A foundation for growth
Unite Group PLC
Annual Report & Accounts 2019
The Unite Group PLC
Annual Report & Accounts 2019
Overview
01 Operational and financial highlights
02 At a glance
04 Why invest in Unite Group PLC
06 Our purpose in action
12
Chairman’s statement
Strategic report
16 Chief Executive’s review
26 Market overview
30 Our business model
32
34
Stakeholder engagement
Directors’ duties and Section
172 Statement
38 Our strategy at a glance
40 Key performance indicators
42 Risk management
44 Principal risks and uncertainties
56 Operations review
62
Property review
68 Financial review
74 Responsible business review
Corporate governance
90
Chairman’s introduction
92 Board of Directors
96 Board statements
97 Board leadership and purpose
100 Division of responsibilities
103 Board activities
107 Nomination Committee
110
Audit Committee
116
Health & Safety Committee
119 Remuneration Committee
125 Directors’ Remuneration Policy
133 Annual Report on Remuneration
148 Directors’ Report
153
Statement of Directors’ Responsibilities
Financial statements
156 Independent auditor’s report
168 Consolidated income statement
169 Consolidated balance sheet
170 Company balance sheet
171 Consolidated statement of changes in
shareholders’ equity
172 Company statement of changes in
shareholders’ equity
173 Statements of cash flows
174 Notes to the financial statements
Other information
228 Financial record
229 Notice of Annual General Meeting
235 Glossary
237 Company information
Our purpose
We are driven by a common purpose –
Creating a Home
for Success for
our students.
For us, that’s making the best home for all
students, helping them grow and succeed at
University and beyond.
We deliver this through having the best people,
the best service and best properties, and working
in line with our values.
Our Students
Quality, affordable homes in a
safe and secure environment.
Read more on page 06
Our Partners
Helping Universities deliver their
ambitions and an excellent student
experience.
Read more on page 08
Our People
Rewarding and stimulating career
paths for diverse and engaged teams.
Read more on page 10
06
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www.unite-group.co.uk
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Operational and financial highlights
39.1p
34.1p
30.3p
27.7p
23.1p
29.0p
22.7p
18.0p
15.0p
33.2p
37%
£388m
£229m
£246m
£201m
15%
14%
13%
12%
2015
2016
2017
2018
£(101.2)m
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2019
EPRA Earnings per share1,2 (p)
Dividend per share (p)
Total accounting return* (%)
(Loss)/Profit before tax (£m)
39.1p
33.2p
12%
£(101.2)m
853p
790p
35%
34%
37%
83
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82
720p
646p
579p
31%
29%
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2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Net asset value1 (p per share)
Loan-to-value ratio* (p)
Customer satisfaction
Higher Education Trust
853p per share
37%
85
82
5
BSC Occupational
Health & Safety
audit rating
Successful
acquisition of
Liberty Living
See more in our CEO’s Review
on page 16
2,390
beds opened
Home for Success for
74,000
students
1 The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). These financial highlights are based
on the European Public Real Estate Association (EPRA) best practice recommendations and these performance measures are published as they are
intended to help users in the comparability of these results across other listed real estate companies in Europe. The metrics are also used internally
to measure and manage the business and align to the performance related conditions for Directors’ remuneration.*
2 2015 and 2016 EPS is based on an adjusted EPRA earnings. A full reconciliation of the financial statements to the EPRA performance measures is set
out in note 2.2 of the financial statements.
* A full glossary of definitions is available on pages 235 and 236.
Other Information
02
At a glance
We are the UK’s largest owner, operator and developer
of purpose-built student accommodation serving the
UK’s world-leading Higher Education sector.
We have the best properties in the best locations and a best in class operating
platform allowing us to deliver a Home for Success for our students, University
partners, people, and shareholders.
45
University
partnerships
74,000
Students
88%
of our portfolio is
aligned to high-
and mid-ranked
Universities
Top ten cities & properties
2019
Rank
1
2
3
4
5
6
7
8
9
City
London
Birmingham
Liverpool
Manchester
Leeds
Sheffield
Newcastle
Bristol
Cardiff
10
Leicester
Total
Proportion of
Unite portfolio
Completed
Beds (FY19)
10,920
6,498
6,469
5,017
4,634
4,498
3,763
3,758
3,480
3,251
Full-time
Student
Numbers
(18/19)
327,840
73,845
51,980
66,195
59,525
53,150
47,845
47,345
40,065
38,680
52,288
806,470
71%
Market Share
3.3%
8.8%
12.4%
7.6%
7.8%
8.5%
7.9%
7.9%
8.7%
8.4%
6.5%
Unite is invested in two specialist funds and joint
ventures with institutional investment partners.
Unite UK Student
Accommodation
Fund (USAF)
£2.8bn
GAV
London Student
Accommodation
Venture (LSAV)
£1.3bn
GAV
See our Property review on page 62
7
5
6
10
2
3
4
9
8
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The Unite Group PLCAnnual Report & Accounts 2019 03
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1,900
Highly trained people
5,191
New beds in secured
development pipeline
Our values and culture
Our people live our values, and that is
part of what makes our Home for Success.
See our
Property
review on
page 62
Work together
Be better
Do what’s right
See it through
Have fun
Environmental
and social impact
Being a responsible business is central
to everything we do at Unite Students.
See more on our Responsibilities on page 74
Other Information
04
Why invest in Unite Group PLC
We are the UK’s leading owner, operator and developer
of student accommodation with a strong track record of
delivering returns.
Market leadership
with focus on
customer service
and efficiency
Transformational acquisition
of Liberty Living creates
combined portfolio of
74,000 beds
Sector-leading operating
margins thanks to PRISM
operating platform and scale
efficiencies
Digital capability has helped
increase the differentiation
of our offer, improve student
experience and drive
operating efficiencies
High-quality,
visible income
Favourable
market dynamics
Strategic relationships with
45 University partners
56% of our rooms are let under
nomination agreements, two-
thirds of which are multi-year
and inflation-linked
High-quality, well located
portfolio, 88% aligned to high-
and mid-ranked Universities
Re-bookers account for 28%
of our direct-let bookings
UK demographic turns
positive from 2021 – potential
213,000 additional students
by 2030
Government support for
international student growth
Undersupplied market
Supports rental growth
of 3.0–3.5%, through a
combination of improved
utilisation value-driven
price increases
£15m
of annual cost synergies from
acquisition of Liberty Living
6 years
WAULT of nomination
agreements
+4%
growth in applications for
High-Tariff Universities
Read more on page 17
Read more on page 23
Read more on page 26
The Unite Group PLCAnnual Report & Accounts 2019
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Robust income and
capital structure
Track record of
earnings growth
Well positioned
for future growth
Strong balance sheet
Investment grade
credit rating
Well diversified debt across
lenders and maturities
Average rental growth of
3.5% and occupancy of
98% over five years
24% compound annual
dividend growth over
five years
85% dividend pay-out ratio
for enlarged group
Acquisition of Liberty Living
materially EPS enhancing
from 2020
Visible earnings growth
trajectory
Scalable operating platform
Strong development
pipeline, with capacity
to maintain development
run-rate of 2,000 beds p.a.
Further growth opportunities
emerging
35%
LTV target
+206%
Total shareholder return over
five years
5,191
new beds to
deliver by 2023
Read more on page 68
Read more on page 68
Read more on page 62
Other Information
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The Unite Group PLCAnnual Report & Accounts 2019 07
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“IfIhadanyissuesIcouldalwaysfindsomeoneto
helptoresolvethoseissuesasbestaspossible,
whichisalwaysagoodthingbecauseyoudon’t
wanttobestressedwhenyou’resettlingin.
Evennowthey’realwaystheretohelp.Itfeels
likelivingathome.”
Hassan
Student living in Birmingham
OUR PURPOSE IN ACTION
Creating a Home for Success for our
Students
Our continued research and insight programme, and almost 30 years’
experience give us a sector–leading knowledge of what students want.
This has helped us to build our student proposition and develop our brand
promises to ensure we create a Home for Success:
Getting settled in: making the leap to University and student life is a huge
transition, so we make every effort to help students settle in. Our enhanced
service platform makes student life hassle-free where we can help it, whilst
empowering students to live the student life they want to experience.
Feeling safe and secure: feeling comfortable in your accommodation is what
makes a place feel homely, so safety is our top priority.
Knowing someone’s there if you need them: not everyone needs support,
but even being aware of a safety net can inspire confidence, so we make
sure our students know we are there for them. Our in-app maintenance
reporting system allows students to log and track issues, with 80% being
fixed first time before the end of the next working day.
Read more on page 59
+19
Net Promoter score
75%
Students checked
in online where offered
the facility
Other Information
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The Unite Group PLCAnnual Report & Accounts 2019 09
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“Unitehavereallyworkedhardtoproperlyunderstand
therequirementsandtheneedsofourstudents.
I’mconfidentthatthestudentroomsthatUniteare
operatinganddevelopingfortheUniversityofLeeds
areprovidingourstudentswithcomfortable,
goodvalue,safeaccommodation.I’mreally
lookingforwardtotheopeningof
WhiteRoseViewinSeptemberthis
yearandtoworkingmoreclosely
withtheteamatUnitein
futureyears.”
Ian Robertson
Director of Residential &
Catering Services,
University of Leeds
OUR PURPOSE IN ACTION
Delivering exceptional student experience
for our
Partners
Our relationships with our University partners are crucial to us being
able to offer the best service to our students; an ambition shared by
our partners.
We work hard to create tailored plans with our University partners to ensure
students are aware of opportunities to enrich their student life and aid their
studies, making us the partner of choice to the strongest Universities.
We achieve this by offering the best properties in the best locations, with
enhanced service from our people. Our deep relationships allow us to grow
the proportion of beds in long-term nomination agreements that underpin
our security of earnings and visability of future growth. Our 2019 Higher
Education Trust score of 82, a rise of one-point from last year, shows that
our partners are confident in our ability to deliver a Home for Success to
their students.
Read more on page 14
82
Higher Education
Trust score
56%
of beds under
nomination
agreements
Other Information
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The Unite Group PLCAnnual Report & Accounts 2019 11
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“HomeforSuccessformeisallaboutthat
relationshipyouhavewiththestudents.
It’saboutwhentheywalkinandtheycall
youbyyourfirstnameandtheyarehappy
toseeyouandhappytobehome.”
Johnny
Unite Service and Sales Advisor
OUR PURPOSE IN ACTION
Creating a great place to work for our
People
78%
Employee
Engagement score
Real Living
Wage
Employer
As a service-focused business, our people are just as important as
our customers.
We are driven by our values and culture and are committed to developing a
diverse and inclusive organisation.
We hold Investors in People Gold status and are a Real Living Wage employer
whilst offering enriching employee benefits that create a healthy work/life
balance. We regularly review our people policies to ensure we are creating
an innovative platform from which our people can thrive.
Attracting the best people to the right roles is paramount as this drives
a strong internal culture, operational efficiency, and high performance
and engagement.
We provide work opportunities for 160 students through our Student
Ambassador programme. By paying the Real Living Wage, this provides
meaningful skills and career development opportunities.
Read more on page 83
Other Information
12
Chairman’s statement
2019 was a successful and transformational
year for Unite.
“Webelieveinacting
responsiblyand
sustainablyinall
areasofourbusiness
topromoteourlong-
termsuccessforall
key stakeholders.”
Phil White
Chairman
39.1p
34.1p
33.2p
29.0p
30.3p
27.7p
23.1p
22.7p
18.0p
15.0p
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
EPRA Earnings per share1,2 (p)
Dividend per share (p)
39.1p
33.2p
2019 was another successful year for Unite, building on our strong
foundations for growth. Our high-quality, well-located portfolio
produced a strong year of operational performance, delivering
across all of our key metrics. In addition, we leveraged our best-in-
class operating platform to make the transformational acquisition
of Liberty Living’s 24,000-bed portfolio. This is made possible by the
quality of our value-for-money product, our customer service, highly
committed people and our positive and growing reputation with
students and Universities.
Financial performance has once again been strong, with a total
accounting return of 11.7% and 15% growth in EPRA EPS to 39.1p. This
performance is underpinned by continued like-for-like rental growth,
further improvements to our operating margins and development
completions. Due to this positive performance, we are proposing a
final dividend of 22.95p, to deliver a total dividend of 33.2p for the
full year, an increase of 14% year-on-year.
1 The financial statements are prepared in accordance with International Financial
Reporting Standards (IFRS). These financial highlights are based on the European Public
Real Estate Association (EPRA) best practice recommendations and these performance
measures are published as they are intended to help users in the comparability of
these results across other listed real estate companies in Europe. The metrics are also
used internally to measure and manage the business and align to the performance
related conditions for Directors’ remuneration.*
2 2015 and 2016 EPS is based on an adjusted EPRA earnings. A full reconciliation of the
financial statements to the EPRA performance measures is set out in note 2.2 of the
financial statements.
* A full glossary of definitions is available on page 235 and 236.
The Unite Group PLC Annual Report & Accounts 2019 13
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Our strong performance is only possible because of the
talent and hard work of our teams across the business. On
behalf of the Board, I would like to thank them for another
excellent year. I would also like to take the opportunity
to welcome our new colleagues from Liberty Living. Our
acquisition brings together two high-performing companies
with an excellent track record of success, and I am very
excited by the opportunities that lie ahead.
I will be stepping down from the Board at the 2021 Annual
General Meeting, following completion of the integration
of the Liberty Living acquisition. Succession planning is
underway and the Nomination Committee will identify my
successor within the next 12 months. Sir Tim Wilson stepped
down from the Board at the end of the year after serving
nine years, and I would like to thank him for his significant
contribution to Unite. Dame Shirley Pearce DBE was
appointed to the Board in November and Professor Sir Steve
Smith will join in April 2020, both as Non-Executive Directors
who bring a wealth of experience in the Higher Education
sector. In addition, we are pleased to welcome Thomas
Jackson, head of CPPIB’s UK real estate business, as a Non-
Executive Director, following the acquisition of Liberty Living.
as environmental impact, diversity, affordability, mental
health and wellbeing. 2020 will see new sustainability
targets set for the enlarged business that recognise the
challenge of climate change and our role in helping more
young people access Higher Education and improving
outcomes for students.
The success of our business is founded on a clear strategy
and we will continue to deliver on its main objectives:
providing value-for-money accommodation that our
customers value; delivering quality buildings designed
around student needs; generating high-quality recurring
earnings; and maintaining a strong capital structure.
The outlook for our business remains positive, reflecting
increasing participation rates for UK Higher Education,
growing international demand and the shortage of fit-
for-purpose housing in the UK. While Brexit negotiations
and the Higher Education Funding Review create some
uncertainty, the Higher Education sector’s strong
fundamentals, our high-quality portfolio and pipeline,
University relationships and market-leading operating
platform, provide the foundations for continued growth.
We have a diverse and experienced Board who are
committed to promoting the long-term success of the
Company for the benefit of key stakeholders. We believe
in acting responsibly and sustainably in all areas of our
business and work to make a difference in areas as diverse
Phil White
Chairman
26 February 2020
Our people, values and culture
set us apart from competitors
Work
together
Be
better
Do what’s
right
See it
through
Have
fun
Read more about our People on page 83
14
The Unite Group PLC
Annual Report & Accounts 2019
University Partnerships
Our University partners are crucial to our long-term success and are a key
strategic advantage for us. Universities increasingly recognise the importance of
their accommodation options in attracting and retaining students. As we do, they
recognise student homes as a key part of a student’s experience at University,
allowing them to fully benefit from their investment in higher education. This has
led to a broad range of discussions around new opportunities with our University
partners, including increasing our long-term nomination agreements to secure
income for longer. Our University Partnership team is in continual dialogue with
our 45 partners to understand their needs and accommodation strategies, and this
informs our bespoke city-wide proposals to Universities.
For example, we have been working with the University of Bristol to assist them
in delivering their plans to cater for significant growth in student numbers in
a new University partnership agreement. We have agreed to deliver around
3,000 beds in multi-year nomination agreements across the city. This includes
comprehensive refurbishment plans across four assets to improve their
specification and the overall experience for students. The agreement also
includes long-term nomination agreements on two new development sites
in the city totalling around 1,100 beds. These buildings are being designed in
tandem with the University of Bristol, who have also supported our planning
proposals. One of those new developments is the Bristol Royal Infirmary (BRI),
a heritage-led redevelopment scheme of the old BRI building. It will provide 62
residential units alongside 416 beds for students, and the conversion of a Listed
chapel for community use. This scheme is now in the construction phase and will
be delivered for the University in time for the 2021/22 academic year.
We have also secured a new strategic 30-year nomination agreement with the
University of Leeds at our White Rose View development, completing in 2020.
Our latest Higher Education Trust score of 82, an increase of one-point on last
year and three-points over the last three years, not only shows that Universities
increasingly trust us as a provider of accommodation, but also shows that
Universities trust our offer to their students more than ever.
Following the acquisition of Liberty Living, the enlarged Group now has nearly
41,500 beds let under nomination agreements, deepening our key University
relationships. The acquisition brings relationships with new Russell Group
institutions, such as the University of Manchester, the University of Sheffield and
Cardiff University. This aligns with our aim to partner with high- and mid-ranked
Universities across the UK. The Liberty portfolio also broadens our product range,
including lower price points in some markets, helping to meet an increasingly
diverse range of student needs.
82
Higher Education
Trust score
88%
of our portfolio is
aligned to high-
and mid-ranked
Universities
45
University
partners
Do what’s
right
Strategic
report
16 Chief Executive’s review
26 Market overview
30 Our business model
32
Stakeholder engagement
34
Directors’ duties and Section
172 Statement
38 Our strategy at a glance
40 Key performance indicators
42 Risk management
44 Principal risks and uncertainties
56 Operations review
62 Property review
68 Financial review
74 Responsible business review
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Chief Executive’s review
We have maintained our focus on delivering sustainable growth in
recurring profits and cash flows over the long-term, and on delivering
a Home for Success for all who live with us.
“Ourstrongresultsremain
underpinnedbythequalityof
ourvalue-for-moneyproductand
thestrengthofourrelationships
withUniversities.Thesequalities
differentiateUniteinasectorthat
remainsundersuppliedandis
anticipatingstronggrowthinstudent
numbersoverthenextdecade.”
Richard Smith
Chief Executive Officer
I am pleased to report another strong year for Unite. We
have maintained our focus on delivering sustainable growth
in recurring profits and cash flows over the long term, and
on delivering a Home for Success for all who live with us. We
do this by providing valued customer service and operating
high-quality, affordable accommodation, designed
specifically for our customers’ needs. Our investment
discipline ensures we align our portfolio to the strongest
Universities, while maintaining a robust capital structure.
Strong performance in 2019 resulted in 15% growth in
EPRA EPS, reflecting continued like-for-like rental growth,
further improvements to our operating margins and
development completions. The loss before tax of £101.2
million is primarily the result of the impairment of goodwill
and intangibles of £384.1 million resulting from the share
component of our £1.4 billion acquisition of Liberty Living,
which was priced on a NAV-for-NAV basis. Excluding items
relating to the Liberty Living acquisition, profit before tax
increased to £305.3 million (2018: £245.8 million), reflecting
growth in EPRA earnings and higher revaluation gains from
the development pipeline. The security, quality and visibility
of our earnings provides the confidence to maintain our
dividend payout of 85% of EPRA EPS.
We also delivered another strong year of total accounting
returns. Looking forward, our acquisition of Liberty Living
will help to further enhance the income component of our
total returns.
Our key financial performance indicators are set out below:
Financial highlights
EPRA earnings
EPRA EPS
Dividend per share
EPRA EPS yield
Total accounting return
2019
£110.6m
39.1p
33.2p
4.9%
11.7%
2018
£88.4m
34.1p
29.0p
4.7%
13.2%
(Loss)/profit before tax
£(101.2)m
£245.8m
Profit before tax excluding
items relating to the Liberty
Living acquisition
Basic EPS
EPRA NAV per share
See-through LTV ratio
£305.3m
(31.5)p
853p
37%
£245.8m
90.8p
790p
29%
A reconciliation of (loss)/profit before tax to EPRA earnings is set out in
note 8 of the financial statements.
We will continue to focus on growing our earnings.
This is supported by our operational excellence and
development activities. We have a high degree of income
visibility through our nomination agreements and re-
bookers, as well as growing demand from international
and postgraduate students. The more effective utilisation
of assets also underpins our ability to grow income on an
annual basis, while ensuring the ongoing affordability of
our product. We see further opportunities to enhance our
operating margins, while also continuing to invest into our
service offer.
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3.8%
3.4%
3.4%
3.2%
15%
14%
13%
12%
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
EPRA Earnings per share1,2 (p)
Total accounting return* (%)
Rental Growth
39.1p
12%
3.4%
1 The financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS). These financial highlights are
based on the European Public Real Estate Association (EPRA) best
practice recommendations and these performance measures are
published as they are intended to help users in the comparability
of these results across other listed real estate companies in Europe.
The metrics are also used internally to measure and manage the
business and align to the performance related conditions for
Directors’ remuneration.*
2 2015 and 2016 EPS is based on an adjusted EPRA earnings. A full
reconciliation of the financial statements to the EPRA performance
measures is set out in note 2.2 of the financial statements.
* A full glossary of definitions is available on pages 235 and 236.
Our PRISM operating platform, coupled with our
experienced management and leadership teams, give us a
unique capability to drive value through scale efficiencies,
revenue management and utilisation, supporting our focus
on delivering sustainable growth in income. This capability
underpinned our £1.4 billion acquisition of Liberty Living
during the year and gives us confidence in delivering
material earnings accretion for the combined Group.
Development remains one of the core strengths of
our business and will significantly contribute to our
future earnings growth. We continue to see significant
development opportunities through University
partnerships and more traditional development activity,
driven by a positive outlook for student demand and our
established relationships in the real estate sector.
We remain focused on improving the quality of our
portfolio through our customer insight and extensive local
knowledge to align with the top performing Universities
and ensure that we are meeting our customers’ needs
within our markets.
Placing and acquisition of Liberty Living
In July, we announced our transformative acquisition of
Liberty Living’s 24,000-bed portfolio for £1.4 billion in a
NAV-for-NAV deal from Canada Pension Plan Investment
Board (CPPIB). The acquisition was funded through a
combination of cash and shares, including the £260 million
of gross proceeds raised through our successful 9.99%
equity placing in early July at a price of 985p per share.
17
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Chief Executive’s review continued
The acquisition utilises Unite’s best-in-class operating
platform, PRISM, to create a combined portfolio of 74,000
beds and valued at c.£8 billion (Unite share: £5.2 billion).
Liberty Living beds will be fully integrated into PRISM,
delivering £15 million of annual cost synergies from 2021.
Positive early progress on integration has increased
2020 cost synergies to £5–6 million. We expect to incur
integration costs of £7 million in 2020 to realise these
cost synergies.
The acquisition is materially accretive to EPRA earnings per
share from 2020 onwards and is broadly NAV-per-share
neutral. The acquisition has been conservatively financed,
resulting in an LTV of 37% for the combined Group at
the year end, which we intend to reduce to 35% through
disposals, development profits and valuation growth. The
acquisition completed at the end of November, following
unconditional approval from the Competition and Markets
Authority (CMA).
We have made significant progress in the first three
months of our ownership and we now expect to realise
overhead cost savings more quickly than initially expected.
In addition, we see opportunities over time for further
efficiencies in areas such as procurement and energy
efficiency in the Liberty Living portfolio.
We remain committed to combining the best of both
businesses and there have already been significant
operational learnings from our working with our new
colleagues. In particular, Liberty Living has fostered
excellent operational relationships with its University
partners which will complement the strength of our
existing strategic level relationships. The Liberty Living
acquisition also offers a wide range of properties, generally
at affordable price points. This is highly complementary
to our existing portfolio and University relationships and
creates the breadth of product to pursue opportunities
for customer segmentation. We may also incorporate
elements of the less-intensive operating model used by
Liberty Living in some locations, which is highly efficient
while still delivering positive student experience.
Home for Success
While Higher Education is not the only path to a fulfilling
and successful life, its capacity to improve the professional
and social outcomes of people from every walk of life
remains undiminished. This is increasingly recognised
by both young people and parents as reflected in record
participation levels, with 33% of UK 18-year-olds in 2019
choosing to make the investment in going to University,
up from 26% in 2010.
At the same time and in a highly competitive market,
we recognise that students are increasingly focused on
the value-for-money they get from this investment. This
underpins our determination to ensure Unite remains
positively differentiated from other operators by the
The Unite Group PLC Annual Report & Accounts 2019 19
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quality of the experience we offer. Central to this is our
continued investment in our brand and our people’s
commitment to our purpose.
Home for Success means providing a living environment
that enables students to get the very best out of their
time at University. With this in mind, we continue to
invest in the things that our extensive research tells us
matter most to students and the Universities we work
with: the smoothest possible transition to University life;
a home that is safe and secure; and ensuring that help
is on hand when needed. Our progress in delivering our
brand promises over the last year is demonstrated by
record customer satisfaction, Higher Education trust and
employee engagement as well as our achievement of a
Five-Star Occupational Health & Safety audit from the
British Safety Council.
Just as important as a great day-to-day living experience
is the overall value we offer students over the course
of their time with us. As a result, our properties are
located where students consistently tell us they want
to live: close to their University, public transport and
other amenities. The design of our properties reflects a
detailed insight into what students want, with common
areas where they can relax and socialise, study areas and,
in most cases, outside space. Our portfolio includes a
range of different accommodation types but 91% of our
students live in shared flats with ensuite bathrooms, a
shared kitchen and common living space. We know this
is how most students prefer to live and also best meets
the requirements of our University partners. Over the
last year, to ensure our common rooms remain in step
with the changing lifestyles and preferences of students,
we have involved students and Universities in testing a
number of innovations in design, layout, specification
and fit out, and rolled out these initiatives across a
number of properties.
Not all students are the same and we therefore offer
a range of different price points and tenancy lengths
to meet their varied requirements. Our rents include
all utility bills and service charges, high speed Wi-Fi,
full contents insurance, a rapid response maintenance
service, round-the-clock security, a 24/7 call centre,
access to our market leading welfare service and the
MyUnite app. As well as a wealth of useful information
about student living, this bespoke digital platform
provides quick and efficient access to key services.
Collectively, these services help students avoid many of
the direct and indirect costs, as well as the administrative
hassle and hidden costs, they may encounter while living
in private accommodation.
The integration of the Liberty Living business provides the
opportunity to deliver an even better Home for Success to
more students more efficiently.
Common room in Horizon Heights, Liverpool
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Transformational acquisition of Liberty Living’s
24,000 bed portfolio.
In July we announced the £1.4
billion acquisition of Liberty Living.
We have held a great respect
for Liberty Living, regarding
them as another industry leader
with similar values and focus
on customer service, University
relationships and safety.
We completed the acquisition from
Canada Pension Plan Investment
Board on 29 November, following
an unconditional approval from
the Competition and Markets
Authority (CMA).
The acquisition brings our total
number of beds up to 74,000, in
177 properties in 27 University
towns and cities across the UK.
Our increased scale means we can
offer a Home for Success to even
more students and nurture stronger
long-term University partnerships.
At the same time, we will reduce
operating costs and overheads in the
Liberty Living portfolio, to deliver £15
million of annual cost synergies from
2021. Liberty Living will be integrated
into our best-in-class operating
system, PRISM. The combination will
give more students access to our
MyUnite app and welfare services.
74,000
Beds
across the enlarged
Unite Group
177
Properties
in 27 University towns and
cities across the UK
“Thisdealbringstogethertwo
complementarybusinesseswhoshare
acommitmenttoprovidinghigh-quality,
affordablestudentaccommodationwitha
focusonserviceandwelfareandastrategic
alignmenttoUniversitieswherestudent
demandisstrongest.”
Richard Smith
Chief Executive Officer
The Unite Group PLC Annual Report & Accounts 2019
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Chief Executive’s review continued
Safe and secure
Safety forms a key part of how we operate as a responsible
business, underpinned by our commitment to go above
and beyond minimum standards to provide the safest and
most secure environment for our students and employees.
As a result, I am delighted that we have achieved a Five-star
audit rating (out of five) from the British Safety Council (BSC)
following an Occupational Health & Safety audit in November.
The audit measures our performance against a number of
key safety management indicators, providing organisations
with a worldwide benchmark of their safety management
systems against current best practice to enable continual
improvement. This result reflects significant improvement
from our last audit 18 months ago, where we were awarded
a Four-star rating.
This achievement is the culmination of hard work and
investment, including additional health and safety resource
and improved accountability and ownership of health
and safety across the business. The hard work does not
stop here and we remain absolutely committed to both
understanding how we keep our students and employees
safe, and executing this to the very best of our ability.
Fire safety is a critical part of our health and safety strategy.
Our fire safety plans involve engagement with our primary
authority, the Avon Fire & Rescue Service, and local fire
brigades as well as input from independent fire safety experts
who conduct annual assessments of our portfolio and have
confirmed that all our properties are safe for occupation.
We also work closely with the Ministry of Housing,
Communities and Local Government (MHCLG) to ensure
our properties comply with emerging guidelines. As part of
this, following the tragic events at Grenfell Tower, we have
removed Aluminium Composite Materials (ACM) cladding
from our buildings where needed, in line with Government
advice. We take fire safety extremely seriously and are at
the forefront of new improvements, being one of the first
to act on ACM advice. More recently, and in accordance with
the Government’s Building Safety Advice of 20 January 2020,
we are undertaking a thorough review of the use of High-
Pressure Laminate (HPL) cladding on our properties.
We have identified 19 properties with HPL across our estate,
all but three of which are greater than 18 metres in height.
The majority of buildings have minimal HPL, covering less
than a quarter of the buildings.
Tests of the materials and cladding systems are being carried
out for each property. All our buildings have been confirmed
safe for students to occupy by independent fire safety
experts. In addition, special measures have been put in place
at the affected buildings, including increased building patrols
by staff and additional alarm measures, and we will remove
this cladding where it fails to meet the new requirements.
The Unite Group PLC Annual Report & Accounts 2019 We are committed to doing what’s right, in line with our
values. We do not expect there to be any building closures
related to these works.
The cost of replacing the HPL cladding is expected to be
£15–20 million (Unite share), which will form part of our
capex programme for investment properties. We expect
this spend to be incurred over the next 12–24 months, with
activity prioritised according to our risk assessments. If we
are successful in claims under build contracts, the cost for
Unite could be lower than this figure.
Partner of choice for Universities
Our reputation with partner Universities is a key strategic
advantage for Unite. The results of our latest independent
Higher Education trust survey show that our reputation with
Universities across the UK is at record levels. This is leading
to a broad range of discussions about new opportunities
with our University partners. In a highly competitive
environment, Universities increasingly recognise the
importance of high-quality accommodation in their ability
to attract and retain students and ensure their satisfaction.
Universities typically seek to guarantee accommodation for
all first year and international students, recognising that
housing helps students settle into University life and forms
an important part of their offer to students.
Unite is increasingly viewed as a strategic partner by
Universities in delivering their long-term accommodation
strategies, building on our best-in-class operating platform
and the commitment of 1,900 people whose understanding
of students is informed by our almost 30-year history in the
Higher Education sector.
We put these capabilities at the disposal of Universities
through a sustained engagement programme, spanning
multiple levels and functions within Universities. Our
local management teams work closely with University
accommodation offices, student services and sustainability
teams to ensure we fully meet their requirements on a
day-to-day basis. A dedicated University engagement
team, meanwhile, maintains regular contact with Vice-
Chancellors and their leadership teams to ensure we
fully understand – and can contribute to – their long-term
ambitions and strategy.
Following the acquisition of Liberty Living, the enlarged
Group now has nearly 41,500 beds let under nomination
agreements with 45 of the UK’s leading institutions. The
acquisition deepens some of our key University relationships
and brings new relationships with Russell Group institutions
such as the University of Manchester, the University of
Sheffield and Cardiff University. The Liberty Living portfolio
broadens our product range, including lower price points in
some markets, helping us meet demand from Universities
for high-quality, affordable accommodation.
For the 2019/20 academic year, 56% of the combined
Group’s beds are let under nomination agreements
(2018/19: 60%), reflecting a lower level of nominations
in the Liberty Living portfolio. This compares to just
over 20% of beds under nomination agreements
among our peers in the corporate Purpose-Built Student
Accommodation (PBSA) sector. With an average remaining
life of six years, our multi-year nomination agreements
provide us with visibility for average annual rental
growth of 3.0% over the next five years at current
levels of inflation and utilisation.
During 2019, we secured two further long-term
University partnerships with the University of Bristol
and the University of Leeds. These agreements will
further enhance the alignment of our income to high-
and mid-ranked Universities. We are also in active
dialogue with 11 Universities over potential partnerships,
covering nearly 24,000 existing and new beds. These
discussions often cover a range of potential solutions
on a city-wide basis, including multi-year nomination
agreements for our existing operational assets,
on-campus and off-campus developments and
stock transfer/outsourcing arrangements.
Operating quality buildings
The quality, location and scale of our portfolio is a
key component of our business model and long-term
strategy. We aim to operate high-quality, affordable
buildings and offer a range of price points to meet the
needs of different students. Our properties are located in
and around leading Universities where student demand is
strongest. We believe that our focus on these institutions
is the best strategy for driving continued high levels of
occupancy and rental growth. We are therefore focussing
our portfolio activity on further improving alignment
to high- and mid-ranked Universities and being in the
best locations. For the 2019/20 academic year, 88% of
our income is generated by students attending such
Universities (2018/19: 90%). This alignment has been
modestly diluted by the acquisition of the Liberty Living
portfolio but will be enhanced by our development
pipeline and planned disposals.
During 2019, in addition to the Liberty Living acquisition,
we opened 2,390 new beds, added 456 beds to our
portfolio through acquisition and sold 1,127 beds to
third parties. Taking into account these activities and
the acquisition of Liberty Living, together with valuation
movements, the value of our investment portfolio
(including our share of USAF and LSAV) is £4.7 billion
as at 31 December 2019 (2018: £2.7 billion).
23
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Chief Executive’s review continued
We made excellent progress in our development pipeline
during the year. We delivered three buildings on time and
budget for the 2019/20 academic year, with approximately
70% of the beds secured under nomination agreements
with an average life of 16 years, supporting our quality
of income. Planning consents and build contracts are
in place for all 2020 and 2021 deliveries and plans for
schemes to be delivered in 2022 and 2023 are being
progressed. We intend to maintain a development run-
rate of approximately 2,000 beds or £150–200 million of
annual capital expenditure, with opportunities once again
emerging in London following a softening in land values.
London remains our most under-supplied market, with
some of our strongest University relationships.
Disposals remain an important part of our strategy and
we will continue to recycle assets out of our portfolio to
ensure that we increase our exposure to the UK’s best
Universities, while generating capital to invest in further
development activity and other investment opportunities.
During the year, we completed £298 million of disposals
(Unite share £249 million) in line with book value, across
seven properties at a blended yield of 5.7%.
We intend to sell a further £150–200 million of assets per
annum (Unite share) in both 2020 and 2021, including some
assets acquired with Liberty Living, to help reduce our LTV
from 37% at the year end to its medium-term target of
35%. This disciplined approach to portfolio optimisation
underpins our ability to sustain rental growth over a longer
time horizon and fund the development pipeline.
Unite as a responsible business
We believe in acting responsibly and sustainably in all areas
of our business. Our Up to uS programme works to make
a difference in areas including our environmental impact,
diversity, affordability, mental health and wellbeing. We
look to engage with our multiple stakeholders to inform
our strategy and understand how we can sustainably
deliver value over the long term.
We continue to invest in our portfolio to improve our
energy efficiency, through initiatives such as smart
building controls, solar panels and air source heat pumps.
In addition, there are opportunities to roll out a range
of energy efficiency measures across the former Liberty
Living estate. We are committed to acquiring 100%
renewable energy, which has contributed to reductions
in our carbon emissions, and recently signed a Power
Purchase Agreement to buy around 30% of our electricity
from a dedicated wind farm in Scotland (excluding Liberty
Living properties). In addition, we work with the National
Union of Students (NUS) through their Positive Impact
Awards to encourage environmentally friendly living habits
by our customers as they live independently for the first
time in many cases.
We also believe strongly in delivering social value by
supporting Universities to widen participation into
Higher Education and helping to improve outcomes for
students. The Unite Foundation works in partnership
with 27 Universities to provide support to students
from challenging backgrounds and is providing financial
support to 189 students for the 2019/20 academic year.
We accelerated the national roll out of our Leapskills
programme for school leavers in 2019 and continue to
connect students to prospective employers through our
Placer app.
We want to be a great place to work and are committed to
creating diverse and engaged teams. We are an accredited
Real Living Wage Employer and hold the prestigious
Investors in People Gold Standard accreditation, reflecting
our focus on recruiting, retaining and developing the very
best people. We also employ around 160 of the students
who live with us as Ambassadors, providing meaningful
employment and development opportunities for young
people each year.
Our sustainability performance is reflected in achieving the
leading GRESB performance in the listed residential sector
in Europe and a three-star rating, our AA rating from MSCI
and a Most-Improved Award under EPRA’s Sustainability
Best Practice Recommendations.
2020 will see the launch of a dedicated sustainability
report as we look to provide greater transparency and
accountability around our ESG initiatives. We plan to
introduce stretching new carbon targets for our enlarged
business and will also adopt the recommendations of the
Task Force on Climate-related Financial Disclosures (TCFD).
Growing demand for Higher Education
The outlook for student accommodation remains
positive, with structural factors continuing to drive a
demand-supply imbalance for our product. The UK
Higher Education sector is recognised globally for the
strength of its Universities and the contribution it makes
to research, innovation, talent development and the UK
economy and our society more broadly. The UK is the
second most popular destination for international students
and 28 UK Universities feature in the top 200 of the QS
World University rankings. Unite works with 21 of these
institutions.
Demographic pressures, resulting in a shrinking
18-year-old population since 2015, reverse rapidly from
2021. Participation rates also continue to grow, reflecting
the value young adults place on a higher level of education
and the financial stability it offers. Moreover, the
Government is targeting a 115,000 increase in international
student numbers by 2030, which will be aided by the
launch of a new two-year post-study visa for the 2020/21
The Unite Group PLC Annual Report & Accounts 2019 participation in post-18 education to remain a key part of
the Government’s education strategy. Our alignment to
and relationships with the best Universities, as well as our
focus on delivering affordable, value-for-money homes for
our customers, positions us well to navigate any changes.
There are significant growth opportunities available to the
Group, created by increasing student numbers and the
growing awareness of the benefits of PBSA among non-
first year students. We continue to see opportunities for
new developments and University partnerships, building
on the strength of our brand in the sector and the need of
Universities to deliver on exceptional student experience
in a competitive HE environment. We are one of the largest
operators of rented residential accommodation in the
UK and our operating capabilities provide us with a real
opportunity. We see the potential to segment our existing
customer proposition to better meet student needs and
extend our offer to new customer groups.
Despite some uncertainty created by Brexit, the review of
Higher Education funding and Coronavirus outbreak, the
outlook for demand remains strong. The early strength
of applications data and reservations for the 2020/21
academic year are supportive of rental growth of
3.0–3.5% through a combination of value-driven price
increases and improved utilisation. We are also confident
in the medium-term outlook for earnings growth. Rental
growth, together with cost synergies from the Liberty
Living acquisition and new openings net of planned
disposals, could add 16p to 20p to EPS on completion
of our secured pipeline. This supports attractive total
returns, through a balance of growing recurring income
and NAV growth.
Richard Smith
Chief Executive Officer
26 February 2020
academic year. JLL forecasts a 335,000 increase in full-time
student numbers by 2030 on the assumption of current
participation rates. Given constraints on new supply of
University-owned stock and private-rented housing, the
vast majority of this new demand will need to be met by
corporate PBSA providers.
The Government’s response to the Augar Report on post-18
education and funding is expected later this year. We are
encouraged by the Government’s desire to strengthen
the global standing of the UK Higher Education sector and
increase and widen participation in post-18 education.
Brexit will have a negative impact on EU student numbers
from 2021/22, which accounts for 9% of our customers,
due to the potential loss of ‘Home’ fee status and access
to a tuition fee loan for EU students. We expect a 30%
reduction in demand from EU students, equating to just
under 3% of our customer base by 2023/2024. However,
we are confident in our ability to absorb this impact thanks
to the coinciding demographic growth for UK students and
the more accommodating visa policy for non-EU students.
Coronavirus
We continue to monitor the situation regarding the
outbreak of the Coronavirus, with the safety and wellbeing
of our students and employees our top priority. We
have been in contact with Public Health England since
late January and are closely following their guidance, as
well as that of the World Health Organisation. We have
robust contingency plans in place and are taking steps to
ensure our students have access to the most up-to-date
information and advice.
To date, we have not seen a negative impact on
reservations from international students for the 2020/21
academic year. We are monitoring the potential risk to our
2020 summer income and 2020/21 academic year income
in the event of ongoing disruption. We will continue to work
on mitigating actions and monitor the situation. We will
provide an update if appropriate.
Outlook
The outlook for the business remains positive. Building
on the foundations of the sector’s strong fundamentals
and our best-in-class operating platform, the Group is
well placed to deliver sustainable earnings growth in the
years ahead. Higher Education policy is likely to evolve
during the current Parliament, but we expect increased
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Market overview
Unite operates in a sector that remains undersupplied
and is anticipating strong growth in student numbers
over the next decade.
Record student numbers and
participation rates
Full-time student numbers reached
record levels at nearly 1.9 million for the
2018/19 academic year. The number of
applicants and the number of students
accepted onto courses in 2019 was
706,000 and 541,000 respectively
(2018: 696,000 and 530,000). A 1.5%
YoY increase in acceptances was driven
by a record participation rate among
UK 18-year-olds and a 7% increase in
acceptances from non-EU students.
The initial applications data for the
2020/21 academic year is encouraging,
with overall applications up 1.2%.
A further increase in application
rates has helped to offset the lowest
point in the demographic dip for
UK 18-year-olds. Growth has come
from a record number of non-EU
applicants (+14.7%), primarily driven
by increases from China and India.
Student demand remains strongest
for higher-tariff Universities, which
have seen applications increase by 4%
YoY, in contrast with broadly stable
applications for medium- and lower-
tariff Universities. This is consistent
with our strategic focus on partnerships
with the strongest Universities where
student numbers are growing.
The medium-term outlook for student
numbers is strong. Demographic
pressures are forecast to reverse
significantly from 2021, with the
18-year-old population returning to
2010’s height by 2024 and continuing
to grow strongly thereafter. This would
imply demand for 213,000 additional
UK undergraduate places by 2030 at
current participation rates. High-tariff
Universities have been the major
beneficiaries of growth in student
numbers since number caps were
removed in 2012. Looking forward,
we expect the return to demographic
growth to bring greatest benefits to
medium-tariff Universities, as high-
tariff institutions look to strengthen or
maintain their entry requirements.
In addition, the UK Government’s
international education strategy
is targeting a 25% increase in the
number of international students to
600,000 by 2030. In September 2019,
the Government announced a new
two-year post-study work visa for
international students to be launched
for the 2020/21 student intake. The
new visa would replace the existing
Tier 4 student visa, which typically
entitles international students to
remain in the UK for four months
following completion of their course.
The change is expected to improve the
UK’s international competitiveness in
the Higher Education sector, helping to
attract more students from China and
improve the UK’s share of international
students from India, Hong Kong,
Singapore and the Middle East.
Higher Education policy
The Augar review of post-18 education
and funding was published on 30 May
2019. The report contained a number of
recommendations to the way the Higher
Education sector is funded, including:
a reduction in the maximum annual
amount of tuition fees payable by UK
students from £9,250 per annum to
£7,500 per annum; the reintroduction of
means-tested maintenance grants of up
to £3,000 per annum; and an increase in
the period before which student loans
are written off after graduation from 30
years to 40 years.
A student survey by the Higher
Education Policy Institute (HEPI)
revealed that students’ views are
mixed between the current tuition fee
model and Augar’s recommendation
to lower headline fees: 40% prefer the
current system of £9,250 paid back
over 30 years; 41% prefer Augar’s
approach of £7,500 paid off over 40
years; and 18% have no preference
between the two. More significantly,
79% of students say the level of interest
charged on their tuition fee loan is one
of the most important aspects of the
funding system.
The Government has promised to
carefully consider the recommendations
of the Augar Report on tuition fee
levels with a view to reducing the debt
burden on students. In addition, the
Government will consider the balance of
funding between Universities, Further
Education, apprenticeships and adult
learning. We also expect an increased
focus on the value-for-money delivered
by Higher Education institutions and
purpose-built student accommodation.
The Government recently confirmed
that the review of fees and funding will
take place alongside the next spending
review later in 2020.
UK 18-year old population and participation rate
000s
900
850
800
750
700
650
18-year-old population (LHS)
Participation rate (RHS)
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
F
0
2
0
2
F
1
2
0
2
F
2
2
0
2
F
3
2
0
2
F
4
2
0
2
F
5
2
0
2
F
6
2
0
2
F
7
2
0
2
F
8
2
0
2
F
9
2
0
2
F
0
3
0
2
Source: ONS, UCAS, Unite
38%
36%
34%
32%
30%
28%
The Unite Group PLC Annual Report & Accounts 2019 27
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We remain confident that our strategy
of delivering high-quality, affordable
homes for students and relationships
with the best Universities in the UK
positions us to successfully navigate
future policy changes in these areas.
Awaiting clarity on Brexit
While the impact on student numbers
of the UK leaving the EU is difficult to
predict, the number of EU students
studying in the UK continued to
grow from 108,000 in 2014/15 to
129,000 in 2018/19, made up by
94,000 undergraduates and 35,000
postgraduate students.
The near-term outlook for EU students
has been supported by the Government
announcement that students from the
EU starting their courses in 2020/21 will
have current funding arrangements
guaranteed for the duration of their
degrees, meaning that the full impact
of any new funding arrangements
following the UK leaving the EU will not
take effect until 2023/24.
Following Brexit, there is a risk that
tuition fees for EU students will
rise from £9,250 to the higher rates
currently paid by non-EU students, as
well as EU students no longer having
access to a tuition fee loan. As a result,
we are forecasting a 30% decline in EU
undergraduates by 2023, equating to a
fall of around 2% of total students.
The terms of the EU withdrawal
agreement outline that the UK will
continue to participate in the EU’s
current Erasmus+ and Horizon 2020
Research and Innovation programmes.
The Government has also stated that
participation in successor programmes
to Horizon 2020 and Erasmus+
will be discussed during transition
period negotiations as details of the
new programmes emerge. Despite
the uncertainty this creates, we are
encouraged by the Government’s
stated desire to maintain and
strengthen the UK’s global position
in Higher Education.
Sustainable rental growth
The UK PBSA market delivered rental
growth of 2.6% for the 2019/20
academic year (Cushman & Wakefield),
a modest reduction on the 2.8%
delivered in 2018/19. Beds under
nomination or lease agreements
produced rental growth of 3.3% in
2019/20, above the 2.3% rental growth
delivered by direct-let beds. This
reflects pressure on direct let rents
in some mature markets adjusting to
competition from new supply.
We remain focused on providing
a cluster-led ensuite product at
more affordable price points, which
aligns with the requirements of our
University partners.
For the 2019/20 academic year, average
weekly ensuite rents for corporate
PBSA ranged from £120–170 per week
in major provincial markets and £232
per week in London. This compares to
Unite’s average ensuite rent of £138
in provincial markets and £221 in
London. The largest segment of PBSA
demand remains at a price point of
between £100 to £150 per week, where
there is also the opportunity to attract
more non-first year students from the
private rented sector. 66% of Unite
beds in provincial markets are priced
below £150 per week.
Current UK inflation implies a slight
reduction in rental growth from
multi-year nomination agreements
with fixed or inflation-linked annual
rental increases for 2020/21 to
around 3%. However, we remain
confident in delivering rental growth
across the portfolio of 3.0–3.5% for
2020/21 through further utilisation
enhancements and value-driven
price increases.
Sources of demand and supply
2,000,000
1,500,000
1,000,000
500,000
Other UK
Undergraduate –
828,000
Live at
Home –
368,000
UK Postgraduate –
162,000
HMO –
865,000
UK 1st year +
International –
893,000
PBSA –
650,000
0
Demand
Supply
Source: Unite, JLL, HESA
Increasing focus on value-
for-money
The Augar Report also underlines that
Universities retain a responsibility
for delivering value-for-money to
students, which includes University
accommodation, and recommends that
the Office for Students should examine
the cost of student accommodation
more closely to improve the quality and
consistency of data. A recent survey of
60,000 students by Knight Frank and
UCAS underlined that value-for-money
is the most important factor influencing
students’ decisions on where to live.
Accommodation choice is not entirely
driven by cost, with students willing
to pay a premium for certain features
and amenities.
We will continue to offer a range of price
points to meet the needs of different
customers and demonstrate the value-
for-money that living with Unite offers
by delivering the services that students
and our University partners’ value.
These include: all-inclusive bills and high-
speed Wi-Fi; hassle-free administration;
committed and highly trained staff on
hand when they’re needed; a range
of proprietary digital platforms; rapid
response maintenance; and 24/7
emergency support.
28
Market overview continued
Adjusting for all-inclusive bills in Unite properties and
shorter average tenancy lengths than HMOs, the cost of
our accommodation is around 8% more expensive than the
private-rented sector in our provincial markets. This equates
to £10 more per week for the additional service and product
features we provide. This includes the quality of our locations,
communal study spaces, ensuite bathrooms and hassle-
free offer, which can positively impact wellbeing and allows
students to focus on what is important. We are confident in
the value-for-money our service provides to students.
The Augar Report recognised the improvement in quality
of student accommodation over the past 20 years, through
a growing proportion of ensuite and studio rooms and
improved amenity space. The average weekly cost of a new
PBSA bed space delivered in 2019/20 was £149, according to
Cushman & Wakefield, which when adjusted for inflation is
just over £1 higher in real terms compared to 2016. Cushman
& Wakefield analysis suggests that the overall quality of new
beds delivered in 2019 was 6% higher than 2018 deliveries
when adjusting for features such as bed size, storage space,
natural light and common space.
Capital traded in UK student accommodation sector
7
6
5
n 4
b
£
3
2
1
0
Liberty
Living
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: CBRE
Strong investment appetite
The PBSA continues to perform well. Strong fundamentals
and a track record of consistent rental growth continue to
attract significant volumes of capital, despite a reduction in
investment volumes in the wider UK real estate sector due
to political uncertainties. Approximately £3.1 billion of assets
traded in 2019 (CBRE), excluding our acquisition of Liberty
Living’s £2.2 billion UK portfolio. This is lower than the high
levels seen over recent years, due to less stock coming to
market following a period of consolidation by larger operators
and Brexit-related uncertainty.
There is still a strong appetite to deploy capital in the sector,
with investment demand principally coming from international
or institutional investors. As the sector has matured, investors
have become more focused regarding strength of location, the
health of local Universities, building amenities and fire safety.
We also see a focus on operating platforms and scale, which
continues to drive the consolidation of the sector in the UK.
New entrants to the PBSA market and institutional investors
generally lack management or development platforms.
Hence, a number of recent transactions have been structured
as sale and management agreements, incorporating a mix of
operational and pipeline assets.
Average weekly accommodation cost (UK excl. London)
£140
£120
£100
£80
£60
10
13
113
136
Unite
HMO sector
Source: Unite, Rightmove, Save the Student
Yields remain well supported
Rent
Bills
Service premium
Adjusted to 43-week average
tenancy length
Yields in the sector have slightly reduced over the past
year, reflecting investor demand and the attractive income
characteristics of the sector. However, we have witnessed a
growing divergence in pricing between prime and secondary
markets. Prime London assets have seen further yield
compression, with transaction evidence setting a new
benchmark yield of sub-4% in zone 1 locations in London. In
addition, there remains significant investor focus on prime
provincial markets such as Edinburgh, Bath, Bristol, Oxford and
Manchester where student demand remains strong and there
are most competing uses for land.
Demand for secondary and tertiary assets has reduced,
resulting in yields in some provincial markets drifting higher.
This reflects a weakening demand-supply balance in some
cities aligned to lower-ranked Universities. However, we
consider income performance and asset pricing to be well
supported in good-quality secondary markets, particularly for
affordably priced properties which remain fully let and have
greatest potential to attract students from the private rented
sector.
Looking forward, we see yields remaining broadly stable
in 2020, albeit with continuing polarisation between prime
and secondary markets in a competitive market for student
numbers.
An indicative spread of direct-let yields by location is outlined
below:
London
Prime provincial
Major provincial
Provincial
31 Dec 2019
31 Dec 2018
3.75–4.25%
4.5–5.0%
4.0–4.50%
4.5–5.0%
5.25–5.75%
5.25–5.75%
6.25–6.75%
6.0–6.5%
The Unite Group PLC Annual Report & Accounts 2019
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New supply reliant on corporate PBSA providers
The PBSA sector now provides homes to over 650,000 students,
representing around one-third of the UK’s student population.
At this level, there still remains a 243,000 shortfall in beds
compared to the numbers of first-year and international
students, before taking account of the increasing numbers
of second and third-year students who are choosing this
type of accommodation.
2019 saw the delivery of an additional 32,000 beds across 40
different UK markets, of which 73% was delivered in the 27
cities in which Unite operates. Some provincial markets saw
high concentrations of new completions in the year, including
Sheffield, Liverpool and Newcastle, which has depressed rental
growth and occupancy as new supply is absorbed. Studios
accounted for around a third of the new deliveries, consistent
with recent years, leading to an over-supply of more expensive
product in some cities.
Around 7,000 beds left the market in 2019 driven by
obsolescence, resulting from the delivery of new product.
Closures have been concentrated in ageing University-owned
stock, 50% of which is now over 20 years’ old (Cushman &
Wakefield). The majority of new deliveries now offer large
common spaces and Cushman & Wakefield reports that 95% of
all new beds delivered in 2019 offer a three-quarter double bed
or larger.
The corporate PBSA sector accounted for 87% of the beds
delivered for the 2019/20 academic year, the highest proportion
of new beds on record according to Cushman & Wakefield,
underlining the corporate sector’s importance in helping to meet
the growing need for student accommodation.
A number of new openings for 2019 were impacted by late
delivery, meaning that affected students were required to find
temporary accommodation for the start of their courses. All of
Unite’s new openings were delivered on time for the 2019/20
academic year, continuing our long-term track record in the
sector. We work closely with our University partners and supply
chain to ensure our new developments deliver the student
experience expected by our customers. This is recognised in our
success in securing nomination agreements on around 65% of
new beds delivered by the business in the past five years.
We expect new supply will moderate to around 25,000 beds in
2020 and reduce further thereafter as certain larger provincial
markets adjust to recent new supply and planning policy
becomes more restrictive towards PBSA. The new London Plan
requires new student accommodation to secure a nomination
agreement with one or more Higher Education providers as well
as the provision of at least 35% of units at affordable student
rents. Moreover, local authorities are increasingly keen to
promote new supply in the Build-to-Rent (BTR) sector, which is
creating increased competition for development sites in major
UK cities. We are also witnessing a growing trend for mixed-use
planning consents, incorporating BTR residential homes and
co-living alongside student accommodation. The combination
of these factors increases barriers to entry for new PBSA
supply, but plays to the strengths of our long-held University
relationships and highly experienced development team.
2019/20 rental growth (Unite vs market)
6%
5%
4%
3%
2%
1%
0%
4.8%
3.4%
2.9%
3.4%
2.6%
Wholly
owned
USAF
LSAV
Group
Market
Source: Unite (Like-for-like properties excluding Liberty Living), Cushman & Wakefield
Development costs relatively stable
Activity in the UK construction sector remains in modest
decline, with new orders declining in the second half of 2019.
However, optimism has rebounded following greater clarity
around Brexit and the election result, which has the potential
to increase order books through 2020. Lower activity has
seen input cost inflation ease; however, this has been offset
by pressures on labour costs, reflecting structural shortages
in some skilled trades. Overall, we anticipate build cost
inflation of 1.5–2% in 2020 and 2–3% in 2021.
Land prices have remained relatively stable in regional
markets despite improvements in PBSA valuations. This
reflects some caution on the part of developers given
heightened levels of recent political uncertainty. Land price
inflation has been particularly muted for larger sites capable
of delivering greater than 500 beds, which remain the target
for our land purchasing. In London, land values have softened
over the past year as a result of depressed activity in both the
office and built-for-sale residential sectors. This has improved
the viability of student accommodation in zones 1 and 2 in
central London, where we once again see opportunities to
acquire sites which meet our hurdle rates for development.
The depth and duration of this opportunity is uncertain given
improving sentiment and transaction levels in other sectors
following the General Election, which may create more
competition for development sites.
66%
of Unite’s provincial
beds priced below
£150 per week
30
Our business model
Our Home for Success, delivering for our students and
University partners, our employees and our investors.
Our core principles
How we create value
What we do
Focus on
UK student
accommodation
Alignment to
the strongest
Universities
Affordable price
points, focused
on shared living
High-quality,
well-located,
purpose-built
homes
Disciplined capital
management,
new capital to
pursue growth
opportunities
Acting
responsibly
and sustainably
Best-in-class
operating platform
Unrivalled scale
and efficiency
74,000 beds
1,900
committed people
56%
of beds under
nomination
agreements
Unique insights
and expertise
Strategic
partnerships with
45 Universities
OPERATE
We operate and manage 74,000 beds
across the UK. Our scale and PRISM
operating platform allows us to deliver the
best customer service and efficiencies.
INVEST
We seek to continuously enhance our
portfolio through acquisition, refurbishment
and disposal activity, to ensure we have the
best buildings and remain aligned to the
strongest Universities.
Our development activity delivers new
beds in supply-constrained markets.
PARTNER
We partner with Universities to deliver
their long-term accommodation strategies,
helping them to attract and retain
students while delivering exceptional
student experience.
Our Higher Education Engagement
Team work closely with Universities to
identify new opportunities for University
Partnerships.
The Unite Group PLC Annual Report & Accounts 2019 What we deliver
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Our students
A home that is safe
and secure with
support when
it’s needed
Our Universities
A trusted partner,
helping to attract
and retain students
Our people
Diverse and
engaged teams
Our investors
Superior total
returns through
recurring income
and capital growth
85
Customer Satisfaction
Score
82
Higher Education
Trust Score
78%
Employee Engagement
Score
24%
Compound annual
dividend growth
since 2014
32
Stakeholder engagement
Below are our key stakeholder groups and how we engage with them. We approach each group
with a tailored response to their needs, ensuring we can continue to provide a Home for Success,
in a safe and secure manner that is mutually beneficial to our stakeholders whilst contributing
positively to our local communities and achieving long-term sustainable returns for our investors.
Our Students
Why we engage
How we engage
With almost 30 years of
Our purpose of creating a Home for Success influences all areas of our student
experience, and deep insight
engagement. This includes helping students to prepare for University life through our
and research programmes,
Leapskills programme and, once they move in with us, providing peer-to-peer support
we are experts when it comes
through our Student Ambassadors and other useful advice through digital services
to understanding students’
accessible through the MyUnite app.
evolving needs. This unique
standpoint helps us to ensure
our students get the most out of
their University experience and
differentiates us by delivering a
better Home for Success.
As well as satisfaction surveys of our own students, we run bespoke annual research
programmes to gain insights into the expectations, needs and priorities of the wider
student population. We also ask students what they want from their accommodation,
using their views to shape our new building designs. We also work with the NUS to
encourage environmentally friendly living habits by our customers through our Positive
Impact scheme.
Our Universities
We aim to be not just a supplier
We maintain regular contact with our partner Universities at multiple levels. Our local
but a strategic partner to
management teams work closely with University accommodation offices, student services
the strongest Universities.
and sustainability teams to ensure we fully meet their requirements on a day-to-day basis. A
We invest in understanding
dedicated Higher Education Engagement team is in regular contact with Vice Chancellors and
individual institutions’ long-term
their leadership teams to ensure we fully understand their long-term ambitions and strategy.
aspirations, accommodation
requirements and service
expectations. This means
our offer is built around the
priorities of students and
Universities alike.
Our deep research programmes help us create sector leading materials to communicate
what students want to the HE sector as a whole. Our latest student research, titled ‘The
New Realists’, investigating how student expectations of University life match the reality,
whilst also looking at who the student of 2019 really is.
We also involve Universities in the design of our new developments to ensure we deliver
a product that best meets the needs of their students.
The Unite Foundation works in partnership with 27 Universities to provide support to students
from challenging backgrounds and help more young people access Higher Education.
Our People
We are driven by our values and
We conduct feedback surveys four times a year to keep our finger on the pulse of our
have a strong internal culture
business. These surveys are completely anonymous and encourage honest sharing. Our
which helps create diverse
regular business updates and feedback sessions also give our people a chance to voice their
and engaged teams. With our
ideas, and line managers are empowered to free up information flow.
people being the heart of our
business, we want to make sure
they have a platform from which
to succeed, creating a Home
for Success and encouraging
innovation.
Employee panels, reverse mentoring and ‘open chairs’ at our Operations Board, provide
further opportunities for our people to engage with our purpose, strategy and business plans.
We report quarterly to the Board on the feedback from the employee panel and two Non-
Executive Directors attend the sessions twice per year. Action plans are developed to address
issues raised by our people and report back on new proposals.
We employee second- and third-year students on the National/London Living Wage to act
as peer-to-peer support for new students as they settle in to their new home, and also
throughout critical stages of the student journey through University life.
Our Investors
Our investors and funders are
We aim to produce balanced and transparent reporting and communications that allow our
a key source of our efficient
investors to best understand our business and strategy, key risks and how we deliver long-
capital that allows our business
term shareholder value.
to invest and grow. We want our
investors to be clear on what
we are doing, how we do it, and
where we are headed. We also
address the key risks facing our
business and how we will seek to
mitigate their impact.
We conduct around 150 to 200 investor meetings throughout the year through roadshows,
conferences, property tours and other ad hoc meetings. Last year we also held our first
dedicated investor roadshow on sustainability.
In addition, we hold regular Capital Markets Days to provide a more detailed update on our
strategy and the future outlook for our markets.
The Unite Group PLC Annual Report & Accounts 2019 33
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How we measure
Stakeholder outcomes
We measure student outcomes through our independently verified customer
satisfaction and Net Promoter Scores, which are benchmarked against our PBSA
and service sector peers.
Our bespoke research is reported publicly to aid the development of our sector
as a whole and inform how we continue our research going forward to track
trends.
Our social impact is measured through the NUS’ annual Positive Impact Awards.
We also measure the volume of student interaction with our people and through
our digital platforms to ensure we are delivering the most relevant support.
We monitor the quality and income visibility provided by our long-term
nomination agreements. We also maintain a pipeline of opportunities for new
University partnerships, from which we seek to convert one or two new deals
each year.
A RedBrick Research University Trust survey is conducted annually to measure
our reputation in the Higher Education sector.
The Unite Foundation will provide financial support to 189 students for the
2019/20 academic year, in partnership with 27 Universities.
The results of our people surveys are independently processed for analysis
by our leaders, with common trends being discussed, helping us to inform our
business decisions.
We verify our commitment to our people through external accreditations
including the Investors in People Gold standard and our status as a Real Living
Wage employer.
We analyse the diversity of our teams and Board as well as the make-up of
shortlists for leadership roles. We also measure take-up of employee benefits
to assess their success and relevance.
Investor feedback gives us critical information about how we operate as a
business. We allow investors to feed back to us at regular intervals.
We monitor our performance against market expectations for key financial and
non-financial indicators. In addition, we benchmark ourselves against peers to
understand our market relative performance.
The results of our findings inform how
we operate so we can continually match
our product and service to the changing
needs of our students. We listen to
our students to give them the student
lifestyle and study environment they
want.
By understanding Universities’ long-
term requirements and working closely
together on a day-to-day basis, we
help them deliver value-for-money and
an exceptional experience for their
students. This is measured through
Universities’ own student satisfaction
scores, student wellbeing and retention.
In this way, we deliver a key part of their
offer to potential applicants.
All our people have a voice that gets
heard in an open and trusting forum.
This helps us improve our product
and services and allows space for true
innovation and fresh thinking.
In 2019, we made a number of decisions
following feedback from our people,
including an enhancement to Shared
Parental Leave, introduction of a revised
approach to employee communications
including a new employee hub and app,
as well as the roll-out of our ‘back to the
floor’ and reverse mentoring programmes
for all senior operational leaders.
With our investors having a deep
understanding of our business and
strategy, we have a stable foundation
to grow. This dialogue also helps to
ensure an alignment of interests with our
investors.
+19
Net Promoter Score
85
Customer
Satisfaction Score
82
Higher Education
Trust Score
56%
of beds under nomination
agreements
78%
Employee
Engagement Score
Investors in
People Gold
award
60%
Total shareholder
return in 2019
24%
Compound Annual
Dividend Growth
over five years
34
Directors’ duties and Section 172 Statement
The Directors are well aware of their duties to act in accordance with the Companies Act.
These include a fundamental duty to promote the success of the Company for the benefit
of its members as a whole. This duty is central to the Board’s decision-making processes
and outcomes.
In performing their duties during 2019, the Directors have had regard to the matters set out in
Section 172(1) of the Act:
(a)thelikely
consequencesof
anydecisioninthe
long-term
(b)theinterestsof
theCompany’s
employees
(c)theneedtofosterthe
Company’sbusiness
relationshipswith
suppliers,customers
andothers
More specifically, during 2019 this has included:
Considering the long-term consequences of
any decision
The Board delegates day-to-day management and decision
making to its senior management team, but maintains
oversight of the Company’s performance, and reserves to
itself specific matters for approval, including significant
new strategic initiatives and major decisions relating to
capital raising and allocation. Through regular updates
from senior management and measurement against long-
term objectives, the Board monitors that management is
acting in accordance with its agreed strategy and the long-
term interests of key stakeholders.
As an example, throughout 2019 the Board gave extensive
consideration to the impact of the acquisition of Liberty
Living on the Group’s key stakeholders. This involved
an appraisal of the financial effects of the acquisition,
the operational risks involved in its integration, optimal
financing arrangements and regulatory risk arising relating
to the Competition and Markets Authority. In addition,
the Board considered the impact of the acquisition on the
Group’s employees, customers, University partners and
suppliers as well as the potential consequences for existing
shareholders.
During the year, the Board approved £298 million of
disposals in order to help mitigate the increase in LTV
resulting from the Liberty Living acquisition and ensure
adequate capital remains available to fund the secured
pipeline and pursue new growth opportunities.
Looking after the interests of employees
The Board recognises that creating diverse and engaged
teams is critical to the business’s ongoing success. The
Board has designated one of its Non-Executive Directors
(Elizabeth McMeikan, the Senior Independent Director and
Chair of the Remuneration Committee) to help ensure the
views and concerns of the workforce are brought to the
Board and taken into account.
The Board continues to encourage improvements in
systems, processes and benefits which impact the health,
safety and wellbeing of our employees. Feedback from the
Employee Panel is provided to the Board on a quarterly
basis by the Chief Customer Officer. In addition, to enhance
engagement by the Board, two Non-Executive Directors will
attend the Employee Panel twice per year going forwards
to listen directly to employees and report independently to
the Board.
Listening to employee feedback, during 2019 the Board
discussed the benefits of a number of proposals in relation
to employees. This resulted in the following:
• enhanced pension entitlements
• enhanced shared parental leave
The Unite Group PLC Annual Report & Accounts 2019 35
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asbetweenmembers
oftheCompany
• the extension of our diversity and inclusivity initiatives,
including the launch of our LGBT network building on
the work of the Diversity in Action Group established in
2017 to better understand and improve diversity and
inclusion across the Group
• a revised approach to employee communications
including a new employee hub, employee app and
improved communication platforms/channels
•
•
implementing a ‘back to the floor’ programme for
all senior operational leaders; and
introducing reverse mentoring for all senior
operational leaders
An annual talent review is conducted by the Board,
alongside the development and executive succession
planning activities undertaken by the Nomination
Committee, with the aim of identifying, nurturing and
retaining high-performing employees. In 2019, the Board
considered the integration of Liberty Living employees
into the wider Group and tasked senior management with
identifying and retaining talented employees to ensure the
acquisition delivers the best of both businesses.
Fostering business relationships with suppliers,
customers and others
The business interacts with a variety of external
stakeholders, including students, parents, Universities as
well as the Government and the Office for Students, as
regulator to the UK Higher Education sector.
During the year, the Board reviewed customer satisfaction
surveys from both students and Universities to understand
how business decisions impact on our customers. This
included a review of University Partnership activity,
provided by the Higher Education Engagement team.
Specifically, this supported the decisions to proceed with
development spend at Middlesex Street in London, the
agreement of a 30-year nomination agreement with the
University of Leeds at White Rose View and a city-wide
nomination agreement with the University of Bristol.
Directors meet with University VC’s and other senior
leaders within Universities to hear directly from them as to
how we are performing, what we can do better and also to
hear about developments in the HE sector more broadly.
Specifically, following completion of the Liberty Living
acquisition, Directors met with Liberty Living University
partners as part of our overall engagement programme.
36
Directors’ duties and Section 172 Statement continued
The Board receives the results of our regular customer
engagement surveys, which during 2019 resulted in the
following key actions:
• Student Ambassador programme to be rolled out
across all properties
• the relaunch of Service Style (our service programme
which helps ensure a high-quality and consistent service
delivery, nationwide)
• review of Maintenance SLAs so they are customer
focused
•
introduction of more regular surveys including
transactional surveys with a specific focus on
maintenance; and
• more detailed City analysis to support our City Team
action plans going into 2020
The Board is cognisant of the focus given to value-for-
money as part of the review of Higher Education funding,
including the contribution made by accommodation. As
a result, the Board remains supportive of the Company’s
strategy of offering a broad range of price points and
tenancy lengths to cater to different customers. The
acquisition of Liberty Living was also considered beneficial,
in widening the range of accommodation at lower price
points in certain cities.
The Board considered risks to the Group’s operational
and development supply chain arising from Brexit, as
well as the potential for increases in construction costs
resulting from higher inflation and labour shortages. As
a consequence, the Board delegated responsibility to the
Executive team to fix construction costs and bring forward
purchases of key components to mitigate the risk of a
disorderly exit from the European Union.
Maintaining a reputation for high standards of
business conduct
The Board recognises the importance of the business’s
reputation with its University partners, students and
parents, Government and communities in seeking to
promote the long-term success of the business. This covers
the standards of the business’s product and services, as
measured by annual surveys of customer satisfaction and
University Trust, which are communicated to the Board by
senior management.
The Board also monitors the Company’s activities with
regards to student welfare and wellbeing, which forms
part of the Company’s responsible business strategy and
our ‘Home for Success’ purpose. This had led to the Board
supporting the launch of our new Insight report: ‘The
New Realists’, highlighting our focus on understanding
and meeting the needs of students, at the Universities UK
conference in September 2019 and widely attended by VCs
and senior leaders within Universities. This was followed
with a Board Director hosting a series of roundtable
discussions with University partners across England
and Scotland.
In addition, the Board has supported the launch by
the British Property Federation of The Good Practice
Guide on Student Wellbeing in private PBSA in July this
year. Further, the Board has supported the Company’s
Leapskills programme, our resilience workshop designed
to support sixth formers and better prepare them for
the leap to University. The Board’s investment in this
important initiative was acknowledged by the Department
for Education who publicly endorsed the launch of our
Leapskills platform in July 2019.
The Board regularly reviews our Group Health & Safety
policy and procedures with particular focus given to fire
safety to ensure our properties comply with emerging
regulations following the tragic events at Grenfell Tower.
The Board was fully supportive of the removal of ACM
cladding from our buildings in line with Government
advice. In addition, the Board has requested a full review
of HPL cladding across the estate which has led to the
identification of 19 affected buildings. The Board fully
supports the decision of senior management to undertake
work on all affected buildings over the next 12–24 months.
The Unite Group PLC Annual Report & Accounts 2019 Acting fairly for all shareholders
Considering the business’s environmental impact
The Board recognises that acting fairly in the interests
of all shareholders improves the Company’s governance
procedures as well as increasing investors’ confidence in the
transparency and accountability of the business. Considering
the views of all shareholders helps the Board to clarify and
prioritise the Company’s long-term objectives and ensure
senior management remain aligned with these goals.
Unite’s Up to Us responsible business programme includes
a commitment to reducing environmental impact to ensure
the long-term sustainability of the Company. The Board
recognises the risks associated with environmental impact
and climate change and monitors the Group’s performance
against regulatory requirements as well as benchmarking
its performance based on external ESG ratings.
The Board received feedback from research analysts in
advance of full year and interim results, to help address
potential investor questions in our financial reporting.
In addition, the Board reviewed feedback from investors
and analysts following the full year and interim results to
identify potential risks and consider business activity to
address these issues.
During 2019, the Board gave significant consideration
to the impact on shareholders of the share placing and
acquisition of Liberty Living. In order to determine that the
acquisition was in the best interests of all shareholders, the
Board considered the expected accretion to earnings, NAV
and total accounting returns resulting from the transaction,
the risks associated with integration and delivering cost
synergies, as well as the impact on the Group’s long-term
financial stability. The Board ensured informal pre-emption
to existing shareholders for the July 2019 share placing
which part funded the Liberty Living acquisition. The Board
also reviewed the relationship agreement with CPPIB in
relation to the proposed 20% shareholding they would hold
in the enlarged Group following the acquisition.
During the year, the Board has reviewed matters such as
the size of dividend payments, results announcements and
resolutions for the AGM. In addition, the Board continues
to monitor risks and opportunities to its business
operations, which could have a material impact on the
Company’s sustainability, reputation with and perception
by investors.
Following an ESG roadshow with major investors in 2019,
the Board supported the decision of senior management
to review the Group’s existing sustainable and responsible
business strategy with a view to establishing new targets
for the Group during 2020.
Our impact on our communities
Contributing to our local communities is a responsibility
and an opportunity for Unite. The Board recognises we
are a large employer in the cities in which we operate
and provide essential accommodation in support of
Universities.
The Board supports the Company’s objective of delivering
positive impact in the communities in which it operates,
by helping to improve access to Higher Education and
outcomes for students. As a result, the Board remains
supportive of the Company’s financial support for the
Unite Foundation and other charities, as well as initiatives
such as Placer which provide employment opportunities to
students.
The Group’s development activity also forms an important
part of its long-term commitment to an area, by delivering
new high-quality affordable homes, s106 contributions
and new employment opportunities. In 2019, the Board
continued to support these activities with the approval
of a construction start at Middlesex Street in London and
commitment to a new development site in Nottingham.
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Our strategy at a glance
Our strategy is to build and operate the UK’s leading
portfolio of student accommodation, designed specifically
for students, in the right locations with services that our
students and University partners value.
Strategic pillars
Current strategic focus
Quality
properties
01
Quality
service
platform
02
Quality
University
partnerships
03
• Portfolio optimisation through
development, disposal,
acquisition and lifecycle
investments to ensure we have
the right properties in the right
locations, aligned with the
strongest Universities
• Ensuring our buildings are safe
and secure for our customers
and people, and are increasingly
environmentally sustainable
• Maintain high occupancy rates
• Deliver sustainable value-driven
rental growth
• Deliver ongoing efficiency
improvements though our
proprietary operating platform
• Continue to research the needs
of today’s students to enhance
the service we provide
• Strengthen our partnerships
with Universities
• Grow the proportion of
Unite beds aligned to high-
and mid-ranked Universities
• Continue to increase the quality
of nomination agreements
• Pursue new opportunities for
University partnerships across
existing and new beds
The Unite Group PLC Annual Report & Accounts 2019 £1.4bn
Acquisition of Liberty Living
98%
Occupancy rate across our portfolio
88%
Beds now aligned
to high- and mid-ranked
Universities
2019 in review
Objectives for 2020
Links to performance
• Acquired Liberty Living for £1.4bn
• Continue to increase the quality
• Earnings Per Share
• 2,390 new beds opened for
2019/20, with approximately
70% of beds secured under
nomination agreements
• Disposed of £249 million
of assets (Unite Share) to
manage leverage and fund new
development activity
of our portfolio through targeted
acquisitions and the disposal of
£150–200 million of assets
• Enhance alignment of our
portfolio to high- and mid-ranked
Universities, in cities in which we
already have a presence in order
to drive efficiencies
• Secure new sites for
development pipeline
• Establish new carbon targets
for the combined business
• Achieved occupancy rate of 98%
and 3.4% rental growth
• Maintain full occupancy and
rental growth of 3.0–3.5%
• Delivered further improvements
• Successfully integrate Liberty
in our EBIT margin
• Progress on integration has
accelerated cost synergies from
Liberty Living
Living onto the Unite operating
platform
• Secure the £15 million of annual
cost synergies targeted from the
Liberty Living acquisition
• Total accounting return
• NAV per share
• Higher Education Trust score
• Customer Satisfaction score
• Like-for-like rental growth
Read more about our
Quality properties on page 62
• Earnings Per Share
• EBIT margin
• Customer Satisfaction score
• Employee Engagement score
• Safety
Read more about our Quality
service platform on page 56
• 88% of beds now aligned
to high- and mid-ranked
Universities
• Two new University partnership
deals with University of Bristol
and University of Leeds
• Liberty Living acquisition brings
new relationships with Russell
Group Universities
• Pursue additional University
• Earnings Per Share
partnership schemes to deliver
further growth and long-term
security of income
Increase beds under long-term
nomination agreements
Improve Higher Education
Trust score
•
•
• Total accounting return
• WAULT of nomination
agreements
• % alignment to high- and mid-
ranked Universities
• Higher Education Trust score
Read more about our
Quality University partnerships
on page 23
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Key performance indicators
2019 saw a strong year of operational performance,
delivering across all of our key metrics.
Financial KPIs
39.1p
34.1p
853p
37%
790p
720p
30.3p
27.7p
23.1p
646p
579p
35%
34%
31%
29%
37%
15%
14%
13% 12%
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
EPRA Earnings per share* (p)
EPRA NAV per share* (p)
Total accounting return* (%)
Loan-to-value ratio* (%)
39.1p
853p
12%
37%
Measure
Measure
Measure
Our EPRA measure of profit
per share reflects the level
of income delivered by
operating activities.
Our EPRA NAV per share
measures the market value
of rental properties and
developments less any debt
used to fund them plus
any working capital in the
business.
The total accounting return
to shareholders is the ratio
of growth in EPRA NAV per
share plus dividends paid as a
percentage of opening EPRA
NAV per share.
Measure
Our ratio of net debt to
property values.
Comment
Comment
Comment
Comment
Growth in earnings has been
driven by like-for-like rental
growth, improvements in
EBIT margin and the delivery
of new beds through our
development pipeline.
Sustained growth in our
earnings is made possible by
the quality of our value-for-
money product, our highly
committed people and
our positive and growing
reputation with students and
Universities.
NAV growth has principally
been driven by rental growth
and development profits, as
well as a contribution from
yield compression and new
shares issued at a premium
to NAV.
Our sustained growth in
NAV reflects the strength of
fundamentals in the student
accommodation sector,
our development expertise
and our strategic focus on
operating quality properties.
Our total accounting return in
2019 was delivered through
a growing component of
recurring earnings together
with NAV growth through
rental growth, development
profits and yield compression.
Maintaining a strong total
return from our portfolio is a
result of our focus on growing
recurring earnings, improving
the quality of our portfolio
and our ability to add value
through our development
activities.
LTV rose during the year,
principally due to our
acquisition of Liberty Living.
We continue to target a
medium-term LTV of 35%,
which we intend to reach
through rental growth
and planned disposals of
£150–200 million p.a.
Target
Target
Target
Target
Deliver meaningful and
sustainable growth in EPS by
maintaining high occupancy,
rental growth, improving
operating margins and
delivering the development
pipeline.
To deliver growth in NAV
through a combination
of rental growth and
development profits.
To deliver attractive total
returns, through a balance of
recurring income and capital
growth.
To maintain LTV around the
35% level.
Alignment to strategy
Alignment to strategy
Alignment to strategy
Alignment to strategy
* Results are based on the European Public Real Estate Association Performance
measures. Reconciliations to IFRS measures are disclosed in note 2.2b and 2.3c.
Read more about Remuneration on page 119
The Unite Group PLC Annual Report & Accounts 2019 Strategic alignment key
Quality properties
Quality service platform
Quality University partnerships
Quality people
Operational KPIs
6
5
5
4
81
80
83
2
85
83
59%
54%
78%
75%
79
79
80
81
82
75%
78%
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2018
2019
2015
2016
2017
2018
2019
Safety (Number of accidents)
Customer satisfaction
Employee Engagement (%)
Higher Education trust
2
85
78%
82
Measure
Measure
Measure
Measure
The number of reportable
accidents in our operations
each year as a means of
assessing our success in
approaching health and
safety.
We undertake an independent
survey twice a year to
understand our relationship
with our customers, the
experience we provide and
their likelihood to rebook and
recommend Unite.
We undertake independent,
anonymous surveys among
our employees to gain regular
and insightful feedback on
who we are as a company
and how we can continue to
improve.
Annual qualitative research
among Higher Education
partners by RedBrick
Research to understand their
perception of Unite and the
degree to which we meet their
needs.
Comment
Comment
Comment
Comment
Our Accident Incident
Management System (AIMS)
has provided us with greater
visibility of our incident
reporting, enabling us to
implement new ways of
working that have improved
efficiency. Keeping our
people and students safe and
secure is our top priority and
supports our strategic priority
to offer quality service. We
also achieved a Five-star
Occupational Health and
Safety audit rating from the
British Safety Council.
This year we have achieved a
record customer satisfaction
score. We are committed to
drive further improvement
through the delivery of our
brand promises and our
commitment to Home for
Success across our entire
operating platform.
Having changed survey
provider for 2020, analysis of
customer satisfaction will focus
on Net Promoter Score, which
will enhance comparability to
sector and wider service sector
companies.
This year we achieved
another engagement record
which represents a positive
result compared to external
benchmarking. We will focus
on improving this score
further in 2020 while we
go through our integration
process with Liberty Living.
Understanding what our
Higher Education partners
need from us, both as
institutions and for their
students, is vital to designing
and delivering our market-
leading service proposition.
This year we have achieved
a further increase in our
score, reflecting our ongoing
commitment to our University
partners.
Target
Target
Target
Target
We strive to reduce the
number of reportable
incidents year-on-year and
maintain or improve our BSC
Safety rating.
We aim to reach the top 10%
of benchmarked companies
within the next three years.
We strive to improve our
score year-on-year, including
through our integration
period with Liberty Living.
We aim to reach the mid-80-
point level within the next
three years whilst welcoming
our new University partners
through our acquisition of
Liberty Living.
Alignment to strategy
Alignment to strategy
Alignment to strategy
Alignment to strategy
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Risk management
“Aflexibleriskmanagementframework
tomanagecompetingpriorities.”
Chris Szpojnarowicz
Company Secretary and Group Legal Director
Our risk management framework
During 2019, our risk management framework
was tested with the competing priorities of the
transformational Liberty Living acquisition and
the ongoing safe delivery of our underlying
operations and financial performance.
The Board identified and then addressed the
potential distraction risk arising from such a
complex acquisition, ensuring these competing
priorities were appropriately resourced with clear
milestones and early warning signs identified.
Our risk management framework is designed
to cope with such challenges and ensure there
is appropriate insight, flexibility and resilience.
This insight and flexibility was especially critical
through 2019 as Brexit and wider political and
economic uncertainty continued.
Our values are the foundation for our risk
management framework and ultimately combine
in our purpose to provide a Home for Success.
Our risk management framework and how we
assess our principal risks, identify emerging risks
and ultimately manage and mitigate risk are set
out on the following pages.
1
2
3
4
Board leads risk review
Assessing our risk profile and our principal risks.
Top-down review
Identifying a wide range of strategic and emerging risks
and opportunities.
Bottom-up review
Challenging risks identified by operational management
and more technical risks such as information technology,
security, continuity, GDPR, financing and treasury.
Board searches externally for best practice
Engaging with senior leaders in the Higher Education sector
and technical experts on key issues such as fire safety.
Output – five risk categories
Market risks (supply and demand)
Operational risks
Read more on pages 47 to 49
Read more on pages 50 and 51
Property/development risks
ESG risks
Read more on pages 52 to 53
Read more on page 54
Financial risks
Read more on page 55
The Group’s principal risks mapped across these five risk categories, their
impact on our strategic objectives and how we mitigate these risks are set
out on pages 47 to 55.
The Unite Group PLC Annual Report & Accounts 2019 Key risk developments in 2019
Risk profile category What happened in 2019
Unite risk activity
Operational risks
(safety)
Continued Government, HE sector,
wider stakeholder and media focus
on fire safety, especially in high-rise
residential buildings.
Dynamic fire regulatory environment
following the Hackitt Review and
Building Regulations change. Focus
on cladding moves from Aluminium
Composite Materials (ACM) to High-
Pressure Laminates (HPL).
Regionalised our health, safety and
security team, allowing closer and
more ‘on the ground’ support for
our Operations teams helping them
deliver our safe and secure brand
promise.
The British Safety Council conducted three comprehensive safety audits: an Occupational Health & Safety
Audit, a Fire Safety Audit and a Construction Audit.
The Occupational Health & Safety Audit measures performance against a number of key safety management
indicators, providing organisations with a worldwide benchmark of their safety management systems against
current best practice to enable continual improvement. The Group achieved Five-stars (out of five) for this audit
in 2019, which reflects significant improvement from our last audit 18 months ago when awarded a Four-star
rating.
Fire safety management – improved our policies and procedures, risk assessments, training and fire records.
Implemented Fire Risk Management Framework BS 9997.
Continued working closely with Department for Communities and Local Government (DCLG), local fire
authorities and fire safety experts to ensure fire safety and address any remedial actions following
Grenfell Tower learnings. Review of HPL across our estate.
Reviewed and updated our fire strategy decisions as well as our fire safety specifications for new builds
and developments.
Maintenance regimes – improved testing and planned preventative maintenance.
Operational risks
(Liberty Living
acquisition/
integration)
Market risks
(supply increase)
Intense focus on the Liberty
Living acquisition, a complex and
transformational opportunity,
alongside delivering the Group’s
existing operational and financial
performance.
Started work on Liberty Living
integration.
Pressure on direct-let rents in some
mature markets following increasing
new supply.
Market risks
(reduction in
demand)
Continuing Brexit and wider political
and economic uncertainty.
Market risks
(supply and
demand)
Customer expectations continue
to increase. Value-for-money and
affordability are ever more critical.
Read more about Safe and Secure on pages 22 and 23
On going risk and opportunity review that:
1.
2.
The Liberty Living acquisition is right for the Group and is negotiated on the best commercial terms;
The Group is able to still deliver its underlying operational and financial performance in parallel to
delivering the Liberty Living acquisition; and
3.
Liberty Living synergies and integration are delivered on time and to budget.
Read more about Liberty Living acquisition on page 20
Active property recycling, with 88% of Unite’s portfolio (after including the Liberty Living properties) aligned to
high- and mid-ranked Universities.
98% occupancy in 2019/20, underpinned by 56% nomination agreements, with an average remaining life of six
years providing income and rental growth certainty.
Read more about University Partnerships on page 14 and our Property review on pages 62 to 66
Continued monitoring of political and HE sector developments. Tuition fee levels and access to the loan book
for EU students guaranteed for 2019/20 and 2020/21. The ongoing quality of UK higher education continues
to attract growing numbers of international students. EU and non-EU acceptances increased in 2019 which
offset the current UK 18-year-old demographic reduction. Demographics for UK 18-year olds bottom out in
2020, before returning to strong growth from 2021. There is evidence of early strength of applications data and
reservations for the 2020/21 academic year.
Implemented our Brexit Disruption Plan (which focuses on People, Procurement and Developments)
recognising the inevitable disruption Brexit will bring.
Read more about Market overview on page 26
Record customer satisfaction and Higher Education Trust scores evidencing continued strong service delivery.
Continued the roll-out of our Student Ambassador programme and comprehensive Welcome programmes to
ensure that students settle in quickly and feel safe and secure.
ESG Risks
Increasing focus on ESG risks as
integral to longer-term sustainability.
Read more about Operations review on pages 56 to 61
Engagement with Investors and other stakeholders as we develop our ESG strategy.
Read more about Up to uS, our ESG Strategy on pages 74 to 87
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Principal risks and uncertainties
Our risk appetite
The Group’s risk appetite is considered as a fundamental
part of the Board’s strategy setting and annual budget
– it does not happen in isolation. Our risk appetite is
underpinned by our principal financial aim to continue
generating high-quality recurring earnings and maintaining
a strong capital structure.
During the year, the Board reviewed our risk appetite in
light of the developing key in-year and emerging risks. This
considered both threats to – and opportunities in – our
business flowing from the Liberty Living acquisition and
integration as well as wider macro risk developments in
the PBSA sector and the broader Higher Education sector,
property market and economy.
Stress testing our strategic planning
Each year, the Board develops and refreshes the Group’s
Strategic Plan. This is based on detailed three-year strategic/
financial projections (with related scenario planning) and rolls
forward for a further two years using more generic assumptions.
The Board maps our strategic objectives against our risk profile.
Then, always conscious that risk events do not necessarily
happen in isolation, the Board stress tests these projections
against multiple combined risk events. Through this process, a
base case and stress-tested Strategic Plan are developed.
During 2019, consistent with prior years, this stress-tested
scenario planning considered a material reduction in the
number of European and international students, a material rise
in long-term interest rates and yield expansion, together with a
combination of all these events occurring at the same time.
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The influences of
multiple combined
risk events
Yield expa n s i
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Strategic objective
Risk profile category
Principal risks
Quality properties
Property/
development
Increasing competition and customer expectations underline the need to constantly
improve the quality of our portfolio – substantially enlarged by the Liberty Living
acquisition, while navigating site selection, development/planning risks and building
cost inflation as well as disposal risks.
Quality service
platform
Market
(supply and demand)
Operational
(Health and Safety)
The health, safety, wellbeing and security of the 74,000 students who make Unite
Students their home as well as the 1,900 people who work for us is the foundation of our
reputation and continued focus on Health & Safety is key to building and maintaining this
trust.
Affordability and value-for-money are ever more critical in the increasingly
competitive market place. Delivering a range of price points and service offerings along
with value-for-money continues to be critical to our sustainable and longer-term success.
In an increasingly competitive market with more demanding customers, developing
and retaining our talent is critical to ensure market leadership.
Quality University
partnerships
Market
(supply and demand)
With the increasing supply and maturing PBSA sector, enhancing strong and sustainable
University relationships is increasingly important, including ones new to Unite from
Liberty Living.
Delivering a value-for-money service aligned to the needs of students is critical to meet
the requirements of our University partners.
Creating the right corporate culture for
effective risk management
The Group’s risk management framework is designed to
identify the principal and emerging risks, ensure that risks
are being appropriately monitored, controls are in place
and required actions have clear ownership with requisite
accountability.
The organisation has an open and accountable culture, led
by a stable and experienced leadership team operating
in the sector for a number of years. This culture is set by
the Board in the way it conducts its Board and Committee
meetings and cascades through the organisation enabling
a suitable culture for risk management.
The culture of the organisation recognises – and accepts
– that risk is inherent in business and encourages an open
and proactive approach to risk management as opposed
to a blame culture. By viewing our risks through the lens
of our strategic objectives, the Group is able to ensure risk
management is pro-active and pre-emptive and not a tick
box exercise.
The Unite Group PLC Annual Report & Accounts 2019
The Board has the overall responsibility for the governance
of risks and ensures there are adequate and effective
systems in place. It does this in various ways:
• Risks are considered by the Board as an intrinsic part of
strategy setting and consideration of new opportunities –
risk is recognised as an inherent part of each opportunity
• A twice yearly formal review by the Board of principal
risks, how they are changing and considering any
emerging risks
• Risk Committee reviews the principal and emerging risks
that the Group is facing or should consider
• Specific risk management in dedicated Board
sub-Committees allowing focus on specific risk areas
(for example, the Audit Committee and Health and
Safety Committee)
• Risk Committee scrutiny and challenge of
management activity allowing a focused forum for
risk identification and review
• Risk assurance through external and internal auditors
as well as specialist third party risk assurance where
appropriate (e.g. British Safety Council providing
specialist independent health and safety assurance)
Our risk management framework
The Board
Composition of Risk
Committee
Risks assessed as part of strategy setting and risk oversight
Owned by the Board and its Committees
Twice yearly formal risk review and ongoing monitoring of risk integral to
Board meetings
Risk management
Policies and controls
Owned by the Risk Committee and
the Operations/Property Boards
Monthly risk tracker review at
Operations/Property Boards
Risk Committee review and
challenge of all risk trackers
and related risk and opportunity
activity
Underpinning risk management
(such as Capital Operating
Guidelines; Treasury Policy; Anti-
Bribery Policy; Major Investment
Approvals Committee and the
internal controls framework)
Richard Smith
Chief Executive Officer
Joe Lister
Chief Financial Officer
Nick Hayes
Group Property Director
John Blanshard
Chief Customer Officer
Chris Szpojnarowicz
Company Secretary and
Group Legal Director
People and culture
Embedded risk management culture
Openness, transparency and clear ownership of risk management
(through risk trackers) cascades through the organisation
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Principal risks and uncertainties continued
Our Key Risk Indicators (KRIs)
Quality
properties
Gross Asset Value
Asset age
Occupancy
Rental Growth
Quality service
platform
Safety
Customer satisfaction
Employee engagement
Quality University
partnerships
Safety
Higher Education trust
Customer satisfaction
% Noms v. Direct Let
As explained above, the Group has an annual business
planning process, which comprises a Strategic Plan, a
financial forecast for the current year and a financial
projection for the forthcoming three years (which includes
stress testing and scenario planning and also rolls forwards
for another two years). This plan is reviewed each year
by the Board as part of its strategy setting process.
Once approved by the Board, the plan is cascaded down
across the Group and provides a basis for setting all
detailed financial budgets and strategic actions that are
subsequently used by the Board to monitor performance.
The forecast performance outlook is also used by the
Remuneration Committee to establish the targets for
both the annual and longer-term incentive schemes.
The financing risks of the Group are considered to have the
greatest potential impact on the Group’s financial viability.
The two principal financing risks for the Group are:
•
the Group’s ability to arrange new debt/replace
expiring debt facilities; and
Robust assessment of principal risks
• any adverse interest rate movements
The Directors confirm that they have conducted a robust
assessment of the principal and emerging risks facing the
Group together with an assessment of the procedures to
identify emerging risks. The process for how the Board
determined these risks is explained above and these risks
are set out on pages 47 to 55.
Viability statement
The Directors have assessed the viability of the Group
over a three year period to December 2022, taking
account of the Group’s current position and the potential
impact of its principal risks. The Directors consider the
three year lookout period to be the most appropriate as
this aligns with the Group’s own strategic planning period
combined with the levels of planning certainty that can
be derived from the development pipeline. Based on this
assessment, the Directors have a reasonable expectation
that the Group will be able to continue in operation and
meet its liabilities as they fall due over the period to
December 2022.
The Group has secured funding for the committed future
development pipeline, which includes the Unite and Liberty
Living unsecured loan facilities, and prepares its Strategic
Plan on a fully funded basis in line with the three year
outlook period. Disposals are an important part of our
strategy with the recycling of assets out of our portfolio
generating capital to invest in development activity and
other investment opportunities.
To hedge against the potential of adverse interest rate
movements the Group manages its exposure with a
combination of fixed rate facilities and using interest rate
swaps for its floating rate debt. During the year the Group
has complied with all covenant requirements attached to
its financing facilities.
Read our Financial review on page 68
Risks linked to strategy
Quality properties
Quality service platform
Quality University partnerships
Quality people
The Unite Group PLC Annual Report & Accounts 2019 Market risks
1 Demand reduction: driven by Brexit uncertainty,
Government HE/immigration policy or other macro events
Possible events
Impact
Movement
• Brexit impacting numbers of EU students coming to study in
• Potential reduction in demand and hence profitability and
the UK
asset values
• Changes in Government policy on Higher Education funding
• Departure from EU impacting EU research grants and EU
• Immigration policy changes affecting international student
students coming to the UK
numbers and behaviour
• Emerging risk that the Coronavirus outbreak becomes
further widespread, impacting the ability of international
students to travel to the UK
Risk management
• We continued to monitor and prepare for our key Brexit operational risks – People, Procurement and Development – through
our Brexit Disruption Plan
• Against the background of continuing political uncertainty through 2019, we monitored Government HE and immigration
policy and its impact on UK, EU and international student numbers studying in the UK
• Regularly reviewing our portfolio – especially conscious it is growing through the Liberty Living acquisition – to ensure we have
the highest-quality portfolio, appropriately sized and in the right locations
• We continue to monitor the situation regarding the outbreak of Coronavirus. We are in contact with Public Health England
and are closely following their guidance as well as that of the World Health Organisation. Contingency and mitigation plans
are being prepared
Strategic objective
Link to strategy
• Offering great service is key to helping us address any reduction in demand. Ensuring we have high-quality properties
aligned to Universities with a growing share of student demand mitigates demand reduction
Read more about Our business model on page 30
What happened in 2019
• Brexit alongside wider political uncertainty continued through 2019
• UK continued as second most popular international destination for students (after the US). Applications for international
students are up 8% for the 2020/21 academic year
• The Government has become more supportive of growth in international students, setting a target to increase international
students by a further 115,000 students (a 25% increase) by 2030 and extending post-study work visas to two years
• EU students funding arrangements for duration of study confirmed for 2020/2021
• The Higher Education Funding Review was published in May 2019 but uncertainty continues as to when any of its
recommendations will be implemented
• Increased focus on quality and length of nomination agreements – 56% secured through nomination agreements with six
years average maturity
Read more about Market overview on page 26
Risk mitigation in 2019
• Ongoing monitoring of our Brexit Disruption Plan and Government HE and immigration policy
• Through implementation of Home for Success – our core purpose to provide environments that help students achieve more
during their time at University – we are seeing consistently high customer satisfaction and Higher Education trust scores
Read more about Key performance indicators (KPIs) on pages 40 and 41
Focus for 2020
• Ongoing monitoring of the impact of Brexit and Government policy against the background of a larger portfolio as we
integrate Liberty Living
• Continued focus on portfolio management, using disposals to reduce exposure in higher risk markets
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Principal risks and uncertainties continued
Market risks continued
2 Demand reduction: value-for-money/affordability
Possible events
Impact
Movement
• Increasing focus on the cost of a University education –
• More competition for value and reduced demand for year-
round student accommodation in the longer-term resulting
in lower profitability and asset values
affordability and value-for-money
• Emerging risk of shorter/more semester-led courses and
increasing home study
• Emerging risk of alternative course delivery for certain
courses/markets (the extension of Massive Open Online
Courses)
• Emerging risk of monitoring or regulation of the costs,
rents, profitability and value-for-money of student
accommodation
• Emerging risk of FE being promoted over HE
Risk management
Link to strategy
• Ensuring we deliver an affordable product which provides good value-for-money. Partnering with stronger Universities with
properties in the best locations
• Support Universities in their work to demonstrate the value of a University education
Strategic objective
• Offering quality service is key to ensuring we have relationships with the high- and mid-ranked Universities (the ones
most likely to sustain a reduction in demand). Our PRISM operating platform helps us deliver the best customer
service efficiently
• Offering a wider range of product enables students to have more choice
Read more about Our business model on page 30
What happened in 2019
• Increasing media attention on value-for-money for students in HE
• Continued strong service delivery evidenced by record levels of customer satisfaction and Higher Education Trust scores
• Increasing proportion of second and third years choosing PBSA. Over two thirds of Unite’s direct-lets are returning students
• Continued our Student Ambassador programme and University-adopted Welcome programme
• Acquisition of Liberty Living provides a wider range of product and price points and more affordable product
Read more about our Operations review on page 56
Risk mitigation in 2019
• Engagement with our customers and Universities to ensure we deliver services our customers value and an affordable product
• Continued investment in market knowledge and building on our relationships with the strongest Universities, driven by Home
for Success and our University partnerships team
Focus for 2020
• Ongoing review of our services, product proposition and specification, including the Liberty Living proposition
• Greater segmentation of product for customers
• Demonstrating the value-for-money of our offer compared to alternatives
The Unite Group PLC Annual Report & Accounts 2019 49
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Movement
Possible events
Impact
• New supply as sustained high levels of investment demand
• More competition for the best sites
filter into the development market, primarily through
investors providing forward commitments to smaller
developers
• Potential impact on rental growth and occupancy
Strategic objective
Link to strategy
• Offering great service as well as having high-quality properties is critical to mitigating any supply surplus
What happened in 2019
• Continued high level of individual PBSA assets and portfolios traded in 2019
• New supply starting to slow down in specific markets with more challenging planning environments and the emergence
of the PRS sector as an alternative option for sites that could have been developed for PBSA
• PBSA sector continues to mature and becomes increasingly professionalised
• Unite 98% occupancy for the 2019/2020 academic year, underpinned by 56% nomination agreements
• Three new properties delivered in 2019. Active property recycling, resulting in higher-quality Unite portfolio
Read more about our Operations review on page 56 and Property review on page 62
Risk mitigation in 2019
We continue with our focus and strategy on:
• Disciplined investment approach to markets with supply/demand imbalance
• Exposure to the best Universities underpinned with new developments secured with nomination agreements
• Investment in our brand and student experience – creating better environments within our new developments through
Home for Success
• Maintaining strong relationships with key Higher Education partners
Read more about Partner of Choice for Universities on page 23
Focus for 2020
• Our portfolio: integration of the Liberty Living business as well as delivering our development pipeline, underpinned with
strong University partnerships
• Our people and our operating platform: ensure our People and PRISM continue to help us deliver consistently high levels of
service to students and Universities alike
• Our capital structure: ensuring we have a strong yet flexible capital structure so we can adapt appropriately as supply grows
Risks linked to strategy
Quality properties
Quality service platform
Quality University partnerships
Quality people
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Operational risks
4 Major health and safety (H&S) incident in a property or a development site
Movement
Movement
Possible events
Impact
• Fatality or major injury from a fire or other incident at
• Impact to students living with us, contractors working
a property
on-site and visitors
• Multiple contractor injuries at a development or
• Reputational damage and trust in Unite Students as a
operational site
Risk management
reliable partner
• H&S is given direct Board supervision by the H&S Committee (a sub-Committee of the Board) which actively supervises H&S,
ensuring robust policies and procedures are in place and consistently complied with
• H&S is also actively reviewed in the Operations and Property Boards, ensuring that H&S is top of mind in our day-to-day
operations and regularly assessed and validated
• Well resourced health and safety team, working with our customer facing teams on a continual basis
• Use of audits and external consultants to ensure that we are maintaining high standards
Read more about Health and Safety Committee report on page 116
Strategic objective
Link to strategy
Link to strategy
• Ensuring the safety of our customers, contractors and employees is fundamental to us offering quality service
Read more about Our business model on page 30
What happened in 2019
• The Hackitt Review and Building Regulations change continues the focus on fire safety especially in high-rise residential
properties
• Focus on combustible materials continues, with high-pressure laminates (HPL) now under review
• Fire safety management – continued focus on our policies and procedures, risk assessments, training and fire records
• Implemented Fire Risk Management Framework BS 9997
• Maintenance regimes – continued focus on testing and planned preventative maintenance
• Continued working closely with Department for Communities and Local Government (DCLG) and local fire authorities and fire
safety experts to ensure fire safety and address any remedial actions following Grenfell Tower learnings
• Continued good performance against our KPIs
Risk mitigation in 2019
External assurance sought through the British Safety Council (BSC), our external safety auditor, with three BSC safety audits:
1. Occupational Health and Safety audit spanning 39 operating properties and our Bristol head office – achieved BSC Five-star
audit rating
2. Dedicated fire safety audit
3. Construction audit
Student safety campaigns for students during their first six weeks living with Unite. These were run in conjunction
with local fire and rescue services and Police Community Support Officers. These focus on:
1. Student fire safety
2. Student personal safety
Focus for 2020
• Implement Hackitt Review recommendations – ensure the ‘golden thread’ per property (a digital, single repository of
information per building from design through to construction and any later changes in occupation)
• Continued focus on fire safety and education, reinforcing fire as our biggest safety risk
• Make changes to HPL cladding as necessary
• Implement learnings from BSC Five-star occupational Health & Safety audit
The Unite Group PLC Annual Report & Accounts 2019
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Possible events
Impact
New Risk
• Failing to deliver the Liberty Living integration and
• Reputational and financial risk for the Group impacting
cost synergies on time and to budget
shareholder confidence
• Dissatisfied employees impacting customer satisfaction and
weakening University relationships
Risk management
• Clear milestones through the acquisition process with regular and thorough Group Board review and oversight
• Development of a clear Integration Plan focused on People, Process and Technology, underpinned with a comprehensive
governance and reporting framework
Strategic objective
• Earnings and NAV growth
• Improving customer service with growing scale
What happened in 2019
Link to strategy
• Intense, regular and balanced focus on the Liberty Living acquisition, a complex and transformational transaction, with the
potential for distraction from the Group’s underlying operational and financial performance
Risk mitigation in 2019
• Clarity for people and their teams on their in-year delivery and ensuring increasing levels of work activity are appropriately
resourced
Focus for 2020
1. Phased operational integration through 2020 following an initial period of dual running the Liberty Living business to limit
disruption after completion of the acquisition
2. Deliver synergy benefits by mobilising the Liberty Living beds onto the Unite PRISM operating platform during 2020 and then
start delivery of annualised synergies from 2021
3. Sustain existing operational business performance with a continued focus on Unite’s underlying core business while dual
running the Liberty Living business; and
4. Ensure we deliver a great experience for our customers, University partners and all our people across the enlarged
business with a dedicated resource leading on our Employee Proposition
Risks linked to strategy
Quality properties
Quality service platform
Quality University partnerships
Quality people
52
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Property/development risks
6 Inability to secure the best sites on the right terms. Failure or delay to complete
a development within budget and on time for the scheduled academic year
Movement
Movement
Possible events
Impact
• Site acquisition risk – increasing competition for the
• NAV and EPS affected by aborted schemes and/or reduced
best sites
financial returns, with cash tied up in development
• Planning risk – delays or failure to get planning
• Reputational impact of delivering a scheme late and leaving
• Construction risk – build cost inflation due to increasing
development (albeit tempered by Brexit uncertainty)
• Construction execution risk – pressure on EU labour/
materials due to Brexit
• Climate risk – physical, regulatory and transactional risks
associated with climate change and the environmental
impact of our development activity
Risk management
students without accommodation
• Potential increases in construction costs as we seek to
reduce the carbon intensity of our developments and
comply with more stringent building regulations
• Experienced development team with extensive site selection and planning expertise, coupled with strong track record and
focus on project delivery and strong relationships with construction partners with appropriate risk sharing. Group Board
approval for commitments above a certain threshold
• Financial investment in schemes carefully managed prior to grant of planning
• We seek to reduce embodied carbon through efficient construction methods and invest in energy efficiency measures to
reduce carbon emissions and water usage of our buildings during operation
Strategic objective
• Quality properties
• High-quality service for students and Universities
• Reduce our negative environmental impacts
Link to strategy
Read more about Operating quality buildings on page 23 and Unite as a responsible business on page 24
What happened in 2019
• Three schemes delivered, on time and to budget
• Secured development and partnerships pipeline of 5,191 beds for delivery over the next four years, generating 6.8%
yield on cost
Read more about Property review on page 62
Risk mitigation in 2019
• Regular development team and property review, with Group Board Director oversight to ensure failure to secure sites or
complete on time are managed in the budget
• Detailed planning pre-applications and due diligence before site acquisition
• Build cost inflation regularly appraised and refreshed. Mid-sized framework contractors used and longer-term relationships
established to mitigate cyclical swings
• Engagement with our supply chain regarding future reductions in embodied carbon through our development activity, for
example through building design and material specification
Read more about Development pipeline and University Partnerships pipeline on page 65
Focus for 2020
• Ensuring delivery of our three properties scheduled for 2020/21 academic year opening. Managing Brexit-related disruption at
these development schemes (people and materials) and keep pipeline on time and to budget
• Securing more sites to build the pipeline for 2022 and beyond
• We plan to introduce stretching new carbon targets for our enlarged business, considering both the impact of operational
carbon emissions and embodied carbon from our development and refurbishment activity
Read more about Secured development and partnerships pipeline on page 66
The Unite Group PLC Annual Report & Accounts 2019 53
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7 Property markets are cyclical and performance depends on
general economic conditions
Possible events
Impact
Movement
Movement
• Buying, developing or selling properties at the wrong point
• Reduction in asset values reducing financial returns
in the cycle
Risk management
• Group Board and Property Board ongoing monitoring of property market, direction and values
• Forecast rental growth and recurring profit offsets any yield movement
• Ensuring we have a strong yet flexible capital structure so we can adapt appropriately to market conditions
• Clear and active asset management strategy
Strategic objective
• Quality properties
• Greater focus on earnings as a driver of financial returns for investors
• Sustainable and growing returns
Read more about Our business model on page 30
What happened in 2019
Link to strategy
• Continued high level of individual PBSA assets and portfolios traded in 2019, including the £1.4bn Liberty Living portfolio
• Successfully recycled capital from our portfolio with £298m of disposals (Unite share £249m)
• Customer satisfaction and Higher Education trust scores at record levels supporting rental growth and our portfolio value
Read more about Property portfolio on page 63
Read more about Disposal activity on page 66
Risk mitigation in 2019
• Disposals – ongoing monitoring of our portfolio and a successful portfolio disposal
• Acquisitions – disciplined acquisitions strategy exercising caution over portfolio premiums being paid in the market. Careful
management of net debt and LTV
• Maintaining disciplined approach to new development transactions by maintaining Group hurdle rates
Focus for 2020
• Ongoing monitoring of Brexit and Government policy and its impact on the property market and general economic conditions.
Ensuring a strong yet flexible capital structure to manage the property cycle
• Continued focus on Home for Success and our partnerships with stronger Universities
Risks linked to strategy
Quality properties
Quality service platform
Quality University partnerships
Quality people
54
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ESG risks
8 ESG Risks: environmental and social challenges to our longer-term sustainability
Possible events
Impact
New Risk
• Reputational and financial impacts arising from lack of clarity
and environmental targets and enforcement action for non-
compliance, such as on minimum standards for EPCs
• Damage to properties and disruption to customer
experience, operations and supply chain due to extreme
weather events
• Reduced investor confidence and access to finance
• Requirement for significant capital investment and asset
management activity to address these environmental risks
Environmental/climate change risks include:
• Regulatory risks: ongoing evolution of more stringent
climate related regulations such as energy efficiency
standards and reporting standards
• Physical risks: increased frequency and severity of
extreme weather events such as high winds, intense
rainfall and heatwaves
• Transition risks: risk associated with the transition to a low
carbon economy such as rising stakeholder expectations on
performance and disclosure, reducing embodied carbon,
asset stranding, and energy supply challenges and rising
non-commodity costs
Social risks include:
• Increased expectations regarding our contribution to
widening participation in Higher Education and improving
outcomes for students
Risk management
• Ongoing development and implementation of building energy performance strategy to manage EPC risk exposure and
deliver performance improvements across the enlarged portfolio as well as closer integration with asset management
and development activity
• Improve stakeholder engagement, dialogue and disclosure on climate related issues as part of a wider business focus on
improving sustainability strategy, performance and reporting
• Implement a corporate power purchase agreement (PPA) linking a proportion of our baseload energy consumption directly
to renewable energy generation assets
Read more about Up to uS and how we act responsibly and sustainably on page 74
Strategic objective
Link to strategy
• Develop and communicate a clear ESG strategy during 2020
• Develop revised Science Based Carbon Targets during 2020 covering our new enlarged portfolio
• Deliver energy and carbon performance improvements required to follow UK decarbonisation targets
What happened in 2019
• Government consultations in England and Wales on more stringent EPC minimum standards
• Increased stakeholder expectation around ESG performance and disclosure, and themes such as Task Force on Climate-
related Financial Disclosures (TCFD), GRESB and Net Zero carbon emissions
• Volatile wholesale energy markets with ongoing uncertainty and complexity, and increasing non-commodity costs
• Flooding including several cities in which the business operates (no direct impacts on our properties)
• Liberty Living portfolio acquisition brings new climate related risks and opportunities
• MSCI ESG rating: AA
• GRESB score and rating: 72 (Three-star)
Risk mitigation activity in 2019
• Engaged key stakeholders to understand their most material ESG concerns
• Submitted responses to EPC consultations via the British Property Federation (BPF)
• Continued investment in energy efficiency initiatives to deliver real world energy and carbon savings
• Completed tender for and entered into final negotiations for 5MW corporate power purchase agreement
• Disclosed in line with EPRA sBPR, achieving Silver rating and Most Improved award
Focus for 2020
• Publication of a standalone sustainability report, as we look to provide greater transparency and accountability around our
ESG initiatives aligned with relevant metrics and guidance such as TCFD, EPRA sBPR and GRESB
• We plan to update our Up to uS sustainability strategy with stretching new targets including carbon. Our new Sustainability
Report due out later in the year will also address the recommendations of the Task Force on Climate-related Financial
Disclosures (TCFD)
• Develop building energy performance strategy across whole portfolio including Liberty Living properties to better manage
exposure to climate related risks such as future EPC minimum standards, and identify energy and carbon reduction opportunities
The Unite Group PLC Annual Report & Accounts 2019 Financial risks
9 Liquidity risk/over-commit to development
Possible events
Impact
Movement
Movement
Movement
• Unite breaches a loan covenant or fails to replace debt
on expiry
• Interest rate increase
• If unable to replace debt, then possible forced sale of assets
potentially leading to sales below valuation. Slowdown of
development activity
• Unite unable to meet future financial commitments
• Reduced level of profitability
• Adverse rate movements can lead to reduced profitability
and reduction in property values (through resulting
expansion of valuation yields and lower valuations)
Risk management
• Proactively managing debt maturities to refinance facilities at least six–12 months before maturity and in parallel diversifying
our sources of finance to repay more expensive and less flexible borrowings
• Control of future cash commitments in line with progress of disposals. Interest rates monitored by the funding team as an
integral part of our refinancing activity – owned by the CFO and with Group Board oversight
• Gearing ratios defined in our Capital Operating Guidelines
• Hedge exposure with interest rate swaps and refinance facilities with fixed rates
Read more about Financial review on page 68
Strategic objective
• Earnings and NAV growth
Read more about Our business model on page 30
What happened in 2019
Link to strategy
• Weighted average debt maturity decreased slightly from 5.8 years to 5.4 years and average cost of debt reduced to 3.3%
(31 December 2018: 3.8%)
• At as 31 December 2019, LTV 37% (31 December 2018: 29%) and net debt of £1,884m (31 December 2018: £856m),
increasing due to the Liberty Living acquisition. 93% of debt at fixed rate/swapped
Risk mitigation in 2019
• Regular and reliable engagement with lenders
• With a benign interest rate environment, we continue to take advantage of historically low rates (both on new debt and also
entering into forward-starting interest rate swaps locking in rates for our development pipeline). Our Capital Operating
Guidelines require our hedge percentage to be between 75% and 95%. Current ratio at 93% (31 December 2019) but rising to
95% in Q4 2020
Focus for 2020
• Reducing LTV and funding future development acquisitions beyond 2022
• Funding future development acquisitions beyond 2020
• Extending 2022 debt maturities to better phase future maturities
Risks linked to strategy
Quality properties
Quality service platform
Quality University partnerships
Quality people
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Operations review
“Wemadegoodprogressagainst
allourkeyoperationalmetricsin
2019;deliveringrentalgrowthand
marginimprovementsalongside
recordachievementsinourcustomer
surveysandexternalsafetyaudit.”
John Blanshard
Chief Customer Officer
The Group continues to report on an IFRS basis and
presents its performance in line with best practices as
recommended by EPRA. The Operations and Property
reviews focus on EPRA measures as these are our key
internal measures and aid comparability across the real
estate sector.
Sales, rental growth and profitability
The key strengths of our operating business are our highly
committed people, our PRISM operating platform, our brand
and the strength of our relationships with Universities.
We continued to build on these in 2019, delivering a 15%
increase in EPRA EPS to 39.1p (2018: 34.1p). This growth has
again been driven by high occupancy, rental growth and the
impact of capital recycling, as well as further operational
efficiencies and ongoing cost discipline.
Summary income statement
Rental income
Property operating expenses
Net operating income (NOI)
NOI margin
Management fees
Operating expenses
Finance costs
Acquisition and net performance fees
Development and other costs
EPRA earnings
EPRA EPS
EBIT margin
2019
£m
213.9
(53.1)
160.8
75.2%
14.4
(21.8)
(43.9)
6.8
(5.7)
110.6
39.1p
71.7%
2018
£m
188.3
(48.0)
140.3
74.5%
15.6
(21.7)
(40.0)
–
(5.8)
88.4
34.1p
71.3%
A reconciliation of profit after tax to EPRA earnings is set out in note 2.2b
to the financial statements.
The Unite Group PLC Annual Report & Accounts 2019 Rental income has increased by £25.6 million, up 14%, as
a result of like-for-like rental growth, new openings and
just over one month’s contribution from Liberty Living,
offset by the impact of disposals made in the year. This
resulted in a 15% increase in NOI to £160.8 million and an
improvement in NOI margin to 75.2% (2018: £140.3 million
and 74.5%).
The efficiency programme implemented in 2018 helped
mitigate underlying inflation in overheads by streamlining
processes and procedures identified through our student
insight and delivered thanks to PRISM and our scale
efficiencies. Management fee income from joint ventures
was £21.2 million (2018: £15.6 million), as a result of
recurring management fees of £14.4 million and non-
recurring fees of £6.8 million (2018: £13.2 million and £2.4
million). This includes £4.6 million from partial recognition
of the LSAV performance fee (2018: nil). We have continued
to make progress towards our EBIT margin target of 74% by
the end of 2021, achieving 71.7% in 2019, through scale and
further operating efficiencies. Following the acquisition
of Liberty Living, we see further opportunities to enhance
the enlarged Group’s EBIT margin target over time through
procurement savings, investments in energy efficiency and
customer segmentation.
Finance costs increased to £43.9 million (2018: £40.0
million). An increase in net debt during the year to £1,884
million (2018: £856 million) was caused primarily by the
acquisition of Liberty Living at the end of November and
was partially offset by a lower average cost of finance in
2019 of 3.6% (2018: 3.8%) as we have utilised revolving
credit facilities at lower average rates. Interest capitalised
into development schemes decreased from £10.5 million to
£9.1 million, driven both by lower development spend and
lower capitalisation rates. We expect capitalised interest
to remain at around this level given the ongoing level of
development activity in 2020 and 2021.
Development (pre-contract) and other costs remained
broadly flat at £5.7 million (2018: £5.8 million), reflecting
site acquisitions, the earnings impact of share-based
incentives and our contribution to our charitable trust, the
Unite Foundation.
Occupancy, reservations and rental growth
Occupancy across Unite’s portfolio for the 2019/20
academic year stands at 98% and like-for-like rental growth
of 3.4% was achieved. Beds under like-for-like nomination
agreements delivered 3.4% rental growth, reflecting
fixed or inflation-linked uplifts on multi-year agreements.
Direct-let beds delivered 3.8% YoY growth on a like-for-
like basis, through a combination of value-driven price
increases as well as improvements in the utilisation of our
assets. We are offering more 51-week tenancies where we
see demand, in particular from international students. In
addition, we achieved a 46% increase in summer income in
2019 by changing tenancies to support summer demand,
increased focus and delivery by our teams and through the
introduction of hotel-style stays in certain locations. We
forecast utilisation of 88% for 2019/20 and continue to see
the potential to improve utilisation to the low-90%s over
the medium term.
At a fund level, LSAV delivered rental growth of 4.8% for
2019/20, reflecting the portfolio’s focus and the ongoing
shortage of purpose-built accommodation in London. The
wholly owned and USAF portfolios delivered rental growth
of 3.4% and 2.9% respectively, reflecting a higher level of
nomination agreements in those portfolios and a higher
weighting to more highly penetrated provincial markets.
2019/20 Rental growth*
By fund
Wholly owned portfolio
USAF
LSAV
Total
3.4%
2.9%
4.8%
3.4%
By type
Nominations
Direct-let
Non like-for-like**
Total
3.4%
3.8%
2.9%
3.4%
* Excludes sale and leaseback properties and Liberty Living properties.
** Non like-for-like properties include buildings which have changed from nominations to direct-let, or vice versa, during the year.
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Operations review continued
73%
reservations
for 2020/21
We have maintained a high proportion of beds let to
Universities, with 56% of rooms under nomination
agreements (2018/19: 60%). The decrease in our weighting
to nominations agreements reflects the slightly lower level
of nomination in the legacy Liberty Living portfolio. The
acquisition of Liberty Living has deepened some of our
key University relationships, and brings new relationships
with Russell Group institutions such as the University of
Manchester, University of Sheffield and Cardiff University.
65% of these agreements, by income, are multi-year and
therefore benefit from annual fixed or inflation-linked
uplifts. These agreements secure average annual rental
growth of 3.0% over the next five years at current levels
of inflation and utilisation. The remaining agreements
are single year and we again achieved a renewal rate
of 85% on these agreements. Enhanced service levels
and our extensive understanding of student needs have
resulted in longer term and more robust partnerships with
Universities over recent years. The unexpired term of our
nomination agreements is six years, in line with 2018.
We expect the proportion of beds let to Universities to
remain at or around this level in the future. This balance
of nominations and direct-let beds provides the benefit
of having income secured by Universities, as well as the
ability to offer rooms to re-bookers and postgraduates and
determine market pricing on an annual basis.
Agreement length
Single year
2–5 years
6–10 years
11–20 years
20+ years
Total
Beds
2019/20
15,264
11,214
4,579
5,224
5,203
41,484
Beds
2018/19
7,543
11,672
1,675
4,026
4,099
29,105
2019/20
% Income
35
28
12
13
12
100
UK students account for 60% of our customers and
account for a large proportion of the beds under
nomination agreements with Universities. In addition,
31% and 9% of our customers come from non-EU and EU
countries respectively, reflecting the relative appeal of
our hassle-free product when compared with alternatives
in the private rented sector.
Re-bookers accounted for 28% of our direct-let bookings
for the 2019/20 year, increasing the proportion of our
direct-let beds let to non-first years to 75%. This reduces
our exposure to less predictable first year undergraduate
customers and puts less emphasis on clearing following
A-level results.
Postgraduates have increased as a share of our total
customer base over the past five years, driven by strong
growth in UK postgraduate numbers and increasing
awareness of the benefits of PBSA. In response, we are
considering how to tailor our offer for postgraduates as
part of our wider review of customer segmentation.
Reservations for the 2020/21 academic year are
encouraging at 73%, in line with record levels in 2018, as
a result of our continued focus of working alongside the
UK’s best Universities, the success of our online marketing
strategy and further progress through our local
marketing operation in China. We continue to monitor
the situation regarding the outbreak of the Coronavirus
and its potential impact on reservations for summer 2020
and the 2020/21 academic year, and we are working on
mitigation plans if required.
We have good visibility over rental growth for the 2020/21
academic year, with the nomination agreements in place
on a large proportion of our beds. Falling UK inflation
over the past 12 months will result in a slight reduction
in rental growth from multi-year nomination agreements
with annual RPI-linked rental increases. However, we still
anticipate annual rental increases of just under 3% from
our nomination agreements. In addition, we also see a
positive outlook for direct-let sales through re-bookers
The Unite Group PLC Annual Report & Accounts 2019 59
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and growing demand from non-EU international and
postgraduate students. We expect increases in utilisation
to contribute around a third of our 3.0–3.5% rental growth
target for 2020/21, through a combination of longer
tenancy lengths and new multi-year group bookings.
Enhancing our customer proposition
Our best-in-class operating platform continues to drive
both service enhancements and operational efficiency. We
remain committed to reinvesting a significant proportion
of savings in enhanced customer services that deliver
value-for-money for students and support our purpose of
creating a Home for Success. This includes investment in
our MyUnite app, our Student Ambassador programme
and staff training around student welfare. This ongoing
investment in our customer proposition is factored into our
74% EBIT margin target.
Home for Success forms a key component of how we
operate as a responsible business, and means providing
a living environment that enables students to get the very
best out of their time at University. With this in mind, we
continue to invest in the things that our extensive research
tells us matter most to them: the smoothest possible
transition to University life; a home that is safe and secure,
where they can study and socialise in the way they want;
and ensuring that help is on hand when needed.
Making sure the move to University and the process of
settling in is as smooth as possible for students enhances
retention and reduces the workload on our teams. In
delivering this experience, we bring together our expertise
in design and a carefully designed suite of traditional
and digital services delivered by people who have a long
experience of welcoming students from every background
to their new life.
We continue to strengthen our relationship with our
customers, as reflected in record student satisfaction, up
to 85 in 2019 from 83 last year. Our net promoter score
(NPS) has also increased from 17 in 2018 to 19 in 2019,
reflecting enhancements to customer service and greater
consistency across the estate. This puts us materially
ahead of the wider corporate PBSA sector (NPS of 6) and
University PBSA (NPS of -4) based on the latest National
Student Housing Survey. Our success in providing buildings
and a student offer that is valued by Universities is
evidenced by our ongoing success in delivering valuable
nomination agreements and our independently verified
University Trust score that increased to a record level of 82
in 2019 (2018: 81).
Recent service enhancements
The MyUnite app, currently used by 90% of our students,
gives a platform for students to message each other in a
moderated forum before moving in. In response to student
demand, we have also recently rolled out an online check-in
service, also available through the app and used by 75% of
students to be offered the facility in 2019. Allowing students
to book check-in slots makes for a smoother check-in day
and allows our people to concentrate on providing a hassle-
free and positive experience for new students, helping them
to settle in quicker.
Once living with us, the MyUnite app allows students to log
maintenance requests and anonymous noise complaints,
book and use laundry machines and notify the security team
if they are locked out of their room so they can be let in at
any hour. The logging of maintenance requests has been
improved further, allowing auto-scheduling and monitoring
of requests to help our teams deliver first-time fixes by the
end of the working day in 80% of cases. All of these functions
put more power and choice into our students’ hands, and
also increases our operating efficiencies, allowing us to
concentrate on offering unbeatable service. These digital
channels are increasing in popularity with our students,
as illustrated by a 13% increase in online WebChats to our
contact centre, versus a 23% reduction in calls regarding
students’ accounts and a fall of 40% in general customer
service calls compared to the previous year.
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Operations review continued
Helping students settle in
Our Student Ambassador programme typically involves
second and third-year students, who have chosen to stay
with Unite, providing peer-to-peer support within their
buildings, especially for students arriving at University for
the first time. They are on hand to help students move into
their rooms quickly on check-in day, find the facilities they
will need and to advise on the realities and practicalities
of student life. Over the coming weeks and months, they
represent a highly accessible source of support at critical
points during a student’s journey through University.
We have recruited a 160-strong network of Student
Ambassadors to help our 2019 intake of students, all
of whom gain valuable work experience and personal
development and are paid the National or London
Living Wage.
Before students arrive, we offer both physical and virtual
property tours and room viewings to familiarise students
with their new home. We also review and improve our
welcome communications each year to make sure the
information students receive before leaving to go to
University is relevant and needed, while not overwhelming.
These communications feature local information for the
student’s chosen city, linking them to local amenities,
events and services. We also guide our students to our
online Common Room, which was visited by over 180,000
people in 2019, over two-thirds of whom were completely
new users. Articles classed as Student Living and Health
& Wellbeing had the highest combined views, and these
make up a key part of our welcome communications. 80%
of customers surveyed said they found their pre-arrivals
communications useful, and pre-arrival calls to our contact
centre reduced by 7%.
Student wellbeing
During the year, we collaborated with the British Property
Foundation to create a wellbeing guide and to drive
positive change within the PBSA sector, leading by example.
The guide outlines key findings on student welfare and
suggests best practice within the sector. The guide was
endorsed by the Department for Education.
We were the first in the sector to develop a professional
framework for student wellbeing and to hire student
service professionals to advise and guide our teams on
difficult or unfamiliar situations. Our customer service
teams are all trained in active listening to ensure they have
the tools they need to quickly identify potential welfare
issues before they become problematic and, if necessary,
signpost students to an appropriate professional service.
We also link in with University support networks and
local wellbeing services, including the third-party peer-to-
peer advice call centre, Nightline. We operate a 24/7/365
emergency contact centre for times of need, who received
around 94,000 calls during the year.
We have a clear escalation process in which all team
members can raise a concern about a student’s wellbeing,
and we work very closely with our University partners
to direct them to the support they need. Each of our
city teams has trained mental health first aiders and we
regularly update our staff on trends and emerging issues
in student welfare. We recognise the important part
student accommodation has to play in student welfare,
and the opportunity we have to influence a positive
student experience from transitioning to student life and
throughout their journey through University.
Improving outcomes for students
Our student insight programmes consistently tell us that
students’ expectations before moving to University do
not align with the reality of student living. To tackle this
disparity, we launched Leapskills in 2018, a programme
that helps to build resilience in prospective students and
address key issues they may face on a day-to-day basis.
The programme is made up of free resources, including
a digital game that lets students and their teachers
explore a virtual student accommodation block and look
at what tricky scenarios they may encounter. This evokes
discussions around living with peers, managing finances
and potentially feeling lonely, among other topic areas.
The programme has been received overwhelmingly well,
with students and teachers telling us that the courses have
better prepared them for University life. The Department
The Unite Group PLC Annual Report & Accounts 2019 of Education has also endorsed and championed
Leapskills. 64 educational institutions have now signed
up for Leapskills and over 1,700 students have already
participated in the programme to help them better prepare
for University.
To deepen our student offer, we have partnered with
Placer, a work experience matching app that helps
to connect students with the best work experience
opportunities available to supplement their University
course. Historically, placements have been hard to reach
for some students, but Placer levels the playing field
to offer equal opportunities to any student who signs
up to the service for free. This means socio-economic
background and other factors will not influence a student’s
ability to gain work experience. So far, nine Universities
are live with Placer with a further six committed for the
2019/20 academic year. To date, opportunities from 4,124
employers, including top graduate employers Enterprise-
Rent-A-Car, HSBC, GSK and EY, have been shown to 7,000
students, with 25,000 saved to student shortlists and
2,000 clicks to apply. These opportunities positively
supplement the students’ University course and improve
future employability.
Improving access to Higher Education
Moving to University, progressing in your subject and then
eventually graduating are huge milestones in anyone’s
life. These challenges are even harder if you do not have
the support of a family. The Unite Foundation charity
was founded in 2012 to work with students who do not
have family support to help them through this process,
offering care leavers and estranged students wrap-around
support as part of an accommodation scholarship with
Unite. Only 6% of care leavers under the age of 21 go to
University, with almost half dropping out from their course.
The Unite Foundation is proud that its scholars show a
92% continuation rate from their first year of study. The
Foundation currently works with 27 University partners,
has awarded over 400 scholarships since 2012 and 130
students have already graduated; transcending their
early academic disadvantage.
University relationships
Our reputation with Universities is another of our key
performance metrics, and our latest Higher Education Trust
survey revealed our reputation is at an all-time high. This is
the result of our active engagement with our Universities
at various different levels in the business; from the day-to-
day operational activity with our city teams and liaising with
University accommodation offices and student services
to strategic conversations with Vice-Chancellors and their
senior teams through our Higher Education engagement
team and senior management. We are committed to helping
our University partners to meet their own goals, such as
customer satisfaction scores, student experience, wellbeing
and retention goals. We continue to secure long-term
nomination agreements that reflect this confidence in our
offer, and our Universities increasingly view us as a strategic
partner to their long-term accommodation strategies rather
than just a traditional supplier.
Our partners are also invested in our long-term commitment
to widening participation in Higher Education, through
the Unite Foundation, and our deep insight and research
programmes and campaigns. We have also received positive
feedback within the sector for our Leapskills programme.
During the year, we launched our Higher Education website
which caters specifically to potential and current University
partners. This includes information on our Home for Success
purpose and brand promises, as well as information on how
we can work to create tailored offers for our partners. There
are also links to our student insight programmes and blogs
from our thought leaders.
Our acquisition of Liberty Living positions us as an even
stronger partner for Universities, increasing our presence
from 22 to 27 towns and cities across the UK. This has
given us the opportunity to connect with more of the UK’s
strongest Universities and allows us to offer a wider range
of accommodation options in our existing markets to better
match what our University partners need for their students.
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We have recruited a
160-strong network of Student
Ambassadors to help our 2019
intake of students
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Property review
Our growth reflects the strength of our portfolio
and high-quality development pipeline.
EPRA NAV growth
EPRA NAV per share increased by 8% to 853 pence at 31 December 2019 (31
December 2018: 790 pence). In total, EPRA net assets were £3,110 million at 31
December 2019, up from £2,085 million a year earlier.
The main drivers of the 63 pence per share growth in EPRA NAV per share were:
• The growth in the value of the Group’s share of investment assets as a result
of rental growth (+20 pence) and yield compression (+11 pence)
• The value added to the development portfolio (+24 pence)
• The impact of the share placing, acquisition of Liberty Living and associated
expenses (+6 pence)
• The impact of retained profits and other items (+2 pence)
£m
Pence per share
EPRA NAV as at 31 Dec 2018
Rental growth
Yield movement
Development property gains
Share placing and Liberty Living acquisition
Retained profits/other
EPRA NAV at 31 Dec 2019
2,085.4
72.4
40.9
87.0
785.2
38.8
3,109.7
790
20
11
24
6
2
853
Property pipeline
The Unite Students’ development pipeline extends until 2023,
and will create over 5,000 beds for students.
2020/21
2,257 beds
White Rose View,
Leeds
976 beds
Artisan Heights,
Manchester
603 beds
First Way,
London
678 beds
Middlesex Street,
London
913 beds
The Unite Group PLC Annual Report & Accounts 2019 63
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“Ourpropertyactivityisfocusedonfurtherimprovingouralignmentto
high-andmid-rankedUniversitiesandbeinginthebestlocations.”
Nick Hayes
Group Property Director
Property portfolio
• The acquisition of Liberty Living, representing £2,019
The valuation of our property portfolio at 31 December
2019, including our share of gross assets held in USAF
and LSAV, was £5,225 million (31 December 2018: £2,967
million). The £2,258 million increase in portfolio value
(Unite share) was attributable to:
• Valuation increases of £206 million on the investment
and development portfolios, with like-for-like rental
growth of 3.4% and yield compression of 11 basis
points
• Capital expenditure on developments of £224 million,
including interest capitalised
• Capital expenditure of £15 million on investment
assets relating to refurbishment and asset
management initiatives
million of gross assets
• Other acquisitions of £7 million, disposals of £250
million and the impact of the change in Unite’s
ownership stake in USAF of £(74) million
• £110 million due to the recognition of leased assets
under IFRS 16
The see-through net initial yield of the portfolio is
5.00%, including properties acquired from Liberty Living
(December 2018: 5.00%). For investment assets held
throughout the year, there has been 11 basis points
of yield compression. The Liberty Living portfolio was
valued at an average net initial yield of 5.26% at the
year end. Our alignment to growing Universities means
that our portfolio is well placed to deliver continued
rental growth.
2021/22
1,329 beds
2022/23
1,324 beds
2023/24
281 beds
Old BRI,
Bristol
416 beds
Derby Road,
Nottingham
620 beds
Temple Quarter,
Bristol
704 beds
Wyvil Road, London
281 beds
Property pipeline
The Unite Students’ development pipeline extends until 2023,
and will create over 5,000 beds for students.
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Property review continued
Summary balance sheet
Rental properties
Rental properties (leased)
Properties under development
Total property
Net debt
Lease liability
Other assets/(liabilities)
EPRA net assets
31 December 2019
31 December 2018
Wholly
owned
£m
3,407
110
412
3,929
(1,450)
(99)
(120)
2,260
Share of
Fund/JV
£m
1,296
–
–
1,296
(434)
–
(13)
849
Total
£m
4,703
110
412
5,225
(1,884)
(99)
(133)
3,109
Wholly
owned
£m
1,497
–
279
1,776
(471)
–
(14)
1,291
Share of
Fund/JV
£m
1,188
–
3
1,191
(385)
–
(12)
794
Total
£m
2,685
–
282
2,967
(856)
–
(26)
2,085
The proportion of the property portfolio that is income generating is 92% by value, up from 90% at 31 December 2018,
with 8% now under development. The portfolio is 34% weighted to London by value on a Unite share basis, which will rise
to 38% on a built-out basis following completion of our secured development pipeline.
Unite investment portfolio analysis at 31 December 2019
Wholly owned
USAF
LSAV
Lease
Total
Unite share
London
Prime provincial
Major provincial
Provincial
Total
Value (£m)
Beds
Properties
Value (£m)
Beds
Properties
Value (£m)
Beds
Properties
Value (£m)
Beds
Properties
Value (£m)
Beds
Properties
Unite ownership (£m)
Buildings designed for students
1,015
3,499
11
877
7,042
15
1,198
17,324
37
317
4,957
11
3,407
32,822
74
3,407
391
1,870
6
641
5,342
18
1,527
19,506
48
291
3,520
10
2,850
30,238
82
628
1,061
5,291
12
–
–
–
274
3,067
1
–
–
–
1,335
8,358
13
668
17
260
1
29
618
2
29
753
2
35
1,059
3
110
2,690
8
110
2,484
10,920
30
1,547
13,002
35
3,028
40,650
88
643
9,536
24
7,702
74,108
177
4,813
1,648
34%
1,047
22%
1,701
35%
417
9%
4,813
100%
The focus of our property activity is to provide buildings designed specifically around the needs of today’s students, in
the best locations alongside high-performing Universities. We involve our University partners in the design and planning
process to ensure that we are delivering buildings that meet the requirements of their students. We also aim to provide
value-for-money accommodation and look to continually enhance the specification of our estate, using technology to
improve customer service, reduce our environmental impact and drive efficiency savings through energy and water
savings, upgraded Wi-Fi speeds and new features to improve the living experience.
Our development and portfolio activity is designed to support this strategic approach, ensuring that the portfolio is best
placed to meet students’ requirements and drive full occupancy and rental growth in the medium term.
Development and University partnership activity
Development and University partnership activity continues to be a significant driver of growth in future earnings and
NAV and is aligned to our focus on high- and mid-ranked Universities. Our pipeline of traditional development, University
partnerships and forward funds includes 5,191 beds with a total development cost of £681 million, of which 1,872 beds will
be delivered in London for a total development cost of £375 million.
We continue to identify new development and University partnership opportunities that deliver our target returns in both
London and the regions. In particular, we see an emerging development opportunity in zones 1 and 2 of Central London,
The Unite Group PLC Annual Report & Accounts 2019 following a softening in land values. We expect to add to
our pipeline during 2020 and maintain a run-rate of c.2,000
new beds per annum.
The anticipated yield on cost of this secured pipeline is
6.8%. Prospective returns on new direct-let schemes
remain attractive at around 8.0% in provincial markets.
We have lower hurdle rates for developments that are
supported by Universities or where another developer
is undertaking the higher risk activities of planning and
construction. The new London Plan requires student
accommodation to secure a nomination agreement with
one or more Universities, meaning we expect new London
developments to be delivered as University partnerships
with development yields of 6.0–6.5%. University
partnerships make up almost 60% by value of our
secured development pipeline.
We have contractually fixed our exposure to construction
costs on all schemes completing in 2020 and entered into
design and build contracts for our 2021 deliveries, which
substantially de-risks our cost risk. We have brought
forward the procurement of all critical items supplied from
European countries on our 2020 completions.
2019 and 2020 completions
We completed 2,390 beds across three new schemes
during 2019 in line with budget and programme, achieving
full occupancy in the first year of operation. Around 70%
of these beds are let to Universities under nomination
agreements for the 2019/20 academic year, with an average
duration of 16 years, supporting our ongoing focus on
quality of income.
The 2020 development pipeline is nearing completion on
time and to budget. We are opening 2,257 beds across
three properties all in high-ranking University cities, with
over 50% of the beds already secured under nomination
agreements, with an average life of 15 years, supporting
our ongoing focus on quality of income.
Development pipeline
During the year, we secured planning on our 913-bed
Middlesex Street site in London for delivery in 2021.
Middlesex Street creates new supply in a strategically
important location where there is a shortage of affordable,
high-quality accommodation. The scheme is expected to
deliver a £86 million uplift to NAV, of which £40 million is
still to be recognised, and will add 2 pence to EPRA EPS
from 2021/22.
Planning has also now been secured for our 416-bed
student accommodation development at the Old BRI site
in Bristol city centre, which will be delivered for the start
of the 2021/22 academic year. The consented scheme
includes 62 rented residential homes and includes 20%
affordable units. Unite will deliver the residential portion of
the scheme with the option of retaining or disposing of the
homes on completion.
We have continued to add to our pipeline during the year,
with an additional two schemes expected to deliver an
additional c.1,000 beds. One of the schemes is a 620-
bed development site in Nottingham, which is subject to
planning consent, expected to open in time for the 2022/23
academic year. In addition, we have acquired a c.300-
bed development site at Wyvil Road in London as part of
the Liberty Living acquisition, which has the potential to
accommodate both student and other residential uses.
University partnerships pipeline
In addition to growing the number of beds and the value
of income underpinned by long-term University-backed
nomination agreements, we have made further progress
with our strategy of delivering ongoing growth through
partnerships with Universities. We have secured two
further University partnership schemes over the past
12 months.
In October, Unite agreed commercial terms with the
University of Leeds for a 30-year nomination agreement
for its White Rose View development in Leeds.
In January 2020, we announced we were in advanced
negotiations with the University of Bristol for a University
partnership covering around 3,000 beds in Bristol. This will
include a large proportion of Unite’s existing operational
assets in the city following targeted investments as well as
the 416-bed Old BRI development and the 650-bed Temple
Quay development in close proximity to the University’s
new Temple Quarter campus. The long-term agreement
strengthens our long-standing and valuable relationship
with the University.
At Middlesex Street in London, we were supported through
planning by King’s College London and both parties are
working towards a long-term nomination agreement ahead
of completion for the start of the 2021/22 academic year.
We continue to make progress with our strategy of
delivering ongoing growth through partnerships with
Universities. Through our Higher Education Engagement
team, we have a pipeline of active discussions for new
University partnerships, with 11 Universities covering
almost 24,000 beds. These discussions often cover a
range of potential solutions on a city-wide basis, reflecting
each University’s specific accommodation needs.
These strategic discussions may include multi-year
nomination agreements for our existing operational
assets, on-campus and off-campus developments and
stock transfer.
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Property review continued
The nature of these discussions and the commitment required by both parties means that some opportunities will fall
away. This often reflects changes in circumstances, strategy or personnel for Universities or our own decision not to
pursue certain opportunities. For Universities, decisions over their accommodation strategies are often superseded
by academic matters and investment in their own academic estates. However, there remains a compelling rationale
for Universities to work with us to deliver operational efficiencies and provide the new accommodation required to
deliver their future growth ambitions.
Positively, we continue to track a healthy flow of new opportunities to add to the pipeline. Our experience suggests that
we will convert 10–20% of these opportunities over time. As a result, we expect to add one or two new deals per year as
previously outlined.
Multi-year nominations
Off-campus development
On-campus development
Stock transfer
Total
Secured development and partnerships pipeline
Type
Beds
Execution risk
Existing portfolio
10,200
Low/Medium
New
New
New
3,700
5,700
4,000
23,600
Medium
High
High
Target
delivery
2020
2020
2022
2023
2020
2021
2021
2022
Wholly owned
First Way, London
New Wakefield, Manchester
Derby Road, Nottingham1
Wyvil Road, London1
Total wholly owned
University partnerships
White Rose View, Leeds
Old BRI, Bristol
Middlesex Street, London
Temple Quarter, Bristol1
Total University partnerships
Total pipeline (Unite share)
1 Subject to obtaining planning consent.
Disposal activity
Secured
beds
No.
Total
completed
value
£m
Total
development
costs
£m
Capex in
period
£m
Capex
remaining
£m
Forecast
NAV
remaining
£m
Forecast
yield on
cost
%
678
603
620
281
2,182
976
416
913
704
3,009
5,191
126
85
64
132
407
124
57
272
96
549
956
102
56
48
87
293
83
42
186
77
388
681
33
20
1
18
72
35
1
37
1
74
146
31
17
47
69
164
25
21
141
76
263
427
8
11
16
44
79
15
15
40
18
88
167
6.0%
7.8%
8.0%
6.4%
7.1%
7.4%
6.2%
6.1%
6.2%
6.6%
6.8%
We will continue to manage the quality of the portfolio and our balance sheet leverage by recycling capital through disposals
and reinvesting into developments and acquisitions of assets aligned to the best Universities. During the year, the Group’s
share of disposals was £249 million, in line with book values, at a blended net initial yield of 5.7%. This included the sale to
USAF of five properties for £202 million (Unite share: £153m), located in Portsmouth, Leeds, Newcastle and Birmingham
and totalling 2,378 beds. In addition, in October we exchanged and completed on the sale of two wholly owned properties
in Coventry, comprising 1,127 beds for £96 million to Mapletree Investments at a price in line with book value.
Following the acquisition of Liberty Living, we intend to dispose of approximately £150–200 million of assets per annum,
broadly in line with historical levels. These target disposals, combined with rental growth, are intended to ensure that we
meet our target LTV of 35% and underpin our ability to sustain rental growth over a longer time horizon.
The Unite Group PLC Annual Report & Accounts 2019 67
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Releasing talent through scholarships to
estranged and care experienced students
Going to, progressing and then graduating from
University are major life changes for anyone,
and all the more challenging without a family to
support you. The Unite Foundation is a charity that
works with University partners across England
and Scotland to offer care-leavers and estranged
students an accommodation scholarship in a Unite
Students property and provide a stable Home for
Success. Only 6% of care-leavers under the age of
21 go to University, with almost half leaving before
the end of their course. The Unite Foundation is
proud that its scholars show a 92% continuation
rate.
The Unite Foundation was founded by Unite Students
in 2012 and supports our efforts to work with
Universities to widen participation in Higher Education,
as well as improving outcomes for students. Adding
social value and contributing to the third sector is a key
part of our responsible business strategy.
The Unite Foundation works with 27 University
partners and has awarded 434 scholarships since 2012,
and 130 students have graduated; transcending their
early academic disadvantage.
Paige, a Unite Foundation media graduate, found the
scholarship invaluable.
“The Unite Foundation Scholarship meant that I had
a place to call home. It’s important to realise that just
because you come from a dysfunctional background
doesn’t mean you need to live a dysfunctional life. I
feel like the Unite Foundation scholarship really helped
me process that, without them I wouldn’t be where I
am now.”
Since graduating, Paige is pursuing a career in radio
– most recently presenting No Filter on BBC Radio
Humberside – using her degree to work towards
her dream job, which would not have been possible
without support from the Unite Foundation and her
University.
27
University
partners are
working with the
Unite Foundation
434
scholarships have
been awarded
since 2012
130
students have
graduated,
transcending their
early academic
disadvantage
92%
Unite Foundation
scholars continue
past their first
year of study
68
Financial review
“Financialperformancehasonceagain
beenstrongwith15%growthinEPRA
EPS,underpinnedbyourUniversity
relationships,operatingplatformand
developmentactivity.”
Joe Lister
Chief Financial Officer
Income statement
A reconciliation of Profit before tax to EPRA earnings measures is set out in summary below and expanded in section 8 of
the financial statements.
The underlying performance of the business has shown continued growth, but was affected by the non-recurring costs
associated with the Liberty Living acquisition.
EPRA earnings
Valuation gains and profit/loss on disposal
Impairment of goodwill
Acquisition costs
Changes in valuation of interest rate swaps and debt break costs
Minority interest and tax
(Loss)/profit before tax
EPRA earnings per share
Basic earnings per share
Unite
£m
103.1
Liberty Living
£m
7.5
2019
£m
110.6
198.1
(384.1)
(22.8)
(5.4)
2.4
(101.2)
39.1p
(31.5)p
2018
£m
88.4
153.6
–
–
(0.1)
3.9
245.8
34.1p
90.8p
The loss before tax of £101.2 million includes the impairment of goodwill and intangibles of £384.1 million, resulting
from the acquisition of Liberty Living, which was offset by a higher level of EPRA earnings of £110.6 million and a higher
valuation uplift of £198.1 million in 2019 (2018: £88.4 million and £153.6 million respectively). The Liberty Living acquisition
was priced on a NAV-for-NAV basis for a total consideration of £1.4 billion. Goodwill was created, and subsequently
impaired, in relation to the share element of the consideration issued to CPPIB. This reflected the premium to NAV implied
by the share price at completion in late November, following a strong appreciation post-announcement of the transaction.
The Unite Group PLC Annual Report & Accounts 2019 Acquisition of Liberty Living and Share Placing
On 3 July 2019, the Company announced that it had agreed
to acquire Liberty Living’s UK portfolio of purpose-built
student accommodation, comprising 24,021 beds across
51 properties, for a total consideration of £1.4 billion.
In consideration for the acquisition, CPPIB received
approximately 72.6 million new ordinary shares in Unite,
representing a 20.0% shareholding in the enlarged Group
and total cash consideration of approximately £0.8 billion.
The cash consideration was split between £492 million
payable by Unite Group PLC from the net proceeds of
a share placing in July, existing debt facilities and cash
resources. Separately, USAF acquired Liberty Living’s
properties in Cardiff (3,480 beds in eight properties)
for £253 million. The acquisition completed on
29 November 2019.
We completed a placing of 26.4 million new ordinary shares
in July 2019 at a price of 985 pence per share, raising gross
proceeds of £260 million. The proceeds were used to fund
part of the cash consideration for the acquisition of Liberty
Living. The Company applied the principles of pre-emption
when allocating new shares to those investors that
participated in the placing.
The consideration for the acquisition was calculated on a
NAV-for-NAV basis as at 31 March 2019, with certain agreed
adjustments applied to the EPRA NAVs of Unite and the
Liberty Living portfolio. This meant that Unite acquired
the Liberty Living business at its EPRA NAV on 31 March
2019. Shares were issued to CPPIB based on Unite’s EPRA
NAV at the same date, which equated to 827p per share
before adjustments for dividends paid before completion.
Goodwill arose based on the difference between this issue
price and the share price on completion of the transaction
on 29 November 2019.
As the acquisition has been accounted for as a business
combination, the premium paid over the fair value of
the net assets acquired is treated as goodwill in the
consolidated balance sheet at the time of acquisition.
Goodwill of £377.4 million arising in respect of the
transaction was recognised on acquisition. Goodwill
and intangible assets were subsequently assessed for
impairment. An impairment charge of £384.1 million for the
full amount of goodwill recognised on acquisition (£377.4
million) and the fair value of the Liberty Living brand
(£6.7 million) has been taken to the consolidated income
statement. No portfolio premium has been recognised
following the acquisition.
The Board expects the placing and associated acquisition
of Liberty Living to be materially accretive to earnings and
dividends per share from the year ending 31 December 2020.
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Financial review continued
Cash flow and net debt
Interest rate hedging arrangements and cost of debt
The Operations business generated £85.4 million of net
cash in 2019 (2018: £81.2 million) and net debt increased to
£1,884 million (2018: £856 million). The key components of
the movement in see-through net debt were:
• The acquisition of Liberty Living and associated
acquisition costs (generating a total outflow of
£1,349 million)
• Net proceeds from the share placing (£255 million)
• The disposal programme (generating total inflows
of £243 million)
• Total capital expenditure of £240 million
• Operational cash flow of £85 million
• The impact of new units issued in USAF and our reduced
shareholding (£84 million reduction in net debt)
• Dividends paid of £70 million
In 2020, we expect net debt to increase as planned capital
expenditure on investment and development activity will
exceed anticipated asset disposals.
Debt financing
The Group maintains a disciplined approach to managing
leverage, with see-through LTV of 37% at 31 December
2019 (31 December 2018: 29%).
The increase during the year was primarily driven by the
Group’s acquisition of Liberty Living. We intend to dispose
of £150–200 million of assets per annum to fund our
development activity and reduce LTV to a target of 35% by
the end of 2021, assuming current yields.
With greater focus on the earnings profile of the business,
we are continuing to monitor our net debt to EBITDA ratio,
which we target to return to 6–7x over the medium term.
The Unite Group PLC has maintained investment grade
corporate ratings of BBB from Standard & Poor’s and Baa2
from Moody’s, reflecting Unite’s robust capital position,
cash flows and track record. As a result of the acquisition
of Liberty Living, Standard & Poor’s and Moody’s have
affirmed Unite’s and Liberty Living’s credit ratings and
changed the outlook from stable to positive.
Our average cost of debt based on current drawn amounts
has reduced to 3.3% (31 December 2018: 3.8%) and the
Group has 93% of investment debt subject to a fixed or
capped interest rate (31 December 2018: 99%) for an
average term of 5.4 years (31 December 2018: 5.8 years).
The reduction in the average cost of debt during the year
reflected the lower-cost debt assumed through the Liberty
Living acquisition as well as the redemption of the £90
million of 6.125% retail bonds in December 2019.
We will continue to proactively manage debt maturity
profiles and to lock into longer term debt at rates below
our current average cost of debt. Borrowings for the
combined Group are well diversified across lenders and
maturities, with only limited maturities before 2022.
Key debt statistics
(Unite share basis)
Net debt
LTV
Net debt:EBITDA ratio
Interest cover ratio
Average debt maturity
Average cost of debt
Proportion of investment
debt at fixed rate
31 Dec 2019
31 Dec 2018
£1,884m
£856m
37%
6.8*
3.5
29%
6.1
3.4
5.4 years
5.8 years
3.3%
93%
3.8%
99%
* 2019 calculation based on average net debt, pro rata for completion
of Liberty Living acquisition in late November 2019.
Amendments to IFRS
The new accounting standard, IFRS 16 Leases, became
effective from 1 January 2019. This standard impacts
our sale and leaseback portfolio which comprised 2,690
beds across eight properties at 31 December 2019. These
properties were sold by the Group between 2004 and
2009 to institutional investors and simultaneously leased
back by the Group. The properties have income secured by
nomination agreements to offset the lease payment to the
institutional owners. The new standard creates a right-
of-use asset for leased properties based on net income
forecasts and a liability for future lease payments.
At 31 December 2019, due to the recognition of £110.4
million of leased properties and a lease liability of £98.9
million, the LTV of the leased properties is 90%. This causes
LTV to increase by 1% on a see-through basis. As this is a
result of the accounting treatment for leased properties
under the new standard, the Group continues to monitor
and present LTV on a pre-IFRS 16 adjustments basis. EPRA
Earnings has marginally benefitted from the application of
IFRS 16.
The Unite Group PLC Annual Report & Accounts 2019 71
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The table below shows the impact of adopting the new standard on EPRA Earnings, EPRA NAV and LTV in 2019.
Further details of the impact on transition can be found in note 1 of the financial statements.
FY2019
pre-IFRS 16
£m
IFRS 16
adjustments
£m
FY2019
post-IFRS 16
£m
Income statement
Net operating income
Overheads less management fees
Finance costs
Development/other
EPRA Earnings
EPRA EPS (p)
EBIT margin
Balance sheet
Rental properties
Leased properties
Properties under development
Total property portfolio/GAV
Cash
Debt
Lease liability
Net debt
Other assets/(liabilities)
EPRA NAV
EPRA NAV (p)
LTV
160.8
(9.3)
(45.7)
1.1
106.9
37.8
70.9%
4,720.4
–
411.8
5,114.2
114.9
(1,999.2)
–
(1,884.3)
(118.6)
3,111.3
853
37%
–
1.9
1.8
–
3.7
1.3
–
110.4
–
110.4
–
–
(98.9)
(98.9)
(13.1)
(1.6)
160.8
(7.4)
(43.9)
1.1
110.6
39.1
71.7%
4,720.4
110.4
411.8
5,224.6
114.9
(1,999.2)
(98.9)
(1,983.2)
(131.7)
3,109.7
853
38%
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Dividend
Tax and REIT status
We are proposing a final dividend payment of 22.95 pence
per share (2018: 19.5 pence), making 33.2 pence for the full
year (2018: 29.0 pence). The final dividend will be fully paid
as a Property Income Distribution (PID) of 22.95 pence.
Subject to approval at Unite’s Annual General Meeting on
7 May 2020, the dividend will be paid in either cash or new
ordinary shares (a ‘scrip dividend alternative’) on 15 May
2020 to shareholders on the register at close of business
on 14 April 2020. The last date for receipt of scrip elections
will be 23 April 2020.
Further details of the scrip scheme, the terms and
conditions and the process for election to the scrip scheme
are available on the Company’s website.
As a result of the quality, predictable earnings outlook for
the business, we are planning to maintain our dividend
payout at 85% of EPRA earnings.
The Group holds REIT status and is exempt from tax on
its property business. During the year, we incurred £2.5
million of corporation tax (2018: £4.1 million), relating
primarily to profits on our property management activities,
and a £2.4 million tax credit in respect of prior years.
The Finance Act 2019 has resulted in the reversal of the
deferred tax liability of £24.4 million on investments in
USAF units and the corresponding deferred tax asset of
£9.9 million on losses, resulting in a £14.5 million increase
in net asset value.
14%
growth in
full year dividend
The Unite Group PLC Annual Report & Accounts 2019 Funds and joint ventures
The table below summarises the key financials at 31 December 2019 for each vehicle.
Property Assets
£m
Net debt
£m
Other assets
£m
Net assets
£m
Unite share
of NAV
£m
Maturity
Unite share
USAF
LSAV
2,850
1,335
(858)
(490)
(9)
(21)
1,983
824
437
412
Infinite
2022/2027
22%
50%
USAF and LSAV have performed well in the year to 31
December 2019. LSAV has delivered a strong performance
based on rental growth and yield compression in
London. USAF’s performance is in line with the broader
performance of the business.
In May, USAF raised £250 million of new equity from
external investors to fund new acquisitions. Unite did not
participate in the equity raise, meaning its stake in USAF
reduced from 25% to 22%. We sold five assets to USAF
for a total consideration of £202 million during the year
(Unite share £153 million), located in Portsmouth, Leeds,
Birmingham and Newcastle. In addition, USAF acquired
two properties in Newcastle in June for a total of £34
million, including allowance for an extensive refurbishment
of both properties.
Furthermore, as part of the acquisition of Liberty Living,
USAF acquired Liberty Living’s Cardiff properties,
totalling 3,480 beds for £253 million. USAF retains
around £200 million of acquisition capacity
and will continue to monitor acquisition
opportunities to further improve the
quality of the portfolio.
Fees
During the year to 31 December 2019, the Group
recognised net fees of £22.3 million from its fund and
asset management activities (2018: £15.6 million). The
increase was driven by growth in NOI and asset valuations,
the acquisition fee received from USAF in relation to the
purchase of Liberty Living’s Cardiff properties and initial
recognition of a net performance fee from LSAV.
The London portion of our LSAV joint venture has a
maturity in 2022. Discussions are ongoing with our joint
venture partner GIC over the future of the vehicle. The joint
venture has performed well over its life and we continue to
see an opportunity to realise value from the performance
fee payable to Unite at maturity. The 2019 results recognise
an initial £5.7 million of this fee (£4.6 million net of tax) and,
based on current expectations, Unite’s remaining share of
the performance fee is expected to be c.£15–20 million net
of tax. The performance fee is payable at the end of the life
of the joint venture and is based on the cash realised to the
joint venture partners. The remaining fee will be realised
over the period until the vehicle’s scheduled maturity in
2022, subject to the performance, outlook and discussions
with GIC over the future of the fund. Further detail can be
found in note 2.4 to the financial statements.
USAF asset management fee
LSAV asset and property
management fee
USAF acquisition fee
Net performance fee
Unite disposal management fee
Total fees
2019
£m
11.2
3.2
2.2
5.7
–
22.3
2018
£m
10.2
3.0
–
2.4
15.6
73
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74
Responsible business review
We are committed to creating a Home for Success and operating
as a responsible business. Having clear focus areas helps us add
strategic value to our business and increase our impact.
Summary
Up to uS is all about how we operate as
a business, ensuring that we act both
responsibly and sustainably in delivering
our Home for Success purpose across all
aspects of our business.
Up to uS sets out four Responsible
Business objectives: reducing our
negative environmental impacts;
delivering a positive social impact for
young people and the communities we
work in; creating diverse and engaged
teams and looking after the interests of
our customers, investors and partners.
The infographic on the next page
highlights how the four key areas of
Up to uS act as a foundation to grow
and deliver a Home for Success.
You can read more about how we
engage with our stakeholders on pages
32 and 33.
It’s more than just a responsible
business policy or ESG reporting, it’s
about how we all contribute to creating
an all-round sustainable business, both
now and in the future.
Our CFO, Joe Lister, chairs our quarterly
Up to uS Committee, bringing together
senior leaders to coordinate and oversee
our approach and initiatives, managing
risks and opportunities within this
mandate.
We believe human rights are universal
and recognise that the UN Guiding
Principles on Business and Human
Rights set a standard of conduct
expected of companies. We do our
best to ensure that everyone involved
or associated with our business is
protected, treated fairly and subject to
our anti-bribery and corruption, health
and safety, anti-slavery and other
policies, including those covering data
protection, performance management,
flexible working, grievances, leave, and
quality and diversity.
Further details of Up to uS can be found
on our website, and we’ll be publishing
a stand-alone sustainability report
later this year. This will provide more
detail on our approach and ambition
on sustainability, as well as setting out
stretching new targets for our enlarged
business.
ESG Ratings and reporting
Updated ESG ratings have been
undertaken by various external
rating agencies:
• MSCI: rated us as ‘AA’,
placing us in the top 28%
• GRESB: Sector Leader in the
European Listed Residential
sector
• EPRA sBPR: Silver, and Most
Improved Award in 2019
• FTSE-Russel: retained our
listing on the FTSE4Good index,
significantly outperforming our
sector average scores.
• ISS-oekom: awarded us ‘Prime’
status, with a rating of C+, putting
us in the top 10% of companies
they’ve assessed.
• CDP: C rated
Non-financial information statement
Colleagues
Group Health and Safety Policy
Employee Handbook
Equality, Diversity and Inclusion policy
Trans and gender identity policy
Whistleblowing policy
Directors’ Remuneration Report
Read more about Colleagues on page 83
Anti-corruption
and bribery
Anti-bribery policy
Read more about Anti-corruption and bribery
on page 74
Environmental
matters
Environment policy
Statement on carbon reduction/target
Description of principal
risks and impact of
business activity
Read more about Principal risks and impact of
business activity on pages 44 to 55
Read more about Environmental matters on page 76
Human rights
Unite Group code of ethics
Modern Slavery statement
Data Protection Policy
Social matters
Up to Us strategy
Read more about Human rights on page 74
Volunteering Policy
Fundraising guidelines
Charity Policy including matched giving
Read more about Social matters on pages 81 and 82
Description of the
business model
Read more about Our business model
on pages 30 and 31
Non-financial key
performance indicators
Read more about our Non-financial KPIs on page 41
The Unite Group PLC Annual Report & Accounts 2019 1
Reduce our
environmental impact
Maximise the business benefits of reducing our
energy and carbon, water and resource use and
waste and encourage responsible behaviour in our
employees, customers and suppliers.
2
Deliver positive social impact
for young people and the
communities we work in
Deliver positive social impacts to help young people
succeed in further education and build sustainable lives,
while supporting the communities we work in.
Read more on page 76
Read more on page 81
Key
Our purpose
Responsible
business objectives
Our priorities
n t a l i m p a c t
e
m
Deliver positiv
people and th
e s
o
e c
o
m
ci
a
l i
T h e r e when you n
e
e
d
u
s
Home for
Success
m
m
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ur enviro n
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u
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e
R
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u
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C
r
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d
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s
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a
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g
n
i
t
t
e
G
d
e
n
g
aged teams
s
r
e
artn
r
u
a f e a n d secure
L o o k a f t e r t h e interests of o
r s, in v estors and p
S
t o m e
c u s
3
Create diverse
and engaged teams
Create a truly diverse and engaged workforce where
people are passionate about the work they do, and
feel valued and recognised for the contribution
they make.
4
Look after the interests of our
customers, investors and partners
Develop lasting, trusted and transparent relationships
with investors, Universities and suppliers, while meeting
the needs of our customers.
Read more on page 83
Read more on page 84
75
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76
Responsible business review continued
1
Reduce our environmental impact
At Unite Students one of our values is ‘do what’s right’,
and for us that includes working hard to reduce the
impact our operations have on the environment. We
recognise the serious and imminent threat posed by
climate change, and that we have a responsibility to
reduce our contribution by cutting carbon emissions
and helping our customers adopt lasting responsible
living habits. We’ve made some good progress so far
and have achieved a 10% reduction in total energy
use on a per bed basis since 2014. In keeping with the
energy hierarchy this focus on reducing consumption
is central to our Energy and Environment Strategy,
but we’ve also made good progress in decarbonising
our energy supply, and all electricity purchased on
our Group supply contract (96% in 2019) is backed up
with REGOs (Renewable Energy Guarantee of Origin
Certificates) meaning it is 100% renewable and can
be traced back to source. Following the recent Liberty
Living acquisition, we’ll be ramping up our focus on
energy and carbon reduction and will be announcing
ambitious new targets later in 2020.
Although climate change is the biggest environmental
challenge we face, we don’t stop there. Our Energy
and Environment Strategy focuses on all of our most
significant environmental impacts which also include
water, resource use and waste.
Renewable Energy Focus
As a responsible business, we’ve always placed
a strong emphasis on saving energy and
improving our energy efficiency. After all, energy
consumption constitutes not only one of our
largest operating costs, but also one of our most
significant sources of carbon emissions.
The next step, if you follow the energy hierarchy, is to
look at sustainable energy production – both through
purchasing credible, traceable renewable electricity
from the National Grid, as well as through generating
as much of our own energy from renewable sources.
Going forwards, we are looking at further
opportunities to install more PV across our portfolio.
Since May 2017, we’ve been purchasing 100%
renewable energy, backed by the Renewable Energy
Guarantee of Origin Certificate (REGO). We are also
working to complete a Corporate Power Purchase
Agreement (PPA) that will see around 30% of our
electricity sourced from a single wind farm in
Scotland, creating an even stronger link back to the
source of our power. It is expected that the PPA will
be completed and signed off early in 2020.
Last year we embarked on a solar PV retrofit project,
installing panels of more than 410kW across four
sites. This array will generate enough green energy to
power around 85 average UK homes.
100%
Renewable energy
purchased since May 2017
The Unite Group PLC Annual Report & Accounts 2019 77
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During 2019 we installed over 400kWp of solar PV and
continued the rollout of smart networked heating controls,
to deliver significant improvements in energy performance
and customer experience. We also rolled out water saving
measures including flow regulated taps and showers and
more efficient WCs, saving over 25,000,000 litres of water
during 2019; that’s more than two Olympic swimming pools.
This, together with ongoing grid decarbonisation, has helped
us continue our downward trend in carbon emissions, with
absolute combined scope 1 and location based scope 2
(emissions from direct combustion of fossil fuels such as
in gas boilers and Company owned vehicles, and emissions
from electricity and heat consumed on our sites based on
UK National Grid emissions intensity respectively) compared
to 2014 falling by 47.9%. When the impact of us purchasing
REGO backed renewable power is taken into account then
absolute combined scope 1 and market based 2 emissions
have fallen by 94.4% since 2014.
As a member of the Innovation Gateway, a partnership of
organisations committed to improving the performance
of their properties, we work with other leading partners
including RBS, Tesco, Heathrow Airport, DEFRA, BT and
University of Birmingham to share the risks and benefits
of sourcing and developing innovative solutions to
sustainability challenges we face. As well as playing a part
in the Innovation Gateway picking up various industry
awards, our in-house energy and environment strategy
was also recognised with our Group Energy Manager
receiving the 2019 Energy Management Leader of
the Year award at the prestigious EDIE Sustainability
Leaders Awards.
In addition to purchasing REGO backed electricity since
2017, during 2019 we have been working to develop a
corporate power purchase agreement (PPA) with our
supply chain covering about 30% of our electricity
consumption (excluding Liberty Living properties). This
will provide even stronger links back to the renewable
source of power. It is expected that this corporate PPA will
be finalised in the first-half of 2020 and leave the option
open for further portions of our energy consumption to
be linked under similar agreements to further renewable
power generators. This approach stimulates demand
for additional renewable power generation, further
decarbonising the grid supply.
Whole estate Scope 1 + Scope 2
(location based) emissions, absolute
Whole estate Scope 1 + Scope 2
(location based) emissions, per bed per year
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2014
2015
2016
2017
2018
2019
1.6000
1.2000
0.8000
0.4000
0
2014
2015
2016
2017
2018
2019
Scope 1
Scope 2 (location based)
Scope 1
Scope 2 (location based)
78
Responsible business review continued
1
ESTATE DATA
Year end bed
numbers
Carbon contributing
bed numbers
Carbon contributing
floor area (m2)
ENERGY &
WATER USE
Natural gas
Reduce our environmental impact continued
2017
Change vs
base year
(2014)
Data
Change vs
prior year
Data
2018
Change vs
base year
(2014)
Change vs
prior year
Data
2019
Change vs
base year
(2014)
Change vs
prior year
49,506
15.03%
1.79%
48,726
13.21%
-1.58%
49,992
16.16%
2.60%
49,528 26.59%
7.84%
48,804
24.74%
-1.46%
49,242 25.86%
0.90%
1,411,279 22.98%
10.08%
1,391,455
21.25%
-1.40%
1,400,011 22.00%
0.61%
2017
2018
2019
Consumption
Change vs
base year*
Change vs
prior year
Consumption
Change vs
base year*
Change vs
prior year
Consumption
Change vs
base year*
Change vs
prior year
Absolute (kWh)
30,700,364
31.60%
620
3.96%
5.6%
-2.1%
36,632,735
57.03%
751 25.89%
19.3%
21.1%
39,616,444 69.82%
805 34.93%
8.1%
7.2%
Relative to
bed numbers
(kWh/bed)
Relative to floor
area (kWh/m2)
Electricity
Relative to
bed numbers
(kWh/bed)
Relative to floor
area (kWh/m2)
Heat
Relative to
bed numbers
(kWh/bed)
Relative to floor
area (kWh/m2)
Relative to
bed numbers
(kWh/bed)
Relative to floor
area (kWh/m2)
Water
Absolute (m3)
Relative to
bed numbers
(m3/bed)
Relative to floor
area (m3/m2)
21.8
7.01%
-4.1%
26.3
29.51%
21.0%
28.3 39.20%
7.5%
Absolute (kWh)
116,256,064
3.85%
2,347.26
-17.97%
3.3%
-4.2%
109,881,655
-1.85%
2,251.49
-21.31%
-5.5%
-4.1%
106,148,132
-5.18%
2,155.66
-24.66%
-3.4%
-4.3%
82.38
-15.56%
-6.1%
78.97
-19.05%
-4.1%
75.82
-22.28%
-4.0%
Absolute (kWh)
9,196,679 187.21%
185.68 126.88%
92.6%
78.6%
11,793,033 268.30%
241.64 195.26%
28.2%
30.1%
11,775,682 267.76%
239.14 192.20%
-0.1%
-1.0%
6.52 133.54%
75.0%
8.48 203.74%
30.1%
8.41 201.44%
-0.8%
TOTAL ENERGY (gas + electricity + heat)
Absolute (kWh)
156,153,106.91
12.76%
3,152.80
-10.92%
6.7%
-1.1%
158,307,422.92 14.32%
3,243.74
-8.35%
1.4%
2.9%
157,540,258.50
13.76%
3,199.33
-9.61%
-0.5%
-1.4%
110.65
-8.31%
-3.1%
113.77
-5.72%
2.8%
112.53
-6.75%
-1.1%
2,193,535 20.55%
44.3
4.87%
-1.1%
-8.3%
2,452,769 34.80%
50.3
19.00%
11.8%
13.5%
1,954,648
7.42%
39.7
-6.01%
-20.3%
-21.0%
1.6
-6.29%
-10.2%
1.8
6.28%
13.4%
1.4
-15.82%
-20.8%
* 2014 for energy, 2015 for water.
Increased
Decreased
No Data
The Unite Group PLC Annual Report & Accounts 2019 79
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GREENHOUSE
GAS EMISSIONS
Emissions
Change vs
base year**
Change vs
prior year
Emissions
Change vs
base year**
Change vs
prior year
Emissions
Change vs
base year**
Change vs
prior year
2017
2018
2019
5,768
31.3%
-1.0%
6,851
55.9%
18.8%
7,397
68.3%
0.1165
3.7%
-8.2%
0.1404
25.0%
20.5%
0.1502
33.8%
8.0%
7.0%
4.09
6.7%
-10.1%
4.92
28.6%
20.5%
5.28
38.0%
7.3%
42,687
-23.8%
-9.8%
33,315
-40.5%
-22.0%
29,205
-47.9%
-12.3%
0.8619
-39.8%
-16.4%
0.6826
-52.3%
-20.8%
0.5931
-58.6%
-13.1%
30.25
-38.0%
-8.2%
23.94
-51.0%
-20.8%
20.86
-57.3%
-12.9%
22,927
-58.6%
-51.2%
2,359
-95.7%
-89.7%
3,128
-94.4%
32.6%
0.4629
-67.3%
-54.8%
0.0483
-96.6%
-89.6%
0.0635
-95.5%
31.4%
16.25
-66.4%
-55.7%
1.70
-96.5%
-89.6%
2.23
-95.4%
31.8%
48,454
-19.8%
-8.9%
40,166
-33.5%
-17.1%
36,601
-39.4%
-8.9%
0.9783
-36.6%
-15.5%
0.8230
-46.7%
-15.9%
0.7433
-51.9%
-9.7%
34.33
-34.8%
-17.2%
28.87
-45.2%
-15.9%
26.14
-50.3%
-9.4%
28,695
-52.0%
-45.7%
9,210
-84.6%
-67.9%
10,524
-82.4%
14.3%
0.5794
-62.1%
-49.6%
0.1887
-87.7%
-67.4%
0.2137
-86.0%
13.3%
20.33
-61.0%
-50.6%
6.62
-87.3%
-67.4%
7.52
-85.6%
13.6%
Total Scope
1 emissions
Absolute
(tonnes CO2e)
Relative to
bed numbers
(tonnes CO2e/bed)
Relative to floor
area (kg CO2e/m2)
Total Scope
2 emissions
(location based)
Absolute
(tonnes CO2e)
Relative to
bed numbers
(tonnes CO2e/bed)
Relative to floor
area (kg CO2e/m2)
Total Scope
2 emissions
(market based)
Absolute
(tonnes CO2e)
Relative to
bed numbers
(tonnes CO2e/bed)
Relative to floor
area (kg CO2e/m2)
Total Scope
1+2 emissions
(location based)
Absolute
(tonnes CO2e)
Relative to
bed numbers
(tonnes CO2e/bed)
Relative to floor
area (kg CO2e/m2)
Total Scope
1+2 emissions
(market based)
Absolute
(tonnes CO2e)
Relative to
bed numbers
(tonnes CO2e/bed)
Relative to floor
area (kg CO2e/m2)
** Base year = 2014.
Increased
Decreased
No Data
80
Responsible business review continued
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Reduce our environmental impact continued
GREENHOUSE
GAS EMISSIONS
Emissions
Change vs
base year**
Change vs
prior year
Emissions
Change vs
base year**
Change vs
prior year
Emissions
Change vs
base year**
Change vs
prior year
2017
2018
2019
14,602
-1.4%
-4.6%
11,666
-21.2%
-20.1%
9,858
-33.4%
-15.5%
0.2948
-22.1%
-11.5%
0.2390
-36.8%
-18.9%
0.2002
-47.1%
-16.2%
10.35
-19.8%
-13.3%
8.38
-35.0%
-19.0%
7.04
-45.4%
-16.0%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
114,623
2,348.64
82.38
126,289
2,348.88
90.76
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
106,289
2,158.51
75.92
116,147
2,158.71
82.96
–
–
–
–
–
–
–
–
–
–
–
-7.3%
-8.1%
-7.8%
-8.0%
-8.1%
-8.6%
Total verifiable
Scope 3 emissions
Absolute
(tonnes CO2e)
Relative to
bed numbers
(tonnes CO2e/bed)
Relative to floor
area (kg CO2e/m2)
Total non-verifiable
Scope 3 emissions
Absolute
(tonnes CO2e)
Relative to
bed numbers
(tonnes CO2e/bed)
Relative to floor
area (kg CO2e/m2)
Total of verifiable
and non-verifiable
Scope 3 emissions
Absolute
(tonnes CO2e)
Relative to
bed numbers
(tonnes CO2e/bed)
Relative to floor
area (kg CO2e/m2)
** Base year = 2014.
Increased
Decreased
No Data
Table Notes:
GHG emissions calculated in line with HM
Government’s ‘Environmental Reporting
Guidelines: Including streamlined energy
and carbon reporting March 2019 (Updated
Introduction and Chapters 1 and 2)’
and the GHG Protocol. Emissions have
been independently verified to a level
of ‘Reasonable Assurance’ against the
requirements of ISO14064-3:2006 by
SGS UK Ltd.
‘Per bed’ emissions and energy consumption
have been calculated using ‘carbon contributing
bed numbers’, which are a pro rata share of each
site’s total bed numbers based on the number
of months it was in scope during the reporting
period. E.g. a 100 bed site that was only in scope
for six months due to disposal would be taken to
have only 50 carbon contributing beds during
the reporting period.
Scope 1 emissions include gas consumed in
properties, and fuel consumed in business
vehicles.
Scope 2 emissions include grid electricity
consumption, and district heating
consumption in properties.
Verifiable Scope 3 emissions include Category
1 (Purchased goods and services – water),
Category 3 (Fuel and energy-related activities
including T&D and WTT emissions), Category
6 (Business travel – including direct and
indirect (WTT and T&D) emissions from
flights (including RF), and rail travel),
where verifiable data sources exist.
Non-verifiable Scope 3 emissions include
Category 1 (Purchased goods and services
– operation and management of real estate
assets, calculated using QUANTIS Scope 3
screening tool based on spend), Category 2
(Capital goods – new properties, calculated
using QUANTIS Scope 3 screening tool),
Category 5 (Waste Generated in Operations),
and Category 7 (Employee commuting),
where insufficient data is available to verify
in accordance with the requirements of ISO
14064-3:2006.
Emissions factors used are the 2019 ‘UK
Government emission conversion factors
for greenhouse gas company reporting’,
although Market Based Scope 2 emissions
are calculated using the supplier’s contractual
emissions factor which is zero for 96.5%
of electricity (this amount is fully backed
by REGOs).
More detailed breakdown of emissions,
including by asset and category, are reported
via schemes including the CDP Climate Change
Disclosure and GRESB Real Estate Assessment.
The Unite Group PLC Annual Report & Accounts 2019
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2 Deliver positive social impact for young
people and the communities we work in
the programme is to reduce this
expectation gap and better prepare
students for the leap to University.
The importance and value of this
initiative was acknowledged by the
Department for Education who
publicly endorsed the launch of
our digital Leapskills platform in
July 2019.
To date, 64 educational institutions
have signed up for the resource,
meaning over 1,700 students are
better prepared for University. We
have plans to further develop the
programme and extend its reach
over the coming year.
The feedback from students and
teachers alike is incredibly positive.
“It gave me a good insight into
University life and the financial
aspects.” – Year 12 student.
“These sessions afforded our
students the ability to reflect on
University life and to consider how
they can best prepare for it in terms
of establishing support networks
and fostering social relationships
and friendship groups. Our survey
indicated that students’ confidence
levels in terms of their knowledge
and understanding of University life
more than doubled by the end of the
session.” – Sixth Form Teacher.
We also continue to deliver social
value by supporting Universities
to widen participation into Higher
Education and helping to improve
outcomes for students.
The Unite Foundation helps
estranged and care experienced
students who do not have family
financial support to access Higher
Education. Working with 27
Universities, the Foundation has
provided wrap-around support
to 189 students for the 2019/20
academic year, and over 430
students in total since 2012. 92%
of Unite Foundation scholars have
continued their studies through
to their second year. With only 6%
of care-leavers under the age of
21 attending University in the UK,
and almost half not continuing
their studies past their first year,
this shows the significance of the
Foundation’s support.
Placer is a service that gives students
a platform to find work experience
positions they may have struggled
to find through traditional routes
or word of mouth. There are nine
Universities who are live on Placer
with a further six Universities
committed to sign-up for the 2019/20
academic year. 4,124 positions from
employers including Enterprise-
Rent-A-Car, HSBC, GSK and EY have
appeared to 7,000 students, with
25,000 saved to student shortlists
and 2,000 clicks to apply. The app
levels the playing field so students
from any background have the
opportunity to find relevant work
experience positions to boost their
career prospects.
We are committed to helping
our employees and students
adopt lasting, responsible living
and working habits, through an
employee and customer engagement
programme. We do this through
our work with the National Union
of Students (NUS) and their Positive
Impact Awards. Now in its sixth year,
our Positive Impact programme
continues to grow and evolve as a
way of delivering for stakeholders. In
2019 our network of Positive Impact
Leads helped 24 of our city teams
achieve NUS Positive Impact Awards,
eight of which were Gold Awards.
Positive Impact aligns with our
broader responsible business focus
‘Up to uS’, and incorporates key
themes including health and safety,
social impact and wellbeing, as well
as the environment.
We believe all young people
deserve a Home for Success and
have committed to helping them
succeed in Higher Education and
in developing sustainable living
practices. A key aspect of this
is to ensure that young people
transitioning to University are well
prepared for independent living
and supported in maintaining and
growing healthy relationships.
Our student research consistently
tells us that student expectations
before University are different to
the reality when they arrive. As a
result we developed Leapskills, our
resilience workshop designed to
support sixth formers. The aim of
Increase on last year’s
charitable contributions
27%
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2
Deliver positive social impact for young
people and the communities we work in
continued
The importance of community
is paramount to our Up to uS
objectives and we work hard
to support the local areas we
live and work in. 2019 saw over
a 20% increase on last year’s
charitable contributions with over
£600,000 donated to regional and
national charities across the UK
(excluding the Unite Foundation).
These funds have been raised
and donated through direct and
facilitated giving, as well as in-kind
donations. Supporting charitable
organisations that align with our
Home for Success purpose and
values is important to us and
we always seek to maximise the
opportunity to raise awareness
with our customers in the hope
they become the future generation
of supporters. Each year our city
teams and head office nominate
a local charity to support for the
academic year. Each charity has
young people as a key beneficiary
and our people work to engage
students and colleagues with
them through fundraising events
and volunteering. This regional
activity runs alongside our two
national charity partnerships:
The British Heart Foundation
and Into University.
The British Heart Foundation
partnership forms a key part of our
sustainable behaviour programme
which encourages students to
recycle and reuse unwanted
goods, culminating in donations
of £330,000 for the year. To date,
over 1,000 students and employees
have also successfully completed
life-saving CPR training provided
by BHF.
Volunteering also provides the
opportunity for both our employees
and our students to engage with
local communities. By providing
our resources and expertise to
organisations, we can make a
tangible difference while
encouraging motivation and
engagement amongst employees.
Employee volunteering has been
running for five years and allows
employees to take one day, or
7.5 hours, out of their schedule
to volunteer for local charities/
organisations that support young
people. Our work with local
charities, which allows our teams
to make more impact on a regional
scale, combined with the
overarching impact offered
by the national partnerships,
creates a powerful opportunity
for us to make a valuable
contribution to charities,
employees and students alike.
We view all developments as our
long-term commitment to a local
area. From the outset on any
scheme, we look to understand
the important issues through
discussion with ward councillors,
resident groups, community
councils and nearby businesses.
Our approach is to address as many
of these issues as we can with
our proposals. Early engagement
with our neighbours has helped
deliver award-winning buildings,
promoting collaboration between
local communities and the student
population.
Ensuring dialogue continues during
the development process and into
the operational phase, strengthens
the deliverability of any considered
benefits. Providing targeted s106
contributions, localised bursaries
and rooms at affordable rents
contributes directly to the local
community, while also helping to
deliver a high-quality, value-for-
money product for students. There
is also recognition from many local
authorities that purpose-built
student accommodation frees up
general housing, so that it can be
returned for use by young families
and professionals.
£663,891 Donated to regional and
national charities across the UK
The Unite Group PLC Annual Report & Accounts 2019 3
Create diverse and engaged teams
A key pillar of delivering Home for
Success is the quality, diversity
and engagement of our people.
It is only through a well-led,
engaged team that our customers
experience our best service. We
place great emphasis on engaging
and training our teams so that they
can focus all of their energy on
serving our customers.
This year we have changed
our People model so that
local managers take greater
accountability for recruiting,
developing and leading their teams.
We continue to use engagement
as our core measure of success
in this area. We increased our
overall engagement score to 78%
and continue to hold Investors in
People Gold status as well as being
an accredited Real Living Wage
employer.
We introduced new People systems
to improve local accountability
of managers for People matters,
as well as employee self-service,
giving colleagues access to their
own information about pay
and employment details. A new
Employee app is planned for roll
out in the coming months, helping
managers and employees to access
the information they need to work
effectively.
Our approach to employee
communication was further
enhanced with monthly Team Talk
meetings designed to update all
employees on how the business is
progressing. Our Employee Panels,
attended by a member of the Group
Board, provided a further channel
for two-way communication,
building on the feedback we already
receive through other channels
including our regular engagement
surveys.
Significant attention has also
been given to welcoming our new
employees from Liberty Living
into Unite Students. Following
completion of the acquisition in
November, our approach was
designed to demonstrate the
values of Unite and to provide a
very personal introduction to the
business. We continue to listen
to the ideas and expertise of our
Liberty Living teams so that we can
deliver an even better experience
for our customers. We will hold a
national all-employee event in 2020
to thank, excite and motivate our
people about our combined future
and help bring to life our Home for
Success purpose.
We continue to recognise the
contribution of our people through
a local and national Round of
Applause scheme, which is based
on employee nomination. A new
national awards event will bring
together the best contributors
from both Liberty Living and Unite
Students in another drive to bring
the cultures of both businesses
closer together.
Our senior management teams are
championing a range of diversity
and inclusion actions, including
balanced shortlists, reverse
mentoring and an ‘open chair’ at
Operations Board meetings. The
open chair enables diverse thinking
and ideas to be surfaced at the
most senior levels. Participants can
come from any area of the business,
the aim being to provide the
Operations Board with insight and
challenge by introducing different
perspectives on key topics.
We are looking to enhance our
shared parental leave and paternity
policies during 2020, to offer
a better work/life balance and
greater flexibility for our people
with families.
In 2019 we changed our employee
benefit provider to Lifeworks to
enhance benefits available to our
people, including access to welfare
services and discounts in a range of
retail shops. Following the results
of the BSC Occupational Health and
Safety audit, we have identified
areas for improvement around our
employee wellbeing offer, which we
will look to address in 2020.
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78% Employee
engagement score 1,900 FTE employee
numbers
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4
Look after the interests of our
customers, investors and partners
We are committed to ensuring that
we keep the interests of our key
external stakeholders at the heart
of what we do. This means the
interests of the students who live
with us, the Universities that partner
with us, and the organisations and
individuals who invest in Unite
Students. Doing so is a fundamental
part of ensuring we continue to
be a sustainable, responsible and
successful business. We work to
make a difference in areas as
diverse as safety, mental health
and wellbeing and affordability.
You can read more about how we do
this for each of these stakeholder
groups on pages 32 and 33.
Safety forms a key part of how we
operate as a responsible business,
underpinned by our commitment
to go above and beyond minimum
standards to provide the safest and
most secure environment for our
students and employees.
We continue to work closely with
the Department for Communities
and Local Government and local fire
authorities and experts to address
any remedial actions following the
Grenfell Tower tragedy. We have
removed Aluminium Composite
Materials (ACM) cladding from our
buildings in line with Government
advice and are undertaking a
thorough review of the use of
High-Pressure Laminate (HPL)
on our properties. If we need to
take further action in line with
Government advice, we will. We
are committed to doing what’s
right, in line with our values.
In 2019, we also implemented the
Fire Risk Management Framework
BS 9997, and appointed a new Head
of Fire Safety with experience in
both the London Fire Brigade and
other Fire Safety Management roles.
The appointment will help as we
integrate our fire safety strategy
across the newly acquired Liberty
Living portfolio.
We invited The British Safety Council
to undertake a comprehensive
range of safety audits in 2019,
including an Occupational Health
and Safety Audit, Fire Safety Audit
and a Construction Audit. The
Occupational Health and Safety
Audit measures performance against
a number of key safety management
indicators, providing organisations
with a worldwide benchmark of their
safety management systems against
current best practice. We were proud
to achieve a Five-star audit score (out
of five), representing a significant
improvement from our last audit 18
months ago where we achieved a
Four-star rating.
The welfare and wellbeing of our
customers is another top priority.
We collaborated with the British
Property Foundation in creating a
wellbeing guide to drive positive
change within the PBSA sector
and lead by example. The guide
outlines key findings around student
welfare and suggests best practice.
The guide was endorsed by the
Department for Education.
To help students settle-in to
University life we have rolled out our
Student Ambassador programme
to a much wider audience. The
programme typically involves
second- or third-year students,
who have chosen to continue
living with us, to offer peer-to-peer
support to new students within their
buildings, especially when first year
students first move in. After the
settling-in periods, the Ambassadors
represent a highly accessible
source of support at critical points
throughout the academic year and
on each student’s journey through
University life. We have recruited a
nearly 160-strong network of Student
Ambassadors, all of whom are paid
the National or London Living Wage.
2019 saw the publication of
the Augar review of post-18
education and funding. The report
underlines that Universities retain
a responsibility for delivering
value-for-money to students, which
includes University accommodation.
We continue to demonstrate value-
for-money to our customers by
delivering the services that students
and our University partners value.
The structure of our student offer
has always put the student first,
making sure we are providing a
platform for success and reducing
hassle by having all-inclusive
bills, high speed Wi-Fi, specifically
designed communal spaces as well
as well-trained staff and welfare
leads in each city. This allows us to
be there when we are needed, or to
direct students towards appropriate
third-party welfare services.
Our MyUnite app puts more
convenience and power into the hands
of our students. They are able to raise
maintenance logs, instant message
their flat mates, book a washing
machine in the laundry rooms, receive
notifications when a parcel arrives for
them and more. When students first
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move in, they can also check-in online,
an option chosen by 75% of students
with access to the facility this year. All
this functionality is based on student
feedback, so we have worked hard to
make sure living with us aligns to student
needs and wants. This has helped us
achieve a customer satisfaction score
of 85 in 2019.
The Strategic Report on pages 16 to
87 was approved by the Board and is
signed on its behalf by:
Higher Education Trust score
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Richard Smith
Chief Executive
26 February 2020
University partnerships
45
Water Consumption Efficiency
Alongside energy consumption and carbon
emissions, one of our biggest environmental
impacts is our water use. It’s also a significant
cost to the business.
Faulty toilet cisterns can be one of the biggest
contributors to water consumption. A single leaking
cistern can waste over 52,000 litres of water a year,
creating considerable cost and water wastage.
Based on analysis of water meter data collected via
smart meters across our estate, we identified the
highest consuming sites. We then undertook detailed
surveys to find out what was causing the higher than
expected consumption and what we could do about it.
We have now installed more than 1,300 dual-flush
toilet upgrades and more than 3,000 tap flow-
regulators, as well as sourcing and fitting a new
type of shower head in all of our buildings which
saves up to 10,000 litres of water per shower
each year. This will save 740 million litres each year.
We have already achieved more than £110,000 in
water cost savings during 2019, and we expect this
to increase. Following this success, more widespread
water efficiency works are planned going forwards.
1,300
dual-flush
toilet upgrades
3,000
tap flow-regulators
have been installed
740m
litres of water saved
each year
£110,000
saved in water cost
savings to date
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Gender diversity
Total employees
Male
Female
1,015
904
Senior management
Male
Female
62
41
Board
Male
Female
6
3
“Itwasbecomingincreasinglydifficult
torunsafespacesforpeoplewhere
wewerebefore.Wecouldneverhave
knownuntilwemovedherewhat
wouldhappen:it’sjust
growingandgrowing
intermsofbeinga
communityhub.”
Ben Eydmann
MahaDevi manager
Creating Community Spaces
Back in 2017 Unite Students, in partnership with
Islington Council, utilised an opportunity presented
by a planning stipulation to incorporate a community
space within its new Holloway Road accommodation.
Rather than just create a generic community hall which
was outlined in the Section 106, we proposed running
a competitive tender process for the opportunity for a
not for profit or charitable organisation to take on this
space, and in doing so, maximise the opportunity the
availability of such a space would create. The emphasis
of this process was to find an organisation that would
bring direct benefit to the local community, whilst helping
to integrate the student residents that the property
would house. Along with a heavily subsidised lease, we
were able to offer a fit out of the premises to ensure
that the successful applicant was able to utilise the full
opportunity the space presented by ensuring the final
layout best met their needs.
The Unite Group PLC Annual Report & Accounts 2019 87
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Fast forward two and a half years and MahaDevi Yoga,
providing yoga therapy to young people with disabilities,
has grown the delivery of their services by 82% since
moving in. This also includes access for families with
low incomes through a subsidy the charity provide and
have been able to fund through additional commercial
activity that the larger premises has enabled. In addition,
the centre now has around 25 students regularly
attending sessions each week, several of whom have
also volunteered alongside other members of the
community to support the centre in different ways.
The objective for Unite Students was to create a direct
positive impact in the locality, integrating students and
the local community via a collaborative approach with
local stakeholders. As a result we have strengthened
our position in the local area and developed positive
relationships with all parties involved. The success of
this scheme has helped inform our approach to the
provision of community spaces in other areas of our
portfolio. We are now keenly aware of the mutual
benefit doing this can bring to individual organisations,
local communities and our organisation, generating
genuine impact for all of these groups, in a unique and
genuine way.
This success and newly informed approach has now led
to the provision of two further community use spaces
within existing properties, which are home to a housing
charity, and street intervention service in Bristol. In
addition, we also now have a pipeline for four further
community spaces that have been identified across the
UK. We are in the early stages of working to identify
local stakeholders to collaborate with on these projects,
whilst understanding the most material issues in these
localities to try and help identify appropriate parties to
invite to the tender process.
We are committed to continuing to utilise this approach
where there are suitable opportunities to do so.
88
Listening to our students
Listening to our students has always been
important in informing our decisions and
making sure we are providing a home that
students want. The modern student is
ever-evolving, meaning we need to check
in regularly to make sure we can keep
delivering that commitment.
We launched our annual insight report The New
Realists and the Student Yearbook in 2019, both
reports exploring different aspects of student
lifestyle, expectations of University and who the
student of 2019 really is. We surveyed over 2,500
students and brought in a smaller representation
of students to help launch our reports and spread
the word to our University partners across the UK at
roundtable events, keeping the student voice at the
forefront of our findings.
We consulted with students and interior design
professionals to help us design some of our newest
properties to make sure the functionality of our
buildings is relevant to the modern student. We
sought their feedback on everything from the art
in common spaces, colourings, and the layout of
study and common areas for all our new properties
opened in 2019. We have already begun discussions
on developing the interior designs of our 2020
properties.
Going forward we will continue to call on more
students and design experts to work closely in
keeping our designs relevant, modern, and functional
for students; giving them the spaces they tell us
they want.
2,500
students took
part in our annual
insight survey
52%
of students cite
interest in their
chosen subject as a
top motivation for
going to University
1 in 5
students are
teetotal
69%
of students believe
going to University
is the only way to
make sure they get
the life they want
The Unite Group PLCAnnual Report & Accounts 2019 Working
together
Corporate
Governance
90 Chairman’s introduction
92 Board of Directors
96 Board statements
97 Board leadership and purpose
100 Division of responsibilities
103 Board activities
107 Nomination Committee
110 Audit Committee
116 Health & Safety Committee
119 Remuneration Committee
125 Directors’ Remuneration Policy
133 Annual Report on Remuneration
148 Directors’ Report
153 Statement of Directors’ Responsibilities
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Chairman’s introduction
“During2019,theBoard'sgovernance
focusedondeliveringasuccessful
LibertyLivingacquisitionwhilstin
parallelensuringourexistingbusiness
continuestoperformsafelyand
wesatisfyourcustomerandwider
stakeholderexpectations.”
Phil White
Chairman of the Board
Through the year, as the Liberty Living acquisition process
continued, the Board set clear milestones with dedicated
resources to ensure proper oversight of the transaction.
During this time, the Board was extremely conscious of
UK and wider political and economic uncertainty which
continued through 2019, with the Board ensuring the
acquisition, and the timing of it, continued to be right for
the Group. The Board’s governance also focused on our
ability to successfully integrate the business and realise
the synergies.
Alongside this, and again conscious of the ongoing political
and economic uncertainty, the Board’s governance focus
continued on our core business and performance across
all our key metrics. I am pleased to say the Group delivered
on these metrics, with great performance on safety
(achieving the Five-star out of five BSC Occupational Health
& Safety audit) and customer and University trust (record
satisfaction levels) alongside solid financial performance
with a total accounting return of 11.7% and growth in EPRA
EPS, up 15% to 39.1p.
Delivering the transformational Liberty Living acquisition
in parallel to this strong performance in our core business
is only possible due to the talent and hard work of our
teams across the business. On behalf of the Board, I would
like to thank them for another excellent year whilst also
welcoming our new colleagues from Liberty Living.
During 2019, the Board was also very active with
succession planning. Dame Shirley Pearce DBE joined the
Board in November and Professor Sir Steve Smith will join
in April 2020, both as Non-Executive Directors who bring
a wealth of experience in the Higher Education sector. In
addition, we are pleased to welcome Thomas Jackson, head
of CPPIB’s UK real estate business, as a Non-Executive
Director following the acquisition of Liberty Living. Andrew
Jones and Sir Tim Wilson stepped down from the Board,
after six and nine years’ service respectively, and I would
like to thank them for their service. Sir Tim was also Chair
of our Health & Safety Committee and the Group achieving
the Five-star BSC Occupational Health & Safety audit rating
at the end of 2019 is testament to his safety governance
leadership.
I will also be stepping down from the Board at the 2021
Annual General Meeting following completion of the
integration of Liberty Living. Succession planning is
underway and the Nomination Committee will identify
my successor within the next 12 months.
Going forwards, the Board’s governance focus continues
on developing and overseeing our longer-term sustainable
and resilient strategy, building on our strong foundations
for growth. This is founded on our strategy of providing
value-for-money services that our students and University
partners value; delivering quality buildings designed
around student needs; generating high-quality recurring
earnings and maintaining a strong capital structure.
The Unite Group PLCAnnual Report & Accounts 2019 Engagement with our wider stakeholders continues as key
to our growth, along with robust and effective governance
especially as HE sector and wider market uncertainties
continue in 2020 and beyond. Our governance framework
has been designed to ensure our resilience, help us manage
these uncertainties as well as seizing opportunities, such as
the Liberty Living acquisition.
The following pages provide insight into how our
governance and stakeholder engagement support our
continued growth and longer-term business sustainability.
Phil White
Chairman of the Board
26 February 2020
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Board of Directors
Phil White
Chairman
Richard Smith
Chief Executive Officer
Joe Lister
Chief Financial Officer
Relevant skills, experience
and contribution
Relevant skills, experience
and contribution
Relevant skills, experience
and contribution
Phil has served as Chairman since
May 2009.* He was Chief Executive of
National Express Group plc from 1997
to 2006 and led the business through
growth in the UK and overseas. He
gained extensive executive experience
in the public transport sector during
the period of deregulation and
privatisation. He is Chair of Lookers plc
as well as a Non-Executive Director of
VP plc.
Phil brings his wealth of experience as
a Chair of FTSE and other companies
to Unite, ensuring best practice in
board effectiveness and corporate
governance. Within the Board, he
helps ensure clarity, critical thinking,
constructive debate and challenge
and the running of an effective Board.
Externally, he ensures there is effective
engagement with our investors over
our strategy, long-term sustainability
and corporate governance.
* Phil’s tenure as Chair exceeds nine years
and Chair tenure and succession planning on
page 100 explains how this is being addressed.
Richard was appointed Chief
Executive in June 2016. Prior to this,
he was Unite’s Managing Director
of Operations from 2011, a role that
involved Richard leading the service
provided to our customers, and
managing maintenance and facilities
management across the Group’s
portfolio.
Joe joined Unite in 2002 having
qualified as a chartered accountant
with PricewaterhouseCoopers. He was
appointed as Chief Financial Officer in
January 2008 having previously held a
variety of roles including Investment
Director and Corporate Finance
Director. Joe is a non-executive
director for Helical PLC.
Joe continues to lead the design and
delivery of the Group’s sustainable
growth and financial performance.
Together with Richard, Joe ensures
the development and communication
of the Group’s strategy with our
investors. In addition, Joe has an
expanded remit over Property and
a critical role in developing and
strengthening the Group’s University
relationships. Joe is also leading the
development of the Group’s ESG
strategy.
Richard joined Unite as Deputy Chief
Financial Officer in 2010. Prior to this,
he spent 18 years in the transport
industry, working in the UK, Europe,
Australia and North America. Richard
spent 13 years at National Express
Group where he held a range of senior
finance, strategy and operations
roles, including Group Development
Director and Chief Financial Officer,
North America.
Richard continues to lead
the successful development,
communication and implementation
of the Group’s strategy, providing
clear and valued leadership and
delivery of the Group KPIs. His
engagement with our investors helps
ensure our strategy is well understood
and valued. This has translated into
continued strong financial and share
price performance and helps ensure
the Group is well-placed to carry this
success into future years.
The Unite Group PLCAnnual Report & Accounts 2019
Nomination Committee member
Audit Committee member
Remuneration Committee member
Health and Safety Committee member
Chairman of Committee
Ilaria del Beato
Non-Executive Director
Ross Paterson
Non-Executive Director
Relevant skills, experience
and contribution
Relevant skills, experience
and contribution
Ilaria was appointed a Non-Executive
Director in December 2018. She is CEO
of Frasers Property UK, part of Frasers
Property, a global real estate group.
Ilaria was formerly CEO of GE Capital
UK, a regulated Bank and corporate
lender and led GE Capital Real Estate
UK, a commercial real estate investor,
developer and lender.
Ilaria brings her 30 years of
experience in real estate, including
asset management, investment
and lending, to the Group. This
experience will be vital to the
Group as we navigate the upcoming
market uncertainties and increasing
professionalisation of the sector.
Ross was appointed as a Non-
Executive Director in September 2017.
He is Finance Director of Stagecoach
Group plc, and as a member of
Stagecoach’s Board is responsible
for finance, business development
and legal. In addition, he is a Non-
Executive Director and the Audit
Committee Chair of Virgin Rail Group
Holdings Limited, and a member of
the Business Policy Committee of the
Institute of Chartered Accountants of
Scotland.
Ross contributes to Unite’s Board
using his many years’ experience
of managing finance in a complex
operational business like our own.
He also brings valued insight to
innovation as we continue to enhance
our service offer to our student
customers. Ross uses his financial
and broader business experience as
Chair of the Audit Committee, helping
oversee the Group’s financial rigour
and delivery.
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Board of Directors continued
Richard Akers
Non-Executive Director
Dame Shirley Pearce
Non-Executive Director
Thomas Jackson
Non-Executive Director
Relevant skills, experience
and contribution
Relevant skills, experience
and contribution
Relevant skills, experience
and contribution
Richard was appointed a Non-
Executive Director in September 2018.
From 1995 to 2014 Richard worked
at Land Securities plc, where he had
various positions including as an
Executive Director on the main board
and Managing Director of Retail.
Richard has over 30 years’ experience
in the real estate industry, with a
focus on retail. He is currently Senior
Independent Director and Chair of the
Health & Safety and Remuneration
Committees at Barratt Developments
Plc and a Non-Executive Director at
Shaftesbury Plc. Previously Richard
was a Non-Executive Director at
Emaar Malls PJSC.
Richard brings a wealth of real estate
experience as both an executive and
Non-Executive Director on the boards
of FTSE companies. This experience
will be critical to help the Group
manage change and uncertainty in
the wider real estate sector as well
as the broader economy.
Dame Shirley joined the Board in
November 2019, as a Non-Executive
Director. She has held chair, senior
executive and non-executive roles
at board level in higher education,
health and policing. She was
appointed by the Secretary of State
for Education as the Independent
Reviewer of the Teaching Excellence
and Student Outcomes Framework
(TEF) (completed in October 2019)
and is a member of the Committee on
Standards in Public Life, a member of
the Advisory Board of HCA Healthcare
UK and, until 31 December 2019, Chair
of Court at the London School of
Economics and Political Science (LSE).
Dame Shirley was also Vice-Chancellor
and President of Loughborough
University from 2006–2012. She was
appointed CBE in 2005 for services
to education in the NHS and in 2014
appointed DBE for services to Higher
Education.
Dame Shirley brings her wide ranging
and hands on experience in the HE
sector to the Board. This is especially
critical at a time of on-going change
in the sector, where her insight and
knowledge of HE and broader policy
initiatives will help inform the Board
on our strategic direction.
Thomas joined as a Non-Executive
Director in November 2019. He has
been the head of CPP Investments’ UK
real estate business since 2015 and
is responsible for CPP Investments’
entry into a number of new real estate
sectors, including student housing, life
sciences and the Built-to-Rent sector.
In addition to sitting on the Board of
The Unite Group PLC, Thomas also
sits on a number of CPP Investments’
office, retail and logistics Joint Venture
boards. Beyond the UK, Thomas is also
responsible for CPP Investments’ real
estate investment activity in Germany
and the CEE regions. Thomas originally
joined CPP Investments in 2011 and
was instrumental in its transaction
activity in Spain, the Nordics and India.
Prior to joining CPP Investments,
Thomas was a Vice President in the
real estate investment banking team
at Macquarie bank and focused on
M&A transactions within the UK and
European public and private real
estate companies.
Thomas brings his wide ranging
real estate experience, not only
student housing and specifically his
experience on the Board of Liberty
Living Group plc but also his wider
built-to-rent, retail and logistics real
estate experience to the Board. His
international experience will also
be invaluable for the Board, helping
provide a wider perspective on
developments in real estate as
the Board progresses further its
strategic thinking.
The Unite Group PLCAnnual Report & Accounts 2019
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Nomination Committee member
Audit Committee member
Remuneration Committee member
Health and Safety Committee member
Chairman of Committee
Elizabeth McMeikan
Senior Independent Director
Chris Szpojnarowicz
Company Secretary
Relevant skills, experience
and contribution
Relevant skills, experience
and contribution
Chris was appointed Company
Secretary and Group Legal Director
in 2013, following General Counsel
roles at GE, MTV Networks and other
multinationals. He was previously
an M&A/corporate and commercial
lawyer at Clifford Chance and Baker
McKenzie. Chris uses his general
counsel and corporate/commercial
legal experience to fuse our corporate
and risk governance with our business
activity. In this way, Chris links his
Company Secretary and governance
leadership role with his legal and
commercial experience.
Chris is a Board Trustee of The West
of England Friends Housing Society,
a residential care home which also
provides supported housing and
independent flats as part of an
integrated care community.
Liz was appointed a Non-Executive
Director in February 2014. She has
significant experience in customer-
focused businesses Tesco and
Colgate Palmolive, where she was
successful in driving growth through
an understanding of customer needs
and an innovative marketing approach.
Liz is a non-executive director at
Dalata Hotel Group Plc, McBride
plc, Fresca Group Ltd, an import/
export fruit and vegetable company,
and a director of Second Growth
Community Investment Company.
Previously she was a non-executive
director of JD Wetherspoon plc, the
chair of Moat Homes Ltd, a leading
housing association in the South East,
and CH & Co Ltd, a privately owned
catering company.
Liz brings her extensive consumer-
focused experience, both as an
executive and also on the boards
of other FTSE companies, to help
oversee the design and development
of our customer proposition and
enhanced customer service. As Senior
Independent Director of Unite, Liz
supports the Chair in the effective
running of the Board and as Chair of
the Remuneration Committee, she
helps ensure the Executive Directors’
and broader senior leadership’s
remuneration is aligned to the
long-term sustainable success of
the Group.
96
Board statements
Under the Corporate Governance Code (2019),
the Board is required to make a number of
statements. These statements are set out below:
Requirement
Board statement
More information
Compliance with the Code
The Unite Group PLC is listed on the London Stock
Exchange and is subject to the requirements of
the UK Corporate Governance Code. The Board
is required to comply with the provisions of the
Code and to apply the provisions of the Code
and where it does not explain the reasons
for non-compliance.
The code is available at www.frc.org.uk
Going Concern
The Board is required to confirm that the Group
has adequate resources to continue in operation
for the foreseeable future.
The Board confirms that, in its view, the Company
has complied with the principles and provisions set
out in the Code during 2019, except for provision 19
since the Chair’s tenure has exceeded nine years.
The reason for this and Chair succession planning is
explained below (see Chair tenure succession and
planning on page 100).
Details on how the
Company complies with
the Code can be found
throughout this Corporate
Governance section of the
Annual Report.
After making enquiries and having considered
forecasts and appropriate sensitivities, the Directors
have formed a judgement, at the time of approving
the financial statements, that there is a reasonable
expectation that the Group has adequate resources
to continue in operational existence for the
foreseeable future, being at least 12 months from the
date of these financial statements.
More details on the Going
Concern statement can be
found on pages 174 and 175.
Viability Statement
The Board is required to assess the viability of
the Company taking into account the current
position and the potential impact of the principal
risks and uncertainties set out on pages 47 to 55.
The Directors have a reasonable expectation that
the Group will be able to continue in operation and
meet its liabilities as they fall due over the three-year
period to December 2022.
More details on the Viability
statement can be found on
page 46.
Principal and emerging risks facing the Group
The Board is required to confirm that it has
carried out a robust assessment of the principal
and emerging risks facing the Company and
include a description of these principal risks,
what procedures are in place to identify
emerging risks, and an explanation of how
these are being managed or mitigated.
A robust assessment of the principal and emerging
risks facing the Company was undertaken during the
year, including those that would threaten its business
model, future performance, solvency or liquidity,
together with an assessment of the procedures
to identify emerging risks. These risks and the
assessment undertaken and an explanation of how
these are being managed or mitigated are set out on
pages 42 to 55.
Information around key
risks and risk management
processes can be found
on pages 42 to 55, and
on page 113 of the Audit
Committee report.
Risk management and internal control
The Board is required to monitor the Company’s
risk management and internal control systems
and, at least annually, carry out a review of their
effectiveness.
Fair, balanced and understandable
The Board should confirm that it considers
the annual report, taken as a whole, is fair,
balanced and understandable and provides
the information necessary for shareholders
to assess the Company’s position and
performance, business model and strategy.
The Board conducted a review of the effectiveness of
the systems of risk management and internal control
during the year, and considers that there is a
sound system of internal control which accords with
the ‘Financial Reporting Council’s Guidance on Risk
Management, Internal Control and Related Financial
and Business Reporting.’
Details on the systems
of risk management and
internal control can be
found on pages 42 to 46.
The Directors consider, to the best of each person’s
knowledge and belief, that the annual report, taken
as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy.
See the Audit Committee
report on pages 110 to
115 and the Statement of
Directors’ responsibilities
on page 153.
The Unite Group PLCAnnual Report & Accounts 2019 Board leadership and purpose
Governance leadership
and corporate culture
Following the Liberty Living acquisition, the Group is home
to 74,000 students during a crucial stage of their personal
development at Universities right across the UK. The Board
has ultimate responsibility to Unite’s shareholders for all
the Group’s activities as well as a broader responsibility to
consider the views of other key stakeholders including our
customers, Universities, employees and the communities
we operate in as well as considering environmental and
social issues when making decisions.
To discharge this broader responsibility effectively, the
Group needs to operate in an open, harmonious and
transparent manner, ensuring open communication
between the Board and senior leaders. This is why various
members of the senior leadership team regularly present
to the Board. During 2019, the Chief Customer Officer,
Group Property Director, Business Development Director,
Corporate Finance Director, University Partnerships
Director and Group Legal Director & Company Secretary
(among others) presented to the Board.
This direct access to management opens dialogue beyond
the boardroom. Additionally, with Board meetings taking
place in cities across the UK, the Board visits both new
developments and existing properties and meets with our
Operations teams. This gives it a grounded insight into the
implementation of our overall business strategy.
The Board monitors corporate culture through
interaction and dialogue with our people and also
through regular employee engagement surveys. These
take place right through the organisation, helping ensure
our values and culture are well understood and giving
our people the opportunity for frank and open feedback
and the sharing of different views. These surveys help
measure engagement through their participation rates
as well as the feedback received across the broad
range of topics surveyed. See Stakeholder engagement
on pages 32 and 33 which provides more details on
our employee engagement and how we measure and
monitor corporate culture.
In addition, the Board monitors and measures our
corporate culture through the interaction with other key
stakeholders, such as our customers and our University
partners. See Stakeholder engagement on pages 32
and 33 which provides more details on how we engage,
and measure and monitor our performance, with our
customers and University partners.
Board structure
Board Committees
The Board has delegated certain responsibilities to its Committees, as detailed on the following pages. The terms of
reference for each Committee are reviewed annually and the current versions are available on the Company’s website at
www.unite-group.co.uk. The current membership of each Committee of the Board is set out in the chart below.
Nomination
Committee
Audit
Committee
Chair: Phil White
Elizabeth McMeikan
Ross Paterson
Richard Akers
Ilaria del Beato
Dame Shirley Pearce
Thomas Jackson
Professor Sir Steve Smith*
Chair: Ross Paterson
Richard Akers
Ilaria del Beato
Professor Sir Steve Smith*
Thomas Jackson
Health & Safety
Committee
Chair: Professor Sir
Steve Smith*
Richard Smith
Elizabeth McMeikan
Ilaria del Beato
Dame Shirley Pearce
Remuneration
Committee
Chair: Elizabeth
McMeikan
Phil White
Ross Paterson
Richard Akers
Dame Shirley Pearce
Unite
Executive
Unite Operations
Board
Unite Property
Board
Risk
Committee
* Professor Sir Steve Smith joins the Board on 1 April 2020.
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Board leadership and purpose continued
How the Board operates and stakeholder engagement
The Board has an annual operating rhythm with an agenda of items for the forthcoming year built around our strategic
objectives. The Board’s meetings are split between strategy (considered in light of principal and emerging risks,
opportunities and the approval of specific investments above certain thresholds) and routine operational, property and
financial updates (providing context for the strategic discussions as well as governance oversight of in-year activity).
Meetings take place throughout the UK, often at Universities, so the Board can meet Vice-Chancellors and learn about
their experiences with Unite, their accommodation requirements more generally and broader developments in the Higher
Education sector.
Senior leaders are regularly invited to attend meetings and present to the Board. This provides the Board, and in particular
the Non-Executive Directors, with direct and open access to leaders throughout the Group and helps build a culture of
openness and directness. In addition, external experts are also invited to present to the Board (such as University Vice-
Chancellors and property valuers) to give the Directors a broader and independent perspective.
Stakeholder engagement on pages 32 and 33 explains how the Board engages and measures the views of our key
stakeholders – our Students, Universities, People and Investors – and the outcomes from this engagement.
Board operating rhythm
1
4
Regular updates from the Board Committees
on their activities and recommendations
Ensure that the detailed work performed in the
Board Committees is considered by the Board
as a whole.
Strategy and five-year plan
Discuss, review and approve our strategy and five-
year plan, and track how we are performing against
our current strategy and five-year plan.
5
Risk
Review and discuss our principal and emerging risks
at a Group level and also review operational level
risks (the Board’s operational risk review is to verify
that risks have been properly identified and that
appropriate risk-mitigation plans are being correctly
managed with clear actions and ownership).
2
3
6
Operational, property and financial updates
Provide the Board with the necessary information
to track the Group’s performance and challenge
any problems with performance.
Market and Higher Education sector updates
Ensure the Board has the latest market and
sector knowledge.
New development schemes
Review and challenge new development schemes
being recommended by management and, due
to the significant capital expenditure involved
and key strategic decisions required, approve
these new development schemes.
8
Review of Group policies
7
Training
Review key Group policies to ensure they
are appropriate and implemented effectively.
Review the Board’s training needs and ensure
that the Board is up to date on key legal and
regulatory changes.
Workforce engagement
The Board has designated one of its Non-Executive Directors (Elizabeth McMeikan, the Senior Independent Director and
Chair of the Remuneration Committee) to help ensure the views and concerns of the workforce are brought to the Board
and taken into account.
The Unite Group PLCAnnual Report & Accounts 2019 99
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By attending the Employee Panel Forum meetings,
engaging with people across the organisation and with the
benefit of the regular employment engagement surveys,
Elizabeth McMeikan is able to:
• understand the concerns of the workforce and explain
these at Board meetings;
the impact of the Company maintaining a reputation for
high standards of business conduct. Pages 34 to 37 explain
how this was considered during 2019. Further, pages 102 and
105 explain Board activity and decision making during the
year which flowed from our stakeholder engagement and
how this is aligned to our strategic objectives.
• ensure the Board, and in particular the Executive
How we engage with our investors
Directors, take appropriate steps to evaluate the impact
of proposals and developments on the workforce and
consider what steps should be taken to mitigate any
adverse impact; and
• ensure plans are fed back to the workforce
Workforce engagement has led to shaping our decision
making, which this year has resulted in the following:
• enhanced Shared Parental Leave taking into account
specific feedback
• a revised approach to employee communications
including a new employee hub, employee app and
improved communication platforms/channels
•
•
implementing a ‘back to the floor’ programme for all
senior leaders; and
introducing reverse mentoring for all senior
operational leaders
The Board, through the detailed work of the Remuneration
Committee, also monitors pay and practices across the
wider workforce with the Group People Director attending
these meetings to update on workforce initiatives and offer
an employee perspective to the Committee’s deliberations.
The Board also considers diversity across the workforce,
by considering our gender diversity across the Group (see
page 86) as well as our gender pay gap (see page 122).
Investment in workforce
The Company invests in our people, conscious that we
can only deliver a home for our students, and ultimately
our purpose of Home for Success, through our people.
Our people are one of our key stakeholders and how/
why we engage with them and measure this, as well as the
corresponding outcomes, are set out on page 32 and 33.
As a responsible business, creating diverse and engaged
teams is critical to our on going success and how we do
this, and our approach to investing in and rewarding our
workforce, is set out on page 83.
The Board values effective communication with
shareholders and other providers of capital to the business
and welcomes their views on the Group’s approach to
corporate governance. In addition to the final and interim
presentations, a series of meetings between institutional
shareholders and other providers of capital and senior
management were held throughout 2019.
The Board is made aware of the views of major shareholders
concerning the Company through, among other means,
regular analyst and broker briefings and surveys of
shareholder opinion. These will continue throughout 2020.
Early in 2020, the Remuneration Committee conducted a
consultation with its 20 largest shareholders (representing
approximately two-thirds of the issued share capital)
regarding the proposed grant of an exceptional LTIP to the
Executive Directors and wider leadership with performance
aligned to the longer-term successful delivery of Liberty
Living integration. Following this shareholder consultation,
the Remuneration Committee decided not to proceed
with the grant of this exceptional LTIP for the Executive
Directors. For more detail see 2020 LTIP and shareholder
consultation on page 120.
The Company maintains a corporate website containing
extensive information of interest to both institutional
and private investors. The Company has frequent
discussions with shareholders on a range of issues
affecting its performance, both following the Company’s
announcements and in response to specific requests.
The Company regularly seeks feedback on the perception
of the Company among its shareholders, the investor
community more broadly and its stakeholders.
Save in exceptional circumstances, all members of the
Board attend the Company’s Annual General Meeting
and shareholders are invited to ask questions during the
meeting and to meet with Directors prior to, and after, the
formal proceedings. At the meeting, the Chairman reviews
the Group’s current trading.
Section 172 of the Companies Act 2006 (Section 172)
Section 172 requires the Directors to take into consideration
the interests of stakeholders in their decision making. In
particular, section 172(1) states that regard should be had
to the long-term consequences of decisions, the interests of
the Company’s employees, the need to foster the Company’s
business relationships with suppliers, customers and others,
The results of the votes at the Annual General Meeting,
together with details of the level of proxy votes lodged
for each resolution are made available on a regulatory
information service and on the Company’s website at
www.unite-group.co.uk.
Notice of the Annual General Meeting is set out on
pages 229 to 234.
100
Division of responsibilities
Composition of the Board
Composition of the Board
The composition of the Board during 2019 is set out in the table on page 102.
The Board currently consists of the Chairman, two Executive Directors and six
Non-Executive Directors.
In accordance with the requirements of the Code, each of the current Directors offers
themselves for election or re-election at the Annual General Meeting, to be convened
this year on 7 May 2020. Brief biographies of all the Directors and their skills, experience
and contribution, are set out on pages 92 to 95. Following the individual performance
evaluations of each of the Non-Executive Directors seeking re-election, it is confirmed
that the performance of each of these Non-Executive Directors continues to be effective.
They each demonstrate commitment to the role, and add value and relevant experience
to the Board.
Independence
The Board considers six of its seven Non-Executive Directors to be independent. Thomas
Jackson is not considered to be independent, having been nominated as a Director of the
Company by its largest shareholder Canadian Pension Plan Investment Board (CPPIB)
pursuant to a Relationship Agreement signed as part of the Liberty Living acquisition.
Accordingly, the Company meets the requirement of the Code in relation to members
of the FTSE 350 that at least half of the Board (excluding the Chairman) is made-up of
independent Non-Executive Directors. In addition, Phil White (Chairman of the Board)
was considered independent on his appointment to that role.
Chair tenure and succession planning
The Board is acutely aware that Phil White has been Chair of the Board for more than
nine years. Phil White considered not offering himself for re-election as a Director at the
2019 Annual General Meeting, but at this time he – along with the rest of the Board – were
conscious that the Group was working intensively on the potential acquisition of Liberty
Living. It was felt, on balance, stability and continuity of the Chair position at this time
was preferable in the longer-term interests of the Group and so Phil White continued as
Chair during this critical stage of the acquisition process. Following completion of the
acquisition process, and conscious that the Chair had written to shareholders on behalf of
the Board recommending the acquisition, it was felt on balance preferable that Phil White
continues as Chair to oversee delivery of the Liberty Living integration and synergies. As
such, it was agreed that Phil White would continue as Chair through 2020 and then step
down as Chair by not offering himself for re-election at the 2021 Annual General Meeting.
The Board believes this timetable allows proper time for a comprehensive new Chair
search and proper handover of role and responsibility, crucially important following such
a transformative stage of the Group’s growth.
Chairman
Executive Directors
1
2
Non-Executive Directors 6
Gender diversity
Men
Women
6
3
Independence
During 2020, the Nomination Committee (through a subcommittee chaired by Elizabeth
McMeikan, the Senior Independent Director) is running a process for the search,
recruitment and later on-boarding and handover of the Chair’s role. Phil White is not a
member of this subcommittee.
Non-Executive Directors 1
Independent
Non-Executive Directors 6
The Unite Group PLCAnnual Report & Accounts 2019 Roles
The Chairman and the Non-Executive Directors constructively challenge and help develop proposals on strategy,
and bring strong, independent judgement, knowledge and experience to the Board’s deliberations.
The roles of the Chairman and CEO are clearly separated. Summaries of the responsibilities of the Chairman, CEO and
Senior Independent Director are set out in the table below.
Role: Chairman
Phil White’s principal responsibilities are:
•
•
•
to establish, in conjunction with the Chief Executive, the strategic objectives of the Group for approval by the Board
to organise the business of the Board
to enhance the standing of the Company by communicating with shareholders, the financial community and the Group’s
stakeholders generally.
Role: Chief Executive
Richard Smith has responsibility for:
• establishing, in conjunction with the Chairman, the strategic objectives of the Group, for approval by the Board
•
•
implementing the Group’s business plan and annual budget
the overall operational and financial performance of the Group.
Role: Senior Independent Director
As Senior Independent Director, Elizabeth McMeikan’s principal responsibilities are to:
• act as Chairman of the Board if the Chairman is conflicted
• act as a conduit to the Board for the communication of shareholder concerns if other channels of communication are inappropriate
• ensure that the Chairman is provided with effective feedback on his performance.
The terms and conditions of appointment of the Non-Executive Directors are available for inspection at the Company’s
registered office and at the Annual General Meeting.
Time commitment
Directors are expected to commit approximately 20 days per annum to the business of the Group. We have reviewed the
responsibilities of all Directors and are satisfied that they can fully fulfil this commitment.
Board tenure
Each of the Executive Directors has a rolling contract of employment with a 12-month notice period, while Non-
Executive Directors are, subject to re-election by shareholders, appointed to the Board for a term of approximately
three years. The chart below shows the current tenure of the Non-Executive Directors (rounded up to the nearest year),
including the Chairman.
Non-Executive Director tenure (in years)
11
6
3
Phil
White*
Elizabeth
McMeikan
Ross
Paterson
2
Richard
Ackers
2
Ilaria
del Beato
1
1
Dame Shirley
Pearce
Thomas
Jackson
* See Chair tenure and succession planning on page 100 which explains why Phil White’s tenure exceeds nine years and our succession planning.
101
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Division of responsibilities continued
Professional advice and training
Directors are given access to independent professional advice at the Company’s expense when the Directors deem it
necessary in order for them to carry out their responsibilities. The Directors also have regular dialogue with, and direct
access to, the advice and services of the Company Secretary, who ensures that Board processes and corporate governance
practices are followed.
The Board considers it important that the Committee Chairs continue to receive sector and relevant functional training
(such as on accounting, corporate governance and executive remuneration reporting developments) and accordingly
the Committee Chairs attend relevant external seminars. The Board as a whole receives ongoing training on corporate
governance and other relevant developments.
Induction
On appointment to the Board, each Director takes part in a comprehensive and personalised induction programme.
This induction is also supplemented with ongoing training throughout the year to ensure the Board is kept up to date
with key legal, regulatory and industry updates. Dame Shirley Pearce and Thomas Jackson, who joined the Board in
2019, underwent an induction programme following this framework:
• The business and operations of the Group and the Higher Education sector; the role of the Board and matters reserved for
its decisions; the terms of reference and membership of Board Committees; and powers delegated to those Committees
• The Group’s corporate governance practices and procedures and the latest financial information about the Group
• The legal and regulatory responsibilities as a Director and, specifically, as a Director of a listed company.
As part of the induction programme, each Director also visits key locations to see our business operations and properties
first-hand and the Higher Education institutions with which we partner. Also, they meet with key senior executives, so from
the outset they have access to managers throughout the organisation to help them form their own independent views on
the Group, its performance and the sector we operate in. In addition, they meet with representatives of the Company’s
key advisers.
Board activities in 2019
Directors’ attendance at meetings
Current Directors
Status
Date of appointment
to the Board
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Health
& Safety
Committee
Phil White
Chairman
21 January 2009
12/12
Elizabeth McMeikan
Independent
01 February 2014
12/12
Joe Lister
Executive
02 January 2008
Richard Smith
Executive
01 January 2012
12/12
12/12
Ross Paterson
Independent
21 September 2017
12/12
Richard Akers
Independent
01 September 2018
12/12
N/A
1/1*
N/A
N/A
5/5
5/5
Ilaria del Beato
Independent
01 December 2018
11/12**
4/5**
Dame Shirley Pearce1
Independent
01 November 2019
2/2
Thomas Jackson2
Non-independent
29 November 2019
Andrew Jones3
Independent
01 February 2013
1/1
4/4
Sir Tim Wilson4
Independent
01 December 2010
12/12
N/A
N/A
N/A
5/5
6/6
6/6
N/A
N/A
6/6
6/6
N/A
2/2
N/A
1/1
6/6
2/2
2/2
N/A
N/A
2/2
2/2
2/2
1/1
0/0
1/1
2/2
N/A
3/3
N/A
3/3
N/A
N/A
3/3
1/1
N/A
N/A
3/3
1 Appointed 1 November 2019.
2 Appointed 29 November 2019.
3 Resigned 9 May 2019.
4 Resigned 31 December 2019.
* Elizabeth McMeikan was only a member of the Audit Committee for the first meeting in 2019.
** Ilaria del Beato was unable to attend one Board and Audit Committee meeting during 2019 due to urgent oversees travel.
The Unite Group PLCAnnual Report & Accounts 2019 Board activities
Board activity and annual programme
In addition to the Liberty Living acquisition being considered at each Board meeting, the Board also considered:
February
S U
I G
I E
S G
University Partnership update
Shareholder remuneration
Preliminary results
Tax strategy
April
Market update
S FR I
Growth strategy
Market downturn analysis
IR review
policy consultation
FR QP
Post-completion review – review
of 2018 property completions
May
I
S U
FR G
G G S
Annual General Meeting
Higher Education review
Internal audit plan
Assess auditors
June
S G Qs
S Qs
I
Review internal controls
Strategy
G O C FR
Digital/IT strategy
BI/MI approach
Half-year valuation preview
Principal and emerging risks review
Approval of development
(spend at Middlesex, London)
Brexit readiness plan
July
I
S I E
Interim results
General Meeting and Equity Placing
(Liberty Living acquisition)
August
Qp
New development site in
Nottingham acquired
September
S P
G P
Strategic plan and talent review
Internal Board & Committee
Evaluation
FR E
Debt financing
October
Qp G
New University partnership with
University of Leeds
Qp G
Sale of two Coventry assets
November
S E FR
S FR E
P S G Qs O
P G S
Completion of acquisition of
2020 budget planning
Board appointments (Dame Shirley
Nomination Committee leadership,
Liberty Living
Pearce and Thomas Jackson)
development and succession
December
FR O C
FR G I G E
P G S
Customer satisfaction review
planning
O FR G
Principal and emerging risks review
2020 budget approval
Whistleblowing review
British Safety Council Five-star
– Brexit disruption plan
Prospective year end out-turn
CSR/Unite Foundation
Health & Safety Audit review
S
Strategy
FR
Financial and risk management
O
C
I
G
Qp
Qs
U
P
E
Operational
Commercial
Investor relations
Governance
Quality properties
Quality service platform
University partnerships
People
Earnings & NAV growth
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Board activities continued
How governance and stakeholder engagement has driven the Board’s decision making during 2019
Strategic
objective
Quality
properties
Board’s governance role
Link to principal risk
2019 Board activity and decision making
Liberty Living acquisition
Throughout 2019, direct Board
involvement in and scrutiny of
the Liberty Living acquisition.
Development pipeline
Board scrutiny of city and site
selection for new developments
against backdrop of increasing
competition for the best sites.
Governance of developments/
acquisitions to ensure they run
to budget and schedule and are
earnings accretive.
Health & Safety
As we develop our brand through
the implementation of Home for
Success, the risk of a health and
safety incident damaging our
reputation increases. The Board’s
governance of the health and
safety, wellbeing and security
of the now 74,000 students who
make Unite Students their home
is critical to the Group’s continued
success and trusted reputation.
Property market
cycle risk on
page 53
Ongoing challenge of management to ensure the acquisition is right for
the Group and we can deliver the projected operational and financial
performance.
Engaging with our shareholders, one of our key stakeholder groups,
through both the July 2019 share placing and the 23 July 2019 General
Meeting (seeking approval for the Liberty Living acquisition) to ensure
their views are taken into account in the Board’s decision making.
Read more about Liberty Living acquisition on page 20
Property/
Development
risk on page 52
Three new student residences (2,390 beds) opened on time and to budget.
The beds are fully let to students attending high- and mid-ranked
Universities with 70% of these beds secured on nomination agreements
with an average life of 16 years.
Operational risk –
Major health and
safety incident
in a property or a
development site
on page 50
The Board takes into account its engagement with Universities about these
developments when making a decision whether to proceed or not with
these development schemes.
Read more about Development and partnership activity on page 64
Read more about our Buildings designed for students on page 64
The Board reviews the safety of our students, visitors and employees,
as well as contractors at our development sites, at each Board meeting.
During 2019, this has included monitoring the Hackitt Review, developing
best practice following the Grenfell Tower tragedy and regulatory change.
The Health & Safety Committee, a sub-Committee of the Board, focuses on:
• fire, our biggest safety risk, and our work with the Avon Fire Authority,
our Primary Fire Authority lead
• external safety assurance through The British Safety Council, our
external safety auditor
• physical security review of our properties by WSP Parsons
Brinckerhoff.
During 2019, The British Safety Council conducted three comprehensive
safety audits: an Occupational Health & Safety Audit, a Fire Safety Audit
and a Construction Audit.
The Occupational Health & Safety Audit measures performance against
a number of key safety management indicators, providing organisations
with a worldwide benchmark of their safety management systems against
current best practice to enable continual improvement. The Group
achieved Five-stars (out of five) for this audit in 2019, which reflects
significant improvement from our last audit 18 months ago when
awarded a Four-star rating.
Read more about the Health & Safety Committee report on page 116
The Unite Group PLCAnnual Report & Accounts 2019 105
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Strategic
objective
Quality
service
platform
Board’s governance role
Link to principal risk
2019 Board activity and decision making
Governance to ensure our market-
leading service platform meets
our customers’ and University
partners’ (two of our key
stakeholder groups) needs and
expectations as well as ensuring
it is robust, reliable and scalable
for the increasing number of
customers following the Liberty
Living acquisition.
Market risks – supply
and demand on pages
47 to 49
Through our customer satisfaction surveys and University Trust scores, as
well as direct engagement with VCs and other levels of management within
Universities, the Board is able to take into account the views of these
stakeholders as well as monitoring and measuring our performance.
Oversight that PRISM, our service platform and our customer facing
operational apps (such as the My Unite app) deliver:
• a robust booking system
• an improved and scalable platform for revenue management and
customer engagement
• enhanced service levels for both Universities and students
• market differentiation.
Read more about the Operations review on page 56
Read more about our Stakeholder engagement on pages 32 to 33
Ensuring our product is affordable
and provides good value-for-money
for our customers.
Market risks – supply
and demand on
page 48
Board analysis of the Higher Education accommodation sector and
ensuring we continue to offer an affordable and value-for-money product.
Read more about Operations review on pages 56 to 61
Ensuring our ‘safe and secure’
brand promise extends to keeping
our customers’ and employees’
personal data safe and secure.
Market risks – supply
and demand on
page 48
On going review of our information security and its governance, in
particular having regard to the General Data Protection Regulation
(GDPR).
Leadership development and
succession planning/talent
pipeline. D&I Initiatives.
Market risks – supply
and demand on
pages 47 to 49
The Nomination Committee focuses not only on Board succession,
appointing three Non-Executive Directors in 2019 (Dame Shirley Pearce,
Professor Sir Steve Smith and Thomas Jackson), but also our broader
talent pipeline and leadership development.
The Board considers the output from our employee engagement surveys
when making decisions on wider employee issues.
Market risks – supply
and demand and
Property\Development
risk on pages 47 to 49
and 52 to 53
56% of our total beds are under nomination agreements, with 88%
aligned to high- and mid-ranked Universities. Higher Education review
and our growth strategy having regard to developing new University
partnerships transactions.
Read more about Partner of Choice for Universities on page 23
Quality
University
partnerships
Board scrutiny of our
developments and portfolio
recycling to ensure we partner
with the right Universities and
enhance our long standing
relationships.
Building University relationships
through ongoing engagement and
dialogue with Universities.
Delivering
sustainable
value
HE Government Policy and Brexit
Continued focus on potential HE
Government policy changes as well
as our Brexit readiness planning.
Market Risks – supply
and demand on
page 47
Ongoing Board monitoring of HE Government policy and its impact for
PBSA and more widely as well as continued assessment of our key Brexit
risks and the oversight of our Brexit Disruption Plan in which we prepare
for the inevitable operational disruption due to Brexit.
High-quality, growing earnings
Oversight of operational
performance, rental growth
and University partnerships
transactions along with dividend
growth.
Capital structure
Group Board focus on a strong and
flexible capital structure, which
can adapt to market conditions,
and reducing and diversifying the
cost of funding.
Market risks and
Property/Development
risks on pages 47 to 49
and 52 to 53
98% let across our portfolio for the 2019/20 academic year and 3.0–3.5%
rental growth delivering 15% growth in EPS.
Read more about Operations review on page 56
Financing risk on
page 55
Board oversight on our capital structure following the Liberty Living
acquisition, together with continued focus on locking in debt at
historically low rates for new debt facilities and forward starting interest-
rate swaps for future borrowings for secured development pipeline.
At the end of 2019:
•
Loan to value 37% (31 December 2018: 29%)
• Average cost of debt 3.3% (31 December 2018: 3.8%).
Read more about Financial review on page 68
106
Board activities continued
2019 Performance evaluation
Each year the Board, its Committees and Directors are
evaluated, considering (among other things) the balance
of skills, experience, independence and knowledge
on the Board, its diversity (including gender), how it
works together as a unit and other factors relevant
to its effectiveness.
The feedback was that the Board and its Committees
operate effectively as a team, balancing their collective
responsibility appropriately, with clear agreement on
the Board’s role in shaping, embedding and overseeing
Home for Success and our values. Learnings from the
Board evaluation included:
The Company’s policy is to conduct an externally
facilitated evaluation every third year. During 2019,
the evaluation was conducted internally. The previous
external evaluation was in 2017 and the next external
evaluation is expected to be during 2020.
During 2019, this Board evaluation – building on
prior years – explored our corporate culture and
governance leadership. In addition, due to the size and
transformational nature of the Liberty Living acquisition,
the evaluation also considered the strategic approach
and process for the acquisition, conscious there could be
valuable learnings for the Board from such a large and
complex acquisition. The evaluation also considered the
behaviours and processes of the Board, its Committees
and each member of the Board, including the Chairman.
1.
2.
3.
Conscious of the growth of the Company through the
Liberty Living acquisition, the Board felt it important
to visit more cities in 2020 and, in particular, the
Board will visit Cardiff, a new city for Unite
Hold a dedicated Group Board Safety Day to give
the Board the opportunity to see how safety is
embedded operationally as well as an opportunity
to step back and focus on Safety Governance
With the size of the Board growing in 2020, the
Board is acutely aware this will need careful
attention to ensure it continues to operate
effectively as a team
The Board’s focus areas for the year ahead are outlined below:
2020 governance priorities
Continued delivery of high-quality, growing earnings with oversight and assurances of:
Safety and service
Macro/Market dynamics
Development
Liberty Living integration
Our people
The impact of
Government HE policy
and Brexit on the
sector, UK plc and the
UK economy more
generally. Managing
the risks – and equally
embracing the
opportunities that
change brings.
Choosing, securing
and developing the
right sites in the best
locations. Security
of income coupled
with rental growth
through high-quality
properties with quality
long-term University
partnerships.
Successfully
integrating Liberty
Living.
Ensuring the £15m of
annual cost synergies
are secured.
Developing our talent
pipeline and future
leaders to help ensure
a sustainable future.
Continued focus on
our diversity, equality
and inclusivity
initiatives.
Replacement of HPL cladding
required to ensure buildings
are safe.
Fire safety following the
Hackitt Review and a post-
Grenfell world.
Enhancing our digital
offering for our digital native
customers. Evolving our
product proposition and
customer segmentation –
ensuring we remain focused
on affordability and value-
for-money.
The Unite Group PLCAnnual Report & Accounts 2019 Nomination Committee
Succession planning due to the growth of the
business through the Liberty Living acquisition
has been the Committee’s key focus for 2019.
Nomination
Committee
Members
Phil White
Chairman
Elizabeth McMeikan
Senior Independent
Director
Ilaria del Beato
Non-Executive Director
Ross Paterson
Non-Executive Director
Richard Akers
Non-Executive Director
Dame Shirley Pearce
Non-Executive Director
Thomas Jackson
Non-Executive Director
Nomination Committee Chair’s overview
The Committee’s focus this year has been on succession planning following
the planned stepping down of Andrew Jones and Sir Tim Wilson as Non-
Executives after six and nine years’ tenure respectively. I would like to thank
Andrew and Tim for their contributions to the Board over their years with us.
The Committee’s succession planning led to the successful appointment of
Dame Shirley Pearce (in November 2019) and Professor Sir Steve Smith (who
joins the Board in April 2020). Dame Shirley Pearce and Professor Sir Steve
Smith have in-depth experience in the HE sector and bring a wider sector
perspective to our business. Thomas Jackson also joined the Board, following
Completion of the Liberty Living acquisition, having been nominated as a
Director of the Company by our largest shareholder Canadian Pension Plan
Investment Board (CPPIB) pursuant to a Relationship Agreement signed as
part of the Liberty Living acquisition.
The Committee also continued its focus on executive succession planning and
our talent development. This is conducted through mapping the business’
strategic objectives and growth through the Liberty Living acquisition against
our wider leadership and high-performing, high-potential individuals to
ensure appropriate bench strength and resilience.
As part of this executive and wider succession planning, the Committee also
continued its focus on our diversity and inclusion initiatives, conscious a
diverse leadership team reflecting our wider stakeholders is critical for the
Group’s long-term sustainable success.
Succession planning for the Chairman, led by Elizabeth McMeikan our Senior
Independent Director, has been a specific focus during 2019 and this will
continue in 2020. The section on Chair tenure and succession planning on
page 100 explains why I have continued in post beyond nine years and the
timing and recruitment process for my successor.
Phil White
Chair – Nomination Committee
26 February 2020
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Nomination Committee continued
Composition
The Committee consists entirely of Non-Executive
Directors. The members of the Committee are set out
on page 97 of this Corporate Governance Statement.
At the invitation of the Committee, any other Director
or other person may be invited to attend meetings of
the Committee if considered desirable in assisting the
Committee in fulfilling its role.
Role
The role of the Committee is to:
• Ensure that appropriate procedures are adopted
and followed in the nomination, selection, training,
evaluation and re-election of Directors and for
succession planning, with due regard in all cases to the
benefits of diversity on the Board, including gender
• Regularly review the structure, size, composition,
skills and experience of the Board and to make
recommendations with regard to any adjustments
considered necessary
• When it is agreed that an appointment to the Board
should be made, lead a selection process that is formal,
rigorous and transparent
• Be responsible for identifying, reviewing and
recommending candidates for appointment to the Board
Nomination Committee meetings
The Nomination Committee met twice during the year and
attendance at those meetings is shown on page 102 of this
Corporate Governance Statement. The sub-committee of
the Nomination Committee appointed to focus on Chair
succession planning met a further two times.
Activities in 2019
Review of Board composition and succession planning
The Committee reviewed the Board’s composition to
ensure it has the correct balance of skills, experience,
independence and knowledge. Recognising that the
average tenure of the Non-Executive Directors was just
over six years – and to help ensure orderly succession
planning with Andrew Jones and Sir Tim Wilson stepping
down in 2019 – the Committee believed it was timely to
consider appointing two new Non-Executive Directors.
The Committee felt it important to strengthen the HE
sector experience, especially at a time with so much
potential change in the sector, and led a recruitment
process resulting in the appointment of Dame Shirley
Pearce and Professor Sir Steve Smith.
Russell Reynolds, an external search consultancy, led the
search for these Non-Executive Directors. Russell Reynolds
has no other connection with the Company or individual
Directors.
As per prior years, the Committee also reviewed the
Board’s succession planning for executive roles, to ensure
we have a deep, diverse and inclusive talent pipeline for
future Board appointments. As an integral part of our
executive succession planning, the Committee oversees the
talent mapping to ensure we are growing and nurturing our
talent and developing our high-performers’ high-potential.
Our diversity and inclusivity initiatives (outlined below) are
aligned with this succession planning.
Board diversity policy
The Board recognises that diversity, equality and inclusivity
at Board level and throughout the Group are critical to
long-term success.
During 2019 the Nomination Committee considered
whether it wanted to set specific targets for female
representation on the Board. The Committee believes the
current focus of diversity and inclusivity should be on the
Group as a whole, with the focus on developing a diverse
and inclusive talent pipeline as a result of the initiatives
outlined below. The Committee is not currently considering
setting diversity targets for the Board itself, believing this
is not necessarily in the best interests of the Group and
its stakeholders. However, gender diversity, and all other
aspects of diversity and inclusivity, are considered, along
with the balance of skills, experience, independence and
knowledge when reviewing appointments to the Board.
Beyond the boardroom and within Unite more generally,
we continued to review our approach to diversity, equality
and inclusion during 2019. We recognise this as a key
building block of our People strategy. The UK workforce
and our students are increasingly diverse so in order to
remain competitive, we need to develop a diverse, equal
and inclusive workplace which will in turn best represent
and support our customers.
During 2019, the Operations Board took on responsibility
for the diversity and inclusion across the Group. Over the
course of the year initiatives focused on:
• Developing our Diversity in Action Group launched
in 2017 and led by, and for, employees
• Continued development of our Women’s Network,
which was established in 2018
• Launching our LGBT network
• Widening our recruitment channels to bring in
increased diversity
The Unite Group PLCAnnual Report & Accounts 2019 • Continuing with our annual Diversity, Equality and
In 2020, we will focus on:
• Continued development of our Women’s and LGBT
Network followed by further networks as appropriate
• Continuing our focus groups and Pulse Surveys across
the organisation to understand more about our
employees’ needs
• Further use of specialist job boards to support sourcing
diverse candidates
• Ongoing recruitment training for all hiring managers
• Continuing to work with Stonewall, Business in the
Community and other specialist organisations
• Enhancing our shared parental leave policy to offer
our employees with families greater flexibility.
Read more about Create diverse and engaged teams on page 83
Inclusion e-Learning for all employees
• Ensuring all customer-facing teams are diverse and
appropriately representative of our local communities
and our students
• Actively supporting our high-potential female employees
• Ensuring all leadership roles have 50/50 gender
balanced shortlists
• Working with Stonewall and Business in the Community
to continue to build our knowledge and awareness, and
advise on best practice
• Reviewing our HR policies and procedures to be more
inclusive with related line-manager training
• Planning to support our non-UK EU employees as part
of our Brexit readiness planning
• Training all recruiting managers and the resourcing
team on unconscious bias, to ensure that we are
recruiting the best person for the job
•
Implementation of an ‘open chair’ at our Operations
Board inviting different representatives from the
business to share their insight and experience of
the organisation
•
Introduction of a reverse mentoring programme for
our Operations Board
• Reprisal of our ‘back to the floor’ programme for
our Operations Board.
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Audit Committee
During the year, the Audit Committee continued its key
oversight role for the Board with specific duties as set out in its
terms of reference to reassure shareholders that their interests
are properly protected in respect of the Group’s financial
management and reporting.
Audit
Committee
Members
Ross Paterson
Chair of the
Audit Committe
Ilaria del Beato
Non-Executive Director
Richard Akers
Non-Executive Director
Audit Committee Chair’s overview
The Audit Committee works to a structured programme of activities, with
agenda items focused to coincide with key events in the annual financial
reporting cycle. The Audit Committee reports regularly to the Board on its work.
During the year, the Audit Committee has continued to monitor the integrity
of the Group’s financial statements and supported the Board with its ongoing
monitoring of the Group’s risk management and internal control systems in line
with the requirements under the Corporate Governance Code. The Committee
also determined the focus of the Group’s internal audit activity, reviewed
findings, and verified that management was appropriately implementing
recommendations.
During 2019, the Audit Committee undertook the fourth full evaluation exercise
of the Deloitte audit approach to ascertain the effectiveness of the external
audit function. Further to the completion of the evaluation of the external
audit process, we are satisfied with both the auditor’s independence and audit
approach and have recommended to the Board that Deloitte be re-appointed as
auditor in 2020. The Audit Committee also identified a successor audit partner
to Judith Tacon at Deloitte and supported the planning for transition to the new
audit partner.
We also reviewed the effectiveness of the internal auditors,
PricewaterhouseCoopers (PwC), during 2019. We were satisfied with both the
independence and effectiveness of the internal auditors. Nevertheless, in light
of the major acquisition of Liberty Living in November 2019, we are reviewing
the overall risk assurance arrangements, including internal audit, to ensure
they are appropriate and effective for the enlarged Group.
Since I reported to you last year, Sir Tim Wilson has retired from the Board and
therefore has left the Audit Committee. I found Sir Tim’s extensive knowledge of
the Group and the higher education sector invaluable since joining the Board in
2017 and I extend to him my thanks for the support and insight he provided as a
member of the Audit Committee.
As noted in this Corporate Governance Statement, the Board delegates certain
of its duties, responsibilities and powers to the Audit Committee, so that these
can receive suitably focused attention. However, the Audit Committee acts on
behalf of the full Board, and the matters reviewed and managed by the Audit
Committee remain the responsibility of the Directors as a whole.
The Unite Group PLCAnnual Report & Accounts 2019 Role of the Audit Committee
Audit Committee meetings
The Audit Committee has delegated authority from the
Board set out in its written terms of reference. The terms
of reference for the Audit Committee take into account the
requirements of the Code and are available for inspection
at the registered office, at the Annual General Meeting and
on the Group website at http://www.unite-group.co.uk/
about-us/corporate-governance.
The key objectives of the Audit Committee are:
• To provide effective governance and control over the
integrity of the Group’s financial reporting and review
significant financial reporting judgements
• To support the Board with its ongoing monitoring of the
effectiveness of the Group’s system of internal controls
and risk management systems
• To monitor the effectiveness of the Group’s internal
audit function and review its material findings
• To oversee the relationship with the external auditor,
including making recommendations to the Board in
relation to the appointment of the external auditor
and monitoring the external auditor’s objectivity
and independence
Composition of the Audit Committee
The members of the Audit Committee are set out on page
97 of this Corporate Governance Statement. The Audit
Committee members are all independent Non-Executives
and have been selected with the aim of providing the wide
range of financial and commercial expertise necessary to
fulfil the Audit Committee’s duties. The Board considers
that as a chartered accountant and serving Finance
Director of a FTSE 250 company, I have recent and relevant
financial experience. The Board also considers that the
Committee as a whole has competence relevant to the
sector in which the Group operates.
Meetings are attended, by invitation, by the Chief Financial
Officer and the Group Financial Controller.
I also invite our external auditor, Deloitte, to each meeting.
The Audit Committee regularly meets separately with
Deloitte without others being present. As appropriate,
I also invite our internal auditor, PwC, to attend the
meetings. Deloitte and PwC meet independently
of management to ensure alignment, to update on
respective findings and consider the impact on the
relative approaches of their work.
The Audit Committee met five times during the year and
attendance at those meetings is shown on page 102 of
this Corporate Governance Statement.
Main activities of the Audit Committee
during the year
Meetings of the Audit Committee generally take place just
prior to a Group Board meeting and I report to the Board,
as part of a separate agenda item, on the activity of the
Audit Committee and matters of particular relevance to
the Board in the conduct of its work. At its five meetings
during the year, the Audit Committee focused on the
following activities.
The Audit Committee reviewed the half-year and annual
financial statements and the significant financial reporting
judgements. As part of this review, the Audit Committee
supported the Board by reviewing the financial viability
and the basis for preparing the accounts on a going
concern basis as outlined below. The Audit Committee
also reviewed and challenged the external auditor’s
report on these financial statements.
The Audit Committee discussed the acquisition of
Liberty Living including the approach to accounting for
the acquisition, governance changes and the challenges
the timing of completion of the acquisition posed for the
year end timetable.
As discussed above, the effectiveness of the external
audit function was considered during 2019. During the
evaluation process the Audit Committee considered: the
independence and objectivity of the external auditor;
the make-up and quality of the audit team; the proposed
audit approach and the scope of the audit; the execution
of the audit and the quality of the audit report to the
shareholders; as well as ultimately the fee structure.
The Audit Committee discussed reports from PwC as the
Group’s internal auditor on their audit and assessment of
the control environment. The Committee reviewed and
proposed areas of focus for the internal audit programme
of review including the approach to ensure that the internal
audit activity continues to be aligned to the principal
Group risks.
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Audit Committee continued
Financial reporting
The primary focus of the Audit Committee, in relation
to financial reporting in respect of the year ended 31
December 2019 was to review with both management and
the external auditor the appropriateness of the half-year
and annual financial statements concentrating on:
• The quality and acceptability of accounting policies
and practices
• The clarity of the disclosures and compliance with
financial reporting standards and relevant financial
and governance reporting requirements
• Material areas in which significant judgements have
been applied or where there has been discussion with
the external auditor
• Whether the annual report and accounts, taken as
a whole, is fair, balanced and understandable and
provides the information necessary for shareholders
to assess the Group’s position and performance,
business model and strategy
The Audit Committee’s assessment of the annual report
to ensure that it is fair, balanced and understandable took
into account the following considerations:
• A review of what fair, balanced and understandable
means for Unite
• The high level of input from the Chief Executive Officer
and Chief Financial Officer with early opportunities for
the Board to review and comment on the annual report
• Ensuring consistency in the reporting of the Group’s
performance and management information (as described
on pages 40 to 41), risk reviews (as described on pages
42 to 55), business model and strategy (as described on
pages 30 to 31 and 38 to 39)
• A cross-check between Board Minutes and the annual
report is undertaken to ensure that reporting is balanced
• Whether information is presented in a clear and concise
manner, illustrated by appropriate KPIs to facilitate
shareholders’ access to relevant information
To aid our review, the Audit Committee considers reports
from the Group Financial Controller and reports from the
external auditor on the outcomes of their half-year review
and annual audit. As an Audit Committee, we support
Deloitte in displaying the necessary professional scepticism
their role requires.
In November 2019, the Group received a letter from the
Financial Reporting Council’s Conduct Committee, which
raised certain queries following its review of the 2018
Annual Report. The Audit Committee assisted management
in reviewing and drafting a response to the letter, which
included commitments by the Group to provide additional
disclosure in this 2019 Annual Report. The Conduct
Committee has now closed its inquiry.
Significant issues considered by the Committee
After discussion with both management and the external
auditor, the Committee determined that the key risk of
misstatement of the Group’s 2019 financial statements
related to:
• Property valuations
• REIT compliance
•
Joint venture accounting
Property valuations
The Group’s principal assets are investment properties
and investment properties under development that are
either owned on balance sheet or in USAF or LSAV. The
investment properties are carried at fair value based on
an appraisal by the Group’s external valuers who carry
out the valuations in accordance with the RICS Red Book
valuation guide, taking into account transactional evidence
during the year. The valuation of property assets involves
significant judgement and changes in the core assumptions
could have a significant impact on the carrying value of
these assets.
Management discuss the underlying performance of
each asset with the external valuers and provide detailed
performance data to them including rents, University
lease agreements, occupancy, property costs and costs
to complete (for development properties). Management
receives detailed reports from the valuers and performed
a detailed review of the valuations to ensure that
management considers the valuations to be appropriate.
The valuation report is reviewed by the Chief Financial
Officer and the Property Director prior to sign-off.
During the year, the Committee and/or the Board met with
members of the Group’s valuer panel and challenged them
on the basis of their valuations and their core assumptions,
including the yield for each property, rental growth and
forecast costs.
The Audit Committee questioned the external valuers on
market trends and transactional evidence that supports
the valuations. The Audit Committee was satisfied that the
Group’s valuers were appropriately qualified and provided
an independent assessment of the Group’s assets. The
Audit Committee was satisfied that an appropriate
valuation process had taken place, the core assumptions
used were reasonable and hence the carrying value of
investment and development properties in the financial
statements was appropriate.
The Unite Group PLCAnnual Report & Accounts 2019 The external auditor explained the audit procedures to test
the valuation of investment and development properties
and the associated disclosures. On the basis of the audit
work, the external auditor reported no inconsistencies or
misstatements that were material in the context of the
financial statements as a whole.
Further analysis and detail on asset valuations is set out
on page 62.
as joint ventures. The Audit Committee considered this
and agreed there was no material change and accordingly
it was appropriate to continue to account for USAF and
LSAV as joint ventures under IFRS 11, with Unite recording
its 22.0% share of the results and net assets of USAF as a
joint venture using equity accounting and likewise 50%
for LSAV.
Other issues considered by the Committee
REIT compliance
LSAV performance fee
As a REIT, profits from the Group’s property rental business
and gains on disposal of property assets are exempt
from UK corporation tax. As a result, the Group does not
recognise a deferred tax liability in relation to unrealised
gains on investment properties, or accelerated capital
allowances on property rental business assets. Maintaining
REIT status involves significant judgement about the future
performance of the business and compliance with the REIT
rules and there would be a material impact on the Group’s
tax charge and financial results of not remaining compliant
with the REIT regime.
The Group monitors compliance with the REIT requirements
on a quarterly basis to confirm that the interest cover test
and balance of business test in relation to income are met.
The balance of business test relating to assets is determined
based on figures at 1 January 2019 and so compliance has
already been confirmed for the year.
The Group has modelled tax adjusted property business
profits and declared PIDs in respect of the May 19
and November 19 distributions to ensure that the PID
requirement will be satisfied. The combined PID from
the distributions made during 2019 comprise 97% of the
Group’s forecast tax exempt property rental business
profit, leaving a small amount that can be paid as part
of the May 2020 distribution.
Joint venture accounting
Two of Unite’s significant assets are its investments in USAF
and LSAV which the Group has historically accounted for as
joint ventures.
The Group reports under IFRS 10 Consolidated Financial
Statements, IFRS 11 Joint Arrangements and IFRS 12
Disclosure of Interests in Other Entities, which provides
guidance on how an investor should account for its
interests in other entities, including a definition of control
and guidance on how to classify and account for jointly
controlled arrangements. During the year, management
undertook a detailed review of its classification for both
USAF and LSAV, and following that analysis concluded
that both USAF and LSAV should continue to be treated
The Group is entitled to a LSAV performance fee if the
joint venture outperforms certain benchmarks over its life
ending in 2022. The Committee discussed the recognition
of the LSAV performance fee in 2019, being the first year of
recognition. The Committee challenged the assessment of
‘highly probable’ used to determe the amount to recognise.
This included discussion of the estimates used, being
future rental income and the discount rate (yield).
Goodwill and intangible asset impairment
The Committee discussed accounting for the acquisition of
Liberty Living as a business combination and concluded the
determination to do so did not involve a significant level of
judgement. The Committee also discussed the subsequent
impairment of goodwill and the Liberty Living brand and
agreed that it was appropriate.
Risk management
The Group’s risk assessment process and the way in which
significant business risks are managed is a key area of
focus for the Audit Committee.
Our work here was driven primarily by performing an
assessment of the approach taken by the Group’s Risk
Committee. The Risk Committee is responsible for the
delivery of the Group’s Risk Management Framework,
which the Audit Committee has approved, and the Group’s
assessment of its principal risks and uncertainties, as set
out on pages 47 to 55.
The Board also formally reviewed the Group’s principal risks
at two meetings during the year. Through these reviews,
the Audit Committee considered the risk management
procedures within the business and was satisfied that
the key Group risks were being appropriately managed.
The risk assessment flags the importance of the internal
control framework to manage risk and this forms a
separate area of review for the Audit Committee.
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Audit Committee continued
Internal controls
Led by the Group’s risk assessment process, we reviewed
the process by which the Group evaluated its control
environment. Management is responsible for establishing
and maintaining adequate internal controls. Internal
controls are designed to provide reasonable assurance
regarding (among other things) the reliability of financial
reporting and the preparation of the financial statements
for external reporting purposes. A comprehensive strategic
planning, budgeting and forecasting process is in place.
Monthly financial information and performance insight is
reported to the Board.
For the 2019 financial year, the significant risks identified
were in relation to valuation of properties, REIT compliance,
classification of joint ventures, accounting for the acquisition
of Liberty Living, revenue recognition and management
override. These focus areas were discussed at the Audit
Committee and it was agreed that they should be the
principal areas of focus as they represent the areas with the
greatest level of judgement and materially impact the overall
performance of the Group. These risks are tracked through
the year and we challenged the work done by the auditor
to test management’s assumptions and estimates around
these areas.
The Audit Committee’s work to review the effectiveness
of the internal controls was driven by the Group Financial
Controller’s reports on the effectiveness of internal
controls, supported by the work of the internal auditor and
their reports to the Audit Committee. The feedback from
the Group’s internal auditor on specific areas of control
is tested on a periodic basis and our external auditor is
requested to provide specific feedback and assessment
of the Group’s financial controls and highlight any areas
of weakness. No significant weaknesses were identified
through the course of the Audit Committee’s reviews.
Internal audit
The Group engages PwC to perform internal audit activity,
with this internal audit function reporting directly to the
Audit Committee.
The Audit Committee considered and approved the scope
of the internal audit activity to be undertaken during 2019
and looking forward on a 12 month basis to ensure that
the internal audit approach is more adaptable to the risk
environment. The Audit Committee also discussed and
challenged the output from the internal audit reviews
undertaken in the prior year and concluded that the
reviews provided good support for statements made
by management and that the control environment is
robust in the areas tested over the last three years.
During the year, PwC focused their internal audit work on
maintenance management, nomination agreements and
financial controls. Overall, PWC concluded that there were
no significant issues and controls were well designed, but
noted there were some areas of improvement to be made
to maximise controls and operational efficiency, which
management is in the process of implementing.
External audit
The effectiveness of the external audit process is facilitated
by appropriate audit risk identification at the start of the
audit cycle which we receive from Deloitte in a detailed
audit plan, identifying their assessment of these key risks.
We assess the effectiveness of the audit process in
addressing these matters through the reporting we
receive from Deloitte at both the half-year and year-end
and also reports from management on how these risks
are being addressed.
For the 2019 financial year, the Audit Committee was
satisfied that there had been appropriate focus and
challenge on the primary areas of audit risk and assessed
the quality of the audit process to be good. We hold
private meetings with the external auditor at each Audit
Committee meeting to provide additional opportunity for
open dialogue and feedback from the Audit Committee
and the auditor without management being present.
Matters typically discussed include:
• The auditor’s assessment of business and financial
statement risks and management activity thereof
• The transparency and openness of interactions with
management, confirmation that there has been no
restriction in scope placed on them by management
and the independence of their audit
• How they have exercised professional scepticism
I also meet with the external lead audit partner outside
the formal Audit Committee process.
Independence and external audit tender
The Audit Committee considers the re-appointment of
the external auditor, including the rotation of the audit
partner which is required every five years, each year and
also assesses their independence on an ongoing basis.
2019 is the fifth year during which Deloitte has been the
Group’s external auditor. Judith Tacon is the engagement
partner and has been on the audit team since Deloitte’s
appointment. The 2019 year end audit will be the last
year under the Financial Reporting Council’s APB Ethical
Standards that Judith Tacon will be able to hold the role of
Senior Statutory auditor. As a result, in 2020 Judith Tacon
will hand over to Stephen Craig as Deloitte LLP’s lead audit
partner for Unite.
The Unite Group PLCAnnual Report & Accounts 2019 During the year, Deloitte were appointed to undertake
non-audit services. Fees for non-audit work performed by
Deloitte for the year ended 31 December 2019 were £2.0
million (2018: £0.3 million). Further disclosure of the non-
audit fees incurred during the year ended 31 December
2019 can be found in note 2.6 to the consolidated financial
statements on page 190. Non-audit services related almost
entirely to Reporting Accountant services provided in
respect of the acquisition of Liberty Living, which included
a report on the historical financial information of Liberty
Living, a financial position and prospects report, a working
capital report, a synergy report and accounting and tax
comfort letters. The Audit Committee is comfortable that
Deloitte’s continued objectivity and independence has
not been compromised due to the nature of the reporting
accountant procedures. We considered the nature of the
non-audit work to be principally ‘assurance’, concluding that
the auditors were best placed to provide the highest quality
of assurance in that context and that their independence
and effectiveness as auditors would not be impaired by
doing so.
The Audit Committee approved the fees for audit services
for 2019 after a review of the level and nature of work to
be performed, including the impact of the acquisition of
Liberty Living and accounting standard changes, and after
being satisfied by Deloitte that the fees were appropriate
for the scope of the work required. These fees are also
benchmarked against other listed real estate companies
of comparable size and complexity.
Audit Committee evaluation
The Audit Committee’s activities formed part of the
evaluation of Board effectiveness performed in the
year. Details of this process can be found under 2019
Performance evaluation on page 106.
Ross Paterson
Chair – Audit Committee
26 February 2020
The Audit Committee reviewed Deloitte’s audit work and
determined that appropriate plans are in place to carry
out an effective and high-quality audit. Deloitte confirmed
to the Audit Committee that it maintained appropriate
internal safeguards to ensure its independence and
objectivity. As part of the Audit Committee’s assessment
of the on-going independence of the auditor, the Audit
Committee receives details of any relationships between
the Group and Deloitte that may have a bearing on their
independence and receives confirmation that they are
independent of the Group.
As discussed above, an assessment of Deloitte’s
effectiveness, its processes, audit quality and performance
was undertaken in May 2019 following completion of the
2018 audit.
The Audit Committee regularly reviews its relationship with
the external auditor, including consideration as to when it
next intends to complete a competitive tender process for
the Company’s external audit. As noted above, the Audit
Committee remains satisfied with Deloitte’s effectiveness
and independence. In view of this, the Audit Committee
does not currently anticipate that it will conduct an audit
tender before 2024 in respect of the 2025 financial year
for which a tender would be required in accordance with
applicable law and regulations. The Audit Committee
considers this to be in the best interests of the Company’s
shareholders for the reasons outlined above and will keep
this decision under review.
The Committee confirms compliance with the provisions
of the Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee Responsibilities)
Order 2014.
Non-audit services
To further safeguard the objectivity and independence
of the external auditor from becoming compromised, the
Committee has a formal policy governing the engagement
of the external auditor to provide non-audit services. No
material changes have been made to this policy during
the year. This precludes Deloitte from providing certain
services, such as valuation work or the provision of
accounting services.
For certain specific permitted services (such as reporting
accountant activities and compliance work), the Audit
Committee has pre-approved that Deloitte can be engaged
by management, subject to the policies set out above, and
subject to specified fee limits for individual engagements
and fee limits for each type of specific service. For all
other services, or those permitted services that exceed
the specified fee limits, I as Chairman, or in my absence,
another member, can pre-approve permitted services.
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Health & Safety Committee
Safe and Secure is the first of our three brand
promises – the cornerstone of providing a home
for our 74,000 students.
Health & Safety
Committee
Members
Professor
Sir Steve Smith*
Chair of the Health
& Safety Committee
Richard Smith
Chief Executive Officer
Dame Shirley Pearce
Non-Executive Director
Elizabeth McMeikan
Senior Independent Director
Ilaria del Beato
Non-Executive Director
* Professor Sir Steve Smith will
Chair the Health and Safety
Committee when he joins the
Board on 1 April2020.
Unite Students is home to 74,000 students. For many, this is their first time
living away from home. Being safe and secure is at the heart of everything
we do – our focus on the safety and wellbeing of all our customers,
employees, contractors and other visitors to our properties.
I would like to thank Sir Tim Wilson, who stepped down from the Board on
31 December 2019 following nine years of service, for his safety governance
leadership as Chair of our Health & Safety Committee. Sir Tim’s leadership
has, among things, overseen the implementation of a comprehensive safety
assurance program. This culminated in the Group receiving a Five-star (out
of five) rating from the British Safety Council following an Occupational
Safety Audit at the end of 2019. Professor Sir Steve Smith joins the Board
on 1 April 2020 and will Chair our Health and Safety Committee going
forwards. His wide ranging HE sector experience and hands on knowledge
of the operational aspects of University life will help us continue to improve
our safety governance.
Fire remains one of our top safety risks, with the fire at the student
accommodation building ‘The Cube’ in Bolton a timely reminder of the
critical importance of fire safety. Following our comprehensive review and
replacement of ACM cladding in 2018, during 2019 we reviewed our estate
for HPL (High Pressure Laminate) and are conducting a broader review on
cladding. We have appointed a new Head of Fire Safety with hands-on fire
safety experience in both the London Fire Brigade and other Fire Safety
Management roles bringing his leadership and experience to strategically
manage fire safety across our enlarged portfolio. This appointment is
especially critical and timely as we look to integrate the fire safety strategy
of the Liberty Living properties with ours.
During 2019, we expanded and regionalised our Health, Safety and Security
team, allowing closer and more ‘on the ground’ support for our Operations
teams helping them deliver our Safe and Secure promise. This also allows our
strengthened regional teams to better support the successful integration with
Liberty Living, ensuring the safety of our teams and customers remains our
key priority.
Our focus for 2020 remains on providing absolute confidence to our
customers, employees, visitors and parents/guardians on the safety of
our properties and how we operate them. We will also concentrate on
providing information and education to our customers on how they can
keep themselves safe and secure in their homes.
The Unite Group PLCAnnual Report & Accounts 2019 Health and Safety Committee meetings
British Safety Council (BCS) audits
The British Safety Council conducted three comprehensive
safety audits in November and December 2019. These
comprised of an Occupational Health & Safety Audit,
a Fire Safety Audit and a Construction Audit.
Unite Students achieved a Five-star rating following an
Occupational Health & Safety Audit in November. The
audit measures our performance against a number of key
safety management indicators, providing organisations
with a worldwide benchmark of their safety management
systems against current best practice to enable continual
improvement. This result reflects significant improvement
from our last audit 18 months ago, where we were awarded
a Four-star rating.
This achievement is the culmination of hard work and
investment across the business, including additional
health and safety resource and improved accountability
and ownership of health and safety across the business.
The hard work does not stop here and we remain committed
to both understanding how we keep our students and
employees safe, and executing this to the very best of
our ability.
The main themes that we will now focus on are aligning
our employee wellbeing offering with our customer welfare
support. We will also continue to focus on embedding our
Health and Safety Management system across our business
and developing our H&S Training programme further.
The Fire Safety Audit concluded that progress has
been made with our fire safety management system
and acknowledges the significant investment made in
fire safety. The focus areas are to continue with our
programme of fire safety training and running fire
evacuation simulations.
The Construction Audit highlighted some areas for
improvement at site level that we will address with
our construction partners. We have also introduced
further third party H&S support for the Property
Development Team.
The Health and Safety Committee met three times during
the year and attendance at those meetings is shown on
page 102.
Highlights from 2019
At the beginning of the year, we committed to our teams
that their safety and security would be a priority for the
upcoming year. We have made huge progress towards this
commitment by the following:
• Safe & Secure Plans for each city. Our teams have
worked together to create a bespoke plan for each
city identifying issues that might make our customers
or team members feel unsafe e.g. issues with access,
CCTV or anti-social behaviour. Our focus for 2020 will
be embedding these plans in each city.
• H&S Audit: Each property has had an external H&S
audit carried out by NSF International in addition to a
site-specific Fire Risk Assessment with FCS Live. This
increased level of focus has enabled our teams to have
an independent view of H&S, Fire & Security in their
properties. We will continue with this level of auditing
into 2020 to provide a year-on-year comparison of
performance and will benchmark ourselves against
similar accommodation providers. We also conducted
three British Safety Council audits (see below).
• H&S Culture can be difficult to measure, but the
introduction of the Operations Board Compliance
Committee has supported a renewed focus on Health,
Safety & Security across the business with the senior
leadership setting the appropriate tone from the top.
Our employee engagement survey has also highlighted
that our teams understand the importance of working
together to ensure high standards to keep their
colleagues and customers safe.
• Security Risk Management Training and Business
Continuity Plans. Our Service & Safety Supervisors,
along with Area Managers, Regional Estates Managers
and Regional H&S Managers have attended a five
day Security Risk Management Course. Following
this each site has produced a Business Continuity
Plan highlighting the property specific actions and
information required to manage an incident and
resume ‘business as usual’ within a reasonable
timescale.
• Safe and Secure Month was conducted across the
country. This saw a weekly focus throughout October on
the new Health & Safety procedures and our operations
teams engaged with local emergency services and
enforcement authorities to run educational activities
and events.
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Health & Safety Committee continued
Top-five safety focus areas for 2020
Property Development
We have continued our drive in the improvement in safety,
wellbeing and mental health on our Development sites.
This has focused on:
• Mental Health – supported by our Framework
Contractors all developments are registered with
Mates in Mind. This registration enables each site
to support and proactively promote metal health
and wellbeing of our sites
• Putting a number of our own Development Project
Managers through mental health first aid training
delivered by the British Safety Council
• Continuing to deliver year-on-year improvement
in our H&S KPIs across all our development sites
• Delivering improvement in the welfare standards
across all developments. White Rose View, Leeds
has set a new baseline for the standards expected
from site welfare delivering standards similar to
the common rooms we provide for our students
including pool tables
• All developments commencing on site in 2019
being recognised as Considerate Construction
Scheme ‘Ultra Sites’ – these developments represent
the pinnacle of achievement in exceeding the CCS’s
Code of Considerate Practice
We have streamlined our safety approach to focus on the
below five high priority areas through 2020. This targeted
approach around low frequency, high consequence events
means we are focused on significant risks that may cause
harm. We have aligned members of our Operations Board
with each of these five areas and they are reviewed regularly
at the Operations Board Compliance Committee.
Fire safety
Contractor safety
Electrical safety
Driving for work
Work at height
Incidents
We had two RIDDOR reports for 2019, which is a reduction
from 2018. Both of these incidents related to our employees
and both have been investigated, with preventative measures
put in place to prevent a reoccurrence. In 2020 we are
reviewing our H&S software provision to ensure that the H&S
Team are more insight driven and are able to use predictive
technology to look at where incidents are most likely to occur
as well as monitoring trends of where they currently occur.
Mental health and wellbeing
Mental health for young people continues as an increasing
concern for the Higher Education sector and also for us
at Unite, especially since we are home to so many young
people while they are at University. Welfare Leads receive
mental health first-aid training to look for signs and signpost
help. The Student Support Services and Welfare team are
embedded within each regional team and provide support
to employees and students alike, working closely with
University support teams.
The Unite Group PLCAnnual Report & Accounts 2019 Remuneration Committee
On behalf of the Board, it is my pleasure to
present the Directors’ Remuneration
Report for 2019.
Remuneration
Committee
Members
Elizabeth McMeikan
Chair of the
Remuneration Committee
Phil White
Chairman
Ross Paterson
Non-Executive Director
Richard Akers
Non-Executive Director
Dame Shirley Pearce
Non-Executive Director
Dear Shareholder,
As in previous years, this report is split into three sections: this Annual
Statement, the Policy Report and the Annual Report on Remuneration. You
may recall that we submitted our remuneration policy to a binding shareholder
vote at the 2019 AGM and this was very well supported by shareholders,
receiving 96.85% votes in favour. No changes are proposed to the policy this
year, but we have reproduced the policy table in full over pages 126 and 127
for both ease of reference and in order to provide context to the decisions
taken by the Committee during the year.
2019 performance and reward
2019 saw continued strong core business performance achieved alongside the
transformational acquisition of Liberty Living, completed very late in the year.
Financial highlights included a 25% increase in EPRA earnings (15% on a per
share basis), a Total Accounting Return (TAR) of 11.8%, an EBIT margin of
71.7% and a 14% (4.2p) increase to our full year dividend. Our three-year TSR
has continued to materially outperform the FTSE 350 Real Estate Index, with
an investment of £100 in Unite shares in December 2016 worth £227 as at
31 December 2019, compared to £130 for a similar investment in the Index.
Additionally, Unite was the top performing stock in the real estate sector
over the course of 2019.
Operational performance has also been strong with continued high customer
satisfaction levels and University trust scores reflecting Unite’s strong brand
and operating platform, the quality of our portfolio and our deep relationships
with Universities. 2019 saw the commencement of new long-term nomination
agreements with the University of Birmingham and Oxford Brookes University,
and in October we agreed commercial terms on a nomination agreement with
the University of Leeds. The health and safety of our students and employees
remains central to everything we do and so it was pleasing to see the Group’s
hard work and investment culminating in a Five-star audit rating score from
the British Safety Council (BSC).
In the second half of the year we announced the proposed acquisition of
Liberty Living, and following both shareholder approval and CMA clearance,
we were delighted to complete this deal on 29 November 2019. The deal is truly
transformational and is intended to bring significant strategic and financial
benefits to Unite over the coming years. Whilst we are mindful of the large
amount of hard work still to do in order to consider the acquisition a success, the
Committee is confident in the team’s ability to deliver its stated cost synergies
and operational enhancements across the significantly enlarged portfolio, whilst
maintaining the Group’s commitment to strong balance sheet management and
financial prudence.
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Remuneration Committee continued
Targets applying to the 2019 annual bonus were set at the
start of the year and took into account both internal and
external expectations at the time, but not the impact of the
Liberty Living acquisition. In order to ensure the outturn
for incentive purposes could be compared with the original
targets on a like-for-like basis and reflecting how late in the
performance period the acquisition actually completed
following shareholder approval and CMA clearance, the
Committee considered that the fairest approach for annual
bonus participants was to ring-fence the Liberty Living
acquisition and to assess financial (EPS, TAR and net debt to
EBITDA) performance in respect of the legacy Unite business
for 2019 through adjustments to the year’s reported outturn
under these elements of the bonus. Adjustments were both
upwards and downwards, and were applied consistently
across the employee population where applicable. Further
details are included on page 137.
In respect of Executive Directors, the resulting annual
bonus outcome was 80.9% of maximum. The Committee
was satisfied that these adjustments were appropriate in
the circumstances, with the final result reflecting another
year of very strong performance by the Group and the
significant contributions made by both Executive Directors.
The Committee further considered that an annual bonus
outcome which is c.6% higher than that in 2018 was
justified when reflecting on the various achievements
over each of these periods.
In line with the new remuneration policy, as both Executive
Directors had achieved their applicable shareholding
guidelines as at the date of assessment, amounts over
100% of salary will be deferred in Unite shares for two years.
Further details, including bonus targets, outcomes and
details of personal achievements are included on page
136 and 137.
Performance share awards made in April 2017 were tested
for performance at 31 December 2019. These awards were
based equally on EPS, TAR and TSR outperformance of
the FTSE350 Real Estate ‘Super Sector’ Index. As with the
annual bonus, the Committee resolved to assess financial
performance in respect of only the legacy Unite business
for 2019 through the same adjustments to the reported
outturn under the EPS and TAR elements of the award.
Over the three-year performance period Unite’s relative
TSR significantly outperformed the comparator Index, with
the adjusted EPS and TAR outturns both coming in at or
towards the upper end of the performance ranges set in
2017. Overall vesting of the 2017 awards was therefore 97.1%
of maximum. In approving this outcome, the Committee
was satisfied that the vesting level reflects the underlying
performance of the Company and the continued progress
made over the last three years. Those awards vesting will be
subject to a two-year holding period following formal vesting
in April 2020, and will only be released to Executive Directors
in April 2022. Further details are included on page 138.
Taken as a whole, the Committee is satisfied that overall
pay outcomes in respect of the year ended 31 December
2019 are appropriate and reflect Unite’s performance over
the last one to three years. Our remuneration structure
places a significant weighting on variable pay, motivating
executives to deliver against stretching short- and
long-term targets aligned with Company strategy. The
annual bonus outcome reflects another good year, with
strong financial, operational and individual performance
generating an overall outcome of 80.9% of maximum.
Vesting of the 2017 LTIP – which constitutes the largest
part of each Executive Director’s single figure for the year
– reflects strong longer-term financial and operational
performance, and further significant value creation over
the three-year measurement period.
Finally, Executive Directors were each granted an award under
the LTIP in July 2019 which will vest based on performance
over the three financial years to 31 December 2021. These
awards will vest only to the extent that challenging EPS,
TAR and relative TSR targets are achieved over the period,
with any award vesting required to be held for an additional
two-year period in line with our remuneration policy. In a
slight change to previous years, and as noted in last year’s
report, the TAR element of this award will be measured
relative to the FTSE 350 Real Estate Supersector Index using
a simple ranking approach (cf. absolute targets previously),
whilst the relative TSR element will also be based on a simple
ranking against the constituents of the FTSE 350 Real Estate
Supersector Index (cf. % outperformance of Index in previous
years). Further details are included on pages 141 and 142.
2020 LTIP and shareholder consultation
Taking into account the truly exceptional nature of the
Liberty Living transaction, and mindful of the significant
effort of senior management through the challenging
project, the Committee consulted with Unite’s largest
shareholders on using the exceptional limits in the
Remuneration Policy to make 2020 LTIP awards of 300%
of salary to Executive Directors (cf. 200% of salary normal
awards). It was proposed that the additional 100% of salary
would vest based on objectives linked to the successful
integration of Liberty Living and delivery of Group strategy,
focussing on both what has been achieved and how it has
been achieved over the next three years.
Overall the Committee received input from shareholders
representing c.55% of Unite’s issued share capital during
the consultation process. While on balance there was
majority support for the proposals, feedback received
was mixed. Mindful of the perspectives of Unite’s other
important stakeholders, and keen to maintain a strong
level of shareholder support, the Committee concluded
that withdrawing the proposal for Executive Directors
would be the right approach. 2020 LTIP awards to Richard
The Unite Group PLC Annual Report & Accounts 2019 and Joe will therefore continue to be 200% of salary, with
vesting based on stretching three-year EPS, TAR and TSR
targets. Further details are included on page 144.
In addition to Executive Directors, the original proposal
to grant exceptional LTIP awards extended to all other
LTIP participants. On balance, the Committee felt that the
transformational nature of the acquisition and the need to
retain and reward key management personnel through the
integration process remained vitally important. Accordingly,
we will be proceeding with the proposal to grant below-
Board participants exceptional LTIP awards equivalent to
an additional 50% of their normal award levels in 2020.
These awards will be linked to the same core LTIP metrics
of EPS, TAR and TSR rather than different integration-
specific metrics.
Update on Unite pension arrangements
Reflecting the revised UK Corporate Governance Code and
shareholder feedback, as part of last year’s Remuneration
Policy review we committed that any new Executive
Director appointee at Unite would receive a company
contribution in line with the level available to the majority
of the workforce. Conscious of a planned review of
employee pensions which was due to take place over the
course of 2019, we did not provide details of a specific
percentage, but committed to clarify this in a future
report once more details were known.
At the same time, we committed to cap pension
contributions to our current Executive Directors
in monetary terms with effect from 1 March 2019,
the intention being that by capping the £ company
contribution, the implied percentages of salary
would fall gradually over time.
The Committee is now in a position to provide further
details on both of these areas:
Review of workforce pensions and implication for
new Executive Director appointees
Prior to the 2019 review, Unite’s employee pension provision
comprised two schemes, with participation dependent
on both tenure of employment within the Group and on
Grade. A review of these arrangements identified a number
of challenges, not least the ease of communication from
running multiple schemes and the competitiveness of
offering, particularly for new employees.
Following an in-depth review, and with effect from
1 January 2020, all employees within the Group will move
to a single scheme offering greater flexibility in savings
habits, and supporting the principle that all employees
should, where possible, be encouraged to save a little
more for retirement. The scheme will offer a greater
number of savings options (and smaller steps), with
employee contributions running from 4% to 10% of salary,
matched by a corresponding 1% higher contribution from
Unite. As is currently the case, employees subject to annual
or lifetime savings limits will be offered a cash alternative
in lieu. The new scheme is also Grade-neutral, meaning
all employees have the same savings opportunities open
to them, supporting simplicity and allowing for improved
communication and education across the Group.
In accordance with this new scheme, the Committee can
now confirm that any new Executive Director appointee
would be eligible to participate on the same basis, with
a maximum employer contribution (or cash in lieu) of
11% of salary. We have added this clarification to the
remuneration policy on page 126.
Pension contributions for existing Executive Directors
The Committee has continued to monitor market practice
and investor guidelines with regards to Executive Director
pensions during 2019, and is conscious that this has
become a topic of particular importance for shareholders
and other stakeholders.
In agreement with the Executive Directors, the Committee
will reduce the employer pension contribution to Richard
Smith and Joe Lister in three stages with effect from
1 January 2021. This will reduce the contribution level to
an equivalent of 17%, 14% and 11% of salary for the 2021,
2022 and 2023 financial years respectively, ensuring
alignment with the broader workforce over a reasonable
timeframe. Pension contributions for the 2020 financial
year will be subject to the same £-caps disclosed last year.
Other adjustments to incentive targets
In addition to the aforementioned adjustments to the
reported financial outturns for the purposes of assessing
the 2019 annual bonus and 2017 LTIP, the Committee
reviewed the targets applying to the other in-flight
incentives to ensure they remained appropriate.
Following the completion of the acquisition of Liberty
Living, the Committee resolved to increase the EPS target
ranges applying to both the 2018 and 2019 LTIPs to reflect
the acquisition plan around earnings accretion, as well as
the positive benefits of the IFRS 16 accounting standard
change. The Committee is satisfied that the revised EPS
target ranges are of equivalent difficulty to the targets
originally set and remain challenging but achievable for
LTIP participants.
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Remuneration Committee continued
Implementation of Policy for 2020
Board changes
The Committee remains confident that the remuneration
policy continues to effectively support Unite’s short- and
long-term strategic objectives and promote management
and shareholder alignment.
Effective 1 January 2020, Executive Director salaries will
be increased by 3.0% in line with the broader employee
population. Pension contributions will continue to be
capped at £91,710 per annum for Richard Smith and
£74,650 per annum for Joe Lister.
The annual bonus will operate on the same basis as last
year, with a maximum opportunity of 140% of salary and
performance assessed against a range of key financial and
non-financial measures, and personal/team objectives. As
detailed above, the operation of the LTIP will be similarly
unchanged, with awards of 200% of salary vesting based
on stretching three-year EPS, relative TAR and relative TSR
targets and a mandatory two-year holding period applying.
Full details are included on pages 143 and 144.
Workforce remuneration considerations
The Committee continues to monitor pay and practices
across the wider workforce when considering the
remuneration of Executive Directors, for example in
approving salary increases and in refining our approach on
pension contribution levels. The Group People Director is
invited to attend Committee meetings on a regular basis
to provide updates on workforce initiatives and offer an
employee perspective to the Committee’s deliberations.
For the first time we have disclosed ratios of CEO pay to
the wider population, shown on page 139. Although it is
expected that the movement in the headline figures will
depend predominantly on the extent to which long-term
incentives pay out, the Committee will monitor these
ratios – as well as ratios of fixed pay and pay excluding
long-term incentives – as part of its overall deliberations
on executive remuneration.
Finally, the Committee also continues to consider and
embrace diversity in the workforce. Details of our gender
diversity across the Group are provided on page 86,
with the Committee pleased to note the headline 4.8%
reduction to 5% in Unite’s median gender pay gap for
2018/19. We remain confident in the Group’s commitment
to building a diverse, inclusive and gender-balanced
workforce and are encouraged by the strong progress
made in this area during 2019.
Having served six years and nine years respectively as
Non-Executive Directors at Unite, Andrew Jones and Sir
Tim Wilson stepped down from the Board during the
year. During the year we were pleased to welcome two
new Non-Executive Directors, Dame Shirley Pearce and
Thomas Jackson, to the Unite Board, with Shirley also
joining the Remuneration Committee from the date of her
appointment. Fees paid to Shirley are in line with the fees
paid to the other Non-Executive Directors, as disclosed
on page 135. Reflecting the Relationship Agreement with
CPPIB Holdco, Thomas Jackson will not receive any fees in
respect of his Non-Executive Director position with Unite.
We will also be adding further to our Higher Education
sector experience in 2020 with the appointment of
Professor Sir Steve Smith to the Board as a Non-Executive
Director in April.
Looking ahead
With our planned reduction to incumbent Executive
Director pension contributions over the next few years, the
Committee considers that Unite executive remuneration is
in line with best practice and the UK Corporate Governance
Code. In particular, the Committee continues to believe
that the current remuneration structure is clear, simple,
and appropriately aligned with the Company’s strategy, risk
appetite and culture, and that incentives are appropriately
capped. It is intended that any future Policy review be
focussed on similar objectives.
As ever, we will continue to monitor market developments
throughout the 2020 AGM season and will consider the
appropriateness of any emerging trends for Unite. I hope
that you find this report a clear account of the Committee’s
decisions for the year and would be happy to answer any
questions you may have at the upcoming AGM.
Elizabeth McMeikan
Chair of Remuneration Committee
26 February 2020
The Unite Group PLC Annual Report & Accounts 2019 Overview of Unite remuneration policy and implementation
Remuneration in respect of 2019
Overview of policy
Implementation of policy in 2020
Base salary
• Salaries increased by 2.5% in line with the
broader employee population effective
1 March 2019, as follows:
– CEO, Richard Smith = £458,556
– CFO, Joe Lister = £373,244
• Reviewed from time to time, with
reference to salary levels for similar roles
at comparable companies, to individual
contribution to performance; and to the
experience of each Executive.
• Salaries increased by 3.0% in line with
the broader employee population
effective 1 January 2020, as follows:
– CEO, Richard Smith = £472,313
– CFO, Joe Lister = £384,441
See page 143
See page 126
See page 143
Pension, benefits
• Pension contributions (or equivalent cash
• For existing Executive Directors:
allowance):
– CEO, Richard Smith = £91,710
– CFO, Joe Lister = £74,650
• Benefits in line with policy.
contributions (or an equivalent cash
allowance) capped in monetary terms.
• For new Executive Director appointees:
company pension contributions aligned
with the broader workforce (11% of salary).
• Benefits typically consist of the provision
of a company car or a car allowance, and
private health care insurance.
• Pension contributions to remain capped
at the same £ levels applied in 2019.
• No change to benefits for 2020.
See page 143
See page 126
See page 143
Annual bonus
• Annual bonuses of 113.3% of salary
for each Executive Director (80.9% of
maximum opportunity).
• Bonuses in excess of 100% of salary to be
deferred in Unite shares for two years;
remainder to be paid in cash.
• Maximum annual bonus opportunity for
all Executive Directors of 140% of salary.
• Performance measures typically include
both financial and non-financial metrics,
as well as the achievement of individual
objectives.
• Where an individual has met their
shareholding guidelines, any bonus over
100% of salary is deferred in shares for
two years; where an individual has not
met their shareholding guidelines, up
to 50% of bonus earned is deferred in
shares for three years.
• Malus and clawback provisions apply.
• Maximum annual bonus opportunities
of 140% of salary.
• 2020 bonuses to be based:
– 25.0% on adjusted EPS
– 25.0% on TAR per share
– 20.0% on net debt to EBITDA
– 10.0% on customer satisfaction
– 10.0% on University reputation
– 10.0% on personal/team objectives
See page 136 and 137
See page 127
See page 143
LTIP
• 2017 LTIP vested at 97.1% based on:
– 2019 adjusted EPS of 41.3p vs. a
stretch target of 42.0p
– Total Accounting Return over the
period 2017–19 of c. 44.4% vs. a stretch
target of 44.3%; and
– Relative TSR outperformance of the
FTSE350 Real Estate Index of 20.3%
p.a. vs. a stretch target of 9% p.a.
• Maximum award size for all Executive
Directors of 200% of salary in normal
circumstances (up to 300% of salary in
exceptional circumstances).
• Awards vest subject to performance over
a three-year period. Vested shares are
typically subject to an additional two-year
holding period
• Awards of 200% of salary to be made to
each Executive Director in April 2020.
• Performance to be measured over the
period 1 January 2020 to 31 December
2022 against stretching EPS, relative TAR
and relative TSR targets, each weighted
one-third.
• Two-year holding period will apply to all
• Malus and clawback provisions apply.
vested shares.
See page 138
See page 127
See page 144
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Remuneration Committee continued
2019 Remuneration at a glance
2019 Single total figure of remuneration for current Executive Directors
Salary
Taxable benefits
Pension
Annual Bonus
LTIP
Other
Total
Richard Smith
Joe Lister
£456,692
£371,726
£16,195
£16,928
£80,957
£66,084
£519,361
£1,653,245
£4,499
£2,730,949
£422,736
£1,346,291
£0
£2,223,765
2019 Annual Bonus outcomes
Measure
Adjusted EPS
TAR per share
Net debt to EBITDA ratio
Customer satisfaction
University reputation
Personal/team
objectives
Richard Smith
Joe Lister
Executive
Richard Smith
Joe Lister
2017–2019 LTIP outcomes
25%
25%
20%
10%
10%
10%
Threshold
On target
Maximum
Weight
30% of
maximum
50% of
maximum
100% of
maximum
37.4p
80.6p
7.4x
84
82
39.0p
89.5p
7.2x
85
83
42.0p
103p
6.9x
87
84
Actual
41.3p*
98.5p*
5.9x*
85
82
Objectives and performance assessment included
in Annual Report on Remuneration (page 136)
Max opportunity
(% of salary)
Overall outcome
(% of maximum)
Outcome
(% of salary)
140.0%
140.0%
80.9%
80.9%
113.3%
113.3%
Measure
2019 Adjusted EPS
TAR (2017–2019)
Relative TSR outperformance
Weight
1/3
1/3
1/3
Threshold
25% vest
36.0p
Stretch
100% vest
42.0p
Actual
41.3p*
22.5% (7% p.a.)
44.3% (13% p.a.)
44.4%* (13% p.a.)
Index
Index +9% p.a.
Index +20.3% p.a.
Outcome
(% of max)
88.3%
83.3%
100.0%
50.0%
30.0%
100.0%
Outcome
£519,361
£422,736
Vesting
(% of max)
91.3%
100.0%
100.0%
Executive
Richard Smith
Joe Lister
Overall vesting
(% of maximum)
Interests vesting
Date vesting
Estimated value
(incl. dividends)
97.1%
133,431
108,754
10 April 2020 (holding period
applies until 10 April 2022)
£1,653,245
£1,346,291
* Adjusted from reported figures. Further details are included in the Annual Statement and on pages 137 and 138.
The Unite Group PLC Annual Report & Accounts 2019 Directors’ Remuneration Policy
This report has been prepared in accordance with the provisions of the Companies Act 2006 and Schedule 8 of the Large
and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended). It also meets the
requirements of the UK Listing Authority’s Listing Rules and the Disclosure and Transparency Rules.
In accordance with the Regulations, the following sections of the Remuneration Report are subject to audit: the Single total
figure of remuneration for Directors and accompanying notes (pages 134 to 138), Scheme interests awarded during the
financial year (page 141), Payments to past Directors (page 142), Payments for loss of office (page 142) and the statement
of Directors’ shareholdings and share interests (pages 145 and 146). The remaining sections of the report are not subject
to audit.
Unite’s remuneration policy was approved by shareholders at the 2019 AGM on 9 May 2019. The report below, save for
a number of minor changes, is as disclosed in the 2018 Directors’ Remuneration Report, which is available to download
from the Company’s website at www.unite-group.co.uk/investors. The following changes have been made:
• References to financial years have been updated where appropriate;
• References to changes to the 2016 policy have been removed;
• The policy on pension contributions for new Executive Director appointees has been clarified to reference the rate
now available to the majority of employees of 11% of salary;
• The policy on pension contributions for existing Executive Directors has been updated to reference the planned
reduction to contribution rates from 1 January 2021;
• Pay-for-performance scenario charts have been updated to reflect 2020 salaries and pension contributions;
• New Non-Executive Director service contract dates have been added.
Directors’ Remuneration Policy
The Group aims to balance the need to attract, retain and motivate Executive Directors and other senior executives of
an appropriate calibre with the need to be cost effective, whilst at the same time rewarding exceptional performance.
The Committee has designed a remuneration policy that balances those factors, taking account of prevailing best practice,
investor expectations and the level of remuneration and pay awards made generally to employees of the Group.
In addition to the above, the remuneration policy for the Executive Directors and other senior executives is based on
the following key principles:
• A significant proportion of remuneration should be tied to the achievement of specific and stretching performance
conditions that align remuneration with the creation of shareholder value and the delivery of the Group’s strategic
plans, taking care to consider the needs of all stakeholders.
• There should be a focus on sustained long-term performance, with performance measured over clearly specified
timescales, encouraging executives to take action in line with the Group’s strategic plan, using good business
management principles and taking well considered risks.
•
Individuals should be rewarded for success, but steps should be taken, within contractual obligations, to prevent
rewards for failure – whether financial or operational.
• Above all, Executive Remuneration should support the values and culture of the Group. Pay should be simple and
easy to understand, with all aspects clear and openly communicated to stakeholders and with alignment with pay
philosophies across the Group.
This section of the report sets out the policy which the Company asked shareholders to approve at the 2019 AGM and
which came into effect from that date.
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Directors’ Remuneration Policy continued
Policy Table
Function
Operation
Opportunity
Performance metrics
Base salary
To recognise the
individual’s skills and
experience and to
provide a competitive
base reward.
Base salaries are reviewed
from time to time, with
reference to salary levels for
similar roles at comparable
companies, to individual
contribution to performance;
and to the experience of
each Executive.
Pension
To provide an
opportunity for
executives to build
up income upon
retirement.
All executives are either
members of The UNITE
Group Personal Pension
scheme or receive a cash
pension allowance.
Salary is the only element
of remuneration that is
pensionable.
Any base salary increases are applied in line
with the outcome of the review as part of
which the Committee also considers average
increases across the Group.
None
In respect of existing Executive Directors, it is
anticipated that salary increases will generally
be in line with those of salaried employees as a
whole. In exceptional circumstances (including,
but not limited to, a material increase in job size
or complexity) the Committee has discretion to
make appropriate adjustments to salary levels
to ensure that they remain market competitive.
Existing Executive Directors receive a company
pension contribution or an equivalent cash
allowance which is capped in monetary terms
at 20% of the salary effective at 1 March 2019,
as follows:
None
• Richard Smith: £91,710
•
Joe Lister: £74,650
These caps will continue to apply for 2020.
Company contribution levels will be reduced
from 1 January 2021, 2022 and 2023 to an
equivalent of 17%, 14% and 11% of salary
respectively.
For future Executive Director appointees,
the maximum company pension contribution
will be aligned to that offered to a majority of
employees across the Group in percentage of
salary terms (currently 11% of salary).
Benefits
To provide non-cash
benefits which are
competitive in the
market in which the
executive is employed.
SAYE
To encourage the
ownership of shares
in Unite.
Executives receive benefits
which consist primarily of
the provision of a company
car or a car allowance,
and private health care
insurance, although can
include any such benefits
that the Committee deems
appropriate.
Benefits vary by role and individual
circumstances; eligibility and cost is
reviewed periodically.
None
The Committee retains the discretion to
approve a higher cost in certain circumstances
(e.g. relocation) or in circumstances where
factors outside the Company’s control have
changed materially (e.g. increases in insurance
premiums).
Savings are capped at the prevailing HMRC
limit at the time employees are invited
to participate.
None
An HMRC approved scheme
whereby employees
(including Executive
Directors) may save up to the
maximum monthly savings
limit (as determined by
prevailing HMRC guidelines)
over a period of three years.
Options granted at up to a
20% discount.
The Unite Group PLC Annual Report & Accounts 2019 Function
Operation
Opportunity
Performance metrics
Performance Related Annual Bonus
To incentivise
and reward
strong
performance
against financial
and non-
financial annual
targets, thus
delivering value
to shareholders
and being
consistent with
the delivery of
the strategic
plan.
LTIP
To drive
sustained
long-term
performance
that supports
the creation of
shareholder
value.
Performance measures, targets
and weightings are set at the start
of the year.
At the end of the year, the
Remuneration Committee
determines the extent to which
targets have been achieved.
The delivery of bonus payments is
dependent on whether an individual
has achieved their shareholding
guideline at the end of the relevant
financial year, as follows:
• Shareholding guideline achieved:
any annual bonus earned over
100% of salary will be deferred
for two years;
• Shareholding guideline not
achieved: up to 50% of the annual
bonus payable will be deferred
for three years.
In both cases, deferral is satisfied
by an allocation of shares in the
Company, which are held in the
Employee Share Ownership Trust.
Awards under the Performance
Related Annual Bonus are subject
to malus and clawback provisions,
further details of which are included
as a note to the policy table.
The LTIP comprises a Performance
Share Plan (PSP) and an Approved
Employee Share Option Scheme
(ESOS).
The ESOS is used to deliver a
proportion of the LTIP in a tax-
efficient manner, and is subject to
the same performance conditions
as awards made under the PSP.
Award levels and performance
conditions are reviewed before each
award cycle to ensure they remain
appropriate and no less stretching
than the first cycle.
Awards under the LTIP are subject
to malus and clawback provisions,
further details of which are included
as a note to the policy table.
For Executive Directors,
the maximum annual
bonus opportunity is
140% of base salary.
Up to 30% of maximum
will be paid for Threshold
performance under each
measure and up to 50% of
maximum will be paid for
on-target performance.
A payment equal to the value
of dividends which would
have accrued on vested
deferred bonus shares
will be made following
the release of awards to
participants, either in the
form of cash or as additional
shares. It is the Committee’s
current intention to make
any future dividends
payments from the 2020
financial year onwards in
the form of shares.
Performance is assessed on an annual basis,
as measured against specific objectives set
at the start of each year.
Financial measures will make up at least
70% of the total annual bonus opportunity
in any given year. The remainder will be split
between non-financial metrics and personal/
team objectives according to business
priorities, with the weighting on the latter
being no more than 20% of the total annual
bonus opportunity.
The Committee has discretion to adjust the
formulaic bonus outcomes both upwards
(within the plan limits) and downwards
(including down to zero) to ensure alignment
of pay with performance, e.g., in the event
of one of the targets under the bonus
being significantly missed or unforeseen
circumstances outside management control.
The Committee also considers measures
outside the bonus framework (e.g. H&S)
to ensure there is no reward for failure.
For 2020, financial metrics, non-financial
metrics and personal/team objectives will
make up 70%, 20% and 10% of the total
annual bonus opportunity respectively.
Further details of the measures, weightings
and targets applicable are provided on
page 143.
The LTIP provides for an
award up to a normal
aggregate limit of 200%
of salary for Executive
Directors, with an overall
limit of 300% of salary in
exceptional circumstances.
The current intention is
to award each Executive
Director awards equivalent
to 200% of salary.
Awards may include a
grant of HMRC approved
options not exceeding £6k
per annum, valued on a fair
value exchange (currently
50–60% of a PSP award).
A payment equal to the
value of dividends which
would have accrued on
vested shares will be made
following the release of
awards to participants,
either in the form of cash
or as additional shares. It
is the Committee’s current
intention to make any future
dividends payments from
the 2020 financial year
onwards in the form
of shares.
Vesting of LTIP awards is subject to continued
employment and performance against
relevant metrics measured over a period
of at least three years. The Committee will
select performance measures ahead of
each cycle to ensure that they continue to
be linked to the delivery of the Company
strategy.
Under each measure, threshold performance
will result in up to 25% of maximum vesting
for that element, rising on a straight-line to
full vesting.
If no entitlement has been earned at the end
of the relevant performance period, awards
will lapse. A proportion of vested awards
may, at the discretion of the Committee,
be subject to a holding period following
the end of a three-year vesting period.
The Committee’s current intention is that
all awards will be required to be held for
an additional two-year period post-vesting.
As under the Performance Related Annual
Bonus, the Committee has discretion to
adjust the formulaic LTIP outcomes to ensure
alignment of pay with performance, i.e. to
ensure the outcome is a true reflection of
the performance of the Company.
Details of the measures and targets to be
used for 2020 LTIP awards are included in
the Annual Report on Remuneration on
page 144.
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Directors’ Remuneration Policy continued
Notes to the policy table
The Committee is satisfied that the above remuneration policy is in the best interests of shareholders and does not
promote excessive risk-taking.
For the avoidance of doubt, in approving this Directors’ Remuneration Policy, authority is given to the Company to honour
any commitments entered into with current or former Directors (such as the vesting or exercise of past share awards).
Performance measure selection and approach to target setting
Measures used under the Performance Related Annual Bonus and LTIP are selected annually to reflect the Group’s main
short- and long-term objectives and reflect both financial and non-financial priorities, as appropriate.
The Committee considers that EPS (currently used in both the short- and long-term incentive) is an objective and well-
accepted measure of the Company’s performance which reinforces the strategic objective of achieving profitable growth,
whilst a focus on Total Accounting Return (also currently used in both the short- and long-term incentive) is consistent with
one of our stated objectives and a key indicator of Company performance in the real estate sector. The use of relative TSR
is strongly aligned with shareholders and ensures that executives are rewarded only if they exceed the returns which an
investor could achieve elsewhere in our sector.
Targets applying to the Performance Related Annual Bonus and LTIP are reviewed annually, based on a number of internal
and external reference points. Performance targets are set to be stretching but achievable, with regard to the particular
strategic priorities and economic environment in a given year. Under the bonus, target performance typically requires
meaningful improvement on the previous year’s outturn, and, for financial measures, targets are typically in line with
the upper end of market consensus.
Remuneration policy for other employees
Unite’s approach to annual salary reviews is consistent across the Group, with consideration given to the level of
experience, responsibility, individual performance and salary levels in comparable companies. The Company is now
a fully accredited Living Wage employer.
In terms of variable incentives, all employees are eligible to participate in an annual bonus scheme with business area-
specific metrics incorporated where appropriate. Senior managers are eligible to participate in the LTIP with annual
awards currently up to 75% of salary. Performance conditions are consistent for all participants, while award sizes
vary by level. Specific cash incentives are also in place to motivate, reward and retain staff below Board level.
All employees are eligible to participate in the Company’s SAYE scheme on the same terms.
Shareholding guidelines
The Committee continues to recognise the importance of Executive Directors aligning their interests with shareholders
through building up a significant shareholding in the Company. Shareholding guidelines are in place that require Executive
Directors to acquire a holding (excluding shares that remain subject to performance conditions) equivalent to 250% of
base salary for the Chief Executive and 200% of base salary for each of the other Executive Directors. Until the relevant
shareholding levels are acquired, up to 50% of the annual bonus payable to the relevant Director will be subject to deferral
into shares. Details of the Executive Directors’ current shareholdings are provided in the Annual Report on Remuneration.
In order to provide further long-term alignment with shareholders and ensure a focus on successful succession planning,
Executive Directors will normally be expected to maintain a holding of Unite shares for a period after their employment
as a Director of the Group. This shareholding guideline will be equal to the lower of a Directors’ actual shareholding at
the time of their departure and the shareholding requirement in effect at the date of their departure, with such shares
to be held for a period of at least two years from the date of ceasing to be a Director. The specific application of this
shareholding guideline will be at the Committee’s discretion.
Malus and clawback
Awards under the Performance Related Annual Bonus and the LTIP are subject to malus and, from 2016, clawback
provisions which can be applied to both vested and unvested awards. Malus and clawback provisions will apply for
a period of at least two years post-vesting. Circumstances in which malus and clawback may be applied include a
material misstatement of the Company’s financial accounts, gross misconduct on the part of the award-holder, error
in calculating the award vesting outcome and, from 2019 awards onwards, corporate failure as determined by the
Remuneration Committee.
The Unite Group PLC Annual Report & Accounts 2019 129
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Non-Executive Director remuneration
Subject to annual re-election by shareholders, Non-Executive Directors are appointed
for an initial term of approximately three years. Subsequent terms of three years
may be awarded. The appointment, re-appointment and the remuneration of
Non-Executive Directors are matters reserved for the full Board.
NED
Date of
service contract
P White
10 January 2009
E McMeikan
13 November 2013
R Paterson
21 September 2017
The Non-Executive Directors are not eligible to participate in the Company’s
performance-related bonus plan, long-term incentive plans or pension arrangements.
R Akers
I Beato
20 July 2018
20 July 2018
Details of the policy on fees paid to our Non-Executive Directors are set out in the
table below:
S Pearce
14 October 2019
T Jackson
29 November 2019
Performance
metrics
None
Function
Operation
Opportunity
Fees
To attract and
retain Non-
Executive
Directors of the
highest calibre
with broad
commercial
and other
experience
relevant to the
Company.
Fee levels are reviewed annually, with any adjustments
effective 1 January in the year following review.
The fees paid to the Chairman are determined by the
Committee, whilst the fees of the Non-Executive Directors
are determined by the Board.
Additional fees are payable for acting as Senior Independent
Director and as Chairman of any of the Board’s Committees
(Audit, Remuneration, Nomination and Health & Safety).
Fee levels are benchmarked against sector comparators and
FTSE-listed companies of similar size and complexity. Time
commitment and responsibility are taken into account when
reviewing fee levels.
Expenses incurred by the Chairman and the Non-Executive
Directors in the performance of their duties (including taxable
travel and accommodation benefits) may be reimbursed or
paid for directly by the Company, as appropriate.
Non-Executive Director fee increases
are applied in line with the outcome of
the annual fee review. Fees for the year
commencing 1 January 2020 are set out in
the Annual Report on Remuneration.
Fee levels will be next reviewed during 2020,
with any increase effective 1 January 2021.
It is expected that increases to Non-
Executive Director fee levels will be in line
with salaried employees over the life of the
policy. However, in the event that there is a
material misalignment with the market or
a change in the complexity, responsibility
or time commitment required to fulfil a
Non-Executive Director role, the Board
has discretion to make an appropriate
adjustment to the fee level.
Pay for performance scenarios
The charts below provide an illustration of the potential future reward opportunities for the Executive Directors, and the
potential split between the different elements of remuneration under four different performance scenarios: ‘Minimum’,
‘On-target’, ‘Maximum’ and ‘Maximum including the impact of a 50% share price appreciation on LTIP awards’.
Potential reward opportunities are based on Unite’s remuneration policy, applied to the base salaries effective 1 January
2020. The annual bonus and LTIP are based on the maximum opportunities set out under the remuneration policy, being
140% of salary under the annual bonus and a 2020 LTIP grant of 200% of salary. Note that the LTIP awards granted in a
year do not normally vest until the third anniversary of the date of grant, and the projected value is based on the face
value at award rather than vesting (i.e. the scenarios exclude the impact of any share price movement over the period).
The exception to this is the last scenario which, in line with the requirements of the UK Corporate Governance Code,
illustrates the maximum outcome assuming 50% share price appreciation for the purpose of LTIP value.
)
0
0
0
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(
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£3,000
£2,500
£2,000
£1,500
£1,000
£500
£0
Richard Smith
Joe Lister
£2,658
53.3%
£2,186
43.2%
£1,147
20.6%
28.8%
50.6%
£580
100.0%
30.2%
24.9%
26.5%
21.8%
£476
100.0%
£937
20.5%
28.7%
50.8%
£2,168
53.2%
£1,783
43.1%
30.2%
24.8%
26.7%
22.0%
Minimum
On-target
Maximum
Maximum +50%
share price inc.
for LTIP
Minimum
On-target
Maximum
Maximum +50%
share price inc.
for LTIP
Salary, pension, benefits
Annual Bonus
LTIP
130
Directors’ Remuneration Policy continued
The ‘minimum’ scenario reflects base salary, pension and benefits (i.e., fixed remuneration) which are the only elements
of the executive’s remuneration packages not linked to performance.
The ‘on-target’ scenario reflects fixed remuneration as above, plus bonus payout of 70% of salary and LTIP threshold
vesting at 25% of maximum award.
The ‘maximum’ scenario is shown on two bases: excluding and including the impact of share price appreciation on the
value of LTIP outcomes. In both cases, the scenario includes fixed remuneration and full payout of all incentives (140% of
salary under the annual bonus and 200% of salary under the LTIP), with the final scenario also including the impact of a
50% increase in Unite’s share price on the value of the LTIP (in effect valuing this element of pay at 300% of salary).
Approach to recruitment remuneration
External appointment to the Board
In the cases of hiring or appointing a new Executive Director from outside the Company, the Remuneration Committee
may make use of all the existing components of remuneration, as follows:
Component
Approach
Maximum annual
grant value
Base salary
The base salaries of new appointees will be determined by reference to relevant market data,
experience and skills of the individual, internal relativities and their current basic salary. Where
new appointees have initial basic salaries set below market, any shortfall may be managed with
phased increases over a period of two to three years subject to the individual’s development in
the role.
Pension
Benefits
SAYE
New appointees will receive company pension contributions or an equivalent cash supplement
aligned to that offered to a majority of employees across the Group at the time of appointment
(currently 11% of salary).
New appointees will be eligible to receive benefits which may include (but are not limited to)
the provision of a company car or cash alternative, private medical insurance and any necessary
relocation expenses. New appointees will also be eligible to participate in all-employee
share schemes.
Performance
Related Annual
Bonus
The structure described in the policy table will apply to new appointees with the relevant
maximum being pro-rated to reflect the proportion of employment over the year. Targets
for the individual element will be tailored to each executive.
LTIP
New appointees will be granted awards under the LTIP on the same terms as other executives,
as described in the policy table. The normal aggregate limit of 200% of salary will apply, save
in exceptional circumstances where up to 300% of salary may be awarded.
140% of salary
300% of salary
In determining appropriate remuneration, the Remuneration Committee will take into consideration all relevant factors
(including quantum, nature of remuneration and the jurisdiction from which the candidate was recruited) to ensure that
arrangements are in the best interests of both Unite and its shareholders. The Committee may make an award in respect
of a new appointment to ‘buy out’ incentive arrangements forfeited on leaving a previous employer on a like-for-like basis,
which may be awarded in addition to the remuneration structure outlined in the table above. In doing so, the Committee
will consider relevant factors including time to vesting, any performance conditions attached to these awards and the
likelihood of those conditions being met. Any such ‘buy-out’ awards will typically be made under the existing annual bonus
and LTIP schemes, although in exceptional circumstances the Committee may exercise the discretion available under
Listing Rule 9.4.2 R to make awards using a different structure. Any ‘buy-out’ awards would have a fair value no higher
than the awards forfeited.
Internal promotion to the Board
In cases of appointing a new Executive Director by way of internal promotion, the Remuneration Committee and Board will
be consistent with the policy for external appointees detailed above. Where an individual has contractual commitments
made prior to their promotion to Executive Director level, the Company will continue to honour these arrangements. The
Remuneration policy for other employees is set out on page 128. Incentive opportunities for below Board employees are
typically no higher than Executive Directors, but measures may vary to provide better line-of-sight.
The Unite Group PLC Annual Report & Accounts 2019 Non-Executive Directors
In recruiting a new Non-Executive Director, the Remuneration Committee will utilise the policy as set out in the table on
page 129. A base fee in line with the prevailing fee schedule would be payable for Board membership, with additional fees
payable for acting as Senior Independent Director and/or as Chairman of the Board’s Committees.
Service contracts and treatment for leavers and change of control
Executive Director service contracts, including arrangements for early termination,
are carefully considered by the Committee. In accordance with general market
practice, each of the Executive Directors has a rolling service contract requiring
12 months’ notice of termination on either side. Such contracts contain no specific
provision for compensation for loss of office, other than an obligation to pay for any
notice period waived by the Company, where pay is defined as salary, benefits and any other statutory payments only.
Where a payment is made in equal monthly instalments, the Committee will expect the Director to mitigate his/her losses
by undertaking to seek and take up, as soon as reasonably practicable, any suitable/similar opportunity to earn alternative
income over the period in which the instalments are to be made. The instalment payments will be reduced (including
to zero) by the amount of such income that the employee earns and/or is entitled to earn over the applicable period.
Executive Director service contracts are available to view at the Company’s registered office.
Date of
service contract
28 September 2011
28 March 2002
R Smith
J Lister
Executive
The Remuneration Committee will exercise discretion in making appropriate payments in the context of outplacement,
settling legal claims or potential legal claims by a departing Executive Director, including any other amounts reasonably
due to the Executive Director, for example to meet the legal fees incurred by them in connection with the termination of
employment, where the Company wishes to enter into a settlement agreement and the individual must seek independent
legal advice.
When considering exit payments, the Committee reviews all potential incentive outcomes to ensure they are fair to both
shareholders and participants. The table below summarises how the awards under the annual bonus and LTIP are typically
treated in specific circumstances, with the final treatment remaining subject to the Committee’s discretion:
Calculation of vesting/payment
Annual bonus
Cash element
In the event of retirement, ill health, death, disability, redundancy or any other circumstance at the discretion
of the Remuneration Committee, or in the event of a change of control, Executive Directors may receive a
bonus payment for the year in which they cease employment. This payment will normally be pro-rated for
time and will only be paid to the extent that financial and individual objectives set at the beginning of the
plan year have been met.
Otherwise, Executive Directors must be employed at the date of payment to receive a bonus.
Deferred element
Deferred bonus shares will normally be retained and will be released in full following completion of the
applicable two- or three-year deferral period.
LTIP
Leavers before
the end of the
performance period
Leavers after the end
of the performance
period
In the event of retirement, ill health, death, disability, redundancy or any other circumstance at the discretion
of the Remuneration Committee, or in the event of a change of control, the Committee determines whether
and to what extent outstanding awards vest based on the extent to which performance conditions have
been achieved and the proportion of the vesting period worked. This determination will be made as soon
as reasonably practical following the end of the performance period or such earlier date as the Committee
may agree (within 12 months in the event of death).
In the event of a change of control, awards may alternatively be exchanged for new equivalent awards in
the acquirer where appropriate.
If participants leave for any other reason before the end of the performance period, their award will
normally lapse.
Any awards in a holding period will normally vest following completion of the holding period.
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Directors’ Remuneration Policy continued
External appointments
With the approval of the Board in each case, and subject to the overriding requirements of the Group, Executive Directors
may accept external appointments as Non-Executive Directors of other companies and retain any fees received. Joe Lister
was appointed as a Non-Executive Director on the Board of Helical Plc effective 1 September 2018 and received a fee of
£52,201 in respect of his service for 2019.
Consideration of conditions elsewhere in the Company
When making decisions on Executive Director remuneration, the Committee considers pay and conditions across Unite.
Prior to the annual salary review, the Group People Director provides the Committee with a summary of the proposed
level of increase for overall employee pay. Currently the Remuneration Committee does not formally consult with
employees on the executive remuneration policy and framework.
Consideration of shareholder views
During 2018, the Remuneration Committee consulted with investors representing around two-thirds of Unite’s issued
share capital and with proxy advisors (Glass Lewis, the Investment Association and ISS) to seek their views on the
proposed changes to the Remuneration Policy, as well as remuneration at Unite more broadly. The Committee was
grateful for investors taking the time to participate in the consultation and we welcomed the positive and constructive
feedback received. The Committee used the direct feedback, along with updates to investor body principles published
around the time of the review, to refine and further develop the final proposals. The Committee will continue to monitor
trends and developments in corporate governance and market practice to ensure the structure of the executive
remuneration remains appropriate.
The Unite Group PLC Annual Report & Accounts 2019 Annual Report on Remuneration
The following section provides details of how Unite’s remuneration policy was implemented during the financial year
ended 31 December 2019 and how it will be implemented in 2020.
Remuneration Committee membership in 2019
The primary role of the Committee is to:
• Review, recommend and monitor the level and structure of remuneration for the Executive Directors and other
senior executives
• Approve the remuneration packages for the Executive Directors and ensure that pay outcomes reflect the performance
of the Company
• Determine the balance between base pay and performance-related elements of the package so as to align Directors’
interests to those of shareholders.
The Committee’s terms of reference are set out on the Company’s website. As of 31 December 2019, the Remuneration
Committee comprised five independent Non-Executive Directors:
• Elizabeth McMeikan (Committee Chair)
• Phil White
• Ross Paterson
• Richard Akers
• Dame Shirley Pearce
Andrew Jones and Sir Tim Wilson served on the Remuneration Committee until their stepping down from the Board on
9 May 2019 and 31 December 2019 respectively. Certain executives, including Richard Smith (Chief Executive) and Ruth
George (Group People Director) are invited to attend meetings of the Committee, and the Company Secretary, Christopher
Szpojnarowicz, acts as secretary to the Committee. Thomas Jackson is also invited to attend meetings. No individuals are
involved in decisions relating to their own remuneration. The Remuneration Committee met six times during the year and
details of members’ attendance at meetings are provided in the Corporate Governance section on page 102.
Key activities of the Remuneration Committee in 2019 included:
• Reviewed and approved the Executive Directors’ performance against 2018 annual objectives and 2016 LTIP targets;
determined bonuses payable (including balance between cash and shares), and approved LTIP vesting;
• Considered the Liberty Living acquisition and its implications for executive remuneration at Unite;
• Approved adjustments to relevant annual bonus and LTIP targets and/or reported outcomes in light of IFRS 16 and
the Liberty Living acquisition;
• Considered remuneration market trends and corporate governance developments;
• Reviewed and approved salary increases for the Executive Directors and senior management for 2020;
• Determined the Executive Directors’ bonus and LTIP performance targets for 2020 in line with the strategic plan;
• Reviewed workforce pension arrangements, confirmed approach for new Executive Director appointees and approved
phase-down of pension contributions for incumbent Executive Directors;
• Conducted shareholder consultation on the proposed exceptional 2020 LTIP grant;
• Reviewed and approved the Chairman’s fee;
• Reviewed the CEO pay ratio and gender pay data and disclosures;
• Prepared the Directors Remuneration Report.
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Annual Report on Remuneration continued
Advisors
Mercer | Kepler (‘Mercer’) was appointed as the Committee’s independent advisor following a competitive tender process in
2014, and was retained during the year. The Committee undertakes due diligence periodically to ensure that Mercer remains
independent and that the advice provided is impartial and objective. Mercer is a founding member and signatory of the Code
of Conduct for Remuneration Consultants, details of which can be found at www.remunerationconsultantsgroup.com. In
2019 Mercer provided independent advice including support on the review of executive remuneration for 2020, the review
of pension contribution rates, shareholder consultation support, updates on the external remuneration environment and
performance testing for long-term incentive plans. Mercer reports directly to the Chair of the Remuneration Committee
and does not advise the Company on any other issues. Their total fees for the provision of remuneration services to the
Committee in 2019 were £60,830 (2018: £67,900) on the basis of time and materials.
Summary of shareholder voting at AGMs
The following table shows the results of the advisory vote on the 2018 Annual Report on Remuneration and the binding
vote on the 2019 Directors’ Remuneration Policy at the 2019 AGM:
For (including discretionary)
Against
Total votes cast (excluding withheld votes)
Votes withheld
Total votes cast (including withheld votes)
2018 Annual Report on Remuneration
Directors’ Remuneration Policy
96.97%
3.03%
213,625,277
6,682,764
220,308,041
301,647
220,609,688
213,670,741
6,938,947
220,609,688
0
220,609,688
96.85%
3.15%
Single total figure of remuneration for Executive Directors (audited)
The table below sets out a single figure for the total remuneration received for 2018 and 2019 by each Executive Director
who served in the year ended 31 December 2019:
£
R Smith
J Lister
2019
2018
2019
2018
Salary
456,692
445,910
371,726
362,950
Taxable
benefits
(Note 1)
16,195
15,920
16,928
16,424
Pension
(Note 2)
Annual
Bonus
(Note 3)
LTIP
(Note 4)
Other
(Note 5)
Total
Single
Figure
Total
Fixed
Total
Variable
80,957
519,361
1,653,245
4,499
2,730,949
553,844
2,177,104
72,081
478,822
1,118,247
66,084
422,736
1,346,291
0
0
2,130,979
533,910
1,597,069
2,223,765
454,738
1,769,027
64,523
389,739
910,494
2,250
1,746,380
443,897
1,302,482
Note 1 Taxable benefits for 2019 consist primarily of company car or car allowance and private health care insurance. The figures above include car benefits
of £15,000 for Messrs. Smith and Lister.
Note 2 Pension figures include contributions to the UNITE Group Personal Pension Scheme and cash allowances, where applicable.
Note 3 Payment for performance during the 2019 year. Having already achieved their respective share ownership guidelines, each Executive Director will
receive amounts up to 100% of base salary in cash. The remainder – totalling £60,805 and £49,492 to Messrs. Smith and Lister respectively – will be
deferred in Unite shares for a period of two years.
Note 4 2018 figures: The 2016 awards are valued based on the market price on the date of vesting (23 June 2019) of 967p. These amounts have been revised
from last year’s report to reflect the actual share price on the date of vesting.
2019 figures: For the 2017 awards, the market price on the date of vesting is currently unknown and so the value shown is estimated using the average
market value over the last quarter of 2019 of 1,169.9p. See following sections for further details. The value of the vested 2017 awards shown reflects
the impact of a c.82% increase in the vesting share price compared to the share price at grant. Overall, the impact of the share price increase on the
awards represents c.43% of the LTIP value, equivalent to c.£704k for Richard Smith and c.£574k for Joe Lister. For both 2018 and 2019, LTIP figures
include the value of dividends for vested awards; paid in cash in respect of the 2016 awards and to be paid as additional shares in respect of the 2017
awards. Awards in the form of HMRC-approved options are valued based on the embedded gain at vesting (i.e. subtracting the applicable exercise
price) and attract no dividends.
Note 5 ‘Other’ includes the embedded value of SAYE options at grant.
The Unite Group PLC Annual Report & Accounts 2019
Single total figure of remuneration for Non-Executive Directors (audited)
The table below sets out a single figure for the total remuneration received for 2018 and 2019 by each Non-Executive
Director who served in the year ended 31 December 2019:
£
(Note 1)
P White
R Wilson(i)
A Jones(ii)
E McMeikan(iii)
R Paterson(iv)
R Akers(v)
I Beato(vi)
S Pearce(vii)
T Jackson(viii)
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Base fee
193,420
188,700
48,000
46,820
17,161
46,820
48,000
46,820
48,000
46,820
48,000
15,607
48,000
3,902
8,000
–
–
–
Committee
Chair/SID fees
Taxable benefits
(Note 2)
Total Single Figure
–
–
7,075
6,900
–
–
15,650
14,801
10,000
8,938
–
–
–
–
–
–
–
–
1,630
1,443
551
1,229
454
1,429
334
1,514
–
492
499
609
255
357
–
–
–
–
195,050
190,143
55,626
54,949
17,615
48,249
63,984
63,135
58,000
56,250
48,499
16,216
48,255
4,259
8,000
–
–
–
Note 1 Changes in Non-Executive Directors and responsibilities as follows:
i
ii
Sir Tim Wilson stepped down from the Board on 31 December 2019.
Andrew Jones stepped down from the Board on 9 May 2019.
iii
Elizabeth McMeikan was appointed Senior Independent Director effective 1 February 2018.
iv Ross Paterson was appointed Chairman of the Audit Committee effective 1 February 2018.
v
Richard Akers joined the Board on 1 September 2018.
vi
Ilaria del Beato joined the Board on 1 December 2018.
vii Dame Shirley Pearce joined the Board on 1 November 2019.
viii
Thomas Jackson joined the Board on completion of the acquisition of Liberty Living Group plc on 29 November 2019. Reflecting the Relationship
Agreement with CPPIB Holdco, Thomas will not receive any fees in respect of his Non-Executive Director position with Unite.
Note 2 Taxable benefits relate primarily to travel expenses and accommodation.
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Annual Report on Remuneration continued
Incentive outcomes for the year ended 31 December 2019 (audited)
Annual Bonus in respect of 2019 performance
The maximum bonus opportunity for each Executive Director in 2019 was 140% of base salary, with threshold and target
performance paying 30% and 50% of maximum respectively under each performance measure.
Reflecting the simplification to the Remuneration Policy approved by shareholders, the 2019 annual bonus was based
on an additive combination of financial (weighted 70%), non-financial (20%) and personal/team objectives (10%). Further
details, including the targets set and performance against each of the metrics, are provided in the tables below:
Financial
Measure
Adjusted EPS
TAR per share
Net debt to EBITDA
Non-financial
Customer satisfaction
University Reputation
Personal/team
Personal/team objectives
Weight
25.0%
25.0%
20.0%
10.0%
10.0%
10.0%
Threshold
30% of
maximum
On-Target
50% of
maximum
Stretch
100% of
maximum
37.4p
80.6p
7.4x
84
82
39.0p
89.5p
7.2x
85
83
42.0p
103.0p
6.9x
87
84
Actual
41.3p
98.5p
5.9x
85
82
See table below
Full achievement
Vest
% of maximum
88.3%
83.3%
100.0%
50.0%
30.0%
100.0%
Note: Actual financial outcomes were adjusted from the reported figures; see discussion below.
Personal and team objectives
Focus area
Specific objective
Assessment of performance
Business
Continued development
of Group Health &
Safety function and
capability across
the business
Delivery of Group KPIs
The Committee concluded that there has been significant progress in further improving this
key area. Particular achievements included an evincible improvement in the ownership of
health and safety right across the business alongside a significant increase in capability within
the Group H&S leadership team. The Committee were delighted that the business achieved of
a Five-star audit rating from the British Safety Council (BSC), the highest rating. Additionally,
the continued focus on fire safety was a further achievement. Both these areas were set as
key objectives for Executive Directors.
The Committee noted that there had been excellent progress and delivery across all key
metrics, achieved alongside the acquisition of Liberty Living. In addition to those financial and
non-financial KPIs explicitly captured and rewarded under the annual bonus, the Committee
noted in particular:
• a further 14% increase in full-year dividend to 33.2p;
• continued progress with University partnerships; nomination agreements across the
•
•
enlarged Group covering 41,500 beds;
record employee engagement scores;
record customer satisfaction scores, across both student satisfaction and University
satisfaction both being measured and assessed externally;
• continued financial prudence with credit agencies affirming Unite’s credit rating and
changing their outlook from stable to positive.
Team
Development of talent-
mapping approach and
detailed succession
planning
The Committee considered the detailed work undertaken in assessing current and future
business talent needs and the various senior appointments made during the year as a result
of this. Detailed succession plans for all key roles were developed and agreed by the Board, in
line with the Committee’s expectations.
Demonstrate value
generated by brand
investment
The Committee noted Unite’s strong brand perception in both the Higher Education and
investment communities and the role this had continued to play in the successful delivery of
strategy. The Committee was also pleased with the increased investments in research, life
skills and mental health, and took the invitation to participate in the Augar review of student
accommodation as an example of positive political exposure.
Personal
The Committee concluded that Richard had continued to perform at an excellent level during 2019. His strong leadership
throughout the year ensured that the challenging Liberty Living acquisition was delivered alongside excellent financial
and non-financial results across the core business. Richard delivered across all of his personal targets, with a particular
highlight being his excellent work on talent development and succession planning.
The Committee considers that Joe too had an excellent 2019. Joe’s primary focus the year became the acquisition of
Liberty Living, and the Committee strongly believes that his corporate finance experience, as well as interest and drive,
played a key part in the eventual success of the transaction. Joe has continued to demonstrate strong leadership and has
set the Finance function at Unite up for further success.
The Unite Group PLC Annual Report & Accounts 2019 Executive
Richard Smith
Joe Lister
Overall bonus outcome
% of maximum
% of salary
80.9%
80.9%
113.3%
113.3%
£
£519,361
£422,736
Targets applying to the 2019 annual bonus were set at the start of the year and took into account both internal and
external expectations at the time. Targets did not, therefore, take into account the acquisition of Liberty Living, completion
of which occurred in November 2019.
In order to ensure the outturn for incentive purposes could be compared with the original targets on a like-for-like basis
and reflecting how late in the performance period the acquisition actually completed following shareholder approval and
CMA clearance, the Committee considered that the fairest approach for annual bonus participants was to ring-fence the
Liberty Living acquisition and to assess financial (EPS, TAR and net debt to EBITDA) performance in respect of the legacy
Unite business for 2019 through adjustments to the year’s reported outturn under these elements of the bonus.
Adjustments were both upwards and downwards, and included adjusting for the impact of the additional equity and
shares outstanding from the July equity raise and November deal completion, removing the additional earnings from
Liberty Living during the year, reducing reported net debt to account for the additional debt taken on as part of the deal,
and adjusting for changes to the budgeted acquisition and disposal plan necessitated by the Liberty Living acquisition.
In the same way, the Committee resolved to neutralise the positive impact arising from the IFRS 16 accounting standard
change which was also not accounted for in the original targets set. These adjustments have been applied, where relevant,
in bonus schemes across the organisation, ensuring continued internal alignment and fairness.
Adjustments to reported 2019 financial outturn
Adjusted EPS
TAR per share Net debt to EBITDA
2019 Reported
Annualising Liberty EBITDA to be comparable with Group YE debt
Adjusting for equity raise, shares outstanding for ‘per share’ measures
Removing additional earnings and debt taken on as part of the deal
Adjusting for changes to the budgeted acquisition and disposal plan
IFRS 16 accounting standard change
2019 adjusted for incentive purposes
39.1
+2.7
(1.8)
+2.2
(0.9)
41.3
92.8
+4.9
+2.1
(1.3)
98.5
11.7
(3.5)
(3.1)
+0.8
5.9
No adjustments were made in respect of the non-financial bonus metrics, assessment of which takes place on an autumn
to autumn cycle. With regards to the personal/team element, the Committee retained the original objectives set at the
start of the year and reflected performance against these in the context of the Liberty Living acquisition.
The Committee is satisfied that the overall 2019 bonus outcome after these adjustments of 80.9% of maximum is
appropriate. Continued strong core business performance has been delivered alongside the significant acquisition of
Liberty Living which is an exciting and transformative deal for the Group. In a historical context, the overall outcome
of c.81% of maximum is around 6% higher than 2018 which the Committee believes broadly reflects the relative
achievements in each of the last two years and the experience of shareholders over the period.
Having already achieved their respective share ownership guidelines, each Executive Director will receive amounts up to
100% of base salary in cash. The remainder – totalling £60,805 and £49,492 to Messrs. Smith and Lister respectively – will
be deferred in Unite shares for a period of two years.
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Annual Report on Remuneration continued
2017 LTIP vesting (vested on performance to 31 December 2019)
Awards in 2017 were made under the LTIP, consisting of the Unite Group Performance Share Plan and the Unite Group
Approved Employee Share Option Scheme. Vesting of the awards was dependent on three equally-weighted measures
over a three-year performance period; TAR per share, EPS and TSR outperformance of the FTSE 350 Real Estate (Super
Sector) Index. There was no retest provision. Further details, including vesting schedules and performance against each of
the metrics are provided in the table below:
Measure
Weight
Targets
Outcome
Vest %
2019 Adjusted EPS
1/3
TAR per share
(2017 – 2019)
TSR outperformance of
the FTSE 350 Real Estate
(Super Sector) Index
1/3
1/3
0% vesting below 36 pence
25% vesting for 36 pence
100% vesting for 42 pence or more;
Straight-line vesting between these points
0% vesting below 22.5% (7% p.a.)
25% vesting for 22.5% (7% p.a.)
100% vesting for 44.3% (13% p.a.) or more;
Straight-line vesting between these points
0% vesting if Group underperforms the Index
25% vesting for matching the Index
100% vesting for outperforming Index by 9% p.a.;
Straight-line vesting between these points
41.3 pence
91.3%
44.4%
(13.0% p.a.)
100.0%
Index +20.3% p.a.
(122% return)
100.0%
Note: EPS and TAR outcomes were adjusted from the reported figures; see discussion below.
Total LTIP vesting (sum product of weighting and vest %)
97.1%
The performance period for the each of the elements ended on 31 December 2019. The awards will vest on the third
anniversary of the date of grant and will be subject to an additional two-year holding period.
Consistent with the approach taken for the 2019 annual bonus and for the same reasons, the Committee resolved to ring-
fence the Liberty Living acquisition and to assess financial performance in respect of only the legacy Unite business for
2019 – see page 137. In this context, vesting is 91.3% of maximum under the EPS element, and 100.0% of maximum under
the TAR per share element. Total vesting is therefore 97.1% of maximum. As with the annual bonus, the Committee is
satisfied that the overall vesting outcome after these adjustments is appropriate in the context of the Group’s underlying
performance – both financial and operational – as well as the shareholder experience over the last three years.
Executive
Interests held
(Note 1)
Vesting %
Richard Smith
137,454
Joe Lister
112,033
97.1%
Interests
vesting
133,431
108,754
Date
vesting
Assumed
market price
Estimated value…
(Note 2)
…of which, value due to
share price growth
10 April 2020
1,169.9p
£1,653,245
£1,346,291
£704,432
(43% of total)
£574,153
(43% of total)
Note 1 In each case, interests held includes 934 HMRC-approved options under the ESOS.
Note 2 Estimated value of HMRC-approved options is based on embedded gain (i.e. after subtracting 642.0p exercise price). Value includes the accumulated
dividends on vested shares.
In line with regulations, the value disclosed above and in the single total figure of remuneration table on page 134
captures the full number of interests vesting (i.e. excluding the two-year holding period). As the market price on the date
of vesting is unknown at the time of reporting, the value is estimated using the average market value over the last quarter
of 2019 of 1,169.9p. The actual value at vesting will be trued-up in the 2020 Annual Report on Remuneration. The estimated
values include the impact of a c.82% increase in the assumed market price compared to the share price at grant (642.0p).
Executives also became entitled to additional shares representing the dividends payable on vested LTIP shares over the
three-year performance period. The value of these additional shares is included in the row entitled ‘LTIP’ in the single total
figure of remuneration table on page 134, and equates to £98,002 and £79,754 for Messrs. Smith and Lister respectively.
The Unite Group PLC Annual Report & Accounts 2019 139
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Percentage change in CEO remuneration
The table below shows the percentage change in CEO remuneration from the prior year compared to the average
percentage change in remuneration for all employees.
The CEO’s remuneration includes base salary, taxable benefit and annual bonus. The pay for all other employees is
calculated using the increase in the earnings of full-time employees for tax years 2018 and 2019. The analysis excludes
part-time employees and is based on a consistent set of employees, i.e. the same individuals appear in the 2018 and
2019 populations.
Base salary
Taxable benefits
Annual bonus
2019
£
456,692
16,195
519,361
CEO
2018
£
445,910
15,920
478,822
% change
2018–19
2.4%
1.7%
8.5%
All employees
% change
2018–19
2.5%
5.8%
45.2%
Relative importance of spend on pay
The table below shows shareholder distributions (i.e. dividends and share buybacks) and total employee pay expenditure
for the financial years ended 31 December 2018 and 31 December 2019, along with the percentage change in both.
Total employee pay expenditure
Distributions to shareholders
2019
£m
51.6
70.7
2018
£m
44.1
62.5
% change
2018–19
17.0%
13.1%
The Directors are proposing a final dividend in respect of the financial year ended 31 December 2019 of 22.95 pence per
ordinary share. Employee remuneration excludes social security costs.
CEO pay ratio
UK legislation requires companies with 250 employees or more to publish information on the pay ratio of the Group CEO
to UK employees. In line with this the table below shows the ratio of CEO total pay to that of three employees indicative
of lower quartile (P25), median (P50) and upper quartile (P75) pay received during the financial year ended 31 December
2019 and includes basic salary, pension, and the value received from incentive plans. On average Unite employed 1,450 UK
employees during the financial year ended 31 December 2019.
Financial year
2019
Calculation methodology
Lower quartile (P25)
Median (P50)
Upper quartile (P75)
B (see below)
132:1
112:1
82:1
Given the significant undertaking required to calculate the single figure of remuneration for all UK employees, the
Committee opted to use data already available from the gender pay reporting as the basis for identifying employees at
P25, P50 and P75 (‘Option B’). We believe this provides a reasonable estimate for employees pay at these levels within the
organisation. Further details on the specific steps used in calculating the above ratios are as follows:
• We used the most recent gender pay gap data from 5 April 2019 to rank the hourly rates of all UK employees. From this
initial ranking we identified those individuals positioned at P25, P50 and P75, as well as the immediate employees either
side of P25, P50 and P75.
• Employees selected as P25, P50 and P75 were checked to confirm that they were employed for the whole of the 2019
calendar year. In two cases (P25 and P50) employees were new starters in April 2019 and therefore alternates were
selected to ensure reward amounts aligned with the financial year as far as possible. Selected alternates had the same
GPG hourly rate, job title, and approximate weekly hours as the original choices and were chosen on a next-in-list basis.
• Total FTE remuneration for each of these individuals was then calculated on the same basis as used in the single figure table
for our CEO. All figures are total amounts paid to full-time employees covering the whole 2019 calendar year. Overtime pay,
where received during the year, has been excluded so that the figures are comparable with the Chief Executive.
•
In reviewing the employee pay data, the Committee is comfortable that the P25, P50 and P75 individuals identified
appropriately reflect the employee pay profile at those quartiles, and that the overall picture presented by the ratios
is consistent with our pay, reward and progression policies.
140
Annual Report on Remuneration continued
A summary of the salaries and total single figures of remuneration for the relevant individuals is included in the table below:
Salary
Chief Executive
£456,692
Single figure of remuneration
£2,730,949
Lower quartile
(P25)
£18,135
£20,620
Median
(P50)
£21,689
£24,414
Upper quartile
(P75)
£29,592
£33,459
With this being the first year under the revised reporting requirements, there is limited data against which to compare the
pay ratios above. The Committee will consider the pay ratios in the context of the ratios reported in future years as well as
other important metrics such as the gender pay gap and employee satisfaction levels.
Along with the above ratios comparing total remuneration, the Committee will also keep under review the ratios for
salary and salary plus annual bonus, and additionally track how these change over time. With a significant proportion of
the remuneration of our CEO appropriately linked to the Company’s performance and share price movements over the
longer-term, it is expected that the headline ratios will depend a lot on long-term incentive outcomes, and accordingly may
fluctuate from year-to-year. Participation in the Group’s long-term incentives is currently limited to c.50 senior leaders,
with none of the individuals identified as P25, P50 and P75 in this Group. On the other hand, the significant majority of our
employees are eligible to participate in annual bonus arrangements as shown in the table below – each of the individuals
P25, P50 and P75 received a bonus payment in 2019 – and so the Committee considers this ratio, as well as the ratio
comparing just salary to provide helpful additional context.
Pay ratios for different levels of remuneration
Lower quartile (P25)
Median (P50)
Upper quartile (P75)
Salary
Salary plus annual bonus
Single figure of remuneration
25:1
49:1
132:1
21:1
41:1
112:1
15:1
30:1
82:1
The Committee is confident that Unite remains focused on recognising the individual needs of colleagues in the same
manner as it does for its customers. In this context, we are proud of the reward and benefits packages that offered to
employees, with highlights including:
•
In the UK, Unite has been an accredited Living Wage employer since March 2015;
• Unite conducts regular market reviews of salary ranges in order to maintain competitiveness to market rates, and
moves everyone who is below a band to at least the minimum of that range each year;
• All employees are eligible to participate in the annual bonus scheme, with opportunity varying by level, starting at
10% of salary;
• The competitive pension scheme now provides a top rate employer contribution of 11% of salary to all employees
(as detailed earlier in this report); and
• All employees are able to participate in a SAYE offering – a tax-efficient share plan that allow employees to share in
the success of the Group.
The Unite Group PLC Annual Report & Accounts 2019 Review of past performance
The following graph charts the TSR of the Company and the FTSE 350 Real Estate ‘Super Sector’ Index over the ten-year
period from 1 January 2010 to 31 December 2019. Whilst there is no comparator index or group of companies that truly
reflects the activities of the Group, the FTSE 350 Real Estate ‘Super Sector’ Index (the constituent members of which are all
property holding and/or development companies or real estate investment trusts within the UK), was chosen as it reflects
trends within the UK property market generally and tends to be the index against which analysts judge the performance of
the Company. The table below details the Chief Executive’s single figure remuneration over the same period.
Historical TSR performance
Growth in the value of a hypothetical £100 holding over the 10 years to 31 December 2019
£700
£600
£500
£400
£300
£200
£100
9
0
0
2
r
e
b
m
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c
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D
1
3
t
a
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t
s
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v
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i
0
0
1
£
f
o
e
u
a
V
l
£0
December
2009
Unite
FTSE350 Real estate Supersector Index
December
2010
December
2011
December
2012
December
2013
December
2014
December
2015
December
2016
December
2017
December
2018
December
2019
CEO single figure of
remuneration (£000)
Annual bonus award rates
against maximum opportunity
LTIP award rates against
maximum opportunity
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
M Allan
M Allan
M Allan
M Allan
M Allan
M Allan
£687
£1,476
£994
£1,944
£2,987
£2,382
43.4%
75.8%
63.4%
84.0%
89.4%
88.2%
0.0%
82.4%
26.3%
83.1%
95.2% 100.0%
M Allan
R Smith
£223
£1,239
n/a
43.4%
n/a
100.0%
R Smith
R Smith
R Smith
£1,456
£2,131
£2,731
63.6%
74.3%
80.9%
96.1%
81.9%
97.1%
Scheme interests awarded in 2019 (audited)
LTIP
In July 2019, Executive Directors were granted awards under the LTIP with a face value of 200% of their respective salaries.
The three-year performance period over which performance will be measured began on 1 January 2019 and will end on
31 December 2021. Any awards vesting for performance will be subject to an additional two-year holding period.
Executive
Richard Smith
Joe Lister
Date of grant
24 July 2019
Shares over
which awards granted
(Note 1)
85,190
69,333
Market price
at date of award
1,076.0p
Face value
£916,644
£746,023
Note 1 Combination of HMRC-approved options under the ESOS (557) and nil cost options under the PSP calculated using a share price of 1,076.0p, being the
closing mid-market price on the day the awards were calculated.
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Annual Report on Remuneration continued
Vesting of 2019 awards is dependent on three equally-weighted measures over a three-year performance period: TAR per
share, EPS and TSR measured against the FTSE 350 Real Estate ‘Super Sector’ Index. In a slight change to awards made in
recent years, and as disclosed in last year’s report, the Committee changed the assessment of relative TSR to be based
on a simple ranking against the constituents of the Index (cf. outperformance targets previously) and the assessment of
TAR per share to be on a relative basis against the same constituents (cf. absolute targets previously). There is no retest
provision. The Committee considers that the targets applying under each of the performance measures are no less
stretching than in previous years. Details of the vesting schedules are provided below:
Measure
Weight
Targets
2021 Adjusted EPS
TAR per share ranking vs. the FTSE 350
Real Estate ‘Super Sector’ Index (2019–2021)
TSR ranking vs. the FTSE 350 Real Estate
‘Super Sector’ Index (2019–2021)
1/3
1/3
1/3
0% vesting below 44.2 pence;
25% vesting for 44.2 pence;
100% vesting for 51.9 pence or more;
Straight-line vesting between these points.
0% vesting for performance below median;
25% vesting for performance in line with median;
100% vesting for performance at upper quartile or above;
Straight-line vesting between these points.
0% vesting for performance below median;
25% vesting for performance in line with median;
100% vesting for performance at upper quartile or above;
Straight-line vesting between these points.
Following the completion of the acquisition of Liberty Living, and as noted on page 137, the Committee resolved to
increase the EPS target range to reflect the acquisition plan around earnings accretion, as well as the positive benefit
of the IFRS 16 accounting standard change. The Committee is satisfied that the revised EPS target range is of broadly
equivalent difficulty to the targets originally set and remains challenging yet achievable for LTIP participants:
0% vesting below 44.2 pence;
25% vesting for 44.2 pence;
100% vesting for 51.9 pence or more;
0% vesting below 46.9 pence;
25% vesting for 46.9 pence;
Targets
increased to
100% vesting for 56.2 pence or more;
Straight-line vesting between these points
Straight-line vesting between these points
A similar adjustment was also made in respect of the outstanding 2018 LTIP, with the original EPS targets being increased
from 40.0 pence to 42.1 pence at threshold (25% vesting) and from 46.0 pence to 49.2 pence at stretch (100% vesting).
SAYE
During 2019 Richard Smith entered into a new savings contract under the SAYE plan. Details of all outstanding awards
under this plan are included in the table on page 147.
Exit payments made in the year (audited)
There have been no exit payments during the year ended 31 December 2019.
Payments to past directors (audited)
There have been no payments (2018: £nil) in excess of the de minimis threshold to former Directors during the year ended
31 December 2019 in respect of their former roles as Directors. The Company has set a de minimis threshold of £5,000
under which it would not report such payments.
The Unite Group PLC Annual Report & Accounts 2019 Implementation of Executive Director remuneration policy for 2020
Base salary
The Committee has approved the following salary increases with effect from 1 January 2020:
Executive
Richard Smith
Joe Lister
Base salary from
1 March 2019
Base salary from
1 January 2020
Percentage increase
£458,556
£373,244
£472,313
£384,441
3.0%
3.0%
Proposed salary increases are consistent with the average increase applied across the Group (c. 3.0%).
Pension
Executive Directors will continue to receive a pension contribution or an equivalent cash allowance. Employer pension
contributions for 2020 will continue to be capped at £91,710 per annum for Richard Smith and £74,650 per annum for Joe
Lister. Further to page 121, pension levels will start to be reduced with effect from 1 January 2021 to achieve alignment
with the rate available to the majority of employees by 1 January 2023.
Performance Related Annual Bonus
For 2020, the maximum bonus opportunity for each executive will be 140% of salary, with threshold and target
performance paying 30% and 50% of maximum respectively under each performance measure.
The financial element of the bonus will continue to be based on a combination of EPS, Total Accounting Return and net
debt to EBITDA ratio, with a total weighting of 70% of total bonus. The non-financial measures will be split equally between
customer satisfaction, University reputation and personal/team objectives. Proposed target levels have been set to be
challenging relative to business plan, although specific targets are deemed to be commercially sensitive at this time.
It is the Committee’s current intention to disclose these targets, and the key achievements by each Executive Director,
retrospectively in the 2020 Directors’ Remuneration Report.
Financial (70%)
Non-financial (30%)
Corporate measures
Adjusted EPS
TAR per share
Net debt to EBITDA ratio
Customer satisfaction
University Reputation
Personal/team objectives
Wgt.
25.0%
25.0%
20.0%
10.0%
10.0%
10.0%
If a participant has met their shareholding guidelines at the time the 2020 bonus is due to be paid, any amounts due in
excess of 100% of salary will be deferred in Unite shares for a period of two years, with the remainder paid in cash. If a
participant has not met their shareholding guidelines, up to 50% of the amount payable will continue to be satisfied by
an allocation of shares in the Company deferred for three years. Clawback and malus provisions apply to all awards.
143
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Annual Report on Remuneration continued
LTIP
For 2020, the LTIP will continue to operate on the same basis as in the 2019 financial year. The Committee, having
considered the performance of the Company and other relevant factors, intends that Executive Directors will each receive
an award equivalent to a maximum of 200% of salary delivered through a combination of the PSP and ESOS, with the final
level of vesting dependent on the achievement of three-year performance targets relating to EPS, TAR and TSR, as follows:
Measure
Weight
Targets
2022 Adjusted EPS
TAR per share ranking vs. the FTSE 350
Real Estate Supersector Index (2020–2022)
TSR ranking vs. the FTSE 350 Real
Estate Supersector Index (2020–2022)
1/3
1/3
1/3
0% vesting below 51.1 pence;
25% vesting for 51.1 pence;
100% vesting for 58.7 pence or more;
Straight-line vesting between these points.
0% vesting for performance below median;
25% vesting for performance in line with median;
100% vesting for performance at upper quartile or above;
Straight-line vesting between these points.
0% vesting for performance below median;
25% vesting for performance in line with median;
100% vesting for performance at upper quartile or above;
Straight-line vesting between these points.
EPS targets have been set with reference to internal and external reference points, including our strategic plan and broker
consensus estimates. This year’s EPS targets have been reduced in per annum growth terms as compared to the targets
applying over the last 3 cycles – from 9% to 7% per annum at threshold and from 15% to 12% per annum at stretch. This
reduction reflects lower expectations for EPS growth across both the real estate sector and broader FTSE350 in light of the
lower interest rate environment, increased uncertainty and a more challenging economic outlook overall. The reduction to
targets additionally acknowledges a relative downweighting of development activities within the Group’s balance sheet which
has been a key driver of historical above-market EPS growth. The Committee is satisfied that the targets remain stretching
but achievable for participants, and that 2022 EPS at the full vesting level would represent a genuinely impressive outcome
for the Company. The 7-12% per annum performance range will be applied to the underlying consolidated group EPS for
2019, adjusted to reflect a full year of Liberty Living earnings equivalent.
TSR and TAR targets are based on Unite’s relative performance, with threshold and maximum vesting requiring
performance in line with the median and upper quartile ranked constituent respectively, in line with market best practice.
Full vesting under each element will require continued exceptional performance over the next three years. Any awards
vesting for performance will be subject to an additional two-year holding period, during which time clawback provisions
will also apply. Further details of the grant date and number of interests awarded will be disclosed in next year’s report.
Implementation of Non-Executive Director remuneration policy for 2020
Chairman and Non-Executive Director Fees
During the final quarter of 2019, the Board undertook its annual review of Non-Executive Director fees. Following
consideration of salary increases across the Group and indicative fee increases at sector and FTSE comparators, the Board
determined that the basic fee should be increased by c.3.0% from £48,000 p.a. to £49,440 p.a. and that additional fees
should be increased by a similar rate. The Committee, in considering similar factors, determined that the fee payable to
the Chairman of the Board should be increased by a similar rate from £193,420 to £199,220. Each of these fee increases is
in line with increases applied to the broader employee population.
A summary of the fee increases, which are effective 1 January 2020, is set out in the table below.
Position
Base fees
Chairman
Non-Executive Director
Additional fees
Senior Independent Director
Audit Committee Chair
Remuneration Committee Chair
Nomination Committee Chair
Health and Safety Committee Chair
2019 fees
2020 fees
£193,420
£48,000
£199,220
£49,440
£5,650
£10,000
£10,000
n/a
£7,075
£5,820
£10,300
£10,300
n/a
£7,285
Note 1
Note 1 As Chairman of the Board, Mr White does not receive any additional fee in respect of chairing this Committee.
The Unite Group PLC Annual Report & Accounts 2019 Directors’ interests (audited)
A table setting out the beneficial interests of the Directors and their families in the share capital of the Company as at
31 December 2019 is set out below. None of the Directors has a beneficial interest in the shares of any other Group
company. Since 31 December 2019, there have been no changes in the Directors’ interests in shares.
R Smith
J Lister
P White
R Wilson
A Jones
E McMeikan
R Paterson
R Akers
I Beato
S Pearce
T Jackson
Note 1
Ordinary Shares
of 25p each at
Ordinary Shares
of 25p each at
31 December 2019
31 December 2018
226,614
459,128
13,566
6,275
20,229
6,572
7,163
2,000
0
0
0
254,564
446,931
13,566
6,275
20,229
6,440
7,163
0
0
–
–
Note 1 As at the date of stepping down from the Board on 9 May 2019.
Details of Executive Directors’ interests in share-based incentives are set out in the tables below.
Share price information
As at 31 December 2019 the middle market price for ordinary shares in the Company was 1,260p per share. During the
course of the year, the market price of the Company’s shares ranged from 806p to 1,261p per ordinary share.
Executive Directors’ shareholding requirements (audited)
The table below shows the shareholding of each Executive Director against their respective shareholding requirement as
at 31 December 2019:
Interests
Owned outright
Subject to deferral/
holding period
Unvested and/or subject
to perf. conditions
Shareholding
requirement % of
salary/base fee
Current
shareholding % of
salary/base fee
Requirement
met?
R Smith
J Lister
P White
R Wilson
A Jones (Note 3)
E McMeikan
R Paterson
R Akers
I Beato
S Pearce
T Jackson
Shares
Options
Shares
Options
Note 1
226,614
109,689
459,128
89,265
765
765
331,968
270,164
2,230
2,230
250%
200%
13,566
6,275
20,229
6,572
7,163
2,000
0
0
0
Yes
Yes
Note 2
784%
1711%
88%
165%
531%
173%
188%
53%
0%
0%
0%
Note 1 Includes shares subject to a holding period under the LTIP and deferred bonus shares, where applicable.
Note 2 Based on share price as at 31 December 2019 of 806p. Shares subject to deferral/holding periods are taken on a ‘net of tax’ basis for the purposes of
the current shareholding calculation.
Note 3 As at the date of stepping down from the Board on 9 May 2019.
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Annual Report on Remuneration continued
Executive Directors’ shareholding requirements
Richard Smith
250%
784%
200%
Joe Lister
0%
250%
500%
750%
1,000%
1,250%
1,500%
1,750%
Shareholding requirement
Current shareholding
1711%
Directors’ interests in shares and options under Unite incentives (audited)
Deferred bonus
No deferred bonus shares were outstanding as at 31 December 2019.
LTIP awards
Executive
Plan
Interests held
at 01.01.19
Interests
awarded during
the year
ESOS exercise
price
Interests
vested during
the year
(Note 1)
Interests
lapsed during
the year
Outstanding
at 31.12.19
Period of
qualifying
conditions
Joe Lister
PSP
ESOS
PSP
ESOS
PSP
ESOS
PSP
ESOS
PSP
ESOS
PSP
ESOS
Richard Smith
PSP
ESOS
PSP
ESOS
557
1076.0p
312,445
69,890
90,030
19,911
272,394
109,006
935
111,099
934
89,732
739
–
–
133,947
935
136,520
934
110,258
739
–
–
–
–
–
–
–
–
69,333
–
–
–
–
–
–
85,190
641.5p
–
642.0p
–
811.0p
–
641.5p
–
642.0p
–
811.0p
–
–
89,265
765
–
–
–
–
–
–
19,741
170
–
–
–
–
–
–
–
–
111,099
934
89,732
739
69,333
557
23.06.16 – 23.06.19
10.04.17 – 10.04.20
10.04.18 – 10.04.21
24.07.19 – 24.07.22
–
109,689
24,258
765
170
–
–
–
–
–
–
–
–
–
–
–
–
–
–
136,520
934
110,258
739
85,190
557
23.06.16– 23.06.19
10.04.17 – 10.04.20
10.04.18 – 10.04.21
24.07.19 – 24.07.22
Note 1 All awards vesting for performance during the year are subject to an additional two-year holding period.
383,333
85,747
110,454
24,428
334,198
557
1076.0p
The Unite Group PLC Annual Report & Accounts 2019 SAYE
Executive
Joe Lister
Richard Smith
Options held
at 01.01.19
Granted during
the year
Exercised during
the year
Option price
per share
Options held at
31.12.19
(Note 1)
Maturity date
1,705
1,617
1,266
3,411
–
–
–
–
–
2,122
–
–
–
–
–
527.6p
556.4p
710.8p
527.6p
848.0p
–
1,617
1,266
–
2,122
01.12.18
01.12.20
01.12.21
01.12.18
01.12.22
Note 1 As a result of the Company being in an extended closed period due to the acquisition of Liberty Living and in order to ensure continued compliance
with the relevant Market Abuse Regulations, Executive Directors were not able to exercise their December 2018 maturity options within the six-month
exercise window. Accordingly, these options lapsed as of 30 May 2019. In line with the treatment for other Company insiders, Messrs. Smith and Lister
received equivalent payments of £27,147 and £13,985 respectively on 31 July 2019.
The highest, lowest and closing share prices for 2019 are shown on page 145.
Details of the qualifying performance conditions in relation to the above referred-to awards made in prior years are set
out on previous pages or in earlier reports.
Awards made in prior years took the form of a combination of nil cost options under the PSP and HMRC-approved options
under the ESOS. No variations have been made to the terms or conditions of any awards.
The fair value in respect of Directors’ share options and LTIP awards recognised in the Income Statement is as follows:
Executive
Joe Lister
Richard Smith
2019
£
301,708
369,182
2018
£
308,850
363,098
The Directors’ Remuneration Report has been approved by the Remuneration Committee and signed on its behalf by:
Elizabeth McMeikan
Chair, Remuneration Committee
26 February 2020
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Directors’ Report
As at 26 February 2020, the Company had received notifications from the following companies and institutions of the
voting interests of themselves and their clients in 3% or more of the issued ordinary share capital of the Company.
Shareholder
Canadian Pension Plan Investment Board (CPPIB)
BlackRock Inc
APG Asset Management NV
The Vanguard Group Inc
Authority to allot shares
Percentage of share capital
19.96
6.36
5.98
3.97
The Company passed a resolution at the last Annual General Meeting of the Company on 9 May 2019 authorising the
Directors to allot shares in accordance with Section 551 of the Companies Act 2006.
Share capital
At the date of this report, there are 363,595,651 ordinary shares of 25p each in issue, all of which are fully paid-up and
quoted on the London Stock Exchange.
During the year and through to the date of this report, the following numbers of ordinary shares of 25p each were allotted
and issued as follows:
• 72,582,286 – CPPIB
• 26,353,664 – July 2019 share placing
• 1,017,472 – Unite share scrip scheme
• 110,680 – pursuant to the exercise of options under The Unite Group PLC Savings- Related Share Option Scheme; and
• 16,398 – pursuant to the exercise of options under the Approved Scheme.
The rights attaching to the Company’s ordinary shares, as well as the powers of the Company’s Directors, are set out in the
Company’s articles of association.
There are no restrictions on the transfer or voting rights of ordinary shares in the capital of the Company (other than those
which may be imposed by law from time to time or as set out in the Company’s articles of association).
The Directors have no authority to buy-back the Company’s shares.
In accordance with the Market Abuse Regulations, certain employees are required to seek approval to deal in the
Company’s shares.
The Company is not aware of any agreements between shareholders that may result in restrictions on the transfers of
securities and/or voting rights. No person holds securities in the Company carrying special rights with regard to control of
the Company. Unless expressly specified to the contrary, the Company’s articles of association may be amended by special
resolution of the shareholders.
Change of control
All of the Company’s share schemes contain provisions relating to a change of control. Outstanding rewards and options
would normally vest and become exercisable on a change of control, subject to the satisfaction of any performance
conditions. Other than certain of the Group’s banking facilities, there are no other significant agreements to which the
Company is a party that affect, alter or terminate upon a change of control of the Company following a takeover bid. Nor
are there any agreements between the Company and its Directors or employees providing for compensation for loss of
office or employment that occurs because of a takeover bid.
Details of proposals to be put to the Annual General Meeting in relation to the power of Directors to issue shares in the
Company are set out under the heading ‘Annual General Meeting’.
Going Concern and viability statement
The going concern statement and viability statement are set out on page 96 and are incorporated into this Directors’
Report by reference.
The Unite Group PLC Annual Report & Accounts 2019 149
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Disclosure of information to auditors
The Directors who held office at the date of approval of the Directors’ Report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken all the
steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to
establish that the Company’s auditor is aware of that information.
Directors’ conflicts of interest
The Company has procedures in place for managing conflicts of interest. A Director must notify the Chairman (and the
Chairman notifies the Chief Executive) if he/she becomes aware that he/she, or any of his/her connected parties, may have
an interest in an existing or proposed transaction with the Company or the Group. Directors have a continuing duty to
update any changes to these conflicts.
Political donations
No political donations were made during the year ending 2019.
Indemnities
There are no qualifying third party indemnity provisions or qualifying pension scheme indemnity provisions for the
benefit of any of the Directors.
Research and development
The Company is not currently carrying on any activities in the field of research and development.
Branch outside the UK
The Company does not have any branches outside of the UK.
Appointment and replacement of Directors
The Company’s articles of association provide that Directors may be appointed by the existing Directors or by the
shareholders in a general meeting. Any person appointed by the Directors will hold office only until the next general
meeting, notice of which is first given after their appointment and will then be eligible for re-election by the shareholders.
A Director may be removed by the Company as provided for by applicable law and shall vacate office in certain
circumstances as set out in the articles of association. In addition the Company may, by ordinary resolution, remove
a Director before the expiration of his/her period of office and, subject to the articles of association, may by ordinary
resolution appoint another person to be a Director instead. There is no requirement for a Director to retire on reaching
any age.
Disclosures required under Listing Rule 9.8 4R
For the purposes of LR 9.8.4C, the information required to be disclosed by LR 9.8.4R can be found in the following
locations within the Annual Report:
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Information required under LR 9.8.4R
Amount of interest capitalised and tax relief
Publication of unaudited financial information
Details of long term incentive schemes
Waiver of emoluments by a Director
Waiver of future emoluments by a Director
Non pre-emptive issues of equity for cash
Item (7) in relation to major subsidiary undertakings
Parent participation in a placing by a listed subsidiary
Contracts of significance
Provision of services by a controller shareholder
Shareholder waiver of dividends
Shareholder waiver of future dividends
Agreements with controlling shareholders
All the information referenced above is incorporated by reference into the Directors’ Report.
Reference
Note 3.1, page 190
n/a
Pages 141 to 142 and
144 and 146
n/a
n/a
Pages 17 and 148
n/a
n/a
n/a
n/a
n/a
n/a
n/a
150
Directors’ Report continued
Other information incorporated by reference
The following information in the Strategic Report is incorporated into this Directors’ Report by reference:
• Results and Dividend on page 01
• Greenhouse Gas Emissions page on 77
• Financial instruments and financial risk management page on 42 and Section 4 of the notes to the financial statements
on page 201
• Future developments on pages 24,25, 35 and 62 to 66
• Employment of disabled persons/Employee involvement on pages 83
• Workforce engagement on pages 32 and 33 and page 83
• Engagement with customers, partners and others on pages 32 and 33
The Corporate Governance Statement on pages 90 to 152, the Statement of Directors’ responsibilities on page 153 and
details of post balance sheet events on page 220 are incorporated into this Directors’ report by reference.
Management Report
This Directors’ Report together with the Strategic Report and other sections from the Annual Report forms the
Management report for the purposes of DTR 4.1.8 R.
Annual General Meeting
The Annual General Meeting (AGM) of the Company will be held at the Company’s registered office at South Quay,
Temple Back, Bristol, BS1 6FL at 9.30am on 7 May 2020. Formal notice (the Notice) of the Meeting is given on pages
229 to 234.
Resolutions 4–13: Re-election and election of Directors
In accordance with the requirements of the Code, each of the Directors offers themselves for re-election or election at
the Annual General Meeting. Biographies of each of the Directors seeking election and re-election can be found on pages
92 to 95 together with the reasons why their contributions are, and continue to be, important to be Company’s long-term
sustainable success. Details in relation to Professor Sir Steve Smith who joins the Board in April 2020 are set out below.
Professor Sir Steve Smith
Sir Steve brings with him a wealth of experience in the HE sector. He is currently the Vice-Chancellor and Chief Executive
of the University of Exeter, a position he has held since 2002 and is stepping down from in August 2020. Sir Steve was the
Chair of UCAS between 2012 and 2019 and serves on the Boards of Universities UK (UUK) and the Russell Group. Among
other roles he is also Chair of UUK International Policy Network.
Between 2007 and 2010, Sir Steve led for Higher Education on the Prime Minister’s National Council of Excellence
in Education, which provided advice to Government about strategy and measures to achieve world-class education
performance for all children and young people. Sir Steve was knighted in 2011 for services to Higher Education locally
and nationally.
Sir Steve’s extensive experience in the HE sector will contribute to how the Board navigates a changing HE sector. In
addition, his hands on knowledge and insight into how Universities operate will help us develop stronger University
partnerships. Sir Steve will also Chair our Health and Safety Committee and his on-campus knowledge will help ensure our
approach to safety is well aligned with our customers, Universities, employees and wider stakeholders.
Resolution 16: Authority to allot shares
In addition to the ordinary business of the meeting, Resolution 16 will be proposed as an ordinary resolution to grant the
Directors authority to allot shares in the Company, and grant rights to subscribe for, or to convert, any security into shares
of the Company, up to the aggregate amount stated in the Notice (which represents one-third of the nominal value of the
issued share capital of the Company as at the date of the Notice). In accordance with guidelines issued by the Investment
Association, this resolution also grants the Directors authority to allot further equity securities up to the aggregate
amount stated in the Notice (which represents one-third of the nominal value of the issued share capital of the Company
as at the date of the Notice). This additional authority may only be applied to fully pre-emptive rights issues. The Directors
The Unite Group PLC Annual Report & Accounts 2019 have no present intention of using this authority, however they consider it desirable to maintain the flexibility that
this authority provides. This authority will last until the end of the Annual General Meeting held in 2021, or if earlier
6 August 2021.
Resolution 17: Renewal of the Savings-Related Share Option Scheme (the ‘SAYE’)
The Company adopted the SAYE in 2010 with approval of shareholders. The SAYE is an HM Revenue & Customs tax-
advantaged share plan, open to all Directors and employees (subject to certain minimum service requirements), which
allows employees to save a fixed amount on a monthly basis in order to purchase Company shares. The SAYE, which
the Company operates every year, continues to be popular with employees and has proved to be an attractive and
successful incentive. As shareholder approval to operate the SAYE is due to expire this year, the Company wishes to
extend shareholders’ approval to operate the SAYE for a further period of ten years.
The principal terms of the SAYE are set out in the Appendix to the Notice of General Meeting on page 234.
Resolutions 18 and 19: Disapplication of pre-emption rights resolutions
If the Directors wish to allot new shares and other equity securities for cash (other than in connection with an employee
share scheme), company law requires that these shares are offered first to the shareholders, in proportion to their
existing holdings. The Directors consider it desirable to have the maximum flexibility permitted by corporate governance
guidelines to respond to market developments and to enable allotments to take place to finance business opportunities
without making a pre-emptive offer to existing shareholders. This cannot be done under the Companies Act 2006
unless the shareholders have first waived their pre-emption rights. The purpose of Resolutions 18 and 19 (together
the ‘disapplication of pre-emptions rights resolutions’) is to enable shareholders to so waive their pre-emption rights.
Resolution 18 authorises the Directors to allot new shares pursuant to the authority given by Resolution 16 (the allotment
resolution) for cash:
(a) in connection with a rights issue or pre-emptive issue; and/or
(b) otherwise up to the aggregate amount stated in the Notice (which represents 5% of the nominal value of the issued
share capital of the Company as at the date of the Notice), in each case without the shares first being offered to
existing shareholders in proportion to their existing holdings.
Resolution 19 additionally authorises the Directors to allot new shares for cash, without the shares first being offered
to existing shareholders in proportion to their existing holdings, in connection with the financing (or refinancing, if the
authority is to be used within six months of the original transaction) of an acquisition or specified capital investment which
is announced contemporaneously with the allotment or which has taken place in the preceding six-month period and is
disclosed in the announcement of the allotment.
The authority under Resolution 19 is limited to the aggregate amount stated in the Notice (which represents 5% of the
nominal value of the issued share capital of the Company as at the date of the Notice).
Taken together, this disapplication of pre-emption rights resolutions will allow the Directors to issue new shares for cash
without offering the shares first to existing shareholders in proportion to their existing holdings under the following
circumstances:
•
•
•
in connection with a rights issue or other pre-emptive issue, with a nominal value equivalent to two-thirds of the issued
share capital as at the date of the Notice (which will allow the Directors to make exclusions or such other arrangements
as may be appropriate to resolve legal or practical problems which, for example, might arise with overseas
shareholders);
for any other purpose, with a nominal value equivalent to 5% of the issued share capital as at the date of the Notice; and
in connection with the financing or refinancing of an acquisition or specified capital investment which is announced
contemporaneously with the allotment or which has taken place in the preceding six-month period and is disclosed in
the announcement of the allotment, with a nominal value equivalent to 5% of the issued share capital as at the date of
the Notice, but subject to an overall aggregate limit equivalent to two-thirds of the issued share capital as at the date of
the Notice.
151
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Directors’ Report continued
The Directors intend to adhere to the provisions in the Pre-Emption Group’s Statement of Principles, as updated in March
2015, and not to allot shares for cash on a non-pre-emptive basis pursuant to the authority in Resolution 16 either in
excess of an amount equal to 5% of the total issued ordinary share capital of the Company or in excess of an amount
equal to 7.5% of the total issued ordinary share capital of the Company within a rolling three-year period, without prior
consultation with shareholders. Adherence to the principles would not preclude issuances under the authority sought
under Resolution 19.
The allotment and the disapplication of pre-emption rights resolutions comply with the Share Capital Management
Guidelines issued by the Investment Association in July 2016 and the disapplication of pre-emption rights resolutions
follow the resolution templates issued by the Pre-Emption Group in May 2016.
If the resolutions are passed, the authorities will expire at the end of the next Annual General Meeting of the Company
or, if earlier, 6 August 2021, this being the date 15 months from the passing of the resolutions, whichever is the earlier.
Prior consultation with shareholders before the July 2019 share placing
Prior to launch of the July 2019 share placing (the Placing), the Company consulted with a significant number of its
shareholders to gauge their feedback on the Liberty Living acquisition and the terms of the Placing. Feedback from this
consultation was supportive and as a result the Board chose to proceed with the Placing to part finance the Liberty
Living acquisition through an equity raise which would ensure the Group’s LTV (after the acquisition) would be limited
to approximately 40% immediately following Completion. The Placing was structured as an accelerated bookbuild
to minimise execution and market risk. The Board applied the principles of pre-emption when allocating the Placing
Shares to those investors that participated in the Placing. The Placing Shares were issued pursuant to the allotment and
disapplication of pre-emption authorities that shareholders granted to the Company at the Annual General Meeting on
9 May 2019.
Resolution 20: Notice of General Meetings
The minimum notice period for General Meetings of listed companies is 21 days, but companies may reduce this period
to 14 days (other than for Annual General Meetings). At the Annual General Meeting of the Company held in 2019
shareholders authorised the calling of General Meetings, other than an Annual General Meeting, on not less than 14 days’
notice. Resolution 20 seeks the approval of shareholders to renew the authority to be able to call General Meetings (other
than an Annual General Meeting) on 14 days’ notice. The flexibility offered by Resolution 20 will be used where, taking
into account the circumstances, the Directors consider it appropriate in relation to the business of the Meeting and in the
interests of the Company and shareholders as a whole.
The Company undertakes to meet the requirements for electronic voting under the Shareholders’ Rights Regulations
before calling a General Meeting on 14 days’ notice. If given, the approval will be effective until the Company’s next
Annual General Meeting, when it is intended that a similar resolution will be proposed.
This report was approved by the Board on 26 February 2020 and signed on its behalf by
Christopher Szpojnarowicz
Company Secretary
26 February 2020
The Unite Group PLC Annual Report & Accounts 2019 Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual
Report and Accounts and the Group and parent company
financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Group and
parent company financial statements for each financial
year. Under that law they are required to prepare the
Group financial statements in accordance with IFRSs as
adopted by the EU and applicable law and have elected to
prepare the parent company financial statements on the
same basis.
Under company law, the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
parent company and of their profit or loss for that period.
In preparing each of the Group and parent company
financial statements, the Directors are required to:
• Select suitable accounting policies and then apply
them consistently
• Make judgements and estimates that are reasonable
and prudent
• State whether they have been prepared in accordance
with IFRSs as adopted by the EU
• Prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group and the parent company will continue in
business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the parent company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the parent company and enable them to ensure that its
financial statements comply with the Companies Act 2006.
They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets
of the Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors
are also responsible for preparing a Directors’ Report,
Directors’ Remuneration Report and Corporate
Governance Statement that comply with that law and
those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website. Legislation in
the UK governing the preparation and dissemination
of financial statements may differ from legislation in
other jurisdictions.
Each of the Directors, the names of whom are set out
on pages 92 to 95, confirms that to the best of his or
her knowledge:
• The Annual Report and Accounts taken as a whole is
fair, balanced and understandable and provides the
information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy
• The financial statements, prepared in accordance with
the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, financial position
and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole
• The Directors’ Report includes a fair review of the
development and performance of the business and the
position of the issuer and the undertakings included
in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face.
R S Smith
Director
J J Lister
Director
26 February 2020
153
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154
The Unite Group PLC Annual Report & Accounts 2019 155
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Financial
Statements
156 Independent auditor’s report
168 Consolidated income statement
169 Consolidated balance sheet
170 Company balance sheet
171 Consolidated statement of changes
in shareholders’ equity
172 Company statement of changes
in shareholders’ equity
173 Statements of cash flows
174 Notes to the financial statements
Other information
228 Financial record
229 Notice of Annual General Meeting
235 Glossary
237 Company information
These financial statements are prepared in
accordance with IFRS. The Board of Directors
also presents the Group’s performance on the
basis recommended for real estate companies
by the European Public Real Estate Association
(EPRA). The reconciliation between IFRS
performance measures and EPRA performance
measures can be found in section 2.2 b for EPRA
earnings and 2.3 c for EPRA net asset value
(NAV). The adjustments to the IFRS results are
intended to help users in the comparability of
these results across other listed real estate
companies in Europe and reflect how
the Directors monitor the business.
156
Independent auditor’s report
To the members of the Unite Group PLC
Report on the audit of the financial statements
1. Opinion
In our opinion:
• the financial statements of The Unite Group PLC (the ‘parent company’) and its subsidiaries (the ‘Group’) give a true
and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2019 and of the
Group’s loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and,
as regards the Group financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements which comprise:
• the consolidated income statement;
• the consolidated statement of comprehensive income;
• the consolidated and parent company balance sheets;
• the consolidated and parent company statements of changes in equity;
• the consolidated and parent company statements of cash flow; and
• the related sections 1 to 10.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the
European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of
the Companies Act 2006.
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group and the parent company in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard
as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. The non-audit services provided to the Group for the year are disclosed in section 2.6 to the financial
statements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided to the
Group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
The Unite Group PLC Annual Report & Accounts 2019 157
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3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
•
Investment property and development property valuation;
• Accounting for Joint Ventures;
• Real Estate Investment Trust (‘REIT’) compliance; and
• Acquisition accounting in respect of Liberty Living Group plc.
Within this report, key audit matters are identified as follows:
Newly identified
Similar level of risk
Materiality
Scoping
The materiality that we used for the group financial statements was £31.0m which was determined on the basis
of net assets. However, we use a lower threshold of £5.5m for balances which impact European Public Real Estate
Association (‘EPRA’) earnings.
Our Group audit scope comprises the audit of The Unite Group PLC as well as the Group’s Joint Ventures, The
Unite UK Student Accommodation Fund (‘USAF’), The London Student Accommodation Venture (‘LSAV’), as well as
the newly acquired Liberty Living Group plc. All audit work was completed by the Group audit team.
Significant changes
in our approach
The only significant change in our approach relates to the Group’s acquisition of Liberty Living Group plc; this has
been identified as a key audit matter.
4. Conclusions relating to going concern, principal risks and viability statement
4.1. Going concern
We have reviewed the Directors’ statement in section 1 to the financial statements about
whether they considered it appropriate to adopt the going concern basis of accounting in
preparing them and their identification of any material uncertainties to the Group’s and
Company’s ability to continue to do so over a period of at least 12 months from the date of
approval of the financial statements.
We considered as part of our risk assessment the nature of the Group, its business model and
related risks including where relevant the impact of Brexit, the requirements of the applicable
financial reporting framework and the system of internal control. We evaluated the Directors’
assessment of the Group’s ability to continue as a going concern, including challenging the
underlying data and key assumptions used to make the assessment, and evaluated the
Directors’ plans for future actions in relation to their going concern assessment.
We are required to state whether we have anything material to add or draw attention to in
relation to that statement required by Listing Rule 9.8.6R(3) and report if the statement is
materially inconsistent with our knowledge obtained in the audit.
4.2. Principal risks and viability statement
Based solely on reading the Directors’ statements and considering whether they were
consistent with the knowledge we obtained in the course of the audit, including the
knowledge obtained in the evaluation of the Directors’ assessment of the Group’s and the
Company’s ability to continue as a going concern, we are required to state whether we have
anything material to add or draw attention to in relation to:
• the disclosures on pages 42 to 55 that describe the principal risks, procedures to identify
emerging risks, and an explanation of how these are being managed or mitigated;
• the Directors’ confirmation on page 46 that they have carried out a robust assessment of
the principal and emerging risks facing the Group, including those that would threaten its
business model, future performance, solvency or liquidity; or
• the Directors’ explanation on page 46 as to how they have assessed the prospects of
the Group, over what period they have done so and why they consider that period to be
appropriate, and their statement as to whether they have a reasonable expectation that
the Group will be able to continue in operation and meet its liabilities as they fall due over
the period of their assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
We are also required to report whether the Directors’ statement relating to the prospects of the
Group required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained
in the audit.
Going concern is the
basis of preparation
of the financial
statements that
assumes an entity will
remain in operation
for a period of at least
12 months from the
date of approval of the
financial statements.
We confirm that we
have nothing material
to report, add or draw
attention to in respect
of these matters.
Viability means the
ability of the Group to
continue over the time
horizon considered
appropriate by the
Directors.
We confirm that we
have nothing material
to report, add or draw
attention to in respect
of these matters.
158
Independent auditor’s report continued
To the members of the Unite Group PLC
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
5.1. Investment property and development property valuation
Key audit matter
description
How the scope
of our audit
responded to the
key audit matter
The Group’s principal assets are investment properties (2019: £3,535.8m; 2018: £1,497.1m) and
investment properties under development (2019: £393.4; 2018: £278.9m); these include newly acquired
investment properties following the acquisition of Liberty Living and leased assets. The Group also
holds investments in its joint ventures, USAF and LSAV, with their principal assets also being investment
properties. The investment properties are carried at fair value based on an appraisal by the Group’s
independent external valuers. Valuations are carried out at six-monthly intervals for the Group in
accordance with the Royal Institution of Chartered Surveyors (‘RICS’) Valuation – Professional Standards
(the ‘Red Book’), taking into account transactional evidence during the year.
Management conduct a detailed exercise twice annually to assess the valuation of the Group’s
property portfolio. The valuation is underpinned by a number of judgements and assumptions as it
requires the estimation of property yields, rental growth, occupancy and property management costs.
A small change in these assumptions could have a significant impact on the valuation of properties
and there is an associated fraud risk due to the risk of management override of controls relating to the
valuation process. With regards to the valuation of the USAF and LSAV properties, small changes could
also have a significant impact on a key input to the calculation of a performance fee which could be
recognised for the year ended 31 December 2019 if the hurdle rate is achieved as this is based on the
net asset values of the funds.
With regards to the investment properties under development, additional judgement is required to
forecast discounted cash flows with a deduction for construction costs to complete.
Refer to page 112 (Audit Committee Statement) and section 3.1: Wholly owned property assets and
section 3.4 Investments in joint ventures.
We performed testing on the property valuations and critically assessed the judgements and
estimates that had been made. This work included:
• Understanding and documenting the underlying business process and then evaluating the design,
determining implementation and testing operating effectiveness of the relevant controls for
the Group, with the exception of Liberty Living where no tests of operating effectiveness of the
relevant controls have been performed due to the timing of the acquisition by the Group;
• Understanding and challenging the assumptions used in relation to key drivers such as rental
income and growth, occupancy, yields and property management costs with reference to
the trends at the end of the year and the following year’s budget. Our assessment as to the
appropriateness of the assumptions included consideration of the impact of the United Kingdom
leaving the European Union;
• Meeting with the Group’s valuers to understand the assumptions being taken and consistency of the
judgements with prior year. We also assessed the competency and capability of the Group’s valuers;
• Working with our valuation experts within our Deloitte Real Estate team to benchmark the
assumptions used against market data; and
• Assessing the Group’s development appraisal process through meeting with the development
team and assessing the forecast cost to complete against budget and substantive testing of costs
incurred to date.
Key observations We are satisfied with the approach and methodology adopted in valuing the property portfolio and
consider the valuations to be suitable for inclusion in the financial statements at 31 December 2019.
The Unite Group PLC Annual Report & Accounts 2019 5.2. Accounting for Joint Ventures
Key audit matter
description
A significant proportion of the Group’s assets is held within USAF and LSAV, jointly owned entities that
are accounted for under the equity method as joint ventures (2019: £880.9m; 2018: £819.7m), on the
basis that Unite does not control the entities. At 31 December 2019 Unite had a 22.0% (2018: 25.3%)
ownership of USAF and 50.0% (2018: 50.0%) ownership of LSAV, and acts as manager of both joint
venture vehicles.
Due to the complexity of the contractual arrangements, and the Group’s role as manager of the joint
venture vehicles, the assessment of control involves judgements around a number of significant
factors, particularly with regard to USAF given that it is a multi-investor fund and the Unite ownership
stake is subject to change. In accordance with the requirements of IFRS, there is a need to assess
control with regards to the ability to direct relevant activities, to have exposure to variable returns
and the ability to use power to affect returns at each reporting period. Management have assessed
(in line with the prior year) that Unite does not have control over USAF and LSAV, but has joint control.
Consequently Management has accounted for the joint ventures under the equity method rather than
consolidating them within the Group’s financial statements.
Refer to page 113 (Audit Committee Statement) and section 3.4: Investments in joint ventures.
How the scope
of our audit
responded to the
key audit matter
Our audit procedures on this area focused on assessing the activities of the businesses,
understanding the contractual agreements in place and identifying the methodology applied by
management in reaching their business decisions in order to consider the appropriateness of the
classification of these arrangements as joint ventures in accordance with the requirements of IFRS.
With regards to both USAF and LSAV, we have:
• Understood and documented the underlying business process and evaluated the design and
determined implementation of the relevant controls;
• Critically assessed the key activities and how they impact the returns to the Group from the funds
and challenged management’s own consideration of these factors in their application of IFRS;
• Assessed the Group’s monitoring of its role and the three key factors relating to control and its
exercise in accordance with the judgement required under IFRS; and
• Reviewed any changes to the fund agreements in the year.
Given the particular focus on USAF, we have:
• Assessed the role of the USAF Advisory Committee and whether Unite has the sole power to
direct the activities that are likely to most significantly affect the returns of USAF in the future, and
therefore whether Unite does have control of USAF; and
• Critically evaluated the impact of the percentage ownership on a regular basis.
Key observations There has been no changes to the structure and the role played by Unite as investor and asset/
development manager or to the fund agreements in the year.
We consider Management’s conclusion that Unite does not have control of the Joint Ventures to be
consistent with our conclusion. Therefore, treatment as joint ventures is considered to be appropriate.
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Independent auditor’s report continued
To the members of the Unite Group PLC
5. Key audit matters continued
5.3. REIT compliance
Key audit matter
description
How the scope
of our audit
responded to the
key audit matter
On 1 January 2017, the Group converted to a Real Estate Investment Trust (‘REIT’), with HMRC
confirming that the election to REIT status has been validly made. The primary tax consequences
of conversion and ongoing maintenance of REIT status are that future UK property business profits
and gains on investment properties are not subject to UK corporation tax. Most notably, this means
that the Group no longer recognises deferred tax in relation to the valuation gains on the investment
property portfolio.
In order to maintain REIT status, the Group must comply with certain tests and other conditions to
ensure its continuation under the regime. The compliance tests now also include the results of Liberty
Living following its acquisition by the Group. Due to the material impact on the Group’s financial
results of remaining in compliance with the REIT regime requirements, we consider REIT compliance
to be a key audit matter.
Refer to page 113 (Audit Committee Statement) and section 2.5: Tax.
Our audit procedures included:
• Understanding and documenting the underlying business process and then evaluating the design,
determining implementation and testing operating effectiveness of the relevant controls;
• Considered the impact of the Liberty Living acquisition upon the group’s REIT compliance, Liberty
Living itself being a REIT;
•
Involving tax audit specialists, including REIT specialists, to assess whether the key judgements
relating to REIT compliance are understood;
• Considering the clarity and presentation of the Group’s disclosures of its tax balances and effective
tax rate reconciliation; and
• Testing the Group’s current and forecast compliance with the REIT regime rules. Our assessment as
to the appropriateness of the Group’s forecasts included consideration of the impact of the United
Kingdom leaving the European Union.
Key observations We are satisfied with management’s calculations and compliance with the REIT regime.
5.4. Acquisition accounting in respect of Liberty Living Group plc
Key audit matter
description
The Group completed the acquisition of Liberty Living Group plc on 28 November 2019 with a total
initial consideration of £1,397.1m which consisted of cash and equity shares.
Given the size of the acquisition, we have identified that there is a risk of material misstatement that
the acquisition is not appropriately accounted for in line with IFRS 3 Business Combinations.
We have pinpointed the key audit matter to the assumptions and key estimates and methodology
used by management to identify and fair value the acquired assets, including separately identifiable
intangible assets, together with the appropriateness of the subsequent impairment charge recorded.
Intangible assets of £384.5m arose on the acquisition, representing goodwill and the brand valuation,
which were subsequently impaired in full.
Refer to page 113 (Audit Committee Statement) and section 6 for the Group’s acquisition accounting
policies and the Group’s disclosures for the acquisition.
The Unite Group PLC Annual Report & Accounts 2019 How the scope
of our audit
responded to the
key audit matter
We have evaluated management’s determination of the fair value of the net assets acquired.
We challenged management’s methodology and assumptions underlying the fair values by:
• Understanding the underlying valuation process and then evaluating the design and testing
the implementation of the relevant controls;
• For the valuation of the acquired Liberty Living brand which was recognised as an intangible
asset on acquisition, we involved our internal valuation specialists to evaluate the valuation
methodologies used to determine and value identified intangible assets. We challenged key
assumptions based on external market data, including the applied royalty rate. We compared
these rates to those rates used by management.
• For the valuation of investment properties, we met with the Group’s valuers to understand the
assumptions being taken and consistency of the judgements with previous valuations. Working
with our valuation experts within our Deloitte Real Estate team, we performed benchmarking of
the assumptions used against market data.
To determine the appropriateness of the subsequent impairment of the Liberty brand and the
goodwill arising on acquisition, we performed the following procedures:
• Understanding management’s rationale for the impairment; and
• Challenging the recorded impairment as being in accordance with IAS 36 Impairment of Assets,
including specific consideration of management’s determination that the goodwill represented
the property portfolio premium paid which could not be ascribed to individual acquired properties
as well the fact that management is not planning to use the Liberty brand going forward.
Key observations We are satisfied that management’s key estimates, methodology and assumptions used to determine
the fair values of acquired assets are reasonable and that the impairment recorded is appropriate.
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both
in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Materiality
£31.0m (2018: £21.0m)
£29.5m (2018: £20.0m)
Group financial statements
Parent company financial statements
Basis for
determining
materiality
EPRA Earnings Impacting Measures:
£5.5m (2018: £4.4m)
Materiality: 1% of Net Assets (2018: 1% of
Net Assets)
EPRA Earnings Impacting Measures: 5% of
EPRA Earnings (2018: 5% of EPRA Earnings)
Rationale for
the benchmark
applied
We determined materiality for the Group based
on 1% of net assets as the balance sheet is
considered to be a key driver of a property group.
In addition to net assets, we consider the EPRA
earnings measure to be a critical financial
performance measure for the Group and we have
applied a lower threshold based on 5% of EPRA
earnings for testing of revenue, cost of sales,
operating expenses, loan interest and similar
charges, finance income, share of joint venture
profit and taxation.
1% of Net Assets (2018: 1% of Net Assets)
As the parent holding company the principal
activity is to hold the investments in subsidiaries.
Therefore, the net assets balance is considered to
be the key driver of the Company’s performance
and the most relevant benchmark for materiality.
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Independent auditor’s report continued
To the members of the Unite Group PLC
6. Our application of materiality continued
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected
and undetected misstatements exceed the materiality for the financial statements as a whole. Group performance
materiality was set at 70% of Group materiality for the 2019 audit (2018: 70%). In determining performance materiality,
we considered the following factors:
• our risk assessment, including our assessment of the Group’s overall control environment and that we consider it
appropriate to rely on controls over a number of business processes; and
• our past experience of the audit, which has indicated a low number of corrected and uncorrected misstatements
identified in prior periods.
Materiality
Net Assets
£3,098.0m
Net Assets
Group materiality
EPRA Earnings Impacting Measures
EPRA Earnings
£110.6m
EPRA Earnings
Group EPRA Earnings
Impacting Measures
materiality
Group materiality
£31.0m
Component
materiality range
£29.5m to £18.6m
Audit Committee
reporting threshold
£1.5m
Group EPRA Earnings
Impacting Measures
materiality
£5.5m
Component EPRA
Impacting Measures
materiality range
£4.9m to £2.7m
Audit Committee
reporting threshold
£0.3m
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1.5m (2018:
£1.0m) and for EPRA impacting measures we would report differences in excess of £275,000 (2018: £220,900), as well as
differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
The Unite Group PLC Annual Report & Accounts 2019 7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide
controls, and assessing the risks of material misstatement at the Group level.
The Group is audited by one audit team, led by the Senior Statutory Auditor. Other than for Liberty Living Group plc,
the audit is performed centrally at the Group’s Bristol head office, as the books and records for each entity within the
Group are maintained at this location. For the audit of Liberty Living Group plc, the audit was primarily performed at the
component’s head office in London. The Group only operates within the United Kingdom – this includes Unite as well as
Liberty Living Group plc and the two joint ventures, USAF and LSAV.
We audit all of the results of the Group, including Liberty Living Group plc, together with USAF and LSAV, for the purposes
of our Group audit. We have also tested the consolidation process to confirm our conclusion that there were no significant
risks of material misstatement of the aggregated financial information.
7.2. Our consideration of the control environment
From our walkthroughs and understanding of the entity and after evaluating the design and determining the
implementation and operating effectiveness of the key controls at the business cycle and account balance levels,
other than for Liberty Living, we relied on controls in performing our audit of the following business cycles:
•
Investment property;
• Revenue;
• Expenditure; and
• Payroll.
Reliance on general IT controls was taken for the Group, excluding Living Liberty which continued to use its own systems
following its acquisition by Unite at the end of November 2019.
Excluding Liberty Living, the Group uses the following application systems for the recording and reporting of its financial
statements:
• Oracle EBS – general ledger and room booking system;
• Portal Agent Desktop (PAD) – room booking portal used by students and implemented on top of Oracle EBS and
therefore where revenue transactions are initiated; and
• HFM – used to prepare the Group consolidation at the Group’s Head Office.
We involved IT specialists to assess the key controls over the three systems set out above. Working with IT specialists we
identified and assessed relevant risks arising from each relevant IT system and the supporting infrastructure technologies
based on the role of the application in the Group’s flow of transactions. We obtained an understanding of the IT environment
as part of these risk assessment procedures. Relevant controls were identified and tested to address those IT risks and
involving our IT specialists we performed the following procedures:
• Determined whether each general IT control, individually or in combination with other controls, was appropriately
designed to address the risk;
• Obtained sufficient evidence to assess the operating effectiveness of the controls across the full audit period; and
• Performed exposure testing and additional procedures where required if there were exceptions to the operation of
those controls.
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Independent auditor’s report continued
To the members of the Unite Group PLC
8. Other information
The Directors are responsible for the other information. The other information comprises the information included in the
Annual Report, other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the
other information include where we conclude that:
• Fair, balanced and understandable – the statement given by the Directors that they consider the Annual Report and
financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for
shareholders to assess the Group’s position and performance, business model and strategy, is materially inconsistent
with our knowledge obtained in the audit; or
• Audit committee reporting – the section describing the work of the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the directors’ statement
required under the Listing Rules relating to the Company’s compliance with the UK Corporate Governance Code
containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly
disclose a departure from a relevant provision of the UK Corporate Governance Code.
We have nothing to report in respect of these matters.
9. Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the Directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent company’s
ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud and non-
compliance with laws and regulations are set out below.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
The Unite Group PLC Annual Report & Accounts 2019 11. Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and
then design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient
and appropriate to provide a basis for our opinion.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance
with laws and regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the design of the
Group’s remuneration policies, key drivers for Directors’ remuneration, bonus levels and performance targets;
• results of our enquiries of management, internal audit, the Group’s internal legal counsel and the Audit Committee
about their own identification and assessment of the risks of irregularities;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures
relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of
non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged
fraud; and
– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
• the matters discussed among the audit engagement team and involving relevant internal specialists, including tax,
valuations and IT specialists regarding how and where fraud might occur in the financial statements and any potential
indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for
fraud and identified the greatest potential for fraud in the following areas: investment property and development property
valuation owing to the risk of management override of controls relating to the valuation process; and revenue recognition
owing to the risk of management override of controls relating to the revenue IT system. In common with all audits under
ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory framework that the Group operates in, focusing on provisions
of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the
financial statements. The key laws and regulations we considered in this context included the UK Companies Act, Listing
Rules, and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial
statements but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material
penalty. These included the Group’s compliance with health and safety matters, including fire safety and fire cladding.
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Independent auditor’s report continued
To the members of the Unite Group PLC
11. Extent to which the audit was considered capable of detecting irregularities, including fraud continued
11.2. Audit response to risks identified
As a result of performing the above, we identified investment property and development property valuation as a key audit
matter related to the potential risk of fraud. The key audit matters section of our report explains the matter in more detail
and also describes the specific procedures we performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with
provisions of relevant laws and regulations described as having a direct effect on the financial statements;
• enquiring of management, the Audit Committee and in-house and external legal counsel concerning actual and
potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of
material misstatement due to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing
correspondence with HMRC;
•
•
in addressing the identified revenue fraud risk: testing the revenue IT system controls by involving our IT specialists;
and vouching a sample of rental income to tenancy agreement acceptance and cash receipt; and
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries
and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a
potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the
normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members
including internal specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent company and their environment obtained in
the course of the audit, we have not identified any material misstatements in the Strategic Report or the Directors’ Report.
13. Matters on which we are required to report by exception
13.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
The Unite Group PLC Annual Report & Accounts 2019 13.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration
have not been made or the part of the Directors’ remuneration report to be audited is not in agreement with the accounting
records and returns.
We have nothing to report in respect of these matters.
14. Other matters
14.1. Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by the Board on 10 June 2015 to audit
the financial statements for the year ending 31 December 2015 and subsequent financial periods. The period of total
uninterrupted engagement including previous renewals and reappointments of the firm is five years, covering the years
ending 31 December 2015 to 31 December 2019.
14.2. Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance
with ISAs (UK).
15. Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Judith Tacon
(Senior statutory auditor)
for and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
26 February 2020
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Consolidated income statement
For the year ended 31 December 2019
Rental income
Other income
Total revenue
Cost of sales
Operating expenses
Results from operating activities
Loss on disposal of property
Net valuation gains on property (owned)
Net valuation losses on property (leased)
Impairment of goodwill and intangible asset
Acquisition costs
(Loss)/profit before net financing costs and share of joint venture profit
Loan interest and similar charges
Interest on lease liability
Mark to market changes on interest rate swaps
Swap cancellation and loan break costs
Finance costs
Finance income
Net financing costs
Share of joint venture profit
(Loss)/profit before tax
Current tax
Deferred tax
(Loss)/profit for the year
(Loss)/profit for the year attributable to
Owners of the parent company
Minority interest
(Loss)/earnings per share
Basic
Diluted
All results are derived from continuing activities.
Consolidated statement of comprehensive income
For the year ended 31 December 2019
(Loss)/profit for the year
Movements in effective hedges
Share of joint venture movements in effective hedges
Other comprehensive (loss)/income for the year
Total comprehensive (loss)/income for the year
Attributable to
Owners of the parent company
Minority interest
Note
2.4
2.4
3.1
3.1
6
6
4.3
4.3
4.3
4.3
4.3
4.3
4.3
3.4b
2.5a
2.5a
2.2c
2.2c
2.2c
Note
4.5a
3.4b
2019
£m
134.1
22.1
156.2
(33.0)
(26.6)
96.6
(7.3)
154.8
(8.1)
(384.1)
(22.8)
(170.9)
(23.8)
(9.2)
(2.7)
(2.7)
(38.4)
5.5
(32.9)
102.6
(101.2)
(0.1)
13.7
(87.6)
(89.2)
1.6
(87.6)
(31.5)p
(31.4)p
2019
£m
(87.6)
(4.8)
(0.5)
(5.3)
(92.9)
(94.5)
1.6
(92.9)
2018
£m
112.7
15.6
128.3
(40.2)
(23.6)
64.5
(6.8)
105.8
–
–
–
163.5
(14.3)
–
–
(0.1)
(14.4)
0.9
(13.5)
95.8
245.8
(4.1)
(4.4)
237.3
235.7
1.6
237.3
90.8p
90.6p
2018
£m
237.3
0.6
1.2
1.8
239.1
237.5
1.6
239.1
All other comprehensive income may be classified as profit and loss in the future.
There are no tax effects on items of other comprehensive income.
The Unite Group PLC Annual Report & Accounts 2019 Consolidated balance sheet
At 31 December 2019
Assets
Investment property (owned)
Investment property (leased)
Investment property under development
Investment in joint ventures
Other non-current assets
Right of use assets
Deferred tax asset
Total non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Borrowings
Lease liabilities
Trade and other payables
Current tax liability
Total current liabilities
Borrowings
Lease liabilities
Interest rate swaps
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Share premium
Merger reserve
Retained earnings
Hedging reserve
Equity attributable to the owners of the parent company
Minority interest
Total equity
Note
3.1
3.1
3.1
3.4b
3.3b
3.3a
2.5d
3.2
5.2
5.1
4.1
4.6a
5.4
4.1
4.6a
4.2
2.5d
4.8
4.8
2019
£m
3,406.9
110.4
411.8
875.2
26.0
5.5
2.9
2018
£m
1,497.1
–
278.9
819.7
33.0
–
–
4,838.7
2,628.7
4.0
87.1
86.9
178.0
5,016.7
(1.4)
(3.9)
(234.7)
(4.0)
(244.0)
(1,566.2)
(100.9)
(7.6)
–
(1,674.7)
(1,918.7)
3,098.0
90.9
1,874.9
40.2
1,069.0
(3.5)
3,071.5
26.5
3,098.0
9.1
88.1
123.6
220.8
2,849.5
(1.3)
–
(141.5)
(4.6)
(147.4)
(591.3)
–
(0.1)
(11.9)
(603.3)
(750.7)
2,098.8
65.9
740.5
40.2
1,224.4
2.0
2,073.0
25.8
2,098.8
The financial statements of The Unite Group PLC, registered number 03199160, were approved and authorised for issue by
the Board of Directors on 26 February 2020 and were signed on its behalf by:
R S Smith
Director
J J Lister
Director
169
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Company balance sheet
At 31 December 2019
Assets
Investments in subsidiaries
Total investments
Loan to Group undertaking
Total non-current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Borrowings
Amounts due to Group undertakings
Other payables
Total current liabilities
Borrowings
Interest rate swaps
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Share premium
Merger reserve
Hedging reserve
Retained earnings
Total equity
Note
3.5
5.2
4.1
5.4
5.4
4.1
4.2
4.8
4.8
2019
£m
2,213.7
2,213.7
–
2,213.7
1,208.1
9.4
1,217.5
3,431.2
–
(19.1)
(7.0)
(26.1)
(442.2)
(7.6)
(449.8)
(475.9)
2,955.3
90.9
1,874.9
40.2
(3.0)
952.3
2,955.3
2018
£m
1,189.4
1,189.4
90.0
1,279.4
1,095.7
–
1,095.7
2,375.1
(0.5)
(2.6)
(5.3)
(8.4)
(355.6)
–
(355.6)
(364.0)
2,011.1
65.9
740.5
40.2
2.2
1,162.3
2,011.1
Total equity is wholly attributable to equity holders of The Unite Group PLC. The loss of The Unite Group PLC in 2019 was
£139.3 million (2018: profit of £252.2 million).
The financial statements of The Unite Group PLC, registered number 03199160, were approved and authorised for issue by
the Board of Directors on 26 February 2020 and were signed on its behalf by:
R S Smith
Director
J J Lister
Director
The Unite Group PLC Annual Report & Accounts 2019 Consolidated statement of changes in shareholders’ equity
For the year ended 31 December 2019
Share of joint venture movements in
effective hedges
3.4b
At 1 January 2019
Effect of initial application
of IFRS 16
At 1 January 2019 – as restated
(Loss)/profit for the year
Other comprehensive
loss for the year:
Movement in effective hedges
Total comprehensive
(loss)/profit for the year
Shares issued
Deferred tax on
share-based payments
Fair value of
share-based payments
Own shares acquired
Unwind of realised swap gain
Dividends paid to owners
of the parent company
Dividends to minority interest
At 31 December 2019
Issued
share
capital
£m
Note
Share
premium
£m
Merger
reserve
£m
Retained
earnings
£m
Hedging
reserve
£m
Attributable
to owners
of the
parent
£m
Minority
interest
£m
Total
£m
65.9
740.5
40.2
1,224.4
2.0
2,073.0
25.8
2,098.8
1
–
–
–
3.2
65.9
740.5
40.2
1,227.6
–
2.0
3.2
–
3.2
2,076.2
25.8
2,102.0
–
–
–
–
–
–
–
–
4.8
25.0
1,134.4
–
–
–
–
–
–
–
–
–
–
–
–
4.9
–
–
–
–
–
–
–
–
–
–
–
(89.2)
–
(89.2)
1.6
(87.6)
–
–
(4.8)
(4.8)
(0.5)
(0.5)
–
–
(4.8)
(0.5)
(89.2)
(5.3)
(94.5)
1.6
(92.9)
–
0.2
1.9
(0.8)
–
–
–
–
–
(0.2)
(70.7)
–
–
–
1,159.4
0.2
1.9
(0.8)
(0.2)
(70.7)
–
–
–
–
–
–
–
(0.9)
1,159.4
0.2
1.9
(0.8)
(0.2)
(70.7)
(0.9)
90.9
1,874.9
40.2
1,069.0
(3.5)
3,071.5
26.5
3,098.0
Issued
share
capital
£m
Note
Share
premium
£m
Merger
reserve
£m
Retained
earnings
£m
Hedging
reserve
£m
Attributable
to owners
of the
parent
£m
Minority
interest
£m
Total
£m
At 1 January 2018
60.2
579.5
40.2
1,051.2
(2.1)
1,729.0
25.2
1,754.2
Profit for the year
Other comprehensive
income for the year:
Movement in effective hedges
Share of joint venture movements in
effective hedges
Total comprehensive
income for the year
Shares issued
Deferred tax on
share-based payments
Fair value of
share-based payments
Own shares acquired
Realised swap gain
Dividends paid to owners
of the parent company
Dividends to minority interest
At 31 December 2018
–
–
–
–
–
–
–
5.7
–
161.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
235.7
–
235.7
1.6
237.3
–
–
0.6
1.2
235.7
1.8
–
0.3
1.1
(1.4)
–
(62.5)
–
–
–
–
–
2.3
–
–
0.6
1.2
237.5
166.7
0.3
1.1
(1.4)
2.3
(62.5)
–
–
0.6
1.2
1.6
239.1
–
–
–
–
–
–
166.7
0.3
1.1
(1.4)
2.3
(62.5)
–
(1.0)
(1.0)
65.9
740.5
40.2
1,224.4
2.0
2,073.0
25.8
2,098.8
3.4b
4.8
4.9
The notes on pages 174 to 227 form part of the financial statements.
171
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Company statement of changes in shareholders’ equity
For the year ended 31 December 2019
At 1 January 2019
Loss and total comprehensive loss
for the year
Shares issued
Unwind of realised swap gain
Dividends to shareholders
At 31 December 2019
Issued
share capital
£m
Note
65.9
–
25.0
–
–
4.8
4.9
Share
premium
£m
740.5
–
1,134.4
–
–
Merger
reserve
£m
40.2
Hedging
reserve
£m
Retained
earnings
£m
Total
£m
2.2
1,162.3
2,011.1
–
–
–
–
–
–
(5.2)
–
(3.0)
(139.3)
–
–
(70.7)
952.3
(139.3)
1,159.4
(5.2)
(70.7)
2,955.3
90.9
1,874.9
40.2
At 1 January 2018
Profit and total comprehensive income
for the year
Shares issued
Realised swap gain
Dividends to shareholders
At 31 December 2018
Issued
share capital
£m
Share
premium
£m
Note
60.2
579.5
Merger
reserve
£m
40.2
4.8
4.9
–
5.7
–
–
–
161.0
–
–
–
–
–
–
65.9
740.5
40.2
Hedging
reserve
£m
Retained
earnings
£m
Total
£m
–
–
–
2.2
–
2.2
972.6
1,652.5
252.2
–
–
(62.5)
252.2
166.7
2.2
(62.5)
1,162.3
2,011.1
The notes on pages 174 to 227 form part of the financial statements.
The Unite Group PLC Annual Report & Accounts 2019 Cash consideration for acquisition Liberty Living
6
(492.0)
Statements of cash flows
For the year ended 31 December 2019
Net cash flows from operating activities
Investing activities
Cash acquired on acquisition of Liberty Living
Acquisition costs
Redemption of units in joint ventures
Capital expenditure on properties
Acquisition of intangible assets
Acquisition of plant and equipment
Proceeds from sale of investment property
Interest received
Dividends received
Payments to/on behalf of subsidiaries
Payments from subsidiaries
Net cash flows from investing activities
Financing activities
Proceeds from the issue of share capital
Payments to acquire own shares
Interest paid in respect of financing activities
Swap cancellation costs
Proceeds from non-current borrowings
Repayment of borrowings
Dividends paid to the owners of the parent company
Dividends paid to minority interest
Net cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
Group
Company
Note
5.1
2019
£m
78.5
2018
£m
59.7
–
–
–
30.9
(247.9)
(6.6)
(1.3)
38.0
0.9
37.5
–
–
22.4
(17.5)
–
(179.9)
(4.6)
(0.4)
295.4
0.9
32.8
–
–
(342.9)
(148.5)
254.7
(0.8)
(32.0)
(2.7)
175.0
(96.0)
(69.6)
(0.9)
227.7
(36.7)
123.6
86.9
166.7
(1.4)
(21.1)
(0.1)
375.8
(295.4)
(62.3)
(1.0)
161.2
72.4
51.2
123.6
2019
£m
(2.5)
(492.0)
–
–
–
–
–
–
–
–
–
(301.5)
553.5
(240.0)
254.7
–
(17.4)
–
175.0
(90.3)
(69.6)
–
2018
£m
(0.5)
–
–
–
–
–
–
–
–
–
–
(186.3)
5.7
(180.6)
166.7
–
(9.5)
2.2
269.4
(183.0)
(62.3)
–
252.4
183.5
9.9
(0.5)
9.4
2.4
(2.9)
(0.5)
173
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Notes to the financial statements
Section 1: Basis of preparation
This section lays out the Group’s accounting policies that relate to the financial statements as a whole.
Where an accounting policy is specific to a particular note to the financial statements, the policy is
described in the note to which it relates and has been clearly identified in a box.
Basis of consolidation
The financial statements consolidate those of The Unite Group PLC (the Company) and its subsidiaries (together referred
to as the Group) and include the Group’s interests in jointly controlled entities. The parent company financial statements
present information about the Company as a separate entity and not as a group.
Subsidiaries are those entities controlled by the Company. Control exists when the Company has an existing right that
gives it the current ability to direct the relevant activities of the subsidiary, has exposure or right to variable returns from
its involvement in the subsidiary and has the ability to use its power to affect its returns. The financial statements of
subsidiaries are included in the consolidated financial statements from the date that control commences until the date
that control ceases.
Intra-group balances and transactions, and any unrealised gains and losses arising from intra-group transactions, such as
property disposals and management fees, are eliminated in preparing the consolidated financial statements. Unrealised
gains arising from transactions with joint ventures are eliminated to the extent of the Group’s retained interest in the
entity. Unrealised losses are eliminated in the same way as unrealised gains except where the loss provides evidence of
a reduction in the net realisable value of current assets or an impairment in the value of fixed assets.
Business combinations are addressed in note 6.
Both the parent company financial statements and the Group financial statements have been prepared in accordance
with International Financial Reporting Standards as adopted by the EU (Adopted IFRS) and approved by the Directors.
On publishing the parent company financial statements here together with the Group financial statements, the Company
is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual income statement
and related notes.
The accounting policies have been applied consistently to all periods presented in these consolidated financial statements.
The Company is a public company limited by shares and is registered in England, United Kingdom, where it is also domiciled.
Measurement convention
The financial statements are prepared on the historical cost basis except for investment property (owned), investment
property (leased), investment property under development, investments in subsidiaries and interest rate swaps all of
which are stated at their fair value.
Going concern
In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider
whether the Group can continue in operational existence for the foreseeable future.
The Group’s business activities, together with the factors likely to affect its future development and position, are set
out in the Strategic Report on pages 16 to 87. Section 4 of these Notes to the financial statements includes the Group’s
objectives, policies and processes for managing its capital, details of its borrowings and interest rate swaps, and in note
5.2 its exposure to credit risk. The Board has considered the risks that could arise as a result of potential outcomes of
Britain leaving the European Union and have identified people risk, procurement risks and demand risks. These risks have
been factored into our forecasts and projections.
The Group has prepared cash flow projections 18 months forward to June 2021 and the Group has sufficient headroom
to meet all its commitments. The Group issued new ordinary shares in July 2019 generating gross proceeds of £259.6
million and this together with existing loan facilities will be sufficient to fund the Group’s commitments over the next
18 months. The Group disposes of assets to release capital and maintains positive relationships with its lending banks
The Unite Group PLC Annual Report & Accounts 2019 and has historically secured new facilities before maturity dates and remained within its covenant levels. The Group is
in full compliance with its covenants at 31 December 2019 and expects to remain so. Our debt facilities include loan-to-
value, interest cover and asset class ratios, all of which have a high level of headroom. In order to manage future financial
commitments the Group operates a formal approval process through its Investment Committee and Group Board to
ensure that appropriate review is undertaken before any transactions are agreed.
Accordingly, after making enquiries and having considered forecasts and appropriate sensitivities, the Directors have
formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the
Group has adequate resources to continue in operational existence for the foreseeable future, being at least 12 months
from the date of these financial statements.
Changes in accounting policies – IFRS 16
In the current year, the Group, for the first time, has applied IFRS 16 Leases. The date of the initial application of IFRS 16
for the Group is 1 January 2019.
IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to
lessee accounting by removing the distinction between operating and finance leases, requiring the recognition of a right of
use asset and a lease liability at commencement for all leases, except for short term leases and leases of low value assets
when such recognition exemptions are adopted. In contrast to lessee accounting, the requirements for lessor accounting
have remained largely unchanged.
Details of the Group’s approach to transition to IFRS 16 is set out below, followed by a description of the impact of
adopting IFRS 16.
Approach to transition
The Group has applied IFRS 16 using the cumulative catch up approach, without restatement of the comparative
information (which is presented under IAS 17 and IFRIC 14). In respect of those leases the Group previously treated as
operating leases, the Group has elected to measure its right of use assets as if the lease commencement date was the date
of adoption of IFRS 16 (i.e. 1 January 2019). The cumulative effect of initially applying IFRS 16 has been recognised as an
adjustment to the opening balance of retained earnings as at 1 January 2019.
Applying IFRS 16 to sale and leaseback properties, the Group now recognises sale and leaseback right of use assets in the
consolidated balance sheet (investment property (leased)), initially measured at fair value using a discounted cash flow
model. Other leases previously treated as operating leases have been measured following the approach in IFRS 16.C8(b)
(ii), whereby right of use assets are set equal to the lease liability, adjusted for prepaid or accrued lease payments.
IFRS 16 does not change substantially how a lessor accounts for leases. Under IFRS 16, a lessor continues to classify leases
as either finance leases or operating leases and account for those two types of leases differently. The Group continues to
account for its tenancy contracts offered to commercial and individual tenants as operating leases.
Practical expedients adopted
The Group has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is
or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 14 will continue to be applied
to those leases entered into or modified before 1 January 2019.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any
lease and associated non-lease components as a single arrangement. The Group has used this practical expedient. The
Group has elected not to recognise right of use assets and lease liabilities to leases for which the lease term ends within
12 months of the date of initial application.
Financial impact
The application of IFRS 16 has resulted in the recognition of right of use assets and lease liabilities. Operating lease
incentives previously recognised as liabilities have been derecognised and factored into the measurement of the right of
use assets and lease liabilities.
The Group has chosen to use the table below to set out the adjustments recognised at the date of initial application of IFRS 16.
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Section 1: Basis of preparation continued
EPRA net assets on transition
Investment property (owned)
Investment property (leased)
Investment property under development
Total property portfolio
Debt on properties
Lease liability
Cash
Net debt
Other assets/(liabilities)
EPRA net assets
Group on EPRA basis
31 Dec 2018
as reported
£m
IFRS 16
adjustments
£m
2,685.9
–
282.1
2,968.0
(1,036.4)
–
179.9
(856.5)
(26.1)
2,085.4
–
128.0
–
128.0
–
(115.8)
–
(115.8)
(9.0)
3.2
1 Jan 2019
as restated
£m
2,685.9
128.0
282.1
3,096.0
(1,036.4)
(115.8)
179.9
(972.3)
(35.1)
2,088.6
On 1 January 2019, £128.0 million was recognised on the balance sheet as the fair value of the sale and leaseback portfolio
(classified as investment properties (leased)) and a lease liability of £115.8 million.
Other assets/(liabilities) increased by £9.0 million due to leasehold improvements with a carrying value of £6.7 million
(£10.7 million cost and £4.0 million accumulated depreciation) being transferred from other non-current assets to
investment properties (leased) and £2.3 million of prepayments being reclassified from receivables to the lease liability.
£4.3 million of right of use assets were recognised in relation to offices, vehicles and other equipment, with a
corresponding lease liability of £4.3 million. Both of these balances are included within other assets/(liabilities) in the
table above.
The net difference of £3.2 million has been recognised in retained earnings.
During the 12 months ended 31 December 2019 the Group recognised the following amounts in EPRA earnings:
EPRA earnings at 31 December 2019
Rental income
Property operating expenses
Net operating income
Management fees
Operating expenses
Operating lease rentals
Lease liability interest
Net financing costs
Operations segment result
Property segment result
Unallocated to segments
EPRA earnings
Group on see
through basis
Total
£m
IFRS 16
adjustments
£m
Group on see
through basis
Total
£m
Reference
1
2
3
213.9
(53.1)
160.8
14.4
(23.7)
(11.0)
–
(34.7)
105.8
(1.5)
2.6
106.9
–
–
–
–
1.9
11.0
(9.2)
–
3.7
–
–
3.7
213.9
(53.1)
160.8
14.4
(21.8)
–
(9.2)
(34.7)
109.5
(1.5)
2.6
110.6
1 Disclosed within cost of sales in the consolidated income statement, under IAS 17 and IFRS 16.
2 Disclosed within operating expenses in the consolidated income statement, under IAS 17.
3 Disclosed within finance costs in the consolidated income statement, under IFRS 16.
The application of IFRS 16 resulted in a decrease in operating expenses of £1.9 million and operating lease rentals of £11.0
million due to lease payments no longer being recognised in the P&L. An increased interest expense, in comparison to IAS
17, was recognised in respect of the interest on lease liabilities of £9.2 million.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 Impact on profit or loss
On an IFRS basis there has also been a reduction in net property valuation gains of £8.1 million, which relates to the
downward revaluation of investment properties (leased) and an increase to loss on disposal of £0.4 million, following the
cancellation of two sale and leaseback arrangements.
The following table shows the operating lease commitments relating to the sale and leaseback portfolio included in the IAS
17 disclosure at 31 December 2018, discounted using the incremental borrowing rate at the date of initial application and
the lease liabilities recognised in the statement of financial position at the date of initial application.
Operating lease commitments at 31 December 2018
Effect of discounting the above amount
Reclassification of amounts classified as prepayments at 31 December 2018
Lease liabilities recognised at 1 January 2019
£m
214.4
(96.3)
(2.3)
115.8
The Group’s weighted average incremental borrowing rate applied to lease liabilities as at 1 January 2019 is 4.2%.
Impact of accounting standards and interpretations in issue but not yet effective
At the balance sheet date there are a number of new standards and amendments to existing standards in issue but not
yet effective. The Group has not early adopted the new or amended standards in preparing these consolidated financial
statements.
Other standards
The following new or amended standards and interpretations are not expected to have a significant impact on the Group’s
consolidated financial statements:
•
•
•
•
•
•
•
•
IFRS 3 (amendments) ‘Definition of a business’
IFRS 9 (amendments)
IFRS 10 and IAS 28 (amendments) ‘Sale or Contribution of Assets between an Investor and its Associate or Joint Venture’
IFRS 14 ‘Regulatory Deferral Accounts’
IFRS 17 ‘Insurance Contracts’
IAS 1 and IAS 8 (amendments) ‘Definition of material’
IFRS Standards (amendments) ‘References to Conceptual Framework in IFRS Standards’
IFRS Standards (annual improvements)
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Notes to the financial statements continued
Section 1: Basis of preparation continued
Critical accounting estimates and judgements
The Group’s significant accounting polices are stated in the relevant notes to the Group financial statements.
The preparation of financial statements requires management to exercise judgement in applying the Group’s accounting
policies. It also requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities,
income and expenses.
Significant accounting judgements
The areas which involve a high degree of judgement or complexity in applying the accounting policies of the Group are
explained in more detail in the accounting policy descriptions in the related notes to the financial statements.
The areas where accounting judgements have the most significant impact on the financial statements of the Group are
as follows:
• valuation of investment property and investment property under development (note 3.1)
• classification of joint venture vehicles (note 3.4)
Estimation uncertainty
The estimates and associated assumptions are based on historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Estimates and assumptions are reviewed on an ongoing basis with revisions recognised in the period in which the
estimates are revised and in any future periods affected.
The area involving the most sensitive estimates and assumptions that are significant to the financial statements is set out
below and in more detail in the related note:
• valuation of investment property and investment property under development (note 3.1)
Section 2: Results for the year
This section focuses on the results and performance of the Group and provides a reconciliation between
the primary statements and EPRA performance measures. On the following pages you will find disclosures
explaining the Group’s results for the year, segmental information, taxation, earnings and net asset value
per share. The Group uses EPRA earnings and NAV movement as key comparable indicators across other
real estate companies in Europe.
IFRS performance measures
(Loss)/profit after tax
Basic (loss)/earnings per share
Net assets
NAV per share
EPRA performance measures
EPRA earnings
EPRA earnings per share
EPRA NAV
EPRA NAV per share
EPRA NNNAV
EPRA NNNAV per share
Note
2.2b
2.2c
2.3c
2.3d
Note
2.2a
2.2c
2.3a
2.3d
2.3c
2.3d
2019
£(89.2)m
(31.5)p
£3,071.5m
845p
2019
£110.6m
39.1p
£3,109.7m
853p
£3,008.3m
826p
2018
£235.7m
90.8p
£2,073.0m
787p
2018
£88.4m
34.1p
£2,085.4m
790p
£2,032.7m
770p
The Unite Group PLC Annual Report & Accounts 2019 2.1 Segmental information
The Board of Directors monitors the business along two activity lines, Operations and Property. The reportable segments
for the years ended 31 December 2019 and 31 December 2018 are Operations and Property.
The Group undertakes its Operations and Property activities directly and through joint ventures with third parties.
The joint ventures are an integral part of each segment and are included in the information used by the Board to
monitor the business.
Detailed analysis of the performance of each of these reportable segments is provided in the following sections 2.2 to
2.3. There has been no change to the reportable segments following the acquisition of Liberty Living.
The Group’s properties are located exclusively in the United Kingdom. The Group therefore has one geographical segment.
2.2 Earnings
EPRA earnings amends IFRS measures by removing principally the unrealised investment property valuation gains and
losses such that users of the financials are able to see the extent to which dividend payments (dividend per share) are
underpinned by earnings arising from purely operational activity. The reconciliation between profit attributable to owners
of the parent company and EPRA earnings is available in note 2.2b.
The Operations segment manages rental properties, owned directly by the Group or by joint ventures. Its revenues are
derived from rental income and asset management fees earned from joint ventures. The way in which the Operations
segment adds value to the business is set out in the Operations review on pages 55 to 61. The Operations segment is the
main contributor to EPRA earnings and EPRA EPS and these are therefore the key indicators which are used by the Board
to monitor the Operations business.
The Board does not manage or monitor the Operations segment through the balance sheet and therefore no segmental
information for assets and liabilities is provided for the Operations segment.
a) EPRA earnings
2019
Rental income
Property operating expenses
Net operating income
Management fees
Operating expenses
Interest on lease liabilities**
Net financing costs
Operations segment result
Property segment result
Unallocated to segments
EPRA earnings
Share of joint ventures
Unite
£m
120.3
(30.1)
90.2
21.0
(20.1)
(9.2)
(16.3)
65.6
(1.5)
8.7
72.8
Liberty
Living*
£m
13.8
(2.9)
10.9
–
(1.0)
–
(2.4)
7.5
–
–
7.5
USAF
£m
41.5
(12.2)
29.3
(3.4)
(0.3)
–
(6.7)
18.9
–
(0.2)
18.7
Group on
EPRA basis
Total
£m
213.9
(53.1)
160.8
14.4
(21.8)
(9.2)
(34.7)
109.5
(1.5)
2.6
110.6
LSAV
£m
38.3
(7.9)
30.4
(3.2)
(0.4)
–
(9.3)
17.5
–
(5.9)
11.6
* The 2019 results for Liberty Living represent the 33 day period post acquisition, being 29 November to 31 December 2019.
** The Group has applied IFRS 16 Leases in the current period, therefore the table above has been prepared on an IFRS 16 basis. Further details of the impact
of adoption of IFRS 16 can be found in note 1.
Included in the above is rental income of £17.3 million and property operating expenses of £7.0 million relating to sale and
leaseback properties.
The unallocated to segments balance includes the fair value of share-based payments of (£2.2 million), contributions to
the Unite Foundation of (£1.0 million), fees received from USAF relating to acquisitions of £2.2 million, LSAV performance
fee of £5.7 million, deferred tax charge of (£0.5 million) and current tax charge of (£0.4 million).
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Section 2: Results for the year continued
2.2 Earnings continued
a) EPRA earnings continued
2018
Rental income
Property operating expenses
Net operating income
Management fees
Operating expenses
Operating lease rentals*
Net financing costs
Operations segment result
Property segment result
Unallocated to segments
EPRA earnings
Share of joint ventures
Unite
£m
112.7
(28.6)
84.1
21.8
(20.9)
(11.5)
(13.4)
60.1
(1.1)
(4.3)
54.7
USAF
£m
39.0
(11.5)
27.5
(3.2)
(0.3)
–
(6.2)
17.8
–
(0.2)
17.6
Group on
EPRA basis
Total
£m
188.3
(48.0)
140.3
15.6
(21.7)
(11.5)
(28.5)
94.2
(1.1)
(4.7)
88.4
LSAV
£m
36.6
(7.9)
28.7
(3.0)
(0.5)
–
(8.9)
16.3
–
(0.2)
16.1
* Operating lease rentals arise from properties which the Group has sold and is now leasing back. These properties were sold to generate financing and
they now contribute to the Group’s rental income and incur property operating expenses. Therefore, the Group considers these lease costs to be a form
of financing.
Included in the above is rental income of £18.6 million and property operating expenses of £7.0 million relating to sale and
leaseback properties.
The unallocated to segments balance includes the fair value of share-based payments of (£1.1 million), contributions to the
Unite Foundation of (£0.9 million), deferred tax of £1.2 million and current tax charge of (£3.9 million).
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 b) IFRS reconciliation to EPRA earnings
EPRA earnings excludes movements relating to changes in values of investment properties and interest rate swaps,
profits from the disposal of properties and property impairments, which are included in the profit reported under IFRS.
EPRA earnings reconcile to the profit attributable to owners of the parent company as follows:
EPRA earnings
Net valuation gains on investment property (owned)
Property disposals (owned)
Net valuation losses on investment property (leased)
Property disposals (leased)
Impairment of goodwill and acquired intangible asset
Acquisition costs
Amortisation of fair value of debt recognised on acquisition
Share of joint venture gains on investment property
Share of joint venture property disposals
Swap cancellation and loan break costs
Mark to market changes on interest rate swaps
Current tax relating to impairment of goodwill
Deferred tax relating to properties
Minority interest share of reconciling items*
(Loss)/profit attributable to owners of the parent company
Note
2.2a
3.1
3.1
6
6
3.4b
3.4b
4.3
4.3
2.5d
2019
£m
110.6
154.8
(6.2)
(8.1)
(1.1)
(384.1)
(22.8)
0.4
58.3
0.4
(2.7)
(2.7)
0.5
14.3
(0.8)
(89.2)
2018
£m
88.4
105.8
(6.8)
–
–
–
–
–
58.1
(3.5)
(0.1)
–
–
(5.5)
(0.7)
235.7
* The minority interest share, or non-controlling interest, arises as a result of the Company not owning 100% of the share capital of one of its subsidiaries,
USAF (Feeder) Guernsey Limited. More detail is provided in note 3.4.
c) Earnings per share
The Basic EPS calculation is based on the earnings attributable to the equity shareholders of The Unite Group PLC and
the weighted average number of shares which have been in issue during the year. Basic EPS is adjusted in line with
EPRA guidelines in order to allow users to compare the business performance of the Group with other listed real estate
companies in a consistent manner and to reflect how the business is managed and measured on a day to day basis.
The calculations of basic and EPRA EPS for the year ended 31 December 2019 and 2018 are as follows:
(Loss)/earnings (£m)
Basic
Diluted
EPRA
Weighted average number of shares (thousands)
Basic
Dilutive potential ordinary shares (share options)
Diluted
(Loss)/earnings per share (pence)
Basic
Diluted
EPRA EPS
Note
2019
2018
2.2a
(89.2)
(89.2)
110.6
282,802
1,156
283,958
(31.5)p
(31.4)p
39.1p
235.7
235.7
88.4
259,466
828
260,294
90.8p
90.6p
34.1p
Movements in the weighted average number of shares have resulted from the issue of shares arising from the employee
share-based payment schemes and the equity raise.
In 2019, there were 15,545 (2018: 10,357) options excluded from the potential dilutive shares that did not affect the diluted
weighted average number of shares.
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Section 2: Results for the year continued
2.3 Net assets
EPRA net asset value per share makes adjustments to IFRS measures by principally removing some items that are not
expected to materialise in normal circumstances such as items of deferred tax and the fair value of financial derivatives.
The reconciliation between IFRS NAV and EPRA NAV is available in note 2.3c.
The Group’s Property business undertakes the acquisition and development of properties. The way in which the Property
segment adds value to the business is set out in the Property review on pages 62 to 67.
a) EPRA net assets
2019
Investment properties (owned)
Investment properties (leased)
Investment properties under development
Total property portfolio
Debt on properties
Lease liabilities
Cash
Net debt
Other assets and (liabilities)
EPRA net assets
Loan to value*
Loan to value post-IFRS 16
Unite
£m
Liberty Living
£m
1,462.2
1,944.7
110.4
393.4
1,966.0
(675.5)
(98.9)
67.6
(706.8)
(62.5)
1,196.7
33%
36%
–
18.4
1,963.1
(861.7)
–
19.3
(842.4)
(56.8)
1,063.9
43%
43%
Share of joint ventures
USAF
£m
628.0
–
–
628.0
(194.4)
–
5.2
(189.2)
(1.5)
437.3
30%
30%
LSAV
£m
667.5
–
–
667.5
(267.6)
–
22.8
(244.8)
(10.9)
411.8
37%
37%
* LTV calculated excluding investment properties (leased) and the corresponding lease liabilities.
2018
Investment properties
Investment properties under development
Total property portfolio
Debt on properties
Cash
Net debt
Other assets and (liabilities)
EPRA net assets
Loan to value
Share of joint ventures
Unite
£m
1,497.1
278.9
1,776.0
(594.8)
123.6
(471.2)
(13.3)
1,291.5
27%
USAF
£m
567.1
3.2
570.3
(174.6)
32.4
(142.2)
(4.9)
423.2
25%
LSAV
£m
621.7
–
621.7
(267.0)
23.9
(243.1)
(7.9)
370.7
39%
Group on
EPRA basis
Total
£m
4,702.4
110.4
411.8
5,224.6
(1,999.2)
(98.9)
114.9
(1,983.2)
(131.7)
3,109.7
37%
38%
Group on
EPRA basis
Total
£m
2,685.9
282.1
2,968.0
(1,036.4)
179.9
(856.5)
(26.1)
2,085.4
29%
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 b) Movement in EPRA NAV during the year
Contributions to EPRA NAV by each segment during the year is as follows:
2019
Operations
Operations segment result
Property
Rental growth
Yield movement
Disposal (losses)/gains
Investment property (owned) gains
Investment property (leased) losses
Disposal losses investment property (leased)
Development property gains
Pre-contract/other development costs
Total property
Unallocated
Shares issued
Investment in joint ventures
Acquisition of Liberty Living
Dividends paid
LSAV performance fee
Joint venture property acquisition fee
Swap cancellation and debt break costs
Other
Total unallocated
Total EPRA NAV movement in the year
Total EPRA NAV brought forward as reported
IFRS 16 transition
Total EPRA NAV brought forward revised
Total EPRA NAV carried forward
Share of joint ventures
Unite
£m
Liberty Living
£m
USAF
£m
LSAV
£m
Group on
EPRA basis
Total
£m
65.6
7.5
18.9
17.5
109.5
43.6
20.4
(5.5)
58.5
(8.1)
(1.1)
80.2
(1.5)
10.6
–
–
10.6
–
–
–
–
11.7
2.3
0.2
14.2
–
–
–
–
24.6
18.3
–
42.9
–
–
–
–
90.5
41.0
(5.3)
126.2
(8.1)
(1.1)
80.2
(1.5)
128.0
10.6
14.2
42.9
195.7
254.3
31.7
–
–
–
–
(18.2)
(13.5)
(514.8)
1,045.8
(70.7)
11.4
2.8
(2.7)
(3.6)
(291.6)
(98.0)
1,291.5
3.2
1,294.7
1,196.7
–
–
–
–
–
1,045.8
1,063.9
–
–
–
1,063.9
–
–
–
(0.6)
–
(0.2)
(19.0)
14.1
423.2
–
423.2
437.3
–
–
(5.7)
–
–
(0.1)
(19.3)
41.1
370.7
–
370.7
411.8
254.3
–
531.0
(70.7)
5.7
2.2
(2.7)
(3.9)
715.9
1,021.1
2,085.4
3.2
2,088.6
3,109.7
The £514.8 million acquisition of Liberty Living balance includes cash consideration of £492.0 million and acquisition costs
of £22.8 million. The £1,045.8 million balance represents the fair value of the net assets that were acquired (further details
can be found in note 6).
The £3.9 million other balance within the unallocated segment includes a tax charge of £0.7 million, fair value of share-
based payments charge of £2.2 million and £1.0 million for contributions to the Unite Foundation.
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Section 2: Results for the year continued
2.3 Net assets continued
b) Movement in EPRA NAV during the year continued
2018
Operations
Operations segment result
Property
Rental growth
Yield movement
Disposal and acquisition (losses)/gains
Investment property gains
Development property gains
Pre-contract/other development costs
Total property
Unallocated
Shares issued
Investment in joint ventures
Dividends paid
Swap cancellation and debt break costs
Other
Total unallocated
Total EPRA NAV movement in the year
Total EPRA NAV brought forward
Total EPRA NAV carried forward
Share of joint ventures
Unite
£m
60.1
38.8
37.4
(6.8)
69.4
29.6
(1.1)
97.9
166.7
63.4
(62.5)
(0.1)
(4.7)
162.8
320.8
970.7
1,291.5
USAF
£m
17.8
6.4
7.9
(3.4)
10.9
0.8
–
11.7
–
(5.3)
–
–
(0.2)
(5.5)
24.0
399.2
423.2
LSAV
£m
16.3
19.8
22.3
0.1
42.2
–
–
42.2
–
(58.1)
–
–
(0.2)
(58.3)
0.2
370.5
370.7
Group on
EPRA basis
Total
£m
94.2
65.0
67.6
(10.1)
122.5
30.4
(1.1)
151.8
166.7
–
(62.5)
(0.1)
(5.1)
99.0
345.0
1,740.4
2,085.4
The £5.1 million other balance within the unallocated segment includes a tax charge of £2.7 million, fair value of share-
based payments charge of £1.1 million, purchase of own shares of £0.4 million and £0.9 million for contributions to the
Unite Foundation.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 c) Reconciliation to IFRS
To determine EPRA NAV, net assets reported under IFRS are amended to exclude the mark to market valuation of swaps,
deferred tax liabilities and to recognise all properties at market value.
The Group also manages NAV using EPRA NNNAV, which adjusts EPRA NAV to include the fair value of swaps and debt.
Under EPRA best practice guidelines this is considered to give stakeholders the most relevant comparable information on
the current fair value of all the assets and liabilities in the Group.
The net assets reported under IFRS reconcile to EPRA NAV and EPRA NNNAV as follows:
Net asset value reported under IFRS
Mark to market interest rate swaps
Unamortised swap gain
Unamortised fair value of debt recognised on acquisition
Current tax
Deferred tax
EPRA NAV
Mark to market of fixed rate debt
Mark to market interest rate swaps
Current tax
Deferred tax
EPRA NNNAV
d) NAV per share
Note
2019
£m
3,071.5
8.3
(2.1)
32.4
(0.4)
–
2.3a
3,109.7
(93.5)
(8.3)
0.4
–
2018
£m
2,073.0
0.2
(2.3)
–
–
14.5
2,085.4
(38.0)
(0.2)
–
(14.5)
3,008.3
2,032.7
Basic NAV is based on the net assets attributable to the equity shareholders of The Unite Group PLC and the number of
shares in issue at the end of the year. The Board uses EPRA NAV and EPRA NNNAV to monitor the performance of the
Property segment on a day to day basis.
Net assets (£m)
Basic
EPRA
EPRA diluted
EPRA NNNAV (diluted)
Number of shares (thousands)
Basic
Outstanding share options
Diluted
Net asset value per share (pence)
Basic
EPRA
EPRA (fully diluted)
EPRA NNNAV (fully diluted)
Note
2.3c
2.3a
2019
2018
3,071.5
3,109.7
3,114.0
3,012.6
363,618
1,309
364,927
845p
855p
853p
826p
2,073.0
2,085.4
2,088.7
2,036.0
263,541
917
264,458
787p
791p
790p
770p
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Section 2: Results for the year continued
2.4 Revenue and costs
Accounting policies
The Group recognises revenue from the following major sources:
• Rental income
• Management and performance fees
• Acquisition fees
Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a
customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers
control of its service to a customer.
Rental income
Rental income comprises direct lets to students and leases to Universities and commercial tenants. This revenue is
recognised in the income statement over the length of the tenancy period as the Group provides the services to its
customers. Included in the rental contract is the use of broadband facilities and room cleaning services. The Group
does not offer these services as stand-alone products. Under IFRS 15 the Group does not consider these services to be
individually material and has, consequently, bundled these obligations as a single contract. The transaction prices for
rental income are explicitly stated in each contract. A contract liability can result from payments received in advance,
until the date at which control is transferred to the customer and at that point the revenue begins to be recognised
over the tenancy period. Lease incentives are sometimes recognised on commercial units; these are recognised as
an integral part of the total rental income and spread over the term of the lease.
Management and performance fees
The Group acts as asset and property manager for USAF and LSAV and receives management fees in relation to these
services. Revenue from these fees is recognised over time as the joint ventures simultaneously receive and consume
benefits as the Group performs its management obligations. Detailed calculations in order to determine the transaction
prices for these revenue streams are held within the joint venture agreements.
The Group is entitled to a USAF performance fee if the joint venture outperforms certain benchmarks. The Group
recognises a USAF performance fee at a point in time in the year to which the fee relates. The Group initially assesses
the probability of a fee being earned and its transaction price at half year and adjusts for any potential risks to receiving
this income at year end, when the achieved outturn is known. The USAF performance fee is settled within 12 months of
the year to which the fee relates and the Group receives an enhanced equity interest in USAF as consideration for the
performance fee.
The Group is entitled to a LSAV performance fee if the joint venture outperforms certain benchmarks over its life
ending in 2022. The Group recognises a LSAV performance fee at an amount which is considered ‘highly probable’ to
become due based upon estimates of the future performance of the joint venture; such estimates include future rental
income and the discount rate (yield). Prior to the maturity of the joint venture, the Group pro-rates the total LSAV
performance fee for the remaining life of the joint venture; at 31 December 2019, this was 70% based upon seven years
of the joint venture’s life. The amount which is considered ‘highly probable’ to become due is reassessed annually with
reference to the latest performance of the joint venture and forecasts. The LSAV performance fee is settled at the end
of the life of the joint venture in cash.
As per IFRS 15, the estimated amount of variable consideration is included in the transaction price only to the extent
that it is highly probable that a significant reversal in the amount of revenue recognised will not occur when the
uncertainty associated with the variable consideration is resolved. As the performance fee is variable and dependent
on meeting specific performance targets it is not reasonably possible to determine the future contractual income
relating to this revenue.
Acquisition fees
The Group receives acquisition fees from its joint venture partners. This revenue is linked to the acquisition of land or
property and is therefore recognised at the point in time that control of the asset is transferred to the joint venture.
The transaction price for this revenue stream is stipulated in the joint venture agreement as a percentage of the value
of the acquisition.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 The Group earns revenue from the following activities:
Rental income*
Management fees
LSAV performance fee
USAF acquisition fee
Operations segment
Operations segment
Unallocated
Unallocated
Note
2.2a
2.2a
Impact of minority interest on management fees
Total revenue
2019
£m
134.1
14.4
5.7
2.2
156.4
(0.2)
156.2
2018
£m
112.7
15.8
–
–
128.5
(0.2)
128.3
* EPRA earnings includes £213.9 million of rental income, which is comprised of £134.1 million recognised on wholly owned assets and a further £79.8 million
from joint ventures which is included in share of joint venture profit in the consolidated income statement.
The cost of sales included in the consolidated income statement includes property operating expenses of £33.0 million
(2018: £28.7 million).
2.5 Tax
As a REIT, rental profits and gains on disposal of investment properties are exempt from corporation tax. The Group
pays UK corporation tax on the profits from its residual business, including profits arising on construction operations
and management fees received from joint ventures, together with UK income tax on rental income that arises from
investments held by offshore subsidiaries in which the Group holds a minority interest.
Accounting policies
The tax charge for the year is recognised in the income statement and the statement of comprehensive income,
according to the accounting treatment of the related transaction. The tax charge comprises both current and
deferred tax.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to
tax payable in respect of previous years. The current tax charge is based on tax rates that are enacted or substantively
enacted at the year end.
Deferred tax arises due to certain temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and those for taxation purposes. Temporary differences relating to investments in
subsidiaries and joint ventures are not provided for to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities.
As a REIT, rental profits and gains on disposal of investment properties are exempt from corporation tax. As a result,
no deferred tax provision has been recognised at the balance sheet date in respect of property assets (revaluation and
capital allowances).
The Finance Act 2019 contains provisions that exempt gains arising in accounting periods beginning on or after 6
April 2019 on the disposal by a REIT of shares and other similar interests in entities that derive at least 75% of their
value from land situated in the UK. These provisions exempt the Group’s holdings in unit trusts from the charge to
corporation tax. As a result, the Group has reversed the deferred tax liability historically recognised in respect of these
investments, resulting in a credit to the income statement. The deferred tax asset in respect of losses has also been
reversed, to the extent that it was recognised against the liability on these investments.
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Section 2: Results for the year continued
2.5 Tax continued
a) Tax – income statement
The total taxation (credit)/charge in the income statement is analysed as follows:
Corporation tax on residual business income arising in UK companies
Income tax on UK rental income arising in non-UK companies
Adjustments in respect of prior periods
Current tax charge
Origination and reversal of temporary differences
Adjustments in respect of prior periods
Deferred tax (credit)/charge
Total tax (credit)/charge in income statement
2019
£m
2.1
0.4
(2.4)
0.1
(13.9)
0.2
(13.7)
(13.6)
2018
£m
3.5
0.4
0.2
4.1
4.5
(0.1)
4.4
8.5
The movement in deferred tax provided is shown in more detail in note 2.5d.
In the income statement, a tax credit of £13.6 million arises on a loss before tax of £101.2 million. The taxation credit that
would arise at the standard rate of UK corporation tax is reconciled to the actual tax credit as follows:
(Loss)/profit before tax
Income tax using the UK corporation tax rate of 19% (2018: 19%)
Property rental business profits exempt from tax in the REIT Group
Release of deferred tax liability due to legislative change
Non-taxable items relating to the acquisition of Liberty Living
Property revaluations not subject to tax
Effect of statutory tax reliefs
Effect of tax deduction transferred to equity on share schemes
Rate difference on deferred tax
Prior year adjustments
Total tax (credit)/charge in income statement
2019
£m
(101.2)
(19.2)
(15.2)
(13.6)
76.7
(40.5)
0.1
0.2
0.1
(2.2)
(13.6)
2018
£m
245.8
46.7
(13.5)
–
–
(24.9)
(0.2)
0.3
–
0.1
8.5
As a UK REIT, the Group is exempt from UK corporation tax on the profits from its property rental business. Accordingly,
the element of the Group’s profit before tax relating to its property rental business has been separately identified in the
reconciliation above.
Following the enactment of the Finance Act 2019 the Group has reversed the deferred tax liability historically recognised in
respect of its investments in unit trusts, resulting in a credit to the income statement. The deferred tax asset in respect of
losses has also been reversed, to the extent that it was recognised against the liability on these investments.
Deferred tax is an accounting adjustment intended to reflect tax that the Group may have to pay in the future if certain
events occur, and is distinct from the Group’s current tax charge (the latter being the tax actually payable to HM Revenue
& Customs for the year). Accordingly, a reversal of the deferred tax provision is an accounting only adjustment, and does
not result in the Group receiving a tax credit or refund.
Although the Group does not pay UK corporation tax on the profits from its property rental business, it is required to
distribute 90% of the profits from its property rental business after accounting for tax adjustments as a Property Income
Distribution (PID). PIDs are charged to tax in the same way as property income in the hands of the recipient. For the year
ended 31 December 2019, the required PID is expected to be fully paid by May 2020.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 b) Tax – other comprehensive income
Within other comprehensive income a tax charge totalling £nil (2018: £nil) has been recognised representing deferred tax.
c) Tax – statement of changes in equity
Within the statement of changes in equity a tax credit totalling £1.0 million (2018: £0.1 million credit) has been recognised
representing deferred tax. An analysis of this is included below in the deferred tax movement table.
d) Tax – balance sheet
The table below outlines the deferred tax (assets)/liabilities that are recognised in the balance sheet, together with their
movements in the year:
2019
At 31 December 2018
£m
Charged/(credited)
in income
£m
Charged/(credited)
in equity
£m
At 31 December 2019
£m
Investments
Property, plant and machinery
Share schemes
Tax value of carried forward losses recognised
Net tax (assets)/liabilities
24.4
(0.7)
(0.6)
(11.2)
11.9
(24.4)
0.1
(0.1)
10.7
(13.7)*
–
(0.3)
(0.6)
(0.2)
(1.1)
–
(0.9)
(1.3)
(0.7)
(2.9)
* The (£13.7 million) balance above includes two tax movements (Property, plant and machinery and Share schemes) which are included in EPRA, which
is why they are not included in the IFRS reconciliation in note 2.2b); removing them results in achieving the £14.3 million movement which is excluded
as per EPRA’s best practice recommendations.
2018
At 31 December 2017
£m
Charged/(credited)
in income
£m
Charged/(credited)
in equity
£m
At 31 December 2018
£m
Investments
Property, plant and machinery
Share schemes
Tax value of carried forward losses recognised
Net tax (assets)/liabilities
20.6
(0.8)
(0.9)
(11.3)
7.6
3.8
0.1
0.1
0.4
4.4*
–
–
0.2
(0.3)
(0.1)
24.4
(0.7)
(0.6)
(11.2)
11.9
* The £4.4 million balance above includes two tax movements (Property, plant and machinery and Share schemes) which are included in EPRA, which
is why they are not included in the IFRS reconciliation in note 2.2 b); removing them results in achieving the £5.5 million movement which is excluded
as per EPRA’s best practice recommendations.
Currently, the UK corporation tax rate is due to fall from 19% to 17% with effect from 1 April 2020. This will reduce the
Group’s future current tax charge accordingly. The deferred tax liability at 31 December 2019 has been calculated based
on the rate at which it is expected to reverse.
As a REIT, disposals of investment property are exempt from tax and as a result no deferred tax liability has been
recognised in relation to these assets.
The unit trusts in which the Group invests derive their value from UK land. The Finance Act 2019 contains provisions that
exempt capital gains on such units from the charge to UK tax to the extent they derive their value from UK property. As
a result, the Group reversed the deferred tax liability recognised in respect of these investments during 2019 resulting in
a credit to the income statement. The deferred tax asset in respect of losses has also been reversed, to the extent that it
was recognised against the liability on investments.
Company
Deferred tax has not been recognised on temporary differences of £126.3 million (2018: £191.0 million) in respect
of revaluation of subsidiaries and investment in joint ventures as it is considered unlikely that these investments will
be divested.
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Section 2: Results for the year continued
2.6 Audit fees
During the year, the Group obtained the following services from the Company’s auditor and its associates:
Fees payable to the Group’s auditors for the audit of the parent company and
consolidated financial statements
Fees payable to the Group’s auditors for other services to the Group:
– Audit of the financial statements of subsidiaries
Total audit fees payable to the Group’s auditors
Audit-related assurance services
Corporate finance services
Other services
Total non-audit fees
2019
£m
0.4
0.1
0.5
0.1
1.9
–
2.0
2018
£m
0.2
0.1
0.3
0.1
0.1
0.1
0.3
Non-audit fees almost entirely relate to Reporting Accountant services provided in respect of the acquisition of Liberty
Living. Further details are set out in the Audit Committee report on page 110.
Details on the Company’s policy on the use of the auditor for non-audit services is also set out in the Audit Committee
Report on pages 110 to 115.
No services were provided pursuant to contingent fee arrangements.
Section 3: Asset management
The Group holds its property portfolio directly and through its joint ventures. The performance of the
property portfolio, whether wholly owned or in joint ventures, is the key factor that drives net asset value
(NAV), one of the Group’s key performance indicators. The following pages provide disclosures about the
Group’s investments in property assets and joint ventures and their performance over the year.
3.1 Wholly owned property assets
The Group’s wholly owned property portfolio is held in three groups on the balance sheet at the carrying values
detailed below.
In the Group’s EPRA NAV, all these groups are shown at market value.
i) Investment property (owned)
These are assets that the Group intends to hold for a long period to earn rental income or capital appreciation. The assets
are held at fair value in the balance sheet with changes in fair value taken to the income statement.
ii) Investment property (leased)
These are assets the Group sold to institutional investors and simultaneously leased back. The assets are held at fair value
in the balance sheet with changes in fair value taken to the income statement.
iii) Investment property under development
These are assets which are currently in the course of construction and which will be transferred to Investment property on
completion. The assets are held at fair value in the balance sheet with changes in fair value taken to the income statement.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 Accounting policies
Investment property (owned) and investment property under development
Investment property (owned) and investment property under development are held at fair value.
The external valuation of property assets involves significant judgement and changes to the core assumptions: market
conditions, rental income, occupancy and property management costs, could have a significant impact on the carrying
value of these assets. Further details of the valuation process are included below.
Borrowing costs are capitalised if they are directly attributable to the acquisition and construction of a property asset.
Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress and expenditures
and borrowing costs are being incurred. Capitalisation of borrowing costs continues until the assets are substantially
ready for their intended use but stops if development activities are suspended. If the resulting carrying amount of
the asset exceeds its recoverable amount, an impairment loss is recognised. The capitalisation rate is arrived at by
reference to the actual rate payable on borrowings for development purposes or, with regard to that part of the
development cost financed out of general borrowings, to the average rate. During the year the average capitalisation
rate used was 5.8% (2018: 5.4%).
The recognition of acquisitions of investment property and land occurs on unconditional exchange of contracts, as
this is the date when control passes to Unite. The recognition of disposals of investment property occurs on legal
completion. In accordance with IFRS 15, revenue from the disposal of investment and other property is recognised at a
point in time.
Investment property (leased)
The Group has applied IFRS 16 in 2019 using the cumulative catch-up approach and therefore comparative information
has not been restated and is presented under IAS 17. The details of accounting policies under both IFRS 16 and IAS 17
are presented separately below.
Policy applicable from 1 January 2019
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-
of-use asset and a corresponding lease liability (see note 4.6a) with respect to all lease arrangements in which it is the
lessee. The assets are held at fair value in the balance sheet with changes in fair value taken to the income statement.
Policy applicable before 1 January 2019
Properties held under operating leases are not included in assets, but the future payments due in respect of these
properties are disclosed in note 4.6a.
Valuation process
The valuations of the properties are performed twice a year on the basis of valuation reports prepared by external,
independent valuers, having an appropriate recognised professional qualification. The fair values are based on market
values as defined in the RICS Appraisal and Valuation Manual, issued by the Royal Institution of Chartered Surveyors. CB
Richard Ellis Ltd, Jones Lang LaSalle Ltd and Messrs Knight Frank, Chartered Surveyors were the valuers in the years ended
31 December 2019 and 2018.
The valuations are based on:
•
Information provided by the Group such as current rents, occupancy, operating costs, terms and conditions of leases
and nomination agreements, capital expenditure, etc. This information is derived from the Group’s financial systems
and is subject to the Group’s overall control environment.
• Assumptions and valuation models used by the valuers – the assumptions are typically market related, such as yield
and discount rates. These are based on their professional judgement and market observation.
The information provided to the valuers – and the assumptions and the valuation models used by the valuers – are
reviewed by the Property Board and the CFO. This includes a review of the fair value movements over the year.
The fair value of the Group’s wholly owned properties and the movements in the carrying value of the Group’s wholly
owned property portfolio during the year ended 31 December 2019 are shown in the table below.
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Section 3: Asset management continued
3.1 Wholly owned property assets continued
The movements in the carrying value of the Group’s wholly owned property portfolio during the year ended 31 December
2019 are shown in the table below. The fair value of the Group’s wholly owned properties at the year ended 31 December
2019 is also shown below.
2019
At 1 January 2019
IFRS 16 transition (note 1)
Acquired through business combination (note 6)
Cost capitalised
Interest capitalised
Transfer from investment property under development
Transfer from work in progress
Disposals
Valuation gains
Valuation losses
Net valuation gains
Carrying and market value at 31 December 2019
Investment
property
(owned)
£m
1,497.1
–
1,933.7
6.5
–
189.8
–
(294.8)
88.1
(13.5)
74.6
3,406.9
Investment
property
(leased)
£m
Investment
property under
development
£m
–
128.0
–
6.3
–
–
–
(15.8)
–
(8.1)
(8.1)
110.4
278.9
–
18.4
208.2
9.1
(189.8)
6.8
–
86.1
(5.9)
80.2
411.8
Total
£m
1,776.0
128.0
1,952.1
221.0
9.1
–
6.8
(310.6)
174.2
(27.5)
146.7
3,929.1
The movements in the carrying value of the Group’s wholly owned property portfolio during the year ended 31 December
2018 are shown in the table below. The fair value of the Group’s wholly owned properties at the year ended 31 December
2018 is also shown below.
2018
At 1 January 2018
Cost capitalised
Interest capitalised
Transfer from investment property under development
Transfer from work in progress
Disposals
Valuation gains
Valuation losses
Net valuation gains
Carrying and market value at 31 December 2018
Investment
property
£m
1,261.4
10.5
–
204.5
–
(49.5)
75.6
(5.4)
70.2
1,497.1
Investment property
under development
£m
205.7
230.7
10.5
(204.5)
0.9
–
47.4
(11.8)
35.6
278.9
Total
£m
1,467.1
241.2
10.5
–
0.9
(49.5)
123.0
(17.2)
105.8
1,776.0
Included within investment properties at 31 December 2019 are £31.3 million (2018: £29.9 million) of assets held under a
long leasehold and £0.1 million (2018: £0.1 million) of assets held under short leasehold.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 Total interest capitalised in investment properties (owned) and investment properties under development at 31 December
2019 was £47.6 million (2018: £49.8 million) on a cumulative basis. Total internal costs capitalised in investment properties
(owned) and investment properties under development was £63.4 million at 31 December 2019 (2018: £59.6 million) on a
cumulative basis.
Recurring fair value measurement
All investment and development properties are classified as Level 3 in the fair value hierarchy.
Class of asset
London – rental properties
Prime provincial – rental properties
Major provincial – rental properties
Other provincial – rental properties
London – development properties
Prime provincial – development properties
Major provincial – development properties
Investment property (owned)
Investment property (leased)
Market value
2019
£m
1,015.0
876.5
1,198.1
317.3
245.1
76.1
90.6
3,818.7
110.4
3,929.1
2018
£m
499.8
298.3
409.4
289.6
49.1
125.4
104.4
1,776.0
–
1,776.0
The valuation technique for investment properties is a discounted cash flow using the following inputs: net rental income,
estimated future costs, occupancy and property management costs.
Where the asset is leased to a University, the valuations also reflect the length of the lease, the allocation of maintenance
and insurance responsibilities between the Group and the lessee, and the market’s general perception of the lessee’s
creditworthiness.
The resulting valuations are cross-checked against the initial yields and the capital value per bed derived from actual
market transactions.
For development properties, the fair value is usually calculated by estimating the fair value of the completed property
(using the discounted cash flow method) less estimated costs to completion.
Fair value using unobservable inputs (Level 3)
Opening fair value
IFRS 16 transition*
Acquired through business combination (note 6)
Gains and losses recognised in income statement
Capital expenditure
Disposals
Closing fair value
* Read more about the impact of transitioning to IFRS 16 on page 176.
2019
£m
1,776.0
128.0
1,952.1
146.7
236.9
(310.6)
3,929.1
2018
£m
1,467.1
–
–
105.8
252.6
(49.5)
1,776.0
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Section 3: Asset management continued
3.1 Wholly owned property assets continued
Quantitative information about fair value measurements using unobservable inputs (Level 3)
2019
London –
rental properties
Prime provincial –
rental properties
Major provincial –
rental properties
Other provincial –
rental properties
London –
development properties
Prime provincial –
development properties
Major provincial –
development properties
Investment property
(leased)
Fair value
£m
Valuation
technique
1,015.0 Discounted
cash flows
876.5 Discounted
cash flows
1,198.1 Discounted
cash flows
317.3 Discounted
cash flows
245.1 Discounted
cash flows
76.1 Discounted
cash flows
90.6 Discounted
cash flows
3,818.7
110.4
Discounted
cash flows
Unobservable inputs
Net rental income (£ per week)
Estimated future rent (%)
Discount rate (yield) (%)
Net rental income (£ per week)
Estimated future rent (%)
Discount rate (yield) (%)
Net rental income (£ per week)
Estimated future rent (%)
Discount rate (yield) (%)
Net rental income (£ per week)
Estimated future rent (%)
Discount rate (yield) (%)
Estimated cost to complete (£m)
Estimated future rent (%)
Discount rate (yield) (%)
Estimated cost to complete (£m)
Estimated future rent (%)
Discount rate (yield) (%)
Estimated cost to complete (£m)
Estimated future rent (%)
Discount rate (yield) (%)
Range
£192 – £367
3% – 5%
3.9% – 5.0%
£137 – £212
2% – 5%
4.5% – 6.0%
£74 – £157
2% – 5%
4.8% – 6.1%
£107 – £181
1% – 4%
5.0% – 15.5%
£30.8m – £91.4m
3%
4.0%
£16.8m – £76.4m
3%
4.8% – 5.0%
£35.1m – £46.8m
3%
4.5%
Net rental income (£ per week)
Estimated future rent (%)
Discount rate (yield) (%)
£121 – £167
3%
6.8%
Fair value at 31 December 2019
3,929.1
2018
London –
rental properties
Prime provincial –
rental properties
Major provincial –
rental properties
Other provincial –
rental properties
London –
development properties
Prime provincial –
development properties
Major provincial –
development properties
Fair value
£m
Valuation
technique
499.8
Discounted
cash flows
298.3
Discounted
cash flows
409.4
Discounted
cash flows
Discounted
cash flows
289.6
Discounted
cash flows
49.1
Discounted
cash flows
125.4
104.4
Discounted
cash flows
Unobservable inputs
Net rental income (£ per week)
Estimated future rent (%)
Discount rate (yield) (%)
Net rental income (£ per week)
Estimated future rent (%)
Discount rate (yield) (%)
Net rental income (£ per week)
Estimated future rent (%)
Discount rate (yield) (%)
Net rental income (£ per week)
Estimated future rent (%)
Discount rate (yield) (%)
Range
£184 – £355
2% – 7%
4.0% – 5.0%
£139 – £166
2% – 6%
4.5% – 6.0%
£99 – £149
1% – 5%
4.8% – 6.1%
£100 – £174
2% – 7%
4.9% – 15.0%
Estimated cost to complete (£m)
Estimated future rent (%)
Discount rate (yield) (%)
£63.3m – £186.3m
3%
4.3%
Estimated cost to complete (£m)
Estimated future rent (%)
Discount rate (yield) (%)
£15m – £77.1m
3%
4.5% – 5.3%
Estimated cost to complete (£m)
Estimated future rent (%)
Discount rate (yield) (%)
£19.4m – £57.8m
3%
5.3% – 5.5%
Fair value at 31 December 2018
1,776.0
Weighted
average
£277
4%
4.0%
£163
3%
5.0%
£129
3%
5.7%
£138
3%
6.6%
£65.6m
3%
4.0%
£43.2m
3%
4.9%
£39.6m
3%
4.5%
Weighted
average
£267
3%
4.2%
£153
3%
5.1%
£135
2%
5.6%
£138
4%
5.8%
£135.4m
3%
4.3%
£37.7m
3%
4.8%
£37.1m
3%
5.4%
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 Fair value sensitivity analysis
A decrease in net rental income or occupancy will result in a decrease in the fair value, whereas a decrease in the discount
rate (yield) will result in an increase in fair value. There are inter-relationships between these rates as they are partially
determined by market rate conditions.
Fair value at
31 December 2019
£m
+5%
change in
estimated
net rental income
£m
-5%
change in
estimated
net rental income
£m
+25 bps
change in
nominal
equivalent yield
£m
-25 bps
change in
nominal
equivalent yield
£m
1.015.0
876.5
1,198.1
317.3
245.1
76.1
90.6
1,062.8
955.0
1,252.4
322.1
262.2
85.2
100.7
962.6
865.7
1,134.0
291.4
228.0
67.1
80.5
953.4
866.2
1,143.6
294.9
227.2
67.1
83.3
1,079.9
959.5
1,247.4
319.6
265.2
88.2
99.2
3,818.7
4,040.4
3,629.3
3,635.7
4,059.0
Class of assets
Rental properties
London
Prime provincial
Major provincial
Other provincial
Development properties
London
Prime provincial
Major provincial
Market value
3.2 Inventories
Accounting policies
Inventories are shown at the lower of cost and net realisable value. Net realisable value is the estimated selling price
in the ordinary course of business less the estimated costs of completion and selling expenses. All costs directly
associated with the purchase and construction of a property, and all subsequent qualifying expenditure is capitalised.
Interests in land
Other stocks
Inventories
2019
£m
1.5
2.5
4.0
2018
£m
6.8
2.3
9.1
At 31 December 2019, the Group had interests in two pieces of land (2018: one piece of land).
3.3 Right of use assets and other non-current assets
Accounting policies
Leased assets
The Group has applied IFRS 16 using the cumulative catch-up approach and therefore comparative information has
not been restated and is presented under IAS 17. The details of accounting policies under both IAS 17 and IFRS 16 are
presented separately below.
Policies applicable from 1 January 2019
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right
of use asset and a corresponding lease liability (see note 4.6a) with respect to all lease arrangements in which it is the
lessee. Right of use assets have been measured following the approach in IFRS 16.C8(b)(ii), whereby right of use assets
are set equal to the lease liability, adjusted for prepaid or accrued lease payments. They are subsequently measured at
this initial value less accumulated depreciation and impairment losses.
Policies applicable before 1 January 2019
Assets held under operating leases are not included in other non-current assets, but the future payments due in
respect of these properties are disclosed in note 4.6a.
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Section 3: Asset management continued
3.3 Right of use assets and other non-current assets continued
Accounting policies continued
Property, plant and equipment
Other than land and buildings, property, plant and equipment are stated at cost less accumulated depreciation and
impairment losses (see below). Land and buildings are stated at fair value on the same basis as investment properties.
Property, plant and equipment mainly comprise leasehold improvements at the Group’s head office and London office
as well as computer hardware and software at these sites.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives. Freehold land
is not depreciated. The estimated useful lives are as follows:
• Right of use assets
Shorter of lease and economic life
• Property, plant and equipment
4–7 years
Intangible assets
Intangible assets predominantly comprise computer software which allows customers to book online and processes
transactions within the sales cycle. The expenditure capitalised includes the cost of materials, direct labour and an
appropriate proportion of overheads. The assets are amortised on a straight-line basis over four to seven years, being
the estimated useful lives of the intangible assets, from the date they are available for use. Amortisation is charged to
the income statement within operating expenses.
3.3a Right of use assets
Cost
At 1 January
Additions
Acquired through business combination
At 31 December
Amortisation
At 1 January
Amortisation charge for the year
At 31 December
Carrying value at 1 January
Carrying value at 31 December
Buildings
£m
2019
Other
£m
3.7
1.4
0.7
5.8
–
0.8
0.8
3.7
5.0
0.6
0.2
–
0.8
–
0.3
0.3
0.6
0.5
Total
£m
4.3
1.6
0.7
6.6
–
1.1
1.1
4.3
5.5
The Group leases several assets including office equipment and vehicles. The average lease term is three years.
Approximately 10% of the leases expired in the current financial year. The expired contracts were replaced by new leases
for identical underlying assets. This resulted in additions to right of use assets of £0.2 million in 2019.
The maturity analysis of lease liabilities is presented in note 4.6a.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019
3.3b Other non-current assets
The Group’s other non-current assets can be analysed as follows:
Cost or valuation
At 1 January
IFRS 16 transition*
Additions
Acquired through business combination
At 31 December
Depreciation and amortisation
At 1 January
IFRS 16 transition*
Depreciation/amortisation charge for the year
At 31 December
Carrying value at 1 January
Carrying amount at 31 December
Property,
plant and
equipment
£m
2019
Intangible
assets
£m
21.4
(10.7)
0.4
0.3
11.4
11.2
(4.0)
0.9
8.1
10.2
3.3
53.6
–
5.1
0.4
59.1
30.8
–
5.6
36.4
22.8
22.7
Property,
plant and
equipment
£m
2018
Intangible
assets
£m
20.1
–
1.3
–
21.4
9.1
–
2.1
11.2
11.0
10.2
47.0
–
6.6
–
53.6
25.6
–
5.2
30.8
21.4
22.8
Total
£m
75.0
(10.7)
5.5
0.7
70.5
42.0
(4.0)
6.5
44.5
33.0
26.0
Total
£m
67.1
–
7.9
–
75.0
34.7
–
7.3
42.0
32.4
33.0
* Read more about the impact of transitioning to IFRS 16 on page 176.
Intangible assets include £3.5 million (2018: £2.8 million) of assets not being amortised as they are not yet ready for use.
Property, plant and equipment assets include £0.8 million (2018: £0.6 million) of assets not being depreciated as they
are not ready for use. At 31 December 2019 the Group had capital commitments of £0.5 million (2018: £nil) relating to
intangible assets and £nil (2018: £nil) relating to Property, plant and equipment.
3.4 Investments in joint ventures (Group)
Accounting policies
Joint ventures are those entities over whose activities the Group has joint control, established by contractual
agreement. The consolidated financial statements include joint ventures initially at cost subsequently, increased or
decreased by the Group’s share of total gains and losses of joint ventures on an equity basis. Interest free joint venture
investment loans are initially recorded at fair value – the difference between the nominal amount and fair value
being treated as an investment in the joint venture. The implied discount is amortised over the contracted life of the
investment loan.
The Directors consider that the agreements integral to its joint ventures result in the Group having joint control over the
key matters required to operate the joint ventures. A significant degree of judgement is exercised in this assessment
due to the complexity of the contractual arrangements.
USAF and LSAV are jointly owned entities that are accounted for as joint ventures. Due to the complexity of the
contractual arrangements and Unite’s role as manager of the joint venture vehicles, the assessment of joint control
following changes to accounting standards (IFRS 10) involves judgements around a number of significant factors. These
factors include how Unite as fund manager has the ability to direct relevant activities such as acquisitions, disposals,
capital expenditure for refurbishments and funding whether through debt or equity. This assessment for USAF is
complex because of the number of unitholders and how their rights are represented through an Advisory Committee.
For some of the activities it is not clear who has definitive control of the activities: in some scenarios the Group can
control, in others the Advisory Committee. However, for the activities which are considered to have the greatest impact
on the returns of USAF, acquisitions and equity financing, it has been determined that the Group and the Advisory
Committee has joint control in directing these activities and that on balance, it is appropriate to account for USAF as a
joint venture. The assessment for LSAV is more straightforward because the Group and GIC each own 50% of the joint
venture and there is therefore much clearer evidence that control over the key activities is shared by the two parties.
197
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Section 3: Asset management continued
3.4 Investments in joint ventures (Group) continued
The Group has two joint ventures:
Joint venture
The UNITE UK Student
Accommodation Fund
(USAF)
London Student
Accommodation
Venture (LSAV)
23.4%* (26.9%)
50% (50%)
Group’s share of assets/
results 2019 (2018)
Objective
Invest and operate
student accommodation
throughout the UK
Partner
Consortium of investors
Legal entity in which
Group has interest
UNITE UK Student
Accommodation Fund,
a Jersey Unit Trust
Operate student
accommodation
in London
GIC Real Estate Pte, Ltd Real
estate investment vehicle of
the Government of Singapore
LSAV Unit Trust, a Jersey Unit
Trust and LSAV (Holdings) Ltd,
incorporated in Jersey
* Part of the Group’s interest is held through a subsidiary, USAF (Feeder) Guernsey Limited, in which there is an external investor. A minority interest
therefore occurs on consolidation of the Group’s results representing the external investor’s share of profits and assets relating to its investment in USAF.
The ordinary shareholders of The Unite Group PLC are beneficially interested in 22.0% (2018: 25.3%) of USAF.
a) Net assets and results of the joint ventures
The summarised balance sheets and results for the year, and the Group’s share of these joint ventures are as follows:
2019
Investment property
Cash
Debt
Swap liabilities
Other current assets
Other current liabilities
Net assets
Minority interest
Swap liabilities
EPRA net assets
Profit for the year
2018
Investment property
Cash
Debt
Swap assets/(liabilities)
Other current assets
Other current liabilities
Net assets
Minority interest
Swap (assets)/liabilities
EPRA net assets
Profit for the year
Gross
2,849.9
23.7
(882.1)
–
151.8
(160.6)
1,982.7
–
–
1,982.7
144.0
Gross
2,253.7
127.9
(690.0)
0.4
27.2
(57.9)
1,661.3
–
(0.4)
1,660.9
124.1
USAF
£m
MI
39.0
0.3
LSAV
£m
Total
£m
Share
628.0
5.2
Gross
1,335.0
45.6
Share
667.5
22.8
Gross
Share
4,184.9
1,334.5
69.3
(12.1)
(194.4)
(535.2)
(267.6)
(1,417.3)
–
2.1
(2.6)
26.7
(26.7)
–
–
2.1
USAF
£m
MI
35.4
2.0
–
33.4
(34.9)
437.3
–
–
437.3
37.1
(1.2)
2.7
(24.4)
822.5
–
1.2
823.7
126.9
(0.6)
1.3
(12.2)
411.2
–
0.6
411.8
63.4
(1.2)
154.5
(185.0)
2,805.2
–
1.2
2,806.4
270.9
LSAV
£m
Total
£m
Share
570.2
32.4
Gross
1,243.4
47.7
Share
621.7
23.9
Gross
3,497.1
175.6
(10.8)
(174.6)
(534.0)
(267.0)
(1,224.0)
–
0.4
(1.1)
25.9
(25.9)
–
–
1.8
0.1
6.9
(11.7)
423.3
–
(0.1)
423.2
32.7
(0.3)
0.4
(16.1)
741.1
–
0.3
741.4
122.6
(0.2)
0.2
(8.1)
0.1
27.6
(74.0)
370.5
2,402.4
–
0.2
370.7
61.3
–
(0.1)
2,402.3
246.7
28.3
(474.1)
(0.6)
36.8
(49.7)
875.2
(26.7)
0.6
849.1
102.6
Share
1,227.3
58.3
(452.4)
(0.1)
7.5
(20.9)
819.7
(25.9)
0.1
793.9
95.8
Net assets and profit for the year above include the minority interest, whereas EPRA net assets exclude the minority interest.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 b) Movement in carrying value of the Group’s investments in joint ventures
The carrying value of the Group’s investment in joint ventures increased by £55.5 million during the year ended
31 December 2019 (2018: £26.2 million), resulting in an overall carrying value of £875.2 million (2018: £819.7 million).
The following table shows how the increase has been achieved.
Recognised in the income statement:
Operations segment result
Minority interest share of Operations segment result
Management fee adjustment related to trading with joint venture
Net revaluation gains
Profit/(loss) on disposal of properties
Other
Recognised in equity:
Movement in effective hedges
Other adjustments to the carrying value:
Profit adjustment related to trading with joint venture
Additional capital invested in USAF
LSAV performance fee
Performance fee units issued in USAF
Redemption of units invested in LSAV
Distributions received
Increase in carrying value
Carrying value at 1 January
Carrying value at 31 December
2019
£m
36.4
1.1
6.8
58.3
0.4
(0.4)
102.6
(0.5)
(8.1)
–
(5.7)
–
–
(32.8)
55.5
819.7
875.2
2018
£m
34.1
1.1
6.4
58.1
(3.5)
(0.4)
95.8
1.2
(6.4)
8.6
–
4.0
(39.5)
(37.5)
26.2
793.5
819.7
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Section 3: Asset management continued
3.4 Investments in joint ventures (Group) continued
c) Transactions with joint ventures
The Group acts as asset and property manager for the joint ventures and receives management fees in relation to
these services.
In addition, the Group is entitled to performance fees from USAF and LSAV if the joint ventures outperform certain
benchmarks. The Group receives either cash or an enhanced equity interest in the joint ventures as consideration for
the performance fee. The Group has recognised the following gross fees in its results for the year.
USAF
LSAV
Asset and property management fees
LSAV performance fee
USAF acquisition fee
Investment management fees
Total fees
2019
£m
14.6
6.4
21.0
11.4
2.8
14.2
35.2
2018
£m
13.5
5.9
19.4
–
–
–
19.4
On an EPRA basis, fees from joint ventures are shown net of the Group’s share of the cost to the joint ventures.
The Group’s share of the cost to the joint ventures is £6.6 million (2018: £6.2 million), which results in management
fees from joint ventures of £14.4 million being shown in the Operating segment result in note 2.2a (2018: £13.2 million,
excluding £2.4 million third party management fee).
Investment management fees are included within the unallocated to segments section in note 2.2a.
During 2019, the Group sold five properties to USAF for gross proceeds of £202.3 million. All five properties had been held
on balance sheet as investment property within non-current assets. The proceeds and carrying value of the property are
therefore recognised in profit on disposal of property and the cash flows in investing activities. The profits relating to the
sales, associated disposal costs and related cash flows are set out below:
Included in profit on disposal of property (net of joint venture trading adjustment)
Profit on disposal of property
Gross proceeds
Net cash flows included in cash flows from investing activities
Profit and loss
2019
USAF
£m
1.8
1.8
Cash flow
2019
USAF
£m
202.3
202.3
2018
LSAV
£m
–
–
2018
LSAV
£m
1.0
1.0
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 201
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3.5 Investments in subsidiaries (Company)
Accounting policies
In the financial statements of the Company, investments in subsidiaries are held at fair value. Changes in fair value are
recognised in Other comprehensive income and presented in the revaluation reserve in equity.
Carrying value of investment in subsidiaries
The movements in the Company’s interest in unlisted subsidiaries and joint ventures during the year are as follows:
At 1 January
Additions
Revaluation
At 31 December
Investment in subsidiaries
2019
£m
1,189.4
1,397.1
(372.8)
2,213.7
2018
£m
926.6
–
262.8
1,189.4
The carrying value of investment in subsidiaries has been calculated using the equity attributable to the owners of
the parent company from the consolidated balance sheet adjusted for the fair value of fixed rate loans. This includes
investment property, investment property under development and swaps at a fair value calculated by a third party expert.
All investment properties and investment properties under development are classified as Level 3 in the IFRS 13 fair value
hierarchy and have been discussed on page 194. The fixed rate loans range between Level 1 and Level 2 in the IFRS 13 fair
value hierarchy and have been discussed further on page 202.
A full list of the Company’s subsidiaries and joint ventures can be found in note 10.
Section 4: Funding
The Group finances its development and investment activities through a mixture of retained earnings,
borrowings and equity. The Group continuously monitors its financing arrangements to manage its gearing.
Interest rate swaps are used to manage the Group’s risk to fluctuations in interest rate movements.
The following pages provide disclosures about the Group’s funding position, including borrowings, gearing
and hedging instruments; its exposure to market risks; and its capital management policies.
The Merger reserve arose on the acquisition of the Unilodge portfolio in June 2001.
Accounting policies
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group
becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value, less any attributable transaction costs, and
subsequently at amortised cost.
No financial assets or liabilities have been classified as either fair value through profit or loss or fair value through other
comprehensive income.
The accounting policies applicable to specific financial assets and liabilities, and financing costs, are set out in the
relevant notes.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on trade receivables.
The accounting policy is set out in full in note 5.2.
Derivative financial instruments
The Group enters into derivative financial instruments to manage its exposure to interest rate risk. Further details of
derivative financial instruments, including the relevant accounting policies, are disclosed in notes 4.2 and 4.5.
202
Section 4: Funding continued
4.1 Borrowings
Accounting policies
Interest bearing borrowings are recognised initially at fair value, less attributable transaction costs. Subsequent to initial
recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption
value being recognised in the income statement over the period of the borrowings on an effective interest basis.
The table below analyses the Group’s borrowings which comprise bank and other loans by when they fall due for payment:
Current
In one year or less, or on demand
Non-current
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
Unamortised fair value of debt recognised on acquisition
Total borrowings
Group – Carrying value
Company – Carrying value
2019
£m
1.4
1.5
964.7
567.6
1,533.8
32.4
1,567.6
2018
£m
1.3
85.6
110.3
395.4
591.3
–
592.6
2019
£m
–
–
172.2
270.0
442.2
–
442.2
2018
£m
0.5
84.2
–
271.4
355.6
–
356.1
In addition to the borrowings currently drawn as shown above, the Group has available undrawn facilities of £305.0 million
(2018: £350.0 million). A further overdraft facility of £10.0 million (2018: £10.0 million) is also available.
Properties with a carrying value of £604.7 million (2018: £638.1 million) have been pledged as security against the Group’s
drawn down borrowings. On the occurrence of certain specified events of default, for example the Group failed to
meet its payment obligations in relation to the secured borrowings, the secured lender would be entitled to enforce its
security over the relevant properties and sell them. The sale proceeds would then be applied in discharge of the relevant
borrowings.
The carrying value and fair value of the Group’s borrowings is analysed below:
Level 1 IFRS fair value hierarchy
Level 2 IFRS fair value hierarchy
Other loans and unamortised arrangement fees
Total borrowings
2019
2018
Carrying value
£m
Fair value
£m
Carrying value
£m
Fair value
£m
907.4
231.9
428.3
930.9
244.6
428.3
1,567.6
1,603.8
365.0
237.8
(10.2)
592.6
373.5
251.2
(10.2)
614.5
The fair value of loans classified as Level 1 in the IFRS fair value hierarchy is determined using quoted prices in active
markets for identical liabilities.
The fair value of loans classified as Level 2 in the IFRS fair value hierarchy has been calculated by a third party expert
discounting estimated future cash flows on the basis of market expectation of future interest rates. The fair value
represents the net present value of the difference between the contracted rate and the valuation rate when applied to the
projected balances for the period from the reported date to the contracted expiry date. Loans are valued using the mid-
point of the yield curve prevailing on the reporting date. The valuations do not include accrued interest from the previous
settlement date to the reporting date nor a credit valuation adjustment.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 203
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The following table shows the changes in liabilities arising from financing activities:
2019
Borrowings
Interest rate swaps
Total liabilities from financing activities
2018
Borrowings
Interest rate swaps
Total liabilities from financing activities
4.2 Interest rate swaps
at 1 January
2019
Financing
cash flows
592.6
0.1
592.7
79.0
–
79.0
Acquired
through business
combination
(note 6)
Fair Value
adjustments
Other
changes
at 31 December
2019
861.7
–
861.7
32.4
7.5
39.9
1.9
–
1.9
1,567.6
7.6
1,575.2
at 31 December
2017
Financing
cash flows
Fair Value
adjustments
Other
changes
at 31 December
2018
512.8
0.8
513.6
81.5
–
81.5
–
(0.7)
(0.7)
(1.7)
–
(1.7)
592.6
0.1
592.7
The Group uses interest rate swaps to manage the Group’s exposure to interest rate fluctuations. In accordance with the
Group’s treasury policy, the Group does not hold or issue interest rate swaps for trading purposes and only holds swaps
which are considered to be commercially effective.
Accounting policies
Interest rate swaps are recognised initially and subsequently at fair value, with mark to market movements recognised
in the income statement unless cash flow hedge accounting is applied.
The Group designates certain interest rate derivatives as hedging instruments. The interest rate swap is designated
as the hedging instrument in a hedge of the variability in cash flows attributable to the interest risk of borrowings. At
inception the Group documents the relationship between the hedging instrument and the hedged item, along with the
risk management objectives and its strategy for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging
instrument is effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged
risk, which is when the hedging relationships meet all of the following hedge effectiveness requirements:
• there is an economic relationship between the hedged item and the hedging instrument;
• the effect of credit risk does not dominate the value changes that result from that economic relationship; and
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the
Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity
of hedged item.
The effective portion of changes in fair value of the interest rate swap is recognised in Other comprehensive income
and presented under the heading of Hedging reserve in equity, limited to the cumulative change in fair value of the
hedged item from inception of the hedge. Any ineffective portion of changes in the fair value of the interest rate swap is
recognised immediately in profit or loss.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or
loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. If the
Group expects that some or all of the loss accumulated in the hedging reserve will not be recovered in the future, that
amount is immediately reclassified to profit or loss.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the
qualifying criteria. This includes instances when the hedging instrument expires or is sold, terminated or exercised.
The discontinuation is accounted for prospectively. Any gain or loss recognised in Other comprehensive income and
accumulated in the hedging reserve at that time remains in equity and is reclassified to profit or loss when the forecast
transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in the
hedging reserve is reclassified immediately to profit or loss.
The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the
swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of the
swap counterparties.
204
Section 4: Funding continued
4.2 Interest rate swaps continued
The following table shows the fair value of interest rate swaps:
Current
Non-current
Fair value of interest rate swaps
2019
£m
–
7.6
7.6
2018
£m
–
0.1
0.1
The fair value of interest rate swaps (a credit balance in 2019 and 2018) have been calculated by a third party expert,
discounting estimated future cash flows on the basis of market expectations of future interest rates, representing Level 2
in the IFRS 13 fair value hierarchy.
4.3 Net financing costs
Accounting policies
Net financing costs comprise interest payable on borrowings and interest on lease liabilities, less interest receivable on
funds invested (both calculated using the effective interest rate method) and gains and losses on hedging instruments
that are recognised in the income statement.
Recognised in the income statement:
Interest income
Amortisation of fair value of debt recognised on acquisition
Finance income
Gross interest expense on loans
Interest capitalised
Loan interest and similar charges
Interest on lease liabilities
Mark to market changes on interest rate swaps
Swap cancellation and loan break costs
Finance costs
Net financing costs
2019
£m
(5.1)
(0.4)
(5.5)
32.9
(9.1)
23.8
9.2
2.7
2.7
38.4
32.9
2018
£m
(0.9)
–
(0.9)
24.8
(10.5)
14.3
–
–
0.1
14.4
13.5
The average cost of the Group’s wholly owned investment debt for the year ended 31 December 2019 is 3.3% (2018: 3.8%).
The overall average cost of investment debt on an EPRA basis is 3.3% (2018: 3.8%).
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 4.4 Gearing
LTV is a key indicator that the Group uses to manage its indebtedness. The Group also monitors gearing, which is
calculated using EPRA net asset value (NAV) and adjusted net debt. Adjusted net debt excludes IFRS 16 lease liabilities, the
unamortised fair value of debt recognised on acquisition and mark to market of interest rate swaps as shown below.
The Group’s gearing ratios are calculated as follows:
Cash and cash equivalents
Current borrowings
Non-current borrowings
Lease liabilities
Interest rate swaps
Net debt per balance sheet
Lease liabilities
Unamortised fair value of debt recognised on acquisition
Adjusted net debt
Reported net asset value
EPRA net asset value
Gearing
Basic (net debt/reported net asset value)
Adjusted gearing (adjusted net debt/EPRA net asset value)
Loan to value
4.5 Financial risk factors
Note
5.1
4.1
4.1
4.6a
4.2
4.6a
2.3c
2.3c
2.3c
2.3a
2019
£m
86.9
(1.4)
(1,566.2)
(104.8)
(7.6)
(1,593.1)
104.8
32.4
(1,448.3)
3,071.5
3,109.7
52%
47%
37%
2018
£m
123.6
(1.3)
(591.3)
–
(0.1)
(469.1)
–
–
(469.0)
2,073.0
2,085.4
23%
22%
29%
The Group’s activities expose it to a variety of financial risks: market risks (primarily interest rate risk), credit risk and
liquidity risk. The Group’s treasury policy focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group’s financial performance. Details on credit risk can be found in note 5.3.
a) Interest rate risk
The Group is exposed to interest rate risk because entities in the Group borrow funds at both fixed and floating interest
rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings, and
by the use of interest rate swap contracts and forward interest rate contracts. Hedging activities are evaluated regularly to
align with interest rate views and defined risk appetite; ensuring the most cost-effective hedging strategies are applied.
The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk
management section of this note.
The Group holds its debt finance under both floating and fixed rate arrangements. The majority of floating debt is hedged
through the use of interest rate swap agreements. The Group’s policy guideline has been to hedge 75%–95% of the
Group’s exposure for terms of approximately two to ten years.
At 31 December 2019, after taking account of interest rate swaps, 93% (2018: 100%) of the Group’s borrowing was held at
fixed rates. Excluding the £342 million (2018: £nil) of swaps and caps the fixed investment borrowing is at an average rate
of 3.5% (2018: 4.4%) for an average period of 6.9 years (2018: 6.4 years), including all debt with current or forward starting
swaps the average rate is 3.2% (2018: 4.4%).
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest
amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of
changing interest rates on the fair value of issued fixed rate debt held and the cash flow exposures on the issued variable
rate debt held. The fair value of interest rate swaps at the reporting date is determined by discounting the future cash
flows using the curves at the reporting date and the credit risk inherent in the contract, and is disclosed below. The
average interest rate is based on the outstanding balances at the end of the financial year.
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Section 4: Funding continued
4.5 Financial risk factors continued
a) Interest rate risk continued
As the critical terms of the hedge contracts and their corresponding hedged items are the same, the Group performs
a qualitative assessment of effectiveness and it is expected that the value of the interest rate swap contracts and the
value of the corresponding hedged items will systematically change in opposite direction in response to movements in
the underlying interest rates. The main source of hedge ineffectiveness in these hedge relationships is the effect of the
counterparty and the Group’s own credit risk on the fair value of the hedge contracts, which is not reflected in the fair
value of the hedged item attributable to the change in interest rates. No other sources of ineffectiveness emerged from
these hedging relationships.
The Group holds interest rate swaps and caps at 31 December 2019 against £342 million (2018: £nil) of the Group’s
borrowings. The maturity of these swaps and the applicable interest rates are shown below, in line with disclosure under
IFRS 7:24B(b). The following tables detail various information regarding interest rate swap contracts outstanding at the
end of the reporting period and their related hedged items.
Hedging instruments
Within one year
Between one and two years
Between two and five years
More than five years
Hedged items
Variable rate borrowings
Applicable interest rates
Nominal amount hedged
Carrying amount of hedge
Change in fair value
2019
%
–
–
0.9
1.6
2018
%
–
–
–
–
2019
£m
–
–
342.3
100.0
2018
£m
–
–
–
–
2019
£m
–
–
(2.5)
(5.1)
2018
£m
–
–
(0.1)
–
2019
£m
–
–
(2.4)
(5.1)
2018
£m
–
–
0.6
–
Nominal amount
Change in value
Hedging reserve – continuing
Hedging reserve –
discontinued*
2019
£m
445.0
2018
£m
–
2019
£m
–
2018
£m
–
2019
£m
(5.5)
2018
£m
(0.2)
2019
£m
2.0
2018
£m
2.2
* Balance in cash flow hedging reserve representing the unamortised value of the realised swap gain from hedging relationship for which hedge accounting
is no longer applied.
The following table details the effectiveness of the hedging relationship and the amounts reclassified from hedging
reserve to profit or loss:
Gains/(losses)
in OCI
Hedge
ineffectiveness
2019
£m
2018
£m
2019
£m
2018
£m
Variable rate borrowings
(4.8)
0.6
(2.7)
–
Reclassified
to P&L –
discontinued
Reclassified
to P&L –
continuing
2019
£m
2018
£m
2019
£m
2018
£m
0.2
0.1
–
–
Line item in P&L
Other gains
and losses
Line item in P&L
Loan interest and
similar charges
The interest rate swaps settle on a monthly basis. The floating rate on the interest rate swaps is one-month LIBOR.
The Group will settle the difference between the fixed and floating interest rate on a net basis.
All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are designated
as cash flow hedges to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings. The
interest rate swaps and the interest payments on the loan occur simultaneously and the amount accumulated in equity is
reclassified to profit or loss over the period that the floating rate interest payments on debt affect profit or loss.
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and
non-derivative instruments as at 31 December 2019. For floating rate liabilities, the analysis is prepared assuming the
amount of liability outstanding at the reporting date was outstanding for the whole year. A 1% increase or decrease is
used when reporting interest rate risk internally to key management personnel and represents management’s assessment
of the reasonably possible change in interest rates.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 If interest rates had been 1% higher and all other variables were held constant, the Group’s profit for the year ended
31 December 2019 would decrease by £nil (2018: decrease by £1.1 million). This is mainly attributable to the Group’s high
proportion of hedging. The Group’s sensitivity to interest rates has reduced during the current year mainly due to the high
proportion of debt hedged.
b) Credit risk on financial instruments
In order to minimise credit risk, the Group has adopted a policy of only dealing with creditworthy counterparties and
obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.
The Group only transacts with entities that are rated the equivalent of investment grade and investments in these
instruments, where the counterparties have minimum A- credit rating, are considered to have low credit risk for the
purpose of impairment assessment. The credit rating information is supplied by independent rating agencies where
available and, if not available, the Group uses other publicly available financial information including CDS price and its
own trading records to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are
continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties in
line with Board policy.
Before accepting any new customer, the finance team uses external credit ratings to assess the potential customer’s credit
quality and defines credit limits by customer. Monitoring procedures are also in place to ensure that follow-up action is
taken when ratings deteriorate. The Group does not hold any credit enhancements to cover its credit risks associated with
its financial assets.
The Group considers the following as constituting an event of default for internal credit risk management purposes as
historical experience indicates that financial assets that meet either of the following criteria are generally not recoverable;
• when there is a breach of financial covenants by the debtor; or
•
information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its
creditors, including the Group, in full (without taking into account collateral held by the Group).
Details of the credit quality of the Group’s financial assets as well as the Group’s maximum exposure to credit risk by credit
risk rating grades are set out on note 5.3.
c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an
appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term
funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves,
banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by
matching the maturity profiles of financial assets and liabilities. Details of additional undrawn facilities that the Group has
at its disposal to further reduce liquidity risk are set out below.
For development activities, the Group has a policy of raising substantially the full amount of equity required for each
development before drawing debt against the development. The funding requirements of developments are therefore
secured at the outset of works.
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities with
agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities
based on the earliest date on which the Group can be required to pay.
The contractual maturity is based on the earliest date on which the Group may be required to pay.
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Section 4: Funding continued
4.5 Financial risk factors continued
c) Liquidity risk continued
31 December 2019
Weighted
average
effective
interest
rate
%
2.3
3.5
4.2
n/a
Weighted
average
effective
interest
rate
%
–
4.4
n/a
Variable interest rate instruments
Fixed interest rate instruments
Lease liabilities
Trade and other payables
Total
31 December 2018
Variable interest rate instruments
Fixed interest rate instruments
Trade and other payables
Total
Less than
1 month
£m
1–3
months
£m
3 months
– 1 year
£m
–
–
0.3
–
0.3
–
–
0.6
234.7
235.3
–
–
3.0
–
3.0
1–5
years
£m
445.0
231.9
20.4
–
5+
years
£m
–
875.0
80.5
–
Total
£m
445.0
Carrying
amount
£m
445.0
1,106.9
1,106.9
104.8
234.7
104.8
234.7
697.3
955.5
1,891.4
1,891.4
Less than
1 month
£m
1–3
months
£m
3 months
– 1 year
£m
–
–
–
–
–
–
141.5
141.5
–
–
–
–
1–5
years
£m
–
5+
years
£m
–
203.8
399.0
–
–
203.8
399.0
Total
£m
–
602.8
141.5
744.3
Carrying
amount
£m
–
602.8
141.5
744.3
The Group has access to financing facilities as described below, of which £315 million were unused at the reporting date
(2018: £350 million). The Group expects to meet its other obligations from operating cash flows.
Unsecured bank overdraft facility, reviewed annually and payable at call:
– amount used
– amount unused
Unsecured committed bank loan facilities which may be extended by mutual agreement:
– amount used
– amount unused
d) Covenant compliance
31 December 2019
£m
31 December 2018
£m
–
10.0
10.0
195.0
305.0
500.0
–
10.0
10.0
–
350.0
350.0
The Group monitors its covenant position and the forecast headroom available on a monthly basis. At 31 December 2019,
the Group was in full compliance with all of its borrowing covenants.
The information below relates to Unite debt excluding the debt acquired as part of the acquisition of Liberty Living. The terms
of the covenants and reporting dates relating to Liberty Living debt are currently being negotiated for the enlarged group.
The Group’s unsecured borrowings carry several covenants. The covenant regime is IFRS based and gives the Group
substantial operational flexibility, allowing property acquisitions, disposals and developments to occur with relative freedom.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 Gearing
Unencumbered assets ratio
Secured gearing
Development assets ratio
Joint venture ratio
Interest cover
31 December 2019
31 December 2018
Covenant
Actual
Covenant
Actual
< 1.50
> 1.70
< 0.25
< 30%
< 55%
> 2.00
0.50
2.52
0.05
9%
19%
7.6
< 1.50
> 1.70
< 0.25
< 30%
< 55%
> 2.00
0.23
4.19
0.09
11%
31%
7.8
The Group’s two secured loan facilities carry separate covenants. The covenant headroom position on secured loans is
outlined below and assumes that the Group is able to use available cash within net debt.
31 December 2019
31 December 2018
Weighted covenant
Weighted actual Weighted covenant
Weighted actual
75%
1.5
36%
2.6
75%
1.5
34%
2.7
Loan to value
Interest cover
4.6 Leases
a) Lease liabilities
Accounting policies
The Group has applied IFRS 16 using the cumulative catch-up approach and therefore comparative information has
not been restated and is presented under IAS 17. The details of accounting policies under both IFRS 16 and IAS 17 are
presented separately below.
Policies applicable from 1 January 2019
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a
right of use asset (see note 3.1a) and a corresponding lease liability with respect to all lease arrangements in which
it is the lessee.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined,
the Group uses its incremental borrowing rate.
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability whenever:
• The lease term has changed, in which case the lease liability is remeasured by discounting the revised lease payments
using a revised discount rate.
• The lease payments change due to changes in an index, in which cases the lease liability is remeasured by discounting
the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in
a floating interest rate, in which case a revised discount rate is used).
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the
lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments
using a revised discount rate at the effective date of the modification.
The Group did not make any such adjustments during the period presented.
Policies applicable before 1 January 2019
Payments made under operating leases are recognised in the income statement on straight-line basis over the
term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total
lease expense.
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Section 4: Funding continued
4.6 Leases continued
a) Lease liabilities continued
2019
Lease liabilities
Analysed as:
Non-current
Current
Total lease liability
Lease liability maturity analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
Total
2019
£m
100.9
3.9
104.8
3.9
4.4
4.6
5.3
6.1
80.5
104.8
The Group does not face a significant liquidity risk with regard to its lease liabilities. Lease liabilities are monitored within
the Group’s treasury function.
2018
The total future minimum lease rentals payable under non-cancellable leases fall due for repayment as follows:
Less than one year
Between one and five years
More than five years
Total
2018
£m
13.7
55.7
145.5
214.9
These leases primarily relate to properties which the Group has sold and leased back and on which rental income is
earned. The leases are generally for periods between 11 and 16 years and subject to annual RPI-based rent review. The
total operating lease expenditure incurred during 2018 was £13.8 million.
b) Lease receivables
The Group has applied IFRS 16 using the cumulative catch-up approach and therefore comparative information has not
been restated and is presented under IAS 17.
The Group accounts for its tenancy contracts offered to commercial and individual tenants as operating leases.
Operating lease contracts with Universities contain RPI uplifts and market review clauses.
The lessee does not have an option to purchase the property at the expiry of the lease period.
Maturity analysis of operating lease receivables
The future minimum lease payments receivable under non-cancellable operating leases are as follows:
Less than one year
Between one and five years
More than five years
Total
2019
£m
196.3
241.3
359.3
796.9
2018
£m
96.9
160.8
279.3
537.0
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 4.7 Capital management
The capital structure of the Group consists of shareholders’ equity and adjusted net debt, including cash held on deposit.
The Group’s equity is analysed into its various components in the Statement of Changes in Equity. The components and
calculation of adjusted net debt is set out in note 4.4. Capital is managed so as to continue as a going concern and to promote
the long-term success of the business and to maintain sustainable returns for shareholders and joint venture partners.
The Group uses a number of key metrics to manage its capital structure:
• adjusted net debt (note 4.4)
• adjusted gearing (note 4.4)
• LTV (note 2.3a)
• weighted average cost of investment debt (note 4.5a)
In order to manage levels of adjusted gearing over the medium term, the Group seeks to deliver NAV growth and to recycle
capital invested in lower performing assets into new assets and property developments. £295.5 million of property assets
were sold in 2019 and we plan to sell £100–£150 million of property during 2020. The Group targets a yield on cost of
approximately 7%. The Group does not commit to developing new sites until sufficient equity and funding to fulfil the
full cost of the development is secure.
The Board monitors the ability of the Group to pay dividends out of available cash and distributable profits. Based on
the assumption that no shareholders take up the scrip dividend, the full year dividend will not be covered by operating
cash flows. The full year (interim plus final) dividend is expected to be £106.7 million compared to operating cash flow
of £90.4 million. The shortfall is due to the fact that a significant number of shares were issued to existing shareholders
and CPPIB in 2019 as part of the acquisition of Liberty Living, whilst the Group only owned Liberty Living for one month.
As the Group will earn a full year of income from the Liberty Living portfolio and deliver synergies in 2020, it is expected
that the 2020 full year dividend will be covered by operating cash flows.
4.8 Equity
Accounting policies
Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares, other than on
a business combination, are shown as a deduction, net of tax, in equity from the proceeds. Share issue costs incurred
directly in connection with a business combination are deducted from the proceeds of the issue.
The Company’s issued share capital has increased during the year as follows:
Called up, allotted and fully paid
ordinary shares of £0.25p each
At 1 January
Shares issued (placing)
Shares issued (scrip dividend)
No. of
shares
263,515,151
26,353,664
1,017,472
Shares issued (consideration for Liberty Living (note 6))
72,582,286
Shares issued (options exercised)
At 31 December
123,309
363,591,882
2019
Ordinary
shares
£m
65.9
6.6
0.3
18.1
–
90.9
Share
Premium
£m
No. of
shares
2018
Ordinary
shares
£m
740.5 240,830,281
60.2
247.6
22,128,782
(0.3)
78,090
887.0
0.1
–
477,998
5.5
0.1
–
0.1
Share
Premium
£m
579.5
160.7
(0.1)
–
0.4
1,874.9 263,515,151
65.9
740.5
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote
per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
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Section 4: Funding continued
4.9 Dividends
Accounting policies
Dividends are recognised through equity on the earlier of their approval by the Company’s shareholders or their payment.
During the year, the Company declared and paid an interim dividend of £23.2 million – 10.25p per share (2018: £24.3
million – 9.5p per share) and paid a £47.5 million final dividend – 19.5p per share relating to the year ended 31 December
2018 (2018: £38.2 million – 15.4p per share relating to the year ended 31 December 2017).
After the year end, the Directors proposed a final dividend per share of 22.95p (2018: 19.5p), bringing the total dividend
per share for the year to 33.2p (2018: 29.0p). No provision has been made in relation to this dividend.
The Group has modelled tax adjusted property business profits for five years and declared PIDs in respect of the May 2019
and November 2019 distributions to ensure that the PID requirement will be satisfied. For the year ended 31 December
2019 the required PID is expected to be fully paid by May 2020.
Section 5: Working capital
This section focuses on how the Group generates its operating cash flows. Careful management of working
capital is vital to ensure that the Group can meet its trading and financing obligations within its ordinary
operating cycle.
On the following pages you will find disclosures around the Group’s cash position and how cash is generated
from the Group’s trading activities, and disclosures around trade receivables and payables.
Accounting policies
Cash and cash equivalents comprise cash balances and call deposits. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk
of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash
management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
5.1 Cash and cash equivalents
The Group’s cash position at 31 December 2019 was £86.9 million (2018: £123.6 million).
The Group’s cash balances include £2.6 million (2018: £2.4 million) whose use at the balance sheet date is restricted by
funding agreements to pay operating costs and loan interest relating to specific properties.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 The Group generates cash from its operating activities as follows:
Group
Company
2018
£m
237.3
2019
£m
(139.9)
2018
£m
252.1
(Loss)/profit for the year
Adjustments for:
Depreciation and amortisation
Impairment of goodwill and acquired intangible asset
Acquisition costs
Fair value of share-based payments
Dividends received
Change in value of investment property (owned)
Change in value of investment property (leased)
Change in value of investments
Net finance costs excluding interest on lease liabilities
Loss on disposal of investment property (owned)
Loss on disposal of investment property (leased)
Share of joint venture profit
Trading with joint venture adjustment
Tax (credit)/charge)
Note
£m
3.3
6
6
7.1
3.1
3.1
3.5
4.3
3.4b
2.5a
Cash flows from operating activities before changes in working capital
Increase in trade and other receivables
Increase in inventories
Decrease in trade and other payables
Cash flows from operating activities
Tax paid
Net cash flows from operating activities
2019
£m
(87.6)
7.6
384.1
22.8
2.2
–
7.3
–
–
1.1
–
(154.8)
(105.8)
8.1
–
23.7
6.2
1.1
(102.6)
8.1
(13.6)
105.3
(1.6)
(1.7)
(21.3)
80.7
(2.2)
78.5
–
–
13.5
6.8
–
(95.8)
6.4
8.5
79.2
(4.5)
(5.5)
(5.8)
63.5
(3.8)
59.7
–
–
–
–
(276.0)
–
–
372.9
13.9
–
–
–
–
–
–
–
–
–
–
–
–
(262.8)
7.3
–
–
–
–
–
(28.5)
(3.4)
0.1
–
25.9
(2.5)
–
(2.5)
–
–
2.9
(0.5)
–
(0.5)
In 2019, none of the brought forward trade and other receivables was settled in units in USAF rather than cash (2018: £4.0
million).
Cash flows consist of the following segmental cash inflows/(outflows): operations £85.4 million (2018: £81.2 million),
property £191.8 million (2018: (£138.3 million)) and unallocated (£314.5 million) (2018: £129.5 million).
The unallocated amount includes a net cash outflow of (£487.1 million) in respect of the acquisition of Liberty Living (2018:
£nil), amounts received from shares issued £254.7 million (2018: £166.7 million), dividends paid (£69.6 million) (2018: (£62.5
million)), tax paid (£2.2 million) (2018: (£3.8 million)) and investment in joint ventures £nil (2018: £30.9 million).
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Section 5: Working capital continued
5.2 Trade and other receivables
Accounting policies
On the basis that trade receivables meet the business model and cash flow characteristics tests, they are initially
recognised at transaction price and then subsequently measured at amortised cost.
The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as
these items do not have a significant financing component.
In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess
shared credit risk characteristics. They have been grouped based on the days past due and also according to whether
the tenant is a commercial organisation (including Universities) or an individual student.
The expected loss rates are based on the payment profile for sales by academic year as well as the corresponding
historical credit losses during the period. The historical rate are adjusted to reflect any current and forwarding looking
macroeconomic factors affecting the customer’s ability to settle the amount outstanding, however given the short
period exposed to credit risk, the impact of macroeconomic factors has not been considered significant within the
reporting period.
Trade receivables are written off (ie derecognised) when there is no reasonable expectation of recovery. Failure to
make payments within a reasonable period from the invoice date and failure to engage with the Group on alternative
payment arrangements, amongst others are considered indicators of no reasonable expectation of recovery.
Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking
into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.
Trade and other receivables can be analysed as follows; all trade and other receivables are current.
Trade receivables
Amounts due from Group undertakings (note 5.5)
Amounts due from joint ventures
LSAV performance fee
Prepayments and accrued income
Other receivables
Trade and other receivables
Group
Company
2019
£m
30.5
–
18.7
11.4
20.0
6.5
87.1
2018
£m
22.8
–
36.7
–
14.9
13.7
88.1
2019
£m
–
2018
£m
–
1,208.0
1,095.4
–
–
–
0.1
–
–
0.2
0.1
1,208.1
1,095.7
The Group offers tenancy contracts to commercial (Universities and retail unit tenants) and individual tenants based on
the academic year. The Group monitors and manages the recoverability of its receivables based on the academic year to
which the amounts relate. Rental income is payable immediately, therefore all receivables relating to tenants are past the
payment due date.
We do not anticipate there to be any expected credit loss on amounts receivable from joint ventures as these remain
highly profitable.
Details of amounts due from Group undertakings to the Company are disclosed in note 5.5.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 2019
Rental debtors
Commercial tenants (past due and impaired)
Individual tenants (past due and impaired)
Expected credit loss carried
Trade receivables
2018
Rental debtors
Commercial tenants (past due and impaired)
Individual tenants (past due and impaired)
Expected credit loss carried
Trade receivables
Ageing by academic year
Total
£m
2019/20
£m
2018/19
£m
Prior years
£m
0.4
34.0
(3.9)
30.5
Total
£m
0.4
24.5
(2.1)
22.8
0.3
29.6
–
29.9
0.1
1.8
(1.6)
0.3
–
2.6
(2.3)
0.3
Ageing by academic year
2018/19
£m
2017/18
£m
Prior years
£m
0.1
23.1
–
23.2
0.3
0.2
(0.9)
(0.4)
–
1.2
(1.2)
–
2018
£m
1.8
–
0.3
–
2.1
Movements in the Group’s expected credit losses of trade receivables can be shown as follows:
At 1 January
Acquired on acquisition
Expected credit loss charged to income statement in year
Receivables written off during the year (utilisation of expected credit loss)
At 31 December
2019
£m
2.1
1.4
0.9
(0.5)
3.9
The loss allowance for trade receivables is estimated as an amount equal to the lifetime expected credit loss (ECL).
This loss has been estimated using the Group’s history of loss for similar assets and takes into account current and
forecast conditions.
The impact of credit losses is not considered significant in respect of the financial statements.
5.3 Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations. It arises principally from the Group’s cash balances, the Group’s receivables from customers and
joint ventures and loans provided to the Group’s joint ventures.
At the year end, the Group’s maximum exposure to credit risk was as follows:
Cash
Trade receivables
Amounts due from joint ventures
Note
5.1
5.2
5.2
2019
£m
86.9
30.5
30.1
147.5
2018
£m
123.6
22.8
36.7
183.1
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Section 5: Working capital continued
5.3 Credit risk continued
a) Cash
The Group operates investment guidelines with respect to surplus cash. Counterparty limits for cash deposits are largely
based upon long-term ratings published by credit rating agencies and credit default swap rates. Deposits were placed with
financial institutions with A- or better credit ratings.
b) Trade receivables
The Group’s customers can be split into two groups – (i) students (individuals) and (ii) commercial organisations including
Universities. The Group’s exposure to credit risk is influenced by the characteristics of each customer. The Group holds
customer deposits of £1.0 million (2018: £0.9 million) as collateral against individual customers.
c) Joint ventures
Amounts receivable from joint ventures fall into two categories – working capital balances and investment loans. The
Group has strong working relationships with its joint venture partners and therefore views this as a low credit risk balance.
5.4. Trade and other payables
Accounting policies
Trade payables are initially recognised at the value of the invoice received from a supplier (fair value) and subsequently
at amortised cost. The carrying value of trade payables is considered approximate to fair value.
Trade and other payables due within one year can be analysed as follows:
Trade payables
Retentions on construction contracts for properties
Amounts due to Group undertakings
Amounts due to joint venture
Other payables and accrued expenses
Deferred income
Trade and other payables
Group
Company
2019
£m
15.7
5.8
–
12.0
110.5
90.7
234.7
2018
£m
26.6
9.1
–
–
46.1
59.7
141.5
2019
£m
–
–
19.1
–
7.0
–
26.1
2018
£m
–
–
2.6
–
5.3
–
7.9
Other payable and accrued expenses include £1.0 million (2018: £0.9 million) in relation to customer deposits. These will
be returned at the end of the tenancy subject to the condition of the accommodation and payment of any outstanding
amounts. Deferred income relates to rental income that has been collected in advance of it being recognised as revenue.
Included within accrued expenses is £50.5 million of capital commitments, relating to investment properties under
development, which will be settled in 2020 (2018: £nil).
5.5 Transactions with other Group companies
During the year, the Company entered into various interest-free, repayable on demand loans with its subsidiaries, the
aggregate of which are disclosed in the cash flow statement. In addition, the Company was charged by Unite Integrated
Solutions plc for corporate costs of £3.2 million (2018: £2.5 million).
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 217
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As a result of these intercompany transactions, the following amounts were due from/to the Company’s subsidiaries at the
year end.
Unite Holdings plc
LDC (Holdings) plc
Amounts due from Group undertakings
Unite Integrated Solutions Ltd
Amounts due to Group undertakings
2019
£m
141.5
1,066.5
1,208.0
19.1
19.1
2018
£m
141.7
953.7
1,095.4
2.6
2.6
The Company has had a number of transactions with its joint ventures, which are disclosed in note 3.4c.
The Company has guaranteed £50.5 million of its subsidiary companies’ liabilities (2018: £nil). The guarantees have been
entered into in the normal course of business. A liability would only arise in the event of the subsidiary failing to fulfil its
contractual obligations. These guarantees are accounted for in accordance with IFRS 4.
Section 6: Business combination
Accounting policies
At the time of acquisition, the Group considers whether each acquisition represents the acquisition of a business or the
acquisition of an asset. The Group accounts for an acquisition as a business combination where an integrated set of
activities are acquired in addition to the property. When the acquisition of a subsidiary does not represent a business,
it is accounted for as an acquisition of assets and liabilities. The cost of acquisition is allocated to the assets and
liabilities acquired based on their fair values, and no goodwill or deferred tax is recognised.
A business combination may also require the recognition of identifiable intangible assets by the Group. An intangible
asset is deemed to be identifiable if it is able to be separated or divided from the other assets acquired in the business
combination and sold, licensed or exchanged for something else of value, even if the intention to do so is not present
on behalf of the Group.
Business combinations are accounted for using the acquisition method. The cost of the acquisition is measured as
the fair value of the assets given and equity instruments issued. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the date of
acquisition. Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the
net identifiable assets, including intangible assets, of the acquired entity at the date of acquisition. If the cost of the
acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly
in the income statement. Costs attributable to an acquisition of a business are expensed in the consolidated
income statement under the heading ‘Acquisition costs’.
Goodwill is allocated to cash generating units for the purpose of impairment testing and is tested annually for
impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
On 29 November 2019, the Group completed the acquisition of Liberty Living for total consideration of £1,397.1 million.
This comprised cash consideration paid of £492.0 million and the fair value of new shares issued of £905.1 million.
The consideration for the acquisition was calculated on a NAV-for-NAV basis as at 31 March 2019 with certain agreed
adjustments applied to the EPRA NAVs of Unite and the Liberty Living portfolio. The share price at completion is used to
calculate the fair value of the shares issued and there was a strong appreciation in the share price between announcement
on 3 July 2019 and completion on 29 November 2019.
The acquisition of Liberty Living was accounted for as a business combination due to the integrated set of activities
acquired in addition to the properties. Accordingly, transaction and subsequent structuring costs incurred in relation to
the acquisition of £22.8 million have been expensed in the consolidated income statement.
As the acquisition has been categorised as a business combination, any premium paid over the fair value of the assets
acquired is treated as goodwill in the consolidated balance sheet at the time of acquisition. Goodwill of £377.4 million
arising in respect of the transaction was recognised on acquisition, as detailed below.
218
Section 6: Business combination continued
The fair value of the identifiable assets and liabilities of Liberty Living acquired as at the date of acquisition were:
Investment property
PPE and intangibles assets
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
Total identifiable net assets acquired
IFRS book value
£m
Provisional fair value
adjustment
£m
Fair value recognised
on acquisition
£m
1,952.1
11.9
8.4
22.4
(78.5)
(861.7)
1,054.6
–
(2.5)
–
–
0.4
(32.8)
(34.9)
1,952.1
9.4
8.4
22.4
(78.1)
(894.5)
1,019.7
The valuation techniques used for measuring the fair value of material assets acquired were as follows:
Material assets acquired Valuation technique
Investment property
Liberty Living’s property portfolio was valued externally by Knight Frank, following the valuation process as set out
in note 3.1.
Borrowings
Nominal amounts owed to lenders plus interest payable that has been adjusted for the difference between the
contractual interest rate on the loans and borrowings and the market interest rate.
Goodwill has been recognised as follows:
Cash consideration paid
Fair value of shares issued
Fair value of identifiable net assets acquired
Goodwill
£m
492.0
905.1
(1,019.7)
377.4
Goodwill recognised on acquisition of £377.4 million represents the premium paid over the fair value of the net
assets acquired.
Goodwill has been subsequently assessed for impairment. As no definitive and measurable portfolio premium can be
ascribed to the combined value of the properties an impairment charge for the full amount of goodwill recognised on
acquisition has been taken to the consolidated income statement.
Intangible assets have subsequently been assessed for impairment. The Liberty Living property portfolio will be
rebranded to the Unite brand, therefore an impairment charge of £6.7 million, representing the fair value of the
Liberty Living brand (net of deferred tax) has been taken to the consolidated income statement.
Acquired net assets, on an EPRA basis, has been determined as £1,045.8 million, being the fair value of the net assets
on an IFRS basis (£1,019.7 million), excluding the fair value of the brand that was subsequently fully impaired (£6.7 million)
and the £32.8 million fair value adjustment made to borrowings.
For the period 29 November 2019 to 31 December 2019, on an IFRS basis, Liberty Living contributed revenue of £13.8
million and profit of £18.1 million to the Group’s results (£13.8 million and £7.5 million, respectively, on an EPRA basis).
If the acquisition had occurred on 1 January 2019, revenue would have been £134.4 million and profit would have been
£126.9 million for the year ended 31 December 2019.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 Section 7: Key management and employee benefits
The Group’s greatest resource is its staff and it works hard to develop and retain its people. The remuneration
policies in place are aimed to help recognise the contribution that Unite’s people make to the performance of
the Group.
On the following pages you will find disclosures around wages and salaries and share option schemes which
allow employees of the Group to take an equity interest in the Group.
Accounting policies
The Group operates a defined contribution pension scheme. Obligations for contributions to defined contribution
pension plans are recognised as an expense in the income statement as incurred.
7.1 Staff numbers and costs
The average number of persons employed by the Group (including Directors) during the year (calculated on a monthly
basis), analysed by category, was as follows:
Number of employees
Managerial and administrative
Site operatives
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Pension costs
Fair value of share-based payments
2019
426
937
1,363
2019
£m
49.7
5.1
1.9
2.2
58.9
2018
360
944
1,304
2018
£m
42.7
4.1
1.4
1.1
49.3
The wages and salaries costs include redundancy costs of £1.3 million (2018: £0.4 million).
The total number of persons employed by the Group (including Directors) as at 31 December 2019 was 527 managerial and
administrative and 1,353 site operatives. There are no employees employed directly by the Company.
7.2 Key management personnel
The Board considers that the key management personnel within the Group are those appointed to the Board. As such,
the remuneration of key management personnel is contained within the Directors’ Remuneration Report on pages 119
to 147, which covers the requirements of schedule 5 of the relevant legislation.
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Section 7: Key management and employee benefits continued
7.3 Share-based compensation
A transaction is classified as a share-based transaction where the Group receives services from employees and pays
for these in shares or similar equity instruments. The Group operates a number of share-based compensation schemes
allowing employees to acquire shares in the Company.
a) Share schemes
The Group operates the following schemes:
Long-Term Incentive Plan (LTIP), comprising the:
– Performance Share Plan (PSP); and
– HMRC Approved Employee Share Option Scheme (ESOS)
Details can be found in the Directors’ Remuneration Report
Save As You Earn Scheme (SAYE)
Open to employees, vesting periods of three years, service condition
b) Outstanding share options
The table below summarises the movements in the number of share options outstanding for the Group and their average
exercise price:
Outstanding at 1 January
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at 31 December
Exercisable at 31 December
Weighted
average
exercise
price
2019
Number
of options
(thousands)
2019
Weighted
average
exercise
price
2018
Number
of options
(thousands)
2018
£2.06
£3.64
£2.53
£0.81
£1.45
£2.44
1,751
(179)
(259)
616
1,929
43
£1.40
£0.86
£1.27
£2.65
£2.06
£3.88
1,953
(447)
(437)
682
1,751
85
For those options exercised in the year, the average share price during 2019 was £10.78 (2018: £6.21).
For those options still outstanding, the range of exercise prices at the year end was 0p to 1076p (2018: 0p to 811p) and
the weighted average remaining contractual life of these options was 2.2 years (2018: 2.3 years).
The Group funds the purchase of its own shares by the ‘Employee Share Ownership Trust’ to meet the obligations of
the LTIP and executive bonus scheme. The purchases are shown as ‘Own shares acquired’ in retained earnings. As at
31 December 2019, the number of shares held by the ESOT was 428,017 (2018: 561,600).
The accounting is in accordance with the relevant standards. No further information is given as the amounts for share-
based payments are immaterial.
Section 8: Post balance sheet events
Fire safety is a critical part of our health and safety strategy. In accordance with the Government’s Building Safety Advice
of 20 January 2020, we have initiated a thorough review of the use of High Pressure Laminate (HPL) on our properties.
While the review is ongoing, early indications are that the cost of replacing the cladding could be £15–20 million (Unite
share), which will form part of our capex programme for investment properties. We expect this spend to be incurred over
the next 12–24 months with activity prioritised according to our risk assessments.
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 Section 9: Alternative performance measures
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. APMs are consistent
with how business performance is planned, reported and assessed internally by management and the Board, and provide
comparable information across the Group. The APMs below have been calculated on a see through/Unite share basis, as
referenced to the notes to the financial statements. Reconciliations to equivalent IFRS measures are included in notes 2.2b
and 2.2c. Definitions can also be found in the glossary.
EBIT
Net operating income (NOI)
Management fees
Operating expenses
EBIT margin %
Rental income
EBIT
EBITDA
Net operating income (NOI)
Management fees
Operating expenses
Depreciation and amortisation
Net debt
Cash
Debt
Net debt (adjusted)
Cash
Debt (adjusted)*
Note
2.2a
2.2a
2.2a
2.2a
9
2.2a
2.2a
2.2a
3.3
2.3a
2.3a
2.3a
2019
£m
160.8
14.4
(21.8)
153.4
213.9
153.4
71.7%
160.8
14.4
(21.8)
7.6
161.0
114.9
(1,999.2)
(1,884.3)
114.9
(1,209.3)
(1,094.4)
* Calculated as Unite debt of £1,137.5 million and Liberty Living debt of £71.8 million (£861.7 million pro-rated for 33 days of ownership).
EBITDA : Net debt (adjusted)
EBITDA
Net debt (adjusted)
Ratio
Interest cover (Unite share)
EBIT
Net financing costs
Interest on lease liability/operating lease rentals
Total interest
Ratio
Note
9
9
9
2.2a
2.2a
2019
£m
161.0
(1,094.4)
6.8
153.4
(34.7)
(9.2)
(43.9)
3.5
2018
£m
140.3
15.6
(21.7)
134.2
188.3
134.2
71.3%
140.3
15.6
(21.7)
7.3
141.5
179.9
(1,036.4)
(856.5)
179.9
(1,036.4)
(856.5)
2018
£m
141.5
(856.5)
6.1
134.2
(28.5)
(11.5)
(40.0)
3.4
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Notes to the financial statements continued
Section 9: Alternative performance measures continued
Reconciliation: EPRA earnings to IFRS profit before tax
EPRA earnings
Net valuation gains on investment property (owned)
Property disposals (owned)
Net valuation losses on investment property (leased)
Property disposals (leased)
Impairment of goodwill
Acquisition costs
Amortisation of fair value of debt recognised on acquisition
Changes in valuation of interest rate swaps
Debt exit costs
Minority interest and tax
IFRS (loss) profit before tax
Note
2.2b
2.2b
2.2b
2.2b
2.2b
2.2b
2.2b
2.2b
2.2b
2019
£m
110.6
213.1
(5.8)
(8.1)
(1.1)
(384.1)
(22.8)
0.4
(2.7)
(2.7)
2.0
(101.2)
2018
£m
88.4
163.9
(10.3)
–
–
–
–
–
–
(0.1)
3.9
245.8
Reconciliation: Profit before tax excluding items relating to the Liberty Living acquisition to IFRS loss before tax
Profit before tax excluding items relating to the Liberty Living acquisition
Impairment off goodwill and intangible asset
Acquisition costs
Amortisation of fair value of debt recognised on acquisition
IFRS loss before tax
Adjusted basic EPS (IFRS)
Profit before tax excluding items relating to the Liberty Living acquisition
Number of shares (thousands)
Adjusted basic EPS (IFRS)
EPRA Performance Measures
EPRA like-for-like rental income
Note
6
6
4.3
Note
9
2.2c
2019
£m
305.3
(384.1)
(22.8)
0.4
(101.2)
2019
£m
305.3
282,802
108.0p
2018
£m
–
–
–
–
–
2018
£m
–
–
–
Properties
owned
throughout
the period
166.4
(42.5)
123.9
160.6
(40.2)
120.4
3.6%
3.0%
2019
Rental income
Property operating expenses
Net rental income
2018
Rental income
Property operating expenses
Net rental income
Like-for-like gross rental income
Like-for-like net rental income
EPRA Vacancy Rate
Estimated rental value of vacant space
Estimated rental value of the whole portfolio
EPRA Vacancy Rate
Development
property
Acquisitions and
disposals Calc Other activity
Acquisitions
and disposals
Total EPRA
Earnings
20.5
(4.5)
16.0
6.1
(1.1)
4.9
12.1
(3.6)
8.5
23.4
(7.4)
16.0
14.9
(2.6)
12.4
(1.7)
0.7
(1.0)
27.0
(6.1)
20.9
21.6
(6.7)
15.0
2019
3.5
247.1
1.4%
213.9
(53.1)
160.8
188.3
(48.0)
140.3
2018
2.1
139.2
1.5%
The Unite Group PLC Annual Report & Accounts 2019
EPRA Cost ratio
Property operating expenses
Operating expenses
Development/pre contract
Unallocated expenses
Share of JV property operating expenses
Share of JV operating expenses
Less: Joint venture management fees
Total costs (A)
Group vacant property costs
Share of JV vacant property costs
Total costs excluding vacant property costs (B)
Rental income
Share of JV rental income
Total gross rental income (C)
Total EPRA cost ratio (including vacant property costs) (A)/(C)
Total EPRA cost ratio (excluding vacant property costs) (B)/(C)
2019
33.0
21.1
1.5
4.4
60.0
20.1
0.7
80.8
(14.4)
66.4
–
–
66.4
134.1
79.8
213.9
31%
31%
Unite’s EBIT margin excludes non operational expenses which are included within the EPRA cost ratio above.
EPRA Valuation movement (Unite share)
Wholly owned
USAF
LSAV
Rental properties
Leased properties
2019/20 development completions
Properties under development
Properties held throughout the year
Acquisitions
Disposals to USAF
Total property portfolio
EPRA Yield movement
Wholly owned
USAF
LSAV
Rental properties (Unite share)
Property related capital expenditure
Valuation
£m
Change
£m
63
15
46
124
1,267
509
668
2,444
110
206
412
3,172
2,008
45
5,225
NOI yield
Yield movement (bps)
%
5.1%
5.3%
4.4%
5.0%
H1
(7)
(1)
(3)
(5)
H2
(5)
(3)
(10)
(6)
FY
(12)
(5)
(13)
(11)
Acquisitions
Developments
Rental properties
Other
Total property related capex
Wholly owned
Share of JVs
Group share
Wholly owned
Share of JVs
Group share
2019
2018
–
208
6
9
224
51
6
9
–
66
51
215
15
9
290
–
232
10
10
253
7
6
14
–
27
7
238
25
10
280
2018
28.6
20.9
1.1
2.0
52.6
19.4
0.8
72.8
(13.2)
59.6
–
–
59.6
112.7
75.6
188.3
32%
32%
%
5.2%
3.1%
7.4%
4.8%
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Section 10: Company subsidiaries and joint ventures
In accordance with Section 409 of the Companies Act 2006, a full list of subsidiaries and equity accounted investments
as at 31 December 2019 is disclosed below. Unless otherwise stated, the Group’s ownership interest represents 100%
of the ordinary shares, units or partnership capital held indirectly by Unite Group PLC. No subsidiary undertakings have
been excluded from the consolidation. The subsidiaries acquired as part of the acquisition of Liberty Living have a year
end of 31 August. The Unite Foundation has a year end of 30 September to facilitate academic year reporting. All other
subsidiaries have a year end of 31 December.
Registered office and principal place of business: South Quay House, Temple Back, Bristol, United Kingdom, BS1 6FL
LDC (AIB Warehouse) Limited
LDC (Alscot Road) Limited
LDC (Brunel House) Limited
LDC (Camden Court Leasehold) Limited
LDC (Camden Court) Limited
LDC (Causewayend) Limited
LDC (Portfolio Five) Limited
LDC (Portfolio Four) Limited
LDC (Portfolio One) Limited
LDC (Portfolio) Limited
LDC (Project 110) Limited
LDC (Project 111) Limited
LDC (Chantry Court Leasehold) Limited
LDC (Radmarsh Road) Limited
LDC (Chaucer House) Limited
LDC (Constitution Street) Limited
LDC (Construction Two) Limited
LDC (Euro Loan) Limited
LDC (Ferry Lane 2) GP3 Limited
LDC (Ferry Lane 2) GP4 Limited
LDC (Ferry Lane 2) Holdings Limited
LDC (Finance) Limited
LDC (Greetham Street) Limited
LDC (Gt Suffolk St) GP1 Limited
LDC (Gt Suffolk St) GP2 Limited
LDC (Gt Suffolk St) Holdings Limited
LDC (Gt Suffolk St) Limited Partnership
LDC (Gt Suffolk St) Management GP1 Limited
LDC (Gt Suffolk St) Management GP2 Limited
LDC (Gt Suffolk St) Management Limited Partnership
LDC (Hampton Street) Limited
LDC (Hillhead) Limited
LDC (Holdings) Limited*
LDC (Imperial Wharf) Limited
LDC (International House) Limited
LDC (Kelham Island) Limited
LDC (Leasehold A) Limited
LDC (Leasehold B) Limited
LDC (Loughborough) Limited
LDC (Magnet Court Leasehold) Limited
LDC (Millennium View) Limited
LDC (MTF Portfolio) Limited
LDC (Nairn Street) GP3 Limited
LDC (Nairn Street) GP4 Limited
LDC (Nairn Street) Holdings Limited
LDC (New Wakefield Street) Limited
LDC (Newgate) Limited
LDC (Old Hospital) Limited
LDC (Oxford Road Bournemouth) Limited
LDC (Portfolio 100) Limited
LDC (Portfolio 20) Limited
LDC (Skelhorne) Limited
LDC (Smithfield) Limited
LDC (St Leonards) Limited
LDC (St Pancras Way) GP1 Limited
LDC (St Pancras Way) GP2 Limited
LDC (St Pancras Way) GP3 Limited
LDC (St Pancras Way) GP4 Limited
LDC (St Pancras Way) Holdings Limited
LDC (St Pancras Way) Limited Partnership
LDC (St Pancras Way) Management Limited Partnership
LDC (St Vincent’s) Limited
LDC (Swindon NHS) Limited
LDC (Tara House) Limited
LDC (Thurso Street) GP1 Limited
LDC (Thurso Street) GP2 Limited
LDC (Thurso Street) GP3 Limited
LDC (Thurso Street) GP4 Limited
LDC (Thurso Street) Limited Partnership
LDC (Thurso Street) Management Limited Partnership
LDC (Ventura) Limited
LDC (Vernon Square) Limited
LDC (William Morris II) Limited
LSAV (Angel Lane) GP3 Limited
LSAV (Angel Lane) GP4 Limited
LSAV (Aston Student Village) GP3 Limited
LSAV (Aston Student Village) GP4 Limited
LSAV (Stapleton) GP3 Limited
LSAV (Stapleton) GP4 Limited
LSAV (Stratford) GP3 Limited
LSAV (Stratford) GP4 Limited
LSAV (Wembley) GP3 Limited
LSAV (Wembley) GP4 Limited
LSAV Rent Collection Limited
Stardesert Limited
The Unite Foundation
Unite Accommodation Management Limited
Unite Accommodation Management 2 Limited
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 Registered office and principal place of business: South Quay House, Temple Back, Bristol, United Kingdom. BS1 6FL
Unite Accommodation Management 6 Limited
LSAV (Angel Lane) Management Limited Partnership (50.0%)
Unite Accommodation Management 9 Limited
LSAV (Aston Student Village) GP1 Limited (50.0%)
Unite Accommodation Management 16 Limited
LSAV (Aston Student Village) GP2 Limited (50.0%)
Unite Accommodation Management 18 Limited
LSAV (Aston Student Village) Limited Partnership (50.0%)
Unite Accommodation Management 19 Limited
LSAV (Aston Student Village) Management Limited Partnership (50.0%)
Unite Accommodation Management 20 Limited
LSAV (Stapleton) GP1 Limited (50.0%)
Unite Accommodation Management One Hundred Limited
LSAV (Stapleton) GP2 Limited (50.0%)
Unite Construction (Angel Lane) Limited
Unite Construction (Stapleton) Limited
Unite Construction (Wembley) Limited
Unite Finance Limited*
LSAV (Stapleton) Limited Partnership (50.0%)
LSAV (Stapleton) Management Limited Partnership (50.0%)
LSAV (Stratford) Management Limited Partnership (50.0%)
LSAV (Wembley) GP1 Limited (50.0%)
Unite Finance One (Accommodation Services) Limited
LSAV (Wembley) GP2 Limited (50.0%)
Unite Finance One (Holdings) Limited
Unite Finance One (Property) Limited
Unite FM Limited
Unite For Success Limited
Unite Holdings Limited*
Unite Homes Limited
Unite Integrated Solutions plc
Unite Modular Solutions Limited
Unite Rent Collection Limited
Unite Student Living Limited
USAF GP No 11 Management Limited
USAF LP Limited
USAF Management Limited
USAF Management 6 Limited
USAF Management 8 Limited
USAF Management 10 Limited
USAF Management 11 Limited
USAF Management 12 Limited
USAF Management 14 Limited
USAF Management 18 Limited
USAF Management GP No 14 Limited
USAF Management GP No 15 Limited
USAF Management GP No 16 Limited
USAF Management GP No 17 Limited
LSAV (Wembley) Limited Partnership (50.0%)
LSAV (Wembley) Management Limited Partnership (50.0%)
UNITE Capital Cities Holdings Limited (50.0%)
Unite Capital Cities Limited Partnership (50.0%)
Unite Capital Cities Two Limited Partnership (50.0%)
USAF No 15 Limited Partnership (22.2%)
USAF No 15 Management Limited Partnership (22.2%)
USAF No 16 Management Limited Partnership (22.2%)
USAF No 17 Management Limited Partnership (22.2%)
USAF No 1 Limited Partnership (22.0%)
USAF No 6 Limited Partnership (22.0%)
USAF No 8 Limited Partnership (22.0%)
USAF No 10 Limited Partnership (22.0%)
USAF No 11 Limited Partnership (22.0%)
USAF No 12 Limited Partnership (22.0%)
USAF No 14 Limited Partnership (22.0%)
USAF No 18 Limited Partnership (22.0%)
USAF No 11 Management Limited Partnership (22.0%)
USAF No 14 Management Limited Partnership (22.0%)
Filbert Village Student Accommodation Limited Partnership (22.0%)
LDC (Nairn Street) Limited Partnership (22.0%)
LDC (Nairn Street) Management Limited Partnership (22.0%)
Filbert Village GP Limited (13.3%)
LDC (Nairn Street) GP1 Limited (13.3%)
LDC (Capital Cities Nominee No 1) Limited (50.0%)
LDC (Nairn Street) GP2 Limited (13.3%)
LDC (Capital Cities Nominee No 2) Limited (50.0%)
LDC (Capital Cities Nominee No 3) Limited (50.0%)
LDC (Capital Cities Nominee No 4) Limited (50.0%)
LDC (Capital Cities) Limited (50.0%)
LDC (Ferry Lane 2) GP1 Limited (50.0%)
LDC (Ferry Lane 2) GP2 Limited (50.0%)
LDC (Ferry Lane 2) Limited Partnership (50.0%)
USAF Finance II Limited (13.3%)
USAF GP No 1 Limited (13.3%)
USAF GP No 6 Limited (13.3%)
USAF GP No 8 Limited (13.3%)
USAF GP No 10 Limited (13.3%)
USAF GP No 11 Limited (13.3%)
USAF GP No 12 Limited (13.3%)
LDC (Ferry Lane 2) Management Limited Partnership (50.0%)
USAF GP No 14 Limited (13.3%)
LDC (Stratford) GP1 Limited (50.0%)
LDC (Stratford) GP2 Limited (50.0%)
LDC (Stratford) Limited Partnership (50.0%)
LDC Capital Cities Two (GP) Limited (50.0%)
LSAV (Angel Lane) GP1 Limited (50.0%)
LSAV (Angel Lane) GP2 Limited (50.0%)
LSAV (Angel Lane) Limited Partnership (50.0%)
USAF GP No 15 Limited (13.3%)
USAF GP No 18 Limited (13.3%)
USAF Holdings B Limited (13.3%)
USAF Holdings C Limited (13.3%)
USAF Holdings H Limited (13.3%)
USAF Holdings I Limited (13.3%)
USAF Holdings J Limited (13.3%)
225
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Section 10: Company subsidiaries and joint ventures continued
Registered office and principal place of business: South Quay House, Temple Back, Bristol, United Kingdom. BS1 6FL
USAF Holdings Limited (13.3%)
USAF Nominee No 1 Limited (13.3%)
USAF Nominee No 1A Limited (13.3%)
USAF Nominee No 6 Limited (13.3%)
USAF Nominee No 6A Limited (13.3%)
USAF Nominee No 8 Limited (13.3%)
USAF Nominee No 8A Limited (13.3%)
USAF Nominee No 10 Limited (13.3%)
USAF Nominee No 11 Limited (13.3%)
USAF Nominee No 11A Limited (13.3%)
USAF Nominee No 12 Limited (13.3%)
USAF Nominee No 12A Limited (13.3%)
USAF Nominee No 14 Limited (13.3%)
USAF Nominee No 14A Limited (13.3%)
USAF Nominee No 18 Limited (13.3%)
USAF Nominee No 18A Limited (13.3%)
USAF Nominee No 10A Limited (13.3%)
USAF RCC Limited (13.3%)
Registered office and principal place of business: Fifth Floor, Peninsular House, 30–36 Monument Street, London, United Kingdom, EC3R 8NB
Liberty Atlantic Point (Liverpool) Limited
Liberty Heights (Manchester) Limited
Liberty Living (HE) Holdings Limited
Liberty Living (LH Manchester) Limited
Liberty Living (Liberty AP) Limited
Liberty Living (Liberty PP) Limited
Liberty Living (LP Bristol) Limited
Liberty Living (LP Coventry) Limited
Liberty Living (LP Manchester) Limited
Liberty Living (LQ Newcastle) Limited
Liberty Living (LQ2 Newcastle) Limited
Liberty Living Finance plc
Liberty Living Investments 1 Limited Partnership
Liberty Living Investments 2 Limited Partnership
Liberty Living Investments Nominee 2 Limited
Liberty Living Investments Nominee 3 Limited
Liberty Living Limited
Liberty Living SpareCo Limited
Liberty Living UK Limited
Liberty Park (Bristol) Limited
Liberty Park (US Bristol) Limited
Liberty Plaza (London) Limited
Liberty Point (Coventry) Limited
Liberty Point (Manchester) Limited
Liberty Point Southampton (Block A) Limited
Liberty Prospect Point (Liverpool) Limited
Liberty Quay (Newcastle) Limited
Liberty Quay 2 (Newcastle) Limited
Liberty Living Investments 3 Limited Partnership
Liberty Severn Point (Cardiff) Limited
Liberty Living Investments GP1 Limited
Liberty Living Investments GP2 Limited
Liberty Living Investments GP3 Limited
Liberty Living Investments II Holdco 2 Limited
Liberty Living Investments II Holdco Limited
Liberty Living Investments II Limited
Liberty Living Investments Limited
Liberty Living Investments Nominee 1 Limited
Liberty Village (Edinburgh) Limited
LL Midco 2 Limited
USAF Management 16 Limited
USAF Management 17 Limited
Liberty Living (LG Cardiff) Limited (22.2%)
Liberty Living (Liberty CP) Limited (22.2%)
Liberty Living (Liberty SP) Limited (22.2%)
Registered office and principal place of business: 13 Castle Street, St Helier, Jersey. JE4 5UT
LDC (Gt Suffolk St) Unit Trust
LDC (St Pancras Way) Unit Trust
LDC (Thurso Street) Unit Trust
LSAV (Jersey Manager) Limited
Unite (Capital Cities) Jersey Limited
USAF Jersey Investments Limited
USAF Jersey Manager Limited
LDC (Ferry Lane 2) Unit Trust (50.0%)
LDC (Stratford) Unit Trust (50.0%)
LSAV (Aston Student Village) Unit Trust (50.0%)
LSAV (Holdings) Limited (50.0%)
LSAV (Trustee) Limited (50.0%)
LSAV Unit Trust (50.0%)
Unite Capital Cities Unit Trust (50.0%)
USAF Portfolio 18 Unit Trust (22.0%)
LDC (Nairn Street) Unit Trust (21.9%)
Unite UK Student Accommodation Fund (13.3%)
Notes to the financial statements continuedThe Unite Group PLC Annual Report & Accounts 2019 Registered office and principal place of business: Third Floor, La Plaiderie Chambers, St Peter Port, Guernsey. GY1 1WG
USAF Feeder Guernsey Limited (45.20%)
USAF 15 NRL Limited (22.2%)
USAF Portfolio 15 Unit Trust (22.2%)
USAF Portfolio 16 Unit Trust (22.2%)
USAF Portfolio 17 Unit Trust (22.2%)
Registered office and principal place of business: Saltire Court, 20 Castle Terrace, Edinburgh. EH1 2 EN
LSAV (GP) Limited (50.00%)
LSAV (Property Holdings) Limited Partnership (50.00%)
Registered office and principal place of business: Trident Chambers, Wickhams Cay, P.O. Box 146, Road Town, Tortola, British Virgin Islands
Liberty Park (Bedford) Limited
Liberty Plaza (Newcastle) Limited
Registered office and principal place of business: Third Floor, Barclays House, Victoria Street, Douglas, Isle of Man. IM1 2LE
Filbert Street Student Accommodation Unit Trust (21.9%)
Registered office and principal place of business: 47 Esplanade, St Helier, St Helier, Jersey, JE1 0BD
Liberty Living Group Plc*
Registered office and principal place of business: Room 507, Floor 5, Block 1, Building No. 10, Jintong Road West, Chaoyang District, Beijing, People’s
Republic of China
Unite Students Accommodation (Beijing) Business Service Company Limited
* Held directly by the Company.
227
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Financial Record
EPRA earnings (£m)
EPRA earnings per share (pence)
Adjusted EPRA earnings per share (pence)
IFRS (loss)/profit before tax (£m)
IFRS (loss)/earnings per share (pence)
EPRA net assets (£m)
EPRA NAV per share (pence)
IFRS net assets (£m)
IFRS NAV per share (pence)
LTV (%)
Managed portfolio value (£m)
2019
111
39
39
(101)
(32)
3,110
853
3,072
845
37%
7,702
2018
88
34
34
246
91
2,085
790
2,073
787
29%
4,994
2017
71
30
30
229
95
1,740
720
1,729
717
31%
4,612
2016
61
28
28
201
101
1,557
646
1,452
653
34%
4,327
2015
50
29
23
388
164
1,394
579
1,275
574
35%
3,827
The Unite Group PLC Annual Report & Accounts 2019 229
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of The Unite Group PLC (the Company) will be held at the
Company’s registered office at South Quay, Temple Back, Bristol BS1 6FL at 9.30 a.m. on 7 May 2020 for the purpose
of considering and, if thought fit, passing Resolutions 1, 2 and 4 to 17 as ordinary resolutions and Resolutions 18 to 20
as special resolutions.
As noted in the Company’s announcement on 25 March 2020, the Board has decided to cancel the final dividend for 2019
and suspend further distributions by the Company until market conditions stabilise.
Ordinary resolutions
Annual Report and Accounts
1.
To receive the audited annual accounts of the Company for the year ended 31 December 2019 together with
the Directors’ Report, the Strategic Report and the auditor’s report on those annual accounts (the Annual Report
and Accounts).
Annual Report on Remuneration
2. To approve the Directors’ Remuneration Report (set out on pages 119 to 147 in the Annual Report and Accounts).
3.
[Deliberately left blank].
Election and Re-election of Directors
4. To re-elect Mr Phil White as a Director of the Company.
5. To re-elect Mr Richard Smith as a Director of the Company.
6. To re-elect Mr Joe Lister as a Director of the Company.
7. To re-elect Ms Elizabeth McMeikan as a Director of the Company.
8. To re-elect Mr Ross Paterson as a Director of the Company.
9. To re-elect Mr Richard Akers as a Director of the Company.
10. To re-elect Mrs Ilaria del Beato as a Director of the Company.
11. To elect Dame Shirley Peace as a Director of the Company.
12. To elect Mr Thomas Jackson as a Director of the Company.
13. To elect Sir Steve Smith as a Director of the Company.
Auditors
14. To reappoint Deloitte LLP as auditor of the Company to hold office until the conclusion of the next General Meeting
at which accounts are laid before the Company.
15. To authorise the Audit Committee of the Board to determine the remuneration of the auditor.
OverviewStrategic ReportGovernanceFinancial statementsOther Information 230
Notice of Annual General Meeting continued
Authority to allot shares
16. THAT, in substitution for any equivalent authorities and powers granted to the Directors prior to the passing of this
Resolution, the Directors be and are generally and unconditionally authorised in accordance with Section 551 of the
Companies Act 2006 (the Act):
(a)
To exercise all powers of the Company to allot shares in the Company, and grant rights to subscribe for or
to convert any security into shares of the Company (such shares, and rights to subscribe for or to convert
any security into shares of the Company being ‘relevant securities’), up to an aggregate nominal amount of
£30,299,637 (representing approximately one-third of the nominal value of the issued ordinary share capital of
the Company as at the date of this notice), such amount to be reduced by the nominal amount of any allotments
or grants made under paragraph (b) below in excess of £30,299,637;
(b)
To allot equity securities (as defined in Section 560(1) of the Act) up to an aggregate nominal amount of
£60,599,274 (representing approximately two-thirds of the nominal value of the issued ordinary share capital
of the Company as at the date of this notice) (such amount to be reduced by the nominal amount of any
allotments or grants made under paragraph (a) above) in connection with an offer by way of rights issue:
(i)
In favour of holders of ordinary shares in the capital of the Company at such record date as the Directors
may determine, where the equity securities respectively attributable to the interests of such holders are
proportionate (as nearly as practicable) to the respective number of ordinary shares in the capital of the
Company held by them on any such record date;
(ii)
To holders of any other equity securities as required by the rights of those securities or as the Directors
otherwise consider necessary,
in each case subject to such exclusions or other arrangements as the Directors may deem necessary or expedient to
deal with in relation to treasury shares, fractional entitlements or legal, regulatory or practical problems arising under
the laws or requirements of any overseas territory or by virtue of shares being represented by depository receipts or
the requirements of any relevant regulatory body or stock exchange or any other matter whatsoever, provided that this
authority shall expire (unless previously renewed, varied, extended or revoked by the Company in general meeting) on
6 August 2021 being the date falling 15 months from the passing of this Resolution or, if earlier, at the conclusion of the
next Annual General Meeting of the Company to be held following the passing of this Resolution, save that the Company
may at any time before such expiry make an offer or enter into an agreement which would or might require relevant
securities to be allotted after such expiry and the Directors may allot relevant securities pursuant to such offer or
agreement as if this authority had not expired.
Renewal of the Savings-Related Share Option Scheme
17. THAT:
(a)
(b)
The Unite Group PLC Savings-Related Share Option Scheme (‘SAYE’) in the form produced to the meeting and
initialled by the Chairman for the purposes of identification, the principal terms of which are set out in the
Appendix to the Notice of Annual General Meeting, be approved for operation for a further period of ten years;
and
The Directors be authorised to establish further plans for the benefit of employees outside the UK, based on
the SAYE but modified to take account of local tax, exchange control or securities laws in overseas territories,
provided that any shares made available under such plans are treated as counting against the limits on individual
and overall participation contained in the SAYE.
Special resolutions
Authority to disapply pre-emption rights
18. That if Resolution 16 (Authority to allot shares) is passed, the Board be authorised pursuant to section 570 and section
573 of the Companies Act 2006 to allot equity securities (as defined in the Companies Act 2006) for cash under the
authority given by that resolution and/or to sell ordinary shares held by the Company as treasury shares for cash as
if section 561(1) of the Companies Act 2006 did not apply to any such allotment or sale, such authority to be limited:
The Unite Group PLC Annual Report & Accounts 2019
231
(a)
To the allotment of equity securities or sale of treasury shares in connection with an offer of securities (but in the
case of the authority granted under paragraph (b) of Resolution 16 by way of rights issue only) in favour of holders
of ordinary shares in the capital of the Company at such record date as the Directors may determine and other
persons entitled to participate therein where the equity securities respectively attributable to the interests of
such holders are proportionate (as nearly practicable) to the respective number of ordinary shares in the capital
of the Company held by them on any such record date, subject to such exclusions or other arrangements as the
Directors may deem necessary or expedient to deal with in relation to treasury shares, fractional entitlements
or legal, regulatory or practical problems arising under the laws or requirements of any overseas territory or by
virtue of shares being represented by depository receipts or the requirements of any relevant regulatory body
or stock exchange or any other matter whatsoever; and
(b)
To the allotment of equity securities or sale of treasury shares (otherwise than under paragraph (a) above) up to
a nominal amount of £4,544,945 (this amount representing not more than five per cent of the nominal value of
the issued ordinary share capital of the Company as at the date of this notice),
such authority to expire at the end of the next Annual General Meeting of the Company (or, if earlier, at the close
of business on 6 August 2021, this being the date which is 15 months after the date of this meeting) but, in each case,
prior to its expiry the Company may make offers, and enter into agreements, which would, or might, require equity
securities to be allotted (and treasury shares to be sold) after the authority expires and the Board may allot equity
securities (and sell treasury shares) pursuant to any such offer or agreement as if the authority had not expired.
19. That if Resolution 16 (Authority to allot shares) is passed, the Board be authorised pursuant to section 570 and section
573 of the Companies Act 2006 in addition to any authority granted under Resolution 18 to allot equity securities
(as defined in the Companies Act 2006) for cash under the authority given by that resolution and/or to sell ordinary
shares held by the Company as treasury shares for cash as if section 561(1) of the Companies Act 2006 did not apply
to any such allotment or sale, such authority to be:
(a)
(b)
limited to the allotment of equity securities or sale of treasury shares up to a nominal amount of £4,544,945
(this amount representing not more than 5 per cent of the nominal value of the issued ordinary share capital
of the Company as at the date of this notice); and
used only for the purposes of financing (or refinancing, if the authority is to be used within six months after
the original transaction) a transaction which the Board of the Company determines to be an acquisition or
other capital investment of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption
Rights most recently published by the Pre-Emption Group prior to the date of this notice,
such authority to expire at the end of the next Annual General Meeting of the Company (or, if earlier, at the close
of business on 6 August 2021, this being the date which is 15 months after the date of this meeting) but, in each case,
prior to its expiry the Company may make offers, and enter into agreements, which would, or might, require equity
securities to be allotted (and treasury shares to be sold) after the authority expires and the Board may allot equity
securities (and sell treasury shares) pursuant to any such offer or agreement as if the authority had not expired.
Notice of General Meetings
20. That, a general meeting other than an Annual General Meeting, may be called on not less than 14 clear days’ notice.
By order of the Board
Christopher Szpojnarowicz
Company Secretary
31 March 2020
Registered office:
South Quay House
Temple Back
Bristol BS1 6FL
Registered in England and Wales with registered number 03199160
OverviewStrategic ReportGovernanceFinancial statementsOther Information
232
Notice of Annual General Meeting continued
Notes
A member of the Company who wishes to attend the meeting
in person should arrive at South Quay, Temple Back, Bristol BS1
6FL in good time before the meeting, which will commence at
9.30 a.m. In order to gain admittance to the meeting, members
may be required to produce their attendance card, which is
attached to the form of proxy enclosed with this document,
or otherwise prove their identity.
6.
1.
2.
3.
4.
5.
A member of the Company who is entitled to attend, speak and
vote at the meeting and who is unable or does not wish to attend
the meeting is entitled to appoint a proxy to exercise all or any of
his/her rights to attend and to speak and vote on his/her behalf
at the meeting. A member may appoint more than one proxy
provided each proxy is appointed to exercise rights attached to
different shares (so a member must have more than one share
to be able to appoint more than one proxy). A proxy need not
be a member of the Company but must attend the meeting to
represent his/her appointing member. Appointing a proxy will
not prevent a member from attending in person and voting at the
meeting although voting in person at the meeting will terminate
a member’s proxy appointment. A proxy must vote in accordance
with any instructions given by the member by whom the proxy
is appointed. A form of proxy which may be used to make such
appointment and give proxy instructions accompanies this
notice. You can only appoint a proxy using the procedures
set out in these notes and the notes to the proxy form.
To be valid, any form of proxy, and the original or duly certified
copy of the power of attorney or other authority (if any) under
which it is signed or authenticated, must be received by hand or
by post at Computershare Investor Services PLC, The Pavilions,
Bridgwater Road, Bristol BS99 6ZY, no later than 9.30 a.m. on
5 May 2020.
CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment service
may do so for the meeting and any adjournment(s) thereof
by following the procedures described in the CREST Manual.
CREST Personal Members or other CREST sponsored members,
and those CREST members who have appointed a voting
service provider, should refer to their CREST sponsor or voting
service provider(s), who will be able to take the appropriate
action on their behalf.
In order for a proxy appointment or instruction made by
means of CREST to be valid, the appropriate CREST message
(a CREST Proxy Instruction) must be properly authenticated in
accordance with Euroclear UK & Ireland Limited’s (Euroclear)
specifications, and must contain the information required
for such instruction, as described in the CREST Manual. The
message, regardless of whether it constitutes the appointment
of a proxy, the revocation of a proxy or is an amendment to
the instruction given to a previously appointed proxy must,
in order to be a valid, be transmitted so as to be received by
the Company’s agent (CREST ID 3RA50) by the latest time for
receipt of proxy appointments specified in note 3 above. For
this purpose, the time of receipt will be taken to be the time
(as determined by the timestamp applied to the message by
the CREST Application Host) from which the Company’s agent
is able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST. After this time any change of
instructions to proxies appointed through CREST should be
communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors
or voting service providers, should note that Euroclear does
not make available special procedures in CREST for any
particular message. Normal system timings and limitations
will, therefore, apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a CREST personal
member, or sponsored member, or has appointed a voting
service provider, to procure that his/her CREST sponsor or
voting service provider(s) take(s)) such action as shall be
necessary to ensure that a message is transmitted by means
of the CREST system by any particular time. In this connection,
CREST members and, where applicable, their CREST sponsors
or voting service providers are referred, in particular, to those
sections of the CREST Manual concerning practical limitations
of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction
in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001 (as amended).
If you would like to submit your proxy vote via the internet,
you can do so by accessing our registrar’s website (www.
eproxyappointment.com). You will require the control
number, your unique PIN (which will expire at the end of the
voting period) and your Shareholder Reference Number (SRN),
printed on the proxy card, in order to log in and submit your
proxy vote electronically. You can access this site from any
internet enabled PC. If you submit your proxy via the internet
it should reach the registrar by 9.30 a.m. on 5 May 2020.
Should you complete your proxy form electronically and then
post a hard copy, the form that arrives last will be counted
to the exclusion of instructions received earlier, whether
electronic or posted. Please refer to the terms and conditions
of the service on the website.
7.
8.
9.
In the case of joint holders of shares, where more than one
of the joint holders purports to appoint a proxy, only the
appointment submitted by the most senior holder will be
accepted. Seniority is determined by the order in which the
names of the joint holders appear in the Company’s register
of members in respect of the joint holding (the first-named
being the most senior).
10. If you submit more than one valid proxy appointment in respect
of the same shares, the appointment received last before the
latest time for the receipt of proxies will take precedence.
11. Any person to whom this notice has been sent who is a person
nominated under section 146 of the Act to enjoy information
rights (a Nominated Person) may, under an agreement
between him/her and the shareholder by whom he/she was
nominated, have a right to be appointed (or to have someone
else appointed) as a proxy for the meeting. If a Nominated
Person has no such proxy appointment right or does not wish
to exercise it, he/she may, under any such agreement, have a
right to give instructions to the shareholder as to the exercise
of voting rights.
12. The statement of the rights of shareholders in relation to the
appointment of proxies above does not apply to Nominated
Persons. These rights can only be exercised by shareholders
of the Company.
The Unite Group PLC Annual Report & Accounts 2019
233
19. Under sections 338 and 338A of the Companies Act 2006,
members meeting the threshold requirements in those
sections have the right to require the Company: (i) to give,
to members of the Company entitled to receive notice of the
meeting, notice of a resolution which those members intend to
move (and which may properly be moved) at the meeting; and;
(ii) to include in the business to be dealt with at the meeting
any matter (other than a proposed resolution) which may
properly be included in the business at the meeting, providing
in each case that the requirements of those sections are met
and that the request is received by the Company not later than
six clear weeks before the meeting or if later the time at which
notice is given of the meeting.
20. A member that is a company or other organisation not having
a physical presence cannot attend in person but can appoint
someone to represent it. This can be done in one of two ways:
either by the appointment of a proxy (as described in the notes
above) or of a corporate representative. Members considering
the appointment of a corporate representative should check
their own legal position, the Company’s articles of association
and the relevant provisions of the Act.
21. The following documents are available for inspection at the
registered office of the Company during the usual business
hours on any weekday (Saturday, Sunday or public holidays
excluded) from the date of this notice until the conclusion of
the meeting and will also be available for inspection at the
place of the meeting from 9.15 a.m. on the day of the meeting
until its conclusion:
(a) copies of the Executive Directors’ service contracts with
the Company and any of its subsidiary undertakings; and
(b) letters of appointment of the Non-Executive Directors.
22. A copy of the rules of the Unite Group PLC Savings-Related
Share Option Scheme are available for inspection at the
registered office of the Company and at the offices of Herbert
Smith Freehills LLP during the usual business hours on any
weekday (Saturday, Sunday or public holidays excluded) from
the date of this notice until the conclusion of the meeting and
will also be available for inspection at the place of the meeting
from 9.15 a.m. on the day of the meeting until its conclusion.
13. Pursuant to Part 13 of the Companies Act 2006 and
Regulation 41 of the Uncertificated Securities Regulations
2001 (as amended), the Company specifies that only those
shareholders registered in the register of members of the
Company at 5.00 p.m. on 5 May 2020 (or, if the meeting is
adjourned, 48 hours before the timed fixed for the adjourned
meeting) shall be entitled to attend or vote at the meeting in
respect of the number of shares registered in their name at
that time. In each case, changes to the register of members
of the Company after such time shall be disregarded in
determining the rights of any person to attend or vote at
the meeting.
14. As at the date of this notice, the Company’s issued share capital
comprised 363,595,805 ordinary shares carrying one vote each
at a general meeting of the Company. No ordinary shares were
held in treasury and therefore the total voting rights in the
Company as at the date of this notice are 363,595,805.
15. You may not use any electronic address provided either in
this notice of meeting or any related documents (including
the proxy form) to communicate with the Company for any
purposes other than those expressly stated.
16. The Company must cause to be answered at the meeting
any question relating to the business being dealt with at the
meeting which is put by a member in attendance, except (i) if
to do so would interfere unduly with the preparation for the
meeting or involve the disclosure of confidential information,
(ii) if the answer has already been given on a website in the
form of an answer to a question, or (iii) if it is undesirable in
the interests of the Company or the good order of the meeting
that the question be answered.
17. The following information is available at www.unite-group.co.uk
(1)
the matters set out in this notice of Annual General Meeting;
(2) the total numbers of shares in the Company in respect of
which members are entitled to exercise voting rights at
the meeting;
(3) the totals of the voting rights that members are entitled
to exercise at the meeting; and
(4) members’ statements, members’ resolutions and
members’ matters of business received by the Company
after the date on which notice of the meeting was given.
18. It is possible that, pursuant to requests made by members of
the Company under Section 527 of the Act, the Company may
be required to publish on a website a statement setting out
any matter relating to: (a) the audit of the Company’s accounts
(including the auditor’s report and the conduct of the audit)
that are to be laid before the meeting; or (b) any circumstance
connected with an auditor of the Company ceasing to hold
office since the previous meeting at which annual accounts and
reports were laid in accordance with Section 437 of the Act.
The Company may not require the members requesting any
such website publication to pay its expenses in complying with
Sections 527 or 528 of the Act. Where the Company is required
to place a statement on a website under Section 527 of the
Act, it must forward the statement to the Company’s auditor
not later than the time when it makes the statement available
on the website. The business which may be dealt with at the
meeting includes any statement that the Company has been
required under Section 527 of the Act to publish on a website.
OverviewStrategic ReportGovernanceFinancial statementsOther Information
234
Notice of Annual General Meeting continued
Appendix
Corporate actions
The main terms of the Unite Group PLC Savings-Related Share
Option Scheme (‘SAYE’) are described below. The SAYE is a UK tax-
advantaged all-employee Save As You Earn option plan governed
by relevant UK statutory provisions.
Administration
Options may be granted, and the SAYE is administered, by the
Board of Directors, or a duly authorised Committee of the Board
of Directors (the ‘Board’).
Eligibility
The Board may at any time designate any subsidiary of the
Company as a ‘Participating Company’, and the SAYE will then
be open to all employees of any Participating Company who
meet the eligibility criteria (‘Eligible Employees’).
Options may be exercised in the event of a change of control
by way of general offer, a court sanctioning a compromise or
arrangement of the Company, or a voluntary winding up of the
Company. In such circumstances, options may be exercised, for
a period of up to six months, to the extent of accrued savings
and interest, if any, to the date of exercise.
In the event of a change of control of the Company, an acquiring
company may offer a roll-over into an option over shares in the
acquiring company, subject to complying with the statutory
requirements.
Non-Transferable and Non-Pensionable
Options are non-transferable, save to personal representatives
following death, and do not form part of pensionable earnings.
Timing of grant
Plan Limits
Options under the SAYE may, save in exceptional circumstances,
only be granted pursuant to invitations which have been issued
within a period of 42 days following the date of announcement
by the Company of its interim or final results.
No options may be granted under the SAYE more than 10 years
after shareholders have approved the extension of the plan.
Savings arrangements
Eligible Employees who apply for an option must enter into
an HM Treasury certified savings arrangement. Under these
arrangements, the Eligible Employee will agree to make monthly
savings contributions of a fixed amount within statutory limits
(currently up to a maximum of £500). Shares may only be acquired
on the exercise of the option using the repayment of accrued
savings and interest (if any) under the savings arrangements.
Exercise Price
The price payable for each share under an option will be determined
by the Board prior to grant, provided that it must not be less than
80 per cent of the market value of a share at the time that invitations
for options are issued.
Exercise of options
An option may not normally be exercised until the participant
has completed making contributions under his or her savings
arrangements (which will be either three or five years from the
date of entering into those savings arrangements) and then the
option will be capable of exercise for not more than six months
thereafter.
Leavers
Options will normally lapse where the participant ceases to hold
office or employment with the Company or any subsidiary (the
‘Group’). Options will not lapse where the cessation of office or
employment with a Participating Company is due to death; injury;
disability; redundancy; retirement; the transfer of the participant’s
employment outside of, or the Company with which the participant
holds office or employment ceasing to be a member of, the Group;
or, where the cessation occurs more than three years after grant,
for any reason other than due to misconduct (a ‘Good Leaver’).
Where a participant ceases employment for a Good Leaver reason,
the option will be capable of exercise, for a period of six months from
the date of cessation (or 12 months in the case of death), only to the
extent of accrued savings and interest, if any, to the date of exercise.
Shares may be newly issued, transferred from treasury or market
purchased for the purposes of the SAYE.
Options may not be granted on terms capable of being satisfied
by newly issued shares if to do so would cause the number of
shares which may be issued pursuant to outstanding options or
awards granted within the previous 10 years under the SAYE and
any other employees’ share scheme established by the Company,
when added to the number of shares issued for the purpose of any
such options and awards, to exceed 10 per cent of the Company’s
ordinary share capital in issue immediately prior to the proposed
date of grant.
These limits do not include rights to shares which have been
released, lapsed or otherwise become incapable of exercise
or vesting.
Treasury shares will count as new issue shares for the purpose of
these limits for so long as institutional investor bodies consider
that they should be so counted.
Variation of capital
The number of shares subject to options and/or the option
exercise price may be adjusted, in such manner as the Board may
determine, following any variation of share capital of the Company,
subject to the applicable statutory requirements being complied
with.
Alterations
The Board may amend the rules of the SAYE as it considers
appropriate, subject to any relevant legislation, provided that
no modification may be made which confers any additional
advantage on participants relating to eligibility, plan limits,
the basis of individual entitlement, the price payable for the
acquisition of shares and the provisions for the adjustment of
options without prior shareholder approval, except in relation
to amendments which are minor amendments to benefit the
administration of the SAYE, to take account of a change in
legislation, or to obtain or maintain favourable tax, exchange
control or regulatory treatment for participants or any
Group company.
The Unite Group PLC Annual Report & Accounts 2019 Glossary
Adjusted EPRA Earnings
Adjusted EPRA earnings are prepared on the basis of EPRA earnings excluding the yield related element
of the USAF performance fee.
Adjusted EPRA Earnings
per share
Adjusted net debt
The earnings per share based on Adjusted EPRA Earnings.
The Group’s debt, net of cash and unamortised debt raising costs, excluding the mark to market of
interest rates swaps.
Basis points (BPS)
A basis point is a term used to describe a small percentage, usually in the context of change,
and equates to 0.01%.
Direct let
EBIT
EBITDA
Properties where short-hold tenancy agreements are made directly between Unite and the student.
The Group’s NOI plus management fees and less operating expenses.
The Group’s EPRA earnings before charging interest, tax, depreciation and amortisation. The profit
number is used to calculate the ratio to net debt.
EBIT margin
The Group’s EBIT expressed as a percentage of rental income.
EPRA
The European Public Real Estate Association, who produce best practice recommendations for
financial reporting.
EPRA earnings
EPRA earnings exclude movements relating to changes in values of investment properties and
interest rate swaps and the related tax effects.
EPRA earnings per share
The earnings per share based on EPRA earnings.
EPRA NAV
EPRA NAV includes all property at market value but excludes the mark to market of financial instruments
and deferred tax. EPRA NAV provides a consistent measure of NAV on a going concern basis.
EPRA net asset value
per share
EPRA NNNAV
ESG
GRESB
The diluted NAV per share figure based on EPRA NAV.
EPRA NAV adjusted for the fair value of debt and financial instruments and deferred tax. EPRA NNNAV
provides a ‘spot’ measure of NAV with all assets and liabilities at their fair value.
Environmental, Social and Governance.
GRESB is a benchmark of the Environmental, Social and Governance (ESG) performance of real assets.
Gross asset value (GAV)
Rental properties, plus leased properties and development properties. GAV is reported on a fair value basis.
Gross financing costs
All interest paid by the Group, including those capitalised into developments and operating lease rentals.
It includes all receipts and payments under interest rate swaps whether they are effective or ineffective
under IFRS.
The Group
Group debt
Wholly owned balances plus Unite’s interests relating to USAF and LSAV.
Wholly owned borrowings plus Unite’s share of borrowings attributable to USAF and LSAV.
Interest cover ratio (ICR)
Calculated as EBIT divided by the sum of net financing costs and IFRS 16 lease liability interest costs.
Lease
Properties which are leased to Universities for a number of years and have no Unite management presence.
Like-for-like rental growth Like-for-like rental growth is the growth in gross rental income on properties owned throughout the
current and previous years under review.
Loan to value (LTV)
Net debt as a proportion of the carrying value of the total property portfolio, excluding balances
recognised in respect of leased properties under IFRS 16.
LSAV
The London Student Accommodation Joint Venture (LSAV) is a joint venture between Unite and GIC,
in which both hold a 50% stake. LSAV has a maturity date of September 2022.
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Glossary continued
Major Provincial
Properties located in Aberdeen, Birmingham, Cardiff, Durham, Glasgow, Leeds, Leicester, Liverpool,
Newcastle, Nottingham, Sheffield and Southampton.
Net debt
Group debt, net of cash and unamortised debt issue costs, excluding IFRS 16 investment property (leased)
and associated lease liabilities.
Net debt: EBITDA
Group debt, net of cash and unamortised debt issue costs, excluding lease liabilities for all leased
properties and mark to market of interest rate swaps as a proportion of EBITDA.
Net financing costs (EPRA) Gross financing costs net of interest capitalised into developments and interest received on deposits.
Net initial yield (NIY
or yield)
The net operating income generated by a property expressed as a percentage of its value, taking into
account notional acquisition costs.
Net operating income
(NOI)
The Group’s rental income from rental properties (owned and leased) less those operating costs directly
related to the property, therefore excluding central overheads.
NOI margin
The Group’s NOI expressed as a percentage of rental income.
Nomination agreements
Properties where Universities have entered into a contract to guarantee occupancy. The Universities
nominate students to live in the building and Unite enters into short-hold tenancies with the students.
Other provincial
Properties located in Bedford, Bournemouth, Coventry, Exeter, Loughborough, Medway, Preston,
Portsmouth, Reading, Stoke, Swindon and Wolverhampton.
Prime provincial
Properties located in Bristol, Bath, Edinburgh, Manchester and Oxford.
Rental properties
Investment properties whose construction has been completed and are used by the Operations segment
to generate NOI.
Rental properties (leased)/
Sale and leaseback
Properties that have been sold to a third party investor then leased back to the Group. Unite is also
responsible for the management of these assets on behalf of the owner.
See-through (also Unite
share)
Total accounting return
Wholly owned balances plus Unite’s share of balances relating to USAF and LSAV.
Growth in EPRA NAV per share plus dividends paid, expressed as a percentage of EPRA NAV per share at
the beginning of the period.
Total shareholder return
The growth in value of a shareholding over a specified period, assuming dividends are reinvested to
purchase additional shares.
USAF/the fund
The Unite UK Student Accommodation Fund (USAF) is Europe’s largest fund focused purely on income-
producing student accommodation investment assets.
The fund is an open- ended infinite life vehicle with unique access to Unite’s development pipeline.
Unite acts as fund manager for the fund, as well as owning a significant minority stake.
WAULT
Weighted average unexpired lease term to expiry.
Wholly owned
Balances relating to properties that are 100% owned by The Unite Group PLC or its 100% subsidiaries.
The Unite Group PLC Annual Report & Accounts 2019 Company Information
Unite Group
Executive Team
Richard Smith
Chief Executive Officer
Joe Lister
Chief Financial Officer
Registered Office
Financial Advisers
J.P. Morgan Cazenove
25 Bank Street, London E14 5JP
Numis Securities
The London Stock Exchange Building
10 Paternoster Square, London EC4M 7LT
South Quay House, Temple Back, Bristol BS1 6FL
Registrars
Computershare Investor Services plc
Registered Number in England
03199160
Company Secretary
Christopher Szpojnarowicz
Auditor
Deloitte LLP
PO Box 82
The Pavilions
Bridgwater Road
Bristol
BS99 7NH
Financial PR Consultants
Powerscourt
1 New Street Square, London EC4A 3HQ
1 Tudor Street London EC4Y OAH
THIS REPORT IS COMPLEMENTED BY A RANGE OF ONLINE INFORMATION ABOUT OUR
BUSINESS INCLUDING OUR OPERATIONS AND PROPERTY DIVISIONS, OUR MARKETS,
AND OUR APPROACH TO BEING A RESPONSIBLE BUSINESS.
Find out more online at www.unite-group.co.uk
237
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The Unite Group PLC
South Quay House
Temple Back
Bristol BS1 6FL
+44 (0) 117 302 7000
info@unite-students.com
www.unite-group.co.uk
www.unitestudents.com