HOME FOR SUCCESS - unite-group.co.uk

1 SUCCESSFORHOMEThe Unite Group PLCA nnual report and accounts 2017 The Unite Group PLC Annual report and accounts 2017 Creating a Home for SUCCESS for our students is what drives us. Creating the best home for all students, helping them grow and succeed at University and beyond. We deliver this through having quality people, quality service and quality properties, and behaving in line with our homesWe use our unique insight and experience to deliver quality, secure homes where students can develop academically and socially. Going to University is an exciting time, but the big changes moving to University brings can be stressful. We design our homes and services to ensure the transition from home to University is as smooth as possible. Our research shows that students that feel well integrated into their new environment are better equipped to manage the changes University brings and get the most from all understand not everyone is the same and University experience is unique.

2 We create an environment where everyone can be at home and make the choices that are right for them. Social integration is a key focus of our property and service design. We offer a variety of accommodation at different price points and with different payment options enabling students to choose the right accommodation for them. We also support the Unite Foundation, which provides accommodation scholarships to young people who have been in care or are estranged from their them grow and is where young people build the foundation of the future they want. We believe we have an important role in helping them achieve this. The interpersonal and self-management skills honed at University provide a critical bridge to adulthood. We believe employability is important and work to provide our students with the tools for a successful future. We aim to create a safe and secure environment that is both caring and supportive, but allows our students to develop their University and believe that where a student lives has a material impact on their academic and social experience of University, and ultimately, their lives.

3 Through our people, our service and our properties, we are constantly looking for new and better ways to support students to become well-equipped adults, ready for life after University. We regularly measure how well we are meeting student needs through customer surveys and focus togetherBe betterDo what s rightSee it throughHave fun Read more about Our values p08 and 09 OUR PURPOSEOUR VALUESHOME FORSUCCESS Strategic report1 Financial highlights2 Market drivers4 Business model and strategy6 Understanding our stakeholders8 Quality people10 Quality partnerships12 Chairman s Statement14 Chief Executive s Statement20 Strategy at a glance22 Key performance indicators24 Risk management28 Principal risks and uncertainties32 Operations review36 Property review42 Financial review46 Responsible business reviewCorporate governance52 Chairman s Introduction to Governance56 Board of Directors58 Board Statements59 Shareholder relations60 Leadership65 Effectiveness66 Effectiveness: Nomination Committee Report67 Accountability68 Accountability: Audit Committee Report72 Accountability.

4 Health & Safety Committee Report 75 Annual Statement of the Chair of the Remuneration Committee 79 Directors Remuneration Policy86 Annual Report on Remuneration96 Directors Report99 Statement of Directors Responsibilities in respect of the Annual Report and the Financial Statements Financial statements100 Independent Auditors Report to the Members of the Unite Group PLC only 107 Introduction and table of contents 108 Consolidated income statement108 Consolidated statement of comprehensive income109 Consolidated balance sheet110 Company balance sheet111 Consolidated statement of changes in shareholder s equity112 Statements of cash flows113 Notes to the financial statements155 Financial recordOther information156 Notice of Annual General Meeting160 Glossary162 Company informationBUILDING QUALITY NATIONWIDEOUR BUSINESS AT A GLANCEOur investment strategy Having the right properties, in the right locations, aligned with the best Universities ensures we deliver for our students and our shareholders.

5 Read more about investment strategy on p04 Our property pipelineOur top ten cities2 017 ra n kCity Completed beds(17/18)Full-time student numbers(16/17)Market ,541293, ,84659, ,16851, ,47943, ,45853, ,01548, ,33665, ,22219, ,68734, ,63357, ,385727, of Unite portfolio73%Bir minghamGlasgowHu ddersfieldPlymouthExeterLo ughboroughLiv erpool71020172,152 new beds20183,074new bedsSalisbury Court, Edinburgh (Wholly owned) 581 bedsMillennium View, Coventry (Wholly owned) 391 bedsSt Luke s View, Liverpool (Wholly owned) 7 76 bedsBeech House, Oxford (USAF) 167 bedsThe Old Printworks, Edinburgh (Wholly owned) 237 bedsNewgate Court, Newcastle (Wholly owned) 575 bedsBrunel House, Bristol (Wholly owned) 246 bedsChaucer House, Portsmouth (Wholly owned) 484 bedsSt Vincent s, Sheffield (Wholly owned) 598 bedsInternational House, Birmingham (Wholly owned) 586 bedsOld Hospital, Durham (USAF) 363 bedsHoughall College, Durham (USAF) 222 bedsNew openingsStrategic ReportWhat makes us different Our quality properties and unique University relationships, supported by highly-trained people, utilising a tailor-made service platform set us apart from the competition.

6 Read more about what makes us different on p06 Environmental, social impact and governanceBeing a responsible business is central to everything we do at Unite. Read more on environment, social impact and governance on p46 Our values and cultureIt s not just about what we do, it s how we do it. Our values and culture make Unite a great place to work. Read more about values and culture on p08 and p09 LondonPortsmouthEdinburghLeedsManchester Bir minghamBristolHu ddersfieldNewcastleDurhamBathReadingOxfo rdBournemouthCoventryLo ughboroughSheffieldLiv erpoolNottinghamLeicesterAberdeen8412935 6720192,390new beds20202,973new bedsSkelhorne, Liverpool (Wholly owned) 1,0 8 5 bedsCowley, Oxford (Wholly owned) 887 bedsBattery Park (USAF) 418 bedsConstitution Street, Aberdeen (Wholly owned) 600 bedsTower North, Leeds (Wholly owned) 1,019 bedsNew Wakefield Street, Manchester (Wholly owned) 603 bedsOld BRI, Bristol (Wholly owned) 751 beds85%of our portfolio is aligned to high and mid-ranking Universities20211,000new bedsMiddlesex Street, London (Wholly owned)

7 1,000 beds Read more in our property review on p36 Earnings per share1,2pence30p17161514133028231714 Net asset value1pence per share720p7206465794343821716151413 Dividend per ratio*%31%31343543491716151413 Total accounting return*%14%14153715101716151413 Profit before tax m 229m229201388108771716151413 OPERATIONAL AND FINANCIAL HIGHLIGHTSH ighlights -Strong financial position -Earnings growth underpinned by nominations agreements and development pipeline -Record level of reservations for 18/19 academic year supports rental growth outlook -Significant progress with University partnerships1 The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). These financial highlights are based on the European Public Real Estate Association (EPRA) best practice recommendations and these performance measures are published as they are intended to help users in the comparability of these results across other listed real estate companies in Europe.

8 The metrics are also used internally to measure and manage the business and align to the performance related conditions for Directors remuneration.*2 2015 and 2016 EPS is based on an adjusted EPRA earnings. A full reconciliation of the financial statements to the EPRA performance measures is set out in note of the financial statements.* A full glossary of definitions is available on reportCorporate governanceFinancial statementsOther information01 THE UNITE GROUP PLC ANNUAL REPORT AND ACCOUNTS 2017 Applications and acceptances (thousands)20010003002013201420152016201 7400500600700800667496700512718532718535 700534 ApplicationsAcceptancesSource: UCASI nternational student mobility*1 United StatesCountry of destination192 United Kingdom103 Australia64 France65 Germany56 Other54%123456* 2017 dataSource: OECDPBSA beds (thousands)50010020142015201620172018150 200250350300 LondonUnite MarketsNon Unite MarketsGrowth (rhs)Source: HESA/CBRE/Unite4%2%0%6%8%12%10%14%DEMAND FOR UK HIGHER EDUCATION REMAINS STRONGMARKET DRIVERSS tudent numbers continue to outstrip accommodation more young people choosing to continue their education and investment in themselves, there has been a 35-year period of growing student numbers throughout the country.

9 Today there are more than million students studying in the UK. Most UK Universities offer an accommodation guarantee for first year and international students, but even this is a challenge with current beds available. UK Higher Education institutions have ,000 beds available, with a further 280,000 provided by the private sector. Demand for student accommodation significantly outstrips supply. Many Universities have responded to this by partnering with private accommodation providers, most notably through nominations agreements under which they make up their accommodation shortfall by reserving rooms in return for a guaranteed rent. Unite s business is focused on addressing the demand for student accommodation. In doing so, we aim to provide our University partners and students with much-needed certainty and a living environment that helps some 50,000 students get the best out of their time at UNITE GROUP PLC ANNUAL REPORT AND ACCOUNTS 2017 Strategic reportDemand for accommodation (%)1UK712 International29%12 Source: HESAFull time student numbers (millions) (ex-UK)Non-EUSource: UCASU nique applicants by high, medium and low UCAS Tariff (thousands)2000400201620176008001,000 HighMediumLowSource: UCAST here has been some speculation that changes in national demographics, combined with rising tuition fees and the UK s decision to leave the EU, could lead to a decline in student numbers and, by implication, a reduction in demand for accommodation.

10 However, data from the Universities and Colleges Admission Service (UCAS) shows that applications for 2018 from the EU rose by and those from international students rose by , to a record level. The combination of robust EU and international demand, growth in post-graduates and more 18-year-olds going to University has ensured that UK higher education remains a thriving, vibrant sector. Most significantly, the number of students choosing mid- and higher-tariff Universities, where Unite s business is concentrated, increased while the numbers at lower-tariff institutions fell by 3 per cent in 2017 . As a result, in most cities where we operate, there remains a substantial shortage of student accommodation. A number of factors are likely to further underpin this demand in the future. Higher costs lead to a growing focus on the relative value that different Universities offer. Driving greater transparency and accountability will, for example, be a key priority for the newly established Office for Students, as under the government s new Teaching Excellence Framework, in June 2017 Universities in England and Wales were ranked for the first time according to the quality of their developments are likely to bring an even greater level of scrutiny among applicants.