41061 Unite AR22 HI-RES WEB-READY - Flipbook - Page 46
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THE UNITE GROUP PLC | Annual Report and Financial Statements 2022
FINANCIAL REVIEW continued
FINANCIAL PERFORMANCE continued
We are focused on maintaining a robust and flexible balance
sheet and will continue to use leverage to support our
growth and enhance risk-adjusted returns. However, higher
borrowing costs mean we are likely to reduce our use of
debt over time by accessing other forms of funding, such as
new equity and co-investment where appropriate, as well
as disposals.
Key debt statistics (Unite share basis)
See-through net debt
31 Dec
2022
31 Dec
2021
£1,734m
£1,522m
31%
29%
Net debt: EBITDA ratio
7.3
8.3
Interest cover ratio
3.7
2.8
4.1 years
5.0 years
3.4%
3.0%
97%
90%
LTV
Average debt maturity
Average cost of debt
Proportion of investment
debt at fixed rate
LTV increased to 31% at 31 December 2022 (31 December 2021:
29%), primarily driven by expenditure on our development
pipeline, the acquisition of £141 million of units in USAF and
capital expenditure on the investment portfolio, which more
than offset the impact of disposals and valuation increases
in the period.
With greater focus on the earnings profile of the business,
we continue to monitor our interest cover and net debt to
EBITDA ratios. In 2022, interest cover improved to 3.7x (2021:
2.8x) and net debt to EBITDA reduced to 7.3x (2021: 8.3x),
reflecting the improved operational performance of the
business. We are targeting to maintain an ICR ratio of >3.0x
and improve our net debt to EBITDA ratio to 6–7x.
The Unite Group has maintained investment grade corporate
ratings of BBB (Stable outlook) from Standard & Poor’s and
Baa2 (Positive outlook) from Moody’s, reflecting Unite’s
robust capital position, cash flows and track record.
Funding activity
As at 31 December 2022, the wholly-owned Group had
£397 million of cash and debt headroom (31 December
2021: £421 million), comprising of £29 million of drawn cash
balances and £368 million of undrawn debt (2021: £96 million
and £325 million respectively).
During the year, the Group extended its sustainability-linked
revolving credit facility by £150 million to £600 million, on
terms in line with the existing facility. The facility maturity
has been extended by a year to March 2026, which may be
extended by a further year at Unite’s request, subject to
lender consent.
During the year, LSAV raised a new £400 million syndicated
loan for a term of five years, using the proceeds to pay down
existing facilities approaching maturity. The £100 million L&G
loan facility in LSAV matured in January 2023 and was fully
repaid from existing reserves.
USAF has agreed terms for a new £400 million secured loan
to refinance its existing £380 million bond maturity in June
2023. We expect to complete the refinancing in the second
quarter of 2023 at significantly improved pricing levels
compared to the second half of 2022.
Interest rate hedging arrangements and cost of debt
Our average cost of debt based on current drawn amounts
has increased to 3.4% (31 December 2021: 3.0%). At the
year end, 97% of the Group’s debt was subject to fixed or
capped interest rates (31 December 2021: 90%), providing
protection against future changes in interest rates. Based
on our hedging position and market interest rates, we
currently expect a cost of debt of 3.6% for FY2023 and 3.8%
for FY2024.
Our average debt maturity is 4.1 years (31 December 2021:
5.0 years) and we will continue to proactively manage our
debt maturity profile and diversify our lending base. In
addition, the Group has £300 million of forward starting
interest rate swaps at rates meaningfully below prevailing
market levels with a weighted average maturity of just under
11 years.
Dividend
We are proposing a final dividend payment of 21.7p per
share (2021: 15.6p), making 32.7p for the full year (2021:
22.1p) and representing a 48% increase compared to 2021.
The final dividend will be fully paid as a Property Income
Distribution (PID) of 21.7p, which we expect to fully satisfy
our PID requirement for the 2022 financial year.
Subject to approval at Unite’s Annual General Meeting on
18 May 2023, the dividend will be paid in either cash or new
ordinary shares (a ’scrip dividend alternative’) on 26 May
2023 to shareholders on the register at close of business on
14 April 2023. The last date for receipt of scrip elections will
be 4 May 2023.
During 2022, scrip elections were received for 15.4% and
2.8% of shares in issue for the 2021 final dividend and
2022 interim dividend respectively. Further details of the
scrip scheme, the terms and conditions and the process
for election to the scrip scheme are available on the
Company’s website.
We plan to distribute 80% of adjusted EPS as dividends for
the 2023 financial year.