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The Unite Group plc Annual Report 2015 and Accounts The Unite Group plc STRENGTH Annual Report and Accounts 2015 THROUGH PARTNERSHIP STRENGTH THROUGH PARTNERSHIP Established in 1991, Unite Students is the UK’s largest and most experienced developer and operator of student accommodation. We provide a home for over 46,000 students in 138 properties in 28 of the country’s strongest University towns and cities. We rent our rooms both directly to students, and through working closely with around 60 Universities across the UK; these strong partnerships are key to our success. Our business is delivered through our 1,250 motivated and committed employees. Students come to us from around 165 countries, and our culturally diverse customers are at the heart of our business. We aim to provide them with a home that supports their success, academic achievement, personal growth and employability. Working with our partner Universities, we aim to provide the right accommodation experience and support for students. Our properties provide high quality, well-located and safe accommodation close to University campuses, transport and local amenities. Students living in our properties are provided with someone on hand to help; a well designed study bedroom, all bills, insurance, 24-hour security, cleaning services and high speed Wi-Fi throughout our buildings. We are focused on delivering attractive returns to our investors, while maintaining investment in customer service, our operating platform and future development opportunities. STRATEGIC REPORT 01 Strategic report CONTINUED STRONG 02 Corporate governance 03 Financial statements RESULTS 04 Other information • Excellent financial performances • Growth prospects remain strong on all fronts • Positive reservations and rental outlook • Earnings per share up 34% for 2016/17 • Dividend up by 34% • Development pipeline remains strong • Total return of 37% • Visible earnings growth outlook EARNINGS PER SHARE* DIVIDEND PER SHARE PENCE PENCE 1 23P 3 10 14 17 23 15P 1.8 4.0 4.8 11.2 15.0 2 011 2 012 2 013 2 014 2 015 2 011 2 012 2 013 2 014 2 015 NET ASSET VALUE* TOTAL RETURN PENCE PER SHARE % 579P 318 350 382 434 579 37% 8 11 10 15 37 2 011 2 012 2 013 2 014 2 015 2 011 2 012 2 013 2 014 2 015 IFRS PROFIT BEFORE TAX LOAN TO VALUE RATIO £M % 388M 5 126 77 108 388 35% 54 52 49 43 35 2 011 2 012 2 013 2 014 2 015 2 011 2 012 2 013 2 014 2 015 * Results are based on the European Public Real Estate Association (EPRA) performance measures. 1 2015 EPS of 23p based on adjusted EPRA earnings. The Unite Group plc Annual Report and Accounts 2015 1 STRATEGIC REPORT CONTENTS Strategic report 1 Financial highlights 4 Unite at a glance 6 Highlights 8 Where we operate 10 Chairman’s statement 11 Chief Executive’s statement 14 Business model and strategy 15 Our resources and relationships 16 Our strategy at a glance 18 Market overview 20 Strategy in action 26 Key performance indicators 28 Risk management 31 Principal risks and uncertainties 35 Operations review 38 Property business 42 Financial review 44 Corporate responsibility and sustainability 02 Corporate governance 52 Chairman’s introduction to governance 54 Board of Directors 56 Shareholder relations 57 Leadership 62 Effectiveness 63 Nomination Committee report 64 Accountability 65 Audit Committee report 70 Health & Safety Committee report 72 Annual statement of the Chair of the Remuneration Committee 74 Directors’ remuneration policy 82 Annual report on remuneration 92 Directors’ report 93 Statement of Directors’ responsibilities in respect of the annual report and the financial statements 03 01 2 The Unite Group plc Annual Report and Accounts 2015 01 Strategic report 02 Corporate governance 03 Financial statements 04 Other information Financial statements 94 Independent auditor’s report 98 Introduction and table of contents 99 Consolidated income statement 99 Consolidated statement of comprehensive income 100 Consolidated balance sheet 101 Company balance sheet 102 Consolidated statement of changes in shareholders’ equity 103 Company statement of changes in shareholders’ equity 104 Statements of cash flows 105 Notes to the financial statements 04 Other information 153 Financial record 154 Notice of Annual General Meeting 160 Glossary 162 Company information 03 The Unite Group plc Annual Report and Accounts 2015 3 STRATEGIC REPORT UNITE AT A GLANCE WHAT WE DO OUR PURPOSE HOME FOR SUCCESS OUR CORE PURPOSE IS TO PROVIDE STUDENTS WITH A HOME FOR SUCCESS. THIS MEANS PROVIDING ge W led e a A COMFORTABLE ENVIRONMENT THAT ENABLES w re no ce an s k n d tr r rie h a STUDENTS TO ACHIEVE MORE DURING THEIR TIME u e a ig o p s h x sl e e e tf AT UNIVERSITY AND REFLECTS THE DESIRE OF OUR s - o u f r d r w n e e EMPLOYEES TO POSITIVELY CONTRIBUTE TO MAKING a e a W r STUDENTS FEEL AT HOME. d HOME FOR OUR PURPOSE SITS AT THE HEART OF OUR BRAND. SUCCESS Creating a Home for Success for our students is only possible by W delivering great results for all our stakeholders. We do this by: O SE r e UR O e PURP h a g t c n • Working in partnership with Universities to help them achieve ri e t g r b o the right accommodation experience for their students in line e e t sp W e o l with their strategic plans n op si e bly p • Ensuring that Unite and the students living with us bring positive benefits to their local community and encouraging integration between the community and students • Offering our employees meaningful, challenging and rewarding careers • Delivering sustainable, growing cash flows and consistent, low double digit total returns to our investors Home for Success supports our business model and strategy to create long-term value for all our stakeholders. THE UNITE FOUNDATION SUPPORTING STUDENTS HELPING DISADVANTAGED YOUNG PEOPLE GO TO UNIVERSITY The Unite Foundation was set up as a charitable trust in 2012 with the aim of providing free University accommodation and a generous annual scholarship to young people who aspire to a degree, but face the most challenging circumstances. Reflecting Unite’s purpose, Home for Success, particular emphasis is placed on supporting students for whom a secure home is of particular significance. In the 2015/16 academic year, we are providing 125 scholarship places, and we anticipate that this number will increase to around 135 in the next academic year. Find out more about the Unite Foundation at: www.unitefoundation.co.uk 4 The Unite Group plc Annual Report and Accounts 2015 01 Strategic report 02 Corporate governance 03 Financial statements 04 Other information Our business is split into two business units: Operations and Property. OPERATIONS DELIVERING HIGH LEVELS OF CUSTOMER SERVICE The Operations business unit is responsible for our 138 properties including those owned by our co-investment vehicles. Operations add value by: • Delivering high levels of customer service and building trust in our brand • Letting our rooms to students and our University partners to deliver operating cash flows and earnings • Delivering sustainable annual growth in rental income and profits, increasing the value of our investment portfolio • Ensuring our infrastructure is able to support cost saving and service improvement initiatives, such as mobile working Progress is measured through earnings per share, operating cash flow, customer satisfaction scores, and Higher Education trust and safety benchmarks. Related section Operations review on p35 PROPERTY HIGHEST QUALITY PORTFOLIO The Property business unit is responsible for our development and asset management strategy, and oversees our two co-investment vehicles. Property add value by: • Identifying and managing the delivery of new development opportunities to promote sustainable growth • Maintaining and enhancing the value of our investment assets through targeted asset management activities • Identifying and managing asset disposal activities, generating capital for investment in new development activity The key metrics for the Property business unit are net asset value per share and loan to value. Related section Property business p38 The Unite Group plc Annual Report and Accounts 2015 5 STRATEGIC REPORT HIGHLIGHTS A YEAR OF ACHIEVEMENT THE MOST TRUSTED BRAND During 2015, we continued • Achieving Investors in to transform our buildings, People ‘Gold’ accreditation, customer services and outlining our commitment digital platforms as part of to our employees our ongoing commitment • Completing the roll-out of to deliver Home for Success. key elements of PRISM, our Progress included: new IT system, covering • On target to complete revenue and maintenance the £21m roll-out of our management LED programme, which will • We opened an office in cut our energy consumption China and also established by 15% a Unite Students online • Enhancing our Wi-Fi speed presence in the far east by 25% across all our • Our University Partnership properties, with the Team has continued to option for students to build on our strong Higher upgrade to 50MB Education relationships, with • The launch of the digital nominations agreements platform ‘Student Life Hub’; with partner Universities now a guide to student life standing at 57%, equating to designed to engage with 26,000 beds over the year and empower our students. Confidence and trust in Unite The hub helps students Students has again translated with life skills, supports them into sales success, with over with wellbeing advice, 99% of beds let and more includes ‘everyday’ advice rooms let than ever. This from maintenance to delivered rental growth laundry and gives access of 3.8%. to lifestyle content, written by students for students We achieved record scores on both our customer satisfaction • Partnering with online and University Trust surveys, experts John Smith to launch In addition to continued financial success underlining our commitment an exclusive online shop, throughout 2015, improvements across to supporting students to giving our students access the business resulted in endorsements being achieve their potential.