Unite Group Plc · LSE:UTG
Unite — Investor Day (November 2024)
33 slides from Unite's investor day presentation, Nov 13, 2024
Slide 1: Investor Event
Investor Event Stapleton House 13 November 2024
Slide 2: Agenda
Agenda 1. Market update 2. Customer trends 3. University partnerships 4. Break 5. Supply outlook 6. Delivering growth 7. Q&A 8. Optional tour 2
Slide 3: Strategic outlook
OUTLOOK Strategic outlook Sector-leading platform Growth drivers Outcomes Structurally growing sector Sustainable rental growth Strong outlook for growth Supports margin improvement Sustainable earnings growth Best-in-class operating platform Accelerating as developments complete Development pipelin
Slide 4: Market update
1 Market update Joe Lister Chief Executive 4
Slide 5: Growing value of UK Higher Education
MARKET UPDATE Growing value of UK Higher Education Government supportive of UK 18-year-olds choosing Growing attractiveness of UK Higher Education Higher Education Crucial to new government's Record 18-year-old acceptances World class universities – growth and skills missions in 2024/25 providing so
Slide 6: Structurally supported demand
MARKET UPDATE Structurally supported demand £100,000 additional lifetime earnings for graduates versus non-graduates¹ • 10% growth in UK 18-year-olds by 2030 supports outlook for demand • Participation rates normalising to pre-pandemic growth trajectory • Graduate earnings premium maintained • All-i
Slide 7: Growing attractiveness of UK Higher Education
MARKET UPDATE Growing attractiveness of UK Higher Education • New government more supportive of international students • Encouraging early 2025/26 applications “Be in no doubt: international students are welcome in the UK. • International Education Strategy due in 2025 “This new government values th
Slide 8: Universities are responding to change
MARKET UPDATE Universities are responding to change • Universities are well-established, long-term organisations • Strong balance sheets and limited borrowing • For minority in deficit, shortfall is equivalent to 4% of cost base Universities responding Unite’s positioning Focused on efficiency Stron
Slide 9: Customer trends
2 Customer trends Karan Khanna Chief Operating Officer 9
Slide 10: Flight to quality universities continuing
CUSTOMER TRENDS Flight to quality universities continuing Change in UCAS acceptances 2019-24 20% 15% • UK fee cap has driven international recruitment 10% • 53% growth from 2018/19-2022/23 - • Policy changes have impacted recruitment this year (2)% (10%) • Dependant family member visa restrictions (
Slide 11: 2024/25 sales cycle review
CUSTOMER TRENDS 2024/25 sales cycle review Occupancy and rental growth 99% 99% 10% 98% 97-98% 100% 94% • Strong lettings performance for 2024/25 8% 95% • Continued strong rental growth 6% 90% • 57% let to universities (2023/24: 53%) 4% 7.4% 8.2% 85% 2% 4-5% 80% 3.5% • Occupancy normalising to pre-pa
Slide 12: Nominations agreements delivering value
CUSTOMER TRENDS Nominations agreements delivering value Proportion of beds nominated • Increased university demand for 2024/25 80% • New multi-year agreements with Russell Group 57% 57% universities across 2,500 beds 60% 53% 51% 52% 53% • 90%+ renewal rate 40% • Accommodation availability constraini
Slide 13: Value-for-money and affordable accommodation
CUSTOMER TRENDS Value-for-money and affordable accommodation • PBSA is better value-for-money than competing accommodation types • Appeal of fixed-price all-inclusive offer • Continued investment in service and offer supports price increases • Rising Net Promoter Scores • Strong earnings growth and
Slide 14: University partnerships
3 University partnerships Q&A with Nick Collins Chief Financial Officer Newcastle University 14
Slide 15: New partnership model
UNIVERSITY PARTNERSHIPS New partnership model • JV with Newcastle University for 2,000 new beds in 2027/2028 • c.£250m total development cost (Unite share: £128m) • Long-term strategic partnership • Returns in line with regional developments • Unite role as developer and operator • High-quality part
Slide 16: Our unique offer to universities
UNIVERSITY PARTNERSHIPS Our unique offer to universities Confident of second partnership in next 6-12 months • Trusted partner with 20+ year relationships Partnership opportunity Partner of choice • Committed long-term co-investor • Access to efficiencies through scale 325,000 university Best-in-cla
Slide 17: Break
4 Break 17
Slide 18: Supply outlook
Marsh Mills, Bristol 5 Supply outlook Tom Brewerton Group Development Director 18
Slide 19: Where students live
SUPPLY OUTLOOK Where students live • c.1.7m students need term-time accommodation in Breakdown of full time students seeking the UK (c.75% of all FT students) accommodation (2024/25) 1,000 • Corporate PBSA provides beds for c.25% of students seeking accommodation 800 • c.12ppt increase since 2014 Be
Slide 20: HMO supply is shrinking
SUPPLY OUTLOOK HMO supply is shrinking Landlord net selling intentions 40% • Expect continued decline in HMO market 30% 30% • 100-150,000 fewer bedspaces available over 2 years 20% • 1-in-5 homes for sale were previously for rent¹ 10% 0% • Growing regulatory and tax costs for HMOs Dec-18 Dec-19 Dec-
Slide 21: Rental growth key to development activity
SUPPLY OUTLOOK Rental growth key to development activity • Build cost inflation slowing but costs remain high vs. recent history • Planning complexity and regulation offsetting more favourable commodity and labour costs • Breakeven rents are c.£190/week with schemes increasingly premium and studio-l
Slide 22: New PBSA supply to remain modest
SUPPLY OUTLOOK New PBSA supply to remain modest • Anticipate gradual recovery in new deliveries, still meaningfully below pre-pandemic trend • Deliveries focused in strongest markets • Planning capacity and Building Safety Act will impact rate of deliveries • Little new supply being added net of obs
Slide 23: Development pipeline driving growth
SUPPLY OUTLOOK Development pipeline driving growth Location by value • Our delivery of beds accelerates from 2025 Glasgow Edinburgh 8% 4% • Pipeline 100% located in Russell Group markets Bristol • Delivering affordable beds aimed at the mid-market 11% London • London weighting to increase to c.45% o
Slide 24: Delivering growth
6 Delivering growth Mike Burt Chief Financial Officer 24
Slide 25: Positive outlook for rental growth
DELIVERING GROWTH Positive outlook for rental growth • Rental growth has historically outperformed CPI by 50-100bps • Underpinned by continued investment in portfolio, service and technology • Market conditions and nominations reversion support 4-5% rental growth for 2025/26 Unite rental growth vs.
Slide 26: Continued earnings growth in 2025
DELIVERING GROWTH Continued earnings growth in 2025 Rental growth and moderating cost growth to offset higher borrowing costs • 8.2% rental growth and 97.5% occupancy for 2024/25 Income • 4-5% rental growth and opening of c.1,000 new beds for 2025/26 Staff • Underlying wage growth slowing EBIT margi
Slide 27: Delivering on attractive investment opportunities
DELIVERING GROWTH Delivering on attractive investment opportunities 50% of placing proceeds to be deployed by year end Value-add Newcastle University Development New development acquisitions partnership commitments opportunities • Acquiring 7 income-producing • Formation of £250m Newcastle • 500 bed
Slide 28: Significant visibility over NOI growth
DELIVERING GROWTH Significant visibility over NOI growth • Strong embedded NOI growth through 2024/25 sales cycle and reversion in nomination agreements • Accelerating NOI contribution from development from 2025 (1-2% ppts additional EPS growth) • EPS growth accelerating over medium term Secured NOI
Slide 29: Pipeline is funded for several years of delivery
DELIVERING GROWTH Pipeline is funded for several years of delivery Committed pipeline Future opportunities (2025-2028) (2028+) 7,400 beds / 9 projects¹ Secured pipeline £970m cost to go¹,²,³ 1,100 beds / £300m total cost Phasing of committed development capex¹,³ New opportunities £400m c.£320m c.£27
Slide 30: Positive outlook for total accounting returns
DELIVERING GROWTH Positive outlook for total accounting returns Underpinned by growing income Total accounting return pre-yield movement 19.7% 13.6% 15% 11.0% 11.2% c.12% 9.8% 9.7% 10.3% c.10% Pandemic impact 8.4% 10% 6.9% 5% - (5%) (7.5)% EPRA/Adjusted Earnings NAV growth (10%) 2014 2015 2016 2017
Slide 31: Value enhancing asset management
DELIVERING GROWTH Value enhancing asset management Stapleton House common area refurbishment case study • Significant refurbishment opportunity in portfolio Pre-refurbishment • Delivering £32m of projects at 10% yield in 2024 • Targeting £50-75m p.a. investment at 8% yield • Enhances income and cust
Slide 32: Q&A
7 Q&A 32
Slide 33: Positive outlook
HIGHLIGHTS Positive outlook Growing attractiveness of UK Higher Education • New government supportive of the sector • Encouraging outlook for international demand • UK 18-year-olds choosing Higher Education Alignment to the strongest universities supports rental growth • High tariff universities hav