Unite Group PLC (LON:UTG) has warned about the impact of uncertainty from Brexit and a review of higher education funding in the year ahead as the student accommodation firm reported solid income and capital growth in 2018 and rewarded shareholders with a 28% dividend hike.
For the year ending in December 2018, the FTSE 250-listed firm recorded a 7% increase in pre-tax profits to £245.8mln, while EPRA earnings - an underlying measure of performance preferred by the company - grew by 25% to £88.4mln.
Unite's net debt increased by 7% to £856mln, but its loan-to-value decreased to 29% from 31% the previous year.
The group announced a total dividend of 29p per share for 2018, up from 22.7p the previous year.
Richard Smith, Unite's chief executive said: "Looking ahead, we maintain our positive outlook for the business.
Reservations for the 2019/20 academic year are in line with record levels for this time of year, supporting our like-for-like rental growth guidance of 3.0-3.5%.
Our secured development and University partnerships pipeline of 6,579 beds being delivered over the next four years will further improve operating efficiency and generate significant earnings growth."
He added: "Whilst the backdrop of the ongoing Brexit negotiations and the impending review into Higher Education funding provide some uncertainty, our strategy of aligning to the best Universities and providing good-quality, value-for-money accommodation for resilient segments of the market reinforces our long-term confidence in the business.
"This confidence is reflected in our 28% increase in the full-year dividend."
In a note to clients, analysts at Liberum Capital commented: “Unite’s resilient LFL income growth and a large development pipeline with an expected 7% yield should continue to support sector-leading returns. Nevertheless, following its strong performance, we see the shares as fairly valued for now.”
Liberum maintained a “hold” rating with a target price of 950p.