- Occupancy Decline Current occupancy at 68% (vs. 71% YoY), with 3 percentage points drop driven by weak occupancy in three cities due to students living at home and declining international postgraduates.
- Cost Savings Target GBP 30 million cost savings target by 2026, including GBP 20% reduction in central team costs and GBP 7 million annual savings from tech upgrades.
- Repositioning Portfolio GBP 300 million portfolio sale launched to accelerate repositioning, alongside GBP 100-200 million surplus capital annualized from disposals and reduced CapEx.
- Income Growth Guidance 2025 like-for-like income growth at 4.9%, but 2026 guidance cut to 0-2% due to nomination shortfalls and Empiric acquisition impacts.
- Tech & Integration Savings GBP 7 million annual operating cost savings from tech upgrades, with GBP 2 million already realized in 2025; GBP 17 million synergy target increased for Empiric by 2026.
Operational Performance
Occupancy stood at 68% versus 71% last year, with nominations back 4% year-on-year. However, bookings are up 25% year-on-year in recently opened and refurbished properties. Rental growth is currently at 2.4%, at the lower end of the company's guidance. The company is making good progress in stabilizing its recently opened and refurbished properties, and is confident that it can drive significant commercial improvements through its sales platform.
Valuation Metrics
With a P/E Ratio of 7.13 and a Dividend Yield of 6.19%, the company's valuation appears to be reasonable. The Net Debt / EBITDA ratio of 7.48x indicates a significant level of debt, but the company is confident that it can maintain leverage appropriate for its business. The EV/EBITDA ratio of 23.67 suggests that the company's enterprise value is relatively high compared to its EBITDA.
Outlook
The company expects a slower start to the sales cycle in 2026, with a reduction of 1,000-2,000 beds in nomination agreements. However, it is confident that it can pivot these beds to direct let sales if required. The company is targeting cost savings of £30 million across the Unite and Empiric businesses by the end of 2026, and has already reduced central team costs by 20%. The guidance for 2026 assumes that the company will be able to capture reversion on under-rented nomination agreements, and is forecasting 0-2% growth in like-for-like income for the academic year.
Growth Strategy
The company is focused on high-tariff universities, which have seen strong growth in numbers, and is confident that it can return to its core occupancy levels over time. The company is also exploring options to realize value from its uncommitted pipeline, and expects to generate around £100-200 million per annum of surplus capital from executing on its disposal plan and reducing development CapEx. As Mike Burt mentioned, "We've made good progress in our capital allocation framework, forming two university partnerships and starting construction of new on-campus beds."