8th Oct 2020 11:25
(Alliance News) - Unite Group PLC said Thursday its rental income is set to decline as expected and retained its earnings guidance as it entered the final stages of the 2021 academic year lettings cycle.
The student accommodation company said 88% of bed spaces across its whole portfolio have been let for the academic year ending 2021, compared for 98% the prior year. Since A-Level results in August, new lettings have partially offset the unusually high number of cancellations due to Covid-19.
However, after a recent rise in UK Covid-19 cases, completed lettings fell just short of Unite's 90% occupancy target.
The company is targeting further sales from January 2021 starts from direct let customers plus universities, where talks have already begun.
Nomination agreements make up 57% of bookings for the academic year ending 2021, compared to 56% the year before, while the other 43% are sold on a direct-let basis.
Unite has given students the option to delay their start date to align with university term date changes, around 10% of students having taken them up on this offer. This has contributed to a modest shortening in average tenancy length to 43 weeks from 44 the previous academic year.
Weekly prices are up 1.1% year-on-year on a like-for-like basis. This reflects "contractual growth of 2.8% for multi-year nomination agreements partially offset by weaker growth in single-year nomination agreements and direct-let beds where discounting has been required in certain markets later in the sales cycle to drive occupancy."
In total, Unite is expecting its rental income for the academic year ending 2021 a to fall by between 10% and 20% year-on-year, prior to the impact of Covid-19 cancellations, in line with the expectations set out in its interim results.
The better end of this guidance assumes high completion of upcoming check-ins while the 20% drop allows for increased cancellations.
Unite managed to achieve its cost savings target of between GBP12 million and GBP15 million for 2020.
It has retained its guidance for an EPRA earnings per share figure of between 22 pence and 25p for the 2020 financial year, though this is subject to universities staying open as well as its "anticipated check-in performance and rent collection over the remainder of the year".
The firm is monitoring its banking covenants and principally its ICR covenants, which vary between 1.5 timers and 2.0 times depending on the facility. Unite has headroom for occupancy to fall by around 55% for the academic year ending 2021 before it breaches its tightest ICR covenant.
Based on letting progress and progress so far around check-ins, Unite expects to maintain its compliance with all ICR covenants.
In light of current uncertainty, Unite has not committed to reinstating its dividend, but will keep the decision under review in the first term of the academic year ending 2021.
Chief Executive Richard Smith said: "Overall, we are well-positioned for future growth through our market-leading platform, our valuable development pipeline, our long-term and trusted University partnerships and our strategic alignment to those Universities where demand is strongest."
Shares in Unite were down 0.2% at 882.50 pence in London on Thursday morning.
By Anna Farley; [email protected]
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