Unite Group Plc · LSE:UTG
Unite — H1 2019 Earnings Presentation
32 slides from Unite's earnings presentation, Jul 23, 2019
Slide 1: Platform for Growth
Platform for Growth Interim Results Six months ended 30 June 2019
Slide 2: Delivering on Earnings
DELIVERING ON EARNINGS Sustainable earnings growth H1 H1 FY - EPRA earnings up 16% 2019 2018 2018 o Dividend increased 8% - On track to deliver 74% EBIT margin target EPRA Earnings £61.2m £52.9m £88.4m Transformative acquisition of Liberty Living for £1.4bn, backed by 9.99% placing EPRA EPS 23.2
Slide 3: Performance Highlights
PERFORMANCE HIGHLIGHTS
Slide 4: Best-in-Class
BEST-IN-CLASS Strong sales performance Five-year occupancy and rental growth 5% 99% 99% 98% 100% - 92% reserved for 2019/20 98% 98% 4% 80% - Confident in rental growth of 3.0-3.5% 3% 60% High-quality, well-located portfolio 2% 3.8% 3.8% 40% 3.3% 3.4% 3.2% - 90% aligned to high and mid-ranked Uni
Slide 5: Supportive Market Dynamics
SUPPORTIVE MARKET DYNAMICS YoY change in applications by age and domicile Overall student numbers at record levels (30 June deadline) Change in % YoY - 2019/20 intake expected to be in line with 2018/19 applications - Non-EU applications up 8%, EU up 1% UK 18-year-olds +2,600 +1.0% - Record applic
Slide 6: University Partnerships Delivering
UNIVERSITY PARTNERSHIPS DELIVERING Focus on quality and certainty of income Nominations agreements Beds Beds % income - 60% of Unite beds to be guaranteed by Length (2018/19) (2019/20)1 (2019/20)1 nominations for 2019/20 Single year 7,543 9,441 29% - Increase in nominations reflecting new single-y
Slide 7: Financial Review
FINANCIAL REVIEW
Slide 8: Strong Financial Performance
STRONG FINANCIAL PERFORMANCE % change H1 2019 H1 2018 FY 2018 Income EPRA earnings 16% ↑ £61.2m £52.9m £88.4m EPRA EPS 12% ↑ 23.2p 20.7p 34.1p Dividend per share (interim/full year) 8% ↑ 10.25p 9.5p 29.0p Balance sheet EPRA NAVps 4% ↑ 820p 761p 790p Loan to value1 29% 27% 29% Cash flow Operations ca
Slide 9: Maintaining Momentum in Earnings
MAINTAINING MOMENTUM IN EARNINGS H1 2019 H1 2018 FY 2018 £m £m £m Rental income 108.3 101.9 188.3 Property operating expenses (23.9) (23.4) (48.0) Net operating income (NOI) 84.4 78.5 140.3 NOI margin 78.0% 77.1% 74.5% Management fees 7.2 7.0 15.6 Operating expenses (9.3) (10.4) (21.7) Finance costs
Slide 10: Amendments to IFRS 16
AMENDMENTS TO IFRS 16 H1 2019 IFRS 16 H1 2019 £m pre-IFRS 16 adjustments post-IFRS 16 Income statement Net operating income 84.4 - 84.4 Overheads less management fees (2.9) 0.8 (2.1) Finance costs (21.1) 0.4 (20.7) Development/other (0.4) - (0.4) EPRA Earnings 60.0 1.2 61.2 EPRA EPS 22.8p 0.5p 23.2p
Slide 11: Continued Balance Sheet Discipline
CONTINUED BALANCE SHEET DISCIPLINE Acquisition of Liberty Living will result in a Key debt statistics (Unite share) Day 1 LTV of c.38% 30 Jun 30 Jun 31 Dec 2019 2018 2018 - Target LTV of 35% post-disposals Net debt £897m £770m £856m LTV 29% 27% 29% Net debt:EBITDA ratio 6.0 5.8 6.1 Unite will as
Slide 12: Co-investment Vehicles Continuing to Deliver
CO-INVESTMENT VEHICLES CONTINUING TO DELIVER Strong performance across USAF and LSAV Summary financials £m USAF LSAV Continuing support from co-investment partners GAV 2,399 1,275 - £250m USAF fundraising in May underlines Net debt (679) (483) investor appetite Other assets/liabilities (2) (16)
Slide 13: Liberty Living Accelerates Earnings Growth
LIBERTY LIVING ACCELERATES EARNINGS GROWTH Acquisition is materially EPS accretive from 2020 Expected synergy realisation - Accelerates and extends earnings growth £m 18 15 - 85% dividend pay-out ratio for enlarged group 12 Annual cost synergies of £15m from 2021 9 6 - Operating and overhead sav
Slide 14: Property Review
UNITE STUDENTS / he? PROPERTY REVIEW ms? =
Slide 15: Valuations Remain Well Supported
VALUATIONS REMAIN WELL SUPPORTED Transactional demand remains strong Valuation yields 8% - £1bn traded in H1 7% 6% - Investor sentiment remains positive 5% 4% 3% 2% Unite valuations: +2.6% LfL revaluation uplift in H1 1% 0% - Uplift driven primarily by rental growth 2006 2008 2010 2012 2014 2016
Slide 16: Pipeline Continues to Drive Earnings
PIPELINE CONTINUES TO DRIVE EARNINGS Secured pipeline of 6,580 beds to deliver Total Total Forecast Target Secured completed development yield by 2022 delivery beds value costs on cost (£m) (£m) - c.70% nominations on 2019 openings Wholly owned Skelhorne Street, Liverpool 2019 1,085 90 74 8.0% - M
Slide 17: Outlook
OUTLOOK
Slide 18: Strongly Positioned for Growth
STRONGLY POSITIONED FOR GROWTH Confident in medium-term rental growth of 3.0-3.5% - Through a combination of value-driven price increases and improved utilisation Liberty Living acquisition to combine the best of both businesses - Two highly-complementary portfolios Cowley Barracks, Oxford - Ali
Slide 19: Appendices
APPENDICES
Slide 20: Liberty Living is a High-Quality Portfolio
LIBERTY LIVING IS A HIGH-QUALITY PORTFOLIO Liberty Living is aligned with Unite’s focus on quality Beds under nomination agreements (2018/19)4 and visibility of income Length Unite Liberty Combined Living - 82% aligned to high and mid-ranked Universities1 Single year 7,543 4,343 11,886 - 51% nomin
Slide 21: Leveraging the Best of Both
LEVERAGING THE BEST OF BOTH Integration phase will combine best practices with Income breakdown by type1,2,3 Liberty Living operations 100% 3% 4% - High-quality local operations capability and 80% 39% 47% University relationships 60% Opportunities to further improve our product and 40% service o
Slide 22: Student Numbers Remain Strong
STUDENT NUMBERS REMAIN STRONG Overall student numbers stable in 2018/19 Full-time student numbers 1,827 1,875 1,878 2,000 1,728 1,730 1,771 1,710 2018 student intake broadly in line with 2017 1,600 Students (000s) 1,200 - Higher participation rates offsetting 1% reduction in 800 654 465 677 496
Slide 23: Market Remains Undersupplied
MARKET REMAINS UNDERSUPPLIED 603,000 purpose-built beds for 739,000 1st year Students and supply and international students 2,000 1,728 1,730 1,771 1,827 1,875 1,878 1,800 1,600 Students (000s) - 300,000 University owned 1,400 1,200 1,000 682 699 713 727 731 739 800 - 303,000 corporately owned 600
Slide 24: High Level of Income Visibility
HIGH LEVEL OF INCOME VISIBILITY % of % of income 2019 2020+ 0% 20% 40% 60% 80% 100% beds 140% 120% 160% 180% 200% 220% 240% 260% 280% 300% RPI+ linked contracts Nominations 57% 60% 5.3% YoY income growth 76% multi-year agreements More 2nd and 3rd year students Robust, consistent demand Reb
Slide 25: Unite as a Responsible Business
UNITE AS A RESPONSIBLE BUSINESS Our Up to uS programme sets out how we operate as a responsible business - Supporting our Home for Success purpose We work to make a difference in areas as diverse as environmental impact, diversity, affordability, mental health and wellbeing Our approach focuse
Slide 26: Home for Success
HOME FOR SUCCESS All-inclusive pricing - All utilities and services 89% Of customers using My Unite app - High-speed (70Mbps) Wi-Fi throughout our portfolio - 24/7 customer support centre - Free communal kitchen and bathroom cleaning - ‘My Unite’ app Average monthly usage - Maintenance teams on ha
Slide 27: Portfolio Overview
PORTFOLIO OVERVIEW Geographical breakdown of combined portfolio1 Beds2 % of GAV3 Unite Liberty Market Liberty Living City Unite Combined Combined Living share4 Unite and Liberty Living London 9,406 1,506 10,912 32% 5% Aberdeen Birmingham 4,508 1,572 6,080 7% 13% Liverpool 3,015 2,369 5,384 5% 14% Ed
Slide 28: Summary EPRA Balance Sheet and Income Statement
SUMMARY EPRA BALANCE SHEET AND INCOME STATEMENT Wholly USAF LSAV Unite Group Unite Group £m owned (Unite share) (Unite share) Jun 2019 Dec 2018 Balance sheet Rental properties 1,468 604 638 2,710 2,685 Leased properties 111 - - 111 - Properties under development 369 3 - 372 282 Total property portfo
Slide 29: Portfolio Analysis
PORTFOLIO ANALYSIS 30 June 2019 Wholly Unite USAF LSAV Lease Total owned share London Value (£m) 377 1,006 531 17 1,931 1,146 Beds 1,870 5,283 1,993 260 9,406 40% Properties 6 12 6 1 25 Prime provincial Value (£m) 617 - 413 29 1,059 598 Beds 5,344 - 3,565 618 9,527 20% Properties 18 - 8 2 28 Major p
Slide 30: Debt Facilities
DEBT FACILITIES On-balance sheet Co-investment vehicles Facility Drawn Maturity Facility Drawn Maturity £m £m £m £m Legal + General 109 109 2022 USAF Secured bond 690 690 2023-25 Mass Mutual 124 124 2024 Wells Fargo 100 12 2021 Unsecured Total 790 702 Retail Bond 90 90 2020 LSAV Wells Fargo 250 250
Slide 31: NNNAV
NNNAV £m Jun 2019 Jun 2018 Dec 2018 IFRS net assets 2,165 1,995 2,073 Mark to market on fixed rate debt (52) (45) (38) Realised swap gain (2) - (2) EPRA NNNAV 2,111 1,950 2,033 EPRA NNNAV per share 799p 739p 770p 30
Slide 32: 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 H1 2019 remaining remaining yield on cost (£m) (£m) (£m) (£m) (£m) Wholly owned Skelhorne Street, Liverpool 2019 1,085 90 74 15 5 6 8.0% Tower