TIDMUTG
RNS Number : 4404B
Unite Group PLC (The)
08 October 2020
PRESS RELEASE
8 October 2020
THE UNITE GROUP PLC
('Unite Students', 'Unite', the 'Group', or the ' Company ')
TRADING UPDATE AND Q3 FUND VALUATIONS
The Unite Group plc, the UK's leading owner, manager and
developer of student accommodation, today announces an update on
current trading, dividend and quarterly property valuations for the
Unite UK Student Accommodation Fund ('USAF') and the London Student
Accommodation Joint Venture ('LSAV') as at 30 September 2020.
Current trading
Operations
All of our buildings are open and providing homes for students
who are starting the 2020/21 academic year. The majority of our
customers have now arrived and are settling into their
accommodation. We are working closely with students, Universities
and in line with Government guidance to ensure that we keep our
customers, employees and the communities in which we operate safe.
We have implemented a series of measures to be Covid-secure
(accredited by the British Safety Council) and are assisting
students who need support.
We are grateful to our operational teams who have been and
continue to work in challenging circumstances to support our
customers.
2020/21 applications
UCAS data shows a 4% increase in the number of placed applicants
to UK Universities for the 2020/21 academic year. UK acceptances
have increased by 4%, driven by a record 36.4% participation rate
for 18-year-olds (2019/20: 33.8%). International acceptances also
rose by 4%, reflecting a 9% increase for non-EU students and a 2%
decline in EU acceptances. There has been an ongoing flight to
quality by students, with Higher tariff Universities increasing
acceptances by 12% compared to +1% and 0% for Medium and Lower
tariff Universities respectively.
Letting performance
As we enter the final stages of the lettings cycle for the
2020/21 academic year, we have achieved a strong performance with
88% of bed spaces let across the whole portfolio (2019/20: 98%). We
have seen healthy letting activity since A-Level results on 13
August, with new lettings partially offset by a higher than usual
volume of cancellations, particularly following the recent increase
in UK cases of Covid-19. This resulted in completed lettings
falling marginally short of our 90% occupancy target. However, we
are targeting additional sales from January 2021 starts from direct
let customers as well as Universities, where a number of
discussions are already underway.
Nomination agreements account for 57% of 2020/21 bookings
(2019/20: 56%), with the remaining 43% sold on a direct-let basis.
UK students account for a 45% share of direct-let bookings, up from
38% in 2019/20, reflecting our increased focus on capturing market
share from Houses of Multiple Occupancy (HMOs) and the strength of
domestic demand.
We have offered students the flexibility to delay their start
dates to align to changes in their University term dates. Around
10% of students have taken up this offer, contributing to a modest
shortening in average tenancy lengths to 43 weeks for 2020/21
(2019/20: 44 weeks).
We have high visibility over income for 79% of our bookings,
reflecting those students who have now checked-in to their
accommodation and nomination agreements where Unite receives rent
directly from Universities. A further 21% of bookings are still to
check-in, either this month or in January, which compares to 4% at
the same stage last year. Many of these later starts reflect our
flexible approach to tenancies this year, given later University
course start dates.
Weekly prices have increased by 1.1% YoY on a like-for-like
basis, reflecting contractual growth of 2.8% for multi-year
nomination agreements partially offset by weaker growth in
single-year nomination agreements and direct-let beds (together
+0.1%) where discounting has been required in certain markets later
in the sales cycle to drive occupancy.
Financial impact
Overall, this translates to a 10-20% reduction in rental income
for 2020/21 compared to 2019/20 (prior to the impact of
cancellations in 2019/20 due to Covid-19), in line with the
expectation set out in our half year results. The better end of the
range assumes a high completion rate for upcoming check-ins, while
a 20% reduction allows for a higher level of cancellations.
We have achieved the GBP12-15 million of targeted cost savings
for 2020, principally through insourcing of work over the summer
and savings made to utility and broadband costs. These savings are
inclusive of the costs of delivering our new Covid-secure operating
model for 2020/21, including increased staffing levels since
check-in, enhanced cleaning, physical and social distancing
measures and greater use of technology in our buildings to help
manage interactions with students.
We retain our guidance for EPRA EPS of 22-25 pence for FY2020,
albeit subject to Universities remaining open as well as our
anticipated check-in performance and rent collection over the
remainder of the year.
Debt financing and covenants
We continue to monitor our banking covenants. Given the
disruption to income caused by Covid-19, our principal focus is on
our ICR covenants, which vary between 1.5-2.0x depending on the
facility.
There is headroom for occupancy to fall to c.55% for the 2020/21
academic year before a breach of our tightest ICR covenant. Based
on our letting performance and progress to date around check-ins,
we expect to maintain compliance with all ICR covenants.
Update on dividends
Despite the significant and ongoing disruption caused by
Covid-19, the business has delivered a strong performance for
2020/21. Universities are open, having put in place Covid-secure
operating measures and established plans to adapt teaching content
in response to local outbreaks. However, the resurgence of Covid-19
cases and changing nature of lockdown measures means that we have
lower visibility over income than in a typical year due to delayed
term start dates, extended check-in periods for students and an
increased risk of cancellations.
Given current uncertainty, it is too early to commit to the
reinstatement of dividends. However, the Board will keep this
decision under review during the first term of the 2020/21 academic
year.
We see a positive outlook for student demand for 2021/22 and
beyond supported by a record share of UK 18-year-olds choosing to
enter University, positive demographic growth and our expectations
for a strong recovery in international student numbers, backed by
supportive Government policy.
As a REIT, our PID requirement is typically equivalent to
c.70-75% of our EPRA earnings and our dividend payout ratio will at
least meet this level over time, increasing as earnings visibility
improves.
There is no further PID to be paid by the Company in respect of
the 2019 financial year. The Company will meet its PID requirement
for the 2020 financial year, through future dividend payments in
the period up to 31 December 2021.
Quarterly fund valuations
At 30 September 2020, USAF's property portfolio was
independently valued at GBP2,808 million, representing a
like-for-like increase of 0.7% during the quarter. The portfolio
comprises 30,209 beds in 79 properties across 22 University towns
and cities in the UK.
LSAV's investment portfolio was independently valued at GBP1,325
million, up 0.7% in the quarter on a like-for-like basis. LSAV's
investment portfolio comprises 8,354 beds across 12 properties in
London and Aston Student Village in Birmingham.
The valuation increase is principally driven by the temporary
reduction in stamp duty for residential properties, which is due to
come to an end on 31 March 2021. Removing this impact, valuations
were flat over the quarter for both USAF and LSAV, reflecting a
sales performance for 2020/21 in line with the valuers' assumptions
in the Q2 valuations. The Q3 valuations fully reflect the income
shortfall resulting from a disrupted booking cycle for 2020/21.
Overall, the USAF portfolio is valued at an average yield of
5.3% while the LSAV portfolio is valued at an average yield of
4.4%, both of which were stable over the quarter.
Following recent valuation guidance from the RICS on student
accommodation, the material uncertainty clause has been removed
from the valuations.
Richard Smith, Unite Students Chief Executive Officer, commented
:
"We are very aware of the challenges currently faced by students
and are doing all we can to help keep them and our staff safe
throughout this difficult period. While recognising that this is an
evolving situation, all of our buildings remain open with a range
of independently assessed Covid-secure measures in place. We are
also working closely with our University partners to ensure a
coordinated response and will not hesitate to adapt our approach,
if needed.
"A University experience is not just about academic achievement;
it also serves as an important life event for hundreds of thousands
of young people every year. This experience helps transform lives
for the better. We are therefore encouraged by recent assurances
from Government that it is committed to keeping schools and
Universities open, recognising their absolute importance for our
younger generations and the UK economy.
"Despite the challenging backdrop, we have delivered a robust
performance which is a real credit to the hard work of all our
people across the UK. We remain confident in the outlook for the
Higher Education sector in the UK and I am pleased with our early
success in attracting more of the 855,000 students currently living
in Houses of Multiple Occupancy.
"Overall, we are well-positioned for future growth through our
market-leading platform, our valuable development pipeline, our
long-term and trusted University partnerships and our strategic
alignment to those Universities where demand is strongest."
S
Conference Call
There will be a conference call for analysts and investors this
morning at 8:30 a.m BST. To receive dial-in details, please contact
unite@powerscourt-group.com .
For further information, please contact:
Unite Students
Richard Smith / Joe Lister / Michael Burt Tel: +44 117 302 7005
Unite press office Tel: +44 7754 749 301
Powerscourt
Justin Griffiths / Victoria Heslop Tel: +44 20 7250 1446
About Unite Students
Unite Students is the UK's largest owner, manager and developer
of purpose-built student accommodation, serving the country's
world-leading Higher Education sector. Following the GBP1.4bn
acquisition of Liberty Living in November 2019, we now provide
homes to 75,000 students across 177 properties in 27 leading
University towns and cities. We currently partner with 45
Universities across the UK.
Our people are driven by a common purpose: to provide a 'Home
for Success' for the students who live with us. Unite's
accommodation is safe and secure, high quality and affordable.
Students live predominantly in ensuite study bedrooms, with rents
covering all bills, insurance, 24-hour security and high-speed
Wi-Fi. We also hold a five-star British Safety Council audit
rating.
Founded in 1991 in Bristol, Unite Group is an award-winning Real
Estate Investment Trust (REIT), listed on the London Stock Exchange
and a member of the FTSE 250 Index. Unite is invested in and
operates two specialist funds and joint ventures with institutional
investment partners: the GBP3 billion Unite UK Student
Accommodation Fund (USAF) and the GBP1 billion London Student
Accommodation Vehicle (LSAV).
For more information, visit:
Unite's corporate website www.unite-group.co.uk
The student site www.unite-students.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
TSTFSEESWESSEDS
(END) Dow Jones Newswires
October 08, 2020 02:00 ET (06:00 GMT)
Unite (LSE:UTG)
Historical Stock Chart
From Apr 2024 to May 2024
Unite (LSE:UTG)
Historical Stock Chart
From May 2023 to May 2024