Unite Group Annual Report 2020

Plain-text annual report

Resilience through our people and platormThe Unite Group PLC Annual Report & Accounts 2020Page references are shown throughout for links to important content.3246A safe and welcoming home enables students to engage, learn and thrive. That’s the philosophy that underpins our core purpose, which is to create a Home for Success for our students. It’s fundamental to everything we do.We deliver this through our purpose, supported by a values led culture.Sustainability StrategyA new Sustainability Strategy will enable us to grow responsible and resilient business.The safety of our students and our teams remained a priority during Covid-19.The way we o perateensures we deliver for students, University partners, employees and investors.and develop a long-term 02A Home for Success during Covid-19Our Business ModelCreatng a Home for Success for students.View our 2020 Annual Report & Accounts online at unite-group.co.uk/ar20201. The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). The Group uses alternative performance measures (APMs), which are not defined or specified under IFRS. These APMs, which are not considered to be a substitute for IFRS measures, provide additional helpful information and are based on the European Public Real Estate Association (EPRA) best practice recommendations. A full glossary of definitions is available on pages 225 and 226.FINANCIAL HIGHLIGHTS34.1p39.1p25.5p30.3p27.7p201620162017201720182018201920192020202025.5pEPRA Earnings per share1 (p)Total accounting return1 (%)EPRA NAV/NTA per share1 (p)Dividend per share (p)(Loss)/Profit before tax (£m)Loan-to-value ratio1 (%)29.0p10.25p12.75p22.7p18.0p818p per share34%790p847p818p720p646p201620162017201720182018201920192020202029%37%34%31%34%12.75p13.2%11.7%(3.4)%14.4%14.2%2016201620172017201820182019201920202020£246m£(101)m£(120)m£229m£201m(3.4)%£(120)mCONTENTSOVERVIEW01 Financial highlights02 A Home for Success during Covid-19STRATEGIC REPORT04 At a glance06 Why invest in Unite Group 08 Chairman’s statement 10 Chief Executive’s review17 Operations review22 Property review27 Market review32 Our business model34 Our strategic priorities36 Directors’ duties and Section 172 Statement38 Stakeholder engagement40 Key performance indicators42 Financial review46 Sustainability report64 Risk management68 Principal risks and uncertaintiesCORPORATE GOVERNANCE82 Chairman’s introduction to Governance84 Board of Directors88 Board statements90 Board leadership and purpose96 Division of responsibilities100 Board activities105 Nomination Committee109 Audit Committee115 Health & Safety Committee120 Remuneration Committee124 Directors’ Remuneration report136 Annual Report on Remuneration149 Directors’ Report152 Statement of Directors’ ResponsibilitiesFINANCIAL STATEMENTS154 Independent auditor’s report166 Consolidated income statement166 Consolidated statement of comprehensive income167 Consolidated balance sheet168 Company balance sheet 169 Consolidated statement of changes in shareholders’ equity170 Company statement of changes in shareholders’ equity171 Statements of cash flows172 Notes to the financial statementsOTHER INFORMATION224 Financial record225 Glossary227 Company informationOverviewStrategic ReportGovernanceFinancial StatementsOther Information01We are the only student accommodation provider to hold a 5-star safety rating from the British Safety Council (BSC). We also hold a BSC Covid Secure Workplace assurance confirming our policies, procedures and protocols meet Government guidelines on best practice.• • • • • • During Covid-19 we have undertaken regular student pulse surveys to monitor sentimentMarch 2020 – first in the sector to waive rental payments for students not returning for the third term of the 2019/20 Offered free extensions on the 2019/20 academic year for those who needed to Provided flexibility with student booking dates including flexiblecheck-in January to March 2021 – provided rent discounts recognising extended national lockdown restrictionsProvided free accommodation for care experienced and estranged students via the Unite Foundation scholarship schemeacademic yearstay in our accommodation and could not go homeSupporting students Safety is fundamental to our opera�ons. our ability to deliver. Covid-19 tested our ability to respond and we demonstrated A HOME FOR SUCCESS DURING COVID-19Offered rental discounts to reflect extended national lockdowns support through the Unite Emergency Contact Centre and a partnership with Nightline202124/7 Waived third term student rents for the 2019/20 academic year at a cost of c.£60m2019/2002The Unite Group PLC Annual Report & Accounts 2020• • • • • • • • • • • • Enhanced student welfare services, Covid-19 health and safety training focused including bespoke support for students on personal hygiene, PPE and keeping our shielding, sppuort for those self-isolating, teams safe in propertiesonline welfare checks and a pilot peer-to-Increased flexible working and additional peer schemespecial leave to help employees juggling family Online chat rooms for students in the responsibilities or those simply needing time same building and online events run by away from work in light of Covid-19 pressures'Working from home' guidelines and support, Provided links to University welfare teamsincluding training, to ensure the right home working environment was createdMyUnite App helped students to communicate when self-isolating ensuring Wellbeing support through partnering with they were able to access services and the Healthy Work Company. Additional supportsupport was also available through the Employee Assistance Programme, the 24/7 support through the Unite Emergency virtual Medicash GP and the mental Contact Centre and a partnership with health first aidersNightlineEnhanced night time staffing, providing All front-line employees received a bonus in recognition of their efforts during Covid-19additional support during national lockdownsNo employees were furloughed during Covid-19student ambassadorsStudent wellbeing and Supporting our mental health supportemployeesOverviewStrategic ReportGovernanceFinancial StatementsOther Information03132456789101211151413161718212219232025272624We are the UK’s largest owner, operator and developer of purpose-built student accommodaton.AT A GLANCE We provide a safe and secure home which is affordable and helps students to realise their academic potential whilst enjoying student life. We own the buildings we operate giving us the flexibility to invest in and make decisions, enabling us to deliver on our brand promises. Our regular drumbeat of student research understanding of students and their needs, not just in a practical sense but their emotional journey.enables us to build a unique insight and 110192112031221413225142361524716258172691827 Aberdeen Wolverhampton Bristol Glasgow Nottingham Bath Edinburgh Loughborough Reading Newcastle Birmingham London Durham Coventry Medway Leeds Leicester Exeter Liverpool Bedford Southampton Manchester Oxford Bournemouth Sheffield Cardiff Portsmouthacross 27 cities in in properties England, Scotland and Walesacross the UK180 76,000propertiesbedsThe Unite Group PLC Annual Report & Accounts 20200405OUR BRAND PROMISESOUR VALUESSafe and SecureBuildings and teams. Everything we do is designed to protect studentsCreating room for everyoneBeing authentic and striving for a truly diverse and inclusive environmentGetting you settledNew place, new people, new start. Helping students settle inDoing what’s rightAlways operate with a highly ethical, collaborative and solution driven mindsetRaising the bar togetherContinuously focused on improving the way things are doneThere when you need usWe provide support 24 hours a day, 365 days a yearKeeping uS safeSafety is at the heart of our brand and at the core of everything we do#1 We are the largest provider of student accommodation in the UK5-star We are the only PBSA provider to be accredited with a 5-star rating by the BSC87% of our portfolio is aligned to high and mid-ranked Universities60+ Universities choose to partner with us£1.1bn development capital invested since 2015£338m of value creation through development since 2015100+ commercial and community spaces developed and managed1,900 Employees 05OverviewStrategic ReportGovernanceFinancial StatementsOther InformationWHY INVEST IN UNITE GROUP PLCSector leader in UK studentrecord of deliveringstrong returns. accommoda�on with a trackA best-in-class Structurally growing demand for UK Higher platormEduca�onof annual cost synergies growth in University from acquisition of acceptances for 2020/21Liberty Living £18m+5%06The Unite Group PLC Annual Report & Accounts 2020High visibility over Robust income earnings growthgrowth and capital structureSubstan�al opportuni�es of EPS growth from secured placing in 2020 to fund LTV with a target development ppielinecontinued investment in of around 35%our platform7p£300m34%OverviewGovernanceFinancial StatementsOther InformationStrategic Report07Throughout the pandemic, the Board has been focused on protec�ng the interests of its key stakeholders.CHAIRMAN’S STATEMENT Chairman The pandemic has brought out the best in our business, showing the resilience of our operating platform. I am proudof the hard workand dedication shown by our teams in supporting students throughout this period. On behalf of the Board, I would like to thank our colleagues for their steadfast commitment.Throughout the pandemic, the Board has been focused on protecting the interests of its key stakeholders with a particular focus on doing what’s right for students whose lives and studies have been significantly impacted. Unite was the first Purpose-Built Student Accommodation (PBSA) provider to forgo 2020 summer term rents for students returning home due to Covid-19 during the initial lockdown. We have since offered further flexibility and rental concessions for the 2020/21 academic year to recognise the ongoing disruption experienced by students. These decisions were taken with consideration for the long-term success of the business, our reputation and our desire to show leadership within the student accommodation sector.“ 2020 was a uniquely challenging year for the business due to the significant disruption created by the Covid-19 pandemic.” Phil White08The Unite Group PLC Annual Report & Accounts 2020Our financial performance has understandably been Unite is a great business with fantastic people and it impacted by Covid-19, with EPRA EPS down 35% to 25.5p has been a privilege to have pylaed just a small role and total accounting return reduced to (3.4)%. This in its success over the past decade.performance reflects the impact of rent forgone for the While Covid-19 creates some uncertainty, the gHiher summer term of 2019/20, reduced occupancy for the first Education sector’s strong fundamentals, our high-quality term of 2020/21 and an associated valuation loss. This portfolio and pipeline, the strength of our University resulted in an IFRS loss before tax of £120.1 million (2019: relationships and our market-leading operating platform loss of £101.2 million).provide the foundations for a rapid recovery and Over the years, the business has worked hard to reduce significant future growth. Reflecting this confidence, the its environmental impact, support the wellbeing of our Board is recommending the reinstatement of dividends customers, and promote access to Higher Education with a final dividend of 12.75p payable in May.through the Unite Foundation. However, recognising the need to do more around environmental and social issues, the Board approved a new Sustainability Strategy in late 2020. It includes targets for net zero carbon operations and development by 2030, a commitment to providing opportunities for all our employees 16 March 2021irrespective of their background, gender or ethnicity and a pledge to raise standards across the student housing sector. A Sustainability Committee of the Board has been established to oversee the implementation and development of this strategy.As previously announced, I will retire as Chairman and step down from the Board with effect from 31 March 2021. I will be succeeded as Chairman by Richard Huntingford. My tenure as Chairman was extended to oversee the integration of the Liberty Living acquisition, which completed on schedule in September 2020, having exceeded the cost synergies targeted from the transaction. Phil White Chairman See our 1. The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). The Group uses alternative performance measures (APMs), which are not defined or specified under IFRS. These APMs, which are not considered to be a substitute for IFRS measures, provideadditional helpful information and are based on the European Public Real Estate Association (EPRA) best practice recommendations. A full glossary of definitions is available on pages 225 and 226.Sustainability Report on page 4639.1p29.0p34.1p30.3p22.7p27.7p18.0p10.25p2016201720182019201620172018201925.5p12.75p20202020EPRA Earnings per shareDividend per share (p)(p)1 25.512.75pp09OverviewGovernanceFinancial StatementsOther InformationStrategic ReportDuring the pandemic we have placed a par�cular focus on suppor�ng students, through �nancial support totalling focus on their health, safety and wellbeing. over £100 million and a CHIEF EXECUTIVE’S REVIEW Chief Executive OfficerThe resilience and flexibility of our response under extremely difficult and changing circumstances has only underlined the quality of our teams and value of our operating platform, PRISM.We recognise that the past year has been a particularly challenging time for all students, which is why their wellbeing, safety and security has been our priority since the start of the Covid-19 pandemic. All our properties have remained open and operational throughout the pandemic, recognising that for many students our accommodation is their only home.Following the onset of the Covid-19 pandemic in March, most UK Universities chose to close their campuses, suspending all face-to-face teaching for the remainder of the 2019/20 academic year. In response, Unite was the first corporate PBSA provider to offer to release students from their tenancies for the summer term. We have subsequently offered students further rental discounts for the 2020/21 academic year, reflecting the challenges and disruption students have faced during the latest lockdowns. We have also offered students significant flexibility to manage their changing circumstances, including the ability to extend their stay during summer 2020 at no further cost and flexible or delayed check-ins for the 2020/21 academic year. Our response to Covid-19Richard Smith“ Despite the challenges of the Covid-19 pandemic, I am proud that Unite has emerged from a tough year showing our operational resilience and building on our commitment to doing the right thing to support students.” The Unite Group PLC Annual Report & Accounts 202010We were the first student accommodation provider to be In response to Covid-19, the business delivered £15 million accredited with Covid-19 secure status by the British Safety of cost savings (Unite share) from insourcign of work over Council. We have also worked closely with our University the summer, savings to utility and broadband costs and partners to agree our approach, resulting in increased a four-month reduction in remuneration for Directors provision and access to student wellbeing and mental health and cancellation of bonuses for 2020. Reflecting our cost support during the pandemic. This has included bespoke discipline and the anticipated recovery in rental income, we support for students who are shielding, support for those are targeting an improvement in our EBIT margin to 74% by self-isolating, online welfare checks and a pilot peer-to-peer the end of 2023 (2020: 62.1%, 2019: 71.7%).scheme. We have also worked closely with Public Health Our key financial performance indicators are set out below:England and local authorities during Covid-19. The business delivered a resilient financial performance in 2020 with EPRA earnings of £97.3 million and EPS of 25.5p, down 35% YoY. This reflects the impact of rent rebates for the summer term of 2019/20 and lower occupancy in the 2020/21 academic year, partially offset by cost savings made during the year. The loss before tax of £120.1 million is primarily driven by the valuation loss resulting from income reductions linked to Covid-19.Despite the ongoing disruption created by Covid-19, we look forward to the future with confidence. We have increasing visibility over income thanks to the anticipated return of students following the Easter break, the strength of University applications and growing reservations for the coming 2021/22 academic year. This provides us with the confidence to reinstate dividends, through the payment of a final dividend of 12.75p. This represents a payout ratio of 50% for FY2020, which we intend to increase to at least 80% as market conditions stabilise.Total accounting returns for the year reduced to (3.4)%, reflecting the valuation loss in the year. Looking forward, we expect a strong recovery in total returns from 2021, underpinned by a return to full occupancy and 2-3% growth for the 2021/22 academic year. We continue to target delivery of attractive total returns, through a balance of recurring income and capital growth.Financial resilienceTotal accounting returnRental growthEBIT margin1(3.4)(0.6)62.1%%%14.2%14.4%3.8%71.3%71.7%13.2%67.4%67.9%3.4%3.4%11.7%3.2%20162017201820192016201720182019201620172018201962.1%202020202020(3.4)%(0.6)%A reconciliation of loss before tax to EPRA earnings is set out in note 8 of the financial statements.1. The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). The Group uses alternative performance measures (APMs), which are not defined or specified under IFRS. These APMs, which are not considered to be a substitute for IFRS measures, provide additional helpful information and are based on the European Public Real Estate Association (EPRA) best practice recommendations. A full glossary of definitions is available on pages 225 and 226.See our Financial highlights20202019Financial review on page 42EPRA earnings£97.3m£110.6mEPRA EPS25.5p39.1pIFRS loss before tax£(120.1)m£(101.2)mIFRS basic EPS(31.8)p(31.5)pDividend per share12.75p10.25pEPRA EPS yield3.0%4.9%Total accounting return(3.4)%11.7%EPRA NTA per share818p847pIFRS NAV per share809p845pLoan to value34%37%OverviewGovernanceFinancial StatementsOther InformationStrategic Report1112Return to UniversityEnduring appeal in the residential degreeContinued investment in our best-in-class platformThe Government announced its plan for a phased return Covid-19 has required Universities to develop new teaching of students to University on 22 February. From 8 March, methods to adapt to national lockdowns and social Universities are able to resume in-person teaching for distancing requirements on campus. Almost all Universities students who are studying practical or practice-based provided in-person teaching in the autumn term of subjects and require specialist equipment and facilities. 2020/21 and delivered on a blended basis with face-to-face The Government will review the timing for the return tutorials, seminars and practical work complemented by of remaining students by the end of the Easter holiday. online lectures to observe social distancing guidelines. The University campuses remain open, however we anticipate experience has accelerated Universities’ learnings around that some Universities will choose to switch to online-both the opportunities and limitations of online delivery.only teaching and assessment for the remainder of the HEPI research of student experiences in 2020 revealed a academic year.stronger perception of value-for-money before the move We know from our recent student survey that the majority to remote learning in March 2020. We also know from our want to return and enjoy University life. 86% students are own surveys that students continue to see significant value keen to get onto University campus once it is safe to do so. in the independence that comes from living away from Meanwhile, 79% of students said they wanted to receive home and the friendships and interactions with their peers some face-to-face teaching in the third term, if restrictions at University. This is underlined by UCAS applications data are eased. Approximately 65% of checked-in students for 2021/22, which reveal a significant drop in the number have now returned to our buildings, which we expect to of students intending to live at home while studying.rise further following the end of the Government’s stay at Rather than replacing the residential degree, Universities home rule on 29 March.see the potential for online learning to enhance the Over the next six months, our financial priorities are cash on-campus student experience. Learning will become collection for the 2020/21 academic year and sales for more personalised through higher quality face-to-face 2021/22. We have now collected 95% of rent due to date for interactions in smaller groups, tutorials and practical work, the 2020/21 academic year. As a result, we are confident in supported by online content made available for students to maintaining headroom against all ICR covenants across the access at a time that best suits them. Group and its funds and joint ventures.Reservations for the 2021/22 academic year are In June 2020, we successfully raised £300 million of gross encouraging at 66%lihtly below , which, as expected, is sgproceeds from an equity issue, equivalent to 9.5% of existing the prior year level of 77%. We see strong demand for shares in issue at a price of 870p. The placing proceeds accommodation this Autumn based on an 8.5% increase enable the Company to continue to invest in its market-in UCAS applications, but expect a later sales cycle than leading platform and drive earnings growth. usual due to the uncertainty created by Covid-19. There also remains some uncertainty over the easing of UK The net proceeds, coupled with debpt u to our 35% travel restrictions later this year, which could affect some LTV target, provide around £400 million of investment international students’ ability to arrive in time for the start capacity to capitalise on new University partnership and of the Autumn term. Positively, we have seen a c.150% development opportunities in key cities. We have already increase in the daily rate of direct-let bookings since the secured c.£175 million of new development opportunities Government published its roadmap out of lockdown on 22 since the placing across two sites in central London February, reflecting increased confidence from both UK and Edinburgh and have a healthy pipeline of further and international students.opportunities under evaluation.The placing proceeds were initially used to repay being deployed into new developments. As a result, the placing is immediately accretive to total accounting returns and earnings neutral, with earnings accretion as new development opportunities are delivered.£207 million of secured debt at a cost of 4.8% ahead of CHIEF EXECUTIVE’S REVIEW CONTINUED“ I would like to thank our teams for their dedication over the past year."The Unite Group PLC Annual Report & Accounts 2020We are also in advanced discussions with GIC regarding a long-term extension of our LSAV joint venture, which would crystallise our performance fee during 2021.Successful integration of Liberty LivingDuring 2020, we successfully completed the integration of our £1.4 billion acquisition of Liberty Living’s 24,000-bed portfolio. All Liberty Living properties, customers and employees were fully integrated into our operating platform, PRISM, slightly ahead of planned timings. The Unite customer offer has also been extended to all former Liberty Living customers, including access to the MyUnite app and the comprehensive range of student welfare and support services we provide. I want to thank all of the former Liberty Living employees for their professionalism and commitment throughout the transition, which was challenging given the timing of the pandemic.We realised cost synergies of £11 million in 2020 and now expect to achieve annual cost savings of £18 million from 2021 (increased from our initial target of £15 million). We incurred integration costs of £9.2 million in 2020, of which almost the entirety were recognised in H1. There are opportunities for further cost synergies to be realised over time in areas such as procurement and energy efficiency in the Liberty Living portfolio. Creating a responsible and resilient businessA commitment to ‘doing what’s right’ is part of who we are at Unite Students. Over the years, we’ve worked hard to reduce our environmental impact, support the wellbeing of our student customers, and promote access to Higher Education through the Unite Foundation. In late 2019, we set out to develop a new, ambitious and comprehensive Sustainability Strategy, building on what we had already achieved to address the most materially significant environmental, social and governance challenges we face. During 2020, we engaged with key stakeholders to understand the risks and opportunities, and how we can do more to create a positive impact. Students are concerned about a wide range of topics related to both climate change and how to make the world a fairer place, while sustainability issues are of increasing interest to investors, Universities and other stakeholders. Having listened to our stakeholders, we have developed five overarching sustainability objectives, defining our new level of ambition and showing how we will work to make a real difference: • Becoming net zero carbon by 2030 – we will reduce carbon emissions from new and existing buildings in line with climate science, ahead of the timescale set out in the Paris Climate Agreement to avoid the worst impacts of climate change. We will do this following the net zero carbon hierarchy, with a strong focus on reducing energy consumption through improving our buildings, while also strengthening the way we buy renewable energy and investing in certified carbon offsets for any residual emissions• Creating resilient, resource efficient assets and operations – we will reduce the environmental impact of our new and existing buildings by improving energy and water efficiency, and also help our students to adopt lasting sustainable living habits• Enhancing the health and wellbeing of our employees and students – driving real improvements in physical and mental health and wellbeing based on an understanding of their needs, through improvements to our service model, physical assets and employee support programmes• Providing opportunities for all – including students, employees and in the communities where we work, where all can succeed, whatever their background, gender or ethnicity• Leading the student housing sector – we will work to raise standards across the student housing sector, and deliver value to our customers and investorsOUR VALUES Creating room for everyoneKeeping uS safeDoing what’s rightRaising the bar togetherSee pages 90 and 9113OverviewStrategic ReportGovernanceFinancial StatementsOther Information14We 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 were one of the first companies to take action to remove Aluminium Composite Materials (ACM) cladding from our buildings where needed, in line with Government advice. During 2020, and in accordance with the Government’s Building Safety Advice of 20 January 2020, we undertook 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. We are currently carrying out the replacement of HPL cladding on these properties, with activity prioritised according to our risk assessments, starting with those over 18 metres in height. In line with our value of doing what’s right, we will remove this cladding where it fails to meet regulations. All of our properties have been confirmed as safe to operate and occupy by independent fire safety experts, reflecting a wide range of fire safety measures across our portfolio as well as the special measures put in place at the affected buildings, including increased building patrols by staff, additional alarm measures and other property specific factors such as sprinklers, fire prevention and evacuation plans.The cost of replacing the HPL cladding is expected to be £79.9 million (Unite share: £33.8 million), which will be incurred over the next 12–36 months. We have fully provided for this spend in our year end balance sheet.We are fully supportive of the Government’s actions to improve fire safety in the UK. This is likely to result in more stringent fire safety regulations over the coming years. As we have done to date, we will ensure we are aligned to fire safety regulations as they evolve and will continue to make any required investment. We are seeking to mitigate the costs to Unite of cladding replacement in our buildings through claims from contractors under build contracts, where appropriate. We also await further details of the Government’s recently announced cladding levy for new residential developments.Partner of choice for UniversitiesOur reputation with partner Universities is a key strategic advantage for Unite. In a highly competitive environment, Universities increasingly recognise the importance of high quality, affordable accommodation in their ability to attract and retain students and ensure their satisfaction.CHIEF EXECUTIVE’S REVIEW CONTINUEDThis Annual Report includes detail of our commitments, including targets, timescales and plans, and we are committed to sharing information on our progress and performance through regular and transparent reporting.During 2020, we formally signed up as a supporter of the Task Force on Climate-Related Financial Disclosure (TCFD) and will be publishing more details of our plan for full adoption in 2021, including our net zero carbon pathway. Our sustainability performance is measured by a range of leading external benchmarks, including GRESB, CDP and the EPRA sBPR and we achieved material year-on-year improvements in our ratings for GRESB (4*, 81/100) and CDP (B for Climate Change) in 2020.Safe and secureSafety 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 a safe and secure environment for our students and employees. Covid-19 has only underlined the importance of this commitment.In response to Covid-19, we introduced a number of new and enhanced Covid Secure operating practices for the 2020/21 academic year. These included enhanced cleaning and new physical and social distancing measures such as floor markings, signage, communication in reception areas and repurposed common areas. Reflecting these measures, Unite was also the first student accommodation provider to be accredited with Covid Secure status by the British Safety Council as well as achieving the Sword of Honour for excellence in the management of occupational health and safety.Our investments in our sector-leading operating platform, PRISM, and our MyUnite app have also helped to facilitate digital interactions between Unite employees and students – such as bookings, maintenance requests, parcel collections and logging of issues – and provide opportunities for enhanced service to students. We used the Unite app to manage arrivals and check-ins to ensure students were welcomed in a safe and secure environment.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 continue to be safe for occupation.“ In response to Covid-19, we introduced a number of new and enhanced Covid-19 secure operating practices for the 2020/21 academic year.“14The Unite Group PLC Annual Report & Accounts 2020We believe the decisive actions taken by the business in 87% of our income is generated by students attending response to Covid-19 have enhanced our reputation with such Universities (2019/20: 88%), increasing to 88% Universities. Covid-19 has also intensified the operational on delivery of our secured development ppieline and and financial pressures faced by Universities, which we expect to create a growing appetite for partnerships Value for money is the most important factor influencing with leading PBSA operators in delivering their long-students’ decisions on where to live. Our accommodation term accommodation strategies. We see opportunities is now cheaper than the private rented sector on a to capitalise on our brand and the goodwill created by comparable basis, including bills and contents insurance. our response to Covid-19 to accelerate and enhance our That is before allowing for the hassle-free services we pipeline of University partnerships. Unite is already viewed also provide, including on-hand maintenance teams and as a strategic partner by Universities, building on our best-help when it’s needed from our 24/7 customer support in-class operating platform and the commitment of 1,900 centre and dedicated welfare teams. The significant people whose understanding of students is informed by support and flexibility we have offered during Covid-19 our 30-year history in the Higher Education sector.has also demonstrated to students and parents the value For the 2020/21 academic year 39,250 beds are let under of a trusted, institutional landlord.nomination agreements, representing 60% of total beds During 2020, we opened 2,257 new beds and have sold sold (2019/20: 41,500 and 59%). The reduction in beds 242 beds to third parties. Taking into account these under nomination agreements for 2020/21 reflects the activities, together with valuation movements, the value impact of Covid-19 on occupancy and our willingness to of our investment portfolio (including our share of USAF provide flexibility to highly valued University partners on a and LSAV) is £4.9 billion as at 31 December 2020 (2019: selective basis. With an average remaining life of six years, £4.7 billion).our multi-year nomination agreements provide us with visibility for average annual rental growth of 2% over the Despite the disruption resulting from Covid-19 and next five years at current levels of inflation.lockdown restrictions, we made excellent progress in our development ppieline during the year. We During 2020, we completed a new University Partnership delivered three buildings for the 2020/21 academic year, with the University of Bristol, covering around 3,000 beds. with approximately 40% of the beds secured under We are also in active discussions with three high-tariff nomination agreements with an average life of 22 years, Universities over potential partnerships, covering around supporting our quality of income. Development of our 7,000 existing and new beds, which we are looking to schemes at Middlesex Street in London and Old BRI in progress over the next 12–18 months. These discussions Bristol was suspended during the first national lockdown cover a range of potential solutions on a city-wide basis, to conserve cash and ensure the safety of workers on site. including multi-year nomination agreements for our We have now recommenced construction on both sites existing operational assets, on-campus and off-campus for delivery in 2022. developments and stock transfer.We intend to maintain a development run-rate of approximately 1,500–2,000 beds or £150–200 million The quality, location and scale of our portfolio is a key of annual capital expenditure, with opportunities once component of our business model and long-term strategy. again emerging in London as demand has weakened We aim to operate high quality, affordable buildings from some competing asset classes. London remains our and offer a range of price points to meet the needs of most under-supplied market, with some of our strongest different students. Our properties are located in and around leading Universities where student demand is strongest, supporting high levels of occupancy and rental Disposals remain an important part of our strategy and growth. Our portfolio activity is focused on increasing we will continue to recycle assets out of our portfolio to our alignment to high and mid-ranked Universities and ensure that we increase our exposure to the UK’s best being in the best locations. For the 2020/21 academic year, Universities, while generating capital to invest in further development activity and other investment opportunities. Operating quality buildingscontracted disposals.University relationships.152,25739,250£4.9bnnew beds have been beds are let investment portfolio opened during 2020under Nomination as at 31 December agreements202015OverviewGovernanceFinancial StatementsOther InformationStrategic ReportWe completed the disposal of one wholly-owned property Brexit will have a negative impact on EU student numbers for £10 million in 2020 in line with book value. We are from 2021/22, who account for 9% of our customers, due targeting £200–300 million of disposals in 2021 (Unite to the loss of home fee status and access to a tuition fee share) in anticipation of improving liquidity as greater loan. We expect a 30–40% reduction in demand from visibility emerges over occupancy and income for the EU students, equating to 3–4% of our customer base by 2021/22 academic year. 2023/2024. However, we are confident in our ability to absorb this impact thanks to the coinciding demographic Our ongoing disposal plan will be used to keep LTV toour growth for UK students and the supportive environment medium-term target of 35% as we deliver our secured for the recruitment of non-EU students.development ppieline. This disciplined approach to portfolio optimisation underpins our ability to sustain rental growth over a longer time horizon.Our Chairman, Phil White, will be steppgin down from his role with effect from 31 March 2021. The Board would like to thank Phil for his service. During his Chairmanship, the The Government’s final response to the Augar Report on Group has, amgon other things, grown within the FTSE 250 post-18 education and funding is now expected later this and become a leading European REIT and, more recently, year alongside the next Comprehensive Spending Review. completed the successful acquisition and integration of The recent Skills for Jobs White Paper underlines the Liberty Living. His leadership has been especially critical Government’s commitment to widen participation in post-as the Board navigated Covid-19 through 2020 and into 18 education and strengthen the global standing of the 2021. Phil has ensured the business is ready and resilient UK Higher Education (HE) sector. We expect an increased to embrace the risks and opportunities ahead. Phil will be focus on the quality of HE provision and research, leading succeeded by Richard Huntingford who is the Chairman of to a further concentration of student numbers and funding Future plc, a FTSE 250 gist media, lobal platform for specialin high tariff, research-intensive Universities and leading and who joined the Board in December 2020.teaching-led Universities. We are confident that our strategic alignment to high and mid-ranked Universities positions us to successfully navigate future changes to the The outlook for the business remains strong, reflecting Government’s HE policy.the underlygin strength of student demand, our alignment to the strongest Universities and the capabilities of our best-in-class operating platform. There are significant The outlook for student accommodation remains positive, growth opportunities for the business created by growing with structural factors continuing to drive a demand-student numbers, the ongoing shortage of high quality supply imbalance for our product. Demographic growth and affordable purpose-built student accommodation, will see the number of UK 18 year olds increase by 178,000 Universities need to deliver an exceptional student by 2030. Participation rates also continue to grow and are experience through their accommodation and the growing now at their highest ever level, reflecting the value young awareness of the benefits of PBSA among non-1st year adults place on a higher level of education and the life students. In particular, we see opportunities for new experience and opportunities it offers. Applications data developments and University partnerships, building on for the 2021/22 academic year is very encouraging with an the strengthofour enhanced reputation in the sector. 8.5% increase in applicants as at the 29 January deadline. Despite uncertainty created by Covid-19, Brexit and the The Government is targeting a c.80,000 increase in review of Higher Education funding, we remain well international student numbers by 2030, aided by the positioned for a rapid recovery in earnings. Positive introduction of a new two-year post-study visa (three progress with Covid-19 vaccinations in the UK will enable years for postgraduates). This ambition is underpinned a full reopening of the UK economy. Moreover, the early by the UK Higher Education sector’s global standing and strength of applications data and reservations for the the strength of its Universities. The UK is the second 2021/22 academic year are supportive of a return to most popular destination for international students full occupancy and positive rental growth. We are also and 26 UK Universities feature in the top 200 of the confident in the medium-term outlook for earnings growth, QS World University rankings. Unite works with 20 of driven by a return to sustainable c.3% p.a. rental growth, our substantial secured development ppieline and further opportunities to deploy capital into new development and Given constraints on new suppyl of University-owned stock University partnership opportunities at attractive returns.and private-rented housing, the vast majority of this new demand will need to be met by corporate PBSA providers.Board changesGovernment policyOutlookGrowing demand for Higher EducationCHIEF EXECUTIVE’S REVIEW CONTINUEDthese Universities.16The Unite Group PLC Annual Report & Accounts 2020Summary income statement2020 £m2019 £mRental income263.2213.9Property operating expenses(82.9)(53.1)Net operating income (NOI)180.3160.8NOI margin68.5%75.2%Management fees14.014.4Operating expenses(30.9)(21.7)Finance costs(64.9)(43.9)Acquisition and net performance fees4.66.8Development and other costs(5.8)(5.7)EPRA earnings97.3110.6EPRA EPS25.5p39.1pEBIT margin62.1%71.7%A reconciliation of loss after tax to EPRA earnings is set out in note 2.2b to the financial statements.17Overheads increased by £9.2 million, reflecting the impact of the Liberty Living acquisition and £11 million of initial cost synergies realised in the year. In response to Covid-19, the business delivered £15 million of cost savings (Unite share) from insourcing of work over the summer, savings to utility and broadband costs and a four-month reduction in remuneration for Directors and cancellation of bonuses for 2020.Recurring management fee income from joint ventures reduced slightly to £14.0 million (2019: £14.4 million), reflecting the impact of lower NOI and property valuations in USAF and LSAV. Performance and acquisition fees of £4.6 million were received in the year (net of tax), relating to further partial recognition of the LSAV performance fee (2019: £6.8 million). Based on current expectations, Unite’s remaining share of the LSAV performance fee is expected to be c.£15–20 million.Our EBIT margin reduced to 62.1% in 2020 (2019: 71.7%), reflecting the impact of lower income and partial mitigation from cost savings. Reflecting our cost discipline and the anticipated recovery in rental income from 2021/22 onwards, we are targeting an improvement in our EBIT margin to 74% by the end of 2023. This reflects an increase in the annual cost synergies to be realised from the Liberty Living acquisition to £18 million from 2021, as well as opportunities for further efficiencies over time in areas such as procurement, enhanced use of technology and energy efficiency.Finance costs increased to £64.9 million (2019: £43.9 million), reflecting the increase in average net debt during the year primarily resulting from the acquisition of Liberty Living. This impact was partially offset by a lower average cost of finance in 2020 of 2.7% (2019: 3.6%) as we have substantially drawn our revolving credit facilities at lower average rates and repaid £207 million in secured loans at a blended cost of 4.8%. Interest capitalised into development schemes decreased from £9.1 million to £4.6 million, driven by lower development spend following the pause on construction at Middlesex Street and Old BRI, which will now be delivered in 2022. We expect capitalised interest to increase in 2021, albeit not to 2019 levels, as development activity increases ahead of deliveries in 2022 and 2023.Development (pre-contract) and other costs were broadly stable remained broadly flat at £5.8 million (2019: £5.7 million), reflecting the cost of paused development activity, the earnings impact of share-based incentives, deferred and current tax and our contribution to our charitable trust, the Unite Foundation.OPERATIONS REVIEW 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 profitabilityThe 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. These capabilities helped to deliver a resilient financial performance in 2020, despite the significant disruption created by Covid-19, delivering EPRA EPS of 25.5p (2019: 39.1p). The 35% reduction in EPS reflects our decision to release students from their tenancies in term three of 2019/20 in response to the national lockdown and lower occupancy for term one of the 2020/21 academic year, partially mitigated by savings in operating costs and initial synergies from the acquisition of Liberty Living.Our acquisition of Liberty Living, which completed in November 2019, and the disruption to income caused by Covid-19 are the two key factors explaining the variance in our profitability and operating performance between 2020 and 2019. Rental income increased by £49.3 million, up 23%, as a result of the acquisition of Liberty Living’s 24,000 bed portfolio, which was partially offset by £37 million of rental income forgone through cancellations for the summer term of 2019/20 in response to Covid-19 and lower occupancy for term one of 2020/21. Net operating income also increased by 12%, reflecting our increased scale. EPRA like-for-like rental income reduced by 13.2% YoY for properties owned throughout 2019 and 2020, which resulted in a reduction in NOI margin to 68.5% (75.2%).17OverviewStrategic ReportGovernanceFinancial StatementsOther InformationOccupancy, reservations and rental growth2020/21 academic yearcollection at 93% to date. Collection rates for rents received directly from students are 97% for the year to date and 85% for rents paid directly by Universities. Scheduled payments We let 88% of bed spaces across the whole portfolio for the 2020/21 academic year (2019/20: 98%), which reflected collection rate further improve to over 95%.a resilient performance in challenging circumstances. This represents meaningful outperformance of our PBSA In response to the latest national lockdown in January peers, who delivered average bookingsof 75% for 2020/21 2021, we announced that students were able to apply according to JLL. This reflects the benefit of our long-for a discount of 50% of their rent for a total of 10 weeks term nomination agreements and the adaptability of our and, in addition, will be given a four-week complimentary operating platform in successfully shifting the focus of our extension of their tenancy agreement at the end of the direct-let sales from international to domestic students, academic year to extend their stay into the summer. many of whom would ordinarily stay in the HMO sector. The rental discount and tenancy extension were made available to all students checked-in but not living in their The reduction in our occupancy contrasts with a 5% accommodation between 18 January and 28 March. Take-increase in accepted applicants to UK Universities for the up of the offer has been c.40% by eligible customers, 2020/21 academic year. Due to disruption and uncertainty reflecting c.60% occupancy among checked-in students created by Covid-19, student demand for accommodation during term two. The loss of rental income associated has been temporarily impacted by some students either with the rental discount and tenancy extension is choosing to study from home, not travel to the UK or defer expected to result in a reduction to EPRA EPS of up to their place. We expect this demand to return from 2021/22, £10 million or 2.5p for the 2021 financial year.as restrictions ease relating to Covid-19.Based on rent collection in the year to date, assumed Checked-in occupancy is currently 80%, reflecting attrition in non-checked-in bookings and take-up of our those students who have now checked-in to their 10-week rent discount, we expect to receive 90–95% of accommodation and nomination agreements where contracted rental income of £268 million for the 2020/21 Unite receives rent directly from Universities. Customers academic year (on a Unite share basis).making up the remaining 8% of occupancy are now past their scheduled check-in dates, of whom around 90% are international. Around half of those international customers yet to check-in have confirmed they still plan to arrive in the coming weeks.We have now collected 95% of rent due to date for the 2020/21 academic year. This reflects successful term one rent collection of 96% and a positive start to term two rent by Universities in the coming weeks will see the total CHIEF EXECUTIVE’S REVIEW CONTINUED2020/21 cash collectionTerm 1Term 2Year to datePayable by Universities92%81%85%Payable by students98%96%97%1Total96%93%95%1. Includes both direct-let and nomination referral customers.18The Unite Group PLC Annual Report & Accounts 2020Annual rents reduced by 0.6% on a like-for-like basis for We have maintained a high proportion of income let to 2020/21, reflecting contractual growth of 2.5% through Universities, with 39,250 beds or 60% of those sold for nomination agreements offset by a 3.2% reduction in 2020/21 under nomination agreements (2019/20: 41,484 direct-let rents. The reduction in direct-let rents reflects and 59%). The slight reduction in the number of beds under an increase in the share of direct-let sales to UK customers nomination agreements reflects the decision of some (46% in 2020/21 vs 39% in 2019/20) as a result of our Universities not to renew rolling single-year agreements in success in attracting more domestic students and a lower light of uncertainty over student numbers and occupancy number of international student arrivals. On average, UK created by Covid-19, and flexibility offered to University customers pay 20% lower annual rents than international partners on a case-by-case basis. customers, reflecting a preference for slightly shorter 55% of our nomination agreements, by income, are multi-year tenancy lengths and lower cost room types. Rental growth and therefore benefit from annual fixed or inflation-linked was also impacted by our flexible tenancy offer, which uplifts. These agreements are expected to secure average allowed students to delay the start of their tenancy to annual rental growth of 2.1% over the next five years at coincide with changes to University term dates. Occupancy current low levels of inflation. The remaining agreements are was broadly consistent across our wholly owned portfolio, single year and we achieved a renewal rate of 76% on these USAF and LSAV.agreements for 2020/21 (2019/20:85%). 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 6.4 years, up marginally from 6.2 years in 2019/20.We expect the proportion of beds let to Universities to remain at or around this level in the future. This balance of nomination agreements 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.2020/21 rental growth and occupancy LfL rental By fundgrowthOccupancy12Nomination agreements2.5%Direct-let(3.2)%(0.6)%88%Wholly owned(1.7)%88%USAF(0.1)%89%LSAV1.5%85%Leased(1.2)%100%(0.6)%88%TotalTotal1. Like-for-like properties based on annual value of core student tenancies.2. Beds sold.19OverviewGovernanceFinancial StatementsOther InformationStrategic ReportCHIEF EXECUTIVE’S REVIEW CONTINUEDBased on our expectation of an enhanced campus experience for students, supported by an increase in face-to-face course delivery and a relaxation of international travel restrictions, we anticipate a return to full occupancy and 2–3% rental growth in 2021/22. However, there remains greater risk and uncertainty over occupancy and rental growth than a normal year as lockdown restrictions are eased.Our best-in-class operating platform continues to drive UK students account for 66% of our customers for 2020/21 both service enhancements and operational efficiency. We (2019/20: 60%), making up a large proportion of the beds remain committed to reinvesting a significant proportion under nomination agreements with Universities. In addition, of savings in enhanced customer services that deliver 25% and 9% of our customers come from non-EU and EU value-for-money for students and support our purpose of countries respectively (2019/20: 31% and 9%), reflecting the creating a Home for Success. This includes investment in relative appeal of our hassle-free product when compared our MyUnite app, our Student Ambassador programme with alternatives in the private rented sector.and the provision of student welfare services.Re-bookers accounted for 25% of our direct-let bookings for the 2020/21 year, contributing to the 65% of direct-let We recognise that the past year has been a particularly bookings made to non-1st years. This reduces our exposure challenging time for all students, which is why their to less predictable 1st year undergraduate customers and wellbeing, safety and security has been our priority since puts less emphasis on Clearing following A-level results.the start of the Covid-19 pandemic.Postgraduates now make up 16% of our direct-let Unite Students was the first student accommodation customer base, driven by strong growth in UK provider to be accredited with Covid Secure status postgraduate numbers and increasing awareness accredited by the British Safety Council, following the of the benefits of PBSA. As a result, we are trialling introduction of a number of new and enhanced Covid-19 ways to tailor our offer for postgraduates as part of secure operating practices for the 2020/21 academic year. These included enhanced cleaning and new physical and social distancing measures such as floor markings, signage, communication in reception areas and repurposed Reservations for the 2021/22 academic year are common areas. Our investments in our sector-leading encouraging at 66%, which, as expected, is slightly below operating platformUnite app, also , PRISM, and our Mythe prior year level of 77% given the ongoing uncertainty enabled students to communicate remotely with Unite's created by Covid-19. We expect strong student demand for teams without having to leave their rooms. 2021/22 from both domestic and international students, but anticipate a later sales cycle than a typical year as a To help foster a sense of community, we introduced a result of current uncertainty relating to Covid-19. As a Home Charter for 2020/21, which outlined the expectations result, we have increased our focus on retaining existing for students living together and the ways in which we will direct-let customers, which has led to an increased share assist. Our aim is to create a positive culture for living of sales to domestic re-bookers.as a community and safe, respectful and harmonious homes that help students get the most out of their We have good visibility over rental growth for the 2021/22 time at University. The Home Charter was introduced academic year, with nomination agreements in place on to reflect the new dynamics created by Covid-19 when a large proportion of our beds. Falling UK inflation over living in shared accommodation. Going forward, it will be 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 We have also increased provision and access to student still anticipate annual rental increases of just under 2% wellbeing and mental health support through enhanced from our nomination agreements. In addition, we see student welfare services, including bespoke support for a positive outlook for direct-let sales to re-bookers by students who are shielding, support for those self-isolating, capturing market share from the HMO sector. We also online welfare checks and a pilot peer-to-peer scheme. We see growing demand from non-EU international and have dedicated welfare leads in each of our cities and also postgraduate students, reflecting recent increases to the provide 24/7 support through Unite's Emergency Contact UK’s post-study visa and the international reputation of Centre and a partnership with Nightline.our wider review of customer segmentation.reviewed annually.the UK’s Universities.Delivering for our customersHealth, safety and security2021/22 academic yearBeds Beds % Income Agreement length2020/212019/202020/21Single year17,70915,264452–5 years5,74811,214166–10 years6,8734,5791811–20 years6,7245,2241620+ years2,1965,203 539,25041,484100Total20The Unite Group PLC Annual Report & Accounts 2020Financial support during Covid-19Service enhancements We have provided over £100 million in financial support Our best-in-class operating platform continues to drive to students during the Covid-19 pandemic. We have both service enhancements and operational efficiency. We shown sector leadership in offering rent waivers and remain committed to reinvesting a significant proportion flexibility, reflecting our focus on doing what’s right for of savings in enhanced customer services that deliver all stakeholders and the importance of maintaining a value-for-money for students and support our purpose of sustainable business. We were the first PBSA provider creating a Home for Success.to forgo 2020 summer term rents for students returning This year, there has been a significant focus on improving home due to Covid-19 during the initial lockdown. We also our digital capabilities to support our commitment of offered students the ability to extend their stay into the keeping students and our staff safe and secure during summer at no extra cost.Covid-19. We enhanced our check-in solution by fully For the 2020/21 academic year, we extended the traditional digitalising the end-to-end customer journey, which check-in period for Unite properties thereby reducing was used by 79% of customers, and also extended the the traditional peak and provided flexible check-in for capability of uChat to allow customers to chat to other students during September/October 2020. We also allowed residents on the same floor. This allowed students to international students to move to a January start date, connect with others they would not usually have met forgoing rent for the period from September to December, in regular circumstances and was used by c.18,500 and provided the option to check-in early, at no extra cost, customers. We also introduced a new feature in the where students needed to quarantine having arrived from MyUnite app for customers to let us know if they were a Covid-restricted area.self-isolating, allowing our staff to put measures in place to protect both students and our staff. Following the announcement of a further national lockdown in January 2021, we announced that students In October 2020, we launched new features for our student were able to appyl for a rent discount of 50% for 10 weeks website. It delivers a more flexible, user-friendly platform and a four-week complimentaryetesion of their tenancy xn that enables customers to self-serve. Keyto this wasthe into the summer.delivery of our simplified booking journey, where we reduced the length of the process by 50%. Simplifying We believe our response has strengthened our reputation the booking journey resulted in a 47% poveent inimrm with students, parents, Universities and Government. This conversion rate YoY during November and December.goodwill creates opportunities to secure new University partnerships as well as take market share from the 955,000 In February 2021, we launched a new group booking tool students living in the HMO sector, where the response and marketing campaign to target groups of students who of private landlords has been inconsistent and less might otherwise look to house share in the private rented accommodating overall.sector. We have had encouraging early take-up, particularly from new customers to Unite, supporting our ambitions to capture market share from the HMO sector.21OverviewGovernanceFinancial StatementsOther InformationStrategic ReportCHIEF EXECUTIVE’S REVIEWPROPERTY REVIEW Changes in EPRA guidelinesEPRA NTA growthProperty portfolio In October 2019, EPRA issued updated best practice EPRA NTA per share reduced by 3% to 818p at 31 December recommendations, including new definitions of NAV 2020 (31 December 2019: 847p) with IFRS net assets measures, which became effective for the Group on 1 per share down 4% to 809p (31 December 2019: 845p). January 2020. The revision includes the introduction of In total, EPRA net tangible assets were £3,266 million at EPRA Net Tangible Assets (NTA), which is now the most 31 December 2020, up from £3,087 million a year earlier.relevant NAV measure for the Group, and will become our The main drivers of the 29p per share reduction in EPRA primary NAV measure going forward. EPRA NTA adjusts NTA per share were:EPRA NAV, our existing key NAV measure, by excluding intangible assets. The reduction in the value of the Group’s share of investment assets due to income deductions relating to The table below summarises the difference in EPRA NTA Covid-19 disruption ((30)p) and modest yield expansion and EPRA NAV as at 31 December 2019 and 31 December ((5)p)2020. A full reconciliation of the EPRA measures, from the old to new methodology can be found in note 2.3c to the A provision for the replacement of HPL cladding ((8)p)financial statements.The impact of the share placing at a premium to NAV (+1p)Swap cancellation and debt break fees ((8)p), primarily related to repayment of the Group’s secured debt facilitiesIntegration costs relating to the acquisition of Liberty Living ((2)p)The positive impact of retained profits and other items The valuation of our property portfolio at 31 December (+23p)2020, including our share of gross assets held in USAF and LSAV, was £5,182 million (31 December 2019: £5,225 million). The £43 million reduction in portfolio value (Unite share) was attributable to:Valuation reductions of £164 million on the investment and development portfolios, reflecting £ for £ reductions in value for income shortfalls due to Covid-19Capital expenditure on developments of £92 million, including interest capitalisedCapital expenditure of £48 million on investment assets relating to refurbishment, asset management initiatives and works to replace HPL claddingDisposals of £10 millionA net revaluation loss of £9 million on leased propertiesThe see-through net initial yield of the portfolio was 5.0% at 31 December 2020 (December 2019: 5.0%). Yields have remained broadly stable on investment assets held throughout the year.• • • • • • • • • • • CONTINUED“ Universities increasingly recognise the importance of high-quality, affordable accommodation in their ability to attract and retain students and ensure their satisfaction.“ 31 December 31 December Change 20202019 fromDiluted pence £mper shareEPRA NTA as at 31 Dec 20193,087.0847EPRA NTA at 31 Dec 20203,266.2818EPRA NAV per share823p853p(4)%EPRA NTA per share818p847p%(3)Rental growth(118.6)(30)Cladding provision(33.8)(8)Yield movement(18.5)(5)Share placing294.01Swap cancellation and debt break fees(30.1)(8)Integration costs(9.2)(2)95.623Retained profts/other22The Unite Group PLC Annual Report & Accounts 202031 December 202031 December 2019Wholly owned Share of Fund/JV otal Total Wholly owned Share of Fund/JV T£m£m£m£m£m£mWholly ownedUSAFLSAVLeaseTotalUnite shareRental properties3,6151,2784,8933,4071,2964,703Rental properties (leased)102–102110–110Properties under development187187412412––Total property5,2251,2785,1823,9043,9291,296Net debt(1,326)(416)(1,742)(1,450)(434)(1,884)Lease liability(96)–(96)(99)–(99)Other assets/(liabilities)(40)(38)(78)(142)(13)(155)2,4428243,2662,2388493,087LondonValue (£m)1,1374011,054174,1771,8635,291260126121Prime provincialValue (£m)94964725–7,6455,337618–17182–Major provincialValue (£m)1,2561,4672702918,05819,5073,067753374812ProvincialValue (£m)27328431–4,9583,5201,059–11103–Value (£m)34,83830,2278,3582,6907782138180Value (£m)EPRA net tangible assets2,6091,77011,59135%3111,1171,6213,60022%373,0221,74341,38535%885883659,5377%24Total3,6152,7991,3241027,8404,99576,113100%Unite ownership 100%22%50%100%share3,6156166621024,995Summary balance sheetUnite investment portfolio analysis at 31 December 2020The proportion of the property portfolio that is income generating is 96% by value, up from 92% at 31 December 2019. Properties under development have reduced to 4% of our property portfolio by value (31 December 2019: 8%) following delivery of our 2020 development completions. Our development ppieline carries greater operational risk than the income generating portfolio but delivers attractive risk-adjusted returns, which we expect to materially contribute to the group’s future earnings growth.The investment portfolio is 35% weighted to London by value on a Unite share basis, which will rise to 41% on a built-out basis following completion of our secured development ppieline.BedsPropertiesBedsPropertiesBedsPropertiesBedsPropertiesBedsProperties23OverviewGovernanceFinancial StatementsOther InformationStrategic ReportDevelopment and University partnership activityOur schemes at Artisan Heights in Manchester Arch View House in Wembley, both saw delays to completions as a Development and University partnership activity continues result of disruption caused by Covid-19. The schemes have to be a significant driver of growth in future earnings since completed, allowing students to occupy the buildings and NAV and is aligned to our strategic focus on high from early 2021. The delays were clearly communicated and mid-ranked Universities. Our ppieline of traditional to both student and University customers with students development and University partnerships includes 3,968 offered the opportunity to move to alternative Unite beds with a total development cost of £599 million, of accommodation in the vicinity of both assets. Under the which 2,023 beds or 70% by development cost will be terms of the forward fund agreement for Arch View House, the shortfall in 2020/21 income is covered by the developer.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 The decision was taken in March to delay the delivery of emerging development opportunity in London, following Middlesex Street in London and Old BRI in Bristol from a softening in land values and lower viability for some 2021 to 2022, reflecting the priority of conserving cash competing uses. We expect to add to our ppieline during during a period of significant uncertainty over income. 2021 and maintain a run-rate of c.1,500–2,000The decision resulted in a cash saving of £72 million new beds during 2020. The anticipated yield on cost of this secured ppieline is Development has now been recommenced across both 6.4%. Prospective returns on new direct-let schemes sites, supporting delivery for the 2022/23 academic remain attractive at around 8% in provincial markets. year. Old BRI is let to the University of Bristol under a We have lower hurdle rates for developments that are 15-year nomination agreement and we are working with supported by Universities or where another developer King’s College London towards a long-term nomination is undertaking the higher risk activities of planning and agreement at Middlesex Street.construction. The new London Plan requires student accommodation to secure a nomination agreement with one or more Universities for the majority of rooms, During the year, we used the proceeds of our share placing meaning we expect new London developments to be to secure two new development and University partnership delivered as University partnerships with development schemes for a total development cost of c.£175 million for delivery in 2023. yields of 6.0–6.5%. University partnerships make up around 75% by value of our secured development ppieline.In July, we agreed to acquire a 300-bed development site in We have contractually fixed our exposure to construction central Edinburgh, which forms part of a wider mixed-use costs on all schemes completing in 2022, which redevelopment. We are targeting delivery of the direct-substantially de-risks our cost risk. We have brought let development for the 2023/24 academic year, having forward the procurement of all critical items supplied from secured planning in late 2020. Total development costs are European countries on our 2022 completions to mitigate estimated to be £24 million, delivering a development yield any potential risks from disruption to suppyl chains.of 8.3%.In November, we exchanged contracts to acquire a new 800-bed development site in Paddington, central London We completed 2,257 beds across three new schemes on a subject to planning basis. Total development costs during 2020 despite disruption caused to construction are estimated to be c.£150 million, to be funded from activity as a result of Covid-19 lockdowns and new social the proceeds of our recent equity issue. The scheme distancing measures on site. Around 40% of these beds is targeted for delivery for the 2023/24 academic year, are let to Universities under nomination agreements for subject to planning approval, and is expected to deliver the 2020/21 academic year, with an average duration of 22 a development yield of 6.5%. The development will years, supporting our ongoing focus on quality of income.target a BREEAM Excellent rating and incorporate a Our 976-bed University partnership scheme at White Rose range of design features to reduce its embodied and View in Leeds, was completed on schedule in September. operational carbon, supporting our transition to net zero development and operations.Just under 60% of the beds in the scheme are let to the University of Leeds on a 30-year nomination agreement, helping to strengthen our relationshipone of the UK’s with leading Universities.delivered in central London.per annum.2022 completionsDevelopment ppieline2020 completionsCHIEF EXECUTIVE’S REVIEW CONTINUED24The Unite Group PLC Annual Report & Accounts 2020The long-term agreement strengthens our long-standing In addition to the significant numberof our beds andand valuable relationship with the University. income underpinned by long-term University-backed At our new development site in Paddington, central nomination agreements, we continue to make progress London we intend to deliver the scheme as a University with our strategy ofdelivering sustainable growth through Partnership in line with requirements in the new London partnerships with Universities.Plan for the majority of new beds to be leased to a During 2020, we completed a new University partnership HE provider. The development will help to meet the with the University of Bristol, covering around 3,000 beds growing need for high quality, purpose-built student in Bristol. This will include a large proportion of Unite's accommodation in London and discussions are already existing operational assets in the city following targeted underway with University partners to support the scheme investments as well as the 431-bed Old BRI development through planning, with a view to agreeing a long-term and the 596-bed Temple Quay development in close nomination agreement.proximity to the University's new Temple Quarter campus. University partnerships ppielineSecured development and partnerships ppielineTotal Total completed development Capex in Capex Forecast NAV Forecast Target Secured beds value costs period remaining remaining yield on deliveryNo.£m£m£m£m£mcost %Direct-let developmentTotal direct-let development1,1881971522129467.1%University partnershipsTotal University partnerships2,780634447663171426.2%Total pipeline (Unite share)3,968831599684461886.4%Derby Road, Nottingham20236206448145168.0%Wyvil Road, London202327010080062216.2%Abbey Lane, Edinburgh2023298332412298.3%Middlesex Street, London20229202801875985 556.0%Old BRI, Bristol2022431594441996.2%Temple Quarter, Bristol6.2%2023596856716518TP Paddington, London20238332101492148606.5%1111. Subject to obtaining planning consent.25OverviewGovernanceFinancial StatementsOther InformationStrategic ReportFuture partnership opportunitiesChief Executive Officer Reflecting the financial and operational constraints faced We continue to manage the quality of the portfolio and by Universities, there is a growing appetite for partnerships our balance sheet leverage by recycling capital through with leading operators. We see opportunities to capitalise disposals and reinvesting into developments and on our brand and the goodwill created by our response acquisitions of assets aligned to the best Universities. to Covid-19 to accelerate and enhance our pipeline of During the year, the Group’s share of disposals was University partnerships. £10 million, in line with book value. Through our Higher Education Engagement team, we We are targeting £200–300 million of disposals in 2021 are in discussions for new University partnerships with (Unite share), slightly above historical levels, in anticipation a range of Universities. These discussions often cover a of improving liquidity as greater visibility emerges over range of potential solutions on a city-wide basis, reflecting occupancy and income for the 2021/22 academic year. each University’s specific accommodation needs. These These target disposals, combined with rental growth, are strategic discussions may include multi-year nomination intended to ensure that we meet our target LTV of 35% and agreements for our existing operational assets, on-campus underpin our ability to sustain rental growth over a longer and off-campus developments and stock transfer. We are time horizon. in active discussions with three high-tariff Universities for around 7,000 existing and new beds, which we are looking to progress over the next 12–18 months. In addition, we have a significant further ppieline of medium-term opportunities.The nature of these discussions and the commitment 16 March 2021required by both parties means that some opportunities will fall away. However, we strongly believe that the operational complexity borne by Universities in dealing with Covid-19 and the negative impact on their finances will create new opportunities for University partnerships in the near to medium term. 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.CHIEF EXECUTIVE’S REVIEW CONTINUEDDisposal activityRichard Smith26The Unite Group PLC Annual Report & Accounts 2020The outlook for student numbers remains strong with signi�cant demographic growth and growing demand from interna�onal students. MARKET REVIEWFull-time student numbers reached record levels of two million for the 2019/20 academic year. The number of applicants and the number of students accepted onto courses in 2020 was 729,000 and 570,000 respectively (2019: 706,000 and 541,000). A 5.4% YoY increase in acceptances was driven by a record participation rate among UK 18 year olds and a 17% increase in acceptances from non-EU studentsThe initial applications data for the 2021/22 academic year is very encouraging, with overall applications up 8.5%. UK applications are up by 12%, reflecting a record application rate of 43% for school leavers (2020/21: 40%) as well as strong growth from mature students. Non-EU applications increased by 17% YoY, reflecting strong demand from China and India, which substantially offset the 40% decline in EU students following the loss of home fee status and access to tuition fee loans post-Brexit. Given disruption caused by Covid-19, the Government has stated that A-Level students will not be in a position to sit their exams fairly this summer. As a result, grades will be awarded based on teacher assessments to allow students to progress fairly. The outlook for student numbers remains strong. Demographic growth is significant over the next decade, with the 18-year-old population returning to 2010’s height by 2024 and continuing to grow strongly thereafter. This would imply demand for around 220,000 additional UK undergraduate places by 2030 at current participation rates. . Growth in placed applicants (2020/21 vs 2019/20)20%16.9%15%13.2%10%4.5%5%3.7%1.5%1.1%0%UKOther EUNon-EUHighMediumLowSource: UCASDomicileUniversity tarif27OverviewGovernanceFinancial StatementsOther InformationStrategic Report1,00080056760048540045%37.0%20034.1%40%32.6%33.0%31.9%30.7%29.8%35%28.3%28.8%027.4%202020302020203030%25%20%Source: UCAS, ONS, UniteUK 18 year oldr UKOthe15%10%5%0%2011201220132014201520162017201820192020Source: UCASWe do not expect this new demand to be distributed evenly, with growth likely to be concentrated in high-tariff and teaching-led Universities delivering strong graduate outcomes. Regional differences in demographics are also significant – London sees the greatest demographic growth over the next 10–15 years and is therefore expected to see the greatest increase in places required (HEPI).aligned to the needs of employers. This includes a new Lifetime Skills Guarantee, giving access to a lifelong loan entitlement equivalent to four years of post-18 education.We are encouraged by the Government’s commitment to post-18 education and remain confident that our strategy of delivering high quality, affordable homes for students and The UK Government’s international education strategy is relationships with the best Universities in the UK positions us targeting growth in international student numbers to at to successfully navigate future policy changes in these areas.least 600,000 by 2030, representing at least an additional 80,000 international students. In September 2019, the Government announced a new two-year post-study work visa From 1 January 2021, EU students planning to study in for international students (three years for postgraduates), the UK will be required to appyl for a student visa unless starting from the 2020/21 academic year. The change has exempt due to pre-settled status or Irish nationality. EU already aided the UK’s international competitiveness in the students starting their courses in 2020/21 or before will Higher Education sector, leading to significant growth in continue to benefit from home fee status and have access demand from China and India over the past two years. The to tuition fee loans for the duration of their courses. EU Government is actively seeking to broaden the demand pool undergraduate students starting courses from 2021/22 will from international markets with opportunities for the UK to no longer benefit from home fee status, meaning tuition increase its market share of student arrivals from Africa and fees are expected to rise by more than 50% on average Asian countries, outside of China.from £9,250 to the higher rates paid on average by non-EU students. EU students will also no longer have access to a tuition fee loan.In January 2021, the Government published its interim conclusions on the Augar review of post-18 education and The number of EU students studying in the UK funding. The Government’s key objectives are to drive up the increased to 135,000 in 2019/20, made up by 100,000 quality of Higher Education provision, promote accessibility undergraduates and 35,000 postgraduate students. for students and maintain a financially sustainable student EU students account for 9% of our let bed spaces for finance system. This will include consideration of the Augar the 2020/21 academic year. UCASapplications for Report’s recommendations, including student finance 2021/22 report a 40% reduction in applications from terms and conditions, minimum entry requirements and EU undergraduates, reflecting the impact of Brexit and the treatment of foundation years. The final conclusions travel restrictions linked to Covid-19. If this reduction is on the Augar review will be publishedalongside the next sustained over the coming years, it would equate to a Government Comprehensive Spending Review.The Government also published its Skills for Jobs White The Government has announced a new £100 million Paper in January 2021, setting out a blueprint for a post-Turing Scheme for around 35,000 students to study and 16 education system that enables every student with the work abroad, which will replace the UK's participation in aptitude and desire to go to University to be able to do so, Erasmus+ starting from September 2021. The trade and alongside enhanced provision of technical qualifications, cooperation agreement with the EU also enables the UK to continue to participate in the EU’s Horizon 2020 Research and Innovation programmes.Higher Education policyImpact of Brexitreduction of around 3% of total students by 2023.MARKET REVIEW CONTINUEDForecast growth in UK 18-year old population and UK acceptances to University18-year-old participation rate89371533025823722818 year old populationUniversity Acceptances28The Unite Group PLC Annual Report & Accounts 2020Resilient occupancy and rental growthThe UK PBSA market delivered rental growth of 1.8% for the 2020/21 academic year (Cushman & Wakefield), a reduction on the 2.6% delivered in 2019/20, reflecting weaker occupancy as a result of disruption created by Covid-19. JLL’s Student Housing Leasing Survey reported a reduction in occupancy to 83% in 2020/21 from 98% in 2019/20, with average tenancy lengths also reduced due to operators offering flexible start dates in response to delays to University term dates.Across the sector, beds under nomination or lease agreements produced rental growth of 2.2% in 2020/21, above the 1.5% rental growth delivered by direct-let beds. This reflects short-term pressure on direct-let rents in markets with a high dependence on international students, where occupancy was more significantly impacted by Covid-19. We remain focused on providing a cluster-led ensuite product at more affordable price points, which aligns with the requirements of our University partners.Regional markets delivered rental growth of 1.9% for 2020/21, outperforming the 0.8% growth witnessed in London where occupancy tends to over-index towards international students (CBRE). However, this masks a significant spread in performance at a city level with Prime regional markets delivering 3.0% rental growth, while Secondary markets saw a 0.7% decline in rents.Current UK inflation implies a slight reduction in rental growth from multi-year nomination agreements with fixed or inflation-linked annual rental increases for 2021/22 to around 2%. Based on our expectation of an enhanced campus experience for students and a relaxation of international travel restrictions, we anticipate a return to full occupancy and positive rental growth in 2021/22.Strong investment appetiteThe PBSA sector’s strong fundamentals and a track record of consistent rental growth continues to attract significant volumes of capital, despite a reduction in investment volumes in the wider UK real estate sector due to political uncertainties. Approximately £6 billion of assets traded in 2020 (CBRE), in line with record transaction volumes witnessed in 2015. In February 2020, Blackstone agreed to acquire iQ’s 28,000-bed portfolio for £4.7 billion. The price translated to a material premium to the underlying market value of iQ’s property portfolio, illustrating the willingness of investors to attribute value to the brand, operating and development capabilities of major operators. We expect the increasing focus on operating platforms and scale to drive further continued consolidation of the PBSA sector in the UK. The remaining £1.3 billion of assets traded in the year were largely single small portfolios or single assets, in line with previous years.There remains 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. Given lower visibility over occupancy for the 2020/21 and 2021/22 academic years due to Covid-19, transaction pricing is likely to be stronger where sellers are willing to provide a one-year income guarantee to buyers.Rental growth by geography (2020/21)-1%0%1%2%3%4%Source: CBRELondonSuper PrimePrime RegionalSecondaryFor the 2020/21 academic year, average weekly ensuite rents for corporate PBSA ranged from £125–175 per week in major provincial markets and £238 per week in London (Cushman & Wakefield). This compares to Unite’s average ensuite rent of £137 in provincial markets and £219 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-1st year students from the private rented sector. More than two thirds 69% of Unite beds in provincial markets are priced below £150 per week.UK student accommodation investment volumes7£bn5316420Source: CBRE1.261.473.712.181.871.672.542.151.651.084.141.204.821.23201220132014202020172018201920162015PortfoliosSingle assets1.750.610.991.222.732.212.365.893.544.692.735.346.05(0.7%)0.8%2.2%3.0%29OverviewStrategic ReportGovernanceFinancial StatementsOther Information“ The PBSA sector’s strong fundamentals and a track record of consistent rental growth continues to attract significant volumes of capital.” Stable property yieldsNew supply expected to slow2020 saw the delivery of an additional 25,000 beds across 32 different UK markets, of which just over half was delivered in Yields in the sector have remained stable over the past the 27 cities in which Unite operates. New supply in London year, reflecting continued investor demand and the resilient remains very constrained, with less than 2,000 beds delivered income characteristics of the sector. However, we continue in the year, reflecting limited land supply and more restrictive to see a growing divergence in pricing between prime and planning requirements for student accommodation in the secondary markets. London and Prime regional assets saw new London plan.modest yield compression in 2020, reflecting valuation evidence provided by Blackstone’s acquisition of iQ and A number of schemes planned for delivery in 2021 have other market transactions as well as the strong growth in been delayed as a result of Covid-19. This includes our applications for high-tariff Universities.developments at Middlesex Street in London and Old BRI in Bristol, which will now be delivered for the 2022/23 academic Demand for secondary and tertiary assets has reduced, year. As a result of these delays, we expect new supply across resulting in yields in some provincial markets continuing the UK to reduce to around 20,000 beds in 2021 and then to drift higher. This reflects a weakening demand-supply further thereafter due to funding constraints faced by some balance in some cities where student numbers are reducing smaller developers and more restrictive planning policy or significant new supply is yet to be fully absorbed. In towards PBSA. agggreate, these markets account for less than 10% of our portfolio valuation on a see-through basis. However, we The new London Plan requires new student consider income performance and asset pricing to be well accommodation developments to secure a nomination supported in good-quality secondary markets, providing agreement with one or more Higher Education providers as value-for-money accommodation with the potential to attract well as the provision of at least 35% of units at affordable students from the private rented sector.student rents. Moreover, local authorities are increasingly keen to promote new supply in the Build to Rent (BTR) Looking forward, we see yields remaining broadly stable sector, creating increased competition for development in 2021, albeit with continuing polarisation between sites in major UK cities. We see a clear trend towards prime and secondary markets in a competitive market for mixed-use planning consents, incorporating BTR units and co-living alongside student accommodation. These An indicative spread of direct-let yields by location is factors increase barriers to entry for new PBSA supply, outlined below:however we remain confident in our ability to secure new development opportunities thanks to our long-held University relationships, flexible operating platform and highly experienced development team.Activity in the UK construction sector was negatively impacted by the first national lockdown in 2020, but has since rebounded in line with wider business confidence. Lower activity overall has seen tender cost inflation moderate despite an increase in input cost inflation for The PBSA sector now provides homes to over 680,000 some materials. Overall, we anticipate build costs to remain students, representing around one-third of the UK’s broadly flat in 2021 and with increases of 2–3% in 2022.student population. At this level, there still remains a c.310,000 shortfall in beds compared to the numbers of 1st-year and international students, before taking account of the increasing numbers of 2nd and 3rd-year students who are choosing this type of accommodation.student numbers.MARKET REVIEW CONTINUEDDevelopment costs relatively stable 31 Dec 202031 Dec 2019London3.90–4.25%4.00–4.25%Prime provincial4.50–5.00%4.50–5.00%Major provincial5.00–6.00%5.00–5.50%Provincial6.25–7.50%6.00–7.25%30The Unite Group PLC Annual Report & Accounts 2020Land prices have softened slightly in regional markets over the past year. This reflects some caution on the part of developers given greater uncertainty around funding in the current environment. 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 weakened over the past year as a result of depressed activity in both the office, hotel 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 scale and duration of this opportunity is uncertain given resilient investment activity in other sectors during H2 2020, which may create more competition for development sites.New supply of PBSA beds35,00030,00025,00020,00015,00010,0005,0000201620172018201920202021FProvincalLondonSource: Cushman & Wakefeld32,24731,68630,09126,84622,98419,0001,3024976,2942,8401,8152,00031OverviewGovernanceFinancial StatementsOther InformationStrategic ReportThe way we operate ensures we deliver for students, University partners, employees and investors.OUR BUSINESS MODELOUR CORE PRINCIPLESHOW WE CREATE VALUEWHAT WE DOOperateInvestPartner010203We operate and manage 76,000 operating platform allows us to deliver the best customer experience and sector-leading operating margins.We seek to continuously enhance our portfolio through acquisition, refurbishment and disposals, to ensure we have the best buildings, aligned to the strongest Universities.Our development activity delivers new beds in suppy-lconstrained markets.We partner with Universities to deliver their long-term accommodation strategies. Our Higher Education Engagement Team work closely with Universities to identify new opportunities for University partnerships.beds across the UK. Our scale and PRISM Focus on Best-in-class UK student operating accommodationplatformAlignment to Unrivalled scale the strongest and efficiency across Universities76,000 bedsHigh quality, 1,900 committed well-located purpose peoplebuilt homesValue-for-money Strategic accommodation, partnerships focused on with over 60 shared livingUniversitiesLeadership on Significant and growing sustainability, health, development ppielinesafety and securityDisciplined capital Unique student management, new insights capital to pursue and expertisegrowth opportunities32The Unite Group PLC Annual Report & Accounts 2020WHAT WE DELIVEROUR STUDENTS OUR UNIVERSITIESOUR PEOPLEOUR INVESTORS A Home for Success that is safe and secure with support when it’s neededA trusted partner, helpgin to attract and retain studentsProviding opportunities for all, whatever their background, gender or ethnicitySuperior total returns Read more on Read more on Read more on Read more on page 02page 14page 41page 425-star2,780+7419% p.a.rating by the BSCbed pipeline for long-term University partnershipsemployee engagement during the yeartotal shareholder return since 201133OverviewGovernanceFinancial StatementsOther InformationStrategic ReportOur business focuses around our core purpose; Home for Success supported by a values led culture and underpinned by a focus on the following areas. OUR STRATEGIC PRIORITIES• • • • • • • • • • • • • • Maintain high occupancy, while increasing year-round utilisationDeliver sustainable value-driven rental growthDeliver efficiency improvements through our proprietary operating platformResearch into the needs of today’s students to enhance the service we providePortfolio optimisation through development, disposal, acquisition and lifecycle investments to ensure we have the right properties in the right locations, aligned with the strongest UniversitiesEnsuring our buildings are safe and secure for our customers and peopleStrengthen our partnerships with UniversitiesGrow the proportion of beds aligned to high and mid-ranked UniversitiesContinue to increase the quality of nomination agreementsPursue new opportunities for University partnerships across existing and new bedsBecoming net zero carbon by 2030Creating resilient resource efficient assets and operationsEnhancing the health and wellbeing of our employees and studentsProviding opportunities for all, including students, employees and the communities we work withSTRATEGIC PILLARSCURRENT STRATEGIC FOCUSQuality service Quality Quality University partnershipsA responsible and resilient business01020304platormproper�es34The Unite Group PLC Annual Report & Accounts 2020• The first purpose-built student accommodation provider to forgo 2020 summer term rents• First student accommodation provider to be accredited Covid Secure by the BSC • Increased provision and access to student wellbeing and mental health support• Board approval for our new Sustainability Strategy• Managed cash, liquidity and covenants through Covid-19• LTV reduced to 34% through proceeds of equity issue• BSC Health & Safety audit• CO2 emissions per bed• Energy and water intensity per bed• EPC ratings• Employee Engagement score• Gender and ethnic diversity• Scholarships through the Unite Foundation• LTV• Average debt maturity2020 IN REVIEWLINKS TO PERFORMANCE24,000 beds88%87%Successful integration of Liberty Living portfolioOccupancy rate across our portfolio for 2020/21Beds now aligned to high and mid-ranked Universities• Reputation enhanced through our response to Covid-19 and support for students• 87% of beds aligned to high and mid-ranked Universities• Completed 3,000 bed University partnership with the University of Bristol• 2,257 new beds opened for 2020/21, with 40% of beds secured under nomination agreements• Full provision made for replacement of HPL cladding on 19 properties• Earnings Per Share• NTA per share • Total accounting return• Higher Education Trust score• Customer Satisfaction score• Like-for-like rental growth Read more about our Quality properties on page 22• Targeting £200–300 million of disposals to enhance the quality of our portfolio• Increase alignment of our portfolio to high and mid-ranked Universities• Secure new sites for the development pipeline• Secure planning on 2023 development completions• 88% contracted occupancy and 1.1% growth in weekly rents for 2020/21• All properties remained operational throughout the Covid-19 pandemic• Covid Secure status accredited by the British Safety Council• Delivered £15 million of cost savings over summer 2020 in response to Covid-19• Successful integration of Liberty Living’s 24,000 bed portfolio• Increased run-rate for Liberty Living cost synergies to £18 million• Earnings Per Share• Like-for-like rental growth• EBIT margin• Higher Education Trust score• Customer Satisfaction score• Employee Engagement score• Safety Read more about our Quality service platform on page 17• Return to full occupancy and positive rental growth for the 2021/22 academic year• Mitigate income disruption from Covid-19 through targeted cost savings• Research and development of our operating model of the future • Stakeholder engagement around new Sustainability Strategy• New Sustainability Committee formed to oversee implementation of Sustainability Strategy• Publication of Sustainable Finance Framework and net zero roadmap• Greater transparency around diversity and inclusion dataOBJECTIVES FOR 2021• Pursue additional University partnership schemes to deliver further growth and long-term security of income• Increase beds under long-term nomination agreements• Improve Higher Education Trust score • Earnings Per Share• 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 14Read more about our Responsible and resilient business on page 4635OverviewStrategic ReportGovernanceFinancial StatementsOther InformationDIRECTORS’ DUTIES AND SECTION 172 STATEMENTMeeting the needs and expectations of our stakeholders is fundamental to the delivery of our purpose, Home for Success. Acting in the long-term interests of all of our key stakeholders, including students, our people, Universities, the communities we operate in, our suppliers and our investors is central to the Board’s decision-making process and helps shape the Group’s strategy. Our Board also considers the impact of the Company’s operations on the environment and the long-term risks posed by climate change.The Board maintains oversight of the Company’s performance, and reserves specific matters for approval, including significant new strategic initiatives and major decisions relating to capital raising and allocation. The Board receives regular updates from the Executive team, as well as the wider senior management team including the Group People Director, the Director of Strategy and Investor Relations, the Group Energy & Environmental Manager, the Higher Education Director, Head of Fund Management and the Group Legal Director and Company Secretary. Through measurement against long-term objectives, the Board monitors that management is acting in accordance with its agreed strategy and the long-term interests of our key stakeholders. The following sets out key examples of the Board’s response and its decision making through 2020 when performing its duties under Section 172 of the Companies Act 2006: Our Section 172 Statement.Section 172 Overview Relevant links The long- termThe Board is committed to acting in the long-term interests of all of our key stakeholders.The decisions made in response to Covid-19 were taken with consideration for the long-term success of the business, our reputation and our desire to show leadership within the student accommodation sector. The Company’s long-term business strategy was also reviewed by the Board during the year. Business model page 32Risk management report page 64Board Decision Making pages 102 and 103Our peopleOur people are central to our success as a business.The Board has kept up-to-date with the latest methods of employee engagement, particularly important given the challenges of Covid-19 and remote working. The Board receives regular updates through our designated workforce engagement Non-Executive Director, Elizabeth McMeikan, who attends Employee Panel Forum meetings. Employee engagement page 94Business relationships with suppliers, our students and partnersThe Board understands the importance of fostering business relationships with students, University partners and suppliers.The Board considered the impact on students and Universities when making decisions to waive rent in response to the Covid-19 pandemic. Consideration was also given to the impact on our supply chain from delays to the delivery of property developments.Covid-19 case study page 02Community and the environmentThe Board recognises the increasing importance of climate change and the impact our business has on the communities in which we operate. Community engagement is an important part of how we operate and design our buildings.A new Sustainability Strategy was reviewed and approved by the Board during the year, including new targets around our environmental impact and greater ambition around the social value we create in our communities. Sustainability report page 46High standards of business conductDelivering our Company purpose of providing a Home for Success can only be achieved through the highest standards of business conduct.Our values set our standards of conduct. These were refreshed following the Liberty Living acquisition to include a new value Creating Room for Everyone. Our values page 90Governance report page 82 Our Investors The Board recognises that acting fairly in the interests of all shareholders improves the Company’s governance, increases investors' confidence and reduces our cost of capital.This year we have regularly engaged with our investors on our performance through the challenges of Covid-19 and also consulted with a significant number of shareholders prior to the June 2020 share placing.Shareholder engagement pages 38 and 3936The Unite Group PLC Annual Report & Accounts 2020Taking stakeholders views into account in Board decision making The Covid-19 pandemic resulted in significant disruption to the Group’s operational and development activities with implications for all of the Group’s key stakeholders. The Board had regular video conference calls with the Executive team in addition to the scheduled Board meetings to help oversee and agree the Company’s response to Covid-19. This helped to ensure timely and well-informed decision making in a period of rapidly changing circumstances. The Board considered the long term implications for the business, and the views of our wider stakeholders, when making the following key decisions: • The Board took the decision to forgo rent for students who chose to return home for the remainder of the 2019/20 academic year and extend tenancies at no cost for students unable to return home at the end of their tenancies. The Board took this decision in light of its responsibility to do the right thing for students, while protecting the Group’s brand and reputation with parents, Universities and Government. However, the Board also considered the significant financial cost of this move to investors, as well as the Company’s ongoing ability to comply with covenants under its debt facilities. With all our properties open and operational throughout the first national lockdown, the Board supported the decision to collect rent under nomination agreements where the Group contracts directly with Universities. • The Board took the decision to cancel the 2019 final dividend in March 2020 and later suspend the 2020 interim dividend to conserve cash in the business. Throughout the year, the Board regularly re-visited this decision, taking account of the Company’s requirements to distribute dividends as part of its REIT status and its objective of delivering sustainable, growing dividends to shareholders. • The Board continues to monitor progress on the planned works to remove HPL cladding on 19 affected properties. All our buildings have been independently confirmed as safe to occupy with special measures put in place at the affected buildings, including increased building patrols by staff, additional alarm measures and other property specific factors such as sprinklers, fire prevention and evacuation plans.• Engagement with major shareholders also influenced the Board’s decision to proceed with a £300 million equity issue in June 2020, to fund new opportunities to add to the Company’s University partnership and development pipeline at enhanced returns. The Board agreed to proceed at an issue price at a premium to prevailing NAV, ensuring no NAV dilution to existing shareholders, and providing new investment capacity to deliver earnings accretion as new development opportunities are delivered.• In January 2021, following another national lockdown and with the Government advising students to remain at home, the Board recognised the difficulty students were facing. The Board agreed to support eligible students by providing a 50% rent discount for a total of ten weeks and offering a four week rent free extension to their tenancy agreement over the summer for students to enjoy their University city experience. This discount was extended for up to 10 weeks. For more information on our Covid-19 response, see pages 2 and 3.New Sustainability Strategy The Board understands the growing importance of climate change and environmental, social and governance issues for all our stakeholders. With this in mind, development of a new and more ambitious Sustainability Strategy was a key objective for the Board during 2020:• The new Sustainability Strategy was developed following a process of stakeholder engagement. The Board reviewed the proposed new Sustainability Strategy in September 2020 which helped validate the focus and level of ambition in this strategy. Subsequently, the Board approved the new strategy in November 2020 including commitments and a roadmap to net zero targets in operations and developments by 2030 and stronger commitments around diversity and inclusion in our workforce. The new Sustainability Strategy recognises the long-term impact of the Group’s activities on our climate and society, while also addressing the most material issues facing our customers, employees, University partners and communities. • The Board established a Sustainability Committee in early 2021 to provide formal oversight and challenge to the execution of the Group’s Sustainability Strategy going forwards. Sustainability performance measures are being included in Executive remuneration for the first time in 2021.For more information on our Sustainability Strategy, including the feedback obtained through our stakeholder engagement exercise, see pages 46 to 63 and for details on our climate change risk, see page 79.37OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSTAKEHOLDER ENGAGEMENTWith almost 30 years’ experience in the student sector, Our people are at the heart of our business and we understand students’ evolving needs. This unique engaggin withour people has been especially perspective helps us to ensure our students get the most important during the Covid-19 pandemic. out of their University experience and differentiates us by delivering a better Home for Success. • • • • • • • • • • • • • • • • • • • • • Day-to-day contact with in property teamsThis year we adapted our people engagement strategy given Covid-19 challenges Regular student pulse surveysRegular engagement and employee pulse surveys on Annual survey across the UK student body in partnership with the Higher Education Policy Institute a range of topics such as our support during Covid-19, diversity and inclusion and development of our Our MyUnite app connects flatmates before they move in Sustainability Strategy Student ambassadors help new students settle in Unite Live sessions with our CEO and key senior Student life website ‘The Common Room’ with student-leaders providing regular business updates with an created contentopportunity for our people to ask any questionA Home Charter designed to help foster a supportive Employee panels attended by Non-Executive Director, community for studentsElizabeth McMeikanLeapskills programme for school leavers which helps A new employee Culture Matters group providing students prepare for University lifeemployees with a dedicated employee driven forum to discuss diversity and inclusion issuesWaived 2019/20 third term rents for students during the Provided additional special leave to employees with first national lockdown and in light of lockdowns in 2021 caring responsibilities, extending our cycle to work we offered 50% rent discounts together with a four week scheme all year around and a new flexible working complimentary extension into summer 2021policy to balance work with home prioritiesImplemented a range of Covid-19 specific measures Commenced a programme of training for senior for our students and use of a range of communication leaders with an external diversity and inclusion channels including social media, text bursts and emails consultant to help our teams engage in supportive diversity and inclusion discussionsEnhanced service features in the MyUniteApp including self-isolating notification and the ability to notify our Launched our refreshed values, on the back of the teams remotely of maintenance or other assistance completion of the Liberty Living acquisition, with the requestsinclusion of a new value Creating Room for EveryoneEnhanced student welfare services, including bespoke Refreshed our Diversity and Inclusion strategy with support for students shielding, support for those self-new targets isolating, online welfare checks and a pilot peer-to-peer schemeOUR STUDENTSOUR PEOPLEFor more information on our Covid-19 response For more information on our workforce engagement see and D&I strategy see pages 2 and 3pages 94 and 107WHO ARE OUR STAKEHOLDERS?HOW WE ENGAGEWHAT WE DID FOLLOWING ENGAGEMENT38The Unite Group PLC Annual Report & Accounts 2020COMMUNITIES, PARTNERS OUR UNIVERSITIESOUR INVESTORSAND SUPPLIERSWe aim to be a strategic partner to the strongest Our investors and funders are a We understand the importance of Universities, not just a suppe. Ts means we work lirhikey source of our efficient capital building trusted relationshipsth wiwith University partners to deliver solutions which work that allows our business to invest our communities, partners and for them.and grow.suppliers.We invest in understanding the long-term aspirations of We aim to produce balanced Throughout Covid-19 we have Universities including their accommodation requirements and transparent reporting and engaged actively with Government and service expectations. This is achieved through:communications to allow our and liaised with Public Health investors to best understand our England. We engaged with key Our local management teams working closely with business and strategy, kye risks stakeholders including students, University accommodation and student services teamsand how we deliver long-term Universities, our supply chain, Our dedicated Higher Education team engaging regularly shareholder value. This year we strategic partners, investors, and with Vice Chancellors and University leadership teams increased our communications to our teams across the business to The Unite Foundation working in partnership with investors with regular trading and understand the material issues 27 Universities to provide support to students from business updates to keep investors in developing our Sustainability challenging backgrounds informed of our performance and Strategy. We engage with local In light of Covid-19, this year the annual Higher Education decisions made during the pandemic. decision makers including local Trust Survey was not undertaken but regular dialogue was We significantly increased the volume councillors and stakeholders during maintained with Universities throughout the year. of meetings for investors and lenders the planning process for our new throughout 2020, often in response to property developments. We work ad hoc requests, to provide maximum closely with our contractors and transparency around our response to conducted a BSC Safety Council the changing environment.construction audit to understand areas of improvement.The Universities we partner with recognise the decisions Our investors understand the We have developed key themes which we have made during Covid-19 including: difficult year this has been as we have incorporated into a new a result of the pandemic and Sustainability Strategy to address the Allowing students to arrive 14 days before their 2020/21 appreciate we have had to make areas that matter most to us and our tenancy start date rent-free for quarantine needsdifficult decisions such as cancelling stakeholders. We engaged with local Providing delayed start dates for students to check in the final dividend for 2019 and not leaders on our Paddington, Bristol past the usual September start paying an interim dividend for 2020. and Edinburgh developments and This year, we have increased our support for Universities kept local MPs aware of our actions In June 2020, we consulted with a by providing:relating to Covid-19. Throughout the significant number of our major Our best practice Covid-19 guidelines and FAQs shareholders prior to a successful pandemic, we worked closely with our contractors to ensure our sites A monthly newsletter to our University partners £300 million share placing where outlining our activity over the previous month and remained safe and also worked with we received strong support from sharing what we have plannedour supply chain to mitigate delays both new and existing shareholders. in product and material delivery to Information on planned announcements on rent The principles of pre-emption our development sites. We now refunds and rent discountswere respected insofar as possible through the allocation process.provide mental health and counselling A Higher Education podcast – Accommodation Matters – support to contractors and their which is available on our website, Spotify, Podbean and sub-contractors.Apple Podcasts featuring invited guests from the Higher Education sector to share learnings.• • • • • • • • • For more information on our University partnerships, see For more information on our For more information, business model please see see our Sustainability Strategy on pages 34 and 35page 32pages 46 to 6339OverviewGovernanceFinancial StatementsOther InformationStrategic ReportKEY PERFORMANCE INDICATORSThe business delivered a resilient performance in 2020.Financial KPIsEPRA Earnings per share1 (p)25.5pMeasureOur EPRA measure of profit per share reflects the level of income delivered by operating activities.Comment The business delivered a resilient financial performance in 2020 with EPRA EPS of 25.5, down 35% YoY. This reflects the impact of rent rebates for the summer term of 2019/20 and lower occupancy in the 2020/21 academic year, partially offset by cost savings made during the year. TargetDeliver meaningful and sustainable growth in EPS by achieving high occupancy, rental growth, improving operating margins and delivering the development pipeline.1. 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.2. The second block is the NPS score.Alignment to strategyEPRA NAV/NTA per share1 (p) 818pMeasureOur EPRA NAV/NTA 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.CommentThe NTA decrease has principally been driven by a reduction in the value of the Group's property portfolio, due to income deductions in relation to Covid-19 disruption, modest field expansion and debt exit fees related to the repayment of the Group's secured debt.Further details of the change in EPRA guidelines can be found on page 175.TargetTo deliver growth in NTA through a combination of rental growth and development profits.Alignment to strategyTotal accounting return (%)(3)%MeasureThe total accounting return to shareholders is the ratio of growth in EPRA NAV/NTA per share plus dividends paid as a percentage of opening EPRA NAV/NTA per share.Comment The negative total accounting return in 2020 reflects the valuation loss in the year and lower EPRA earnings.Looking forward we expect a strong recovery in total returns from 2021, underpinned by a return to full occupancy and positive rental growth for the 2020/21 academic year.Further details of the change in EPRA guidelines can be found on page 175.TargetTo deliver attractive total returns, through a balance of recurring income and capital growth.Alignment to strategyLoan-to-value ratio (%)34%MeasureOur ratio of net debt to property values.Comment The reduction in LTV during the year was primarily driven by the net proceeds from the Group's share placing, which more than offset the impact of the valuation loss.TargetTo maintain LTV around the 35% level.Alignment to strategy646p720p790p847p818p34%31%29%37%34%34.1p39.1p25.5p30.3p27.7p20162016201620172017201720182018201820192019201920202020202013.2%11.7%(3.4)%14.4%14.2%2016201720182019202040The Unite Group PLC Annual Report & Accounts 2020Operational KPIsSafety (Number of accidents)12MeasureThe number of RIDDOR reportable accidents in our operations each year as a means of assessing our success in approaching health and safety.Comment The increase reflects the enlarged portfolio following the acquisition of Liberty Living. The largest contributor to the number of reportable accidents were five Covid-19 incidents which were reported whilst Public Health England supported two cities through initial unprecedented outbreaks of Covid-19. TargetWe strive to reduce the number of reportable incidents year-on-year and maintain our 5-star BSC Safety rating.Alignment to strategy556212Customer satisfaction2+33MeasureIn 2020 we made the transition to a Net Promoter Score (NPS) as a more commercially relevant customer experience measure. TargetWe will reset our NPS target once the disruption caused by the pandemic is over.Alignment to strategyEmployee Engagement (%)+74MeasureWe undertake independent, anonymous surveys amongst our employees to gain regular and insightful feedback on who we are as a company and how we can continue to improve.Comment This year we changed the provider to our employee engagement surveys to Glint as we believe more regular pulse surveys for our teams provides more useful management information. During the year three pulse surveys were undertaken ensuring we kept aware of employee feedback during Covid-19. Due to the change in survey provider the 2020 employee engagement score is not directly comparable with previous measures.TargetWe strive to improve our score year-on year.Alignment to strategyHigher Education TrustN/AMeasureWe undertake regular surveys with our Higher Education customers to understand their perception of Unite and how we meet their needs.Comment In light of Covid-19 and the exceptional circumstances that Universities encountered, we did not undertake our annual Higher Education Trust survey. However, regular engagement with our University partners took place throughout the year providing guidance and feedback on student pulse surveys and working with them as Covid-19 developed. We aim to return to the survey in Autumn 2021.TargetWe aim to reach the mid-80 point level within the next three years.Alignment to strategy80818341448533547578+7479808182N/AStrategic alignment keyQuality service platformQuality propertiesQuality University partnershipsResponsible and resilient business Comment Three customer satisfaction surveys are typically undertaken per annum. The 2020 autumn NPS check-in survey achieved a score of +33, close to the international benchmark for hotels in non-Covid-19 times. Covid-19 has meant further surveys have not taken place. The chart data for 2018-2019 reflects a different measure of customer satisfaction, making it non-comparable with the NPS score for 2020.201620162016201620172017201720182018201820182019201920192019202020202020202041OverviewStrategic ReportGovernanceFinancial StatementsOther Information[FINANCIAL REVIEWIncome statement Chief Financial OfficerA reconciliation of loss before tax to EPRA earnings measures is set out in summary below and expanded in section 8 of the financial statements.The performance of the business has been materially impacted in the year by the effects of Covid-19. This reflects the impact of rent rebates for the summer term of 2019/20 and lower occupancy in the 2020/21 academic year, partially offset by cost savings made during the year.The loss before tax of £120.1 million (2019: £101.2 million loss) includes valuation losses and losses on disposal of £178.8 million (2019: £198.1 million gain), reflecting the income shortfall resulting from Covid-19, as well as £35.9 million of costs associated with the repayment of the Group’s secured debt facilities and changes in the valuation of interest rate swaps (2019: £2.7 million), which together more than offset EPRA earnings of £97.3 million (2019: £110.6 million).The business delivered a resilient �nancial performance in 2020 through all of the challenges from Covid-19.“ Our performance reflects the acquisition and integration of Liberty Living and the loss of income and cost-savings resulting from Covid-19." Joe Lister2020 2019 £m£mEPRA earnings97.3110.6Valuation losses/gains and (178.8)198.1loss on disposalImpairment of goodwill and intangibles(384.1)–Integration/acquisition costs(9.2)(22.8)Changes in valuation of interest (35.9)(5.4)rate swaps and debt break costsMinority interest, tax and other items6.52.4EPRA earnings per share39.1p25.5pIFRS basic earnings per share(31.8)p(31.5)pIFRS loss before tax(120.1)(101.2)42The Unite Group PLC Annual Report & Accounts 202042Share placingDebt financing and liquidityCash flow and net debtNet proceeds from the share placing (£294 million)We completed a placing of 34.5 million new ordinary shares Total capital expenditure of £140 millionin June 2020 at a price of 870p per share, raising gross Operational cash flow of £65 million on a proceeds of £300 million. The Company consulted with a see-through basissignificant number of its shareholders prior to the Placing Swap cancellation and debt break fees of £30 millionand respected the principles of pre-emption through the allocation process insofar as possible. A £47 million outflow for other items including lease payments and integration costsThe net proceeds, coupled with debt pu to our 35% LTV target, will be used to commit to new development or In 2021, we expect net debt to increase slightly as planned University partnership opportunities in central London capital expenditure on investment and development and prime provincial markets for delivery in 2023 and activity will exceed anticipated asset disposals.2024. We have already secured c.£175 million of new development opportunities since the placing across two sites in central London and Edinburgh and have a healthy As at 31 December 2020, the wholly owned Group had pipeline of further opportunities that we are evaluating.£379 million of cash and debt headroom (31 December 2019: £332 million) comprising of £329 million of drawn The placing proceeds were initially used to repay cash balances, and £50 million of undrawn debt (2019: £27 million and £305 million respectively).being deployed into new developments. As a result, the placing is immediately accretive to total accounting returns The Group maintains a disciplined approach to managing and earnings neutral, with earnings accretion as new leverage, with see-through LTV of 34% at 31 December development opportunities are delivered. 2020 (31 December 2019: 37%). The reduction in LTV during the year was primarily driven by the net proceeds from the Group’s share placing, which The Operations business generated £57.3 million of net cash in 2020 (2019: £85.4 million) and see-through net debt more than offset the impact of the valuation loss. We reduced to £1,742 million (2019: £1,884 million). The keyintend to dispose of £200–300 million of assets in 2021 and £150-200 million per annum on an ongoing basis (Unite components of the movement in see-through net debt were:share basis) to fund our development activity and manage our LTV target to 35% on a built-out basis.£207 million of secured debt at a cost of 4.8% ahead of • • • • • 43OverviewGovernanceFinancial StatementsOther InformationStrategic ReportWith greater focus on the earnings profile of the business, We plan to publish a sustainable finance framework in the we are continuing to monitor our net debt to EBITDA ratio, coming weeks, aligned to our new Sustainability Strategy, which we target to return to 6–7x over the medium term.which will enable future sustainable debt issuance and provide the opportunity to further diversify our sources 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.We continue to monitor our banking covenants. Given the disruption to income caused by Covid-19, our principal focus is on our ICR covenants, which vary between 1.5–2.0x pdeending on the facility.We remain compliant with all ICR covenants across the Group and its funds and joint ventures. Our tightest ICR covenant requires us to collect 70% of contracted rent for the 2020/21 academic year and we have collected 66% This requires us to collect less than 10% of rents due or outstanding for the balance of 2020/21 to maintain We are proposing a final dividend payment of 12.75p per covenant headroom at the March and June 2021 quarter share (2019: nil), making 12.75p for the full year (2019: end tests. Given current progress on cash collection, 10.25p). The final dividend will be fully paid as a Property scheduled payments by Universities and physical Income Distribution (PID) of 12.75p which we expect to fully occupancy in our buildings, we are confident in retaining satisfy our PID requirement for the 2020 financial year.headroom under our ICR covenants.This represents a payout ratio of 50% for FY2020, which will From Q2 2021, headroom under our ICR covenants increase to at least 80% as market conditions stabilise.is expected to increase materially as the impact of cancellations in Q2 2020 are removed from the 12-month Subject to approval at Unite’s Annual General Meeting on historical ICR calculation.13 May 2021, the dividend will be paid in either cash or new ordinary shares (a ‘scrip dividend alternative’) on 21 May 2021 to shareholders on the register at close of business on Our average costof debt based on current drawn amounts 16 April 2021. The last date for receipt of scrip elections will has reduced to 3.1% (31 December 2019: 3.3%) and the be 29 April 2021.Group has 75% of investment debt subject to a fixed or capped interest rates (31 December 2019: 93%) for an Further details of the scrip scheme, the terms and average term of 4.2 years (31 December 2019: 5.4 years). conditions and the process for election to the scrip The reduction in the average cost of debt during the year scheme are available on the Company’s website.reflected the drawdown of our revolving credit facilities at a lower marginal cost, to ensure access to liquidity due to the uncertainty created by Covid-19. This also resulted The Group holds REIT status and is exempt from tax in a reduction in the average term and hedge ratio on our on its property business. During the year, we incurred investment debt, which we expect to reverse in 2021 as we refinance and repay our revolving credit facilities.primarily to profits on our property management activities, and a £0.3 million tax credit in respect of prior years (2019: We will continue to proactively manage debt maturity £2.4 million).profiles, diversify our lending base and look 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 late 2022. Debt covenantsDividendInterest rate hedging arrangements and cost of debtTax and REIT statusof debt.to date.£1.5 million of corporation tax(09: 21£2.5 million), relating FINANCIAL REVIEW CONTINUED31 December 31 December Key debt statistics (Unite share basis)20202019Net debt£1,742m£1,884mLTV34%37%Net debt:EBITDA ratio10.16.8Interest cover ratio2.53.5Average debt maturity4.2 years5.4 yearsAverage cost of debt3.1%3.3%Proportion of investment 75%93%1debt at �xed rate1. 2019 calculation based on average net debt, pro rata for completion of Liberty Living acquisition in late November 2019.44The Unite Group PLC Annual Report & Accounts 2020Funds and joint venturesUSAF and LSAV have delivered a resilient performance in the year, despite the challenging environment resulting from Covid-19. USAF’s total returns do not reflect retained distributions which, if included, increase the effective total return of the fund to (2.0)%. LSAV’s stronger underlying total return reflects a more modest reduction in property valuations over the year, due to £ for £ income deductions made in relation to Covid-19 having a less material impact on its lower yielding properties.USAF is fully invested at present, based on a year-end LTV of 30%. Unitholders are supportive of further fundraising by USAF later in the year when there is greater visibility on the 2021/22 academic year, and we continue to monitor acquisition opportunities for the fund from both Unite’s own balance sheet and the wider market.There have been no distributions by USAF since January 2020, however they are expected to be reinstated in April to reflect positive progress around rent collection for the 2020/21 academic year and increasing confidence over reservations for the 2021/22 academic year.The secondary market for USAF units continues to operate effectively with £41 million of units trading in 2020 at a modest average discount to NAV.We are in advanced discussions with GIC for a long-term extension of our LSAV joint venture, reflecting its success since its creation in 2005 and subsequent extension and expansion in 2012. As part of the extension, Unite intends to maintain its stake in LSAV at 50%.FeesDuring the year, the Group recognised net fees of £18.6 million from its fund and asset management activities (2019: £21.2 million). The reduction was driven by the reduction in NOI and asset valuations resulting from Covid-19 and the absence of an acquisition fee in USAF that was generated from the Liberty Living acquisition.The London portion of our LSAV joint venture has a scheduled maturity in 2022, at which point Unite is due to receive a performance fee accrued over the life of the JV. As part of the discussions with our joint venture partner GIC over the future of the vehicle, we expect to crystallise the performance fee during 2021 on completion of the extension of the JV. The 2019 results recognised an initial £5.7 million for Unite's share of this fee (£4.6 million net of tax) and we have recognised a further £5.7 million of this fee (£4.6 million net of tax) in 2020, bringing the total amount to date to £11.4 million (£9.2 million net of tax). Based on current expectations, Unite’s remaining share of the performance fee is expected to be c.£15–20 million.Property Assets £mNet debt £mOther assets £mNet assets £mUnite share of NAV £mTotal returnMaturityUnite shareUSAF2,798(843)(60)1,895418(3.9)%Infinite22%LSAV1,324(462)(49)8134060.0%2022/202750%The table below summarises the key financials at 31 December 2020 for our co-investment vehicles.2020 £m2019 £mUSAF asset management fee10.711.2LSAV asset and property management fee3.33.2USAF acquisition fee–2.2Net performance fee4.64.6Total fees18.621.2Joe ListerChief Financial Officer16 March 202145OverviewStrategic ReportGovernanceFinancial StatementsOther Information Operating sustainably means acting in line with our values. We are creating a business which will shape a positive future for generations to come. Covid-19 has underlined the importance of putting the health and wellbeing of our employees and students first. We are committed to ambitious targets on net zero carbon, providing opportunities for students, employees and communities, and leading the student accommodation sector by piloting new initiatives which, working with our partners, will showcase a world-class student experience.As we progress on this journey, we will be working to more closely align ourselves with the Sustainable Development Goals, a collection of interlinked goals set by the United Nations. The goals are designed as a blueprint to achieve a better and more sustainable future for all. We have identified 11 goals that directly relate to our business and newly outlined objectives.United Nations Sustainable Development GoalsSUSTAINABILITY REPORTWhy sustainability ma�ers.Crea�ng a responsible and resilient business.ENVIRONMENTAL Net zero Resource carbonefficientBaltic Wharf, Paddington, Solar panels at London: Targeting Stapleton Housethe highest levels of environmental performancep52p51 46The Unite Group PLC Annual Report & Accounts 2020 SOCIALGOVERNANCEHealth & Opportunities Raising wellbeingfor allstandards Connecting The Unite Disclosure on ESG students digitallyFoundationtopicsp54p58 p60 to 63 47OverviewGovernanceFinancial StatementsOther InformationStrategic ReportSUSTAINABILITY REPORTCreating room for everyoneKeeping uS safeDoing what’s rightRaising the bar together CONTINUEDOUR VALUESStudents make choices based on The Covid-19 pandemic has brought their values and passions and are the importance of doing what’s concerned about a wide range of right into sharper focus with many sustainability issues, including climate businesses, including Unite, acting change and social justice, and are to support communities. We have ready to make a stand for those reached an important crossroads and values through campaigns such as we are clear that building a business School Strike for Climate and Black that is more sustainable, in every Lives Matter. sense, presents the best way forward. Environmental, social and governance issues are of increasing We are committed to reporting importance to investors, partners our progress in an accessible and and other stakeholders, who transparent way. This allows us to be recognise that an organisation’s intentional and thoughtful about the ability to effectively manage risks and value we generate as a company – not opportunities in these areas plays a only forour shareholders, but also for key role in their long-term success. our people, our planet, and society.All businesses have basic ethical and legal responsibilities. However, Details of mandatory non-financial we understand the most successful reporting can be found on pages businesses go further, and strive to 60 to 63, and further details can be balance the needs of shareholders found on our corporate website at against a responsibility to a wider www.unite-group.co.uk. Some of the group of stakeholders including schemes we disclose to and align with customers, local communities and are set out across the bottom of this the environment. The regulatory and page. We are focused on ensuring our legislative landscape is also changing approach and our progress are clear in the UK, with the UK Government and understandable. increasing its ambition and commitment to a green and resilient recovery from the current crisis. ReportingWe acknowledge the responsibility we have towards society and therefore choose to operate sustainably. This re�ects our values, makes good business sense and is the right thing to do. See pages 90 and 9148The Unite Group PLC Annual Report & Accounts 2020Our energy consumption and carbon We participate in a number of Based on this stakeholder feedback, emissions for 2020 are set out on independent assessments of and taking account of current and pages 61 and 62. These have been ESG performance including the emerging regulation and best practice independently verified by SGS UK in sector-leading Global Real Estates across the sector, we completed a line with ISO14064. We also disclose Sustainability Benchmark (GRESB) and materiality assessment of relevant information in line with the European CDP, a not for profit running a global ESG issues as shown above. Public Real Estate Association’s disclosure system for investors. For Using these findings, we have Sustainability Best Practice Reporting both we have achieved steady year-developed five clear sustainability guidelines (EPRA sBPR) and have on-year improvements culminating in objectives addressing the areas secured a Silver Award for this for the a four-star GRESB rating in 2020 and a that matter most to us and our last two years. score of 81/100, well above the overall stakeholders. The following pages average score of 70.In 2020, we formally signed up as provide a more in depth view of our a supporterof the Task Force on ambitions in each of these five areas, Climate-Related Financial Disclosure as well as progress made to date. Our new Sustainability Strategy helps (TCFD) and are aligning our climate-us bring together our activity in areas In addition to these five overarching related risk management processes where we are already performing objectives, we will be setting with the TCFD guidelines. Details of strongly, while also prioritising areas stretching and ambitious new targets our approach are set out on page of focus which are of most interest to in the coming year. We know it will 63 and specific details of climate-our stakeholders. take time, financial investment and related risks are included in the Risk significant business change to achieve Management report on page 79. To inform the development of our them, and will provide updates on our strategy, we engaged with key We know that the way we manage progress during 2021.stakeholders including students, and respond to environmental, social Universities, our suppyl chain, and governance (ESG) issues is of strategic partners (including the growing interest to our investors NUS and Greater London Authority), and other stakeholders, who are investors, and employees across the increasingly factoring ESG performance business to understand the important and risk into their decision making. sustainability topics for each group. A new Sustainability Strategysreldohekat Sot ecnatropImImportance to UniteWellbeing of students & successful outcomesAffordability Health & Safety& accessibilityWellbeing of employees& employee retentionLocal community engagement & supportCharity programmes & networksEnergy & CarbonSustainable buildingsResource use & reusePollutionClimate change Biodiversityadaption & resilienceWaterEquality & diversityTransparency & disclosureResponsible supply chain managementEnvironmental SocialGovernanceStakeholder materiality review49OverviewGovernanceFinancial StatementsOther InformationStrategic ReportBecoming net zero carbon by 2030We recognise the threat posed by climate change and the importance of reducing greenhouse gas emissions in accordance with the Paris Climate Agreement. We are aiming for net zero carbon emissions by 2030 for both new construction and the operation of existing buildings. We understand the huge scale of this challenge, and that we will not meet our ambitions straight away. But we are determined that doing what’s right and are confident it is achievable with the right commitment and investment. We are developing our plan toachieve net zero carbon operations and deliver net zero carbon new developments in accordance with the carbon hierarchy and will produce a Net Carbon Pathway which will be published later in 2021. To deliver net zero carbon new buildings, we will design and build accommodation differently using alternative materials and methods to reduce embodied carbon from ‘cradle to completiono making sure that they ’, while alsare net zero carbon in operation. To achieve net zero carbon operations, we must significantly Finally, we will need to use certified carbon offsets to tackle reduce energy consumption in our existing buildings, any residual carbon that cannot be completely removed.by improving energy efficiency and generating as much renewable energy on site as we can. We will also strengthen This new level of ambition reflects how seriously we take our existing commitment to purchase certified renewable the threat posed byclimate change, and is in line with energy, looking at new ways of doing so that support the the increased focus on this topic by students, University construction of new renewable energyg eneration. We have partners and our shareholders.already made good progress in this area, achieving a 60% reduction in carbon emissions per bed since 2014. • We will deliver net zero carbon new • We will achieve net zero carbon operations, consumption by the end of 2030• We will purchase 100% certified renewable developments, with meaningful reductions in embodied carbon, by the end of 2030including significant reductions in energy electricity that supports the development of new renewable generation capacity by 2028 and stop using fossil fuels by the end of 2030ENVIRONMENTALSUSTAINABILITY REPORT CONTINUEDKEY TARGETSPATHWAY TO NET ZERO CARBONPATHWAY TO NET ZERO CARBON DEVELOPMENTS PATHWAY TO NET ZERO CARBON OPERATIONSREDUCE EMBODIED CARBON REDUCE OPERATIONAL ENERGY MITIGATE RESIDUAL CARBON REDUCE ENERGY USE REDUCE OPERATIONAL ENERGY MITIGATE RESIDUAL CARBON Optimise design, use low carbon Design for performance and Use of certified carbon offsettingmaterials and good construction maximise efficiency over full life of assetChange behaviours to reduce Maximise on-site renewable Use of certified carbon offsettingdemand and improve property energy generation and buy certified efficiency renewable powersite practices12312350The Unite Group PLC Annual Report & Accounts 2020Bal�c Wharf, Paddington, London: Corporate Power Purchase Agreement: Targe�ng the highest levels of environmental performanceStrengthening our commitment to renewable energy In 2021, we will submit plans for Baltic Wharf, a major new development in London and plan to make it one of our most sustainable buildings. We will be targeting significant reductions in embodied carbon through innovative design and the selection and sourcing of low embodied carbon materials. Baltic Wharf will also target the highest levels of environmental performance, aiming for a BREEAM Excellent rating and low energy use in operation, and will include a strong focus on urban-greening, rainwater harvesting, renewable energy and promotion of green transport options. Since 2017, all electricity purchased under our group supply contract with NPower (around 73% of the totalelectricity consumption across our buildings) comes from renewable sources and is backed by REGOs (Renewable Energy Guarantee of Origin Certificates) meaning it is zero carbon. However, to support our net zero carbon ambitions we will need to go further, and purchase energy in ways that directly support the creation of new renewable energy generation – a feature often called ‘additionality’. In 2020 we took our first steps in this direction, signing a 5MW corporate power purchase agreement (PPA) meaning that around 20% of our total electricity consumed will come from a specific wind farm in Scotland, and we are already looking at ways to increase the proportion energy we buy under similar arrangement in future. Read the full case study at www.unite-group.co.uk" Buying electricity through a corporate power purchase agreement creates a strong link between the end user and a specific renewable generator. We were delighted to work with Unite and help deliver real reductions in carbon emissions via a 5MW corporate PPA with the Galawhistle windfarm in Scotland"Npower51OverviewGovernanceFinancial StatementsOther InformationStrategic ReportCrea�ng resilient and resource efcient assets and opera�ons We know it is important to reduce the environmental impact of our buildings and operations, including energy and water consumption, carbon emissions, and waste and resource use. We also have to ensure our business is resilient and can withstand the impacts of climate change and the transition to a low carbon economy over the coming years. In the last six years we have invested over £30 million in energy efficiency projects, achieving a 10% reduction in our energy intensity (total energyuse per student bedroom per year), but we know we must do much more. Therefore in 2021 we will be announcing ambitious targets and plans for further reductions in energy, water, waste and resource use, as part of a long-term focus on improving the environmental performance and resilience of our buildings. • Reduce carbon emissions per bed• Reduce water usage• Increase engagement with students and our employees to embed lasting environmentally responsible living habitsKEY TARGETSSUSTAINABILITY REPORT CONTINUEDRead the full case study about our at Solar panels at Stapleton House www.unite-group.co.ukENVIRONMENTAL CONTINUED52The Unite Group PLC Annual Report & Accounts 2020A safe working environment for employeesDoing what’s right for studentsGender diversity MaleFemale how wedo what’s right for our students www.unite-group.co.ukBoard73Senior Management2915Other1,0198791Read more about at 1 As at 1 April 2021 after Phil White retires as Chairman on 31 March 2021.Enhancing the health and wellbeing of our employees and customersThis is an area where we have a strong track record and where we are well regarded by stakeholders across the sector, especially for the lead we took in response to Covid-19 to support both students and employees. We know that the wellbeing of our students and our employees should be a top priority because we have witnessed how this brings real benefits to our business, as well as the individuals involved.During Covid-19, it has been especially important to fully engage with all employees in light of the rapidly evolving situation and the changing University calendar. We have introduced new two-way channels to listen to our employees and give them direct and frequent access Year-on-year, we run a number of initiatives to help to senior leaders so we can respond to their questions. students make the transition to University life and to settle This includes regular Unite Live forums and through at the start of term, including the Leapskills programme, an regular Covid-19 updates. interactive workshop used with schools. We provide easy We have conducted regular pulse surveys with our teams access to extra support when students need it, all making to understand their needs during this difficult time. a considerable difference to their experience at University and how they perform in their academic studies.We have supported all office-based employees to work from home and this has been enabled by a health and We know going to University and moving away from home safety assessment of their workplace.is a significant life moment for students and with this in mind we initiated and co-wrote the PBSA Wellbeing guide We have doubled our Special Leave to support with balancing work life with home life.for the British Property Federation in 2019. Regional Student Services Managers coach and support teams to We have not furloughed any employees.identify and respond to student welfare issues, supported Our operational teams have continued to work in by a network of approximately 69 Welfare Leads with challenging circumstances during the pandemic, especially advanced training. Our student services team operate to a professional student welfare framework, working closely those providing direct support to students. We have put with our University partners.in place a number of measures to support them so they can continue to respond safely in a dynamic situation. We have implemented a series of Covid Secure measures which are accredited by the British Safety Council and have worked with public health bodies nationally throughout the pandemic.More broadly, we also know from experience that when our workforce is happyandengaged, theydeliver better customer services, improve productivity, with reduced staff turnover and absenteeism.• • • • • • Improve employee engagement • Reduce employee turnover and • Increase successful outcomes from absenteeismstudent wellbeing interactionsKEY TARGETSSOCIAL53OverviewGovernanceFinancial StatementsOther InformationStrategic ReportConnec�ng students digitallyToday’s students are the first true digital generation. Our MyUnite app helps them feel confident and connected, before and during their stay. It allows us to get them settled, to be there when they need us, and keep them safe. During Covid-19 the appp rovided a key channel to provide automated communications to students and their flatmates while self-isolating ensuring they remained connected.To further support our students, we recently initiated Students Supporting Students – a peer to peer ambassador In 2020 Covid-19 tested our business, like many others, and support programme – that focuses on current issues as a responsible business we felt we had an obligation to specific to the student accommodation setting. This covers ‘Do what’s right’ particularly for students living with us.five webinar topics including Settling into your City, Online Learning Motivation and Stress and Anxiety Management. Standing by our convictions required considerable We have drawn on specialist content developed by Student investment. Our decisions to waive the third term of Minds to develop these webinars.rent in 2019/20 and provide rental discounts for the second term of 2020/21 resulted in a significant financial The peer-based model also helps them to develop cost to the business. But we believe this was the right friendship groups, whichare fundamental to a successful thing for students and their wellbeing and this decision student experience, where peers pypla a ractical as well as enhanced our reputation with our stakeholders, while also emotional role in students’ lives. underlining the importance of considering the long-term sustainability of the business.We work in a way which is designed to help students feel safe and secure in their accommodation, with well-trained Actions taken during Covid-19 included:teams and student ambassadors on hand to provide a vital safety net if required. We also provide access to a national First in the sector to refund students the cost of the helpline – Nightline – so that students have someone to 2019/20 third term's accommodation fees if they left speak to whatever their concern.accommodation early because of the pandemic.Providing a rent-free home for those students who did not want to return home in the summer of 2020, ensuring the continuity of a safe and secure living environment during an otherwise uncertain time in their lives.When living with us, students use the app to access and pay for services such as laundry, log maintenance requests, report complaints about noise or to access 24-hour help if they get locked out. They can also opt to receive notifications, for example when a parcel The uChat feature provides a safe, secure and moderated chatroom for students to meet prospective flatmates. It enables students to contact the people they are going to be living with before they arrive at their accommodation, get answers to questions and alleviating some of the anxiety ahead of check-in day. This year we also offered chat rooms to whole floors, and for groups of students living in self-is delivered.contained studios. Enhancing the health and wellbeing of our employees and customers contnued2020: a challenging year• • SUSTAINABILITY REPORT CONTINUEDSOCIAL CONTINUED54The Unite Group PLC Annual Report & Accounts 2020• • • • • • • • • • Flexible booking particularly at the start of the new Increased cleaning and social distancing regimes.academic year given regional lockdowns. Trained and supervised Mental Health First Aid Conducting pulse surveys within the student community accredited welfare leads in each city and an Emergency during Covid-19 to understand how they were coping.Contact Centre available 24/7 and Nightline service for all residents.Providing rental discounts between January and March 2021.Welfare checks and ongoing support using remote access channels, as well as support on a case-by-case Introducing a Home Charter providing guidance on basis.how to protect themselves and others, including advice sheets for self-isolation, cleaning and hygiene. In-person support delivered safely to students when required, including bespoke support to vulnerable Independent audit of policies, procedures and groups.arrangements for Covid-19 by the British Safety Council (BSC). We are the only student accommodation provider to hold the highest 5-star safety rating from the BSC and We believe human rights are universal and recognise that are proud to have been one of the first UK companies the UN Guiding Principles on Business and Human Rights that has been accredited a Covid assured workplace by set a standard of conduct expected of companies. We do the BSC.our best to ensure that everyone involved or associated Greater use of technology to assist social distancing; with our business is protected, treated fairly and subject to digital check-in, se-lfservice parcel collection, virtual our anti-bribery and corruption, health and safety, anti-maintenance assistance and an enhanced MyUnite App slavery and other policies, including those covering data to help create student communities with safe social protection, performance management, flexible working, distancing.grievances, leave, and quality and diversity.Any student can read articles on our online blog platforms of , the Common Room, on different aspectstudent life. We publish up to five new articles a week to help students through University, so they feel settled, achieve their goals and prepare for their future careers. Articles are either written by our in-house team or by a network of student journalists living with us. The platform has had over a million page views over the past 12 months. The topics are driven by students themselves and range from preparing for University, making friends and settling in, to budgeting, sygtain healthy and career planning.Human rightsThe Common Room55OverviewGovernanceFinancial StatementsOther InformationStrategic ReportSUSTAINABILITY REPORT CONTINUEDEnhancing the health and wellbeing of our employees and customers people prepare for independent living contnuedIn response to annual research with students showing 61% of young people are apprehensive and nervous about making the leap to independent living, Unite Students has responded with an interactive workshop used in schools to help better support these young people. This better prepares 17 and 18-year olds for this important transition and has Minister of State for Universitiesalready been used by over 3,000 young people.Usually run as a 45-minute classroom programme as part of the Key Stage 5 PSHE programme, in 2020 Leapskills was adapted to an online format for use by students with parents and carers during Covid-19. Through the workshop, young people discover what it is like living with new people, making new friends, balancing work with fun and managing GP and young persons’ mental health experttheir money. Those who use Leapskills say they feel better prepared at the end of the session and report increased levels of confidence in their move away from home. The Leapskills programme has been endorsed by the Department for Education.Leapskills: A free resource helping young " Going to University and living independently for the first time can be daunting – Leapskills workshops help Year 12 and 13 pupils prepare for this jump and build the skills they need to thrive at University."" The Leapskills toolkit will provide an additional but essential digital option for those who need specific inspiration for building their teen’s life skills for successful communal living.” Michelle Donelan MP Dr Dominique Thomson SOCIAL CONTINUED56The Unite Group PLC Annual Report & Accounts 2020• A 50/50 gender split in the Unite • Fill 60% of managerial roles internally • Minority groups fairly represented in leadership team by the end of 2023 by the end of 2023employees and management by the end of 2024Our teams are key to our business success. We are driven by our values and culture and a commitment to develop a diverse and inclusive organisation. We are keen to do more to provide interesting career pathways within our organisation and to ensure opportunities for progression are available for all. We are focused on greater representation of gender and ethnicity in senior positions and creating a more diverse workforce across our organisation, where everybody feels valued and engaged. We believe creating a more inclusive business improves conditions for all, not just those under represented, and will deliver long-term value for business and society. In support of Black Lives Matter, the business embarked on a review of its diversity and inclusion strategy with leadership training and support enabling leaders to communicate, engage and listen to their teams. This work will continue during 2021.research into the needs of specific groups of students who may be at risk of exclusion, sharing these insights across We work hard to act responsibly across all areas of the the sector and taking positive action with our University business, and we are committed to ensuring that everyone partners to address these issues.behaves with integrity and fairness. We regularly review our policies and ways of working to ensure we are creating an environment where our people can thrive. We know that The Business in the Community Race at Work Charter only by creating a healthy, happy, engaged and productive was signed in 2020 with a commitment to:team, can we go on to have a positive impact on young people at one of the most exciting times of their lives. –Capture ethnicity data and publicise progress.We are committed to creating safe, welcoming and –A zero-tolerance approach on harassment and inclusive communities for our students and supporting bullying.the wider purpose build student accommodation and –Plans to support career progression of ethnic University accommodation sector to improve inclusiveness. minority employees.Activities over the coming years will include commissioning In response to Black Lives Matter, a Culture Matters ally network was created in 2020.Engagement with a leadership and diversity and inclusions specialist, who is providing fresh thinking and stimulus to our teams. Enhanced shared parental leave. Investors in People – Gold award achieved.A Real Living Wage employer.Employee wellbeing champions network across the UK.Over the four years:–£1.1 million donated through student and employee fundraising.–Provided 1,300 counselling sessions to our employees.–Awarded over £95,000 to charities via employee charity match scheme.Achievements and recent progress include:• • • • • • • • Providing opportuni�es for all including students, employees and communi�esKEY TARGETS57OverviewGovernanceFinancial StatementsOther InformationStrategic ReportSUSTAINABILITY REPORT CONTINUEDPositive social impact in communities Unite FoundationIn all of the 27 towns and cities where we operate, we Unite has been the principal supporter of the Unite partner with more than 60 Universities and have a positive Foundation since 2021 and has so far committed over impact by pyglain an active role in local communities. This activity has been enhanced during Covid-19 and is still scholarship for care leavers and estranged young people going strong.who want to go to University, providing free, purpose-built, student accommodation and wrap around support for up to For example, by having our students living as part of three years of study. These young people do not have family communities, this increases spending locally and helps support, some of them have been in care, others have been local businesses, creates employment opportunities living independently, or with friends or extended family and and supports spin-off companies, including educational, some have been homeless. The scholarship provides a place cultural arts events, concerts, performances and sporting for students to live throughout their studies so that they can facilities. Across the UK, student spending supports more focus on embracing the full University experience and plan than £80bn of UK economic output and over 830,000 direct their future. The Foundation, together with its 27 University and indirect jobs.partners and teams on the ground, ensures that its scholars have the opportunity to thrive at University and beyond.We work hard to engage with our local communities, having apositive impact on local residents and wider Each year, 80–100 new scholarships are awarded. This communities. Every employee at Unite has the opportunity means 256 students are currently being supported to spend one full day or eight hours each year volunteering. through the scholarshippg roramme.Although some activities were limited in 2020, this usually Since the programme started eight years ago, the involves supporting a group, community or charity which Foundation has provided support to over 500 students.benefits young people in the communities where we operate. Over 83% of our volunteers have reportedan The retention rate for students supported bytheUnite increase in job satisfaction through a post volunteering Foundation is significantly higher than that of care survey, which has been completed on a rolling basis over experienced and estranged students in the general the past two years.student population, and 27% go on to undertake postgraduate study, which is higher than the national average. Unite is the major donor to the Unite Foundation each year. £10 million to its work. It is a charity that provides a unique • • • SOCIAL CONTINUEDProviding opportuni�es for all including students, employees and communi�es contnuedFind out more about our Positive Impact programme at www.unite-group.co.uk58The Unite Group PLC Annual Report & Accounts 2020Our ambition is to continue to lead the student housing sector and to raise standards and deliver value to customers. This has been demonstrated through Covid-19 when we have provided financial and wellbeing support to students living with us. Our main focus will be to build on established good practice to drive up standards across the whole student accommodation and Higher We will continue to put robust governance and management processes in place toensure compliance requirements, backed up with training and engagement, Our suppyl chain pylas a key role in helpgin us achieve our ambitions and we will continue to work closely with them, and other partners who share our values to bring about measurable improvements, ensurgin sustainable supply chains are operational across the business.We also contribute actively to the ANUK National Code for purpose-built student accommodation and in recent years have helped to raise standards around student welfare support via the Code.Our annual Insight Report, delivered in partnership with the Higher Education Policy Institute (HEPI), shares key insights and analysis around the attitudes, experiences and needs of students. It makes a strong contribution to the work of PBSA providers and Universities, and many of our University partners have used its findings in their Key achievements:First PBSA provider to be accredited Covid Secure by the British Safety Council and to achieve a BSC 5-star rating.Worked in partnership with the Scottish Government, individual Universities and Public Health England to develop guidance relating to Covid-19 for student accommodation providers.Education sector.with all relevant regulations, codes and other verification and reporting.strategy development. • • • Improve scores from the Higher Education • Full alignment of health and safety • Full compliance with the requirements of • Year-on-year improvement of GRESB score, sector on sustainability issuessystems with ISO-45001 the Task Force on Climate-related Financial Disclosures (TCFD)to indicate overall performance against ESG measuresLeading the student housing sector by raising standardsGOVERNANCEKEY TARGETS59OverviewGovernanceFinancial StatementsOther InformationStrategic ReportTo complement the launch of our new Sustainability Strategy, we provide in the following pages statutory repor�ng for the key impacts on our business. Non-financial information statementCarbon emissions and climate changeThe table below summarises how we comply with non-financial performance reporting requirements. All policies are also available on www.unite-group.co.uk/investorselectricity suppyl contract without any renewable element, resulting in a significant increase in market-based scope 2 Carbon emissions and climate change remain a priority emissions. From October 2020 onward these sites all moved area for focus. This year sees two major factors causing across to the group suppyl contract with NPower and so significant changes to energy consumption and associated benefitted from 100% renewable REGO backed electricity.carbon emissions.The second major impact this year has been the Covid-19 Following the acquisition of Liberty Living, emissions associated with these properties are in scope for the first pandemic. Government restrictions and the interruption of normal teaching in the Higher Education sector led to time. This acquisition brought 55 additional properties significant changes in both overall levels of occupancy as into the portfolio, totalling over 24,000 student beds and well as day-to-day patterns of usage. Overall, this led to a c.700,000m of floor area. In addition, these properties significant reduction in consumption and corresponding have not benefited from the same levels of investment carbon emissions compared to budget expectations. in energy efficiency over recent years as the wider Unite Disruption due to Covid-19 also meant that capital estate, and so typically consume more energyp er bed. investment in energy and water saving initiatives planned Properties in the Liberty Living portfolio also make almost for 2020 were unable to proceed as planned.exclusive use of electricity for both heating and hot water (compared to the pre-existing portfolio where a significant The interplay overall of these factors on net emissions is minority of properties use gas or district heat for these), complex, although the effect is an increase in absolute further changing the overall balance of scope 1 and scope energy consumption and emissions, but a reduction in 2 emissions. Furthermore until the end of September 2020 energy and emissions per bed and per m basis. former Liberty Living properties operated under a legacy Employees Anti-corruption and bribery Environmental Description of matters principal risks and impact of business activity Human rightsDescription of the business model Social matters key performance indicatorsGroup Health and Safety PolicyAnti-bribery policyEmployee HandbookEquality, Diversity and Inclusion policyTrans and gender identity policyWhistleblowing policyDirectors’ Remuneration Report Environment policyStatement on carbon reduction/target Unite Group Code of EthicsModern Slavery statementData Protection Policy Volunteering PolicyFundraising guidelinesCharity Policy including matched giving Read more on www.unite-group.co.ukRead more about EmployeesRead more about Read more about Read more about Read more about Read more about our Read more on www.unite-group.co.uk on pages 38 and 39Principal risks and impact of business activity on pages 68 to 80Environmental topics on pages 61 to 63Our business model on pages 32 and 33Human rights on page 55 KPIs on page 41 Non-fnancial Non-fnancial SUSTAINABILITY REPORT CONTINUED2260The Unite Group PLC Annual Report & Accounts 2020Whole estate Scope 1 + Scope 2 (location based) emissions, absoluteWhole estate Scope 1 + Scope 2 (location based) emissions, per bed per yearScope 1Scope 2 (location based)Subject to the easing of lockdown, we aim to undertake detailed energy surveys of the former Liberty Living properties during 2021 to identify energy efficiency opportunities that will help deliver our net zero carbon ambition. Full details of energy consumption and carbon emissions are set out below:Energy consumption carbon emissions dataESTATE DATA201820192020DataChange vs prior yearDataChange vs prior yearDataChange vs base year (2014)Change vs prior yearYear-end bed numbers 48,622 -1.6% 49,992 2.8% 75,531 75.49%51.0%Carbon contributing bed numbers 48,706 -1.4% 49,242 1.1% 74,193 89.63%50.6%Carbon contributing floor area (m2) 1,391,923 -1.4% 1,400,011 0.5% 2,118,807 84.64%51.3%ENERGY & WATER USE201820192020Consumption Change vs prior year Consumption Change vs prior year ConsumptionChange vs base year (2014 for energy, 2015 for water) Change vs prior year Natural GasAbsolute (kWh) 36,632,735 19.3% 39,616,444 8.1% 55,242,941 136.81%39.4%Relative to bed numbers (kWh/bed) 752.1221.1% 804.537.0% 744.58 24.88%-7.5%Relative to floor area (kWh/m2) 26.30 21.0% 28.30 7.5% 26.10 28.26%-7.9%ElectricityAbsolute (kWh) 109,881,655 -5.5% 106,148,132 -3.4% 140,535,318 25.55%32.4%Relative to bed numbers (kWh/bed) 2,256.03 -4.0% 2,155.66 -4.4% 1,894.43 -33.79%-12.1%Relative to floor area (kWh/m2) 78.94 -4.1% 75.82 -4.0% 66.33 -32.00%-12.5%HeatAbsolute (kWh) 11,793,033 28.2% 11,775,682 -0.1% 12,091,340 277.61%2.7%Relative to bed numbers (kWh/bed) 242.13 30.2% 239.14 -1.2% 162.97 99.13%-31.9%Relative to floor area (kWh/m2) 8.47 30.1% 8.41 -0.7% 5.71 104.52%-32.2%TOTAL ENERGY (gas + electricity + heat)Absolute (kWh) 158,307,423 1.4% 157,540,259 -0.5% 207,888,46850.12%32.0%Relative to bed numbers (kWh/bed) 3,250.29 2.9% 3,199.33 -1.6% 2,801.73 -20.83%-12.4%Relative to floor area (kWh/m2) 113.73 2.8% 112.53 -1.1% 98.12 -18.69%-12.8%WaterAbsolute (m3) 2,452,769 11.8% 1,954,648 -20.3% 2,716,738 49.31%39.0%Relative to bed numbers (m3/bed) 50.40 13.5% 39.70 -21.2% 36.60 -13.30%-7.8%Relative to floor area (m3/m2) 1.80 13.4% 1.40 -22.69% 1.30 -22.69%-8.2%50,00030,00035,00040,00045,00020,00025,00010,0005,00015,0002018202020190Tonnes CO2e0.90.50.60.70.80.30.40.12018202020190.20Tonnes CO2e/bed61OverviewStrategic ReportGovernanceFinancial StatementsOther InformationGREENHOUSE GAS EMISSIONS 201820192020EmissionsChange vs prior yearEmissionsChange vs prior yearEmissionsChange vs base year (2014)Change vs prior yearTotal Scope 1 emissionsAbsolute (tonnes CO2e) 6,851 18.8% 7,397 8.0% 10,328 135.1%39.6%Relative to bed numbers (tonnes CO2e/bed) 0.14 20.6% 0.15 6.8% 0.14 24.0%-7.3%Relative to floor area (kg CO2e/m2) 4.92 20.5% 5.28 7.3% 4.87 27.3%-7.7%Total Scope 2 emissions (location based)Absolute (tonnes CO2e) 33,315 -22.0% 29,205 -12.3% 34,856-37.8%19.4%Relative to bed numbers (tonnes CO2e/bed) 0.68 -20.8% 0.59 -13.3% 0.47 -67.2%-20.8%Relative to floor area (kg CO2e/m2) 23.93 -20.8% 20.86 -12.8% 16.45 -66.3%-21.1%Total Scope 2 emissions (market based)Absolute (tonnes CO2e) 2,359 -89.7% 3,128 32.6% 10,694-80.7%241.9%Relative to bed numbers (tonnes CO2e/bed) 0.05 -89.6% 0.06 31.1% 0.14 -89.8%126.9%Relative to floor area (kg CO2e/m2) 1.69 -89.6% 2.23 31.8% 5.05 -89.5%125.9%Total Scope 1+2 emissions (location based)Absolute (tonnes CO2e) 40,166 -17.1% 36,602 -8.9% 45,184 -25.2%23.4%Relative to bed numbers (tonnes CO2e/bed) 0.82 -15.8% 0.74 -9.9% 0.61 -60.6%-18.1%Relative to floor area (kg CO2e/m2) 28.86 -15.9% 26.14 -9.4% 21.33-59.5%-18.4%Total Scope 1+2 emissions (market based)Absolute (tonnes CO2e) 9,210 -67.9% 10,524 14.3% 21,023-64.9%99.8%Relative to bed numbers (tonnes CO2e/bed) 0.19 -67.4% 0.21 13.0% 0.28 -81.5%32.6%Relative to floor area (kg CO2e/m2) 6.62 -67.4% 7.52 13.6% 9.92 -81.0%32.0%Total verifiable Scope 3 emissionsAbsolute (tonnes CO2e) 11,666 -20.1% 9,859 -15.5% 12,326-16.6%25.2%Relative to bed numbers (tonnes CO2e/bed) 0.24 -18.9% 0.20 -16.4% 0.17 -56.0%-16.9%Relative to floor area (kg CO2e/m2) 8.38 -19.0% 7.04 -16.0% 5.83-54.8%-17.3%Total non-verifiable Scope 3 emissionsAbsolute (tonnes CO2e) 6,610 No dataNo data 110,988 1579.1%76,285n/an/a-33.1%Relative to bed numbers (tonnes CO2e/bed) 0.14 No dataNo data 2.25 1560.9%1.03n/an/a-55.6%Relative to floor area (kg CO2e/m2) 4.75 No dataNo data 79.28 1569.4%36.00n/an/a-55.8%Total of verifiable and non-verifiable Scope 3 emissionsAbsolute (tonnes CO2e) 18,276 No dataNo data 120,847 561.2% 88,631n/an/a-28.4%Relative to bed numbers (tonnes CO2e/bed) 0.38 No dataNo data 2.45 554.1% 1.19n/an/a-52.5%Relative to floor area (kg CO2e/m2) 13.13 No dataNo data 86.32 557.4% 41.83n/an/a-52.7%SUSTAINABILITY REPORT CONTINUEDNotes:GHG emissions have been calculated using methodology set out in HM Government's ‘Environmental Reporting Guidelines: Including streamlined energy and carbon reporting March 2019 (Updated Introduction and Chapters 1 and 2)’ in line with the GHG Protocol's ‘A Corporate Accounting and Reporting Standard (Revised Edition)’. Energy consumption and GHG emissions reported here cover 100% of Unite operations, which all occur in the UK, and 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 sites 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 evaluator tool based on spend), Category 2 (Capital goods – new properties, calculated using a detailed embodied carbon assessment of a real and representative new build property, Category 5 (Waste Generated in Operations calculated using QUANTIS Scope 3 evaluator tool based on spend), and Category 7 (Employee commuting calculated using QUANTIS Scope 3 evaluator tool), where insufficient data is available to verify in accordance with the requirements of ISO 14064-3:2006.Emissions factors used are the 2020 ‘UK Government emission conversion factors for greenhouse gas company reporting’. Location Based Scope 2 emissions are calculated using the UK national average grid emissions factor as per the above guidance, whilst 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. This portion is from renewable sources and 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, and at www.unite-group.co.uk62The Unite Group PLC Annual Report & Accounts 2020Managing climate-related risks1. Governance3. Risk Management4. Metrics and Targets2. StrategyAsset stranding: Capital investment required to ensure all assets follow a 1.5°C decarbonisation trajectory Climate change represents a material risk to our business, and remain compliant with evolving minimum energy which is why we have committed to fully implement the standards to avoid asset stranding and negative impacts recommendations of the on asset values.. As we work to become net zero carbon by 2030, we will increase our focus on Energy/carbon costs: Ongoing increases and volatility in the management and disclosure of climate-related risks energy costs and potential new carbon charges resulting and opportunities. We plan to share more details later in increased operating costs.this year including a detailed net zero carbon pathway Changing customer behaviours: driven by shifting showing how we intend to achieve our target. An overview social norms, direct climate impacts, or increased costs against the four core elements of the TCFD guidelines are resulting from the transition to a low carbon economy.More detailed assessment of climate-related risks under different potential climate scenarios will be completed this Our new Sustainability Committee will meet regularly year and inform ongoing business strategy and planning to to ensure Board oversight of environmental, social and ensure effective management and mitigation. This will be governance issues, and hold the business to account publishedduring 2021. for performance in this area including the management of climate-related risk. Our Chief Executive has overall responsibility for our climate-related risks and opportunities We are creating individual Asset Transition Plans charting with ongoing oversight of climate-related issues with each property’s journey to net zero carbon, and a Net our Sustainability Committee, a sub-Committee of the Zero Carbon Pathway setting out our overall approach to Board. The Board also undertakes a twice-yearly formal becoming net zero carbon by 2030. These, along with our risk review (see page 64). Our new Sustainability Steering annual assessment of climate-related risks undertaken Group, chaired by the Chief Financial Officer, coordinates by our Sustainability Steering Group, will inform asset the implementation of our new Sustainability Strategy management and business planning decisions and so help across the business, drives continual improvement, and is build resilience and deliver the decarbonisation needed to responsible for the assessment, management, and reporting limit warming to 1.5°C or lower. As we strengthen our climate-related risk management, we We will undertake annual assessments of climate-related will publish more detailed targets for this area. These are physical, transition and social risks under different climate likely to include absolute and intensity metrics based scenarios over a short, medium and longer term, which will on scope 1, 2 (market and location based) and 3 GHG inform business planning and operational decisions. We emissions (see pages 61 and 62), utilities consumption and already track climate change as a principal risk (see page costs, EPC rating, flood risk and metrological data.79), but will disclose more detail later in 2021. Areas for focus are likely to include:Acute climate impacts: Increased frequency and severity of extreme weather (storms, flooding) resulting in damage to assets and disruption to operations and value chain.Chronic climate impacts: More frequent heatwaves and increased risk of overheating, potentially leading to customer dissatisfaction, risks to health, safety and wellbeing, reduced summer business, and capital expenditure to mitigate. Task Force on Climate-Related Financial Disclosure (TCFD)set out below.of climate-related risks and opportunities. • • • • • 63OverviewGovernanceFinancial StatementsOther InformationStrategic Report“ Our risk management framework is designed to ensure the Board can clearly identify our risks and assess our risk profile and risk appetite.”Chris Szpojnarowicz Company Secretary and Group Legal DirectorThe Board has overall responsibility for the oversight of risk as well as maintaining a robust risk management framework and internal control systemh the Audit , witCommittee reviewing the effectiveness of our risk management and internal control processes. Our risk management framework is designed to ensure the Board can clearly identify our risks, assess our risk profile and risk appetite, and ensure these risks are being managed and mitigated transparently and effectively. Integral to this design is ensuring we are agile and resilient, which proved especially critical through 2020 as we navigated the huge challenges of Covid-19 whilst overseeing the successful integration of the Liberty Living business. The Board conducts a twice yearly dedicated risk review. This considers risks with both a top-down review (identifying a wide range of strategic and emerging risks and opportunities) as well as a bottom-up review (challenging the detailed risk trackers produced by the Operations and Property Boards). As part of this focused risk review, the Board undertakes its annual assessment of the principal risks facing the Group, taking account of those that would threaten our business model, future performance, solvency or liquidity as well as the Group’s strategic objectives.RISK MANAGEMENTOur risk management framework A resilient and agile risk management approach is helpgin us navigate Covid-19.64The Unite Group PLC Annual Report & Accounts 202064Whilst the Board considered there were no fundamental changes to our principal risks due to Covid-19, most of our risks were elevated directly as a result of the pandemic and the challenging economic environment, the safety and wellbeing of our customers and employees and the impact of lockdowns on how students study and how we operate our business.Our values are the foundation for our risk management framework and ultimately combine in our purpose to provide a Home for Success. We recognise that risk cannot be entirely eliminated, but rather use our decision making process to ensure an appropriate balance between risk and opportunity. We are conscious to be risk-aware, defining our risk appetite as we face challenges and embrace new opportunities. 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.Our Covid-19 risk responseThe Group took a proactive and pre-emptive approach to managing the business in response to the dynamic and widespread nature of the pandemic. The health, safety and wellbeing of our customers and employees has always been a principal risk and Covid-19 underlined the importance of putting this first. This safety risk was especially elevated when the first lockdown happened (with Universities closing) and then into the 2020/2021 academic year (with Covid-19 prevalent in student accommodation and the wider community). As the pandemic spread further in 2020 and now in early 2021, alongside physical health, the risk to mental health and wellbeing of our student customers and our people has significantly increased. The Board oversees a comprehensive safety risk management plan which included Unite becoming the first student accommodation provider to achieve Covid Secure status accredited by the British Safety Council. To protect the risk to our reputation, the Board’s Covid-19 risk plan ensured clear dialogue and engagement with our customers, Public Health England, local authorities, Universities and other stakeholders as well as direct Government engagement. As we navigated the impact of the pandemic for our business, staying loyal to our value ‘doing what’s right’ guided our decision making. This was demonstrated with the measures we put in place to respond to Covid-19 for our customers and employees. This included protecting our long-term reputation and enhancing our University partnerships through the pandemic, with Unite waiving rent for students who choose to return home during the third term of 2019/20 academic year, as well as offering rent discounts to those not using their accommodation during the third national lockdown in early 2021. We also ensured a safe working environment for our employees (as detailed on page 53).To manage the income risk which flowed from doing the right thing by waiving / offering discounted rents, the Board took decisive action to protect our cash and financial position. These actions included: deferring development and non-essential operational capex and delivering cost savings, a 30% reduction to salaries and pension contributions for Executive Directors, 10-20% for senior management and a 30% reduction in fees payable to Non-Executive Directors (effective for a four-month period from 1 April), cancelling our 2019 final dividend and suspending our 2020 interim dividend, realising additional cost synergies from the Liberty Living acquisition, in-sourcing work for summer 2020 turnaround and cleaning as well as savings to utility and broadband costs with a halt to discretionary overhead spending and non-essential recruitment. To manage our Financing risks, the Board increased the monitoring of our headroom under our banking covenants under various stress tested scenarios. Covenants vary between facilities but are principally based on LTV and interest cover ratios (ICRs). The ICR ratios were especially challenged by the widespread nature of the pandemic and its impact on income. The Board ensured proactive engagement with lenders. The table on pages 66 and 67 set out in more detail the impact of Covid-19 on our principal risks and what the Board did to address this.Board leads risk reviewAssessing our risk profile and our principal risks and the impact of Covid-19 on these risks.Identifying a wide range of strategic and emerging risks and opportunities.Challenging risks identified by operational management and more technical risks such as information technology, security, business continuity, GDPR, financing and treasury.Engaging with senior leaders in the Higher Education sector and technical experts on key issues such as Covid-19 and fire safety.Top-down reviewBottom-up reviewBoard searches externally for best practiceOutput – five risk categoriesMarket risks (supply and demand) Read more on pages 72 to 74Property/development risks Read more on pages 77 and 78Operational risks Read more on pages 75 and 76ESG risks Read more on page 79Financial risks Read more on page 8065OverviewStrategic ReportGovernanceFinancial StatementsOther InformationRISK MANAGEMENT CONTINUEDCovid-19 impact on our principal risks in 2020 OPERATIONAL RISK – SAFETYCovid-19 impact – what happenedCovid-19 and its widespread impact on the safety and wellbeing of our customers, our employees and the communities we operate in.Our Covid-19 risk response – what we didManaged our Covid-19 safety risk through a comprehensive risk management plan as well as seeking expert Covid-19 third party assurance. We were the first accommodation provider to achieve Covid Secure status accredited by the British Safety Council. To protect our reputation, our Covid-19 plans included clear dialogue and engagement with Public Health England, local authorities, our various stakeholders as well as direct Government engagement. Read more about our Covid-19 risk response on page 65 and in the Heath and Safety Committee report on page 115. During Covid-19 it has been especially important to fully engage with all employees in light of the rapidly evolving situation and the changing University calendar. We have:• increased two-way channels to listen to our employees and give them direct and frequent access to senior leaders so we can respond to situations• held regular Unite Live forums enabling all employees in the business to speak to and ask questions of the leadership team and through regular Covid updates • conducted regular pulse surveys with our teams to understand their needs during this difficult time • supported all office-based employees to work from home, supported by a health and safety assessment of their workplace• increased our Special Leave to support teams with balancing work life and home life.Read more about Covid-19 safety response on pages 2 and 3DEVELOPMENT RISKCovid-19 impact on development, including programme risk in delivering schemes on time and to budget.Covid-19 created unique challenges to securing new sites as well as delivering schemes on time and to budget (temporary site closures and reduced levels of operatives on site as a result of social distancing measures). Notwithstanding this, we delivered 2,257 beds across three development schemes for the 2020/21 academic year. This includes White Rose View in Leeds with a 559-bed 30-year nomination agreement with the University of Leeds (completed on time and budget for student arrivals in September 2020) plus Arch View House, London and Artisan Heights, Manchester delivered in Q4 2020.In response to Covid-19, deferred delivery of two schemes (Middlesex Street, London and Old BRI, Bristol) to 2022.Our Covid-19 risk response – what we didOur Covid-19 risk response – what we didENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) RISK Key stakeholders' focus on ESG risk has increased and is likely to continue because of Covid-19. Through 2020 we developed our new Sustainability Strategy following extensive engagement with investors and other stakeholders. This strategy will play an important role in the longer-term sustainability of the business. Covid-19 impact – what happenedOur Covid-19 risk response – what we didRead more about our Sustainability Strategy on pages 46 to 6366The Unite Group PLC Annual Report & Accounts 2020MARKET RISKCovid-19 impact – what happenedCovid-19 impact – what happenedIncreasing risk of macro events reducing demand for UK HE and student accommodation (such as the Covid-19 pandemic, Government policy around HE or immigration and uncertainty related to Brexit).Our Covid-19 risk response – what we didOur Covid-19 risk response – what we didThis demand risk was amplified by the sudden and unprecedented nature of the global pandemic with Covid-19 impacting us directly and materially in the 2019/20 and 2020/21 academic years leading to a material loss of income. Risk mitigated primarily through suspending dividends, conserving cash, drawing bank facilities and reducing costs wherever possible whilst ensuring safety remained paramount.Worked directly with the Government and public health authorities on Covid-19 as well as with Universities on their dynamic operating plans for the 2020/21 and 2021/22 academic years.High and medium- tariff Universities have demonstrated the most resilience through Covid-19 and this supports our strategy to align with these Universities through our acquisitions, disposals and development activity.Read more in the Market overview on pages 27 to 31Customer expectations of value-for-money and affordability – Covid-19 impacting student experience.Demonstrated value-for-money and affordability through Unite's focus on doing the right thing for all stakeholders, especially students, during the uniquely challenging period. Decisive action to enhance our reputation with students, parents and Universities building on our strong University partnerships, including:• first in the sector to refund students the cost of the third term's accommodation fees for the 2019/20 Academic Year if they left accommodation early because of the pandemic as well as first in the sector to offer discounted rents early in 2021 and a complimentary four weeks to extend their stay into summer 2021• provided rent-free homes for those students who did not want or were unable to return home in summer 2020, ensuring the continuity of a safe and secure living environment during an otherwise uncertain time in their lives• worked closely with Universities to share best practice Covid-19 operating procedures • offered flexible booking particularly at the start of the new academic year given regional lockdowns.Read more about Operations review on page 17Covid-19 increasing level of uncertainty around income. This impacts balance sheet liquidity and compliance with debt covenants.Our debt covenants, like for many other borrowers, were fundamentally tested by the sudden, unexpected and wide ranging nature of Covid-19. This especially so for ICR covenants, not historically a risk and not designed to absorb a change such as this. To manage this risk, the Board took rapid action to ensure that the Group had sufficient liquidity through deferral of development activity, cancellation and suspension of dividends, cost saving activity and drawing bank facilities. This provided the Group with meaningful liquidity headroom to be able to withstand severe downside scenarios. In addition, we have engaged more proactively with our lenders and increased our covenant monitoring across a range of scenarios. This ensured that as risks emerged, we were ready to identify further action and share regular updates with lenders. Also, external audit review of covenant compliance through the Going Concern process.Covid-19 impact – what happenedOur Covid-19 risk response – what we didFINANCIAL RISK67OverviewStrategic ReportGovernanceFinancial StatementsOther InformationPRINCIPAL RISKS AND UNCERTAINTIESOur risk appetite and Covid-19 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 of delivering attractive total returns through recurring income and capital growth, while maintaining a strong capital structure. During the year, the Board regularly reviewed and assessed our risk appetite with frequent Covid-19 calls in addition to the scheduled Board meetings. This risk appetite was assessed against the context of the especially dynamic and volatile Covid-19 situation with a primary focus on the resilience of the business and its agility. This considered both threats to – and opportunities in – our business as well as wider macro risk developments impacting the PBSA sector and the broader Higher Education sector, property market and economy.Our overall risk appetite in the year was broadly unchanged from the previous financial year, although the Board ensured a more prudent approach to risk and opportunity whilst the impact and duration of the pandemic continues as uncertain. Risks – and the related benefits of our actions – are reviewed and assessed with a greater emphasis on their impact on all stakeholders – employees, customers, Universities, investors and suppliers – along with wider society in the context of Covid-19 and its impact on the economy. Stress testing / scenario planning and our Strategic Plan 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 2020, this scenario planning closely monitored Government and public health authorities guidance on Covid-19 as well as the ongoing and dynamic operating plans of Universities for 2020/21 and 2021/22 academic years. The Board developed a wider range of scenarios and stress tests to assess our preparedness and ability to withstand adverse market conditions. Creating the right corporate culture for effective risk managementThe 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 an 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 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:• During 2020 and into 2021, regular Covid-19 Board calls in addition to the scheduled Board meetings. This supports an appropriate balance between a Covid-19 response and other key business areas (such as overseeing ongoing fire safety and a successful Liberty Living integration).• 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.• Enhanced stress testing/scenario planning to reflect the dynamic nature of Covid-19.• 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).ESG Risks and our Sustainability StrategyAs a responsible and trusted business, our wider stakeholders demand we proactively address environmental, social and governance risks. This is consistent with one of our values ‘doing what’s right’. The pace of change in this area has only intensified with Covid-19 with an increasing focus on longer term sustainability. Our overarching ambition is for Unite to clearly lead the student housing sector on sustainability 68The Unite Group PLC Annual Report & Accounts 2020issues and be in the leading pack of real estate companies in the wider sector. This is what our customers and employees expect of us and is critical to Unite being their Home for Success. If we do not do this fast and / or successfully enough, we risk losing the support of our investors and wider stakeholders. In addition, we risk regulatory non-compliance and the resulting increased cost of trying to keep up with fast-paced regulatory change. To mitigate this risk, during 2020 we conducted extensive stakeholder engagement and a materiality assessment to develop our detailed sustainability objectives and targets. The Board needed to better understand our stakeholder expectations; otherwise we risk not meeting them. Read more about our Sustainability Strategy on pages 46 to 63In addition, we assessed our ongoing ESG regulatory and reporting compliance. The Board used this engagement to develop our new Sustainability Strategy. This provides a clear structure with objectives, flagship targets and governance to help ensure its successful delivery. We are especially conscious we risk non-delivery of our Sustainability Strategy if we do not engage and ensure the business owns and leads change through business as usual activity. This a core aspect of the implementation of this strategy and a key focus for 2021.1. Becoming net zero carbon in our operations and developments by 2030 – reducing the carbon emissions from new and existing buildings in line with climate science, ahead of the timescale set out in the Paris Climate Agreement to avoid the worst impacts of climate change. 2. Creating resilient, resource efficient assets and operations – reducing the environmental impact of our new and existing buildings through investment in energy and water efficiency, moving away from the use of fossil fuels, and working with students to encourage sustainable living habits.3. Enhancing the health and wellbeing of our employees and students – engaging and listening to improve mental and physical health and wellbeing. 4. Providing opportunities for all – including students, employees and in the communities where we work, where all can succeed, whatever their background, gender or ethnicity. 5. Leading the student housing sector – raising standards and delivering value to our customers and investors and providing a great place to work for our employees will ensure we further build on our reputation. This will ensure we support UK Universities to build on their reputation nationally and internationally. EnvironmentalSocialGovernanceOur new Sustainability Strategy sets out five key objectives designed to address our most material ESG risks: Climate change risksIn 2020, we formally signed up as a supporter of the Task Force on Climate-Related Financial Disclosure (TCFD) and will be aligning with their requirements for managing and reporting climate-related risks (see page 63 for more information).Our Chief Executive has overall responsibility for our climate-related risks and opportunities with ongoing oversight of climate-related issues provided by our newly established Sustainability Committee, a sub-Committee of the Board. Risks are tracked, managed and mitigated by our Sustainability Steering Group and the relevant business functions. Addressing climate-related risks to our business is a fundamental part of our new Sustainability Strategy and specifically our objectives of: (1) becoming net zero carbon in our operations and developments by end of 2030 and (2) creating resilient, resource efficient assets and operations. Reducing the environmental impact of our buildings and operations, including energy and water consumption, carbon emissions, and waste and resource use, helps ensure our business is resilient and can withstand the impacts of climate change and the transition to a low carbon economy over the coming years. We will continue to focus on climate-related risks as we move to align fully with the TCFD’s recommendations throughout 2021 and will be publishing more details of potential impacts and our approach to managing and mitigating them later in the year. The Board has identified the following climate-related risks: Regulatory; Physical; Transition and Stakeholder risks. For more detail see Principal risk 8 – Climate-related risks: challenge to our longer term sustainability caused by climate change, page 79. 69OverviewStrategic ReportGovernanceFinancial StatementsOther InformationPRINCIPAL RISKS AND UNCERTAINTIES CONTINUEDOur risk management frameworkRisks 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 meetingsEmbedded risk management culture Openness, transparency and clear ownership of risk management (supported by risk trackers) cascades through the organisationRichard SmithChief Executive OfficerJoe ListerChief Financial OfficerNick HayesGroup Property DirectorChris Szpojnarowicz Company Secretary andGroup Legal DirectorOwned by the Risk Committee and the Operations/Property BoardsMonthly risk tracker review at Operations/Property BoardsRisk Committee review and challenge of all risk trackers and related risk and opportunity activityUnderpinning risk management (such as Capital Operating Guidelines; Treasury Policy; Investment Committee and the internal controls framework)The BoardPeople and cultureComposition of Risk Committee Risk managementPolicies and controlsQuality propertiesQuality service platformQuality University partnershipsGross Asset ValueAsset ageOccupancyRental GrowthSafetyCustomer satisfactionEmployee engagementSafetyHigher Education trustCustomer satisfaction% Noms v. Direct-letOur Key Risk Indicators (KRIs)70The Unite Group PLC Annual Report & Accounts 2020Robust assessment of principal risks 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 72 to 80.Viability statementThe Directors have assessed the viability of the Group over a three year period to December 2023, 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 2023.The outlook and future prospects beyond the viability period for the business remains strong, reflecting the underlying strength of student demand, our alignment to the strongest Universities and the capabilities of our best-in-class operating platform. There are significant growth opportunities for the business created by the ongoing shortage of high quality and affordable purpose built student accommodation, Universities’ need to deliver an exceptional student experience through their accommodation and the growing awareness of the benefits of PBSA among non-1st year students. In particular, we see opportunities for new developments and University partnerships, building on the strength of our enhanced reputation in the sector.The Group expects an improvement in financial performance from the 2021/22 academic year reflecting progress around vaccinations for Covid-19 and the Government's plans to remove lockdown restrictions over the coming months. The Directors believe that UK Universities will continue to experience strong demand from UK students as the 18 year old demographic profile becomes increasingly favourable and the relaxation of international travel restrictions allows increased numbers of International students to study in the UK compared to the 2020/21 academic year. 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 three principal financing risks for the Group are: • short term debt covenance compliance• the Group’s ability to arrange new debt/replace expiring debt facilities; and• any adverse interest rate movementsAs outlined in the Going Concern disclosure, the Group expects ICR covenants to improve rapidly from March 2021 as the impact of the initial lockdown and Term 3 2020 rent forbearance is excluded from 12 month historic tests. Debt covenants are therefore not expected to impact the Group’s viability. 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 4271OverviewStrategic ReportGovernanceFinancial StatementsOther InformationPRINCIPAL RISKS AND UNCERTAINTIES CONTINUEDDemand reduction: driven by macro events (such as Covid-19, Government policy around HE or immigration and Brexit uncertainty) • Covid-19 pandemic • Changes in Government policy on Higher Education funding• Immigration policy changes affecting international student numbers and behaviour• Brexit impacting numbers of EU students coming to study in the UK• Covid-19 impacted Unite directly in 2019/20 and 2020/21 academic years leading to a loss of income compared to plans • Potential reduction in demand and hence profitability and asset values• Departure from EU impacting EU research grants and EU students coming to the UK• Offering great customer 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• Covid-19 pandemic: direct impact for Unite alongside wider and indirect global impact• Student applications: The number of applicants and the number of students accepted onto courses in 2020 was 729,000 and 570,000 respectively (2019: 706,000 and 541,000). A 5.4% year on year increase in acceptances was driven by a record participation rate among UK 18-year-olds and a 17% increase in acceptances from non-EU students• Brexit alongside wider political uncertainty continued through 2020• UK continued as second most popular international destination for students after the US• The UK Government’s international education strategy is targeting an increase in the number of international students to at least 600,000 by 2030. In September 2019, the Government announced a new two-year post-study work visa for international students (three years for postgraduates), starting from the 2020/21 academic year• UK leaves EU Erasmus scheme and launches the UK’s own Turing Scheme • Uncertainty continues as to when any of the recommendations in The Higher Education Funding Review (published in May 2019) will be implemented • Increased focus on quality and length of nomination agreements• Mitigated the Covid-19 reduced income primarily by suspending our dividends, conserving cash, drawing bank facilities and reducing costs where possible whilst always protecting safety and the longer term health of the business• Closely monitored Covid-19 guidance from the Government and public health authorities as well as extensive dialogue with our HE partners on their dynamic operating plans for both 2020/21 and 2021/22 academic years. Prepared budgets and business plans under a variety of scenarios and stress tests to assess our preparedness and ability to withstand the adverse market conditions• Government dialogue and ongoing monitoring of Government HE and immigration policy and its impact on UK, EU and international student numbers studying in the UK • Implemented our plan for our key Brexit operational risks – People, Procurement and Development – through our Brexit Disruption Plan• Regularly reviewing our portfolio – especially conscious it has grown through the Liberty Living acquisition – to ensure we have the highest quality portfolio, appropriately sized and in the right locations• Continued to deliver Home for Success, our core purpose to provide homes that help students achieve more during their time at University which was especially challenging for them through 2020• Mitigating impact of reduced income / occupancy from the ongoing pandemic through dividend / cash / third party cost management and our related stress testing / scenario planning• Continuing to work with our HE partners on their dynamic operating plans• Ongoing monitoring of Government HE funding and immigration policy • Continued focus on portfolio management, using disposals to reduce exposure in higher risk marketsPossible EventsImpactStrategic objectiveWhat happened in 2020 Risk mitigation in 2020Focus for 2021MovementRead Our business model on page 32Read more about Market review on page 27MARKET RISK72The Unite Group PLC Annual Report & Accounts 2020Demand reduction: value-for-money/affordability• Increasing focus on the cost of a University education – affordability and value-for-money – especially challenged in 2020 due to Covid-19• Increasing risk of blended University learning (digital plus in person) – accelerated by Covid-19• Emerging risk of shorter/more semester-led courses and increasing home study • Emerging risk of monitoring or regulation of the costs, rents, profitability and value-for-money of student accommodation• Emerging risk of Further Education being promoted over HE • Covid-19 has directly impacted the student experience and elevated concerns around University education affordability and value-for-money. This has generally focused on questions around the value of the student experience with students studying on-line through the pandemic and limitations on their in-person study and wider University life experience • More competition and reduced demand for year-round student accommodation in the longer-term resulting in lower profitability and asset valuesPossible EventsImpactMovement• 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• Covid-19 materially increased media attention on the cost of University education (both tuition fees and accommodation). This largely centred on complaints that the costs remained the same despite students studying on-line through the pandemic and were not able to physically attend University and enjoy the wider University experience• 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• Integrated the Liberty Living beds, providing us with a wider range of product and price points and more affordable product• Waived 2020 summer rents for students returning home due to Covid-19 during the first national lockdown. Unite was the first PBSA operator to do so. Likewise, early in 2021, the first PBSA operator to offer 50% discounted rents and a complimentary four week extension in the summer to allow students to enjoy the summer in their University cities conscious this was an especially challenging time for them • Provided flexible check-in for students during September/October 2020• Allowed international students to move to a January 2021 start date, forgoing September – December 2020 rent• Option to check-in early, at no-extra cost, where students needed to quarantine having arrived from a Covid-restricted area • Connected students via the MyUnite digital app before they moved in so they could get to know each other in advance• Helped foster a sense of community by introducing a Home Charter creating a healthy and supportive living environment • Increased provision and access to student wellbeing and mental health support, including: –Enhanced student welfare services, including bespoke support for students who are shielding, support for those self-isolating, online welfare checks and a pilot peer-to-peer scheme –Online chat rooms for students in the same building, and online events run by student ambassadors –MyUnite App: students communicate remotely with Unite’s teams without having to leave their rooms –24/7 support through Unite’s Emergency Contact Centre and a partnership with Nightline –Dedicated welfare leads for all students including those in quarantine and/or self-isolation –Worked closely with our University partners supporting students and maintaining our focus to keep all students and staff safe across our properties through the pandemic • Working with our HE partners on their dynamic operating plans during the pandemic and ensuring we still provide the best and valued customer experience, whilst keeping everyone safe • Demonstrating the value-for-money of our offer compared to alternatives, including leading the market forgoing rents/offering discounts and complimentary extensions through summer 2021• Ongoing monitoring of Government HE funding • Ongoing review of our services, product proposition and specification • Greater segmentation of product for customersStrategic objectiveWhat happened in 2020 Risk mitigation in 2020Focus for 2021Read more about Our business model on page 32Read more about Operations review on pages 17 to 21MARKET RISK73OverviewStrategic ReportGovernanceFinancial StatementsOther InformationPRINCIPAL RISKS AND UNCERTAINTIES CONTINUEDSupply increase: maturing PBSA sector and increasing supply of PBSA beds • New supply of beds as sustained high levels of investment demand filter into the development market, primarily through investors providing forward commitments to smaller developers• More competition for the best sites• Potential impact on rental growth and occupancy Possible EventsImpactMovement• Offering great service as well as having high quality properties is critical to mitigating any supply surplus• The outlook for levels of new supply started to moderate. This was largely due to Covid-19 uncertainty, companies conserving cash and challenges proceeding with plans prior to the pandemic• New supply is also slowing due to more challenging planning environments and the emergence of the private rent sector (PRS) as an alternative option for sites that could have been developed for PBSA• The PBSA sector continues to mature and is becoming increasingly professionalised• Unite delivered three new properties in 2020 alongside active property recycling, resulting in a higher-quality Unite portfolio• Disciplined investment approach to markets with supply/demand imbalance• June 2020 share placing raising £300 million for Unite’s continued investment in its best-in-class portfolio. Deploying these placing proceeds by exchanging contracts for a 300-bed development site in central Edinburgh, an 800-bed development in Paddington, London and exploring other sites• Exposure to the best Universities underpinned with our 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• Our portfolio: delivering our development pipeline underpinned with strong University partnerships• Our people and our operating platform PRISM. Ensure our people and systems 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 growsStrategic objectiveWhat happened in 2020 Risk mitigation in 2020Focus for 2021Read more about our Operations review on page 17 and Property review on page 22MARKET RISK74The Unite Group PLC Annual Report & Accounts 2020Major health and safety (H&S) incident in a property or a development site• Covid-19 impacting our customers, employees and contractors• Fatality or major injury from a fire or other incident at a property• Multiple contractor injuries at a development or operational site• Covid-19 impacting both the physical and mental health of our customers and employees • Fire or similar safety incident impacting the students living with us, contractors working on-site and visitors• Reputational damage and trust in Unite Students as a reliable partnerPossible EventsImpactMovement• Ensuring the safety of our customers, contractors and employees is fundamental to us offering quality service• Covid-19 has impacted our safety risk in unprecedented ways, whilst our other risks (such as fire and contractor safety) continue and in some cases are even increasing (e.g., increasing since more students are cooking in their student accommodation so there is an increased risk of kitchen fires and other behavioural challenges). Along with the physical health impacts of Covid-19, our students’ and employees’ wellbeing and mental health are being challenged even more than usual• Changes to Building Regulations continued the focus on fire safety especially in high-rise residential properties • Focus on combustible materials continued, with high-pressure laminates (HPL) and other materials under review• Fire safety management – despite Covid-19, continued focus on our policies and procedures, risk assessments, training and fire records• Continued working closely with Ministry for Housing, Communities and Local Government (MHCLG) and local fire authorities and fire safety experts to ensure fire safety and address any remedial actions following Grenfell Tower learnings• H&S has 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• First accommodation provider to achieve Covid Secure status accredited by the British Safety Council• Regular dialogue and engagement with PHE, local authorities, our various stakeholders as well as direct Government engagement on Covid-19• Comprehensive Covid-19 risk management program, including: –Covid Response Team, Covid Secure Workplace and Covid Secure BSC Assurance –Covid audits by our Regional H&S Managers (these audits consist of 20 questions checking whether we are compliant with our Covid safe requirements e.g. staff are wearing facemasks; sanitiser stations are stocked, and additional cleaning regimes are in place) –Our Covid Wiki page (our online employee repository for Covid information) with working safely guidance, change of lay out and ‘how-to’ videos –Recognising the increasing mental health risk, we expanded our H&S wellbeing for employees and appointed Healthy Work Company to work with our operational and safety teams• Appointed Faithful & Gould for assurance on Development safety risk (this includes specific Covid-19 audits on sites as well as a Wellbeing focus)• Refreshed our Values, including a focus on 'Keeping uS safe' and ensuring people know they are able to speak out and help us create a Safety culture• Finding ways to show visible leadership for Safety & Wellbeing driven by our senior leaders. We measure how our teams feel safe and well at work through Glint employee surveys and how our customers feel safe and secure in their homes (NPS)• 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• Implemented the British Safety Council recommendations from our 2019 BSC safety audits (namely, an Occupational Health and Safety audit spanning 39 operating properties and our Bristol head office – achieved BSC 5-star audit rating; a dedicated fire safety audit; and a construction audit)• Monitoring the dynamic Covid-19 situation and proactively revising our operating practices• Continued focus on the safety and wellbeing of our customers, employees and contractors• Removal of HPL cladding, with activity prioritised according to our risk assessments, starting with those over 18 metres in height• Monitoring and preparing for the anticipated more stringent fire safety regulationsStrategic objectiveWhat happened in 2020 Risk mitigation in 2020Focus for 2021Read more about Our business model on page 32Read more about Operations review on pages 17 to 21Read more about Health and Safety Committee report on pages 115 to 119OPERATIONAL RISK75OverviewStrategic ReportGovernanceFinancial StatementsOther InformationPRINCIPAL RISKS AND UNCERTAINTIES CONTINUEDInformation Security and Cyber threat• Significant loss of personal or confidential data or disruption to the corporate systems either through cyber attack or internal theft/error• Results in reputational damage, financial damage and / or increased scrutiny including sanctions and finesPossible EventsImpactMovement• Having strong but proportionate controls, to minimise risk of data loss and to ensure we are compliant with information security and / or data protection regulations• External Cyber Maturity Assessment completed in Q4 2020 acknowledged good progress in our Information Security approach and controls as well as provided key priorities for further improvement• Technical security controls aligned to industry standard security controls which was supported through external security testing and renewal of our certification under the Cyber Essentials Plus scheme• Agreed Information Security Strategy and Technical Security Roadmap• Progressed improvement in security controls through implementing the Information Security Management System aligned to ISO27001• Ongoing programme of training and awareness to promote everyone’s responsibility to protect information, especially personal data• Significant increase in customer and employee data processed due to the acquisition of Liberty Living• Captured customers’ self-isolation status data to support with Covid-19 response activity• Responded to increasing risk challenges presented by Covid-19, such as technical improvements to support increased remote working, improved awareness for employees on information risks of working from home and ensuring the increase in personal data collected for tracking was handled appropriately• Data protection risks increasing due to the processing of Covid-19 health related data and mitigated through cross-functional collaboration, strict access and data retention controls and new procedural controls• Responded to increasing threat of Ransomware• Conducted the Security Awareness For Everyone (SAFE) Programme driving new initiatives and education campaigns• Monitoring of emerging cyber threats to identify any issues that required a response• Information Security and Data protection policies in place to define rules for protecting information. Range of policies and supporting procedures are being expanded• Developed Information security vulnerability assessment and threat hunting capability• Improved Information Security Incident Management procedures• Conducted a review and gap assessment of the Data Protection activities to define an improved framework approach• Renewed Cyber Insurance policy• To continue alignment with the ISO27001 Information Security standard, which provides a framework for a risk-based approach to identifying, implementing and improving security controls• Strengthening the Information Security Committee (ISC) and ISC Working Group enabling business level engagement with Information owners• Expand the perpetual security monitoring and testing activities• Monitor the processing of and controls in place for Covid-19 health related dataStrategic objectiveWhat happened in 2020 Risk mitigation in 2020Focus for 2021Read more about Our business model on pages 32 and 33OPERATIONAL RISK76The Unite Group PLC Annual Report & Accounts 2020Inability 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• Covid-19 impacting delivery of schemes to programme• Site acquisition risk – increasing competition for the best sites• Planning risk – delays or failure to get planning• Construction risk – build cost inflation due to increasing development (albeit tempered by Covid-19 / economic uncertainty)• Construction execution risk – delivery delays impacting labour/materials coming from outside the UK• Disposals risk – inability to execute our disposals programme • Climate risk – physical, regulatory and transactional risks associated with climate change and the environmental impact of our development activity• NTA and EPS affected by deferred schemes and/or reduced financial returns, with cash tied up in development• Reputational impact of delivering a scheme late and leaving students without accommodation• Recycling our portfolio through disposals is a critical aspect of our development strategy and failure to deliver planned disposals results in a deteriorating net debt position and negatively impacts our ability to commit to all of our planned development pipeline• Potential increases in construction costs as we seek to reduce the carbon intensity of our developments and comply with more stringent building regulationsPossible EventsImpactMovement• Quality properties• High-quality service for students and Universities• Reduce our negative environmental impacts• Covid-19 led to the deferral of some development activity through 2020 to conserve cash (Middlesex Street, London and Old BRI, Bristol)• Delivered 2,257 beds across three development schemes for the 2020/21 academic year. White Rose View in Leeds (559-bed 30-year nomination agreement with the University of Leeds) completed on time and budget for student arrivals in September. Following temporary site closures and reduced levels of operatives on site as a result of social distancing measures, Arch View House, London and Artisan Heights, Manchester delivered in Q4 2020• £300 million placing in June 2020 enabling continued investment in our best-in-class platform (exchanged contracts for a 300-bed development site in central Edinburgh and a new 800-bed development site in Paddington on a subject to contract basis)• Completed a new University Partnership with the University of Bristol, covering around 3,000 beds in Bristol. This will include a large proportion of our existing operational assets in the city following targeted investments as well as the 431-bed Old BRI development and the 596-bed Temple Quay development in close proximity to the University's new Temple Quarter campus• 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• Managed development delivery despite Covid-19 as well as managed Brexit-related disruption • 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• Ensuring delivery of our two deferred schemes for delivery in 2022• Deployment of remaining June 2020 share placing proceeds into new schemes at attractive returns • Securing more sites to build the pipeline for 2023 and beyond• Reducing the impact of our operational carbon emissions as well as embodied carbon from our development and refurbishment activityStrategic objectiveWhat happened in 2020 Risk mitigation in 2020Focus for 2021Read more about our Property review on pages 22 to 26Read more about our Sustainability Strategy on page 46Read more about Development pipeline and University partnerships pipeline on page 25Read more about Secured development and partnerships pipeline on page 25PROPERTY / DEVELOPMENT RISK77OverviewStrategic ReportGovernanceFinancial StatementsOther InformationPRINCIPAL RISKS AND UNCERTAINTIES CONTINUEDProperty markets are cyclical and performance depends on general economic conditions• Buying, developing or selling properties at the wrong point in the cycle• Reduction in asset values reducing financial returns and leading to an increase in LTVPossible EventsImpactMovement• Quality properties – managing the quality of our portfolio and our balance sheet leverage by recycling capital through disposals and reinvesting into developments and acquisitions of assets aligned to the best Universities• Greater focus on delivering attractive total returns through recurring income and capital growth, while maintaining a strong capital structure• The purpose-built student accommodation sector continued to deliver strong performance relative to the wider UK real estate sector amid the disruption caused by Covid-19. Strong sector fundamentals and a track record of consistent rental growth continue to attract significant volumes of capital to the sector• Earlier in the Covid-19 pandemic, transaction activity slowed (due to practical problems with buyers accessing sites as well as wider economic considerations) but later in the year a portfolio of provincial assets sold to an international buyer at pricing broadly in line with pre-Covid-19 levels. Given greater uncertainty over occupancy for the 2020/21 academic year, pricing is likely to be stronger where sellers are willing to provide a one-year income guarantee to buyers• The average net initial yield across the portfolio is 5.0% (December 2019: 5.0%). At a city level, there was yield compression in London and other super prime provincial markets, offset by a further increase in yields in more fully-supplied provincial markets• Group Board and Property Board ongoing monitoring of property market, direction and values• Ensuring we have a strong yet flexible capital structure so we can adapt appropriately to market conditions• Clear and active asset management strategy• 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• Ongoing monitoring of Covid-19, Government and central bank policies and their 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 UniversitiesStrategic objectiveWhat happened in 2020 Risk mitigation in 2020Focus for 2021Read more about Our business model on pages 32 and 33Read more about Property portfolio on page 22 and Disposals on page 26PROPERTY / DEVELOPMENT RISK78The Unite Group PLC Annual Report & Accounts 2020Climate-related risks: challenges to our longer-term sustainability caused by climate change 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• Stakeholders risks: not being prepared and / or able to meet increasing expectations around reducing our contribution to climate change from our investors, Higher Education partners and our student customers• 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 Possible EventsImpactMovement• Develop and communicate a clear Sustainability Strategy • Develop Science Based Carbon Targets, which also include our enlarged portfolio following the Liberty Living acquisition• Deliver energy and carbon performance improvements required to follow UK decarbonisation targets • Government consultations in England and Wales on more stringent EPC minimum standards• Continued 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)• Integration of Liberty Living portfolio brings new climate related risks and opportunities • MSCI ESG rating: AA and CDP Climate Change rating:B• GRESB score and rating: 81 (Four-star) • Unite signed up as TCFD Supporter• Unite • Developed a new Sustainability Strategy in 2020 following extensive wider stakeholder engagement • 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 • Stakeholder dialogue to determine preferred climate change (and wider ESG) disclosures • Enhanced focus in the wider business on improving sustainability performance and reporting• Implementing further corporate power purchase agreements (PPAs) linking a proportion of our baseload energy consumption directly to renewable energy generation assets• 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• Disclosed in line with EPRA sBPR, achieving Silver rating • Publication of a net zero carbon pathway, as we look to provide greater transparency and accountability around our Sustainability Strategy • Update our 'Up to uS' Sustainability Strategy with stretching new targets including reduction in carbon emissions. Our new Sustainability Report will also address the recommendations of the TCFD• Develop an 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 opportunitiesStrategic objectiveWhat happened in 2020 Risk mitigation in 2020Focus for 2021ESG RISK Read more about Our Sustainability Strategy on page 4679OverviewStrategic ReportGovernanceFinancial StatementsOther InformationPRINCIPAL RISKS AND UNCERTAINTIES CONTINUEDBalance sheet liquidity risk / compliance with debt covenants • Unite breaches a debt covenant • Inability to replace debt on expiry• Interest rate increase• Unite unable to meet future financial commitments• Breaching a debt covenant may lead to an event of default followed by a repayment demand which could be substantial• Inability to replace debt on expiry may lead to a possible forced sale of assets potentially below valuation. Slowdown of development activity• Adverse interest rate movements can lead to reduced profitability and reduction in property values (through resulting expansion of valuation yields and lower valuations)Possible EventsImpactMovement• Deliver attractive total returns through recurring income and capital growth, while maintaining a strong capital structure• Quality properties – managing the quality of our portfolio and our balance sheet leverage by recycling capital through disposals and reinvesting into developments and acquisitions of assets aligned to the best Universities• Due to Covid-19, our debt covenants (like for so many borrowers) were fundamentally tested by the sudden, unexpected and wide ranging shock of the pandemic. There has been a specific focus on ICR covenants, not historically a risk and not necessarily designed for a shock such as this• Maintained our disciplined approach to leverage, with see-through LTV of 34% at 31 December 2020 (31 December 2019: 37%)• Unite Group PLC 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• See-through average cost of debt reduced to 3.1% (31 December 2019: 3.3%) and 75% of see-through investment debt is subject to a fixed interest rate (31 December 2019: 93%) for an average term of 4.2 years (31 December 2019: 5.4 years)• Successful June 2020 share placing raising £300 million• Repaid £207 million of Group secured debt at a blended coupon of 4.8%• Mitigated the Covid-19 reduced income by (among other things) suspending our dividends, conserving cash, increasing bank facilities and reducing costs where possible• Cash headroom and liquidity: as at 31 December 2020, the Group had £379 million of unrestricted cash reserves, having fully drawn its revolving credit facilities during the period and received £294 million in net proceeds from the June 2020 share placing. Unite was confirmed as an eligible issuer under the HM Treasury and Bank of England Covid Corporate Financing Facility (CCFF) although no current plans to drawdown under the CCFF. In addition, received credit approval for a £100 million extension to our unsecured Group debt facility• Due to Covid-19 and specifically ICR covenants, increased our covenant monitoring across a range of income / stress scenarios to ensure that if any risks emerge, we are ready to identify further action and work with lenders well in advance of formally reporting a covenant breach. In addition, external audit review of covenant compliance through the Going Concern process• Proactive engagement with all our lenders• 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 and reviewed and approved by the Group Board• Interest rate exposure hedged through interest rate swaps and caps and fixed rate debt• Ongoing monitoring of cash headroom, liquidity and covenant headroom / compliance in light of the fluid Covid-19 situation• Following repayment of secured debt in 2020, Treasury focus now moves to earliest debt maturity of November 2022• Raise further debt through 2021 to extend the maturity profile of our debt and diversify our funding sources• Funding future development acquisitions beyond 2023Strategic objectiveWhat happened in 2020 Risk mitigation in 2020Focus for 2021Read more about Our business model on page 32Read more about Financial review on page 42 FINANCING RISKThe Strategic Report on pages 4 to 80 was approved on 16 March 2021 by the Board and is signed on its behalf by:Richard Smith Chief Executive 80The Unite Group PLC Annual Report & Accounts 202080The Unite Group PLC Annual Report & Accounts 202081CONTENTS 82 Chairman’s introduction to Governance84 Board of Directors88 Board statements90 Board leadership and purpose96 Division of responsibilities100 Board activities105 Nomination Committee109 Audit Committee115 Health & Safety Committee120 Remuneration Committee124 Directors’ Remuneration report136 Annual Report on Remuneration149 Directors’ Report152 Statement of Directors’ ResponsibilitiesOverviewStrategic ReportGovernanceFinancial StatementsOther InformationGOVERNANCEThe Board’s governance is focused on delivering a long term sustainable and resilient strategy for the Group.CHAIRMAN’S INTRODUCTION TO GOVERNANCE82 Chairman2020 brought unprecedented challengesto the business with the significant disruption caused by Covid-19. The Board responded by quickly assessing the key impact of the pandemic to the business and ensuring the right governance and resources were in place to oversee the rapidly evolving situation.The Board took immediate steps to ensure the Group was both resilient and agile so the business could perform as well as possible through the pandemic whilst also being in as good a place as possible once we emerge from it.Safety, one of our key risks, was especially challenged by the pandemic. To ensure the safety and wellbeing of our 76,000 customers and our employees, the Board sought third party assurance, obtaining British Safety Council Covid Secure accreditation. The business took a number of other key steps to ensure the safety and wellbeing of our customers, employees and visitors to our sites. These are detailed in the Health and Safety Committee report on page 115.The Board focused on ensuring the business’s financial safety by taking decisive action to conserve cash and reduce costs. These actions included deferring development and non-essential operational capex, a reduction in Board and senior management salaries, cancelling our 2019 final dividend and suspending our 2020 interim dividend and realising further cost savings." Ensuring we have the right governance and resources in place has been more critical than ever due to the dynamic nature of Covid-19."Phil WhiteThe Unite Group PLC Annual Report & Accounts 2020The challenges of Covid-19 have weighed heavily on our key stakeholders. In particular, to protect the interests of students and with a focus on doing what’s right for students whose lives and studies have been significantly impacted by Covid-19, the Board took the decision to waive 2020 summer term rents for students returning home due to Covid-19 during the initial lockdown and then offered further rental discounts for the 2020/21 academic year in early 2021. In parallel to our Covid-19 response, the Board also ensured there were dedicated resources to focus on integrating the Liberty Living business, as well other key priorities such as fire safety and cladding. Continuing to keep our properties open through Covid-19 alongside integrating Liberty Living 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 their dedication and hard work in uniquely challenging times. During 2020, the Board approved a new Sustainability Strategy recognising the need for the business to do more. This Sustainability Strategy includes targets for net zero carbon operations and development by 2030, equality of opportunity for our employees and a commitment to raise standards across the student housing sector. Governance of our Sustainability Strategy is provided by our newly established Board Sustainability Committee. During 2020, I was delighted to welcome Professor Sir Steve Smith to the Board who brings a wealth of experience in the Higher Education sector. Steve was also appointed Chair of our Health & Safety Committee. His extensive experience in Universities and campus life has proved especially helpful as this Committee navigates the volatile and unprecedented challenges of Covid-19.As previously announced, I will retire as Chairman and step down from the Board with effect from 31 March 2021. I will be succeeded as Chairman by Richard Huntingford. My tenure as Chairman was extended to oversee the integration of the Liberty Living acquisition, which completed on schedule in 2020. It has been a privilege to Chair the Board of Unite and play a small role in its success over the past decade.Engagement with our wider stakeholders continues as key to our growth, along with robust and effective governance especially as the HE sector and the wider market faces the uncertainties ahead from Covid-19 and the wider economic impacts. Our governance framework has been designed to ensure our resilience through these uncertainties whilst ensuring our agility to seize opportunities ahead of us.The following pages explain how our governance and stakeholder engagement have supported us through 2020 and how it will continue to support our growth and longer-term sustainability. Phil WhiteChairman16 March 2021See our Sustainability Report on page 46 for more information about our Environmental, Sustainability and Governance strategy for the coming year83OverviewStrategic ReportGovernanceFinancial StatementsOther InformationPhil has served as Chairman since May Richard joined the Board as Non-Executive Richard was appointed Chief Executive 2009 and it was announced earlier Director and Chairman Designate on 1 in June 2016. Prior to this, he was Unite’s (November 2019) that Phil will be retiring December 2020 and will assume the role of Managing Director of Operations from from the Board on 31 March 2021. He was Chairman on 1 April 2021. He is a chartered 2011, a role that involved Richard leading Chief Executive of National Express Group accountant, and has over 30 years of the service provided to our customers, plc from 1997 to 2006 and led the business plc board experience including as Chief and managing maintenance and facilities through growth in the UK and overseas. Executive of Chrysalis Group plc between management across the Group’s portfolio. He gained extensive executive experience 2000 and 2007 and as a Non-Executive Richard joined Unite as Deputy Chief in the public transport sector during the Director of Virgin Mobile Holdings (UK) Financial Officer in 2010. Prior to this, he period of deregulation and privatisation. plc. His Chair roles have included Wireless spent 19 years in the transport industry, He is Chair of Lookers plc as well as a Non-Group plc (formyerl UTV Media plc), working in the UK, Europe, Australia and Executive Director of VP plc.Creston plc and Crown Place VCT plc. North America. Richard spent 14 years In addition to chairing Future plc (since Phil brings his wealth of experience as at National Express Group where he February 2018), Richard is a Non-Executive a Chair of FTSE and other companies to held a range of senior finance, strategy Director of JP Morgan Mid Cap Investment Unite, ensuring best practice in board and operations roles, includign Group Trust plc and The Bankers Investment effectiveness and corporate governance. Development Director and Chief Financial Within the Board, he helps ensure clarity, Officer, North America. Richard is a Non-critical thinking, constructive debate and Richard’s proven FTSE chair, wider non-Executive Director at Stenprop Limited.challenge and the running of an effective executive and executive experience will Richard continues to lead the successful Board. Externally, he ensures there is help us ensure best practice in board development, communication and effective engagement with our investors effectiveness and corporate governance. implementation of the Group’s strategy, over our strategy, long-term sustainability His wealth of experience in public providing clear and valued leadership and and corporate governance. The Board company governance and leadership, delivery of the Group KPIs. His engagement would like to thank Phil for his service. corporate finance, investment, business with our investors helps ensure our During his Chairmanship, the Group has, development, investor relations and media strategy is well understood and valued. His among other things, grown within the will help drive our strategy development operational expertise has helped ensure FTSE 250 and become a leading European and effective engagement with wider the business’s resilience and ongoing REIT and, more recently, completed the stakeholders.delivery through the challenges of Covid-19 successful acquisition and integration of whilst ensuring the Group is well-placed to Liberty Living and maintained the Group’s be ready for the future.market leadership. This is all testament to Phil’s governance leadership. This leadership has been especially critical as the Board navigated Covid-19 through 2020 and into 2021. Phil has ensured the business is ready and resilient to embrace the risks and opportunities ahead. Trust plc. Phil WhiteRichard HuntingfordRichard Smith ChairmanNon-Executive Director Chief Executive Officerand Chairman DesignateRelevant skills, experience and contributionBOARD OF DIRECTORS84The Unite Group PLC Annual Report & Accounts 2020Joe joined Unite in 2002 having Elizabeth was appointed a Non-Executive Ross was appointed as a Non-Executive qualified as a chartered accountant Director in February 2014. She has Director in September 2017. He is Finance with PricewaterhouseCoopers. He was significant experience in customer-Director of Stagecoach Group plc, and appointed as Chief Financial Officer in focused businesses Tesco and Colgate as a member of Stagecoach’s Board January 2008 having previously held a Palmolive, where she was successful in is responsible for finance, business variety of roles including Investment driving growth through an understanding development and legal. In addition, he is Director and Corporate Finance Director. of customer needs and an innovative a Non-Executive Director and the Audit Joe is a Non-Executive Director at marketing approach.Committee Chair of Virgin Rail Group Holdings Limited, and a member of the Elizabeth is a Non-Executive Director Business Policy Committee of the Institute Joe has continued to lead the design at Dalata Hotel Group Plc, McBride plc, of Chartered Accountants of Scotland.and delivery of the Group’s sustainable Fresca Group Ltd, an import/export fruit growth and financial performance, which and vegetable company, and a director of Ross contributes to Unite’s Board using was especially tested during 2020 by Second Growth Community Investment his many years’ experience of managing Covid-19. Joe’s deep experience of our Company. Previously she was a Non-finance in a complex operational business business and especially our funding Executive Director of JD Wetherspoon plc, like our own. He also brings valued insight arrangements has been critical through the chair of Moat Homes Ltd, a leading to innovation as we continue to enhance this difficult time. Together with Richard, housing association in the South East, our service offer to our student customers. Joe ensures the development and and CH & Co Ltd, a privately owned Ross uses his financial and broader communication of the Group’s ongoing catering company.business experience as Chair of the Audit performance and strategy with our Committee, helpgin oversee the Group’s Elizabeth brings her extensive consumer-investors. In addition, Joe has an expanded financial rigour and delivery.focused experience, both as an executive remit over Property and a critical role in and also on the boards of other FTSE developing and strengthening the Group’s companies, to help oversee the design University relationships and the Group’s and development of our customer Sustainability Strategy.proposition and enhanced customer service. As Senior Independent Director of Unite, Elizabeth supports the Chair in the effective running of the Board, led the Nominations Subcommittee for the search of the Chair’s successor and, as Chair of the Remuneration Committee, helps ensure the Executive Directors’ and broader senior leadership’s remuneration is aligned to the long-term sustainable success of the Group.Helical PLC.Joe Lister Elizabeth McMeikan Ross Paterson Chief Financial OfficerSenior Independent DirectorNon-Executive DirectorNomination Committee MemberHealth & Safety Committee MemberAudit Committee MemberSustainability Committee MemberRemuneration Committee MemberCommittee ChairmanOverviewStrategic ReportFinancial StatementsOther InformationGovernance85Richard was appointed a Non-Executive Ilaria was appointed a Non-Executive Dame Shirley joined the Board in Director in September 2018. From 1995 to Director in December 2018. She is CEO November 2019 as a Non-Executive 2014 Richard worked at Land Securities plc, of Frasers Property UK,part of Frasers Director and Chairs our newly established where he had various positions including Property, a global real estate group. Ilaria Sustainability Committee. She has held as an Executive Director on the main was formerly CEO of GE Capital UK, a chair, senior executive and non-executive board and Managing Director of Retail. regulated Bank and corporate lender and roles at board level in Higher Education, Richard has over 30 years’ experience in led GE Capital Real Estate UK, a commercial health and policing with experience of the real estate industry, with a focus on real estate investor, developer and lender. both the public and private sectors. She retail. He is currently Senior Independent is currently an independent member of Ilaria brings her 30 years of experience in Director and Chair of the Health & Safety the Committee on Standards in Public real estate, including asset management, and Remuneration Committees at Barratt Life, a member of the Higher Education investment and lending, to the Group. Developments Plc and a Non-Executive Quality Assurance Panel for the Ministry This experience is vital to the Group as Director at Shaftesbury Plc. Previously of Education in Singapore, a Trustee for we navigate the ongoing and upcoming Richard was a Non-Executive Director at the Royal Anniversary Trust, a member of market uncertainties and increasing Emaar Malls PJSC.the advisory board of HCA and the Hon professionalisation of the sector.President of the Association of University Richard brings a wealth of real estate Administrators AUA. Shirley was Vice experience as both an executive and Non-Chancellor of Loughborough University Executive Director on the boards of FTSE from 2006-2012 and was board member companies. This experience will be critical at the Higher Education Funding Council to help the Group manage the change and for England, the UCEA, and the Healthcare uncertainty in the wider real estate sector commission, as well as being a Non-as well as the broader economy.Executive Director of Health Education England, and the Norfolk, Suffolk and Cambridgeshire Strategic Health Authority. She has held senior governance roles at the LSE, and was appointed an independent reviewer of the TEF. 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 ongoing change in the sector, where her insight and knowledge of HE and broader policy initiatives will help inform the Board on our strategic direction.Richard AkersIlaria del BeatoDame Shirley Pearce Non-Executive DirectorNon-Executive DirectorNon-Executive DirectorRelevant skills, experience and contributionBOARD OF DIRECTORS CONTINUED86The Unite Group PLC Annual Report & Accounts 2020Thomas joined as a Non-Executive Director Sir Steve joined the Board on 1 April Chris was appointed Company Secretary in November 2019. He has been the 2020. He brings with him a wealth of and Group Legal Director in 2013, head of CPP Investments’ UK real estate experience in the HE sector. He was the following General Counsel roles at GE, business since 2015 and is responsible for Vice-Chancellor and Chief Executive of MTV Networks and other multinationals. CPP Investments’ entry into a number of the University of Exeter from 2002 to He was previously an M&A/corporate and new real estate sectors, including student August 2020. Sir Steve was the president commercial lawyer at Clifford Chance and housing, life sciences and the build-to-of Universities UK (2009–2011), Chair of Baker McKenzie. Chris uses his general rent sector. In addition to sitting on the UCAS (2012–2019), served on the Boards counsel and corporate/commercial legal Board of The Unite Group PLC, Thomas of UUK and the Russell Group, and was experience to fuse our corporate and risk also sits on a number of CPP Investments’ Chair of the UUK International Policy governance with our business activity. office, retail and logistics Joint Venture Network (2014–2020). He iChris links his Company Secretary and s currently the boards. Beyond the UK, Thomas is also UK Government International Education risk/governance leadership role with his responsible for CPP Investments’ real Champion, and the Prime Minister’s legal and commercial experience which estate investment activity in Germany Special Representative to Saudi Arabia has been especially critical as the Group and the CEE regions. Thomas originally on Education.navigated the challenges of the pandemic.P Investments in 2011 and was joined CPBetween 2007 and 2010, Sir Steve led for Chris is a Board Trustee of The West instrumental in its transaction activity in Higher Education on the Prime Minister’s of England Friends Housing Society, a Spain, the Nordics and India.National Council of Excellence in Education, residential care home which also provides Prior to joining CPP Investments, Thomas which provided advice to Government supported housing and independent flats was a Vice President in the real estate about strategy and measures to achieve as part of an integrated care community.investment banking team at Macquarie world-class education performance for all bank and focused on M&A transactions children and young people. Sir Steve was within the UK and European public and knighted in 2011 for services to Higher private real estate companies.Education locally and nationally.Thomas brings wide ranging real estate Sir Steve’s extensive experience in the experience, not only from the student HE sector contributes to how the Board housing sector, but also his wider build-navigates a changing HE sector. In to-rent, retail and logistics real estate addition, his hands on knowledge and experience to the Board. His international insight into how Universities operate experience will also be invaluable for help us develop stronger University the Board, helpgpin rovide a wider partnerships. Sir Steve also Chairs our perspective on developments in real Health and Safety Committee and his on-estate as the Board progresses further campus knowledge helps us ensure our approach to safety is well aligned with our customers, Universities, employees and its strategic thinking.wider stakeholders.Thomas Jackson Professor Sir Steve Smith Chris Szpojnarowicz Non-Executive DirectorNon-Executive DirectorCompany SecretaryNomination Committee MemberHealth & Safety Committee MemberAudit Committee MemberSustainability Committee MemberRemuneration Committee MemberCommittee Chairman87OverviewStrategic ReportFinancial StatementsOther InformationGovernanceBOARD STATEMENTSRequirementBoard statementMore informationCompliance with the CodeThe 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 principles of the Code and where it does not, explain the reasons for non-compliance. The code is available at www.frc.org.ukThe Board considers that the Company has, throughout the year ended 31 December 2020, applied the principles and complied with the provisions set out in the Code except in relation to (a) Chair tenure (see explanation on page 96, Chair tenure and successor appointment) and (b) alignment of Executive Director pension contributions with the workforce (see explanation on page 122 of the Directors’ Remuneration report).Details on how the Company has applied the principles and complied with the Code can be found throughout this Corporate Governance section of the Annual Report.The table below on page 89 details where disclosure against the principles of the Code can be found in this Corporate Governance report.Going ConcernThe Board is required to confirm that the Group has adequate resources to continue in operation for the foreseeable future.After making enquiries and having considered forecasts and appropriate sensitivities, the Directors have formed a Judgment, 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 172 and 173.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 66 to 80.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 2023.More details on the Viability statement can be found on page 71.Principal and emerging risks facing the GroupThe 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 arising from the Covid-19 pandemic and those that would threaten its business model, future performance, solvency or liquidity, together with an assessment of the procedures to identify emerging risks. Information around key risks and risk management processes and how they are being managed or mitigated can be found on pages 64 to 80, and on page 113 of the Audit Committee report.Under the Corporate Governance Code, the Board is required to make a number of statements. These statements are set out below.88The Unite Group PLC Annual Report & Accounts 2020RequirementBoard statementMore informationRisk management and internal controlThe 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.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 64 to 80 and 113.Fair, balanced and understandableThe 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 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 109 to 114.Compliance with the CodeThe Company’s disclosures on its application of the principles of the Code can be found on the following pages:Board leadership and Company purposeA. Long-term sustainable success and contribution Pages 36, 46 to 63B. Purpose, values and culturePages 90 and 91C. Resources and control frameworkPages 64 to 70, 92D. Engagement with shareholders and stakeholders Pages 36 to 39, 95E. Workforce policies and practicesPages 38, 53 to 58, 60 and 94 and 95Division of responsibilitiesF. Board leadership Page 97G. Board composition and responsibilities Pages 96 and 97H. Role and commitment of Non-Executive DirectorsPage 97I. Board effectiveness Page 98Composition, succession and evaluationJ. Board appointments, succession plans and diversity Pages 106 to 108K. Board experience, skills and knowledgePages 84 to 87, 97L. Board evaluation Page 104Audit, risk and internal controlM. Internal and external audit – independence and effectivenessPages 113 and 114N. Fair, balanced and understandable Pages 109 to 114O. Risk management and internal controls Pages 64 to 70, 113RemunerationP. Remuneration policies and practices – long-term strategy and successPages 120 to 148Q. Development of policy on remunerationPages 125 and 126, 135R. Judgmentand discretion Pages 122, 125, 128 and 12989OverviewStrategic ReportGovernanceFinancial StatementsOther InformationThe Board is responsible for establishing the Company’s purpose, values and strategy, promoting its culture, We have remained committed to our purpose, continuing overseeing its conduct and affairs, and fopr romoting the to evolve through our stakeholder engagement and our success of the Company for the benefit of its members people. The Board’s ambition is to have a ‘One Team’ culture, and stakeholders. where our values can reflect the mindset, behaviours and attitudes we aspire to role model across the Unite business. These continue to shape our culture, capture who we are, The Board has set our purpose to provide a Home for the things we believe in and how we act. They connect us Success for our students, University partners, our people and drive our behaviours. As we progress on our journey, we and our wider stakeholders. Our purpose describes our do so with an enhanced commitment to doing what’s right. shared commitment and motivation and helps us articulate This goes beyond regulatory compliance and relates to all our business model, develop strategy, operating practices, aspects of the business including the impact on our people approach to risk and how we engage with our stakeholders. and communities.Home for Success is about providing the right home Through 2020, the Board led the development of our new environment for all the tens of thousands of students Sustainability Strategy which provides a framework across that come to live with us each year from across the globe, our operations, making sure our decision making process to enable them to achieve whatever goals and ambitions has responsibilityand sustainabilityat its heart and helping they aspire to. We focus on delivering an excellent service, support a safe future for the planet. See more on our as well as keeping our students safe and secure. We aim Sustainability Strategy on page 46. As we continue to align to make each Unite property a home. During 2020, our ourselves with the Sustainable Development Goals set by purpose of Home for Success directly led to the Board’s the United Nations, we hope to achieve a better and more decision to waive rents for students who left our properties sustainable future for everyone. early in term three of the academic year 2019/20 due to Covid-19 and then laterthe Board offering rent discounts The Board led the development of our refreshed values, to students in early 2021 due to Covid-19. which guide the organisation in delivering our purpose of a Home for Success, where everyone feels they belong and Home for Success is also about facilitating the right are treated equally. platform for our University partners by understanding their long-term aspirations, accommodation requirements and service expectations. This means our offer is built around the priorities of students and Universities alike. Our purpose of Home for Success for our University partners led the Board’s decision making in the way it Unite is a business that strives to be welcoming and worked with Universities on their dynamic operating plans inclusive to all, creating an opportunity to participate and due to the challenges of Covid-19.feel valued. The Board has zero tolerance of any form of discrimination and embraces cultural diversity to provide With our people being at the heart of our business, Home an environment that enables everyone to be their true for Success is about creating an environment enabling selves, creating a sense of belonging for everyone. them to grow, develop and succeed.ga, tough Ainhr2020, this led to the Board’s decision making in how we responded to keep our people safe, whether they continued to work in our properties or were working The Board believes we are at our best when all around us The Board has ultimate responsibility to Unite’s are at their best. Looking after everyone’s wellbeing, both shareholders for all the Group’s activities as well as a physically and mentally remains the Board’s key priority. broader responsibility to consider the views of other Safety is not something else we do, it is part of everything key stakeholders including our customers, Universities, we do and is weaved through the entire business. It is employees and the communities we operate in as well driven by attitude and behaviour and is part of our culture. as considering environmental and social issues when making decisions. This responsibility is intertwined into Our Values and CultureOur Purpose – Home for SuccessCreating room for everyoneKeeping uSsafe from home.our common purpose of Home for Success. BOARD LEADERSHIP AND PURPOSEGovernance leadership and corporate culture.Being authentic and striving for a truly diverse and inclusive environmentSafety is at the heart of our brand and at the core of everything we do 90The Unite Group PLC Annual Report & Accounts 2020Doing what’s rightAlways operate with a highly ethical, collaborative and solution driven mindsetBeing a responsible business is part of our DNA. The Board always looks to do the right thing in the right way, creating trust for our people, our students, our University partners and the communities we operate in. This drives the Board’s actions and decisions as demonstrated by the Board’s leadership in the decision to waive rent for students who chose to return home for the remainder of the 2019/20 academic year as well as the rent discounts offered to students in early 2021. The Board challenges the status quo when needed and takes accountability for its actions. Raising the bar together Continuously focused on improving the way things are doneThe Board’s ambition is to constantly strive to be better, by embracing an inquisitive mindset and exploring the potential of our people’s own development. This does not mean constantly trying new ideas but focusing on our own expertise and building on that. The Board uses clear insight and data to help inform us and understand what really matters to students, driving efficiency, effectiveness and a great customer experience every time. Our culture defines what makes Unite a great place to work and a great company to do business with and forms the fundamental basis for our governance. This is driven by our core purpose of providing a Home for Success to our people as well as our customers. The Board monitors corporate culture through interaction and dialogue with our people and also through regular employee engagement surveys. Whilst more challenging through 2020 due to the absence of physical Board meetings and City visits, this opened up the opportunity for more informal interaction through video conference calls. This Board interaction takes 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. Our employee surveys help measure engagement through their participation rates as well as the feedback received across the broad range of topics surveyed. For example, during Covid-19 the Board responded to feedback relating to additional wellbeing measures and provided support for greater flexible working. We are moving towards evolving a more inclusive and listening culture through various platforms such as Unite Live (see following), ‘Ask Richard’ emails (a dedicated email address for the Chief Executive which provides employees an opportunity to contact him directly with questions they have) and a refreshed Employee Panel. We also operate an ‘open chair’ at our Operations Board, which provide further opportunities for our people to engage with our leadership teams.Unite LiveWe launched ‘Unite Live’ during 2020. This provides employees with an opportunity to engage with our Chief Executive and senior leadership directly through an online forum. Any question can be tabled about working in Unite with regular questions relating to safety, wellbeing and diversity. We update our people on business developments through weekly updates from our Communications team and via a range of platforms including the employee intranet, the Hub. Daily Updates – key messagesDaily updates are communicated via email round ups. These are circulated at all levels of the business with content from across the business, which in 2020 was especially focused on Covid-19 developments, updates on safety and wellbeing.The Board assess and monitors culture to ensure its alignment with our purpose of Home for Success and our values in the constant changing environment. 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 38 to 39 which provides more details on how we engage, and measure and monitor our performance, with our customers and University partners and other key stakeholders.Strategy The Board agrees, and has collective responsibility for, the strategy of the Company, which is outlined in the Strategic Report. Execution of the strategy and day-to-day management of the Company’s business is delegated to the Operations and Property Boards, with the Group Board retaining responsibility for overseeing, guiding and holding management to account. In 2020 the Board approved our new Sustainability Strategy following extensive engagement with investors and other stakeholders. As a responsible and trusted business, our wider stakeholders demand we proactively address environmental, social and governance risks. This is consistent with one of our values, 'doing what’s right'. The pace of change has only intensified with Covid-19 with an increasing focus on longer term sustainability. Our overarching ambition is for Unite to clearly lead the student housing sector on sustainability issues and be in the leading pack of real estate companies in the wider sector. See our Sustainability Strategy on pages 46 to 63 for more detail. In 2020, we formally signed up as a supporter of the Task Force on Climate-Related Financial Disclosure (TCFD) and will be aligning with their requirements for managing and reporting climate-related risks. 91OverviewStrategic ReportGovernanceFinancial StatementsOther InformationBoard oversightThe Board is also responsible for: Board structure Audit CommitteeRemuneration CommitteeNomination CommitteeHealth & Safety CommitteeSustainability Committee Property Services Director, Head of Health & Safety, Group Communications Director, Director of Strategy & Investor The Board discharges some of its responsibilities directly Relations, Group Energy & Environment Manager, Hgiher and others through Committees and senior management. Education Engagement Director and Group Legal Director Terms of Reference for the Committees are available in our & Company Secretary (among others).Governance Framework, published on www.unite-group.co.uk/about-us/corporate-governance. To discharge their broader responsibility effectively, the Group operates in an open, harmonious and transparent manner, ensuring Assessing, monitoring and promoting the Company’s culture, and ensuring that this closely aligns with its open communication between the Board and the business purpose, values and strategy (see page 90, Our Values and its stakeholders. This communication has been more challenging during 2020 due to Covid-19 and the inability to and Culture).meet and spend time together in person at our properties Ensuring the necessary resourcesare in place for and in the cities in which we operate. Nevertheless, the business to meet its strategic objectives. During the Board ensured there was ample opportunity to 2020, this required the Board to ensure there was an listen and hear directly from the leadership team, the appproriate balance between dedicated resources to wider business and our stakeholders. During 2020, this focus on Covid-19 whilst ensuring other teams could included comprehensive engagement with our employees, focus on other strategic priorities such as the Liberty customers and Universities on the impact of Covid-19 and Living integration and Fire Safety.updates on business performance more generally from Establishing workplace policies and business practices the Chief Customer Officer, Group Property Director, that align with the Company’s culture and values and Deputy Chief Financial Officer, Group Investment Director, support its strategy (see pgae 94). 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. The current membership of each Committee of the Board is set out in the chart below:Ross PatersonElizabeth McMeikanPhil WhiteRichard AkersPhil WhiteRichard HuntingfordIlaria del BeatoRoss PatersonElizabeth McMeikanSteve Smith Richard AkersRoss PatersonShirley PearceRichard AkersIlaria del BeatoSteve Smith Shirley PearceThomas JacksonSteve SmithShirley PearceElizabeth McMeikanRichard SmithIlaria del BeatoRoss PatersonShirley PearceRichard AkersRichard SmithIlaria del BeatoThomas JacksonBOARD LEADERSHIP AND PURPOSE CONTINUED• • • Board Committees Committee Chair92The Unite Group PLC Annual Report & Accounts 2020• Overseeing the implementation of a robust controls framework to allow effective management of risk, with this oversight delegated to the Audit Committee (see pages 113). • Effective succession planning for key senior personnel, much of which is delegated to the Nomination Committee (see page 106 to 108). 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. All of the Board’s significant decisions are considered having regard to Section 172 and specifically the likely consequences of these decisions in the long term and their impact on our stakeholders. Pages 36 to 39 of the Strategic Report highlight how the Board has sought to effectively consider and engage with our shareholders and wider stakeholders. While the above summarises the key areas of Board responsibility, it is not intended to be exhaustive. Board operating rhythmCovid-19During 2020, the Board had regular video conference calls in addition to its scheduled Board meeting calendar. These allowed the Board to focus on managing the business through the pandemic whilst also allowing the Board to step back and view the bigger picture and prepare for longer term sustainable growth. The table on pages 66 and 67 sets out what the Board did in response to the impact of Covid-19 on our principal risks.Regular updates from the Board Committees on their activities and recommendations Board composition and management successionMarket and Higher Education sector updatesRiskReview of Group policiesOperational, property and financial updatesStrategy and five-year planNew development schemesDisposalsTrainingEnsure that the detailed work performed in the Board Committees is considered by the Board as a whole.Review the composition of the Board to ensure appropriate combination of skills, experience and knowledge and effective succession planning for key senior personnel.Ensure the Board has the latest market and sector knowledge.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).Review key Group policies to ensure they are appropriate and implemented effectively.Provide the Board with the necessary information to track the Group’s performance and challenge any problems with performance.Discuss, review and approve our strategy and five-year plan, and track how we are performing against our current strategy and five-year plan.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.Review and challenge disposals being recommended by management and ensuring appropriate value in recycling our portfolio.Review the Board’s training needs and ensure that the Board is up to date on key legal and regulatory changes.93OverviewStrategic ReportGovernanceFinancial StatementsOther InformationBOARD LEADERSHIP AND PURPOSE CONTINUEDHow the Board operates and stakeholder engagementThe Board has an annual operating rhythm with an agenda of items for the forthcoming year built around our strategic objectives. In 2020, this operating rhythm was directly impacted by Covid-19 and the intense focus on managing the business through the pandemic. In parallel to this, the Board still maintained its usual business rhythm to help ensure the Group can emerge from the pandemic in a sustainable way and ready for growth. 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 as well as ESG and longer term sustainability) and routine operational, property and financial updates (providing context for the strategic discussions as well as governance oversight of in-year activity). During 2020 and into 2021, regular Covid-19 Board calls are held in addition to the scheduled Board meetings to ensure sufficient time allocation and appropriate balance between a Covid-19 response and our wider strategic and business priorities.Normally meetings take place throughout the UK, often at Universities or in our operating cities, 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. This year these meetings took place virtually due to the pandemic.Senior leaders are regularly invited to attend meetings and present to the Board. During 2020 these took place through video conferencing. These meetings provide 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 36 to 39 explains how the Board engages and measures the views of our key stakeholders and the outcomes from this engagement. Workforce engagementThe 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.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;• ensure the Board, and in particular the Executive 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 the Board’s decision making. Through 2020, these decisions were primarily focused on the challenges of Covid-19 for our people and an increased focus on their safety and wellbeing. This applied to both those employees who continued to work in our properties and to those employees working from home. This resulted in the following:• a revised Flexible Working Policy and Working from Home Guidelines supporting employees with how to balance work and home life, as well as ensuring they were equipped to work remotely from home and stay connected.• sharing a platform with our people to raise and discuss health and wellbeing concerns as well as promoting existing resources and suggesting improvements. • launched ‘Unite Live’ to provide employees with an opportunity to engage with our Chief Executive and senior leaders directly through an online forum where questions are submitted digitally and can be anonymous. See more on Unite Live on page 91.• providing additional special leave to those employees with caring responsibilities.• extending our cycle to work scheme to be available all year round, which was especially helpful for those employees who continued to work in our properties through the year. • rolling out healthcare cash plan, Medicash for all employees which also gives access to virtual GP, particularly helpful in the current climate. This included free cover for our employees’ children.• delivering training focused on the wellbeing of our employees, partnering with The Healthy Work Company. • rolling out a specific ‘home working’ DSE Assessment and e-Learning in line with Covid-19 safe guidelines.• rolling out PPE, reception Perspex screens, social distancing floor marking and the use of temperature checks and anti-viral fogging machines to ensure we continue to provide a safe environment for our employees.• providing professional counselling support for any team members as part of our Employee Assistance Programme.94The Unite Group PLC Annual Report & Accounts 2020The 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, inclusivity and belonging across the workforce, by considering (among other things) our gender and ethnic diversity throughout the Group as well as our gender pay gap.Investment in workforceThe 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 a key stakeholder and how we engage with them and measure this is set out on pages 38 to 39. The Company is a fully accredited Living Wage employer and provides recognition through pay awards, annual bonuses for all employees and our annual employee scheme, Stars Awards, recognising individuals and teams. Senior managers are eligible to participate in the Long Term Incentive Plans. All employees are eligible to participate in the Company’s SAYE scheme. As a responsible and sustainable business, creating diverse and engaged teams is critical to our on going success. Our approach to investing in and rewarding our workforce, is set out on pages 53 and 123.Whistleblowing programme The Board annually reviews our Whistleblowing programme. Our Whistleblowing policy and a clear explanation as to how to raise a concern in confidence is readily available and published on our intranet. Following the Liberty Living acquisition, we integrated both whistleblowing programmes. Our employees are able to raise concerns via various channels, which includes via an independent third-party if they feel this is necessary. Matters raised are then investigated by the Company Secretary and escalated as appropriate. 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 impact of the Company's operations on the community and the environment, the impact of the Company maintaining a reputation for high standards of business conduct and the need to act fairly as between members of the Company. Page 36 explains how this was considered during 2020. Further, pages 100 to 103 explain Board activity and decision making during the year which flowed from our stakeholder engagement and how this is aligned to our strategic objectives.How we engage with our investorsThe 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. This year this has been especially critical as we navigated the pandemic and maintained extensive dialogue and engagement with our shareholders regarding the ongoing performance of the business, the suspension of dividends as well as engagement with our lenders on our Financing covenants compliance and our financing commitments more generally. 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 2021.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 (which was the case for our May 2020 Annual General Meeting due to Covid-19 restrictions on physical meetings), 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. 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. There were no resolutions with less than 80% voting in favour and therefore Code Provision 4 did not apply. During the upcoming Annual General Meeting, the Board is proposing that shareholders of the Company approve an amendment of the Companys’ Articles of Association to allow hybrid general meetings. This will facilitate shareholders to attend, participate and vote in general meetings electronically using technology in addition to their current ability to attend the meeting physically. For more details, please refer to the Notice of Annual General Meeting which is issued separately.95OverviewStrategic ReportGovernanceFinancial StatementsOther InformationChairmanMaleNon-Executive Directors17*1Executive DirectorsFemale Independent Non-Executive Directors237Non-Executive Directors8* As at 1 April 2021 after Phil White retires as Chairman on 31 March 2021.DIVISION OF RESPONSIBILITIESComposition of the BoardThe composition of the Board is set out in the table on page 99.The Board currently consists of the Chairman, two Executive Directors and eight Non-Executive Directors (one of whom is Chairman Designate). Apart from Phil White who is stepping down from the Board on 31 March 2021, each of the other Directors offers themselves for election or re-election at the Annual General Meeting, to be convened this year on 13 May 2021, in accordance with the requirements of the Code, Brief biographies of all the Directors and their skills, experience and contribution, are set out on pages 84 to 87. 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.IndependenceThe Board considers seven of its eight 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 Canada 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 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 successor appointmentThe Board is acutely aware that Phil White has been Chair of the Board for more than ten years. Phil White considered not offering himself for re-election as a Director at the previous 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 that 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, 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 upcoming Annual General Meeting. This continuity through 2020 was even more helpful as the Board had to focus on the immediate demands of Covid-19.During 2020, the Nomination Committee (through a subcommittee chaired by Elizabeth McMeikan, the Senior Independent Director) conducted a thorough process for the search, recruitment and on-boarding of the Chair’s role and recruited Richard Huntingford as a Non-Executive Director and Chairman Designate. Phil White was not a member of this subcommittee. Richard Huntingford was appointed as a Director on 1 December 2020 and will assume the role of Chairman on 1 April 2021. Heidrick & Struggles was engaged as the external search consultancy for this role. The firm has no other connection with the Company or any of the individual Directors.Composition of the BoardIndependenceGender diversity96The Unite Group PLC Annual Report & Accounts 2020RolesThe 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: ChairmanPhil White’s1 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 generallyRole: Chief ExecutiveRichard 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 GroupRole: Senior Independent DirectorAs 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 performance1. These will be taken over by Richard Huntingford from 1 April 2021.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 commitmentDirectors 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. During 2020 and into 2021 additional time commitment is needed as a result of Covid-19 and the Directors attended regular Covid-19 Board calls in addition to the scheduled Board meetings to ensure an appropriate balance between a focused Covid-19 response and an ongoing focus on other key business areas.It’s the Board’s policy to allow Executive Directors to accept directorships of other unconnected companies so long as the time commitments do not have any detrimental impact on the ability of the Director to fulfil his duties. It is considered this will broaden and enrich the business skills of Directors. Any such directorships must be formally approved by the Board.On 4 November 2020, Richard Smith became a Non-Executive Director of Stenprop Limited. No potential conflict has been identified in relation to Richard’s appointment. Richard’s total time commitment with Stenprop Limited is anticipated to be c.22 days per year. There are no timing issues identified with Unites’ Board dates and Stenprop Limited. Stenprop Limited has a March financial year-end. The Board approved this appointment in advance and agreed that it would not impact Richard’s commitment as an Executive Director of Unite.Board tenure1 Richard HuntingfordIlaria del BeatoElizabeth McMeikanRichard AkersRoss PatersonShirley PearceTom Jackson2Steve Smith024NED Tenure613571. Phil White steps down on 31 March 2021.2. Not independent.97OverviewStrategic ReportGovernanceFinancial StatementsOther InformationEach of the Executive Directors has a rolling contract of employment with a 12-month notice period, while On appointment to the Board, each Director takes part in Non-Executive Directors are, subject to re-election by a comprehensive and personalised induction programme. shareholders, appointed to the Board for a term of This induction is also supplemented with ongoing training approximately three years. The chart on the preceding throughout the year to ensure the Board is kept up to date page shows the current tenure of the Non-Executive with key legal, regulatory and industry updates. Richard Directors (rounded up to the nearest year).Huntingford and Sir Steve Smith, who joined the Board in 2020, underwent an induction programme following this framework:Directors are given access to independent professional The business and operations of the Group and the advice at the Company’s expense when the Directors deem it necessary in order for them to carry out their Higher Education sector; the role of the Board and responsibilities. The Directors also have regular dialogue matters reserved for its decisions; the terms of with, and direct access to, the advice and services of the reference and membership of Board Committees; and Company Secretary, who ensures that Board processes and powers delegated to those Committeescorporate governance practices are followed.The Group’s corporate governance practices and procedures and the latest financial information about The Board considers it important that the Committee the Group. The legal and regulatory responsibilities as Chairs continue to receive sector and relevant functional a Director and, specifically, asa Director and Chair of a training (such as on accounting, corporate governance listed company. and executive remuneration reporting developments) and accordingly the Committee Chairs attend relevant As part of the induction programme, thye virtually met external seminars. The Board as a whole receives ongoing with key senior executives, so from the outset they have training on corporate governance and other relevant access to people throughout the organisation to help developments.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. Arrangements will be made when possible (post pandemic) for each Director to visit key locations to see our business operations and properties first-hand and the Higher Education institutions with which we partner.Richard Huntingford joined the Board on Gain a thorough understanding of our strategy and business.Chairman Designate. Despite the challenges of Covid-19, Start to build relationships with the Board, wider Richard received a comprehensive induction to the leadership team and key external people. organisation and the sector, spread across 10 days with Understand our organisational design over 25 induction meetings with different leaders across and structure.of the induction were to:Understand how we are tackling the current challenges around Covid-19, ensuring our resilience whilst seizing any opportunities.Board inductionProfessional advice and training • • DIVISION OF RESPONSIBILITIES CONTINUEDRichard Huntngford – Chair Inducton1 December 2020 as Non-Executive Director and the business and also externally. The primary objectives • • • • 98The Unite Group PLC Annual Report & Accounts 2020Board activities in 2020 Directors’ attendance at meetingsCurrent DirectorsStatusDate of appointment to the BoardBoardAudit CommitteeRemuneration CommitteeNomination CommitteeHealth & Safety CommitteePhil White1Chairman21 January 200911/11–4/43/3–Richard Huntingford2Independent1 December 20201/1––0/0–Elizabeth McMeikanIndependent01 February 201411/11–4/43/33/3Joe ListerExecutive02 January 200811/11––––Richard SmithExecutive01 January 201211/11–––3/3Ross PatersonIndependent21 September 201711/114/44/43/3–Richard AkersIndependent01 September 201811/114/44/43/3–Ilaria del BeatoIndependent01 December 201811/114/4–3/33/3Dame Shirley Pearce Independent01 November 201911/11–4/43/33/3Thomas JacksonNon-independent29 November 201911/11––3/3–Sir Steve Smith3Independent1 April 20208/83/3–3/32/21. Resigning effective 31 March 2021.2. Appointed on 1 December 2020 and will assume the role of Chairman on 1 April 2021.3. Appointed on 1 April 2020.In addition to the scheduled Board meetings mentioned in the table above, this year there were regular Board video conference calls allowing focus on the very dynamic situation caused by Covid-19, the safety of our customers and people and our business/financial performance, as well as the wider impact on the Higher Education sector and the economy more generally. 99OverviewStrategic ReportGovernanceFinancial StatementsOther InformationBoard activity and annual programme In addition to regular updates on Covid-19 being considered at each Board meeting, the Board also considered:GovernanceStrategyFinancial and risk managementPeopleOperational and commercialFebruaryApprove Annual Report Higher Education sector engagementPreliminary resultsLiberty Living people integration Property – development approval MarchIR reviewLeadership through Covid-19 Group cashflow reviewResponse to Covid-19. Post-completion review – review of 2019 property completionsMayChair SuccessionAssess auditorsStrategy refresh, focusing on economic recovery and student numbers forecast post Covid-19Developing our Sustainability StrategyReview internal controls (including Cyber Security)Liberty Living integration reviewCovid-19 operational reviewJuneEquity placingEquity PlacingHigher Education UpdateFunding optionsPrincipal and emerging risks reviewGroup Board Safety Day focusing on: Covid-19, our Safe and Secure promise, ensuring safe Development and Fire SafetyOperating safely through Covid-19JulyRefreshing our OKR’s (Objectives and Key Results in light of Covid-19)Internal Audit Cyber Security reviewHE sector and Covid-19Interim results Plans for our 2020 external Board evaluationCovid-19 operational reviewSeptemberChair SuccessionRefreshing our Sustainability Strategy Interims feedbackStudent welfare and mental healthDevelopment approval OctoberExternal Board & Committee EvaluationDebt strategyReturn of students for academic year 2020/2021 and the Covid-19 impactExecutive succession planning Property Investment Market UpdateNovemberSustainability Strategy review and approval 2021 budget scenario planningOrganisational people design to deliver our Strategy Recommence deferred development schemes DecemberHigher Education engagement Internal Audit and AssuranceAnnual Tax strategy review and approvalPrincipal and emerging risks review Information Security2021 budget approvalProspective year-end out-turnEmployee and student wellbeingWhistleblowing reviewDisposalsOperational incidents safety review and organisational learningBOARD ACTIVITIES100The Unite Group PLC Annual Report & Accounts 2020Board’s decision making during 2020Board’s governance roleLink to principal riskWhat the Board did in 2020 and its decision makingStrategic objective: Safe and SecureSafety, Health and Wellbeing Governance to ensure the health, safety, wellbeing and security of our 76,000 customers and 1,900 employees is paramount. Covid-19 impacted us (like so many businesses) in unprecedented and unforeseen ways, whilst our other safety risks (such as fire and contractor safety) continue.Operational risk – Major health and safety incident in a property or a development site on page 75The Board reviews the safety of our students, visitors and employees, as well as contractors at our development sites, at each Board meeting.In addition, during 2020, the Board had regular Covid-19 calls to discuss our Covid-19 measures and the rapidly evolving situation to ensure the safety and wellbeing of our customers and people.The Health & Safety Committee, a sub-Committee of the Board, focuses on:• Covid-19, oversight and deep dives into our Covid-19 risk management • fire, our main safety risk, and our work with the Avon Fire Authority, our Primary Fire Authority lead as well as our comprehensive cladding review and remedial plan• external safety assurance through The British Safety Council, our external safety auditor • physical security review of our properties by WSP Parsons Brinckerhoff. Read more about the Health & Safety Committee report on page 115Strategic objective: Quality service platformEnsuring our product is affordable and provides good value-for-money for our customers.Market risks – supply and demand on pages 72 to 74Board governance leadership of the decision to waive rent for students who chose to return home for the remainder of the 2019/20 academic year as well as the 50% rent discount offered to students in early 2021.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 17 to 21Governance to ensure our market-leading service platform meets our customers’ and University partners’ 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 72 to 74Through our 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.Board oversight that PRISM, our service platform and our customer facing operational apps (such as the MyUnite 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 17 Read more about our Stakeholder engagement on pages 36 to 39101OverviewStrategic ReportGovernanceFinancial StatementsOther InformationBoard’s decision making during 2020 continuedBoard’s governance roleLink to principal riskWhat the Board did in 2020 and its decision makingStrategic objective: Quality service platform continuedEnsuring our ‘safe and secure’ brand promise extends to keeping our customers’ and employees’ personal data safe and secure.Operations risk – Information Security and Cyber threat on page 76Ongoing review of our information security and its governance, in particular having regard to the General Data Protection Regulation (GDPR). Achieved CyberEssentials+ in 2020 providing us with assurance of our information security.Leadership development and succession planning/talent pipeline. Diversity and Inclusion Market risk – supply and demand on pages 72 to 74During 2020, the Nomination Committee focused not only on Chair succession, appointing Richard Huntingford as the Non-Executive Director and Chairman Designate, 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.Strategic objective: Quality propertiesLiberty Living integration Ensuring the integration is delivered to plan and timetable and oversight of the delivery of the integration benefits. Property market cycle risk on page 78The Board reviewed management actions on various elements of the integration and assessed these against the competing demands of the pandemic. Read more about Liberty Living integration on page 12Development pipeline Board scrutiny of city and site selection for new developments against a backdrop of increasing competition for the best sites.Governance of developments/ acquisitions to ensure they run to budget and schedule and are earnings accretive whilst – during 2020 – balancing development exposure against the demands of Covid-19.Property/Development risk on page 77Deployment of the June 2020 share placing proceeds. Exchanged contracts on:• a 300-bed development site in central Edinburgh• an 800-bed development site in Paddington, central London.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.Deciding to defer development at two sites (Middlesex Street, London and Old BRI, Bristol) to conserve cash due to Covid-19 uncertainty. Read more about Development and partnership activity on page 26Disposals Board governance of our portfolio recycling as we increase our exposure to the UK’s best Universities, while generating capital to invest in further development activity. Property/Development risk on page 78Completed the disposal of one property for £10 million in 2020 (Unite share £10 million) in line with book value. Read more about Disposals on page 26Strategic objective: Quality University partnershipsBoard 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.Market risk – supply and demand and Property/Development risk on pages 72 to 74 and 77 and 78Portfolio activity focused on increasing our alignment to high and mid-ranked Universities and being in the best locations. For the 2020/21 academic year, 87% of our income is generated by students attending such Universities (2019/20: 88%), increasing to 88% on delivery of our secured development pipeline and contracted disposals. Read more about Development and University partnership activity on pages 24 and 25BOARD ACTIVITIES CONTINUED102The Unite Group PLC Annual Report & Accounts 2020Board’s governance roleLink to principal riskWhat the Board did in 2020 and its decision makingStrategic objective: A responsible and resilient businessHE Government Policy and Brexit Continued focus on potential HE Government policy changes as well as our Brexit disruption planning.Market Risk – supply and demand on page 72Ongoing Board monitoring of HE Government policy and its impact for PBSA and more widely as well as continued monitoring of our Brexit Disruption Plan in which we prepare for the operational disruption following the end of the Brexit transition period.High-quality income for the 2020/21 academic year Oversight of Nominations and operational performance and University partnership transactions.Market risk and Property/Development risks on pages 72 to 74 and 77 and 7888% let across our portfolio for the 2020/21 academic year of which 60% is underpinned by nomination agreements. Read more about Operations review on page 17Covenants compliance Group Board leadership for our Covenants compliance.Financing risk on page 80Board leadership over our Financing Covenants compliance tested by the sudden, unexpected and wide ranging impact of Covid-19. This year, there has been a specific focus on ICR covenants.The Board monitors Covenants compliance across a range of income / stress scenarios to ensure that if any risks emerge, the Board is ready to identify further action and work with lenders well in advance.Covenant compliance also has oversight in the Audit Committee and by the external audit review of our Covenant compliance through the Going Concern process. Read more about Financial review on page 42Capital 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.Financing risk on page 80Board oversight on our capital structure, including the June 2020 share placing, and the decision/timing to proceed and the deployment of the placing proceeds. Read more about Financial review on page 42Strategic objective: A responsible and resilient businessAs a listed plc and responsible / trusted business, our wider stakeholders demand we proactively manage environmental, social and governance risks. The Board develops and oversees the implementation of our Sustainability Strategy which has the overarching ambition for Unite to clearly lead the student housing sector on sustainability issues and be in the leading pack of real estate companies in the wider sector.Climate-related change risk on page 79During 2020, the Board led the development of our new Sustainability Strategy. The Board developed this following extensive stakeholder engagement and materiality assessments. This was needed to better understand our stakeholder expectations otherwise the Board risked not meeting them.This new Sustainability Strategy provides a clear structure with objectives, flagship targets and governance to ensure its successful delivery. In addition to developing the new Sustainability Strategy, the Board also interrogated our ongoing ESG regulatory and reporting compliance.The Board also considered the Board’s specific climate change risks, identifying them across: Regulatory risk; Physical risk; Transition risk; and Stakeholder risk. The Board considered the impact of these risks and oversees the assurance of the corresponding risk management.103OverviewStrategic ReportGovernanceFinancial StatementsOther Information2020 performance evaluationEach year a review of the performance of the Board, its Committees and Directors is undertaken. During 2020, the evaluation was conducted by Belinda Hudson Limited in line with the Company’s policy to conduct an externally facilitated evaluation every third year.The evaluation – building on prior years – explored all aspects of performance including Board composition, diversity and dynamics, Board processes and the extent to which the Board fulfils its role and responsibilities. It also covered the effectiveness of the Committees and the Chairman. To conduct the evaluation in a Covid-19 safe environment, a questionnaire-based approach was adopted using Thinking Board, provided by Independent Audit Limited. Belinda Hudson tailored the questionnaires to the specific circumstances of Unite, analysed the output and prepared a report which set out the findings and recommendations. The report was presented to and discussed with the Board. The feedback was that the Board and its Committees have continued to operate effectively and to fulfil their oversight and governance responsibilities taking into account the interests of all stakeholders. In particular, there is clarity as to the Board’s role in shaping, embedding and overseeing Home for Success and our values. Suggested areas for potential development included: 1. Consider setting up a Sustainability Committee, reporting to the Board, to have oversight of the development, integration and communication of the Sustainability Strategy and review how climate-related change and environmental concerns are integrated into the strategy.2. Create space in the Board agenda for more unstructured strategic discussion, blue-sky thinking and Non-Executive Director only discussion.3. Continue to develop the Board’s oversight of the Company’s culture and approach to employee engagement.4. Create more opportunities for the Board members to spend more informal time together when circumstances permit.The Board and each of its Committees have reviewed the suggestions and outcomes of the Board evaluation and developed an implementation plan. Good progress is being made. The Board considered its and the Committees’ current composition. None of them required any change currently but the Nomination Committee will continue to review the Board’s structure, size and composition to ensure the Board has the right balance of skills, diversity and experience.Belinda Hudson Limited and Independent Audit Limited has no other connection with the Company or individual Directors. 2021 governance prioritiesContinued delivery of high-quality income and earnings with oversight and assurance of:Safe and secure Macro/Market dynamicsDevelopment Financing Our peopleCovid-19: ensuring we continue to provide a safe and secure operating environment and workplace. An increased focus on wellbeing.Fire safety: ensuring our Properties continue to be safe and oversight of the ongoing emerging risk around the dynamic fire and building regulations environment. The impact of Covid-19 on the Group’s income / occupancy, Government HE policy, UK plc and the UK economy and global economy more generally.Continuing to look for development with the right sites in the best locations. Security of high quality income through high-quality properties with quality long-term University partnerships.Ongoing Board oversight of the Group’s Covenants compliance, monitoring across a range of income / stress scenarios to ensure the Board can manage the Covenants proactively and pre-emptively. Governance to ensure the Group embraces the opportunities a truly diverse and inclusive workforce brings across all levels of our business, creating a sense of belonging and ensuring our people can bring their true selves to work.Developing our talent pipeline and future leaders to help ensure a sustainable future. BOARD ACTIVITIES CONTINUED104The Unite Group PLC Annual Report & Accounts 2020Nomination Committee Chair’s overviewSuccession planning for the Chairman through a dedicated sub-committee of the Nomination Committee, led by Elizabeth McMeikan our Senior Independent Director, has been a key focus during 2020. This led to the successful appointment of Richard Huntingford as Non-Executive Director and Chairman Designate on 1 December 2020. Richard will take over as Chair when I step down on The Committee has also continued its focus on executive succession planning and our talent development. This year this has especially focused on building a resilient and agile leadership team as we manage the competing priorities of Covid-19 and future growth. As part of this executive and wider succession planning, the Committee also continued its focus on our diversity, and inclusivity, conscious a diverse leadership team needs to reflect our wider stakeholders and is key to the Group’s long-term sustainable success. 31 March 2021.As part of our execu�ve and the Commi�ee also con�nued its focus wider succession planning, on our diversity and inclusion.105OverviewStrategic ReportFinancial StatementsOther InformationGovernanceNOMINATION COMMITTEECompositionRoleNomination Committee meetingsActivities in 2020The Committee consists entirely of Non-Executive Directors. 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. The role of the Committee is to:Ensure that appproriate 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 genderRegularly review thestructure, 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 transparentBe responsible for identifying, reviewign and recommending candidates for appointment to the BoardThe Nomination Committee met three times during the year with 100% attendance at these meetings.Succession planning for the Chairman through a dedicated sub-committee of the Nomination Committee, led by Elizabeth McMeikan our Senior Independent Director, was a key focus during 2020. This led to the successful appointment of Richard Huntingford as Non-Executive Director and Chairman Designate on 1 December 2020. Richard will take over as Chair when Phil White steps down on 31 March 2021.Heidrick & Struggles, an external search consultancy, led the search for the new Chairman. Heidrick & Struggles has no other connection with the Company or individual Directors.• • • • Review of Board composition and succession planningNomina�on Commitee MembersNumber of Mee�ngsAtendance3100%Phil WhiteRichard HuntingfordElizabeth McMeikan Ross Paterson Richard AkersIlaria del BeatoDame Shirley PearceThomas Jackson Professor Sir Steve Smith Chair of the Nomination CommitteeNon-Executive Director and Chairman DesignateSenior Independent DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive Director Non-Executive Director106The Unite Group PLC Annual Report & Accounts 2020NOMINATION COMMITTEE CONTINUEDThe Committee also reviewed the Board’s composition to ensure it has the correct balance of skills, experience, independence and knowledge. The Committee noted the Board had recently been strengthened by the appointment of two Non-Executive Directors with strong HE experience (Dame Shirley Pearce and Professor Sir Steve Smith), which has proved especially helpful for HE insight as the Board navigated the wider impact of the pandemic on the sector. The Committee believes the Board has the correct balance of skills, experience, independence and knowledge but continues to monitor this.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’ potential. Our diversity and inclusivity initiatives (outlined below) are aligned with this succession planning.Diversity and inclusion The Board recognises that diversity and inclusion is fundamental to the culture of the Group, our purpose of Home for Success and ultimately our long term sustainability. Following the Black Lives Matter movement, we formed an employee Culture Matters Network in 2020 giving employees a platform to share their experiences and explore how we can develop our diversity and inclusivity initiatives with a renewed vigour. The Board’s focus has been on creating a workplace where people feel they belong and can bring their whole and true selves into the workplace. Our refreshed value, Creating Room for Everyone, launched following the completion of the Liberty Living acquisition, gives focus to this. To help our teams and particularly our leadership understand their role in making Unite a more diverse and inclusive employer, during 2020 we started working with an external culture specialist, René Carayol. As part of our evolving diversity and inclusivity strategy, the Board has set new Diversity Targets (see further below). To support the embedding of our new value, Creating Room for Everyone, and our ongoing focus on diversity and inclusion, the Board led the following key initiatives:• signed the Business in the Community Race at Work Charter, with a commitment to capture ethnicity data and publicise progress; a zero-tolerance approach on harassment and bullying and action to support ethnic minority career progression. The Board believes signing this Charter is a significant moment for our business• established a Culture Matters Network in response to Black Lives Matter• new D&I training sessions commenced • engagement with a leadership and diversity and inclusions specialist, who is providing fresh thinking and stimulus to our leadership team • committed to new diversity targets as part of our renewed Talent Development Programme, which is focused on promotion, recruitment and talent and reaching beyond our existing gender targets. Our new Talent Development Programme for 2021 will include creating opportunities for minority groupsDiversity targetsThrough this process, the Board set the following diversity and inclusivity targets for the business:• A 50/50 gender split in the Unite Students leadership team by the end of 2023• Fill 60% of managerial roles internally by the end of 2023• Minority groups fairly represented in employees and management by the end of 2024These targets underline the Board’s belief that as a service-based business, our people are as important as our customers. We are driven by our values and culture and a passion and commitment to develop a diverse and inclusive organisation, providing interesting career pathways within our organisation to ensure opportunities for progression are available for all and – critically – with greater representation of women and ethnicity in senior positions and a diverse workforce across our organisation, where everybody feels valued, engaged and they belong.Board Diversity PolicyThe Board and Nomination Committee drive the agenda for diversity across the business. We are making progress, but recognise we need to do more. As a result, the Board set the diversity targets and launched the key initiatives listed above. The Board’s diversity policy is that Board appointments (a) are made on merit and relevant experience, while taking into account the broadest definition of diversity and (b) ensure Unite has, on an ongoing basis, the most effective Board and leadership team to operate the business for the benefit of all its stakeholders. The Committee ensures that when making Board appointments the retained search firm places an emphasis on putting forward candidates who would enhance the overall diversity of the Board. On an ongoing basis, the Committee keeps under review the tenure and experience of the Executive and Non-Executive Directors to ensure the Board has an appropriate and diverse mix of skills, experience, knowledge and diversity. 107OverviewStrategic ReportGovernanceFinancial StatementsOther InformationBoard and senior leadership diversityPhil WhiteThe Board embraces the Code’s underlygpin rinciples with regard to Board balance and diversity, including in respect of ethnicity, gender and age. The Board is also mindful of the aims of the Hampton-Alexander Review, an independent review body which aims to improve women’s representation at board level and in leadership roles. For the major part of the year, the Board comprised three women and seven men representing female gender diversity of 30%. As a consequence of the orderly Chair succession handover process, following Richard Huntingford’s appointment to the Board on 1 December 2020 the gender diversity temporarily reduced to 27.3% until Phil White’s retirement on 31 March 2021 when it returns to 30%. The Nomination Committee continues to consider Board balance and diversity and intends to align the composition of the Board with the recommendations of the Hampton-Alexander Review, as it was in 2019 and at the start of 2020, with our Board comprising one-third women by our 2022 Annual General Meeting. As of 31 December 2020, the number of women in the Executive Committee and their direct reports (including the Company Secretary as required by the Code) is 15 (out of a total of 44) representing 34% of this Group. Our diversity targets listed above will help us grow this percentage of women in leadership positions. Our diversity targets focus on the wider business, but the Nomination Committee is also conscious of the Parker Review and in particular one of its key recommendations that each FTSE 250 Board should have at least one director of colour by 2024. Building on our diversity targets and initiatives and having regard to this recommendation, the Nomination Committee will build a ppieline of candidates working towards the goal of making a Board appointment no later than 2024. In addition to this Board target, the Committee will continue to focus on setting and achieving diversity targets for the wider business to help the Company develop a deep and diverse succession plan at more senior levels within the organisation.16 March 2021Chair – Nomination Committee108The Unite Group PLC Annual Report & Accounts 2020NOMINATION COMMITTEE CONTINUED109OverviewStrategic ReportFinancial StatementsOther InformationGovernanceAudit Committee Chair’s overviewDuring the year, the Audit Committee continued its key oversight role for the Board with its 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.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 Audit Commi�ee con�nued Group's fnancial repor�ng. its key oversight role for the Board in respect of the management and AUDIT COMMITTEEWe also reviewed the effectiveness of the internal auditors, PricewaterhouseCoopers (‘PwC’), during 2020. 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 appproriate and effective for the enlarged Group. 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 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 The Audit Committee determined the focus of the Group’s significant financial reporting judgementsinternal audit activity, reviewed findings, and verified that management was appproriately implementing To support the Board with its ongoing monitoring of the effectiveness of the Group’s system of internal controls recommendations. The Audit Committee also looked and risk management systemsat how to operate effectively in light of the Covid-19 pandemic, in particular, how the external audit could be To monitor the effectiveness of the Group’s internal delivered in the current environment whilst maintaining audit function and review its material findingsthe expected high level of rigour. The Audit Committee also To oversee the relationship with the external auditor, challenged the approach to assessing the Group’s ability including making recommendations to the Board in to continue as a going concern and its likely loan covenant relation to the appointment of the external auditor compliance, by reviewing various scenarios for future and monitoring the external auditor’s objectivity and performance.independence.The Audit Committee undertook a review of its effectiveness in September 2020. The review found The members of the Audit Committee are set out on page that the Audit Committee is working effectively. The 92 of this Corporate Governance Statement. The Audit review identified areas in which we can strengthen our performance and these are reflected in the Committee’s Committee members are all independent Non-Executives priorities for 2021.and have been selected with the aim of providing the wide range of financial and commercial expertise necessary to During 2020, the Audit Committee undertook the fifth fulfil the Audit Committee’s duties. The Board considers full evaluation exercise of the Deloitte audit approachto that as a chartered accountant and serving Finance ascertain the effectiveness of the external audit function. Director of a UK-listed company, I have recent and relevant Further to the completion of the evaluation of the external financial experience.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 2021. Role of the Audit CommitteeComposition of the Audit Committee • • • • Audit Commi�ee MembersNumber of Mee�ngsA�endanceRoss Paterson Richard AkersIlaria del BeatoProfessor Steve Smith Chair of the Audit CommitteeNon-Executive DirectorNon-Executive DirectorNon-Executive Director4100%AUDIT COMMITTEE CONTINUED110The Unite Group PLC Annual Report & Accounts 2020Audit Committee meetingsThe Audit Committee met four times during the year and attendance at those meetings is shown on page 99 of this Corporate Governance Statement. Meetings are scheduled to coincide with key dates in the financial reporting cycle and a forward agenda is agreed by the Committee and reviewed on an ongoing basis.Meetings are attended, by invitation, by the Chief Financial Officer, the Deputy 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.Main activities of the Audit Committee during the yearMeetings 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 four 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. This included challenging forecast cash headroom and reviewing scenarios, which were determined by management, to stress test the impact of a range of performance outcomes upon the viability of the business, in particular with regard to loan covenants. The Audit Committee also reviewed and challenged the external auditor’s report on these financial statements.As discussed above, the effectiveness of the external audit function was considered during 2020. 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.Financial reportingThe primary focus of the Audit Committee, in relation to financial reporting in respect of the year ended 31 December 2020 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 integration of Liberty Living on to Unite systems, processes and controls• The clarity of the disclosures and compliance with financial reporting standards and relevant financial and governance reporting requirements• The clarity and appropriateness of the disclosures in respect of the impact of Covid-19• 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 strategyThe 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 and 41), risk reviews (as described on pages 64 to 80), business model and strategy (as described on pages 32 to 35)111OverviewStrategic ReportGovernanceFinancial StatementsOther Information• • • • • A cross-check between Board Minutes and the Annual The Audit Committee questioned the external valuers on Report is undertaken to ensure that reporting is market trends and transactional evidence that supports balancedthe valuations. The Audit Committee was satisfied that the Group’s valuers were appproriately qualified and provided Whether information is presented in a clear and concise an independent assessment of the Group’s assets. The manner, illustrated by appproriate KPIs to facilitate Audit Committee was satisfied that an appproriate shareholders’ access to relevant informationvaluation process had taken place, the core assumptions To aid our review, the Audit Committee considers reports used were reasonable and hence the carrying value of from the Group Financial Controller and reports from the investment and development properties in the financial external auditor on the outcomes of their half-year review statements was appproriate.and annual audit. As an Audit Committee, we support The external auditor explained the audit procedures to test Deloitte in displaying the necessary professional scepticism the valuation of investment and development properties its role requires.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 After discussion with both management and the external financial statements as a whole.auditor, the Audit Committee determined that the key risk of misstatement of the Group’s 2020 financial statements Further analysis and detail on asset valuations is set out on related to:page 22.Property valuationsJoint venture accountingTwo of Unite’s significant assets are its investments in USAF and LSAV which the Group has historically accounted for as Going concernjoint ventures.The Group reports under IFRS 10–12 which provides The Group’s principal assets are investment properties guidance on how an investor should account for its and investment properties under development that are interests in other entities, including a definition of control either owned on balance sheet or in USAF or LSAV. The and guidance on how to classify and account for jointly investment properties are carried at fair value based on controlled arrangements. During the year, management an appraisal by the Group’s external valuers who carry undertook a detailed review of its classification for both out the valuations in accordance with the RICS Red Book USAF and LSAV, and following that analysis concluded that valuation guide, taking into account transactional evidence both USAF and LSAV should continue to be treated as joint during the year. The valuation of property assets involves ventures. significant judgement and changes in the core assumptions could have a significant impact on the carrying value of The Audit Committee considered this and agreed there was these assets. The Audit Committee identified that the no material change and accordingly it was appropriate to uncertainty caused by the Covid-19 pandemic could cause continue to account for USAF and LSAV as joint ventures an increased level of judgement on property valuations as under IFRS 11, with Unite recording its 22.0% share of the at 31 December 2020.results and net assets of USAF as a joint venture using equity accounting and likewise 50% for LSAV.Management discusses the underlying performance of each asset with the external valuers and provides detailed performance data to them including rents, University The Audit Committee reviewed and challenged lease agreements, occupancy, propertycosts and costs management’s range of scenarios for future performance to complete (for development properties). Management with a focus on forecast liquidity and ICR covenant receives detailed reports from the valuers and performed performance. This review focussed on the assumptions a detailed review of the valuations to ensure that made regarding the impact of the Covid-19 pandemic, management considers the valuations to be appproriate. specifically UK Universities' ability to remain open and The valuation report is reviewed by the Chief Financial provide a blend of online and face-to-face teaching, Officer and the Group Property Director prior to sign-off.demand for University accommodation in the UK and travel restrictions limiting the ability of International students to During the year, the Audit Committee and/or the Board met travel to the UK. The Audit Committee concluded that the with members of the Group’s valuer panel and challenged scenarios had been carried out on an appropriate basis them on the basis of their valuations and their core and agreed to recommend to the Board that the Financial assumptions, including the yield for each property, rental Statements be prepared on a going concern basis.growth and forecast costs.Further detail on going concern is set out on page 172.Significant issues considered by the Audit CommitteeJoint venture accountingProperty valuationsGoing Concern112The Unite Group PLC Annual Report & Accounts 2020AUDIT COMMITTEE CONTINUEDOther issues considered by the CommitteeRisk managementInternal auditExternal auditInternal controlsLSAV performance feeThe Audit Committee’s work to review the effectiveness of the internal controls was driven by the Deputy Chief Financial Officer’s report on internal controls, supported The Group is entitled to a LSAV performance fee if the by the work of the internal auditor and their reports to joint venture outperforms certain benchmarks over its the Audit Committee. The feedback from the Group’s life ending in 2022. The Audit Committee discussed the internal auditor on specific areas of control is tested on recognition of the LSAV performance fee in 2020 and a periodic basis and our external auditor is requested to challenged the assessment of ‘highly probable’ used provide specific feedback and assessment of the Group’s to determine the amount to recognise. This included financial controls and highlight any areas of weakness. No discussion of the estimates used, being future rental significant weaknesses were identified through the course income and the discount rate (yield).of the Audit Committee’s reviews, despitethe impact of Covid-19.The Group’s risk assessment process and the way in which significant business risks are managed is a key area of The Group engages PwC to perform internal audit activity, focus for the Audit Committee.with this internal audit function reporting directly to the Audit Committee.Our work here was driven primarily by performing an assessment of the approach taken by the Group’s Risk Due to the Covid-19 pandemic, the 2020 internal audit Committee. The Risk Committee is responsible for the plan was adapted to a more flexible approach allowing delivery of the Group’s Risk Management Framework, us to focus on key issues. This approach resulted in PwC which the Audit Committee has approved, and the Group’s completing internal audit work on cyber security in 2020. assessment of its principal risks and uncertainties, as set Overall, PwC concluded that there were no significant out on pages 68 to 80.issues and controls were well designed, but noted there were some areas of improvement to be made to maximise The Board also formally reviewed the Group’s principal controls and operational efficiency, which management is risks at two meetings during the year. Through these in the process of implementing.reviews, the Audit Committee considered the risk management procedures within the business and was satisfied that the key Group risks were being The effectiveness of the external audit process is facilitated by appproriate audit risk identification at the start of the The risk assessment flags the importance of the internal audit cycle which we receive from Deloitte in a detailed control framework to manage risk and this forms a audit plan, identifying their assessment of these key risks.separate area of review for the Audit Committee.For the 2020 financial year, the sginificant risks identified were in relation to valuation of properties, classification of joint ventures, going concern, revenue recognition Led by the Group’s risk assessment process, we reviewed and management override of controls. These focus the process by which the Group evaluated its control areas were discussed at the Audit Committee and it was environment. Management is responsible for establishing agreed that they should be the principal areas of focus and maintaining adequate internal controls. Internal as they represent the areas with the greatest level of controls are designed to provide reasonable assurance regarding (among other things) the reliability of financial judgement and materially impact the overallperformance of the Group. These risks are tracked through the year reporting and the preparation of the financial statements and we challenged the work done by the auditor to test for external reporting purposes. A comprehensive strategic management’s assumptions and estimates around these planning, budgeting and forecasting process is in place. areas.Monthly financial information and performance insight is reported to the Board.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.appproriately managed.113OverviewStrategic ReportFinancial StatementsOther InformationGovernanceFor the 2020 financial year, the Audit Committee was satisfied that there had been appropriate focus and To further safeguard the objectivity and independence challenge on the primary areas of audit risk and assessed of the external auditor from becoming compromised, the the quality of the audit process to be good. We hold Committee has a formal policy governing the engagement private meetings with the external auditor at each Audit of the external auditor to provide non-audit services. No Committee meeting to provide additional opportunity for material changes have been made to this policy during open dialogue and feedback from the Audit Committee and the year. This precludes Deloitte from providing certain the auditor without management being present. Matters services, such as valuation work or the provision of typically discussed include:accounting services.The auditor’s assessment of business and financial For certain specific permitted services (such as reporting statement risks and management activity thereofaccountant activities and compliance work), the Audit Committee has pre-approved that Deloitte can be engaged The transparency and openness of interactions with management, confirmation that there has been no by management, subject to the policies set out above, and restriction in scope placed on them by management subject to specified fee limits for individual engagements and the independence of their auditand fee limits for each type of specific service. For all other services, or those permitted services that exceed How they have exercised professional scepticismthe specified fee limits, I as Chairman, or in my absence, I also meet with the external lead audit partner outside another member, can pre-apppermitted services.rove the formal Audit Committee process.During the year, Deloitte was appointed to undertake non-audit services. Fees for non-audit work performed by Deloitte for the year ended 31 December 2020 were £0.1 The Audit Committee considers the re-appointment of the million (2019: £2.0 million). The non-audit fees related to external auditor, including the rotation of the audit partner the work undertaken by Deloitte LLP in its role as external which is required every five years, eacyh ear and also auditor to the Group for the review of the half year report. assesses their independence on an ongoing basis. 2020 is Further disclosure of the non-audit fees incurred during the sixth year during which Deloitte has been the Group’s the year ended 31 December 2020 can be found in note external auditor. In accordance with the requirements to 2.6 to the consolidated financial statements on page 187. rotate the audit partner at least every five years, 2020 saw Accordingly, the Audit Committee was satisfied that both Stephen Craig take over responsibility for the audit from the work performed by Deloitte LLP, and the level of non-Judith Tacon.audit fees paid to it, were appproriate and did not raise any concerns in terms of Deloitte LLP’s independence as The Audit Committee reviewed Deloitte’s audit work and determined that appproriate plans are in place to carry out an effective and high quality audit. Deloitte confirmed The Audit Committee approved the fees for audit services to the Audit Committee that it maintained appproriate for 2020 after a review of the level and nature of work internal safeguards to ensure its independence and to be performed, including the impact of the acquisition objectivity. As partof the Audit Committee’s assessment of Liberty Living, additional audit procedures required of the ongoing independence of the auditor, the Audit as a result of Covid-19 and changes in the regulatory Committee receives details of any relationships between environment, and after being satisfied by Deloitte that the the Group and Deloitte that may have a bearing on their fees were appproriate for the scope of the work required. independence and receives confirmation that they are independent of the Group.The Audit Committee’s activities formed part of the As discussed above, an assessment of Deloitte’s effectiveness, its processes, audiqevaluation of Board effectiveness performed in the year. t uality and performance was undertaken in May 2020 following completion of the Details of this process can be found under ‘Performance evaluation’.2019 audit.The Committee confirms compliance with the provisions of the Statutory Audit Services for Large Companies Market Investigation (Mandatyor Use of Competitive Tender Processes and Audit Committee Responsibilities Order 2014) Order 2014. 16 March 2021• • • Non-audit servicesIndependence and external audit tenderAudit Committee evaluationRoss Patersonauditor to the Group.Chair – Audit Committee114The Unite Group PLC Annual Report & Accounts 2020AUDIT COMMITTEE CONTINUEDUnite is home to 76,000 students. For many, this is their first time living away from home. This year our brand promise of being‘Safe and Secure’ has been more important than ever as students, our people and the communities we operate in faced the unique challenge of living and working in the Covid-19 pandemic. Covid-19 health and safety has been a key priority in 2020 with a focus not only on social distancing and other measures to prevent and control the spread of the virus but also on student and employee wellbeing. Reflecting the measures we had taken, Unite was recognised as the first student accommodation provider to have its Covid secure status accredited by the British Safety Council (BSC). We could not have achieved this without the resilience and agility of our teams whilst working in the very challenging Covid-19 environment. Further information on our Covid-19 response is detailed in this Committee report.Operatng safely is fundamental to being a responsible business and Covid-19 has underlined the importance of our safe and secure promise. 115OverviewStrategic ReportFinancial StatementsOther InformationGovernanceHEALTH & SAFETY COMMITTEEDuring 2020, and in accordance with the Government’s Building Safety Advice of 20 January 2020, we undertook a 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. Having removed Aluminium Composite Materials (ACM) cladding from our building, we will continue to follow our values of doing what’s right and will now remove HPL cladding where it fails to meet regulations. We are currently carrying out replacement of properties with HPL cladding, with activity prioritised according to our risk assessments, starting with those over 18 metres in height. The cost of replacing the HPL cladding is expected to be £79.9 million (Unite share: £33.8 million), which will be incurred over the next 12 to 36 monthsDuring 2020, we continued to expand and regionalise our Health and Safety teamwing closer and more ‘on the , alloground’ support for our Operations teams helpgin them deliver our Safe and Secure brand promise. This also allowed our strengthened regional teams to better support the successful integration with Liberty Living, underlining the safety of our teams and customers as our key priority. Our focus for 2021 remains on providing absolute confidence to our customers, employees, visitors and parents/guardians on the safety of our properties and our workplace. This includes working closely with the Ministry of Housing, Communities and Local Government to ensure our properties comply with emerging guidelines. We will also concentrate on providing clear information and education to our customers on how they can keep themselves safe and secure in their homes. Our focus on safety is not limited to Covid-19. Building on our BSC 5-star rating achieved in 2019, Unite was honoured to receive the BSC Sword of Honour in 2020 for excellence The Health and Safety Committee met three times during in the management of occupational health and safety. the year and attendance at those meetings is shown on Fire safety remains a key safety priority and through page 99.2020 we continued to engage with our primary authority, the Avon Fire and Rescue Service, and local fire services, especially conscious that students’ lives were changing as they lived with us through the pandemic. All of our properties have been confirmed as safe to operate by independent fire safety experts, reflecting a wide range of fire safety measures across our portfolio as well as the special measures put in place at the affected buildings, including increased building patrols by staff, additional alarm measures and sprinklers. Cladding also remains a priority and we continue to work closely with the Ministry of Housing, Communities and Local Government (MHCLG) to ensure our properties comply with emerging guidelines.Health and Safety Committee meetingsHealth & Safety Commi�ee MembersNumber of Mee�ngsA�endanceProfessor Sir Steve Smith Richard Smith Dame Shirley Pearce Elizabeth McMeikan Ilaria del Beato Chair of the Health & Safety CommitteeChief Executive OfficerNon-Executive DirectorSenior Independent DirectorNon-Executive Director3100%116The Unite Group PLC Annual Report & Accounts 2020HEALTH & SAFETY COMMITTEE CONTINUEDCovid-19 – 2020/2021• Covid-19 Secure Workplace – Unite was the first student accommodation provider to be recognised with the British Safety Council ‘Covid Secure Workplace’ assurance. We have implemented subsequent controls which are being reviewed and updated regularly to ensure adherence to ongoing Government guidance. • Adapting to Covid-19 – we adapted and created new policies and operating practices such as a new Clean+ Property Standard outlining our cleaning, quality and safety standards, and a business-wide Covid-19 Risk Assessment. We have also produced a Covid Secure Contractor Guidance Document for our contractors and third parties. This additional guidance has allowed us to continue with key activities including construction work, essential maintenance, and upgrades. • Working From Home – to ensure those working from home have appropriate measures and equipment in place to safely carry out their day-to-day activities, we created an online DSE Assessment and e-Learning in line with Covid-19 guidance. Office equipment has been provided to those employees identified as requiring additional equipment. • Getting ready for academic year 2020/21 – our teams worked tirelessly through the Covid-19 pandemic to clean rooms, common areas and kitchens over the summer of 2020 to get our properties ready for the academic year 2020/2021 intake. Our MyUnite app and operating platform PRISM has helped facilitate digital interactions between our teams and students with bookings, maintenance requests, support for self-isolating students, managing arrivals and check-ins.• Student welfare – we have worked closely with our University partners to increase provision and access to wellbeing and mental health support during the pandemic, including online welfare checks, a pilot peer to peer scheme as well as support for those shielding and self-isolating. • Investment in equipment – we made key investments in equipment to help us control Covid-19, these include: temperature ray guns, Purifog (chemical fogging) machines, PPE, screens, floor markings etc. Highlights and achievements from 2020The Covid-19 pandemic meant readjusting our H&S focus for the year, making sure we remain Covid secure whilst still ensuring the safety of our teams at work and customers living with us. In addition, we rolled out the following initiatives:• Safe & Secure Brand Proposition – we have created and rolled out a Safe & Secure Brand Proposition which explains how we keep our customers and teams safe. This has been especially important for our teams as it has given them the information and tools to have conversations with students, parents, guardians and University partners about the safety and security measures that we have in place to ensure a safe place to live. • Health and Safety training – we have delivered 40 training courses to over 1,300 employees on Health, Safety, Security, Fire and Wellbeing. Alongside this, we continued our mandatory e-learning modules for all employees. We also received Senior Leadership Health and Safety training from the British Safety Council.• Health and Safety Software – we have procured a new H&S Software System which we will roll out to the business in Q2 2021. The software is a market-leading SAS (Software as a Service) system and reduces the need for multiple, complex systems for reporting on safety incident, inspections and audits. This will bring us greater insight into our safety information and data and help us be better, reflecting one of our values Raising the Bar Together. • Working at Height Review – we completed our full review of Working at Height, one of our ‘Top 5 Safety Risks’. Following this review, we now work in partnership with Faithful and Gould for all safety related information before any high-risk working at height. 117OverviewStrategic ReportGovernanceFinancial StatementsOther InformationBritish Safety Council (BCS) auditsFollowing our 5-star audit achievement last year, the BSC has now awarded us the prestigious ‘Sword of Honour’. The Sword of Honour is reserved for elite organisations that have clearly demonstrated excellence in the management of occupational health, safety and environmental risk. Unite is one of only 61 organisations globally who have achieved this accolade.Top-five safety focus areas will continue into 2020/2021Following the completion of our Working at Height safety review, we have revised out Top 5 Safety Risks by replacing Working at Height with violence and assault against our team members in the workplace. Covid-19 has unfortunately exacerbated the prevalence of violence against our team members and we are increasing our focus on measures to protect our frontline teams. Fire safety Contractor safetyElectrical safetyDriving for workViolence and assault against our team members in the workplaceIncidents There were 12 RIDDOR reportable accidents in 2020. Five of these were Covid-19 incidents reported under the category ‘Disease’ in properties in Manchester and Liverpool during October 2020. They occurred whilst Public Health England supported both cities through initial unprecedented outbreaks of Covid-19 in student accommodation in these cities. Three of the RIDDOR accidents related to slip and trip, one related to manual handling, one related to contact with machinery, one related to being caught/carried away in something and one related to being struck against something. All incidents have been comprehensively investigated, with preventative measures put in place to prevent a reoccurrence and lessons learned communicated. The introduction of our new H&S Software system and its data analytics will help provide us clearer insight which will assist in the trending and monitoring of safety incidents data going forward with a focus on near miss reporting as a leading indicator of potential areas of risk. Safety in our Development SitesIn our development activity, there were three RIDDOR reportable injuries and 50 minor incidents in 2020. This represents good safety performance against the industry norm which is especially pleasing with the pressures of the Covid-19 pandemic. This performance is within our Unite internal benchmarks – as follows:PropertyTotal Hours WorkedNon-reportable IncidentsReportable IncidentsArtisan Heights325,472160White Rose View Leeds762,759142White Rose View House 545,590151Middlesex Street53,18230BRI Bristol30,52020Total1,717,523503IncidentsKPI1Benchmark3 RIDDOR0.170.3050 Minor0.295.001 KPI calculated as: No of incidents worked x 100,000 hours / hours worked Mental health and wellbeing We launched our employee wellbeing strategy and training in September 2020 starting with ‘Train the Trainer’ sessions for our nominated Wellbeing champions across the business. ‘The Healthy Work Company’ was appointed our new external specialist partner for this important initiative and they have rolled out training to the operational leadership team. We are also providing professional counselling support for any team members who require it following a Covid-19 outbreak at our properties as it is recognised that the current ‘post-incident’ service currently on offer from our Employee Assistance Programme would be beneficial in these circumstances. We have released our updated Flexible Working Policy, Working from Home Guidelines and home working DSE, all of which have been updated in line with the latest Government restrictions. The use of our head offices in Bristol (South Quay House) and London (Swan House) will continue to be on a strictly prioritised basis and in line with Government restrictions, where team members have highlighted a welfare need or do not have an adequate DSE set-up/space at home. 118The Unite Group PLC Annual Report & Accounts 2020HEALTH & SAFETY COMMITTEE CONTINUEDProperty development Despite the Covid-19 disruption and lockdown restrictions, we made progress in our development pipeline during 2020 and delivered three buildings for the 2020/21 academic year. Throughout the pandemic, we worked closely with our contractors to ensure our sites were safe to operate and introduced various measures such as reducing the number of operatives on site to help social distancing. We have also worked closely with our supply chain to mitigate delays in product and material delivery to our development sites. With testing becoming more available, we now provide all construction operatives and management twice weekly onsite tests. In addition to our Covid-19 safety focus and delivering schemes in a uniquely challenging environment, we also focused on:• Wellbeing – started an operative wellbeing programme through external specialists to promote the support of British Safety Council audit recommendations implemented across developments and supply chain improving the way we deliver our developments• Reporting – overhaul of our management KPIs and reporting, tracking trends, instigating target audits and using monthly improvement drives• Appointment of a new H&S CDM / Clients Rep – Faithful+Gould Limited appointed to drive consistency and improvement across all development and estates projects• Integration of project delivery – bringing a unified approach to the delivery of all construction across Estates, refurbishment, development and asset management• Review and completion of BSC Construction audit actions – one of the key actions from the audit was on management of wellbeing on development sites. We have engaged with an external specialist to help develop a strategy and provide mental health and counselling support to contractors and their sub-contractors.• Continuing to deliver year-on-year improvement in our H&S KPIs across all our development sitesProfessor Steve SmithChair – Health and Safety Committee16 March 2021119OverviewStrategic ReportGovernanceFinancial StatementsOther InformationLike many companies, year was disrupted by Covid-19.our 2020 fnancial Remuneration Committee Chair’s overviewOn behalf of the Board, it is my pleasure to present the Directors’ Remuneration Report for 2020. As in previous years, this report is split into three sections: this Annual Statement, the Policy Report and the Annual Report on Remuneration. Our remuneration policy was last submitted to shareholders at the 2019 AGM, receiving 96.85% votes in favour. No changes are proposed to the policy this year, but we have reproduced the policy report in full over pages 126 to 134 for both ease of reference and in order to provide context to the decisions taken by the Committee during the year.120The Unite Group PLC Annual Report & Accounts 2020120REMUNERATION COMMITTEEdigital check-ins to reduce physical contact and providing free early check-ins to allow those arriving from Covid-restricted areas to quarantine in time for the start of the academic year. Working closely with University partners, the Company will continue to adapt and evolve its approach as the pandemic progresses, with a recent example being the 50% discount offered to students who do not take up residence announced in early 2021. The Board strongly believes that our response to-date will serve to enhance our long-term brand reputation among the student and Higher Education communities. None of this would have been possible without the dedication and hard work of our exceptional colleagues, and I would like to thank all Unite employees – including the 381 new joiners from the Liberty Living acquisition – for their unerring commitment to our customers during this difficult time. In recognition of our operations having continued at full capacity this year, with no employees furloughed and no Government support utilised, the management team implemented a number of additional initiatives to assist our colleagues during this period. Examples include providing additional special leave to those employees with caring responsibilities, flexible working practices, supporting working from home wherever possible with the purchase of necessary equipment and appproriate health and safety assessments, and extending our cycle to work scheme to be available all year round. Performance this year has understandably been impacted by the pandemic, with most financial KPIs showing a year-on-year decline. A short-term cash shortfall resulting from our commitment to students to forgo rent during the final semester of 2019/20 was mitigated by the deferral of development and non-essential operational capital expenditure, as well as a number of additional cost savings. The Board and management agreed early on that the The Board also took the difficult decision to cancel the safety and wellbeing of the students who live with us final dividend for 2019 and the interim dividend for 2020 to and our employees should remain our top priority in any preserve cash within the business. Despite the significant response to the pandemic. With the impact on face-to-disruption caused by Covid-19, the business has delivered face teaching becoming apparent, Unite acted quickly and strong performance heading into the 2020/21 academic decisively to offer to forgo rent for the final semester for any student choosing to return home for the remainder year and we remain optimistic about the prospects for future growth. of the 2019/20 academic year – the first UK Student Accommodation provider to do so. At the same time, we While Covid-19 particularly impacted our 2020 financial recognised that for many students our accommodation is results, there were a number of highlights for Unite their home, and the importance, therefore, of continuing to from an operations perspective, including the successful keep all of our buildings open and our services and support integration of Liberty Living, the continued investment in available. For those students unable to return home at the the safety and wellbeing of our people and assets through end of their tenancies, we pledged to continue to provide implementation of learnings from our 2019 BSC 5-star free accommodation over the summer months, with a audit, and most recently, the development of an ambitious welfare support scheme established to respond to reports new Sustainability Strategy with objectives linked to areas of downward trends in student wellbeing and increased including the environment, health and wellbeing, and loneliness as a result of the pandemic. diversity and inclusion. The successful Placing undertaken in June 2020 will support continued investment in Unite’s Our response for the 2020/21 academic year has been market-leading platform to drive future growth, and about flexibility in a time of continued uncertainty: demonstrates the confidence of investors in our approach.providing flexible booking dates and the abilityto move bookings to a different city where required, conducting 2020 performance and reward Remunera�on Commitee MembersNumber of Mee�ngsAtendanceElizabeth McMeikan Phil WhiteRoss Paterson Richard AkersDame Shirley PearceChair of the Remuneration CommitteeChairmanNon-Executive DirectorNon-Executive DirectorNon-Executive Director4100%121OverviewStrategic ReportFinancial StatementsOther InformationGovernanceWith regards to remuneration for the year, the Board relative TSR targets. Any award vesting is required to be agreed to a 30% reduction to salaries and pension held for an additional two-year period, in line with our contributions for Executive Directors and a 30% reduction remuneration policy. The Committee carefully considered in fees payable to Non-Executive Directors for a four-the appproriateness of making these awards in light of the month period from 1 April 2020. Similar salary reductions pandemic, concluding that as a share-based incentive with of between 10% and 20% were volunteered by senior no immediate cash cost, and with vesting dependent on management over the same period.stretching three-year targets, the granting of these awards remained appropriate and would help to incentivise The Chief Executive and Chief Financial Officer also felt it participants to drive Company performance at a time when would be inappproriate to participate in the annual bonus such focus was needed most. In making this decision, the scheme for 2020. Accordingly,asannounced o n 22 April Committee agreed that there would be no change to the 2020, this scheme was suspended for Richard Smith and performance conditions or targets originally intended to Joe Lister. With the agreement of the Board, the Executive appyl to the awards (as disclosed in the 2019 Directors’ Directors proposedthat a discretionary bonus scheme Remuneration Report), and that, therefore, any vesting should continue to operate, with payouts directed towards in 2023 would require truly exceptional performance front line employees and functional support teams to over the remainder of the performance period. reflect their hard work and commitment to customer The Committee also noted its overarching discretion service during this most difficult of years. A total of under the Remuneration Policy and committed to review c.£1.6 million (2019: c.£5.7 million – all employee bonus any payout from these awards to ensure that it does not excluding the Executive Directors) has been paid to eligible reward windfall gains, and reflects the performance of employees as part of this arrangement.the Company and the experience of stakeholders over the period. Further details are included on pages 142 and 143. LTIP awards made in April 2018 were tested for performance at 31 December 2020. These awards were based equally on EPS, TAR and TSR outperformance of The Committee believes that the remuneration policy the FTSE350 Real Estate Supersector Index. Over the continues to effectively support Unite’s short and long-term three-year performance period Unite’s relative TSR strategic objectives and promote shareholder alignment.outperformed the comparator Index, whilst TAR and EPS performance were below threshold. Overall vesting of There will be no companywide pay increase for 2021 and the 2018 awards was therefore one-third of maximum. In accordingly Executive Director salaries will remain at approving this outcome, the Committee was satisfied that £472,313 for the Chief Executive and £384,441 for the Chief the vesting level reflects the underlygpin erformance of the Financial Officer. Reflecting our commitment to being an Company and the progress made over the last three years. accredited Real Living Wage employer, entry level salaries The Committee was also satisfied that the modest vesting will increase in line with the rates set by the Living Wage represented a fair outcome considering the Covid-19 Foundation (c.1% in London and c.2% in the rest of the UK).context and the overall experience of stakeholders this year. Awards vesting will be subject to a two-year holding Following a review of Unite’s employee pension offering period following formal vesting in April 2021, and will only in 2018, we revisited the contribution rates of Executive be released to Executive Directors in April 2023. Further Directors last year andcommitted that, consistent with details are included on page 138. best practice, these would be aligned with the workforce over a reasonable period. Accordingly, effective 1 January Taken as a whole, the Committee is satisfied that overall 2021, Richard Smith and Joe Lister will receive a maximum pay outcomes in respect of the year ended 31 December pension contribution of 17% of salary, with two further 2020 are appproriate and accordingly we have not reductions scheduled: to a maximum of 14% of salary applied any discretion to this year’s incentive out-turns. A significant proportion of Executive Director pay is dependent on delivery against stretching short and long-term targets aligned with Company strategy. The Executive Directors will be eligible to participate in the Committee fully supported the decision to suspend the annual bonus plan in 2021, with a maximum opportunity annual bonus scheme for Executive Directors and focus of 140% of salary and with performance assessed against available funds on the broader workforce instead, whilst a range of key financial and non-financial measures. There modest vesting under the LTIP reflects, in our view, an will be two principal changes to the operation of the scheme appproriate outcome for having continued to outperform this year: Loan to Value (LTV) will replace net debt to EBITDA sector peers over the last three years.in respect of 20% of the potential annual bonus and the 10% weighting on personal / team objectives will be reallocated Finally, Executive Directors were each granted an award to a new metric, Unite’s Global Real Estate Sustainability under the LTIP in April 2020 which will vest based on Benchmark (GRESB) rating. Use of our GRESB rating is performance over the three financial years to 31 December intended as a first step in introducing ESG metrics into 2022 measured against challenging EPS, relative TAR and Implementation of Policy for 2021effective 1 January 2022 and to a maximum of 11% of salary effective January 2023. 122The Unite Group PLC Annual Report & Accounts 2020REMUNERATION COMMITTEE CONTINUEDUnite’s incentives and reflects the recent announcement Although we recognise that this is very much a function of the Group’s ambitious new Sustainability Strategy. The of differing staff models, it will nevertheless continue to Committee will, in approving outcomes under this element inform our decision-making around Executive Director of the annual bonus, also take into account performance remuneration going forward. against a range of indicators linked to Diversity & Inclusion, Details of our gender diversity across the Group are another key element of the Sustainability Strategy. The provided on page 53 and page 107 and the Committee is operation of the LTIP will be unchanged, with awards of pleased to note further progress in Unite’s mean gender 200% of salary vesting based on three-year EPS, relative pay gap for 2019/20 as a result of a meaningful increase TAR and relative TSR targets and a mandatory two-year in female representation in the upper quartile of pay. holding period applygin. Reflecting continued uncertainty, Reflecting a stepchage n in the focus on inclusion and the Committee has taken the decision to delay targetsetting diversity, Unite has recently signed up to the Race at for the Adjusted EPS element of the award and to instead Work Charter to help drive a sense of belonging for all disclose details via a market announcement once these our employees across the organisation irrespectiveof targets have been determined. Further details, including race and gender. In addition, from 1 January 2021, we will the approach we will take in assessing windfall gains on LTIP include for the first time, gender and ethnicity in all senior outcomes, are included on page 144.leaders’ bonus KPIs. The Committee remains supportive Following a review by the Chairman and Executive Directors, of Unite’s commitment to building a diverse, inclusive and Non-Executive Director fee levels will remain unchanged gender-balanced workforce and are encouraged by further for the 2021 financial year, save for one amendment. The progress made in this area during 2020.fee for the Chair of the Health and Safety Committee will be increased from £7,285 to £10,300 per annum to align with the fees for other Board Committee chairs and to reflect the As noted in last year’s report, the Board added further importance of this role and Committee to Unite’s business. Higher Education sector experience this year with the The new Chairman of the Board’s fee has been set at appointment of Professor Sir Steve Smith as a Non-£225,000 per annum by the Remuneration Committee with Executive Director and Chair of the Health and Safety effect from 1 April 2021 to reflect his experience, a review of Committee in April 2020. the time commitment required of the role at Unite, and the After extending his tenure following the Liberty Living increase in size and complexity of the Group in recent years. acquisition, we announced in October 2020 that Phil White, The Chair of our newly established Sustainability Committee will also receive a Committee Chair fee of £10,300 per 2021. Phil will be succeeded as Chairman by Richard annum, consistent with other Committee Chair fees. Full Huntingford, who joined the Board as Chairman Designate details are included on page 145.on 1 December 2020Fees paid to Steve and Richard are in line with the fees paidto The Committee continues to monitor pay and practices the other Non-Executive Directors, as disclosed on page 145.across the wider workforce when considering the remuneration of Executive Directors. The Group People Director is invited to attend Committee meetings ona Having been approved by shareholders in 2019, the 2022 regular basis to provide updates on workforce initiatives AGM will mark the third anniversary of the adoption of the and offer an employee perspective to the Committee’s current Directors’ Remuneration Policy. In accordance with deliberations. This year the Committee’s work included UK reporting regulations, we will be required to submit a reviewing actions taken for employees as a result of new Policy to shareholders for approval at this time. The the pandemic and approving the proposal to operate a Committee is therefore planning to conduct a full review discretionary bonus scheme to reward staff for their hard of the existing remuneration arrangements during 2021 work during the year.and will look to engage major shareholders to seek their input in due course. We will continue to monitor market For the second time, we have reported ratios of CEO pay developments throughout the 2021 AGM season and will to the wider population, as disclosed on page 140. The consider the appproriateness of any emerging trends for headline ratios have fallen substantially this year, driven Unite. I hope that you find this report a clear account of the predominantly by reduced vesting under the long-term Committee’s decisions for the year and would be happy to incentive plan and the cancellation of the bonus scheme answer any questions you may have at the upcoming AGM.for Executive Directors. We have continued to also disclose ratios of fixed pay and pay excluding long-term incentives which we consider to be more comparable with employees across the Group. During the year, the Committee assessed the 2019 ratios against reported market data and noted that our figures are higher than many other FTSE250 companies. 16 March 2021Board changesWorkforce remuneration considerationsLooking aheadElizabeth McMeikanChairman, would step down from the Board on 31 March Chair of Remuneration Committee123OverviewStrategic ReportFinancial StatementsOther InformationGovernanceRemuneration in respect of 2020Overview of policyImplementation of policy in 2021Base salary• 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• Salaries voluntarily reduced by 30% for a four-month period from 1 April 2020. • 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 unchanged, as follows:– CEO, Richard Smith = £472,313– CFO, Joe Lister = £384,441 See page 136 See page 127 See page 143Pension, benefits• Pension contributions (or equivalent cash allowance) of up to:– CEO, Richard Smith = £91,710– CFO, Joe Lister = £74,650• Pensions voluntarily reduced by 30% for a four-month period from 1 April 2020.• Benefits in line with policy.• For existing Executive Directors: commitment to phase down contributions (or equivalent cash allowance) to the workforce rate by 1 January 2023.• 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 (or equivalent cash allowance) reduced to a maximum of 17% of salary for CEO and CFO.• No change to benefits for 2021. See page 136 See page 127 See page 143Annual bonus• Annual bonus scheme cancelled for Executive Directors in April 2020.• 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.• 2021 bonuses to be based:– 25% on adjusted EPS– 25% on TAR per share– 20% on Loan to Value– 10% on customer satisfaction– 10% on University reputation – 10% on GRESB rating See page 137 See page 128 See page 143LTIP• 2018 LTIP vested at 33.33% based on:– Relative TSR outperformance of the FTSE350 Real Estate Index of 13.0% p.a. vs. a stretch target of 9.0% p.a; – Total Accounting Return over the period 2018–20 below the threshold target; and– 2020 adjusted EPS below the threshold target.• 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.• Malus and clawback provisions apply.• Awards of 200% of salary to be made to each Executive Director in April 2021.• Performance to be measured over the period 1 January 2021 to 31 December 2023 against EPS, relative TAR and relative TSR targets, each weighted one-third.• Two-year holding period will apply to all vested shares. See page 138 See page 129 See page 144Overview of Unite remuneration policy and implementation124The Unite Group PLC Annual Report & Accounts 2020DIRECTORS’ REMUNERATION REPORTThis 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 136 to 138), Scheme interests awarded during the financial year (page 142), Payments to past Directors (page 143), Payments for loss of office (page 143) and the statement of Directors’ shareholdings and share interests (pages 145 and 146). The remaining sections of the report are not subject to audit.The 2018 UK Corporate Governance Code sets out principles against which the Committee should determine the Policy for executives. A summary of the principles and how the Unite’s Remuneration Policy reflects these is set out below:PrincipleApproachClarity – Remuneration arrangements should be transparent and promote effective engagement with shareholders and the workforce.The Committee operates a consistent remuneration approach that is well-understood internally and externally. The Committee regularly engages with major shareholders on executive remuneration and undertook a detailed consultation during the design of the current Policy.Simplicity – Remuneration structures should avoid complexity, and their rationale and operation should be easy to understand.The Group operates a market-standard remuneration structure consisting of fixed pay, an annual bonus and a single long-term incentive. The annual bonus scheme was simplified as part of the last Policy review through the removal of the personal performance multiplier and four-point performance schedule. Risk – Remuneration arrangements should ensure reputational and other risks from excessive rewards, and behavioural risks that can arise from target-based incentive plans, are identified and mitigated.Each year, incentive targets will be set which the Committee believes are stretching and achievable within the risk-appetite set by the Board. The Committee retains full discretion to override formulaic incentive outcomes under both the annual bonus and long-term incentive in the event that this would produce a result inconsistent with the Company’s remuneration principles.All variable incentives incorporate recovery provisions (malus and clawback) that allow the Committee to reduce the outcomes, potentially down to zero, in specified cases. The Committee believes that these triggers are appropriately wide-ranging and enforceable.Alignment to culture – Incentive schemes should drive behaviours consistent with Company purpose, values and strategy.All permanent employees participate in the annual bonus, and share the same corporate performance metrics to ensure cultural alignment across the Group. We believe that aligning remuneration across the business is a key element of aligning our culture, fulfilling our values and being a strong driver of business performance.Predictability – The range of possible values of rewards to individual Directors and any other limits or discretions should be identified and explained at the time of approving the policy.The Committee maintains clear caps on incentive opportunities and will use its available discretion if necessary. Proportionality – The link between individual awards, the delivery of strategy and the long-term performance of the Company should be clear. Outcomes should not reward poor performance.The Committee ensures performance metrics are clearly aligned with the Group’s strategy each year, maintaining an appropriate balance between fixed pay, short- and long-term incentive opportunities. Targets are set to be stretching but achievable, within the Board’s risk appetite. Details of our approach to measure selection and target setting is included as a note to the Policy Table.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 this year:• References to financial years have been updated where appropriate;• Pay-for-performance scenario charts have been updated to reflect 2021 salaries and pension contributions; and• New Non-Executive Director service contract dates have been added.125OverviewStrategic ReportGovernanceFinancial StatementsOther InformationDirectors’ Remunera�on PolicyThe Group aims to balance the need to attract, retain and motivate Executive Directors and other senior executives of an appproriate calibre with the need to be cost effective, whilst at the same time rewarding exceptional performance. 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 propotioof remuneration should be tied to the achievement of specific andstretching performance rn 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, wipth erformance measured over clearly specified timescales, encouraging executives to take action in line with the Group’sstrategic 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 The Committee has designed a remuneration policy that balances those factors, taking account of prevailing best practice, which came into effect from that date. • • • • 126The Unite Group PLC Annual Report & Accounts 2020DIRECTORS’ REMUNERATION REPORT CONTINUEDPolicy tableFunctionOperationOpportunityPerformance metricsBase 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.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.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. NonePension 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.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:• Richard Smith: £91,710• Joe Lister: £74,650Company contribution levels will be reduced from 1 January 2021, 2022 and 2023 to an equivalent of up to 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).NoneBenefits To provide non-cash benefits which are competitive in the market in which the executive is employed.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.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).NoneSAYE To encourage the ownership of shares in Unite.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.Savings are capped at the prevailing HMRC limit at the time employees are invited to participate.None127OverviewStrategic ReportGovernanceFinancial StatementsOther InformationFunctionOperationOpportunityPerformance metricsPerformance 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.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; and• 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.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 2021, financial metrics and non-financial metrics will make up 70% and 30% of the total annual bonus opportunity respectively. Further details of the measures, weightings and targets applicable are provided on page 143.128The Unite Group PLC Annual Report & Accounts 2020DIRECTORS’ REMUNERATION REPORT CONTINUEDFunctionOperationOpportunityPerformance metricsLTIP To drive sustained long-term performance that supports the creation of shareholder value.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.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 grant 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, ie to ensure the outcome is a true reflection of the performance of the Company.Details of the measures and targets to be used for 2021 LTIP awards are included in the Annual Report on Remuneration on page 144.Notes to the policy tableThe 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 settingMeasures 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. 129OverviewStrategic ReportGovernanceFinancial StatementsOther InformationTargets applygin 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, tgarets are typically in line with the upper end of market consensus.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 100% 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.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 (excludign 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-termalignment 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 Director's 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.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 appyl 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. 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.Remuneration policy for other employeesShareholding guidelinesMalus and clawbackNon-Executive Director remunerationNEDDate of service contractP White10 January 2009E McMeikan13 November 2013R Paterson21 September 2017R Akers20 July 2018I Beato20 July 2018S Pearce14 October 2019T Jackson29 November 2019S Smith14 October 2019R Huntingford26 October 2020130The Unite Group PLC Annual Report & Accounts 2020DIRECTORS’ REMUNERATION REPORT CONTINUEDThe Non-Executive Directors are not eligible to participate in the Company’s performance-related bonus plan, long-term incentive plans or pension arrangements.Details of the policy on fees paid to our Non-Executive Directors are set out in the table below: FunctionOperationOpportunityPerformance metricsFees 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, Health & Safety and, from 2021, Sustainability). 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 2021 are set out in the Annual Report on Remuneration.Fee levels will be next reviewed during 2021, with any increase effective 1 January 2022. 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. None.Pay for performance scenariosThe 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 2021. Pension contributions reflect the agreed reduction to a maximum of 17% of salary effective 1 January 2021. 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 2021 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 (ie 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. Salary, pensions, benefitsMinimumRemuneration (£’000)£3,000£1,000£2,000£2,500£500£1,500£0MinimumOn-target50.1%50.1%29.0%20.7%26.2%26.2%30.3%43.3%21.5%21.5%24.9%53.4%100.0%100.0%£467£929£1,774£2,159£569£1,136£2,175£2,64729.1%30.4%25.0%20.8%43.4%53.5%Richard SmithJoe ListerOn-targetMaximumMaximumMaximum +50% share price inc. for LTIPMaximum +50% share price inc. for LTIPAnnual bonusLTIP131OverviewStrategic ReportGovernanceFinancial StatementsOther InformationThe ‘minimum’ scenario reflects base salary, pension and benefits (ie 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 valugin this element of pay at 300% of salary).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:In determining appproriate 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.Approach to recruitment remunerationExternal appointment to the BoardMaximum annual ComponentApproachgrant valueBase salaryPensionSAYEPerformance Related Annual BonusLTIPThe 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.New appointees will receive Company pension contributions or an equivalent cash time of appointment (currentyl 11% of salary).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.The structure described in the policy table will appyl to new appointees with the relevant 140% of salaryfor the individual element will be tailored to each executive.New appointees will be granted awards under the LTIP on the same terms as other 300% of salaryexecutives, as described in the policy table. The normal agggreate limit of 200% of salary will apply, save in exceptional circumstances where up to 300% of salary may be awarded.supplement aligned to that o�ered to a majority of employees across the Group at the New appointees will be eligible to receive bene�ts which may include (but are not limited maximum being pro-rated to re�ect the proportion of employment over the year. Targets Benefts132The Unite Group PLC Annual Report & Accounts 2020DIRECTORS’ REMUNERATION REPORT CONTINUEDInternal promotion to the BoardIn 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. With regards to pension contributions, as above, this would be aligned to that offered to a majority of employees across the Group at the time of promotion to the Board. The Remuneration Policy for other employees is set out on page 130. Incentive opportunities for below Board employees are typically no higher than Executive Directors, but measures may vary to provide better line-of-sight.Non-Executive DirectorsIn recruiting a new Non-Executive Director, the Remuneration Committee will utilise the policy as set out in the table on page 131. 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 controlExecutiveDate of service contractJ Lister28 March 2002R Smith28 September 2011Executive 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.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.133OverviewStrategic ReportGovernanceFinancial StatementsOther InformationCalculation of vesting / paymentAnnual bonusCash elementIn 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 elementDeferred bonus shares will normally be retained and will be released in full following completion of the applicable two- or three-year deferral period.LTIPLeavers before the end of the performance periodIn 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.Leavers after the end of the performance periodAny awards in a holding period will normally vest following completion of the holding period.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 c.£57k in respect of his service for 2020. Richard Smith was appointed as a Non-Executive Director on the Board of Stenprop Limited effective 4 November 2020 and received a fee of c.£6k in respect of his service for 2020.Consideration of conditions elsewhere in the CompanyWhen 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 Committee is planning to conduct a full review of the existing remuneration arrangements during 2021, ahead of the triennial policy shareholder vote, and will look to engage major shareholders as appropriate to seek their input in due course. The following section provides details of how Unite’s remuneration policy was implemented during the financial year ended 31 December 2020 and how it will be implemented in 2021.134The Unite Group PLC Annual Report & Accounts 2020DIRECTORS’ REMUNERATION REPORT CONTINUEDRemuneration Committee membership in 2020The 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 2020, the Remuneration Committee comprised five independent Non-Executive Directors. • Elizabeth McMeikan (Committee Chair)• Phil White• Ross Paterson• Richard Akers• Dame Shirley PearceCertain 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 and Richard Huntingford was invited to attend the December meeting following his appointment as Chairman Designate. No individuals are involved in decisions relating to their own remuneration. The Remuneration Committee convened four times during the year and details of members’ attendance at meetings are provided in the Corporate Governance section on page 99. Key activities of the Remuneration Committee in 2020 included:• Reviewed and approved the Executive Directors’ performance against 2019 annual objectives and 2017 LTIP targets; determined bonuses payable, and approved LTIP vesting;• Approved the Directors’ Remuneration Report for 2019;• 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 and approved grant of awards under the LTIP in April 2020;• Discussed and approved remuneration actions in respect of Covid-19, including temporary reductions to salaries and pensions for Executive Directors, and temporary reductions to fees for the Chairman and Non-Executive Directors;• Considered remuneration market trends and corporate governance developments;• Reviewed and approved the new Chairman’s fee with effect from 1 April 2021;• Reviewed the CEO pay ratio and gender pay data and disclosures; and• Commenced preparation of the 2021 Directors' Remuneration Report.AdvisorsMercer | Kepler (‘Mercer’) was appointed as the Committee’s independent advisor following a competitive tender process in 2014, and was retained during the 2020 financial year. The Committee undertakes due diligence periodically to ensure that Mercer remains independent and that the advice provided is impartial and objective. During 2020, Mercer provided independent advice including support on the review of executive remuneration arrangements for 2020, updates on the external remuneration environment, performance testing for long-term incentive plans and Directors’ Remuneration Report drafting support. 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 2020 were £36,788 (2019: £60,830) on the basis of time and materials.135OverviewStrategic ReportGovernanceFinancial StatementsOther InformationFollowing the lead adviser moving to Ellason LLP, Ellason LLP was appointed as the independent remuneration advisor to the Committee effective 1 January 2021. Both Mercer and Ellason are members and signatories of the Code of Conduct for Remuneration Consultants, details of which can be found at www.remunerationconsultantsgroup.com. None of the individual Directors have a personal connection with either Mercer or Ellason. Summary of shareholder voting at AGMsThe following table shows the results of the advisory vote on the 2019 Annual Report on Remuneration at the 2020 AGM, and the binding vote on the 2019 Directors’ Remuneration Policy at the 2019 AGM:2019 Annual Report on RemunerationDirectors’ Remuneration PolicyFor (including discretionary)297,901,75093.04%213,670,74196.85%Against22,290,9286.96%6,938,9473.15%Total votes cast (excluding withheld votes)320,192,678220,609,688Votes withheld3,961,2540Total votes cast (including withheld votes)324,153,932220,609,688Single total figure of remuneration for Executive Directors (audited) The table below sets out a single figure for the total remuneration received for 2019 and 2020 by each Executive Director who served in the year ended 31 December 2020:ExecutivesSalary Note 1Taxable benefits Note 2Pension Note 3Annual Bonus Note 4LTIP Note 5Other Note 6Total Single FigureTotal FixedTotal VariableR Smith 2020425,08216,20273,7380377,3390892,361515,022377,3392019456,69216,19580,957519,3611,258,7044,4992,336,408553,8441,782,564J Lister 2020345,99717,49859,6260307,1662,248732,535423,120309,4152019371,72616,92866,084422,7361,024,72201,902,196454,7381,447,4581. 2020 figure reflects the 30% reduction to salaries for Executive Directors which applied for a four-month period from 1 April 2020.2. Taxable benefits for 2020 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. 3. Pension figures include contributions to the UNITE Group Personal Pension Scheme and cash allowances, where applicable. The 2020 figure reflects the 30% reduction to pension contributions for Executive Directors which applied for a four-month period from 1 April 2020.4. As announced on 22 April 2020, the 2020 annual bonus scheme was suspended for the Chief Executive and Chief Financial Officer.5. 2019 figures: The 2017 awards are valued based on the market price on the date of vesting (10 April 2020) of 874.0p. These amounts have been revised downwards from last year’s report to reflect the actual share price on the date of vesting. 2020 figures: For the 2018 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 2020 of 971.0p. See following sections for further details. The value of the vested 2018 awards shown reflects the impact of a c.20% 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.16% of the LTIP value, equivalent to c.£59k for Richard Smith and c.£48k for Joe Lister. For both 2019 and 2020, LTIP figures include the value of dividends for vested awards, in both cases paid as additional shares. Awards in the form of HMRC-approved options are valued based on the embedded gain at vesting (ie subtracting the applicable exercise price) and attract no dividends.6. ‘Other’ includes the embedded value of SAYE options at grant.136The Unite Group PLC Annual Report & Accounts 2020ANNUAL REPORT ON REMUNERATIONSingle total figure of remuneration for Non-Executive Directors (audited)The table below sets out a single figure for the total remuneration received for 2019 and 2020 by each Non-Executive Director who served in the year ended 31 December 2020:Non-Executives Note 1Base fee Note 2Committee Chair / SID fees Note 2Taxable benefits Note 3Total Single FigureP White2020179,302–252179,5552019193,420–1,630195,050E McMeikan202044,49614,50813359,137201948,00015,65033463,984R Paterson202044,4969,270953,775201948,00010,000–58,000R Akers202044,496–944,505201948,000–49948,499I Beato202044,496––44,496201948,000–25548,255S Pearce(i)202044,496–944,50520198,000––8,000T Jackson(ii)2020––––2019––––S Smith(iii)202032,1364,735–36,8712019––––R Huntingford(iv)20204,120––4,1202019––––1. Changes in Non-Executive Directors and responsibilities as follows:i. Dame Shirley Pearce joined the Board on 1 November 2019.ii. 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.iii. Professor Sir Steve Smith joined the Board on 1 April 2020 and became Chair of the Health and Safety Committee from this date.iv. Richard Huntingford joined the Board as Chairman Designate on 1 December 2020.2. 2020 figures reflect the 30% reduction to base fees and additional fees for Non-Executive Directors which applied for a four-month period from 1 April 2020.3. Taxable benefits relate primarily to certain travel expenses and accommodation.Incentive outcomes for the year ended 31 December 2020 (audited)Annual Bonus in respect of 2020 performanceThe maximum bonus opportunity for each Executive Director in 2020 would have been 140% of base salary. However, reflecting the Covid-19 context and the decision to suspend dividends, Richard and Joe felt it would be inappropriate to participate in the annual bonus scheme for 2020. Accordingly, as announced on 22 April 2020, this scheme was suspended for the Chief Executive and Chief Financial Officer. A total of c.£1.6 million (2019: c.£5.7 million – all employee bonus excluding the Executive Directors) has been paid to below-Board employees as part of a discretionary bonus arrangement proposed by management and approved by the Committee, with payouts directed towards front line employees and functional support teams to reflect their hard work and commitment to customer service during the year.137OverviewStrategic ReportGovernanceFinancial StatementsOther Information2018 LTIP vesting (vested on performance to 31 December 2020)Awards in 2018 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 Supersector Index. There was no retest provision. Further details, including vesting schedules and performance against each of the metrics, are provided in the table below:MeasureWeightTargetsOutcomeVest %2020 Adjusted EPS1/30% vesting below 42.1 pence 25% vesting for 42.1 pence 100% vesting for 49.2 pence or more; Straight-line vesting between these points25.5 pence0.0%TAR per share (2018–2020)1/30% 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 points21.9% (6.8% p.a.)0.0%TSR outperformance of the FTSE350 Real Estate Supersector Index1/30% 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 pointsIndex +13.0% p.a. (41.6% return)100.0%Note: As disclosed in last year’s report, the EPS target range was increased to reflect the Liberty Living acquisition plan around earnings accretion and the positive benefit of the IFRS 16 accounting standard change. The original target range was 40–46 pence.Total LTIP vesting (sum product of weighting and vest %)33.33%The performance period for the each of the elements ended on 31 December 2020. The awards will vest on the third anniversary of the date of grant and will be subject to an additional two-year holding period. In approving an overall outcome of 33.33% of maximum, the Committee satisfied itself that the vesting level reflects the underlying performance of the Company and the progress made over the last three years. Although 2020 EPRA EPS and TAR have been negatively impacted by the Covid-19 pandemic resulting in no vesting under these elements, Unite has continued to materially outperform sector peers in generating returns for shareholders over the longer-term. The Committee also took into account the broader pandemic context and the overall experience of stakeholders this year, as outlined in the Chair’s Statement.ExecutiveInterests heldVesting %Interests vestingDate vestingAssumed market priceEstimated value...... of which, value due to share price growthNote 1Note 2Richard Smith110,99733.33%36,99910 April 2021971.0p£377,339£59,187 (16% of total)Joe Lister90,47130,15710 April 2021£307,166£48,242 (16% of total)1. In each case, interests held includes 739 HMRC-approved options under the ESOS.2. Estimated value of HMRC-approved options is based on embedded gain (ie after subtracting 811.0p 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 136 captures the full number of interests vesting (ie 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 2020 of 971.0p. The actual value at vesting will be trued-up in the 2021 Annual Report on Remuneration. The estimated values include the impact of a c.20% increase in the assumed market price compared to the share price at grant (811.0p). 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 136, and equate to £20,086 and £16,346 for Messrs. Smith and Lister respectively. 138The Unite Group PLC Annual Report & Accounts 2020ANNUAL REPORT ON REMUNERATION CONTINUEDPercentage change in remuneration of Directors and employeesThe Committee has previously disclosed year-on-year changes in salary, benefits and annual bonus for the Chief Executive Officer compared with that of all employees. In accordance with the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 (applying to financial years commencing on or after 10 June 2019), this analysis has now been expanded to cover each Executive Director and Non-Executive Director. This table will be built up over time to display a five-year history. Executive Director remuneration includes base salary, taxable benefits and annual bonus (where eligible). Non-Executive Director remuneration includes base fee and any additional fees paid, and taxable benefits. The pay for all employees is calculated using the increase in the earnings of full-time employees for tax years 2019 and 2020. The analysis excludes part-time employees and is based on a consistent set of employees, ie the same individuals appear in the 2019 and 2020 populations. DirectorBasic salary/total feeTaxable benefitsAnnual bonusNote 1Note 2Note 3Note 4R Smith(6.9)%0.0%(100.0)%J Lister(6.9)%3.4%(100.0)%P White(7.3)%(84.5)%n/aE McMeikan(7.3)%(60.2)%n/aR Paterson(7.3)%100.0%n/aR Akers(7.3)%(98.2)%n/aI Beato(7.3)%(100.0)%n/aS Pearce(7.3)%100.0%n/aT Jacksonn/an/an/aS Smithn/an/an/aR Huntingfordn/an/an/aAll employees4.4%2.3%(67.8)%1. Changes in Directors and responsibilities during the 2019 and 2020 financial years as follows:− Dame Shirley Pearce joined the Board on 1 November 2019.− 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.− Professor Sir Steve Smith joined the Board on 1 April 2020 and became Chair of the Health and Safety Committee from this date.− Richard Huntingford joined the Board as Chairman Designate on 1 December 2020.2. The basic salary/total fee figures shown are based on full-time equivalent comparisons. All Directors agreed a temporary 30% reduction to their salary/fees for the period of four months ended 31 July 2020 which is reflected in the year-on-year comparison. Similar salary reductions of between 10% and 20% were agreed by senior management over the same period.3. For Executive Directors, taxable benefits consist primarily of company car or car allowance and private health care insurance. For Non-Executive Directors, taxable benefits relate primarily to certain travel expenses and accommodation which, given the relatively small numbers involved, can produce sizeable % changes from year to year.4. The figures shown are reflective of any bonus earned during the respective financial year. Non-Executive Directors are not eligible to participate in the annual bonus scheme.Relative importance of spend on payThe table below shows shareholder distributions (ie dividends and share buybacks) and total employee pay expenditure for the financial years ended 31 December 2019 and 31 December 2020, along with the percentage change in both. 2020 £m2019 £m% change 2019–20Total employee pay expenditure64.751.625.4%Distributions to shareholders070.7(100)%Distributions to shareholders reflects actual payments made during the relevant financial year. Employee remuneration excludes social security costs. A significant proportion of the % change in total employee expenditure between 2019 and 2020 reflects the Liberty Living acquisition and increased headcount. 139OverviewStrategic ReportGovernanceFinancial StatementsOther InformationRelationship between the remuneration of the CEO and all employeesThe Company’s approach to remuneration is consistent for all employees.As determined last year, 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 2020 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 2020 financial year. • Total FTE remuneration for each of these individuals was then calculated to 31 December 2020 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 2020 financial 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.CEO pay ratio20202019Note 1Methodology usedBBAverage number of employees1,7561,450Ratio of CEO single figure total remuneration:– To employee at the 25th percentile42:1113:1– To employee at the 50th percentile36:196:1– To employee at the 75th percentile28:170:1Ratio of CEO base salary plus annual bonus figure:– To employee at the 25th percentile21:149:1– To employee at the 50th percentile18:141:1– To employee at the 75th percentile14:130:1Ratio of CEO base salary figure:– To employee at the 25th percentile22:125:1– To employee at the 50th percentile19:121:1– To employee at the 75th percentile14:115:1Additional detailsCEO total single figure (£’000)8922,336CEO base salary (£’000)425457Employees total pay and benefits (£’000)– at the 25th percentile21.220.6– at the 50th percentile24.624.4– at the 75th percentile32.033.5Employees base salary (£‘000)– at the 25th percentile19.618.1– at the 50th percentile22.621.7– at the 75th percentile29.429.61. 2019 CEO single figure of remuneration has been trued-up from last year’s report to reflect the actual market price on the date of vesting for 2017 LTIP awards, with ratios updated accordingly.140The Unite Group PLC Annual Report & Accounts 2020ANNUAL REPORT ON REMUNERATION CONTINUEDThe Committee notes that the statutory CEO pay ratios have fallen significantly in 2020 as compared to 2019, with the ratio of CEO total remuneration to the median employee, for example, dropping from 96:1 to 36:1. This change reflects a number of factors, most notably the suspension of the annual bonus scheme for Executive Directors and lower overall vesting under the long-term incentive scheme as compared to last year. Along with the ratios comparing total remuneration, the Committee has committed to keep under review the ratios for salary and salary plus annual bonus, and additionally track how these change over time. A significant proportion of the CEO’s remuneration is linked to Group performance and share price movements over the longer-term and as a result, it is expected that changes in the headline ratios may be volatile. Participation in the Group’s long-term incentives is currently limited to c.60 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 – and so the Committee considers this ratio, as well as the ratio comparing just salaries, to provide helpful additional context.Having reviewed these additional data points, the Committee is satisfied that the fluctuation in the headline ratios this year reflects appropriate differences in the structure of remuneration at different levels of seniority. Small reductions in the salary ratios at P25 and P50 reflect the salary reductions taken by Executive Directors between April and July this year, whilst the ratios comparing salary plus annual bonus have improved at all levels as a result of payment of discretionary annual bonuses to employees below senior management level.Finally, the Committee has reviewed Unite’s 2019 pay ratios against those reported by other UK-listed companies during the year. On this measure, it is recognised that Unite’s 2019 total pay ratios were high relative to the broader FTSE250; however, the Committee believes that these differences are driven primarily by the Group’s staffing model and the proportion of the workforce employed in our frontline teams, rather than excessive pay outcomes at a senior level. It is anticipated that the 2020 figures will be more market-aligned.Review of past performanceThe following graph charts the TSR of the Company and the FTSE350 Real Estate Supersector Index over the ten-year period from 1 January 2011 to 31 December 2020. Whilst there is no comparator index or group of companies that truly reflects the activities of the Group, the FTSE350 Real Estate Supersector 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 on page 142 details the Chief Executive’s single figure remuneration over the same period. Historical TSR performanceGrowth in the value of a hypothetical £100 holding over the 10 years to 31 December 2020£300£200£100£0£500December 2020December 2010December 2011December 2012December 2013December 2014December 2015December 2016December 2017December 2018December 2019£700£800£400£600Value of £100 invested at 31 December 2010FTSE350 Real estate Supersector IndexUnite141OverviewStrategic ReportGovernanceFinancial StatementsOther Information2011201220132014201520162017201820192020M AllanM AllanM AllanM AllanM AllanM Allan R SmithR SmithR SmithR SmithR SmithNote 1Note 2CEO single figure of remuneration (£000) £1,476£994£1,944£2,987£2,382£223 £1,239£1,456£2,131£2,336£892Annual bonus award rates against maximum opportunity75.8%63.4%84.0%89.4%88.2%n/a43.4%63.6%74.3%80.9%n/aLTIP award rates against maximum opportunity82.4%26.3%83.1%95.2%100.0%n/a100.0%96.1%81.9%97.1%33.33%1. 2019 CEO single figure of remuneration has been trued-up from last year’s report to reflect the market price on the date of vesting for 2017 LTIP awards.2. 2020 annual bonus scheme was cancelled for Executive Directors in April 2020.Scheme interests awarded in 2020 (audited) LTIPIn April 2020, 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 2020 and will end on 31 December 2022. Any awards vesting for performance will be subject to an additional two-year holding period.ExecutiveDate of grantShares over which awards granted Note 1Market price at date of awardFace valueRichard Smith23 April 2020118,129803.5p£949,167Joe Lister96,256£773,4171. Combination of HMRC-approved options under the ESOS (746) and nil cost options under the PSP calculated using a share price of 803.5p, being the closing mid-market price on the day the awards were calculated.As noted in the Chairman’s Statement, the Committee carefully considered the appropriateness of making these awards in light of the pandemic, concluding that as a share-based incentive with no immediate cash cost, and with vesting dependent on stretching three-year targets, the granting of these awards remained appropriate and would help to incentivise participants to drive Company performance at a time when such focus was needed most. Vesting of the awards is dependent on three equally-weighted measures over a three-year performance period: Adjusted EPS, relative TAR and relative TSR (in both cases measured against the constituents of the FTSE 350 Real Estate Supersector Index). Targets for each performance measure are consistent with those disclosed prospectively in the 2019 Directors’ Remuneration Report, with the Committee satisfied that any vesting in 2023 will require exceptional performance over the remainder of the performance period. Details of the vesting schedules are provided below: MeasureWeightTargets2022 Adjusted EPS1/30% 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.TAR per share ranking vs. the FTSE350 Real Estate Supersector Index (2020–2022)1/30% 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.TSR ranking vs. the FTSE350 Real Estate Supersector Index (2020–2022)1/30% 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.142The Unite Group PLC Annual Report & Accounts 2020ANNUAL REPORT ON REMUNERATION CONTINUEDThe Committee retains overarching discretion under the Remuneration Policy to approve the vesting of these awards. Any payout will be scrutinised by the Committee to ensure that it does not reward windfall gains, and reflects the performance of the Company and the experience of stakeholders over the period. Factors which the Committee may consider in making this assessment include (but are not limited to): the overall single figure of remuneration for each Executive Director in the year of vesting, the proportion of LTIP value accounted for by share price appreciation, the shape of the market recovery following Covid-19, absolute TSR levels as compared to historical FTSE and sector norms, financial and non-financial indicators, and how our shareholders, employees, customers and other stakeholders have fared over the period. Deferred annual bonusIn accordance with the Remuneration Policy, and having already achieved their respective share ownership guidelines, Messrs. Smith and Lister received £60,805 and £49,492 of their annual bonuses earned in respect of the 2019 financial year in the form of Unite shares which are deferred for a period of two years, as follows:ExecutiveDate of grantShares over which awards grantedMarket price at date of awardDate of vestRichard Smith27 February 2020 5,0671,200p27 February 2022 Joe Lister27 February 20204,1241,200p 27 February 2022SAYEDuring 2020, Joe Lister 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 148.Exit payments made in the year (audited) There have been no exit payments during the year ended 31 December 2020.Payments to past Directors (audited) There have been no payments (2019: £Nil) in excess of the de minimis threshold to former Directors during the year ended 31 December 2020 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.Implementation of Executive Director remuneration policy for 2021Base salaryThere will be no change to Executive Director salaries with effect from 1 January 2021:ExecutiveBase salary from 1 January 2020 Base salary from 1 January 2021 Percentage increaseRichard Smith£472,313£472,3130%Joe Lister£384,441£384,4410%Reflecting our commitment to being an accredited Real Living Wage employer, entry level salaries will increase in line with the rates set by the Living Wage Foundation (c.1% in London and c.2% in the rest of the UK).PensionExecutive Directors will continue to receive a pension scheme contribution, a cash allowance of equivalent cost to the company or a combination of both. With effect from 1 January 2021, total employer pension contributions will be reduced to an equivalent of up to 17% of salary for both Executive Directors. Further reductions over the next two years will align both Executive Directors with the wider workforce.Performance Related Annual BonusCorporate measuresWgt.Financial (70%)Adjusted EPS25%TAR per share25%Loan to Value (LTV)20%Non-financial (30%)Customer satisfaction10%University reputation10%GRESB rating10%143OverviewStrategic ReportGovernanceFinancial StatementsOther InformationFor 2021, 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 be based on a combination of EPS, Total Accounting Return and Loan to Value (LTV), with the latter replacing net debt to EBITDA ratio. The decision to revert to LTV (which had been used as an annual bonus measure until 2014) reflects the Board’s view that this measure is better understood by internal participants, more widely used by the investment community to measure Unite’s performance, and better reflects our focus on business resilience and balance sheet strength following Covid-19.The non-financial measures will be split equally between customer satisfaction, University reputation and a metric based on Unite’s Global Real Estate Sustainability Benchmark (GRESB) rating, withthe latter replacing individual / team objectives. The use of the GRESB metric represents a first step in introducing ESG metrics into Unite’s incentives and reflects the recent announcement of the Group’s ambitious new Sustainability Strategy which was approved by the Board in 2020. GRESB is an externally-assessed benchmark of the ESG performance of real estate assets which the Committee believes will lend itself to an objective and robust performance target for the year. Reflecting another of the Group’s sustainability objectives linked to ‘providing opportunities for all’, the Committee will, in approving outcomes under this element of the annual bonus, also take into account performance against a range of indicators linked to Diversity & Inclusion. Further work around a suite of sustainability KPIs targets and timescales is due to be completed during 2021 and may inform changes to the way we target ESG performance in 2022 and beyond.For both the financial and non-financial elements, proposed target levels have been set to be challenging relative to business plan, although the specific targets are deemed to be commercially sensitive at this time. It is the Committee’s current intention to disclose these targets retrospectively in the 2021 Directors’ Remuneration Report. If a participant has met their shareholding guidelines at the time the 2021 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 appyl to all awards.For 2021, the LTIP will continue to operate on the same basis as in recent years. 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.In line with the approach taken in 2020, the Committee will retain overarching discretion to approve the vesting of these awards and will carefully scrutinise overall outcomes to ensure that they reflect the performance of the Company and the experience of stakeholders over the period, and do not reward windfall gains. Factors which the Committee may consider in making this assessment include (but are not limited to): the overall single figure of remuneration for each Executive Director in the year of vesting, the proportion of LTIP value accounted for by share price appreciation, the shape of the market recovery following Covid-19, absolute TSR levels as compared to historical FTSE and sector norms, financial and non-financial indicators, and how our shareholders, employees, customers and other stakeholders have fared over the period. Due to continued uncertainty and the implications this has for being able to set credible and appproriately stretching targets, the Committee has taken the decision to delay target setting for the Adjusted EPS element of the award. The Committee expects that it will be in a position to set and disclose targets for this one-third of the award within six months of grant, and will provide details of the agreed targets via market announcement once determined.LTIPMeasureWeightTargets2023 Adjusted EPS1/3To be determined and disclosed within six months of grant.TAR per share ranking vs. the FTSE350 Real Estate 1/30% vesting for performance below median; Supersector Index (2021–2023)25% vesting for performance in line with median; 100% vesting for performance at upper quartile or above; Straight-line vesting between these points.TSR ranking vs. the FTSE350 Real Estate Supersector 1/30% vesting for performance below median; Index (2021–2023)25% vesting for performance in line with median; 100% vesting for performance at upper quartile or above; Straight-line vesting between these points. 144The Unite Group PLC Annual Report & Accounts 2020ANNUAL REPORT ON REMUNERATION CONTINUEDTSR 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. 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 2021Chairman and Non-Executive Director FeesThere will be no change to Non-Executive Director fees with effect from 1 January 2021, save for an increase to the additional fee for the Chair of the Health and Safety Committee, which will be aligned with the fees for other Board Committee Chairs to reflect the importance of this role and Committee to Unite’s operations. We’re establishing a Sustainability Committee and there will be a (new) Chair fee of £10,300 pa – same as other Committee Chair fees.Richard Huntingford will succeed Phil White as Chairman of the Board with effect from 1 April 2021. His fee as Chairman of the Board has been set at £225,000 per annum reflecting his experience, a review of the time commitment required of the Chairman role at Unite, and the increase in size and complexity of the Group in recent years.Position2020 fees2021 feesBase feesChairmanNote 1£199,220£199,220 £225,000Non-Executive Director£49,440£49,440Additional feesSenior Independent Director£5,820£5,820Audit Committee Chair£10,300£10,300Remuneration Committee Chair£10,300£10,300Nomination Committee ChairNote 2n/an/aHealth and Safety Committee Chair£7,285£10,300Sustainability Committee Chair£10,3001. Richard Huntingford will succeed Phil White as Chairman of the Board with effect from 1 April 2021. His fee as Chairman of the Board has been set at £225,000 per annum.2. Role is undertaken by the Chairman of the Board, with no any additional fee payable in respect of chairing this Committee. 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 2020 is set out below. None of the Directors has a beneficial interest in the shares of any other Group company. Since 31 December 2020, there have been no changes in the Directors’ interests in shares.Ordinary shares of 25p each at 31 December 2020Ordinary shares of 25p each at 31 December 2019R Smith232,361226,614J Lister464,875459,128P White15,29013,566E McMeikan7,7216,572R Paterson8,3127,163R Akers11,7242,000I Beato1,7240S Pearce1,1490T Jackson00S Smith0n/aR Huntingford10,000n/aDetails of Executive Directors’ interests in share-based incentives are set out in the tables below.145OverviewStrategic ReportGovernanceFinancial StatementsOther InformationShare price informationAs at 31 December 2020 the middle market price for ordinary shares in the Company was 1,045p per share. During the course of the year, the market price of the Company’s shares ranged from 634.5p to 1,339p 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 2020: InterestsOwned outrightSubject to deferral / holding periodUnvested and / or subject to perf. conditionsShareholding requirement % of salary / base feeCurrent shareholding % of salary / base feeRequirement met?Shares / nil-cost optionsOptions / HMRC optionsShares / nil-cost optionsOptions / HMRC optionsNote 1Note 2R Smith232,361247,3161,671312,8312,042250%806%YesJ Lister464,875201,2661,671254,5752,042200%1,556%YesP White15,29080%E McMeikan7,721163%R Paterson8,312176%R Akers11,724248%I Beato1,72436%S Pearce1,14924%T Jackson00%S Smith00%R Huntingford10,000211%1. Includes shares subject to a holding period under the LTIP and deferred bonus shares, where applicable.2. Based on share price as at 31 December 2020 of 1,045.0p. Shares subject to deferral / holding periods are taken on a ‘net of tax’ basis for the purposes of the current shareholding calculation.Executive Directors’ shareholding requirements0%1,750%1,500%1,250%1,000%750%500%250%Richard SmithJoe ListerShareholding requirementCurrent shareholding250%806%200%1,556%146The Unite Group PLC Annual Report & Accounts 2020ANNUAL REPORT ON REMUNERATION CONTINUEDDirectors’ interests in shares and options under Unite incentives (audited)Deferred bonusExecutiveInterests held at 1 January 2020Granted during the yearLapsed during the yearVested during the yearInterests held at 31 December 2020End of deferral periodJoe Lister–4,124––4,12427.02.22Richard Smith–5,067––5,06727.02.22LTIP awardsExecutivePlanInterests held at 1 January 2020Interests awarded during the yearESOS exercise priceInterests vested during the year1Interests lapsed during the yearInterests outstanding at 31 December 2020Period of qualifying conditionsJoe ListerPSP111,099––107,8773,222–10.04.17ESOS934–642.0p90628–– 10.04.20PSP89,732––––89,73210.04.18ESOS739–811.0p––739– 10.04.21PSP69,333––––69,33324.07.19ESOS557–1076.0p––557– 24.07.22PSP–95,510–––95,51023.04.20ESOS–746803.5p––746– 23.04.23272,39496,256108,7833,250256,617Richard SmithPSP136,520––132,5603,960–10.04.17ESOS934–642.0p90628–– 10.04.20PSP110,258––––110,25810.04.18ESOS739–811.0p––739– 10.04.21PSP85,190––––85,19024.07.19ESOS557–1076.0p––557– 24.07.22PSP–117,383–––117,38323.04.20ESOS–746803.5p––746– 23.04.23334,198118,129133,4663,988314,8731. All awards vesting for performance during the year are subject to an additional two-year holding period.147OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSAYEExecutiveOptions held at 1 January 2020Granted during the yearExercised during the yearOption price per shareOptions held at 31 December 2020 Note 1Maturity dateJoe Lister1,617––556.4p1,61701.12.201,266––710.8p1,26601.12.21–1,182–760.8p1,18201.12.23Richard Smith2,122––848.0p2,12201.12.221. As at year-end, Joe Lister held 1,617 options under the 2017 scheme which had matured but not yet been exercised.The highest, lowest and closing share prices for 2020 are shown on page 146.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:Executive2020 £2019 £Joe Lister278,839301,708Richard Smith342,046369,182The Directors’ Remuneration Report has been approved by the Remuneration Committee and signed on its behalf by:Elizabeth McMeikanChair, Remuneration Committee16 March 2021148The Unite Group PLC Annual Report & Accounts 2020ANNUAL REPORT ON REMUNERATION CONTINUEDAs at 31 December 2020, the Company had received notifications from the following companies and institutions of themselves and their clients in 3% or more of the issued share capital of the Company. There have been no significant changes since that date through to 16 March 2021.ShareholderPercentage of share capitalCanada Pension Plan Investment Board18.23BlackRock Inc7.56APG Asset Management NV6.67Standard Life Aberdeen5.31The Vanguard Group Inc4.01Royal London Asset Management Ltd3.36MFS Investment Management3.15Share capitalAt the date of this report, there are 398,208,608 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:• 34,502,872 – June 2020 share placing;• 83,634 – pursuant to the exercise of options under The Unite Group PLC Savings – Related Share Option Scheme; and • 30,220 – 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.Prior consultation with shareholders before the June 2020 share placingPrior to launch of the June 2020 share placing (the Placing), the Company consulted with a significant number of its shareholders to gauge their feedback on the terms of the Placing. Feedback from this consultation was supportive and as a result the Board chose to proceed with the Placing. 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 7 May 2020.The net proceeds of £300 million were raised through the Placing. To date, we have secured two development schemes since the Placing (see page 43). We are also targeting a further pipeline of developments and University partnerships to deploy the remaining proceeds. The Placing Price of 870.0 pence per placing share represented a discount of 3.1 per cent to the middle market closing price of 897.5 pence on 24 June 2020. The Placing resulted in an increase of 20.86% in issued share capital over the three-year period preceding the issue. Prior to all placings over this three year period, the Company consulted with a significant number of its shareholders and then raised and utilised the placing proceeds for specific reasons explained in the placing terms of these respective placings.Authority to issue sharesThe Directors may only issue shares if authorised to do so by the Articles of Association or the shareholders in general meeting. At the Company’s Annual General Meeting held on 7 May 2020, shareholders granted an authority to the Directors to allot ordinary shares up to an aggregate nominal amount of £30,299,637 (which represented one-third of the nominal value of the issued share capital of the Company as at 31 March 2020). In accordance with guidelines issued by the Investment Association, this resolution also granted the Directors authority to allot further equity securities up to the aggregate amount of £30,299,637 (representing one-third of the nominal value of the issued share capital of the Company as at 31 March 2020). This additional authority was only permitted for fully pre-emptive rights issues. As at 31 December 2020, the shares that had been allotted were to satisfy awards under the Company’s share schemes and the June 2020 placing. As this authority is due to expire on 13 May 2021, shareholders will be asked to renew and extend the authority, given to the Directors at the last Annual General Meeting, to allot shares in the Company, or grant rights to subscribe for, or to convert any security into, shares in the Company for the purposes of Section 551 of the Companies Act 2006. Further details on the resolution will be provided in the Notice of this year's Annual General Meeting and its explanatory notes.149OverviewStrategic ReportGovernanceFinancial StatementsOther InformationDIRECTORS’ REPORTDisapplication of pre-emption rightsDirectors’ conflicts of interestPolitical donationsIndemnitiesChange of controlResearch and developmentBranches outside the UKAppointment and replacement of DirectorsGoing Concern and viability statement Disclosure of information to auditorsIf the Directors wish to allot new shares and other equity The Company has procedures in place for managing securities, or sell treasury shares, for cash (other than in conflicts of interest. A Director must notify the Chairman connection with an employee share scheme) company law (and the Chairman notifies the Chief Executive) if he/she requires that these shares are offered first to shareholders becomes aware that he/she, or any of his/her connected in proportion to their existing holdings. There may be parties, may have an interest in an existing or proposed occasions, however, when the Directors need the flexibility transaction with the Company or the Group. Directors have to finance business opportunities by the issue of shares a continuing duty to update any changes to these conflicts.without 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. No political donations, contributions or expenditure were At the forthcoming Annual General Meeting, shareholders made during the year ending 2020.will be asked to pass two special resolutions to grant the Directors powers to disappyl shareholders’ pre-emption rights under certain circumstances. Further details on the There are no qualifying third party indemnity provisions resolutions will be provided in the Notice of this year’s or qualifying pension scheme indemnity provisions for the Annual General Meeting.benefit of any of the Directors.All of the Company’s share schemes contain provisions The Company is not currently carrying on any activities relating to a change of control. Outstanding rewards and in the field of research and development.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 The Company does not have any branches outside of 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 The Company’s Articles of Association provide that agreements between the Company and its Directors or Directors may be appointed by the existing Directors or employees providing for compensation for loss of office or by the shareholders in a general meeting. Any person employment that occurs because of a takeover bid.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 The going concern statement and viability statement are by the shareholders. A Director may be removed by the set out on pages 172 & 173 and page 71 respectively and Company as provided for by applicable law and shall vacate are incorporated into this Directors’ Report by reference.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 The Directors who held office at the date of approval of his/her period of office and, subject to the Articles of the Directors’ Report confirm that, so far as they are each Association, may by ordinary resolution appoint another aware, there is no relevant audit information of which the person to be a Director instead. There is no requirement Company’s auditor is unaware; and each Director has taken for a Director to retire on reaching any age.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. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.the UK.150The Unite Group PLC Annual Report & Accounts 2020DIRECTORS’ REPORT CONTINUEDDisclosures required under Listing Rule 9.8 4RFor 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:Information required under LR 9.8.4RReference(1)Amount of interest capitalised and tax reliefNote 3.1, page 187(2)Publication of unaudited financial informationn/a(4)Details of long term incentive schemesPages 138 and 144 & 145(5)Waiver of emoluments by a DirectorPages 122(6)Waiver of future emoluments by a Directorn/a(7)Non pre-emptive issues of equity for cashPages 12 and 149(8)Item (7) in relation to major subsidiary undertakingsn/a(9)Parent participation in a placing by a listed subsidiaryn/a(10)Contracts of significancen/a(11)Provision of services by a controller shareholdern/a(12)Shareholder waiver of dividendsn/a(13)Shareholder waiver of future dividendsn/a(14)Agreements with controlling shareholdersn/aAll the information referenced above is incorporated by reference into the Directors’ Report.Other information incorporated by referenceThe following information in the Strategic Report is incorporated into this Directors’ Report by reference:• Results and Dividend on page 1• Greenhouse Gas Emissions and Energy Consumption Disclosures on page 61 • Financial instruments and financial risk management on page 64 and Section 4 of the notes to the financial statements on page 199• Future developments on page 25• Employment of disabled persons/Employee involvement on page 57• Workforce engagement on page 94• Engagement with customers, partners and others on page 36 The Corporate Governance report on pages 82 to 151, the Statement of Directors’ responsibilities on page 152 and details of post balance sheet events on page 216 are incorporated into this Directors’ Report by reference.Management ReportThis 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 MeetingThe Annual General Meeting of the Company will be held at the Company’s registered office at South Quay, Temple Back, Bristol, BS1 6FL at 9.30am on 13 May 2021. Formal notice of the meeting is given separately and is available on the Company’s website at https://www.unite-group.co.uk/investors.This report was approved by the Board on 16 March 2021 and signed on its behalf byChristopher Szpojnarowicz Company Secretary16 March 2021151OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSTATEMENT OF DIRECTORS’ RESPONSIBILITIES The Directors are responsible for preparing the Annual Under applicable law and regulations, the Directors Report and Accounts and the Group and Parent Company are also responsible for preparing a Directors’ Report, financial statements in accordance with applicable law Directors’ Remuneration Report and Corporate Governance Statement that comply with that law and Company law requires the Directors to prepare Group and Parent Company financial statements for each financial The Directors are responsible for the maintenance and rquired to prepare the year. Under that law they areeintegrity of the corporate and financial information Group financial statements in accordance with IFRSs as included on the Company’s website. Legislation in adopted by the EU and applicable law and have elected to the UK governing the preparation and dissemination prepare the ParentCompany financial statements on the of financial statements may differ from legislation in same basis.Under company lawors must not approve the Each of the Directors, the names of whom are set out , the Directfinancial statements unless they are satisfied that they give on pages 84 to 87, confirms that to the best of his or her a true and fair view of the state of affairs of the Group and knowledge:Parent Company and of their profit or loss for that period.The Annual Report and Accounts taken as a whole is In preparing each of the Group and Parent Company fair, balanced and understandable and provides the financial statements, the Directors are required to:information necessary for shareholders to assess the Company’s position and performance, business model Select suitable accounting policies and then appyl them and strategyconsistentlyThe financial statements, prepared in accordance with Make judgements and estimates that are reasonable the applicable set of accounting standards, give a true and prudentand fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings State whether they have been prepared in accordance with IFRSs as adopted by the EUincluded in the consolidation taken as a wholeThe Directors’ Report includes a fair review of the Prepare the financial statements on the going concern basis unless it is inappproriate to presume that the development and performance of the business and the Group and the parent company will continue in position of the issuer and the undertakings included business.in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that The Directors are responsible for keeping adequate they face. 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 16 March 2021as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.and regulations.those regulations. other jurisdictions.• • • • • • • R S Smith J J ListerDirector Director152The Unite Group PLC Annual Report & Accounts 2020CONTENTS 154166166167168169170171172 Independent auditor’s report Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Company balance sheet Consolidated statement of changes Company statement of changes in shareholders’ equityin shareholders’ equity Statements of cash �ows Notes to the �nancial statementsFINANCIAL STATEMENTSOverviewStrategic ReportGovernanceOther InformationFinancial Statements153Report on the audit of the financial statements1. OpinionIn 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 2020 and of the Group’s profit for the year then ended;• the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRSs) as adopted by the European Union;• the Parent Company financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006; and• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.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 flows; and• the related sections 1 to 9.The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law, international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006.2. Basis for opinionWe 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 and Parent Company 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.154The Unite Group PLC Annual Report & Accounts 2020To the members of the Unite Group PLCINDEPENDENT AUDITOR’S REPORT3. Summary of our audit approachKey audit mattersThe key audit matters that we identified in the current year were:• Going concern; • Investment property and development property valuation; and• Accounting for Joint Ventures.Within this report, key audit matters are identified as follows: Newly identified Increased level of risk Similar level of riskMaterialityThe materiality that we used for the Group financial statements was £32.5m which was determined on the basis of net assets. However, we use a lower materiality threshold of £4.6m for balances which impact EPRA earnings. ScopingOur Group audit scope comprises the audit of The Unite Group PLC as well as Group’s joint ventures: The Unite UK Student Accommodation Fund (‘USAF’) and The London Student Accommodation Vehicle (‘LSAV’). All audit work was completed by the group audit team. Significant changes in our approachWe no longer consider Liberty Living plc (‘Liberty Living’) to be a separate component following the completion of its full integration into the Group’s systems, process and controls; we have not therefore audited Liberty Living as a separate component. Changes to our key audit matters are set in section 5 below. 4. Conclusions relating to going concernIn auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.Our evaluation of the directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the going concern basis of accounting is discussed in section 5.1.Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group’s and Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In relation to the reporting on how the group has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting.Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.155OverviewStrategic ReportGovernanceFinancial StatementsOther Information5. Key audit mattersKey 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.The Group has a number of borrowing facilities which contain covenants that require the Group to maintain specific financial ratios. As a result of Covid-19 the outlook remains uncertain, and there are a range of potential outcomes which are wide-ranging and unknown and therefore judgements about future potential financial impacts are inherently uncertain. On this basis, in the year we have identified going concern as a new key audit matter. In the prior year our report included key matters relating to REIT compliance and acquisition accounting in respectof Liberty Living. REIT compliance is no longer identified as a key audit matter as we have not historically identified any issues with the Group’s compliance with the REIT regime and it has now been a number years following the Group’s conversion to a REIT. The acquisition accountingof Liberty Living was specific to the prior year. 5.1. Going concernKey audit matter description In assessing whether the �nancial statements should be prepared on the going concern basis, the Directors are required to consider all available information about the future for a period of at least 12 months from the date of approval of the �nancial statements. In conducting their assessment, the Directors have concluded that there are no material uncertainties which may cast signi�cant doubt over the Group’s or Parent Company’s ability to continue as a going concern over this 12 month period. At 31 December 2020 the Group had c.£1,689m of borrowings drawn down across di�erent facilities, as well as available undrawn facilities of £50.0m and a further overdraft facility of £10.0m available. There is liquidity headroom within the Group’s forecast across the period of assessment for going concern. The borrowing facilities contain covenants that require the Group to maintain speci�c �nancial ratios and the focus of our work has been on forecast covenant compliance. In addition, at 31 December 2020 the Group held net cash and cash equivalents of £338.3m. The impact of the Covid-19 pandemic is described on pages 10 to 12. The Group’s properties have remained open and operational throughout the pandemic. However, following the introductions of local and national lockdowns most UK Universities during 2020 and also in early 2021 suspended face-to-face teaching; this has adversely impacted the occupation of the Group’s properties. Furthermore, the Group released students from their tenancies in the summer term of 2020 and has o�ered students further tenancy concessions in early 2021. Together, these factors have adversely a�ected the trading performance of the Group. The Directors have updated their forecasts to take into account, to the extent possible given the current uncertain environment, the impact of Covid-19 on current and future trading performance, net debt and liquidity. As at the date of this report, the outlook as a result of Covid-19 remains uncertain, and there are a range of potential outcomes which are wide-ranging and unknown and therefore judgements about future potential �nancial impacts are inherently uncertain; as a result, this is an area where potential fraud could occur. In particular, there is signi�cant judgement in the Directors’ assessment of the length of time over which the impact on performance and cash in�ows might be felt, particularly with regards to occupation of its properties. Occupation of its properties is a�ected by the actions of both the UK government and Universities which is outside of the Group’s control. As outlined in their statement on going concern on pages 172 and 173, the Directors have considered di�erent scenarios in assessing the impact of Covid-19 includingabase case and a reasonable worse case. In addition, the Directors have modelled a reverse stress test to assess what would need to occur for the Group to breach its most sensitive �nancial covenant. This covenant is for the Interest Cover Ratio (‘ICR’) which should not be below a range of 1.5 to 2.0 depending on the borrowing facility. The assumptions in the reverse stress test model reduced income from the base case to such a level that the Directors determine that the probability of them occurring is remote. As set out on page 173 the Group is required to collect less than 10% of rents due or outstanding for the balance of the 2020/21 academic year to maintain covenant compliance. This is below of that modelled in the reasonable worse case scenario. Should the impact of the pandemic on trading conditions be more prolonged or severe than currently forecast by the Directors under its reasonable worse case, the Group would need to implement additional operational or �nancial measures.As a result of the current and potential future impact of Covid-19 on the Group and the uncertainties regarding covenant compliance forecasting, we identi�ed a key audit matter related to going concern due to the signi�cant judgement required to conclude that there is not a material uncertainty which may cast signi�cant doubt over the Group’s or Parent Company’s ability to continue as a going concern.Further details of the judgements considered and the conclusions are included in Section 1 of the �nancial statements and as part of the Audit Committee disclosure of signi�cant items on page 112. 156The Unite Group PLC Annual Report & Accounts 2020To the members of the Unite Group PLCINDEPENDENT AUDITOR’S REPORT CONTINUEDHow the scope of our audit responded to the key audit matterWe performed the following audit procedures which consider the impact of the uncertainty of the Covid-19 pandemic on the going concern assessment: • Obtained an understanding of the relevant controls over the going concern process;• Challenged the revenue assumptions, for the outturn of the 2020/21 academic year and the assumptions for the 2021/22 academic year, which included the following: –Assessed the Group’s forward sales bookings for next academic year; –Assessed UCAS application data for the next academic year; –Agreed a sample of nomination contracts (NOMs) where a University is contracted to take an agreed number of beds in a property, for the current and next academic years to supporting documentation; –Assessed the contract enforceability of the NOMs agreements; –Assessed Universities’ financial positions, including vouching any debtor positions; and –Held discussions with internal Deloitte Higher Education sector specialists to assess the reasonableness of the assumptions used against the Higher Education sector data.• Challenged the cost assumptions within the forecasts, including consideration of previous incurred costs and the effectiveness of any cost savings;• Challenged the reasonableness of the scenario analysis performed and reverse stress test with reference to the income and cost assumptions;• Determined the Group’s liquidity and headroom positions with reference to borrowing facility agreements;• Tested the arithmetical accuracy of the models used to prepare the Group’s forecast and related scenarios; • Assessed the reasonableness of key mitigations available; and• Assessed the sufficiency of the Group’s disclosure concerning the going concern basis and uncertainties arising.Key observationsWe are satisfied that the directors’ base case forecasts, reasonable worse case and reverse stress test scenarios indicate that the Group has sufficient financial resources over the going concern period and that they are not forecast to breach their key financial covenants over the period of assessment. We are satisfied that the Directors’ conclusion that there are no material uncertainties over the Group and Parent Company’s ability to continue as a going concern is appropriate. The associated disclosures set out on pages 172 and 173 are in accordance with the accounting standards and we consider them to be appropriate.157OverviewStrategic ReportGovernanceFinancial StatementsOther Information5. Key audit matters continued5.2. Investment property and development property valuationKey audit matter descriptionHow the scope of our audit responded to the key audit matterKey observations The Group’s principal assets are investment properties (2020: £3,716.5m; 2019: £3,517.3m) and investment properties under development (2020: £187.2; 2019: £411.8m). 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. The valuation is underpinned by a number of estimates and assumptions as it requires the estimation of property yields, rental growth, occupancy and property management costs. Due to the impact of Covid-19 there is more uncertainty in these assumptions compared with the prior year. A small change in these assumptions could have a signi�cant 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 signi�cant impact on a key input to the calculation of a performance fee which could be recognised for the year ended 31 December 2020 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 estimate is required to forecast discounted cash �ows 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. Signi�cant accounting judgements and estimation uncertainty disclosures relating to Investment property and development property valuation are set out in Section 1. We performed testing on the property valuations and assessed the estimates that had been made. This work Understood and challenged the assumptions used in relation to key drivers such as rental income and growth, occupancy, yields and property managementcosts with reference to the trends at the end of the year and the following year’s budget. Our assessment as to the appproriateness of the assumptions included consideration of the impact of the Covid-19 pandemic upon forecast occupancy and rental income;Challenged the accuracy, completeness and consistency of the information provided to the external valuers which included testing a sample of income and tenancy data back to Group held information;Met with theGroup’sexternal valuers to understand the assumptions being taken and consistency ofthe estimates with prior year. We also assessed the competency and capability of the Group’s valuers;Involved our valuation specialists within our Deloitte Real Estate team to benchmark the assumptions used against market data, including relevant transactions; Reconciled the external valuation reports to underlying �nancial records;Assessed the appproriateness of the external valuers approach with respect to replacement cladding and the Assessed 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. underlying �nancial records; andAssessed the su�ciency of the Group’s valuation disclosures, including the related sensitivities.We are satis�ed with the approach and methodology adopted in valuing the property portfolio and consider the investment property and development property valuations to be suitable for inclusion in the �nancial statements at 31 December 2020.included:Obtained an understanding and tested the relevant controls over the investment property and development property valuation process;impact on valuations and Unite’s valuation related disclosures;We challenged the appropriateness of cost to complete information and reconciled the valuation reports to • • • • • • • • • 158The Unite Group PLC Annual Report & Accounts 2020To the members of the Unite Group PLCINDEPENDENT AUDITOR’S REPORT CONTINUED5.3. Accounting for Joint venturesKey audit matter descriptionHow the scope of our audit responded to the key audit matterKey observations A signi�cant proportion of the Group’s assets is held within USAF and LSAV, jotlyoin wned entities thatare accounted for under the equity method as joint ventures (2020: £849.0m; 2019: £875.2m), on the basis that Unite does not control the entities. At 31 December 2020 Unite had a 22% (2019: 22%) ownership of USAF and 50.0% (2019: 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 signi�cant factors, particularly with regard to USAF. USAF is a multi-investor fund with an Advisory Committee and the Group’s ownership stake is subject to change. In accordance with the requirements of IFRS 10 Consolidated Financial Statements, 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 a�ect returns at each reporting period. Management have assessed (in line with the prior year) that the Group 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 �nancial statements.Refer to page 112 (Audit Committee Statement) and section 3.4: Investments in joint ventures. Signi�cant accounting judgements disclosure relating to accounting for joint ventures are set out in Section 1.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 classi�cation of these arrangements as joint ventures in accordance with the requirements of IFRS.With regards to both USAF and LSAV, we have:Obtained an understanding of the relevant controls over the accounting for joint ventures process; 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, including whether there was Assessed the Group’s monitoring of its role and the three key factors relating to control in accordance with the judgement required under IFRS 10. This included whether control had been exercised; andReviewed the fund agreement in the year to con�rm that there have been no changes. Given the particular focus on USAF, we have:Assessed the role of the USAF Advisory Committee and whether the Group has the sole power to direct the activities that are likely to most signi�cantly a�ect the returns of USAF in the future, and therefore whether Unite does have control of USAF; andEvaluated the impact of the percentage ownership on a regular basis.We are satis�ed with Management’s conclusion that there has been no changes to the structure and the role played by the Group as investor and asset / development manager or to the fund agreements in the year. We are satis�ed with Management’s conclusion that the Group does not have control of the Joint Ventures. Therefore, treatment as joint ventures is considered to be appproriate.• • • • • • evidence of contradictory evidence; 159OverviewStrategic ReportGovernanceOther InformationFinancial Statements6. Our application of materiality6.1. MaterialityWe 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:Group financial statementsParent company financial statementsMateriality£32.5m (2019: £31.0m)EPRA Earnings impacting measures: £4.6m (2019: £5.5m)£31.2m (2019: £29.5m)Basis for determining materialityMateriality: 1% (2019: 1%) of net assetsEPRA Earnings impacting measures: 5% (2019: 5%) of EPRA Earnings 1% (2019: 1%) of Net Assets Rationale for the benchmark appliedWe 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 those items impacting EPRA earnings. 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.To the members of the Unite Group PLCINDEPENDENT AUDITOR’S REPORT CONTINUEDEPRA Earnings impacting measuresMateriality Net assets Group materiality EPRA Earnings Group EPRA Earnings Impacting Measures materialityNet assets £3,260.0mGroup materiality £32.5mAudit Committee reporting threshold £1.60mGroup EPRA Earnings impacting measures materiality£4.6mAudit Committee reporting threshold £0.2mEPRA earnings £97.3m160The Unite Group PLC Annual Report & Accounts 20206.2. Performance materiality6.3. Error reporting threshold7.1. Identification and scoping of components7.2. Our consideration of the control environment We set performance materiality at a level lower than materiality to reduce the probability that, in agggreate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group and Parent Company performance materiality was set at 70% (2019: 70%) of Grpou and Parent Company materiality. In determining performance materiality, we considered the following factors:our risk assessment, including our assessment of the Group’s overall control environment, including the impact of Covid-19, and that we consider it appropriate to rely on controls over a number of business processes; andour past experience of the audit, which has indicated a low number of corrected and uncorrected misstatements identified in prior periods.We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1.6m (2019: £1.5m) and for EPRA impacting measures we would report differences in excess of £231,000 (2019: £275,000), 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.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. The audit has been performed remotely due to the impact of Covid-19 measures. We have continued to engage with staff at the Group’s Bristol head office, as the books and records for each entity within the Group are maintained at this location. The Group only operates within the United Kingdom – this includes The Unite Group PLC and its related subsidiaries, as well as the two joint ventures, USAF and LSAV. We audit all of the results of the Group 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 agggreated financial information. From our understanding of the relevant controls we took a controls reliance approach in the following business cycles:Revenue.Reliance on general IT controls was taken for the Group, excluding the legacy Living Liberty systems which were retired in July 2020 following Liberty Living’s full integration into Unite’s systems.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; andHFM – used to prepare the Group consolidation at the Group’s Head Office.We involved IT specialists to assess the relevant 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 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, individuallyor in combination with other controls, was appropriately designed to address the risk;Performed additional procedures where required if there were exceptions to the operation of those controls. • • • • • • • • • • 7. An overview of the scope of our auditInvestment property; andObtained sufficient evidence to assess the operating effectiveness of the controls across the full audit period; and 161OverviewStrategic ReportGovernanceOther InformationFinancial Statements8. Other information9. Responsibilities of Directors10. Auditor’s responsibilities for the audit of the financial statements11. Extent to which the audit was considered capable of detecting irregularities, including fraudThe other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.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.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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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.We have nothing to report in this regard.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 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.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 agggreate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.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.Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. 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; the directors determine is necessary to enable the preparation of financial statements that are free from material 11.1. Identifying and assessing potential risks related to irregularities• • To the members of the Unite Group PLCINDEPENDENT AUDITOR’S REPORT CONTINUED162The Unite Group PLC Annual Report & Accounts 2020• • • • • • • • any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures identifying, evaluating and complygin 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 the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; andthe matters discussed among the audit engagement team 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 oppn the organisation for ortunities and incentives that may exist withifraud and identified the greatest potential for fraud in the following areas: going concern, owing to significant judgements within the forecast period of assessment; 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 specifically to theCovid-19 discounts and refunds offered to students which were processed outside of the Group’s automated revenue 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, focusign 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.As a result of performing the above, we identified going concern and investment property and development property valuation as key audit matters related to the potential risks 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 those key audit matters. In addition to the above, our procedures to respond to risks identified included the following:reviewed the financial statement disclosures and testing tosupporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;made enquiries of management, the Audit Committee and in-house and external legal counsel concerning actual and performed analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material read minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with HMRC; in addressing the identified revenue fraud risk relating to the Covid-19 discounts and refunds offered to students: revenue adjustments to supporting schedules; and vouched a sample of refunds to tenancy agreement and cash refunds; in addressing the risk of fraud through management override of controls, we tested the appropriateness of journal entries and other adjustments; assessed whether the judgements made in making accounting estimates are indicative 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.relating to:– – alleged fraud;– potential litigation and claims;misstatement due to fraud;understood the relevant controls over the processing and approval of the discounts and refunds; reconciled the manual andof a potential bias; and evaluated the business rationale of any significant transactions that are unusual or outside the 11.2. Audit response to risks identified163OverviewStrategic ReportGovernanceOther InformationFinancial StatementsReport on other legal and regulatory requirements12. Opinions on other matters prescribed by the Companies Act 200613. Corporate Governance StatementIn our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance during the audit: 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; andthe 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.The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viabiylit and that part of the Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code specified for our review.Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained the directors’ statement with regards to the appproriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 88;the directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is appproriate set out on page 71;the directors’ statement on fair, balanced and understandable set out on page 89;the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 88;the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 89; andthe section describing the work of the Audit Committee set out on pages 109 to 114.• • • • • • • • To the members of the Unite Group PLCINDEPENDENT AUDITOR’S REPORT CONTINUED164The Unite Group PLC Annual Report & Accounts 202014. Matters on which we are required to report by exception15. Other matters which we are required to address16. Use of our reportStephen Craig (Senior statutory auditor)14.1. Adequacy of explanations received and accounting records14.2. Directors’ remuneration15.1. Auditor tenure15.2. Consistency of the audit report with the additional report to the Audit CommitteeUnder 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; oradequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not 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.Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ with the accounting records and returns.We have nothing to report in respect of these matters.Following the recommendation of the Audit Committee, we were appointed by the Board 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 6 years, covering the years ended 31 December 2015 to 31 December 2020.Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).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.For and Behalf of Deloitte LLP Statutory AuditorLondon, United Kingdom 16 March 2021 • • • been received from branches not visited by us; orremuneration have not been made or the part of the directors’ remuneration report to be audited is not in agreement 165OverviewStrategic ReportGovernanceOther InformationFinancial StatementsNote2020£m2019£mRental income2.4196.1134.1Other income2.419.522.1Total revenue 215.6156.2Cost of sales(53.3)(32.1)Expected credit losses(8.6)(0.9)Operating expenses(34.7)(26.6)Results from operating activities119.096.6Loss on disposal of property(1.9)(7.3)Net valuation (losses)/gains on property (owned and under development)3.1(124.2)154.8Net valuation losses on property (leased)3.1(11.2) (8.1)Impairment of goodwill and intangible asset– (384.1)Integration/acquisition costs(9.2) (22.8)Loss before net financing costs and share of joint venture (loss)/profit(27.5)(170.9)Loan interest and similar charges4.3(41.9)(23.8)Interest on lease liability4.3(8.8)(9.2)Mark to market changes on interest rate swaps4.3(5.8)(2.7)Swap cancellation and loan break costs 4.3(30.1)(2.7)Finance costs(86.6)(38.4)Finance income4.35.65.5Net financing costs (81.0)(32.9)Share of joint venture (loss)/profit3.4b(11.6)102.6Loss before tax(120.1)(101.2)Current tax2.5a(1.2)(0.1)Deferred tax2.5a(0.9)13.7Loss for the year(122.2)(87.6)Loss for the year attributable to Owners of the parent company (121.0)(89.2)Minority interest(1.2)1.6(122.2)(87.6)Loss per shareBasic2.2c(31.8p)(31.5p)Diluted2.2c(31.8p)(31.4p)All results are derived from continuing activities.Note2020£m2019£mLoss for the year(122.2)(87.6)Mark to market movements on hedged instruments4.5a(12.8)(4.8)Hedges reclassified to profit or loss2.5–Share of joint venture mark to market movements on hedged instruments3.4b(0.1)(0.5)Other comprehensive loss for the year(10.4)(5.3)Total comprehensive loss for the year(132.6)(92.9)Attributable toOwners of the parent company(131.4)(94.5)Minority interest(1.2)1.6(132.6)(92.9)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.166The Unite Group PLC Annual Report & Accounts 2020For the year ended 31 December 2020CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2020CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMENote2020£m2019£mAssetsInvestment property (owned)3.13,614.73,406.9Investment property (leased)3.1101.8110.4Investment property (under development)3.1187.2411.8Investment in joint ventures3.4b849.0875.2Other non-current assets3.3b21.926.0Right of use assets3.3a4.35.5Deferred tax asset2.5d1.92.9Total non-current assets4,780.84,838.7Inventories3.28.84.0Trade and other receivables5.2104.087.1Cash and cash equivalents5.1338.386.9Total current assets451.1178.0Total assets5,231.95,016.7LiabilitiesBorrowings4.1–(1.4)Interest rate swaps4.2(5.8)–Lease liabilities4.6a(4.4)(3.9)Trade and other payables5.4(141.3)(234.4)Current tax liability(0.3)(4.0)Provisions5.5(15.7)(0.3)Total current liabilities(167.5)(244.0)Borrowings4.1(1,689.9)(1,566.2)Lease liabilities4.6a(96.7)(100.9)Interest rate swaps4.2(17.8)(7.6)Total non-current liabilities(1,804.4)(1,674.7)Total liabilities(1,971.9)(1,918.7)Net assets3,260.03,098.0EquityIssued share capital4.899.590.9Share premium4.82,160.31,874.9Merger reserve40.240.2Retained earnings949.01,069.0Hedging reserve(14.1)(3.5)Equity attributable to the owners of the parent company3,234.93,071.5Minority interest25.126.5Total equity3,260.03,098.0The financial statements of The Unite Group PLC, registered number 03199160, were approved and authorised for issue by the Board of Directors on 16 March 2021 and were signed on its behalf by:R S Smith J J ListerDirector Director167At 31 December 2020CONSOLIDATED BALANCE SHEETOverviewStrategic ReportGovernanceFinancial StatementsOther InformationNote2020£m2019£mAssetsInvestments in subsidiaries3.51,826.72,213.7Total non-current assets1,826.72,213.7Trade and other receivables5.22,386.11,208.1Cash and cash equivalents 2.09.4Total current assets2,388.11,217.5Total assets4,214.83,431.2Current liabilitiesBorrowings 4.1––Interest rate swaps4.2(5.8)–Amounts due to Group undertakings 5.4(0.6)(19.1)Other payables5.4(3.8)(7.0)Total current liabilities(10.2)(26.1)Borrowings4.1(1,066.6)(442.2)Interest rate swaps4.2(17.8)(7.6)Total non-current liabilities(1,084.4)(449.8)Total liabilities(1,094.6)(475.9)Net assets3,120.22,955.3EquityIssued share capital4.899.590.9Share premium4.82,160.31,874.9Merger reserve40.240.2Hedging reserve(13.3)(3.0)Retained earnings833.5952.3Total equity3,120.22,955.3Total equity is wholly attributable to equity holders of The Unite Group PLC. The loss (2019: loss) of The Unite Group PLC in 2020 was £118.8 million (2019: £139.3 million).The financial statements of The Unite Group PLC, registered number 03199160, were approved and authorised for issue by the Board of Directors on 16 March 2021 and were signed on its behalf by:R S Smith J J ListerDirector Director168The Unite Group PLC Annual Report & Accounts 2020At 31 December 2020COMPANY BALANCE SHEETNoteIssued sharecapital£mShare premium£mMerger reserve£mRetained earnings£mHedging reserve£mAttributable to owners of theparent£mMinority interest£mTotal£mAt 1 January 202090.91,874.940.21,069.0(3.5)3,071.526.53,098.0Loss for the year–––(121.0)–(121.0)(1.2)(122.2)Other comprehensive loss for the year:Mark to market movements on hedged instruments––––(12.8)(12.8)–(12.8)Hedges reclassified to profit or loss––––2.52.5–2.5Share of joint venture mark to market movements on hedged instruments3.4b––––(0.1)(0.1)–(0.1)Total comprehensive loss for the year–––(121.0)(10.4)(131.4)(1.2)(132.6)Shares issued4.88.6285.4–––294.0–294.0Deferred tax on share-based payments–––0.1–0.1–0.1Fair value of share-based payments–––1.6–1.6–1.6Own shares acquired–––(0.7)–(0.7)–(0.7)Unwind of realised swap gain––––(0.2)(0.2)–(0.2)Dividends paid to owners of the parent company4.9––––––––Dividends to minority interest––––––(0.2)(0.2)At 31 December 202099.52,160.340.2949.0(14.1)3,234.925.13,260.0NoteIssued sharecapital£mShare premium£mMerger reserve£mRetained earnings£mHedging reserve£mAttributable to owners of theparent£mMinority interest£mTotal£mAt 1 January 201965.9740.540.21,227.62.02,076.225.82,102.0(Loss)/profit for the year–––(89.2)–(89.2)1.6(87.6)Other comprehensive loss for the year:Mark to market movements on hedged instruments––––(4.8)(4.8)–(4.8)Share of joint venture mark to market movements on hedged instruments3.4b––––(0.5)(0.5)–(0.5)Total comprehensive (loss)/profit for the year–––(89.2)(5.3)(94.5)1.6(92.9)Shares issued4.825.01,134.4–––1,159.4–1,159.4Deferred tax on share-based payments–––0.2–0.2–0.2Fair value of share-based payments–––1.9–1.9–1.9Own shares acquired–––(0.8)–(0.8)–(0.8)Unwind of realised swap gain––––(0.2)(0.2)–(0.2)Dividends paid to owners of the parent company4.9–––(70.7)–(70.7)–(70.7)Dividends to minority interest––––––(0.9)(0.9)At 31 December 201990.91,874.940.21,069.0(3.5)3,071.526.53,098.0The notes on pages 172 to 222 form part of the financial statements.169For the year ended 31 December 2020CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYOverviewStrategic ReportGovernanceFinancial StatementsOther InformationNoteIssued share capital£mShare premium£mMerger reserve£mHedging reserve£mRetained earnings£mTotal£mAt 1 January 202090.91,874.940.2(3.0)952.32,955.3Loss and total comprehensive loss for the year–––(12.6)(118.8)(131.4)Hedges reclassified to profit or loss–––2.5–2.5Shares issued4.88.6285.4–––294.0Unwind of realised swap gain–––(0.2)–(0.2)Dividends to shareholders4.9––––––At 31 December 202099.52,160.340.2(13.3)833.53,120.2NoteIssued share capital£mShare premium£mMerger reserve£mHedging reserve£mRetained earnings£mTotal£mAt 1 January 201965.9740.540.22.21,162.32,011.1Loss and total comprehensive loss for the year–––(5.0)(139.3)(144.3)Shares issued4.825.01,134.4–––1,159.4Unwind of realised swap gain–––(0.2)–(0.2)Dividends to shareholders4.9––––(70.7)(70.7)At 31 December 201990.91,874.940.2(3.0)952.32,955.3The notes on pages 172 to 222 form part of the financial statements.170The Unite Group PLC Annual Report & Accounts 2020For the year ended 31 December 2020COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYNoteGroupCompany2020£m2019£m2020£m2019£mNet cash flows from operating activities5.173.378.5(0.7)(2.5)Investing activitiesCash consideration for acquisition Liberty Living–(492.0)–(492.0)Cash acquired on acquisition of Liberty Living–22.4––Acquisition costs–(17.5)––Investment in joint ventures(7.5)–––Capital expenditure on properties(148.5)(179.9)––Acquisition of intangible assets(2.7)(4.6)––Acquisition of plant and equipment(0.7)(0.4)––Proceeds from sale of investment property–295.4––Interest received0.10.9––Dividends received10.232.8––Payments to/on behalf of subsidiaries––(539.1)(301.5)Payments from subsidiaries––35.8553.5Net cash flows from investing activities(149.1)(342.9)(503.3)(240.0)Financing activitiesProceeds from the issue of share capital294.0254.7294.0254.7Payments to acquire own shares(0.7)(0.8)––Interest paid in respect of financing activities(54.2)(32.0)(17.5)(17.4)Swap cancellation and debt exit costs(30.1)(2.7)(1.5)–Proceeds from non-current borrowings355.1175.0225.0175.0Repayment of borrowings(233.3)(96.0)–(90.3)Dividends paid to the owners of the parent company–(68.5)–(68.5)Withholding tax paid on distributions(3.4)(1.1)(3.4)(1.1)Dividends paid to minority interest(0.2)(0.9)––Net cash flows from financing activities327.2227.7496.6252.4Net increase/(decrease) in cash and cash equivalents251.4(36.7)(7.4)9.9Cash and cash equivalents at start of year86.9123.69.4(0.5)Cash and cash equivalents at end of year338.386.92.09.4171For the year ended 31 December 2020STATEMENTS OF CASH FLOWSOverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 1: Basis of preparationThis 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 non-current assets.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 conventionThe 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 concernIn 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. At 31 December 2020 The Group had £338 million of cash and expects to maintain significant liquidity headroom, both now and through the medium term. The Group is continuing to collect cash from students in line with previous years and has the ability to withstand severe downside scenarios from a cash headroom perspective. Our response to Covid-19 is described on pages 2-3 and in the Operations Review.In response to Covid-19, the Directors have considered a range of scenarios for future performance, with a focus on forecast liquidity and ICR covenant performance. The Directors’ Base Case scenario is informed by their reasoned opinion that UK Universities will remain open, providing a blend of online and face-to-face teaching for the remainder of the 2020/21 academic year consistent with the government roadmap announced on 22 February. Universities are expected to open for the 2021/22 academic year and, accordingly, there will be demand for student accommodation from both UK and international students. The greater level of uncertainty around international students’ behaviour and their ability to travel to the UK could lead to a reduction in demand from this customer group. The Directors have considered a Reasonable Worst Case scenario involving a decline in income compared to the Base Case as follows:172The Unite Group PLC Annual Report & Accounts 2020NOTES TO THE FINANCIAL STATEMENTS• Significant disruption to the remainder of the 2020/21 academic year, with around half of students not returning to their accommodation in the third term• Significantly reduced income for the 2021/22 academic year as a result of travel restrictions, limiting the ability of international students to travel to the UKUnder each of these scenarios, the Directors are satisfied that the Group has sufficient liquidity and will maintain covenant compliance over the next 12 months. To further support the Directors’ going concern assessment, a ‘Reverse Stress Test’ was performed to determine the level of performance at which adopting the going concern basis of preparation may not be appropriate. This involved assessing the minimum amount of income required to ensure financial covenants would not be breached. Our tightest ICR covenant requires us to collect 70% of contracted rent for the 2020/21 academic year which compares to 66% collected to date. This requires us to collect less than 10% of rents due or outstanding for the balance of 2020/21 to maintain covenant compliance. The Directors are satisfied that the possibility of such an outcome is sufficiently remote that adopting the going concern basis of preparation is appropriate.As at the date of this report, the global outlook as a result of Covid-19 continues to be uncertain and the range of potential outcomes is wide ranging and unknown. In particular, should the impacts of the pandemic on trading conditions be more prolonged or severe than currently forecast by the Directors or considered under the Reasonable Worst Case referenced above, namely if there is a further sustained national lockdown that results in Universities not opening physically and students either not arriving at University or returning home, the Group’s going concern status would be dependent on its ability to seek interest cover covenant waivers from its lenders. The Directors consider this eventuality to be remote.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.Impact of accounting standards and interpretations in issue but not yet effectiveAt 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 standardsThe 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 10 and IAS 28 (amendments) ‘Sale or contribution of assets between an investor and its associate or joint venture’• IFRS 17 ‘Insurance contracts’• IAS 1 and IAS 8 (amendments) ‘Definition of material’• IAS 1 (amendments) ‘Classification of liabilities as current or non-current’• IFRS 9, IAS 39 and IFRS 7 (amendments) ‘Interest rate benchmark reform’• IFRS 16 (amendments) ‘Covid-19 related rent concessions’• IFRS Standards (amendments) ‘References to Conceptual Framework in IFRS Standards’• IFRS Standards (annual improvements)173OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 1: Basis of preparation continuedCritical accounting estimates and judgementsThe 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 applygin 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.The areas which involve a high degree of judgement or complexity in applygin 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)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. In 2020 these revisions include the impact of Covid-19.below and in more detail in the related note:valuation of investment property and investment property under development (note 3.1)Significant accounting judgementsEstimation uncertainty The area involving the most sensitive estimates and assumptions that are significant to the financial statements is set out • • • NOTES TO THE FINANCIAL STATEMENTS CONTINUED174The Unite Group PLC Annual Report & Accounts 2020Section 2: Results for the yearThis 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. In October 2019, EPRA issued updated best practice recommendations, including new definitions of NAV measures, which became effective for the Group on 1 January 2020. The revision includes the introduction of EPRA Net Tangible Assets (NTA) which is the most relevant new NAV measure for the Group, and this will be our primary NAV measure going forward. EPRA NTA adjusts EPRA NAV, our existing key NAV measure, by excluding intangible assets. EPRA also introduced EPRA Net Reinstatement Value (NRV) and EPRA Net Disposal Value (NDV) metrics as set out in note 2.3c. The Group uses EPRA earnings and NAV and NTA movement as key comparable indicators across other real estate companies in Europe.IFRS performance measuresNote2020 £m2019 £m2020 pps2019 ppsLoss after tax2.2c(121.0)(89.2)(31.8p)(31.5p)Net assets2.3d3,234.9£3,071.5809p845pEPRA performance measuresNote2020 £m2019 £m2020 pps2019 ppsEPRA earnings2.2c97.3110.625.5p39.1pEPRA NAV2.3d3,285.23,109.7823p853pEPRA NTA2.3d3,266.23,087.0818p847p2.1 Segmental informationThe Board of Directors monitors the business along two activity lines, Operations and Property. The reportable segments for the years ended 31 December 2020 and 31 December 2019 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.The Group’s properties are located exclusively in the United Kingdom. The Group therefore has one geographical segment.2.2 EarningsEPRA 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. In 2020, in consideration of EPRA’s focus on presenting clear comparability in results from recurring operational activities, EPRA earnings excludes integration costs. The reconciliation between profit/loss 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 17 to 21. 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.175OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 2: Results for the year continued2.2a) EPRA earnings20202019Group on EPRA basisUniteUSAFLSAV Total£m£m£m£mGroup on EPRA basisUniteUSAFLSAV Total£m£m£m£mShare of joint venturesShare of joint venturesRental incomeProperty operating expensesManagement feesOperating expensesNet �nancing costsRental income134.141.538.3213.9Property operating expenses(12.2)(33.0)(7.9)(53.1)Management fees21.0(3.4)(3.2)14.4Operating expenses(21.1)(0.3)(0.4)(21.8)(9.2)(9.2)Net �nancing costs(18.7)(6.7)(9.3)(34.7)196.134.232.9263.2(61.9)(12.8)(8.2)(82.9)Net operating income134.221.424.7180.320.1(2.8)(3.3)14.0(30.1)(0.3)(0.5)(30.9)(8.8)––(8.8)(40.6)(6.6)(8.9)(56.1)Operations segment result74.811.712.098.5Property segment result(2.2)––(2.2)Unallocated to segments7.1(0.3)(5.8)1.0EPRA earnings79.711.46.297.3Net operatgin income101.129.330.4160.8Operations segment result73.118.917.5109.5Property segment result(1.5)––(1.5)Unallocated to segments8.7(0.2)(5.9)2.6EPRA earnings18.780.311.6110.6Interest on lease liabilitiesInterest on lease liabilities––Included in the above is rental income of £14.6 million and property operating expenses of £7.3 million relating to sale and leaseback properties.The unallocated to segments balance includes the fair value of share-based payments of (£1.7 million), contributions to the Unite Foundation of (£1.0 million), LSAV performance fee of £5.7 million, deferred tax charge of (£0.8 million) and current tax charge of (£1.2 million).EPRA earnings excludes integrations costs associated with the acquisition of Liberty Living, which total £9.2 million in the year.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).NOTES TO THE FINANCIAL STATEMENTS CONTINUED176The Unite Group PLC Annual Report & Accounts 20202.2b) IFRS reconciliation to EPRA earningsEPRA earnings excludes movements relating to changes in values of investment properties (owned, leased and under development), profits/losses from the disposal of properties, swap/debt break costs, impairment of goodwill and acquisition/integration costs, which are included in the loss/profit reported under IFRS. EPRA earnings reconcile to the loss attributable to owners of the parent company as follows:Note2020£m2019£mLoss attributable to owners of the parent company(121.0)(89.2)Net valuation losses/(gains) on investment property (owned)3.1124.2(154.8)Property disposals (owned)1.96.2Net valuation losses on investment property (leased)3.111.28.1Property disposals (leased) –1.1Impairment of goodwill and acquired intangible asset –384.1Integration/acquisition costs9.222.8Amortisation of fair value of debt recognised on acquisition(4.3)(0.4)Share of joint venture losses/(gains) on investment property3.4b41.5(58.3)Share of joint venture property disposals3.4b–(0.4)Swap cancellation and loan break costs4.330.12.7Mark to market changes on interest rate swaps4.35.82.7Current tax relating to impairment of goodwill–(0.5)Deferred tax2.5d0.1(14.3)Minority interest share of reconciling items*(1.4)0.8EPRA earnings2.2a97.3110.6* 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 3.4.2.2c) Earnings per shareThe Basic EPS calculation is based on the earnings/loss 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 on a day-to-day basis.The calculations of basic and EPRA EPS for the year ended 31 December 2020 and 2019 are as follows:Note2020 £m2019 £m2020 pps2019 pps(Loss)/earningsBasic(121.0)(89.2)(31.8p)(31.5p)Diluted(121.0)(89.2)(31.8p)(31.4p)EPRA2.2a97.3110.625.5p39.1p20202019Weighted average number of shares (thousands)Basic381,379282,802Dilutive potential ordinary shares (share options)8721,156Diluted382,251283,958Movements 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 2020, there were 11,278 (2019: 15,545) options excluded from the potential dilutive shares that did not affect the diluted weighted average number of shares.177OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 2: Results for the year continued2.3 Net assets2.3a) EPRA NAV and NTAEPRA NTA makes adjustments to IFRS measures by removing the fair value of financial instruments and the carrying value of intangibles. The reconciliation between IFRS NAV and EPRA NTA 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 22 to 25.2020Unite£mShare of JVsGroup on EPRA basis£mUSAF£mLSAV £mInvestment property (owned)3,614.7616.7661.84,893.2Investment property (leased)101.8––101.8Investment property (under development)187.2––187.2Total property portfolio3,903.7616.7661.85,182.2Debt on properties(1,663.5)(201.1)(268.2)(2,132.8)Lease liabilities(96.3)––(96.3)Cash338.315.437.3391.0Net debt(1,421.5)(185.7)(230.9)(1,838.1)Other assets and (liabilities)(21.3)(13.2)(24.4)(58.9)EPRA NAV2,460.9417.8406.53,285.2Intangibles per IFRS balance sheet(19.0)––(19.0)EPRA NTA2,441.9417.8406.53,266.2Loan to value*35%30%35%34%Loan to value post IFRS 1636%30%35%35%* LTV calculated excluding investment properties (leased) and the corresponding lease liabilities.2019Unite£mShare of JVsGroup on EPRA basis£mUSAF£mLSAV £mInvestment property (owned)3,406.9628.0667.54,702.4Investment property (leased)110.4––110.4Investment property (under development)411.8––411.8Total property portfolio3,929.1628.0667.55,224.6Debt on properties(1,537.2)(194.4)(267.6)(1,999.2)Lease liabilities(98.9)––(98.9)Cash86.95.222.8114.9Net debt(1,549.2)(189.2)(244.8)(1,983.2)Other assets and (liabilities)(119.3)(1.5)(10.9)(131.7)EPRA NAV2,260.6437.3411.83,109.7Intangibles per IFRS balance sheet(22.7)––(22.7)EPRA NTA2,237.9437.3411.83,087.0Loan to value*39%30%37%37%Loan to value post IFRS 1640%30%37%38%* LTV calculated excluding investment properties (leased) and the corresponding lease liabilities.NOTES TO THE FINANCIAL STATEMENTS CONTINUED178The Unite Group PLC Annual Report & Accounts 20202.3b) Movement in EPRA NTA during the yearContributions to EPRA NTA by each segment during the year is as follows:2020NoteUnite£mShare of joint venturesGroup on EPRA basisTotal£mUSAF£mLSAV £mOperationsOperations segment result2.2a74.811.712.098.5Add back amortisation of intangibles3.3b6.4––6.4Total Operations81.211.712.0104.9PropertyRental growth(102.4)(24.0)(15.0)(141.4)Yield movement(17.6)(1.1)0.1(18.6)Disposal losses (owned)(1.9)––(1.9)Investment property losses (owned)(121.9)(25.1)(14.9)(161.9)Investment property losses (leased)3.1a(11.2)––(11.2)Investment property losses (under development)3.1a(4.2)––(4.2)Pre-contract/other development costs2.2a(2.2)––(2.2)Total Property(139.5)(25.1)(14.9)(179.5)UnallocatedShares issued294.0––294.0Investment in joint ventures2.3(5.7)3.4–Dividends paid––––Joint venture property acquisition fee––––LSAV performance fee11.4–(5.7)5.7Swap cancellation and debt break costs4.3(30.1)––(30.1)Purchase of intangibles3.3b(2.7)––(2.7)Integration costs(9.2)––(9.2)Other(3.4)(0.4)(0.1)(3.9)Total Unallocated262.3(6.1)(2.4)253.8Total EPRA NTA movement in the year204.0(19.5)(5.3)179.2Total EPRA NTA brought forward2,237.9437.3411.83,087.0Total EPRA NTA carried forward 2,441.9417.8406.53,266.2EPRA NAV brought forward at 1 January 2020 was £3,109.7 million, and closing EPRA NAV at 31 December 2020 was £3,285.2 million. The movement of (£175.5 million) is shown in the table above by excluding the amortisation of intangibles (£6.4 million) and the purchase of intangibles £2.7 million.The £3.9 million other balance within the unallocated segment includes a tax charge of £2.1 million, the purchase of own shares of £0.7 million and £1.0 million for contributions to the Unite Foundation.179OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 2: Results for the year continued2.3 Net assets continued continued2.3b) Movement in EPRA NTA during the year2019NoteGroup on EPRA basisUniteUSAFLSAV Total£m£m£m£mShare of joint venturesOperationsPropertyUnallocatedTotal EPRA NTA movement in the year966.014.141.11,021.2Total EPRA NTA carried forward2,237.9437.3411.83,087.0Operations segment result––Total OperationsYield movement–Investment property gains (leased)––––Investment property gains (under development)––––Total PropertyShares issued–––––––––––Purchase of intangibles––OtherTotal Unallocated2.2a73.118.917.5109.5Add back amortisation of intangibles3.3b5.65.678.718.917.5115.1Rental growth54.211.724.690.520.42.318.341.0Disposal (losses)/gains (owned)(5.5)0.2(5.3)Investment property gains (owned)69.114.242.9126.23.1a(8.1)(8.1)Disposal losses investment property (leased)(1.1)(1.1)3.1a80.280.2Pre-contract/other development costs2.2a(1.5)(1.5)138.614.242.9195.7254.3254.3Investment in joint ventures31.7(18.2)(13.5)Acquisition of Liberty Living531.0531.0Dividends paid(70.7)(70.7)LSAV performance fee11.4(5.7)5.7Joint venture property acquisition fee2.8(0.6)2.2Swap cancellation and debt break costs4.3(2.7)(2.7)3.3b(5.5)(5.5)(3.6)(0.2)(0.1)(3.9)748.7(19.0)(19.3)710.4Total EPRA NTA brought forward1,271.9423.2370.72,065.8EPRA NAV brought forward at 1 January 2019 was £2,088.6 million and closing EPRA NAV at 31 December 2019 was £3,109.7 million. The movement of £1,021.1 million is shown in the table above by excluding the amortisation of intangibles (£5.6 million) and the purchase of intangibles £5.5 million.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.NOTES TO THE FINANCIAL STATEMENTS CONTINUED180The Unite Group PLC Annual Report & Accounts 20202.3c) Reconciliation to IFRSTo determine EPRA NAV, net assets reported under IFRS are amended to exclude the fair value of financial instruments and associated tax.To determine EPRA NTA, net assets reported under IFRS are amended to exclude the fair value of financial instruments, associated tax and the carrying value of intangibles.To determine EPRA NRV, net assets reported under IFRS are amended to exclude the fair value of financial instruments, associated tax and real estate transfer tax.To determine EPRA NDV, net assets reported under IFRS are amended to exclude the fair value of financial instruments, but include the fair value of fixed interest rate debt and the carrying value of intangibles.The net assets reported under IFRS reconcile to EPRA NAV, NTA, NRV and NDV (previously NNNAV) as follows:2020NAV £mNTA £mNRV £mNDV £mNet assets reported under IFRS3,234.93,234.93,234.93,234.9Mark to market interest rate swaps24.424.424.4–Unamortised swap gain(1.8)(1.8)(1.8)(1.8)Mark to market of fixed rate debt–––(85.2)Unamortised fair value of debt recognised on acquisition28.128.128.128.1Current tax(0.4)(0.4)(0.4)–Intangibles per IFRS balance sheet–(19.0)––Real estate transfer tax––312.0–EPRA reporting measure3,285.23,266.23,597.23,176.02019NAV £mNTA £mNRV £mNDV £mNet assets reported under IFRS3,071.53,071.53,071.53,071.5Mark to market interest rate swaps8.38.38.3–Unamortised swap gain(2.1)(2.1)(2.1)(2.1)Mark to market of fixed rate debt–––(93.5)Unamortised fair value of debt recognised on acquisition32.432.432.432.4Current tax(0.4)(0.4)(0.4)–Intangibles per IFRS balance sheet–(22.7)––Real estate transfer tax––280.5–EPRA reporting measure3,109.73,087.03,390.23,008.3181OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 2: Results for the year continued2.3 Net assets continued2.3c) Reconciliation to IFRS continuedThe previous EPRA NAV metric reconciles to the new EPRA NAV, NTA, NRV and NDV (previously NNNAV) metrics as follows:2020NTA £mNRV £mNDV £mNTA ppsNRV ppsNDV ppsEPRA NAV3,285.23,285.23,285.2823p823p823pIntangibles per IFRS balance sheet(19.0)––(5p)––Real estate transfer tax–312.0––78p–Mark to market of fixed rate debt––(85.2)––(21p)Mark to market interest swaps––(24.4)––(6p)Current tax––0.4–––EPRA reporting measure3,266.23,597.23,176.0818p901p796p2019NTA £mNRV £mNRV £mNTA ppsNRV ppsNRV ppsEPRA NAV (as previously reported)3,109.73,109.73,109.7853p853p853pIntangibles per IFRS balance sheet(22.7)––(6p)––Real estate transfer tax–280.5––77p–Mark to market of fixed rate debt––(93.5)––(25p)Mark to market interest swaps––(8.3)––(2p)Current tax––0.4–––EPRA reporting measure3,087.03,390.23,008.3847p930p826p2.3d) NAV, NTA, NRV and NDV per shareBasic 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 NTA to monitor the performance of the Property segment on a day-to-day basis.Note2020 £m2019 £m2020 pps2019 ppsNet assetsBasic NAV3,234.93,071.5809p845pEPRA NAV2.3a3,285.23,109.7825p855pEPRA NAV (diluted)3,290.03,114.0823p853pEPRA NTA 2.3a3,266.23,087.0820p849pEPRA NTA (diluted)3,271.03,091.4818p847pEPRA NRV2.3c3,597.23,390.2903p932pEPRA NRV (diluted)3,601.93,394.5901p930pEPRA NDV3,176.03,008.3798p827pEPRA NDV (diluted)3,180.73,012.6796p826pNumber of shares (thousands)20202019Basic398,226363,618Outstanding share options1,4841,309Diluted399,710364,927NOTES TO THE FINANCIAL STATEMENTS CONTINUED182The Unite Group PLC Annual Report & Accounts 20202.4 Revenue and costsAccounting policiesRental incomeManagement and performance feesAcquisition feesThe Group recognises revenue from the following major sources:Rental incomeManagement and performance feesAcquisition feesRevenue 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 comprises direct-lets to students and leases to Universities and commercial tenants. This revenue is 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.The Group acts as asset and property manager for USAFand 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 2020, this was 80% based upon eight 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 relating to this revenue.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.• • • recognised in the income statement over the length of the tenancy period as the Group provides the services to its on meeting specific performance targets it is not reasonably possible to determine the future contractual income 183OverviewStrategic ReportGovernanceOther InformationFinancial StatementsSection 2: Results for the year continued2.4 Revenue and costs2.5 Tax continuedThe Group earns revenue from the following activities:The cost of sales included in the consolidated income statement includes property operating expenses of £53.3 million (2019: £32.1 million).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.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. The applicable deferred tax rate increased from 17% to 19% due to the enactment during the period of the Finance Act 2020, which cancelled the planned reduction in corporation tax to 17% from 1 April 2020. This rate change increased the deferred tax assets recognised at the year-end by £0.1 million.As a REIT, rental profits and gains on disposal of investment properties and propertych investments are exempt rifrom corporation tax. As a result, no deferred tax provision has been recognised at the balance sheet date in respect of property assets or units in USAF and LSAV.20202019Note£m£mRental income*2.2a134.1Management fees2.2a14.4LSAV performance fee5.7USAF acquisition fee2.2(0.2)Operations segmentOperations segmentUnallocatedUnallocatedImpact of minority interest on management fees196.114.05.7–215.8156.4(0.2)Total revenue215.6156.2* EPRA earnings includes £263.2 million (2019: £213.9 million) of rental income, which is comprised of £196.1 million (2019: £134.1 million) recognised on wholly owned assets and a further £67.1 million (2019: £79.8 million) from joint ventures, which is included in share of joint venture (loss)/profit in the consolidated income statement.Accounting policies NOTES TO THE FINANCIAL STATEMENTS CONTINUED184The Unite Group PLC Annual Report & Accounts 20202.5a) Tax – income statement2.5b) Tax – other comprehensive incomeThe total taxation charge/(credit) in the income statement is analysed as follows:The movement in deferred tax provided is shown in more detail in note 2.5d.In the income statement, a tax charge of £2.1 million arises on a loss before tax of £120.1 million. The taxation credit that would arise at the standard rate of UK corporation tax is reconciled to the actual tax charge as follows: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.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 2020 the required PID is expected to be fully paid by the end of 2021.Within other comprehensive income a tax chargetotalling £nil (2019: £nil) has been recognised representingdeferredtax. 20202019£m£m20202019£m£mCorporation tax on residual business income arising in UK companies2.1Income tax on UK rental income arising in non-UK companies0.4Adjustments in respect of prior periods(2.4)Origination and reversal of temporary di�erences(13.9)E�ect of change in tax rateAdjustments in respect of prior periods0.2Income tax using the UK corporation tax rate of 19% (2019: 19%)(19.2)Property rental business pro�ts exempt from tax in the REIT Group(15.2)Release of deferred tax liability due to legislative change(13.6)Non-taxable items relating to the acquisition of Liberty Living76.7Property revaluations not subject to tax(40.5)Mark to market changes in interest rate swaps not subject to taxE�ect of indexation on investmentsE�ect of statutory tax reliefs0.1E�ect of tax deduction transferred to equity on share schemes0.2Rate di�erence on deferred tax0.1Prior year adjustments2)(2.1.20.3(0.3)Current tax charge1.20.10.9(0.1)0.10.9(13.7)2.1(13.6)Loss before tax(120.1)(101.2)(22.8)(7.4)0.1(0.8)31.21.10.70.1––(0.1)2.1(13.6)–––Deferred tax charge/(credit)Total tax charge/(credit) in income statementTotal tax charge/(credit) in income statement185OverviewStrategic ReportGovernanceOther InformationFinancial StatementsSection 2: Results for the year continued2.5 Tax continued2.5c) Tax – statement of changes in equity2.5d) Tax – balance sheetCompanyWithin the statement of changes in equity a tax charge totalling £0.1 million (2019: £1.1 million credit) has been recognised representing deferred tax. An analysis of this is included below in the deferred tax movement table.The table below outlines the deferred tax (assets)/liabilities that are recognised in the balance sheet, together with their Deferred tax has not been recognised on temporary differences of £4.3 million (2019: £126.3 million) in respectof revaluation of subsidiaries and investment in joint ventures as it is considered unlikely that these investments willbe divested.The decrease in the unprovided deferred tax amount is primarily driven by the enactment of provisions contained in Finance Act 2019 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 majorityof the Company’s investments in subsidiaries from the charge to corporation tax. movements in the year: 20202019 At 31 December 2019in incomein equityAt 31 December 2020£m£m£m£m At 31 December 2018in incomein equityAt 31 December 2019£m£m£m£mCharged/(credited)Charged/(credited)Charged/(credited)Charged/(credited)Investments–––Share schemesInvestments––Share schemes––(0.9)(0.6)(1.3)(1.3)(0.7)–(2.9)0.9*0.1(1.9)11.9(13.7)*(1.1)(2.9)Property, nt and machinery and provisionspla0.3(0.2)0.2Tax value of carried forward losses recognised0.8(0.1)24.4(24.4)Property,plant and machinery and provisions (0.7)0.1(0.3)(0.9)(0.6)(0.1)(0.6)(1.3)Tax value of carried forward losses recognised(11.2)10.7(0.2)(0.7)Net tax (assets)/liabilitiesNet tax liabilities/(assets)* The £0.9 million balance above includes tax movements totalling £0.8 million in respect of Property,plant and machiner y, share schemes and losses which are included in EPRA earnings and therefore not shown as a reconciling item in the IFRS reconciliation in note 2.2b. Removing them results in the £0.1 million movement shown in note 2.2b.* The (£13.7 million) balance above includes tax movements which are included in EPRA earnings and therefore not shown as a reconciling item in the IFRS reconciliation in note 2.2 b. Removing them results in the £14.3 million movement shown in note 2.2b.NOTES TO THE FINANCIAL STATEMENTS CONTINUED186The Unite Group PLC Annual Report & Accounts 20202.6 Audit feesDuring the year, the Group obtained the following services from the Company’s auditor and its associates:2020£m2019£mFees payable to the Group’s auditors for the audit of the parent company and consolidated financial statements0.50.4Fees payable to the Group’s auditors for other services to the Group:– Audit of the financial statements of subsidiaries0.10.1Total audit fees payable to the Group’s auditors0.60.5Audit-related assurance services0.10.1Corporate finance services–1.9Other services––Total non-audit fees0.12.0Non-audit fees in 2020 relate entirely to services provided in respect of the 2020 half year review. Non-audit fees in 2019 almost entirely related to Reporting Accountant services provided in respect of the acquisition of Liberty Living. 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 109 to 114.No services were provided pursuant to contingent fee arrangements.Section 3: Asset managementThe 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 assetsThe 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 NTA and 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.187OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 3: Asset management continued3.1 Wholly owned property assets continuedAccounting policiesValuation processInvestment property (owned) and investment property (under development)Investment property (leased)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 costsare beg in incurred. Capitalisationof 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 2.8% (2019: 5.8%).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.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.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 LLP, Chartered Surveyors were the valuers in the years ended 31 December 2020 and 2019. 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.reviewed by the Property Board and the CFO. This includes a review of the fair value movements over the year. The valuations are based on:The information provided to the valuers – and the assumptions and the valuation models used by the valuers – are • • NOTES TO THE FINANCIAL STATEMENTS CONTINUED188The Unite Group PLC Annual Report & Accounts 2020The 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 2020 are shown in the table below. 2020Investmentproperty(owned)£mInvestmentproperty(leased)£mInvestment property (under development)£mTotal£mAt 1 January 20203,406.9110.4411.83,929.1Cost capitalised25.02.687.6115.2Interest capitalised––4.64.6Transfer from investment property under development312.6–(312.6)–Transfer from work in progress––––Disposals(9.8)––(9.8)Valuation gains56.5–6.462.9Valuation losses(176.5)(11.2)(10.6)(198.3)Net valuation losses(120.0)(11.2)(4.2)(135.4)Carrying and market value at 31 December 20203,614.7101.8187.23,903.7The 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. 2019 Investmentproperty(owned)£mInvestmentproperty(leased)£mInvestment property (under development)£mTotal£mAt 1 January 20191,497.1128.0278.91,904.0Acquired through business combination1,933.7–18.41,952.1Cost capitalised6.56.3208.2221.0Interest capitalised––9.19.1Transfer from investment property under development189.8–(189.8)–Transfer from work in progress––6.86.8Disposals(294.8)(15.8)–(310.6)Valuation gains88.1–86.1174.2Valuation losses(13.5)(8.1)(5.9)(27.5)Net valuation gains74.6(8.1)80.2146.7Carrying and market value at 31 December 20193,406.9110.4411.83,929.1Included within investment properties at 31 December 2020 are £29.7 million (2019: £31.3 million) of assets held under a long leasehold and £0.1 million (2019: £0.1 million) of assets held under short leasehold.Total interest capitalised in investment properties (owned) and investment properties under development at 31 December 2020 was £52.2 million (2019: £47.6 million) on a cumulative basis. Total internal costs capitalised in investment properties (owned) and investment properties under development was £66.8 million at 31 December 2020 (2019: £63.4 million) on a cumulative basis.189OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 3: Asset management continued3.1 Wholly owned property assets continuedRecurring fair value measurementAll investment and development properties are classified as Level 3 in the fair value hierarchy.Class of asset2020£m2019£mLondon – rental properties1,137.01,015.0Prime provincial – rental properties949.3876.5Major provincial – rental properties1,255.81,198.1Other provincial – rental properties272.6317.3London – development properties158.8245.1Prime provincial – development properties25.676.1Major provincial – development properties2.890.6Investment property (owned)3,801.93,818.7Investment property (leased)101.8110.4Market value3,903.73,929.1The 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)2020£m2019£mOpening fair value3,929.11,904.0Acquired through business combination–1,952.1(Losses) and gains recognised in income statement(135.4)146.7Capital expenditure119.8236.9Disposals(9.8)(310.6)Closing fair value3,903.73,929.1NOTES TO THE FINANCIAL STATEMENTS CONTINUED190The Unite Group PLC Annual Report & Accounts 2020Quantitative information about fair value measurements using unobservable inputs (Level 3)2020Fair value£mValuation techniqueUnobservable inputsRangeWeighted averageLondon – rental properties1,137.0Discounted cash flowsNet rental income (£ per week) Estimated future rent increase (%) Discount rate (yield) (%)£164–£370 2%–3% 3.9%–5.0%£267 3% 4.0%Prime provincial – rental properties949.3Discounted cash flowsNet rental income (£ per week) Estimated future rent increase (%) Discount rate (yield) (%)£140–£229 2%–3% 4.0%–6.2%£169 3% 4.8%Major provincial – rental properties1,255.8Discounted cash flowsNet rental income (£ per week) Estimated future rent increase (%) Discount rate (yield) (%)£82–£167 1%–3% 4.7%–7.0%£132 2% 5.7%Other provincial – rental properties272.6Discounted cash flowsNet rental income (£ per week) Estimated future rent increase (%) Discount rate (yield) (%)£87–£188 1%–3% 5.0%–13.8%£136 2% 6.8%London – development properties158.8Discounted cash flowsEstimated cost to complete (£m) Estimated future rent increase (%) Discount rate (yield) (%)£84.9m–£147.9m 3% 4.0%£114.9m 3% 4.0%Prime provincial – development properties25.6Discounted cash flowsEstimated cost to complete (£m) Estimated future rent increase (%) Discount rate (yield) (%)£19.1m–£65.3m 3% 4.3%£40.8m 3% 4.3%Major provincial – development properties2.8Discounted cash flowsEstimated cost to complete (£m) Estimated future rent increase (%) Discount rate (yield) (%)£45.5m 3% –£45.5m 3% –3,801.9Investment property (leased)101.8Discounted cash flowsNet rental income (£ per week) Estimated future rent increase (%) Discount rate (yield) (%)£129–£185 3% 6.8%£147 3% 6.8%Fair value at 31 December 20203,903.7191OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 3: Asset management continued3.1 Wholly owned property assets continuedQuantitative information about fair value measurements using unobservable inputs (Level 3) continued2019Fair value£mValuation techniqueUnobservable inputsRangeWeighted averageLondon – rental properties1,015.0Discounted cash flowsNet rental income (£ per week) Estimated future rent increase (%) Discount rate (yield) (%)£192–£367 3%–5% 3.9%–5.0%£277 4% 4.0%Prime provincial – rental properties876.5Discounted cash flowsNet rental income (£ per week) Estimated future rent increase (%) Discount rate (yield) (%)£137–£212 2%–5% 4.5%–6.0%£163 3% 5.0%Major provincial – rental properties1,198.1Discounted cash flowsNet rental income (£ per week) Estimated future rent increase (%) Discount rate (yield) (%)£74–£157 2%–5% 4.8%–6.1%£129 3% 5.7%Other provincial – rental properties317.3Discounted cash flowsNet rental income (£ per week) Estimated future rent increase (%) Discount rate (yield) (%)£107–£181 1%–4% 5.0%–15.5%£138 3% 6.6%London – development properties245.1Discounted cash flowsEstimated cost to complete (£m) Estimated future rent increase (%) Discount rate (yield) (%)£30.8m–£91.4m 3% 4.0%£65.6m 3% 4.0%Prime provincial – development properties76.1Discounted cash flowsEstimated cost to complete (£m) Estimated future rent increase (%) Discount rate (yield) (%)£16.8m–£76.4m 3% 4.8%–5.0%£43.2m 3% 4.9%Major provincial – development properties90.6Discounted cash flowsEstimated cost to complete (£m) Estimated future rent increase (%) Discount rate (yield) (%)£35.1m–£46.8m 3% 4.5%£39.6m 3% 4.5%3,818.7Investment property (leased)110.4Discounted cash flowsNet rental income (£ per week) Estimated future rent increase (%) Discount rate (yield) (%)£121–£167 3% 6.8%Fair value at 31 December 20193,929.1Fair value sensitivity analysisA 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.Class of assetsFair value at 31 December 2020 £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 £mRental propertiesLondon 1,137.0 1,213.8 1,100.5 1,090.1 1,233.2 Prime provincial 949.3 1,019.3 923.7 923.8 1,024.5 Major provincial 1,255.8 1,350.3 1,222.6 1,232.5 1,345.4 Other provincial 272.6 294.8 266.8 270.4 292.1 Development propertiesLondon 158.8 169.7 147.9 142.6 168.0 Prime provincial 25.6 30.4 20.9 18.5 34.2 Major provincial 2.8 2.82.8 4.7 1.1 Market value3,801.9 4,081.1 3,685.2 3,682.6 4,098.5 NOTES TO THE FINANCIAL STATEMENTS CONTINUED192The Unite Group PLC Annual Report & Accounts 20203.2 Inventories3.3 Right of use assets and other non-current assetsAccounting policiesAccounting policiesInventories 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. Allcosts directly associated with the purchase and construction of a property, and all subsequent qualifying expenditure is capitalised.At 31 December 2020, the Group had interests in four pieces of land (2019: two pieces of land).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.Other than land and buildings, pproerty,p lant 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, pd equipment mainly comprise leasehold improvements at the Group’s head office and London office lant anas 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 lifeProperty,p lant and equipment 4–7 yearsIntangible 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 appproriate 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.20202019£m£mInterests in land6.72.1Inventories8.84.01.5Other stocks2.5Leased assetsProperty, plant and equipment Intangible assets• • 193OverviewStrategic ReportGovernanceOther InformationFinancial StatementsSection 3: Asset management continued3.3a) Right of use assets 20202019Buildings£mOther£mTotal£mBuildings £mOther£mTotal£mCostAt 1 January5.80.86.63.70.64.3Additions–0.60.61.40.21.6Acquired through business combination–––0.7–0.7At 31 December5.81.47.25.80.86.6AmortisationAt 1 January(0.8)(0.3)(1.1)–––Amortisation charge for the year(1.4)(0.4)(1.8)(0.8)(0.3)(1.1)At 31 December(2.2)(0.7)(2.9)(0.8)(0.3)(1.1)Carrying value at 1 January5.00.55.53.70.64.3Carrying value at 31 December3.60.74.35.00.55.5The Group leases several assets including office equipment and vehicles. The average lease term is three years.Approximately 42% of the leases expired in the current financial year (2019: 10%). The expired contracts were replaced by new leases for identical underlying assets. This resulted in additions to right of use assets of £0.6 million in 2020 (2019: £0.2 million).The maturity analysis of lease liabilities is presented in note 4.6a. 3.3b) Other non-current assetsThe Group’s other non-current assets can be analysed as follows:20202019Property, plant and equipment£mIntangibleassets£mTotal£mProperty, plant and equipment£mIntangibleassets£mTotal£mCostAt 1 January11.459.170.510.753.664.3Additions0.72.73.40.45.15.5Acquired through business combination–––0.30.40.7At 31 December12.161.873.911.459.170.5Depreciation and amortisationAt 1 January(8.1)(36.4)(44.5)(7.2)(30.8)(38.0)Depreciation/amortisation charge for the year(1.1)(6.4)(7.5)(0.9)(5.6)(6.5)At 31 December(9.2)(42.8)(52.0)(8.1)(36.4)(44.5)Carrying value at 1 January3.322.726.010.222.833.0Carrying amount at 31 December2.919.021.93.322.726.0Intangible assets include £1.1 million (2019: £3.5 million) of assets not being amortised as they are not yet ready for use. Property, plant and equipment assets include £0.1 million (2019: £0.8 million) of assets not being depreciated as they are not ready for use. At 31 December 2020 the Group had capital commitments of £0.1 million (2019: £0.5 million) relating to intangible assets and £0.3 million (2019: £nil) relating to Property, plant and equipment.NOTES TO THE FINANCIAL STATEMENTS CONTINUED194The Unite Group PLC Annual Report & Accounts 20203.4 Investments in joint ventures (Group)Accounting policiesJoint 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 jugdements around a number of significant factors. These factors include how Unite as fund manager has the ability todirect 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 appproriate 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.The Group has two joint ventures:Legal entity in which Joint ventureresults 2020 (2019)Partner Group has interestGroup’s share of assets/ObjectiveThe UNITE UK Student 23.4%* (23.4%)UNITE UK Student Accommodation Fund Accommodation Fund, (USAF)throughout the UKa Jersey Unit Trust50% (50%)GIC Real Estate Pte, Ltd Real LSAV Unit Trust, a Jersey Unit Accommodation Trust and LSAV (Holdings) Ltd, Venture (LSAV)incorporated in JerseyInvest and operate Consortium of investorsstudent accommodation London Student Operate student accommodation estate investment vehicle of in London and the Government of SingaporeBirmingham* 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% (2019: 22.0%) of USAF.195OverviewStrategic ReportGovernanceOther InformationFinancial StatementsSection 3: Asset management continued 3.4 Investments in joint ventures (Group) continued3.4a) Net assets and results of the joint venturesThe summarised balance sheets and results for the year, and the Group’s share of these joint ventures are as follows:Net assets and (loss)/profit for the year above include the minority interest, whereas EPRA NTA excludes the minority interest.20202019USAF LSAV Total £m£m£mGrossMIShareGrossShareGrossShareUSAF LSAV Total £m£m£mGrossMIShareGrossShareGrossShareInvestment propertyCashOther current assetsOther current liabilitiesNet assetsInvestment propertyCash–––Other current assetsOther current liabilitiesNet assets––––––––2,798.338.3616.71,323.6661.84,121.91,316.869.71.015.474.637.3144.353.7(912.7)(12.5)(201.1)(536.4)(268.2)(1,449.1)(481.8)–––(1.2)(0.6)(1.2)(0.6)1.0–0.20.40.21.40.4(61.0)(1.5)(13.4)(49.2)(24.6)(110.2)(39.5)1,895.325.3417.8811.8405.92,707.1849.0–(25.3)––––(25.3)–––1.20.61.20.6EPRA NTA1,895.3417.8813.0406.52,708.3824.3–(42.6)(0.8)(11.1)0.60.3(42.0)(11.6)EPRA NTA1,982.7–437.3823.7411.82,806.4849.1144.02.137.1126.963.4270.9102.6DebtSwap liabilitiesMinority interestSwap liabilities2,849.939.0628.01,335.0667.54,184.91,334.523.70.35.245.622.869.328.3Debt(882.1)(12.1)(194.4)(535.2)(267.6)(1,417.3)(474.1)Swap liabilities(1.2)(0.6)(1.2)(0.6)151.82.133.42.71.3154.536.8(160.6)(2.6)(34.9)(24.4)(12.2)(185.0)(49.7)1,982.726.7437.3822.5411.22,805.2875.2Minority interest(26.7)(26.7)Swap liabilities1.20.61.20.6(Loss)/pro�t for the yearPro�t for the yearNOTES TO THE FINANCIAL STATEMENTS CONTINUED196The Unite Group PLC Annual Report & Accounts 20203.4b) Movement in carrying value of the Group’s investments in joint venturesThe carrying value of the Group’s investment in joint ventures decreased by £26.2 million during the year ended 31 December 2020 (2019: £55.5 million increase), resulting in an overall carrying value of £849.0 million (2019: £875.2 million). The following table shows how the decrease has arisen.2020£m2019£mRecognised in the income statement:Operations segment result23.736.4Minority interest share of Operations segment result0.61.1Management fee adjustment related to trading with joint venture6.36.8Net valuation (losses)/gains on investment property(41.5)58.3Property disposals–0.4Other(0.7)(0.4)(11.6)102.6Recognised in equity:Movement in effective hedges(0.1)(0.5)Other adjustments to the carrying value:Profit adjustment related to trading with joint venture(6.3)(8.1)Additional capital invested in LSAV7.5–LSAV performance fee(5.7)(5.7)Distributions received(10.0)(32.8)(Decrease)/increase in carrying value(26.2)55.5Carrying value at 1 January875.2819.7Carrying value at 31 December849.0875.23.4c) Transactions with joint venturesThe 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.2020£m2019£mUSAF13.514.6LSAV6.66.4Asset and property management fees20.121.0LSAV performance fee11.411.4USAF acquisition fee–2.8Investment management fees11.414.2Total fees31.535.2On 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 £6.1 million (2019: £6.6 million), which results in management fees from joint ventures of £14.0 million being shown in the Operating segment result in note 2.2a (2019: £14.4 million).197OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 3: Asset management continued 3.4 Investments in joint ventures (Group) continued3.4c) Transactions with joint ventures continuedInvestment management fees are included within the unallocated to segments section in note 2.2a.The Group did not sell any properties to USAF or LSAV in 2020. 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:Profit and loss2020£m2019USAF£mIncluded in profit on disposal of property (net of joint venture trading adjustment)–1.8Profit on disposal of property–1.8Cash flow2020£m2019USAF£mGross proceeds–202.3Net cash flows included in cash flows from investing activities–202.33.5 Investments in subsidiaries (Company)Accounting policiesIn 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 subsidiariesThe movements in the Company’s interest in unlisted subsidiaries and joint ventures during the year are as follows:Investment in subsidiaries2020£m2019£mAt 1 January2,213.71,189.4Additions–1,397.1Revaluation(387.0)(372.8)At 31 December1,826.72,213.7The 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 190. 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 200.A full list of the Company’s subsidiaries and joint ventures can be found in note 9.NOTES TO THE FINANCIAL STATEMENTS CONTINUED198The Unite Group PLC Annual Report & Accounts 2020Section 4: FundingThe 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; itsexposure to market risks; and its capital management policies. The Merger reserve arose on the acquisition of the Unilodge portfolio in June 2001.Financial assets and financial liabilities are recognised in the Group’s balance sheet 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.comprehensive income.The accounting policies applicable to specific financial assets and liabilities, and financing costs, are set out in the relevant notes.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.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.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:In addition to the borrowings currently drawn as shown above, the Group has available undrawn facilities of £50.0 million (2019: £305.0 million). A further overdraft facility of £10.0 million (2019: £10.0 million) is also available. No financial assets or liabilities have been classified as either fair value through profit or loss or fair value through other Accounting policiesAccounting policies Financial instrumentsImpairment of financial assetsDerivative financial instruments4.1 BorrowingsGroup – Carrying valueCompany – Carrying value2020201920202019£m£m£m£mCurrent––Non-current795.9795.9297.3–568.6270.71,661.81,066.628.1–Total borrowings1,689.91,567.61,066.6442.2In one year or less, or on demand1.4In more than one year but not more than two years1.5In more than two years but not more than �ve years964.7172.2In more than �ve years567.6270.01,533.8442.2Unamortised fair value of debt recognisedon acquisition 32.4–––199OverviewStrategic ReportGovernanceOther InformationFinancial StatementsSection 4: Funding continued4.1 Borrowings continuedProperties with a carrying value of £nil (2019: £604.7 million) have been pledged as security against the Group’s drawn down borrowings. During the year the Group repaid all of its secured borrowings, retaining only unsecured borrowing at 31 December 2020. The carrying value and fair value of the Group’s borrowings is analysed below: 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. The following table shows the changes in liabilities arising from financing activities:20202019Carrying valueFair valueCarrying valueFair value£m£m£m£mat 1 January Financing Fair Value Other at 31 December 2020changes2020 Acquired through business at 31 December Financing combination Fair Value Other at 31 December 2018(note 6)changes2019Level 1 IFRS fair value hierarchy907.4930.9Level 2 IFRS fair value hierarchy231.9244.6428.3428.3BorrowingsInterest rate swapsBorrowings592.679.0861.732.41.91,567.6109.5(5.6)0.9104.8Interest rate swaps0.17.57.6903.1932.2––786.8786.8Total borrowings1,689.91,719.01,567.61,603.81,567.6121.7(4.3)4.91,689.9104.8(4.3)–0.6101.17.6–16.0–23.61,680.011.75.51,814.6117.4702.273.4862.639.91.91,680.0Other loans and unamortised arrangement feesLease liabilitiesLease liabilities–––––2020 2019cash �owsadjustmentscash �owsadjustmentsTotal liabilities from �nancing activitiesTotal liabilities from �nancing activitiesNOTES TO THE FINANCIAL STATEMENTS CONTINUED200The Unite Group PLC Annual Report & Accounts 20204.2 Interest rate swapsThe 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.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 itemwith the , along 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 hedgedrisk, 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; andthe 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 p art 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 inOther 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.The following table shows the fair value of interest rate swaps:The fair value of interest rate swaps (a credit balance in 2020 and 2019) 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.Accounting policies • • • 20202019£m£mCurrent–5.817.8Fair value of interest rate swaps23.67.6Non-current7.6201OverviewStrategic ReportGovernanceOther InformationFinancial StatementsSection 4: Funding continued4.3 Net financing costsAccounting policiesNet 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:2020£m2019£mInterest income(5.6)(5.5)Finance income(5.6)(5.5)Gross interest expense on loans50.832.9Interest capitalised(4.6)(9.1)Amortisation of fair value of debt recognised on acquisition(4.3)–Loan interest and similar charges41.923.8Interest on lease liabilities8.89.2Mark to market changes on interest rate swaps5.82.7Swap cancellation and loan break costs30.12.7Finance costs86.638.4Net financing costs81.032.9The average cost of the Group’s wholly owned investment debt for the year ended 31 December 2020 is 3.2% (2019: 3.3%). The overall average cost of investment debt on an EPRA basis is 3.2% (2019: 3.3%).4.4 GearingLTV 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:Note2020£m2019£mCash and cash equivalents5.1338.386.9Current borrowings4.1–(1.4)Non-current borrowings4.1(1,689.9)(1,566.2)Lease liabilities4.6a(101.1)(104.8)Interest rate swaps4.2(23.6)(7.6)Net debt per balance sheet(1,476.3)(1,593.1)Lease liabilities4.6a101.1104.8Unamortised fair value of debt recognised on acquisition2.3c28.132.4Adjusted net debt(1,347.1)(1,448.3)Reported net asset value2.3c3,234.93,071.5EPRA net asset value2.3c3,285.23,109.7GearingBasic (net debt/reported net asset value)46%52%Adjusted gearing (adjusted net debt/EPRA net asset value)41%47%Loan to value2.3a34%37%NOTES TO THE FINANCIAL STATEMENTS CONTINUED202The Unite Group PLC Annual Report & Accounts 20204.5 Financial risk factorsThe 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.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 appproriate 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 anddefined risk appetite;ensuringthe most cost-effective hedgingstrategies 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 2020, after taking account of interest rate swaps, 70% (2019: 93%) of the Group’s borrowing was held at fixed rates. Excluding the £250.0 million (2019: £342.3 million) of swaps and caps the fixed investment borrowing is at an average rate of 3.2% (2019: 3.5%) for an average period of 6.8 years (2019: 6.9 years), including all debt with current or forward starting swaps the average rate is 3.2% (2019: 3.2%).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 upon the issuance of forecast 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 is disclosed below. The average interest rate is based on the outstanding balances at the end of the financial year.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 underlygin interest rates. The main source of hedge ineffectiveness in these hedge relationships is the effect of the counterparty and the Group’s o in the fair wn credit risk on the fair value of the hedge contracts, which is not reflectedvalue 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 2020 against £250.0 million (2019: £342.3 million) 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.4.5a) Interest rate riskHedging instrumentsApplicable interest ratesNominal amount hedgedCarrying amount of hedgeChange in fair value20202019202020192020201920202019%%£m£m£m£m£m£mWithin one year––––––––1.6(5.8)–(5.8)0.1250.0(4.2)(4.2)–––2.51.650.0(13.6)(8.5)Between one and two yearsBetween two and �ve years0.9342.3(2.5)(2.4)More than �ve years1.6100.0(5.1)(5.1)203OverviewStrategic ReportGovernanceOther InformationFinancial StatementsSection 4: Funding continued4.5 Financial risk factors continued continued4.5a) Interest rate risk4.5b) Credit risk on financial instrumentsHedged itemsPhase 1 IBOR reformHedging reserve – Nominal amountChange in valueHedging reserve – continuingdiscontinued*20202019202020192020201920202019£m£m£m£m£m£m£m£m Hedge to P&L – to P&L – Losses in OCIdiscontinuedcontinuing20202019202020192020201920202019£m£m£m£mLine item in P&L£m£m£m£mLine item in P&LVariable rate borrowings445.0(5.5)2.0Mark to market Variable rate borrowings(4.8)(2.7)0.2interest rate swaps800.0–(15.8)1.8(12.8)(3.3)2.3––Other gains –movements on and losses* 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 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 2020. 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 possiblechange in interest rates.If interest rates had been 1% higher and all other variables were held constant the Group’s loss for the year ended 31 December 2020 would increase by £8.0 million (2019: £nil). This is mainly attributable to the Group’s reduced proportion of hedging. The Group’s sensitivity to interest rates has increased during the year mainly due to the lower proportion of debt hedged.At 31 December 2020 the Group had £800 million of floating rate debt that fixes on the basis of LIBOR together with related derivative hedges fixing on the same basis with a notional value of £300 million. The Group has entered discussions with the lenders to manage the transition of the debt and hedges to alternative benchmark rates during 2021, although exact timing is uncertain. The debt will transition to the risk free rate coterminously with the related hedge instruments, and management do not anticipate any significant impact on theexisting hedgingarrangements reported at year-end as a result of the transition. In order to minimise credit risk, the Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appproriate, 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 line with Board policy.reserve to profit or loss: continuously monitored and the agggreate value of transactions concluded is spread amongst approved counterparties in Reclassifed Reclassifed ine�ectivenessNOTES TO THE FINANCIAL STATEMENTS CONTINUED204The Unite Group PLC Annual Report & Accounts 2020Before 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; orinformation 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.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 appproriate 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 hasp a olicy 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.• • 4.5c) Liquidity risk20202019Weighted average Less than 1–3 3 months1–5 5+ Carrying interest rate1 monthmonths– 1 yearyearsyearsTotalamount%£m£m£m£m£m£m£mWeighted average Less than 1–3 3 months1–5 5+ Carrying interest rate1 monthmonths– 1 yearyearsyearsTotalamount%£m£m£m£m£m£m£mefective efective Variable interest rate instrumentsFixed interest rate instrumentsVariable interest rate instruments2.3445.0445.0445.0Fixed interest rate instruments3.5231.9875.01,106.91,106.94.20.30.63.020.480.5104.8104.8n/a234.7234.7234.71.7–––800.0–800.0800.03.2–––300.0575.0875.0875.04.20.40.73.323.073.7101.1101.1141.3141.3141.3––––Total 0.4142.03.31,123.0648.71,917.41,917.4Total 0.3235.33.0697.3955.51,891.41,891.4Lease liabilitiesTrade and other payables–––––––Lease liabilitiesTrade and other payables––––n/a205OverviewStrategic ReportGovernanceOther InformationFinancial StatementsSection 4: Funding continued4.5 Financial risk factors continued4.5c) Liquidity risk continuedThe Group has access to financing facilities as described below, of which £60.0 million were unused at the reporting date (2019: £315.0 million). The Group expects to meet its other obligations from operating cash flows. 2020£m2019£mUnsecured bank overdraft facility, reviewed annually and payable at call:– amount used–– – amount unused10.010.010.010.0Unsecured committed bank loan facilities which may be extended by mutual agreement:– amount used500.0195.0– amount unused50.0305.0550.0500.04.5d) Covenant complianceThe Group monitors its covenant position and the forecast headroom available on a monthly basis. At 31 December 2020, the Group was in full compliance with all of its borrowing covenants. 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.20202019CovenantActualCovenantActualGearing< 1.500.42< 1.500.50Unencumbered assets ratio> 1.702.81> 1.702.52Secured gearing< 0.250.0< 0.250.05Development assets ratio< 30%4%< 30%9%Joint venture ratio< 55%18%< 55%19%Interest cover> 2.003.9> 2.007.6The Group also has bonds which carry several covenants which the Group was also in full compliance with as set out below. 20202019Weighted covenantWeighted actualWeighted covenantWeighted actualNet gearing< 60%35%< 60%40%Secured gearing< 25%0%< 25%0%Unsecured gearing> 1.672.87> 1.672.50Interest cover> 1.752.67> 1.753.87The Group’s two secured loan facilities were repaid in full in 2020. The covenant headroom position on the secured loans in 2019 is outlined below and assumes that the Group is able to use available cash within net debt.20202019Weighted covenantWeighted actualWeighted covenantWeighted actualLoan to valuen/an/a75%36%Interest covern/an/a1.52.6NOTES TO THE FINANCIAL STATEMENTS CONTINUED206The Unite Group PLC Annual Report & Accounts 20204.6 Leases4.6a) Lease liabilitiesAccounting policiesThe 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 balance sheet.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.Lease liabilities2020 £m2019£mAnalysed as:Non-current96.7100.9Current4.43.9Total lease liability101.1104.8Lease liability maturity analysisYear 14.43.9Year 24.84.4Year 35.44.6Year 46.25.3Year 56.66.1Onwards73.780.5Total101.1104.8The Group does not face a significant liquidity risk with regard to its lease liabilities. Lease liabilities are monitored within the Group’s treasury function. 207OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 4: Funding continued4.6 Leases4.7 Capital management continued4.6b) Lease receivablesMaturity analysis of operating lease receivablesThe 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.The future minimum lease payments receivable under non-cancellable operating leases are as follows: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. £9.8 million of property assets were sold in 2020 and we plan to sell £150–£200 million of property during 2021. The Group targets a yield on cost of approximately 7% from investments in its development and University partnerships ppieline. 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 be covered by operating cash flows. The full year dividend is expected to be £50.8 million compared to operating cash flow of £57.3 million. 20202019£m£mLess than one year169.8296.7363.0Total829.5796.9196.3Between one and �ve years241.3More than �ve years359.3• • • NOTES TO THE FINANCIAL STATEMENTS CONTINUED208The Unite Group PLC Annual Report & Accounts 20204.8 EquityAccounting policiesOrdinary 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 each20202019No. of sharesOrdinary shares£mShare Premium£mNo. of sharesOrdinary shares£mShare Premium£mAt 1 January363,591,88290.91,874.9263,515,15165.9740.5Shares issued (placing)34,502,8728.6285.126,353,6646.6247.6Shares issued (scrip dividend)–––1,017,4720.3(0.3)Shares issued (consideration for Liberty Living)–––72,582,28618.1887.0Shares issued (options exercised)75,678–0.3123,309–0.1At 31 December398,170,43299.52,160.3363,591,88290.91,874.9The 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.4.9 DividendsAccounting policiesDividends are recognised through equity on the earlier of their approval by the Company’s shareholders or their payment. During the year, the Company cancelled the proposed final 2019 dividend and did not pay an interim 2020 dividend (2019: £23.3 million interim dividend – 10.25p per share and £47.5 million final dividend – 19.5p per share relating to the year ended 31 December 2018).After the year-end, the Directors proposed a final dividend per share of 12.75p (2019: 22.95p which was subsequently cancelled), bringing the total dividend per share for the year to 12.75p (2019: 10.25p). No provision has been made in relation to this dividend.The Group has modelled tax adjusted property business profits for 2020 and 2021 and the PID requirement in respect of the year ended 31 December 2020 is expected to be satisfied by the end of 2021.209OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 5: Working capitalThis 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.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.The Group’s cash position at 31 December 2020 was £338.3 million (2019: £86.9 million).The Group’s cashbalances include £1.2 million (2019: £2.6 million) whose use at thebalance sheet date is restricted by funding agreements to pay operating costs.The Group generates cash from its operating activities as follows:Cash flows consist of the following segmental cash inflows/(outflows): operations £57.3 million (2019: £85.4 million), property (£78.2 million) (2019: £191.8 million) and unallocated £272.3 million (2019: £314.5 million). Accounting policies5.1 Cash and cash equivalentsGroupCompanyNote2020201920202019£m£m£m£m£mLoss for the year––––––Change in value of investment property (leased)–Change in value of investments––––Loss on disposal of investment property (leased)––––(Increase) in inventories––(122.2)(118.8)9.2–––––1.7––(300.0)124.2–11.2––387.045.126.75.8–30.11.51.9–––11.6–12.0–2.1–105.3132.7(3.6)(28.5)(0.3)(0.1)(4.5)–(53.3)3.074.680.7(0.7)(2.5)(1.3)–73.378.5(0.7)(2.5)(87.6)(139.9)Adjustments for:Depreciation and amortisation7.6Impairment of goodwill and acquired intangible asset384.1Acquisition costs22.8Fair value of share-based payments6.12.2Dividends received(276.0)Change in value of investment property (owned and under development)3.1(154.8)8.13.13.5372.9Net �nance costs excluding interest on lease liabilities4.318.313.9Mark to market changes in interest rate swaps4.32.7Swap break and debt exit costs4.32.7Loss on disposal of investment property (owned)6.21.1Share of joint venture loss/(pro�t)3.4b(102.6)Trading with joint venture adjustment8.1Tax charge/(credit)2.5a(13.6)(Increase)/decrease in trade and other receivables(1.6)0.1(1.7)(Decrease)/increase in trade and other payables25.9(21.3)Tax paid(2.2)Cash �ows from operating activities before changes in working capitalCash �ows from operating activitiesNet cash �ows from operating activitiesNOTES TO THE FINANCIAL STATEMENTS CONTINUED210The Unite Group PLC Annual Report & Accounts 2020The unallocated amount includes a net cash outflow of £nil in respect of the acquisition of Liberty Living (2019: £487.1 million), amounts received from shares issued £294.0 million (2019: £254.7 million), dividends paid £nil (2019: (£69.6 million)), tax paid (£1.3 million) (2019: (£2.2 million)) and investment in joint ventures (£7.5 million) (2019: £nil).During the year the Company novated £400 million of debt (2019: nil) from subsidiary undertakings and this forms the significant proportion of non-cash movement in inter-company balances.5.2 Trade and other receivablesAccounting policiesOn 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.GroupCompany2020£m2019£m2020£m2019£mTrade receivables16.430.5––Amounts due from Group undertakings (note 5.6)––2,385.91,208.0Amounts due from joint ventures25.218.7––LSAV performance fee22.811.4––Prepayments and accrued income24.520.0––Other receivables15.16.50.20.1Trade and other receivables104.087.12,386.11,208.1The 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 5.6.211OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 5: Working capital continued5.2 Trade and other receivables5.3 Credit risk continued20202019Ageing by academic yearTotalPrior years£m£m£m£mAgeing by academic yearTotalPrior years£m£m£m£m20202019£m£m20202019Note£m£m2020/212019/202019/202018/19Rental debtors1.41.00.30.12.827.219.45.0(12.2)(4.6)(5.3)(2.3)Trade receivables16.415.8–0.6Rental debtorsTrade receivables30.529.90.30.33.9–8.6(0.3)At 31 December12.23.9338.316.448.0402.7147.5Commercial tenants (past due and impaired)Individual tenants (past due and impaired) Commercial tenants (past due and impaired)–Individual tenants (past due and impaired) –CashTrade receivablesExpected credit loss carried0.40.30.12.634.029.61.8Expected credit loss carried(3.9)(1.6)(2.3)At 1 January2.1Acquired on acquisition1.4Expected credit loss charged to income statement in year0.9Receivables written o� during the year (utilisation of expected credit loss)(0.5)5.186.95.230.5Amounts due from joint ventures5.230.1Movements in the Group’s expected credit losses of trade receivables can be shown as follows: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.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: NOTES TO THE FINANCIAL STATEMENTS CONTINUED212The Unite Group PLC Annual Report & Accounts 20205.3a) CashThe 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.5.3b) Trade receivablesThe 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 £0.8 million (2019: £1.0 million) as collateral against individual customers.5.3c) Joint venturesAmounts 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 payablesAccounting policiesTrade 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:GroupCompany2020£m2019£m2020£m2019£mTrade payables16.815.7––Retentions on construction contracts for properties5.85.8––Amounts due to Group undertakings––0.619.1Amounts due to joint venture–12.0––Other payables and accrued expenses68.4110.23.87.0Deferred income50.390.7––Trade and other payables141.3234.44.426.1Other payable and accrued expenses include £0.8 million (2019: £1.0 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 £nil of capital commitments, relating to investment properties under development (2019: £50.5 million).5.5 ProvisionsAccounting policiesProvisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation and are discounted to present value where the effect is material. During 2020, and in accordance with the Government’s Building Safety Advice of 20 January 2020, we undertook a thorough review of the use of High-Pressure Laminate (HPL) cladding on our properties. We have identified 19 properties with HPL that needs replacing across our estate, four of which are wholly owned. We are currently carrying out replacement works for properties with HPL cladding, with activity prioritised according to our risk assessments, starting with those over 18 metres in height. The overall cost of replacing the HPL cladding is expected to be £79.9 million (Unite Share: £33.8 million), of which £15.7 million is in respect of wholly owned properties. Whilst the overall timetable for these works is uncertain, we anticipate this will be incurred over the next 3 years. The regulations continue to evolve in this area and we will ensure that our buildings are safe for occupation and compliant with laws and regulations.213OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 5: Working capital continued5.5 Provisions continuedThe Group has recognised provisions for the cost of these cladding works as follows:Gross £mUnite Share £mWholly ownedUSAFLSAVTotalWholly ownedUSAFLSAVTotalAt 31 December 20181.54.81.27.51.51.10.63.2Additions1.40.4–1.81.40.1–1.5Utilisation(2.6)(3.8)(1.2)(7.6)(2.6)(0.8)(0.6)(4.0)At 31 December 20190.31.4–1.70.30.4–0.7Additions15.750.614.480.715.711.07.233.9Utilisation(0.3)(2.0)(0.2)(2.5)(0.3)(0.4)(0.1)(0.8)At 31 December 202015.750.014.279.915.711.07.133.85.6 Transactions with other Group companiesDuring 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 £3.1 million (2019: £3.2 million). As a result of these intercompany transactions, the following amounts were due from/to the Company’s subsidiaries at the year end. 2020£m2019£mUnite Holdings Limited141.5141.5LDC (Holdings) Limited1,532.01,066.5Liberty Living Group plc712.4–Amounts due from Group undertakings2,385.91,208.0Unite Integrated Solutions plc0.619.1Amounts due to Group undertakings0.619.1The Company has had a number of transactions with its joint ventures, which are disclosed in note 3.4c.Section 6: Key management and employee benefitsThe 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 policiesThe 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.6.1 Staff numbers and costsThe 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 employees20202019Managerial and administrative532426Site operatives1,2079371,7391,363NOTES TO THE FINANCIAL STATEMENTS CONTINUED214The Unite Group PLC Annual Report & Accounts 2020The aggregate payroll costs of these persons were as follows:2020£m2019£mWages and salaries62.049.7Social security costs5.85.1Pension costs2.71.9Fair value of share-based payments1.72.272.258.9The wages and salaries costs include redundancy costs of £6.1 million (2019: £1.3 million). The total number of persons employed by the Group (including Directors) as at 31 December 2020 was 508 managerial and administrative and 1,396 site operatives. There are no employees employed directly by the Company.6.2 Key management personnelThe 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 120 to 148, which covers the requirements of schedule 5 of the relevant legislation.6.3 Share-based compensationA 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 schemesThe 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 ReportSave As You Earn Scheme (SAYE)Open to employees, vesting periods of three years, service conditionb) Outstanding share optionsThe table below summarises the movements in the number of share options outstanding for the Group and their average exercise price: Weighted average exercise price2020Number of options (thousands)2020Weighted average exercise price2019Number of options (thousands)2019Outstanding at 1 January£1.451,929£2.061,751Forfeited during the year£3.47(159)£3.64(179)Exercised during the year£2.38(255)£2.53(259)Granted during the year£0.501,157£0.81616Outstanding at 31 December£0.832,672£1.451,929Exercisable at 31 December£3.4659£2.4443For those options exercised in the year, the average share price during 2020 was £9.75 (2019: £10.78).For those options still outstanding, the range of exercise prices at the year-end was 0p to 1076p (2019: 0p to 1076p) and the weighted average remaining contractual life of these options was 2.5 years (2019: 2.2 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 2020, the number of shares held by the ESOT was 342,342 (2019: 428,017).The accounting is in accordance with the relevant standards. No further information is given as the amounts for share-based payments are immaterial.215OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 7: Post balance sheet eventsOn 12 March 2021, and in the normal course of business, the Group exchanged contracts for the disposal of a portfolio of 8 properties within Investment Property and Investment Property held within its Investment in joint ventures for a combined consideration of £132.5 million.Section 8: 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.Note2020 £m2019 £mEBITNet operating income (NOI)2.2a180.3160.8Management fees2.2a14.014.4Operating expenses2.2a(30.9)(21.8)163.4153.4EBIT margin %Rental income2.2a263.2213.9EBIT8163.4153.462.1%71.7%EBITDA Net operating income (NOI)2.2a180.3160.8Management fees2.2a14.014.4Operating expenses2.2a(30.9)(21.8)Depreciation and amortisation8.47.6171.8161.0Net debtCash2.3a391.0 114.9 Debt2.3a(2,132.8)(1,999.2)(1,741.8)(1,884.3)Net debt (adjusted)Cash2.3a391.0 114.9 Debt (adjusted)*(2,132.8)(1,209.3)(1,741.8)(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 in 2019).EBITDA : Net debt (adjusted)EBITDA8171.8 161.0 Net debt (adjusted)8(1,741.8)(1,094.4)Ratio10.16.8 Interest cover (Unite share)EBIT8163.4 153.4Net financing costs2.2a(56.1)(34.7)Interest on lease liability/operating lease rentals2.2a(8.8)(9.2)Total interest(64.9)(43.9)Ratio2.53.5 NOTES TO THE FINANCIAL STATEMENTS CONTINUED216The Unite Group PLC Annual Report & Accounts 2020Reconciliation: IFRS loss before tax to EPRA earningsNote2020 £m2019 £mIFRS loss before tax (120.1)(101.2)Net valuation losses/(gains) on investment property (owned)2.2b165.7(213.1)Property disposals (owned)2.2b1.95.8Net valuation losses on investment property (leased)2.2b11.28.1Property disposals (leased)2.2b–1.1Impairment of goodwill2.2b–384.1Integration/acquisition costs2.2b9.222.8Amortisation of fair value of debt recognised on acquisition2.2b(4.3)(0.4)Changes in valuation of interest rate swaps2.2b5.82.7Swap cancellation and loan break costs2.2b30.12.7Minority interest and tax (2.2)(2.0)EPRA earnings97.3110.6EPRA Performance MeasuresSummary of EPRA performance measuresNote2020 £m2019 £m2020 pps2019 ppsEPRA Earnings97.3110.625.5p39.1pEPRA NTA3,271.03,091.4818p847pEPRA NRV3,601.93,394.5901p930pEPRA NDV3,180.73,012.6796p826pEPRA Net initial yield3.8%4.9%EPRA Vacancy rate13.0%1.4%EPRA Cost ratio (including vacancy costs)40.0%31.1%EPRA Cost ratio (excluding vacancy costs)36.2%30.6%EPRA like-for-like rental income£mProperties owned throughout the periodDevelopment propertyAcquisitions and disposalsTotal EPRA Earnings2020Rental income144.912.4105.9263.2Property operating expenses(43.6)(3.9)(35.4)(82.9)Net rental income101.38.570.5180.32019Rental income 166.4 20.5 27.0 213.9 Property operating expenses(42.5) (4.5)(6.1) (53.1) Net rental income 123.9 16.0 20.9 160.8 Like-for-like gross rental income(12.9%)Like-for-like net rental income(18.2%)EPRA Vacancy Rate2020£m2019£mEstimated rental value of vacant space31.53.5Estimated rental value of the whole portfolio241.8247.1EPRA Vacancy Rate13.0%1.4%217OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 8: Alternative performance measures continued EPRA Net Initial Yield20202019Net operating income (£m)* 197.7 242.7 Property market value (£m) 4,893.2 4,702.4 Notional acquisition costs (£m) 256.0 237.7 5,149.2 4,940.1 Net initial yield (%)3.8%4.9%* Net operating income calculated by annualising rental income for December.EPRA Cost ratio2020£m2019£mProperty operating expenses61.9 33.0 Operating expenses30.1 21.1 Development/pre contract costs2.2 1.5 Unallocated expenses*3.2 4.4 97.4 60.0 Share of JV property operating expenses21.0 20.1 Share of JV operating expenses0.80.7Share of JV unallocated expenses*0.4– 119.680.8Less: Joint venture management fees(14.0)(14.4) Total costs (A)105.666.4Group vacant property costs**(7.4)(0.7) Share of JV vacant property costs**(2.5) (0.4) Total costs excluding vacant property costs (B)95.7 65.3 Rental income196.1134.1Share of JV rental income67.179.8Total gross rental income (C)263.2 213.9Total EPRA cost ratio (including vacant property costs) (A)/(C)40%31%Total EPRA cost ratio (excluding vacant property costs) (B)/(C)36%31%* Excludes amounts in respect of the LSAV performance fee.** Vacant property costs reflect the per bed share of operating expenses allocated to vacant beds.Unite’s EBIT margin excludes non operational expenses which are included within the EPRA cost ratio above.EPRA Valuation movement (Unite share)Valuation £mChange £m%Wholly owned3,288.7(130.9)(3.9%)USAF616.7(25.1)(4.0%)LSAV661.8(14.9)(2.2%)Rental properties4,567.2(170.9)(3.6%)Leased properties101.82020/21 development completions326.0Properties under development187.2Properties held throughout the year5,182.2Total property portfolio5,182.2NOTES TO THE FINANCIAL STATEMENTS CONTINUED218The Unite Group PLC Annual Report & Accounts 2020EPRA Yield movementNOI yieldYield movement (bps)%H1H2FYWholly owned5.0%–(4)(4)USAF5.3%–––LSAV4.4%–(1)(1)Rental properties (Unite share)5.0%–(3)(3)Property related capital expenditure20202019Wholly ownedShare of JVsGroup shareWholly ownedShare of JVsGroup shareAcquisitions––––51.051.0Developments87.6–87.6208.26.5214.7Rental properties25.022.947.96.58.715.2Other4.6–4.69.1–9.1Total property related capex117.222.9140.1223.866.2290.0Section 9: Company subsidiaries and joint venturesIn accordance with Section 409 of the Companies Act 2006, a full list of subsidiaries and equity accounted investments as at 31 December 2020 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 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 6FLLDC (AIB Warehouse) Limited (04872419)**LDC (Portfolio Five) Limited (06079581)**LDC (Alscot Road) Limited (06176428)**LDC (Portfolio Four) Limited (04985603)**LDC (Brunel House) Limited (09760628)**LDC (Portfolio One) Limited (03005262)**LDC (Camden Court Leasehold) Limited (05140620)**LDC (Portfolio) Limited (08419375)**LDC (Camden Court) Limited (05082671)LDC (Project 110) Limited (05083580)**LDC (Causewayend) Limited (08895966)**LDC (Project 111) Limited (05791650)**LDC (Chantry Court Leasehold) Limited (05140258)**LDC (Radmarsh Road) Limited (05435290)**LDC (Chaucer House) Limited (09898020)**LDC (Skelhorne) Limited (09898132)**LDC (Constitution Street) Limited (09210998)**LDC (Smithfield) Limited (03373096)**LDC (Construction Two) Limited (04847268)LDC (St Leonards) Limited (08895830)**LDC (Euro Loan) Limited (06623603)**LDC (St Pancras Way) GP1 Limited (07359501)LDC (Ferry Lane 2) GP3 Limited (07503842)**LDC (St Pancras Way) GP2 Limited (07359428)LDC (Ferry Lane 2) GP4 Limited (07503913)**LDC (St Pancras Way) GP3 Limited (07503268)LDC (Ferry Lane 2) Holdings Limited (07504099)LDC (St Pancras Way) GP4 Limited (07503251)LDC (Finance) Limited (09760806)**LDC (St Pancras Way) Holdings Limited (07360734)LDC (Greetham Street) Limited (08895825)**LDC (St Pancras Way) Limited Partnership**LDC (Gt Suffolk St) GP1 Limited (07274156)LDC (St Pancras Way) Management Limited Partnership**LDC (Gt Suffolk St) GP2 Limited (07274000)LDC (St Vincent's) Limited (10218310)**LDC (Gt Suffolk St) Holdings Limited (07353946)LDC (Swindon NHS) Limited (04207502)**LDC (Gt Suffolk St) Limited Partnership**LDC (Tara House) Limited (09214177)**LDC (Gt Suffolk St) Management GP1 Limited (07354719)LDC (Thurso Street) GP1 Limited (07199022)LDC (Gt Suffolk St) Management GP2 Limited (07354728)LDC (Thurso Street) GP2 Limited (07198979)LDC (Gt Suffolk St) Management Limited Partnership**LDC (Thurso Street) GP3 Limited (07434001)LDC (Hampton Street) Limited (06415998)LDC (Thurso Street) GP4 Limited (07434133)LDC (Hillhead) Limited (06176554)LDC (Thurso Street) Limited Partnership**LDC (Holdings) Limited (02625007)*LDC (Thurso Street) Management Limited Partnership**LDC (Imperial Wharf) Limited (04541678)**LDC (Ventura) Limited (04444628)LDC (International House) Limited (10131352)**LDC (Vernon Square) Limited (06444132)* Held directly by the Company.** Company is exempt from the requirements of the Companies Act relating to the audit of individual financial statements by virtue of s479A for the financial year ended 31 December 2020.219OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 9: Company subsidiaries and joint ventures continuedRegistered office and principal place of business: South Quay House, Temple Back, Bristol, United Kingdom, BS1 6FLLDC (Kelham Island) Limited (05152229)LDC (William Morris II) Limited (05999281)**LDC (Leasehold A) Limited (04066933)**Liberty Atlantic Point (Liverpool) Limited (03885187)**LDC (Leasehold B) Limited (05978242)**Liberty Heights (Manchester) Limited (07399622)**LDC (Loughborough) Limited (04207522)**Liberty Living (HE) Holdings Limited (10977869)**LDC (Magnet Court Leasehold) Limited (05140255)**Liberty Living (LH Manchester) Limited (07120141)**LDC (Millennium View) Limited (09890375)**Liberty Living (Liberty AP) Limited (03633307)**LDC (MTF Portfolio) Limited (05530557)**Liberty Living (Liberty PP) Limited (03991475)**LDC (Nairn Street) GP3 Limited (07808933)Liberty Living (LP Bristol) Limited (07242607)**LDC (Nairn Street) GP4 Limited (07808919)Liberty Living (LP Coventry) Limited (04330729)**LDC (Nairn Street) Holdings Limited (07579402)**Liberty Living (LP Manchester) Limited (04314013)**LDC (New Wakefield Street) Limited (10436455)**Liberty Living (LQ Newcastle) Limited (04302869)**LDC (Newgate) Limited (08895869)**Liberty Living (LQ2 Newcastle) Limited (07298853)**LDC (Old Hospital) Limited (09702143)**Liberty Living Finance plc (10979349)**LDC (Oxford Road Bournemouth) Limited (04407309)**Liberty Living Group Plc (BR020813)*/**LDC (Portfolio 100) Limited (07989369)**Liberty Living Investments 1 Limited Partnership**LDC (Portfolio 20) Limited (08803996)**Liberty Living Investments 2 Limited Partnership**Liberty Living Investments 3 Limited Partnership**Unite Finance One (Accommodation Services) Limited (04332937)**Liberty Living Investments GP1 Limited (09375866)**Unite Finance One (Holdings) Limited (04316207)**Liberty Living Investments GP2 Limited (09375868)**Unite Finance One (Property) Limited (04303331)**Liberty Living Investments GP3 Limited (10518849)**Unite FM Limited (06807562)**Liberty Living Investments II Holdco 2 Limited (09574059)**Unite For Success Limited (05157263)Liberty Living Investments II Holdco Limited (08929431)**Unite Holdings Limited (03148468)*/**Liberty Living Investments II Limited (09680931)**Unite Homes Limited (05140262)Liberty Living Investments Limited (09375870)**Unite Integrated Solutions plc (02402714)Liberty Living Investments Nominee 1 Limited (09375846)**Unite Modular Solutions Limited (05140259)Liberty Living Investments Nominee 2 Limited (09375849)**Unite Rent Collection Limited (05982935)**Liberty Living Investments Nominee 3 Limited (10519085)**Unite Student Living Limited (06204135)Liberty Living Limited (04055891)**USAF GP No 11 Management Limited (07351883)Liberty Living SpareCo Limited (04616115)**USAF LP Limited (05860874)**Liberty Living UK Limited (06064187)**USAF Management Limited (05862721)Liberty Park (Bristol) Limited (07615601)**USAF Management 6 Limited (06225945)Liberty Park (US Bristol) Limited (07615619)**USAF Management 8 Limited (06387597)Liberty Plaza (London) Limited (07745097)**USAF Management 10 Limited (06714695)Liberty Point (Coventry) Limited (04992358)**USAF Management 11 Limited (07082782)Liberty Point (Manchester) Limited (04828083)**USAF Management 12 Limited (07365681)Liberty Point Southampton (Block A) Limited (10314954)**USAF Management 14 Limited (09232206)Liberty Prospect Point (Liverpool) Limited (04637570)**USAF Management 18 Limited (10219775)Liberty Quay (Newcastle) Limited (05234174)**USAF Management GP No.14 Limited (09130985)**Liberty Quay 2 (Newcastle) Limited (07376627)**USAF Management GP No.15 Limited (09749946)**Liberty Severn Point (Cardiff) Limited (04313995)**USAF Management GP No.16 Limited (09750068)**Liberty Village (Edinburgh) Limited (10323566)**USAF Management GP No.17 Limited (09750061)**LL Midco 2 Limited(08998308)**USAF Management No.18 Limited Partnership LSAV (Angel Lane) GP3 Limited (08646359)**LDC (Capital Cities Nominee No.1) Limited (05347228) (50.0%)LSAV (Angel Lane) GP4 Limited (08646929)**LDC (Capital Cities Nominee No.2) Limited (05359457) (50.0%)LSAV (Aston Student Village) GP3 Limited (10498217)**LDC (Capital Cities Nominee No.3) Limited (08792780) (50.0%)LSAV (Aston Student Village) GP4 Limited (10498484)**LDC (Capital Cities Nominee No.4) Limited (08792688) (50.0%)* Held directly by the Company.** Company is exempt from the requirements of the Companies Act relating to the audit of individual financial statements by virtue of s479A for the financial year ended 31 December 2020.NOTES TO THE FINANCIAL STATEMENTS CONTINUED220The Unite Group PLC Annual Report & Accounts 2020Registered office and principal place of business: South Quay House, Temple Back, Bristol, United Kingdom, BS1 6FLLSAV (Stapleton) GP3 Limited (08646819)**LDC (Capital Cities) Limited (05347220) (50.0%)LSAV (Stapleton) GP4 Limited (08647019)**LDC (Ferry Lane 2) GP1 Limited (07359448) (50.0%)LSAV (Stratford) GP3 Limited (08751654)**LDC (Ferry Lane 2) GP2 Limited (07359481) (50.0%)LSAV (Stratford) GP4 Limited (08751629)**LDC (Ferry Lane 2) Limited Partnership (50.0%)LSAV (Wembley) GP3 Limited (08725127)**LDC (Ferry Lane 2) Management Limited Partnership (50.0%)LSAV (Wembley) GP4 Limited (08725235)**LDC (Stratford) GP1 Limited (07547911) (50.0%)LSAV Rent Collection Limited (08496230)**LDC (Stratford) GP2 Limited (07547994) (50.0%)Stardesert Limited (04437102)LDC (Stratford) Limited Partnership (50.0%)The Unite Foundation LDC Capital Cities Two (GP) Limited (08790742) (50.0%)Unite Accommodation Management Limited (06190905)**LSAV (Angel Lane) GP1 Limited (08593689) (50.0%)Unite Accommodation Management 2 Limited (05193166)**LSAV (Angel Lane) GP2 Limited (08593692) (50.0%)Unite Accommodation Management 6 Limited (05077346)**LSAV (Angel Lane) Limited Partnership (50.0%)Unite Accommodation Management 9 Limited (06190863)**LSAV (Angel Lane) Management Limited Partnership (50.0%)Unite Accommodation Management 16 Limited (07061314)**LSAV (Aston Student Village) GP1 Limited (10498478) (50.0%)Unite Accommodation Management 18 Limited (08328484)**LSAV (Aston Student Village) GP2 Limited (10498481) (50.0%)Unite Accommodation Management 19 Limited (08790504)LSAV (Aston Student Village) Limited Partnership (50.0%)Unite Accommodation Management 20 Limited (08790642)LSAV (Aston Student Village) Management Limited Partnership (50.0%)Unite Accommodation Management One Hundred Limited (07989080)**LSAV (Stapleton) GP1 Limited (08593695) (50.0%)Unite Construction (Angel Lane) Limited (08792704)**LSAV (Stapleton) GP2 Limited (08593699) (50.0%)Unite Construction (Stapleton) Limited (09023406)LSAV (Stapleton) Limited Partnership (50.0%)Unite Construction (Wembley) Limited (09023474)LSAV (Stapleton) Management Limited Partnership (50.0%)Unite Finance Limited (04353305)*/**LSAV (Stratford) Management Limited Partnership (50.0%)LSAV (Wembley) GP1 Limited (08635735) (50.0%)USAF GP No 6 Limited (05897755) (13.3%)LSAV (Wembley) GP2 Limited (08636051) (50.0%)USAF GP No 8 Limited (06381914) (13.3%)LSAV (Wembley) Limited Partnership (50.0%)USAF GP No 10 Limited (06714734) (13.3%)LSAV (Wembley) Management Limited Partnership (50.0%)USAF GP No 11 Limited (07075210) (13.3%)UNITE Capital Cities Holdings Limited (08801242) (50.0%)USAF GP No 12 Limited (07368735) (13.3%)Unite Capital Cities Limited Partnership (50.0%)USAF GP No 14 Limited (09089977) (13.3%)Unite Capital Cities Two Limited Partnership (50.0%)USAF GP No 15 Limited (09585201) (13.3%)USAF Management 16 Limited (07735741) (22.2%)**USAF GP No.15A Limited (12644211) (22.0%)USAF Management 17 Limited (05591986) (22.2%)**USAF GP No.16A Limited (12644210) (22.0%)USAF Management No. 14 Limited Partnership (22.0%)USAF GP No.17A Limited (12644208) (22.0%)USAF Management No. 15 Limited Partnership (22.2%)USAF GP No 18 Limited (10219336) (13.3%)USAF Management No. 16 Limited Partnership (222%)USAF Holdings B Limited (06324325) (13.3%)USAF Management No. 17 Limited Partnership (22.2%)USAF Holdings C Limited (06381882) (13.3%)USAF No.1 Limited Partnership (22.0%)USAF Holdings H Limited (09089805) (13.3%)USAF No.6 Limited Partnership (22.0%)USAF Holdings I Limited (09581882) (13.3%)USAF No.8 Limited Partnership (22.0%)USAF Holdings J Limited (10215997) (13.3%)USAF No.10 Limited Partnership (22.0%)USAF Holdings Limited (05870107) (133%)USAF No.11 Limited Partnership (22.0%)USAF Nominee No.1 Limited (05855598) (13.3%)USAF No.12 Limited Partnership (22.0%)USAF Nominee No.1A Limited (05835512) (133%)USAF No.14 Limited Partnership (22.0%)USAF Nominee No.6 Limited (05855599) (13.3%)USAF No.15 Limited Partnership (22.2%)USAF Nominee No.6A Limited (05885802) (13.3%)USAF No.15A Limited Partnership (22.0%)USAF Nominee No.8 Limited (06381861) (13.3%)* Held directly by the Company.** Company is exempt from the requirements of the Companies Act relating to the audit of individual financial statements by virtue of s479A for the financial year ended 31 December 2020.221OverviewStrategic ReportGovernanceFinancial StatementsOther InformationSection 9: Company subsidiaries and joint ventures continuedRegistered office and principal place of business: South Quay House, Temple Back, Bristol, United Kingdom, BS1 6FLUSAF No.16A Limited Partnership (22.0%)USAF Nominee No.8A Limited (06381869) (13.3%)USAF No.17A Limited Partnership (22.0%)USAF Nominee No.10 Limited (06714690) (13.3%)USAF No.18 Limited Partnership (22.0%)USAF Nominee No.10A Limited (06714615) (13.3%)USAF No.11 Management Limited Partnership (22.0%)USAF Nominee No.11 Limited (07075251) (133%)Filbert Village Student Accommodation Limited Partnership (22.0%)USAF Nominee No.11A Limited(07075213) (13.3%)LDC (Nairn Street) Limited Partnership (22.0%)USAF Nominee No.12 Limited (07368733) (13.3%)LDC (Nairn Street) Management Limited Partnership (22.0%)USAF Nominee No.12A Limited (07368755) (13.3%)Filbert Village GP Limited (06016554) (13.3%)USAF Nominee No.14 Limited (09231609) (13.3%)LDC (Nairn Street) GP1 Limited (07580262) (13.3%)USAF Nominee No.14A Limited (09231604) (13.3%)LDC (Nairn Street) GP2 Limited (07580257) (13.3%)USAF Nominee No.18 Limited (10218595) (13.3%)USAF Finance II Limited (08526474) (13.3%)USAF Nominee No.18A Limited (10219339) (13.3%)USAF GP No 1 Limited (05897875) (13.3%)USAF RCC Limited (05983554) (13.3%)Registered office and principal place of business: 13 Castle Street, St Helier, Jersey, JE4 5UTLDC (Gt Suffolk St) Unit TrustLSAV (Aston Student Village) Unit Trust (50.0%)LDC (St Pancras Way) Unit TrustLSAV (Holdings) Limited (50.0%)LDC (Thurso Street) Unit TrustLSAV (Trustee) Limited (50.0%)LSAV (Jersey Manager) LimitedLSAV Unit Trust (50.0%)Unite (Capital Cities) Jersey LimitedUnite Capital Cities Unit Trust (50.0%)USAF Jersey Investments LimitedUSAF Portfolio 18 Unit Trust (22.2%)USAF Jersey Manager LimitedLDC (Nairn Street) Unit Trust(21.9%)LDC (Ferry Lane 2) Unit Trust (50.0%)Unite UK Student Accommodation Fund(13.3%)LDC (Stratford) Unit Trust (50.0%)Registered office and principal place of business: Third Floor, La Plaiderie Chambers, St Peter Port, Guernsey, GY1 1WGUSAF Feeder Guernsey Limited (45.2%)USAF Portfolio 17 Unit Trust (22.2%)USAF Portfolio 15 Unit Trust (22.2%)USAF 15 NRL Limited (22.2%)USAF Portfolio 16 Unit Trust (22.2%)Registered office and principal place of business: Saltire Court, 20 Castle Terrace, Edinburgh, EH1 2 ENLSAV (GP) Limited (SC431844) (50.0%)LSAV (Property Holdings) Limited Partnership (50.0%)Registered office and principal place of business: Trident Chambers, Wickhams Cay, P.O. Box 146, Road Town, Tortola, British Virgin IslandsLiberty Park (Bedford) LimitedLiberty Plaza (Newcastle) LimitedRegistered office and principal place of business: Third Floor, Barclays House, Victoria Street, Douglas, Isle of Man, IM1 2LEFilbert Street Student Accommodation Unit Trust (21.9%)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 ChinaUnite Students Accommodation (Beijing) Business Service Company Limited* Held directly by the Company.** Company is exempt from the requirements of the Companies Act relating to the audit of individual financial statements by virtue of s479A for the financial year ended 31 December 2020.NOTES TO THE FINANCIAL STATEMENTS CONTINUED222The Unite Group PLC Annual Report & Accounts 2020223CONTENTS 224225227 Financial record Glossary Company informationOTHER INFORMATIONOverviewStrategic ReportGovernanceFinancial StatementsOther InformationFINANCIAL RECORD20202019201820172016EPRA earnings (£m)97111887161EPRA earnings per share (pence)2639343028IFRS (loss)/profit before tax (£m)(120)(101)246229201IFRS (loss)/profit per share (pence)(32)(32)9195101EPRA net tangible assets (NTA)/net assets (NAV) (£m)3,2663,0872,0851,7401,557EPRA NTA/NAV per share (pence)1818847790720646IFRS net assets (£m)3,2353,0722,0731,7291,452IFRS NAV per share (pence)809845787717653LTV (%)34%37%29%31%34%Managed portfolio value (£m)7,8387,7024,9944,6124,3271. EPRA NTA for 2020 and 2019. EPRA NAV for 2018 and prior.224The Unite Group PLC Annual Report & Accounts 2020Adjusted net debtThe 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-letProperties where short-hold tenancy agreements are made directly between Unite and the student.EBITThe Group’s NOI plus management fees and less operating expenses.EBITDAThe Group’s EPRA earnings before charging interest, tax, depreciation and amortisation. The profit number is used to calculate the ratio to net debt.EBIT marginThe Group’s EBIT expressed as a percentage of rental income.EPRAThe European Public Real Estate Association, who produce best practice recommendations for financial reporting.EPRA earningsEPRA earnings exclude movements relating to changes in values of investment properties and interest rate swaps and the related tax effects. In 2020, in consideration of EPRA’s focus on recurring income, EPRA earnings excludes integration costs.EPRA earnings per shareThe earnings per share based on EPRA earnings.EPRA NAVEPRA 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 shareThe diluted NAV per share figure based on EPRA NAV.EPRA Net Tangible Assets (NTA)EPRA NTA includes all property at market value but excludes the mark to market of financial instruments, deferred tax and intangible assets. EPRA NTA provides a consistent measure of tangible NAV on a going concern basis.EPRA Net Tangible Assets per shareThe diluted NTA per share figure based on EPRA NTA.EPRA Net Reinstatment Value (NRV)EPRA NRV includes all property at market value but excludes the mark to market of financial instruments, deferred tax and real estate transfer tax. EPRA NRV assumes that entities never sell assets and represents the value required to rebuild the entity.EPRA Net Disposal Value (NDV)EPRA NDV includes all property at market value, excludes the mark to market of financial instruments, but includes the fair value of fixed interest rate debt and the carrying value of intangible assets. EPRA NDV represents the shareholders’ value in a disposal scenario.EPRA Net Initial Yield (NIY)The net operating income generated by a property expressed as a percentage of its value, taking into account notional acquisition costs.EPRA Vacancy RateThe ratio of the estimated market rental value of vacant spaces against the estimated market rental value of the entire property portfolio (including vacant spaces).EPRA Cost RatioThe ratio of net overheads and operating expenses against gross rental income.ESGEnvironmental, Social and Governance.GRESBGRESB 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 costsAll 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 GroupWholly owned balances plus Unite’s interests relating to USAF and LSAV.Group debtWholly owned borrowings plus Unite’s share of borrowings attributable to USAF and LSAV.GLOSSARY225OverviewStrategic ReportGovernanceFinancial StatementsOther InformationInterest cover ratio (ICR)Calculated as EBIT divided by the sum of net financing costs and IFRS 16 lease liability interest costs.LeaseProperties which are leased to Universities for a number of years.Like-for-like rental growthLike-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.LSAVThe 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 and ASV has a maturity date of January 2027.Major ProvincialProperties located in Aberdeen, Birmingham, Cardiff, Durham, Glasgow, Leeds, Leicester, Liverpool, Newcastle, Nottingham, Sheffield and Southampton.Net debtGroup debt, net of cash and unamortised debt issue costs, excluding IFRS 16 investment property (leased) and associated lease liabilities.Net debt: EBITDANet debt as a proportion of EBITDA.Net financing costs (EPRA)Gross financing costs net of interest capitalised into developments and interest received on deposits.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 marginThe Group’s NOI expressed as a percentage of rental income.Nomination agreementsAgreements at properties where Universities have entered into a contract to reserve rooms for their students, usually guaranteeing occupancy. The Universities usually either nominate students to live in the building and Unite enters into short-hold tenancies with the students or the University enters into a contract with Unite and makes payment directly to Unite.Other provincialProperties located in Bedford, Bournemouth, Coventry, Exeter, Loughborough, Medway, Portsmouth, Reading and Wolverhampton.Prime provincialProperties located in Bristol, Bath, Edinburgh, Manchester and Oxford.Rental propertiesInvestment properties whose construction has been completed and are used by the Operations segment to generate NOI.Rental properties (leased)/Sale and leasebackProperties 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)Wholly owned balances plus Unite’s share of balances relating to USAF and LSAV.TCFDThe Task force on Climate-related Financial Disclosures develops voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers and other stakeholders.Total accounting returnGrowth in EPRA NTA per share (previously NAV per share) plus dividends paid, expressed as a percentage of EPRA NTA per share (previously EPRA NAV per share) at the beginning of the period.Total shareholder returnThe growth in value of a shareholding over a specified period, assuming dividends are reinvested to purchase additional shares.USAF/the fundThe 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.WAULTWeighted average unexpired lease term to expiry.Wholly ownedBalances relating to properties that are 100% owned by The Unite Group PLC or its 100% subsidiaries.GLOSSARY CONTINUED226The Unite Group PLC Annual Report & Accounts 2020The Unite Group PLCExecutive TeamFinancial AdvisersNumis SecuritiesRegistered OfficeRegistrarsRegistered Number in EnglandCompany SecretaryAuditorFinancial PR ConsultantsRichard Smith25 Bank Street, London E14 5JPChief Executive OfficerChief Financial OfficerThe London Stock Exchange Building 10 Paternoster Square, London EC4M 7LTSouth Quay House, Temple Back, Bristol BS1 6FLPO Box 82 03199160The Pavilions Bristol Christopher SzpojnarowiczBS99 7NHJ.P. Morgan CazenoveJoe ListerComputershare Investor Services plcDeloitte LLPPowerscourtBridgwater Road 1 New Street Square, London EC4A 3HQ1 Tudor Street London EC4Y OAHFind out more online at www.unite-group.co.ukCOMPANY INFORMATION227OverviewGovernanceFinancial StatementsStrategic ReportOther InformationThe Unite Group PLC South Quay House Temple Back Bristol BS1 6FL +44 (0) 117 302 7000 info@unite-students.comwww.unite-group.co.uk www.unitestudents.com

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