Unite Group Plc · LSE:UTG
Unite — FY2018 Earnings Presentation
30 slides from Unite's earnings presentation, Mar 7, 2019
Slide 1: Maintaining Momentum: Preliminary Results 2018
Staniforth House, Birmingham Maintaining Momentum Preliminary Results Year ended 31 December 2018
Slide 2: Another Successful Year
ANOTHER SUCCESSFUL YEAR High-quality earnings and strong capital structure 31 Dec 31 Dec Change - EPRA earnings up 25% 2018 2017 o Dividend increased 28%, 85% payout ratio EPRA earnings £88.4m £70.5m +25% - 13% total accounting return - LTV of 29% EPRA EPS 34.1p 30.3p +13% Sustainable growth in
Slide 3: Performance Highlights
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Slide 4: Business in Strong Position
BUSINESS IN STRONG POSITION Strong sales performance Five-year occupancy and rental growth 5% 99% 99% 98% 100% - 98% occupancy for 2018/19 with 3.2% rental growth 98% 98% 4% 80% - 75% reserved for 2019/20 (2018/19: 75%) 3% 60% - Confident in rental growth outlook of 3.0 - 3.5% 2% 3.8% 3.8% 40% 3.3
Slide 5: Market Remains Supportive
MARKET REMAINS SUPPORTIVE YoY change in applications by age and domicile UK Higher Education sector performing well (15 January deadline) Change in - Adapting to political change % YoY applications - Consistently strong in global league tables UK 18yr-olds +2,610 +1.0% All other UK -5,845 -3.1%
Slide 6: University Partnerships Delivering
UNIVERSITY PARTNERSHIPS DELIVERING Improved quality of income Nominations agreements Beds % income % income Length - 60% of 2018/19 beds guaranteed by nominations (2018/19) (2018/19) (2017/18) - 5.3% YoY growth in nominations income due to Single year 7,543 24% 29% improvements in mix and location
Slide 7: 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 8: Financial Review
FINANCIAL REVIEW
Slide 9: Strong Financial Performance
STRONG FINANCIAL PERFORMANCE 31 Dec 2018 31 Dec 2017 % change Income EPRA earnings £88.4m £70.5m 25% EPRA EPS 34.1p 30.3p 13% Dividend per share 29.0p 22.7p 28% Balance sheet EPRA NAVps 790p 720p 10% Loan to value 29% 31% 2% Cash flow Operations cash flow £81.2m £63.2m 28% Metrics Total
Slide 10: Earnings Growth Momentum Maintained
EARNINGS GROWTH MOMENTUM MAINTAINED 31 Dec 2018 31 Dec 2017 £m £m Rental income 188.3 170.8 Property operating expenses (48.0) (44.3) Net operating income (NOI) 140.3 126.5 NOI margin 75% 74% Management fees 15.6 14.1 Operating expenses (21.7) (24.6) Finance costs (40.0) (45.2) USAF acquisition and
Slide 11: Earnings Growth Outlook
EARNINGS GROWTH OUTLOOK Earnings growth prospects supported by: - High-quality development programme - Positive rental growth outlook and operating efficiencies - Pro forma LTV of 35% post-pipeline and disposals EPS 55p 1p - 2p 2p - 3p 50p 12p - 15p 45p 40p 2p -3p 35p 30p 25p 47p - 51p 20p 34p 15
Slide 12: Disciplined Approach to Leverage
DISCIPLINED APPROACH TO LEVERAGE Strong debt position Key debt statistics (Unite share) 31 Dec 31 Dec - Diversified sources and balanced maturity profile 2018 2017 Net debt £856m £803m - Limited refinancing requirements before 2022 LTV 29% 31% - Cost of debt 3.6% when fully drawn Net debt:EBITDA r
Slide 13: Co-investment Vehicles Continuing to Deliver
CO-INVESTMENT VEHICLES CONTINUING TO DELIVER Strong performance across USAF and LSAV Summary financials USAF LSAV - LSAV’s higher total accounting return driven £m £m by stronger yield compression in London GAV 2,253 1,242 USAF acquisitions Net debt (562) (486) - Completed two forward funds in D
Slide 14: Property Review
PROPERTY REVIEW
Slide 15: Valuations Well Supported
VALUATIONS WELL SUPPORTED Transactional volume remains strong Valuation yields 8% - Over £3 billion traded in 2018 7% 6% - Wide range of portfolio deals and single-asset 5% transactions 4% - Investor sentiment remains positive 3% 2% 1% Diverse investor base 2006 2008 2010 2012 2014 2016 2018 Uni
Slide 16: Optimising Portfolio Performance
OPTIMISING PORTFOLIO PERFORMANCE Continued rental growth outperformance 2018/19 rental growth (Unite vs. market) 4% 3.2% Improving portfolio quality through investment 2.9% 3% 2.3% - 3,074 new beds delivered in 2018 with around 50% 2.2% 2.3% let under nominations (WAULT of 10 years) 2% - Extendi
Slide 17: Development Pipeline
DEVELOPMENT PIPELINE Pipeline 100% aligned to high and mid- Target Total Secured completed Total development Forecast yield ranked Universities delivery beds value costs on cost (£m) (£m) Wholly owned Secured pipeline of 6,579 beds to Skelhorne Street, Liverpool 2019 1,085 95 74 8.0% deliver by
Slide 18: Outlook
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Slide 19: Well Positioned for Future Growth
WELL POSITIONED FOR FUTURE GROWTH Sustainable earnings growth St Vincent’s Place, Sheffield - Underpinned by portfolio and income quality, development pipeline, University partnerships and operating efficiency Ongoing confidence despite uncertainty created by Brexit and Higher Education funding
Slide 20: Appendices
* a UNITE STUDENTS APPENDICES
Slide 21: 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 1,600 2018 student intake broadly in line with 2017 Students (000s) 1,200 654 677 700 718 718 700 696 800 - Excess of applications and higher particip
Slide 22: 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 - 300,000 University owned Students (000s) 1,400 1,200 - 303,000 corporately owned 1,000 800 682 699 713 727 731 739 600
Slide 23: Competitive Landscape
COMPETITIVE LANDSCAPE 1.87 million full-time students in the UK Breakdown of accommodation for full-time students Own residence, - Around 1.5 million require accommodation 75,000 Students living Private-rented at home, housing, 810,000 360,000 Over 800,000 students living in private-rented housi
Slide 24: Home for Success
HOME FOR SUCCESS All-inclusive pricing - All utilities and services Of customers using 89% 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 25: Our Top 10 Markets
OUR TOP 10 MARKETS 2018 City Full-time Completed beds Market rank student numbers (18/19) Share (17/18) 1 London 9,406 308,010 3.1% Aberdeen 2 Birmingham 4,508 69,090 6.5% 3 Sheffield 3,999 52,690 7.6% Glasgow Edinburgh 4 Bristol 3,494 45,510 7.7% Newcastle Durham 5 Leeds 3,457 56,125 6.2% Leeds 6 L
Slide 26: 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) Dec 2018 Dec 2017 £m £m £m £m £m Balance sheet Rental properties 1,497 567 621 2,685 2,379 Properties under development 279 3 - 282 216 Total property portfolio/GAV 1,776 570 62
Slide 27: Portfolio Analysis
PORTFOLIO ANALYSIS 31 December 2018 Wholly Unite USAF LSAV Lease Total owned share London Value (£m) 369 977 500 - 1,846 1,082 Beds 1,870 5,283 1,993 260 9,406 40% Properties 6 12 6 1 25 Prime provincial Value (£m) 598 - 298 - 896 449 Beds 5,344 - 2,678 618 8,640 17% Properties 18 - 7 2 27 Major pro
Slide 28: Debt Facilities
DEBT FACILITIES On-balance sheet Co-investment vehicles Facility Drawn Maturity Facility Drawn Maturity £m £m £m £m Legal + General 114 114 2022 USAF Secured bond 690 690 2023-25 Mass Mutual 124 124 2024 Wells Fargo 100 - 2021 Unsecured Total 790 690 Retail Bond 90 90 2020 LSAV Wells Fargo 250 250 2
Slide 29: NNNAV
NNNAV 2018 2017 £m £m IFRS net assets 2,073 1,729 Mark to market on fixed rate debt (38) (55) Realised swap gain (2) - EPRA NNNAV 2,033 1,674 EPRA NNNAV per share 770p 692p 28
Slide 30: 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 2018 remaining remaining yield on cost (£m) (£m) (£m) (£m) (£m) Wholly owned Skelhorne Street, Liverpool 2019 1,085 95 74 30 19 8 8.0% Tower N