Unite Group Plc · LSE:UTG
Unite — Investor Day (October 2021)
46 slides from Unite's investor day presentation, Oct 19, 2021
Slide 1: Capital Markets Day October 2021
CAPITAL MARKETS DAY October 2021
Slide 2: Today's agenda
CAPITAL MARKETS DAY Today’s agenda 10:15 Introduction Richard Smith 10:30 A view on HE Nick Hillman, HEPI 11:00 Customer strategy Karan Khanna 11:15 Break 11:30 Portfolio review Nick Hayes 11:45 Sustainability Michael Burt 12:00 Financial outlook Joe Lister 12:15 Summary Richard Smith 12:30 Lunch 13
Slide 3: Unite Students Team: Leadership team
CAPITAL MARKETS DAY Unite Students Team Leadership team Richard Smith Joe Lister Karan Khanna Nick Hayes Michael Burt Nicola Marsden Chief Executive Chief Financial Chief Customer Group Property Group Investment Group Communications Officer Officer Director & ESG Director Director Operations Team 3
Slide 4: Unite Students Team: Operations Team
CAPITAL MARKETS DAY Unite Students Team Leadership team Operations Team Steph Dale David Marr Louise Redfern Chloe Byatte Natalie Snelson Will Scott Head of Operations Head of Operations Area Manager Operations Manager Operations Manager Regional Student for South and for North England Support Manag
Slide 5: Guest Speaker Nick Hillman
CAPITAL MARKETS DAY Guest Speaker Nick Hilman Director of HEPI 4
Slide 6: Introduction
INTRODUCTION 1 Introduction Richard Smith, Chief Executive 5
Slide 7: Our strategy
Our strategy INTRODUCTION HOME FOR SUCCESS Our objectives Delivering for our customers Attractive returns for A responsible and resilient and Universities shareholders business Growth through Improving our A best-in-class Investing to enhance development and Our priorities environmental and student
Slide 8: Breakdown of acceptances by type
INTRODUCTION Breakdown of acceptances by type Stable student 000s 800 numbers for 2021/22 700 600 175 168 151 158 182 170 176 149 154 174 500 110 115 114 110 115 115 87 99 106 400 93 300 • Acceptances marginally down with more 200 395 397 392 385 401 421 352 373 382 380 unplaced applicants 100 0 201
Slide 9: Occupancy breakdown by academic year
INTRODUCTION Occupancy breakdown by academic year 2021/22 sales 2021/22 performance 51% 21% 13% 6% 3% 2020/21 53% 16% 11% 4% 4% • 94% occupancy for 2021/22 2019/20 57% 16% 15% 6% 4% (2019/20: 98%, 2020/21: 88%) 0% 20% 40% 60% 80% 100% Nomination agreements UK direct-let China direct-let o Rental gro
Slide 10: Structural trends for the next decade
INTRODUCTION Structural trends for the next decade 18-year-old population and participation rate1 000s Demographic Flight to 45% 1,000 growth quality 893 38% 900 40% 730 800 35% 700 30% 600 25% 500 2015 2018 2021 2024 2027 2030 18-year-old population (RHS) 18-year-old participation rate (LHS) 1. UCA
Slide 11: A view on HE
A VIEW ON HE 2 A view on HE Nick Hillman, HEPI 10
Slide 12: Customer strategy
CUSTOMER STRATEGY 3 Customer strategy Karan Khanna, Chief Customer Officer 11
Slide 13: Strong foundations
CUSTOMER STRATEGY Strong foundations Best-in-class Quality University Strong portfolio operating platform partnerships with opportunity PRISM technology High degree of income Range of product and platform visibility price points Passionate frontline Trusted brand, enhanced High-quality pipeline team
Slide 14: Expectations are evolving
CUSTOMER STRATEGY Expectations are evolving Elevated student Higher University Greater emphasis on core expectations for rooms, expectations, especially purpose, social impact and social space, amenities around student welfare community engagement and technology 13
Slide 15: Student accommodation landscape
CUSTOMER STRATEGY Student accommodation landscape • Unite’s affordable, mainstream offer has broad appeal • Well placed to support Universities’ growth plans through nomination agreements • Significant opportunity to capture market share from the HMO sector Houses of Multiple University Halls Budget
Slide 16: Long-term Commercial and Operational strategy
CUSTOMER STRATEGY Long-term Commercial and Operational strategy Delivering a Home for Success Digital, Continued Segmented product Increased asset mobile-first Frontline service investment in and service management capabilities excellence technology (PRISM) Greater customer advocacy Increased retent
Slide 17: A more segmented customer offer
CUSTOMER STRATEGY A more segmented customer offer Undergraduate 1st years Undergraduate 2nd and 3rd years Postgraduate and Internationals • Strong links to Universities • Live together with friends • Dedicated blocks or buildings • Resident Ambassador • Hassle-free living with utilities, for like-mi
Slide 18: Portfolio review
PORTFOLIO REVIEW 4 Portfolio review Nick Hayes, Group Property Director 17
Slide 19: Optimising our portfolio
PORTFOLIO REVIEW Optimising our Capital recycling (Unite share)1 £400m £300m portfolio £200m £100m 0m £(100)m • Growing alignment to strongest Universities £(200)m o 90% of rental portfolio in Russell Group £(300)m 2015 2016 2017 2018 2019 2020 2021F cities, 100% of development pipeline Acquisitions
Slide 20: Growing our London footprint
PORTFOLIO REVIEW Growing our 150,000 18-year-old population and HE entry rates1 60% London footprint 120,000 90,000 50% 40% 30% 60,000 20% • Strong demand outlook 30,000 10% 0 0% o Significant demographic growth as t les ds es t nd be r ds Eas t st st on th E Wa idlan t h W cotl a um id lan h We t h
Slide 21: Investing to enhance rental growth
PORTFOLIO REVIEW Investing to enhance Year of opening by % of beds rental growth 15% 10% • Multi-year asset management opportunity 5% o £35-50m annual capex 0% o 0.5-1.0% contribution to rental growth 92 995 999 002 005 008 011 014 017 020 19 1 1 2 2 2 2 2 2 2 o Funded through capital recycling • Wi
Slide 22: Manchester overview
PORTFOLIO REVIEW Manchester overview Full-time students (2019/20)1 Undergraduate Postgraduate UK 41,920 6,480 EU 3,170 1,030 • Leading University city (67k full-time students) Non-EU 7,915 6,785 • 6,000 Unite beds across 11 properties Total 53,005 14,295 o 50% nominations o 80% of DL sales to intern
Slide 23: Parkway Gate
PORTFOLIO REVIEW Parkway Gate 729 beds, opened in 2008 • Particularly popular with international students • Opportunity to refurbish asset and enhance amenities alongside cladding remediation • Planning secured for revised configuration and additional 24 beds • Upgraded to EPC ‘B’ rating on completi
Slide 24: Kincardine Court
PORTFOLIO REVIEW Kincardine Court 229 beds, opened in 2001 • Well-located asset popular with postgraduates • Planning consent for 92-bed extension on car park • Amending service proposition and specification for postgraduate market o 4-bed cluster flats • Combined with upgrade of existing block • EP
Slide 25: New Medlock House
PORTFOLIO REVIEW Previous specification New Medlock House 671 beds, opened in 2002 • Basic existing specification, affordable price point • Attractive to UK undergraduate market New specification • Planning consent secured for 17 new bedrooms • Creation of new common room and study space • 5-year no
Slide 26: Sustainability
SUSTAINABILITY 5 Sustainability Michael Burt, Group Investment & ESG Director 25
Slide 27: Our sustainability strategy
SUSTAINABILITY Our sustainability strategy OUR OBJECTIVES NET ZERO RESOURCE HEALTH & OPPORTUNITIES RAISING CARBON EFFICIENT WELLBEING FOR ALL STANDARDS Becoming net zero Improving energy and Enhancing the health An environment Raising standards carbon for both our water efficiency, and and wellbeing
Slide 28: Improving environmental performance
SUSTAINABILITY Improving environmental performance Consumption Carbon • Focus on the ‘four Cs’ o Lower energy consumption by encouraging responsible living habits o Carbon savings for operational properties and new developments from cradle to grave Asset performance o Cost reduction opportunities th
Slide 29: Net zero carbon
SUSTAINABILITY Net zero carbon 2019 GHG emissions by source Scope 1, Gas Scope 3, other 7% 17% Scope 2, Heat 2% • 2030 net zero commitment for operations and development Scope 2, Scope 3, Electricity • Unite emissions include students’ energy use Development 29% 45% How we’ll get there: • 28% reduct
Slide 30: Making our buildings net zero carbon
SUSTAINABILITY Making our buildings net zero carbon DECARBONISING OUR ENERGY SUPPLY ON-SITE RENEWABLE ENERGY We will purchase 100% renewable electricity, and Solar PV included in new builds and installed increase the amount coming from new, unsubsidised on existing buildings where feasible to source
Slide 31: Net zero development
SUSTAINABILITY Net zero development Breakdown of embodied carbon on development1 • >20% reductions identified in embodied carbon Servicing 7% Other o Savings from low-carbon concrete 7% and finishes Finishes Substructure 18% o Targeting 40% by 2030 7% • TP Paddington, London and Abbey Lane, Edinburg
Slide 32: EPC ratings
SUSTAINABILITY EPC ratings EPC ratings by floorspace1 50% 40% 40% • 53% of portfolio is currently A-C rated 36% o Fully compliant with current regulations 30% o Improvement projects for a further 8% 25% 23% of floorspace in 2021/22 20% 20% 17% o Developments targeting ‘A’ rating 13% 13% • Variety of
Slide 33: Helping young people succeed
SUSTAINABILITY Helping young people succeed • Clear link to our Home for Success purpose o Supporting transition to University o Widening access to post-18 education o Helping students to achieve more • 500 Unite Foundation scholarships since 2012 o 29 partner Universities o Demonstrable impact for
Slide 34: Financial outlook
FINANCIAL OUTLOOK 6 Financial outlook Joe Lister, Chief Financial Officer 33
Slide 35: Our financial priorities
FINANCIAL OUTLOOK Our financial priorities Total accounting return and dividends1 20% 40p 15% 30p 10% 20p 5% 10p 1. Delivering attractive returns 0% 0p o Target total accounting returns of 8.5-10% -5% (3.9% in H1) 2014 2015 2016 Capital Return (LHS) 2017 2018 2019 Earnings Yield (LHS) 2020 2021F Div
Slide 36: Delivering attractive returns
FINANCIAL OUTLOOK Delivering attractive returns • Returns underpinned by earnings and sustainable rental growth of 3.0-3.5% o 0.5-1.0% from asset management initiatives • Development and asset management delivers best return on capital • c.£1,000/bed p.a. to be invested in sustainability, lifecycle
Slide 37: Delivering growth in income & NAV
FINANCIAL OUTLOOK Delivering growth in income & NAV Key drivers of earnings growth Annual Annual EPS Annual NAV • Outlook for earnings growth of 6-8% p.a. from investment impact1 impact /(divestment) stabilised 2022 position Rental growth 2-3p 25-30p o Rental growth o New openings less disposals Ass
Slide 38: Leading in fire safety
FINANCIAL OUTLOOK Leading in fire safety ACM and HPL Fire safety is a critical part of our strategy Spent to date £15m • Linked to our Home for Success purpose Provision, H1 2021 £45m • One of the first companies to remove ACM cladding • 15 buildings remediated or works underway Further investment •
Slide 39: Opportunities for University partnerships
FINANCIAL OUTLOOK Opportunities for University partnerships • Universities facing financial and operational constraints • Unite able to unlock operational efficiencies alongside new accommodation • Partner of choice, reflecting our response to the pandemic Off-campus development On-campus developmen
Slide 40: Maintaining balance sheet discipline
FINANCIAL OUTLOOK Maintaining balance LTV and ICR sheet discipline 4x 3x 50% 40% 30% 2x 20% • Development commitments at 15% of GAV 1x 10% • Seek to fund £250-300m of development and asset 0x 2014 2015 2016 2017 2018 2019 2020 2021PF 0% management capex from disposals and value growth LTV (RHS) ICR
Slide 41: Recovery & growth in earnings
FINANCIAL OUTLOOK Recovery & growth in earnings • Earnings substantially recovered in FY2022 • Anticipate normalised performance from FY2023 £m FY2021 FY2022 FY2023 Comment Occupancy: 2020/21 88% - - 2021/22 94% 94% - Grade inflation concentrating demand in strongest markets 2022/23 - ~97% ~97% Norm
Slide 42: Protection against inflation
FINANCIAL OUTLOOK Protection against inflation Income Staff costs Utilities Development costs • 70% of multiyear • Efficiencies driven by • Electricity fully hedged • Costs fixed for 2022 nominations have RPI our scale and for 2022, 50% for 2023 schemes inflators, 20% CP- investments in • Gas spend
Slide 43: Summary
SUMMARY 7 Summary Richard Smith, Chief Executive 42
Slide 44: Home for Success
SUMMARY Home for Success 1 2 3 4 5 6 Structurally High-quality Best-in-class High visibility Substantial Leadership in growing portfolio operating over returns growth sustainability sector platform opportunities • Demographic • Aligned to the • Over 60 • Sustainable • Market share • Net zero growth
Slide 45: Our properties in Manchester
CAPITAL MARKETS DAY Our properties in Manchester 44
Slide 46: Thanks
UNITE STUDENTS Thanks