Unite Group Plc · LSE:UTG
Unite — H1 2024 Earnings Presentation
45 slides from Unite's earnings presentation, Jul 24, 2024
Slide 1: Accelerating Growth: Interim results
Accelerating Growth Interim results Six months ended 30 June 2024 24 July 2024
Slide 2: Contents
CONTENTS Contents 1. Performance highlights 2. Finance and property review 3. Operations review 4. Outlook 5. Q&A 6. Appendices 2
Slide 3: Performance highlights
1 Performance highlights Joe Lister, Chief Executive 3
Slide 4: Strong H1 performance
PERFORMANCE HIGHLIGHTS Strong H1 performance H1 2024 H1 2023 FY 2023 • Continued growth in earnings and dividends • Record earnings Adjusted earnings1 £125.3m £110.2m £184.3m • Dividend up 5% to 12.4p Adjusted EPS1 28.7p 27.5p 44.3p • Dividend at 80% of adjusted earnings • Strong demand for 2024/25
Slide 5: Strong demand for Higher Education
PERFORMANCE HIGHLIGHTS Strong demand for Higher Education UCAS applicants and UK application rate • Positive long-term outlook for student numbers 1,000 50% 16% growth in UK 18-year-olds by 20301 000's • 800 46% 41.9% • Rising participation trend for under/postgraduates 600 42% • 3% growth in intern
Slide 6: Supply unable to meet demand
PERFORMANCE HIGHLIGHTS Supply unable to meet demand New supply of PBSA beds 40,000 • Housing supply unable to keep pace with student demand 30,000 • Many university cities facing housing shortages 20,000 • 100,000-150,000 fewer HMO beds available • Key constraint on university growth 10,000 - • New
Slide 7: Accelerating our growth
PERFORMANCE HIGHLIGHTS Accelerating our growth c.£700m of new investment commitments in 2024 Value-add Newcastle University Development New development acquisitions partnership commitments opportunities c.£170m (net) c.£70m c.£200m c.£280m • Acquiring 7 income-producing • Formation of £250m Newcastl
Slide 8: Finance and property review
2 Finance and property review Mike Burt, Chief Financial Officer 8
Slide 9: Strong financial performance
FINANCE AND PROPERTY REVIEW Strong financial performance LfL rental growth Adj. EPRA EPS Dividend per share 7% 28.7p 12.4p +4% YoY +5% YoY NTA per share Total accounting return1 Net debt: EBITDA2 969p 7.9% 5.7x +5% in H1 1) NTA growth + dividends paid / opening NTA for 6 months 2) Trailing 12 months
Slide 10: Rental income driving earnings growth
FINANCE AND PROPERTY REVIEW Rental income driving earnings growth • NOI growth driven by rental increases, higher occupancy and investment activity • Lower interest cost reflecting reduced borrowings • 5% growth in interim dividend Adjusted earnings bridge £130m 8.6 (1.7) £120m 1.8 0.9 5.5 125.3 £11
Slide 11: Stable margins, improving through H2
FINANCE AND PROPERTY REVIEW Stable margins, improving through H2 EBIT margin progression • Underlying margins stable YoY 75.0% Utility 72.9% • Rental growth offsetting cost pressures 72.5% sell back 1.3% • Real Living Wage increase of 10% 70.0% • 15% underlying increase in utilities1 71.8% 71.6% 71.
Slide 12: Strong NAV growth and TAR
FINANCE AND PROPERTY REVIEW Strong NAV growth and TAR • 5% NTA growth in H1, underpinned by rental growth • Total accounting return of 7.9% in H1 (9.5% excluding yield movement) • Additional fire safety provisions expected in H2, as well as unwind of swap gain H1 NTA movement H1 TAR composition 980p
Slide 13: Rental growth driving valuations
FINANCE AND PROPERTY REVIEW Rental growth driving valuations £bn UK PBSA Investment volumes • Increasing investment activity for PBSA 12 10 • £2.5bn of transactions so far in 2024 iQ Student 8 Roost Liberty • Private equity and institutional buyers active Living 6 4 • 2.7% like-for-like valuation gr
Slide 14: Value-enhancing investment activity
FINANCE AND PROPERTY REVIEW Value-enhancing investment activity • Continued focus on portfolio quality and ability to deliver sustainable rental growth • Portfolio 92% aligned to Russell Group cities by value • Recycling capital into stronger assets across development and refurbishment pipeline Deve
Slide 15: Acquiring well located assets from USAF
FINANCE AND PROPERTY REVIEW Acquiring well located assets from USAF £243m of assets in Russell Group markets, with asset management opportunities Marketgate and Phoenix Court USV Cambrian Point Bristol Liverpool Cardiff • £136m combined value at 5.0% NOI • £50m value at 6.6% NOI yield • £57m value a
Slide 16: Kings Place, London
FINANCE AND PROPERTY REVIEW Kings Place, London • New Zone 1 London scheme added to pipeline • 444 beds for delivery in 2027 • £170m total development cost at 6.5% NOI yield • Fully consented scheme, Q4 2024 start on site • Purchased land in July • Located in Borough, close to partner universities a
Slide 17: High-quality balance sheet
FINANCE AND PROPERTY REVIEW High-quality balance sheet Pro forma 30 June 2024 30 June 2023 LTV 18%1 26% 31% • Focused on balance sheet quality Net debt:EBITDA ratio 5.7 6.8 • LTV target of c.30% (pro forma: 18%1) Interest cover ratio 4.8 3.8 • Net debt : EBITDA target of 6-7x • ICR target of 3.5-4.0
Slide 18: Financial outlook for 2024
FINANCE AND PROPERTY REVIEW Financial outlook for 2024 Rental growth Earnings & dividend Total accounting return At least 7% for AY2024/25 Adjusted EPS at upper end Around 12% of 45.5-46.5p (+4-5% YoY) (pre-yield movement) 98-99% occupancy 80% dividend payout See page 37 for further financial guidan
Slide 19: Operations review
3 Operations review Karan Khanna, Chief Operating Officer 19
Slide 20: Strong demand for 2024/25
OPERATIONS REVIEW Strong demand for 2024/25 Occupancy and rental growth • Strong progress with reservations for 2024/25 8.0% 99% 99% 98-99% 100% • 94% of beds let (H1 2023: 98%) 6.0% 94% 95% • Ahead of typical sales cycle 4.0% 7.4% 88% 7.0%+ 90% 2.0% • Broad-based strength in all our markets 2.3% 3.
Slide 21: Positive outlook for 2025/26
OPERATIONS REVIEW Positive outlook for 2025/26 Rental growth vs. incomes and inflation • Supply / demand imbalance to continue Sep-19 to Sep-24¹ • Strongest cities acutely short of housing 30% 24% 27% 21% • Limited new supply in most markets 20% 14% • Focused on delivering value-for-money 10% • Rent
Slide 22: Upgrading our Operating Platform
OPERATIONS REVIEW Upgrading our Operating Platform Technology Service Product • New student app for Sept 2024/25 • Best in Class Student Support • Roll out underway for new • New website for 2025/26 sales • Expanded Resident Ambassador designs of bedroom and amenity • New Booking Platform in 2025 Pr
Slide 23: Outlook
4 Outlook Joe Lister, Chief Executive 23
Slide 24: Accelerating earnings growth
OUTLOOK Accelerating earnings growth Illustrative drivers of medium-term NOI growth • Improving operational outlook £400m • Rental growth ahead of expectations for 2024/25 19 • EBIT margin improvement in 2024 and 2025 +39% 15 • Placing supports doubling of committed development in strongest markets
Slide 25: Positive outlook
OUTLOOK Positive outlook • Strong H1 performance and outlook • Market environment offers compelling investment opportunity to accelerate growth in leading university cities • Capability to leverage our best-in-class platform to accelerate developments and scale-up university partnerships • Placing s
Slide 26: Q&A
5 Q&A
Slide 27: Appendices
6 Appendices 27
Slide 28: Home for Success
APPENDICES 82% of customers using Home for Success MyUnite app • City-centre locations with range of price points • • Close to university campuses Shared living and studios 68% of customers used • Good transport links online check-in • Help when it’s needed • 24/7 customer support centre • • New stu
Slide 29: Portfolio overview
APPENDICES Portfolio overview Geographical breakdown of portfolio Aberdeen 2024 Completed beds Full-time student City rank (23/24) numbers (21/22) Edinburgh 1 London 12,578 382,635 Glasgow 2 Manchester 5,639 97,785 Newcastle 3 Leeds 5,533 69,495 Durham 4 Liverpool 5,340 55,325 5 Birmingham 4,982 85,
Slide 30: Portfolio and customer breakdown
APPENDICES Portfolio and customer breakdown Customers by domicile Customers by year of study Distribution of beds by weekly price Postgraduate, 2023/24 2022/23 2021/22 30% 17% 20% UK 72% 72% 70% 10% 1st year Non-EU 26% 25% 25% undergrad., 0% Returning undergrad., 55% 28% Other EU 2% 3% 5% London RoU
Slide 31: Creating a positive impact
APPENDICES Creating a positive impact Employees Local communities The United Nations Sustainable Development Goals (UN SDGs) (see Our ambition: An equitable, inclusive and safe workspace that Our ambition: Create real social value that meets more details at provides rewarding and fulfilling careers.
Slide 32: A responsible and resilient business
APPENDICES A responsible and resilient business EPC ratings by floorspace • Significant improvement in EPC ratings 100% 92% • Now >99% A-C rated (2022: 80%) 75% 61% • Energy intensity reduced 8% from 2019 baseline 50% • Further £11m investment planned for 2024 35% 22% 19% 25% 7% • Continued progress
Slide 33: Making our buildings net zero carbon
APPENDICES Making our buildings net zero carbon 33
Slide 34: Fire safety
APPENDICES Fire safety • All properties safe to operate with risk-based approach to cladding remediation works • Expect further provisions in H2 • Expect to recover 50-75% of total costs through claims from contractors • £6m of claims settled in H1 for one property (Unite share: £3m) • Financial imp
Slide 35: University partnership opportunities
APPENDICES University partnership opportunities • Growing opportunity to strengthen university OUR UNIQUE OFFER TO UNIVERSITIES partnerships • Housing a constraint to university growth Partner of • Trusted partner with 20+ year relationships choice • Committed long-term co-investor • Quality issues
Slide 36: Value-add acquisitions from USAF
APPENDICES Value-add acquisitions from USAF Acquiring well-located assets with asset management opportunities • £243m of acquisitions from USAF Acquisitions from USAF Disposals to USAF • Acquiring first-generation PBSA assets, in 7 properties 2 properties strong locations and Russell Group cities •
Slide 37: 2024 financial outlook
APPENDICES 2024 financial outlook AY2023/24 AY2024/25 FY2024 Comment Operating performance Rental growth 7.4% 7%+ One term of 2024/25 income in FY2024 Occupancy 99.8% 98-99% EBIT margin c.68.5% +c.50bps YoY Property activity (Unite share) Development capex c.£320m Build costs and site purchases on f
Slide 38: Rental portfolio analysis June 2024
APPENDICES Rental portfolio analysis 30 June 2024 Wholly USAF LSAV Lease Total Unite share owned London Value (£m) 1,217 414 1,715 14 3,359 2,208 Beds 3,812 1,863 6,643 260 12,578 38% Properties 11 6 14 1 32 Prime regional Value (£m) 1,184 960 - 20 2,062 1,482 Beds 7,998 6,047 - 618 13,971 26% Prope
Slide 39: Operations result
APPENDICES Operations result H1 2024 H1 2023 Change £m Share of Wholly Share of Total Total £m % Wholly owned Fund/JV owned Fund/JV Rental income Like-for-like properties 137.6 59.2 196.8 129.0 55.1 184.1 12.7 7% Non-like-for-like properties 12.4 2.6 15.0 9.8 3.1 12.9 2.1 16% Total rental income 150
Slide 40: EPRA Earnings statement
APPENDICES EPRA Earnings statement USAF LSAV 30 June 2024 30 June 2023 Wholly owned (Unite share) (Unite share) £m £m Rental income 150.0 32.5 29.3 211.8 197.0 Property operating expenses (41.6) (10.3) (6.7) (58.6) (50.2) Net operating income (NOI) 108.4 22.2 22.6 153.2 146.8 NOI margin 72.3% 68.3%
Slide 41: EPRA balance sheet
APPENDICES EPRA balance sheet USAF LSAV Unite Group Unite Group £m Wholly owned (Unite share) (Unite share) June 2024 Dec 2023 Balance sheet Rental properties 3,803 840 991 5,635 5,510 Leased properties 82 - - 82 85 Properties under development 244 - - 244 175 Total property portfolio/GAV 4,129 840
Slide 42: LTV reconciliation
APPENDICES LTV reconciliation • Group maintains a c.30% LTV target on 30 June 2024 Net debt GAV LTV £m £m see-through basis See-through LTV (1,507) 5,879 26% • EPRA LTV includes net payables reflecting: • Debt interest accruals (£18m) Net payables (115) - • Trade creditors (£45m) Intangibles - 10 •
Slide 43: Debt information
APPENDICES Debt information 30 June 2024 31 Dec 2023 Facility Drawn Maturity £m £m Net debt £1,507m £1,571m On-balance sheet LTV 26% 28% Unsecured bond (LL 2024) 300 300 2024 Net debt:EBITDA ratio 5.7x 6.1x Sustainable RCF 750 - 2026/27 Interest cover ratio 4.8x 4.6x Unsecured term loan 150 150 2027
Slide 44: Secured development and partnerships pipeline
APPENDICES Secured development and partnerships pipeline Type1 Target Secured Total Total Capex in Capex Forecast NAV Forecast yield delivery beds completed development period (£m) remaining remaining on cost value costs (£m) (£m) (£m) (£m) Committed development Bromley Place, Nottingham DL 2024 271
Slide 45: Development capex phasing
APPENDICES Development capex phasing • USAF acquisitions (c.£125m) expected to complete in September 2024 • c.£45m USAF acquisition asset management initiatives to be completed by 2027 as nominations expire Phasing of development capex¹ £400m c.£320 c.£275m £300m c.£250m £200m c.£125m £100m c.£35m -