Unite Group Plc · LSE:UTG
Unite — FY2019 Earnings Presentation
37 slides from Unite's earnings presentation, Feb 26, 2020
Slide 1: A Foundation for Growth
A Foundation for Growth Preliminary Results Year ended 31 December 2019
Slide 2: A transformational year
A transformational year Strong progress against all key metrics 31 Dec 31 Dec % • EPRA EPS up 15% and dividend up 14% 2019 2018 Change • 11.7% total accounting return EPRA Earnings £110.6m £88.4m +25% • LTV of 37% with medium-term target of 35% Acquisition of Liberty Living for £1.4bn EPRA EPS 3
Slide 3: Content
Content Performance Highlights Financial Review Property Review Operations Review Outlook Appendices 3
Slide 4: Performance Highlights
Performance Highlights Preliminary Results Year ended 31 December 2019
Slide 5: Business in a strong position
Business in a strong position Strong sales performance Five-year occupancy and rental growth • 3.4% rental growth for 2019/20 with 98% occupancy 98% 98% 99% 98% 98% • 73% reserved for 2020/21 (2019/20: 73%) 5% 100% • Supports rental growth outlook of 3.0-3.5% 4% 80% 3% 60% High-quality portfolio
Slide 6: Positive progress on Liberty Living integration
Positive progress on Liberty Living integration Two highly complementary portfolios Expected synergy realisation £m • 74,000 beds across 27 UK cities 20 • Combined portfolio valued at £8bn (total share) 15 • Acquisition completed in late November following unconditional approval from the CMA 10 5
Slide 7: Earnings growth outlook
Earnings growth outlook Medium-term earnings visibility supported by: • Positive rental growth outlook • £15m of cost synergies from Liberty Living from 2021 • Pipeline de-risked by University Partnerships • Pro forma LTV of 35% post pipeline and disposals 9.5p – 10p 3p – 5p (1)p 4p 2p (3)p – (4)p
Slide 8: Financial Review
Financial Review Preliminary Results Year ended 31 December 2019
Slide 9: Strong financial performance
Strong financial performance 31 Dec 2019 31 Dec 2018 % Change Income statement EPRA earnings £110.6m £88.4m +25% EPRA EPS 39.1p 34.1p +15% Dividend per share 33.2p 29.0p +14% Balance sheet EPRA NAVps 853p 790p +8% Loan to value 37% 29% Cash flow Operations cash flow £85.4m £81.2m +5% Other
Slide 10: Continued earnings and margin growth
Continued earnings and margin growth 31 Dec 2019 31 Dec 2018 £m £m Rental income 213.9 188.3 Property operating expenses (53.1) (48.0) Net operating income (NOI) 160.8 140.3 NOI margin 75.2% 74.5% Management fees 14.4 15.6 Operating expenses (21.8) (21.7) Finance costs (43.9) (40.0) Acquisition and
Slide 11: High degree of income visibility
High degree of income visibility % of Customer type % of income 2020 2021+ beds • New relationships through Liberty • 3.0% p.a. rental growth on multi- Nomination Living year agreements at current RPI 53% 56% agreements • Index-linked contracts • Targeting more city-wide deals • Targeting UK and Int
Slide 12: Earnings growth outlook
Earnings growth outlook Medium-term earnings visibility supported by: • Positive rental growth outlook • £15m of cost synergies from Liberty Living from 2021 • Pipeline de-risked by University Partnerships • Pro forma LTV of 35% post pipeline and disposals 9.5p – 10p 3p – 5p (1)p 4p 2p (3)p – (4)p
Slide 13: NAV bridge
NAV bridge 8% YoY growth in NAV • 3.4% rental growth and 11bp of yield compression in the year • Planning gains recognised for Middlesex Street and Old BRI • 9.9% share placing in July at 985p • Liberty Living acquisition priced on a NAV-for-NAV basis o £377 million of goodwill arising from differ
Slide 14: Robust capital structure
Robust capital structure Strong debt position Key debt statistics (Unite share) • LTV of 37% following Liberty Living acquisition (2018: 29%) 31 Dec 2019 31 Dec 2018 • Average cost of debt reduced to 3.3% Net debt £1,884m £856m LTV 37% 29% Opportunities to further reduce the cost of debt Net deb
Slide 15: Continued growth from co-investment vehicles
Continued growth from co-investment vehicles Strong performance from USAF and LSAV Summary financials • LSAV’s higher total accounting return driven by strong rental USAF LSAV growth and yield compression in London £m £m GAV 2,850 1,335 £489m of USAF acquisitions UPDATE • Acquisition of Liberty
Slide 16: Property Review
Horizon Heights Skelhorne Street, Liverpool L35GH Property Review Preliminary Results Year ended 31 December 2019
Slide 17: Valuations well supported
Valuations well supported Transactional volume remains strong Valuation yields 8% • Over £5bn traded in 2019, including Liberty Living 7% • Less stock coming to market following a period of 6% 5% consolidation by major operators 4% 3% • Buyers more focused on strength of locations and local 2% Uni
Slide 18: Enhancing our portfolio
Enhancing our portfolio Continued rental growth outperformance 2019/20 rental growth (Unite vs. market) • Strong performance in London 6% 4.8% 5% • Income growth through enhanced utilisation 4% 3.4% 3.4% • Segmentation opportunities for re-bookers and postgraduates 2.9% 2.6% 3% Improving portfol
Slide 19: Market remains undersupplied
Market remains undersupplied PBSA now provides homes to 650,000 students Growth in supply and demand • There remains a 243,000 shortfall to 1st year and 600,000 3.0 international student numbers 500,000 2.5 400,000 2.0 32,000 new beds delivered in 2019 with 7,000 beds leaving 300,000 1.5 the mar
Slide 20: Secured development pipeline
Secured development pipeline Secured pipeline of 5,191 beds to deliver by 2023 Target Secured Total Total Forecast yield delivery beds completed development on cost • £681m total development cost (£427m to come) value (£m) costs (£m) • London represents 55% by value Traditional development New o
Slide 21: Operations Review
Operations Review Preliminary Results Year ended 31 December 2019
Slide 22: Extending the range of University Partnerships
Extending the range of University Partnerships 41,500 beds now under nomination agreements Nomination agreements • 56% of total beds vs. 19% for corporate PBSA peers Beds Beds % Income Length • Liberty Living brings new University relationships 2019/20 2018/19 2019/20 Single year 15,264 7,543 35%
Slide 23: Student demand remains robust
Student demand remains robust Student numbers at record levels 000s UK 18-year-old population and participation rate • 2019/20 intake of 541,000 students, up 1.5% 900 893 38% o Record participation rate offsetting demographic decline 850 36% • 2020/21 applications up 1.2% 800 34% o Strong non-EU g
Slide 24: High-quality, affordable accommodation
High-quality, affordable accommodation Value-for-money is the most important factor influencing students’ decisions on where to live The cost of our accommodation is only 8% more expensive than HMO • Equivalent to an extra £10 per week for all the additional product and service features we provi
Slide 25: Unite as a responsible business
Unite as a responsible business Addressing the challenge of mental health and wellbeing Investing to improve our environmental impact • Peer-to-peer support through our Student Ambassadors • New smart building controls and opportunities in Liberty Living • Collaborated on new PBSA wellbeing guid
Slide 26: Outlook
Outlook Preliminary Results Year ended 31 December 2019
Slide 27: A foundation for growth
A foundation for growth Well positioned for sustainable earnings growth • Rental growth, cost synergies and new openings net of disposals could add 16p to 20p to EPS Demand outlook remains positive • Student number growth supported by demographics, increasing participation and international grow
Slide 28: Appendices
Appendices Preliminary Results Year ended 31 December 2019
Slide 29: Student numbers remain strong
Student numbers remain strong Record student numbers in 2019/20 Change in student population by region • Higher participation rates and international growth 30% offsetting the decline in the 18-year-old population 20% A UK University education is highly valued 10% 0% • Unite works with 21 of 28
Slide 30: Home for Success
Home for Success All-inclusive pricing • All utilities, insurance and services Of customers using • High-speed Wi-Fi (70 Mbps) 90% MyUnite app • MyUnite app • Maintenance teams on hand Help when it’s needed Of customers used • 24/7 customer support centre 75% online check-in at • Customer servic
Slide 31: Review of High-Pressure Laminate (HPL) cladding
Review of High-Pressure Laminate (HPL) cladding We are undertaking a thorough review of the use of High-Pressure Laminate (HPL) cladding on our properties • In accordance with the Government’s Building Safety Advice of 20 January 2020 We have identified 19 properties with HPL across our estate •
Slide 32: Portfolio overview
Portfolio overview Geographical breakdown of portfolio 2020 Completed beds Full-time student City Market share rank (19/20) numbers (18/19) Aberdeen 1 London 10,920 327,840 3.3% 2 Birmingham 6,498 73,845 8.8% Edinburgh Glasgow 3 Liverpool 6,469 51,980 12.4% 4 Manchester 5,017 66,195 7.6% 7 Newcastle
Slide 33: Rental portfolio analysis
Rental portfolio analysis 31 December 2019 Wholly Liberty USAF1 LSAV Lease Total Unite share owned Living London Value (£m) 550 465 391 1,061 17 2,484 1,648 Beds 1,993 1,506 1,870 5,291 260 10,920 34% Properties 6 5 6 12 1 30 Prime provincial Value (£m) 419 458 641 - 29 1,547 1,047 Beds 3,566 3,476
Slide 34: Summary EPRA balance sheet and income statement
Summary EPRA balance sheet and income statement USAF2 LSAV Unite Group Unite Group £m Wholly owned Liberty Living (Unite share) (Unite share) 2019 2018 Balance sheet Rental properties 1,462 1,945 628 668 4,703 2,685 Leased properties 110 - - - 110 - Properties under development 393 19 - - 412 282 To
Slide 35: Debt facilities
Debt facilities On-balance sheet Co-investment vehicles Facility Drawn Maturity Facility Drawn Maturity £m £m £m £m Secured USAF Legal + General 108 108 2022 Secured bond 775 775 2023-25 Mass Mutual 124 124 2024 Wells Fargo 100 100 2021 Unsecured Total 875 875 HSBC/RBS 350 175 2022 LSAV HSBC/RBC/RBS
Slide 36: Reconciliation of NAV measures
Reconciliation of NAV measures 2019 2019 2018 2018 £m p £m p Net asset value reported under IFRS 3,072 845 2,073 787 Mark to market interest rate swaps 8 - Unamortised swap gain (2) (2) Unamortised fair value of debt recognised on acquisition 32 - Current tax - - Deferred tax - 14 EPRA NAV 3,110 853
Slide 37: Secured development and partnerships pipeline
Secured development and partnerships pipeline Target Secured Total completed Total Capex in period Capex remaining Forecast NAV Forecast yield on delivery beds value (£m) development (£m) (£m) remaining (£m) cost costs (£m) Traditional development First Way, London 2020 678 126 102 33 31 8 6.0% New