UNITE Group plc · LSE:UTG
UNITE — H1 2010 Earnings Presentation
31 slides from UNITE's earnings presentation, Aug 25, 2010
Slide 1: UK's leading developer and manager of student accommodation: Interim Results
The UK UK’ss leading developer and manager of student accommodation Interim Results Six months ended 30 June 2010
Slide 2: Highlights
Highlights Adjusted NAV up 8% to 286pps 30 30 31 - Stabilised portfolio values up 3.8% June June Dec - £9.7m of development profit recognised 2010 2009 2009 Net N tPPortfolio tf li CContribution t ib ti up 11% tto £4 £4.2m 2 Adjusted NAV(pps) 286 276 265 - Reservations 87% at 25 Aug (87% in 2009
Slide 3: Strategy and market
The heart of student living Strategy and market
Slide 4: Market view
Market view Funding changes ahead mean the market will need to evolve - Browne Review (expected October 2010) UK Full‐Time Students Demand / supply imbalance remains acute 1,800,000 - 10,000 undergraduate intake increase nt Numbers 1,600,000 leading to c.70,000 increase in student 1,400,000 popu
Slide 5: Strategy
Strategy UNITE’s stated strateg strategy clearl clearly addresses a changing market Two clear financial objectives - Grow G value l off student t d t accommodation d ti investments i t t over time ti - Increase profits from management of portfolio Good progress achieved against each strategic
Slide 6: Financial review
The heart of student living Financial review
Slide 7: Financial highlights
Financial highlights 6 months to 6 months to 12 months to June 2010 June 2009 Dec 2009 Earnings Total portfolio income £96.0m £85.3m £164.3m Net portfolio contribution £4.2m £3.8m £0.6m Adjusted loss (£4.1m) (£13.3m) (£28.7m) Profit / (loss) before tax £9 8m £9.8m (£29 7m) (£29.7m) (£34 9m) (£34.9m)
Slide 8: NAV bridge
NAV bridge Pence per share 300 2 (2) 290 5 7 280 9 270 286 260 265 250 7
Slide 9: Constituents of NAV
Constituents of NAV Property Other assets / Adjusted % of net assets liabilities NAV assets £m £m £m Group assets Stabilised 443 (263) 180 39% Stabilising 193 (93) 100 21% Development 53 (46) 7 2% Total wholly owned assets 689 (402) 287 62% UNITE share of co-investment vehicles USAF 171 (65) 106 23%
Slide 10: Net Portfolio Contribution
Net Portfolio Contribution Jun 10 Jun 09 % change Rental growth and additional beds driving £m £m t line top li growth th Total income 96.0 85.3 13% Margin improvement and reduction in UNITE share of rental income 46.2 41.9 10% overhead UNITE’s share 48% 49% Cost pressure from utilities and ti
Slide 11: Income Statement
Income Statement Jun 10 Jun 09 £ £m £ £m Net Portfolio Contribution 4.2 3.8 Development segment (8.7) (16.3) Other income 04 0.4 01 0.1 Restructuring costs - (0.9) Adjusted loss (4.1) (13.3) Valuation movement / loss on disposal 27 9 27.9 (25 4) (25.4) Mark-to-market movement (11.9) 9.7 Deferred tax
Slide 12: Portfolio valuation yields
Portfolio valuation yields Relative yield performance Yield compression of 10bps across 8 5% 8.5% 8.0% 7.5% portfolio 7.0% 6.5% - Portfolio average of 6 6.6% 6% 6.0% 5.5% 5.0% Premium of c.50 basis points for assets 4.5% 4.0% 3.5% with secured income 3 0% 3.0% YE 04 HY 05 YE 05 HY 06 YE 06 HY 07
Slide 13: Capital structure
Capital structure Key debt statistics Financing position remains robust Jun 10 Jun 09 Dec 09 - Net debt and gearing at sustainable Adjusted net debt £409m £584m £390m levels Adjusted gearing 89% 161% 92% Debt markets are improving, but lenders Adjusted LTV 49%¹ 60% 59% Average cost of debt remai
Slide 14: Operational review
Operational review The heart of student living 13
Slide 15: Development pipeline
Development pipeline Beds Completed Total Costs to NAV to Stabilised yyield value development complete recognise on cost cost £m £m £m £m 2010 Deliveries – UNITE share 1,119 48 39 3 1 8.3% 2011 Deliveries 1,158 92 79 53 7 8.25% - 8.5% 2012-13 Deliveries 2,300 285 218 218 67 9.0% - 9.5% S Secured pip
Slide 16: Funding the development pipeline
Funding the development pipeline Realised development profits Proven track record with USAF 2006 2007 2008 2009 2010 ((forecast)) £m £m £m £m £m - strong cash and profit Asset sales 519 238 301 160 145 generation from asset sales Development cost (387) (157) (234) (149) (135) Good balance sheet
Slide 17: Proactive asset management
Proactive asset management Property management platform remains a key area of competitive advantage - Online presence supported by contact centre - Blueprint programme has created scalable operating platform Value-add refurbishment opportunities emerging across estate - £5m capex delivering £4m
Slide 18: USAF and acquisition opportunities
USAF and acquisition opportunities Approximately £145m asset sales to USAF USAF UNITE USAF expected H2 equity sales to portfolio raised USAF value - £10m development profit realised £m £m £m - £40m £40 cash h released l d 2006 297 515 515 Exchanged contracts on £25m open market purchase 2007 73
Slide 19: University partnership opportunities
University partnership opportunities Continuing to pursue competitive tender processes - Long lead times but potentially significant opportunity Shape of UNITE proposition emerging g g - Co-investing asset manager alongside third party investor partners p y Manager, - UNITE to act as Property g
Slide 20: Summary and outlook
Summary and outlook Solid progress against all strategic objectives - Growth in NAV and profit Positioning business for ongoing tough environment over next 11-22 years - Managing balance sheet prudently - Maintaining stretching return requirements for new investment Changing market environment
Slide 21: Pioneers of Student Living
PIONEERS OF STUDENT LIVING
Slide 22: UNITE parents vs UK population
UNITE parents vs UK population 35.2 33.6 29.7 31.2 23.7 23.2 UNITE – excl London 18.0 19.3 15.7 15.2 13.9 UNITE – London 12.0 10.6 9.4 9.3 UK average Hard pressed Moderate means Comfortably off Urban prosperity Wealthy achievers Hard Pressed Moderate Means Comfortably Off Urban Prosperity Wealthy Ac
Slide 23: The London student market
The London student market London has three important characteristics that Proportion of International distinguish it from the wider UK market HESA – All Students - A full time student population (266,000) that is larger than the next five largest student markets combined - An A incredibly i dibl l
Slide 24: Differentiating the student experience
Differentiating the student experience UNITE’s accommodation and offer - Prime student locations - Online booking and payment - Multi-lingual telephone booking line - Flat shares for up to 8 people - Single & double occupancy studios - Group booking facility - Dedicated management teams - No hidden
Slide 25: Our top markets
Our top 10 markets 2010 2009 City Completed Completed FT Projected Rank Rank Beds Beds Student Market (10/11) (09/10) Numbers Share (08/09) 1 1 London 6,741 5,327 266,346 2.5% 2 2 Sh ffi ld Sheffield 3 734 3,734 3 734 3,734 44 146 44,146 8 5% 8.5% 3 3 Liverpool 3,372 3,372 39,395 8.6% 4 4 Leeds 3,13
Slide 26: 2010 openings
2010 openings Great Suffolk Street, SE1, London Woodland Court, N7, London Wedgwood Court, N7, London 25
Slide 27: Co-investment vehicles – key terms
Co-investment Co investment vehicles – key terms USAF UCC OCB JV History: Multi investor fund formed Dec JV with GIC formed March 05 JV with OCB formed August 09 06 Strategy: UK direct let student London & Edinburgh focus Build and operate 3 London accommodation Build a £350m+ portfolio asse
Slide 28: See through balance sheet and income statement
See through balance sheet and income statement Total Adjusted Group USAF UCC USV Investment Devt - OCB Devt - Group Group Total £'m £'m £'m £'m £'m £'m £'m £'m £'m Property 636 171 113 31 951 44 53 1,048 Net debt (362) (63) (74) (20) (519) (21) (47) (587) Other assts 6 (2) (2) (2) 0 (2) 1 (1) Net As
Slide 29: Debt facilities
Debt facilities UNITE Group Co-investment vehicles £m £m USAF BNP Paribas 180 - CMBS 280 HSH Nordbank 155* - Lloyds 115 - Abbey/ HSH Nordbank 106 Bank of Ireland 100 501 UCC Nationwide 100 - HSH Nordbank 300** RBS 82 USV Deutsche Postbank 50 - Lehmans 35 - Natixis 12 Others 76 47 743 OCB - HSH Nordb
Slide 30: NNNAV
NNNAV June 2010 June 2009¹ Dec 2009 £m £m £m Net assets 372 373 366 Valuation gains not recognised on properties 30 24 18 held at cost Fair value of fixed rate debt (7) (5) (6) Deferred tax - - - NNNAssets 395 392 378 NNNAV per share 246p 246p 237p ¹ Restated for the impact of the Placing and Open O
Slide 31: Covenant headroom
Covenant headroom Covenant headroom Covenant Weighted Weighted actual covenant 2009 Jun 10 Jun 09 Dec 10 LTV¹ 74% 49% 60% 59% ICR 1.08 1.88 1.49 1.63 MNW² £250m £460m £312m £423 ¹ Assumes available cash is used to pay down debt, otherwise 64% ² MNW bbased d on hi highest h t MNW covenantt Improvin