UNITE Group plc · LSE:UTG
UNITE — Investor Day (September 2017)
64 slides from UNITE's investor day presentation, Sep 26, 2017
Slide 1: Capital Markets Day
Capital Markets Day Aston Student Village, Birmingham 26 September 2017
Slide 2: Agenda
AGENDA 1. Welcome and introduction Richard Smith, Chief Executive 2. The Higher Education landscape Dr Diana Beech, HEPI 3. A Vice-Chancellor’s perspective Professor Alec Cameron, V-C, Aston University 4. Trading update and strategic overview Richard Smith, Chief Executive 5. The best property portf
Slide 3: Welcome and introduction
Welcome and introduction Richard Smith, Chief Executive
Slide 4: The higher education landscape
The higher education landscape Dr Diana Beech, HEPI
Slide 5: Higher Education Policy Institute
api Higher Education Policy Institute
Slide 6: Strength and resilience of the UK higher education sector
The continuing strength and resilience of the UK higher education sector – some key observations and trends Dr Diana Beech Director of Policy and Advocacy 5
Slide 7: About HEPI
About HEPI • UK’s only specialist higher education think tank. • Supported by 115 universities in all four parts of the UK, plus around 10 corporates. • We organise conferences and seminars – usually with Vice- Chancellors and key influencers in the sector. • We try to join up policymakers and the w
Slide 8: About me
About me • Joined HEPI in March as the new Director of Policy and Advocacy. • Previously Programme Manager at the DfE with responsibility for setting up the Office for Students (OfS). • Experienced in researching HE issues (employability, open access policy and EU science and research funding). • Ea
Slide 9: UK HE: going from strength to strength
UK HE: going from strength to strength 8
Slide 10: A closer look at domestic demand
A closer look at domestic demand Figure 1: Proportional change in all acceptances to UK higher education providers, four weeks after A level results day • 4 weeks after A-Levels, 505,680 acceptances on FT UG courses at UK providers. • This is 1% lower than at the equivalent point last year BUT highe
Slide 11: Reasons behind the drop in applicants
Reasons behind the drop in applicants • 6% drop in numbers on UG nursing programmes in England (19,670 in 2017 compared to 20,880 in 2016) due to changes in finance options for these subjects. • 56% drop in part-time student numbers since 2010 (107,325 in 2015-16 compared to 243,355 in 2010-11) due
Slide 12: Numbers of 18-year-olds
Numbers of 18-year-olds • Despite a 1% fall in the 18-year-old population Figure 4: Proportional change in all acceptances from England by age, four weeks after A level results day this year, a record number of 18-year-olds have been placed in university. • In England, 207,720 18-year-olds have been
Slide 13: The effects on different tariff providers
The effects on different tariff providers • Higher and medium tariff Figure 10: Proportional change in all acceptances to UK providers by tariff group, four weeks after A level results day providers have increased their acceptances since 2013; this year up 1% and 2% respectively. • Numbers at lower
Slide 14: Postgraduate acceptances numbers
Postgraduate acceptances numbers • 22% increase in numbers enrolled on FT PG courses (90,600 students in 2016-17). • 8.6% increase in numbers enrolled on PT PG courses (74,900 students in 2016-17). • This rise is due to new PG loans. Source: HEFCE’s ‘Higher Education in England: Key facts’ 13
Slide 15: A look at international demand
A look at international demand • Placed acceptances from the EU stand at 29,850 (down 2% from 2016). • Placed acceptances from outside the EU stand at 36,850 (up 4%). • Combined number of EU & non-EU acceptances has grown. Source: Interim assessment of UCAS acceptances for the 2017 cycle, four weeks
Slide 16: Brexit and international students
Brexit and international students • Fee levels for EU students and access to student support is guaranteed for academic year 2018-19. • The depreciation of the £ has made UK higher education more affordable to non- EU students. • International student fees help drive university surpluses and investm
Slide 17: Some positive predictions
Some positive predictions • Even if fewer EU students come to the UK, our universities will only lose £40 million a year in the 1st year. That is 0.1% of the total income of publicly-funded HEIs in the UK. • Some institutions like Oxford and Cambridge are likely to see their fee income rise. • The d
Slide 18: Expansion without limits
Expansion without limits • Simon Marginson has described a world-wide trend to high participation in higher education. • Even those countries with high participation rates will go on seeing further expansion. • This is driven by the ambitions of families to advance or maintain their social position.
Slide 19: Policy Q1: Impact of HE reforms
Policy Q1: Impact of HE reforms • TEF could be a big factor in international student choice. • The International Student Survey 2017 found high-quality teaching is the single most important factor for prospective students when choosing a university, country or course. • LEO data further highlights d
Slide 20: Policy Q2: Status of international students
Policy Q2: Status of international students • Removing international students from net migration targets will be key to ensuring the UK reaps the full benefits of international participation in UK higher education. 19
Slide 21: Policy Q3: Other terms of Brexit
Policy Q3: Other terms of Brexit • Freedom of movement of people is vital to the health of the UK teaching and research base. • Access to European funding and research collaborations post- Horizon 2020 is necessary to maintain research capacity, as is ensuring a major role for UK universities in the
Slide 22: Some optimistic voices
Why Britain can still lead world in science and tech after Brexit Some optimistic voices The Telegraph HOME NEWS SPO Education lary University Student life Apprenticeships League tables P 4 Education Brexit will be good for universities, Oxford's new Head of Brexit strategy says G ve GB 2rcomments B
Slide 23: Policy Q4: Tuition fee debates
Policy Q4: Tuition fee debates • Any new policy decision regarding tuition fees could affect student numbers and university income. • Plausible options are to bring back maintenance grants and raise the repayment threshold. • The key is not to risk the return of student number caps. 22
Slide 24: Points to take away
Points to take away 1. The UK boasts the top two universities in the world, as well as many others in the top half of the table. 2. The UK has educated more of the world’s leaders than any other country. 3. Domestic demand is strong: record numbers of 18-year-olds are going to university, offsetting
Slide 25: Higher Education Policy Institute
api Higher Education Policy Institute
Slide 26: A Vice-Chancellor's perspective
A Vice-Chancellor’s perspective Professor Alec Cameron, V-C, Aston University
Slide 27: Trading update and strategic overview
Trading update and strategic overview Richard Smith, Chief Executive
Slide 28: Trading update
TRADING UPDATE 99% occupancy for 2017/18* Full year rental growth at mid to upper end of our 3.0 - 3.5% forecast Five new buildings opened in September 2017 - Delivered on time, on budget - Fully let for 2017/18 at stabilised rents – delivering yield on cost targets - 67% nominations with 13 y
Slide 29: Quality portfolio
QUALITY PORTFOLI(
Slide 30: Continued demand for high quality universities
CONTINUED DEMAND FOR HIGH QUALITY UNIVERSITIES University enrolments* 8% 7% 6% 4% 4% 4% 4% 4% 3% 3% 2% 2% 1% 0% 0% HE student numbers -2% 2,000 1,819 1,827 -2% 1,749 1,730 1,771 1,710 1,728 1,800 -4% 1,600 -6% (5%) 1,400 2014 2015 2016 2017 1,200 Higher Tariff Medium Tariff Low Tariff 1,000 Source:
Slide 31: UK's best property portfolio
UK’S BEST PROPERTY PORTFOLIO Increasingly aligned to high and mid-ranked Universities Located close to Universities Well maintained Mid-market price point Increasing exposure to quality Universities 86% 86% 84% 82% 81% 80% 78% 78% 76% 74% Total% 2015 High & Mid 2016 High & Mid After Disposal
Slide 32: Partnerships underpin income and rental growth
PARTNERSHIPS UNDERPIN INCOME AND RENTAL GROWTH 60% secured under nomination agreements 1,000 beds sold to Universities during clearing at market rates - 69% multi-year agreements with annual, RPI-linked uplifts University relationships are driving new - Rental growth of 3 - 3.5% already secure
Slide 33: Brand and service driving performance
BRAND AND SERVICE DRIVING PERFORMANCE Platform enhancing and differentiating student proposition - Supports University partnerships - Driving student retention and return PRISM driving operational efficiencies and service enhancement - Enhancing margin through operating and central overhead effi
Slide 34: A platform for sustainable growth
A PLATFORM FOR SUSTAINABLE GROWTH
Slide 35: The best property portfolio
The best property portfolio Nick Hayes, Property Director
Slide 36: Portfolio alignment
PORTFOLIO ALIGNMENT Actively positioning portfolio – based on insight Best Universities and locations Insight driving portfolio Right price point - 92% beds are shared flats - Range of locations in London Well maintained - Average age = 8 years - Consistent investment in lifecycle Source: Un
Slide 37: Active portfolio recycling – disposals
ACTIVE PORTFOLIO RECYCLING – DISPOSALS Significant volume of portfolio recycling Disposal portfolio City Beds - £472 million sold in 2017 – 10% of portfolio Liverpool 1,159 4 peripherally located properties Birmingham 909 1 asset aligned to low-ranked University Glasgow 753 1 peripheral location,
Slide 38: Active portfolio recycling – ASV acquisition
ACTIVE PORTFOLIO RECYCLING – ASV ACQUISITION High quality, well-located beds alongside Illustrative financial returns mid-ranked University £m Acquisition price 227 Good progress since acquisition Capex 3 - 100% let Total Investment 230 - 2,300 nominations beds Underwrite £pa £pw - Refurbishment
Slide 39: Active portfolio recycling – acquisitions
ACTIVE PORTFOLIO RECYCLING – ACQUISITIONS 38
Slide 40: Development – enhances portfolio quality
DEVELOPMENT – ENHANCES PORTFOLIO QUALITY Pipeline aligned to high and Target Secured Total completed Total development Forecast yield mid-ranked Universities delivery beds value costs on cost (£m) (£m) Regional wholly owned 2,100 beds delivered in 2017 on St Leonard's, Edinburgh 2017 581 65 41 9
Slide 41: Portfolio management – Birmingham
PORTFOLIO MANAGEMENT – BIRMINGHAM Beds University Focus Acquired ASV 3,067 Aston Nominations focused International 586 Aston Replacing older asset sold Battery Park 418 UoB Growing University relationship Sold The Heights 909 BCU 15-year old asset 40
Slide 42: Outperforming market rental growth
OUTPERFORMING MARKET RENTAL GROWTH 17/18 rental growth 3.50% 3.0-3.5% 3.00% 2.75% 2.55% 2.50% 2.32% 2.19% 2.00% 1.50% Bed type 1.00% 0.50% 0.00% Non-ensuite Ensuite Studio Whole of Unite 8% market Students External Market Clusters Source: Knight Frank Student Housing report Studios 92% Source: Unite
Slide 43: The best University partnerships
The best University partnerships Darren Ellis, HE Engagement Director
Slide 44: A trusted partner
A TRUSTED PARTNER 2017 +/- vs. 2011 % Unite Students provides high standards of student accommodation 80 +14 Unite Students provides an excellent service to students 77 +20 Unite Students understands the needs of students 80 +20 Unite Students understands the needs of the HE sector 81 +16 Unite Stud
Slide 45: A comprehensive engagement strategy
A COMPREHENSIVE ENGAGEMENT STRATEGY Sustained engagement over many years Benefits of engagement - 86% of University relationships are greater than five years Nominations agreements Systematic ‘man marking’ of key decision makers - Relationships at different levels Valuable insight - Board re
Slide 46: Nominations agreements – purpose and nature
NOMINATIONS AGREEMENTS – PURPOSE AND NATURE University requirement: Key features Critical to Universities to meet accommodation guarantees - All 1st year students Contract between University and Unite - Now includes clearing students - International students up to three years University guaran
Slide 47: Growing our University partnerships
GROWING OUR UNIVERSITY PARTNERSHIPS % portfolio under nominations agreements 35,000 70% 30,000 60% 25,000 50% 20,000 40% 15,000 30% 10,000 20% 5,000 10% 0 0% 12/13 13/14 14/15 15/16 16/17 17/18 Nominations beds Nominations % Percentage of our portfolio under nominations agreements has grown from 4
Slide 48: Growing our University partnerships
GROWING OUR UNIVERSITY PARTNERSHIPS Agreement length Beds % Rental income % Single 9,038 31 52,357 29 2 - 10 years 12,017 41 80,795 44 11 - 20 years 3,783 13 25,517 14 20+ years 4,225 15 24,515 13 Total 29,063 183,183 69% of nominations under multi-year agreements 1,000 beds sold to Universities
Slide 49: Reputation delivers insight and relationships
REPUTATION DELIVERS INSIGHT AND RELATIONSHIPS Detailed understanding of historic recruitment performance Superior insight into in-year performance Insight into universities’ future strategy Relationships provide new opportunities as decision-makers move within HE sector 48
Slide 50: University partnerships – the emerging opportunity
UNIVERSITY PARTNERSHIPS – THE EMERGING OPPORTUNITY 49
Slide 51: University partnerships – the emerging opportunity
UNIVERSITY PARTNERSHIPS – THE EMERGING OPPORTUNITY Market context Growth in student numbers Increased competition – more accommodation guarantees Desire to have more 2/3 years in PBSA Lack of capital / desire to use own capital Stock transfer Development – on and off campus 300,000 Univers
Slide 52: Future partnership opportunities
FUTURE PARTNERSHIP OPPORTUNITIES Off-campus development On-campus development Stock transfer Unite sources land As per off campus, but Unite acquires real estate University sources land University inputs into design Commitment to upgrade and planning Capital release Likely to include n
Slide 53: The best service platform
The best service platform Simon Jones, Operations Director
Slide 54: About our customers
ABOUT OUR CUSTOMERS Customer analysis 100% Non-EU 90% (DL) Non-1st 17% DL year 80% EU (DL) 6% 40% 35% 70% UK (DL) Non-1st 17% year 65% Med 60% 47% 50% 40% 1st Noms Year Noms 30% 60% 65% 60% 20% 1st High Year 38% 35% 10% 0% Customer Total Customer Direct-let Customer Type Customers Domicile Customer
Slide 55: Sustained investment in student insight
SUSTAINED INVESTMENT IN STUDENT INSIGHT Annual applicant and student survey provides insights into whole student market - Conducted by YouthSight in partnership with the HEPI - Provides market insight and HE sector engagement Annual satisfaction survey (TNS TRI*M measure) - Focused on uS student
Slide 56: Platform delivering for students and universities
PLATFORM DELIVERING FOR STUDENTS AND UNIVERSITIES Safety and security | Quality of properties | Sense of belonging 55
Slide 57: Highly efficient sales model
HIGHLY EFFICIENT SALES MODEL Enhanced market intelligence and sales Sustained investment in university relationships history National campaigns China sales office delivering Sales phasing - Replicating University relationships in UK Revenue management Sales channels Total beds 8% 100% On
Slide 58: PRISM driving efficiency
PRISM DRIVING EFFICIENCY On track to deliver 75% NOI margin and 25 - 30bps overhead efficiency target Efficiencies enable service enhancements which drive University partnerships Revenue maximisation Back office efficiencies NOI efficiencies Dynamic pricing £5m saving realised Online tenan
Slide 59: A platform for growth
A platform for growth Richard Smith, Chief Executive
Slide 60: Earnings growth
EARNINGS GROWTH Earnings growth prospects supported by: Progressive dividend aligned to earnings - High-quality development programme growth and dependable income - Positive rental growth outlook - 75% pay out EPS 55 50 3p - 4p 2p - 3p 45 10p - 11p 40 35 6p 2p 3p 30 25 42p - 46p 20 32p 15 23p 25
Slide 61: Nominations underpin earnings and growth
NOMINATIONS UNDERPIN EARNINGS AND GROWTH 60% of beds under nomination agreements with Nominations agreements by length 3.0 - 3.5% rental growth Six years remaining life 15% Two-thirds have occupancy certainty 31% 1 year 13% 2 - 10 year One-third single year – high renewal rate 11 - 20 year 2
Slide 62: Earnings outlook enhanced by growth
EARNINGS OUTLOOK ENHANCED BY GROWTH Development pipeline stronger than ever Development deliveries Beds EPS - 7,000 beds 10,000 Beds EPS 16 9,000 14 8,000 - Opportunity to grow 7,000 12 6,000 10 5,000 8 4,000 6 University partnerships provide new growth 3,000 4 opportunity 2,000 1,000 2 - - - Re
Slide 63: The leader in the market
THE LEADER IN THE MARKET The best property portfolio - Quality locations - Maintaining quality through investment - New products, enhancing estate The strongest University relationships - Unparalleled relationships and insight - 29,000 beds under nominations The best service platform - Student
Slide 64: Unite Students
UNITE STUDENTS