Unite Group Plc · LSE:UTG
Unite — FY2011 Earnings Presentation
30 slides from Unite's earnings presentation, 2012
Slide 1: Preliminary Results, Year ended 31 December 2011
The UK’s leading developer and manager of student accommodation Preliminary Results Year ended 31 December 2011
Slide 2: Highlights
Highlights Strong NPC growth - Rental and occupancy growth 2011 2010 - New openings Net Portfolio Contribution £11.0m £4.1m Adjusted NAV up 8% to 318pps - Stabilised portfolio values up 3.1% Adjusted NAV per share 318p 295p - £33m development profit in year - After £21m UMS losses and provision
Slide 3: Strategy and market
The heart of student living |JUWUND Strategy and market
Slide 4: Rent and occupancy outlook
Rent and occupancy outlook Demand outlook UCAS Full Year Applicants 2004-2012 - Over 160,000 more University applicants than places - School leaver demand resilient - International demand increasing Supply outlook - Planning regime remains challenging - Capital constraints limiting new supply Ap
Slide 5: Yield outlook
Yield outlook Average yields stable at 6.6% UNITE vs IPD All Property Initial Yield - Flat since late 2009 8.0% 7.5% - Movements in sub-categories 7.0% 6.5% Transaction volumes healthy 6.0% 5.5% - £1.1bn investment and development in 2011 5.0% 4.5% Banks’ attitude important determinant of yiel
Slide 6: Strategy
Strategy Target low double-digit total returns, with modest risk Development Capital growth Income growth London focus London focus Rental growth Mix of product, price Quality portfolio and Operating efficiencies point and location universities New openings 9% yield on cost target
Slide 7: Financial review
The heart of student living |JUWUND Financial review
Slide 8: Financial Highlights
Financial Highlights 2011 2010 Income Statement Net portfolio contribution £11.0m £4.1m Adjusted profit (pre UMS) £5.4m £4.3m Adjusted EPS (pre UMS) 3.4p 2.7p Balance Sheet NAV (adjusted, fully diluted per share) 318p 295p Adjusted net debt £434m £335m Adjusted gearing 84% 71% See-through LTV 54% 54
Slide 9: Adjusted NAV bridge
Adjusted NAV bridge Pence per share 335 5 (13) 17 325 315 14 318 305 295 295 285 275 31-Dec-10 Rental Growth Development Retained profit UMS 31-Dec-11 8
Slide 10: Net Portfolio Contribution
Net Portfolio Contribution Rental growth and new beds driving top line Dec Dec % growth 2011 2010 change £m £m Margin pressure from utility prices Total income 219.5 188.9 16% Lower finance costs reflect lower proportion UNITE share of rental 95.6 89.0 7% of hedging, lower interest rates and u
Slide 11: Income Statement
Income Statement Dec 2011 Dec 2010 £m £m £m £m Net Portfolio Contribution 11.0 4.1 Development pre-contract costs (3.2) (3.2) Development trading profits 1.2 4.0 Restructuring, share option and other costs (3.6) (0.6) Adjusted profit (pre UMS) 5.4 4.3 UMS - 2011 trading (5.5) (4.8) - provision for c
Slide 12: See through balance sheet and income statement
See through balance sheet and income statement Wholly owned USAF / JVs UNITE UNITE (UNITE share) see through see through Dec 11 Dec 10 £m £m £m £m Balance sheet Rental Properties 617 400 1,017 884 Properties under development 189 - 189 138 Total property portfolio 806 400 1,206 1,022 Net debt (434)
Slide 13: Capital Structure
Capital Structure Key debt statistics Dec 11 Dec 10 Good progress with debt financing Net debt £434m £335m - £169m of new balance sheet facilities Adjusted gearing 84% 71% - £82m RBS facility extended to 2015 since See through LTV 54% 54% year end Average see through cost of debt 5.7% 6.8% - £147m
Slide 14: Asset disposals
Asset disposals Proceeds Book value £m £m Completed / exchanged Wholly owned 17.6 17.7 USAF 21.0 21.4 UCC 8.0 7.5 46.6 46.6 Under offer Wholly owned 13.9 14.0 60.5 60.6 Average yield 6.5% 6.5% On track for £100m to £150m sales by December 2012 USAF capacity growing with disposals Ongoing Asset
Slide 15: Co-investment vehicles
Co-investment vehicles USAF: established track record, size, 31 December 2011 diversification USAF UCC OCB £m £m £m - Portfolio valued £1.25bn GAV (£m) 1,273 387 189 - 11.5% total return Borrowing / others (£m) (594) (242) (110) - £62m units traded at small premium to NAV Adjusted NAV (£m) 679 145
Slide 16: Operational review
The heart of student living |OMUND Operational review 15
Slide 17: Operations
Operations Customer service focus - Students and Universities more demanding consumers - Asset and service quality paramount - Deepening University relationships Range of service and efficiency improvements made in 2011 - Upgrades to systems and on-line booking platform - Enhanced maintenance, c
Slide 18: Development Pipeline
Development Pipeline Secured Total Total Capex in Capex NAV Stabilised beds completed development period remaining remaining yield on value cost cost £m £m £m £m £m 2012 London 1,345 172 124 62 24 3 9.3% Glasgow 477 35 27 13 13 1 9.0% 1,822 207 151 75 37 4 9.2% 2014 London 1,514 166 123 15 108 36 9.
Slide 19: UNITE Modular Solutions
UNITE Modular Solutions UNITE demand diminished - No 2013 openings - Secured pipeline not suitable for modular build Non-student scheme complexity an issue - Production rates behind plan in Q4 - £5.5m trading loss in 2011 UMS operation to be closed - £5.6m provision for completing contracts -
Slide 20: Summary and Outlook
Summary and Outlook Good progress against all strategic objectives - Growth in NAV and NPC - Development pipeline progressed - Effective capital management Foundations in place for further growth in NPC and NAV in 2012 - 3-4% rental growth - Cost savings delivered - New openings - Development pi
Slide 21: Appendices
Appendices 20
Slide 22: UK Student Accommodation Market
UK Student Accommodation Market Full time student numbers growth Student numbers have doubled since 1991 - Driven by government policy, demographics, global mobility - >160,000 more applicants than places 2012 - Variations at city/university level UK attractive to global students - >46% of UNITE
Slide 23: Product and Service Offering
Product and Service Offering All-inclusive pricing - All utilities and services - Internet connection and wi-fi (in some properties) - 24/7 operations - Transparency and certainty City centre locations - Close to university campuses - Flat-shares and studios - More affordable product in developm
Slide 24: Phases of Growth
Phases of Growth 2000 - 2006 : First mover advantage - Rapid national expansion - High quality sites secured - Financial and operational stretch 2006 - 2009 : Operational and financial consolidation - Co-investment model established to diversify capital - Operational change programme implemented
Slide 25: See-through Balance Sheet and Income Statement
See-through Balance Sheet and Income Statement Group USAF UCC USV OCB Total £m £m £m £m £m £m Balance sheet Rental Properties 617 208 116 29 47 1,017 Properties under development 189 - - - - 189 Net debt (434) (95) (71) (20) (27) (647) Other assets/(liabilities) (40) (2) (2) (1) 0 (45) Net Assets 33
Slide 26: Our Top 10 Markets
Our Top 10 Markets 2012 2011 City Forecast Completed FT Projected Rank Rank completed Beds Student Market Beds Numbers Share (12/13) (11/12) (10/11) 1 1 London 8,074 6,729 289,925 2.3% 2 2 Sheffield 3,731 3,731 48,107 7.8% 3 3 Liverpool 3,372 3,372 41,795 8.1% 4 4 Leeds 3,138 3,138 51,025 6.1% 5 5 B
Slide 27: The London Student Market
The London Student Market Proportion of International Students HESA 10/11 – All Students London has three important characteristics that distinguish it from the wider UK market - A full time student population (294,000) that is larger than the next five largest student markets combined - A very lo
Slide 28: Debt facilities
Debt facilities On-balance sheet Co-investment vehicles USAF Facility £m Drawn £m Maturity Facility Drawn Maturity Amount HSH / Abbey 106 106 2013 Investment £m £m CMBS 280 280 2014 Kennedy Wilson LP 100 100 2013 Santander 63 50 2015 Nationwide 100 56 2014 HSBC 75 62 2015 RBS 82 78 2015 Lloyds 115 1
Slide 29: Co-investment vehicles – key terms
Co-investment vehicles – key terms USAF UCC OCB JV History: Multi investor fund formed JV with GIC formed March 05 JV with OCB formed August 09 Dec 06 Strategy: UK direct let student London & Edinburgh focus Build and operate 3 London accommodation Build a £350m+ portfolio assets Exclusivi
Slide 30: NNNAV
NNNAV Dec 2011 Dec 2010 £m £m Net assets 388 387 Valuation gains not recognised on properties held at cost 76 37 Fair value of fixed rate debt (5) (6) Deferred tax - - NNNAssets 459 418 NNNAV per share 286pps 261pps 29