TIDMUTG
RNS Number : 4297O
Unite Group PLC (The)
08 October 2021
PRESS RELEASE
8 October 2021
THE UNITE GROUP PLC
('Unite Students', 'Unite', the 'Group', or the ' Company ')
TRADING UPDATE AND Q3 FUND VALUATIONS
Unite Students, the UK's leading owner, manager and developer of
student accommodation, today announces an update on current
trading. We also provide quarterly property valuations for the
Unite UK Student Accommodation Fund ('USAF') and the London Student
Accommodation Joint Venture ('LSAV') as at 30 September 2021 .
Richard Smith, Chief Executive of Unite Students, commented
:
"We have seen record demand for UK universities from UK school
leavers and non-EU students, particularly for the strongest
universities to which we are strategically aligned, although higher
grade attainment and restrictions around international travel as a
result of the pandemic have impacted occupancy in a small number of
cities. There remains a strong outlook for student demand driven by
demographic growth, rising participation rates and increasing
demand from non-EU markets. This underpins our confidence in a
rapid recovery in earnings and total returns, driven by sustainable
rental growth, our substantial development pipeline and further
opportunities to deploy capital."
Current trading
Higher Education sector update
Latest UCAS data shows a total of 508,000 students placed at UK
universities for the 2021/22 academic year, 1.6% below the same
stage in 2020/21. The number of placed students from the UK
increased by 1.4%, driven by a record entry rate for UK 18 year
olds (37.9%). Non-EU student numbers have increased by 5% but this
has been more than offset by a 56% reduction in EU students
impacted by Brexit and Covid-19 travel restrictions.
More students have attained the entry requirements for their
first choice universities than in a normal year, reflecting the 44%
of students awarded A* or A grades in this year's A levels,
compared with 25% in 2019 (Source: Ofqual). This has resulted in
acceptances becoming more concentrated at leading universities,
particularly benefiting higher tariff universities who have seen
acceptances increase by 3% compared to 2020/21. The sharp increase
in grade attainment has seemingly disrupted the normal distribution
of students between universities. This has contributed to an
increase in the number of unplaced applicants to 145,000 (2020/21:
117,000), which together with a higher number of students deferring
places to next year, is expected to support demand for the 2022/23
academic year.
Letting performance
As we enter the final stages of the lettings cycle for the
2021/22 academic year, 94% of bed spaces are now let across our
total portfolio (2020/21: 88%, 2019/20: 98%), slightly below
management's previous expectations for 95-98% occupancy.
A record level of university applications has not translated
into higher student intake as expected with higher grade attainment
distorting the distribution of students among our cities. We are
sold out in the majority of our markets with significant waiting
lists in a number of key cities for students struggling to find
suitable accommodation. However, we have seen a concentration of
voids in cities where we expect universities to have lost market
share of students or which are adjusting to new supply.
Our waiting lists equate to an additional c.1-2% in potential
occupancy, which we would expect to be re-distributed among our
other cities as disruption from higher grading unwinds. The
Government has confirmed that grade boundaries will return to
pre-pandemic levels over the next two years. This year's strong
undergraduate intake in higher-ranked cities will also support
student numbers and rental growth prospects in these markets over
the next three years.
UK direct-let sales have been particularly strong this cycle,
accounting for 21% of available beds (2020/21: 16%) and reflecting
our proactive efforts to target re-bookers and customers who might
otherwise stay in houses of multiple occupancy. International
direct-let sales have increased slightly compared to 2020/21 with
an increase in non-EU demand, partially offset by a greater than
expected reduction in EU sales following removal of home-fee status
and access to tuition fee loans.
International travel restrictions continue to have an effect on
demand from China, where record numbers of new undergraduate
students have not yet translated into bookings. For students
needing to self-isolate on arrival in the UK, we are continuing to
offer them the opportunity to arrive at their accommodation up to
three weeks early at no extra cost.
Occupancy by type and domicile by academic year
Direct-let
------------ -------------------------- ------
Nominations UK China EU Non-EU Total
--------- ------------ ---- ------ --- ------- ------
2019/20 57% 16% 15% 4% 6% 98%
------------ ---- ------ --- ------- ------
2020/21 53% 16% 11% 4% 4% 88%
------------ ---- ------ --- ------- ------
2021/22 51% 21% 13% 3% 6% 94%
--------- ------------ ---- ------ --- ------- ------
Pricing activity remains disciplined in the market with only
limited discounting in specific markets with higher availability.
As a result, we expect to deliver rental growth of 2.3% for the
2021/22 academic year
Financial impact
The reduction in occupancy and rental income for the 2021/22
academic year is expected to result in EPRA EPS at the lower end of
guidance for FY2021 of 27-30 pence (excluding the LSAV performance
fee). The impact of lower rental income in terms two and three of
2021/22 will also reduce rental income for the 2022 financial year
by GBP8-10 million (Unite share) compared to management's previous
expectations, equivalent to around 2 pence of EPRA EPS.
We will seek to mitigate this impact on 2022 EPRA EPS through
ongoing sales activity by targeting international students who may
delay their arrival to the UK until the new year and the
reintroduction of summer business in 2022. In addition, we are
targeting cost savings from operational efficiencies resulting from
lower occupancy. We are fully-hedged for our FY2022 energy costs,
which represent c.5% of rental income, protecting earnings from
rising wholesale prices.
Rent collection and check-in
We have now collected 96% of rent due for the 2020/21 academic
year, excluding the impact of the 10-week rental discount offered
to customers for the second semester. There remains 1% of rent
still to be billed for the 2020/21 academic year.
Check-in of students is progressing well for the new academic
year and early rent collection is in line with expectations.
Quarterly fund valuations
At 30 September 2021, USAF's property portfolio was
independently valued at GBP2,825 million, reflecting a 1.1%
increase on a like-for-like basis during the quarter. The portfolio
comprises 29,627 beds in 76 properties across 20 University towns
and cities in the UK.
LSAV's property portfolio was independently valued at GBP1,764
million, reflecting a 3.7% increase on a like-for-like basis during
the quarter. LSAV's property portfolio comprises 9,716 beds across
14 properties in London and Aston Student Village in
Birmingham.
The valuation increase is driven by increased occupancy for the
2021/22 academic year and rental growth. In addition, the USAF and
LSAV portfolios have seen 2 bps and 8 bps of yield compression
respectively during the quarter. The USAF and LSAV portfolios are
valued at weighted average yields of 5.2% and 4.2%
respectively.
The Company will be hosting a Capital Markets Day on 19
October.
S
For further information, please contact:
Unite Students
Joe Lister / Michael Burt Tel: +44 117 302 7005
Unite press office Tel: +44 117 450 6300
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. We provide homes to 73,000
students across 173 properties in 25 leading University towns and
cities. We currently partner with over 60 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 achieved a five-star British Safety Council rating
in our last audit.
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.unitestudents.com
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