Unite Group H1 Earnings Call Highlights

Unite Group LON: UTG said its first-half performance met expectations as the U.K. student-accommodation provider advanced a strategy to concentrate its portfolio around stronger universities, accelerate asset sales and use surplus capital for development, partnerships and share buybacks.

The company said applications to high-tariff universities increased 7%, the fastest growth in more than a decade, while those institutions now receive more than twice as many applicants per available place. Unite said it expects demand to continue outpacing housing supply in the markets it is targeting, supporting occupancy of 95% to 97%, rental growth above inflation and improved margins over time.

Portfolio reshaping and disposals

Unite plans to focus its future portfolio on 55,000 to 60,000 beds across 20 cities, compared with its current portfolio of 72,000 beds in 29 markets across the Unite and Hello Student brands. The company has identified 15,000 to 20,000 beds for disposal, representing roughly 20% to 25% of operational beds but about 15% of portfolio value because of their lower price points.

The company sold £130 million of assets in the first half and has a further £500 million of assets being marketed across 12 sales processes, with just over £100 million under offer. It reiterated its target for £300 million to £400 million of disposals this year and said the broader portfolio transition could be completed within 12 to 24 months.

Management acknowledged that the investment market has softened amid higher funding costs and broader macroeconomic uncertainty. However, it said it would not sell assets at any price and would assess bids against expected returns from retaining properties and alternative uses of capital, including share repurchases.

Mike Burt, Unite’s CFO, said the planned disposals include properties with lower occupancy, rental-growth potential and operating margins than the company’s targeted future portfolio. He said those assets may nevertheless appeal to value-add investors because they are priced below replacement cost and offer potential for net operating income improvement.

Leasing momentum across Unite and Hello Student

Karan Khanna, Unite’s COO, said the Unite portfolio was 89% reserved across nominations and direct lets, compared with 87% at the same point last year. Direct-let bookings increased, with returning-student bookings up by almost one-third.

Khanna said Unite has used “pragmatic but disciplined” pricing rather than high incentives. In Nottingham, for example, the company expects full occupancy this year compared with 70% last year, while income is expected to rise 20%.

At the end of June, Unite’s direct-let bookings were 11 percentage points ahead of the wider market, based on data from StuRents, while Hello Student was 10 points ahead. Unite said it has increased on-site sales by 80% year over year and online bookings by nearly 30% through localized marketing, website improvements and refined marketing programs.

The company said clearing and international student bookings remain important variables for the remainder of the sales cycle. Management noted uncertainty around postgraduate demand from China and said stronger universities could compete aggressively for domestic students during clearing.

Hello Student, acquired in late January through the Empiric acquisition, was 77% occupied, up nine percentage points from last year. Khanna said a dedicated Mandarin-speaking international sales team generated nearly £22 million in sales over six months and helped lift the weekly sales rate by 50% following the acquisition. Unite now expects Hello Student occupancy of 88% to 90%, with rental growth broadly in line with the core Unite portfolio.

Financial performance and capital allocation

Rental income increased 1.5% on a like-for-like basis in the first half, as rental growth offset lower occupancy. Short-term lettings of unsold rooms added half a percentage point to occupancy, according to Burt.

Adjusted earnings per share fell 8% to 27.1 pence, reflecting higher interest costs and the Hello Student acquisition before full cost synergies are realized. The interim dividend was unchanged at 12.8 pence per share.

Property values declined 6.4% in the first half, driven primarily by a 29-basis-point increase in average property yields to 5.5%. EPRA net tangible assets per share fell 9% to £8.65. The company said its £165 million first-half share buyback, representing 6% of its equity, added 28 pence to NTA per share because shares were repurchased at a discount to underlying asset value.

Unite said it is on track to capture £18 million of annualized synergies from the Empiric transaction, ahead of its previous plan. It has already secured £9 million of those savings in 2026 through integration measures including streamlined teams, migrated finance platforms and rationalized central roles and contracts.

• Net debt to EBITDA was 7.5 times on a pro forma basis at June following the Hello Student acquisition.
• The company expects leverage to return to its target range of six to seven times over the next 12 months as disposals progress.
• Unite has a development pipeline expected to deliver 6,000 beds over four years in London, Glasgow, Manchester and Newcastle.
• Hawthorn House in Stratford, which includes 700 student beds and an academy school, is fully let ahead of opening, with half its student beds under a long-term nomination agreement with University Arts London.

Outlook maintained

Unite maintained its 2026 adjusted earnings guidance of 41.5 pence to 43 pence per share. Burt said first-half rental income modestly exceeded expectations due to short-term lettings, though this was offset by a one-off second-half earnings impact of 0.6 pence related to the transition to the Renters’ Rights Act.

The company said all new purpose-built student accommodation tenancies will be exempt from the legislation, but students were able to submit early-leave requests during the initial transition period. Management said cost performance remained in line with expectations and that lower management fees associated with reduced valuations would benefit the second half.

Looking ahead, Unite said its strategy is centered on improving alignment with financially robust universities, expanding long-term nomination agreements and growing its presence among returning undergraduate students, a segment it said is often served by an increasingly regulated and shrinking house-in-multiple-occupation market.

About Unite Group (LON:UTG)

Unite Students is the UK's largest owner, manager and developer of purpose-built student accommodation, serving the country's world-leading Higher Education sector. We provide homes to 70,000 students across 157 properties in 23 leading university towns and cities. We currently partner with over 60 universities across the UK. Our people are driven by a common purpose: to provide a 'Home for Success' for the students who live with us. Unite's accommodation is safe and secure, high quality and affordable.

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