41061 Unite AR22 HI-RES WEB-READY - Flipbook - Page 20
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THE UNITE GROUP PLC | Annual Report and Financial Statements 2022
CHIEF EXECUTIVE’S REVIEW continued
Being a responsible and resilient business
Our sustainability strategy is focused on delivering a positive
impact through our People and Places initiative. This is driven
by the social contribution we make to the students who live
with us, our employees and local communities as well as our
progress in minimising our impact on the environment.
We continue to make progress towards our objective of
becoming a net zero carbon business by 2030. During the
year, we invested £13 million in energy initiatives to reduce
consumption, save carbon and ensure ongoing compliance with
regulations, up from £3 million in 2021. This contributed to a
further improvement in the EPC ratings of our portfolio during
the year, with 80% of the portfolio now A–C rated (2021: 57%).
We are committed to donating 1% of our annual adjusted
earnings to social initiatives. These initiatives will be closely
aligned to our purpose of providing a Home for Success
for students and supporting wider participation in Higher
Education. This includes the Unite Foundation, the charitable
trust founded by Unite to provide free accommodation for
care leavers and estranged students while at university. The
Foundation marked its tenth anniversary this year and, to
mark the milestone, Unite provided financial support for 100
new student scholarships for the 2022/23 academic year as
well as home starter kits for over 200 additional students.
Over 600 students have now benefited from scholarships
during the Foundation’s 10-year history.
Higher Education Policy
The Government concluded its consultation on Higher
Education policy in 2022, which emphasised a focus on
investing in the UK’s world-class universities, enabling highquality outcomes for graduates and making sure that Higher
Education remains accessible to all. Going forwards, the
Office for Students (OfS) will be responsible for monitoring
minimum standards for Higher Education providers based
on continuation and completion of courses as well as
graduate progression. Application of these standards is in
its early days and the OfS will initially work with providers
to understand the context for any underperformance. We
are confident that our strategic alignment to high- and midranked universities positions us to successfully navigate any
risks from restrictions on low-value courses.
International students contribute an estimated £29 billion
to the UK economy each year and provide a vital source of
funding for universities. However, international students and
their impact on migration remains topical, with attention
currently focused on the number of dependents coming to
the UK with students. Given our product is focused on singleoccupancy bedrooms, we see relatively limited risk in the
event of more restrictive visa rules for dependents.
Opportunities for growth
The outlook for student accommodation remains positive,
with structural factors continuing to drive a demand/supply
imbalance for our product. Demographic growth will see the
population of UK 18-year-olds increase by 140,000 (19%) by
2030. Application rates to university have also grown steadily
over recent years, reflecting the value young adults place
on a higher level of education and the life experience and
opportunities it offers.
This backdrop creates significant opportunities to grow the
business in the UK student accommodation sector through
development and targeted acquisitions in our strongest
markets and partnerships with universities.
The HMO sector, which provides homes to over one million
students, is increasingly expensive due to rising mortgage
costs for landlords and utility costs for tenants. We expect
these cost pressures to only grow for private landlords
given increasing regulation around the quality of homes
and environmental performance standards through EPC
certification. We expect this to further reduce the availability
of private rented homes over time, increasing demand for
the purpose-built, sustainable accommodation we provide.
We believe that there is also an exciting opportunity to
grow our platform in the wider living sector by catering to
the growing number of young professional renters living in
major UK cities. We already serve this market through the
9,000 postgraduate students who live with us each year. In
September, we acquired a pilot build-to-rent (BTR) property
in Stratford, East London for £71 million. The pilot offers the
opportunity to test our operational capability in the sector
and understand the potential synergies with our core student
business through increased customer retention and cost
efficiencies in areas such as maintenance and procurement.
Early signs are positive, with new lettings and renewals
achieving average rental uplifts of 11%. The property is set to
be fully integrated into our operating platform from Q2 2023
and our initial review suggests we have the capabilities to
operate effectively and efficiently in the BTR sector.
Positive Outlook
We are confident in the outlook for the business, which
remains positive, reflecting the underlying strength of
student demand, our alignment to high-quality universities
and the capabilities of our best-in-class operating platform.
We have seen a strong start to the 2023/24 sales cycle, reflecting
the appeal of our high-quality portfolio and fixed-price,
all-inclusive offer, which provides students with significant
savings and certainty on their bills. We now expect to deliver
rental growth of 6–7% for the 2023/24 academic year, enabling
us to offset cost pressures and improve our EBIT margin to
70% for 2023. Growing income also offers support to our
property valuations as the market adjusts to an environment
of higher funding costs. As a result, we expect to deliver 5–8%
growth in adjusted EPS in 2023 and a total accounting return
of 8–10% before the impact of property yield movements.
There remains a clear need for new high-quality, affordable
student accommodation to support the growth of our
university partners. We are exploring a variety of routes
to fund new growth, while ensuring we maintain a robust
and resilient balance sheet. Despite pressures from
higher funding and operating costs, we remain confident
in our ability to grow earnings and deliver attractive total
accounting returns for shareholders.
Richard Smith
Chief Executive Officer
28 February 2023