Key facts
- Unite Students reported a £417m pre-tax loss for the six months to June, reversing a £186m profit from the prior year.
- The loss was driven by a £530m revaluation of its property portfolio and challenging building costs.
- The company plans to divest up to £400m of its property assets.
- Occupancy rates are expected to reach 94-96% for the current academic year.
- Unite criticized new regulations and rising costs for making new student accommodation development difficult.
Unite Students has reported a substantial £417m pre-tax loss for the first half of the year, a stark contrast to the £186m profit recorded in the same period last year. The company attributed the loss primarily to a £530m revaluation of its property portfolio and significant challenges related to building costs.
Earnings for the FTSE 250 firm decreased by 2% to £142m. Unite has been experiencing lower occupancy rates and has implemented rent reductions to improve stock turnover. To address its financial situation and focus on students at leading UK universities, the company is undertaking an "ambitious" plan to sell up to £400m of its property assets. In the six months to June, Unite already generated £130m from property disposals and aims to reduce its footprint further by offloading an additional 20,000 beds.
Despite targeted price cuts in cities like Leicester, Nottingham, and Sheffield, Unite anticipates one to two percent rental growth for the current academic year. The company expects occupancy to rise to between 94% and 96% this year, indicating a recovery from recent lower levels. The acquisition of rival Empiric last August contributed to an 11% increase in rents to £262m. However, analysts at Quilter Cheviot noted that this deal, which was "immediately accretive" for most acquisitions, occurred at an inopportune time for Unite, leading to a 7% drop in earnings per share to 27.1p.
Unite warned that the supply of student accommodation is likely to tighten in the coming years due to a slowdown in new construction and the exit of multiple-occupancy landlords. The firm stated that higher build costs and new regulations make new development extremely challenging, requiring rents of approximately £300 per week to be viable outside of London, significantly above the current average of £190. The company also criticized the Renters' Rights Act for contributing to landlords leaving the sector, compounded by rising mortgage costs. Furthermore, older student accommodation is becoming obsolete, leading to beds being removed from the market due to age, high running costs, and the need for higher quality facilities. Unite's shares fell 3.4% to 538p in early trading.