Great. Good morning, everybody, and welcome to our results announcement this morning. Welcome to you all in the room and those joining us remotely. As you will have seen, we've been fairly busy over the last few days, and we're excited to be able to talk to you today about the progress that we're making and the plans that we've got. For those of you who have participated, thank you very much for your ongoing support. We feel blessed to be operating in a sector which is being supported by structural tailwinds, and to have made real progress in locking down an opportunity set that this capital will allow us to keep pushing to unlock, and also for us to then go forward and to secure further opportunities from our emerging pipeline.
We will, of course, remain disciplined with our capital and continue to rotate out of those assets where we see lower growth opportunities, and also using debt appropriately within our net debt to EBITDA targets. So we'll run through the results, and touch on the placing as well this morning. So the highlights really from the results, the placing was launched off the back of a strong set of results for the first half of 2024. Record earnings and record dividends that we generated, driven by that strong lettings performance, which underpins all of the results that we're talking about today from an occupancy and a rental growth perspective. Driving 4% growth in EPS, 5% growth in NTA per share, and an 8% total accounting return in the first half.
That's fundamentally driven by that rents growth that we were able to deliver over the course of the first half, feeding through into valuations. With yields stabilizing, starting to see this sense of momentum building into valuations. We're looking forward to finishing off the 2024-2025 letting cycle over the next couple of weeks, and still targeting that full occupancy and rents growth of 7%+. The outlook for 2025-26 is looking equally positive off the back of the strong market fundamentals, our customer offer, relationships with the university, and alignment and locations in those strongest of university cities.
So the GBP 450 million equity raise that was announced this morning will underpin the growth in our GBP 1.5 billion development pipeline and the number of other exciting opportunities that will accelerate the earnings growth of the business into the high single digits over the next few years. While the first half of this year has been characterized by political and some policy uncertainty for the higher education space, I must say I'm looking forward with a bit more certainty and more optimism over the coming months. U.K. universities are a fantastic asset to this country and something which I, and I think we should all be incredibly proud of. They provide opportunities for young people, they drive research and growth, and they're a major export, providing investment and jobs to regional cities across the U.K.
In our conversations with the new government, they recognize this, and they've talked positively in the run-up to the election and afterwards about the important role that universities play in the growth agenda, and they've described them as being a public good, which is quite different to the previous government. They've talked about putting university funding back on a stabilized, financial footing, and we could see them strengthening the remit of the regulator and give them more power to intervene in the financial status of universities. The changes to student loan payment profiles means that the government now is recouping the significant majority of the loans, and that gives them more room to play with. Whilst it's clear that many universities will need to cut their cloth accordingly, and we see a number of them already started these processes, universities are generally well-run.
They've got low leverage and they're asset rich, and with a clearer picture of the financial, future financial funding environment, I think they will be able to plan accordingly. Overall, applications this year are down slightly, down about 1.7%. That equates to about 10,000 fewer applications. That doesn't necessarily feed through into the number of people who will go to university, with U.K. participation marginally down, albeit well ahead of pre-COVID levels. Importantly, however, applications to the high and mid-tariff universities are flat, and the weakness has been seen in those low-tariff universities, which are down by 4%. And this supports our deliberate approach in targeting the portfolios in these universities.
And despite some of the noise, actually, international undergraduate recruitment has remained robust, with the exception of Nigeria, which has seen effectively the total fall of 2,500 fewer applications. That's the fall in international applications in total, and the important markets of China and also the US are both up. The new immigration rules for postgraduate students are now effective, meaning that postgraduate students are unable to bring dependents with them, and this has led to a fall of around 40,000 students, representing about 2% of all full-time students. These are mainly students from Nigeria and India, but because those students bring family members with them, they typically, or they just don't live with us, we haven't seen any impact on our business from that change at all.
And then the final point on immigration is the Migration Advisory Committee was asked to look at whether there was any abuse of the student visa systems in the run-up to the election, but it was clear that there was no evidence of abuse of this system. And so we're not expecting to see any fundamental changes to immigration rules or the student visa system, going forward. And some of our university partners have actually said to us that they're seeing a pickup in international student recruitment since the election, which, I think, is great news. And with the U.S., Canada and Australia all making it harder for international students to go there and study, I think the U.K. is looking more attractive on a relative basis for many international students.
So overall, the policy backdrop is more supportive from this new government than we had from the previous regime. On the supply side, the squeeze that we talked about about 12 months ago, is continuing to play out. New starts and deliveries remain well below historic averages, and the capital bed, capital requirements per bed are significantly higher than they have been. The forward funding market is not operating for many of those traded developers, and development isn't viable in about half the markets in which we operate in, due to that build cost inflation. And that's all flowing through to limited new supply, especially the affordable beds and those mid-market price points where we operate. And the pressure on the small landlord is continuing. There's around 100,000 fewer HMO beds, driven by that increasing regulation, and tougher funding environments.
And we continue to see that pressure. And the reintroduction of EPC requirements on those landlords, I think, will put further pressure on that sector of the market. So a bit more color on the placing itself. We will use the funds to support the GBP 700 million pipeline of opportunities that we've generated. It accelerates our earnings growth into the high single digits and underpins a 10% total accounting return outlook for the next few years. From the proceeds themselves, we will deliver a return of low teens, just sort of giving a really good indication of the quality of returns that we can generate from these types of opportunities.
And what's fantastic is the opportunity set that we've got in front of us is as big as it's ever been, and I think the quality of it is as good as it's ever been. And it's a great time for us to have capital to be deploying into a marketplace which is receptive, which is giving us opportunities that we haven't seen for some time. Well, the opportunity set that we've got in front of us really falls into three buckets. Not helpfully, there's four points on the screen there, but the three elements really are core development activity that we've got. This is kind of bread and butter for what we do in Unite. Opportunities in London, Bristol and Glasgow, and then one other very strong regional city.
We're able to meet our hurdle rates of 7.5% in the region, 6.5% in London. But what's really encouraging is that actually we've been doing that on a de-risked basis. So the last two schemes that we've secured have both had planning, sort of representing, sort of on a risk-adjusted basis, a real improvement in those returns. We will also use the capital to fund our commitment to the Newcastle joint venture. That continues to progress well. The building is now being demolished as we speak. Planning has been submitted, and we'd expect that planning to be received before the end of the year, allowing us to get on site as planned around the year-end.
And we're continuing to target a yield of 7.5% on these investments, and we're making great progress with conversations with other universities who've seen that deal with Newcastle and started to see whether that's appropriate for their growth opportunities as well. And we've also secured a portfolio of value-add acquisitions from USAF to buy assets with asset management upside, delivering an IRR of around 9%-10%. And we are part-funding that by the sale of more stabilized dryer assets back to USAF in return. And we're starting to see a few more individual acquisition opportunities. These are opportunities where we can get our hands dirty. We've got a opportunity to unlock some value, and that, alongside those university partnerships, are areas where we will be keen to explore over the coming few months. Mike?
Thanks, Joe, and good morning, everyone. I'm going to take us through the finance and property review, starting with the financial highlights from the first half. The business performed strongly in the first half, delivering 4% growth in adjusted EPS on the back of strong rental growth and occupancy for the 2023/2024 academic year. This supports a 5% increase in the interim dividend to 12.4p. EPRA Net Tangible Assets increased by 5% in H1 to 969p, reflecting the strength of our sales performance for the coming academic year. Together with dividends paid in the period, this resulted in a total accounting return of 7.9%. Over the page, we discuss the drivers of earnings growth. Net operating income increased by 4% year-on-year through a combination of like-for-like growth and investment activity.
Reductions in overheads helped to offset higher direct property costs for utilities and staff, which we discuss in more detail on the next slide. Finance costs were GBP 8.6 million lower year-over-year, thanks to lower borrowings and a reduction in the average cost of debt. This resulted in a 14% increase in adjusted earnings and 4% on a per-share basis, after taking account of increased shares and issue following last year's equity raise. Our EBIT margin remained stable in the period on an underlying basis, with strong rental growth offsetting cost increases from staff and utilities. As a Real Living Wage employer, wage rates increased by 10% for the relevant members of our city teams at the start of this year. The Real Living Wage remains key to employee attraction and retention in a competitive and price-sensitive environment for frontline service and hospitality roles.
Utility costs rose by 15% on an underlying basis due to higher commodity prices following the expiry of our cheaper historical hedges. Looking ahead, the recent softening in wholesale prices is expected to support a flattening in utility costs over the next 12-18 months. We see our EBIT margin improving by 50 basis points year on year for 2024 as a whole, supported by strong rental growth and moderating cost increases. We expect this progression in margin to continue into 2025. We incurred GBP 3.5 million of costs in the period for our technology replatforming program. Since the full year, we've expanded the program to include development of a new property management system, which is fundamental to our future leasing activity.
We're now halfway through the planned GBP 35 million investment in technology, with the remaining cost to be incurred over the next 2.5 years. The investment will deliver a payback of under 5 years through a combination of cost efficiencies and improved year-round utilization. Net tangible assets increased by 5% in H1 to 969p. This was principally driven by rental growth, which more than offset a small further increase in property yields. We saw modest development services in the period for on-site schemes and see further value creation in the pipeline in the second half as we commit to additional projects. NAV benefited from a gain on the closeout of in-the-money swaps used to pre-hedge our GBP 400 million pound bond issue. This will unwind in the second half, with the mark-to-market benefit reallocated to new borrowings.
We continue to make good progress with fire safety remediation work. We expect to make new provisions in the second half for future projects, which will be equivalent to around 1.5% of our NAV after recoveries through successful claims made in the year. This NTA growth translated to a total accounting return of 7.9% in the first half, or 9.5%, excluding yield movements. Investment activity remains strong for the PBSA sector, with GBP 2.5 billion of transactions in H1. Both private equity and institutional buyers remain active, attracted by the income growth characteristics of the sector. Our portfolio saw a 2.7% like-for-like increase in valuation in the period. Strong rental growth more than offset a modest five basis points increase in property yields, which, as Joe said, are showing clear signs of stabilizing.
Our H1 valuations were also impacted by the abolition of Multiple Dwellings Relief, which had previously reduced stamp duty for a number of our properties. We remain active across our GBP 8.7 billion owned and managed estate, with a continued focus on driving investment activity that improves the quality of our portfolio and alignment to the strongest UK universities. We're on site at 5 projects in our development pipeline and achieved planning consents in H1 for 2,400 beds in London, Bristol, and Glasgow. Our asset management activity is also increasing, recognizing the potential to drive rental growth and deliver an enhanced student experience through targeted refurbishment. We will deliver GBP 47 million of projects this year at a target yield on cost of 8%. We secured our first university joint venture in the period with Newcastle University.
Demolition is now underway at Castle Leazes, and planning has been submitted for the development of 2,000 new beds on the site. We also completed disposals totaling GBP 184 million in the period to improve portfolio quality. Including the assets held for sale to USAF in the second half, we expect to make GBP 300 million of disposals for 2024 as a whole. Part of the use of proceeds for our equity raise is the acquisition of 7 properties from USAF, with value-add opportunities for a total of GBP 243 million. This will be satisfied through the disposal of GBP 118 million of properties to USAF and a balance in cash payment. For USAF, the transaction brings two high-quality modern assets into the fund that meet its core return targets and also provides new funding capacity.
For Unite, the acquisition brings on-balance sheet properties with asset management upside that we know well in strong city center locations. We've identified GBP 45 million of refurbishments on the acquisition portfolio for delivery over the next 2 years. This supports a blended yield post CapEx of 5.9% and an ungeared IRR of 9%-10% on the assets we're acquiring. The newest addition to our pipeline is Kings Place, our GBP 170 million development located in Borough, in Zone 1 of Central London. It's well-located for a number of Central London university campuses, as well as transport links. We were previously under bidder on the site 1 year ago, which came back to us after another purchaser failed to perform. We've acquired the site with the benefit of a full planning consent, which supports delivery for the 2027-28 academic year.
We expect the scheme to deliver a yield on cost of 6.5%, which is very attractive for a consented Central London scheme of this type. The high-quality, studio-led development will target the premium student market and provide around 50% more amenity space per student than our typical developments. As Joe said, we remain focused on maintaining a high-quality balance sheet to support our growth. Following the placing, our LTV will reduce to 18% on a pro forma basis. We expect to deploy around GBP 300 million of the placing proceeds this year, taking LTV up to the low-to-mid-20s% by year-end. As we deploy the remaining proceeds, we see LTV stepping back up to the high 20s% by the end of 2025.
We remain disciplined around capital allocation and will continue to target disposals of around 2%-3% of the portfolio each year to manage our leverage and fund additional investment opportunities. On the debt side, there remains good appetite to lend to the student accommodation sector, as demonstrated by our GBP 400 million bond issue in June. Reflecting our hedging and well-laddered debt maturity profile, we anticipate a gradual increase in borrowing costs in H2 and into 2025. Turning to outlook. We continue to see a positive financial outlook for the business in 2024 and beyond. As we head into the busy clearing period after A-level results, we're confident in delivering occupancy of 98%-99% for the 2024-2025 academic year, which supports rental growth of at least 7%.
This leasing performance underpins an increase in our earnings guidance to the upper end of our range of 45.5p-46.5p. Our dividend payout remains unchanged at 80% of adjusted earnings for 2024. Strong NAV growth in H1 also supports an increase to our total accounting return guidance to around 12% for the year, which excludes any movement in property yields. With that, I'll hand you over to Karan to take you through the operations review.
Thanks, Mike. As Mike and Joe shared earlier, our strong half-year performance is built on our industry-leading operating platform, and it's great to see that the investments that we're making to enhance its capabilities is leading to continued commercial success, but also improved student experience as well. We are now 94% sold for this academic year. That is well ahead of a typical sales cycle, although slightly behind last year, which we know was exceptionally strong. A key highlight this year has been an additional 2,600 beds that our high tariff university partners have taken from us. They've taken this on a long-term nom spaces at market rates with appropriate caps and collars, which I think is a real vote of confidence in our offer, but also a vote of confidence on their own ability to drive their student numbers.
So overall, we will be about 58% nominated this year, compared to 54% last year. We've also seen an increase in the number of rebookers. In fact, since the start of the pandemic, our rebooking success rate is in fact up 55%. This performance, along with the primary research that we do with students, suggests that more and more U.K. domestic students see purpose-built student accommodation as a better home for them all the way through their years of study, rather than moving out after the first year into the HMO sector. As Mike said, we are now in the final phase of sales for this coming sales cycle, and we remain confident of achieving at least a 7% rental growth and occupancy between 98% and 99%. Looking ahead, we continue to see the demand and supply imbalance persisting.
While the Labour government has made building new homes, including those for students, a priority, it will take time for the policy to be enacted and then for that to actually lead to real construction. We are, however, very mindful of the affordability challenge, and this remains front of mind as we think about our pricing strategy, going forward, and we want to remain value for money. As we have shared before, if you look at the evolution of our rental growth, it has actually tracked behind wage growth as well as CPI, and only just ahead of student loans. This gives us confidence that our medium to longer term rental growth ambitions remain, achievable while we remain affordable, mainstream within the offer market.
We also continue to offer a broad range of all-inclusive price points in our cities, so a student and their parents can choose what they want and at what price do they wanna pay. Add to that, we have continued to up our investment and our proposition, and I'll take you through that in a second. As a result of these investments, we have seen our student satisfaction scores continue to grow, and we had another record increase in the last end-of-term survey that we did in May. This remains our key yardstick to assess if we're offering value for money, and we believe we continue to offer to do that. Looking ahead, we believe we can drive rental growth between 4% and 5% for the next academic year.
We believe this is achievable through a combination of renewal of some of our longer-term noms that are expiring. That will slightly be offset by some of the lower inflation-linked growth that we will see with some of the other longer-term noms that we have. But we will be supported by asset management initiatives that Mike talked about earlier, as well as seeing the return from our technology investment as well. Final bit for me, a little bit more on the operating platform and the progress that we are making with its evolution and enhancement. Pleased to say, overall, we are making really good progress. On the technology front, we're just about to go live with the first phase of our upgrades, which are predominantly around our digital estate.
This involves a brand-new student app, as well as a brand-new student-facing website as well. The app is absolutely critical to the ways this generation of students wants to interact with us, and it will offer them a whole range of services, from how they manage their account, to how they can chat to their flatmates, to eventually rebooking with us as well. It'll also make us more efficient in our operations because students will be able to raise all their maintenance issues through the app. They'll be able to tell us if they are locked out, which does happen a fair bit, or if they have a noise complaint, which also happens a fair bit.
In fact, the last two things account for the bulk of the calls that we get into our central call center, which hopefully we can then reduce as well. Our newer website will showcase our properties in a much more compelling fashion, help students make the choice of room that they want, as well as the location and city, much more interesting. In 2025, we will introduce our new booking engine and our new property management system, which will then further enhance our ability to show up different properties and actually start to do a lot more yield management as well. The booking system upgrades will come in time for our next academic cycle, so that's the 2026-2027 cycle that starts next October, and both the app and the website will go through a series of releases before we get to full functionality.
In parallel, we have continued to invest in our service proposition. Back in February, I talked about the launch of our 24/7, 365 operating model, and we're really pleased to say that is now fully embedded, and the feedback that we hear from students, parents, as well as our university partners, is hugely positive. Support to Stay, which is our flagship student welfare program and recognized by our university partners as industry-leading as well, continues to deliver excellent results, as well as our expanded Resident Ambassador program that is now in every single site. As a result of these programs, we saw an 8-point increase in students saying that they felt supported and looked after when staying with us. In fact, that's the metric that grew the most in our latest student survey, and probably the one that gives us the most pride.
Finally, we continue to make excellent progress on our next-generation designs. Our Amenity pilot that we ran at Morris House in Nottingham has been a real success with a new welcome experience. We've introduced a self-service market café, more tailored social spaces, as well as study spaces, as well as a new parcel management solution, which we're now rolling out to different properties, which should reduce the administrative burden that our city teams have to deal with.
We've also finished the designs of our new ensuite flats. They are more spacious, even though they are within the same footprint, and we've introduced a real heart-of-home kitchen, which is how a lot of us live as well right now. All of these innovations are being introduced in our new developments that Mike and Joe talked about earlier, as well as the asset management initiatives that are live in 2024. So as you can see, there are a lot of exciting stuff happening in driving our operating platform. And on that note, I'm gonna hand back to Joe.
Thank you, Karan. So I think it goes without saying that the outlook for growth remains really positive for us, and with EPS growth accelerating into the high single digits from 26 and beyond, being driven by rental growth ahead of expectations, expected margin improvements, our committed pipeline, and the use of acquisitions. And the placing clearly supports the commitments to that development pipeline in our strongest markets and provides us with growing visibility on our earnings over the coming few years. I think importantly, also, as I mentioned, it allows us to look forward with more confidence and to step into those opportunities that we are seeing. And to that extent, we are making really good progress on our, what will be hopefully our second university partnership. It is a similar size and deal structure to the Newcastle opportunity.
It's with an existing partner who we worked with for very many years, and we've got the opportunity to take an existing hall that they own to effectively double that in terms of its density. We'll provide beds to the university through construction, and we are planning to submit a joint planning consent or application towards the end of the summer, again, showing the progress that we're making, and hopefully be able to announce something before the end of the year. So overall, I think it is a really good time to be investing in the sector, and as a new management team, we are delighted with the progress that we've made over the first half of the year. It feels like operationally, we really haven't missed a beat.
That really sits behind our ability to upgrade the EPS and TAR guidance we provided at the beginning of the year, and the placing only goes to support the outlook and growth of the business to take advantage of a pipeline of great opportunities and drive and support that strong earnings growth over the next few years. So thank you all. We'll move on to questions. So maybe we can start in the room if anyone has any questions. If you can, use the microphone, it just helps people who are listening remotely to hear. So I think Caroline has got one. I think Sam, over here.
Hi. Morning. It's Sam King from BNP Paribas Exane. Congratulations on a good set of results and for the placing as well. Just a couple of questions on CapEx and university JVs, picking up on a comment in the results statement, that you see annual CapEx increasing to GBP 400 million per year from the current level of GBP 200 million to GBP 250 million, primarily driven by uni JVs. If I think about the Newcastle JV, your share of the CapEx on that is about just under GBP 130 million, and that's quite a big project. So does that suggest quite a significant ramp-up in the number of uni JV deals you're signing? Any kind of comments on that and demand from unis, firstly. And then just secondly, just on timing of that and how, and how quickly that can ramp up. Thanks.
Yeah. So I think in the back of the presentation, Sam, you'll see some phasing on the CapEx, based on the committed schemes and the pipeline that we're funding through the placing. We do see CapEx in the near term at around GBP 300 million, but I think as we start to add in new projects, and particularly university partnerships, we could see that step up to more like GBP 400 million. I think on the future university partnerships, it will depend on the scale of our stake. We've talked about having a stake of, you know, between 25%-50%, for the university, which would mean that we might have a higher share of the capital commitments on some of those future schemes. I think the GBP 400 million is more of a medium-term number, but it gives you a sense of where we could get to.
Thanks.
Couple down here.
Hi, morning. Allison from BofA. So I have two questions. First is about the GBP 300 million equity raise last year. How much of that has been deployed so far? And the second is, very project-specific. On the Central Quay project, if I don't remember wrong, you have around GBP 97 million total development cost, as disclosed for full year 2023, but I see that number has increased to GBP 123 million. So why the increase? Is this project-specific, or
Yeah. So starting with GBP 300 million, Allison, so the use of proceeds for last year's placing were for 2 development schemes in Stratford and Bristol. The Meridian Square scheme in Stratford is moving on-site, having secured planning application in the first half, and the Bristol scheme is already on-site. The remainder of the proceeds were for those asset management initiatives that I mentioned. So just under GBP 50 million of projects this year, and probably more like GBP 50 million-GBP 75 million of projects next year. So delivering in line with our plan, and as always, as we always anticipated, that CapEx would be spent over the course of 2 to 2.5 years. In terms of Central Quay, so Central Quay is the new development that we've had consented in Glasgow. We've actually upsized the planning consent that we've achieved there versus our initial expectations.
So that was initially a scheme of 800 beds, and actually, through the density we've been able to add through planning, that has helped in terms of achieving a higher number, so over 920 beds there now. That's the single biggest driver of the cost. There has been some inflation in the wider market, but we're still confident of hitting those returns of around the 7.5% through the rental growth we can achieve.
Hi, I'm Sam Duff from Collytics. Thanks for the presentation. So obviously, you've shown very strong growth over the last couple of years, and you note that you're keeping an eye on affordability. On that, have you noticed any change in maybe the mix of your tenants in terms of international versus domestic, or how they're funding their accommodation? Anything along those lines.
Karan, do you want to
Yeah, so our overall mix remains sort of stable. We haven't seen any changes, and especially from the China market. That still remains relatively strong. We're obviously doing a little bit more nominations, so we will probably end up taking a little bit more UK domestic. The nomination deals tend to be first-year students, and they tend to be more UK domestic students with a little bit of international in there. So overall, I think we are relatively stable in terms of its overall mix. In terms of actually funding, we're again not seeing a massive change. The maintenance loans will remain a core part of how students will continue to fund their accommodation and living expenses. I think parents continue to be a key source as wage growth has gone up and certain prices have gone up as well.
Again, what we are seeing, and we've seen this through our applicant survey as well, is that more students are saying that they are picking up jobs, or sort of part-time work as well, to fund either their living expenses or their, accommodation sort of needs as well. So I think that's probably the biggest change, is that I think there's about, if I, if I remember correctly, 60%-70% of students have said that they are now looking at getting part-time work to support their stay at university.
Thank you. Very helpful.
Morning, it's Matthew Saperia from Peel Hunt. One quick question. The transactions you've announced with USAF today, does that clear the liquidity needs that the fund had to pay out to shareholders?
Yes, it will do, and it provides further capital for the fund to then invest in its sort of capital requirements over the next couple of years as well. So it does clear that down. Any more questions in the room? No. Mike, have we got anything come through?
We do on the webcast. We've got two questions from Othman Alraqi from Fidelity. The first one: "Is the acquisition from USAF partly driven by redemptions in the fund?" Which I think Joe's just touched on. "What do you expect the pro forma LTV to be at a USAF level following the redemptions?" We paid some redemptions in the first half. The loan-to-value ratio at the period end was 26%. Following the redemptions that'll be funded out of the disposal proceeds, the LTV will remain around the same level.
Second question from Othman was: "Do you contemplate accessing the unsecured bond market again this year to help fund your growth?" As I said, we've just recently completed a GBP 400 million bond issue. We've got a bond that's still outstanding that we'll repay at the end of this year, but we're not anticipating any more bond issuance in 2024. I think that's it for questions.
Great. Well, if there's no more questions, thank you all for your time. Thank you for coming along today, and, look forward to seeing you all soon.