Delivering Earnings Growth Preliminary Results Year ended 31 - PowerPoint PPT Presentation

Greetham Street, Portsmouth Delivering Earnings Growth Preliminary Results Year ended 31 December 2016

CONTINUING STRONG PERFORMANCE  Strong financial performance 2016 2015 - Adjusted EPRA earnings up 24% to £61.3 million - NAV up 12% to 646p - LTV maintained at 34% Adjusted EPRA earnings £61.3m £49.5m - Full year dividend increased 20% to 18.0 pence  Excellent progress with strategic objectives Adjusted EPRA EPS 27.7p 23.1p - First major on-campus acquisition at Aston University - PRISM fully implemented and delivering benefits EPRA NAVps 646p 579p - Regional development pipeline deepened - Disposal of lower quality regional portfolio Dividend per share 18.0p 15.0p (full year)  Market dynamics remain favourable - 98% occupancy and 3.8% rental growth Total return on NAV 15% 37% - Student number outlook remains positive - 73% reservations for 2017/18 (up from 67% in See-through LTV ratio 34% 35% 2016/17), supporting rental growth of 3.0 - 3.5%  Highly visible earnings growth prospects Operations cash flow £61.3m £40.8m - Pipeline and rental growth could add 15 to 20 pence pa to EPS by 2019  Dividend pay-out ratio increased to 75% a year Reservations* 73% 67% ahead of plan * Reservations as at 21 February - 3.1% dividend yield on opening NAV 1

STRATEGY AND MARKET

STRUCTURAL GROWTH UNDERPINS INVESTMENT CASE  UK Higher Education is world class UK Universities world University rankings - Top Universities consistently ranked in global and 18 40 European top tier 16 35 Number of institutions (bars) Number of institutions (lines) 14 30 - UK is second most popular destination for 12 25 international students 10 20 8 15 6  Participation rates in Higher Education are growing 10 4 globally 5 2 0 0 - Developed economies – societal change 2011 2012 2013 2014 2015 2016 Top 10 Top 20 Top 50 Top 100 Top 200 o 37% in UK in 2016, up from 34% in 2013 Source: THE - Developing economies – growing wealth International students - Growth in female students most marked  Brexit impact becoming clearer 25% 19% 20% - Not expected to have material impact on student 15% numbers at our Universities 10% 10% 6% 6% 5% 3% 3%  Stronger Universities will continue to grow 3% 5% 2% 2% 0% - Universities are adapting and forecasting growth - Removal of student number cap facilitates growth - Universities focused on student experience and value for money for students Source: Education at a Glance 2016, OECD 3

UNITE UNIQUELY POSITIONED TO SUCCEED  Our platform – sector leading operating platform Income by University rankings - PRISM provides flexibility and efficiency 60% - University relationships provide income security, 50% 48% acquisition opportunities and insight 40% 44% 40% 38% 38% 38% - Leading service levels support rebooking and 30% University loyalty 20% 22% 18% 10% 14%  Our partnerships – alignment with growing Universities 0% and more nominations 15 16 Proforma 15 16 Proforma 15 16 Proforma High Medium Low - 82% of income from high and mid-ranked Noms DL Universities, 86% on a proforma basis Source: Unite estimates - 58% income secured through noms – 5,000 additional beds in the last three years Nominations / direct-let split - Direct let provides market rent evidence and homes for 2 nd and 3 rd years 18%  Our properties and people – quality locations, well maintained, great people 6% 35% 65% - Development programme adds 7,000 beds by 2019 58% 18% - Portfolio management based on insight – Aston acquisition and portfolio disposal UK (DL) EU (DL) - Most experienced and committed operator in 1st year 2/3 years + Non-EU (DL) Noms the sector Source: Unite 4

STRATEGY FOCUSED ON EARNINGS AND GROWTH  High levels of earnings and dividend growth Earnings and dividend growth Pence per share % - Annual growth rates of 29% for EPS and 45% 30 40 for DPS since 2012 35 25 30 20 - Earnings growth outlook supports high 25 double-digit dividend growth 15 20 15 10 10 5  Visible earnings growth from development 5 pipeline and rental growth outlook 0 0 2012 2013 2014 2015 2016 EPS DPS Total Return - Development pipeline could add 12 - 14pps Source: Unite to EPS Components of total return - Rental growth could add a further 3 - 7pps % of total return to EPS Rental growth 10%  Opportunities for growth are attractive 33% Retained profits - Further selective development 26% Development portfolio - On campus growth Yield compression 31% - Growing 2 nd and 3 rd year market Source: Unite 5

FINANCIAL REVIEW

STRONG FINANCIAL PERFORMANCE Year-on-year 2016 2015 movement Income Adjusted EPRA earnings £61.3m £49.5m 24% Adjusted EPRA EPS 27.7p 23.1p 20% EPRA earnings £62.7m £61.3m 2% Adjusted EPS yield on opening NAV 4.8% 5.3% (0.5)% Dividend per share (full year) 18.0p 15.0p 20% Balance Sheet EPRA NAVps 579p 12% 646p Total accounting return 15% 37% (22)% See-through LTV 35% 1% 34% Cash Flow Operations cash flow £61.3m £40.8m 50% 7

EARNINGS GROWTH MOMENTUM MAINTAINED  Continuing to deliver earnings growth 2016 2015 £m £m - High occupancy, rental growth and portfolio growth Total income 304.9 277.9 Unite’s share of rental income 159.1 144.3 - Adjusted EPRA earnings up 24% to £61.3 million Unite’s share of property (42.8) (39.8) operating expenses  Scale benefits continue to accrue Net operating income (NOI) 116.3 104.5 - Overhead efficiency measure of 40bps NOI margin 73.1% 72.5% annualised achieved – on track for target of Management fees 14.0 12.0 25 - 30bps by end of 2017 Operating expenses (23.1) (21.9) - PRISM implementation supporting NOI margin Finance costs¹ (45.9) (48.1) improvement towards target of 75% Net performance/acquisition fee 6.9 22.0 Property and other costs (5.5) (7.2)  Performance fee £6.5 million EPRA earnings 62.7 61.3 - Ongoing fee will be minimal Yield related performance fee (1.4) (11.8) Adjusted EPRA earnings 61.3 49.5  Full year dividend up 20% to 18.0p Adjusted EPRA EPS 27.7p 23.1p - Pay-out increased to 75% of recurring EPRA EPS Adjusted EPRA EPS yield on NAV 4.8% 5.3% a year ahead of plan ¹ Finance costs include net interest of £32.4m and lease payments of £13.5m on sale and leaseback properties 8

HIGHLY VISIBLE EARNINGS GROWTH PROGRESSION  Earnings growth prospects supported by:  Earnings growth will drive further dividend growth - High quality development programme - Policy to pay out 75% of recurring EPS - Positive rental growth outlook - Positive dividend growth outlook  Disposals to fund 2019 pipeline and ASV EPS 55 3p – 7p 4p - 5p 50 12p - 14p 45 40 35 3p 30 25 39p - 44p 20 15 25p 23p 10 17p 14p 5 0 2013 EPS 2014 EPS 2015 EPS 2016 EPS 2016 Secured Rental Disposals Illustrative openings pipeline growth 2019 EPS and ASV Assumptions: Note: Illustrative earnings progression demonstrating - Development pipeline delivered in line with forecast building blocks of growth (not profit forecast) - Rental growth of 2 - 4% p.a. - Disposals of £250-400m (Unite share) assumed over the period (including sales in 2017) - Conversion of convertible will dilute earnings by c.1p (not shown above) - Overheads increase with inflation 9

BALANCED RETURNS  Growing proportion of returns generated internally NAV Pence per share 670 660 8 14 650 21 640 630 620 25 610 600 26 590 580 646 570 560 550 540 579 530 520 510 500 31-Dec-15 Rental Retained Development Yield Dividend 31-Dec-16 growth profits portfolio compression 10

STRONG CAPITAL STRUCTURE  Strong debt position Key debt statistics (see-through) 2016 2015 - Diversified sources and balanced maturity profile Net debt £776m £731m - Limited refinancing requirements before 2020 LTV 34% 35% Cost of debt 4.2% 4.5%  Average cost of debt reduced to 4.2% Average debt maturity (years) 4.9 5.6 - Impact of new debt, fixed at lower rates Net debt:EBITDA ratio 6.5 6.9  LTV maintained at 34% and net debt:EBITDA Proportion investment debt fixed 100% 90% below 7.0x Proportion unsecured 25% 27% - Target to remain around these levels going forward Debt maturity profile £m - £114 million of disposals in 2016 400 350 - Disposals of £150 - 200 million in 2017 to fund 300 development and ASV 250 Group 200 150 - £102 million exchanged in February 2017 Funds 100 50 - ASV acquisition and Q1 disposals maintain - LTV at 34% 2017 2018 2019 2020 2021 2022 2023 2024 2025 11