UNITE Group plc · LSE:UTG
UNITE — Investor Day (October 2018)
36 slides from UNITE's investor day presentation, Oct 9, 2018
Slide 1: Capital Markets Day
Capital Markets Day South Quay House, Bristol 9 October 2018
Slide 2: Agenda
AGENDA 1. Trading update and strategy overview Richard Smith, Chief Executive 2. Delivering continued earnings growth Joe Lister, Chief Financial Officer 3. Operational excellence and value John Blanshard, Chief Customer Officer & Joe Lister, Chief Financial Officer 4. Portfolio strategy Nick Hayes,
Slide 3: Trading update and strategy overview
Trading update and strategy overview Richard Smith
Slide 4: Trading Update
TRADING UPDATE Supportive market driving full occupancy and target Occupancy and rental growth rental growth 100% 98% 99% 98% 98% 99% 98% 5.0% 90% - 98% occupancy for 2018/19 academic year 80% 4.0% - Full-year rental growth in line with 3.0 - 3.5% forecast 70% 60% 3.0% - USAF and LSAV Q3 valuation
Slide 5: Demand for UK HE remains strong
DEMAND FOR UK HE REMAINS STRONG Total 2018 enrolments in line with 2017 Full-time student numbers Students (000s) - Applications continue to outstrip acceptances 2,000 1,827 1,855 1,878 1,800 1,771 1,710 1,728 1,730 - Record participation rates among UK 18-year-olds 1,600 1,400 offsetting demograp
Slide 6: A resilient market for PBSA
A RESILIENT MARKET FOR PBSA Market remains undersupplied Students and supply Students (000s) - c.750,000 1st year and international students 2,000 1,827 1,855 1,878 - 615,000 PBSA beds 1,800 1,600 1,728 1,730 1,771 ○ University stock flat 1,400 1,200 ○ New supply slowing 1,000 800 750 682 699 713
Slide 7: Increasing focus on value for money
INCREASING FOCUS ON VALUE FOR MONEY Proactively managing portfolio to meet Operating efficiency mainstream students’ needs 76% 75% 70 74% 61 60 - 92% cluster / shared flats 72% 71% Efficiency (bps) 50 70% 70% 40 Margin 68% - Wide range of price points 66% 30 30 64% 64% 20 62% 60% 10 Sustained in
Slide 8: Growing appetite for long-term partnerships
GROWING APPETITE FOR LONG-TERM PARTNERSHIPS Accommodation increasingly important part of Chaucer House, Portsmouth Universities’ overall proposition - Recognising impact on retention and satisfaction - More Universities offering 3-year guarantees to international students Universities under incr
Slide 9: Driving Unite's earnings growth
DRIVING UNITE’S EARNINGS GROWTH Operational excellence Portfolio strategy University partnerships Future growth opportunities New Sustainable openings rental growth - nominations Future (Less - efficiency earnings disposals) - utilisation Current earnings 8
Slide 10: Delivering continued earnings growth
Delivering continued earnings growth Joe Lister
Slide 11: Earnings growth outlook
EARNINGS GROWTH OUTLOOK PPS Assumptions / rationale 2018 consensus 34p 2018 openings full-year impact 2-3p 60% of year 1 income 2019-21 openings 11-14p Includes lower cost of debt and 35% LTV Based on 2-4% NOI growth; includes efficiencies, utilisation NOI growth per annum 1-2p and rental growth Dis
Slide 12: Secured development and partnerships pipeline
SECURED DEVELOPMENT AND PARTNERSHIPS PIPELINE Total Total Target Secured completed development Capex in Capex Forecast NAV Forecast Type delivery beds value costs period remaining remaining yield on cost (£m) (£m) (£m) (£m) (£m) Wholly owned Skelhorne Street, Liverpool Dev 2019 1,085 94 74 10 39 10
Slide 13: Modelling Unite's balance sheet
MODELLING UNITE’S BALANCE SHEET Built-out Cost to Expected NOI £’m June 2018 Disposals balance complete dev’t profit growth1 sheet Investment 2,474 Development 345 2,819 (85) 546 154 250 3,684 Net debt (770) 85 (546) (1,231) Other liabilities (40) (40) 2,009 2,413 NAVps 761p 914p LTV 27% 33% 1 Assum
Slide 14: Operational excellence and value
Operational excellence and value John Blanshard & Joe Lister
Slide 15: Operating platform
OPERATING PLATFORM Our operating platform continues to deliver customer service and develop further efficiencies through: OUR PEOPLE OUR SCALE OUR TECHNOLOGY Highly engaged, 50,000+ bed creates PRISM enabled customer centric teams, central efficiency efficiencies, self-serve with greater levels an
Slide 16: Developing operational excellence
DEVELOPING OPERATIONAL EXCELLENCE Using an insight-led approach over the past 3-4 years, we have developed a much deeper understanding of the things that really matter to our customers (and the things that don’t) Our insight sources: Insight themes fed into our Our operational excellence three Bra
Slide 17: Managing income – sales
MANAGING INCOME – SALES Our Brand … inform our: … resulting in: Promises: Get me settled in Digital content The right, tailored information provided to our Safe & secure Service Style training customers to help them make their booking as easy There when University and as possible you need us agent p
Slide 18: Managing income – sales
MANAGING INCOME – SALES Progressively making our sales process as effective and efficient as possible Improvement areas: From: To: Website Online bookings have increased 20% 26% Service Centre Onsite sales have decreased 55% 43% China office and SALES international agents Nominations business 50%
Slide 19: Customer service and driving efficiency
CUSTOMER SERVICE AND DRIVING EFFICIENCY 1 2 3 4 Booking a room Contact uS Smart check-in Moving in 33% reduction to MyUnite app provides 81% of students Online channels growing our call centre welcome information feel excited and so customers feel less 61% feel anxious Offer to completion 60% reduct
Slide 20: Customer service and driving efficiency
CUSTOMER SERVICE AND DRIVING EFFICIENCY 5 6 7 8 Delivering Self-serve Safe & secure Check-out services 84% view welfare guides 94% first-time fix for 24/7 safety support 99% of students deposits maintenance issues were handed back Digital common room Flexibility in staffing Only 15 disputes raised 9
Slide 21: 2018 performance update
2018 PERFORMANCE UPDATE Another strong sales performance Occupancy and rental growth 100% 98% 99% 98% 98% 99% 98% 5.0% - 98% occupied for 2018/19 90% 80% 4.0% 70% - 3 - 3.5% rental growth achieved 60% 3.0% 50% 40% 3.8% 3.8% 2.0% 3.3% 3.4% 3-3.5% 30% 3.0% 20% 1.0% Delivering efficiency savings ta
Slide 22: Sustainable rental growth
SUSTAINABLE RENTAL GROWTH Nominations agreements underpin rental growth Rushford Court, Durham - 45% of rooms have annual RPI linkage - 2019/20 expected to deliver 3 - 4% Enhanced portfolio utilisation will support rental growth - Average tenancy length 45 weeks, up 1% ○ 34% – 51 weeks, growing
Slide 23: Driving efficiency
DRIVING EFFICIENCY Margin improvements – 75% in 2018 NOI margin and overhead efficiency 76% 70 - Lower headcount per bed 74% 61 61 74% 75% 60 73% 73% 72% 72% 71% 50 - Improved maintenance efficiency Efficiency (bps) 70% 48 68% 40 40 40 Margin - Greater level of self-serve 66% 64% 30 30 20 62% - Ce
Slide 24: Portfolio strategy
Staniforth House, Birmingham Portfolio strategy Nick Hayes
Slide 25: Portfolio strategy underpins rental growth
PORTFOLIO STRATEGY UNDERPINS RENTAL GROWTH Strong development and University partnership 2018 new openings pipeline Beds 3,074 - 3,074 beds opened in 2018 Value £227m Cost £182m - 6,310 beds being delivered over next 3 years in strong University cities where demand is high Occupancy 98% Nomination
Slide 26: Insight driven portfolio management
INSIGHT DRIVEN PORTFOLIO MANAGEMENT 25
Slide 27: Disposals support ongoing portfolio enhancement
DISPOSALS SUPPORT ONGOING PORTFOLIO ENHANCEMENT Actively managing quality of portfolio based on insight 2018 disposals City Beds Value £m - Cities where demand is greatest Plymouth 1,111 54.0 - Well located Huddersfield 1,005 47.1 Sheffield 767 32.3 - Cluster-led Bristol 231 15.6 - Affordable Birm
Slide 28: A maturing approach to capital allocation
A MATURING APPROACH TO CAPITAL ALLOCATION Allocating capital across range of Rental growth adds to income returns opportunities - Nominations add to rental growth stability - Driving long-term returns and earnings - Continual enhancement of the portfolio quality - Risk adjusted return criteria B
Slide 29: The London opportunity
THE LONDON OPPORTUNITY A unique market Growth in London portfolio 12,000 35% - Rated world’s most popular destination for 11,000 30% international students (THE and Student.com survey) 10,000 25% Number of Beds % of income 9,000 20% Shortage of affordable supply 8,000 15% 7,000 10% - 300,000 stu
Slide 30: University partnerships
University partnerships Tom Brewerton
Slide 31: A trusted partner for Universities
A TRUSTED PARTNER FOR UNIVERSITIES 60% of beds under nomination agreement for 2018/19 % portfolio under nominations agreements 70% 35,000 60% 60% - In line with target of 55 - 60% 60% 57% 58% 30,000 % Portfolio under nominations Beds under nominations 48% 49% 50% 46% 25,000 - Targeting improving q
Slide 32: Focus on quality of new and existing agreements
FOCUS ON QUALITY OF NEW AND EXISTING AGREEMENTS Good progress improving quality of nominations Nominations agreements (18/19) - Multi-year agreements with rental guarantee Agreement Beds % Rental % up to 74% (2017: 69%) length income - WAULT 6 years (2017: 6 years) Single 7,543 26% 46,956 24% - 20
Slide 33: New partnership models – continued progress
NEW PARTNERSHIP MODELS – CONTINUED PROGRESS Expect to secure 1-2 new projects per year Off-campus On-campus development Stock transfer development and new models Most likely near term growth Further opportunities being Challenging economics and opportunity explored – long gestation exploring new m
Slide 34: University partnerships – Oxford case study
UNIVERSITY PARTNERSHIPS – OXFORD CASE STUDY 887-bed building opening in 2019; fully nominated to Oxford Brookes University on 25-year deal; extends partnership with OBU to 1,350 beds - Strong existing relationship with OBU - OBU obliged to meet HiMO targets in order to grow academic estate - Highl
Slide 35: Summary and Q&A
Summary and Q&A Richard Smith & Joe Lister Brunel House, Bristol
Slide 36: Summary
SUMMARY Strong lettings and operational performance for 2018/19 Market fundamentals remain supportive Sustainable earnings and rental growth - Nominations Brunel House, Bristol - Utilisation - Efficiency – new 2021 target Further growth opportunities - Broadening range of attractive opportun