TIDMUTG
RNS Number : 9831Q
Unite Group PLC (The)
24 June 2020
Press release
THIS ANNOUNCEMENT IS NOT FOR PUBLICATION, RELEASE, DISTRIBUTION
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RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL
FURTHER, THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND
IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
LEI: 213800BBUUWVDH9YI827
For immediate release
24 June 2020
THE UNITE GROUP PLC
('Unite Students', 'Unite', the 'Group', or the ' Company ')
PRE-CLOSE TRADING STATEMENT
Unite Students, the UK's leading owner, manager and developer of
student accommodation, today provides a trading update ahead of the
end of the first half of the financial year ending on 30 June
2020.
Highlights
-- 97% of Universities plan to provide in-person teaching in the Autumn term of 2020/21*
-- Reservations at 80% for the 2020/21 academic year (2019/20: 88%), of which half underpinned by contracted
nomination agreements
-- 94% of rent has been collected under nomination or lease agreements for the summer term of 2019/20, reflecting
the strength of Unite's relationships with Universities and the robustness of its nomination agreements
-- First student accommodation provider to have our Covid Secure status accredited by the British Safety Council
-- Guidance for EPRA EPS of 22-25 pence for FY2020, reflecting the impact of rent forgone for the summer term of
2019/20 and 90% target occupancy for 2020/21
-- Anticipate reinstating dividend payments following the start of the 2020/21 academic year in line with our
expectations
Richard Smith, Unite Students Chief Executive Officer, commented
:
"Universities are planning to open their campuses and
accommodation to students this Autumn. We also know through our own
research that students are keen to start or get back to University
as soon as it's safe to do so. At Unite, we remain committed to
providing students with the safe and secure environment they and
their parents want. We are delighted to be the first UK
purpose-built student accommodation provider to be issued a Covid
assurance assessment statement by the British Safety Council.
We have growing visibility and confidence over our income for
the 2020/21 academic year, reflective of the strength of our
University relationships. Our best-in-class operating platform also
provides the flexibility to rapidly adjust our marketing strategies
and reduce costs. We remain confident in the outlook for higher
education demand and with our market-leading position see
significant opportunities for growth through University
partnerships, new developments and by attracting more of the
850,000 students currently living in Houses of Multiple
Occupancy."
* Universities UK survey published 17 June 2020
The person responsible for releasing this announcement on behalf
of the Company is Chris Szpojnarowicz, Company Secretary.
For further information, please contact:
Unite Students
Richard Smith / Joe Lister / Michael Burt Tel: +44 117 302 7005
Powerscourt
Justin Griffiths / Victoria Heslop Tel: +44 20 7250 1446
Higher Education sector update
The Universities UK survey published on 17 June outlined that
97% of Universities plan to provide in-person teaching in the
Autumn term of 2020/21. Teaching will be delivered on a 'blended'
basis with face-to-face tutorials, seminars and practical work
complemented by online lectures to observe social distancing
guidelines. We expect University campuses to be open from the
Autumn, offering a range of social opportunities and student
support.
Recent data from UCAS showed a small increase in deferrals
compared to last year in advance of the June 18 deadline for
acceptances. We are expecting deferral rates to be higher than last
year, albeit limited by the clear desire of young people to attend
university, weaker employment prospects and fewer gap year
opportunities for school leavers.
There remains uncertainty over international student numbers
given travel restrictions and caution on the part of students to
travel. Recent survey results from the British Council highlight
that between one third and two thirds of non-EU international
students may choose to cancel or delay their travel plans for
2020/21. This is in line with our assumptions.
2019/20 academic year
We anticipate a c.15% reduction in income for the 2019/20
academic year, reflecting our decision to forgo rents for students
who have chosen to return home for the summer term. Unite was the
first corporate PBSA provider to offer students refunds on their
summer term rents, reflecting our core value of doing the right
thing for our customers, people and other stakeholders.
Reflecting the strength of our University relationships, we have
collected 94% of rent due to date for the summer term under
nomination or lease agreements, where Universities collect rent
directly from students.
2020/21 academic year
We have increasing visibility over income as we approach the
start of the 2020/21 academic year. Reservations of 80% are below
the prior year (2019/20: 88%), reflecting delays by some students
and Universities in making their accommodation choices at this
stage. We expect a higher than usual volume of sales activity later
in the booking cycle.
We are targeting 90% occupancy for 2020/21 (2019/20: 98%),
underpinned by the income security provided by our multi-year
nomination agreements. Overall, we expect 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).
Breakdown of reservations for 2020/21 by domicile and year of
study
Nominations* Direct let
UK China EU Other Total
Intl.
------------- ------ -------
First year n/a 3,598 1,173 851 555 n/a
2(nd) and 3(rd)
year n/a 4,914 3,070 1,052 1,168 n/a
Postgraduate n/a 166 3,968 142 297 n/a
------------- ------ ------ ------ ------- -------
Total 38,698 8,678 8,211 2,045 2,020 59,652
% of reservations 65% 15% 14% 3% 3% 100%
% of beds to
sell 52% 12% 11% 3% 3% 80%
------------- ------ ------ ------ ------- -------
* All years and domiciles
Nomination agreements
Nomination reservations total 38,698 beds or 52% of available
beds for the 2020/21 academic year (2019/20: 41,484 beds or 56%),
of which 90% is aligned to High and Mid-ranked Universities. 30,362
of these nominated beds (41% of total beds) are already contracted
and we expect the substantial majority of the c.8,300 unsigned
nomination beds (11% of total beds) to complete in the coming
weeks.
Since mid-April, we have seen a reduction in nomination
reservations totalling 2,600 beds, relating to handbacks under
non-underwritten agreements and cancellations of single-year
agreements. We have quickly moved to sell these beds on a
direct-let basis.
Breakdown of nomination reservations (2020/21, total Group)
Status Beds Gross rental income (GBPm)
Contracted with underwrite 26,498 190.1
Contracted, not underwritten 3,864 21.9
Non-contracted 8,336 57.8
Total 38,698 269.8
Direct-let sales
Direct let reservations account for 20,954 beds or 28% of total
beds. We have a further 15,300 beds left to sell, representing 20%
of total beds.
We are seeing healthy levels of demand from UK undergraduate
students, reflecting the shift in our marketing towards domestic
students and our targeting of students living in houses of multiple
occupancy (HMOs). We have seen an encouraging improvement in
international reservations in recent weeks after a period of
subdued sales. 2(nd) and 3rd year students account for just under
half of international sales, providing greater certainty over
income. Notably, we have continued to see strong demand for
single-occupancy studio rooms (14% of direct let beds for
sale).
We will seek to maintain price discipline but will use price
reductions and incentives selectively to drive future sales and
optimise occupancy.
Recognising the increased risk of cancellations due to
Coronavirus, we will be contacting all UK and international
customers to reconfirm bookings over the coming weeks. Whilst
bookings are contractual and supported by 4% average advanced
rental payments, there remains higher risk around international
bookings than in a normal year.
Operating model for 2020/21
We remain focused on delivering a safe and secure living
environment for students.
We expect our cluster flats with shared kitchen and living
spaces to be classified by the Government as households for the
purposes of social distancing guidelines. This would enable our
buildings to operate at close to full occupancy.
We are introducing a number of new and enhanced Covid-19 secure
operating practices for the 2020/21 academic year to comply with
Government guidance. This will include enhanced cleaning and new
physical and social distancing measures, such as floor markings,
signage, reception communication and repurposed common areas.
Reflecting these measures, we have received a Covid assurance
statement from the British Safety Council (BSC).
Our investments in our sector-leading operating platform, PRISM,
and our MyUnite app, already facilitate a range of digital
interactions between Unite staff and students, such as bookings,
maintenance requests and logging of issues and provide
opportunities for enhanced service to students. These enhancements
can be delivered without an increase in operating costs, due to
efficiencies in other areas.
Development pipeline
We will deliver 2,257 beds across three development schemes for
the 2020/21 academic year. White Rose View in Leeds, where we have
a 559 bed 30-year nomination agreement with the University of
Leeds, will be completed on time and budget for student arrivals
this September.
Due to temporary site closures and reduced levels of operatives
on site as a result of social distancing measures, we are expecting
completion of First Way, Wembley and Artisan Heights, Manchester to
be delayed until Q4 2020. We will provide alternative accommodation
to those students affected and expect both buildings to be fully
operational from January 2021. Due to fixed-price build contracts,
we are not liable for any cost overruns. We expect to generate
income from these buildings during the 2020/21 academic year
through the usual January intake by some Universities.
We took the decision earlier this year to defer delivery of our
schemes at Middlesex Street, London and Old BRI, Bristol into 2022.
We expect to re-start construction in Q1 2021, following the start
of the 2020/21 academic year. The total cost of delays is expected
to be GBP2 million.
Cashflow and earnings guidance
We anticipate EPRA EPS of 22-25 pence in FY2020, reflecting 35%
rent collection for summer term of 2019/20, zero summer income and
a 10-20% YoY reduction in rental income for the Autumn term of
2020/21.
This translates to a reduction in Group cashflow of GBP95-110
million in 2020 (previously GBP90-125m), reflecting greater
visibility over the impact of rent forgone in 2019/20 and
contracted income for 2020/21.
The reduction in cashflow is mitigated by actions to retain
GBP95-105 million in cash in the business in 2020. This includes
GBP67 million of deferred capex in the development pipeline,
GBP20-30 million from deferral of non-essential operational capex
and GBP12-15 million of P&L cost savings covering the period
from May to August 2020.
We are targeting additional cost savings from 2021 through
further efficiencies in our operating model, procurement and
utility costs. These are additional to the GBP15 million of annual
cost synergies to be realised from our acquisition of Liberty
Living from 2021.
Our earnings and cashflow guidance assumes no return to more
stringent lockdown measures and that University campuses are open
to students in the Autumn, reflecting social distancing
requirements.
Dividends
We anticipate reinstating dividend payments following the start
of the 2020/21 academic year in line with our expectations.
There remains GBP2 million of Property Income Distribution (PID)
to be paid by the Company in respect of the 2019 financial
year.
H1 valuations
From discussion with our valuers, we anticipate a 2-3% reduction
in property valuations in H1 2020. This reflects income deductions
relating to zero summer business and the anticipated impact of
Covid-19 disruption on 2020/21 income. Property yields are expected
to be broadly unchanged over the period.
Our valuers have informed us that their valuation reports as at
30 June 2020 will include a statement highlighting material
uncertainty given the current environment.
Cash headroom and liquidity
As of 22 June, the Company had GBP253 million of unrestricted
cash reserves. The Company has been confirmed as an eligible issuer
under the HM Treasury and Bank of England Covid Corporate Financing
Facility (CCFF). At this stage, we have no plans to drawdown under
the CCFF.
In addition, we have received credit approval for a GBP100
million extension to our unsecured Group debt facility.
We remain confident in our cash headroom and liquidity through
the 2020/21 academic year based on income visibility provided
through our contracted nomination agreements. We have GBP45 million
of committed capex remaining for 2020 development completions and
average cash consumption is c.GBP11-13 million per month.
Banking relationships and debt covenants
We continue to monitor our banking covenants, which vary between
facilities but are principally based on LTV and ICR ratios. Given
the interruption 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.
We are confident in our headroom under ICR covenants at both a
Group and fund level. 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 contracted nomination agreements totalling
41% of beds, this would require only limited conversion of our
reserved but unsigned nomination agreements or check-ins by
customers under existing direct-let reservations.
S
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 74,000 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 en-suite 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 ,
Important Notices
This Announcement is for information only and does not itself
constitute or form part of an offer to sell or issue or the
solicitation of an offer to acquire, purchase or subscribe for, any
securities referred to herein in any jurisdiction including,
without limitation, the United States or any restricted territory
(as defined below) or any other jurisdiction in which the same
would be unlawful.
The securities referred to herein have not been and will not be
registered under the United States Securities Act of 1933, as
amended (the "Securities Act"), or under the securities laws of any
state or other jurisdiction of the United States, and may not be
offered or sold directly or indirectly in or into the United States
absent registration under the Securities Act or pursuant to an
exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and in compliance
with the securities laws of any state or any other jurisdiction of
the United States.
This Announcement, and the information contained herein, is not
for release, publication or distribution, directly or indirectly,
to persons in the United States, Australia, Canada, the Republic of
South Africa or Japan or in any jurisdiction in which such
publication or distribution is unlawful (each a "restricted
territory"). The distribution of this Announcement in certain
jurisdictions may be restricted by law. No action has been taken by
the Company, its affiliates or any person acting on its or their
behalf which would permit an offer of securities referred to herein
or possession or distribution of this Announcement or any other
offering or publicity material relating to such securities in any
jurisdiction where action for that purpose is required.
This Announcement has been issued by, and is the sole
responsibility, of the Company. No representation or warranty,
express or implied, is or will be made as to, or in relation to,
and no responsibility or liability is or will be accepted by any
other person or any of their respective affiliates or agents as to,
or in relation to, the accuracy or completeness of this
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advisers, and any liability therefore is expressly disclaimed.
Certain statements contained in this Announcement constitute
"forward-looking statements" with respect to the financial
condition, performance, strategic initiatives, objectives, results
of operations and business of the Company. All statements other
than statements of historical facts included in this Announcement
are, or may be deemed to be, forward-looking statements. Without
limitation, any statements preceded or followed by or that include
the words "targets", "plans", "believes", "expects", "aims",
"intends", "anticipates", "estimates", "projects", "will", "may",
"would", "could" or "should", or words or terms of similar
substance or the negative thereof, are forward-looking statements.
Forward-looking statements may include statements relating to the
following: (i) future capital expenditures, expenses, revenues,
earnings, cashflows, synergies, economic performance, indebtedness,
financial condition, dividend policy, losses and future prospects;
and (ii) business and management strategies and the expansion and
growth of the Company's operations. Such forward-looking statements
involve risks and uncertainties that could significantly affect
expected results and are based on certain key assumptions, some of
which are outside of the Company's influence and/or control. Many
factors could cause actual results, performance or achievements
to differ materially from those projected or implied in any
forward-looking statements. The important factors that could cause
the Company's actual results, performance or achievements to differ
materially from those in the forward-looking statements include,
among others, economic and business cycles, the terms and
conditions of the Company's financing arrangements, foreign
currency rate fluctuations, competition in the Company's principal
markets, acquisitions or disposals of businesses or assets, the
national and international impact of the Covid-19 pandemic, changes
in government and other regulation, including in relation to the
environment, travel, health and safety and taxation, labour
relations and work stoppages, changes in political and economic
stability and trends in the Company's principal industries. Due to
such uncertainties and risks, you are cautioned not to place undue
reliance on such forward-looking statements, which speak only as of
the date hereof. In light of these risks, uncertainties and
assumptions, the events described in the forward-looking statements
in this Announcement may not occur. No statement in this
Announcement is intended to be a profit estimate or profit
forecast. The forward-looking statements contained in this
Announcement speak only as of the date of this Announcement. The
Company, its directors, the Banks and their respective Affiliates
and any person acting on its or their behalf each expressly
disclaim any obligation or undertaking to update or revise publicly
any forward-looking statements, whether as a result of new
information, future events or otherwise, unless required to do so
by applicable law or regulation, the Listing Rules made by the
Financial Conduct Authority (the "FCA") under the Financial
Services and Markets Act 2000 (as amended) ("FSMA"), the Market
Abuse Regulation (EU) No.596/2014 ("MAR"), the Disclosure Guidance
and Transparency Rules made by the FCA under FSMA, the rules of the
London Stock Exchange plc or the FCA.
This Announcement does not constitute a recommendation regarding
the shares of the Company or any invitation or inducement to engage
in investment activity under section 21 of the Financial Services
and Markets Act 2000. Past performance cannot be relied upon as a
guide to future performance.
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END
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