headroom position has improved on the
three covenant measures as outlined in the following table.
Loan to value
Interest cover
Minimum net worth
covenant
31 December 2009 31 December 2008
Weighted Weighted Weighted Weighted
actual
71%
1.35
£250m* £423m £250m £406m
actual
74% 59%**
1.63
1.08
covenant
76%
1.10
* based on greatest minimum net worth covenant
** if available cash is used to pay down debt, otherwise 68%
Debt facilities in co-investment vehicles
The break-down of debt facilities in co-investment vehicles is
outlined in the following table:
Debt at
31 Dec 09
£m
477
253
58
45
Average
interest rate
% fixed/
capped
5.4% 100%
5.5% 100%
3.9% 100%
5.5% 100%
Average
maturity
(years)
First
maturity
3.9 Dec 2012
4.7 Sep 2014
2.7 Sep 2011
2.6 Sep 2011
USAF
UCC
OCB
USV
Co-investment vehicle debt maturities (£m)
600
500
400
300
200
100
0
2010
2011
2012
2013
2014
2015
2016+
Drawn at 31 Dec 08
Drawn at 31 Dec 09
Co-investment vehicle debt maturities
The funds and joint ventures are in full compliance with all of their
borrowing covenants at 31 December 2009. USAF currently has
£20 million of undrawn facilities and will require £130 million of new
debt to utilise its full acquisition capacity and maintain its LTV at
50%. The other joint ventures are fully funded and do not require
any new debt.
Dividend
In light of the market conditions and the Group’s decision to invest
in development opportunities, it will not re-instate a dividend until
such point that the business is generating a meaningful level of
profits such that any dividend would be properly covered.
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People and organisation
UNITE’s ability to adapt to changing circumstances continues to
be underpinned by a strong values-based culture which, together
with our commitment to first class people practices, makes our
organisation a place to achieve a challenging, rewarding and
meaningful career. Leadership and learning featured heavily across
the organisation through 2009 as new processes and ways of
working were embedded to provide improved customer focus
throughout UNITE’s buildings and working practices. 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 2009 we focused our organisational
development approach around ensuring our organisation is
effectively designed to execute our strategy through the completion
of our transformational change programmes. Key initiatives included:
– Organisation design – through both strategic and detailed
organisation design initiatives, we redesigned the business
around our core competencies of Development Management,
Property Management, Asset Management and Fund
Management. The detailed design work covered a number of
areas including work processes, role accountabilities, information
flows, key interactions, decision boundaries and skills and
capability requirements. We also redesigned 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.
– Change management – through the delivery of our Property
Management and Development Management change
programmes, we continued to instill effective change
management skills into our business. These core skills will
stand us in good stead as we move to an environment of
continuous improvement and strategic evolution through 2010.
– Employee engagement – we continued to work hard to engage
our people with the priorities and change required across the
business. Our employee survey benchmarked our organisation
within the top 30% of UK companies. UNITE also featured
in the Britain’s Top Employers 2009 for Best Examples of
HR Management.
– Ensuring our strategy is clear from the boardroom to the front
line – we have embedded a high-quality business planning
process to provide individual employees with a clear line of sight
to our strategic goals. Our framework ensures that we have an
aligned set of goals and clear performance measures, with a
more integrated risk and resource planning process.
– Learning and development – we established our Property
Management learning and development programme through
our Training Academy in Birmingham. This purpose built facility,
within our flagship student accommodation, is designed for
inducting and training our customer facing teams in the
consistent delivery of our customer service standards.
– Leadership development – we delivered a new programme to
all managers on effective execution of strategy. We continued
the roll-out of our core Leadership and Mentoring programmes
ensuring leadership excellence.
– Performance management and reward – through our Personal
Development Plans, we developed a consistent approach to
performance measurement and management and clearly
linked our reward structures to performance against key
strategic priorities.
– Values/competency model – we used and further developed our
core competency framework (Job Fitness Model) aligned to our
values, for our business unit operations and support functions.
– Aligning our talent strategy to our business strategy – to ensure
that we have the right mix of skills and expertise in senior roles.
We are committed to investing in high performing individuals
who exert the greatest degree of influence on company
performance and we have tailored development plans for
potential successors. We have added three new roles to our
Leadership Executive with a focus on developing our business
for growth and engaging our people with our strategic goals.
Looking ahead
The Group’s actions during 2009 have moved the business on
to a stronger footing. Consequently it is now well placed to adapt
to a changing market environment and to take advantage of the
opportunities that we expect to emerge as a result of funding cuts
in UK Higher Education.
2010 seems likely to be a period of further uncertainty for the UK
economy, not least because of the impending election and lack of
clarity regarding the impact and future of the Government’s
stimulus package.
However, demand for student accommodation is based on
strong fundamentals and with the Group’s sound financial base
and established operating platform, it is well placed to weather
any near term volatility and prosper for the long term.
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Corporate responsibility
Sustainable living
UNITE is committed to effective environmental management to
support sustainable environments in the communities in which it
operates. As a major user of utilities with 129 multiple occupancy
buildings under management, UNITE takes its responsibility for
sustainable living very seriously, encouraging the responsible use
of energy and resources in the buildings it manages and by its
38,300 customers.
UNITE’s commitment to its communities
UNITE recognises its long term commitment to local communities
and develops effective environmental management strategies to
encourage sustainability. On average a 200-bed UNITE
development will generate over £1 million of income for the local
economy. UNITE’s purpose build student accommodation relieves
pressure on houses with multiple occupancies, releasing these
back to young professionals and families in the community.
UNITE measures and manages emissions by following the
principles set out in the Green House Gas (GHG) protocol and
employing measures to achieve energy savings in line with the
requirements set out in the Carbon Reduction Commitment (CRC).
These include combined heat and power units, on-site energy
generation and smart metering.
In 2009, we undertook BREEAM assessments on six buildings
which were rated “very good” or above confirming our
commitment to thoughtful and progressive design in our property
portfolio. Certified measures included thermal insulation, green
roofs, biomass boilers, solar thermal collectors, detailed travel plans
and enhanced lighting designs. UNITE will continue to undertake
BREEAM assessments on all new builds.
It is the UNITE Group policy to focus on developing dilapidated
inner city office space or other centrally located brownfield sites to
contribute to regeneration and urban renewal. During 2009, all of
our new buildings were built on brownfield sites or on land
designated as regeneration areas.
We also maximise the use of electronic communication for our
customers through state of the art online communications and
booking systems to save on paper and postage.
UNITE Modular Solutions
Through its modular manufacturing facility, UNITE Modular
Solutions, based in Stroud, Gloucestershire, UNITE promotes
energy saving manufacturing methods through designing, building
and transporting innovative modular designs. Modular techniques
are recognised for reducing build time by up to half when
compared with traditional methods, reducing waste, as well as
offering significant reduction in associated energy use during
construction, depth of foundations required and impact on local
environment.
Carbon emission summary 2009
In 2009, UNITE’s operating portfolio increased by 2,853 beds in
14 properties and has implemented a number of new initiatives
including:
– Smart metering across all properties
– 10,000 water saving packs
– Robust feedback mechanism from operations to development
to improve energy efficiency across new builds.
Residential operations 2009
Residences
gas
Residences
electricity
GHG
scope
Energy kWh
Total
CO2
tonnes*
%
of total
Carbon
Emissions
% Change
in CO2
compared
to 2008
1
14,728,489
3,007
4.8%
2 107,893,505 58,982 94.5%
122,621,994 61,989 97.7%
0.04
*See below for emissions factors
Internal operations 2009
GHG
scope
Energy
kWh
Total CO2
tonnes*
%
of total
Carbon
Emissions
% Change
in CO2
compared
to 2008
Offices
gas
Offices
electricity
Manufacturing
gas
Manufacturing
electricity
1
2
1
2
*See below for emissions factors
226,642
46
0.1%
287,416
157
0.2%
1,755,454
358
0.6%
1,206,585
3,476,097
660
1,221
1.0%
1.9% –1.6%
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Business travel 2009
Business
Travel
Company
cars
Commercial
vehicles
Private
cars
GHG
scope
Distance
km
Total CO2
tonnes*
%
of total
Carbon
Emissions
% Change in
CO2
compared
to 2008
1
1,093,160
165
0.3%
**
1
417,758
1,510,918
**
64
229
0.1%
0.4% –30.3%
1 Compared to the total business travel from 2008 (including commercial vehicles).
If commercial vehicles are excluded from 2008 calculations, the % change is –18.4%.
** Commercial Vehicles were reported on last year, but are now not accounted
for within the UNITE holding company.
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)
2008
0.537
Electricity
Gas
0.206
Assumed car average emission (km weighted)
153
2009
0.547
0.204
kg/KWh
kg/KWh
g/km
KPI table 2009
Business
Travel
Residential
CO2/bed
Manufacturing
CO2/module
Business
Travel
CO2/000km
Measures
(no. beds;
no. modules;
000km)
CO2 kg
KPI
% Change in CO2
compared
to 2008
37,006*
61,989,258
1,675
0.0%
1,929
1,018,015
528
–12.4%
1,511
228,968
152
–2.0%
*No. beds averaged across the reporting year.
In 2009, the Group saw the results of UNITE’s 2008 Sustainable
Living Campaign which encouraged and supported its customers
to reduce their energy and water consumption, and to actively
encourage behavioural change in driving down its carbon footprint.
This programme saw a strong uptake from customers. Once the
implementation of measurement practices are established across
the Group’s buildings, UNITE will review the opportunity to roll-out
a carbon reduction customer engagement campaign.
Corporate charity work
UNITE supports organisations who share its values of supporting
students and nurturing entrepreneural spirit. The UNIAID charity
helps young people to take advantage of a university education
by supporting them to manage their finances more effectively.
UNITE works with UNIAID to provide accommodation bursaries
to students. During 2009, UNITE continued its support for UNIAID
by providing 55 students with free accommodation for the year.
UNITE also works with SIFE (Students in Free Enterprise), a global
network of business executives, academic leaders and university
students who believe in ethical enterprise. During 2009, we
became a Gold sponsor of SIFE to mobilise university students
around the world to make a difference in their communities whilst
developing their skills to become socially responsible business
leaders.
An important element of our corporate responsibility programme
is also to support our people in their charitable fundraising. UNITE
operates a charity match initiative, where the organisation matches
the amount raised by an employee for their chosen charity (up to
the value of £250). In the past six years UNITE has donated some
£45,000 to its employees’ chosen charities.
Woodland Court,
Islington, London
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
26
Risks and uncertainties
Risk description
Impact
Mitigation
Development Management risks
Failure to secure sites at
attractive prices
Unable to generate returns in line
with plans
Failure or delays in obtaining
planning consents
Cost of aborted schemes. Delayed
schemes impacting financial returns
Delays in completion of construction
in time for the start of academic year
or cost over-runs
Reduced financial returns and cash tied
up. Impact on reputation with customers
Skilled development team and strong
reputation. Focus on off-market
transactions
Established planning expertise. Low
financial investment in schemes prior
to grant of planning
Strong track record and focus on
project delivery and strong relationships
with construction partners with appropriate
risk sharing. Use of UNITE’s unique off-site
manufacturing modular technology,
reducing delivery and cost risk
Property and Asset
Management risks
Risk arising from short-term nature
of tenancies – occupancy and rents
Revenues are uncertain. Reduced lettings
as a result of economic downturn
General cost inflation, in particular on the
cost of utilities
Reduced return on investment portfolio
Geographic diversification. Supply/demand
imbalance. Strong sales and marketing
expertise
Forward purchase of utilities. Annual
opportunity to increase rent to recover
additional costs
Fund Management
Ability to determine strategy of Funds/JVs
not in line with Group strategy
Conflicts of interest
Established separate fund
management function
Risk of being forced to sell properties
if redemption requests cannot be met
Properties sold below valuation
Contractual limits on redemption rate
in USAF. Proactive management of fund
investors, equity raising and alternative
sources of finance
Financing
Liquidity risk
Properties may be difficult to sell,
potentially impacting cash flow
Management of debt maturity. Control
of future cash commitments
Adverse interest rate movements
Reduced profitability
Hedge exposure with interest rate swaps
Breach of borrowing covenants
Debt becomes immediately repayable
Regular forecasting of covenant position.
Proactive management of any potential
issues
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
27
8
2
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i
Risk description
Impact
Mitigation
Market risks
Concentration of assets in student
accommodation sector
Reduced student numbers impacting
financial performance
Geographic diversification and in-depth
market intelligence
Changes in Government policy may affect
student numbers
May reduce demand and hence prices
Supply/demand imbalance is significant
at present and demand from overseas
is increasing. Strong sales and
marketing expertise
Property markets are cyclical and
performance depends on general
economic conditions
Under/over performance of investment
portfolio
Clear and active asset
management strategy
Impact of changes in legislation, particularly
in respect of environmental legislation and
planning regulations
Increased cost of compliance leading to
reduced returns or, in extremis, scheme
cancellation
Highly developed skill base for managing
planning process and building design.
Minimum investment made in schemes
prior to securing planning
General
Attracting and retaining the best people
Critical to delivering business strategy
Reputational risk with universities,
students or parents
Reduced lettings, difficult to attract the
best people and weaker relationships with
university clients, planners and other
stakeholders
Our process for managing risk is set out in more detail on page 36 of the Corporate Governance section of this Annual report.
UNITE is a values-based organisation.
This means we recruit to a clear set of
behaviours and seek to develop people
to their full potential with leading
in-house learning and development.
We measure employee satisfaction
through regular surveys and act on
employee feedback
Experienced brand, sales and marketing
teams. Respond to customer feedback
and strong focus on safety of our
customers and staff with regular audits.
Strong focus on meeting customer needs
with research-based product and service
development
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
28
Key performance indicators
Objective
Measure
Performance
To manage our assets effectively
including the buying and selling
of assets
(see pages 15 to 17 of Business review)
To maintain a strong and profitable
development pipeline
(see pages 19 to 20 of Business review)
To manage the strength of our
balance sheet
(see page 17 of Business review)
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 (swap and loan break
costs, £10m: restructuring, £3m).
Assets sales in period (£m)
This measures the value of assets sold 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.
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.
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.
To manage Funds/JV’s efficiently,
maximising medium-term total returns
and maintain investor support and trust
(see pages 20 to 22 of Business review)
Return on NAV
This measure indicates a measure of the
combined capital and revenue returns from
our major co-investing funds.
USAF (%)
UNITE Capital Cities (%)
To develop and retain high performing
people, teams and leaders that live
UNITE’s values
(see page 23 of Business review)
Employee satisfaction (%)
Regular reviews carried out by
independent agency to understand
engagement.
2009
(33)
2008
(54)
246
388
0.6
(21)
67
1
(5.4)
5
495
10
390
531
92
131
8.2
(14.0)
62
(21.6)
10.5
63
The Board of Directors
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
29
1.
4.
2.
6.
3.
5.
7.
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1. Phil White CBE
Chairman
Phil, 60, was appointed Non-Executive Director
in January 2009 and became Chairman in May
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.
2. Mark Allan
Chief Executive
Mark, 37, 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.
3. Joe Lister
Chief Financial Officer
Joe, 38, joined UNITE in 2002. He was
appointed as Chief Financial Officer in January
2008 having held a variety of roles within UNITE
prior to that, including Investment Director. Joe
is responsible for the Group’s finances and
investment strategy. As Chief Financial Officer,
Joe is also responsible for the Company
secretarial function and Chairs the Group’s
Major Investment Approval meetings. Prior
to joining UNITE, Joe qualified as a chartered
accountant with PricewaterhouseCoopers.
4. John Tonkiss
Chief Operating Officer
John, 42, joined UNITE in 2001 as General
Manager of the Group’s off-site manufacturing
facility 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.
5. Nigel Hall
Non-Executive Director,
Senior Independent Director and
Chairman of the Audit Committee
Nigel, 54, 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.
6. Stuart Beevor
Non-Executive Director
and Chairman of the
Remunerations Committee
Stuart, 53, 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.
7. Richard Walker
Non-Executive Director
Richard, 43, 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.
UNITE
Annual Report & Accounts 2009
30
Directors’ report
for the year ended 31 December 2009
The Directors present their annual
report and audited financial
statements for the year ended
31 December 2009.
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 78.
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
15 to 18)
•
Key performance indicators (page
28)
•
Risks and uncertainties (page
s 26 and 27)
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 2 to 29 of this report.
Profit and dividends
The Group loss for the year attributable to shareholders amounted
to £34.9 million (2008: £115.9 million). The Directors do not
recommend the payment of a final dividend for the year (2008: nil
pence per ordinary share). No interim dividend was paid during the
course of the year (2008: 0.83p per share).
Directors
Each of Messrs N P Hall, S R H Beevor, R Walker, M C Allan,
J M Tonkiss and J J Lister served as Directors throughout the
year. Mr G K Maddrell and Mr N A Porter respectively acted as
Chairman and Deputy Chairman until 15 May 2009, on which
date they both stood down from the Board.
On 21 January 2009, Mr P M White was appointed to the
Board, as an additional Non-Executive Director of the Company
and as Chairman Designate. Mr White became Chairman of the
Board on 15 May 2009.
Each of Messrs R S Walker and J M Tonkiss, who retire by rotation,
offer themselves for re-election at the annual general meeting of the
Company which has been convened for 18 May 2010 (the “Annual
General Meeting”). Brief biographies of all the Directors, including
those standing for re-election, are set out on page 29. 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 M Tonkiss 2
J J Lister 3
P M White 4
N P Hall
S R H Beevor
R S Walker
Ordinary shares of 25p each
31 December 2009
838,053
362,392
393,715
10,000
17,849
–
10,000
Ordinary shares of 25p each
31 December 2008
363,006
148,832
87,121
–
9,849
–
–
UNITE
Annual Report & Accounts 2009
31
1 Mr Allan’s interests include 594,484 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 327,269 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 293,043 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.
None of the Directors has a beneficial interest in the shares of any
other Group company. Since December 2009, there have been
no changes in the Directors’ interests in shares.
Changes in share capital
During the year, 2,108 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 at
a price of 188p per share. In addition, a total of 427,926 ordinary
shares were allotted and issued pursuant to the exercise of options
granted under The UNITE Group plc Unapproved Company Share
Option Scheme (373,229 at a price of 146.5p per share; and
54,733 at a price of 191p per share).
On 9 April 2009, the Company also allotted and issued 2,041,059
ordinary shares of 25p each at a price of 92.75p per share
pursuant to the Group’s LTIP and on 6 October 2009, a further
32,819,972 ordinary shares of 25p each were allocated and issued
pursuant to a placing and open offer at a price of 250p per share.
Substantial interests in the share capital
of the Company
As at 3 March 2010, 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
FMR LLC
Cohen & Steers Inc
J P Morgan Asset Management Holdings Inc
Lloyds TSB Group plc
AXA S.A.
Morgan Stanley Investment Management Ltd
Legal & General Group plc
FIL Limited
Orange European Property Fund NV
Perennial Investment Partners (Australia) Limited
Allianz SE
Percentage of Share
Capital
5.18
4.98
4.92
4.90
4.84
4.80
3.95
3.66
3.62
3.61
3.22
Donations
The Company made no political donations during the course
of the year but made charitable donations of £15,000 to
UNIAID Foundation (2008: £15,000) and £15,000 to Students
in Free Enterprise (2008: £5,000). The Company also donated
55 accommodation bursaries across the UK for the 2008/09
academic year to UNIAID Foundation equating to £275,936
(2008: £247,500).
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 £5,673
(2008: £6,206).
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
2009 the Group’s trade creditors were equivalent to 27 days’
purchases (2008: 32 days). The Company does not have any
trade creditors (2008: 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.
The Group continues to advance its development of a transparent,
scalable and robust safety management system.
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 across 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 Long Term Incentive Plan was introduced
in 2005 with the aim of being better able to structure remuneration
packages so as to retain, motivate and reward selected Executive
Directors and Senior Managers. It is anticipated that a new SAYE
option scheme (to replace the scheme originally put in place
in 1999), in which all employees will be eligible to participate,
will be introduced during the course of the year.
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.
5
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UNITE
Annual Report & Accounts 2009
32
Directors’ report continued
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 18 May 2010. Formal notice of the meeting is given on pages
93 and 94.
In addition to the ordinary business of the meeting, Resolution 6
will be proposed as an ordinary resolution to grant the Directors
authority to allot shares in the Company, and grant rights
to subscribe for or to convert any security into shares of the
Company, up to an aggregate of nominal value of £13,302,275
(representing approximately one third of the issued share capital of
the Company as at 3 March 2010). 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 £13,302,275, again representing
approximately one third of the nominal value of the issued ordinary
share capital of the Company as at 3 March 2010. This additional
authority may only be applied to fully pre-emptive rights issues.
Resolution 7 will be proposed as a special resolution to authorise
the Directors to allot equity securities for cash other than in
accordance with statutory pre-emption rights (which require
a company to offer all allotments for cash first to existing
shareholders in proportion to their holdings), 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 £1,995,341 (representing approximately five per cent
of the issued share capital of the Company as at 3 March 2010).
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
following 15 months from the passing of the resolutions, whichever
is the earlier.
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 (Resolution 8), is a special resolution to
allow general meetings of the Company, other than annual general
meetings, to be called upon not less than 14 clear days’ notice,
in accordance with the Shareholders’ Rights Regulations. The
Directors will only utilise this authority to hold meetings on less
than 21 clear days’ notice where it considers it to be in the best
interest of shareholders. The second (Resolution 9), also a special
resolution, relates to the abolition of the Company’s authorised
share capital and the adoption of revised articles of association
following the full implementation of the Companies Act 2006
in October 2009. The principal changes are as follows:
The Company’s objects
Prior to the full implementation of the Companies Act 2006, the
provisions regulating the operations of the Company were set
out in the Company’s memorandum and articles of association.
The Company’s memorandum contained, among other things,
the objects clause which set out the scope of the activities the
Company is authorised to undertake. This clause was drafted
to give a wide scope.
The Companies Act 2006 significantly reduced the constitutional
significance of a company’s memorandum. The Companies Act
2006 provides that a memorandum will record only the names of
subscribers and the number of shares each subscriber has agreed
to take in the company. As of 1 October 2009, the objects clause
and all other provisions which are contained in the Company’s
memorandum are deemed to be transferred to the Company’s
articles of association. The Company is now permitted to remove
these provisions by special resolution.
Further, the Companies Act 2006 states that unless a company’s
articles provide otherwise, that company’s objects are unrestricted.
This abolishes the need for companies to have objects clauses.
For this reason the Company is proposing to remove its objects
clause together with all other provisions of its memorandum which,
by virtue of the Companies Act 2006, are treated as forming part
of the Company’s articles of association with effect from 1 October
2009. Resolution 9(a) confirms the removal of these provisions for
the Company. As the effect of this resolution will be to remove the
statement currently in the Company’s memorandum of association
regarding limited liability, the revised articles of association (the
“New Articles”) also contain an express statement regarding the
limited liability of shareholders.
Articles which duplicate statutory provisions
Provisions in the Company’s existing articles of association (the
“Existing Articles”) which replicate provisions contained in the
Companies Act 2006 are in the main amended to bring them into
line with the Companies Act 2006.
Authorised share capital and unissued shares
The Companies Act 2006 abolishes the requirement for a
company to have an authorised share capital and the New Articles
reflect this. Directors will still be limited as to the number of shares
they can at any time allot because allotment authority continues
to be required under the Companies Act 2006, save in respect
of employee share schemes.
Redeemable shares
Under the Companies Act 1985, if a company wished to issue
redeemable shares, it had to include in its articles the terms and
manner of redemption. The Companies Act 2006 enables directors
to determine such matters instead provided they are so authorised
by the articles. The New Articles contain such an authorisation.
The Company has no plans to issue redeemable shares but if it
did so the Directors would need shareholders’ authority to issue
new shares in the usual way.
Authority to purchase own shares, consolidate and sub-divide shares,
and reduce share capital
Under the Companies Act 1985, a company required specific
enabling provisions in its articles to purchase its own shares, to
consolidate or sub-divide its shares and to reduce its share capital
or other undistributable reserves as well as shareholder authority
to undertake the relevant action. The Existing Articles include these
enabling provisions. Under the Companies Act 2006 a company
will only require shareholder authority to do any of these things
and it will no longer be necessary for articles to contain enabling
provisions. Accordingly certain of the relevant enabling provisions
have been removed in the New Articles.
UNITE
Annual Report & Accounts 2009
33
Suspension of registration of share transfers
The Existing Articles permit the Directors to suspend the
registration of transfers. Under the Companies Act 2006 share
transfers must be registered as soon as practicable. The power
in the Existing Articles to suspend the registration of transfers is
inconsistent with this requirement. Accordingly, this power has
been removed in the New Articles.
Notice of general meetings
The Companies Act 2006 requires that the notice of a company’s
general meeting now contains certain additional information, and
this is reflected in the New Articles.
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 Annual General Meeting 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.
Adjournments for lack of quorum
Under the Companies Act 2006 as amended by the Shareholders’
Rights Regulations, general meetings adjourned for lack of quorum
must be held at least 10 clear days after the original meeting.
The Existing Articles have been changed to reflect this requirement.
By order of the Board
A D Reid
Secretary
3 March 2010
Proxies
Under the Companies Act 2006, proxies are required to vote in
accordance with instructions given to them. Where the same proxy
is appointed by more than one shareholder, and the instructions
given to that proxy are to vote in different ways, that proxy will be
entitled to vote more than once on a show of hands to reflect the
instructions given to him. This is reflected in the New Articles.
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 with that used in the model articles for public
companies produced by the Department for Business, Innovation
and Skills.
A copy of the New Articles, and the Existing Articles marked to
show the changes being proposed, will be available for inspection
at the registered office of the Company and at the offices of
Osborne Clarke, One London Wall, London EC2Y 5EB during
usual business hours on any week day until the Annual General
Meeting and will also be available for inspection at the place of the
Annual General Meeting from 9.15 a.m. on the day of the meeting
until its conclusion.
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 31 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.
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Annual Report & Accounts 2009
34
Corporate governance
for the year ended 31 December 2009
During the course of the year,
the Company complied with the
principles of best practice set out
in Section 1 of 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 2009, there were 11 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 P M
White (Chairman), Mr N P Hall (Senior Independent Non-Executive
Director) and two other Non-Executive Directors (Messrs S R H
Beevor and R S Walker). Mr G K Maddrell and Mr N A Porter
respectively served as Chairman and Deputy Chairman until
15 May 2009, on which date they stood down from the Board.
Mr P M White, who was appointed an additional Non-Executive
Director and Chairman Designate on 21 January 2009, became
Chairman of the Board on 15 May 2009.
Each of the current Non-Executive Directors, 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. The Company therefore meets the requirement of the
Combined Code in relation to members of the FTSE 350 (to which
the Company was re-admitted in December 2009), that at least
half of the Board (excluding the Chairman), is made up of
independent Non-Executive Directors.
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 12 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.
UNITE
Annual Report & Accounts 2009
35
Audit Committee
During the year, the Audit Committee comprised Messrs N P Hall,
S R H Beevor and R S Walker, all being independent Non-
Executive Directors. Mr Hall acted as Chairman of the Audit
Committee throughout the year. 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,
all of which meetings were attended by each of its members.
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 work relating to the placing and open offer undertaken by
the Company in September 2009.
Remuneration Committee
During the year, the Remuneration Committee comprises
Mr S R H Beevor (who acted as Chairman), Mr N P Hall and
Mr R S Walker (all being independent Non-Executive Directors),
together with Mr G K Maddrell (until he stood down from the Board
on 15 May 2009), and Mr P M White (as from 4 September 2009).
As Mr Maddrell, who was Chairman of the Company until 15 May
2009, was considered independent on his appointment to that
role, his membership of the Remuneration Committee was in
accordance with the provisions of the Combined Code, as
amended in June 2006. Likewise, Mr P M White, who became
Chairman of the Board on 15 May 2009, was considered
independent on his appointment to that role, in which case his
membership of the Committee is also in accordance with the
provisions of the Code.
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,
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 38 to 44.
During the course of 2009, five meetings of the Remuneration
Committee were held, all of which were attended by each of the
then current members of the Committee.
Nominations Committee
During the year, the Nominations Committee was, until he
stood down from the Board on 15 May 2009, 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, who was then Non-Executive Deputy Chairman,
chaired the Committee). Mr P M White took over as Chairman
of the Nominations Committee on his appointment as Chairman
of the Board on 15 May 2009. 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 2009, two meetings of the Nominations Committee were
held, each of which was attended by Messrs P M White, N P Hall,
S R H Beevor, R S 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.
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 divisional 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 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.
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UNITE
Annual Report & Accounts 2009
36
Corporate governance continued
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 and has concluded that such controls were effective
throughout such period.
The Company has an established framework of internal controls
which, amongst other things, includes the following:
Financial reporting
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
pages 26 and 27. 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 pages 26 and 27.
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.
Investor relations
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.
UNITE
Annual Report & Accounts 2009
37
Directors’ responsibility statement
Each of the Directors confirm that to the best of their 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.
By order of the Board
M C Allan
Director
3 March 2010
J J Lister
Director
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Statement of Directors’ responsibilities in respect of
the Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report 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.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent company
and of their profit or loss for that period.
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 judgements 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 adequate accounting
records that are sufficient to show and explain the parent
company’s transactions and 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 2006. 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
complies 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.
UNITE
Annual Report & Accounts 2009
38
Directors’ Remuneration Report
for the year ended 31 December 2009
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 Companies Act
2006 and Schedule 8 to the Large
and Medium-sized Companies
and Groups (Accounts & Reports)
Regulations 2008. 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.
Certain sections of this report are subject to audit and these have
been clearly marked. The unaudited section of the report deals with
the remuneration policy that is to be followed in 2010 and
describes arrangements which applied during 2009.
Remuneration Committee
During the year, the Committee consisted of Mr S R H Beevor
(who chaired the Committee), Mr G K Maddrell (until 15 May 2009,
when he stood down from the Board), Mr N P Hall, Mr R S Walker
and Mr P M White (as from 4 September 2009), all of whom are
independent Non-Executive Directors (other than Messrs Maddrell
and White who respectively was and is Chairman of the Board).
Mr M C Allan is invited to attend meetings of the Committee.
The Committee is required annually to approve the remuneration
policy and rewards for the Executive Directors and to monitor the
structure and level of remuneration for other senior management.
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, (who was the Group HR Director during 2009),
provided advice and services to the Committee during the
course of the year but did not participate in any discussion
relating to his own remuneration.
During 2009 some of the key issues addressed by the Committee
were as follows:
•
reviewing and updating the Company’s policy on Executive
Directors’ remuneration to ensure it remained appropriate;
•
reviewing the base salaries of the Executive Directors;
•
setting performance targets in line with the Company’s strategy
for the annual bonus plan and determining the amounts
potentially payable; and
•
reviewing the current long-term incentive arrangements.
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 Committee are available on the
Company’s website.
UNITE
Annual Report & Accounts 2009
39
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.
The annual bonus scheme is seen as an essential part of total
reward and incentivisation for Executive Directors. Annual bonus
targets include elements for performance against financial and
non-financial criteria and personal objectives. The targets aim
to address the issues facing the business over the coming year.
The Committee views long-term incentives as a key way of
retaining and aligning the interests of Executive Directors and
other senior executives with shareholders and the Company’s
corporate goals.
Risk is taken into account when setting the targets and when
determining entitlements under variable pay schemes. This is
done by ensuring that targets, whilst stretching, are realistic; for
the long-term benefit of the Company; and are achievable without
taking inappropriate business risks. 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.
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 defined measures.
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.
Having frozen the salaries of the Executive Directors in 2009,
the Committee approved the following base salaries with effect
from 1 March 2010.
M C Allan
J J Lister
J M Tonkiss
Base salary from
1 March 2009 to
28 February 2010
£385,000
£200,000
£210,000
Base salary from
1 March 2010 to
28 February 2011
£385,000
£220,000
£240,000
Percentage
increase
0%
10%
14.3%
The salaries of Messrs Tonkiss and Lister had been purposefully
set below market levels to reflect their relatively recent
appointments to their respective roles. The salary increases for
the upcoming year reflect their progress in their roles, although it
should be noted that the new salaries are still, in the view of the
Committee, below market levels.
Benefits in kind include a company car or car allowance and
private health insurance.
Only basic salary is pensionable.
Pension
The Company contributes to a self-investing pension plan of
Mr Allan. In 2009, the Company contributed an amount equivalent
to 7.5% of Mr Allan’s salary to such plan.
In determining the remunerations of Executive Directors and other
senior executives, the Committee also takes account the level of
remuneration and pay awards generally to employees of the Group.
Messrs Lister and Tonkiss are members of The UNITE Group
Personal Pension Scheme, which is a money purchase scheme.
The Company contributes 12.5% of salary into the scheme.
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During 2009, a benchmarking review of the current market
positioning of the Group’s executive remuneration was undertaken
on behalf of the Committee using a comparator of other Real Estate
companies and a pan sector of companies of similar size to the
Company. That review 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. However, in using comparative
pay survey data, the Committee treats the data with caution,
recognising the risk of an upward pay ratchet. The main
components of the Executive Directors’ remuneration
packages are:
UNITE
Annual Report & Accounts 2009
40
Directors’ Remuneration Report continued
Performance Related Bonus
The Group operates an annual performance related bonus
scheme which is designed to reward outstanding contributions
and encourage the achievement of targeted levels of performance
over the short term. Under the scheme Executive Directors’ basic
bonus entitlements for 2009 have been calculated by reference to
performance targets set in relation to profitability; increases in net
asset value; the net amount of cash generated from capital activities
and the year-end free cash balance; customer satisfaction and
employee satisfaction. For the 2010 bonus scheme, performance
targets have been set in relation to broadly the same criteria.
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.
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 is applied against the
basic bonus entitlement of the relevant Executive Director. That
multiplier is determined following the Performance Development
Programme review of each Executive Director (which is carried
out at the end of the year), and reflects the strength of that
Director’s individual performance over the course of the year.
As a result of the above, 2009 bonus payments for Executive
Directors could have ranged in amounts up to 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 2009 reflect basic bonus entitlements
(calculated in accordance with the sliding scale referred to above),
of 56.55% of basic salary. That percentage was arrived as a result
of the Group having achieved bonus entitlements in relation to net
asset value, year-end free cash balance, cash raised from capital
activities and employee satisfaction. Bonus entitlements were
not achieved in relation to profitability and customer satisfaction.
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 49.2% and 60.5 % of their respective basic salaries.
In 2008, bonus payments to the Executive Directors ranged in
amounts equivalent to between 34% and 43% of base salary.
In accordance with the Company’s Guidance for Executive
Directors’ Shareholdings (see below), 50% of the bonus payable
to each of Messrs M C Allan and J M Tonkiss will be satisfied by
an allocation of shares in the Company under The UNITE Group
plc Share Bonus Plan (the “Share Bonus Plan”), and will be held
in the Company’s Employee Share Ownership Trust (the “ESOT”)
for three years, whilst 100% of the bonus payable to Mr J J Lister
will be paid in cash.
The Remuneration Committee has decided that the Executive
Directors (being the only employees holding allocations of shares
under the Share Bonus Plan pursuant to awards made in 2008
and 2009), should be given the opportunity to elect to convert
such awards into forfeitable share awards prior to the expiry of the
2009/10 tax year. Participants who elect to convert their awards
will be pay tax on the value of such awards in the 2009/10 tax year,
although the forfeitable shares will be held subject to the normal
terms of the Share Bonus Plan (including the same good and bad
leaver provisions as applied to the original share awards), until the
third anniversary of the date of the original award.
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 the subsisting 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.
UNITE
Annual Report & Accounts 2009
41
For awards in 2010 (as was the case for awards made in previous
years), performance conditions will be based on growth in net
asset value and the total shareholder return performance of the
Company, each applying to 50% 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% 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% 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% of the
target value, but less than 116%, the number of shares that will
vest will be calculated on a straight line basis. Under awards made
prior to 2009, 45% of the total number of shares the subject of that
element of the award would vest if the actual net asset value was
80% of the target value, with 100% of such shares vesting if the
actual value was 116% or more of the target value. However, for
awards made in 2009 and subsequently, only 30% of an award
will vest if 80% of the target value is achieved.
In relation to that element of an award referable to total shareholder
return, the performance of the Company will be measured over
a three-year measurement period, against the performance of
a comparator group of companies. For the awards made in 2010,
the comparator group will be those companies comprising the
FTSE 350 Real Estate “Super Sector” 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 that comparator group provide an appropriate
comparison external benchmark for the Company’s performance.
For the achievement of median-ranked performance, 33% of that
part of the award vests. If the Company is ranked in the top 25%
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 below the median. If the Company is ranked between median
and the upper quartile, the number of shares that will vest will be
between 33% and 100% of the total number of shares the subject
of that element of the award, calculated on a straight-line basis.
The same vesting scale applies to the total shareholder return
elements of awards made prior to 2010.
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
vested and it is considered unlikely that any element of the LTIP
awards made in 2007 will vest.
Service Contracts and Notice Periods
In accordance with general market practice, each of the Executive
Directors has a rolling service contract requiring 12 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:
P M White
N P Hall
S R H Beevor
R Walker
10 January 2009
6 March 2003
20 February 2004
3 November 2005
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 2011
in the case of Mr R S Walker; at the Annual General Meeting in
2012 in the case of Messrs N P Hall and P M White; and at the
Annual General Meeting in 2013 in the case of Mr S R H Beevor.
The appointment and re-appointment and the remuneration of
Non-Executive Directors are matters reserved for the full Board.
The basic fee payable to each of the Non-Executive Directors
during 2009 was £35,000 per annum, with the Chairmen of the
Audit and Remuneration Committees being paid an additional
£7,000 and £6,500 respectively. The Senior Independent Director
also received an additional payment of £4,500 per annum.
The additional fees payable to the chairmen of the Audit and
Remuneration Committees and to the Senior Independent Director
reflect the increased duties attributable to fulfilling those roles.
With effect from 1 January 2010 it was agreed to increase the
fee payable to the Chairman of the Board to £112,500 per annum
and to increase the basic fee payable to each Non-Executive
Director to £39,000. It was also agreed to increase the fee payable
for chairing the Audit Committee to £8,000 per annum. The fees
payable for chairing the Remuneration Committee and for being
Senior Independent Director were not increased.
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UNITE
Annual Report & Accounts 2009
42
Total Shareholder Return
The following graph charts the total shareholder return of
the Company and the FTSE 350 Real Estate “Super Sector”
Index over the five year period from 31 December 2004 to
31 December 2009.
Total Shareholder Return
200
180
160
140
120
100
80
60
40
20
0
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 50% (or such lesser percentage as is required to take
the relevant Director’s holding up to the guideline level), 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 ESOT. 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.
D ec 04
Jun 05
D ec 05
Jun 06
D ec 06
Jun 07
D ec 07
Jun 08
D ec 08
Jun 09
D ec 09
UNITE
FTSE 350 Real Estate
Whilst there is no comparator index or group of companies which
truly reflects the activities of the Group, the FTSE 350 Real Estate
“Super Sector” Index (the constituent members of which are all
property holding and/or development companies or real estate
investment trusts 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.
Audited Information
Remuneration Summary
Executive Directors
M C Allan
J M Tonkiss
J J Lister
Non Executive Directors (Fees)
P M White
N P Hall
S R H Beevor 1
R Walker
G K Maddrell 2
N A Porter 2
Fees
£’s
–
–
–
85,227
46,500
41,500
35,000
44,296
18,849
* Payable in cash.
** Satisfied by an allocation of shares in the Company held in the ESOT.
Basic
Salaries
£’s
Performance
Bonus*
£’s
Deferred
Bonus**
£’s
385,000
210,000
200,000
116,480
63,535
98,400
116,480
63,535
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Other
Benefits***
£’s
20,403
12,631
14,714
–
–
–
–
–
–
Total
Remuneration
2009
£’s
638,363
349,701
313,114
85,227
46,500
41,500
35,000
44,296
18,849
Total
Remuneration
2008
£’s
565,574
312,441
283,144
–
46,500
41,500
35,000
117,500
50,000
*** Benefits receivable consist primarily of company car or car allowance and private health care insurance.
1 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.
2 The fees paid to each of Messrs G K Maddrell and N A Porter in 2009 relate to the period 1 January 2009 to 15 May 2009, on which latter date both Mr Maddrell and Mr Porter stood down from the Board.
Pensions
During the year Mr J M Tonkiss 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 and £25,000 in the year. The Company also
made contributions of £26,950 to a self investing pension scheme of Mr M C Allan.
UNITE
Annual Report & Accounts 2009
43
Share Options
Director
M C Allan
J M Tonkiss
J J Lister
G K Maddrell
N A Porter
N P Hall
S R H Beevor
R Walker
As at
31.12.08
11,823
54,733
1,545
5,235
50,000
8,255
3,154
5,235
58,662
–
393,706
–
–
–
Granted
during
the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Exercised
during
the year
–
54,733
–
–
–
–
–
–
–
–
373,229
–
–
–
Lapsed
during
the year
–
–
–
–
–
–
–
–
–
–
20,477
–
–
–
As at
31.12.09
11,823
–
1,545
5,235
50,000
8,255
3,154
5,235
58,662
–
–
–
–
–
Exercise
Price
323.5p
191p
323.5p
191p
232.5p
129p
158.5p
191p
232.5p
–
146.5p
–
–
–
Normal Exercise Dates
21.03.2005 – 20.03.2012
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
–
22.10.2005 – 21.10.2012
–
–
–
–
–
–
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Vesting of half the options granted prior to 2004 under the
Unapproved Scheme was based on the total shareholder return
of the Company against companies included in the FTSE Small
Companies Index (excluding investment trusts) over the three-year
period from the date of grant. Vesting of the other half was based
on the Company’s net asset growth exceeding 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. Options granted under the Unapproved Scheme
after 1 January 2004 were subject to revised performance criteria
based solely on total shareholder return against companies
included in the FTSE Small Companies Index (excluding
investments trusts).
The closing mid-market price on the day of exercise of options
by Mr M C Allan was 276.25p per share. Gains made by
Mr Allan equate to £46,796.72.
The closing mid-market price on the day of exercise of options
by Mr N A Porter was 277p per share. Gains made by Mr Porter
equate to £487,063.85.
As at 31 December 2009, the middle market price for ordinary
shares in the Company was 299.5p per share. During the course
of the year, the market price of the Company’s shares ranged from
38.5p to 300p per ordinary share.
Of the options referred to in the table 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”). Those options lapsed when Mr Porter resigned as a
Director. All other options were granted pursuant to The UNITE
Group plc Unapproved Share Option Scheme (the “Unapproved
Scheme”). All options were granted for no consideration.
Options granted under the Approved Scheme were not made
subject to performance conditions, which was 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 a market value, as at the date of grant, of no
more than £30,000).
UNITE
Annual Report & Accounts 2009
44
LTIP Awards
Director
M C Allan
J M Tonkiss
J J Lister
P M White
N P Hall
S R H Beevor
R Walker
G K Maddrell
N A Porter
Interests
held at
01.01.09
80,194
55,096
124,294
29,162
33,058
67,796
4,860
12,842
64,568
–
–
–
–
–
–
Interests awarded
during year
(ordinary shares
of 25p each
in the Company)
415,094
226,415
215,633
–
–
–
–
–
–
Market price
per share
when awarded
411.5p
544.5p
309.75p
92.75p
411.5p
544.5p
309.75p
92.75p
411.5p
544.5p
309.75p
92.75p
–
–
–
–
–
–
Interests vested
during the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Interests lapsed
in the year
80,194
29,162
4,860
–
–
–
–
–
–
–
–
–
Interests held
at 31.12.09
(ordinary shares
of 25p each
in the Company)
–
55,096
124,294
415,904
–
33,058
67,796
226,415
–
12,842
64,568
215,633
–
–
–
–
–
–
Period of qualifying conditions
11.04.2006 – 11.04.2009
11.04.2007 – 11.04.2010
15.04.2008 – 15.04.2011
09.04.2009 – 09.04.2012
11.04.2006 – 11.04.2009
11.04.2007 – 11.04.2010
15.04.2008 – 15.04.2011
09.04.2009 – 09.04.2012
11.04.2006 – 11.04.2009
11.04.2007 – 11.04.2010
15.04.2008 – 15.04.2011
09.04.2009 – 09.04.2012
–
–
–
–
–
–
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:
A table setting out the beneficial interests of the Directors in the
share capital of the Company as at 31 December 2009 is set
out on page 30.
By order of the Board
S R H Beevor
Chairman of the Remuneration Committee
3 March 2010
M C Allan
J M Tonkiss
J J Lister
2009
£
82,566
46,968
27,356
156,890
2008
£
118,217
61,654
41,205
221,076
Independent Auditors’ Report to the
members of The UNITE Group plc
UNITE
Annual Report & Accounts 2009
45
We have audited the financial statements of The UNITE Group plc for the year ended 31 December 2009 which comprise the
Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Balance
Sheets, the Consolidated and Company Statement of Changes in Shareholders’ Equity, the Group and Company Statement of Cash
Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
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 auditors’ 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
As explained more fully in the Directors’ Responsibilities Statement set out on page 37, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements
in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with
the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/UKP.
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Opinion on financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at
31 December 2009 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU
and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
•
•
•
the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006; and
the information given in the Directors’ Report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
information given in the Corporate Governance Statement set out on pages 34 to 36 with respect to internal control
and risk management systems in relation to financial reporting processes and about share capital structures is
consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
•
•
•
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit; or
a Corporate Governance Statement has not been prepared by the Company.
Under the Listing Rules we are required to review:
•
•
the Directors’ statement, set out on page 36, in relation to going concern; and
the part of the Corporate Governance Statement on pages 34 to 36 relating to the Company’s compliance with
the nine provisions of the June 2008 Combined Code specified for our review.
Stephen Bligh (Senior Statutory Auditor), for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants, 8 Salisbury Square, London EC4Y 8BB
3 March 2010
UNITE
Annual Report & Accounts 2009
46
Consolidated Income Statement
For the year ended 31 December 2009
Revenue
Cost of sales
Administrative expenses
Loss on disposal of property
Loss on part disposal of investment in joint venture
Net valuation losses on property
Loss before net finance costs
Loan interest and similar charges
Changes in fair value of interest rate swaps
Finance costs
Finance income
Net finance costs
Share of joint venture profit/(loss)
Loss before tax
Tax
Loss for the year
Loss for the period attributable to
Owners of the parent company
Minority interest
Earnings per share
Basic
Diluted
Note
2009
£’000
2008
Restated
£’000
2
2
2
3
5
5
5
9
6
9
265,352
133,594
(246,960)
(121,765)
(23,097)
(4,705)
(3,416)
–
(15,337)
(23,458)
(13,308)
(6,737)
(20,045)
891
(19,154)
6,929
(31,115)
(19,286)
(12,396)
(2,464)
(25,342)
(59,488)
(28,843)
(32,414)
(61,257)
2,211
(59,046)
(10,319)
(35,683)
(128,853)
1,233
12,511
(34,450)
(116,342)
(34,861)
(115,942)
411
(400)
(34,450)
(116,342)
18
18
(25.9p)
(25.9p)
(92.4p)
(92.4p)
The restatement of the comparatives has no impact on the loss for the year and is explained in Notes 9 and 18.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2009
UNITE
Annual Report & Accounts 2009
47
Loss for the period
Revaluation of investment property under development
Movements in effective hedges
Gains on hedging instruments transferred to income statement
Share of joint venture valuation gain on investment property under development
Share of joint venture movements in effective hedges
Other comprehensive income for the period
Total comprehensive income for the period
Attributable to
Owners of the parent company
Minority interest
All movements above are shown net of deferred tax.
2009
£’000
2008
£’000
(34,450)
(116,342)
–
1,854
–
–
574
2,428
1,510
(5,825)
1,142
1,309
(9,960)
(11,824)
(32,022)
(128,166)
(32,553)
(127,366)
531
(800)
(32,022)
(128,166)
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UNITE
Annual Report & Accounts 2009
48
Consolidated Balance Sheet
At 31 December 2009
Assets
Investment property
Investment property under development
Property, plant and equipment
Investment in joint ventures
Joint venture investment loans
Intangible assets
Other receivables
Total non-current assets
Completed property
Properties under development
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Borrowing and financial derivatives
Trade and other payables
Current tax creditor
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
Equity attributable to the owners of the parent company
Minority interest
Total equity
Note
2009
£’000
2008
Restated
£’000
2007
Restated
£’000
7
7
8
9
9
10
12
7
7
11
12
13
15
14
15
16
17
17
17
17
17
17
403,600
403,700
597,747
–
52,989
102,180
7,351
8,030
9,094
148,344
125,481
130,218
12,239
6,542
–
578,076
204,113
5,618
7,219
–
5,107
8,089
1,103
603,037
853,538
75,214
–
38,097
249,124
121,936
8,166
44,714
48,764
10,311
55,395
111,845
104,557
48,374
56,316
343,854
501,889
331,183
921,930
1,104,926
1,184,721
(179)
(136,876)
(240,234)
(72,581)
(80,172)
(116,928)
(475)
(372)
(873)
(73,235)
(217,420)
(358,035)
(467,648)
(552,140)
(363,720)
–
–
(12,873)
(467,648)
(552,140)
(376,593)
(540,883)
(769,560)
(734,628)
381,047
335,366
450,093
39,902
31,079
30,874
247,539
176,541
174,333
40,177
51,097
–
40,177
85,699
1,805
40,177
187,957
17,644
(12,827)
(15,135)
(892)
365,888
320,166
450,093
9
15,159
15,200
–
381,047
335,366
450,093
The restatement of the comparatives, which has no impact on net assets, and the presentation of a third balance sheet are explained
in Note 9.
These financial statements were approved by the Board of Directors on 3 March 2010 and were signed on its behalf by:
M C Allan
Director
J J Lister
Director
Company Balance Sheet
At 31 December 2009
UNITE
Annual Report & Accounts 2009
49
Assets
Investments in subsidiaries
Investments in joint ventures
Total investments
Joint venture investment loan
Total non-current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current Liabilities
Borrowing and financial derivatives
Trade and other payables
Total current liabilities
Net Assets
Equity
Issued share capital
Share premium
Merger reserve
Retained earnings
Total equity
Note
9
9
9
12
13
15
14
17
17
17
17
2009
£’000
2008
Restated
£’000
2007
Restated
£’000
96,818
115,810
238,195
1,571
764
4,433
98,389
116,574
242,628
3,836
102,225
304,622
1,008
305,630
407,855
3,461
3,146
120,035
245,774
253,270
257,125
–
–
253,270
257,125
373,305
502,899
–
(32,263)
(32,263)
(1,730)
(40,573)
(42,303)
(648)
(42,239)
(42,887)
375,592
331,002
460,012
39,902
31,079
30,874
247,539
176,541
174,333
40,177
47,974
40,177
83,205
40,177
214,628
375,592
331,002
460,012
The restatement of the comparatives, which has no impact on net assets, and the presentation of a third balance sheet are explained
in Note 9.
Total equity is wholly attributable to equity holders of The UNITE Group plc.
These financial statements were approved by the Board of Directors on 3 March 2010 and were signed on its behalf by:
M C Allan
Director
J J Lister
Director
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UNITE
Annual Report & Accounts 2009
50
Consolidated Statement of Changes in Shareholders’ Equity
For the year ended 31 December 2009
Issued
share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
At 1 January 2009
31,079
176,541
40,177
Loss for the period
Other comprehensive
income for the period
Transfer (see Note 1)
Shares issued
Fair value of share-
based payments
Own shares acquired
Dividends to minority
interest
–
–
–
–
–
–
8,823
70,998
–
–
–
–
–
–
–
–
–
–
–
–
–
–
413
(1,959)
–
At 31 December 2009
39,902
247,539
40,177
51,097
Issued
share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Retained
earnings
£’000
At 1 January 2008
30,874
174,333
40,177
187,957
Loss for the year
Other comprehensive
income for the year
Investment received
from minority interest
Transfer on completion
or disposal of
investment property
Shares issued
Fair value of share-
based payments
Own shares acquired
Dividends to the owners
of the parent company
–
–
–
–
–
–
–
–
205
2,208
–
–
–
–
–
–
–
–
–
–
–
–
–
–
At 31 December 2008
31,079
176,541
40,177
(115,942)
–
–
–
308
(2,192)
(3,090)
85,699
Retained
earnings
£’000
85,699
(34,861)
–
Revaluation
reserve
£’000
Hedging
reserve
£’000
Minority
interest
£’000
Total
£’000
1,805
(15,135)
15,200
335,366
–
–
–
411
(34,450)
2,308
120
2,428
1,805
(1,805)
–
–
–
–
–
–
–
–
–
–
79,821
413
(1,959)
(572)
(572)
(12,827)
15,159
381,047
Revaluation
reserve
£’000
17,644
–
Hedging
reserve
£’000
(892)
–
Minority
interest
£’000
Total
£’000
–
450,093
(400)
(116,342)
2,819
(14,243)
(400)
(11,824)
–
–
–
–
–
–
16,000
16,000
–
–
–
–
–
–
2,413
308
(2,192)
(3,090)
1,805
(15,135)
15,200
335,366
18,658
(18,658)
–
–
–
–
–
–
–
–
–
–
Company Statement of Changes in Shareholders’ Equity
For the year ended 31 December 2009
UNITE
Annual Report & Accounts 2009
51
At 1 January 2009
Loss for the period
Revaluation of investments in subsidiaries and joint ventures
Shares issued
At 31 December 2009
At 1 January 2008
Loss for the period
Revaluation of investments in subsidiaries and joint ventures
Shares issued
Dividends to shareholders
At 31 December 2008
Issued
share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Retained
earnings
£’000
Total
£’000
31,079
176,541
40,177
83,205
331,002
–
–
–
–
8,823
70,998
–
–
–
(2,543)
(2,543)
(32,688)
(32,688)
–
79,821
39,902
247,539
40,177
47,974
375,592
Issued
share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Retained
earnings
Restated
£’000
Total
Restated
£’000
30,874
174,333
40,177
214,628
460,012
–
–
205
–
–
–
2,208
–
–
–
–
–
(2,279)
(2,279)
(126,054)
(126,054)
–
(3,090)
2,413
(3,090)
31,079
176,541
40,177
83,205
331,002
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Statements of Cash Flows
For the year ended 31 December 2009
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
Loss 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
Cash flows from taxation
Investing activities
Proceeds from sale of investment property
Payments to/on behalf of subsidiaries
Payments from subsidiaries
Equity invested in joint ventures and subsidiaries
Advances on loans to 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
Total interest paid
Interest capitalised into inventory & property under
development included in cash flows from operating activities
Interest paid in respect of financing activities
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 (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
Note
2009
£’000
Group
2008
Restated
£’000
Company
2008
Restated
£’000
2009
£’000
(34,450)
(116,342)
(2,440)
(2,279)
4
5
9
6
3,359
413
15,337
19,154
3,416
–
(6,929)
(2,243)
(1,233)
(3,176)
(15,263)
3,356
308
25,342
59,046
12,396
2,464
10,319
2,402
(12,511)
(13,220)
(9,653)
82,128
(202,402)
2,145
(845)
94,246
(27,375)
64,989
(158,404)
(476)
(396)
52,695
251,553
–
–
–
76
–
–
–
–
–
–
–
–
(280)
–
–
–
–
–
(2,364)
(304)
(2,559)
139
–
–
–
–
(181)
(2,849)
(1,852)
(4,272)
–
–
–
–
–
–
(472,687)
413,204
(1,843)
5,745
(16,117)
(14,572)
–
–
–
(306)
6,923
480
(1,645)
(24,212)
–
5,258
1,877
(1,182)
(766)
–
(53,371)
33,935
187,252
(74,055)
3,902
(21,564)
(51,141)
(179)
–
–
–
–
–
–
–
(179)
–
–
–
–
–
–
–
–
(35)
–
(35)
–
9,532
(12,032)
(24)
79,821
(1,959)
16,219
(34,922)
(478)
2,413
(2,192)
260,433
347,865
(462,119)
(320,762)
–
–
(572)
(136,452)
(38,004)
86,768
48,764
13
(35)
16,000
(3,090)
4,799
33,251
53,517
86,768
79,821
2,413
–
–
–
–
–
–
79,642
2,738
(1,730)
1,008
–
–
–
–
–
(3,090)
(712)
(1,082)
(648)
(1,730)
Notes to the Financial Statements
UNITE
Annual Report & Accounts 2009
53
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 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 Section s408 of the
Companies Act 2006 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 expect that the Group will
continue as a going concern. These forecasts show that the Group has improved its headroom in covenant compliance and its cash
position during the year following the issue of new shares, sales of properties and various cost saving initiatives.
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 on the Chairman’s Statement and Business Review. The principle 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; and the achievement of operating targets, in particular projected occupancy levels and rental increases.
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
• Financial assets and liabilities including interest rate swaps
• Land and buildings included in property, plant and equipment
• Joint venture investment loans
Accounting standards adopted
Included within the IASB’s Annual Improvement programme is a change in the accounting treatment for investment properties under
development. These properties are now accounted for under IAS 40, therefore revaluation surpluses and deficits on investment properties
under development are recognised in the income statement rather than equity. Previously development properties were accounted for
under IAS16 and revaluations were consequently taken directly to reserves. This change has been applied to 2009 and in accordance
with the requirements of adopted IFRS, the results of the prior periods have not been restated. An impact of the transition is that the
opening balance on the revaluation reserve has been transferred, on 1 January 2009, to retained earnings.
IAS 1 (revised) requires the presentation of a more detailed statement of changes in equity and statement of comprehensive income
as primary statements, separate from the income statement. As a result, a consolidated statement of comprehensive income and a
consolidated statement of changes in equity, showing changes in each component of equity for each period presented, have been
included in the primary statements.
Impact of accounting standards and interpretations in issue but not yet effective
A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2009
and have not been applied in preparing these consolidated financial statements. None of these are expected to have an effect on the
consolidated financial statements of the Group with the exception of the following item:
Amendment to IAS39 “Financial Instruments”. This standard is amended such that gains or losses on a hedged instrument should be
reclassified from equity to profit or loss during the period that the hedged forecast cash flows affect profit or loss. This amendment will
apply to the Group from the accounting period commencing 1 January 2010.
The Group has not early adopted any standard, amendment or interpretation.
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Notes to the Financial Statements
continued
1. Significant accounting policies (continued)
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 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 completed property and 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.
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 basis. Interest free joint venture investment loans are initially recorded at fair value the
difference between the nominal amount and fair value is treated as an investment in joint venture. The implied discount is amortised over
the contracted life of the investment.
(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.
(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.
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
55
1. Significant accounting policies (continued)
(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 highly probable forecast loan
interest payment, the effective part of any valuation 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 (o).
Investment properties held under operating leases are not included in assets.
(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 include adjustments to remove the fair value of construction, which has
yet to take place and making reasonable assumptions regarding expected rentals and costs.
Any gain or loss arising from a change in fair value is recognised in the income statement.
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 but
stops if development activities are suspended. 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. During the year the
average capitalisation rate used was 6.7% (2008: 6.9%).
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
56
Notes to the Financial Statements
continued
1. Significant accounting policies (continued)
(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
50 years
• Leasehold improvements Shorter of life of lease and economic life
• Fixtures and fittings
• Motor vehicles
4 years
4 years
• Plant & equipment
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 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. The Group’s development costs relate
to designs and processes at the Group’s manufacturing facility.
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
UNITE
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
57
1. Significant accounting policies (continued)
(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.
(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.
(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 declared.
(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 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.
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. The purchases are shown as “Own shares acquired” in the retained earnings in
Note 17.
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Notes to the Financial Statements
continued
1. Significant accounting policies (continued)
(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 can earn promote fees relative to criteria specified in the joint venture agreements.
(iii) Property sales
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) Manufacturing revenue
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.
(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.
UNITE
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
59
2. Segment reporting
Segment information for the Group is presented in respect of the Group’s business segments based on the Group’s management and
internal reporting structure. The Group undertakes its Development and Investment activities directly and in joint ventures with third parties.
The joint ventures are an integral part of each segment and have similar economic and other characteristics to the Group’s direct activities.
Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis and is
reported excluding mark to market and valuation movements.
The Directors do not consider that the group has meaningful geographical segments as it operated exclusively in the United Kingdom
in the year.
The Group’s Development segment undertakes the acquisition and development of properties, (including the manufacture and sale of
modular building components) to practical completion. Many of the Group’s properties are acquired with a view to a future sale to the
UNITE UK Student Accommodation Fund. The Development segment’s revenue predominantly comprises the sales proceeds of
properties, including those sold to the UNITE UK Student Accommodation Fund; it also includes revenue from the sale of modules
to third parties and joint ventures, and development management fees earned from joint ventures.
The Investment segment comprises the asset and property management of completed properties, owned directly by the Group or by
joint ventures. Its revenues are derived from net rental income and asset management fees earned from joint ventures.
(a) Segment revenues and costs
2009
Revenue
Cost of sales
Write down of work in progress, property under development
and completed property
Total cost of sales
Administrative expenses
Loan interest and similar charges
Interest rate swap payments on ineffective hedges
Finance income
Share of joint venture investment segment result
Adjust asset management fee for minority interest
Adjust property sales for minority interest
Segment result/corporate costs
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
Note
Investment
segment
£’000
Development
segment
£’000
64,405
200,947
(29,416)
(197,935)
–
(19,609)
(29,416)
(217,544)
(13,875)
(657)
21,114
(17,254)
(13,284)
(9,684)
480
7,430
160
–
–
–
–
–
–
430
Unallocated
corporate
costs
£’000
–
–
–
–
(8,565)
(8,565)
–
–
–
–
–
–
Total
£’000
265,352
(227,351)
(19,609)
(246,960)
(23,097)
(4,705)
(13,284)
(9,684)
480
7,430
160
430
2 (b)
6,216
(16,824)
(8,565)
(19,173)
1
9
–
6
4
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
Note
Investment
segment
£’000
63,080
Development
segment
£’000
70,514
(30,028)
(60,248)
–
(30,028)
(13,680)
(31,489)
(91,737)
(6,300)
19,372
(27,523)
(28,365)
1,409
1,877
6,654
947
–
–
–
–
Unallocated
corporate
costs
£’000
–
–
–
–
(11,135)
(11,135)
–
–
–
–
Total
£’000
133,594
(90,276)
(31,489)
(121,765)
(31,115)
(19,286)
(28,365)
1,409
1,877
6,654
Share of joint venture investment segment result
Segment result/corporate costs
2 (b)
(27,523)
(11,135)
(37,711)
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
60
Notes to the Financial Statements
continued
2. Segment reporting (continued)
(a) Segment revenues and costs (continued)
Investment segment revenue
Management fees (Note 2c)
Adjust asset management fee for minority interest
Management fees per income statement
Rental income from wholly owned and leased assets (Note 2c)
Investment segment revenue
Development segment revenue
Property sales from completed properties and properties under development
Manufacturing revenue
Development management fee
Development segment revenue
(b) Segment results and adjusted loss
2009
£’000
6,404
(160)
6,244
58,161
64,405
2008
£’000
5,237
–
5,237
57,843
63,080
2009
£’000
2008
£’000
189,973
69,713
9,902
1,072
–
801
200,947
70,514
The Group reports an adjusted loss, on the basis recommended for real estate companies by EPRA, the European Public Real Estate
Association, which excludes movements relating to changes in values of investment properties and interest rate swaps, profits on
disposal of investment properties and the related tax effects. The components of this loss are shown below together with a reconciliation
to the loss reported under IFRS. The items shown in this table represents the amounts attributable to the parent company shareholders,
hence excluding any minority interest. Items affected in this way have been marked as “net of minority interest”.
Investment segment result (net of minority interest)
Development segment result (net of minority interest)
Other unallocated items
Corporate costs (excluding share option fair value charges)
Share option fair value charges
Restructuring costs
Share of joint venture overheads (net of minority interest)
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 current tax credit
Current tax charge (net of minority interest)
Note
2(c)
2009
£’000
6,216
2008
£’000
947
(16,824)
(27,523)
(5,118)
(412)
(3,035)
(464)
–
(24)
–
(9,560)
683
(201)
(6,018)
(308)
(4,809)
(290)
(6,120)
(478)
(137)
–
–
(24)
Adjusted loss for the year attributable to owners of the parent company
(28,739)
(44,760)
2. Segment reporting (continued)
(b) Segment results and adjusted loss (continued)
Reconciliation of adjusted loss to IFRS reported loss
Adjusted loss for the year attributable to owners of the parent company
Net valuation losses on properties
Loss on sale of property
Share of joint venture valuation losses
Minority interest share of valuation (losses)/gains
Loss on part disposal of investment in joint venture
Share of joint venture profit/(loss) on disposal
Changes in fair value of interest rate swaps
Share of joint venture changes in fair value of interest rate swaps
Interest rate swap payments/(receipts) on ineffective hedges allocated to investment segment
Deferred tax
Share of joint venture deferred tax
Loss for the year attributable to owners of the parent company
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
61
2009
£’000
(28,739)
(15,337)
(3,416)
(1,472)
(71)
–
62
2008
£’000
(44,760)
(25,342)
(12,396)
(10,360)
480
(2,464)
(56)
2,823
(32,414)
(55)
9,684
1,619
41
–
(1,409)
12,535
244
(34,861)
(115,942)
The Group measures its operational performance by considering the income generated from properties compared with its overhead and
can be calculated as follows:
Net portfolio contribution
Investment segment result
Corporate costs (excluding share option fair value charges)
Share of joint venture overheads
Net portfolio contribution
2009
£’000
6,216
(5,118)
(464)
634
2008
£’000
947
(6,018)
(290)
(5,361)
1
9
–
6
4
s
t
n
e
m
e
t
a
t
s
The Group’s wholly owned properties are split between several categories of fixed and current assets. Those held as fixed assets are
carried at fair value with profits or losses on disposal shown separately in the income statement. Whereas properties in current assets
are carried at cost unless fair value is lower and disposals are included in sales and cost of sales. Additionally revaluation and disposal
profits or losses of properties held by joint ventures are accounted for separately as part of the Group’s share of joint ventures. The overall
impact of the movement in property valuations and profits or losses on disposals on the interests of the parent company shareholders is
summarised on the next page:
l
i
a
c
n
a
n
F
i
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
62
Notes to the Financial Statements
continued
2. Segment reporting (continued)
(b) Segment results and adjusted loss (continued)
Property valuation movements
2009
Development
Property under development
Investment property under development
Completed property
Share of joint venture
Land write downs
Investment
Investment property
Share of joint venture
Loss on disposal of investment property
Tangible fixed assets
Total effect on net assets
Impact of unbooked NAV:
– from property completion
– arising from development
Property valuation movements
2008
Development
Property under development
Investment property under development
Completed property
Investment property
Share of joint venture
Work in progress write downs
Investment
Investment property
Share of joint venture
Loss on disposal of investment property
Tangible fixed assets
Total effect on net assets
Impact of unbooked NAV:
– arising from development
Current assets
Fixed assets
Cost of sales
impairments
£’000
Revenue/cost of
sales disposal
£’000
Net valuation
movement
£’000
Loss on disposal
£’000
(11,691)
(5,686)
–
–
–
(6,682)
(5,330)
9,963
–
(2,588)
(19,609)
–
–
–
–
–
–
1,997
–
–
–
4,277
(4,685)
–
–
–
–
–
(8,460)
(3,540)
–
(12,000)
(195)
–
–
–
–
–
–
–
62
(3,416)
(3,354)
–
(19,609)
4,277
(16,880)
(3,354)
(35,566)
–
–
2,695
(13,646)
–
–
–
–
Current assets
Fixed assets
Cost of sales
impairments
£’000
Revenue/cost of
sales disposal
£’000
Net valuation
movement
£’000
Loss on disposal
£’000
–
(2,541)
–
10,473
2,222
–
(30,852)
(10,573)
–
–
–
–
–
–
–
–
(56)
10,518
10,154
(19,487)
–
–
–
(1,228)
10,518
–
–
(10,774)
(31,489)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(12,396)
(41,425)
(12,452)
(53,877)
(325)
–
(325)
(31,489)
10,518
(31,596)
(12,452)
(65,019)
–
(9,789)
–
–
(9,789)
Total
(17,377)
(6,682)
4,633
1,997
(2,588)
(20,017)
(8,460)
(3,478)
(3,416)
(15,354)
(195)
2,695
(13,646)
(46,517)
Total
(19,487)
(2,541)
9,290
10,473
2,222
(10,774)
(10,817)
(30,852)
(10,629)
(12,396)
Total effect on adjusted net assets
(19,609)
(6,674)
(16,880)
(3,354)
Total effect on adjusted net assets
(31,489)
729
(31,596)
(12,452)
(74,808)
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
63
2. Segment reporting (continued)
(c) Segment result (see through basis)
Information on the Group’s investment activities on a see through basis (showing the Group’s share of joint ventures), including an
allocation of interest, is set out below.
2009
Wholly Owned
£’000
Leased/Other
£’000
Total
£’000
USAF
£’000
Capital Cities
£’000
Student Village
£’000
OCB
£’000
Total
£’000
100% UNITE
Share of co-invested joint ventures
Group
on see
through
basis
Total
£’000
Rental income
43,200
14,961
58,161
14,522
6,610
2,587
Property operating expenses
(excl. lease rentals)
(12,921)
(5,767)
(18,688)
(4,016)
(1,266)
Net operating income
30,279
39,473
10,506
9,194
6,404
6,404
(13,875)
(13,875)
–
–
5,344
(446)
–
–
–
(759)
1,828
–
–
Management fees
Administrative expenses
Investment segment result
before interest and operating
lease rentals
Operating lease rentals
Loan interest and similar
charges
Interest rate swap payments
Finance income
Financing costs
30,279
1,723
32,002
10,506
4,898
1,828
–
(10,728)
(10,728)
–
–
–
(13,284)
(9,684)
480
–
–
–
(13,284)
(4,970)
(3,614)
(1,270)
(9,684)
480
–
22
–
12
–
16
(22,488)
(10,728)
(33,216)
(4,948)
(3,602)
(1,254)
–
–
–
–
–
–
–
–
–
2
2
2
23,719
81,880
(6,041)
(24,729)
17,678
57,151
(446)
5,958
–
(13,875)
17,232
49,234
–
(10,728)
(9,854)
(23,138)
–
(9,684)
52
532
(9,802)
(43,018)
7,430
6,216
Investment segment result
7,791
(9,005)
(1,214)
5,558
1,296
574
1
9
–
6
4
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
Property operating expenses and operating lease rentals are shown as cost of sales in Note 2(a). Operating lease rentals result from sale
and leaseback transactions which are considered a form of financing, hence the costs are shown next to interest above.
2008
Wholly Owned
£’000
Leased/Other
£’000
Total
£’000
USAF
£’000
Capital Cities
£’000
Student Village
£’000
Total
£’000
100% UNITE
Share of co-invested joint ventures
Group
on see
through
basis
Total
£’000
Rental income
44,895
12,948
57,843
13,032
5,016
2,343
20,391
78,234
Property operating expenses
(excl. lease rentals)
Net operating income
Joint venture management fees
Administrative expenses
Investment segment result before
interest and operating lease rentals
(15,209)
(5,710)
(20,919)
(3,990)
(708)
(568)
(5,266)
(26,185)
29,686
–
–
7,238
5,237
36,924
5,237
(13,680)
(13,680)
9,042
4,308
1,775
15,125
52,049
–
–
(336)
–
–
–
(336)
4,901
–
(13,680)
29,686
(1,205)
28,481
9,042
3,972
1,775
14,789
43,270
Operating lease rentals
–
(9,109)
(9,109)
–
–
–
–
(9,109)
Loan interest and similar charges
Interest rate swap receipts
Finance income
Financing costs
(28,365)
1,409
1,877
–
–
–
(28,365)
(4,505)
(2,646)
(1,561)
(8,712)
(37,077)
1,409
1,877
–
342
–
95
–
140
–
577
1,409
2,454
(25,079)
(9,109)
(34,188)
(4,163)
(2,551)
(1,421)
(8,135)
(42,323)
Investment segment result
4,607
(10,314)
(5,707)
4,879
1,421
354
6,654
947
Property operating expenses and operating lease rentals are shown as cost of sales in Note 2(a). Operating lease rentals result from sale
and leaseback transactions which are considered a form of financing, hence the costs are shown next to interest above.
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
64
Notes to the Financial Statements
continued
2. Segment reporting (continued)
(d) Segment assets and liabilities (see through basis)
31 December 2009
100%
UNITE
Wholly
Owned
£’000
Share of co-invested joint ventures
Group on see
through basis
USAF
£’000
Capital
Cities
£’000
Student
Village
£’000
OCB
£’000
Total
£’000
Total
£’000
Investment property
403,600
163,747
110,922
29,495
–
304,164
707,764
Investment property under development
Completed property
Property under development
–
204,113
38,097
–
–
–
150
–
–
–
–
–
30,938
31,088
31,088
–
–
–
–
204,113
38,097
Investment & development property
645,810
163,747
111,072
29,495
30,938
335,252
981,062
Cash – investment
Other assets – investment
Other assets – development
Other assets
Debt – investment
Debt – development
Other liabilities – investment
Other liabilities – development
Interest rate swaps
Total liabilities
Net assets attributable to owners of the parent
company
Minority Interest
Net assets
Adjusted net assets
Net assets attributable to owners of the parent
company
Mark to market of interest rate swaps
Valuation gain not recognised on property held at cost
Deferred tax
Adjusted net assets
Reconciliation of segment assets and liabilities
to balance sheet
Investment assets
Development assets
Assets attributable to minority interest
Total assets
Interest in joint ventures
Investment liabilities
Development liabilities
Liabilities attributable to minority interest
48,429
54,239
12,534
13,684
2,043
2,241
2,047
20,015
68,444
160
–
183
2
80
–
–
730
423
732
54,662
13,266
115,202
13,844
2,228
2,321
2,777
21,170
136,372
(276,020)
(77,834)
(76,004)
(22,735)
– (176,573)
(452,593)
(162,406)
–
–
–
(14,493)
(14,493)
(176,899)
(45,040)
(2,376)
(1,750)
(1,920)
–
(6,046)
(51,086)
(27,831)
–
(267)
–
(3,717)
(3,984)
(31,815)
(29,401)
(1,756)
(6,148)
(1,302)
(546)
(9,752)
(39,153)
(540,698)
(81,966)
(84,169)
(25,957)
(18,756)
(210,848)
(751,546)
220,314
95,625
29,131
5,859
14,959
145,574
365,888
150
15,009
–
–
–
15,009
15,159
220,464
110,634
29,131
5,859
14,959
160,583
381,047
220,314
95,625
29,131
29,533
17,986
–
1,756
6,148
–
–
–
–
5,859
1,302
–
(33)
14,959
145,574
365,888
546
9,752
39,285
–
–
–
17,986
(33)
(33)
267,833
97,381
35,279
7,128
15,505
155,293
423,126
506,268
177,591
113,148
31,816
2,047
324,602
830,870
254,744
335
–
–
152
–
–
–
31,668
31,820
286,564
–
–
335
761,347
177,591
113,300
31,816
33,715
356,422 1,117,769
160,583
921,930
(477,760)
(81,966)
(83,902)
(25,957)
(546)
(192,371)
(670,131)
(62,938)
(185)
–
–
(267)
–
–
–
(18,210)
(18,477)
(81,415)
–
–
(185)
Total liabilities
(540,883)
(81,966)
(84,169)
(25,957)
(18,756)
(210,848)
(751,731)
See through gearing is calculated on an adjusted basis as 133% (2008: 174%).
Development assets include completed property as these are held for resale.
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
65
2. Segment reporting (continued)
(d) Segment assets and liabilities (see through basis – continued)
31 December 2008 (Restated – see Note 9)
Investment property
Investment property under development
Completed property
Property under development
100%
UNITE
Wholly
Owned
£’000
Share of co-invested joint ventures
Group on see
through basis
USAF
£’000
Capital
Cities
£’000
Student
Village
£’000
Total
£’000
Total
£’000
403,700
166,381
116,919
29,040
312,340
716,040
52,989
75,214
249,124
–
–
–
150
–
–
–
–
–
150
–
–
53,139
75,214
249,124
Investment & development property
781,027
166,381
117,069
29,040
312,490 1,093,517
Cash
Other assets – investment
Other assets – development
Other assets
Debt – investment
Debt – development
Other liabilities – investment
Other liabilities – development
Interest rate swap
Total liabilities
111,845
3,998
2,310
65,971
14,934
586
–
142
166
3,576
3,505
–
9,884
4,233
166
121,729
70,204
15,100
192,750
4,584
2,618
7,081
14,283
207,033
(381,587)
(89,132)
(74,989)
(22,972)
(187,093)
(568,680)
(259,653)
–
(53,272)
(3,040)
(27,272)
–
(47,776)
(2,001)
–
(1,354)
(1,926)
(7,046)
–
–
(259,653)
(7,337)
(11,731)
(65,003)
–
(1,926)
(29,198)
(1,027)
(10,074)
(57,850)
(769,560)
(94,173)
(85,315)
(31,336)
(210,824)
(980,384)
Net assets attributable to owners of the parent company
204,217
76,792
34,372
4,785
115,949
320,166
Minority Interest
Net assets
Adjusted net assets
50
–
–
–
15,150
15,200
204,267
91,942
34,372
4,785
131,099
335,366
Net assets attributable to owners of the parent company
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
Adjusted net assets
46,668
28,937
–
2,001
7,046
1,027
10,074
–
–
–
–
–
85
–
85
56,742
28,937
85
279,822
78,793
41,418
5,897
126,108
405,930
Reconciliation of segment assets and liabilities
to balance sheet
Investment assets
Development assets
Assets attributable to minority interest
Total assets
Interest in joint ventures
Investment liabilities
Development liabilities
Total liabilities
581,516
170,964
119,371
36,121
326,456
907,972
392,261
50
–
–
316
–
–
–
316
392,577
–
50
973,827
170,964
119,687
36,121
326,772 1,300,599
131,099
1,104,926
(486,544)
(94,172)
(83,389)
(31,336)
(208,897)
(695,441)
(283,016)
–
(1,926)
–
(1,926)
(284,942)
(769,560)
(94,172)
(85,315)
(31,336)
(210,823)
(980,383)
See through gearing is calculated on an adjusted basis at 174%.
Development assets include completed property as these are held for resale.
1
9
–
6
4
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
66
Notes to the Financial Statements
continued
2. Segment reporting (continued)
(d) Segment assets and liabilities (see through basis – continued)
31 December 2007 (Restated – see Note 9)
Investment property
Investment property under development
Property under development
100%
UNITE
Wholly
Owned
£’000
Share of co-invested joint ventures
Group on see
through basis
USAF
£’000
Capital Cities
£’000
Student Village
£’000
Total
£’000
Total
£’000
597,747
167,042
67,593
31,826
266,461
864,208
102,180
121,936
–
–
36,001
–
–
–
36,001
138,181
–
121,936
Investment and development property
821,863
167,042
103,594
31,826
302,462 1,124,325
Cash
Other assets – investment
Other assets – development
Interest rate swaps
Other assets
Debt – investment
Debt – development
Other liabilities – investment
Other liabilities – development
Interest rate swaps
Other liabilities – unallocated
Total liabilities
Net assets
Adjusted net assets
56,316
58,386
111,728
1,103
4,158
509
–
–
2,522
1,113
365
–
3,910
10,590
95
–
338
1,717
365
338
66,906
60,103
112,093
1,441
227,533
4,667
4,000
4,343
13,010
240,543
(409,253)
(78,398)
(43,696)
(23,552)
(145,646)
(554,899)
(185,898)
–
(20,458)
–
(20,458)
(206,356)
(62,471)
(3,293)
(55,330)
–
(8,803)
(228)
(1,228)
(4,247)
(434)
(3,895)
(8,416)
(70,887)
–
–
(4,247)
(59,577)
(662)
(718)
(9,465)
(13,591)
(12,873)
–
–
(718)
(734,628)
(81,919)
(70,063)
(28,165)
(180,147)
(914,775)
314,768
89,790
37,531
8,004
135,325
450,093
Net assets attributable to owners of the parent company
314,768
89,790
37,531
8,004
135,325
450,093
Mark to market of interest rate swaps
Valuation gain not recognised on property held at cost
Deferred tax
Adjusted net assets
Reconciliation of segment assets and liabilities to
balance sheet
Investment assets
Development assets
Total assets
Interest in joint ventures
Investment liabilities
Development liabilities
Unallocated liabilities
Total liabilities
6,828
38,726
12,873
228
434
–
–
–
–
(338)
–
718
324
–
718
7,152
38,726
13,591
373,195
90,018
37,965
8,384
136,367
509,562
713,552
171,709
71,228
36,169
279,106
992,658
335,844
–
36,366
–
36,366
372,210
1,049,396
171,709
107,594
36,169
315,472 1,364,868
135,325
1,184,721
(480,527)
(81,919)
(45,358)
(27,447)
(154,724)
(635,251)
(241,228)
(12,873)
–
–
(24,705)
–
(24,705)
(265,933)
–
(718)
(718)
(13,591)
(734,628)
(81,919)
(70,063)
(28,165)
(180,147)
(914,775)
See through gearing is calculated on an adjusted basis at 136%.
Development assets include completed property as these are held for resale.
3. Expenses
Group result before tax is stated after charging:
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
– 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 investment property to:
– USAF (see Note 9)
– Other purchasers
Loss on the part disposal of joint ventures
Amortisation of intangible assets other than goodwill
(included in administrative expenses)
Rentals paid under operating leases
£’000
8,460
6,682
195
–
3,416
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
67
2009
£’000
186
90
440
459
–
£’000
2008
£’000
186
65
238
500
10
1,361
1,403
20,379
4,638
325
15,337
25,342
5,412
6,984
3,416
–
1,998
13,331
12,396
2,464
1,953
11,899
1
9
–
6
4
s
t
n
e
m
e
t
a
t
s
Non-audit fees in respect of the parent company are included within the Group amounts as disclosed above.
l
i
a
c
n
a
n
F
i
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 administrative
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
Number of employees
2009
376
515
891
2009
£’000
27,841
2,847
593
413
2008
466
542
1,008
2008
£’000
30,741
3,141
788
308
31,694
34,978
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
68
Notes to the Financial Statements
continued
4. Staff numbers and costs (continued)
Company
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).
Directors remuneration
Directors’ emoluments
2009
£’000
1,192
2008
£’000
1,611
The aggregate amount paid to money purchase pension schemes in respect of the Directors for the year was £78,200 (2008: £99,845).
Retirement benefits accrued to three directors during the year (2008: four directors).
Full details of Directors’ remuneration are disclosed on pages 38 to 44.
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 £0.658 million (2008: £0.580 million ) in respect of
Board services.
5. Net finance costs
Group
Recognised in the income statement:
Finance income
– Interest income on deposits
– Impact of discounting on interest free joint venture investment loans (Note 9)
Finance income
Gross interest expense on loans
Interest capitalised
Loan break costs
Loan interest and similar charges
Changes in fair value of interest rate swaps
– transferred from equity
– relating to ineffective hedges
Finance costs
Net finance costs
Recognised directly in equity:
Changes in fair value of interest rate swaps
– transferred to income statement
– relating to effective hedges
2009
£’000
(480)
(411)
(891)
2008
Restated
£’000
(1,877)
(334)
(2,211)
24,183
48,789
(10,899)
(20,424)
24
478
13,308
28,843
–
6,737
6,737
20,045
19,154
1,586
30,828
32,414
61,257
59,046
–
(3,473)
(3,473)
(1,586)
7,604
6,018
6. Tax credit
Group
Recognised in the income statement:
Current tax expense
Corporation tax in respect of income
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
Adjustments for prior years
Total tax credit in income statement
Reconciliation of effective tax rate:
Loss before tax
Income tax using the domestic corporation tax rate
Effect of indexation on investment and development property
Non-deductible expenses
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
Effects of other comprehensive income:
Revaluation of investment property under
development
Gross
£’000
–
Tax
£’000
–
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
69
2009
£’000
–
461
–
(75)
386
2008
£’000
–
301
101
(378)
24
(333)
(12,093)
(1,286)
(1,619)
(1,233)
(442)
(12,535)
(12,511)
%
2009
£’000
%
2008
£’000
(100.0)%
(35,683)
(100.0)%
(128,853)
(28.0)%
(9,991)
(28.5)%
(36,723)
0.9%
9.0%
(1.1)%
22.3%
(2.8)%
(3.6)%
(0.2)%
0.0%
(3.5)%
2009
Net
£’000
–
317
3,210
(375)
7,962
(995)
(1,286)
(75)
–
(1,233)
0.8%
3.4%
0.5%
19.1%
(4.7)%
(0.3)%
(0.3)%
0.3%
(9.7)%
Gross
£’000
Tax
£’000
986
4,433
639
24,613
(6,053)
(442)
(378)
414
(12,511)
2008
Net
£’000
2,097
(7,603)
(587)
1,778
1,510
(5,825)
1
9
–
6
4
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
Movements on effective hedges
3,473
(1,619)
1,854
Gains on hedging instruments transferred
to income statement
Share of other comprehensive income
of joint ventures
–
574
4,047
–
–
(1,619)
–
1,142
–
1,142
574
2,428
(8,242)
(12,606)
(409)
782
(8,651)
(11,824)
The tax effect shown above on the share of joint venture other comprehensive income represents deferred tax arising in the Group’s own
balance sheet due to the tax see through nature of some of the Group’s interests in joint ventures.
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
70
Notes to the Financial Statements
continued
7. Investment and development property
2009
At 1 January 2009
Cost capitalised
Interest capitalised
Transfer from property under development
Investment
property
£’000
403,700
3,401
138
–
Transfer from investment property under development
60,599
(60,599)
Transfer from work in progress
Disposals
Net realisable value provision
Valuation gains
Valuation losses
Net valuation losses
At 31 December 2009
Carrying value of properties on which borrowings are secured
–
(55,778)
–
5,670
(14,130)
(8,460)
403,600
392,660
–
–
–
486
(7,168)
(6,682)
Investment
property
under
development
£’000
52,989
13,063
1,229
Completed
property
£’000
75,214
Property
under
development
£’000
Total
£’000
249,124
781,027
–
–
95,415
111,879
9,255
10,622
–
214,898
(214,898)
(80,669)
(89,611)
(226,058)
(5,330)
(11,691)
(17,021)
–
–
–
503
–
–
–
–
–
–
–
–
503
6,156
(21,298)
(15,142)
645,810
579,239
–
–
204,113
164,339
38,097
22,240
2008
At 1 January 2008
Cost capitalised
Interest capitalised
Transfer from property under development
Transfer from land held for development
Investment
property
£’000
Investment
property
under
development
£’000
597,747
102,180
4,577
311
–
–
37,808
3,894
–
–
Transfer from investment property under development
88,352
(88,352)
Transfer from work in progress
Disposals
Net realisable value provision
Valuation gains
Valuation losses:
– Recognised in equity
– Recognised in the income statement
Net valuation losses
At 31 December 2008
Carrying value of properties on which borrowings are secured
–
(266,908)
–
–
–
–
15,387
3,389
–
(35,766)
(20,379)
403,700
402,190
(1,292)
(4,638)
(2,541)
52,989
52,989
Completed
property
£’000
Property
under
development
£’000
Total
£’000
–
–
–
121,936
821,863
146,833
189,218
15,011
19,216
87,757
(87,757)
–
–
–
40,119
(51,434)
70,297
70,297
–
–
2,291
42,410
–
(318,342)
(1,228)
(19,487)
(20,715)
–
–
–
–
–
–
–
–
18,776
(1,292)
(40,404)
(22,920)
75,214
75,214
249,124
781,027
249,124
779,517
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 £38.907 million (2008: £249.124 million) and Completed property of £204.113 million (2008: £75.214 million) held in
current assets are carried at the lower of cost and net realisable value, but their fair values have been determined as described below.
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 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 set out in the table below:
At 31 December 2009 property under development comprised entirely of properties where planning has been obtained but the
development process has not yet reached the construction stage.
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
71
7. Investment and development property (continued)
2009
At 31 December 2009
Valuation gain not recognised on property held at cost
Fair value at 31 December 2009
2008
At 31 December 2008
Investment
property
£’000
403,600
–
403,600
Investment
property under
development
£’000
Completed
property
£’000
Property
under
development
£’000
Total
£’000
–
–
–
204,113
38,097
645,810
17,177
809
17,986
221,290
38,906
663,796
Investment
property
£’000
Investment
property under
development
£’000
Completed
property
£’000
Property
under
development
£’000
Total
£’000
403,700
52,989
75,214
249,124
781,027
Valuation gain not recognised on property held at cost
–
–
5,026
23,911
28,937
Fair value at 31 December 2008
403,700
52,989
80,240
273,035
809,964
Included within investment properties and investment properties under development are the following values in respect of leasehold
interests:
2009
Valuation and net book value
Long leasehold
Short leasehold
2008
Valuation and net book value
Long leasehold
Short leasehold
Investment
property
£’000
Investment
property under
development
£’000
Completed
property
£’000
Property
under
development
£’000
43,200
10,380
53,580
–
–
–
–
–
–
–
–
–
Investment
property
£’000
Investment
property under
development
£’000
Completed
property
£’000
Property
under
development
£’000
46,170
10,660
56,830
–
–
–
–
–
–
–
–
–
Total
£’000
43,200
10,380
53,580
Total
£’000
46,170
10,660
56,830
The total interest included in investment and development properties at 31 December 2009 was £36.385 million (2008: £40.772 million).
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 £48.995 million at 31 December 2009 (2008: £56.119 million).
1
9
–
6
4
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
72
Notes to the Financial Statements
continued
8. Property, plant and equipment
2009
Cost or valuation
At 1 January 2009
Additions
Disposals
Revaluation
At 31 December 2009
Depreciation and impairment losses
At 1 January 2009
Depreciation charge for the year
Disposals
At 31 December 2009
Carrying amount at 31 December 2009
2008
Cost or valuation
At 1 January 2008
Additions
Disposals
Revaluation
At 31 December 2008
Depreciation and impairment losses
At 1 January 2008
Depreciation charge for the year
At 31 December 2008
Freehold land
and buildings
£’000
Leasehold
Improvements
£’000
Motor vehicles,
plant and
equipment
£’000
Fixtures,
fittings and
equipment
£’000
Total
£’000
1,420
2,175
6,654
7,908
18,157
27
–
–
438
(26)
–
421
(18)
–
886
(44)
(195)
2,202
7,066
8,311
18,804
858
267
(35)
1,090
1,112
3,346
5,503
475
–
3,821
3,245
514
–
6,017
2,294
Freehold land
and buildings
£’000
Leasehold
Improvements
£’000
Motor vehicles,
plant and
equipment
£’000
Fixtures,
fittings and
equipment
£’000
1,745
2,021
6,306
348
–
–
7,746
162
–
–
256
(102)
–
607
251
858
2,175
6,654
7,908
18,157
2,962
384
3,346
3,308
4,910
593
5,503
2,405
8,724
1,403
10,127
8,030
–
–
(195)
1,225
420
105
–
525
700
–
–
(325)
1,420
245
175
420
10,127
1,361
(35)
11,453
7,351
Total
£’000
17,818
766
(102)
(325)
Carrying amount at 31 December 2008
1,000
1,317
Valuation
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 historic cost of £1.807 million (2008: £1.807 million).
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
73
9. Investments in subsidiaries and joint ventures
Group
Reclassification of joint venture loans and investments
The Group finances its joint ventures through a mixture of interest free loans and capital contributions. The group has reclassified certain
of the loans and capital contributions it makes to its joint ventures from current other receivables to non-current asset joint venture
investment loans and investment in joint ventures to reflect their respective terms.
All partners finance the joint ventures on the same terms, hence the finance income now arising on these receivables equals the increase
in the share of joint venture loss. This adjustment therefore has no effect on the result for the year or net assets.
The amounts reclassified from current other receivables (2008: £51.913 million and 2007: £45.645 million) have been taken to joint
venture investment loans (2008: £2.157 million and 2007: £1.961 million) and investment in joint ventures (2008: £49.756 million and
2007: £43.684 million). The Group and the Company have also now discounted the joint venture loans already held as non-current other
receivables, of £3.667 million in 2008 and 2007 reducing those amounts by £207,000 and £521,000 in those years respectively and
increasing the investment in joint ventures by the same amount. These loans are now amalgamated with the other reclassified receivables
in joint venture investment loans.
The unwinding of the discount on the interest free loans has increased the Group’s finance income in 2008 by £334,000. As noted above
this is offset by an increase in the share of joint venture loss and so has no effect on the result for the year. The Company accounts for its
investments in joint ventures at fair value with changes being taken to reserves, consequentially the unwinding of the discount has caused
the Company’s loss for 2008 to be reduced by £315,000.
As a result of these reclassifications restated balance sheets for 2007 have been presented as required by IAS1 Presentation of Financial
Statements.
Group
Share of profit:
Investment segment result
Minority interest share of investment segment result
Overheads
Net revaluation loss
Current tax
Deferred tax
Share of Landsbanki provision
Impact of discounting on interest free loans
Other
Share of items recognised directly in equity:
– valuation gains
– movement in effective hedges
– deferred tax on movement in effective hedges
Additions
Disposals
Profit adjustment related to trading with joint venture
Distributions received
At start of year
At end of year
Investment in joint
venture
£’000
Joint venture
investment loan
£’000
2009
Total interest
£’000
Investment in joint
venture
£’000
Joint venture
investment loan
£’000
7,430
1,150
(499)
(1,473)
683
41
–
(411)
8
6,929
–
497
77
–
–
–
–
–
–
–
411
–
411
–
–
–
7,430
1,150
(499)
6,654
80
(293)
(1,473)
(10,360)
683
41
–
–
8
–
244
(6,120)
(334)
(190)
7,340
(10,319)
–
497
77
1,519
(10,150)
389
25,825
6,082
31,907
24,585
–
(3,542)
(6,923)
22,863
125,481
148,344
–
128
–
6,621
5,618
–
(3,414)
(6,923)
29,484
131,099
12,239
160,583
(2,924)
(2,579)
(5,258)
(4,737)
130,218
125,481
–
–
–
–
–
–
–
334
–
334
–
–
–
–
–
177
–
511
5,107
5,618
2008
Restated
Total interest
£’000
6,654
80
(293)
(10,360)
–
244
(6,120)
–
(190)
(9,985)
1,519
(10,150)
389
24,585
(2,924)
(2,402)
(5,258)
(4,226)
135,325
131,099
The impact of discounting the interest free joint venture loans is included in the finance income as disclosed in Note 5.
1
9
–
6
4
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
74
Notes to the Financial Statements
continued
9. Investments in subsidiaries and joint ventures (continued)
During 2008 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 £16 million 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
– LDC (Project 110) Ltd
– LDC (Project 170) Ltd
UNITE UK Student Accommodation Fund
OCB
2009
Gains/(losses)
recognised
directly
in equity
£’000
2009
Profit
£’000
(5,109)
898
2008
Profit
Restated
£’000
3,093
1,722
3
8,608
1,705
6,929
(198)
(2,507)
108
(11,013)
–
–
365
(491)
574
(10,319)
(8,242)
2008
Losses
recognised
directly
in equity
Restated
£’000
(5,082)
–
(987)
(2,173)
–
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 Ltd, USAF GP No.10 Ltd and USAF GP
No.11 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.
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 five (2008: 13) properties into the joint venture for £95.440 million (2008: £171.915 million), this
includes £95.440 million (2008: £64.492 million) of completed property held as inventory. The profits relating to sales and associated
disposal costs and related cash flows are set out below:
Included in turnover (net of joint venture trading adjustment)
Included in cost of sales
Loss relating to the sale of investment properties to USAF pre disposal costs
Disposal costs
Goodwill impairment
Profit on disposal of property
Profit and loss
2009
£’000
92,839
Profit and loss
2008
£’000
61,890
(83,645)
(51,481)
–
(91)
–
9,103
(5,080)
(268)
(64)
4,997
9. Investments in subsidiaries and joint ventures (continued)
Completed property
Gross proceeds
Part settled by:
Investment in joint venture
Net cash flows included in cash flows from operations
Investment property
Gross proceeds
Part settled by:
Investment in joint venture
Equity redeemed on reduction of percentage holding
Disposal costs
Net cash flows in investing activities
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
75
Cash flow
2009
£’000
Cash flow
2008
£’000
95,440
64,492
(18,601)
76,839
–
64,492
–
–
–
–
–
107,423
(6,268)
1,698
(268)
102,585
The goodwill impairment charged against the loss on disposal relates to synergistic benefits associated with the disposed properties.
During the year the Group’s interest in the UNITE UK Student Accommodation Fund was diluted from 22.2% to 18.9% as a result of new
equity raised from external unit holders. Some of this holding represents the beneficial interest of the minority; the ordinary shareholders of
The UNITE Group Plc are beneficially interested in 16.3% of the fund (2008: 18.5%).
OCB is the joint venture formed with Oasis Capital Bank in August 2009. This joint venture takes the form of companies held by OCB
Property Holdings (Jersey) Ltd in which the Group has a 25% interest.
The agreements integral to the above, which include the Group assuming delegated responsibility for development, property and asset
management of the venture, result in the Group having joint control of these entities with the investors.
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.
During the year the Group sold three properties under development into the joint venture for £88.172 million. The profits relating to sales
and associated disposal costs and related cash flows are set out below:
Included in turnover (net of joint venture trading adjustment)
Included in cost of sales
Disposal costs
Loss on disposal of property
Gross proceeds
Part settled by:
Investment in joint venture
Investment loan to joint venture
Net cash flows included in cash flows from operations
Profit and loss
2009
£’000
Profit and loss
2008
£’000
88,602
(89,777)
(116)
(1,291)
Cash flow
2009
£’000
88,172
(3,643)
(9,357)
75,172
–
–
–
–
Cash flow
2008
£’000
–
–
–
–
1
9
–
6
4
s
t
n
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m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
76
Notes to the Financial Statements
continued
9. Investments in subsidiaries and joint ventures (continued)
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 Capital Cities JV properties are partly funded with debt totalling £253.347 million (2008: £249.963 million) which equates to
68.4% (2008: 64.1%) of the market value of these properties. The Group has guaranteed its share, 30%, of this debt amounting to
£76.004 million (2008: £74.989 million). This guarantee only takes effect in the event that the joint venture is unable to repay the debt
within nine months of it becoming due. The Group considers the likelihood of the guarantee being invoked to be remote based on the
level of debt and the time frames allowed under the arrangements. These guarantees are accounted for in accordance with IFRS 4.
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. The interests of Lehman Brothers are now managed by their
administrator PricewaterhouseCoopers. Under the articles of LDC (Project 170) Ltd, the Group is additionally entitled to the first £1.250
million 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.
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
Development Sales
Capital Cities
Student Village JVs
– LDC (Project 110) Ltd
OCB JV
2009
£’000
2008
£’000
3,368
2,801
6,169
166
–
947
1,113
2,758
2,479
5,237
698
42
–
740
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
77
9. Investments in subsidiaries and joint ventures (continued)
Summary financial information on joint ventures
UNITE UK Student Accommodation Fund
2009
£’000
2008
Restated
£’000
100%
2007
Restated
£’000
2009
£’000
18.9%
2008
Restated
£’000
22.2%
UNITE share
2007
Restated
£’000
20.1%
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets/equity
Represented by:
1,002,860
897,126
834,544
84,779
24,713
22,175
(16,610)
(22,100)
(17,992)
(487,461)
(487,043)
(392,585)
583,568
412,696
446,142
Net assets attributable to the USAF fund unitholders
524,771
371,033
400,925
Direct interest in partnership reserves
56,424
39,505
43,256
52,198
56,063
Total equity/joint venture carrying value
581,195
410,538
444,181
108,261
Minority partnership loans (classified as debt)
2,373
2,158
1,961
2,373
50,526
39,258
89,784
2,158
91,942
44,646
43,183
87,829
1,961
89,790
Underlying capital employed
Profit/(loss) for the period
Capital Cities joint venture
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets/equity
583,568
412,696
446,142
110,634
25,438
(64,521)
30%
30%
30%
370,345
366,848
343,990
7,324
(6,724)
8,573
12,831
(10,884)
(17,872)
(273,842)
(249,963)
(213,847)
97,103
114,574
125,102
29,131
34,372
37,531
1
9
–
6
4
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
(Loss)/profit for the period
(17,030)
10,310
Student Village JV – LDC (Project 110) Limited
51%
51%
51%
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets/equity
Profit/(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
OCB joint venture
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets/equity
Profit for the period
58,990
56,026
63,600
1,859
(6,128)
2,274
(7,459)
2,787
(6,100)
(51,579)
(49,251)
(51,421)
3,142
3,444
–
2,718
(1,815)
–
903
6
123,750
11,111
(15,269)
(83,878)
35,714
6,820
1,590
(5,014)
–
5,123
(4,063)
–
1,060
216
–
–
–
–
–
–
8,866
1,571
795
4,433
51%
51%
51%
–
5,951
(5,101)
–
850
–
–
–
–
–
452
530
425
25%
8,929
–
–
–
–
Investments in joint ventures per balance sheet
148,344
125,481
130,218
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
78
Notes to the Financial Statements
continued
9. Investments in subsidiaries and joint ventures (continued)
Company
Cost or valuation
At start of year
Additions
Impact of discounting on interest free loans
Revaluation
At end of year
Unlisted subsidiary
undertakings
2009
£’000
2008
£’000
2009
£’000
115,810
238,195
14,572
–
–
–
(33,564)
(122,385)
764
34
(103)
876
96,818
115,810
1,571
Investment in
joint ventures
2007
Restated
£’000
2008
Restated
£’000
4,433
5,925
–
(315)
(3,354)
764
–
(286)
(1,206)
4,433
Investment loan to Student Village joint venture
The company has the following investments in principal subsidiaries and joint ventures:
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
OCB UNITE Property Holdings (Jersey) Ltd
Country of incorporation
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
Jersey
UNITE Connaught Services Ltd
England and Wales
2009
£’000
3,836
Joint venture investment loan
2008
£’000
3,461
2007
£’000
3,146
Class of
Shares held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2009
100%
100%
100%
100%
100%
100%
75%
100%
100%
100%
100%
100%
100%
100%
75%
100%
51%
25%
60%
Ownership
2008
100%
100%
100%
100%
100%
100%
75%
100%
100%
100%
100%
100%
100%
100%
75%
100%
51%
–
–
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.
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
79
10. Intangible assets
Group
2009
Cost
At 1 January 2009
Additions
Disposals
At 31 December 2009
Amortisation
At 1 January 2009
Amortisation charge for the year
Impairment charge
Disposals
At 31 December 2009
Carrying amount at 31 December 2009
2008
Cost
At 1 January 2008
Additions
At 31 December 2008
Amortisation
At 1 January 2008
Amortisation charge for the year
Impairment charge
At 31 December 2008
Carrying amount at 31 December 2008
11. Inventories
Land held for development
Finished goods
Work in progress
Raw materials and consumables
Goodwill
£’000
Development
costs
£’000
Computer
software
£’000
Total
£’000
2,625
–
–
2,625
2,293
–
332
–
2,625
–
692
147
(18)
821
217
189
–
–
406
415
11,822
1,498
–
15,139
1,645
(18)
13,320
16,766
5,410
1,809
–
(26)
7,193
6,127
7,920
1,998
332
(26)
10,224
6,542
Goodwill
£’000
Development
costs
£’000
Computer
software
£’000
Total
£’000
2,625
–
2,625
2,194
–
99
2,293
332
578
114
692
81
136
–
217
475
10,754
1,068
11,822
3,593
1,817
–
5,410
6,412
2009
£’000
–
5,206
1,364
1,596
8,166
13,957
1,182
15,139
5,868
1,953
99
7,920
7,219
2008
£’000
5,000
–
3,664
1,647
10,311
The land held for development at 31 December 2008 was written down by £10.774 million to market value in 2008 and has subsequently
been sold.
At 31 December 2008, security had been given by way of a first charge over the land held for development to secure the Group’s borrowings.
During the year, interest totalling £0.277 million (2008: £1.208 million) was capitalised into land held for development.
1
9
–
6
4
s
t
n
e
m
e
t
a
t
s
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i
a
c
n
a
n
F
i
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
80
Notes to the Financial Statements
continued
12. Trade and other receivables
Non-current
Interest rate swaps
Current
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
2009
£’000
–
–
2008
Restated
£’000
–
–
Group
2007
Restated
£’000
1,103
1,103
18,738
20,577
14,900
Company
2008
£’000
–
–
–
2009
£’000
–
–
–
–
13,153
11,532
1,291
44,714
–
13,050
11,716
10,052
55,395
–
304,617
253,263
11,711
11,370
10,393
48,374
–
–
5
–
–
7
304,622
253,270
2009
£’000
Group
2008
£’000
48,764
111,845
–
48,764
(25,077)
86,768
2009
£’000
1,008
–
1,008
Company
2008
£’000
–
(1,730)
(1,730)
Bank balances include £17.1 million (2008: £16.3 million) 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 £nil (2008: £30.8 million) is secured against bank debt
pending the refinancing of a property.
14. Trade and other payables
Trade payables
Amounts due to group undertakings
Other payables and accrued expenses
2009
£’000
Group
2008
£’000
11,816
15,269
–
60,765
72,581
–
64,903
80,172
2009
£’000
77
29,674
2,512
32,263
Company
2008
£’000
31
37,804
2,738
40,573
Trade payables include £4.048 million (2008: £6.329 million) in relation to retentions on construction contracts.
15. Borrowings and financial derivatives
Non-current
Bank and other loans
Interest rate swaps
Current
Overdrafts
Bank and other loans
Interest rate swaps
2009
£’000
Group
2008
£’000
2009
£’000
Company
2008
£’000
438,247
507,739
29,401
44,401
467,648
552,140
–
179
–
179
25,077
108,424
3,375
136,876
–
–
–
–
–
–
–
–
–
–
1,730
–
–
1,730
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
81
15. Borrowings and financial derivatives (continued)
Maturity analysis
Borrowings fall due as follows:
Group
2009
Bank and other loans
2008
Non-derivative financial liabilities
Bank and other loans
Bank overdrafts
Carrying
value
£’000
438,426
Carrying
value
£’000
Within
1 year
£’000
179
Within
1 year
£’000
1–2 years
£’000
2–5 years
£’000
190
408,214
1–2 years
£’000
2–5 years
£’000
More than
5 years
£’000
29,843
More than
5 years
£’000
616,163
108,424
1,252
257,269
249,218
25,077
25,077
–
–
–
The Group has various borrowing facilities available to it. The undrawn committed facilities available at 31 December 2009 in respect of
which all conditions precedent had been met at that date were as follows:
Expiring in two to five years
Investment loan facilities
Expiring in one year or less
Working capital facilities
2009
£’000
2008
£’000
37,252
23,000
60,252
–
56
56
In addition, there are further committed facilities available where not all conditions precedent have yet been met amounting to £277 million
(2008: £268 million). Of this amount £57 million (2008: £8 million) remains available only for completed properties and £32 million (2008:
£20 million) only for development properties, the remaining £187 million (2008: £240 million) 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 £244.805 million of its subsidiary companies borrowings (2008: £311.435 million). 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.
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
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
2009
£’000
2008
£’000
48,764
111,845
(179)
(133,501)
(438,247)
(507,739)
(29,401)
(47,776)
(419,063)
(577,171)
29,533
46,668
(389,530)
(530,503)
365,888
423,126
115%
92%
320,166
405,930
180%
131%
1
9
–
6
4
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
UNITE
UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
82
Notes to the Financial Statements
continued
16. Deferred tax liabilities
Group
Investment property
Investment property under development
Development property held as stock
Property, plant and machinery
Investments in joint ventures
Financial instruments
Tax (asset)/liabilities
Set off of tax
Net tax liabilities
2009
£’000
–
–
(2,911)
(326)
–
(7,006)
(10,243)
10,243
–
Assets
2008
£’000
–
–
(4,883)
–
–
(12,735)
(17,618)
2009
£’000
2,834
–
–
–
Liabilities
2008
£’000
9,988
(156)
–
282
7,409
7,504
–
–
10,243
17,618
17,618
(10,243)
(17,618)
–
–
–
2009
£’000
2,834
–
(2,911)
(326)
7,409
(7,006)
–
–
–
Net
2008
£’000
9,988
(156)
(4,883)
282
7,504
(12,735)
–
–
–
At 31 December 2009 the Group has calculated a potential deferred tax asset as shown below, 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.
Tax value of losses
Tax value of temporary timing differences
Total potential deferred tax asset
Movement in temporary timing differences during the year:
2009
Investment property
Investment property under development
Development property held as stock
Property, plant and machinery
Investments in joint ventures
Financial instruments
2008
Investment property
Investment property under development
Development property held as stock
Property, plant and machinery
Investments in joint ventures
Financial instruments
Tax value of losses carried forward
2009
£’000
33,265
3,478
36,743
2008
£’000
24,613
2,866
27,479
Recognised
in income
£’000
At
31 December
2009
£’000
–
–
–
–
–
1,619
1,619
2,834
–
(2,911)
(326)
7,409
(7,006)
–
Recognised
in income
£’000
At
31 December
2008
£’000
–
587
–
–
409
9,988
(156)
(4,883)
282
7,504
(1,778)
(12,735)
–
(782)
–
–
At
31 December
2008
£’000
9,988
(156)
(4,883)
282
7,504
(12,735)
–
At
31 December
2007
£’000
11,563
5,182
(457)
(390)
7,266
(2,048)
(8,243)
12,873
Transfers
£’000
(156)
156
–
–
–
–
–
Transfers
£’000
5,067
(5,067)
–
–
–
–
–
–
Recognised
in equity
£’000
(6,998)
–
1,972
(608)
(95)
4,110
(1,619)
Recognised
in equity
£’000
(6,642)
(858)
(4,426)
672
(171)
(8,909)
8,243
(12,091)
Company
Deferred tax has not been recognised on temporary timing differences of £5.056 million (2008: £14.462 million) 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.
UNITE
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
83
Issued share capital
£’000
Share premium
£’000
Merger reserve
£’000
Retained earnings
£’000
Revaluation reserve
£’000
Hedging reserve
£’000
Total
£’000
30,874
174,333
40,177
187,957
17,644
(892)
450,093
(116,342)
–
17. Capital and reserves
Group
At 1 January 2008
Loss for the year
Investment property under
development
– revaluation
– deferred tax
Effective hedges – movements
– deferred tax
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
205
2,208
Fair value of share-based payments
Own share acquired
Dividends to the owners
of the parent company
Transfer to minority interest
–
–
–
–
–
–
–
–
At 31 December 2008
31,079
176,541
40,177
Loss for the year
Effective hedges – movements
– deferred tax
Share of joint venture movements in
effective hedges (net of related tax)
Transfer on completion or disposal
of investment property
–
–
–
–
–
–
–
–
–
–
Shares issued
8,823
70,998
Fair value of share-based payments
Own share acquired
Transfer to minority interest
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
At 31 December 2009
39,902
247,539
40,177
51,097
18,658
(18,658)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
308
(2,192)
(3,090)
400
85,699
(34,450)
–
–
–
–
413
(1,959)
(411)
–
–
–
(7,604)
1,779
1,586
(444)
(116,342)
2,097
(587)
(7,604)
1,779
1,586
(444)
2,097
(587)
–
–
–
–
1,309
–
1,309
–
(9,960)
(9,960)
1,805
(15,135)
320,166
–
–
–
–
–
400
–
2,413
308
(2,192)
(3,090)
800
–
(34,450)
3,473
(1,619)
574
–
–
–
–
(120)
3,473
(1,619)
574
–
79,821
413
(1,959)
(531)
(12,827)
365,888
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,805
(1,805)
1
9
–
6
4
s
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
Annual Report & Accounts 2009
84
Notes to the Financial Statements
continued
17. Capital and reserves (continued)
Company
Reconciliation of movement in capital and reserves
At 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
Loss for the year
Revaluation of investment in subsidiaries and joint ventures
Shares issued
At 31 December 2009
Share capital
Authorised shares of 25p each
Issued at start of year – fully paid
Firm placing, placing and open offer
Shares issued to long-term incentive plan
Share options exercised
Issued at end of year – fully paid
Issued share capital
£’000
Share premium
£’000
Merger reserve
£’000
Retained earnings
Restated
£’000
Total
Restated
£’000
30,874
174,333
40,177
214,628
460,012
–
–
205
–
–
–
2,208
–
–
–
–
–
(2,279)
(2,279)
(126,054)
(126,054)
–
(3,090)
2,413
(3,090)
31,079
176,541
40,177
83,205
331,002
–
–
–
–
8,823
70,998
–
–
–
(2,543)
(2,543)
(32,688)
(32,688)
–
79,821
39,902
247,539
40,177
47,974
375,592
2009
174,000,000
124,315,841
32,819,972
2,041,059
430,070
159,606,942
Number of Ordinary shares
2008
155,000,000
123,495,242
–
707,612
112,987
124,315,841
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 represented 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 2008 of nil (2007: 1.67p) per 25p ordinary share
Interim dividend of nil (2008: 0.83p) per 25p ordinary share
2009
£’000
–
–
–
2008
£’000
2,061
1,029
3,090
Earnings per share and net asset value per share
18.
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
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
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Annual Report & Accounts 2009
85
Note
2009
£’000
Restated
(for share issue)
£’000
2008
As
previously
reported
(34,861)
(115,942)
(115,942)
2(b)
(28,739)
(44,760)
(44,760)
134,747
125,485
124,095
3
303
303
134,750
125,788
124,398
(25.9)
(25.9)
(21.3)
(92.4)
(92.4)
(35.6)
(93.4)
(93.4)
(36.0)
Movements in the weighted average number of shares have resulted from the firm placing, placing and open offer in October 2009 and
the issue of shares arising from the employee share-based payment schemes.
In addition to the potential dilutive ordinary shares (share options) shown above there were a further 874,000 share options in existence
at 31 December 2009 (2008: 1,304,000) which are anti-dilutive.
The calculation of earnings per share for the year-ended 31 December 2008 and the net asset value per share as at 31 December 2008
have been restated in accordance with the retrospective adjustment requirements of IAS 33 Earnings per Share with regard to the firm
placing, placing and open offer in October 2009. The issue comprised 32,819,972 shares and gave rise to proceeds of £82.050 million,
£77.272 million net of issue costs. The adjustments arising from the reclassification of joint venture investment loans explained in Note 9
have no impact on earnings or net asset value per share.
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
Note
2009
£’000
Restated
(for share issue)
£’000
2008
As
previously
reported
365,888
397,438
320,166
2(d)
423,126
483,202
405,930
1,514
2,985
2,985
424,640
486,187
408,915
159,607
157,436
124,316
778
1,560
1,560
160,385
158,996
125,876
229
265
265
252
307
306
258
327
325
1
1
9
9
–
–
6
6
4
4
s
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
86
Notes to the Financial Statements
continued
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 three to five 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 thee 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
2009
Number of options
(thousands)
2009
Weighted average
exercise price
2008
Number of options
(thousands)
2008
£1.96
£2.22
£1.52
£2.22
£2.08
£2.01
1,607
(480)
(430)
180
877
516
£2.12
£3.02
£1.96
£1.90
£1.96
£1.82
1,670
(237)
(113)
287
1,607
1,088
The weighted average remaining contractual life of outstanding options was 2.2 years (2008: 3.0 years).
The weighted average share price on the date of exercise for options exercised during the year was £2.80 (2008: £3.21).
The range of exercise prices on the share options outstanding at the end of the year was 129p to 371p (2008: 129p to 371p).
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
Unapproved and approved share option
schemes, LTIP – TSR component
Model Used
Monte Carlo simulations combined
with binomial lattice
SAYE share option scheme
Black-Scholes
ESOT bonus awards, LTIP – NAV
component
Discounted share price at grant
Reason for model used
Monte Carlo simulations used to model
FTSE comparator groups (for TSR
performance condition) combined with
(for share options) binomial lattice to
incorporate seven-year exercise window
Service condition only, short exercise window
makes a fixed date model appropriate
Awards equates to a gift of free shares with
a performance/service condition. Discounted
for dividends not receivable during the service
period (ESOT only)
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
2009
78p
2008
200p
93–259p
227–310p
222p
50%
3–5 years
0.5%
190p
17%–37%
3–5 years
1.0%
Risk free interest rate (based on UK government bonds)
2.23%–2.89%
4.1%–4.2%
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.
UNITE
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
87
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 receivables and trade payables – arise 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 and caps.
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, caps 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, none of the Group’s development borrowing at 31 December 2009 is fixed. 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
2009 approximately £17.5 million (2008: £65.4 million) of the Group’s anticipated refinancing was hedged for an average term of 4.7 years
(2008: 5.7 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 2009,
the Group’s policy has been to hedge in excess of 50% of the Group’s exposure for terms of approximately 2–15 years.
At 31 December 2009, after taking account of interest rate swaps, 75% (2008: 87%) of the Group’s medium and long-term borrowing
on completed properties was held at fixed rates. This is fixed at an average rate of 6.7% (2008: 6.2%) for an average period of 4 years
(2008: 4 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 2009, it is estimated that a general increase of one percentage point in interest rates would increase the Group’s loss before
tax by approximately £0.9 million (2008: £0.9 million), Effective and ineffective interest rate swaps have been included in this calculation.
1
9
–
6
4
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
88
Notes to the Financial Statements
continued
20. Financial Instruments (continued)
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.
Interest rate swaps maturity
Within 1 year
1–2 years
2–5 years
More than 5 years
2009
Nominal
amount
hedged
£’000
–
5,000
2009
Applicable
interest rates
%
2008
Nominal
amount
hedged
£’000
2008
Applicable
interest rates
%
–
158,205
3.36–4.98
4.79
–
–
260,247 4.80–5.785
18,244
4.79– 5.15
47,149
4.50–5.63
364,551
5.12–5.63
The following is a maturity analysis of financial liabilities using the contractual undiscounted cash flows:
2009
Non-derivative financial liabilities
Bank and other loans
Trade and other payables
Derivative financial liabilities
Interest rate swaps
2008
Non-derivative financial liabilities
Bank and other loans
Bank overdrafts
Trade and other payables
Derivative financial liabilities
Interest rate swaps
Total
£’000
Within 1 year
£’000
1-2 years
£’000
2-5 years
£’000
More than 5 years
£’000
495,667
73,056
11,620
73,056
11,632
433,450
38,965
–
–
–
70,428
14,146
14,129
36,983
5,170
Total
£’000
Within 1 year
£’000
1–2 years
£’000
2–5 years
£’000
More than 5 years
£’000
773,686
170,511
26,799
309,563
266,813
25,077
80,544
25,077
80,544
–
–
–
–
–
–
24,471
3,556
3,525
11,096
6,294
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 in the balance sheet.
Cash
Other trade receivables (see below)
Amounts due by joint ventures (excluding loans that are capital in nature)
Joint venture investment loans
Amounts receivable from joint ventures are not past due or impaired.
Other trade receivables represent amounts due from the Group’s external customers as follows:
2009
£’000
48,764
18,738
13,153
12,239
92,894
2008
Restated
£’000
111,845
20,577
13,050
5,618
151,090
2009
Rental debtors
Commercial tenants (past due and impaired)
Individual tenants (past due and impaired)
Provisions carried
Past due but not impaired
Manufacturing debtors (not past due or impaired)
Total
£’000
2009/10
£’000
2008/09
£’000
Prior years
£’000
Ageing by academic year
7,628
6,304
(3,398)
10,534
8,204
18,738
5,209
3,061
(920)
7,350
8,204
755
2,100
(1,439)
1,416
–
1,664
1,143
(1,039)
1,768
–
15,554
1,416
1,768
20. Financial Instruments (continued)
2008
Rental debtors
Commercial tenants (past due and impaired)
Individual tenants (past due and impaired)
Provisions carried
Past due but not impaired
Manufacturing debtors (not past due or impaired)
UNITE
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
89
Total
£’000
2008/09
£’000
2007/08
£’000
Prior years
£’000
Ageing by academic year
7,003
4,359
(1,681)
9,681
10,896
20,577
4,100
1,371
(652)
4,819
10,896
15,715
1,514
2,988
(671)
3,831
–
1,389
–
(358)
1,031
–
3,831
1,031
The Group holds £8.557 million (2008: £8.450m) in tenant deposits as collateral on the above rental debtors. This has been taken into
account, together with historical collection patterns, in establishing the level of provisions carried.
Movements in provisions carried are explained as follows:
At start of year
Impairment charged to income statement in year
Debt write off
At end of year
2009
£’000
1,681
2,066
(349)
3,398
2008
£’000
1,144
1,454
(917)
1,681
Effective interest rates
Interest rate swaps with fair value liabilities of £29.401 million (2008: £47.776 million) 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 2009 is 5.45% (2008: 5.7%). The average cost of the Group’s borrowing
on completed properties at 31 December 2009 is 5.6% (2008: 6.2%).
Fair value of financial assets and liabilities
The Group has the following financial assets and liabilities carried at fair value:
Joint venture investment loans
Interest rate swaps
IFRS7 level
3
2
2009
£’000
12,239
29,401
Group
2008
£’000
5,618
47,776
2009
£’000
3,836
–
Company
2008
£’000
3,461
–
The IFRS7 level categorisation relates to the extent the fair value can be determined by reference to comparable market values. The
classifications range from level 1 where instruments are quoted on an active market through to level 3 where the assumptions used to
arrive at fair value do not have comparable market data. There have been no transfers between levels during the year. The movement in
level 3 instruments is disclosed in Note 9.
The fair value of joint venture investment loans, which form part of the Group’s interest in joint ventures, have been valued using a discount
rate based on an estimated market cost of 10% over the contracted period of the investment.
The fair values of interest rate swaps and fixed rate loans (shown in the table below) have been calculated by a third party expert
discounting estimated future cash flows on the basis of market expectations of future interest rates.
Fair values have been calculated by discounting future cash flows at prevailing interest rates.
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
2009
Book value
£’000
2009
Fair value
£’000
2008
Book value
£’000
2008
Fair value
£’000
(39,941)
(41,447)
(20,900)
(23,211)
1
9
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6
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
Annual Report & Accounts 2009
90
Notes to the Financial Statements
continued
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 investment 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
2009 capital on this basis amounted to £423 million (2008: £406 million). The Group seeks to manage its adjusted gearing, which is
based on this capital base, in a range of 100% to 120%.
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
2009
£’000
2008
£’000
14,186
54,903
200,932
270,021
10,993
41,426
150,316
202,735
Leases for commercial properties typically run for 5–15 years with market rent reviews every 5 years.
Leases of residential accommodation properties run for periods between 17 and 25 years 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
2009
£’000
42,274
21,233
33,314
96,821
2008
£’000
31,894
27,665
28,907
88,466
Notes to the Financial Statements
continued
UNITE
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Annual Report & Accounts 2009
Annual Report & Accounts 2009
Annual Report & Accounts 2009
Annual Report & Accounts 2009
91
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 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
2009
£’000
2008
£’000
2,295
2,354
As a result of these intercompany transactions, the following amounts were due (to)/from the company’s subsidiaries at the year-end.
UNITE Holdings plc
UNITE Finance One (Property) Ltd
UNITE Finance Ltd
LDC (Holdings) plc
LDC (Portfolio One) Ltd
Amounts due from group undertakings
LDC (Holdings) plc
Unilodge Holding Ltd
Unilodge Holdings (UK) Ltd
Amounts due to group undertakings
2009
£’000
2008
£’000
77,103
130,694
–
30,408
197,106
99,772
12,767
–
–
10,030
304,617
253,263
–
(13,862)
(15,812)
(29,674)
(8,130)
(13,862)
(15,812)
(37,804)
The company has had a number of transactions with its joint ventures, which are disclosed in Note 9.
Transactions with key management personnel
Director’s remuneration is disclosed in Note 4.
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UNITE
Annual Report & Accounts 2009
Annual Report & Accounts 2009
92
Five year record
Adjusted diluted net asset value per share (pence)* **
Net asset value per share on an IFRS basis (pence)*
Adjusted net assets (£m)
Net assets on an IFRS basis (£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 (%)
Investment segment result (£m)
Net portfolio contribution (£m)
Adjusted (loss)/profit before tax (£m)
(Loss)/profit before tax (£m)
Earnings per share
– adjusted (pence)*
– basic (pence)*
2009
265
229
423
366
2008
306
252
483
320
2007
374
337
587
450
2006
385
358
604
481
2005
336
298
524
383
2,039
1,829
1,723
1,435
1,165
92
133
115
58
82
6
1
(29)
(35)
(21)
(26)
131
174
180
58
78
1
(5)
(45)
(116)
(36)
(92)
106
136
121
63
82
8
(2)
(63)
(37)
(50)
(30)
78
111
85
92
98
8
2
(9)
71
(12)
58
162
172
193
81
86
4
1
3
32
3
28
*net asset values and earning per share for 2008 and prior years have been restated in accordance with the retrospective adjustment requirements of IAS 33 Earnings per Share
with regard to the firm placing, placing and open offer in October 2009.
**2005 and 2006 have been restated to show the 46 pence per share impact of redeeming the UNITE Finance One bond.
Notice of Annual General Meeting
UNITE
Annual Report & Accounts 2009
93
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 18 May
2010 for the purpose of considering and, if thought fit, passing the
following resolutions which, in the case of resolutions numbered
1 to 6 (inclusive), shall be proposed as ordinary resolutions and,
in the case of resolutions numbered 7 to 9 (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 2009, 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 2009.
3. To re-appoint Mr R S Walker as a Director of the Company.
4. To re-appoint Mr J M Tonkiss as a Director of the Company.
5. To re-appoint KPMG Audit Plc as auditors to hold office 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
6. THAT, in substitution for any equivalent authorities and powers
granted to the Directors prior to the passing of this Resolution,
the Directors be and are generally and unconditionally
authorised pursuant to Section 551 of the Companies Act 2006
(the “Act”):
(a) to exercise all powers of the Company to allot shares in the
Company, and grant rights to subscribe for or to convert any
security into shares of the Company, up to an aggregate
nominal amount of £13,302,275;
(b) to allot equity securities (as defined by Section 560(1) of the
Act) in connection with a rights issue up to an aggregate
nominal amount of £13,302,275:
a.
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 practicable), to the
respective number of ordinary shares in the capital of
the Company held by them; and
b.
to holders of any other equity securities as required by the
rights of those securities or as the Directors otherwise
consider necessary,
but subject to such exclusions or other arrangements as
the Directors 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,
provided that this authority shall expire (unless renewed, varied
or revoked by the Company in general meeting), on the date
falling 15 months from the passing of this resolution or, if earlier,
at the conclusion of the next annual general meeting of the
Company to be held following the passing of this Resolution,
save that the Company may, before such expiry, make an offer
or enter into an agreement which would or might require shares
in the Company to be allotted or rights to subscribe for or
convert securities into shares be granted after such expiry
and the Directors may allot shares or grant rights to subscribe
for or convert securities into shares in pursuance of such offer
or agreement as if this authority had not expired.
7. THAT, in accordance with Section 570(1) of the Act, the
Directors be and are empowered to allot equity securities (within
the meaning of Section 560(1) of the Act) pursuant to the
general authority conferred on them by Resolution 6 above as
if Section 561(1) of the Act did not apply to any such allotment,
provided that 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 £1,995,341
and this authority shall expire on the date falling 15 months from
the passing of this resolution, or, if earlier, at the conclusion of
the next annual general meeting of the Company to be held
following the passing of this resolution, 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 570(1) of
the Act.
8. THAT a general meeting other than an annual general meeting
may be called upon not less than 14 clear days’ notice.
9. THAT:
(a) the articles of association of the Company be amended
by deleting to the fullest extent permitted by law all of the
provisions of the Company’s memorandum of association
which, by virtue of Section 28 of the Act, are to be treated
as provisions of the Company’s articles of association;
(b) any limit on the maximum amount of shares that may be
allotted by the Company which is imposed by the amount
of the Company’s authorised share capital that is in force be
revoked; and
(c) the draft articles of association produced to the meeting and
initialled for the purposes of identification by the chairman of
the meeting be and they are adopted by the Company in
substitution for, and to the exclusion of, its existing articles
of association.
BY ORDER OF THE BOARD
A D Reid
SECRETARY
Dated 3 March 2010
Registered office:
The Core
40 St Thomas Street
Bristol
BS1 6JX
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Annual Report & Accounts 2009
94 Notice of Annual General Meeting continued
Notes
1. A member of the Company who wishes to attend the meeting in person should
arrive at the offices of the Company, The Core, 40 St Thomas Street, Bristol BS1
6JX in good time before the meeting, which will commence at 9.30 a.m. In order
to gain admittance to the meeting, members may be required to produce their
attendance card, which is attached to the form of proxy enclosed with this
document, or otherwise prove their identity.
2. A member of the Company who is unable or does not wish to attend the meeting
is entitled to appoint a proxy to exercise all or any of his/her rights to attend and to
speak and vote on his/her behalf at the meeting. A proxy need not be a member
of the Company but must attend the meeting to represent his/her appointing
member. Appointing a proxy will not prevent a member from attending in person
and voting at the meeting. A form of proxy which may be used to make such
appointment and give proxy instructions accompanies this notice. You can only
appoint a proxy using the procedures set out in these notes and the notes to the
proxy form.
3. To be valid, any form of proxy, and the original or duly certified copy of the power
of attorney or other authority (if any) under which it is signed or authenticated,
must be received by hand or by post at Computershare Investor Services PLC,
The Pavilions, Bridgwater Road, Bristol BS99 6ZY, no later than 9.30 a.m. on
14 May 2010.
4. CREST members who wish to appoint a proxy or proxies through the CREST
electronic proxy appointment service may do so for the meeting and any
adjournment(s) thereof by using the procedures described in the CREST Manual.
CREST Personal Members or other CREST sponsored members, and those
CREST members who have appointed a service provider(s), should refer to their
CREST sponsor or voting service provider(s), who will be able to take the
appropriate action on their behalf.
5. In order for a proxy appointment or instruction made using the CREST service to
be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be
properly authenticated in accordance with Euroclear’s specifications, and must
contain the information required for such instruction, as described in the CREST
Manual. The message, regardless of whether it constitutes the appointment of a
proxy or is an amendment to the instruction given to a previously appointed proxy
must, in order to be a valid, be transmitted so as to be received by the Company’s
agent (CREST ID 3RA50) by the latest time for receipt of proxy appointments
specified in Note 3 above. For this purpose, the time of receipt will be taken to be
the time (as determined by the timestamp applied to the message by the CREST
Application Host) from which the Company’s agent is able to retrieve the message
by enquiry to CREST in the manner prescribed by CREST. After this time any
change of instructions to proxies appointed through CREST should be
communicated to the appointee through other means.
6. CREST members and, where applicable, their CREST sponsors, or voting service
providers should note that Euroclear does not make available special procedures
in CREST for any particular message. Normal system timings and limitations will,
therefore, apply in relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take (or, if the CREST member
is a CREST personal member, or sponsored member, or has appointed a voting
service provider, to procure that his/her CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary to ensure that a message
is transmitted by means of the CREST system by any particular time. In this
connection, CREST members and, where applicable, their CREST sponsors or
voting system providers are referred, in particular, to those sections of the CREST
Manual concerning practical limitations of the CREST system and timings.
7. The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001 (as amended).
8. If you would like to submit your proxy vote via the internet, you can do so by
accessing our registrar’s website (www.eproxyappointment.com). You will require
the control number, your unique PIN (which will expire at the end of the voting
period) and your Shareholder Reference Number (“SRN”), printed on the proxy
card, in order to log in and submit your proxy vote electronically. You can access
this site from any internet enabled PC.
9. In the case of joint holders, where more than one of the joint holders purports to
appoint a proxy, only the appointment submitted by the most senior holder will
be accepted. Seniority is determined by the order in which the names of the joint
holders appear in the Company’s register of members in respect of the joint
holding (the first-named being the most senior).
10. If you submit more than one valid proxy appointment in respect of the same
shares, the appointment received last before the latest time for the receipt of
proxies will take precedence.
11. Any person to whom this notice is sent who is a person nominated under Section
146 of the Act to enjoy information rights (a “Nominated Person”) may, under an
agreement between him/her and the shareholder by whom he/she was
nominated, have a right to be appointed (or to have someone else appointed) as a
proxy for the meeting. If a Nominated Person has no such proxy appointment right
or does not wish to exercise it, he/she may, under any such agreement, have a
right to give instructions to the shareholder as to the exercise of voting rights.
12. The statement of the rights of shareholders in relation to the appointment of
proxies above does not apply to Nominated Persons. These rights can only be
exercised by shareholders of the Company.
13. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 (as
amended), the Company specifies that only those shareholders registered in the
register of members of the Company at 5.00 p.m. two days before the meeting
shall be entitled to attend or vote at the meeting in respect of the number of shares
registered in their name at that time.
14. As at 3 March 2010 the Company’s issued share capital consists of 159,627,311
ordinary shares carrying one vote each. Therefore the total voting rights in the
Company as at 3 March 2010 are 159,627,311.
15. You may not use any electronic address provided either in this notice of meeting or
any related documents (including the proxy form) to communicate with the
Company for any purposes other than those expressly stated.
16. Members attending the meeting have the right to ask and, subject to the
provisions of the Act, the Company must cause to be answered, any questions
relating to the business being dealt with at the meeting.
17. The following information is available at www.unite-group.co.uk (1) the matters set
out in this Notice of Annual General Meeting; (2) the total numbers of shares in the
Company in respect of which members are entitled to exercise voting rights at the
meeting; (3) the totals of the voting rights that members are entitled to exercise at
the meeting; and (4) members’ statements, members’ resolutions and members’
matters of business received by the Company after the date on which notice of
the meeting was given.
18. It is possible that, pursuant to requests made by members of the Company under
Section 527 of the Act, the Company may be required to publish on a website
a statement setting out any matter relating to: (a) the audit of the Company’s
accounts (including the auditor’s report and the conduct of the audit) that are to be
laid before the annual general meeting; or (b) any circumstance connected with an
auditor of the Company ceasing to hold office since the previous meeting at which
annual accounts and reports were laid in accordance with Section 437 of the Act.
The Company may not require the members requesting any such website
publication to pay its expenses in complying with Sections 527 or 528 of the Act.
Where the Company is required to place a statement on a website under Section
527 of the Act, it must forward the statement to the Company’s auditor not later
than the time when it makes the statement available on the website. The business
which may be dealt with at the meeting includes any statement that the Company
has been required under Section 527 of the Act to publish on a website.
19. In accordance with Section 338 of the Act, a member or members of the
Company may (provided that the criteria set out in Section 338(3) of the Act are
met) require the Company to give to members notice of a resolution which may
properly be moved and is intended to be moved at the meeting, provided that:
(a) the resolution must not be, if passed, ineffective (whether by reason of
inconsistency with any enactment or the Company’s constitution or otherwise);
and (b) the resolution must not be defamatory of any person, frivolous or
vexatious. Such a request may be in hard copy form or in electronic form, must be
authenticated by the person or persons making it, must identify the resolution of
which notice is to be given and must be received by the Company not later than
six weeks before the meeting, or, if later, the time at which notice is given of the
meeting. (In the foregoing sentence, the terms “hard copy form”, “electronic form”
and “authenticated” bear their respective meanings set out in the Act in relation to
a communication, or a document or information sent or supplied, to a company.)
20. In accordance with Section 338A of the Act, a member or members of the
Company may (provided that the criteria set out in Section 338A(3) of the Act
are met) require the Company to include in the business to be dealt with at the
meeting a matter (other than a proposed resolution) which may properly be
included in the business of the meeting, provided that the matter is not defamatory
of any person, frivolous or vexatious. A request may be in hard copy form or
electronic form, must identify the matter to be included in the business, must be
accompanied by a statement setting out the grounds for the request, must be
authenticated by the person or persons making it and must be received by the
Company not later than six weeks before the meeting, or, if later, the time at which
notice is given of the AGM. (In the foregoing sentence, the terms “hard copy form”,
“electronic form” and “authenticated” bear the respective meanings set out in the
Act in relation to a communication, or a document or information sent or supplied,
to a company.)
21. 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
annual general meeting and will also be available for inspection at the place of the
meeting from 9.15 a.m. on the day of the meeting until its conclusion:
(a) 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
(b) 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 9(c).
Glossary
UNITE
Annual Report & Accounts 2009
95
Adjusted, fully diluted net asset value per share
(Adjusted NAV)
The basic NAV per share figure is recalculated to take account
of dilutive outstanding share options and adjusted to:
• exclude the mark to market of interest rate swaps
• exclude the impact of deferred tax
• include the valuation gain not recognised on properties held
at cost.
Gross financing costs
This includes all interest paid by the Group and its share of
interest paid by joint ventures, including interest capitalised into
developments and operating lease rentals. It includes all receipts
and payments under interest rate swaps whether they are effective
or ineffective under IFRS as economically they all hedge interest
rate exposures. It excludes the cost of early termination of loans
and swaps.
Financing costs
Adjusted net debt
The Group’s debt, net of cash and unamortised debt raising costs,
excluding the mark to market of interest rates swaps.
Adjusted net debt to property assets
Is the adjusted net debt as a percentage of the value of properties.
Gross financing costs net of interest capitalised into developments
and interest received on deposits.
Interest cover ratio (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.
Adjusted gearing
Adjusted net debt as a percentage of adjusted net assets.
Net operating income (NOI)
The rental income from completed properties less those operating
costs directly related to the property, hence excluding central
overhead.
Net profit contribution (NPC)
This is an important indicator of operational performance as it
measures the net operating income from the completed properties,
net of their financing costs and the Group’s total non-development
related overheads.
Adjusted profit
Adjusted profit is prepared on the basis recommended for real
estate companies by EPRA, the European Public Real Estate
Association, which excludes movements relating to changes in
values of investment properties and interest rate swaps, profits
on disposal of investment properties (but not trading properties)
and the related tax effects.
Adjusted earnings per share
The diluted earnings per share based on adjusted profit.
Total income from managed portfolio
This measure indicates the overall scale of the property portfolio
that the Group manages, it comprises rental and related income,
totalling £164.3 million from properties owned by:
The Group
Third parties and leased by the Group
USAF
UCC
USV
The Group’s total share of this gross income is shown in Note 2(c).
£m
43.2
15.0
78.9
22.0
5.2
Net Initial Yield (NIY or Yield)
The net operating income generated by a property expressed as
a percentage of its value.
Basis points (bps)
A basis point is a term used to describe a small percentage, usually
in the context of a change, and equates to 0.01%
Net rental growth
The annual growth in net operating income less costs from a
property (measured on a like-for-like basis i.e. excluding impact
of completion and disposals).
Minimum net worth
A minimum net worth covenant measures the value of the
Company against an absolute target.
USAF/the Fund
The UNITE UK Student Accommodation Fund established in 2006
is now Europe’s largest fund that purely focuses 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 Real Estate. It is a closed-ended vehicle
due to mature in 2013 and was established by UNITE to develop
and operate student accommodation in London and Edinburgh.
UCC equity is now fully invested and all development projects have
been completed.
OCB
UNITE successfully established a joint venture with Oasis Capital
Bank in August 2009. The joint venture consists of three
development assets located in London, all of which are due
for completion in 2010.
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 bed spaces. It is a closed-ended fund
with one remaining operational asset located in Sheffield.
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Annual Report & Accounts 2009
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Glossary continued
Stabilising 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
UCAS
UCAS is the central organisation responsible for processing
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).
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.
Our business
Company Information
Our core purpose at UNITE is to
deliver the best accommodation
experience for students, with
passion and pride.
Our mission statement explained:
to deliver
– means we do what we say we will
the best
– we lead, we’re research based and we’re recognised
for our innovation
accommodation experience
– it’s the service we provide, as much as the bricks and
mortar, that creates our customers’ experience
for students
– and no-one else
with passion and pride
– the way we work, we love what we do and
we are proud to tell people who we work for
UNITE management
Leadership Executive
Mark Allan
Chief Executive
Joe Lister
Chief Financial Officer
John Tonkiss
Chief Operating Officer
James Granger
Corporate Development Director
Nathan Goddard
Business Development Director
Caroline Mallin
Communications Director
Shane Spiers
Managing Director, Property Management
Richard Simpson
Managing Director, Development
Mark Creedy
Managing Director, Fund Management
Steve Grant
Managing Director, Asset Management
Will Garrard
Managing Director, UNITE Modular Systems
Registered Office
The Core,
40 St Thomas Street,
Bristol BS1 6JX
Registered Number in England
3199160
Company Secretary
Andrew Reid
Auditors
KPMG Audit Plc
8 Salisbury Square
London EC4Y 8BB
Financial Advisers
J.P. Morgan Cazenove
20 Moorgate
London EC2R 6DA
Numis Securities
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Registrars
Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Financial PR Consultants
Financial Dynamics
Holborn Gate
26 Southampton Buildings
London WC2A 1PB
UNITE is the UK’s leading developer and
co-investing manager of purpose built
student accommodation.
Designed and produced by Radley Yeldar (London) | www.ry.com
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
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Annual Report & Accounts 2009