Unite Group H2 Earnings Call Highlights

Core Viewpoint - Unite Group is experiencing challenges in occupancy and rental growth, leading to a cautious outlook for the upcoming academic year, while also focusing on cost efficiencies and portfolio repositioning towards higher-tariff universities. Financial Performance - Net tangible assets per share decreased by 2% to 955p, with a 0.5% like-for-like revaluation deficit in the rental portfolio [1] - EBIT margin fell to 65.9% due to lower occupancy and inflationary cost increases, while adjusted earnings rose by 9% and adjusted EPS increased by 2% to 47.5p [2] - Like-for-like income growth was reported at 4.9% for 2025, driven by strong rate growth despite lower occupancy [3] Market Dynamics - Direct-let bookings are slightly ahead year-on-year, with a 25% increase in bookings for recently opened and refurbished properties [4] - For the next academic year, Unite is currently 68% sold, about three percentage points behind last year, primarily due to cautious university nominations [5] - The company noted a decline in international postgraduate demand and a trend of students opting to live at home [6] Strategic Initiatives - Unite is repositioning its portfolio towards higher-tariff universities, with a current alignment of 67% and a medium-term target of 80% [17] - The company announced the sale of St Pancras Way for £186 million, which will help recycle capital for partnerships and developments [18] - Unite is targeting £300 million to £400 million in disposals for 2026, with expected yields of around 5.5% to 6% [19] Cost Management - Overhead rationalization completed in December resulted in a 20% reduction in central staff costs, with £30 million in annual cost efficiencies identified [11] - A technology platform upgrade is expected to generate nearly £7 million in annual operating cost savings [12] Integration and Synergies - Integration of Empiric is underway, with an increased annual synergy target of £17 million, although near-term earnings are expected to be impacted [13][14] Brand Strategy - Unite will maintain "Hello Students" as a separate brand to cater to returners seeking independent living, leveraging its international sales network [15] Outlook - Adjusted EPS guidance for 2026 is set at 41.5p to 43p, with expectations for modest earnings upside from a £100 million share buyback [16] - The company anticipates lower occupancy and rent guidance for 2026, with a focus on achieving cost efficiencies [8][9]