Unite Group Plc · LSE:UTG
Unite — FY2020 Earnings Presentation
39 slides from Unite's earnings presentation, Mar 16, 2021
Slide 1: Resilience through our people and platform
Resilience through our people and platform Preliminary Results Year ended 31 December 2020
Slide 2: Delivering on our purpose
Delivering on our purpose • Focus on doing the right thing for all stakeholders 31 Dec 31 Dec % • Significant and ongoing support for students 2020 2019 Change • Enhanced reputation with students, parents and Universities • Demonstration of our best-in-class operating platform EPRA Earnings £97.3m £
Slide 3: Contents
Contents 1. Performance highlights 2. Financial review 3. Property review 4. Outlook 5. Appendices 3
Slide 4: 1. Performance highlights
1. Performance highlights 4
Slide 5: Operational delivery
Operational delivery • Resilient operating performance Occupancy and rental growth 95-98% 5% 99% 98% 98% 100% • 88% of beds let for the 2020/21 academic year, outperforming 88% peers (75%1) 4% 80% 3% 2-3% • 95% cash collection for 2020/21 60% 2% • Confident in retaining ICR covenant headroom 3.4% 3.
Slide 6: Our response to Covid-19
Our response to Covid-19 Over £100 million in financial support Financial support for students Proven operational resilience Health, safety and welfare • First PBSA provider to forgo 2020 • All properties open and • First PBSA provider to be summer term rents operational throughout the accredited wi
Slide 7: Creating a responsible and resilient business
Creating a responsible and resilient business • Commitment to doing what’s right is one of our values • New Sustainability Strategy developed following broad engagement with stakeholders • Five objectives defining our new levels of ambition around sustainability Becoming net Creating resilient Enhan
Slide 8: 2. Financial review
2. Financial review 8
Slide 9: Resilient financial performance
Resilient financial performance 31 Dec 2020 31 Dec 2019 % Change Income statement EPRA earnings £97.3m £110.6m (12)% EPRA EPS 25.5p 39.1p (35)% Dividend per share 12.75p 10.25p +24% Balance sheet EPRA NTA per share 818p 847p (3)% Loan to value 34% 37% Cash flow Operations cash flow £57.3m £85.4m (33
Slide 10: Earnings impacted by Covid-19 disruption
Earnings impacted by Covid-19 disruption 31 Dec 2020 31 Dec 2019 £m £m Rental income 263.2 213.9 Property operating expenses (82.9) (53.1) Net operating income (NOI) 180.3 160.8 NOI margin 68.5% 75.2% Management fees 14.0 14.4 Operating expenses (30.9) (21.8) Finance costs (64.9) (43.9) Acquisition
Slide 11: Earnings bridge
Earnings bridge • 11 additional months’ contribution from Liberty Living • £11m of synergies from Liberty Living acquisition delivered in FY2020 • £60m of rent forgone for Covid-19 in FY2020 (Unite share) • Reflecting impact of cancellations in 2019/20 and flexible tenancies in 2020/21 • Lost income
Slide 12: Cash collection
Cash collection 2020/21 academic year • We expect to receive 90-95% of contracted rental income of £268 million for the 2020/21 academic year (Unite share) based on 88% of beds sold • 10-week rental discount expected to result in a £10m reduction in rental income (Unite share) • A number of schedule
Slide 13: 2021 earnings guidance
2021 earnings guidance • Guidance for 27-30p of EPRA EPS for FY2021 • 50% dividend payout for 2020, increasing to at least 80% as market conditions stabilise £m FY2020 FY2021 Comment Term 2 119 90 Impact of rent discounts and lower occupancy in 2020/21 Term 3 51 75-80 Return to campus post-Easter in
Slide 14: Earnings growth outlook
Earnings growth outlook • High visibility over significant future earnings growth • Positive rental growth outlook • Pipeline de-risked by University partnerships • £18m annual cost synergies from Liberty Living • Pro forma LTV of 30-35% post pipeline and disposals • 74% EBIT margin target by end of
Slide 15: NAV bridge
NAV bridge • 3% reduction in EPRA NTA • Reflecting £ for £ reductions in value for income shortfalls due to Covid-19 • A £34m provision for the replacement of HPL cladding covering 19 properties • 3 basis point increase in property yields 860p 850p 840p Swap cancellation/debt break costs (8p) Integr
Slide 16: Proactive approach to cladding
Proactive approach to cladding • Fire safety is a critical part of our health and safety strategy • Linked to our Home for Success purpose • One of the first companies to remove ACM cladding from our properties • We have identified 19 properties with High-Pressure Laminate (HPL) cladding across our
Slide 17: Cash and debt facilities
Cash and debt facilities Key debt statistics (Unite share) • Robust balance sheet 31 Dec 2020 31 Dec 2019 • LTV of 34% (2019: 37%) Net debt £1,742m £1,884m • BBB credit rating LTV 34% 37% Net debt:EBITDA ratio1 10.1 6.8 • Opportunity to further reduce the cost of debt Interest cover ratio 2.5 3.5 •
Slide 18: Resilient performance by co-investment vehicles
Resilient performance by co-investment vehicles Summary financials • Slight reduction in management fees due to income USAF LSAV disruption from Covid-19 £m £m • Further £5.7m of LSAV performance fee in 2020 GAV 2,798 1,324 (£4.6m post-tax) Net debt (843) (462) • USAF expected to reinstate distribut
Slide 19: 3. Property review
Artisan Heights, Manchester 3. Property review 19
Slide 20: Strong investment appetite
Strong investment appetite • PBSA continues to attract significant volumes of capital UK student accommodation investment • Record transaction volumes in 2020, dominated by volumes Blackstone’s acquisition of iQ £bn 8 • Transactions taking longer to complete 6 • Income guarantees a feature of transa
Slide 21: Enhancing our portfolio
Enhancing our portfolio • Stability in PBSA rents despite Covid-19 YoY rental growth (2020/21) 3% • Contracted increases through nomination agreements 2% 2.5% • Direct-let pricing reflects shift in mix to UK customers 1% at 20% lower average tenancy value 0% -0.6% -1% • Slight shortening of tenancy
Slide 22: New supply expected to slow
New supply expected to slow • PBSA now provides homes to 680,000 students New supply of PBSA beds • 310,000 bed shortfall to 1st year and international 35,000 students 30,000 25,000 • Widening awareness of PBSA’s benefits among non- 20,000 first year students 15,000 10,000 • 25,000 new beds delivere
Slide 23: Secured development pipeline
Secured development pipeline • Secured pipeline of c.4,000 beds to deliver by 2023 Target Secured Total Total Forecast delivery beds completed development yield on cost • £599m total development cost at 6.4% yield on cost value costs (£m) (£m) • London represents 71% by value Direct-let development
Slide 24: 4. Outlook
4. Outlook 24
Slide 25: Higher Education update
Higher Education update • 5.4% growth in placed applicants for 2020/21 YoY growth in placed applicants (2020/21) 20% 16.9% • Stronger growth for Unite Universities (+6.3%) 15% 13.2% • Record participation rate for UK students Strong growth from non-EU students, but travel disrupted 10% • 4.5% 3.7% •
Slide 26: Strong outlook for student numbers
Strong outlook for student numbers • We expect strong student demand in 2021/22 Breakdown of reservations (2021/22) • 8.5% growth in UCAS applications • Return to growth in the 18-year-old population UK 1st year, 5% • Record participation rates UK returner, 9% • Significant growth in non-EU student
Slide 27: Enhanced University partnerships
Enhanced University partnerships • 39,250 beds now under nomination agreements Nomination agreements Beds Beds % Income • 60% of beds sold for 2020/21 Length 2020/21 2019/20 2020/21 • Significant income visibility Single year 17,709 15,264 45% 2-5 years 5,748 11,214 16% • WAULT of six years (2019: s
Slide 28: Positioned for a rapid recovery
Positioned for a rapid recovery • Outlook remains strong despite short-term uncertainty created by Covid-19 • Positive demand outlook • Strong student demand for 2021/22 • Record participation rates • Demographics and international growth support strong growth in the next decade • Well positioned th
Slide 29: 5. Appendices
5. Appendices 29
Slide 30: Home for Success
Home for Success • All-inclusive pricing • All utilities, insurance and services Of customers using • High-speed Wi-Fi (70 Mbps) 86% MyUnite app • MyUnite app • Maintenance teams on hand • Help when it’s needed • 24/7 customer support centre Of customers used 79% online check-in • Customer service t
Slide 31: High-quality, affordable accommodation
High-quality, affordable accommodation • Value-for-money is the most important factor influencing students’ decisions on where to live • Our accommodation is now cheaper than HMO • Before allowing for the additional product and service features we provide • Covid-19 has demonstrated the value of a t
Slide 32: Portfolio overview
Portfolio overview Geographical breakdown of portfolio Aberdeen 2021 Completed beds Full-time student City Market share rank (20/21) numbers (19/20) 1 London 11,591 350,000 3.3% Edinburgh Glasgow 2 Liverpool 6,469 53,495 12.1% 3 Birmingham 6,256 77,255 8.1% 7 Newcastle Durham 4 Manchester 5,620 67,2
Slide 33: Portfolio and customer breakdown
Portfolio and customer breakdown Customers by domicile Customers by year of study Distribution of beds by weekly price 30% 2020/21 2019/20 Postgraduate, 25% 13% 20% UK 66% 60% 15% Returning 10% Undergrad., 1st year Non-EU 25% 30% Undergrad., 5% 23% 0% 64% Other EU 9% 10% London Provincial Bookings b
Slide 34: Rental portfolio analysis
Rental portfolio analysis 31 December 2020 Wholly owned USAF LSAV Lease Total Unite share London Value (£m) 1,137 401 1,054 17 2,609 1,770 Beds 4,177 1,863 5,291 260 11,591 35% Properties 12 6 12 1 31 Prime provincial Value (£m) 949 647 - 25 1,621 1,117 Beds 7,645 5,337 - 618 13,600 22% Properties 1
Slide 35: EPRA performance measures
EPRA performance measures 2020 2019 2020 2019 £m £m Pence per share Pence per share EPRA Earnings 97.3 110.6 25.5 39.1 EPRA NTA 3,271.0 3,091.4 818 847 EPRA NRV 3,601.9 3,394.5 901 930 EPRA NDV 3,180.7 3,012.6 796 826 EPRA net initial yield 3.8% 4.9% EPRA vacancy rate 13.0% 1.4% EPRA cost ratio (inc
Slide 36: EPRA capital expenditure
EPRA capital expenditure 2020 2019 £m Wholly owned Share of JVs Group share Wholly owned Share of JVs Group share Acquisitions - - - - 51.0 51.0 Developments 87.6 - 87.6 208.2 6.5 214.7 Rental properties 25.0 22.9 47.9 6.5 8.7 15.2 Other 4.6 - 4.6 9.1 - 9.1 Total property related capex 117.2 22.9 14
Slide 37: Summary EPRA balance sheet and income statement
Summary EPRA balance sheet and income statement USAF LSAV Unite Group Unite Group £m Wholly owned (Unite share) (Unite share) 2020 2019 Balance sheet Rental properties 3,615 617 662 4,893 4,703 Leased properties 102 - - 102 110 Properties under development 187 - - 187 412 Total property portfolio/GA
Slide 38: Debt facilities
Debt facilities On-balance sheet Co-investment vehicles Facility Drawn Maturity Facility Drawn Maturity £m £m £m £m Unsecured USAF HSBC/RBS 400 350 2022 Secured bond 775 775 2023-25 HSBC/RBC/RBS 400 400 2022 Wells Fargo 150 135 2024 Unsecured bond (Unite) 275 275 2028 Total 925 910 Unsecured bond (L
Slide 39: Secured development and partnerships pipeline
Secured development and partnerships pipeline Target Secured Total completed Total Capex in period Capex remaining Forecast NAV Forecast yield on delivery beds value development (£m) (£m) remaining cost (£m) costs (£m) (£m) Direct-let development Derby Road, Nottingham1 2023 620 64 48 1 45 16 8.0% W