UNITE Group plc · LSE:UTG
UNITE — H1 2018 Earnings Presentation
28 slides from UNITE's earnings presentation, July 2018
Slide 1: First-Class Progress
First-Class Progress Interim Results Six months ended 30 June 2018
Slide 2: Successful Delivery
SUCCESSFUL DELIVERY Delivering high-quality, sustainable earnings 30 Jun 30 Jun 31 Dec - High-quality income with visible earnings 2018 2017 2017 growth prospects - 30% growth in dividend EPRA Earnings £52.9m £40.4m £70.5m Maintaining our market leading platform EPRA EPS 20.7p 18.0p 30.3p - Exce
Slide 3: Performance Highlights
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Slide 4: Clear Market Leader
CLEAR MARKET LEADER Strong sales performance Customer analysis (17/18) - 91% reserved for 2018/19 - On track for rental growth of 3.0 - 3.5% DL, 40% - China office and website driving sales Non-1st Year, Medium, 69% 45% High-quality portfolio in best locations - 85% aligned to Universities seein
Slide 5: Supportive Market Dynamics
SUPPORTIVE MARKET DYNAMICS UK Higher Education sector performing well Full-time student numbers Students (000s) - Adapting to political change 2,000 1,710 1,728 1,730 1,771 1,827 1,855 1,878 1,800 - Consistently strong in global league tables 1,600 1,400 1,200 Overall student numbers at record l
Slide 6: University Partnerships Delivering
UNIVERSITY PARTNERSHIPS DELIVERING Real progress with new opportunities Nominations agreements (17/18) Length Beds % beds % income - Growing appetite from Universities Single year 9,038 31% 29% - Relationships unlocking value 2-10 years 12,017 41% 44% - High-quality institutions 11-20 years 3,783
Slide 7: Financial Review
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Slide 8: Strong Financial Performance
STRONG FINANCIAL PERFORMANCE % change 30 Jun 2018 30 Jun 2017 31 Dec 2017 Income EPRA earnings 31% ↑ £52.9m £40.4m £70.5m EPRA EPS 15% ↑ 20.7p 18.0p 30.3p Dividend per share (interim/full year) 30% ↑ 9.5p 7.3p 22.7p Balance sheet EPRA NAVps 6% ↑ 761p 669p 720p Loan to value n/a 27% 30% 31% Cash flow
Slide 9: Earnings Growth Momentum Maintained
EARNINGS GROWTH MOMENTUM MAINTAINED 30 Jun 2018 30 Jun 2017 31 Dec 2017 £m £m £m Rental income 101.9 92.4 170.8 Property operating expenses (23.4) (21.7) (44.3) Net operating income (NOI) 78.5 70.7 126.5 NOI margin 77.1% 76.5% 74.1% Management fees 7.0 7.5 14.1 Operating expenses (10.4) (12.2) (24.6
Slide 10: Delivering Total Returns
DELIVERING TOTAL RETURNS Transactional demand remains strong Valuation yields 10.0% - £2 billion traded in H1 9.0% 8.0% 7.0% - Demand strongest for best assets 6.0% 5.0% 4.0% 3.0% 2.0% Property growth, supporting income growth 1.0% 0.0% YE 2004 HY 2010 YE 2015 - Rental growth 3.0 - 3.5% Unite Co
Slide 11: Pipeline Driving Earnings
PIPELINE DRIVING EARNINGS 3,075 beds opening in September 2018 Target Total Total Forecast Secured completed development yield delivery beds value costs on cost (£m) (£m) - On time and on budget Wholly owned Chaucer House, Portsmouth 2018 484 42 33 8.0% - 100% aligned to high and mid-ranked Newgat
Slide 12: Disciplined Approach to Leverage
DISCIPLINED APPROACH TO LEVERAGE Strong debt position Key debt statistics (Unite share) 30 Jun 30 Jun 31 Dec - Diversified sources and balanced 2018 2017 2017 maturity profile Net debt £770m £696m £803m LTV 27% 30% 31% - Refinancing opportunity in 2020 Cost of debt 4.1% 4.2% 4.1% - Cost of debt 3.
Slide 13: Co-Investment Vehicles Continuing to Deliver
CO-INVESTMENT VEHICLES CONTINUING TO DELIVER Strong performance across USAF and LSAV Summary financials USAF LSAV £m £m USAF forward funds opening in 2018 and 2019 GAV 2,314 1,202 - £50 million capacity remaining Net debt (642) (400) LSAV development phase expired Other assets/liabilities (19)
Slide 14: Outlook
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Slide 15: Strongly Positioned for Continued Growth
STRONGLY POSITIONED FOR CONTINUED GROWTH High-quality income and visible earnings growth - Underpinned by increasing nominations agreements, development pipeline and improved margins High-quality portfolio - Aligned to the strongest universities where intake continues to grow Brunel House, Brist
Slide 16: Appendices
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Slide 17: Student Numbers Remain Strong
STUDENT NUMBERS REMAIN STRONG Student numbers in 2018 expected to be in line with University enrolments 2017 record levels 8% 7% 6% 6% 2018 student intake in line with 2017 4% 3% 3% 2% 2% 1% - Participation rates increasing offsetting 0% 0% demographic decline -2% - EU applicants up 2%, Internat
Slide 18: Market Remains Undersupplied
MARKET REMAINS UNDERSUPPLIED 615,000 purpose-built beds for c.750,000 1st year Students and supply and international students Students (000s) 1,827 1,855 1,878 2,000 1,771 1,728 1,730 1,800 1,600 - 300,000 University owned 1,400 1,200 1,000 739 750 713 728 - 315,000 corporately owned 682 699 800 6
Slide 19: Competitive Landscape
COMPETITIVE LANDSCAPE Unite remains the largest provider of student accommodation New beds 315k corporate beds in 50-60k expected over the UK (18/19) the next 3-4 years 60,000 50,000 40,000 30,000 52,262 20,000 35,000 28,000 25,000 25,000 19,000 17,500 10,000 16,000 15,000 13,000 0 Unite UPP IQ Li
Slide 20: Operational Excellence – A Home for Success
OPERATIONAL EXCELLENCE – A HOME FOR SUCCESS Service enhancements - Service style - New digital services - Student ambassadors Sales channels and revenue management - Dynamic pricing Newgate Court, Newcastle - Range of sales channels o 3,500 sales from China office – up 8% - Improving short-stay
Slide 21: Product and Service Offering
PRODUCT AND SERVICE OFFERING All-inclusive pricing Houghall Court, Durham - All utilities and services - High-speed (70Mbps) Wi-Fi throughout our portfolio - 24/7 customer support centre - Free communal kitchen and bathroom cleaning - ‘Living with Unite’ app - Maintenance teams on hand City-cent
Slide 22: Our Top 10 Markets
OUR TOP 10 MARKETS 2017 City Completed Value of Unite FT student Market rank beds portfolio numbers Share (18/19) (18/19) (15/16) 1 London 9,541 39% 299,230 3.2% 2 Sheffield 4,766 8% 51,920 9.2% 3 Birmingham 4,683 8% 60,655 7.7% 4 Bristol 3,725 7% 43,700 8.5% 5 Leeds 3,458 3% 55,345 6.2% 6 Liverpool
Slide 23: Summary EPRA Balance Sheet and Income Statement
SUMMARY EPRA BALANCE SHEET AND INCOME STATEMENT Wholly USAF LSAV Unite Group Unite Group owned (Unite share) (Unite share) Jun 2018 Dec 2017 £m £m £m £m £m Balance sheet Rental properties 1,313 560 601 2,474 2,379 Properties under development 331 14 - 345 216 Total property portfolio/GAV 1,644 574 6
Slide 24: Portfolio Analysis
PORTFOLIO ANALYSIS 30 June 2018 Wholly Unite USAF LSAV Lease Total owned share London Value (£m) 363 947 489 - 1,799 1,052 Beds 1,886 5,406 1,989 260 9.541 43% Properties 7 13 6 1 27 Major provincial Value (£m) 1,584 256 581 - 2,421 1,102 Beds 18,553 3,067 7,000 2,577 31,197 45% Properties 51 1 16 7
Slide 25: Debt Facilities
DEBT FACILITIES On-balance sheet Co-investment vehicles Facility Drawn Maturity Facility Drawn Maturity £m £m £m £m USAF Secured Secured bond 690 690 2023-25 Legal + General 114 114 2022 Wells Fargo 100 - 2021 790 690 Mass Mutual 124 124 2024 LSAV Unsecured HSBC 81 81 2018 RBS 3 3 2019 Retail Bond 9
Slide 26: NNNAV
NNNAV Jun 2018 Jun 2017 Dec 2017 £m £m £m IFRS net assets 1,995 1,599 1,729 Mark to market on fixed rate debt (45) 16 (55) EPRA NNNAV 1,950 1,615 1,674 EPRA NNNAV per share 739pps 668pps 692pps 25
Slide 27: Taking Business Responsibly
TAKING BUSINESS RESPONSIBLY Responsibility Environmental impact HE Insight Reports £30 million invested into energy reduction initiatives – Mental health training 5-year payback The Leap Leading contributor to NUS Green Impact awards FTSE4Good GRESB Green Star, MSCI ‘AA’ GPR Sustaina
Slide 28: Secured Development and Partnerships Pipeline
SECURED DEVELOPMENT AND PARTNERSHIPS PIPELINE Total Total Target Secured completed development Capex in Capex Forecast NAV Forecast delivery beds value costs period remaining remaining yield on cost (£m) (£m) (£m) (£m) (£m) Wholly owned Chaucer House, Portsmouth 2018 484 42 33 9 2 2 8.0% Newgate Cou