Unite Group Plc

Good morning everybody and thank you all for joining the call. Since we last spoke, we've taken action across a number of areas and I'm encouraged to see signs of early progress. And today we will be updating on current trading, taking you through progress with the disposals and flagging the appointment of an advisor to accelerate the repositioning wealth portfolio and updating on our Q1 valuations for USAF and LSAAF. So starting with trading, Overall, we are trading in line with the guidance we shared in February. We're currently 74% reserved for the 26-27 academic year against 76% at the same time last year. And these reservations are supportive of our rental growth guidance of the 2-3% range. Direct let sales are responding to our proactivity. We're currently tracking about one to two points above the direct let market at this stage. and the market is competitive, but we are benefiting from our mid-market price points and our proactivity on pricing. We're keeping our powder dry on incentives at the moment, but we could see some more promotional activity later in the year and we are having success at selling beds that have been handed back to us by universities. Nominations are currently at 54%. We've continued to see lower tier universities be more cautious in their approach and managing their financial exposure. It is fairly normal that we see ups and downs in nominations agreements at this stage, and we could see NOMs move further by plus or minus one to two points by the end of the cycle. On the positive side, high tariff universities are wanting more beds and locking into longer term agreements and top up for 26, 27. But as we call that in February, it won't be until July when we firm up numbers with universities with some further demand likely in August once they also have been released. We are confident that we will win NOMs when universities are ready to commit. Hello Student, our brand that comprises the Empiric portfolio is trading in line with the update provided at the prelims. Sales are starting to improve following our early interventions and we are seeing the acceleration we need. We are up 11 points since the prelims and we expect to reach mid 80s at the end of the cycle. We also continue to make good progress for the integration and delivery of synergies. We've now secured 3 million of the 9 million savings targeted for this year. Across Unite and Hello, our teams are fully focused on driving sales. Operational teams are incentivised, web bookings and international and virtual sales teams have all seen good pick up since we last spoke. We've seen good demand from Chinese students in particular. We're selling around seven to 800 direct that rooms a week at the moment and the next few weeks are really important to us. We will continue to see the value of our platform and our teams. I can assure you that we are leaving no stone unturned. On costs, we are fully hedged on energy for this financial year and 70% for 27. Our interest costs are also fully hedged. So overall progress is in line with our expectations and we are reaffirming guidance at the lower end ranges for occupancy and rental growth and for our adjusted EPS to be at the 41.5 to 43p range. Moving on to disposals, as you know, we've always been active recyclers of assets. We set out a target of three to 400 million in November, double our previous run rate and highlighted that this would be a multi-year programme. We're making good progress against this target with £130 million under offer or completed, with a sub-francrestway disposal to USAF expected to close in May. We have a further £500 million of assets being marketed across a portfolio of lower growth assets, development land, non-student assets and from the Empiric portfolio. We recognise that selling assets to this market is not straightforward, but we are encouraged by the depth of investor demand and those looking at our portfolios of assets. We have over 70 investors currently in the data room for the larger portfolio, and given the quantum and range of assets being marketed, this means that we are well placed to deliver on this target. Delivering on these disposals would improve current occupancy by three points, improve nominations by three points, and also improve our operating margins, showing the drag that the tail of the portfolio is having on our overall performance. We've also announced this morning that we've appointed advisors to accelerate the portfolio repositioning. As set out in November, this will enable us to create a higher quality portfolio. We need to address the tail of the portfolio, to align to further the strongest universities where demand is and will be strongest and most resistant to further market changes. Our platform and relationships mean that we will be the first choice for both students in all years of study and universities for their nominations and partnerships. And it will allow us to move faster to our target of 80% high tariff alignment and 60% nonce. We believe that higher quality portfolio offers the best way for us to return to more predictable growing earnings consistent with our long term track record. And we will work hard and fast to move through the process and obviously provide updates on our disposal strategy and portfolio shape and size over the coming few months. We will also update on reservations and disposals alongside our AGM in mid-May and further trading update in July. On the share buyback, we've made good progress with 85 million of the 100 million now deployed, and we expect to extend the share buyback programme as we make progress with the disposals, with proceeds being split roughly equally between existing capital commitments and share buybacks. On valuations, we have seen some softening of yields in Q1 with USAF at 9 basis points and LSF at 13 basis points. This is largely being driven by outward movement in interest rates and sentiment in the sector reflecting the tougher trading environment. And we've seen a widening yield differentiation based on the quality and operating performance of individual assets. At this stage in the sales cycle, there is limited rental growth being baked into the valuations and this will become clearer in Q2 and Q3 valuations as normal. We expect a similar approach to be reflected in the Group's wholly owned valuations at H1. Before opening up for Q&A, hopefully you'll see that it's clear that we're not standing still and we're working hard to deliver on a clear set of priorities. which are one to drive operation and sales performance across United Students and Hello. Secondly, to accelerate the repositioning of the portfolio so that we're the first choice for students across all years of study, nominations and partnerships in the best university cities. And thirdly, to maintain a strong balance sheet allocating surplus capital to further share buybacks. Together, this will give us the greatest visibility over income and growth consistent with our track record and enable us to deliver value to shareholders. On that note, we'll open up to Q&As. As stated, questions can be submitted online. Thank you to those who already submitted. I think Mike will read out the questions and then we'll allocate accordingly between us. So Mike, over to you.

Thanks, Joe. I'll start with Anna Escalante at Morgan Stanley, who's got a couple of questions. So the first one is on nomination agreements. Nomination agreements have fallen by one percentage point versus the end of February. What has changed since the full year results? Can you explain the flexibility that universities have in the reservations?

Yeah, thanks, Mike. Yeah, it's interesting what we're seeing in the market in the moment. We're having really positive conversations with the high quality university partners. So as I mentioned, extending existing arrangements, we've been winning tenders versus other operators and seeing more beds from those operators. Where they're multi-year agreements, we've seen rental growth uplifts typical with what we've had historically. and I'd say a strong performance with those universities. On the flip side, those universities who are less confident on numbers are taking a more cautious approach and a number of those universities have been more active in the single year deals and that's where we've seen those universities choosing not to renew those agreements or where they have the provision to have some flexibility in numbers, hand back some additional beds as well. It is fairly normal that we would see this movement in nominations rooms at this stage Particularly amongst those one-year agreements where we have multi agreements at fixed numbers of beds They don't have the ability to hand back. So this is really about the fluctuation in the 12% of our portfolio which has single year agreements and that is where we're seeing the movement in numbers of beds and and we will continue to see that through the next couple of months as universities get clear on what their final numbers will be.