CREATING A HOME FOR SUCCESS FOR STUDENTS
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THE UNITE GROUP PLC | Annual Report and Financial Statements 2021 CREATING A HOME FOR SUCCESS FOR STUDENTS A safe and welcoming home enables students to engage, learn and thrive. That’s the philosophy that underpins the core of our purpose, which is to create a Home for Success for our students. It’s fundamental to everything we do.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 01 FINANCIAL HIGHLIGHTS 37.1p 29.0p 14.4% 34.1p 13.2% 30.3p 11.7% 27.6p 22.7p 22.1p 10.2% 24.0p 12.75p 10.25p 2017 2018 2019 -3.4% 2021 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 2020 ADJUSTED EARNINGS PER SHARE1, 2 (P) DIVIDEND PER SHARE (P) TOTAL ACCOUNTING RETURN1 (%) 27.6p 22.1p 10.2% 95p 882p 37% 91p 86p 34% 847p 31% 29% 29% 818p 790p 2017 2018 -32p -32p 2021 720p 2019 2020 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 IFRS BASIC EARNINGS PER SHARE (P) EPRA NTA PER SHARE1, 3 (P) LOAN-TO-VALUE RATIO1 (%) 86p 882p 29% OPERATIONAL HIGHLIGHTS • Recovery in 2021/22 and strong student • Balance sheet positioned for growth demand for 2022/23 • Committed to being a responsible • Record development pipeline, funded and resilient business through active capital recycling • Best-in-class platform supporting attractive financial returns CONTENTS STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 01 Highlights 90 Chair’s introduction to 174 Independent auditor’s report 02 Our Annual Report at a glance Governance 184 Consolidated income statement 04 Being purpose-led 92 Board of Directors 184 Consolidated statement of 06 Why invest in Unite 96 Board statements comprehensive income 08 Our business model 99 Board leadership and purpose 185 Consolidated balance sheet 08 Who we are 106 Division of responsibilities 186 Company balance sheet 10 How we operate 109 Board activities 187 Consolidated statement of 12 The value we create 117 Nomination Committee changes in shareholders’ equity 15 Section 172 statement 120 Audit Committee 4 188 Company statement of changes 126 Sustainability Committee in shareholders’ equity 18 Chair’s statement 130 Health & Safety Committee 189 Statements of cash flows 20 Chief Executive’s review 134 Remuneration Committee 190 Notes to the financial 27 Market overview statements 30 Our strategy 136 Directors’ Remuneration policy 32 Key performance indicators 153 Annual Report on Remuneration OTHER INFORMATION 168 Directors’ Report View our 2021 Annual Report & 34 Sustainability report 249 Financial record Accounts online at: unite-group.co.uk/ 50 TCFD 171 Statement of Directors’ 250 Glossary investors/reports-and-presentations 56 Operations review Responsibilities 253 Company information 62 Property review 70 Financial review 74 Risk management Page references are shown throughout 76 Principal risks and uncertainties for links to important content 1. The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). The Group uses alternative performance measures (APMs), which are not defined or specified under IFRS. These APMs, which are not considered to be a substitute for IFRS measures, provide additional helpful information and are based on the European Public Real Estate Association (EPRA) best practice recommendations. The metrics are also used internally to measure and manage the business and to align to the performance related conditions for Directors’ remuneration. See glossary for definitions and note 8 for calculations and reconciliations. 2. Adjustment made to EPRA EPS to remove the impact of the LSAV performance fee. Further details are provided in notes 2 and 8. 3. 2017 & 2018 based on EPRA NAV as previously reported. 4. With effect from 1 January 2022, the Audit Committee will be renamed the Audit & Risk Committee. See the Audit Committee report for more information.
02 THE UNITE GROUP PLC | Annual Report and Financial Statements 2021 OUR ANNUAL REPORT AT A GLANCE OUR PURPOSE Read more 04 Our purpose, Home for Success, provides the right environment for students living with us to engage, learn and thrive. WHY INVEST IN UNITE Read more 06 We are the UK’s largest owner, manager and developer of purpose- built student accommodation, serving the UK’s world-leading BUSINESS Higher Education sector. MODEL Read more 08 We provide high-quality student accommodation that we own, operate and manage. We continually enhance our portfolio and work alongside universities to deliver their long-term accommodation strategies.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 03 CHIEF EXECUTIVE’S REVIEW We have seen positive recovery in our performance in 2021 and 20 are positioned for growth. The outlook for the business and UK Higher Education sector is strong, driven by rising participation rates, demographic Read more growth and increasing numbers of international students. We have a record development pipeline and balance sheet capacity to pursue new growth opportunities. SUSTAINABILITY REPORT We are a responsible and sustainable business. Our Sustainability Strategy helps us prioritise areas of focus and our Read more 34 stakeholder materiality review, undertaken in 2020, continues to inform our actions. CORPORATE GOVERNANCE Read more 89 The Board is focused on delivering a long-term sustainable and resilient strategy for the Group. The Board’s composition brings a range of broad skills, balance and experience to our business.
04 THE UNITE GROUP PLC | Annual Report and Financial Statements 2021 BEING PURPOSE-LED HOME FOR SUCCESS Home for Success provides the right home environment for the students who come to live with us each year from across the globe, to enable them to achieve whatever goals and ambitions they aspire to. Home for Success is also about being the right partner for universities to work with as well as providing our people with the opportunity to grow, develop and succeed. Our corporate strategy is underpinned by our strategic objectives, sustainability strategy, brand promises and values. Strategic Objectives Delivering for our Attractive A responsible customers and returns for and resilient universities shareholders business Read more about our three strategic objectives on pages 30–31 Sustainability Strategy Net zero Resource Health & Opportunities Raising carbon efficient wellbeing for all standards Read more about our Sustainability Strategy on pages 34–49 Brand Promises Provide a space to Provide a place Be there when grow and thrive to belong you need us Values Keeping Creating room Doing what’s Raising the us safe for everyone right bar together
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 05 OUR PURPOSE IN ACTION DURING COVID-19 Student University Employee Wellbeing Partnerships Inclusion The Covid pandemic amplified We work closely with our We are committed to providing the need to support students, University partners. During the opportunities for all our team particularly those who were far pandemic this relationship was members, whatever their away from home or were unable strengthened by the actions we background, gender or ethnicity. to travel home due to distance or took to support students. With the Covid pandemic creating personal circumstances. extra pressures for our teams, we In addition, we regularly provide focused on keeping employees We have invested in our city research and insight to the safe through the provision of PPE, teams ensuring they are there higher education sector about providing regular operational for students when needed. student trends and sentiment Covid-19 updates and providing Our student support teams are which informs their thinking flexibility for those employees available in all cities and, working and planning. Our Class of 2021 who needed to work from home. together with our Resident research highlighted student Throughout the pandemic we Ambassadors, provide a valuable concerns about the 2021/22 have engaged with our teams support network for all students academic year. Concerns primarily through a range of tools and living with us. related to being ready, leaving channels, surveyed how they are the safety of sixth form and their feeling and provided forums by • Over £100m in financial mental health whilst being away which to hear their feedback. support to students during from home. In response to this, Covid-19 pandemic we have enhanced our focus on • Weekly Covid updates • All properties remained creating supportive communities to teams throughout open and operational in our properties with people on the Covid pandemic during Covid-19 providing hand to support. • Recruitment of EDI & support for students Wellbeing lead • Over 60 partnerships • Six dedicated student with Higher Education • Launch of new employee support teams across institutions engagement forum, the UK Culture Matters • Over half of beds sold under • Over 190 Resident nomination agreements • Employee engagement Ambassadors recruited score of 75 (2020: 74) • Four student and in year parent research reports published during 2020/21 academic year
06 THE UNITE GROUP PLC | Annual Report and Financial Statements 2021 WHY INVEST IN UNITE SUSTAINABLE GROWTH Sector leader in UK student accommodation with strong returns STRUCTURALLY HIGH-QUALITY BEST-IN-CLASS GROWING PORTFOLIO OPERATING SECTOR PLATFORM Demographic growth Aligned to the strongest Over 60 University partnerships The UK’s 18-year-old population is set universities We are the partner of choice for a to grow by 22% by 2030, supporting Our portfolio is increasingly large number of the UK’s leading demand for an additional c.200k focused on the UK’s leading universities, reflecting our track undergraduate places at current universities, where we see the record, focus on student welfare and participation rates. strongest prospects for student our high-quality, affordable products number growth, through our new and services. Rising HE participation investment activity and disciplined 2021/22 saw a record share of capital recycling. Passionate frontline teams 18-year-olds accepting a place at Front-line service excellence university, reflecting young people’s Investing to enhance our is monitored throughout the recognition of the life experience that operational estate year through the Net Promoter university provides. Multi-year asset management Score which drives greater opportunity to create value customer advocacy. Growing international demand by enhancing rents and The UK Government is targeting reducing operational costs Sector-leading operating margins further growth in International through investments in our We drive cost efficiencies through student numbers with a particular customer proposition. our scale using our PRISM focus on attracting more students technology platform. Management from Africa, the Middle East and fees from joint ventures and Asian countries outside of China. funds also cover c.67% of our annual overheads. 18-YEAR-OLD PARTICIPATION % OF THE RENTAL PORTFOLIO BY SHARE OF BEDS LET UNDER RATE IN 2021/22 VALUE IN RUSSELL GROUP CITIES NOMINATION AGREEMENTS FOR 2021/22 38.3% 90% 51% See pages 27–29 for more information See pages 62–69 for more information See pages 56–61 for more information
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 07 HIGH VISIBILITY SUBSTANTIAL LEADERSHIP IN OVER RETURNS GROWTH SUSTAINABILITY OPPORTUNITIES Targeting attractive total Market share gains Net zero carbon returns of 8.5–10% p.a. from HMO sector Becoming a net zero carbon for both Achieved through recurring Almost one million students live our operations and developments earnings, rental growth and in houses of multiple occupancy, by 2030. development profits. providing a significant opportunity. Unite Foundation Development of 1,500–2,500 Providing support for estranged Sustainable rental growth beds per annum and care experienced students of 3.0–3.5% p.a. Investment focused on strongest throughout the course of Underlying rental growth driven by 8–10 markets in the UK, with growing their studies. student demand and contracted opportunities in London and major increases through multi-year regional cities. Leapskills university nomination agreements, supported by asset management Helping young people prepare New University partnerships for independent living. initiatives. Opportunities for new developments on and off-campus as well as Improved index rating 6,000-bed development pipeline partnerships for the transfer of Maintained a GRESB 4-star rating Secured pipeline of £967 million, their existing accommodation stock and improved score to 85. which is expected to add 78p to NTA to unlock operating efficiencies and 10p to EPRA EPS on delivery. and help to fund investment in new accommodation. Emerging young professionals market Significant potential from expanding our platform to cater for the growing number of professional renters living in major cities. TOTAL ACCOUNTING RETURNS OVER FULL-TIME STUDENTS LIVING TARGET REDUCTION IN THE PAST 10 YEARS IN UNIVERSITY-OWNED OPERATIONAL ENERGY ACCOMMODATION OR HMOS CONSUMPTION BY 2030 13.5% pa 1.4 million 28% See pages 70–73 for more information See pages 20–26 for more information See pages 34–55 for more information
08 THE UNITE GROUP PLC | Annual Report and Financial Statements 2021 BUSINESS MODEL WHO WE ARE We are the UK’s largest owner, manager and developer of purpose-built student accommodation We provide homes to 74,000 students across 172 properties in 25 leading university cities and towns. We currently partner with over 60 universities across the UK. Our accommodation is high quality and affordable as well as safe and secure. Aberdeen We are committed to raising standards in the student accommodation sector for our customers, investors and employees. Edinburgh Glasgow 2021 COMPLETED CITY 7 Newcastle rank BEDS (21/22) Durham 1 London 11,654 2 Liverpool 6,365 5 Leeds 3 Birmingham 5,919 Manchester Liverpool 4 Manchester 5,620 4 6 Sheffield 2 5 Leeds 5,610 Nottingham Loughborough 6 Sheffield 4,498 Birmingham 3 10 Leicester 7 Newcastle 3,763 Coventry Bedford 8 Bristol 3,753 Oxford Cardiff London 9 Cardiff 3,481 Bristol Reading 9 1 8 10 Leicester 3,251 Bath Medway Top 10 53,914 Southampton Bournemouth Portsmouth Total 73,907 RANKED PROPERTIES BEDS UNIVERSITY PARTNERS No. 1 172 74,000 > 60 The largest provider of Work alongside University Operate in 25 cities and In properties across the UK student accommodation partners to deliver their towns across England, in the UK accommodation needs Scotland and Wales
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 09 OUR FOCUS People, Earnings, Development culture and occupancy and University relationships and demand partnerships We have 1,900 employees who are We have high visibility over The quality, location and scale of committed to the delivery of our our earnings, provide sector our portfolio is a key component purpose, Home for Success. Our leading margins and operate in our business model and long- values underpin how they deliver in a structurally growing sector term strategy. day-in, day-out and we encourage with demographic demand set We have a development pipeline open and honest conversations to grow by 22% by 2030. and balance sheet capacity to with our employees about how Occupancy is driven by a mix provide new growth opportunities we can improve our offering to of nomination agreements through University partnerships and students as well as ways to make with University partners and targeted acquisitions Unite Students a great place to direct-let sales. work. We are a Real Living Wage Our strategy is focused on optimising employer and provide fair pay to Nomination agreements are our portfolio through capital our employees. Our commitment contracts between universities and rotation by growing alignment to the to training and developing provides private accommodation providers strongest universities and focusing opportunities for progression for the provision of beds for new investment in London and amongst our teams. students. These can range from prime regional cities. one year to multi-year contracts up Our actions are driven by insights We offer a flexible, collaborative to 30 years providing a guaranteed from our employees and students and mutually beneficial partnership number of beds over a fixed period. and this enables us to work approach to meet the needs of Over half of these agreements are collaboratively with our University universities and students delivering multi-year deals benefiting from partners across the range of topics accommodation which meets annual fixed or inflation-linked including sustainability, inclusion, university and student needs. rental uplifts. wellbeing and safety which form part of student life at university. Our aim is to provide universities In addition, we market directly with a level of control over their to students through our website capital investment, ongoing costs and agents enabling us to capture and student experience. market share from the houses of multiple occupancy (HMO) We aim to be a strategic partner to market, an area where we have the strongest universities to deliver seen significant progress in the last solutions which work for them and two years. support their growth ambitions. NUMBER OF EMPLOYEES AVERAGE LENGTH OF DEVELOPMENT PIPELINE 1,900 NOMINATION AGREEMENTS ALIGNED TO UNIVERSITY 7 years PARTNERSHIPS 83%
10 THE UNITE GROUP PLC | Annual Report and Financial Statements 2021 BUSINESS MODEL continued HOW WE OPERATE UNRIVALLED BEST-IN-CLASS INSIGHT OPERATING PLATFORM We have a 30-year track record in the UK student We operate and manage 74,000 beds across 25 accommodation sector, having pioneered its early cities and towns in the UK. Our scale and PRISM development and since created the largest portfolio operating platform allow us to deliver the best all- in the sector. This knowledge is complemented by round customer experience for students, alongside a range of data sources and forecasts, which drive sector-leading operating margins. the evolution of our operating model and capital Our teams are central to delivering our purpose of allocation decisions. providing a ‘Home for Success’ for students. Staff The customer is at the heart of what we do and training is focused on student welfare with welfare we invest significant time into understanding the leads in every city and peer support provided by wants and needs of our customers through regular Resident Ambassadors. research and insight. In addition, we actively engage We are leaders in sustainability, health, safety and with university leaders across the UK to ensure we student welfare in the student accommodation sector. can best support their growth ambitions. Segmented Passionate customer offer front-line teams We see opportunities to tailor our As well as overseeing the day-to-day customer offer to better address the needs running of our properties, our front-line of different customers as they progress teams are committed to support students through university and beyond. PBSA during their stay. This includes being has typically been a first-year orientated available when questions arise, supporting product and, as a result, the majority their overall welfare and in the case of of non-first-year and UK postgraduate international students providing cultural students currently opt to live in the orientation support. Our teams are a much- HMO sector. valued connection between parents and students which is key when students first This presents a significant opportunity move away from home. to capture market share through more tailored service and property propositions targeted at students as they participate in their higher education journey and seek greater independence over the years.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 11 PORTFOLIO UNIVERSITY PARTNER ENHANCEMENT OF CHOICE We seek to continuously enhance our portfolio We partner with universities to deliver their long- through acquisition, asset management and term accommodation strategies. We are proud disposals to ensure we have the best buildings, of our track record of aligning to the strongest aligned to the strongest universities. universities. Our track record and commitment to students has helped us increase the share of This is complemented by our significant and beds leased to universities over the long-term, growing development pipeline focused on high- increasing visibility over income. quality, well-located new buildings in the strongest university cities in the UK. Opportunities are Our Higher Education Engagement team sourced and delivered by our experienced in-house work closely with universities to identify new development team. Development activity is funded opportunities for University partnerships. through capital recycling, debt facilities and equity issuance for larger opportunities. High-quality Visibility pipeline of income Our secured development pipeline totals We lease over half of our beds to 6,000 beds with a total development cost of universities through nomination £967 million to be delivered in the period agreements which have an average to 2026. 100% of the pipeline is aligned to length of seven years. Russell Group university cities, where we Over half of these agreements are multi- see the strongest student demand. year deals benefiting from annual fixed We have significantly increased our London or inflation-linked rental uplifts. These pipeline since our 2020 equity issue and multi-year agreements are expected to development in London now accounts for see rental increases of around 4% for 78% by value of our secured pipeline. the 2022/23 academic year.
12 THE UNITE GROUP PLC | Annual Report and Financial Statements 2021 BUSINESS MODEL continued THE VALUE WE CREATE STUDENTS OUR PEOPLE UNIVERSITIES Key issues Key issues Key issues • Value-for-money • Training and development • Student welfare • Customer service • Equality, diversity and inclusion • Operational performance • Welfare support • Health, safety and wellbeing • Health and safety How we engaged How we engaged How we engaged Our front-line property teams engage We provide a range of channels for Through our Higher Education with students on a day-to-day basis, our teams to feedback. We hold Engagement team, we meet supplemented by peer-to-peer regular ‘Unite Live’ sessions with regularly with leaders across support provided by our Resident our CEO and key senior leaders to the UK university sector. Ambassadors. We also engage with provide business updates with the We engage at various levels in students using our MyUnite app and opportunity to ask questions. institutions for discussions ranging social media channels. We conduct regular employee from strategic planning to day-to-day This is complemented by our engagement surveys with findings operational requirements. customer research programme shared with our teams to help jointly In addition, we engage actively in which includes surveys on specific develop action plans the wider higher education sector, issues, including student views on We also launched our new employee presenting at conferences and climate change. engagement forum, Culture Matters, contributing to higher education Value creation in 2021 during the year attended by Non- research. • Provided 50% rental discounts for Executive Director, Ilaria del Beato. Value creation in 2021 10 weeks between Jan–Mar 2021 Value creation in 2021 • Provided 37,359 beds to • Offered complimentary four-week • Flexible working policy universities for the 2021/22 tenancy extensions for eligible implemented academic year students in summer 2021 • Safety enhancements for property • Progressed University partnership • Increased peer-to-peer support teams including solo protect and developments with University of for students through our Resident bodycam cameras Bristol and King’s College London Ambassador programme • EDI training programme provided • Secured two new development • Helped to provide accommodation to senior leaders sites in London, providing new affordable housing under scholarships to 166 students • Investment in the Learning and nomination agreements through the Unite Foundation Development team and resources Priorities for 2022 to support our teams • Enhanced student welfare We continue to evolve our product Priorities for 2022 services, including support for offering to reflect the range of students shielding or self-isolating Our focus is to provide our during Covid-19 customers living with us, as has employees with a great place to work. been shown through our customer Our EDI strategy will be launched Priorities for 2022 segmentation work undertaken this year and a new training academy We continue to explore opportunities during 2021. providing support will be operational for new University partnerships, We continue to engage with students during 2022. where we can work with universities on a range of issues which impact to unlock operational efficiencies on their living habits and, during alongside new accommodation. 2022, will be developing proposals to We are also set to deliver 1,351 address student concerns relating to beds in new accommodation for climate change which we know from the 2022/23 academic year. our student survey in 2021, is an important issue for them.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 13 See our s172 statement on page 15 COMMUNITIES SUPPLIERS INVESTORS Key issues Key issues Key issues • Trust and transparency • Risk management • Financial performance • Land use • Human rights • Strategic direction • Local investment and job creation • Responsible supply chain • Sustainability and risk management How we engaged How we engaged How we engaged Our operational teams are active With support from an independent We engaged regularly with investors in their communities through procurement consultancy, we around our financial results as well as our Company-wide volunteering undertook a thorough review of our through ad hoc events. In addition, programme. supplier relationships during 2021. we hosted a Capital Markets Day in We are relaunching our Positive We continued to ensure our buildings Manchester to update analysts and Impact programme in 2022, which meet existing and emerging safety investors on our Group strategy. includes awards for projects regulations, including planned work Value creation in 2021 undertaken by employees aimed for the remediation of cladding • Delivered increased occupancy at delivering measurable benefits where required. of 94% and 2.3% rental growth in their local communities. Value creation in 2021 • 15% growth in adjusted EPS We also engage actively with local • Spent £130 million with suppliers stakeholders for our development across development activity, • Total accounting return of 10.2% projects to ensure the design cladding remediation and • Receipt of £53 million LSAV of our buildings, public spaces refurbishments performance fee and community facilities meets their needs. • Entered into build contracts for • Dividend payout ratio increased our development at Derby Road, to 80% Value creation in 2021 Nottingham • Employment for 1,500 people in • Added c.2,000 new beds to the local communities • Supported new renewable secured development pipeline power generation through our Priorities for 2022 • Committed to build c.2,000 beds first corporate PPA for a Scottish of new student accommodation wind farm We are focused on a return to in our communities full occupancy and 3.0–3.5% p.a. Priorities for 2022 rental growth from 2022/23, as • Invested £3 million in initiatives to Having conducted a review of our well as delivery of our secured reduce our environmental impact strategic suppliers during 2021, development pipeline. • 296 hours of employee we will continue to formalise our Investors are also keen to volunteering in the year approach with our next tier of understand our long-term suppliers and introduce a new approach to sustainability, Priorities for 2022 Code of Conduct. and in particular our strategy In 2022, we are developing a to address climate-related risks. long-term community engagement strategy, which ensures greater ongoing engagement with local stakeholders from the development stage through to operations. This will focus on promoting healthy and economically viable communities, while increasing transparency over our community impact.
14 THE UNITE GROUP PLC | Annual Report and Financial Statements 2021 CREATING VALUE PROVIDING OPPORTUNITIES FOR ALL Government Kickstart Scheme The Kickstart Scheme is open to people aged 16–24 that are currently claiming Universal Credit and are at risk of long-term unemployment. In 2021, amongst a challenging recruitment period with a high number of vacancies in front line roles, we took part in the scheme. Designed to help boost youth employment following the Covid-19 pandemic, these roles were required as additional headcount, as opposed to replacing existing roles. We hired 83 individuals between the ages of 18–24 who had been on Universal Credit, offering them six month job placements and training to develop key employment skills, paid at the National Living Wage. We remain committed to the Kickstart Scheme moving forward. For more about this project, go online to: unite-group.co.uk/creatingvalue
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 15 SECTION 172 Statement by the Directors in accordance with Section 172(1) of the Companies Act 2006 Meeting the needs and expectations Through measurement against In 2021, we held a Capital Markets Day of our stakeholders is fundamental long-term objectives, the Board in Manchester where we shared our to delivery of our purpose, Home monitors how management is acting strategy and approach to longer term for Success. Acting in the long-term in accordance with the Board’s agreed sustainability, alongside tours of our interests of the business and all our strategy and the long-term interests of operations in the city with our local stakeholders, including students, our our key stakeholders. teams. Reflecting requests from investors people, universities, the communities for greater transparency around the we operate in, our suppliers and our Our investors costs of environmental initiatives, the investors, is central to the Board’s presentation provided new disclosure The Board recognises that acting fairly decision-making process and shapes around planned investments and EPC in the interests of all shareholders the Group’s strategy. Our Board also ratings across the portfolio. increases investor confidence, reduces considers the impact of the Company’s our cost of capital and ensures good operations on the environment and the Through engagement with investors governance. This also supports the risks posed by climate change. and conscious of our values, in ability of the business to invest and particular ‘Doing what’s right’, the grow through access to capital when it is In all decision making, the potential Board oversaw the renewal of the required. We provide all investors with impact on our stakeholders is taken Group’s revolving credit facility which equal access to information through into account, together with the likely was converted into a sustainable loan our public reporting for financial results consequences of these decisions in the agreement with KPIs linked to our and trading statements, as well as long term and also the desirability of environmental and social initiatives. additional disclosures in areas such as the Company maintaining a reputation sustainability through our corporate for high standards of business conduct The interests of our employees website. In addition, we engage (see principal decision making as regularly with investors at conferences As a service business, providing homes further detailed on pages 110–114 and and ad hoc meetings, which address for 74,000 young people, often their stakeholder engagement on pages investor groups from a range of markets first time living away from home, the 12–13). These considerations are central and of differing sizes. Board recognises the importance of our to delivering our Home for Success employees and the role they play in our purpose, which include, for example, In 2021, the Remuneration Committee business. Engaging with our people has when we offered rental discounts conducted a consultation with the been especially important through the to students (as further detailed on Company’s twenty largest shareholders pandemic. During 2021, we established page 21) and the development of our regarding the renewal of the our new employee engagement forum, Net Zero Carbon Pathway (as further Remuneration Policy, which will be Culture Matters, providing a quarterly detailed on page 26). presented to shareholders for approval forum where employee feedback and at the 2022 AGM. The outcome of engagement can be tabled formally. Our The Board maintains oversight of the shareholder feedback confirmed Non-Executive Director for Workforce Company’s performance, and reserves that the current Remuneration Engagement, Ilaria del Beato, attends the specific matters for approval, including Policy in respect of salaries, pension Culture Matters meetings and provides significant new strategic initiatives contributions and performance-linked regular updates to the Board, ensuring and major decisions relating to capital short and long-term incentives remains consideration is given to employee raising and allocation. appropriate and fit-for-purpose, with needs and concerns. The Board also To help the Board understand our suggested minor refinements to include understands employees’ views through wider stakeholder relationships and a simplified annual bonus deferral our regular employee surveys as well as inform the Board’s decision-making, approach. We proposed changing the ‘Unite Live’ sessions with our CEO and the Board receives regular updates financial metrics of the annual bonus senior leaders enabling employees to from the Executive team, as well as the from 70% to 60% allowing for an ask questions directly of the CEO and wider senior leadership team including increase in non-financial ESG metrics leadership team. Our commitment to the Group People Director, the Group from 30% to 40% however following employee engagement can be seen by Investment & Sustainability Director, shareholder feedback, the current our employee engagement score of 75 the Group Energy & Environmental 70/30 split of financial and non-financial (2020: 74). Manager, the Higher Education metrics will remain. Further information Director, Head of Fund Management on the Remuneration Policy can be and the Group Legal Director and found in the Remuneration Committee Company Secretary. Chair’s Introduction to the Director Remuneration Policy on page 136. Further information on employee engagement can be found on pages 99–102
16 THE UNITE GROUP PLC | Annual Report and Financial Statements 2021 SECTION 172 continued The need to foster business Our Higher Education Engagement public spaces and community facilities relationships with our customers, Team meets regularly with university also meets their needs. Our high- University partners and suppliers leaders and teams at various levels quality properties provide additional Customers enabling us to discuss this strategic economic benefit for local businesses planning as well as day-to-day and development activity helps Our purpose, Home for Success, is to operational requirements. This regenerate local areas, deliver public provide a safe and welcoming home for feedback is shared with our Board realm improvements and create new students to engage, learn and thrive who in turn consider our strategies for community spaces. Our operational at university, while preparing them delivering value to universities. Our and property teams actively engage for life beyond. Our student survey annual Higher Education Engagement with communities through public programme provided an opportunity survey provides the Board with services, local authorities and local for students to provide direct and frank key insight into our reputation and businesses. Our Positive Impact feedback which enabled us to listen performance with our university programme encourages our teams to to the student voice to understand partners as further detailed as part of work with local stakeholders. what is important to them during their our Higher Education Trust operational time living with us and also on wider The environment KPI on page 33. This helps inform topics. During 2021, climate change the way we improve our product and As a responsible business, our wider was reported as a top priority for our service. The Board is also regularly stakeholders demand we proactively customers and accordingly we plan updated on trends in the Higher manage environmental, social and to increase engagement with them Education sector in the UK and globally, governance risks. Moreover, we on how they can develop sustainable which inform the Group’s strategy understand the significant contribution living habits. around the universities with which it that property makes to global CO2 seeks to partner over the long-term. emissions and how essential it is that The Board reviews the Net Promoter Score from our student surveys. This we play our part in the fight against Suppliers climate change while keeping in mind helps the Board decide where to invest in customer service and property We work with a wide range of suppliers the likely consequence of our decisions enhancements to ensure we deliver across our operations and development in the long-term. value-for-money for our customers. activities to deliver a high-quality, affordable customer offer. The Board has oversight of our Our city teams engage with our environmental impact through review student customers on a day-to-day Our teams maintained strong of our Sustainability Strategy, which basis, covering welfare issues which relationships with suppliers and was approved by the Board in 2020 have increased during Covid-19. This throughout Covid-19. This was and launched externally in 2021. This is complemented by our Resident especially important during Covid-19 new strategy specifies clear targets to Ambassadors, who provide peer-to- when we initially paused development reduce our environmental impact over peer support to students, and organise activity at Middlesex Street, London time. In addition, our Net Zero Carbon activities in our properties to help and Campbell House, Bristol, and Pathway, published in December 2021, foster like-minded communities. subsequently resumed activity in details our approach to reach net zero early 2021. The Board recognises the carbon across our operations and University partners importance of supplier relationships developments by 2030. Engagement and were provided with regular around environmental impact comes Universities are key strategic updates throughout the year which indirectly through feedback from stakeholders, directly accounting for included feedback following a investors, students, universities and around half of our reservations each thorough review of our supplier local communities, all of which is year under nomination agreements and relationships and interviews with considered by the Board. During the the other half indirectly through their our twenty-five strategic suppliers. year, the Sustainability Committee students who book directly with us. The considered the Group’s approach to reputation, health and future growth of Our impact on the community climate disclosures under Task Force our University partners remains central and the environment on Climate-related Financial Disclosure to our business prospects. (TCFD), providing feedback which Community Partnering with the strongest has shaped the enhanced reporting Home for Success is about creating a included in this Annual Report. universities helps us provide a range sense of belonging and community of different approaches delivering both in our properties and beyond. solutions which work for our partners To maximise the value we create for and support their growth ambitions. communities and ensure our ability to Through this partnering, we can explore continue to operate and grow within opportunities for new University Further information on our Sustainability Strategy them, we seek to build trusted, long- partnerships, where we can unlock can be found on pages 34–55 term relationships with community operational efficiencies, alongside new partners. This can be seen in our accommodation options. This in turn development activity where we actively helps support our improved day-to-day engage with local communities to operations and our longer-term growth. ensure the design of our buildings,
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 17 STAKEHOLDER STAKEHOLDER CONCERN OUR RESPONSE Investors Our investors wanted to understand Our 2021 Capital Markets Day set out the Group’s strategy to deliver on our business, its resilience its purpose, ‘Home for Success’. The event focused on enhancing the through Covid-19 and longer term student experience and discussed planned investments in the portfolio to sustainability, as well as be kept drive rental growth. It also explored the ways in which we are improving up-to-date with events impacting our environmental and social impact and how we plan to deliver financial financial returns. returns to our shareholders. In 2021, we reinstated our dividend payments with a payout ratio of 80% of adjusted EPS as market conditions stabilised. Employees Our employees were concerned We obtained a BSC Covid Secure status to ensure health and safety in our about the impact of Covid-19 on operations through the pandemic. their health and wellbeing in their We are trialling a new Hybrid Flexible Working Policy and expanded the workplace, its impact on our day- training and resources we provide to our people around health, safety and to-day business operations and wellbeing as well as enhancing mental health provision. the resilience of our longer term business. In 2021, we hired a Diversity, Inclusion & Wellbeing lead who is developing our EDI & Wellbeing strategy and helping us embed equality, Our employees were concerned diversity, inclusion and wellbeing into our culture through a learning and about equality, diversity and development programme. inclusivity (EDI). Customers Our customers wanted action on Throughout the year, we engaged with students on a range of issues which climate change. impact on their stay in our properties. In light of their feedback on the climate change survey, we are developing initiatives focused on how they can play a role in making their stay more sustainable which we know is an important issue for them. Our customers wanted increased We increased peer-to-peer support for students through our new Resident support. Ambassador programme, which provides invaluable support to students in finding like-minded students. The Resident Ambassadors are focused on finding the voice of the student community in properties and are working with our property teams to deliver a personalised student experience. Our customers wanted more value- We improved our hassle-free, value-for-money offer to attract customers for-money. currently living in houses of multiple occupancy (HMOs) and are seeing an increase in sales to UK second and third year students and a meaningful increase in re-booking activity for 2022/23. University Our University partners wanted We maintained regular contact with our university partners updating partners clarity on the Covid-19 measures in them on the latest Covid-19 measures and working with them to support place across our properties. students throughout the year. Our properties remained open and operational throughout the pandemic. Our University partners wanted to be supported in their growth We regularly engaged with university teams to offer a range of different ambitions. approaches which ensured we delivered the right solutions for them and are focused to work with universities to unlock operational efficiencies alongside new accommodation requirements. Suppliers Our suppliers wanted longer term To help ensure we have longer term and valuable supplier relationships, relationships. we undertook a thorough review of our supplier relationships during 2021 with support from a third-party procurement consultancy, including interviews with our twenty-five strategic suppliers. The community Our local communities wanted Throughout 2021 and through our development activity, we employ over and the to ensure they benefit from our 1,500 roles in local communities. In addition, we invested £3 million in environment presence in their communities. initiatives to reduce our environmental impact and over 296 hours of employee volunteering was carried out in the year. We continue to be aware of the growing importance on climate A structured community engagement strategy is being developed to change and environmental, social ensure greater ongoing engagement from the development stage through and governance issues for all of our to operations. stakeholders. Our Sustainability Committee was formed in 2021 to provide formal oversight and challenge to the execution of the Group’s Sustainability Strategy launched in 2021. In addition, sustainability performance measures are being introduced into the Executive remuneration.
18 THE UNITE GROUP PLC | Annual Report and Financial Statements 2021 CHAIR’S STATEMENT A ROBUST PERFORMANCE We continued to do what’s right for all stakeholders, in line with our values “During the year the business returned to earnings growth, increased occupancy, grew the development pipeline and delivered disposals to enhance the quality of the portfolio. We also continued to do what’s right for all stakeholders, including providing further financial support to students.” Richard Huntingford Chair Dear Shareholders, 2021 has been a successful year for Unite, in which we have delivered a strong performance despite the challenges posed by the Covid-19 pandemic. I would like to start by thanking all our staff across the group for the hard work and resilience they have shown to deliver for our student and university customers and position the business for future growth. I would also like to thank our university partners for their ongoing support. During the year the business returned to earnings growth, increased occupancy, grew the development pipeline and delivered disposals to enhance the quality of the portfolio. We also continued to do what’s right for all stakeholders, in line with our values, including providing further financial support to students. The year in review 2021 saw a recovery in our financial performance and a return to growth. Across our portfolio, the Group delivered an improvement in occupancy to 94% for the 2021/22 academic year (2020/21: 88%) alongside 2.3% rental growth, reflecting strong student demand. Together with a lower impact from rental discounts offered in response to the pandemic, this resulted in a 15% increase in adjusted EPS to 27.6p (2020: 24.0p).
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 19 14.4% 3.4% 3.4% 71.3% 71.7% 13.2% 3.2% 67.9% 11.7% 62.1% 62.3% 10.2% 2.3% 2017 2018 2019 -3.4% 2021 2017 2018 2019 -0.6% 2021 2020 2020 2017 2018 2019 2020 2021 TOTAL ACCOUNTING RETURN1 RENTAL GROWTH1 ADJUSTED EBIT MARGIN1 10.2% 2.3% 62.3% Investor demand for the student This activity will support sustainable I would like to thank Phil for his accommodation sector remains strong rental growth through our value-for- leadership over many years and his which, together with rental growth, money offer and margin improvements contribution to the growth of Unite and supported a 4.6% revaluation uplift in over time. Our secured development making Unite the business it is today. the property portfolio during the year. pipeline also offers significant visibility I have a strong empathy for Unite’s This contributed to 8% growth in our over future growth in earnings and ‘Home for Success’ purpose and have EPRA NTA to 882p (31 December 2020: net assets. been hugely impressed by the talent and 818p) and a return to an IFRS profit commitment of our teams since joining before tax of £343.1 million (2020: loss A responsible and resilient business the business. of £120.1 million), equating to IFRS EPS We are committed to creating a of 85.9p (2020: loss of 31.8p). We have a strong Board with a mix of responsible and resilient business, which complementary skills as well as diversity delivers for all of our stakeholders over The balance sheet remains in robust of knowledge, background and gender. the long term. This commitment has health with LTV reduced to 29% following As a team, we bring a range of expertise shaped our response to the pandemic, £261 million of disposals in the year and from the higher education, real estate, during which we have acted to protect receipt of a £53 million performance finance and hospitality sectors. During the interests of students, our university fee from our LSAV joint venture. This the year, Richard Akers stepped down partners, employees and investors. provides the financial capacity to deliver from the Board in view of his other We have placed significant focus on our secured development pipeline and business commitments. Richard was the health, safety and wellbeing of our pursue new growth opportunities. a very valuable member of the Unite customers and our people by reducing Board with his wealth of experience Reflecting the improving trading risks in our buildings as far as possible of the wider property market and his outlook and the Board’s confidence and supporting those needing to self- sound judgement. On behalf of the in the Group’s future outlook, the isolate. Recognising the disruption caused Board, we wish Richard well. proposed dividend for the year has to students during the national lockdown been increased by 73% to 22.1p. in early 2021, we offered additional rental Based on our year end Board discounts to students unable to use their composition, we meet the Hampton accommodation. We have now provided Alexander gender target with 33% of Delivery of our strategy over £100 million in financial support to the Board being female and will look Unite is the largest operator of students during the pandemic. The Board to further broaden the diversity of our purpose-built student accommodation believes this response has strengthened Board in the coming years. in the UK with 74,000 beds across 25 our reputation with students, parents, leading university towns and cities and universities and Government. celebrated its 30th anniversary this Looking forward year. The business growth to date has Our new Sustainability Strategy, launched There is growing demand for UK been built on the solid foundations in early 2021, includes stretching Higher Education and an unmet need of a best-in-class operating platform, new targets for how we will reduce for the high-quality, value-for-money high-quality portfolio, trusted university our environmental impact, improve accommodation that we provide. These relationships and in-house development opportunities for employees and raise drivers support strong organic growth, capability. Our aim is to further develop standards across the student housing underpin demand for our secured this platform to create a sector-leading sector. We published our Net Zero developments and create opportunities business, which delivers value for Carbon Pathway at the end of 2021, which for new growth through development, its customers, attractive returns for sets out the activities and investments strategic partnerships with universities shareholders and has a positive impact required by the business to meet our and potentially expansion into other on the environment and wider society. 2030 net zero ambition. Delivery and complementary living sectors to our development of this strategy is being operating platform and customer focus. As outlined at our Capital Markets Day overseen by our new Sustainability As a result, I look forward with great in October 2021, our stakeholders have Committee, formed during 2021. confidence to the Group delivering rising expectations around our product, attractive and growing returns to service and wider business impact on the shareholders over the coming years. Board changes environment and society. In response, our strategy is focused on delivering an This is my first year as Chair, following Richard Huntingford enhanced experience for our customers, Phil White stepping down from the Board with effect from 31 March 2021. Chair supported by investments in technology 23 February 2022 and our estate and a more segmented customer offer over time. 1. See glossary for definitions and note 8 for alternative performance measure calculations and reconciliations.
20 THE UNITE GROUP PLC | Annual Report and Financial Statements 2021 CHIEF EXECUTIVE’S REVIEW RESILIENCE AND FLEXIBILITY During the Covid-19 pandemic we prioritised working with our University partners to support students “The business has seen a strong recovery in performance in 2021. We are well positioned for growth due to our alignment to the strongest universities, an enhanced reputation thanks to our supportive actions during the pandemic, and our best-in- class operating platform.” Richard Smith Chief Executive Officer The business has delivered a strong performance in 2021, despite the ongoing challenges presented by the Covid-19 pandemic. We have once again proven the quality and resilience of our operating platform, with all properties remaining open during national lockdowns at the start of the year, as they did throughout 2020. This reflects the commitment of our teams as well as the value of our best in class operating platform, PRISM, which allowed us to quickly adapt to the changing circumstances. As a business, we are committed to acting responsibly and ‘Doing what’s right’. This principle has shaped our response to the pandemic and led to the further rental discounts and complimentary tenancy extensions offered to students unable to use their accommodation at the start of 2021. We have increased the support offered to students and our employees
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 21 37.1p 95p 29.0p 34.1p 91p 86p 30.3p 22.7p 22.1p 27.6p 24.0p 12.75p 10.25p 2017 2018 -32p -32p 2021 2017 2018 2019 2020 2021 2019 2020 2017 2018 2019 2020 2021 ADJUSTED EARNINGS PER SHARE1, 2 (P) IFRS BASIC EARNINGS PER SHARE (P) DIVIDEND PER SHARE (P) 27.6p 86p 22.1p to ensure their health, safety and gains, disposal proceeds and receipt financial support offered in the Higher wellbeing. We believe these actions of our LSAV performance fee. This Education sector and reflects our have enhanced our reputation with provides the financial headroom to commitment to show leadership in students, parents, universities and deliver our secured development the sector as well as encouraging others Government and will create further pipeline and pursue new growth to act accordingly. opportunities in the future. opportunities. Our key financial performance indicators are set out All our properties remained, and Return to growth in the table below. continue to remain, open and operational, employing a range of The business delivered a strong Continued support for students measures to reduce transmission of recovery in financial performance in and universities Covid-19 where possible. With the 2021 with adjusted earnings of £110.1 removal of the remaining restrictions million and adjusted EPS of 27.6p, Since the outbreak of Covid-19, we during the fourth quarter of 2022, up 15% year-on-year. This reflects have strived to play our part and students will be able to enjoy the full an increase in occupancy to 94% for do the right thing for our students experience of university life. the 2021/22 academic year (2020/21: and University partners in a fair and 88%) and a lower impact from rental proportionate way. In response to Positive outlook for 2022/23 discounts when compared to 2020. The the national lockdown announced in profit before tax of £343.1 million also January 2021, students not living in We see strong demand for reflects the valuation growth of our their accommodation were able to accommodation this autumn, with property portfolio during the year. We apply for a ten-week rental discount UCAS applications up 7% on pre- have announced a dividend of 22.1 p and four-week complimentary pandemic levels. Reservations for the for the full year, which represents a tenancy extension. 2022/23 academic year are encouraging payout ratio of 80% of adjusted EPS, at 67%, which is ahead of the prior year underlining our confidence in future We have now provided over £100 level of 60%. This is underpinned by the business performance. Total accounting million in financial support to students 50% of beds secured under nomination returns for the year improved to 10.2%, during the Covid-19 pandemic through agreements for an average term of reflecting an 8% increase in EPRA NTA a combination of rent waivers and seven years. We expect bookings under to 882p. Our LTV ratio reduced to 29% flexibility offered to students. We nomination agreements to grow as a during the year through revaluation believe this is the largest package of percentage of bookings by the end of the current annual sales cycle and to increase to 55% of total beds over the Financial highlights1 2021 2020 next two academic years. This reflects the opportunity to deepen relationships Adjusted earnings £110.1m £91.6m with our existing University partners. Adjusted EPS 27.6p 24.0p We have recently secured new multi- IFRS profit/(loss) before tax £343.1m £(120.1)m year agreements to let 1,000 beds to IFRS basic EPS 85.9p (31.8)p two Russell Group universities from Dividend per share 22.1p 12.75p the 2022/23 academic year. We expect Adjusted EPS yield 3.4% 2.8% strong student demand for 2022/23 from both domestic and international Total accounting return 10.2% (3.4)% students. We have maintained our focus on retaining existing direct- EPRA NTA per share 882p 818p let customers, which has led to an IFRS net assets per share 880p 809p increased share of sales to re-bookers. Loan to value 29% 34% The attractiveness of PBSA over HMO is being clearly proven. 1. See glossary for definitions and note 8 for alternative performance measure calculations and reconciliations. A reconciliation of profit/loss before tax to EPRA earnings and adjusted earnings This supports our anticipated return is set out in note 8 of the financial statements. to 97% occupancy and 3.0–3.5% rental growth for the 2022/23 academic year. 1. The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). The Group uses alternative performance measures (APMs), which are not defined or specified under IFRS. These APMs, which are not considered to be a substitute for IFRS measures, provide additional helpful information and are based on the European Public Real Estate Association (EPRA) best practice recommendations. The metrics are also used internally to measure and manage the business and to align to the performance related conditions for Directors’ remuneration. See glossary for definitions and note 8 for calculations and reconciliations. 2. Adjustment made to EPRA EPS to remove the impact of the LSAV performance fee. Further details are provided in notes 2 and 8.
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